United Realty Advisors, LP et al v. Verschleiser et al

Filing 294

MEMORANDUM OPINION ANDORDER re: (182 in 1:14-cv-08084-JGK-JLC) LETTER MOTION for Discovery to Strike Plaintiffs' Expert Reports and to Preclude their Testimony in this Action. addressed to Magistrate Judge James L. Cott from Joshua S ummers, Esq. dated January 17, 2017. filed by Multi Capital Group of Companies, L.L.C., Eli Verschleiser. Pending before the Court are the plaintiffs' objections to Magistrate Judge Cott's January 18, 2017 Order (the "Order") striking two expert reports because they were filed after the court-ordered deadline for expert disclosure. (As further set forth in this Order.) The Court has considered all of the arguments raised by the parties. To the extent not specifically addr essed, the arguments are either moot or without merit. The objections are overruled. The Clerk of Court is directed to close all open motions. (Signed by Judge John G. Koeltl on 3/25/2017) Filed In Associated Cases: 1:14-cv-05903-JGK-JLC, 1:14-cv-08084-JGK-JLC(cf)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
JACOB FRYDMAN, ET AL.,
Plaintiffs,

14-cv-5903 (JGK)(JLC)
14-cv-8084

- against MEMORANDUM OPINION AND
ORDER

ELI VERSCHLEISER, ET AL.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:

Pending before the Court are the plaintiffs’ objections to
Magistrate Judge Cott’s January 18, 2017 Order (the “Order”)
striking two expert reports because they were filed after the
court-ordered deadline for expert disclosure. Dkt. 258. After
carefully considering the objections and the extensive
submissions by the parties, the objections are overruled.
This case involves two consolidated actions, United Realty
v. Verschleiser, No. 14-cv-5903 (S.D.N.Y.), and Frydman v.
Verschleiser, No. 14-cv-8084 (S.D.N.Y.). As this Court explained
in an Opinion and Order dated March 22, 2016, “These actions are
the latest chapter in a long-running and acrimonious dispute
between Jacob Frydman and Eli Verschleiser, former partners in a
Real Estate Investment Trust.” Frydman v. Verschleiser, 172 F.
Supp. 3d 653, 658 (S.D.N.Y. 2016). Familiarity with the facts,
underlying claims, and procedural history of this case is
presumed. See id. at 659-662; see also United Realty Advisors,
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LP v. Verschleiser, No. 14 CV. 5903, 2015 WL 3498652, (S.D.N.Y.
June 3, 2015).
The conduct of the parties in this litigation has been less
than exemplary. “Each party has used judicial and extra-judicial
scorched earth practices to torment the other party.” Frydman,
172 F. Supp. 3d at 658.
On August 26, 2016, this Court referred the case to
Magistrate Judge Cott for general pre-trial, including for
scheduling and discovery. See Dkt. 174. The Order that is
subject to the current objections describes the relevant
chronology of events in detail. See Dkt. 258 at 2-3. In short,
on October 6, 2016, Magistrate Judge Cott set December 16, 2016
as the deadline for expert disclosure, which was memorialized in
a Scheduling Order dated October 7, 2017. See Dkt. 195 (“Parties
must exchange expert reports by December 16, 2016.”). The
Scheduling Order also set December 16, 2016 as the deadline for
fact discovery, and January 20, 2017 as the deadline for expert
discovery, meaning that all discovery would be complete by
January 20, 2017.
It is undisputed that between October 6, 2016, and December
16, 2016, the parties made various applications with respect to
discovery --- which resulted in the extension of the fact
discovery deadline to January 20, 2017, meaning that fact and

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expert discovery would conclude on the same date --- but that no
party moved to extend the deadline for expert disclosure.
The plaintiffs produced two expert reports around January
11, 2017, a little more than one week before the close of
discovery. One proposed expert was to testify regarding damages,
and the other was to testify regarding the interpretation of
certain data to help establish that the defendants had hacked
the plaintiffs’ servers. The defendants moved to strike the
expert reports and exclude the testimony of the proposed experts
pursuant to Rule 37(b)(2) of the Federal Rules of Civil
Procedure because the reports were submitted after the December
16, 2016 deadline for expert disclosure. In the Order,
Magistrate Judge Cott granted the motion and struck the expert
reports. The instant objections followed.
Federal Rule of Civil Procedure 72(a) requires this Court
to set aside any portion of the Order “that is clearly erroneous
or is contrary to law.” As a “non-dispositive matter,” a
pretrial discovery ruling is reviewed under this highly
deferential standard. See Thomas E. Hoar, Inc. v. Sara Lee
Corp., 900 F.2d 522, 525 (2d Cir. 1990). An order is clearly
erroneous if the reviewing court is “left with the definite and
firm conviction that a mistake has been committed.” See Easley
v. Cromartie, 532 U.S. 234, 242 (2001) (citation and internal
quotation marks omitted). “An order is contrary to law when it
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fails to apply or misapplies relevant statutes, case law or
rules of procedure.” Thompson v. Keane, No. 95 Civ. 2442 (SHS),
1996 WL 229887, at *1 (S.D.N.Y. May 6, 1996) (citation and
internal quotation marks omitted).
“The decision to strike an expert disclosure is entrusted
to the discretion of the . . . court.” Regalado v. Ecolab Inc.,
No. 14-CV-6020 (LGS), 2016 WL 94139, at *2 (S.D.N.Y. Jan. 7,
2016) (citation omitted); see also Eastwood v. City of N.Y., No.
05 CIV. 9483 (RJS), 2009 WL 3459206, at *2 (S.D.N.Y. Oct. 27,
2009) (“Consistently, it has been held that a magistrate’s
report resolving a discovery [dispute] between litigants should
be afforded substantial deference and be overturned only if
found to be an abuse of discretion.” (quoting Nikkal Indus.,
Ltd. v. Salton, Inc., 689 F. Supp. 187, 189 (S.D.N.Y. 1988))).
Court-imposed deadlines matter. See, e.g., Peterson v. Home
Depot U.S.A., Inc., No. 11 CIV. 5747 (ER), 2014 WL 1355622, at
*4 (S.D.N.Y. Apr. 4, 2014); Hnot v. Willis Grp. Holdings Ltd.,
No. 01-CV-6558 (GEL), 2006 WL 2381869, at *3 (S.D.N.Y. Aug. 17,
2006). The Court of Appeals has instructed that “compliance
[with discovery orders] is necessary to the integrity of our
judicial process. A party who flouts such orders does so at his
peril.” Update Art, Inc. v. Modiin Publ’g, Ltd., 843 F.2d 67, 73
(2d Cir. 1988).

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The Order was neither clearly erroneous nor contrary to
law. It was well-within Magistrate Judge Cott’s discretion to
enforce the discovery deadline for expert disclosure in this
case by striking the untimely expert reports.
The plaintiffs claim that counsel for the plaintiffs
reached an informal side agreement with counsel for one (though
not all) of the defendants to extend the deadline for expert
disclosure. For the reasons stated in the Order, the side
agreement could not have bound all of the parties in this
litigation. Dkt. 258 at 3. More importantly, whatever its merits
as between the parties, the side agreement could not override
the court’s Order. Dkt. 258 at 3-4; see also Peterson, 2014 WL
1355622, at *4 (“[A]ll deadlines are ‘final’ unless and until
the Court grants an extension.”). Given the conduct of the
parties in this litigation, it was folly for the plaintiffs to
rely on a side agreement with one of the defendants without
obtaining the court’s agreement to change the court-ordered
deadline.
The plaintiffs further argue that Magistrate Judge Cott’s
schedule for expert disclosure was ambiguous given his directive
that the parties should attempt to work out discovery issues
between themselves. For the reasons recounted in the Order, the
deadline for expert disclosure was clear. Magistrate Judge
Cott’s wistful hope that the parties in this case could resolve
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discovery disputes without court intervention (the default
assumption in the typical case) did not give the parties license
to amend unilaterally the discovery schedule. See id.; Hnot,
2006 WL 2381869, at *4 (“The real flaw in plaintiffs’ position,
however, is that regardless of what transpired at the August
2002 conference, plaintiffs subsequently failed to take even
minimally adequate steps to protect their alleged right to the
discovery now at issue.”). The parties should have sought to
resolve any perceived ambiguity with the court before the
deadline, not after. The plaintiffs have not hesitated to seek
court intervention (and submit lengthy submissions) regarding
various (often minute) issues. It was incumbent upon them to do
so here if they believed that there was an ambiguity.
The plaintiffs fault Magistrate Judge Cott for not holding
a hearing before striking the reports, but it cannot be said
that that constituted an abuse of discretion. Magistrate Judge
Cott issued the Order only after receiving submissions from the
parties. It is clear that Magistrate Judge Cott was intimately
familiar with the case, and that a hearing would not have
materially added to the record or resulted in a different
decision. See Gaus v. Conair Corp., No. 94 CIV. 5693 (KTD), 2000
WL 1277365, at *2 (S.D.N.Y. Sept. 7, 2000) (“[The Magistrate
Judge] was in the best position to evaluate the efforts made by
[the defendant] and decided that the situation did not warrant
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the type of relief requested by [the plaintiff].”). Furthermore,
the plaintiffs have filed extensive submissions in connection
with these objections and were able to raise their arguments
with this Court at a conference. This Court is satisfied that
Magistrate Judge Cott properly struck the expert reports.
The plaintiffs also point to the preclusion factors set
forth in Softel, Inc. v. Dragon Med. & Sci. Commc’ns, Inc., 118
F.3d 955 (2d Cir. 1997): “(1) the party’s explanation for the
failure to comply with the discovery order; (2) the importance
of the testimony of the precluded witness; (3) the prejudice
suffered by the opposing party as a result of having to prepare
to meet the new testimony; and (4) the possibility of a
continuance.” Id. at 961. The plaintiffs claim that Magistrate
Judge Cott failed to consider these factors in making his
ruling, and thus that the ruling is contrary to law, because the
Order failed to articulate specifically an analysis pursuant to
Softel. The argument is unpersuasive: “[J]udges are not required
to [incant] particular language when issuing rulings on nondispositive discovery issues.” Eastwood, 2009 WL 3459206, at *3.
Moreover, having considered the Softel factors, this Court
can detect no clear error in the Order. First, as already
addressed, the discovery schedule was clear, and the plaintiffs
offer no reasonable explanation for their failure to comply with
the unambiguous deadline for expert disclosure. The plaintiffs
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indicate that the defendants engaged in delaying tactics
designed to forestall depositions and discovery, which
purportedly prevented the plaintiffs from engaging experts until
a belated juncture, which delayed expert disclosure. Despite the
rhetoric, it is clear based on the submissions that the
plaintiffs were perfectly capable of engaging their experts long
before December 16, 2016, and of making their expert disclosures
by that deadline. See Softel, 118 F.3d at 961 (“[The
plaintiff’s] explanation for its failure to comply with this
deadline was that [its expert] did not have enough time to
conduct his inquiry because he did not have access to the
relevant diskettes until shortly before the deadline. This
explanation is inadequate.”). It was incumbent upon the
plaintiffs to seek redress from the court for the defendants’
alleged dilatory conduct and to obtain an extension of the
deadline for exchanging expert reports before its expiration.
Second, again notwithstanding the plaintiffs’ rhetoric, the
plaintiffs’ case is not foreclosed by the preclusion of the two
experts. The plaintiffs can still, through fact evidence,
attempt to prove their claims and establish damages. See Great
White Bear, LLC v. Mervyns, LLC, No. 06 CIV. 13358 (RMB) (FM),
2008 WL 2220662, at *6 (S.D.N.Y. May 27, 2008) (“Although
damages testimony is crucial in a breach of contract action, it
appears that nothing would preclude [the litigant] from offering
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at least some of the substance of the Report through a fact
witness.”). It is also incredible that the plaintiffs would wait
until nine days before the final discovery cut-off date to
submit the two reports if these two experts were so critical to
their case.
Finally, taking the third and fourth factors together,
permitting the expert reports would have had a cascading effect
delaying this already protracted litigation. See Rienzi & Sons,
Inc. v. N. Puglisi & F. Industria Paste Alientari S.P.A., No.
08-CV-2540 (DLI), 2011 WL 1239867, at *4 (E.D.N.Y. Mar. 30,
2011). While the plaintiffs argue that discovery would not have
had to be reopened, the practical consequence would have been to
render the January 20, 2017 close of discovery a dead letter.
See Hnot, 2006 WL 2381869, at *3-5. The expert reports were
submitted approximately nine days before the January 20, 2017
close of discovery. The defendants would have insisted on
deposing the plaintiffs’ experts, and then on retaining their
own experts for rebuttal. The result would be additional expert
reports, rebuttal expert reports, expert depositions, and other
motion practice and unanticipated discovery applications to be
resolved by the court. The parties have haggled over myriad
insignificant issues in this case that have frequently required
court intervention; there is no reason to believe that they
would have streamlined their efforts to meet the discovery
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deadline. The defendants would have been prejudiced by such a
delay.
Magistrate Judge Cott acted within his discretion in
enforcing the discovery schedule. He set a final deadline for
expert disclosure. The parties were obliged to follow it, and to
live with the potentially “severe” consequences if they failed
to do so. Design Strategy, Inc. v. Davis, 469 F.3d 284, 294 (2d
Cir. 2006); see also Hnot, 2006 WL 2381869, at *5 (“Nor is there
anything remotely unreasonable or unjust in holding plaintiffs
to major deadlines in a case management plan.”).
The Court has considered all of the arguments raised by the
parties. To the extent not specifically addressed, the arguments
are either moot or without merit. The objections are overruled.
The Clerk of Court is directed to close all open motions.
SO ORDERED.
Dated:

New York, New York
March 25, 2017

_____________/s/______________
John G. Koeltl
United States District Judge

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