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National Union Fire Insurance Co. of Pittsburgh, P.A. v. Guaranty Bank and Trust Co.

United States District Court, D. Colorado

March 2, 2015

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, As Subrogee and Assignee for, THE HAIN CELESTIAL GROUP, INC., Plaintiff,
v.
GUARANTY BANK AND TRUST COMPANY, JEFFREY M. WAGNER, JOHN D. WAGNER, KRISTIE WAGNER, Defendants.

ORDER

LEWIS T. BABCOCK, District Judge.

This matter is before me on a Motion to Strike Defendant Jeffrey M. Wagner's Answer and Affirmative Defenses and for Summary Judgment filed by Plaintiff National Union Fire Insurance Company of Pittsburgh, PA, as subrogee and assignee for the Hain Celestial Group, Inc. [Doc #86] Defendant Jeffrey M. Wagner, who is not represented by counsel in this matter, has not responded to the motion. Oral arguments would not materially assist me in my determination. After consideration of the parties' arguments, and for the reason stated, I GRANT the motion to strike. In addition, I GRANT IN PART and DENY IN PART the motion for summary judgment and, as such, I ENTER JUDGMENT in favor of Plaintiff, and against Defendant Jeffrey M. Wagner, on Plaintiff's Fifth Claim for Relief for Theft.

I. MOTION TO STRIKE

Plaintiff paid a claim on a Crime Loss Insurance Policy it issued to Hain Celestial Group, Inc. ("Hain"), the parent company of Celestial Seasonings, following the embezzlement of funds by its former employee, Defendant Jeffrey M. Wagner. Hain executed an Assignment and Release pursuant to which it assigned to Plaintiff all rights to pursue the claims raised here. Plaintiff, as Hain's subrogee, raises three claims for relief against Defendant Jeffrey M. Wagner - for Unjust Enrichment; Conversion; and Theft - in its Amended Complaint dated September 26, 2013. [Doc #30] Defendant, acting pro se, filed his Answer with Affirmative Defenses to the Amended Complaint in which he generally denied all the allegations against him and set forth a laundry list of possible affirmative defenses. [Doc #54]

Thereafter, on April 8, 2014, Plaintiff filed a Motion to Compel Defendant Jeffrey M. Wagner to Produce Documents and Respond to Plaintiff's Interrogatories [Doc #58]. On May 14, 2014, Magistrate Judge Kristen L. Mix granted the motion to compel upon finding that Plaintiff had met the requirements of Fed.R.Civ.P. 37(a). As such, Magistrate Mix ordered that "on or before June 12, 2014, Defendant Jeffrey Wagner shall produce documents responsive to Request Nos. 5, 6, 7, 9, 11, 12, and 14 of Plaintiff's First Set of Requests for Production of Documents" and "on or before June 12, 2014, Defendant Jeffrey Wagner shall respond to Interrogatory Nos. 1, 4, 6, 7, 8, 9, 10, 12, 13, 14, 16 and 18 of Plaintiff's First Set of Interrogatories." In addition, the ordered warned him "that failure to comply with this Order and to participate in this lawsuit in the future will result in the imposition of sanctions." [Doc #64]

In this motion to strike, Plaintiff asserts that Defendant has not complied with Magistrate Mix's order and has not produced any response to the discovery requests. [Doc # 86] As such, Plaintiff asks that I strike Defendant's Answer and Affirmative Defenses to Plaintiff's Amended Complaint [Doc #54] pursuant to Fed.R.Civ.P. 37(b)(2)(A)(iii), which provides that "[i]f a party... fails to obey an order to provide or permit discovery... the court where the action is pending may issue further just orders [including]... (iii) striking pleadings in whole or in part...". Id. In so requesting, Plaintiff's counsel indicates that he believes, based on a report in the local newspaper, that Defendant was sentenced to a term of imprisonment on May 30, 2014, following a guilty plea as discussed below, and is currently incarcerated. [Doc #86 Ex. G] As such, Plaintiff's counsel avers that he "has no reason to believe Mr. Wagner intends to comply with the May 14, 2014 Order, or otherwise defend himself in this action."

A district court's discretion to choose a sanction under Fed.R.Civ.P. 37(b)(2)(A) "is limited in that the chosen sanction must be both just and related to the particular claim which was at issue in the order to provide discovery." Ehrenhaus v. Reynolds, 965 F.2d 916, 921 (10th Cir. 1992)( quoting Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707, 102 S.Ct. 2099, 2106, 72 L.Ed.2d 492 (1982)). The Tenth Circuit has identified five factors a court should consider when assessing a request pursuant to Fed.R.Civ.P. 37(b)(2):

(1) the degree of actual prejudice...; (2) the amount of interference with the judicial process;... (3) the culpability of the litigant; (4) whether the court warned the party in advance that dismissal of the action would be a likely sanction for noncompliance; and (5) the efficacy of lesser sanctions.

Ehrenhaus v. Reynolds, supra, 965 F.2d. at 921 (citations omitted). "Determination of the correct sanction for a discovery violation is a fact-specific inquiry that the district court is best qualified to make." Id. at 920.

As an initial matter, I note that while Plaintiff does not seek entry of default judgment against Defendant, it asks that I strike Defendant's answer and his affirmative defenses. As such, it appears that Plaintiff intends that dismissal will be the ultimate sanction imposed and that law is clear that "dismissal represents an extreme sanction appropriate only in cases of willful misconduct" as "[i]n many cases, a lesser sanction will deter the errant party from further misconduct." Id. at 920 (citations omitted). "Particularly in cases in which a party appears pro se, the court should carefully assess whether it might appropriately impose some sanction other than dismissal, so that the party does not unknowingly lose its right of access to the courts because of a technical violation." Id. at 920 n.3 ( citing Mitchell v. Inman, 682 F.2d 886, 887 (11th Cir. 1982)(per curium)).

Defendant has failed to participate in discovery since the action was filed. He has failed to obey the Magistrate Judge's order specifically compelling discovery, resulting in prejudice to Plaintiff in the form of delay, its inability to prepare its case, and ever-increasing attorney fees and costs, as well as creating substantial interference with the judicial process. The order, dated May 14, 2014, was issued prior to his guilty plea and apparent sentencing and incarceration, and would have been sent to his address of record. Defendant has provided no justification for his failure to comply, or indeed to participate in discovery at all. As a result, Defendant has wilfully failed to comply with a direct court order. Defendant was warned by the court that failure to comply would result in sanctions, and I find that given the repeated unwillingness to comply with his obligations and participate in this lawsuit, that a lesser sanction would likely be ineffective. I agree with Plaintiff that Defendant Jeffrey M. Wagner's willful failure to comply, coupled with the explicit warning that such failure would result in sanctions warrants the imposition of such sanctions under Fed.R.Civ.P. 37(b)(2)(A). Furthermore, based on the circumstances presented here, I find that striking his Answer and Affirmative Defenses to the Amended Complaint [Doc #54] is a fair and appropriate sanction for his failure to respond or participate in this litigation. See generally Microsoft Corp. v. Computers Plus USA, Inc., 2007 WL 1725277 (D.Colo. 2007) (unpublished)(ruling that striking the defendants' answer was a "just" sanction). As such, I grant Plaintiff's motion to strike.

II. MOTION FOR SUMMARY JUDGMENT

Plaintiff also seeks entry of summary judgment in its favor on two of its claims against Defendant Jeffrey M. Wagner for Conversation (Fourth Claim for Relief) and Theft (Fifth Claim for Relief) pursuant to Fed.R.Civ.P. 56. I again note that Defendant Jeffrey M. Wagner has not responded to this motion, which was sent to his address of record.

Specifically, Plaintiff claims that summary judgment is appropriate on its claims for Conversion and Theft pursuant to the doctrine of issue preclusion. In support of this argument, Plaintiff refers me to a Plea Agreement and Advisement Pursuant to Fed.R.Crim.P. 11 [Doc #86 Ex. B] in which Defendant Jeffrey M. Wagner pled guilty to a theft charge and a forgery charge in the District Court of Boulder County Colorado, Case No. 12CR1792, on March 20, 2014. The factual basis for the guilty plea was that while Defendant Jeffrey M. Wagner was employed by Celestial Seasonings he stole $1.8 million from the company and forged documents as part of that theft scheme. [Doc #86 Ex. A] Because Defendant Jeffrey M. Wagner admitted stealing from Celestial ...


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