Opinion
No. CIV. 04-2494 FCD/KJM.
February 15, 2006
MEMORANDUM AND ORDER
This matter is before the court on interpleader defendant Internal Revenue Service's ("IRS" or "the government") motion to strike interpleader defendant Jeanne Spaich's ("Spaich") claim to the interplead funds pursuant to Federal Rule of Civil Procedure 37(d), and to disburse the funds at issue to the government. In so moving, the government asks the court to impose the ultimate sanction of dismissal of Spaich's claim because she twice failed to attend her properly noticed and scheduled deposition.
Because oral argument will not be of material assistance, the court orders the matter submitted on the briefs. E.D. Cal. L.R. 78-230(h).
The court treats the government's latter "request" as a motion under Federal Rule of Civil Procedure 56.
BACKGROUND
Gavrillo Spaich, Jeanne's father, sold a load of prunes to plaintiff Cal Fruit International, Inc. ("plaintiff"). The IRS then levied plaintiff in September 2004 to collect the $89,315.60 owed by plaintiff to CalPrune, a corporation owned by Gavrillo Spaich, for the prunes. Rather than pay the IRS levy, plaintiff filed this interpleader action, depositing said funds with the court and seeking a determination as to who is entitled to the funds. Specifically, plaintiff alleges that it does not know the identity of the seller of the prunes, whether it was CalPrune (Gavrillo Spaich) or Jeanne Spaich. Both the government and Spaich filed claims to the interplead funds.
The government's claim arises from various federal tax assessments against CalPrune. Spaich's claim, on the other hand, arises from her allegation that she is the owner of the prunes sold to plaintiff and that her father was merely acting as her agent; therefore, she contends the funds should be distributed to her rather than go to pay the IRS' tax levy.
The original deadline to complete discovery in this case was October 28, 2005. (Pre-Trial Sch. Order, filed May 2, 2005.) The government noticed Spaich's deposition for August 19, 2005, after the parties mutually selected that date. On the day of the deposition, however, Spaich inexplicably failed to appear. Acknowledging her failure to provide adequate notice to the government, her counsel reimbursed the government for its expenses associated with the deposition.
Thereafter, Spaich's counsel communicated with the government in an effort to resolve the matter short of any further depositions. Spaich's counsel provided the government with information regarding Spaich's position that all of the relevant liabilities had been paid prior to the IRS' levy on the subject funds and/or all such liabilities had been subsequently paid. Spaich's counsel and the government's counsel engaged in a series of e-mails on this issue. A resolution of the matter was not reached, and the parties agreed to extend the discovery deadline to November 30, 2005, which the court approved. Spaich's deposition was then mutually scheduled for November 17, 2005. Yet, on the day of the deposition, she again failed to appear, allegedly due to work commitments. Her counsel again reimbursed the government its expenses.
STANDARD
Federal Rule of Civil Procedure 37(d) gives the court discretion, if a party fails to attend a properly noticed deposition, to sanction the party failing to appear for non-compliance. See Fed.R.Civ.Proc. 37(b)(2)(A)-(C). Sanctions include, but are not limited to: limiting evidence, closing discovery, striking the pleadings, dismissing a claim, or entry of a default judgment. Id.
Before dismissing a case for non-compliance with Rule 37, the court must examine the following factors: (1) the public's interest in the expeditious resolution of litigation; (2) the court's docket concerns; (3) the risk of prejudice to the defendant; (4) the judicial policy favoring disposition of cases on the merits; and (5) the availability of a less drastic sanction. Payne v. Exxon Corp., 121 F.3d 503, 507 (9th Cir. 1997). Striking the claim is a severe penalty and should only be assessed as a sanction in extreme circumstances, especially when such a remedy is dispositive of the action. See Thompson v. Housing Authority, 782 F.2d 829, 831 (9th Cir. 1986).
ANALYSIS
Upon consideration of the factors outlined above, the court finds that Rule 37 sanctions, any one of which would have the effect of entry of judgment in favor of the government, are not merited at this time. The government requests dismissal because Spaich twice failed to appear at her scheduled deposition. While the government cites several cases where parties' claims were stricken for failure to appear at depositions, those cases are inapposite as they involve willful conduct in violation of direct court orders to appear, after a nearly complete failure to meaningfully participate in the discovery process. See Creative Gifts, Inc., v. UFO, 235 F.3d 540, 544 (10th Cir. 2000); Viswanathan v. Scotland County Bd. of Educ., 165 F.R.D. 50, 53-54, aff'd 76 F.3d 377 (4th Cir. 1996); In re Sumitomo Copper Litigation, 204 F.R.D. 58, 60-61 (S.D.N.Y. 2001). No such "complete failure" of the discovery process has occurred here.
Plaintiff has not disobeyed direct court orders. She has, however, failed to appear at two noticed depositions despite the selection of a mutually convenient date and her counsel's admonitions to appear. While wholly improper under the rules, the court does not dismiss her claim to the subject funds. First, it is noteworthy, that during this time, her counsel sought to resolve the matter short of her deposition. Although ultimately unsuccessful, such good faith efforts are relevant to the court's consideration of this motion.
Additionally, while the court acknowledges that the government was not required to seek a court order or other sanctions prior to filing the instant motion, the court also considers this fact in its analysis. Had the court previously ordered her appearance, and she then failed to appear, the grant of a Rule 37 motion would likely have been warranted.
Finally, the court considers the serious questions involved in this case regarding who is entitled to the interplead funds and in what amount. For instance, the government, in its initial calculations asserted that the amount owed by CalPrune to the government was more than $550,000.00. Admitting error in that first calculation, the government in a later correction filed with the court, indicated the relevant amount was $120,000.00. (Praecipe to Gov't Reply, filed Jan. 6, 2006.) Spaich argues that the amount owed is substantially less than $120,000.00 and indeed may be zero. In light of these significant issues, Spaich should be given one last opportunity to appear at her deposition.
Therefore the court reopens discovery, which closed on November 30, 2005, and orders Spaich's deposition. Said deposition shall take place within 30 days of the date of this order. The government shall have 45 days from the date of the deposition to file a supplemental brief regarding its substantive claim to the funds; Spaich shall have 20 days thereafter to file a supplemental opposition; the government shall file any reply within 10 days thereof. The court will set the matter for hearing, if necessary, upon review of the supplemental briefs.
Spaich is admonished that this is her final opportunity to appear for her deposition; if she does not appear, the court will grant the government's motion to strike and pursuant thereto, disburse the subject funds to the government.
CONCLUSION
For the foregoing reasons, the government's motion to strike Spaich's interpleader claim is DENIED. However, as a result of the court's ordering the deposition of Spaich, the court defers ruling on the government's motion for disbursement of the interplead funds. Plaintiff's motion for attorney's fees is likewise deferred until this case is resolved on the merits, as the imposition of attorney's fees against the interplead funds depends on which interpleader defendant prevails. See Abex Corp. v. Ski's Ener., Inc., 748 F.2d 513, 516 (9th Cir. 1984).
IT IS SO ORDERED.