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United States District Court, S.D. New York

August 3, 2005.

OSRECOVERY, INC., et al., Plaintiffs,

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 That appeal, however, has been withdrawn.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 other respects.


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