Commercial Division Blog

Posted: February 28, 2019 / Categories Commercial, Discovery/Disclosure, Sanctions

First Department Affirms Discovery Sanction

On February 26, 2019, the First Department issued a decision in Transasia Commodities Inv. Ltd. v. NewLead JMEG, LLC, 2019 NY Slip Op. 01361, affirming a discovery sanction, explaining:

Defendants-appellants' motion to vacate their default was properly denied. Defendants's failure to timely pay a $15,000 court-ordered sanction may be deemed willful, as such recent conduct was consistent with defendants-appellants' pattern of noncompliance with multiple prior discovery orders, as well as their: (i) deliberate disposal of nearly three years worth of relevant email correspondence between defendants-appellants' controlling principals, (ii) their misleading statements made to the court, (iii) their providing altered documents to plaintiff, and (iv) their assertion of counterclaims founded upon, inter alia, altered documents — which counterclaims were ultimately withdrawn after forensic study of the documents. Where a party is found to have engaged in a protracted pattern of delay and noncompliance with numerous court orders, willful and contumacious conduct may be inferred, and it is a provident exercise of discretion under such circumstances to reject the party's excuse for such conduct. As defendants-appellants failed to provide an acceptable excuse for their noncompliance with the court's October 19, 2016 order, it is unnecessary to determine whether a meritorious defense exists. Moreover, plaintiff has established it would be prejudiced if defendants-appellants' default was vacated, as defendants admittedly erased tens of thousands of relevant emails that were exchanged between defendants' two primary principals during the time period in question.

(Internal citations omitted).

A big part of complex commercial litigation is giving, receiving and evaluating evidence (this is called "discovery"). This decision discusses the problem of litigants not performing their discovery obligations and what can happen to them if they do not. Contact Schlam Stone & Dolan partner John Lundin at if you or a client has a question regarding discovery obligations (and what to do if a litigant is not honoring those obligations).