RP Golden State Management, LLC v. Ohio Security Insurance Company ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 RP GOLDEN STATE MANAGEMENT, No. 1:19-cv-00600-DAD-JLT LLC, 12 ORDER DENYING DEFENDANT’S Plaintiff, MOTION FOR INVOLUNTARY DISMISSAL 13 OF THIS ACTION UNDER RULE 41(b) AND v. REFFERING DEFENDANTS MOTION FOR 14 SANCTIONS UNDER RULE 37 TO THE OHIO SECURITY INSURANCE ASSIGNED MAGISTRATE JUDGE 15 COMPANY, (Doc. No. 58) 16 Defendant. 17 18 This matter is before the court on the motion for involuntary dismissal and for terminating 19 and/or monetary sanctions filed on behalf of defendant Ohio Security Insurance Company (“Ohio 20 Security” or “defendant”) on September 18, 2020. (Doc. No. 58.) Pursuant to General Order No. 21 617 addressing the public health emergency posed by the COVID-19 pandemic, defendant’s 22 motion was taken under submission on the papers. (Doc. No. 62.) For the reasons explained 23 below, the court will deny the pending motion to the extent defendant seeks involuntary dismissal 24 of this action pursuant to Rule 41(b) of the Federal Rules of Civil Procedure. As to defendant’s 25 request for terminating and/or monetary sanctions under Rule 37 based on plaintiff’s alleged 26 repeated violations of the rules governing discovery and its failure to comply with the court’s 27 discovery orders, the undersigned will refer defendant’s motion to United States Magistrate Judge 28 Jennifer L. Thurston, consistent with Local Rule 302(c), for resolution. 1 BACKGROUND 2 On March 25, 2019, plaintiff RP Golden State Management LLC, dba Garden Suites Inn 3 (“RP Golden” or “plaintiff”) filed this action against defendant in the Kern County Superior 4 Court alleging claims for breach of contract, breach of the covenant of good faith and fair dealing, 5 and bad faith, related to a commercial general liability insurance policy that plaintiff had 6 purchased from defendant to cover a hotel that plaintiff owned and operated. (Doc. No. 1-1 at 2– 7 5.) Defendant removed this action to this federal court on May 3, 2019. (Doc. No. 1.) 8 In early June 2019, the parties sought and received a 90-day stay of the proceedings in this 9 case so they could explore the possibility of informal settlement, which efforts were ultimately 10 unsuccessful. (Doc. Nos. 7, 8.) A year later, following several stipulations to continue the formal 11 settlement conference that the court had scheduled, and after having already twice amended the 12 scheduling order at the parties’ request, the court denied the parties’ request to amend the 13 scheduling order for a third time. (See Doc. No. 29.) 14 On June 16, 2020, plaintiff’s then-counsel filed a motion to withdraw as attorney for 15 plaintiff in this action based on the representation that there had “been an irremediable breakdown 16 in communication between [himself] and plaintiff” and for additional reasons that were disclosed 17 to the court in a declaration filed by counsel under seal. (Doc. Nos. 30, 33.) On August 24, 2020, 18 the court granted that motion to withdraw and provided plaintiff fourteen (14) days from the date 19 of that order to obtain new counsel because, unlike individuals who “may appear in propria 20 persona, corporations and other entities may appear only through an attorney; an unrepresented 21 entity cannot file any pleadings, make or oppose any motions, or present any evidence to contest 22 liability.” (Doc. No. 53 at 3–4) (citing Caveman Foods, LLC v. Payne’s Caveman Foods, LLC, 23 No. 2:12-cv-01112-WBS-CKD, 2015 WL 6736801, at *2 (E.D. Cal. Nov. 4, 2015) (quoting 24 Rowland v. Cal. Men’s Colony, 506 U.S. 194, 202 (1993))).1 Plaintiff was warned in that order 25 1 While that motion to withdraw as attorney of record was pending before the court, defendant 26 had filed two motions to compel the depositions of certain witnesses, both of which were granted. 27 (Doc. Nos. 37, 44, 52, 57.) Because this order only addresses the pending motion to the extent it seeks involuntary dismissal under Rule 41(b), the court will not provide further background as to 28 the parties’ discovery disputes or those motions to compel in this order. 1 “that failure to comply with this order will result in the dismissal of this action for failure to 2 prosecute and failure to comply with the court’s order.” (Doc. No. 53 at 6.) Nevertheless, the 3 September 8, 2020 deadline for plaintiff to obtain new counsel and for that counsel to file a notice 4 of appearance passed, and neither a notice of appearance by new counsel nor a request for an 5 extension of time in which to comply with the court’s order were filed by plaintiff. 6 On September 18, 2020, defendant filed the pending motion for involuntary dismissal of 7 this action pursuant to Rule 41(b) and for terminating and/or monetary sanctions pursuant to Rule 8 37. (Doc. No. 58.) In its supporting memorandum, defendant argues that involuntary dismissal is 9 warranted in light of plaintiff’s failure to obtain counsel in compliance with the court’s August 10 24, 2020 order and that the requested Rule 37 sanctions are warranted because “RP Golden, 11 through its managing agents, has failed to comply with the rules of discovery, has willfully 12 violated this Court’s discovery orders, and has irreparably thwarted Ohio Security’s ability to 13 conduct critical discovery and prepare for trial.” (Doc. No. 59 at 2.) Plaintiff did not timely file 14 an opposition to the pending motion. 15 On September 21, 2020, plaintiff filed a request for an extension of time in which to 16 obtain new counsel. (Doc. No. 64.) The court granted plaintiff’s request, set a new deadline of 17 November 23, 2020 for plaintiff to obtain counsel, and warned that “[t]he failure of the plaintiff 18 to appear through an attorney will result in a recommendation that the action be dismissed.” 19 (Doc. No. 65.) 20 On October 13, 2020, defendant filed a reply in support of the pending motion, 21 acknowledging that the court had given plaintiff additional time to retain counsel but nevertheless 22 arguing that involuntary dismissal and imposition of sanctions remained appropriate in light of 23 plaintiff’s repeated failures to obey court orders. (Doc. No. 68.) 24 On October 23, 2020, plaintiff filed a response to the pending motion, in which Mr. Pravin 25 (Paul) Desai, the Manager/Owner and agent of RP Golden, appeared to contend that he can 26 represent “himself” pro se, on behalf of RP Golden, and that in any event he was continuing to try 27 to obtain counsel for RP Golden and would do so by the November 23, 2020 deadline. (Doc. No. 28 69 at 2, 4.) However, that deadline passed without the filing of a notice of appearance by new 1 counsel on behalf of plaintiff. Thus, on November 25, 2020, defendant filed a supplemental reply 2 in support of its pending motion, arguing that “[i]n short, RP Golden has been afforded with a 3 generous amount of time to obtain a new attorney, but has not done so” and “[a]dditional time is 4 unwarranted.” (Doc. No. 70.) 5 On November 30, 2020, plaintiff filed a second motion for an extension of time in which 6 to obtain counsel and a request for the court to appoint counsel to represent plaintiff. (Doc. No. 7 71.) On December 3, 2020, the court denied plaintiff’s request for the appointment of counsel but 8 granted plaintiff a further extension of time in which to obtain counsel, setting a deadline of 9 December 18, 2020 and again warning that plaintiff’s failure to appear in this action through an 10 attorney will result in a recommendation by the magistrate judge that this action be dismissed. 11 (Doc. No. 72.) 12 Because plaintiff failed to obtain counsel by that deadline, on December 21, 2020, the 13 court issued an order to plaintiff to show cause why this action should not be dismissed due to its 14 failure to comply with the court’s orders. (Doc. No. 73.) On January 8, 2021, plaintiff filed a 15 response to the court’s order in which Mr. Desai explained that his search for an attorney to 16 represent RP Golden is on-going, and to demonstrate his efforts in this regard, he provided copies 17 of his correspondences with various lawyers whom he had contacted to represent RP Golden in 18 this litigation. (Doc. No. 75.) Therein, plaintiff also requested a third extension of time in which 19 to obtain counsel. (Id.) In light of plaintiff’s “diligent attempt to retain counsel,” the court 20 discharged the order to show cause and set a new deadline of March 1, 2021 for plaintiff to obtain 21 counsel. (Doc. No. 76.) 22 On February 11, 2021, plaintiff filed a fourth request for an extension of time in which to 23 obtain counsel, this time based upon a medical emergency and hospitalization of Mr. Desai. 24 (Doc. No. 77.) On February 17, 2021, the court granted plaintiff’s request and set a deadline of 25 April 19, 2021, warning that “[t]he Court will not again extend this deadline.” (Doc. No. 78 at 2.) 26 Despite this warning, on February 19, 2021, plaintiff filed yet another (fifth) request for an 27 extension of time to obtain counsel, explaining that many attorneys had declined to represent RP 28 Golden at that time due to the COVID-19 pandemic and requesting that the court appoint counsel 1 for plaintiff in this action. (Doc. No. 79.) On April 5, 2021, the court denied plaintiff’s request 2 for the appointment of counsel but granted plaintiff’s request for a further extension of time, 3 setting a deadline of April 30, 2021 for plaintiff to obtain counsel. (Doc. No. 80.) 4 In short, in the more than six months that defendant’s motion has been pending, plaintiff 5 requested and received several extensions of time in which to obtain new counsel. Finally, on 6 April 13, 2021, attorney Ryan C. Wright filed a notice of appearance as counsel of record for RP 7 Golden in this action. (Doc. No. 83.) 8 LEGAL STANDARD 9 Rule 41(b) of the Federal Rules of Civil Procedure provides that “[i]f the plaintiff fails to 10 prosecute or to comply with these rules or a court order, a defendant may move to dismiss the 11 action or any claim against it.” Fed. R. Civ. P. 41(b). 12 “District courts have inherent power to control their dockets. In the exercise of that 13 power they may impose sanctions including, where appropriate, default or dismissal.” Thompson 14 v. Hous. Auth. of City of L.A., 782 F.2d 829, 831 (9th Cir. 1986) (citing Link v. Wabash Railroad 15 Co., 370 U.S. 626, 629–630 (1961)). “Dismissal, however, is so harsh a penalty it should be 16 imposed as a sanction only in extreme circumstances.” (Id.) (citing Henderson v. Duncan, 779 17 F.2d 1421, 1423 (9th Cir. 1986)). A Rule 41(b) dismissal “must be supported by a showing of 18 unreasonable delay.” Henderson, 779 F.2d at 1423. 19 In evaluating a Rule 41(b) motion, courts “must weigh the following factors: (1) the 20 public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its docket; 21 (3) the risk of prejudice to defendants[]; (4) the availability of less drastic alternatives; and (5) the 22 public policy favoring disposition of cases on their merits.” Pagtalunan v. Galaza, 291 F.3d 639, 23 642 (9th Cir. 2002); see also Ferdik v. Bonzelet, 963 F.2d 1258, 1260–61 (9th Cir. 1992). 24 “Although it is preferred, it is not required that the district court make explicit findings in order to 25 show that it has considered these factors.” Id. at 1261 (citing Henderson, 779 F.2d at 1424). 26 “Dismissal (or another terminating sanction is proper where at least four of the five factors 27 support dismissal, . . . or where at least three factors ‘strongly’ support dismissal.” Cannon 28 Partners, Ltd. v. Cape Cod Biolab Corp., 225 F.R.D. 247, 251 (N.D. Cal. 2003) (citing Yourish v. 1 Cal. Amplifier, 191 F.3d 983, 990 (9th Cir. 1999)). 2 “[T]he Ninth Circuit has stated that for case-dispositive sanctions based on discovery 3 violations, the key is whether the discovery violation ‘threaten[s] to interfere with the rightful 4 decision of the case.’” Gonzalez v. Jones, No. 2:15-cv-2448-TLN-KJN, 2021 WL 307564, at *5 5 (E.D. Cal. Jan. 29, 2021), report and recommendation adopted, 2021 WL 1060234 (E.D. Cal. 6 Mar. 18, 2021) (citing Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 7 1097 (9th Cir. 2007) (“The most critical factor to be considered in case-dispositive sanctions is 8 whether a party’s discovery violations make it impossible for a court to be confident that the 9 parties will ever have access to the true facts.”)). 10 DISCUSSION 11 In moving for dismissal defendant does not address the factors outlined above that courts 12 must weigh when considering whether to dismiss an action pursuant to Rule 41(b). Rather, 13 defendant emphasizes that the repeated failure and refusal of RP Golden’s managing agents 14 (notably, Mr. Desai and his wife, Asha Desai) to appear for their properly noticed depositions, 15 even after the court compelled their appearance by video conference in light of the COVID-19 16 pandemic, has “unquestionably prevented Ohio Security from discovering the basis of RP 17 Golden’s claims, including the basis for any purported damages, and have prevented Ohio 18 Security form obtaining essential discovery needed to prepare for trial.” (Doc. No. 59 at 8.) 19 Defendant also argues that plaintiff “had no valid excuse for its failure to retain counsel” (id. at 20 9), and that terminating and/or monetary sanctions remain appropriate regardless of whether RP 21 Golden obtains counsel “because RP Golden’s principals, Asha Desai and Paul Desai (both 22 individually and as RP Golden’s Person Most Qualified), failed to appear for deposition, even 23 when they were represented by counsel, and then again failed to appear at their [court-]ordered 24 depositions on September 9, 10, and 11, 2020.” (Doc. No. 68 at 3.) 25 The court is sympathetic to defendant’s understandable frustrations with regard to the 26 extended length of time it has taken plaintiff to obtain counsel in this action following the 27 withdrawal of its prior counsel in August 2020. However, the court notes that with one exception 28 in which an order to show cause was issued, plaintiff has been diligent in both its efforts to obtain 1 counsel and its submission of requests to the court for additional time in which to do so. 2 Although plaintiff’s successive requests for extensions of time to obtain new counsel and the 3 court’s granting of those requests have necessarily delayed the progress of this litigation, the court 4 does not agree that such a delay warrants dismissal of this action under Rule 41(b) for failure to 5 prosecute or obey court orders. 6 To the extent that defendant seeks dismissal of this action under Rule 41(b) due to 7 plaintiff’s violation of the discovery rules and refusal to comply with the court’s discovery orders, 8 namely by failing to appear for properly noticed and court-compelled depositions, defendant has 9 not persuaded the court that dismissal under Rule 41(b) is an appropriate sanction for those 10 purported violations. In the court’s view, consideration of the first factor (the public’s interest in 11 expeditious resolution of litigation) and the second factor (the court’s need to manage its docket) 12 do not weigh in favor of dismissal given that plaintiff has been without representation since 13 August 2020, and since then, the court has granted plaintiff’s successive requests for additional 14 time to retain counsel, and indeed new counsel for plaintiff has finally appeared in this action on 15 April 13, 2021. As to the third factor (risk of prejudice to defendant), the court is not persuaded 16 that plaintiff’s prior failures to appear for their depositions necessarily means that they will thwart 17 renewed efforts in that regard, particularly given that plaintiff is now represented by counsel. 18 Although defendant argues that even before plaintiff’s former counsel withdrew, plaintiff’s agents 19 had failed to appear for their depositions in early and mid-August 2020, the court notes that 20 during that time period, the relationship between plaintiff and its then-counsel had already 21 deteriorated to the point where there was represented to be an “irremediable breakdown in 22 communication.” (See Doc. No. 53 at 4.) Thus, it is not clear that under the guidance of its new 23 counsel, plaintiff would continue to violate discovery rules and the court’s discovery orders such 24 that interference with accessing the truth would result. As to consideration of the fourth factor 25 (the availability of less drastic alternatives), the court notes that defendant has sought lesser 26 ///// 27 ///// 28 ///// 1 sanctions under Rule 37 as an alternative to dismissal under Rule 41(b).” Thus, defendant does 2 | not argue that less drastic alternatives are not available to address plaintiffs conduct. Finally, 3 | consideration of the fifth factor (public policy favoring disposition of cases on their merits) 4 | weighs against involuntary dismissal of this action. 5 In sum, the court concludes that the harsh sanction of dismissal of this action under Rule 6 | 41(b), due to plaintiff's failure to obtain counsel by the initial deadline set by the court and 7 | purported violations of the discovery rules and discovery-related orders, is not appropriate. This 8 | conclusion is based on the legal standards applicable under Rule 41(b). This order should not be 9 | construed as a determination by the court that imposition of terminating and/or monetary 10 || sanctions under Rule 37 are inappropriate in this case or construed as precluding a finding by the 11 || magistrate judge that any such sanctions under Rule 37 are appropriate here. Defendant’s 12 | arguments with regard to Rule 37 sanctions will be evaluated and addressed by the magistrate 13 | judge in a separate order. 14 CONCLUSION 15 For the reasons set forth above: 16 1. Defendant’s motion for involuntary dismissal of this action pursuant to Rule 41(b) 17 (Doc. No. 58) is denied; 18 2. Defendant’s motion for sanctions pursuant to Rule 37 (Doc. No. 58) is hereby 19 referred to United States Magistrate Judge Jennifer L. Thurston, consistent with 20 Local Rule 302(c), for resolution. 21 | IT IS □□ ORDERED. sass - Dated: _ June 16, 2021 YL A Dou 23 UNITED STATES DISTRICT JUDGE 24 25 20 | 2 As noted above, the assigned magistrate judge will evaluate defendant’s motion with regard to 27 || defendant’s request for sanctions under Rule 37, consistent with Local Rule 302(c)(1), which provides that “[a]ll discovery motions, including Fed. R. Civ. P. 37 motions,” will be handled by 28 | the assigned magistrate judge. L.R. 302(c)(1).