Steven Willand Inc. v. Merit Hardware Inc.
Steven Willand Inc. v. Merit Hardware Inc.
2024 WL 1469975 (D.N.J. 2024)
February 15, 2024
Waldor, Cathy L., United States Magistrate Judge
Summary
The Defendants consistently failed to comply with discovery requests and Court Orders regarding Electronically Stored Information, despite warnings and a Pretrial Scheduling Order. As a result, the Court recommended that their pleadings be struck and default be entered against them, making it impossible to adjudicate on the merits. The District Court was directed to have Plaintiff file a motion for default judgment.
Additional Decisions
Note: This is an unpublished decision. Check your jurisdiction’s rules about citing unpublished decisions before citing this case to a court.
STEVEN WILLAND INC., A New Jersey Corporation Plaintiff,
v.
MERIT HARDWARE INCORPORATED, A Connecticut Corporation; JEFFREY MULLINS, individually; and CLARIBEL MULLINS, individually, Defendants
v.
MERIT HARDWARE INCORPORATED, A Connecticut Corporation; JEFFREY MULLINS, individually; and CLARIBEL MULLINS, individually, Defendants
Civil Action No. 21-01869 (SRC) (CLW)
United States District Court, D. New Jersey
Filed February 15, 2024
Counsel
Michael James Geraghty, Sills Cummis & Gross P.C., Newark, NJ, for Plaintiff.Michael Damian Camarinos, Camarinos Law Group, LLC, Hackensack, NJ, for Defendants.
Waldor, Cathy L., United States Magistrate Judge
REPORT AND RECOMMENDATION
*1 This matter comes before the Court sua sponte concerning Defendants’ ongoing failure to provide discovery and comply with Court Orders. Pursuant to Federal Rule of Civil Procedure 78, the Court did not hear oral argument on this application. Upon careful consideration of the record for this matter; and for good cause show; and
WHEREAS Plaintiff Steven Willand Inc. commenced this action by filing a Complaint on February 4, 2021. (ECF No. 1). Plaintiff alleges that it delivered certain equipment to Defendant Merit Hardware Incorporated and/or its customers pursuant to a credit agreement, and that Merit Hardware failed to compensate Plaintiff as required under that agreement. (Generally Compl., ¶ 1). Plaintiff further alleges that Defendants Jeffrey Mullins and Claribel Mullins “personally guaranteed the repayment of all credit extended to [Merit Hardware]” under that agreement. (Id. at “Factual Background ¶ 2). Plaintiff contends that Defendants collectively owed a balance of $280,324.45 under the credit agreement as of December 31, 2020, with contractual interest accruing monthly thereafter. (Id. ¶¶ 3-5). While it has asserted four different counts, each setting forth a different legal theory, Plaintiff seeks the same relief in each: recovery of the balance allegedly owed under the credit agreement, together with interest and an award of attorneys’ fees (also allegedly provided under the terms of the parties’ agreement). (Generally id.); and
WHEREAS Defendants filed an Answer on April 9, 2021, (ECF No. 8), as well as an Amended Answer and Counterclaim on January 31, 2022. (ECF No. 18).[1] In its counterclaim, Merit Hardware sought damages related to Steven Willand Inc.’s decision to cancel its status as a dealer, as well as Steven Willand Inc.’s alleged collusion with other dealers in a concerted effort to harm Merit Hardware. (Generally Id.); and
WHEREAS the Court entered a Pretrial Scheduling Order on February 2, 2022 and the parties began formal discovery. (ECF No. 20). The record reflects that Defendants’ long history of discovery deficiencies began almost immediately thereafter, (March 24, 2022 Order, ECF No. 22), and that the Court gave Defendants many chances satisfy their obligations. (E.g. ECF Nos. 25, 27, 31, 36 38, 45, 49). The record further reflects, and the Court so finds, that Defendants have not done so; and
WHEREAS on December 21, 2023, the Court informed Defendants that it was considering striking their pleadings as a sanction for their conduct, gave them yet another opportunity to cure their discovery deficiencies, and explicitly warned them about the consequences should they fail to do so:
TEXT ORDER: The Court has carefully considered the parties’ recent submissions, (ECF Nos. 50, 52, 53, and 54), as well as the information counsel conveyed on the record during the 12/21/23 conference. The Court finds that Defendants have violated multiple court orders regarding the discovery in question (including the 10/31/23 Order specifying that it would be Defendants’ “final opportunity” to cure their ongoing discovery failures). The Court is now considering sua sponte recommending that the District Court sanction Defendants’ conduct by striking their pleadings and entering default against them. Under the Court of Appeals’ guidance in Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 868 (3d Cir. 1984), the Court must weigh several factors when determining whether dismissal would be an appropriate sanction: (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) a 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, and (6) the meritoriousness of the claim or defense. The record to date establishes that the first 4 Poulis factors support dismissal. If Defendants fail to produce the outstanding discovery on or before 1/19/24, the Court will be satisfied that no sanctions short of dismissal will suffice and will enter a Report and Recommendation suggesting that the District Court strike Defendants’ pleadings, enter default against them, and permit Plaintiff to pursue a default judgment. The Court further finds that, regardless of whether Defendants eventually produce the materials in question, Plaintiff is entitled to recover the reasonable attorneys’ fees incurred in its extensive efforts seeking the Court's assistance in compelling Defendants to honor their discovery obligations. Plaintiff's counsel shall submit to Defendants’ counsel a Certification of Services rendered regarding those fees, and the parties shall thereafter meet and confer in an attempt to agree on an appropriate amount of reimbursement. Absent such an agreement, Plaintiff may submit an appropriate application to the Court.
*2 (Dec. 21, 2023 Order, ECF No. 55) (emphases added); and
WHEREAS by letter dated January 22, 2024, Plaintiff's counsel advised that “Defendants did not comply with the Court's December 21 Order by failing to produce the outstanding discovery on or before January 19, 2024.” (Jan. 22, 2024 Letter at 2, ECF No. 57). Plaintiff therefore requested that the undersigned “enter forthwith a Report and Recommendation, as contemplated by the December 21 Order, recommending that the District Court strike Defendants’ pleadings, enter default against them, and permit Plaintiff to pursue a default judgment.” (Id.); and
WHEREAS, to date, Defendants have not responded to Plaintiff's January 22, 2024 letter, or otherwise written to the Court in connection with the December 21, 2023 Order; and
WHEREAS Federal Rule of Civil Procedure 37(b)(2)(A) provides, in relevant part, that “[i]f a party ... fails to obey an order to provide or permit discovery ... the court where the action is pending may issue further just orders. This may include ... striking pleadings in whole or in part ... [and] rendering a default judgment against the disobedient party.” Fed. R. Civ. P 37(b)(2)(A); and
WHEREAS Federal Rule of Civil Procedure 16(f)(1) provides, in relevant part: “On motion or on its own, 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.”; and
WHEREAS the Court finds that Defendants’ conduct in this case appears to merit sanctions under both Rules. Specifically, the Court believes that it would be appropriate to strike Defendants’ responsive pleadings and counterclaim and direct the Clerk of the Court to enter default against them. Under either Rule, the Court's legal analysis would be the same; and
WHEREAS when determining whether to strike pleadings or dismiss claims pursuant to Rules 16 or 37, the Court must ensure that such severe sanctions would be appropriate in light of the factual circumstances at issue. As this Court noted in its December 21, 2023 Order, the United States Court of Appeals for the Third Circuit has set forth the six factors it would consider when determining whether a trial court abused its discretion by imposing such sanctions. Poulis v. State Farm Fire & Casualty Co., 747 F.2d 863, 868 (3d Cir. 1984); and
WHEREAS, under Poulis, a District Court may dismiss a case or strike a pleading as a sanction when, on balance, the following factors weigh in favor of dismissal: (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) a 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. Poulis, 747 F.2d at 868; and
WHEREAS, while Poulis addressed the propriety of dismissing a plaintiff's complaint, courts in this Circuit also balance the Poulis factors when determining whether to strike a defendant's responsive pleading. See Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 919 (3d Cir. 1992) (noting that the Third Circuit will apply the Poulis factors “in reviewing sanction orders that deprive a party of the right to proceed with or defend against a claim.”) (emphasis added); Linwood Trading Ltd. v. Am. Metal Recycling Servs., No. 14-5782 (CCC) (JBC), 2017 U.S. Dist. LEXIS 103075, at *3 (D.N.J. June 1, 2017) (weighing the Poulis factors in connection with a sua sponte application to strike a defendant's answer and enter default as a sanction pursuant to Federal Rule of Civil Procedure 37(b)(2)); and
WHEREAS the Third Circuit has further determined that a Court may dismiss a litigant's claims without first conducting a Poulis analysis where that party's behavior makes it impossible to adjudicate the case on its merits. Iseley v. Bitner, 216 F. App'x 252, 255 (3d Cir. 2007) (“Ordinarily a District Court is required to consider and balance six factors enumerated in [Poulis] when deciding, sua sponte, to use dismissal as a sanction. When a litigant's conduct makes adjudication of the case impossible, however, such balancing under Poulis is unnecessary.”); and
WHEREAS this Court has already found that the first four Poulis factors favor striking Defendants’ pleadings. (Dec. 21, 2023 Order, ECF No. 55). Given Defendants’ ongoing failure to participate in this case despite this Court's invocation of Poulis and its explicit warning that it would recommend such drastic sanctions if Defendants did not honor their discovery obligations, the Court now finds that no lesser sanctions would be effective in ensuring Defendants’ compliance; and
WHEREAS the Court will assume, without finding, and for the purposes of this application only, that Defendants defenses have some legal and factual merit; and
WHEREAS, on balance, the Poulis factors overwhelmingly favor sanctioning Defendants’ conduct by striking their pleadings, entering defaults against them, and permitting Plaintiff to pursue default judgments against them; and
WHEREAS the Court further finds that Defendants’ ongoing failure to meaningfully participate in this matter has made resolution on the merits impossible, and that such sanctions would be appropriate even if the Court had not conducted a Poulis analysis. Iseley, 216 F. App'x at 255;
IT IS is on this 15th day of February, 2024,
RECOMMENDED that the District Court STRIKE Defendants’ responsive pleadings and counterclaim, and place Defendants in default as a sanction for their ongoing failure to provide discovery and comply with Orders of this Court; and it is further
RECOMMENDED that the District Court further direct Plaintiff to file a motion for default judgment against Defendants.[2]
Footnotes
Merit Hardware was named as the sole counterclaimant. Defendants Jeffrey and Claribel Mullins are not parties to those counterclaims. (Id.).
In accordance with Federal Rule of Civil Procedure 72 and Local Civil Rule 72.1, any objections to this Report and Recommendation shall be filed within fourteen (14) days after service hereof. Any party may respond to another party's objections within fourteen (14) days after being served with a copy thereof.