2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4 * * * 5 Case No. 2:22-cv-00395-JAD-DJA 6 Teal Petals St. Trust,
7 Plaintiff, Order 8 v.
9 NewRez, LLC fka New Pen Financial dba Shellpoint Mortgage Servicing, et al. 10 Defendants. 11 And related counterclaims. 12
13 NewRez, LLC fka New Penn Financial dba Shellpoint Mortgage Servicing, 14 Plaintiff, 15 v. 16 Iyad Haddad aka Eddie Haddad; Resources 17 Group, LLC; Resources Group, LLC as Trustee of Teal Petals St. Trust; 9863 Dublin 18 Valley, LLC; Saticoy Bay LLC dba Saticoy Bay LLC Series 9863 Dublin Valley St.; 19 Saticoy Bay LLC Series 9863 Dublin Valley St.; et al., 20 Defendants. 21 22 I. Introduction. 23 This case is a remnant of Nevada’s foreclosure crisis in which real estate investors like 24 Iyad Haddad aka Eddie Haddad and his numerous entities snapped up homes for pennies on the 25 dollar after the owners defaulted on their homeowner-association (“HOA”) assessments.1 The 26
27 1 These summary of facts are derived from prior orders and the complaints in these consolidated 1 Court has previously outlined the facts in this case and will not do so again here except to explain 2 that one of Shellpoint’s2 theories is that Haddad controls certain party entities (which, together 3 with Haddad, the Court refers to as “Defendants”3 for the purposes of this order) and improperly 4 used those entities to prevent Shellpoint from foreclosing on its deed of trust securing a 5 $340,000.00 home mortgage. Shellpoint theorizes that Defendants are alter egos of one another 6 and have aided and abetted one another in achieving their goal of keeping Shellpoint from 7 foreclosing. 8 In July of 2024, Shellpoint served requests for production, interrogatories, and requests for 9 admission on Defendants, which discovery requests were intended to support Shellpoint’s alter 10 ego and aiding and abetting theories. (ECF No. 71 at 2-3); (ECF No. 74 at 2). Defendants 11 responded to the requests for production, but not the interrogatories or requests for admission. 12 (ECF No. 86 at 8). Defendants sought a protective order preventing them from responding 13 further to the requests for production and from responding to the interrogatories and requests for 14 admission, claiming the discovery was irrelevant and overbroad and proposed posting a 15 $240,000.00 bond in lieu of responding to the discovery. (ECF No. 71). The Court denied this 16 motion, ordered Defendants to respond to Shellpoint’s discovery requests, and granted 17 Shellpoint’s countermotion to compel Defendants to respond to Shellpoint’s requests for 18 production. (ECF No. 125). 19 Shellpoint now moves for sanctions, arguing that Defendants’ supplemental responses to 20 Shellpoint’s discovery requests are either deficient or that Defendants have decided to improperly 21 object and not respond. (ECF No. 144). Defendants argue that they do not need to further 22 respond to Shellpoint’s discovery requests because the Defendants have stipulated that they are 23 “jointly and severally liable to Shellpoint for any damages that may be awarded in this action 24 against any one or more of them.” (ECF Nos. 139, 151). So, Defendants assert that “Shellpoint 25
26 2 This refers to NewRez LLC fka New Penn Financial dba Shellpoint Mortgage Servicing. 27 3 This refers to Resources Group, LLC; Resources Group, LLC as Trustee of Teal Petals St. Trust; 9863 Dublin Valley, LLC; Saticoy Bay LLC; Saticoy Bay LLC Series 9863 Dublin Valley 1 has been relieved of its obligation to prove that any Defendant is an alter ego of any other 2 Defendant” and, as a result, Shellpoint’s discovery requests seek irrelevant information. (ECF 3 Nos. 139, 151). 4 The Court is not convinced by Defendants’ arguments. While the Court’s order did not 5 prohibit Defendants from objecting to discovery where appropriate, the Court did reject 6 Defendants’ arguments that Shellpoint’s discovery requests—directed to alter ego and aiding and 7 abetting theories of liability—were irrelevant and would be rendered unnecessary by a 8 $240,000.00 bond. (ECF No. 125). Defendants’ new argument—that discovery directed to alter 9 ego and aiding and abetting theories of liability are irrelevant and rendered unnecessary by 10 Defendants’ stipulation—is a form of its prior argument and fails for the same reasons. The 11 Court does not find that Defendants’ stipulation alleviated them of their Court-ordered obligation 12 to respond to Shellpoint’s discovery requests. So, that was not a basis for the Defendants to 13 object to Shellpoint’s discovery requests. Where they have done so Defendants have violated the 14 Court’s order. 15 Shellpoint suggests that the Court find that Defendants’ failure to obey the discovery order 16 is civil contempt, impose an attorney fee sanction for all the amounts Shellpoint has incurred and 17 will incur as a result of Defendants’ failure, and to recommend striking Defendants’ answers and 18 entering a default judgment against them. Alternatively, Shellpoint requests that the Court order 19 the allegations supporting its alter ego and civil aiding and abetting theories established (or 20 prohibit Defendants from opposing such theories), stay proceedings until Defendants comply with 21 the discovery order, and admonish Defendants and their counsel. 22 II. Legal standard. 23 Federal Rule of Civil Procedure 37(b)(2)(A) provides that the Court may order certain 24 sanctions for a party’s failure to comply with a discovery order. These sanctions include, 25 amongst other things, the Court entering “further just orders,” directing that certain facts be taken 26 as established for the purposes of the action, prohibiting the disobedient party from opposing 27 designated claims, striking pleadings, staying proceedings until the order is obeyed, and rendering 1 disobedient party to pay the reasonable expenses caused by the party’s failure to comply. See 2 Fed. R. Civ. P. 37(b)(2)(C). Before entering a case dispositive sanction under Rule 37(b)(2), the 3 Court must consider: (1) the public’s interest in expeditious resolution of litigation; (2) the court’s 4 need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public 5 policy favoring disposition of cases on their merits; and (5) the availability of less drastic 6 sanctions. Connecticut General Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 7 1096 (9th Cir. 2007). The Court may find a party in civil contempt if the moving party has shown 8 by clear and convincing evidence that the contemnor has violated a specific and definite order of 9 the court and the contemnor does not meet their burden of showing why they were unable to 10 comply. In re Dual-Deck Video Cassette Recorder Antitrust Litigation, 10 F.2d 693, 695 (9th 11 Cir. 1993). A court may wield its civil contempt powers for two separate and independent 12 purposes: (1) to coerce the defendant into compliance with the court’s order; and (2) to 13 compensate the complainant for losses sustained. Shell Offshore Inc. v. Greenpeace, Inc., 815 14 F.3d 623, 629 (9th Cir. 2016). 15 III. Analysis. 16 Here, the Court finds that certain of Shellpoint’s alternative sanctions are appropriate. 17 The Court declines to enter contempt sanctions because Shellpoint’s requested civil contempt 18 attorney fee sanctions seek sanctions they may incur in the future. The Court declines to 19 speculate on these sanctions.
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2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4 * * * 5 Case No. 2:22-cv-00395-JAD-DJA 6 Teal Petals St. Trust,
7 Plaintiff, Order 8 v.
9 NewRez, LLC fka New Pen Financial dba Shellpoint Mortgage Servicing, et al. 10 Defendants. 11 And related counterclaims. 12
13 NewRez, LLC fka New Penn Financial dba Shellpoint Mortgage Servicing, 14 Plaintiff, 15 v. 16 Iyad Haddad aka Eddie Haddad; Resources 17 Group, LLC; Resources Group, LLC as Trustee of Teal Petals St. Trust; 9863 Dublin 18 Valley, LLC; Saticoy Bay LLC dba Saticoy Bay LLC Series 9863 Dublin Valley St.; 19 Saticoy Bay LLC Series 9863 Dublin Valley St.; et al., 20 Defendants. 21 22 I. Introduction. 23 This case is a remnant of Nevada’s foreclosure crisis in which real estate investors like 24 Iyad Haddad aka Eddie Haddad and his numerous entities snapped up homes for pennies on the 25 dollar after the owners defaulted on their homeowner-association (“HOA”) assessments.1 The 26
27 1 These summary of facts are derived from prior orders and the complaints in these consolidated 1 Court has previously outlined the facts in this case and will not do so again here except to explain 2 that one of Shellpoint’s2 theories is that Haddad controls certain party entities (which, together 3 with Haddad, the Court refers to as “Defendants”3 for the purposes of this order) and improperly 4 used those entities to prevent Shellpoint from foreclosing on its deed of trust securing a 5 $340,000.00 home mortgage. Shellpoint theorizes that Defendants are alter egos of one another 6 and have aided and abetted one another in achieving their goal of keeping Shellpoint from 7 foreclosing. 8 In July of 2024, Shellpoint served requests for production, interrogatories, and requests for 9 admission on Defendants, which discovery requests were intended to support Shellpoint’s alter 10 ego and aiding and abetting theories. (ECF No. 71 at 2-3); (ECF No. 74 at 2). Defendants 11 responded to the requests for production, but not the interrogatories or requests for admission. 12 (ECF No. 86 at 8). Defendants sought a protective order preventing them from responding 13 further to the requests for production and from responding to the interrogatories and requests for 14 admission, claiming the discovery was irrelevant and overbroad and proposed posting a 15 $240,000.00 bond in lieu of responding to the discovery. (ECF No. 71). The Court denied this 16 motion, ordered Defendants to respond to Shellpoint’s discovery requests, and granted 17 Shellpoint’s countermotion to compel Defendants to respond to Shellpoint’s requests for 18 production. (ECF No. 125). 19 Shellpoint now moves for sanctions, arguing that Defendants’ supplemental responses to 20 Shellpoint’s discovery requests are either deficient or that Defendants have decided to improperly 21 object and not respond. (ECF No. 144). Defendants argue that they do not need to further 22 respond to Shellpoint’s discovery requests because the Defendants have stipulated that they are 23 “jointly and severally liable to Shellpoint for any damages that may be awarded in this action 24 against any one or more of them.” (ECF Nos. 139, 151). So, Defendants assert that “Shellpoint 25
26 2 This refers to NewRez LLC fka New Penn Financial dba Shellpoint Mortgage Servicing. 27 3 This refers to Resources Group, LLC; Resources Group, LLC as Trustee of Teal Petals St. Trust; 9863 Dublin Valley, LLC; Saticoy Bay LLC; Saticoy Bay LLC Series 9863 Dublin Valley 1 has been relieved of its obligation to prove that any Defendant is an alter ego of any other 2 Defendant” and, as a result, Shellpoint’s discovery requests seek irrelevant information. (ECF 3 Nos. 139, 151). 4 The Court is not convinced by Defendants’ arguments. While the Court’s order did not 5 prohibit Defendants from objecting to discovery where appropriate, the Court did reject 6 Defendants’ arguments that Shellpoint’s discovery requests—directed to alter ego and aiding and 7 abetting theories of liability—were irrelevant and would be rendered unnecessary by a 8 $240,000.00 bond. (ECF No. 125). Defendants’ new argument—that discovery directed to alter 9 ego and aiding and abetting theories of liability are irrelevant and rendered unnecessary by 10 Defendants’ stipulation—is a form of its prior argument and fails for the same reasons. The 11 Court does not find that Defendants’ stipulation alleviated them of their Court-ordered obligation 12 to respond to Shellpoint’s discovery requests. So, that was not a basis for the Defendants to 13 object to Shellpoint’s discovery requests. Where they have done so Defendants have violated the 14 Court’s order. 15 Shellpoint suggests that the Court find that Defendants’ failure to obey the discovery order 16 is civil contempt, impose an attorney fee sanction for all the amounts Shellpoint has incurred and 17 will incur as a result of Defendants’ failure, and to recommend striking Defendants’ answers and 18 entering a default judgment against them. Alternatively, Shellpoint requests that the Court order 19 the allegations supporting its alter ego and civil aiding and abetting theories established (or 20 prohibit Defendants from opposing such theories), stay proceedings until Defendants comply with 21 the discovery order, and admonish Defendants and their counsel. 22 II. Legal standard. 23 Federal Rule of Civil Procedure 37(b)(2)(A) provides that the Court may order certain 24 sanctions for a party’s failure to comply with a discovery order. These sanctions include, 25 amongst other things, the Court entering “further just orders,” directing that certain facts be taken 26 as established for the purposes of the action, prohibiting the disobedient party from opposing 27 designated claims, striking pleadings, staying proceedings until the order is obeyed, and rendering 1 disobedient party to pay the reasonable expenses caused by the party’s failure to comply. See 2 Fed. R. Civ. P. 37(b)(2)(C). Before entering a case dispositive sanction under Rule 37(b)(2), the 3 Court must consider: (1) the public’s interest in expeditious resolution of litigation; (2) the court’s 4 need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public 5 policy favoring disposition of cases on their merits; and (5) the availability of less drastic 6 sanctions. Connecticut General Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 7 1096 (9th Cir. 2007). The Court may find a party in civil contempt if the moving party has shown 8 by clear and convincing evidence that the contemnor has violated a specific and definite order of 9 the court and the contemnor does not meet their burden of showing why they were unable to 10 comply. In re Dual-Deck Video Cassette Recorder Antitrust Litigation, 10 F.2d 693, 695 (9th 11 Cir. 1993). A court may wield its civil contempt powers for two separate and independent 12 purposes: (1) to coerce the defendant into compliance with the court’s order; and (2) to 13 compensate the complainant for losses sustained. Shell Offshore Inc. v. Greenpeace, Inc., 815 14 F.3d 623, 629 (9th Cir. 2016). 15 III. Analysis. 16 Here, the Court finds that certain of Shellpoint’s alternative sanctions are appropriate. 17 The Court declines to enter contempt sanctions because Shellpoint’s requested civil contempt 18 attorney fee sanctions seek sanctions they may incur in the future. The Court declines to 19 speculate on these sanctions. And the Court finds attorney’s fees sanctions appropriate under 20 Rule 37(b)(2)(C), so compensatory civil contempt sanctions would be redundant. The Court also 21 declines to recommend striking Defendants’ answers because lesser sanctions are available. 22 Finally, the Court declines to find Shellpoint’s alter ego and civil aiding and abetting theories 23 established or to prohibit Defendants from opposing such theories. The Court will be requiring 24 Defendants to respond to Shellpoint’s discovery, with which responses Shellpoint may support its 25 theories. While Shellpoint speculates that Defendants may have destroyed documents that would 26 prove these theories, that is only speculation and not a reason for the Court to grant Shellpoint’s 27 requested sanctions. 1 The Court will, however, stay discovery deadlines in this matter and give Defendants 2 forty-five days to amend their responses to Shellpoint’s discovery requests. Defendants may not 3 object on relevance grounds. The Court will further require Defendants to pay Shellpoint’s 4 attorney’s fees incurred in bringing the motion for sanctions and for meeting and conferring with 5 Defendants leading up to the motion for sanctions. 6 7 IT IS THEREFORE ORDERED that Shellpoint’s motion for sanctions (ECF No. 144) 8 is granted in part and denied in part as outlined herein. It is granted insofar as the Court will 9 stay discovery in this matter until Defendants amend their responses to Shellpoint’s discovery 10 requests and will require Defendants to pay Shellpoint’s attorney’s fees incurred in bringing this 11 motion for sanctions and for meeting and conferring with Defendants leading up to it. It is denied 12 in all other respects. 13 IT IS FURTHER ORDERED that discovery deadlines in this matter are stayed until 14 December 1, 2025. 15 IT IS FURTHER ORDERED that Defendants have until October 13, 2025, to provide 16 their amended responses to Shellpoint’s discovery requests. Defendants may not object to those 17 requests on relevance grounds. 18 IT IS FURTHER ORDERED that Defendants and Shellpoint must meet and confer and 19 attempt to stipulate to the amount of sanctions Defendants must pay to Shellpoint. This 20 stipulation must be filed on or before October 13, 2025. 21 IT IS FURTHER ORDERED that, on or before December 1, 2025, the parties must file 22 a stipulation lifting the stay of discovery, proposing renewed deadlines as necessary, and 23 informing the Court whether Shellpoint intends to file any further motions related to Defendants’ 24 discovery responses. 25 26 DATED: August 28, 2025 27 DANIEL J. ALBREGTS