Aloyts v 601 Tenant's Corp.

[*1] Aloyts v 601 Tenant's Corp. 2009 NY Slip Op 50638(U) [23 Misc 3d 1108(A)] Decided on April 13, 2009 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 13, 2009
Supreme Court, Kings County

Bella B. Aloyts & Edith K. Kovnat, Plaintiff,

against

601 Tenant's Corp. and Jeff Berger, Defendants.



30043/06



Attorney for Plaintiff:

Jeffrey L. Saltiel, Esq.

Wenig Saltiel & Greene, LLP

26 Court Street, Suite 502

Brooklyn, NY 11242

Attorney for Defendant:

Arthur Morrison, Esq.

11 Skyline Drive

Hawthorne, NY 10532

Carolyn E. Demarest, J.

Plaintiffs have moved to strike the answer of defendants based upon the alleged concealment or spoliation of documentary evidence and the alleged improper coaching of a witness during a deposition. A lengthy hearing was held to determine the merits of plaintiffs' motion.

This action concerns plaintiffs' lease for a commercial unit beneath her residential unit in defendant co-operative which she leased for the purpose of constructing a medical office therein. Both plaintiffs' proprietary residential lease and the lease for the commercial basement space were signed on December 9, 2004 when defendant Berger's predecessor, Sarah Sadikova, was president of the board. Plaintiffs commenced construction in or about September 2005, but it is defendants' claim that they failed to [*2]obtain approval from the board of directors for the plan filed with the Department of Buildings (DOB) as required under the terms of the lease and made misrepresentations in the documentation filed with the DOB. Defendant Jeff Berger became president of the board in October 2005, following commencement of the lease terms. He has occupied a first floor residential unit, which is apparently partially above the proposed medical office space, since 1999. The primary issue of fact at present is whether plaintiffs did obtain the approval of the board of directors for the proposed construction prior to Mr. Berger's tenure as president or whether they failed to do so and fraudulently obtained a work permit for construction by filing a false application with the Department of Buildings (DOB).

The case has been fraught with contentious motion practice from the inception. Mr. Berger, though clearly a critical party, was uncooperative in scheduling his deposition. Because of the numerous discovery disputes, the Hon. Stanley Parnass was appointed as special master to oversee discovery. Several attempts at mediation have proved unsuccessful. Several pre-mature dispositive motions by defendants were denied.

The present motion is addressed to the minutes of the corporate board meetings which were not timely disclosed. Specifically, after being provided with documents purporting to be the requested meeting minutes, at which plaintiffs' renovation plans were alleged to have been addressed, plaintiffs' counsel discovered, only during Mr. Berger's deposition, that an undisclosed "White Book" was maintained that contained the original minutes. When Mr. Berger was asked to provide this book, he failed initially to do so. When finally provided, it was discovered that the official original minutes differed significantly from the documents previously produced.

In addition, the instant motion was predicated upon alleged coaching improprieties observed by the stenographer present during the deposition of the former board president Sarah Sadikova. After several delays in scheduling, this deposition was finally taken at Ms. Sadikova's home as she was purportedly disabled from appearing at counsel's office, although she was able to appear for the hearing before the court. Annexed to the moving papers is the affidavit of Kerri Anne Marashaj, a court reporter employed by On-Time Court Reporting Inc., who recorded Ms. Sadikova's examination on March 10, 2008, and who attested that Ms. Sadikova's responses to questions posed by plaintiffs' counsel, Marnie Kudon, were "mouthed" to her by defendant Jeff Berger. Ms. Marashaj explained in her affidavit that, because of the seating arrangement in the Sadikova living room, Ms. Kudon was unable to see the communications between Sarah Sadikova and Jeff Berger, who was sitting opposite her. Ms. Marashaj further attested that this improper witness tampering continued throughout the deposition which began at 10 a.m. and did not conclude until 4 p.m. It was only after the deposition concluded that Ms. Marashaj alerted Ms. Kudon to the improprieties.

During her testimony at hearing, however, Mr. Marashaj recanted the accusations contained in her affidavit, claiming that Ms. Kudon had badgered her into signing it, [*3]though it was untrue, by calling at her home and approaching her at an unrelated deposition. Ms. Marashaj testified she had finally signed because her employer had directed her to co-operate with plaintiffs' counsel. Ms. Marashaj was obviously very hostile to Ms. Kudon at hearing and specifically denied many of the statements contained in her affidavit. The court notes that it is highly improbable that counsel conducting a deposition within a living room would be unaware of continuous communication over a period of several hours between the witness she was examining and another defendant seated in close proximity to herself. (In her affidavit, Ms. Marashaj states Mr. Berger was sitting between herself and Ms. Kudon, "directly" to Ms. Kudon's right.) In light of Ms. Marashaj's testimony, this court discounts plaintiffs' accusations of witness tampering, which were also vigorously denied by Sarah Sadikova.

Plaintiffs' complaint, verified on September 28, 2006, by Meir Katz as attorney-in-fact for plaintiff Kovnat, seeks a declaration that the lease is in full force and effect and that plaintiffs are not in violation thereof, a Yellowstone injunction against termination of the lease [FN1] and damages in excess of $750,000 for interference with plaintiffs' use of the premises in frustrating the construction necessary to the opening of a medical practice. The essence of the dispute presently centers around plaintiffs' allegedly falsely representing defendant Board's approval of construction plans to the DOB so as to obtain work permits, which permits were subsequently revoked and/or stop work orders issued upon defendants' complaint. Critical to plaintiffs' case is proof that the plans had been approved by the Board in conformity with the terms of the lease prior to commencement of construction. Accordingly, the failure to produce accurate minutes of the meetings of the Board of Directors during the relevant period is highly prejudicial to plaintiffs.

At issue now is defendants' failure to produce a "white" binder purportedly containing the original minutes of several board meetings which plaintiffs contend would demonstrate that the plaintiffs' representative did appear and seek and/or obtain board approval for the construction which has been commenced.[FN2] The original demand for minutes was served on March 9, 2006, seeking all correspondence, documentation and board minutes to date relating to the subject commercial space leased pursuant to written agreement dated December 9, 2004. When defendants failed to respond, an order to show cause was brought in May 2007. Defendants were ordered by this court to respond. However, in July 2007, defendants moved for summary judgment claiming no need for further discovery. That motion was summarily denied by this court which again directed production of outstanding discovery. In October 2007, defendants represented that they [*4]had turned over all copies of board meeting minutes in their possession, acknowledging that minutes for January, May, June, July, August and September of 2005 and October of 2006 could not be located. Depositions thereafter commenced in November 2007. Plaintiffs relied upon the minutes produced in taking the deposition of defendant board's treasurer Alexander Prutrovsky and in preparing for Berger's deposition beginning on February 12, 2008, at which it was discovered that an original "file" or "binder" of minutes, not previously produced, was kept for each year in a locked room at the office of 601/Tenants Corp.. Plaintiffs' counsel called for the production of the original document at the continuation of the Berger deposition on February 14, 2008. However, on February 14, Mr. Berger "forgot"to bring the minute book promising to send it the next day for the continued Prutrovsky deposition, but this did not occur. Mr. Berger claims to have had the original minutes with him on February 20, 2008, when he appeared to continue his own deposition, but failed to turn them over. On March 11, 2008, Sarah Sadikova was deposed without access to the original minute book.

On March 12, 2008, the parties appeared before this Court which again directed immediate production of the "White Minutebook." However, at the deposition of Galina Rekhtman on March 18, 2008, held in the presence of Referee Stanley Parnass, the original White Minutebook was still not produced. When the White Minutebook was finally produced, it was discovered that several minutes had been materially altered to delete suggestions that, in fact, the board had received and approved the plans ultimately submitted to the DOB. A perusal of the minutes, comparing those contained in the "original" White Minutebook with those produced as copies pursuant to earlier demands, confirms significant deviations, obviously the result of deliberate modifications. The Court rejects the explanations proffered by Jeff Berger to reconcile the inconsistencies. Mr. Berger's testimony that the minutes were taken in Russian and then transcribed in English or that the minutes were occasionally altered at a subsequent meeting based upon objections raised that are not reflected in the minutes of those subsequent meetings or that some minutes were merely drafts, are simply not plausible to explain the variations. In several instances, Mr. Berger's hearing testimony is contradicted by his testimony at deposition. Mr. Berger's testimony that the existence of the White Minutebook was unknown to him at the time discovery was initially demanded in this lawsuit but that, at a board meeting in July 2007, Inna Stavitskay, secretary to the corporation, "stood up and said hold on. There are drafts. We have a binder [and] went to the room and brought the binder to me", representing it to be the originals (Transcript of Berger Testimony on July 11, 2008, at p. 49, Exhibit A to Kudon Affirmation in Opposition), does not relieve defendants of their continuing duty to disclose all relevant documents as discovered and certainly does not excuse non-compliance with the repeated orders of this Court to produce the originals in 2008. Nor does such explanation cure the obvious discrepancies between the Whitebook Minutes and those initially produced and the indications that the documents had deliberately been edited with both deletions and supplemental text. In [*5]light of defendants' disingenuous and false representations regarding such disclosure and their continuing attempts to frustrate plaintiffs' right to depose the parties and necessary third parties, this Court finds defendants' failure to disclose, in violation of the several orders of this Court, to have been willful and contumacious.

Accordingly, pursuant to CPLR § 3126(1), this Court hereby determines that the issue as to whether the defendant board had been supplied with plans and had approved such plans as submitted to the DOB, which resulted in permits being issued by DOB in 2005, is resolved for the purposes of the action in accordance with the claims of plaintiffs, and defendants are precluded from disputing such position in the further litigation of the action or from making use of the minutes of board meetings for any purpose. See De Gennaro v Robbie Robinson Textiles, Inc., 224 AD2d 574 [2d Dept 1996]. This Court denies the request to strike the defendants' answer in its entirety based upon plaintiffs' own apparent culpability in presenting the false affidavit of a court reporter. It is further directed that, pursuant to CPLR § 3126 and Part § 130-1.1 of the Rules of the Chief Administrator, within thirty days of the date hereof, defendants and their attorney, Arthur Morrison, jointly and severally, shall pay to plaintiffs' counsel, to be applied against legal fees, the sum of $10,000 as costs and attorneys fees for their failure to make prompt and complete disclosure as directed by this Court and for their course of conduct in seeking to delay and prolong the resolution of this case by failing to produce witnesses for deposition as requested, failing to timely provide documents and for repeatedly interposing meritless and premature motions for summary judgment in an effort to avoid disclosure.

Defendants' cross-motion, made in response to plaintiffs' motion pursuant to CPLR § 3126, to dismiss "pursuant to 3211(a)(7)" for failure to state a cause of action, is denied as untimely and meritless and is further evidence of defendants' dilatory tactics warranting sanctions.

During the pendency of the hearing on plaintiffs' spoliation motion, which began on July 11, 2008 and did not conclude until January 20, 2009, defendants made a further motion pursuant to DR5-105(B) of the Lawyers' Code of Professional Responsibility (22 NYCRR § 1200.24)[FN3] seeking the disqualification of plaintiffs' counsel because Marnie Kudon of Wenig, Saltiel and Greene, LLP, gave testimony at hearing. As a further ground for disqualification, defendants challenge Ms. Kudon's efforts to obtain the affidavit of court reporter Kerri Anne Marashaj accusing Jeff Berger of witness tampering at the deposition of Sarah Sadikova, as in violation of DR-102(A)(4) (NYCCR § 1200.3). [*6]

The application to disqualify based upon Ms. Kudon's testimony at the hearing is denied. At the commencement of the spoliation hearing on July 11, 2008, Mr. Saltiel of plaintiffs' counsel's firm immediately raised the probability that Ms. Kudon would be a witness as she had been the attorney responsible for the case from its inception and was most knowledgeable concerning the relevant facts regarding the discovery issues. Mr. Saltiel took over the conduct of the hearing and Ms. Kudon was permitted to remain in the courtroom to assist him. At the conclusion of the hearing, I ruled that I would not disqualify counsel based upon the need to testify regarding improprieties in discovery.

Disciplinary Rule 5-105(B), cited by movant, reads:

A lawyer shall not continue multiple employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer's representation of another client, or if it would be likely to involve the lawyer in representing differing interests . . . .

The intent of this provision is to protect the integrity of the attorney-client relationship and ward against the possible dilution of the attorney's loyalty to one client because of a concommitant duty to a second client. This Court fails to perceive any possible conflcit in the instant case where the attorney's testimony is necessary in furtherance of the clients' interest and there are no competing interests.

While it is not generally desirable for an attorney representing a party to give testimony as a witness (DR5-102 (22 NYCRR § 1200.21)), it is not prohibited where the attorney is knowledgeable of the facts. See DR7-106(C)(3) (22 NYCRR § 1200.37). DR 5-102(b) (22 NYCRR § 1200.28) in substance parallels DR 5-105(B) in providing: "A lawyer may not act as advocate before a tribunal in a matter if (1) another lawyer in the lawyer's firm is likely to be called as a witness on a significant issue other than on behalf of the client. . .." (emphasis added). Such is not the case here where the testimony of counsel was offered on behalf of her client.

DR 5-102(a)(3) provides that a lawyer who is likely to be a witness shall not act as an advocate except when "disqualification of the lawyer would work substantial hardship on the client." Clearly, the need for counsel's testimony was not predictable at the outset of the litigation and only arose out of the behavior of defendants within the context of the litigation. After the years of discovery and the investment therein, it would be a hardship to the plaintiffs to be forced to start over with new counsel. However, in light of the serious allegations of impropriety against Ms. Kudon in allegedly obtaining an affidavit that the affiant now claims, under oath, to be false and to have been elicited through duress, and that adversely reflect on the honesty, trustworthiness and fitness of the attorney, in violation of DR 1-102 (22 NYCRR § 1200.3) and DR 7-102(A)(4) (22 NYCRR § 1200.33), Marnie Kudon shall be removed from the prosecution of the case on behalf of plaintiffs. [*7]

Although the alleged improprieties of counsel would, if established[FN4], warrant the granting of the disqualification motion as to the entire firm, and perhaps disciplinary action against the offending attorney, given the long history of animosity between counsel and mutual gamesmanship, duplicity and unprofessional behavior, the Court declines to prejudice plaintiffs by disqualifying all members of the plaintiffs' law firm, particularly given the resultant delay which would work to the detriment of both sides. See generally, Melcher v Apollo Medical Fund Management LLC, 52 AD3d 244 [1st Dept 2008]. The motion to disqualify the firm of Wenig Saltiel, LLP is therefore granted only to the extent of disqualifying Marnie Kudon.

The lengthy proceedings just concluded relate exclusively to discovery, which has now consumed two and a half years and the time and attention, not only of this Court, but of Special Referee Stanley Parnass and JHO Ira Harkavy to whom the case was referred for mediation, all without reaching the actual merits of the controversy. Construction has been halted and the leased commercial space remains unoccupied. At the last appearance before the Court, the Court was advised that a new board president had been elected to replace defendant Berger and both sides indicated an interest in arbitration before JHO Harkavy. The parties are therefore directed to appear before the Court at 10AM on April 27, 2009, with their counsel, prepared to enter into an agreement for such arbitration if they are still desirous of doing so. As an alternative, the parties may stipulate in writing to be bound to the determination of JHO Harkavy as arbitrator. Such stipulation must be signed by each party personally. Judge Harkavy has indicated his willingness to act as arbitrator if the parties consent.

The foregoing constitutes the decision of the Court.

E N T E R,

J. S. C. Footnotes

Footnote 1:See prior decision of this Court dated January 24, 2007, denying a Yellowstone injunction based upon the terms of the lease and dismissing the first and second causes of action.

Footnote 2:Even if resolved in plaintiffs' favor, there remain other issues of fact regarding changes to the plans and whether construction was in compliance with DOB standards.

Footnote 3:This Court is mindful that, effective April 1, 2009, the Code of Professional Responsibility has been replaced by the Rules of Professional Conduct, however, the issues were briefed based upon the prior Code and those provisions have been cited herein. Moreover, the alleged infractions occurred under the prior Code.

Footnote 4:While accepting Ms. Marashaj's recantation testimony at face value for the purposes of this motion, the Court is not entirely satisfied with her credibility as she seems to have been caught in an impossible professional conflict rendering both her affidavit and her hearing testimony unreliable.