Stewart Title Guaranty Co. v. 2485 Calle Del Oro, LLC
| Decision Date | 07 August 2017 |
| Docket Number | Case No.: 15-CV-2288-BAS(WVG) |
| Court | U.S. District Court — Southern District of California |
| Parties | STEWART TITLE GUARANTY COMPANY, Plaintiff, v. 2485 CALLE DEL ORO, LLC et al., Defendants. |
REPORT AND RECOMMENDATION ON PLAINTIFF'S MOTION FOR SANCTIONS, RECOMMENDING (1) TERMINATING SANCTIONS, (2) PAYMENT OF EXPENSES, AND (3) CRIMINAL CONTEMPT PROCEEDINGS
[Doc. No. 45.]
Plaintiff brings this motion for terminating and monetary sanctions against Defendants Gettel and Conix VRC, LLC (collectively, "Defendants"). To understand this Court's recommendations, it is necessary to lay out the tortured history of this case, which the Court sets forth below and now summarizes. The email correspondence between opposing counsel reveal that while Plaintiff has been exceptionally patient and cooperative since the beginning of the case, Defendants and their attorney, Joseph Sammartino ("Defense Counsel" or "Mr. Sammartino"), have delayed and ultimately completely abdicated their discovery obligations despite a Court Order compelling their compliance. Plaintiff's counsel has tried mightily for months to obtain discovery informally. Defense Counsel continuously promised Plaintiff's counsel that Defendants would provide the requested discovery informally and lulled Plaintiff's counsel into believing that production was imminent. During this process, Plaintiff's counsel's correspondence were often outright ignored for days or weeks without a response. It was only when it became apparent that Defendants had no intention of following through on their promises that Plaintiff was left with no other option than to engage the Court and propound formal discovery. However, even the authority of the Court proved insufficient to prod Defendants into complying with their discovery responsibilities, and they ignored a Court Order compelling them to comply. To date, Defendants and Defense Counsel have provided no discovery to Plaintiff1 and have violated multiple Court Orders. Then, when faced with the prospect of case-dispositive and monetary sanctions, they failed to file any response to the instant motion for sanctions and failed to appear at the sanctions hearing.
Left with no alternative in light of Defendants' and Mr. Sammartino's complete failure to provide discovery, repeated violations of the Court's Orders, and failure to appear at the sanctions hearing, this Court recommends2 (1) granting Plaintiff's motion for terminating sanctions, (2) striking Defendants Gettel and Conix VRC, LLC's Answers, (3) entering default judgment and judgment in favor of Plaintiff, and (4) ordering $6,275 in payment of expenses to be paid jointly and severally by Defendants and Defense Counsel. Additionally, the undersigned Magistrate Judge certifies the facts below pursuant to 28 U.S.C. § 636(e)(6), recommends criminal contempt proceedings against Mr. Sammartino, and reporting to the State Bar of California.
Plaintiff Stewart Title filed its complaint on October 13, 2015, alleging fraud, RICO violations, negligence and other claims against Defendants 2485 Calle del Oro, LLC, Courtland Gettel, Jeffrey Greenberg, Conix VRC, LLC, Kathryn Nighswander, and Lynette Moreno.3 (Doc. No. 1.)4 Defendants Gettel, Nighswander, and Conix VRC, LLC all filed answers on February 10, 2016. (Doc. Nos. 16-18.)5
Defendant Gettel, who has pleaded guilty to his involvement, and other co-conspirators were involved in a criminal scheme to defraud private real estate lenders out of tens of millions of dollars. (16-CR-1099-WQH, Doc. Nos. 10-11.) Plaintiff was just one of eight victims who was defrauded out of millions of dollars, all of whom have now filed petitions seeking restitution from Gettel and his co-conspirators of the $33.6 million swindled from them. (Id., Doc. Nos. 22, 24-26, 28, 29.) The United States supports most of the victims' efforts to recoup their losses. (Id., Doc. No. 41.) Gettel has agreed to provide restitution to his victims and forfeit his ill-gotten gains. (Id., Doc. Nos. 10, 12.)As Plaintiff stated in a July 1, 2016, joint status report in the instant case, "[i]f Stewart determines that recovery from these trusts is not viable, Stewart will consider dismissing this action and seek recovery through the [criminal] restitution orders." (Doc. No. 53 at 2.) However, there are multiple victims all fighting for some pro-rata share of any funds the United States may be able to obtain through forfeiture and off-sets from the sale of any of the involved properties. Accordingly, Plaintiff's prospect of obtaining full recovery is slim.
In the instant civil case, the Magistrate Judge originally assigned to the case ordered that an Early Neutral Evaluation ("ENE") occur on May 25, 2016. (Doc. No. 19.) The parties also were instructed to make initial disclosures on May 4th and lodge a joint discovery plan on May 11th, which they did. (Id.; see also Doc. No. 26.)
However, an ENE was not held. After receiving and considering the parties' ENE statements, the prior Magistrate Judge converted the ENE to an attorneys-only telephonic status conference. (Doc. No. 27.) The Magistrate Judge ordered a joint status report be lodged on July 1, 2016 before the status conference that was to be held on July 8, 2016. (Doc. No. 28.) In anticipation of the report and status call, on June 29, 2016, Plaintiff spoke with Mr. Sammartino about Defendants providing informal discovery regarding the financial status of Defendant Gettel's trust accounts. This call was memorialized in an email the same day at 3:48 p.m. (Doc. No. 42-3, Ex. B.) Less than two hours later, Defense Counsel responded via email that "[his] clients [were] willing to provide the information requested below." (Id.) The informal discovery Defense Counsel agreed to produce included information about the financial status of the trusts related to Gettel's various entities, including "copies of the trusts, the identity of the banks that the trusts use, bank account numbers, a list of the entities they have funded and the amounts that they funded, and any bank statements for the trusts' accounts or other documents regarding the trusts' financial situations." (Id.)
The parties lodged their joint status report on July 1, 2016, representing to the Magistrate Judge that they were working well together and that Defendants had agreed to provide documents informally to Plaintiff. (Doc. No. 53 at 2-3.) The parties requested a30-day continuance of the July 8, 2016 status conference. (Id.) The Court granted the request based upon the positive representations made by the parties, set the next status conference for August 8, 2016, and ordered that another joint status report be lodged on August 1, 2016. (Doc. No. 29.) With additional time granted, Plaintiff emailed Mr. Sammartino on July 8, 2016 for an update on when the informal discovery would be provided. (Doc. No. 42-3, Ex. B.) Defense Counsel did not respond. Plaintiff again emailed Defense Counsel on July 14, 2016 and asked for the same information. (Id.) Mr. Sammartino briefly responded that same day after his six-day silence, stating only that "[he] was working on getting it for [Plaintiff]." Defense Counsel provided no explanation of what was being done to acquire the information or when he expected to produce it to Plaintiff. Then radio silence ensued for eight days. When he failed to produce the promised informal discovery, Plaintiff again emailed him on July 22, 2016, asking for another status update. (Id.) Mr. Sammartino again did not respond.
On August 1, 2016, the parties owed the Magistrate Judge another joint status report, but Defense Counsel's last communication to Plaintiff occurred on July 14, 2016, over two weeks earlier. Plaintiff reached out to Defense Counsel via email on August 1, 2016, at 10:18 a.m., and addressed two points: that Plaintiff still had not received the informal discovery and referenced an attached document, which appears to have been a draft of the joint status report due that same day. (Doc. No. 42-3, Ex. C.) Three minutes later, Mr. Sammartino replied via email stating that he had not responded to Plaintiff's earlier email because his wife had been in the hospital,6 reassured Plaintiff that he continued to work on obtaining the informal discovery, and promised he would produce it as soon as he received it. (Id.) In fact, Defense Counsel represented in this email that his clients were eager to resolve the matter and that "requests have been made to the appropriate banks and financial institutions." (Id.) He also suggested for the first time that the delay may be due to thebanks not responding to his requests. (Id.) In an email exchange later that same day, Defense Counsel suggested to Plaintiff that the joint status report ought to ask for a 45-day—rather than a 30-day—continuance to allow him to represent to the Court that he had "done everything possible" to get the requested documents. (Id.) Mr. Sammartino suggested that he could "most likely get [] a declaration or affidavit from Ms. Nighswander that there is nothing in any of the trust accounts." (Id.) As far as this Court knows, Defense Counsel never produced a declaration from Nighswander nor an explanation for its non-production.7
The joint status report was lodged on August 1, 2016 as directed, and while it was still positive in tone, the report indicated only that Defense Counsel was continuing his efforts to obtain discovery without providing a description of the efforts being made. (Doc. No. 53 at 6 (paragraph 3).) The original Magistrate Judge granted the parties' request for a 45-day continuance and scheduled the next status report to be lodged on September 13, 2016 with the status conference to be held on September 22, 2016. (Doc. No. 30.)
On September 12, 2016, the day before the next joint status report was due, Plaintiff sent an email to Defense Counsel. (Doc. No. 42-3, Ex. D.) In this email, Plaintiff lamented that no documents had yet been produced and...
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