Khaldei v. Kaspiev

Filing 120

OPINION AND ORDER. For the reasons in this Opinion and Order, Plaintiff's objection is overruled and Magistrate Judge Gorenstein's opinion is affirmed in its entirety. At oral argument on October 22, 2013, counsel for the parties indicated their amenability to making another attempt at settlement of this case. If they have not already done so, counsel are directed to contact Judge Gorenstein's chambers to schedule a settlement conference. They are further directed to file a joint letter no later than ten days after the conference, advising this Court of the results. (Signed by Judge John F. Keenan on 11/3/2013). (rjm)

Case 1:09-md-02013-PAC Document 57

Filed 09/30/10 Page 1 of 45
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: Nov. 4, 2013

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------X
UNITED STATES DISTRICT COURT
ANNA SOUTHERN DISTRICT OF NEW YORK
EFIMOVNA KHALDEI,
:
:
-----------------------------------------------------------x
Plaintiff,
:
In re FANNIE MAE 2008 SECURITIES
:
08 Civ. 7831 (PAC)
:
No. 10 Civ. 8328 (PAC)
LITIGATION
:
09 MD 2013 (JFK)
-against:
:
:
: OPINION & ORDER
OPINION & ORDER
KALMAN KASPIEV,
:
-----------------------------------------------------------x
:
Defendant.
:
------------------------------X
HONORABLE PAUL A. CROTTY, United States District Judge:
JOHN F. KEENAN, United States District Judge:
In an opinion filed August 8, 2013, Magistrate Judge
BACKGROUND1

Gorenstein denied Plaintiff Anna a boom in home financing which was fueled, among
The early years of this decade saw Efimovna Khaldei’s motion for
spoliation sanctions against Defendant KalmanNew lending instruments, such as
other things, by low interest rates and lax credit conditions. Kaspiev. See
Khaldei v. Kaspiev, --- F. risk loans) and Alt-A mortgages (low-documentation loans)
subprime mortgages (high credit Supp. 2d ––––, 2013 WL 4016497
(S.D.N.Y. Aug. 7, 2013). Plaintiff has filed an objection to
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
Judge Gorenstein’s decision, and renews her request for
assumption that the market would continue to rise and that refinancing options would always be
sanctions before this Court. The Court heard oral argument on
available in the future. Lending discipline was lacking in the system. Mortgage originators did
the objection on October 22, 2013. For the reasons that follow,
not hold these high-risk mortgage loans. Rather than carry the rising risk on their books, the
the objection is overruled and Judge Gorenstein’s opinion is
originators sold their loans into the secondary mortgage market, often as securitized packages
affirmed in its entirety. This ruling does not address the
known as mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
parties’ pending cross-motions for summary judgment.
But then the housing bubble burst. In 2006, the demand for housing dropped abruptly
I.
Background
and home prices began to fall. In light of the changing housing market, banks modified their
A.
The Underlying Facts
lending practices and became unwilling to refinance home mortgages without refinancing.
The Court assumes familiarity with the facts of this case.
Briefly stated, Plaintiff is the daughter and heir of the late
1

Unless otherwise indicated, all references cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.

photographer Evgeny Khaldei (“Evgeny”).

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Plaintiff alleges that

in March 1997, shortly before his death, Evgeny entered into an
agency agreement with Defendant whereby Defendant would act as
Evgeny’s worldwide agent for twenty years for the “promotion and
sale of photographs produced for sale from the negatives.”

The

next day, Evgeny entered into a licensing agreement with Corbis,
a digital archive that licenses images to third parties.

Among

other provisions, the Corbis agreement called for Evgeny,
Defendant, and Corbis to select images for licensing, and for
Evgeny to transport the original negatives they selected to
Corbis, which would return them to Evgeny after scanning them.
However, Defendant later instructed Corbis to return the
negatives directly to him.

Defendant asserts that he did this

because Evgeny had wanted to give or sell the images to the U.S.
Library of Congress.

The negatives returned to Defendant by

Corbis, as well as a disputed number of photographs given by
Plaintiff to Defendant after Evgeny’s death in December 1997
(collectively, the “Materials”), are at the heart of this
lawsuit.
The discovery process has been difficult since the
beginning of this action, as Judge Gorenstein thoroughly set
forth in his opinion. See Khaldei, 2013 WL 4016497, at *1–3.

As

relevant to the instant application, Plaintiff argues that
Defendant consistently concealed records and evidence regarding
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the location of the Materials.

Plaintiff repeatedly sought to

inspect the Materials, but Defendant refused to disclose their
location, which was his residence.

Defendant had stored the

Materials in various locations over the years, but moved them on
March 8, 2011 from his apartment to a storage locker at
Manhattan Mini Storage, LLC.

Because the parties could not

agree on a preservation order, this Court entered an order
directing the impoundment of the Materials on March 29, 2011.
Since then, Defendant has come forward three times with
additional photographs to deposit with the Court.
B.

The Motion for Sanctions and Judge Gorenstein’s Opinion
The parties fully briefed cross-motions for summary

judgment before this Court in April.

Notwithstanding these

motions, on May 15, 2013, Plaintiff’s counsel sought leave from
Judge Gorenstein to file a separate motion for spoliation
sanctions.

In his letter to Judge Gorenstein, counsel asserted

that the Materials’ “situation in their place of storage at the
commencement of the litigation was evidence” that Defendant
destroyed when he moved the Materials from his apartment to
Manhattan Mini Storage.

Judge Gorenstein allowed the motion but

stated in his memo endorsement, “It is not clear why Rule 37 —
let alone the legal doctrine of spoliation — applies to the
situation described.” (ECF No. 94.)
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Plaintiff filed her motion on June 6, 2013.

In it, she

argued that Defendant intentionally destroyed “physical
evidence” by moving the Materials.
“stringent” sanction:

Plaintiff sought a

that Defendant be precluded from

testifying that he deposited with the Court all of the
Materials.
On August 7, 2013, Judge Gorenstein denied Plaintiff’s
motion in its entirety. See Khaldei, 2013 WL 4016497.

Judge

Gorenstein flatly rejected Plaintiff’s contention “that the act
of moving the photographs to Manhattan Mini Storage constituted
the destruction of evidence relevant to this case.” Id. at *5.
Because no evidence was destroyed, Plaintiff was not entitled to
spoliation sanctions.

Judge Gorenstein also wrote that

Defendant had no notice of an obligation to keep the Materials
in exactly the same place throughout the litigation. Id. at *5–
6.

Nor did he find any evidence that Defendant acted with a

culpable state of mind. Id. at *6.

Judge Gorenstein therefore

concluded that Plaintiff had not shown any of the three
necessary elements of a spoliation claim, and denied the motion.
II.
A.

Discussion

Relevant Legal Standards

When a party files an objection to a magistrate judge’s
order on a non-dispositive matter, the district judge to whom
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the case is assigned must “modify or set aside any part of the
order that is clearly erroneous or is contrary to law.” Fed. R.
Civ. P. 72(a).

“An order is clearly erroneous only when the

reviewing court on the entire evidence is left with the definite
and firm conviction that a mistake has been committed.” E.g.,
Surles v. Air France, 210 F. Supp. 2d 501, 502 (S.D.N.Y. 2002).
It is contrary to law if “it fails to apply or misapplies
relevant statutes, case law or rules of procedure.” E.g.,
MacNamara v. City of New York, 249 F.R.D. 70, 77 (S.D.N.Y.
2008).

This is a highly deferential standard, and the objector

thus carries a heavy burden. U2 Home Entm’t, Inc. v. Hong Wei
Int’l Trading Inc., No. 04 Civ. 6189, 2007 WL 2327068, at *1
(S.D.N.Y. Aug. 13, 2007); see also Lugosch v. Congel, 443
F. Supp. 2d 254, 276 (N.D.N.Y. 2006) (noting that particular
deference is due where “the magistrate judge has been deeply
involved in discovery matters in the case for years”).
A party seeking sanctions for spoliation must establish
“(1) that the party having control over the evidence had an
obligation to preserve it at the time it was destroyed; (2) that
the evidence was destroyed with a culpable state of mind; and
(3) that the destroyed evidence was relevant to the party’s
claim or defense.” Centrifugal Force, Inc. v. Softnet Commc’n,
Inc., 783 F. Supp. 2d 736, 741 (S.D.N.Y. 2011) (Gorenstein, J.)
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(citing Byrnie v. Town of Cromwell, Bd. of Educ., 243 F.3d 93,
107–09 (2d Cir. 2001)) (internal quotation marks and alterations
omitted).

The court may grant sanctions if they would

serve the threefold purpose of (1) deterring parties
from destroying evidence; (2) placing the risk of an
erroneous evaluation of the content of the destroyed
evidence on the party responsible for its destruction;
and (3) restoring the party harmed by the loss of
evidence helpful to its case to where the party would
have been in the absence of spoliation.
Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 162 (2d Cir.
2012) (alterations omitted).
B.

Analysis

The Court agrees with Judge Gorenstein that Plaintiff’s
request for sanctions flows from a fundamentally flawed premise.
Notwithstanding Plaintiff’s contention that “[w]hen Defendant
secretly moved Plaintiff’s property, he destroyed the evidence
of what materials were at the original location” (Pl. Br. at 9),
the mere act of moving the Materials did not constitute
spoliation.
In support of her position, Plaintiff cites cases in which
a negligently installed heater and siding were removed from
houses. (Pl. Br. at 18 (citing Cmty. Assoc. Underwriters of Am.,
Inc. v. Rhodes Dev. Grp., Inc., No. 09 Civ. 257, 2013 WL 818596
(M.D. Pa. Mar. 5, 2013) (heater); Fines v. Ressler Enters.,
Inc., 820 N.W.2d 688 (N.D. 2012) (siding)).)
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Contrary to

Plaintiff’s claim that those negligence cases are “similar to
this one,” they are obviously and materially distinguishable.
The removed items were actually installed in place before being
removed by the plaintiffs, and such installation was highly
probative of the complained-of tort.

By contrast, the instant

case concerns photographs and negatives, items that cannot be
“installed.”

Similarly, the fact that Defendant apparently

moved the Materials from his apartment to a storage locker has
no bearing the substance of Plaintiff’s claims.
Plaintiff urges that her “motion is not about what
materials that Defendant surrendered, but rather focuses on her
thwarted effort to determine whether Defendant withheld other
property of hers.” (Pl. Br. at 12.)

This assertion is puzzling.

If the charge is that Defendant may have hidden certain
Materials while moving others to the storage locker, presumably
he could have also hidden them at any time before or after that.
Regardless, there is no compelling evidence that Defendant acted
in bad faith when he moved the property from his apartment to
storage, Plaintiff’s insinuations aside.
Plaintiff’s other arguments are similarly unavailing, and
none come close to meeting the standard under Rule 72(a).
First, she notes that Defendant has come forward and deposited
additional Materials with the Court since the initial
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impoundment order.
faith, not bad.

If anything, this is indicative of good

Second, Plaintiff emphasizes that Defendant did

not initially disclose the location of the Materials during the
early phases of discovery in 2011.

This issue was litigated

more than two years ago, and was ultimately resolved by the
Court’s impoundment order; it seems irrelevant today.

Third,

Plaintiff notes that Defendant failed to produce his contract
for the storage locker at Manhattan Mini Storage.

But Plaintiff

was not prejudiced by this failure, because Manhattan Mini
Storage gave a copy to Plaintiff upon her request.

Finally,

Plaintiff’s reply includes a bizarre digression regarding
whether Defendant’s use of the words “possession” and “control”
are so contradictory that Defendant’s attorneys should be deemed
to have “waived the attorney-client privilege regarding what
they heard from Defendant in that regard.” (Reply at 3–4.)

This

argument is incoherent, unpersuasive, and utterly beside the
point.

Judge Gorenstein was correct to reject this and the rest

of Plaintiff’s contentions.

His ruling is affirmed.

III. Conclusion
For the foregoing reasons, Plaintiff’s objection is
overruled and Magistrate Judge Gorenstein’s opinion is affirmed
in its entirety.

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I

At oral argument on October 22, 2013, counsel for the
parties indicated their amenability to making another attempt at
settlement of this case.
counsel are

If they have not already done so,

ted to contact Judge Gorenstein's chambers to

schedule a settlement conference.

They are further

rected to

file a joint letter no later than ten days after the conference,
advising this Court of the results.

SO ORDERED.

Dated:

New York, New York
November ~
,2013

/~i~1

~
John F. Keenan
'
United States District Judge

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