295 F.R.D. 1
E.D.N.Y2013Background
- Sentry sued Brand (Budget Services, Inc.) and Hershel Weber over alleged breach of contract and asserted an alter-ego theory tied to workers’ compensation policies issued in 2008; two actions were consolidated.
- Magistrate Judge Mann repeatedly ordered defendants to produce documents (including bank records, payroll, contracts between Brand and Budget, and Weber’s tax returns) and to supply a sworn Weber affidavit attesting production.
- Defendants produced late, backdated, inconsistent, and misleading affidavits and withheld responsive materials; large document productions arrived only after repeated orders and sanctions.
- Magistrate Judge Mann found willful noncompliance, awarded monetary sanctions, deferred harsher relief pending a supplemental affidavit, then recommended preclusion or default when noncompliance continued.
- District Judge Vitaliano conducted de novo review of objections and adopted the R&R: defendants are precluded from offering evidence opposing Sentry’s alter-ego claim at summary judgment and trial; agreed monetary sanctions were affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether severe discovery sanctions (preclusion or default) are warranted for failure to comply with multiple discovery orders | Defendants repeatedly obstructed discovery, filed false/backdated affidavits, produced documents late; lesser sanctions failed; preclusion or default appropriate | Noncompliance was inadvertent or based on counsel following instructions; prejudice not shown; Magistrate didn’t require exhaustion of lesser sanctions | Court upheld Magistrate’s recommendation: preclude defendants from opposing Sentry’s alter-ego claim (alternative of default justified by record) |
| Whether Weber’s affidavits complied with court orders | Affidavits were false, backdated, contradicted later production, and failed to confirm presence/absence of contract between Brand and Budget | Weber allegedly followed instruction and used required language; any inconsistencies could be cured by deposition | Court found affidavits noncompliant, dissembling, and unreliable; failure supported sanctions |
| Whether monetary sanctions and fee-shifting under Rule 37(b) are required for subsequent violations | Some violations lacked substantial justification; fees and costs incurred pursuing motions should be awarded | Some delays caused by third-party/technical issues; not all violations unjustified | Court ordered defendants to pay agreed monetary sanctions and to pay one-third of fees/costs for the January 9, 2013 motion (or submit fee application) |
| Whether prejudice is required to impose preclusion/default sanctions under Rule 37 | Sentry argued prejudice existed and, in any event, prejudice is not prerequisite — deterrence and compliance justify sanctions | Defendants argued absence of prejudice precludes severe sanctions | Court (and cited precedent) held prejudice not required; deterrence and sustained willful noncompliance suffice |
Key Cases Cited
- Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357 (2d Cir. 1991) (authorizes preclusion as a discovery sanction and stresses proportionality)
- Insurance Corp. of Ireland v. Compagnie des Bauxites, 456 U.S. 694 (U.S. 1982) (sanctions must relate to the discovery order and claim at issue)
- Nat’l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639 (U.S. 1976) (Rule 37 sanctions serve deterrence and enforcement aims)
- Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130 (2d Cir. 2007) (severity of sanctions must be commensurate with noncompliance)
- Agiwal v. Mid Island Mortg. Corp., 555 F.3d 298 (2d Cir. 2009) (four-factor test for severe discovery sanctions)
- S. New England Tel. Co. v. Global NAPs, Inc., 624 F.3d 123 (2d Cir. 2010) (prejudice not required to impose severe sanctions under Rule 37)
- Update Art, Inc. v. Modiin Publ’g, Ltd., 843 F.2d 67 (2d Cir. 1988) (recognizes preclusion and dismissal as harsh but sometimes necessary sanctions)
- Nieves v. City of New York, 208 F.R.D. 531 (S.D.N.Y. 2002) (continued discovery refusal justifies dismissal or preclusion)