Mason Tenders District Council of Greater New York et al v. Phase Construction Services, Inc. et al
Filing
77
OPINION AND ORDER. For the reasons set forth above, Plaintiff's motion to amend is GRANTED and Plaintiffs' motion to compel discovery is GRANTED. The Clerk of Court is respectfully directed to terminate the motions, Docs. 64, 73. It is so o rdered. re: 64 MOTION to Amend/Correct 1 Complaint, filed by Mason Tenders District Council Welfare Fund, Training Fund, Annuity Fund, Mason Tenders District Council of Greater New York, Pension Fund, John J. Virga, H ealth and Safety Fund, 73 MOTION to Compel Defendants to Produce Documents filed by Mason Tenders District Council Welfare Fund, Training Fund, Annuity Fund, Mason Tenders District Council of Greater New York, Pension Fund, John J. Virga, Health and Safety Fund. (Signed by Judge Edgardo Ramos on 11/30/2016) (rjm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
11/30/2016
MASON TENDERS DISTRICT COUNCIL OF
GREATER NEW YORK, MASON TENDERS
DISTRICT COUNCIL WELFARE FUND,
PENSION FUND, ANNUITY FUND,
TRAINING FUND, HEALTH AND SAFETY
FUND, and JOHN VIRGA,
OPINION AND ORDER
14 Civ. 6016 (ER)
Plaintiffs,
- against PHASE CONSTRUCTION SERVICES, INC.,
and SL CONSTRUCTION GROUP, INC.,
Defendants.
Ramos, D.J.:
Mason Tenders District Council of Greater New York (the “Union”), Mason Tenders
District Council Welfare Fund, Pension Fund, Annuity Fund, Training Fund, Health and Safety
Fund (together, the “Funds”) and John Virga (all together, “Plaintiffs”) bring this action against
Defendants Phase Construction Services, Inc. and SL Construction Group, Inc. alleging breach
of contract and violations of the Taft-Hartley Act, and the Employment Retirement Income
Security Act of 1974 (“ERISA”). Before the Court are Plaintiffs’ motion to amend the
Complaint to include Salvatore LaBarca and Phase NY as defendants, and Plaintiffs’ motion to
compel discovery.
For the reasons stated below, Plaintiffs’ motions are GRANTED.
I. Factual 1 and Procedural Background
The Funds are labor-management trust funds established and maintained pursuant to
various collective bargaining agreements (“CBA”). Complaint (“Compl.”) (Doc. 1) ¶ 5.
Pursuant to a CBA, employers contribute to the Funds, which in turn provide fringe benefits to
employees. Id. Defendants SL Construction Group, Inc. (“SL”) and Phase Construction
Services, Inc. (“Phase”) perform construction services in the greater New York area and
maintain an office at 55 West 39th Street (the “39th Street office”). Id. at ¶¶ 8, 10, 12. Salvatore
LaBarca is the president and chief executive officer of both Defendants. Id. at ¶¶ 9, 11. On
November 8, 2005, the Union and SL entered into a CBA requiring SL to, among other things,
remit “fringe benefit contributions” to the Funds and submit “dues checkoffs” and Political
Action Committee contributions to the Union based on the number of hours of work performed
by its Union employees. Id. at ¶ 14. The CBA also gave the Funds the right to audit SL’s books
and records to determine if it was remitting the proper amount of fringe benefit contributions. Id.
at ¶ 15. On August 1, 2014, Plaintiffs filed the instant action alleging, among other things,
breach of the CBA. Plaintiffs brought suit against both SL and Phase claiming that they were
“commonly owned and operated” and that Phase is jointly and severally liable because the
corporations maintained “integrated operations” such that they are “alter egos and/or a single
employer.” Id. at ¶ 13.
1
The following factual background is based on allegations in the Complaint, which the Court accepts as true for
purposes of the instant motion. See Koch v. Christie’s Int’l PLC, 699 F.3d 141, 145 (2d Cir. 2012). Plaintiffs have
also submitted several exhibits with their motion, see Doc. 71, of which the Court may take judicial notice, because
they are documents filed in court. See Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991) (“[C]ourts
routinely take judicial notice of documents filed in other courts, . . . not for the truth of the matters asserted in the
other litigation, but rather to establish the fact of such litigation and related filings.”).
2
Within the first two months, the parties stipulated to three extensions for Defendants to
submit an answer or otherwise respond. (Docs. 7-9) As a result, the Court directed Defendants
to respond by October 6, 2014. Defendants filed an Answer on October 7, 2014. (Doc. 10) On
December 10, 2014, the parties agreed to a Discovery Plan and Scheduling Order, providing, in
pertinent part, that joinder of additional parties and any amendment to pleadings were to be filed
by January 10, 2015; and that all discovery was to be completed by July 19, 2015. 2 (Doc. 12)
Pursuant to the discovery schedule, Plaintiffs served Defendants with interrogatories and
documents requests. Rex Whitehorn, Defendants’ counsel, advised Deke Bond, Plaintiffs’
counsel, that all of Defendants’ business records, including documents responsive to Plaintiffs’
requests, were located in Defendants’ warehouse in Deer Park, New York. Memorandum of
Law in Support of Plaintiffs’ Motion to Compel and For Sanctions (“Pl. Compel Memo”) (Doc.
73), Ex. I (Affirmation of Deke Bond). On May 8, 2015, Bond went to the warehouse to inspect
the documents and found “scores of boxes, each labeled with a company name and a year
designation.” Id. Bond noted that the latest date appearing on the boxes that had Defendants’
name on the label (or some derivation thereof) was 2013. Id. On July 10, 2015, the parties
requested an extension to complete discovery. The Court granted the request extending the
discovery deadline until October 1, 2015. (Docs. 13, 14)
LaBarca’s deposition was held on October 1, 2015, the last day of discovery. In response
to a question regarding the location of post-2013 SL and Phase documents, LaBarca testified that
because he had various bookkeepers, his records were not “that good” and that he had yet to file
taxes for 2014. Nevertheless, LaBarca made assurances that his accountants were working on
2
No deadline was set for the filing of any supplemental pleadings.
3
filing taxes for 2014 and that the underlying documents were “somewhere.” Pl. Compel Memo.
Ex. M (LaBarca Deposition 47:18-25). LaBarca also identified additional individuals who
possibly possessed relevant information, including Patricia LaBarca-Burton, LaBarca’s sister,
and Patricia Dima, his accountant. At the status conference held on October 8, 2015, Plaintiffs’
counsel informed the Court about LaBarca’s deposition and requested an extension of the
discovery deadline to depose the identified individuals and allow Defendants to produce
documents from areas other than the warehouse. 3 Defendants’ counsel joined in the extension
request, stating that it, too, had additional individuals to depose and documents to produce.
Consequently, the Court granted the parties a sixty-day extension to complete discovery until
December 8, 2015.
Following the conference, on October 22, 2015, Plaintiffs sent a letter to Defendants
highlighting LaBarca’s testimony about additional documents not stored in the warehouse, and
requested that they “produce copies of all relevant, responsive documents from those locations
that have not yet been searched.” Pl. Compel. Memo. Ex. N. Plaintiffs also requested that
Defendants comply with Plaintiffs’ demand for an audit of Defendants’ books and records for the
time period after December 29, 2013, the end date for the period of the last audit. Plaintiffs
added that they would seek Court intervention “if needed.” Id.
On November 18, 2015, Plaintiffs requested leave to file a motion to compel discovery,
claiming that Defendants had refused to make their books and records available for inspection
3
At the status conference, Whitehorn explicitly acknowledged that LaBarca’s deposition revealed new individuals
and potential documents. He stated “in addition to providing [the documents from the warehouse], [LaBarca’s]
deposition did reveal additional sources of information that we left some blanks open and the deposition transcript
for us to produce and we are going to follow up immediately.” Transcript of Oct. 8, 2015 Status Conference (Doc.
15) 4:17-20.
4
and audit by Plaintiffs and refused to produce documents located outside of the warehouse.
(Doc. 17) On December 9, 2015, the Court held a status conference at which Defendants’
counsel represented that the 39th Street office had closed and that all the documents that had been
stored in the office had been moved to the warehouse in Deer Park. Transcript of Dec. 9, 2015
Status Conference (Doc. 23) 10:7:17. The Court then directed the parties to file a joint case
management plan by December 15, with all discovery to be completed no later than February 9,
2016. 4 The Court also reserved judgment on the issue of the audit. One day after the deadline,
on December 16, the parties filed a joint motion for an extension to file the case management
plan until December 23, 2015, which the Court granted. (Docs. 21, 22)
On December 23, 2015, Plaintiffs informed the Court that the parties were unable to
reach an agreement with respect to the case management plan and filed their own discovery
plan. 5 (Doc. 25) They also apprised the Court of the conduct by Defendants’ counsel that they
claimed “impeded the progress” of a joint discovery plan, including the refusal to produce
certain documents or to respond to Plaintiffs’ request for depositions, and asked the Court to
order Defendants’ counsel to cooperate in arranging the depositions. Id. That same day,
Defendants filed their proposed discovery plan agreeing to, in pertinent part, “produce all
documents concerning SL and/or Phase which were not in the Deer Park warehouse at the time
of Mr. Bond’s visit that are within Defendants’ custody, possession or control on or before
January 25, 2016.” (Doc. 26) Five days later, on December 28, 2015, the Court adopted
Plaintiffs’ proposed discovery plan and ordered Defendants to make the previously identified
4
Prior to the status conference, on December 3, 2015, Barbara Mehlsack filed a notice of appearance on behalf of
Plaintiffs. (Doc. 19)
5
The Scheduling Order filed by Plaintiffs did not change the January 10, 2015 deadlines for filing amended
pleadings or joining additional parties. See Scheduling Order (Doc. 25, Ex. 2).
5
parties available for depositions (“Dec. 28 Discovery Order”). 6 (Doc. 27) On December 29,
2015, Defendants filed a letter objecting to the Dec. 28 Discovery Order, claiming that Plaintiffs’
discovery submission was not a “joint submission” and that Defendants were not provided an
opportunity to respond to the relief sought by Plaintiffs. (Doc. 29) In response, on December
30, the Court denied Defendants’ request to withdraw the Dec. 28 Discovery Order (“Dec. 30
Order”) and directed them to file a letter listing the specific document requests to which they
objected. (Doc. 30)
On January 8, 2016, Defendants filed their objections to Plaintiffs’ discovery requests,
claiming, among other things, that the requests were overly broad and vague or sought
confidential information. (Doc. 33) Less than one week later, on January 14, 2016, Plaintiffs’
counsel, Mehlsack, filed an emergency letter motion to extend the time for discovery to March 9,
2016, informing the Court that she had suffered major injuries as a result of a ski accident. (Doc.
34) Mehlsack also requested that the Court order Defendants to produce witnesses, including
Dima, for depositions and impose sanctions on Defendants for failure to comply with the Court’s
Dec. 30 Order, including requiring Defendants to pay attorneys’ fees. Id. Though Defendants
opposed Plaintiffs’ motion (Doc. 35), on January 27, 2016, the Court granted the extension to
March 9, 2016 and ordered Defendants to produce the parties for deposition (Doc. 36). The
Court also denied Defendants’ objections to Plaintiffs’ discovery requests (Docs. 40, 49) 7 and
6
The Dec. 28 Discovery Order provided, in part, that Defendants consented to the deposition of Dima and the
production of responsive documents prior to her deposition. Dima had previously informed Plaintiffs that she would
not produce documents without the consent of Defendants. Consequently, Plaintiffs sought confirmation from
Defendants’ counsel that Defendants consented to Dima’s production of certain documents and that she had been
given notice of Plaintiffs’ request for a deposition.
7
In its January 27, 2016 Order, the Court directed the parties to further brief the issue of production of tax returns.
Plaintiffs’ counsel requested three extensions to file a response to Defendants’ motion due to complications as a
6
ordered that all discovery be completed by April 1, 2016, with depositions completed by March
18, 2016. On March 16, 2016, the parties requested another extension to complete depositions
until April 1, 2016, due to a deponent’s family medical emergency. (Doc. 51) The Court
granted the request and ordered that all discovery be completed by April 11, 2016. (Doc. 52)
Dima’s deposition was held on March 31, 2016. Defendants’ counsel did not attend the
deposition.
On April 13, 2106, Plaintiffs sent a letter to Defendants claiming that they had not
complied with their discovery obligations and listed the document requests that were still
outstanding. Pl. Compel Memo Ex. F. The next day, at the April 14, 2016 status conference,
Mehlsack informed the Court that Plaintiffs had received only “a few assorted” documents from
Defendants dated after December 30, 2013, not including documents received from Dima.
Transcript of Apr. 14, 2016 Status Conference (Doc. 53) 2:8-18. Mehlsack also requested leave
to file a motion to amend the Complaint to include LaBarca as a defendant, explaining that
Defendants’ tax returns showed that LaBarca borrowed significant amounts of money from
Defendants and that no loan agreements were produced. Mehlsack again requested that the
Court impose a sanction – this time, an order precluding Defendants from offering any
documents that had not been produced as of that date as evidence – due to Defendants’ refusal to
produce relevant documents post December 2013. Id. at 4:19-5:9. Mehlsack further noted that
Defendants had not submitted a statement claiming either that the documents requested did not
exist or that they had already been produced. Id. at 5:10-15. Lastly, Mehlsack informed the
Court of a new corporation created by LaBarca, Phase NY, which she claimed could potentially
result of the accident Plaintiffs’ counsel suffered and confusion regarding the date the submissions were due. (Docs.
43, 47, 51) The Court granted all three extensions.
7
be liable to Plaintiffs because of LaBarca’s alleged improper borrowing of money from
Defendants. Id. at 7:2-8:9. In response, Whitehorn explained that at the deposition, LaBarca
stated that he had closed the 39th Street office in August 2015 and that all of the documents in
that office were sent to the warehouse in Deer Park. Id. at 12:12-16. Whitehorn made no
mention of Phase NY’s potential involvement in the instant action.
The Court granted Plaintiffs’ request for leave to file the instant motion to amend the
Complaint to name LaBarca as a defendant and directed Plaintiffs to file the motion by May 27,
2016. The Court also ordered Defendants to respond to Plaintiffs’ letter regarding outstanding
discovery by April 22, 2016 and suggested that Defendants submit a statement that no additional
documents existed, if in fact Defendants found that to be the case. 8 The next day, on April 15,
Plaintiffs sent Defendants a letter requesting relevant documents regarding Phase NY, claiming
that Phase NY should be “automatically” covered by the Complaint. Pl. Compel Memo. Ex. J.
Defendants responded to Plaintiffs letter on April 26, 2016, claiming that Defendants had indeed
complied with their discovery obligations and attached an affidavit from LaBarca. Id. at Ex. E.
In the affidavit, LaBarca claimed that he had “searched [his] records for any additional
responsive documents [he] understood that were being demanded and none exist.” Id.
On May 12, 2016, Plaintiffs requested leave to supplement the Complaint to name Phase
NY as a defendant. 9 (Doc. 58) Four days later, on May 16, 2016, Plaintiffs sent a letter to
8
The Court specifically stated, “if [Defendants] make a determination that documents that are requested do not
exist, just say that so that we don’t keep coming back fighting about nonexistent documents. Transcript of April 14,
2016 Status Conference 28:21-23.
9
Plaintiffs seek to supplement the Complaint pursuant to Rule 15(d) as opposed to seeking to “amend” the
Complaint because Phase NY was created after Plaintiffs filed the Complaint. See Fed. R. Civ. P. 15(d) (allowing
courts to grant motions for supplemental pleadings upon reasonable notice).
8
Defendants requesting a meet-and-confer to address the outstanding discovery disputes and
claiming that LaBarca’s affidavit was insufficient to satisfy Defendants’ Rule 34(b)(2)
obligation. Pl. Compel Memo Ex. G. On May 20, 2016, Defendants responded, acknowledging
that it was an attempt at a meet-and-confer request, but stated that “meeting and conferring to
discuss the unreasonable allegations, insinuations and accusations made in [Plaintiffs’] letter
would not be productive.” Id. at Ex. H.
The Court granted Plaintiffs’ request to file a motion to supplement the Complaint to
name Phase NY as a defendant on May 20, 2016, and directed Plaintiffs to include their
application to add Phase NY to the instant motion to amend due on May 27, 2016. (Doc. 61)
Plaintiffs timely filed the motion to amend to name LaBarca and Phase NY as defendants. (Doc.
64) In addition to asserting the claims alleged in the Complaint against LaBarca and Phase NY,
Plaintiffs’ proposed Amended Complaint also alleges new facts regarding the absence of armslength dealing between both SL and Phase; and LaBarca’s “complete domination” of Defendants
for his personal purposes. See Amended Complaint (Doc. 64, Ex. 1) at 13-14. Plaintiffs also
seek four new remedies including, (1) an order enjoining Defendants from using corporate funds
for LaBarca’s personal expenditures; (2) an order directing LaBarca to provide an accounting of
his use of corporate funds for personal purposes; (3) an order enjoining LaBarca from disposing
of any personal assets purchased or maintained with corporate funds; and (4) an order directing
the creation of a constructive trust in the proceeds from LaBarca’s disposition of personal assets
purchased or maintained with corporate funds. Id. at 43-45.
On June 28, 2016, Plaintiffs requested a pre-motion conference regarding Defendants’
alleged discovery deficiencies and sought leave to file a motion to compel. (Doc. 67) After
9
further briefing, the Court granted leave on July 14, 2016 (Doc. 72) and Plaintiffs filed the
instant motion to compel discovery on August 3, 2016 (Doc. 73).
II. Legal Standard
A. Leave To Amend
Federal Rule of Civil Procedure 15(a) provides that the “court should freely give leave [to
amend] when justice so requires.” Fed. R. Civ. P. 15. “Generally, a “district court has discretion
to deny leave for good reason, including futility, bad faith, undue delay, or undue prejudice to the
opposing party.” Holmes v. Grubman, 568 F.3d 329, 334 (2d Cir. 2009) (quoting McCarthy v.
Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007)). Where a plaintiff seeks to join
parties to its civil suit, Federal Rule of Civil Procedure 21 “is the operative rule.” Otegbade v.
N.Y. City Admin. for Children Servs., No. 12 CIV. 6298 (KPF), 2015 WL 851631, at *2
(S.D.N.Y. Feb. 27, 2015). Rule 21 permits the addition of any parties by order of the court “at
any time, on just terms.” Fed. Civ. R. P. 21; see also Momentum Luggage & Leisure Bags v.
Jansport. Inc., No. 00 Civ. 7909 (DLC), 2001 WL 58000, at *1-2 (S.D.N.Y. Jan 23, 2001).
Because an answer has been filed here, the “showing necessary under Rule 21 is the same as that
required under Rule 15(a).” Int’l Media Films, Inc. v. Lucas Entm't, Inc., No. 07 Civ. 1178
(JGK) (FM), 2008 WL 781823, at *1 (S.D.N.Y. Mar. 20, 2008).
Where, as here, a scheduling order governs amendments to the complaint, the Second
Circuit has held that the lenient standard under Rule 15(a) or Rule 21 must be balanced against
the requirement under Rule 16(b) that the Court’s scheduling order shall not be modified except
upon a showing of good cause. See Holmes, 568 F.3d at 334; Lawrence v. Starbucks Corp., No.
08 CIV. 3734 (JCF), 2009 WL 4794247, at *3 (S.D.N.Y. Dec. 10, 2009) (finding that plaintiffs
showed good cause for their delay and proceeding to analyze the proposed amendment under
10
Rules 15 and 21); see also Fresh Del Monte Produce, Inc. v. Del Monte Foods, Inc., 304 F.R.D.
170, 175 (S.D.N.Y. 2014) (listing cases noting the “obvious tension” between the standards of
Rules 15(a) and 16(b).
Nevertheless, even if a court finds good cause for plaintiff’s delay, it may still deny a
motion to amend a complaint on the basis of prejudice to the defendant or futility. Assuming the
original complaint was filed within the statute of limitations, a court must deny as futile any
claims that would be otherwise barred by the statute of limitations, unless the claims “relate
back” to the date on which the original complaint was filed. See Slayton v. Am. Express Co., 460
F.3d 215, 227-28 (2d Cir.2006). A proposed amendment is also deemed futile if the proposed
claim could not withstand a Rule 12(b)(6) motion to dismiss. Lucente v. IBM Corp., 310 F.3d
243, 258 (2d Cir. 2002).
B. Discovery
Federal district courts have broad discretion in deciding motions to compel. See Grand
Cent. P’ship. Inc. v. Cuomo, 166 F.3d 473, 488 (2d Cir. 1999). Federal Rule of Civil Procedure
26 requires that the parties to a civil action provide a copy, or description by category and
location, of all documents (among other things) that the “disclosing party has in its possession,
custody, or control and may use to support its claims or defenses.” Fed. R. Civ. P. 26(a)(1)(A).
Though the burden of demonstrating relevance is on the party seeking discovery, see, e.g.,
Mandell v. Maxon Co., No. 06 Civ. 460, 2007 WL 3022552, at *1 (S.D.N.Y. Oct. 16, 2007), a
party seeking to file a motion to compel after discovery has closed must establish good cause.
See, e.g., Gucci Am., Inc. v. Guess?, Inc., 790 F. Supp. 2d 136, 139-40 (S.D.N.Y. 2011); EngHatcher v. Sprint Nextel Corp., No. 07 Civ. 7350 (BSJ) (KNF), 2008 WL 4104015, at *3
(S.D.N.Y. Aug. 28, 2008). If a party objects to discovery requests, that party bears the burden of
11
showing why discovery should be denied. See Fin. Guar. Ins. Co. v. Putnam Advisory Co., LLC,
314 F.R.D. 85, 87-88 (S.D.N.Y. 2016).
III. Discussion
A. Motion to Amend the Complaint
i.
Plaintiffs Have Shown “Good Cause” For Their Delay
Plaintiffs argue that they have satisfied the “good cause” requirement of Rule 16 because
they were diligent in bringing the motion to amend to name LaBarca as a defendant upon
receiving sufficient information to support their claims, despite filing the motion after the
deadline set in the Dec. 28 Discovery Order. 10 Memorandum of Law in Support of Plaintiffs’
Motion to Amend Complaint (“Pl. Amend Memo”) (Doc. 65) at 11. The Scheduling Order
directed the parties to file any amendments to the pleadings by January 10, 2015. After
numerous extensions, the Court ordered that April 11, 2016 was the last day of the discovery,
though discovery issues are still outstanding. Plaintiffs filed the instant action on May 27, 2016.
Generally, a “finding of ‘good cause’ depends on the diligence of the moving party.”
Parker v. Columbia Pictures Indus., 204 F.3d 326, 339-40 (2d Cir. 2000) (noting that “in certain
cases the court may determine that the deadline cannot reasonably be met despite the diligence of
the party seeking the extension”) (internal quotation marks omitted); Port Auth. Police
Benevolent Ass’n, Inc. v. Port Auth. of N.Y. & New Jersey, No. 15 Civ. 3526 (AJN), 2016 WL
6083956, at *3 (S.D.N.Y. Oct. 17, 2016) (“Specifically, the movant must show that the deadlines
10
The “good cause” analysis does not apply to Plaintiffs’ motion to supplement the Complaint to name Phase NY as
a defendant pursuant to Federal Rule of Civil Procedure 15(d). See Beckett v. Inc. Vill. of Freeport, No. 11 Civ.
2163 (LDW) (AKT), 2014 WL 1330557, at *6 (E.D.N.Y. Mar. 31, 2014) (“[A] party seeking to supplement
pleadings under Rule 15(d) is not required to demonstrate “good cause” under Rule 16(b)(4) since this latter
provision pertains solely to motions to amend—not motions to supplement pleadings.”).
12
cannot be reasonably met despite its diligence.”) (internal quotation marks omitted). “[T]he
court may deny leave to amend where the party seeking it knew or should have known the facts
sought to be added to the complaint.” Cummins, Inc. v. N.Y. Life Ins., No. 10 Civ. 9252 (TPG),
2012 WL 3870308, at *3 (S.D.N.Y. Sept. 6, 2012).
Where delayed discovery prevented a party
from discovering facts sufficient to support a cause of action, a party must show that it acted
diligently upon learning the new facts. See e.g., Enzymotec Ltd. v. NBTY, Inc., 754 F. Supp. 2d
527, 537 (E.D.N.Y. 2010) (noting that delayed discovery and settlement negotiations deferred
plaintiff’s ability to discover facts and holding that plaintiff acted diligently by seeking leave to
file an amended complaint only two months after acquiring information). While the diligence
inquiry is the primary consideration, courts may also consider other relevant factors including
whether the proposed amendment would result in prejudice to defendants. See Kassner v. 2nd
Avenue Delicatessen Inc., 496 F.3d 229, 244 (2d Cir. 2007); see also Fresh Del Monte Produce,
Inc. v. Del Monte Foods, Inc., 304 F.R.D. 170, 175 (S.D.N.Y. 2014) (citing Kassner, 496 F.3d at
244).
Defendants claim that Plaintiffs were not diligent because they learned about LaBarca’s
potential “corporate abuses” after Plaintiffs’ May 2015 inspection of the documents at the
warehouse and after LaBarca’s deposition in October 2015. Plaintiffs filed the instant motion, at
the very least, seven months after this discovery. Memorandum of Law in Opposition to
Plaintiffs’ Motion to Amend Complaint (“Def. Opp.”) (Doc. 66), at 12. Plaintiffs claim,
however, that they did not have sufficient evidence to state a claim against LaBarca until after
they received tax returns in February 2016 and concluded the depositions of LaBarca-Burton and
Dima in March 2016. Pl. Amend Memo at 11.
13
The Court agrees with Plaintiffs. Though Plaintiffs do acknowledge that they introduced
LaBarca’s potential liability at the December 9, 2015 status conference, they are correct in noting
that an attempt to assert claims against LaBarca would have been premature at that time. 11
Plaintiffs’ Reply Memorandum of Law in Further Support of Motion to Amend Complaint (“Pl.
Amend Reply”) (Doc. 71) at 3. The basis for Plaintiffs’ claim was LaBarca’s testimony about
borrowing funds from Defendants, however, he also claimed that only Dima would know if he
had paid any of the loans back. See, e.g., Enzymotec, 754 F. Supp. 2d at 537 (noting that
plaintiff “may have suspected” that defendant breached an agreement, but finding that plaintiff
acted properly by waiting until its cause of action was “based on factual allegations, not factual
speculation”). Thus, it was proper for Plaintiffs to wait until after Dima’s deposition to seek
leave to amend.
Further, the Court notes the numerous discovery disputes that contributed to the
significant delays in document productions and depositions. As a consequence, the depositions
of LaBarca-Burton and Dima were conducted in March 2016 – over eight months after the
original discovery deadline of July 19, 2015 and less than two weeks shy of the extended
discovery deadline of April 11, 2016. Plaintiffs claim that at Dima’s deposition, they learned
that LaBarca “took hundreds of thousands of dollars from his companies,” had “no loan
agreements, paid no interest and had no business records that demonstrated if, how and when he
paid back the so-called loans.” Pl. Amend Memo. at 11-12. On April 14, 2016, only two weeks
after Dima’s deposition, Plaintiffs informed the Court of their intention to seek leave to amend
11
In response to Plaintiffs assertion of a possible theory of liability against LaBarca, Defendants explained that
Plaintiffs were relying on only two documents suggesting that “two very small” loans were made to LaBarca.
Transcript of Dec. 9, 2015 Status Conference 15:15-16:8. Defendants also claimed that there was an actual
accounting record of this loan and insisted that LaBarca did not serve as the “alter ego” of Defendants. Id.
14
the Complaint to name LaBarca as a defendant. Id. at 12. Accordingly, the Court finds that
Plaintiffs were diligent in seeking leave. See, e.g., Permatex, Inc. v. Loctite Corp., No. 03 Civ.
943, 2004 WL 1354253, at *3 (S.D.N.Y. June 17, 2004) (holding that plaintiff exhibited
diligence by moving to amend less than two months after deposition that brought new
information to light).
Plaintiffs also seek to add new claims for injunctive relief against Defendants and
LaBarca to, among other things, enjoin LaBarca from disposing of personal assets purchased
using corporate funds and enjoin Defendants from using corporate funds for LaBarca’s personal
expenditures. See Amended Complaint at 42-45. Because the deadline to add claims has also
passed, these claims must also be reviewed under the Rule 16 “good cause” standard. As was
true of the proposed amendments to add LaBarca and Phase NY as defendants, the information
that forms the basis of Plaintiffs’ additional claims against LaBarca is derived from the March
2016 depositions. Accordingly, given that the Court finds that Plaintiffs diligently sought leave
to amend to name LaBarca as a defendant, Plaintiffs have also shown good cause to amend the
Complaint to add these additional claims. See Tardif v. City of N.Y., No. 13 Civ. 4056 (KMW)
(FM), 2015 WL 9257069, at *6 (S.D.N.Y. Dec. 7, 2015), aff’d, 2016 WL 2343861 (S.D.N.Y.
May 3, 2016) (applying Rule 16 good cause standard to addition of new claims and finding that
because plaintiff did not meet good cause standard for adding defendants, plaintiff did not satisfy
good cause standard for adding accompanying new claims).
ii.
Plaintiffs’ Amendment Does Not Unduly Prejudice Defendants
Where, as here, a plaintiff has met the “good cause” standard by being diligent, courts
may still deny leave to amend the complaint if the amendment results in undue prejudice or is
15
futile. See e.g., Soroof Trading Dev. Co. v. GE Microgen, Inc., 283 F.R.D. 142, 149 (S.D.N.Y.
2012) (“leave to amend may be denied when granting leave would be prejudicial or would be
futile because the amended complaint would not survive a motion to dismiss”); see also Kassner,
496 F.3d at 244 (noting that in addition to diligence, a court may also consider “whether
allowing the amendment of the pleading at this stage of the litigation will prejudice defendants”).
Similarly, when determining whether to grant a motion to supplement a pleading pursuant to
Rule 15(d), courts should contemplate prejudice to the opposing party and, in their discretion
grant “supplementation where it will promote the economic and speedy disposition of the
controversy between the parties, will not cause undue delay or trial inconvenience, and will not
prejudice the rights of any other party.” See Andino v. Fischer, 698 F. Supp. 2d 362, 373
(S.D.N.Y. 2010) (internal quotation marks omitted).
In determining what constitutes “prejudice,” courts consider whether the assertion of the
new claim would, among other things, require defendant to expend significant additional
resources to conduct discovery and prepare for trial or significantly delay the resolution of the
dispute. AEP Energy Servs. Gas Holding Co. v. Bank of Am., N.A., 626 F.3d 699, 725 (2d Cir.
2010) (citing Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir. 1993)). Here,
Defendants claim that an amendment would impose on them significant discovery burdens,
including searching for more written discovery, re-deposing witnesses, and submitting
dispositive motions. Defs. Amend Opp. at 24. Defendants also claim that reviewing and
producing documents relevant to LaBarca and Phase NY will be expensive and once again claim
that Plaintiffs had access to these documents in May 2015. Id. at 28.
Relying on In re Am. Int’l Grp., Inc. Sec. Litig., No. 04 Civ. 8141 (JES), 2008 WL
2795141, at *3 (S.D.N.Y. July 18, 2008) (“AIG”), Defendants also claim that they did not
16
receive “fair notice” of the claims asserted against LaBarca because the claims against him are
“unique” in that they arise from “an entirely new set of operative facts.” Defs. Amend Memo at
25-26. Specifically, Defendants argue that Plaintiffs’ claims against SL and Phase derive from
alleged violations of ERISA and that Plaintiffs’ corporate veil piercing theory of liability against
LaBarca is distinct and not consistent with those claims. Lastly, Defendants highlight the history
of extensions and delay in discovery in this action and argue that additional delays would also
prejudice Defendants. Id. at 24-25.
The Court finds Defendants’ arguments unpersuasive. 12 As Plaintiffs note, the requests
12
Though Plaintiffs assert that the amendment to include LaBarca as a defendant “relates back” to the Complaint, as
required by Federal Rule of Civil Procedure 15(c)(1), Defendants do not explicitly address relation back. Instead,
Defendants argue that they would be prejudiced because Plaintiffs’ claims against LaBarca, (1) do not arise from the
same “incident,” and (2) that Defendants did not have fair notice of the potential claims against LaBarca. These
claims, however, arguably address two of the elements of the relation back doctrine. Accordingly, the Court will
briefly discuss its application.
Generally, if a “complaint is amended to include an additional defendant after the statute of limitations has run, the
amended complaint is not time barred if it ‘relates back’ to a timely filed complaint.” VKK Corp. v. Nat’l Football
League, 244 F.3d 114, 128 (2d Cir. 2001). Under Federal Rule of Civil Procedure 15(c)(1)(C), an amendment to
add an additional party relates back to the date of the original complaint if three conditions are satisfied: (1) the
amendment asserts a claim arising from the “conduct, transaction or occurrence” in the original pleading; (2) the
party to be added “received such notice of the action that it will not be prejudiced in defending on the merits;” and
(3) the party to be added “knew or should have known that the action would have been brought against it, but for a
mistake concerning the proper party’s identity.” Fed. R. Civ. P. 15(c)(1)(B-C).
Importantly, claims against any newly added defendants will not “relate back” to the date of the original complaint
where the plaintiff’s failure to name the prospective defendant was “the result of a fully informed decision as
opposed to a mistake concerning the proper defendant’s identity.” See Krupski, 560 U.S. at 541. Where a plaintiff
is aware of the alleged misconduct of a certain individual, and where a plaintiff “was not required to sue them,”
plaintiff’s failure to do so in the original complaint, “in light of [its] obvious knowledge” must be considered a
matter of choice and not a mistake. See Schoolcraft v. City of N.Y., 81 F. Supp. 3d 295, 301 (S.D.N.Y. 2015)
(quoting Cornwell v. Robinson, 23 F.3d 694, 705 (2d Cir. 1994)); see also Barrow v. Wethersfeld Police Dep’t., 66
F.3d 466, 470 (2d Cir. 1996) (“the failure to identify individual defendants when the plaintiff knows that such
defendants must be named cannot be characterized as a mistake”); Abdell v. City of New York, 05 Civ. 8453, 2006
WL 2620927, at *7 (S.D.N.Y. Sept. 12, 2012) (“Where a plaintiff fails to timely sue a potentially liable party despite
incriminating disclosures made within the statute of limitations, the Court cannot find that a mistake was made for
relation back purposes.”).
Though Plaintiffs were not required to add LaBarca as a defendant, as the Court previously discussed, Plaintiffs
were not sufficiently apprised of LaBarca’s alleged misconduct until after Dima’s deposition in March 2016. Given
17
for relevant documents concerning LaBarca were already covered in the Dec. 28 Order. 13
Moreover, since Defendants have consistently represented that no further documents exist and
that they are in complete compliance with the Court’s order, Defendants will not need to conduct
additional document searches with regard to LaBarca. Defendants’ claim that they would have
to “re-depose witnesses” is weakened by the fact that they did not attend Dima’s deposition nor
did they pose any questions to LaBarca-Burton during her deposition. Lastly, it is doubtful that
any discovery relating to Phase NY will pose a significant burden, given that Phase NY had been
in operation for approximately eight months at the time the instant motion was filed.
Defendants’ reliance on AIG is also unavailing. AIG involved a securities class action in
which the lead plaintiff sought to amend the complaint (for a third time) to include claims
concerning different time periods, different divisions of the company, different management,
different alleged objectives, different disclosures, and different shareholders.” 2008 WL
2795141 at *2. The lead plaintiff knew the basis for the proposed amendment before they filed
their motion for class certification and stipulated to a scheduling order. Id. Defendants there
that Plaintiffs named not only SL, the corporation with which it directly contracted, but also Phase through a theory
of common ownership and control, it is clear that Plaintiffs would have named LaBarca as a defendant had they
known about his alleged misconduct at the time the Complaint was filed.
Notably, Plaintiffs’ proposed claims against LaBarca are not barred by the applicable statute of limitations.
Plaintiffs simply claim that the amendment relates back in order to recover for contributions owed in 2008 and 2009,
which would be barred by the six-year statute of limitations if the Amended Complaint, filed in May 2016, did not
relate back. Further, Plaintiffs’ proposed claims against Phase NY are not subject to Rule 15(c). See Fed. R. Civ. P.
15(d) (allowing courts to grant motions for supplemental pleadings upon reasonable notice).
13
Specifically, the Dec. 28 Order directs Defendants to produce, among other things, “[a]ll documents concerning
any form of compensation, loan, lease, financial transaction or transfer of assets: a) from Phase to any owner,
officer, manager, stockholder or member of the Board of Directors of Phase; b) from Phase to any owner, officer,
manager, stockholder or member of the Board of Directors of SL; c) from SL to any owner, officer, manager,
stockholder or member of the Board of Directors of SL; and d) from SL to any owner, officer, manager, stockholder
or member of the Board of Directors of Phase.” See Dec. 28 Order Request No. I.A.4. Plaintiffs also cite to
numerous other provisions requiring Defendants to produce documents relevant to LaBarca. See Pl. Amend Memo
at 15 (Request Nos. I.A.1, 2, 3, 4, 5, 6. 7 and II.A.1, & 2).
18
argued that the amendment would impose new discovery burdens and expand the class period by
more three years. Id. The amendment also concerned “an entirely new set of documents and
custodians.” Id. Consequently, the court denied plaintiff’s leave to amend and noted that
defendants would have to redo the work they had done to prepare to oppose the motion for class
certification; the class certification process would have to restart and the hundreds of depositions
that had already been scheduled would have to be put on hold or rescheduled. Id. at *3 n.3. The
court also found that because the amendment concerned a new set of facts, the original complaint
had not afforded defendants fair notice. Id. at *3.
It is clear that the same concerns do not apply here. This is not a securities class action
involving numerous parties and hundreds of depositions. This is Plaintiffs’ first attempt at
amending the Complaint. Plaintiffs were not aware of LaBarca’s alleged conduct before the
scheduling order was filed and no leave has been sought to file dispositive motions. The
proposed amendment arises from the conduct at issue in the Complaint and does not expand the
time frame asserted in the Complaint. Though it is true that the theory of corporate veil piercing
is not explicitly asserted in the Complaint, Defendants’ characterization of this case as simply a
breach of contract or an ERISA violation is misleading. The basis for Plaintiffs’ claims against
Phase hinges on whether SL and Phase are severally and jointly liable pursuant to an alter ego
and/or single employer theory of liability. Thus, the crux of this case is in determining, what
entity, (if any) would be liable to Plaintiffs as the employer. LaBarca, as president and CEO of
both corporations (which Plaintiffs use to support their theory of alter ego and single employer
19
liability), had ample notice of Plaintiffs’ theories for recovery and his potential role in the
litigation. 14
Accordingly, the Court finds that Defendants have not sufficiently shown that they would
be prejudiced by Plaintiffs’ amendment.
iii.
Plaintiffs’ Amendment is Not Futile
As with amendments under Rule 15, courts may deny joinder of parties pursuant to Rule
21 upon a showing of undue delay, bad faith, prejudice, or futility. Joinder may be denied as
futile if the proposed pleading would not withstand a motion to dismiss pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure. See Hernandez v. Habana Room, Inc., No. 11 Civ. 1264
(RMB) (JCF), 2012 WL 423355, at *2 (S.D.N.Y. Feb. 9, 2012) (citing Oneida Indian Nation of
New York v. City of Sherrill, 337 F.3d 139, 168 (2d Cir. 2003)). To survive a motion to dismiss,
a plaintiff must allege sufficient facts to suggest the elements of a claim. See Starr v. Sony BMG
Music Entertainment, 592 F.3d 314, 321 (2d Cir. 2010) (citing Bell Atlantic v. Twombly, 550
U.S. 544, 556 (2007)). Here, Plaintiffs seek to impose liability on LaBarca by “piercing the
corporate veil” and on Phase NY using the “single employer” doctrine.
As an initial matter, Plaintiffs claim that their motion to amend to join LaBarca and Phase
NY as defendants should be granted because joinder would be appropriate here. Pl. Amend
Memo at 18. Pursuant to Rule 20, LaBarca and Phase NY may be joined as defendants if the
claims against them arise “out of the same transaction, occurrence or series of transactions or
14
Moreover, Defendants were alerted to Plaintiffs’ possible theory of liability as early as the December 2015 status
conference. Yet, Defendants did not participate in the March depositions, even though they knew that Plaintiffs
would inquire of Dima whether LaBarca had repaid loans taken from Defendants.
20
occurrences” and “any question of law or fact common to all defendants will arise in the action.”
Fed. R. Civ. P. 20(a)(2). As previously noted, there is no question that the claims that LaBarca
and Phase NY are potentially liable for breach of the trust agreement and failure to compensate
workers arise out of the same transaction or occurrence. As Plaintiffs correctly note, the “issues
of the laborers’ hours worked and their coverage under the Union Agreement are common to all
defendants.” Pl. Amend Memo at 19.
To pierce the corporate veil, Plaintiffs must establish “(i) that the owner exercised
complete dominion over the corporation with respect to the transaction at issue; and (ii) that such
domination was used to commit a fraud or wrong that injured the party seeking to pierce the
veil.” 15 Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997); see also Lin
v. Toyo Food, Inc., No. 12 Civ. 7392 (KMK), 2016 WL 4502040, at *5 (S.D.N.Y. Aug. 26,
2016). Similarly, to state a claim under the single employer theory of liability, Plaintiffs must
allege sufficient facts to show, among other things, an “interrelationship of operations, common
management, centralized control of labor relations and common ownership,” as well as “the use
of common office facilities and equipment and family connections between or among the various
enterprises.” Lihli Fashions Corp. Inc. v. N.L.R.B., 80 F.3d 743, 747 (2d Cir. 1996) (citing
Radio & Television Broadcast Tech. Local Union 1264 v. Broadcast Serv. of Mobile, Inc., 380
U.S. 255, 256 (1965) (per curiam).
15
Though Plaintiffs note that the alter ego theory can be applied broadly and flexibly in the ERISA context,
Plaintiffs apply New York law to argue that they have alleged sufficient facts to pierce the corporate veil and state a
claim against LaBarca. Defendants do not contest Plaintiffs’ use of New York law. The Court finds that Plaintiffs’
application is appropriate here. See e.g., Ret. Plan of UNITE HERE Nat. Ret. Fund v. Kombassan Holding A.S., 629
F.3d 282, 288 (2d Cir. 2010) (“The test of alter ego status is flexible, allowing courts to weigh the circumstances of
the individual case, while recognizing that the following factors are important: whether the two enterprises have
substantially identical management, business purpose, operation, equipment, customers, supervision, and
ownership.”) (internal quotation marks omitted).
21
Defendants claim that the Court should deny Plaintiffs’ motion to amend because their
allegations against LaBarca and Phase NY do not state a claim upon which relief can be granted.
Specifically, Defendants argue that Plaintiffs have not sufficiently alleged a veil piercing claim
against LaBarca because Plaintiffs’ reliance on Dima’s deposition is misplaced, in that Dima
testified that she did not observe LaBarca engaging in any illegitimate or illegal practices. Defs.
Amend. Opp. at 20-21. Defendants further contend that Plaintiffs’ allegations regarding alter
ego and single employer liability against Phase NY are conclusory and self-serving and
contradict the available facts. Id. at 14, 16. Defendants add that Phase NY is operated and
managed by a completely separate team, employs different people, and works on different
construction jobs. Id.
Defendants’ arguments are inappropriate at this stage. At the motion to dismiss stage,
Plaintiffs must simply allege sufficient facts – not affirmatively prove facts through discovery –
to state a claim upon which relief may be granted. Here, Plaintiffs have alleged that (1) LaBarca
had complete and unfettered control over the finances and operations of Defendants and Phase
NY and as such determined which creditors to pay and when; and (2) LaBarca borrowed
significant sums of money from Defendants for his personal use that he did not pay back or pay
interest on. The Court finds that these allegations are sufficient to state a claim for corporate veil
piercing against LaBarca. With respect to Phase NY, Plaintiffs allege that LaBarca created
Phase NY in November 2015 to evade and avoid the obligations of SL and Phase. Specifically,
Plaintiffs claim that Phase NY has been doing the same type of construction work performed by
Defendants for Defendants’ former customers. Plaintiffs further allege that LaBarca’s treatment
of Defendants as non-distinct entities “blur[s] the corporate lines among all three entities.”
22
Amended Complaint at 8-10. The Court finds that these allegations are also sufficient to state a
claim against Phase NY pursuant to a single employer theory of liability.
Accordingly, Plaintiffs’ motion to amend the Complaint is GRANTED.
B. Motion to Compel Discovery
Plaintiffs argue that Defendants have failed to produce relevant documents for the period
after December 31, 2013 – the last day of the previous audit period – and have not provided an
adequate explanation for their noncompliance. Pl. Compel Memo at 16. Defendants disagree
and claim that their previous document productions sufficiently comply with the Court’s
discovery orders and that LaBarca’s affidavit adequately explains that no other responsive
documents exist.16 Memorandum of Law in Opposition (“Def. Compel Opp.”) (Doc. 75) at 8-9.
Generally, “a party’s good faith averment that the items sought simply do not exist, or are
not in his possession, custody, or control, should resolve the issue of failure of production since
one “cannot be required to produce the impossible.” Menard v. Chrysler Grp. LLC, No. 14 Civ.
16
Defendants also claim that Plaintiffs’ motion to compel should be denied because Plaintiffs did not fulfill the
“meet-and-confer” requirement prior to filing their motion. Def. Compel Memo at 12. Under Rule 37, a motion to
compel must include “a certification that the movant has in good faith conferred or attempted to confer with the
person or party failing to make disclosure or discovery in an effort to obtain it without court action.” Fed. R. Civ. P.
37(a)(1). However, courts have excused the meet-and-confer requirement “where temporal exigencies required
speedy action and where efforts at informal compromise would have been clearly futile.” Prescient Partners, L.P. v.
Fieldcrest Cannon, Inc., No. 96 Civ. 7590 (DAB) (JCF), 1998 WL 67672, at *3 (S.D.N.Y. Feb. 18, 1998). Here, it
is clear that Plaintiffs attempted, via their May 16, 2016 letter, to schedule a meet and confer with Defendants before
filing their motion. See Pl. Compel Memo, Ex. G (“Pursuant to Fed. R. Civ. P. 37(a)(1) . . . [Plaintiffs] are available
to discuss with you how Defendants may remedy the [discovery] defects.”) Defendants rejected this invitation,
explicitly replying that “meeting and conferring . . . would not be productive.” Considering Defendants outright
refusal to meet and confer, and the extensive discovery disputes in this matter, the Court finds that any additional
efforts by Plaintiffs to reach a compromise would have been futile and, as such, deems Plaintiffs’ meet-and-confer
requirement satisfied.
23
6325 (VB), 2015 WL 5472724, at *1 (S.D.N.Y. July 2, 2015) (quoting Zervos v. S. S. Sam
Houston, 79 F.R.D. 593, 595 (S.D.N.Y. 1978)). “In the face of a denial by a party that it has
possession, custody or control of documents, the discovering party must make an adequate
showing to overcome this assertion.” Golden Trade S.r.L. v. Lee Apparel Co., 143 F.R.D. 514,
525 n. 7 (S.D.N.Y. 1992). In other words, Plaintiffs must cite to specific evidence to challenge
Defendants’ assertions that no additional responsive documents exist. See e.g., Margel v. E.G.L.
Gem Lab Ltd., No. 04 Civ. 1514 (PAC) (HBP), 2008 WL 2224288, at *3 (S.D.N.Y. May 29,
2008) (noting that moving party did “not cite any specific evidence impugning [the nonmovant’s] assertions that their production [was] complete” and thus court could not find basis for
misconduct); Jackson v. Edwards, No. 99 Civ. 0982 (JSR) (HBP), 2000 WL 782947, at *3-4
(S.D.N.Y. June 16, 2000) (“Since plaintiff has offered nothing to show that [defendant’s claims
that he has no responsive documents] are untrue, [plaintiff’s] motion to compel a further
response to these requests is denied.”).
Here, Plaintiffs have identified specific evidence to call into question Defendants’
contention that no further responsive documents exist. Plaintiffs first point to LaBarca’s
deposition in which he claimed that documents may exist at locations other than the warehouse,
including the 39th Street office. However, LaBarca’s affidavit does not address whether any
other locations were in fact searched. Though Defendants claim that the 39th Street office was
closed in October 2015, Defendants have made no representations regarding whether the
documents that were moved from the 39th Street office to the warehouse in Deer Park were
relevant and had been produced to Plaintiffs. Moreover, the tax returns, showing that SL and
Phase indeed continued to generate profit after 2013, further challenge Defendants’ claims that
no records exist of financial transactions or operations for 2014 and 2015. Plaintiffs’ belief that
24
documents relating to the projects from which SL and Phase profited (according to the tax
returns) is thus, not misplaced or farfetched. Nevertheless, Defendants are correct in claiming
that the existence of the tax returns does not mean that additional documents must exist. Def.
Compel Memo at 7. However, because Plaintiffs have cited to specific evidence that challenges
Defendants’ blanket assertion that no additional documents exist, the burden now shifts to
Defendants to show specifically where they have searched and why these documents are not, in
fact, within their custody, possession, or control.
Accordingly, Plaintiffs’ motion to compel discovery is GRANTED. Defendants are
therefore directed to produce all relevant documents post-December 2013, or in the alternative,
explain specifically what efforts were undertaken to find relevant documents and why relevant
documents do not exist, if in fact, that is the case.
If a court grants a motion to compel, it must, after giving an opportunity to be heard,
impose the moving party’s reasonable expenses incurred in making the motion on the party who
created the need for the motion, unless the nondisclosure was “substantially justified” or other
circumstances make such an award unjust. Fed. R. Civ. P. 37(a)(5)(A); see also Klein v. Torrey
Point Grp., LLC, 979 F. Supp. 2d 417, 442 (S.D.N.Y. 2013). To determine whether a party’s
nondisclosure was justified, courts use “an objective standard of reasonableness,” which does not
require that the non-disclosing party have acted in good faith. Bowne of New York City, Inc. v.
AmBase Corp., 161 F.R.D. 258, 262 (S.D.N.Y. 1995) (citing Pierce v. Underwood, 487 U.S.
552, 565 (1988)).
Here, the Court has extended multiple discovery deadlines, settled several discovery
disputes, and ordered Defendants to comply with discovery orders on numerous occasions. See
25
e.g., Docs. 21, 22, 27, 36, 40, 49. Plaintiffs have also made repeated requests for discovery,
which Defendants’ have disregarded. As Defendants acknowledge, Plaintiffs’ discovery requests
are not new, yet, Defendants have continued to refuse to address LaBarca’s testimony regarding
the existence of additional relevant documents and to explain the profits listed in the tax returns
dated 2014 and 2015, in light of the representation that no records exist of financial transactions
or operations for 2014 and 2015. Though Defendants have repeatedly claimed that all
responsive documents were made available to Bond when he inspected the warehouse in May
2015, Defendants have not addressed the fact that documents dated June 2015 and later (and any
documents related to Phase NY) could not have existed in the warehouse at the time. The Court
finds that Plaintiffs’ counsel made a good faith effort to obtain such information prior to filing
the motion to compel and that Defendants’ objections – which the Court has previously denied –
and their nondisclosure is not justified. Accordingly, Plaintiffs’ motion for attorneys’ fees and
costs is GRANTED.
The Court finds that no further sanctions are appropriate at this time.
26
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?