135 East 57th Street, LLC v. Gerald Katzoff, etal.
(Index No. 602167-09, NYS Supreme Court, June 6, 2011)
We represented: PLAINTIFF
Hon. Charles Ramos, J.S.C.
DECISION and ORDER
2 THE COURT: Good morning. Good afternoon.
3 We have plaintiff?
4 MR. REIFF: Yes, your Honor.
5 THE COURT: Who has 57th Street Day Spa LLC?
6 MR. KRASSNER: I do, your Honor.
7 THE COURT: Greenhouse Day Spa, 57th Street LLC?
8 Anybody represent them?
9 MR. KRASSOF: I don't think that entity exists.
10 THE COURT: GH Day Spa Inc?
11 MR. KRASSOF: That is me, together with Katzoff and
12 Spa, 57th Street LLC.
13 THE COURT: Then we have Lather and Robert Hoyt--
14 MR. REIFF: Mr. Reiff of Itkowitz & Harwood
15 for the plaintiff.
16 Our motion today is seeking sanctions in connection
17 with all of the defendants' discovery defaults. It is also
18 seeking to correct the pleadings to correct it from
19 Greenhouse Day Spa, 57th Street LLC, which is incorrectly
20 named in the caption, to its correct name, which is GH Day
21 Spa, 57th Street LLC.
22 THE COURT: And that is represented by -
23 MR. REIFF: Has not appeared.
24 THE COURT: Also. Okay.
25 MR. REIFF: That is the only party that has not
26 appeared by counsel, you Honor.
2 THE COURT: It will be GH Day Spa singular?
3 MR. REIFF: That's correct.
4 THE COURT: 57th Street LLC?
5 MR. REIFF: Yes, your honor.
6 So there's - two GH entities, one a
7 corporation and one an LLC?
8 MR. REIFF: Correct, your Honor.
9 THE COURT: Proceed with your motion. There is
10 the lectern.
11 MR. REIFF: Sure.
12 All right. Your Honor, as I mentioned, this is a
13 discovery default motion. All Defendants have failed to
14 comply with their discovery obligations and some of them
15 pretty severely so.
16 I will take it by groups of parties represented by
17 counsel here.
18 THE COURT: Sure.
19 MR. REIFF: I think the most egregious default
20 right here is by the GH or the Greenhouse defendants,
21 because these defendants have taken completely contradictory
22 positions, to say the least, in their sworn statements.
23 THE COURT: Does anyone represent the
24 Greenhouse defendants here, or are they represented by
26 MR. REIFF: Yes, they are.
2 THE COURT: But they are not here?
3 MR. REIFF: GH Day Spa Pinchuk and Katzoff. I
4 have called them the GH or Greenhouse defendants in the
6 These three defendants are completely in default of
7 their obligations. They have not responded. Pinchuk in
8 particular has not even responded to our document demand or
9 our interrogatories, has not responded with a single piece
10 of paper or single response. We have sent letters, made
11 this motion, and still no response.
12 What we did get was an affidavit in response,
13 saying and I quote -- this is the affidavit in opposition
14 filed in this motion Paragraph 3 "At no time did I have any
15 ownership interest in the 57th Street Day Spa LLC or in any
16 of the other named defendants --" and skipping two sentences
17 "-- subsequent to September of 2005 __ II which is the date of
18 the key transaction in this case in which a surreptitious
19 ownership change took place. "I had absolutely no
20 involvement with the spa located at the premises, nor did I
21 have any connection directly or indirectly with the Lather
23 Your Honor, this is completely false.
24 other way to put it.
25 THE COURT: Why don't I have -- maybe it is here.
26 Whose affidavit is this?
2 MR. REIFF: The affidavit of Rae Pinchuk. She
3 is, in fact, contrary to her affidavit.
4 THE COURT: I don't think I have it.
5 MR. REIFF: This is NYCEF Document Number 53 on
6 the electronic docket. I don't know if a courtesy copy was
7 delivered by counsel.
8 THE COURT: I got it.
9 MR. REIFF: I was quoting from Paragraph 3 of this
10 affidavit of Rae Pinchuck, sworn to under the penalty of perjury
11 on May 20th of 2011
12 THE COURT: States at Paragraph 5, "I am not in
13 possession or control of any documents requested nor to
14 anything else related to this action."
15 So what can I do to someone who submits a response
16 to the discovery demand saying I have no documents and it is
17 an affidavit?
18 MR. REIFF: Well it is kind of ironic, your Honor,
19 that three months earlier she had filed another affidavit in
20 which she attached documents that are pertinent to this
21 action and said because of these documents you should
22 dismiss me from the case, Judge.
23 So now, she--
24 THE COURT: All right. I have -- keep it simple,
25 fella. I take it one step at a time. I know you are
26 raising a serious issue. You say this affidavit is
2 perjured. You know what the CPLR says. You move for the
3 appropriate relief. At this point I don't have before me
4 the record that you're talking about.
5 MR. REIFF: Well, actually we do, your' Honor. It
6 is in our motion papers.
7 THE COURT: Oh.
8 MR. REIFF: So fortunately, I attached it. It was
9 the affidavit of Rae Pinchuk in -- I believe --
10 THE COURT: Which exhibit is that?
11 MR. REIFF: This is Exhibit 22 to our moving
13 THE COURT: Okay.
14 MR. REIFF: And this is- the Pinchuk affidavit
15 in support of the summary judgment motion a few months ago
16 when we appeared before you and you denied the summary
17 judgment motion in full, in Paragraph I, Ms. Pinchuk
18 affirmed, attests under penalty of perjury that she is a
19 managing member of GH Day Spa -- 57th Street, a member of
20 Day Spas. And Ms. Pinchuk signed the lease as well as the
21 lease amendment that is the subject of this litigation.
22 So to claim that she had no ownership interest, no
23 involvement in the premises, is false.
24 But it is even worse than that, your Honor. I
25 will let you just review that, but there is some even more
26 damming documents here that are in play that we have
2 received in the limited discovery responses from the only
3 defendant that even produced anything here.
4 (Pause in proceedings.)
5 MR. REIFF: Your Honor--
6 THE COURT: Counsel, how do you reconcile these
7 two affidavits?
8 MR. KRASSNER: I honestly they think are not
9 contrary to each other, although they may be a little
10 sloppy. At the time after the first affidavit was
11 produced t submitted t all of the defendants were represented
12 by the office of Jody Markman. I believe that ~-
13 THE COURT: Counsel, tell me the information that
14 was there, Mr. Krassner.
15 MR. KRASSNER: Just to respond to the Court's
16 inquiry, to the best of my knowledge, speaking with her
17 directly, she was nothing but a convenient signatory to the
18 lease with no ownership interest in the companies.
19 THE COURT: This is not going to do it. I have an
20 affidavit where she says that he was the managing member of
21 one of the defendants, and now I have an affidavit saying
22 she no involvement with the spa located at the premises and
23 no connection directly or indirectly with the Lather
25 MR. KRASSNER: After September of 2005. She also
26 says in the affidavit that I prepared that she reviewed the
2 discovery of February of 2010 --
3 THE COURT: In the affidavit she says she is the
4 managing member.
5 MR. KRASSNER: Managing member does not mean she
6 is an owner.
7 THE COURT: I didn't say that, but it certainly
8 means in -- she controls the LLC. She is the managing
10 MR. KRASSNER: I think in this instance
11 THE COOURT: Apparently she is not well.
12 MR. KRASSNER: She is not well at all.
13 THE COURT: She had brain surgery.
14 MR. REIFF: She did have surgery, yes, your Honor.
15 I don't know more, beyond that, but she has been
16 participating in this litigation to some extent. I can't
17 say one way or the other.
18 MR. KRASSNER: The reality is, I spoke with Ms.
19 Pinchuk. She clearly has a brain tumor, lives in
20 Pennsylvania, her voice is slow. It is obvious she is ill.
21 Behind the scenes, she was a family friend of Mr. Katzoff
22 for years. She was working in the spa as a convenience
23 THE COURT: Does she ever come into New York?
24 MR. KRASSNER: I don't know.
25 THE COURT: Here is what she is facing. She is
26 facing a deposition.
2 MR. KRASSNER: Which is fine. Your Honor -- all
3 Mr. Katzoff and -- Mr. Katzoff Ms. Pinchuk, she is well
4 enough to travel because when I spoke to her once, she was
5 improving. We will produce her for a deposition.
6 THE COURT: Then let's have a deposition and we
7 will straighten it out. This first affidavit was in error.
8 We will deal with that and whatever the consequences are of
9 that, but let's nail her down one way or the other. Either
10 she is in this case or not in this case. We have
11 conflicting affidavits. I can't accept counsel's statement
12 because everything is hearsay, so make arrangements. Either
13 you're going out to Bucks County at her expense, or she is
14 coming in to New York to be deposed. Have it worked out
15 amongst the two of you.
16 What is the next problem?
17 MR. REIFF: Your Honor, I mean, the problem really
18 is that we have no e-mails or other documents from her.
19 That is the problem. We do have e-mails on -- by contrast,
20 from the one defendant that did produce something here and
21 sure enough, this is Rae Pinchuk participating in the Day
22 Spa business in 2008 contrary to her representations.
23 Again, I will raise that at deposition.
24 Now, I had previously agreed to now I have no
25 choice but to proceed with the deposition.
26 THE COURT: Yes.
2 MR. REIFF: So that is that on Ms. Pinchuck
3 Let me turn to Mr. Katzoff now and GH Day Spas,
4 which is also troubling, to say the least.
5 Mr. Katzoff put in his sworn interrogatory response
6 that he had no documents for himself or for GH Day Spas or
7 for 57th Street Day Spa period, end of story. None. Why?
8 Because all of these documents purportedly went up in a
9 fire. The fire took place in February of 2011, your Honor,
10 well after the commencement of this litigation, well after
11 this Court signed the preliminary conference order
12 specifically directing all of the parties to preserve
13 evidence in this case.
14 THE COURT: Isn't it amazing how in a high
15 percentage of my cases there are fires or power failures
16 that destroy all of the documents? In fact, we had a case
17 before us involving a very important New York realtor and
18 they had a power outage and all of their electronic
19 documents disappeared. Just miraculous coincidences.
20 MR. REIFF: It is very convenient, your Honor, I
21 suppose, but the problem is that the affidavits that have
22 been put in in response to this motion, now Mr. Katzoff says
23 the fire is totally unrelated to this action.
24 Well, your Honor, the plaintiff disagrees. The
25 fire is central to this action because all of the documents
26 are gone because of this purported fire.
2 Counsel goes a step further and says that plaintiff
3 has not even made a showing that there were relevant or
4 discoverable documents that were destroyed. Now, not only
5 is that sort of impossible to say when you have your own
6 client attesting that all of the relevant documents were
7 burned in the fire, but the very few documents we received
8 in the aborted bankruptcy case filed by 57th Street Day Spa
9 previously were bank records that were received from
10 Yardley, Pennsylvania, the same little town in Pennsylvania
11 where this purported fire took place. So clearly, some
12 records were out there in Pennsylvania. We didn't get a lot
13 of discovery in the bankruptcy case. You don't get much in
14 bankruptcy discovery as a creditor.
15 THE COURT: What are you looking for here?
16 MR. REIFF: At this point, your Honor, we are
17 being hamstrung, forced to litigate with hands tied behind
18 our backs. No documents. No explanation. We have said at
19 least give us some backup for the fire and they won't give
20 us that, so now we have nothing, no documents, no
21 interrogatory responses. We have zero in order to prove our
22 case and we know that Katzoff was the managing member of GH
23 and --
24 THE COURT: Their position is that the documents
25 were destroyed, right?
26 MR. KRASSNER: No. The position is, if he had
2 documents which he may not have had for reasons that will
3 become very evident, they were burned in the fire. The
4 place burned to the ground. He is not saying there were
5 documents there. He doesn't know if he had anything from
6 2005, but if he had anything, there was a fire. Not that
7 he had things, but he had nothing -- nothing to do with this
8 company after 2005 and simply stated, I have spoken to Mr.
9 Katzoff. I came in, cross-examined him myself, satisfied
10 that the affidavit is accurate except for what was given in
11 February 2010 or 2011 -- 2011, there is nothing else and
12 what was in the warehouse he doesn't even know, may have
13 been in the basement, but it is all logical in context, not
14 logical with plaintiff spinning it beyond what it is and by
15 the way, this is a nonpayment of a commercial bank loan. He
16 is spinning this as if it is some major conspiracy among
17 defendants when all that happened here is, this commercial
18 tenant stopped paying rent at the end of the lease, nothing
19 more and nothing less, and then with no basis, he sues the
20 world including Rae Pinchuk who was just an employee and
21 this guy knows that. This is very personal between his
22 client and my clients for, reasons I can inform the Court of
23 right now. In two sentences I will tell the Court what the
24 situation here is.
25 THE COURT: Explain. You're standing.
26 MR. KEASSNER: Mr. Katzoff owned a chain of spas.
2 He went to sell them -- this whole chain, big deal, Steiner
3 Sports. They bought all of the locations, Texas wherever.
4 Mr. Kaplan the landlord would not consent to the lease
5 assignment even though they had the right to do it. He
6 wanted to get paid money, saying you're only selling the
7 location because of my location and therefore, pay me even
8 though the lease says otherwise. Steiner Sports said I
9 don't want to get involved in a lawsuit, we will buy
10 everything else for the same price, keep this location.
11 Take the other ones. The heck with it.
12 So basically, at that point Lather came in, 2005,
13 took over totally. Katzoff left, he didn't care about it,
14 he got paid big bucks from the sale, so it had nothing to do
15 with this spa once they came in and that is why, when you
16 hear the back story, it is logical. He didn't care about
17 it. Had nothing to do with it. He walked away from it.
18 Rae Pinchuk was a family friend and signed the
19 lease as a convenience -- as people do in business -without
20 thinking. She signed it. I am told, and I
21 inquired, I did my duty, that she is a family friend for
22 years and years, so in context, that is why my client --
23 THE COURT: But you have to understand, you have
24 not made a motion for summary judgment yet to dismiss this
26 MR. KEASSNER: There was a prior motion, a 3211.
2 THE COURT: But your clients are still in the case
3 and when they are still in the case, they still have
4 discovery obligations.
5 MR. KRASSNER: And they stand by the affidavits
6 that I submitted. It is possible that if Ms. Markman was
7 involved-they would all be treated together as people tend
8 to do, but if they want to take a deposition of Ms. Pinchuk
9 and drag her down, or go to Bucks County and listen to her
10 slurred speech, fine.
11 If they want Mr. Katzoff -- he is a busy man -- he
12 will gladly appear. If he is not telling the truth, they
13 will figure it out, but with the back story, that is why it
14 is logical that they have nothing.
15 MR. REIFF: Your Honor --
16 THE COURT: I don't care if it is logical. I just
17 want responses
18 MR. REIFF: We have Blackberry e-mails produced by
19 another defendant. Did those go up in the fire too? And
20 Mr. Katzoff keeps an office across the street from the prior
21 premises. He has all of his businesses run out of a place
22 called Manhattan Capital LLC which is an umbrella company.
23 He has computers, he has his accountant there, has an in
24 house counsel. This is not just some guy. He has a
25 business, a bunch of businesses and he had a Blackberry from
26 which he was sending e-mails, like Rae Pinchuk was sending
2 e-mails by Blackberry. These documents are all now
3 purposely gone. They won't give documentation of an
4 insurance claim in connection with the purported fire. They
5 won't give us anything about this purported fire and they
6 are claiming the fire is not important because it has
7 nothing to do with the action, even though it destroyed all
8 of the documents that pertain to this action.
9 Your Honor, we are left with no choice but to seek
10 sanctions here. We have no options left at this point
11 because they refuse to give us anything.
12 MR. KRASSNER: The remedy is a deposition of
13 plaintiff Katzoff and he will appear for a deposition. They
14 can inquire and ask. If he has not done the right thing,
15 there is a remedy, but at this point he has submitted an
16 affidavit that he has nothing other than what was already
17 given up.
18 THE COURT: I think you're right. Your only
19 remedy is to punish him for contempt if this is a perjured
20 affidavit. If necessary, we will have somebody take a look
21 at his computer hard drive.
22 MR. REIFF: Well, that is a problem. He is saying
23 they won't produce the computer hard drive because it was
24 purportedly destroyed.
25 THE COURT: What is the story with the computer
26 hard drive? Available or not?
2 MR. KRASSNER: The computers in Pennsylvania
3 burned to the ground. To the extent he has a business in
4 the City, I mean, he has other business interests, I don't
5 think they have the right to go to his computer for other
6 business interests. I think his remedy is take a deposition
7 and inquire.
8 THE COURT: You can't take a deposition of a
10 Look, you say there was a fire, documents were
11 destroyed, but he has another computer.
12 MR. KRASSNER: He has other business. He has an
13 office in Manhattan.
14 THE COURT: He does business in Pennsylvania
15 Manhattan, or both place?
16 MR. KRASSER Both? I know he has offices in
18 THE COURT: Did he have a fire in Manhattan also?
19 MR. KRASSER: No.
20 THE COURT: Let's take a look at his Manhattan
21 computer. Do a keyword search.
22 MR. KRASSER: I don't think that they asked for
23 that yet.
24 MR. REIFF: We absolutely did, your Honor. A long
25 time ago we asked for it. We asked for them to identify
26 any computers that might potentially contain relevant
2 electronic pieces of information.
3 THE COURT: If he has a computer in the Manhattan
4 office, let's take a look at it. He may have things copied,
5 may have a file -- if he will have computer correspondence
6 on this issue, if he did -- what time period are we looking
8 MR. REIFF: We are looking at from approximately
9 the middle of 2005 through the end of the lease period and
10 actually thereafter, because he appears --
11 THE COURT: Is that when the matter came in? In
13 MR. REIFF: Yes.
14 THE COURT: It is a relevant time period. So you
15 make the computer available. Either copy the hard drive or
16 have Croll or somebody go over and take look at the computer
17 and find out and if is he lying here, he is in trouble. I
18 tell you right now, I don't like perjured affidavits.
19 MR. KRASSNER: I don't know exactly what computers
20 he has, doesn't have.
21 THE COURT: We will find out. This is -- I am
22 getting a really bad feeling. Go ahead. We will
23 MR. REIFF: So we will set down a schedule then
24 for that to go forward?
25 THE COURT: Okay.
26 MR. REIFF: That takes care of the Greenhouse
2 defendants. We can turn now to the Day Spa defendants who
3 likewise have produced nothing and likewise, have failed to
4 identify all sorts of potential sources of electronic or
5 stored information as well. Day Spa was the actual tenant
6 of record. They claim to have no documents regarding
7 occupancy of the premises. They occupied the premises for
8 I don't know, ten years and they claim to have no documents
9 pertaining to it, claim to have no e-mails or anything else,
10 even though the Lather defendants have produced e-mail
11 correspondence, minimal correspondence with Day Spa officers
12 and representatives. They have produced no documents.
13 THE COURT: What were the e-mail addresses given
14 for the Day Spa officers and representatives?
15 MR. REIFF: It was for Bill Minner. He is the
16 chief financial officer.
17 THE COURT: Okay.
18 MR. REIFF: 57th Street Day Spa. I can pull up his
19 address in a moment, Minnier. Bminner@aol.com
20 THE COURT: How can you have e-mails from someone
21 at 57th Street Day Spa and Day Spa has no documents? Who is
22 representing Day Spa?
23 MR. ROSE: The question that your Honor is asking
24 is why don't we have any documents?
25 THE COURT: Yes. If someone has an e-mail
26 correspondence from one of your officers or representatives,
2 and your client is saying they don't have any documents --
3 MR. ROSE: Yes, Judge. The documents -- first of
4 all, the documents that Day Spa had were produced prior to
5 the fire in connection with the bankruptcy action, which
6 were -- those documents were annexed as Exhibit 11 to
7 plaintiff's moving papers. So for the plaintiff to say that
8 Day Spa has not produced any documents whatsoever is
10 In addition, counsel's affirmations in support of
11 the instant motion in Paragraph A acknowledges that Day Spa
12 has produced documents.
13 Furthermore, any of the documents that Day Spa may
14 have had were done in connection with what counsel has
15 grouped together as the Greenhouse defendants, so -- and/or
16 the Lather defendants, so anything that Day Spa may have had
17 was either produced in connection with the bankruptcy
18 proceeding or during the period of time when the law firm of
19 Jody Markman represented all of the defendants, so -- and
20 then of course we had the fire, which destroyed all of
21 Katzoff's property in Yardley, Pennsylvania to the ground.
22 So there is nothing left, nothing for Day Spa to produce at
23 his point.
24 THE COURT: Again, the computer was burned up as
26 MR. ROSE: Burned to the ground.
2 THE COURT: The computer this fellow was using,
3 that was destroyed?
4 MR. ROSE: Absolutely, and yes --
5 THE COURT: There is no server that has these
7 MR. ROSE: It was on the premises.
8 MR. REIFF: The AOL server was in Yardley,
10 MR. REIFF: Your Honor, Bill Minner, according to
11 the website, is also an officer of that company across the
12 street from the subject premises.
13 MR. ROSE: They are not a party, Judge.
14 MR. REIFF: They are doing business there with Mr.
15 Katzoff's office on -- he is clearly
16 THE COURT: We will take a look at his computer as
18 MR. REIFF: Okay.
19 THE COURT: And --
20 MR. ROSE: Which computer?
21 THE COURT: And if we will find documents on that
22 Computer that are responsive to these demands, you client
23 Will have some very, very serious explanation to make.
24 MR: REIFF: So this is Bill Minner's computers and
25 emails so that we can ascertain --
26 THE COURT: Absolutely.
2 MR. REIFF: the scope of the situation.
3 MR. KRASSNER: Your Honor, may I be heard?
4 Speaking for my client, we are not trying to avoid
5 discovery. But I think the Court has to put this case in
6 context. Notwithstanding the amended complaint that there
7 was a large conspiracy, plaintiff has shown absolutely no
8 legitimacy to his claim that this unpaid rent filters
9 through down to all of these other companies and to permit
10 discovery of Mr. Katzoff's business empire --
11 THE COURT: Then make the appropriate motion to
12 get your clients out of the case. I am stuck with
13 defendants that are in the case stonewalling on discovery.
14 MR. KRASSNER: We are stonewalling? He can't do a
15 fishing expedition because he has unlimited pockets and now,
16 Mr. Minner --
17 THE COURT: Have you seen any timely responses
18 objecting to these discovery demands?
19 MR. ROSE: We responded to counsel's
20 interrogatories as well as discovery requests. In
22 THE COURT: Where are the responses that they
24 MR REIFF: Right, so the responses your Honor are
25 located at --
26 MR. ROSE: -- Exhibit 26 and 27. So we objected
2 and then provided the documents that we had. We responded
3 to the interrogatories.
4 So for the Court to suggest with all due respect,
5 that we have stonewalled --
6 (Pause in proceedings.)
7 THE COURT: Which interrogatories do you say they
8 did not respond to?
9 MR. REIFF: Okay. So on the interrogatories, your
10 Honor, as we set forth in our letter complaining about their
11 interrogatory responses, this is Exhibit 31 to our motion
12 papers, if you go to it, as you can see, it is a long letter
13 because there were so many problems with the responses but
14 if you turn to, for example, Interrogatory Number 5, this is
15 and your Honor's rules by the way are candid as to what
16 subjects can be explored at the outset on interrogatories,
17 but they refused to provide or failed to provide us with all
18 of the key e-mail accounts here. So we have a very limited
20 THE COURT: Wait a minute. They do supply you
21 with three emails accounts, don't they?
22 MR. ROSE: Yes.
23 MR. REIFF: No. No. See, your Honor, if you look
24 at their actual responses to Interrogatory Number --
25 THE COURT: Five.
26 MR. REIFF: Four, I am sorry --
2 THE COURT: Four?
3 MR. REIFF: Yes. So let's go to Exhibit 26 and
4 turning to their response which is on page 7, they identify
5 three e-mail addresses.
6 THE COURT: Yes.
7 MR. REIFF: Rob@lather.com, Shanahm@aol.com and
8 Shelly@lather.com. Our problem with that, your Honor, is
9 that they didn't identify several other addresses that we
10 know about only because we received a few documents from one
11 of the other defendants here. Had we not received those
12 documents, we would not have gotten any idea --
13 THE COURT: What e-mail addresses are those?
14 MR. REIFF: Those e-mails -- those addresses of Rae
15 Pinchuk, Gerald Katzoff, both defendants that we talked
16 about earlier, Mr. Minner, whose AOL files weren't produced
17 at all and also Emily Davidson, the president of Lather and
18 we don't know what other e-mail addresses are out there that
19 might have relevant information here.
20 So all we know is that that they have failed to
21 provide us with an adequate response. We have raised this
22 again and they have not supplemented their response or given
23 us any pertinent information.
24 MR. ROSE: Go ahead.
25 If in fact plaintiff now has that, for it seems
26 sort of disingenuous for him to come before the Court and
2 say I need it even if they already have it --
3 THE COURT: He is seeking sanctions against your
4 client for essentially lying to him. That is what it boils
5 down to. He said instead of giving me seven e-mail
6 addresses, they gave me three.
7 MR. KRASSNER: Your Honor, Mr. Dannnenberg's
8 He is seeking sanctions against your
9 THE COURT: This is why this appears to me
11 MR. KRASSNER: Appears to be to plaintiff
12 THE COURT: And poorly done stonewalling, too.
13 MR. KRASSNER: Mr. Dannenberg's papers are
14 instructive. They obtained a judgment against a named
15 tenant at the start of this lawsuit before getting judgment,
17 THE COURT: I will cut you off.
18 This is the third time I have listened to this.
19 You want to make a motion for summary judgment, be my guest,
20 but right now you're in the case, and you will be sanctioned
21 because of these kinds of responses. This is ridiculous.
22 What else?
23 MR. REIFF: Your Honor, just briefly, we still
24 don't have a list of devices. Same story. We know that
25 there are Blackberrys out there. We know for example Ms.
26 Pinchuk uses a Blackberry. We know that Mr. Katzoff uses a
2 Blackberry. We know that Mr. Hoyt uses a Blackberry.
3 THE COURT: Why weren't these identified? Do we
4 have an explanation?
5 MR. ROSE: I was not aware of that, Judge.
6 MR. RIEFF: The documents show it and the problem
7 we have is if there were Blackberrys, there were probably
8 desktops and laptops. One would think that maybe these
9 computers have information that would be relative to the
10 case that we still don't have, that we are now in 2011, this
11 was filed in 2009, we have nothing from these defendants,
12 your Honor, and that is why we have brought the sanctions
13 motion because we are left with no choice but to pursue
14 sanctions against these defendants. We have nothing. We
15 have no other option.
16 MR. KRASSNER: If those Blackberrys ha nothing
17 relevant to the case at all, why can he go on a fishing
18 expedition without a showing there is some relevance?
19 THE COURT: How do we know if there is nothing of
20 relevance on the Blackberrys until and unless we take a look
21 at them, if we have e-mail correspondence from these people?
22 That is what you use Blackberrys for.
23 MR. ROSE: Judge, if I may, counsel claims we
24 didn't provide information with respect to who has
25 Blackberrys or computers. I respectfully refer the Court to
26 response Number Four of my response to the interrogatories
2 which asks for location of primary -- and I responded that
3 Robert Hoyt used a laptop and I gave the location, as well
4 as Shelly Levitt, who has a desktop computer in Pasadena.
5 Nothing about the computers in New York, nothing about the
6 computers across the street in Pennsylvania, wherever that
7 was, nothing about the Blackberrys.
8 MR. ROSE: By the time this response was
10 THE COURT: There was another fire?
11 MR. ROSE: -- there was the fire.
12 THE COURT: And the fire burned up the Blackberrys
13 too, I suppose.
14 MR. ROSE: That I will not say, your Honor.
15 THE COURT: To a certain extent, I feel sorry for
16 you. Whether it was Markman who led you guys down into
17 this situation or the clients, I don't know, but this is
19 MR. KRASSNER: Going back to my clients, because
20 we said earlier they said they have nothing and we discussed
21 the remedy of depositions to see what he has, before -- you
22 know, we are talk about different defendants, but my
23 defendants we spoke about earlier, to the extent --
24 THE COURT: Why didn't -- since Ms. Markman was
25 submitting these answers to interrogatories on behalf of
26 your client as well, why didn't your client identify for
2 example, the computers in New York and the computers across
3 the street?
4 MR. KRASSNER: I would presume because of the
5 entirely different businesses.
6 THE COURT: And he is able to make that decision
7 on his own? All right.
8 I am granting sanctions so far against all of the
9 defendants we have been talking about.
10 What other defendants do we have to take care of?
11 MR. REIFF: Our concern with the Lather defendants
12 -- and these were the only defendants who made the discovery
13 response, so obviously we feel that they've -- don't deserve
14 maybe as harsh sanctions, but they are refusing to cooperate
15 in two key respects.
16 One, your Honor, is we have also asked them for a
17 response to our interrogatory regarding the destruction of
18 documents. Clearly, a lot of documents have been
19 purportedly destroyed here according to --
20 THE COURT: Did Lather have a fire, too?
21 MR. REIFF: Lather won't answer the question
22 because they claim that your interrogatory rule, Rule 19
23 precludes any interrogatories dealing with the destruction
24 of documents whatsoever and they refuse to answer.
25 THE COURT: No. No. No.
26 MR. DANNENBERG: Your Honor, that is not true.
2 This is so over the top, your Honor. Your Rule Number 19
3 says these are the three areas, these are the only three
4 areas in which interrogatories can be -- and that is
5 consistent with the federal practices. Interrogatories
6 historically have been used as abusive practices. You will
7 ask the questions at depositions anyway, so if you want to
8 ask questions in these three areas, who are the witnesses,
9 how do you calculate damages and where your documents are
10 held, go ahead. Anything else you can't ask. Whether
11 documents --
12 THE COURT: Who says that?
13 MR. DANNENBERG: Your Rule 19.
14 THE COURT: It doesn't say that.
15 And what about the existence of the documents? If
16 documents have been destroyed, don't you think we would like
17 to know that before we have a deposition?
18 MR. DANNENBERG: The question asks who are the
19 custodians of your documents, not who are the -- where are
20 the documents that don't exist.
21 MR. REIFF: No, your Honor.
22 THE COURT: This is ridiculous.
23 MR. DANNENBERG: Judge, with all due respect, I am
24 aware of no documents -- there is no file I am aware of. No
25 documents have been destroyed.
26 THE COURT: Good.
2 MR. DANNENBERG: If you tell me to answer the
3 interrogatory, I will, but there is a reason for having the
4 rules and we will ask the questions at deposition, but if
5 you tell me to answer it, I will answer it.
6 THE COURT: Answer it.
7 MR. DANNENBERG: Okay.
8 MR. REIFF: Thank you, your Honor, and then --
9 MR. ROSE: With regard to your Honor's finding or
10 -- that sanctions are appropriate with respect to 57th
11 Street Day Spa, I would like to respectfully point out that
12 case law requires a hearing before your Honor can assess
13 sanctions to determine whether or not the response was
14 willful and designed to deprive the plaintiff of discovery
15 and at this point, there is an extensive response on behalf
16 of 57th Street Day Spa. We have given
17 THE COURT: Since the record makes it pretty
18 obvious, what possible explanation do your clients have for
19 not identifying, for example, the computers and Blackberrys?
20 MR. ROSE: We did identify the computers that are
21 related to the accounts. We don't have to identify
22 computers that are from another business, Judge. I have
23 never ever seen that, Judge.
24 MR. KRASSNER: None of the defendants --
25 THE COURT: You're suggesting that your clients
26 can have multiple computers and will pick and choose amongst
2 those computers which computers they say contains relevant
3 documentation without at least alerting the Court and the
4 adversary to the fact that there are other computers?
5 MR. ROSE: What I am saying, Judge --
6 THE COURT: You think -- I know you didn't
7 articulate these responses, I know it was done by somebody
8 else, but I am telling you right now, that is
9 unprofessional. Or the client simply decided not to tell
10 his attorney or her attorney
11 MR. ROSE: I would say on behalf of Ms. Markman
12 that was--
13 THE COURT: Fine.
14 You want to have a hearing? Tomorrow -- Monday
15 morning. 9:30 right here. Bring your witnesses.
16 MR. ROSE: No, Judge, I -
17 THE COURT: Tuesday?
18 MR. ROSE: I will withdraw that request, Judge.
19 MR. KRASSNER: I was going to add, before you make
20 a decision on sanctions, that they have -- my clients have
21 an opportunity to be deposed to see if they have documents
22 and also --
23 THE COURT: We don't put the cart before the
24 horse. The way we do commercial litigation is very simple.
25 We get the documents first. Then people know what
26 questions to ask and what questions they don't have to ask.
2 That saves everybody a lot of time and effort.
3 MR. KRASSNER: I don't think
4 THE COURT: Here is my decision, my decision in
5 this case: The motion is granted with regard to all of the
6 defendants. You will answer those questions. I am not
7 hitting you with sanctions. You will answer those
8 questions, the Lather defendants and get that resolved, out
9 of the way. There will be new answers to interrogatories
10 and new responses to the discovery demands and counsel for
11 each defendant will make serious efforts to make sure those
12 answers are complete and err on the side of being too
14 If there are additional computers in Singapore, I
15 would like to know about them. I don't think we will look
16 at them, but I would like to know about them. Everything.
17 Lay it all out. Tell your clients they have got a problem.
18 If I find if we find any relevant documents on
19 those other areas, those other computers, other sources of
20 information that have not been identified, it will be
21 $10,000 per client, per computer.
22 MR. ROSE: If .--
23 THE COURT: Thank you very much, folks.
24 MR. KRASSNER: Your Honor, these defendants have
25 not been willful as required by -- required by case law. If
26 their previous responses were not complete, please give us
2 an opportunity to complete them, but to impose a sanction of
3 that magnitude in the early part of the litigation I think
4 may be a little harsh. My clients -- they have not been
5 stonewalling. There were too many complaints. You know,
6 there are six causes of action. Several were dismissed
7 already. There was prior motion practice here.
8 THE COURT: Counsel, this is a 2009 case and we
9 have not had depositions yet.
10 MR. KRASSNER: Three complaints. His causes of
11 action were dismissed. I just request that you give us an
12 opportunity, say 30 days, to provide full and complete
13 responses and then, based on those responses, withhold a
14 determination of what you can do until then, because I
15 think --
16 THE COURT: If your client produces these
17 computers and there are documents that show up that are
18 relevant or within the scope of the discovery demands, they
19 can come here and explain at length why it wasn't revealed,
20 but if I find that that is not persuasive, $10,000 per
22 MR. KRASSNER: But they will have an opportunity
23 to explain?
24 THE COURT: Yes.
25 MR. KRASSNER: Not an absolute sanction at this
2 THE COURT: Yes. They can give me whatever --
3 MR. KRASSNER: Maybe an extraneous piece of paper
4 here and there.
5 MR. DANNENBERG: Your Honor, can I be heard on a
6 point of clarification?
7 THE COURT: Sure.
8 MR. DANNENBERG: You're I think angry about things
9 that you have heard regarding all of the defendants other
10 than the three that I represent, and I don't want that anger
11 to be interpreted later on, based on something that you
12 said, to impact on my clients.
13 THE COURT: It is not.
14 MR. DANNENBERG: At the May 9th conference, the
15 compliance conference order, you addressed us all with your
16 law secretary afterwards and counsel specifically renewed
17 the motion with regard to my clients, except for the issue
18 of the interrogatory which I have now agreed to respond to,
19 and not the question of whether there was any sanctions on
20 the e-mails, but they didn't like the fact that there was
21 hard copy production. So there was a question of
22 electronic discovery.
23 THE COURT: Yes. You wanted the native form, the
25 MR. REIFF: Yes, your Honor. Two remaining issues
26 on this motion. One was this misnomer issue. You want to
2 replace Greenhouse with GH -- some of the defendants opposed
3 this just because they have not put in any reason why.
4 There is settled case law on this point. GH Day Spa is the
5 signatory to the lease.
6 I ask your Honor to please grant that portion of
7 the application.
8 THE COURT: Motion granted.
9 with regard to the data and the format
10 MR. REIFF: This is the only remaining issue, I
11 believe, to this motion. If I may be heard very briefly on
13 THE COURT: What is the objection?
14 MR. DANNENBERG: The objection is if it has to go
15 to an outside vendor, to go through some type of analysis of
16 the extent to which there's -- over the scope, the cost and
17 the cases that I cite in our brief, no cases in their brief
18 say it is on the requesting party. There was a case that I
19 found last night
20 THE COURT: Do you have anything that is binding
22 on me? Because the cases go all over the lot.
23 MR. DANNENBERG: Not on this issue. With all due
24 respect, your Honor, nothing is binding on you. They are
25 all in this Court. Judge Rakower has the only one that
26 deals with e-mails sent to an outside vendor and that one
26 would be in our favor. The general rule stated that
2 discovery generally is paid for by the requesting party, but
3 with regard to downloading documents --
4 THE COURT: There is no general rule. That is
5 just it. In fact, the Commercial Division is meeting now on
6 an ongoing basis with representatives of the Commercial Bar
7 to come up with a rule that we can suggest to Jonathan
8 Lippman on this and there is no unanimity at all. The rule
9 is really simple. You keep the documents in any form you
10 want to keep the documents. You want to keep them on
11 carbon paper, that is up to you. You want to keep them in
12 expensive forms where we have to go back and find old tapes
13 and reformat the operating systems, that is up to you. It
14 is not up to the plaintiff. You bear the cost.
15 MR. DANNENBERG: Absolutely, and I don't disagree
16 with that.
17 What happened here, your Honor, is that production
18 was made in hard copy. One of the defendants Lather, at
19 that moment in February was in the middle of a motion for
20 summary judgment, so the discovery was not made for them, it
21 was made for the other two defendants.
22 We will produce that now in hard copy, but when I
23 came in in March, I initiated a call to the other side and
24 said how do you want to do this? And that was the first
25 time there was any kind of conference between attorneys on
26 electronic discovery. I raised it. He said I don't want
2 hard copy, I want the electronic discovery and I said how
3 about we put it in pdf that is text searchable, we will put
4 everything on pdf and he said no, we don't want pdf, we want
5 it in TIFF format, TIFF format for Microsoft Outlook, which
6 is what all three of these people used.
7 I said we will download it on to TIFF format and
8 produce it there and he said we don't want that either,
9 because then it is you deciding what should be responsive,
10 which is the normal thing you do in discovery. The
11 producing party responds to what he or she --
12 THE COURT: But, the document is an electronic
13 document. The data is part of an electronic document.
14 MR. DANNENBERG: That was the last part of it. If
15 we produce it, download it on to disk from our files, and I
16 believe you do get --
17 THE COURT: I think so.
18 MR. DANNENBERG: So that was a question that Judge
19 Rakower dealt with, but what happens if plaintiff wants to
20 insist that we don't want you to be the one to choose, don't
21 want us to choose what is responsive to their discovery
23 MR. REIFF: Your Honor, I have to correct this,
24 because that is not at all what I said.
25 THE COURT: I think we are at cross purpose~ here.
26 MR. DANNENBERG: If they will take the position
2 that just give us to us in native format, you respond how
3 you think it is appropriate, but not hard copy. We want it
4 in native format. We will do that. On disk.
5 What counsel and I have discussed, unless I was
6 hearing things, because we had a conference with your law
7 secretary when the subject came up on May 9th is that we
8 want it sent to an outside vendor, independent vendor, all
9 of your e-mails, however you keep them and because we don't
10 ask for any e-mails, we only asked for limited categories,
11 things that were responsive to, you know, on such and such a
12 subject, we will have to have a discussion about search
13 terms. That is how it is done.
14 So the independent third party vendor will apply
15 certain search terms and give a subset of e-mails and that
16 will be the ones that are deemed responsive to the request
17 subject only to an attorney, me, going through them and
18 making sure that there are no privileged documents. So
19 there is an outside expense involved for the vendor and
20 additional expense for me to decide whether they are
21 privileged documents.
22 The one decision on that is Judge Rakower's, where
23 it was determined that the cost should be borne by the
24 requesting party because those documents by definition
25 aren't readily available, because you have to send it out.
26 If all they are going to want at this point before
2 deposition is for us to make the determination of what is
3 responsive and to produce it in a native format, we will do
4 it at our expense, but that is not what they have requested
5 before now.
6 MR. REIFF: Your Honor, that is simply not
7 accurate. What we requested was that an attorney review
8 the electronically stored information. What counsel has
9 always represented is that Robert Hoyt was choosing
10 picking and choosing which e-mails he would produce and he
11 represented in his letter response to my discovery default
12 letter that that is the way it has to be done, it has to be
13 Robert Hoyt who chooses this.
14 Our problem, your Honor, is that there is a
15 six-month gap in the e-mails, some before and some after
16 this gap and that gap is right around the negotiation of
17 this critical transaction that is the subject of our
18 complaint. These e-mails are falling off of the face of
19 the planet.
20 THE COURT: Generally speaking, I will not require
21 the kind of a keyword search of a database that you're
22 talking about, unless I have reason to think that someone is
23 deliberately trying to avoid this kind of discovery.
24 You're right, because then, you're looking at everything in
25 the computer and it is a gargantuan task, but if there is no
26 dispute about giving this over in proper format and if there
2 is a representation that that is all there is, fine, but the
3 danger is, and this is where we get into the -- your client
4 having to suffer the cost of this, the danger is if someone
5 comes up with an e-mail that your client does not turn over
6 and this happens a lot because you have multiple parties and
7 somebody this is typically what happens, one of the
8 defendant's says sure, I got this e-mail and everybody else
9 said it never existed, Croll goes in, does a search, it is
10 $25,000 and we find --
11 MR. DANNENBERG: I understand.
12 THE COURT: So that is where we are at.
13 Initially, sure, of course, your side, you, your clients,
14 whatever, it is your responsibility to give, make sure these
15 are responsive documents. You do whatever you think you
16 have to do. I don't presume that they are not responsive.
17 You will have to show me that there is a gap, some reason to
18 inquire further and then, it gets very expensive.
19 MR. DANNENBERG: Yes, but the gap
20 THE COURT: We are not there yet.
21 MR. REIFF: Your Honor, all we want is
22 THE COURT: Right now, give it to him on disk.
23 MR. REIFF: In a searchable format. The, outlook
24 files, that is all we want. We just want the attorney to
25 make the decision about what documents to produce. That it
2 MR. DANNENBERG: They don't get to say which
3 person on my side, the attorney or the client.
4 THE COURT: It is your responsibility. Your side
5 of the table. You're not party to the action.
6 MR. REIFF: That is fine, as long as we get it in
7 Outlook format or TIFF format. Either one is fine with us.
8 MR. KRASSNER: So I understand we have to produce
9 the computers at this point not responding to the whole
11 MR. KRASSNER: We have to confer with counsel to
12 make arrangements to get access to our computers.
13 THE COURT: Yes. They can do a keyword search on
14 these computers. I want to see what is on there. If he is
15 satisfied there is nothing there, okay, great, but if he
16 sees there is a smoking gun, then we are talking about some
18 MR. ROSE: Judge, and I apologize for my miss
19 poor choice of words earlier to your Honor. I just want to
20 clarify for purposes of -- Day Spa, we are no longer in
21 possession of the premises which was in the Landlord/Tenant
22 Court. So for purposes of responding to plaintiff's motion,
23 we are not required to respond to everything all over again,
24 are we Judge?
25 THE COURT: No. No. You will correct what you
26 think needs to be corrected obviously. Everything else can
2 stand. Make it clear in your response other than these
3 corrections, our responses stand.
4 MR. ROSE: Okay.
5 THE COURT: But now, it is your name on those
6 responses and not Markman's, not prior counsel.
7 MR. REIFF: Actually, your Honor, this attorney is
8 from Ms. Markman's office. But for the other two,
10 THE COURT: It is on you.
11 Okay. Thank you very much.
12 MR. REIFF: Thank you very much, your Honor.