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Keywords

plaintiffdefendantdiscoverytrialpleawillbankruptcycomplianceclass actionbad faithcivil procedure

plaintiffdefendantdiscoverytrialpleawillcomplianceclass actionbad faithcivil procedure

Related Cases

Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d 912, Fed. Sec. L. Rep. P 97,216, 24 Fed.R.Serv.3d 614, RICO Bus.Disp.Guide 8157

Facts

In 1988, three class actions were filed against Blinder, Robinson & Co., Inc. and its executives for allegedly defrauding investors in penny stocks. The plaintiffs claimed that the defendants failed to disclose excessive markups on securities transactions, violating federal and state securities laws. After a series of procedural developments, including a stay due to a bankruptcy proceeding against Blinder, Robinson, the case proceeded against the remaining defendants. The defendants failed to comply with court orders regarding discovery and did not appear at trial, leading to the entry of a default judgment against them.

In 1988, three separate class actions were filed in the United States District Court for the Eastern District of Pennsylvania by Dan and Louise Hoxworth, Bradley Gavron, and Barry Brownstein on behalf of investors who claimed to have been defrauded in connection with the purchase and sale of various “penny stocks.” The three actions, which were subsequently consolidated for purposes of pretrial proceedings, asserted claims against (1) Blinder, Robinson & Co., Inc. (Blinder, Robinson), a Colorado-based securities dealer through which plaintiffs consummated their stock transactions; (2) Meyer Blinder, the Chairman and President of Blinder, Robinson; and (3) John Cox, the Vice President of Blinder, Robinson.

Issue

Did the district court abuse its discretion in entering a default judgment against the defendants for failing to comply with court orders and for not appearing at trial?

Rule

The court applied Federal Rule of Civil Procedure 55, which allows for the entry of default against a party that fails to plead or otherwise defend, and considered the factors outlined in Poulis v. State Farm Fire and Casualty Co. for imposing sanctions.

Analysis

The court found that the defendants had personal responsibility for their failure to comply with court orders and that their conduct was willful and in bad faith. The court noted a history of dilatoriness and prejudice to the plaintiffs due to the defendants' noncompliance with discovery requests and failure to appear at trial. The court concluded that no lesser sanction would be effective given the long history of the case and the defendants' behavior.

Conclusion

The court affirmed the default judgment against the defendants, concluding that the plaintiffs' claims were meritorious and that the imposition of default was justified given the circumstances.

Who won?

Plaintiffs prevailed in the case because the court found that the defendants' failure to comply with court orders and their absence at trial warranted the imposition of a default judgment.

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