New York Trial Court Grants Motion for Default Judgement Valued in Excess of $250 Million Due to Defendants' Disobedience of Discovery Orders 12/10/08

New York Supreme Court Justice Walter B. Tolub recently refused to rescind his decision granting a default judgment against the defendants valued in excess of $250,000,000 due to the defendants' repeated and unexcused failure to abide by discovery orders. In CDR Creances S.A.S. v Cohen (2008 NY Slip Op 52351(U)),a case involving an alleged breach of a loan agreement in connection with the purchase of real estate, Justice Tolub denied the defendants' motions to renew and reargue his prior decision granting a default judgment and set the case down for an inquest. The case underscores the importance of adherence to court ordered discovery deadlines, and provides an extreme example for attorneys and parties of the potentially dire consequences for those in default without an adequate reason.

Displaying impatience with the course of discovery and the defendants' arguments seeking renewal or reargument of the default motion, Justice Tolub pointed out that the defendants had never shown merit to their arguments made in support of their motion, or merit to their potential defenses to the action. Justice Tolub determined that the defendants had offered nothing by way of proof other than an attorney's affidavit, which is insufficient to defeat the motions. In addition, Justice Tolub expressed displeasure with the defendants' argument of "law office failure" premised upon the assertion that their prior counsel was at fault for not advising them of the potential consequences of failing to meet their discovery obligations. Justice Tolub ruled that this excuse is not law office failure and was again unsupported by any proof.

The decision in CDR Creances, while a drastic result for the defendants and their counsel, suggests that recalcitrance or stonewalling with discovery can pose dire consequences to litigants, as courts have numerous options in punishing the offending party, including striking pleadings and entering default judgments. Those who repeatedly violate discovery orders do so at their own peril.

The court's decision can be found in the following link: http://www.nycourts.gov/reporter/3dseries/2008/2008_52351.htm

We would be pleased to discuss the CDR Creances decision in more detail at your convenience. Contact Patrick J. Brennan for a more in-depth discussion of the opinion.

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