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Northstar Financial Co., Inc. v. Nocerino

United States District Court, Third Circuit

November 15, 2013




The dispute between the parties, Plaintiff Northstar Financial Companies, Inc. and Defendants James J. Nocerino and Horizon Financial Network, LLC, centers around an asset purchase and employment agreement. Unfortunately, rather than litigate this case on the merits, Defendants have chosen to engage in obstructionist discovery practices that have persisted since 2011 when Plaintiff filed its complaint.

Before the Court is Plaintiff’s motion for sanctions and request that a default judgment be entered against Defendants. Because we conclude that Defendants’ discovery violations have been egregious and in bad faith, we will grant Plaintiff’s motion and enter a default judgment on Plaintiff’s behalf and against Defendants.


Plaintiff is a financial services company. Through an asset purchase agreement dated January 15, 2010, Plaintiff purchased Horizon, also a financial services company, which was owned by Defendant Nocerino. Plaintiff and Nocerino also entered into an employment agreement whereby Nocerino was to work for Plaintiff. Under the asset purchase agreement and employment agreement, Plaintiff was assigned the right to all future revenue earned from the client-related assets acquired from the acquisition of Horizon. The central issue in this case pertains to Nocerino’s obligation to turn over the revenue he received after the purchase agreement, and Plaintiffs allegations that he refused to do so.

On July 5, 2011, Plaintiff initiated this action against Defendants, Nocerino and Horizon, in state court and thereafter, on August 12, 2011, Defendants removed the case to this Court, invoking diversity jurisdiction. Attorneys Joseph Vaughn and Joseph Freeth[1] signed the Notice of Removal and were listed on the docket as attorneys of record for the Defendants. (See Notice of Removal; ECF docket.)

The ongoing discovery disputes between the parties, which culminated in the instant motion, began in late 2011.[2] While recapping the discovery history is cumbersome, we do so in order to demonstrate why we have concluded default is appropriate.


On or about October 28, 2011, shortly after the complaint was filed, Defendants were served with Plaintiff’s First Set of Requests for Interrogatories and Plaintiff’s First Set of Requests for Documents. Pursuant to Federal Rules of Civil Procedure 33(b)(2) and 34(b)(2)(A), answers to this discovery were due on November 28, 2011.

On December 2, 2011, after the thirty-day response deadline had passed, Defendants served their responses, which were entirely inadequate. For instance, in a discovery request that was central to the dispute, Plaintiff’s interrogatory no. 3 requested the identification of all revenue earned from the sale of financial products or the rendering of financial services since May 1, 2011—including the name of the client, account and/or policy that generated the revenue. Defendants’ answer was devoid of any written response and only included attached commission statements without explaining which specific documents were responsive to Plaintiff’s interrogatory. These documents did not contain Bates stamp numbers or any other method of identification, nor did they include the name of the client or account that generated the revenue.

By way of a second example of Defendants’ deficient discovery answers, in response to Plaintiff’s request for documents no. 12, which requested copies of all 2010 IRS Form 1099s received by James J. Nocerino, Defendants did not produce these documents and responded that the 1099s were with Mr. Nocerino’s Certified Public Accountant. Despite the fact that Plaintiff’s request had been made at the end of October 2011, Defendants had yet to produce these documents as of the end of December 2011, nearly two months later. (Doc. No. 30, pp. 2, 5.)

On January 9, 2012, at Plaintiff’s request, we held a telephone conference regarding Defendants’ deficient responses. The parties were then given a two-week period to attempt to reach a resolution. Having failed to do so, a hearing was held on January 24, 2012.

At the hearing, Defendants’ counsel was unable to provide any explanation for Defendants’ belated and inadequate responses other than they had not yet gathered the requested information. Accordingly, we entered an Order on January 30, 2012 that: (1) directed Defendants to fully and completely comply with Plaintiff’s discovery requests on or before February 3, 2012; (2) required Defendants to Bates-stamp their discovery responses and include an index or other document identifying which documents were responsive to each particular discovery request; and (3) sanctioned Defendants in the amount of $1000.00 to be paid on or before February 3, 2012. (See Doc. No. 33.)

On February 2, 2012, Defendants served their Second Supplemental Responses to Plaintiff’s First Set of Interrogatories and Second Supplemental Responses to Plaintiff’s First Set of Requests for Documents. Defendants Bates-stamped documents 1-1942 and included two indices.

On March 8, 2012, Plaintiff filed its first motion for sanctions asserting that Defendants’ February 2, 2012 responses failed to comply with this Court’s January 30, 2012 Order and were otherwise deficient. A hearing on Plaintiff’s motion for sanctions was held on April 23, 2012, and there, upon review of Defendants’ responses, we concluded that Defendants still had not fully complied with Plaintiff’s discovery requests and were in violation of this Court’s January 30, 2012 Order. For example, although Defendants’ response included indices, such indices did not, contrary to the clear directive in our January 30, 2012 Order, identify which documents were responsive to each particular discovery request. (See Hr’g Tr., Apr. 23, 2012 at pp. 45-46.) Additionally, some of the commission statements requested by Plaintiff had still not been produced. Defendants’ counsel, Mr. Vaughan, conceded as much and acknowledged that Mr. Nocerino could have obtained these statements by simply calling the companies that issued the statements, but that this did not occur because Plaintiff could just as easily have subpoenaed the companies for the same information. (Id. at pp. 37-38.) This position runs counter to Defendants’ obligations under Rule 34.[3]

Just prior to the hearing, Mr. Vaughan also provided Plaintiff with Defendants’ responses to Plaintiff’s Second Set of Interrogatories and Plaintiff’s Third Set of Requests for Production of Documents. These responses were nearly one month delinquent and did not include certain documents indicated as being attached. Mr. Vaughan stated that he had just received the documents from his clients a few days prior, and conceded at the hearing that Defendants had still not submitted phone records that were requested in Plaintiff’s First Set of Requests for Documents, which were at that point more than five months overdue. ...

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