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LifeTree Trading PTE., Ltd. v. Washakie Renewable Energy, LLC

United States District Court, S.D. New York

June 2, 2017



          J. PAUL OETKEN United States District Judge

         This action involves a $90 million contract for biofuel that Plaintiff LifeTree Trading PTE., LTD. (“LifeTree”) alleges was breached by Defendant Washakie Renewable Energy, LLC (“Washakie”). For the duration of the litigation, Washakie maintained that it was not liable for breach due to the failure of an oral condition precedent. Washakie has now abandoned that position, conceding liability and admitting that its prior submissions to the Court―including statements made under oath by three of Washakie's representatives―were untrue. At this stage, Washakie challenges only LifeTree's allegation of damages. Before the Court are three motions: LifeTree's motion for summary judgment and for sanctions (Dkt. No. 76); Washakie's motion for summary judgment (Dkt. No. 83); and Washakie's motion to exclude LifeTree's expert (Dkt. No. 97). For the reasons that follow, LifeTree's motion is granted in part and denied in part, Washakie's motions are denied, and the Court awards sanctions for Washakie's fraud on the Court.

         I. Background

         Familiarity with the background of this litigation, as set out in the Court's prior opinion, is presumed. See Lifetree Trading PTE., LTD. v. Washakie Renewable Energy, LLC, No. 14 Civ. 9075, 2015 WL 3948097 (S.D.N.Y. June 29, 2015).

         For the duration of this litigation, Washakie maintained that it was not liable for breach of contract due to the failure of an oral condition precedent requiring Washakie to obtain a line of credit from a Turkish bank. Id. at *7. Washakie supported this claim with sworn affidavits from Rachel Kingston, Isaiah Kingston, and a declaration from Jacob Kingston; the Kingstons were all employees or executives of Washakie. (Dkt. Nos. 39, 40, 41.) These statements submitted to the Court specifically described the negotiations between the parties and their agreement to the oral condition precedent to the contract, which was itself for 90, 000 metric tons of soy methyl ester (“SME”). (Id.) The statements also described Washakie's holdings in Turkey and the parties' prior contractual dealings, which were alleged to have also included similar conditions precedent. (Id.)

         It was on the basis of the claimed existence of the condition precedent that the Court denied LifeTree's pre-discovery motion for summary judgment. Lifetree, 2015 WL 3948097, at *9. In denying summary judgment, the Court relied heavily on the Kingstons' statements: “Washakie's evidence of the existence of a condition precedent includes . . . most significantly, affidavits by two executives and one employee of Washakie who were privy to the negotiations surrounding the Contract, and who attest to the fact that both parties understood that the Contract was conditioned on Washakie's succeeding in obtaining a letter of credit from a Turkish bank.” Id. (citations omitted).

         That was two years ago. Since that time, the parties have continued to litigate this action and take discovery on this theory of the case. And discovery yielded some significant revelations: namely, that Washakie did not have the holdings in Turkey that the Kingstons had described in their affidavits, and that, as the Kingstons ultimately testified in deposition, contrary to their prior sworn statements, the parties' prior contractual dealings did not include similar conditions precedent. (Dkt. No. 77 at 20.) Accordingly, LifeTree now moves for summary judgment and seeks sanctions for Washakie's coordinated misstatements to the court. (Id. at 20-21.)

         In response to LifeTree's motion, Washakie takes a surprising tack. In its own motion for summary judgment, Washakie wholly abandons the condition precedent theory of nonliability that it had maintained for the duration of this action. (Dkt. No. 90 at 2 n.3.) Along with its motion, Washakie submits sworn affidavits from Rachel, Isaiah, and Jacob Kingston withdrawing their previous sworn statements and affirming that they were “untrue.” (Dkt. Nos. 84, 85, 86.) This bears repeating: The Kingstons submitted sworn statements to the Court admitting that their previous sworn statements to the Court were not true. As a result, Washakie concedes that it breached the contract with Lifetree and contests only LifeTree's requested damages. (Dkt. No. 90 at 1.) Washakie also seeks to exclude the testimony of LifeTree's damages expert, J. Stephen Lucas. (Dkt. No. 97.) Washakie does not oppose LifeTree's request for sanctions.

         The Court first addresses LifeTree's request for sanctions; second, it addresses Washakie's motion to exclude Lifetree's expert; and third, it addresses the cross-motions for summary judgment on the issue of damages.

         II. Sanctions

         A. Legal Standard

         “A Court has the inherent authority to sanction a party for committing a fraud on the court.”[1] Bravia Capital Partners Inc. v. Fike, No. 09 Civ. 6375, 2015 WL 1332334, at *3 (S.D.N.Y. Mar. 25, 2015). Fraud on the court exists where there is clear and convincing evidence that a party has “sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system's ability impartially to adjudicate a matter” by “unfairly hampering the presentation of the opposing party's claim or defense.” Passlogix, Inc. v. 2FA Tech., LLC, 708 F.Supp.2d 378, 393 (S.D.N.Y. 2010) (quoting McMunn v. Mem'l Sloan- Kettering Cancer Ctr., 191 F.Supp.2d 440, 445 (S.D.N.Y. 2002)).

         Where a court finds fraud on the court, a variety of sanctions are available, including an award of attorney's fees, an adverse jury instruction, or the entry of default judgment against the offending party. See Bravia Capital Partners Inc., 2015 WL 1332334, at *3 (citing R.F.M.A.S., Inc. v. So, 271 F.R.D. 13, 22 (S.D.N.Y. 2010)). However, a sanction that has the effect of ending the case and granting judgment to one of the parties is “so harsh a remedy that it should be imposed only in the most extreme of circumstances.” Sanchez v. Litzenberger, No. 09 Civ. 7207, 2011 WL 672413, at *5 (S.D.N.Y. Feb. 24, 2011) (quoting Bower v. Weisman, 674 F.Supp. 109, 112 (S.D.N.Y. 1987)).

         B. ...

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