Breach of fiduciary duty; accounting; legal malpractice; attorney’s fees; spoliation of evidence.
By Kelly Moynihan┃Managing Editor
Plaintiffs brought a suit against defendants, both co-owners of a real estate corporation, alleging breach of fiduciary duty and seeking an accounting after defendants allegedly failed to account for corporation funds and allowed a corporation-owned premises to fall into despair. Defendants asserted derivative counterclaims against each plaintiff as well as plaintiffs’ counsel (“counsel”). Defendants’ motion sought to: (1) compel counsel to produce its malpractice insurance policy under CPLR § 3101(f); (2) sanction plaintiffs and counsel for violations of 22 NYCRR § 221; (3) compel plaintiffs to answer deposition questions and produce certain documents; and (4) sanction plaintiffs for spoliation of evidence. The court held counsel must produce its malpractice insurance pursuant to CPLR 3101(f), despite an alleged agreement that plaintiffs would indemnify counsel, as the policy would qualify as “excess coverage,” to which the rule explicitly applies. The court found counsel’s instructions to plaintiffs not to answer deposition questions to be improper, pursuant to 22 NYCRR § 221, which requires a deponent to answer all deposition questions except to (1) preserve privilege or confidentiality, (2) enforce a court order, or (3) when a question is improper and would cause “significant prejudice” if answered. Counsel’s arguments that his instructions not to answer the questions based on privileged information, future legal strategy or theory, and prevention of a fishing expedition, did not persuade the court. The court also found counsels’ disruptions of the deposition violated 22 NYCRR § 221.1 and § 221.3. Profane statements by a plaintiff to defendants’ counsel violated 22 NYCRR § 221.1(b), which requires that persons in attendance of a deposition “shall not make statements or comments that interfere with the questioning.” The court required plaintiff to answer the questions that counsel improperly instructed plaintiffs not to answer in a continuation of the deposition. The court instructed plaintiffs and counsel to split defendants’ costs and attorneys fees for the motion and continued depositions. Finally, the court denied defendants’ request to compel production of certain documents, which defendants alleged plaintiffs negligently allowed to be damaged during Hurricane Sandy. The court dismissed the claim without prejudice because defendants’ motion referred to requested documents in “broad, sweeping” terms not matching their First Demand for Production of Documents; thus the court could not properly compel the document production.
Freidman v. Fayenson, Index No. 650106/2011, 12/4/2013 (Bransten, J.).
Kelly Moynihan┃Managing Editor