Decided March 24, 2011.
Lefkowicz Gottfried, LLP, New York, New York, By: Mark I. Lefkowicz, Attorneys for the Plaintiffs.
Greenberg Traurig, LLP, By: Stephen Saxl, Attorneys for the Defendant.
Defendant, Counterclaim-Plaintiff here, Daily News, L.P. ("Daily News") brings this motion to enforce the Conditional Order of this Court dated November 17, 2010, against Plaintiffs, Counterclaim-Defendants here, 23KT Gold Collectibles, Ltd. ("23KT") and The Merrick Mint, Ltd. ("Merrick"). In so moving, the Daily News seeks an order striking 23KT and Merrick's Reply to Counterclaims and finding liability in favor of the Daily News on all of its counterclaims. 23KT and Merrick cross move for entry of a Protective Order in favor of 23KT and Merrick pursuant to CPLR 3103(a) and an order denying the Daily News's motion to enforce the Conditional Order.
At oral argument on a motion in 23KT Gold Collectives, Ltd. et al. v. Daily New, L.P., the parties agreed to submit this motion for consideration on their respective papers. ( See Hr'g Tr. 2, February 28, 2011.)
These motions stem from an action commenced by 23KT and Merrick in April 2009, alleging that they entered into certain agreements with the Daily News and that the Daily News breached those agreements. ( See Saxl Aff. ¶ 6.) In June 2009, the Daily News served a Verified Answer and Counterclaim. ( Id.) In December 2009, the Daily News served a Verified Amended Answer and Counterclaim. ( Id.) The Daily News alleged six causes of action against 23KT and Merrick: breach of contract, trademark infringement in violation of the Lanham Act, unfair competition in violation of the Lanham Act, common law trademark infringement and unfair competition, dilution and unjust enrichment. ( See Saxl Aff. Ex. C, ¶¶ 93-172.) In July 2010, the Court granted the Daily News's motion for summary judgment, dismissing all claims raised by 23KT and Merrick. ( See Saxl Aff. ¶ 8 and Ex. D.)
Affirmation of Stephen L. Saxl in Support of Counterclaim-Plaintiff's Motion to Enforce the Conditional Order.
At a subsequent status conference to schedule discovery for the Daily News's counterclaims, the parties, in a Preliminary Conference Order "so ordered" by the Court, set August 20, 2010, as the date by which all demands for document discovery and inspection were to be served and September 20, 2010, as the date for all responses to be served. ( Id.) The Daily News served its first request for documents on August 20, 2010. ( See Saxl Aff. ¶ 9 and Ex. E.) 23KT and Merrick failed to respond to the Daily News's document request by the September 20, 2010, deadline set in the Preliminary Conference Order. ( See Saxl Aff. ¶¶ 9-10.) The Daily News, in an attempt to avoid judicial intervention, agreed to extend 23KT's and Merrick's deadline to respond to the document request to October 15, 2010. ( See Saxl Aff. ¶ 10.) On October 19, 2010, 23KT and Merrick served their response to the Daily News's document request. ( See Saxl Aff. ¶ 11 and Ex. G.) The response did not include objections to any requests made by the Daily News and attested that it included "all relevant documents and records." ( Id.)
As a result of 23KT's and Merrick's failure to provide document discovery that was responsive to the Daily News's request, the Court entered a Conditional Order against 23KT and Merrick. ( See Saxl Aff. ¶ 16 and Ex. A.) The Conditional Order provides:
Counterclaim-Defendant shall produce all relevant documents responsive to Counterclaim-Plaintiff's August 20, 2010, request for production on or before December 10, 2010. If Counterclaim-Defendant fails to comply by December 10, 2010, its reply to counterclaims shall be stricken and a finding of liability on all counterclaims entered in favor of Counterclaim-Plaintiff.
( See Saxl Aff. Ex. A.) On December 14, 2010, the Daily News received 23KT's and Merrick's response to the document request. ( See Saxl Aff. ¶ 17 and Ex. K.) 23KT's and Merrick's response consisted of nine documents, eight of which were previously produced. ( Id.) Additionally, for the first time, 23KT and Merrick included objections in their response. ( See Saxl Aff. ¶ 19 and Ex. K.) Based on the foregoing, the Daily News moves to have the Court enforce the Conditional Order against 23KT and Merrick due to their failure to provide responsive discovery. 23KT and Merrick cross move for a Protective Order on the grounds that the Daily News abused discovery by serving overly broad and burdensome demands.
Enforcement of the Conditional Order
CPLR 3126 authorizes courts to issue an order in response to a party's refusal to obey a disclosure order, including an order striking pleadings. The Court of Appeals has taken the position that, in order to maintain the credibility of court orders and the integrity of the judicial system, litigants cannot ignore such orders without consequence. Kihl v. Pfeffer, 94 NY2d 118, 123 (1999) (affirming dismissal of complaint for failure to respond to interrogatories within the timeframe set by the court's preliminary conference order). In Wilson v. Galicia Contracting Restoration Corp., the trial court, after defendants failed to comply with the court's preliminary conference order, issued a self-executing conditional order directing defendants to comply by a set date or have their answer stricken. 10 NY3d 827, 828-9 (2008). When the defendant failed to comply, the court enforced its order. Id. at 829. 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." Id. at 830.
In order to defeat enforcement of a conditional order, the defaulting party must demonstrate a reasonable excuse for its failure to produce the requested documents and a meritorious claim or defense through an affidavit. Gibbs v. St. Barnabas Hospital, 2010 NY Slip Opinion 9198 at *4 (Dec. 16, 2010).Where these two conditions cannot be met, the court may enforce its conditional order. See B.E.N. Trading Corp. v. Shirley Import, Inc. , 68 AD3d 629 , 630 (1st Dept. 2009) (striking answer due to defendant's failure to offer a reasonable excuse for failing to comply with discovery orders upheld); DeRiggi v. Brady , 68 AD3d 487 (1st Dept. 2010) (striking answer due to defendant's unexplained failure to comply with disclosure orders upheld).
23KT and Merrick do not dispute that the Conditional Order entered by the Court on November 17, 2010, is self-executing. ( See Lefkowicz Aff. ¶ 5.) Therefore, it falls to 23KT and Merrick to demonstrate a reasonable excuse for its failure to comply with the Conditional Order and a meritorious claim or defense to the Daily News's claims. 23KT and Merrick have not submitted an affidavit demonstrating a meritorious defense to the Daily News's counterclaims. Since 23KT and Merrick failed to demonstrate one of the two elements required to defeat the Daily News's motion to enforce the Conditional Order, the Daily News's motion to enforce the Conditional Order must be granted.
Affirmation of Mark I. Lefkowicz in Opposition of Motion to Enforce Conditional Order and in Support of Cross Motion for a Protective Order.
CPLR 3103(a) empowers courts to issue a protective order restricting the use of a disclosure device in order to prevent abuse of the disclosure process. CPLR 3122(a) requires a party objecting to disclosure requests to serve its objection stating, with reasonable particularity, the reason for each objection, within twenty days of service of the disclosure request. Generally, the failure to timely move for a protective order prohibits the court from inquiring into the propriety of the disclosure requests. Alaten Co. v. Solil Management Corp., 181 AD2d 466, 466 (1st Dept. 1992). However, if the disclosure demands are "palpably improper," the timeliness of the motion is no longer a bar. Id.
A disclosure demand may be "palpably improper" for several reasons. A disclosure demand may be "palpably improper" when it seeks material that is irrelevant to the issue in controversy. Duhe v. Midence , 1 AD3d 279 , 280 (1st Dept. 2003). An overly broad and unduly burdensome demand may also be "palpably improper." Haller v. North Riverside Partners, 189 AD2d 615, 616 (1st Dept. 1993) (requests for all correspondence relating to the corporation and defendants); Saratoga Harness Racing, Inc. v. Roemer, 274 AD2d 887, 889 (3d Dept. 2000) (request for financial records for a three year period). A request for confidential information, such as tax returns, is "palpably improper" unless the requesting party can demonstrate the information is indispensible to its claim and otherwise unobtainable. Saratoga Harness Racing, 274 AD2d at 889.
The Daily News served its disclosure requests on 23KT and Merrick on August 20, 2010, the date set by the Preliminary Conference Order. ( See Saxl Aff. Ex. E.) 23KT and Merrick failed to make a timely objection to the Daily News's disclosure requests by the September 20, 2010, deadline set by the Preliminary Conference Order. ( See Saxl Aff. ¶ 11 and Ex. G.) 23KT and Merrick did also not move for a protective order at that time. 23KT and Merrick included objections in their supplemental response, which was served after the deadline for such response set by the Conditional Order, to the Daily News's disclosure request. ( See Saxl Aff. ¶ 17 and Ex. K.) 23KT and Merrick did not move for a protective order at that time.
23KT and Merrick now cross-move for a protective order (dated January 25, 2011), four months after the response deadline set by the Preliminary Conference Order and more than month after the response deadline set by the Conditional Order. ( See Lefkowicz Aff.) Therefore, the motion for a protective order is untimely and the Court is only required to consider any disclosure demands that may be "palpably improper." The documents requested by the Daily News are clearly relevant to its counterclaims. ( See supra p. 2.) Only the request in Item 8 of the disclosure request can be considered overly broad and burdensome. ( See Saxl Aff. Ex. E at 6.) Unlike the Daily News's other requests, this Item is not limited to documents related to the relationship between the Daily News and 23KT and Merrick or the subject of that relationship. The Daily News also requested all tax returns for 23KT, the New England Mint, Merrick and any other company affiliated with or under the control of 23KT. ( See Saxl. Aff. Ex. E. at 7, ¶ 10.) The Daily News did not demonstrate that this information is either indispensible to its claim or is otherwise unobtainable. It is plausible that the same information contained in the tax returns would also be included in the financial records requested in Item 9. ( See Saxl. Aff. Ex. E. at 7.)
Accordingly, it is
ORDERED that the Daily News's motion to enforce the Conditional Order, striking 23KT and Merrick's Reply to Counterclaims and finding liability in favor of the Daily News on all of its counterclaims is granted.
ORDERED that 23KT and Merrick's motion for a protective order is granted insofar as Items 8 and 10 of the disclosure request and denied as to all other Items of the disclosure requests.