ZAVALA ALVAREZ v. DARBAR MANAGEMENT INC (2021)

ORDER

Plaintiff Fructuouso Zavala-Alvarez cooked, cleaned, and washed the dishes at the Delhi Darbar Kabab House on Devon Avenue in Chicago for 20 years. He quit in 2019. He believes that he was underpaid, so he sued the restaurant, its ownership, and its management. He brought claims under the Fair Labor Standards Act, the Illinois Minimum Wage Law, and the Chicago Minimum Wage Ordinance, alleging that Defendants did not pay him statutory minimum wages and overtime.

Discovery did not go smoothly, to put it mildly. At first, Zavala encountered problems obtaining documents from Defendants and getting a straight answer to his interrogatories. Zavala responded by filing a motion to compel, which Magistrate Judge Fuentes later granted. One might have expected that judicial intervention would have put Defendants on the path to compliance. But not here. If anything, the non-responsiveness, evasion, and mendacity got worse.

After encountering more problems, Zavala filed a motion for discovery sanctions under Rule 37 against two Defendants: Darbar Management, Inc. (the restaurant) and Irfan Moten (an owner). See Pl.’s Mtn. for Discovery Sanctions (Dckt. No. 70). Judge Fuentes presided over a two-day evidentiary hearing. After compiling the record, Judge Fuentes issued a thorough and comprehensive Report and Recommendation that recounted Defendants’ serial non-compliance. The “testimony revealed a pattern of obfuscation, obstruction, and outright lies that made it virtually impossible for plaintiff to use the restaurant's records to prove his case.” See Report and Recommendation, at 10 (Dckt. No. 102).

After reviewing the record anew, the Court hereby adopts the Report and Recommendation in its entirety. Plaintiff Zavala's motion for discovery sanctions (Dckt. No. 70) is hereby granted.

Background 1

According to the complaint, Fructuouso Zavala-Alvarez worked at the Delhi Darbar Kabab House for 20 years. See Second Am. Cplt., at ¶ 4 (Dckt. No. 64). He cooked, cleaned, and washed dishes for two decades. Id. He left the business in May 2019. Id.

Zavala alleges that he worked at the restaurant six days per week from June 2016 to May 2019. Id. at ¶ 20. And the days were long. He worked from 4:00 p.m. to 3:00 a.m. on Mondays, Wednesdays, Thursdays, and Sundays. Id. And he worked from 4:00 p.m. to 4:00 a.m. on Fridays and Saturdays. Id. So, he worked 11 or 12 hours a day, for months on end. Id. That's 68 hours per week. Id. at ¶ 21.

Zavala alleges that Defendants did not pay him what he was owed. He received a weekly salary of $450 from June 2016 to March 2019. Id. at ¶ 22. It went up to $470 for the rest of March 2019, and then to $500 during April and May 2019. Id. Doing the math, that's about $6.61 per hour from June 2016 to March 2019, and $7.35 per hour from April to May 2019.

Zavala ultimately brought claims against the business, Defendant Darbar Management, Inc. (d/b/a Delhi Darbar Kabab House), seeking minimum wages and overtime for the previous three years. He also sued Irfan Moten, one of the former owners. Id. at ¶ 10. And he sued Irfan's brother, Imran Moten, who was a manager. Id. at ¶ 12.

Those three Defendants – Irfan and Imran Moten, plus the restaurant itself – loom large in the motion at hand. But Zavala sued a few other Defendants too, including (1) Salim Moten, a manager; (2) Skaanz Enterprise, Inc., the (alleged) new owner as of September 2019; and (3) Asif Rangoonwala, another one of the (alleged) new owners. Id. at ¶¶ 11, 15, 18, 67.

Zavala served the first wave of discovery requests in September 2019. Defendants served incomplete responses, so Zavala filed a motion to compel in January 2020. Judge Fuentes granted that motion on January 16, 2020. See 1/16/20 Order (Dckt. No. 40). In particular, Judge Fuentes ordered Defendants to produce documents in response to 13 requests, or provide a sworn statement that they lacked responsive documents. Id. at 2. Judge Fuentes expressly “compel[led] Defendants to produce time cards, time sheets, and all records of cash wages paid.” Id.

Judge Fuentes granted the motion to compel answers to four interrogatories, too. One of the interrogatories required Defendants to identify other kitchen workers (i.e., corroborating witnesses). See Defs.’ Answer to Pl.’s Interrogatories, at No. 1 (Dckt. No. 32-2). Other interrogatories required Defendants to disclose how many hours Plaintiff worked, as well as the amount he was paid. Id. at Nos. 2–5.

Defendants later served supplemental responses to the document requests and interrogatories. They supplemented their document production, but the collection remained incomplete. For example, they produced an incomplete collection of statements from PNC Bank. They also produced summaries – not primary source documents – of monthly sales revenue.

Darbar Management and Irfan Moten represented that they had no other records of Plaintiff's hours and wages, except the time cards that they had already produced. Those 21 pages of time cards are critical to this motion, so the Court will call them the “Time Cards.” See generally Time Cards (Dckt. No. 96-8). Defendants responded that they had no cash ledgers or receipts. In their supplemental responses dated January 31, 2020 and February 13, 2020, Defendants represented once again that they possessed no other responsive documents. They also represented that their responses were true and correct and were based on their personal knowledge.

The interrogatory answers were less than forthcoming. For example, in response to the interrogatory about other employees, Defendants identified only three other workers in the kitchen (and even then, one lived in Pakistan, and another person was identified only by his or her first name).

One of the most important interrogatories asked about Plaintiff's hours and wages. Defendants responded that Plaintiff never worked more than 40 hours per week, and that the “exact dates and times of Plaintiff's employment are contained in the production requests herein D000001-D000021.” See Supplemental Answers to Pl.’s Interrogatories, at 2 (Dckt. No. 96-9, at 10 of 14) (emphasis added); see also id. at 3 (“Defendants state that they only have employment records for the Plaintiff pursuant to dates of employment contained in the production requests herein D000001-D000021.”). So, in response to an interrogatory about a central issue in the case, Defendants responded under oath that the Time Cards provided the answer.

The deposition of Irfan Moten began exposing the dark underbelly of the discovery responses. Irfan Moten testified that his brother (Imran Moten) located the Time Cards during a search for records, and he then handed them over to Irfan Moten for production in discovery. See Irfan Moten Dep., at 24–25 (Dckt. No. 70-5). So Irfan testified, under oath, that the Time Cards were legitimate business records located during a search. He gave no indication that the Time Cards were created after the fact and made to look like business records.

And importantly, Irfan Moten also testified that his brother Irman had discarded the time cards for other employees “when we cleaned the place” in late 2019. See Irfan Moten Dep., at 61 (Dckt. No. 70-5). Putting that date in perspective, Plaintiff served document requests on September 5, 2019. So Defendants threw away employee records after discovery was underway.

The deposition also elicited admissions that exposed the falsity of Defendants’ tax returns. They understated revenue and wages to employees. For example, the company's 2018 tax return showed revenue of about $493,000 and wage payment of less than $16,000. The revenue figure was understated because the company did not keep records of cash receipts, or records of sales through Uber Eats (a delivery service). The wage payment was understated, too. It covered only two employees. It did not cover Plaintiff or many other kitchen workers (many of whom were paid in cash). So the tax returns were inaccurate in two critical respects: they did not accurately reflect the cash in, or the cash out.

Filing a false tax return is no small thing. But here, Defendants compounded the deception because they relied on the false information in the tax returns to support their motion for summary judgment. See Defs.’ Mtn. for Summary Judgment (Dckt. No. 35). Darbar Management relied on the tax returns to argue that it had revenue of less than $500,000, and thus had no “enterprise” liability under the Fair Labor Standards Act. Id. The tax returns were one of the pillars of their motion for summary judgment. See Affidavit of Irfan Moten (Dckt. No. 35-1) (relying on the tax returns from 2016, 2017, and 2018). Defendants later withdrew that motion after Irfan Moten's deposition – that is, after the deposition exposed the falsity of the tax returns.

Plaintiff promptly filed a motion for sanctions. See Pl.’s Mtn. for Discovery Sanctions (Dckt. No. 70). Some of the motion focused on the incomplete document production and interrogatory responses. The motion also raised the destruction of documents.

In response, Defendants admitted that they did not keep proper records. “Bluntly speaking the Delhi Durbar Restaurant, owned by Darbar Management, did not maintain the ordinary business records, required by Federal and State law ․” See Defs.’ Resp., at 1 (Dckt. No. 78). Plaintiff “was paid in cash.” Id. So, according to Defendants, they did not produce more records because they did not exist: “Defendant has not produced records as to Plaintiff [sic] hours and pay. The simple response is that there are not records.” Id. at 2. In an accompanying affidavit, Imran Moten flatly denied – in an underwhelming, one-sentence denial – that he had ever destroyed any business records. See Affidavit of Imran Moten, at ¶ 3 (Dckt. No. 78-3).

Judge Fuentes scheduled an evidentiary hearing. Then, five days before the hearing, more of the truth came out. Defense counsel notified Plaintiff's counsel that the Time Cards weren't legitimate business records after all. See 7/23/20 Email (Dckt. No. 89-1). In fact, Defendants created them after receiving Plaintiff's document requests. Id.

In other words, Plaintiff served requests for all records showing the amount of time that he worked, and the amount of money that he received. In response, Defendants created fraudulent documents. They took a pen, filled out some blank time cards, and then produced them in discovery, giving the impression that they were legitimate records of the restaurant. And worse yet, they affirmatively represented that their responses to the document requests were true and correct. So they created false documents, and then lied about it.

Defendants’ story was unraveling, and it fell apart at the evidentiary hearing. Irfan Moten admitted that he created the Time Cards in October or November 2019, after receiving Plaintiff's document requests. He also admitted that he had no personal knowledge of how many hours Plaintiff had worked. He fabricated evidence on a central issue in the case.

Instead of producing actual business records, Irfan Moten decided to make them up. He sat around a table with Irman and Salim, and the three of them fabricated the Time Cards after the lawsuit was underway. See 8/7/20 Tr., at 50–66 (Dckt. No. 94). He picked numbers out of thin air instead of revealing the actual number of hours that Plaintiff worked. He purported to rely on Salim's “memory.” He selected hours that favored his side of the story, wrote them on fake time cards, and produced them in discovery as if they were the real thing.

The admission that he lacked personal knowledge undermined a litany of representations in Defendants’ discovery responses. Judge Fuentes compiled the list. See 1/26/21 Report and Recommendation, at 11–12 (Dckt. No. 102); see also Hearing Ex. 9 (Dckt. No. 96-9); Hearing Ex. 10 (Dckt. No. 96-10). Again and again, Defendants represented that the Time Cards accurately reflected the hours worked and the amount paid. When document requests asked for records about hours and wages, Defendants pointed to the Time Cards. And when the interrogatories asked about the same subject, Defendants pointed to the Time Cards once again. It was a consistent, persistent lie.

The testimony about the document destruction revealed an intent to deceive, too. The document destruction took place two months after receiving Plaintiff's document requests. Irfan Moten testified that Irman Moten told him that he threw away a box of documents. Irman Moten denied throwing away business records, but he admitted searching for records two or three months after the lawsuit was filed. Viewed as a whole, the testimony confirmed that Defendants knew about the document requests, but destroyed documents anyway.

The evidentiary hearing also confirmed that Defendants were less than forthcoming about the identities of other kitchen workers. Irfan Moten knew the names of several more kitchen workers. See 8/7/20 Tr., at 75–79 (Dckt. No. 94). But from November 2019 to February 2020, Defendants served discovery responses that revealed only three names (and one was incomplete, too).

To make matters worse, the hearing confirmed that Irfan Moten made a number of false statements at his deposition. The Magistrate Judge's opinion includes 10 examples. See 1/26/21 Report and Recommendation, at 12 (Dckt. No. 102). One lie stands out: Irfan Moten's statement that he did not know when the Time Cards were filled out, and did not recognize the handwriting. In reality, the Time Cards were prepared after they received the document requests. And Irfan Moten should know – after all, they contain his handwriting.

In sum, Defendants “offered two different sets of facts in discovery in this matter: one before plaintiff's sanctions motion and one after it.” Id. at 15. As the Magistrate Judge found, the record confirms that Defendants orchestrated the “destruction of relevant and likely highly material evidence.” Id. at 16. They engaged in the “fabrication of evidence” by creating phony Time Cards. Id. And they made “repeated false statements” about an assortment of topics, including the authenticity of the Time Cards, the identities of other kitchen workers, and the revenue of the restaurant.

Analysis

The story, as retold in the Report and Recommendation, is a sordid one. “[T]he only evidence Irfan Moten and Darbar Management have produced has been fabricated, perjurious, or tainted by their fabrications and perjury.” Id. at 22.

And it is undisputed, too. After Judge Fuentes issued his report, Defendants filed a Response to the Magistrate's Report and Recommendations. See Dckt. No. 103. Defendants did not disagree with any of facts summarized by Judge Fuentes. In fact, they admitted that Judge Fuentes got it exactly right. “Defendants can not object to the factual findings set forth in the Magistrate's Report.” Id. at 3.

Judge Fuentes summed up the entire saga in one sentence:

It took a sanctions motion by plaintiff, and an on-the-record court hearing with three live witnesses in July and August 2020, to reveal that no contemporaneous records exist at all, that the records plaintiff was led to believe were contemporaneous records in fact were fabricated long after the events in question, that Irfan Moten and Darbar Management knew as early as November 2019 that at least some documents were destroyed after service of the discovery requests to which they were likely responsive, and that virtually everything plaintiff had been told in writing and oral discovery about the nature and quality of defendants’ proof of his work hours and of the restaurant's revenue stream was false or wholly unreliable.

See 1/26/21 Report and Recommendation, at 15 (Dckt. No. 102).

So the facts are undisputed. The only question now is what to do about it.

Judge Fuentes recommended that this Court “sanction defendants Irfan Moten and Darbar Management by holding plaintiff's wage and hour claims, and his claim of FLSA enterprise liability as to Darbar Management, to be established and by precluding those defendants from offering any contrary evidence on those key issues.” Id. at 23.

There is more than ample authority under the Federal Rules to impose that remedy. Rule 37 equips district courts with abundant authority to address discovery abuses. One possible remedy is “directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims.” See Fed. R. Civ. P. 37(b)(2)(a)(i). Another possible remedy is “prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence.” See Fed. R. Civ. P. 37(b)(2)(a)(ii).

There is a compelling need to protect the search for truth. At the end of the day, the judicial system depends on truth telling. A party that fills the courtroom with falsehoods as part of a win-at-all-costs strategy surrenders the opportunity to tell his side of the story. “[F]alsifying evidence to secure a court victory undermines the most basic foundations of our judicial system. If successful, the effort produces an unjust result. Even if it is not successful, the effort imposes unjust burdens on the opposing party, the judiciary, and honest litigants who count on the courts to decide their cases promptly and fairly.” Secrease v. Western & Southern Life Ins. Co., 800 F.3d 397, 402 (7th Cir. 2015).

The recommended remedy fits the facts. Defendants destroyed documents, fabricated evidence, served false discovery responses, and gave false testimony. Litigation is supposed to be about the search for truth. But here, Defendants peddled falsehood after falsehood, destroying the truth and creating a false story based on phony evidence.

And again, Defendants do not disagree with that recommendation. In their response, they did not argue that such a remedy is unsupported by the facts, or disproportionate to the transgressions at issue.

Instead, Defendants argued that other Defendants should be allowed to present evidence on the issues at hand. That is, Defendants argue that the motion was directed at only two Defendants: Darbar Management, Inc. and Irfan Moten. So, as they see it, Irman Moten (the one who destroyed the documents) and the remaining Defendants should be allowed to present evidence on any of the issues, even if the other two Defendants cannot.

The Court leaves that issue for another day. Plaintiff moved for relief against only two Defendants, and the Court has resolved that issue. There is no pending motion for relief against any other Defendant, so the Court will not reach that issue.

But the Court offers three observations. First, one wonders how Irman Moten and Salim Moten could testify about how many hours Plaintiff worked, and how much money he earned. After all, both of them participated in the creation of the phony Time Cards. Irfan Moten sat around a table with Irman and Salim, and the three of them filled in the fake Time Cards, which reflect all of their signatures. Participating in the fabrication of evidence is not a good way to get to the witness stand.

Second, one wonders how Irman Moten could testify about facts after destroying documents that address those facts. According to Irfan Moten, Irman Moten threw away company records about hours and wages. A destroyer of evidence is not in a good position to build evidence on the witness stand.

Third, one wonders how the other two Defendants (Skaanz Enterprise, Inc. and Asif Rangoonwala) will be allowed to present evidence about Plaintiff's hours and wages. They acquired the business in September 2019, four months after Plaintiff left the restaurant for good.

Simply put, the remaining Defendants cannot expect to offer evidence if they lack clean hands and personal knowledge. And here, there is good reason to doubt that the other Defendants have what it takes to testify.

Conclusion

For the foregoing reasons, the Court adopts the Report and Recommendation in its entirety. The motion for sanctions is hereby granted. Plaintiff's wage and hour claims, including the claim of FLSA enterprise liability as to Darbar Management, are deemed established. Defendants Darbar Management and Irfan Moten are precluded from presenting any evidence on the issues covered by this Order, including without limitation evidence about Plaintiff's hours, wages, work schedule, and term of employment. The Court grants the request for reasonable attorneys’ fees and costs. By March 12, 2021, Plaintiff shall file a motion for reasonable attorneys’ fees and costs. The response is due on March 26, and the reply is due by April 2.

Steven C. Seeger, United States District Judge