Opinion
Case No. 16-23787-B-7 Adversary No. 16-2132
04-23-2018
In re: THOMAS OLIVER BROWN, Debtor(s). RICHARD A. BIAMA, Plaintiff(s), v. THOMAS OLIVER BROWN, Defendant(s).
DC No. KP-1
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION IN LIMINE
INTRODUCTION
The court has before it a motion in limine filed by defendant Thomas Oliver Brown. Docket 76. Defendant moves "to preclude Plaintiff [Richard A. Biama] from offering any testimony in his case in chief-via Alternative Direct Testimony Declarations and Exhibits, or through live oral testimony as a result of Plaintiff's violation of this Court's January 18, 2018, Order and United States Bankruptcy Court, Eastern District of California, Local Rule 9017-1." Id. at 1:22-25. Basically, defendant contends that plaintiff should not be permitted to present direct testimony-written or oral-of any witness or offer any exhibits because plaintiff failed to timely deliver alternate direct testimony declarations and marked exhibits as the court ordered on January 18, 2018, and as required by Local Bankruptcy Rule 9017-1.
Plaintiff opposes defendant's motion in limine. Docket 87. Plaintiff asserts that witnesses and exhibits were timely disclosed in a list that was emailed to defendant over a year ago, in March of 2017, and updated on April 16, 2018. Plaintiff does not dispute that alternate direct testimony declarations were not timely delivered to the defendant. Nevertheless, plaintiff suggests that alternate direct testimony declarations and properly marked exhibits are not necessary-and that the failure to timely deliver either or both is immaterial-because defendant knows how plaintiff will testify and is familiar with the exhibits that plaintiff intends to offer. Plaintiff also suggests that an exclusionary sanction for any court order or local rule violation is too harsh and that if a sanction is ordered for noncompliance a lesser sanction must be imposed.
The court heard defendant's motion in limine prior to scheduled start of trial on April 23, 2018. Appearances were noted on the record.
This order constitutes the court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure ("Civil Rule") 52(a) (applicable by Federal Rule of Bankruptcy Procedure ("Bankruptcy Rule")) 7052. This order also supplements the court's oral statements and the summary of this decision placed on the record in open court on April 23, 2018. For the reasons explained below, defendant's motion in limine Will be GRANTED IN PART AND DENIED IN PART: (1) GRANTED as to sanctions for plaintiff's violation of the court's January 18, 2018, order and Local Bankruptcy Rule 9017-1; and (2) DENIED as to the request for an exclusionary sanction. BACKGROUND
If there are any conflicts between the court's oral statements and this written decision, this written decision controls. See Playmakers LLC v. ESPN, Inc., 376 F.3d 894, 896 (9th Cir. 2004) (citation omitted).
An order filed on January 18, 2018, set an April 23, 2018, trial date. Docket 73. That order also imposed two independent but related obligations on the parties: (1) it required the parties to disclose witnesses and exhibits under Civil Rule 26(a)(3)(A); and (2) it also required the parties to prepare and deliver to opposing counsel alternate direct testimony declarations and marked trial exhibits under Local Bankruptcy Rule 9017-1.
The parties were informed on two earlier occasions that the court would require alternate direct testimony declarations for trial. Dockets 52, 71.
Plaintiff was ordered to disclose witnesses and exhibits and to deliver alternate direct testimony declarations and marked exhibits to the defendant by April 9, 2018. Id. Defendant was ordered to disclose witnesses and exhibits and to deliver alternate direct testimony declarations and marked exhibits to the plaintiff by April 16, 2018. Id. Defendant timely complied. Dockets 75, 79. Plaintiff did not.
Plaintiff did not deliver alternate direct testimony declarations or properly marked trial exhibits to defendant by April 9, 2018. Plaintiff confirmed that direct testimony declarations were not delivered to the defendant any time prior to the start of trial on April 23, 2018. See also Dockets 77 at 2:2-3, 3:3-6, 4:17-18, 83 at 5:11-12, 87 at 2:7-15. Plaintiff provided defendant with marked trial exhibits on January 16, 2018, as a purported "update" to a March 2017 email that included an attachment with some 600 pages of unmarked or improperly-marked documents. Dockets 83 at 5:13-16, 6:13-15; 87 at 2:1-6. DISCUSSION
Civil Rule 26(a)(3)(A) governs pretrial disclosures and includes a requirement that each party "provide to the other party and promptly file . . . the name and, if not previously provided, the address and telephone number of each witness" as well as "an identification of each document or other exhibit[.]" Fed. R. Civ. P. 26(a)(3)(A)(i), (iii). Civil Rule 26(a)(3)(A) is enforced through Civil Rule 37(c)(1) which "forbid[s] the use at trial of any information required to be disclosed by Rule 26(a) that is not properly disclosed." Hoffman v. Constr. Protective Servs., Inc., 541 F.3d 1175, 1179 (9th Cir. 2008) (internal quotation marks and citations omitted). More precisely, Civil Rule 37(c)(1) states as follows:
If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified
or is harmless.Fed. R. Civ. P. 37(c)(1).
Civil Rule 37(c)(1) is self-executing, and an automatic sanction designed to provide a strong inducement for disclosure. Goodman v. Staples The Office Superstore, LLC, 644 F.3d 817, 827 (9th Cir. 2011) (citations omitted). There are two ways to avoid the automatic and self-executing exclusionary sanction of Civil Rule 37(c)(1), i.e., by establishing that a failure to timely disclose is (i) substantially justified or (ii) harmless. The party facing exclusion bears the burden of proving either. R & R Sails, Inc. v. Ins. Co. of Pa., 673 F.3d 1240, 1246 (9th Cir. 2012) (citations omitted); Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1107 (9th Cir. 2001).
The court has particularly wide latitude to issue sanctions under Civil Rule 37(c)(1). Yeti by Molly, 259 F.3d at 1106. However, if the exclusionary sanction amounts to dismissal of a claim or a terminating sanction, the court is required to also consider whether noncompliance involves willfulness, fault, or bad faith. R & R Sails, 673 F.3d at 1247 (citation omitted). Willfulness, bad faith, and fault are defined to mean "disobedient conduct not shown to be outside the control of the litigant." Fjelstad v. Am. Honda Motor Co., Inc., 762 F.2d 1334, 1341 (9th Cir. 1985).
And even upon a finding of willfulness, bad faith, or fault the court must still weigh: (i) the public's interest in the expeditious resolution of litigation; (2) the court's need to manage its docket; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions. Thompson v. Housing Auth. of City of Los Angeles, 782 F.2d 829, 831 (9th Cir. 1986). "The subparts of the fifth factor are whether the court has considered lesser sanctions, whether it tried them, and whether it warned the recalcitrant party about the possibility of case dispositive sanctions." Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1096 (9th Cir. 2007) (citations omitted).
The delivery obligation under Local Bankruptcy Rule 9017-1 is similar to the disclosure obligation under Civil Rule 26(a)(3)(A). Local Bankruptcy Rule 9017-1 states as follows: "Unless otherwise ordered by the Court, copies of all alternate direct testimony declarations by witnesses and exhibits that are intended to be presented at trial or hearing shall be furnished to opposing counsel[.]" Local Bankr. R. 9017-1(b). And like Civil Rule 37(c)(1), Local Bankruptcy Rule 9017-1 permits the court to sanction a party for noncompliance (or untimely compliance):
If a party fails to comply with the provisions of this Rule or an order for the timely exchange and lodging with the court of Alternative Direct Testimony Statements, exhibits, or other evidence as ordered by the court, the court may issue appropriate sanctions. The sanctions may include the court excluding such Direct Testimony Statement(s) and the live direct testimony of the witness(es) giving such statements, exhibits, or other evidence presented which were not timely exchanged or presented, or such lesser sanction as appropriate and reasonable.Local Bankr. R. 9017-1(d).
Sanctions under Local Bankruptcy Rule 9017-1 are analogous to the Civil Rule 26(a)(3)(A) sanctions available through Civil Rule 37(c)(1). Bank of Stockton v. Dugo (In re Dugo), 2016 WL 4126757, *4 (E.D. Cal. 2016). Thus, "a bankruptcy court must consider whether the claimed noncompliance involved willfulness, fault, or bad faith and the availability of less severe sanctions before imposing sanctions for violations of Bankruptcy Rule 9017-1 that effectively terminate the adversary proceeding." Id. This court is also guided by Kostecki v. Sutton (In re Sutton), 2015 WL 7776658 (9th Cir. BAP 2015). Inasmuch as Sutton involved an appeal of a decision by a different bankruptcy judge in this district it is instructive.
In Sutton, the plaintiffs violated Local Bankruptcy Rule 9017-1 by submitting their alternate direct testimony declarations and exhibits seven days prior to trial. Id. at *2-4. The plaintiffs claimed they had difficulty obtaining the signed declarations from the declarants because they lived far away or were traveling and hard to track down. Id. at *4. The bankruptcy court concluded that the plaintiffs' failure to comply with Local Bankruptcy Rule 9017-1 caused extreme prejudice to the debtor in his trial preparation, granted the debtor's motion in limine to exclude the evidence, and entered judgment in favor of the debtor. Id. at *4-5.
On appeal, the BAP in Sutton found that the bankruptcy court's exclusion of the plaintiffs' declarations and exhibits was "analogous to sanctions under Civil Rule 37(c)(1)" and "amounted to the dismissal of Plaintiffs' fraud claims based upon their failure to comply with" Local Bankruptcy Rule 9017-1. Id. at *6. The BAP concluded that the bankruptcy court's case terminating sanction was an abuse of discretion because the court failed to make a finding of bad faith, willfulness, or fault and did not consider a more moderate penalty, such as continuing the trial to allow the debtor's attorney more time to prepare or a monetary sanction to compensate the debtor's attorney for an unnecessary appearance. Id. at *7-9. Additional factors also were not weighed before the exclusionary sanction was imposed. Id. at 10.
Turning to this case, plaintiff was ordered on January 18, 2018, to disclose witnesses and exhibits under Civil Rule 26(a)(3)(A) and to deliver alternate direct testimony declarations and marked exhibits to the defendant under Local Bankruptcy Rule 9017-1. Plaintiff was further ordered to comply with both obligations by April 9, 2018.
The court assumes that the list and documents plaintiff emailed to defendant in March of 2017 is a Civil Rule 26(a)(3)(A) compliant disclosure. The court notes that disclosure was made after discovery closed on December 21, 2016. Docket 14. However, defendant did not raise that issue. Moreover, the court need not address the extent of plaintiff's compliance with the disclosure obligation based on its determination, infra, that the plaintiff violated the delivery obligation under the court's January 18, 2018, order and Local Bankruptcy Rule 9017-1.
Plaintiff did not deliver alternate direct testimony declarations to the defendant by April 9, 2018. Apparently that remained unchanged up to the April 23, 2018, trial date. Plaintiff also delivered properly marked trial exhibits to the defendant seven days late on April 16, 2018. Consequently, the court has little difficulty concluding that plaintiff violated the court's January 18, 2018, order and Local Bankruptcy Rule 9017-1.
Plaintiff's court order and local rule violations are not substantially justified. There is no substantial justification for the failure to comply with a federal court order. Crystal Palace Gambling Hall, Inc. v. Mark Twain Indus. (In re Crystal Palace Gambling Hall, Inc.), 817 F.2d 1361, 1365 (9th Cir. 1986) (no exceptional circumstances exception to compliance with a federal court order); Anderson v. Comptois, 109 F. 971 (9th Cir. 1901) (unacceptable for attorney to instruct client and others to disobey order disagreed with). Plaintiff's suggestion that timely delivered alternate direct testimony declarations and marked exhibits are unnecessary-and that trial may proceed without either or both because defendant is familiar with plaintiff's evidence in this adversary proceeding based on evidence admitted in the parties' prior arbitration proceeding-is also without merit and borders on the frivolous. As to the alternate direct testimony declarations specifically, plaintiff was informed on multiple occasions they were required for trial. And it is not up to the plaintiff to unilaterally determine the necessity of complying with a local bankruptcy rule obligation incorporated into the court's pre-trial order. Plaintiff is obligated to comply with this court's order-and thence with the local bankruptcy rule obligation-whether or not he agrees with it. Maness v. Meyers, 419 U.S. 449, 458-459 (1975).
There are also ethical considerations involved when an attorney-such as plaintiff's attorney-decides to disobey an order. As the California Supreme Court stated in In re Anna Lou Kelley, 52 Cal. 3d 487 (1990): "Disobedience of a court order, whether as a legal representative or as a party, demonstrates a lapse of character and a disrespect for the legal system that directly relate to an attorney's fitness to practice law and serve as an officer of the court." Id. at 495.
Plaintiff's court order and local rule violations are also prejudicial and therefore not harmless. See Padilla v. Beard, 2017 WL 1354565, *3 (E.D. Cal. 2017). Plaintiff's violations are prejudicial to the court because the court must now expend judicial resources to address the violations and adjust its calendar to accommodate for them. They are also prejudicial to the defendant who is accused of fraud and is faced with substantial non-dischargeable debt. The absence of timely alternate direct testimony declarations and marked exhibits interferes with the defendant's ability to develop a meaningful defense and prepare effective cross-examination. An awareness of what the evidence might be based on the parties' prior arbitration proceeding does not alleviate that prejudice. In other words, ignoring for the moment that the arbitration concluded nearly five years ago and memories fade, there is a substantial difference between knowing what a witness may say and the exhibits that a party may offer and knowing what a witness will say and the exhibits that a party will offer. Alternate direct testimony declarations and timely marked exhibits facilitate the latter for the court and the defendant and that is why they are ordered for trial.
The determination that plaintiff's court order and local rule violations are not substantially justified-and that they are prejudicial and therefore not harmless-would typically result in exclusion under Civil Rule 37(c)(1) and thence Local Bankruptcy Rule 9017-1. But here exclusion would be case terminating because it would prevent the plaintiff from proving any element of the § 523(a)(2)(A) claim. And although plaintiff's court order and local rule violations are willful because they are not substantially justified, see Fjelstad, 762 F.2d at 1341, and at least three factors weigh in favor of a terminating sanction, several other factors and several sub-factors compel the court, reluctantly, to order a lesser sanction. Therefore, for all the foregoing reasons:
There is a strong public interest in expeditiously resolving this adversary proceeding which has been pending for nearly two years. The expeditious resolution of this adversary proceeding would facilitate the court's management of its docket insofar as it would eliminate the need for the court to again reset trial and conduct other proceedings related to this adversary proceeding. And as noted above, plaintiff's court order and local rule violations are prejudicial to the defendant and the court.
There is a strong public policy that favors resolving cases on their merits. The court has not previously imposed a lesser sanction for the plaintiff's conduct addressed hereinabove which means the court is unable to ascertain the effectiveness of any lesser sanction. And plaintiff was not warned that a failure to comply with the court's January 18, 2018, order and Local Bankruptcy Rule 9017-1 would result in an exclusion of all of plaintiff's evidence resulting in an inability to prove the § 523(a)(2)(A) claim. --------
IT IS ORDERED that defendant's motion in limine is GRANTED IN PART AND DENIED IN PART: GRANTED as to the imposition of a lesser sanction and DENIED as to an exclusionary sanction.
IT IS FURTHER ORDERED that the April 23, 2018, trial is VACATED and trial is continued to June 4, 2018, at 9:30 a.m.
IT IS FURTHER ORDERED that by April 30, 2018, plaintiff shall serve defendant with alternate direct testimony declaration(s) of any individual who will or may testify in plaintiff's case-in-chief and all properly marked exhibits plaintiff will or may offer at trial (in a three-hole punched binder). Defendant may file and serve an amended alternate direct testimony declaration by May 7, 2018.
IT IS FURTHER ORDERED that by 5:00 p.m. on April 30, 2018, plaintiff shall pay defendant $5,250.00 in attorney's fees (15 hours at $350.00 per hour) for defendant's appearance on April 23, 2018, trial preparation, and preparation of the motion in liminie, trial brief, and other related documents filed in preparation of trial. Plaintiff shall also file certification of payment with the court.
IT IS FURTHER ORDERED that-in addition to the $5,250.00 ordered hereinabove-plaintiff shall pay the attorney's fees that defendant incurs in this matter from April 24, 2018, to and including 9:30 a.m. on June 4, 2018. These attorney's fees shall be paid prior to the commencement of trial on June 4, 2018. To facilitate the payment of these attorney's fees, on May 31, 2018, defendant shall file and serve (by facsimile and email) a declaration of all attorney's fees incurred during the referenced period with an estimate of the attorney's fees for the period from June 1, 2018, through and including 9:30 a.m. on June 4, 2018.
IT IS FURTHER ORDERED that if the plaintiff fails to pay any of the attorney's fees ordered hereinabove the court will consider dismissal of this adversary proceeding, the exclusion of evidence, and any additional sanction determined to be appropriate under the circumstances.
IT IS FURTHER ORDERED that trial in this matter is limited to the issues framed by the pleadings.
IT IS FURTHER ORDERED that objections to alternate direct testimony declaration(s) and exhibit(s) shall be served on opposing counsel and lodged with the court by May 31, 2018.
Dated: April 23, 2018.
/s/_________
UNITED STATES BANKRUPTCY JUDGE
INSTRUCTIONS TO CLERK OF COURT
SERVICE LIST
The Clerk of Court is instructed to send the attached document, via the BNC, to the following parties: Joseph M. ElGuindy
2990 Lava Ridge Court, Suite 205
Roseville CA 95661 Karen Pine
PO Box 4155
El Dorado Hills CA 95762 Timothy L. Hamilton
3161 Cameron Park Dr #205
Cameron Park CA 95682