Opinion
Index No. 510914/2016 Motion Seq. No. 18
01-02-2024
ADAM JOSEPH, individually and as Member of Legs Media, LLC and Milk Agency, LLC, Plaintiff, v. MAZDACK RASSI, individually and as Member of Legs Media, LLC and Milk Agency, LLC; MOISHE MANA, individually and as Member of Legs Media, LLC and Milk Agency, LLC, EREZ SHTERNLICHT, individually and as Member of Legs Media, LLC and Milk Agency, LLC; MILK STUDIOS, LLC; LEGS MEDIA, LLC; MILK AGENCY, LLC; MILK MAKEUP', LLC; MILK MAKEUP HOLDINGS, LLC; MILK MAKEUP MANAGEMENT, LLC; and SCOTT SASSA, Defendants,
Unpublished Opinion
DECISION AND ORDER
HON. LEON RUGHELSMAN JUDGE
The plaintiff has moved seeking to compel discovery pursuant to CPLR §3216. The defendants have opposed the motion. Papers were submitted by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.
As recorded by the Appellate Division in Joseph, v. Rassi, 197 A.D.3d 1156, 151 N.Y.S.3d 359 [2d Dept., 2021] the plaintiff maintains a 25% share of Legs Media LLC, a production company, and Milk Agency LLC, an advertising and social media company. The plaintiff commenced this action, individually and as a member Of Legs Media LLC and Milk Agency LLC, "alleging that the Controlling Members used Legs Media and Milk Agency staff and resources to enhance the value of their separate companies at the expense pf the plaintiff and. the LLCs in which he had an interest. This included appropriation of a cosmetic brand, Milk Makeup, which, was developed by Legs Media staff, and. the use of Legs Media and Milk Agency resources and office -space. The Controlling Members, aided by the defendant Scott Sassa, allegedly redirected significant resources to Milk Makeup, draining Legs Media's resources, and then created new companies which excluded the plaintiff from ownership of Milk Makeup... The Controlling Members also allegedly sought to create a new entity which would fold in Legs Media and Milk Agency, without offering the plaintiff an equivalent interest. The plaintiff rejected an offer made to him with respect to' Legs-. Media., and his employment, as managing member was terminated. The Controlling Members then, started to wind down Legs Media' s. business" (id).
First, the' plaintiff has moved seeking to compel the production of all text messages of the defendants relevant to this lawsuit. The defendants do not really deny the relevance of the text messages they possess but oppose that request, essentially on the grounds the production of text messages for eight devices preserved by the defendants would be prohibitively expensive and could cost almost $50,000. The plaintiff rejects that basis for denial of the discovery.
In one of the earliest New York cases dealing with ESI. the court noted that "electronic discovery raises a series of issues that were never envisioned by the drafters of the CPLR" (see.., Lipco Electrical Corp., v. ASG Consulting. Corp., 4 Misc.3d 1019(A), 798 N.Y.S.2d 345 [Supreme Court Nassau County 2004]). Nevertheless, courts in New York, other states, and the Federal courts have crafted guidelines: and rules to govern discovery for ESI. Thus, Federal Rule of Civil Procedure §26 (b) (2.) (B) amended in 2006 states that "a party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue, burden or cost" (id). In Chen-Oster v. Goldman, Sachs & Co., 285 F.R.D. 294 [S.D.N.Y. 2012] the court held, based upon the advisory Committee notes to the amendments, that the undue burden or costs relate to the accessability of the ESI not the cost of production. The court explained that "for example, the sheer volume of data may make its production expensive, but that alone does not bring it within the scope of Rule 26(b)(2)(B). Rather, the cost or burden must be associated with some technological feature that inhibits accessibility" (id). This comports with the presumption enunciated by the Supreme Court that "the responding party must bear the expense of complying with discovery requests" (Oppenheimer Fund Inc., v. Sanders, 437 U.S. 340, 98 S.Ct. 2380,' 57 L.Ed.2d 253 [1978]). Thus, early cases rejected cost shifting on the basis of undue burden. As one court observed in a design defect case against General Motors "the mere fact that producing documents: would be burdensome and expensive and would interfere with a party's normal operations is not inherently a reason to refuse an otherwise legitimate discovery request" (Baine v. General Motors Corp., 141 F.R.D. 328 [Middle District of Alabama 1991]).
However, recently courts have adopted a more favorable approach to cost shifting.. As one. court recently explained "where the: cost of producing documents is very significant, the Court has the power to allocate the cost of discovery, and doing so is fair. If Plaintiffs' counsel has confidence in the merits of its case, they should not object to making an investment in the cost of securing documents from Defendant and sharing costs .with Defendant" (Boeynames v. LA Fitness International LLC, 285 F.R.D,. 331 [Eastern District of Pennsylvania 2012]).
Turning to New York, courts generally require the party to produce all relevant ESI regardless of the costs involved. However, "the court is ndt insensitive to the cost entailed in electronic discovery, and would, at the appropriate juncture, entertain an application by defendants to obligate plaintiff, the requesting party, to absorb all or a part of the cost of the e-discovery it seeks, or will seek" (Weiller v. New York Life Insurance Company, 6 Misc.3d 1038(A), 800 N.Y.S.2d 359 [Supreme Court New York County 2005]). Indeed, the Commercial Division Rules contain an appendix concerning guidelines for the discovery of ESI.. The guidelines explain that while generally the costs of production fall upon the responding party "however, where the court determines the request constitutes an undue burden or expense on the responding party, the court may exercise its broad discretion to permit the shifting of costs between the parties" (see, NYCRR 22 §202.70 Appendix A VIII(A;). The guidelines enumerate seven factors the court should consider before determining whether cost sharing is appropriate. They include whether the request is tailored to discover relevant information, whether information is available from other sources, the cost of production in relation to the amount of controversy in the case, the cost of production compared to: the amount in controversy as well as the resources of the parties, the ability to control the costs and the importance and benefits of the information sought. Thus, When considering any cost shifting or cost sharing the party seeking to defray the costs must present evidence of the actual costs 1nvo1ved (Bilek v. Federal Insurance Company, 2023 WL 8270362 [Northern District of Illinois 2023]). The defendants have submitted an affidavit from Daniel Generosa, the president of an e-diseovery, litigation support, and legal technology consulting firm., who explains that the: costs of producing the texts sought would be between $30,000 and $50,000 (see, Affidavit, of Daniel Generosa, ¶17 [NYSCEF Doc. No. .436]), The plaintiff produced an: affidavit from Robert Fried a senior vice-president of an eDiscovery, litigation support, and legal technology company, who disputed the conclusions of Mr. Generosa and concluded the total cost of the text messages, sought would be approximately between $9,100 and $18,200 (see, Affidavit of Robert Fried, ¶13 [NYSCEF Doc. No. 448]). The court cannot evaluate whether the wide discrepancy in price is due to factors other than, the fact one is significantly more expensive than the other. In any event, after carefully reviewing all the criteria regarding the costs of ESI the court hereby orders the parties to equally share such costs. The parties may meet and confer and select an expert together. Of course, any cost sharing only concerns the retrieval costs involved.. The costs of reviewing the relevance of such texts is the responsibility of the producing party.
The next discovery issue concerns the personal financial information of the defendants. Specifically, the plaintiff seeks "any and all tax returns, financial statements, personal financial statements, loan applications, or other documents for Rassi, Shternlicht, and Mana which attribute a value for the respective Defendant1s economic interest in any Milk branded entity" (see, Affirmation in Support,' 129 [NYSCEF Doc. No. 420]) . The plaintiff claims, this information is necessary because they "will have the valuations that the controlling members attribute to the entities of Legs Media and Milk Agency. These valuations are relevant to whether Legs Media and/or Milk Agency had the capacity to take advantage of the corporation opportunity Milk Makeup" (see, Affirmation in Reply, ¶10 [NYSCEF Doc. No. 442]). Thus, the plaintiff seeks information regarding the valuations the defendants themselves attributed to the entities. The plaintiff insists that "the valuations of the specific companies are directly relevant to the ability of the companies; to borrow capital and therefore they are directly relevant to the issue of whether the. companies had., the. capacity to take advantage of the Milk Makeup corporate opportunity" (see, Affirmation in Reply, ¶11 [NYSCEF Dod. No.- 442].) .
The reason the defendants sought the plaintiff's financial information, which was provided, was to discern whether the plaintiff even maintained the financial ability to participate in any corporate opportunities. That information is directly relevant to whether the plaintiff can sustain a cause of action for misappropriation of corporate opportunity. There is ho comparable basis to seek defendant's private financial information... However, the. plaintiff argues that "after Joseph produced, financial documentation that demonstrated that he had the financial resources to participate in- Milk Makeup, Defendants shifted their argument to state that the issue was whether Legs Media/Milk Agency had the financial capacity to capitalize the Milk Makeup opportunity" (see, Affirmation in Support, ¶33 [N'YSCEF Doc. No. 420]). Thus, the plaintiff argues they are entitled to the defendant's private financial information to. evaluate the defendant's beliefs regarding valuations and the capacity to engage in any such opportunity. This ''shift" in argument is difficult to comprehend. If the defendants did not have the financial ability to. capitalize the Milk Makeup opportunity then surely the plaintiffs claims for usurpation of corporate opportunity fail.: The defendants could not possibly have any objection demonstrating there was really no ability for any corporate opportunity and thus no basis for plaintiff's claims. Further., if the defendants .did capitalize- the opportunity, which apparently occurred prompting this lawsuit, then the financial information serves no useful purpose to the plaintiff. Thus, the valuations the individual defendants assigned to the Corporations is not relevant. The only relevant issue is whether by engaging in such opportunities they impermissibly harmed the plaintiff. There, is no private financial information that will further any claims. The subjective belief of the defendants prior to engaging in. any opportunity has no bearing on any opportunity that actually happened and the alleged harm plaintiff suffered. Of course, the plaintiff has already been provided with significant information concerning the value of the corporations which surely are relevant to. quantify plaintiff's damages, if any. However, there is no basis to seek information that discloses what the defendants thought the companies were-, .worth. .That information is. simply not relevant. The harm the plaintiff' suffered, if indeed he suffered harm, is the only relevant information in this regard.
Therefore, the motion seeking the financial information of the defendants is denied.
So ordered.