Guarantee Company of North America USA v. Lakota Contracting Inc., Civil Action No. 2019-1601

Background

Guarantee Company of North America sued Lakota Contracting Inc. (d/b/a NCF Interiors), National Commercial Flooring, JRH Avion Park, LLC, and Reza and Roya Amirghaffari alleging indemnity default. Proceedings began May 2019.
Defaults were entered for failure to plead but later vacated after defendants cited counsel conflicts and family hardships; an agreed scheduling order and discovery deadlines followed.
Plaintiff served discovery; defendants answered the amended complaint late and then failed to produce any discovery by court-imposed deadlines.
Defense counsel moved to withdraw, citing defendants’ failure to provide information; the Court permitted withdrawal and ordered corporate defendants to retain counsel (corporations cannot proceed pro se).
Defendants ignored further court orders, did not appear at the sanctions hearing, and later submitted a letter claiming counsel conflicts and possible insolvency without explaining discovery noncompliance.
The Court found willful, repeated noncompliance, denied lesser measures as ineffective, granted Plaintiff’s renewed sanctions motion, entered default judgment on Count I against all defendants, and awarded Plaintiff its reasonable expenses for the renewed motion.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether default judgment under Fed. R. Civ. P. 37 is appropriate for discovery violations	Default judgment is warranted because defendants repeatedly ignored court orders, produced no discovery, and failed to appear, so lesser sanctions would be ineffective	Defendants claimed inability to retain counsel due to conflicts and anticipated insolvency; did not justify discovery failures	Court granted default judgment on Count I as sanction: defendants’ pattern of noncompliance, burden on the court, and disrespect justified the sanction
Whether corporate defendants’ failure to retain counsel justifies default	Corporate defendants’ lack of counsel prevented discovery and justified default to prevent further delay	Corporate defendants argued conflicts impeded hiring counsel and sought time to obtain counsel and pursue insolvency	Court held corporations must appear through counsel; failure to retain counsel, despite warnings, supported default
Whether lesser sanctions would be adequate before imposing default	Plaintiff argued prior accommodations and a prior sanction (dismissal of a counterclaim) failed, so lesser sanctions would be futile	Defendants requested additional time (conflicts/insolvency) as justification for delay	Court explained a lesser sanction was inadequate given repeated noncompliance and prior unsuccessful accommodations; default was justified without exhausting lesser measures
Whether defendants’ asserted conflicts/bankruptcy prospects excuse noncompliance	Plaintiff: assertions are insufficient and do not excuse failure to engage in discovery	Defendants: conflicts prevented retaining counsel; may pursue bankruptcy, and requested additional time	Court found the cursory conflict/bankruptcy assertions unpersuasive and not a valid excuse for willful discovery refusals

Key Cases Cited

Bonds v. District of Columbia, 93 F.3d 801 (D.C. Cir. 1996) (district courts have broad discretion to impose discovery sanctions and must ensure sanctions are just)
Webb v. District of Columbia, 146 F.3d 964 (D.C. Cir. 1998) (default judgment is a sanction of last resort; three justifications may independently support default)
Shea v. Donohoe Constr. Co., 795 F.2d 1071 (D.C. Cir. 1986) (discusses reasons supporting severe sanctions including prejudice, docket burden, and deterrence)
Washington Metro. Area Transit Comm’n v. Reliable Limousine Serv., LLC, 776 F.3d 1 (D.C. Cir. 2015) (no duty to impose lesser sanctions first; court must explain why lesser sanctions are inadequate)
Rowland v. California Men’s Colony, Unit II Men’s Advisory Council, 506 U.S. 194 (1993) (a corporation may appear in federal court only through licensed counsel)
Carazani v. Zegarra, 972 F. Supp. 2d 1 (D.D.C. 2013) (entry of default supported where defendant failed to respond to discovery and communication attempts)
U.S. Sec. & Exch. Comm’n v. China Infrastructure Investment Corp., 189 F. Supp. 3d 118 (D.D.C. 2016) (default judgment appropriate where defendants repeatedly violated court orders and stalled litigation)
Perez v. Berhanu, 583 F. Supp. 2d 87 (D.D.C. 2008) (willfulness and recalcitrance support severe sanctions where lesser orders are unlikely to work)
Flynn v. Thibodeaux Masonry, Inc., 311 F. Supp. 2d 30 (D.D.C. 2004) (entry of default where corporation refused to retain counsel despite court order)
Founding Church of Scientology v. Webster, 802 F.2d 1448 (D.C. Cir. 1986) (default judgment inappropriate unless misconduct involves willfulness, bad faith, or fault)