D.A. Bennett LLC v. Cartz

• Decision Date: 16 January 2014
• Citation: 113 A.D.3d 945,979 N.Y.S.2d 179,2014 N.Y. Slip Op. 00262
• Parties: D.A. BENNETT LLC, Respondent, v. Natalie CARTZ, Defendant, and Kermit Hayes, Appellant.
• Court: New York Supreme Court — Appellate Division

113 A.D.3d 945

979 N.Y.S.2d 179

2014 N.Y. Slip Op. 00262

D.A. BENNETT LLC, Respondent,

v. Natalie CARTZ, Defendant,andKermit Hayes, Appellant.

Supreme Court, Appellate Division, Third Department, New York.

Jan. 16, 2014.

Paul C. Rapp, Monterey, Massachusetts, for appellant.

Couch Dale Marshall, PC, Latham (Kimberlee Dale Marshall of counsel), for respondent.

Before: ROSE, J.P., LAHTINEN, McCARTHY and GARRY, JJ.

GARRY, J.

Appeal from an order of the County Court of Rensselaer County (Jacon, J.), entered March 26, 2012, which affirmed an order of the Troy City Court dismissing the counterclaims of defendant Kermit Hayes.

In January 2005, pipes froze in a house owned by defendant Kermit Hayes (hereinafter defendant) in the City of Troy, Rensselaer County, causing flooding that allegedly destroyed his professional photography archive and business records.¹ According to defendant, this damage resulted from the failure of a new heating system that had recently been installed by plaintiff. In April 2005, plaintiff commenced this action alleging that defendant had failed to pay the balance due for the installation of the heating system, and defendant answered, asserting counterclaims for the destruction of his property. In January 2011, on the morning that trial was scheduled to commence, plaintiff moved pursuant to CPLR 3126 to preclude defendant from presenting any evidence of his past earnings and income as the result of his alleged failure to provide specified documents in the course of discovery. After oral argument, City Court granted plaintiff's application and precluded defendant from offering business records, his own testimony or expert testimony as to the value of the archive. Plaintiff then moved to dismiss the counterclaims on the ground that defendant could not prove damages, and the court granted the motion. County Court affirmed upon defendant's appeal, and defendant appeals to this Court.

A trial court is authorized by CPLR 3126 to fashion an appropriate remedy for a party's failure to cooperate with discovery, and the sanction imposed is not disturbed in the absence of a clear abuse of discretion ( see Matter of Scaccia, 66 A.D.3d 1247, 1250, 891 N.Y.S.2d 484 [2009]; O'Brien v. Clark Equip. Co., 25 A.D.3d 958, 960, 807 N.Y.S.2d 703 [2006] ). However, the remedy of preclusion is drastic, especially where, as here, it has the effect of preventing a party from asserting its claim ( see Vatel v. City of New York, 208 A.D.2d 524, 525, 617 N.Y.S.2d 61 [1994] ), and is therefore “reserved for those instances where the offending party's lack of cooperation with disclosure was willful, deliberate, and contumacious” ( Matter of Duma v. Edgar, 58 A.D.3d 1085, 1086, 873 N.Y.S.2d 747 [2009] [internal quotation marks and citation omitted]; accord Kumar v. Kumar, 63 A.D.3d 1246, 1248, 881 N.Y.S.2d 518 [2009]; seeCPLR 3126[2] ).

Here, plaintiff's application for preclusion was made orally, without notice to defendant, and was unsupported by affidavits, copies of discovery demands, the parties' disclosure-related correspondence or any other written documentation.² The history of the parties' discovery transactions can be discerned only from their appellate briefs and the transcript of argument in City Court. According to counsel's arguments, in March 2006, plaintiff demanded that defendant furnish contracts, proposals, receipts and other business records, and 25 years of tax returns. Defendant allegedly responded that most of these records had been destroyed by the flooding, and supplied the records that remained.³ Plaintiff allegedly renewed its request at defendant's 2006 deposition and was again advised that defendant had supplied the records he possessed. It appears that the parties later exchanged expert reports, and plaintiff moved unsuccessfully for summary judgment. Other than the two requests in 2006, plaintiff did not specifically identify any further efforts to obtain records from defendant, nor does it appear that plaintiff ever moved to compel compliance with any outstanding demands prior to the filing of the note of issue and certificate of readiness ( see22 NYCRR 210.17). Defendant argues that discovery was essentially completed several years before trial, that plaintiff had been furnished with all of the documents that he possessed, and that he was “blindsided” when the preclusion motion was filed on the morning of trial without advance notice. ⁴

The scant record does not permit a determination as to whether there has been an overall pattern of unexcused noncompliance from which an inference of willfulness can be drawn ( see Hesse Constr., LLC v. Fisher, 61 A.D.3d 1143, 1144, 876 N.Y.S.2d 251 [2009] ). It was plaintiff's burden as the party seeking relief pursuant to CPLR 3126 to establish willfulness or bad faith ( see Cafferty v. Thomas, Collison & Place, 282 A.D.2d 959, 960, 723 N.Y.S.2d 722 [2001]; Nabozny v. Cappelletti, 267 A.D.2d 623, 625, 699 N.Y.S.2d 589 [1999]; Shapiro v. Rose Textiles Indus., 195 A.D.2d 935, 935–936, 600 N.Y.S.2d 819 [1993]; see also Jones v. General Motors Corp., 287 A.D.2d 757, 759, 731 N.Y.S.2d 90 [2001] ). As that burden was not met, preclusion should not have been granted and defendant's counterclaims should not have been dismissed. Moreover, City Court made no finding of willfulness, but based the preclusion order instead upon the conclusion that the records that defendant sought to admit were “speculative,” and thus unduly prejudicial—a determination that does not provide a basis for relief pursuant to CPLR 3126.⁵

ROSE, J.P., and LAHTINEN, J., concur.

McCARTHY, J. (concurring in part and dissenting in part).

I agree with the majority that City Court never made a finding of willfulness regarding defendant Kermit Hayes (hereinafter defendant) and that the scant record does not support an inference of willfulness regarding defendant's production of, or failure to produce, his business records. I reach a different conclusion, however, as to defendant's tax returns.¹ Therefore, I partially dissent.

If a party willfully fails to disclose information that should have been disclosed pursuant to CPLR article 31, the court may impose a sanction for that disclosure violation ( seeCPLR 3126). Some permitted sanctions include orders precluding the party from producing certain items of evidence or precluding any proof on a particular issue ( seeCPLR 3126[2] ). The trial court has the authority to fashion the appropriateremedy, and the sanction imposed will not be disturbed absent a clear abuse of discretion ( see VanEtten Oil Co., Inc. v. Exotic Flora & Fauna, Ltd., 78 A.D.3d 1438, 1439, 912 N.Y.S.2d 148 [2010]; Matter of Scaccia, 66 A.D.3d 1247, 1250, 891 N.Y.S.2d 484 [2009] ).

While disclosure of tax returns is disfavored, and a demand for 25 years of tax returns may have been overly burdensome, defendant was required to raise any objections to disclosure within 20 days of service of the notice ( seeCPLR 3122). He cannot wait for years to raise some of these arguments on appeal. As he did not raise a timely objection, defendant could only resist the demand, or defend his failure to comply, on the ground that the demand “seeks privileged material or is palpably improper” (Briand Parenteau, Inc. v. Dean Witter Reynolds, 267 A.D.2d 576, 577, 699 N.Y.S.2d 230 [1999]; see Murphy v. Hamilton, 90 A.D.3d 1294, 1295, 934 N.Y.S.2d 595 [2011]; Saratoga Harness Racing v. Roemer, 274 A.D.2d 887, 889, 711 N.Y.S.2d 603 [2000] ).

Although they are confidential ( see Briand Parenteau, Inc. v. Dean Witter Reynolds, 267 A.D.2d at 577, 699 N.Y.S.2d 230), tax returns are not privileged. A request for tax returns is not palpably improper, but disclosure of them is disfavored unless they contain relevant information that is not available from other sources ( see DG & A Mgt. Servs., LLC v. Securities Indus. Assn. Compliance & Legal Div., 78 A.D.3d 1316, 1319, 910 N.Y.S.2d 242 [2010]; compare Saratoga Harness Racing v. Roemer, 274 A.D.2d at 889, 711 N.Y.S.2d 603; Briand Parenteau, Inc. v. Dean Witter Reynolds, 267 A.D.2d at 577, 699 N.Y.S.2d 230). City Court recognized the relevance of defendant's income from his photography business to the valuation of his photography archives, and the information is not otherwise available due to the unfortunate destruction of most of defendant's business records. Thus, defendant cannot avoid his failure to object to the demands for his tax returns ( see DG & A Mgt. Servs., LLC v. Securities Indus. Assn. Compliance & Legal Div., 78 A.D.3d at 1319, 910 N.Y.S.2d 242; compare Briand Parenteau, Inc. v. Dean Witter Reynolds, 267 A.D.2d at 577, 699 N.Y.S.2d 230).

Not only did defendant fail to ever...