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3801 Beach Channel, Inc. v. Shvartzman

March 21, 2007

3801 BEACH CHANNEL, INC., ET AL., PLAINTIFFS,
v.
YAKOV SHVARTZMAN, ET AL., DEFENDANTS.



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

ORDER

Plaintiffs Yevgeniy Yezerskiy and 3801 Beach Channel, Inc. move for sanctions, pursuant to Rule 37 of the Federal Rules of Civil Procedure, against defendants Yakov Shvartzman, Beach Channel Services, Inc., Alexander Iorsh, Alexander Herman, and their attorney. Docket Entry ("DE") 59. Although the plaintiffs fail to request a specific form of relief, I interpret their motion as requesting the reasonable expenses associated with the plaintiffs' protracted efforts to compel the defendants' compliance with my repeated orders regarding discovery. Id. at 3 ("Plaintiffs were [forced] to incur significant legal fees in their attempts to procure compliance [with discovery requests and court orders] by the Defendants."). For the reasons set out below, I grant the plaintiffs' motion, and direct the defendants to produce all outstanding discovery no later than March 28, 2007.

I. Background

The plaintiffs commenced this litigation on January 13, 2005. DE 1. On September 7, 2005, the plaintiffs' former attorney, Marvin Kramer ("Kramer") filed a letter requesting the court's assistance in compelling discovery. DE 8. At a telephone conference on September 12, 2005, the Honorable Joan Azrack, United States Magistrate Judge (to whom the case was then referred), directed the defendants to provide all outstanding discovery documents by September 23, 2005, and warned that failure to comply would result in a recommendation of default. DE 9. On September 26, 2005, Kramer filed another letter, again complaining that the defendants still had not produced the requested discovery documents at issue. DE 10. Judge Azrack held another status conference on October 12, 2005. DE 12. Although the minute entry for that conference lists Kramer as present, subsequent docket entries indicate that he did not attend, and that in his absence, the defendants provided the court with a package, representing that it contained the remaining discovery documents at issue. Id. (minute entry listing Kramer as present and noting that "Def. produced docs that will be held by court"); DE 13 (letter from Kramer apologizing for missing the conference and noting receipt of documents). On September 14, 2005, Kramer picked up the package, and on September 17, 2005, filed a letter asserting that the documents that had been produced were inadequate and incomplete as responses to his discovery requests. DE 13. On November 9, 2005, Kramer requested sanctions against the defendants for their failure to comply with discovery. DE 15.

After the case was referred to me, I held a status conference on November 7, 2006, and subsequently entered a case management and scheduling order requiring the submission of all motions to compel discovery by November 22, 2006 and contemplating the completion of all discovery by February 15, 2007. DE 44.*fn1 On November 20, 2006, the plaintiffs filed a motion to compel outstanding discovery documents, DE 45, and I directed the defendants to file a response by November 27, 2006. Order dated November 22, 2006. Approximately a month later, at a status conference on December 20, 2006, the defendants had still failed to file a response, but I nonetheless gave them until 5:00 p.m. on December 21, 2006, to file a response to the plaintiffs' motion to compel. DE 50. The next day, the defendants docketed what purported to be a letter "in response to plaintiffs' motion to compell [sic] discovery." DE 51. In fact, the document associated with that docket entry was correspondence between the parties and not a response to the plaintiffs' motion to compel. I therefore entered an order granting the plaintiffs' motion in its entirety and directed the defendants to provide all requested discovery by January 5, 2007. Order dated December 22, 2006. In that order, I specifically warned the defendants that "I will entertain an application for discovery sanctions pursuant to Rule 37 if the defendants fail to comply." Id.

On January 5, 2007, the parties appeared before me for oral argument on the defendants' motion to dismiss -- which had been referred to me for a report and recommendation by the assigned District Judge -- at which point I learned that the defendants had once again failed to produce the discovery documents that were the subject of my previous order. DE 52. In the interests of facilitating discovery and avoiding a protracted battle over the propriety of sanctioning the defendants or their attorney, I provided the defendants an additional three days -- until January 8, 2007 -- to comply with my previous orders, and directed the plaintiffs' counsel to file a letter on January 9, 2007, reporting on the status of the defendants' compliance. Id.

On January 9, 2007, the plaintiffs filed a letter reporting that the defendants had not produced the outstanding discovery and requesting that I hold the defendants in contempt and impose sanctions under Rule 37. DE 56. Notwithstanding my previous order granting the plaintiffs' motion to compel discovery in its entirety, the defendants proceeded to file a letter later that same day purporting to request a "ruling" on certain of the plaintiffs' discovery demands. DE 57. In their letter, the defendants claim that a number of the plaintiffs' document and interrogatory requests were protected by the attorney-client privilege (defendants' 2003 bank statements and answers to certain interrogatories), that other documents requested were "irrelevant to the issues at hand," that the plaintiffs are "not entitled" to other documents (tax returns), and finally, that "[i]t is our belief that the Defendants do not have to comply" with other demands (sales tax and payroll information from late 2003 to 2005). Id. Subsequently, on February 2, 2007, the plaintiffs filed the motion for sanctions that is the subject of this order, DE 59, and on February 7, 2007, the defendants filed a response in opposition. DE 60.

II. Discussion

A. Bases For Sanctions

Federal Rule of Civil Procedure 37, entitled, "Failure to Make Disclosures or Cooperate in Discovery; Sanctions," provides procedures for compelling disclosures mandated by Rule 26(a) and responses to discovery. Rule 37(b), upon which the plaintiffs' sanctions motion is predicated, provides for the imposition of sanctions "[i]f a party ... fails to obey an order to provide or permit discovery." In addition, pursuant to Rule 37(c)(1), if "[a] party ... without substantial justification fails to disclose information required by Rule 26(a)" the court may impose sanctions, including but not limited to "any of the actions authorized under Rule 37(b)(2)(A), (B), and (C)."Those sanctions include, among others:

(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action[;]

(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting that party from introducing designated matters in evidence; [and]

(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party[.]

Fed. R. Civ. P. 37(b)(2)(A)-(C). Rule 37(b) further provides that in lieu of, or in addition to, any of the foregoing orders: the court shall require the party failing to obey the order or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure ...


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