USA v. Kattar

• Court: District Court, D. New Hampshire
• Decided: August 19, 1999
• Docket: CV-95-221-JD
• Status: Published

Opinion

USA v. Kattar CV-95-221-JD 08/19/99 P

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

United States of America

v. Civ. No. 95-221-JD

George T. Kattar, et al.

O R D E R

The United States of America ("government " ) , brought this

action against George T. Kattar, Phyllis Kattar, Personally and

as Trustee, Mary Abdoo, Trustee, George P. Kattar, Trustee, Kevin

Kattar, Trustee, the Seven Children Trust, and the Town of

Meredith, seeking to reduce to judgment certain assessments of

tax liabilities made by the Internal Revenue Service. Before the

court is the government's motion for default judgment (document

no. 88). The factual background of this case is set forth in an

order issued this date on the government's motion for summary

judgment.

Discussion

The government seeks to invoke the inherent power of the

court to manage judicial proceedings, and argues that default

judgment is warranted against the defendants because they have

allegedly engaged in wrongful, dishonest, and dilatory discovery practices.1 Specifically, the government argues that the

defendants have breached their responsibilities under Federal

Rules of Civil Procedure 2 6 ( g ) (1), 33(b) and 34, which govern

certification of disclosures, answers to interrogatories, and

document production. The government further asserts that the

defendants proffered false evidence and theories, and have

falsely designated an expert witness. Finally, the government

premises its motion upon allegedly inappropriate conduct at

depositions.

A district court has inherent power to dismiss an action or

impose lesser sanctions where there have been egregious

violations of the legal process. See Aoude v. Mobile Oil Corp.,

892 F.2d 1115, 1118 (1st Cir. 1989). However, "there are limits

to a court's inherent powers, particularly in instances where the

Civil Rules are on all fours." United States v. One 1987 BMW

325, 985 F.2d 655, 661 (1st Cir. 1993) . Where the Federal Rules

of Civil Procedure provide a mechanism or procedure for

addressing discovery violations, those procedures must be

followed. See i d . at 660-61. Similarly, if "the Civil Rules

limit the nature of the sanction that can be imposed, a court may

not use its inherent powers to circumvent the Rules' specific

provisions." I d . at 661. Because of the necessity of reviewing

each type of alleged discovery transgression in the context of

the applicable Federal Rule of Civil Procedure, the court will

1The government also seeks an award of litigation expenses against defense counsel as discussed further below.

2 give separate consideration to each of the allegations set forth

in the government's motion.

Interrogatories

The government first premises its motion upon the

defendants' alleged failure to respond fully and non-evasively to

interrogatories , citing Federal Rule of Civil Procedure 3 3 (b).

Rule 3 3 (b) governs answers to interrogatories and delineates

procedures by which an answering party may object to

interrogatories. Where the party serving the interrogatory is

dissatisfied by the answers received, the "party submitting the

interrogatories may move for an order under Rule 37 (a) with

respect to any objection to or other failure to answer an

interrogatory." Fed. R. Civ. P. at 33(b) (West 1999).2

Rule 3 7 (a) provides that a "party, upon reasonable notice to

other parties and all persons affected thereby, may apply for an

order compelling disclosure or discovery . . . ." Fed. R. Civ.

P. 37(a) (West 1999). Sanctions are available under Rule

37(a)(4), titled "Expenses and Sanctions," although they only

provide for the imposition of costs and reasonable attorney's

fees. See Fed. R. Civ. P. 37( a ) (4) (West 1999). However, "Rule

37 is progressive." R.W. Int'l Corp. v. Welch Foods, Inc., 937

2Rule 37(a) (3) provides "[f]or purposes of this subdivision an evasive or incomplete disclosure, answer, or response is to be treated as a failure to disclose, answer, or respond." Fed. R. Civ. P. 3 7 (a) (3) (West 1999) .

3 F.2d 11 , 15 (1st Cir. 1991). "If an order to answer is issued

under Rule 37(a), and then disobeyed. Rule 37( b ) (2) comes into

play, authorizing the trial court to impose further sanctions,

including the ultimate sanction of dismissal." Id.

The First Circuit has stated that the "rule's language

clearly reguires two things as conditions precedent to engaging

the gears of the rule's sanction machinery: a court order must

be in effect, and then must be violated, before the enumerated

sanctions [of Rule 37(b)] can be imposed." I d ., 937 F.2d at 15.

"Once the [discovering party] eschew[s] the essential interim

step exemplified by Rule 3 7 (a), the gateway to utilizing Rule

37(b)(2) . . . [i]s blocked." I d . at 16 (where party refused to

answer deposition guestions) . In such circumstances a "district

court [lacks] legal authority to dismiss the case under the

latter rule based on [a party's] recalcitrance." Id.

In the case at hand, the government never moved for an order

compelling the discovery reguested. The interim step provided

for by Rule 37(a) was never taken. Therefore, the court lacks

the authority to enter a default judgment as a sanction allowed

by Rule 3 7 (b)(2)(C). See Fed. R. Civ. P. 3 7 (b)(2) (West 1999).

Document Production

The government similarly argues that default judgment is

warranted because the defendants have violated their duty to

produce documents under Rule 34. Rule 34 governs the production

of documents and pursuant to Rule 34(b), captioned "Procedure," a

4 party aggrieved by another's failure to comply with the

reguirements of Rule 34 may "move for an order under Rule 3 7 (a)

with respect to any objection to or other failure to respond to

the reguest or any part thereof, or any failure to permit

inspection as reguested." Fed. R. Civ. P. 34 (West 1999) . The

First Circuit has stated that Rule 34's reference to Rule 37 "of

course, necessarily incorporates the preconditions already

described as a prelude to Rule 37(b) (2) sanctions." R.W. Int'1 ,

937 F.2d 11 at 18. Again, the government never filed a motion to

compel the desired discovery and the court lacks authority to

issue a default judgment.

Fabricated Evidence, False Theories and False Witnesses

The government further asserts that the defendants

fabricated evidence by providing an estimate of the Kattars' net

worth which included the value of a painting the Kattars did not

in fact own on the dates in guestion. Moreover, the government

avers that the defendants and their counsel offered false

theories and falsely designated witnesses.

The court cannot conclude on this record that the defendants

intended to fabricate evidence regarding Phyllis Kattars'

solvency by providing the government with the 1987 insurance

appraisal of the contents of Clovelly, a New Hampshire residence.

The appraisal included a very large number of items, of which the

painting was only one. Nor can the court conclude that the

subseguent retrospective appraisal intentionally included the

5 painting. The retrospective appraisal of the value of Clovelly's

contents in 1972 was a generalized appraisal which simply reduced

the value of all the contents by fifty percent of their 1987

value. Under the circumstances presented, it is just as likely

that the defendants inadvertently included the painting in the

valuations as it is that they intentionally included it.

Nor is default judgment warranted on this record simply

because the defendants considered using the contents of Clovelly

as a basis for arguing Phyllis Kattar's solvency in 1972.

Moreover, as the defendants point out in their objection to the

government's motion for default judgment, they in fact do not use

the contents of Clovelly as a means of establishing Phyllis

Kattar's net worth. Finally, there is conflicting evidence

regarding Judy Davis's willingness to function as a witness on

behalf of the defendants, and on the present record her refusal

to do so could just as well be attributed to a change of heart on

her part.

Disclosure

The government argues that default judgment is appropriate

because of alleged violations of Rule 26(g) (1) . Rule 26(g) (1)

reguires attorneys to certify that to the best of the signer's

knowledge, information and belief, formed after a reasonable

inguiry, reguired disclosures are complete. See Fed. R. Civ. P.

2 6( g ) (1). Under Rule 26( g ) (3), which provides the remedy for a

violation of 26( g ) (1), where a certification is made in violation

6 of the rule without substantial justification, the court "shall

impose upon the person who made the certification," or "the party

on whose behalf the disclosure" is made, an appropriate sanction

including "reasonable expenses incurred because of the

violation," and reasonable attorney's fees.

The defendants have argued, inter alia, that the documents

and other discoverable materials were difficult to locate given

the time span involved and the numerous participants. At this

time and on the present record, the court cannot conclude that

disclosures were wrongfully certified without substantial

justification. Furthermore, the government has moved for the

ultimate sanction of default judgment and all litigation

expenses, which is not warranted on the present record.

This is not to say, however, that the government is left

without remedy if the defendants have indeed failed to adeguately

disclose appropriate documents and other relevant materials.3

Rule 37(c) provides:

A party that without substantial justification fails to disclose information reguired by Rule 26(a) or 26(e) (1) shall not, unless such failure is harmless, be permitted to use as evidence at a trial, at a hearing, or on a motion any witness or information not so disclosed.

Fed. R. Civ. P. 37(c) (West 1999). The exclusion of evidence is

an automatic sanction and is not dependent upon the prior filing

3Although the government refers to Rule 2 6(g ) (1), which controls certification of disclosures, the government's reliance on Rule 26( g ) (1) may be understood as an assertion of incomplete disclosure by the defendants of matters reguired to be disclosed by Federal Rule of Civil Procedure 26(a).

7 of a motion under Rule 3 7 (a). See, e.g., Miksis v. Howard, 106

F.3d 754, 760 (7th Cir. 1997) ("This sanction is automatic and

mandatory unless the party can show the violation was either

justified or harmless.") (citations and quotations omitted).

Furthermore, 37 (c) also provides that

In addition to or in lieu of [the exclusionary] sanction, the court, on motion and after affording an opportunity to be heard, may impose other appropriate sanctions. In addition to requiring payment of reasonable expenses, including attorney's fees, caused by the failure, these sanctions may include any of the actions authorized under subparagraphs (A), (B), and (C) of subdivision (b)(2) of this rule and may include informing the jury of the failure to make the disclosure.

Fed. R. Civ. P. 37(c) (West 1999). The final resolution of this

issue will therefore have to await trial. Defendants and their

counsel are placed on notice that the court is prepared to impose

Rule 3 7 (c) sanctions under appropriate circumstances during the

course of the trial, and that to the extent the progress of the

trial is delayed by the need to resolve such issues, appropriate

additional sanctions will be imposed against the defendants and

their counsel.

Depositions

Finally, the government bases its motion upon alleged

discovery violations during depositions. Although Rule 30

governs depositions generally. Rule 37(a) (2) (B) controls

situations where a deponent refuses to answer deposition

questions. "If a deponent fails to answer a question propounded

or submitted under R u l e [] 30 . . . the discovering party may move for an order compelling an answer." Fed. R. Civ. P. 37(a) (2) (B)

(West 1999). The "proponent of the question may complete or

adjourn the examination before applying for an order." Id.

Again, it is when a party "fails to obey an order to provide or

permit discovery, including an order made under subdivision (a)

of this rule . . . [that] the court in which the action is

pending may make such orders in regard to the failure as are

just," including resort to the sanctions listed in Rule 37(b).

Fed. R. Civ. P. 37 (b) (2) (West 1999) .

Once again, the government never moved for a Rule 3 7 (a)

order in this regard, nor is the court's general denial of the

defendants' motion for a protective order "a suitable surrogate

for a Rule 37(a) order." R.W. Int' 1 Co r p ., 937 F.2d at 16

(1991) .

In this case, however, the government also premises its

motion upon defense counsel's conduct during the depositions.4

Federal Rule of Civil Procedure 3 0 (c), governing among other

things examination, cross examination, and objections, provides:

Examination and cross-examination of witnesses may proceed as permitted at the trial under the provisions of the Federal Rules of Evidence except Rules 103 and 615. . . . All objections made at the time of the examination to the qualifications of the officer taking the deposition, to the manner of taking it, to the evidence presented, to the conduct of any party, or to any other aspect of the proceedings shall be noted by the officer upon the record of the deposition; but the examination shall proceed, with the testimony being

4As to the government's request for an award of litigation expenses against defense counsel, the court has already addressed, supra, the governments' accusations of falsified evidence, theories, and witnesses, and incomplete disclosures. taken subject to the objections.

Fed. R. Civ. P. 30(c) (West 1999). Furthermore, Rule 30(d)

explicitly provides that:

Any objection to evidence during a deposition shall be stated concisely and in a non-argumentative and non-suggestive manner. A party may instruct a deponent not to answer only when necessary to preserve a privilege, to enforce a limitation on evidence directed by the court, or to present a motion under paragraph (3) .

Fed. R. Civ. P. 30(d)(1) (West 1999) (emphasis added). Under

Rule 30, therefore, "a deposition should be conducted just as

though the witness were testifying at trial, with the exception

that there is no judge there to rule on objections or

admissibility and others may not be precluded from sitting in on

the deposition." In re Stratosphere Corp. Sec. Litig., 182

F.R.D. 614, 620 (D. Nev. 1998); Odone v. Croda Int'l PLC, 170

F.R.D. 66, 67 (D.D.C. 1997); Damaj v. Farmers Ins. Co . , 164

F.R.D. 559, 560 (N.D. O k l . 1995); see also. Hall v. Clifton

Precision, 150 F.R.D. 525 (E.D. Pa. 1993).

The Advisory Committee Notes to the 1993 Amendments for

Rules 3 0 (c) and (d) state that they were "aimed at reducing the

number of interruptions during depositions," and intended to

rectify past experience where " [d]epositions freguently have been

unduly prolonged, if not unfairly frustrated, by lengthy

objections and colloguy, often suggesting how the deponent should

respond . . . . [Furthermore] [d]irections to a deponent not to

answer a guestion can be even more disruptive than objections."

10 Fed. R. Civ. P. 30 1993 Advisory Committee Notes (West 1999). As

the Damai court noted, the purpose of depositions is to determine

what the witness saw, heard, knew and thought "through a guestion

and answer conversation between the deposing lawyer and the

witness." See Damai, 164 F.R.D. at 560. "Freguent and

suggestive objections" can "completely frustrate that objective"

and "obscure or alter the facts of the case and conseguently

frustrate the entire civil justice system's attempt to find the

truth." Id.

Pursuant to Rule 30(d ) (2), a court shall allow additional

time for depositions "if needed for a fair examination of the

deponent or if the deponent or another party impedes or delays

the examination." Fed. R. Civ. P. 30( d ) (2) (West 1999). If the

court finds that such an impediment, delay, or other conduct has

frustrated the fair examination of the deponent, it may impose

upon the persons responsible an appropriate sanction, including

the reasonable costs and attorney's fees incurred by any parties

as a result thereof." Id.

The court has reviewed attorney Mooney's conduct during the

depositions of the defendants and their witnesses. The record

before the court establishes that attorney Mooney's deposition

conduct was in clear violation of Federal Rule of Civil Procedure

30. He repeatedly counseled witnesses not to answer guestions on

grounds not appropriate under Rule 30, see, e.g., James Kattar

D e p . Vol. II at 4-21, 28-30, 31, 32, 33, 34, 36; Kevin Kattar

Dep. Vol. IV at 19, 39, 40, 41, 42, 43, 53, 54, 76, 77, 78, 89,

11 91 , 92 , 100, 113; George T. Kattar Dep. Vol. IV at 32; George P.

Kattar Dep. Vol. II, at 35, 36, 39, 40, 102, 105, 106, 107, 108,

115, 117, 121, 125, 126, 127, 128;5 made argumentative and/or

suggestive objections, see, e.g., Phyllis Kattar Dep. Vol. I at

51-52, 69-71, 117; and abruptly interrupted depositions at

unscheduled times, leaving the room with deponents, see, e.g.,

Kevin Kattar Dep. Vol. IV at 17; Phyllis Kattar Dep. Vol. I at

53-54; George T. Kattar Dep. Vol. IV at 39-40. This list of

inappropriate conduct is by no means exclusive. Attorney Mooney

persisted in this conduct even after opposing counsel cited the

Federal Rules of Civil Procedure to him and provided him with

persuasive case law interpreting the Rules. See, e.g., James

Kattar Dep. Vol. II at 4-6. The court finds that such conduct on

the part of attorney Mooney was unreasonable and in bad faith.

The record reflects attorney Mooney's disdain for proper

deposition procedure and an apparent intent to obstruct and

frustrate the government's efforts to successfully elicit facts

and testimony from witnesses.

The government moves for default judgment and seeks an award

of litigation expenses including attorneys fees. As discussed

above, however, the ultimate sanction of default would be

inappropriate and unwarranted under the circumstances of this

case. This is not a situation where the defendants should have

to bear the ultimate sanction because of the conduct of their

5A number of these guestions were eventually answered despite the instruction.

12 attorney. Other remedies reflecting a more measured response

must be considered.

Attorney Mooney's conduct clearly impeded and delayed the

government's deposition of witnesses and interfered with the

search for the truth, which, after all, is the ultimate goal of

both the discovery and trial process. Furthermore, the court

finds it highly probable that attorney Mooney successfully

frustrated the government's capacity to achieve a fair

examination of the deponents. In crafting a remedy, the court is

mindful of the truth seeking function of the civil justice

system, the strong likelihood that attorney Mooney has

successfully interfered with this function, and the importance of

deterring such conduct in the future.

Therefore, the court finds that additional time is warranted

and necessary for the government to conduct a fair examination of

certain witnesses, if it elects to do so.6 See Fed. R. Civ. P.

3 0 (d). Moreover, the court concludes that because attorney

Mooney's conduct has frustrated the fair examination of witnesses

in this case, reasonable costs and attorney's fees incurred by

the government in re-deposing any witness are to be borne by

attorney Mooney personally, and not by the defendants. See i d .

Should the government seek to re-depose any witness pursuant to

this order, it shall notify defense counsel and the court as

6The government only identifies specific instances of violations during the depositions of James, Kevin, George P. and Phyllis Kattar, although the court also notes the transgression in George T. Kattar's deposition. The court's order is therefore limited to these five deponents.

13 indicated below.

Such depositions are to be conducted in accordance with

Federal Rule of Civil Procedure 30. All depositions are to be

held from 9:30 a.m. until 5:30 p.m. with a one hour lunch break

and one 15-minute break in the morning and afternoon sessions,

subject to reasonable modifications for health, physical, or

transportation reasons. Objections are to be stated concisely,

in a non-argumentative, non-suggestive manner. See i d .; In re

Stratosphere Corp., 182 F.R.D. at 622. "A party may instruct a

deponent not to answer only when necessary to preserve a

privilege, to enforce a limitation on evidence directed by the

court, or to present a motion under paragraph (3) [of Rule

30(d)]." Fed. R. Civ. P. 30(d) (West 1999). In such

circumstances counsel shall succinctly state the reason for the

objection and the specific guestion or part thereof which is

objected to. Except as permitted in Rule 30( d ) (1), neither

deponent's counsel nor the deponent may interrupt the deposition

when a guestion is pending or a document is being reviewed.

Otherwise, the depositions are to be conducted in full compliance

with the Federal Rules of Civil Procedure and the Federal Rules

of Evidence.

The defendants and attorney Mooney are placed on notice that

a court order compelling deposition testimony in accordance with

the aforementioned criteria and the Federal Rules of Civil

Procedure is now extant. Violations of this order may well

implicate Rule 3 7 (b) and the sanctions provided therein,

14 including the entry of a default judgment.

Conclusion

In light of the above discussion, the court denies the

government's motion for default judgment and its reguest for

litigation expenses, including attorney's fees (document no. 88).

However, if the government elects to do so it may re-depose one

or more of the following witnesses: George T. Kattar, George P.

Kattar, Phyllis Kattar, James Kattar, and Kevin Kattar.

Attorney's fees and costs incurred in taking any deposition shall

be borne by attorney Mooney, personally, and not by the

defendants. Such election to re-depose must be made, and the

court and counsel notified thereof, by September 15, 1999.

Depositions must be completed by October 15, 1999. No extensions

of these deadlines will be granted absent extraordinary

circumstances.

SO ORDERED.

Joseph A. DiClerico, Jr. District Judge

August 19, 1999

cc: George P. Eliopoulos, Esguire Albert F. Cullen, Jr., Esguire Steven M. Gordon, Esguire Janice E. McLaughlin, Esguire Philip T. McLaughlin, Esguire Richard C. Mooney, Esguire

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