Opinion
99 Civ. 1492 (JSM).
November, 2000.
For Plaintiff: David J. Young, Marc J. Kessler, Squire, Sanders Dempsey L.L.P., Columbus, Ohio, Keith E. Dobbins, Squire, Sanders, Dempsey L.L.P. N.W. Washington, DC.
For Defendants: Lee Sacks, Law Offices of Lee Sacks, APC Santa Monica, California., Richard R. Mainland, Brent Darby, Fulbright Jaworski, L.L.P., Los Angeles, California. John C. Sabetta, Seyfarth, Shaw, Fairweather Geraldson New York, NY.
MEMORANDUM OPINION AND ORDER
This is a classic example of a defendant who uses every conceivable delaying tactic to frustrate the plaintiff's attempt to proceed with discovery, and when the day of judgment comes, brings in new counsel in an attempt to avoid the sanctions that his conduct merits.
The parties are presently before the Court on a motion brought by Glimcher Properties Limited Partnership ("Plaintiff") to preclude N.J.MM, LLC, First Avenue Investment Trust I, and First Avenue Investment II (collectively "Defendants") from offering any testimony from their principal, Robert Ferrante, because he invoked his Fifth Amendment privilege with respect to all, relevant questions at his deposition, and for the attorneys' fees and expenses that it incurred in connection with that deposition.
The application is granted in all respects.
BACKGROUND
On May 8, 2000, the Court conducted a conference in this case in which it directed that Mr. Ferrante's deposition be taken during the month of May. On May 15, 2000, the court received a letter by facsimile from Defendants' counsel stating that despite numerous attempts "by telephone, facsimile and overnight courier, we have been unable to reach Mr. Ferrante. Additionally, this office has yet to receive payment for any work done for Mr. Ferrante."
Thereafter, one of Defendants' counsel sought and obtained leave to withdraw on the ground that there was a conflict of interest. Defendants' local counsel also made an application by order to show cause to withdraw, stating:
On May 9, 2000 I spoke with Mr. Ferrante for the first time. We had a short conversation about the terms of my continued representation. One such term was that Mr. Ferrante's outstanding balance needed to be paid immediately and that a retainer needed to be sent. Mr. Ferrante assured me that both payments would arrive within the next few days. I have still not received payment.
Counsel repeated that numerous attempts had been made to contact Mr. Ferrante without success.
By order dated June 9, 2000, the Court granted the applications by counsel to withdraw and ordered Defendants to appear by counsel at a conference on June 21, 2000, and put Defendants on notice that if counsel did not appear, a default judgment would be entered against them.
Counsel appeared for Defendants on June 21, 2000, and stated that he had only recently been retained by Mr. Ferrante. At that conference, the Court ordered that Mr. Ferrante's deposition was to proceed on July 13, 2000 in Columbus Ohio.
On June 30, 2000, the Court received a letter from the attorney who appeared for Defendants on June 21 stating that, although counsel had been assured by a representative of Mr.
Ferrante less than an hour before the June 21 conference that a wire transfer had been made to his firm, no such transfer ever arrived. The Court therefore granted the attorney's application to withdraw, but again directed that Mr. Ferrante appear for his deposition, and repeated that should he fail to appear for the deposition, a default judgement would be entered against Defendants.
On July 13, 2000, Mr. Ferrante appeared for the deposition and acknowledged that he was aware of this Court's order.
Although he appeared without counsel, he indicated that he had been discussing the matter with counsel who now appears for Defendants. Ferrante then invoked his Fifth Amendment privilege with respect to all questions relevant to this action.
Thereafter, on August 23, 2000, a notice of appearance on behalf of the Defendants was filed by Lee Sacks, an attorney who had apparently been consulting with Mr. Ferrante about this matter since at least early in May. According to Mr. Sacks, he contacted Plaintiff's counsel and indicated that Mr. Ferrante would be prepared to answer some relevant questions, but would still assert his Fifth Amendment privilege with respect to some relevant matters.
On September 1, 2000, Plaintiffs served this motion to preclude the testimony of Mr. Ferrante and for sanctions.
DISCUSSION
The principles governing this motion are fully set forth in the opinion of the Second Circuit Court of Appeals in United States v. Certain Real Property, 55 F.3d 78 (2d Cir. 1995). In that case, the Court recognized the importance of the Fifth Amendment privilege and the need to carefully balance a party's right to the protection of the privilege and the adversary's right to obtain the discovery, stating:
[B]ecause all parties — those who invoke the Fifth Amendment and those who oppose them — should be afforded every reasonable opportunity to litigate a civil case fully and because exercise of Fifth Amendment rights should not be made unnecessarily costly, courts, upon an appropriate motion, should seek out those ways that further the goal of permitting as much testimony as possible to be presented in the civil litigation, despite the assertion of the privilege. Thus, if there is a timely request made to the court, the court should explore all possible measures in order to "select that means which `strikes a fair balance . . . and . . . accommodates both parties.'" United States v. U.S. Currency, 626 F.2d 11, 16 (6th Cir. 1980) (quoting Shaffer v. United States, 528 F.2d 920, 922 (4th Cir. 1975)).
Certain Real Property, 55 F.3d at 83-84 (citation and footnote omitted).
The Circuit Court also noted, however:
Courts need to pay particular attention to how and when the privilege was originally invoked. Since an assertion of the Fifth Amendment is an effective way to hinder discovery and provides a convenient method for obstructing a proceeding, trial courts must be especially alert to the danger that the litigant might have invoked the privilege primarily to abuse, manipulate or gain an unfair strategic advantage over opposing parties. See S.E.C. v. Graystone Nash, 25 F.3d 187, 190 (3d Cir. 1994) (discussing "the potential for exploitation" through abusive assertions of the Fifth Amendment in civil actions). If it appears that a litigant has sought to use the Fifth Amendment to abuse or obstruct the discovery process, trial courts, to prevent prejudice to opposing parties, may adopt remedial procedures or impose sanctions.
Certain Real Property, 55 F.3d at 84-85.
In the end, the Second Circuit in Certain Real Property upheld the ruling of the District Court that the party invoking the privilege should be precluded from testifying about matters as to which the Fifth Amendment privilege had been invoked.
Here, the evidence is overwhelming that Mr. Ferrante's invocation of the Fifth Amendment privilege was but one step in a concerted effort to obstruct Plaintiff's efforts to obtain discovery. He cynically sent lawyers into court to delay the proceedings by making false representations that their fees would be paid and, in one case, falsely represented that funds had been wired. He also deliberately refused to respond to repeated communication from his counsel in which they sought to discuss discovery obligations with him.
When he could no longer delay his court-ordered deposition, he appeared without counsel, and invoked the Fifth Amendment with respect to all questions relevant to this action. Although he had apparently been consulting his present attorney throughout the relevant period, neither he nor that counsel made any effort to reach the compromise that his counsel now urges. This fact clearly draws into question the bona fides of the current proposal, which would still have Mr. Ferrante invoking his privilege as to certain questions.
In any event, the current offer is both too little and too late. Mr. Ferrante has already delayed this case unconscionably by his fraudulent and dilatory conduct. Having chosen to use the invocation of the Fifth Amendment as a means to delay this case even further, Mr. Ferrante should suffer the consequences of his actions.
For the foregoing reasons, the application to preclude the testimony of Robert Ferrante in this action, and for attorneys fees incurred in connection with his deposition, is granted.
SO ORDERED.