R.W. International Corp. v. Welch Foods, Inc.

133 F.R.D. 8, 1990 WL 183737
District Court, D. Puerto Rico·Decided November 21, 1990·No. Civ. No. 89-0511 (JP)·Published·Cited by 2 cases

Opinion

OPINION AND ORDER

PIERAS, District Judge.

The Court has before it plaintiffs’, R.W. International Corp. and T.H. Ward de la Cruz, Inc., revised Motion to Alter or Amend the Judgment. The plaintiffs allege that sanctions imposed by this Court pursuant to Fed.R.Civ.P. 11, 16(f) and 37(b)(2) are baseless, and that they were denied due process of law under Rule 11. For the reasons stated below, the plaintiffs’ motion is GRANTED as to the issue of attorney’s fees and costs DENIED as to all other issues.

I. THE FACTS

On January 10, 1990, this Court issued an Opinion and Order dismissing the complaint and imposing sanctions, 129 F.R.D. 25. The Opinion and Order presented a detailed recapitulation of the factual background surrounding this case. The following is a brief summary of that factual background. Plaintiffs alleged that Welch unjustifiably terminated the distributorship agreement between them in violation of Law 75. Law 75 refers to the Puerto Rico Dealer’s Contract Act. 10 L.P.R.A. § 278, [10] et seq. The statute delineates all the factors which must be considered in order to calculate the extent of damages caused for an unjust termination of a dealer’s contract.

On May 2, 1989 a Magistrate in this case imposed Rule 37 sanctions of $3,000.00 because the plaintiff Mr. Ward refused to attend his own deposition. On October 27, 1989, the plaintiffs appeared at the Initial Scheduling Conference before this Court unprepared to discuss their allegations regarding the extent of damages under the statute. At the Initial Scheduling Conference, the Court ordered the plaintiffs to produce the documents regarding their alleged Law 75 damages, on or before November 13, 1989. The plaintiffs consistently failed to comply substantially with the Court’s Order. See Codefendant Welch’s Motion to Dismiss for Failure to Prosecute & for Failure to Comply with the Court’s ISC Order and the supplementary motions related to it. In addition, when the plaintiff, Mr. Ward, finally agreed to appear at his deposition, he repeatedly refused to answer the questions that were posed to him. The following is an example of the plaintiff’s bad faith during the discovery process:

Q. Tell us what percent of the value of the services invoiced by R.W. are generated from sources in Puerto Rico?
A. I’m not answering anything that has to do with my tax exemption; that’s not relevant to the case of Welch.
Q. Relevance is not an issue when you’re being asked questions. You have to answer.
A. I don’t want to answer that, I’m not going to answer that.

Deposition of Thomas Ward, November 15, 1989, Tr. 10.

II. RULE 11 SANCTIONS

Fed.R.Civ.P. 11 provides that a court may order a party to pay reasonable expenses resulting from the filing of a pleading that is not well grounded in fact nor warranted by existing law. Rule 11 applies to discovery motions. 28 U.S.C.A. Fed.R.Civ.P. 11 (Supp.1990) (Advisory Committee Notes, 1983 Amendment). Therefore, plaintiffs’ inadequate responses to discovery requests fall within the scope of Rule 11. Rule 11 holds parties and their counsel to “an affirmative duty of reasonable inquiry,” so that the federal courts may promote judicial efficiency by deterring frivolous suits. Lancellotti v. Fay, 909 F.2d 15, 18 (1st Cir.1990).

The plaintiffs’ contention that Rule 11 sanctions cannot be imposed upon a case that was removed from state court, is without merit. In fact, the case which the plaintiffs’ cite as authority, Robinson v. Dean Witter Reynolds, Inc., 129 F.R.D. 15, 20 (D.Mass.1989), clearly states that “once additional submissions are filed in federal court (such as Plaintiffs’ Memorandum in Opposition to Motion to Compel Arbitration in this case), then the plaintiffs and their attorney are subject to Rule 11 with respect to those later filings.” Therefore, on May 8, 1989, when the plaintiffs’ filed their Opposition to Codefendant Welch’s Motion for Sanctions Under Rule 37 and then proceeded to file an Amended Complaint on September 1, 1989, the plaintiffs became subject to Federal Rule 11 sanctions.

The plaintiffs’ claim that the Court denied them an opportunity to be heard before Rule 11 sanctions were imposed, thus depriving them of a due process right. Plaintiffs are accurate in their assertion that the imposition of Rule 11 sanctions must be accompanied by due process. But the Advisory Committee Notes to Rule 11 make clear that “the Rule 11 procedural format ‘should depend on the circumstances of the situation,’ ” Muthig v. Brant Point Nantucket, Inc., 838 F.2d 600 (1st Cir.1988) (citation omitted). Actual evidentiary hearings are not always necessary. Oliveri v. Thompson, 803 F.2d 1265, 1280 (2nd Cir.1986), cert. denied, City of Suffolk v. Graseck, 480 U.S. 918, 107 S.Ct. 1373, 94 L.Ed.2d 689 (1987). For instance, in McLaughlin v. Bradlee, 803 F.2d 1197 (D.C.Cir.1986) an attorney was not entitled to a Rule 11 hearing where the district judge was a primary participant in the proceedings. The judge’s participation in the proceedings allowed him to observe those elements of the litigation most relevant to [11] the criteria for imposing sanctions. In addition, the Rule 11 Advisory Committee Notes provide that the procedural format to be followed for the imposition of Rule 11 sanctions is within the discretion of the district court judge. See also Markel, et al. v. Scovill Manufacturing Co. et al., 657 F.Supp. 1102, 1111 (W.D.N.Y.1987). Furthermore, general notice that a court is considering the imposition of penalties is sufficient notice for the Rule 11 due process requirement. Lepucki v. Van Wormer, 765 F.2d 86, 88 (7th Cir.1985) (emphasis added), cert. denied, Hyde v. Van Wormer, 474 U.S. 827, 106 S.Ct. 86, 88 L.Ed.2d 71 (1985).

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R.W. International Corp. v. Welch Foods, Inc., 133 F.R.D. 8, 1990 WL 183737 (prd 1990).

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