BRIAN 1 BARRY #135631 JILL LEVINE BETTS #208065 2 LAW OFFICES OF BRIAN BARRY 1801 Avenue of the Stars, Suite 307 3 Los Angeles, California 90067 Telephone: [phone] Facsimile: [phone] 5 Attorneys for Class Action Plaintiffs 6 [Additional Counsel on Signature Page] 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In re HERITAGE BOND LITIGATION ____________________________________ David Sinow, Howard Preston, Langdon Parrill, Ray Stits, Barrett Anderson, Laurence Pilgeram, Scott McKenry, Ralph Allman, and Gilbert Kivenson, On behalf of themselves and all others similarly situated, Plaintiffs, v. U.S. Trust Company of Texas, N.A., U.S. Trust Corporation, Tarrant County Health Facilities Development Corporation, Jerold Goldstein, Onofrio V. Bertolini, Stephen P. Goodman, Evan Greenspan, Estate of Andrew Kornreich, Deceased, Cary Medill, Estate of Emery Rubin, Larry A. Rubin, Herbert Saltzman, Virgil Lim, Clarke Underwood, Donald B. Chalker, Marshall Wexler, Robert Kasirer, Debra Kasirer, Bistra & Munkacs Holdings, Inc., JDDJ Holdings, L.P., Health Care Holdings, LLC, CareContinuum, LLC, Loui s Pontarelli, William Filippone, Leo Dierckman, Alan Pollak, Geri Ostlund, Richard Kuhl, James E. Iverson, Victor P. Dhooge, John M. Clarey, James F. Dlugosch, Edward J. Hentges, Kenneth R. Larsen, Jerome E. Tabolich, Steven W. Erickson, Paul R. Ekholm, Kenneth E. Dawkins, Joel T. Boehm, Sabo & Green, Atkinson, Andelson, Loya, Ruud & Romo, Valuation Counselors Group, Inc., Capital Consulting Group, Inc., Healthcare Financial Solutions Group, Inc., Zelenofske, Axelrod & Co., Ltd., Berman and Bertolini, Inc. aka Berman & Associates, Michael Sobelman, Sobelman Cohen & Sullivan LLP, Foley & Lardner as Doe No. 2, and Wildman, Harrold Allen & Dixon as Doe No. 3 and Does 4-10, Defendants. 02-ML-1475-DT(RCx) Consolidated With Case Nos: CV 01-5752 DT (RCx) CV 02-382 DT (RCx) CV 02-993 DT (RCx) CV 02-2745 DT (RCx) CV 02-6484 DT (RCx) CV 02-6841DT (RCx) CV 02-9221 DT (RCx) Companion Case CV 02-6512 DT This Document Relates To: CV 02-382 DT (RCx) JOINT STIPULATION REGARDING PLAINTIFFS MOTION FOR SANCTIONS AGAINST DEFENDANT ATKINSON, ANDELSON, LOYA, RUUD &ROMO AND JOEL BOEHM FOR DESTRUCTION OF EVIDENCE Date: December 17, 2003 Time: 9:30 a.m. Courtroom: 23 Hon. Rosalyn M. Chapman Discovery Cutoff: June 30, 2004 Pre-Trial Conf: August 25, 2004 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA - WESTERN DIVISION
JOINT STIPULATION REGARDING PLAINTIFFS MOTION FOR SANCTIONS AGAINST DEFENDANT ATKINSON, ANDELSON, LOYA, RUUD & ROMO AND JOEL BOEHM FOR DESTRUCTION OF EVIDENCE
1 2 I. 3 A. 4 INTRODUCTION Plaintiffs Introduction Before the Court is a class action arising from eleven municipal bond
5 offerings which raised over $130 million between December 1996 and March 6 1999. The money was purportedly borrowed to acquire and renovate former 7 hospitals as facilities to assist the elderly. Instead, the offerings comprised a large 8 scale Ponzi scheme; the end result of which was that all of the facilities went into 9 foreclosure or bankruptcy by 2000. 10 Defendant Atkinson, Andelson, Loya, Ruud & Romo (Atkinson or the 11 Firm) is a law firm which acted as underwriters counsel for the last four bond 12 13 offerings (the Fort Worth No. 2 offering, the East Houston offering, the Seminole 14 offering and the Brownsville offering). Defendant Joel T. Boehm acted as the 15 primary attorney for the underwriter on eight of the offerings, including the last 16 four. Initially, Boehm was employed by defendant Sabo & Green, but on or about 17 October 1998, he went to work for Atkinson and is still in their employ. In 18 addition, Boehm claims to have performed some additional work related to the 19 Heritage bond offerings as a sole practitioner in the 1998-March 1999 time frame 20 for which he received approximately $100,000. His counsel represents that when 21 he left Sabo & Green he went to work immediately for Atkinson, so the work he 22 did on his own had to be done while employed at the law firms. Despite the 23 extensive role that Boehm and Atkinson played in all of the last four bond 24 offerings, plaintiffs counsel has been advised that, in response to plaintiffs First 25 Request For Production of Documents (1st RFP), the only documents Boehm 26 personally has are the closing binders for the Offerings and the Firm is unable to 27 produce a single piece of paper because they cannot locate their documents. 28
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1 Moreover, the Firm has failed to offer any kind of explanation as to why they can 2 not locate their documents, despite two years having passed since they were first 3 sued in connection with the Heritage debacle. The Firm has also failed to give any 4 indication as to where the documents may possibly be now, where they were last, 5 what might have happened to them, or the steps they have taken to track them 6 7 8 9 10 11 12 14 down. Despite repeated promises to do so, the Firm has never provided a supplemental response to the 1st RFP or the Second Request for Documents (2 nd RFP) (which requested invoices and billing records).1 Instead, after the Firms initial objection, plaintiffs have encountered an ever-flowing stream of promises to supplement followed by predictable failures to live up to promises flippantly made. Defendants Introduction Defendants Atkinson, Andelson, Loya, Ruud & Romo (AALR&R) and
13 B.
15 Joel T. Boehm (Mr. Boehm) have complied with each of Plaintiffs discovery 16 requests and each of this Courts orders. 17 In sum, Mr. Boehm and AALR&R, played only a partial role in the 18 preparation of the Official Statements a booklet that the plaintiff bondholders 19 may or may not have ever seen or read in the course of purchasing Heritage bonds 20 from their respective brokers. The preliminary versions of the last four Heritage 21 bond Official Statements were compiled, in part, by Mr. Boehm, in the course of 22 his employment with AALR&R. They were subsequently reviewed for 23 finalization by a multitude of other parties with an involvement in and a 24 25 The Firm has likewise failed to provide supplemental responses to the Request for Admissions, and, just days ago, the Firm provided a much delayed 27 supplemental response to the plaintiffs Interrogatories, which are inadequate, see 28 fn. No. 6 herein. 26
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1 knowledge of the subject Heritage projects, much greater than that of Mr. Boehm. 2 Much of the information in the Official Statements was supplied by other 3 defendants, i.e., feasibility studies supplied by the Feasibility Defendants, 4 appraisals supplied by the Appraisal Defendants, etc. The final versions of the 5 Official Statements were not even signed by Mr. Boehm, but instead, by other 6 7 8 9 10 11 12 defendants in this litigation. Neither Mr. Boehm, nor AALR&R, were involved in the construction, management, operation, or financial function of any of the Heritage projects. Plaintiffs allege as much throughout their Fourth Amended Consolidated Class Action Complaint (4AC). The true and unobscured facts show that AALR&R and Mr. Boehm have each timely, properly, and in good faith, responded to each and every one of
13 Plaintiffs multiple discovery requests in this matter. Neither AALR&R, nor Mr. 14 Boehm, have ever destroyed any records in response to this litigation, and Plaintiff 15 has not, and cannot, provide any evidence of this careless allegation. And, until 16 this Motion, Plaintiffs have never formally challenged any of Defendants 17 substantive responses or legal objections to Plaintiffs requests for production, the 18 first of which were received by Plaintiffs as far back as 11 months ago. 19 Nevertheless, Plaintiffs now bring this frivolous motion, which has no basis 20 in law, much less in fact. Very simply, this motion is unfounded, unauthorized by 21 law, and a form of harassment of the subject Defendants. 22 23 24 25 26 27 28 II. A. STATEMENT OF FACTS Plaintiffs Statement of Facts Atkinson is a California-based law firm with offices in Sacramento, Pleasanton, Riverside, Cerritos and San Diego. Boehm joined Atkinsons San Diego office and brought Miller & Schroeder, the now-bankrupt underwriter for all the Heritage bond offerings, to Atkinson as a client. Atkinson thereupon acted
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1 as underwriters counsel for the last four Heritage bond offerings that Miller & 2 Schroeder underwrote (Fort Worth No. 2, East Houston, Seminole and 3 Brownsville). These offerings were effective October 5, 1998, November 3, 1998, 4 December 21, 1998 and March 11, 1999, respectively, and raised a total of slightly 5 more than $37 million.2 6 7 8 9 10 11 12 Atkinson and Boehm were initially named in the Hermann putative class action filed in San Diego Superior Court on November 20, 2001. Barry Declaration at 4, Exhibit A.3 Atkinson and Boehm were named in this action for the first time in the Allman complaint, which was filed on August 20, 2002. However, years earlier, Atkinson and Boehm had ample reason to know that the Heritage Entities would become immersed in litigation. Atkinsons employee,
13 defendant Boehm, was intimately familiar with the allegations of fraud in 14 connection with the offerings which were levied in the Platt (filed in 1997) and 15 Cornerstone (filed in 1998) litigations. FAC at 164,243. Moreover, in May 16 1999, the Firms client, Miller & Schroeder, abruptly refused to underwrite any 17 additional Heritage offerings and began an investigation into its liability for the 18 previous offerings. FAC at 360-64. Thus, Atkinson and Boehm knew or should 19 have known that litigation was imminent.4 In late 1999 and early 2000, 20 21 In connection with its role as underwriters counsel on the last four Heritage bond offerings, Atkinson and Boehm have been named in this action for 23 Joint and Several Liability under Cal. Corps. Code 25504.1 (FAC, 448-51), 24 negligence (FAC, 461-73) and conspiracy to commit fraud (FAC, 496-504). 22 25 27 Herrmann eventually filed an action in this Court and dismissed his 26 State Court case. As noted above, the offerings for which Atkinson acted as 28 underwriters counsel were the last of the series, and were all less than a year old
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1 receivership and/or foreclosure actions were filed relating to each Heritage facility 2 and in August 2000 Heritage Rancho filed for bankruptcy. 3 On December 27, 2002, plaintiffs served their 1st RFP on all defendants. 4 Barry Declaration at 5, Exhibit B. On January 29, 2003, Atkinson and Boehm 5 responded with a slew of objections but said they would produce. Barry 6 7 8 9 10 11 12 Declaration at 6, Exhibit C and D. On May 17, 2003, plaintiffs counsel, Brian Barry, sent a fax to Atkinsons counsel, Dan White, asking why he had not heard from him regarding Atkinsons production of documents. Barry Declaration at 7, Exhibit E. Thereafter, a conversation took place wherein Mr. White informed Mr. Barry that Atkinson could not find any documents. On June 12, 2003, the 2nd RFP was on served on
13 Atkinson along with the Requests for Admission (RFA) to all defendants and 14 the First Set of Interrogatories (Rogs) to the attorney and accountant defendants. 15 Barry Declaration at 9, Exhibits F-H. On July 11, 2003, Atkinson and Boehm 16 again responded with blanket objections. Barry Declaration at 10, Exhibits I-N. 17 18 19 20 21 22 23 24 25 26 27 28 in May 1999.
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On July 17, 2003, the day after the initial discovery status conference with this Court, plaintiffs counsel wrote to Charles Grebing, the lead attorney for the attorney group and counsel for Boehm, and asked Grebing to look into the situation regarding Atkinsons document production, or lack thereof, because Plaintiffs found their claim to not have a single document very difficult to believe. Barry Declaration at 11, Exhibit O. On August 6, 2003, for the first time in writing, counsel for Atkinson advised plaintiffs counsel that, although efforts to locate their documents continued, they were not in possession of any documents responsive to plaintiffs discovery requests. Atkinson also promised to
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1 provide supplemental responses to all of the outstanding discovery requests within 2 30-45 days. Barry Declaration at 12, Exhibit P. 3 In August, per this Courts order, all lead counsel met to formulate a 4 discovery plan. At that time, as lead counsel for the attorney group, Mr. Grebing 5 agreed that the attorney defendants would provide supplemental responses to all of 6 7 8 9 10 11 12 plaintiffs discovery requests by September 26, 2003. Grebing further agreed that a definitive answer from Atkinson about whether they could locate their documents would be forthcoming on that same day. That day came and went with no communication from counsel for Atkinson. On October 6, 2003 the September Discovery Report was sent to this Court. Atkinson stated that they were aware the 2nd RFP asked for invoice and payments records, but that a specific request for the
13 invoice and payment records had not been made and the matter was being further 14 addressed by counsel. (Emphasis in original). No explanation was provided for 15 why Atkinsons counsel had not even attempted to obtain documents from its 5 16 client which were responsive to a request served four (4) months prior. 17 On October 10, 2003, plaintiffs counsel sent a fax to Atkinsons counsel 18 asking for the supplemental responses and notification in writing of whether any 19 documents were found. Barry Declaration at 15, Exhibit Q . On October 14, 20 2003, Atkinsons counsel telephoned plaintiffs counsel and verbally provided 21 information as to approximately how much money Atkinson had received in fees 22 from their work on the Heritage deals (which was one of the questions in the 23 interrogatories). At that time, Atkinsons counsel stated that a written response 24 would be sent by the end of the week or Monday at the latest. 25 On October 22, 2003, plaintiffs counsel sent an email to the lead counsel 26 27 28
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The same sentences appeared in the October discovery report.
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1 for the attorney group asking for the Atkinson supplemental responses. Barry 2 Declaration at 16. On October 29, 2003, plaintiffs counsel sent a fax to the lead 3 attorney again asking for Atkinsons responses, noting they were more than a 4 month overdue. Barry Declaration at 17, Exhibit R. In response, on November 5 3, 2003, despite being the lead counsel for the attorney group, Mr. Grebing sent 6 7 8 9 10 11 12 plaintiffs counsel a letter wherein he stated that he did not represent Atkinson and that plaintiffs counsel should continue to deal solely with counsel for Atkinson. Barry Declaration at Exhibit S. On November 5, 2003, Atkinsons counsel called plaintiffs counsel and said that she had served her supplemental interrogatory responses weeks before. Plaintiffs counsel noted that there was no evidence of service on Verilaw.
13 Atkinsons counsel chalked it up to secretarial error. Despite promises of 14 Atkinsons counsel to immediately re-serve it on Verilaw, no response was sent. 15 Therefore, on November 6, 2003, plaintiffs counsel faxed the lead lawyer for the 16 attorney group and stated that (1) Atkinson had never provided the supplemental 17 responses to any of the discovery requests; (2) Atkinson had never confirmed in 18 writing that they could not locate the documents; and (3) Atkinson had not 19 produced their billing records (despite the fact all productions were supposed to be 20 done by the end of October per the discovery plan). Plaintiffs counsel stated that, 21 given the foregoing, a motion for evidentiary sanctions would be forthcoming 22 soon. Barry Declaration at 19, Exhibit T. On November 12, 2003, six days 23 after the November 5, 2003 telephone conversation with Atkinsons counsel, and 24 hours after Boehms counsel appeared in front of this Court in connection with a 25 motion to compel the production of the SEC deposition transcript, supplemental 26 27 28
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1 interrogatory responses were served.6 Barry Declaration at Exhibit V. Although 2 it is now ten (10) months since Atkinson first responded to the initial document 3 request from plaintiffs, supplemental responses to the two Document Requests and 4 the Requests for Admissions have still not been provided, despite the repeated 5 promises to do so. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs note that the responses are insufficient. Interrogatory No. 5 was not actually answered because the response answered a different interrogatory. Specifically, Interrogatory No. 5 asked for information relating to monies that were paid or transferred by Atkinson to other people (such as Kasirer) because plaintiffs have been informed that monies were transferred from Atkinson to Debra Kasirer. However, Atkinson answered as if the question asked for information relating to monies paid to Atkinson (a response that was identical to Interrogatory No. 1). In addition, it also appears response No. 6 is not accurate because the answer does not list any payments from Kasirer to Atkinson for legal work. However, in the Grand Jury 6(e) motion pending before Judge Percy Anderson, Kasirer is claiming attorney/client privilege for documents created by or sent to Atkinson which relate to work Atkinson did for him. Barry Declaration at 20, Exhibit U. Boehm did provide supplemental responses to the interrogatories which were incomplete, they had to be supplemented again after plaintiffs counsel provided evidence to Boehms counsel that they were not complete/truthful (see fn. 9 below). Also, it was not until this Courts made its recent ruling on Plaintiffs motion to compel production of his SEC deposition transcript that he finally supplemented his response to the RFA and admitted being deposed.
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Boehm initially objected to all discovery requests, but eventually in his supplemental response to the 1st RFP his answer to each of the requests therein was: After a reasonable search for additional documents, Boehm has determined that he is not personally and/or individually in possession of any other documents [other7 than the closing binders] responsive to Propounding Partys requests. Barry Declaration at Exhibit W.
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The documents gathered and/or generated by Atkinson/Boehm in
2 connection with their engagement as underwriters counsel for four bond offerings 3 should be voluminous.8 Instead of producing even a single page, Atkinsons 4 counsel advises simply that the documents cannot be located. Similarly, Boehm 5 simply states that he has no documents in his possession, custody or control 6 7 8 9 10 11 12 relating to additional work he performed for Heritage as a sole practitioner, and in his interrogatory answers he cant identify exactly what he did, nor when he did it, nor exactly how much he received in payments. Such responses conveniently deprive plaintiffs of critical evidence to prove their claims, both against defendant Atkinson, Boehm and against the other defendants with whom they conspired to defraud plaintiffs. No explanation has been offered for what happened to the
13 documents. Plaintiffs case has been irreparably harmed by Atkinson/Boehms 14 actions in either destroying or losing these files and these defendants must be 15 punished for their misconduct. Defendants Statement of Facts 16 B. 17 18 1. Atkinson, Andelson, Loya, Ruud & Romo Atkinson, Andelson, Loya, Ruud & Romo (AALR&R) served as counsel
19 for the underwriter, Miller & Schroeder, with respect to the last four Heritage 20 Bond offerings (Ft. Worth, East Houston, Seminole and Brownsville). Joel 21 Boehm was the attorney at AALR&R working on the Heritage Bonds, specifically 22 including participation in the drafting of the Official Statements relative to each of 23 the above-mentioned four bond offerings. The offerings were effective October 5, 24 1998, November 3, 1998, December 21, 1998 and March 11, 1999, respectively. 25 26 27 To illustrate, Sabo & Green, the first counsel to the underwriters that 28 employed Boehm, had 32 boxes of documents.
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AALR&R was first named as a defendant in this action in the Allman
2 complaint, which was filed on August 20, 2002. Since becoming a party to this 3 lawsuit, AALR&R has at all times complied with its discovery obligations. 4 Plaintiffs, however, accuse AALR&R and its counsel of improprieties with respect 5 to discovery in this case. As demonstrated below, plaintiffs factual statement is 6 7 8 9 10 11 12 one-sided, misleading and inaccurate. Nothing about the conduct of AALR&R and/or its counsel has been inappropriate or sanctionable. Plaintiffs sanctions request should be summarily rejected. a. Information Regarding AALR&Rs Documents Plaintiffs requests for production of documents, in typical fashion, ask AALR&R to identify and produce any documents responsive to plaintiffs various
13 requests. AALR&R, as explained more fully below, responded that if responsive 14 documents exist, it would produce same, other than attorney-client privileged
9 15 material. Plaintiffs counsel was thereafter informed orally several times and in 16 writing on two occasions that AALR&R could locate no responsive documents
17 and as such had none to produce. Nothing in plaintiffs requests for production 18 asks AALR&R to state why the documents cannot be located, to explain its 19 actions or to state anything other than what AALR&R has already stated on 20 several occasions AALR&R has no documents from its work on the Heritage 21 Bonds, but if some are located they will promptly be produced. AALR&R and its 22 counsel should not be sanctioned for not providing a detailed explanation when no 23 request for one has ever been made and when Mr. Barry and his clients are not 24 entitled to one. Nevertheless, in the spirit of cooperation and to address this issue 25 26 27 AALR&Rs response to plaintiffs Request for Production (Set One) 28 is attached to the Declaration of Susan L. Oliver as Exhibit 3.
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1 head-on, AALR&R offers the following information regarding its documents. 2 On October 1, 1998, Joel Boehm was hired by AALR&R. (Declaration of 3 Joel Boehm, 3). At the time he was hired, Mr. Boehm had already been involved 4 in drafting the Official Statements for Bond Offerings 1-8 of the Heritage Bonds. 5 (Id. at 2). After becoming employed with AALR&R, Mr. Boehm drafted 6 portions of the Official Statements for Bond Offerings 9-12, and was the only 7 attorney at AALR&R to be so engaged. (Id. at 3). During this time frame, Fall 8 1998 through Spring 1999, AALR&R subleased an office for Mr. Boehm in the 9 same building as the firms client, Miller & Schroeder, in Solana Beach, 10 California. (Id. at 4). The office had its own lock and was separate from Miller 11 & Schroeders offices. (Id. ) The location of Mr. Boehms office was for 12 13 convenience purposes while the Official Statements for Bonds 9-12 were being 14 prepared. (Id.) After the Official Statements were drafted and after the last Heritage Bond 15 16 was issued, Mr. Boehm relocated to AALR&Rs San Diego office, located in the 17 Rancho Bernardo area of San Diego. (See Declaration of Debra Gourluck, 4 and 18 Declaration of Joel Boehm, 5). AALR&Rs San Diego office is small and 19 accommodations had to be made to make room for Mr. Boehm, including 20 shuffling of administrative personnel from offices to secretarial stations. 21 (Declaration of Debra Gourluck, 4-5). In addition to having space concerns with 22 respect to staff, AALR&R had space concerns with respect to file materials. (Id.) 23 In other words, there was inadequate space at AALR&R for the Heritage Bond 24 working files. Further, there was no need for the working files any longer as all of 25 the deals were closed. As such, Mr. Boehm took with him only the Closing 26 Binders, which include copies of the Official Statements. (Declaration of Joel 27 Boehm, 7). At this time, no claims had been made and no lawsuits had been 28
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1 filed with respect to the Heritage Bonds. (Id.) What Miller & Schroeder did with 2 its files is unknown. Counsel for AALR&R is informed that the Bankruptcy 3 Trustee for Miller & Schroeder does not have the documents. 4 Plaintiffs and their lawyer may be unhappy that the AALR&R documents 5 cannot be located. AALR&R and its counsel also wish that they had the 6 documents. However, under the above-recited facts, there is simply nothing that 7 in any way approaches destruction of evidence or that in any way constitutes 8 improper conduct. The files were simply left in the safe keeping of the clients, to 9 whom the documents belonged, after work on the Heritage Bonds was finished but 10 before Boehm or AALR&R was aware of any problems with the Heritage Bonds 11 or the individual investors purported loss of money. Plaintiffs sanction request is 12 13 meritless and should be denied. 14 b. 15 AALR&Rs Responses To Plaintiffs Request For Production Of Documents AALR&R, along with all other defendants in this action, was served with
16 plaintiffs first request for production of documents on December 27, 2002. 17 AALR&R timely responded to plaintiffs request for production, setting forth 18 applicable objections, including objections to the scope and format of the various 19 requests as well as objections based upon the attorney-client privilege, and the 20 prematurity of the requests under the PSLRA (as there was no operative pleading 21 and pending motion to dismiss at the time). (See, Exhibit 3.) Nevertheless, 22 AALR&R responded that it would produce all non-privileged responsive 23 documents in its possession, custody or control to the extent that any such 24 documents existed. 25 Both prior to and following the service of AALR&Rs responses to 26 plaintiffs request for production, counsel for AALR&R had numerous 27 conversations with representatives of AALR&R regarding the existence of 28
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1 responsive documents. In the spring of 2003, counsel for AALR&R was 2 informed that the firm, despite a diligent search, could locate no documents 3 relative to its involvement in the Heritage Bond matters (as explained in the 4 foregoing section). Plaintiffs counsel, Brian Barry, was thereafter informed of the 5 lack of documentation by Dan White of White, Noon & Oliver, counsel for 6 7 8 9 10 11 12 AALR&R. (See plaintiffs Statement of Facts in Joint Stipulation, p. 4.) 10 Mr. Barry has also repeatedly been informed by Susan Oliver of White, Noon & Oliver that if any of AALR&Rs documents are located that he will immediately be advised and that AALR&R will amend its discovery responses to reflect the existence of documents responsive to a particular request. (See Exhibit 1, Oliver letter to Barry of August 6, 2003). In light of the foregoing, and in light of the fact
13 that no documents have been located between Spring 2003 and the present, 14 AALR&Rs responses to plaintiffs request for production (set one) remain valid 15 and accurate that AALR&R will produce the documents if they can locate same. 16 Nothing about the conduct of AALR&R or its counsel has been inappropriate in 17 any way in addressing this document issue. 18 c. 19 AALR&Rs Responses To Other Discovery Served By Plaintiffs. AALR&R has also appropriately and timely responded to plaintiffs other
20 discovery requests. Specifically, on June 12, 2003, plaintiff served upon 21 AALR&R, and the other defendants in this action, special interrogatories, requests 22 23 24 25 Although plaintiffs counsel, Mr. Barry, admits that he was informed 26 of the lack of documentation in May 2003, he later states in his statement of facts that he learned for the first time on August 6, 2003, that AALR&R had no 27 documents relative to its work on the Heritage Bonds. This internal inconsistency 28 is telling.
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for admissions and request for production of documents (set two). On July 11,
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1 2003, AALR&R timely responded to plaintiffs discovery requests, serving its 2 responses via the Verilaw system in place in this litigation. (See Exhibits 4-6 3 respectively, attached to the Declaration of Susan L. Oliver.) 4 Following receipt of AALR&Rs responses to this discovery, neither Mr. 5 Barry nor anyone at his firm expressed any dissatisfaction whatsoever with respect 6 to anything contained in AALR&Rs responses. Specifically, neither Mr. Barry 7 nor anyone from his office ever sent Mr. White or Ms. Oliver a letter or placed a 8 phone call to either of them regarding perceived inadequacies in AALR&Rs 9 discovery responses. Instead, several weeks after receipt of AALR&Rs discovery 10 responses, Mr. Barry included in plaintiffs portion of the initial draft discovery 11 status report, which was subsequently sent to Judge Chapman, a short statement 12 13 regarding AALR&Rs alleged lack of compliance with its discovery obligations. 14 This was the first time that counsel for AALR&R was aware that plaintiffs were 15 dissatisfied with its responses to discovery. 16 Upon receipt of the discovery status report, counsel for AALR&R sent a 17 letter to Mr. Barry, dated August 6, 2003, despite still receiving no direct 18 communication from Mr. Barrys office. In this August 6 letter, counsel for 19 AALR&R, Ms. Oliver, informed Mr. Barry that AALR&R had at all times 20 complied with its discovery obligations and that while the objections asserted by 21 AALR&R in response to plaintiffs discovery were appropriate and warranted, 22 she would re-review AALR&Rs responses to plaintiffs discovery and provide 23 supplemental responses within 30 to 45 days. (See Exhibit 1, Oliver letter to 24 Barry of August 6, 2003.) 25 Counsel for AALR&R then re-reviewed AALR&Rs discovery responses 26 and determined that the responses to request for admissions and request for 27 production of documents were appropriate and that no supplemental responses 28
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1 were needed. Counsel then promptly advised Mr. Barry, via a letter to Barry dated 2 August 11, 2003, that AALR&R would not be supplementing its responses to 3 these discovery requests. (Exhibit 2, Oliver letter to Barry of August 11, 2003). 4 However, counsel for AALR&R felt that a supplemental response to plaintiffs 5 special interrogatories would be appropriate and informed Barry that supplemental 6 7 8 9 10 11 12 13 responses the interrogatories would be provided within 30 to 45 days.11 Interestingly, plaintiffs counsel has never responded in any way to Ms. Olivers letter of August 11, 2003; plaintiffs counsel has never indicated that he disagreed with the course of action set forth in the letter of August 11, 2003; and notably plaintiffs counsel fails to even mention the existence of this letter in its current request for sanctions against AALR&R. In keeping with the representations set forth in its letter of August 11, 2003,
14 counsel for AALR&R further conferred with her client and began preparation of a 15 supplemental response to plaintiffs special interrogatories, to be served in 16 September 2003. However, counsel for AALR&R became ill with staff infection 17 18 At the time Ms. Oliver sent this letter she was referring to plaintiffs 19 request for production (set one). Since that time, she has conferred with Mr. Barry 20 by telephone and has agreed to produce information, to the extent it exists, to request for production (set two), which primarily involves payment information 21 relative to work performed by AALR&R on the Heritage Bonds. When Ms. 22 Oliver spoke with Mr. Barry in late August or early September, her reminded her 23 that a second request for production had been served. Ms. Oliver stated that she had forwarded that request to her client but that her office had not specifically 24 referenced that request (set two) in its most recent (at that time) communications 25 with AALR&R. That is the subject of the statements in the September Discovery 26 Status Report. Mr. Barrys attempt to twist those statements to make it sound that counsel for AALR&R had made no attempt to obtain payment information or that 27 it had delayed in obtaining the information is disingenuous and should be 28 unavailing.
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1 and was placed on bed rest for a number of days. Because counsel for AALR&R 2 wanted to keep plaintiffs counsel in the loop as to the timing of service of 3 supplemental responses, Ms. Olivers secretary called Jill Betts, an attorney 4 employed at the law offices of Brian Barry, who also works on this case. Ms. Betts 5 was informed of Ms. Olivers illness and also that supplemental responses would 6 7 8 9 10 11 12 be provided as soon as Ms. Oliver returned to the office. When Ms. Oliver returned to work, she promptly called Ms. Betts. At that time, Ms. Oliver orally provided Ms. Betts with information responsive to plaintiffs special interrogatories, so that the information would be immediately available to the plaintiffs. Ms. Oliver also informed Ms. Betts that the information provided over the telephone would also be set forth in the form of a supplemental response to the
13 special interrogatories and served upon plaintiffs (and all other parties via the 14 Verilaw system) by the end of that week (October 10, 2003) or Monday at the 15 latest. 16 Monday, October 13, 2003 was a holiday (Columbus Day) and Ms. Olivers 17 law offices were closed. Therefore on Tuesday, October 14, 2003, Ms. Oliver 18 finalized the supplemental discovery responses and asked her secretary to serve 19 those through the Verilaw system. Ms. Oliver was informed that the supplemental 20 discovery responses had been served through Verilaw. 21 22 23 24 25 26 27 28 On November 5, 2003, Brian Barry sent counsel for all of the Attorney Defendants a settlement demand letter. Ms. Oliver received this letter late that afternoon, just as she was preparing to leave the office for a trip out of the country. Ms. Oliver telephoned Mr. Barry immediately and informed him that she was leaving the office very shortly and would be out of the country for the next five days. Ms. Oliver also informed Mr. Barry that counsel for Joel Boehm, Charles Grebing, was in Hawaii attending an ABOTA meeting and that the other attorney
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1 in Mr. Grebings office working on this case, Kimberly Howatt, was out of the 2 country. Ms. Oliver therefore informed Mr. Barry that it would be a period of time 3 before the Attorney Defendants could evaluate and respond in any fashion to his 4 demand letter. This call was placed by Ms. Oliver as a courtesy to Mr. Barry. 5 During this telephone call, which was initiated by Ms. Oliver, Mr. Barry asked 6 7 8 9 10 11 12 why he had not received supplemental interrogatory responses from AALR&R. Ms. Oliver informed Mr. Barry that those responses had been served weeks ago. Mr. Barry stated that he had not received them and after checking his computer system, he indicated that the Verilaw website showed no record of their service. Counsel for AALR&R then indicated that she would doublecheck with respect to the service of the supplemental interrogatories and acknowledged that it was
13 possible a mistake may have occurred since a series of temporary secretaries had 14 worked for her in October 2003 (while a permanent secretary was being 15 interviewed and hired). Counsel also informed Mr. Barry that if there had been a 16 problem with service that the issue would be rectified promptly upon her return to 17 the office on Tuesday, November 11, 2003. 18 November 5, 2003 was the first time that Ms. Oliver or any person in her 19 office was aware that there was any problem with the service of the supplemental 20 responses to the special interrogatories. In other words, plaintiffs counsel made 21 no effort whatsoever to raise this issue with counsel for AALR&R and then only 22 raised it when AALR&Rs counsel initiated a phone call on another issue. 23 Thereafter, on November 6, 2003, despite being aware that AALR&Rs 24 counsel was out of the country, despite being told that if there was a problem with 25 service it would be rectified upon counsels return on November 11, 2003, and 26 despite being informed that the lawyers representing Joel Boehm were either out 27 of the country or in Hawaii, Mr. Barry apparently sent a letter to Charles Grebing, 28
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1 counsel for Boehm, rather than to counsel for AALR&R, stating that (1) 2 [AALR&R] had not provided supplemental responses to discovery requests, (2) 3 [AALR&R] had never confirmed in writing that it could not locate the documents; 4 (3) [AALR&R] had not produced their billing records . . . and that . . . a motion for 5 evidentiary sanctions would be forthcoming soon. (Plaintiffs Statement of Facts 6 7 8 9 10 11 12 13 in Joint Stipulation pg. 6). AALR&R was not copied on the letter.12 Upon her return to the office, Ms. Oliver served AALR&Rs supplemental responses to the special interrogatories, serving same by Verilaw on November 12, 2003. (See Exhibit 7). (This time Ms. Oliver personally checked to make sure the responses had been properly forwarded to Verilaw and personally obtained the written verification from Verilaw that the responses were received and served.) Nothing about the conduct of AALR&R or its counsel has been
14 inappropriate, designed to frustrate the discovery process, or anything other than 15 cooperative. Counsel for AALR&R acknowledges and accepts responsibility for 16 the error in the service of the supplemental responses to special interrogatories in 17 18 19 20 21 22 23 24 25 26 27 28 In addition to the fact that Mr. Barry has allegedly been communicating with other counsel regarding purported discovery disputes with AALR&R, rather than with AALR&Rs counsel directly, AALR&R also finds it curious that Mr. Barry would tell Mr. Grebing (counsel for Joel Boehm) that AALR&R had never confirmed in writing its inability to locate documents relative to its work on the Heritage Bonds. By November 6, 2003, the date of his letter to Mr. Grebing, Mr. Barry had been told in writing on at least two occasions that AALR&R had no documents regarding its work on the Heritage Bonds. Specifically, that information is contained in Ms. Olivers letters to Mr. Barry of August 6, 2003 and August 11, 2003. (Mr. Barry was also advised of this several times over the telephone by counsel for AALR&R.) Notably, this statement in Mr. Barrys letter to Mr. Grebing also contradicts Mr. Barrys own statements in Plaintiffs portion of this Joint Stipulation. On page 4 of Plaintiffs Statement of Facts, Mr. Barry acknowledges that he was informed in writing of the lack of documents upon receipt of Ms. Olivers letter of August 6, 2003.
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1 October 2003. This error was, however, unintentional and was rectified as soon as 2 it was brought to counsels attention. This error, while unfortunate, certainly does 3 not equate to sanctionable conduct. Morever, had Mr. Barry communicated 4 directly with counsel for AALR&R, this problem could have been easily corrected 5 much sooner. 6 7 8 9 10 11 12 Additionally, neither Mr. Barry nor anyone from his office, has to date ever communicated directly to AALR&R that plaintiffs are dissatisfied with AALR&Rs responses to requests for admissions. In other words, there has been no direct communication on this topic, much less any formal meet and confer, as required by the Federal Rules of Civil Procedure and by Judge Chapmans Discovery Order. AALR&R cannot be required to supplement its responses to
13 requests for admissions (which responses are appropriate and reasonable in the 14 first instance) unless AALR&R has been informed that there is a perceived 15 inadequacy in the responses and is given an opportunity to meet and confer or 16 amend its responses if appropriate. 17 18 19 20 In sum, AALR&R and its counsel have engaged in no wrong-doing of any sort and sanctions are wholly unwarranted. 2. Joel T. Boehm Mr. Boehm has completely and timely complied with each and every of
21 Plaintiffs discovery requests to the full extent of the Federal Rules, Local Rules, 22 and the Courts Orders in this matter. Plaintiffs cannot show otherwise, and any 23 contention that Mr. Boehm has not complied is simply untrue. That stated, and 24 undisputed, it is wholly unclear what conduct of Mr. Boehm Plaintiffs so 25 vehemently seek to punish. The simple answer is that there is no such conduct, 26 and thus Plaintiffs Motion is not only meritless, but frivolous, as well. 27 By their Motion, Plaintiffs seek punishment of Mr. Boehm for his failure to 28
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1 answer questions that Plaintiffs never asked. Plaintiffs further seek to sanction 2 Mr. Bohem for the purported destruction of documents that were not in his 3 possession. Plaintiffs request that this Court punish Mr. Boehm despite the fact 4 that he has not violated and discovery order or rule. Plaintiffs Motion for 5 Sanctions as against Mr. Boehm is entirely unjustified, and an abuse of both the 6 7 8 9 10 11 12 parties prior efforts towards cooperation, and this Courts confidence in Plaintiffs counsel. a. Mr. Boehm has responded to each of Plaintiffs discovery requests in a timely and complete manner. On December 27, 2002, Plaintiffs propounded their First Request for Production of Documents. Mr. Boehm provided his written responses thereto
13 on January 29, 2003. (Exhibit A to Declaration of Kimberly D. Howatt.) By these responses, Mr. Boehm stated objections to both the form and 14 15 substance of Plaintiffs discovery requests, yet subject thereto and in the spirit of 16 good faith, advised Plaintiffs that discovery and investigation were in progress. 17 Mr. Boehm further advised, through his written responses, that he would produce 18 all non-privileged responsive documents in his possession, custody, or control, to 19 the extent any such documents exist. [emphasis added] In or about April 2003, as 20 discovery progressed, Mr. Boehm voluntarily and without formal action, provided 21 22 23 24 25 26 27 28 supplemental responses to Plaintiffs first set of document requests. (Exhibit B to Declaration of Kimberly D. Howatt.) By these supplemental responses (of which Plaintiffs only cite a portion), Mr. Bohem maintained the same legal objections, yet, again, subject thereto and in the spirit of good faith, advised Plaintiffs that, Mr. Boehm had conducted a reasonable search and the only nonprivileged documents of which he is in possession are the closing transcripts relative to the Heritage bonds.
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1
Two months later, on June 12, 2003, Plaintiffs propounded their Second
2 Request for Production of Documents. Mr. Boehm provided his written 3 responses thereto on July 10, 2003. (Exhibit C to Declaration of Kimberly D. 4 Howatt.) 5 By these responses, Mr. Boehm again stated legal objections to both the 6 7 8 9 10 11 12 form and substance of Plaintiffs discovery requests, but nonetheless responded subject to the objections and in the spirit of good faith. Mr. Boehm again advised Plaintiffs that Mr. Boehm had conducted a reasonable search, and that the only non-privileged documents of which he is in possession are the closing transcripts relative to the Heritage bonds. Mr. Boehms counsel informally advised Plaintiffs counsel that documents generated during his employment with Sabo &
13 Green were in the possession of that firms counsel, and would be produced. Mr. 14 Boehms counsel further advised that Mr. Boehm was similarly not in possession 15 of the documents generated for Miller & Schroeder during his employment with 16 AALR&R. 17 In accordance with these representations, Mr. Boehms former employer, 18 Defendant Sabo & Green, produced the documents that had been generated by Mr. 19 Boehm in the course of his employment therewith. Plaintiffs never expressed any 20 shock or concern that such documents were in the possession of parties other than 21 Mr. Boehm. As a matter of conventional reason, Mr. Boehm as an employee of 22 the law firm retained by Miller & Schroeder, simply would not have possession or 23 control of such documents; he is neither the legal owner of the documents (i.e., the 24 client), nor a partner in the firm that was retained by the client.13 Again, in 25 26 In fact, Plaintiffs cite, as an example of proper production, to a 27 memo to file purportedly prepared by Mr. Boehm that logically came from the 28 documents produced by Sabo & Green.
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1 accordance with those representations, Mr. Boehm formally responded to 2 discovery by indicating that the Miller & Schroeder files were no longer in his 3 possession. Mr. Boehms counsel further advised Plaintiffs counsel that the 4 Miller & Schroeder files were also not within the possession of AALR&R, if they 5 even existed. 6 7 8 9 10 11 12 As to Plaintiffs request for Mr. Boehms SEC deposition transcript, Mr. Boehm made a good faith objection to the production, and the parties were unable to agree on the interpretation of relevant legal authorities. Mr. Boehm informed Plaintiffs, and this Court, that he had been expressly advised by the SEC that the deposition was part of a non-public hearing within the meaning of 17 C.F.R. 203.6, and was thus confidential. Even so, and as Mr. Boehm advised Plaintiffs
13 counsel, he conveyed Plaintiffs request for his deposition to the SEC attorney, 14 and was awaiting further instruction, in accordance with cited decisional law. 15 Plaintiffs were dissatisfied with this response, met and conferred with counsel for 16 Mr. Boehm, and the parties subsequently participated in the Joint Stipulation 17 process pursuant to Local Rule 37.1, et seq. 18 On November 12, 2003, this Court ordered that Mr. Boehm also submit a 19 specific deposition request form to the same SEC attorney by November 19, 2003. 20 Mr. Boehm complied with this Order on November 18, 2003. (See, 21 Declaration of Kimberly D. Howatt.) 22 On June 12, 2003, Lead Plaintiff Ray Stits propounded his Special 23 Interrogatories and Requests for Admissions. Mr. Boehm provided his written 24 responses to each of these, respectively, on July 10, 2003. (See, Declaration of 25 Kimberly D. Howatt.) 26 With regard to the Requests for Admissions, requesting information 27 regarding the SEC proceedings Mr. Boehm understood to be confidential, Mr. 28
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1 Boehm stated the legal basis for his stated inability to answer. Following this 2 courts ruling on the production of Mr. Boehms SEC deposition transcript, Mr. 3 Boehm voluntarily provided supplemental responses to the Requests for 4 Admissions, with substantive answers thereto. (See, Declaration of Kimberly D. 5 Howatt.) 6 7 8 9 10 11 12 b. Plaintiffs have never objected to Mr. Boehms responses to their requests for production of documents. Importantly, Plaintiffs have never formally challenged Mr. Boehms legal objections to the form and substance of Plaintiffs special interrogatories and requests for admissions. Mr. Boehm has continuously and consistently maintained valid objections to Plaintiffs discovery requests, as authorized by the F.R.C.P.,
13 federal and constitutional law, and/or the Discovery Order in this matter. In fact, 14 instead of addressing these objections in a proper procedural and professional 15 manner, Plaintiffs counsel has taken a more antagonistic approach and has 16 accused Mr. Boehm of intentional misrepresentations, based solely upon his own 17 one-sided interpretation of various documents. Whereas most counsel would 18 address questions about a partys discovery responses and corresponding 19 documentary evidence at the time of that partys deposition, this method of 20 refreshing a partys recollection is, indeed, unconventional. Nonetheless, Mr. 21 Boehm has responded to such approach, in the spirit of good faith, by informally 22 agreeing to provide (and has provided) supplemental responses to certain of the 23 specially interrogatories.14 24 25 Mr. Boehm is not the only party to have expressed difficulty recalling events that transpired at least 4-6+ years ago. Three of the Outside Director 27 defendants each specifically stated, in their written discovery responses, that they 28 too were unable to recall all events about which Plaintiffs inquired via written 26
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1
Likewise, aside from the SEC deposition transcript, Plaintiffs have never
2 sought any further response from Mr. Boehm to their requests for production of 3 documents, nor challenged Mr. Boehms substantive objections, nor requested 4 formal responses regarding the location of his employers or Miller & Schroeders 5 documents. In fact, on October 27, 2003, Plaintiffs proceeded to propound a third 6 7 8 9 10 11 12 13 set of requests for production of documents which seek yet another category of documents (electronic data), and make no mention of the documents of Mr. Boehms employer or Miller & Schroeder. c. Mr. Boehm does not have possession, custody, or control of the documents generated for Miller & Schroeder, nor the ability or reason to preserve same for the Firm. In actuality, Mr. Boehm does not have possession, custody, or control over
14 any of the file documents generated for Miller & Schroeder while he was at 15 AALR&R. At the time Mr. Boehm drafted the last four Official Statements for 16 Miller & Schroeder, through his employment with AALR&R, AALR&R had 17 leased an office for him in the same building as the offices of the client in Solana 18 Beach, California. (See, Declaration of Joel T. Boehm, 4.) By the end of March 19 1999, the Official Statements for Miller & Schroeder had all been drafted and the 20 corresponding Heritage bond offerings issued. In June of 1999, Mr. Boehm 21 22 23 24 25 26 27 28 discovery due to the lapse of time.
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relocated from AALR&Rs Solana Beach office to AALR&Rs San Diego office. (See, Declaration of Joel T. Boehm, 5.) At this time, due to space constraints, Mr. Boehm took with him most all of the Closing Binders, which included copies of the Official Statements. (See, Declaration of Joel T. Boehm, 6-7.) Thus, Mr. Boehm believes that those documents, if they still exist, remain in
24
1 the possession and control of Miller & Schroeder the client and rightful owners 2 of the files. From the time he left those files in the Spring of 1999, it was 3 approximately 2 years before Mr. Boehm was ever named in a Heritage 4 bond proceeding. Mr. Boehm does not know what Miller & Schroeder did with 5 the documents left in their possession. Mr. Boehm has no information as to 6 7 8 9 10 11 12 whether Plaintiffs have ever pursued this issue with the Miller & Schroeder bankruptcy trustee. It is unknown if any of these files are in the Miller & Schroeder documents now held by the trustee. Plaintiffs allegations that Mr. Boehm should have known of the impending litigation at the time he last saw the Miller & Schroeder documents is entirely meritless and factually unreasonable. As Plaintiffs, themselves, allege, the last
13 Heritage bond offering occurred in March of 1999 almost 3 years before the 15 14 Herrmann state court action was filed and served. Thus, at the time of the final 15 Heritage bond, Mr. Boehm had no notice of impending litigation, nor any reason 16 to predict the aggressive litigation that was forthcoming. It was after the 17 completion of this last bond offering that AALR&R and Mr. Boehm left the 18 documents in possession of the client, Miller & Schroeder. At this time, Mr. 19 Boehm saw no continued need for my possession of the files because he was not 20 aware of any claims then being made against Miller & Schroeder with respect to 21 the Heritage Bonds. (See, Declaration of Joel T. Boehm, 7.) 22 In fact, the Platt lawsuit that Plaintiffs reference, stems from a 1997 23 Complaint for unlawful termination not a lawsuit for fraud. No identifiable 24 allegations of fraud arose until several years into that lawsuit, as documents 25 26 27 Notably, the Herrmann action never proceeded past the pleading 28 stage, and was ultimately voluntarily dismissed by Plaintiff Lewis Herrmann.
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1 exchangedi n the course of this litigation now reveal. Even so, Mr. Boehm was 2 not intimately familiar with the Platt lawsuit as Plaintiffs baselessly allege, and 3 thus would not have been aware of such allegations either way. The same is true 4 with regard to the Cornerstone lawsuit to which Plaintiffs cite. In fact, nothing 5 more that Plaintiffs own 4AC allegations are offered in support of these 6 7 8 9 10 11 12 conclusive expressions of Plaintiffs counsels opinion of what he thinks Mr. Boehm knew. These mere allegations are offered, very simply, because there is no evidence to demonstrate that Mr. Boehm had such knowledge, and in fact, he did not. In fact, the allegations that Plaintiffs cite in support of their allegation that Mr. Boehm was intimately familiar with the Platt litigation, pertain to a 1999
13 document which was written after the last bond had been issued. This does not 14 confirm that Mr. Boehm had any knowledge of any of the allegations of that 15 complaint. There is no evidence that Mr. Boehm that Mr. Boehm had any 16 familiarity with the Platt litigation, much less an intimate one. 17 Plaintiffs are also devoid of any evidence whatsoever to support their 18 frivolous and ill-conceived allegation that Mr. Boehm had any role in the loss or 19 destruction of the Miller & Schroeder documents. Very simply, Plaintiffs 20 statement that Bohems [discovery] tactics have been similarly offensive is 21 entirely baseless, and nothing more than a vexatious contention by Plaintiffs 22 counsel. Mr. Boehm, too, is dismayed by the absence of these documents, as they 23 would likely show the work he performed in drafting the Official Statements at 24 issue, and thus support his solid defense against Plaintiffs allegations. 25 d. Plaintiffs conduct in filing their meritless and frivolous motion should be 26 stopped and sanctioned. 27 As demonstrated above, Mr. Boehm has timely complied with Plaintiffs 28
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1 discovery requests, as well as this Courts Orders, at all times. As such, 2 Plaintiffs current motion is manifestly baseless and patently frivolous. Plaintiffs 3 motion is a complete abuse of the cooperation that has previously been extended 4 to him, a misuse (and mis-citation) of the laws regarding discovery, and, in itself, 5 warrants sanctions in a monetary amount reflecting the time spent by counsel for 6 7 8 9 10 11 12 III. A. ARGUMENT Plaintiffs Argument Attorneys such as Atkinson/Boehm owe special duties to their clients, including duties to retain and protect documents. See, e.g., Rules of Professional Mr. Boehm in responding to this sham.
13 Conduct, Rule 4-100 (Preserving Identity of Funds and Property of a Client); 14 Ramirez v. Fuselier, 183 Bankr. 583 (9th Cir. BAP 1995) (interpreting Rule 4-100 15 as requiring an attorney to keep and maintain files for five years after the 16 conclusion of a case). See also, Cal. Bus. & Prof. Code 6068(e) (requiring an 17 attorney, at every peril to himself, to protect the confidential information of his 18 client). It can not be disputed that Atkinson was underwriters counsel for the 19 final four (4) Heritage bond offerings. Neither can it be disputed that Boehm was 20 employed by Atkinson at the time of the last four (4) offerings and that he was 21 Atkinsons primary attorney assigned to handle Miller & Schroeder deals. In 22 addition, according to Boehm, he performed additional work related to the 23 Heritage bonds in 1998 and 1999 as a sole practitioner.16 See Barry Declaration at 24 25 Boehms first supplemental response to plaintiffs Interrogatories initially claimed that Boehm performed some unidentified work relating to the 27 Heritage debacle for both Miller & Schroeder and Heritage during his transition 28 from Sabo & Green to Atkinson, Andelson, Loya, Ruud, & Romo in 1998" and 26
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1 Exhibits X-Z. 2 Soon after Atkinson/Boehm completed their work on Miller & Schroeders 3 last four Heritage bond offerings and Boehm completed his side work on Heritage, 4 it became evident that litigation would likely ensue as Miller & Schroeder (its 5 client) began an investigation into the Heritage bond funds, facilities and 6 offerings. FAC, 360-64.17 Shortly thereafter, a slew of legal actions began to be 7 filed, such as receiverships, foreclosures and bankruptcies. On February 16, 2001, 8 9 10 again in 1999 after the final bond offering. See Barry Declaration at Exhibit X. Plaintiffs counsel immediately pointed out that if Boehm did work on his own, 11 during the time he was transitioning between firms, why were his fees and costs 12 being completely covered by the Sabo and Atkinson insurance policies? Boehm 13 also denied ever giving any monies to Kasirer. Plaintiffs counsel had to inform Boehms counsel that there was proof Boehm gave Kasirer at least $18,000, and 14 Boehms counsel requested that the documents be faxed to him. Plaintiffs counsel 15 did just that. Shortly thereafter, Boehm served his second supplemental response 16 to the Interrogatories which eliminates the language quoted above and simply says that work was performed in 1998 and 1999 for which he was paid directly and that 17 he paid Kasirer $18,000 but did not remember why. See Barry Declaration at 18 Exhibit Y. Recently, Boehms counsel sent plaintiffs counsel a letter wherein he now claims that Boehms dates of employment from Sabo & Green to the 19 Atkinson firm were but consecutive he continued to do some work, however, in 20 order to assist in the continuing effort to gather information concerning the bond 21 documents for which he was entitled to be paid. See Barry Declaration at Exhibit Z. While the story is changing, and memories are suddenly being somewhat 22 refreshed when presented with evidence, the one thing that is certain is that 23 Boehm performed work for Heritage and Miler & Schroeder as a sole practitioner 24 in addition to the work he performed as an employee of Atkinson and perhaps Sabo too. Therefore, Boehm should have his own file of documents that relate to 25 this work. Yet he claims he does not have anything other than the closing 26 binders and seems to have an amazing lack of memory of important things. 27 28 In the case of the last offering, the Brownsville offering, the offering was barely effective before Miller & Schroeder pulled the plug on future offerings.
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1 U.S. Trust filed an action against certain Heritage executives/Board members in 2 State Court in Texas. In June 2001, the first action that is part of this MDL 3 proceeding, the Betker action, was filed. In November 2001, the Herrmann class 4 action was filed in San Diego State Court which named the Firm and Boehm as 5 defendants. Under a variety of analyses, Atkinson/Boehm had a duty to retain all 6 7 8 9 10 11 12 documents. Notwithstanding this duty, Atkinson now claims that it either lost or destroyed the documents. Boehm claims he has no documents in his possession custody or control other than the closing binders. It is highly suspicious that the very documents that would condemn or exonerate Atkinson and/or Boehm for their role in bringing the bonds to market, to the detriment of plaintiffs, should disappear. Thus far, Atkinson/Boehm have not
13 even demonstrated a willingness to clarify what happened to the documents. For 14 their role in losing or destroying this critical evidence, sanctions should issue. 15 This Court has the power to issue such sanctions as part of its inherent power to 18 16 manage its own affairs. Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991). 17 18 19 20 21 22 23 24 25 26 27 28 State law would appear to apply to this motion because the claims alleged against Atkinson/Boehm are state law-based claims. Federal law, however, also supports sanctions for the conduct described herein and applicable citations are footnoted below. A finding of bad faith is not required herein for the Court to impose sanctions for destroying evidence and sanctions may be imposed against a party that merely had notice that the destroyed evidence was potentially relevant to litigation. Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993). Accord, Akiona v. U.S., 938 F.2d 158, 161 (9th Cir. 1991), cert. denied, 503 U.S. 962 (1992).
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1.
Sanctions Pursuant to CCP 2023 Are Appropriate To Punish Atkinsons Conduct Herein
For the defendants misuse of the discovery process, sanctions pursuant to California Code of Civil Procedure 2023 are appropriate. Cedars-Sinai Medical
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1 Center v. Superior Court, 18 Cal. 4th 1, 12 (1998) ([d]estroying evidence in 2 response to a discovery request after litigation has commenced would surely be a 3 misuse of discovery within the meaning of section 2023, as would such 4 destruction in anticipation of a discovery request). See also, R.S. Creative, Inc. v. 5 Creative Cotton, Ltd., 89 Cal. App. 4th 486 (1999) (a traditional remedy for 6 7 8 9 10 11 12 spoliation of evidence is the imposition of discovery sanctions). Here, Atkinson/Boehm claim that they have lost or destroyed the discovery sought without explanation as to the circumstances leading to such loss or destruction. As a threshold matter, plaintiffs urge this Court to order the defendants to provide a sworn declaration describing how and under what circumstances all documents responsive to plaintiffs discovery requests were lost
13 or destroyed. Should it be determined that the documents were destroyed after 14 Atkinson/Boehm received constructive or actual notice of this case, plaintiffs urge 15 that 2023 sanctions issue to the maximum allowable degree, as expressly 16 permitted by 2023: 17 18 19 (b) To the extent authorized by the section governing any particular discovery method or any other provision of this article, the court, after notice to any affected party, person, or attorney, and after opportunity for hearing, may impose the following sanctions against anyone engaging in conduct that is a misuse of the discovery process.
20 Cal. Code Civ. Proc. 2023(b). Even for negligent destruction, sanctions would 21 be appropriate. Glover, 6 F.3d at 1329. 22 23 24 25 26 27 28 a) Monetary Sanctions
Monetary sanctions are not only allowed under 2023, they are mandated: (1) The court may impose a monetary sanction ordering that one engaging in the misuse of the discovery process, or any attorney advising that conduct, or both pay the reasonable expenses, including attorneys fees, incurred by anyone as a result of that conduct. . . . If a monetary sanction is authorized by any provision of this article, the court shall impose that sanction unless it finds that the one subject to the sanction acted with substantial justification or that other
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1
circumstances make the imposition of the sanction unjust.
2 Cal. Code Civ. Proc. 2023(b)(1) (emphasis added). Here, Atkinson has been 3 stonewalling plaintiffs for 10 months without explaining what happened to the 4 missing documents. There can be no justification for Atkinsons dilatory tactics 5 and, at a minimum, the Firm should be required to pay the costs of this motion. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Boehms tactics have been similarly offensive. b) Issue Sanctions
Issue sanctions are also allowable under the facts presented by the defendants misconduct: (2) The court may impose an issue sanction ordering that designated facts shall be taken as established in the action in accordance with the claim of the party adversely affected by the misuse of the discovery process. The court may also impose an issue sanction by an order prohibiting any party engaging in the misuse of the discovery process from supporting or opposing designated claims or defenses. Cal. Code Civ. Proc. 2023(b)(2). Issue sanctions can be used here to preclude Atkinson/Boehm from offering evidence, making objections and/or crossexamining plaintiffs witnesses regarding designated issues. See, e.g., In re Marriage of Economou, 223 Cal. App. 3d 97 (1990).19 Given Atkinson/Boehms dilatory conduct and attitude toward plaintiffs rights to discovery in this action, it would be entirely reasonable for the Court to preclude the Firm and Boehm from
21 offering evidence, making objections and/or cross-examining plaintiffs witnesses 22 on the issue of the veracity of the Offering Statements with respect to the last four 23 offerings at issue in this litigation. c) Evidentiary Sanctions 24 25 26 27 Boehm should be precluded from offering evidence for the last 4 28 offerings that took place when he was at Atkinson.
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Evidentiary sanctions are available to address the defendants misconduct:
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1 2
(3) The court may impose an evidence sanction by an order prohibiting any party engaging in the misuse of the discovery process from introducing designated matters in evidence.
3 Cal. Code Civ. Proc. 2023(b)(3). Repeated misuse of the discovery process 4 supports evidentiary sanctions, which preclude the offering of evidence by the 5 wrongdoer. See, e.g., Do It Urself Moving & Storage, Inc. v. Brown, Leifer, 6 Slatkin & Berns, 7 Cal. App. 4th 27 (1992) (evidence supported determination that 7 plaintiffs noncompliance with discovery obligations was willful, justifying 8 evidentiary sanction, notwithstanding plaintiffs contention that their conduct 9 was at most negligent where the record was replete with instances of plaintiffs 10 attempts to delay trial and withhold promised items of discovery). Here, because 11 of the bad faith dilatory tactics, it would be appropriate to preclude 12 13 Atkinson/Boehm from offering any form of evidence relating to the veracity of the 14 Offering Statements for the last four offerings, even if they ultimately convince the 20 15 Court that the loss or destruction of the documents was merely negligent. 16 17 d) Terminating Sanctions The sanction of rendering judgment by default against a disobedient party is
18 a drastic measure, but it has long been held appropriate for litigants like Atkinson 19 who persist in refusing to comply with discovery obligations. Petersen v. City of 20 Vallejo, 259 Cal. App. 2d 757 (1968); Fred Howland Co. v. Superior Court of Los 21 Angeles County, 244 Cal. App. 2d (1966) (trial court may apply ultimate sanction 22 of default against litigant who persists in outright refusal to comply with his 23 24 25 Federal law allows a district court to exclude witness testimony 26 grounded on destroyed evidence which is proffered by the party responsible for destruction. Glover at 1329; Unigard Sec. Inc. Co. v. Lakewood Engg & Mfg. 27 Corp., 982 F.2d 363, 368 (9th Cir. 1992); Campbell Indus. v. M/V Gemini, 619 28 F.2d 24, 27 (9th Cir. 1980).
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1 discovery obligations).21 As severe as this sanction is, the unsuccessful imposition 2 of a lesser sanction is not a prerequisite. Housing Authority of City of Alameda v. 3 Gomez, 26 Cal. App. 3d 366 (1972). The test on appeal is whether the lower court 4 abused its discretion on the particular facts before it. Id. The facts before this 5 Court warrant imposition of a terminating sanction. Atkinson, Boehm and their 6 7 8 9 10 11 12 13 counsel have been stonewalling plaintiffs for ten months without producing a single sheet of paper or even attempting to explain why no documents have been or will be forthcoming. A default sanction may be drastic, but Boehm, Atkinson and its constituent members are officers of the Court. They know better than to play fast and loose with the discovery rules.22 e) Contempt Sanctions
Contempt sanctions are expressly allowed under CCP 2023(b)(5). Given
14 Atkinsons and Boehms role as an officer of the Court and its apparent contempt 15 for the discovery rules in this matter, contempt sanctions would not be an abuse of 16 discretion. 17 18 19 20 21 22 23 24 25 26 27 2. Adverse Evidentiary Inferences Are Appropriate To Punish Atkinsons Misuse Of The Discovery Process
Apart from sanctions available under CCP 2023, another potent remedy for spoliation of evidence is imposition of an evidentiary inference that the evidence Under federal law, [d]efault and dismissal are proper sanctions in view of willful destruction of documents and records that deprived [a party] of the opportunity to present critical evidence on its key claims to the jury. Natl Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639 (1976); Prof. Seminar Consultants, Inc. v. Sino American Tech. Exch. Council, Inc., 727 F.2d 1470 (9th Cir. 1984); Hughes Aircraft Co. v. Century Indem. Co., 141 F.3d 1176 (9th Cir. 1998).
22 21
Lesser terminating sanctions might also be appropriate, including an 28 order striking Atkinsons affirmative defenses. Cal. Code Civ. Proc. 2023(b)(4).
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1 which one party has destroyed or rendered unavailable was unfavorable to that 2 party. Cedars-Sinai at 11. As the Supreme Court noted in the Cedars-Sinai case, 3 such an evidentiary inference has a long common law history, dating back to 1817. 4 5 6 7 Id. This inference is currently set forth in Evidence Code 413 and provides: In determining what inferences to draw from the evidence or facts in the case against a party, the trier of fact may consider, among other things, the partys . . . willful suppression of evidence relating thereto. . . .
8 Cal. Evid. Code 413. Standard civil jury instructions provide a similar inference. 9 See, BAJI No. 2.03. This Court is free to craft an inference to fit the 10 circumstances of this case, including consideration of the defendants role as 11 officers of the Court. 12 Adverse inferences based on spoliation of evidence are available under 13 federal law. Glover, 6 F.3d at 1329. A recent case on point set forth a three (3) 14 part test to determine if an adverse inference instruction is warranted. The party 15 seeking the inference must establish (1) duty to preserve; (2) that records were 16 destroyed with a culpable state of mind; and (3) relevance of the destroyed 17 evidence. Zubulake v. UBS Warburg LLC, 2003 WL 22410619 (S.D.N.Y. Oct. 22, 18 2003). As the Zubulake court noted, the greater the relevance of the destroyed 19 evidence, the less culpability required. Id. at *6 (citation omitted). An analysis of 20 21 the facts in the case at bar prove that each part of the test is met. 22 23 24 25 26 27 28
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First, there is no question that numerous rules applicable to attorneys imposed a duty on Atkinson and Boehm to preserve documents related to the Heritage bond offerings. Atkinson and Boehms duty to preserve these documents was underscored by the fact that they had to have reasonably anticipated litigation when their client pulled the plug on future offerings and started investigating potential liability, especially in light of the fact that the Platt
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1 litigation, which alleged that $2 million in bond monies disappeared, was ongoing 2 at that time. The next inquiry is, exactly what documents did Atkinson and Boehm 3 have to preserve? Anyone who anticipates being a party or is a party to a lawsuit 4 must not destroy unique, relevant evidence that might be useful to an adversary. 5 Zubulake at *3. Once a party reasonably anticipates litigation, it must suspend its 6 7 8 9 10 11 12 routine document retention and destruction policy and put in place a litigation hold to ensure the preservation of relevant documents. Zubulake at *4. Regarding the second prong of the test - the culpable state of mind prong mere negligence is sufficient. If the evidence was destroyed in bad faith, that fact alone demonstrates relevance. Zubulake at *6. Clearly, Atkinson and Boehm were at least negligent, but the failure to offer any explanation as to what
13 happened to the documents, coupled with the blatant stonewalling of plaintiffs 14 discovery requests in this case gives rise to an inference that Atkinson and Boehm 15 are acting in bad faith. As for the third prong of the Zubulake test, the lost or destroyed documents 16 17 would undoubtedly be relevant to the plaintiffs claims. The veracity of the 18 Official Statements are at the very heart of the claims in this case. Furthermore, 19 the documents uncovered in discovery that related to the drafting of the other 20 Official Statements clearly show that these documents would also be relevant. 21 22 23 24 25 26 27 28 For example, the plaintiffs have uncovered a memo to file written by Boehm when he was working at Sabo & Green. Barry Declaration at Exhibit AA . The memo to file reveals the following relevant information: Boehm was aware of prior bond offerings which
involved both Emery Rubin and Robert Kasirer. Some of these offerings had large cost overruns and
incorrect feasability study projections and resulted in lawsuits.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Boehm was aware that at least one of the lawsuits
contained allegations that both Emery Rubin and Robert Kasirer misappropriated monies. Boehm said he was going to review the litigation files
from these lawsuits. Therefore, via this single memo to file plaintiffs can prove that when Boehm drafted the Official Statements he already knew and did not disclose the following facts: Contrary to the statement in the Official Statement in the
section entitled Relationship Among the Parties, Robert Kasirer did in fact have an existing relationship with Emery Rubin, an officer of the Heritage Entity. Contrary to the statements in the Official Statement,
Robert Kasirer did not have a favorable history in bond projects of this nature. In fact, his prior bond projects failed, allegedly due to cost overruns and incorrect feasability studies. This is particularly important given the fact that these are some of the causes for the failure of the Heritage bond projects. Boehm never disclosed the allegations of
misappropriated bond monies (identical to the allegations in this case) which were clearly material pieces of information that should have been disclosed in the Official Statements. See FAC 122-127, 171(c)-(d). Significantly, this single incriminating document has not been produced by any other party in discovery. Plaintiffs do not anticipate that it will turn up in any other files. This is because it is a memo to file and it is unlikely that it was provided to anyone outside the law firm. Given Boehms
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1 position that he has no documents relating to Heritage other than the closing 2 binders, the ONLY party who would be able to produce this document to the 3 plaintiffs is Sabo & Green. The same analysis would hold true for any 4 incriminating memos to file which would have been housed in the annals of 5 Atkinson. Therefore, plaintiffs will not likely find any of documents of this nature 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 relating to the time period when Boehm worked at Atkinson. Another internal Sabo & Green memo from Green to Boehm discusses the history of the Heritage/Columbia transaction, which was never disclosed to investors. This document proves Boehm was fully aware of the history of the Columbia-Kasirer situation, and the hidden profit Kasirer would be making from the offerings. Barry Declaration Exhibit BB. Yet another example is found in 250(a) where Boehm memorialized a telephone conversation he had with bond counsel. According to the notes, Bond counsel had opined that if Heritage Housing Development (HHD) guaranteed the bonds then the history of HHD and its financial status would have to be disclosed, which Boehm noted which of course were not gonna do. This document provides evidence that Boehm knew that any such disclosure would jeopardize the future of the scheme to defraud and that Boehm was willing to structure the offerings in a way which would help perpetuate the fraud. Barry Declaration, Exhibit CC. Furthermore, critical evidence has been uncovered regarding the fact Boehm was aware of and tried to authorize the co-mingling of monies by making or instructing that changes be made to bond documents, and then instructed that a risk factor be inserted for this (which never happened). FAC 256(a)-(e). These documents came from other attorney files. As notes to the file and similar documents appear to be lost forever, and
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1 they would clearly be relevant, plaintiffs easily satisfy the Zubulake test, and this 2 Court should hold that an adverse inference instruction is warranted. 3 3. Penal Sanctions Are Appropriate To Punish Atkinsons Misuse Of The Discovery Process 4 California Penal Code 135 creates criminal penalties for spoliation: 5 6 7 8 Every person who, knowing that any book, paper, record, instrument in writing, or other matter or thing, is about to be produced in evidence upon any trial, inquiry, or investigation whatever, authorized by law, willfully destroys or conceals the same, with intent thereby to prevent it from being produced, is guilty of a misdemeanor.
9 Cal. Pen. Code 135. Plaintiffs have been unable, despite repeated requests, to 10 ascertain the circumstances surrounding the loss or destruction of the documents 11 sought by the 1st RFP. By this motion, plaintiffs seek an order compelling 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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Atkinson and Boehm to provide a sworn statement describing such circumstances. Should plaintiffs suspicions of wrongful destruction prove correct, penal sanctions are appropriate. 4. Defense Counsel Should Likewise Be Sanctioned For Their Independent Misuse Of The Discovery Process
Lawyers are subject to discipline, including suspension and disbarment, for participating in the suppression or destruction of evidence. Cedars-Sinai at 13 (citing Cal. Bus. & Prof. Code 6106 and Rules of Prof. Conduct, Rule 5-220). Despite plaintiffs repeated requests and the repeated promises from counsel for Atkinson that supplemental responses, would be forthcoming, Atkinsons counsel has responded with nothing but delay and obfuscation, refusing to explain why documents have not or cannot be produced. Boehms counsel has been equally evasive. Despite having authority cited to him that proved he had to request his clients SEC deposition transcript, he refused to do so for 8 months (and refused to answer the RFAs until the motion to compel was granted). In addition, when he
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1 finally answered the interrogatories, they did not tell the truth. The fact he gave 2 Kasirer money had to proved to Boehms counsel by plaintiffs counsel, as Boehm 3 said in his sworn responses that he never did. When doing the second 4 supplemental responses to reflect this information, the answers regarding the work 5 Boehm did on his own suddenly changed, Funny how the story changed after 6 7 8 9 10 11 12 plaintiffs counsel pointed out that in light of the initial answers, Boehms defense costs and fees should not be fully covered by the firms insurance policies. Conduct less outrageous than this has been held sanctionable. See, e.g., Volkswagenwerk Aktiengesellschaft v. Superior Court In and For Sacramento County, 122 Cal. App. 3d 326 (1981) (where defense counsel took no action until 25 days following service of answers to interrogatories, made only one or two
13 incomplete telephone calls in order to resolve disputed matters and refused 14 plaintiffs offer of an extension of time in which to file a motion to compel so that 15 the matter could be discussed, the trial court did not abuse its discretion in 16 imposing sanctions against defense counsel pursuant to rule authorizing 17 18 19 20 21 22 23 24 25 26 27 28 imposition of sanctions against the person involved for failure to resolve a discovery matter). Because counsel has repeatedly refused to acquiesce to plaintiffs reasonable demands for an explanation of the circumstances surrounding loss or destruction of the documents sought, sanctions against Atkinsons counsel are warranted. B. Defendants Argument Not only have plaintiffs presented a distorted summary of the facts leading up to this Motion, they have also argued the wrong law. Specifically, except for a few citations to federal law (two of them in footnotes), plaintiffs arguments are based on California state law. Federal law, however, clearly applies to this Motion which requests discovery sanctions pursuant to either Rule 37 of the Federal Rules
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1 of Civil Procedure (FRCP) or this Courts inherent authority to sanction for 2 misuse of discovery. Delving into the issue of whether federal or state law 3 applies, however, is unnecessary because the General Discovery Order issued by 4 the Honorable Rosalyn M. Chapman on July 16, 2003 (hereinafter referred to as 5 the Discovery Order), as modified by the parties August 15, 2003 Joint 6 7 8 9 10 11 Stipulation (hereinafter referred to as the Joint Stipulation modifying Discovery Order), both of which are predicated upon the FRCP, clearly apply to this Motion.23 1. The Discovery Order, the Joint Stipulation Modifying Discovery Order, and Local Rule 37-1 This Motion relating to discovery involves two disputes - first, AALR&Rs
12 lack of possession of documents from its work on the Heritage Bonds which 13 would be responsive to plaintiffs requests for production of documents; and 14 15 16 17 18 19 20 second, service of AALR&Rs supplemental responses to plaintiffs other discovery requests. Even a review of plaintiffs recitation of the facts leading up to this Motion demonstrates that neither of these issues was ever addressed in a face-to-face conference between Mr. Barry and counsel for AALR&R, or between Mr. Barry and the lead attorney for the Attorney Defendants, Charles Grebing. Plaintiffs lack of effort to resolve this purported dispute is important, as
21 explained below. As the parties, their counsel, and this Court are aware, a full day was spent 22 23 preparing the Discovery Order. The obvious purpose of spending an entire day 24 preparing an order summarizing discovery procedures in this case was to simplify 25 such procedures and to involve the Court in discovery disputes only when 26 27 28
Though unnecessar y, the issue of wheth er federal o r state law app lies, as well as app lication to this Motio n of both fed eral and state la w, will be analyze d later within de fendants argu ments.
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1 absolutely necessary. Reflecting the Courts intention of strictly enforcing the 2 Discovery Order, Paragraph 21 states: Failure to comply with this Order will 3 result in severe sanctions to counsel, and may eventually result in sanctions upon 4 the parties. (Emphasis added). 5 Notwithstanding such unambiguous words, plaintiffs have not even 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 attempted to comply with Paragraph 8 of the Discovery Order, as modified by the Joint Stipulation modifying Discovery Order, which states: The following procedures shall be observed in identifying and resolving all discovery disputes: Counsel for the party that feels there is a discovery problem or dispute shall send a letter to counsel for the opposing party or parties, identifying the discovery problem or dispute; counsel for the opposing party or parties shall respond within ten (10) work days; if the problem or dispute is not resolved, lead discovery counsel for the groups to which these parties have been assigned shall comply with Local Rule 37-1 (as modified) within five (5) work days (excluding weekends and holidays). Prior to personally meeting, counsel should, of course, attempt to resolve the problem or dispute by a telephonic conference; however, that does not absolve counsel from complying with the requirement to meet in-person within five (5) work days of exchanging correspondence. The lead discovery counsel for the group to which the movant has been assigned shall schedule the in-person meet and confer... If the in-person meet and confer is unsuccessful, and the problem or dispute remains unresolved, a Joint Stipulation shall be filed within twenty (20) days. (See p. 5, ls. 1-28 through p. 6, ls. 1-8 of the Joint Stipulation modifying Discovery Order, amending 8 of the Discovery Order) (emphasis added). As
21 noted above, plaintiffs counsel, Brian Barry, has not complied with the above22 recited paragraph or even attempted to do so. Not only have Mr. Barry and 23 counsel for AALR&R not met in-person, neither have he and Mr. Grebing, the 24 lead discovery attorney for the Attorney Defendants. Moreover, Mr. Barry has 25 made no attempts to arrange such a meeting, even though the Discovery Order and 26 the Joint Stipulation modifying Discovery Order direct that he, as the moving 27 party, shall schedule the in-person meet and confer. (Ibid.). An in-person 28
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1 meeting between Mr. Barry and counsel for AALR&R would likely not have been 2 necessary, however, had Mr. Barry contacted counsel for AALR&R by telephone 3 to discuss the discovery matters at issue herein. If he had done so, counsel for 4 AALR&R would have imparted to Mr. Barry the information included in this 5 Motion, making unnecessary the Courts participation in this dispute. 6 7 8 9 10 11 12 Plaintiffs have also failed to comply with Paragraph 6 of the Discovery Order. Therein, Judge Chapman directs that Local Rule 37-1 shall be modified to require face-to-face meetings to resolve discovery disputes, rather than telephonic conferences which are normally required in cases involving counsel located in different counties. Further demonstrating the Courts expectation that counsel will obey the Discovery Order, in Paragraph 6, Judge Chapman states that
13 [t]he Court expects strict compliance by counsel with Local Rule 37. In relevant part, the Central District of Californias Local Rule 37 states as 14 15 follows: Prior to the filing of any motion relating to discovery pursuant to 16 F.R.Civ.P. 26-37, counsel for the parties shall confer in a good faith effort to eliminate the necessity for hearing the motion or to 17 eliminate as many of the disputes as possible. It shall be the 18 responsibility of counsel for the moving party to arrange for this conference... Unless relieved by written order of the Court upon 19 good cause shown, counsel for the opposing party shall confer with counsel for the moving party within ten (10) calendar days after the 20 moving party serves a letter requesting such conference. The moving partys letter shall identify each issue and/or discovery request in 21 dispute, shall state briefly with respect to each such issue/request the moving partys position (and provide any legal authority which the 22 moving party believes is dispositive of the dispute as to that issue/request), and specify the terms of the discovery order to be sought. 23 (See Discovery Order, 6) (emphasis added). 24 2. Applicability of Federal Law 25 As previously mentioned, and although plaintiffs state otherwise in a 26 Footnote contained herein (see FN 11, in plaintiffs legal argument, wherein 27 plaintiffs state: State law would appear to apply to this motion because the 28
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1 claims alleged against Atkinson/Boehm are state law-based claims), federal law 2 applies to this Motion. Admittedly, there is room for differing choice-of-law 3 interpretations in many federal diversity cases. In cases such as this, however, 4 where a valid federal rule of civil procedure is directly on point, the choice is clear 5 - the federal rule applies. See, Hanna v. Plumer, 380 U.S. 460, 470-474 (1965); 6 7 8 9 10 11 12 see also, Exxon Corp. v. Burglin, 42 F.3d 948, 950-951 (5th Cir. 1995). In Hanna, the United States Supreme Court explained this principle as follows: When a situation is covered by one of the Federal Rules, the question facing the court is a far cry from the typical, relatively unguided Erie Choice: the court has been instructed to apply the Federal Rule, and can refuse to do so only if the Advisory Committee, this Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions.
13 Hanna, supra, 380 U.S. at 471. More recently, the Fifth Circuit has reiterated the 14 rule: 15 16 17 18 19 20 If the [federal] Rule speaks to the point in dispute and is valid, it is controlling, and no regard need be paid to contrary state provisions... Indeed, to date the Supreme Court has never squarely held a provision of the civil rules to be invalid on its face or as applied. Exxon Corp., supra, 42 F.3d at 950 (citations omitted) (emphasis added). This Motion has been brought by plaintiffs to request that the Court order sanctions against AALR&R and Joel Boehm for their alleged misuse of discovery. As set
21 forth below, Rule 37 of the Federal Rules of Civil Procedure addresses the issue of 22 sanctions for misuse of discovery. Thus, Rule 37 is directly on point, and federal 23 law applies to this Motion. Rule 37 of the Federal Rules of Civil Procedure 24 3. 25 Rule 37 of the Federal Rules of Civil Procedure (hereinafter Rule 37) 26 provides that any party may apply for an order compelling discovery or disclosure. 27 (See FRCP 37(a)). The Rule is often applied in situations like this where a party 28
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1 allegedly fails to respond to requests for production or allegedly provides 2 incomplete or evasive discovery responses. (See FRCP 37(a)(2)-(3)). According 3 to Rule 37, however, counsel are required to meet and confer, or at least attempt to 4 meet and confer, in an effort to resolve discovery disputes before bringing motions 5 regarding such disputes. (See FRCP 37(a)(2)(A) and (d)). As one court explained, 6 7 8 9 10 11 12 sending a letter to opposing counsel demanding compliance with a discovery request is not considered an earnest attempt to meet and confer. Soto v. City of Concord, 162 FRD 603, 623 (N.D.Cal. 1995) (quotation omitted). Rather, continued the court, a live exchange of ideas and opinions is required. Id. Following such reasoning, in Soto v. City of Concord, the court refused to impose sanctions against the defendants because it appeared that the plaintiff did
13 not make an adequate attempt to meet and confer before filing a motion to compel 14 production of documents. Id. Plaintiffs counsel in Soto had sent a letter to 15 defendants counsel outlining why he thought defendants objections to discovery 16 were unfounded, and urging defendants compliance by a specific date. Id. at 62217 623. Although the plaintiff in Soto made more of an effort to settle the discovery 18 dispute outside of court than plaintiffs have made in this case, the Soto court still 19 found such effort inadequate. This Court should similarly find with respect to 20 plaintiffs minimal efforts to settle this dispute outside of court. 21 According to another requirement of Rule 37, a declaration must be attached 22 23 24 25 26 27 28 to a motion to compel. That declaration must detail moving counsels efforts to confer with opposing counsel, and, if such efforts proved useless, the declaration must explain why. Tri-Star Pictures, Inc. v. Ungler, 171 FRD 94, 99 (S.D.NY 1997). As discussed above, plaintiffs have woefully failed to meet their burden with respect to arranging a conference with counsel for AALR&R, or with the lead attorney for the Attorney Defendants, regarding the discovery disputes at issue in
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1 this Motion. Therefore, plaintiffs may not rely on Rule 37 to impose sanctions 2 upon AALR&R and Mr. Boehm for misuse of the discovery process. 3 There is a second and even more compelling reason why plaintiffs may not 4 rely on Rule 37 to impose sanctions upon AALR&R and Mr. Boehm. This reason 5 is that Rule 37s sanctions are not available absent a prior valid order compelling 6 7 8 9 10 11 12 discovery under Rule 37(a). See, Shepherd v. American Broadcasting Cos., Inc., 62 F.3d 1469, 1474 (D.C. Cir. 1995); see also, Unigard Security Ins. Co. v. Lakewood Eng. & Mfg. Corp., 982 F.2d 363, 367 (9th Cir. 1992); see also, Bayoil v. Polembros Shipping Limited, 196 F.R.D. 479, 482 (S.D. Tex. 2000) (quoting Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure 2284 (1994)) (For [a] [c]ourt to impose sanctions under Rule 37, there must b...