A recent decision from the Manhattan Commercial Division reminds us of the ramifications of non-compliance with discovery obligations. Although in my experience courts (especially the Commercial Division) typically do not like to get involved in discovery disputes (see, e.g., ComDiv Rule 14 requiring parties to meet and confer to resolve all discovery disputes); however, they will step in if a party is consistently refusing to participate in discovery and is delinquent in his or her discovery obligations, including by wielding the drastic remedy of striking a party’s pleadings.

In Tsung Tsin Association, Inc., v Tian Xiang Zhu et al., plaintiff Tsung Tsin Association, Inc., a New York not-for-profit corporation, commenced an action against its former officers and directors alleging, among other things, that they (i) engaged in a fraudulent scheme in which they purchased in bulk cemetery plots in the name of the corporation, illegally sold the plots to third parties, and illegally kept the sales proceeds for themselves; (ii) caused the corporation to enter below-market leases in exchange for bribes; and (iii) caused the corporation to re-finance its mortgages on its properties in excess of the existing debt and directed the excess loan proceeds to themselves. Plaintiff asserted causes of action for (i) an accounting; (ii) corporate waste and injury to property; and (iii) violations under the New York Not-for-Profit Corporation Law.  

Defendant Tian Xiang Zhu, a director and co-chair of the board, allegedly possessed critical documents concerning Plaintiff’s claims but routinely served late, deficient, and incomplete responses to Plaintiff’s demands. After months of delay, Manhattan Commercial Division Justice Jennifer G. Schecter ordered Zhu to meet and confer with plaintiff’s counsel regarding his discovery responses and to address any unresolved issues in a joint letter. After Zhu failed to comply, Justice Schecter demanded an explanation from Zhu’s counsel, who once again failed to comply with her directive. Having seen enough from Zhu and his counsel, Justice Schecter granted Plaintiff leave to file a motion to address Zhu’s misconduct, and Plaintiff filed a motion to strike Zhu’s answer.

In opposition to the motion, Zhu’s counsel stated that the motion was moot because Zhu had served updated discovery responses. Justice Schecter disagreed, finding that the updated discovery responses were insufficient, and issued an interim order, which recounted Zhu’s and his counsel’s repeated violations with court directives:

“Enough is Enough. No reasonable attorney should think this is an acceptable way to practice in the Commercial Division. The court cannot tolerate counsel that refuses to play by the rules and consequently wastes the resources of the parties and the court trying to compel compliance with the most basic litigation obligations”

Justice Schecter admonished Zhu’s counsel with what had to be done to comply with his client’s discovery obligations – i.e., serving supplemental discovery responses, producing all responsive documents, filing a detailed Jackson affidavit, etc. – but then conditioned her directives as follows:

“Given Zhu’s history of disregarding court orders, anything short of complete compliance with this order will result in the striking of his pleadings. For the avoidance of doubt, this is a conditional order–and counsel should explain to his client what that means.”  

And can you guess what happened next? That’s right, Zhu failed to comply. As a result, Justice Schecter not only made good on her promise to strike Zhu’s answer but also granted Plaintiff permission to file a motion for a default judgment as against Zhu based on his “willful and contumacious” conduct, reasoning that because Zhu and his counsel “ignored and violated virtually every one of the court’s discovery directives,” the court was left with “no confidence that a lesser sanction will impel compliance.”

In my experience, rare is the occasion on which a court will impose the harsh result of striking a party’s pleading. But as exemplified in Tsung Tsin Association, Inc., v Tian Xiang Zhu et al., when a party is given multiple opportunities to comply and even warned of the consequences of non-compliance, the court—in this case the Commercial Division—will bring down the remedial hammer.  Again, Justice Schecter: “[T]his order will make clear that further similar conduct will have serious consequences.” ComDiv practitioners, please be guided accordingly. 

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