MARILYN D. GO, Magistrate Judge.
In this action brought under the diversity jurisdiction of this Court, Plaintiff Meyer Corporation U.S. ("Meyer") asserts claims against defendants Alfay Designs, Inc. ("Alfay") and Al Smaldone arising from defendants' alleged tortious interference with plaintiff's license agreement with Farberware, Inc. ("Farberware") for the sale of certain tea kettles.
This Order addresses the remaining component of plaintiff's Motion for Sanctions with respect to certain conduct occurring at a deposition of Jayme Smaldone, the son of defendant Al Smaldone, held on October 12, 2012.
In an electronic order filed on May 16, 2013, this Court granted the motion for sanctions against defendant Al Smaldone with respect to the disappearance of Mr. Dickie's phone, but denied plaintiff's request that the Court strike defendants' answer. This Order sets forth the Court's findings of fact and reasons for the ruling, as well as describes the sanctions imposed against defendants.
Plaintiff called five witnesses who were all present at the deposition of Jayme Smaldone: Ryan Williams, plaintiff's counsel; Dean Dickie, plaintiff's counsel who conducted the deposition; Dean Krause, general counsel for plaintiff; Daniel Macom, a videographer employed by Ellen Grauer Court Reporting, who videotaped the deposition; and Sophie Nolan, a court reporter also employed by Ellen Grauer Court Reporting who transcribed the deposition. Defendant called defendant Al Smaldone, who was also present at the deposition and the subject of the motion at issue.
The parties do not dispute that a deposition of Jayme Smaldone was held on October 12, 2012 and that all six of the above-named witnesses were present, along with Ellen August, counsel for defendants. Tr. at 7 (DE 132-1). The parties took a break some time in the afternoon and resumed around 3:51 p.m. Tr. at 36. Both sides also agree that some time after the deposition continued, Al Smaldone got up, walked to the back of the room, and stood behind the seated videographer before leaving the room through the door nearest the back of the room. Tr. at 18-19, 38-39 (Williams); 52-53 (Nolan); 72, 74 (Krause); 117 (Smaldone). He returned to the deposition room a few minutes minutes later. Tr. at 19 (Williams); 39 (Macom); 53 (Nolan); 94 (Dickie).
According to plaintiff's witnesses, shortly before the deposition resumed, the videographer asked if he could power off a phone that had been placed on a table behind him and was ringing during the break. Tr. at 15-16 (Williams), 50-51 (Nolan), 72 (Krause), 92 (Dickie); Affidavit of Daniel Macom ("Macom Aff.") at ¶ 4 (DE 101-6). After Mr. Dickie said the phone was his and asked the videographer to turn it off, the videographer powered off the phone and placed the phone back on a credenza. Tr. at 15 (Williams), 32 (Macom), 49-50 (Nolan), 72 (Krause), 92 (Dickie); Macom Aff. at ¶ 5 (DE 101-6). After the deposition broke again at 4:23 p.m., Mr. Dickie went to get his phone at the back table and announced that his phone was missing. Tr. at 21 (Williams), 40-41 (Macom), 49-50, 53 (Nolan), 76 (Krause), 94 (Dickie). In the ensuing search for the phone, Mr. Dickie found it wrapped in paper towels and hidden in a closed cabinet above the opening of a paper towel dispenser in the men's restroom. Tr. at 55 (Nolan), 77-78 (Krause), 94, 98-99 (Dickie).
Mr. Macom, Ms. Nolan, and Mr. Krause testified that after the deposition resumed on the record at 3:51 p.m., everybody attending the deposition was in the conference room and seated. Tr. at 35, 37 (Macom); 51 (Nolan); 72 (Krause). All of plaintiff's witnesses testified that nobody other than Al Smaldone left or entered the room between the resumption of the deposition at 3:51 p.m. and the next break at 4:23 p.m. Tr. at 19 (Williams), at 39 (Macom), 53-55 (Nolan), 75-76 (Krause), 94 (Dickie). Plaintiff contends in its motion that Al Smaldone was the person who took Mr. Dickie's cell phone and hid it.
In his testimony, Mr. Smaldone denied taking the cell phone or even seeing it on the back table of the conference room. Tr. at 118, 120. He also denied entering the men's restroom after he had stepped out.
I found that the plaintiff's witnesses were credible and provided a plausible and consistent version of the events at issue.
In contrast, I did not find Mr. Smaldone credible at all, both because of his demeanor and manner in testifying and because of what he said. He gave, at best, confused testimony
Thus, as further elaborated below, I find that Al Smaldone took Mr. Dickie's cell phone from the conference room and hid it in the cabinet above the opening of the paper towel dispenser in the men's restroom.
The deposition of Jayme Smaldone on October 12, 2012 was held in a conference room with an elongated table with the longer sides slightly curved and straight ends, as depicted in Plaintiff's Exhibit 15.
As the attendees were about to reconvene at about 3:51 p.m., following a break in the deposition, Mr. Macom said that a cell phone on the table behind him was ringing and asked to turn it off. Tr. at 15 (Williams), 32 (Macom), 50 (Nolan), 72 (Krause), 92 (Dickie). The phone, an iPhone, was plugged into an outlet near the end of the table behind Mr. Macom to his left and near the door. Tr. at 33-34 (Williams), 46 (Macom); Pl.'s Exh. 1B, 1G. Mr. Dickie said the phone was his and asked Mr. Macom to power it off.
At some point after questioning resumed, Mr. Smaldone stood up and walked to the back of the room. Tr. at 18-19 (Williams), 37-38 (Macom), 51-52 (Nolan), 72-74 (Krause), 93 (Dickie). He stood for a few minutes to the left of Mr. Macom, facing the conference table and with his back close to the cell phone on the credenza. Tr. at 18-19 (Williams), 37-38 (Macom), 51-52 (Nolan), 72-74 (Krause), 93 (Dickie). As Mr. Smaldone stood there, he was "moving around behind" Mr. Macom, and Mr. Macom felt uncomfortable having somebody close behind him while he worked. Tr. at 38. Mr. Smaldone had his hands behind his back, Tr. at 18-19 (Williams), 93 (Dickie), and was reaching behind with his hands. Tr. at 74 (Krause). Mr. Smaldone then left the deposition room through the door to the left of the videographer, and returned to the room several minutes later through the other conference room door behind Ms. August. Tr. at 19-25 (Williams), 39 (Macom), 52 (Nolan), 94 (Krause), 117, 119 (Smaldone).
At the request of Jayme Smaldone, the participants took another break in the deposition at 4:23 p.m. Tr. at 20-21 (Williams), 40 (Macom), 53 (Nolan), 76 (Krause), 94 (Dickie). During the time the deposition was in session between 3:51 p.m. and 4:23 p.m., everyone remained in his seat, except for Mr. Al Smaldone. Tr. at 39-40. Other than Mr. Smaldone, no one had entered the room during that period.
At Mr. Dickie's request, Mr. Williams called the phone and heard it ring multiple times, instead of going straight to voicemail. Tr. 21-22 (Williams), 96-97 (Dickie). Mr. Krause also called the phone and heard it ring multiple times instead of going to voicemail. Tr. at 77-78 (Krause). Because the phone had been powered off by Mr. Macom prior to resumption of the deposition at 3:51 p.m., the phone would not have rung unless it had been turned on. Tr. at 33-34 (Macom), 21-22 (Williams), 77-78 (Krause), 97 (Dickie).
Mr. Krause went to the men's restroom to search for the phone and while there, heard the phone vibrating. Tr. at 54-55 (Nolan), 78-79 (Krause). After Mr. Krause began digging through the garbage under a paper towel dispenser, Mr. Dickie entered the men's restroom. Tr. at 78-79 (Krause), 98 (Dickie). The paper towel dispenser unit appears to be similar to models found in other public restrooms, and is made of stainless steel with an upper cabinet unit having an opening at the bottom from which paper towels can be removed and a bottom receptacle for used towels. Plaintiff's Exhibit 2A-2C. As the men were talking, they heard the phone vibrating again and Mr. Dickie joined in searching through the garbage. Tr. at 79 (Krause), 98 (Dickie). Mr. Krause then exited the men's restroom, but Mr. Dickie remained. Tr. at 79-80 (Krause), 98-99 (Dickie). Upon hearing the phone ring again, Mr. Dickie tried to reach into the opening of the paper towel dispenser from the opening for pulling out paper towels. Tr. at 99. He could feel the phone vibrating, but could not reach far enough into the opening to get the phone.
After discovering the phone, Mr. Dickie re-entered the conference room and announced that he had located his phone. Tr. at 22 (Williams), 41-42 (Macom), 56 (Nolan), 90 (Krause), 101 (Dickie). Mr. Dickie then adjourned the deposition, after which Mr. Williams called the police to report that the phone had been stolen. Tr. at 23 (Williams), 101-102 (Dickie). Mr. Dickie, Mr. Williams, Mr. Krause, Mr. Macom, and Ms. Nolan were still present when the police arrived, but Al Smaldone and Ms. August had departed. Tr. at 26 (Williams), 56 (Nolan).
Based on the foregoing facts, I conclude that Mr. Smaldone was the person who removed Mr. Dickie's phone from its case and from the charger, while standing behind Mr. Macom. He then set the case of the phone face down back on the table, laying the plug of the charger inside the case so it would appear that the phone was still charging there. I also find that after he surreptitiously removed Mr. Dickie's phone from the conference room, Mr. Smaldone went into the men's restroom. He turned the phone on but was unable to access information on the phone. He then wrapped the phone in paper towels and placed it standing up in the cabinet space above the paper towel dispenser.
Defendants point to the absence of a named suspect on the police report and argue that this is significant, either because the police did not believe that Mr. Smaldone had committed the crime or because no one who spoke with the police suggested that Mr. Smaldone had taken it. Tr. at 130 (Mr. Rubin's closing argument). I disagree since I am doubtful that the officers had the benefit of the testimony given at the hearing or were interested in spending time investigating the theft of a cell phone that had been recovered. Accordingly, I also find that Al Smaldone gave false testimony to this Court both in his declaration submitted with defendants' opposition to plaintiff's motion and in his testimony at the evidentiary hearing.
Plaintiff requests numerous sanctions for Mr. Smaldone's misconduct, the most severe of which is the striking of defendants' answer, effectively granting default judgment.
As the Second Circuit has recognized, "a court has the inherent power to supervise and control its own proceedings and to sanction counsel or a litigant for bad-faith conduct."
I find that the evidence of Mr. Smaldone's misconduct is clear and convincing. Based on the credible evidence presented, Mr. Smaldone was the only person who had the opportunity to take the phone, since all the others remained seated and no one entered the room between 3:51 p.m. until the next break. He was also the only person in the conference room who had the opportunity to hide the phone in the men's restroom. Needless to say, he also had the motivation to take the phone in order to access information of his adversaries' attorney. Setting aside whatever interests the attorneys for plaintiff may have had at the time, the Court finds implausible that the videographer and court reporter would conspire with them to present false testimony to the Court.
As for the question of the sanction of default judgment requested by the plaintiff, the "[c]ases in which courts have struck pleadings, or entered judgment against a party, have generally involved intentional misconduct that has materially and negatively affected the resolution of an action."
Analyzing Mr. Smaldone's conduct under these factors, this Court finds that striking the defendants' answer and entry of default judgment in favor of plaintiff is not warranted. Although Mr. Smaldone's theft of the phone was intentional and taken in bad faith to gain a tactical advantage, none of the other factors weigh in favor of entering default. Critically, there has been no prejudice to plaintiff or any effect, let alone material impact, on the merits of the claims in this action. Mr. Dickie testified that the phone was password protected, Tr. at 104, and plaintiff presents no evidence that Mr. Smaldone had accessed the phone. Although Mr. Dickie suggests that Mr. Smaldone hid the phone with the intention of later attempting to gain access to it at his leisure, Tr. at 104-05, that did not happen.
Moreover, in spite of ongoing friction between Mr. Smaldone and plaintiff's counsel during the deposition, there is no indication that Mr. Smaldone engaged in an ongoing pattern of serious misconduct during this case. This appears, instead, to be an instance of Mr. Smaldone seizing an opportunity that presented itself at the deposition after a long and acrimonious day.
Courts have imposed the harsh sanction of dismissal or entry of default only in the most severe situations of misconduct that materially affect the merits of a case. For example, the court in
Plaintiff in this case argues that the situation in
Nonetheless, serious sanctions are warranted to punish defendants for both the theft of the phone, and Mr. Smaldone's apparent lack of remorse and willingness to give false testimony to the Court.
Courts have imposed lesser sanctions than dismissal on a wide variety of misconduct involving dishonesty. For instance, where a former plaintiff, who was also the husband and father of then-current plaintiffs, submitted altered CT scans and audiotapes to defendants, a court gave the jury an instruction that plaintiff had offered fabricated evidence and imposed a monetary sanction consisting of defendants' expenses in making the motion.
Even in cases where one party has accessed information belonging to an opposing party or counsel, courts often decline to take the drastic step of dismissing a claim.
Accordingly, after analyzing the circumstances of Mr. Smaldone's conduct and other cases involving similarly serious misconduct, dishonesty and attempted access to private information, I find that plaintiff is entitled to an adverse jury instruction and a monetary sanction of reasonable attorneys' fees. Since this incident does not bear directly on the merits of the claims in this case, the jury instruction should only state that Mr. Al Smaldone presented false testimony to the Court after attempting to gain access to plaintiff's private information.
I also find that an award of attorneys' fees is appropriate. In post-hearing submissions, plaintiff provided specific billing records to support the amount of fees sought, while defendants objected both to the imposition of fees and the reasonableness of the fees and costs sought. Pl's Supp. Brief (DE 152); Defs' Supp. Brief (DE 154). Plaintiff's counsel seeks attorneys' fees in the amount of $80,193 and costs in the amount of $13,356.83, for time and money expended in litigating this motion. Pl's Supp. Brief at 1, 8. Defendants argue that the fees and costs sought are excessive and unreasonable, and are based on inflated hourly rates and without contemporaneous time records.
The standard method for determining the amount of reasonable attorneys' fees is the lodestar method, which is based on "the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate."
In assessing the reasonableness of fees sought, the court "must examine the particular hours expended by counsel" with a view to "the value of the work product of the particular expenditures to the client's case."
A party seeking attorneys' fees bears the burden of supporting its claim of hours expended by accurate, detailed and contemporaneous time records.
Additionally, "courts in the Second Circuit regularly reduce attorneys' fees by 50 percent for travel time."
As a preliminary matter, I find that the hourly rates of $400 for Mr. Dickie, a partner, and $250 for associates Ryan Williams and Gregory Kubly, are reasonable, albeit on the high end of what is commonly awarded in this district. "[T]he prevailing hourly rate for partners in this district ranges from $300.00 to $400.00, and a reasonable hourly rate for a senior associate ranges from $200 to $300."
In its supplemental papers, plaintiff seeks fees for 132.2 hours of time spent preparing the motion and reply, as well as 158.8 hours spent preparing and conducting the evidentiary hearing.
Before considering the reasonableness of the actual hours worked, I note that Mr. Dickie and Mr. Williams both billed their full rate for travel time on January 14, 2013 and April 29, 2013.
Turning to the reasonableness of non-travel hours worked, I note that the motion for sanctions included several other claims, and this Court did not award fees as to those portions of the motion.
With respect to the time spent preparing the motion, because the billing records contain vague entries and block billing, coupled with the fact that the other portions of the sanctions motion not related to the theft of the phone are severable, I find appropriate a reduction of 50 percent of the hours of time claimed for preparation for the motion and reply, which shall be applied after deducting 15 hours travel time for Mr. Williams and 7.5 hours for Mr. Dickie, as previously discussed.
The billing records for the time spent preparing for the evidentiary hearing suffer from the same block-billing practices. I also find an expenditure of 124.5 hours in preparation for the evidentiary hearing (147 hours claimed less 22.5 hours of travel time) to be excessive for a half-day proceeding involving a straightforward and factual dispute about a few events occurring in the span of less than two hours. Thus, I find that a 30 percent reduction of the hours spent preparing for and participating in the hearing is appropriate. Such a reduction, after subtracting 22.5 hours spent on travel, results in reduced hours of 52.85 for the associates, 29.4 for Mr. Dickie, and 4.9 hours for Ms. Orr, for a total of 87.15 hours. Those reduced hours yield fees of $13,212.50 for the associates, $11,760 for Mr. Dickie, and $392 for Ms. Orr, for a total of
I find that the time spent on the findings of fact is appropriate and award fees for such work of $2,875 for the associates' time, and $120 for Mr. Dickie's time, for a total of
In light of the foregoing, plaintiff is awarded a total of
With respect to the costs assessed, I find that the cost of the transcript and video of the Jayme Smaldone deposition, totaling $3,669.65, is not recoverable. Had there been no misconduct by Al Smaldone, plaintiff would have still incurred such costs. Additionally, the amounts claimed for lodging costs in New York are too high.
For the reasons stated, plaintiff may recover a total of
For the foregoing reasons, plaintiff's motion for sanctions regarding the theft of Mr. Dickie's cell phone is granted in part and denied in part. Plaintiff is entitled to an adverse jury instruction and attorneys' fees in the amount of $48,782.50 and costs in the amount of $5,588.80.
Tr. at 122-23.