127 F.R.D. 63 (S.D.N.Y. 1989), 86 Civ. 9491 (JMW), Quadrozzi v. City of New York

Docket Nº86 Civ. 9491 (JMW).
Citation127 F.R.D. 63
Opinion JudgeWALKER, District Judge:
Party NameJohn QUADROZZI, et al., Plaintiffs, v. The CITY OF NEW YORK, et al., Defendants. The CITY OF NEW YORK, Counterclaim and Third-Plaintiff, v. John QUADROZZI, et al., Counterclaim Defendants and Edward J. Halloran, et al., Third-Party Defendants.
AttorneyMichael Barron, Fredrika V. Miller, Corp. Counsel of the City of New York, New York City, for defendants. Gerald Walpin, Steven S. Miller, Barry Michael Okun, Robert A. Saperstein, New York City, for plaintiffs.
Case DateJuly 17, 1989
CourtUnited States District Courts, 2nd Circuit, Southern District of New York

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127 F.R.D. 63 (S.D.N.Y. 1989)

John QUADROZZI, et al., Plaintiffs,


The CITY OF NEW YORK, et al., Defendants.

The CITY OF NEW YORK, Counterclaim and Third-Plaintiff,


John QUADROZZI, et al., Counterclaim Defendants


Edward J. Halloran, et al., Third-Party Defendants.

No. 86 Civ. 9491 (JMW).

United States District Court, S.D. New York.

July 17, 1989

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[Copyrighted Material Omitted]

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Antitrust defendant moved for the imposition of sanctions on plaintiffs. The District Court, Walker, J., held that: (1) imposition of sanctions was warranted for discovery abuses, and (2) Rule 11 sanctions were warranted.

Motion granted in part and denied in part.

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Michael Barron, Fredrika V. Miller, Corp. Counsel of the City of New York, New York City, for defendants.

Gerald Walpin, Steven S. Miller, Barry Michael Okun, Robert A. Saperstein, New York City, for plaintiffs.


WALKER, District Judge:

The City of New York (the " City" ) seeks sanctions against plaintiffs, John Quadrozzi and other ready-mix concrete producers (collectively, " clients" ), their attorneys, Gerald Walpin (" Walpin" ) and Alexander A. Miuccio (" Miuccio" ), and their respective firms, Rosenman & Colin and Altieri, Kushman, Miuccio & Frind (collectively, " counsel" ). This Court dismissed plaintiffs' substantive antitrust claims with prejudice in March, 1988. The City now argues that dismissal with prejudice is an insufficient response to plaintiffs' dilatory conduct and moves for monetary sanctions pursuant to Fed.R.Civ.P. 11 and 37(b), the common law and 28 U.S.C. § 1927. In sum, the City alleges that the initial antitrust action was brought and continued in bad faith and that plaintiffs abused the judicial process by repeatedly failing to comply with this Court's discovery orders. The City seeks reimbursement for attorneys' fees for the entire proceeding in the sum of $227,497.50. For the reasons stated below, the City's motion is granted in part and denied in part.


The instant sanctions motion demands an understanding of the history of this prolonged and contentious litigation. Emphasis is placed upon the discovery disputes which lie at the heart of the City's motion for sanctions.

On August 20, 1986, the City entered into a requirements contract (the " contract" ) with West 57th Street Corporation (" West 57th" ) and Mustapha Ally (" Ally" ) (collectively, " the defendants" ). The contract required the City to provide a site for West 57th and its principal, Ally, to build a

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cement batching plant, in return for which West 57th would provide the City with all of the City's cement needs at a set price for a period of five years. Additionally, the contract permitted West 57th to sell excess capacity cement to private contractors at prices not exceeding those charged to the City.

On December 11, 1986, plaintiffs commenced an antitrust suit before this Court alleging, inter alia, that the contract amounted to an unlawful agreement to fix prices and a conspiracy to monopolize. Plaintiffs alleged violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and section 3 of the Clayton Act, 15 U.S.C. § 14. At the same time, plaintiffs also instituted a parallel Article 78 proceeding in state court. Both the federal and state actions challenged the validity of the contract and sought to enjoin the construction and operation of the concrete plant.

A. The State Court Action

The plaintiffs' Article 78 proceeding alleged that the City was acting beyond the scope of its authority in violation of the New York City Charter and the State Constitution. The New York State Supreme Court initially denied a temporary restraining order " as not being in the best public interest." John Quadrozzi, et al., v. The City of New York, et al, Index No. 28421/86, at 2 (April 15, 1987).

On April 15, 1987, the state Court dismissed plaintiffs' motion for a temporary injunction and granted defendants' cross-motion for dismissal for insufficiency. The court found that the contract was not illegal under any public law provisions. Moreover, the court found that there was sufficient evidence for the City to believe that the ready-mix concrete industry in New York was underworld controlled and was itself guilty of monopolistic practices. The court then concluded that the City had a " duty ... to take action" and that it was proper for the City's Office of Economic Development to determine that the creation of an independent concrete plant would enhance the economic well-being of the City by supplying the City and the private sector with concrete at fair market rates. Tr. April 15, 1987, at 7.1

The state court also noted, in dicta, that it was reasonable to doubt the bona fides of the plaintiffs. The court found that inferences could be drawn that plaintiffs did not bring the action in good faith for a legitimate and proper purpose. The court based its conclusion on reports of organized crime control and bid rigging in the concrete industry. Moreover, the court determined that 90-100% of the concrete market in Manhattan was in the control of two of the plaintiffs, Certified Concrete Co. and Atlas Transit Mix Corp., while most of the other plaintiffs were located outside the Manhattan market, and had never before even bid on City projects. The Appellate Division, First Department, unanimously affirmed the dismissal of plaintiffs' action.2

B. The Federal Court Action

Within two weeks of commencing their simultaneous state and federal actions on December 11, 1986, plaintiffs served the defendants with document requests and notices to take depositions in the federal antitrust suit before this Court. Depositions were scheduled to commence on January 14, 1987 with document production by January 26. After several adjournments requested by the City, discovery began in mid-February, and by the end of February the City had produced thousands of pages of responsive documents. Between February 26 and April 10, 1987, plaintiffs took ten days of depositions.

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With plaintiffs' discovery well underway, the parties turned to defendants' discovery requests. It is plaintiffs' response to these requests that is at the core of the City's motion for sanctions.

1. The City's Quest for Documentary Discovery

The City served its document requests on February 17, 1987, and its notices of deposition on March 4, 1987. Responses were due by March 19, 1987. Upon stipulation of the parties, that response date was extended two weeks to April 2, 1987. On April 2, plaintiffs served Rule 34 Responses to the City's document requests (" the April 2 Responses" ).3 See Miller Aff., Motion to Compel, Ex. B-M. The eleven concrete producers submitted separate Responses but each included identical general objections claiming that many of the requested documents contained confidential information relating to prices, operating costs and market share and territory information-such as how much concrete each plaintiff had delivered and to whom it was delivered-and would only be produced to the City pursuant to a proposed confidentiality stipulation and order. See Miller Aff. Motion to Compel ¶ 18.

On April 2, hours after plaintiffs served their initial Rule 34 Responses, plaintiffs' counsel learned that some of the plaintiffs were not willing to produce their documents relating to price, cost and customers at all because they no longer believed the City was able, even under a proposed confidentiality stipulation, to keep information out of the hands of competitors.4 Consequently, plaintiffs' counsel sent a letter (" the April 2 letter" ) to the City in order to clarify " some ambiguity" which " may have resulted" in the " rush to generate" the Rule 34 Responses. See Miller Aff. Ex. B. In the letter, counsel explained that the objection to producing confidential information, as set forth in General Objection H of the Rule 34 Responses,5 as well as any other applicable objection, should be applied generally without regard to an agreement on a proposed confidentiality stipulation. Plaintiffs had thus decided not to allow discovery of any of their purportedly confidential documents unless their stated objections were overruled by this Court.

On April 3, 1987, at a conference before the Court, plaintiffs' counsel admitted that they were having an " enormous problem ... trying to convince [their] clients that [material relating to prices, costs and customers] is something that need be discovered here." Ex. 37 at 12. The Court, by Order dated April 14, 1987, then directed plaintiffs to produce all documents to which they did not object by April 22, 1987. The Court also ordered a stay, precluding plaintiffs from taking further depositions of City witnesses until plaintiffs provided the City with meaningful discovery. Without document production, the City was unable to conduct its noticed depositions. See Ex. 38. By the April 22 compliance date, plaintiffs had only produced documents in response to five of the City's thirty Requests.

On April 30, 1987, the City served counterclaims against five of the plaintiffs (John Quadrozzi, Quadrozzi Concrete Corp., Joseph A. Ferrara, Ferrara Bros. Building Materials Corp., and Marine Pollution Services Inc. d/b/a Certified Concrete Co.) and third-party claims against two additional parties (Edward J. Halloran and Transit-Mix Concrete Corp.). The counterclaims and third-party claims alleged antitrust violations similar to those that plaintiffs alleged against the City. See Ex. 49.

On May 13, 1987, frustrated with plaintiffs' refusal to disclose information which

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the City deemed to be at the heart of the...

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