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Federal Trade Commission v. American Evoice, Ltd.

United States District Court, D. Montana, Missoula Division

February 3, 2017




         The parties move for various relief. Plaintiff Federal Trade Commission ("FTC") moves the Court to: (1) impose sanctions against Defendant Steven V. Sann ("Sann") and the Corporate Defendants[1] in this case as a result of their failure to appear for depositions and produce discovery (Doc. 240); (2) compel Defendant Terry Lane a/k/a Terry Sann ("Lane") to produce outstanding discovery (Doc. 240); (3) compel Sann to appear for depositions following the production of the outstanding discovery (Doc. 245); and (3) issue summary judgment in favor of the FTC and against Sann, Lane, and the Corporate Defendants (Doc. 245).[2] In contrast, Sann moves the Court to: (1) issue a protective order preventing his deposition (Doc. 242); (2) compel the FTC to produce documents in printed form rather than in paper (Doc. 257); (3) modify the current Scheduling Order to continue the time for discovery, and to continue the final pretrial conference and trial date (Doc. 256); and (4) extend the time for Sann and the Corporate Defendants to respond to the FTC's motions (Doc. 259). As discussed in detail below, the Court will deny in part and grant in part these motions.


         For purposes of the motions at bar, the Court will not repeat the full and complicated history of this case. Suffice to say this case involves an alleged scheme by Defendants to defraud consumers by "cramming" their landline telephone bills with unwanted and unutilized telecommunications services, including voicemail, digital fax, and call forwarding. Through its Complaint filed January 8, 2013 (Doc. 1), the FTC alleges that Defendants' alleged scheme violated section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a), and requests injunctive and other equitable relief, including rescission or reformation of contracts, restitution, the refund of monies paid, and disgorgement of unlawfully obtained assets.

         Sann, who is alleged by the FTC to be the ringleader of this scheme, was indicted in the United States District Court for the District of Montana on 32 counts of Wire Fraud in violation of 18 U.S.C. § 1343, 2 counts of Money Laundering violation of 18 U.S.C. § 1957, and 1 count of Conspiracy in violation of 18 U.S.C. § 371. Sann ultimately pled guilty to 1 count of Wire Fraud and 1 count of Money Laundering, and was sentenced by this Court on July 17, 2015, to twenty four months on each count to run concurrently. Sann is currently incarcerated in Taft Correctional Institution ("Taft CI") in Taft, California, and states that he is scheduled to be released to a "half-way house" in mid-February, 2017.

         During Sarin's criminal proceedings, this matter was stayed.[3] Following resolution of the criminal matter, the Court lifted the stay and held a preliminary pretrial scheduling conference on November 12, 2015. During this pretrial conference, the parties discussed various motions filed on behalf of Defendants which requested the release of currently restrained assets to be applied towards attorneys' fees. These assets were frozen pursuant to a stipulated Preliminary Injunction Order entered by the Court on May 8, 2013 (Doc. 55). Defendants' counsel stated that if the funds were not released, they would be forced to withdraw and Defendants would be required to represent themselves pro se through the entirety of this litigation.

         The Court expressed that it understood that denial of the motions for the release of funds would result in Defendants representing themselves pro se and decided to set a lengthier discovery and motions period to account for this possibility. Further, the Court noted that Sann would most likely be released from prison in spring of 2017 and set a bench trial date of March 20, 2017, to allow him to appear personally. Following the preliminary pretrial scheduling conference, the Court denied Defendants' motions for the release of funds and allowed counsel for Defendants to withdrawal from representation. (Doc. 196.)

         Despite the measures taken by the Court, it appears that various issues have arisen concerning the discovery and the motions deadlines. As discussed above, Sann, as the self-described representative for the Corporate Defendants in this case, has refused to appear for scheduled depositions and now moves for a protective Order preventing his deposition. In response to this refusal, the FTC moves for sanctions against Sann in the form of a Court order directing that certain facts be taken as true pursuant to Federal Rule of Civil Procedure 37.

         Further, Defendant Lane, Sarin's wife and apparent agent for Sann, has been instructed by Sann that she is no longer his agent and has refused to produce several emails requested for production. The FTC now moves to compel the production of these emails, and to compel Sann to appear for his deposition following the production of these emails.

         Additionally, Sann moves to extend the discovery deadline in this case and to extend the time to respond to the FTC's motions until he is released from prison and is free to conduct his case. The Court will address these motions below.

         I. Discovery Motions

         As discussed, the Court set an uncharacteristically long period for discovery due to the potential that Defendants would be representing themselves pro se and because Sann would be incarcerated. However, despite this long schedule, problems have arisen. Specifically, Sann has moved for a protective order preventing his deposition and Lane has refused to produce certain documents requested by the FTC. The FTC now moves for sanctions, to compel Sann to appear at his deposition, and to compel production of certain documents.

         A. Motion for Sanctions and to Compel Deposition (FTC)

         On September 28, 2016, the Court granted the FTC's motion, pursuant to Federal Rule of Civil Procedure 30(a)(2)(B), to depose Sann in his individual capacity and as the Rule 30(b)(6) designee of the Corporate Defendants in this action.[4] (Doc. 231.) This motion was unopposed. As such, the FTC coordinated with prison officials at Taft CI and arranged for depositions to occur on November 7, 2016. Despite his previous lack of objection, Sann emailed the FTC on November 1, 2016, stating his intentions to move for a protective order precluding the depositions of him the Corporate Defendants. Later, on November 4, 2016, a prison official at Taft CI emailed counsel for the FTC and stated "Inmate Sann has changed his mind and is declining to participate in the deposition scheduled for Monday, November 7, 2016." (Doc. 240-1 at 66.)

         Apparently, Sarin believed that he would be able to review the discovery prior to his deposition in order to prepare. However, the discovery provided by the FTC is saved to a CD-ROM and, due to restrictions imposed on inmates at Taft CI, Sann is not allowed to possess or review the disk. Further, due to a lack of space in inmates' cells, Sann is unable to store the vast majority of the discovery, which consists of tens of thousands of pages. Because he is unable to review the discovery and prepare for his deposition, Sann seeks a protective order preventing his deposition until he is released from prison and can review the discovery. Consequently, the FTC seeks sanctions against Sann for his alleged refusal to be deposed.

         Federal Rule of Civil Procedure 37(d) states that a court "may, on motion, order sanctions if a party or a party's officer, director, or managing agent-or a person designated under Rule 30(b)(6) or 31(a)(4)-fails, after being served with proper notice, to appear for that person's deposition." Fed.R.Civ.P. 37(d)(1)(A)(i) (internal punctuation omitted). Sanctions for failure to appear include:

(i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims;
(ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient ...

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