reasoning that “the district court’s order of contempt simply 13 [could not] be sustained as a coercive civil contempt order,” where “it was impossible 14 for [the contemnor] to purge itself of contempt by returning documents which were in 15 the sole possession of its counsel”
How later courts described this case
- reasoning that “the district court’s order of contempt simply 13 [could not] be sustained as a coercive civil contempt order,” where “it was impossible 14 for [the contemnor] to purge itself of contempt by returning documents which were in 15 the sole possession of its counsel”
- “As 20 a condition precedent to imposing sanctions pursuant to Federal Rule of Civil Procedure 21 37 the Defendants must have violated a Court Order”
- explaining that “the substantial compliance defense excuses an alleged 24 contemnor who, despite not achieving total compliance, has achieved near-total 25 compliance through the exhaustion of all reasonable efforts”
Written by the judges who cited it.
The opinion
1
2
3
4
5
6
7
8
9
10 UNITED STATES DISTRICT COURT
11 SOUTHERN DISTRICT OF CALIFORNIA
12
13 AARON STANZ, individually and Case No.: 22-cv-01164-GPC-JLB
derivatively on behalf of Jet Genuis
14
Holdings, Inc., ORDER GRANTING PLAINTIFF’S
15 REQUEST FOR ATTORNEY’S FEES
Plaintiff,
AND REPORT AND
16
v. RECOMMENDATION RE:
17 PLAINTIFF’S EX PARTE
JORDAN BROWN, et al.,
APPLICATION FOR OSC AS TO
18
Defendants. WHY DEFENDANTS SHOULD NOT
19 BE HELD IN CONTEMPT OF
COURT FOR FAILING TO
20
COMPLY WITH A COURT ORDER
21
[ECF No. 217]
22
23 AND RELATED COUNTERCLAIM.
24
25 Before the Court is Plaintiff Aaron Stanz’s (“Plaintiff”) Ex Parte Application for
26 Order to Show Cause as to Why Defendants Should Not be Held in Contempt of Court for
27
28
1 Failing to Comply with a Court Order (Ex Parte Motion) —namely, the Court’s Order
2 Granting Plaintiff’s Motion to Compel (Motion to Compel Order or Order).2 (ECF Nos.
3 215, 217; see also ECF No. 188.) Defendants Jordan Brown (“Brown”), Jet Genius
4 Holdings, Inc. (“JGH”), Jet Genius Florida Holdings, Inc., Bowman Aviation, Inc., Jet
5 Agency Global, LLC, C3 Jets, LLC, and C3 Limo, LLC (collectively, “Defendants”) did
6 not file an opposition. For the reasons set forth below, Plaintiff’s request for attorney’s
7 fees is GRANTED, subject to Plaintiff’s submission of a supporting declaration and
8 documentation. The Court RECOMMENDS to the Honorable Gonzalo P. Curiel that the
9 Court initiate civil contempt proceedings against Defendants. Further, the Court certifies
10 the pertinent facts in connection with a civil contempt inquiry. The Court
11 RECOMMENDS sanctions in the form of coercive per diem fines. However, the Court
12 RECOMMENDS against the imposition of sanctions in the form of adverse inferences,
13 issue preclusion, and entry of default judgment.
14 I. BACKGROUND
15 A. Second Amended Complaint
16 The following allegations are taken from the Second Amended Complaint:
17 Plaintiff is the creator and developer of software and systems that simplify and
18 accelerate aircraft charter brokering, including JetXchange, The Grid, and the Charter
19 Flight Group website, which are also supported by custom applications, reports, lead
20 generation tools, databases, business analytics, and certain client lists (collectively, the
21
22
23 1 By order dated August 13, 2025, the Court construed Plaintiff’s Ex Parte
Application for Order to Show Cause as to Why Defendants Should Not be Held in
24
Contempt of Court for Failing to Comply with a Court Order as a Motion for Sanctions
25 pursuant to Federal Rule of Civil Procedure 37. (See ECF No. 223 at 2.)
26
2 On January 9, 2025, Plaintiff filed a Notice of Motion and Motion to Compel
27 Production of Documents and for an Order Awarding Attorney’s Fees (hereinafter “Motion
to Compel”). (ECF No. 188.)
28
1 “JGH Platform”). (ECF No. 78 at 10, ¶ 38.) The JGH Platform allows a charter aviation
2 brokerage company to operate more efficiently by facilitating more trips per staff member
3 than any charter brokerage competitor. (Id. at 10-11, ¶ 38.)
4 Plaintiff and Brown formed JGH, a private jet charter broker, with a non-party,
5 Alexander Wolf (“Wolf”), in 2016. (Id. at 1, 11, ¶¶ 1, 39.) Plaintiff contributed the JGH
6 Platform to JGH and received a 49.5% ownership interest in the company. (Id. ¶ 39.)
7 Plaintiff and Brown are the two primary shareholders of JGH. (Id. at 1, ¶ 1.) Plaintiff
8 served as the Chief Technology Officer and had principal responsibility for designing and
9 implementing the JGH Platform. (Id. at 1, 11, ¶¶ 1, 44.) Since 2018, Brown has been
10 JGH’s Chief Executive Officer (“CEO”) and sole director. (Id. at 1-2, ¶ 1.)
11 In August 2018, Plaintiff, Wolf, and Brown entered into an agreement, whereby
12 Plaintiff reduced his ownership interest in JGH from 49.5% to 25%, resigned from JGH’s
13 Board of Directors,3 and assigned rights in the JGH Platform to JGH, and Brown became
14 JGH’s sole director. (Id. at 15, 17, ¶¶ 62, 70.) The agreement provided for certain
15 safeguards to guarantee the collection and payment of FET and to minimize the opportunity
16 for self-dealing by Brown. (See id. at 15, 17, ¶¶ 65, 68.)4 According to Plaintiff, Brown
17 “repeatedly assured” him that he would operate the business for the benefit of shareholders
18 and that he would not form another business entity for the purposes of transferring JGH
19 operations and leaving behind an “empty shell with only liabilities.” (Id. at 14, ¶ 57.)
20 Plaintiff alleges that Brown used JGH as his “personal piggy bank” and “raided
21 JGH’s assets through phony transactions, indefensible self-approved compensation, and
22 wrongful diversion of corporate assets” to the tune of approximately $1.9 million. (Id. at
23
24
25 3 Wolf also stepped down from the Board of JGH pursuant to the agreement. (ECF
No. 78 at 15, ¶ 62.)
26
27 4 For instance, the agreement provided that JGH would not loan money to or accept
loans from a shareholder or its assigns without Plaintiff’s prior written consent. (ECF No.
28
1 2, 18, ¶¶ 2, 71.) Plaintiff further alleges that Brown “employs a shell game of entities to
2 avoid paying Plaintiff amounts due to him and to avoid other company obligations.” (Id.
3 at 2, 18–27, ¶¶ 4, 76–136.) For example, on September 16, 2019, Brown formed Jet
4 Agency Global, LLC and transferred to Jet Agency ownership of, or licensed rights in and
5 to, the JGH Platform without adequate consideration. (Id. at 19–20, ¶¶ 82, 89.) Thereafter,
6 on September 11, 2020, Brown formed C3 Limo, LLC with his wife Stacy Brown, who
7 was listed as manager for six months before it was changed to Chasen Dobos, Brown’s
8 stepson. (Id. at 21, ¶ 94.) Brown transferred to C3 Limo ownership of, or licensed rights
9 in and to, parts of the JGH Platform without adequate consideration and transferred cash
10 from JGH to C3 Limo. (Id. at 21, ¶¶ 95, 96.) Less than a year later, on April 23, 2021,
11 Brown formed C3 Jets and transferred $100,000 per month from JGH to the new company.
12 (Id. at 21-22, ¶¶ 97-98.) Brown had no plans to repay JGH for these fund transfers. (Id. at
13 21-22, ¶¶ 95–99.)
14 Plaintiff further alleges that Brown “seeks to avoid millions in assessed federal
15 excise taxes (‘FET’) related to chartering aircrafts.” (Id. at 2, ¶ 4.) As a business that
16 collected payment for commercial domestic transportation of persons, JGH was subject to
17 an assessment of FET. (Id. at 12, ¶ 46.) Brown failed to timely and fully pay the FET
18 related to JGH’s operations and instead “took actions to saddle Plaintiff personally with
19 much of that burden—$1.3 million in unpaid FET—, despite assurances Brown would
20 account for those taxes, while also shifting JGH’s operations and assets to a new entity to
21 avoid payments.” (Id. at 2, 12–17, 23–25, ¶¶ 4, 50–70, 108–22.) Plaintiff further alleges
22 that Brown utilized Plaintiff’s former cell phone number to impersonate him. (Id. at 2-3,
23 25–27, ¶¶ 5–6, 124–36.)
24 In August 2022, Plaintiff initiated the instant suit. (See ECF No. 1.) In a Second
25 Amended Complaint filed in August 2023, Plaintiff, individually and derivatively on
26 behalf of Jet Genius Holdings, Inc., levied 19 claims against Defendants, including express
27 indemnity equitable indemnity, breach of duty to defend, breach of fiduciary duty, breach
28 of contract, fraud, unjust enrichment, conversion, and a request for declaratory relief. (Id.
1 at 28-41.) At the time the Second Amended Complaint was filed, Plaintiff remained the
2 holder of 25% of the outstanding and issued shares of JGH. (Id. at 9, ¶ 28.)
3 B. Relevant Procedural Background
4 On February 29, 2024, Plaintiff and Defendants Brown, C3Jets LLC, C3 Limo LLC,
5 Jet Agency Global, LLC, and Bowman Aviation, Inc. (collectively, the “Brown
6 Defendants”) lodged a Joint Discovery Statement concerning the Brown Defendants’
7 failure to respond to Plaintiff’s RFPs (Set One). (ECF No. 102.) The Court held a
8 Discovery Conference on March 7, 2024, and ordered the Brown Defendants to provide
9 supplemental responses and production no later than March 22, 2024. (ECF No. 103.) The
10 Brown Defendants failed to do so.
11 On April 4, 2024, Plaintiff and JGH lodged a Joint Discovery Statement, as did
12 Plaintiff and the Brown Defendants. (ECF No. 107.) After a Discovery Conference,
13 Defendants agreed, inter alia, to provide updated responses and supplemental production
14 to Plaintiff’s RFPs (Set One) by May 10, 2024. (ECF No. 110.) Plaintiff and Defendants
15 lodged an updated Joint Discovery Statement on June 21, 2024. (ECF No. 117.) Plaintiff
16 claimed that Defendants failed to timely serve supplemental responses to Plaintiff’s RFPs
17 and that he had received a document production in an unreadable format. After another
18 Discovery Conference, Defendants were ordered to serve second supplemental responses
19 to Plaintiff’s RFPs (Set One) and produce a complete privilege log by July 15, 2024. (ECF
20 No. 120.)
21 The Mandatory Settlement Conference was held on July 22, 2024. (ECF No. 125.)
22 The case did not settle. (Id.) On July 30, 2024, the Court held another Discovery
23 Conference. (ECF No. 126.) On August 19, 2024, following another Status Conference,
24 the Court ordered Defendants to complete their document production by
25 September 13, 2024. (ECF No. 135.) On August 21, 2024, the parties left a joint voicemail
26 with Chambers informing the Court that they had resolved their discovery dispute. (ECF
27 No. 136.)
28
1 Plaintiff’s counsel withdrew from the case on September 23, 2024. (ECF No. 145.)
2 On September 30, 2024, the Court ordered that all remaining depositions, including that of
3 Plaintiff, be conducted by November 15, 2024, or fourteen days after Plaintiff retains
4 counsel, whichever occurs first. (ECF No. 146.)
5 On October 16, 2024, the Court held a Status Conference because Defendants failed
6 to meet the September 13, 2024 document production deadline. (ECF No. 150.) The Court
7 ordered Defendants to provide Plaintiff with supplemental responses to the discovery
8 requests at issue by October 21, 2024. (ECF No. 150.) Defendants did provide Plaintiff
9 with supplemental responses on October 21. Ten days later, the parties lodged another
10 Joint Discovery Statement concerning those responses, as Plaintiff asserted they were
11 deficient. A Status Conference was held on November 12, 2024. (ECF No. 152.) The
12 Court held a discovery hearing on November 19, 2024. (ECF Nos. 151, 153, 158, 162,
13 164.) Following the hearing, the Court authorized a motion to compel to resolve the
14 dispute. (ECF No. 164.)
15 On November 20, 2024, the parties filed another Joint Discovery Statement
16 concerning Defendants’ interrogatory responses. (ECF No. 165.) On December 5, 2024,
17 the Court held a Discovery Conference and resolved the dispute. (ECF No. 175.) On
18 January 6, 2025, the Court extended the deposition deadline to January 31, 2025. (ECF
19 No. 185.)
20 In January 2025, Plaintiff filed a Motion to Compel, seeking an order for the
21 production of documents and an award of attorney’s fees. (ECF No. 188.) Plaintiff sought
22 to compel responses to Plaintiff’s Requests for Production (“RFP”) (Set One) served on
23 Defendants. (Id. at 2.) Defendants filed an opposition (ECF No. 190), and Plaintiff filed
24 a reply (ECF No. 191). On May 15, 2025, and May 28, 2025, the Court held hearings on
25 Plaintiff’s Motion to Compel. (ECF Nos. 207, 210, 213, 214.) The Court granted
26 Plaintiff’s Motion to Compel on June 6, 2025, and ordered the following:
27 1. Brown shall permit Plaintiff (or his designated expert or
representative) to inspect the electronic storage media for all
28
1 agreed upon custodians, to include providing access to their
Gmail accounts, at a mutually agreeable date and time within
2
fourteen (14) days of the date of this Order.
3
2. Brown shall permit Plaintiff (or his designated expert or
4
representative) to inspect and copy physical items and
5 documents that may contain responsive material at a mutually
agreeable date and time within fourteen (14) days of the date of
6
this Order.
7
3.To the extent Defendants have possession, custody, or control
8
of the cell phones used by the agreed upon custodians, they shall
9 make those phones available for inspection by Plaintiff at a
mutually agreeable date and time within fourteen (14) days of
10
the date of this Order.
11
4. Brown shall file a declaration with the Court within ten (10)
12
days of the date of this Order confirming that he has requested
13 all responsive bank statements and credit card statements.
Brown shall produce these statements to Plaintiff within seven
14
(7) days of receipt of the statements.
15
5. Within fourteen (14) days of the date of this Order, Defendant
16
Jet Agency Global, LLC shall produce all documents in its
17 possession, custody, or control responsive to RFP No. 5,[6] or
allow Plaintiff (or his designated expert or representative) to
18
inspect and copy the same at a mutually agreeable date and time.
19 If no further documents exist, Defendant shall amend its response
to state that a reasonable inquiry has been made, and no further
20
responsive documents exist.
21
22
23
5 These custodians include: (1) Brown; (2) personal assistants, presumed to be but
24
not limited to, Ileana Garces, Marie Stone, Bianca Feller, Kimberlee Pouykham, and Emile
25 Rosenow; Executives Chasen Dobos, Ryan Sargent, and Yves Brancheau; (3) accounting
staff Roya Arabi, Deb Fouts, Cindy Grotsky, Maureen Bartzis, and Laurie Rector; (4)
26
shareholder Wolf; and (5) Stacy Brown.
27
6 Plaintiff’s RFP No. 5 to Jet Agency Global, LLC requested all client invoices since
28
1 6. Within fourteen (14) days of the date of this Order, Defendant
C3 Jets, LLC shall produce all documents in its possession,
2
custody, or control responsive to RFP No. 197, or allow Plaintiff
3 (or his designated expert or representative) to inspect and copy
the same at a mutually agreeable date and time. If no further
4
documents exist, Defendant shall amend its response to state that
5 a reasonable inquiry has been made, and no further responsive
documents exist.
6
7 7. Within fourteen (14) days of the date of this Order,
Defendants shall produce all responsive documents withheld on
8
the basis of privilege, except for those documents over which
9 Stacy Brown asserts the marital communications privilege.
10
8. Within ten (10) days of the date of this Order, Defendants
11 shall serve on Plaintiff signed copies of their interrogatories in
compliance with Fed. R. Civ. P. 33.
12
13 9. Plaintiff shall file a declaration substantiating the reasonable
fees incurred by his counsel in filing the reply and attending the
14
two related hearings before the Court within ten (10) days of the
15 date of this Order. Defendants may file any opposition
challenging the reasonableness of the amount of attorney’s fees
16
within five (5) days of Plaintiff’s filing of his declaration.
17
10. Within fourteen (14) days of the date of this Order,
18
Defendants shall produce a privilege log of any communications
19 as to which Stacy Brown is asserting marital communications
privilege.
20
21 11. Failure to timely comply with any aspect of this Order
may expose Defendants to the imposition of sanctions up to
22
and including evidentiary and issue preclusion sanctions.
23
24
(ECF No. 215 at 25–27.)
25
26
27
7 Plaintiff’s RFP No. 19 to C3 Jets LLC requested production of all check registers
28
1 After the initial 10-day timeframe for compliance set forth in the Motion to Compel
2 Order passed, Plaintiff’s counsel initiated the meet-and-confer process on June 17, 2025.
3 (ECF No. 217 at 4.) During the meet-and-confer phone call, Defendants’ counsel informed
4 Plaintiff’s counsel that “he was working on it, but made no promises,” with the subsequent
5 14-day windows for production eventually passing without any compliance from
6 Defendants. (Id. at 4-5 (citing ECF No. 217-1 at 2, ¶ 3.)
7 Plaintiff filed the instant Ex Parte Motion on June 25, 2025. (ECF No. 217.)
8 Pursuant to the undersigned’s Chambers Rules, after service of an ex parte motion,
9 opposing counsel has until 5:00 p.m. the next court day to file an opposition or to request
10 an extension. J. Burkhardt’s Civ. Chambers R. § VII. Defendants neither filed an
11 opposition nor requested an extension. On August 7, 2025, the parties lodged with the
12 Court pursuant to § V of Judge Burkhardt’s Civil Chambers Rules a Joint Discovery
13 Statement, improperly styled a “Joint Motion for Determination of Discovery Dispute.”
14 Due to the substantial overlap between the lodged document and the instant Ex Parte
15 Motion, the Court advised the parties that it would address all the issues in the context of
16 the motion. The Court provided an additional opportunity for briefing and directed the
17 parties to address any issues not already included in the initial motion in the remaining
18 briefing. (ECF No. 223.) Specifically, the Court ordered Defendants to file an opposition
19 to the Ex Parte Motion by August 25, 2025, and Plaintiff to file a reply by September 2,
20 2025. (ECF No. 223 at 2.) Defendants again did not file an opposition. Plaintiff filed a
21 Notice of No Reply Brief, informing the Court that it did not file a reply “because there
22 [was] no opposition for Plaintiff to address.” (ECF No. 225 at 2.)
23 In his Ex Parte Motion, Plaintiff represents that, with one exception, Defendants
24 failed to comply with the Motion to Compel Order. (ECF No. 217 at 2.) However, a
25 review of the subsequent Joint Discovery Statement reveals that Defendants produced some
26 discovery subsequent to the filing of the Ex Parte Motion; thus, the Ex Parte Motion no
27 longer accurately reflects the current status of Defendants’ compliance or noncompliance
28 with the Order (ECF No. 215). (See ECF No. 226 at 1.) The Court therefore ordered
1 Plaintiff to supplement its Ex Parte Motion no later than October 3, 2025, “to reflect the
2 aspects of the [Motion to Compel Order] with which Plaintiff maintains Defendants have
3 still failed to comply,” and ordered Defendants to file an opposition by October 10, 2025.
4 (Id. at 2.) Plaintiff filed the Court-ordered supplement (“Supplement”) on October 3, 2025.
5 (ECF No. 228.) Defendants once again filed no opposition.
6 As Defendants did not file an opposition despite three opportunities to do so, the
7 Court deems Plaintiff’s Ex Parte Motion unopposed. Because Plaintiff’s representations
8 in the Ex Parte Motion and the Supplement are facially plausible and uncontested by
9 Defendants, the Court accepts them as true to the extent set forth in this Relevant
10 Procedural Background, and the Court certifies them as part of this Report and
11 Recommendation.
12 II. DISCUSSION
13 A. Plaintiff’s Argument
14 1. Ex Parte Motion
15 Plaintiff argues in his Ex Parte Motion that “other than [a] single act of ostensible
16 compliance to inspect hard-copy materials” in accordance with paragraph 2, Defendants
17 “remain in violation of every operative paragraph [of the Motion to Compel Order],”
18 asserting that “[n]o declaration or bank statements have been filed; no verified
19 interrogatory answers have been served; no productions or confirmations under
20 [paragraphs] 5–7 have issued; no privilege log for marital communications has been
21 provided; and no access to e-mail accounts, servers, or custodians’ devices has been
22 granted.” (ECF No. 217 at 2, 4, 8.) Contending that he cannot “fairly prepare for trial,
23 quantify damages, or safeguard shareholder interests while Defendants ignore the Court’s
24 explicit directives” Plaintiff maintains that “the risk that responsive materials have been
25 concealed, destroyed, or otherwise spoliated grows with each passing day.” (Id. at 2–3.)
26 Plaintiff asserts that Defendants’ noncompliance “deprives [him] of evidence needed to
27 prove claims involving misappropriate assets, diverted tax proceeds, and self-dealing
28 transactions that may expose unknown co-conspirators.” (Id. at 7.) Further, Plaintiff insists
1 that Defendants’ “serial, selective non-production is not the benign product of insolvency
2 or disorganization,” but rather demonstrates willful defiance. (Id. at 6–7.) Plaintiff alleges
3 that during the May 28, 2025 hearing regarding the Motion to Compel, Defendants’ counsel
4 disclosed e-mail addressed associated with individuals not identified as custodians in the
5 Motion to Compel, thus indicating that Defendants possess the requisite technological
6 capability to locate, access, and transmit the electronically stored information responsive
7 to Plaintiff’s discovery requests. (Id. at 6.)
8 Plaintiff requests that the Court issue an order to show cause requiring Defendants
9 to appear and to explain why the Court should not sanction their continued noncompliance
10 with the Motion to Compel Order. (Id. at 8.) Should the Court determine that Defendants
11 have failed to demonstrate good cause for their noncompliance, Plaintiff asks that the Court
12 enter of finding of civil contempt and impose various sanctions. (Id.) Specifically, Plaintiff
13 requests that the Court: (i) impose a coercive fine of $1,000 per day until Defendants
14 achieve compliance; (ii) strike Defendants’ answers and enter default judgment against
15 Defendants “on all claims and counterclaims,” followed by an expedited “prove-up” to
16 determine damages; (iii) impose sanctions in the form of adverse inferences and issue
17 preclusion;8 (iv) order reimbursement of all reasonable attorney’s fees and costs incurred
18 since June 6, 2025, including those incurred preparing the instant Ex Parte Motion and as
19 a result of Defendants’ continued noncompliance; and (v) award Plaintiff “such further
20 relief as the Court deems mandatory to preserve the orderly administration of justice.” (Id.
21 at 8–10.)
22 As addressed above, Defendants failed to oppose the Ex Parte Motion.
23 ///
24
25
26
8 Plaintiff’s request for sanctions in the form of adverse inferences and issue
27 preclusion “includ[es] deeming all subsequently produced documents authentic and
admissible and establishing that any destroyed, altered, or withheld item would have been
28
1 2. Supplement to Ex Parte Motion
2 In the Supplement, Plaintiff asserts that “Defendants’ selective, unusable, and
3 incomplete production” has caused “concrete, case-dispositive prejudice[.]” (ECF No. 228
4 at 12.) Plaintiff contends that Defendants produced “a limited, mislabeled document-dump
5 of compressed, partially corrupted ESI served without Bates labeling, load files/metadata,
6 or the structured form required by Fed. R. Civ. P. 34(b)(2)(E),” consisting, in part, “of
7 folders (‘Profit & Loss,’ ‘Balance Sheets,’ etc.) that are incongruent with their contents
8 and cut off around April 10, 2024.” (Id. at 3.) Further, Plaintiff maintains that Brown
9 failed to comply with paragraph 1 and that Defendants took no action to comply with
10 paragraphs 3, 7, and 10 of the Motion to Compel Order. (Id. at 4–8.) With respect to the
11 remaining provisions in the order, Plaintiff represents the following:
12
ECF No. 215 Order ¶2: [Brown shall p]ermit Plaintiff (or his
13
designated expert or representative) to inspect and copy physical
14 items and documents that may contain responsive material.
15
Produced: Defendants[9] offered an in-person, paper-only
16 inspection at a private residence within the 14-day window.
17
Deficiency: On this record, no discrete violation of ¶2 is
18 established. However, consistent with prior orders requiring that
electronic production be delivered in parallel, ESI should be
19
prioritized. A physical inspection should follow, rather than
20 substitute for, completion of ESI production under Fed. R. Civ.
P. 34(b)(2)(E), so that any on-site review is targeted, efficient,
21
and facilitates organized collection rather than a burden-shifting
22 paper exercise. The prior in-person invitation would have been
congruent with the Court’s directives had Defendants also
23
complied with the ESI or cell phone inspection components; by
24 electing to proceed only with an in-person limited paper
inspection, Defendants rendered the visit largely untenable. Any
25
26
27
9 The Court notes that paragraph 2 of the Order mandated compliance from Brown
28
1 Fed. R. Civ. P. 37 remedies for ESI noncompliance should guide
the scope and logistics of any inspection under ¶2.
2
3 Prejudice to Plaintiff: Shifts burden to Plaintiff and is inferior
to the ordered electronic production. Defendants ignored nearly
4
every paragraph of the June 6, 2025 order, proffering only a
5 ‘hard-copy inspection[.’] This is classic burden shifting that is
tangential to, and no substitute for, ordered electronic production
6
under Rule 34(b)(2)(E). The Defendant entities operated on
7 email, SMS texts, and cloud systems; paper records were highly
limited and are valuable only in the context of full and complete
8
ESI production as ordered by the Court. In light of Defendants’
9 ongoing avoidance of ESI production, account inspection, and
compliance, the probative value and reliability of any paper-only
10
showing are suspect.
11
(Id. at 5–6; ECF No. 215 at 25.)
12
ECF No. 215 Order ¶4: Brown declaration confirming that he
13
has requested all responsive bank statements. Brown shall
14 produce these statements to Plaintiff.
15
Produced: No ¶4 declaration confirming issuer requests; no
16 issuer-pulled bank or credit-card statements. Instead, Defendants
produced a single personal Chase account (2017–2023) and
17
selective and non-compliant consumer credit-card statements not
18 tied to comprehensive issuer requests.
19
Deficiency: No issuer pulls; no confirmation of requests to all
20 relevant issuers.
21
Prejudice to Plaintiff: Prevents tracing of revenues,
22 distributions, and Federal Excise Tax (“FET”) collections;
invites selective curation.
23
24 (ECF No. 228 at 6.)
25 ECF No. 215 Order ¶5: Jet Agency Global, LLC to produce all
doc[uments] responsive to RFP 5 or allow inspection; else amend
26
to state non-existence after reasonable inquiry.
27
28
1 Produced: No conforming production; any materials received
are facially deficient.
2
3 Deficiency: Invoices omitted; no amended response stating non-
existence after reasonable inquiry.
4
5 Prejudice to Plaintiff: Forecloses receivables and FET tracing;
impairs damages computation.
6
7 ECF No. 215 Order ¶6: C3 Jets, LLC to produce all
doc[uments] responsive to RFP 19[10] or allow inspection; else
8
amend to state non-existence after reasonable inquiry.
9
Produced: No conforming production; any materials received
10
are facially deficient.
11
Deficiency: Registers and general ledgers omitted; no amended
12
response stating non-existence after reasonable inquiry.
13
Prejudice to Plaintiff: Blocks fund-flow and inter-company
14
analysis; invites self-contradictions.
15
(Id. at 6–7.)
16
ECF No. 215 Order ¶8: Serve signed interrogatory answers.
17
18 Produced: None.
19
Deficiency: Defendants served unverified interrogatory answers,
20 a nullity under Fed. R. Civ. P. 33(b)(3), (5).[11]
21
22
10 Plaintiff’s RFP 19 to Brown requested all minutes of any meetings of any entity
23 defendant’s respective committees since December 13, 2016. (ECF No. 188-3 at 8.)
24
11 Rule 33 of the Federal Rules of Civil Procedure provides, in pertinent part:
25
(3) Answering Each Interrogatory. Each interrogatory
26
must, to the extent it is not objected to, be answered separately
27 and fully in writing under oath.
…
28
1
Prejudice to Plaintiff: Presently unusable at trial; deprives
2
Plaintiff of sworn admissions and fixed positions; forces
3 litigation against a moving target and invites ambush via late
verification; facilitates self-concealment by omission, prejudices
4
due process by obscuring notice of positions and evidentiary
5 bases, and veers toward de facto self-concealing misconduct.
6
(Id. at 7.)
7
Plaintiff maintains that Defendants’ noncompliance “warrants calibrated, coercive
8
remedies,” including adverse inferences and evidentiary bars tied to the missing categories,
9
signed verifications, and per-diem civil-contempt fines, until Defendants achieve full
10
compliance with the Motion to Compel Order, and insists that such sanctions are necessary
11
to “disincentivize ongoing misconduct” and to deter “continued self-dealing, personal
12
enrichment, and dissipation of assets.” (Id. at 14, 16.)
13
Defendants failed to file an opposition to the Supplement.
14
B. Legal Standard
15
Rule 37 of the Federal Rules of Civil Procedure “authorizes the district court, in its
16
discretion, to impose a wide range of sanctions when a party fails to comply with the rules
17
of discovery or with court orders enforcing those rules.” Compass Bank v. Morris Cerullo
18
World Evangelism, 104 F. Supp. 3d 1040, 1052 (S.D. Cal. 2015) (citation omitted); see
19
also Guifu Li v. A Perfect Day Franchise, Inc, 281 F.R.D. 373, 390 (N.D. Cal. 2012) (“As
20
a condition precedent to imposing sanctions pursuant to Federal Rule of Civil Procedure
21
37 the Defendants must have violated a Court Order”). Pursuant to Rule 37(b)(2)(A), “[i]f
22
a party or a party’s officer, director, or managing agent—or a witness designated
23
under Rule 30(b)(6) or 31(a)(4)—fails to obey an order to provide or permit discovery . . .
24
25
26
(5) Signature. The person who makes the answers must
27 sign them, and the attorney who objects must sign any objections.
28
1 the court where the action is pending may issue further just orders,” which may include the
2 following:
3 (i) directing that the matters embraced in the order or other
designated facts be taken as established for purposes of the
4
action, as the prevailing party claims
5
(ii) prohibiting the disobedient party from supporting or
6
opposing designated claims or defenses, or from introducing
7 designated matters in evidence;
8
(iii) striking pleadings in whole or in part;
9
(iv) staying further proceedings until the order is obeyed;
10
11 (v) dismissing the action or proceeding in whole or in part;
12
(vi) rendering a default judgment against the disobedient party;
13 or
14
(vii) treating as contempt of court the failure to obey any order
15 except an order to submit to a physical or mental examination.
16
Fed. R. Civ. P. 37(b)(2)(A).
17
There are two limitations to the application of a Rule 37(b)(2) sanction. “First, any
18
sanction must be ‘just’; second, the sanction must be specifically related to the particular
19
‘claim’ which was at issue in the order to provide discovery.”
20
Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982)
21
(quoting Fed. R. Civ. P. 37(b)(2)). “Imposition of sanctions under Rule 37(b), and the
22
selection of the particular sanction, are matters left to the discretion of the trial court.” Liew
23
v. Breen, 640 F.2d 1046, 1050 (9th Cir. 1981). “The purpose of civil sanctions is to ensure
24
compliance with court orders and to compensate aggrieved parties for the sanctioned
25
party’s failure to comply with court rules and orders.” Cruz v. Nike Retail Servs., Inc., 346
26
27
28
1 F.R.D. 107, 114 (S.D. Cal. 2024) (citing Oracle USA, Inc. v. Rimini St., Inc., 81 F.4th 843,
2 858 (9th Cir. 2023)).12
3 C. Analysis
4 1. Civil Contempt
5 Plaintiff requests that the Court hold Defendants in contempt of court for failing to
6 comply with the Motion to Compel and impose a coercive per diem fine of $1,000 per
7 Defendant, payable to the Clerk, “commencing on the date the contempt order is entered”
8 in order to “disincentivize non-compliance until full compliance has been certified.” (ECF
9 No. 217 at 9.)
10 Except in limited circumstances not applicable here,13 United States Magistrate
11 Judges lack contempt authority. See 28 U.S.C. § 636(e); see also HM Elecs., Inc. v. R.F.
12 Techs., Inc., No. 12CV2884-BAS (MDD), 2014 WL 12102169, at *1 (S.D. Cal. Dec. 16,
13 2014) (citing 28 U.S.C. § 636(e); Bingman v. Ward, 100 F.3d 653, 656–657 (9th Cir. 1996)
14 (explaining that “[m]agistrate judges themselves do not have authority to make any
15 findings of contempt, so must certify their findings to the district judge”). Title 28, Section
16 636 of the United States Code provides, in pertinent part, that upon the commission of an
17 act constituting a civil contempt,
18 the magistrate judge shall forthwith certify the facts to a district
judge14 and may serve or cause to be served, upon any person
19
20
21 12 “Even without a discovery order, discovery misconduct may be punished under
the court’s inherent powers to manage its affairs. Guifu Li, 281 F.R.D. at 390 n.13 (citation
22
and quotation marks omitted).
23
13 United States magistrate judges may, for instance, assert civil or criminal contempt
24
authority in any case in which the magistrate judge presides with the consent of the parties
25 and may exercise summary criminal contempt authority to sanction any obstruction of the
administration of justice occurring “in the magistrate judge’s presence.” 28 U.S.C. §
26
636(e)(2), (4).
27
14 “The magistrate judge’s certification of facts serve[s] the function of the charging
28
1 whose behavior is brought into question under this paragraph, an
order requiring such person to appear before a district judge upon
2
a day certain to show cause why that person should not be
3 adjudged in contempt by reason of the facts so certified. The
district judge shall thereupon hear the evidence as to the act or
4
conduct complained of and, if it is such as to warrant punishment,
5 punish such person in the same manner and to the same extent as
for a contempt committed before a district judge.
6
7 28 U.S.C. § 636(e)(6)(B)(iii). “Essentially, the magistrate judge’s role is to determine
8 whether Plaintiff has established a prima facie case of contempt[.]” Moog Inc. v. Skyryse,
9 Inc., No. 2:22-CV-09094-GW (MAR), 2023 WL 12032095, at *2–3 (C.D. Cal. May 16,
10 2023).
11 “Civil contempt . . . consists of a party’s disobedience to a specific and definite court
12 order by failure to take all reasonable steps within the party’s power to comply. The
13 contempt need not be willful, and there is no good faith exception to the requirement of
14 obedience to a court order.”15 In re Dual-Deck Video Cassette Recorder Antitrust Litig.,
15 10 F.3d 693, 695 (9th Cir. 1993) (citation and quotation marks omitted); see also United
16 States v. Powers, 629 F.2d 619, 627 (9th Cir. 1980) (citation omitted) (explaining that civil
17 contempt is an appropriate remedy when a court aims to “enforce compliance with a court
18 order”). “[C]ivil contempt sanctions, or those penalties designed to compel future
19 compliance with a court order, are considered to be coercive and avoidable through
20
21
22
consider additional evidence.” 3A Fed. Prac. & Proc. Crim. § 715 (4th ed.); see also 7A
23 Fed. Proc., L. Ed. § 17:12 (“Trying the contempt charges de novo, the district judge will
hear the evidence as to the act or conduct complained of and, if it is such as to warrant
24
punishment, punish the person in the same manner and to the same extent as for a contempt
25 committed before a district judge.”).
26
15 Federal Rule of Civil Procedure 37(b)(2)(A)(vii) permits the Court to treat as
27 contempt of court the failure to obey any order to provide or permit discovery, except for
an order to submit to a physical or mental examination. See Fed. R. Civ. P.
28
1 obedience, and thus may be imposed in an ordinary civil proceeding upon notice and an
2 opportunity to be heard.” Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S.
3 821, 827 (1994). “The party alleging civil contempt must demonstrate that the alleged
4 contemnor violated the court’s order by clear and convincing evidence, not merely a
5 preponderance of the evidence.” In re Dual-Deck, 10 F.3d at 695 (citation and quotation
6 marks omitted); see also Bagwell, 512 U.S. at 827 (stating that “civil contempt sanctions,
7 or those penalties designed to compel future compliance with a court order, are considered
8 to be coercive and avoidable through obedience, and thus may be imposed in an ordinary
9 civil proceeding upon notice and an opportunity to be heard,” further explaining that
10 “[n]either a jury trial nor proof beyond a reasonable doubt is required”).
11 Thus,
12
[t]o establish a prima facie case for civil contempt, the moving
13 party must show, “by clear and convincing evidence,” that the
non-moving party disobeyed “a specific and definite court
14
order,” and that such disobedience was “beyond substantial
15 compliance” and “not based on a good faith and reasonable
interpretation of the court’s order.”
16
17 Daimler AG v. A-Z Wheels LLC, No. 16-CV-875 JLS (MDD), 2022 WL 281580, at *1
18 (S.D. Cal. Jan. 31, 2022) (quoting In re Dual-Deck, 10 F.3d at 695). “Once the moving
19 party meets this standard, the burden shifts to the contemnor to demonstrate that he or
20 she took every reasonable step to comply, and to articulate reasons why compliance was
21 not possible.” HM Elecs., Inc., 2014 WL 12102169, at *1 (citing Donovan v. Mazzola,
22 716 F.2d 1226, 1240 (9th Cir. 1983)); see also Coleman v. Newsom, 131 F.4th 948, 956
23 (9th Cir. 2025) (explaining that “the substantial compliance defense excuses an alleged
24 contemnor who, despite not achieving total compliance, has achieved near-total
25 compliance through the exhaustion of all reasonable efforts”); United States v. Ayres,
26 166 F.3d 991, 994 (9th Cir. 1999) (citation omitted) (stating that “[a]n alleged contemnor
27 may defend against a finding of contempt by demonstrating a present inability to
28 comply”); In re Dual-Deck, 10 F.3d at 695 (citation and quotation marks omitted)
1 (“Substantial compliance with the court order is a defense to civil contempt, and is not
2 vitiated by ‘a few technical violations’ where every reasonable effort has been made to
3 comply”).
4 Here, the undersigned Magistrate Judge concludes that Plaintiff’s allegations
5 establish a prima facie case for civil contempt. Defendants disobeyed “a specific and
6 definite court order” by failing to substantially comply with all but one of the discovery
7 directives set forth in the Motion to Compel Order. Daimler AG, 2022 WL 281580, at *1
8 (quoting In re Dual-Deck, 10 F.3d at 695). In his Supplement, Plaintiff concedes that
9 Brown has comported, at least nominally, with the second discovery directive since the
10 filing of the Ex Parte Motion. (See ECF No. 228 at 5 (Plaintiff’s acknowledgement that
11 “[o]n this record, no discrete violation of ¶2 is established”). With respect to the remaining
12 discovery directives, however, Plaintiff’s Supplement indicates that Defendant produced
13 only minimal discovery, subsequent to the filing of the Ex Parte Motion, andthat
14 Defendant’s production was substantially incomplete and noncompliant. (See ECF No.
15 228 at 4–8.); see also In re Heritage Bond Litig., 223 F.R.D. 527, 533 (C.D. Cal. 2004)
16 (holding that plaintiffs demonstrated by clear and convincing evidence that defendants
17 failed to comply with the court’s order compelling the production of documents, thus
18 warranting a finding of civil contempt under Federal Rule of Civil Procedure 37(b)(20(D),
19 where it was “clear that the efforts by [] defendants to obtain relevant and significant
20 documents for [] plaintiffs was minimal”). Thus, the burden shifts to Defendants to
21 demonstrate a present inability to comply with the Order. See Ayres, 166 F.3d at 994.
22 However, as noted above, Defendants failed to file an opposition to Plaintiff’s Ex Parte
23 Motion despite three opportunities to do so.
24 Moreover, as noted in the Motion to Compel Order, this Court has overseen discovery
25 disputes regarding Defendants’ responses to the discovery requests at issue for more than
26 a year. (ECF No. 215 at 23.) On multiple occasions, Defendants agreed to supplement
27 their responses in accordance with agreements reached at informal Discovery Conferences,
28 only for Defendants to thereafter revoke or deny those agreements. (Id. at 23-24.) Further,
1 Defendants have repeatedly failed to meet deadlines set by the Rules of Civil Procedure
2 and by Court orders. (Id. at 24.) That pattern continues, as Defendants persist in flagrantly
3 disregarding the discovery directives set forth in the Order. See HM Elecs., Inc., 2014 WL
4 12102169, at *1 (quoting Stone v. City and Cnty. of San Francisco, 968 F.2d 850, 856–57
5 (9th Cir. 1992)) (“To assess whether an alleged contemnor has taken ‘every reasonable
6 step’ to comply with the terms of a court order, the district court can consider (1) a history
7 of noncompliance, and (2) a failure to comply despite the pendency of a contempt
8 motion.”). Court orders are not something Defendants can merely “work on” but “make
9 no promises” to comply with. (See ECF No. 217 at 4.) They must be adhered to.
10 Defendants have not opposed the Motion and have not met their burden to
11 demonstrate they were unable to comply, despite taking all reasonable steps to do so. See
12 Daimler AG, 2022 WL 281580, at *1.
13 The Court therefore certifies the pertinent facts set forth above in the Relevant
14 Procedural Background. The Court further certifies that Defendants, individually and
15 collectively, violated a specific and definite order of this Court; did not take every
16 reasonable step to comply with the order; and have not established that they were unable
17 to comply with the order. Accordingly, the Court recommends that the Honorable Gonzalo
18 P. Curiel initiate civil contempt proceedings against Defendants.
19
a. Coercive Fines
20
21 One form of relief requested by Plaintiff is the imposition of a coercive fine of
22 $1,000 per day until Defendants achieve compliance.
23 “[A] per diem fine imposed for each day a contemnor fails to comply with an
24 affirmative court order” can constitute a coercive civil sanction. Coleman, 131 F.4th at
25 962–63 (quoting Bagwell, 512 U.S. at 829). “A court, in determining the amount and
26 duration of a coercive fine, must ‘consider the character and magnitude of the harm
27 threatened by continued contumacy, and the probable effectiveness of any suggested
28 sanction in bringing about the result desired.’” Whittaker Corp. v. Execuair Corp., 953
1 F.2d 510, 516 (9th Cir. 1992) (quoting United States v. United Mine Workers of Am., 330
2 U.S. 258, 304 (1947))). The Court determines that daily coercive fines in the amounts
3 set forth below are the appropriate sanction, carefully calculated to incentivize
4 compliance with the Motion to Compel Order.
5 In Falstaff Brewing Corp. v. Miller Brewing Co., the Ninth Circuit reversed an
6 amended order of the district court holding plaintiff in contempt of court for, inter alia,
7 failing to return documents as required by a protective discovery order. 702 F.2d 770,
8 777, 780, 783 (9th Cir. 1983). The Court is mindful of Falstaff’s direction on the need
9 to clearly differentiate between coercive civil contempt sanctions and punitive criminal
10 contempt sanctions.16 Importantly, a coercive per diem fine cannot constitute a civil
11 contempt sanction where the record shows that compliance with the court’s order is
12 impossible. See id. at 782 (reasoning that “the district court’s order of contempt simply
13 [could not] be sustained as a coercive civil contempt order,” where “it was impossible
14 for [the contemnor] to purge itself of contempt by returning documents which were in
15 the sole possession of its counsel”). “A court’s power to impose coercive civil contempt
16 depends upon the ability of the contemnor to comply with the court’s coercive order.”
17 Id. at 778 (citing Shillitani v. United States, 384 U.S. 364, 371 (1966)). Where a coercive
18 sanction is imposed, the civil contemnor “carries the keys of his prison in his own
19 pocket,” either literally or figuratively; whereas if the penalty is fixed, the criminal
20 contemnor “is furnished no key, and he cannot shorten the term by promising not to
21 repeat the offense.” Gompers v. Buck’s Stove & Range, Inc., 221 U.S. 418, 442 (quoting
22
23
16 The Falstaff Court cautioned, “[w]here . . . a judgment of contempt contains an
24
admixture of criminal and civil elements, ‘the criminal aspect of the order fixes its character
25 for purposes of procedure on review.’” Falstaff, 702 F.2d at 778 (quoting Penfield Co. of
California v. Securities & Exchange Commission, 330 U.S. 585, 591 (1947)). The Ninth
26
Circuit also addressed the distinction between compensatory civil contempt sanctions,
27 payable to the opposing party, and coercive civil contempt sanctions, payable to the Court.
See id. at 779-80. Here, Plaintiff is only requesting, and the Court is only recommending,
28
1 In re Nevitt, 117 F. 448, 461 (8th Cir. 1902)); see also Coleman, 131 F.4th at 962
2 (explaining that “just as a conditional sentence of imprisonment is coercive and civil if
3 the contemnor ‘carries the keys of his prison in his own pocket,’ a purgeable civil fine is
4 one that is forward-looking and conditional, allowing the contemnor to avoid its
5 imposition by altering some behavior”) (quoting Bagwell, 512 U.S. at 828).
6 In this case, certain aspects of the Order are, on their face, clearly well within
7 Defendants’ power to comply. All Defendants have failed to serve Plaintiff with signed
8 interrogatory responses in violation of the Federal Rules of Civil Procedure and the
9 Motion to Compel Order. Defendant Brown has failed to submit a declaration as ordered
10 by the Court. All Defendants have failed to provide a privilege log as ordered by the
11 Court. All Defendants have failed to produce discovery they had agreed in their
12 discovery responses and in the pleadings and hearings related to the Motion to Compel
13 to produce, even after production was ordered by the Court. With respect to other
14 aspects of the Motion to Compel Order, specifically directives 1 and 3, it is not as
15 obvious on its face that Defendants have the current ability to comply, but the burden
16 had shifted to them to articulate reasons why compliance was not possible, and they
17 declined to file any opposition to the Ex Parte Motion. Nonetheless, the Court, in this
18 recommendation, still allows for Defendants to avoid civil coercive sanctions either by
19 complying with directives 1 and 3 of the Order or by submitting declarations
20 demonstrating impossibility. Thus, each Defendant truly “carries the keys of his prison
21 in his own pocket,” as each possesses the ability to purge contempt through compliance
22 with any contempt order hereafter issued by Judge Curiel. See Gompers, 221 U.S. at
23 442.
24 The Court recommends daily coercive sanctions, to be paid to the Court, in the
25 following amounts until the required actions are completed.
26
27
28
1 Defendant ¶ Number Required Action to End Sanctions Daily
from Sanction
2
Order/RFP Amount
3 Number
Brown ¶¶ 1, 3 Permit Plaintiff (or his designated expert $500 per
4
RFP Nos. or representative) to inspect the servers, day
5 28, 31, 32, email accounts, cell phones, and any
33, 37, 38, other electronic storage media within
6
39, 43, 53, Brown’s possession, custody, or control
7 54, 58, 64, for all agreed upon custodians AND file
65, 66, 67, a declaration with the Court signed by
8
68, 69, 70 Brown: (1) specifically identifying which
9 electronic storage media he currently has
possession, custody or control of and has
10
made available to Plaintiff; (2)
11 specifically identifying which electronic
storage media he maintains he never had
12
possession, custody or control of and the
13 basis for that assertion; (3) specifically
identifying any electronic media storage
14
devices he previously had possession,
15 custody or control of and no longer does;
and (4) for each electronic storage media
16
device identified under (3), setting forth
17 why it is not available for inspection,
when and how it became unavailable for
18
inspection, and what efforts were made,
19 and when, to preserve the devices and
their data for this litigation.
20
Brown ¶ 4 Produce all responsive bank and credit $250 per
21 RFP Nos. card statements to Plaintiff AND file a day
5, 7, 8, 9 declaration with the Court confirming
22
that he has requested all responsive bank
23 statements and credit card statements
from his financial institutions and that all
24
responsive documents have been
25 produced. All transactional information
beyond that which is requested may be
26
redacted.
27
28
1 Defendant ¶ Number Required Action to End Sanctions Daily
from Sanction
2
Order/RFP Amount
3 Number
Jet Agency ¶ 5 Produce all client invoices since $200 per
4
Global, RFP No. 5 December 13, 2016, AND file a day
5 LLC declaration confirming that this has been
completed.
6
C3 Jets, ¶ 6 Produce all check registers and general $200 per
7 LLC RFP No. 19 ledgers since December 13, 2016 AND day
file a declaration confirming this has
8
been completed.
9 All ¶¶ 7, 10 Produce a privilege log of any $100
Defendants communications as to which Stacy (joint and
10
Brown is asserting marital several)
11 communications privilege; produce all
responsive documents withheld on the
12
basis of privilege, except for those
13 documents over which Stacy Brown
asserts the marital communications
14
privilege; AND file a declaration with
15 the Court affirming that no responsive
documents are being withheld on the
16
basis of privilege outside of those on the
17 Stacy Brown marital communications
privilege log.
18
All ¶ 8 Serve on Plaintiff signed copies of their $100 per
19 Defendants interrogatories in compliance with Fed. Defendant
R. Civ. P. 33 AND file a declaration with per day
20
the Court confirming that it has been
21 completed.
22
23
24
25
26
27
28
1 Defendant ¶ Number Required Action to End Sanctions Daily
from Sanction
2
Order/RFP Amount
3 Number
All ¶ 3 To the extent they have possession, $500 per
4
Defendants custody, or control of the cell phones Defendant
5 except for used by the agreed upon custodians, per day
Brown, make those phones available for
6
because, inspection by Plaintiff AND file a
7 for Brown, declaration with the Court: (1)
this action specifically identifying which cell
8
is already phones they currently have possession,
9 addressed custody or control of and have made
in the first available to Plaintiff; (2) specifically
10
entry in identifying which electronic cell phones
11 this chart they maintain they never had possession,
custody or control of and the basis for
12
that assertion; (3) specifically identifying
13 any cell phones they previously had
possession, custody or control of and no
14
longer do; and (4) for each cell phone
15 identified under (3), setting forth why it
is not available for inspection, when and
16
how it became unavailable for
17 inspection, and what efforts were made,
and when, to preserve the device and its
18
data for this litigation.
19
Should Judge Curiel issue an order imposing the recommended civil coercive
20
sanctions, the Court further recommends that the sanctions be suspended for five days after
21
such order is issued.
22
b. Default Liability on All Claims and Counterclaims
23
Plaintiff requests that the Court “strike Defendants’ answers and enter default as to
24
liability on all claims and counterclaims.” (ECF No. 217 at 9.) Furthermore, “upon entry
25
of default, Plaintiff asks that the Court set an expedited prove-up to determine damages,
26
shifting to Defendants the burden of disproving amounts that would have been
27
ascertainable had they produced the ordered records.” (Id.)
28
1 The District Court has the discretion to strike pleadings, dismiss the action, or render
2 default judgment in response to noncompliance with a discovery order. Fed. R. Civ. P.
3 37(b)(2)(A)(iii, v-vi). “Dismissal, however, is authorized only in extreme circumstances
4 and only where the violation is due to willfulness, bad faith, or fault of the party.” In re
5 Exxon Valdez, 102 F.3d 429, 432 (9th Cir. 1996) (citation and quotation marks omitted);
6 see also Henry v. Gill Indus., Inc., 983 F.2d 943, 946 (9th Cir. 1993) (citationomitted)
7 (“Where the drastic sanctions of dismissal or default are imposed, however, the range of
8 discretion is narrowed and the losing party’s non-compliance must be due to willfulness,
9 fault, or bad faith.”).
10 In deciding whether to dismiss a case or render default judgment, a court must weigh
11 the following five factors: “(1) the public’s interest in expeditious resolution of litigation;
12 (2) the court’s need to manage its docket; (3) the risk of prejudice to the [moving party];
13 (4) the public policy favoring disposition of cases on their merits; and (5) the availability
14 of less drastic sanctions.” In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d
15 1217, 1226 (9th Cir. 2006) (citation omitted); see also Adriana Int’l Corp. v. Thoeren, 913
16 F.2d 1406, 1412 (9th Cir.1990). “These factors are ‘not a series of conditions precedent
17 before the judge can do anything,’ but a ‘way for a district judge to think about what to
18 do.’” Id. (quoting Valley Eng’rs Inc. v. Elec. Eng’g Co., 158 F.3d 1051, 1057 (9th Cir.
19 1998). “Where a court order is violated, the first two factors support sanctions and the
20 fourth factor cuts against a default. Therefore, it is the third and fifth factors that are
21 decisive.” Adriana Int’l Corp., 913 F.2d at 1412. The moving party suffers prejudice
22 where the actions of the non-moving party impair the “ability to go to trial or threaten to
23 interfere with the rightful decision of the case.” Id. “Delay alone has been held to be
24 insufficient prejudice” but “[f]ailure to produce documents as ordered, . . . is considered
25 sufficient prejudice.” Id. “The district court’s finding of prejudice deserves substantial
26 deference because the district court is in the best position to assess prejudice.” In re
27 Phenylpropanolamine, 460 F.3d at 1228 (citation and quotation marks omitted).
28
1 Plaintiff argues that Defendants’ “non-compliance immediately deprives [him] of
2 evidence needed to prove claims involving misappropriated assets, diverted tax
3 proceedings, and self-dealing transactions that may expose unknown co-conspirators.
4 Further, Plaintiff insists that “[t]he resulting prejudice is manifest,” as “without the
5 requested financial records and verified interrogatories, [he] cannot quantify damages or
6 test the veracity of Defendants’ anticipated defenses.” (ECF No. 217 at 7.) The Ninth
7 Circuit has held that “[t]he district court abuses its discretion if it imposes a sanction of
8 dismissal without first considering the impact of the sanction and the adequacy of less
9 drastic sanctions.” Malone v. U.S. Postal Serv., 833 F.2d 128, 131 (9th Cir. 1987) 9citation
10 omitted). “Failure to Warn has frequently been a contributing factor in [Ninth Circuit]
11 decisions to reverse orders of dismissal.” Id. at 133 (citations omitted). Reviewing courts
12 may consider whether a district court: (1) explicitly discussed the feasibility of less drastic
13 sanctions; (2) implemented alternative methods of sanctioning before ordering dismissal;
14 or (3) warned the non-moving party of the possibility of dismissal before ordering
15 dismissal. Id. at 132. In this case, the Court expressly warned Defendants that failure to
16 comply with the Motion to Compel Order could result in more serious sanctions, up to and
17 including evidentiary and issue preclusion sanctions. (ECF No. 215 at 27 (“Failure to
18 timely comply with any aspect of this Order may expose Defendants to the imposition of
19 sanctions up to and including evidentiary and issue preclusion sanctions.”).) Further, the
20 Court previously ordered Defendants to pay, within 30 days, Plaintiff’s reasonable
21 attorney’s fees incurred in bringing the Motion to Compel (ECF No. 224), which
22 Defendants have allegedly failed to do. (ECF No. 230).
23 The Court recognizes that Defendants’ repeated failure to provide discovery
24 beginning in February 2024, compounded by their continued refusal to comply with court
25 orders, constitutes an interference with the rightful decision of the case. However, the
26 Court is not persuaded that invoking the drastic sanction of dismissal or default—which
27 has been characterized as the “most severe penalty” authorized only in “extreme
28 circumstances”—is appropriate at this time. U.S. for Use & Ben. of Wiltec Guam, Inc. v.
1 Kahaluu Const. Co., 857 F.2d 600, 603 & 603 n.5 (9th Cir. 1988) (citation omitted); see
2 also Gen. Atomic Co. v. Exxon Nuclear Co., 90 F.R.D. 290, 307 (S.D. Cal. April 23, 1981)
3 (citation omitted) (“[D]ismissal and default judgment, the sanctions of last resort, run
4 counter to the strong public policy of deciding cases on their merits and affording litigants
5 their fair day in court.”). Instead, less drastic sanctions, such as those outlined in the instant
6 Order, should be utilized first. Defendants are once again warned, though, that continued
7 noncompliance may result in terminating sanctions. Because the Court recommends
8 against entry of default, the Court need not address Plaintiff’s request for an expedited
9 prove-up to determine damages.
10 c. Adverse Influence and Issue Preclusion
11 In his Ex Parte Motion, Plaintiff requests sanctions in the form of “adverse-influence
12 and issue-preclusion findings, including deeming all subsequently produced documents
13 authentic and admissible and establishing that any destroyed, altered, or withheld item
14 would have been unfavorable to Defendants.” (ECF No. 217 at 10.) Plaintiff maintains
15 that “Defendants’ defiance is willful, not inadvertent.” (Id. at 6.) In the court-ordered
16 Supplement, Plaintiff asserts that the record in this case warrants the imposition of
17 sanctions in the form of “adverse inferences and evidentiary bars tied to the missing
18 categories[.]” (ECF No. 228 at 14.)
19 As a sanction for failure to comply with a discovery order, a District Court may issue
20 an order “directing that the matters embraced in the order or other designated facts be taken
21 as established for purposes of the action, as the prevailing party claims.” Fed. R. Civ. P.
22 37(b)(2)(A)(i); Guifu Li, 281 F.R.D. at 393 (citation omitted). Courts have held that
23 “[a]n adverse inference instruction can take many forms, []
ranging in degrees of harshness.” Apple Inc. [v. Samsung Elecs.
24
Co., Ltd.,], 881 F. Supp. 2d [1132,] 1150 [N.D. Cal. 2012]. The
25 level of harshness should be commensurate with the
egregiousness of the conduct. Id. There are three levels of
26
instructions generally considered: (1) “when a spoliating party
27 has acted willfully or in bad faith, the jury can be instructed that
certain facts are deemed admitted and must be accepted as true”;
28
1 (2) “when a spoliating party has acted willfully or recklessly, a
court may impose a mandatory presumption”; and (3) the least
2
harsh instruction “permits (but does not require) a jury to
3 presume that the lost evidence is both relevant and favorable to
the innocent party.” Id. (citation omitted).
4
5 Ramos v. Swatzell, No. EDCV121089BROSPX, 2017 WL 2857523, at *14 (C.D. Cal. June
6 5, 2017), report and recommendation adopted, No. ED CV 12-1089-BRO (SPx), 2017 WL
7 2841695 (C.D. Cal. June 30, 2017) (declining to impose a requested sanction in the form
8 of an adverse inference jury instruction suggesting that defendants concealed evidence that
9 one defendant was counseled for dishonesty in a government investigation, where plaintiffs
10 “failed to show that was the case”).
11 Further, Rule 37(b)(2) sanctions are limited by two considerations: the sanction must
12 be “just” and must be “specifically related to the particular claim which was at issue in the
13 order to provide discovery.” Guifu Li, 281 F.R.D. at 393 (quotation marks and citation
14 omitted). Here, Plaintiff fails to specify which “particular claim[s]” of the 19 causes of
15 action set forth in his Second Amended Complaint are at issue in connection with his
16 request for Rule 37(b)(2) sanctions in the form of adverse inferences and issue preclusion.
17 See Guifu Li, 281 F.R.D. at 393; (see also ECF No. 217 at 7) (contending generally that
18 “Defendants’ non-compliance immediately deprive[d] Plaintiff of evidence needed to
19 prove claims involving misappropriated assets, diverted tax proceeds, and self-dealing
20 transactions that may expose unknown co-conspirators”). Plaintiff also does not address
21 whether the requested sanctions are “specifically related” to those claims. Id. at 393-94
22 (deeming facts pertaining to the issue of alter ego liability set forth in two paragraphs of
23 the complaint established, subject to rebuttal at trial, where one defendant “repeatedly
24 refused to produce documents and deponents that would clarify its corporate ownership
25 and structure, concluding that “[t]his [was] an appropriate and narrowly tailored sanction
26 to address the Court’s orders that have been violated”). Moreover, despite raising the
27 specter of the destruction of evidence by Defendants (see ECF No. 217 at 10), Plaintiff
28 fails to develop this potential argument with any specificity. See, e.g., Ramos, 2017 WL
1 2857523, at *13 (explaining that a party seeking an adverse inference instruction based on
2 the destruction of evidence must establish: (1) that the party having control over the
3 evidence had an obligation to preserve it at the time it was destroyed; (2) that the records
4 were destroyed with a culpable state of mind; and (3) that the evidence was relevant to the
5 party’s claim or defense such that a reasonable trier of fact could find that it would support
6 that claim or defense). The record, at this time, does not establish that evidence has been
7 destroyed. The Court is not persuaded that the imposition of adverse inference
8 instructions and issue preclusion are the appropriate sanctions at this time. See Dr. Lokesh
9 Tantuwaya MD, Inc. v. Jetsuite, Inc., No. 19-CV-49-W-BLM, 2023 WL 6378012, at *6
10 (S.D. Cal. Sept. 27, 2023) (awarding attorneys’ fees and costs but declining to impose
11 terminating sanctions under Rule 37(b), where plaintiff failed to produce responsive
12 documents, respond to interrogatories, participate in the meet and confer process, or
13 respond to defendant’s motion to compel); see also AMC Tech., LLC v. Cisco Sys., Inc.,
14 No. 11-CV-3403 PSG, 2013 WL 3733390, at *4 (N.D. Cal. July 15, 2013) (citation and
15 quotation marks omitted) (holding that sanctions in the form of adverse inferences “have
16 similar effect to default judgment and should only be awarded with very great restraint”).
17 The Court therefore recommends against imposing sanctions in the form of adverse
18 inferences and issue preclusion.
19 2. Attorney’s Fees
20 Pursuant to Federal Rule of Civil Procedure 37(b)(2)(C), Plaintiff requests an award
21 of all reasonable attorneys’ fees and costs incurred since June 6, 2025, as a result of
22 Defendants’ noncompliance with the Motion to Compel Order, including all attorney’s fees
23 and costs incurred preparing the instant Ex Parte Motion. (ECF No. 217 at 10.) Plaintiff
24 seeks “to ensure that Defendants do not profit from their discovery misconduct and to
25 restore the parties to level litigation footing.” (Id.)
26 “Imposition of sanctions under Rule 37(b), and the selection of the particular
27 sanction, are matters left to the discretion of the trial court.” Liew, 640 F.2d at 1050
28 (citations omitted). Federal Rule of Civil Procedure 37(b) provides, relevant part:
1 Payment of Expenses. Instead of or in addition to the orders
above, the court must order the disobedient party, the attorney
2
advising that party, or both to pay the reasonable expenses,
3 including attorney’s fees, caused by the failure [to obey an order
to provide or permit discovery], unless the failure was
4
substantially justified or other circumstances make an award of
5 expenses unjust.
6
Fed. R. Civ. P. 37(b)(2)(A), (C). “The party against whom an award of expenses is sought
7
has the burden of showing the special circumstances that make his failure to comply
8
‘substantially justified.’” Liew, 640 F.2d at 1050 (quoting Fed. R. Civ. P. 37b)(2)).
9
As noted above, Defendants failed to oppose Plaintiff’s Ex Parte Motion. Thus,
10
Defendants have not attempted to meet their burden of showing that special circumstances
11
render their failure to comply with the Order “substantially justified.” Id. The Court finds
12
no substantial justification for Defendants’ noncompliance and is not aware of any
13
circumstances that would make awarding expenses unjust. The Court therefore concludes
14
that Plaintiff is entitled to reasonable attorney’s fees and costs incurred following June 6,
15
2025, as a result of Defendants’ noncompliance with the Motion to Compel Order. See
16
Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1482-83 (9th Cir. 1992)
17
(affirming award of approximately $24,000 in attorney’s fees and costs incurred obtaining
18
an order compelling discovery); Ramos, No. EDCV121089BROSPX, 2017 WL 2857523,
19
at *15 (citing Fed. R. Civ. P. 37(b)(2)(C)) (holding that plaintiffs were entitled to monetary
20
sanctions in the form of attorney’s fees and expenses, where defendant failed to obey the
21
court’s order to produce documents”).
22
It is of no moment that Plaintiff concedes in the Supplement that “[o]n this record,
23
no discrete violation of ¶2 is established” where Brown afforded Plaintiff the opportunity
24
to inspect and copy physical items and documents within the 14-day window provided for
25
in the Motion to Compel Order (ECF No. 228 at 5) or that the Defendants partially
26
complied with the Order in other, modest ways.
27
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1 As Defendants’ counsel has only been attorney of record since April 21, 2025 (ECF
2 No. 204), and Defendants have been disregarding discovery deadlines since February 2024,
3 the Court finds Defendants to be the disobedient party and orders the Defendants, jointly
4 and severally, to pay the reasonable attorney’s fees and costs.
5 However, Plaintiff has not detailed the amount of reasonable attorney’s fees and
6 costs incurred in connection with Defendants’ noncompliance. See RG Abrams Ins. v. L.
7 Offs. of C.R. Abrams, 342 F.R.D. 461, 523 (C.D. Cal. 2022) (stating that “[t]he party
8 seeking the award of fees must submit evidence to support the request”). As this Court has
9 explained:
10 In the Ninth Circuit, a district court determines a reasonable fee
award first by “calculating the lodestar amount, which is the
11
‘number of hours reasonably expended on the litigation
12 multiplied by a reasonable hourly rate.’” Chaudhry v. City of Los
Angeles, 751 F.3d 1096, 1110 (9th Cir. 2014) (quoting Hensley
13
v. Eckerhart, 461 U.S. 424, 433 (1983)). To assess a reasonable
14 hourly rate, the court must look to the “rate prevailing in the
community for similar work performed by attorneys of
15
comparable skill, experience, and reputation.” Camacho
16 v.Bridgeport Fin., Inc., 523 F.3d 973, 979 (9th Cir. 2008)
(quoting Barjon v. Dalton, 132 F.3d 496, 502 (9th Cir. 1997)).
17
“Affidavits of the [fee applicant] and other attorneys regarding
18 prevailing fees in the community, and rate determinations in
other cases, . . . are satisfactory evidence of the prevailing market
19
rate.” United Steelworkers of Am. v. Phelps Dodge Corp., 896
20 F.2d 403, 407 (9th Cir. 1990).
21
Kirschner v. J.P. Morgan Chase Bank, N.A., No. 20-CV-01712-LAB-JLB, 2021 WL
22
2633592, at *2–3 (S.D. Cal. June 25, 2021). Accordingly, Plaintiff SHALL FILE
23
supporting declarations and documentation sufficient to support its request for attorney’s
24
fees and costs within ten (10) days of the date of this Order. See id. at *3 (citing Blum v.
25
Stenson, 465 U.S. 886, 895 n.11 (1984) (“To inform and assist the court in the exercise of
26
discretion, the burden is on the fee applicant to produce satisfactory evidence—in addition
27
to the attorney’s own affidavits—that the requested rates are in line with those prevailing
28
1 in the community for similar services by lawyers of reasonably comparable skill,
2 experience[,] and reputation.”); McCwon v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir.
3 2009) (citation omitted) (“The party seeking the award should provide documentary
4 evidence to the court concerning the number of hours spent, and how it determined the
5 hourly rate(s) requested.”)). Defendants may file an opposition challenging the
6 reasonableness of the amount of attorney’s fees within five (5) days of the date of
7 Plaintiff’s filing of his declaration. See RG Abrams Ins., 342 F.R.D. at 523 (“The party
8 opposing the fee request bears the burden of rebuttal that requires submission of evidence
9 to the district court challenging the accuracy and reasonableness of the hours charged or
10 the facts asserted by the prevailing party in submitted affidavits.”) (citation and quotation
11 marks omitted).
12 III. CONCLUSION AND RECOMENDATION
13 For the foregoing reasons, Plaintiff’s request for attorney’s fees is GRANTED.
14 Plaintiff SHALL FILE a declaration and documentation sufficient to support its request
15 for attorney’s fees and costs within ten (10) days of the date of this Order. Defendants
16 may file an opposition challenging the reasonableness of the amount of attorney’s fees
17 within five (5) days of the date of Plaintiff’s filing of his supporting declaration and
18 documentation. The Court RECOMMENDS to the Honorable Gonzalo P. Curiel that the
19 Court initiate civil contempt proceedings against Defendants. Further, the Court certifies
20 the pertinent facts in connection with a contempt inquiry, as set forth in the relevant
21 procedural background above. The Court RECOMMENDS that Plaintiff’s request for
22 sanctions in the form of coercive per diem fines be GRANTED in the amounts set forth in
23 this Report and Recommendation. The Court further RECOMMENDS, however, that
24 Plaintiff’s request for sanctions in the form of adverse inferences, issue preclusion, and
25 entry of default judgment be DENIED.
26 IT IS HEREBY ORDERED that, pursuant to 28 U.S.C. § 636(b)(1)(C), any party
27 to this action may file written objections with the Court and serve a copy on all parties no
28
1 || later than February 12, 2026. The document should be captioned “Objections to Report
2 |}and Recommendation.”
3 IT IS FURTHER ORDERED that if objections are filed, any reply is due by
4 February 26, 2026. The parties are advised that failure to file objections within the
5 || specified time may waive the right to appeal the district judge’s order. Martinez v. □□□□□
6 F.2d 1153, 1157 (9th Cir. 1991).
7 IT IS SO ORDERED.
8 ||Dated: January 29, 2026
n. Jill L. Burkhardt
10 ited States Magistrate Judge
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