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Berd v. De Bastos

United States District Court, D. North Dakota

March 18, 2019

Madjid Berd, et. al., Plaintiffs,
Paul De Bastos and Paul Real Estate, Defendants.



         I. BACKGROUND

         Plaintiffs filed this action in the wake of proceedings filed against North Dakota Developments, LLC (“NDD”), Robert Gavin, Daniel Hogan, and several “relief defendants” by the United States Securities and Exchange Commission, alleging that NDD, Gavin, and Hogan had fraudulently raised more than $62 million from investors through the sale of interests in North Dakota man camps. See Case No. 4:15-cv-053 (D.N.D. May 5, 2015). In the complaint in this action, plaintiffs allege Paul De Bastos and Paul Real Estate, Inc. (“Paul Real Estate”), acting as NDD's sales agents, actively assisted NDD in offering and selling unregistered, nonexempt, and fraudulent securities from May 2012 to April 2015. Specifically, plaintiffs assert claims against Paul Real Estate and De Bastos, by separate counts, for violations of Section 10(b)-5 of the Securities Exchange Act of 1934 (15 U.S.C. § 78(j)) and SEC Rule 10b-5 (17 C.F.R. § 240.10b-5) in connection with the offer or sale of NDD securities and for violations of N.D.C.C. § 10-04-17 by offering and selling unregistered securities and selling securities as an unlicensed agent. De Bastos is president of Paul Real Estate, a Florida corporation and alleged alter ego of De Bastos.

         Paul Real Estate did not respond to the complaint and a clerk's entry of default was filed as to it on March 2, 2017. Paul Real Estate subsequently filed for bankruptcy in the Southern District of Florida on or about June 8, 2017. And, on November 27, 2017, De Bastos filed a motion to stay this action in its entirety pending Paul Real Estate's bankruptcy, averring that his assets and those of Paul Real Estate may be intertwined. This motion was denied.

         De Bastos responded to the complaint by filing a motion to dismiss for lack of personal jurisdiction. This motion was denied on November 2, 2017. Since that time, if De Bastos has served an answer to the complaint, he has not filed it with the court.

         On November 2, 2018, plaintiffs filed a Motion to Compel Discovery pursuant to Fed.R.Civ.P. 37. Plaintiffs seek an order directing De Bastos to produce documents responsive to their first request for production of documents and provide more detailed responses to their first set of interrogatories. Additionally, they seek an order determining that De Bastos's answers and objections to their requests for admissions are insufficient and that the matters either be admitted or that an amended response be served. Plaintiffs have filed copies of their discovery requests, De Bastos's responses to these requests, and their e-mail correspondence with De Bastos as exhibits. De Bastos has not responded to the motion to compel.


         A. Governing law

         Fed. R. Civ. P. 26(b)(1) addresses the scope of discovery in civil actions and provides as follows:

(1) Scope in General. Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

         Rule 26(a) requires the parties to make certain initial disclosures without a demand having been served by the opposing parties.

         Rule 37 of Federal Rules of Civil Procedure sets forth the recourse available to a party if the opposing party fails to fulfill its discovery obligations. Relevant here, it provides that “[i]f a party fails to make a disclosure required by Rule 26(a), any other party may move to compel disclosure and for appropriate sanctions.” Fed. R. Civ. P 37(a)(3)(A). It also provides that a party may move to compel a response from a party who fails to properly answer interrogatories or produce requested documents. Fed.R.Civ.P. 37(a)(3)(B)(iii)-(iv).

         With respect to requests for admissions, Fed.R.Civ.P. 36(a)(6) provides:

(6) Motion Regarding the Sufficiency of an Answer or Objection. The requesting party may move to determine the sufficiency of an answer or objection. Unless the court finds an objection justified, it must order that an answer be served. On finding that an answer does not comply with this rule, the court may order either that the matter is admitted or that an amended answer be served. The court may defer its final decision until a pretrial conference or a specified time before trial. Rule 37(a)(5) applies to an award of expenses.

         Finally, a party proceeding pro se is not excused from complying with court orders or substantive and procedural law. Farnsworth v. City of Kansas City, Mo., 863 F.2d 33, 34 (8th Cir.1988); Am. Inmate Paralegal Assoc. v Cline, 859 F.2d 59, 61 (8th Cir. 1988); Burgs v. Sissel, 745 F.2d 526, 528 (8th Cir. 1984) (per curiam).

         B. Rule 26(a) Disclosures

         De Bastos must comply with the Rule 26(a) disclosure requirements. The fact he is proceeding pro se is not an excuse. Consequently, De Bastos shall make his Rule 26(a) disclosures on or before April 19, 2019. Failure to comply may result in sanctions, including assessment of attorney's fees and costs incurred because of the non-disclosure, the exclusion of any evidence favorable to him, the striking of defenses, or even the entry of a default judgment against him. Fed.R.Civ.P. 37(c)(1).

         C. Plaintiffs' First Request for Production of Documents

         On April 16, 2018, plaintiffs served De Bastos with requests for the production of documents in his possession, custody, or control. (Doc. No. 45-1). On May 31, 2018, De Bastos responded as follows:

Please note that many of my files and other office materials, including NDD related documents were ruined by Hurricane Irma. This notwithstanding, I have requested that my attorney check his files to see what, if any information he can provide to me that is not “work product” or other privileged materials. He informed me that he will check and provide what he may have, although this may take several weeks.
Such production would likely include “generic” materials which the Plaintiffs may have received. I have nothing specific to any of them. Nor do I have access to certain email accounts any longer. Once I receive the documents from my former attorney, I may be able to ascertain whether any documents may have existed.

(Doc. No. 45-4).

         De Bastos's summary response as set forth above is inadequate. Further, there is nothing in the record indicating that he followed through on his promise to provide what documents are subject to his control, including specifically those in the possession of his attorney.

         De Bastos shall have until April 19, 2019, to file a proper response to plaintiffs' requests for production of documents. The response must include a separate response for each request as required by Fed.R.Civ.P. 34(b)(2)(A). In responding to each request, De Bastos must state either (1) that he has produced with his response the documents sought in the request that are within his possession, custody, or control (including those in the hands of his attorneys) or (2) explain why the documents sought in the particular request cannot be produced. As for the actual production of the documents, the court concludes in this instance that De Bastos, by not properly responding to plaintiffs' document requests and plaintiffs' motion, has waived any right (1) to object to the production requests based on grounds of lack of relevancy, overbreadth, or vagueness, or (2) to complain about plaintiffs' failure to specify in their request for production of documents a reasonable time, manner, and place for inspection of the same ...

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