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United States District Court, S.D. New York

February 15, 2005.

OS RECOVERY, INC., et al., Plaintiffs,

The opinion of the court was delivered by: LEWIS KAPLAN, District Judge


Defendant Latvian Economic Commercial Bank ("Lateko") moves to dismiss the claims of 775 Doe plaintiffs who failed to respond to interrogatories as ordered by the Court by December 20, 2004, the date on which Lateko claims the responses were due. It acknowledges that 215 of those plaintiffs produced signed and sworn responses to the interrogatories after that date. Plaintiffs cross-move for sanctions on the ground that counsel for Lateko have violated disciplinary rules contained in the Code of Professional Responsibility.

Lateko's Motion for Discovery Sanctions

  Rule 37(b)(2) provides, in part, that if "a party fails to obey an order to provide or permit discovery," the Court may "make such orders in regard to the failure as are just," including "an order striking out pleadings or parts thereof." In determining whether to dismiss the claim of a plaintiff that has failed to comply with a discovery order, the Court first must determine whether the failure is attributable to wilfulness, bad faith or fault. Assuming that it is, the Court then must consider (1) the efficacy of lesser sanctions, (2) the duration of the period of non-compliance, and (3) whether the non-compliant party has been warned. E.g., In re Rezulin Prods. Liability Litig., 223 F.R.D. 109, 116-17 (S.D.N.Y. 2004) (collecting cases).

  In this case, the interrogatories in question were served on February 12, 2004. On May 24, 2004, the Court ordered each of the Doe plaintiffs to respond, with limited exceptions not here relevant, within thirty days. In an order dated June 1, 2004, which rejected plaintiffs' objections to another defendant's interrogatories and compelled responses, the Court expressly cautioned that "any failure to comply with this or any other order of this Court may result in the imposition of sanctions, which may be case dispositive." On June 22, 2004, the Court granted an extension of Page 2 time, but warned that no further extensions would be granted. Despite this warning, the Court did grant more time, but the clock ultimately ran out on December 20, 2004.

  The failure of the 560 Doe plaintiffs who had not responded by the time this motion was made on January 21, 2005 can only have been wilful. Indeed, plaintiffs' counsel does not seriously suggest otherwise. Given the warnings that these plaintiffs have received, there is no reason to suppose that lesser sanctions would be effective. Indeed, plaintiffs' papers, which are dated February 4, 2005, do not claim that any of these 560 had responded even by then. These plaintiffs have not responded to the interrogatories that now have been outstanding for a year and two days. In all the circumstances, the claims of these 560 plaintiffs will be dismissed.

  That leaves for consideration the 215 Doe plaintiffs whom Lateko concedes filed sworn answers after December 20 but on or before January 21, 2005. Given the relatively brief default following the ultimate deadline and the disagreement about whether a private agreement among counsel tolled the December 20 date for two weeks over the holidays, the Court declines to dismiss as to these plaintiffs.

  Plaintiffs' Cross-Motion

  Plaintiffs claim that Lateko's counsel have violated certain disciplinary rules and seek the imposition of sanctions on three bases.

  First, they contend that "this Court's Local Rule 1.5(b)(5) permits the Court to discipline an attorney for any ethical violations if" certain criteria are satisfied. (Pl. Mem. 21-22) That statement is exceedingly misleading and does plaintiffs' counsel no credit. What Local Civil Rule 1.5(b) actually says is that sanctions "may be imposed, by the Committee on Grievances," in the circumstances referred to in plaintiffs' memorandum. (Emphasis added) The suggestion that an individual judge, in the course of a pending litigation, may impose professional discipline under the rule was less than candid.

  Second, plaintiffs argue that federal courts have inherent power to impose sanctions in appropriate circumstances. Quite so. But further complicating this already unduly complicated lawsuit by a satellite dispute over a charge of professional misconduct — particularly in circumstances where charges of professional conduct either have been or could be made against plaintiffs' counsel as well — would not serve the goal of resolving the parties' dispute. The Court declines to go there, as the litigants have more appropriate avenues open to them.

  Third, plaintiffs rely on 28 U.S.C. § 1927, which permits courts to require counsel "who so multipl[y] the proceedings in any case unreasonably and vexatiously" to pay the excess costs thus incurred. Even if the attorneys in question have committed the professional misconduct of which they are accused, however, plaintiffs have failed to demonstrate that the conduct "multiplied the proceedings." In any case, the Court, in the exercise of discretion, would decline to Page 3 entertain the request for reasons previously stated.


  Accordingly, the motion to dismiss the claims of the Doe plaintiffs who had not filed sworn answers to the interrogatories [docket item 240] is granted to the extent that the claims of such plaintiffs who had not filed such answers on or before January 21, 2005 are dismissed. It is denied in all other respects. Lateko is directed to settle an order embodying this ruling and specifically identifying by number the 560 Doe plaintiffs as to whom the action has been dismissed on three days' notice.

  Plaintiffs' cross-motion for sanctions, dated February 4, 2005 and evidently not yet filed, is denied without prejudice to any grievance plaintiffs may file with the Court's grievance committee or the Departmental Disciplinary Committee of the Appellate Division, First Department. This denial is without prejudice to any in limine application plaintiffs may make in response to a filed summary judgment motion or immediately before trial to suppress the use of any allegedly privileged documents said to have been obtained or used in violation of applicable professional standards.

  SO ORDERED. Page 1


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