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OSRECOVERY, INC. v. ONE GROUPE INTERNATIONAL

United States District Court, S.D. New York


August 2, 2005.

OSRECOVERY, INC., et al., Plaintiffs,
v.
ONE GROUPE INTERNATIONAL, INC., et al., Defendants.

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

ORDER

Defendant Latvian Economic Commercial Bank ("Lateko") moves, pursuant to Fed.R.Civ.P. 37, for sanctions against certain Doe plaintiffs who, it claims, have not complied with their discovery obligations under the Federal Rules and orders of this Court.

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 willfulness, bad faith or fault. If so, it then considers the efficacy of lesser sanctions, the duration of the period of non-compliance, and whether the non-compliant party has been warned. E.g., In re Rezulin Prods. Liab. Litig., 223 F.R.D. 109, 116-17 (S.D.N.Y. 2004). Before proceeding to consider these factors in the specific context of this motion, it is appropriate to begin with a brief statement about the course of proceedings, consideration of which is indispensable to understanding that context.

  Plaintiffs here claim to have been defrauded in a scheme the broad contours of which have been outlined in a number of published opinions, familiarity with which is assumed.*fn1 The action has been brought by several thousand individual plaintiffs in addition to one corporate entity. The individuals are referred to in the caption as Doe plaintiffs, as they allegedly fear reprisals should their identities become a matter of public record. Moreover, it appears that, at the outset of the litigation, plaintiffs' counsel did not even know most of their clients' names, relying instead on e-mail addresses alone. Discovery in this action has been extremely problematic. While there have been difficulties on both sides, one has been that discovery responses from the many individual plaintiffs have been late, vague and incomplete when they have been forthcoming at all. It appears that plaintiffs' counsel perhaps do not have the sort of relationships with their thousands of clients scattered all over the place that they might have in other cases and that is virtually essential if individualized and complete discovery responses are to be prepared. But whatever the reason, the problem has persisted. At this point, the Court's ability to obtain anything more has been exhausted. (For a general description of some of this background, see Lateko's memorandum of law at pages 2-5.)

  The Deficiencies

  1. The Court previously ordered each of the plaintiffs to produce two pieces of identification. This is not an insignificant obligation in this case, given that the individual plaintiffs are proceeding anonymously, that all or most initially appear to have been known to their own counsel only as e-mail addresses, and that it cannot merely be assumed that each of them actually exists. It is undisputed that Does 3, 12, 26, 50, 63, 107, 109, 129, 131, 184, 246, 249, 258, 308, 343, 354, 406, 410, 426, 456, 473, 483, 509, 553, 554, 582, 586, 597, 603, 614, 640, 690, 692, 700, 731, 736, 741, 757, 759, 794, 795, 822, 823, 824, 829, 835, 869, 872 and 891 have provided no pieces of identification whatsoever despite prior court orders. Nor has any of them submitted an affidavit or other evidence explaining either that he or she has no such identification or that there is some reason why he or she cannot produce it.

  Plaintiffs argue that they have complied substantially with the requests in that Does 741 and 835 have been physically deposed and the others have shown that they are more than Internet addresses in that they have provided their names and addresses in response to interrogatories. Lateko has no effective response to this contention. To this extent, its motion has been a waste of time.

  2. Lateko next claims that Does 13, 26, 135, 154, 189, 258, 354, 363, 473, 597, 692, 700, 727, 731, 736, 794, 797, 827, 829, 835, and 891 have responded insufficiently to its Interrogatory Nos. 8 and 9, which seek to determine exactly what representations they claim to have relied upon and by whom and when they were made. Each answered as follows:

"Subject to and without waiving the General Objections and Reservations of Rights to the extent sustained by the order of the Court dated May 24, 2004, I state that I relied on representations in deciding to transfer money into OSGold, including, but not limited to, the following: 1) OSGold Dollars are 100% backed by gold; 2) and OSGold Account is an online monetary system which allows you to convert money to gold, store it online and spend it at your convenience; 3) as soon as the transfer of funds into OSGold is made, your account will be funded by the agreed upon amount; and 4) debit cards could be used at over 200,000 ATMs worldwide for the withdrawal of OSGold funds."*fn2
All ignored the portions of the interrogatory seeking the identification of the person(s) who made the representations and when and how they were made.

  Plaintiffs' counsel seek to excuse this formulaic response by claiming that all or most of the plaintiffs invested through a web site that no longer is on line and simply do not remember anything else. If that is the case, the answers should have said so. Certainly no plaintiff has submitted an affidavit or other evidence to the effect that the plaintiff has revealed all that he or she knows that is responsive to the interrogatories. Nevertheless, Lateko would be prejudiced by this response only to the extent that a plaintiff might seek at trial to rely on representations other than those that he or she can point to on a version of the web site that was on line at the time he or she invested including as might occur, for example, if a plaintiff sought to testify to any representations that might have been made to the plaintiff personally or via e-mail or chat rooms. As these plaintiffs, for whatever reason, willfully have failed to comply with the Court's order to respond fully to these interrogatories, Lateko is entitled to a sanction appropriate to the offense.

  3. Lateko seeks dismissal as to Does 129, 184, 215, 317, 332, 352, 405, 406, 548, 554, 559, 614, 704, 719, 756, 757, 795, 802, 822, 824, 834, and 872 on the ground that they have produced no documents relating to damages as requested in Document Requests 21 and 38 and Interrogatory 11. Plaintiffs' only response is to argue that there is no requirement that damages be proved by documentary evidence. But that is beside the point. The requests sought documents relating to damages. If they exist, Lateko is entitled to them regardless of whether these plaintiffs intend to rely upon them. And none of these plaintiffs have submitted any affidavit or other evidence that documents relating to their damage claims do not exist. Indeed, the non-existence of any such documents seems exceptionally unlikely, as plaintiffs reasonably may be expected to have checkbook records, cancelled checks, and/or bank statements evidencing at least the fact that they made investments that they here seek to recover.

  As it is quite likely that these plaintiffs have at least some basic documents that bear on their damage claims but have failed to produce them, the appropriate course is to preclude them from offering any evidence of damages unless they timely submit affidavits stating that he or she does not have any documents responsive to the relevant requests.

  4. Interrogatory 11 required plaintiffs to provide "all calculations and supporting reasoning . . . supporting the damage amount stated by you in your answer to this interrogatory." Lateko claims that the responses of Does 3, 30, 50, 62, 106, 107, 131, 135, 154, 189, 311, 346, 356, 364, 392, 395, 402, 404, 405, 426, 428, 443, 444, 459, 478, 483, 506, 509, 548, 582, 586, 594, 595, 618, 704, 727, 759, 760, 787, 797, 808, 809, 827 and 850 are insufficient. Many of these plaintiffs responded in pertinent part as follows:

"I seek damages in an amount to be determined at trial, including but not limited to [amount, e.g., $2,236.00] in compensatory damages plus interest, and other damages including but not limited to punitive damages. I further state that I am unable to provide further calculations and supporting reasoning in support of my damages figures because I am no longer able to access the OSGold and OSOpps websites, which comprised the most comprehensive set of records relating to my account. The damages figure is based on the best information available to me based on my records and recollection."
Some added to this formula by referring generally to documents, but in so doing provide no further explanation of the amounts claimed.

  The fact (if it be so) that the web sites referred to no longer are online goes only so far as an excuse here. Even if these plaintiffs have no records and do not recall, absent the web sites, how much they invested and how much they received back, they were perfectly capable of saying (if it be so) that they seek to recover the amount they invested less whatever they recovered. Or they could have said they seek to recover the amount they claim they would have earned had the representations made to them been true. There are other alternatives. But the point is the same — there is nothing about the inaccessability of the web sites that prevented the plaintiffs from explaining the reasoning underlying their damages claims, not to mention how they came up with the specific amounts they included in their answers. Nor has any excuse been offered for the complete failure to explain what "other damages" — not classifiable as compensatory or punitive — they seek to recover.

  Lateko is entitled to relief tailored to the specific shortcomings.

  5. Six Doe plaintiffs (Does 246, 690, 109, 410, 785 and 809) failed to appear for deposition. Plaintiffs have offered no satisfactory excuse. The contention that perhaps some of them did not find it worth their while to travel to New York or some other more convenient site in view of the cost is baseless in the absence of any affidavit or other proof that they could not afford the trip and in the absence also of any request that the depositions be taken in their home districts, by telephone or on written questions. There is no reason for their claims to survive.

  * * *

  Plaintiffs repeatedly were warned that failure to comply with the Court's orders and with discovery obligations could result in dismissal. They have had repeated chances to comply. Immovable deadlines repeatedly were moved to accommodate them. At this point, it is crystal clear that the failures have been willful and that lesser sanctions than those the Court now imposes would be ineffective, as have been all of the prior warnings. Conclusion

  The renewed motion of defendant Latvian Economic Commercial Bank for sanctions is granted to the following extent:

  1. Does 13, 26, 135, 154, 189, 258, 354, 363, 473, 597, 692, 700, 727, 731, 736, 794, 797, 827, 829, 835, and 891 are precluded from offering evidence that they relied on any representations made to them, apart from representations made on a web site within a reasonable time preceding the dates on which they made their investments.

  2. Each of Does 129, 184, 215, 317, 332, 352, 405, 406, 548, 554, 559, 614, 704, 719, 756, 757, 795, 802, 822, 824, 834, and 872 is precluded from offering any evidence of damages absent the service and filing, on or before August 22, 2005, of an affidavit by each stating that he or she does not have any documents responsive to the relevant requests.

  3. Each of Does 3, 30, 50, 62, 106, 107, 131, 135, 154, 189, 311, 346, 356, 364, 392, 395, 402, 404, 405, 426, 428, 443, 444, 459, 478, 483, 506, 509, 548, 582, 586, 594, 595, 618, 704, 727, 759, 760, 787, 797, 808, 809, 827 and 850 is precluded from offering any evidence of damages apart from (a) evidence of their net out of pocket loss of funds invested by them in OSGold and OSOpps, not to exceed the amounts stated in their interrogatory responses, and (b) punitive damages.

  4. The action, insofar as it is brought by Does 246, 690, 109, 410, 785 and 809, is dismissed with prejudice based on their willful failures to appear for deposition.

  To the extent Lateko seeks an order precluding other evidence not produced in response to its discovery requests, the Court will address the issues at trial to the extent they actually arise.

  SO ORDERED.


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