Porter Bridge Loan Company v. Northrop

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT May 14, 2014
Elisabeth A. Shumaker
PORTER BRIDGE LOAN Clerk of Court
COMPANY, INC.,
Plaintiff-Appellee,
v. No. 13-5054
(D.C. No. 4:09-CV-00593-JED-FHM)
FREDERICK H. NORTHROP, (N.D. Okla.)
Defendant-Appellant,
and
NANCY G. HENTGES, Trustee of
the Nancy G. Hentges Trust;
MARK MARTENS,
Defendants.
------------------------------
STEPHEN J. CAPRON,
Attorney-Appellant.
ORDER AND JUDGMENT*
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 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 This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral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.
Before McHUGH, PORFILIO, and O’BRIEN, Circuit Judges.
Defendant Frederick H. Northrop and his attorney Stephen J. Capron appeal the
district court’s order sanctioning them for failing to respond adequately to post-judgment
discovery propounded by plaintiff Porter Bridge Loan Co. (Porter Bridge). We dismiss
the appeal as to Dr. Northrop and affirm the district court’s award of sanctions against
Mr. Capron.
I. BACKGROUND
Porter Bridge obtained a default judgment against Dr. Northrop and other
defendants. In June 2011, it served him with discovery requests pursuant to
Fed. R. Civ. P. 69(a)(2), which states: “In aid of the judgment or execution, the judgment
creditor . . . may obtain discovery from any person—including the judgment debtor—as
provided in these rules . . . .” Dr. Northrop failed to furnish complete responses,
including responses concerning assets and disbursements from the Frederick H. Northrop
Trust (the Trust), a trust for which Dr. Northrop is both the trustor and the trustee.
Eventually, in early November, 2011, Porter Bridge filed a motion to compel. On
February 15, 2012, the magistrate judge entered an order to compel discovery, but denied
Porter Bridge’s request for fees and costs. Dr. Northrop then produced supplemental
responses, but Porter Bridge deemed them inadequate. The magistrate judge held a
telephonic hearing on August 6, 2012, and ordered the parties to meet and confer to
resolve the discovery disputes. After the meeting, Dr. Northrop provided another
supplemental discovery response, which Porter Bridge again found incomplete, so it
-2-
notified the magistrate judge, who ordered supplemental briefing. In its supplemental
brief on the motion to compel, Porter Bridge requested sanctions pursuant to Fed. R. Civ.
P. 37(b)(2), as well as reimbursement for its attorney fees and costs.
On October 25, 2012, the magistrate judge entered an order denying in part and
granting in part Porter Bridge’s supplement to its motion to compel, and ordered
Dr. Northrop to provide additional information and documentation in response to the
discovery requests. The magistrate judge found the discovery delays were not
substantially justified and no other circumstances made an award of sanctions unjust.
Accordingly, he “impose[d] a monetary sanction in the total amount of $1,500.00 on
Northrop and his counsel, jointly and severally, as a sanction for [their failure to
discharge their duty to complete discovery].” Aplt. App. at 191. Dr. Northrop sought
review by the district court, and the district court affirmed. Dr. Northrop and Mr. Capron
appeal the imposition of a sanction; they do not challenge the amount of the sanction.
II. BANKRUPTCY DISCHARGE MOOTED NORTHROP’S APPEAL
After this appeal was filed, Dr. Northrop received a discharge in bankruptcy.
Accordingly, this court is prevented from granting him any effective relief because the
bankruptcy discharge operates to release him from his debts. See 11 U.S.C. § 727(b)
(providing that discharge in bankruptcy “discharges the debtor from all debts that arose
before the date of the order for relief”). Therefore, his appeal is moot and will be
dismissed.1
1
Neither party has addressed whether the sanction order is dischargeable in
bankruptcy. Therefore, the issue is waived. See San Juan Citizens Alliance v. Stiles,
-3-
Attorney Capron’s appeal is not mooted by the bankruptcy discharge. Counsel has
standing to appeal orders directly affecting him. See Kaufman v. Am. Family Mut. Ins.
Co., 601 F.3d 1088, 1095 (10th Cir. 2010).
III. SANCTION AWARD AGAINST ATTORNEY CAPRON
Mr. Capron challenges the district court’s order imposing on him a discovery
sanction of $1,500.00. Under Rule 37(b)(2)(A) & (C), if a party “fails to obey an order to
provide or permit discovery,” the district court “must order the disobedient party, the
attorney advising that party, or both to pay the reasonable expenses, including attorney
fees, caused by the failure, unless the failure was substantially justified or other
circumstances make an award of expenses unjust.” (Emphasis added.) We review a
district court’s discovery-sanction order for an abuse of discretion. Lee v. Max Int’l,
LLC, 638 F.3d 1318, 1320 (10th Cir. 2011). We also review for an abuse of discretion
the district court’s discovery rulings. Carr v. Castle, 337 F.3d 1221, 1232 (10th Cir.
2003).
A party and his counsel may both be held personally liable for expenses incurred
in failing to comply with discovery orders. Roadway Express, Inc. v. Piper, 447 U.S.
752, 763 (1980). “Rule 37 sanctions must be applied diligently both to penalize those
whose conduct may be deemed to warrant such a sanction, and to deter those who might
be tempted to such conduct in the absence of such a deterrent.” Id. at 763-64 (internal
quotation marks and brackets omitted).
654 F.3d 1038, 1056 (10th Cir. 2011) (holding issue not raised sufficiently in
opening brief is waived on appeal).
-4-
A. Due Process
Mr. Capron asserts that the sanction order violated his rights to due process
because he did not have notice and an opportunity to be heard before the sanction was
imposed. Due process requires that a party facing the assessment of costs and attorney
fees have “notice that such sanctions are being considered by the court and a subsequent
opportunity to respond. An opportunity to be heard does not require an oral or
evidentiary hearing on the issue; the opportunity to fully brief the issue is sufficient to
satisfy due process requirements.” Resolution Trust Corp. v. Dabney, 73 F.3d 262, 268
(10th Cir. 1995) (citation omitted). Moreover, “due process concerns posed by an
outright dismissal are plainly greater than those presented by assessing counsel fees
against lawyers.” Roadway Express, Inc., 447 U.S. at 767 n.14. And whether the notice
and hearing were adequate “turns, to a considerable extent,” on circumstances showing
that the party knew of the “consequences of his own conduct.” Link v. Wabash R.R. Co.,
370 U.S. 626, 632 (1962).
Porter Bridge’s supplemental brief in support of its motion to compel requested
sanctions under Rule 37(b)(2), which clearly provides for sanctions against a party and
his attorney. We conclude that the possibility that counsel would be sanctioned for the
extended discovery failures was reasonably foreseeable and that counsel had adequate
notice that sanctions could be imposed on him. See Sally Beauty Co. v. Beautyco, Inc.,
372 F.3d 1186, 1191 (10th Cir. 2004) (finding it reasonably foreseeable that counsel
would have jury costs taxed against them where counsel settled the case after a
court-imposed deadline, resulting in unnecessary court costs); see also id. (citing
-5-
Devaney v. Cont’l Am. Ins. Co., 989 F.2d 1154, 1160 (11th Cir. 1993), for the proposition
that “due process is satisfied where counsel had reason to know of the possibility of
sanctions, despite the fact that the motions for sanctions named only the party and not
counsel”). Mr. Capron had an opportunity to respond, and filed a written response,
before the magistrate judge entered the sanction order. Therefore, we conclude
Mr. Capron did not suffer a violation of his due process rights.
B. Discovery Rulings
Mr. Capron challenges the district court’s findings that he and his client failed to
comply with Porter Bridge’s discovery requests. Therefore, he claims the failures could
not form the basis for a sanction. The court held that Dr. Northrop had not fully
complied with Interrogatory No. 12, which requested that he “[i]dentify and describe all
instances in which the Trust has paid any account payable or other expense or liability of
Northrop during the Relevant Time Period.” Aplt. App. at 227 (internal quotation marks
omitted). The district court found that banking records for the Trust showed expenditures
for personal expenses that were not explained, as well as transfers of funds to unnamed
accounts. Mr. Capron contends that the unidentified payments and transfers were
improperly the subject of the motion to compel because there is no evidence that they
were made on an account, or for an expense, of Dr. Northrop. He says that the payments
could have been made to benefit one of the other trust beneficiaries, and that he had
furnished all information pertinent to Dr. Northrop. In essence, he asks the court and
Porter Bridge to take his word for it, rather than have access to all of the information.
But as the district court noted, Porter Bridge was “entitled to the detailed information that
-6-
reflect[ed] the transactions in order to determine whether there were fraudulent transfers.”
Id. at 228.
Turning to the deficiencies in the requests for production of documents,
Mr. Capron argues generally that Porter Bridge did not identify any of the particular
documents that were not produced or show that the documents had been in
Dr. Northrop’s possession. But Porter Bridge could not be expected to identify
documents it did not receive or to know what documents Dr. Northrop did nor did not
possess.
As to the specific document requests, the district court held that the responses
were inadequate concerning the AT&T and ONG accounts listing Dr. Northrop as “the
obligor” or “an obligor.” Even though Dr. Northrop was listed as an account obligor,
Mr. Capron maintains that these accounts are not relevant to a document request for
Dr. Northrop’s accounts payable because he did not pay them.2 We disagree; the district
court did not abuse its discretion in ruling that, as an obligor on the accounts,
2
Mr. Capron also argues that sanctions cannot be based on a failure to produce
these documents because opposing counsel refused to meet and confer, as required by
Rule 37(A)(5)(a)(i). This allegation appears to be based solely on a footnote in his
opposition to Porter Bridge’s motion to compel. See Aplt. App. at 154 n.2.
Mr. Capron asserted that during the meet-and-confer session, he wished to analyze
whether these accounts were “technically” accounts payable, even though
Dr. Northrop “did not consider [them to be] his obligation.” Id. Opposing counsel
declined to engage in such a discussion. We conclude that these circumstances do
not qualify as a refusal to meet and confer. See Rule 37(a)(1) (requiring party
moving for order compelling discovery to certify that he “has in good faith conferred
or attempted to confer with the person or party failing to make disclosure or
discovery in an effort to obtain it without court action”).
-7-
Dr. Northrup was required to produce the account information in response to the
documents request.
The district court next determined that records pertaining to large transfers of
money from the Trust to unidentified accounts or by checks payable to “Pat Northrop” or
“Cash” were insufficient and ordered Dr. Northrop to supplement the relevant financial
records and information. Mr. Capron argues that he was improperly sanctioned for
failing to provide information, rather than documents. But this request is related to the
information requested by Interrogatory No. 12, discussed above. Thus, not only could
Porter Bridge have expected the documents to reveal information, Mr. Capron and his
client should have provided both documents and information on this topic.
Mr. Capron further contends that Dr. Northrop produced all of the documents
relevant to the Trust that were in his possession or control. This representation is
undercut by the facts that Dr. Northrop was both trustor and trustee, and that he did
produce some Trust documents responsive to the requests for production, thus indicating
that even if he did not have the remaining documents in his possession, he had “the legal
right, authority or ability to obtain [them] upon demand.” U.S. Int’l Trade Comm’n v.
ASAT, Inc., 411 F.3d 245, 254 (D.C. Cir. 2005) (defining “control” of documents).
The district court also determined that Dr. Northrop had not produced the account
information for a certain Chase credit card account. Mr. Capron asserts that this account
was used for Dr. Northrop’s medical practice and the records for it had been produced
prior to the sanction order. The district court acknowledged that some of these records
-8-
had been produced and did not abuse its discretion by ordering production of all of the
records.
C. Sanction Order
Having concluded the district court did not abuse its discretion by finding
Dr. Northrop and his counsel had not fully complied with discovery or in compelling
them to do so, we finally consider Mr. Capron’s arguments pertaining to imposition of
the sanction order itself. In general terms, he asserts a number of contentions that are
merely patent obfuscations.
He states the magistrate judge found Dr. Northrop’s efforts to comply were
generally responsive, thus no actual prejudice resulted from his acts or those of his
counsel. Mr. Capron asserts the AT&T and ONG records were irrelevant to any inquiry
into Dr. Northrop’s fraudulent intent, thus no interference with the judicial process was
caused. He then reprises the issue of notice with which we have already dealt, and
concludes the sanctions were not required to prevent future discovery failures.
From the record, it is patent to us Mr. Capron and his client received the benefit of
a very patient court. Indeed, they had three opportunities to comply properly with
discovery, but by standing on specious contentions, they failed to do so. Yet, as we have
previously held, three failed opportunities are “more than enough” to warrant imposition
of sanctions. Lee, 638 F.3d at 1321. Consequently, we also hold the district court did not
abuse it’s discretion by imposition of sanctions of $1,500.00 upon Mr. Capon and his
client.
-9-
IV. CONCLUSION
Dr. Northrop’s appeal is dismissed as moot. The district court’s sanction award
against Attorney Capron is affirmed.
Entered for the Court
John C. Porfilio
Circuit Judge
- 10 -