Judge Karlin

09-07061 Solis v. Asif (Doc. # 65) - Document Text

SIGNED this 09 day of September, 2010.





) Case No. 09-41026
) Chapter 7

Debtors. )
Secretary of Labor, )
United States Department of Labor, )
Plaintiff, )

vs. )
Adversary No. 09-7061

Defendant. )


On September 18, 2009, the Secretary of the Department of Labor (“DOL” or “Plaintiff”)

brought this Adversary Proceeding against Defendant (and Debtor), Mohammad Asif. The

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Complaint arises out of Defendant’s business dealings with Ghulam Hussain, who worked at a
convenience store owned by Defendant after entering the United States as an H-1B non-immigrant
professionalworker. DOLassertsthatDebtor,throughthecorporation,Mahaom,LLC,ownedsolely
by Debtor and his wife, submitted a false Labor Condition Application to DOL and a false I-129
Petition to the Department of Homeland Security, under penalty of perjury, in an effort to obtain a
visa application for Mr. Hussain so that he could work for Debtor or his LLC at substandard wages,
in violation of the Fair Labor Standards Act. Plaintiff claims that Defendant owes $45,326.45 in
back wages and overtime to Mr. Hussain, as determined by a judgment entered against him
September 24, 2009, and that this debt was incurred by fraud and should be excepted from his
discharge pursuant to 11 U.S.C. § 523(a)(2)(A).

Plaintiff’s position on motion

After completion of discovery, the parties submitted an agreed Pretrial Order, which was
entered June 7, 2010. 1 That Pretrial Order contained a rather lengthy list of stipulated facts.
Defendant then timely filed a Motion for Summary Judgment, 2 Plaintiff timely responded to it, 3 and
before Defendant could file his reply brief, Plaintiff filed a Motion for Order Allowing Leave to File
Amended Response in Opposition to Defendant’s Motion for Summary Judgment and for Leave to
Amend the Pretrial Order. 4 The basis for this Motion is DOL’s contention that it is now in
possession of newly-discovered, material and relevant documents, which it had sought with due

1Doc. 42.

2Doc. 45.

3Doc. 51.

4Doc. 56.


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diligence from another federal agency, the United States Customs and Immigration Service (USCIS),
before the close of discovery and before its response to the summary judgment motion was due, but
which had not been received until after its response was filed, and the Pretrial Order entered.

The new information is that Mahaom, LLC, Debtor’s company, submitted an application for
anotherH-1B worker (Mr.Latin)only a month afteritsubmitted the application forGhulam Hussain.
DOL contends Debtor falsely testified during his 11 U.S.C. § 341 hearing that he had only submitted
one such application during the summer of 2005. DOL further contends that during his deposition,
Debtor testified regarding his need for an H-1B Financial Manager for a “gasoline wholesaler”
business, and specifically denied making application for any other H-1B worker.

DOL contends that the documents it has now received, post-close of discovery, demonstrate
that the testimony both of Debtor, and his accountant, Ajay Dave, both of whom are scheduled to be
witnesses at trial, was at least incomplete, if not materially false. DOL contends it would be
manifestly unjust, now that the information has come to light at a time when there is no trial setting,
to deprive it of the ability to use these documents at trial, and to dispute material facts numbered 4,
5, 6, 7, 8, 12, 13, 14, 16 and 26 contained in Debtor’s summary judgment motion. DOL further
argues that because Debtor well knew about these documents, that DOL’s use of them will not create
any surprise or prejudice to him. It claims the only prejudice would be to DOL, caused by Debtor’s
failure to respond truthfully to discovery timely submitted to him.

DOL seeks to amend the Pretrial Order to supplement the witness and exhibit list, and to
withdraw some stipulations of fact DOL agreed to only because they believed the information they
had received under oath during discovery. DOL contends documents just received from another
federal agency demonstrate the real facts are not as stipulated. DOL further asserts it does not seek


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to add new claims or raise new legal arguments, but only to include the new facts in the framework
already outlined in the Pretrial Order and “to correct misrepresentation made by Defendant under

In addition, DOL claims it reasonably learned of the existence of these documents only on
July 23, 2010, and the instant motion was then filed August 2, 2010. DOL further claims that the
newly discovered documents not only go to the heart of the disputed material facts that are the
subject of the Adversary Proceeding and the pending summary judgment motion—that the services
of a foreign worker were obtained by fraud or false representations that Debtor made—but, as
importantly, that Debtor knew of these material facts and purposely hid this information from DOL
during the discovery phase of the case. DOL further alleged in its Complaint that Defendant’s
employment practices represented a pattern of deceptive conduct, which could also impact the
information just discovered, and thus could theoretically be material to this Court’s analysis of the
§ 523(a)(2) claim.

Debtor’s position on motion

Debtor objects to the motion on these four bases: 1) that the discovery deadline expired May
24, 2010, some two and one-half months before the motion was filed, and DOL does not adequately
demonstrate why it could not have obtained the new information from the other federal agency prior
to that time; 2) that the Pretrial Order says it shall not be amended unless to prevent manifest
injustice, and there would be no such injustice if the motion is denied; 3) that it would be unfair to
not allow Defendant additional discovery based on the new evidence, assuming DOL does not want


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to re-open discovery; and 4) that Defendant has incurred considerable expense filing his summary
judgment motion and that expense “will have been for nothing” if DOL’s motion is sustained.5

Court’s request for additional information

Because motions such as this can unduly delay matters, the Court requested additional
information from DOL concerning its contention that the new documents “contradict deposition
testimony” and that Debtor failed to produce the pertinent documents during discovery, rather than
setting this matter immediately to an evidentiary hearing. Specifically, the Court requested
information “as to how these documents contradict the direct testimony of the Debtor in his
deposition,” and “specific discovery requests, if any, that should have resulted in the production of
these documents, but did not....”,6 as DOL alleged.

In response, DOL filed a pleading, with exhibits, totaling 167 pages.7 Essentially its response
is that the newly found documents show Debtor, through his company, petitioned USCIS for two
different workers to be employed for the same position, for the same time period, and for the same
salary; these petitions were submitted one month apart in 2005. DOL submits that Debtor testified
two separate times that he had only applied for one such H-1B worker,8 and that the newly found
documents contradict the entire fact pattern that Defendant, and his accountant, described during
their respective depositions.

5Defendantalso asks DOL be assessed his attorney fees for drafting the summary judgmentmotion “and forsuch
other relief as the Court may deem appropriate.”
6See Court’s email communication to both counsel dated August 18, 2010.
7Doc. 62.
8Transcript of 341 Meeting of Creditors, September 2,2009,on Track 2 at5:33-6:30,and Deposition taken May
10, 2010 at pp. 34, 42.

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DOL further asserts that Debtor responded to certain Requests for Production and
Interrogatories in a fashion that is now contradicted by the newly found documents. First, Debtor
produced no documents, contending that any document within the scope of the requests had already
been produced either to DOL during the wage investigation or to the Chapter 7 Trustee. DOL
contends the 835 pages of documents that Defendant and his company provided to USCIS in support
of both H-1B petitions were responsive to at least Request for Production No. 1 and No. 12. The first
request sought all documents referenced in Plaintiff’s interrogatories or Defendant’s answers to those
interrogatories. The second sought “all written communication between Defendant Asif and/or
Mahaom, LLC and the federal government regarding the status of Ghulam Hussain and his position
under the H-1B program.”9

At first glance, the latter request does seem to be limited to documents concerning Hussain,
but a close reading of that request does indicate the request relates to the “federal government” as
a whole, and not just to DOL. DOL asserts that 835 pages of documents provided by Defendant and
his company to USCIS was responsive to the request, but Defendant only effectively produced,
during the administrative proceedings with DOL, upon which he relied in responding, the basic
application and petition, plus one supporting letter.

DOL also identifies Debtor’s response to Interrogatory 20 as an example of a response that
is simply false, and that DOL can now demonstrate its falsity as a result of the newly found
documents. In addition, the Court can certainly see how knowing the true answer to this

9Emphasis added.


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interrogatory would have led DOL to these additional documents much earlier. 10 That interrogatory
asked Defendant to identify and describe all corporate filings completed by Stasia Flynn during her
employment at Mahaom, LLC. Debtor’s answer identified only the H-1B application and I-129
Petition for Hussain, and significantly omitted a very similar application signed by Ms. Flynn for Mr.
Latin only a month later. DOL asserts the letters signed by Flynn and submissions of additional
documents for both Hussain and Latin’s petitions in October and November 2005 would have been
responsive to this request and Request No. 1.

Debtor never effectively denies the specific allegations by DOL that some of his answers were
non-responsive, at best, and deceptive, at worst. In fact, his best response is that he “forgot” about
these documents. 11 In addition, in the response to DOL’s supplemental filing, Debtor’s counsel
admits that had he known these documents existed, he would have produced them. Notwithstanding
this tacit admission that these documents are relevant, he then asks the Court to deny the motion.
Debtor’s only other argument is that “these documents add nothing to the case.”12

Conclusions of Law

Federal Rule of Civil Procedure 16.2(c), which applies to adversary proceedings in this Court
pursuant to Federal Rule of Bankruptcy Procedure 7016, states that a Pretrial Order may only be
modified by consent of the parties or upon “order of the court to prevent manifest injustice.” The

10Debtor suggests because the discovery deadline has expired, DOL’s motion should be denied. But these
written discovery answers were first due thirty days after service, which the Court file reflects occurred no later than
December 11, 2009. See Docs. 15 and 16. Had they been correctly and accurately answered, DOL would have known
about the other applicant and could have specifically pursued those documents from Debtor (or the other federal agency)
months earlier, and would have been in a more informed position to question Debtor during his deposition. Accordingly,
this basis for denial of the motion is not persuasive.

11In partial response to DOL’s motion, Debtor submitted an affidavit saying that he had “forgotten” about these
documents when he answered the interrogatories and gave deposition testimony under oath. See Doc. 63-1.

12Doc. 63.


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burden of demonstrating manifest injustice falls upon the party moving for modification. 13 The
decision to modify the pretrial order lies within the trial court's discretion.14

In exercising that discretion, the court should consider the following factors: (1) prejudice
or surprise to the party opposing trial of the issue; (2) the ability of the party to cure any prejudice;

(3) disruption to the orderly and efficient trial of the case by inclusion of the new issue; (4) bad faith
by the party seeking to modify the order,15 and 5) whether movant formally and timely requested the
amendment to the pretrial order. 16 In applying these factors, the court must assure “the full and fair
litigation of claims.”17
The Court cannot say that if DOL had possessed the information about the other H-1B
application, or the entire 835 pages relevant to that application and Hussain’s, at the time it
participated in the § 341 hearing, or when it deposed Defendant and others, including the “extensive
documentation about Mahaom, LLC’s Business Plan and consulting contracts,” that it would not
have resulted in DOL learning information that could have proved helpful to its prosecution of this
dischargeability proceeding. In addition, the Court also cannot say that had DOL received the correct
information in a timely fashion from Debtor, directly, and as required by the rules of civil procedure,
that it might have elected not to stipulate to certain matters in the Pretrial Order.

13Koch v. Koch Indus., Inc., 203 F.3d 1202, 1222 (10th Cir. 2000).
14 Davey v. Lockheed Martin Corp., 301 F.3d 1204, 1208 (10th Cir. 2002) (quoting Fed.R.Civ.P. 16(e)). See

also Arias v. Pacheco, 2010 WL 2171021 (10th Cir. 2010).


16 Palace Explore. Co. v. Petroleum Dev. Co., 316 F.3d 1110, 1117 (10th Cir. 2003). Also see Koch v. Koch

Indus, Inc., 203 F.3d at 1222 (noting "the timing of the motion [to amend] in relation to commencement of trial is an
important element in analyzing whether the amendment would cause prejudice or surprise").

17Koch v. Koch Indus., Inc., 203 F.3d at 1222.


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The Court does find that DOL could be significantly prejudiced by not granting this motion.
Debtor clearly knew about all of this information, but elected not to disclose it. Accordingly, he will
not be surprised or prejudiced at trial if the Court grants the motion. Second, the only way to cure
the problem solely created by Debtor when he “forgot” about this information, or otherwise failed
to testify accurately and respond appropriately to discovery, is to grant the motion. Third, granting
this motion will not unduly disrupt these proceedings. No trial has been set. There is a pending
summary judgment motion, but that motion is based on stipulations that DOL contends it would
never have made had Debtor participated in the discovery process in good faith. Fourth, the Court
can find no bad faith by DOL in seeking to modify the Pretrial Order, or to amend its response to the
summary judgment motion, in light of this new information. Although it should not have had to go
to another federal agency to get the information it now seeks to use, as Debtor should have provided
it, it filed this motion just as soon as it obtained the relevant information. Finally, DOL timely
brought this motion in advance of trial, and just as soon as it learned the content of the information
Debtor should have disclosed. Accordingly, every factor upon which this Court should base its
decision tips decidedly in favor of granting the motion.

Debtor’s position that the motion should be denied because discovery has closed is
unpersuasive, as noted above. Had he responded fully and forthrightly to discovery in January 2010,
none of this would have been necessary. In fact, it is DOL who has been prejudiced by having to redo
a Pretrial Order now that it has all the facts, and by having to re-do its summary judgment


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Similarly, had Debtor responded appropriately, DOL might not have agreed to the stipulated
facts18 in the Pretrial Order, which could well have resulted in Debtor not even being in a position
to file the summary judgment motion. Accordingly, the fact that Debtor may have to pay his counsel
for filing a summary judgment motion, and preparing a response, as a result of his having not
responded accurately and fully to outstanding discovery, is a small price for him to pay at this point
in these proceedings. The Court will, therefore, not reward Debtor by requiring DOL to pay his
attorney fees.

IT IS, THEREFORE, ORDERED that Plaintiff’s Motion for Order Allowing Leave to File
Amended Response in Opposition to Defendant’s Motion for Summary Judgment and for Leave to
Amend the Pretrial Order is granted. Plaintiff shall file its Amended Response in Opposition to
Defendant’s Motion for Summary Judgment by September 30, 2010, and any reply by Defendant
shall be filed by October 14, 2010.

IT IS FURTHER ORDERED that the parties consult regarding an amended Pretrial Order,
and submit an amended Pretrial Order to this Court no later than September 23, 2010. 19 If they are
unable to agree upon such an agreed order, each party shall submit the version they seek the Court
to adopt, specifically indicating the language in dispute, also by September 23, 2010.

18 See Morrison Knudsen Corp. v.Ground Improvement Techniques, Inc., 532 F.3d 1063, 1075 (10th Cir. 2008)
(holding that while stipulations cannot be disregarded or set aside at will, they are not absolute and will be set aside to
prevent manifest injustice).

19DebtorsuggeststhatperhapshewouldwantadditionaldiscoveryiftheCourtgrantedthismotion. TheCourt
is hard-pressed to understand why he would be entitled to additional discovery when the information DOL complains
it did not receive—and seeks to use now—is information he admits he already has, but just “forgot” to give DOL or his
own counsel. If DOL consents to an additional period of discovery, however, for both parties, the Court would allow
a delay in submission of an amended, and final, Pretrial Order. If that occurs, however, the Court requests the parties
file an agreed motion and order to set aside the Pretrial Order now in place, setting forth the agreed additional discovery
deadlines, and an agreed date for a new pretrial conference, which they can obtain by contacting the Clerk of the Court.
If counsel mutually opt for that course, such motion and order should be filed by September 23, 2010.


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