320 W. 13th St., LLC v Wolf Shevack, Inc.

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320 W. 13th St., LLC v Wolf Shevack, Inc. 2012 NY Slip Op 32048(U) July 23, 2012 Supreme Court, New York County Docket Number: 603730/07 Judge: Joan M. Kenney Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] Index Number : 60373Ol2007 320 WEST 13TH STREET vs. WOLF SHEVACK, INC. SEQUENCE NUMBER : 015 STRIKE ANSWER NEW YOFN COUNTY CLERK'S OFFICE [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 8 X -----___--II-__-_________________I_____ 3 2 0 WEST 13TH STREET, LLC, Plaintiff, DECISION & ORDER Index No.: 6 0 3 7 3 0 / 0 7 -again3 t- JOAN M. KEMNEY, J.: sequence numbers 015 and 016 a r e Motion disposition. I n motion sequence number 015, plaintiff moves, p u r s u a n t to CPLR 3126 Wolf, ( 3 ) , to s t r i k e the a n s w e r s of Lawrence H . J a y Wolf, Wolf Shavack, David J. Wolf, I n t e g r a t e d Communications, Ltd. National Yellow Pages, Ipc., , Wolf Group Inc., Wolf, Mary Wolf Group New York, Inc., Wolf Wolf Group (USA), Inc., Wolf Family Holdings Limited, Amalgamated Technologies I n c . and Optlo Software Inc. (collectively, the Wolf defendants) for withhQlding and/or destroying relevant and necessary discoverable documents and failing t o comply w i t h discovery o r d e r s or, in t h e alternative, p u r s u a n t to CPLR 3126 (I), holding that the issues to w h i c h these document6 a r e relevant be deemed resolved as a g a i n s t the Wolf defendants. The Wolf defendants cross-move, pursuant to CPLR 3126, to dismiss the conditional order complaint of or, preclusion violation of discovery o r d e r s . seek attorney's i n the a l t e r n a t i v e , based on to i g s u e a plaintiff's alleged In addition, t h e Wolf d e f e n d a n t s fees, p u r s u a n t to CPLR 3042. [* 3] In morion sequence number 016, d e f e n d a n t s T r i n a d Management, LLC, Trinad Advisors GP, LLC and Atlantis Equities, Inc. (collectively, the Tlrinad defendants) move, pursuant to CPLR 3126, to s t r i k e plaintiff s claims a s asserted a g a i n s t them, based on p l a i n t i f f s failure t o comply w i t h t h e court s compliance order of January 23, 2012. FACFUAL W K G R O U N D The f a c t s of this case have been p r e v i o u s 1 c o u r t s decision of December 22, herein. In brief, this 2008, detailed i n t h e arid will not be r e i t e r a t e d action i n v o l v e s the enforcement of a stipulation of settlement, entered into on J a n u a r y 7, 2003, in connection w i t h a c l a i m f o r r e n t owed t o p l a i n t i f f from defendants pursuant to a commercial lease. According t o the complaint, no payment on t h e outBtanding p r i n c i p l e has been made since June 3 0 , 2004, and p l a i n t i ¬ f asserts f i v e causes of a c t i o n , seek to void defendants alleged t r a n s f e r of all of which a s s e t s under t h e Debtor Creditor Law or the CPLR. In the p r e 3 e n t motion (motion sequence number 015), plaintiff seeks sanctions against the Wolf defendants for the alleged inadvertent destruction of financial documents from J a n u a r y 1, 2 0 0 3 t h r o u g h January 31, 2 0 0 5 . P l a i n t i f f s t a t e s t h a t , b y compliance c o n f e r e n c e order d a t e d April 7 , 2011, defendants were d i r e c t e d b y t h e c o u r t to produce the financial documents requested by plaintiff in its document demand 2 [* 4] / Motion, request of May 14, 2 0 1 0 . for counsel the Wolf defendants Ex. L. On April 25, disclosure written served 2011, responses, p u r s u a n t t o the compliance conference o r d e r , in w h i c h c o u n s e l s t a t e d that the Wolf defendants had no I d e a where the relevant documents were or w h e t h e r t h e y still exist. Motion, E x . S. Subsequently, the matter was marked off t h e calendar in o r d e r f o r defendants to appeal t h e compliance conference o r d e r , but defendants abandoned the appeal and the matter wag restored t o the calendar on J a n u a r y 2 3 , 2012. Motion, Ex, T. T h e r e a f t e r , the Wolf defendants submitted discovery demands, documents had sugplernental stating responses to plaintiff's financial that all of the relevant inadvertently been destroyed. Motion, Ex. U. Plaintiff asserts t h a t the Wolf defendants h a v e only produced limited financial documents, which they knew were already in p l a i n t i f f ' s possession, and that they have failed to produce any of t h e f i n a n c i a l data required p u r s u a n t to t h e court's conference o r d e r . have submitted compliance It is n o t e d that the individual Wolf defendants affidavits attesting destroyed after t h e s t i p u l a t i o n of that the settlement, documents but were before t h e instant litigation was commenced, based on e a c h person's habits regarding financial record retention. In opposition to p l a i n t i f f ' s motion, a n d in s u p p o r t of their cross motion, t h e Wolf defendants a r g u e that plaintiff's 3 motion, [* 5] based on spoliation of e v i d e n c e , should be denied because none of the financial records were destroyed during t h e pendency of t h e c u r r e n t action and because there is no e v i d e n c e of misconduct w i t h respect t o t h e destruction of t h e records. Moreover, t h e Wolf defendants c l a i m t h a t a p r e c l u s i o n o r d e r should be issued against plaintiff, b a s e d on plaintiff's order of January 23, 2012, f a i l u r e t o comply w i t h t h i s court's ordering p l a i n t i f f deposition and t o respond t o d e f e n d a n t s ' C r o s s motion, Ex. A. to appear for b i l l of p a r t i c u l a r s . T h e c o u r t notes that this o r d e r does not warn that any sanctions may be imposed f o r failure to comply. In reply to the Wolf defendants' apposition, plaintiff reiterates its arguments and points o u t that w i l f u l d e s t r u c t i o n of evidence is not neceesary i n order t o find spoliation. plaintiff Further, s a y s t h a t t h e Wolf defendants were on notice of t h e potential of a lawsuit from tho moment that they failed to comply w i t h the stipulation of settlement, which p r e d a t e s the destruction of t h e financial r e c o r d s . I n addition, plaintiff a v e r s t h a t t h e requested documents are not available t o i t from any other s o u r c e . With regard to the cross motion, plaintiff maintains t h a t the court's o r d e r wag based on t h e false representations of the Wolf d e f e n d a n t s that all financial disclosure h a d been made, a n d t h a t t h e Wolf d e f e n d a n t s should not profit from t h e i r own misconduct. I n motion sequence number 016, t h e T r i n a d defendants s e e k to have sanctions imposed a g a i n s t plaintiff for p l a i n t i f f ' s f a i l u r e t o 4 [* 6] comply with t h e c o u r t ' s compliance conference order of J a n u a r y 2 3 , 2 0 1 2 , t h e same baais f o r the Wolf d e f e n d a n t s ' cros8 motion. This motion is d e n i e d , for t h e r e a s o n s appearing below. DISCUSSION Plaintiff's motion (motion sequence number 015) seeking t o s t r i k e the Wolf defendants' answer based on their spoliation of evidence o r , i n the alternative, t o allow a negative i n f e r e n c e charge against them at trial is g r a n t e d to t h e e x t e n t of allowing a negative inference charge. T h e Wolf defendants' cross motion is d e n i e d in its e n t i r e t y . " S p o l i a t i o n is the destruction of evidence. Although originally defined as t h e intentional destruction of evidence arising o u t of a party's bad f a i t h , the law concerning spoliation h a s been e x t e n d e d t o t h e n o n i n t e n t i o n a l d a a t r w t i o n of evidence. A c o r r e l a t i n g t r e n d toward expansion of sanctions f o r t h e inadvertent loss of e v i d e n c e r e c o g n i z e s t h a t s u c h physical evidence often i s t h e moat eloquent impartial ' w i t n e s s ' t o what really occurred, and further recQgnizes t h e resulting unfairness i n h e r e n t i n allowing a p a r t y to destroy evidence and then t o benefit from t h a t c o n d u c t or omiasion. Under New Y o r k law, spoliation s a n c t i o n s are appropriate where a litigant, intentionally or n e g l i g e n t l y , disposes of crucial items of e v i d e n c e . . . before t h e adversary h a s a n opportunity t o i n s p e c t t h e m [internal citations omitted]. " Kirkland v New York Housing Authority, 2 3 6 A D 2 d 170, 173 (1"' Dept '1997). "When parties involved i n litigation engage i n the destruction of evidence, a number O K remedial options are provided by existing N e w Y o r k statutory and common law. Under CPLR 3126, if a c o u r t finds that a p a r t y destroyed evidence t h a t 'ought t o have been disclosed . . . , t h e c o u r t may make s u c h o r d e r s with regard t o [* 7] t h e failure or r e f u s a l a s a r e j u s t . ' N e w Y o r k courts therefore possess broad discretion t o p r o v i d e proportionate relief t o the party deprived of t h e lost e v i d e n c e , such a s precluding proof favorable to t h e spoliator to restore balancs to the litigation, r e q u i r i n g the spoliator to pay c o s t s to t h e i n j u r e d party a s s o c i a t e d with t h e dovelopmnant of replacement e v i d e n c e ' or employing a n adverse inferepce instruction at t h e trial o f t h e a c t i o n [internal citations o m i t t e d ] , " Ortega v C i t y o f New Yoork, 9 WY3d 69, 7 6 ( 2 0 0 7 ) . In t h e case at bar, t h e Wolf d e f e n d a n t s do not dispute that they d e s t r o y e d the financial records' but merely claim that such destruction was inadvertent and occurred prior to the institution of t h e p r e s e n t action. destruction However, as n o t e d above, the nonintentional crucial evidence of does not negate a c h a r g e of spoliation (Herera v Matlin, 303 AD2d 198 [ l J t Dept 20031 1 , and t h e court agrees with p l a i n t i f f that the Wolf defendants should have realized t h a t they might be sued when t h e y stopped fulfilling their financial obligations u n d e r the stipulation of s e t t l e m e n t , which occurred p r i o r t o the r e c o r d s ' destruction. Auto & See generaIly MetLife Home v Joe? Basil Chevrolet, Inc,, 1 NY3d 4 7 8 ( 2 0 0 4 ) . However, in the exercise of its discretion, the court c o n c l u d e s that t h e a p p r o p r i a t e sanction in the i n s t a n t case is to i s s u e a negative inference charge rather than to s t r i k e the Wolf defendants' pleadings. Foley v Consolidated Edison Company of N e w York, Inc., 84 A D 3 d 4 7 6 ( l e t Dept 2011); S c h a n t z v F i s h , 7 9 AD3d 481 ( l a tDept 2010). A n e g a t i v e inference charge " p r o v i d e s t h a t t h e jury shall determine whether t h e r e was a reasonable explanation for 6 [* 8] t h e destruction of e v i d e n c e and, i f n o t , the inference to be drawn from its destruction. Gogos v Modell s S p o r t i n g Goods, I n c m r 8 7 AD3d 2 4 8 , 255 ( l s tDept 2 0 1 1 ) . of It I s more appropriate for the trier f a c t to evaluate credibility and the seasonableness of the records destruction than f o r the c o u r t t o do s o based only on motion p a p e r s . The determination whether to s t r i k e a plsalding f o r f a i l u r e to comply with court-ordered disclosure l i e s within t h e sound discretion of the t r i a l c o u r t . However, the d r a s t i c remady o f a t r i k i n q a pleading pursuant to CPLR 3126 s h o u l d not be imposed unless the failure tQ comply with discovery demands or orders is c l e a r l y willful and contumacious. Willful and contumacious conduct may be i n f e r r e d from a p a r t y s repeated f a i l u r e to comply with c o u r t - o r d e r e d diicovery, coupled with i n a d e q u a t e explanations for the failure to comply or a failure to comply w i t h c o u r t - o r d e r e d discovery o v e r a n extended period of time [ i n t e r n a l q u o t a t i o n marks a n d citations omitted] . O r g e l v S t e w a r t T i t l e I n s u r a n c e Company, 91 AD3d 922, 923 ( 2 d Dept 2 0 1 2 ) : Tos v Jackson H e i g h t s C a r e Center, LLC, 91 A D 3 d 943 ( 2 6 Degt 2012); G a l - E d v 153rd Street Associates, LLC, 7 3 Ad3d 438 (let Dept 2010) ; B a r a l a n I n t e r n a t i o n a l , S . p . A . v A v a n t I n d u s t r i e s . Limited, 242 A D 2 d 2 2 6 ( I s t Dept 1 9 9 7 ) . In the case at bar, there was only one c o u r t o r d e r , r e c e n t l y issued, with which the Wolf d e f e n d a n t s claim p l a i n t i f f failed to comply. That order did not i n d i c a t e that any sanctions would be imposed for non-compliance, and plaintiff s explanation for i t s non-compliance, based on t h e destroyed f i n a n c i a l records, does n o t indicate w i l f u l or contumacious conduct w a r r a n t i n g s a n c t i o n s . 7 [* 9] T h e r e f o r e , t h e Wolf d e f e n d a n t s ' c x o s s motion i s denied. Similarly, and f o r t h e same rea.spns, the T r i n a d defendants' m o t i o n ( m o t i o n sequence number 016) is similarly denied. A l t h o u g h t h e Trinad defendants s t a t e that they h a v e p r o v i d e d a l l of t h e financial documents r e q u e s t e d by plaintiff, a s previously stated, t h e T r i n a d defendants' claim is based on o n l y one c o u r t o r d e r , r e c e n t l y issued, that did not indicate the possibility o f sanctions being imposed for noa-compliance. At t h i s juncture, t h e c o u r t declines t o exercise i t s discretion t o impose sanctfcnns against p l a i n t i f f . Based on the f o r e g o i n g , it i s h e r e b y ORDERED t h a t p l a i n t i f f ' s rnQtion ( m o t i o n sequence number 0 1 5 ) i s granted to t h e extent of allowing a negative i n f e r e n c e c h a r g e a g a i n s t L a w r e n c e H. Wolf, Mary Wolf, Jay Wolf, David J. Wolf, Wolf Shevack, Inc., Wolf Group I n t e g r a t a d Cofmnunications, Ltd., Wolf Group New YQrk, I n c . , Wolf NationaJ Yellow Pages, I n c . , Wolf Group ( U S A ) , I h c . , ClJolf Family Holdings Limited, Amalgagated Technologies Inc. and O p t i o S o f t w a r e Inc. a t trial, b u t is o t h e r w i s e d e n i e d ; and it is further ORDERED that the cross motion of Lawrence H. Wolf, Mary Wolf, Jay Wolf, David J. Wolf, Wolf S h e v a c k , I n c . , Wolf Group I n t e g r a t e d Communications, Ltd., Wolf Group New York, I n c . , Yellow Pages, I n c . , Wolf Group ( U S A ) , I n c . Wolf N a t i o n a l , Wolf Family Holdings Limited, Amalgamated Technologies Inc. and Optio S o f t w a r e I n c . I (motion sequence number 015) I s denied in i t s entirety; and it is 8 [* 10] further ORDERED Advisors G P , that the motion of Trinad Management, LLC, Trinad LLC and Atlantis E q u i t i e s , Inc. (motion sequence number 016) is denied; and it is further ORDERED that the parties are t o appear for a status conference on August 2 3 , 2012 at 9 : 3 0 a . ~ , in Room 3 0 4 l o c a t e d at 71 Thomas S t r e e t , NYC 10013. Dated: 7 / 2 3 / 1 2 Joan M. Kenney, J . S . C . 9

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