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Current Developments in the Commercial Divisions of the
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Posted: December 18, 2016

Default Judgment Based on Refusal to Provide Discovery Has Collateral Estoppel Effect

On December 13, 2016, the First Department issued a decision in Metro Foundation Contractors, Inc. v. Marco Martelli Associates, Inc., 2016 NY Slip Op. 08329, holding that a default judgment issued as a discovery sanction had collateral estoppel effect, explaining:

The court correctly dismissed the breach of contract causes of action as barred by the doctrine of collateral estoppel. The judgment dismissing the action brought by plaintiff in federal court against defendant’s surety (based on defendant’s alleged failure to pay plaintiff in accord with the contract), although obtained on default, is a proper basis for collateral estoppel since it resulted from plaintiff’s willful and repeated refusal to provide discovery in that action. Plaintiff may not re-litigate the contract issues against defendant, because those issues, which plaintiff had a full and fair opportunity to litigate in the federal action but affirmatively chose not to by its own failure to comply with court orders, are dispositive here.

(Internal quotations and citations omitted) (emphasis added).

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