Page:Olcott v. Delaware Flood Co.pdf/4

 Plaintiff challenged the sufficiency of the accounting. The court-appointed accounting expert also found each of the submitted accountings wholly inadequate. The court held an evidentiary hearing after each submission and, after each hearing, concluded the submitted accounting did not comply with the court’s accounting orders. After each hearing, the court ordered Defendants to file a supplemental accounting.

After the third submission, and a delay of almost four years, the court concluded Defendants' failure to comply was willful and in bad faith. The court partially based its conclusion on the testimony of two of Defendant Michael Galesi's former attorneys. Each testified Galesi agreed to provide an accounting solely to obtain a continuance and never had any intention of complying with the court’s accounting order. Counsel also testified that Galesi still had no intention of complying with the court’s order and would rather "take his chances" than provide the accounting. Plaintiff also introduced evidence that none of Defendants had requested bank records or made any other effort to produce an accounting in compliance with the court’s order. As a result of the willful discovery violations, the court entered an order of default on February 8, 1990. Fed. R. Civ. P. 37(b)(2); Fed. R. Civ. P. 55(a). In its order, the court stated:

This court must order a sanction appropriate to the severity of Defendants' abuse of the legal process. Plaintiff is entitled to a judgment against the Defendants, jointly and severally, for his investment of $1.9 million less any portion of those funds which Defendants can establish were utilized for legitimate purposes under the terms and provisions of the limited partnership agreements. There will be a trial at which the burden will be on the Defendants to establish to the satisfaction of the fact finder that any portion of Plaintiff’s contribution was utilized for -4-