Phone: 516.746.8000
Fax: 516.393.8282
REPLY TO GARDEN CITY OFFICE
April 25, 2017
New York State Court of Appeals
Attn: Hon. John Asiello, Clerk
20 Eagle Street
Albany, New York 12207
Re: Herman v. Herman/APL-2017-00031
Dear Mr. Asiello:
Plaintiffs-Respondents, Rosemarie Herman (“Rosemarie”), in her various
capacities, including as natural guardian of Plaintiffs-Respondents Gavin Esmail and
Jesse Esmail (collectively, “Plaintiffs-Respondents”) submit this letter brief pursuant
to 22 N.Y.C.R.R. §500.11 in opposition to the appeal of Defendants-Appellants,
Maurice Herman, individually and in his various capacities, Windsor Plaza LLC, a
New York company, and Windsor Plaza LLC, a Delaware company (collectively
“Maurice” or “Defendants-Appellants”).1 Defendants-Appellants seek a reversal of
the First Department’s November 1, 2016 Decision and Order (the “Affirmance”),2
which unanimously affirmed the May 2, 2016 Decision and Order of the Honorable
Shirley W. Kornreich, (the “IAS Court”). The crux of the instant appeal is the IAS
Court’s May 2, 2016 decision to preclude Maurice from participating in a damages
inquest (the “Preclusion Order”) due to his continued disobedience of a conditional
order, dated July 13, 2015, which defaulted him as to liability and struck his
1 Unless otherwise defined, capitalized terms have the same meaning ascribed to them in Plaintiffs-
Respondents’ August 10, 2016 Brief (“Appellate Brief”) to the Appellate Division, First
Department (the “First Department”). To avoid abandonment under Rule 22 N.Y.C.R.R.
§500.11(f), Plaintiffs-Respondents incorporate their Appellate Brief, which contains a detailed
recitation of all of the points raised herein, and respectfully refer the Court thereto.
2 Herman v. Herman, 144 A.D.3d 433 (1st Dep’t 2016).
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 2
pleadings, but required the production of documents concerning damages (the
“Default Order”).
Maurice spends a large portion of his brief attempting to disavow the
judicially-established facts. He also misconstrues relevant precedent from this Court
and ignores that: (1) he continuously violated conditional orders, which mandates
preclusion as a matter of law; (2) C.P.L.R. §3216 permits the IAS Court, in its sound
discretion, to order preclusion as a sanction; and (3) Maurice’s due process rights
have not been infringed because the sanction imposed is the result of his own
misconduct. Moreover, the issue of calculating damages at the inquest has been
resolved by the First Department as a matter of law, obviating any material defense
Maurice could have availed himself of at the inquest. Accordingly, Maurice’s
contention that preclusion yielded a one-sided and inequitable inquest on that issue
is fallacious. The Preclusion Order must be affirmed, again.
STATEMENT OF THE FACTS
Plaintiffs-Respondents are compelled by Maurice’s mischaracterization of the
facts to summarize the: (a) misconduct alleged in the Complaint; (b) disobedience
that led to the Default Order; and (c) disobedience that led to the Preclusion Order.
A. Underlying Allegations Now Judicially Established
The Complaint3 avers a series of unlawful step-transactions, by which Maurice
and his friend Michael Offit (“Offit”) conspired to deprive Maurice’s sister,
Rosemarie, and her children, of their 50% interests in six prime apartment buildings
in Manhattan (the “Properties”). (Compl., ¶¶53-98.) In its most basic terms, the
Complaint alleged the following:
1. Rosemarie’s 50% interests were held in Trusts. Rosemarie and
Maurice’s parents left them equal shares of the Properties. By April 1997,
3 The IAS Court directed the parties not to re-file papers previously filed and instead cite to docket
numbers. (R244; R250, n.6.) This Court may nevertheless take judicial notice of the Complaint.
E.g., Allen v. Strough, 301 A.D.2d 11, 18 (2d Dep’t 2002) (“In New York, courts may take judicial
notice of a record in the same court of either the pending matter or of some other action”). The
Complaint and its exhibits may be found in the NYSECF system at Dockets 1 through 1-18.
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 3
Rosemarie’s 50% interest was held in two Trusts. Maurice owned his 50%
of the Properties outright.
2. Offit becomes trustee of both Trusts in 1997 and the Properties are
transferred into LLCs. In 1997, with Maurice’s aid and at his instance,
Offit became trustee of both Trusts. Maurice directed the initial drafting of
the trust that held Rosemarie’s interest in five of the Properties, which could
not be amended or revoked without Offit’s consent. The remaining
Property was held in a separate trust for Rosemarie’s benefit. Thereafter,
and without the consent of Rosemarie, Maurice and Offit purported to
transfer the Properties into LLCs, naming Maurice as the sole managing
member. This enabled the Properties to be subsequently transferred
through the LLCs rather than publicly-filed deeds.
3. The concealed 1998 Deal. On December 31, 1998, by agreement with
Offit as trustee, Maurice “acquired” the Trusts’ interests in the LLCs for
approximately $8,000,000, $3,000,000 in cash and $5,000,000 in notes
bearing interest at 7% (the “1998 Deal”) and concealed it from Rosemarie.4
4. The 1998 Deal cut Rosemarie out of a sale of the Herman Properties.
Maurice planned to sell some or all of the Herman Properties at the time of
the 1998 Deal.5
5. The concealed $101,925,000 2002 Deal. Maurice sold five of the
Properties in late 2002 for $101,925,000, representing a 745% increase over
4 Although Defendants-Appellants continue to claim that Solita attested to the fairness of the 1998
Deal in the Purchase Agreement, this allegation is (1) contrary to the judicially-established facts of
the Complaint; (2) is improper due to Maurice’s default (see Woodson v. Mendon Leasing Corp.,
100 N.Y.2d 62, 717 (2003)(“defaulters are deemed to have admitted all factual
allegations contained in the complaint”); and (3) is false based on documentary evidence withheld
by Maurice for years, which directly contradicts this baseless argument. Plaintiffs-Respondents
note that to the extent they have been able to obtain discovery, it has consistently supported the
allegations of the Complaint.
5 Documents concealed by Maurice until 2014, supported this allegation by showing that he began
selling five Herman Properties in early 1999. (Dockets 752-754.)
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 4
the values used in the 1998 Deal.6 Maurice’s own valuations of the
remaining property located at 952 Fifth Avenue, New York, NY (“952
Fifth”), and the air rights appurtenant thereto, show that what had been
equal ownership in 1997 had transmogrified into, at least, $150,000,000 for
Maurice, whereas, at most, Rosemarie only received $8,000,000.
6. The misconduct was exposed in 2010. Maurice and Offit continued to
conceal the 1998 Deal from Rosemarie until 2010.7 In or around that time,
Maurice wanted to sell 952 Fifth but was impaired from doing so because
his mother, Solita, occupies the penthouse apartment. In an attempt to oust
his mother from her apartment so a sale could be done, Maurice filed an
Article 81 guardianship proceeding against her,8 at which point an
investigation of the ownership of 952 Fifth finally revealed the 1998 Deal
and related misconduct.
The facts in the Complaint, and liability of Defendants-Appellants, are
judicially established as a result of the Default Order, which was unanimously
affirmed by the First Department, Herman v. Herman, 134 A.D.3d 442 (1st Dep’t
2015), and is not challenged herein. Accordingly, the judicially-established claims
against Defendants-Appellants, include claims for, inter alia, breach of fiduciary
duty, unjust enrichment and constructive trust.
B. Maurice’s Disobedience that Led to the Default Order
As background, the Default Order was issued because Maurice violated over
twenty Court directives concerning discovery extending to, at least, seven different
areas, as he:
1. Withheld over 3,000 pages of relevant documents after corrupting their
chain of custody in June 2011. (R271-272; R276; R294-95.) The IAS
6 The 2002 Deal contract contained a confidentiality provision prohibiting disclosure to, inter alia,
Rosemarie. (Docket 1167, §6.1.)
7 Offit and Maurice agreed to conceal the 1998 Deal from Rosemarie by entering into a
confidentiality agreement. Moreover, Offit admitted that Maurice asked him to conceal the 1998
and 2002 Deals from Rosemarie and that he did so. (Docket 1135, ¶¶18-19, 23-24.)
8 Maurice was ultimately compelled to withdraw the lawsuit.
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 5
Court specifically noted Maurice had lied and his counsel had submitted a
false affirmation in respect thereof, (R271);
2. Deleted emails after the parties signed an ESI Preservation Stipulation,
(R270, R275);
3. Destroyed his wills after four orders requiring their submission for in
camera review, (R280-282);
4. Failed to properly log documents, (R272-280; R282-283);
5. Falsely stated, as did his accountant, Kenneth Kaufman ("Kaufman"), that
they did not have tax returns for the LLCs (R283-289), which the IAS Court
described as a “veritable three-card monte,” (R286);
6. Lied in his interrogatory responses, stating he was not involved in creating
the 1991 Trust, (Docket 1142, ¶1(a)), when discovery established otherwise
(Docket 1139); and
7. Solicited Kaufman to destroy tax returns and stated in emails that he could
refuse to produce documents with impunity, (Docket 961, pp. 5-6; Docket
983).
Although one might expect that the default would have caused Maurice to start
complying with discovery orders, he did not.
C. Maurice’s Disobedience of the Conditional Default Order
In support of this appeal, Maurice conflictingly argues that he complied with
the IAS Court’s discovery directives (Defendants-Appellants’ Letter Brief (the
“Letter Brief”), 4-6), while also admitting non-compliance and arguing that “[t]he
sanction imposed by the IAS court did not fit the discovery default at issue,” (Id., 7).
In reality, the undisputed facts establish that Maurice failed to comply with the
conditional Default Order, which ordered him to:
[P]roduce the portions of his unsigned personal [tax] returns in Kaufman's
custody that report income, expenses, deductions, loans, losses, interest,
management fees and/or any other benefit he received or deduction he took
related to the LLCs in 1998 through 2003, including the K-ls issued to him.
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 6
Maurice may redact information on his personal returns that is unrelated to the
LLCs, except he shall not redact the tax year, the taxing authority's
information, his name, his address, the preparer's information, the date, the
signature lines and/or any part of the tax form (as opposed to entries thereon)
.…
***
ORDERED that … the motion to compel production of Maurice's
communications with Kenneth Kaufman and his accounting firm, Savastano
Kaufman & Company, LLC, is granted [and] the motion to compel production
of Maurice's personal tax returns is granted to the extent that his unsigned
personal returns … be produced redacted in accordance with this opinion; and
unless Maurice produces said redacted personal returns by the deadline, he is
precluded from contesting damages at the inquest ….;
***
ORDERED that all documents ordered to be produced herein shall by
produced within 20 days after this decision and order is filed ….
(R289-90; R295-96.) The Default Order was filed July 15, 2015. (R267.) Absent a
stay, Maurice was required to comply by August 5th. (R10.)9
On July 17, 2015 Maurice sought a stay of the Default Order from the First
Department. (R249; R317.) However, presiding Justice David Saxe told Maurice’s
counsel he had “no grounds” to withhold the tax returns, (R249), and denied the
emergency stay application holding that “Justice Kornreich’s Decision and Order
remains extant and law of the case,” (R299).10 Notwithstanding this order, Maurice
admittedly failed to produce the documents by the deadline without seeking
additional time to comply. Plaintiffs-Respondents then moved to enforce the Default
Order. (R250.)
On September 9, 2015, over a month after the deadline and the day before his
opposition to Plaintiffs-Respondents’ motion was due, Maurice’s counsel emailed
overwhelmingly redacted and incomplete copies of Maurice's tax returns, which
9 It is undisputed that Kaufman had the subject unsigned tax returns before the Default Order was
issued. (R289.)
10 The preliminary injunction was ultimately denied. (R304.)
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 7
omitted several pages and even redacted the actual tax form in contravention to the
Default Order. (R11; R250; R339.) Accordingly, Maurice’s contention that he
“produced tax returns pursuant to the initial discovery order,” (Letter Brief, 5), is
false. Furthermore, the communications with Kaufman were not produced.
Plaintiffs-Respondents outlined the discrepancies to the IAS Court.
Maurice now argues that he “did not willfully fail to comply” claiming that the
tax returns “were not in his possession thus he was reliant upon the schedule of
nonparties.” (Letter Brief, 12, n.5.) Even if, arguendo, that were true (which it is
not), Maurice admitted under oath that he did not even ask Kaufman for his tax
returns until after the initial deadline. (R11.)
Maurice next attempts to excuse his noncompliance by arguing the IAS Court’s
Orders were “ever evolving.” (Letter Brief, 5.) To the contrary, there were no
subsequent orders requiring the production of new discovery. Rather, the IAS Court
issued additional orders providing Maurice with at least three more chances to
comply, as follows:11
1. Second Order - After the initial discrepancies were outlined for the IAS
Court, it directed Maurice to submit redacted and unredacted versions of
the unsigned tax returns for in camera review. (R309.) After review, the
IAS Court ruled that “the court will give [Maurice] one last chance to avoid
preclusion at the inquest” and set a deadline to: (1) produce the Kaufman
Communications, or provide an explanatory affidavit why they do not exist;
and (2) submit an affidavit in camera stating whether any of the redacted
entries reflect monies paid to him “by entities listed thereon for any
transaction, fee, service, or loan connected with the LLCs, and if so,
Maurice shall state which entity or entities paid him, how much each one
paid him, on which returns, and why he was paid by each one” (the “Second
Chance Order”) (R310.) As stated by the IAS Court, the Second Chance
Order “was the second self-executing order,” (R12);
2. Third Order - After reviewing Maurice’s in camera affidavit, the IAS
Court found that Maurice had originally redacted entries related to the
LLCs, had not supplied the facts in his affidavit that were required by the
11 A more detailed canvassing of the events is contained in the Appellate Brief at pages 15-26.
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 8
Second Chance Order and drew “the inference that Maurice omitted these
facts because they would weigh in favor of permitting plaintiffs to see the
entries, entries necessary to prove damages.” (R312-13.) The IAS Court
ordered that “Maurice, therefore, shall produce his 1998 through 2002
Returns with all unredacted entries relating to the entities he mentions in
his affidavit” by November 23, 2015, (R312);12
3. Fourth Order - Maurice’s additional production was still overly-redacted.
Plaintiffs-Respondents sent a letter to the Court, (R395-572), which,
together with subsequent letters, (R573-593), and a transcript of a
conference showed there were still redactions related to the LLCs. The IAS
Court then ordered:
Maurice shall provide the other parties with copies of his 1998
through 2003 personal tax returns (Returns) that reveal all entries
for Sheffield Associates, Inc. (Sheffield). The LLCs did pay
monies to Sheffield, which is wholly-owned by Maurice….
Maurice redacted entries on the Returns relating to benefits he
received from the LLCs through Sheffield….
(R314). Thereafter, on December 18, 2015, Maurice produced documents including
un-redacted entries concerning Sheffield, (R603-807), establishing that all the prior
productions contravened the conditional Default Order and conditional Second
Chance Order.
More importantly, despite his assertion to the contrary, Maurice still has not
fully complied with the Default Order. Maurice never produced the Kaufman
Communications. Although he has admitted that there were communications with
Kaufman, he self-servingly claimed they are not relevant.13 Further, although
Maurice now argues that he “ultimately produced [his] fully unredacted tax returns”
12 All the entities in Maurice’s affidavit were related to the LLCs by Maurice’s own admissions.
13 Plaintiffs-Respondents offered to accept a written representation from Maurice’s counsel that,
after his personal review, the communications were not responsive to document demands, but no
representation was ever provided. (R828, p. 23, l. 20 -- p.24, l. 9; R11.)
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 9
this is false.14 Accordingly, it is impossible to determine whether Maurice has
complied with the Default Order. In this regard, the IAS Court specifically found
that Maurice failed to disclose all of the information he was required to disclose in
his affidavit, as directed in the Second Chance Order, because he intended to deprive
Plaintiffs-Respondents of information “necessary to prove damages.” (R312-13.)
Plaintiffs-Respondents moved to enforce the conditional Default Order and
subsequent Orders to preclude Maurice from participating in the inquest. Maurice
did not oppose five of Plaintiffs-Respondents’ grounds for relief and admitted to the
truth of three others (R11, R839-1044, R1067). Recognizing he might be precluded
from contesting damages, Maurice cross-moved to limit Plaintiffs-Respondents’
damages, arguing that Plaintiffs-Respondents are only entitled to the value of the
Properties in 1998 as a measure of damages. Relying on the foregoing facts, the IAS
Court denied Maurice’s cross-motion concerning damages and precluded him from
participating in the inquest ruling:
Maurice is precluded from participating in the inquest. He has been given
perhaps more chances than the law allows to comply with the conditional
order. See Keller [v. Merchant Capital Portfolios, LLC, 103 A.D.3d 532 (1st
Dep’t 2013)]. He repeatedly flouted this court’s Default and Reargument
Decisions by not complying at all, not complying on time, or only partially
complying, without offering reasonable excuses. He delayed the action and
wasted judicial resources. His actions were clearly contumacious.
(R13.)
D. The Affirmance
The First Department unanimously affirmed the Preclusion Order, including
the issue of Plaintiffs-Respondents’ measure of damages. On that issue, the Court
held that: “in light of the default judgment against him, Maurice was liable on
numerous claims in the complaint, including unjust enrichment and constructive
trust, for which plaintiffs’ damages may not be limited to out of pocket losses from
the 1998 transaction at issue ….” Herman, 144 A.D.3d at 434. Defendants-
14 Plaintiffs-Respondents have previously notified Maurice’s appellate counsel (different than his
trial counsel) that this averment is untrue. (Appellate Brief, n.22.)
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 10
Appellants failed to seek leave to appeal of this issue. (Dec. 6, 2016 Mem. of Law
in Support of Motion for Leave to Appeal at 6-12.) Hain v. Jamison, 28 N.Y.3d 524,
534 (2016)(“scope of review … is generally limited to those parts of the judgment
that have been appealed ….”). Moreover, Defendants-Appellants have abandoned
this issue by not fully addressing it in their letter brief. See 22 N.Y.C.R.R.
§500.11(f).15 Accordingly, the First Department’s ruling regarding the measure of
damages is law of the case, which permits Plaintiffs-Respondents to recover the value
realized by Maurice as a result of his misconduct. E.g., Matter of Rothko, 43 N.Y.2d
305 (1977) (permitting appreciation damages on fraud based breach of fiduciary
duties claims); Kenford Co. v. Erie Cnty., 108 A.D.2d 132, 137 (4th Dep’t 1985) aff'd,
67 N.Y.2d 257 (1986)(“It is well settled in New York that in a breach of contract case
a plaintiff may recover not only losses sustained, but also gains prevented”); Simonds
v. Simonds, 45 N.Y.2d 233, 243 (1978)(“A court of equity in decreeing a constructive
trust is bound by no unyielding formula. The equity of the transaction must shape the
measure of relief”).16
Here, the appreciation realized as to the five Properties sold in the 2002 Deal
has been undisputed and admitted by Maurice in his own tax returns, to wit: the
difference between the 2002 Deal and the 1998 Deal. (E.g., Docket 1, ¶17.)
Consequently, and as relevant here, Maurice’s argument that his preclusion has
prevented him from “airing” the issue of the measure of damages at an “ex parte
inquest” and prevented the Referee from having “the benefits of both sides” of the
issue is a red herring. (Letter Brief, 9.) For these reasons, the issue of whether the
IAS Court had the power to preclude Maurice is the sole issue before the Court.
Barclay's Ice Cream Co. v. Local No. 757 of Ice Cream Drivers & Emp. Union, 41
N.Y.2d 269, 271 (1977)(on an appeal of a certified question of whether an order was
properly made the “only inquiry is whether on the facts deemed to have been
established the Appellate Division had power to grant the injunctive relief that it did;
15 Although Defendants-Appellants contend that full briefing must be ordered herein due to the
nature and argument of the instant appeal, they have failed to even utilize the full word-count they
are permitted to use. The request must be denied as it is nothing more than an attempt to delay the
proceedings.
16 Plaintiffs-Respondents incorporate pages 49-55 of their Appellate Brief, and respectfully refer
the Court thereto for full argument on the issue.
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 11
if that power existed we do not inquire into the propriety of its exercise”)(citations
omitted).
ARGUMENT
Defendants-Appellants contend that precluding a defendant from participating
in a damages inquest is an inappropriate sanction because: (1) C.P.L.R. §3126 does
not permit preclusion as a sanction and the legislature has not amended the statute to
permit it; (2) precluding a defendant from participating in a damages inquest when
damages are not for a “sum certain” is contrary to this Court’s holding in Rokina
Optical Co. v. CameraKing, Inc., 63 N.Y.2d 728 (1984) and other precedent; and (3)
preclusion denies a defendant due process. These arguments are not only without
merit, but also completely disregard the law applicable to the enforcement of
conditional orders, which mandates the affirmance of the Preclusion Order.
POINT I
WELL-SETTLED PRECEDENT CONCERNING THE ENFORCEMENT
OF CONDITIONAL ORDERS SUPPORTS THE PRECLUSION ORDER
In order to safeguard the integrity of the judicial process, parties must comply
with Court orders. Permitting a party to disregard orders without the possibility of
facing the ultimate penalty of preclusion would permit parties to pervert the discovery
process without ramifications and to the detriment of the aggrieved party. This public
policy is supported by this Court’s determination that conditional orders are self-
executing. Wilson v. Galicia Contr. & Restoration Corp., 10 N.Y.3d 827 (2008)
(“As the conditional order was self-executing” the appellant's “failure to produce
[requested] items on or before the date certain” rendered it “absolute”)(internal
citation omitted).
In Gibbs v. St. Barnabas Hosp., 16 N.Y.3d 74, 80 (2010), this Court,
reaffirming Fiore v. Galang, 64 N.Y.2d 999 (1985), explained:
As this Court has repeatedly emphasized, our court system is dependent on
all parties engaged in litigation abiding by the rules of proper practice …. The
failure to comply with deadlines not only impairs the efficient functioning of
the courts and the adjudication of claims, but it places jurists unnecessarily in
the position of having to order enforcement remedies to respond to the
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 12
delinquent conduct of members of the bar, often to the detriment of the litigants
they represent. Chronic noncompliance with deadlines breeds disrespect for
the dictates of the Civil Practice Law and Rules and a culture in which cases
can linger for years without resolution. Furthermore, those lawyers who
engage their best efforts to comply with practice rules are also effectively
penalized because they must somehow explain to their clients why they cannot
secure timely responses from recalcitrant adversaries, which leads to the
erosion of their attorney-client relationships as well. For these reasons, it is
important to adhere to the position we declared a decade ago that “[i]f the
credibility of court orders and the integrity of our judicial system are to be
maintained, a litigant cannot ignore court orders with impunity….”
Id. at 81, 83(citing Kihl v. Pfeffer, 94 N.Y.2d 118, 123 (1999)). Lower courts
routinely enforce conditional orders as to defendants. See e.g. Winters v. Uniland
Dev. Corp., 124 A.D.3d 1356, 1357 (4th Dep’t 2015)(answer stricken where
“Defendants failed to comply with [the Court’s discovery]”); 23KT Gold
Collectibles, LTD. v. Daily News, 30 Misc.3d 1241(A), *2 (Sup. Ct. N.Y. Cty.
2011)(“According to the Court of Appeals, the self-executing nature of the
conditional order coupled with the defendants’ failure to comply rendered the order
‘absolute,’ and prevented the defendant from introducing evidence ‘tending to defeat
plaintiff's cause of action’”).
The Gibbs Court further stated “we have made clear that to obtain relief from
the dictates of a conditional order that will preclude a party from submitting evidence
in support of a claim or defense, the defaulting party must demonstrate (1) a
reasonable excuse for the failure to produce the requested items and (2) the existence
of a meritorious claim or defense.” 16 N.Y.3d at 80. Excusing a disobedient party
from a conditional order without requiring it to establish both of the foregoing
elements is improper as a matter of law. Id.; see also Keller v. Merchant Capital
Portfolios, LLC, 103 A.D.3d 532 (1st Dep’t 2013)(holding that it is reversible error
not to enforce a conditional order that has been disobeyed without a reasonable
excuse).
Here, Maurice has admittedly failed to comply with multiple conditional
orders, including the Default Order. In fact, Maurice has disobeyed at least twenty-
five directives in sixteen different orders. In opposing the motion seeking preclusion,
Maurice failed to submit a reasonable excuse for his default and in fact admitted he
did not even seek to obtain his tax returns until after the deadline set by the IAS Court
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 13
and reaffirmed by the First Department. (R10-12.) Kihl, 94 N.Y.2d at 123 (enforcing
a conditional order, this Court “underscore[d] that compliance with a disclosure order
requires both a timely response and one that evinces a good-faith effort to address the
requests meaningfully”). In the same regard, although it is not necessary to prove
willfulness to enforce a conditional order,17 the IAS Court and the First Department
both concluded Maurice’s “failure to fully comply with four court orders directing
him to produce certain documents warrants an inference of willful noncompliance.”
Herman, 144 A.D.3d at 434.
Defendants-Appellants’ criticisms of Plaintiffs-Respondents’ reliance on
Gibbs and Keller, arguing that the Court did not address the issue of full preclusion
in those cases, fail because both cases stand for the proposition that to maintain the
credibility of the courts, conditional orders must be enforced as absolute. The fact
that Gibbs concerned the dismissal of a plaintiff’s complaint because he violated a
preclusion order makes no difference. That case provides analogous support for the
matter sub judice, as a sanction precluding a defendant from participating in an
inquest represents the same type of total litigation loss that the plaintiff in Gibbs
sustained. Keller is also analogous even though the sanction imposed there was
limited to a liability default. The underlying holding of Keller remains that a party is
not permitted to disobey conditional orders, as Maurice did here, without
consequence.
Based on the foregoing law, and since Maurice admittedly did not have a
reasonable excuse for his non-compliance, the IAS Court correctly issued the
Preclusion Order because it was required to enforce the conditional Default Order as
a matter of law.
POINT II
C.P.L.R. §3126 PERMITS PRECLUSION
Aware that they cannot reverse the Preclusion Order in light of the discovery
misconduct outlined supra, Defendants-Appellants contend that the IAS Court was
17 Gibbs, 16 N.Y.3d at 82 (“the court relieves itself of the unrewarding inquiry into whether a party's
resistance was willful”)(citation omitted); accord Legarreta v. Neal, 108 A.D.3d 1067, 1070 (4th
Dep’t 2013)(citing Keller, 103 A.D.3d at 533; Gibbs, 16 NY3d at 82; Siegel, NY Prac § 367 at 608
(4th ed 2005)).
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 14
prohibited from ordering preclusion because (1) C.P.L.R. §3126 does not expressly
permit such a sanction; and (2) the Legislature has specifically excluded it from the
statute. (Letter Brief, 6-7.) Defendants-Appellants’ arguments however, focus only
on C.P.L.R. §3126(2), which allows a court to prohibit a party from supporting claims
or defenses, disregarding the rest of the statute and the precedent interpreting it.
Simply put, Defendants-Appellants’ interpretation of C.P.L.R. §3126 is wrong.
Section 3126 grants courts the authority to “make such orders with regard to
the failure or refusals as are just, among them ….” Interpreting this language, this
Court has concluded that “it is within the trial court's discretion to determine
the nature and degree of the penalty” and “the sanction will remain undisturbed
unless there has been a clear abuse of discretion.” See e.g. Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Global Strat Inc., 22 N.Y.3d 877 (2013)(citing Kihl, 94
N.Y.2d at 122; Those Certain Underwriters at Lloyds, London v. Occidental Gems,
Inc., 11 N.Y.3d 843, 845 (2008)). Defendants-Appellants’ interpretation ignores that
the statute expressly authorizes orders “as are just” and the “among them” language
in the statute makes it clear that the remedies stated are exemplary not exhaustive.
Further, their argument that the penalties available under C.P.L.R. §3126 are limited
because the statute is modeled after Federal Rule 37, is also unavailing as Rule 37
similarly provides that a court “may issue further just orders” and also uses exemplary
language stating “They may include ….” Fed. R. Civ. P. 37.
Interestingly, in opposing the underlying motion before the IAS Court,
Defendants-Appellants acknowledged the broad language of C.P.L.R. §3126,
arguing that “‘[t]he statute’s proposed penalties were not intended to be exhaustive.
The Practice Commentaries to C.P.L.R. §3126 encourage the courts to exercise their
ingenuity.…’” (R851, citations omitted.) Defendants-Appellants cannot now escape
this judicial admission. Wallace v. Envtl. Control Bd., 8 A.D.3d 78, 78 (1st Dep’t
2004)(disregarding appellant’s argument on appeal where appellant “took the
opposite position before the IAS court”).
Finally, contrary to Defendants-Appellants’ arguments concerning the
legislature, this Court has addressed the legislative intent behind C.P.L.R. §3126,
stating: “the Legislature, recognizing the need for courts to be able to command
compliance with their disclosure directives, has specifically provided that a ‘court
may make such orders … as are just’ ….” Kihl, 94 N.Y.2d at 123.
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 15
The plain language of C.P.L.R. §3126, as a whole, also supports post-default
preclusion. Sub-section (c) provides that, where a party refuses to comply with
discovery orders, the trial court may issue an “order striking out pleadings or parts
thereof … or rendering a judgment by default against the disobedient party.” In sub-
section (b), the statute also empowers the trial court to enter “an order prohibiting the
disobedient party from supporting or opposing designated claims or defenses, from
producing in evidence designated things or items of testimony … or from using
certain witnesses.” Taken together, the statute expressly permits the post-default
sanctions in the Preclusion Order which prohibited Defendants-Appellants from
opposing Plaintiffs-Respondents’ case-in-chief on the issue of damages and barred
them from supporting their defenses and producing evidence or witnesses.
The practical reality is that a trial court must be empowered to remedy post-
default discovery misconduct, including precluding a defendant from participating in
an inquest. Otherwise, a defendant will be able to withhold from plaintiff discovery
that relates to damages before the inquest, only to then have the full arsenal of trial
mechanics at his disposal at the inquest, to the detriment of the plaintiffs. In this case,
the IAS Court’s sanction did precisely that, relying on the statutorily provided
remedies under C.P.L.R. §3126 .
POINT III
PRECLUDING A DEFENDANT FROM PARTICIPATION
IS NOT CONTRARY TO PRECEDENT
Relying exclusively on Rokina Optical Co. v. Camera King, Inc., 63 N.Y.2d
728 (1984), Defendants-Appellants argue that precluding a defendant from
participating in a damages inquest when the damages are not for a “sum certain” is
“contrary to this Court’s precedent,” and “expressly disallows a non-adversarial
inquest.” (Letter Brief, 7-9, 10.) As a threshold matter, Defendants-Respondents did
not raise this argument before the IAS Court, and therefore did not preserve it.
Bingham v. N.Y. City Transit Auth., 99 N.Y.2d 355, 359 (2003)(“Unlike the Appellate
Division, we lack jurisdiction to review unpreserved issues in the interest of
justice.”).
If the Court does consider the argument, a plain reading of Rokina proves that
it does not provide Defendants-Appellants with an immutable right to participate in
the inquest for several reasons. First, Rokina is factually inapposite. The defendant
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 16
there was defaulted for the failure to respond to a single set of interrogatories and
there was no discovery misconduct after the liability default. The Court’s holding
was only that a defendant whose answer is stricken initially has the right to participate
in a damages inquest. The Court did not hold that a trial court is without power to
impose further discovery sanctions after the entry of a default judgment if the
defendant engages in post-default obstructive conduct. Nor would it make sense for
the Court to so hold, as doing so would effectively permit a defendant to violate
discovery orders with impunity after an answer has been stricken. Given the fact that
Rokina is not applicable to the issues herein, it is entirely irrelevant whether damages
are for a “sum certain.” Moreover, the reference to “sum certain” in C.P.L.R. §3215
refers to whether a clerk has the unilateral authority to enter judgment or whether the
amount of the judgment must be set by the Court, not whether a court can prevent a
party from participating in a proceeding. Accordingly, Defendants-Appellants’
attempt to contrive an argument based on this language is meritless.
Additionally, the issue of whether a defendant can be precluded from
participating at an inquest was decided in the affirmative by Appellate Division
decisions after Rokina. For example, in Settembrini v. Settembrini, 270 A.D.2d 408,
409 (2d Dep’t 2000), the Second Department recognized that the entry of a default
judgment and an order precluding a defendant’s participation at an inquest are
separate remedies that are both available in appropriate circumstances, stating:
For more than a year, the defendant had willfully disobeyed a multitude of
court orders. He repeatedly frustrated disclosure, purloined marital assets,
falsified financial documents, refused to appear for an examination before trial,
and defied requests for medical records to substantiate his claims of ill health.
Although the defendant was able to travel to Italy, Portugal, and Canada, he
claimed to be too ill to make any court appearances, including an appearance
on the date which was scheduled for trial. Accordingly, the Supreme Court
properly imposed the maximum penalty on the defendant pursuant to CPLR
3126. (see, e.g., Zletz v Wetanson, 67 NY2d 711 ….”
Id. (citations omitted); see also Langer v. Miller, 281 A.D.2d 338 (1st Dep’t 2001)
(affirming trial court order which prohibited defendant “from putting in any
affirmative proof at inquest”).
Defendants-Appellants’ contention that Settembrini only imposed “partial
preclusion” is inaccurate. Rather, in addition to ordering preclusion from introducing
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 17
evidence, the Second Department precluded defendant from cross-examining
plaintiff’s experts. Accordingly, the Second Department clearly ordered defendant’s
full preclusion (both on plaintiffs and defendants’ case in chief). Given his conduct,
it is entirely irrelevant that “Maurice is [now] ready, willing and able to proceed at a
new inquest,” (Letter Brief, 10), and permitting him to do so would run counter to
this Court’s holdings concerning conditional orders.
POINT IV
PRECLUSION HAS NOT DEPRIVED
DEFENDANTS-APPELLANTS DUE PROCESS
Defendants-Appellants’ final argument is that they have been denied due
process because the sanction “did not fit the discovery default” and has distorted the
Court’s proper function (Letter Brief, 11-12). Consequently, Defendants-Appellant
list alternative sanctions they contend the IAS Court should have ordered instead of
preclusion. Id..18
As a preliminary matter, Defendants-Appellants have also failed to preserve
this argument as it was not made before the IAS Court. Kami & Sons, Inc. v. Pipe,
248 A.D.2d 312, 313 (1st Dep’t 1998)(“Plaintiff's claim that it was denied due
process by the motion court's reliance on a Special Master's recommendation
respecting discovery is improperly raised for the first time on appeal”); Bingham, 99
N.Y.2d at 359.
As to its substance, the argument is meritless. An order denying a defendant
the right to defend is an appropriate punishment “for the suppression of material
18 Defendants-Appellants’ position implies that a court conducting an ex parte inquest will permit
a party to introduce evidence and make arguments without any regard for the law because there is
no opposing party. Courts already regularly perform this function when a party defaults by not
appearing. Joosten v. Gale, 129 A.D.2d 531, 535 (1st Dep’t 1987)(“CPLR 3215 does not
contemplate that default judgments are to be rubber-stamped once jurisdiction and a failure to
appear have been shown. Some proof of liability is also required to satisfy the court as to the prima
facie validity of the uncontested cause of action …. The standard of proof is not stringent,
amounting only to some first-hand confirmation of the facts.”)(citation omitted). Moreover,
C.P.L.R. §3215(b) provides “judgment shall not exceed in amount or differ in type from that
demanded in the complaint ….” In the unlikely event a default judgment is entered in contravention
of §3215(b), a defendant may seek relief pursuant to C.P.L.R. §5015.
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 18
evidence in its possession.” Feingold v. Walworth Bros., Inc., 238 N.Y. 446, 452
(1924) (citing Hammond Packing Co. v. Arkansas, 212 U.S. 322, 351 (1909)). Such
a punishment is necessary to protect the due process rights of the party from whom
the evidence was withheld. Black v. United States, 389 F. Supp. 529 (D.D.C. 1975)
(“Principles of due process require a court to impose Rule 37 sanctions if the
defendant refuses to produce documents which are essential for the Plaintiff to prove
his allegations or for the Plaintiff to negate the defendant's defense. The sanctions are
not imposed as a deterrent or punishment alone, although they obviously have such
an effect. Rather, the sanctions relieve the Plaintiff of a burden he should not have to
bear without the documents”). The due process rights of the withholding party are
not violated by the punishment, because it is presumed “that the refusal to produce
evidence material to the administration of [the requesting party’s] due process was
but an admission of the want of merit in the asserted defense.” Ins. Corp. of Ireland
v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 705–06 (1982)(citing Hammond
Packing, 212 U.S. at 350-51).
Defendants-Appellants falsely aver that in Feingold, this Court held that
“striking [the] answer of defendant who did not produce documents intended for
valuation was beyond the court’s power” and a violation of due process. (Letter Brief,
11.) In reality, the Feingold Court specifically acknowledged that a court's authority
“‘in a proper case’ [to] strike out an answer as punishment for disobedience of [an]
order of discovery without depriving a defendant of his property without due process
of law, is well established.” Id. at 451. The critical inquiry is whether the court “fit[s]
the punishment to the offense,” an analysis that is fact-specific. Id. at 454. The
defendants in that case failed to produce certain books and records pursuant to a court
order, and the trial court struck their answer and granted plaintiff the relief sought in
the complaint. On appeal, this Court found that the defendants had produced volumes
of documents, and that their failure to produce the remainder could only bar them
from maintaining certain defenses as to which those documents pertained.
Feingold actually supports the preclusion sanction imposed against
Defendants-Appellants in this case. The IAS Court determined that Maurice withheld
critical evidence relating to the only issue to be tried -- Plaintiffs-Respondents’
damages. Specifically, Justice Kornreich stated: “[t]he court draws the inference that
Maurice omitted these facts because they would weigh in favor of permitting
plaintiffs to see the entries, entries necessary to prove damages.” (R312-13.) It is
impossible for Plaintiffs-Respondents or the IAS Court to know the magnitude of the
Herman v. Herman/APL-2017-00031
April 25, 2017
Page 19
harm caused by the fact that this evidence was withheld, since to this day no one
knows what is contained in the Kaufman Communications and Maurice's unredacted
personal returns. Under the circumstances, and consistent with the analysis in
Feingold, precluding Maurice from participating in the damages inquest is a
punishment that “fits the offense,” because it prevents him from mounting a defense
as to the very issue he has intentionally thwarted Plaintiffs-Respondents from
proving.
Maurice also cites Oak Beach Inn. Corp. v. Babylon Beacon, Inc., 62 N.Y.2d
158 (1984), to support his due process arguments, but his reliance is again misplaced.
In Oak Beach, a discovery sanction was issued against a newspaper that refused to
reveal a news source by relying on the Shield Law, which “grants a journalist an
exemption from being ‘adjudged in contempt’ for refusing or failing to disclose the
‘source’ of any particular news item.” Id. at 166. Thus, the issue in Oak Beach was
whether a party can be sanctioned for failing to comply with discovery when the
discovery sought is protected from disclosure by statute due to constitutional
concerns relating to freedom of the press. Id. at 166 (“the CPLR should not create
new obstacles to newsgathering or undermine the strong legislative policy expressed
in the Shield Law”). Here, Maurice did not withhold evidence as a result of, or in
reliance on, some constitutional or statutory right or obligation. Rather, he had
absolutely no excuse whatsoever for his noncompliance, which renders Oak Beach
Inn completely inapplicable.
As a final point, and as set forth above, the sanction imposed by the Preclusion
Order is within the scope of C.P.L.R. §3126. That being the case, if the punishment
were unconstitutional, the statute would be as well. The Court cannot consider that
question because Defendants-Appellants have not challenged the constitutionality of
the statute, and have not notified the Attorney General as would be required if the
statute's constitutionality were challenged.
CONCLUSION
Maurice made a calculated decision that he is better off disobeying the Default
Order than complying with it. As a matter of public policy, a defendant cannot be
permitted to thwart discovery and then claim that he is entitled to participate in a
proceeding that is limited to the very issue to which the discovery relates. Such a
result would not only favor an intentional wrongdoer, but also unjustly prejudice a
}ASPAN •••
• •• SCHLESINGER ...
Herman v. Herman!APL-201 7-00031
April 25, 2017
Page 20
plaintiff. The Preclusion Order should be affirmed and the certified question
answered in the affirmative.
Respectfully submitted,
~
JASPAN SCHLESINGER LLP
Natasha Shishov, Esq.
Steven R. Schlesinger, Esq.
~~~.--
LAW OFFICES OF
CRAIG AVEDISIAN P.C.
Craig Avedisian, Esq.
Attorneys for Plaintifft-Respondents
CERTIFICATION
I certify pursuant to Rule SOO.Il(m) of the Rules of Practice of the State of
New York Court of Appeals that foregoing letter, submitted pursuant to Rule 500.11 ,
was prepared on a computer. The name of the typeface used is Times New Roman.
The total number of words in this letter, inclusive of point headings and footnotes
and exclusive of pages containing the proof of service, certificate of compliance, or
any authorized addendum containing statutes, rules, regulations, etc. is 6,846.
Dated: April25, 2017
New York, New York
Respectfully submitted,
LAW OFFICES OF
CRAIG AVEDISIAN P.C.
Craig Avedisian
60 East 42nd Street, 40th Floor
New York, New York 10165
(212) 687-8360
JASPAN SCHLESINGER LLP
;(/~
~atasha Shishov, Esq.
Steven R. Schlesinger, Esq.
300 Garden City Plaza
Garden City, New York 11530
( 5 ] 6) 7 46-8000
Attorneys for Plaintiffs-Respondents