Consolidated Sewing Mach. Corp. v Sanford

[*1] Consolidated Sewing Mach. Corp. v Sanford 2008 NY Slip Op 50715(U) [19 Misc 3d 1114(A)] Decided on March 21, 2008 Supreme Court, New York County Shulman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 21, 2008
Supreme Court, New York County

Consolidated Sewing Machine Corp., Chandler Machine USA, LLC and Unlimited Parts & Supplies, Inc., Plaintiffs,

against

Gregory Sanford, Unlimited Equipment, Inc., Chandler Machine Company Sales WV LLC, Johnnie Duart Sandford, Charles Maxant, Oleg Potseluyko, Tatiana Demidenko, John Doe 1 a/k/a Marco Melendez and John Does 2 through 10, Defendants.



604384/05



Ira Glauber, Esq., Jaffe & Asher LLP, counsel for plaintiff

Joseph R. Sahid, Esq., counsel for defendants

Martin Shulman, J.

Plaintiffs, Consolidated Sewing Machine Corp., et al. ("Consolidated" or collectively, "plaintiffs"), have moved to compel discovery (e.g., production of documents requested in the First Request for Production of Documents ["1st Request"] and Second Request for the Production of Documents ["2nd Request]) jointly and severally from defendants, Gregory Sanford ("Sanford"), Chandler Machine Company Sales, WV L.L.C. ("Chandler West Va.") and Charles Maxant, its President ("Maxant") and other defendants (collectively, "defendants") and to strike defendants' answers for failure to comply with discovery. An affirmation in opposition to this motion for discovery/preclusion was submitted by defendants' attorney, Joseph R. Sahid, Esq. ("defense counsel")[FN1]. Defense counsel attempted to demonstrate his ongoing [*2]compliance with plaintiffs' discovery demands through his e-mail communications to plaintiffs' counsel and attaches copies of same to his affirmation. Defense counsel further challenges plaintiffs' counsel's effort to expand prior disclosure orders of Justice Carol Edmead which would otherwise force defendants to disclose customer information and business details unrelated to the subject matter of this lawsuit.

On February 26, 2008, this court had extensive colloquy with the parties' counsel on the record. Much of the argument focused on whether defense counsel's varied e-mails constituted legally sufficient responses to certain disclosure requests. During this approximately three hour session, defense counsel was afforded the opportunity to: (1) reiterate his November 28, 2006 letter request seeking reargument of Justice Edmead's January 17, 2006 Decision and Order which granted plaintiffs a preliminary injunction without opposition [FN2] (the "PI Order") and modify same solely as to Sanford; (2) reiterate his December 23, 2006 letter request seeking reagument of this court's November 27, 2006, Decision and Order which denied a motion to dismiss the complaint as against Maxant individually ("Non-dismissal Order"); (3) request that the court communicate with Special Referee Jack Suter, Esq.,[FN3] about defense counsel's right to make objections pursuant to Uniform Rule 22 NYCRR § 221 et seq. without fear of being sanctioned; and (4) direct plaintiffs' counsel to contact various companies listed on a disclosed Chandler West Va. accounts receivable document totaling $32,180.30 to request payments which upon receipt should be escrowed and not released to any party without further order of the court or the parties' agreement.

PLAINTIFFS' DISCOVERY MOTION

Electronic Discovery

From Sanford's Hard Drive

Based upon this court's September 24, 2007 order to enforce Justice Edmead's June 20, 2006 disclosure order, defense counsel had agreed to maintain custody and [*3]control of Sanford's computer in his office to enable plaintiffs to copy its hard drive for evaluation. As noted in the February 26, 2008 transcript, defense counsel requested that plaintiffs' counsel provide him with the name of the expert and arrange to copy the hard drive within two weeks or the computer would be returned to Sanford. On the record, Consolidated's counsel observed that the costs to evaluate Sanford's hard drive would probably outweigh any meaningful information to be gained from this exercise. By letter dated March 10, 2008, defense counsel advised that since the two week period has elapsed without plaintiffs' counsel taking any action to obtain this requested discovery, Consolidated's right to obtain same is waived and counsel would be returning the computer to Sanford. Accordingly, defendant Sanford is no longer required to comply with this court's September 24, 2007 Decision and Order.

Document Requests

During oral argument, this court mediated this protracted discovery dispute [FN4] that is the subject of this round of motion practice and inter alia made a recommendation agreeable to both counsel to facilitate acceptable responses to certain discovery demands; viz., Consolidated's counsel would e-mail copies of plaintiffs' 1st and 2nd Requests (Exhibits B and C to Motion) to defense counsel to use these documents as templates which would enable him to adequately prepare verified responses in a cost-effective manner.

Defense counsel's unrefuted March 10th letter to the court further acknowledged his belated e-mail receipt of plaintiffs' 2nd Request late Friday afternoon on March 7, 2008. Notwithstanding any ruling stated on the record, this court affords defense counsel an additional four weeks from the March 7, 2008 receipt date to fully respond to both the 1st and 2nd Requests.

At this juncture, this court does not question defense counsel's arguable, good faith efforts to comply with these document requests via e-mail responses implicitly based on information and belief. Nonetheless, it is ordered that defendants' respective responses to any outstanding items demanded in the 1st Request and defendants' responses to the entire 2nd Request inter alia must include an affidavit by someone with personal knowledge of the facts who will attest to existence or non-existence of a requested document(s) in response to any outstanding document requests in the 1st Request not previously responded to and to the 2nd Request as directed below. Each requested item must be addressed seriatim.

During colloquy on the record, defense counsel reiterated that since defendant, Chandler West Va. was in business for a short four month period ("business period"), this company could not have generated a large quantity of documents. Notwithstanding any of Justice Edmead's prior decisions and orders limiting the scope of plaintiffs' [*4]document requests, after consideration of Consolidated's motion and defendants' opposition, this court was not persuaded to retain Justice Edmead's prior limitation rulings and now directs defendants including Maxant and Chandler West Va. to fully respond by producing documents sought in 1st Request Nos.: 1 through 4; 12 (copies of letters to and from customers, etc., in unredacted form); 19 (copies of sales and billing records for all Chandler West Va. customers during the business period); and 36-38 (copies of records of plaintiffs' goods shipped or transported to Chandler West Va. during the business period).

Defendants are further directed to fully respond to all document requests set forth in the 2nd Request without any limitation to Request Nos.: 1(a)-(d) (e.g., documentation referable to the "sale of 12 machines to a customer named JADO by defendant Unlimited Equipment for which payment was made to Maxant and his company Chandler West Virginia . . ." [Glauber Aff. in Support of Discovery Motion

at ¶ 11]); 2-3 (copies of records of sales of sewing machines and/or parts from Maxant and Chandler West Va. to Sanford and Duart); 4 (copies of records regarding cutting machines Sanford sold to Sewmaster, another Maxant owned company); 5-7 (e.g., copies of 2005 credit card statements of Sanford and/or Duart); 8 (copies of Wachovia bank records referable to defendants' investment in defendant, Unlimited Equipment); 10 (to the extent not already produced); 11 (copies of Sewmaster's invoice[s] to Chandler West Va.); 12, 13 and 16 (copies of cancelled checks of Chandler West Va.); 14-15 (copies of tax returns for Chandler West Va., Sanford and Duart for the relevant periods underlying this lawsuit); 17-19 (without limitation, copies of all accounting records of Chandler West Va.); 20-21 (copies of e-mails or other correspondence between defendants and any Far East factories and/or their agents); 22-24 (without any limitation, copies of purchase orders Chandler West Va. received and e-mails, correspondence and other similar documents with its customers and suppliers during the business period); 25 (copy of a Sewmaster purchase order made to Chandler West Va.); and 26 (defendants' telephone records for the relevant time periods underlying this lawsuit redacting information unrelated to the subject matter of this litigation).

Parenthetically, many of the document requests in the 1st and 2nd Request may be identical to document/information requests made during the course of Maxant's, Sanford's and/or Duart's depositions ("EBT Requests") (see Glauber Aff. in Support of Discovery Motion at ¶ 14[a]-[q]). Defendants are further directed to comply with any of these EBT Requests not specifically itemized in either the 1st or 2nd Request. The parties are further reminded that the foregoing disclosure is subject to the October, 2006 Confidentiality Stipulation and Order.

Accordingly, plaintiffs' motion to compel disclosure is granted and defendants are directed to comply with plaintiffs' 1st and 2nd Requests and EBT Requests (collectively, the "Requests"). If defendants fail to comply with plaintiffs' Requests within four weeks of March 7, 2008, plaintiffs' counsel shall submit an affirmation detailing the default and shall settle an order of preclusion on notice pursuant to CPLR § 3126(2).

REARGUMENT OF THE PI ORDER

Because of Sanford's purported financial hardship, defense counsel during colloquy on the record on February 26, 2008, reiterated his November 28, 2006 letter [*5]request to reargue the PI Order.[FN5] The PI Order inter alia barred defendants: (1) from directly or indirectly soliciting, contacting or otherwise doing business with any of Consolidated's customers; (2) from directly or indirectly soliciting, contacting or otherwise doing business with any of Consolidated's vendors, graphic artists, or website designers for the purpose of competing with plaintiffs; (3) from directly or indirectly using or disclosing plaintiffs' confidential information for any purpose; (4) from directly or indirectly using any business or trade name that is confusingly similar to those of plaintiff including any variant of "Chandler", "Consolidated" or "Unlimited"; (5) from directly or indirectly communicating with plaintiffs' existing employees to inter alia obtain information about plaintiffs' business, to compete with plaintiffs and/or recruit these employees; (6) from directly or indirectly diverting plaintiffs' existing or prospective business opportunities; (7) from using or accessing information from plaintiffs' computer system and/or e-mail accounts; (8) from directly or indirectly using plaintiffs' federally registered trademark, "Chandler" for any purpose; and (9) directing defendants to return copies or extracts of documentation containing confidential information. No appeal was taken of the PI Order after its service with notice of entry.

In denying reargument of the PI Order, the March 29th Order found that Maxant and Chandler West Va.:

failed to show that "the court overlooked or misapprehended the facts or the law or for some reason mistakenly arrived at its earlier decision" as required for reargument . . . Further, defendants failed to demonstrate a meritorious defense to the injunction, that the plaintiffs' action is without merit, irreparable injury would not result in lifting the injunction, and that the balance of equities tip in favor of moving defendants. Therefore the application to reargue and vacate or modify the order granting injunctive relief is denied.

(see March 29, 2006 Decision and Order, n.o.r. Index No. 604384/05 at p. 5).

Defense counsel's letter request for reargument of the PI Order covers no new territory and essentially repeats Sanford's hardship claims before Justice Edmead as a then self-represented litigant. Defense counsel urges the court to modify what he views as an overbroad injunction to allow Sanford to again engage in the industrial sewing machine business and suggested preliminary injunction parameters set forth in Justice Edmead's May 16, 2006 Decision and Order governing Melendez.

This court is not unmindful of the need to short circuit procedures otherwise expected of all civil litigants to save time and money and this court will eschew form [*6]over substance where circumstances warrant it. Still, this court cannot ignore plaintiffs' counsel's protestations that defense counsel improperly has been and currently is making motions by letter and otherwise not complying with the CPLR.

Expanding on this point, this court concurs that defendants' motions disguised as letter requests do not comport with the CPLR requisites of motion practice (CPLR §2211), are not accompanied with the mandatory notice of motion (see 22 NYCRR

§ 202.7; see also, CPLR 2214[a]), bypass the filing requirement with the Motion Submissions Part to be properly calendared and are submitted directly to Chambers without the required $45.00 fee payment (CPLR § 8020[a]).[FN6]

Regardless of these procedural infirmities, this court will address Sanford's request for reargument to modify the PI Order.

CPLR § 2221 states as follows:

Motion affecting prior order.

(a) A motion for leave to renew or to reargue a prior motion, for leave to appeal from, or to stay, vacate or modify, an order shall be made, on notice, to the judge who signed the order, unless he or she is for any reason unable to hear it ...

A motion for reargument, addressed to the discretion of the court, is designed to afford a party an opportunity to establish that the court overlooked or misapprehended the relevant facts, or misapplied any controlling principle of law. Foley v. Roche, 68 AD2d 558, 418 NYS2d 588 (1st Dept., 1979). Motions for leave to reargue are not designed to provide an unsuccessful party with successive opportunities to reargue issues previously decided, or to present arguments different from those originally presented. Pro Brokerage, Inc. v. Home Ins. Co., 99 AD2d 971, 472 NYS2d 661 (1st Dept., 1984); William P. Pahl Equipment Corp. v. Kassis, 182 AD2d 22, 588 NYS2d 8 (1st Dept., 1992).

Even a cursory review of the Amended Verified Complaint (Exhibit A to Discovery Motion) discloss allegations pointing to Sanford [FN7] as a central player who embarked on a scheme with his co-defendants to commit acts of unfair competition, trademark infringement, tortious interference with contract, conversion and other similar claims. Moreover, during his deposition, Sanford admitted to such wrongdoing. During the February 26th colloquy before the court, defense counsel characterized Sanford's wrongful acts as being benign when looking at the "big picture." Nonetheless, there is nothing which was written or said which persuades this court that Justice Edmead misapprehended any facts or law to justify modifying the PI Order. Parenthetically, [*7]Melendez was a former salesperson for Consolidated with a sporadic work history (Id., at ¶ 26) and appears to be a minor player in some of the schemes that are the subject of this lawsuit. Illustrative of this are complaint allegations (implicit and otherwise) that Melendez took his "marching orders" from Sanford and received kick-backs for diverting sales from plaintiffs to Unlimited Equipment. The markedly different roles these defendants played in plaintiffs' companies is seemingly obvious and can reasonably explain the March 29th Order's less restrictive preliminary injunction against Melendez. Sanford's reargument request is denied.

REARGUMENT OF THE NON-DISMISSAL ORDER

In the March 29th Order, Justice Edmead also denied that branch of Maxant's and Chandler West Va.'s dismissal motion not only by finding proper service of process to obtain jurisdiction over both Maxant and Chandler West Va., but also, based on the record before the court, by factually finding inter alia that these non-domiciliary defendants transacted business within New York State as co-conspirators with Sanford and committed torts in West Virginia which affected plaintiffs in New York State.

Not surprisingly, defense counsel made a CPLR § 3211(a)(7) motion to dismiss Amended Verified Complaint against Maxant individually. In the Non-Dismissal Order denying Maxant's motion, this court determined that the Amended Verified Complaint, affidavits and exhibits (i.e., extrinsic evidence), "for pleading survival purposes. . ." (Leon, supra ) have sufficiently alleged causes of action implicating Maxant individually . . ." (see November 27, 2006 Decision and Order, n.o.r. Index No. 604384/05 at p. 5).

In defense counsel's December 23, 2006 letter request for reargument (with the same procedural infirmities) to vacate the Non-Dismissal Order and dismiss this action against Maxant individually, he essentially contends that the case law he proffered was not considered (i.e., Pelton v. 77 Park Avenue Condominium, 38 AD3d 1 (1st Dept., 2006). Again, this court did not misapprehend any facts or law. Pelton, supra , implicates the business judgment rule to shield a corporate officer from individual liability for poor decisions taken in good faith and in furtherance of legitimate corporate purposes. However, if the pleaded allegations against Maxant and his company, Chandler West Va., ultimately prove to be true, his status as a corporate officer will not shield him from personal liability as a tortfeasor. Maxant's reargument request is also denied.

DEFENSE COUNSEL'S DEPOSITION OBJECTIONS

In letters dated October 22, 2007 and December 17, 2007, and in colloquy during the February 28th oral argument of plaintiffs' discovery motion, defense counsel repeatedly expressed concern that he was being harshly treated by Referee Suter and could be potentially sanctioned for making what he believes to be proper objections in accordance with Uniform Rule 22 NYCRR 221.1(a), especially to avoid waivers if he is required to make the same objections at trial. Illustrating this point, defense counsel annexed copies of selected pages of Melendez's October 18, 2007 deposition transcript. Plaintiffs' counsel countered that defense counsel was repeatedly making speaking objections in violation of Uniform Rule 22 NYCRR 221.1(b).

As noted in Footnote 3, supra , in supervising the requested depositions in this action, Referee Suter was granted all the powers of the court and it is his "calls" which must guide counsel. It is further noted that:CPLR 3115(a) affords attorneys a measure [*8]of relaxation at the deposition session that they do not have at trial. To encourage the questioning to roam wide and far without constant punctilio exercised to exclude questions objectionable under the rules of evidence, the rule permits the attorney to withhold all such objections except those relating to mere form, which subdivision (b) governs. Failing to raise the objection at the deposition does not waive it . . . If the answer can be excluded under any rule of evidence, the court will not permit it to be read at the trial.

(Connors, 2005 Practice Commentaries, McKinney's Cons. Laws of NY, Book 7B, CPLR 3115[a] at 149).

Since most experienced attorneys prior to taking depositions stipulate that all objections except as to the form of the question are reserved for the trial court, no counsel should encumber the deposition with evidentiary objections. Against this statutory backdrop, this court's review of the colloquy between defense counsel and Referee Suter suggests that the latter's profound patience has worn thin with the manner and scope of the former's objections which read more like speaking objections which Uniform Rule 22 NYCRR 221.1(b) was enacted to restrict.

On the other hand, defense counsel correctly points out that objections to instantly avoidable errors (form of the question) must be made at the deposition (CPLR § 3115[b]), otherwise they are waived at trial (see Rodriguez v. New York City Housing Authority, 215 AD2d 362 [2nd Dept., 1995]). However, defense counsel should simply make the objection and succinctly state the basis for same without inviting extensive colloquy with opposing counsel and the Special Referee. Rest assured, properly measured objections will not precipitate the imposition of sanctions.

CHANDLER WEST VA.'S RECEIVABLES

The PI Order bars Sanford, Maxant and/or Chandler West Va. from contacting certain customers who purchased sewing machines and/or parts from Chandler West Va. during the business period, but who presumably withheld payments for reasons not relevant here. Accordingly, this court directs plaintiffs' counsel to contact various companies listed on a disclosed Chandler West Va. accounts receivable document totaling $32,180.30 to request payments which upon receipt shall be escrowed and not released to any party without further order of the court or the parties' agreement. If it is ultimately determined that these receivables belong to plaintiffs, then Consolidated's failure to mitigate its damages by not expeditiously collecting these monies will entitle defendants to an offset against proven damages, if any, awarded plaintiffs.

The parties shall appear in Part 1, Room 1127B, 111 Centre Street, New York County on May 13, 2008 at 9:30 a.m. for a final status conference to set a date for filing the Note of Issue and scheduling a trial date.

The foregoing constitutes this Court's Decision and Order. A copy of this Decision and Order has been mailed to counsel for the parties.

DATED: New York, New York

March 21, 2008

___________________________

Hon. Martin Shulman, J.S.C.

Footnotes

Footnote 1: Joseph R. Sahid, Esq. represents Sanford, Johnnie Duart Sanford ("Duart"), Maxant, Chandler West Va. and Marco Melendez ("Melendez"). Defense Counsel has repeatedly advised the court that he is representing defendants pro bono and therefore has reasonably pursued a course of conduct to conserve his time and keep costs to a minimum (e.g., use of e-mail communications to counsel, letters to the court, oral applications during court appearances, etc.).

Footnote 2: In the PI Order, Justice Edmead noted that Maxant, Duart and Chandler West Va. either failed to respond to, or oppose, plaintiffs' application for a preliminary injunction, a drastic remedy. The court further noted Sanford's opposition: "that he was not a shareholder, director, officer, or employee of defendant Unlimited Equipment or defendant Chandler WV. He has never received payment or compensation for either defendant . . . he has no Confidential Information in his possession custody and control. . . [and] that plaintiffs' requested relief would prevent him form earning a living and supporting himself and his family." (see, January 17, 2006 Decision and Order, n.o.r. Index No. 604384/05 at p. 5).

Footnote 3: Because of the contentious nature of this litigation and the lack of progress in the parties completing their respective depositions, this court issued a September 24, 2007 Decision and Order appointing Court Attorney Jack Suter, Esq. as Special Referee (CPLR

§ 3104[a]) to supervise all outstanding and continuing depositions in this action and granting Referee Suter all powers of the court except as provided in CPLR § 3104 ( c) which would include imposing sanctions, if warranted.

Footnote 4: Prior and subsequent to this court being referred this case after Justice Edmead's recusal, the parties' counsel have continuously exchanged rancorous letters regarding plaintiffs' 1st and 2nd Requests, the conduct of the parties and counsel during scheduled depositions and telephone conversations, and defense counsel has sent repeated e-mails raising discovery concerns and objections to self perceived "slings and arrows" maneuvers plaintiffs' counsel has thrown at him to drive up litigation costs and harass defendants.

Footnote 5: Notably, Maxant and Chandler West Va. previously moved to dismiss this action as against them for lack of personal jurisdiction and to reargue the PI Order and in a March 29, 2006 Decision and Order ("March 29th Order"), Justice Edmead denied both branches of this motion. Court records disclose that the March 29th Order was served with notice of entry on April 11, 2006, and no appeal was taken of the March 29th Order after its service with notice of entry.

Footnote 6: Because defense counsel is representing defendants pro bono and has acted in good faith, defense counsel "gets a pass" for now. However, any future applications for relief must conform to the CPLR and court rules. A failure to comply with same will result in the rejection of such non-conforming application.

Footnote 7: Sanford was a former valued Consolidated employee (i.e., Vice-President of Operations, a manager of Consolidated's New York office and Chandler USA, responsible for their day-to-day operations [Id. at ¶ 21]).