Shaffer v. RWP Group, Inc.

169 F.R.D. 19, 1996 U.S. Dist. LEXIS 15773, 1996 WL 607093
CourtDistrict Court, E.D. New York
DecidedOctober 19, 1996
DocketNo. CV 93-4081 (ADS)
StatusPublished
Cited by20 cases

This text of 169 F.R.D. 19 (Shaffer v. RWP Group, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shaffer v. RWP Group, Inc., 169 F.R.D. 19, 1996 U.S. Dist. LEXIS 15773, 1996 WL 607093 (E.D.N.Y. 1996).

Opinion

MEMORANDUM AND ORDER

SPATT, District Judge:

The plaintiffs move, pursuant to Rule 37 of the Federal Rules of Civil Procedure and the Court’s inherent power, for an order sanctioning the defendants for their alleged willful and intentional destruction of documents relevant to the issues presented in this litigation. Specifically, the plaintiffs urge this Court to (1) preclude the defendants from introducing at trial any information or data contained in the documents the plaintiffs maintain were destroyed; (2) deem conclusive the plaintiffs’ calculation, based upon limited data turned over to them, of monetary damages sustained by them in the years 1989, 1990 and 1991, and correspondingly preclude the - defendants from contesting same; and (3) permit the plaintiffs to “inform” the jury of the defendants alleged destruction of documents. The Court having [21]*21reviewed the parties’ submissions, the motion is granted only to the extent set forth below.

BACKGROUND

This action arises out of an Agreement of Sale (the “Agreement”) between the plaintiffs, former shareholders of Donald Shaffer Associates, Inc. (“DSA”), and the defendant RWP Group, Inc. (“RWP”). The Agreement, dated November 18, 1985, took effect on February 1, 1986. The defendant RWP Life Associates, Inc. is an affiliate of RWP. The defendants Roffer, Pollack and Bergner are officers, directors and shareholders of RWP.

In the Agreement, the plaintiffs sold to RWP the assets of DSA, a general insurance brokerage business. Among the assets sold were DSA’s right, title and interest in all insurance entitlements on policies placed by DSA prior to the effective date of the Agreement. In consideration for the asset sale, as well as a noncompetition covenant, DSA was to receive monthly a percentage of the commission income generated by RWP sales to former DSA customers. Pl.Aff. ¶¶ 3-4; Def. Aff. ¶ 2. The Agreement provides in pertinent part as follows:

9.4 Within fifteen (15) days following the end of each month ... [RWP] shall submit to [DSA] a schedule of the Collected Net Commissions and Fees [RWP] received during such month. Such schedule shall be deemed conclusive upon [DSA] if not contested by [DSA] or its authorized representative within six (6) months following its submission by [RWP]. [DSA] or its representative shall be permitted to audit those books and records of [RWP] that contain any of the information set forth on each schedule, upon reasonable request to [RWP], at [RWP’s] place of business during [RWP’s] normal business hours.

The Agreement was amended on or about March 23,1987. The letter amendment, exe-' euted by RWP and Donald Shaffer, on behalf of Shaffer Partners, DSA’s successor in interest, provides in relevant part as follows:

5. Concurrently with the execution hereof, [RWP] is paying to Seller the sum of $10,000 in settlement of all adjustments required in respect of schedules of Collected Net Commissions and Other Commissions and Fees covering the period from commencement of the Agreement through February 28,1987. Such $10,000 ... shall not constitute an advance against Collected Net Commissions or Other Fees and Commissions.

The plaintiffs filed the instant action on September 7, 1993, alleging, among other things, that (1) RWP and RWP Life Associates, Inc. knowingly and fraudulently concealed and diverted portions of the commissions to which the plaintiffs were entitled under the Agreement, including furnishing the plaintiffs with monthly statements understating commission income earned by RWP from DSA accounts, and, correspondingly, the percentage of those commissions due and owing the plaintiffs, see First Amended Complaint ¶¶ 157-193; (2) all of the defendants wrongfully converted commission monies due and owing the plaintiffs, see First Amended Complaint ¶¶ 194-206; (3) the defendants RWP, Roffer, Pollack and Bergner breached their fiduciary duty to the plaintiffs by misappropriating and diverting commission monies, see First Amended Complaint ¶¶ 207-210; and (4) the defendants schemed to defraud Plaintiffs in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 (1984 & Supp.1996), see First Amended Complaint ¶¶ 211-244. The instant motion relates to allegedly destroyed documents that the plaintiffs maintain will prevent them from demonstrating the amount of damages they sustained in 1989, 1990 and 1991 due to the defendants’ alleged concealment and diversion of commission monies dub the plaintiffs.

According to Plaintiffs, commissions generated by former DSA clients can be divided roughly into two areas: “Life” commissions, consisting of group and individual life, disability and health insurance policies, as well as pensions and financial services; and “P & C” commissions, consisting of property, casualty and liability insurance policies. There were two avenues by which RWP collected commissions on the premiums. Sometimes, RWP received a check from the insurance carrier. At other times, RWP sent premium statements directly to the insureds and with[22]*22held their commission prior to forwarding a check to the insurance carrier.

With respect to P & C policies, the plaintiffs identify four “essential” types of documents needed to evaluate the damages they allegedly sustained: (1) customer files, including actual insurance policies; (2) ledger histories, constituting invoices sent and premiums received from individual insureds; (3) commission payables registers (“CPRs”), monthly computer-generated documents containing individual entries of commissions received by RWP with respect to each “producer,” including DSA; and (4) records of RWP’s payments to insurance companies. With respect to the Life policies, the plaintiffs maintain that relevant documents include miscellaneous cash receipts listings (“MCRLs”), computer-generated records that “purport to reflect the Life commissions credited to DSA by tracking the life insurance company statements,” and an “adding machine tape including all of the items that, when totaled, equal the aggregate commissions shown on the top line of the monthly statement.” Brickman Aff. ¶ 14. The plaintiffs state that the MCRLs have not been furnished for the years 1986, 1987, 1988 and the first six months of 1989; additionally, they claim that the adding machine tapes were “discontinued” in December 1989.

In August 1994, the plaintiffs served a document demand upon the defendants. See Brickman Aff.Ex. B. Item 1 sought “[b]ooks of account, general ledgers, cash receipts book, and financial records, whether in paper, electronic, or other form, of [RWP] and RWP Life Associates, Inc. ... together with banking records of RWP Life, all from February 15, 1986 to date.” Item 2 sought “[c]ustomer ledger histories (or their equivalent) for DSA ... accounts from February 15,1986 to date.” Item 3 sought “[CPRs] (or their equivalent), and records from which they were compiled, from February 15, 1986 to date.” In response, the defendants’ attorney, by letter dated January 18, 1995, stated that certain documents had been destroyed by RWP “in the normal course of its business” for the purpose of “obtain[ing] storage space and operating space for more recent records being moved into storage and for records on new business.”

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Bluebook (online)
169 F.R.D. 19, 1996 U.S. Dist. LEXIS 15773, 1996 WL 607093, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shaffer-v-rwp-group-inc-nyed-1996.