The opinion of the court was delivered by: (judge Caputo)
Presently before the Court is the Motion for Sanctions and a Rule to Show Cause why Defendants Feldspar Investments, LLC, Feldspar Properties, LLC, and Ronald W. Satterfield (collectively "Defendants") Should Not Held in Contempt of Court. (Doc. 139). For the reasons that follow, Plaintiffs' request for sanctions will be granted in part and denied in part.
In 1991, Plaintiffs sold a manufacturing plant and property located in Hazle Township, Luzerne County, Pennsylvania (the "Site") to Chromatex and Rossville Industries. As part fo the sale, Chromatex and Rossville Industries agreed to defend and indemnify Plaintiffs against any environmental liability associated with the Site (the "Indemnification Agreement"). Thereafter, the Environmental Protection Agency ("EPA") sued Chromatex and Plaintiffs due to environmental issues related to the Site. Chromatex provided a defense for Plaintiffs. In 1993, the EPA obtained both a judgment for its then-accrued response costs and a declaratory judgment for future response costs.
In the meantime, Defendant Culp, Inc. purchased substantially all of the assets of Chromatex and related selling corporations for $32.8 million- $13.3 million to pay the debts of the selling corporations and the rest in cash. Chromatex received none of the sale proceeds.
Instead, Defendant Satterfield, Defendant W. Frank Hutchenson, and other directors and shareholders of Rossville Investments and Chromatex allegedly diverted funds from Chromatex and sought to shield the funds from being used to satisfy the EPA's additional costs and the indemnification obligations owed to Plaintiffs.
Meanwhile, unbeknownst to Plaintiffs, the EPA continued to conduct response actions at the site. After ten years of additional work, the EPA began to issue invoices to Chromatex and Plaintiffs now totaling over $10.3 million in costs allegedly incurred for clean-up activities.
Ultimately, Plaintiffs commenced this action against a number of Defendants for damages and to enforce the Indemnification Agreement. In particular, Plaintiffs named Feldspar Investments, LLC and Feldspar Properties, LLC as Defendants because the two companies were allegedly formed by Satterfield and were entities into which the assets of Chromatex were fraudulently transferred. Satterfield was also named as a Defendant.
II. Relevant Procedural History
On April 14, 2010, Plaintiffs served interrogatories and document requests on the Feldspar Defendants. On April 26, 2010, Plaintiffs served interrogatories and document requests on Defendant Satterfield. Defendants failed to timely respond to the discovery requests or request an extension of time to respond.
Thereafter, on June 22, 2010, Plaintiffs filed a motion to compel Defendants to provide responses to their discovery requests. On July 2, 2010, Defendants provided minimal responses to Plaintiffs' requests, including the production of fifteen (15) documents. On July 26, 2010, Plaintiffs filed a response identifying the deficiencies in Defendants' discovery production.
On October 8, 2010, the Court granted Plaintiff's motion to compel discovery from Defendant Satterfield and the Feldspar Defendants.
In March 2011, Plaintiffs sent multiple correspondences to Defendants detailing the deficiencies in their discovery responses and requesting supplemental discovery disclosures. In particular, Plaintiffs sought electronically-stored information in its native format after Defendant Satterfield produced an incomplete printout of electronic financial statements that had not been previously produced.
On April 5 and 6, 2011, the Court held a hearing on the destruction of documents by Satterfield and Defendants Chromatex/Rossville. During the course of the hearing, the Court confirmed that Plaintiff's motion to compel discovery from the Feldspar Defendants and Defendant Satterfield was granted ...