| Holme v Global Mins. & Metals Corp. |
| 2011 NY Slip Op 08683 [90 AD3d 423] |
| Dcmbr 1, 2011 |
| Appellate Division, First Department |
| James W. Holme, Respondent, v Global Minerals andMetals Corp. et al., Appellants. |
—[*1] McMillan Constabile Maker & Perone LLP, Larchmont (William Maker, Jr. of counsel), forBipin H. Shah, appellant. Seidman & Seidman, P.C., New York (Irving P. Seidman of counsel), and Graubard Miller,New York (Steven Mallis of counsel), for respondent.
Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered March 4, 2011,which, insofar as appealed from, granted an adverse inference charge against defendants due tospoliation of electronic records; ordered the corporate defendants' production of an unredactedmaster index and the personal tax returns of defendants R. David Campbell and B.H. Shah within20 days of service of the order with notice of entry; ordered Campbell and Shah, within 20 daysof service of the order with notice of entry, in the event they could not produce their tax returns,to execute all forms needed to permit plaintiff to apply to the Internal Revenue Service to obtaincopies thereof for 1996 through 2010; and stated that the court would grant an oral motion tostrike defendants' pleadings in their entirety if defendants failed to comply with any portion ofthis order, unanimously affirmed, with costs.
The court providently exercised its discretion by granting an adverse inference charge againstdefendants due to their spoliation of their electronic accounting and trading records. Defendantshad an obligation to preserve such records because they should have foreseen that the underlyinglitigation might give rise to the instant enforcement action; the records were destroyed with aculpable state of mind; and they are relevant to plaintiff's claims of fraudulent conveyances (see Ahroner v Israel Discount Bank ofN.Y., 79 AD3d 481, 482 [2010]; Sage Realty Corp. v Proskauer Rose, 275AD2d 11, 17 [2000]), which this Court previously held were sufficiently pleaded to withstanddismissal (Belding v Verizon N.Y., Inc., 65 AD3d 414 [2009]).
Further, the court providently exercised its discretion by imposing sanctions for defendants'alleged failure to comply with orders to provide Global's complete general ledgers andunredacted master index.
The IAS court also providently exercised its discretion by ordering defendants Campbell andShah to produce their individual tax returns. Although disclosure of tax returns is generally [*2]disfavored, special circumstances exist in that plaintiff seeks tosupport his alter ego and de facto merger claims by showing that Global's assets were improperlytransferred while Global was going out of business (see Berger v Fete Cab Corp., 57AD2d 784 [1977]; Chaudhry v Abadir, 261 AD2d 497 [1999]). Concur—Tom,J.P., Andrias, Catterson, Abdus-Salaam and Rom�n, JJ.