Commercial Division Blog

Posted: December 9, 2019 / Categories Commercial, Discovery/Disclosure

Striking Answer and Dismissal of Counterclaims as Discovery Sanction Upheld

On November 27, 2019, the Second Department issued a decision in Sparakis v. Gozzer Corp., 2019 NY Slip Op. 08590, upholding striking an answer and dismissing counterclaims as a discovery sanction, explaining:

In July 2016, the plaintiffs served the defendants with a request for production of documents. The defendants did not respond to this demand within 20 days. On August 29, 2016, the parties appeared for a preliminary conference, and a preliminary conference order was issued, inter alia, directing the defendants to respond to the plaintiffs' discovery demand by a date certain. The defendants had not yet responded to the plaintiffs' discovery demand when the parties appeared for a compliance conference on March 7, 2017. In a compliance conference order dated March 7, 2017, the Supreme Court directed the defendants to respond to the plaintiffs' discovery demand within 20 days. The defendants failed to respond by the deadline set forth in the compliance conference order. Thereafter, pursuant to a stipulation dated May 18, 2017, the defendants acknowledged that they failed to comply with the court-ordered disclosure set forth in the preliminary conference order and the compliance conference order, and agreed to produce the documents requested in the plaintiffs' discovery demand by May 31, 2017. The stipulation further provided that in the event the defendants failed to produce the responsive documents by that date, the plaintiffs were permitted to move, without prior court approval, to strike the defendants' answer and counterclaims and for leave to enter a default judgment.

On June 12, 2017, the plaintiffs moved pursuant to CPLR 3126 to strike the defendants' answer and counterclaims and for leave to enter a default judgment against them. According to the plaintiffs, the defendants' document production was incomplete because none of the documents requested from the defendant Aktor Corporation (hereinafter Aktor) were produced. In an affirmation in opposition, the defendants' then counsel indicated that the documents requested from Aktor were inadvertently omitted from the defendants' production and that Aktor was in the process of collecting responsive documents. The record demonstrates that, after the plaintiffs' motion was fully submitted, the defendants retained new counsel, who submitted an affirmation in further opposition to the plaintiffs' motion, indicating that the defendants had produced certain limited documents from Aktor. In response, the plaintiffs' counsel asserted that the defendants' belated document production was incomplete. By order entered January 18, 2018, the Supreme Court, inter alia, granted that branch of the plaintiffs' motion which was to strike the answer and counterclaims insofar as asserted on behalf of Aktor. The defendants appeal.

The nature and degree of the penalty to be imposed pursuant to CPLR 3126 lies within the sound discretion of the Supreme Court. Although actions should be resolved on the merits where possible, a court may strike the answer of a defendant for failure to comply with court-ordered discovery where there is a clear showing that the noncompliance is willful and contumacious. Here, Aktor's willful and contumacious conduct can be inferred from its repeated failure to timely and fully respond to the plaintiffs' discovery demand, and the absence of an adequate explanation for its failure to comply with the deadlines set forth in the preliminary conference order, the compliance conference order, and the parties' stipulation.

(Internal quotations and 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).