Upstate Shredding, LLC v. Ne. Ferrous, Inc.
| Decision Date | 02 March 2016 |
| Docket Number | 3:12-CV-1015 (LEK/DEP) |
| Parties | UPSTATE SHREDDING, LLC and WEITSMAN SHREDDING, LLC, Plaintiffs, v. NORTHEASTERN FERROUS, INC., and JAY GOLDBLATT, Defendants. |
| Court | U.S. District Court — Northern District of New York |
On June 21, 2012, Plaintiffs Upstate Shredding, LLC ("Upstate") and Weitsman Shredding, LLC (collectively, "Plaintiffs") commenced this action asserting claims for breach of contract, common law fraud, conversion, and unjust enrichment. Dkt. No. 1 ("Complaint"). In their Answer, Defendants Jay Goldblatt ("Goldblatt") and Northeastern Ferrous, Inc. ("Northeastern") (collectively, "Defendants") counterclaimed against Plaintiffs on the same causes of action advanced by Plaintiffs, and additionally sued Adam Weitsman ("Weitsman") individually. Dkt. No. 9 ("Answer"). In a Memorandum-Decision and Order filed September 30, 2014, the Court granted summary judgment in favor of Defendants on all of Plaintiffs' claims and on Northeastern's breach of contract counterclaim against Plaintiffs. Dkt. No. 39 ("September Order").
This matter returns to the Court on Plaintiffs' Motion for reconsideration of the Court's September Order and to reopen discovery. Dkt. Nos. 91 ("Motion for Reconsideration"); 91-26 ("Plaintiffs Reconsideration Memorandum").1 Defendants opposed the Motion and Plaintiffs filed a Reply. Dkt. Nos. 97-6 ("Defendants Response Memorandum - Motion for Reconsideration"); 102 ("Plaintiffs Reply - Motion for Reconsideration").2 Defendants have filed a Motion to preclude evidence and for the award of attorneys' fees pursuant to Federal Rule of Civil Procedure 37. Dkt. Nos. 98 ("Motion to Preclude"); 98-5 (Motion to Preclude Memorandum"). Plaintiffs oppose this Motion and cross-moved for attorneys' fees. Dkt. Nos. 104 ("Plaintiffs Cross-Motion"); 104-4 ("Plaintiffs Cross-Motion Memorandum"). Defendants also moved for sanctions pursuant to Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927 against Plaintiffs. Dkt. Nos. 109-9 ("Motion for Sanctions"); 109-9 ("Motion for Sanctions Memorandum"). Finally, Defendants moved to enforce the Protective Order entered by the Court. Dkt. Nos. 112 ("Motion to Enforce Protective Order"); 112-2 ("Motion to Enforce Protective Order Memorandum").3
For the following reasons, Plaintiffs' Motion for reconsideration, Cross-Motion for attorneys' fees, Defendants' Motion to preclude, and Motion for sanctions are all denied. Plaintiffs' request for attorneys' fees in response Defendants' Motion for sanctions and Defendants' Motion to enforce the Protective Order are granted.
The Court recounts the background and procedural history of the case. For further background, reference is made to the September Order. Plaintiffs are New York corporations engaged in the purchase and processing of scrap metals. Sept. Order at 2. In or around September 2010, Plaintiffs began purchasing scrap metal from Northeastern, a Canadian corporation. Id. Plaintiffs would quote Northeastern a price per ton of scrap and Northeastern would then arrange for a shipping company to haul the scrap to Plaintiffs' New York facility. Id.
When a shipment arrived at Plaintiffs' facility, Plaintiffs' employees would weigh the shipment and determine the amount of dirt and other non-processable materials present. Id. The amount of non-scrap material would be deducted from the total weight of the shipment in order to determine the price owed to Northeastern. Id.
Starting in June or July of 2011, Plaintiffs began to withhold payments for received shipments. Id. at 3. Northeastern subsequently stopped making shipments to Plaintiffs. Id. Weitsman then met Goldblatt, an owner of Northeastern, and assured him that Plaintiffs would resume payments if Northeastern resumed shipments. Id. Northeastern resumed shipments, but Plaintiffs did not pay for any of them. Id.
Plaintiffs allege that they stopped making payments when Weitsman received a voice message from a shipping company driver who claimed to have delivered Northeastern scrap to Plaintiffs. Id. In the message, the driver claimed that the drivers had orders from Northeastern to pay Plaintiffs' employees to under-record the amount of dirt in Northeastern's shipments. Id. Plaintiffs contacted the Federal Bureau of Investigation ("FBI"), which began an investigation into the matter. Id. The FBI directed Weitsman to meet with Northeastern representatives wearing awire. Id. The FBI suggested that Weitsman get Northeastern to resume shipments. Id. at 3-4.
Plaintiffs commenced this action on June 21, 2012, Compl., and following discovery, the parties moved for summary judgment on all claims. Dkt. Nos. 25; 31. In the September Order, the Court found that Defendants had made a prima facie case for breach of contract because it was undisputed that Plaintiffs did not make payments for all shipments after July 2011. Sept. Order at 5. Plaintiffs asserted that Defendants' bad faith conduct excused Plaintiffs' nonperformance under the contract, but the Court found that Plaintiffs did not raise a genuine issue of material fact regarding bad faith because they failed to offer any admissible evidence. Id. at 6-7. Accordingly, the Court granted summary judgment in favor of Defendants on all of Plaintiffs' claims against Defendants and on Defendants' breach of contract claim against Plaintiffs. Id. at 9. Defendants' breach of contract claim against Weitsman was dismissed. Id.
Following the September Order, Defendants moved for an award of damages consistent with the Order. Dkt. No. 40. On December 29, 2014, the action was reassigned to the Honorable Brenda K. Sannes, U.S. District Judge. Dkt. No. 44. In December 2014, Plaintiffs' counsel was informed by the United States Attorney's Office for the Northern District of New York that the FBI's investigation was closed. Dkt. No. 51-1 ¶ 3. During the investigation, the FBI had declined to disclose details of the investigation to Plaintiffs. Dkt. No. 104-1 ("Devendorf Cross-Motion Declaration") ¶ 7. Accordingly, on December 31, 2014, Plaintiffs submitted a subpoena to the FBI for the production of materials from the investigation. Id. ¶ 4. In February 2015, after the Court denied Defendants' Motion to quash the subpoena, Dkt. No. 55, the FBI produced certain materials.4Dkt. No. 91-1 ("Devendorf Reconsideration Declaration") ¶ 17.5
Upon receipt of the FBI materials, Plaintiffs submitted a Letter Request to adjourn the trial on damages and to conduct an investigation as to the subpoenaed materials. Dkt. No. 59. Defendants opposed that request. Dkt. No. 60. On April 14, 2015, the parties appeared before Judge Sannes for a hearing ("April Hearing") regarding Plaintiffs' request to adjourn the trial. See Text Minute Entry (Apr. 14, 2015); see also Dkt. No. 98-2 ("Transcript"). At the conference, Plaintiffs argued that there were outstanding FBI materials that they had not received. Tr. at 3:20-23. Plaintiffs also argued that the FBI investigation, while ongoing, had impeded their ability to contact and depose certain witnesses. Id. at 10:4-9. Based on Plaintiffs' representations, Judge Sannes adjourned the damages trial and allowed Plaintiffs to conduct additional discovery and depositions of witnesses who either were unavailable because of the FBI investigation or whose identities were not previously known. Id. at 23:25-24:8; see also Text Minute Entry (Apr. 14, 2015).
In May 2015, the FBI produced additional documents. See Dkt. No. 65. In July 2015, Plaintiffs conducted depositions of Peter Wangler ("Wangler") and Aaron Posner ("Posner"). Devendorf Recons. Decl. ¶ 36; see also Dkt. Nos. 91-16 ("Posner Deposition"); 91-17 ("Wangler Deposition"). Plaintiffs also conducted depositions of two former employees of Northeastern, Richard G. Cross ("Cross, Sr.") and Richard S. Cross ("Cross, Jr."). Devendorf Recons. Decl. ¶ 26. Defendants moved to prevent the deposition of Cross, Sr. on the ground that he was an individual known by all parties before the close of discovery. Dkt. No. 72. Judge Sannes denied Defendants'Motion and permitted Cross, Sr.'s deposition. Text Minute Entry (June 30, 2015). Judge Sannes also permitted Defendants to take Weitsman's deposition and Plaintiffs to serve Defendants with supplemental interrogatories. Id.; Dkt. No. 79.
On July 21, 2015, Judge Sannes filed an Order of Recusal and this action was reassigned to the Court. Dkt. No. 89. On July 27, 2015, Plaintiffs filed their Motion for reconsideration. Mot. Recons. Defendants then filed Motions to preclude evidence, for sanctions, and to enforce the protective order, and Plaintiffs cross-moved for attorneys' fees. Mot. Preclude; Pls. Cross-Mot.; Mot. Sanctions; Mot. Enforce Prot. Order.
Because Defendants' Motion for sanctions and Motion to preclude evidence involve common issues of fact, the Court addresses them together. Claiming that Plaintiffs made misrepresentations at the April 14, 2015 hearing that led the Court to reopen discovery, Defendants request that the Court preclude all evidence that the Plaintiffs obtained after the reopening of discovery. Mot. Preclude Mem. at 14. In addition, Defendants request attorneys' fees and costs they incurred from the reopening of discovery. Id. at 15. Defendants also filed a Motion for sanctions pursuant to Rule 11 and 28 U.S.C. § 1927. Mot. Sanctions.
Under Rule 11(b)(3), an attorney presenting "a pleading, written motion, or other paper" to a court must certify "to the best of [their] knowledge, information, and belief" that "the factual contentions have evidentiary support." FED. R. CIV. P. 11(b)(3). The appropriateness of sanctions under Rule 11 is determined by "an objective standard of reasonableness." United States v. Int'lBhd. of Teamsters, Chauffers, Warehousemen & Helpers of Am., AFL-CIO, 948 F.2d 1338, 1344 (2d Cir. 1991). A particular factual contention is subject to...
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