U.S. District Court, Maryland Case Summaries: October 30, 2011 [Daily Record, The (Baltimore, MD)]
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Civil Procedure
Discovery deficiencies
BOTTOM LINE: Plaintiff's motion to compel discovery was denied because plaintiff failed to follow FRCP 37 or the local discovery rules before filing his motion with the court.
CASE: Anderson v.
FACTS: On
The district court denied Anderson's motion without prejudice to re-filing the motion, in compliance with the rules, if the discovery conflicts remain after the parties made sincere attempts to resolve them.
LAW: Litigants have an obligation to cooperate with respect to planning and executing discovery or resolving discovery disputes.
A party cannot file a motion to compel without first working cooperatively with the other party to resolve the dispute. See FRCP 37(a)(1); Loc. R. 104 .7; Guideline 1.a. Specifically, a party must either confer with the other party and make "sincere attempts to resolve the differences between them," or make a sincere effort to confer that the other party rebuffs. Loc. R. 104.7; see FRCP 37(a)(1).
Attorneys "are expected to communicate with each other in good faith throughout the discovery process to resolve disputes without the need for intervention by the Court, and should do so promptly after becoming aware of the grounds for the dispute." Guideline 1.e; see Kemp v. Harris, 263 F.R.D. 293, 297 (D.Md.2009). Counsel "may bring unresolved discovery disputes to the Court's attention for resolution by filing a letter, in lieu of a motion, that briefly describes the dispute, unless otherwise directed by the Court." Guideline 1.e.
When the time is ripe to file a motion to compel, a certificate attesting to the conference -- or "counsel's attempts to hold such a conference without success" -- must accompany the motion. Loc. R. 104.7; see FRCP 37(a)(1).
Anderson neither filed a certificate nor suggested that he made any effort to communicate with Reliance about the deficiencies in Reliance's discovery responses.
Moreover, when a party asserts that the opposing party provided substantially inadequate discovery responses, the party must follow the procedures set out in Local Rule 104.8;
As one facet of the duty to cooperate, Local Rule 104.8 requires that the parties try to resolve disputes regarding the adequacy of discovery responses informally, without involving the court. Loc. R. 104.8.b. If the informal communications do not resolve the dispute, the requesting party may serve a motion to compel on the opposing party (not the court), receive a response, and serve a reply. Loc. R. 104 .8.a-b. Only after this exchange may the requesting party file the papers with the court, and only if the dispute still remains despite the parties' sincere efforts to resolve it. Loc. R. 104.8.c.i. At that time, "the party seeking to compel discovery shall file the certificate required by L.R. 104.7, and shall append thereto a copy of the motion and memoranda previously served by the parties under L .R. 104.8.a." Id.
Anderson filed his motion directly with the court, unaccompanied by the required certificate or Reliance's response. Therefore, the issue of whether Reliance's responses were complete and non- evasive, as required by FRCP(a)(4), was not ripe for decision.
While Anderson's motion was not a model of clarity, Reliance's responses were largely boilerplate objections. Boilerplate objections are expressly prohibited by FRCP 33(b)(4), which provides that "[t]he grounds for objecting to an interrogatory must be stated with specificity." See also Loc. R. 104.6.
Moreover, objections to discovery, including Rule 33 interrogatories and Rule 34 document production requests, must be specific, non-boilerplate, and supported by particularized facts where necessary to demonstrate the basis for the objection. Hall v. Sullivan, 231 F.R.D. 468, 470 (D.Md.2005); Thompson v. U.S. Dep't of Hous. &
Additionally, in some instances, Reliance asserted privilege without particularizing its assertion. Objections based on attorney- client privilege or the work product doctrine must be particularized. FRCP 26(b)(5). The failure to do so to be a waiver of the privilege or work product protection. Victor
Accordingly, the district court ordered all counsel to conduct discovery in accordance with the principles set forth in Mancia, 253 F.R.D. at 358, which includes an obligation to cooperate during the conduct of discovery, as well as to limit the cost of discovery so that it is proportional to what is at issue in the case.
COMMENTARY: If an emergency discovery dispute arises that counsel cannot resolve, despite good faith efforts to do so, the court ordered counsel to follow the procedure adopted in
Counsel must make good faith attempts to resolve the dispute themselves. If counsel cannot resolve the dispute, they should notify the judge and demonstrate why the matter is an emergency and that they have made good faith efforts to resolve it.
PRACTICE TIPS: If a party refuses to provide discovery on the basis of attorney--client privilege or work product immunity, and if providing separate designations for each document in the privilege log would be excessively burdensome or expensive, the party may designate categories of documents instead, provided that each document in the category is within the privilege or protection claimed and shares common characteristics with the others in the category. Guideline 10.d.iii, iv.
Civil Procedure
Discovery sanctions
BOTTOM LINE: Where defendants in a products liability suit served plaintiffs' counsel with written requests for interrogatories and production of documents, agreed to plaintiffs' request for an extension of time, made repeated attempts over ensuing months to obtain the materials, and then filed a motion to compel discovery and impose sanctions on plaintiffs for discovery violations, the motion to compel was rendered moot by plaintiffs' subsequent production of the responses, but the motion to impose sanctions was granted.
CASE: Windsor v.
FACTS: Plaintiffs,
Defendants alleged that on
By
In
On
The district court granted in part and denied in part Defendants' Motion for Sanctions and to Compel Discovery.
LAW: Federal Rule of Civil Procedure 37(a) authorizes the basic motion for enforcing discovery obligations.
District courts enjoy substantial discretion in managing discovery, including granting or denying motions to compel.
Further, dilatory conduct during the discovery process only makes the litigation process less efficient and more expensive. Imposition of sanctions would mitigate the expense unfairly imposed on Defendants, and could serve to deter Plaintiffs and their lawyers from similar foot-dragging in the future.
Accordingly, the Court granted Defendants' motion for sanctions.
COMMENTARY: Defendants' motion was, in large part, mooted by developments subsequent to its filing. The issue of Plaintiffs' Rule 26(a)(2) disclosures was mooted in its entirety by the Court's granting of Plaintiffs' motion for leave to file the disclosures out of time and the Court's finding that Defendants would not be prejudiced thereby. Further, Defendants' motion to compel Plaintiffs' responses to their other discovery requests was moot because Plaintiffs' counsel represented that he had since served the responses, and Defendants made no claim to the contrary despite ample opportunity to do so.
For these reasons, the Court denied as moot the part of Defendants' motion relating to Plaintiffs' Rule 26(a)(2) disclosures and the motion to compel Plaintiffs' response to Defendants' interrogatories and requests for document production.
PRACTICE TIPS: Even if a court grants a motion to compel discovery responses pursuant to Federal Rule of Civil Procedure 37, the court may not order payment of the reasonable costs incurred by the moving party if the moving party failed to confer in good faith with opposing counsel before filing the motion, if the opposing party's non-cooperation was substantially justified, or if ordering the payment would be otherwise unjust.
Civil Procedure
Untimely motion to dismiss
BOTTOM LINE: Bankruptcy court did not err in denying defendant's untimely motion to dismiss for failure to state a claim, which was filed after defendant filed his answer to plaintiff's complaint, even though bankruptcy judge noted in his opinion that plaintiff's complaint did not contain sufficient factual matter to state a claim plausible on its face sufficient to meet the pleading test.
CASE: Stevens v.
FACTS: In late 2004,
The contract also included a stock pledge agreement for the two companies, a life insurance policy for the benefit of Showalter, and UCC financing statements to secure the amount owed. Stevens eventually defaulted under the terms of the note. On
On
In the complaint he filed against Stevens in the
Stevens filed an answer on
The matter later proceeded to trial, after which the bankruptcy judge issued a decision denying Stevens a discharge on the grounds that Stevens had taken numerous steps within the year preceding the filing of his bankruptcy petition to remove property from his control so as to put such property out of Showalter's reach. At the outset of his opinion, the bankruptcy judge wrote in a brief footnote that while the complaint did not contain sufficient factual matter to state a claim plausible on its face sufficient to meet the pleading test, this issue was not raised by the defendant and that, therefore, the case was tried under "the old rules" of notice pleading.
Stevens appealed to the district court, which affirmed the decision of the
LAW: Stevens argued that the
The plain language of Federal Rule of Civil Procedure 12(b) establishes that a Rule 12(b)(6) motion to dismiss is untimely after an answer has been filed. However, a failure to submit a 12(b)(6) defense before pleading is not necessarily fatal because a defendant retains the right to raise the defense of failure to state a claim: (1) by filing a motion for judgment on the pleadings, pursuant to Rule 12(c), after the pleadings are closed but early enough not to delay trial; or (2) by raising the defense at trial. See Fed.
Thus, many courts have concluded that a court may construe an untimely Rule 12(b)(6) motion as a Rule 12(c) motion for judgment on the pleadings. See, e.g., Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir.1999).
It is equally true that, where a plaintiff's complaint fails to state a claim upon which relief can be granted, courts routinely grant leave to amend to provide the plaintiff with an opportunity to cure the errors in his complaint.
Further, it is undeniable that, at some point, a defendant no longer retains the right to claim that he has been prejudiced by deficiencies in a plaintiff's complaint.
In this case, it was beyond dispute that Stevens' motion to dismiss, which was expressly brought pursuant to Rule 12(b)(6), was presented after the filing of his answer and was, therefore, untimely. See Fed.
Accordingly, the decision of the
COMMENTARY: Even if the
Furthermore, even if the
Tellingly, Stevens did not attack the sufficiency of the evidence presented at trial, nor did he otherwise contest the merits of the
PRACTICE TIPS: While a court considering an untimely Rule 12(b)(6) motion to dismiss may choose to construe the motion as a Rule 12(c) motion for judgment on the pleadings, there is no binding authority explicitly requiring that a court must do so, nor is there any authority demonstrating that a court's failure to do so necessitates the undoing of a trial on the merits where the defendant fails to re-assert his defense in subsequent proceedings.
Commercial Law
Small Business Investment Act
BOTTOM LINE: Pursuant to the Small Business Investment Act of 1958, the
CASE:
FACTS: Pursuant to the Small Business Investment Act of 1958 (the "Act"), the
This case involved ECC Partners L.P, a limited partnership licensed as an SBIC.
In
ECentury was
Among its responsibilities, the SBA monitors the operation of all SBICs, in the course of which it undertakes annual reviews of the SBIC's financial statements. In 2006, after receiving
Accordingly, on
Thereafter, in
The SBA also asked the Court to take exclusive jurisdiction over all
The Court granted the requested relief and appointing the SBA as
ECentury,
Eventually, the Receiver filed a Recommended Disposition of Claims and a Motion for Entry of an Order Approving the Receiver's Recommended Disposition of Claims, Authorizing Payment of Approved Claims and Establishing Summary Disposition Procedures. The Receiver recommended that
No objection was taken with regard to the payment of the
The Court approved the recommended disposition, subject to any claimant's filing of an opposition.
The district court confirmed the SBA's Recommended Disposition of Claims, and denied ECentury's Motion in Opposition to the Receiver's Recommended Disposition of Claims.
LAW: The Receiver concluded that ECentury's claim for unpaid management fees was subordinated to amounts owed to the SBA. ECentury argued that the SBA lacked authority to unilaterally subordinate a licensee's approved management expenses in favor of its own equity interest.
A receivership created under 15 U.S.C. [section]687c is governed by principles applicable to federal equitable receivers generally.
Where a petitioner seeks relief from a receivership, the receiver ordinarily has no power to adjudicate that claim. Instead, that authority lies within the sound discretion of the appointing court.
Under the Small Business Investment Act of 1958, when the SBIC is licensed, the licensee agrees to abide by the provisions of the Act and accompanying Regulations. The Regulations provide that some or all of the licensee's rights may be forfeited if the SBA determines that the licensee has been noncompliant in some way, including when a Restricted Operation Condition has occurred.
The SBA has the right to impose certain remedies if a Restricted Operation Condition and is not cured to its satisfaction in a timely fashion. If the condition is not timely cured, SBA's remedies include the right to review and re-determine the licensee's approved Management Expenses. 13 C.F.R. [section]107.1820(f)(4).
Among other things, a licensee is not allowed to have a condition of capital impairment greater than that allowed under 13 C.F.R. [section]107.1830(c); if it does, the SBA has the right to re- determine the management fee. See 13 C.F.R. [section]107.1820(f)(4).
In this case, in the early part of 2007, the SBA determined that
The Regulations are explicit as to the SBA's authority, which includes reducing the licensee's management fees and expenses; indeed, the SBA would, most likely, have the right to extinguish a licensee's management fee altogether. And certainly, the SBA may remediate a capital impairment condition by reducing the management fee and offering the licensee the option of carrying the portion in excess of the reduced amount on its balance sheet such that, should things eventually turn around, the licensee would have the opportunity to recover up to the originally approved management fee once the SBA's preferred limited partnership claim has been paid.
As such, ECentury's argument that the SBA lacked authority to subordinate the fee was unpersuasive. There was nothing inherently unreasonable or unfair about a preferred equity partner (which, after all, provided financing for the business) to require that satisfaction of its equity interest come before payment of a portion of the management fee. Accordingly, the Court confirmed the SBA's Recommended Disposition of Claims.
COMMENTARY: ECentury also argued that to enforce the subordination clause,
When it was licensed as an SBIC,
PRACTICE TIPS: Capital impairment is the degree to which the
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