Klein v. Harper

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 4, 2015
Elisabeth A. Shumaker
Clerk of Court
R. WAYNE KLEIN, the court appointed
receiver of U.S. Ventures LC, Winsome
Investment Trust, and the assets of
Robert J. Andres and Robert L.
Holloway,
Plaintiff - Appellee,
v. No. 14-4068
(D.C. No. 2:12-CV-00023-DN)
TERRY L. HARPER, (D. Utah)
Defendant - Appellant,
and
WINGS OVER THE WORLD
MINISTRIES,
Defendant.
ORDER AND JUDGMENT*
Before GORSUCH, O’BRIEN, and HOLMES, Circuit Judges.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Defendant Terry L. Harper appeals the district court’s entry of default
judgment as a sanction for his repeated failure to comply with court orders in an
action filed by Plaintiff R. Wayne Klein, a court-appointed receiver (the “Receiver”)
who sought to recover fraudulent transfers made to Mr. Harper. We exercise
jurisdiction under 28 U.S.C. § 1291, conclude the district court did not abuse its
discretion, and affirm.
BACKGROUND
The Receiver was appointed by a federal district court to recover assets on
behalf of defrauded investors. In that capacity, the Receiver filed a complaint against
Mr. Harper and Wings Over the World Ministries (Wings), a corporation closely-held
by Mr. Harper, seeking to recover assets fraudulently transferred to them.1
Mr. Harper, proceeding pro se and declaring himself a “living, breathing, natural
born, free man on the soil, Sovereign American Citizen[ ],” Aplt. App., Vol. I, at 38,
filed a joint answer and motion to dismiss raising numerous challenges to the court’s
jurisdiction, the Receiver’s standing, and the absence of evidentiary proof in the
Receiver’s complaint. The district court denied the motion, ruling it had original
subject matter jurisdiction, the Receiver had standing to recover fraudulent transfers,
and the complaint was sufficiently pled. Mr. Harper reasserted his challenges to the
1
The district court ultimately entered default judgment against Wings, which
never answered the complaint. The district court denied Mr. Harper’s attempts to
represent Wings, because only a licensed attorney can represent another party in
federal court. Wings did not appeal.
-2-
court’s jurisdiction and the Receiver’s standing, filing a motion to strike the
complaint, stating he had no evidence the Receiver, whom he referred to as the
“Libellee[ ]” had standing “to bring allegations” or cause any “investigation,
harassment, meddling” or other action against him. Id. at 186. The district court
denied this motion, ruling that the issues of jurisdiction and standing had been
resolved and would not be reconsidered. Mr. Harper filed an interlocutory appeal,
which we dismissed for lack of jurisdiction.
The magistrate judge to whom the case was referred under 28 U.S.C.
§ 636(b)(1), scheduled a pre-trial conference. Mr. Harper failed to appear; then filed
a motion declaring his “non-presence” at the hearing because he had “no record or
evidence that [he was] required to fall prey to masters of ‘Legal-eze’ in any manner.”
Aplt. App., Vol. I, at 310. Over the next few weeks, Mr. Harper filed ten voluminous
and rambling submissions in which he continued to challenge the court’s jurisdiction
and the Receiver’s standing. The district court struck eleven of Mr. Harper’s filings
because they did not comply with the local rules of civil procedure in format,
substance, and procedure and were almost impossible to decipher. The court ordered
Mr. Harper to pay the Receiver’s attorneys’ fees and warned Mr. Harper that he was
subject to sanctions if he continued filing frivolous submissions. But Mr. Harper did
not pay the ordered fees and his frivolous filings continued unabated; he filed more
motions reasserting the jurisdiction and standing issues the court had already ruled
upon.
-3-
Furthermore, Mr. Harper completely failed to respond to the Receiver’s
discovery requests. He ignored the August 2013 Request for Admissions and letters
and emails from the Receiver explaining his response was past due. The district
court granted the Receiver’s motion to compel Mr. Harper’s compliance with
discovery and ordered him to provide discovery responses by January 14, 2014. It
also struck another five of Mr. Harper’s submissions as frivolous and non-compliant
with the court’s rules. It warned Mr. Harper that it would not accept frivolous filings
that failed to comply with local and federal rules and that reasserted issues already
addressed by the court. It ordered Mr. Harper to pay the Receiver’s attorneys’ fees
related to his abusive litigation conduct, and warned Mr. Harper it would consider
more serious sanctions if he continued to file improper or frivolous submissions,
including the entry of default judgment against him.
Mr. Harper did not provide discovery responses by the January deadline.
Further, despite the court’s warning, he filed another motion challenging the
Receiver’s standing which was nearly incoherent. And despite his refusal to comply
with any discovery requests or the court’s discovery order, Mr. Harper moved for
summary judgment.
The Receiver then moved for entry of default under Fed R. Civ. P. 37(b)(2)(A)
as a sanction for Mr. Harper’s repeated failure to comply with discovery requests and
orders, as well as his repeated frivolous filings and failure to pay any of the
court-ordered fees owed to the Receiver. The magistrate judge granted the Receiver
-4-
an extension of time to respond to the summary judgment motion and issued a Report
and Recommendation (R&R) in March 2014, to grant the motion for entry of default
against Mr. Harper as a sanction. Mr. Harper did not file any objections to this R&R.
The district court adopted the R&R, granting the motion for entry of default.
The clerk of court filed a default certificate and in May 2014, the Receiver moved for
entry of default judgment. See Fed. R. Civ. P. 55(b)(2) (following entry of default,
“the party must apply to the court for a default judgment”). Mr. Harper filed a Notice
of Unverified Claims, arguing any default judgment was void and that the Receiver
lacked standing to assert the claims in his complaint; a Notice of Trespass, arguing
the Receiver’s complaint trespassed on his property; and a Notice of Signature,
asserting that all the documents filed with the court which lacked a wet-ink signature
were void. The district court entered default judgment, and Mr. Harper appeals.
DISCUSSION
Mr. Harper argues the district court erred in granting summary judgment
because it failed to address the central issues as to whether the Receiver complied
with his receivership appointment and all applicable statutes and the Constitution,
and whether there were any voidable transfers. He also asserts the default judgment
was void because it was entered before the Receiver responded to his motion for
summary judgment.
-5-
I. Firm Waiver Rule
The Receiver contends Mr. Harper waived any appellate arguments when he
failed to object to the March 2014 R&R recommending entry of default. Under this
court’s firm waiver rule, the failure to timely object to a magistrate judge’s finding
and recommendations “waives appellate review of both factual and legal questions.”
Casanova v. Ulibarri, 595 F.3d 1120, 1123 (10th Cir. 2010) (internal quotation
marks omitted). Mr. Harper contends that he did not receive any notice, by mail or
email, of the magistrate judge’s R&R. His address changed about the time the R&R
was issued, and he failed to notify the court of his address change. But he asserts
that the district court and the Receiver’s counsel had previously sent all filings to him
by email, yet neither sent him the R&R by email. He states he first learned about the
R&R when Receiver’s counsel sent him, by email, the motion for entry of default
judgment on May 19, 2014, after which he immediately filed numerous objections
and notified the court of his address change. His motion for summary judgment was
pending during this same time period, and Mr. Harper submitted affidavits from
friends who recalled Mr. Harper saying he was surprised that he had not heard
anything from the court about his pending motions.
We may grant relief from the firm waiver rule in the interests of justice,
considering such factors as a pro se litigant’s effort to comply, the force and
plausibility of his explanation for not complying and the importance of the issues
raised. Id. The record shows that Mr. Harper was always very responsive to all other
-6-
filings, indeed overly so, and the only time period in which Mr. Harper was not
regularly submitting filings to the court was after the R&R was issued in March 2014
until the May 19 entry of default, to which he promptly filed eight objections. See id.
at 1123-24 (considering pro se party’s attentive responses to other filings to apply
exception to firm waiver rule). Considering Mr. Harper’s pro se status, his
attentiveness to all other filings, and the importance of dismissing a case on default
judgment, we conclude that the interests of justice support an exception in this case
to the firm waiver rule.
II. Merits
Under Rule 37(b)(2), “a district court may issue sanctions, including default
judgment against the disobedient party when a party disobeys a discovery order.”
Klein-Becker USA, LLC v. Englert, 711 F.3d 1153, 1159 (10th Cir. 2013) (internal
quotation marks omitted). Moreover, courts have broad inherent power to sanction
misconduct and abuse of the judicial process, Chambers v. NASCO, Inc., 501 U.S.
32, 43-45 (1991), which “includes the power to enter a default judgment,” Shepherd
v. American Broadcasting Companies, Inc., 62 F.3d 1469, 1475 (D.C. Cir. 1995)
(citing cases). Default judgment is “a harsh sanction that should be used only” if the
failure to comply with court orders is the result of “willfulness, bad faith, or any fault
of the disobedient party” rather than inability to comply. Klein-Becker, 711 F.3d at
1159 (brackets and internal quotation marks omitted). We review the district court’s
decision to enter default judgment as a sanction for abuse of discretion. Id.
-7-
The district court found that Mr. Harper’s failure to comply with court orders
or to participate in any discovery had materially impeded the litigation and the
Receiver had to use valuable time and money responding to Mr. Harper’s many
frivolous filings. It found Mr. Harper had repeatedly and willfully refused to follow
court orders and had deliberately ignored court orders while simultaneously filing
frivolous motions. It listed the many times the magistrate judge and court had
warned Mr. Harper that his continued submission of frivolous motions and his failure
to comply with court orders could result in sanctions, including entry of default
judgment. Id. (listing factors to be considered to determine if sanction of default or
dismissal is warranted, identified in Ehrenhaus v. Reynolds, 965 F.2d 916, 921
(10th Cir. 1992)).
We have reviewed the record and find no abuse of the district court’s
discretion. Mr. Harper failed to attend the scheduled pretrial conference, repeatedly
refused to comply with discovery requests, including the court’s order compelling
him to file his discovery responses by January 2014. In addition, Mr. Harper filed
dozens of frivolous motions, as well as a frivolous interlocutory appeal. Further, he
repeatedly and routinely ignored the district court’s orders. There is no merit to his
arguments that he needed to continually reassert his jurisdictional and standing
arguments in order to preserve these issues for appeal or that the default could not be
entered until the court first ruled on his summary judgment motion.
-8-
It is clear from Mr. Harper’s filings and submissions in the district court that
his non-compliance was willful and deliberate and that he had no intention of
complying with any discovery or other court orders. The district court repeatedly
warned Mr. Harper and attempted lesser sanctions, including payment of the
Receiver’s attorneys’ fees, which Mr. Harper also ignored. The district court did not
abuse its discretion in entering default judgment against Mr. Harper for his egregious
failure to comply with discovery rules and court orders.
The judgment of the district court is affirmed.
Entered for the Court
Jerome A. Holmes
Circuit Judge
-9-