Case 3:12-cv-01068-RNC Document 38 Filed 06/28/13 Page 1 of 7

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT ) ) ) ) ) ) ) ) ) ) )

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. JERRY S. WILLIAMS, MONKS DEN, LLC, and FIRST IN AWARENESS, LLC, Defendants.

No. 3:12-cv-01068-RNC

MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS MOTION FOR SANCTIONS Pursuant to Rule 37(b)(2), Plaintiff Securities and Exchange Commission (Commission) respectfully requests this Court issue sanctions against defendant Jerry S. Williams for his willful failure to obey this Courts order of April 2, 2013. BACKGROUND The Commission filed this securities enforcement action on July 20, 2012. After receiving an extension form the Court, Williams filed his answer on September 13, 2013. The parties held their discovery conference with Magistrate Judge Martinez on December 11, 2012. Pursuant to Rule 26(a)(1) of the Federal Rules of Civil Procedure (Federal Rules), Williams initial disclosures were due fourteen days after this conference, or on December 26, 2012. Williams did not meet this deadline and has never served any initial disclosures. 1 On December 18, 2012, the Commission served Williams with a set of interrogatories by first class mail. 2 A copy of the interrogatories is attached as Exhibit A to this memorandum.

1 2

The Commission served its initial disclosures several weeks earlier on October 17, 2012.

The Commission also served Williams with a set of requests for admission as well as requests for the production of documents. Williams has similarly failed to respond to either of these requests. For the present, the Commission is moving to compel only the interrogatory answers.

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Williams answers to these interrogatories were due on Monday, January 21, 2013. See Fed. R. Civ. P. 6(d) & 33(b)(2) (2013). A week after the January 21st deadline, on January 28, 2013, Commission counsel contacted defendant Williams by email and requested a date for completion. Defendant Williams responded two days later, stating he was working toward completion and hop[ed] to be able to send it out by the weekend. A copy of this correspondence is attached as Exhibit B to this memorandum. Commission counsel waited another week. On February 6, 2013, Commission counsel sent a follow up email to Williams requesting an update on the status of the answers. A copy of this email is attached as Exhibit C. Williams has never responded to this email. On February 27, 2013, the Commission filed a motion to compel and for contingent sanctions against defendant Williams for his failure to provide initial disclosures or to serve interrogatory answers. See Electronic Docket Entries 25 (Motion) and 26 (Memorandum of Law). On April 2, 2013, Magistrate Judge Martinez granted the Commissions motion to compel initial disclosures and interrogatory responses. Pursuant to the Courts order, defendant Williams was ordered to submit his initial disclosures and interrogatory answers within fourteen (14) days of the filing of the Courts order, or by Tuesday, April 16, 2013. Defendant Williams failed to comply with this order. To date, Williams has refused to serve his initial disclosures or to provide any response to the Commissions interrogatories.

ARGUMENT Federal Rule of Civil Procedure 37(b)(2) provides that a court may order sanctions if a party fails to obey a discovery order. See Bambu Sales, Inc. v. Ozak Trading Inc., 53 F.3d 849,

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852-54 (2d Cir. 1995) (affirming issuance of default judgment for failure to comply with discovery order). The imposition of sanctions rests within the sound discretion of the Court. Southern New England Telephone Co. v. Global NAPs Inc., 624 F.3d 123, 143 (2d Cir. 2010). In exercising this discretion, the Second Circuit Court of Appeals recommended consideration of the following factors: (1) the willfulness of the non-compliant party or the reason for noncompliance; (2) the efficacy of lesser sanctions; (3) the duration of the period of non-compliance; and (4) whether the non-compliant party had been warned of the consequences of noncompliance. Id. (quoting Agiwal v. Mid Island Mortg. Corp., 555 F.3d 298, 302 (2d Cir. 2009)). Here, all of these factors weigh in favor of issuing a default judgment against defendant Williams. A. Williams willful failure to comply is without any reason or justification. Williams has effectively refused to provide any discovery since the beginning of this action. He has never provided any justifiable basis to withhold initial disclosures or a response to the Commissions interrogatories. Rather, he has flouted the Rules of Civil Procedure by refusing to participate in the litigation. Under these rules, Williams failure to provide initial disclosures or to provide interrogatory answers is itself subject to sanctions, without need to obtain a court order to compel. See Fed. R. Civ. P. 37(d)(ii) & 37(c)(1)(C). It is the equivalent of failing to appear for a properly noticed deposition. See Fed. R. Civ. P. 37(d)(i). Here, however, the Commission, in the first instance, sought a court order to compel Williams initial disclosures and interrogatory answers. The Court granted this motion and issued an order clearly stating that Williams compliance was due within fourteen (14) days of the filing of the Courts order. Since the issuance of this order, Williams has done nothing. He has refused to comply, continuing to flout his obligations under the Federal Rules. Williams

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failure to obey this Courts order enforcing the Federal Rules of Civil Procedure can be interpreted only as a willful defiance to participate in this litigation. B. Lesser sanctions will not be effective. No lesser sanction will prompt Williams compliance with the Courts outstanding order. Williams has not even deigned to respond to the Commissions motion seeking compliance, nor the Courts order to comply. As Williams is the defendant, dismissal of the Commissions claims or a stay of these proceeding are inappropriate because these remedies would benefit only Williams. Finally, treating Williams failure to respond as a contempt of court would not provide any effective relief. The Commissions complaint seeks over $2 million in disgorgement. Any award of attorneys fees or costs with respect to Williams non-compliance would be minor in comparison to the remedies sought in the Commissions complaint. Williams would certainly trade contempt fees and costs in exchange for delaying his liability for the securities fraud claims asserted in this action. The Commission has been waiting on Williams disclosures and written discovery answers before taking addition discovery from Williams, including his deposition. 3 The Commission needs Williams disclosures and written discovery answers to, among other things, (i) prepare an effective deposition, (ii) narrow the scope of questioning, and (iii) decide what additional discovery to take in light of Williams disclosures and answers to written discovery. Williams is not responding to written discovery because, from his perspective, there are no good answers to these interrogatories and requests for admission. Rather than provide
3

On June 11, 2008, over four months since Williams failed to respond to the Commissions last request for completed answers to interrogatories, Commission counsel sent Williams an email requesting dates for his possible deposition. Williams responded a week later on June 18, that he would be available on July 11 or 12. Thus, Williams clearly received the Commissions request for completed written discovery answers and is aware of the ongoing litigation. He is just ignoring discovery requests he does not want to answer. As set forth above, the Commission specifically served its written discovery early in order to have the benefit of Williams answers before taking his deposition.

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discovery and initial disclosures that would prove his liability, he is willfully refusing to participate. C. Williams discovery failures have been continuous since the start of discovery. The parties held their discovery planning conference with the Court on December 11, 2012. Williams initial disclosures were due two weeks later on December 26, 2012. They have been overdue now for over six months. On December 18, 2012, the Commission served Williams with a set of interrogatories. The answers to these interrogatories have similarly been due for over five months. D. The Court warned Williams that default judgment may be entered if he refused to comply with the discovery order. As part of the Courts order compelling Williams to provide initial disclosures and answers to interrogatories, it stated: the defendant is cautioned that if he fails to comply with this courts order to provide initial disclosures and respond to plaintiffs . . . interrogatories, the court may impose sanctions, including default judgment and/or imposition of reasonable expenses. (DE 31). Despite this warning, Williams refused to provide any initial disclosures or answers to the Commissions interrogatories. CONCLUSION Williams has willfully failed to comply with his discovery obligations for months. On April 2, 2013, the Court entered an order compelling Williams to comply with these obligations and warned him of the consequences of failing to do so. Despite this warning, Williams continues to avoid meeting these obligations. This willful failure to obey the rules and orders of this Court merits entry of default judgment against Williams. WHEREFORE, the Commission respectfully requests this Court an order entering default judgment against Williams.

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Respectfully submitted, SECURITIES AND EXCHANGE COMISSION, By its attorney, /s/ R.M. Harper II Richard M. Harper II (PHV #05528) Senior Trial Counsel U.S. Securities and Exchange Commission 33 Arch Street, 23rd Floor Boston, Massachusetts 02110 (617) 573-8979 (Harper) (617) 573-4590 (Facsimile) HarperR@sec.gov June 28, 2013

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CERTIFICATE OF SERVICE I hereby certify that on June 28, 2013 I served the foregoing document on following unrepresented parties by overnight and electronic mail: Jerry S. Williams 3123 North 82nd Way Mesa, Arizona 85207

/s R.M. Harper II Richard M. Harper II