Ceglia v. Zuckerberg et al
DECISION and ORDER granting 462 Seventh Motion to Compel. Signed by Hon. Leslie G. Foschio on 8/15/2012. (SDW)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
PAUL D. CEGLIA,
MARK ELLIOT ZUCKERBERG, and
PAUL A. ARGENTIERI, ESQ.
Attorney for Plaintiff
188 Main Street
Hornell, New York 14843
BOLAND LEGAL, LLC
Attorneys for Plaintiff
DEAN M. BOLAND, of Counsel
18123 Sloane Avenue
Lakewood, Ohio 44107
GIBSON, DUNN & CRUTCHER LLP
Attorneys for Defendants
ORIN S. SNYDER, and
ALEXANDER H. SOUTHWELL, of Counsel
200 Park Avenue
New York, New York 10166-0193
THOMAS H. DUPREE, JR., of Counsel
1050 Connecticut Avenue, N.W.
Washington, District of Columbia 20036
HARRIS BEACH LLP
Attorneys for Defendants
TERRANCE P. FLYNN, of Counsel
Larkin at Exchange
726 Exchange Street
Buffalo, New York 14210
This case, referred to the undersigned be Honorable Richard J. Arcara on May
27, 2011, for all pretrial matters, is presently before the court on Defendants’ Seventh
Motion to Compel (Doc. No. 461), filed July 11, 2012 (“Defendant’s motion”).
Defendants specifically seek a court order directing Plaintiff to produce a letter referred
to as the “Kasowitz letter,” from the New York law firm of Kasowitz, Benson, Torres &
Friedman LLP (“Kasowitz”) to DLA Piper LLP (“DLA Piper”) and Lippes Mathias Wexler
Friedman LLP (“Lippes Mathias”), all law firms that formerly represented Plaintiff in this
action, in which Kasowitz advises DLA Piper and Lippes Mathias it is withdrawing from
the case based on a determination that the purported contract at issue is a fraud.
Defendants’ Memorandum of Law in Support of Their Seventh Motion to Compel and
for Other Relief (Doc. No. 461) (“Defendants’ Memorandum”), at 1. Defendants also
request the court impose sanctions against Plaintiff and his attorneys for failing to
produce the Kasowitz letter. Defendants’ Memorandum at 4. Defendants maintain they
only learned about the Kasowitz letter after the court rejected Plaintiff’s attempt to
conceal it by failing to include the Kasowitz letter in the August 29, 2011 Privilege Log
(“the Privilege Log”), on which were listed ten items that became the subject of
Defendants’ Fifth Motion to Compel (Doc. No. 294). Defendants’ Memorandum at 1-2.
After reviewing the ten Privilege Log items in camera, the undersigned, in a Decision
and Order filed April 19, 2012 D&O (Doc. No. 357) (“April 19, 2012 D&O”), directed
Plaintiff to produce, inter alia, Privilege Log Item 379 because any privilege that may
have attached to Item 379 was waived by Plaintiff’s disclosure of its contents to one
Jason Holmberg (“Holmberg”), who is not an attorney, and whose need to know the
information contained within Item 379 was not established. It was only after Plaintiff
produced Item 379 that Defendants learned the Kasowitz letter had been attached but
not also produced. Defendants’ Memorandum at 2. Accordingly, Defendants filed their
Sixth Motion to Compel (Doc. No. 381) seeking an order compelling Plaintiff to produce
the Kasowitz letter. In a Decision and Order filed June 28, 2012 (Doc. No. 457) (“June
28, 2012 D&O”), the undersigned ordered Plaintiff to produce the Kasowitz letter within
ten days, i.e., by July 9, 2012, on the basis that the contents of the Kasowitz letter had
been revealed to Holmberg, without first establishing Holmberg had any need to know
the information contained therein, and that Plaintiff, by failing to disclose the existence
of the Kasowitz letter by including such letter on Plaintiff’s Privilege Log, had waived
any privilege that otherwise could have attached to it. June 28, 2012 D&O at 43.
Plaintiff did not appeal the June 28, 2012 D&O. As Boland represented to Defendants
and the court that all documents included in Item 379 had been produced, the court
specified that Boland file with Plaintiff’s response a copy of the document Plaintiff
claimed had to have actually produced to Defendants. July 11, 2012 Text Order (Doc.
No. 464). Plaintiff, however, continues to refuse to produce the Kasowitz letter.
In opposition to Defendants’ motion, Plaintiff, on July 20, 212, filed a Response
to Seventh Motion to Compel Regarding So-Called Kasowitz Letter (Doc. No. 466)
(“Plaintiff’s Response”),1 submitting the Kasowitz letter for in camera review. Despite
two court orders, including the April 19, 2012 D&O and the June 28, 2012 D&O,
specifically calling for Plaintiff to produce the Kasowitz letter to Defendants, Plaintiff
An unredacted copy of Plaintiff’s Response was separately subm itted to the court.
now asserts, for the first time, he was not required to include the Kasowitz letter in the
Privilege Log because Plaintiff was, according to the Electronic Asset Inspection
Protocol (Doc. No. 85), agreed to by the parties and so ordered by the undersigned on
July 1, 2011, only required to include in a privilege log those documents Stroz Friedberg
LLC (“Stroz Friedberg”), a digital forensic consulting firm whose services Defendants
have retained in connection with this action, both discovered in its analysis of Plaintiff’s
electronic media and identified that Stroz Friedberg intended to produce to Defendants.
Plaintiff’s Response at 4. In further support of their motion, Defendants maintain that
Plaintiff had an independent obligation to produce or include on the Privilege Log the
Kasowitz letter regardless of whether Stroz Friedberg located or identified such
document as presumptively relevant under the Electronic Assets Inspection Protocol.
Defendants’ Reply Memorandum of Law in Support of Their Seventh Motion to Compel
(Doc. No. 467) (“Defendants’ Reply”), at 4. Defendants further maintain that because
neither the August 29, 2011 Privilege Log nor any subsequent privilege log listed the
Kasowitz letter, any privilege that otherwise could have attached to the letter has been
waived. Id. at 4-5. Defendants repeat their request for sanctions. Id. at 5-6.
Despite two court orders directing Plaintiff to produce the Kasowitz letter to
Defendants, Plaintiff submitted the Kasowitz letter to the court for in camera review.
Not only was the submission of the Kasowitz letter to the court unsolicited, but in
camera review of the letter only serves to corroborate the court’s earlier determination,
i.e., that the Kasowitz letter is relevant to the genuineness of the dispute contract, the
issue before the court on Defendants’ pending motions to dismiss, and, as such, either
should have been produced to Defendants or included in a privilege log. The failure to
include the Kasowitz letter in a privilege log, however, waives any privilege that
otherwise could have attached. See United States v. Construction Products Research,
Inc., 73 F.3d 464, 473 (2d Cir. 1996) (failure to provide adequately detailed courtordered privilege log waives privilege); see also W.D.N.Y. Local R.Civ.P. 26(e)(2)
(requiring assertion of privilege “be furnished in writing when the party responds to such
discovery or disclosure”); Robbins & Meyers, Inc. v. J.M. Huber Corp., 2010 WL
2595332, at *5 (W.D.N.Y. June 24, 2010) (plaintiff required to produce two documents
plaintiff asserted was protected because any privilege that may have attached to two
documents was waived by failing to list the documents in a privilege log provided to
defendants); Bove v. The Allied Group, 2004 WL 5902631, *1 (W.D.N.Y. Oct. 28, 2004
(failure to provide privilege log complying with local rule waives privilege); and A.I.A.
Holdings, S.A. v. Lehman Bros., Inc., 2000 WL 1538003, *3 n. 1 (S.D.N.Y. Oct. 17,
2000) (citing PKFinans Int’l. Corp. v. IBJ Schroder Leasing Corp., 1996 WL 525862, *3
(S.D.N.Y. Sep’t. 17, 1996) (“party’s failure to produce [privilege] log results in a waiver
of any privilege that might otherwise be asserted” (citing caselaw))). Accordingly,
inasmuch as it seeks to compel Plaintiff to produce the Kasowitz letter, Defendants’
Motion is GRANTED.
With regard to Defendants’ request that Plaintiff be sanctioned for failing to
comply with previous court orders, “[i]t is well settled that district courts enjoy wide
discretion in sanctioning litigants appearing before them.” Novak v. Wolpoff &
Abramson, LLP, 536 F.3d 175, 177 (2d Cir. 2008) (citing Design Strategy, Inc. v. Davis,
469 F.3d 284, 295 (2d Cir. 2006)). Further, Rule 37(b) provides a non-exclusive list of
sanctions that the court may, in its discretion, impose on a party who “fails to obey an
order to provide or permit discovery . . . .” Fed. R. Civ. P. 37(b)(2). “Provided that there
is a clearly articulated order of the court requiring specified discovery, the district court
has the authority to impose Rule 37(b) sanctions for noncompliance with that order.”
Daval steel Products v. M/V Fakredine, 951 F.2d 1357, 1363 (2d Cir. 1991) (citing
Salahuddin v. Harris, 782 F.2d 1127, 1131 (2d Cir. 1986)). See also Buffalo
Carpenters Pension Fund v. CKG Ceiling and Partition Company, 192 F.R.D. 95, 97-98
(W.D.N.Y. 2000) (observing that “Rule 37(b)(2) only enables the court to sanction a
party for failure ‘to obey an order to provide or permit discovery . . . .’” (quoting Fed. R.
Civ. P. 37(b)(2))). Rule 37(b) provides a non-exclusive list of sanctions that the court
may, in its discretion, impose on a party who ‘fails to obey an order to provide or permit
discovery . . . .” Fed.R.Civ.P. 37(b)(2). The listed sanctions, relevant to the instant
case, include “treating as contempt of court the failure to obey any order. . . .”
Fed.R.Civ.P. 37(b)(2)(A)(vii). “Whether imposed pursuant to Rule 37 or the court’s
inherent power, a contempt order is . . . a ‘potent weapon to which courts should not
resort’” except in the absence of “‘a fair ground of doubt as to the wrongfulness of the
[contemnor’s] conduct.’” Southern New England Telephone Co. v. Global NAPS Inc.,
624 F.3d 123, 143 (2d Cir. 2010) (reviewing for abuse of discretion district court’s
imposition of sanctions for failure to comply with court-ordered discovery).
In discerning whether to impose sanctions pursuant to Rule 37(b)(2)(A), district
courts consider “‘(1) the wilfulness of the non-compliant party or the reason for the
noncompliance; (2) the efficacy of lesser sanctions; (3) the duration of the period of
noncompliance; and (4) whether the non-compliant party had been warned of the
consequences of noncompliance.” Sourthern New England Telephone Co., 624 F.3d at
144 (quoting Agiwal v Mid Island Mortgage Corp., 555 F.3d 298, 302 (2d Cir. 2009)).
Not only does the text of Rule 37 require only that the district judge’s orders be “just,”
but given the district court’s “wide discretion” in imposing Rule 37 sanction, these
factors are not exclusive and each need not be resolved against the party against
whom sanctions are sought to be imposed so as to be within the court’s discretion.
Southern New England Telephone Co., 624 F.3d at 144 (internal quotation and citation
omitted). Rather, “[t]he district court is free to consider the full record in the case in
order to select the appropriate sanction.” Id. Further, upon granting a party’s motion
for sanctions pursuant to Rule 37(b)(2), “the court must order the disobedient party, the
attorney advising that party, or both to pay the reasonable expenses, including
attorney’s fees, caused by the failure, unless the failure was substantially justified or
other circumstances make an award of expenses unjust.” Fed.R.Civ.P. 37(b)(2)(C).
Here, the circumstances prompting Defendants to file their Seventh Motion to Compel
warrant the award of monetary sanctions and the costs of the motion.
Specifically, production of the Kasowitz letter has twice been ordered by the
court, including on April 19, 2012 (Doc. No. 357), and June 28, 2012 (Doc. No. 457).
That the Kasowitz letter was never disclosed in a privilege log, given its obvious
relevance to the issue of whether the contract at the heart of this litigation is genuine, is
beyond cavil. As noted, Boland failed to comply with the July 11, 2012 Text Order
directing Plaintiff provide a copy of the document Plaintiff had, as Plaintiff had
represented, actually served on Defendants. Significantly, that an unredacted copy of
the Kasowitz letter was delivered, contrary to the court’s direction, to the court, but not
provided to Defendants, confirms the Kasowitz letter was the attachment to Item 379
sought by Defendants. Moreover, the attempt to goad the court into further review of
the Kasowitz letter by its unsolicited submission to the court only served to further delay
compliance with this court’s orders. Such conduct is beyond disrespect and will not be
countenanced. Significantly, Plaintiff points to no circumstances making the award of
expenses unjust. Accordingly, Plaintiff is to be fined $ 1,000 for failing to produce the
Kasowitz letter to Defendants, and Boland is also fined $ 1,000 for interfering with the
court’s discovery orders. See Robbins & Meyers, Inc. v. J.M. Huber Corp., 2011 WL
3359998, at * (W.D.N.Y. Aug. 3, 2011) (attorney’s failure to comply with court-ordered
discovery warranted sanctions (citing Fox Industries, Inc. v. Gurovich, 2006 WL
2882580, at * 10 (E.D.N.Y. Oct. 6, 2006 ))). Further, Defendants are awarded attorneys
fees incurred in connection with their Seventh Motion to Compel.
Based on the foregoing, Defendant’s Seventh Motion to Compel (Doc. No. 462)
Plaintiff and his attorneys are hereby ORDERED to comply fully with the court’s
direction to produce the Kasowitz Letter within three (3) days of this Decision and
Order. Plaintiff is ORDERED to pay $ 1,000 to this court as a civil contempt sanction.
Boland is ORDERED to pay $ 1,000 to this court as a civil contempt sanction. The
payment of these sanctions shall be by certified check to the Clerk of the Court,
Western District of New York, and shall be made within twenty (20) days of this
Decision and Order. Defendants are directed to file affidavits of costs and attorneys’
fees incurred, consistent with this Decision and Order, within ten (10) days of this
Decision and Order; Plaintiffs’ opposition, if any, shall be filed within ten (10) days
thereafter. Any showing that the award of costs should be allocated, pursuant to
Fed.R.Civ.P. 37(b)(2)(C), between Plaintiff and his attorneys shall be included in the
required affidavits to be filed by the Plaintiff. Oral argument shall be at the discretion of
/s/ Leslie G. Foschio
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
August 15, 2012
Buffalo, New York
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