BDG Gotham Residential, LLC v. Western Waterproofing Company, Inc.

Background

Western Waterproofing entered a deferred-prosecution agreement (DPA) with the New York County District Attorney’s Office. In the DPA, Western Waterproofing accepted responsibility for matters described in an attached Statement of Facts (SOF). The SOF primarily contained factual statements. Western Waterproofing agreed that some facts were true and, for other statements identified as findings of the District Attorney’s investigation, agreed to rely on those investigative determinations despite lacking direct knowledge.

The DPA stated that it provided no benefits, privileges, or rights to entities other than the parties to the agreement. It also stated that the DPA and SOF were not to be treated as admissible in proceedings other than a proceeding brought by the District Attorney’s Office. Western Waterproofing obtained the DPA after cooperating with the criminal investigation, accepting responsibility, undertaking remediation, and making the admissions described in the SOF. As a result, it avoided criminal prosecution concerning the events at issue in this civil action.

Dispute Over the Proposed Stipulation

The parties agreed to file a separate stipulation of facts for use in this action. The stipulation would include facts to which Western Waterproofing admitted in the SOF, except for certain details about injured construction workers that the parties agreed to exclude as unduly prejudicial. The stipulation would not refer to the DPA or the underlying criminal investigation.

The parties disagreed about whether Western Waterproofing had “admitted” facts that it accepted only by relying on the District Attorney’s investigative determinations. They also disagreed about whether statements in the SOF that lacked the phrase identifying the District Attorney’s investigation should nevertheless be treated as if that phrase appeared.

Ruling

The court held that it could not order Western Waterproofing to stipulate to facts described in the SOF as having been determined by the District Attorney’s investigation, including facts on which Western Waterproofing relied without direct knowledge. If Western Waterproofing declined to stipulate to relevant facts, the district judge would ultimately decide whether, and for what purposes, the SOF, the DPA, or both were admissible at trial as direct evidence or for impeachment.

For discovery, however, the court permitted the plaintiffs to use the underlying documents for any purpose otherwise within the scope of Federal Rule of Civil Procedure 26(b)(1). The court ordered the parties to file their standalone stipulation of facts for review no later than August 12, 2022.