“Incorrigible” Defendant’s Answer And Counterclaims Stricken For Failing To Comply With Discovery Orders

On July 13, 2015, Justice Kornreich of the New York County Commercial Division issued a decision in Herman v. Herman, 2015 NY Slip Op. 31205(U), granting a motion to strike a defendant's pleadings.

In Herman, the plaintiff sister and defendant brother each inherited 50% interests in six real estate LLCs from their father. The complaint alleged that, with the connivance of her trustee, the defendant had purchased her 50% share of the LLCs for $8 million, and then sold five of the six LLCs for $100 million. The complaint alleged that the brother and the trustee—also a defendant in the action—had conspired among themselves to conceal these transactions and the real value of the LLCs from the plaintiff.

By the time of the present decision, the defendant brother had established a long history of violating discovery orders. He and his lawyer had lied about the extent of searches they had made for e-mails, he had deleted e-mails (discovered because e-mails on the trustee's privilege log had not been produced or logged by him), and he had destroyed several of his prior wills, which allegedly named the trustee as a beneficiary, after he had been specifically ordered to produce them for in camera review. On January 20, 2015, the court issued an order conditionally striking his pleadings unless he produced or logged other missing emails by January 27, later extended to January 30. This was not done. The defendant brother also failed to produce copies of his own or the LLCs' tax returns.

Furthermore, in a related litigation between the defendant brother and the trustee, the trustee alleged that the defendant told him not to produce any documents, that he—the defendant—did not "generally produce documents that may be harmful to his position in civil litigation," and that, in his experience, "there is no penalty" for failing to comply with discovery orders. In the same vein, the defendant told his sister by e-mail that the action would last "for at least the next decade, and probably much longer than that."

Upon that record, the court granted the motion and struck the defendant’s pleading.

The court stated the applicable standard for striking a pleading:

The following factors are appropriately considered and warrant striking the answer: 1) whether the conduct prejudiced the plaintiff by impeding its ability to obtain true discovery and forcing plaintiff to spend enormous amounts of money and time to prove his or her case; 2) whether misconduct was not isolated and defendants did not attempt to correct it; and 3) whether in considering a lesser sanction, the court concluded that the wrongdoing would continue if the lawsuit was allowed to proceed.

Applying that standard to the defendant's conduct, the Court found that the defendant had lied and hidden documents for years, that he had a "strategy of disobeying the court's discovery orders," that previous imposition of sanctions "did not cause him to alter his behavior," and that he was "incorrigible."

The Court therefore dismissed the defendant's answer and all of his counterclaims and cross-claims, and further ordered that, if he failed to produce the missing tax returns, he would be "“precluded from contesting damages at the inquest."

This case shows that the Commercial Division is enforcing its obligation to prevent discovery abuses, but also that a relentlessly dishonest defendant can still take advantage of courts' "repeated provision of second and third chances [to] prolong a case for years," a problem the court itself acknowledged.