It Doesn’t Pay to Delay—or Blame the Victim—in Discovery

Vladeck, Waldman, Elias & Engelhard, P.C. v. Paramount Leasehold, L.P., No. 653416/2011, 2015 NY Slip Op. 50298(U) (N.Y. Sup. Ct. Mar. 4, 2015).

In this landlord-tenant dispute, the court considered whether the defense counsel’s conduct rose to the standard of frivolousness required to impose sanctions under New York law.

The plaintiff law firm claimed the defendant landlord wrongly enticed it to renew its lease by offering an incentive of up to $266,000 for renovations despite intending to convert the building to a hotel. After renewing, the law firm invested hundreds of thousands of dollars in upgrades and notified the landlord of its additional renovation plans, hoping to take advantage of the incentive. Only then did the landlord disclose its plans to convert the building and end the firm’s lease early.

The law firm stopped improving the premises and withheld rent payments for the last three months of 2011. In December 2011, the landlord notified the law firm it intended to terminate the lease. The law firm paid its back rent and remained in the premises. Subsequently, the landlord abandoned its plans to convert the building into a hotel.

The law firm sued the landlord for fraudulent inducement, breach of the implied covenant of good faith and fair dealing, and anticipatory repudiation. The landlord asserted counterclaims for breach of contract and attorneys’ fees.

Discovery Disputes

The law firm filed a motion asking the court to strike the landlord’s answer and seeking costs and sanctions for three discovery transgressions:

  1. The landlord never issued a litigation hold, although it was on notice that litigation was likely before it filed its complaint in December 2011 and despite the judge instructing the landlord’s counsel to preserve documents in June 2013.
  2. The landlord’s counsel engaged in a pattern of dilatory discovery tactics, including the following:
    • In November 2012, the firm subpoenaed records from the landlord. The landlord’s managing agent produced 82 illegible documents from one senior executive in February 2013. The executive’s search was deficient because although she claimed to have searched her e-mail with two search terms—“Vladeck” and “1501 Broadway”—a document with both terms in its subject line was not produced until April 2014.
    • The landlord included nonprivileged documents on its privilege log. One log entry was riddled with mistakes: an e-mail that contradicted the landlord’s position was listed with an incorrect subject line, had a misleading description, and did not name its non-attorney recipients.
  3. The landlord produced documents as late as two years after they were requested and on the eve of depositions, during them, or after them, requiring the law firm to extend and retake depositions.For instance, in June 2013, the court ordered the landlord to produce documents relating to the hotel conversion. The landlord waited until spring 2014 to produce 50,000 documents and did not produce 9,000 more until May 16, 2014, after all depositions were complete and just before the extended discovery deadline expired.

The judge found that these incidents amounted to “frivolous conduct” that was “undertaken primarily to delay or prolong the litigation.” She required the landlord’s counsel to pay the law firm’s costs and attorneys’ fees in filing the motion for sanctions and for the extended and retaken depositions.

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As this case demonstrates, a party that has engaged in discovery misconduct is unlikely to dodge sanctions with a blame-the-victim defense. Here, the landlord cited the law firm’s expansion of claims in its amended complaint as responsible for the delayed production of documents. The landlord also argued sanctions were unwarranted because it did not violate any court orders. Instead, it went so far as to suggest that the law firm did not file a “proper warning” in the form of a motion to compel.

This seems like a clear-cut case of discovery maneuvering, so it is surprising that the landlord’s counsel attempted to assert that its conduct was “entirely proper.” Instead of shifting the blame, a better course of conduct would have been to own up to the shortcomings. If the discovery were truly damaging, then the landlord should have contemplated settlement rather than delay discovery or bury documents in the privilege log.