Abouelmakarem v. MDNMA INC.

Background

Nader Abouelmakarem sued MDNMA INC., MSSMINJA INC., Mahmoud Mustafa, and Nazih K. Mustafa under the Fair Labor Standards Act and New York Labor Law. He alleged that he worked long hours as a salesman, cashier, and clerk at two tourist gift shops, received a flat cash salary, and was not paid the required minimum wage, overtime, or other payments and benefits.

The sanctions motions concerned MSSMINJA, Mahmoud, and Nazih, whom the opinion calls the “Non-Debtor Defendants.” Abouelmakarem served document requests on April 11, 2022. The court ordered the Non-Debtor Defendants to respond by June 28, 2022, and later ordered them to respond by September 12, 2022, warning that sanctions could follow. The defendants produced some tax-return information but did not provide the additional discovery required by those orders.

The court later ordered Mahmoud and MSSMINJA to produce documents referenced during depositions, including bank records, checks, invoices, travel-related credit-card statements, and information about current or former employees. The court set February 27, 2023, as the deadline. Mahmoud and MSSMINJA did not produce the ordered documents by that deadline.

Plaintiff’s Requests

Abouelmakarem filed two motions under Federal Rule of Civil Procedure 37. Rule 37 allows a court to impose sanctions when a party disobeys a discovery order. He asked the court, in the alternative, to strike the Non-Debtor Defendants’ answer, bar them from introducing requested documents or testifying about those matters, enter a default judgment, treat the disobedience as contempt of court, and award attorney fees and costs.

The defendants argued that they had produced everything they could and that other requested materials were irrelevant, burdensome, vague, or unavailable. They also relied on Mahmoud’s absence from the country, MDNMA’s bankruptcy filing, and the possibility that documents had been misplaced or destroyed.

Court’s Analysis

The court found repeated violations of clear discovery orders. It determined that the Non-Debtor Defendants understood their obligations and that their noncompliance was not caused by circumstances beyond their control. Mahmoud’s absence from the country did not excuse noncompliance because documents could have been obtained through employees or others connected to the businesses. MDNMA’s bankruptcy stay also did not extend to the Non-Debtor Defendants.

The court further found that the defendants had been obligated to preserve potentially relevant evidence since approximately December 2021. It rejected the defendants’ late and conclusory objections that the requests were too burdensome or overly broad. The noncompliance lasted for months, delayed the case, and harmed Abouelmakarem’s ability to investigate and challenge affirmative defenses concerning his alleged misconduct and the defendants’ ownership or management roles.

The court considered lesser sanctions but concluded that penalties less severe than evidence preclusion and striking the affirmative defenses would not adequately address the violations or deter future violations. However, the court noted that the defendants had not been specifically warned that continued noncompliance would result in a default judgment. That consideration weighed against imposing a default judgment or striking the entire answer.

Ruling

The court ordered that the Non-Debtor Defendants could not introduce into evidence documents that they had not timely produced to Abouelmakarem. It also struck the affirmative defenses in the Non-Debtor Defendants’ answer.

The court awarded reasonable attorney fees and costs related to the first sanctions motion against MSSMINJA, Mahmoud, and Nazih jointly and individually. It awarded reasonable attorney fees and costs related to the second sanctions motion against Mahmoud and MSSMINJA jointly and individually. Abouelmakarem was directed to file a fee application by June 20, 2023.

The court did not enter a default judgment, did not strike the entire answer, and did not impose the other requested sanctions to the extent they were not included in the specified relief. Judge Lewis J. Liman concluded that the motions for sanctions were granted in part and denied in part.