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United States v. Toth

United States District Court, D. Massachusetts

October 15, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
MONICA TOTH, Defendant.

          MEMORANDUM AND ORDER GRANTING MOTION FOR ENTRY OF SANCTIONS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.

         The United States of America filed this case to collect a civil penalty assessed against Defendant Monica Toth for her alleged failure to timely report her financial interest in, and/or her signatory or authority over, a bank account opened in Defendant's name at UBS AG in Zurich, Switzerland (the “Account”) for the 2007 calendar year. Currently before the Court is the Government's amended motion for entry of sanctions. [ECF No. 93]. For the reasons explained below, the Government's motion is GRANTED.

         I. BACKGROUND AND PROCEDURAL HISTORY

         On September 16, 2015, the Government filed this action against Defendant. [ECF No. 1]. The Government hired a professional process server who declared under penalty of perjury that he made a significant number of trips to Defendant's residence in Weston, Massachusetts in an attempt to serve Defendant with legal process. [ECF No. 5-2 at ¶¶1-5]. On January 11, 2016, after concluding that Defendant knew he was attempting to serve her with legal process and had made a deliberate effort to avoid service, the process server served Defendant pursuant to Massachusetts Rule of Civil Procedure 4(d)(1) by leaving copies of the summons and complaint at Defendant's Weston, Massachusetts residence. [Id. at ¶¶7-8]. Defendant failed to file an answer or otherwise respond to the complaint within 21 days of service pursuant to Rule 12 and, on February 5, 2016, the Government filed a motion for entry of default [ECF No. 5], which the Court granted on February 9, 2016 [ECF No. 6]. On February 22, 2016, the Government filed a motion for entry of default judgment. [ECF No. 8]. The Court allowed two untimely requests by Defendant for extensions of time to respond to the motion for entry of default judgment. [ECF Nos. 14, 17]. On April 29, 2016, the Court held a hearing on the motion for entry of default judgment at which Defendant represented herself pro se. At the hearing, the Court strongly urged Defendant to retain counsel and emphasized that the Government is looking to impose a very substantial penalty of $2 million. [April 29, 2016 Hr'g Tr. at 11:14-22]. The Court told Defendant that if she plans to defend the lawsuit, she must get a lawyer or start defending it herself. [Id. at 9:15-10:1]. Defendant represented that she would hire a lawyer to defend the suit, and the Court provided guidance to Defendant about how to find a lawyer to represent her, and granted her an additional 30-day extension to retain an attorney and move to vacate the default judgment. [Id. at 11:14-12:10, 22:6-24:3]. The Court warned Defendant not to let any other deadlines go by without responding appropriately. [Id. at 23:15- 19].

         Defendant did not hire a lawyer to represent her and, on June 17, 2016, she filed a motion to vacate the default judgment pro se [ECF No. 29], which the Court granted on August 17, 2016 [ECF No. 43]. On October 13, 2016, Defendant moved to dismiss the complaint [ECF No. 49]; the Court denied the motion to dismiss on May 2, 2017 [ECF No. 59]. After Defendant failed to timely answer the complaint pursuant to Rule 12, on June 16, 2017, the Government filed a motion for an order requiring Defendant to answer. [ECF No. 60]. The Court granted the Government's motion and ordered Defendant to file an answer to the complaint by close of business on July 10, 2017. [ECF No. 61]. On July 11, 2017, Defendant filed her answer. [ECF No. 62]. Two days later, Defendant filed an untimely request for an extension of time to file her answer, which the Court allowed. [ECF Nos. 63, 64].

         On September 20, 2017, the Court held a scheduling conference with the parties. [ECF No. 75]. During the hearing, the Court told Defendant that it would set a discovery schedule that she must follow, emphasized that Defendant must herself be responsive to the Court's deadlines or hire counsel, and told her that the Court would not accept any further excuses for not adhering to the Court's deadlines from this point forward. [Sept. 20, 2017 H'rg Tr. at 6:20-7:7; 12:15- 13:1; see also ECF No. 75]. The Court again strongly urged Defendant to hire an attorney to represent her, given the amount of money at issue in this case. [Id. at 12:19-25]. Following the hearing, on September 22, 2017, the Court issued a scheduling order requiring the parties to complete fact discovery by March 21, 2018. [ECF No. 77].

         On the day of the scheduling conference, September 20, 2017, the Government personally served Defendant with requests for production, interrogatories, requests for admission, and a deposition notice scheduling Defendant's deposition for November 7, 2017. [ECF No. 80 at 2]. Defendant did not timely respond to any of the Government's discovery requests or seek an extension from the Court. On November 7 and November 13, 2017, the Government submitted letters to the Court notifying it that Defendant failed to respond to its requests for production, interrogatories, and requests for admission and served deficient initial disclosures pursuant to Rule 26. [ECF Nos. 80, 81, and 81-1]. On November 27, 2017, the Court ordered Defendant to supplement her initial disclosures and respond to the Government's requests for production and interrogatories by December 11, 2017, and warned Defendant that a failure to provide adequate responses could result in the imposition of sanctions. [ECF No. 82].

         In direct violation of the Court's November 27, 2017 order, Defendant failed to supplement her initial disclosures or respond to the Government's written discovery requests by the December 11, 2017 deadline. On December 22, 2017, the Government filed a motion to compel and to impose sanctions [ECF No. 83], which Defendant also did not respond to. On January 19, 2018, the Court granted the Government's motion to compel and ordered that, inter alia, Defendant must provide full, complete, and accurate answers to the Government's interrogatories and production requests by February 9, 2018, that no further extensions would be permitted, and imposed the sanction that Defendant waived all objections to the interrogatories and production requests other than those based on privilege. [ECF No. 84]. The Court expressly warned Defendant that the Court would consider additional strong sanctions against her if she failed to comply with the Court's January 19, 2018 order, which could include an order precluding Defendant from using responsive documents and from raising or otherwise eliciting testimony about the subject matters encompassed by the interrogatory responses at trial; accepting certain facts as established, including that Defendant acted “willfully” when she failed to file a Financial Bank Account Reports form (“FBAR”); entering a default judgment against Defendant for the penalty amount requested in the complaint, including fines and interest; striking her pleadings; or treating her refusal to comply as contempt of court. [Id. at ¶ 3].

         Nonetheless, Defendant failed to comply with the Court's January 19, 2018 order and, as a result, on March 9, 2018, the Government file a motion for sanctions against Defendant. [ECF No. 86]. On March 12, 2018, in advance of a status conference before the Court, Defendant served the Government with revised initial disclosures and responses to the Government's requests for production and interrogatories. [ECF 93 at 3]. In contravention of the Court's January 19, 2018 order, Defendant's amended initial disclosures failed to comply with the requirements of Rule 26, her written discovery responses were replete with non-privilege objections, and Defendant withheld documents and information based on these objections. [See ECF No. 93-2]. In total, Defendant produced just three single-page documents of dubious relevance, [1] although she identified 32 categories of responsive documents which were withheld based on non-privilege objections. [ECF No. 93-2 at 27-28, 35-37]. During the status conference, the Court admonished Defendant for her failure to comply with the Government's discovery requests and the Court's deadlines, reminded Defendant that she could not withhold documents based on non-privilege objections, and agreed not to rule on the Government's motion for sanctions until after Defendant's deposition in hopes that Defendant would respond to the status conference by providing additional discovery. [Mar. 12, 2018 H'rg Tr. at 3:14-18; 4:21-25; 7:6-11; 16:8-17].

         On July 27, 2018, the Government filed a motion to compel testimony from Defendant [ECF No. 92] and the instant amended motion for sanctions for Defendant's repeated noncompliance with orders of this Court [ECF No. 93]. Specifically, the Government asks that the Court issue an order an order directing the following facts to be taken as established:

1. Defendant had legal control over, and the legal authority to direct the disposition of the funds in, the Account (and any sub-accounts), by investing the funds, withdrawing the funds, and/or transferring the funds to third-parties, between the date the Account was opened and at least December 31, 2008.
2. Should the United States establish that Defendant is liable for the penalty alleged in the complaint, for the purposes of calculating the amount of such penalty, the Account (and any sub-accounts) contained $4, 347, 407 as of the penalty-calculation date.
3. Defendant had a legal obligation to timely file an FBAR regarding the Account in each calendar year that the Account was open, including with regard to calendar year 2007.
4. Defendant willfully failed to file an FBAR regarding the Account with respect to ...

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