United States District Court, D. South Dakota, Southern Division
MEMORANDUM OPINION AND ORDER REGARDING SANCTION
CLAIMS AND DIRECTING DRAFTING OF FINAL JUDGMENT
Lawrence L. Piersol United States District Judge.
background facts of this case are summarized in this
Court's Memorandum Opinion granting the Plaintiffs Motion
for Summary Judgment, Doc. 225, filed April 14, 2016, and the
Court's Memorandum Opinion Granting Plaintiffs Motion for
Summary Judgment, Doc. 482, filed April 5, 2017. Still
pending before the Court are various claims by SPV for
sanctions against some of the lawyers who have represented
Third-Party Defendants in this litigation.
asking for monetary damages for sanctions against Aaron
Twersky, who was the last of a series of lawyers who
represented Silberman, who was the successor trustee of The N
Bergman Insurance Trust. Sanctions were also requested
against attorneys representing the Estate of Nancy Bergman,
that being Brian Donahoe as the local South Dakota counsel,
and attorney Gerald Kroll, the California lawyer who was the
primary counsel for The Estate of Nancy Bergman.
In the Eighth Circuit, district court impositions of
sanctions are. governed by the abuse of discretion standard.
Perkins v. General Motors Corp., 965 F.2d 597, 602
(8th Cir. 1992) (upholding district court's imposition of
sanctions under Federal Rules of Civil Procedure 11 and 26);
Gallagher v. Magner, 619 F.3d 823, 844 (8th Cir.
2010) ("We review an order denying discovery sanctions
for an abuse of discretion.") (citation omitted).
"[T]he district courts [are given] a large amount of
discretion in regulating and sanctioning misconduct which
occurs in proceedings before it." Good Stewardship
of Christian Center v. Empire Bank, 341 F.3d 794, 797
(8th Cir. 2003) (citing Hunt v. City of Minneapolis,
Minn, 203 F.3d 524, 527 (8th Cir. 2000)). See
Bunting v. Sea Ray, Inc., 99 F.3d 887, 890 (8th Cir.
1996) (holding that "[t]he conduct of discovery is
committed to the trial court's sound discretion."
The trial court did not "condone" obstructionist
tactics in refusing to grant sanctions). Specific to when
deciding whether to dismiss a case as a sanction for
discovery abuses, "the district court must balance its
'need to advance its burdened docket against the
consequence of irrevocably extinguishing [a] litigant's
claim.' " Empire Bank, 341 F.3d at 797
(citation omitted). While a district court is advised to
first consider lesser sanctions, Keefer v. Provident Life
and Ace. Ins. Co., 238 F.3d 937, 941 (8th Cir. 2000),
"[t]he futility of lesser sanctions is a further
consideration in the district court's balancing
calculation." Empire Bank, 341 F.3d at 797
(citing First Gen. Res. Co. v. Elton Leather Corp.,
958 F.2d 204, 206 (8th Cir. 1992)). Moreover, imposing a
sanction on a litigant "is proper only if just and
expressly related to the particular claim."
MacGregor v. Mallinckrodt, Inc., 373 F.3d 923, 935
(8th Cir. 2004) (citing Keefer, 238 F.3d at 941).
Rule of Civil Procedure 37 " 'provides generally for
sanctions against parties or persons unjustifiably resisting
discovery.' " § 2281 History and Purpose of
Rule, 8B Fed. Prac. & Proc. Civ. § 2281 (3d ed.)
(quoting Advisory Committee Note to 1970 amendments of Rule
37, 78 F.R.D. at 538). In the Eighth Circuit,
"[I]mposition of discovery sanctions requires 'an
order compelling discovery, a willful violation of that
order, and prejudice to the other party.'
Mallinckrodt, 373 F.3d at 934 (quoting Chrysler
Corp. v. Carey, 186 F.3d 1016, 1019 (8th Cir. 1999)).
See Guifu Li v. A Perfect Day Franchise, Inc., 281
F.R.D. 373, 390 (N.D. Cal. 2012) ("As a condition
precedent to imposing sanctions pursuant to Federal Rule of
Civil Procedure 37 the Defendants must have violated a Court
Order."); Fed. Prac & Proc,, supra at § 2282
("The general scheme of  [R] ule  is that
ordinarily sanctions can be applied only for a failure to
comply with an order of the court.) Defendants had to be
forced by motion to comply but ultimately, after much effort
by SPV and the Court, the Estate did ultimately substantially
comply in the proceedings before this Court. Nachman Bergman,
as an individual and Trustee did only partially comply and
the sanction of dismissal of his claims was and is again
granted. Compliance by Malka Silberman individually and as
Trustee will be discussed only in regard to the period of
representation by Attorney Twersky. See:
Doc. 312, Order Granting in Part and Denying in Part
Plaintiff and Third-Party Defendants' Motion to Compel,
Docket No. 196, dated June 28, 2016
Doc. 305, Order on Plaintiffs and Third-Party Defendants'
Motion to Compel, Docket No. 237, dated June 28, 2016
Doc. 342, Order on Motion to Compel Brian Donahoe to Comply
with Subpoena, Docket No. 252, dated August 11, 2016
Doc. 327, Order on Plaintiffs and Third-Party Defendants'
Motions to Compel Attorneys Pamela Reiter and Ronald Parsons
to Comply with Subpoenas, Docket No. 255, dated July 15, 2016
Doc. 309, Order on Plaintiffs and Third-Party Defendants'
Motion to Compel Attorney Alan Peterson to Comply with
Subpoena, Docket No. 258, dated June 29, 2016
Doc. 310, Order on Plaintiffs and Third-Party Defendants'
Motion to Compel Attorney Matthew Dorothy to Comply with
Subpoena, Docket No. 261, dated June 29, 2016
Doc. 311, Order on Plaintiffs and Third-Party Defendants'
Motion to Compel and for Sanctions Against Third-Party
Defendant Nachman Bergman, Docket No. 278, dated June 30,
Doc. 472, Memorandum Opinion and Order on Plaintiffs and
Third-Party Defendants' Motion to Compel, filed March 6,
failed the first prong of the Eighth Circuit's three-part
test for Rule 3 7 sanctions-an order compelling discovery.
See Countryside Cas. Co. v. Orr, 523 F'.2d 870,
872 n. 3 (8th Cir. 1975) ("The sanctions found in
Fed.R.Civ.P. 37 are the only relief available for failure to
make discovery.") (citations omitted).
Federal Rule of Civil Procedure 11, district court
impositions of sanctions are reviewed under the deferential
"abuse of discretion" standard. Cooter &
Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct.
2447, 110 L.Ed.2d 359 (1990). "A district court would
necessarily abuse its discretion if it based its ruling on an
erroneous view of the law or on a clearly erroneous
assessment of the evidence." Id. A Rule 11
be warranted when a pleading is "presented for any
improper purpose, such as to harass or to cause unnecessary
delay or needless increase in the cost of litigation, "
Fed.R.Civ.P. 11(b)(1), contains allegations or factual
contentions that lack evidentiary support, Fed.R.Civ.P.
11(b)(3), or contains denials of factual contentions that are
not warranted on the evidence. Fed.R.Civ.P. 11(b)(4).
Clark v. United Parcel Service, Inc., 460 F.3d 1004,
1008 (8th Cir. 2006). Furthermore, "Rule 11 sanctions
are imposed only in response to claims that are not
'warranted by existing law or by a nonfrivolous argument
for the extension, modification, or reversal of existing
law." MHC Inv. Co. v. Racom Corp., 323 F.3d
620, 623 (8th Cir. 2003) (quoting Fed.R.Civ.P. 11(b)(2)).
Fatal to SPV's claim that Rule 11 has application here,
however, "Rule 11 expressly does not apply to
disclosures and discovery requests or responses subject to
Rules 2 through 37." Ideal Instruments, Inc. v.
Rivard Instruments, Inc., 243 F.R.D. 322, 334 (N.D. IA.
2007) (citing Fed.R.Civ.P. 11(d) (emphasis in original). See
Perkins, 965 F.2d at 601-02 (upholding Rule 11
sanctions based on motion practice unrelated to discovery).
No basis has been shown for Rule 11 sanctions.
sanctions imposed under Rule 11, which are imposed at a
court's discretion, Federal Rule of Civil Procedure 26
"requires sanctions if a violation of the rule is
found." Books are Fun, Ltd. v. Rosebrough, 239
F.R.D. 532, 550 (S.D. IA. 2007) (citations omitted).
"Rule 26(g) sanctions are designed 'to deter abuse
and compensate the opposing party for all expenses, whenever
incurred, that would not have been sustained had the opponent
conducted itself properly.' " Id. (quoting
Johnson Int'l Co. v. Jackson Nat'l Life Ins.
Co., 19 F.3d 431, 439 n. 10 (8th Cir. 1994) (internal
quotations and citation omitted)). Rule 26(g) sanctions are
proper " 'when the signing of [a discovery request]
is incomplete, evasive or objectively unreasonable under the
circumstances.' " Id. (quoting st. Paul
Reinsurance Co. Ltd. v. Commercial Fin. Corp., 198
F.R.D. 508, 515 (N.D. Iowa 2000)) (alteration in original).
See Oregon RSA No. 6, Inc. v. Castle Rock Cellular of
Oreg. Ltd. Partnership, 16 F.3d 1003, 1007 (9th Cir.
1996) (using "an objective standard to determine whether
a party or attorney has responded or objected to a discovery
request for an improper purpose."). "The most
obvious situation where sanctions are appropriate occurs when
a party or its attorney submits a false discovery
document." Rosebrough, 239 F. R. D. at 551
(citing Perkins, 965 F.2d at 600 n. 5). Submitting a
false discovery document-or fabricating evidence-"has
been referred to as 'the most egregious misconduct'
which justifies a finding of fraud upon the Court."
Interpreter Services, Inc. v. BTB Technologies,
Inc., No. CIV 10-4007, 2011 WL 6935343, at *8 (D.S.D.
Dec. 29, 2011) (quoting In re Coordinated Pretrial
Proceedings in Antibiotic Antitrust Actions (Antitrust
Actions), 538 F.2d 180, 195 (8th Cir. 1976), abrogation on
other grounds recognized by Briscoe v. County of St.
Louis, Missouri, 690 F.3d 1004, 1011 n. 2 (8th Cir.
2012)). For a court to find such a fraud has been committed,
it "must be supported by clear, unequivocal and
convincing evidence." Antitrust Actions, 538
F.2dat 195 (citing Barr Rubber Products Co. v. Sun Rubber
Co., 425 F.2d 1114, 1120 (2nd Cir. 1970), cert,
denied 400 U.S. 878, 91 S.Ct. 118, 27 L.Ed.2d 115
regard to the claims against Aaron Twersky, some more history
is necessary. Malka Silberman as Successor Trustee of The N
Bergman Insurance Trust, was represented at the inception of
this litigation in 2014 by Andrew Citron. Attorney Citron
never made an appearance in the litigation but secured the
representation for Silberman by the South Dakota law firm of
Johnson, Heidepriem, & Abdallah. The Johnson, Heidepriem
firm, through their attorneys, Pamela Bollweg and Ronald
Parsons of Sioux Falls appeared for Malka Silberman on
September 25, 2014, and withdrew from that representation on
October 20, 2015. Silberman was next represented by Attorney
Matthew Dorothy beginning on November 19, 2015, and that
representation lasted until April 8, 2016. Next, after
Attorney Dorothy, Silberman was represented by attorney Aaron
Twersky who made his appearance in the litigation on April 8,
2016, and that representation continued until he and local
counsel, James Moore of Woods, Fuller, Shultz & Smith
moved on August 16, 2016, to be allowed to withdraw. The
Court allowed their withdrawal from the ...