Amway Corp. v. Shapiro Express Co., Inc.

Citations: 102 F.R.D. 564; 1984 U.S. Dist. LEXIS 15456Docket: No. 83 Civ. 1655 (RO)

Court: District Court, S.D. New York; June 28, 1984; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The case involves the alleged destruction of machinery during transit from West Germany to Michigan, with multiple defendants participating in the transportation. Defendant Michael Shapiro contracted to transport the machinery from Newark, New Jersey, to Ada, Michigan. Since January, the plaintiff and co-defendants have faced ongoing obstruction from Shapiro in their attempts to conduct discovery, prompting a motion under Fed. R. Civ. P. 37 to strike his answer and seek further relief. The court finds these severe sanctions warranted due to Shapiro's conduct.

Shapiro has chosen to represent himself despite having legal counsel for other matters. His deposition on January 16, 1984, was characterized by evasive and perjurious responses to straightforward inquiries about his trucking business, Shapiro Express Co. Inc. Despite suggestions from his later-retained counsel regarding bullying during the depositions, the court observed no basis for these claims. Instead, Shapiro's tactics hindered the discovery process, as evidenced by his repeated inability to provide clear answers about his business operations and personal circumstances, including his employment status and vehicle ownership.

The witness initially referred to owning "fourteen or fifteen vehicles," which he later attributed to a slip of the tongue, expressing uncertainty about the actual ownership of the vehicles, including whether they might belong to corporations. He could not provide registration details for the vehicle he drove to the deposition, initially misidentifying it. When asked about trucking firms named Shapiro, he acknowledged Shapiro Express but was uncertain about his involvement, stock ownership, or corporate officers, suggesting he might need to contact the Secretary of State for clarity.

Following several unproductive deposition sessions, counsel sought court intervention. An order to show cause was issued, but the witness, Mr. Shapiro, failed to appear. After extending the order, marshals found him unavailable, claiming he was in Israel. Mr. Shapiro later appeared voluntarily but continued to provide unclear responses. The court noted a need to clarify the seriousness of testifying under oath, emphasizing the potential consequences of false testimony. Throughout the proceedings, inconsistencies in Mr. Shapiro’s answers raised concerns about the reliability of his testimony, prompting the court to indicate that uncertain responses could be treated as perjury.

The witness, Mr. Shapiro, exhibited evasive behavior during questioning regarding his involvement and knowledge of certain matters, particularly relating to a deceased individual, Lampert. The court admonished him for providing false statements and insisted on straightforward responses. Following a prior order for Shapiro to produce specific records related to his trucking companies, he appeared on May 3 with inadequate documentation. His attorney's explanations for this failure were deemed unconvincing, leading to Shapiro being found in contempt and ordered to be incarcerated until compliance. The next day, Shapiro’s counsel provided a substantial number of documents, resulting in Shapiro's release and a continuation of his deposition scheduled for May 29. During this session, Shapiro's responses to inquiries about his business premises were inconsistent and misleading. For instance, he denied knowledge of his office's landlord and claimed to receive office space without compensation, raising suspicions about the truthfulness of his statements. The court noted the contradictions in his answers, suggesting a deliberate intent to obfuscate and harass opposing parties.

On May 29, Mr. Shapiro failed to produce documents he was ordered to obtain by April 25. Following his deposition, he was directed to retrieve certain records from his accountant, which included tax returns for the 14-06 Augustina Avenue Corporation, revealing his long-term status as both stockholder and officer, contradicting prior claims of no ownership or knowledge of corporate officers. As a result, the plaintiff and co-defendants sought to strike his answer and pierce the corporate veils of several interrelated shell corporations owned by him.

The court referenced Rule 37(b)(2) of the Federal Rules of Civil Procedure, which allows for various sanctions against parties that fail to comply with discovery orders, including establishing facts in favor of the compliant party, barring claims or defenses, striking pleadings, or even entering a default judgment. The court found Mr. Shapiro's actions to constitute not just disobedience but also perjury and a blatant disregard for the discovery process. Despite the severity of striking his answer potentially leading to a default judgment, the court deemed it necessary due to Shapiro's continuous noncompliance and prior contempt of court, which had already resulted in imprisonment for compliance. The court acknowledged that while severe sanctions require careful judicial discretion, they are justified in cases of willful disregard for court orders, as supported by precedent. Ultimately, the court concluded that merely striking Shapiro's answer might not suffice to provide adequate relief to the parties involved.

Mr. Shapiro's use of multiple trucking corporations to evade liability is to be disregarded in future legal proceedings. His deposition reveals a pattern of utilizing various entities to conceal the true ownership and structure of his operations. Due to his lack of cooperation during discovery, an order under Fed. R. Civ. P. 37(b)(2)(B) is deemed appropriate, preventing him from contesting the piercing of the corporate veil. Additionally, costs and attorney’s fees are awarded for the proceedings following an unsuccessful deposition attempt. The court references established Second Circuit precedent, indicating that, in the absence of a defendant's admission, knowledge of the falsity of statements can only be established through circumstantial evidence. The case of Shapiro Express Co. Inc. exemplifies this issue, as it was classified as an 'inactive' corporation with no income, despite being involved in the transaction related to the bill of lading, suggesting a strategic use of corporate entities to obfuscate financial realities.