RINAT HAFIZOV v. BDO USA LLP JANET BERNIER MATTHEW DYMENT (2023)

DECISION and ORDER: MOTION TO AMEND

In this employment discrimination case, Plaintiff claims that he was subject to discrimination, a hostile work environment, and retaliation by his former employer BDO USA, together with his former supervisors, the individual defendants. The matter recently came before the Court on Plaintiff's motion to amend his complaint.¹

BACKGROUND

Plaintiff's motion requested leave to amend in two respects. One aspect of the motion sought to add Title VII claims. The Court previously granted that request, to which Defendants consented, and Plaintiff filed an Amended Complaint accordingly. That aspect of Plaintiff's motion is resolved. The remaining issue is Plaintiff's desire to augment his existing retaliation claims with additional allegations of post-termination retaliation.

The currently operative Amended Complaint contains claims for retaliation based on several pre-termination events and one post-termination event. The alleged post-termination event relates to a letter from BDO's counsel responding to Plaintiff's post-termination letter detailing his claims and declaring his intent to litigate. The BDO letter suggested that Plaintiff's efforts to describe an earlier lawsuit between BDO and an employee other than Plaintiff “may constitute a breach of the settlement agreement.” The Amended Complaint alleges that that aspect of BDO's letter was a threat to assert frivolous claims in response to Plaintiff's protected activity of asserting allegations of discrimination against BDO.² (“Amended Complaint,” Dkt. 60 ¶¶ 128-131.)

Plaintiff's proposed additional amendment seeks to add a second post-termination event of alleged retaliation similar to the first one in that Plaintiff alleges that BDO, through counsel, made another post-termination threat of legal liability against Plaintiff. More particularly, the additional facts relate to a letter from defense counsel sent on February 22, 2023, approximately four months after the litigation began, to Plaintiff's counsel setting forth in detail many purported deficiencies in Plaintiff's discovery responses (the “Deficiency Letter”). (Dkt. 41-7.) The length of the Deficiency Letter, more than 11 pages, generally appears to be a typical deficiency letter an attorney would send in an intensely litigated case such as this one.

At the end of the Deficiency Letter, following a request for Plaintiff to correct the purported deficiencies, defense counsel included a paragraph concerning a recorded telephone call that Plaintiff had produced during discovery. That paragraph, which is the basis for Plaintiff's proposed amendment, reads in relevant part as follows:

Finally, we wanted to make you aware of the fact that pursuant to Plaintiff's initial production of documents, it has come to Defendants’ attention that Plaintiff appears to have recorded a telephone conversation between Plaintiff, Matthew Dyment [one of the Defendants], and Shannon Ford [a non-party] on May 18, 2022. As Plaintiff is aware, Mr. Dyment is a Massachusetts resident, worked (and continues to work) out of BDO's Boston office at the time of Plaintiff's termination, and was in his home in Massachusetts at the time of the recorded call. Massachusetts’ Wiretapping Law makes it a crime to record a wire conversation without the prior consent of all parties to the communication. See Mass. Gen. Laws Ann. ch. 272, § 99(C). Therefore, in addition to breaching his Code of Conduct with BDO, which forbids recording telephone conversations with BDO employees, Plaintiff may have violated Massachusetts’ Wiretapping Law and Mr. Dyment may be entitled to a civil remedy under the law.

The paragraph ended with a footnote stating that Plaintiff may also have violated Florida's Wiretapping Law with respect to Ms. Ford. (Dkt. 41-7 at 11-12.)

In late February 2023, Plaintiff's counsel provided defense counsel with Plaintiff's proposed amendment asking whether Defendants consented to the amendment. The relevant portion of the proposed amendment includes 18 paragraphs devoted to the Deficiency Letter. (Dkt. 41-1 at ¶¶ 132-49.) The proposed new paragraphs follow the existing allegations about the alleged threat related to the settlement agreement and characterize the Deficiency Letter as a second instance of post-termination retaliation. The first proposed additional paragraph sums up the new allegations, claiming: “Defendants, through their counsel, have accused [Plaintiff] of engaging in criminal and civil wrongdoing by virtue of having recorded a conversation at work (the recording of which was produced in discovery) and threatened to pursue bogus and bad faith claims against him by virtue of the recording.” (Dkt. 41-1 at ¶ 132.) Among other allegations, the proposed amendment asserts that, “[u]pon information and belief, Defendants would not have threatened any potential civil counterclaims or criminal liability had Defendants learned about Plaintiff's recording in any other context other than after he asserted legal claims against Defendants.” (Dkt. 41-1 at ¶ 146.)

After having had a chance to review the proposed amendment, defense counsel responded by email that Defendants did not consent to the amendment. That response and the email exchange that followed bear mentioning. In her initial response, defense counsel stated that “the proposed amendments are a gross mischaracterization of the facts and completely ignore your client's wrongdoing.” (Dkt. 41-8 at ECF 5 (email from Lindsay Ditlow to Christina Sabato, Feb. 28, 2023 at 8:11 p.m.).)

In an email responding to defense counsel, Plaintiff's counsel characterized the Deficiency Letter as an obvious threat but invited defense counsel to provide an alternative explanation if there was one. (Dkt. 41-8 at ECF 4 (email from David Gottlieb to Lindsay Ditlow, Feb. 28, 2023 at 9:10 p.m.).) Defense counsel then denied that the Deficiency Letter made any threat and was not an attempt to intimidate Plaintiff. Defense counsel added “Defendants are permitted to defend themselves in this litigation with appropriate counterclaims and affirmative defenses and doing so is not retaliation.” (Dkt. 41-8 at ECF 3 (email from Lindsay Ditlow to David Gottlieb, March 1, 2023 at 1:43 p.m.).)

Plaintiff's counsel then responded that defense counsel's email “makes it clear that the purpose of writing the letter was to ‘assert counterclaims.’ ” Plaintiff's counsel added, “[w]hether counterclaims or threatened counterclaims are retaliatory is a question for a jury. You have also not explained the letter's reference to ‘criminal’ as oppose[d] to civil wrongdoing.” (Dkt. 41-8 at ECF 2 (email from David Gottlieb to Lindsay Ditlow, March 1, 2023 at 2:54 p.m.).) Plaintiff's counsel again gave defense counsel an opportunity to further respond before seeking leave to amend. In the final email response, defense counsel asserted that “[t]he purpose of the letter, as you know well, was to identify issues and deficiencies within plaintiff's discovery production.” Defense counsel further stated that “[n]owhere in the letter did we threaten your client with either actions related to criminal wrongdoing or criminal or civil liability for the prosecution of his claims.” (Dkt. 41-8 at ECF 2 (email from Lindsay Ditlow to David Gottlieb, March 1, 2023 at 6:49 p.m.)

On April 14, 2023, Plaintiff filed his motion to amend. (Dkts. 39-41.) The amendment as proposed folds in allegations about counsel's exchange of emails. The amendment thus alleges that Plaintiff gave Defendants an opportunity to explain the reason for the statements made in the Deficiency Letter; that Defendants admitted that the reason “was because they intended to assert counterclaims against [Plaintiff]”; and that Defendants never provided a reason for referring to Plaintiff's potential criminal liability. (Dkt. 41-1 at ¶¶ 138-143.) The proposed amendment concludes with the following paragraph: “It is clear Defendants’ conduct is an attempt to intimidate [Plaintiff] and chill his prosecution of his claims – consistent with BDO's many-times-over documented practice of retaliating against those who pursue claims.” (Dkt. 41-1 at ¶ 149.)

To be clear, the proposed amendment does not add a new cause of action but instead incorporates allegations about the Deficiency Letter into Plaintiff's existing claim for pre- and post-termination retaliation. Finally, the Court notes that Defendants have not asserted any counterclaims, let alone ones based on the alleged threats in the Deficiency Letter.

LEGAL STANDARDS ON MOTION TO AMEND

The legal standard for considering a motion to amend is well-established. Pursuant to Federal Rule of Civil Procedure 15(a)(2), the Court should give leave to amend when justice so requires. Whether to grant or deny a motion to amend is within the Court's sound discretion but a motion to amend generally should be granted in the absence of futility, bad faith, undue delay, or undue prejudice to the opposing party. See McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007). Where a party moves to amend after the court-ordered deadline for doing so has expired, a good-cause standard applies pursuant to Federal Rule of Civil Procedure 16. That rule does not apply in this instance because Plaintiff sought leave to amend prior to the deadline for doing so as set forth in the amended scheduling order of April 17, 2023 at Dkt. 43.

Proposed amendments are deemed futile when they fail to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. IBEW Local Union No. 58 Pension Trust Fund & Annuity Fund v. Royal Bank of Scotland Group, PLC, 783 F.3d 383, 389 (2d Cir. 2015). Accordingly, to avoid futility, a proposed amended claim must be plausible on its face. Here, Defendants oppose the proposed amendment based on futility and also bad faith.

DISCUSSION

Defendants argue that the amendment is futile because it fails to satisfy two essential elements of a retaliation claim. To properly assert a claim for retaliation, a plaintiff must plausibly allege four elements: that (1) plaintiff engaged in statutorily protected activity; (2) the employer was aware of that activity; (3) the employer took adverse action against the plaintiff; and (4) there is a causal connection between the protected activity and the adverse action. See, e.g., Kessler v. Westchester County Department of Social Services, 461 F.3d 199, 205-06 (2d Cir. 2006). The first two elements are not in dispute on this motion. Plaintiff has alleged that he engaged in protected activity by complaining about and asserting claims for discrimination and a hostile work environment. He also has adequately alleged that his employer, BDO, was well aware of his complaints and legal claims. Defendants focus on the third and fourth elements, arguing that Plaintiff's amendment fails to allege (1) any adverse employment action based on the Deficiency Letter, and (2) any causal connection between protected activity and the alleged threats made in the Deficiency Letter.

An adverse employment action is one that “well might have dissuaded a reasonable worker from making or supporting [similar] charges.” Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53, 68, 126 S. Ct. 2405, 2415 (2006) (internal quotation marks omitted). Plaintiff contends that the Deficiency Letter was an adverse employment action because the last paragraph threatened Plaintiff with counterclaims and raised the prospect of criminal and civil liability in connection with Plaintiff's recording a phone call without the consent of other participants. That threat, according to Plaintiff, would dissuade a reasonable worker from continuing to advance their claim.

The Court credits Plaintiff's counsel with creative and zealous representation of their client. They have taken a routine discovery letter with observations about evidence that the Plaintiff produced and contorted it into an adverse employment action. The last paragraph of the Deficiency Letter merely points out that certain evidence produced by Plaintiff was, allegedly, obtained in violation of the law. To be sure, in the email exchange that followed Plaintiff's proposed amendment defense counsel made a declarative statement that “Defendants are permitted to defend themselves in this litigation with appropriate counterclaims and affirmative defenses.” But neither that statement nor the Deficiency Letter itself can reasonably be considered a threat that would dissuade a reasonable worker from continuing to pursue litigation that he already had filed.

Nor does Plaintiff gain ground by pointing to the fact that Defendants’ brief opposing the proposed amendment discussed the evidentiary vulnerability of the recorded call; rather than contriving a new justification as Plaintiff seems to suggest, Defendants merely responded to Plaintiff's conclusory allegations that “assertion of Mr. Hafizov's potential criminal and civil liability have no relation to any discovery issues.” (Dkt. 41-1 ¶¶ 135-36.) Quite simply, the Deficiency Letter does not qualify as an adverse employment action. Rather it is merely an assertion of factual statements and alleged legal consequences made in regard to the very discovery material that Plaintiff had produced.

As legal support for his argument that the Deficiency Letter is an actionable adverse employment action, Plaintiff offers three legal propositions: first an employer's post-termination conduct can be actionable retaliation; second, counterclaims and lawsuits, even meritorious ones, can be actionable retaliation; and third, threats of retaliation can be actionable. Plaintiff has cited case law supporting each of those propositions. But what Plaintiff has not done is cite any case that is on point to the facts and circumstances of this case.

The case Plaintiff relies on as being most analogous – Van Alphen v. Tocqueville Asset Management, L.P., No. 18-CV-4154, Dkt. Nos. 37, 43 (S.D.N.Y. Feb. 21, 2019) – is materially distinguishable both because the plaintiff in that case was still employed by the defendant employer at the time his attorney received the allegedly retaliatory communication from defendant's counsel, and because the threatened action was tied, either explicitly or implicitly, to whether the plaintiff accepted the defendant employer's settlement demands.

Moreover, the Deficiency Letter cannot be an actionable adverse action because Plaintiff has not plausibly alleged that the counterclaims and actions purportedly threatened are baseless. (Def. Mem. at 10-12.³ ) As Defendants argue, for a counterclaim or other claim made during ongoing litigation to be actionable retaliation, the claim must be both objectively baseless and filed in bad faith. Plaintiff responds that even meritorious claims asserted in bad faith can be actionable retaliation. (Pl. Reply at 6-9.⁴ ) District courts in this Circuit appear divided on that issue, and the Second Circuit has not directly addressed it. See Kim v. Lee, No. 22-CV-61, 2023 WL 2317248, at *3 n.5 (2d Cir. March 2, 2023) (stating, in the context of wage and hour law retaliation case, “we need not decide whether and under what circumstances a non-frivolous counterclaim may constitute unlawful retaliation”).

But, as Judge Failla recently noted, “[a] greater number of courts ․ have required that a filing made in the course of an ongoing litigation be both baseless and made in bad faith in order to constitute an adverse employment action for purposes of a retaliation claim.” Figueroa-Torres v. Kleiner, No. 20-CV-4851, 2022 WL 768483, at *10 n.10 (S.D.N.Y. March 14, 2022) (emphasis in original); see also Sherman v. Fivesky, LLC, No. 19-CV-8015, 2020 WL 5105164, at *2-5 (S.D.N.Y. Aug. 31, 2020) (denying motion for leave to file amended complaint by plaintiff, a former employee, because the former employer's service of a subpoena on the plaintiff's current employer and ensuing motion to add a counterclaim for breach of contract were not objectively baseless).

There are good reasons why both bad faith and baselessness should be required in the context of a case like this one, where the employee already has filed litigation claiming discrimination and retaliation, the employer is vigorously defending itself in the litigation, the case is well into discovery, and the alleged threat appears as a final mention in a routine discovery letter between counsel. For example, as Judge Liman observed in denying a plaintiff's motion to amend to include claims of retaliation based on counterclaims actually filed (let alone ones that are merely threatened), “no reasonable employee should expect that the employer-defendant would simply surrender in the face of litigation.” Sherman, 2020 WL 510516 at *6. And, “[a]bsent both elements” – bad faith and baselessness – employers, already having been sued, could well be chilled from asserting viable counterclaims and defenses, which “raise[s] First Amendment issues.” Figueroa-Torres, 2022 WL 768483 at *10 n.10 (quoting Kim v. Lee, No. 21-CV-3552, 2021 WL 6052122 at *11 (S.D.N.Y. Dec. 20, 2021), aff'd, 2023 WL 2317248 (2d Cir. March 2, 2023)).

In reply, Plaintiff attempts to portray Figueroa-Torres as an outlier that relied on Kim, which was appealed. Kim, however, was affirmed on appeal. And Plaintiff's attempt to portray the Second Circuit as “ma[king] it clear” that courts are to consider whether a claim is baseless or in bad faith, reads too much into what was simply the Second Circuit's noting that it did not need to address the question. (Pl. Reply at 6.)

Notably, the proposed further amended complaint does not allege that a counterclaim by Defendant Dyment against Plaintiff in regard to the recording would be baseless; rather, Plaintiff merely denies that he violated the applicable law. (Dkt. 41-1 at ¶ 144.) Instead, Plaintiff alleges that other theoretical counterclaims would be frivolous – such as those asserted by other of the Defendants. But once again, Plaintiff goes out of his way to contort the Deficiency Letter beyond reason. The only reference to remedial relief in the relevant paragraph is that “Mr. Dyment may be entitled to a civil remedy under the law.” (Dkt. 41-7 at 12.) Plaintiff nonetheless spins the paragraph into a threat of five separate claims. (See Pl. Mem.⁵ at 18 (enumerating (i) threatened counterclaims by Mr. Dyment); (ii) “unexplained, threatened” counterclaims by other Defendants; (iii) threatened civil liability as to Ms. Ford, (iv) threatened criminal liability as to recording Mr. Dyment; and (v) threatened criminal liability as to recording Ms. Ford)).

In short, instead of basing his proposed amendments on what the last paragraph of the Deficiency letter actually says, and instead of considering the context of the last paragraph within the Deficiency Letter, Plaintiff bases his proposed amendment on imagined claims that conceivably could be asserted. That simply is not plausible and is no basis for granting leave to amend.

Nor does it matter that Plaintiff seeks to introduce the additional allegations as a second post-termination incident of retaliation rather than as entirely new cause of action. Allowing the amendment would only lead the parties and the Court down a wayward path of unnecessary time and expense.

Having determined that the proposed amendment is futile due to failure to allege a cognizable adverse employment action, the Court need not and does not address Defendants’ additional arguments that the proposed amendments also fail to allege the requisite causation.

Aside from futility, the only other basis Defendants argue for denying the motion to amend is bad faith. In that regard, Defendants assert that Plaintiff's motion is predicated on several misrepresentations. The examples provided, however, evince aggressive advocacy and hyperbole, and disagreement about characterizations or conclusions to be drawn; they do not demonstrate bad faith. (See Def. Mem. at 19-20 (taking issue with (i) Plaintiff's characterizing Defendants’ assertions in the Deficiency Letter as advancing “bogus and bad faith claims,” (ii) as threatening Plaintiff “when the Letter does no more than relay factual recitations,” and (iii) as “[i]nsinuating that Defendants had included information related to Ms. Ford and Florida's wiretapping statute in the body of the Letter” when such information was included only in a footnote); and (iv) Plaintiff's failure to acknowledge his breaching BDO's Code of Conduct as a claim made by any Defendant other than Mr. Dyment.).) But they are no less futile.

CONCLUSION

For the foregoing reasons, Plaintiff's motion to amend is DENIED. To the extent not otherwise mentioned above, the Court has considered Plaintiff's arguments and determined them to be without merit.

Copies transmitted this date to all counsel of record.

FOOTNOTES

1.   The case has been referred to me for general pretrial purposes. (Dkt. 51.) The Court read the sum and substance of this decision from the bench into the record following oral argument on July 19, 2021.

2.   Defendants previously moved to strike those allegations, along with all other allegations related to the settled litigation involving the other employee. The Court denied the motion to strike. The arguments at issue there, however, are not at issue on the instant motion. Accordingly, the ruling on the motion to strike has little to no relevance to the instant motion.

3.   “Def. Mem.” refers to Defendants’ Memorandum Of Law In Opposition To Plaintiff's Motion For Leave To Amend The Complaint, at Dkt. 45.

4.   “Pl. Reply” refers to Plaintiff's Reply Memorandum Of Law In Further Support Of His Motion For Leave To Amend The Complaint, at Dkt. 46.

5.   “Pl. Mem.” refers to Plaintiff's Memorandum Of Law In Support Of His Motion For Leave To Amend The Complaint, at Dkt. 40.

ROBERT W. LEHRBURGER UNITED STATES MAGISTRATE JUDGE