GLOBAL MED GROUP, LLC, a Texas limited liability company, Plaintiff, v. NEW HIGH LTD., a Hong Kong corporation, Defendant. And Related Counterclaims Case No. CV 22-6031 CAS (PVCx) United States District Court, C.D. California Signed February 12, 2024 Counsel Michael A. Bowse, Bowse Law Group APC, Los Angeles, CA, for Plaintiff. Lawrence J. Hilton, Alec Pierce Schulman, Robert D. Hunt, Taylor C. Foss, One LLP, Newport Beach, CA, for Defendant. Castillo, Pedro V., United States Magistrate Judge REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE *1 This Report and Recommendation is submitted to the Christina A. Snyder, United States District Judge, pursuant to 28 U.S.C. § 636 and General Order 05-07 of the United States District Court for the Central District of California. I. INTRODUCTION On November 13, 2023, New High Ltd. filed a motion for terminating sanctions (“Motion,” Dkt. No. 96), along with a memorandum of points and authorities (“Mem.,” Dkt. No. 96-1) and the Declaration of Taylor C. Foss (“Foss Decl.,” Dkt. No. 96-2) and set the Motion for hearing on December 11, 2023. On December 7, 2023, the Court continued the hearing until January 11, 2024. (Dkt. No. 102). Global Med Group LLC's opposition to the Motion was due no later than December 21, 2023. See Local Rule 7-9. While Global Med filed a “Notice of Intent” to oppose the Motion (Dkt. No. 104), it waited until the day before the hearing to do so. On December 28, 2023, New High filed a Reply in support of its Motion (“Reply,” Dkt. No. 109), along with the supplemental declaration of Lawrence J. Hilton (“Hilton Decl.,” Dkt. No. 109-1). On January 10, 2024, Plaintiff filed the Declaration of Michael A. Bowse in Response to Motion for Sanctions. (“Bowse Decl.,” Dkt. No. 113). On January 11, 2024, the Court held a hearing on the Motion. (Dkt. No. 115). Plaintiff was given until January 25, 2024, to file a short supplemental brief that includes two declarations: one from counsel that confirms when counsel made Plaintiff aware of the Court's October 5 and November 16, 2023 orders, directing Global Med to pay New High sanctions awards of $4,432.50 and $9,973.45, respectively; and a second declaration from a Global Med officer, which describes why Global Med is unable to pay the sanctions and when it intends to do so. (Dkt. No. 115, citing Dkt. Nos. 93, 98). On January 24, 2024, Plaintiff filed a supplemental brief, which consisted only of the Supplemental Declaration of Michael A. Bowse (“Bowse Supp. Decl.,” Dkt. No. 116-1) and the Declaration of Daniel S. Guez (“Guez Decl.,” Dkt. No. 116-2). On February 1, 2024, Defendant filed a response. (“Resp.,” Dkt. No. 117). For the reasons stated below and at the hearing, it is recommended that New High's Motion be GRANTED, that Global Med's Complaint be DISMISSED WITH PREJUDICE, and that New High be AWARDED its reasonable attorney's fees. II. RELEVANT PROCEDURAL BACKGROUND On August 24, 2022, Global Med filed a Complaint against New High, alleging breach of contract, fraud, negligent representation, and violations of Cal. Bus. & Prof. Code § 17200. (Dkt. No. 1). On October 13, 2022, New High filed Counterclaims for promissory fraud, fraudulent transfer, conspiracy to make fraudulent transfers, breach of contract, account stated, and goods sold and delivered against Global Med, Daniel Guez, Andreana Bosilcic, Delfern Holdings, LLC, and ROES 1–10. (Dkt. No. 12). On November 30, 2022, New High filed Amended Counterclaims, which added Mapleton Capital, LLC as a Counter-Defendant. (Dkt. No. 30). On December 14, 2023, New High filed Second Amended Counterclaims, which added a counterclaim for declaratory judgment of alter ego liability against Global Med and Guez. (Dkt. No. 106). *2 On June 20, 2023, the Court granted New High's first motion for discovery sanctions and ordered Global Med to pay New High a sanctions award of $2,750 within 30 days of the order. (Dkt. No. 75). Global Med failed to pay timely the sanctions award, finally submitting payment two months after it was due and offering no explanation for its dilatory payment. (Dkt. No. 93 at 6–7). On October 5, 2023, the Court granted New High's second motion for discovery sanctions and ordered Global Med to pay New High a sanctions award of $4,432.50 within 30 days of the order. (Dkt. No. 93). The Court admonished Global Med: “Failure to comply with the terms of this Order may result in a recommendation for default judgment or terminating sanctions pursuant to the Court's inherent authority to enforce its orders.” (Id. at 10) (emphasis in original). On November 16, 2023, the Court granted New High's third motion for discovery sanctions and ordered Global Med to pay New High a sanctions award of $9,973.45 withing 30 days of the order. (Dkt. No. 98). The Court again warned Global Med: “Failure to comply with the terms of this Order may result in a recommendation for default judgment or terminating sanctions pursuant to the Court's inherent authority to enforce its orders.” (Id. at 5) (emphasis in original). After Global Med failed to pay either of these last two sanction awards (the “Sanctions”), New High filed the instant motion. III. APPLICABLE LEGAL STANDARDS A. Sanctions Under Federal Rule of Civil Procedure 16 Under Rule 16, a court may sanction a party or a party's attorney who fails to obey a court order. Fed. R. Civ. P. 16(f)(1) (“On motion or on its own, the court may issue any just orders, including those authorized by Rule 37(b)(2)(A)(ii)–(vii), if a party or its attorney ... fails to obey a scheduling or other pretrial order”). Rule 16 further requires: “Instead of or in addition to any other sanction, the court must order the party, its attorney, or both to pay the reasonable expenses—including attorney's fees—incurred because of any noncompliance with this rule, unless the noncompliance was substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P. 16(f)(2). Whether a sanction is “unjust” requires a “consideration of the degree of the sanction in light of the severity of the transgression which brought about the failure to [comply with the scheduling or pretrial order].” Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 241 (3d Cir. 2007); accord Mireskandari v. Mail, No. CV 12-2943, 2014 WL 12561581, at *8 (C.D. Cal. Aug. 4, 2014), aff'd in part, appeal dismissed in part sub nom. Mireskandari v. Associated Newspapers, Ltd., 665 F. App'x 570 (9th Cir. 2016). “Under Rule 16(f) courts have ‘very broad discretion to use sanctions where necessary to insure not only that lawyers and parties refrain from contumacious behavior, already punishable under the various other rules and statutes, but that they fulfill their high duty to insure the expeditious and sound management of the preparation of cases for trial.’ ” Hollywood v. Carrows California Fam. Restaurants, No. 2:18 CV 2098, 2018 WL 11348278, at *5 (C.D. Cal. Nov. 7, 2018) (quoting In re Baker, 744 F.2d 1438, 1440 (10th Cir. 1984)). “The purpose of Rule 16 sanctions is to encourage forceful judicial management of cases and deter conduct that unnecessarily consumes the court's time and resources.” Mireskandari, 2014 WL 12561581, at *8; see Sherman v. United States, 801 F.2d 1133, 1135 (9th Cir. 1986) (“The 1983 amendments to Rule 16 make clear that the rule is broadly remedial and its purpose is to encourage forceful judicial management”); Wilson v. KRD Trucking West, No. 2:10 cv 00163, 2013 WL 836995, *4 (D. Nev. Mar. 6, 2013) (“In determining the appropriate sanction, the Court notes that a primary objective of Rule 16(f) is the deterrence of conduct that unnecessarily consumes the Court's time and resources that could have been more productively utilized by litigants willing to follow the Court's procedures”); Martin Family Trust v. Heco/Nostalgia Enterprises Co., 186 F.R.D. 601, 603 (E.D. Cal. June 9, 1999) (“Rule 16(f) was designed not only to insure expeditious and sound management of the preparation of cases for trial but to deter conduct that unnecessarily consumes ‘the Court's time and resources that could have been more productively utilized by litigants willing to follow the Court's procedures.’ ”) (quoting Mulkey v. Meridian Oil, Inc., 143 F.R.D. 257, 262 (W.D. Okla. 1992)). “In deciding whether a sanction under Rule 16(f) is merited, the court need not find that the party acted willfully, intentionally, or in bad faith.” Mireskandari, 2014 WL 12561581, at *8; see Lucas Auto. Eng'g, Inc. v. Bridgestone/Firestone, Inc., 275 F.3d 762, 769 (9th Cir. 2001); Martin Fam. Trust v. NECO/Nostalgia Enters. Co., 186 F.R.D. 601, 604 (E.D. Cal. 1999) (collecting cases); 6A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1531 (3d ed. 2012). “Nor does Rule 16(f) require a showing of prejudice to justify sanctions.” Mireskandari¸ 2014 WL 12561581, at *8; see John v. Louisiana, 899 F.2d 1441, 1448 (5th Cir. 1990). B. Sanctions Under the Court's Inherent Power *3 In addition, the Court has the inherent authority to award sanctions for a party's failure to obey court orders. See Link v. Wabash R.R. Co., 370 U.S. 626, 630–31 (1962) (A district court has the inherent power “to manage [its] own affairs so as to achieve the orderly and expeditious disposition of cases.”); Cooke v. United States, 267 U.S. 517, 539 (1925) (observing that a court's inherent powers “derive from the absolute need of a trial judge to maintain order and preserve the dignity of the court”). The Supreme Court in Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980), reiterated the federal courts' inherent power to levy sanctions, including attorneys' fees, for “willful disobedience of a court order.” Id. at 766 (citation omitted). The Supreme Court reaffirmed the Roadway principles in Chambers v. NASCO, Inc., 501 U.S. 32 (1991), emphasizing the continuing need for resort to the court's inherent power, because it is “both broader and narrower than other means of imposing sanctions.” Id. at 46. On the one hand, the inherent power “extends to a full range of litigation abuses”; on the other, the litigant must have “engaged in bad faith or willful disobedience of a court's order.” Id. at 46–47. In Chambers, the Court left no question that a court may levy fee-based sanctions when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons, delaying or disrupting litigation, or has taken actions in the litigation for an improper purpose. Id. at 45–46 & n.10. “Under both Roadway and Chambers, then, the district court has the inherent authority to impose sanctions for bad faith, which includes a broad range of willful improper conduct.” Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001). Indeed, “the inherent power of a court can be invoked even if procedural rules exist which sanction the same conduct.” Chambers, 501 U.S. at 49. IV. DISCUSSION The Court deems Global Med's failure to file a timely opposition as consent to granting the Motion. See L.R. 7-12 (“The failure to file any required document ... may be deemed consent to the granting ... the motion ....”). Moreover, sanctions are warranted under both Rule 16 and the Court's inherent authority for Global Med's failure to follow multiple Court orders. Under the court's inherent authority, as well as its authority pursuant to the federal rules, the court may enter terminating sanctions for discovery violations. See Roadway, 447 U.S. at 764–67; Fed. R. Civ. P. 37(b)(2)(A)(v)–(vi); Fed. R. Civ. P. 41(b). In deciding whether to grant terminating sanctions, the Court considers five factors: (1) the public interest in expeditious resolution of litigation; (2) the Court's need to manage its docket; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on merits; and (5) the availability of less drastic sanctions. Conn. Gen. Life Ins. Co. v. New Images, 482 F.3d 1091, 1096 (9th Cir. 2007). The first two factors usually favor the imposition of sanctions, while the fourth factor cuts against it. Henry v. Gill Indus., Inc., 983 F.2d 943, 948 (9th Cir. 2002). Thus, the “key factors are prejudice and the availability of lesser sanctions.” Id. (citation omitted). Nevertheless, the five factors merely “amounts to a way for a district judge to think about what to do, not a series of conditions precedent before the judge can do anything, and not a script for making what the district judge does appeal-proof.” Id. Accordingly, “a district court is not required to make specific findings on each of the essential factors.” In re Eisen, 31 F.3d 1447, 1451 (9th Cir. 1994). A. The Public's Interest in Expeditious Resolution of Litigation and the Court's Need to Manage its Docket As discussed above, the first and second factors of the five-factor test support a terminating sanction. Henry, 983 F.2d at 948. New High failed to pay timely the sanctions awarded on June 20, 2023, finally submitting payment two months after it was due and offering no explanation for its dilatory actions. It has failed to pay the sanctions ordered on October 5 and November 16, 2023, despite prodding by Global Med's counsel. (E.g., Foss Decl. ¶¶ 4–6; Hilton Decl. ¶ 3). Global Med also disregarded the Court's local rules, which requires it to file timely either an opposition brief or a notice of non-opposition to noticed motions. See L.R. 7-9. In response to New High's September 9 and November 11 motions, Global Med did neither. Under these circumstances, the Court finds that Global Med willfully disobeyed the Court's June 20 Order, requiring sanctions payment to New High by July 20, 2023; the October 5 Order, requiring sanctions payment to New High by November 6; and the Court's November 16 Order, requiring sanctions payment to New High by December 18. See Roadway Express, 447 U.S. at 766 (reiterating the federal courts' inherent power to levy sanctions for “willful disobedience of a court order”); Stars' Desert Inn Hotel & Country Club, Inc. v. Hwang, 105 F.3d 521, 525 (9th Cir. 1997) (“Disobedient conduct not shown to be outside the control of the litigant is sufficient to demonstrate willfulness, bad faith or fault warranting default.”); Pray v. M/Y NO BAD DAYS, 303 F. App'x 563, 564 (9th Cir. 2008) (“Willful disobedience of a court order may justify terminating sanctions.”). *4 Global Med's actions also unnecessarily consumed the Court's time and resources. Global Med's failure to pay the Sanctions has interfered with efficient management of this case and imposed unwarranted burdens on the Court and its personnel, along with opposing counsel. Accordingly, additional sanctions are also warranted under Rule 16(f) “to insure ... that lawyers and parties ... fulfill their high duty to insure the expeditious and sound management of the preparation of cases for trial.’ ” Hollywood, 2018 WL 11348278, at *5; see also Link, 370 U.S. at 630–31 (concluding that district courts have the “inherent power ... to manage their own affairs so as to achieve the orderly and expeditious disposition of cases”). New High's vexatious delays and noncompliance has stalled this action and consumed an inordinate and unwarranted amount of this Court's time and resources to address issues solely within New High's ability to avoid. See Ferdik v. Bonzelet, 963 F.2d 1258, 1261 (9th Cir. 1992) (finding the first and second factors “strongly support” dismissal due to the plaintiff's “vexatious noncompliance” with the court's orders, causing the case to drag on and consume “large amounts of the court's valuable time”); see also Fed. R. Civ. P. 41(b) (“If the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it.”). B. The Risk of Prejudice to New High and the Availability of Less Drastic Sanctions “Where a court order is violated, the first and second factors will favor sanctions and the fourth will cut against them. Therefore, whether terminating sanctions [are] appropriate ... turns on the third and fifth factors.” Computer Task Grp., Inc. v. Brotby, 364 F.3d 1112, 1115 (9th Cir. 2004) (citation omitted). The third factor—the risk of prejudice to New High—weighs heavily in favor of dismissal. “A defendant suffers prejudice if the plaintiff's actions impair the defendant's ability to go to trial or threaten to interfere with the rightful decision of the case.” Adriana Int'l Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th Cir. 1990) (citation omitted). Global Med has not rebutted the presumption of prejudice caused by its willful failure to prosecute the case, respond to motions, and pay sanctions awards. Indeed, New High's failure to follow the local rules and timely respond to motions amount to an admission that its actions have prejudiced New High. Finally, the Court has attempted less drastic sanctions to no avail. In determining the availability of lesser sanctions, the court should consider “alternative sanctions, whether it tried them, and whether it warned the recalcitrant party about the possibility of dismissal.” Valley Engineers Inc. v. Elec. Eng'g Co., 158 F.3d 1051, 1057 (9th Cir. 1998). On multiple occasions, the Court has ordered monetary sanctions for Global Med's discovery violations and failures to obey court orders. The Court has explicitly warned Global Med that its continuing failures to obey court order could result in terminating sanctions. These lesser sanctions apparently fell on deaf ears. Thus, there is no reason to expect that any sanction less than dismissal will have any effect on Global Med's willful and bad faith refusal to participate in this case. See In re Phenylpropanolamine (PPA) Prod. Liab. Litig., 460 F.3d 1217, 1229 (9th Cir. 2006) (“Warning that failure to obey a court order will result in dismissal can itself meet the ‘consideration of alternatives’ requirement.”); Hester v. Vision Airlines, Inc., 687 F.3d 1162, 1170 (9th Cir. 2012) (“in light of the defendant's willful disobedience, the district court could reasonably conclude that additional lesser sanctions would be pointless”) (citation omitted). At the January 11 hearing, Plaintiff's counsel informed the Court—for the first time—that he had never informed his client that it owed the Sanctions. Counsel asserts that he first informed his client later that day that it owed the Sanctions, and that prior to January 11, 2024, Counsel had told Global Med that “[he] had to pay sanctions to New High and that [he] would take care of making those payments.” (Bowse Supp. Decl. ¶ 2). But Counsel does not credibly explain why he would have thought that he was supposed to pay the Sanctions. The Court's orders explicitly required Global Med to pay the Sanctions. (Dkt. No. 93 at 10; Dkt. No. 98 at 5). And on January 11, Counsel asserted that the only reasons that the Sanctions had not been paid is that “Global Med lacks and has lacked funds to pay those sanctions” and that he “would have advanced payment of those sanctions amounts on behalf of Global Med but also lacked the funds to do so.” (Bowse Decl. ¶¶ 4–5) (emphasis added). Moreover, Counsel does not provide any credible evidence that he was “severally constrained” by illness “during a substantial part of 2023” (id. ¶ 5) or how his illness excused Global Med from paying the Sanctions. Any omission by Counsel to inform his client of the Court's orders does not excuse Global Med's failure to pay the Sanctions. See Link v. Wabash R. Co., 370 U.S. 626, 633–34 (1962) (A party who “voluntarily chose this attorney as his representative in the action ... cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent and is considered to have notice of all facts, notice of which can be charged upon the attorney.”) (citation omitted). *5 Counsel asserts that Global Med needs an additional 60 days to pay the Sanctions. (Bowse Decl. ¶ 7). Global Med contends that it presently lacks funds and needs until May 1, 2024, “to obtain liquid funds from which it can pay the ordered sanction amounts or from which it can pay Mr. Bowse so he can pay the ordered sanction amounts.” (Guez Decl. ¶¶ 3–4). However, given the history of this case and the purported evidence that funds have been improperly transferred out of Global Med's coffers (see generally Resp. at 3–6), the Court has no faith that the Sanctions will ever be paid. In sum, based on weighing the five factors, the Court finds that a terminating sanction is warranted. Anheuser-Busch, Inc. v. Nat. Beverage Distributors, 69 F.3d 337, 348 (9th Cir. 1995) (“It is well settled that dismissal is warranted where, as here, a party has engaged deliberately in deceptive practices that undermine the integrity of judicial proceedings: courts have inherent power to dismiss an action when a party has willfully deceived the court and engaged in conduct utterly inconsistent with the orderly administration of justice.”) (citation omitted). Pursuant to the Court's inherent power to address New High's bad faith conduct, which has both delayed and disrupted the litigation, as well as the Court's authority under the federal rules, the Court finds that dismissal with prejudice is appropriate. V. RECOMMENDATION For the foregoing reasons, IT IS RECOMMENDED that the District Court issue an order: (1) GRANTING New High's Motion for Terminating Sanctions; (2) DISMISSING WITH PREJUDICE Global Med's Complaint; and (3) AWARDING New High its reasonable attorney's fees.