Cessna Finance Corporation v. Al Ghaith Holding Company PJSC

Background

Cessna Finance Corporation filed a petition in 2015 to enforce an arbitration award against Al Ghaith Holding Company PJSC (AGH). After obtaining a judgment against AGH, Cessna’s assignee, CesFin Ventures LLC, pursued post-judgment discovery. CesFin served AGH with a subpoena dated October 23, 2020, seeking documents related to enforcing the judgment.

In May 2021, Magistrate Judge Fox ordered AGH to comply with the subpoena. After AGH raised the lack of a protective order as a barrier to production, the court entered a protective order in July 2021. AGH later made three document productions, but CesFin asserted that they answered only two of 45 requests and covered only 2019 and 2020, despite the court’s order requiring documents dating back to April 15, 2013. In September 2021, the court ordered AGH to complete its production by October 20, 2021 and warned that failure to do so could result in sanctions.

Requests for Sanctions

CesFin asked the court to hold AGH and three individuals—the Al Ghaiths—in contempt and require them to pay a daily fine and CesFin’s attorneys’ fees and costs. CesFin also sought sanctions against AGH in a related enforcement action, including treating certain facts as established, barring AGH from opposing those facts, and striking AGH’s affirmative defenses.

Court’s Analysis and Rulings

Under Federal Rule of Civil Procedure 37, a court may sanction a party that fails to obey a discovery order. The court found that AGH failed to comply with the May 4 and September 20, 2021 orders and that its production was insufficient. Because the failure was not substantially justified and no other circumstance made an award unjust, the court determined that AGH should pay CesFin’s reasonable expenses, including attorneys’ fees, caused by the violations. CesFin was ordered to file an affidavit or declaration describing those expenses by June 3, 2022.

The court denied the Rule 37 fee request against the Al Ghaiths. It explained that Rule 37 refers to a disobedient party, while the individuals were not parties in the related enforcement action. The record also did not sufficiently establish what role, if any, each individual played in AGH’s failure to comply with the discovery orders, which were directed only to AGH.

The court denied CesFin’s request for sanctions against AGH in the related enforcement action. It concluded that CesFin could not use sanctions in this action as a shortcut to obtain the ultimate relief sought in that other action, particularly where the requested sanctions could limit the Al Ghaiths’ ability to challenge facts. The court also found that the request was moot as to AGH because AGH had never appeared in the related action and a default had been entered against it.

The court did not decide the request to hold AGH and the Al Ghaiths in contempt. Because the magistrate judge lacked authority to grant or deny contempt without the parties’ consent, the court stated that it would separately recommend action to the district judge. The final order states that CesFin’s sanctions motion was granted in part and denied in part.