                           This opinion will be unpublished and
                           may not be cited except as provided by
                           Minn. Stat. § 480A.08, subd. 3 (2014).

                                STATE OF MINNESOTA
                                IN COURT OF APPEALS
                                      A15-0664

                         First American Title Insurance Company,
                                       Respondent,

                                            vs.

                             National Title Resources Corp.,
                            dba Northwest Title Agency, et al.,
                                     Co-Appellants,

                                      Wayne Holstad,
                                       Appellant.

                                  Filed February 1, 2016
                                         Affirmed
                                        Kirk, Judge

                             Washington County District Court
                                File No. 82-CV-13-6236

Mark E. Greene, Brooke C. Nelson, Bernick Lifson, P.A., Minneapolis, Minnesota (for
respondent)

Nathan M. Hansen, North St. Paul, Minnesota; and H. Alan Kantrud, Lake Elmo, Minnesota
(for co-appellants)

Wayne B. Holstad, Frederic W. Knaak, Holstad & Knaak, PLC, St. Paul, Minnesota (for
appellant)

         Considered and decided by Kirk, Presiding Judge; Peterson, Judge; and Chutich,

Judge.
                          UNPUBLISHED OPINION

KIRK, Judge

       Appellants appeal from an attorney-fees judgment and a default judgment entered

against them as discovery sanctions. We affirm.

                                          FACTS

       In 2013, respondent First American Title Insurance Company (First American)

brought this action against appellants Wayne Holstad, Joel Holstad, and National Title

Resources Corp., d/b/a Northwest Title Agency (National) (collectively, the Holstads).

Wayne and Joel Holstad are brothers. Joel Holstad is the sole owner and president of National.

       Wayne Holstad and Joel Holstad each have or have had an interest or role in other

businesses in the title industry. Wayne Holstad co-founded Northwest Title and Escrow Corp.

(NTEC) in 1983, and also served as its outside counsel. Joel Holstad was a shareholder of

NTEC from 1984 to 1988, when he formed National. Wayne Holstad is currently the chief

executive officer of Northwest Title Agency, Inc. (NTA),1 a former subsidiary of NTEC. In

approximately 2006, Wayne Holstad purchased NTA. NTEC was dissolved in 2011. In

December 2011, Wayne Holstad agreed to sell Joel Holstad NTA. The Holstads assert that

Joel Holstad never ultimately paid for the business, but served as its chief operating officer

until August 2012, when it ceased operations.




1
  In 2013, NTA, changed its name to Northwest Escrow Services Corp. and then to National
Title Agency Escrow Inc. In December 2014, it changed its name back to NTA. This opinion
refers to it by its original name.

                                                2
       In its complaint, First American alleged that the Holstads were liable to First American

on a judgment against NTEC and a judgment against NTA. First American’s claims were

based on principles that permit piercing the corporate veil; an assertion that the Holstads were

the successors and/or alter egos of NTEC and NTA; fraud; unlawful business practices; and

unjust enrichment.

       On October 30, 2014, First American served separate requests for admissions, requests

for production of documents, and interrogatories on the Holstads, through the e-filing system

(EFS). Only the interrogatories for Wayne Holstad were opened, by the attorney representing

Joel Holstad and National. On December 10, First American sent a letter to the Holstads’

attorneys advising them that it had not received their discovery responses and warning them

that failure to provide responses within 10 days would result in a motion to compel. First

American addressed the letter to each of the Holstads’ attorneys and referred to discovery

served upon “your clients.”

       On December 19, Wayne Holstad responded by answering only the interrogatories.

He did not respond to First American’s requests for production or its requests for admissions.

In his answers to the interrogatories, Wayne Holstad stated that he had not received the

requests for admissions. By that date, First American did not receive any kind of discovery

response from Joel Holstad or National.

       On January 2, 2015, First American moved for summary judgment, together with an

alternative motion to compel discovery responses. The same day, Wayne Holstad filed a

cross-motion for summary judgment, seeking dismissal of all of First American’s claims.




                                               3
       On January 15, Joel Holstad served answers to First American’s interrogatories and

responses to its requests for production. He produced nothing in response to the requests for

production, responding to every request by stating “NONE” or that he objected to the request

because it was overbroad and irrelevant. Specifically, he objected to production of his

personal tax returns since 2009 and certain bank records in his possession or to which he had

access. Joel Holstad never responded to the requests for admissions.

       The same day, National served answers to First American’s interrogatories and

responses to requests for admissions. National never responded to requests for production of

documents.

       On January 30, the district court held a hearing on all motions. It granted First

American’s motion to compel and reserved ruling on the summary-judgment motions. The

district court required that, by February 27, the Holstads pay First American $999 for attorney

fees, and that the parties “meet and confer” in person to attempt to resolve discovery issues.

In addition, it ordered:

                      Should any [d]efendant fail to serve answers or respond to
              requests for production, or fail to pay attorney fees to [First
              American] as awarded above, within the deadlines provided in
              this [o]rder, then [First American] may make, file, and serve upon
              the failing [d]efendant, an affidavit setting forth the [d]efendant’s
              failure. Unless within three days after service of such affidavit of
              failure, the failing [d]efendant shall make, file, and serve [First
              American] with a verified objection, setting forth adequate and
              substantive reasons for the failure, and within that same time,
              shall schedule and serve notice of a further hearing to determine
              why such [d]efendant’s [a]nswers to [First American]’s
              [c]omplaint should not be stricken, such [d]efendant’s [a]nswer
              to [First American]’s [c]omplaint shall be stricken, and judgment
              by default shall be entered in favor of [First American].



                                               4
       Wayne Holstad’s counsel never met with First American to discuss discovery. Wayne

Holstad also never paid or communicated with First American about the attorney-fees

judgment. Although Joel Holstad and his counsel met with First American as ordered, Joel

Holstad did not pay the attorney-fees judgment.

       On March 3, First American filed an affidavit with the district court describing the

Holstads’ noncompliance with the order compelling discovery.           On March 6, Wayne

Holstad’s attorney filed a responsive affidavit. Neither Joel Holstad nor National responded

to First American’s affidavit. None of the Holstads scheduled or served a notice of a further

hearing to determine why their answers should not be stricken and judgment by default

entered in favor of First American.

       On March 23, First American wrote a letter to the district court asking it how to

proceed. None of the Holstads responded to this letter. On March 27, following the district

court’s instructions, First American filed an application for a default judgment. A week later,

on April 3, Joel Holstad and National objected to the entry of a default judgment. On April

7, Wayne Holstad did the same. None of the Holstads requested a hearing to discuss why the

district court should not enter a default judgment.

       On April 13, the district court ordered that the Holstads’ answers be stricken and a

default judgment be entered against them. The district court was careful to note that it was

not entering default judgment in response to the Holstads’ failure to pay the attorney-fees

judgment, but rather their failure “to avail themselves of the simple procedure that was given

to them to appear and defend against the default judgment being entered.”

       The Holstads appeal.


                                               5
                                      DECISION

       A district court may impose sanctions if a party fails to obey a discovery order. Minn.

R. Civ. P. 37.02(b). Authorized sanctions range from awarding attorney fees and costs caused

by the discovery violation up to dismissing all or part of an action “or rendering a judgment

by default against the disobedient party.” Id. We review a district court’s discovery-related

orders for abuse of discretion. Shetka v. Kueppers, Kueppers, Von Feldt & Salmen, 454

N.W.2d 916, 921 (Minn. 1990); Frontier Ins. Co. v. Frontline Processing Corp., 788 N.W.2d

917, 922 (Minn. App. 2010), review denied (Minn. Dec. 14, 2010).

       We defer to a district court’s factual findings unless they are clearly erroneous.

Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999). A finding is clearly

erroneous if, after reviewing the record, we are “left with a definite and firm conviction that

a mistake has been made.” Id. (quotation omitted). When making this determination, we

view the evidence in the light most favorable to the district court’s findings. Trondson v.

Janikula, 458 N.W.2d 679, 682 (Minn. 1990). We also defer to its credibility determinations.

Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988). This deference includes a district

court’s determinations regarding the credibility of affidavits. Hestekin v. Hestekin, 587

N.W.2d 308, 310 (Minn. App. 1998).

I.     The district court did not abuse its discretion in imposing the attorney-fees
       sanction.

       A.     Alleged failure of service

       Wayne Holstad argues that the district court erred by imposing the attorney-fees

sanction because First American never served him with the discovery requests, and that an



                                              6
affidavit of service is a “critical prerequisite” in a case in which parties challenge such service.

Likewise, Joel Holstad and National argue that the attorney-fees sanction was inappropriate

because they did not receive the discovery requests.

       The General Rules of Practice provide that an affidavit of service is not necessary for

documents served through the EFS:

                     The records of the [EFS] indicating transmittal to a
              registered recipient who has designated an e-mail address for
              service of process in the case shall be sufficient proof of service
              on the recipient for all purposes.

Minn. R. Gen. Pract. 14.05 (2012).2 As the district court found, EFS records in this case show

that each discovery document was served via the EFS, with email notice upon counsel for

Wayne Holstad, his legal assistant, and counsel for Joel Holstad and National. Notably, none

of the Holstads ever described problems obtaining the discovery requests through the EFS

after First American’s letter clearly notified them of their existence. Further, none of the

Holstads filed a motion for relief due to technical problems with the EFS. See Minn. R. Gen.

Pract. 14.01(c)(2) (“Upon motion and a showing that an electronically served document was

unavailable to or not received by a party served, the court may enter an order extending the

time for responding to that document.”).

       We conclude that the district court’s finding that First American served the Holstads

with the discovery requests via the EFS is not clearly erroneous. Fletcher, 589 N.W.2d at

101. In addition, under Minn. R. Gen. Pract. 14.05, the lack of an affidavit of service was not


2
  This rule was amended effective July 1, 2015. It still provides that EFS records “shall be
sufficient proof of service on the recipient for all purposes.” Minn. R. Gen. Pract. 14.05
(2015).

                                                 7
a barrier to imposing sanctions against the Holstads for their failure to timely respond to all

of the discovery requests.

       B.     Meet-and-confer requirement

       Minn. R. Civ. P. 37.01(b) provides that a motion to compel discovery “must include a

certification that the movant has in good faith conferred or attempted to confer with the person

or party failing to make the discovery in an effort to secure the information or material without

court action.” Minn. R. Gen. Pract. 115.10 also states that “[n]o motion will be heard unless

the parties have conferred either in person, or by telephone, or in writing in an attempt to

resolve their differences prior to the hearing.” The moving party must certify compliance

with the rule or reasons for not complying. Id.

       Wayne Holstad asserts that the district court lacked the authority to impose sanctions

because First American failed to submit a certification that the parties had met and conferred

regarding discovery, along with its motion to compel. He did not raise this issue before the

district court. Because the district court did not rule on the issue, we decline to consider it on

appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (reviewing court must

generally consider only issues presented to and considered by district court).

       However, we note that, because both First American and Wayne Holstad moved for

summary judgment at the January 30, 2015 hearing, both parties had an obligation to initiate

a settlement conference prior to the motion hearing under rule 115.10. See Minn. R. Gen.

Pract. 115.10 (providing that it is the “moving party” that “shall initiate the [settlement]

conference”). Further, there is no caselaw holding that failing to meet and confer precludes

the district court from hearing a motion to compel or granting sanctions.


                                                8
       C.     Punishing a party for attorney conduct

       Under basic principles of agency, attorney neglect is chargeable to his or her client.

Finden v. Klaas, 268 Minn. 268, 271, 128 N.W.2d 748, 750 (1964). However, courts are

reluctant to punish an innocent client for his counsel’s neglect. See, e.g., Charson v. Temple

Israel, 419 N.W.2d 488, 491 (Minn. 1988) (granting relief from judgment where the client

was not complicit in the negligence or wrongdoing of his attorney); Kurak v. Control Data

Corp., 410 N.W.2d 34, 36 (Minn. App. 1987) (“A litigant is not to be penalized for the neglect

or mistakes of his lawyer. Courts will relieve parties from the consequences of the neglect or

mistakes of their attorney, when it can be done without substantial prejudice to their

adversaries.” (quotation omitted)).

       Wayne Holstad argues that the district court should not have punished the Holstads for

any failings of their attorneys in not responding to the discovery requests. Again, he did not

raise this issue before the district court and, therefore, we decline to consider it on appeal. See

Thiele, 425 N.W.2d at 582. Nevertheless, we note that the record does not conclusively

establish that the Holstads were innocent in failing to adequately and timely respond to First

American’s discovery requests. This is especially the case given that Wayne Holstad is an

attorney, and the fact that Joel Holstad signed discovery responses that were deemed

inadequate by the district court.

       Therefore, the district court did not abuse its discretion in imposing the attorney-fees

sanction. See Shetka, 454 N.W.2d at 921.




                                                9
II.    The district court did not err in striking the Holstads’ answers and issuing a
       default judgment.

       Because “the primary objective of the law [is] to dispose of cases on the merits,” the

most punitive sanction of dismissal and entry of a default judgment is only appropriate under

“exceptional circumstances.” Firoved v. Gen. Motors Corp., 277 Minn. 278, 283, 152

N.W.2d 364, 368 (1967). Chief among such circumstances are those in which a party’s

discovery violations impair the other party’s ability to defend against or prove a claim. See

Frontier Ins., 788 N.W.2d at 924-26; see also Chicago Greatwestern Office Condo. Ass’n v.

Brooks, 427 N.W.2d 728, 730-31 (Minn. App. 1988) (stating that prejudice to the moving

party is “a prime consideration” in determining the severity of a sanction). Moreover, district

courts must have broad discretion to manage cases and enforce calendar rules in order to

prevent “unnecessary and inexcusable delays.” Firoved, 277 Minn. at 284, 152 N.W.2d at

369. A party that “willfully and without justification or excuse” fails to comply with

discovery orders effectively “forfeits the right to a trial on the merits.” State by Humphrey v.

Ri-Mel, Inc., 417 N.W.2d 102, 108-09 (Minn. App. 1987) (citing Breza v. Schmitz, 311 Minn.

236, 237, 248 N.W.2d 921, 922 (1976)), review denied (Minn. Feb. 17, 1988).

       The severity of the discovery sanction to be imposed depends on several factors:

(1) whether the district court set a certain date by which compliance was required; (2) whether

the district court warned of potential sanctions for noncompliance; (3) whether the

noncompliance with discovery was “an isolated event or part of a pattern”; (4) whether the

noncompliance was “willful or without justification”; and (5) whether the moving party has

demonstrated prejudice. Frontier Ins., 788 N.W.2d at 923.



                                              10
       All five factors are present here. It is undisputed that the district court told the Holstads

what they needed to do and when, including: pay the attorney-fees award and meet and confer

by February 27, and, within three days after service of any “affidavit of failure” filed by First

American, submit a “verified objection” and schedule a hearing to determine why their

answers should not be stricken and default judgment entered. In so ordering, the district court

amply warned the Holstads of the potential consequences of noncompliance.

       The record also demonstrates that the district court did not clearly err in finding that

the pattern of noncompliance was willful and without justification. Id. Joel Holstad and

National began this matter by “challeng[ing] [] the sufficiency of process without factual or

legal basis,” and only answered after First American had filed an affidavit of default. The

Holstads then ignored First American’s discovery requests when first served and after

receiving the December 10 letter, with the exception of Wayne Holstad’s answers to

interrogatories. Even after First American filed a motion to compel, none of the Holstads

fully responded to the discovery requests. Wayne Holstad failed to meet and confer regarding

discovery as ordered, and the Holstads failed to pay the attorney-fees judgment as ordered

without providing an excuse to the district court. Finally, after First American filed an

affidavit of noncompliance, none of the Holstads followed the straightforward procedure

required by the district court to present a defense to avoid default judgment.

       The record also supports the district court’s conclusion that the Holstads’ conduct

prejudiced First American by depriving it of important evidence and delaying the case for

months. Id. For example, both Joel Holstad and Wayne Holstad have claimed that they do

not have the financial records of NTA. In July 2013, Wayne Holstad asserted that much of


                                                11
the financial information related to NTA was stored electronically and that he did not have

access to it. By January 2015, he asserted that the data from the company’s “computerized

operating accounting system was lost,” causing the need to manually recreate records for tax

purposes.

       Business records are key to proving claims involving piercing the corporate veil and

successor liability. See Victoria Elevator Co. v. Meriden Grain Co., 283 N.W.2d 509, 512

(Minn. 1979). Based upon the record, the likelihood of gaining complete corporate records

from the entities involved steeply declined over time, especially because NTEC is now

dissolved and NTA is no longer operating.

       The Holstads’ pattern of unjustified noncompliance with discovery is the type of

conduct that can amount to forfeiture of the right to trial. See Ri-Mel, 417 N.W.2d at 109-10

(affirming entry of default judgment when appellants repeatedly failed to cooperate with

deposition or appear for court as ordered, despite being warned that default sanction would

result); Frontier Ins., 788 N.W.2d at 923-25 (affirming dismissal of appellant’s claims against

all defendants based on failure to provide meaningful discovery responses). On this record,

we conclude that the district court did not abuse its broad discretion by entering a default

judgment as a sanction. See Shetka, 454 N.W.2d at 921.

       Having affirmed the default judgment, we do not reach Wayne Holstad’s argument

that he is entitled to judgment as a matter of law.

       Affirmed.




                                               12
