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Fox Industries, Inc. v. Gurovich

October 6, 2006

FOX INDUSTRIES, INC., AND CHARLES E. RICHARDSON, PLAINTIFF(S),
v.
LEONID GUROVICH, A/K/A LEO GORE, CYNTHIA GRACEFFO, DELTA BALLS, LLC, STR INDUSTRIES, LLC, TITON INDUSTRIES, LLC, JOHN DOES 1-100, FICTITIOUS PERSONS, AND XYZ CORPS. 1-100, FICTITIOUS ENTITIES, DEFENDANT(S).
LEONID GUROVICH, A/K/A LEO GORE, AND STR INDUSTRIES, LLC, COUNTER/THIRD PARTY PLAINTIFFS,
v.
FOX INDUSTRIES AND CHARLES RICHARDSON, COUNTER DEFENDANTS, AND FOX CORPORATE INVESTMENTS, LTD. AND ROBERT MANN, THIRD PARTY DEFENDANTS.



The opinion of the court was delivered by: Wall, Magistrate Judge

MEMORANDUM & ORDER

Before the court are (1) plaintiffs' letter motion to strike the answers and impose additional sanctions on the defendants, based on a letter sent by defense attorney Simon Schwarz to non-party Kramer Industries [245*fn1 ]; (2) plaintiffs' motion on notice, seeking similar sanctions along with disqualification of defense counsel, based on delivery of the same letter to two other non-parties [269]; and (3&4) plaintiffs' motions to strike certain "Notices" entered by the defendants on the court docket and seeking sanctions [282 and 284].

Also before the court are (5) defendants' cross motion for a protective order [265 & 267*fn2 ]; (6) defendants' motion for costs and fees [266]; and (7) defendants' purported cross motion pursuant to 28 U.S.C. §1927 in regard to the "Notices" issue [286], which was docketed only as opposition to plaintiffs' motion numbered 284, and never docketed as an independent motion.

For the reasons set forth herein, the plaintiffs' letter motion [245] and the plaintiffs' motion on notice [269] are both granted to the extent of imposing sanctions, albeit not all of the sanctions sought by the plaintiffs. Simon Schwarz shall pay sanctions in the amount of $1000 per letter, for a total of $3000, directly to the court for usurping the court's authority. The plaintiffs' motions to strike the defendants' "Notices" [282 & 284] and for sanctions are granted. The Clerk of the Court shall strike docket entries number 279, 280, 281 and 283. The plaintiffs are awarded costs and attorney's fees on motions number 245, 269, 282 and 284 in the amount of $4000. The court declines, at this time, to enter the other sanctions sought by the plaintiffs, that is, disqualification of Mr. Schwarz and the striking of the defendants' answers, counterclaims and defenses, for reasons set forth infra.

The defendants' Cross-Motion for a protective order [265 & 267] is granted in part and denied in part, with a protective order being granted as to the Quicken Loans subpoena and denied as to the other subpoenas, and the defendants are awarded $1000 in costs and fees on that motion. The defendants' Motion for Costs and Attorneys' Fees [266] is otherwise denied. The defendants' purported cross motion for sanctions pursuant to 28 U.S.C. §1927 [286] is also denied.

DISCUSSION

The underlying history of this litigation has been set forth repeatedly in the many orders that have issued from the undersigned and Judge Platt and it will be repeated here only as necessary. The trigger for the instant spate of motions was three subpoenas served by the plaintiffs on three non-parties - Kramer Industries, Inc., Great Lakes Industries, Inc., and Quicken Loans, Inc. - and simultaneously served on defense counsel Simon Schwarz on February 14, 2006. Soon thereafter, according to plaintiffs' counsel, Michael Saffer, he received a phone call from Kramer's principal advising him that Kramer had received a letter from Schwarz "directing Kramer not to comply with the Subpoena." [245:3/3/06 Saffer Ltr. at 2](emphasis in original). Saffer asserts that he was not served with a copy of the letter from Schwarz to Kramer, and would not have known about it if not for the Kramer principal's phone call. Id. The same letter was sent to the two other subpoenaed non-parties, Quicken Loans, Inc. and Great Lakes Industries, Inc. [267:Schwarz Aff. ¶13] Schwarz adamantly maintains that he faxed Saffer copies of all three letters on the same day he sent them to the non-parties, February 21, 2006. See id.; see also [267:Otto Decl. ¶8].

The Schwarz letter to Kramer*fn3 stated that the subpoena "appears to be a wholesale fishing expedition for unknown information that is not reasonably calculated to reveal any information relevant, material or necessary to the issues in the cited case, that has any bearing thereon or that can serve as the basis for discovery of any documents or other alleged evidence in this matter." [245: Ex. B, p.2] The letter, dated February 21, 2006, a week after service of the subpoenas, asserted that the defendants would "immediately" move to quash the subpoena and seek sanctions against the plaintiffs, and that the defendants "ask that you respectfully not produce any such documents sought by Fox and Richardson until such time as the Gurovichs have had the opportunity to challenge and quash the above referenced subpoena." Id. (emphasis in original). The letter did not, however, merely "ask" the recipients not to respond; it also announced, in bold print, that due to alleged service flaws, "the subpoena is null and void as a matter of law and should not be complied with." Id. (emphasis in original).

The letter continued, stating that the defendants had not received the requisite notice of service of the subpoenas, and that the subpoena was defective on jurisdictional grounds, concluding, again using bold print, that "the subpoena served on you is null and void as a matter of law and you may not comply with this illicit subpoena not personally served on you by a person at least 18 years old but sent to you instead by fed-ex to a place in NJ more than 100 miles from that federal district, issued by the United States District Court in Suffolk County, New York instead of a local court of general jurisdiction without prior notice to the parties which are the subject of the subpoenas. Please conduct yourselves accordingly." Id. at 2-3 (emphasis in original).

The letters apparently worked. None of the non-parties have responded to the subpoenas. Although Quicken Loans had sent out documents responsive to the subpoena by UPS, Quicken intercepted the delivery of those documents after both Schwarz, in his letter, and Mr. Gurovich, in emails, demanded that they do so. [267:Schwarz Aff. ¶12 & Ex. 4; Otto Decl. ¶¶7 &8] The many motions now before the court followed.

The plaintiffs' letter motion[245] and defendants' motions [256, 265, 266 & 267]

On March 3, the plaintiffs served their letter motion, asking that the defendants' answer be stricken, their defenses suppressed, a sanction imposed on Schwarz, and fees and costs be awarded, based on the letter from Schwarz to Kramer Industries. [245] As of that date, the defendants had not moved to quash the subpoenas or otherwise contacted the court about them, despite Schwarz's claim ten days earlier to the non-parties that they would "immediately" move to quash. On March 7, the defendants moved for an extension of time to oppose the plaintiffs' motion and to cross move. [248] The motion was granted, and the defendants were directed to serve and file opposition, along with any cross motion, by March 17, 2006. On March 17, the defendants filed not their opposition and cross motion, but a second motion seeking an extension of time. [254] The court did not immediately rule on the motion, awaiting opposition from the plaintiffs, which was filed on March 20. Also on March 20, without having gotten a ruling on their second motion for an extension of time, the defendants filed opposition to the plaintiffs' motion and a cross motion for a protective order. [256] On March 21, those papers were rejected by the undersigned as untimely and not in compliance with the Individual Rules. [257] The plaintiffs' motion was thus, as of that date, unopposed.

The defendants moved for reconsideration of the rejection of their opposition papers and cross motion. [261] That motion was denied by Order dated April 12, but the court, mindful of the seriousness of the issues at hand, granted the defendants the opportunity to file opposition and a cross motion no later than May 3, 2006, by 5:00 p.m. [263 at 4-5] The admonition that all papers must be filed by 5:00 p.m. on May 3rd was set forth in all caps and bold print in the Order. Moreover, Mr. Schwarz was advised that he should "address the question of why the court should not, at the least, order his withdrawal and/or disqualification from the case, based not only on the letters sent to the non-parties regarding the February 14 subpoenas, but the effect on this litigation of his cumulative behavior during the prosecution of this lawsuit." [263 at 5]

At 4:55 p.m. on May 3, the defendants filed papers described in the docket entry as "RESPONSE in Opposition re 245 Letter MOTION . . . and Cross Motion for Protective Order including Notice of Cross-Motion, Affirmations of Simon Schwarz, Esq., Theresa Otto and Cynthia Greceffo in Support, and Memorandum of Law." [265] Despite that description, the filing consisted only of declarations from Theresa Otto and Cindy Graceffo [265-1], designated as the "Main Document;" a second set of the Otto and Graceffo Declarations [265-2]; 35 pages of exhibits [265-3]; and an additional two page exhibit [265-4]. There was no opposing letter from Schwarz, no affirmation from Schwarz, and no memorandum of law in opposition. Nor were there any notice of motion or other papers in support of the purported cross motion. Those papers were docketed instead at 8:01 p.m. on May 3, past the deadline imposed by the court. [267] They consisted of a Notice of Motion for a Protective Order [267 pp.1-4]; an affirmation from Mr. Schwarz [267 pp.5-20]; a Memorandum of Law [267 pp.21-50]; the Otto Declaration [267 pp.51-55]; and the Gracefo Declaration [267 pp.55 ff.]. In an order dated May 5, 2006, the court noted the untimeliness of the filings, but once again gave the defendants the benefit of the doubt, and accepted the papers in opposition and in support of the cross motion, still "mindful of the seriousness of the issues." [268 at 1]

Also filed on May 3 at 8:01 p.m. was the defendants' "Notice of Motion for Costs and Attorney Fees as Prevailing Party on Motion for Sanctions and An Award of Attorney Fees and Costs and Sanctions for Discovery Abuse and Misconduct." [266] In the May 5 Order, the court termed this motion as "timely filed." Closer inspection of the costs and fees motion papers reveals them to be, in large part, additional argument in opposition to the plaintiffs' motions and/or in support of the cross motion. The substance of the motion for fees and costs is directly related to the subpoenas, and the defendants could and should have included this line of argument in the other papers. The court surmises that the additional motion was made to avoid the undersigned's rule that briefs cannot exceed 25 pages. Nonetheless, the court will consider the motion, having suggested in the earlier order that it was properly before the court.

The court will address the substance of these motions infra.

Filing of the Defendants' "Notices"and the Plaintiffs' Motion on Notice [269] and Motions to Strike the "Notices"[282 & 284]

On May 12, 2006, the plaintiffs filed a motion on notice, asking that the defendants' answers, the counterclaims, and the third party complaint be stricken, and their defenses suppressed; that a "significant monetary sanction" be imposed on the defendants and their counsel, Simon Schwarz, for their wrongful interference with the subpoena process; that Schwarz be disqualified from representing the defendants in this action; and that the plaintiffs be awarded their fees and costs on the motion. [269] This motion was allegedly*fn4 made after the plaintiffs learned that the same letter that was sent to Kramer Industries was also sent to the two other non-parties who received subpoenas - Quicken Loans and Great Lakes Industries. That same day, the court issued an order setting forth a briefing schedule for the plaintiffs' motion on notice. The defendants were directed to file their opposition papers no later than 5:00 p.m on May 26. They filed them on May 26 at 4:49 p.m. [274]. The plaintiffs were directed to file their reply papers no later than 5:00 p.m. on June 2. They filed them on June 2 at 1:15 p.m.

On June 7, the defendants moved to strike the reply papers, on the ground that the Saffer affidavit's length violated the undersigned's Individual Rules regarding the length of reply briefs. [277] That motion was denied on June 8, 2006.

Also on June 8, the defendants filed a series of "Notices," docketed as having been filed in regard to docket entry number 275, which is the plaintiffs' reply to the defendants' opposition to their motion number 269. These "Notices," entered on the docket as numbers 279, 280, and 281, purport to bring to the court's attention certain documents that, for reasons Mr. Schwarz does not understand, do not appear on the docket. He submitted them, he states, in order to "supplement[] the previous discovery motions, cross-motions and orders on file with the Court." [279 at 2] One of the "Notices" [281] also purports to be a cross motion. On June 9, 2006, the plaintiffs moved to strike the Notices and for fees and costs on the motion. [282] The defendants opposed that motion on June 12. [285] On that same day, the defendants filed yet another Notice [283], and the plaintiffs moved to strike that Notice as well [284], again seeking fees and costs. On June 14, the defendants filed ...


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