United States District Court, Northern District of New York
April 9, 2001
PRECISIONFLOW TECHNOLOGIES, INC., PLAINTIFF-COUNTER-DEFENDANT,
CVD EQUIPMENT CORPORATION, DEFENDANT-COUNTER-CLAIMANT; AND STAINLESS DESIGN CONCEPTS, LTD., DEFENDANTS. CVD EQUIPMENT CORPORATION, PLAINTIFF, V. KEVIN BRADY AND JOHN DOES I-XV, DEFENDANTS.
The opinion of the court was delivered by: Mordue, District Judge.
MEMORANDUM-DECISION AND ORDER
The present objections by plaintiff, PrecisionFlow
Technologies, Inc., ("PrecisionFlow") to a Memorandum-Decision
and Order by Magistrate Judge David R. Homer dated December 27,
2000, imposing sanctions on PrecisionFlow and its counsel for
failure to produce PrecisionFlow employees for deposition, arise
out of a series of contentious discovery disputes between
PrecisionFlow and defendant CVD Equipment Corporation ("CVD").
For the reasons stated below, the Court denies PrecisionFlow's
objections, and affirms Magistrate Judge Homer's
Memorandum-Decision and Order in its entirety.
In June and July 2000, counsel for CVD served notices upon
counsel for PrecisionFlow for the depositions of nine
PrecisionFlow employees. In a series of letters and telephone
calls between counsel over the next few months, these
depositions were confirmed and rescheduled several times.
Ultimately, the depositions were commenced on October 18, 2000,
just before 10:00 a.m. at a motel fifteen minutes from
PrecisionFlow's facilities, and were scheduled to continue for
several days until concluded.
Present at the deposition were: counsel for CVD and
PrecisionFlow, two CVD employees there to provide technical
guidance to CVD counsel, and the president of PrecisionFlow. Of
the nine noticed PrecisionFlow employees, however, only one
appeared. When counsel for CVD inquired about the eight
remaining employees, Lee Palmateer, counsel for PrecisionFlow,
advised counsel for CVD, for the first time, that PrecisionFlow
has "no control" over the appearances of the CVD employees and
that "the proper way to get these employees would have been to
subpoena them." It is undisputed that the PrecisionFlow
employees were fifteen minutes away at PrecisionFlow facilities,
and indeed at least two were waiting for a call from Mr.
Palmateer advising them to appear for the deposition.
The deposition transcripts, annexed to the decision hereto,
reveal a contentious interchange between the attorneys regarding
the production of the witnesses. The CVD attorney, Daniel Burke,
asked at least six times, whether Mr. Palmateer, as the attorney
for PrecisionFlow, was going to produce the noticed witnesses.
Although Mr. Palmateer stated that he believed one additional
witness was going to appear, he told CVD that he had no control
over whether the remaining seven witnesses were going to appear:
Mr. Burke: Okay. We have nine deposition notices.
Are you as PFT's counsel going to produce these
Mr. Palmateer: Like I said, these are employees.
These are non-parties. I can't direct them to do
Mr. Burke: Are you — you're not going to answer my
Mr. Palmateer: That's my answer to your question.
Do you have another question?
Mr. Burke: Do you know whether they're going to
appear for their depositions?
Mr. Palmateer: How can I know? These are
Mr. Burke: We're going to call for a Magistrate. I
don't know if we have a telephone.
Mr. Palmateer: Mr. Burke, let me clarify our
position. Under Rule 45 if the employee is not an
officer, director or a managing agent, then he's
considered a non-party, and I'm bound to that
rule, and I cannot speak for these individual
employees and that's why I'm not speaking for
Mr. Burke: . . . Just as far as a courtesy and as
far as proceeding, we have three days of
depositions scheduled. What are your plans as far
as the witnesses, like, which witnesses are you
going to bring?
Mr. Palmateer: Well, like I said before, I can't
put a leash around their necks and bring them
Because Mr. Palmateer refused to confirm that any of the
remaining eight noticed witnesses were going to appear, after
calling Magistrate Judge Homer, and deposing the one witness who
was present, counsel for CVD promptly concluded the
Shortly thereafter, CVD moved for sanctions against
PrecisionFlow and its counsel pursuant to Fed.R.Civ.P. 37(d) for
failure to produce the PrecisionFlow employees. In a
Memorandum-Decision and Order dated December 27, 2000,
Magistrate Judge Homer imposed sanctions upon PrecisionFlow and
its counsel for reasonable expenses incurred by CVD, including
reasonable attorneys' fees and costs in connection with the
depositions. PrecisionFlow now objects to Magistrate Judge
Homer's Memorandum-Decision and Order.
A. Standard of Review
According to Rule 72(a) and the Federal Magistrates Act,
28 U.S.C. § 631-639, the proper standard of review is dependent
upon whether the Magistrate decided a dispositive or
non-dispositive issue. If a matter is dispositive, a district
court will employ a de novo review of the Magistrate's Order.
See 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a). If a matter is
nondispositive, a district court shall reverse a Magistrate's
findings only if they are "clearly erroneous and contrary to
law." 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a).
Magistrate Judge Homer's Memorandum-Decision and Order is
non-dispositive, ruling only on CVD's motion for sanctions
Accordingly, this Court must review Magistrate Judge Homer's
Memorandum-Decision and Order under the "clearly erroneous or
contrary to law" standard of review. Id.; see Fonseca v.
Columbia Gas Systems, 37 F. Supp.2d 214, 218 (W.D.N.Y. Sept. 17,
1998). This standard affords magistrate judges broad discretion
in resolving nondispositive disputes, thus reversal is
appropriate only if the discretion is abused. See Thomas E.
Hoar Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990).
PrecisionFlow objects to: (1) the legal standards used by the
Magistrate Judge in sanctioning PrecisionFlow and its attorneys;
and (2) the Magistrate Judge's recitation of the facts, as
unsupported by the record. The Court will address each objection
1. The Legal Standard
PrecisionFlow argues that: "The Court used an incorrect two
part legal standard — (a) inducement and reasonable reliance
plus (b) no substantial justification or other circumstances —
where the correct legal standard is (a) inducement and
reasonable reliance plus (b) especially serious disregard for
the discovery rules." Pl.'s Mem. of Law, p. 6. After reviewing
the entire record, however, the Court finds that Magistrate
Judge Homer's thorough Memorandum-Decision and Order was neither
clearly erroneous nor contrary to law. Magistrate Judge Homer
relied on In re Keystone Foods, (134 B.R. 828, 829
(Bankr.W.D.Pa. 1991)), and Fed.R.Civ.P. 37(d)*fn4 in
extracting the legal standard applicable to the present motion.
a. Inducement and Reasonable Reliance
In Keystone Foods, the court held that because the plaintiff
and its counsel had control of a non-party witness and undertook
the responsibility of producing that non-party witness for
deposition, as evidenced by the correspondence between counsel,
a subpoena was unnecessary, and sanctions on the plaintiff and
its counsel were proper pursuant to Bankruptcy Rule 7037 and
Fed.R.Civ.P. 37(d) when that witness failed to appear. See 134
B.R. at 830. Although PrecisionFlow contends that it did not
induce CVD's reliance, it fails to object or present any legal
argument to Magistrate Judge Homer's use of the Keystone
Foods, "inducement and reasonable reliance test." Indeed,
PrecisionFlow's argument is focused solely on the issue of
whether it disregarded discovery rules in failing to produce its
employees as demanded by CVD.
b. No Substantial Justification
Fed.R.Civ.P. 37(d) states, in part, that ". . . the court
shall require the party failing to act or the attorney advising
that party or both to pay the reasonable expenses, including
attorney's fees, caused by the failure unless the court finds
that the failure was substantially justified or that other
circumstances make an award of expenses unjust." Fed.R.Civ.P.
37(d) (emphasis added). PrecisionFlow
bases the argument that Magistrate Judge Homer applied the
incorrect legal standard upon CHARLES ALAN WRIGHT & ARTHUR R.
MILLER, FEDERAL PRACTICE AND PROCEDURE, which explains that
Rule 37(d) "allows the imposition of sanctions against a party for
especially serious disregard of the obligations imposed by the
discovery rules even though it has not violated any court
order." 8A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE AND PROCEDURE § 2291, at 714 (2d ed. 1994). Although
PrecisionFlow is correct that Magistrate Judge Homer
acknowledged the treatise in the Memorandum-Decision and Order,
the Court finds that Magistrate Judge Homer did not act contrary
to law in applying the standard set forth in Rule 37(d), rather
than the explanation in the treatise.
Applying the principles in Keystone Foods, and Fed.R.Civ.P.
37(d), Magistrate Judge Homer found that sanctions should be
imposed against PrecisionFlow and its counsel because
PrecisionFlow assumed responsibility for and controlled the
appearances of all nine PrecisionFlow employees, but failed to
produce eight of the nine for the October 18, 2000,
deposition.*fn5 Additionally, Magistrate Judge Homer found
that because PrecisionFlow's counsel advised CVD, for the first
time, at the deposition that the notices of deposition were
insufficient and would not be honored, PrecisionFlow caused the
depositions to be terminated at "substantial expense and
inconvenience to CVD as well as to PrecisionFlow itself."
PrecisionFlow Technologies, Inc. v. CVD Equip. Corp.,
198 F.R.D. 33, 39 (N.D.N.Y. Dec. 27, 2000). Magistrate Judge Homer
further noted that "[t]he nonappearance of the eight employees
could have been resolved between the parties on October 18 if
PrecisionFlow and its counsel had explained the circumstances
with even a minimal degree of truthfulness." Id.
PrecisionFlow argues that Magistrate Judge Homer's reliance on
Keystone Foods, is misplaced because the non-party witness at
issue in that case was a former officer, and none of the noticed
PrecisionFlow employees are present or former officers,
directors, or managing agents pursuant to Rule 37(d).
PrecisionFlow, however, also argues that the Court can impose
sanctions pursuant to Rule 37(d) "for failure of a
non-subpoenaed, non-party to appear" if detrimental
reliance*fn6 is first proven.*fn7 Pl.'s Mem. of Law, p. 8.
PrecisionFlow's attempts to distinguish In re Keystone, and
Rule 37(d), on the grounds that the noticed employees are not
officers, directors, or managing agents, therefore, are belied
by the fact that they failed to object
(though they had more than three months to do so) to CVD's
notices of deposition, thereby inducing CVD to rely, to their
detriment, on PrecisionFlow to produce the non-party,
non-subpoenaed, PrecisionFlow employees. Moreover, as the
correspondence between the parties illustrate, PrecisionFlow
discussed the time and location of the depositions with CVD on
several occasions, and even agreed that CVD should conduct the
depositions fifteen minutes from PrecisionFlow facilities for
the convenience of the noticed employees. Finally, not only did
PrecisionFlow and its counsel give CVD every reason to believe
it would produce the noticed employees for the depositions, but
PrecisionFlow and its counsel intended, and were indeed ready,
to produce the witnesses. See Palmateer Decl. ¶ 4.
("PrecisionFlow and its attorneys honored the notices by
preparing witnesses and otherwise preparing to attend the
depositions."). Mr. Palmateer, however, refused to place a
telephone call to the remaining PrecisionFlow employees to ask
them to appear for deposition, or at the very least, explain to
CVD that he had instructed the employees to remain at the
PrecisionFlow facilities until they were needed. Thus, the Court
finds that PrecisionFlow's failure to produce the PrecisionFlow
employees was mean-spirited and combative in nature, and not
Accordingly, in this particular case, it was well within
Magistrate Judge Homer's discretion to impose sanctions and
appropriate the responsibility of paying the expenses CVD
incurred at the October 18, 2000, depositions to PrecisionFlow
and its counsel.
2. Recitation of the Facts
PrecisionFlow incorporates by reference "Palmateer 2
Declaration" and objects to the portions of Magistrate Judge
Homer's recitation of the facts. In "Palmateer 2 Declaration,"
PrecisionFlow's attorney, Mr. Palmateer, objects to Magistrate
Judge Homer's characterization of the facts, but fails to allege
how any of the facts in the Memorandum-Decision and Order are
clearly erroneous. Mr. Palmateer further objects to the portions
of the recitation of facts "that relate to facts which were not
at issue in the instant motion and which were not advocated for
or against by the parties and which are unnecessary for the
Court's Order." Palmateer 2 Decl. ¶ 24. Because PrecisionFlow
fails to allege how the facts were clearly erroneous or contrary
to law, and seems only to be alleging that they were irrelevant,
the Court will address this point no further.
The Court finds that Magistrate Judge Homer's
Memorandum-Decision and Order imposing sanctions upon
PrecisionFlow and its counsel is neither clearly erroneous nor
contrary to law, and therefore will not disturb Magistrate Judge
Homer's broad discretion in resolving this particularly
contentious discovery dispute. Accordingly, it is hereby
ORDERED that PrecisionFlow's objections to Magistrate Judge
Homer's Memorandum-Decision and Order are DENIED in their
entirety; and it is further
ORDERED that Magistrate Judge Homer's Memorandum-Decision and
Order is AFFIRMED in its entirety; and it is further
ORDERED that the parties proceed in accordance with Magistrate
Judge Homer's December 27, 2000, Memorandum-Decision and Order.
IT IS SO ORDERED.