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‐ 3743

‐ cv

Sentry Ins. a Mut. Co. v. Weber, et al.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT.

CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS

PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE

PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A

SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY

MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC

DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING

TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT

REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second 1

Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley 2

Square, in the City of New York, on the 27 th day of December, two thousand 3

seventeen. 4

5

PRESENT: GUIDO CALABRESI, 6

RAYMOND J. LOHIER, JR., 7

Circuit Judges

, 8

EDWARD R. KORMAN, 9

District Judge .* 10

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐ 11

SENTRY INSURANCE A MUTUAL COMPANY, 12

13

Plaintiff

‐ Appellee

, 14

15

v. No. 16

‐ 3743

‐ cv 16

17

HERSHEL WEBER, 18

19

Defendant

‐ Appellant

, 20

21

BRAND MANAGEMENT INC., AKA BUDGET 22

* Judge Edward R. Korman, of the United States District Court for the Eastern

District of New York, sitting by designation.2 SERVICES INC., DYNAMIC CLAIM SERVICES, 1

INC., BUDGET SERVICES INC., 2

3

Defendants

. 4

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FOR APPELLANT: Avrom R. Vann, New York, NY. 6

7

FOR APPELLEE: Stephen R. Harris, Laura M. Zulick, Drinker 8

Biddle & Reath LLP, Philadelphia, PA. 9

10

11

Appeal from a judgment of the United States District Court for the Eastern 12

District of New York (Eric N. Vitaliano, Judge ). 13

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, 14

AND DECREED that the judgment of the District Court is AFFIRMED. 15

Hershel Weber appeals from a judgment of the District Court (Vitaliano, J.) 16

granting summary judgment in favor of Sentry Insurance a Mutual Company 17

(“Sentry”) and denying the defendants’ cross

‐ motion for summary judgment. 18

We assume the parties = familiarity with the facts and record of the prior 19

proceedings, to which we refer only as necessary to explain our decision to affirm. 20

1. Preclusion Order 21

Weber argues that the District Court abused its discretion by precluding 22

him from offering evidence to oppose Sentry’s alter ego claim as a sanction for 23

discovery violations. We disagree. Federal Rule of Civil Procedure 37 gives 243 courts broad discretion to sanction parties who fail to obey discovery orders, 1

including the discretion to preclude “the disobedient party from supporting or 2

opposing designated claims or defenses.” Fed. R. Civ. P. 37(b)(2)(A)(ii). Several 3

factors guide our review, including “(1) the willfulness of the non

‐ compliant 4

party

. . . ; (2) the efficacy of lesser sanctions; (3) the duration of the period of 5

noncompliance; and (4) whether the non

‐ compliant party had been warned of the 6

consequences of noncompliance.” S. New England Tel. Co. v. Global NAPs Inc., 7

624 F.3d 123, 144 (2d Cir. 2010) (quotation marks omitted). The sanction must 8

also “relate to the particular claim to which the discovery order was addressed.” 9

Daval Steel Prods., a Div. of Francosteel Corp. v. M/V Fakredine, 951 F.2d 1357, 10

1366 (2d Cir. 1991). 11

The record supports the determination that the defendants engaged in 12

willful, bad

‐ faith discovery conduct; monetary sanctions had repeatedly proven 13

ineffective to secure the defendants’ compliance with Judge Mann’s orders; and 14

the defendants violated multiple compulsion orders over a year

‐ long period. 15

Judge Mann repeatedly warned Weber that further noncompliance could result in 16

severe sanctions, including preclusion. And because most of the delayed and 17

outstanding production of documents related to entities controlled by Weber (and 184 therefore to Sentry’s alter ego claim), the preclusion order was well tailored to the 1

defendants’ noncompliance. Contrary to Weber’s contention, Sentry was not 2

required to show prejudice resulting from the defendants’ misconduct. See S. 3

New England Tel. Co., 624 F.3d at 148–49. We also reject Weber’s argument that 4

the sanction was an abuse of discretion because it resulted in the entry of a $12.5 5

million judgment against him. A sanction “must be commensurate with the 6

non

‐ compliance.” Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130, 140 7

(2d Cir. 2007). Under the circumstances of this case, the sanction was 8

appropriately commensurate. See Sieck v. Russo, 869 F.2d 131, 134 (2d Cir. 9

1989). Finally, we reject Weber’s contention that the District Court failed to 10

consider and exhaust alternative sanctions because the sanction imposed is 11

“appropriate on the overall record.” S. New England Tel. Co., 624 F.3d at 148. 12

2. Partial Summary Judgment Order 13

The District Court also properly granted Sentry’s motion for partial 14

summary judgment on its alter ego claim. Under New York law, an owner is 15

liable for the acts of a corporation when the corporation is merely an “alter ego” 16

of the owner. See Carte Blanche (Sing.) Pte., Ltd. v. Diners Club Int’l, Inc., 2 F.3d 17

24, 26 (2d Cir. 1993). A party seeking to pierce the corporate veil, and thereby 185 hold an owner liable, must show that (1) “the owner exercised complete 1

domination over the corporation with respect to the transaction at issue,” and (2) 2

“such domination was used to commit a fraud or wrong that injured the party 3

seeking to pierce the veil.” MAG Portfolio Consult, GMBH v. Merlin Biomed 4

Grp. LLC, 268 F.3d 58, 63 (2d Cir. 2001) (quotation marks omitted). 5

We first reject Weber’s argument that Sentry failed to adequately plead its 6

alter ego claim. Sentry’s complaint against Budget Services Inc. (“Budget”) and 7

Weber contains sufficiently specific factual allegations that Weber dominated 8

Brand Management Inc. (“Brand”) and Budget and that he used his domination to 9

avoid the corporations’ contractual obligations to Sentry. To the extent Weber 10

now argues that Sentry failed to plead an alter ego claim in its complaint against 11

Brand, and that the District Court therefore could not determine that Brand is 12

Weber’s alter ego, Weber failed to raise this argument in the District Court and 13

has forfeited it. See Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067, 1077 (2d Cir. 1993). 14

We also reject Weber’s argument that, even if Sentry adequately pleaded its 15

alter ego claim, summary judgment was nonetheless improper because 16

(1) genuine disputes of material fact remain and (2) Sentry did not establish the 17

elements of its alter ego claim as to Budget. We are not persuaded. First, 186 because of the District Court’s preclusion order, there was no evidence properly 1

before the District Court that created a genuine factual dispute. Second, the 2

District Court correctly concluded, based on the factors described in Wm. 3

Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 139 (2d 4

Cir. 1991), that Sentry demonstrated that both Brand and Budget are Weber’s alter 5

egos. 6

We have considered Weber’s remaining arguments and conclude that they 7

are without merit. For the foregoing reasons, the judgment of the District Court 8

is AFFIRMED. 9

FOR THE COURT: 10

Catherine O = Hagan Wolfe, Clerk of Court 11

12