Yu v. Diguojiaoyu, Inc.

Background

Shanchun Yu and Ruili Jin sued Diguojiaoyu, Inc., doing business as Diguo Edu., and Shuntao Zhang. They alleged that Diguo, an education consulting agency, altered their transcripts while helping them apply to graduate programs. According to the plaintiffs, the falsified records were discovered and both plaintiffs were expelled from schools. Their claims included fraud, deceptive business practices, unjust enrichment, and defamation.

The defamation claim concerned an announcement allegedly published on Diguo’s official WeChat platform after an initial court conference. The announcement allegedly stated that the plaintiffs were responsible for their own academic dishonesty, that the defendants did not have to compensate them, and that the plaintiffs had conspired with their lawyer to defame, threaten, blackmail, and extort Diguo for $680,000.

Discovery and Court-Order Violations

The plaintiffs served interrogatories, a deposition notice, and document requests. The defendants did not respond by the original deadline and later provided responses that the court found seriously deficient. The interrogatory responses were not verified, answered only three of ten interrogatories, and used objections without substantive answers for the others. The defendants also refused to produce documents and did not state their objections with the required specificity.

The defendants and their counsel, Leonard X. Gillespie, also failed to comply with several court orders. The court identified violations involving a late joint letter, failure to provide the defendants with a court order and file proof of service, failure to participate in preparing the joint pretrial order, failure to respond to an order to show cause, and failure to effectively cooperate in submitting revised pretrial materials. Gillespie acknowledged that his handling of the case had been “absolutely remiss” and that his conduct was “inexcusabl[e].”

Sanctions and Discovery Ruling

The court held that sanctions were warranted under Rules 16 and 37 of the Federal Rules of Civil Procedure and under the court’s inherent authority. It found that the violations involved clear court orders and that Gillespie’s failure to comply was willful, part of a continuing pattern, and without a good-faith explanation. A finding of bad faith was not required for sanctions under Rules 16 and 37, although the court also found willful disobedience supporting sanctions under its inherent authority.

The court granted the plaintiffs’ request for sanctions and to compel discovery. It ordered the defendants and Gillespie, jointly and severally—meaning each could be responsible for the full amount—to reimburse the plaintiffs for fees and costs caused by the discovery and pretrial violations and the preparation of the motions. The recoverable expenses included $3,450 incurred in connection with the defendants’ failure to participate in preparing the proposed joint pretrial order, along with other reasonably incurred fees and costs. The plaintiffs had to submit an accounting supported by authenticated billing records, and the defendants had to provide complete and verified discovery responses by December 4, 2019.

The court denied the plaintiffs’ request to strike the defendants’ pleadings and enter default judgment. It warned that further violations could lead to additional sanctions, including striking the defendants’ answer and entering default judgment.

Partial Summary Judgment on Defamation

The plaintiffs also moved for partial summary judgment on their defamation claim. The motion was unopposed, but the court explained that an unopposed motion cannot automatically be granted. The court still had to determine whether the record supported the plaintiffs’ factual assertions and whether their legal theory was valid.

The court denied the motion because the plaintiffs had submitted no admissible evidence authenticating the alleged announcement or showing that the defendants published it. The document attached to the plaintiffs’ brief was not supported by an affidavit establishing its authenticity and was not a type of self-authenticating document. The court also rejected the argument that the defendants had admitted the relevant allegations by failing to deny one paragraph, because the defendants had denied repeated versions of those allegations elsewhere in their answer.

The denial did not prevent the plaintiffs from authenticating the announcement or presenting other evidence at trial. The court therefore granted the sanctions and discovery requests but denied the motion for partial summary judgment. The Clerk was directed to terminate ECF Nos. 54 and 56.