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V.I.M. RECYCLERS v. MAGNER

April 26, 2004.

V.I.M. RECYCLERS, Plaintiff
v.
LUKE MAGNER, and INDUSTRECYCLE, L.L.C., Defendants



The opinion of the court was delivered by: MORTON DENLOW, Magistrate Judge

MEMORANDUM OPINION AND ORDER

This case comes before this Court on referral from Judge Bucklo for resolution of three related motions: (1) a motion for rule to show cause filed by Plaintiff V.I.M. Recyclers, L.P. ("Plaintiff"); (2) Plaintiff's motion to enforce an August 22, 2003 order for sanctions; and (3) a motion to vacate sanctions filed by Defendants Luke Magner and Industrecycle, L.L.C. (collectively "Defendants") — The parties have consented to this Court's jurisdiction to decide these matters on the basis of a limited consent pursuant to 28 U.S.C. § 636(c)(1). For the following reasons, the motion for rule to show cause and the motion to enforce order are granted and the motion to vacate sanctions is denied.

I. BACKGROUND

  On June 6, 2003, Judge Bucklo granted Plaintiff's motion to compel Luke Magner's answers to request for production and interrogatories, ordering compliance "with respect to production of documents as discussed in court." Def. Memo. Ex. 3. Likewise, on July 14, 2003, Judge Bucklo granted Plaintiff's motion to compel discovery relating to post-termination transactions with actual or potential customers of Plaintiff during the relevant tune frame. Docket #30. Although no specific compliance date was set for either order, the parties agreed to a thirty-day deadline from July 14, 2003.

  By August 22, 2003, the documents had not been produced. On that date, the parties appeared before Judge Bucklo on Plaintiff's motion for rule to show cause and for sanctions. At the hearing, Defendants' counsel stated that Luke Magner was in the process of filing for bankruptcy and that counsel had no authority to turn over any documents. Tr. at 3. Judge Bucklo found Defendants willfully disobeyed her order and granted Plaintiff's motions. Tr. at 3-4. She imposed sanctions against Defendants, ordering them to pay Rule 37 costs in the amount of $1000 and an additional $100 per day until Defendants complied with the order. Tr. at 4, Dkt. #36. On September 24, 2003, Judge Bucklo denied Defendant's motion for an order specifying further amount of fees because in her order of August 22 she had "awarded costs in the amount of $100 per day, to be paid to plaintiff from that day forward until defendant complies with the Court's prior orders." Dkt. #39.

  On September 9, 2003, Defendants' counsel sent a letter to Plaintiff's counsel, attaching responses to document requests, interrogatories, and requests to admit. Def. Memo. Ex. 4. The letter also indicates that other responsive documents exist, but Defendants refused to produce those documents unless the parties entered into a protective order. Dkt. 50. On October 10, 2003, Defendants filed a motion for a protective order with Judge Bucklo, who referred the case to this Court. Subsequently, Defendants revised their motion to comport with this Court's requirements and filed that revised motion on October 24, 2003. On October 29, 2003, this Court granted Defendants' October 24 motion for a protective order. Dkt. 50. On November 5, 2003, Defendants produced all responsive documents. On January 7, 2004, Defendants produced "full and complete" financial statements for both Industrecycle and Luke Magner. Def. Memo. Ex. 2.

  Although Defendants produced documents, they failed to pay the imposed sanctions. Plaintiff's counsel requested the payments via letters dated September 29, 2003, October 3, 2003, and December 4, 2003. On February 18, 2004, Defendants filed this motion to vacate sanctions in response to Plaintiff's motion to enforce the August 22, 2003 order for sanctions. Plaintiff now seeks a rule to show cause why Defendants should not be held in contempt for failing to comply with the August 22, 2003 sanctions, seeks to enforce mat order, and requests reimbursement for the expenses resulting from this motion.

  II. LEGAL STANDARDS

  A court has broad discretion to impose sanctions against a party for abuse of discovery orders. Fed.R.Civ.P. 37. Consequently, a court may impose sanctions for civil contempt "to coerce obedience to a court order or to compensate the complainant for losses sustained as a result of the contumacy." United States v. Berg, 20 F.3d 304, 311 (7th Cir. 1994). However, before a court can enter a finding of contempt for failure to follow a court order, the complaining party must prove, by clear and convincing evidence, that the contemptor has not been "reasonably diligent and energetic in attempting to accomplish what was ordered." Id. If contempt is found, relief may include an award of attorney's fees and costs for preparing and prosecuting a contempt petition. Oxford Capital III., L.L. C. v. Sterling Payroll Fin., L.L.C., No. 01 C 1173, 2001 WL 1491521, at *3 (N.D. Ill. Nov. 26, 2001). Where the court seeks to remedy ongoing disobedience with an order, a civil fine may be imposed as a coercive sanction against the contemptor that can be purged through full, timely compliance with the order. Id.

  In order to support a finding of civil contempt, "the district court must be able to point to a decree from the court which set[s] forth in specific detail an unequivocal command which the party in contempt violated." Id. A court is authorized to impose civil contempt sanctions upon the court's own finding that a party has violated the court's unequivocal command by clear and convincing evidence. Id.

  III. DISCUSSION

  Defendants posit two reasons for their failure to pay Plaintiff any amount as sanctions. First, sanctions would not be consistent with the interests of justice, given the proceedings in this case since August 22, 2003. Second, a bona fide dispute exists between Defendants and Plaintiff as to the amount of the sanctions Defendants are obligated to pay. The Court will now turn to Defendants' first argument. A. THE INTERESTS OF JUSTICE

  Defendants argue that sanctions would not serve the interests of justice because they were not in violation of a previous court order. They point to the fact that the June 6 and July 14, 2003 Orders (the "Orders") compelling them to produce certain documents gave them no precise deadline by which to produce those documents. Defendants' delay allegedly was perpetuated by the fact that Magner operates Industrecycle by himself, without any other employees, and because Magner was contemplating bankruptcy. Magner did not perceive his delay in compliance to be violative of the Orders. Thus, Defendants conclude, these circumstances did not warrant sanctions.

  The Court finds this argument disingenuous. The transcripts of the August 22, 2003 proceedings show that Defendants did not intend to produce any documents. Defendants did not claim hardship due to a lack of manpower, nor did they make the argument at that time that there were no deadlines. Instead, Defendants' sole reason was that Defendant Magner was contemplating filing bankruptcy. Judge Bucklo found this reason to be inadequate and the refusal to be willful disobedience. ...


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