Opinion
2011-12-1
James W. HOLME, Plaintiff–Respondent, v. GLOBAL MINERALS AND METALS CORP., et al., Defendants–Appellants.
Kaye Scholer LLP, New York (H. Peter Haveles, Jr. of counsel), for Global Minerals and Metals Corp., GMMC Enterprise Corp., GMMC, Inc., GMMC, LLC, and R. David Campbell, appellants. McMillan Constabile Maker & Perone LLP, Larchmont (William Maker, Jr. of counsel), for Bipin H. Shah, appellant.
Kaye Scholer LLP, New York (H. Peter Haveles, Jr. of counsel), for Global Minerals and Metals Corp., GMMC Enterprise Corp., GMMC, Inc., GMMC, LLC, and R. David Campbell, appellants. McMillan Constabile Maker & Perone LLP, Larchmont (William Maker, Jr. of counsel), for Bipin H. Shah, appellant. Seidman & Seidman, P.C., New York (Irving P. Seidman of counsel), and Graubard Miller, New York (Steven Mallis of counsel), for respondent.TOM, J.P., ANDRIAS, CATTERSON, ABDUS–SALAAM, ROMÁN, JJ.
Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered March 4, 2011, which, insofar as appealed from, granted an adverse inference charge against defendants due to spoliation of electronic records; ordered the corporate defendants' production of an unredacted master index and the personal tax returns of defendants R. David Campbell and B.H. Shah within 20 days of service of the order with notice of entry; ordered Campbell and Shah, within 20 days of service of the order with notice of entry, in the event they could not produce their tax returns, to execute all forms needed to permit plaintiff to apply to the Internal Revenue Service to obtain copies thereof for 1996 through 2010; and stated that the court would grant an oral motion to strike defendants' pleadings in their entirety if defendants failed to comply with any portion of this order, unanimously affirmed, with costs.
The court providently exercised its discretion by granting an adverse inference charge against defendants due to their spoliation of their electronic accounting and trading records. Defendants had an obligation to preserve such records because they should have foreseen that the underlying litigation might give rise to the instant enforcement action; the records were destroyed with a culpable state of mind; and they are relevant to plaintiff's claims of fraudulent conveyances ( see Ahroner v. Israel Discount Bank of N.Y., 79 A.D.3d 481, 482, 913 N.Y.S.2d 181 [2010]; Sage Realty Corp. v. Proskauer Rose, 275 A.D.2d 11, 17, 713 N.Y.S.2d 155 [2000] ), which this Court previously held were sufficiently pled to withstand dismissal (63 A.D.3d 417, 879 N.Y.S.2d 453 [2009] ).
Further, the court providently exercised its discretion by imposing sanctions for defendants' alleged failure to comply with orders to provide Global's complete general ledgers and unredacted master index.
The IAS court also providently exercised its discretion by ordering defendants Campbell and Shah to produce their individual tax returns. Although disclosure of tax returns is generally disfavored, special circumstances exist in that plaintiff seeks to support his alter ego and de facto merger claims by showing that Global's assets were improperly transferred while Global was going out of business ( see Berger v. Fete Cab Corp., 57 A.D.2d 784, 395 N.Y.S.2d 451 [1977]; Chaudhry v. Abadir, 261 A.D.2d 497, 692 N.Y.S.2d 399 [1999] ).