OPINION OF THE COURT
BECKER, Circuit Judge.
This is an appeal by Curtis T. Bedwell & Sons, Inc. ("Bedwell"), plaintiff and counterclaim defendant in a district court action arising out of a construction contract dispute, from the district court's Fed.R.Civ.P. 37(b) and (d) discovery sanctions orders which: (1) dismissed Bedwell's complaint; (2) decreed liability by default against it on a claim and counterclaim; and (3) awarded damages of $616,505 plus interest on the claim without a hearing on the damage amount. The prevailing parties in these claims were International Fidelity Insurance Company ("International"), the surety on the performance bond issued to cover John J. Hennelly, Inc. ("Hennelly"), Bedwell's masonry subcontractor, and Fred Zimmerman ("Trustee"), the trustee in bankruptcy for Hennelly in its subsequently filed bankruptcy proceeding. The principal issues before us are: (1) whether the district court, in dismissing the complaint, properly applied the governing Poulis factors
We are persuaded by the district court's numerous findings concerning Bedwell's discovery abuses, including the personal discovery misconduct of Bedwell's principal officers, Curtis and Thomas Bedwell, and by the district court's careful weighing of the Poulis factors, that it did not abuse its discretion by entering judgment on the merits against Bedwell on both Bedwell's complaint and the claim and counterclaim against Bedwell. We also conclude that the district court's refusal to hold an adversary hearing to determine damages was not improper. On the basis of Bedwell's discovery abuses, the district court had entered an order precluding Bedwell from producing evidence as to damages. Because that order was plainly justified on this record, and because giving effect to it would render any hearing on damages meaningless, the district court's assessment of damages will also be affirmed. We note in this regard that the excluded evidence pertained to cost of completion which was the major area of the discovery abuse; that cost of completion comprised 97% of the damages; that the district court had ample evidence to calculate damages; and that pursuant to leave of court, Bedwell filed an extensive brief countering the Trustee's damage submissions.
We begin with a description of the facts and procedural history of the case; unfortunately they are complicated and, because their full recitation is necessary to an understandable discussion, our description must be extensive.
I. FACTS AND PROCEDURAL HISTORY
Bedwell was the general contractor on a project to construct a Preliminary Treatment Building and New Sludge Digestion and Gas Facility at the City of Philadelphia's Northeast Water Pollution Control Plant. In December, 1981 Bedwell entered into two subcontracts for masonry work
The parties contracted for two types of bonds regarding the masonry work. First, the subcontracts between Bedwell and Hennelly provided that completion of the masonry work would be guaranteed by performance and payment bonds ("the subcontract bonds"), which were written for Hennelly by appellee International.
These interrelated commitments came to the fore in November, 1982 when Hennelly, asserting that Bedwell had failed to make timely progress payments as required by the subcontract, walked off the job. Bedwell contended, however, that the failure to make payments occurred because Hennelly had failed to construct certain portions of the project and had failed to make timely payments to its employees and suppliers, rendering Bedwell obligated to make payments under the Philadelphia payment bonds. Bedwell therefore treated Hennelly's abandonment of the projects as a breach of contract and sought payment from International under the subcontract bonds.
Bedwell then hired as counsel Matthew S. Donaldson, Jr. ("Donaldson"), who filed a complaint on its behalf in November, 1983, alleging that International had refused to perform its obligations under the subcontract bonds. A complicated exchange of pleadings followed, only part of which relates to this appeal. International filed a third party complaint against Hennelly and John and Margaret Hennelly ("the individual Hennellys"), asserting contractual and common law indemnification claims. See supra note 2. Hennelly and the individual Hennellys counterclaimed against International and claimed against Bedwell: (1) for outstanding payments due under the subcontract agreement; and (2) for the destruction of Hennelly as a going concern, which allegedly resulted from Bedwell's failure to make payments. Bedwell, in turn, filed a counterclaim against Hennelly. Subsequently, Hennelly filed a petition for protection under Chapter 11 of the federal Bankruptcy Code and is now represented by the Trustee.
The pleadings raised two major questions for exploration by discovery. First, which party, Bedwell or Hennelly, first materially breached the terms of the subcontract?
Discovery began in January, 1984 with a broad request by International to Bedwell for, inter alia, production of all documents relating to the cost of completion of the masonry work. International served the requests upon Bedwell's attorney, Donaldson,
On October 15, 1984 International served its first set of interrogatories on Bedwell, requesting identification of every person with knowledge of the allegations in the complaint and seeking expert witness information. Answers to the interrogatories were due within 30 days, on November 15, 1984. See Fed.R.Civ.P. 33(a). International also filed a second request for document production on October 15, requesting all documents corresponding to the answers to the first set of interrogatories.
November 15 passed without Bedwell producing either the documents identified at the October 3 deposition, which International contends Bedwell should have produced in response to the January request for production, or answers to the first interrogatories. On November 21, 1984, International moved pursuant to Fed.R.Civ.P. 37(a) to compel production of these documents.
On December 3, before the court had acted on the motion, Bedwell supplied International with 524 pages of documents, including certain communications with the City of Philadelphia. However, the response did not include Mr. Mody's notebooks, which Bedwell claimed were "personal." Moreover, Bedwell failed to supply additional cost of completion information. Also on December 3, International moved to compel answers to its October 15 first set of interrogatories and served a second set of interrogatories seeking answers and identification of documents related to cost of completion. These answers were due January 3, 1985, but were not filed until January 10, 1985. International has argued that these answers were incomplete, that they contained material inaccuracies, and that Bedwell's promises to cure these deficiencies were never fulfilled.
Bedwell did not respond to International's motion to compel answers to the October 15 first set of interrogatories; instead, on December 14 it filed the answers themselves, which later were found by the district court to be incomplete. Reacting to the insufficiency of the answers, International filed, on December 18, a supplemental motion to compel answers.
The district court acted on International's motions on December 20 and issued two orders. First, finding that Bedwell had not provided cost of completion documents responsive to International's first document request (made in January), it ordered Bedwell to comply within five days. Second, the court ordered Bedwell to provide "full and complete" answers to the October 15 (first) set of interrogatories and to provide the documents requested in International's second document request within seven days. The court explicitly warned Bedwell to comply with the order "or suffer sanctions." J.A. at 1414.
The events that occurred between the December 20 orders and a discovery conference on January 2, 1985 are the subject of heated dispute. On December 20, the same day the orders issued, the court called Donaldson to inform him of its decision on the motion to compel and its deadlines for providing the information. Subsequently, Donaldson attempted to reach Thomas Bedwell by telephone to inform him of the court's decision.
Bedwell also maintained that during this time (i.e., from December 12, 1984 until January 2, 1985), because of an alleged death threat to Donaldson's mother, Donaldson had effectively withdrawn from the case.
Also during the month of December, 1984, International attempted to resume the deposition of Thomas Bedwell, and to depose Curtis Bedwell, chairman of the board of Bedwell, and project manager Shashi Mody. Although the exact interactions between International's counsel and Donaldson and between Donaldson and his client Bedwell regarding the depositions are in dispute, the court found that International and Donaldson scheduled and, at Thomas Bedwell's insistence, were forced to reschedule depositions of Curtis Bedwell and Mody.
International met with additional difficulties in its attempts to depose Curtis Bedwell. Donaldson informed International in early December that Curtis Bedwell could not be deposed for health reasons, but Donaldson never moved for a protective order under Fed.R.Civ.P. 26(c). International filed a motion to compel on December 20, 1984, and Donaldson responded at the January 2 discovery conference by presenting a letter from Curtis Bedwell's doctor. As the district court noted, however, under the terms of the letter, even if Curtis Bedwell was unfit to testify in court, he could be deposed under appropriate conditions.
After Bedwell failed to comply with the five and seven day deadlines imposed by the district court in its December 20 orders, International moved for sanctions on December 27, and on December 28 moved to compel full answers to its first set of interrogatories. In response to the ongoing discovery problems, the court held the January 2 discovery conference. At the conference Donaldson submitted the documents due on December 27 and, according to the court, advanced "the unbelievable argument" that the additional documents need not be produced because he had earlier permitted International's counsel access to other, different documents. J.A. at 1405. Donaldson also offered excuses for the failures of Curtis Bedwell and Shashi Mody to appear at their scheduled depositions. At that time the court directed Donaldson to
Also on January 2, Bedwell filed amended answers to the first set of interrogatories. However, according to International, these amended answers were not "full and complete," and although Donaldson apparently agreed to provide supplemental answers, they were never provided. On January 3, International resumed the deposition of Thomas Bedwell.
On January 14 the district court announced that sanctions would follow shortly and issued orders enforcing its December 20 orders. The court ordered Mody and Curtis Bedwell to make themselves available for their depositions.
On January 16, 1985, International resumed the deposition of Thomas Bedwell, and on January 18, International deposed Shashi Mody, with Thomas Bedwell in attendance. Although Donaldson had told Thomas Bedwell of the need to produce Mody's notebooks promptly, it was not until January 22 that Thomas Bedwell finally delivered them by giving the notebooks to Donaldson on the day Donaldson was to take the deposition of an International employee.
During a telephone conversation following the breakdown of settlement negotiations on January 25, International informed Bedwell of its intent to resume its scheduled deposition of Thomas Bedwell on January 28. International refused Bedwell's request to again reschedule Thomas Bedwell's deposition. Commenting on this refusal, Curtis Bedwell, in a telephone conversation, remarked "[t]he court will just have to give us more time." J.A. at 1639.
On January 28, Thomas Bedwell told Donaldson at 8:00 a.m. that he would attend the deposition, then discharged Donaldson at 9:15 a.m. Although Donaldson, aware of the court's displeasure with Bedwell's discovery behavior, appeared at the site of the scheduled deposition, Thomas Bedwell failed to attend the deposition. Instead, as Thomas Bedwell admits, he directed his secretary to call and tell International that he was sick and would not be able to attend. The court found, and Bedwell does not dispute, that International hired private investigators who gathered information indicating that Thomas Bedwell was not sick on January 28. With direct reference to these events, the court later expressed displeasure with Thomas Bedwell's attitude toward the litigation.
In response to Thomas Bedwell's failure to appear and the other discovery problems, International filed a third sanctions motion on January 29, 1985, seeking dismissal of Bedwell's complaint and attorneys' fees. Bedwell hired new counsel the next day, and on February 1, new counsel received Donaldson's files. Under the direction of new counsel, Bedwell began producing additional documents and made employees available for depositions.
On February 11 the district court filed a memorandum supplementing the opinions of December 20 and January 14. The court stated that Bedwell was continuing to impede the progress of the case, and fined Bedwell $2,000.
In response to International's January 29 third sanctions motion, the court held an evidentiary hearing on February 22 and 25 regarding whether Bedwell should be subject to further sanctions because of its ongoing discovery abuses. The district court held the matter under advisement until October 9, 1985 when the court, pursuant to Rule 37, dismissed Bedwell's complaint against International and counterclaim against the Trustee, and entered judgment by default on liability against Bedwell on the Trustee's and the individual Hennellys' claims.
The district court established liability against Bedwell by default on the Trustee's and the individual Hennellys' claims because the key issues of their claims and Bedwell's counterclaim against the Trustee were the obverse of one another: who breached the subcontract, and who owed whom under the subcontract? As a result, the district court concluded that finding for the Trustee and the individual Hennellys necessitated both dismissal of Bedwell's claim and finding liability against Bedwell on the Trustee's and the individual Hennellys' claim.
The court ordered the Trustee and the individual Hennellys to submit damages assessment memoranda with evidentiary support and further ordered that "[i]f a hearing is necessary, the Court will schedule it after receipt of the above papers. Plaintiff shall be precluded from submitting any evidence on its claimed cost of completion of the masonry subcontracts at issue." J.A. at 1398.
Following submission of damages assessment memoranda, but without holding an evidentiary hearing or permitting Bedwell to introduce countervailing evidence on damages, the district court on September 5, 1986 determined the damages on the Trustee's and the individual Hennellys' claims.
2,500,000 total subcontract price (Sludge Digestion Facility and Preliminary Treatment Building) - 1,734,572 total Bedwell paid Hennelly --------- 765,428 unpaid amount - 173,119 reasonable cost of completion --------- 592,309 total owed to Hennelly
The court determined the subcontract price from the face of the document. To determine the "reasonable cost of completion" figure, the district court adopted the bid of Damar Masonry Company, Inc. ("Damar") to complete the masonry work for $173,1199. Damar's offer had been approved by the bankruptcy court supervising Hennelly's reorganization, but had been rejected by Bedwell.
Second, concerning items left at the facilities when Hennelly walked off the construction site, the district court found that the Trustee was entitled to damages of $24,196 "for the value of equipment, machinery and tools not returned by Bedwell in a timely manner." J.A. at 1367 (citations omitted). To arrive at the $24,196 figure, the district court subtracted the amount received at auction for items sold by the Trustee after their return ($3,100) from the fair market value of the equipment ($27,596).
In sum, the district court awarded the Trustee $616,505 in damages for the subcontract and equipment claims, plus interest.
II. THE SANCTIONS JUDGMENT DETERMINING LIABILITY
A. The Applicable Law
The district court dismissed Bedwell's complaint and rendered a default judgment against it under Fed.R.Civ.P. 37(b)(2), which provides in pertinent part,
Rule 37(d) provides that in the event of a failure to appear for a deposition or to serve answers to interrogatories, the court "may make such orders in regard to the failure as are just" including the actions described under 37(b)(2), or may require the payment of reasonable expenses.
Dismissal under Fed.R.Civ.P. 37 is a matter for the discretion of the district court. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976) (per curiam). We review the dismissal for abuse of discretion, see Carter v. Albert Einstein Medical Center, 804 F.2d 805, 807 (3d Cir.1986); Ali v. Sims, 788 F.2d 954, 957 (3d Cir.1986). We review the district court's findings of fact on a clearly erroneous standard. See Ellis v. Ringgold School Dist., 832 F.2d 27, 29 (3d Cir.1987).
In National Hockey League v. Metropolitan Hockey Club, Inc., the Supreme Court reversed a decision of this court and held that the district court did not abuse its discretion in dismissing a complaint under Rule 37 where the district court had found that the plaintiff demonstrated "`flagrant bad faith'" and its counsel's conduct amounted to "`callous disregard' of [his] responsibilities." 427 U.S. at 643, 96 S.Ct. at 2781. The Supreme Court noted that although the party before the appellate court may be chastened by the dismissal granted by the lower court and hence may be likely to comply with future discovery orders, the deterrent effect of sanctions on other parties should not be underestimated lest "other parties to other lawsuits would feel freer than we think Rule 37 contemplates they should feel to flout other discovery orders of other district courts." Id. at 643, 96 S.Ct. at 2781. The Court firmly stated the need for deterrence:
Id. at 642-43, 96 S.Ct. at 2780-81.
In Poulis v. State Farm Fire and Casualty Co., 747 F.2d 863 (3d Cir.1984), we examined the factors that must be considered in determining whether the district court properly exercised its discretion in ordering an extreme discovery sanction. See also Scarborough v. Eubanks, 747 F.2d 871, 875-78 (3d Cir.1984) (applying Poulis factors to Rule 41 default judgment). The six factors identified in Poulis are:
747 F.2d at 868 (emphasis omitted).
The district court in the case sub judice balanced the six Poulis factors to determine
B. Application of the Poulis Factors
1. Bedwell's Personal Responsibility
The district court found that "plaintiff here, through its president Thomas Bedwell, shares some of the responsibility (with prior counsel) for the repeated discovery abuses and violations of court orders." J.A. at 1384. First, the court found that Thomas Bedwell shared responsibility for a number of abuses of the deposition process. It found that Thomas Bedwell had his secretary call counsel for International on the morning of the January 28 deposition to say he was ill and could not attend the deposition, when, in fact, he was fully able to attend the deposition, but had fired Donaldson and did not wish to attend without counsel. In addition the court found that the frequent rescheduling of Thomas Bedwell's deposition was the result of his personal unavailability, and that Thomas Bedwell's insistence on being present at project manager Shashi Mody's deposition led to Mody's repeated unavailability.
Second, the district court found that Thomas Bedwell was responsible for Bedwell's failure to produce Mody's notebooks detailing the costs of completion. The court found that Donaldson told Thomas Bedwell in early January, 1985 that the court had ordered production of the notebooks, yet Bedwell did not release them to Donaldson until Donaldson refused to attend a deposition without them.
Third, the court found that Thomas Bedwell had a "lax attitude" about the discovery process which was "demonstrated by Thomas Bedwell's unenthusiastic attempts to return Donaldson's Christmas-period telephone calls and his evasiveness during the February hearing." J.A. at 1385-86. Moreover, the district court found that Thomas Bedwell admitted that he knew of the January 2, 1985 conference in chambers and of the court's reprimand over prior discovery abuses.
Bedwell argues that the district court's findings regarding personal responsibility are clearly erroneous. Bedwell attempts to place total responsibility on Donaldson, maintaining that it was neither aware of nor responsible for the discovery abuses because Donaldson never informed it of International's discovery requests, of discovery deadlines, or of the district court's scheduling and other discovery orders. Bedwell argues that it gave documents to Donaldson when requested to do so, and that Shashi Mody and Bedwell failed to appear for their depositions in December because Donaldson scheduled the depositions without clearing the dates with Mody and Bedwell in advance. Bedwell further asserts that it is not responsible for Curtis Bedwell's failure to appear because it requested Donaldson to file the necessary protective papers. In short, Bedwell argues that Donaldson abandoned his client, and that it should not be responsible for actions that arose from Donaldson's abandonment. We disagree.
The district court's detailed findings of Thomas Bedwell's personal responsibility for repeated deposition abuses and failure to produce documents are supported by the record and demonstrate that Bedwell and its officers shared responsibility with Donaldson, rather than that Bedwell was an unknowing client abandoned by its attorney.
In sum, the record fully supports the district court's determination that the first factor of the Poulis test, shared responsibility between Bedwell and Donaldson, was met. See also Ennis v. New Jersey Bell Telephone Co., 782 F.2d 396, 397 (3d Cir.1985), cert denied, 475 U.S. 1082, 106 S.Ct. 1461, 89 L.Ed.2d 718 (1986) (personal responsibility component of Poulis test met where party was aware of counsel's prior inability to comply with court rules).
2. Prejudice to Opponent
The district court found that Bedwell's discovery abuses "severely prejudiced" the appellees by depriving them of important information and by forcing appellees to expend costs in obtaining court orders to force Bedwell to comply with discovery requests. J.A. at 1388.
On appeal, Bedwell does not dispute the finding that appellees were forced to expend costs to obtain compliance, but contends that future discovery merely would be cumulative. Alternatively, Bedwell attempts to evade the finding of prejudice by noting that it replaced its counsel after becoming aware of the abuses and by pointing out that new counsel has complied with all discovery orders and requests, and will continue to do so. Bedwell maintains that because Donaldson conducted very little discovery on behalf of his client, it, not the other parties, was the true victim of the discovery abuses.
Moreover, Bedwell submits that the district court should not have dismissed its claim and granted judgment against it on the Trustee's claim unless the harm to the other parties amounted to "irremediable prejudice" that could not be "alleviated by [the] court's reopening discovery and postponing trial." Coca-Cola Bottling Co. of Shreveport, Inc. v. Coca-Cola Co., 110 F.R.D. 363, 369 n. 14 (D. Del.1986) (emphasis omitted). We disagree. In Poulis, the district court's determination that the plaintiff's conduct prejudiced the adversary was supported by the record where "interrogatories were never answered nor were objections filed; defense counsel was obliged to file a motion to compel answers, and was obliged to file its pre-trial statement [before plaintiffs filed their pre-trial statement]." 747 F.2d at 868 (citation omitted). In Scarborough v. Eubanks, filed on the
In contrast to the parties claiming prejudice in Scarborough, International vigorously pursued the available discovery methods to avoid being prejudiced, including filing six discovery motions with the district court. Furthermore, the district court's finding that appellees were deprived of important information is supported by the fact that the documents continued to trickle in after the court's second discovery deadline.
3. History of Dilatoriness
The district court found that Bedwell's discovery delays amounted to a "pattern of abuse" that exceeded those found in Poulis. In Poulis, one failure to answer interrogatories and a failure to file a pretrial statement were sufficient to support a dismissal. Here, on the other hand, the district court noted that the discovery abuses amounted to "far more extensive lapses over an extended period of time." J.A. at 1388. The record on appeal demonstrates a significant pattern of delay, including failure to comply fully with document requests evidenced by Bedwell's continued delivery of documents after the court's second discovery deadline, failure to answer fully International's expert interrogatories, and repeated failures by Mody and Thomas Bedwell to attend depositions, which actions necessitated repeated motions to compel.
Bedwell argues that the delay here resembles the delay in Ali, which we found insufficient to support the dismissal of a complaint. In Ali, the district court sua sponte entered an order pursuant to Rule 37(b) deeming the factual allegations of plaintiff Ali's complaint admitted. 788 F.2d at 956. The history of dilatoriness consisted of a total failure by government officials to respond to Ali's discovery requests. However, in Ali this court's reversal of the district court's grant of partial summary judgment did not turn on the length of the delay involved. The failure to respond to discovery requests was a result of a change of counsel, and there was no finding of party responsibility or that the conduct indicated willfulness or bad faith. We determined that "[e]ven if there was inexcusable delay, the other Poulis factors suggest that the severe sanction was inappropriate." 788 F.2d at 957-58. In addition, the Ali panel noted that the district court had made no balancing of the Poulis factors.
Thus, we conclude that the Ali decision is inapposite on the issue of dilatoriness. In any event, the record supports the district court's finding that a pattern of delays in excess of that held sufficient to support a dismissal in Poulis was present here.
4. Party or Attorney Conduct Demonstrating Bad Faith
The district court found that Bedwell's first counsel, Donaldson, willfully failed to comply with three court orders, and to comply with outstanding discovery requests, and failed to advance plausible reasons for the failures. Further, the court found that "to the extent [Thomas] Bedwell was responsible, he too acted willfully, not as a result of negligence or other reasonable excuse." J.A. at 1389.
With regard to Donaldson, there is evidence in the record supporting the court's finding that Donaldson failed to respond to court orders and legitimate discovery requests and to procure key personnel for depositions. The evidence suggests that much of Donaldson's behavior was not willful, but may have been attributable to a perceived threat to a family member.
Bedwell maintains that because of Donaldson's "abandonment," it was not aware of its responsibilities and thus that its conduct was not willful or in bad faith. However, Thomas Bedwell admittedly was aware of the January 2, 1985 conference at which Bedwell's discovery failures were discussed, yet continued to demonstrate intransigence. The January 28 phone call to International's counsel falsely claiming that Thomas Bedwell was ill and could not attend the scheduled deposition is a further indication of bad faith. All in all, the record supports the district court's finding of bad faith.
5. Alternative Sanctions Available
The district court imposed three lesser sanctions before dismissing Bedwell's complaint: (1) a limitation of Bedwell's time period for discovery responses issued on January 14; (2) a unilateral extension of International's discovery deadline also issued on January 14; and (3) a $2,000 sanction against Bedwell issued on February 11, 1985. Bedwell argues on appeal, as it argued before the district court, that the lesser sanctions achieved the desired effect — it began to comply fully with discovery orders as soon as it dismissed Donaldson on January 28, 1985 — and that further sanctions are unnecessary. With the exception of Thomas Bedwell's failure to appear at his deposition after firing Donaldson on January 28, Bedwell contends that its cooperation indicates a willingness to mend its discovery-abusing ways. Bedwell further asserts that after hiring new counsel, it supplied 2,000 pages of documents to International, and that Bedwell made its employees available for depositions. Neither International nor the Trustee has faulted the new counsel's conduct of the case in any respect.
The court, however, found that the prior, less severe sanctions did not deter discovery abuses. The court observed that replacing Bedwell's attorney would be insufficient to prevent further abuses because it was "convinced that a significant part of the responsibility for the problems to date rests with [Bedwell]." J.A. at 1389-90. The court carefully considered the impact of Bedwell's hiring new counsel and determined that because of Bedwell's substantial responsibility for the earlier discovery abuses, future abuses could be expected to occur. Although Bedwell's compliance with discovery orders improved significantly after it retained new counsel, the record supports the court's determination that such improvements were too little, too late and that one main source of abuse, Thomas Bedwell, still remained.
In determining the appropriate sanction, the court also reviewed untried alternative sanctions. First, it found that because discovery abuses related to key damages issues, merely precluding testimony in areas
The parties' estimates in response to the panel's questions at oral argument as to the percentage of the discovery that related to damage issues varied widely (from 20% to virtually all). There is, however, no doubt that the cost of completion was the most significant disputed issue in the case. Although the district court's conclusions on this point may be excessive, we cannot say that the district court's determination that precluding testimony on this issue was not a viable alternative to dismissal was in error. We are supported in this conclusion by the fact that the record indicates that defendants filed six discovery motions to gain Bedwell's compliance with the discovery rules, in addition to taking numerous other actions, and that several lesser sanctions had already been imposed.
6. Meritoriousness of the Claim
In Poulis, we stated that "[a] claim, or defense, will be deemed meritorious when the allegations of the pleadings, if established at trial, would support recovery by plaintiff or would constitute a complete defense." 747 F.2d at 869-70 (citations omitted). The district court here determined that both sides' positions appeared reasonable from the pleadings and that an examination of meritoriousness "d[id] not appear to advance the analysis one way or another." J.A. at 1391.
Bedwell argues that the defendants in Poulis had a "compelling" defense, 747 F.2d at 870, and that, as a result, dismissal of the Poulis plaintiff's claim was appropriate, whereas dismissal here was inappropriate because the district court found that both parties made out prima facie cases. There is no indication, however, that in order to meet the meritoriousness factor supporting dismissal in Poulis the defense must be compelling and, at all events, one Poulis factor is not controlling. The meritoriousness factor here is neutral and not dispositive.
7. Summary of Poulis Factors
Although Poulis recognized that the sanction of dismissal is disfavored, the district court here made extensive findings and carefully weighed the Poulis factors, and the record does not indicate an abuse of discretion. The first five Poulis factors all support dismissal here, particularly the finding that Bedwell shared personal responsibility with Donaldson, and the sixth factor, the meritoriousness of the claim, is neutral. Thus, even though the sixth factor does not advance the analysis, the balance of factors strongly supports the district court's dismissal and fixing of liability against Bedwell, which cannot be viewed as an abuse of discretion.
Moreover, the deterrent function of Rule 37 dismissal leads us to affirm. Bedwell argues that its discovery abuses should be attributed solely to Donaldson, that it was sufficiently chastened by the earlier discovery orders and by the threat of dismissal, and that with its new attorneys it will fully comply with future discovery orders. As the Supreme Court noted in National Hockey League, "[i]t is quite reasonable to conclude that a party who has been subjected to such an order will feel duly chastened, so that even though he succeeds in having the order reversed on appeal, he will nonetheless comply promptly with future discovery orders of the district court." 427 U.S. at 642-43, 96 S.Ct. at 2780-81. However, we are also mindful of the Supreme Court's further admonition that despite the likelihood that the appealing party will be chastened, the dismissal sanction "must be available" in order to achieve its important deterrent effects. Id. at 643, 96 S.Ct. at 2681.
For all the foregoing reasons, we will affirm the district court's dismissal of Bedwell's claim against International for payment under the performance bonds and Bedwell's counterclaim against the Trustee. Because the Trustee's and the individual Hennellys' claims and Bedwell's counterclaim were the obverse of one another,
III. ASSESSMENT OF DAMAGES
As we have explained above, the district court entered judgment against Bedwell on behalf of the Trustee, Hennelly, and the individual Hennellys under Rule 37(b)(2)(C), which permits entry of an order "rendering a judgment by default against the disobedient party." Fed.R.Civ.P. 37(b)(2)(C). The default judgment established Bedwell's liability and left two damage issues to be determined: (1) the subcontract amount (the amount owed to Hennelly under the subcontract); and (2) the value of the equipment, machinery, and tools not returned by Bedwell.
To determine the amount of the damages arising from the default judgment, the district court allowed the Trustee to submit affidavits and briefs, and allowed Bedwell to file a brief in response, but did not hold a hearing on damages and did not permit Bedwell to introduce any evidence to support its contentions. The court then fixed damages against Bedwell at $616,505. On appeal, Bedwell argues that the district court erred by determining damages without permitting a hearing or providing Bedwell with a chance to present evidence, and therefore rendered a judgment based on unreliable information.
Even assuming that the district court's consideration of Bedwell's brief did not afford it an adequate opportunity to challenge the Trustee's damage submissions, a doubtful proposition under the circumstances,
The judgment of the district court will be affirmed.
FootNotes
J.A. at 3798-99.
Via his cross-appeal, the Trustee seeks to reverse the district court's decision not to award damages on the claim, maintaining that the district court abused its discretion in failing to award damages. We disagree, and will affirm the district court's decision not to award destruction of business damages.
Under Pennsylvania law, lost income or profit damages are recoverable, but only where they can be proved with reasonable certainty. See Delahanty v. First Pennsylvania Bank, N.A., 318 Pa.Super. 90, 126, 464 A.2d 1243, 1261 (1983). The record supports the district court's determination that the single affidavit of Hennelly's expert accountant was insufficient to establish that the bankruptcy of Hennelly was the reasonable and foreseeable result of Bedwell's breach. The record indicates that Hennelly may have been in financial difficulty before Bedwell ceased payments on the subcontract, and further, that the expert's affidavit, which states "that the majority of the books and records for the time period ending December 31, 1982 were not available," J.A. at 860, was based on discussions with Hennelly's attorney and with John J. Hennelly rather than on an evaluation of the books and records for that crucial time period.
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