Brady v. Southern Electric Supply Co. Inc.

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 05-41989
Chapter 7
ACCRA COMMUNICATIONS
GROUP, INC.
Debtor.
___________________________/
LOIS I. BRADY, Trustee, 	A.P. No. 07-4051
Plaintiff,
vs.
SOUTHERN ELECTRIC SUPPLY
COMPANY, INC.,
Defendant.
___________________________/
MEMORANDUM OF DECISION
In the above-captioned adversary proceeding, Chapter 7 trustee
Lois Brady (“Plaintiff”) filed a Motion to Compel Discovery because
counsel 	for 	Defendant 	Southern 	Electric 	Supply 	Company, 	Inc.
(“Defendant”) had been unresponsive to Plaintiff’s discovery requests
for 	approximately 	four 	months. 	Defendant’s 	counsel 	provided
discovery 	one 	day 	prior 	to 	the 	hearing 	on 	the 	Motion 	to 	Compel 	and
did 	not 	appear 	at 	the 	hearing. 	The 	Court 	ordered 	Defendant 	to
reimburse Plaintiff for the costs of bringing the Motion to Compel.
Signed: June 30, 2008
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 30, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 07-04051 Doc# 53 Filed: 06/30/08 Entered: 06/30/08 16:28:46 Page 1 of 9

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At Plaintiff’s request, the Court issued an Order to Show Cause
Re: 	Failure 	to 	Pay 	Sanctions. 	Defendant’s 	counsel 	argues 	that 	he
should 	not 	be 	required 	to 	pay 	the 	sanctions 	that 	were 	previously
awarded and that further sanctions should not be awarded.
The Court holds that Defendant’s counsel must pay the sanctions
that 	were 	awarded 	by 	court 	order 	dated 	January 	2, 	2008. 	The 	Court
declines to award further sanctions.
SUMMARY OF FACTS
On March 9, 2007, Plaintiff filed an adversary complaint against
Rexel 	Datacom 	Inc., 	which 	was 	amended 	to 	name 	Southern 	Electric
Supply Co., Inc. as the defendant. 	The complaint sought recovery of
alleged 	preferential 	transfers. 	The 	matter 	was 	set 	for 	trial
assignment on September 21, 2007, but the parties continued the trial
assignment 	date 	to 	January 	18, 	2008 	by 	stipulation. 	The 	discovery
cut-off date was December 18, 2007.
Plaintiff’s 	counsel 	contacted 	Defendant’s 	counsel 	on 	August 	8
and 	August 	13, 	2007 	to 	make 	an 	informal 	request 	for 	discovery. 	On
August 21, 2007, Defendant’s counsel responded that he would produce
the requested documents soon. 	The documents were not received, and,
on 	September 	25, 	2007, 	Plaintiff’s 	counsel 	notified 	Defendant’s
counsel that she would serve formal discovery requests.
Plaintiff’s counsel served requests for production of documents,
interrogatories, and requests for admissions on Defendant’s counsel
on 	October 	8, 	2007. 	Responses 	were 	due 	within 	30 	days 	of 	service,
pursuant 	to 	Bankruptcy 	Rules 	7033, 	7034, 	and 	7036. 	On 	November 	26
Case: 07-04051 Doc# 53 Filed: 06/30/08 Entered: 06/30/08 16:28:46 Page 2 of 9

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and 27, Plaintiff’s counsel left messages for Defendant stating that
the deadline for production of the requested documents was November
8, 	2007 	and 	that 	no 	responses 	had 	been 	received. 	On 	November 	30,
2007, 	Defendant’s 	counsel 	informed 	Plaintiff’s 	counsel 	that 	he 	had
been 	in 	a 	car 	accident 	and 	was 	taking 	medications, 	so 	that 	the
documents could not be produced immediately. 	However, he promised to
produce them in a few days. 	On December 3, 2007, Plaintiff’s counsel
sent 	Defendant’s 	counsel 	a 	demand 	letter 	requesting 	responses 	by
December 5, 2007.
On December 7, 2007, Plaintiff filed a Motion for Sanctions or,
in the Alternative, Motion to Compel Discovery (“Motion to Compel”).
The 	Motion 	to 	Compel 	was 	set 	for 	hearing 	on 	December 	20, 	2007.
Defendant did not produce any documents until December 19, 2007.
On 	December 	20, 	2007, 	Plaintiff’s 	counsel 	appeared 	at 	the
hearing 	on 	the 	Motion 	to 	Compel. 	Defendant’s 	counsel 	did 	not 	file
any opposition to the Motion to Compel, and he did not appear at the
hearing. 	Plaintiff’s counsel informed the Court that documents had
been produced the day before the hearing. 	Thus, an order compelling
production 	would 	not 	be 	needed, 	only 	an 	award 	of 	fees. 	The 	Court
awarded Plaintiff 	attorney’s fees for filing the Motion to Compel.
The Court instructed Plaintiff’s counsel to give Defendant ten days’
notice and opportunity to object to the amount of fees awarded.
On 	December 	21, 	2007, 	Plaintiff 	filed 	and 	served 	a 	Notice 	of
Award of Monetary Sanctions in the amount of $1,791.50. 	Defendant’s
counsel did not respond to the notice, and the Court entered an Order
Case: 07-04051 Doc# 53 Filed: 06/30/08 Entered: 06/30/08 16:28:46 Page 3 of 9

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1The Court’s docket indicates that sanctions were due on
February 1, 2008 - thirty days after the order was entered. 	In her
Motion for Issuance of OSC, Plaintiff’s counsel states that
February 1 was the due date. 	However, the docket notation does not
have the effect of a court order.
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Granting 	Monetary 	Sanctions 	on 	January 	2, 	2008. 	A 	deadline 	for
payment of sanctions was not specified in the Order. 1
The 	parties 	settled 	the 	case 	prior 	to 	trial. 	On 	February 	25,
2008, 	Plaintiff 	filed 	an 	Amended 	Application 	for 	Order 	Approving
Compromise which stated that Defendant agreed to pay Plaintiff $6,000
“to settle the claims asserted against it by the Trustee.” 	An order
granting the application was entered on March 14, 2008.
Defendant paid the compromised amount but failed to pay the fees
awarded 	pursuant 	to 	the 	Motion 	to 	Compel. 	At 	Plaintiff’s 	request,
the Court issued an Order to Show Cause Re: Failure of Debtor [sic]
to Comply with Order Granting Monetary Sanctions (“OSC”) on April 23,
2008. 	Defendant’s counsel responded in writing to the OSC. 	At the
hearing on June 4, 2008, neither party presented further argument.
DISCUSSION
Plaintiff requests payment of the sanctions that were awarded
by court order dated January 2, 2008, as well as reimbursement of
Plaintiff’s attorneys’ fees incurred for applying for the OSC.
Discovery sanctions awarded on January 2, 2008
Federal Rule of Civil Procedure 37(a), which is made
applicable to adversary proceedings in bankruptcy through
Bankruptcy Rule 7037, provides that “[a] party, upon reasonable
notice to other parties and all persons affected thereby, may apply
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for an order compelling disclosure or discovery” if a party fails
to respond to an interrogatory submitted under Rule 33, or fails to
permit inspection as requested under Rule 34. 	FRCP 37(a)(2)(B).
Rule 37(a)(4) states that:
[I]f the disclosure or requested discovery is provided
after the motion was filed, the court shall, after
affording an opportunity to be heard, require that the
party or deponent whose conduct necessitated the motion
or the party or attorney advising such conduct or both of
them to pay to the moving party the reasonable expenses
incurred in making the motion, including attorney’s fees,
unless the court finds that the motion was filed without
the movant’s first making a good faith effort to obtain
the disclosure or discovery without court action, or that
the opposing party’s nondisclosure, response, or
objection was substantially justified, or that other
circumstances make an award of expenses unjust.
In this case, Defendant responded to Plaintiff’s discovery
request after the Motion to Compel was filed, so Rule 37(a)(4)
requires that the Court order Defendant to compensate Plaintiff for
reasonable expenses unless one of the three exceptions applies.
The Court finds that no exception applies, so the award of expenses
was warranted.
First, Plaintiff’s counsel made a good faith effort to obtain
discovery prior to filing the Motion to Compel. 	Plaintiff’s
counsel contacted Defendant’s counsel at least seven times between
August 8 and December 3 in an effort to obtain discovery without
the Court’s involvement. 	Defendant’s counsel affirmatively
represented that the discovery would be provided on at least two
occasions, but it was not provided. 	Plaintiff filed the Motion to
Compel as a last resort after her informal and formal requests for
discovery were unsuccessful.
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2Defendant’s Ex Parte Application for Trial Continuance states
that Defendant’s car accident occurred during late November.
3This date was included in Defendant’s Ex Parte Application
for Trial Continuance, not the response to the OSC.
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Second, Defendant’s nondisclosure was not substantially
justified. 	Defendant never objected to the content or scope of
Plaintiff’s discovery requests. 	Defendant’s counsel first informed
Plaintiff that there would be some delay in producing discovery on
November 30, when he stated that he had been in a car accident and
would be unable to produce the documents for a few days. 2 	However,
Defendant’s counsel has presented no reason why he did not provide
timely responses to Plaintiff’s formal discovery requests, which
were due by November 8. 	Defendant’s counsel has presented no
substantial justification for his failure to produce any documents
to Plaintiff’s counsel between mid-August and late November, 2007.
Finally, Defendant has not shown that other circumstances make
an award of expenses unjust. 	Defendant’s counsel states that he
was ill and unable to work on the date of the hearing on the Motion
to Compel. 	Defendant’s counsel subsequently underwent abdominal
surgery on December 29, 2007. 3 	However, Defendant’s counsel was
able to prepare discovery and provide it to Plaintiff’s counsel on
December 19. 	In addition, Defendant’s counsel still has not
presented any explanation for his failure to produce discovery
before the Motion to Compel was filed.
Plaintiff’s counsel followed the instructions given by the
Court at the December 20 hearing and provided ten days’ notice to
Defendant’s counsel of the amount of fees she incurred in preparing
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the Motion to Compel. 	Defendant’s counsel did not object to the
amount of fees awarded.
Defendant argues that he should no longer be required to pay
sanctions because the parties settled the case for $6,000, and
Defendant has fully performed the settlement agreement, which
included a release of future claims by the trustee. 	However, the
trustee’s claim for discovery sanctions is not a future claim. 	A
court order awarding sanctions to the trustee was entered prior to
the parties’ settlement agreement. 	The settlement agreement does
not explicitly include the preexisting sanctions award, nor does it
excuse Defendant from complying with the Court’s order to pay
sanctions.
Defendant has not presented any justification for its failure
to timely comply with Plaintiff’s discovery request. 	Although the
Court is sympathetic to the health problems suffered by Defendant’s
counsel around the time when sanctions were awarded, Defendant’s
prior lack of cooperation with the discovery process warrants the
Court’s previous award of sanctions in the amount of $1,791.50.
Additional Sanctions for Applying for OSC
Federal Rule of Civil Procedure 37 does not provide a basis
for imposing further sanctions against a party for failure to pay
discovery sanctions; it only provides a basis for awarding
sanctions for discovery violations. 	See New York v. Gleave, 189
F.R.D. 263, 266 (W.D.N.Y. 1999). 	However, bankruptcy courts have
the power to hold parties in civil contempt for violation of a
court order, including an order to pay discovery sanctions. See
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Caldwell v. Unified Capital Corp. (In re Rainbow Magazine), 77 F.3d
278, 284-85 (9th Cir. 1996); see also 11 U.S.C. § 105(a).
In order to hold a party in contempt, the bankruptcy court
must find that the party “violated a specific and definite order of
the court.” 	Dyer v. Lindblade (In re Dyer), 322 F.3d 1178, 1191
(9th Cir. 2003). 	In this case, Defendant’s counsel has not yet
paid sanctions that the Court ordered him to pay. 	However, the
order was not sufficiently specific and definite because it did not
specify when the sanctions were due. 	For this reason, the Court
will not hold Defendant in contempt at this time.
CONCLUSION
Discovery sanctions in the amount of $1,791.50, as awarded by
court order on January 2, 2008, were warranted. 	However, the order
did not specify when compliance was required, so further sanctions
for contempt of court are not appropriate at this time. 	Defendant
will be ordered to pay $1,791.50 in sanctions to Plaintiff within
30 days from entry of the order pursuant to this Memorandum.
END OF DOCUMENT
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COURT SERVICE LIST
Kristina Pollak
Stromsheim and Associates
201 California St. #350
San Francisco, CA 94111
Mark A. Walsh
Walsh and Walsh P.C.
420 Exchange #270
Irvine, CA 92602
Case: 07-04051 Doc# 53 Filed: 06/30/08 Entered: 06/30/08 16:28:46 Page 9 of 9