United States District Court, S.D. New York
August 3, 2005.
OSRECOVERY, INC., et al., Plaintiffs,
ONE GROUPE INTERNATIONAL, INC., et al., Defendants.
The opinion of the court was delivered by: LEWIS KAPLAN, District Judge
Defendant Latvian Economic Commercial Bank ("Lateko") moves,
pursuant to Fed.R.Civ.P. 37, for an order of contempt and
sanctions against Gray Clare and OSRecovery, Inc. The motion is
based on the refusal of Clare to comply with this Court's order
of January 13, 2005, which granted Lateko's motion to compel
discovery against him and directed him to respond in full to
Lateko's discovery requests and to produce all documents in his
possession, custody or control that are responsive to Lateko's
document requests to OSRecovery. It seeks to hold OSRecovery
responsible for Clare's alleged contumacy on the theory that it
and Clare are alter egos. The relief sought is an order (1)
deeming certain facts to be established against OSRecovery, (2)
precluding Clare and OSRecovery from further representing any
persons defrauded by Clare or from financing or controlling this
action, (3) arresting, imprisoning, and imposing a coercive fine
on Clare until he complies with the discovery orders, and (4)
awarding costs and attorneys fees to Lateko.
By order dated August 1, 2005, this Court dismissed the action insofar as
it was brought on behalf of OSRecovery. Clare is not a plaintiff in this
action for purposes of seeking recovery. Accordingly, insofar as Lateko
seeks to have certain facts deemed to have been established against
OSRrecovery and to have it and Clare precluded from representing various
persons, this motion is moot.
As far as Clare's refusal to respond to discovery, the matter is equally
simple. He was served with interrogatories and document requests. When
Lateko moved to compel him to respond, he resisted the motion solely on the
ground that he was not a party and could not be compelled to respond as
such. The Court held that he was estopped, for purposes of discovery, to
deny that he is a party and ordered him to respond. He defied the order. He now
raises a handful of objections to the contempt motion.
First, he argues that the Court lacks subject matter
jurisdiction by virtue of an appeal he filed from the January 13,
2005 order directing that he comply with the discovery requests.
That appeal, however, has been withdrawn. Docket item 312.
Second, he argues that the Court's ruling that he was estopped
to deny, for discovery purposes, that he is a party to this
action is erroneous. The Court already has ruled against him
twice on that contention. It is no more persuasive now than
before. Moreover, the record now makes unmistakably clear that
OSRecovery is nothing more than a front for Clare, who entirely
dominates and controls it. There simply is no denying that it has
been acting entirely as his proxy throughout this litigation.
Hence, Clare in every sense important to this issue always has
been a party.
Third, Clare argues that some of the discovery sought from him
by Lateko's document requests and interrogatories is not relevant
to this action. The time for making that argument, however, has
passed, as he never raised it in opposing the motion to
compel.*fn1 Nor does his relevancy argument even attempt to
cover all of the discovery sought.
Accordingly, Lateko's motion is granted to the extent that Gray
Clare is hereby held in civil contempt of this Court. He shall
pay a fine of $2,500 for each day, commencing on August 12, 2005,
during which his failure to comply with the Court's January 13,
2005 continues. The Court hereby orders also that Gray Clare be
arrested wherever in the United States and its possessions he may be found,*fn2 transported to an
appropriate detention facility in this district, and there held
pending further order of this Court, which will be forthcoming
when he demonstrates that he has complied fully with the January
13, 2005 order. Defense counsel shall submit an appropriate
arrest warrant for signature. Lateko's motion is denied in all