December 30, 2014
CLARK BARTHOLOMEW; TANYA BARTHOLOMEW; and A.B., a Minor, By His Next Friend CLARK BARTHOLOMEW; Plaintiffs,
BURGER KING CORPORATION; CTI FOODS HOLDING CO., LLC.; UNITED STATES ARMY AND AIR FORCE EXCHANGE SERVI76CES; DOES 1-150, Defendants.
ORDER (1) OVERRULING OBJECTIONS TO MAGISTRATE JUDGE’S OCTOBER 27, 2014 AMENDED FINDINGS AND RECOMMENDATION; AND (2) ADOPTING OCTOBER 27, 2014 AMENDED FINDINGS AND RECOMMENDATION TO GRANT DEFENDANTS’ JOINT MOTION FOR SANCTIONS
J. Michael Seabright United States District Judge
Before the court are Plaintiffs Clark Bartholomew (“Clark”), his wife Tanya Bartholomew (“Tanya”), and their minor son A.B.’s (collectively, “Plaintiffs”) Objections to Findings and Recommendations issued by Magistrate Judge Richard L. Puglisi to grant Defendants’ Joint Motion for Sanctions stemming from Plaintiffs’ failure to comply with court orders requiring in-person attendance at a September 10, 2014 settlement conference. Doc. No. 251. An October 16, 2014 Findings and Recommendation (“F&R”) recommended a compensatory sanction of an award of attorneys’ fees and costs incurred by Defendants Burger King Corporation (“BKC”), CTI Foods Holding Co., Ltd. (“CTI”), and the United States of America and Army and Air Force Exchange Service (“AAFES”) (collectively, “Defendants”). Doc. No. 246, F&R at 8. An October 27, 2014 Amended Findings and Recommendation (“Amended F&R”) incorporated the F&R, and recommended awards of $3, 560.34, $3, 668.00, and $1, 231.76 to BKC, CTI, and AAFES respectively. Doc. No. 250, Amended F&R at 9. (Because the Amended F&R reiterates the conclusions in the F&R, the court construes Plaintiffs’ Objections as directed towards the Amended F&R.)
Plaintiffs argue that the sanctions are punitive and violate the Fifth Amendment to the United States Constitution, contending that (1) Plaintiffs did not disobey the Court’s Orders of July 3 and 15, 2014, (2) Plaintiffs took all reasonable steps to comply with the court’s orders, and (3) Defendants did not sustain actual losses of attorneys’ fees and costs because of Plaintiffs’ absence. Based on the following, the court OVERRULES Plaintiffs’ Objections, ADOPTS the Amended F&R, and GRANTS Defendants’ Joint Motion for Sanctions.
On one level, this proceeding is simple -- the court ordered at least one Plaintiff (as well as each Defendant) to personally appear at the September 10, 2014 settlement conference. No Plaintiff appeared. No prior notice was given to the court or the Defendants. Plaintiffs thus violated a court order, and the court has authority to sanction them.
Although the settlement conference was held, the dynamics of a settlement conference are much different when the parties themselves attend. The case did not settle, and Defendants sought costs or dismissal as a sanction. Magistrate Judge Puglisi examined the circumstances, and recommended an award of fees and costs, but not dismissal. His decision was correct. The court explains these circumstances in more detail below.
A. Factual Background
During a July 3, 2014 status conference, this court directed that “[a] further settlement conference, with at least one person with authority to settle from each party, shall be scheduled by Friday, July 17, 2014.” Doc. No. 231. The case, which was filed in 2011, had reached a critical juncture -- it was nearing trial (then-set for August 19, 2014), see id., and prior settlement conferences had not resolved the case. See, e.g., Doc. No. 223. On July 15, 2014, Magistrate Judge Puglisi issued an Order Setting Settlement Conference (the “July 15 Order”) specifically ordering “all parties and their lead counsel” to appear on September 10, 2014. Doc. No. 233, July 15 Order at 1 (emphasis added). The July 15 Order further directed that “[e]ach party or a designated representative with final settlement authority, other than an attorney of record, must personally attend the settlement conference.” Id. (emphasis added). The July 15 Order noted that:
“Final settlement authority” means that the insurance representatives at the settlement conference must be authorized to explore settlement options fully and to agree at that time to any settlement terms acceptable to the parties. The person should have “unfettered discretion and authority” to change the settlement position of a party. The purpose of requiring a person with unlimited settlement authority to attend the conference contemplates that the person’s view of the case may be altered during the face-to-face conference. A limited or sum certain of authority is not adequate.
Id. at 1 n.1. The July 15 Order reiterated the need for the parties’ attendance explaining that “[t]he order for parties’ personal appearance is intended to increase the efficiency and effectiveness of the settlement conference, by reducing the time for communication of offers and expanding the ability to explore options for settlement.” Id. at 3.
At the September 10, 2014 settlement conference, two counsel of record appeared in person for Plaintiffs, and one representative, along with counsel, for each Defendant. Doc. No. 236. But no Plaintiff appeared in person. Id. Neither Plaintiffs nor their counsel had given any prior notification that they would not appear. Nor had they previously sought permission to appear, or to be available, only by telephone. According to Clark, he was unable to attend in person because he recently obtained employment in Virginia, had not accrued sufficient leave to fly to Hawaii, and needed to be present to answer questions in connection with his employer’s investigation into his background; however, both he and Tanya were available by telephone. Doc. No. 243-1, Bartholomew Decl. ¶¶ 1-3, 5. Despite Plaintiffs’ failure to attend in person, a settlement conference was held, but the case did not settle. Id.
B. Procedural Background
On September 15, 2014, BKC and CTI filed a Joint Motion for Sanctions, to which AAFES joined, Doc. No. 240, for “Clark[’s] failure to attend said settlement conference, in violation of this Court’s orders.” Doc. No. 237, Mot. at 3, 5. Plaintiffs filed their Opposition on September 29, 2014, alleging in part that BKC violated four pretrial orders requiring the parties to exchange written settlement offers. Doc. No. 243, Pls.’ Opp’n at 1-4. Defendants BKC and CTI filed Replies on October 3 and 6, 2014, Doc. Nos. 244, 245, noting that Plaintiffs failed to seek relief from the July 15 Order prior to the settlement conference, and stating specific dates on which written correspondence regarding settlement negotiations was sent to Plaintiffs via email. Doc. No. 245-1, Kidani Decl. ¶ 6.
On October 16, 2014, Magistrate Judge Puglisi issued an F&R to grant the Joint Motion, finding Plaintiffs in contempt for having violated a court order, and directing Defendants to “file declarations regarding the attorneys’ fees and costs incurred related to the September 10, 2014 Settlement Conference and in making the present Motion.” Doc. No. 246, F&R at 8. On October 27, 2014, the Amended F&R recommended awarding Defendants’ attorneys fees and costs in the amounts of $3, 560.34, $3, 668.00, and $1, 231.76 to BKC, CTI, and AAFES respectively as a compensatory sanction. Doc. No. 250, Amended F&R at 9.
Plaintiffs filed Objections on October 30, 2014. Doc. No. 251. AAFES filed a Position Statement on November 6, 2014, Doc. No. 252, and BKC and CTI filed a Joint Response on November 13, 2014, Doc. No. 253. On December 3, 2014, the court requested supplemental briefing from Plaintiffs. Doc. No. 257. Accordingly, on December 17, 2014, Plaintiffs filed a Supplemental Memorandum in Support of their Objections. Doc. No. 258. Pursuant to Local Rule 7.2(d), the court finds this matter suitable for disposition without a hearing.
III. STANDARD OF REVIEW
When a party objects to a magistrate judge’s findings or recommendations, the district court must review de novo those portions to which the objections are made and “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1); see also United States v. Raddatz, 447 U.S. 667, 673 (1980); United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (“[T]he district judge must review the magistrate judge’s findings and recommendations de novo if objection is made, but not otherwise.”).
Under a de novo standard, this court reviews “the matter anew, the same as if it had not been heard before, and as if no decision previously had been rendered.” Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006); United States v. Silverman, 861 F.2d 571, 576 (9th Cir. 1988). The district court need not hold a de novo hearing; however, it is the court’s obligation to arrive at its own independent conclusion about those portions of the magistrate judge’s findings or recommendation to which a party objects. United States v. Remsing, 874 F.2d 614, 618 (9th Cir. 1989).
The Amended F&R found Plaintiffs in contempt of a court order, or orders. Applying a de novo review, the court sets forth the legal standard for civil contempt sanctions, addresses Plaintiffs’ specific objections, and explains why the standards are met here.
A. Legal Standard
Civil contempt “consists of a party’s disobedience to a specific and definite court order by failure to take all reasonable steps within the party’s power to comply.” Reno Air Racing Ass’n v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006) (quoting In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993)). Although the contempt “need not be willful, [ ] a person should not be held in contempt if his action appears to be based on a good faith and reasonable interpretation of the court’s order.” Id. (quoting In re Dual Deck Video Cassette Recorder Antitrust Litig., 10 F.3d at 695); see also Boink Sys., Inc. v. Las Vegas Sands Corp., 2011 WL 3419438, at *3 (D. Nev. Aug. 3, 2011) (“A few technical violations do not vitiate substantial compliance if a party has made reasonable efforts to comply.” (citations omitted)). Further, substantial compliance with the court order is a defense to civil contempt. In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d at 695.
The party claiming civil contempt must demonstrate a violation of the court’s order by clear and convincing evidence. Id. Accordingly, the moving party must establish that “(1) that [the alleged contemnor] violated the court order, (2) beyond substantial compliance, (3) not based on a good faith and reasonable interpretation of the order, (4) by clear and convincing evidence.” United States v. Bright, 596 F.3d 683, 694 (9th Cir. 2010) (quoting Labor/Cmty. Strategy Ctr. v. L.A. Cnty. Metro. Trans. Auth., 564 F.3d 1115, 1123 (9th Cir. 2009)); see also F.T.C. v. Affordable Media, 179 F.3d 1228, 1239 (9th Cir. 1999) (“The standard for finding a party in civil contempt is well settled: The moving party has the burden of showing by clear and convincing evidence that the contemnors violated a specific and definite order of the court.”).
If the moving party meets this initial four-part test, the burden then shifts to the alleged contemnor to demonstrate why it was unable to comply. Affordable Media, LLC, 179 F.3d at 1239; Stone v. City & Cnty. of San Francisco, 968 F.2d 850, 856 n.9 (9th Cir. 1992). In other words, the accused party must “show [that it] took every reasonable step to comply.” Stone, 968 F.2d at 856 n.9 (citation omitted). To assess whether an alleged contemnor has taken “every reasonable step” to comply with the terms of a court order, the court can consider a variety of factors, including, for example, whether the contemnor has a history of noncompliance, and whether the contemnor failed to comply despite the pendency of a contempt motion. See Stone, 968 F.2d at 857.
“A court has wide latitude in determining whether there has been contemptuous defiance of its order, ” Gifford v. Heckler, 741 F.2d 263, 266 (9th Cir. 1984) (citations omitted); see also Stone, 968 F.2d at 856, and “retains discretion to establish appropriate sanctions.” Bright, 596 F.3d at 696. Sanctions for civil contempt may be imposed to coerce compliance with a court order and/or to compensate the injured party for losses sustained. Koninklijke Philips Elecs., N.V. v. KXD Tech., Inc., 539 F.3d 1039, 1044 (9th Cir. 2008); Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 517 (9th Cir. 1992) (citing United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947)). “Unlike the punitive nature of criminal sanctions, civil sanctions are wholly remedial.” Whittaker Corp., 953 F.2d at 517 (citation omitted).
B. Application of Contempt Standards
1. Plaintiffs Violated a Court Order
The essential facts are not in dispute. In accordance with the court’s directive at the July 3, 2014 status conference, the July 15 Order specifically provides that “[e]ach party or a designated representative with final settlement authority, other than an attorney of record, must personally attend the [September 10, 2014] settlement conference.” Doc. No. 233, July 15 Order at 1 (emphasis added). At the September 10, 2014 settlement conference before Magistrate Judge Puglisi, Plaintiffs did not appear in person, nor did they send a representative with final settlement authority other than counsel of record. Based on these undisputed facts, the court finds that Plaintiffs violated the July 15 Order.
2. Plaintiffs Failed to Substantially Comply with an Order
Plaintiffs argue that they substantially complied with court directives or orders through the personal appearance of two counsel on their behalf “with full authority to negotiate and settle the cases, ” and Plaintiffs’ “availability by telephone throughout the entire 3-hour settlement conference.” Doc. No. 251, Pls.’ Objs. at 5. The court disagrees. The July 15 Order specifically requires Plaintiffs’ in-person attendance at the settlement conference. Doc. No. 233, July 15 Order at 1. The July 15 Order emphasizes the importance of this requirement explaining that (1) “[t]he purpose of requiring a person with unlimited settlement authority to attend the conference contemplates that the person’s view of the case may be altered during the face-to-face conference. A limited or sum certain of authority is not adequate[, ]” id. at 1 n.1, and (2) “[t]he order for parties’ personal appearance is intended to increase the efficiency and effectiveness of the settlement conference[.]” Id. at 3.
Given the importance of in-person attendance and the emphasis placed on this requirement in the July 15 Order, the court finds (by clear and convincing evidence) that merely being available by telephone and sending counsel of record with authority to settle is not substantial compliance.
3.Plaintiffs’ Absence Is Not Based on a Good Faith and Reasonable Interpretation of the July 15 Order
Plaintiffs argue that neither the court orders nor LR 16.5(b)(2),  “the local rule subsection cited and relied on in the [July 15 Order], ” required their personal appearance “so long as they were represented by counsel at the conference who had authority to negotiate.” Doc. No. 251, Pls.’ Opp’n at 12. Plaintiffs engage in a lengthy argument examining the specific language of the minutes from the July 3, 2014 status conference, as well as of LR 16.5(a),  and (b)(3),  arguing that they reasonably interpreted them only to apply to pro se parties. Id. at 13-18. They contend that, under these Rules, they were not required to appear in person, as long as counsel had authority to settle. Id. Plaintiffs, however, ignore the specific language of the July 15 Order, which required their in-person attendance at the settlement conference. Ultimately, Plaintiffs’ argument that they did not violate a specific local rule is not relevant -- they violated a court order.
4. Plaintiffs Failed to Take Every Reasonable Step to Comply
Plaintiffs contend that they took “all reasonable steps within their power to insure compliance with the Court’s Orders.” Doc. No. 251, Pls.’ Opp’n at 5. But they have not demonstrated any effort to comply, other than the attendance of counsel with settlement authority and being personally available by telephone. As the Amended F&R found, prior to the scheduled settlement conference, Plaintiffs did not seek relief from the personal appearance requirement, such as asking for a continuance to a date when at least one Plaintiff could attend in person, or seeking leave to appear via telephone. Plaintiffs provided no declaration from Tanya explaining why she could not attend the settlement conference in person. Nor did Plaintiffs notify the court or Defendants in advance that Plaintiffs would not attend the settlement conference.
In short, there is no evidence that Plaintiffs took any reasonable steps to obtain relief from the July 15 Order, much less to reschedule the settlement conference to a time when Plaintiffs could comply. The record is clear and convincing -- the court adopts the Amended F&R’s findings that Plaintiffs failed to show that they took every reasonable step to comply with the July 15 Order. See Stone, 968 F.2d at 856 n.9.
5. An Award of Defendants’ Reasonable Attorneys’ Fees and Costs Is an Appropriate Compensatory Sanction
Plaintiffs contend that Defendants did not suffer any losses as a result of Plaintiffs’ personal absence from the settlement conference, and therefore the recommended sanctions of attorneys’ fees and costs are punitive and contrary to law. Plaintiffs argue that because the settlement conference proceeded for three hours and the parties moved their positions during that conference, Defendants cannot establish that the attorneys’ fees and costs in connection with the settlement conference and bringing the Joint Motion were incurred unnecessarily. See Doc. No. 251, Pls.’ Opp’n at 7. The court disagrees.
The court specifically required Plaintiffs to attend the settlement conference in person in order to maximize the potential for settlement. There is no dispute that a representative from each Defendant, along with counsel, appeared in person at the settlement conference, that Defendants incurred attorneys’ fees and costs for such appearance, that a settlement conference was held despite Plaintiffs’ absence, and that the case did not settle. “A settlement conference without all of the necessary parties present is not productive.” Painters Joint Comm. v. Wallco, 2013 WL 3930485, at *3 (D. Nev. July 26, 2013) (citing Pitman v. Brinker Int’l, Inc., 216 F.R.D. 481, 486 (D. Ariz. 2003)). Thus, courts have awarded sanctions of attorneys’ fees and costs incurred as a result of a party’s failure to appear at a settlement conference in violation of a court order. See, e.g., CLM Partners LLC v. Fiesta Palms, LLC, 2013 WL 6388760, at *2 (D. Nev. Dec. 5, 2013) (imposing sanctions of attorneys’ fees and costs incurred because party failed to attend settlement conference in violation of court order); Painters Joint Comm., 2013 WL 3930485, at *4 (imposing sanctions of attorneys’ fees and costs incurred as a result of party’s failure to attend settlement conference).
As the Amended F&R found, Defendants incurred attorneys’ fees and costs in connection with the unsuccessful settlement conference -- they suffered actual loss as a result of Plaintiffs’ violation of the July 15 Order. Magistrate Judge Puglisi -- who conducted the settlement conference -- specifically described the conference as “fruitless, ” and did so “[a]s a result of Plaintiffs’ failure to comply with the court’s orders.” Doc. No. 250, Amended F&R at 7. Accordingly, a compensatory award of attorneys’ fees and costs is not punitive.
Nor were Plaintiffs deprived of their due process rights to notice and an opportunity to be heard. The Joint Motion provided Plaintiffs with adequate notice that compensatory sanctions might be imposed and Plaintiffs were afforded an opportunity to present their position through these proceedings -- and their Opposition to the Joint Motion, Objections to the Amended F&R, as well as supplemental briefing.
6. The Recommended Awards of Attorneys’ Fees and Costs Are Reasonable
The Amended F&R details the hours expended by Defense counsel in attending the settlement conference. It applies a “lodestar” calculation with the hours expended and appropriate hourly rates of counsel. Doc. No. 250, Amended F&R at 7-8. These amounts are reasonable and appropriate. Plaintiffs, however, argue that the requested hourly rate of $340 for BKC’s counsel is excessive due to BKC’s failure to include specifics in counsel’s alleged certifications, including a list of the more than fifty cases counsel tried. Doc. No. 251, Pls.’ Opp’n at 21. The court disagrees.
In determining whether an hourly rate is reasonable, courts consider the experience, skill, and reputation of the attorney requesting fees. See Webb v. Ada Cnty., 285 F.3d 829, 840 & n.6 (9th Cir. 2002). A reasonable hourly rate will reflect the prevailing market rates in the community for attorneys “of reasonably comparable skill, experience, and reputation” doing similar work. Prison Legal News v. Schwarzenegger, 608 F.3d 446, 455 (9th Cir. 2010).
Counsel declared that he is “the managing partner” of his law firm, “licensed to practice law” in Hawaii “since 1978, specializing in civil trial and jury practice.” Doc. No. 247, Kidani Decl. ¶ 3. Counsel further states that he “has tried over fifty cases to verdict or judgment . . . and [has] been certified by two organizations approved by the American Bar Association for certification in civil trial litigation, including the National Trial Board Association and the American Board of Professional Trial Attorneys.” Id. ¶ 4.
Such statements are sufficient to establish both the number of years counsel has practiced in this district and his reputation and level of competence in civil litigation. Furthermore, the court is familiar with the prevailing rates in the community for federal litigation of a similarly complex nature. Based on the court’s knowledge of the rates and experience of local counsel and the declaration of BKC’s counsel, the court finds a reasonable hourly rate for BKC’s counsel to be $340.
Based on the foregoing, the court ADOPTS the Amended Findings and Recommendation to Grant Defendant Burger King Corporation and CTI Foods Holding LLC’s Joint Motion for Sanctions (joined by AAFES). Upon de novo review, the court concludes (by clear and convincing evidence) that Plaintiffs violated a July 15, 2014 court Order. Their violation was not based on a good faith and reasonable interpretation of the Order, and they failed to take every reasonable step to comply with that Order. The court also concludes that Magistrate Judge Puglisi’s recommended awards of Defendants’ attorneys’ fees and costs are reasonable and sufficiently-supported compensatory sanctions. Accordingly, the court OVERRULES Plaintiffs’ Objections, ADOPTS the Amended F&R, and GRANTS Defendants’ Joint Motion for Sanctions.
IT IS SO ORDERED.