United States Court of Appeals, Third Circuit
United States Court of Appeals, Third Circuit
3d 215
38 Fed.R.Serv.3d 1484
John P. Karoly, Jr. (argued), Law Offices of John Karoly, Allentown, PA,
for Appellants.
Henry S. Perkin, Perkin & Feldman, Allentown, PA, Benjamin D. Lentz
(argued), Hart & Hume, New York City, for Appellee.
Before: STAPLETON, LEWIS and ALDISERT, Circuit Judges.
OPINION OF THE COURT
LEWIS, Circuit Judge.
its discretion in holding the defendant and the nonparty deponent in contempt
and in fashioning sanctions with respect to its contempt order.
2
We will hold that the district court abused its discretion in holding the
defendant in contempt for failure to appear because the plaintiff failed to set a
time and place for his deposition, as required by the district court's order. We
further find that the district court did not err in holding the nonparty deponent
in contempt, inasmuch as he failed to attend a scheduled deposition. However,
we conclude that the district court abused its discretion in sanctioning the
nonparty deponent by binding him to the established facts. As a result, we will
remand to the district court so it may reconsider appropriate sanctions
consistent with this opinion.
I.
The Underlying Action
3
On November 21, 1995, in aid of its enforcement of the judgment, General took
the deposition of Charles Hair, an attorney Daddona retained to incorporate
various entities. Daddona was given notice of the deposition, but did not attend.
Hair testified that he incorporated Five-Star, Ltd.; Par-3, Ltd.; D.G. Holding,
Inc.; The Master at Shepherd Hills, Inc.; and The Golf Course at Shepherd
Hills, Inc. He also testified that Five-Star was owned in three equal shares by
Gubitosi, the Culnen Family Trust and the Dadd Partnership. The Dadd
Partnership was owned in equal parts by Daddona and his two brothers. FiveStar owned 100% of the shares in Par-3, Ltd. Five-Star also owned 85% of the
shares in D.G. Holding, Inc.; The Dadd Partnership owned 10% and Gubitosi
5% of the remainder. D.G. Holding, in turn, owned The Masters at Shepherd
Hills, Inc. and The Golf Course at Shepherd Hills, Inc. Together, Par3, Ltd. and
D.G. Holding, Inc. operated a golf course and country club known as Shepherd
Hills. Hair also testified that he had owned 5% of D.G. Holding which he later
transferred to Gubitosi. Hair's testimony was limited to the events surrounding
the incorporation of these entities; he did not purport to describe their current
ownership structure.
On May 22, 1996, General wrote to John P. Karoly, Jr., Gubitosi's attorney,
designating June 3, 1996, as the date for his deposition. Gubitosi then fired
Karoly and hired a new attorney, James L. Heidecker. (He later replaced
Heidecker with Karoly). Heidecker requested and received a brief adjournment.
On June 17, 1996, General sent a letter to Heidecker regarding the contempt
order and the deposition. Neither Heidecker nor Gubitosi responded.
11
General wrote to Heidecker again on June 25, 1996, and designated July 31,
1996, as the new date for the deposition. Gubitosi requested yet another
adjournment, and General wrote again on July 23, 1996, designating July 24 as
the date for document production and August 15 as the date for the deposition.
But Gubitosi did not produce any documents by the 24th. By letter dated July
29, 1996, General informed Gubitosi that if the documents were not produced
by July 31, 1996, the deposition would not go forward and another motion for
sanctions would be presented to the court. On August 15, Gubitosi arrived at
the offices of General's lawyer, claiming that he was there for the deposition;
however, General had canceled the deposition, and General's attorneys were
not present because it had not received the requested documents by July 31,
1996. Thus, once again, the deposition did not go forward.
12
13 Five-Star Holding, Limited (a/k/a Five-Star Ltd.), D.G. Holding, Inc. (a/k/a D.G.
(i)
Holding, Inc.), Par-3, Ltd., The Masters at Shepherd Hills, Inc. and The Golf Course
at Shepherd Hills, Inc. are all Pennsylvania corporations;
14 Gubitosi, the Dadd Partnership and [Culnen] Family Trust each own one third of
(ii)
the shares of stock in Five-Star Limited;
15 Five-Star Limited owns 85% of the shares of stock in D.G. Holding, Inc., the
(iii)
Dadd Partnership owns 10% and Gubitosi owns 5%;
(iv) Five-Star Limited owns 100% of the shares of stock in Par-3, Ltd.;
16
17 D.G. Holding, Inc., owns 100% of the shares of stock in The Masters at
(v)
Shepherd Hills, Inc. and the Golf Course at Shepherd Hills, Inc.;
(vi) The Dadd Partnership is a Pennsylvania partnership; and
18
19 Judgment debtor Daddona owns, either individually or jointly with judgment
(vii)
debtor Judy Daddona, a one third interest in the Dadd Partnership, Donald A.
Daddona owns, either individually or jointly with Eva Daddona, a one third interest
and Frank P. Daddona owns, either individually or jointly with Katherine Daddona,
a one third interest.
20
S.A. at 27-28.
21
General's motion was granted in its entirety by an Order filed August 28, 1996.
II.
22
III.
23
Daddona and Gubitosi argue that the district court abused its discretion in
holding them in contempt and in fashioning its sanctions. Specifically, the
district court held, pursuant to Rule 37(b) of the Federal Rules of Civil
Procedure ("Failure to Make Disclosure or Cooperate in Discovery:
Sanctions"), that (1) Daddona was "in contempt of Court for failure to obey this
Court's Order dated January 19, 1996, directing him to pay a sanction of $100,
attend his deposition and produce documents by February 19, 1996;" and (2)
Gubitosi was "in contempt of Court for failure to obey this Court's Order dated
May 15, 1996, directing him to attend his deposition and to produce documents
by June 15, 1996." Order, filed August 28, 1996, at 1. Daddona and Gubitosi
argue that because they did not receive proper notice of their depositions, the
court's finding of contempt and imposition of sanctions were improper.2
24
We review the granting of a motion for sanctions for failing to comply with a
Rule 37 discovery order for abuse of discretion. Quality Prefabrication, Inc. v.
Daniel J. Keating Co., 675 F.2d 77, 78 (3d Cir.1982); see Petrucelli v.
Bohringer and Ratzinger, GMBH, 46 F.3d 1298, 1310 (3d Cir.1995) ("We
apply the abuse of discretion standard when reviewing orders regarding the
scope and conduct of discovery.").
25
(A) An order that the matters regarding which the order was made or any other
designated facts shall be taken to be established for the purposes of the action in
accordance with the claim of the party obtaining the order; ...
29
treating as a contempt of court the failure to obey any orders except an order to
submit to a physical or mental examination; ...
30 lieu of any of the foregoing orders or in addition thereto, the court shall require
In
the party failing to obey the order or the attorney advising that party or both to pay
the reasonable expenses, including attorney's fees, caused by the failure, unless the
court finds that the failure was substantially justified or that other circumstances
make an award of expenses unjust.
31
32
The Appellants argue that "Daddona received no notice at all and Appellee
General admits that there was no deposition even scheduled." Appellants' Br. at
13. It is undisputed, both in the briefs and at oral argument, that General never
scheduled a deposition after the court issued its January 19, 1996 Order, and
our review of the record leads us to the same conclusion. Thus, we hold that
Daddona did not violate the express terms of that Order because General never
set a time and place for a deposition. While it is clear from the record that
Daddona has engaged in extraordinary delaying tactics, he did not violate the
terms of that particular Order.
33
Appellants also argue that Gubitosi "had previously appeared for a deposition
that had been unilaterally canceled without notice." Id. at 14. Here, the record
does not support the Appellants' position. General wrote to Gubitosi's attorney
on July 23, 1996, designating July 24 as the date of document production and
August 15 as the date of the deposition. Gubitosi did not produce any
documents by July 24. By letter dated July 29, 1996, General informed
Gubitosi that if the documents were not produced by July 31, 1996, the
deposition would not go forward and another motion for sanctions would be
presented to the court. On August 15, Gubitosi arrived at the offices of
General's lawyer and stated that he was there for the deposition. Of course, by
then General had canceled the deposition because it had not received the
requested documents by July 31, 1996. Thus, the deposition did not go forward.
34
The July 29 letter provided Gubitosi notice that the deposition would be
canceled if he failed to comply with the document production request.
Moreover, the Order indicated that document production was to occur "at a
time and place designated by " General. A. at 4 (emphasis in original).
Gubitosi, therefore, violated the express terms of the May 15, 1996 Order.
35
Pursuant to Rule 37(b), the district court again declared Gubitosi in contempt in
its August 28 Order. The court held that the Established Facts were binding on
him (and Daddona) and ordered him to pay General's expenses and Attorney's
fees.3
36
The district court did not specify whether it was acting pursuant to 37(b)(1) or
(2). On its face, however, Rule 37(b)(2) applies only to parties, and we have
found no case that has applied Rule 37(b)(2) to a nonparty.4 We conclude that
Rule 37(b)(1) provides the appropriate means to sanction a nonparty. See
Miller v. Transamerican Press, Inc., 709 F.2d 524, 531 (9th Cir.1983) (noting
that Rule 37(b)(1) sanctions may be available against nonparty deponent who
fails to appear at deposition); see also 7 Moore's Federal Practice 37.40 (3d
ed. 1997) ("[O]nly Rule 37(b)(1), governing a deponent's failure to be sworn or
to answer a question after being directed to do so by the court, applies to
nonparties. Rule 37(b)(2), governing all other failures to obey discovery orders,
does not apply to nonparties."); 9 Moore's Federal Practice 45.04 (3d ed.
1997) ("Rule 37(b) sanctions are in their nature usually applicable to parties.").
37
38
We also find that the court did not abuse its discretion when it required
Gubitosi to pay $500 to General for its expenses and attorney's fees, caused by
his failure to comply with the May 15, 1996 Order. See Robin Woods Inc. v.
Woods, 28 F.3d 396, 400 (3d Cir.1994) (requiring party found to be in
contempt for violating injunction to pay opposing party's attorney's fees).
39
Nonetheless, we find that the district court abused its discretion when it
purported to bind Gubitosi to the Established Facts. As the Supreme Court
explained in Insurance Corp. v. Compagnie des Bauxites, 456 U.S. 694, 705,
102 S.Ct. 2099, 2105-06, 72 L.Ed.2d 492 (1982), Rule 37(b)(2) "embodies the
standard[s] established in Hammond Packing Co. v. Arkansas, 212 U.S. 322,
29 S.Ct. 370, 53 L.Ed. 530 (1909), for the due process limits on" rules
providing for discovery sanctions. Those "two standards--one general and one
specific--... limit a district court's discretion. First, any sanction must be 'just';
second, the sanction must be specifically related to the particular 'claim' which
was at issue in the order to provide discovery." 456 U.S. at 707, 102 S.Ct. at
2107. Thus, a court, under Rule 37(b)(2)(A), cannot direct that designated facts
be taken as true when those facts are unrelated to the claim or defense with
respect to which the discovery is being sought. Rule 37(b)(2)(A); Wright,
Miller & Cooper, 8A Federal Practice & Procedure, 2283.
40
As we have noted, Rule 37(b)(2) on its face applies only to sanctions against
parties. Rules 37(b)(1) and 45(e), which allow a court to treat the failure of a
non-party under subpoena to provide discovery as a contempt, do not provide
for a sanction comparable to the one authorized by Rule 37(b)(2)(A) and, in
light of Hammond Packing, we believe that omission was advertent. A nonparty, by definition, is not a participant in the litigation and, when a non-party
refuses to provide discovery, no claim has been asserted by or against it.
Accordingly, we believe that neither Rule 37(b)(1) nor Rule 45(e) was intended
to authorize an order that would effectively preclude a non-party from asserting
in the future a claim that has not yet been made.
41
The district court's order in this case states only that Gubitosi will be bound by
certain facts. It does not, in conformity with Rule 37(b)(2)(A), contain the
limitation "for the purposes of the action." Even if we assume, however, that
the district court's order was intended to bind Gubitosi only in the course of
further proceedings to collect the judgment against Daddona in this action, we
would nevertheless conclude that the order was not authorized by Rule 37(b)(1)
or Rule 45(e). The only effect that we can perceive as possibly intended by the
order in this context would be preclusion of Gubitosi from asserting any claim
of ownership of a present interest in property levied upon that would be
inconsistent with the stipulated facts. Since such a claim would not have been
the subject of the pending litigation or the discovery sought, we cannot uphold
the district court's sanction order in its current form.
IV.
42
For the reasons discussed above, we will reverse the order of the district court
to the extent it holds plaintiff Daddona in contempt. As to the nonparty
deponent, Gubitosi, we will affirm the order of the district court holding him in
contempt, but remand so that the court may fashion appropriate sanctions
consistent with this opinion.5
Rule 45(e) (1996) provides in relevant part: "Contempt. Failure by any person
without adequate excuse to obey a subpoena served upon that person may be
The Appellants also argue that the Order violates their right to "due process"
(presumably that which is guaranteed by the Fifth Amendment). Appellants' Br.
at 18. Because of the result we reach, we need not decide that issue as to
Daddona, and because we find that Gubitosi had proper notice, his due process
claim is without merit
The Appellants argue that the district court only had authority to issue an order
punishing a party or nonparty for failing to attend a deposition pursuant to Rule
37(d). They are mistaken
Gubitosi could be sanctioned pursuant to Rule 37(b)(1), which grants a district
court the authority to punish a nonparty for failing to follow the court's
directions. See Miller v. Transamerican Press, Inc., 709 F.2d 524, 531 (9th
Cir.1983) (noting that Rule 37(b)(1) sanctions may be available against
nonparty deponent who fails to appear at deposition). Moreover, on its face,
Rule 37(d) applies only to parties.
If Daddona had violated the January 19 Order, the court had the authority to
sanction him under both Rule 37(b)(2) and Rule 37(d).
On remand, the district court should ensure that it documents its reasons for
finding Gubitosi in contempt, the type of contempt applicable (civil or
criminal) and its rationale for the particular sanctions that it ultimately imposes.
See generally Harris v. City of Philadelphia, 47 F.3d 1311 (3d Cir.1995)