Sentry Ins. a Mut. Co. v. Weber
16-3743-cv
| 2d Cir. | Dec 27, 2017Background
- Sentry Insurance sued Hershel Weber and related corporate defendants (Brand Management Inc., Budget Services Inc., etc.) seeking to hold Weber personally liable as their alter ego for unpaid obligations.
- During discovery Weber and associated entities repeatedly failed to comply with court compulsion orders and prior monetary sanctions, over a period of more than a year.
- The district court (Vitaliano, J., adopting Judge Mann’s discovery rulings) imposed a Rule 37 sanction precluding Weber from offering evidence opposing Sentry’s alter ego claim and later granted partial summary judgment for Sentry on that claim.
- The preclusion sanction eliminated key documentary evidence tying Weber to the corporations and left Sentry’s evidence unopposed at summary judgment.
- Weber appealed, arguing the discovery sanction and resulting partial summary judgment were abusive, disproportional, and unsupported by the record.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Preclusion sanction under Fed. R. Civ. P. 37 | Court properly sanctioned Weber for willful, bad‑faith discovery violations; lesser sanctions had failed | Sanction was abusive, disproportionate, and not justified; prejudicial because it produced a $12.5M judgment | Affirmed: sanction was within district court’s broad discretion; willfulness, duration, prior warnings, and tailoring supported preclusion |
| 2. Whether Sentry pleaded alter ego adequately | Complaint alleged Weber dominated Brand and Budget and used domination to avoid obligations | Weber contended Sentry failed to plead alter ego against Brand and thus court could not find Brand an alter ego | Affirmed: pleadings were sufficiently specific; any failure to raise the Brand‑specific pleading argument in district court was forfeited |
| 3. Whether genuine issues of material fact precluded summary judgment on alter ego | Sentry showed domination and misuse under Passalacqua factors; preclusion left no admissible opposing evidence | Weber argued factual disputes remained and Sentry did not meet elements as to Budget | Affirmed: preclusion removed contrary evidence and Passalacqua factors supported finding Brand and Budget were Weber’s alter egos |
| 4. Proportionality and necessity of severe sanction | Sanction was commensurate given repeated noncompliance and ineffectiveness of monetary sanctions | Sanction was excessive because it led to a large judgment and foreclosed Weber’s defenses | Affirmed: sanction was commensurate to misconduct and appropriate on the overall record |
Key Cases Cited
- S. New England Tel. Co. v. Global NAPs Inc., 624 F.3d 123 (2d Cir. 2010) (factors for reviewing discovery sanctions and propriety of preclusion)
- Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357 (2d Cir. 1991) (sanction must relate to claim at issue)
- Carte Blanche (Sing.) Pte., Ltd. v. Diners Club Int’l, Inc., 2 F.3d 24 (2d Cir. 1993) (alter ego liability under New York law)
- MAG Portfolio Consult GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58 (2d Cir. 2001) (two‑part test for veil piercing: domination and misuse)
- Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131 (2d Cir. 1991) (factors for determining corporate domination)
- Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130 (2d Cir. 2007) (sanctions must be commensurate with noncompliance)
- Sieck v. Russo, 869 F.2d 131 (2d Cir. 1989) (upholding severe discovery sanctions in appropriate circumstances)
- Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067 (2d Cir. 1993) (forfeiture of arguments not raised in district court)