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Jail Time No Excuse for Discovery Default

In plaintiff strategic consulting firm’s suit against its former chief operating officer for conversion of $341,436.61, fraud and breach of fiduciary duty, the Alexandria U.S. District Court accepts the magistrate judge’s recommendation to grant default judgment to plaintiff firm, in light of defendant’s failure to participate in discovery for nearly five months.

Plaintiff has alleged sufficient facts to establish its possessory rights over specific funds, as well as defendant’s liability for converting these assets. The property at issue is certain monies withdrawn from plaintiff’s primary business banking account between March 1, 2013 and Dec. 31, 2013. Plaintiff asserts defendant served as its COO during this time period and he was an authorized signatory on the account. Defendant held a corporate debit card associated with this account and plaintiff alleges defendant used the debit card and access to the company account to make hundreds of unauthorized transactions for personal use, including medical expenses, restaurant meals and bar tabs, purchases of fine jewelry, luxury men’s clothing, air travel and hotel stays. Copies of the company’s bank statements for the period detail these expenditures. As a result of defendant’s diversion of company funds, the company suffered ongoing cash shortfalls and required capital contributions from the CEO to meet its expenses.

Defendant’s current incarceration for DWI has nothing to do with his lack of responsiveness during the nearly year-long course of this litigation. Defendant makes no allegation that he was incarcerated or otherwise disabled from litigating during the discovery period from April to September. The public records of the state court in which defendant was tried and sentenced for the offense for which he is currently incarcerated shows that he was not sentenced until Feb. 20, 2015 — a full 161 days after the close of discovery. Defendant’s lament that his current incarceration has made it impossible for him to mount a defense or otherwise participate in the litigation of this case is farfetched and unconvincing.

In addition to the $341,436.61 in compensatory damages for conversion, the magistrate judge recommended an award of plaintiff’s reasonable attorney’s fees and costs incurred in seeking discovery from defendant. Plaintiff submitted an affidavit in support of attorney’s fees stating that plaintiff’s counsel and his associates and paralegals expended $5,000 worth of legal services in seeking discovery from defendant. However, the affidavit does not provide in any detail how this attorney and paralegal time was spent. The court is unable to reach a determination as to whether the time spent was reasonable. Plaintiff has not provided sufficient information to justify an award of attorney’s fees.

The court enters default judgment in favor of plaintiff in the amount of $341,436.61. The court denies plaintiff’s alternative sanction request to strike defendant’s answer, bar any defenses and order a presumption that honest responses to plaintiffs’ unanswered discovery would support plaintiff’s claims.

Opportunities Development Group LLC v. Andruss (Ellis/Davis) No. 1:14cv62, April 30, 2015; March 3, 2015; USDC at Alexandria, Va. VLW 015-3-220, 21 pp.

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