Sanctions & Magistrate Judges: MJs May Preclude Evidence & Deem Facts Admitted under R. 37(b), If These Don’t End the Claim—Violated Order Needn’t Be Written—Order Allowing Discovery≠R. 37 Order—Can MJs Order R. 11 Sanctions? (Cir. Split)
Joint Stock Company Channel One Russia Worldwide v. Informir LLC, 2017 U.S. Dist. LEXIS 165702 (S.D.N.Y. July 18, 2017):
Before me are two motions, both filed by plaintiffs, seeking sanctions against defendant Panorama Alliance, LP (Panorama) and its former attorney Alan P. Fraade, of the Mintz Fraade Law Firm, P.C. (Mintz Fraade).1 On October 17, 2016, plaintiffs moved [*2] for discovery sanctions against Panaorama and Fraade pursuant to Fed. R. Civ. P. 37(b). (Dkt. No. 127.) On October 28, 2016, they moved for additional sanctions pursuant to Fed. R. Civ. P. 11. (Dkt. No. 134.) Both motions arise out of Panorama's ultimately unsuccessful effort to convince this Court to dismiss all of plaintiffs' claims against it, pursuant to Fed. R. Civ. P. 12(b)(2), for lack of personal jurisdiction.
1 On May 9, 2017, I issued an Order (Dkt. No. 255) granting attorney Fraade's motion for leave to withdraw as counsel for Panorama, subject to certain conditions, but retained jurisdiction over Fraade and Mintz Fraade in connection with the instant sanctions motions. On May 30, 2017, after those conditions were satisfied, I directed the Clerk of the Court to remove attorney Fraade's name as counsel of record for Panorama. (Dkt. No. 275.) See pp. 27-28, infra.
For the reasons that follow I will GRANT the Rule 37(b) motion and order Panorama and Fraade to pay the reasonable discovery expenses, including attorneys' fees, incurred by plaintiffs from September 8, 2016, through March 30, 2017, as a result of Panorama's failure, despite a court order, to produce documents responsive to the jurisdictional discovery authorized by this Court in connection with its Rule 12(b)(2) motion. As discussed in more detail below, plaintiffs were required to serve a third-party subpoena, take a third-party deposition, and incur other discovery costs in order to uncover jurisdictionally-significant facts that Panorama and its counsel could and should have revealed in response to the document requests served upon it. As an additional sanction pursuant to Rule 37(b)(2)(A)(i), I will direct that the following facts be taken as established for [*3] purposes of this action: Asaf Yevdayev is and was, at all relevant times, Panorama's agent and representative with respect to the conduct at issue herein. Panorama may not (through its agent Yevdayev or otherwise) deny or contest the agency relationship that it improperly concealed from plaintiffs through its discovery misconduct.
In addition, I RECOMMEND that the Honorable George B. Daniels, United States District Judge, GRANT the Rule 11 motion. I have concluded that Panorama's Rule 12(b)(2) motion was filed and pursued in violation of Rule 11(b)(3) and (4), in that the motion was premised on factual contentions and denials wholly unwarranted by the evidence then available to Panorama and its counsel. Many of those factual contentions and denials were not merely unsupported; they were sharply contradicted by evidence known to Panorama and its counsel but concealed from plaintiffs. Although plaintiffs ultimately defeated the Rule 12(b)(2) motion -- based in large part on the additional jurisdictional discovery they were required to pursue as a result of Panorama's misconduct -- they did so at considerable expense and on narrower grounds than the ruling they likely could have obtained had Panorama not misrepresented the facts in its [*4] motion papers. I therefore recommend that Panorama and its counsel be ordered to pay plaintiffs' remaining expenses, including attorneys' fees, reasonably incurred in opposing Panorama's Rule 12(b)(2) motion from August 25, 2016, through March 30, 2017. I further recommend that as an additional sanction pursuant to Rule 11(c)(4), Judge Daniels direct that the following facts be taken as established for purposes of this action: Asaf Yevdayev is and was, at all relevant times, Panorama's agent and representative with respect to the conduct at issue herein. In my view, Panorama should not be permitted (through its agent Yevdayev or otherwise) to deny or contest the agency relationship that it improperly concealed from plaintiffs in its motion papers.
OVERVIEW OF MISCONDUCT
Panorama is a limited partnership formed under the laws of the United Kingdom. As part of its effort to avoid this Court's jurisdiction, Panorama asserted that it had no office, agent, or "representative" in New York, and specifically denied that it had any "association" with premises at 1702 Avenue Z, Brooklyn, New York (the Avenue Z Address), where a New York resident named Asaf Yevdeyev (Yevdayev), doing business as Media Alliance Inc. (Media [*5] Alliance), advertised and sold Panorama's allegedly infringing internet protocol television (IPTV) service to Russian-speaking residents of New York and other states. Panorama provides that programming to subscribers through its website www.mypanorama.tv (the Website). According to Panorama, Yevdeyev was "just a reseller of Panorama products," acting for his own benefit rather than on behalf of Panorama. Yevdeyev had no other "relationship" with Panorama. Further, Panorama stated, it never advertised or sought to conduct business in the United States.
Panorama made these assertions consistently and repeatedly, beginning in May 2016 and continuing through February 2017. It made them in letters, in discovery responses, in briefs, and in a series of declarations, affirmations, and affidavits, some of them signed by or in the name of David Zeltser (sometimes spelled "Zeltzer"), who identified himself as Panorama's Managing Director (and claimed to be its only partner), and some signed by attorney Fraade. It now appears, however, that these assertions -- among others -- were false. It further appears that in at least some instances attorney Fraade knew that Panorama's factual assertions were [*6] false but nonetheless repeatedly presented them to the Court, sometimes over his own signature, without disclosure of any of the countervailing facts that Fraade knew, or easily could have learned with minimal effort, and that would have revealed Panorama's jurisdictional motion to be frivolous.
For example, Fraade knew, but did not disclose, that his fees were not paid by Panorama. His initial retainer was paid by Media Alliance, by means of a check signed by Yevdayev, bearing the Avenue Z Address, and drawn on JPMorgan Chase Bank, NA (JPMorgan Chase). Thereafter, Fraade received a series of checks from Media Alliance, as well as from entities identified as "Ocean Ray LLC" and "Skyper Group LLC." Most of these checks were signed by Yevdayev, and all of them bore Brooklyn addresses and were drawn on accounts at JPMorgan Chase. Fraade also knew, well before he filed Panorama's Rule 12(b)(2) motion, that Yevdayev's email address was "firstname.lastname@example.org," and that his email signature included the internet address of Panorama's Website (which, as it turned out, Yevdayev himself had registered) and three telephone numbers, including two connecting callers directly to Panorama:
USA and Canada: 1 800 556 5617 [*7]
UK: +44 20 3239 7009
These are the same numbers that Panorama displayed on its Website. That the "1-800" number was intended for the use of customers in the "USA and Canada" was apparent from the helpful label, "USA and Canada," which also appeared on the Website. In addition, the Website displayed the Avenue Z Address, along with a local Brooklyn number, under the headline "Panorama TV Authorized Dealers."
Further, although Panorama supported its jurisdictional motion (and later opposed plaintiffs' sanctions motions) with declarations from Zeltser, it was Yevdayev, in Brooklyn, who first arranged for Fraade to obtain Zeltser's signature, initially coordinated Fraade's representation of Panorama (and may have continued to do so), and either paid or advanced Panorama's legal fees. In an email exchange between Yevdayev and Fraade dated June 9, 2016, Yevdayev stated, "I spoke to the U.K office" who "assured me that you will have it early am," and "on another note, i had fedexed a check to your office." In response, Fraade thanked Yevdayev and explained that he was emailing a form of declaration "which needs to be signed in the UK and returned to me tomorrow." The following day, Fraade filed [*8] a declaration, signed by Zeltser, attesting under penalty of perjury that Panorama had no office in New York, that it did no business in the State of New York, and that there was "no office associated with Panorama Alliance, LP" at the Avenue Z Address.
2 The factual background and procedural history of this action are described in more detail in the Court's prior decisions. See, e.g., Joint Stock Co. Channel One Russia Worldwide v. Infomir LLC, 2017 WL 825482 (S.D.N.Y. Mar. 2, 2017), report and recommendation adopted, 2017 WL 1321007 (S.D.N.Y. Mar. 30, 2017). Joint Stock Co. Channel One Russia Worldwide v. Infomir LLC, 2017 WL 696126 (S.D.N.Y. Feb. 15, 2017), report and recommendation adopted, Mar. 27, 2017 (Dkt. No. 201).
Plaintiffs are a group of Russian television broadcasters suing to redress what they characterize as the "pirating" and resale of their programming to consumers in the United States, over the internet, without authorization and without paying any license fees to plaintiffs. See First Am. Compl. (Dkt. No. 211) ¶¶ 1, 4. Defendant Panorama allegedly sells subscriptions to plaintiffs' programming, through its Website, to Russian-speaking customers in New York and elsewhere. Id. ¶¶ 39, 42, 96.
A. Plaintiffs Attempt Service and Move for a Default Judgment
In their original Complaint, filed on February 19, 2016, plaintiffs asserted claims for trademark and copyright infringement, among other causes of action, against multiple defendants, including an entity identified as "Panorama TV," which plaintiffs described as a "for profit organization with a principal [*9] place of business located [at the Avenue Z Address.]" Compl. (Dkt. No. 1) ¶ 57. Plaintiffs alleged that "Panorama TV" owned and operated the Website, through which it accomplished its alleged infringement of plaintiffs' programming. Id. ¶¶ 7, 57.
On March 16, 2016, plaintiffs attempted to serve "Panorama TV" with process at the Avenue Z Address. See Blaustein Decl. filed Oct. 17, 2016 (Dkt. No. 128), ¶ 9 & Ex. A. "Panorama TV" did not answer or otherwise respond to the Complaint. On April 25, 2016, plaintiffs obtained a Clerk's Certificate of Default as to "Panorama TV" (Dkt. No. 45), and on May 12, 2016, they moved for default judgment. (Dkt. No. 54.)
B. Panorama Appears Through Fraade
One day later, on May 13, 2016, attorney Fraade entered a notice of appearance as counsel for "Defendant Panorama TV." (Dkt. No. 58.) In a letter dated May 20, 2016 (Dkt. No. 61), Fraade stated that his client was actually "My Panorama TV UK," which he identified as "a corporation organized under the laws of the United Kingdom," and which, he asserted, "has no offices in the United States." According to Fraade, "My Panorama TV UK" could not have been effectively served at the Avenue Z Address. The business [*10] at that address "may be an unrelated distributor," Fraade wrote, but was not "an office of Panorama TV UK." Id. In a letter dated May 26, 2016 (Dkt. No. 62), attorney Fraade further clarified, "Our client's actual entity name is Panorama Alliance LP and it is a Limited Partnership formed under the laws of the United Kingdom."
C. First Zeltser Declaration
On June 10, 2016, in response to plaintiffs' motion for default judgment, Panorama filed a declaration bearing the signature of David Zeltser, who identified himself as the Managing Director of Panorama. Zeltser Decl. filed June 10, 2016 (Dkt. No. 75), at 1 (First Zeltser Declaration). Zeltser stated that Panorama was a Limited Partnership formed under the laws of the United Kingdom, with a principal address at 44 Main Street, Douglas, South Lanarkshire, Scotland. Id. He further attested that Panorama had no office and did no business in the State of New York. Id. He specifically denied that there was any office "associated" with Panorama located at the Avenue Z address. Id. Zeltser attached a one-page "Certificate of Registration of a Limited Partnership" (Certificate), dated August 13, 2013, issued by the Registrar of Companies for [*11] Scotland, stating that Panorama was duly registered as a Limited Partnership "this day." Id. Ex. A. The Certificate did not provide any address for Panorama and did not identify its general or limited partners, its managing director(s), or any other principals, directors, officers, or agents.3
3 According to Companies House, which is the United Kingdom's registry for corporate documents, the South Lanarkshire address provided by Panorama as its "principal address" in the First Zeltser Declaration was also used by 2,172 other companies as their "registered" address. See Blaustein Ltr. filed July 11, 2016 (Dkt. No. 90), at 2 & Ex. D.
D. The July 22 Order
At a conference before me on July 22, 2016, plaintiffs and Panorama agreed to amend the Complaint to name Panorama as a defendant in place of "Panorama TV" and to vacate the Clerk's Certificate of Default as to "Panorama TV." In addition, attorney Fraade accepted service of process on behalf of Panorama. Thereafter, in an Order issued the same day (the July 22 Order), I set a briefing schedule for Panorama's anticipated motion to dismiss for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). (Dkt. No. 95.) I also authorized plaintiffs to serve written discovery on Panorama, "targeted to the issue of personal jurisdiction," and to serve a non-party subpoena on Domains by Proxy, LLC (Domains by Proxy), which plaintiffs identified as the registrar and host of the Website. Id. at 1-2.
E. Jurisdictional Discovery
Pursuant to the July 22 Order, plaintiffs served a subpoena on Domains by Proxy on [*12] July 25, 2016, and served Panorama with document requests and interrogatories on July 27, 2016. See Blaustein Decl. filed Oct. 17, 2016, ¶ 14. Panorama's responses, dated August 18 and 19, 2016, were signed only by attorney Fraade, although its interrogatory answers were accompanied by a one-page declaration in the name of David "Zeltzer" [sic] (Second Zeltzer Declaration), stating that Zeltzer "was consulted" regarding the interrogatories, read them, and knew them to be true. See Interrog. Ans. dated Aug. 18, 2016 (Dkt. No. 125-5), at 7-8; Doc. Req. Resp. dated Aug. 19, 2016 (Dkt. No. 132-1), at 5.4
4 The Second Zeltzer Declaration did not state that Zeltzer read the interrogatory answers, or knew the answers to be true. Moreover, in place of Zeltzer's signature, there was only his typed name, in violation of Fed. R. Civ. P. 33(b)(1)(B) and § 8.4 of the Southern District of New York Electronic Case Filing Rules & Instructions. See Interrog. Ans. at 8.
Although Panorama did not object to any of plaintiffs' document requests, its responses were remarkably uninformative and, in a number of respects, implausible. Plaintiffs requested twenty-one categories of documents. In response, Panorama produced a single page: the same one-page Certificate previously filed as an exhibit to the First Zeltser Declaration. Beyond that one page, it repeatedly denied that any responsive documents "exist in the possession or custody of Panorama." For example, in response to plaintiffs' requests for documents "pertaining to Panorama's ownership, [*13] control, use or interest in the Website," Panorama stated, "No such documents exist in the possession or custody of Panorama as this was an online registration." Doc. Req. Resp. at No. 4. Plaintiffs also asked for documents pertaining to Panorama's use of the "1-800" telephone number displayed on the Website. Once again Panorama stated, "No such documents exist." Id. at No. 5. In response to plaintiffs' request for documents "sufficient to identify Panorama's partners, officers and directors," Panorama asserted that there were no such documents because "Panorama only has one (1) member, officer and director, David Zeltzer [sic]." Id. at No. 15.
Plaintiffs' interrogatory answers were consistent with its document request responses. The answers were prepared by Fraade and his colleague Adama V. Sirleaf, "with the aid of David Zeltser." Interrog. Ans. at No. 1. Yevdayev "was consulted" with respect to two questions. Id. Asked about its contact information, ownership, and management structure, Panorama gave its principal place of business as 1 Lyric Square, London, United Kingdom (not the South Lanarkshire address provided in the First Zeltser Declaration), and denied having any limited [*14] partners, officers, or directors other than Zeltser. Id. at Nos. 2, 8.5 It also denied that it had any "business relationship" with any "persons or entities present in the United States," or "any relationship with any person or entity located" at the Avenue Z Address. Id. at Nos. 3, 4. It specifically denied that it had any "written agreement or formal relationship" with Yevdayev, who merely "made purchases from the Website similar to it being available to other consumers." Id. at No. 7. Separately, Panorama denied that it had any "presence" or any "authorized representatives" anywhere in the United States. Id. at Nos. 21, 23.
5 Panorama's Form LP-5, required by United Kingdom law, tells a different story. On that form, publicly available from the website of Companies House, Panorama reported that its general partner was "Broad Admin Ltd." and that it had a limited partner known as "Alfa Admin Ltd." See https://beta.companieshouse.gov.uk/company/SL013886/filing-history (last visited July 17, 2017). Panorama never produced its Form LP-5 in discovery.
Panorama asserted that it "hired Domains by Proxy to register the Website," which it "own[ed]," "control[led]," and used to "offer its services or products" that are available worldwide and that "consumers located in the United States" could purchase. Interrog. Ans. at Nos. 9, 11, 13-15. It also admitted that it "owns and uses" the "1-800" number appearing on the Website. Id. at No. 16. However, Panorama denied that the Website was "intended to offer or sell goods or services in the United States," asserting that it "does not advertise or promote the Website in the United States" [*15] and "does not provide IPTV services in the United States either directly or through an agent or affiliate." Id. at Nos. 12, 13.
F. The Rule 12(b)(2) Motion
On August 25, 2016, Panorama filed its motion to dismiss all of plaintiffs' claims against it for lack of personal jurisdiction pursuant to Rule 12(b)(2). (Dkt. No. 108.) The motion was supported by the affirmation of attorney Fraade, who attested -- under penalty of perjury -- that Panorama "has not had sufficient contact with the United States or the State of New York, which would subject it to personal jurisdiction by this Court." Fraade Aff. filed Aug. 25, 2016 (Dkt. No. 109), ¶ 10. Fraade added that his client "does not advertise in the United States or New York" and does not "actively seek consumers within the United States." Id. ¶ 12. Fraade also submitted a declaration from David "Zeltzer" [sic] (Third Zeltzer Declaration), once again stating that Panorama had no office at the Avenue Z Address (or elsewhere in New York), had no "agents or representatives in the United States," and did not "do business in the State of New York." Third Zeltzer Decl. filed Aug. 25, 2016 (Dkt. No. 110), ¶¶ 8-10.
In its memorandum of law, signed by Fraade, Panorama argued [*16] that it could not be subject to either general or specific jurisdiction in New York because it "performs all of its business activities out of the United Kingdom and has not solicited consumers or business in the United States." Panorama Mem. in Supp. filed Aug. 25, 2016 (Dkt. No. 111), at 2. Relying on the accompanying affirmation and declaration, Panorama asserted that it had "no relationship" with the Avenue Z Address. Id. at 3. With regard to the 1-800 number listed on the Website for customers "in the US and Canada," see Blaustein Ltr. dated Aug. 30, 2016 (Dkt. No. 125-2), Ex. 9, Panorama asserted, without explanation, that it was actually "meant to provide assistance to Panorama's consumers in and across Europe." Panorama Mem. in Supp. filed Aug. 25, 2016, at 4. Panorama concluded that it "ha[d] no office, contracts, agents, or representatives in the State of New York," that it did not "target" New York or "pursue consumers in New York," and therefore that it would be unfair to subject it to the personal jurisdiction of this Court. Id. at 7.
G. Plaintiffs Ask Panorama to Withdraw the Rule 12(b)(2) Motion
By letter to attorney Fraade dated August 30, 2016, plaintiffs requested that Panorama withdraw its Rule 12(b)(2) motion [*17] and provide supplemental jurisdictional discovery. Blaustein Ltr. dated Aug. 30, 2016, at 1. Plaintiffs explained that various jurisdictional facts asserted by Panorama in its discovery responses and its motion papers were "demonstrably false," including the claims that it had no office in New York, did no business in New York, did not advertise or pursue consumers in the United States, had no agents or representatives in the United States, and was not "associated" with the Avenue Z Address. Id. at 2. Plaintiffs based their position on evidence from the Website and from Brooklyn, including:
- a photograph of the Avenue Z Address building exterior, which displayed a "Panorama TV" logo on the wall and a sign reading "MyPanorama.tv" in the window, id. Ex. 2;
- a screenshot of the Website displaying an identical "Panorama TV" logo, id. Ex. 3;
- a screenshot from the "Contact Information" page of the Website inviting prospective customers "in the US and Canada" to call Panorama's 1-800 number, id. Ex. 9; and
- a screenshot from the "Authorized Dealers" page of the Website showing the Avenue Z Address, id. Ex. 10.6
Plaintiffs warned Panorama that if it did not withdraw its Rule 12(b)(2) motion or provide [*18] supplemental discovery responses it could be subject to sanctions pursuant to Rule 37 and Rule 11. Id. at 5.
6 Plaintiffs also pointed to corporate records from various jurisdictions indicating that Yevdayev was associated with other entities named "Panorama." For example, a Form AP01, obtained from Companies House in the United Kingdom, showed that in 2011 Yevdayev was appointed a director of Panorama Digital Limited, with a service address at 1 Lyric Square, London. Blaustein Ltr. dated Aug. 30, 2016, Ex. 7. This was the same address given by defendant Panorama in its interrogatory answers, see Interrog. Ans. at No. 2, and subsequently described by Zeltser in a declaration submitted in opposition to plaintiffs' Rule 37(b) motion as "just a corporate address." Fourth Zeltser Decl. filed Oct. 24, 2016 (Dkt. No. 132), ¶ 12.
By email dated September 2, 2016 (Dkt. No. 125-3), Fraade stated, "Our client is not willing to withdraw its motion to dismiss." According to Fraade, "None of the alleged additional evidence which you provide changes anything." Id. Fraade also declined to provide supplemental discovery responses, stating, "If your case was so good on the existing facts, you would not need additional discovery." Id.
H. The September 8 Order
In a letter-application dated September 6, 2016 (Dkt. No. 119), followed by a telephonic conference with the Court on September 8, 2016, plaintiffs complained about Panorama's deficient document production, and in particular about its failure to produce any documents concerning the relationship between Panorama and its "authorized dealer" at the Avenue Z Address. Attorney Fraade confirmed that his client's position was that "[n]o such documents exist." Tr. of Sept. 8, 2016 Conf. (Dkt. No. 123), at 9:18-23, 12:12. Fraade explained that there was "one individual there," referring to Yevdayev, who "has purchased [Panorama's] product as anyone else has the right to purchase product on [*19] the website and has resold it." Id. at 13:21-25. Fraade continued, "I believe my client knows that that person exists," but "there's no formal dealership or representative agreement or distribution agreement. I believe these people asked to be listed on the website to facilitate I guess their ability to sell in the United States and not for my client to sell in the United States." Id. at 14:2-9. The Court followed up:
THE COURT: All right. Let me see if I['ve] got this straight, Mr. Fraade. Your client has nothing to do with these folks except that they know that it resells your client's products and it allows them in effect to put their address and their contact information on your website for that purpose?
MR. FRAADE: That's correct.
Id. at 14:10-15.
At the conclusion of the telephone conference, the Court directed Panorama to search its documents again, including electronic documents, for items responsive to plaintiffs' requests, and to produce them by September 19, 2016, "keeping in mind the broad definition of documents and the generous definition of agreement" set by Fed. R. Civ. P. 34(a)(1)(A) and Local Civil Rule 26.3(c).7 Tr. of Sept. 8, 2016 Conf. at 18:12-17. The Court put the point as plainly as possible:
THE COURT: Let me be clear. An agreement [*20] does not have to be a written signed contract. An agreement can be an informal oral agreement. If you have documents, even if they don't say contract at the top, that reflect the existence of whatever agreement is in place that allows those fellows to do whatever it is [they do] in Brooklyn, you need to produce those.
Id. at 15:21-16:1.
7 Fed. R. Civ. P. 34(a)(1)(A) authorizes parties to request "any designated documents or electronically stored information -- including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations -- stored in any medium from which information can be obtained" that are in the responding party's "possession, custody, or control." Local Civil Rule 26.3(c), in turn, provides, "The term 'document' is defined to be synonymous in meaning and equal in scope to the usage of the term 'documents or electronically stored information' in Fed. R. Civ. P. 34(a)(1)(A)."
Attorney Fraade assured the Court that he would "clarify with my client and make sure they provide the proper information." Tr. of Sept. 8, 2016 Conf. at 16:13-14. The Court warned:
THE COURT: So you've got to find that stuff, emails, electronic data, whatever it is, and you've got to produce it. And if you keep coming back and saying we don't know what those guys are doing in Brooklyn and we don't have anything, the next request I get I'm sure is going to be for a deeper and more painful level of discovery.
Id. at 17:2-7.
The Court's instructions were repeated in a written order issued the same day (the September 8 Order), which directed Panorama to "conduct another search of its documents -- keeping in mind the broad scope of the term 'documents' as defined by Local Civil Rule 26.3(c) and Fed. R. Civ. P. 34(a)(1)(A)," and to produce any responsive documents no later than September 19, 2016. Order dated Sept. 8, 2016 (Dkt. [*21] No. 121), ¶ 2.
Panorama never produced any additional documents.
I. The Domains by Proxy Production
On September 9, 2016, Domains by Proxy responded to plaintiffs' subpoena, producing documents showing that the Website's domain name was registered on December 16, 2010 by Yevdayev -- not Panorama, which was formed three years later -- and that Yevdayev was still the registrant, as well as the technical, administrative, and billing contact for the domain name. (Dkt. No. 125-6.) Counsel for plaintiffs emailed a copy of the Domains by Proxy documents to attorney Fraade the same day, reiterating the request that Panorama withdraw its Rule 12(b)(2) motion. Blaustein Decl. filed Oct. 17, 2016, ¶ 21 & Ex. D.
In a letter to plaintiffs dated September 19, 2016 (Dkt. No. 125-1), attorney Fraade stated that "[w]e had writte[n] to Mr. Zeltser to explain the need to use broad definitions for the terms 'documents' and 'agreements.' Nevertheless, Mr. Zeltser has again advised us that Panorama has produced all responsive documents and agreements," and that "all of the answers which were already provided were accurate to the best of his knowledge." Fraade added, "I spoke with Mr. Asaf Yevdayev, who informed me that although he purchased [*22] the domain site MYPANORAMA.TV in 2010, he was unsuccessful in launching it as a business . . . [and] subsequently allowed Panorama Alliance LP to take over the domain site and has had nothing to do with it since." Id. at 2.
J. Plaintiffs Request Additional Discovery
On September 20, 2016, plaintiffs filed a letter-application asserting that Panorama's jurisdictional discovery responses were "untruthful" and noncompliant with the Court's prior orders, and that the discovery recently received from Domains by Proxy showed that Panorama's motion was frivolous. (Dkt. No. 125.) Plaintiffs asked the Court to: (i) authorize additional discovery, including a deposition of Yevdayev; (ii) sanction Panorama pursuant to Fed. R. Civ. P. 37(b)(2)(A)(i) by summarily denying its Rule 12(b)(2) motion, or, in the alternative; (iii) set a briefing schedule for a motion for sanctions pursuant to Rule 11(c). Id. 1-2, 4. By order dated September 28, 2016 (Dkt. No. 126), I authorized plaintiffs to subpoena Yevdayev for documents and deposition testimony, but deferred consideration of sanctions.
K. The Yevdayev Deposition
By email dated September 30, 2016, attorney Fraade accepted service of plaintiffs' subpoena on behalf of Yevdayev and provided counsel with Yevdayev's contact information, [*23] including the email address "email@example.com" and the Avenue Z address. Blaustein Decl. filed Oct. 17, 2016, ¶ 25 & Ex. E. On October 20, 2016, Fraade represented Yevdayev at his deposition. See Yevdayev Dep. Tr., Oct. 20, 2016 (Dkt. No. 137-1).
Yevdayev testified that he lived in Brooklyn and worked at Media Alliance, a company with no employees started by Yevdayev at the Avenue Z Address, selling subscriptions to Panorama's IPTV service, which he advertised in local Brooklyn newspapers. Yevdayev Dep. Tr. at 5:2-8, 31:15-33:14, 34:3, 38:8-9, 51:17-19, 97:17-20. Yevdayev started selling Panorama subscriptions "[a]bout five years ago, four years ago," that is, prior to Panorama's formation in 2013. Id. at 97:17-20. The telephone number of the Avenue Z Address was the same number shown on the Panorama Website, and the signage at the premises included "[a] sign of Panorama TV, My Panorama TV outside the building." Id. at 31:18-24, 32:10-21, 51:25-52:8, 64:9-66:21, 97:17-18.
According to Yevdayev, he purchased multiple subscriptions from Panorama by logging in to the Website through a "special link" for "dealers, resellers." Yevdayev Dep. Tr. at 39:18-22; 44:24-46:23, 57:5-19. Yevdayev paid for [*24] the subscriptions by wire transfer, and then resold them to consumers in New York and elsewhere. Id. at 48:18-49:7, 57:9-24, 58:7-11. He received technical support from Panorama both by telephone and through an online "ticket system." Id. at 84:18-24, 85:21-86:24, 89:15-16. Yevdayev confirmed that Panorama knew he was reselling its service locally, but claimed that there was no "agreement" between Media Alliance and Panorama. Id. at 46:19-47:12; 90:10-14. He denied that he owned any other businesses "that have a relationship with Panorama Alliance LP." Id. at 55:22-25. The Avenue Z Address and Yevdayev's Brooklyn telephone number were listed on Panorama's Website, according to Yevdayev, "because we sell their product." Id. at 103:8-17.
Yevdayev testified that he was not an officer or director of Panorama, had no ownership interest in Panorama, did not know anyone who did, and had never spoken, texted, or emailed with anyone who was an officer or director or held themselves out as an owner of Panorama. Yevdayev Dep. Tr. at 56:19-21; 82:11-83:14. The only representatives of Panorama he could recall speaking to were "Slava" and "Marina," who responded to "technical" questions Yevdayev [*25] submitted through the online ticket system. Id. at 83:15-89:24. The most recent such phone call with Slava took place at the "[b]eginning of the year  sometime." Id. at 87:18-19. Yevdayev said he had "heard of" David Zeltser, because "[i]n the industry everbody knows everybody," but had never met or seen Zeltser, and had no contact information for him. Id. at 95:5-96:19.
Yevdayev acknowledged that he registered the domain name www.mypanorama.tv "ten years ago or a long time ago." Yevdayev Dep. Tr. at 105:8, 106:2-6, 107:2-3. Thereafter, Yevdayev testified, he "transferred" ownership of the domain name to "Panorama company in U.K.," for no compensation, because he "lacked" the "knowledge and finances" he needed to make his own product, and instead continued to sell Panorama's product. Id. at 106:11-25, 108:16-22, 109:4-13, 110:9-11, 112:7-13. Shown a Domains by Proxy document listing him as the current registrant, as well as the technical, administrative, and billing contact for the domain name www.mypanorama.tv (Dkt. No. 125-6), Yevdayev was "curious myself why my name is still on it." Yevdayev Dep. Tr. at 106:9-10. "[I]t shouldn't be there but it is still there." Id. at 106:25.
The Yevdayev subpoena [*26] (Dkt. No. 135-6) sought documents as well as testimony, including documents concerning the Website, any communications between Yevdayev and Panorama, any relationship between Yevdayev and Panorama, and Panorama's business in the United States. At deposition, Yevdayev testified that he searched his records for such documents but did not find any. Yevdayev Dep. Tr. at 63:3-25.
L. Plaintiffs' Sanctions Motions Against Panorama
1. The Rule 37(b) Motion
On October 17, 2016, plaintiffs filed a motion seeking discovery sanctions against Panorama and its counsel pursuant to Rule 37(b)(2)(A). See Pl. Mem. in Supp. filed Oct. 17, 2016 (Dkt. No. 130), at 1. Plaintiffs argued that Panorama failed to comply with this Court's July 22 and September 8 Orders, requiring them to incur "large fees uncovering evidence Panorama was ordered by this Court to produce." Id. at 3-4; see also id. at 18-19 (Panorama's discovery misconduct caused "avoidable months of motion practice and research that have cost the Court and [plaintiffs] time and money"). Plaintiffs sought an order (i) reinstating the April 25, 2016 "default judgment" (actually a Clerk's Certificate of Default) against Panorama or entering a default judgment against it; (ii) "designat[ing]" Panorama a New York [*27] resident and Yevdayev its "partner or agent" for jurisdictional purposes; (iii) prohibiting Panorama from "supporting any claims or defenses" with its jurisdictional discovery responses or any of the Zeltser/Zeltzer declarations; (iv) striking Panorama's Rule 12(b)(2) motion; and (v) awarding plaintiffs their fees incurred in responding to that motion, including their discovery efforts, and in preparing their motion, to be paid by Panorama, Fraade, and Mintz Fraade. Id. at 19.
In opposition to the Rule 37(b) motion, Panorama insisted that it "provided all responsive documents which it has in its possession, custody, or control" during jurisdictional discovery. Panorama Opp'n Mem. filed Oct. 24, 2016 (Dkt. No. 133), at 3.8 It did not address any of the specific questions raised by plaintiffs in their motion, such as why it provided incorrect information concerning the Website and then failed to correct its responses, or how it was possible to claim truthfully that it did not possess a single document concerning (for example) its ownership, the registration and management of its own Website, its own 1-800 number, or its connection to Yevdayev, who registered the Website, bought Panorama subscriptions in bulk, paid by [*28] wire transfer, had access to a special dealer "link," and whose Brooklyn address and phone number appeared on the Website as an "authorized dealer."
8 As noted above, Panorama did not object to any of plaintiffs' document requests when it responded to them. In its Rule 37(b) opposition brief, however, Panorama suggested for the first time that it limited its jurisdictional discovery responses in accordance with objections that it never asserted. For example, when discussing the sufficiency of its interrogatory responses, Panorama stated: "As jurisdictional discovery is for a limited purpose, Panorama answered each interrogatory appropriately. Plaintiffs' interrogatories were supposed to be tailored to establishing if Panorama had a business presence in the United States." Panorama Opp'n Mem. filed Oct. 24, 2016, at 5 (emphasis added).
Panorama argued that none of the evidence submitted by plaintiffs supported the existence of a "purported relationship" between Panorama and Yevdayev. Panorama Opp'n Mem. filed Oct. 24, 2016, at 3. Panorama asserted again that Yevdayev "has no formal relationship with Panorama other than as a reseller of the product," and that he was not a "partner, member, an owner, operator, or an agent of Panorama." Id. at 6-7. Panorama did not explain what it meant by a "formal relationship," or what kinds of relationships it meant to exclude by the use of that qualifier.
In his accompanying declaration (the Fourth Zeltser Declaration), Zeltser stated that "[t]o the best of its knowledge, Panorama provided full and accurate responses to Plaintiffs' interrogatories" and "made reasonable efforts" to comply with plaintiffs' document requests. Fourth Zeltser Decl. filed Oct. 24, 2016 (Dkt. No. 132), ¶¶ 9, 10.9 Zeltzer continued:
Panorama maintains that it has no [*29] formal relationship with either Mr. Yevdayev or [the Avenue Z Address]. Panorama does not seek to conduct business in the United States and does not target any of its advertising to customers in the United States. While Plaintiffs were able to produce links between Mr. Yevdayev, a resident of the state of New York, and the Brooklyn address, there are no formal business links between Panorama and the United States.
Id. ¶ 11.
9 Zeltser did not describe any of those efforts. The Fourth Zeltser Declaration, like the Second Zeltzer Declaration, was signed only with the declarant's typed name.
Attorney Fraade, who submitted his own declaration, likewise affirmed Panorama's main jurisdictional assertions, albeit in language that indicated he was relying on Panorama for their veracity. See, e.g., Fraade Decl. filed Oct. 24, 2016 (Dkt. No. 131), ¶ 8 ("after being so advised by my client," Fraade filed his May 20, 2016 letter "informing the Court that, according to my client," it had no offices or employees in the United States and could not have been served in Brooklyn.); id. ¶ 14 ("[p]ursuant to Panorama's assurances," Fraade wrote his September 19, 2016 letter to plaintiffs confirming that Panorama had already fully responded to plaintiffs' jurisdictional discovery requests); id. ¶ 15 ("Even after being informed of the consequences of noncompliance with the Court's [*30] Order, Panorama has continuously maintained that it has no relationship with [Yevdayev], rather he is just a reseller of Panorama products.") Fraade went on to argue that sanctions against Mintz Fraade "would be inappropriate" because he "made good faith efforts to obtain the truth from Panorama, and [has] made all attempts to ensure that Panorama complied with the Court's order[s]," thereby fulfilling his professional responsibilities. Id. ¶ 17.
2. The Rule 11 Motion
On October 28, 2016, plaintiffs filed their second sanctions motion, arguing that additional sanctions were warranted pursuant to Rule 11 because Panorama and its counsel advanced "certain objectively unreasonable factual contentions and unreasonably denied others relating to Panorama's activities in New York" in its Rule 12(b)(2) motion and supporting submissions and then refused to withdraw that motion when asked to do so, notwithstanding plaintiffs' tender of evidence connecting Yevdayev, the Website, the Avenue Z address, and Panorama. Pl. Mem. in Supp. filed Oct. 28, 2016 (Dkt. No. 136), at 1, 4-9; see also Blaustein Decl. filed Oct. 28, 2016 (Dkt. No. 135), ¶ 6.10 According to plaintiffs, attorney Fraade further violated Rule 11 by failing in his duty to independently [*31] assess the merits of the factual assertions made in the Rule 12(b)(2) motion and by continuing to advocate those assertions in the face of evidence that undermined them. Pl. Mem. in Supp. filed Oct. 28, 2016, at 10-11. Plaintiffs sought an order (i) awarding plaintiffs their fees incurred responding to Panorama's motion to dismiss, including their discovery efforts, and preparing their Rule 11 motion, to be paid by Panorama, Fraade, and Mintz Fraade; and (ii) striking Panorama's Rule 12(b)(2) motion and "finding" that this Court has jurisdiction over Panorama. Id. at 14.11
10 In accordance with Rule 11's "safe harbor" provision, Fed. R. Civ. P. 11(c)(2), the motion was served on October 6, 2016, 21 days before it was filed, to give Panorama an opportunity to withdraw its Rule 12(b)(2) motion without penalty. See Blaustein Decl. filed Oct. 28, 2016, ¶ 4. Panorama did not avail itself of that opportunity, even after Yevdayev testified on October 20, 2016. Instead, on November 2, 2016, Panorama filed a reply brief in further support of its Rule 12(b)(2) motion. (Dkt. No. 141.) The reply brief argued, among other things, that Panorama "undisputedly . . . does not have an authorized representative in New York." Panorama Reply Mem. filed Nov. 2, 2016, at 2.
11 The only sanction that plaintiffs requested in their Rule 11 motion that they did not also request in their Rule 37(b) motion was an award of fees related to the Rule 11 motion.
In opposition to the Rule 11 motion, attorney Fraade filed a memorandum of law supported by declarations from himself and Zeltser (the Fifth Zeltser Declaration). Zeltser attested once again that Panorama had no "connection" to the Avenue Z Address, no "formal relationship" with Yevdayev, and did not "seek to conduct business in the United States" or "target any of its advertising to customers in the United States." Fifth Zeltser Decl. filed Nov. 14, 2016 (Dkt. No. 143), ¶ 13. Zeltser also swore that pursuant to this Court's September 8 Order Panorama "conducted another reasonable search," which he did not further describe. Id. ¶ 15. Thereafter, according to Zeltser, [*32] Panorama "advised its counsel that it had already produced all responsive documents." Id.12
12 Oddly, Zeltser attested only that this is what Panorama advised its counsel. He did not attest, in this declaration, that what Panorama told its counsel was true; that is, that it possessed no additional responsive documents.
Attorney Fraade himself declared, once again, that in response to plaintiffs' jurisdictional discovery demands Panorama "produced the only responsive document it had in its control or possession." Fraade Decl. filed Nov. 14, 2016 (Dkt. No. 142), ¶ 11. Rule 11 sanctions would be inappropriate, according to Fraade, because "[t]here are reasonable bas[e]s upon which this Court could find it lacks personal jurisdiction over Panorama." Id. ¶ 23. He argued that "there has been no testimony or documents produced which demonstrate that Mr. Yevdayev and Panorama have a relationship sufficient for personal jurisdiction." Id. ¶ 22 (emphasis added). In its brief, also signed by attorney Fraade, Panorama went further and asked for "reverse sanctions and costs" against plaintiffs, on the ground that the Rule 11 motion was "served for an improper purpose" and was "not well-grounded in fact or law." Panorama Opp'n Mem. filed Nov. 14, 2016 (Dkt. No. 144), at 6.
M. The January 17, 2017 Argument
At a conference on January 17, 2017 -- by which time the Rule 12(b)(2) motion and both sanctions motions were fully briefed -- I asked attorney Fraade to confirm that [*33] Panorama had "no documents" pertaining to Yevdayev's claim at deposition that he transferred the domain name of the Website to Panorama. Tr. of Jan. 17, 2017 Conf. (Dkt. No. 167) at 41:12-13. "Not a single email, not a tweet, not a text message, not a telephone call log, not a message slip, not a note, not a contract, not nothing, correct?" Id. at 41:14-15. Attorney Fraade responded, "That's what I've been told by both Panorama and [Yevdayev] in his deposition confirmed that information." Id. at 41:16-18. Fraade continued, "I have no knowledge of anything to the contrary other than what I've been told and what I've seen." Id. at 42:1-3.
N. Denial of the Rule 12(b)(2) Motion
On March 2, 2017, I issued a Report and Recommendation concluding that plaintiffs had adequately made a prima facie showing that Panorama was subject to specific personal jurisdiction here, in accordance with New York's long-arm statute and constitutional due process standards, and recommending that the District Judge deny its Rule 12(b)(2) motion. Joint Stock Co., 2017 WL 825482. I found that Panorama's "long-standing" and "substantial" relationship with Yevdayev, together with Yevdayev's status as (at minimum) a New York-based "large-volume purchaser" and reseller of [*34] Panorama's product, with "special website privileges," provided an ample basis for specific personal jurisdiction pursuant to N.Y. C.P.L.R. § 302(a)(1) with respect to all claims asserted in the Complaint. Id. at *8-10. For the same reasons, I found that exercising personal jurisdiction over Panorama complied with federal due process standards, noting: "Regardless of the exact nature of the relationship between Panorama and Yevdayev, Panorama's bulk sales of IPTV subscriptions to a New York resident through its Website, together with its identification of his business as an 'authorized dealer' at the Avenue Z Address, constituted purposeful availment and gave Panorama reason to foresee being haled into court in New York." Id. at *16. However, I did not find, on the record then before me, that Yevdayev was Panorama's "agent" whose conduct could be imputed to Panorama, or that Panorama was otherwise subject to general personal jurisdiction in New York. Id. at *7-8.
On March 30, 2017, the District Judge adopted my recommendation in full and denied Panorama's motion to dismiss. Joint Stock Co., 2017 WL 1321007.
O. The Motion for Leave to Withdraw
On April 4, 2017, attorney Fraade moved pursuant to Local Civil Rule 1.4 for leave to withdraw as counsel for Panorama, on the ground that his client had [*35] become "unresponsive" and was "no longer cooperating" with its attorney. Fraade Decl. filed Apr. 4, 2017 (Dkt. No. 209), ¶ 11; see also Fraade Mem. in Supp. filed Apr. 4, 2017 (Dkt. No. 210), at 2 (citing a "breakdown in communication" as a factor warranting withdrawal).
In his Rule 1.4 declaration, Fraade described his conduct during the jurisdictional discovery period as follows: He submitted plaintiffs' discovery requests to David "Zeltzer" [sic]. Fraade Decl. filed Apr. 4, 2017, ¶ 5. "Mr. Zeltzer provided the response to the interrogatories," and responded to plaintiffs' document requests "by producing one responsive document, claiming that was the sole responsive document in Panorama's possession or control." Id. Fraade, in turn, "submitted these responses on Panorama's behalf with the understanding that Panorama had conducted a reasonable search." Id. Fraade did not describe the basis for that understanding. "However, opposing counsel produced evidence which called into question Panorama's responses," including evidence that Yevdayev "actually registered" the Website's domain name. Id. Fraade "requested" that Panorama search again for responsive documents. Id. ¶ 7. But on September 18, [*36] 2016, Zeltzer "once again asserted that his responses to both the interrogatories and the request for documents were accurate," which assertion Fraade duly communicated to plaintiffs. Id. After receiving a service copy of plaintiffs' Rule 11 motion on October 10, 2016, Fraade once again contacted Panorama and "implored" it to "use all reasonable efforts to ensure that it had produced all responsive documents and that it was in compliance with the Court's orders." Id. ¶ 8.
Fraade did not describe Panorama's response, if any, to his plea. Nor did he discuss his interactions with Zeltser/Zeltzer during the preparation and filing of Panorama's opposition to plaintiffs' sanctions motions. As noted above, Fraade filed two additional Zeltser declarations, on October 24 and November 14, 2016, respectively, and two accompanying briefs, all insisting that Panorama properly discharged its discovery obligations.13
13 On February 24, 2017, Fraade filed yet another Declaration of David Zeltser (the Sixth Zeltser Declaration), this one in opposition to plaintiffs' motion for a preliminary injunction against Panorama. Zeltser attested, among other things, that during jurisdictional discovery Panorama "provided the only responsive document which it possessed" and, "[t]o the best of its abilities," provided "full and accurate responses to Plaintiff's interrogatories." Sixth Zeltser Decl. filed Feb. 24, 2017 (Dkt. No. 193), ¶ 9. Zeltser went on to assert, once again, that Panorama has no "agents or representatives in the United States." Id. ¶ 13. In place of a manual signature, the Sixth Zeltser Declaration was signed only with the declarant's typed name. Id. at 4.
"Lately," Fraade attested, "Panorama has been unresponsive to my communications." Fraade Decl. filed April 4, 2017, ¶ 9. According to Fraade, Panorama had not responded to its counsel's communications -- or counsel's requests for payment -- since March 2, 2017, when Fraade provided his client [*37] with this Court's opinion recommending denial of its Rule 12(b)(2) motion. Id. ¶¶ 9-10. Counsel's last "contact from our client" was on February 24, 2017, "when Mr. Zeltser returned an executed document with respect to the Preliminary Injunction motion." Id. ¶ 10. Panorama's lack of communication, Fraade stated, put its counsel "in an untenable position," leading to the withdrawal application. Id. ¶ 11.14
14 Fraade's accompanying brief describes the nature of the asserted conflict between attorney and client somewhat more explicitly. See Fraade Mem. in Supp., at 3 ("Panorama has taken a position which makes it difficult for [Mintz Fraade] to continue to insist upon it complying with the Court's Order to produce documents responsive to Plaintiff[s'] production requests . . . This failure to respond to [Mintz Fraade's] advice and direction has created an irreconcilable conflict between [Mintz Fraade] and Panorama.")
Fraade included with his moving papers a copy of Mintz Fraade's retainer agreement with his client, dated May 9, 2016 (Dkt. No. 209-1), and addressed to "Panorma [sic] TV" at 1 Lyric Square, London. The agreement contains a choice-of-law provision stating that in the event of a dispute between attorney and client New York law will apply -- because, among other things, "Panorama TV has its office in the State of New York." Ret. Ag. ¶ 6(D).
The client signature on the retainer agreement is indecipherable, and is not accompanied by any typed name or title. Ret. Ag. at 8. However, it is clearly not the same as the signature on the manually-signed First, Third, and Sixth Zeltser/Zeltzer Declarations.
P. The April 5, 2017 Letter-Motion to Compel
One day later, on April 5, 2017, plaintiffs filed a letter-motion to compel [*38] discovery, requesting that the Court "enforce" its July 22 and September 8 Orders regarding jurisdictional discovery by directing Mintz Fraade "to turn over all relevant communications concerning the Retainer Agreement and [Panorama's] presence in New York," in particular the transmittal and reply emails associated with the Retainer Agreement. Dowd Ltr. filed Apr. 5, 2017 (Dkt. No. 213), at 1, 3.15 In addition, plaintiffs requested that the Court consider the "new evidence" revealed by the Mintz Fraade retainer agreement in connection with the pending sanctions motions. Id.
15 Also on April 5, 2017, plaintiffs filed their First Amended Complaint in which Yevdayev (among others) was newly named as an individual defendant in this action.
In his response, attorney Fraade asserted that the statement "Panorama TV has its office in the State of New York" was an "unfortunate drafting mistake," made by an unnamed associate at Mintz Fraade who accidentally included "erroneous" "boilerplate" language in the Panorama retainer agreement. Fraade Ltr. filed Apr. 7, 2017 (Dkt. No. 214), at 1. Fraade added that he had "no knowledge of who signed the Retainer Agreement," id. at 2, and that it "never occurred to me to compare" the signature on the Retainer Agreement with any other client signature. Id.
In their formal response to the motion to withdraw, plaintiffs stated that [*39] they did not oppose attorney Fraade's withdrawal, but asked the Court to (i) retain jurisdiction over Fraade and Mintz Fraade for the purposes of the instant sanctions motions and (ii) require Fraade, as a condition of withdrawal, to produce various documents and appear at a deposition. Pl. Mem. in Resp. filed Apr. 18, 2017 (Dkt. No. 233), at 1.
Q. The Case Management Conference
On April 19, 2017, during the course of a case management conference, I denied plaintiffs' April 5, 2017 letter-motion to compel without prejudice to their ability to seek similar discovery in the ordinary course, but cautioned attorney Fraade that, in deciding the instant sanctions motions, the Court would consider relevant facts placed into the record after briefing on those motions was completed. See Tr. of Apr. 19, 2017 Conf. (Dkt. No. 238) at 39:25-40:14; Order dated Apr. 20, 2017 (Dkt. No. 237).
R. Conditional Withdrawal Granted
On May 9, 2017, I granted Fraade's motion for leave to withdraw, retaining jurisdiction over him and his firm in connection with the instant sanctions motions, subject to the conditions that counsel (i) produce all emails and other communications between Mintz Fraade and Panorama, [*40] or any person acting on Panorama's behalf, concerning the Retainer Agreement; (ii) produce the manually-signed Second, Fourth, and Sixth Zeltser (or Zeltzer) declarations that correspond to the declarations filed at Dkt. Nos. 125-5 (at ECF page 8), 132, and 193, which bear only the declarant's typed name; and (iii) provide the originals of all Zeltser (or Zeltzer) declarations on file in this action for review,16 or submit a declaration explaining this could not be done. Order filed May 9, 2017 (Dkt. No. 255), at 14-16. I also directed Panorama to obtain successor counsel as promptly as possible, and gave plaintiffs leave to request a Clerk's Certificate of Default if by June 12, 2019, Panorama had neither filed its answer nor sought additional time within which to do so. Id. at 15-16.
16 Section 8.4 of this Court's Electronic Case Filing Rules & Instructions states that "[a] document requiring the signature of a party or witness shall be electronically filed in a scanned format that contains an image of the actual signature." Section 7 provides that "[d]ocuments that are electronically filed and require original signatures," other than the signature of the person who filed them, "must be maintained in paper form" by the person who filed them for varying lengths of time; that "affidavits, declarations and proofs of service" must be "maintained in paper form" until "five years after all time periods for appeals expires," and that "[o]n request of the Court" the person who filed the documents electronically "must provide original documents for review."
Attorney Fraade served the May 9 Order on Panorama that same day, by emailing a copy to "firstname.lastname@example.org," "an email address which we have utilized for Panorama," and to "a personal email address which for reasons of confidentiality has not been included in this Declaration." Fraade Decl. filed May 11, 2017 (Dkt. No. 256). On May 15, 2017, Fraade filed a declaration (Dkt. No. 258) attesting that he had produced [*41] the required communications regarding the Retainer Agreement, as well as scans of the manually-signed signature pages of the Second and Fourth Zeltser/Zeltzer Declarations. As to the Sixth Zeltzer Declaration, Fraade explained that he could not open the client email that he believed contained a scan of its signature page, but had nonetheless forwarded the email to plaintiffs' counsel. Id. On May 26, 2017, Fraade filed another declaration (Dkt. No. 274), attesting that although he requested originals of the signature pages of the Zeltser/Zeltzer declarations, he never received them. On May 30, 2017, I directed the Clerk of the Court to remove attorney Fraade as Panorama's counsel of record. (Dkt. No. 275.)
S. New Evidence
By letter dated June 1, 2017, plaintiffs submitted copies of seven checks made out to attorney Fraade, and two emails between Fraade and Yevdayev, and requested that these documents "be considered by the Court" in connection with their sanctions motions. Dowd Ltr. filed June 1, 2017 (Dkt. No. 279), at 1. The checks, which bear dates between June 9, 2016 and March 21, 2017, are all made out to attorney Fraade. Id. Ex. B. Most of them are signed by Asaf Yevdayev. Id. Some [*42] of them are helpfully labeled "Panorama," or "for Panorama Alliance, L.P.," but none of them is written on a Panorama bank account. Id. The June 9, 2016 check is written on the account of Media Alliance at JPMorgan Chase, and includes the Avenue Z Address. Id. Later checks come from Media Alliance, Ocean Ray, LLC (Ocean Ray), and Skyper Group LLC (Skyper Group) -- all drawn on JPMorgan Chase accounts. Id. The checks from Ocean Ray and Skyper Group also display addresses in Brooklyn, New York. Id.
The emails are all dated June 9, 2016 -- the day before Fraade filed the First Zeltser Declaration -- and are between Fraade and "email@example.com," which Fraade later acknowledged to be Yevdayev's email address, with carbon copies to an individual named "Albert Benjamin" (who has not otherwise been mentioned in this action). Dowd Ltr. filed June 1, 2017, Ex. C. At 7:23 p.m., Yevdayev wrote, "I spoke to UK office, because of the time difference they could not email you today, but they assured me that you will have it early am. [P]lease keep me or Albert posted if you don['t] receive it by noon," adding "on another note, i had fedexed a check to your office." Id. At 7:33 p.m., Fraade replied: "Thanks. I [*43] will be emailing to the Legal email address this evening a form of Declaration which needs to be signed in the UK and returned to me tomorrow. I am leaving the name of the person signing it blank but will fill that in after I receive the signed document back." Id. Fraade filed the First Zeltser Declaration on behalf of Panorama the next day.
On June 2, 2017, I informed the parties that I would consider the new evidence in connection with the sanctions motions and gave Fraade a deadline of June 7, 2017, to submit any response. Order dated June 2, 2017 (Dkt. No. 280), at 1. On June 6, 2017 I granted attorney Fraade's letter-application for an extension of time, through June 12, 2017, to respond to the new evidence. (Dkt. No. 283.)
On June 12, 2017, Fraade filed a letter-brief arguing that the checks written to him by First Media and the other Brooklyn-based payers were not "relevant" because he "never testified or stated who paid" his firm, adding, "I am not aware of any prohibition for payment of fees by third parties by any ethical or other rules." Fraade Ltr. filed June 12, 2017 (Dkt. No. 289), at 1.17 Fraade explained that Yevdayev "advised me that he would be advancing payment on Panorama's [*44] behalf." Id. Fraade did not know who the other payers were and did not believe that he had "any obligation to ascertain same." Id. at 2. He believed that all of the payers, including Media Alliance, were "entities which simply advanced funds on behalf of Panorama, due to Panorama being based in the UK, without offices in the United States" Id. at 1. Fraade acknowledged that he received the last check (for $2000 from Skyper Group, dated March 21, 2017), but argued that it did not contradict the statement he made in his withdrawal application (that "our last contact from our client was on February 24, 2017," Fraade Decl. filed Apr. 4, 2017, ¶ 10), because "I never stated that no payment was made on behalf of the client." Id. at 3.18
17 Rule 1.8(f) of the New York Rules of Professional Conduct (RPC), 22 N.Y.C.C.R. § 1200.0, states in pertinent part: "A lawyer shall not accept compensation for representing a client, or anything of value related to the lawyer's representation of the client, from one other than the client unless: (1) the client gives informed consent; [and] (2) there is no interference with the lawyer's independent professional judgment or with the client-lawyer relationship."
18 In fact, he did. In the same declaration, Fraade attested that he provided his client with a copy of the Court's March 2, 2017 Report and Recommendation and March 7, 2017 Order, but received no responses. He continued: "At the same time, I requested that Panorama make a payment to our firm for an additional retainer for services going forward, pursuant to our retainer agreement. Again, we received neither a response, nor payment." Fraade Decl. filed Apr. 4, 2017, ¶ 9 (emphasis added). The Skyper Group check was dated March 21, 2017. Fraade's assertion that this particular payment was "arranged" prior to the end of February, through Yevdayev, Fraade Ltr. filed June 12, 2017, at 3, does not render truthful his broad claim he received no "payment" after March 7.
Fraade attached to his letter four emails from himself to "David," dated between September 1 and September 16, 2017, and one from David to him, dated September 18, 2017, all addressed to or from "firstname.lastname@example.org." Fraade Ltr. filed June 12, 2017, Exs. 3-4. These emails show that Fraade kept his client up to date on the proceedings in this Court during that period, including the September 8 Order, and that he urged his client, more than once, to respond [*45] promptly. On September 18, 2017, David responded by email, "We have no presence in usa, and will not continue answering same questions more than once. Answer all as you see fit, we will go until decision on our request to close the case." Id. Ex. 3. These statements were apparently the basis for Fraade's September 19 letter to plaintiffs, in which he wrote, "Mr. Zeltser has again advised us that Panorama has produced all responsive documents and agreements," and that "all of the answers which were already provided were accurate to the best of his knowledge."
Fraade also attached an email from David dated October 24, 2016, which in turn attached the signed signature page of the Fourth Zeltzer Declaration. In his cover email, David wrote that although he had signed the document, "I dont [sic] understand certain things, I will have someone speaking english contact you Tuesday afternoon." Fraade Ltr. filed June 12, 2017, Ex. 1. The email continued, "Fo [sic] payment, we will make timely arrangements." Id. Fraade did not wait until Tuesday afternoon. He filed the Fourth Zeltser declaration (bearing the declarant's typed name instead of a manual signature) at 11:45 p.m. that same day: Monday, [*46] October 24, 2016.
Fraade devotes a portion of his letter to his assertion that his representation of Yevdayev at deposition was pursuant to a separate retainer agreement neither requested nor directed by Panorama. Fraade Ltr. filed June 12, 2017, at 2. Fraade states that both Yevdayev and Panorama were "advised of the potential conflict," but did not object. Id.19
19 RPC 1.7, which addresses conflicts among current clients, states in pertinent part that such a conflict is waivable, if, among other things, "each affected client gives informed consent, confirmed in writing." 22 N.Y.C.C.R. § 1200.0, Rule 1.7(b)(4) (emphasis added). Fraade has neither described nor produced any written confirmation, from either client, of the claimed conflict waiver.
T. Panorama and Yevdayev Default
No new counsel entered an appearance on behalf of Panorama after attorney Fraade's withdrawal became effective on May 30, 2017, and Panorama failed to answer the First Amended Complaint by the June 12, 2017 deadline. Similarly, Yevdayev -- who was served with process on May 8, 2017 (see Dkt. No. 257) -- never appeared in this action and never answered the First Amended Complaint. On June 30, 2017, plaintiffs moved for default judgment against Panorama and Yevdayev (Dkt. No. 309), and on July 10, 2017, the District Judge granted plaintiffs' motion, granting a default judgment against Panorama and Yevdayev and permanently enjoining Panorama from, among other things, transmitting plaintiffs' programming. (Dkt. No. 313.)
I. THIS COURT'S AUTHORITY
Pretrial matters "not dispositive [*47] of a party's claim or defense" may be referred to a Magistrate Judge for hearing and decision, subject to review by the District Judge on a "clearly erroneous" or "contrary to law" standard if a party files timely objections. Fed. R. Civ. P. 72(a); see also 28 U.S.C. § 636(b)(1)(A). Motions for dispositive relief may be referred to a Magistrate Judge for report and recommendation, subject to de novo review by the District Judge. Fed. R. Civ. P. 72(b); see also 28 U.S.C. § 636(b)(1)(B).
A. Rule 37(b) Sanctions
Motions seeking Rule 37(b) sanctions for noncompliance with the Court's discovery orders "are ordinarily considered non-dispositive, and therefore fall within the grant of Rule 72(a), 'unless the sanction employed disposes of a claim.'" Seena Int'l Inc. v. One Step Up, Ltd., 2016 WL 2865350, at *10 (S.D.N.Y. May 11, 2016) (quoting Lan v. Time Warner, Inc., 2016 WL 928731, at *1 (S.D.N.Y. Feb. 9, 2016)). "The critical issue . . . is what sanction the magistrate judge actually imposes," not what sanction the moving party seeks. 12 Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure § 3068.2, at 383 (Thomson Reuters 2014) (hereafter Fed. Prac. & Proc.). Thus, "If a moving party requests a dispositive sanction, but the magistrate judge declines to impose it, the judge's decision is governed by Rule 72(a)," and may be modified or set aside only if "clearly erroneous or contrary to law." Steele v. Costco Wholesale Corp., 2005 WL 1068137, at *2 (E.D.N.Y. May 6, 2005); Fed. R. Civ. P. 72(a); see also Pippins v. KPMG LLP, 279 F.R.D. 245, 253 (S.D.N.Y. 2012) ("A Magistrate Judge's resolution of [*48] discovery disputes deserves substantial deference."). Accordingly, "[m]onetary sanctions pursuant to Rule 37 for noncompliance with discovery orders usually are committed to the discretion of the magistrate [judge]." Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990).
An order precluding the introduction of certain evidence or barring certain contentions "may also be properly characterized as non-dispositive . . . [a]s long as the order does not wholly dispose of a party's claim or defense." Seena Int'l Inc., 2016 WL 2865350, at *10 (citing, inter alia, Update Art, Inc. v. Modiin Publ'g, Ltd., 843 F.2d 67, 71 (2d Cir. 1988)); see also Magee v. Paul Revere Life Ins., 178 F.R.D. 33, 37 (E.D.N.Y. 1998) (Magistrate Judge's order precluding expert witness testimony as a sanction for plaintiff's discovery misconduct was non-dispositive); UBS Int'l Inc. v. Itete Brasil Instalacoes Telefonicas, Ltd., 2011 WL 1453797, at *1 & n.2 (S.D.N.Y. Apr. 11, 2011) (Magistrate Judge "has the authority" to preclude disobedient parties from "advancing certain arguments"). Similarly, orders directing that designated facts be taken as established are within the Magistrate Judge's discretion, so long as the facts so designated do not have the effect of "finally resolv[ing] a party's claim or defense." Burns v. Imagine Films Entm't, Inc., 164 F.R.D. 594, 597, 600 (W.D.N.Y. 1996) (Magistrate Judge did not exceed his authority under Rule 72(a) by resolving issue of "prior access" in favor of copyright plaintiffs as a discovery sanction, because plaintiffs were still required to "affirmatively prove each element of [their] copyright [*49] claim").
Magistrate Judges may recommend -- but do not have authority to impose -- discovery sanctions that dismiss a claim, preclude an entire defense, or otherwise "terminate" the action by striking a pleading entirely or entering a default judgment against a party. See Mason Tenders Dist. Council Welfare Fund v. Precise Brick, Inc., 2009 WL 1675399, at *1 (S.D.N.Y. June 15, 2009); Aponte v. Atl. Express Transp., 2008 WL 2388256, at *3 (E.D.N.Y. June 11, 2006); UBS Int'l Inc., 2011 WL 1453797, at *1 n.2 ("If dismissal were the appropriate sanction, it would be necessary for me to submit a report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B).").
For the reasons that follow, I conclude that Panorama's misconduct during jurisdictional discovery in this action warrants severe sanctions against Panorama and its former counsel, but that a default judgment is neither warranted nor necessary as a discovery sanction, particularly since the District Judge has already granted a default judgment against Panorama. Because the sanctions I find appropriate do not dispose of any claim or defense in the action, I have the authority to impose them pursuant to Rule 72(a) and § 636(b)(1)(A). See Seena Int'l Inc., 2016 WL 2865350, at *10.
B. Rule 11 Sanctions
It is unclear in this Circuit whether Magistrate Judges have the authority to impose Rule 11 sanctions. In Kiobel v. Millson, a three-judge panel of the Second Circuit was "evenly divided" on the issue, "with one member of the panel concluding that magistrate judges have [*50] authority to impose Rule 11 sanctions, another judge concluding that they do not, and the third declining to endorse either view in light of the statute's ambiguity." 592 F.3d 78, 79 (2d Cir. 2010); see also Houston v. Manheim-N.Y., 475 F. App'x 776, 779 (2d Cir. 2012) (summary order) ("we have not yet resolved" whether Magistrate Judges have the authority under 28 U.S.C. § 636(b)(1)(A) and Rule 72(a) to deny motions for Rule 11 sanctions).
Since Kiobel, Magistrate and District Judges in this Circuit have generally treated motions for Rule 11 sanctions as dispositive, "out of an abundance of caution." E.g., F.T.C. v. Consumer Health Benefits Ass'n, 2011 WL 2341097, at *1 n.4 (E.D.N.Y. June 8, 2011) (Mann, M.J.) ("Out of an abundance of caution, this Court has fashioned its conclusions with respect to the propriety of Rule 11 sanctions as a Report and Recommendation."); Gelicity UK Ltd. v. Jell-E-Bath, Inc., 2014 WL 1330938, at *1 n.1 (E.D.N.Y. Apr. 1, 2014) (Mann, M.J.) ("Because the Second Circuit has not resolved the issue of a magistrate judge's authority to sanction under Rule 11, its inherent powers, or 28 U.S.C. § 1927, this Court, out of an abundance of caution, addresses [plaintiff's motion for sanctions] in a report and recommendation."); Gurvey v. Cowan, Leibowitz & Latman, P.C., 2015 WL 5472893, at *2 (S.D.N.Y. Sept. 17, 2015) (Schofield, D.J.) (citing Kiobel, 592 F.3d at 79-80) (noting that "in the context of Rule 11, the Second Circuit has left open whether de novo review is required for a magistrate judge's recommendation of sanctions under Rule 11" and, therefore "[i]n an exercise of caution" applying de novo review to Magistrate Judge's recommendation [*51] that defendants' Rule 11 motion be granted).
Because the authority of Magistrate Judges to impose Rule 11 sanctions is unresolved in this Circuit, and following the majority of District and Magistrate Judges who have adopted a conservative approach to the issue, I present my conclusion that Rule 11 sanctions are warranted against Panorama and its former counsel as a Report and Recommendation.
II. THE RULE 37(b) MOTION
A. Legal Standards
Rule 37 "governs the district court's procedures for enforcing discovery orders and imposing sanctions for misconduct." World Wide Polymers, Inc. v. Shinkong Synthetic Fibers Corp., 694 F.3d 155, 158 (2d Cir. 2012). Pursuant to Rule 37(a), a party may, upon notice to other parties and all affected persons, "move for an order compelling . . . discovery," after conferring in good faith (or attempting to confer in good faith) with the person or party failing to provide it. Fed. R. Civ. P. 37(a)(1). A party seeking discovery may move for a Rule 37(a) order to compel if, inter alia, a party "fails to answer an interrogatory submitted under Rule 33" or "fails to produce documents" requested under Rule 34. Fed. R. Civ. P. 37(a)(3)(B)(iii)-(iv). For the purposes of Rule 37(a) motions to compel, "an evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer or respond." Fed. R. Civ. P. 37(a)(4). If a motion to compel is granted, or if the requested discovery is provided only [*52] after the motion is filed, the Court "must, after giving an opportunity to be heard, require the party . . . whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees," unless the movant failed to attempt in good faith to obtain discovery before moving to compel, the opposing party's response to the motion was "substantially justified," or an award would be "unjust." Fed. R. Civ. P. 37(5)(A).
Rule 37(b) "provides comprehensively for sanctions for failure to obey discovery orders." 8B Fed. Prac. & Proc. § 2289, at 531. Pursuant to Rule 37(b)(2)(A), the court in which an action is pending may impose "just" sanctions on a party who "fails to obey an order to provide or permit discovery." Fed. R. Civ. P. 37(b)(2). A court order directing compliance with discovery requests is a required predicate to Rule 37(b) sanctions. See, e.g., Salahuddin v. Harris, 782 F.2d 1127, 1131 (2d Cir. 1986) ("The plain language of Rule 37(b) requires that a court order be in effect before sanctions are imposed."); Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357, 1364 (2d Cir. 1991) (citing Salahuddin, 782 F.2d at 1131) ("[T]here must be a valid court order in force before sanctions may be imposed pursuant to Rule 37(b)(2)."); id. at 1366 (declining to require "formal and specific warnings before imposing Rule 37(b)(2) sanctions" because "such sanctions can only be imposed [*53] for violation of a specific, previously entered court order"). The order disobeyed can take a variety of forms, and need not be written. JSC Foreign Econ. Ass'n Technostroyexport v. Int'l Dev. & Trade Servs., Inc., 2005 WL 1958361, at *14 n.10 (S.D.N.Y. Aug. 16, 2005); see also 8B Fed. Prac. & Proc. § 2289, at 531-32 (citing Fed. R. Civ. P. 37(b) advisory committee's note to 1970 amendment) (Rule 37(b) refers to any "order to provide or permit discovery" and "thus makes these sanctions available to orders against a party having this effect regardless of what rule they were made under.").
Rule 37(b)(2)(A) sets forth a "non-exclusive list of sanctions that may be imposed on a party when the party 'fails to obey an order to provide or permit discovery.'" Hurley v. Tozzer, Ltd., 2017 WL 1318005, at *2 (S.D.N.Y. Feb. 10, 2017), report and recommendation adopted, 2017 WL 1064712 (S.D.N.Y. Mar. 21, 2017) (quoting Salahuddin, 782 F.2d at 1131) The list includes:
(i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims;
(ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) dismissing the action or proceeding in whole or in part
(v) rendering a default judgment against the disobedient party
Fed. R. Civ. P. 37(b)(2)(A)(i)-(iii), (v), (vi).20
20 In the absence of a predicate order to provide or permit discovery, "a court may impose sanctions on a party for misconduct in discovery under its inherent power to manage its own affairs." Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 106-07 (2d Cir. 2002). However, sanctions imposed under the Court's inherent power require a finding of "bad faith . . . [which] must be shown by 'clear evidence' that the actions in question are taken for 'harassment or delay or . . . other improper purposes.'" Cretella v. Liriano, 370 F. App'x 157, 159 (2d Cir. 2010) (quoting United States v. Int'l Bhd. of Teamsters, 948 F.2d 1338, 1345 (2d Cir.1991)). I need not decide whether the sanctions imposed on Panorama and its former counsel pursuant to Rule 37(b) would also be warranted pursuant to this Court's inherent power. Any such sanctions would be redundant with those imposed and recommended herein, and in any event were not requested by plaintiffs. See Kingsway Fin. Servs., Inc. v. Pricewaterhouse-Coopers LLP, 2008 WL 5336700, at *6 n.10 (S.D.N.Y. Dec. 22, 2008) ("I need not consider whether sanctions would be proper under Rule 37(d), Rule 26(g)(2), (3) or 28 U.S.C. § 1927 because defendants have only moved for sanctions pursuant to Rule 37(b)(2).").
"Instead of or in addition to" the sanctions authorized by Rule 37(b)(2)(A), "the court [*54] must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust." Fed. R. Civ. P. 37(b)(2)(C).
"Disciplinary sanctions under Rule 37 are intended to serve three purposes. First, they ensure that a party will not benefit from its own failure to comply. Second, they are specific deterrents and seek to obtain compliance with the particular order issued. Third, they are intended to serve a general deterrent effect on the case at hand and on other litigation, provided that the party against whom they are imposed was in some sense at fault." S. New Eng. Tel. Co. v. Glob. NAPs Inc., 624 F.3d 123, 149 (2d Cir. 2010) (quoting Update Art, Inc., 843 F.2d at 71). District Courts have "broad discretion in fashioning an appropriate sanction" for discovery violations, and sanctions "may be imposed where a party has breached a discovery obligation" either through "bad faith or gross negligence" or through "ordinary negligence." Residential Funding Corp., 306 F.3d at 101. The sanction imposed must also "relate to the particular claim to which the discovery order was addressed." Seena Int'l Inc., 2016 WL 2865350, at *14 (quoting Daval Steel Prod., 951 F.2d at 1358).
The "mildest" sanction under Rule 37(b) "is an order to reimburse the opposing party for expenses caused [*55] by the failure to cooperate." Seena Int'l Inc., 2016 WL 2865350, at *11 (quoting Cine 42nd St. Theatre Corp. v. Allied Artists Pictures Corp., 602 F.2d 1062, 1066 (2d Cir. 1979)). "Monetary sanctions are the norm, not the exception, when a party is required to engage in motion practice in order to obtain the discovery to which it is entitled." Id.
"If monetary sanctions are not sufficient, '[m]ore stringent' orders may be issued," including adverse inference orders, preclusion orders, and orders "deeming disputed issues determined adversely to the position of the disobedient party." Seena Int'l, Inc., 2016 WL 2865350, at *12 (quoting Cine 42nd St. Theatre Corp., 602 F.2d at 1066). Where the discovery misconduct has deprived the opposing party of key evidence needed to litigate a contested issue, an order prohibiting the disobedient party from contesting that issue -- or simply directing that the matter be taken as established -- is also appropriate. See, e.g., Knox v. Palestine Liberation Org., 229 F.R.D. 65, 71 (S.D.N.Y. 2005) ("establishing as a sanction facts sufficient to permit the exercise of personal jurisdiction over defendants").
Striking pleadings and imposing a default judgment are "the most severe sanction[s]" that Rule 37(b) provides, "because [they] terminate" the action. Mason Tenders Dist. Council Welfare Fund v. Precise Brick, Inc., 2009 WL 1675399, at *1 (S.D.N.Y. June 15, 2009). While the Second Circuit has "expressed a preference for resolving disputes on the merits rather than by default," it has also "consistently recognized that Rule 37 sanctions are applicable in 'extreme circumstances,' where [*56] 'a party fails to comply with the court's discovery orders willfully, in bad faith, or through fault.'" Robertson v. Dowbenko, 443 F. App'x 659, 660 (2d Cir. 2011) (quoting John B. Hull, Inc. v. Waterbury Petrol. Prods., Inc., 845 F.2d 1172, 1176 (2d Cir. 1988)). "Although entry of a default judgment is an extreme measure, discovery orders are meant to be followed" and "[a] party who flouts such orders does so at his peril." Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 853 (2d Cir. 1995) (quoting Update Art, Inc., 843 F.2d at 73).
The Court has wide discretion to apportion Rule 37 monetary sanctions between a party and its counsel. See, e.g., Yeboah v. United States, 2000 WL 1576886, at *3-4 (S.D.N.Y. Oct. 20, 2000) (awarding Rule 37(b) monetary sanctions against counsel for plaintiff where "plaintiff failed over the course of many months to comply with defendant's legitimate discovery requests and subsequent Court Orders," the record was "devoid of any legitimate justification for [those] failures" and "plaintiff's counsel was given numerous opportunities to cure his and his client's derelictions"); id. at *4 (where attorney, "because his own conduct, including misrepresentations and repeated dishonored commitments, wasted the time and resources of [defendants] and the Court, it is most appropriate to impose this particular sanction against counsel personally."); AAIpharma Inc. v. Kremers Urban Dev. Co., 2006 WL 3096026, at *6 (S.D.N.Y. Oct. 31, 2006) (whether to hold "the party or its counsel, or both" liable for monetary sanctions under Rule 37(a) is a decision that "lies within the Court's discretion"). Joint and [*57] several sanctions against parties and their attorneys "are available when the court finds both to be equally at fault," Hunt v. Enzo Biochem, Inc., 2011 WL 4840713, at *7 (S.D.N.Y. Oct. 12, 2011), and are clearly appropriate where "the sanctionable conduct is a 'coordinated effort' of counsel and party." Metropo. Opera Ass'n, 2004 WL 1943099, at *25 (quoting Estate of Calloway v. Marvel Entm't Grp., 9 F.3d 237, 239-40 (2d Cir. 1993)).
When exercising their discretion to impose the appropriate sanction under Rule 37(b), courts in this Circuit consider four non-exclusive factors: "(1) the willfulness of the non-compliant party or the reason for noncompliance; (2) the efficacy of lesser sanctions; (3) the duration of the period of noncompliance; and (4) whether the non-compliant party had been warned of the consequences of noncompliance." S.E.C. v. Razmilovic, 738 F.3d 14, 25 (2d Cir. 2013), as amended (Nov. 26, 2013) (quoting S. New Eng. Tel. Co., 624 F.3d at 144). "Prejudice to the moving party may also be a significant consideration, though not an absolute prerequisite in all circumstances." Royal Park Invs. SA/NV v. U.S. Bank Nat'l Ass'n, 319 F.R.D. 122, 126 (S.D.N.Y. Nov. 9, 2016) (citing S. New Eng. Tel. Co., 624 F.3d at 147); see also Grammar v. Sharinn & Lipshie, 2016 WL 525478, at *3 (S.D.N.Y. Feb. 8, 2016) (citing S. New Eng. Tel. Co., 624 F.3d at 148-49) (prejudice to the moving party is "relevant, although the Second Circuit has emphasized that the absence of prejudice should not be accorded significant weight"). No single factor is dispositive. World Wide Polymers, 694 F.3d at 159; Grammar, 2016 WL 525478, at *3.
a. Willfulness of Noncompliance
"Noncompliance with discovery orders is considered willful when the court's orders have been clear, when the party [*58] has understood them, and when the party's noncompliance is not due to factors beyond the party's control." Thompson v. Jam. Hosp. Med. Ctr., 2015 WL 7430806, at *3 (S.D.N.Y. Nov. 20, 2015) (quoting In re Fosamax Prods. Liab. Litig., , 2013 WL 1176061, at *2 (S.D.N.Y. Mar. 31, 2013); accord Davis v. Artuz, 2001 WL 50887, at *3 (S.D.N.Y. Jan. 19, 2001) (citing Baba v. Japan Travel Bureau Int'l, Inc., 165 F.R.D. 398, 402-03 (S.D.N.Y. 1996)). "Willful non-compliance is routinely found, for instance, where a party has 'repeatedly failed to . . . produce documents . . . in violation of the district court's orders.'" Farmer v. Hyde Your Eyes Optical, Inc., 2015 WL 2250592, at *7 (S.D.N.Y. May 13, 2015) (quoting Doe v. Delta Airlines, 2015 WL 798031, at *8 (S.D.N.Y. Feb. 25, 2015); accord Grammar, 2016 WL 525478, at *3 (failure to comply with two orders, without an explanation for the delinquency, was a sufficient basis for a finding of willfulness "[g]iven the clarity and simplicity of the Court's orders and the absence of any indication that defendant's noncompliance is the result of factors beyond its control").
b. Efficacy of Lesser Sanctions
There are two important limitations on a court's exercise of discretion under Rule 37(b): the sanctions imposed must be "just" and "the severity of the sanction must be commensurate with the non-compliance." Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130, 140 (2d Cir. 2007). Thus, a court "should always seek to impose the least harsh sanction that will remedy the discovery violation and deter such conduct in the future." Grammar, 2016 WL 525478, at *3. However, a "district court is 'not required to exhaust possible lesser sanctions before imposing dismissal or default if such a sanction is appropriate on the overall record.'" Shcherbakovskiy v. Seitz, 450 F. App'x 87, 88 (2d Cir. 2011) (quoting S. New. Eng. Tel. Co., 624 F.3d at 148)).
c. [*59] Duration of Noncompliance
Courts "have found noncompliance for a period of several months sufficient to warrant dismissal or default." Urbont v. Sony Music Entm't, 2014 WL 6433347, at *3 (S.D.N.Y. Nov. 6, 2014) (granting default sanctions where defendant failed to participate in discovery for over a year, and had made no contact with counsel or the court for over six months). Lesser sanctions may be imposed after a "relatively short" period of noncompliance. See, e.g., 3801 Beach Channel, Inc. v. Shvartzman, 2007 WL 879668, at *6 (E.D.N.Y. Mar. 21, 2007).
"Courts are generally hesitant to impose terminating sanctions before warning the offending litigant." Grammar, 2016 WL 525478, at *4 (citing Johnson v. Strive E. Harlem Emp't Grp., 990 F. Supp. 2d 435, 455 (S.D.N.Y. 2014)). "[S]evere sanctions like dismissal or default should be imposed only if the party has been warned that such a sanction will follow from continued non-compliance and has nevertheless refused to comply." Urbont, 2014 WL 6433347, at *3; accord Agiwal v. Mid Island Mortg. Corp., 555 F.3d 298, 303 (2d Cir. 2009) (dismissal was appropriate where Magistrate Judge's discovery orders "warned of the possibility of sanctions, including dismissal," notwithstanding plaintiff's "alleged health problems and the fact that English is his second language"). However, parties have "no absolute entitlement to be 'warned' that they disobey court orders at their peril," Daval Steel Prods., 951 F.2d at 1366, and even terminating sanctions may be imposed with no warning beyond the sanctions motion itself. See Grammar, 2016 WL 525478, at *4 (defendant "could not [*60] argue that it lacked notice that it faced the possibility of terminating sanctions, as such notice was provided on the face of the plaintiff's motion").
Plaintiffs assert that Panorama "failed to obey" two different court orders directing discovery responses: the July 22 Order and the September 8 Order. See Pl. Mem. in Supp. filed Oct. 17, 2016, at 1. Although I agree that Panorama's August 2016 jurisdictional discovery responses were "false, incomplete [and] evasive," id. at 4, I cannot sanction Panorama for its discovery misconduct prior to September 8, 2016 -- at least not pursuant to Rule 37(b) -- because the September 8 Order was the first and only "clearly articulated order of the court requiring specified discovery" by Panorama. See Daval Steel Prods., 951 F.2d at 1363.
Once the September 8 Order was issued, however, Panorama was obligated, on pain of Rule 37(b) sanctions, to conduct another search of its documents and to produce documents responsive to plaintiffs' requests no later than September 19, 2016. The September 8 Order was clear and simple. Panorama has never argued that it did not understand what was required. Nor has it ever suggested that its noncompliance was due to factors beyond its control. Nonetheless, Panorama failed [*61] to produce a single page after September 8, 2016, and falsely claimed, through its counsel, that no responsive documents existed. I will therefore order Panorama and its counsel to pay the reasonable discovery expenses, including attorneys' fees, incurred by plaintiffs from September 8, 2016, through March 30, 2017, which is the date on which Panorama's Rule 12(b)(2) motion was denied. As an additional sanction I will direct that the following facts be taken as established for purposes of this action: Asaf Yevdayev is and was, at all relevant times, Panorama's agent and representative with respect to the conduct at issue herein. Panorama may not (through its agent Yevdayev or otherwise) deny or contest the agency relationship that it improperly concealed from plaintiffs through its discovery misconduct.
1. The July 22 Order Was Not a Court Order "to Permit or Provide Discovery"
The July 22 Order granted plaintiffs authority to conduct pre-answer jurisdictional discovery by, among other things, serving Panorama with "written discovery targeted to the issue of personal jurisdiction." July 22 Order ¶ 5. The July 22 Order did not, however, compel or otherwise direct Panorama to produce any particular [*62] documents (in response to demands not yet served) or to provide any other specified discovery. For that reason, while Panorama's deficient responses to plaintiffs' document requests and interrogatories may have violated other discovery rules,21 they were not a "fail[ure] to obey" the July 22 Order, as plaintiffs suggest, see Pl. Mem. in Supp. filed Oct. 17, 2016, at 1.22
21 See, e.g., Fed. R. Civ. P. 26(g)(1)(B) (by signing a discovery response, "an attorney or party certifies that to the best of the person's knowledge, information, and belief formed after a reasonable inquiry" that the response is "consistent with these rules," "not interposed for any improper purpose," and is "neither unreasonable nor unduly burdensome or expensive"); Fed. R. Civ. P. 26(e)(1) (a party has a duty to "supplement or correct" its discovery responses "in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing"); Fed. R. Civ. P. 33(b)(3) (each interrogatory not objected to must be answered "separately and fully"); Fed. R. Civ. P. 34(b)(2)(B) (production of documents must be completed no later than the time specified in the request or another reasonable time); Fed. R. Civ. P. 37 (a)(4) ("[A]n evasive or incomplete disclosure, answer or response must be treated as a failure to disclose, answer, or respond.").
22 The same issue arose during the parties' September 8, 2016 discovery conference, when plaintiffs' counsel characterized the July 22 Order as "requiring the production of jurisdictional discovery." Tr. of Sept. 8, 2017 Conf., at 3:12-13. The Court corrected counsel: "what it actually required was that [plaintiffs] serve that discovery by July 29th and that Panorama respond by August 19th before [plaintiffs'] opposition papers [to the Rule 12(b)(2) motion] were due." Id. at 3:16-18.
Instead, the deficient responses created a more-than-adequate basis for plaintiffs' September 6, 2016 letter-application, which was in substance a motion to compel,23 and which, in turn, led to an order enforceable pursuant to Rule 37(b). See, e.g., Glencore Denrees Paris v. Dep't of Nat'l Store Branch 1, 2008 WL 4298609, at *4 (S.D.N.Y. Sept. 19, 2008) ("Where one party fails to respond to a discovery request, or provides evasive or incomplete responses, the aggrieved party may seek [a Rule 37(a)] order to compel disclosure or discovery . . . Rule 37(b) relief, however, is usually appropriate only where a discovery order has been violated."); Salahuddin, 782 F.2d at 1132 (declining to "imply an order to compel discovery" from a "conjunctive reading" of three discovery-related orders and reversing the District Court's imposition of Rule 37(b) sanctions because "[t]here was no violation of a court order upon which to base Rule 37(b) sanctions."); Martin v. Giordano, 2016 WL 4411401, at *6 (E.D.N.Y. Aug. 18, 2016) (explaining that, in Salahuddin, "the Second Circuit rejected [*63] implicit orders as a basis for sanctions" under Rule 37). Rule 37(b) came into play only when the Court issued the September 8 order.24
23 Although framed as a request to extend the briefing schedule for the Rule 12(b)(2) motion, the September 6 letter-application complained about Panorama's deficient document production, stated that plaintiffs' counsel had attempted in good faith to obtain discovery without court action, and further stated that they planned to "meet and confer" with Panorama the next day.
24 Similarly, plaintiffs' argument that they are entitled to costs and attorneys' fees pursuant to Rule 37(a)(5)(A) -- which applies only to Rule 37(a) motions to compel -- is misplaced. See Pl. Mem. in Supp. filed Oct. 17, 2016, at 10-11. It is possible that plaintiffs' Rule 37(a)(5)(A) argument is simply error. The only opinion they cite in this section of their brief actually deals with sanctions under Rule 37(b)(2). See Kingsway Fin. Servs., Inc., 2008 WL 5336700, at *6 n.10 ("I need not consider whether sanctions would be proper under Rule 37(d), Rule 26(g)(2), (3) or 28 U.S.C. § 1927 because defendants have only moved for sanctions pursuant to Rule 37(b)(2).").
2. Panorama Failed to Comply with the September 8 Order
On September 8, 2016, I directed Panorama, both orally and in writing, to conduct a second search of its documents and to produce any items responsive to any of plaintiffs' document requests by September 19, 2016. See Tr. of Sept. 8, 2016 Conf. at 15:21-16:1; Sept. 8 Order ¶ 2. I emphasized repeatedly that Panorama was to conduct that search "keeping in mind the broad definition of documents" -- including emails and other electronic documents and data -- and "the generous definition of agreement" set forth in Fed. R. Civ. P. 34(a)(1)(A) and Local Civil Rule 26.3(c). Tr. of Sept. 8, 2016 Conf. at 17:2-8, 18:12-17; Sept. 8 Order ¶ 2. The September 8 Order was not limited to specific documents requests or document categories: instead, it did what plaintiffs incorrectly argue the July 22 Order did -- directed Panorama to produce all documents requested by plaintiffs.
As noted above, Panorama has never argued that it did not understand the September 8 Order or that it was unable to comply due to factors beyond its control. Nor could it. Its attorney Fraade assured the Court during the September 8 [*64] conference that he would "clarify with [his] client and make sure they provide the proper information." Tr. of Sept. 8, 2016 Conf. at 16:13-14. The next day, he wrote to Panorama explaining -- correctly -- that there was a "discrepancy" between its discovery responses to date and the evidence produced by plaintiffs, which required Panorama to conduct a second search, using "as broad an understanding of the term 'documents' as possible," including emails, online records, and other electronic documents. Fraade Ltr. dated Sept. 9, 2016 (Dkt. No. 289-4), at 2-3. Fraade specifically told his client to produce "any contact and emails that Panorama may have had with customers in the United States through the Website," and any documents, "including online records," related to the 1-800 number, which -- as counsel accurately noted -- "can only be used by customers in the United States or Canada." Id. at 3.
Yet Panorama, which had thus far produced only the one-page Certificate, never produced another page. Moreover, insofar as the record discloses, the client never responded to Fraade except in a September 18 email which did not state that Panorama conducted any further search, did not discuss any of the categories of [*65] documents described in the underlying request or in Fraade's September 9 letter, and did not deny that those documents existed or were in Panorama's possession, custody, or control. Fraade Ltr. filed June 12, 2017, Ex. 3, at 3. Instead, "David" complained that he did not "understand why we have to answer same questions more than once"; lashed out at a competitor that he believed to be behind this action, which he characterized as "[t]his mess" and "this ridicules [sic] lawsuit"; stated broadly that Panorama had "no presence in USA" and that its "[a]nswers are the same as before"; and instructed counsel to "[a]nswer all as you see fit," noting that "we will go until decision on our request to close the case." Id.
The following day, attorney Fraade informed plaintiffs, "Mr. Zeltser has again advised [Mintz Fraade] that Panorama has produced all responsive documents and agreements [and] further asserts that Panorama has no presence in the United States or New York." Fraade Ltr. dated Sept. 19, 2016, at 1. Similar representations were contained in the Fourth Zeltser Declaration, filed on October 24, 2016, which also stated that Panorama "made reasonable efforts" to comply with plaintiffs' document requests. Fourth [*66] Zeltzer Decl. ¶ 10. In short, counsel "saw fit" to invent a representation that his client never made -- that "Panorama has produced all responsive documents and agreements" -- and that no reasonable attorney in Fraade's position would have believed even if made. Fraade himself already had physical possession of responsive documents that should have been produced on Panorama's behalf,25 and his client necessarily possessed, or had access to, many more, none of which it ever produced.
25 For the purposes of Rule 34(a) document requests, "a party is deemed to 'control' documents that it has the legal right or the practical ability to obtain--even where those documents are in the physical possession of non-parties." Chevron Corp. v. Donziger, 296 F.R.D. 168, 190 (S.D.N.Y. 2013) (quoting Fed. R. Civ. P. 34(a)(1)). See also id. (quoting James W. Moore, 7 Federal Practice § 34.14[c], at 34-80 (3d ed. 2013) ("Documents in the possession of a party's attorney may be considered to be within the control of the party" for the purposes of a Rule 34 document request.")
Some of the responsive documents that Panorama and its counsel failed to produce have since come to light through other channels. For example, Panorama should have produced its Form LP-5, which listed its partners -- Broad Admin Ltd. and Alfa Admin Ltd. -- and was directly responsive to plaintiffs' requests for documents pertaining to Panorama's "corporate structure," its "ownership," and the identity of its "partners, officers and directors." See Doc. Req. Resp. at Nos. 1, 8, 15.26 Moreover, the Form LP-5 was publicly filed with Companies House in the United Kingdom and available online, as this Court has noted several times. See Joint Stock Company, 2017 WL 825482, at *2 n.4; Order dated May 9, 2017, at 4 n.4.
26 The Form LP-5 does not identify David Zeltser (or Zeltzer) as a partner. It therefore contradicts Panorama's assertion, in its document responses, that it "only has one  member, officer and director, David Zeltzer," Doc. Req. Resp. at No. 15, and its related assertion, in its interrogatory responses, that "David Zeltser is Panorama's only Partner and its Managing Director." Interrog. Ans. at No. 8.
Other responsive [*67] documents, which have never been produced, must nonetheless exist in Panorama's possession, custody, or control. For example, because Panorama has (or had) two partners, both of which were themselves fictional persons, it must have additional documents pertaining to its structure, its ownership, and the identity of its partners, officers, and directors. Even if there were no written partnership agreement between Broad Admin Ltd. and Alfa Admin Ltd. (which would strain credulity), there must be banking records, tax or accounting documents, emails, texts, or notes relating to the same subjects -- none of which could have been properly withheld pursuant to one or more of Panorama's Rule 34(b)(2)(C) objections, because Panorama made no such objections.
Panorama's Retainer Agreement with Mintz Fraade should also have been produced (or withheld as privileged and logged as such, had Panorama asserted any privilege objection). Assuming that it was executed by someone with authority to do so, the client signature on that document -- which is clearly not the signature submitted to the Court as that of David Zeltser (or Zeltzer) -- confirms that someone else also serves as a director, officer, or "agent" of Panorama [*68] and falls within several categories requested by plaintiffs. See, e.g., Doc. Req. at Nos. 1 (Panorama's corporate structure), 8 (ownership of Panorama), 15 (identity of Panorama's "partners, officers and directors"); see also id. at 2 (identity of "each of Panorama's agents, partners, limited partners, affiliates, subsidiaries, joint ventures, and associated entities registered or located in the United States"). In addition, any documents identifying the person who signed the Retainer Agreement, as well as any documents evidencing his or her role at Panorama, were responsive to plaintiffs' requests and therefore should have been produced as directed by the September 8 Order. See id. at Nos. 1, 8, 15.
The checks to Fraade, including those signed by Yevdavyev, should also have been produced or, in the alternative, withheld and logged as privileged. As noted above, Panorama denied possession of any "documents that mention, concern, relate to, and/or pertain" to (i) any "agreement or contract" made between Panorama and Yevdayev; (ii) any "agreement or contract" made between Panorama and "any New York resident or New York business"; (iii) any "relationship" between Panorama and the Avenue Z address; [*69] and (iv) any "relationship" between Panorama and Media Alliance. Doc. Req. Resp. at Nos. 9, 13, 18, 20. The withheld checks are responsive to each of these requests and no reasonable attorney in Fraade's position could have failed to understand that.
At a minimum, the checks evidence some "relationship" or "agreement" between defendant Panorama, on the one hand, and Yevdayev (a New York resident) and Media Alliance (a New York business at the Avenue Z Address), on the other hand. Whether Yevdayev and his Brooklyn-based vehicles paid Panorama's bills themselves (which would make no sense if, as Yevdayev testified, he had no ownership interest in Panorama) or whether they "advanced" the money and were later reimbursed (as attorney Fraade suggested, see Fraade Ltr. filed June 12, 2017, at 1), they could not have done so in the absence of an underlying agreement, even if informal, of which the checks themselves are evidence.27 Further, if Panorama reimbursed the Brooklyn entities, the checks, bank records, and other documents evidencing the repayment should also have been produced. It thus appears that although attorney Fraade communicated to his client the broad definitions of "document" [*70] and "agreement" described in the September 8 Order, see Fraade Ltr. dated Sept. 9, 2016, at 2-3, he did not apply those definitions to documents in his own physical possession.
27 We are told by Fraade, for example, that the March 12, 2017 check he received from Skyper Group LLC "was arranged prior to the end of February through Asaf." See Fraade Ltr. filed June 12, 2017, at 3.
Legal fees aside, it was clear from Yevdayev's testimony that there was a disclosable "relationship" and a series of "agreements" between Panorama and the Brooklyn business, as to which Panorama must have possessed, and should have produced, a variety of documents, many of them electronic. Yevdayev registered the domain name of Panorama's Website, "transferred" it to Panorama, used a Panorama email address, listed the Brooklyn street address for Media Alliance on the Website, purchased bulk subscriptions through a special dealer "link" on the Website, paid for those subscriptions via wire transfer, resold them to residents of New York and elsewhere in the United States, and obtained technical support from Panorama via internet and telephone. See Yevdayev Dep. Tr. at 48:22-49:7, 57:9-11, 58:7-14, 84:17-86:10, 103:8-17, 105:6-107:3. It cannot be that these transactions generated no written or electronic documents of any kind. An online domain name registration creates electronic documents. Wire transfers are [*71] evidenced by bank records. Panorama's servers must contain records concerning the creation and use of Yevdayev's "@panorama.tv" email account, as well as his "dealer" transactions. Someone placed the Avenue Z Address on the Website as an "authorized dealer," leaving an electronic trail. See id. at 103:7-24. In addition, Panorama must have records of the subscriptions it sold to New Yorkers via Yevdayev -- all of whom must have become Panorama customers, with their own login credentials, in order to watch Panorama's IPTV programming. Yet Panorama claimed to have no documents pertaining to any agreement or contract with any New York resident. Doc. Req. Resp. at No. 13.
Similarly, Panorama's claim to possess no documents pertaining to its "ownership, control, use or interest" in the Website, or the "1-800" telephone number displayed on the Website, for the reason these were "online registration[s]," Doc. Req. Resp. at Nos. 4-5, betrays a willful refusal to comply with its discovery obligations. At the September 8 conference, the Court made clear that which any competent attorney already knows: that the term "documents" includes electronic documents. See Tr. of Sept. 8, 2017 Conf. at 14:22-15:1; 15:21-16:1; Fed. R. Civ. P. 34(a)(1)(A); Local Civil Rule 26.3(a). Even if [*72] Panorama operates a paperless business, it cannot "own and control" a Website through which it "offers its services [and] products," "provides technical support to its customers worldwide," and advertises "online," see Interrog. Ans. at Nos. 9, 11, 17, 18, nor can it set up and maintain a 1-800 number for the use of customers in "the US and Canada," see Blaustein Ltr. dated August 30, 2016 at Ex. 9, without receiving and generating multiple electronic records, to which it has -- at a minimum -- electronic access, and which it was required to search pursuant to the September 8 Order for documents responsive to plaintiffs' requests.
3. Effect of Panorama's Noncompliance
This Court's March 2, 2017 opinion recommending denial of Panorama's Rule 12(b)(2) motion, followed by the District Court's March 30, 2017 order adopting that recommendation in full and denying the motion, resolved the issue of personal jurisdiction in plaintiffs' favor and thereby cabined the prejudice to plaintiffs arising from Panorama's noncompliance with the September 8 Order. However, Panorama's discovery misconduct imposed substantial costs on plaintiffs, including the costs of conducting third-party discovery and pursuing [*73] independent research in order to uncover the facts necessary to oppose the Rule 12(b)(2) motion and counter Panorama's unfounded jurisdictional assertions. Moreover, although plaintiffs succeeded in convincing the Court that it could exercise specific personal jurisdiction over Panorama, they did not obtain the ruling they sought, which was that Yevdayev was Panorama's agent in New York, subjecting it to general jurisdiction here. See Joint Stock Co. Channel One Russia, 2017 WL 825482, at *16. Had they known, during the motion cycle, who paid Panorama's legal bills, and who had arranged for its counsel to obtain the necessary declarations from the "UK office," Dowd Ltr. filed June 1, 2017, Ex. C, plaintiffs would likely have obtained a more robust result.
4. Severe Sanctions Are Warranted
Given the "clarity and simplicity," Grammar, 2016 WL 525478, at *3, of the September 8 Order and the oral directive that preceded it, as well as the clear evidence -- supplied by Fraade himself -- that he understood the breadth of Panorama's search and production obligation and communicated that understanding to his client, Fraade Ltr. dated Sept. 9, 2016, at 2 ("Documents include documents in any form," including "electronic format," "emails," and "online records"), and the "absence of any indication [*74] that [Panorama's] noncompliance [was] the result of factors beyond its control," Grammar, 2016 WL 525478, at *3, I do not hesitate to conclude that Panorama's noncompliance was willful. The remaining Razmilovic factors, 738 F.3d at 25, also support significant sanctions against Panorama and its former counsel.
Panorama's discovery noncompliance was sustained and consistent. Its failure to obey the September 8 Order was part of a broader pattern of intransigence and misrepresentation, beginning with attorney Fraade's first letter in this action, which argued that Panorama could not have been properly served at the Avenue Z address because Media Alliance was at most a distributor "unrelated" to Panorama. See Fraade Ltr. filed May 20, 2016, at 1. The pattern continued thereafter with Panorama's cavalier approach to plaintiffs' document demands and interrogatories, its submissions in support of its Rule 12(b)(2) motion and in opposition to plaintiffs' motions for sanctions and a preliminary injunction, its representations to the Court at the January 17, 2017 oral argument, and its complete failure -- even though its counsel recognized the "discrepancy" between Panorama's discovery responses and the evidence assembled by plaintiffs -- to supplement [*75] or correct its responses, as required by Fed. R. Civ. P. 26(e)(1), at any time prior to the resolution of the Rule 12(b)(2) motion. The denial of that motion mitigated but did not erase the prejudice to plaintiffs, who incurred substantial costs and delays as a result of Panorama's noncompliance with the September 8 Order. In addition, Panorama has still not revealed basic information -- such as who owns and manages it, as well as the precise nature of its relationship with Yevdayev and his Brooklyn businesses -- relevant not only to the now-concluded jurisdictional dispute, but also to other phases of the litigation, including the post-default phase now commencing. In any event, the courts, including the Supreme Court, "have consistently rejected the 'no harm, no foul' standard for evaluating discovery sanctions." S. New Eng. Tel. Co., 624 F.3d at 148.
For these reasons, and because none of the exceptions to Fed. R. Civ. P. 37(b)(2)(C) applies here, the Court must issue monetary sanctions. Accordingly, I will award plaintiffs their reasonable expenses, including reasonable attorney's fees, incurred between September 8, 2016 and March 30, 2017 as a result of Panorama's failure to comply with the September 8 Order. See Seena Int'l Inc., 2016 WL 2865350, at *11 ("Monetary sanctions are the norm, not the exception, when a party [*76] is required to engage in motion practice in order to obtain the discovery to which it is entitled."). The expense award, in an amount to be determined after plaintiffs have submitted the necessary evidence, will run jointly and severally against Panorama and its counsel.
I will also award a non-monetary sanction, pursuant to Rule 37(b)(2)(A)(i), by directing that the following facts be taken as established for all purposes of this action: Asaf Yevdayev is and was, at all relevant times, Panorama's agent and representative with respect to the conduct at issue in this action. Panorama may not (through its agent Yevdayev or otherwise) deny or contest the agency relationship that it improperly concealed from plaintiffs through its discovery misconduct. This sanction is "specifically related to the particular [claims] at issue in the order to provide discovery," Ins. Corp. of Ir. v. Compagnie Dex Bauxites De Guinee, 456 U.S. 694, 707 (1982), and addresses the potential prejudice to plaintiffs arising from Panorama's failure to produce documents pertaining to its relationship with Yevdayev. See Daval Steel Prods., 951 F.2d at 1365 ("When a party seeks to frustrate [the purpose of the discovery provisions of the Federal Rules of Civil Procedure] by disobeying discovery orders, thereby preventing disclosure of facts essential [*77] to an adjudication on the merits, severe sanctions are appropriate.")
I recognize that, as a practical matter, the non-monetary sanctions that plaintiffs requested -- including the sanction described above -- became moot either when the Court denied the Rule 12(b)(2) motion or when it granted plaintiffs' more recent motion for a default judgment against Panorama. Nonetheless, a non-monetary sanction is required to ensure that, even if Panorama vacates or overturns the default judgment, it "will not benefit from its own failure to comply" with the September 8 Order. S. New Eng. Tel. Co., 624 F.3d 123 at 149 (quoting Update Art, Inc., 843 F.2d 67 at 71). In the unlikely event that Panorama successfully contests the default judgment, either by motion or on appeal, it will remain bound by this order and will not be permitted to divorce itself from Yevdayev for purposes of this action.
III. THE RULE 11 MOTION
A. Legal Standards
"Rule 11 of the Federal Rules of Civil Procedure governs the conduct of attorneys in connection with their representations to the court, whether by signing, filing, submitting, or later advocating a pleading, written motion, or other paper." In re Sept. 11th Liab. Ins. Coverage Cases, 243 F.R.D. 114, 123 (S.D.N.Y. 2007) (citing Fed. R. Civ. P. 11(b)). Rule 11(b) provides that when an attorney or party makes written representations to the Court, he "certifies" that, "to the best of [his] knowledge, information, and belief," formed [*78] after an inquiry "reasonably under the circumstances:
(1) the representation is not made for any "improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the costs of litigation," Fed. R. Civ. P. 11(b)(1);
(2) any claims, defenses or legal contentions are warranted by existing law or by "non-frivolous" arguments that existing law should be extended, modified, reversed, or that new law should be established, Fed. R. Civ. P. 11(b)(2);
(3) any factual contentions have "evidentiary support" or are likely to have evidentiary support after a "reasonable opportunity for further investigation and discovery," Fed. R. Civ. P. 11(b)(3); and
(4) any denials of factual contentions are "warranted on the evidence" or, if specifically so identified, are "reasonably based on belief or a lack of information." Fed. R. Civ. P. 11(b)(4).
"A pleading, motion or other paper violates Rule 11 either when it 'has been interposed for any improper purpose, or where, after reasonable inquiry, a competent attorney could not form a reasonable belief that the pleading is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law.'" Kropelnicki v. Siegel, 290 F.3d 118, 131 (2d Cir. 2002) (quoting W.K. Webster & Co. v. Am. President Lines, Ltd., 32 F.3d 665, 670 (2d Cir.1994)); see also Advanced Video Techs. LLC v. HTC Corp., 2015 WL 7621483, at *10 (S.D.N.Y. Aug. 28, 2015) (quoting Wechsler v. Hunt Health Sys., Ltd., 216 F. Supp. 2d 347, 356 (S.D.N.Y. 2002)) ("A pleading, motion, or paper violates Rule 11 if it [*79] is frivolous, legally unreasonable, or factually without foundation, even though not signed in subjective bad faith."). "Rule 11 thus imposes on attorneys 'an affirmative duty to conduct a reasonable inquiry into the facts and the law.'" In re AOL, Inc. Repurchase Offer Litig., 2013 WL 6331802, at *3 (S.D.N.Y. Dec. 5, 2013) (quoting Bus. Guides, Inc. v. Chromatic Commc'ns Enters., Inc., 498 U.S. 533, 551 (1991)).
A violation of Rule 11 is "complete when the paper is filed." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395 (1990) (internal citation omitted). However, "a litigant's obligations with respect to the contents of papers are not measured solely as of the time they are filed with or submitted to the court, but include reaffirming to the court and advocating positions contained in those pleadings and motions after learning that they cease to have any merit." Fed. R. Civ. P. 11(b) advisory committee's note to 1993 amendment.
To determine whether Rule 11 has been violated, whether by parties or counsel, "courts apply 'an objective standard of reasonableness.'" New V & J Produce Corp. v. NYCCaterers Inc., 2014 WL 5026157, at *5 (S.D.N.Y. Sept. 29, 2014) (quoting Weinraub v. Glen Rauch Sec., Inc., 419 F. Supp. 2d 507, 512 (S.D.N.Y. 2005)). Because "[t]he general standard for finding a violation of Rule 11 is one of objective unreasonableness," courts "need not make a finding of subjective bad faith" before imposing Rule 11 sanctions. Lee v. Grand Sichuan E. (N.Y.) Inc., 2014 WL 199512, at *1 (S.D.N.Y. Jan. 17, 2014) (citing ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 579 F.3d 143, 150-51 (2d Cir.2009)). "Rule 11 thus forbids counsel from asserting an 'empty-head-but-pure-heart defense' as justification for frivolous legal or factual claims." In re Australia & N.Z. Banking Grp. Ltd. Secs. Litig., 712 F. Supp. 2d 255, 266 (S.D.N.Y. 2010) (emphasis added) (quoting In re Pennie & Edmonds LLP, 323 F.3d 86, 99 (2d Cir. 2003)). "Whether an attorney's [*80] conduct was unreasonable should be determined not with the benefit of hindsight, but rather on the basis of what was objectively reasonable to believe at the time the pleading, motion or other paper was submitted." Zagami v. Cellceutix Corp., 2017 WL 1180923, at *10 (S.D.N.Y. Mar. 29, 2017) (quoting In re Initial Pub. Offering Secs. Litig. v. Credit Suisse First Boston Corp., 399 F. Supp. 2d 369, 371 (S.D.N.Y. 2005)).
Attorneys are "entitled to rely" on their clients' factual representations, but only if they are "objectively reasonable." Jeffreys v. Rossi, 275 F. Supp. 2d 463, 480 (S.D.N.Y. 2003) (citing Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1329-30 (2d Cir.1995)), aff'd sub nom. Jeffreys v. City of N.Y., 426 F.3d 549 (2d Cir. 2005) "When the court is considering sanctions on a factual claim, 'the initial focus of the district court should be on whether an objectively reasonable evidentiary basis for the claim was demonstrated in pretrial proceedings or at trial.'" Edmonds v. Gilmore, 988 F. Supp. 948, 957 (E.D. Va. 1997) (quoting Calloway v. Marvel Entm't Grp., 854 F.2d 1452, 1470 (2d Cir.1988)), rev'd on other grounds, Pavelic & LeFlore v. Marvel Entm't Grp., 493 U.S. 120 (1989)). If the factual claim is "utterly lacking in support," Kiobel, 592 F.3d at 81 (quoting Storey v. Cello Holdings, LLC, 347 F.3d 370, 388 (2d Cir. 2003), the court must then:
. . . scrutinize the objective reasonableness of the attorney's pre-filing inquiry and the basis for the claim developed by that inquiry. If the inquiry was objectively reasonable under the circumstances and disclosed a reasonable factual basis for the claim, then sanctions are not appropriate. On the other hand, if the attorney either failed to make an objectively reasonable inquiry or pursued a claim for which no basis was disclosed by such an inquiry, then [*81] sanctions are appropriate.
Calloway, 854 F.2d at 1470. See also Kirsh v. Scott, 1994 WL 132383, at *1-5 (S.D.N.Y. Apr. 11, 1994) (imposing Rule 11 sanctions on counsel where he had no objectively reasonable evidentiary basis on which to claim that his client had suffered a "major heart attack" and where the only pre-filing inquiry he conducted "was an interview with his client"). In considering whether the pre-filing inquiry was objectively reasonable, the court may consider whether the attorney was able to describe his inquiry in an affidavit. See Calloway, 854 F.2d at 1471 (fact that attorney failed to submit any affidavit concerning his pre-filing inquiry "strongly suggests that no inquiry was made"). Moreover, although a reasonable pre-filing inquiry can protect an attorney from Rule 11 sanctions for filing a claim or motion that later proves groundless, counsel may still be sanctioned if he "subsequently restate[s] the claim after learning that it was groundless." Id. at 1472.
If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, "the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation." Fed. R. Civ. P. 11(c)(1). However, sanctions are never mandatory. See, e.g., Ipcon Collections LLC v. Costco Wholesale Corp., 698 F.3d 58, 63 (2d Cir. 2012) (quoting Perez v. Posse Comitatus, 373 F.3d 321, 325 (2d Cir. 2004)) ("[E]ven when a district court finds a violation of [*82] Rule 11, '[t]he decision whether to impose a sanction for a Rule 11(b) violation is . . . committed to the district court's discretion.'").
The advisory committee's note to the 1993 amendment to Rule 11 sets forth factors that a court may consider when deciding whether or what sanctions to impose. Those factors include: (1) "[w]hether the improper conduct was willful, or negligent"; (2) "whether it was part of a pattern or activity, or an isolated event"; (3) "whether it infected the entire pleading, or only one particular count or defense"; (4) "whether the person has engaged in similar conduct in other litigation"; (5) "whether it was intended to injure"; (6) "what effect it had on the litigation process in time or expense"; (7) "whether the responsible person is trained in the law"; (7) "what amount, given the financial resources of the responsible person, is needed to deter that person from repetition in the same case"; and (8) "what amount is needed to deter similar activity by other litigants." Holmes v. Allstate Corp., 2012 WL 627238, at *15 (S.D.N.Y. Jan. 27, 2012) (quoting Fed. R. Civ. P. 11(b) advisory committee's note to 1993 amendment), report and recommendation adopted, 2012 WL 626262 (S.D.N.Y. Feb. 27, 2012).
The principal objective of Rule 11 sanctions "is not compensation of the victimized party but rather the deterrence of baseless [filings] [*83] and the curbing of abuses." Colliton v. Morgan, 2009 WL 874043, at *1 (S.D.N.Y. Mar. 31, 2009) (quoting Caisse Nationale de Credit Agricole-CNCA v. Valcorp, Inc., 28 F.3d 259, 266 (2d Cir. 1994)). Rule 11 "is not a fee-shifting mechanism and does not create an entitlement to attorney's fees." Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cty. of Albany, 369 F.3d 91, 97-98 (2d Cir. 2004) (internal quotations and citation omitted). Moreover, as the Supreme Court has cautioned, Rule 11 "'must be read in light of concerns that it will . . . chill vigorous advocacy.'" Lee v. Grand Sichuan E. (N.Y.) Inc., 2014 WL 199512, at *1 (S.D.N.Y. Jan. 17, 2014) (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990)). Accordingly, the Second Circuit "has instructed courts to 'resolve all doubts in favor of' the party against whom sanctions are sought." GemShares, LLC v. Kinney, 2017 WL 1092051, at *1 (S.D.N.Y. Mar. 15, 2017) (quoting Rodick v. City of Schenectady, 1 F.3d 1341, 1350 (2d Cir. 1993)).
Sanctions under Rule 11 "must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated," and can include "nonmonetary directives," monetary penalties paid to the court, or "if imposed on motion and warranted for effective deterrence," an award of part or all of the reasonable attorney's fees and expenses "directly resulting from the violation." Fed. R. Civ. P. 11(c)(4). Sanctions can also include an order precluding certain evidence or dismissal of the action. Abdelhamid v. Altria Grp., Inc., 515 F. Supp. 2d 384, 392 (S.D.N.Y. 2007) (citing Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse § 16(b)(3) (3d ed. 2000)). The court has "'broad discretion' to 'tailor appropriate and reasonable sanctions'" under Rule 11, and to determine the amount of any fee award. Lawrence v. Wilder Richman Sec. Corp., 417 F. App'x 11, 15 (2d Cir. 2010) (quoting O'Malley v. N.Y.C. Transit Auth., 896 F.2d 704, 709 (2d Cir. 1990)). In [*84] general, however, any award of fees to another party "should not exceed the expenses and attorneys' fees for the services directly and unavoidably caused by the violation of the certification requirement." Fed. R. Civ. P. 11(b) advisory committee's note to 1993 amendment.
Rule 11 sanctions should be imposed "on the persons--whether attorneys, law firms, or parties--who have violated the rule or who may be determined to be responsible for the violation. The person signing, filing, submitting, or advocating a document has a nondelegable responsibility to the court, and in most situations is the person to be sanctioned for a violation." Fed. R. Civ. P. 11(b) advisory committee's note to 1993 amendment. "Absent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee." Fed. R. Civ. P. 11(c)(1) (emphasis added). "[A]n attorney's withdrawal from a case does not prevent the imposition of Rule 11 sanctions for papers filed prior to the withdrawal." Dangerfield v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 2003 WL 22227956, at *7 (S.D.N.Y. Sept. 26, 2003).
Plaintiffs argue that Rule 11 sanctions are warranted against Panorama and its counsel for filing and refusing to withdraw its Rule 12(b)(2) motion, which advanced "certain objectively unreasonable factual contentions and unreasonably denied others relating to [*85] its activities in New York." Pl. Mem. in Supp. filed Oct. 28, 2016, at 4. Plaintiffs argue further that attorney Fraade failed in his duty to independently assess the merits of the factual assertions in the Rule 12(b)(2) motion. Id. at 10-11. I agree.
1. Panorama Advanced False and Unsupported Factual Contentions in Support of the Rule 12(b)(2) Motion
Panorama argued in its Rule 12(b)(2) motion that it lacked "sufficient contact" with New York (and with the United States generally) to be subject to general or specific personal jurisdiction in this District. Panorama Mem. in Supp. filed Aug. 25, 2016, at 2; Fraade Aff. filed Aug. 25, 2016, at ¶¶ 9-13. In support of that argument, Panorama advanced specific factual contentions that lacked an "objectively reasonable evidentiary basis," Calloway, 854 F.2d at 1470, and that Panorama and its counsel knew were not "likely" to "have evidentiary support after a reasonable opportunity for further investigation," see Fed. R. Civ. P. 11(b)(3), because they already knew those contentions to be false. Similarly, Panorama and its attorney denied factual contentions where they knew those contentions to be true or knew that that their denials were neither "warranted on the evidence" nor "reasonably based on belief or a lack of information." Fed. R. Civ. P. 11(b)(4). Moreover, [*86] if and to the extent counsel failed to appreciate the lack of any objectively reasonable basis for his client's factual assertions and denials when he filed the Rule 12(b)(2) motion, he repeatedly "restate[d] the claim after learning that it was groundless." Calloway, 854 F.2d at 1472.
In its Rule 12(b)(2) motion, Panorama and attorney Fraade repeated the baseless factual assertions they made during jurisdictional discovery: that Panorama did not transact business in New York, and that it had no agent or "representative" in New York, no "relationship" with Yevdayev except as a "reseller," and no "association" with the Avenue Z address. See Third Zeltzer Decl. ¶¶ 8-10; Fraade Aff. filed Aug. 25, 2016, at ¶¶ 10-12; Panorama Mem. in Supp. filed Aug. 25, 2016, at 2, 3. They made those assertions and denials despite knowing or learning facts to the contrary (which plaintiffs subsequently elicited in their protracted efforts to obtain jurisdictional discovery). For example, both Panorama and Fraade knew, before filing the Rule 12(b)(2) motion, that Yevdayev and Media Alliance, not Panorama, paid Fraade's retainer; that Yevdayev spoke to the "UK office" on June 9, 2016, to arrange for Fraade to obtain a signature on a declaration that "need[ed] to be signed in the UK"; and [*87] that Yevdayev used an "@mypanorama.tv" email address and listed Panorama's contact information, including its 1-800 number for the "USA and Canada," as part of his email signature. See Dowd Ltr. filed June 1, 2017, at Exs. B, C.28
28 Further, Fraade must have known that Yevdayev was lying when he testified in his October 20, 2016 deposition that his only communications with anyone at Panorama were with "Slava" and "Marina," whom he contacted through the Website's "ticket system" to discuss "technical question[s]," most recently "at the beginning of the year," meaning 2016. Yevdayev Dep. Tr. at 83:4-90:6. This testimony is sharply inconsistent with Yevdayev's June 9, 2016 email to Fraade himself, stating "I spoke to the UK office . . . they assured me that you will have it early am." Dowd Ltr. filed June 1, 2017, Ex. 3. See also Fraade Ltr. filed June 12, 2017, at 1 ("With respect to the initial payment of our $5,000 retainer, [Yevdayev] advised me that he would be advancing payment on Panorama's behalf.").
Fraade personally knew these facts when he submitted Panorama's Rule 12(b)(2) motion papers on August 25, 2016, including his own attestation, under penalty of perjury, that Panorama "has not had sufficient contact with the United States or the State of New York, which would subject it to personal jurisdiction by this Court," Fraade Aff. filed Aug. 25, 2016, at ¶¶ 9-13. Moreover, if Fraade visited the Website -- a fairly basic step, under the circumstances, and surely part of any objectively reasonable pre-filing inquiry -- he would also have known, before he filed the Rule 12(b)(2) motion, that Panorama listed the Avenue Z Address as an "Authorized Dealer" and provided a 1-800 number for customers "in the US and Canada." Blaustein Ltr. dated Aug. 30, 2016, Ex. 9. Whether counsel did visit the Website before filing the Rule 12(b)(2) motion is unclear. Attorney Fraade, like the attorney in Calloway, failed to submit any affidavit concerning his pre-filing inquiry, which "strongly suggests that [*88] no inquiry was made." 854 F.2d at 1471.
In addition, Panorama knew (and Fraade learned prior to the Yevdayev deposition) that Yevdayev purchased and registered the Website's domain name on December 16, 2010, three years before Panorama was formed in the United Kingdom, and remained the registrant and contact for all purposes. Panorama also knew (and Fraade learned at the Yevdayev deposition, if not before) that it had engaged in substantial and ongoing commercial transactions with Yevdayev for many years, including bulk sales of subscriptions to its allegedly infringing IPTV programming for resale in New York and elsewhere; that it received payment for these subscriptions by wire transfer from Yevdayev in New York; and that it provided Yevdayev with technical support. Yet on November 2, 2016 -- after Yevdayev testified -- Fraade filed Panorama's reply memorandum in support of its Rule 12(b)(2) motion, asserting that Panorama "undisputedly" did not have any "authorized representatives in New York." Panorama Reply Mem. filed Nov. 2, 2016, at 2.
Fraade now concedes that he "understood . . . that Media Alliance and [Yevdayev] had a relationship with Panorama," and asserts that he "never hid" those facts. Fraade Ltr. filed [*89] June 12, 2017, at 2. In fact, Panorama consistently denied exactly that, first in its responses to plaintiffs' document demands, see Doc. Req. Resp. at Nos. 9, 20 (denying that any documents pertaining to Yevdayev or Media Alliance existed in "possession or custody" of Panorama), and interrogatories, see Interrog. Ans. at No. 4 (Panorama does not have "any relationship with any person or entity located or doing business at [the Avenue Z Address]"); then in its moving papers, see, e.g., Third Zeltzer Decl. ¶ 9 (denying that there was any office "associated" with Panorama at the Avenue Z address), its reply papers, see, e.g., Panorama Reply Mem. filed Nov. 2, 2016, at 4 ("Panorama has never wavered in its assertion that it has no relationship with the United States"), and its submissions in opposition to the pending sanctions motions, see, e.g., Fraade Decl. filed Nov. 14, 2016, ¶ 22 ("the evidence does not support" the contention that Panorama, itself, was conducting business at the Avenue Z address and "there has been no testimony or documents produced which demonstrate that Mr. Yevdayev and Panorama have a relationship sufficient for personal jurisdiction.").
Applying the "objective [*90] unreasonableness" standard, see ATSI Commc'ns, Inc., 579 F.3d at 150, I conclude that Panorama and attorney Fraade violated Rules 11(b)(3) and (4) by signing, filing and submitting papers in support of the Rule 12(b)(2) motion without any objectively reasonable evidentiary basis for their key factual allegations. It is equally clear that attorney Fraade either failed to make an objectively reasonable inquiry or pursued a claim for which no basis was disclosed by such an inquiry. The Rule 12(b)(2) motion was, accordingly, "factually without foundation." Advanced Video Techs. LLC, 2015 WL 7621483, at *10.29 Moreover, Panorama and its attorney continued to advance those baseless factual contentions long after they were discredited. See Fed. R. Civ. P. 11(b); Jeffreys, 275 F. Supp. 2d at 482 (denying Rule 11 motion based on record at relevant time but noting that, since "new evidence has come to light that renders [the client's] story implausible as a matter of law," counsel and their client "would be at serious risk of sanctions" were they to "continue to litigate this case").
29 I do not conclude that Panorama or attorney Fraade presented the Rule 12(b)(2) motion for an "improper purpose" in violation of Rule 11(b)(1), or advanced "frivolous" legal arguments therein in violations of Rule 11(b)(2). If Panorama's factual contentions had been supported or supportable by evidence, its legal arguments might have had some "chance of success." Fishoff v. Coty Inc., 634 F.3d 657, 654 (2d Cir. 2011) (quoting Morley v. Ciba-Geigy Corp., 66 F.3d 21, 25 (2d Cir.1995)).
2. Sanctions Are Warranted Against Panorama and Fraade
Applying the factors set forth in the advisory committee's notes to the 1993 amendment, I find that Rule 11 sanctions against Panorama and its counsel are appropriate. See Holmes, 2012 WL 627238, at *16-17 (applying those factors to conclude that Rule 11 sanctions were warranted against plaintiffs' [*91] counsel despite the "absence of a showing of bad faith"); see also Fed. R. Civ. P. 11(b) advisory committee's note to 1993 amendment (sanctions should be imposed "on the persons -- whether attorneys, law firms, or parties--who have violated the rule or who may be determined to be responsible for the violation.") Particularly in light of Panorama's prior discovery misconduct, discussed above, I find without difficulty that its assertion of baseless factual contentions in connection with its Rule 12(b)(2) motion was both willful and part of a pattern. Moreover, those baseless factual contentions and denials "infected the entire" motion and had a substantial effect on this litigation in time and expense. See Id.
The Court does not know whether David Zeltser (or Zeltzer), Asaf Yevdayev, or any other representative of Panorama who was "responsible" for its motion papers is "trained in the law." Fed. R. Civ. P. 11(b) advisory committee's note to 1993 amendment. Panorama's New York counsel is so trained, but nonetheless repeatedly presented to this Court, sometimes over his own signature, factual assertions he knew to be false, as well as factual assertions as to which no "competent attorney could [have] form[ed] a reasonable belief" that they were grounded [*92] in fact. Kropelnicki, 290 F.3d at 131.
Moreover, throughout this case Fraade has made it clear that he functioned as a passive conduit of information from his client to the Court (and to plaintiffs). See, e.g., Fraade Ltr. filed May 26, 2016 (Mintz Fraade has been "advised by our client . . . that it has no offices in the United States, and no employees in the United States [and t]here is no one in the United States who is authorized to accept service"); Fraade Ltr. dated Sept. 1, 2016 (Dkt. No. 289-3) ("We are not agreeing to withdraw the [12(b)(2)] motion with respect to there being no personal jurisdiction in New York based on your prior advice as to the lack of contacts of [Panorama] in the US."); Fraade Ltr. dated Sept. 19, 2016, at 1 ("Mr. Zeltser has again advised us that Panorama has produced all responsive documents and agreements. Mr. Zeltser further asserts that Panorama has no presence in the United States or New York."); Fraade Decl. filed Nov. 14, 2016, ¶ 14 (Fraade wrote his September 19, 2016 letter "[p]ursuant to our client's assurances"); Panorama Opp'n Mem. filed Nov. 14, 2016, at 2 (counsel "repeatedly advised its client of its discovery obligations and the consequences of noncompliance with the Court's [*93] jurisdictional orders [but] Panorama has advised its counsel on multiple occasions that it has conducted a reasonable search and has submitted all responsive documents");30 Fraade Ltr. filed June 12, 2017 ("Panorama repeatedly stated and confirmed that it had no presence in the US. Panorama consistently took the position that it had no offices, personnel or operations in the US. In an email dated September 18, 2016 . . . Panorama stated twice that 'We have no presence in USA.'").
30 There is no indication that Panorama ever conducted reasonable search of its documents, and communications between Fraade and Panorama following the September 8 Order strongly suggest that Panorama never conducted a second search at all. The only response from Panorama to Fraade's September 9, 2016 communication explaining Panorama's obligations under the September 8 Order is the email from "David" dated September 18, 2016 at 11:32 pm (i.e. one day before the deadline for Panorama's document production under the September 8 Order) states, "I reviewed your last few emails and do not understand why we have to answer same questions more than once . . . We have no presence in usa, and will not continue answering same questions more than once. Answer all as you see fit, we will go until decision on our request to close the case." Fraade Ltr. filed June 12, 2017, Ex. 3.
Attorney Fraade cannot evade sanctions on the ground that he merely relied on his client's representations. Even at the outset of the motion cycle, those representations were not "objectively reasonable" in light of what Fraade already knew about Panorama's relationship with Yevdayev and Media Alliance. See Jeffreys, 275 F. Supp. 2d at 480. Moreover, there is no evidence that Fraade conducted any sort of pre-filing inquiry, even to the extent of looking at the Website. If he had, he would have discovered additional facts undercutting the representations he presented to the Court. It is also noteworthy that Fraade did not move for leave to withdraw until after the Rule 12(b)(2) motion was decided, at which point he informed the Court -- for the first time [*94] -- that the evidence produced by plaintiffs "called into question Panorama's responses." Fraade Decl. filed Apr. 4, 2017, ¶ 5. Fraade was given that evidence prior to September 8, 2016, id., and had personal knowledge of even more damning evidence -- such as Yevdayev's role in orchestrating and financing Panorama's legal representation -- of which plaintiffs themselves were still unaware. Yet Fraade refused to withdraw the Rule 12(b)(2) motion, kept the evidence secret, and continued to advocate for the dismissal of all claims against Panorama on the ground that it had no representatives or agents in New York, did no business here, and had no association with the Avenue Z Address.
Accordingly, I recommend that the District Judge grant plaintiffs' motion for Rule 11 sanctions and order Panorama, Fraade, and Mintz Fraade, jointly and severally, to pay the reasonable expenses, including attorneys' fees and out-of-pocket costs, incurred by plaintiffs in opposing Panorama's motion to dismiss for lack of personal jurisdiction, including their expenses incurred in (i) briefing and arguing the Rule 12(b)(2) motion; (ii) seeking and obtaining jurisdictional discovery as to Panorama, formally or informally, from August 25, 2016 [*95] through March 30, 2017 (except to the extent that such expenses are reimbursed in accordance with my Rule 37(b) sanctions order); and (iii) preparing and pursuing their Rule 11 motion. I further recommend that, as an additional sanction pursuant to Rule 11(c)(4), the District Judge direct that the following facts be taken as established for purposes of this action even if Panorama should vacate or overturn the default judgment against it: Asaf Yevdayev is and was, at all relevant times, Panorama's agent and representative with respect to the conduct at issue in this action.
ORDER AS TO DISCOVERY SANCTIONS
It is hereby ORDERED that plaintiffs' motion for sanctions pursuant to Fed. R. Civ. P. 37(b) (Dkt. No. 127) is GRANTED. Panorama, attorney Fraade, and Minz Fraade, jointly and severally, must pay the reasonable expenses, including attorneys' fees and out-of-pocket costs, caused by Panorama's failure to obey this Court's discovery orders issued orally and in writing on September 8, 2016, including plaintiffs' expenses incurred in (i) seeking and obtaining additional jurisdictional discovery as to Panorama, formally or informally, from September 8, 2016 through March 30, 2017; and (ii) preparing and pursuing their Rule 37(b) motion.
It is further [*96] ORDERED that plaintiffs shall file one or more declarations setting forth those expenses no later than August 1, 2017, and shall attach the relevant time and expense records, including attorney time records and invoices for out of pocket expenses. Panorama and its counsel may file responding papers, limited to the amount of fees and costs to be awarded, no later than August 15, 2017. There shall be no reply.
It is further ORDERED that, as an additional sanction pursuant to Rule 37(b)(2)(A)(i), the following facts shall be taken as established for purposes of this action, even if Panorama should succeed in vacating or overturning the default judgment against it: Asaf Yevdayev is and was, at all relevant times, Panorama's agent and representative with respect to the conduct at issue in this action. Panorama may not (through its agent Yevdayev or otherwise) deny or contest the agency relationship that it improperly concealed from plaintiffs through its discovery misconduct.
RECOMMENDATION AS TO RULE 11 SANCTIONS
I hereby respectfully RECOMMEND that the Honorable George B. Daniels, United States District Judge, GRANT plaintiffs' motion for sanctions pursuant to Fed. R. Civ. P. 11 (Dkt. No. 134), and order Panorama, Fraade, and Mintz [*97] Fraade, jointly and severally, to pay the reasonable expenses, including attorneys' fees and out-of-pocket costs, incurred by plaintiffs in opposing Panorama's motion to dismiss for lack of personal jurisdiction, including: (i) plaintiffs' expenses incurred in briefing and arguing the Rule 12(b)(2) motion; (ii) their expenses incurred in seeking and obtaining jurisdictional discovery as to Panorama, formally or informally, from August 25, 2016 through March 30, 3017 (except to the extent that such expenses have previously been reimbursed in accordance with my Rule 37(b) sanctions order); and (iii) their expenses incurred in preparing and pursuing their Rule 11 motion. I further RECOMMEND that, as an additional sanction pursuant to Rule 11(c)(4), the District Judge direct that the following facts be taken as established for purposes of this action, even if Panorama should succeed in vacating or overturning the default judgment against it: Asaf Yevdayev is and was, at all relevant times, Panorama's agent and representative with respect to the conduct at issue in this action. Panorama should not be permitted (through its agent Yevdayev or otherwise) to deny or contest the agency relationship that it improperly concealed from plaintiffs [*98] in its motion papers.
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