Wells Fargo Bank NA v. Wyo Tech Investment Group LLC ( 2019 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Wells Fargo Bank NA, No. CV-17-04140-PHX-DWL 10 Plaintiff, ORDER 11 v. 12 Wyo Tech Investment Group LLC, et al., 13 Defendants. 14 15 Pending before the Court is the Judgment Creditors’ motion for sanctions. (Doc. 16 190.) For the following reasons, the motion will be granted in part and denied in part. 17 BACKGROUND 18 On February 3, 2019, the Judgment Creditors served Wyo Tech with a first request 19 for production of documents (“RFP”) and a first set of interrogatories. (Docs. 126-1, 126- 20 2.) 21 On April 30, 2019, the parties filed a joint letter summarizing a discovery dispute 22 over Wyo Tech’s response to those requests. (Doc. 126.) 23 On May 1, 2019, following a hearing, the Court issued an order requiring Wyo Tech 24 “to comply with the two outstanding discovery requests.” (Doc. 128.) In reaching this 25 conclusion, the Court rejected “Wyo Tech’s objection to the requests as being overbroad,” 26 finding that “Wyo Tech has forfeited or waived its objections for reasons as stated on the 27 record. However, the Court will not compel Wyo Tech to comply with the [Judgment 28 Creditors’] request for production #15.” (Id.) The Court further ordered Wyo Tech to 1 “produce all material no later than May 15, 2019.” (Id.) 2 On August 13, 2019, the Judgment Creditors filed the motion for sanctions. (Doc. 3 190.) Afterward, Wyo Tech filed an opposition (Doc. 210) and the Judgment Creditors 4 filed a reply (Doc. 220). 5 On October 15, 2019, the Court issued a tentative ruling on the Judgment Creditors’ 6 motion. (Doc. 256.) 7 On October 30, 2019, the Court heard oral argument. (Doc. 277.) 8 DISCUSSION 9 A. The Parties’ Arguments 10 In their motion for sanctions, the Judgment Creditors contend that Wyo Tech still 11 has not fully complied with their RFPs and interrogatories, even though the Court set a 12 May 15, 2019 deadline for compliance. (Doc. 190.) The motion begins by summarizing 13 an array of discovery-related emails and communications that the parties exchanged 14 between May 15, 2019 and July 24, 2019. (Id. at 1-9.) The Judgment Creditors contend 15 that, during this period, Wyo Tech “play[ed] a game of cat and mouse with its discovery 16 responses,” repeatedly “ma[de] a belated production of documents,” and “serv[ed] pithy, 17 useless interrogatory responses.” (Id.at 1.) The Judgment Creditors then identify the 18 following 11 categories of information that, in their view, Wyo Tech still has not fully 19 and/or properly disclosed: 20 1. Persons with an ownership interest in Wyo Tech and Inductance:1 The 21 Judgment Creditors contend that Wyo Tech merely provided a general reference to the 22 “documents previously produced” and argue this response was insufficient because Wyo 23 Tech was required to identify the Bates numbers of the documents that fully address this 24 topic. (Id. at 9-10.) 25 1 Specifically, Interrogatory 1 required Wyo Tech to “[i]dentify all Persons that have 26 an ownership interest, direct or indirect, in You, including the amount each Person contributed to You and the date on which each Person made this contribution” (Doc. 126- 27 2 at 8), and Interrogatory 6 required Wyo Tech to “[i]Identify all Persons that have an ownership interest, direct or indirect, in Inductance, including the amount each Person 28 contributed to Inductance and the date on which each Person made this contribution” (Doc. 126-2 at 13). 1 2. Persons who performed services for Wyo Tech:2 The Judgment Creditors 2 contend that Wyo Tech responded to this interrogatory by merely cross-referencing its 3 general ledger and telling the Judgment Creditors that Wyo Tech shouldn’t be required to 4 incur the expense necessary to prepare a more detailed answer. (Id. at 11.) The Judgment 5 Creditors argue this response was insufficient because (1) the Court already found that 6 Wyo Tech waived any overbreadth objections and (2) in any event, Wyo Tech improperly 7 failed to certify that the general ledger contains all of the information that’s responsive to 8 this interrogatory. (Id. at 11-12.) 9 3. Purchases on Wyo Tech’s behalf:3 The Judgment Creditors contend that 10 “Wyo Tech merely referred to its bank statements and said that it is ‘still compiling this 11 information.’” (Id. at 12.) The Judgment Creditors contend this response was insufficient 12 because almost all of the underlying invoices actually refer to a different company 13 (Inductance), not to Wyo Tech. (Id.) 14 4. Wyo Tech’s assets and liabilities:4 The Judgment Creditors contend that 15 Wyo Tech first referred to a single document (an “Agreement to Release Intellectual 16 Property Rights”) and said “this information is still being compiled,” then later referred to 17 a second document (balance sheet as of December 31, 2018). (Id. at 12-13.) The Judgment 18 Creditors contend these responses are insufficient because the balance sheet only shows 19 the assets and liabilities on a particular date, not during the full time period covered by the 20 interrogatories, and doesn’t break out each individual asset/liability or show the relevant 21 dates on which they were acquired or incurred. (Id.) 22 23 2 Specifically, Interrogatory 2 required Wyo Tech to “[i]dentify all Persons that performed services for You, whether as an employee, contractor, or otherwise, including 24 what services each Person provided for You, the date when each service was provided, and how much You paid for each services.” (Doc. 126-2 at 9.) 25 3 Specifically, Interrogatory 3 required Wyo Tech to “[i]dentify all Persons that bought any items for You, including what items each Person bought for You, the date when 26 each item was bought, and how much You paid for each item.” (Doc. 126-2 at 10.) 27 4 Specifically, Interrogatory 4 required Wyo Tech to “[i]dentify all of Your assets, including when You acquired each asset and the value of each asset” (Doc. 126-2 at 11), 28 and Interrogatory 5 required Wyo Tech to “[i]dentify all of Your liabilities, including when You incurred each liability and the amount of each liability” (Doc. 126-2 at 12). 1 5. Invoices showing services performed and/or goods bought for Wyo Tech by 2 DAS or members of the Danzik family:5 The Judgment Creditors contend that “Wyo Tech 3 did not produce any receipts or invoices showing purported services performed or goods 4 bought by DAS or any of Mr. Danzik’s family members . . . that would support the 5 hundreds of thousands of dollars that Wyo Tech paid them” and instead mistakenly claimed 6 that a different set of invoices (were directed to a different company, Inductance) were 7 responsive. (Id. at 13.) The Judgment Creditors further contend that, when they pointed 8 out this error, “Wyo Tech’s counsel then promised to get us an explanation . . . but still has 9 not done so.” (Id.) 10 6. Tax returns:6 The Judgment Creditors contend that Wyo Tech did not 11 produce any tax returns and “insisted that Wyo Tech did not file any tax return for 2017 or 12 2018.” (Id. at 13-14.) According to the Judgment Creditors, this assertion is suspect 13 because Wyo Tech has sent letters to its investors referring to its prior tax filings. (Id.) 14 7. Correspondence between Wyo Tech’s counsel and Wyo Tech’s investors:7 15 The Judgment Creditors contend that Wyo Tech refused to produce any such 16 correspondence based on the theory that it is protected to the attorney-client privilege, yet 17 Wyo Tech’s counsel has made clear during this case that it doesn’t represent any of the 18 investors. (Id. at 14.) 19 … 20 … 21 22 5 The RFPs bearing on these topics include RFPs 6-13. (Doc. 126-1 at 10-11.) 6 Specifically, RFP 21 required Wyo Tech to produce “[a]ll tax returns You filed with 23 any federal, state, or local authorities, including all attachments and schedules filed with those tax returns and any Schedules K-1 that You sent or received.” (Doc. 126-1 at 12.) 24 7 During oral argument, the Judgment Creditors argued that all of the correspondence 25 between Wyo Tech’s counsel and Wyo Tech’s investors should have been produced pursuant to RFP 2, which required Wyo Tech to produce “[a]ll documents You provided 26 to any Person that has an ownership interest, direct or indirect, in You.” (Doc. 126-1 at 9.) The Court is unconvinced. Although Wyo Tech’s counsel may have been acting as Wyo 27 Tech’s agent at the time the correspondence was sent, the “Definitions” section of the RFPs doesn’t say that references to Wyo Tech should be construed as also encompassing Wyo 28 Tech’s agents—to the contrary, the “Definitions” provide that “‘You’ or ‘Your’ means Wyo Tech.” (Doc. 126-1 at 5.) 1 8. Wyo Tech’s bank records:8 The Judgment Creditors contend that Wyo Tech 2 failed to produce any bank records for the account ending in x2809 after November 2017, 3 even though the account remained open through February 2018, and never followed up on 4 a promise to produce the outstanding documents. (Id. at 14.) 5 9. Custodians: The Judgment Creditors contend that “Wyo Tech refused to 6 disclose from what custodians it collected documents and text messages and what search 7 terms it used.” (Id. at 14-15.) The Judgment Creditors further contend that this refusal is 8 suspicious because, although Wyo Tech “produced almost no emails from 2018 or 2019” 9 and “did not produce any text messages,” the Judgment Creditors have separately 10 obtained—via a subpoena to an investor—hundreds of emails that should have been 11 produced by Wyo Tech. (Id.) 12 10. Failure to verify non-existence of documents: The Judgment Creditors 13 contend that, although Wyo Tech’s counsel stated he “believes” certain documents do not 14 exist and/or is “unaware” of the existence of certain documents, Wyo Tech has not properly 15 certified the non-existence of these documents. (Id. at 15-16.) 16 11. Privilege log: The Judgment Creditors contend that, although Wyo Tech has 17 redacted information from various documents, it has “not produced a privilege log” and 18 “has refused to confirm whether any other documents were withheld or redacted on 19 privilege grounds.” (Id. at 16.) 20 Based on these alleged production failures, the Judgment Creditors seek the 21 following four sanctions under Rule 37(b)(2)(A): (1) an order precluding Wyo Tech from 22 arguing that any payments it made to DAS, to Mr. Danzik, or to any other members of the 23 Danzik family were for legitimate business purposes; (2) an order precluding Wyo Tech 24 from denying that DAS is the managing member of and/or has an ownership interest in 25 26 8 Specifically, RFP 22 required Wyo Tech to produce “[a]ll bank, brokerage, and credit card statements for accounts (a) that bear Your name; or (b)(i) from which You have 27 received funds, directly or indirectly; (ii) from which You have paid funds to another Person (including as a result of indemnification or contribution obligations); or (iii) from 28 which You have charged expenses, directly or indirectly, regardless of whose name is listed on the account.” (Doc. 126-1 at 12.) 1 Wyo Tech; (3) an order requiring Wyo Tech to “remedy all of the deficiencies we identify”; 2 and (4) attorneys’ fees. (Id. at 1, 17.) 3 In its opposition, Wyo Tech begins by accusing the Judgment Creditors of engaging 4 in “an improper attempt . . . to prevail by default in this action based not on the merits, but 5 rather on procedural technicalities and completely overblown, if not false assertions” and 6 of pursuing “a scorched-earth discovery onslaught that has absolutely nothing to do with 7 proving any interest in the interpleaded funds, but rather is aimed exclusively at trying to 8 manufacture alleged ‘violations’ by Wyo Tech and others as a pretext and means by which 9 [the Judgment Creditors] can prevail.” (Doc. 210 at 1-2.) Next, Wyo Tech argues the 10 motion for sanctions is procedurally improper because the Judgment Creditors “skipped 11 over not only the Court’s protocol requiring submission of a discovery dispute summary, 12 but also the step of seeking an order compelling Wyo Tech to further supplement its 13 interrogatory responses.” (Id. at 3.) On the merits, Wyo Tech argues that “the alleged 14 deficiencies” in its production “have already been substantially addressed and rectified or 15 will be once verifications have been signed and delivered by opposing counsel, which will 16 occur before August 31, 2019.” (Id.) 17 More specifically, Wyo Tech contends that the motion for sanctions “can be 18 summarized as” complaining about the non-production of five categories of information— 19 (1) ownership list for Wyo Tech and Inductance, (2) who performed services and/or bought 20 items for Wyo Tech, (3) assets and liabilities of Wyo Tech, (4) tax returns, correspondence, 21 and bank records, and (5) failure to verify the non-existence of certain documents. (Id. at 22 3-4.) As for the first category, Wyo Tech argues that it has provided “a complete 23 spreadsheet listing every investor by name, address, and phone number—along with 24 additional information regarding the amount invested.” (Id. at 4.) As for the second 25 category, Wyo Tech argues that all of the responsive information can be found in its general 26 ledger and “[t]here are no copies of invoices related to those expenditures insofar as 27 undersigned counsel is aware.” (Id.) As for the third category, Wyo Tech argues it is 28 “moot because Wyo Tech has no current assets or liabilities.” (Id.) As for the fourth 1 category, Wyo Tech assets that “it has yet to file any tax returns and therefore has no 2 documents responsive to that request,” “there are no letters from Wyo Tech’s counsel to 3 the investors of Wyo Tech,” and there are “no bank records containing any relevant 4 information after 2017, since the account in question has no activity since it was frozen by 5 Wells Fargo.” (Id.) As for the fifth category, Wyo Tech contends that the documents don’t 6 exist. (Id.) 7 In their reply, the Judgment Creditors begin by disputing Wyo Tech’s procedural 8 challenge to the sanctions motion, arguing that the Court already issued an order 9 compelling Wyo Tech to comply with the RFPs and interrogatories, so “what Wyo Tech 10 really argues is that we should have to get an additional order from this Court stating that 11 it really means that Wyo Tech must ‘comply’ . . . .” (Doc. 220 at 2-3.) As for the 11 12 categories of information discussed in the motion, the Judgment Creditors argue as follows: 13 1. Persons with an ownership interest in Wyo Tech and Inductance: The 14 Judgment Creditors seem to acknowledge that Wyo Tech has produced a spreadsheet 15 identifying all of its (and Inductance’s) investors but argues that Wyo Tech still has not 16 sworn or verified that this spreadsheet is complete. (Id. at 7.) 17 2. Persons who performed services for Wyo Tech: The Judgment Creditors 18 argue that Wyo Tech’s current position on this issue—that all of the responsive information 19 can be found in its general ledger—is different from the position Wyo Tech previously 20 took, which is that only some of the responsive information appears in the ledger and it 21 would be too expensive to compile or summarize the remaining information. (Id. at 7-9.) 22 According to the Judgment Creditors, such “flip flopping is precisely why Wyo Tech 23 should have answered these interrogatories completely and under oath in the first instance, 24 so it would be locked into a position and could not later change its answers.” (Id. at 9.) 25 The Judgment Creditors continue: “So if Wyo Tech’s answer—under oath—is that the 26 general ledger shows all [relevant payments], then we will accept that response when 27 properly verified.” (Id.) 28 … 1 3. Purchases on Wyo Tech’s behalf: The Judgment Creditors offer the same 2 arguments on this issue that they offered with respect to the previous issue. (Id. at 7-9.) 3 4. Wyo Tech’s assets and liabilities: The Judgment Creditors argue that Wyo 4 Tech’s “mootness” argument is unavailing because the interrogatories sought all of the 5 assets and liabilities that Wyo Tech acquired since January 2016, not simply a snapshot of 6 what assets and liabilities exist right now. (Id. at 9-10.) 7 5. Invoices showing services performed and/or goods bought for Wyo Tech by 8 DAS or members of the Danzik family: The Judgment Creditors state that (1) Wyo Tech’s 9 current claim that no such invoices exist is different from the claim Wyo Tech made during 10 earlier stages of the discovery process, which was that all of the invoices had already been 11 produced, and (2) if it’s true that no invoices exist, Wyo Tech should be required to 12 formally certify their non-existence (instead of simply making representations to that effect 13 in motion papers). (Id. at 5-6.) 14 6. Tax returns: The Judgment Creditors contend that Wyo Tech still hasn’t 15 attempted to reconcile its assertion that no tax returns exist with the letters it previously 16 sent to investors (which refer to “filed” tax returns). (Id. at 3-4.) Thus, the Judgment 17 Creditors argue the Court should “require [Wyo Tech] to complete an I.R.S. Form 8821 or 18 other similar form to authorize [the Judgment Creditors] to get Wyo Tech’s tax returns, 19 Schedules K-1, and all attachments directly from the I.R.S.” (Id.) 20 7. Correspondence between Wyo Tech’s counsel and Wyo Tech’s investors: 21 The Judgment Creditors dispute Wyo Tech’s claim that no such correspondence exists 22 because (1) this “is a flip flop from Wyo Tech’s initial position” that the correspondence 23 exists but its privileged and (2) the claim is demonstrably untrue because copies of such 24 correspondence have already been filed in the Court’s docket in this case. (Id. at 5.) 25 8. Wyo Tech’s bank records: The Judgment Creditors note that “Wyo Tech 26 does not dispute our showing that [the x2809 account] stayed open through at least 27 February 2018” and that Wyo Tech instead seeks to withhold the most recent bank records 28 on relevance grounds. (Id. at 4-5.) The Judgment Creditors argue this position is 1 unavailing because (1) the Court already ruled that Wyo Tech forfeited any relevance- 2 based objections and (2) the relevance objection is misplaced because Wells Fargo 3 suggested (when depositing the seized funds into the Court’s interpleader account) that 4 nearly $50,000 in additional funds had been deposited following the seizure in November 5 2017. (Id.) 6 9. Custodians: The Judgment Creditors argue Wyo Tech failed to address their 7 argument concerning the missing custodian list “and thus concedes its validity.” (Id. at 6.) 8 10. Failure to verify non-existence Of documents: The Judgment Creditors argue 9 that, “had Wyo Tech’s counsel merely confirmed the nonexistence of these documents” 10 during the meet-and-confer process, litigation could have been avoided. (Id. at 6.) 11 11. Privilege log: The Judgment Creditors argue Wyo Tech failed to address their 12 argument concerning the privilege log “and thus concedes its validity.” (Id. at 6.) 13 B. Analysis 14 The Judgment Creditors’ motion will be granted in part and denied in part. 15 As an initial matter, Wyo Tech’s argument that the motion “is premature and 16 procedurally improper” (Doc. 210 at 3) is mostly unavailing. On May 1, 2019, the Court 17 issued an order that essentially required Wyo Tech to comply with the Judgment Creditors’ 18 first set of RFPs and first set of interrogatories by May 15, 2019. (Doc. 128.) Thus, the 19 Judgment Creditors were not required to file another motion to compel after the May 15 20 production deadline expired—it was permissible for them to challenge the sufficiency of 21 Wyo Tech’s production by filing a motion for sanctions. See Fed. R. Civ. P. 37(b)(2)(A) 22 (“If a party . . . fails to obey an order to provide or permit discovery, the court . . . may 23 issue further just orders.”). Nor were the Judgment Creditors required to follow the 24 discovery-dispute protocol set forth in the amended scheduling order, at least with respect 25 to documents that (in their view) should have been produced by Wyo Tech in response to 26 the first set of RFPs and first set of interrogatories. (Doc. 124 at 4-5.) The discovery- 27 dispute protocol applies only to “discovery motions,” which the Court views as 28 encompassing motions to compel and other similar disputes (not disputes arising after the 1 Court has already fully litigated an earlier motion to compel and ordered compliance). 2 The one caveat is that the Judgment Creditors’ motion accuses Wyo Tech of failing 3 to produce 11 specific categories of information, yet some of those categories don’t appear 4 to be covered by the first set of RFPs or first set of interrogatories. As for those documents, 5 it wasn’t permissible for the Judgment Creditors to jump directly to a sanctions motion 6 under Rule 37—instead, they should have followed the discovery-dispute protocol. 7 Turning to the merits, this dispute marks yet another instance where Wyo Tech has 8 caused significant problems by missing deadlines, ignoring emails from opposing counsel, 9 and making inaccurate representations to opposing counsel and to the Court. (See 10 generally Doc. 246 at 6-15.) However, it also marks another instance where the Judgment 11 Creditors have overreached by seeking sanctions that are disproportionate to the underlying 12 discovery violation. (Id. at 12 [citing Doc. 186 at 4].) Accordingly, before addressing 13 which sanctions, if any, should be imposed under Rule 37(b)(2)(A), it is important to 14 identify which categories of purportedly missing information are truly in dispute. As 15 explained below, the Court views the disputes as falling into four broad categories. 16 First, it appears that 4 of the 11 categories of “missing” information identified in 17 the Judgment Creditors’ motion actually involve a situation where Wyo Tech’s position is 18 that no responsive documents exist and/or all responsive documents have already been 19 produced, the Judgment Creditors don’t have any specific reason to dispute Wyo Tech’s 20 position, and the only issue is whether Wyo Tech has properly verified the completeness 21 of its production. The categories falling into this situation are Category 2 (“Persons who 22 performed services for Wyo Tech”—Wyo Tech now asserts that the general ledger shows 23 all relevant payments), Category 3 (“Purchases on Wyo Tech’s behalf”—Wyo Tech now 24 asserts that the general ledger shows all relevant payments), Category 5 (“Invoices showing 25 services performed and/or goods bought for Wyo Tech by DAS or members of the Danzik 26 family”—Wyo Tech now asserts that no such documents exist), and Category 10 (“Failure 27 to verify non-existence Of documents”—Wyo Tech asserts that no such documents exist). 28 For these four categories of information, the Court will simply confirm, through this order, 1 that Wyo Tech’s responses to date are complete and that Wyo Tech may not take a contrary 2 position during the remaining stages of this case. 3 Additionally, with respect to Category 1 (“Persons with an ownership interest in 4 Wyo Tech and Inductance”), although Wyo Tech asserted in its written response to the 5 sanctions motion that the spreadsheet it previously produced to the Judgment Creditors is 6 “complete” and “list[s] every investor by name, address and phone number” (Doc. 210 at 7 4), Wyo Tech’s counsel clarified during oral argument that this representation was 8 inaccurate and there are, in fact, a handful of additional “founding” investors who aren’t 9 listed in the spreadsheet. Thus, Wyo Tech’s counsel requested some additional time to 10 disclose these additional names, and the Judgment Creditors’ counsel responded by stating 11 that such supplementation wouldn’t cause much hardship or prejudice. Accordingly, with 12 respect to Category 1, the Court will confirm, through this order, that Wyo Tech’s response 13 is limited to (1) the persons identified in the previously-produced spreadsheet and (2) the 14 handful of additional “founding” members who must be identified by Wyo Tech within 14 15 days of the issuance of this order. 16 Second, there are two categories of information where Wyo Tech’s position is that 17 no responsive documents exist, yet the Judgment Creditors have identified a specific reason 18 to doubt the accuracy of this representation. These are Category 6 (“Tax returns”) and 19 Category 7 (“Correspondence between Wyo Tech’s counsel and Wyo Tech’s investors”). 20 As for the tax returns, although Wyo Tech’s took the position in its response to the 21 sanctions motion that “it has yet to file any tax returns” (Doc. 210 at 4, emphasis in 22 original), the Judgment Creditors included, as an exhibit to their motion, a copy of a March 23 25, 2019 letter from Wyo Tech to one of its investors in which Wyo Tech wrote: “Enclosed 24 is your 2017 Schedule K-1 (Form 1120S) . . . which has been filed with the corporate tax 25 return of WYO Tech Investment Group, LLC.” (Doc. 191-16 at 2.) Enclosed with the 26 letter is what appears to be the actual Schedule K-1. (Id. at 3-6.) It is frustrating that Wyo 27 Tech didn’t even acknowledge this letter in its response to the sanctions motion, let alone 28 attempt to reconcile its position (i.e., no tax returns exist) with the letter. Nevertheless, 1 during oral argument, Wyo Tech’s counsel did attempt to provide such a reconciliation, by 2 explaining that the K-1 enclosed with the letter was a draft that Wyo Tech ultimately 3 declined to file. Wyo Tech’s counsel further stated that Wyo Tech has no objection to 4 completing an IRS Form 8821 so the Judgment Creditors may obtain any Wyo Tech tax 5 returns, Schedules K-1, and other attachments (to the extent they exist) directly from the 6 IRS. Given this clarification, the Court will order Wyo Tech to complete an IRS Form 7 8821. 8 As for the correspondence between Wyo Tech’s counsel and Wyo Tech’s investors, 9 Wyo Tech initially took the “position that any such communications, assuming they even 10 exist, would be subject to attorney-client privilege and not discoverable” (Doc. 191-12 at 11 6) but now takes the position that “there are no letters from Wyo Tech’s counsel to the 12 investors of Wyo Tech.” (Doc. 210 at 4.) This position, however, appears to be 13 inaccurate—the Judgment Creditors included, as an exhibit to their motion, a February 12, 14 2019 letter from Wilenchik & Bartness to Wyo Tech’s investors. (Doc. 191-18.) On the 15 one hand, this seems similar to the tax-return issue—Wyo Tech made a broad assertion in 16 its motion papers that no responsive documents exist without even attempting to reconcile 17 its position with the seemingly-contradictory evidence that was enclosed as an exhibit to 18 the Judgment Creditors’ motion. This makes it difficult to place much stock in the accuracy 19 of Wyo Tech’s discovery-related representations. On the other hand, it is not clear to the 20 Court that the first set of RFPs required Wyo Tech to produce the correspondence between 21 its counsel and its investors. See footnote 7 supra. Thus, the Judgment Creditors haven’t 22 demonstrated that sanctions may be imposed against Wyo Tech under Rule 37(b)(2)(A) 23 based on the failure to produce this particular category of information. 24 Third, there are two categories of information where the parties have a dispute over 25 the scope of what must be produced. These are Category 4 (“Wyo Tech’s assets and 26 liabilities”) and Category 8 (“Wyo Tech’s bank records”). As for the asset-and-liability 27 information, Wyo Tech contends it only needs to produce information concerning its 28 current assets and liabilities (and there’s nothing to produce because it no longer has any 1 assets or liabilities) while the Judgment Creditors argue that Wyo Tech must produce 2 historical asset-and-liability information. The Court concludes the Judgment Creditors 3 have the better side of this argument. The instructions to the interrogatories explained that 4 “[t]he relevant time period to which each request refers is January 1, 2016 through the date 5 of production” and “[t]he past tense form shall be construed as the present tense, and vice 6 versa, whenever such a dual construction will serve to bring with the scope of a request 7 any response that would otherwise not be within its scope.” (Doc. 126-2 at 6.) Thus, the 8 two interrogatories at issue—which required Wyo Tech to “[i]dentify all of Your assets, 9 including when You acquired each asset and the value of each asset” and to “[i]dentify all 10 of Your liabilities, including when You incurred each liability and the amount of each 11 liability” (Doc. 126-2 at 11-12)—required Wyo Tech to produce its asset-and-liability 12 information from January 2016 to the present, not just a snapshot of its asset-and-liability 13 information as of today. Accordingly, the Court will order Wyo Tech to supply the 14 additional, missing information in the form discussed by the Judgment Creditors’ counsel 15 during oral argument. 16 As for the bank records, Wyo Tech argues it shouldn’t be required to produce any 17 records from after November 2017 because post-seizure records are irrelevant, while the 18 Judgment Creditors argue Wyo Tech should be required to produce all records through 19 February 2018 because (1) the Court already ruled that Wyo Tech forfeited any relevance 20 objections and (2) on the merits, the later records are relevant because Wells Fargo has 21 suggested there was post-seizure deposit activity. The Court concludes the Judgment 22 Creditors have the better side of this argument, too. Accordingly, the Court will order Wyo 23 Tech to supply the additional, missing information. 24 Fourth, there are two categories of information where Wyo Tech simply failed to 25 respond to the Judgment Creditors’ arguments. These are Category 9 (“Custodians”) and 26 Category 11 (“Privilege log”). Accordingly, the Court will order Wyo Tech to supply the 27 missing information. See also LRCiv 7.2(i) (failure to respond to a motion may be deemed 28 a consent to the granting of the motion). 1 With this backdrop in mind, the Court must address which sanctions, if any, to 2 impose under Rule 37(b)(2)(A). This rule provides that a trial court “may issue further just 3 orders” when a party “fails to obey an order to provide or permit discovery.” The Ninth 4 Circuit has emphasized that district courts possess “broad discretionary powers in this 5 area.” Liew v. Breen, 640 F.2d 1046, 1050 (9th Cir. 1981). This discretion is informed by 6 “two standards—one general and one specific . . . . First, any sanction must be ‘just’; 7 second, the sanction must be specifically related to the particular ‘claim’ which was at issue 8 in the order to provide discovery.” Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites 9 de Guinee, 456 U.S. 694, 707 (1982). 10 Here, the Court concludes it would be unjust, and disproportionate, to impose either 11 of the issue-preclusion sanctions requested in the Judgment Creditors’ motion. Although 12 it is understandable why the Judgment Creditors may be frustrated with Wyo Tech’s 13 discovery conduct, and although a court is not “required to attempt to coax [a non- 14 complaint party] into compliance . . . by imposing incrementally increasing sanctions,” 15 United States v. $49,000 Currency, 330 F.3d 371, 379 (5th Cir. 2003), the dispute here 16 largely concerns Wyo Tech’s failure to verify the completeness of its responses, not the 17 non-production of documents. Furthermore, Wyo Tech had some basis for disagreeing 18 over the scope of some of the other disputed categories of information. 19 As for the third sanction requested in the Judgment Creditors’ motion—an order 20 requiring Wyo Tech to “remedy all the deficiencies we identify in this motion, or provide 21 a sworn declaration from a person with knowledge regarding why it cannot, within one 22 week of this order, and if it fails to do so, the [Judgment Creditors] should be given leave 23 to strike Wyo Tech’s answer and for entry of a default judgment” (Doc. 190 at 17)—the 24 Court has essentially granted this relief through the various orders and outcomes 25 summarized above (i.e., decreeing that Wyo Tech may not later change its responses to 26 Categories 1 (apart from “founding” members) 2, 3, 5, and 10, ordering Wyo Tech to 27 complete an IRS Form 8821 so the Judgment Creditors may obtain Wyo Tech’s tax forms, 28 and ordering Wyo Tech to produce its asset-and-liability information, the full set of bank 1 records, the custodian list, and the privilege log). 2 As for the fourth sanction requested in the Judgment Creditors’ motion—a request 3 for the attorneys’ fees incurred in making the motion—the Court agrees this is reasonable. 4 Although the Judgment Creditors overreached with respect to some of the remedies being 5 sought and didn’t establish that some of the disputed information (e.g., the correspondence 6 between Wyo Tech’s counsel and Wyo Tech’s investors) was covered by the earlier 7 production order, the bottom line is that the Judgment Creditors have substantially 8 prevailed and that the Judgment Creditors shouldn’t have been required to file a sanctions 9 motion in the first place—this whole dispute could have been avoided had Wyo Tech 10 promptly and accurately responded to the Judgment Creditors’ correspondence during the 11 meet-and-confer process. 12 As for the amount of fees to be awarded, the parties are ordered to meet-and-confer 13 in the hope they might reach a resolution without requiring further court intervention. As 14 discussed during oral argument, it is the Court’s view that the Judgment Creditors should 15 be allowed to recover some, but not all, of the costs they incurred when seeking relief. If 16 the parties cannot reach agreement, the Judgment Creditors may file a fee application, 17 which Wyo Tech may then oppose. The application need not comply with Local Rule 54.2, 18 because that rule “does not apply to . . . claims for attorneys’ fees and related expenses for 19 violations of the Federal Rules of Civil Procedure.” See LRCiv 54.2(a). 20 Accordingly, IT IS ORDERED that: 21 (1) The Judgment Creditors’ motion for sanctions (Doc. 190) is granted in part 22 and denied in part; 23 (2) As for the following four categories of information identified in the Judgment 24 Creditors’ motion—Category 2 (“Persons who performed services for Wyo Tech”—Wyo 25 Tech asserts that the general ledger shows all relevant payments), Category 3 (“Purchases 26 on Wyo Tech’s behalf”—Wyo Tech asserts that the general ledger shows all relevant 27 payments), Category 5 (“Invoices showing services performed and/or goods bought for 28 Wyo Tech by DAS or members of the Danzik family”—Wyo Tech asserts that no such 1 || documents exist), and Category 10 (‘Failure to verify non-existence of documents”—Wyo 2|| Tech asserts that no such documents exist)—the Court hereby confirms, through this order, 3 || that Wyo Tech’s responses to date are complete and that Wyo Tech may not take a contrary 4|| position during the remaining stages of this case; 5 (3) As for Category | (“Persons with an ownership interest in Wyo Tech and || Inductance’), the Court hereby confirms, through this order, that Wyo Tech’s response is 7\|| limited to (1) the persons identified in the previously-produced spreadsheet and (2) the 8 || handful of additional “founding” members who must be identified by Wyo Tech within 14 9|| days of the issuance of this order. 10 (4) Wyo Tech must, within 14 days of the issuance of this order, complete an 11 || IRS Form 8821 and provide the completed form to the Judgment Creditors; 12 (5) As for Category 4 (“Wyo Tech’s assets and liabilities”) and Category 8 13 || (“Wyo Tech’s bank records”), Wyo Tech’s arguments concerning the limited scope of these categories are overruled and Wyo Tech must complete its production within 14 days || of the issuance of this order; 16 (6) As for Category 9 (“Custodians”) and Category 11 (‘Privilege log”), Wyo 17|| Tech must produce this information within 14 days of the issuance of this order; and 18 (7) As for the amount of fees to be awarded to the Judgment Creditors, the parties 19 || must meet-and-confer in an attempt to reach a resolution without requiring further court || intervention. If the parties cannot reach agreement, the Judgment Creditors may file a fee application, which Wyo Tech may then oppose. 22 Dated this 31st day of October, 2019. 23 24 □ — 2 fi 26 United States District Judge 27 28 -16-