*1 THIS MATTER is before the Court on plaintiff's letter application (Letter Application) (ECF No. 44) seeking the Court's permission to file a motion to strike defendants BizConnect Inc. (BizConnect) and Zimmi Tech, Inc.’s (Zimmi) answer and counterclaim (ECF No. 24) because of defendants’ failure to respond to discovery or comply with court orders. I entered an order deeming the Letter Application to be plaintiff's motion to strike defendants’ answer and counterclaim (hereinafter, Motion) (ECF No. 44) and set a January 15, 2024 deadline for defendants to file opposition to the Motion. (ECF No. 45.) Defendants did not file an opposition to the Motion. However, the parties filed a joint status report on January 25, 2024 (ECF No. 47) providing additional information relevant to the Motion. For the following reasons, I recommend that the Motion be GRANTED, defendants’ answer and counterclaim be stricken, default be entered against defendants, and plaintiff be granted leave to file for default judgment.

I. FACTS AND PROCEDURAL HISTORY

This case arises out of a failed business partnership. Plaintiff filed an amended complaint on December 23, 2022 asserting that BizConnect breached multiple agreements between the parties when it failed to pay the full amounts due for plaintiff's data and support services.[1] (ECF No. 19 ¶¶8–17.) In addition to nonpayment, plaintiff also alleges that BizConnect never intended to pay plaintiff (id. ¶46) and, instead, “concocted” a scheme to “siphon and misappropriate all benefits from the agreements with [p]laintiff while parking the obligations in a corporation that they knew at the time could not and would not meet the financial payment obligations,” (id. ¶54). To carry out this scheme, plaintiff alleges that BizConnect — which was allegedly insolvent at the time — fraudulently transferred the data delivered under the agreements to another entity, Zimmi, for the sole purpose of avoiding plaintiff's outstanding invoices. (Id. ¶¶65–69.)

Defendants filed an answer and counterclaim to plaintiff's amended complaint on February 6, 2023. (ECF No. 24.) Defendants state that Zimmi “is the ‘renamed’ successor to” BizConnect. (Id. p.5.) Defendants assert that “data received from [p]laintiff was shared solely with the renamed entity Zimmi, to which [p]laintiff acknowledged servicing with full knowledge of the name change.” (Id. p.6.) Defendants assert ten affirmative defenses allegedly barring plaintiff's claims and reserve the right to assert additional affirmative defenses that discovery reveals to be applicable. (Id. pp.8, 9.)

Defendants’ counterclaim asserts claims for fraudulent inducement, breach of contract, and breach of the covenant of good faith and fair dealing. (Id. pp.20–24.) Defendants allege that plaintiff fraudulently induced BizConnect into entering into agreements, which plaintiff then breached by failing to timely provide BizConnect with the agreed-upon data and services. (Id. pp.10, 11, 15, 16.) Defendants also allege that the data that plaintiff delivered was “outdated, inaccurate, and incomplete.” (Id. p.20.)

*2 The parties filed a joint proposed discovery plan on January 31, 2023 (ECF No. 23) in anticipation of an initial scheduling conference set for February 7, 2021 (ECF No. 20). The joint proposed discovery plan called for the service of initial written discovery requests by February 28, 2023 and for fact discovery to conclude on December 1, 2023. (ECF No. 23 p.2.) I adopted the parties proposed discovery schedule and set a telephone status conference for June 6, 2023. (ECF No. 25.)

On March 31, 2023, the parties filed a stipulation dismissing the Individual Defendants and extending the time for plaintiff to respond to defendants’ counterclaim. (ECF No. 27.) The stipulation also proposed to extend the time for the parties’ to serve written discovery requests to April 28, 2023. (Id.). The District Judge so ordered this stipulation on April 3, 2023. (ECF No. 28.)

On May 12, 2023, the parties sought another extension of discovery deadlines (ECF No. 33), which I granted on May 15, 2023 (Amended Scheduling Order) (ECF No. 34). The Amended Scheduling Order extended the deadline to respond to written discovery to June 30, 2023 but kept the original fact discovery deadline of December 1, 2023. (Id.)

The parties first informed me of defendants’ failure to timely respond to plaintiff's requests for the production of documents and plaintiff's interrogatories (Plaintiff's Requests) in their August 1, 2023 joint status letter. (ECF No. 35.) In the status letter, the parties also informed me that BizConnect had filed for dissolution and Zimmi had informed plaintiff that it was in the process of filing for dissolution and “consulting with Nevada bankruptcy counsel for a potential filing.” (Id. pp.1, 2.) Defendants stated that they would dismiss their counterclaim and no longer participate in this action. (Id. p.2.) However, as of August 1, 2023, Zimmi had neither filed for dissolution nor filed for bankruptcy. (Id.) Plaintiff informed the Court that plaintiff would file a motion to compel if the parties were unable to resolve this dispute. (Id.)

The parties next appeared before me for a telephone status conference on August 11, 2023. (ECF No. 38.) During the conference, defendants reiterated that they were considering bankruptcy and did not plan to pursue their counterclaims. However, I found that their contemplation of bankruptcy did not excuse them of their discovery obligations and ordered defendants to respond to Plaintiff's Requests by September 29, 2023. (Id. ¶1.) Further, I granted plaintiff leave to file a letter-application to strike defendants’ answer and counterclaim if defendants failed to timely respond to Plaintiff's Requests. (Id.) I set another telephone status conference for October 16, 2023 (id. ¶2), which was adjourned to November 22, 2023 (ECF Nos. 40, 41, 42).

The parties submitted another joint status letter on October 11, 2023 informing me that, in violation of the August 11, 2023 order compelling defendants to respond to Plaintiff's Requests, defendants had not responded. (ECF No. 39 p.1.) The parties also informed me that — despite defendants’ repeated stated intentions to seek dissolution of their corporate status, dismiss their counterclaim, and no longer participate in this action — Zimmi had yet to file for dissolution or bankruptcy. (Id.) Although plaintiff had already been granted leave to file a letter-application to strike defendants’ answer and counterclaim because of defendants’ failure to timely respond to Plaintiff's Requests, plaintiff refrained from doing so because of the parties’ ongoing discussions. (Id. p.2.) Specifically, defendants informed plaintiff that they were prepared to file for bankruptcy but indicated a willingness to discuss a consent judgment. (Id.)

*3 The parties appeared before me for another telephone status conference on November 22, 2023. (Minute Entry following ECF No. 42.) The parties informed me at the conference that defendants had still not responded to Plaintiff's Requests. Additionally, defendants informed me, once again, that they were going to file bankruptcy but had not done so yet. I set a telephone status conference for January 31, 2024 (ECF No. 43), which was later adjourned to February 28, 2024 (ECF No. 48).

On December 28, 2023, nearly six months after defendants’ responses to Plaintiff's Requests were due, plaintiff filed this Motion. (ECF No. 44.) Plaintiff explains that defendants’ failure to respond to Plaintiff's Requests is “denying [plaintiff] necessary discovery to prosecute its claim and oppose [d]efendants’ counterclaims.” (Id. p.2.)

Plaintiff notes that, instead of responding to Plaintiff's Requests, defendants have “repeatedly expressed to [plaintiff] and this Court that they are preparing to file for bankruptcy, which would result in an automatic stay of this litigation.” (Id.) Plaintiff declined to file a letter-application to strike defendants’ answer and counterclaim at an earlier juncture based on defendants’ representations. (Id. pp.2, 3.) However, plaintiff asserts that it “has made reasonable efforts to obtain the delinquent discovery and [d]efendants have had enough time to initiate their bankruptcy claims,” and, as such, plaintiff filed the instant Motion. (Id. p.3.)

Defendants did not file an opposition to the Motion or provide an update regarding their intention to seek dissolution or bankruptcy relief. However, the parties filed a joint status report on January 25, 2024. (ECF No. 47.) In the joint status report, defendants’ counsel advised me that “he is informed that his clients have retained a bankruptcy firm and are awaiting a filing.” (Id. p.2.)

II. DISCUSSION

Federal Rule of Civil Procedure (Rule) 16 and Rule 37 authorize the imposition of sanctions for failure to comply with a court order and for failure to respond to discovery request. Walsh v. Ernie's Auto Detailing Inc., No. 20–17785, 2022 WL 18027856, at *3 (D.N.J. Nov. 30, 2022), report and recommendation adopted, 2022 WL 18027847 (D.N.J. Dec. 30, 2022). Rule 16(f) provides that the “court may issue any just orders, including those authorized by Rule 37(b)(2)(A)(ii)–(vii), if a party or its attorney ... fails to obey a scheduling order or other pretrial order.” Fed.R.Civ.P. 16(f)(1)(C). Under Rule 37, a court may order sanctions against a party if “after being properly serviced with interrogatories ... or a request for inspection ..., fails to serve its answers, objections, or written response.” Fed.R.Civ.P. 37(d)(1)(A)(ii). The sanctions provided in Rule 37 include “striking pleadings in whole or in part.” Fed.R.Civ.P. 37(b)(2)(A)(iii).

In Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 868 (3d Cir. 1984), the Third Circuit identified six factors that are to be considered in determining whether a sanction, such as striking a pleading, is appropriate: (1) the extent of the party's personal responsibility; (2) the prejudice to the adversary caused by the failure to meet scheduling orders and respond to discovery; (3) the history of dilatoriness; (4) whether the conduct of the party or the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which entails an analysis of alternative sanctions; and (6) the meritoriousness of the claim or defense. Id. No single Poulis factor is determinative. Mindek v. Rigatti, 964 F.2d 1369, 1373 (3d Cir. 1992).

*4 The first factor weighs in favor of granting the Motion. Defendants have repeatedly represented to their counsel that they are in the process of filing for defendants’ dissolution or bankruptcy, which would result in a stay of this litigation and defendants’ discovery obligations. (See ECF No. 39 (“Defendants informed [plaintiff] that ... Zimmi and BizConnect intended to seek dissolution of their corporate status, dismiss their counterclaims and no longer participate in this action.”).) However, defendants have not filed for bankruptcy protection and continue to use the potential for a bankruptcy filing to excuse their failure to comply with discovery obligations and the Court's orders. Because defendants are represented by competent counsel and there is no indication that defendants are ignorant of the current situation, I must assume that defendants bear personal responsibility for the failure to comply with their discovery obligations and the Court's orders.

The second factor weighs in favor of granting the Motion. “[T]he burden imposed by impeding a party's ability to prepare effectively a full and complete trial strategy is sufficiently prejudicial.” Ware v. Rodale Press, Inc., 322 F.3d 218, 219 (3d Cir. 2003). Prejudice also includes “deprivation of information through non-cooperation with discovery, and costs expended obtaining court orders to force compliance with discovery.” Adams v. Trustees of New Jersey Brewery Employees’ Pension Tr. Fund, 29 F.3d 863, 874 (3d Cir. 1994). As a result of defendants’ failure to provide any response to Plaintiff's Requests, plaintiff's ability to pursue its claims against defendants and defend against defendants’ counterclaim has been severely impeded. While plaintiff continues to spend resources in an attempt to move this litigation forward, defendants have repeatedly demonstrated an unwillingness to comply with their discovery obligations and this Court's orders. See Glob. Creditors Corp. v. Diamond Logistics, Inc., No. 13–00184, 2014 U.S. Dist. LEXIS 118227, at *9 (D.N.J. Aug. 6, 2014), report and recommendation adopted, 2014 WL 4211244 (D.N.J., Aug. 25, 2014) (finding repeated failures to participate in the litigation caused prejudice).

The third factor weighs in favor of granting the Motion. “Extensive or repeated delay or delinquency constitutes a history of dilatoriness, such as consistent non-response to interrogatories, or consistent tardiness in complying with court orders.” Adams, 29 F.3d at 874; Chiarulli v. Taylor, No. 08–04400, 2010 WL 1371944, at *3 (D.N.J. Mar. 31, 2010). Discovery has been ongoing for a substantial time and defendants have refused to cooperate by providing any sort of response to Plaintiff's Requests. Despite several extensions for the time to respond to Plaintiff's Requests and the Court's order directing defendants to respond to the same, defendants have not made any apparent effort to comply. Accordingly, there is clear history of dilatoriness.

Defendants’ disregard of Plaintiff's Requests and Court orders is “an intentional and strategic decision by [d]efendants based on their alleged plan to file for bankruptcy.” (ECF No. 44 p.5.) Defendants have continually ignored their discovery obligations in violation of the Rules and Court orders. I can only conclude defendants’ disregard is willful and knowing. Thus, the fourth factor weighs in favor of granting the Motion. See Roman v. City of Reading, 121 F. App'x 955, 960 (3d Cir. 2005) (“In the face of court-imposed deadlines, repeated failure to observe court-imposed deadlines and total failure to pursue a claim beyond the pleadings may constitute willful conduct.”).

The fifth factor weighs in favor of granting the Motion. Alternative sanctions would do little to resolve the standstill in discovery. Defendants have not opposed the Motion or suggested an alternative sanction. Moreover, defendants have repeatedly stated that they intend to file for bankruptcy protection, withdraw their counterclaim, and no longer participate in this litigation. (ECF Nos. 35 p.2, 39 p.1.) They have not done so. At this point, after defendants’ willful failure to comply with the Court's orders, no sanction, other than striking of defendants’ answer and counterclaim, will be effective to move this matter to resolution.

*5 This factor is neutral due to the litigation having not proceeded beyond propounding written discovery. At this stage, without the benefit of any evidence, I find that there is an insufficient basis to evaluate the meritoriousness of the claims or defenses. However, “[e]ach factor need not be satisfied” for the Court to strike the answer and counterclaim. Ware, 322 F.3d at 221. Here, the balance of the remaining factors weighs in favor of granting plaintiff's Motion.

I issue this report and recommendation upon my review of the papers and without oral argument. See Fed.R.Civ.P. 78(b); see also L.Civ.R. 78.1(b). For the reasons stated above, it is:

1. RECOMMENDED that the Motion (ECF No. 44) be GRANTED.

2. RECOMMENDED that defendants’ answer and counterclaim be stricken, default be entered against defendants, and plaintiff be granted leave to file for default judgement.

3. ORDERED that the Clerk of the Court administratively terminate the Motion at ECF No. 44 pending the review of this report and recommendation.

4. ORDERED that the Clerk of the Court activate this report and recommendation to indicate that it requires further action by the District Judge.

5. ORDERED that the parties have 14 days to file any objections to this report and recommendation pursuant to Local Civil Rule 72.1(c)(2).