What is the ability of a litigant in the Commercial Division to use evidence located in the public records outside of the United States to re-open a New York court judgment?  

On December 7, 2016, in Alexander Gliklad v. Michael Cherney, No. 602335/2009, 2016 BL 411934 (N.Y. Sup. Dec. 7, 2016 ), Justice Anil Singh of the Commercial Division denied the defendant’s motion to vacate a judgment pursuant to CPLR 5015(a)(2) on the basis of purportedly previously unavailable evidence obtained from a government archive of bank records in Russia.  In so holding, Justice Singh articulated a clear rule that evidence that was in the public record – albeit in a foreign country – at the time of the discovery phase of a case does not constitute “newly discovered” evidence in the meaning of CPLR 5015(a)(2).  Gliklad is also a notable decision because the judgment that the court refused to modify was the product of the drastic measure -- imposed by a prior Commercial Division justice -- of striking the defendant’s affirmative defense of lack of consideration on the basis of the defendant’s “willful and contumacious” behavior” in refusing to produce relevant discovery.[1]

1. Factual and Procedural Background

Justice Singh’s December 7, 2016, decision is the latest development in a long-running litigation between two Russian businessmen that was commenced in the Commercial Division in August 2009.  In that litigation, the plaintiff sought to enforce a $270 million promissory note signed by the defendant in purported consideration of the plaintiff’s transfer to the defendant of a 26.37% interest in the Russian coal company Kuzbass Coal.  The litigation has been aggressively prosecuted by both sides, with the plaintiff alleging that the defendant has connections to the Russian mafia (which the defendant has denied).  In his answer to the plaintiff’s complaint, the defendant interposed a number of counterclaims and affirmative defenses.  As relevant here, the defendant’s ninth affirmative defense pled that the promissory note was unenforceable for lack of consideration.  The defendant contended that he already owned the shares in Kuzbass Coal purportedly transferred to him by the plaintiff at the date of the note, and that the note therefore lacked consideration.

After the defendant failed to produce any documentation in support of his lack-of-consideration affirmative defense, the original Commercial Division justice assigned to the case, Justice Melvin Schweitzer, ordered that the defendant be deposed to explain where any documentation might be found or why it was unavailable.  When the defendant still could not produce or identify any supporting documents, Justice Schweitzer struck the affirmative defense, holding that defendant’s failure to furnish discovery on the issue was “willful and contumacious.”  The First Department affirmed Justice Schweitzer’s ruling in 2014.  Gliklad v. Cherney, 113 A.D.3d 505, 506 (1st Dep’t 2014).  Justice Schweitzer then granted the plaintiff summary judgment on his breach of contract claim, and entered a final judgment against the defendant on November 4, 2015.

The case was subsequently assigned to Justice Singh in the Commercial Division, and the defendant moved before Justice Singh to vacate the judgment pursuant to CPLR §§ 5015(a)(2) & 5015(a)(3), on the grounds that the defendant had identified “newly discovered” evidence supporting his lack-of-consideration affirmative defense, and that the plaintiff had committed misconduct in concealing the evidence from the defendant.  The defendant contended that, after the judgment had been entered, he discovered bank records from a now-defunct Russian bank located in a Russian government archive in Siberia.  The defendant argued that these records revealed that the plaintiff had misrepresented the time period when he purchased the Kuzbass Coal shares that he sold to the defendant in consideration for the promissory note.  As a result, the defendant argued that the judgment should be vacated pursuant to CPLR § 5015(a)(2) because the plaintiff never purchased the shares that he purported to sell.  The defendant also argued that the newly discovered evidence reveals that the plaintiff had made misrepresentations to the court about purchasing the Kuzbass Coal shares.

2. Justice Singh’s Decision

Justice Singh denied the defendant’s motion to vacate the judgment.  First, the court noted that the defendant had a long history of litigation misconduct.  In particular, the court pointed to an earlier instance in which the defendant had submitted purported “newly discovered” to delay the execution of the same judgment in 2014.  That evidence consisted of a document in which the plaintiff purportedly transferred his interest in the Kuzbass Coal shares to his daughters.  Justice Schweitzer denied the effort to disturb the judgment on the basis of that document, concluding its authenticity was “highly dubious.”[2]  Justice Singh stated that it would assess the defendant’s new purported evidence against the “stark backdrop” of this prior conduct.[3]

Justice Singh then turned to the question of whether the bank records at issue fell within the definition of “newly discovered” evidence pursuant to CPLR § 5015(a)(2), justifying re-opening the litigation.  He determined that they did not.  The court noted that the statute and the relevant caselaw require newly discovered evidence to be that which could not reasonably have been discovered prior to trial.  Justice Singh then concluded that “[e]vidence which is a matter of public record is not, in general, deemed new evidence which could not have been discovered with due diligence before trial.”[4]  The court rejected the defendant’s argument that he could not have discovered the evidence earlier because the records were located in a Russian bank that was closed in 2002, and had been stored in an archive in Siberia for over a decade.  The Commercial Division concluded that these facts do not override the presumption that public records are accessible to litigants during the discovery phase. 

Justice Singh then denied the defendant’s motion to vacate the judgment on the basis of the plaintiff’s asserted misconduct in allegedly misrepresenting facts concerning his purchase of the Kuzbass Coal shares, as purportedly proved by the newly discovered bank records.  Justice Singh rejected as inapposite cases cited by the defendant in which the courts had vacated judgments on the basis of litigation misconduct.  The court reasoned that those cases were distinguishable because they involved “unambiguous, direct evidence of intentional fraud, misconduct or misrepresentation” whereas the misconduct alleged by the defendant here rested on “facts inferred indirectly from bank records,” which were ultimately “unconvincing.”[5]

3. Conclusion

Gliklad provides the Commercial Division litigant with guidance in three areas.  First, Justice Singh’s opinion underscores the importance of maintaining credibility with the Court throughout protracted litigation even if it is heated.  The court’s rejection of the plaintiff’s newly discovered evidence rested, in part, on the court’s assessment that the plaintiff lacked credibility in light of prior misconduct in the lawsuit.  Second, Gliklad indicates that Commercial Division judges are willing to employ the drastic remedy of striking of affirmative defenses where a litigant repeatedly refuses to comply with discovery demands.  Finally, Gliklad highlights the uphill battle that litigants confront in attempting to re-open litigation after a judgment is rendered on the basis of evidence that is obtained after the close of discovery – particularly where the evidence is in the public record and even where that record is in the files of a foreign government agency.