Opinion
Index No. 65663, Index No. 656634/2016
08-02-2021
Franklin LAMA, Lidio Zapata, Ramona Bautista, Juan Tavares, Iluminada Blanco, individually and derivatively as shareholders of the 3681 Broadway HDFC, Plaintiffs, v. The 3681 BROADWAY HDFC, Mirtha Hasburn, Antonio Hasbun, Celina Almonte, Beatriz Santana, Cristian Delgado, Valerie Matos, Michelle Then, Board of Directors of the 3681 Broadway HDFC, The City of New York, John Doe, and Jane Doe, Defendants.
Karin Arrospide, Esq., White Plains, NY, for plaintiffs. Thomas Fleishell & Associates, P.C., New York, NY (Michael Stevens of counsel) for all defendants except the City of New York.
Karin Arrospide, Esq., White Plains, NY, for plaintiffs.
Thomas Fleishell & Associates, P.C., New York, NY (Michael Stevens of counsel) for all defendants except the City of New York.
Gerald Lebovits, J.
Plaintiffs are former board members of the 3681 Broadway Housing Development Fund Corporation (3681 Broadway HDFC or the HDFC) and current residents of 3681 Broadway in Manhattan. In 2016, they brought this action for breach of fiduciary duty and breach of contract, alleging, among other things, that the current board was financially mismanaging 3681 Broadway HDFC. Defendants—3681 Broadway HDFC itself, its board, and its current board members—counterclaimed, alleging that plaintiffs had financially mismanaged the HDFC during their time on the board and had failed to turn over documents belonging to the HDFC when they left the board.
This motion arises from the latest of several discovery disputes in this action. Defendants move to strike plaintiffs’ complaint under CPLR 3126, to preclude plaintiffs from introducing any evidence with respect to any defenses which relate to this motion at trial under CPLR 3126, and to compel plaintiffs to respond to defendants’ discovery demands under CPLR 3124. The court grants the branch of defendants’ motion seeking to compel plaintiffs to respond to defendants’ interrogatories. The court orders an evidentiary hearing on the branch of defendants’ motion seeking to compel plaintiffs to produce documents in response to defendants’ requests for production, except as to request no. 8. The court denies defendants’ motion to compel production with respect to request no. 8 and denies the other branches of defendants’ motion.
BACKGROUND
In September 2019, defendants served plaintiffs with a set of interrogatories and a notice for discovery and inspection of documents. (See NYSCEF Nos. 203, 205.) Plaintiffs rejected both. (See NYSCEF Nos. 204, 206.) In December 2019, defendants moved to compel plaintiffs to respond to the discovery demands. (See NYSCEF No. 207.) Although the court initially denied the motion, the court later granted defendants’ motion to reargue. (See NYSCEF Nos. 208, 209.)
Defendants interposed a second motion to compel; the court granted the motion in April 2020. (See NYSCEF Nos. 210, 211.) The court set a deadline of June 16, 2020, for plaintiffs to respond to defendants’ discovery demands. (See NYSCEF No. 211 at 3.) Plaintiffs did not respond by the deadline. Defendants then served a good-faith letter on plaintiffs, requesting their compliance with the court's order. (See NYSCEF No. 212.) In a September 2020 status-conference order, the court ordered plaintiffs to respond to defendants’ discovery demands by October 19, 2020. (See NYSCEF No. 213 at 1.) On October 16, 2020, plaintiffs responded to defendants’ discovery demands. (See NYSCEF Nos. 214, 215.) Plaintiffs objected to most of defendants’ interrogatories and requests for production. (See id. ) Unsatisfied with plaintiffs’ responses, defendants filed this motion.
DISCUSSION
Trial courts have broad discretion in supervising discovery. ( Stambovsky v Reiner , 145 AD2d 309, 310 [1st Dept 1988].) New York courts favor "liberal discovery." ( Forman v Henkin , 30 NY3d 656, 663 [2018].) Parties must comply with a court's discovery orders. Compliance requires a timely, good-faith response to discovery demands. ( Kihl v Pfeffer , 94 NY2d 118, 123 [1999].) If a party fails to obey an order for disclosure, the court has broad discretion to issue such orders against the disobedient party "as are just." ( CPLR 3126 ; see also Arts4All, Ltd. v Hancock , 54 AD3d 286, 286 [1st Dept 2008].)
The movant in a motion to strike must make a clear showing that the nonmovant's noncompliance with discovery requests was willful, contumacious, or in bad faith. ( Mateo v City of New York , 274 AD2d 337, 337 [1st Dept 2000].) It is insufficient for the movant to merely allege that the nonmovant has concealed discoverable documents; the movant must provide evidence of concealment. ( Melcher v Apollo Med. Fund Mgt. LLC , 52 AD3d 244, 245 [1st Dept 2008].) If the movant does so, the burden shifts to the nonmovant to provide a "reasonable excuse" for noncompliance. ( Fish & Richardson, P.C. v Schindler , 75 AD3d 219, 220 [1st Dept 2010].) If the movant does not provide evidence to the contrary, a court may accept the nonmovant's claim that due diligence was performed to turn over all responsive documents. (See e.g. Heinze v Mnuchin , 2009 NY Slip Op 50711[U], *5 [Civ Ct, NY County Apr. 16, 2009] ["As defendants allege that they have provided plaintiff with all of the documents in their possession, plaintiff's frustration with defendants’ inability to locate certain documents forms no basis for compelling their production."].) Alternatively, a court may make credibility determinations in an evidentiary hearing on a discovery motion. (See CEMD El. Corp. v Metrotech LLC I , 141 AD3d 451, 453 [1st Dept 2016] ["[A] hearing is required to determine, among other things, whether defendant's failure to attend the disposition was willful and contumacious."].)
I. The Branch of Defendants’ Motion Seeking to Compel Plaintiffs to Respond to Defendants’ Interrogatories
Defendants served plaintiffs with 22 interrogatories. Plaintiffs responded to Nos. 1 and 22 but objected to the remaining 20.
Plaintiffs object to defendants’ interrogatories on the basis that they seek information to support counterclaims that are barred by the statute of limitations, the business judgment rule, or both. These affirmative defenses are inappropriate objections to discovery demands; they address the merits of defendants’ underlying counterclaims, not defendants’ discovery demands. Plaintiffs may raise these defenses on a motion to dismiss or a motion for summary judgment. (See Rite Aid Corp. v Grass , 48 AD3d 363, 364 [1st Dept 2008] [affirming trial court's granting summary judgment before discovery was completed].) But while the counterclaims remain live—and this court is not addressing their merits in this decision—plaintiffs must provide requested discovery relating to the counterclaims.
Plaintiffs also object to these interrogatories as seeking information beyond the scope of this litigation. Plaintiffs raise this objection in response to interrogatories asking each plaintiff to declare how much they currently owe 3681 Broadway HDFC in arrears. Plaintiffs claim that their arrears as residents are irrelevant to defendants’ counterclaims, which target plaintiffs’ alleged mismanagement as board members. However, private information is discoverable if it is relevant to a party's claims. ( Forman , 30 NY3d at 664.) The trial court has wide discretion in determining whether interrogatories are relevant and appropriate. ( Fellner v Texas Mexican Ry. Co. , 76 AD2d 820, 820 [1st Dept 1980].) Plaintiffs’ personal financial situations are relevant to their alleged financial mismanagement of 3681 Broadway HDFC. Plaintiffs had financial dealings with the same corporation, 3681 Broadway HDFC, as residents and as board members. To the extent that plaintiffs’ arrears as residents impacted their business decisions as board members, plaintiffs’ arrears are relevant to this litigation.
For the same reason, plaintiffs must respond to interrogatories asking whether they have been leasing rooms in their apartments. Again, this case concerns plaintiffs’ financial management of 3681 Broadway HDFC. Plaintiffs’ alleged renting of rooms is a financial transaction that occurred at 3681 Broadway. It is possible that plaintiffs’ financial activities as residents impacted their activities as board members. Consequently, whether plaintiffs lease or sublease rooms in their apartments is relevant to defendants’ counterclaims.
Plaintiffs object to other interrogatories on the basis that they are argumentative and improperly require the adoption of assumptions. Plaintiffs claim that interrogatories concerning board activities imply that plaintiffs alone were responsible for those board activities. This implicit assumption would be prejudicial because plaintiffs served on the board with individuals who are not parties to the litigation, such that the board's actions are not attributable solely to plaintiffs. Plaintiffs’ argument is unpersuasive. Defendants’ phrasing of interrogatories about board decisions does not prejudice plaintiffs. The interrogatories do not state, either explicitly or implicitly, that plaintiffs are solely responsible for board decisions. Further, plaintiffs may explain in their responses their role, or lack thereof, in arriving at board decisions. Defendants’ interrogatories are not argumentative and do not impermissibly require the adoption of assumptions. To the extent that plaintiffs interpret the interrogatories otherwise, they may in their responses dispel any incorrect assumptions that they perceive.
Plaintiffs object to interrogatories on the basis that the information sought was already subject to previous litigation between the parties. In 2011, 3681 Broadway HDFC brought an action in Supreme Court, New York County, against three then-board members, including Franklin Lama, a plaintiff here. (See NYSCEF No. 219 at ¶ 12.) The corporation alleged that defendants there had been withholding documents belonging to it. The parties settled the case on October 27, 2011. (See NYSCEF No. 221.) They agreed to schedule a special meeting of shareholders to elect a new board. They also agreed that if defendants were not re-elected, defendants would turn over all documents and records belonging to 3681 Broadway HDFC and provide an accounting to the new board. As Lama was re-elected to the board, the return-of-documents and accounting provisions of the settlement did not apply. The 2011 settlement, therefore, does not dispose of the issue of which documents plaintiffs here turned over when they left the board.
Plaintiffs object to interrogatories on the basis that the information requested is available in 3681 Broadway HDFC's internal records and is within the personal knowledge of defendant Beatriz Santana and defendants’ bookkeeper, Maria Reyes. Parties must refrain from placing unnecessarily onerous discovery demands on one another. ( Kavanagh v Ogden Allied Maintenance Corp. , 92 NY2d 952, 954 [1998].) Plaintiffs claim that the information that defendants seek is readily available in records that they already possess. In this action, however, defendants are counterclaiming for the return of documents that they allege that plaintiffs improperly kept from their time on the board. Whether the relevant documents are in plaintiffs’ or defendants’ possession is disputed.
Regardless, plaintiffs’ objection fails. Plaintiffs claim that defendants would be able on their own find the information sought, not that plaintiffs lack that information. The fact that information is equally accessible to the requesting party is not a proper objection to discovery. (See Sanon v Sanon , 51 Misc 3d 1214[A], 2016 NY Slip Op 50657[U], *3 [Sup Ct, Monroe County 2016] ["[T]his court can find no authority for the proposition that a party, from whom disclosure is demanded, may decline disclosure on a premise that the requesting party also has access to the requested documents."].)
For the same reason, the court finds unpersuasive plaintiffs’ objection that defendants seek publicly available information. Interrogatory no. 9 asks whether plaintiff Juan Taveras got a New York City Department of Buildings (DOB) permit before installing a fountain at 3681 Broadway. Plaintiffs argue that defendants can search public records to determine whether the DOB issued a permit. Defendants argue that records cannot affirmatively state that the DOB did not issue a permit. At most, defendants can infer that the DOB did not issue a permit if public records do not list a permit for the fountain. The fact that information is publicly available does not necessarily prevent a party from seeking that information during discovery from an adversary. (See Long v State of New York , 33 AD2d 621, 621 [3d Dept 1969] ; see also Alfaro v Schwartz , 233 AD2d 281, 282 [2d Dept 1996].) The court finds that defendants’ interrogatory is not designed to harass and is not unduly burdensome. (See Kavanagh , 92 NY2d at 955.) Whether Tavares received a DOB permit is within his personal knowledge, so the interrogatory places no undue burden on plaintiffs. It is more efficient for plaintiffs to confirm whether Taveras obtained a permit than for defendants to search public records for the absence of a permit. (Cf. MBIA Ins. Corp. v Countrywide Home Loans, Inc. , 27 Misc 3d 1061, 1073 [Sup Ct, NY County 2010].)
The court has considered plaintiffs’ remaining objections and finds them unavailing. As plaintiffs’ objections are meritless, the court grants defendants’ motion under CPLR 3124 to compel plaintiffs to respond to defendants’ interrogatories.
The court denies, however, defendants’ motions to strike plaintiffs’ complaint under CPLR 3126 and to preclude plaintiffs from introducing any evidence with respect to any defenses which relate to this motion at trial under CPLR 3126. The court does not find that plaintiffs’ failure to respond adequately to defendants’ interrogatories was willful, contumacious, or in bad faith. Plaintiffs did not ignore defendants’ interrogatories or provide wholly inappropriate responses. (Cf. Kihl , 94 NY2d at 122 [striking complaint because plaintiff's responses to interrogatories were delayed, "lack[ed] any reasonable detail and improperly reserve[d] the right to provide answers at a later time"].) Plaintiffs provided substantive, albeit meritless, objections to defendants’ interrogatories. Further, plaintiffs responded to the interrogatories before the deadline that the court set in its status-conference order.
II. Plaintiffs Object to Defendants’ Requests for Production
Although plaintiffs state specific objections to 30 of defendants’ 33 requests for production, they have produced documents in response to some of defendants’ requests notwithstanding their objections. Plaintiffs have produced only 45 pages of documents in total.
Plaintiffs object to request for production no. 8. Request no. 8 demands that plaintiffs provide an accounting for the time that any plaintiff served on the board. Defendants’ third counterclaim in this action is for an order requiring plaintiffs to provide an accounting. An accounting is an equitable remedy. (See Roslyn Union Free Sch. Dist. v Barkan , 16 NY3d 643, 650 [2011].) Defendants now request that plaintiffs provide a full accounting during discovery. This would effectively grant defendants judgment on their accounting counterclaim before they have established their entitlement to that relief. Defendants’ motion to compel production with respect to request no. 8 is denied.
Plaintiffs object to defendants’ requests for production as insufficiently bounded in time. This objection is unpersuasive. A request for production must be limited to an "identifiable" time period. (See Kantor v Kaye , 114 AD2d 782, 782-783 [1st Dept 1985].) Defendants request documents for the time when any plaintiffs served on the board of 3681 Broadway HDFC. (See NYSCEF No. 119 at ¶¶ 1-10.) Plaintiffs know when they served on the board. Plaintiffs can, without undue effort, identify the precise time limitations on defendants’ discovery demands.
Plaintiffs also contend that defendants already possess the documents that are responsive to their own requests. Plaintiffs interpose this as continuing objection to every one of defendants’ requests. (See NYSCEF No. 215 at 2.) Plaintiffs also state this as a specific objection to requests nos. 1-7, 9, 10, 13-20, 22, and 23. (See id. at. ¶¶ 1-7, 9, 10, 13-20, 22, 23.) Plaintiffs claim that defendants have already produced the documents in plaintiffs’ possession that are responsive to defendants’ requests; and that plaintiffs do not have any other documents. (See id. at ¶¶ 1-5, 13, 19-23, 27, 28; NYSCEF No. 219 at ¶ 4.)
According to plaintiffs, the HDFC documents at issue were stored in two locked rooms in the basement of 3681 Broadway during their time on the board. (See id. at ¶ 7.) Plaintiffs claim that defendants, as the new board members, should now have the keys to those rooms and thus exclusive access to the documents. (See id. at ¶ 17.) Defendants, however, claim that plaintiffs did not turn over all of the requested documents when plaintiffs left the board—only documents for 2011 and 2012. (See NYSCEF No. 228 at ¶ 4.)
Both parties submit affidavits to support their claims. Defendants rely on the affidavit of defendant Mirtha Hasbun, a current board member. Hasbun alleges that the previous board turned over only HDFC records and documents for 2011 and 2012, withholding those materials for periods preceding 2011. (See NYSCEF No. 228 at ¶ 4.) Hasbun claims that plaintiffs still have the pre-2011 documents.
Plaintiffs submit the affidavit of plaintiff Franklin Lama. Lama represents that he does not have the documents and that he made a good-faith effort to respond to defendants’ discovery requests. (See NYSCEF No. 219 at ¶ 4.) He also asserts that his fellow plaintiffs do not have the documents and made a good-faith effort to respond. (See id. at ¶ 5.) Lama, however, cannot definitively attest to what others possess or have done. (See JMD Holding Corp. v Congress Fin. Corp. , 4 NY3d 373, 384-385 [2005].) At most, he can attest to what he believes, to the best of his knowledge, that his co-plaintiffs possess or have done.
That plaintiffs have not each attested individually to lacking possession of the documents at issue, though, does not establish that they do have the documents. And this court may not compel plaintiffs to produce documents that they do not have. (See Smith v County of Nassau , 138 AD3d 726, 728 [2d Dept 2016].) The court therefore must determine whether defendants provide sufficient evidence to justify a finding that plaintiffs are concealing records and documents in their possession.
Defendants do not make an indisputable showing that plaintiffs have the documents. Rather, each side offers conflicting sworn testimony about what happened to the pre-2011 materials when the current board replaced the previous one; and defendants have not provided evidence that necessarily disproves plaintiffs’ representations. This case is thus unlike Continental Industries Group v Ustuntas (173 AD3d 419, 420 [1st Dept 2019] ), in which the Court found that plaintiff was willfully withholding discovery materials because plaintiff had failed repeatedly to comply with discovery orders based on different, "ever-changing and irreconcilable" excuses.
That said, defendants’ reasons to believe plaintiffs are withholding the documents at issue are plausible, if circumstantial. In particular, plaintiffs have produced a mere 45 pages of documents in response to defendants’ discovery requests. Moreover, it would make little sense for defendants to withhold or decline to use documents in their own possession, given that defendants’ counterclaims about plaintiffs’ alleged mismanagement of the HDFC depend on those very documents. These facts lend credibility to defendants’ claim that plaintiffs possess the documents. In these circumstances, this court concludes that an evidentiary hearing is required to determine which party in fact possesses the documents. (See CEMD El. Corp. , 141 AD3d at 453.) The court will decide the remainder of defendants’ motion to compel production in light of its findings at the hearing.
Accordingly, for the foregoing reasons it is hereby
ORDERED that the branch of defendants’ motion under CPLR 3126 seeking to strike plaintiffs’ complaint is denied; and it is further
ORDERED that the branch of defendants’ motion under CPLR 3126 seeking to preclude plaintiffs from introducing any evidence with respect to any defenses which relate to this motion at trial is denied; and it is further
ORDERED that the branch of defendants’ motion under CPLR 3124 seeking to compel plaintiffs to respond to defendants’ interrogatories dated September 10, 2019, is granted, and plaintiffs shall provide interrogatory responses within 30 days of service of a copy of this order with notice of its entry; and it is further
ORDERED that the branch of defendants’ motion under CPLR 3124 seeking to compel production in response to request no. 8 of defendants’ September 4, 2019, request for discovery and inspection of documents is denied; and it is further
ORDERED that the court will hold an evidentiary hearing by Microsoft Teams on the branch of defendants’ motion to compel production in response to requests nos. 1-7 and 9-33 of defendants’ September 4, 2019, request for discovery and inspection of documents; and it is further
ORDERED that defendants shall serve notice of entry on all parties.