Plaintiff’s Claims Dismissed Due to His Invocation of his Fifth Amendment Rights When Being Deposed

On June 22, 2022, Justice Cohen of the New York County Commercial Division issued a decision in Small v. DMRJ Group LLC, 2022 NY Slip Op. 31956(U), dismissing a plaintiff’s claims because of his invocation if his Fifth Amendment rights when being deposed, explaining:

In its own motion for summary judgment, DMRJ argues that the action must be dismissed as a consequence of Small’s invocation of his Fifth Amendment privilege during discovery in this action. Under New York law, the privilege against self incrimination was
intended to be used solely as a shield, and thus a plaintiff cannot use it as a sword to harass a defendant and to effectively thwart any attempt by defendant at a pretrial discovery proceeding to obtain information relevant to the cause of action alleged and possible defenses thereto.

DMRJ’ s motion is granted. By repeatedly invoking his Fifth Amendment right at his deposition, Small is preventing the defendant from properly defending the lawsuit. Even if Small prevails on his interpretation of the Operating Agreement and IMA, D MRJ still may defend on the basis that Small’s claim effectively rewards him for fraudulent conduct. As noted above, a contract is unenforceable under New York law if it is closely connected with an unlawful act. Accepting Small’s contention that losses on certain investments, designated as Realized Only assets in the IMA, do not matter for purposes of calculating IMA Net Profits, DMRJ still may argue that ignoring those losses permit Small to profit by his own fraud. And in that regard, Small refused to answer basic questions about his role with Black Elk:

When asked when was the first time that you heard the name Black Elk, Small invoked the Fifth Amendment.

When asked were you the portfolio manager for Black Elk from 2010 to 2015, Small invoked the Fifth Amendment.

When asked and you were obligated to act in PPVA’s best interests in 2014; isn’t that right, Small invoked the Fifth Amendment.

When asked you were in charge of managing Black Elk’s response to the civil and criminal litigation on behalf of Platinum; isn’t that right, Small invoked the Fifth Amendment

When asked if the Black Elk Opportunities Funds were set up to strip value from PPVA, Small invoked the Fifth Amendment.

When asked if subordinating PPVA’s interests resulted in you, personally, Dan Small, being paid out on your $100,000 investment in Platinum Partners Black Elk Opportunities Fund; isn’t that right, Small invoked the Fifth Amendment.

And so on. Small’s unwillingness to testify about his role in causing the losses that allegedly negate his entitlement to compensation prejudices DMRJ’ s ability to defend this case. Notably, the consequences attendant on Small’s repeated invocation of his Fifth
Amendment rights was a risk previewed over three years ago, when DMRJ moved to stay this action pending the resolution of certain civil, criminal and regulatory actions currently pending against Small. Among other things, DMRJ forewarned that the effect of the pending criminal action against Plaintiff is likely to result in Plaintiff pleading a Fifth Amendment privilege in response to defenses raised by Defendant, thus substantially prejudicing DMRJ from defending this action. Small opposed a stay, however, criticizing DMRJ’s flawed reasoning that Small is likely to invoke the Fifth Amendment privilege in this matter. From the outset, therefore, Small assumed the risk that the criminal and civil cases swirling around the Platinum funds and Black Elk could impinge on his ability to prosecute this action.

Small’s arguments to the contrary are unavailing. That Small submitted to 7 hours of examination in which he answered all non-privileged questions not involving the Indictment, for example, does not address the prejudice resulting from Small’s repeated assertion of privilege. In Batista, the First Department permitted defendants to ask questions at depositions relating to issues relevant to their defenses, and cautioned that should plaintiff continue to invoke his Fifth Amendment right against self-incrimination, he does so at the risk of having his complaint dismissed. Similarly, here, it is Small’s refusal to answer relevant questions that prejudices DMRJ, regardless of his willingness to answer questions he deems non-privileged. Also, Small’s argument that DMRJ is not entitled to summary judgment on the merits of its affirmative defenses misses the mark. DMRJ is not moving for summary judgment on its affirmative defenses, but rather based on a showing that Small’s involvement with the Black Elk scheme is relevant to its defenses and that he cannot prosecute this action while at the same time blocking DMRJ’s access to relevant information. Therefore, DMRJ’s motion for summary judgment is granted, and the Complaint is
dismissed.

(Internal quotations and citations omitted).