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Blasi v. United Debt Services, LLC

United States District Court, S.D. Ohio, Eastern Division

May 23, 2017

Peter Blasi, et al., Plaintiffs,
United Debt Services, LLC, et al., Defendants.



          Terence P. Kemp United States Magistrate Judge

         As the Court explained in an Opinion and Order filed on February 21, 2017 (Doc. 213) this Fair Credit Reporting Act case involves a crossclaim filed against AMG Lead Source, one of the defendants, by Name Seeker, Inc., another defendant. In that order, the Court detailed Name Seeker's efforts to obtain discovery from AMG, including the apparent spoliation of evidence by AMG after it received discovery requests pertaining to that evidence. The Court had set the matter for a hearing on a motion for sanctions, but that hearing was canceled when AMG indicated that it no longer would defend the case or oppose the motion for sanctions. The Court concluded, under those circumstances, that it was “reasonable to conclude that AMG intentionally destroyed relevant evidence both in violation of its obligations under the Federal Rules of Civil Procedure and in contravention of orders of this Court.” Doc. 213, at 4.

         The next question addressed by the Court was what sanctions were appropriate. The Court, at Name Seeker's request, struck a motion to dismiss for lack of personal jurisdiction which AMG had filed. It also considered whether to impose the sanction of a default judgment on the crossclaim, but because there was a discovery order in place which, if followed, might supply Name Seeker with some of the information which AMG had withheld or destroyed, the Court deferred a ruling on that particular sanction. It noted, however, that if the discovery did not cure the prejudice to Name Seeker which AMG's misconduct had caused, it would consider entering default judgment. Id. at 5. Finally, the Court determined that Name Seeker was entitled to an award of attorneys' fees, and directed it to submit an itemization of its costs and fees.

         Since the date of that order, a number of additional developments have occurred. First, on March 10, 2017, Name Seeker filed its motion for fees, asking the Court to award it fees and costs in the amount of $156, 366.22. It seeks that award against both AMG and its counsel, Brian Melber. The motion asserts that the rates charged by the various attorneys and others who worked on the case - which include a blended rate of $460.00 per hour for attorneys from the Manatt, Phelps & Phillips firm, $305.00 per hour for a senior paralegal, $285.00 per hour for a senior litigation support staff member, and $350.00 per hour for local counsel from McGlinchey Stafford PLLC - are reasonable. It also is supported by declarations from attorneys A. Paul Heeringa and Richik Sarkar, both of which support the assertion that the amount of fees and costs incurred in seeking discovery from AMG was reasonable and necessary, and a declaration from John R. Clingerman, who works in the field of computer forensics, and who also performed services in this case.

         The only opposition to that motion was filed by Mr. Melber. He submitted a declaration explaining why he believes that any sanctions should be imposed only against AMG and not against him. Name Seeker filed a reply memorandum which addresses Mr. Melber's declaration.

         The other development, communicated by counsel during the course of a telephone conference with the Court, is actually a non-development: the discovery which AMG had agreed to provide in the order referred to in the Court's February 21, 2017 order (see Doc. 212), has not been provided. AMG did not respond to written discovery, did not turn over any additional electronic devices, and AMG did not appear for deposition. Consequently, there is no evidence in the record which would support a determination that, as to its crossclaim, Name Seeker has not been severely prejudiced by AMG's failure to provide discovery and its destruction of evidence. Additionally, after the Court permitted Mr. Melber to withdraw as counsel for AMG, it has not retained other counsel, and is now unrepresented. The Court will now address the two open issues: are additional sanctions warranted against AMG, and should Mr. Melber be held liable for any monetary sanctions levied against his former client?

         I. Additional Sanctions

         Granting a default judgment against AMG is appropriate for two different reasons. The first does not require the Court to consider AMG's disregard of its discovery obligations and the Court's discovery orders. That is because “[t]he failure of a corporation to have counsel appear and represent it is not only the basis for an entry of a default under Rule 55(a), but where the Court accords the Defendant notice and opportunity to be heard on a motion for a default judgment under Rule 55(b), also supports the entry of a judgment by default under Rule 55(b).” Hutton Constr., Inc. v. Northeast Florida Contractors, Inc., 2008 WL 2645547, *9 (E.D. Tenn. June 30, 2008). The absence of counsel also justifies imposition of a default judgment as a discovery sanction if the corporate party previously failed to comply with discovery orders, since the corporate party, once it is no longer represented by counsel, cannot actively litigate the case. See, e.g., Barette Outdoor Living, Inc. v. Michigan Resin Representatives, LLC, 2013 WL 1799858 (E.D. Mich. April 5, 2013). Since both those situations are present in this case, it is now appropriate to award Name Seeker a default judgment on its crossclaim.

         The current version of that crossclaim (Doc. 196) alleges claims for contractual indemnity, breach of contract, fraud, civil conspiracy to commit fraud, deceptive trade practices, and spoliation of evidence. It seeks both declaratory relief on the claims for indemnification and monetary damages, attorneys' fees, and costs. To the extent that Name Seeker asks for non-monetary relief, that will be part of the default judgment. Any other relief, particularly damages, will have to await further proceedings in the case.

         The Court will also grant additional sanctions in the form of an award of attorneys' fees and costs. AMG has not, of course, contested the amounts requested. The Court has not conducted a searching review of the fee request given the absence of any adversary briefing, but it has reviewed it sufficiently thoroughly to satisfy itself that, at least as a prima facie matter, the time expenditures all appear related to AMG's misconduct and they fall within a reasonable range. Consequently, the Court will award the full amount of fees and costs as an additional discovery sanction.

         II. Mr. Melber

         The Court begins its discussion of this issue by summarizing the facts contained in Mr. Melber's declaration.

         As Mr. Melber understands Name Seeker's argument, it accuses him of failing to prevent the deletion of files from the AMG laptop in question and of making false representations to the ...

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