Sillam v. Labaton Sucharow LLP

Background

Judge McMahon had previously determined that the only remaining claim was fraudulent inducement based on Gerard Sillam and Aldric Saulnier’s execution of two release agreements with the defendants. The matter was referred to Magistrate Judge Ona T. Wang for general pretrial management.

The immediate dispute arose from the location of the plaintiffs’ depositions. At a January 2023 conference, plaintiffs’ counsel represented that the plaintiffs would sign affidavits or agreements addressing the defendants’ concerns about possible criminal proceedings in France. Based on those representations, the court allowed the plaintiffs to remain in France and gave the defendants the choice of conducting Sillam’s deposition remotely or in person in France.

The plaintiffs signed declarations on February 16, 2023. The declarations promised, among other things, that they would not file or pursue any type of legal proceeding in France against the defendants, their counsel, or affiliated persons, when the proceeding related directly or indirectly to the deposition or the case. The declarations also stated that the plaintiffs had consulted their New York and French attorneys and understood that a breach could lead to sanctions.

Sillam was deposed remotely in May 2023. The defendants later learned that he had filed two criminal complaints in France, one in March 2023 and another in April 2023. The court issued an order requiring Sillam to explain why those filings did not breach his declaration.

The Court’s Findings

Sillam and his counsel offered three main explanations: the declaration applied only to complaints arising from the deposition; the defendants or their lawyers had violated French law before Sillam signed the declaration, giving him a preexisting right to file the complaints; and Sillam had a good-faith basis or relied on advice of counsel.

The court rejected each explanation. It held that the declaration’s plain language was not limited to the way the deposition occurred or to questions asked during the deposition. It also found that the declaration contained no exception for complaints that Sillam considered meritorious and no exception for complaints filed in good faith. The court did not decide whether the French complaints themselves had merit.

The court further found that Sillam had breached the promises in the declaration by filing the 2023 complaints. It found that he acted intentionally and not in good faith and had not shown good cause for the breach.

Sanctions and Further Proceedings

The defendants sought sanctions under Federal Rule of Civil Procedure 37, which permits penalties for certain discovery violations. The court found that a monetary sanction was warranted under Rule 37(a)(5). It stated that Sillam would be directed to pay reasonable fees and costs for the defendants’ drafting and negotiation of the declaration, preparation for and conduct of Sillam’s deposition, and motion practice concerning the 2023 complaints.

The order did not determine the amount of the monetary sanction. It directed the defendants to submit factual support, including billing records, and allowed the plaintiffs to oppose the amount. The court also directed briefing on whether a harsher sanction or other relief—including dismissal—should be recommended or ordered under other rules, a federal statute, or the court’s inherent authority. The order did not dismiss the case.

The court stayed all discovery until further order. It directed Saulnier to submit a letter identifying the discovery he believed remained outstanding and allowed the defendants to respond.