The opinion of the court was delivered by: KEVIN FOX, Magistrate Judge
In this action for breach of an insurance contract, brought under the
court's diversity jurisdiction, cross motions for discovery sanctions
have been filed by defendant Federal Insurance Company ("Federal") and by
plaintiff Invision Media Communications, Inc., and INTV, Inc.
(collectively "INTV"*fn1). INTV has also moved to compel Federal to: (a)
disclose documents that Federal has identified as protected by the
attorney-client privilege and/or the work product doctrine; (b) produce
individuals for depositions; and (c) respond to specified interrogatories
and document requests.
Federal contends that the plaintiff has: (i) made false statements
regarding the location and existence of its documents; (ii) failed to
disclose or to disclose timely requested documents; (iii) destroyed
evidence relevant to this action; and (iv) committed other violations of
the Federal Rules of Civil Procedure and the Individual Rules of Practice
of the assigned district judge and of
this Court for which sanctions are required. As a sanction for
these alleged violations, Federal has requested that the action be
dismissed, that the plaintiff be precluded from offering evidence on
damages it is alleged to have suffered as a consequence of the breach of
contract, and/or that a monetary sanction be imposed on the plaintiff.
For its part, INTV maintains that Federal has improperly asserted the
attorney-client privilege and/or the work product doctrine in refusing to
disclose 85 documents sought by the plaintiff. Accordingly, the plaintiff
has moved to compel disclosure of those documents, and has requested
that, if necessary, the Court conduct an in camera review of the
documents that have been withheld from disclosure. The plaintiff contends
that Federal and its counsel have obstructed discovery intentionally by:
withholding documents from disclosure improperly; failing to respond to
interrogatories adequately; and making false statements regarding the
existence of documents. As a sanction for this alleged misconduct, the
plaintiff seeks monetary sanctions and an order striking the defendant's
For the reasons discussed below, Federal's request for monetary
sanctions is granted. INTV's request for an order compelling Federal to
disclose documents is granted, in part, and denied in part. INTV's
request for an order compelling Federal to supplement its responses to
the plaintiff's discovery demands, pursuant to Rule 26(e) of the Federal
Rules of Civil Procedure, is granted. INTV's request for an order
compelling Federal to produce individuals for depositions is granted in
part, and denied in part. Its request for sanctions is denied.
INTV is a Delaware corporation engaged in the business of providing
television and internet-related production and recording facilities.
Prior to the autumn of 2001, INTV
maintained offices or other facilities in at least four buildings
in Manhattan: 5 West 37th Street, 8 West 38th Street, 600 Broadway and
632 Broadway. INTV alleges that, during the two-week period following the
September 11, 2001 attack on the World Trade Center, civil authorities
either closed or restricted access to the sections of Manhattan in which
INTV's facilities were located. Due to the lack of access to its
facilities, INTV contends that it experienced a substantial decrease in
revenue, because it lost business, and experienced a substantial increase
in its expenses, stemming from efforts it made to safeguard its
facilities and to resume normal business operations.
On or around October 2, 2002, INTV filed an insurance claim with
Federal, an Indiana corporation that had previously issued to INTV a
policy insuring INTV against certain risks of loss associated with the
facilities it maintained at the above-referenced locations. INTV also
reported to Federal that it needed an advance payment on its claim
urgently, in the amount of $200,000, because of cash flow problems it was
experiencing. On or about October 8, 2002, Federal approved advance
payments to INTV on its claim, totaling $65,000. On October 30, 2002,
Craig Notte, an attorney representing INTV, sent a letter ("Notte
Letter") via facsimile to Scott Pringle ("Pringle"), an agent at Federal
who was working on INTV's claim. In part, the letter contained the
As you are well aware, INTV suffered enormous
losses because of September 11th, and as a result,
is on the brink of going out of business.
Specifically, because of impossible cash flow
problems, INTV is about to lose possession of its
television production studio at 632 Broadway to
its owner unless INTV immediately pays rent and
utility arrears, plus other costs associated with
its possession. INTV's studio at 632 Broadway
generates a substantial portion of INTV's monthly
revenue, and if it is lost, INTV's fate will be
The irreparable harm facing INTV must propel you
to act immediately. Unless a substantial sum is
paid to INTV tomorrow, INTV's damages will be
magnified to the point where it will be forced
out of business. INTV would then have no
choice but to pursue all available legal remedies
against Chubb [an insurance company affiliated
with the defendant]. The sum to be paid
immediately must not be less than $200,000, which
is a fraction of its total claim.
Over the next several months, Federal continued to adjust INTV's claim.
During that time, INTV reduced the size of its staff. Furthermore,
between November 2001 and April 2002, INTV moved out of its West 37th
Street, West 38th Street and 632 Broadway facilities. Attempts to settle
the insurance claim were unsuccessful, and INTV filed an action in the
New York State Supreme Court, New York County, in June 2002. The
defendant removed that action to this court on July 17, 2002.
On October 1, 2002, Federal's counsel, H. Christopher Boehning
("Boehning"), served a request for production of documents on INTV's
counsel, Barbara A. Matarazzo ("Matarazzo"), requesting, inter
4. All documents concerning the payment of
insurance premiums by Plaintiffs to Federal.
5. All documents, including time sheets, pay
stubs, overtime requests or records,
concerning work performed by employees of
Plaintiffs during the year 2001.
6. All documents, including bank statements and
cancelled checks, concerning or reflecting
payments by Plaintiffs to their employees
during the year 2001.
17. All documents concerning payment of any bills
or invoices by the Plaintiffs to the landlord
or landlords of 600 Broadway, including
cancelled checks or bank statements.
24. All electronic mail communications sent or
received by Plaintiffs during August 2001,
September 2001 and October 2001.
In its response to the corresponding document requests noted above
("Plaintiffs Document Request Response"), INTV stated the following:
4. Documents concerning the payment of insurance
premium are attached hereto as Exhibit C. All
checks from 2001 have been put in storage.
5. The overtime hours that employees worked were
accounted for in the spreadsheet previously
provided as part of proof of loss. The 2001
time sheets are in storage. Upon retrieval, if
any are responsive to this inquiry, they will
6. Checks for employee payments not in storage
are attached hereto as Exhibit D. The
remaining responsive documents are in storage
and will be provided when obtained.
17. The documents (checks, statements and bank
statements) in Plaintiff's possession are
attached hereto as Exhibit K. When other
documents in storage become available, they
will be provided.
24. None in plaintiff's possession as all
electronic mail is archived on servers for two
Attached to the Plaintiffs Document Request Response were copies of
bank statements for the period February 24, 2001, through September 25,
2001, as well as copies of a number of checks, for an account at Chase
Manhattan Bank ("Chase").
The plaintiff maintains that during November 2002, agents of the
plaintiff twice visited the storage facility used by the plaintiff and
searched for the documents referenced above. In a letter to Boehning
dated December 12, 2002, Matarazzo wrote:
I want to update you on the completion of our
document production. I am informed by my client
that their bank is in the process of reprinting
the requested statements and checks from their
microfiche. The e-mails have proven impossible to
obtain, as the information no longer exists on the
I am now advised by the bank that the documents
should be available by mid-January.
In a subsequent letter to Boehning, Matarazzo stated again that her
client could not find the relevant checks and bank statements in storage,
and that copies of the same had been requested from the plaintiff's bank.
In a December 18, 2002 letter, Matarazzo also reminded Boehning that she
had previously advised him that "the 2001 time sheets were in storage and
my client has not yet been able to locate it [sic]."
In response to the Matarazzo letters, Federal demanded that all
responsive documents be produced by December 27, 2002, and that INTV
identify, inter alia, the bank that was reproducing the checks
and statements and the name and address of the storage facility referred
to in the Plaintiffs Document Request Response. Additional correspondence
followed. However, Federal became dissatisfied and wrote to the assigned
district judge, who directed that INTV produce a witness to testify about
the chain of custody of the documents which INTV had been unable to
On January 15, 2003, the plaintiff disclosed additional bank statements
and copies of checks. The plaintiff acknowledged that its disclosure,
insofar as it related to checks, was still incomplete due to difficulties
the bank was experiencing in reproducing legible copies of its microfiche
records. Matarazzo stated that the bank estimated that it would require
an additional two or three months to reproduce the 262 checks requested,
and that the cost of doing so would be $18 per check. The plaintiff
objected to having to pay the cost of reproducing the checks.
Matarazzo's letter also stated that the requested bank statements that
Federal had requested were enclosed with that letter, "in total."
However, the documents attached to that letter did not include bank
statements for the periods September 26, 2001, through October 23, 2001,
and May 23, 2002, through June 24, 2002. According to the defendant, it
plaintiff to the omission of the September 26, 2001 bank statement
in a letter dated January 22, 2003. The defendant brought the omission to
the attention of the court in a February 11, 2003 letter.
On January 21, 2003, the plaintiff's general counsel, Carlin Ross
("Ross"), was deposed by Federal about the chain of custody regarding the
documents that the plaintiff had been unable to locate. Ross testified
that when INTV closed its West 37th Street facility in November or
December of 2001, she placed all physical documents maintained there into
boxes and they were transported to INTV's West 38th Street facility. Ross
testified further that subsequently, when INTV closed its West 38th
Street facility, she placed the documents located there into boxes, which
were then transported to INTV's 600 Broadway facility. She noted that the
documents in these boxes which included "[a]ll of our contracts,
all of our banking records, tax returns, employee any kind of
employee files or payroll taxes or bank account files" were
placed into filing cabinets at 600 Broadway, where they remained, as of
the date of the deposition, with the exception of some "old marketing
materials," which were discarded. Ross stated that none of INTV's
documents were in storage as of the date of the deposition, and none had
ever been in storage prior to that date. Ross explained that previously,
until November 2002, she had believed that two boxes of documents from
INTV's West 37th Street and West 38th Street facilities, that contained
checks, bank statements and equipment leases, were transported to a
storage facility in New Jersey rather than to 600 Broadway. Ross also
identified the name and the location of the New Jersey storage facility
that INTV used. She explained further ...