Homesteaders Life Company v. Gatens-Harding Funeral Home, Inc.
3:15-cv-12544
S.D.W. VaAug 8, 2016Background
- Plaintiff Homesteaders Life sued Gatens-Harding Funeral Home and its principals for alleged fraud (RICO-related). Defendants answered but largely refused to participate in discovery.
- Defendants failed to provide initial disclosures, did not respond to discovery, ignored a motion to compel, disobeyed the Court’s discovery order, and did not oppose Plaintiff’s request for default judgment.
- The Court entered default judgment against Defendants and warned that, under Fed. R. Civ. P. 16(f)(2) and 37(b)(2)(C), Defendants would be required to pay Plaintiff’s fees and costs unless they showed substantial justification or other circumstances making fee-shifting unjust.
- Defendants moved to waive the mandatory fee sanction, arguing severe financial hardship, concurrent civil and criminal litigation, attempts to negotiate settlement, and that defense counsel charged reduced fees.
- The Court found Defendants’ conduct unjustified, refused to excuse noncompliance based on resource constraints or settlement negotiations, and concluded awarding fees would be appropriate (including as available under the RICO statute).
- The Court denied the waiver request and directed Plaintiff to submit documentation substantiating its fees and costs for the Court to review reasonableness.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether mandatory fee-shifting under Rules 16(f)(2) and 37(b)(2)(C) should be waived | Fees should be awarded to compensate Plaintiff for expenses caused by Defendants’ discovery noncompliance | Waive fees because noncompliance was substantially justified by financial hardship, concurrent litigation, settlement efforts, and reduced-rate counsel | Denied — Defendants failed to show substantial justification or circumstances making fees unjust |
| Whether Defendants’ financial hardship and parallel criminal/civil matters excuse noncompliance | Plaintiff argued these circumstances do not excuse discovery failures or shift its costs | Defendants argued resource prioritization justified noncompliance and waiver of fees | Rejected — delay in seeking a stay or otherwise addressing the case shows choice, not inability, to comply |
| Whether reduced-rate defense counsel should be exempt from fee liability | Plaintiff sought fees from the disobedient party (and potentially counsel) for costs caused | Defendants argued counsel’s reduced-rate representation makes assessing counsel’s liability inequitable | Rejected — reduced rate does not absolve counsel of responsibility for assuring compliance |
| Whether attorney’s fees could also be awarded under RICO | Not directly opposed; Plaintiff cited statutory fee-shifting under RICO as alternative support for fees | Defendants did not displace statutory entitlement | Court noted 18 U.S.C. § 1964 authorizes recovery of costs and fees and could independently support fee award |
Key Cases Cited
- Pierce v. Underwood, 487 U.S. 552 (U.S. 1988) (good-faith reasonable misunderstanding can support finding of substantial justification)
- Hathcock v. Navistar Int'l Transp. Corp., 53 F.3d 36 (4th Cir. 1995) (disobedience to discovery orders must be serious or cause prejudice to warrant sanctions)
- Falstaff Brewing Corp. v. Miller Brewing Co., 702 F.2d 770 (9th Cir. 1983) (sanctions improper where noncompliance was attributable to inability to comply)
- Rickels v. City of South Bend, 33 F.3d 785 (7th Cir. 1994) (disobedient party bears burden to show substantial justification)
- Burkett ex rel. Estate of Burkett v. AIG Claim Servs., Inc., 244 F.R.D. 328 (N.D.W. Va. 2005) (disobedient party must prove substantial justification or injustice)
- Robinson v. Equifax Info. Servs., 560 F.3d 235 (4th Cir. 2009) (factors for determining reasonableness of attorney’s fees)