Opinion
Index No. 654930/2017 MOTION SEQ. Nos. 005 006
07-29-2022
KULIARCHAR SEA FOODS (COX'S BAZAR) LTD., Plaintiff, v. SOLEIL CHARTERED BANK, SOLEIL CAPITALE CORPORATION, and GOVIND SRIVASTAVA, Defendants.
Freiberger Haber LLP, Melville, NY (Jeffrey M. Haber of counsel), for plaintiff. Peyrot & Associates, P.C., New York, NY (David Van Leeuwen of counsel), for defendants.
Unpublished Opinion
Freiberger Haber LLP, Melville, NY (Jeffrey M. Haber of counsel), for plaintiff.
Peyrot & Associates, P.C., New York, NY (David Van Leeuwen of counsel), for defendants.
PRESENT: HON. GERALD LEBOVITS PART Justice.
DECISION + ORDER ON MOTION
GERALD LEBOVITS, J.
The following e-filed documents, listed by NYSCEF document number (Motion 005) 233, 234, 235, 236, 237, 238, 239, 240, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 293, 294, 295 were read on this motion to/for QUASH SUBPOENA, FIX CONDITIONS.
The following e-filed documents, listed by NYSCEF document number (Motion 006) 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292 were read on this motion to/for STRIKE PLEADINGS.
Plaintiff in this action is seeking $558,000 (plus interest) from defendants under a letter of credit in that amount issued to facilitate the sale of a shipment of shrimp by plaintiff to a third party. The current motions do not go to the merits of this action, however. They are instead only the latest in a series of motions arising from discovery-related disputes between the parties.
In motion sequence 005, plaintiff moves for a protective order quashing a subpoena served by defendants on a nonparty bank in Bangladesh. In motion sequence 006, plaintiff moves to strike defendants' answer for defendants' asserted failure to comply with several of this court's discovery orders. The motions are granted.
BACKGROUND
The motion to strike arises from plaintiffs' repeated efforts to take the deposition of a representative of defendant Soleil Chartered Bank who is familiar with the structure and operations of the bank.
In a May 2021 status-conference order, this court directed Soleil Chartered Bank to produce a witness for deposition by mid-June. (NYSCEF No. 180 at 2.) Defendants did not produce a witness from the bank-only counsel to the trustee of the trust that owns all shares of the bank. That witness was unable to answer plaintiff's questions fully. (See NYSCEF No. 181 at 1.) Following the next scheduled discovery conference in July 2021, this court ordered Soleil Chartered Bank to "produce a witness who possesses first-hand knowledge of the structure and general operations of SCB, as well as the claims and defenses asserted in this action . . . [no] later than August 30, 2021." (Id. at 2.) The July 2021 status-conference order expressly provided that "[f]ailure to appear as ordered will result in sanctions under CPLR 3126." (Id.) That order also provided that "[s]ubpoenas for documents and testimony shall be served on or before September 10, 2021." (Id. at 3.)
Defendants did not produce a witness for deposition as directed in the July 2021 conference order. Plaintiff moved to strike defendants' answer under CPLR 3126 for that failure. (See NYSCEF No. 183.) This court decided the motion in November 2021. Despite the prior order's provision providing for the imposition of discovery sanctions for further noncompliance, this court declined at that time to strike defendants' answer outright. But the court warned that "defendants' longstanding and continuing failure in this action to comply with court orders requiring them to provide discovery is rapidly approaching the point at which striking their answer is this court's only available recourse." (NYSCEF No. 231 at 1.) This court ordered defendants by mid-December 2021 to produce "a representative of Soleil Chartered Bank with knowledge of that party's structure and operations," and provided that if defendants failed to do so, "absent good cause shown," their answer "shall be stricken on the [written] request of plaintiff." (Id. at 2.)
On December 16, 2021, defendants produced a witness to testify on behalf of Soleil Chartered Bank, Nikhil Dhurandher. (See NYSCEF No. 281 [deposition transcript].) The deposition reflected that defendants had asked Dhurandher that morning to testify- notwithstanding his lack of involvement with the transaction underlying the action-because the previously designated witness had fallen ill. (See id. at Tr. 60-61.)
Separately, in the week preceding the Dhurandher deposition, defendants served a document subpoena on a Bangladeshi bank, Mercantile Bank Limited, seeking documents related to the bank's commercial dealings with plaintiff. (See NYSCEF No. 235 [subpoena].) The subpoena indicated that it was prompted by a February 2018 article published by a Bangladeshi newspaper about the relationship between plaintiff and Mercantile Bank. (See id. at 1 [Document Request No. 1].)
Plaintiff moved by order to show cause to quash the subpoena and for a protective order under CPLR 3103 (mot seq 005). (See NYSCEF No. 256.) In connection with the motion, plaintiff sought, and this court granted, interim relief staying the bank's obligation to comply with the subpoena pending this court's consideration of the motion to quash.
Shortly thereafter, plaintiff also moved again to strike defendants' answer under CPLR 3126, contending that Dhurandher lacked the knowledge of Soleil Chartered Bank's structure and operations that this court's November 2021 had required (mot seq 006).
Motion sequences 005 and 006 are consolidated here for disposition.
DISCUSSION
Because this court's disposition of plaintiff's motion to strike (mot seq 006) will affect the analysis of plaintiff's motion to quash (mot seq 006), the court addresses first the motion to strike.
I. Plaintiff's Motion to Strike (Mot Seq 006)
Striking a party's answer for failure to provide discovery is a drastic remedy, appropriate only when no lesser sanction will do. In this case, however, this court already concluded in its November 2021 order that defendants' discovery-related conduct suggested that any sanction short of striking the answer likely would be insufficient. (See NYSCEF No. 231 at 1.) This court opted, though, to give defendants one last chance to comply with their discovery obligations before imposing that sanction. The question on motion sequence 006 is thus whether defendants took the chance afforded them in this court's prior order. The court concludes they did not.
This court directed, in multiple prior discovery orders, that defendants produce (i) a representative of Soleil Chartered Bank, who (ii) has knowledge of the bank's structure and operations. Defendants now contend that they satisfied the first of these two requirements by providing Dhurandher, whom they describe "as one of the three top managers of SCB." (NYSCEF No. 290.) But Dhurandher testified that he is not a manager, or even an employee, of Soleil Chartered Bank. Instead, he is a consultant providing services to the bank as an independent contractor. (See NYSCEF No. 281 at Tr. 10-11, 12-15, 22, 28, 57, 87-89, 93-94.)
Nonetheless, this court declines to give dispositive significance to the distinction between an employee or executive and a contractor-particularly when deeming that distinction material would entail striking a party's answer. The more fundamental problem with Dhurandher's testimony is that it shows throughout that he is not familiar with the structure and operations of Soleil Chartered Bank beyond the particular services that he (and others in comparable positions) provide to the bank.
As noted above, Soleil Chartered Bank is apparently owned by a Liechtenstein trust. But Dhurandher testified that he did not know the name of that trust or any details relating to its formation-or, for that matter, whether the trustees of the trust are running the bank's day-to-day operations. (See id. at Tr. 24-25, 55, 85, 86, 95-96, 105). Indeed, Dhurandher testified that because he was only a consultant for the bank acting as an intermediary with potential customers, rather than being employed by the trust or the bank directly, it would not have been feasible for him to ask about that information. (See id. at Tr. 55-56, 85-86, 105.)
Dhurandher testified that he does not know if the bank had a board of directors or a chairperson. (See id. at Tr. 64, 69.) When asked if a particular individual was a director or an officer of the bank, he said that he did not know. (See id. at Tr. 101-103.) He could name only one person who might be employed by the bank, as opposed to providing services to them on a contract basis-and he was unsure if even that person was employed directly by the bank. (See id. at Tr. 52-55, 56-57, 75-76.)
Dhurandher also testified that he did not know whether the bank employed or retained a lawyer to oversee litigation involving the bank; and he said that he did not know who would have that information, because that type of matter was handled by the controlling trust. (See id. at Tr. 69-70.) Dhurandher was not involved in obtaining the bank's operating license (issued by the Union of Comoros), and had no first-hand knowledge whether that license, once issued, had been renewed and kept current. (See id. at Tr. 79-80, 84-85.) Nor did he know whether the bank had ever applied for or been granted a state or federal banking license in the United States. (See id. at Tr. 92-93, 94-95.) He explained that this type of issue, too, was dealt with by the controlling trust, and was beyond his responsibility as a consultant (See id. at Tr. 95.)
In short, Dhurandher had knowledge of, and provided testimony about, the kinds of transactions for which he himself provided services to Soleil Chartered Bank. But Dhurandher lacked the knowledge of the bank's structure and operations required by this court's prior orders.
In opposing plaintiff's request to strike defendants' answer, defendants argue that plaintiff is contending that Soleil Chartered Bank is essentially a shell company serving only as an alter ego for defendant Govind Srivastava. Therefore, defendants assert, plaintiff's insistence on defendants' producing a witness with knowledge of the bank's structure and operations is merely a clever attempt "to masquerade a dispute on the merits as a discovery dispute." (NYSCEF No. 290 at 1.) This does not follow. That plaintiff believes Soleil Chartered Bank to be no more than Srivastava's alter ego does not foreclose plaintiff from pursuing discovery to obtain admissible evidence to support that theory of the case. Nor does plaintiff's belief free defendants from the obligation to provide responsive discovery-especially in light of this court's several clear orders saying as much.
Given defendants' continuing, persistent failure to comply with this court's discovery orders, the only appropriate sanction is to strike their answer.
II. Plaintiff's Motion to Quash (Mot Seq 005)
Plaintiff also moves for a protective order under CPLR 3103 quashing defendants' nonparty subpoena. This motion is not rendered academic by the court's grant of plaintiff's motion to strike. Defendants contend that the information sought might be relevant to the issue of damages (see NYSCEF No. 293 at 5)-an issue that defendants may still contest following the striking of their answer. Plaintiff's motion is granted.
Defendants issued the subpoena three months after the deadline for documentary subpoenas set by this court's July 2021 conference order. (NYSCEF No. 181 at 3.) This court is not persuaded by defendants' assertion (NYSCEF No. 293 at 5-6) that because plaintiff had not filed its note of issue, defendants could simply disregard the intermediate discovery deadlines imposed by the court. Defendants suggest that issuing the subpoena months after the deadline was unavoidable because they had "just discovered the information in December 2021" that prompted the subpoena. (Id. at 6.) But the newspaper article to which defendants refer had appeared in February 2018. Defendants do not explain why they did not, or could not have, become aware of that article earlier. In any event, defendants did not seek or obtain leave from this court to issue a subpoena after the court-ordered deadline.
The subpoena (see NYSCEF No. 235) lacks any "explanation of the circumstances or reasons requiring disclosure," whether "on the face of the subpoenas or in any accompanying material," as required by CPLR 3101 (a) (4). (Capacity Group of NY, LLC v. Duni, 186 A.D.3d 1482, 1483 [2d Dept 2020].) The absence of this required explanation alone warrants granting in full plaintiffs motion to quash. (See id [affirming motion court's order quashing nonparty subpoenas, and collecting cases].
These clear procedural defects are fatal to defendants' belated subpoena. The subpoena must therefore be quashed, as plaintiff has requested.
This court need not reach plaintiff's arguments that (i) the subpoena was not properly served; and (ii) the information sought by the subpoena was not crucial to the claims and defenses in the action.
Accordingly, it is
ORDERED that plaintiffs motion under CPLR 3103 for a protective order quashing defendants' nonparty subpoena (mot seq 005) is granted; nonparty Mercantile Bank need not respond to the subpoena, and defendants must return or destroy any materials that they received from Mercantile Bank pursuant to the subpoena; and it is further
ORDERED that plaintiffs motion to strike under CPLR 3126 (mot seq 006) is granted, and defendants' answer is stricken; and it is further
ORDERED that plaintiff may within 30 days of entry of this order move for a default judgment against defendants; and it is further
ORDERED that plaintiff serve a copy of this order with notice of its entry on all parties.