Ruradan Corporation v. City of New York

Background

Ruradan Corporation’s case concerns a dispute with its former commercial tenant, JLEE 19 Corp. doing business as Toasties, and with individual defendants Jin Choi, Matthew Ahn, and Raymond Kim, who were personal guarantors under the lease. The tenant stopped operating in July 2020 after its business declined during the COVID-19 pandemic. Ruradan later found another tenant and sought rent and other amounts under the lease.

The City of New York was also a defendant because the Toasties defendants relied on the City’s COVID-19 “Guaranty Law” to avoid liability. Ruradan sought a declaration that the law was invalid and unconstitutional or did not apply retroactively to the personal guarantees. The opinion states that another court had found the law violated the Contracts Clause, and that the City was appealing that decision. The sanctions order did not decide those underlying issues.

Settlement conference and sanctions request

The court ordered the parties to attend an in-person settlement conference on February 7, 2024. The order required corporate parties to send a person with decision-making authority. The court’s publicly posted individual rules warned that a party who failed to meet the attendance requirements could be required to reimburse other parties’ time and travel expenses and could face other sanctions.

Ahn and Kim did not attend. They had not asked the court for permission to be excused or to participate remotely. The parties held some settlement discussions, but the conference ended early because the absent defendants were needed to explore a resolution fully. The court learned that defense counsel had not told Ahn and Kim that they were required to attend, believing that Choi could represent all defendants. Choi could not commit additional settlement funds for the other defendants.

Ruradan sought $4,650, calculated as 9.3 hours at $500 per hour. The request covered 7.3 hours for preparing for, traveling to, and attending the conference, plus two hours for preparing the sanctions motion. The Toasties defendants opposed the request, offered an explanation for Ahn’s and Kim’s absence, and noted that defense counsel apologized at the conference.

Court’s analysis

The court explained that Federal Rule of Civil Procedure 16(f) and the court’s inherent authority permit sanctions when a party fails to attend a required settlement conference or obeys a scheduling or other pretrial order. A court cannot force parties to settle, but it may require them to appear for a settlement conference. The court also stated that Rule 16(f) does not require a showing of bad faith and that violating a pretrial order can support some sanction.

The court was reluctant to impose sanctions but found them warranted because the failure to attend clearly violated the court’s order. It considered the circumstances, including that Choi attended with some authority and that the parties conducted limited settlement discussions.

The court awarded compensation for two hours of Ruradan’s counsel’s time, totaling $1,000. It did not award travel time or all conference time because some settlement discussions occurred. It did not award preparation time because that work would have been necessary even if the conference had proceeded normally. It also rejected the requested two hours for preparing the sanctions motion, finding that the two-page letter motion without case citations did not justify that amount.

Disposition

The court ordered sanctions of $1,000 payable to Ruradan. Ahn and Kim are jointly responsible for the full amount with their counsel. Payment was required by April 3, 2024, and counsel had to file an affidavit confirming payment by that date. The clerk was directed to terminate the sanctions motion at docket entry 157. The opinion’s footnote states that filing objections would not automatically pause payment and that a stay would have to be sought from Judge Liman.

The opinion is signed by Katharine H. Parker, although the supplied case metadata identifies Lewis Liman as the judge; the text refers to Judge Liman in connection with a possible stay.