United States District Court, D. Maryland
FIRST MARINER BANK, Plaintiff.
THE RESOLUTION LAW GROUP, P.C., et al., Defendants.
REPORT AND RECOMMENDATION
SUSAN K. GAUVEY, Magistrate Judge.
Pending before the Court is First Mariner Bank's ("Plaintiff") motion for sanctions. (ECF No. 238). The Court has considered the motion, R. Geoffrey Broderick's and the Resolution Law Group's ("RLG") (collectively "Defendants") response in opposition (ECF No. 246), and Plaintiff's reply thereto (ECF No 251). The Court held a hearing on the present motion, as well as Plaintiffs pending motion for entry of civil contempt order (ECF No. 202), on April 9, 2014. (ECF No. 253). For the reasons discussed herein, it is the undersigned's recommendation that Plaintiff's motion for sanctions (ECF No. 238) be GRANTED and the sanction of default be entered against Defendants.
Judge Garbis, in his memorandum order denying Defendants' motion to dismiss (ECF No. 60), summarized the nature of Plaintiff's claims against Defendants. Plaintiff has pled three claims: false advertising in violation of the Lanham Act (15 U.S.C. § 1125(a)), unfair competition, and defamation. All of Plaintiff's claims against Defendants are based on Defendant Resolution Law Group's ("RLG") mail advertisements dated April 6, 2012 and May 3, 2012 (and possibly other dates) to certain of Plaintiff's Maryland customers. These mailers stated that RLG was investigating First Mariner, suggested (at minimum) that First Mariner was engaging in illegal and improper banking practices, and indicated that some banks were in settlement negotiations with government agencies. The advertisements also said that the government would seek monetary damages for individuals and reductions in home loans, principal balances, and interest rates. The mailers urged the recipients to contact RLG promptly.
Plaintiff maintains that RLG is operating a mass joinder mortgage reduction scam, similar to scams condemned in other jurisdictions. Plaintiffs allege that RLG's mailers are untrue and seek to scare recipients into engaging RLG (and paying a retainer) for non-existent mortgage reduction services and representation in a scam-lawsuit which RLG has no bona fide basis for filing - all to the considerable detriment of Plaintiff's business and goodwill.
A. History of Discovery Misconduct
It is against the backdrop of these claims and factual allegations that Plaintiff first sought discovery from Defendants, serving Plaintiff's first discovery on Defendants on December 11, 2012. Dissatisfied with Defendants' response to Plaintiff's first set of interrogatories and requests for production of documents, on March 13, 2013, Plaintiff filed a motion to compel discovery. (ECF No. 73-1). Following a hearing, by letter memorandum and order, dated April 19, 2013, the Court agreed with Plaintiff, finding Defendants' answers to interrogatories to be totally unresponsive and largely boilerplate. (ECF No. 87). As such, the Court ordered Defendants to fully answer, by May 1, 2013, interrogatories Nos.
4 (all employees), 7 (cost of advertisement mailings), 10 (persons involved in creation, maintenance, funding, and domain registration), 11 (list and information regarding persons answering calls from recipients of mailed advertisements) and 14 (recordings and transcriptions of calls). (Id. at 2). The Court warned that "[f]ailure to [completely answer interrogatories] will subject defendants to additional sanction." (Id. at 1).
The Court similarly found many of Defendants' responses to Plaintiff's requests for production of documents "totally uninformative [and] boilerplate, " noting that Defendants failed to actually produce any documents with their response. (Id. at 2). As such, the Court ordered Defendants to produce, by May 1, 2013, all documents sought in requests Nos. 1, 4, 5 and 6 (all advertisements including blanks and drafts), 7, 8 (contracts, including those with Marketing Smart and Register.com), 10, and 11 (scripts, training materials, including subject of fee amount). The Court likewise warned that "[f]ailure to produce all documents will subject Defendant[s] to additional sanction." (Id.)
The Court's April 19, Order also commanded, in order to assure that Plaintiff would receive all disseminated advertisements or drafts of the same, Mr. Ian Berger of RLG to submit an affidavit "attaching all advertisements, explaining and attesting to the fact that these represent the universe of advertisements and drafts." (Id.). Additionally, the Court further ordered production of "a complete list of recipients of defendants' advertisements" (under cover of Berger's affidavit), a list of RLG employees to date and a "viable address" for Defendants' marketing firm (also under cover of Berger's affidavit) and finally that Mr. Berger should state in his affidavit that he "has attempted to obtain a current, valid address [for the marketing firm] and list those attempts." (Id.).
Finding no substantive justification for Defendants' discovery failures, the Court's April 19, Order awarded expenses to Plaintiff. (Id.).
By letter motion dated May 2, 2013 (ECF No. 91), Plaintiff complained that Defendants had failed to comply with the Court's April 19, 2012 Order. As such, the Court held a hearing on May 21, and agreed that Defendants had significantly failed to comply, as delineated in the telephone hearing, and thus, ordered Defendants to file, by June 5, 2013, supplemental answers to interrogatory Nos. 4 (all employees), 7 (cost of advertisement mailings), 8 (selection of recipients of mailed advertisements), 10 (persons involved in creation, maintenance, funding and domain registration), 11 (list and information regarding persons answering calls from recipients of mailed advertisements), 14 (recordings and transcriptions of calls); supplemental responses to request Nos. 5 and 6 (all advertisements including blanks and drafts), 7 (contracts including with Marketing Smart and Register.com), 10 (scripts, training materials, including subject of fee amount); and supplementation to the Berger affidavit, paragraph Nos. 3 (failure to attach all Advertisements, including blanks and drafts, with attestation that those attached are the universe of advertisements), 7 (failure to give specifics of effort to identify valid address for Marketing Smart), and 8 (failure to obtain lists of recipients from Marketing Smart). (ECF No. 105). Further, the Court ordered that these supplemental answers and responses must be signed by both Mr. Kirk and Mr. Calhoun as counsel and both Mr. Berger and Mr. Broderick as representatives of RLG and that the supplemental affidavit be signed by both Mr. Berger and Mr. Broderick.
By letter dated June 6, 2013, Plaintiff again advised the Court that Defendants had failed to comply with the May 22, Order. In response, by letter order dated June 13, 2013 (ECF No. 121), the Court asked Plaintiff's counsel to specifically identify remaining discovery deficiencies and instructed Defendants' counsel "to carefully review my past letter orders and the plaintiff's counsel's complaint regarding lack of compliance [and warned that] [c]ontinued failure to respond completely may result in additional sanctions, up to and including entry of default judgment on any claims negatively affected by the failure of discovery." (Id.) (emphasis added). The Court held a hearing on June 24 and once again found continued failure to satisfactorily respond, including failure to answer certain interrogatories, notably interrogatory Nos. 4 (all employees), 8 (selection of recipients of mailed advertisements), 10 (internet website consultant), 11 (list and information regarding persons answering calls of recipients of mailed advertisements), and 14 (recordings and transcripts of calls); failure to answer certain requests for documents, notably documents Nos. 5 and 6 (all drafts of advertisements), 7 (contracts with Marketing Smart, Register.com and other vendors), and 10 (scripts, training materials, etc.); and continued failure to provide the ordered affidavit statements on the universe of advertisements and drafts, an adequate address for Marketing Smart to allow service of a subpoena, lists of recipients associated with specific advertisements, and an attestation that lists are the universe of persons who received advertisements (A list of recipients was first produced literally during the discovery hearing on June 24, though the list was not associated with any particular mailing).
Following the June 24, hearing, the Court issued a letter memorandum and order, dated July 3, 2013, allowing that Defendants could "still cure the [above noted] deficiencies, which may lessen the sanction" imposed for its discovery violations to date. (ECF No. 140). However, the Court "determined to award additional attorney's fees (as set forth by Plaintiff's counsel in ECF No. 123 and to which Defendant has not responded)" and ordered briefing as to any further sanctions. (Id.). As directed, Plaintiff filed its motion for sanctions on July 15, 2013. (ECF No. 142). On July 31, 2013, Defendants served on Plaintiff their supplemental discovery responses, addressing the deficiencies outlined in the Court's July 3, Order, and responded with a memorandum opposing Plaintiff's motion for additional sanctions. (ECF No. 143).
By memorandum opinion, dated October 24, 2013, the Court determined that sanctions were warranted for Defendants' discovery misconduct to date. (ECF No. 160). The Court's memorandum opinion discussed, in detail, Defendants' obstreperous discovery misconduct and evaluated Defendants' failures in the context of the Fourth Circuit's four-factor standard for assessing appropriate sanctions. First, as to factor-one, "the history of Defendants' discovery misconduct overwhelmingly demonstrates the Defendants' bad faith." (Id. at 20). Second, as to factor-three and factor-four, the Court determined the "need for deterrence is great" for the type of meritless non-compliance exhibited by Defendants and "quite obviously, the previous monetary sanction of an award of expenses was ineffective." (Id. at 21). The more difficult question involved factor-two, "the nature and extent of prejudice that First Mariner suffered and suffers by Defendants' discovery misconduct, and the appropriate relief for that prejudice." (Id. at 22). The Court found both procedural prejudice -; evasiveness, delay, and obfuscation hindering a party's ability to develop its case, a "death by a thousand cuts" approach to legitimate discovery requests - as well as substantive prejudice - hindering a party's ability to prosecute a claim or present evidence at trial. Following Defendants' July 31 supplemental discovery disclosure, the Court acknowledged that the prejudice to date was largely procedural given that Defendants eventually produced much of the requested discovery (or swore that it did not exist - sometimes with questionable credibility), with the important exceptions of the denial of information regarding Marketing Smart and the lack of identification of past employees. (Id. at 27-28). Accordingly, by amended order, dated December 4, 2013, the Court ordered the following sanctions against Defendants:
[T]hat defendants are liable to plaintiff for attorney's fees in the amount of $23, 221.00 and shall pay plaintiff this amount by December 13, 2013;
[T]hat the following jury instruction be given at the trial of this case:
Through the course of discovery, the court found that defendants delayed in providing complete information about RLG's operations, personnel and procedures, the development of mailed advertisements, and the selection of targeted recipients of the mailed advertisements. While defendants eventually provided much of the requested information, defendants' delay impeded plaintiff's effort to develop evidence to support its allegation that defendant RLG is not offering legitimate legal services.
Accordingly, you may consider this conduct by defendants along with all of the other evidence presented, during trial, in deciding the issues presented for your determination in this case.
[T]hat defendants may not introduce any further evidence on their costs of the mailed advertisements, beyond the per piece cost provided.
[T]hat defendants shall provide plaintiff with the contact information for all persons identified in answers to interrogatories nos. 4 and 11 and for Gary L. Kit Wright, Bill Goodman and Brian Maller by December 11, 2013.
(ECF No. 191).
On December 16, 2013, Plaintiff filed its motion for entry of civil contempt order (ECF No. 202), following Defendants' failure to pay the $23, 221.00 attorney's fees sanction by the December 13, 2013 deadline. On February 21, 2014, the Court held a hearing on Plaintiff's motion and found Defendant Broderick in civil contempt, pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vii). (ECF No. 252). An additional hearing as to the appropriate remedy for Defendant Broderick's contempt was held on April 9, 2014. (ECF No. 253). According to a status report filed by Defendants on April 15, 2014, Defendants have finally paid the $23, 221.00 sanction imposed pursuant to the Court's December 4, Order. (ECF No. 255). The Court has now received verification of that payment.
B. Present Discovery Dispute
On March 7, 2014, Plaintiff filed its second motion for sanctions following further alleged discovery misconduct by Defendants. (ECF No. 238). Specifically, Plaintiff asserts three bases for additional sanctions: (1) spoliation of evidence, (2) failure to respond to interrogatories, and (3) failure to adequately prepare RLG's Rule 30(b)(6) designee, Defendant Broderick, for deposition. (Id. at 3).
Regarding Plaintiff's interrogatories, on November 22, 2013, Plaintiff served identical sets of 3 interrogatories on Defendants, seeking information about Defendants' revenue and net profits associated with advertisements pertaining to First Mariner and the costs incurred by Defendants in pursuing lawsuits against First Mariner in New York, New Jersey, and any other location. (ECF No. 238-5). At the time Plaintiff filed its motion for sanctions, March 7, 2014, Defendants had not responded. Defendants responded to Plaintiff's interrogatories contemporaneously with filing Defendants opposition to Plaintiff's motion for sanctions (four-months after first receiving Plaintiff's interrogatories). (ECF No. 246, 23). Plaintiff's reply brief objects to the adequacy of Defendants' interrogatory responses, asserting that Defendants' responses raise boilerplate objections and respond evasively. (ECF No. 251, 6-7).
As to Mr. Broderick's preparation for his deposition, on December 18, 2013, Defendant Broderick was deposed in his individual capacity and as RLG's Rule 30(b)(6) corporate designee. (ECF No. 238-2; ECF No. 238-3). Plaintiff's Rule 30(b)(6) notice identified thirty six (36) topics for examination for Mr. Broderick's deposition (ECF No. 238-2, 6-9). Topics included, for example, "the identity of any person [RLG] represent[s] in the lawsuits [against First Mariner] that [RLG] claim[s] has an action against [First Mariner], " "payments from the plaintiffs of the lawsuits [against First Mariner] and the terms of engagement, " "[RLG] offices, including staff, support, and record keeping, " and "the maintenance of [RLG] books and records, including without limitation document and e-mail retention and destruction policies." (ECF No. 238-2). A review of the transcript excerpts of Mr. Broderick's deposition illustrates the sort of responses given by Mr. Broderick on these topics, for example:
Q. What if any document retention policy does the Resolution Law Group have?
A. I'm not aware of the particular policy for documents.
Q. Do you know if one exists?
A. No, I'm not sure.
(ECF No. 238-4, 7).
Q. You don't know if The Resolution Law Group has 1099 forms for independent contractors it has worked with?
A. It might, but I don't know for sure, sorry.
Q. Where would you look for that information?
A. I - I don't know - I don't know if we 1099'd or whom we've 1099'd
Q. I'm not asking who right now. I want to know if you've ever provided a 1099 form to an independent contractor working with the resolution Law Group.
A. I don't know for sure.
Q. Where would the 1099 form be kept by The Resolution Law Group?
A. I don't know. That's a good question. I'm not sure.
(Id. at 9-10).
Q. What services have accountants provided the Resolution Law Group?
A. I don't know exactly what's the services, what was performed and what was not performed.
Q. Where were the accountants located who performed services for the Resolution Law Group?
A. I'm not sure. I know over the past couple of years we've used a couple of different accountants. I'm not sure exactly where they're located, if they had their own office or if they working out of one of the offices. I'd have to look into that. I'm sorry. I don't know the answer.
(Id. at 10-11).
Q. With respect to number 18, "Costs incurred by you in pursuing the lawsuits, " what inquiry did you undertake to determine that you are the person that can respond to questions on that topic - on behalf of The Resolution Law Group.
A. I didn't do any inquiry. I just figured you had if you had any concerns about it, you'd discuss it with me, like the other questions.
(Id. at 36).
Q. Number 32 "the maintenance of your books and records, including without limitation documents and email retention and destruction policies." What inquiry did you undertake that you were the best person to respond to questions on that topic?
A. I did not inquire into that, I'm sorry.
Q. You didn't make any inquiry. You don't know if there's any document retention policy, you've testified to that earlier; correct?
A. Right, that's correct.
Q. And you don't know where, if at all, The Resolution Law Group maintains business records? A. That's correct.
(Id. at 40). Mr. Broderick similarly could not identify where, or if, RLG maintains client files for a client represented by RLG in a federal "mass tort action" in the Eastern District of New York (Case No. 1:12-cv-04686):
Q. You don't have a file for Mr. Abraham?
A. I don't know the extent to which Mr. Abraham has a file.
(Id. at 39). Moreover, Mr. Broderick refused to answer any questions pertaining to RLG finances, invoking the Fifth Amendment approximately forty (40) times in response to questioning on topics such as whether RLG has paid any filing fees in connection with mass-tort lawsuits against First Mariner or other banks, how much money RLG has received from plaintiffs it purports to represent in mass-tort actions, and how much RLG paid Marketing Smart in connection with marketing RLG services. (Id. at 31-40).
Finally, as to alleged spoliation of evidence, during Mr. Broderick's December 18, deposition, Mr. Broderick admitted that "a few months" prior to his December deposition (in the midst of discovery) or "around the summertime, " he "disposed of" the laptop he used in connection with RLG business. (ECF No. 238-4, 16-18). Mr. Broderick acknowledged that the discarded laptop was, in fact, the only computer he used for RLG business for several years prior to its alleged "crash." (Id. at 18). However, Mr. Broderick refused (or was unable) to identify what efforts he actually undertook to recover the computer's hard drive or even where he actually "disposed of" or "recycled" the device. (Id. at 18-22). For example, Mr. Broderick described his alleged recovery efforts as follows:
Q. Who did you ask about that?
A. I don't know. I'm remembering when I bought - I don't know if I went to Office Depot, Office Max or Staples. Wherever I bought the new computer, I probably consulted with the team, the tech team, at the store about it. I would imagine that's what I would have done.
Q. Did you consult with - you would imagine. Do you know if you did that?
A. No, I don't remember exactly what I - I remember doing - trying to do everything that I could ...