United States District Court, N.D. Illinois
April 26, 2004.
V.I.M. RECYCLERS, Plaintiff
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.
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.
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. Contemplation of
bankruptcy in August does not excuse non-compliance with a month-old
court order, much less one that was two months old.
The Rule 37 costs of $1000 imposed for contempt was not onerous, and
Defendants could have stopped the additional sanction of $100 a day by
producing the documents sooner rather than later. In fact, the final
documents were not produced until November 5, 2003 more than two
months after the sanctions order was entered. Furthermore, Defendants'
initial response on September 9, 2003 was a mere eighteen days after the
sanctions order. Clearly, such an immediate response was a direct effect
of the sanctions, indicating that the sanctions properly served their
purpose. If Defendants were contemplating vacating the sanctions, they
could not sit on their hands while Plaintiff expends time and money to
enforce the orders.
Defendants can not pick and choose which court orders to obey.
Therefore, Defendants' motion to vacate sanctions is denied and
Plaintiff's motion to enforce sanctions is granted. The Court now turns
to the proper amount of sanctions.
B. AMOUNT OF SANCTIONS
Defendants claim that as of September 9, 2003, they were in substantial
compliance with the Orders, in other words Defendants were "reasonably
diligent and energetic in attempting to accomplish what was ordered."
Berg, 20 F.3d at 311. Plaintiff argues that Defendants did not fully
comply with the Orders until November 5, 2003, when they finally produced
On September 9, 2003, Defendants responded to Plaintiff's document
requests and answered written discovery. They did not, however, produce
documents or give answers that they claimed required the security of a
protective order, for which they moved in earnest on October 10, 2003.
Plaintiff then objected to Defendants' discovery responses, which were
supplemented on October 23, 2003. On October 24, 2003, Defendants moved
this Court for a protective order, which was entered on October 29, 2003.
Dkt. 49-50. On November 5, 2003, Defendants finally produced all
responsive documents. The first issue is whether Defendants are required to comply completely
with the Orders before the sanctions are lifted or whether they are
required to substantially comply. The contempt order states that
Defendants should pay $100 a day until they comply with the Orders it
does not say "substantially" comply. However, because the purpose of the
sanctions is to coerce a party into compliance, once compliance has begun
in earnest the party should be relieved of the sanctions on a going
This Court disagrees with Defendants' position that they were in
compliance with the Orders on September 9, 2003 because an additional
month passed before they attempted to obtain a protective order. On
October 10, 2003, Defendants first attempted to obtain a protective
order. Dkt. 48. Although the motion was revised, the Court finds
Defendants' actions to have shifted at that point from dilatory to
cooperative. The documents that were not produced were properly withheld
until a protective order was in place. Although Defendants brought this
delay upon themselves, Defendants promptly produced the documents once
the protective order was entered.
Therefore, the Court finds that Defendants did not comply with the
Orders until October 10, 2003, when they first filed for a protective
order. Consequently, Defendants must pay to Plaintiff the amount of
$1,000.00 in Rule 37 costs and $100.00 a day from August 22, 2003 to
October 10, 2003, inclusive, for a total of fifty days and an additional
$5,000.00. IV. CONCLUSION
For the reasons set forth in this opinion, Plaintiff's motion to
enforce sanctions is granted and Defendants' motion to vacate sanctions
is denied. Defendants have failed to show cause why they should not be
held in contempt for failing to pay the sanctions order against them on
August 22, 2003. Consequently, Defendants are ordered to pay to Plaintiff
$1,000.00 in Rule 37 costs, plus interest at the prime rate from August
22, 2003. $5,000.00 for failure to comply with court orders for fifty
days, plus interest at the prime rate from October 10, 2003, and
attorney's fees in the amount of $2,750.00 (ten hours at a rate of $275
per hour), incurred by Plaintiff as a result of preparing and presenting
this motion. Defendants shall pay all sums to Plaintiff on or before May
JUDGMENT IN A CIVIL CASE
Jury Verdict. This action came before the Court for
a trial by jury. The issues have been tried and the
jury rendered its verdict.
Decision by Court. This action came to hearing
before the Court. The issues have been heard and a
decision has been rendered.
IT IS HEREBY ORDERED AND ADJUDGED that Plaintiff's motion for rule to
show cause and to enforce sanctions is granted and Defendants' motion to
vacate sanctions is denied. Defendants have failed to show cause why they
should not be held in contempt for failing to pay the sanctions order
against them on 8/22/03. Consequently, Defendants are ordered to pay to
Plaintiff $1,000.00 in Rule 37 costs, plus interest at the prime rate
from 8/22/03, $5,000.00 for failure to comply with court orders for fifty
days, plus interest at the prime rate from 10/10/03, and attorney's fees
in the amount of $2,750.00 incurred by Plaintiff as a result of preparing
and presenting this motion. Defendants shall pay all sums to Plaintiff on
or before 5/12/04.
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