Opinion
Index No. 651526/2020
07-07-2022
Seaport Global Holdings LLC, Plaintiff, v. Eric Dusansky, Defendants.
Manatt, Phelps & Phillips LLP, New York, NY (Ronald G. Blum and Matthew F. Bruno of counsel), for plaintiff. Polsinelli PC, New York, NY (Gabriel Levinson of counsel), for defendant.
Unpublished Opinion
Manatt, Phelps & Phillips LLP, New York, NY (Ronald G. Blum and Matthew F. Bruno of counsel), for plaintiff.
Polsinelli PC, New York, NY (Gabriel Levinson of counsel), for defendant.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 24, 27, 31, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67 were read on this motion to COMPEL PRODUCTION.
Plaintiff, Seaport Global Holdings LLC, is an investment bank. Seaport formerly employed defendant, Eric Dusansky. Seaport brought this action against Dusansky, alleging that it is entitled to repayment of a promissory note that Dusansky had previously executed in Seaport's favor. Dusansky, alleging that Seaport still owes him commissions and deal-related payments, has counterclaimed for breach of contract.
This court previously engaged in a lengthy discovery conference with the parties and adjudicated a motion to compel. Now before the court is a second discovery motion. Dusansky moves to compel Seaport to provide further document discovery and seeks discovery sanctions. Seaport cross-moves to compel Dusansky to appear for deposition.
Dusansky's motion to compel is granted in part and denied in part. Seaport's cross-motion is denied.
DISCUSSION
"[D]iscovery determinations rest within the sound discretion of the motion court." (Mann ex rel. Akst v. Cooper Tire Co., 33 A.D.3d 24, 28 [1st Dept 2006]; accord Stambovsky v Reiner, 145 A.D.2d 309, 310 [1st Dept 1988] [emphasizing trial courts' broad discretion in supervising discovery].) On this motion and cross-motion, the parties contest-with perhaps unnecessary vigor-several discovery-related issues arising from Dusansky's counterclaim. The court's determinations on these issues are set forth below.
I. The Branch of Dusansky's Motion Seeking to Compel Seaport to Supplement its Document Responses
Dusansky contends that Seaport's existing discovery responses and document productions are insufficient, and that he is entitled to further discovery. He therefore moves to compel Seaport to supplement the discovery it has provided so far. Dusansky's motion to compel is granted in part and denied in part.
Under Dusansky's employment contract with Seaport, he is entitled to commissions on "syndicated" and "co-managed deals" from revenue that he generated and that is credited to the Equity Sales Department. Specifically, the contract provides:
"On syndicated deals (origination business), [Dusansky] will earn sales commissions of 20% of the net revenues generated by [Dusansky] (for [Dusansky's] accounts only) that are credited to the Equity Sales Department on Company-led managed deals.
On co-managed deals, [Dusansky] will be paid at the rate of 25% of the net revenues generated by [Dusansky] (as substantiated per Company police) that are credited to the Equity Sales Department."(NYSCEF No. 27 at 1-2.)
In correspondence between counsel during discovery, Seaport provided a list of 10 deals that were credited to the Equity Sales Department during Dusansky's employment with Seaport. (See NYSCEF 31.) On this motion, Dusansky has provided evidence of at least one more deal credited to the Equity Sales Department while Dusansky was employed by Seaport, involving an entity known as Northern Oil & Gas. (See NYSCEF No. 55 at ¶ 7; NYSCEF No. 56 at ¶ 10.)
On Dusansky's counterclaim, questions remain about (i) whether other deals were, or should have been, credited to the Equity Sales Department during Dusansky's employment, beyond the 11 referenced above; and (ii) which deals properly credited to the Equity Sales Department (whether 11 deals or more) in that period involved Dusansky's clients/accounts, such that he should receive payments based on those deals. Pursuing these questions in discovery entails two further inquiries: (iii) which custodians at Seaport have (or have generated) electronically stored information (ESI) relevant to Dusansky's counterclaim; and (iv) where those custodians' ESI is located, what it consists of, and how it may be searched for relevant documents.
1. Custodians.
The parties previously agreed on the identities of seven custodians. (See NYSCEF No. 49 at 10 [Seaport attorney affirmation in opposition]; NYSCEF No. 56 at ¶ 6 [Dusansky attorney affirmation in reply].) Dusansky has now provided evidence, chiefly in the form of emails about Seaport deals and commissions to be paid on those deals, demonstrating that five additional custodians may have relevant information: Victoria Kump (see NYSCEF Nos. 58, 59); Mary Johnson (see NYSCEF No. 63); and Amorette Salvatore, Michael Bodino, and Brett Hryszko (see NYSCEF No. 59).
Dusansky contends that two additional individuals, Matthew Schandler and Buchanan Lilley, should be treated as custodians of relevant information. (See NYSCEF No. 56 at ¶¶ 8, 11, 13.) This court is not persuaded that the emails and related documents submitted by Dusansky sufficiently support this contention so as to require searching these individuals' ESI.
Dusansky also contends that Seaport should be compelled to identify additional categories of custodians: among others, the individuals at Seaport who(i) were responsible for creating and issuing any policies or procedures for how traders would be compensated for investment banking deals; (ii) determined whether or not any particular investment banking deal would be credited to the Equity Sales Department; (iii) determined whether commissions would be paid to a trader in connection with an investment banking deal; and (iv) created, maintained, or produced the pot lists, pot account lists, pot wires, and banking spreadsheets. (See NYSCEF No. 46 at 7-8 [email from counsel for Dusansky to counsel for Seaport].)
Seaport's response to this contention, previously made in the form of an email from Seaport's counsel, appears to be that "the seven custodians whom the parties previously, and collaboratively, identified are the individuals with information relevant to Defendant's newly minted-requests." (NYSCEF No. 48 at 7; see also NYSCEF No. 46 at 2.) This response is unpersuasive. Even if Seaport's representation were accurate, Dusansky would be entitled to receive that representation in the form of a formal discovery response rather than merely an email between counsel. And the representation does not appear to be accurate. As discussed above, Dusansky has provided emails from Seaport's initial production indicating that other individuals were involved in making determinations with respect to crediting deals to the Equity Sales Department, producing pot lists, and so on, beyond that initial set of seven custodians.
Seaport must therefore identify the individuals at Seaport who, during the relevant period of June 1, 2018, to December 31, 2019, came within the four categories described above. To the extent that this set of individuals includes only the seven custodians previously identified and the five additional custodians listed above, Seaport shall so state.
2. Sources of ESI.
This court's prior discovery order directed Seaport to identify potentially relevant categories and sources of ESI. (See NYSCEF No. 57 at Tr. 19 [excerpt from decision delivered on the record].) Seaport identified three ESI repositories: Global Relay, a third-party platform that stores and maintains electronic communications; and DUDE, a proprietary Seaport platform that "maintain[s] information concerning trades of securities and trade claims"; and Xtiva, a third-party software program that "tracks payments received by Seaport and calculates brokers' commissions." (NYSCEF No. 48 at 9 [Seaport mem. of law, summarizing information provided by Seaport's counsel in emails to Dusansky's counsel].) Over the course of the parties' ensuing meet-and-confer sessions, Seaport identified a fourth source of ESI: the hard drives and other locally stored files of the custodians Seaport had identified. (See NYSCEF No. 46 at 10 [email from Seaport's counsel to Dusansky's counsel].)
a. Global Relay.
With respect to Global Relay, several questions remain about how Seaport uses it to store and maintain ESI, which are discussed further below. The record is clear, though, that Global Relay's ESI can be broken down by custodian and searched using "Boolean, Proximity, and Wildcard searches." (NYSCEF No. 46 at 2.) Dusansky must provide Seaport appropriate search terms for purposes of searching local files and Global Rely repositories for the twelve custodians listed above.
Dusansky has also raised questions about what ESI is, and is not, stored and maintained in Global Relay, to which Seaport must provide further answers. Seaport has indicated, for example, that Global Relay stores "primarily electronic communications." (NYSCEF No. 48 at 12.) This general statement leaves unclear whether and to what extent Global Relay stores other types of documents generated by Seaport executives and employees in the course of their work that might be relevant here. Seaport must supplement its prior responses to address this issue.
Additionally, Seaport's counsel indicated that Global Relay's storage of electronic communications, from which Seaport previously made document productions, includes "instant-messaging[] and Bloomberg messaging," which Seaport executives used to communicate. (NYSCEF No. 46 at 2.) But Dusansky represents in a reply affidavit that Seaport's document productions have not included Bloomberg or instant messages from any of the Seaport officers and executives who made decisions about investment banking deals and revenue sharing. (See NYSCEF No. 55 at ¶¶ 4, 6.) Seaport must supplement its prior productions to indicate whether those productions included Bloomberg/instant messages that Dusansky overlooked (and if so, where in those productions the messages can be found); whether the prior productions inadvertently omitted relevant Bloomberg/instant messages; or whether Global Relay does not contain any responsive Bloomberg/instant messages. Relatedly, Seaport must clarify whether Global Relay's storage has captured all Seaport electronic communications for the relevant period of June 1, 2018, through December 31, 2019; and whether any ESI from that period was previously stored in Global Relay but was at some point deleted or purged (and, if so, what ESI).
b. DUDE.
Dusansky also seeks additional information about ESI contained within DUDE, Seaport's trading-information platform. Seaport suggests that this request should be denied because while at Seaport, Dusansky "asked for, and received, documents and information regarding" DUDE (and Xtiva). (NYSCEF No. 48 at 11.) But the emails to and from Dusansky on which Seaport relies show only that Dusansky received the output of DUDE (and Xtiva)-not that he would have been familiar with the inputs into those programs and the decisions made by Seaport executives and employees about what information he should be provided.
Seaport's counsel also told Dusansky's counsel over email that "to the extent DUDE circulated trade information concerning any of the deals or transactions that were credited to the Equity Sales Department, these communications would have been captured in Global Relay and produced." (NYSCEF No. 45 at 5.) This contention, though, would not necessarily apply either to trade information that was generated within DUDE but not circulated, or to trade information concerning deals that were not credited to the Equity Sales Department, but should have been.
This court concludes that Seaport must supplement its discovery responses with respect to DUDE to provide information on the following subjects: (i) whether DUDE contains information concerning Seaport's investment banking deal revenues and deal-related credits that it collected or did not collect (and, if not, where is that information stored); (ii) how information and data in DUDE is organized; (iii) what types of searches can be run within DUDE; (iv) whether the data stored in DUDE encompasses the full June 1, 2018, through December 31, 2019, period; and (v) whether any data previously stored in DUDE for that period been deleted or purged (and, if so, what information has been deleted).
c. Xtiva.
Dusansky similarly seeks additional information about ESI in Xtiva, Seaport's payment/commission-tracking program. This court concludes that Seaport must supplement its discovery responses with respect to DUDE to provide information on the following subjects: (i) whether Xtiva is used to track investment banking deals; (ii) if so, whether the data in Xtiva include revenues/deal credits received by Seaport in connection with investment banking deals (whether or not commissions were then paid to traders); (iii) which individuals and/or which programs input payment data into Xtiva; (iv) the identity and responsibilities of the Seaport Commissions Director whom Seaport has indicated manages Xtiva; (v) how data in Xtiva is organized (whether by client, by trader, or otherwise) (vi) what types of searches can be run within Xtiva; (vii) whether the data stored in Xtiva encompasses the full June 1, 2018, through December 31, 2019, period; and (viii) whether any data previously stored in Xtiva for that period been deleted or purged (and, if so, what information has been deleted).
II. The Branch of Dusansky's Motion Seeking Discovery Sanctions
Dusansky contends vehemently that Seaport failed to comply with this court's order on Dusansky's first motion to compel, and that its noncompliance warrants discovery sanctions under CPLR 3126. Seaport has admittedly been at times somewhat uncooperative in discovery; and its interpretation of this court's prior order was unduly narrow. But this court is not persuaded that Seaport's conduct was so obstructive or improper as to warrant discovery sanctions. Dusansky's sanctions request is denied.
III. Seaport's Cross-Motion to Compel Dusansky to Appear for Deposition
Seaport has cross-moved to compel Dusansky to appear for his deposition. Seaport argues that it has produced all relevant information and documents and that no further paper discovery remains. As set forth above, this court disagrees. Given that significant paper discovery must still be provided, Seaport's effort to require Dusansky now to appear for a deposition is premature. The cross-motion is denied.
Accordingly, for the foregoing reasons, it is
ORDERED that the branch of Dusansky's motion seeking under CPLR 3124 to compel Seaport to supplement its discovery responses is granted to the extent set forth below and otherwise denied:
(i) Dusansky must, by August 19, 2022, provide Seaport with appropriate search terms for ESI stored in the local files of the 12 custodians referred to above and stored in Global Relay for those 12 custodians;
(ii) Seaport must, by August 19, 2022, provide Dusansky with responses to the various questions relating to Global Relay, DUDE, and Xtiva that are discussed above;
(iii) Seaport must, by September 30, 2022, produce documents from the 12 custodians' local files and Global Relay storage that are responsive to the search terms provided by Dusansky;
(iv) Dusansky must, by September 30, 2022, provide appropriate search terms for ESI stored in Xtiva and DUDE for the 12 custodians referred to above; and
(v) Seaport must, by November 18, 2022, produce ESI from Xtiva and DUDE responsive to the search terms provided by Dusansky;
and it is further
ORDERED that the parties shall meet and confer at mutually convenient times during this period about the ESI search terms provided by Dusansky and the likely volume of ESI that those terms will return; and it is further
ORDERED that the parties may by mutual agreement adjust these deadlines without court approval; and it is further
ORDERED that the branch of Dusansky's motion seeking discovery sanctions under CPLR 3126 is denied; and it is further
ORDERED that Seaport's cross-motion under CPLR 3124 to compel Dusansky to appear for a deposition is denied; and it is further
ORDERED that the parties appear before this court for a telephonic status conference on October 7, 2022.