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EFMC International, Inc. v. Leep

December 12, 2006

EFMC INTERNATIONAL, INC., PLAINTIFF,
v.
LEEP, INC., DEFENDANT.



The opinion of the court was delivered by: Judge McClure

MEMORANDUM

BACKGROUND

On June 28, 2005, plaintiff, EFMC International, Inc. ("EFMC"), instituted this civil action against defendant, Leep, Inc. ("Leep"). In its amended complaint, plaintiff alleges that defendant failed to fulfill its obligations under a contract that was entered into in June, 2002. The amended complaint seeks recovery under various contract theories including breach of contract (Count I), promissory estoppel (Count II), unjust enrichment (Count III), quantum meruit (Count IV), breach of settlement agreement (Count V), and fraud in the inducement (Count VI).

This order stems from a pattern of nonparticipation in this case by the defendant and its counsel. The first instance of this conduct occurred when the parties voluntarily agreed to mediation in this case. After a mediator was selected and the mediation was scheduled, defendant decided that it would not send an agent to the mediation who had any authority to resolve the dispute, thus rendering the mediation useless. Thereafter, the mediation was cancelled.

The next instance of nonparticipation came during discovery. Plaintiff served requests for admission upon defendant. Defendant did not respond to these requests. Plaintiff then filed a motion for summary judgment, arguing that the failure to respond resulted in each request being deemed admitted. (Rec. Doc. No. 14.) It relied on these deemed admissions to show that there was no disputed material fact. Defendant failed to reply to this motion within the ten days set forth by the local rules. Yet, prior to a decision by us on plaintiff's motion, the defendant was finally heard from. It filed a declaration in opposition to plaintiff's motion for summary judgment (Rec. Doc. No. 17), a motion to enlarge time for responding to request for admissions and to allow withdrawal of admissions deemed made for failure to respond in thirty days (Rec. Doc. No. 18), and provided responses to the original requests for admissions.

In an order dated September 19, 2006, this court allowed the defendant to withdraw its deemed admissions. In doing so, we noted that we had complete discretion whether to allow the admissions to stand or allow defendant to withdraw the admissions and cure any prejudice to plaintiff by other means. Because we felt it important to decide the case on the merits, we allowed the defendant to withdraw the admissions. To cure prejudice to the plaintiff, we extended the discovery deadline and ordered defendant's counsel to pay to the plaintiff's attorney fees incurred in the filing of the various motions and briefs associated with defendant's lack of participation in the case. Furthermore, the order stated that if the parties agreed to the amount to be paid by defendant's counsel within ten days, that amount shall be paid within thirty days of the date of the order.

Both parties agreed to the amount of $25,003.80 within the ten-day period. Yet, defendant's counsel did not pay the amount by October 19, 2006, which was required by the September 19, 2006 order. On October 27, 2006, the plaintiff filed a motion for contempt for defendant's failure to adhere to the court order., and the same day filed a supporting brief. As usual, the defendant and its counsel did not reply to this motion. We scheduled a hearing on plaintiff's motion, which was conducted on December 8, 2006. Counsel for plaintiff and local counsel for defendant were both present at the hearing.

During the hearing, local counsel for defendant conceded that both parties agreed to the amount of $25,003.80. He also conceded that he was in violation of the court's September 19, 2006 order. He attempted to justify his conduct by stating that defendant's primary counsel operates out of Washington state, and that he had been retained as local counsel for the sole purpose of filing documents with the court.

The hearing produced yet more evidence of defendant's dilatory conduct. As already discussed, the court's September 19, 2006 order extended the discovery deadline until December 1, 2006. Plaintiff attempted to depose several employees of the defendant prior to this new deadline, but these requests went unanswered. Plaintiff argued that this new violation of the discovery rules, coupled with the past violations and nonparticipation in the case, entitled plaintiff to entry of judgment by default as the only meaningful sanction available to the court.

When the court asked defendant's local counsel why judgment by default should not be entered against his client, he had very little to argue. He conceded that defendant consistently failed to participate in the case and that plaintiff had been prejudiced by this failure. He did allude to the fact that defendant may be experiencing financial difficulties as a reason for the failure to pay the money owed pursuant to the court order. Finally, he stated that his client has indicated that it has a meritorious defense, and this should be considered when deciding whether to enter default judgment.

At the hearing, counsel for both parties were able to agree to several things. Both parties agreed that the original $25,003.60 must be paid pursuant to the court order. They also agreed that interest at a rate of six percent from October 19, 2006 should be added to this amount. They agreed that this amount should be reduced by a payment of $8,500.00 received by plaintiff's counsel from defendant's Washington state counsel on December 7, 2006. Finally, the parties agreed to the amount of $10,000.00 for plaintiff's expenses in bringing the motion for contempt. This amount represents payment for time spent preparing the original contempt motion and supporting brief, preparing for the hearing, traveling to and from the courthouse, and the time actually spent at the hearing.

Thus, the court has before it plaintiff's unopposed motion for contempt. Now, for the following reasons, the court confirms its finding in open court that local counsel for defendant is in contempt of the court's September 19, 2006 order. Furthermore, the court will grant the extreme sanction of entering default judgment in favor of plaintiff and against defendant.

DISCUSSION

I. Plaintiff's Motion for ...


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