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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: February 6, 2020

Party Sanctioned for Falsifying Document

On January 17, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Sprecase v. Tenreiro, 2020 NY Slip Op. 30155(U), sanctioning a party for falsifying a document, explaining:

Mr. Stipa moves for sanctions pursuant to 22 NYCRR § 130-1.1. A court in a civil action is authorized to award the reasonable attorneys’ fees and expenses incurred by a party as a result of the opposing party’s frivolous conduct. Conduct is frivolous for the purposes of a motion for sanctions if (i) it is completely meritless, (ii) it is done to delay or prolong the litigation or to harass or injure another party, or (iii) asserts false material statements of fact. Mr. Stipa also moves for sanctions pursuant to CPLR § 3126. In accordance with CPLR § 2136:

if any party refuses to obey an order for disclosure or willfully fails to disclose information which the court finds ought to have been disclosed pursuant to this article, the court may make such orders with regard to the failure or refusal as are just, among them: …

3. an order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or any part thereof, or rendering a judgment by default against the disobedient party . . . .

In addition to CPLR § 3126 and 22 NYCRR § 130-1.1, a court has inherent power to address actions which are meant to undermine the truth-seeking function of the judicial system and place in question the integrity of the courts and our system of justice.

At issue in this motion is an admittedly falsified document produced in discovery by Mr. Tenreiro. Counsel for Mr. Tenreiro and Ms. Braschi sent a letter to counsel for Mr. Stipa, dated October 1, 2019, stating that a document provided to Mr. Stipa in discovery purporting to be a Payment Agreement between Mr. Tenreiro and Mr. Stipa was, in fact, intentionally fabricated.

The letter states:

Please take notice that in the last two weeks, Daniel Tenreiero has advised that, while a one-page document, previously provided to you, captioned Payment Agreement and dated January 6, 2013 (the “Document,” true copy attached), correctly captures certain material terms of an oral agreement reached between Mr. Stipa and Mr. Tenreiro, reached on or about January 6, 2013, the document itself is not genuine, in the sense that Mr. Stipa did not sign it on January 6, 2013, or ever.

Pursuant to ethical rules, I am advising you of this development essentially as soon as I became aware of it.

Mr. Tenreiro has instructed me to apologize to you, and through you to Mr. Stipa for improperly creating this document and injecting it into the case. Mr. Tenreiro well understands there is no excuse or justification for it. As he explained to me, however, he reacted excessively and improperly given: (a) Mr. Stipa’s refusal to honor the oral agreement which was in fact reached by the two gentlemen on January 6, 2013; (b) Mr. Stipa’s filing a lawsuit against a family member and; (c) Mr. Stipa’s refusal to pay Daniel, or offer to pay Daniel, an amount anywhere near the reasonable value of Daniel’s services. Still, Daniel has solemnly advised me he well understands the foregoing are not an excuse or justification for his conduct – and I have elected to proceed with the representation in express reliance on that understanding.

The Payment Agreement created by Mr. Tenreiro speaks directly to the critical issues at the heart of Mr. Stipa’s claims and Mr. Tenreiro’s defenses and counterclaims. It is the proverbial “smoking gun.” Mr. Tenreiro used the Payment Agreement as leverage to pressure Mr. Stipa to withdraw his claims and went so far as to threaten sanctions against him if he failed to do so. Mr. Tenreiro falsely swore in his responses to requests for admissions that the Payment Agreement was “a true and correct copy of the original document. He falsely swore in two sets of interrogatory responses that Mr. Stipa signed the Payment Agreement on January 6, 2013, the same day that he claimed it was drafted. He also falsely represented that the Payment Agreement was genuine in multiple written communications. He fabricated not only the document itself, but also its origins, falsely claiming that he and Mr. Stipa met face-to-face, agreed on the terms and set them down in writing, and then signed in each other’s presence. Mr. Tenreiro now admits that this is completely false.

In short, Mr. Tenreiro acted in bad faith in fabricating this “smoking gun” evidence in order to defraud Mr. Stipa and the court, harass and injure Mr. Stipa, and cause unreasonable delay and expense in this litigation. This conduct warrants the imposition of sanctions. The issue before the court is what sanctions are appropriate under these circumstances.

Mr. Stipa urges the court to strike Mr. Tenreiro’s answer and counterclaims. As the First Department has observed, there is no per se rule that the pleadings must be struck in any case in which fraud is shown. The sanctions imposed must be proportionate to the particular discovery misconduct in each case. Here, striking Mr. Tenreiro’s answer and counterclaims would be an extreme measure that would deprive him of his day in court. Importantly, Mr. Tenreiro came forward and admitted to his misconduct and apologized for his behavior. Of course, Mr. Stipa may introduce evidence of Mr. Tenreiro’s fraud and misconduct to a fact finder to impeach his credibility. This would address any potential prejudice to Mr. Stipa. Under these circumstances, the court does not agree that striking Mr. Tenreiro’s answer and counterclaims is warranted.

This does not mean that his fabrication of evidence should be overlooked, however. A party’s purposeful fabrication of evidence should not be countenanced merely because the party made a decision not to rely on the evidence and to admit to its fabrication. In such a case, monetary sanctions, including attorneys’ fees, expert fees, and disbursements, are appropriate.

Mr. Stipa’s motion for sanctions is therefore granted to the extent that Mr. Tenreiro shall pay the expenses incurred by Mr. Stipa in connection with the fraudulent Payment Agreement, including the reasonable attorneys’ fees and costs of bringing this motion for sanctions and any expenses incurred in an effort to ascertain the document’s authenticity.

(Internal quotations and citations omitted).

Courts have little patience for litigants or lawyers who cross the line from creative to making frivolous arguments or who try to defraud the court. The defendat here was lucky to have a lawyer who promptly and fully dealt with his misconduct when it was discovered. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding whether an argument or action by a party has crossed the line from creative to sanctionable.

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