PETROLEUM MARKETING GROUP, INC. v. UNIVERSAL PROPERTY SERVICES, INC., et al Civil Action No. 22-2410 (GC) (RLS) United States District Court, D. New Jersey Filed March 03, 2023 Counsel Frederick Santarelli, Roger J. Harrington, Elliott Greenleaf & Siedzikowski, Blue Bell, PA, for Plaintiff. Jordan M. Rand, Klehr Harrison Harvey Branzburg, Philadelphia, PA, Steve M. Kalebic, Kalebic, Mcdonald & Miller, PC, Hackensack, NJ, for Defendant. Singh, Rukhsanah L., United States Magistrate Judge LETTER ORDER *1 Dear Counsel: This matter comes before the Court upon the Motion of Plaintiff Petroleum Marketing Group, Inc. (“Plaintiff”) for Contempt and Sanctions against Defendants Universal Property Services, Inc. (“Universal”), Shamikh Kazmi (“Kazmi”), MR3 Logistics, LLC (“MR3”), and Orbit Freight Lines, LLC (“Orbit”) (collectively, “Defendants”) for violating the Court's August 22, 2022 Order (Dkt. No. 58) requiring Defendants to produce all documents responsive to Plaintiff's Request for Production by no later than September 15, 2022 (the “Motion”). (Dkt. No. 71). Defendants oppose the Motion. (Dkt. No. 76). The Court considers the Motion without oral argument pursuant to Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1(b). For the reasons set forth below, Plaintiff's Motion for Contempt and Sanctions is DENIED in part and GRANTED in part. I. BACKGROUND AND PROCEDURAL HISTORY As the facts and background are well-known to the parties and the Court, they are not set forth at length. Only those facts and procedural history related to the instant Motion are discussed herein. By way of background, this action arises from allegations that, on or about February 2021 through August 2021, Defendants engaged in a scheme to unlawfully take and transport thousands of gallons of Plaintiff's gasoline product without permission or payment, thereby leading to Plaintiff's claims of conversion (against all Defendants), breach of an implied agreement (against Universal and Kazmi), breach of the implied duty of good faith and fair dealing (against Universal and Kazmi), unjust enrichment (against Universal and Kazmi), promissory estoppel (against Universal and Kazmi), and Conspiracy (against all Defendants). (See generally Dkt. No. 1). On February 18, 2022, Universal asserted a counterclaim against Plaintiff for breach of contract. (See generally Dkt. No. 32). On March 23, 2022, Plaintiff served on Defendants its Requests for Production of Documents and Interrogatories pursuant to Federal Rules of Civil Procedure 33 and 34 (“Requests for Production”). (Dkt. No. 71 at p. 5). On April 22, 2022, Defendants served their responses and objections to Plaintiff's Requests for Production, agreeing to produce a majority of the documents on a rolling basis. (Dkt. No. 71 at p. 6). On August 10, 2022, Plaintiff sought leave to file a motion to compel after Defendants “fail[ed] to produce any documents responsive to Plaintiff's discovery requests.” (See Dkt. No. 52). On August 11, 2022, the Court entered an Order requiring Defendants to file a letter setting forth the status of the outstanding discovery requests. (See Dkt. No. 54). On August 18, 2022, Defendants filed their letter response, conceding that there was “no legitimate excuse” for the delayed document production and that Defendants did not object to entry of an order to compel. (Dkt. No. 55). On August 22, 2022, the Court entered a stipulated Order requiring Defendants to produce all documents responsive to Plaintiff's Request for Production by no later than September 15, 2022 (the “August Order”). (Dkt. No. 58). On September 13, 2022, Defendants made the first production of documents and requested an extension until September 29, 2022 to complete production, to which Plaintiff consented. (See Dkt. No. 63 at p. 1). On September 21, 2022, Defendants made a supplemental production and stated that “[t]heir is more coming.” (Dkt. No. 63). On November 8, 2022, the Court held a status telephone conference, during which the Court granted Plaintiff leave to file a motion to compel and for sanctions should Defendants fail to produce the documents by no later than November 18, 2022. (Dkt. No. 71 at pp. 6-7). *2 On November 23, 2022—after Defendants failed to produce any documents by November 18, 2022—Plaintiff filed the instant Motion, asking the Court to hold Defendants “in contempt for their willful violation of this Court's August 22, 2022 Order requiring Defendants to produce all documents responsive to Plaintiff's Request for Production [by] no later than September 15, 2022” and to “impose sanctions against the Defendants, ordering Defendants to pay Plaintiff $1,000.00 as fees and costs, plus $100.00 per day until Defendants fully comply with the Court's August 22, 2022 Order.” (Dkt. No. 71 at p. 3). On December 6, 2022, Defendants filed an opposition to the Motion, arguing that, since the filing of the Motion, Defendants “produced two of the three remaining categories of documents: (1) customer invoices; and (2) communications between the Defendants” and that “[t]he only remaining documents relate to the contracts between Universal ... and its customers[.]” (See Dkt. No. 76 at p. 1). On January 12, 2023, the parties filed a joint letter wherein Plaintiff asserted that while much of the production was, in fact, complete, Universal had yet to produce corporate documents required to complete a valuation of Universal, thereby necessitating a resolution of the instant Motion.[1] (Dkt. No. 77 at pp. 1-2). In response, Universal countered that it does not possess the valuation documents Plaintiff seeks “in part due to the limited duration of the business line at issue.” (Dkt. No. 77 at p. 2). On January 17, 2023, the Court held a telephone status conference during which Defendants indicated that the valuation documents remained unproduced. (See Minute Entry, Jan. 17, 2023). On February 16, 2023, Universal filed a motion for partial summary judgment on its breach of contract counterclaim, which remains pending before the District Court. (Dkt. No. 83). II. LEGAL STANDARD Rule 37 provides that “[i]f a party ... fails to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a), the court in which the action is pending may issue further just orders.” Fed. R. Civ. P. 37(b)(2)(A). These orders may include “treating as contempt of court the failure to obey any order.” See Fed. R. Civ. P 37(b)(2)(A)(vii). “Civil contempt is a means by which the Court may, if necessary, ensure that its discovery orders are obeyed.” Andrews v. Holloway, 256 F.R.D. 136, 140 (D.N.J. 2009) (citations omitted); see generally McDonald's Corp v. Victory Invs., 727 F.2d 82, 87 (3d Cir. 1984) (“[C]ivil contempt may be employed to coerce the defendant into compliance with the court's order and to compensate for losses sustained by the disobedience.”). A plaintiff seeking a civil contempt order “must show by clear and convincing evidence: (1) that a valid court order existed; (2) that defendant had knowledge of the order; and (3) that defendant disobeyed the order.” Andrews, 256 F.R.D. at 141 (citation omitted). However, “a court should not hold a party in contempt of court if there is ground to doubt the wrongfulness of the respondent's conduct, and any ambiguities in the order will be resolved in favor of the party charged with contempt.” Holtec Int'l v. Ameritube, LLC, No. 17-594, 2022 U.S. Dist. LEXIS 204312, at *4 (D.N.J. Jan. 19, 2022) (citing Andrews, 256 F.R.D. at 141); see also Robin Woods Inc. v. Woods, 28 F.3d 396, 399 (3d Cir. 1994) (“The plaintiff has a heavy burden to show a defendant guilty of civil contempt. It must be done by “clear and convincing evidence,” and where there is ground to doubt the wrongfulness of the conduct, he should not be adjudged in contempt.). *3 Alternatively, or in addition to, the sanctions provided pursuant to Rule 37(b)(2)(A), “the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P. 37(b)(2)(C) (emphasis added). “A party's nondisclosure, response or opposition is ‘substantially justified’ if the motion raised an issue ‘about which reasonable men could genuinely differ on whether a party was bound to comply with a discovery rule[.]’ ” 800 Cooper Fin., LLC v. Liu, Nos. 16-736 & 17-456, 2022 WL 17486344, at *6 n.10 (D.N.J. Dec. 7, 2022) (citations omitted). III. DISCUSSION Plaintiff asks the Court to find Defendants in contempt for failing to abide by the August Order (Dkt. No. 58), which required Defendants to produce all documents responsive to Plaintiff's Request for Production by no later than September 15, 2022. (Dkt. No. 71 at pp. 7-8). Considering the record before this Court, it is clear that the first two requirements for finding civil contempt are fulfilled. Indeed, the August Order is a valid court order of which, as the record shows, Defendants were acutely aware. Thus, the sole issue that remains before this Court is whether Defendants disobeyed the August Order. See Andrews, 256 F.R.D. at 141. Through the moving papers, Plaintiff notes that it appears that Defendants themselves, rather than counsel, are responsible for violating the August Order: “To Plaintiff's knowledge, counsel for Defendants has repeatedly and consistently requested that his clients produce responsive documents[;]” however, “instead of complying with their counsel's request and producing the documents, Defendants have made numerous empty promises that a production was coming.” (Dkt. No. 71 at p. 9). The Third Circuit has held that “[u]nder Rule 37, an attorney may only be sanctioned for personally violating a discovery order or for advising a client to do so.” Naviant Mktg. Sols., Inc. v. Larry Tucker, Inc., 339 F.3d 180, 185 (3d Cir. 2003). Because the record before this Court does not support a finding of misconduct by defense counsel, the Court will not find Defendants’ counsel in contempt. Nevertheless, the Court will not simply excuse Defendants’ non-compliance with the August Order. As an initial matter, the Court notes that, prior violating the August Order, Defendants had already failed to meet Plaintiff's deadline for production. Indeed, Plaintiff first sought leave to file a motion to compel on August 10, 2022. (See Dkt. No. 52). Rather than granting Plaintiff's request, the Court permitted Defendants an opportunity to explain the delay, for which Defendants ultimately conceded there was “no legitimate excuse.” (Dkt. No. 55). The Court then imposed two court-ordered deadlines: September 15, 2022 and November 18, 2022, which Defendants subsequently violated. It was only after the filing of the instant Motion on November 23, 2022 that Defendants attempted to comply, producing documents in response to Plaintiff's Requests for Production. Although it is unclear to the Court the extent to which Plaintiff has been prejudiced by Defendants’ delayed discovery production, it is apparent that Plaintiff has experienced monetary harm associated with the filing of the instant Motion. Furthermore, Defendants provide this Court with no substantial justification for violating the August Order. Indeed, the parties agree that Defendants were bound to abide by the August Order. See 800 Cooper Fin., LLC, 2022 WL 17486344, at *6 n.10. Accordingly, the Court finds that Defendants’ conduct warrants the imposition of a sanction under Rule 37(a)(5)(A). *4 In determining the appropriate sanction under the Rule, the Court considers the specific harm caused by Defendants and the corresponding relief. Because Plaintiff experienced monetary harm in pursuing its Motion, the Court finds monetary relief appropriate in this circumstance. Accordingly, Plaintiff will be awarded the reasonable attorneys’ fees and costs incurred by Plaintiff as a result of Defendants’ failure to comply with the August Order. These sanctions will include time and expenses associated with the instant Motion and other efforts made by Plaintiff to obtain the requested discovery from Defendants between the August 22, 2022 deadline and the filing of the instant Motion on November 23, 2022. However, Defendants’ clients alone shall be responsible for the sanctions imposed herein. See DirecTV, Inc. v. Needleman, No 03-2476, 2005 WL 8174789, at *3 (D.N.J. Feb. 22, 2005) (sanctioning only the clients, when the record “does not support a finding of misconduct by defense counsel” but by the client alone). IV. CONCLUSION Accordingly, for the reasons set forth above, and for good cause shown; IT IS, THEREFORE, on this 3d day of March 2023, ORDERED that Plaintiff's Motion for Contempt and Sanctions (Dkt. No. 71) is hereby GRANTED IN PART as it relates to Plaintiff's Motion for Sanctions and DENIED IN PART as it relates to Plaintiff's Motion for Contempt; and it is further ORDERED that by no later than March 20, 2023, Plaintiff shall file an application and proposed order for the award of reasonable fees and costs consisting of the amounts identified in the foregoing Opinion. The application shall include an attorney declaration setting forth the fees and costs to which they are entitled, calculating the total award, and attaching supporting documentation, including appropriately redacted time sheets; and it is further ORDERED that by no later than March 27, 2023, Defendants may submit a response, if any, concerning the reasonableness of the amount sought, without rearguing any of the matters presented to the Court on this motion; and it is further ORDERED that to the extent Defendants have not yet produced the agreed upon responsive, nonprivileged, and relevant corporate documents that will be used to valuate Universal, Defendants must do so by no later than March 27, 2023; and it is further ORDERED that the Clerk of Court is hereby directed to TERMINATE the Motion pending at Docket Entry No. 71. SO ORDERED. Footnotes [1] Plaintiff asserts that Defendants agreed to produce: (1) unredacted contracts between Universal and its customers; (2) unredacted invoices between Universal and its customers; (3) unredacted M&T Bank statements showing payments received by Universal; (4) communications between MR3, Orbit, Universal, and Kazmi; and (5) all corporate documents that will be used to valuate Universal. (Dkt. No. 71 at p. 6).