Opinion
16-cv-00609-GNS-RSE
06-06-2019
UNITED PARCEL SERVICE CO., et al. PLAINTIFF v. DNJ LOGISTIC GROUP, INC. DEFENDANT
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND RECOMMENDATIONS
REGINA S. EDWARDS, MAGISTRATE JUDGE
Plaintiffs, United Parcel Service Co. and UPS Worldwide Forwarding, Inc. (collectively referred to as “UPS”), have moved the Court to enter an order for sanctions, including default judgment, against Defendant, DNJ Logistic Group, Inc. (“DNJ”). (DN 85). DNJ did not file a response to UPS's Motion, and the time to do so has expired. This matter is ripe for adjudication.
Pursuant to 28 U.S.C. § 636(b)(1)(A) & (B), the District Court referred this matter to the undersigned Magistrate Judge for findings of fact and recommendations. (DN 87). For the reasons set forth herein, the Court recommends that UPS's Motion for Sanctions (DN 85) be GRANTED.
I. FINDINGS OF FACT
a. Background
On September 23, 2016, UPS filed the Complaint in this action alleging breach of contract, negligent misrepresentation, and unjust enrichment claims against DNJ and DNJ's President, CEO, and owner, Ralph Nabavi (“Nabavi”) (collectively referred to as “Defendants”). (DN 1). According to the Complaint, the parties entered into a Small Package Cargo Handling Services Agreement (the “Agreement”) on September 14, 2010. (Id. at p. 1). Pursuant to the Agreement, DNJ, a provider of freight forwarding services, was contracted to move small package cargo for UPS along certain international routes that UPS did not routinely fly. (Id.). The agreed upon prices for DNJ's services were controlled by the terms set forth in a series of attachments to the Agreement. (Id. at p. 2). More specifically, the Agreement provided that for services performed, “DNJ would charge a specified rate per kilogram for particular routes, also known as ‘lanes,'” (id.), and UPS would “forward payments to [DNJ] no later than thirty (30) days after receipt of a [DNJ] invoice.” (DN 1-2 at p. 5) (Agreement at § 2.2). “DNJ provided services under the Agreement . . . from September 2010 until DNJ terminated the Agreement on July 22, 2016.” (DN 1 at p. 2).
Beginning in June 2016, just before DNJ terminated the Agreement, UPS discovered that it was being overbilled by DNJ. (Id. at p. 9). According to UPS, the plain text of the Agreement provided that “DNJ would invoice [UPS] for the actual weight of the packages [UPS] tendered to DNJ, multiplied by the agreed-upon rate per kilogram for the lane segment at issue.” (Id. at p. 7). However, UPS claims that at Nabavi's direction, DNJ used “inflated” package weights to compute the amounts provided in DNJ's invoices, which caused UPS to pay DNJ more than what UPS owed under the Agreement. (Id. at p. 8).
Upon discovery of DNJ's billing practices, UPS confronted DNJ and demanded remuneration. (Id. at p. 9). DNJ, however, denied UPS's allegations, started returning packages, and ultimately, refused to further perform its services. (Id.). Then, on July 22, 2016, in accordance with Section 4.1 of the Agreement, DNJ served UPS with a Notice of Termination (“Notice”). (Id.). See also (DN 1-2 at p. 5) (Agreement at § 4.1). Approximately thirty (30) days after DNJ's Notice, the parties' Agreement was terminated on August 22, 2016. (DN 1 at p. 9). The following month, UPS initiated the instant lawsuit.
b. Procedural History
Initially represented by counsel, Defendants, in lieu of an answer to the Complaint, filed a Motion to Dismiss arguing that under Federal Rule of Civil Procedure 12(b)(6), UPS failed to state any claim upon which relief can be granted. (DN 12). In part, the District Court agreed with Defendants and granted their Motion to Dismiss, but only to the extent that UPS's claims of negligent misrepresentation against DNJ and Nabavi were dismissed. See (DN 23). Accordingly, the individual defendant, Nabavi, was dismissed as a party from this action. (Id.). See also (DN 86). However, UPS's breach of contract and unjust enrichment claims remained against the corporate defendant, DNJ. (DN 23).
Following the District Court's Memorandum Opinion and Order entered on July 20, 2017, DNJ filed an Answer to UPS's remaining claims. (DN 24). Additionally, DNJ also filed a Counterclaim against UPS alleging breach of contract and unjust enrichment claims resulting from unpaid invoices for shipments made in June and July 2016. (Id. at p. 17). The Court conducted a telephonic status conference to discuss the remaining claims (DN 25) and, in accordance with the deadlines proposed by the parties, subsequently entered the Scheduling Order on August 11, 2017. (DN 28). The parties commenced discovery and, according to UPS, DNJ began its strategy of delay. (DN 85 at p. 2).
On January 24, 2018, UPS noticed DNJ's 30(b)(6) deposition pursuant to Federal Rule of Civil Procedure 30.(Id.). To date, however, not one deposition has been conducted in this matter. (Id.). Rather, multiple discovery disputes arose between the parties. (Id.). See also (DNs 37, 41, & 43). Accordingly, the Court ordered that DNJ's Rule 30(b)(6) deposition, in addition to all other discovery, except for third-party discovery, be stayed pending the Court's resolution of the parties' discovery disputes. (DN 41); see also (DN 85 at p. 2). Upon consideration of the parties' arguments, the Court ruled in favor of UPS, and DNJ objected. See (DNs 53 & 65). Following the District Court's Memorandum Opinion and Order overruling DNJ's objection to the Court's resolution of the aforementioned disputes, the discovery stay was lifted on July 3, 2018. (DN 65); see also (DN 85 at p. 3).
Generally, Rule 30 governs “Depositions by Oral Examination.” Fed.R.Civ.P. 30. In pertinent part, Rule 30(b)(6) governs the “Notice or Subpoena Directed to an Organization:”
In its notice or subpoena, a party may name as the deponent a public or private corporation, a partnership, an association, a governmental agency, or other entity and must describe with reasonable particularity the matters for examination. The named organization must then designate one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf; and it may set out the matters on which each person designated will testify. A subpoena must advise a nonparty organization of its duty to make this designation. The persons designated must testify about information known or reasonably available to the organization. This paragraph (6) does not preclude a deposition by any other procedure allowed by these rules.Id. at 30(b)(6).
UPS then re-noticed DNJ's Rule 30(b)(6) deposition for August 14, 2018. (Id. at p. 3). But, on August 13, 2018, the day before DNJ's Rule 30(b)(6) deposition, the Court conducted a telephonic conference to address DNJ's request to postpone the deposition. (Id.). See also (DN 74). Based on the Court's discussion with the parties, the Court ordered that DNJ's Rule 30(b)(6) deposition be temporarily postponed for thirty (30) days. (Id.). However, before the expiration of the 30-day postponement period, DNJ's counsel filed a Motion to Withdraw on August 31, 2018. (DN 76). On September 20, 2018, the Court granted defense counsel's Motion. (DN 78). Pursuant to that Order, the Court also granted DNJ's request to issue a 60-day stay for all discovery and other deadlines in order to allow DNJ the opportunity to secure new counsel. (Id.). See also (DN 76).
Just prior to the expiration of the 60-day stay ordered by the Court, Nabavi submitted a letter to the Court on November 16, 2018 requesting additional time to retain counsel. (DN 79). In response, UPS filed a letter opposing DNJ's request. (DN 80). Additionally, UPS moved the Court to enter an order compelling DNJ's deposition on or before January 31, 2019. (Id. at p. 2). Ultimately, in an abundance of caution, the Court granted DNJ an additional fourteen (14) days to retain counsel. (DN 82). Crucially, in the Court's Order entered on January 2, 2019, the Court warned “DNJ that failure to secure counsel at the expiration of this extended period may subject the corporate defendant to a default judgment as well as a dismissal of DNJ's counterclaim against the plaintiffs.” (Id. at p. 4).
The 14-day extended period passed, and no attorney filed an appearance for DNJ. The Court then scheduled a telephonic status conference for January 30, 2019. (DN 83). On January 30, 2019, however, DNJ failed to appear, and the Court rescheduled the telephonic status conference to February 8, 2019. (DN 84). On February 8, 2019, following the Court's discussion with counsel for UPS, as well as Nabavi, the Court entered an Order confirming that as of the date of the conference, there had not been an attorney designation for DNJ. (DN 86).
To date, no counsel has entered an appearance on behalf of DNJ.
c. UPS's Motion for Sanctions
Following DNJ's failure to appear at the telephonic status conference set for January 30, 2019, UPS filed the subject Motion for Sanctions. (DN 85). In the Motion, UPS provides a litany of tactics used by DNJ to obstruct this litigation, which have “resulted in over a year's worth of discovery stays, delayed DNJ's Rule 30(b)(6) deposition for a year, and prevented UPS from conducting any discovery whatsoever over the past six months.” (DN 85 at p. 1). Furthermore, UPS claims that DNJ's willful violation of a clear and unambiguous Order from the Court, in addition to DNJ's failure to appear at a Court-Ordered telephonic status conference, warrants severe sanctions against DNJ. (Id.). More specifically, pursuant to Federal Rules of Civil Procedure 16(f) and 37(b), UPS moves the Court to render a default judgment against DNJ on UPS's claims, as well as dismiss DNJ's Counterclaim against UPS. (Id. at p. 4, 7).
II. CONCLUSIONS OF LAW
a. Legal Standard
Federal Rule of Civil Procedure 16 provides that the Court may sanction a party or its attorney for failing to appear at a scheduling or other pretrial conference; being substantially unprepared to participate--or not participating in good faith--at a conference; or failing to obey a scheduling or other pretrial order. Fed.R.Civ.P. 16(f)(1)(A) - (C). Potential sanctions under Rule 16 include:
1. prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;
2. striking pleadings in whole or in part;
3. staying further proceedings until the order is obeyed;
4. dismissing the action or proceeding in whole or in part;
5. rendering a default judgment against the disobedient party; or
6. treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination.
Fed. R. Civ. P. 16(f)(1) (cross-referencing available sanctions under Fed.R.Civ.P. 37(b)(2)(A)(ii) - (vii)).
Among the variety of discovery sanctions available in a district court's “arsenal,” the entry of a default judgment against a defendant or an order of dismissal against a plaintiff are the court's strongest weapons. See Grange Mut. Cas. Co. v. Mack, 270 Fed. App'x. 372, 376 (6th Cir. 2008) (“A district judge holds a variety of sanctions in his arsenal, the most severe of which is the power to issue a default judgment.”). Therefore, the sanction of default judgment, or dismissal, under Rule 37 for failure to cooperate in discovery is regarded as “the sanction of last resort.” Beil v. Lakewood Eng'g and Mfg. Co., 15 F.3d 546, 552 (6th Cir. 1994); see also Bank One of Cleveland, N.A. v. Abbe, 916 F.2d 1067, 1073 (6th Cir. 1990) (“Just as ‘[dismissal of an action for failure to cooperate in discovery is a sanction of last resort . . . so, too, is entry of default judgment.'”) (quoting Patton v. Aerojet Ordnance Co., 765 F.2d 604, 607 (6th Cir. 1985)).
Accordingly, because the sanction of default is particularly harsh, United Coin Meter Co., Inc. v. Seaboard Coastline RR., 705 F.2d 839, 846 (6th Cir. 1983), the Court should not impose such a harsh sanction lightly. Brown v. Sneed, No. 09-392-GFVT, 2011 WL 3567469, at *4 (E.D. Ky. Aug. 15, 2011); Rishell v. Standard Life Ins. Co., No. 1:08-cv-1198, 2009 WL 395884, at *7 (W.D. Mich. Feb. 13, 2009). Rather, a motion for sanctions under Rule 37(b) is addressed to the Court's discretion. See Photo Exch. BBS, Inc. v. Sheline, No. 2:10-cv-566, 2012 WL 1599050, at *2 (S.D. Ohio May 7, 2012) (“The imposition of sanctions, or the type of sanctions imposed, is within the sound discretion of the court based on the facts of each particular case.”) (citing National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642-43 (1976); Regional Refuse Sys., Inc. v. Inland Reclamation Co., 842 F.2d 150, 154 (6th Cir. 1988)); accord Freeman v. Troutt, No. 3:10-0697, 2011 WL 4343806, at *2 (M.D. Tenn. Sept. 14, 2011), report and recommendation adopted, No. 3:10-0697, 2011 WL 5981653 (M.D. Tenn. Nov. 29, 2011); and Farrah Group, LLC v. Duroplas Corp., No. 05-73537, 2006 WL 8432690, at *1 (E.D. Mich. May 24, 2006).
The Court's discretion is informed by the following four factors provided in Harmon v. CSX Transp., Inc., 110 F.3d 364 (6th Cir. 1997):
(1) whether the party's failure to cooperate in discovery is due to willfulness, bad faith, or fault; (2) “whether the adversary was prejudiced by the dismissed party's failure to cooperate in discovery”; (3) “whether the dismissed party was warned that failure to cooperate could lead to dismissal”; and (4) “whether less drastic sanctions were imposed or considered before dismissal was ordered.”Id. at 366-67 (quoting Regional Refuse Sys., Inc., 842 F.2d at 153-55); see also Bank One of Cleveland, N.A., 916 F.2d at 1073. “Although no one factor is dispositive, dismissal is proper if the record demonstrates delay or contumacious conduct.” United States v. Reyes, 307 F.3d 451, 458 (6th Cir. 2002).
b. Discussion
Applying these principles to the facts presented, the Court recommends that UPS's Motion for Sanctions (DN 85) be granted for the following reasons.
i. Willfulness, Bad Faith, or Fault
“For a [party's] actions to be motivated by bad faith, willfulness, or fault, [the party's] conduct ‘must display either an intent to thwart judicial proceedings or a reckless disregard for the effect of [the party's] conduct on those proceedings.'” Wu v. T.W. Wang, Inc., 420 F.3d 641, 643 (6th Cir. 2005) (quoting Mulbah v. Detroit Bd. of Educ., 261 F.3d 586, 591 (6th Cir. 2001)).
A review of the record reveals that DNJ has failed to appear at two (2) pretrial conferences. See (DN 84) (January 30, 2019 telephonic status conference) and (DN 86) (February 8, 2019 telephonic status conference). Additionally, DNJ has failed to obey four (4) pretrial orders. See (DN 78) (September 20, 2018 Order requiring DNJ to secure new counsel and staying deadlines for sixty (60) days following entry of the Order); (DN 82) (January 2, 2019 Order requiring DNJ to secure counsel and staying deadlines for an additional fourteen (14) days following entry of the Order); (DN 83) (January 18, 2019 Order requiring all parties to participate in a telephonic status conference on January 30, 2019); and (DN 84) (January 30, 2019 Order requiring all parties to participate in a telephonic status conference on February 8, 2019). Thus, although the Court has granted more than sufficient time for new counsel to enter an appearance on behalf of DNJ, DNJ has shown no inclination to comply with multiple Orders from the Court requiring DNJ to obtain substitute counsel. See (DNs 78 & 82). Consequently, it is difficult to characterize DNJ's disobedience as anything other than willful and deliberate. See Bass v. Jostens, Inc., 71 F.3d 237, 241 (6th Cir. 1995) (defining “willful” as a “conscious and intentional failure to comply with the court order.”).
The Court notes that Nabavi, who was terminated as a defendant in this action effective July 20, 2017, participated in the telephonic status conference on February 8, 2019. (DN 86). However, “a corporation must be represented in court by an attorney and may not be represented by an officer.” Harris v. Akron Dep't of Pub. Health, 10 Fed. App'x 316, 319 (6th Cir. 2001) (citing Doherty v. Am. Motors Corp., 728 F.2d 334, 340 (6th Cir. 1984); Ginger v. Cohn, 426 F.2d 1385, 1386 (6th Cir. 1970)); see also Zobele Mexico, S.A. de C.V. v. TSS Techs., Inc., No. 1:18-CV-596, 2019 WL 1130752, at *2 (S.D. Ohio Feb. 13, 2019), report and recommendation adopted, No. 1:18CV596, 2019 WL 1125873 (S.D. Ohio Mar. 12, 2019) (“Furthermore, it is insufficient for a person to attempt to represent a corporation as an officer of the corporation.”) (citing Reich v. Pierce, 45 F.3d 431, n. 1 (6th Cir. 1994)); Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167, 172 (2nd Cir. 2001) (finding that a corporation can only appear in federal court with counsel and cannot be represented pro se by its principal).
Compare Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167 (2nd Cir. 2001) (holding that the court abused its discretion when it required corporate defendant whose counsel had withdrawn to find new counsel in less than one week).
To offset the implication of disobedient conduct, “the burden is on the [disobedient] party to show that the failure was due to inability and not to willfulness, bad faith, or fault.” Intercept Security Corp. v. Code-Alarm-Inc., 169 F.R.D. 318, 322 (E.D. Mich. 1996) (citing Regional Refuse Sys., Inc., 842 F.2d at 154). Here, the Court notes that in the letter dated November 16, 2018, Nabavi informed the Court that “[DNJ's] current financial position prevents it from retaining counsel outside of Louisville.” (DN 79). However, the Court explicitly advised DNJ that because “[t]he Sixth Circuit has held that a corporation must appear by counsel or not at all,” Bischoff v. Waldorf, 660 F.Supp.2d 815, 820 (E.D. Mich. 2009) (citing Ginger v. Cohn, 426 F.2d 1385, 1386 (6th Cir. 1970), “[a] lack of resources does not excuse a corporate party's failure to have counsel appear on its behalf.” (DN 82 at p. 2-3) (citing Board of Trustees of the Plumbers, Pipefitters & Mech. Equip. Service Local Union No. 392 Pension Fund v. Kenneth R. Rogers Plumbing & Heating Co., 2011 WL 4467640, at *6-7 (S.D. Ohio Aug. 25, 2011); NK Beer & Wine, Inc. v. USA, 2009 WL 1874031, at *1 (W.D. Mich. June 29, 2009), R&R adopted, 2011 WL 4460479 (S.D. Ohio Sept. 26, 2011)); see also Zobele Mexico, S.A. de C.V. v. TSS Techs., Inc., No. 1:18-CV-596, 2019 WL 1130752, at *2 (S.D. Ohio Feb. 13, 2019), report and recommendation adopted, No. 1:18CV596, 2019 WL 1125873 (S.D. Ohio Mar. 12, 2019) (“[C]ourts have consistently declined to waive the rule [requiring a corporation to appear in federal court through a licensed attorney], even in cases of severe financial hardship.”) (internal citations and quotations omitted). Thus, since the Court granted former defense counsel's Motion to Withdraw approximately eight months ago, the Court finds DNJ's continued failure to retain new counsel to be unreasonable. Such conduct evidences a continuing course of bad faith and constitutes a clear record of delay.
To be clear, because no attorney has filed an appearance on behalf of DNJ, the Court notes that the conduct under review is exclusively that of the party. See Hart v. Estes, No. 3:17CV-317-CRS, 2018 WL 1914295, at *1 (W.D. Ky. Apr. 23, 2018) (“The court noted that there is a distinction to be drawn between conduct of a party and conduct of a party's counsel, stating that although our court hesitates, but is not entirely unwilling, to approve a default judgment when any misconduct is solely the fault of the attorney, we need not hesitate here because [the defendant] perpetrated the discovery abuse [].”) (citing Grange Mutual Cas. Co., 270 Fed. App'x. at 376; Harmon, 110 F.3d at 367-68) (internal quotations omitted).
Accordingly, the first Harmon factor weighs heavily against DNJ.
ii. Prejudice
The Sixth Circuit has recognized that a party suffers prejudice from another party's failure to comply with discovery if the uncooperating party's actions have the effect of “preventing [the other party] from obtaining evidence essential to the preparation of its defense.” Universal Health Grp. v. Allstate Ins. Co., 703 F.3d 953, 956 (6th Cir. 2013). Based on DNJ's actions thus far in this matter, the prejudice to UPS is clear.
First, the instant Motion details multiple attempts by UPS to schedule DNJ's Rule 30(b)(6) deposition. See (DN 85). More specifically, UPS states that DNJ was noticed about the deposition on January 24, 2018. (Id. at p. 2). To date, however, more than one year has passed since the first Rule 30(b)(6) deposition notice to DNJ, and yet, UPS provides that “not a single witness has been deposed in this case.” (Id.). Critically, although the Court initially found good cause to postpone DNJ's Rule 30(b)(6) deposition, it is evident that DNJ's disobedient conduct has severely impeded UPS's ability to conduct any discovery relevant to this action. Therefore, requiring UPS to proceed to trial on the issue of liability without the benefit of all the requested discovery, including DNJ's Rule 30(b)(6) deposition, would undoubtedly be prejudicial to UPS.
Second, in the Court's Order dated January 2, 2019, the Court expressly provided to DNJ that “[t]he rule of [the Sixth] [C]ircuit is that a corporation cannot appear in federal court except through an attorney.” (DN 82 at p. 2) (citing Doherty v. American Motors Corp., 728 F.2d 334, 340 (6th Cir. 1984)). However, DNJ has not demonstrated good cause to justify its continued lack of representation. Thus, DNJ's blatant failure to comply with multiple Orders from the Court admonishing DNJ to secure substitute counsel detrimentally prevents any forward movement in this case. See (DNs 78 & 82). Additionally, DNJ's failure to participate in the Court-ordered telephonic status conferences on January 30, 2019 and February 8, 2019 have further delayed this litigation. See (DNs 84 & 86).
Accordingly, the second Harmon factor weighs against DNJ.
iii. Prior Warning
The third Harmon factor, whether the party was warned that failure to cooperate may lead to sanctions, also weighs in favor of imposing sanctions against DNJ. In analyzing this factor, the Sixth Circuit has stated that “[c]lear notice is required” about the potential imposition of sanctions. Peltz v. Moretti, 292 Fed. App'x 475, 480 (6th Cir. 2008). For example, courts have been reluctant to uphold sanctions of dismissal under Rule 37 absent “firm and definite” statements by the [district] court sufficient to constitute “notice that ‘further non-compliance would result in dismissal.'” Freelandv. Amigo, 103 F.3d 1271, 1279-80 (6th Cir. 1997) (quoting Vinci v. Consol. Rail Corp., 927 F.2d 287, 288 (6th Cir. 1991); Harris v. Callwood, 844 F.2d 1254, 1256 (6th Cir. 1988)) (emphasis in original).
In analyzing this factor, the Court refers to its Order entered on January 2, 2019. (DN 82). In the Order, the Court could not have been clearer about the potential sanctions that awaited DNJ should the corporate defendant fail to obtain new counsel. (Id. at p. 3) (“In light of the potential means of redress against DNJ, the Court finds good cause to permit a brief additional extension of time in order to allow [DNJ] the opportunity to secure new counsel. However, the Court cautions the corporate defendant as to the available sanctions that may be imposed, which include the entry of a default judgment against DNJ as well as a dismissal of the corporate defendant's counterclaim, if DNJ does not retain new counsel in accordance with the deadline set forth in this Order.”) (emphasis in original). Here, the Court's language was unambiguous, and DNJ was warned that refusal to comply with the Order of this Court may result in the entry of a default judgment against DNJ. Therefore, such language as provided in the Court's January 2, 2019 Order sufficiently rises to the level of clear notice required to weigh in favor of the imposition of sanctions. Moreover, to date, DNJ continues to violate this Court's Orders requiring an attorney to enter an appearance on behalf of the corporate defendant. See (DNs 78 & 82).
Accordingly, the third Harmon factor is satisfied and weighs against DNJ.
iv. Consideration of Less Drastic Sanctions
As to the fourth and final Harmon factor, the undersigned concludes that no lesser sanction is appropriate in this case. In requiring DNJ to obtain substitute counsel, the Court has afforded DNJ more than enough time to comply with the Court's Orders. See (DNs 78 & 82). To date, however, no attorney has entered an appearance on behalf of DNJ. Further, the rule of the Sixth Circuit is clear: “a corporation cannot appear otherwise than through an attorney.” (DN 82 at p. 2) (citing United States v. 9.19 Acres of Land, 416 F.2d 1244, 1245 (6th Cir. 1969). Thus, for all practical purposes, DNJ is already in default. See Ivan Ware & Son, Inc. v. Delta Aliraq, Inc., No. 3:10-cv-484-CRS-CHL, 2016 WL 8064365, at *3 (W.D. Ky. Dec. 5, 2016), report and recommendation adopted, No. 3:10-cv-00484-CRS, 2017 WL 379459 (W.D. Ky. Jan. 26, 2017); see also Ackra Direct Mktg. Corp. v. Fingerhut Corp., 86 F.3d 852, 856-57 (8th Cir. 1996) (explaining that the corporate defendant “was technically in default beginning on” the date the court allowed counsel to withdraw.).
Additionally, DNJ has not filed a response to UPS's Motion for Sanctions. Thus, the Court concludes that DNJ's failure to respond to the instant Motion is sufficient grounds for the District Court to grant UPS's Motion for Sanctions. See LR 7.1(c) (“Failure to timely respond to a motion may be grounds for granting the motion.”); see also Paulmann v. Hodgdon Powder Co., Inc., 2014 WL 4102354 *1 (W.D. Ky. 2014) (“Failure to respond to a dispositive motion will be grounds for granting the motion.”) (citing Humphrey v. U.S. Attorney General's Office, 279 Fed. App'x 328, 331 (6th Cir. 2008). More significantly, DNJ's failure to respond indicates to the Court that lesser sanctions than default would be wholly unavailing. For example, DNJ's representations to the Court of its current financial position suggests that monetary sanctions would likely be ineffectual. See (DN 79). Further, continuing to require DNJ to secure counsel to file an appearance on its behalf is also inadequate, because it is DNJ's ongoing failure to secure counsel to enter an appearance on its behalf for which a sanction is warranted. Thus, the undersigned sees no reason to allow DNJ another opportunity to disregard discovery obligations or ignore another order of the Court. See Stitt v. Dylan Const., Inc., No. 06-11849, 2007 WL 45913, at *2 (E.D. Mich. Jan. 5, 2007) (“Dismissal is the sanction of last resort[,] but a district court does not abuse its discretion in dismissing a case even though other sanctions might be workable, if dismissal is supported on the facts.”) (citing Beil, 15 F.3d at 552; Bell & Beckwith v. United States, 766 F.2d 910, 912 (6th Cir.1985)).
Accordingly, consideration of the fourth Harmon factor weighs against DNJ.
c. Conclusion
All four of the Harmon factors weigh strongly in favor of granting UPS's Motion for Sanctions. Therefore, pursuant to Fed.R.Civ.P. 16(f)(1), insofar as it incorporates Fed.R.Civ.P. 37(b)(2)(A)(v) & (vi), the Court shall recommend imposing the sanctions of rendering default judgment against DNJ, as well as dismissing DNJ's Counterclaim against UPS.
d. Damages
The Court notes that although entry of default judgment on liability is recommended in favor of UPS, the issue of damages cannot be ascertained on the record presented because the damages are unliquidated. See (DN 85 at p. 7). Therefore, if the District Court adopts this recommendation and renders default judgment against DNJ, the undersigned recommends that the appropriate proceedings be conducted to make sufficient findings concerning the determination of damages. See Fed.R.Civ.P. 55(b).
The Court notes that it recommends default judgment as a sanction pursuant to Federal Rules of Civil Procedure 16(f) and 37(b), rather than Rule 55. As provided above, Rule 16 permits a court to issue, on its own, any just order, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party fails to appear at a pretrial conference or fails to obey a pretrial order. Fed.R.Civ.P. 16(f)(1)(A) & (C). Additionally, Rule 37(b)(2)(A)(vi) permits a court to grant default judgment against a disobedient party. Fed.R.Civ.P. 37(b)(2)(A)(vi). Accordingly, the District Court has authority to render default judgment against DNJ, even though UPS did not move for an entry of default pursuant to Rule 55(a). See Colston v. Cramer, No. 07-CV-12726, 2008 WL 559579, at *1 (E.D. Mich. Feb. 26, 2008) (“[A] plain reading of Rule 55 demonstrates that entry of default by the clerk is a prerequisite to an entry of default judgment. [However,] there is an exception to this rule when a court enters a default judgment as a discovery sanction under Federal Rule of Civil Procedure 37 . . .”) (citations omitted). That being said, when default judgment is entered by the Court, the Court “may conduct hearings or make referrals--preserving any federal statutory right to a jury trial--when, to enter or effectuate judgment, it needs to . . . determine the amount of damages.” Fed.R.Civ.P. 55(b)(2)(B).
III. RECOMMENDATIONS
For the reasons provided above, and the Magistrate Judge, having made findings of fact and conclusions of law, recommends that UPS's Motion for Sanctions (DN 85) be GRANTED. Accordingly, the undersigned recommends that the District Court render default judgment against DNJ and dismiss DNJ's Counterclaim against UPS.
The Court further recommends that the appropriate proceedings be scheduled for the purpose of determining the amount of damages to be entered against DNJ.
NOTICE
Therefore, under the provisions of 28 U.S.C. § 636(b)(1)(B) and (C) and Fed.R.Civ.P. 72(b), the Magistrate Judge files these findings and recommendations with the Court and a copy shall forthwith be electronically transmitted or mailed to all parties. Within fourteen (14) days after being served with a copy, any party may serve and file written objections to such findings and recommendations as provided by the Court. If a party has objections, such objections must be timely filed or further appeal is waived. Thomas v. Arn, 728 F.2d 813 (6th Cir.), aff'd, 474 U.S. 140 (1984).
Copies: Counsel of Record
DNJ Logistics Group, Inc.,7045 N.W. 46 th Street, Miami, FL 33166
Ralph Nabavi, 10654 Stonebridge Boulevard, Boca Raton, FL 33498