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Mechanics Savings Bank v. Town of Richmond

Superior Court of Maine, Sagadahoc

March 27, 2014

MECHANICS SAVINGS BANK Plaintiff
v.
TOWN OF RICHMOND and MALAMUTE INVESTMENT MANAGEMENT Defendants HOWARD HOFFMAN Party in interest

ORDER FOR SANCTIONS

A. M. Horton, Justice, Superior Court.

Before the court is Plaintiff Mechanic Saving Bank's Motion For Sanctions Pursuant To Rule 37. Plaintiff requests that the court impose sanctions against defendant Malamute Investment Management and party-in-interest Howard Hoffman, based on their failure to appear for deposition upon oral examination in violation of the discovery rules and an order of the court. Malamute and Mr. Hoffman have filed oppositions to the Bank's motion. The court elects to decide the Motion without oral argument. See M.R. Civ. P. 7(b)(7).

Background

Plaintiff Bank filed its complaint on October 26, 2012, seeking a declaratory judgment to the effect that it owns the property located at 19 Frog Lane, Richmond, Maine. The Town of Richmond filed its answer on November 16, 2012. On November 26, 2012, defendant Malamute Investment Management ("Malamute") filed an answer, a counterclaim, a motion for summary judgment, and an application to proceed without fees. The president and sole shareholder of Malamute, Howard Hoffman, signed all of the court filings for Malamute. Mr. Hoffman is not an attorney authorized to engage in the practice of law in the State of Maine.

The court denied the application to proceed without fees on November 29, 2012. On December 6, 2012, Malamute, again via Mr. Hoffman, filed a motion to withdraw its previous demand for a jury trial. Mr. Hoffman later moved to intervene individually as a party in interest in the case, and has been representing himself in that capacity.

On December 7, 2012, the Bank filed a motion to strike all of Malamute's court filings and requested default, and Malamute, again through Mr. Hoffman, filed an opposition. In an order dated January 8, 2013, the court granted the motion to strike all of the filings signed by Mr. Hoffman on behalf of Malamute, because Malamute has to be represented by an attorney authorized to practice in Maine, and Mr. Hoffman is not an attorney. However, the court afforded Malamute the opportunity to set aside the default by retaining an attorney to file a motion to set aside default by February 8, 2013. Attorney Elliot Teel entered an appearance on behalf of Malamute and filed a motion to set aside default on February 7, 2013. On March 5, 2013, the court granted the motion to set aside default and granted Hoffman's motion to intervene as a party-in-interest. Hoffman filed an answer on March 25, 2013. The court set the discovery deadline for September 5, 2013.

Plaintiff Bank's counsel attempted to schedule depositions upon oral examination of both Malamute and Mr. Hoffman for the end of August but Hoffman responded that he could not attend because he was moving. On September 4>, 2013, the Bank filed a motion to extend the discovery deadline, on the ground that Hoffman and Malamute[1]did not appear for their properly noticed depositions. The court extended the discovery deadline to November 3, 2013. The Bank's counsel noticed a deposition for October 15, 2013, but Hoffman once again stated that he could not attend in person. Malamute then filed a motion seeking an order for the depositions to be conducted remotely on October 10, 2013.

In an order dated November 5, 2013, the court denied Malamute's request for remote deposition and ordered Hoffman to provide opposing counsel with five dates on which he would be available for a deposition at plaintiffs counsel's office before January 15, 2014. The court specifically stated that it was "a discovery order for purposes of M.R. Civ. P. 37."

The court held a status conference on January 7, 2014, in which the Bank's and Malamute's counsel, but not Mr. Hoffman, participated, and as a result issued an order noting that Hoffman had failed to appear at a properly scheduled deposition pursuant to its November 5 order, and also noting that a motion under Rule 37 could be filed. Despite this clear warning, Mr. Hoffman still failed to make himself available for his and Malamute's depositions.

On January 27, 2014, plaintiff filed its Motion For Sanctions Pursuant To Rule 37, asking the court, among other sanctions, to preclude Malamute and Mr. Hoffman from opposing summary judgment in favor of the Bank. Both Malamute and Hoffman filed oppositions to the motion on February 18, 2014, and the Bank filed a reply memorandum February 24, 2014.

Discussion

1. Timeliness of Defendants' Oppositions

Plaintiff first argues that defendants Hoffman and Malamute filed late oppositions to plaintiffs motion for sanctions. Plaintiff states that its motion was filed on January 24, 2014, however, the date stamp shows that it was received on January 27, 2014. Defendants were required to file within 21 days of this date. M.R. Civ. P. 7(c)(2). Although the deadline would have been February 17, 2014, that date, President's Day, is a legal holiday. Under the rules, defendants were allowed to file the following day, February 18, 2014. M.R. Civ. P. 6(a). Defendants' filings were stamped as received on February 18, 2014 and were therefore timely filed.

2. Motion for Sanctions

Plaintiffs motion seeks sanctions under Rule 37 because Mr. Hoffman and Malamute failed to appear for their properly noticed depositions, and to comply with the court's order regarding their depositions. Rule 37 provides

[T]f a party or an officer, director, or managing agent of a party or a person designated under Rule 30(b)(6) or 31(a) to testify on behalf of a party fails ... to appear before the officer who is to take a deposition, after being served with a proper notice . . . without having made an objection thereto . . . the court in which the action is pending on motion may make such orders in regard to the failure as are just, and among others it may take any action authorized under paragraphs (A), (B), and (C) of subdivision (b)(2) of this rule. In lieu of any order or in addition thereto, the court shall require the party failing to act or the attorney advising that party or both to pay the reasonable expenses, including attorney fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.

M.R Civ. P. 37(d).

Malamute is a party defendant, and Mr. Hoffman clearly qualifies as both a party and an officer of a party, for purposes of the rule. Malamute's and Mr. Hoffman's depositions were always scheduled seriatim, and whenever Mr. Hoffman failed to appear, Malamute failed to appear as well. See Plaintiffs Motion for Sanctions Pursuant to Rule 37, Exhibits A, B and F. On that basis, the court has no hesitation in deeming party-in-interest Hoffman's dilatory conduct to be the conduct of Defendant Malamute as well.

Plaintiff has clearly established that Malamute as a party and Mr. Hoffman as a party have both failed repeatedly to appear for deposition upon oral examination.

Section (b)(2) of Rule 37 gives the court discretion to order a remedy for a discovery failure, including issuing "[X]n 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." M.R. Civ. P. 37(b)(2)(C). In this case, Mr. Hoffman and Malamute not only violated the discovery rules by failing to appear at a deposition, but Mr. Hoffman violated the court's November 5, 2013 order.

The Law Court has said that, in determining a Rule 37 discovery sanction, "the trial court should consider (l) the specific purpose of the discovery rules; (2) the party's conduct throughout the proceedings; (3) the party's bona fides in its failure to comply with the discovery rules; (4) prejudice to the other parties; and (5) the need for the orderly administration of justice." Douglas v. Martel, 2003 ME 132, ¶ 5, 835 A.2d 1099. Parties are "not entitled to a 'warning' that their blatant violations of the discovery rules could result in the dismissal of their action." St. Paul Ins. Co. v. Hayes, 2001 ME 71, ¶ 14, 770 A.2d 611.

For purposes of the first listed factor, Mr. Hoffman's conduct on behalf of himself and Malamute has frustrated the purpose of the discovery rules. As the Law Court explained in St. Paul Insurance Co., the Maine Rules of Civil Procedure must "be construed to secure the just, speedy and inexpensive determination of every action." Id. 5 ¶ 8 (quoting M.R. Civ. P. 1). The discovery rules aim to "eliminate the sporting theory of justice and to enforce full disclosure between the parties." Id. (internal quotation omitted). Mr. Hoffman's ongoing failure to appear for his and Malamute's deposition has delayed the case by over six months. His actions required opposing counsel to spend time and money on setting up alternate dates for depositions and required the court to hold additional status conferences.

The second factor also weighs against Mr. Hoffman and Malamute. Mr. Hoffman previously filed motions on behalf of Malamute in violation of 4 M.R.S. § 807 (2013), which prohibits the unauthorized practice of law. As a result, Malamute was conditionally defaulted for failing to retain an attorney. Although the court is not obligated to warn a party to follow the rules, Malamute and Hoffman were on notice that they must comply with the law or suffer the consequences, including an entry of default against them. Mr. Hoffman repeatedly informed opposing counsel that he could not be present for properly noticed depositions, stated that he moved without providing opposing counsel his new address, and requested remote deposition without any good cause other than his own inconvenience. Given this behavior, the court finds that Hoffman has not acted in good faith in repeatedly failing to appear for his deposition.

Turning to the third listed factor, Malamute's and Mr. Hoffman's excuses are unconvincing. Hoffman blames his failure to appear for the December 30 deposition on bad weather. He notified opposing counsel on December 25, 2013 that he would not be able to make the deposition on December 30, the date that he chose, because it was impossible to get a flight to Maine due to the holiday season and bad weather. In its November 5, 2013 order, the court made clear that Hoffman is not an out-of-state defendant and that he must make himself available for an in-person deposition in Maine. Hoffman's excuse that bad weather prevented him from appearing in Maine on a date of his own choosing does not constitute good cause. His failure to rectify his nonappearance at any time since then also counts against Malamute and Mr. Hoffman.

Regarding the fourth factor, the Bank has been prejudiced by the additional time and expense incurred as a result of Malamute's and Mr. Hoffman's conduct. See Douglas, 2003 ME 132, ¶ 9, 835 A.2d 1099. While Hoffman and Malamute would both be prejudiced by the sanction that the court imposes in response to their conduct, "they have . . . only themselves to blame . . ." St. Paul. Ins. Co., 2001 ME 71, ¶12, 770 A.2d 611.

Finally, the fifth factor also weighs against Hoffman and Malamute. As the Law Court has explained, "[r]ecourse to the authority of the court for orders compelling compliance with the rules must be the exception rather than the rule." Harris v. Soley, 2000 ME 150, ¶ 17, 756 A.2d 499. Because Hoffman refused to appear for deposition, the Court had to hold additional status conferences, issue an order denying remote deposition, and repeatedly extend the discovery period in the case.

For these reasons, the court hereby grants the Plaintiffs' Motion for Sanctions Pursuant to Rule 37. As to sanction, the court notes that it has already ordered Mr. Hoffman to appear for deposition, and has no intention of doing so again.

The nature of the violation should influence the nature of the sanction. Because Malamute and Mr. Hoffman have refused to provide discovery in the form of their own deposition testimony, it is entirely fair to preclude them from presenting evidence. As a sanction, the court will preclude Malamute and Mr. Hoffman from presenting any evidence, either at trial or in response to a motion for summary judgment, to defend against the Bank's declaratory judgment claim. (Malamute's counterclaims filed on its behalf by Mr. Hoffman have already been stricken). Malamute through counsel and Mr. Hoffman, through counsel or pro se, may, however, oppose the Bank's claim on legal grounds.

The court will also award the Bank its reasonable attorney fees and costs against Malamute and Mr. Hoffman for the expense of bringing its Rule 31 motion, and also for the time and expense incurred in attempting to schedule the depositions of Malamute and Mr. Hoffman.

IT IS HEREBY ORDERED AS FOLLOWS:

1. Plaintiff Bank may either request the case be set for jury-waived trial, or may file a motion for summary judgment at any time in the next 60 days.
2. If the Bank files a motion for summary judgment, Defendant Malamute through counsel and party-in-interest Hoffman may file opposing legal memoranda in response to the Bank's motion for summary judgment, but may not file any responsive statement of material facts, any affidavits or any other material in an attempt to raise genuine issues of material fact. Based on the facts set forth in the Bank's statement of material facts and any affidavits or other material filed by the Bank, and the legal memoranda of all parties, the court will determine whether the Bank has demonstrated that it is entitled to judgment as a matter of law. If the motion is granted, the court will enter final judgment. If the motion is denied, the court will set the case for jury-waived trial.
2. If a trial is held, Malamute through its counsel and Mr. Hoffman may appear and cross-examine the Bank's witnesses, but under this Order they are precluded from presenting evidence.
3. The Bank may within 30 days file a detailed application for fees and expenses, supported by counsel's affidavit on reasonableness and a breakdown of the time and expenses for which reimbursement is requested. Malamute and Mr. Hoffman may file a response within 14- days of the filing of the Bank's application.

Pursuant to M.R. Civ. P. 79{a), the Clerk is hereby directed to incorporate this Order by reference in the docket


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