452 76 FEDERAL SUPPLEMENT, 3d SERIES

452 76 FEDERAL SUPPLEMENT, 3d SERIES

1 Laurent’s Motion to Suppress State-ments and Conduct in Connection withHis Refusal to Provide a DNA Sampleis GRANTED in part and DENIED inpart;

1 Laurent’s Motion to Exclude Alias isDENIED as moot;

1 Laurent’s Motion to Compel Discoveryis GRANTED in part and STAYED inpart. The Government is ORDEREDto disclose the 2011 DNA search andseizure warrants. It is further OR-DERED by Friday, January 9, 2015,to show cause why the underlying ap-plications should not also be disclosed.Laurent is also ORDERED by Mon-day, January 12, 2015, to file a letterexplaining the extent to which his twomotions to compel discovery remainlive.

SO ORDERED.

,

Deborah RAIMEY and LarryRaisfeld, Plaintiffs,

v.

WRIGHT NATIONAL FLOODINSURANCE CO.,

Defendant.

Nos. 14–CV–00461 (JFB)(SIL)(GRB).

United States District Court,E.D. New York.

Signed Dec. 31, 2014.

Background: Homeowners brought actionagainst insurance company, which was car-rier participating in National Flood Insur-ance Program pursuant to National FloodInsurance Act (NFIA), seeking to chal-

lenge denial of their claims under floodinsurance policy. After mediation failed,homeowners alleged violations of court’sdiscovery orders, specifically with respectto production of reports by engineeringfirm retained by insurance company. TheDistrict Court, Gary R. Brown, UnitedStates Magistrate Judge, 303 F.R.D. 17,entered order imposing evidentiary sanc-tions on insurer and monetary sanctions onits counsel. Motions for reconsiderationand/or clarification with respect to broadercase management issue were denied byCommittee of Magistrate Judges manag-ing Hurricane Sandy cases, 2014 WL7011069, and with respect to case-specificissues by Magistrate Judge. Insurer ap-pealed.

Holdings: The District Court, Joseph F.Bianco, J., held that:

(1) magistrate judge did not err in findingthat court’s case management ordersrequired insurer’s disclosure of initial,‘‘draft’’ report made by engineer whoconducted on-site examination of home-owners’ property, even though such re-port was subject to peer review pro-cess;

(2) insurer failed to demonstrate that theevidentiary sanction imposed against itwas contrary to law; and

(3) counsel for insurer failed to demon-strate that the monetary sanctionsagainst it were contrary to law.

Affirmed.

1. United States Magistrate JudgesO237(8, 11)

District court may reverse a magis-trate judge’s order on a nondispositive pre-trial matter only if the order is clearlyerroneous or contrary to law. 28 U.S.C.A.§ 636(b)(1)(A); Fed.Rules Civ.Proc.Rule72(a), 28 U.S.C.A.

453RAIMEY v. WRIGHT NAT. FLOOD INS. CO.Cite as 76 F.Supp.3d 452 (E.D.N.Y. 2014)

2. United States Magistrate JudgesO237(8)

Magistrate judge’s order is ‘‘clearlyerroneous’’ only when the reviewing court,on the entire evidence, is left with thedefinite and firm conviction that a mistakehas been committed. 28 U.S.C.A.§ 636(b)(1)(A); Fed.Rules Civ.Proc.Rule72(a), 28 U.S.C.A.

See publication Words and Phras-es for other judicial constructionsand definitions.


Magistrate judge’s order is ‘‘contraryto law’’ when it fails to apply or misappliesrelevant statutes, case law, or rules ofprocedure. 28 U.S.C.A. § 636(b)(1)(A);Fed.Rules Civ.Proc.Rule 72(a), 28 U.S.C.A.



Discovery matters are generally con-sidered nondispositive of the litigation, forpurposes of determining proper standardto apply to review of magistrate judge’sorder. 28 U.S.C.A. § 636(b)(1)(A); Fed.Rules Civ.Proc.Rule 72(a), 28 U.S.C.A.


Sanctions which are not ‘‘case-disposi-tive,’’ such as striking pleadings such thatthe cause of action must be dismissed, arealso generally considered nondispositive,for purposes of determining proper stan-dard to apply to review of magistratejudge’s order. 28 U.S.C.A. § 636(b)(1)(A);Fed.Rules Civ.Proc.Rule 72(a), 28 U.S.C.A.

6. Federal Civil Procedure O1271Magistrate judge’s finding in home-

owners’ action against flood insurance car-rier, that court’s discovery-related casemanagement orders in Hurricane Sandy

cases required carrier to disclose initial,‘‘draft’’ report made by engineer who con-ducted on-site examination of home-owners’ property, even though report wassubject to peer review process, was sup-ported by evidence that orders requireddefendants to produce ‘‘any documentationrelating to an assessment of the claimedloss, including all loss reports and damageassessments, adjuster’s reports, engineer-ing reports’’ and ‘‘all expert reports and/orwritten communications that contain anydescription or analysis of the scope of lossor any defenses under the policy,’’ that or-ders explained unequivocally that suchdocuments included draft engineering re-ports, and that all parties were aware thatthird-party engineers, such as carrier’s re-tained engineering expert, might possessthose drafts. Fed.Rules Civ.Proc.Rule 34,28 U.S.C.A.

7. Federal Civil Procedure O1574

‘‘Control,’’ for purposes of rule provid-ing that parties shall produce documentsin the responding party’s possession, cus-tody, and control, is broadly defined, andincludes situations where the party has thepractical ability to obtain the documentsfrom another, irrespective of his legal enti-tlement to the documents. Fed.Rules Civ.Proc.Rule 34, 28 U.S.C.A.


8. Federal Civil Procedure O31, 1935.1

Wishful ‘‘group think’’ by similarly sit-uated parties is not an excuse for ignoringthe plain language of case managementorders and the Federal Rules of Civil Pro-cedure.


Because the Federal Rules of CivilProcedure are intended to allow discoveryto proceed without the delay and costs


caused by constant court involvement, dis-trict courts have broad discretion to im-pose evidentiary sanctions. Fed.RulesCiv.Proc.Rule 37(b)(2), 28 U.S.C.A.

10. Federal Civil Procedure O1278When a party seeks to frustrate the

design of the Federal Rules of Civil Proce-dure by disobeying discovery orders,thereby preventing disclosure of facts es-sential to an adjudication on the merits,severe sanctions are appropriate. Fed.Rules Civ.Proc.Rule 37(b)(2), 28 U.S.C.A.

11. Federal Civil Procedure O1278In homeowners’ action against flood

insurance carrier, magistrate judge did notabuse his discretion in imposing evidentia-ry sanctions for carrier’s violation of dis-covery-related case management order inHurricane Sandy cases requiring disclo-sure of draft engineering reports subjectto the peer review process; sanction couldnot be construed as estopping carrier frompresenting one of its defenses, in potentialviolation of the Appropriations Clause, butmerely limited carrier to presenting theample expert testimony it already pos-sessed in support of its defense, and mag-istrate did not assess the most severesanctions, but took measured step of pre-venting carrier from further supplement-ing its defense, and so sanction was nar-rowly tailored to the purpose of preventingcarrier from further delaying the proceed-ings by engaging in additional expert dis-covery. U.S.C.A. Const. Art. 1, § 9, cl. 7;Fed.Rules Civ.Proc.Rule 37(b)(2)(A)(ii), 28U.S.C.A.

12. Federal Civil Procedure O1278Under Second Circuit precedent, the

government and its agents can be subject-ed to non-monetary evidentiary sanctionsunder the civil procedure rule governingsanctions for failure to make disclosures orto cooperate in discovery. Fed.Rules Civ.Proc.Rule 37(b), 28 U.S.C.A.


In homeowners’ action against floodinsurance carrier, magistrate judge didnot abuse his discretion in imposing mone-tary sanctions against carrier’s counselfor, inter alia, carrier’s violation of discov-ery-related case management order inHurricane Sandy cases requiring disclo-sure of draft engineering reports subjectto peer review process; allegation that de-fense counsel in hundreds of other Hurri-cane Sandy cases had same misunder-standing did not mitigate this counsel’sviolation, given orders’ plain language,counsel’s attempt to curtail testimony athearing, and prejudicial impact on home-owners, counsel failed to make ‘‘reason-able inquiry’’ to ensure that its discoveryresponse was complete and correct, failedto obtain additional photos required byorders, and aggravated its initial violationby its unreasonable response to the dis-covery motion, including its conduct athearing, and counsel’s conduct constituteda willful effort to frustrate discovery ofthe true facts. Fed.Rules Civ.Proc.Rules26(g)(1), 34, 28 U.S.C.A.

John S. Mostyn, Rene M. Sigman, TheMostyn Law Firm, Houston, TX for Plain-tiffs.

Anthony Martine, Patrick Walsh Bro-phy, McMahon, Martine & Gallagher,LLP, Brooklyn, NY, Kristina J. Fonte,Gerald J. Nielsen, Nielsen, Carter &Treas, LLC, Metairie, LA, for Defendant.

Larry Demmons, The Demmons LawFirm, LLC, Metairie, LA, for Amicus curi-ae.

MEMORANDUM AND ORDER

JOSEPH F. BIANCO, District Judge.


Deborah Raimey 1 and Larry Raisfeld(‘‘plaintiffs’’) sued Wright National FloodInsurance Company (‘‘Wright’’ or ‘‘defen-dant’’)—a ‘‘Write Your Own’’ (‘‘WYO’’)flood insurance carrier and the issuer of apolicy covering a house plaintiffs owned inLong Beach, New York—for breach ofcontract. Plaintiffs alleged that theirhouse was damaged by flooding duringHurricane Sandy, and that Wright wrong-fully denied plaintiffs’ claim under the poli-cy by attributing the damage to long-termdeterioration.

Pending before the Court is defendant’sappeal of an order issued by MagistrateJudge Gary R. Brown on November 7,2014, In re Hurricane Sandy Cases, 303F.R.D. 17 (E.D.N.Y.) (the ‘‘November 7Order’’), addressing the disclosure of draftengineering reports on insured propertiesallegedly affected by Hurricane Sandy,and imposing evidentiary sanctions on de-fendant Wright and monetary sanctions onits counsel for failing to obey discoveryorders and causing undue delay to theseproceedings. The sanctions arose from (1)a failure by defendant and its counsel todisclose an initial written report (datedDecember 9, 2012) by George Hernemar,an engineer from U.S. Forensic (‘‘USF’’),who had inspected the home at issue andconcluded that it had been damaged be-yond repair by Hurricane Sandy, and (2)the conduct by defendant’s counsel at asubsequent evidentiary hearing beforeMagistrate Judge Brown to determine howthe undisclosed initial report was modifiedinto a second subsequent report, datedJanuary 7, 2013 (disclosed to plaintiffs),which eliminated certain observations bythe engineer and reached the exact oppo-site conclusions—namely, that the defectsin the home had not been caused by the

storm, but rather were due to long-termdeterioration. In particular, following theevidentiary hearing, Magistrate JudgeBrown found, inter alia, the following: (1)defendant and its counsel violated theirobligations to comply with this Court’s dis-covery orders by failing to produce theinitial engineering report; (2) the process,in this particular case, that led to thealterations of Hernemar’s observations inthe initial report and the reversal of thereport’s conclusions was ‘‘flawed,’’ ‘‘unprin-cipled,’’ ‘‘reprehensible,’’ and ‘‘highly im-proper’’; (3) the failure to disclose theinitial report resulted, in this case, in ‘‘un-reasonably prolonging this litigation, im-posing unnecessary costs upon plaintiffsand further contributing to the unwarrant-ed delays in resolving this claim’’; and (4)‘‘given the discovery failures by defen-dant’s counsel, the unreasonable responseby defendant to the allegations, and coun-sel’s shocking attempt to curtail inquiryduring the hearing, it is reasonable tocharge the costs associated with the hear-ing to defendant’s counsel.’’ (November 7Order, at 24–25, 25–31.)

For the reasons set forth in detail below,the Court affirms Magistrate JudgeBrown’s November 7 Order in its entirety.More specifically, there is no basis for thisCourt to conclude that Magistrate JudgeBrown’s findings or his sanctions wereclearly erroneous or contrary to law, aswould be required for a reversal. Havingcarefully reviewed the record, it is abso-lutely clear to this Court that the processthat led to the modification of the initialengineering report (including the removalof observations that were inconsistent withthe new conclusions) was flawed, and theconcealment of that initial report and theprocess that led to the new report (includ-

1. The parties interchangeably spell plaintiff’sname ‘‘Raimey’’ and ‘‘Ramey.’’ Per the case

caption, the Court will use Raimey.


ing conduct at the evidentiary hearing) hasprejudiced plaintiffs in terms of delay andcosts in this litigation, such that the sanc-tions were warranted.

First, Magistrate Judge Brown’s findingthat the Court’s discovery orders requiredthe disclosure by the defendant of theinitial engineering report is not erroneous.In fact, Case Management Order # 1, inplain and unambiguous language, directedthe defendants to produce ‘‘any documen-tation relating to an assessment of theclaimed loss, including all loss reports anddamage assessments, adjuster’s reports,engineering reports TTTT’’ and ‘‘all expertreports and/or written communicationsthat contain any description or analysis ofthe scope of loss or any defenses under thepolicy.’’ (CMO 1 at 9.) Moreover, the factthat the scope of discovery included draftreports was unequivocally emphasized la-ter in the Order when the Court stated thefollowing: ‘‘Documents routinely preparedin the ordinary course of business, includ-ing but not limited to adjusters’ reportsand other expert analyses, including draftreports, are not privileged and should beproduced.’’ (Id. at 10 (emphasis added).)Defendant’s primary objection to this find-ing is that counsel for Wright (as well asother counsel for both sides in the Hurri-cane Sandy cases) did not interpret CMO 1(or the subsequent discovery orders) torequire the production of documents in thepossession of third parties, such as engi-neers, and Wright did not have the initialHernemar report in its possession. How-ever, there is no such limitation in thediscovery orders and, as Magistrate JudgeBrown correctly noted, counsel has a dutyto make reasonable inquiry to ensure dis-covery responses are complete and correct,including from third parties over whomcontrol exists, and there is no doubt thatWright had the legal and practical abilityto obtain this initial report from USF.Moreover, based upon emails produced at

the direction of this Court following oralargument on the appeal (which inexplica-bly were also never produced to plaintiffs,contrary to the plain language of the dis-covery orders, even though in Wright’spossession), it is clear that Wright’s VicePresident of Claims (Jeff Moore) receiveda photograph of the initial report by emailfrom plaintiff on January 28, 2013. Thus,any argument that Wright or its counselhad to approach third parties to learn ofthe existence of the initial report is clearlyincorrect.

Second, Magistrate Judge Brown didnot err in concluding that the failure toproduce the initial report concealed con-duct by USF in this case that was, amongother things, highly improper. As athreshold matter, contrary to the argu-ments of Wright and USF, the Court isnot suggesting that there is anything pro-blematic about a peer review process ingeneral as it relates to engineering re-ports, or any other reports generated inconnection with an insurance claim. More-over, the fact that a principled and thor-ough peer review process may ultimatelylead to a conclusion that is contrary to theinitial report certainly does not implicate afinding of fraud, or even necessarily sug-gest that something improper has takenplace. Instead, this Court concludes thatMagistrate Judge Brown correctly foundthat USF’s peer review conduct as it re-lates to the Raimey claim was improper.In particular, the second peer review engi-neer (Michael Garove), without any addi-tional inspection of the property, not onlychanged the report to reach the exact op-posite conclusions but also removed lan-guage from the initial report that indicatedthat Hernemar could not inspect certainportions of the house—such as the founda-tion (which was obscured by piles of sand)and the crawlspace (which was obstructedand could not be thoroughly inspected)—


and replaced that language with languagewhich suggested that observations of thoseareas supported the contrary conclusions.Regardless of the validity of the ultimateconclusions (which Magistrate JudgeBrown questioned), these modifications ofthe language memorializing the engineer’sinability to inspect certain areas are inde-fensible (even if approved by the first engi-neer), and certainly place into question thevalidity of the entire peer review processat USF. In fact, Hernemar apparently ac-cepted all of the changes proposed by Ga-rove after his peer review—including theremoval of the language indicating his ina-bility to examine certain areas and hisconclusions—without question, as Garoverecalled no conversations with Hernemarabout the report. Even in other situationswhere such review is the product of aprincipled peer review process, such pro-cess should not be completely concealedfrom a plaintiff who is challenging in litiga-tion the ultimate determination of the en-gineering firm. Fundamental fairness, asembodied in the Court’s discovery orders,dictates that plaintiffs suing over a denialof an insurance claim should have knowl-edge of any such prior reports and be ableto test and challenge the process that ledto the modifications in the report and itsconclusions.2 Thus, although USF seeksto defend its new conclusions in the modi-fied report, that does not excuse the con-duct as it relates to the Raimey claim—namely, the removal of observations incon-

sistent with the new conclusions, as well asthe concealment of that initial report andthe process that led to the second report,from the plaintiffs.

Third, there is no basis to conclude thatMagistrate Judge Brown erred in findingthat the failure to produce the initial re-port unreasonably prolonged the litigation,imposed unnecessary costs upon plaintiffs,and further contributed to the unwarrant-ed delays in resolving the claim in thiscase. Certainly, the initial report, and theprocess that led to the modifications tothat report, are a critical component in thelitigation of this case. It was not unrea-sonable for Magistrate Judge Brown toconclude that had that initial report (whichthe Court now knows Wright was aware ofas early as January 28, 2013) been pro-duced to plaintiffs (along with related doc-uments such as the redline version that ledto the modified report and the emails) in atimely fashion, the case would have beenable to move forward more expeditiouslyand that plaintiff would have avoided un-necessary litigation costs in obtainingthose documents, including an evidentiaryhearing. Although plaintiffs had a photo-graph of a portion of the initial report anddid not provide that report to defendant’scounsel in the discovery process, that fail-ure in no way hindered defendant’s abilityto comply with its discovery obligations.In fact, as noted above, plaintiffs had al-

2. In fact, at oral argument, the Federal Emer-gency Management Agency (‘‘FEMA’’) with-drew its appeal of the portion of MagistrateJudge Brown’s November 7 Order that againreiterated that defendants in all HurricaneSandy cases were required to produce, amongother documents, all draft reports by any en-gineer relating to properties at issue in thelitigation, including such documents in thepossession of a third party. FEMA noted thatit ‘‘is committed to providing transparency toits policyholders,’’ and was in the process ofobtaining the relevant documents from third

party contractors responsive to the Court’sOrder and producing such documents.Therefore, although it is unclear the extent towhich engineering firms and/or insurancecompanies have utilized a flawed or fraudu-lent process in denying the claim, plaintiffs inall Hurricane Sandy will rightfully have trans-parency into that process as a result of theenforcement of the discovery orders, and willbe able to challenge any such practices in afair and just manner in the context of thelitigation.


ready provided that photograph of the re-port to Wright in an email on January 28,2013, almost one year before this lawsuitwas filed. In any event, because of plain-tiffs’ counsel failure to produce the photo-graph of the initial report to the defen-dant, Magistrate Judge Brown limited thesanction to the costs incurred in the litiga-tion after plaintiff disclosed the photo-graph of the initial report to defense coun-sel.

Fourth, Magistrate Judge Brown did noterr in finding that counsel for the defen-dant, among other things, responded un-reasonably to the allegations and engagedin a ‘‘shocking attempt to curtail inquiryduring the hearing.’’ As a threshold mat-ter, Magistrate Judge Brown presidedover the hearing and had the benefit ofseeing the conduct of defendant’s counselunfold firsthand. Such observations by ajudge in the course of hearing, includinghow the conduct affected the hearing andthe motive behind that conduct, are enti-tled to deference. Moreover, there aremore than sufficient grounds, based uponthis Court’s careful review of the tran-script, to support this finding. Hernemartestified, under oath, that he made thechanges to his own report after an ‘‘opendiscussion’’ via telephone with a peer re-view engineer. Throughout his testimony,Hernemar repeatedly sought to portraythe peer review process as it related to hisrevision of his initial report as one thatinvolved a personal, substantive exchangebetween him and the ‘‘peer review’’ engi-neer. Counsel for defendant argues that itwas not improper for counsel to suggestafter Hernemar testified that additionalwitnesses were unnecessary. This Courtagrees that such an argument, in and ofitself, certainly would not be sanctionable.However, defendant’s counsel went wellbeyond that. In an effort to persuadeMagistrate Judge Brown to stop the hear-ing, counsel for the defendant (even

though we now know counsel had no pre-hearing substantive discussions with thesecond engineer regarding his ‘‘peer re-view’’ of the initial report) represented tothe Court, inter alia, that the testimony ofthe peer review engineer (Garove) wouldbe consistent with Hernemar’s, in that Ga-rove would testify that he ‘‘made sugges-tions and that the two engineers con-sult[ed] about the suggestions.’’ WhenMagistrate Judge Brown decided to hearGarove’s testimony notwithstanding thatrepresentation, it became clear that therepresentation was inaccurate. Garove,who had reviewed his redline edits to theinitial report prior to his testimony, con-tradicted Hernemar in a number of impor-tant respects, including that he did notrecall ever communicating with Hernemarregarding his suggested edits and that,instead, Hernemar just adopted his conclu-sions completely. Thus, there does notappear to have been an ‘‘open discussion’’via telephone, or any other back-and-forthexchange, before Hernemar adopted Ga-rove’s edits in a wholesale manner. Inshort, there is a more than sufficient basis,based upon this representation by defen-dant’s counsel, and other conduct by de-fendant’s counsel at the hearing and fol-lowing the hearing, for Magistrate JudgeBrown to find that counsel should not haveattempted to curtail the hearing in thismanner and that it was ‘‘an effort to mis-lead the Court.’’ That finding was obvi-ously informed by the totality of the cir-cumstances as it relates to the failure toproduce the initial report, as well as themanner in which the evidence unfolded atthe hearing.

Given these findings, Magistrate JudgeBrown was well within his discretion toimpose both the monetary and evidentiarysanctions on defendant Wright and itscounsel. The evidentiary sanction cannotbe construed as an estoppel in violation of


the Appropriations Clause, and both theevidentiary and monetary sanctions werewithin the scope of Magistrate JudgeBrown’s authority under Rule 37(b). Insum, as set forth in detail below, the factu-al findings and particular sanctions im-posed are neither clearly erroneous, norare they contrary to law. Accordingly, theNovember 7 Order is affirmed in its en-tirety.

I. BACKGROUND

A. Facts

In late October 2012, Hurricane Sandyleft a trail of destruction along the EastCoast. After the storm, many home-owners seeking to restore damaged or de-stroyed property sought legal reliefagainst insurers who denied their claims.A panel of three Magistrate Judges in thisDistrict, in which more than a thousandsuch cases have been brought, has workeddiligently to facilitate swift but fair resolu-tions of these claims, via a consolidatedmanagement approach to discovery andmediation.3

In the instant case, plaintiffs allege thattheir Long Beach property, covered undera flood insurance policy by defendant, wasdamaged in October 2012 by HurricaneSandy-related flooding. (Complaint ¶¶ 1,11–12.) According to plaintiffs, indepen-dent experts they hired to evaluate theproperty ‘‘determined and found conclusiveevidence that the flood event criticallydamaged Plaintiffs’ covered property.’’(Id. ¶ 15.) Defendant admits that therewas damage to the dwelling by flood, forwhich it partially compensated plaintiff,but denies the allegations with respect tothe extent of the damage. (Answer ¶¶ 11–14.)

1. The Discovery Orders

The plaintiffs’ case, like all HurricaneSandy-related cases, is subject to the casemanagement orders (‘‘CMOs’’) issued bythe Committee covering discovery prac-tices. The Committee issued CMO 1,ECF Dkt. No. 15, on February 21, 2014.

In CMO 1, the Committee ordered de-fendants to produce, among other docu-ments:

b. any documentation relating to an as-sessment of the claimed loss, includingall loss reports and damage assess-ments, adjuster’s reports, engineeringreports, contractor’s reports, photo-graphs taken of the damage or claimedlosses, and any other evaluations of theclaim; TTT

f. all expert reports and/or writtencommunications that contain any de-scription or analysis of the scope of lossor any defenses under the policy.

(CMO 1 at 9.) The Committee also statedthat, ‘‘Counsel for each party is encour-aged and expected to provide any informa-tion that would be reasonably be helpful totheir adversary in evaluating the case formediation/arbitration purposes.’’ (Id.)

The Committee further stated:

Documents for which a privilege is prop-erly asserted include communicationsbetween counsel and client, documentscreated in anticipation of litigation, com-munications between or among plaintiffs’counsel, and communications between oramong non-insurer defendants’ counsel,insurer defendants’ counsel and their re-spective clients. Documents routinelyprepared in the ordinary course of busi-

3. See Case Management Order (‘‘CMO’’) 1,ECF Dkt. No. 15 at 1–2 [hereinafter CMO 1 ](discussing efforts of the Hurricane SandyCommittee (the ‘‘Committee’’), consisting ofthree magistrate judges, to ‘‘ease the burden

and expense upon the litigants and the Court’’and streamline case management for the nu-merous consolidated hurricane-related casesin this District).


ness, including but not limited to ad-justers’ reports and other expert analy-ses, including draft reports, are notprivileged and should be produced.

(Id. at 10 (emphasis added).)

Subsequently, on April 7, 2014, the Com-mittee issued CMO 3. (See ECF Dkt. No.28.) In CMO 3, the Committee respondedto a question from unspecified defensecounsel as to whether expert reports hadto be produced under CMO 1. (Id. at 9.)The Committee reiterated that its ordermeant that ‘‘to the extent that any such[expert] report was prepared prior to theissuance of this Order, such report mustbe produced immediately to opposingcounsel.’’ (Id.)

2. Plaintiffs’ Motion

On September 26, 2014, well after dis-covery had concluded, plaintiffs filed a‘‘Motion to Set Discovery Schedule and Setfor Trial,’’ ECF Dkt. No. 57, in which theymade several allegations against Wrightand its third-party engineering firm, USF,which had performed the inspection andanalysis of plaintiffs’ Long Beach propertyfor defendant. Plaintiffs allege thatWright and USF failed to produce all ofthe expert reports on which it had relied indenying their claim, namely those writtenby the USF engineer who had conductedthe on-site examination, George Herne-mar. (Id. at 2.) Plaintiffs further allegedthat Hernemar informed them after defen-dant denied their claim that he had indeed

written an engineering report, but it hadcome to the opposite conclusions, i.e., thatHurricane Sandy flooding had broken thefoundation of the home. (Id. at 2–3.)Hernemar allegedly told them that ‘‘he didnot author a report that disclaimed causa-tion from Sandy.’’ (Id. at 2.) Moreover,plaintiffs alleged that he showed them acopy of his report as originally drafted,and allowed them to take cell phone photo-graphs of a couple of the pages, includingthe cover, though he would not allow themto have a copy. (Id. at 3.) 4 The coverreflected a report dated December 9, 2012,but the first report plaintiffs received fromdefendant was dated January 7, 2013.

One of the potential implications of theseallegations was that defendant’s third-par-ty engineer had originally drafted its anal-ysis of plaintiffs’ claim to conclude thatstorm flooding had indeed caused the dam-age, but that USF and/or Wright latermodified or altered the report to providedefendant with the more favorable conclu-sion. In its response to plaintiffs’ motion,defendant admitted the existence of thisinitial report and that it had not beendisclosed during discovery, claiming igno-rance as to its existence. (Response, ECFDkt. No. 59 at 4–5.) Moreover, defendantblamed plaintiffs for failing to raise thisissue to the Court and to defense counselduring discovery, out of a desire to use theexistence of the conflicting report as a‘‘ ‘gotcha’ moment’’ at mediation. (Id. at2.) 5

4. In their motion, plaintiffs alleged that thepicture was of the report as displayed on acomputer screen. (ECF Dkt. No. 57 at 3.)Exhibit 2 to the motion, however, clearly re-flected a photograph of the physical reportdocument. (ECF Dkt. No. 57–2). At thehearing in front of Magistrate Judge Brown,counsel for plaintiffs stated that this statementin the motion was an error, and the picturewas actually of the paper report observedduring Hernemar’s second visit to the proper-

ty. (Tr. of Evidentiary Hr’g, Oct. 16, 2014[‘‘Oct. 16 Tr.’’], at 19.) Magistrate JudgeBrown, after evaluating the credibility of thewitnesses, credited plaintiffs’ account. De-fendant presents no basis for this Court toconclude that Magistrate Judge Brown’s fac-tual determination on that issue, which wascollateral to his other legal rulings, was clear-ly erroneous.

5. As discussed infra, at the December 17,2014 oral argument on this motion, plaintiffs’


3. The Evidentiary Hearing 6

Magistrate Judge Brown held a lengthyevidentiary hearing on October 16, 2014 toresolve the allegations about undiscloseddraft reports and possible manipulationsof the conclusion by defendant or USF. Atthe hearing, defendant—through testimo-ny by witnesses from USF, namelyHernemar and another engineer, MichaelGarove—explained the existence of theconflicting draft report, and how the engi-neering ‘‘peer review’’ process led to thechanges in the report and its conclusion.

In particular, Hernemar testified at thehearing that he inspected the damage atplaintiffs’ property on December 4, 2012,and then wrote a ‘‘draft’’ report datedDecember 9, 2012 which he submitted toUSF for peer review. (Oct. 16 Tr. at 65,74–75.) That report was the same oneplaintiffs later obtained, during Herne-mar’s follow-up inspection conducted atplaintiffs’ property on January 25, 2013after their claim had been denied. (Id. at17–18). The December 9, 2012 report con-cluded that the building on the propertywas structurally damaged by the stormflooding, causing a collapse of the founda-tion walls around the southwest corner of

the building, and that a repair of the build-ing was not economically viable. (See De-cember 9, 2012 Report, ECF Dkt. No. 71–6.)

Hernemar testified that he subsequentlyhad ‘‘open discussion’’ via telephone withanother engineer at USF (an apparent ref-erence to Michael Garove), who pointedout some flawed assumptions in the draft.(Oct. 16 Tr. at 59, 71.) As a result, Herne-mar testified that he ‘‘rewrote’’ his reportto arrive at the opposite conclusions—find-ing that the structural damage was due to‘‘long-term differential movement of thebuilding’’ and the supporting soils—and itwas issued in its final form on January 7,2013. (Id. at 75, 90; see also January 7,2013 Report, ECF Dkt. No. 71–7.) Herne-mar said repeatedly that he himself wroteboth reports, and that no one else at USFhad altered them. (Id. at 57–58, 90, 119.)Hernemar admitted that, although variousobservations of the property and conclu-sions about the structure had been re-moved from the report between drafts, hehad not conducted another site visit duringthat interim period between December 9,2012 and January 7, 2013.7 (Id. at 70–71.)

counsel provided the Court with emails re-ceived as part of additional discovery disclo-sures after the November 7 Order. One emailto the claims adjuster contained references toplaintiffs emailing and calling Jeff Moore, aVice–President for Claims at Wright, to dis-cuss the draft report they had seen. (See ECFDkt. No. 115 (electronic filing of emails pro-vided by plaintiffs).) On that basis, the Courtordered defendant to disclose any emails be-tween Moore and plaintiffs, which it did onDecember 23, 2014. (See ECF Dkt. No. 122.)The emails, produced pursuant to the order,reflect that not only did plaintiffs alert Mooreabout the allegedly conflicting reports on Jan-uary 28, 2013 via email, including a picture ofthe draft report, but Moore then quickly for-warded plaintiffs’ email to Gary Bell of USF,stating: ‘‘We need to talk about this. I have ahorrendous day today but maybe we can dis-

cuss around 5 or 6 my time? Ramey is thename on this file.’’ (See id. at 1–2.)

6. At the hearing, defendant was representedby McMahon Martine & Gallagher LLP.

7. For example, the December 9, 2012 Reportstated that, ‘‘The crawl space could not bethoroughly inspected due to congestions oflose [sic] floor insulation hanging down, de-bris and a stark smell of undetermined petro-leum products.’’ (December 9, 2012 Report,ECF Dkt. No. 71–6 at 3.) The inaccessibility ofthe crawlspace was confirmed by Hernemarin his testimony. (Oct. 16 Tr. at 61, 107).The January 7, 2013 Report, however, provid-ed a number of purported observations aboutthe state of the underside of the building fromwithin the crawlspace, such as that ‘‘the ex-posed soil was soft, wet and uneven’’ and‘‘[d]eposits of waterborne debris were noted


He also testified that he did not exchangeemails with anyone at USF about the re-port on plaintiffs’ property. (Id. at 90–91.)Instead, he rewrote the report based sole-ly on his ‘‘open discussion’’ via telephonewith a ‘‘peer reviewing engineer.’’ (Id. at71.)

After Hernemar testified, counsel fordefendant stated that he now agreed thatdiscovery should occur and he did notthink he needed to call Garove, who wassupposed to testify about the peer reviewprocess. (Id. at 119–20.) Both MagistrateJudge Brown and plaintiffs’ counsel disa-greed. (Id. at 120.) Defendant’s counselcontinued to assert that Hernemar’s testi-mony had resolved the issues relevant tothe hearing, and that ‘‘[Hernemar] wasn’trequired, he wasn’t compelled, he wasn’treally told to do anything. He adopted theopinions [in the January 7, 2013 Report].’’(Id. at 121.) Defense counsel then statedto the Court that:

Mr. Garove will testify, and this is arepresentation to the court, is that, yes,he was the peer reviewer for the originalreport, the rough report of December,that his peer review, basically his peerreview, he made suggestions and thatthe two engineers consult about the sug-gestions and that Mr. Hernemar couldadopt or deny every single suggestionmade and then the report is finalized.

(Id. at 123–24.) 8 Defense counsel thenagain argued that Garove’s testimonywould be duplicative of Hernemar’s, stat-ing,

[Hernemar] testified clearly and un-equivocally that those changes were partof the peer review process, that heagreed to those changes, and thosechanges were his and his opinion alone.So we are now getting far afield of whatthe reason for this hearing was, in myhumble opinion, Judge, if we are puttingon a witness to testify about the peerreview process that this witness alreadytestified happened.

(Id. at 125.) Nonetheless, MagistrateJudge Brown granted plaintiffs’ applica-tion to have Garove testify.

In his testimony, Garove confirmed thathe was the USF engineer assigned to peerreview Hernemar’s December 9, 2012 Re-port. (Id. at 137.) He did not visit theproperty, nor was he certain as to whetherhe had inspected any of the other damagedhomes nearby. (Id. at 129.) Further, Ga-rove testified that USF’s peer review pro-cess normally involves reviewing the initialreport and any supplemental photographs,drawings, and so forth, and then evaluat-ing ‘‘as a peer, as an engineer, the validityof what is being stated,’’ in order to make‘‘a final determination about whether ornot the conclusions that are included with-in the report are accurate or in line with,

on the underside of the floor framing and thefloor insulation was matted and fallen.’’(January 7, 2013 Report, ECF Dkt. No. 71–7at 3). The USF witnesses were unable torationally explain at the hearing how thesestatements could possibly be supported byHernemar’s inspection, when he was unableto enter the crawlspace.

8. The Court notes that, at the oral argumentregarding this appeal on December 17, 2014,counsel for defendant averred that he hadspoken neither to Hernemar nor to Garoveabout their testimony before the October evi-dentiary hearing, other than to discuss Herne-

mar’s compensation for his appearance, in anattempt to avoid any appearance of coachingthe witnesses, and stated that the representa-tion was based on a conversation with coun-sel for U.S. Forensics. Garove also testifiedat the hearing that he did not prepare withdefense counsel prior to the hearing. (Oct. 16Tr. at 127.) However, when defendant’scounsel made this proffer of Mr. Garove’santicipated testimony to Magistrate JudgeBrown, he did not mention that it was notbased upon his own interview of the witness,but rather a conversation with USF’s counsel.


you know, engineering knowledge.’’ (Id.at 139.) Garove then would edit the draftreport using track changes in MicrosoftWord—including adding or subtracting in-dividual observations based on the evi-dence provided, and altering the report’sconclusions—and send a ‘‘redline’’ fileshowing those changes back to the inspect-ing engineer for finalization. (Id. at 139–40.)

Garove testified that this process oc-curred with respect to Hernemar’s draftreport on plaintiffs’ property, and that hewas the one who changed the conclusionsas to the cause of the damage. (Id. at145–47.) Indeed, the changes Garovemade to the draft report were extensive,based on the track changes or redline fileprovided to the Court by defendant. (See‘‘Letter to Judge Brown in Compliancewith Court’s Order Entered 10/31/14 Di-recting Certain Disclosure, and AttachingSame,’’ ECF Dkt. No. 77–1.) Garove alsoincluded the following comment, labeled‘‘MPG1,’’ in that redline:

George:Please note the changes/comments with-in the report. Please noted [sic] that wedon’t theorize about damages. We ob-serve, inspect and report damages to thebuilding. In this case, we did not ob-served [sic] any damage from hydrosta-tic, hydrodynamic, buoyancy forces orscour or erosion of support soils thatcaused damage to the subject buildingor foundation.Please finalize this report and send toDonna for issue.Michael P. Garove, P.E.Partner

(Id. at 1.) Garove stated that, after email-ing the edited report back to Hernemar, itappeared that Hernemar ‘‘adopt[ed] hisconclusions completely,’’ despite the factthat Garove did not recall ever communi-cating with Hernemar about his edits.

(Oct. 16 Tr. at 146–47.) In fact, in re-sponse to Magistrate Judge Brown’s ques-tion, Garove admitted it was fair to saythat he was the author of the January 7,2013 Report. (Id. at 156.) His name,however, does not appear anywhere in thefinal report, nor does the report reflectthat it was peer reviewed or edited bysomeone other than the listed author.

After Garove’s testimony, there was adiscussion between the lawyers and Magis-trate Judge Brown about a representativefrom Wright, who was at the hearing andalso was prepared to testify. At the be-ginning of the hearing, defendant’s counselhad identified the witness as Jeff Moore.(See id. at 5 (‘‘We also have Jeff Moorehere, from Wright Flood, if your Honordeems testimony from the defendant nec-essary as well.’’).) Moore was being madeavailable to testify that Wright does notreceive any reports except the final report,from U.S. Forensic. During the hearing,after Magistrate Judge Brown suggestedthat all engineering reports should havebeen turned over by Wright under thediscovery orders, counsel for Wright stat-ed, ‘‘Judge, it [CMO 1] says the partiesmust produce that. The only two reportsFidelity had, and they are the party in thiscase, were the two final reports sent themby USF, and those are the two reportsexchanged.’’ (Id. at 126; see also id. at122 (counsel for defendant stating to theCourt that only ‘‘finalized reports TTT werethen submitted to the carrier. But therough draft reports are not seen by thecarrier, by my client. They see the finalreportTTTT’’).) Thus, after Garove’s testi-mony, counsel for defendant made the fol-lowing representation to the Court regard-ing the substance of Moore’s anticipatedtestimony:

Judge, there is a witness from the insur-ance company who is prepared to offertestimony that he does not receive any


report but the final report. But Mr.Garove testified to that, about the insur-ance company only getting the final re-port. And, in light of the fact that wehave taken up a chunk of your day, Idon’t think it is necessary. But I deferto your Honor. If you want to hearfrom him, I am happy to call him.

(Id. at 167.; see also id. at 168 (defensecounsel stating that defendant was resting‘‘unless you [the Court] feel you want tohear from him [Moore] saying I only re-ceived the final report’’).) Based uponthat representation, Magistrate JudgeBrown stated that he did not need to hearfrom Moore.9 (See id.)

4. The November 7 Order

After considering the evidence, Magis-trate Judge Brown issued the November 7Order, finding that Wright’s failure to dis-close the draft report or the existence andeffect of the peer review practices duringdiscovery ‘‘unnecessarily complicate[d] anddelay[ed] this action.’’ November 7 Orderat 30. Importantly, Magistrate JudgeBrown found that CMO 1, subsequentlyreinforced by CMO 3, ECF Dkt. No. 29 at9–10, clearly mandated that all partiesmust disclose and produce any such draftengineering reports during discovery.November 7 Order at 25–27. MagistrateJudge Brown ordered that: (1) defendantsin all Hurricane Sandy cases subject to theCMOs must produce to the respectiveplaintiffs any drafts, redlines, etc. pre-pared by engineers, claims adjustors, orother agents or contracts ‘‘whether suchdocuments are in the possession of defen-dant or any third party,’’ if they had notdone so already; (2) defendant Wright

would be sanctioned for its conduct bybeing prohibited from supporting its casewith any expert testimony from an engi-neer other than the original engineer ex-aminer, George Hernemar; and (3) de-fense counsel would be sanctioned for itsconduct by paying plaintiffs’ counsel’s rea-sonable fees and costs associated with themotion and the October 16, 2014 hearing.

5. The Motion for Reconsideration

On November 21, 2014, Wright filed amotion for reconsideration of the Novem-ber 7 Order. In a Memorandum and Or-der, dated December 12, 2014, MagistrateJudge Brown denied the motion in its en-tirety. First, the Court rejected the argu-ment that the evidentiary preclusion reme-dy constitutes an estoppel of a ‘‘fiscalagent of the United States’’ in violation ofthe Appropriations Clause. Second, theCourt adhered to its finding that defen-dant’s counsel had unreasonably prolongedthe litigation, did not reasonably respondto the allegations, and made a ‘‘shockingattempt to curtail inquiry during the hear-ing.’’ On that issue, Magistrate JudgeBrown outlined the inconsistencies be-tween the testimony of Hernemar and Ga-rove and then explained:

The dichotomy between the witnesses’accounts highlights one troubling aspectof the conduct by Wright’s counsel. Af-ter Hernemar had given his misinforma-tive account, but before Garove testified,counsel for Wright tried three times toend the hearing, representing to theCourt that Garove would testify that ‘‘hemade suggestions and that the two engi-neers consult[ed] about the sugges-tions.’’ Tr. 123–24 (arguing that Herne-

9. As noted infra, emails produced after oralargument before this Court on appeal demon-strate that Moore received a photograph ofHernemar’s unaltered report in an email fromplaintiff Raimey on January 28, 2013. Thus,Moore was apparently prepared to testify thatUSF had never given him the initial report

(and thus, at a minimum, imply that Wrightdid not have the initial report in its possessionand had no knowledge of it), even though heactually was made aware of the existence ofthe initial report from plaintiffs prior to thelawsuit being filed, and even took action on it.

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mar had ‘‘clearly testified that thosewere his opinions adopted by him follow-ing a peer review process’’). Given therecord at that point in the proceeding,counsel’s argument, some of which wasfacially false, constituted an effort tomislead the Court.Other factors supporting the sanctionsimposed include the failure of counsel toproperly investigate the allegations andits overly aggressive defense of the peerreview process in the aftermath of thehearing. On this last point, even afterthe hearing, counsel attempted to shieldthe redline version of the Garove Herne-mar report under a cloak of work prod-uct privilege when the application ofsuch privilege had been rejected by theCommittee in February 2014. CompareDE [71] at 13–14 and Tr. 154–55 withCMO 1 at 10 (‘‘expert analyses, includ-ing draft reports, are not privileged’’);see also November 7 Order at 16–18[26–28] (‘‘it is difficult to understand howcounsel can assert work product in goodfaith’’).

December 12, 2014 Memorandum and Or-der, at 10–11 (footnote omitted).

Finally, as to the peer review process inthis case, Magistrate Judge Brown notedthat the initial report stated that thecrawlspace could not be thoroughly in-spected, and the revised report containedobservations of the crawlspace to supportthe conclusions (even though no additionalinspection of the crawlspace had been per-formed).10 Id. at 11–12. In summary, onthe ‘‘peer review’’ process in this case,Magistrate Judge Brown reiterated:

The conclusion of the peer reviewed re-port flies in the face of all other evidenceof record, such as the report of theindependent adjustor, the report of the

Building Commissioner for the City ofLong Beach and the undisputed factsthat the dwelling became uninhabitableand was razed. Wright continues toargue that, in theory, the house sus-tained limited damages, while in reality,it was damaged beyond repair.

Id. at 13.

6. Oral Argument on Appeal

On December 17, 2014, this Court heldoral argument on Wright’s appeal of Mag-istrate Judge Brown’s decision. Duringthe argument, counsel for Wright empha-sized that Wright did not have the initialHernemar report. (See December 17,2014 Tr. at 14 (‘‘So Wright Flood didn’thave it, and it didn’t come to my office inthe claims file.’’); see also id. at 20 (‘‘YourHonor, plaintiffs’ counsel were the onlyones who had all three reports. My clientdidn’t. We have the two final reports.They had both those in the CMO processand they had this photograph of the firstdraft. They had more information thanwe did.’’).) Similar arguments were madein the written objections. (See Def.Wright’s Objections, ECF Dkt. No. 95 at 1n. 5 (‘‘Indeed, neither Wright nor Wright’scounsel was aware of the process by whichUSF peer reviewed its reports untilWright’s counsel were informed by Mr.Demmons, counsel for USF, within justdays before the hearing.’’); see also id. at2 (noting that it was undisputed that U.S.Forensics did not provide the initial reportto Wright).)

However, during the oral argument,plaintiffs’ counsel submitted to the Courtemails which had recently been producedto plaintiffs by defense counsel in the wakeof the November 7 Order. The submissionincluded emails from Deborah Raimey to

10. The Court also referenced plaintiffs’ asser-tion that the ‘‘observations’’ by Garove thatwere added to Hernemar’s report appear

nearly verbatim in 28 other reports purport-edly authorized by a dozen different engi-neers. Id. at 12.


the claims adjuster hired by Wright (DavidMaxime). Plaintiff Raimey’s emails fromJanuary 26, 2013 to Maxime provided, in-ter alia, photographs of portions of theinitial report and the following statementin all capital letters:

REPORT WE RECEIVED FOR 24MICHIGAN—VERY DIFFERENTTHAN THE ORIGINAL WHICHLEADS U.S. TO BELIEVE THATTHIS REPORT WAS FALSIFIED,AND WE WILL CONTINUE TOPURSUE THIS WITH THE INSUR-ANCE COMPANY, U.S. FORENSIC.AND OTHERS. SOMEONE NEEDSTO BE HELD ACCOUNTABLE FORTHIS. WE ARE VICTIMS OF A HUR-RICANE, DISPLACED FROM OURHOME AND HAVING TO DEALWITH THIS IN ADDITION.

(ECF Dkt. No. 115–1.) A subsequentemail was sent by plaintiff to Maxime onFebruary 5, 2013, stating the following:

Hi David,

Please let me know if you have heardanything about 24 Michigan St. I havecalled the VP of claims, Jeff Moore, 3times now and have also emailed him.He was to get back to me within 24hours after we spoke, which was lastMonday. There is something definitelywrong here. We are not going to cashthat check for Michigan. It is obviousthat something is going on, since no onewill get back to us about this engineer’sreport and our questioning of thechanges. Is it time to hire a lawyer?Please let me know if you have heardanything, or can find out anything forus.

(ECF Dkt. No. 115–2.) Plaintiffs’ counselargued that these emails demonstratedthat Wright, contrary to representations tothe Court, knew about the initial Herne-mar report as early as January 26, 2013.

In rebuttal, defendant’s counsel notedthat the email went to the adjuster, andnot Wright: ‘‘[T]his email. That went toColonial Claims, the independent adjustingcompany. That didn’t go to my client.There is still no evidence before you thatthis thing ever made its way into theclaims file, and made it to my associate,and then to local counsel.’’ (December 16,2014 Tr. at 76–77.)

Given this additional information at theoral argument, and the reference in plain-tiff’s email to contact with Jeff Moore, theCourt directed that Wright produce to op-posing counsel and the Court any emails inits possession between Mr. Moore andplaintiffs. The Court also asked that U.S.Forensic produce any emails betweenHernemar and Garove regarding the prop-erty at issue in this case.

7. Post–Argument Documents

On December 23, 2014, counsel forWright and counsel for U.S. Forensics pro-duced additional emails pursuant to theCourt’s direction.11

Among the documents produced byWright was an email, dated January 28,2013, from plaintiff to Mr. Moore whichattached a photograph of the portion of theinitial Hernemar report (that plaintiff hadobtained) and the following statement:‘‘Mr. Moore, Thank you for speaking withme today, Monday, January 28, 2013. Iappreciate that you will look into our con-cerns about our property at 24 Michigan

11. Counsel for Wright also noted the follow-ing in his letter: ‘‘In searching his emailrecords, Mr. Moore has located other docu-ments that do not constitute correspondencewith the plaintiffs, which were not contained

in the claim file but which relate to theRaimey claim. All such documents will beproduced to counsel for plaintiffs as a supple-ment to the production previously made pur-suant to CMO # 1.’’ (ECF Dkt. No. 122.)


St. in Long Beach, NY. I will send picturesfor you to look over.’’ (ECF Dkt. No. 122–1.) Above the photograph of the conclu-sions of the initial report, plaintiff wrote inthe email: ‘‘ORIGINAL REPORT SUB-MITTED BY GEORGE, THE ENGI-NEER.’’ (Id.) Mr. Moore, the Vice Presi-dent of Claims at Wright, forwards theemail within an hour to Gary Bell at U.S.Forensic stating: ‘‘We need to talk aboutthis. I have a horrendous day today butmaybe we can discuss around 5 or 6 mytime? Ramey is the name on this file.’’(ECF Dkt. No. 122–1.)

B. Procedural History

Plaintiffs commenced this action on Jan-uary 21, 2014. Defendant answered thecomplaint on March 30, 2014.

The evidentiary hearing in front of Mag-istrate Judge Brown regarding the draftreport at issue occurred on October 16,2014, and the resultant order was issuedon November 7, 2014. Defendant Wright,as well as numerous other defendants inHurricane Sandy cases, filed motions forreconsideration of the order on November21, 2014. The Hurricane Sandy Commit-tee issued an opinion denying the motionto reconsider with respect to the broadercase management issue on December 8,2014. Magistrate Judge Brown issued aseparate opinion denying the motion toreconsider with respect to the issues spe-cific to this case on December 12, 2014.

Defendant filed the pending objectionsto Magistrate Judge Brown’s November 7Order also on November 21, 2014. Plain-tiffs filed their opposition to both on De-cember 1, 2014. USF filed its amicuscuriae brief in support of defendant on

December 1, 2014, and plaintiffs filed theiropposition to that brief on December 15,2014. The Federal Emergency Manage-ment Agency (‘‘FEMA’’) also filed an ap-peal of Judge Brown’s order with respectto defendants’ duty to disclose draft re-ports, but withdrew it at the oral argumenton December 17, 2014.12 The Court heardoral argument on December 17, 2014.

On December 19, 2014, plaintiffs filed amotion requesting an order to show causehearing ‘‘as to why [defendant] should notbe further sanctioned for its blatant andcontinued violations of this Court’s ordersand for material misrepresentations madeto the Court.’’ (ECF Dkt. No. 119–1 at 1.)In the memorandum of law in support ofthat motion, plaintiffs’ counsel traces thechronology of events regarding plaintiffs’insurance claim, and various documentsrelated thereto, and argues the following:

On February 11, 2013, Jeff Moore finallyemails Ms. Ramey and attaches copies ofthe January 7th and January 28th re-ports, purporting to contain the engi-neers seal and signature. However, acursory analysis of the reports forward-ed by Mr. Moore shows that the originalreport had been manipulated to fraudu-lently attach Hernemar’s seal and signa-ture from December 28th report to theJanuary 7th report. A simple review ofthe two signatures on the cover pages ofthe December 28th and January 7th re-ports shows that the signatures areidentical. In an email change beginningon January 27, 2013 between Hernemarand Gary Bell of U.S. Forensic, it be-comes readily apparent that they aresimply swapping pages between reports

12. FEMA is not a party to this action, but is adefendant in approximately ninety other Hur-ricane Sandy cases, and has interests at stakein this case because of its responsibility forunderwriting the losses of participating WYOcarriers such as defendant. FEMA withdrew

its appeal because, as discussed supra, it nolonger wished to challenge the interpretationof the CMOs and the disclosure duties of alldefendants, and believed that it was in sub-stantial compliance as of the oral argumentdate.


to give the false impression that Herne-mar had previously signed and sealedthe January 7th report. However,Hernemar never signed the January 7threport, it was not contained in his file atthe October 16, 2014 hearing, andHernemar did not produce the January7th report in response to the AttorneyGeneral’s subpoena.

(Id. at 7–8 (footnotes and citations omit-ted.).)

On December 23, 2014, counsel forWright and counsel for USF producedadditional emails pursuant to the Court’sdirection at the oral argument. On De-cember 23, 2014 counsel for plaintiffs sub-mitted a letter to the Court noting,among other things, that ‘‘[t]he emailsproduced by USF today as Exhibits 1through 4 to its letter have never beenpreviously produced to Plaintiffs, and areclearly responsive to the Court’s previousorders and directives.’’ (ECF Dkt. No.121.) On December 23, 2014, counsel forWright filed a letter containing variousarguments in light of the supplementalproductions to the Court.

On December 24, 2014, plaintiffs’ coun-sel filed a supplemental memorandum insupport of the motion requesting an orderto show hearing based upon additional doc-uments provided to the Court on Decem-ber 23, 2014. On December 26, 2014,counsel for Wright submitted a letter re-sponding to plaintiffs’ motion for an orderto show cause hearing, and seeking to havethe Court direct that plaintiffs’ counselproduce documents to defendant pursuantto the discovery orders. On December 30,2014, plaintiffs’ counsel responded to thearguments regarding plaintiffs’ productionof documents pursuant to the discoveryorders.

The appeal of the November 7 Order isfully submitted, and the Court has fullyconsidered the submissions and argumentsof the parties, as well as amicus curiae.13

II. STANDARD OF REVIEW

[1–3] This Court may reverse a magis-trate judge’s order on a nondispositive pre-trial matter only if the order is ‘‘clearlyerroneous or contrary to law.’’ 28 U.S.C.§ 636(b)(1)(A); Fed.R.Civ.P. 72(a); seeThomas E. Hoar, Inc. v. Sara Lee Corp.,900 F.2d 522, 525 (2d Cir.1990) (‘‘A magis-trate TTT may issue orders regarding non-dispositive pretrial matters. The districtcourt reviews such orders under the ‘clear-ly erroneous or contrary to law’ stan-dard.’’). ‘‘An order is ‘clearly erroneous’only when the reviewing court on the en-tire evidence is left with the definite andfirm conviction that a mistake has beencommitted.’’ Weiss v. La Suisse, 161F.Supp.2d 305, 321 (S.D.N.Y.2001) (inter-nal citation and quotation marks omitted).‘‘An order is ‘contrary to law’ when it failsto apply or misapplies relevant statutes,case law or rules of procedure.’’ Id.

[4, 5] Discovery matters are generallyconsidered nondispositive of the litigation.Thomas E. Hoar, 900 F.2d at 525; Zarat-zian v. Abadir, No. 10–CV–9049 (VB),2012 WL 9512531 at *7 (E.D.N.Y. May 23,2012) (citing Caidor v. Onondaga Cnty.,517 F.3d 601, 605 (2d Cir.2008)). Sanc-tions which are not ‘‘case-dispositive,’’ suchas striking pleadings such that the cause ofaction must be dismissed, are also general-ly considered nondispositive. Thomas E.Hoar, 900 F.2d at 525. Accordingly, thisCourt reviews the November 7, 2014 Or-der under the ‘‘clearly erroneous or con-trary to law’’ standard.

13. The Court does not address in this appealthe post-argument motions to the Court, in-cluding the request by plaintiffs for an order

to show cause hearing. The Court refersthese new motions to Magistrate JudgeBrown for his consideration.


III. DISCUSSION

Defendant Wright raises five objectionsto the November 7 Order: (1) the Orderwrongly sanctions Wright by estopping itfrom presenting expert evidence in thefuture other than Hernemar’s, because de-fendant is a WYO carrier appearing in itscapacity as a federal ‘‘fiscal agent’’ underthe National Flood Insurance Program(‘‘NFIP’’) as administered by FEMA; (2)the Order wrongly sanctions defendant fordelaying the litigation by not complyingwith the discovery order, because the Or-der misinterprets what CMO 1 and CMO 3required parties to disclose; (3) the Orderwrongly finds that defendant’s response tothe allegations about non-compliance withthe CMOs was ‘‘unreasonable;’’ (4) the Or-der wrongly finds that defense counselmade a ‘‘shocking attempt to curtail inqui-ry during the hearing,’’ leading to Magis-trate Judge Brown sanctioning defensecounsel with payment of plaintiffs’ costsand fees associated with plaintiffs’ motion;and (5) the Order fails to identify anyprofessionally impermissible conduct ordemonstrably erroneous conclusions withrespect to the peer review process.

These objections can be consolidated asconcerning two primary issues: whetherthe November 7 Order properly interpret-ed the CMOs as requiring the disclosure ofdraft expert reports subject to the peerreview process (the second and fifth objec-

tions); and whether the Rule 37 sanctionsimposed by Magistrate Judge Brown wereappropriate (the first, third, and fourthobjections). The Court addresses theseissues in turn.

A. The Interpretation of the CMOswith Respect to Draft Reports

[6] As an initial matter, the Court con-cludes that the plain language of theCMOs could not be clearer: defendantswere ordered to produce ‘‘any documenta-tion relating to an assessment of theclaimed loss, including all loss reports anddamage assessments, adjuster’s reports,engineering reports TTTT’’ and ‘‘all expertreports and/or written communicationsthat contain any description or analysis ofthe scope of loss or any defenses under thepolicy.’’ (CMO 1 at 9). ‘‘Any documenta-tion’’ included draft reports written by en-gineers. In fact, the same document laterexplained, unequivocally, ‘‘Documents rou-tinely prepared in the ordinary course ofbusiness, including but not limited to ad-justers’ reports and other expert analyses,including draft reports, are not privilegedand should be produced.’’ (Id. at 10 (em-phasis added).) To the extent that defen-dant suggests that the Committee itselfdid not interpret the CMOs in that man-ner, the Court disagrees. The Committeehas reiterated that the scope of the CMOs’required disclosures included draft engi-neering reports.14 See In re Hurricane

14. Defendant argues that the Committee con-tradicted itself when it issued CMO 8, ECFDkt. No. 42, and CMO 10, ECF Dkt. No. 58,in that these orders suggested that plaintiffsdid not have to disclose documents possessedby third parties on the subject of repair costs,such as receipts, invoices, etc., held by thirdparty contractors. This argument is incor-rect. In CMO 8, the Committee stated that toavoid the disclosure requirement, plaintiffswould have to demonstrate in their formaldiscovery responses why the documents werenot ‘‘in their possession, custody or control,’’and defendants were thereby authorized to

subpoena the documents themselves from thethird party contractors. (CMO 8 at 4, 7.) Asdiscussed infra, the draft reports are not out-side defendant’s control. In CMO 10, theCourt further addressed those subpoenas forrepair costs and estimates, because defen-dants in four cases had issued subpoenas tothird parties ‘‘seeking all documents in theirfiles relating to the properties at issue.’’(CMO 10 at 1–2.) The Committee, adoptingMagistrate Judge Pollak’s reasoning, statedthat such subpoenas had to be tailored totheir purposes, i.e., obtaining repair cost-re-lated documents, rather than demanding ev-


Sandy Cases, No. 14 MC 41, 2014 WL7011069 (E.D.N.Y. Dec. 11, 2014).

Indeed, at the December 17, 2014 oralargument, defendant (as well as FEMA,while withdrawing its appeal of the No-vember 7 Order) appeared to retreat fromasserting that draft reports were not sub-ject to disclosure under the CMOs. In-stead, defendant argues that it was awaredrafts in its own files had to be produced,but not aware that it had to produce filesheld by third parties, i.e., USF, the engi-neering firm retained by defendant to eval-uate plaintiffs’ property. Defendant pointsto the discussion of draft reports at theFebruary 5, 2014 Hurricane Sandy Com-mittee hearing where the groundwork waslaid for the issuance of CMO 1. Defendantargues that the issue of third party posses-sion of draft reports was raised by theparties at the hearing, when defense liai-son counsel stated:

On the drafts of engineers reports, oneof the things that we struggled with theplaintiffs’ bar in the meetings was youneed initial disclosures. Are each sidegoing to just produce the initial disclo-sures of what the client or counsel pos-sesses, or do they have to go get third-party files like contractors, engineers,estimators, adjusters, and what not?And so, we can do it either way, it justhas to be even and clearly spelled out.

(Tr. of Evidentiary Hr’g, Feb. 5, 2014[‘‘Feb. 5 Tr.’’], at 64–65.) Plaintiffs’ liaisoncounsel added: ‘‘Your Honors, if we’re go-ing to go the more expansive route then 90days is not going to be sufficient.’’ (Id. at65.) Defendant argues that because CMO1 ordered automatic disclosures to be com-pleted in 60 days, and it did not expresslystate that parties must collect the files ofengineers, adjusters, and other third par-

ties, the CMO did not require disclosure ofdraft reports held by third parties.

[7, 8] These arguments are unavailing.The fact that the discovery deadline wasshorter than requested does not belie theobvious meaning of the plain language.The CMO required draft reports be dis-closed, and—as shown by the discussion atthe hearing cited by defendant—all theparties were aware that third party engi-neers might possess those drafts. FederalRule of Civil Procedure 34 provides thatparties shall ‘‘produce’’ documents ‘‘in theresponding party’s possession, custody,and control.’’ Control for the purposes ofdiscovery is broadly defined, and includessituations where the party ‘‘has the prac-tical ability to obtain the documents fromanother, irrespective of his legal entitle-ment to the documents.’’ Golden Trade,S.r.L. v. Lee Apparel Co., 143 F.R.D. 514,525 (S.D.N.Y.1992) (citations omitted); seealso Arkwright Mut. Ins. Co. v. Nat’l Un-ion Fire Ins. Co. of Pittsburgh, Pa., 90Civ. 7811(AGS) 1994 WL 510043 at *3(S.D.N.Y. Sept. 16, 1994) (control includesthe ‘‘legal right or practical ability to ob-tain [documents] from another source ondemand.’’). Here, the draft reports werein the possession of USF, defendant’s re-tained engineering experts. Defendanthas offered no proof whatsoever that it didnot have the practical ability or, if re-quired, the legal right to obtain the docu-ments from USF. Indeed, defendant wasable to ‘‘secure’’ the attendance of USFemployees at the October 16, 2014 hearingfor the purposes of testimony on the rec-ord without a subpoena—the Court there-fore finds it hard to countenance (nor is italleged by defendant) that, as part of thestandard relationship between an insur-ance company and its engineering consul-

ery document in a third party’s file, relevantor not. These orders do not relate to defen-

dant’s situation.


tant, documents are not shared as a matterof course at the company’s request. Thelevel of control in this case is no differentthan, for example, the control one main-tains over documents prepared by one’sretained accountants or bankers. See, e.g.,De Vos v. Lee, No. 07–CV–804 (JBW), 2008WL 2946010 at *1 (E.D.N.Y. July 29, 2008)(‘‘documents in the possession of a party’saccountant are deemed within that party’scontrol for purposes of Rule 34 discov-ery’’); Zervos v. S.S. Sam Houston, 79F.R.D. 593, 595–96 (S.D.N.Y.1978) (partysubject to disclosure order is considered tobe in control of banking records not in hisphysical possession). Therefore, it waseminently reasonable for the Committee toexpect that the parties would comply withits discovery orders in accordance with theFederal Rules of Civil Procedure, and pro-duce any responsive documents withintheir control.15 Defendant’s arguments donot demonstrate that the November 7 Or-der’s interpretation of the CMOs is clearlyerroneous or contrary to law.

In any event, as discussed supra,Wright’s argument that the initial Herne-mar report was only in the possession ofthird party USF, and that Wright had noability to know of its existence, is furtherundermined by the post-oral argument dis-closure of additional emails which makeclear that plaintiffs sent an email with aphotograph of a portion of the initial re-port to Wright’s Vice President of Claims(Jeff Moore) on January 28, 2013. Thus,any reasonable inquiry into the documents

in the possession of Wright would haverevealed the existence of the initial report(including emails related to the report),and the report and related documentscould have been easily retrieved and pro-duced pursuant to the CMOs.

Defendants and USF as amicus curiaeseemingly ascribe Magistrate JudgeBrown’s interpretation of the CMOs to amisunderstanding of the engineering peerreview process. Both attempt to arguethat, even after Magistrate Judge Brown’sinquiry into whether Wright violated thediscovery order and disclosure of the draftreport/redline on plaintiff’s property wasmade, no professional misconduct on thepart of USF or Wright has been identified.The November 7 Order is decried as amisunderstanding of the necessity and va-lidity of the peer review process in engi-neering and other fields.

This argument misses the point. ThisCourt does not hold that the peer reviewprocess as a methodology is unsound,flawed, or fraudulent. To the extent thatany aspect of the November 7 Order couldbe read to imply that, this Court makesclear that the concept of peer review is notbeing placed into question by this Court.Further, this Court is not holding that anindividual peer review resulting in achange of conclusions from the originaldraft is inherently wrong or fraudulent.In some cases, it well may be that theinitial examiner made mistakes that shouldbe corrected upon review.

15. Defendant argues that not a single plaintiffor defendant interpreted the CMOs to requiredisclosure of drafts held by third parties. TheCourt doubts this is the case—especially givenCMOs 8 and 10, discussed supra, whereclearly some plaintiffs argued that the re-quired third party documents were outsidetheir control and the Committee allowed de-fendants to issue subpoenas—but even if itwere, wishful ‘‘group think’’ by similarly situ-ated parties is not an excuse for ignoring the

CMOs’ plain language and the Federal Rulesof Civil Procedure. To the extent that defen-dants in other cases, many of whom filedmotions for reconsideration of the November7 Order that the Committee denied, arguethat the November 7 Order should be limitedin its applicability to Wright alone, that argu-ment is unavailing because the CMOs them-selves are applicable to all Hurricane Sandydefendants.


What the CMOs, the November 7 Order,and now this Court all demand is transpar-ency into the engineering peer review pro-cess via discovery, so that plaintiffs canexamine and challenge their claims deter-minations on a case-by-case basis. In thiscase, Magistrate Judge Brown found itincontrovertible that Garove removed ob-servations made by Hernemar about plain-tiffs’ property and substituted contradicto-ry or highly misleading observations intheir place.16 He also found that Garovechanged the final conclusions of the reportbased, at least in part, on those misleadingobservations. Garove in fact admitted thathe was the one who ‘‘rewrote’’ the report,but his name did not appear anywhere onit as a peer reviewer, let alone as anauthor. Magistrate Judge Brown’s find-ings regarding the flawed ‘‘peer reviewprocess’’ in connection with plaintiffs’property in this case are certainly noterroneous. Obviously, without visibilityinto the peer review process, plaintiffs

would be at a significant disadvantage inpursuing their claims.

This Court concludes that the unprinci-pled nature of the peer review process inthis particular case, as applied to plaintiffs’property, is apparent to even the layper-son.17 This Court is, to be clear, not refer-ring to the peer review process concept ingeneral in the insurance industry, butrather only the manner in which this par-ticular report was reviewed and modifiedwas flawed and unprincipled, and the con-cealment of that process was in violation ofthe discovery orders. As discussed below,that violation was further compounded bythe conduct of counsel at the evidentiaryhearing itself. Again, the need to followthe CMOs and provide transparency intothe claims process is crucial to a fair litiga-tion of the plaintiffs’ claims in all Hurri-cane Sandy cases.

Accordingly, defendant’s appeal with re-spect to Magistrate Judge Brown’s inter-pretation of defendant’s discovery obli-gations is denied.18

16. For example, as Magistrate Judge Brownnoted, the December 9, 2012 Report statedthat, ‘‘The crawl space could not be thorough-ly inspected due to congestions of lose [sic]floor insulation hanging down, debris and astark smell of undetermined petroleum prod-ucts.’’ (December 9, 2012 Report, ECF Dkt.No. 71–6 at 3.) The inaccessibility of thecrawlspace was confirmed by Hernemar inhis testimony. (Oct. 16 Tr. at 61, 107.) TheJanuary 7, 2013 Report, however, provided anumber of purported observations about thestate of the underside of the building fromwithin the crawlspace, such as that ‘‘the ex-posed soil was soft, wet and uneven’’ and‘‘[d]eposits of waterborne debris were notedon the underside of the floor framing and thefloor insulation was matted and fallen.’’(January 7, 2013 Report, ECF Dkt. No. 71–7at 3.) Similarly, Garove modified the report toremove Hernemar’s reference to a ‘‘deposit ofsand’’ around the foundation walls of thehome and his conclusion that ‘‘[f]or the defi-nite determination of the cause of the slope ofthe floor and the leaning of the walls, thesand along the west and south perimeter of

the building had to be removed and maybealso a part of the south west floor has to beopened up.’’ (See Redline, ECF Dkt. No. 77–1 at 7.) Instead, Mr. Garove, in support of thenew conclusions, stated in the modified re-port (which Hernemar accepted) that ‘‘no evi-dence’’ was observed of damage to the foun-dation components. (Id. at 6.)

17. Magistrate Judge Brown also expressed aconcern that this flawed version of peer re-view may be widespread. Obviously, the pre-cise scope of any such unprincipled or decep-tive practices, in the guise of peer review, willbe revealed by the discovery of the draft re-ports required in all the Hurricane Sandycases.

18. To the extent the November 7 Order reit-erating the import of the CMOs was directedonly at defendants, the Committee’s opiniondenying the motions for reconsiderationcured any defect by noting that the languageregarding draft reports in the CMOs was mu-tual, and plaintiffs too are charged with dis-closing any drafts within their control. See In


B. Sanctions

[9, 10] Courts are empowered to issue‘‘just orders’’ if a party ‘‘fails to obey anorder to provide or permit discovery,’’ toinclude such sanctions as ‘‘prohibiting thedisobedient party from supporting or op-posing designated claims or defenses.’’Fed.R.Civ.P. 37(b)(2)(A), (b)(2)(A)(ii).Rule 37(b)(2)(C) further allows courts to‘‘order the disobedient party, the attorneyadvising that party, or both to pay thereasonable expenses, including attorney’sfees, caused by the failure, unless the fail-ure was substantially justified or othercircumstances make an award of expensesunjust.’’ The district courts have broaddiscretion to impose sanctions under Rule37(b)(2), because the Rules are intended toallow discovery to proceed without the de-lay and costs caused by constant courtinvolvement, and ‘‘[w]hen a party seeks tofrustrate this design by disobeying discov-ery orders, thereby preventing disclosureof facts essential to an adjudication on themerits, severe sanctions are appropriate.’’Daval Steel Products, a Div. of Francos-teel Corp. v. M/V Fakredine, 951 F.2d1357, 1365 (2d Cir.1991) (citations omitted);see also Residential Funding Corp. v. De-George Fin. Corp., 306 F.3d 99, 106–07 (2dCir.2002) (noting that Rule 37(b) providesfor sanctions for violations of discoveryorders, in addition to courts’ inherent pow-er to impose sanctions for misconduct indiscovery); Tse v. UBS Fin. Servs., Inc.,568 F.Supp.2d 274, 321–22 (S.D.N.Y.2008)(‘‘Courts in this circuit have often awardedattorneys’ fees to sanction a party whodisregards her discovery obligations.’’) (ci-tations omitted).

In this case, Magistrate Judge Brown inthe November 7 Order imposed sanctionson both defendant and its counsel for vio-

lating the CMO in combination with theconduct that occurred at the hearing. De-fendant is barred from supporting its de-fenses or opposing plaintiffs’ claim withany expert testimony other than Herne-mar’s, or producing, relying on, or creatingany new expert reports. Defendant’scounsel is responsible for plaintiffs’ coun-sel’s reasonable costs associated with themotion for discovery including the hearingand related briefing, because of ‘‘discoveryfailures by defendant’s counsel, the unrea-sonable response by defendant to the alle-gations, and counsel’s shocking attempt tocurtail inquiry during the hearing.’’ No-vember 7 Order at 31. Defendant nowmakes several arguments as to why Magis-trate Judge Brown’s decision to imposesanctions was clearly erroneous and con-trary to law. The Court disagrees, andaffirms the sanctions.

1. Rule 37(b)(2)(A)(ii) SanctionAgainst Further Expert Testimony

[11] Defendant argues that because itappears in this case in its capacity as a‘‘fiscal agent[ ] of the United States’’ under42 U.S.C. § 4071(a)(1), the Court cannotsanction it by estopping the presentationof further expert testimony. Such a sanc-tion, according to defendant, violates theAppropriations Clause of the UnitedStates Constitution. Defendant mostlycites as support inapposite cases, such asOffice of Pers. Mgmt. v. Richmond, 496U.S. 414, 426, 110 S.Ct. 2465, 110 L.Ed.2d387 (1990), which deal with sanctionsgranting ‘‘a money remedy that Congresshas not authorized.’’ See also Jacobson v.Metropolitan Prop. & Cas. Ins. Co., 672F.3d 171, 177 (2d Cir.2012) (finding it‘‘questionable’’ whether the doctrine of re-pudiation applies in the context of NFIP

re Hurricane Sandy Cases, No. 14 MC 41,2014 WL 7011069 at *4 (E.D.N.Y. Dec. 11,

2014).


policies); Gunter v. Farmers Ins. Co., Inc.,736 F.3d 768, 774 (8th Cir.2013) (estoppelcannot be used to compel the governmentto pay out treasury funds beyond congres-sional appropriations limits). Although asingle case cited by defendant, Richardsonv. American Bankers Ins. Co. of Florida,279 Fed.Appx. 295, 299–300 (5th Cir.2008),stands for the somewhat more relevantproposition that an NFIP insurer cannotbe estopped from raising a proof of lossdefense, the evidentiary sanction againstWright in this case cannot in any way beconstrued as estopping defendant from as-serting one of its defenses.

[12] To the contrary, defendant’s sanc-tion merely limits it under Rule37(b)(2)(A)(ii) to presenting the ample ex-pert testimony it already possesses in sup-port of its defense. Under Second Circuitprecedent, the government and its agentscan be subjected to non-monetary eviden-tiary sanctions under Rule 37(b) such asthis one. See In re Attorney General ofUnited States, 596 F.2d 58, 65–66 (2d Cir.1979) (evidentiary or issue-related sanc-tions should be considered before holdingthe Attorney General in contempt), cert.denied, 444 U.S. 903, 100 S.Ct. 217, 62L.Ed.2d 141 (1979); Wahad v. F.B.I., 813F.Supp. 224, 227–28 (S.D.N.Y.1993) (im-posing ‘‘issue-related’’ sanctions underRule 37(b), specifically the establishmentof facts for the purposes of the action, onthe government defendants for failing toobey discovery orders); National LawyersGuild v. Attorney General, 94 F.R.D. 600,615 (S.D.N.Y.1982) (‘‘Rule 37(b) provides acourt with wide discretion in selecting anappropriate sanction. Fines and costsmay be imposed, even against the UnitedStates, the offending party may be pre-cluded from offering proof on particularissues, and, in an appropriate case, judg-ment may be entered against the offend-er.’’).

The November 7 Order does not assessthe most severe sanctions, such as strikinga pleading or preventing Wright from as-serting a defense; instead, it takes themeasured step of preventing Wright fromfurther supplementing its defense with ex-pert testimony beyond what it already pos-sesses. The sanction is narrowly tailoredto the purpose of preventing defendantfrom further delaying the proceedings byengaging in further expert discovery, be-cause of the prejudice caused to plaintiffsby the failure to comply with the CMOs.See Cine Forty–Second St. Theatre Corp.v. Allied Artists Pictures Corp., 602 F.2d1062, 1066 (2d Cir.1979) (Rule 37 issue-related sanctions serve the purpose of ‘‘en-sur[ing] that a party will not be able toprofit from its own failure to comply.’’).Accordingly, the evidentiary sanction doesnot constitute an estoppel in violation ofthe Appropriations Clause.

In sum, defendant has not demonstratedthat the evidentiary sanction against it wascontrary to law.

2. Monetary Sanctions

[13] Defense counsel makes several ar-guments with respect to the monetarysanctions as to why counsel should not bepenalized for violating the discovery orderand for the subsequent conduct. Thesearguments are addressed in turn and, asdiscussed below, this Court finds no error(much less clear error) in MagistrateJudge Brown’s findings, or the exercise ofhis discretion to impose monetary sanc-tions based upon this findings.

Counsel for defendant first argues thatit should not be singled out and sanctionedfor discovery violations based on a misun-derstanding of the CMOs because, it alleg-es, all the attorneys for defendants in theother hundreds of Hurricane Sandy caseshad the same misunderstanding, and allfailed to disclose documents such as drafts


created by third party engineers. As dis-cussed supra, the allegation that othersalso ignored the CMOs’ obvious plain lan-guage does not mitigate the violation, es-pecially given the circumstances surround-ing the violation in this particular case(including the conduct at the evidentiaryhearing) and the prejudicial impact theviolation had on plaintiffs. Furthermore,as evidenced by the discussion at the Feb-ruary 5, 2014 hearing counsel referencedin the briefing, all parties and their attor-neys were aware that third party engi-neers might possess drafts of engineeringreports.

Federal Rule of Civil Procedure 26(g)(1)requires attorneys to make a ‘‘reasonableinquiry’’ to ensure a discovery response iscomplete and correct. The Court agreeswith Magistrate Judge Brown that counselfailed this duty, because merely askingWright for its own file on plaintiffs’ claimwas an insufficient inquiry given the lan-guage in the CMO. As stated above, coun-sel was aware that USF might have draftsof engineering reports, and there is noevidence to suggest that USF’s files couldnot be easily requested. Moreover, as dis-cussed in supra note 3, the emails defen-dant disclosed on December 23, 2014, wellafter Magistrate Judge Brown issued hisopinion, reflect that defendant was wellaware of a possible conflicting draft reportin the case at bar because plaintiffs noti-fied Moore, defendant’s Vice–President ofClaims, directly on January 28, 2013, andattached a photograph of the initial report.The Court is now unsure whether defensecounsel even reasonably investigated intotheir own client’s documents (includingemails), let alone made reasonable inquiryto third parties under the client’s control.

Additionally, separate from the draft re-port issue, CMO 1 demanded ‘‘all TTT pho-tographs taken of the damage or claimedlosses.’’ (CMO 1 at 9.) The final USF

report, which both Wright and counsel ad-mit to having received, stated that it onlycontained ‘‘representative photographs,’’and that ‘‘photographs taken but not in-cluded in the report are available uponrequest.’’ (January 7, 2013 Report, ECFDkt. No. 71–7 at 5.) Not obtaining theadditional photographs from the preparersof the report was yet another clear viola-tion of the CMO.

Defense counsel similarly argues that itshould not be sanctioned for failing to dis-close the draft report when plaintiffs hadknowledge of its existence since January25, 2013, whereas Wright and defensecounsel allegedly did not know the Decem-ber 9, 2012 report existed. While thisargument is entirely negated by the emailsbetween Moore and plaintiffs, MagistrateJudge Brown did not have the benefit ofthat information, and limited the time-frame of the monetary sanction to theperiod after the September 26, 2014 mo-tion because he believed that plaintiffsknew there was a discrepancy with respectto the engineering report and did not raiseit with the Court or defense counsel priorto the September 26, 2014 motion. SeeNovember 7 Order at 30–31. This consid-eration mitigates the sanction on counselsuch that this objection is not warranted.

In any event, defense counsel is notbeing unfairly targeted in a manner con-trary to law or factually erroneous becausethe sanctions are based on more than justthe failure to obey the CMOs’ require-ments. Counsel aggravated the initial vio-lation by its unreasonable response toplaintiffs’ motion for discovery, includingthe conduct at the October 16 hearing.

Defense counsel argues in response thatthere was no attempt to curtail the testi-mony at the hearing in front of MagistrateJudge Brown, and further argues that,even if there were, such conduct is notsanctionable because any conduct at the


hearing was not in violation of any discov-ery order.

This argument is inconsistent with boththe facts and the law.19 First, it is plainfrom the record that counsel made a sig-nificant misrepresentation to MagistrateJudge Brown with respect to the contentof Garove’s testimony. In explaining whyhe believed the hearing should end withoutGarove testifying, defense counsel stated,‘‘Judge, my feeling is that, based on thetestimony this morning and based on thereason for this hearing, the hearing isresolved. The witness clearly testifiedthat those were his opinions adopted byhim following a peer review process; thathe wasn’t required, he wasn’t compelled,he wasn’t really told to do anything. Headopted the opinions.’’ (Oct. 16 Tr. at121.) Counsel then made a ‘‘representa-tion’’ to the court that Garove would testifythat he made ‘‘suggestions’’ to Hernemaron the report, and then ‘‘the two engineersconsult [sic] about the suggestions.’’ (Id.at 124.)

In fact, Garove’s testimony, as summa-rized in detail supra and by Magistrate

Judge Brown, presented a starkly con-trasting version of the peer review processthan Hernemar’s, a version that also di-rectly contradicted counsel’s representa-tion to Magistrate Judge Brown. It is,frankly, irrelevant whether or not counselmade that misrepresentation out of aknowing attempt to prevent harmful testi-mony or, as averred at oral argument, outof ignorance because counsel had neverdirectly conferred with Garove about thecontent of his testimony.20 Neither re-flects an adequate rationale for makingevidently false statements to the Court.Moreover, Hernemar never mentioned theexistence of a redline document; had Ga-rove not testified, the existence of thatadditional (and crucial) document and Ga-rove’s admonition to ‘‘note’’ the changesand comments and ‘‘finalize this report andsend to Donna for issue’’ would not havebeen disclosed. If Magistrate JudgeBrown had accepted defense counsel’s ar-guments and ended the hearing beforeGarove testified, plaintiffs and the Courtwould have been left with a drastically

19. As a threshold matter, the Court disagreeswith the argument by Wright that the eviden-tiary hearing was somehow limited to wheth-er there was an alteration of initial reportwithout the author’s consent and, thus, Mag-istrate Judge Brown’s inquiry should haveended once Mr. Hernemar testified that heagreed to the changes. First, the fact thatHernemar gave that testimony is certainly notdispositive of that issue. The Court has everyright to hear the testimony of other relevantwitnesses, including Mr. Garove, on that is-sue. Second, the hearing was not limited tothe issue of unauthorized alteration of thereport (although that allegation was made byplaintiffs’ counsel). Instead, MagistrateJudge Brown made clear that the entire cir-cumstances surrounding changes between theundisclosed initial report and the report pro-duced in discovery. (See Electronic Order,No. 14–CV–461(JFB)(SIL)(GRB), Oct. 1, 2014(‘‘Counsel for the parties will ensure that Mr.George Hernemar will be present in person to

testify about the preparation and submissionof the report and related matters. Counselfor defendants will also produce any othernecessary witnesses to explain, as appropri-ate, any differences between the purportedoriginal report and the report ultimately pro-duced in discovery.’’).)

20. Counsel argued at oral argument aboutwhat was intended by defense counsel’s use ofthe word ‘‘consult’’ at the October 16, 2014hearing. Defense counsel argued that theword in isolation could encompass Garove’saccount of the peer review process as well.Given the context of Hernemar’s testimonyabout ‘‘open discussion’’ and telephone con-versation(s) immediately preceding these rep-resentations, defense counsel, in arguing thatGarove’s testimony would be repetitive, clear-ly intended ‘‘consult’’ to convey the same im-pression. The Court agrees with MagistrateJudge Brown on this point that this is cleareven from a reading of the transcript.


different impression of the draft reportsand the peer review process with respectto plaintiffs’ property. Furthermore, theexistence of the critical redline documentwould have for some unknown period re-mained undisclosed.

Defense counsel’s conduct exemplifieswhat the Second Circuit was describingwhen it discussed a party’s frustrating dis-covery by ‘‘preventing disclosure of factsessential to an adjudication on the merits.’’Daval Steel, 951 F.2d at 1365. In DavalSteel, the party was in fact sanctioned notjust for its violation of an order from thecourt to produce a witness for a deposition,but also for the conduct of counsel at thedeposition and the party’s refusal to con-tinue the deposition after an abortive ini-tial session because that conduct ‘‘evince[d]a willful frustration of [ ] efforts to discov-er the true facts.’’ Id. Magistrate JudgeBrown did not err in concluding that coun-sel’s conduct in responding to courts’ dis-covery orders, as well as the conduct atthe hearing, evinced a willful effort to frus-trate the discovery of the true facts.21

In sum, defendant’s counsel wishes toparse each statement made to MagistrateJudge Brown and argue that sanctionswould not be warranted based on onestatement. Defendant’s counsel furtherargues that no other defense counsel, whomay have failed to produce such reportspursuant to the CMOs has been similarlysanctioned. However, those arguments

overlook that Magistrate Judge Brown’ssanctions were based not only on the fail-ure to produce the initial report as re-quired by the clear language of the CMOs,but on a combination of additional factualfindings in this particular case, including,inter alia, the following: (1) the failure toproduce the initial report (and the processused to modify that report) concealed aflawed and unprincipled process in thisparticular case; (2) the lack of disclosurein this particular case unreasonably pro-longed the litigation, imposed unnecessarycosts on plaintiffs, and further delayed res-olution of the claim; and (3) defense coun-sel’s response to the allegations, and theattempt to curtail the hearing, further ex-acerbated the prejudice to plaintiffs interms of delay and costs. Thus, it is thetotality of the circumstances upon whichthe sanctions were based, consistent withthe law and Second Circuit precedent.

Accordingly, the Court also affirms theNovember 7 Order with respect to thesanctions for attorneys’ fees.

IV. CONCLUSION

For the reasons set forth herein, theCourt affirms Magistrate Judge Brown’sNovember 7 Order in its entirety.

SO ORDERED.

,

21. Counsel for defendant argues that asanction is improper for suggesting, afterconsultation with FEMA, that an indepen-dent engineering review (once an issue wasraised regarding the validity of these re-ports) should be performed. That sugges-tion itself obviously was not the basis ofMagistrate Judge Brown’s sanction. WhenMagistrate Judge Brown refers to defensecounsel’s response to the allegations, he wasreferring to, among other things, the failureto investigate the allegations prior to thehearing and the efforts to curtail the hear-

ing to leave the Court ‘‘with a distinct mis-impression of the practices employed byU.S. Forensic.’’ November 7 Order at 29.Although Magistrate Judge Brown also ref-erences attempts to ‘‘defend the indefensiblepractices’’ revealed at that hearing, he wasreferencing counsel’s failure to recognizethe seriousness of the conduct at USF andthe prejudicial impact it already had onplaintiffs (and the threat to deny the claimif plaintiffs failed to cooperate in anotherreview), and not simply the suggestion of anindependent review in general.

452 76 FEDERAL SUPPLEMENT, 3d SERIES

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