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Federal National Mortgage Association v. Chicago Title Insurance Co.

United States District Court, S.D. Indiana, Indianapolis Division

September 20, 2019



          Matthew P. Brookman United States Magistrate Judge.

         I. Introduction

         Judgment Creditor, Chicago Title Insurance Company (“Chicago Title”) seeks an entry holding Judgment Defendant, Nickolas W. Jekogian, III (“Jekogian”) in contempt of court and to impose sanctions on Jekogian for his repeated failure to comply with the rules and orders of this Court. (Docket No. 156). Jekogian did not respond to the motion. The Honorable Jane Magnus-Stinson assigned this matter to the Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1)(B). The undersigned recommends Chicago Title's request be granted in part and denied in part for the reasons that follow.

         II. Background

         Chicago Title obtained a judgment against Jekogian over six (6) years ago, on June 7, 2013, in the amount of $343, 301.39 (Docket No. 97) (the “Judgment”). Since that date Chicago Title has been unsuccessful in satisfying the judgment-which brings the case before the undersigned today to consider this motion for sanctions.

         The Judgment continues to accrue interest at the statutory rate. In 2015, Jekogian and Chicago Title entered into a written agreement to satisfy the Judgment. (Docket No. 156 at ECF p. 1). The Agreement provided that Jekogian would make certain periodic payments to Chicago Title. (Id.). Chicago Title asserts that Jekogian has breached the Agreement multiple times, which has forced Chicago Title to seek court intervention through proceedings supplemental to attempt to collect on its Judgment and discovery information about Jekogian's assets that could be used to repay the Judgment. (Id.).

         Chicago Title moves for sanctions against Jekogian for alleged discovery misconduct. The primary misconduct alleged is that Jekogian has failed to abide by this Court's November 5, 2018, Order requiring Jekogian to “supplement and provide answers to, and produce documents responsive to, discovery requests served upon him by Chicago Title in a manner consistent with the September 6, 2018, letter sent by Chicago Title to Jekogian” (Docket No. 153) and by this Court's January 22, 2019, Order requiring Jekogian to reimburse Chicago Title for the $3, 640.00 in attorneys' fees incurred in order to file the motion to compel addressed in the Court's November 5, 2018 order. (Docket No. 155). Chicago Title asserts it has not been reimbursed. (Docket No. 156 at ECF p. 3).

         The Court's record shows that these failures are just Jekogian's latest in a long line of dismissive behavior towards this matter, both before and after judgment was entered. A review of the post-judgment activity is appropriate. On August 15, 2013, Chicago Title requested a proceeding supplemental (Docket No. 98), which was originally scheduled for September 30, 2013, hearing. (Docket No. 100). The scheduling order warned that disobedience of the order may be punished as contempt. (Id.). On September 27, 2013, Chicago Title requested that the hearing be continued as Jekogian was providing answers to written discovery. (Docket No. 105). Chicago Title also advised that Jekogian had provided it with an address that the Court may use as a service address for Jekogian. (Docket No. 105 at ECF p. 2). On September 30, 2013, the Court vacated the hearing and noted Jekogian's address for the purposes of service. (Docket No. 107).

         On July 11, 2014, Chicago Title filed a renewed motion for proceedings supplemental (Docket No. 108) after it was unable to obtain a full accounting from Jekogian and this court set a hearing for August 14, 2014. (Docket No. 109). Again, the Court warned disobedience of the order could be punished by contempt. (Id.). Jekogian did not appear at the August 14, 2014, hearing, [1] despite proper service. (Docket No. 113). On December 9, 2014, this Court ordered Jekogian to comply with Chicago Title's earlier propounded discovery requests and warned him that failure to do so could result in being found in contempt of court and the imposition of sanctions. (Docket No. 114 at ECF p. 3). Also on December 9, 2014, the Court ordered Jekogian to appear on January 26, 2015, for a show cause hearing after his August 14, 2014, failure to appear. (Docket No. 115 at ECF p. 3).

         On January 21, 2015, five days before the show cause hearing, Jekogian filed an agreed motion to continue the hearing indicating that he had recently retained counsel and was working to resolve the issues, which necessitated the hearing. (Docket No. 118). The Court granted the request and extended the hearing to March 3, 2015. (Docket No. 119). On February 27, 2015, the parties reported they were in the process of finalizing a settled resolution to the matter and again requested the Court to continue the show cause hearing. (Docket No. 120). The Court granted that request, indicating that the hearing could be reset by motion of either party. (Docket No. 121).

         The parties appeared to be working towards a resolution, at least until October 27, 2015, when Chicago Title reported that Jekogian had failed to make a payment, as agreed, by September 1, 2015; thus, Chicago Title asked for a proceeding supplemental hearing to be set. (Docket No. 122). The Court granted that request, but made clear that it was only rescheduling the previously continued proceedings supplemental and show cause hearing and that it would not enforce the scope of the settlement agreement executed by the parties as such a request was beyond the scope of this litigation. (Docket No. 123). A hearing was set for March 3, 2016 (Docket No. 124), but again Chicago Title filed an agreed motion to continue the hearing indicating that the parties had reached an agreement. (Docket No. 125). The Court granted that request, indicating that the hearing could be reset by motion of either party. (Docket No. 126).

         Once again, the parties appeared to be working towards a resolution until, perhaps predictably, October 7, 2016, when Chicago Title reported that Jekogian had failed to make a payment, as agreed, by September 1, 2016; thus, Chicago Title again asked for a proceeding supplemental hearing to be set. (Docket No. 128). The Court set a hearing for November 29, 2016, warning that disobedience of that order may be punished by contempt. (Docket No. 130). On October 25, 2016, Jekogian's counsel indicated that Mr. Jekogian sought to terminate him as counsel (Docket No. 129) and the Court permitted counsel to withdraw by order on October 27, 2016. (Docket No. 131). Since October 27, 2016, Jekogian has proceeded in this matter pro se.

         Jekogian failed to appear at the November 29, 2016, hearing, and a show cause hearing was scheduled for December 29, 2016. (Docket No. 134; Docket No. 135).[2]

         On January 18, 2017, the parties reported that Jekogian would voluntarily update his asset information and that they would work out discovery without further Court involvement. (Docket No. 139). Nonetheless, approximately ten (10) months later, and after Jekogian had failed to make a payment pursuant to the settlement agreement, Chicago Title again requested a proceeding supplemental hearing. (Docket No. 140). The Court set the hearing for December 15, 2017 and warned that disobedience of the Order may be punished as contempt. (Docket No. 142). Despite proper service (Docket No. 143), Jekogian again failed to appear. (Docket No. 144). A show cause hearing was set for January 31, 2018. (Docket No. 145). By agreement of the parties this hearing was continued to March 8, 2018, as they had again been in discussions concerning Defendants' assets and liabilities. (Docket No. 147 at ECF p. 2; Docket No. 149). Again, despite proper service (Docket No. 150), Jekogian failed to appear at the March 8, 2018 hearing. (Docket No. 151).

         On September 25, 2018, Chicago Title filed the above-mentioned motion to compel after it received inadequate answers to a Second Set of Interrogatories and Requests for Production of Documents served to Jekogian on June 22, 2018. (Docket No. 152). Of interest, this round of written discovery sought to obtain information regarding two trusts that Chicago Title argued “are potentially sources of assets that should properly be subject to execution [to satisfy the judgment].” (Docket No. 152 at ECF p. 4). Prior to serving the motion, Chicago Title provided a letter to Jekogian detailing the supplementations it sought (“September 6, 2018 letter”), but Jekogian's paltry one-page response was unsatisfactory. (Docket No. 152-7).

         The Court ordered Jekogian to supplement in a manner consistent with the September 6, 2018, letter, as discussed above by November 19, 2018. (Docket No. 153). While Jekogian did produce some responses on November 19, 2018, Chicago Title argues that they were not verified or under oath and Jekogian's responses to paragraphs 5, 7, 8, and 9 of the September 6, 2018 letter were woefully deficient. (Docket No. 156-1; Docket No. 156-2). On December 28, 2018, Chicago Title sent another follow-up letter to Jekogian summarizing additional and remaining issues with discovery and warning that additional court proceedings may be necessary should Jekogian fail to supplement his discovery by January 15, 2019. (Docket No. 156 at ECF pp. 4-5; Docket No. 156-4; Docket No. 156-5). Chicago Title indicates that Jekogian has failed to provide full and complete discovery responses. (Docket No. 156 at ECF p. 5). Thus, Chicago Title requests that this Court impose further sanctions and find that Jekogian be held in contempt.

         III. Standard

         The Court has the inherent power to protect the integrity of the judicial system and punish those who abuse it by fashioning a sanction proportional to the abusive conduct. Chambers v. NASCO, Inc., 501 U.S. 32, 44-45 (1991); Allen v. Chicago Transit Auth., 317 F.3d 696, 703 (7th Cir. 2003) (sanction under court's inherent power “should be proportioned to the gravity of the offense”).

         Rule 37 gives the court authority to sanction a party for discovery misconduct, in particular. A party's failure to comply with discovery orders is misconduct subject to sanctions under Rule 37(b). Making evasive or incomplete disclosures in response to document requests or interrogatories, or in answer deposition questions is another type of discovery misconduct. R. Civ. P. Rule 37(a)(4). That behavior is treated as a failure “to disclose, answer, or respond, ” id., and Rule 37(d) permits sanctions under Rule 37(b) to be imposed for that conduct. Discovery misconduct may be sanctioned in any “just” manner, including imposition of various types of sanctions listed in Rule 37(b)(2)(A). Of relevance to this motion, Rule 37(b)(2)(A)(i) and (ii) provides that sanctions may include: “(i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims” and “(ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters into evidence.”

         Further, an award of attorneys' fees incurred in bringing or responding to a discovery motion must be made in favor of the winning party unless the other's conduct or position “was substantially justified or other circumstances make an award of expenses unjust.” See Fed. R. Civ. P. Rule 37(b)(2)(C) and 37(d)(3).

         Rule 37 sanctions are appropriate where a party displays willfulness, bad faith, or fault in violating his discovery obligations. Marrocco v. General Motors Corp., 966 F.2d 220, 224 (7th Cir. 1992) (citing National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 640 (1976)). Willfulness or bad faith may be inferred through a party's “pattern of contumacious conduct or dilatory tactics, ” and that conduct can lead to the harshest of sanctions. Crown Life Ins. Co. v. Craig, 995 F.2d 1376, 1383 (7th Cir. 1993). See also Newman v. Metropolitan Pier & Exposition Auth., 962 F.2d 589, 591 (7th Cir. 1992) (affirming sanction of default where, although district court had not made a finding of bad faith, the party's failure to comply with discovery obligations was part of a pattern of noncompliance rather than inadvertent, isolated, or merely careless); Downs v. Westphal, 78 F.3d 1252, 1257 (7th Cir. 1996) (affirming default judgment against pro se defendants where evidence of their bad faith conduct was overwhelming; they rivaled only each other in their level of untruthfulness).

         “Fault” as a ground for imposing Rule 37 sanctions considers whether the party's discovery conduct demonstrates objectively a lack of reasonableness. Marrocco, 966 F.2d at 224. A party's “extraordinarily” poor judgment or “gross” negligence as opposed to a mere mistake or carelessness may warrant harsh Rule 37 sanctions. Id. (directing verdict in favor of plaintiff where defendant flagrantly disregarded its duty “to preserve and monitor the condition of evidence which could be pivotal in a lawsuit”).

         Sanctions serve two purposes: to penalize parties who do not follow the rules and to deter others tempted that abusive conduct has no consequence. Greviskes v. Univs. Research Ass'n, Inc., 417 F.3d 752, 758-59 (7th Cir. 2005); Phillips Medical Sys. Intl'l, B.V. v. Bruetman, 982 F.2d 211, 214 (7th Cir. 1992). Whether the court is exercising its inherent power or invoking Rule 37, the sanction must be proportional to the abusive conduct. Allen v. Chicago Transit Auth., 317 F.3d 696, 703 (7th Cir. 2003) (stating sanction under court's inherent power “should be proportioned to the gravity of the offense”); Maynard v. Nygren, 372 F.3d 890, 893 (7th Cir. 2004) (stating for Rule 37 sanctions, the punishment should fit the crime). The court should consider “the egregiousness of the conduct in question in relation to all aspects of the judicial process.” Dotson v. Bravo, 321 F.3d 663, 667-68 (7th Cir. 2003) (internal quotation omitted).

         IV. Findings of Fact

         Chicago Title specifically avers that Jekogian has still insufficiently responded to paragraphs 5, 7, 8, and 9 of the September 6, 2018 letter, despite this Court's order to do so. Those paragraphs and Jekogian's responses are as follows:

         Paragraph 5:

Interrogatories 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 31, 32, 33, 34: These Interrogatories concerned the Jekogian Family Trust and the BBJ Family Irrevocable Trust, which you admitted in response to Interrogatories 15 and 16 have “substantial real estate assets” or “holdings” and, as you conceded in response to Interrogatory 13, “have made various investments in real estate and debt instruments including some partnerships that I was once a partner in and guaranteed some of the debt.” On this basis alone, information about the trusts is germane to the issues in this collection matter. We are entitled to discover information regarding what holdings and assets each trust has, any transfers of money or assets between and among the trusts and you or your family and businesses, and the various other issues addressed in the Discovery Requests. For these reasons, your objections that the trusts “operate outside of [you], ” are “not . . . part[ies] to this action, ” that “[t]he business decisions of the trusts have nothing to do with Chicago Titles [sic] claims, ” or that you “cannot answer for them” lack merit or any legal basis. Additionally, the term “You” is defined in the Discovery Requests to include you, “your present and former partners, employees, agents, attorneys, and all other persons acting on [you] behalf or under [your] ...

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