United States v. One Tract Real Prop

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
ONE TRACT OF REAL PROPERTY AND
ALL APPURTENANCES AND
IMPROVEMENTS THERETO, located in
Little River Township, Wake
County, North Carolina, being more
particularly described in Book 5023,
Page 0442 of the Wake County
Registry, being titled in the name of
W. D. Enterprises, Incorporated, a
No. 95-1282
North Carolina Corporation, c/o
Lois Hodge, and any and all
proceeds from the sale of said
property,
Defendant-Appellant,
LOIS HODGE,
Claimant-Appellant,
and
W. D. ENTERPRISES, INCORPORATED;
HAROLD WHITE,
Claimants.
Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
W. Earl Britt, District Judge.
(C-93-389-5-BR)
Submitted: January 31, 1997
Decided: February 20, 1997
Before WIDENER, NIEMEYER, and WILLIAMS, Circuit Judges.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
Mohammed M. Shyllon, Melvin L. Wall, Jr., SHYLLON & SHYL-
LON, Raleigh, North Carolina, for Appellant. Janice McKenzie Cole,
United States Attorney, Thomas P. Swaim, Assistant United States
Attorney, Raleigh, North Carolina, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
In June 1993, the United States (Government) commenced an in
rem civil forfeiture action under 21 U.S.C. § 881(a)(7) (1994), against
real property, buildings, and appurtenances thereto located in Wake
County, North Carolina. The property, which was titled in the name
of W.D. Enterprises, Incorporated (W.D. Enterprises), a North Caro-
lina corporation, c/o Lois Hodge,1 had been used as the primary resi-
dence of William Douglas Hodge (William) and Lois Rainey Holden
Hodge (Hodge) and their children and stepchildren since March 1985.
In 1988, William was convicted of "maintaining a dwelling" for the
purpose of facilitating illegal drug activity with regard to the property.
In 1990, William's stepdaughter was convicted of felony cocaine
charges in connection with illegal drug activity facilitated by the
property. The Government asserts that a search of the property
_________________________________________________________________
1 Lois Hodge is described in the record as managing agent of W.D.
Enterprises, Inc.
2
revealed "crack" cocaine in bottles displaying Hodge's name and that
it had obtained a taped conversation of a drug negotiation between
Hodge and an undercover agent regarding cocaine and marijuana
transactions which took place at the property.
Hodge, on behalf of W. D. Enterprises, claimed an"innocent
owner" defense, proffering affidavits that she did not negotiate with
an undercover agent for drug transactions at the property and that it
was not her voice on the Government's tape. 21 U.S.C. § 881(a)(7).
Nonetheless, Hodge failed to comply with the Government's numer-
ous discovery requests. Accordingly, the district court, by order of a
magistrate judge filed June 24, 1994, granted the Government's
motion to compel discovery. The order read, in pertinent part, "Claim-
ant W. D. Enterprises, Inc. IS ORDERED to respond to all discovery
previously served on it no later than July 5, 1995. 2 Claimant is fore-
warned that failure to obey this Order may result in a dismissal of its
claim, taxation of costs and attorney fees, and other sanctions."
Because W.D. Enterprises and Hodge failed to fully comply with the
order to compel discovery, the Government, by motion on July 15,
1994, sought sanctions, specifically including that the court dismiss
W.D. Enterprises' claim and grant summary judgment to the Govern-
ment. Thereafter, the Government and Hodge entered into a stipula-
tion filed with the district court.3
The district court, by order filed December 1, 1994, noted that
Hodge had failed "to participate in a pre-trial conference and the prep-
aration of a pre-trial order. Throughout this litigation claimant Lois
Hodge has failed to comply with discovery requests, resulting in the
filing of motions for sanctions . . . ." The order continued:
_________________________________________________________________
2 It appears the order erroneously read 1995 instead of 1994.
3 In the stipulation, filed with the district court on July 21, 1994, Hodge
admitted that she was the sole owner of 100 percent of the corporation's
stock and that if she consented to or was involved in illegal drug activity
at the property that such knowledge would be imputed to W. D. Enter-
prises, meaning that the corporation would not be able to utilize an "in-
nocent owner" defense. Hodge admitted that she knew her husband
William Douglas Hodge, the sole director and officer of W. D. Enter-
prises, was involved in the sale and distribution of marijuana but denied
knowledge that the defendant property was involved in her husband's
crimes.
3
Claimant Lois Hodge is hereby ORDERED to contact coun-
sel for plaintiff [the Government] and participate in a pre-
trial conference as required by the local rules of this Court,4
said conference to be held in the office of the United States
Attorney not later than 5:00 p.m., Friday 9 December 1994.
Failure to comply with this order may result in an order
striking the claim of Lois Hodge. Counsel for plaintiff shall
promptly notify the court if claimant Lois Hodge does not
comply with this order.
On December 5 Hodge's new attorney,5 in compliance with the
December 1 order, contacted the Government's attorney and orally
agreed to provide Hodge's contribution to the delinquent pre-trial
order by close of business on December 6. The Government's attor-
ney agreed and, because he planned to be out of town from December
7 through 8, stated that he would review Hodge's anticipated contri-
bution to the pre-trial order on December 9, and contact Hodge's
attorney that day if he had any questions. Because the Government
received no contribution to the pre-trial order, it filed another motion
for sanctions on December 12, seeking dismissal of Hodge's claim.
By order filed December 20, the district court granted the Govern-
ment's motion, finding that "[a]lthough counsel for the claimant
[Hodge] did contact the plaintiff, no contribution to the pre-trial order
in anticipation of the pre-trial conference has been provided, despite
representations to the contrary." Thus, the court"ORDERED that the
claimant is sanctioned for her failure to comply with the Court's
_________________________________________________________________
4 Local Rule 25.02 requires that at least 10 days prior to the "final pre-
trial conference," trial counsel for each party must confer and prepare a
proposed "final pre-trial order." The "pre-trial order" must contain five
sections: stipulations, contentions of the parties, exhibits, designation of
pleadings and discovery material, and witness information. E.D.N.C.
Loc. R. 24.03. The function of the "final pre-trial conference," is "to
resolve any disputes concerning the contents of the pre-trial order."
E.D.N.C. Loc. R. 24.04.
5 Mr. Melvin Wall filed a notice of appearance with the district court
on behalf of Hodge on December 7, 1994. Mr. Wall continues to repre-
sent Hodge on appeal. Initially, Hodge was represented by two other
attorneys whose motion to withdraw as counsel was granted Septem-
ber 8, 1994.
4
Order of pre-trial discovery, and pursuant to Rule 37(b)(2)(B) of the
Federal Rules of Civil Procedure, the claimant will not be allowed to
support her claim in this matter [i.e. by use of an innocent owner
defense]." Because the court had previously"made a probable cause
determination" that the property was forfeitable and because Hodge's
innocent owner claim was dismissed, the court granted summary
judgment to the Government.
Hodge then filed a motion for reconsideration, under Fed. R. Civ.
P. 59(e). In support of her Rule 59 motion, Hodge's counsel averred
that he misunderstood his client's duty to provide"the required pre-
trial exchange of information" by December 9, 1994. Specifically, he
alleged that it was his understanding that the Government's motion to
continue, filed December 6 and granted by the court the following
day, "would postpone the date for the respective parties to make the
required pretrial exchange of information . . . to a date to be deter-
mined by the Clerk." Further, he alleged that the Government's coun-
sel led him to believe the date for the pretrial exchange of information
would be postponed if the motion to continue was granted by the court.6
In response, the Government denied having misled Hodge's counsel
regarding her duties as enumerated in the December 1 order. The
court denied the Rule 59 motion, which Hodge appeals.
On appeal, Hodge claims that dismissal of her claim for failure to
comply with the court's December 1 order was an inappropriate sanc-
tion and that the Government was not entitled to summary judgment.
Because we find no merit in these claims, we affirm. We have previ-
ously granted Hodge's motion to decide the appeal without oral argu-
ment.
Rule 16(f) of the Federal Rules of Civil Procedure authorizes dis-
trict courts to employ those sanctions provided in Rule 37(b)(2)(B),
_________________________________________________________________
6 In the Rule 59(e) motion, Hodge alleged, for the first time, that the
seizure should be disallowed because no preseizure hearing was con-
ducted as discussed in United States v. James Daniel Good Real
Property, 510 U.S. 43 (1993). Because, however, Rule 59(e) motions
cannot be used to raise new issues, we will not address this issue on
appeal. See Ray E. Friedman & Co. v. Jenkins, 824 F.2d 657, 660 (8th
Cir. 1987); Hashwani v. Barbar, 822 F.2d 1038, 1041 (11th Cir. 1987).
5
(C),7 and (D), including dismissal, in a number of situations such as
where a party or its attorney fails to obey a scheduling or pretrial
order, fails to appear at a scheduling or pretrial conference, or fails
to participate in good faith. Rabb v. Amatex Corp., 769 F.2d 996, 999-
1000 (4th Cir. 1985). A trial court may preclude a party from intro-
ducing evidence or supporting a claim "under Fed. R. Civ. P. 37(b)
(2)(B) even if to do so is tantamount to a Fed. R. Civ. P. 37(b)(2)(C)
dismissal." Id. at 1000 (citations omitted). The decision of what sanc-
tion is appropriate under the prevailing circumstances is within the
district court's sound discretion. Id. at 999. The question on appeal is
thus not whether the reviewing court would have dismissed the action
as an original matter but whether the district court abused its discre-
tion in doing so. National Hockey League v. Metropolitan Hockey
Club, Inc., 427 U.S. 639, 642 (1976). In this light, the United States
Supreme Court in discussing Fed. R. Civ. P. 37 has cautioned against
the "natural tendency on the part of reviewing courts, properly
employing the benefit of hindsight, to be heavily influenced by the
severity of outright dismissal as a sanction for failure to comply with
a discovery order." Id. The Court further noted that the harsh sanction
of dismissal "must be available to the district court in appropriate
_________________________________________________________________
7 Rule 37(b)(2) reads, in pertinent part:
(b) Failure to Comply With Order.
***
(2) Sanctions by Court in Which Action is Pending. If a
party . . . fails to obey an order to provide or permit dis-
covery . . . the court in which the action is pending may
make such orders in regard to the failure as are just,
and among others the following:
***
(B) An order refusing to allow the disobedient party to
support or oppose designated claims or defenses, or
prohibiting that party from introducing designated
matters in evidence;
(C) An order striking out pleadings or parts thereof, or
staying further proceedings until the order is obeyed,
or dismissing the action or proceeding or any part
thereof, or rendering a judgment by default against
the disobedient party. . . .
6
cases, not merely to penalize those whose conduct may be deemed to
warrant such a sanction, but to deter those who might be tempted to
such conduct in the absence of such a deterrent." Id. at 643. There is,
however, a due process limitation on a district court's power to dis-
miss under Rule 37(b) such that a court is not authorized to dismiss
a complaint when it has been established that a litigant's noncompli-
ance with a pretrial production order was because of inability, rather
than willfulness, bad faith or fault. Rabb, 769 F.2d at 1000 (citing
Societe Internationale Pour Participations Industrielles Et Commer-
ciales v. Rogers, 357 U.S. 197, 212 (1958)).
We do not find that the court abused its discretion in denying
Hodge's claim. Hodge's repeated refusals to comply with the Govern-
ment's legitimate discovery requests, despite court orders to the con-
trary, evidences willful, "bad faith" conduct. Further, such conduct
was prejudicial to the Government (because it could not defend
against claims, facts, and witnesses that Hodge refused to provide)
and hampered the district court's efforts to advance and resolve the
litigation. The court's attempts to gain compliance with less drastic
sanctions were ineffective--Hodge received two explicit court orders
warning her that failure to comply with discovery could result in dis-
missal of her claim. Finally, Hodge's conduct itself warranted sanc-
tion, which should act as a deterrence to others. Thus, we do not find
that the district court's dismissal of Hodge's claim was an abuse of
discretion. Rabb, 769 F.2d at 999-1000.
Hodge's appellate counsel, who represented her at the time the dis-
trict court dismissed her claim, alleges that it was his understanding
that the court's December 7 order, which continued the trial and pre-
trial, negated his client's duty to provide information to the Govern-
ment as explicitly instructed by the court's December 1 order. The
December 7 order granting a continuance read: "Upon the motion of
the United States, it is hereby ORDERED that the trial currently set
for 3 January 1995 is continued until 27 February 1995. The Clerk is
directed to reschedule the pretrial accordingly." The Government's
motion requesting the continuance sought "to continue the Pre-Trial
and Trial, scheduled in this action for December 21, 1994 and January
3, 1995, respectively." Although Hodge's attorney may have miscon-
strued the court's December 7 continuance order, we do not find that
the district court abused its discretion in dismissing Hodge's claim,
7
given her repeated failure to participate in the discovery process and
comply with the court's discovery orders. Fed. R. Civ. P. 37(b)(2)(B).
Hodge's conduct throughout the litigation--with and without counsel
--belies her argument that her failure to follow the district court's
December 1 order occurred because her attorney was misled or failed
to understand an order of the district court.8
Hodge's argument that the Government was not entitled to sum-
mary judgment as a matter of law also fails. With Hodge's innocent
owner defense dismissed under Fed. R. Civ. P. 37(b)(2)(B), the record
was more than sufficient to show probable cause that the property was
subject to forfeiture. See 21 U.S.C. § 881(a)(7); United States v. 7715
Betsy Bruce Lane, 906 F.2d 110, 111 (4th Cir. 1990) (in a civil forfei-
ture proceeding, government need only show probable cause that
there is a substantial connection between the subject property and
underlying criminal activity; once probable cause is shown, the bur-
den shifts to claimant to prove by a preponderance of the evidence
that the factual predicates for forfeiture have not been met). Accord-
ingly, the district court's denial of Hodge's Rule 59(e) motion is
affirmed.
AFFIRMED
_________________________________________________________________
8 Counsel's confusion, however, is misplaced. First, the district court's
December 1 order was clear and unequivocal: Hodge was ordered to con-
tact Government counsel and "participate in a pretrial conference as
required by the local rules of this Court, said conference to be held in
the office of the United States Attorney not later than 5:00 p.m., Friday
9 December 1994." (Emphasis added). The pretrial conference to which
the court referred is explained in Local Rule 24.02, which requires the
parties to meet in order to create a pre-trial order for use in the final pre-
trial conference. See E.D.N.C. Loc. R. 24.02-04. The December 1 order
specifically noted "the failure of claimant Lois Hodge to participate in a
pre-trial conference and [in] the preparation of a pre-trial order."
(Emphasis added). Again, this should have alerted counsel to the nature
of the court's demands. Finally, the Government's motion for continu-
ance, filed on December 6, stated that the "Pre-trial" it sought to continue
was set for December 21, 1994. Thus, we do not find that the district
court abused its discretion by denying Hodge's motion for reconsidera-
tion on the grounds that her counsel confused his client's duty to meet
with the Government by December 9 with the continuance of the pretrial
conference set for December 21. See Rabb, 769 F.2d at 999-1000.
8