Unreported / Non-Citable
Background
This long-running shareholder dispute pits Aaron Stanz, the technology co-founder of private-jet broker Jet Genius Holdings (“JGH”), against his co-founder Jordan Brown and a network of related charter-aviation entities. Stanz alleges that Brown engaged in self-dealing by diverting JGH revenue and federal excise tax (“FET”) proceeds to other companies he controls. The case has produced extensive discovery, much of it electronically stored information (“ESI”) on JGH’s proprietary platform.
In June 2025, the magistrate judge granted Stanz’s motion to compel production of documents and on-site inspection of certain ESI sources. The order required the defendants to produce specific categories of documents and to permit a controlled inspection of business systems and a personal cell phone within set deadlines. The defendants did not comply. Instead, they offered only a limited “hard-copy inspection” that did not satisfy the order. Stanz filed an ex parte application asking the court to issue an order to show cause why defendants should not be held in contempt. The defendants did not respond. The court construed the application as a Federal Rule of Civil Procedure 37 sanctions motion and addressed it on the merits.
The Court’s Holding
The magistrate judge issued a Report and Recommendation that the district judge initiate civil contempt proceedings against the defendants and impose coercive per-diem fines until they comply. At the same time, the magistrate recommended against the harsher sanctions Stanz had requested: adverse-inference jury instructions, issue preclusion (treating disputed facts as established), and entry of a default judgment.
Magistrate judges in federal court do not have direct contempt authority. Under 28 U.S.C. § 636(e), the magistrate must certify the relevant facts to the district judge, who then conducts the contempt hearing. The order carefully certifies the underlying record: a clear prior order requiring specific production and inspection; the defendants’ production of only a small subset; their unilateral substitution of a limited paper inspection for the ordered ESI and cell-phone inspection; and their refusal to engage with the motion at all.
On the appropriate sanction, the court applied the standard Rule 37 framework. Adverse-inference instructions, issue preclusion, and default judgment are powerful remedies but are reserved for the most serious cases of willful and prejudicial noncompliance. The court concluded that, while the defendants’ conduct warranted significant sanctions, those terminal-style sanctions were premature. A coercive per-diem fine would put concrete economic pressure on the defendants to comply without depriving them of their day in court. The court also separately granted Stanz’s request for additional attorney’s fees attributable to the contempt-related work, subject to submission of supporting documentation.
Key Takeaways
- Federal courts in California will issue contempt recommendations when a party flouts a clear order requiring specific production or ESI inspection, but they tend to start with coercive monetary sanctions rather than terminating sanctions like default judgment.
- Substituting a more convenient compliance method (here, a paper inspection) for the inspection actually ordered is treated as noncompliance, not partial compliance.
- Adverse-inference instructions, issue preclusion, and default judgment are reserved for the most serious willful and prejudicial discovery abuses; courts often try less drastic remedies first.
- Failure to oppose a contempt or sanctions motion forfeits the chance to explain or mitigate the conduct, leaving the certified facts in the moving party’s preferred light.
Why It Matters
Discovery enforcement is one of the busiest areas of magistrate-judge practice in the Southern District of California. This recommendation illustrates the typical escalation ladder: an order to compel, an attorney-fee award for the cost of the motion, then certification of contempt facts and coercive per-diem fines for ongoing noncompliance, with terminating sanctions held in reserve. Litigants who think they can stonewall or pick which parts of an order to obey should expect mounting financial consequences, even if their case is not yet at risk of a default.
For California businesses caught in commercial litigation, the case is a reminder that ESI obligations are real and enforceable. A party that controls business systems containing relevant data must produce that data through the methods the court orders, not through unilaterally chosen alternatives. For plaintiffs, the case is also a reminder that aggressive sanction requests like default judgment are easier to ask for than to win — judges in this district will often start with coercive sanctions before crossing the merits-altering line.