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Carto Bankruptcy — Motion for Terminating Sanctions (8/19/99)

San Diego, California 92101
Attorneys for Creditor/Plaintiff


In re:











Chapter 7

DATE: 10-1-99

TIME: 10:00 a.m.


JUDGE: Honorable John J. Hargrove

Memorandum of Points and Authorities for Support of Motion for Terminating Sanctions against Willis Carto and Elisabeth Carto

Plaintiff LEGION FOR THE SURVIVAL OF FREEDOM (hereinafter Plaintiff LSF) hereby submits the following memorandum of points and authorities for support of motion for issue sanctions against Defendants WILLIS CARTO and ELISABETH CARTO (hereinafter Defendants CARTOS).


On October 7, 1998, and pursuant to Bankruptcy Rule 7033 and Federal Rule of Civil Procedure Rule 33, Plaintiff LSF properly propounded to Debtor/Defendants WILLIS and ELISABETH CARTO Special Interrogatories, Set Number One, Requests for Admissions, Set Number One, and Requests for Production of Documents, Set Number One. See Court Records Copies of all discovery requests, responses and correspondence between counsel are attached to Plaintiff’s original motions to compel, filed with this Court in January of 1999.

Thereafter, on or about November 9, 1998, Debtors responded to the discovery requests. See Court Records. Unfortunately, however, Debtors objected and refused to respond to the large majority of the discovery requests, instead asserting frivolous and bad faith objections. Debtors further improperly responded to many of the interrogatories, instead providing answers which were wholly unresponsive. See Court Records.

Based upon the foregoing, on November 12, 1998, Plaintiff met and conferred with Debtors in writing. See Court Records. Subsequently, and after much prompting on the part of Plaintiff’s Attorneys, on November 20, 1998, Counsel for the Debtors met with Plaintiff’s Attorney in an attempt to informally resolve the discovery disputes. See Declaration of Bryan D. Sampson. Based thereupon, Plaintiff provided Debtors with a letter confirming the content of the agreements which Counsel were able to reach. See Court Records.

Pursuant to the agreements, Debtors were to have provided Plaintiff with supplemental responses to the Interrogatories, document demands and requests for admissions, by December 15, 1998. See Court Records.

Subsequently, Attorney for Debtors requested, and was granted, two extensions of time in which to supplementally respond to the discovery requests. See Declaration of Bryan D. Sampson.

Thereafter, on or about December 30, 1998, Debtors did provide Plaintiff with supplemental responses. See Court Records. Unfortunately, however, Debtors again failed to provide Plaintiff with substantive responses to the Interrogatories. In fact, and despite Counsels’ Agreements, Debtors provided responses which were identical to those Debtors had served to Plaintiff more than two months prior. See Court Records.

Based upon the foregoing, Counsel for Plaintiff again met and conferred with Debtors in writing on January 4, 1999. See Court Records. Therein, Plaintiff advised Debtors that it was bringing a motion to compel and request for sanctions against Debtors. Plaintiff further advised Debtors that it would take the motion to compel off-calendar should Debtors provide Plaintiff with substantive responses to the outstanding discovery. See Court Records. Despite the foregoing, Debtors failed to further respond and Plaintiff was forced to bring a motion to compel further responses. See Declaration of Bryan D. Sampson.

Accordingly, this Court issued an order compelling Debtor/Defendants WILLIS CARTO and ELISABETH CARTO to pay monetary sanctions and to further provide full and complete responses to Plaintiff’s discovery by no later than July 31, 1999. See Exhibit 1 and court records. Unfortunately, Debtors continue to fail to respond despite Plaintiff’s reasonable and repeated meet and confer attempts and despite this Court’s prior Order. See Exhibits 1 and 2 and attached Declaration of Bryan D. Sampson.

As the Court may be aware, Debtors stonewalling tactics, including but not limited to their refusal to participate in discovery and their wilfully failure to comply with prior Court orders, has been these Debtors’ modus operandi throughout the course of six years of litigation against them. In fact, in the underlying State court case, Debtors failed and refused to respond to any discovery whatsoever, instead posing frivolous objections to each and every of the discovery requests. It was for this reason that Debtors, as well as their attorneys of record, had been sanctioned numerous times by the State court. See Exhibit 3.

In fact, based upon the Debtors WILLIS and ELISABETH Carto’s repeated discovery abuses and failures to comply with the State court’s orders regarding Plaintiff’s right to obtain the discovery (both pre- and post-judgment), the Debtors and their Counsel had been sanctioned no fewer than six times! See attached Declaration of Bryan D. Sampson.

After numerous motions to compel and repeated sanction awards, the State Court was left with no option but to set contempt hearings against Debtors. At the second, continued contempt hearing, the State Court ultimately indicated that Debtors WILLIS and ELISABETH CARTO were in civil contempt of court on four (4) separate and distinct counts for failing and/or refusing to obey the orders of the court and were each in criminal contempt of court on fifty (51) counts. See Exhibit 4. The court further cautioned CARTOs that they would be imprisoned for both civil and criminal contempt should they continue to fail to comply by June 8, 1998 (a third continued hearing). See Exhibit 4.

Despite the above, on June 5, 1998, the CARTOs again decided to avoid compliance with the trial court’s discovery orders by filing the instant Chapter 7 Bankruptcy, thus automatically staying any action of the lower court. Hence, to date Debtors have not complied with the prior court orders nor given Plaintiff even one substantive response to the outstanding discovery. Instead, they have doggedly persisted in pursuing a long and tortured path of discovery abuse to conceal the true history and disposition of several million dollars of money they converted from Plaintiff. See Declaration of Bryan D. Sampson. To the contrary, Debtors have again used the same bad faith objections to refuse to respond to Plaintiff’s discovery in the instant action, knowing that the State trial court had already deemed the very same objections frivolous. See Declaration of Bryan D. Sampson.

Clearly this Court cannot condone Debtors’ repeated bad faith acts and dilatory tactics. Based upon the foregoing, Plaintiff respectfully requests this Court grant Plaintiff a termination sanction against Debtor/Defendants WILLIS CARTO and ELISABETH CARTO for their wilful and deliberate disobedience of this Court’s prior Order, including, but not limited to, striking the Debtors’ Answer in the instant matter, and entering their default pursuant to the following legal overview. See Exhibit 5.


Bankruptcy Rule 7037 and Bankruptcy Rule 9014 incorporate Federal Rule of Civil Procedure 37 and prejudgment discovery actions. Federal Rule of Civil Procedure 37(a) sets forth the requirements of a motion for an order compelling discovery and the sanctions available when a party fails to respond to the discovery. Federal Rule of Civil Procedure 37 (b-d). Specifically, if a party fails and or refuses to respond to discovery, the court may issue an order striking all or part of a pleading, dismissing an action or a part thereof, or rendering a default judgment. Federal Rule of Civil Procedure 37(b)(2). The Court may further require the disobedient party or the party’s attorney or both to pay reasonable expenses, including attorney’s fees, incurred in bringing the action. See in re: Lincoln North Association, Limited Partnership, 163 B.R. 403 (Bankr. D. Mass. 1993).

Pursuant to the foregoing Federal Rules of Civil Procedure and Bankruptcy Rules, this Court was authorized to issue its Order compelling Debtors WILLIS and ELISABETH CARTO to supplement inadequate responses to written discovery requests and to pay sanctions. See Exhibit 1 and Court Records. Debtors, however, have inexplicably continued to refuse and/or fail to comply with the foregoing Order. See Exhibit 2 and attached Declaration of Bryan D. Sampson.

Prior to filing this Motion, Plaintiff made a reasonable effort to obtain the Debtors’ voluntary compliance. As more fully described above, however, Debtors have evidenced their intent to deliberately and wilfully continue to disobey not only this Court’s Order, but any Court’s Order. See Exhibit 3. For Debtors indisputably had adequate notice of the prior Court Order, yet refuse to comply with the order. Instead, they prefer to ignore all attempts to meet and confer and continue to conceal the history of the embezzled millions. They also have failed to inform Plaintiff of any excuse of inability to comply therewith. Further, even after being advised by Plaintiff that their continued refusal to comply would result in the instant Motion, Debtors failed to respond in any manner whatsoever. See Declaration of Bryan D. Sampson.

Debtors’ disobedience of this Court’s Order is extremely prejudicial to Plaintiff, and frustrates Plaintiff’s right to discovery. As the Court is aware, this matter involves allegations of Debtors’ embezzlement and/or larceny of over $6 Million from Plaintiff. In fact, both this Court and the State Court already confirmed Debtors’ conversion of monies. The facts as to what assets were transferred, to whom, and for what consideration, is the very crux of Plaintiff’s case. Unfortunately, such evidence may only be obtained from Debtors.

Yet, it is more than apparent that Debtors, perhaps thinking that they are above the law, will not comply with any motion to compel or monetary sanctions. Plaintiffs obtained numerous prior orders from the Hon. Judge Maino in the State court case. Debtors, failed to comply with those orders. They have further made it abundantly clear that they intend to continue their misconduct by flagrantly ignoring the Order of this Court.

Given the history of Debtors’ failure to respond to discovery in both the underlying State action and in these bankruptcy proceedings, this Court is justified at this time in issuing a terminating sanction against Defendant WILLIS and ELISABETH CARTO, as well as monetary sanctions. Therefore, Plaintiff also requests this Court grant Plaintiff its reasonable expenses against Debtors of $750.00 for 4.2 hours at the reasonable rate of $180 per hour in attorney’s fees spent in meeting and conferring and preparing this motion as well as attending the hearing on this matter. See attached declaration of Bryan D. Sampson.


Based upon the foregoing, Plaintiff LSF hereby requests this Court grant the attached, proposed terminating order at Exhibit 5 based upon Defendant WILLIS and ELISABETH Cartos’ failure and refusal to respond to a legitimate discovery order this from this Court.

DATED: August 19, 1999


By: [signed]

Bryan D. Sampson