Jul 19, 2011 Civil Procedure
Ninth Circuit upholds terminating sanctions and $1.1 million default judgment entered for GMSR’s client after opponents’ discovery abuse

Dreith v. Nu Image, Inc. (9th Cir. 2011) 2011 U.S. App. LEXIS 14686 (United States Court of Appeals for the Ninth Circuit) [published]. GMSR’s client, the Film Musicians Secondary Market Fund — created under collective bargaining agreements between the film industry and the American Federation of Musicians of the United States and Canada — benefits musicians who work on films and other media by collecting and distributing deferred wages (residuals) owed them from revenues earned in the secondary market of films and other works they helped create. The Fund sued defendant film producers after they stubbornly failed to comply with their revenue reporting obligations on several works. When defendants persisted in withholding information in federal district court, the court entered their default as a discovery sanction, held a prove-up hearing on damages, and entered a $1.1 million judgment for the Fund.

Defendants appealed despite never having availed themselves of any district court remedy to set the default aside, even though the reassignment of the case to a different judge after imposition of sanctions but before entry of judgment gave them a natural opening for seeking trial court relief.

The Ninth Circuit affirmed, rejecting defendants’ protestations on appeal that the sanctioning judge failed to go by the book and that the second judge’s careful reexamination of defendants’ conduct was beside the point. In its published opinion, the Court concluded “both that the district court possessed the power to impose the sanction of default and that the district court did not abuse its discretion by so doing.” The Court observed, “We are left to wonder why such sophisticated litigants, represented by counsel, failed to avail themselves of the avenues for relief from default afforded them” under the federal rules.