Opinion
1:20-CV-05685 (DEH)(KHP)
07-10-2024
PAPE M DIEDHIOU, Plaintiff, v. THE REPUBLIC OF SENEGAL ET AL., Defendants.
TO: THE HONORABLE DALE E. HO, UNITED STATES DISTRICT JUDGE.
REPORT AND RECOMMENDATION ON MOTION FOR SANCTIONS
KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE
Before me for a Report and Recommendation is Defendants' motion for sanctions made pursuant to Rule 11 of the Federal Rules of Civil Procedure (“Rule 11”), 28 U.S.C. § 1927 (“§ 1927”), and the Court's inherent authority. (ECF No. 123). Defendants argue that Plaintiff's claims are frivolous and, in light of newly-obtained evidence, were untruthful and made in bad faith. They request that the Court sanction Plaintiff and Plaintiff's counsel by dismissing the claims with prejudice, awarding Defendants attorneys' fees and costs incurred defending against the claims, and granting any further relief the Court deems warranted. For the reasons stated below, I recommend the motion be DENIED in its entirety without prejudice to renewing the motion following summary judgment or after trial.
BACKGROUND
The Court assumes familiarity with the background of this action, which has been previously summarized in a decision on Defendant the Republic of Senegal's (“Senegal”) motion for summary judgment, and Defendant Pierre Goudiaby's (“Goudiaby”) motion to dismiss the complaint. See Diedhiou v. Republic of Senegal, 2023 WL 5747493 (S.D.N.Y. Sept. 6, 2023). This report summarizes only those facts relevant to the underlying motion for sanctions.
Plaintiff Pape M. Diedhiou (“Diedhiou” or “Plaintiff”) alleges that he provided various services to Senegal, Goudiaby, and several of Goudiaby's companies beginning in 2007 through 2014. (ECF No. 119, Third Amended Complaint “TAC” ¶2). Goudiaby is a prominent architect who served as a special advisor to Senegal's then-President Abdoulaye Wade. (TAC ¶¶19, 20.) Goudiaby is also Diedhiou's uncle. (TAC ¶18.)
In 2007, Senegal's former Ambassador, along with Goudiaby, approached Diedhiou seeking his assistance with the development of a commercial real estate project in New York City. (TAC ¶18.) The project was intended to develop a property for Senegal's benefit. TAC ¶21. In 2008, Senegal formed Teranga, LLC (“Teranga”) for the purpose of purchasing and developing the commercial property. (TAC ¶28.) Senegal is the sole member of Teranga LLC, and Diedhiou was (and alleges he still is) the sole manager of the company. (TAC ¶29.) Diedhiou alleges that from 2007 to 2014 he provided various services to the project to develop the property including assisting with construction, permitting, designing interiors, and managing various environmental study needs. (TAC ¶36.) Diedhiou also alleges that he incurred significant out of pocket expenses (at least $128,260) in connection with the project. (TAC ¶44.) He states that “none of [his] expenses have ever been reimbursed.” (TAC ¶48.)
In addition to the out-of-pocket expenses, Diedhiou alleges that he sent an invoice to Senegal in 2016 for $1,628,650 for all services rendered to the property. (TAC ¶¶52-53.) He was directed to seek payment directly from Goudiaby. (TAC ¶54.) Diedhiou alleges that despite repeated demands for payment, neither Goudiaby nor Senegal “have ever paid Diedhiou anything for his work on the project.” (TAC ¶¶57-59.) Finally, Diedhiou alleges that Goudiaby was paid at least $2,750,000 for his work related to the project. (TAC ¶65.)
Plaintiff filed this action on July 23, 2020, initially only naming the Republic of Senegal and Teranga as defendants. (ECF No. 1.) The current complaint, the TAC, was filed on November 28, 2023, which removed Teranga as a Defendant, and added Goudiaby along with several Goudiaby-controlled entities as Defendants, although none of those additional corporate entities have been served. During discovery, Plaintiff produced only limited bank records for himself and Teranga. Plaintiff managed these bank accounts and served as signatory for these accounts. (TAC ¶¶ 28, 30; ECF No. 124-3.) Specifically, he produced a single heavily redacted bank statement from TD, which reflected a single $378,151.70 credit received from the Senegalese mission to the UN. (ECF 125-8.) The rest of the page was blank. (Id.) Plaintiff also produced a single-page redacted bank statement for a Teranga account at HSBC. Plaintiff testified in a deposition that he had done the redactions himself and he could not obtain an unredacted version of this bank statement, or any other bank records, because the records were over 7 years old and outside most banks' document retention windows. (ECF No. 75-2, Senegal's Deposition of Plaintiff, “Depo. Tr.” at 89:8-23.) During his deposition, Plaintiff also testified that Teranga only ever had one bank account at a time. Depo. Tr. at 108-110 (“We never had two or three accounts at the same time.”)
In or about January 2024, Defendants subpoenaed Plaintiff's and Teranga's bank records from HSBC Bank USA N.A. (“HSBC”) and TD Bank, N.A. (“TD”). (ECF No. 154, Transcript of May 8, 2024 Evidentiary Hearing on Motion for Sanctions, “Tr.” at 8:24-25). The records revealed that Plaintiff's company received a wire for $350,00 from a Goudiaby-associated entity five days after Senegal purchased the property that it intended to develop. (ECF No. 124-5.) The records also revealed that: 1) there were at least three bank accounts that Plaintiff controlled simultaneously, 2) Plaintiff redacted his previously-produced bank record in a way that hid transfers from Teranga to an Eva Diedhiou and another Plaintiff-controlled account and, 3) Plaintiff made numerous personal purchases in amounts ranging from $50 to $7,000 using funds in the Teranga accounts. (See ECF Nos. 124-3; 125 at 5.) Defendants contend that their review of the bank records have revealed up to $500,000 of unexplained deposits into Plaintiff's accounts. (ECF No. 125 at 7.)
Defendants served a draft of the present motion on Plaintiff on January 9, 2024, shortly after receiving bank records from HSBC. (ECF No. 124 ¶3.) Two days later, Defendants received records from TD, and informed Plaintiff that said records further supported their proposed motion. (Id. ¶4.) The parties met and conferred on January 18, 2024, and during the call Plaintiff's counsel offered to seek leave to amend the complaint to address any discrepancies between the TAC and the newly produced evidence. (Id ¶5.) Defendants stated that they would oppose any motion seeking leave to amend and “reiterated [their] demand that Plaintiff withdraw his complaint with prejudice." (Id. ¶6.) Defendants then filed the instant motion on February 2, 2024. (ECF No. 123.)
On March 5, 2024, the parties appeared before the undersigned for a day-long evidentiary hearing. At the hearing, Plaintiff and Plaintiff's counsel were questioned by counsel for the Defendants, and both parties submitted additional evidence in advance of the hearing.
LEGAL STANDARD
1. Sanctions under Rule 11
A court may impose sanctions under Rule 11 upon an attorney who presents frivolous claims in a pleading. Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., 682 F.3d 170, 177 (2d Cir. 2012). To constitute a “frivolous” position for purposes of Rule 11 sanctions, it is not enough that the arguments presented are unpersuasive. Mareno v. Rowe, 910 F.2d 1043, 1047 (2d Cir. 1990). Rather, “it must be clear under existing precedents that there is no chance of success and no reasonable argument to extend, modify or reverse the law as it stands.” Id. (citation omitted). In other words, the court should not consider whether the claims in question are “losers,” but rather whether they are “so clearly [ ] loser[s] that it is in the interest of justice to deter future plaintiffs and attorneys from prosecuting similar ones.” Toussaint v. NY Dialysis Servs., Inc., 230 F.Supp.3d 198, 223 (S.D.N.Y.), aff'd, 706 Fed.Appx. 44 (2d Cir. 2017). This is an objective standard. Oliveri v. Thompson, 803 F.2d 1265, 1275 (2d Cir. 1986).
A motion for sanctions can not be filed until at least 21 days after the motion is served on the opposing party. Fed.R.Civ.P. 111993 Advisory Committee's Note. If, during that period, the alleged violation is corrected by withdrawing (whether formally or informally) some allegation or contention, the motion should not be filed with the court. Id. These provisions are intended to provide a type of “safe harbor” against motions under Rule 11 in that a party will not be subject to sanctions on the basis of another party's motion unless, after receiving the motion, it refuses to withdraw that position or to acknowledge candidly that it does not currently have evidence to support a specified allegation. Id. Under the former rule, parties were sometimes reluctant to abandon a questionable contention lest that be viewed as evidence of a violation of Rule 11; under the revision, the timely withdrawal of a contention will protect a party against a motion for sanctions. Id.
In assessing whether sanctions are appropriate, the court should consider whether the attorney's conduct was “objectively unreasonable” at the time the pleading was signed. Id. Moreover, since Rule 11 imposes a “continuing obligation” on counsel to correct or withdraw documents that are found to lack support, a court should also consider whether it was objectively unreasonable for an attorney to “reaffirm[ ]” claims and “advocat[e] positions” after they were shown to be inaccurate. Galin v. Hamada, 753 Fed.Appx. 3, 8 (2d Cir. 2018) (citing Fed.R.Civ.P. 111993 Advisory Committee's Note) (affirming decision not to impose sanctions based on the filing of the complaint but to impose sanctions based on the plaintiff's refusal to withdraw the claims after discovery made clear they were not viable).
“[T]he imposition of sanctions is a choice of last resort,” and even if a court finds that a claim is frivolous, it should “as a first option[ ] consider the dismissal of that action on the merits through the mechanism of summary judgment.” Safe-Strap Co. v. Koala Corp., 270 F.Supp.2d 407, 419 (S.D.N.Y. 2003).
2. Sanctions under the Court's Inherent Power and § 1927
“The court has inherent power to sanction parties and their attorneys” when the party or the attorney has “acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78 (2d Cir. 2000) (citation omitted). Similarly, §1927 provides that an attorney “who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927.3.
To award sanctions under either § 1927 or the court's inherent power, the court must find “clear evidence” that the claims in question are “entirely meritless” and that the party acted “in bad faith.” Revson, 221 F.3d at 79 (citations omitted). To find bad faith, the court must conclude that the action was “asserted wantonly, for purposes of harassment or delay, or for other improper reasons.” Browning Debenture Holders' Comm. v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir. 1977). “Poor legal judgment” is not the same as bad faith. Schlaifer Nance & Co. v. Est. of Warhol, 194 F.3d 323, 340 (2d Cir. 1999). The only difference between a sanctions award under § 1927 and a court's inherent power is that “awards under § 1927 are made only against attorneys. . . while an award made under the court's inherent power may be made against an attorney, a party, or both.” United States v. Prevezon Holdings, Ltd., 305 F.Supp.3d 468, 478 (S.D.N.Y. 2018).
In the discovery context, the discretion to sanction a party under a Court's inherent powers should be exercised with “even more restraint than usual.” Yukos Cap. S.A.R.L. v. Feldman, 977 F.3d 216, 235-36 (2d Cir. 2020). That is because, “Rules 26(g) and 37 represent the principal enforcement power to punish discovery abuse.” Id. “Inherent power sanctions are thus not a primary mechanism by which a party can obtain relief for a discovery abuse: They should serve only as a useful backstop against discovery abuses that do not clearly violate Rules 26(g) and 37.” Id.
DISCUSSION
1. Sanctions Under Rule 11
Defendants argue that Rule 11 sanctions against counsel and Plaintiff are appropriate because the TAC contains factual allegations which Plaintiff knew to be false and that his counsel “could have confirmed to be false.” (ECF No 125 at 3.) Specifically, they point to statements that Plaintiff was never paid or reimbursed “anything” or that Defendants “failed to ever compensate” Plaintiff. Id. Defendants note that the newly obtained bank records indicate that Plaintiff may have been reimbursed for numerous transactions and/or expenses, although, the $500,000 in unexplained deposits represents less than half of Plaintiff's claimed damages of at least $1,628,650. Thus, they contend the allegation the Plaintiff did not receive “anything” is untrue.
At the evidentiary hearing, Plaintiff testified that many of the unexplained deposits came from his personal funds, including deposits intended to reimburse Teranga for any personal expenses Plaintiff incurred. (See Tr. At 95-96.) Plaintiff also testified that some of the transfers Defendants rely on in support of their motion were actually done in service of Goudiaby. For example, when Defendants questioned Plaintiff about a $6,000 transfer to “Eva Diedhiou,” Plaintiff testified Eva is Goudiaby's daughter, and that yet another $40,000 transfer was to Goudiaby's other daughter to purchase a car. (Tr. At 20:2-19; at 109:1-7.) Plaintiff testified other expenses were used to support Goudiaby's businesses abroad, including one $42,000 transfer which was payment to a Chinese entity for the offices of Goudiaby's Chinese company. (Tr. at 109:8-24.) Further, Plaintiff points to evidence in the record of Goudiaby making statements years after all the transfers took place wherein Goudiaby purports to admit he owes Plaintiff a “share” of unspecified “emoluments.” (See e.g., ECF Nos. 75-15; 78-13.) In sum, Plaintiff contends that the bank records do not show payments for the specific project at issue but rather payments for other things unrelated to the project and that he is still owed money in connection with the project. At the evidentiary hearing, Defendants also questioned Plaintiff about his prior deposition testimony when he appeared to have testified about having only one bank account at one time. Plaintiff offered an explanation and said he was confused by the deposition questioning.
Defendants have not proven that Diedhiou was in fact reimbursed for any of his expenses. They offered no testimony to show that the specific deposits were from Senegal or Goudiaby for the project at issue. Rather, they merely questioned Plaintiff and his lawyer about the bank records. Both Plaintiff and his lawyer provided explanations. Thus, there are fact issues about what the bank transactions reflect. Similarly, with respect to the deposition, it is possible that Plaintiff was confused and now has clarified the accounts that he had and provided explanations about various transactions.
“Rule 11 neither penalizes overstatement nor authorizes an overly literal reading of each factual statement.” In re Proshares Tr. II Sec. Litig., 2021 WL 2548765, at *1 (S.D.N.Y. June 22, 2021). While the evidence obtained from TD and HSBC raises serious questions about Plaintiff's honesty, Defendants do not argue that the evidence suggests Plaintiff was reimbursed for all of his services and expenses. Therefore, even if the Court fully credited Defendants' interpretation of the evidence, it would not render Plaintiff's claims for damages “so clearly [ ] loser[s] that it is in the interest of justice to deter future plaintiffs and attorneys from prosecuting similar ones.” Toussaint, 230 F.Supp.3d at 223. Further, when evaluating a motion for Rule 11 sanctions, a court must “resolve all doubts in favor of the signer” of the pleading. Galin v. Hamada, 283 F.Supp.3d 189, 201 (S.D.N.Y. 2017), aff'd, 753 Fed.Appx. 3 (2d Cir. 2018). At most, Defendants have raised significant doubts about Plaintiff's claims in the TAC regarding the extent to which he was paid for his services and/or reimbursed for expenses. These issues are not appropriately resolved on a motion for sanctions. Rather, they must be tested at summary judgment or trial.
Further, the Court notes that when Defendants served a proposed motion for sanctions on the Plaintiff, it demanded Plaintiff move to dismiss the action with prejudice. Plaintiff offered to move for leave to amend the complaint to correct any misleading allegations, which Defendants said they would oppose. Had Defendants allowed Plaintiff to move for leave, any defect in the TAC could have been cured in a means consistent with Rule 11's safe harbor provision (e.g., Plaintiff could have clarified whether any payments were received in connection with the project). While Plaintiff did not actually move for leave to amend, that may have in part been due to Plaintiff counsel's then-pending motion to withdraw. See ECF No. 126. In any event, the Rule provides that where a Plaintiff formally, or informally, withdraws the offending contention, the motion for sanctions should not be filed. Fed.R.Civ.P. 111993 Advisory Committee's Note. Here, Plaintiff has at least informally withdrawn the contention that Diedhiou never received any reimbursement but maintains that he is entitled to significantly more than any amounts currently paid. That Defendants refused to accept amendment and demanded that Plaintiff withdraw his complaint with prejudice suggests that the present motion may have been brought for the improper purpose of serving as a substitute for a motion for summary judgment. See Safe-Strap Co. v. Koala Corp., 270 F.Supp.2d 407, 420 (S.D.N.Y. 2003) (denying motion for sanctions which was in effect seeking summary judgment).
Defendants suggest that Plaintiff's counsel should have subpoenaed the bank records himself, and that his failure to do so constitutes sanctionable failure to “investigate” his clients claims under Rule 11. However, Defendants point to no authority suggesting that a reasonable investigation requires counsel to subpoena third-parties to obtain records when Defendants could (and did) do so. Defendants did not seek those bank records themselves until 2024. At the evidentiary hearing, Defendants conceded they were “lucky” to obtain more complete bank records from TD and HSBC in response to the subpoena, given the age of the accounts. (Tr. 4:22-25.) At the same hearing, Plaintiff offered proof that he sought more complete bank records from HSBC in 2017 but was told that no records matched his request because the bank did not retain records going so far back in time. (Tr. 105-106.) Thus, it appears that Plaintiff and his counsel made at least some attempt to find records. Plaintiff's counsel also testified that he reviewed multiple other records. Rule 11 is violated when, “after reasonable inquiry, a competent attorney could not form a reasonable belief that the pleading is well grounded in fact.” In re Proshares Tr. II Sec. Litig., 2021 WL 2548765, at *1. Here, for the reasons discussed above, Defendants have not shown that the signed pleadings were not generally well grounded in fact or that Plaintiff's counsel did not investigate the claims. Thus, Rule 11 sanctions are inappropriate at this time.
Therefore, I respectfully recommend that the motion be DENIED as to sanctions sought under Rule 11.
2. Sanctions Under the Court's Inherent Power and §1927
While Rule 11 sanctions must be based on the signature of an attorney or client on a pleading, motion, or other paper in a lawsuit, sanctions under §1927 and the Court's inherent power are not so limited. Compare United States v. Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers cf Am., AFL-CIO, 948 F.2d 1338, 1344 (2d Cir. 1991) with Banus v. Citigroup Glob. Markets, Inc., 757 F.Supp.2d 394, 399 (S.D.N.Y. 2010). Therefore, in addition to the allegedly false statements in the TAC and Plaintiff's counter statement of facts, Defendants say sanctions are warranted under Section 1927 or the Court's inherent power because 1) Plaintiff produced improperly redacted bank records that were designed to mislead or hide information about financial transactions and, 2) Plaintiff made demonstrably false statements in his deposition about how many bank accounts Teranga could have simultaneously.
It is true that Plaintiff only produced two heavily redacted pages of bank records during discovery. Plaintiff explained he was unable to find or produce more records and copies given the age of the accounts. (ECF Nos. 124-8; 124-16; Depo Tr. at 89:16-17.) He testified that he did the redactions himself by hand, in order to “focus on” the unredacted items. (Depo Tr. at 89:2-4; 90:1-5.) At the evidentiary hearing, Plaintiff proffered evidence that he unsuccessfully sought more complete records from HSBC in 2017. (Tr. 105-106.) Defendants asked Plaintiff about two line items he redacted from the TD statement: two wires out of a Teranga account each worth about $6,000. (Tr. at 20-21.) Plaintiff testified one transfer was to Goudiaby's daughter, Eva Diedhiou, and the other was to Plaintiff's company Kumpo LLC which would pay fees on behalf of Senegal. Id. Plaintiff was not questioned at the evidentiary hearing about the specific redactions made to the HSBC statement, which included a deposit of about $3,000 from an unknown source, and a check made out for $400 which was otherwise visible beneath the redacted portion. (ECF No. 124-16.) Thus, it is not clear whether the redacted portions of the records show transactions relevant to the claims in this case.
With regard to the allegedly false deposition testimony, Plaintiff initially testified at his deposition that Teranga only ever had one bank account at a time. (Depo. Tr. at 86:16-20.) Specifically, he stated that Teranga could only have one account at a time and that one would have to close one before the next could open. (Depo. Tr. At 113:20-25) (Plaintiff testifying, “That's why you have all these accounts. Every time I had to keep them open - then I had to close the account. We never had two or three accounts at the same time - - it was always one account. And HSBC would not allow you to use the same business ID.”) Defense counsel presented evidence that Teranga had three bank accounts, and that the two HSBC accounts were open concurrently. (Depo Tr. 108-109; 114.) Plaintiff maintained that it was impossible to have more than one open account at a time. (Id. at 70, 100, 112, 114.) Specifically, Plaintiff testified that you could only have one “business account” under a single business Id. (Id. 100:21-25.) After several rounds of back and forth trying to explain to the Plaintiff that the evidence shows two accounts open at the same time, and Plaintiff replying that it was impossible, Defense counsel decided to move on and counsel spoke off the record. (Id. at 117.) At the evidentiary hearing, Plaintiff attempted to clarify his prior deposition testimony, explaining Teranga could only have one business checking account at a time, and that the other accounts were linked savings accounts opened by HSBC at the same time as the checking account under the same business Id. (See Tr. at 59-60.) Review of the additional HSBC accounts' statements confirmed that they were savings accounts. (Id.)
To award sanctions under either § 1927 or the court's inherent power, the court must find “clear evidence” that the claims in question are “entirely meritless” and that the party acted “in bad faith.” Robinson v. De Niro, 614 F.Supp.3d 73, 76 (S.D.N.Y. 2022), report and recommendation adopted, 2022 WL 7091518 (S.D.N.Y. Oct. 12, 2022). For the reasons discussed above, the revelations that Teranga had multiple bank accounts simultaneously and that Plaintiff hid several bank transactions that have not yet been proven to relate to the project at issue in this case fail to render Plaintiff's claims “entirely meritless.”
To the extent Defendants allege that Plaintiff has perpetrated a fraud on the court through his behavior in discovery, “[s]anctions for fraud are warranted if it is established by clear and convincing evidence that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system's ability to impartially adjudicate the action. Thus, clear and convincing evidence of bad faith is a prerequisite to an award of sanctions under the court's inherent power.” Fischman v. Mitsubishi Chem. Holdings Am., Inc., No. 18-CV-8188 (JMF), 2022 WL 3646205, at *1-2 (S.D.N.Y. Aug. 24, 2022). The sanction that Defendants seek, dismissal of the action, is granted “only in extreme situations,” as where “a party lies to the court and his adversary intentionally, repeatedly, and about issues that are central to the truth-finding process.” Rossbach v. Montefiore Med. Ctr., 19-CV-5758 (DLC), 2021 WL 3421569, at *4-5 (S.D.N.Y. Aug. 5, 2021). However, an “isolated instance of perjury, standing alone, will not constitute a fraud upon the court,” let alone one that calls for dismissal. Fischman, 2022 WL 3646205, at *2 (denying motion for §1927 and inherent authority sanctions where Defendants alleged Plaintiff fabricated a piece of evidence and then lied about doing so in a deposition.)
Here, Plaintiff's purported “relevance” redactions were clearly improper because they were not done with advance permission from the Court and hid transactions that might in fact be relevant given the broad definition of relevance under Rule 26. Trireme Energy Holdings, Inc. v. Innogy Renewables U.S. LLC, 2022 WL 621957, at *2 (S.D.N.Y. Mar. 3, 2022)(collecting cases disfavoring relevance redactions.) Plaintiff testified that none of the redacted items actually contradicted his allegations. One of the two redacted payments Defendants focused on at the evidentiary hearing was ultimately made to Defendant's daughter, and the parties dispute whether the other payment (the transfer to Kumpo LLC) was used for Senegal's benefit or came out of Plaintiff's funds. While the Court does not condone Plaintiff's discovery misconduct, terminating sanctions are not appropriate for making the redaction. Rather, to the extent this case proceeds to trial, Defendants can confront Plaintiff about the bank records and cross examine him about the redaction and his inconsistent testimony. Fischman, 2022 WL 3646205, at *2 (collecting cases denying motions for sanctions where there were limited instances of forgery or fabrication.)
Terminating sanctions are similarly inappropriate for Plaintiff's statements regarding the number of concurrently operating Teranga bank accounts. Plaintiff was directly and repeatedly confronted with evidence of concurrently-open HSBC accounts at his deposition, so he either did not understand what was being asked, or devotedly stuck to statements Defendants already knew were false. And, Plaintiff's testimony at the evidentiary hearing on this sanctions motion was consistent with his position that he only had one checking account at a time. The only thing that became clear through the evidentiary hearing on this motion is that Defendants now have more bank records than Plaintiff himself was able to obtain, there were multiple accounts that reflect various payments, and that there are factual disputes about whether the payments reflect that Plaintiff received payments/reimbursements for some portions of the project at issue. To be sure, this Court is troubled by Plaintiff's and his counsel's conduct during discovery because they improperly redacted documents and failed to clarify Diedhiou's deposition statements until the evidentiary hearing. However, Defendants have not offered clear and convincing evidence of bad faith, much less a scheme calculated to interfere with the judicial system's ability to impartially adjudicate the action. Plaintiff's discovery-related conduct is more appropriately addressed in a Rule 37 motion.
Now that discovery is closed, Defendants have more information about financial transactions between and among Senegal, Goudiaby, Plaintiff and Teranga. Plaintiff has been deposed a second time. Remaining questions about how much Plaintiff was actually paid for his services, and the quality of evidence offered, can and should be evaluated at summary judgment or trial. Thus, it is premature to determine whether Plaintiff has actually committed a fraud on the Court and brought this action in bad faith. See Yukos Cap. S.A.R.L., 977 F.3d at 235.Defendants remain free to bring a motion under Rule 37 of the Federal Rules, which represent the “principal enforcement power to punish discovery abuse.” Id.
Therefore, I respectfully recommend that Defendants' motion for terminating sanctions under Rule 11, Section 1927 and the Court's inherent power be DENIED without prejudice.
NOTICE
Parties shall have fourteen days from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days only when service is made under Fed.R.Civ.P. 5(b)(2)(C)(mail), (D) (leaving with the clerk), or (F) (other means consented to by the parties)). A party may respond to another party's objections after being served with a copy. Fed. R. Civ. P.72(b)(2).
Plaintiff shall have fourteen days to serve and file any response. Defendant shall have seventeen days to serve and file any response. Any objections and any responses to such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Dale E. Ho at the United States Courthouse, 500 Pearl St., New York, New York 10007, and served on the other parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Ho. The failure to file timely objections shall result in a waiver of those objections for purposes of appeal. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).