United States v. $743, 856. 34 In Bank Funds, 2:08-cv-07568

Background

The United States filed a civil forfeiture action in 2008 seeking $743,856.34 seized from several bank accounts as proceeds of alleged mail, wire, and bank fraud and related money-laundering statutes. Patricia Clark filed a claim to $292,680.33 (Wells Fargo account) and an answer demanding a jury trial.
The case was stayed from 2009–2014 under 18 U.S.C. § 981(g) pending related criminal prosecutions; the stay was lifted in October 2014 and a discovery schedule issued.
The government served Supplemental Rule G(6) interrogatories and other discovery in December 2014; claimant repeatedly missed deadlines, was ordered by the magistrate (Mar. 20, 2015) to answer without objection and produce documents by April 21, 2015, and provided incomplete and delayed responses and supplemental materials.
The government moved (May 22, 2015) to strike Patricia Clark’s claim and answer and enter default for failure to comply with discovery; claimant produced hundreds of pages, conceded some responses were incomplete, and offered more supplementation and a stipulation to extend discovery dates.
The court weighed the five-factor Malone test for terminating sanctions, considered whether misconduct showed willfulness or bad faith, and found insufficient prejudice and no clear willfulness to justify default judgment; instead it issued a 60‑day compliance warning and extended the case schedule by 60 days.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether claimant’s failure to comply with discovery justifies striking her claim and entering default under Rule 37	Patricia’s deficient and untimely discovery impeded the government’s ability to pursue depositions and meet the existing schedule, warranting terminating sanctions	Patricia acknowledged incomplete responses but said production was substantial, delays were not willful, and she would supplement; she offered to extend discovery to cure prejudice	Court denied motion for default; ordered compliance within 60 days, admonished claimant, and extended case deadlines by 60 days
Whether the Malone factors favor terminating sanctions	Government: first two factors favor sanctions and discovery noncompliance supports striking the claim	Claimant: prejudice can be cured by schedule extension; public policy favors resolution on merits; less drastic sanctions are available	First two factors favored sanctions, but prejudice was not incurable, public‑policy and availability of lesser sanctions counseled against termination
Whether claimant’s conduct showed willfulness or bad faith (required for default)	Government: failures could not be caused by circumstances beyond claimant’s control; demonstrate fault/willfulness	Claimant: offered explanations, has produced documents and will continue to supplement; no manifest bad faith	Court found no clear willfulness or bad faith sufficient to impose terminating sanctions
Appropriate remedy for discovery noncompliance	Government sought striking claim and default	Claimant sought opportunity to supplement and proposed schedule extensions	Court imposed a warning and 60‑day deadline to comply; extended discovery and trial dates instead of imposing default

Key Cases Cited

Hester v. Vision Airlines, Inc., 687 F.3d 1162 (9th Cir. 2012) (sets out Ninth Circuit approach to terminating sanctions and requirement of willfulness for default sanctions)
Malone v. U.S. Postal Serv., 833 F.2d 128 (9th Cir. 1987) (articulates five-factor test for terminating sanctions)
In re Phenylpropanolamine (PPA) Prods. Liability Litig., 460 F.3d 1217 (9th Cir. 2006) (explains role of Malone factors as guide rather than checklist)
Henry v. Gill Industries, Inc., 983 F.2d 943 (9th Cir. 1993) (prejudice and willfulness are key factors in terminating-sanctions analysis)
Fjelstad v. American Honda Motor Co., Inc., 762 F.2d 1334 (9th Cir. 1985) (default under Rule 37 requires willfulness, bad faith, or fault)