NSB U.S. SALES, INC., Plaintiff, v. Gary BRILL, Defendant. NSB RETAIL SOLUTIONS, INC. Plaintiff, v. KLIGER-WEISS INFOSYSTEMS, INC. and the Zellman Group, LLC, Defendant No. 04 Civ. 9240(RCC) United States District Court, S.D. New York January 26, 2007 Casey, Richard C., United States District Judge MEMORANDUM & ORDER *1 Plaintiff NSB Retail Solutions, Inc. (“NSB” or “Plaintiff”) moves for sanctions against Defendant Kliger-Weiss Infosystems, Inc. (“KWI” or “Defendant”) pursuant to Rule 37 of the Federal Rules of Civil Procedure, asserting that Defendant has willfully obstructed the discovery process and disregarded orders of the Court directing Defendant to comply with discovery obligations. For the following reasons, Plaintiff's motion for sanctions is GRANTED. I. BACKGROUND This litigation arises out of a sub-licensing agreement (the “Agreement”) under which Defendant was permitted to include Plaintiff's software, called Coalition, with the point-of-sale cash registers it sells to customers. (See Wild Aff. ¶ 3; Kliger Aff. ¶ 7.) Plaintiff contends, inter alia, that Defendant did not comply with the Agreement by failing to report in a timely fashion, if at all, the sales Defendant made to its customers. (Am.Consol.Compl.¶ 11.) Plaintiff also contends that Defendant has not remitted payment in accordance with the Agreement. (Id. ¶ 12.) Defendant has continued to sub-license Plaintiff's Coalition software during the course of this litigation and, according to Plaintiff, has continued to flout its reporting and payment obligations. Plaintiff seeks damages and injunctive relief or, in the alternative, a declaratory judgment that the Agreement terminated on December 21, 2005 along with damages for non-payment since that time. (Wild Aff. ¶¶ 4-7.) In turn, Defendant has counterclaimed for lost revenues and profits, alleging that Plaintiff supplied faulty software and failed to provide adequate technical support. (Answer to Am. Consol. Compl. ¶¶ 26-34.) The specific facts relevant to the instant motion are few. In April 2005, Plaintiff served formal document requests on Defendant which included, among other things, a request for all “documents that refer, relate, or pertain to the subject matter of this litigation” and all “documents which constitute communications between KWI and any third-party whatsoever with respect to the subject matter of this litigation.” (Wild Aff. ¶ 9.) In response, Defendant provided some documents to Plaintiff (Kliger Aff. ¶ 14), did not interpose any specific objection to Plaintiff's requests, and did not disclose that it was withholding any documents (Wild Aff. ¶ 9). Later, however, Plaintiff learned that Defendant had not turned over contracts, purchase orders, invoices, and e-mails which Plaintiff believed were relevant to the Agreement. Those documents, according to Plaintiff, directly relate to the parties' dispute as to whether Defendant accurately and promptly reported: “(1) what KWI sub-licensed (i.e., which types of Software); (2) how much KWI sub-licensed (i.e., how many stores or registers of the Customer); (3) when KWI did the sub-licensing (as opposed to when KWI finally reported the sales; (4) to whom the sub-licensing was done; and (5) how much the Customers paid to sub-license the Software.” (Wild Aff. Ex. F at 2.) *2 The Court referred the resulting discovery dispute to Magistrate Judge James C. Francis. On July 25, 2006, after reviewing letters from both parties, Judge Francis ordered Defendant to produce the documents in question on the ground that they are “plainly relevant” to the parties' dispute. (Id. Ex. F.) In addition, Judge Francis warned that, while “[a]n award of costs is not yet warranted, ... KWI is on notice to cooperate in discovery.” (Id.) A few days later, Defendant returned to Judge Francis and requested permission to “redact its prices and profit figures from the document production.” (Id. Ex. G.) Judge Francis denied this request, explaining that “[t]he requested information is integral to the sublicensing agreement that is the subject matter of this litigation.” (Id.) Finally, at a status conference on August 18, 2006, this Court ordered Defendant to comply with Judge Francis's ruling within one week or face sanctions. Almost a full month later, Defendant delivered to Plaintiff only two categories of documents: contracts and customer order forms. According to Plaintiff, Defendant still has not produced any records of the profits that it made from the sub-licensing at issue, any records showing what amounts the sub-licensees actually paid Defendant, nor any e-mails, memos, or other correspondence with its customers or between its employees in the past year. (Pl.'s Reply at 2.) Plaintiff also notes that, although Defendant claims to have produced “a complete paper trail” of customer contracts (Kliger Aff. ¶ 13), “so far only unsigned contracts have been produced, and even then, only for less than half of the sub-licensees” (Pl.'s Reply at 3). Nonetheless, Defendant contends that “as of September 13, 2006, NSB counsel had received all of KWI's accounting documents relating to the parties' Sub-License Agreement.” (Kliger Aff. ¶ 16.) At a status conference on September 22, 2006, the Court granted Plaintiff's request for leave to file the instant motion for Rule 37 sanctions. II. DISCUSSION Rule 37(b) provides, in pertinent part, that when a party fails to comply with a discovery order, a court may impose just sanctions by, among other things, “treating as a contempt of court the failure to obey any orders” and “requir[ing] the party failing to obey the order or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees, caused by the failure.” Fed.R.Civ.P. 37(b). District courts have wide discretion in imposing such sanctions to deter misconduct during discovery. See Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357, 1365 (2d Cir.1991); Fonar Corp. v. Magnetic Resonance Plus, Inc., 162 F.R.D. 276, 279 (S.D.N.Y.1995). “Because discovery under the Federal Rules of Civil Procedure is designed to function free from the delay and costs of court intervention, severe sanctions are appropriate when a party seeks to frustrate this design by disobeying discovery orders.” Ashkinazi v. Sapir, No. 02 Civ. 00002(RCC), 2005 WL 937597, at *4 (S.D.N.Y. April 20, 2005). *3 Rule 37 sanctions are necessary and appropriate in the present circumstance. As a result of Defendant's dilatory tactics to date, Plaintiff has been forced to appeal for court intervention on multiple occasions during discovery. And three times the Court has ordered Defendant to turn over the documents that Plaintiff requested-Judge Francis did so twice, this Court once thereafter. Yet Defendant still has not complied with those orders. Of course, Defendant sees things differently. Defendant claims to have “fully disclosed” all of its records “relat[ing] to its sub-licensing of plaintiff's products and is in compliance with the discovery Orders.” (Kliger Aff. ¶ 3.) But Defendant has only disclosed those documents that Defendant itself has deemed relevant to the litigation. Judge Francis determined that broader disclosure is necessary. Defendant now attempts to reargue the merits of Judge Francis's decisions in its opposition to Plaintiff's motion for sanctions. The Court will not consider such arguments. If Defendant believed Judge Francis's rulings were in error, it could have sought review of those rulings from this Court pursuant to Rule 72(a) of the Federal Rules of Civil Procedure. Defendant chose not to do so. Instead, Defendant ignored Judge Francis's rulings even after this Court ordered compliance. The Court simply cannot excuse such behavior, “lest other parties who come upon this case mistake leniency for tolerance and willful disregard of proper court orders for anything other than [conduct] antithetical to the effective administration of justice.” Ashkinazi, 2005 WL 937597, at *6. Accordingly, Defendant must pay the legal fees Plaintiff reasonably incurred as a result of Defendant's discovery misconduct: $26,667.00. In addition, the Court imposes a separate fine on Defendant in the amount of $25,000 for its contempt of court orders. Finally, defense counsel's law firm is to be fined $5,000.00 for defense counsel's role in his client's actions. Defendant will produce all contracts, purchase orders, invoices, e-mails and other correspondence which refer to, relate to, or otherwise have any nexus to the Agreement or this litigation. Such documents will include, but are not limited to, the following: (1) copies of all contracts with sub-licensees; (2) records showing what amounts the sub-licensees actually paid Defendant; and (3) any e-mails, memos, or other correspondence between Defendant and sub-licensees anytime in 2006 and before (if withheld). Discovery is to be completed within thirty (30) days from the entry of this order. The documents in question should have been turned over long ago. Discovery in this case will end and the Court's orders will be followed. Discovery abuses in the future, should they occur, will be met with the full extent of this Court's sanctions power under Rule 37. III. CONCLUSION For the foregoing reasons, Plaintiff's motion for sanctions pursuant to Rule 37(b) of the Federal Rules of Civil Procedure is GRANTED. Defendant is to pay Plaintiff $26,667.00 in legal fees. In addition, Defendant is to pay a fine of $25,000.00 and defense counsel's law firm is to pay a fine of $5,000.00. Defendant will immediately produce all documents required by this order and both parties will complete discovery within thirty (30) days. The parties will appear before the Court for a status conference on Friday, March 16, 2007 at 9:30 a.m. *4 So Ordered: