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Henrik Klinge Retained Trust v. Triumph Apparel Corp

January 27, 2012


The opinion of the court was delivered by: Magistrate Judge Carlson



This is a breach of contract action brought by the Plaintiff arising out of a longstanding commercial lease arrangement at a property in York County, Pennsylvania. The Plaintiff, the Henrik Klinge Retained Trust ("Plaintiff" or "Klinge"), alleged a straightforward breach of this lease agreement in its complaint, asserting that the parties entered into a lease in September of 1990, and that Triumph Apparel Corporation ("Defendant" or "Triumph Apparel") breached the lease by vacating the premises without notice in August 2009, after accruing several months' delinquencies of rent payments. (Doc. 1) On January 18, 2011, prior to trial, the Court entered a consent judgment against Defendant in the amount of $800,000. (Doc. 50) Thereafter, Plaintiff engaged in discovery in aid of execution.

Frustrated by the results of this post-judgment discovery process, Plaintiff has now filed a motion seeking sanctions under Rule 37 of the Federal Rules of Civil Procedure (Doc. 79), arguing that Defendant has "made a mockery of the [discovery] process by its studied refusal to provide the information sought by Plaintiff." (Doc. 82, at 2) Plaintiff seeks an award of costs and attorney's fees.

Defendant disputes Plaintiff's characterization of its post-judgment conduct, represents that its discovery responses have been appropriate, and therefore maintains that sanctions are entirely unwarranted. Plaintiff declined to file a reply brief in further support of its motion, which is now ripe for disposition. For the reasons that follow, we find that Plaintiff has failed to demonstrate that sanctions are warranted, and the motion will be denied.


Frustrated by what it has been able to discover to date about the potential existence of assets that might help satisfy the judgment in this case, Plaintiff's motion claims that Defendant has unreasonably failed to participate meaningfully in post-judgment discovery in aid of execution. (Doc. 79) In its brief in support of the motion, Plaintiff asserts that "Defendant has steadfastly refused to provide copies of all bank account statements, has failed to provide their corporate minute book with minutes and motions, and, most significantly, has refused to provide any accounting for the millions of dollars in funds generated by its relationship with Iconix Brand Group." (Doc. 82, at 1-2) In addition, Plaintiff expresses frustration that Plaintiff designated a former Chief Operating Officer as the company's designee for purposes of a Rule 30(b)(6) deposition, arguing that the designee was unable to answer certain questions put to him regarding company assets. Lastly, Plaintiff complains about the timing of the production of certain documents that had been requested in connection with the corporate deposition. For all of these alleged failures, Plaintiff argues that the Court should impose sanctions against Defendant under Rule 37 of the Federal Rules of Civil Procedure.

In response, Defendant asserts that Plaintiff has essentially been seeking sanctions against Defendant for alleged non-compliance with discovery requests almost from the moment the consent judgment was entered in this case, and in many ways seems to have conducted discovery to support a motion for sanctions rather than to discover information in aid of executing on the judgment. Moreover, Defendant essentially suggests that Plaintiff has long known that the company was penniless, and without assets that could be executed upon. In this regard, Defendant emphasizes that Plaintiff has, for years, been aware that Defendant ceased all business operations in 2009, and that Defendant's assets were liquidated during the first half of 2010 after the financing arrangement with Wells Fargo Bank was terminated, resulting in the final demise of the company, and culminating in the sale of certain real estate that Defendant owned at the time. Accordingly, Defendant maintains that "Plaintiff knew when it obtained the judgment that Defendant was dead as a company and had been for over 6 months." (Doc. 81, at 10-11)

In response to Plaintiff's assertion that it has refused to participate in discovery, Defendant notes that since April 2011, the company has produced more than 3,000 documents containing substantive information in response to discovery requests, and that the company has made available an additional two truckloads of corporate records that were generated by prior management that may contain relevant information, but Plaintiff has declined to review these documents.

In addition, Triumph Apparel defends its decision to designate one of its former officers, Kevin Nisbet, as the company's corporate designee in response to Plaintiff's Rule 30(b)(6) deposition notice. Defendant notes that Mr. Nisbet traveled from his home in South Carolina to Pennsylvania on October 24, 2011, to be subjected to the deposition, and that Mr. Nisbet was prepared to testify about the documents that had already been produced to Plaintiff, and which reflected Defendant's financial condition at the time the records were created. These documents included banking records and ledgers that show the flow of funds into and out of Defendant during 2009 and the first half of 2010, among other corporate records. Defendant emphasizes that certain documents Plaintiff would like to discover simply do not exist or are now beyond the ability of the company to provide, particularly in its non-operating, liquidated state.

Finally, Defendant asserts that Mr. Nisbet was prepared to testify substantively in response to Plaintiff's deposition notice, but Plaintiff's counsel elected not to use the documents that had been produced in order to determine whether Mr. Nisbet could respond, preferring to accept "I don't know" as an answer to numerous questions, and then take the drastic route of requesting sanctions on the grounds that Defendant had designated an unprepared or ignorant witness for the deposition. Defendant argues that although Mr. Nisbet testified that he was prepared to provide additional substantive testimony at the deposition, Plaintiff's counsel decided not to solicit any further testimony, and instead simply adjourned the deposition, leading to the instant motion. On these asserted facts, Defendant contends that sanctions are simply not warranted.


A. Legal Standards

Pursuant to Rule 69 of the Federal Rules of Civil Procedure, a judgment creditor is permitted to engage in discovery in aid of execution. ...

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