Abdallah W. Tamari, Ludwig W. Tamari, Farah Tamari, Co-Partners D/B/A Wahbe Tamari & Sons Co. v. Bache & Co. (Lebanon) S.A.L., a Lebanese Corporation, Appeal of Robert P. Howington, Jr.

Citations: 729 F.2d 469; 38 Fed. R. Serv. 2d 1044; 1984 U.S. App. LEXIS 25112Docket: 83-1950

Court: Court of Appeals for the Seventh Circuit; February 26, 1984; Federal Appellate Court

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Plaintiffs Abdallah W. Tamari, Ludwig W. Tamari, and Farah Tamari, operating as Wahbe Tamari Sons Co., appealed a district court order that made them and their former counsel, Howington, Elworth, Osswald, Hough (the Firm), jointly liable for costs incurred by defendant Bache Co. Lebanon S.A.L. The appeal arose from a long-running case initiated in December 1975, where the Tamaras alleged Bache defrauded them of over two million dollars, claiming violations of the Commodity Exchange Act. The district court imposed fees and costs due to the Tamaras' failure to comply with discovery orders, specifically their absence from scheduled depositions. 

Despite a court order requiring the Tamaras to establish a deposition schedule by September 16, 1982, and subsequent reminders regarding an October 27 deadline, the Tamaras did not appear for their depositions. The Firm argued that the Tamaras were busy but did not seek an evidentiary hearing or respond to Bache's motion to dismiss, which was granted due to noncompliance. The Tamaras later filed a motion to vacate the dismissal, claiming they were not aware of the deadlines due to misinformation from their counsel. On February 7, 1983, the court vacated the dismissal, confirming that the Firm had inaccurately conveyed the court's orders to the Tamaras. The appellate court affirmed the district court's order regarding the assessment of fees and costs against the Firm.

Bache filed a motion on March 7, 1983, seeking reimbursement for expenses incurred due to the Tamaras' failure to meet a deposition deadline. These expenses included attorneys' fees related to Abdallah Tamari's deposition and opposition to the Tamaras' motion to vacate. Both parties submitted comprehensive briefs, and no evidentiary hearing was requested. The Tamaras argued that the war in Beirut justified their non-compliance, asserting it impeded their ability to appear for depositions and produce documents. However, on May 11, 1983, the court granted Bache's motion for fees and costs under Federal Rule of Civil Procedure 37, deeming the Tamaras' arguments "unpersuasive," noting that none were in Beirut during the relevant times and that alternative solutions to document production challenges existed. The court found the expenses reasonable and imposed them jointly on the Tamaras and their law firm.

Under Federal Rule of Civil Procedure 37(b), the court may impose sanctions for non-compliance with court orders, requiring the offending party or their attorney to pay reasonable expenses unless justified or unjust circumstances exist. The district court has broad discretion in applying these sanctions, which are designed to prevent unjustified resistance to discovery. The Firm argued that sanctions could only follow a motion to compel discovery; however, the court clarified that a formal motion is not always necessary if the party had sufficient notice of the required discovery actions.

In Properties International, Ltd. v. Turner, the court upheld sanctions imposed by a district court under Rule 37(b) for failure to comply with an order requiring complete discovery, noting that no formal motion from the opposing party was necessary for such sanctions. Similarly, in Charter House Insurance Brokers, Ltd. v. New Hampshire Insurance Co., the court recognized an attorney's promise in open court to produce documents as equivalent to an order under Rule 37(b). The case of Henry v. Sneiders affirmed that an oral order from a district court suffices for Rule 37(b) sanctions, even without a written order. In Jones v. Uris Sales Corp., proceedings held in chambers where a judge directed a deadline for document production were treated as an oral order.

The Firm was repeatedly notified about the requirement to complete the Tamaras' depositions by October 27, 1982, through a status hearing, a minute order, and an in-chambers discussion involving the judge. Despite the Firm's admission of receiving these notifications, they failed to ensure the Tamaras' appearance. The court indicated a predisposition to dismiss the case if the Tamaras did not appear, emphasizing the history of non-compliance. Additionally, Bache's attorneys sent two letters reminding the Firm of the court's order regarding the depositions.

While Rule 37(b) permits a court to impose expenses on a party's attorney, such sanctions are considered severe and typically require a formal motion to compel. However, in this case, the Firm had the opportunity to present a detailed argument against the sanctions before they were imposed, thereby justifying the court's decision to proceed despite the lack of a formal motion.

The Firm argued it did not view the October 27 date as a deadline, claiming plaintiffs' counsel misinterpreted a September 16 court order as establishing that date for depositions. The district court deemed the Firm's argument unpersuasive, granting Bache's motion for fees and costs. The court concluded that the Firm had sufficient notice of the deadline and an opportunity to contest the imposition of expenses, satisfying Rule 37 requirements.

Regarding culpability, the Firm contended Rule 37(b) sanctions require wilfulness or bad faith for violations. However, established authority indicates that a party's culpability influences the type of sanctions but not their imposition. Courts have sanctioned negligent failures in discovery. The Firm was deemed negligent for not informing the Tamaras of the deadline, as there was no evidence they communicated this requirement despite receiving notice.

The Firm claimed it could not meet the deadline due to unavailable documents resulting from conflict in Beirut, but the district court found this insufficient to excuse their failure to schedule depositions or communicate with Bache. On February 7, 1983, the district court vacated an earlier dismissal order, stating the Tamaras were not informed of the deadline and thus did not wilfully violate the court's order.

The Firm also contested the reasonableness of the $10,802.08 awarded in fees and costs, arguing that the November 2 deposition of Abdallah Tamari was excessive. Although the deposition appeared lengthy, the district judge found Bache's request for fees reasonable and not extravagant, affirming the appropriateness of having two attorneys present for the deposition.

The review of the deposition supports the judge's opinion, revealing that while some questions were repetitive, they primarily focused on the communications between the Tamaras and their attorneys, as well as the status of documents related to a prior discovery order. Tamari's nonresponsive answers and interruptions from her attorneys contributed significantly to the deposition's length. The Firm did not prove that the expenses incurred during Bache's opposition to the Tamaras' motion to vacate the dismissal order were unreasonable. The district court, familiar with the case's context, found the expenses reasonable, and no clear abuse of discretion was demonstrated.

Bache seeks reimbursement for appellate fees and costs, a somewhat novel request. The Tenth Circuit's ruling in Ohio v. Arthur Andersen Co. indicated that awards for appellate expenses may be appropriate when a party defends a discovery order on appeal. Awarding appellate expenses to Bache aligns with Rule 37(b), which allows for the recovery of expenses caused by a party's failure to comply with a court order. The appellate costs incurred by Bache resulted from the Tamaras' and the Firm's noncompliance with the deposition deadline. Additionally, not awarding these costs could discourage parties from seeking sanctions, undermining Rule 37(b)'s purpose.

The conclusion emphasizes that Rule 37(b) sanctions empower the district court to ensure compliance with discovery orders, particularly in protracted cases. The court affirms the district court's decision to impose sanctions and awards Bache the reasonable fees and costs associated with the appeal. The Firm's argument regarding the dismissal of the lawsuit is deemed untimely, as it did not request a hearing or a chance to respond at that time, nor did it raise the Beirut situation during the status hearing concerning deposition attendance.