# Builders Insulation of Tennessee, LLC v. Southern Energy Solutions

> District Court, W.D. Tennessee · January 17, 2020

URL: https://www.frixlaw.com/law-library/cases/10439737

## Case

- **Court:** District Court, W.D. Tennessee
- **Decided:** January 17, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10439737

## How later opinions describe it (automated extraction)

- affirming dismissal of complaint where bad faith was found, even though “there was no explicit warning of dismissal”

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
________________________________________________________________

BUILDERS INSULATION OF )
TENNESSEE, LLC, )
)
Plaintiff, )
)
v. ) No. 17-cv-2668-TLP-tmp
)
SOUTHERN ENERGY SOLUTIONS, )
A Tennessee General Partnership; )
THOMAS WALKER DAVIS, a/k/a Thom )
Davis; and TERI LEIGH DAVIS, )
a/k/a Teri Davis, )
)
Defendants. )
________________________________________________________________

ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SANCTIONS
________________________________________________________________

Before the court by order of reference is plaintiff Builders
Insulation of Tennessee, LLC’s (“Builders”) Motion for Sanctions,
filed on November 8, 2019. (ECF Nos. 176; 102.) On November 21,
2019, defendants Southern Energy Solutions, Thomas Davis, and Teri
Davis (collectively “SES”) filed a response. (ECF No. 178.) For
the following reasons, the Motion for Sanctions is GRANTED in part
and DENIED in part.
I. FINDINGS OF FACT
In September 2015, Builders and Thom Davis entered into
discussions pursuant to which Builders Insulation expressed
interest in hiring Thom Davis as an employee. (ECF No. 103 at 3
¶ 8.) Thom and Teri Davis apparently informed Builders that they
were winding down the operations of Southern Energy Solutions, a
company run by the Davises. (Id. at 3 ¶ 9.) Builders subsequently

hired Thom Davis, and he executed an at will employment contract
with Builders. (Id. at 3 ¶ 10.) According to Builders, “Builders
Insulation and Thom Davis agreed that Thom Davis, as an employee
of Builders Insulation, would bid on projects on behalf of Builders
Insulation and Builders Insulation would provide labor and
materials on those various projects.” (Id. at 3 ¶ 11.) Builders
alleges that Thom and Teri Davis, contrary to their
representations, continued to run SES even after Builders hired
Thom Davis. (Id. at 3 ¶ 13.) Builders further contends that
“instead of bidding on projects and providing labor and materials
for the benefit of Builders Insulation, Thom Davis used Builders
Insulation’s trucks, equipment, inventory and tools on projects

for the benefit of himself, Teri Davis and Southern Energy
Solutions.” (Id.) Builders fired Thom Davis on July 26, 2017.
(ECF No. 80 at 91-92.) Builders filed the instant lawsuit
against SES on September 12, 2017. (ECF No. 1.)
Several acrimonious disputes have arisen during the discovery
process in this case. The most recent dispute, which is the subject
of the instant motion, involves an All-In-One computer in SES’s
possession and certain bank records from SES’s Independent Bank
account. On March 11, 2019, Builders filed a Motion to Compel
regarding SES’s failure to produce account records for SES’s
Independent Bank account for the time period of September 2015 to
August 2017. (ECF No. 89.) District Judge Parker referred the

motion to compel to the undersigned on March 28, 2019. (ECF No.
102.) At a hearing on May 1, 2019, Builders also requested that
SES be required to produce a mirror image of an All-In-One computer
in SES’s possession. SES indicated that, after the motion was
filed, SES requested the records from its bank. The bank
subsequently informed SES that it could provide the records by
early May. Accordingly, the undersigned directed SES to produce
the bank records requested by May 15, 2019. (ECF No. 118 at 2.)
While the undersigned did not require SES to produce a mirror image
of its All-In-One computer, the court directed “counsel for SES
[to] ensure that the All-In-One computer is searched and all
relevant information contained therein produced by May 15, 2019.”

(Id. at 4.)
On May 20, 2019, Builders filed a Notice of Noncompliance
stating that SES failed to comply with the court’s May 1, 2019
order. (ECF No. 123.) According to Builders, SES produced 897 pages
of documents from its search of the All-In-One computer, despite
previously representing to the court that it had no such relevant
documents in its possession. (Id. at 2 n.1.) In addition, the bank
records produced by SES appeared to have a print date of April 19,
2019, meaning that SES was in possession of these documents prior
to hearings before the court regarding the discovery dispute on
April 25 and May 1. (Id. at 2.) Builders also pointed out that the
bank records produced by SES appeared to be copies rather than

originals from the bank itself. (Id.) Lastly, Builders asserted
that SES had produced altered checks. (Id. at 2-3.)
The day after Builders filed the Notice of Noncompliance,
counsel for SES moved to withdraw. (ECF No. 124.) The undersigned
granted the motion to withdraw on June 10, 2019. (ECF No. 142.)
SES then filed a pro se response to the Notice.1 (ECF No. 136.) In
the pro se response, SES states: “Defendants were unaware that
non-original copies were provided to attorneys Ballin, Ballin and
Fishman.” (Id. at 3.) SES also states: “Defendants turned over
what was thought to be the original documents from the bank[.]”
(Id.) Finally, SES states: “Defendants unknowingly provided
Ballin, Ballin and Fishman altered copies of the deposits[.]” (Id.)

SES subsequently retained its present counsel, and a second
response to the Notice was filed through counsel on August 9, 2019.
(ECF No. 161.) In this response, SES acknowledges that it provided
altered checks to Builders: “Defendants, prior to providing copies
of the records to their prior counsel, redacted certain information

1In response to the instant Motion, SES states that Teri Davis
submitted the pro se response to the Notice of Noncompliance as an
email attachment to the court’s ECF mailbox. (ECF No. 178 at 3.)
SES points out that the defendants did not sign the pro se
response. (Id.)
in the ‘memo’ section of the deposited checks which would identify
the street address or lot number of the job(s) being paid for with
the check.” (Id. at 2.) While SES admits to redacting information

from the checks, it asserts that it did so in good faith, seeking
only to keep confidential information out of the hands of a
business competitor, Builders. (Id. at 3-4.) The response states
as follows:
Defendants redacted the information out of their concern
that the information, particularly as to job site, would
enable the Plaintiff to ascertain square footage of the
job and determine, based on the customer’s payment,
SES’s job pricing to SES’s customers. As SES’s pricing
information is confidential, Defendants were concerned
that such information would give Builders an unfair
competitive advantage.

(Id. at 4.) SES provided unredacted copies of the bank records in
question contemporaneously with filing its response. (Id.)
On October 24, 2019, the undersigned held a hearing on the
Notice of Noncompliance, at which time the undersigned authorized
Builders to submit a motion for sanctions based on its allegations.
Builders filed the instant Motion for Sanctions on November 8,
2019. (ECF No. 176.) Builders also submitted a side-by-side
comparison of the fifty-four altered checks alongside the
originals. (ECF No. 177.) According to Builders, the checks
initially produced by SES consisted of “ten blurry check images
per page in hard copy form,” on which “alterations and redactions
are not apparent to the naked eye.” (ECF No. 176 at 5.) It was not
until the production of documents from the All-In-One computer,
which included copies of five check images from August 2017, that
Builders was able to compare the check images to the corresponding

originals and discover the alterations. (Id. at 5-6.) When provided
with originals of the check images, Builders discovered fifty-four
of the checks had been altered when initially produced. (Id.)
On approximately twenty-four of the checks, SES removed
invoice numbers.2 On approximately twenty-four of the checks,
defendants removed lot numbers from the memo lines.3 Defendants
also removed addresses and other property identifiers from the
memo lines of approximately twenty checks.4 Defendants removed the
words “foam” or “insulation” from the memo lines of approximately
seven checks.5 Defendants also removed pricing information from
the memo lines of approximately ten checks.6

2See Check Nos. 3240, 1095, 1069, 3457, 4914, 1056, 1115, 1127,
17862, 144, 1134, 18157, 148, 1254, 1153, 12536, 1287, 1245,
1465, 5863, 1213, 1339, 2032, & 1010. (ECF No. 177.)

3See Check Nos. 2389, 2498, 2767, 3240, 3565, 3644, 1028, 3750,
1095, 2643, 4786, 3457, 4838, 4914, 5052, 5088, 1134, 5287,
5434, 5595, 5742, 5813, 5863, & 6002. (ECF No. 177.)

4See Check Nos. 2389, 2498, 1767, 1028, 1069, 2643, 170, 1056,
1115, 1127, 144, 1052, 1134, 1014, 5434, 186, 5872, 5884, 2032,
& 5511. (ECF No. 177.)

5See Check Nos. 8487, 8742, 1177, 1014, 1172, 1339, & 1034. (ECF
No. 177.)

6See Check Nos. 3457, 3565, 3644, 3750, 4838, 5052, 5088, 5287,
5863, & 6002. (ECF No. 177.)
According to Builders, SES used a “sophisticated process” of
redaction “to make it appear as if nothing had been altered on the
checks.” (Id. at 6.) None of the checks contain the word “redacted”

or have information blacked out in such a manner that would make
the redaction apparent. Rather, the checks appear as though they
have not been altered in any way. Builders contends “this involved
cutting, copying, pasting, manipulating the check image itself to
recreate a horizontal memo line, while removing relevant
information altogether to make it appear as if nothing had been
altered.” (Id.) Upon the undersigned’s review of a side-by-side
comparison of the original and altered checks, it appears as though
approximately twenty-five of the checks were altered in such a way
that required defendants to remove text crossing below the memo
line, meaning defendants had to either redraw the memo line or
take great care to make it appear undisturbed.7

SES filed a response to Builders’ Motion for Sanctions on
November 21, 2019. (ECF No. 178.) According to SES, “[p]rior to
providing copies of the records to their prior counsel, Teri Davis
redacted certain information in the ‘memo’ section of the deposited
checks which would identify the street address or lot number of
the job(s) being paid for with the check.” (Id. at 2.) According

7See Check Nos. 4786, 2643, 1095, 1069, 5088, 8742, 1115, 144,
1052, 1134, 1177, 1014, 148, 5434, 1153, 1172, 5742, 5872, 5884,
5863, 1339, 2032, 6002, 1034, & 1010. (ECF No. 177.)
to SES, Teri Davis redacted the information out of concern that
Builders, as a business competitor, would be able to use the
information to gain an unfair competitive advantage. (Id. at 4.)

SES reiterated its “concern that the [redacted] information,
particularly as to job site, would enable [Builders] to ascertain
square footage of the job and attempt to determine, based on the
customer’s payment, SES’s job pricing to SES’s customers.” (Id.)
SES also noted that while the Davises understood that a Protective
Order was in place, they did not understand that the order
precluded Builder’s counsel from sharing information with its
client. (Id.) Moreover, SES voiced concerns about whether Builders
has adhered to the Protective Order, “based on SES’s dealings with
common suppliers it shares with Builders during the course of this
litigation.” (Id. at 4-5.)
II. CONCLUSIONS OF LAW

A. Authority of Magistrate Judge to Impose Rule 37 Sanctions
As a preliminary matter, the court will address its authority
to rule on the instant Motion by order rather than report and
recommendation. Magistrate judges generally have authority to
enter orders regarding non-dispositive pre-trial motions but must
submit report and recommendations for dispositive motions. See 28
U.S.C. § 636; Fed. R. Civ. P. 72. There is little debate as to
whether a magistrate judge can enter an order imposing monetary
sanctions on a party under Rule 37. See New London Tobacco Mkt.,
Inc. v. Ky. Fuel Corp., No. 6:12-CV-91-GFVT-HAI, 2016 U.S. Dist.
LEXIS 96712, at *1 n.1 (E.D. Ky. Mar. 16, 2016) (“Ordinarily, an
award of attorneys' fees under Rule 37 is a non-dispositive matter

that may be finally decided by a magistrate judge pursuant to 28
U.S.C. § 636(b)(1)(A).”) (citing Starcher v. Corr. Med. Sys., Inc.,
144 F.3d 418, 421 (6th Cir. 1998) aff'd sub nom. Cunningham v.
Hamilton Cty., Ohio, 527 U.S. 198 (1999) (considering a magistrate
judge's award of attorneys' fees under Rule 37)); see also Brown
v. Tellermate Holdings Ltd., No. 2:11-CV-1122, 2015 WL 4742686, at
*1 (S.D. Ohio Aug. 11, 2015) (“An award of attorneys' fees for
discovery misconduct is not dispositive of a claim or defense and
is therefore reviewed under Rule 72(a)'s ‘clearly erroneous or
contrary to law’ standard.”) (citing Estates of Ungar & Ungar ex
rel. Strachman v. Palestinian Auth., 325 F. Supp. 2d 15, 25 (D.R.I.
2004) aff'd sub nom. Ungar v. Palestine Liberation Org., 402 F.3d

274 (1st Cir. 2005); Baker v. Peterson, 67 F. App'x 308, 311 (6th
Cir. 2003) (per curiam) (citing Ocelot Oil Corp. v. Sparrow Indus.,
847 F.2d 1458 (10th Cir. 1988), for the proposition that "the
magistrate's imposition of attorney fees as a discovery sanction
is reviewed under the 'clearly erroneous or contrary to law'
standard”)); Zang v. Zang, No. 1:11-CV-884, 2014 WL 5426212, at *4
(S.D. Ohio Oct. 22, 2014) (“With few exceptions, orders concerning
pre-trial discovery matters including the imposition of monetary
sanctions for violations under Rule 37 are considered to be non-
dispositive.”) (citing Nance v. Wayne County, 264 F.R.D. 331 (M.D.
Tenn. 2009); Sutton v. United States SBA, 92 F. App’x 112, 120
(6th Cir. 2003) (motion for discovery sanctions is "not excepted

in subparagraph (A) or elsewhere referenced in §636(b)(1)(B)" and
therefore a magistrate judge can determine a Rule 37 sanctions
motion); Universal Health Group v. Allstate Ins. Co., 703 F.3d 953
(6th Cir. 2013)(series of non-dispositive sanctions imposed by
order by magistrate judge, prior to report and recommendation that
recommended sanction of dismissal for continued violations);
LeMasters v. Christ Hospital, 791 F. Supp. 188 (S.D. Ohio 1991)
(partially modifying but affirming "nondispositive" magistrate
judge order imposing sanction of $500 per day for tardy discovery
production)). It is worth noting that motions for sanctions under
Rule 37 differ from motions for sanctions under Rule 11, which the
Sixth Circuit consider to be dispositive. See Bennett v. General

Caster Serv. of N. Gordon Co., 976 F.2d 995, 997 (6th Cir. 1992).
The question thus becomes whether the request for relief in
the form of a default judgment affects the authority of the
magistrate judge to determine a Rule 37 motion for sanctions.
“There appears to be a split in authority on whether a magistrate
judge should provide a report and recommendation to a district
judge on a Fed. R. Civ. P. 37 motion for sanctions where, as here,
the relief sought is dispositive (e.g., default judgment).” Coach,
Inc. v. Dequindre Plaza, L.L.C., No. 11-cv-14032, 2013 WL 2152038,
at *2 n.1 (E.D. Mich. May 16, 2013) (citing Bell-Flowers v.
Progressive Ins. Co., No. 04-3026, 2005 WL 3434818, at *1, 2 n.1
(W.D. Tenn. Dec. 13, 2005) (Pham, M.J.)). Courts are divided on

the issue of “whether the sanction chosen by the magistrate judge,
rather than the sanction sought by the moving party, governs the
magistrate judge's authority over the motion.” Webasto Thermo &
Comfort N. Am., Inc. v. BesTop, Inc., No. 16-cv-13456, 2018 WL
5098784, at *3 (E.D. Mich. Oct. 19, 2018) (internal quotation marks
omitted). Some courts have addressed such motions via report and
recommendation. See Coach, Inc., 2013 WL 2152038, at *2 n.1
(collecting cases). However, “[t]he majority of courts to consider
the issue have concluded that when a party brings a motion for
discovery sanctions, the sanction chosen by the magistrate judge,
rather than the sanction sought by the moving party, governs the
magistrate judge's authority over the motion.” Bell-Flowers, 2005

WL 3434818, at *1, 2 n.1 (citing Phinney v. Wentworth Douglas
Hosp., 199 F.3d 1, 6 (1st Cir. 1999); Gomez v. Martin Marietta
Corp., 50 F.3d 1511, 1519 (10th Cir. 1995); Steele v. Costco
Wholesale Corp., No. 03-0713, 2005 U.S. Dist. LEXIS 8348, at *4-5
(E.D.N.Y. May 6, 2005) (unpublished); Segal v. L.C. Hohne
Contractors, Inc., 303 F.Supp. 2d 790, 793-94 (S.D. W. Va. 2004)).
Other magistrate judges in the Sixth Circuit have followed
Bell-Flowers. See Summit Assets, LLC v. O'Malley, No. 11-12327,
2012 WL 13008759, at *1 n.1 (E.D. Mich. July 31, 2012) (“While the
Plaintiffs seek dispositive relief under Rule 37 (i.e., a default
judgment), they also request alternative, non-dispositive
discovery sanctions, including costs and attorney fees, and ‘any

other sanctions this Court deems to be fair and just under the
circumstances.’ Because I am denying a default judgment (albeit
without prejudice) and instead ordering non-dispositive relief, I
am entering an order pursuant to 28 U.S.C. § 636(b)(1)(A), rather
than issuing a Report and Recommendation under 28 U.S.C. §
636(b)(1)(B). In a Rule 37 motion, and particularly one that
requests alternative relief, it is the relief granted, not the
relief sought that determines which clause of § 636(b)(1)
applies.”); Sildack v. Corizon Health, Inc., No. 11-12939, 2013 WL
1316707, at *1 n.1 (E.D. Mich. Mar. 29, 2013) (“Although the
motions are titled ‘motions to dismiss,’ the relief I am granting
is non-dispositive. I therefore proceed by Order under 28 U.S.C.

§ 636(b)(1)(A), rather than Report and Recommendation under 28
U.S.C. § 636(b)(1)(B).”); Goode v. Mercy Mem'l Hosp., No. 11-
10037, 2014 WL 7369926, at *1 n.1 (E.D. Mich. Dec. 29, 2014)
(“Although the motion is titled a ‘motion to dismiss,’ this matter
was referred to the undersigned pursuant to 28 U.S.C. §
636(b)(1)(A), a motion for discovery sanctions is not one excepted
from coverage under 28 U.S.C. § 636(b)(1)(A), and the relief
granted here is non-dispositive. Thus, the undersigned proceeds by
Order under 28 U.S.C. § 636(b)(1)(A) rather than Report and
Recommendation under 28 U.S.C. § 636(b)(1)(B).”); Arabbo v. City
of Burton, No. 13-11331, 2015 WL 3403851, at *1 n.1 (E.D. Mich.
May 26, 2015) (“Although the motion is titled ‘motion to dismiss,’

the relief I am granting is non-dispositive. I therefore proceed
by Order under 28 U.S.C. § 636(b)(1)(A), rather than Report and
Recommendation under 28 U.S.C. § 636(b)(1)(B).”); Thurmond v. City
of Southfield, No. 15-13167, 2017 U.S. Dist. LEXIS 39360, at *2
n.1 (E.D. Mich. May 26, 2017) (“Although the motion is framed as
a ‘motion to dismiss,’ I am not granting dispositive relief. I
therefore proceed by Order under 28 U.S.C. § 636(b)(1)(A), rather
than Report and Recommendation under 28 U.S.C. § 636(b)(1)(B).”);
Catrinar v. Wynnestone Cmtys. Corp., No. 14-11872, 2017 U.S. Dist.
LEXIS 161648, at *1 n.1 (E.D. Mich. Sep. 30, 2017) (“Although
Plaintiff requests a default judgment as an alternative sanction
under Fed. R. Civ. P. 37, the relief I am granting is non-

dispositive. I therefore proceed by Order under 28 U.S.C. §
636(b)(1)(A), rather than Report and Recommendation under 28
U.S.C. § 636(b)(1)(B).”).
The undersigned concludes that, as previously decided in
Bell-Flowers, it is the sanction selected by the magistrate judge
rather than the sanction requested by the moving party that governs
whether a Rule 37 motion qualifies as dispositive or
nondispositive.8 To conclude otherwise would allow the moving party
to improperly dictate the authority of the magistrate judge and
manipulate the standard of review. Segal, 303 F.Supp. 2d at 794.

Because the undersigned elects to impose only monetary sanctions
at this time, the motion falls within the scheme of § 636(b)(1)(A),
which permits the undersigned to proceed by order rather than
report and recommendation.
B. Default Judgment
Builders seeks a default judgment against SES as a result of
defendants “intentionally altering material evidence.” (ECF No.
176-1 at 9-10.) Under Rule 37(b)(2) of the Federal Rules of Civil
Procedure, a district court may sanction parties who fail to obey
discovery orders in a number of ways, including dismissal of the
action or rendering a default judgment against the disobedient
party. Fed. R. Civ. P. 37(b)(2)(A)(v)-(vi). The dismissal of an

action for non-compliance with a discovery order under Rule 37 is

8While a motion for default judgment under Rule 55 is dispositive,
Callier v. Gray, 167 F.3d 977, 981 (6th Cir. 1999), such a motion
is substantially different and substantively distinguishable from
a motion for sanctions under Rule 37. See Segal, 303 F.Supp. 2d at
794 (“Federal Rule of Civil Procedure 37(b)(2) gives this court
power to impose any sanction that is just, with default judgment
being the most severe sanction. Although the plaintiff may ask the
court to impose the most severe of sanctions, it is for the court
to decide which sanctions, if any, is appropriate.”). Unlike a
motion for default judgment under Rule 55, “a motion for ‘default
judgment’ [under Rule 37] based on alleged discovery violations is
nothing more than an optimistically labeled motion for sanctions.”
Id.
a sanction of “last resort,” one which a court may impose only
when “a party's failure to cooperate in discovery is due to
willfulness, bad faith, or fault.’” Peltz v. Moretti, 292 F. App’x

475, 478 (6th Cir. 2008) (quoting Reg'l Refuse Sys. v. Inland
Reclamation Co., 842 F.2d 150, 153-54 (6th Cir. 1988)). The same
is true for entry of a default judgment as a discovery sanction
under Rule 37. Bank One of Cleveland, N.A. v. Abbe, 916 F.2d 1067,
1073 (6th Cir. 1990) (“Just as dismissal of an action for failure
to cooperate in discovery is a sanction of last resort that may be
imposed only if the court concludes that a party's failure to
cooperate in discovery is due to willfulness, bad faith, or fault,
so, too, is entry of default judgment.”) (internal quotation marks
and citations omitted). The court considers four factors when
deciding whether to impose the sanction of dismissal or default
judgment under Rule 37:

The first factor is whether the party's failure to
cooperate in discovery is due to willfulness, bad faith,
or fault; the second factor is whether the adversary was
prejudiced by the party's failure to cooperate in
discovery; the third factor is whether the party was
warned that failure to cooperate could lead to the
sanction; and the fourth factor . . . is whether less
drastic sanctions were first imposed or considered.

Freeland v. Amigo, 103 F.3d 1271, 1277 (6th Cir. 1997) (citing
Reg’l Refuse Sys., 842 F.2d at 154-55; Bass v. Jostens, Inc., 71
F.3d 237, 241 (6th Cir. 1995); Bank One of Cleveland, 916 F.2d at
1073); see also Stamtec, Inc. v. Anson, 195 F. App’x 473, 478-79
(6th Cir. 2006) (restating the four-factor test in reviewing
default judgment as a discovery sanction under Rule 37). None of
these factors is dispositive. Barron v. Univ. of Mich., 613 F.

App’x 480, 484 (6th Cir. 2015).
1. First Factor
The first factor is whether a party’s failure to cooperate in
discovery is due to willfulness, bad faith, or fault. Freeland,
103 F.3d at 1277. In seeking default judgment as a discovery
sanction, willfulness or bad faith “requires a clear record of
delay or contumacious conduct.” Carpenter v. City of Flint, 723
F.3d 700, 704 (6th Cir. 2013). “Contumacious conduct means
‘behavior that is perverse in resisting authority and stubbornly
disobedient.’” Phipps v. Accredo Health Group, Inc., No. 2:15-cv-
02101-STA-cgc, 2017 WL 685579, at *4 (W.D. Tenn. Feb. 21, 2017)
(quoting Carpenter, 723 F.3d at 704-05). The purportedly wrongful

conduct “must display either an intent to thwart judicial
proceedings or a reckless disregard for the effect of [the] conduct
on those proceedings.” Carpenter, 723 F.3d at 705 (quoting Tung-
Hsiung Wu v. T.W. Wang, Inc., 420 F.3d 641, 643 (6th Cir. 2013)).
According to Builders, the conduct of SES throughout the discovery
process demonstrates willfulness and bad faith. (ECF No. 176-1 at
10.) Builders points to the fact that SES failed to comply with
the May 1, 2019 order after representing to the court that it had
requested bank records from Independent Bank and intended to
produce them to Builders. (Id.)
According to SES, this case does not reflect a clear record

of contumacious conduct, although SES no longer disputes producing
altered records. (ECF No. 178 at 4-6.) SES contends that its
reasons for doing so, even if misguided, do not rise to the level
of contumacious conduct. (Id.) SES points out that Builders has
had the unredacted records it requested since August 9, 2019. (Id.)
SES states that Builders’ argument is based on conjecture regarding
the “sophistication” of SES’s redaction efforts. (Id.) According
to SES, “[t]he record does reflect that [the Davises] implicitly
acknowledged altering the records in the Pro Se June 4 Response
and their concern over protecting SES’s proprietary information.”
(Id. at 6.)
There is no way the June 4 pro se response can be reasonably

construed as an acknowledgement by the Davises that they altered
the checks. The Davises explicitly state in their response:
“Defendants were unaware that non-original copies were provided to
attorneys Ballin, Ballin and Fishman.” (ECF No. 136 at 3.) The
Davises also state: “Defendants turned over what was thought to be
the original documents from the bank[.]” (Id.) Finally, the Davises
state: “Defendants unknowingly provided Ballin, Ballin and Fishman
altered copies of the deposits[.]” (Id.) There is nothing in the
pro se response to suggest that the Davises “implicitly
acknowledged” altering the records they produced. Rather, the
Davises misrepresented in the pro se response that they were
unaware of producing altered documents.

Builders points to the “sophisticated” means of redaction,
which the Davises state is conjectural. Whether sophisticated or
not, it is clear to the court that the alterations were done
carefully. Approximately twenty-five checks had text removed that
extended below the memo line. Teri Davis removed this information
in such a way that the memo line appears undisturbed. In order to
accomplish this, Teri Davis must have either removed the
information extremely carefully or removed and redrawn the memo
line onto each check so it would appear undisturbed. Either way,
it evidences a deliberate effort to remove information in a manner
that would not appear obvious to the naked eye. Moreover, Teri
Davis submitted a response to Builders’ Notice of Noncompliance

that explicitly stated the Davises did not know they had turned
over altered checks to their counsel at the time. It is entirely
unreasonable to believe that Teri Davis could have unknowingly
engaged in the careful redaction of the checks produced by SES. On
the contrary, the record clearly demonstrates that the Davises
acted with “an intent to thwart judicial proceedings [and] a
reckless disregard for the effect of [their] conduct on those
proceedings.” See Carpenter, 723 F.3d at 705. The Davises provided
Builders with altered checks and then tried to hide it.9 This
clearly qualifies as willful conduct committed in bad faith. This
factor weighs strongly in favor of a default judgment.
2. Second Factor

The second factor is whether the adversary was prejudiced.
Freeland, 103 F.3d at 1277. “A defendant is prejudiced by a
plaintiff's dilatory conduct if the defendant is ‘required to waste
time, money, and effort in pursuit of cooperation which [the non-
compliant party] was legally obligated to provide.’” Carpenter,
723 F.3d at 707 (quoting Harmon v. CSX Transp., 110 F.3d 364, 368
(6th Cir. 2013)). Builders claims it suffered prejudice because
SES possessed “all of the most critical documents” relating to
Builders’ claims. (ECF No. 176-1 at 10-11.) According to Builders,
SES had “exclusive control of the supporting records which would
allow Builders Insulation to not only easily calculate its damages

from [SES’s] conduct, but also potentially identify others with
knowledge of [SES’s] scheme.” (Id. at 11.) According to Builders,
“the property address was the primary way Builders Insulation could
cross-reference checks to SES projects for which Builders
Insulation provided labor and material.” (ECF No. 176-1 at 7.)
Builders contends that SES knew revealing the property address

9It must be noted that the record contains nothing to suggest that
the Davises’ current or former counsel had knowledge of or
participated in this misconduct.
relevant to each check would enable Builders to cross reference
that check with its account statement to SES to find the
corresponding purchase order. (Id.) This prevented Builders from

seeing the amount SES billed and collected related to the
properties that Builders worked on. (Id.) Without this
information, according to Builders, it is impossible to determine
whether the monetary amounts billed and collected for any given
job match, as SES has no copies of any of the invoices sent to its
customers. (Id.) According to Builders, identifying the property
corresponding to each check “is the only way to connect the amounts
paid to SES and the amounts SES paid to Builders[.]” (Id.)
SES, on the other hand, argues that Builders cannot
demonstrate that it sustained any lasting prejudice, as SES
provided non-redacted copies of the bank deposits following
Builders’ Notice of Noncompliance. (ECF No. 178 at 6-7.) As SES

points out, Builders has had unredacted copies of the deposit
checks since August 9, 2019. (Id. at 7.) SES also notes that
Builders has always had the ability to subpoena such documents
directly from the bank. (Id.) However, SES cannot dispute that its
conduct required Builders to spend “time, money, and effort in
pursuit of cooperation which [SES] was legally obligated to
provide.” See Carpenter, 723 F.3d at 707. Ultimately, Builders was
prejudiced by SES, although the prejudice to Builders’ case was
later rectified. This factor weighs in favor of default judgment.
3. Third Factor
The third factor is whether the party was warned that failure
to cooperate could lead to the sanction. Freeland, 103 F.3d at

1277. Builders argues that SES was “clearly on notice” that its
conduct during the discovery process could lead to sanctions. (ECF
No. 176-1 at 11.) As Builders points out, SES faced several motions
for sanctions during these proceedings and also appeared at
hearings regarding the ongoing discovery disputes. (Id.)
SES argues that it has had no prior warning from the court
that failure to comply with the Court’s May 1, 2019 order could
result in a default judgment against SES. (ECF No. 178 at 7.) The
May 1, 2019 order itself did not contain this warning. (ECF No.
118.) SES also points out that while Builders previously sought
sanctions, it did not previously seek a default judgment. (ECF No.
178 at 7.) SES also points out that the court has not imposed any

sanctions on SES in this case. (Id.) Ordinarily, this factor would
weigh strongly against the sanction of default judgment because
the court “has not warned [the Davises] that a failure to cooperate
in discovery could lead to the sanction of default judgment.”
Phipps, 2017 WL 685579, at *5. However, this case involves far
more alarming conduct than a mere “failure to cooperate” by the
Davises. Because the Davises engaged in bad faith and contumacious
conduct, the third prong of this inquiry affords them little
protection here. See Harmon, 110 F.3d at 367 (“Where a plaintiff
has not been given notice that dismissal is contemplated, a
district court should impose a penalty short of dismissal unless
the derelict party has engaged in bad faith or contumacious

conduct.”) (internal quotations marks omitted); see also Universal
Health Group, 703 F.3d at 956 (affirming dismissal of complaint
where bad faith was found, even though “there was no explicit
warning of dismissal”).
4. Fourth Factor
The fourth factor is whether less drastic sanctions were first
imposed or considered. Freeland, 103 F.3d at 1277. As default
judgment is a sanction of “last resort,” the court must consider
whether lesser sanctions would maintain the integrity of these
proceedings. See Bank One of Cleveland, 916 F.2d at 1073; see also
Carpenter, 723 F.3d at 709. While the court has not yet imposed
sanctions on SES, Builders has previously requested sanctions

twice in this case. (ECF Nos. 49; 76.) Builders argues that any
sanctions less than entry of a default judgment are unlikely to
impact the Davises’ conduct, as they have continuously delayed,
changed their testimony, and withheld relevant information. (ECF
No. 176-1 at 11.) Builders asserts that such an extreme remedy is
necessary not only to punish the Davises and deter them from
repeating such behavior but also to deter other litigants from
behaving in such a manner. (Id.) Builders emphasizes that the
Davises did not satisfy their discovery obligations until the court
required “counsel for SES [to] ensure that the All-In-One computer
is searched, and all relevant information contained therein
produced[.]” (ECF No. 118.) Builders points out that this

production occurred five months after Builders deposed Thom and
Teri Davis and after multiple hearings regarding the ongoing
discovery disputes. (ECF No. 176-1 at 11-12.)
SES emphasizes that the court has not imposed any sanctions
against SES to date, and argues that less drastic sanctions are
available and sufficient if the court decides to impose sanctions
at all. (ECF No. 178 at 7.) Whether less drastic sanctions will
prove sufficient to deter future violations by the Davises remains
to be seen. Certainly, the conduct at issue here cannot go
unaddressed or be allowed to continue. However, after considering
all four factors under Freeland, the court finds that the sanction
of a default judgment is not warranted at this time. Accordingly,

Builders’ request for a default judgment is DENIED.
C. Attorney’s Fees
Additionally, Builders seeks attorney’s fees as a sanction.
Under Rule 37(b)(2)(C), instead of imposing any of the sanctions
listed in Rule 37(b)(2)(A) for failing to comply with a discovery
order, such as dismissal or entry of a default judgment, “the court
must order the disobedient party . . . to pay the reasonable
expenses, including attorney's fees, caused by the failure, unless
the failure was substantially justified or other circumstances
make an award of expenses unjust.” Fed. R. Civ. P. 37(b)(2)(C).
Builders contends that defendants “cannot offer any justification
for their behavior.” (ECF No. 176-1 at 12.) Builders notes that it

has spent significant time and expense throughout the discovery
process, which Builders attributes to SES’s failure to comply with
“basic discovery obligations.” (Id.) Accordingly, Builders
requests its costs and fees associated with preparing and
prosecuting its prior Motion to Compel, its Notice of
Noncompliance, and the instant Motion for Sanctions.10 (Id.)
Builders argues that the only fees incurred as a result of
the redacted checks was the filing of the Notice of Noncompliance.
(ECF No. 178 at 8.) Anything beyond that, SES argues, Builders
took upon itself to incur additional costs in pursuing the
alternate avenues of relief. (Id.) The undersigned is inclined to
follow the mandate of Rule 37(b)(2)(C) by awarding attorney’s fees

to Builders for the failure of SES to comply with the court’s May
1, 2019 order. Accordingly, the undersigned GRANTS Builders
request for attorney’s fees for preparing the instant Motion for
Sanctions and its Notice of Noncompliance, as well as the cost and

10Elsewhere in the Motion for Sanctions, Builders seemingly
requests “all fees incurred in discovery since the inception of
the case[.]” (ECF No. 176-1 at 12.) Builders cites no authority to
support the scope of this request, and the undersigned views such
a request as overreaching.
fees associated with Builders’ preparation and appearance at the
October 24, 2019 hearing.
D. Depositions

Moreover, Builders requests the opportunity to re-open
depositions of the defendants. While the court is not inclined to
award default judgment to Builders in this circumstance, the
undersigned finds the request to re-open depositions reasonable
due to the fact that SES deprived Builders of the opportunity to
question the Davises about the altered and withheld documents
during their initial depositions. Accordingly, the undersigned is
inclined to permit Builders to have the opportunity to re-depose
the Davises only on the recent document production of unaltered
bank records, as well as the 897 records from the All-in-One
computer. The request to re-open depositions as described above is
hereby GRANTED. If Builders elects to re-depose the defendants,

said depositions should be completed within 30 days of the entry
of this order.
III. CONCLUSION
For the reasons above, Builders’ Motion for Sanctions is
GRANTED in part and DENIED in part. Within 30 days from the entry
of this order, Builders’ counsel shall file a declaration setting
forth in detail the fees and expenses reasonably incurred as a
result of filing the Notice of Noncompliance, the Motion for
Sanctions, and counsel’s appearance at the October 24, 2019
hearing.
Defendants are hereby warned that any future abuse of the

litigation process or failure to comply with the court’s orders
may result in default judgment and other sanctions under Rule 37.
IT IS SO ORDERED.
s/ Tu M. Pham
TU M. PHAM
United States Magistrate Judge

January 17, 2020
Date

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10439737. Public record. Not legal advice.