42 West LLC v. Gould

Background

42WEST provided public-relations and crisis-management services connected to Gould’s 2020 settlement with the Securities and Exchange Commission. The opinion states that Gould did not pay for those services. The parties later signed a settlement agreement requiring a $50,000 payment by January 31, 2021, and a $34,000 payment by March 2021, with additional provisions governing default-related fees and penalties.

42WEST filed claims for breach of contract and fraudulent inducement. The opinion describes numerous statements by Gould in 2020 that allegedly promised or represented that payments had been sent or would soon be sent, although the promised payments did not arrive. Gould eventually made payments totaling $53,491 between November 2 and December 17, 2021, but made no further payments. The settlement agreement’s default provision called for $99,000 in principal, plus attorney fees and costs.

The opinion also describes repeated discovery problems. Gould provided inadequate interrogatory responses, failed to produce documents, failed to complete required financial-disclosure forms, and did not attend a February 16, 2022 in-person status conference. The court issued multiple warnings that continued noncompliance could result in default judgment, contempt, or other sanctions. The court later found that Gould had not completed discovery by the August 25, 2023 deadline.

Default Judgment

Under Federal Rules of Civil Procedure 16 and 37, the court may impose sanctions, including default judgment, when a party fails to attend a required conference or obeys neither scheduling nor discovery orders. The court considered Gould’s lengthy history of noncompliance, the failure of lesser sanctions, the repeated warnings, and the prejudice to 42WEST from continued delay.

The court found that Gould’s conduct was willful and in bad faith. It concluded that default judgment was necessary and ordered that judgment be entered against Gould on all counts in the complaint. Because this was a default judgment, the factual allegations were treated as established except for the amount of damages, which the court separately calculated.

Civil Contempt

The court held Gould in civil contempt for violating the order requiring him to attend the February 16, 2022 conference and the order requiring completion of discovery by August 25, 2023. Civil contempt is a court remedy for violating a clear order when the violation is shown clearly and convincingly and the person did not make a reasonable effort to comply.

The court found each element satisfied. Gould did not appear at the required conference, did not timely seek an adjournment, and did not complete discovery as ordered. The court declined to impose an additional fine or other monetary sanction because the damages award already compensated 42WEST for work caused by the violations.

The court declined to hold Gould in criminal contempt at that time. It stated that any criminal-contempt proceeding would require constitutional safeguards, including notice and a hearing. The court warned that it could consider referring the matter for criminal prosecution if Gould had used settlement discussions and discovery delays to place assets beyond creditors’ reach.

Damages and Interest

The court determined that the remaining principal under the settlement agreement was $45,509, based on the $99,000 obligation less the $53,491 in payments. It awarded $121,071.30 in compensatory attorney fees and costs after crediting Gould with the $671.50 previously paid as a sanction for failing to attend the February 16 conference. The total compensatory award for the default was therefore $166,580.30.

The court declined to award punitive damages at that time because it had found civil contempt, warned about possible criminal contempt, and awarded interest. It awarded prejudgment interest of $41,772.86 at nine percent per year from December 18, 2021, through September 30, 2024. It also awarded post-judgment interest from September 30, 2024, until payment, using the federal rate under 28 U.S.C. § 1961.

Disposition

The court ordered entry of default judgment against Alexander S. Gould for $166,580.30 in damages, $41,772.86 in prejudgment interest, and post-judgment interest at the federal rate until payment. It held Gould in civil contempt for violating the specified court orders, declined additional monetary sanctions, declined criminal contempt at that time, directed the Clerk to enter judgment, and closed the case.