Clientron Corp. v. Devon IT, Inc.

310 F.R.D. 262, 2015 U.S. Dist. LEXIS 114301, 2015 WL 5093084
CourtDistrict Court, E.D. Pennsylvania
DecidedAugust 28, 2015
DocketCIVIL ACTION NO. 13-5634
StatusPublished
Cited by9 cases

This text of 310 F.R.D. 262 (Clientron Corp. v. Devon IT, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Clientron Corp. v. Devon IT, Inc., 310 F.R.D. 262, 2015 U.S. Dist. LEXIS 114301, 2015 WL 5093084 (E.D. Pa. 2015).

Opinion

MEMORANDUM RE PLAINTIFF’S MOTION FOR SANCTIONS

BAYLSON, District Judge

This case is an intensely disputed breach of contract dispute filed by Clientron Corp., a Taiwanese corporation which sold computer-related equipment to Defendant Devon IT, Inc., a Pennsylvania corporation. Plaintiffs second amended complaint has also made allegations against the two shareholders of Devon IT, Dr. John Bennett and his wife, Nance DiRocco.

Prior Memoranda of this Court have reviewed details about the nature of the case and the conduct of the parties. See Memo-randa at ECF 30, 61, 105; see also ECF 8 (E.D.Pa. No. 141396). Plaintiff is a manufacturer of computer equipment and had agreements to sell substantial quantities of its equipment to Defendant Devon IT, and delivered equipment that resulted in invoices of several million dollars, which have not been paid. Prior to instituting this suit, Plaintiff had instituted an arbitration proceeding in Taiwan which was the subject of a previous opinion in this case, ECF 61, and is also the subject of cross-motions for summary judgment which are being decided by a separate Memorandum and Order, filed contemporaneously with this Memorandum and Order.

Following extensive briefing on plaintiffs motion for sanctions, the Court had a hearing on August 19, 2015.

[265]*265The ease has been unusual because of the extensive discovery disputes. Clientron has filed four separate motions to compel, see ECF 16 (E.D.Pa. No. 14-1396); ECF 78, 115, 134 (E.D.Pa. No. 13-5634), plus many letters to the Court detailing discovery issues (dated May 4, May 20, June 16), which were considered in conference and will be docketed, most of which the Court has found meritorious, at least in part. The Court has entered unusually high number of Orders requiring Defendants to provide discovery, many of which followed recorded telephone conferences and/or in-eourt hearings which documented Defendants’ lack of good-faith discovery conduct. See Orders at ECF 20 (E.D.Pa. No. 14-1396); ECF 125, 133, 138 (E.D.Pa. No. 13-5634); see also ECF 127, 132,140,148.

In summary, the Court characterizes Defendants’ responses to Plaintiffs discovery requests as espousing improper and non-meritorious objections, and then serving responses which are haphazard as to the facts, lacking in detail, frequently missing deadlines, and otherwise being incomplete and/or obstructionist. Defendants’ discovery behavior can be accurately described as initially serving blanket, boilerplate, and meritless objections, followed by document production which ranged from a failure to adequately search to the proverbial data dump of voluminous but non-responsive paper, and deponents whose ignorance was only matched by their lack of preparation.

At times, Defendants’ discovery behavior has been deceptive and darkly laughable, and resembles the conduct of Falstaff, the bombastic, bumbling knight in Verdi’s opera of the same name, who ends up in the river Thames — but discovery in commercial litigation is not, or at least is not supposed to resemble, a comic opera.

The failure of Defendants to comply as the Federal Rules require and obey existing Court Orders is largely due to the nonchalant approach to pretrial discovery of Defendant Dr. John Bennett, who is the co-owner, with his wife, of Devon IT, a corporation, and chairman of its board of directors. However, Dr. Bennett never took his discovery obligations seriously, particularly in obeying Orders of this Court.

Dr. Bennett recently filed for bankruptcy. Clientron has moved in the bankruptcy court to lift the automatic stay. By Order of the Court, Dr. Bennett was given the opportunity to file a separate personal response to the motion for sanctions, of which he availed himself. ECF 165, 166. Because of the automatic stay, however, the Court will not comment on Clientron’s motion for sanctions as it applies to Dr. Bennett.

The Court will group the many allegations in Plaintiffs motion for sanctions, and Defendants’ responses, into three categories as follows:

1. Defendants’ failure to adequately search for and produce relevant documents.

The record of this ease shows that Plaintiff served appropriate requests for documents, that Dr. Bennett and his wife (Nance DiRoc-co) are the sole shareholders of Devon IT, and that DiRocco is not at all active in the business. Although Dr. Bennett, as co-owner and chairman of the board, and as an individual Defendant in this case, had a responsibility of becoming personally involved in discovery, he claimed he did not have knowledge of many corporate activities. The record shows that Devon IT, at least at certain times, had 30 - 40 employees and justifies a conclusion that no current employee had any personal knowledge of the details of the contractual relationship between Clien-tron and Devon IT. The discovery record shows that although Dr. Bennett claimed that he did at one point search for documents, he also stated that he largely delegated this responsibility to others. However, considering the obligations of the corporation and the individual Defendants, they did not satisfy their obligation to search for and produce responsive paper documents and electronically stored information. Dr. Bennett, as the effective owner of Devon IT, had the ability to control the affairs of the company and was ultimately responsible for its refusal to pay Clientron the money that had been billed for goods sold and delivered to Devon IT. However, he was unable to testify to any [266]*266details supporting Devon IT’s defenses or counterclaims in this case, but claimed others in the company were more knowledgeable of those details. Dr. Bennett expressed ignorance of basically all details including names of responsible officials, location of documents, etc.

Devon IT asserts that it had legitimate reasons not to pay Clientron, relating to the alleged lack of quality of the products and similar defenses, and Devon IT filed counterclaims in this case seeking damages for such deficiencies (ECF 107). The discovery record shows that Clientron endeavored to get detailed information from Devon IT about Devon IT’s defenses and counterclaims, without success.

As one example, Devon IT admits that it basically conducted a “data dump” by making available to Clientron 93 boxes of irrelevant documents, and did not at all detail the documents it produced into topics, categories, or other subjects, which is not accepted in normal discovery practice by a party producing documents in commercial litigation. See Rule 34(b)(2)(E).

Devon IT does not adequately detail, in its responses to Clientron’s motion, any appropriate explanation for Clientron’s demonstration that Devon IT’s discovery conduct, particularly of the chairman of its board of directors, Dr. Bennett, was deficient.

2. Failure to fulfill corporate obligation regarding 30(b)(6) and obey Court orders regarding producing financial information.

During Dr. Bennett’s deposition, he claimed he had little knowledge of the internal workings of Devon IT and related entities on many details, which is of doubtful credibility given the closely held nature of Devon IT, particularly its financial affairs. For example, Dr. Bennett testified:

Q: Do you have access to the Devon IT general ledger?
A: No.

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Bluebook (online)
310 F.R.D. 262, 2015 U.S. Dist. LEXIS 114301, 2015 WL 5093084, Counsel Stack Legal Research, https://law.counselstack.com/opinion/clientron-corp-v-devon-it-inc-paed-2015.