Oconnor (Burch vs Burch-brief) Blavatnik
Transcript of Oconnor (Burch vs Burch-brief) Blavatnik
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
J. CHRISTOPHER BURCH, JCB INVESTMENTS, LLC, and C. WONDER LLC,
Plaintiffs,
v.
TORY BURCH, EDUARDO HOLSCHNEIDER, JOHN S. HAMLIN, GLEN SENK, ERNESTO ZEPEDA, MARIA ASUNCION ARAMBURUZABALA LARREGUI, ISLA CORAL, S.A. DE C.V., AND TORY BURCH LLC,
Defendants.
) ) ) ) ) ) ) ) ) ) ) ) ) ) )
C.A. No. 7921CS
TORY BURCH LLC,
Counterclaim Plaintiff,
v.
J. CHRISTOPHER BURCH, JCB INVESTMENTS, LLC, C. WONDER LLC and RIVER LIGHT VENTURE PARTNERS LLC,
Counterclaim Defendants.
) ) ) ) ) ) ) ) ) ) ) )
DEFENDANTS TORY BURCH AND TORY BURCH LLC’S BRIEF IN SUPPORT OF THEIR MOTION TO COMPEL PLAINTIFFS TO
PRODUCE DOCUMENTS AND COMPLY WITH DISCOVERY OBLIGATIONS
EFiled: Dec 03 2012 07:24PM EST Transaction ID 48129673 Case No. 7921CS
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES.............................................................................................. iii
INTRODUCTION............................................................................................................... 1
BACKGROUND................................................................................................................. 7
A. Plaintiffs Seek Expedition, And The Parties Target November 30 For Completing Their Document Productions......................................................................................... 7
B. The Parties Serve Responses And Objections To The Document Requests............................................................................ 8
C. The Parties Meet And Confer On Documents, But Plaintiffs Refuse To Produce Their Search Terms............................. 9
D. Plaintiffs Make An Inadequate And Incomplete Document Production....................................................................... 12
ARGUMENT..................................................................................................................... 16
I. PLAINTIFFS SHOULD BE ORDERED TO COMPLETE THEIR PRODUCTION EXPEDITIOUSLY. ............................................. 16
II. PLAINTIFFS SHOULD BE ORDERED TO EXPAND THEIR LIST OF CUSTODIANS. .............................................................. 18
III. PLAINTIFFS’ FAILURE TO PRODUCE CERTAIN RELEVANT DOCUMENTS IS AN ABUSE OF THE DISCOVERY PROCESS............................................................................ 20
IV. PLAINTIFFS SHOULD BE COMPELLED TO MAKE A RECIPROCAL PRODUCTION OF SAMPLES OF NONRESPONSIVE DOCUMENTS. ......................................................... 22
CONCLUSION ................................................................................................................. 26
iii.
TABLE OF AUTHORITIES
Page(s) CASES
Bayer Healthcare Pharm. Inc. v. Schering Corp., No. 3548VCS at 4, 15 (Del. Ch. May 28, 2009) (Transcript) .................................... 16
DeGeer v. Gillis, 755 F. Supp. 2d 909 (N.D. Ill. 2010) ........................................................................... 18
In re Seroquel Prods. Liability Litig., 244 F.R.D. 650 (M.D. Fla. 2007)................................................................................. 24
Klig v. Deloitte LLP, 2010 WL 3489735 (Del. Ch. Sept. 7, 2010) ................................................................ 16
Monier, Inc. v. Boral Lifetile, Inc., 2010 WL 2285022 (Del. Ch. June 3, 2010)................................................................. 16
Nat’l Day Laborer Org. Network, 2012 WL 2878130 (S.D.N.Y. July 13, 2012) ........................................................ 23, 24
Prod. Res. Grp. L.L.C. v. NCT Grp., Inc., 863 A.2d 772 (Del. Ch. Nov. 17, 2004)....................................................................... 16
Sunnen Prods. Co. v. Travelers Cas. & Surety Co. of Am., 2010 WL 743633 (E.D. Mo. Feb. 25, 2010)................................................................ 17
Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D. Md. 2008)..................................................................................... 24
VSI Holdings, Inc. v. SPX Corp., 2004 WL 6047330 (E.D. Mich. Aug. 6, 2004) ............................................................ 18
William A. Gross Constr. Assocs., Inc. v. Am. Mfrs. Mut. Ins. Co., 256 F.R.D. 134 (S.D.N.Y. 2009) ................................................................................. 24
OTHER AUTHORITIES
Gordon V. Cormack & Mona Mojdeh, Machine Learning for Information Retrieval: TREC 2009 Web, Relevance Feedback and Legal Tracks, in NIST Special Publication: SP 500278, The Eighteenth Text Retrieval Conference (TREC 2009) Proceedings (2009) ............................................................................... 23
iv. TABLE OF AUTHORITIES (Continued)
Page(s)
Maura R. Grossman & Gordon V. Cormack, TechnologyAssisted Review in EDiscovery Can Be More Effective and More Efficient Than Exhaustive Manual Review, XVII Rich. J. L. & Tech. 11 (2011) ............................................................... 23
Quinn Emanuel Urquhart & Sullivan LLP, Predictive coding comes of age (Nov. 19, 2012)......................................................... 24
RULES AND STATUTES
Del. Ct. Ch. R. 34 .............................................................................................................. 17
Del. Ct. Ch. R. 37 .............................................................................................................. 16
1.
Defendants Tory Burch and Tory Burch LLC respectfully submit this brief
in support of their motion for an order compelling plaintiffs to produce documents and
comply with their discovery obligations pursuant to Chancery Rules 26, 34 and 37 and
their commitments to this Court.
INTRODUCTION
In their motion for expedition, plaintiffs represented to the Court that their
document production would be substantially complete by November 30. That
commitment has turned out to be worthless. On November 30, plaintiffs produced just
10,000 documents.1 Much of plaintiffs’ production was makeweight. Some 3,000 of
those documents were nightly sales updates from Tory Burch stores — mass emails to all
corporate employees. Hundreds of pages more consisted of Google alerts and other
public news dispatches. Missing from plaintiffs’ production were the very documents
bearing on the allegations that they make in their complaint. By way of example only:
· Plaintiffs alleged that Chris Burch was totally open with the company, Tory
and director John Hamlin about his plans for his C. Wonder store and that
he showed them exactly what he was planning to do. Documents to back
this? Not there.
· Plaintiffs alleged that defendants wrongfully torpedoed Project Amethyst,
and that Bidder A “reversed its position in a letter to Mr. Burch dated
1 By contrast, Tory Burch LLC produced more than 26,000 documents and over
68,000 pages.
2.
August 1.” Only a handful of documents on Project Amethyst were
produced, and the referenced letter was nowhere to be found.
· Plaintiffs alleged that the defendants tortiously interfered with C. Wonder’s
relationships with its vendors, causing it to find alternate, more costly
arrangements. Documents to back this? Not there.
· Plaintiffs alleged that Chris traveled the world to find sources for the
company. Proof that it happened? Minimal. When pressed to produce
Chris’s calendar, plaintiffs initially resisted and then, weeks into the meet
andconfer process, claimed that they did not know if he kept a calendar.
Are they serious? One document that defendants located in their own files
says that Chris logged 275,000 miles of air travel in 2010,
circumnavigating the globe 11 times. No calendar? Really?
· Plaintiffs alleged that Jorg Mohaupt, the designee of Access Industries’
billionaire founder Len Blavatnik on the Tory Burch LLC board, told his
fellow directors “that he did not see the necessity for a conflicts
investigation committee, that Mr. Burch’s new ventures were a ‘nonissue,’
that Mr. Burch had been exceedingly open about his new brands, and that it
was his opinion that other members of the Board were creating false
allegations for the purpose of forcing Mr. Burch off the Board.” But when
pressed to disclose the extent of the now admitted financial relationship
between Mr. Blavatnik and Mr. Burch, plaintiffs refused. And they told
Access to do the same in response to defendants’ subpoena.
3.
Plaintiffs’ production in response to requests bearing on the counterclaims,
likewise, is also nonexistent. Again, by way of example only:
· The counterclaims allege that Chris asked for and received lists of the
company’s topselling products in a number of categories. Defendants
have produced hundreds of communications Chris Burch had with Tory
Burch employees in which he badgered them for, and received, inside
information. The mirror images of those documents were missing from
plaintiffs’ production. And what did Chris Burch do with all this
information? Can’t tell. The production does not seem to have covered
that.
· The counterclaims allege that the C. Wonder stores shamelessly copy the
distinctive look of Tory Burch stores:
4.
But there were no documents produced that show why the C. Wonder store
design evolved from the following July 2010 image (see Ex. 1):
. . . to this design by the time the C. Wonder stores opened:
5.
Two documents in defendants’ production show that the C. Wonder team
was keenly focused on the Tory Burch store design. The first is an email that Amy
Shecter — who, at the time, was transitioning from Vice President of Global Retail at
Tory Burch to President of C. Wonder — wrote to the manager of the Tory Burch store in
the Short Hills mall alerting the manager that a firm then working on a store design for
Chris’s new venture would be coming by to take pictures of the store. The second is an
email from Nick Matfus, one of Chris Burch’s key executives based in China, in which
he arranged for the drawings for the Tory Burch Short Hills store to be made available to
that same design firm. Exs. 2 & 3.2 Did plaintiffs’ produce these emails? No. Did they
produce the pictures that Shecter arranged to be taken at the Short Hills store? No. Did
they produce the drawings that Maftus provided to Chris’s designers? No. Did they
produce documents showing what happened to the photos and drawings? No.
In short, plaintiffs have produced very few of their own internal
communications. Defendants produced in excess of 2,000 toplevel emails between
Chris Burch’s email accounts at Burch Creative Capital and its predecessors and Amy
Shecter.3 Accordingly, unless documents were deleted or destroyed, plaintiffs should
have found and produced all of these Chris/Amy communications, plus much, much
2 All citations herein to exhibits (“Ex. __”) refer to the exhibits annexed to the
Transmittal Affidavit of Shannon E. German, submitted herewith.
3 The company had these emails because Ms. Shecter had an email account at Tory Burch through the summer of 2010.
6.
more. But plaintiffs’ production contains fewer than 50 toplevel email communications
between Chris and the President of C. Wonder.
If this were just a matter of tardiness, defendants would not be bothering
the Court with this motion. But, unfortunately, there is much more going on here. When
plaintiffs submitted their response to defendants’ First Requests for the Production of
Documents, plaintiffs stated for 18 of the requests that that they would produce
documents pursuant to “search parameters to be agreed upon by the parties.” Plaintiffs
also objected to producing any documents at all to an additional 13 requests, stating only
that they would reconsider their position after the parties met and conferred.
But, after having engaged in weeks of meet and confer sessions, with a
commitment from plaintiffs only that they will produce documents to 28 of the 33
requests based on search terms that plaintiffs have still not turned over and have only
agreed to turn over today after learning that defendants were making a motion to compel.
And plaintiffs also have stiffarmed defendants’ request that plaintiffs expand their group
of 16 custodians to include an additional nine individuals, including Mr. Burch’s former
righthand woman, the president and main designer for his Asian affiliate, 9 Kings, the C.
Wonder director of store interiors and director of store planning, and others plaintiffs
themselves identified as knowledgeable witnesses.
In short, as of today, neither the defendants nor the Court have any idea as
to what process led to plaintiffs’ empty November 30th production, what the plaintiffs are
going to produce in the future, how they will go about finding those documents or when
any additional documents will be produced. This wholesale flouting of discovery
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obligations is unacceptable in any case pending before this Court. It is especially
inappropriate in an expedited litigation.
The Court should order plaintiffs to immediately supplement their
production and provide the same kind of transparency into what they are producing and
how they are producing it that plaintiffs have asked for and received from defendants.
The Court should also order plaintiffs to search for and produce documents from the files
of the additional custodians sought by defendants, and substantially complete production
of documents responsive to defendants’ requests from those files immediately as well.
BACKGROUND
A. Plaintiffs Seek Expedition, And The Parties Target November 30 For Completing Their Document Productions.
On October 2, 2012, plaintiffs filed a complaint alleging that defendants
improperly barred plaintiffs from selling their equity interests in Tory Burch LLC and
tortiously interfered with their right to compete with Tory Burch LLC via a new fashion
brand known as C. Wonder. Shortly after filing their complaint, plaintiffs served on
defendants a set of 22 documents requests. Ex. 4. On October 18, defendants served
document requests on plaintiffs seeking the production of 33 categories of documents.
Ex. 5.
On October 23, plaintiffs moved for expedition. Plaintiffs sought a January
2013 trial date, with document production to be substantially completed by November 30.
At the conference on that motion, the Court stated it would schedule a trial in April 2013
and left the parties to negotiate the details of a pretrial schedule. The parties have, until
8.
recently, assumed substantial completion of document production by plaintiffs, Tory
Burch and Tory Burch LLC in response to initial document requests would occur on
November 30.
B. The Parties Serve Responses And Objections To The Document Requests.
On November 15, plaintiffs and defendants filed their responses and
objections to outstanding discovery requests. Tory Burch LLC and its founder, Tory
Burch, agreed to conduct a search for and produce responsive, nonprivileged documents
in response to every single one of plaintiffs’ requests. See Ex. 6.
Plaintiffs followed a different approach. For 18 of defendants’ requests,
plaintiffs agreed only to provide documents “in accordance with the Search Parameters,”
which plaintiffs defined to mean “search parameters agreed upon by the parties.” Ex. 7,
Response to Request No. 1; see id. Responses to Requests No. 2, 3, 4, 5, 7, 8, 16, 18, 23,
25, 26, 27, 28, 29, 30, 31, 33. For 13 other requests, plaintiffs interposed boilerplate
objections that the requests were “overly broad and unduly burdensome,” among other
grounds. Plaintiffs did not specify what, if anything, responsive to these requests would
be produced. Rather, they stated only that they were “willing to meet and confer.” See
id., Responses to Requests 6, 9, 10, 11, 12, 13, 15, 17, 19, 20, 21, 24, 32.
These requests go to the very core of this case. For example, Request 10 —
which seeks “All documents concerning any information Plaintiffs requested or received
from Tory Burch LLC concerning Tory Burch LLC or any aspect of its business” — goes
directly to defendants’ counterclaim allegations of misappropriation and misuse of
9.
confidential information. See Counterclaims ¶¶ 7477, 85, 90, 91, 9799, 103, 11420.
Similarly, Request 13 seeks documents “concerning the C. Wonder Brand,” including
more than a dozen specific types of brandrelated information, which are plainly relevant
to plaintiffs’ allegations that the C. Wonder brand is “unique” (e.g., Compl. ¶ 50) and
defendants’ contention that it is a “knockoff” of the Tory Burch brand (e.g.,
Counterclaims ¶¶ 3, 5060). But plaintiffs nonetheless declined to produce any
responsive documents.
C. The Parties Meet And Confer On Documents, But Plaintiffs Refuse To Produce Their Search Terms.
After serving their responses and objections, counsel for plaintiffs
suggested a meet and confer on November 19 regarding custodians, time periods and
search terms. In anticipation of that call, defendants asked plaintiffs to be prepared to
state “precisely what Plaintiffs will be prepared to produce in response to Defendants’
requests,” noting that the call would be “more productive if the parties exchange search
terms in advance.” And defendants informed plaintiffs that they would be using
predictive coding. Ex. 8.
On the November 19 call, defendants explained their hybrid approach to
document review, which included: (i) manual attorney review of potentially relevant hard
copy and electronic files in accessible locations; (ii) traditional keyword searching
(including email domain names and individual terms) followed by manual attorney
review of potentially relevant documents identified by those searches (which included the
terms “Amethyst” and “C. Wonder”); and (iii) computerassisted review known as
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“predictive coding.” Defendants have disclosed all of the keywords and domains they
used as part of their process. See Exs. 9 & 10.
Defendants also made available to plaintiffs the Wachtell Lipton attorney
who is implementing the predictive coding process in this case. She explained to
plaintiffs that the “Waterloo” predictive coding algorithm being used was trained by
using a set of documents determined to be responsive or nonresponsive by attorney
reviewers as well as 99 search terms that defendants disclosed to plaintiffs following that
discussion. See Ex. 9. She also explained that the “seed set” of documents used to train
the algorithm was updated iteratively, such that every responsiveness decision made by
an attorney throughout the entire review was considered in the algorithm’s selection of
further potentially responsive documents. Thus, the “seed set” of training documents for
the algorithm encompasses every document deemed to be either responsive or non
responsive by an attorney reviewer.
At the end of that discussion, plaintiffs’ counsel stated that the predictive
coding process “seemed robust” and requested that plaintiffs be given access to
defendants’ entire “seed set” — including documents deemed nonresponsive in attorney
review. Defendants explained that such a request was tantamount to requesting that all
nonresponsive documents reviewed by attorneys be produced. Instead of that
unnecessary and burdensome unilateral production, defendants offered a reciprocal
exchange of a sample of nonresponsive, nonprivileged documents to test and verify the
results of the differing search methods the parties were utilizing. See Ex. 11.
11.
Plaintiffs did not share their search terms in advance of that discussion,
refused to provide them on that call, and stated that they were unwilling to do so until
they became comfortable with defendants’ use of predictive coding. The parties
exchanged multiple emails over the next two days, and again met and conferred for
several hours on November 21. See id. Plaintiffs continued to refuse to disclose their
search parameters. Plaintiffs did agree to produce certain documents in response to
certain other requests, but, once again, they based their proposed production on search
terms that they would not disclose. Plaintiffs agreed to memorialize their revised position
in a letter, which they promised to send on November 23. That day and the next came
and went without a response. See Ex. 12.
On the evening of November 25, plaintiffs sent their letter. Plaintiffs made
seven further demands for information concerning predictive coding, including the full
seed set. Ex. 13. Defendants responded to these demands by letter on November 28,
agreeing to produce all responsive documents in its “seed set” and to provide two 1,000
document samples for testing of both the documents deemed nonresponsive by the
predictive coding process and by the attorney review team that trained it. Ex. 10.
Defendants again explained that the “seed set” for their predictive coding process
represented every single document that had been reviewed by an attorney and that
plaintiffs’ request would require the production of tens of thousands of nonresponsive
documents — a volume of nonresponsive documents larger than plaintiffs’ entire
production on November 30.
12.
Defendants requested, moreover, that any sampling be reciprocal. They did
so because scientific testing has shown that at least as many, if not more, documents will
be missed using plaintiffs’ method of keyword searching as in defendants’ predictive
coding process. As such, defendants’ proposal was that both plaintiffs and Tory Burch
LLC sample 1,000 documents deemed nonresponsive by attorney reviewers and another
1,000 documents that were not reviewed by attorneys. Id. at 1011.
Plaintiffs, however, have refused any reciprocal sampling, and continued to
withhold their search terms until their unilateral demand for sampling was met. They did
so even though they premised their response to 28 of 33 requests on “agreed upon”
search terms that they refused to provide. Nevertheless, defendants have since agreed to
provide nonresponsive documents to plaintiffs so that plaintiffs can assess the reliability
of the predictive coding process both initially and at the completion of production. Ex.
14.
D. Plaintiffs Make An Inadequate And Incomplete Document Production.
Not surprisingly, when the parties exchanged productions on November 30,
plaintiffs’ production was wholly inadequate; their responses have not since been
supplemented. See Ex. 15. Plaintiffs produced just 17,035 pages (representing some
10,000 documents). Approximately onethird of the documents consisted of nightly sales
updates from Tory Burch stores that had been emailed en masse to all Tory Burch
corporate employees. And more than five hundred additional documents were nothing
13.
more than Google alerts and other public news articles. The remainder appears to include
many communications that Tory Burch already had (as one side of the exchange).
Significantly, plaintiffs produced virtually nothing on key issues in their
complaint or defendant’s counterclaims. For example:
a) Plaintiffs allege throughout the complaint that they were forthright
with the Board about C. Wonder before it opened, showing the board “products and
videos regarding the brand” in February 2011. Compl. ¶ 41. They also allege that Chris
laid out the entire C. Wonder concept to Tory at a meeting in Southampton on his iPad
and that he followed up by emailing Tory additional videos and pictures. Compl. ¶ 45.
But there is not a single video file in plaintiffs’ production. And plaintiffs did not
produce the emails Chris says he sent to Tory. Indeed, plaintiffs have not even produced
the email, cited in their complaint, in which Chris Burch disclosed his “actual or potential
conflicts” to the board. See Compl. ¶ 41.
b) Plaintiffs’ complaint holds up Jorg Mohaupt, Access’s
representative on the board, as the only virtuous director on a board that is otherwise
beholden to Tory. E.g., Compl. ¶¶ 4951. But plaintiffs have not produced
communications between themselves and anyone at Access Industries, and the word
“Mohaupt” is nowhere to be found in their production even though, again, their
complaint cites emails authored by Jorg Mohaupt. See id.
c) Plaintiffs complain that Tory Burch wrongfully interfered with the
Project Amethyst bidding process by “berat[ing]” bidders into reversing course and
imposing as a condition of any deal that Chris enter into a settlement agreement with the
14.
company. Compl. ¶¶ 8183. Again, no such documents have been produced. Plaintiffs
failed to produce even the correspondence cited in their complaint showing the purported
change in Bidder A’s in position. See id.
d) In the counterclaims, Tory Burch LLC alleges that Chris Burch
breached his fiduciary duties and contractual obligations under his consulting agreement
by misappropriating the company’s confidential information. The counterclaims cite
eight different categories of confidential information that were provided to Chris Burch in
his role as a consultant, including lists of the company’s topselling shoes, readytowear
apparel, handbags and small leather goods, among other items; detailed cost information
on a number of the company’s topselling items, contact information for the factories that
the company was using to manufacture its goods in China; and a breakdown of the cost to
construct one of the company’s stores. Defendants have produced hundreds of emails
showing all of these items were requested by and provided to Chris Burch at his Burch
Creative Capital email accounts. But plaintiffs have not produced the same emails from
their files and have offered no reason why they are missing. The fact that these emails
were not produced raises grave questions about the integrity of plaintiffs’ production.
e) Plaintiffs have also produced very few internal emails of any type
from their own files. As a company that has aggressively built its brand over the last
several years, it makes no sense that so little C. Wonder branding, public relations and
design materials have been produced. Defendants produced in excess of 2,000 toplevel
emails between Chris Burch, using his email account at Burch Creative Capital (and its
predecessors), and Amy Shecter, the former Vice President of Global Retail at Tory
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Burch who went on to join C. Wonder as its President. Plaintiffs’ production contains
fewer than 50. Something is not right.
16.
ARGUMENT
Delaware’s “well established policy of pretrial disclosure . . . is based on a
rationale that a trial decision should result from a disinterested search for truth from all
the available evidence rather than tactical maneuvers based on the calculated
manipulation of evidence and production.” Klig v. Deloitte LLP, 2010 WL 3489735, at
*67 (Del. Ch. Sept. 7, 2010) (“Discovery is called that for a reason. It is not called ‘hide
the ball.’”). This Court has “broad discretion to craft a proper remedy for discovery
shortcomings” under Chancery Court Rule 37 and its inherent equitable powers. Monier,
Inc. v. Boral Lifetile, Inc., 2010 WL 2285022, at *3 (Del. Ch. June 3, 2010); see also
Bayer Healthcare Pharm. Inc. v. Schering Corp., No. 3548VCS at 4, 15 (Del. Ch. May
28, 2009) (Transcript) (granting motion to compel and awarding costs and fees where a
party’s discovery responses were “slow in actually getting to searching” and “should
have been . . . more forthcoming.” ); Prod. Res. Grp. L.L.C. v. NCT Grp., Inc., 863 A.2d
772, 80203 (Del. Ch. Nov. 17, 2004) (ordering “prompt and complete responses to each
request for production” and awarding costs and attorneys’ fees in response to
“unjustified” objections).
I. PLAINTIFFS SHOULD BE ORDERED TO COMPLETE THEIR PRODUCTION EXPEDITIOUSLY.
As shown above, plaintiffs’ November 30 production was entirely
inadequate, and defendants have no insight as to why categories of documents have been
omitted, including documents cited in the complaint, communications between the owner
17.
and president of C. Wonder, and documents showing Chris Burch’s request, receipt and
use of Tory Burch LLC’s confidential information, among other things. Until hours
before this motion was filed, plaintiffs had refused to disclose their search terms and only
agreed to provide them under threat of this motion. Even now, defendants do not know
what those terms will be, how long it will take to negotiate them, or why entire categories
of evidence are missing from the production that plaintiffs have made.
Plaintiffs’ delays in providing this information and making a meaningful
production are prejudicing defendants’ ability to prosecute their claims and defenses in
this expedited case. Defendants are seeking judicial intervention because they have no
faith that, without Court involvement, they will receive a complete production in a timely
manner.
From the outset, plaintiffs have obscured their process and delayed delivery
of critical information. Chancery Rule 34 requires that responses to requests for the
inspection or production of documents “state, with respect to each item or category, that
inspection and related activities will be permitted as requested, unless the request is
objected to, in which event the reasons for objection shall be stated.” Del. Ct. Ch. R.
34(b). “If objection is made to part of an item or category, the part shall be specified and
inspection permitted of the remaining parts.” Id. Plaintiffs, however, failed to give
defendants substantive written responses to many of defendants’ requests, as they are
required to do, and instead refused to produce based on boilerplate objections with an
invitation to meet and confer. See Sunnen Prods. Co. v. Travelers Cas. & Surety Co. of
Am., 2010 WL 743633, at *1 (E.D. Mo. Feb. 25, 2010) (“The party resisting discovery
18.
must show specifically how each interrogatory or document request is not relevant or
how each question is overly broad, burdensome or oppressive.”).
And even when plaintiffs belatedly committed to producing some
documents in writing, they tethered their responses to 28 of 33 requests to “agreed upon”
search terms. But plaintiffs then refused to tell defendants what search terms they were
using, even though defendants were clearly entitled to this information. Where parties
have refused to disclose their search terms, courts have ordered their disclosure. See,
e.g., DeGeer v. Gillis, 755 F. Supp. 2d 909, 917 (N.D. Ill. 2010) (directing producing
party to “identify the individuals searched and search terms it used”); VSI Holdings, Inc.
v. SPX Corp., 2004 WL 6047330, at *3 (E.D. Mich. Aug. 6, 2004) (ordering plaintiff to
“divulge its search methodology and search terms used to locate responsive documents”).
Indeed, as of the filing of this motion, although they have committed to
providing defendants with their search terms, plaintiffs still have not done so. If and
when defendants receive those terms, they no doubt will need to negotiate supplemental
terms to address the gaping holes in plaintiffs’ current production. Defendants request
that the Court compel plaintiffs to complete their production of documents without
further delay.
II. PLAINTIFFS SHOULD BE ORDERED TO EXPAND THEIR LIST OF CUSTODIANS.
On November 14, plaintiffs provided defendants with a list of 16 custodians
they proposed to use in their review. The next day, defendants requested that 12
additional individual custodians be added — including design executives with C.
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Wonder, Mr. Burch’s former righthand woman, and key players at Chris Burch’s Asian
affiliate, 9 Kings, among others — and asked that plaintiffs search the files of individuals
holding ten corporate positions (including marketing and store managers) at C. Wonder,
if they were not otherwise named.
On November 23, defendants revised their custodian request, narrowing it
to only nine additional named custodians and eight corporate positions. These additional
custodians include individuals involved with the design of the C. Wonder store and the
development of the C. Wonder brand. They also include store managers for the C.
Wonder stores, whose documents may go directly to the issue of customer confusion and
to whether C. Wonder’s customers associated it with the Tory Burch brand.4
Although plaintiffs have had defendants’ proposed additions to plaintiffs’
custodian list for weeks, plaintiffs have not agreed to add any of these custodians.
Plaintiffs have never claimed that adding these additional custodians would be unduly
burdensome or that a search of their files is unlikely to lead to the discovery of relevant
evidence. Accordingly, in light of the expedited nature of these proceedings, plaintiffs
should be ordered to search and produce documents from the files of these additional
custodians without further delay.
4 These additional custodians include individuals that plaintiffs have identified as
knowledgeable. As plaintiffs have designated that response as Highly Confidential, this list of custodians will be provided to the Court when a confidentiality order has been entered.
20.
III. PLAINTIFFS’ FAILURE TO PRODUCE CERTAIN RELEVANT DOCUMENTS IS AN ABUSE OF THE DISCOVERY PROCESS.
As noted above, certain specific categories of documents have been wholly
omitted from plaintiffs’ production and, based on their responses and objections and the
parties’ meet and confers, there is no reason to believe these important documents will
ever be produced. Defendants seek the Court’s assistance in securing their production.
Chris Burch’s Calendar. Plaintiffs allege that Chris Burch was a “loyal,
diligent and active Director” who, among other things, traveled extensively through
China to source goods for the company. Compl. ¶ 11. The counterclaims allege that
when Mr. Burch was taking these trips (and getting $11 million as a management
consultant to do so) he was actually sourcing copycat products and developing copycat
store furnishings for C. Wonder. Counterclaims ¶¶ 3739, 50, 55. Plainly, the nature and
scope of Chris’s business travels are a central issue in this case.
Although there are scattered documents concerning travel arrangements in
plaintiffs’ production, and plaintiffs say they will produce others if they happen to come
upon them, no calendar, diary, daybook or planner of any kind has been produced for
Chris Burch. Defendants have been trying to get plaintiffs to commit to produce Mr.
Burch’s calendar since late October. On Friday night, November 30, the day when their
document production was supposed to be substantially complete, plaintiffs’ counsel said
that they still have not been able to find a calendar and do not know whether one even
exists.
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If counsel does not know whether one exists, it is only because they have
not asked the right person or because the person they asked did not give them a candid
response. The documentary record is clear that one was kept. On December 29, 2010,
one of Chris’s assistants, Stefanie Mohr, sent him an email referencing the “travel
calendar we kept during the year” in the course of calculating over 275,000 airline miles
that Chris Burch flew on business trips that year. See Ex. 16. Nothing justifies further
delay in finding these documents: plaintiffs should immediately produce Chris Burch’s
business calendars and diary entries.
Access Documents. Plaintiffs have failed to produce any documents
concerning the business, financial or other relationships between plaintiffs and Tory
Burch LLC member Access Industries (or its board designees). As noted earlier, in
plaintiffs’ production, there is not a single document that bears the last name of Access’s
representative Jorg Mohaupt, and not a single email sent to or received from Access.
Although plaintiffs paid lip service to meeting and conferring on this request in their
responses and objections, it is now apparent that they will not produce these documents.
Not only have they blocked their own discovery on this issue, plaintiffs
have also instructed Access, its principals, and its directornominees to withhold relevant
documents from their own productions in response to subpoenas issued to them. Access
has agreed to follow this instruction. See Ex. 17. Moreover, plaintiffs have taken the
position that information concerning the financing by Access of, or any investment in, C.
Wonder or Chris Burch’s other businesses is irrelevant and will not be produced.
22.
Plaintiffs’ position is meritless. Their complaint squarely alleges that
Access’s purportedly impartial director sided with Chris Burch in disputed matters and
held the opinion that “other members of the Board were creating false allegations for the
purpose of forcing Mr. Burch off the Board.” Compl. ¶ 51. Plainly, defendants are
entitled to know the nature and extent of any financial relationships in order to test
plaintiffs’ allegation that Mr. Mohaupt stood as the only paragon of virtue on an
otherwise conflicted board.
Defendants also are entitled to know whether Chris used confidential
financial information obtained from Tory Burch LLC to attract Access and potentially
other investors into C. Wonder or one of Chris’ other business ventures, as it appears
from documents in Tory Burch’s own files that he did.5 If such information was shared,
it would directly undercut plaintiffs’ allegations that Mr. Burch “had not and was not
using any of the Company’s confidential information to benefit his new brands.” Compl.
¶ 50.
IV. PLAINTIFFS SHOULD BE COMPELLED TO MAKE A RECIPROCAL PRODUCTION OF SAMPLES OF NONRESPONSIVE DOCUMENTS.
At this stage, defendants have met and exceeded all of plaintiffs’ demands
for information concerning its predictive coding process short of disclosing every
5 For example, in one J. Christopher Capital investment presentation, Mr. Burch
provides inside financial information about the success of Tory Burch LLC in violation of his confidentiality obligations to the company. But plaintiffs have not produced documents and communications showing how Chris and his team used this presentation or to whom it was shown.
23.
document that their attorneys reviewed, including offering to produce samples of
documents deemed nonresponsive. Defendants have also (a) described that process in
detail, both orally and in writing; (b) made the senior attorney who is implementing this
process available for questioning; (c) agreed to consider supplemental custodians, “seed
documents” and keyword searches that Plaintiffs may suggest in good faith; and (d)
provided scientific evidence independently validating the process.6 Defendants’ offer is
more than reasonable.
In contrast, plaintiffs have refused to conduct any reciprocal testing on their
search methods, despite significant evidence that their keyword searches are less effective
than predictive coding. Plaintiffs’ basic position is that their method of using search
terms and contract attorneys is presumptively sound. But their production proved that
false here.
Indeed, courts have recognized that “[t]here is increasingly strong evidence
that keyword searching is not nearly as effective at identifying relevant information as
many lawyers would like to believe,” Nat’l Day Laborer Org. Network, 2012 WL
2878130 (S.D.N.Y. July 13, 2012) (quotation marks omitted), and that “there is a
growing body of literature that highlights the risks associated with conducting an
6 See, e.g., Maura R. Grossman & Gordon V. Cormack, TechnologyAssisted
Review in EDiscovery Can Be More Effective and More Efficient Than Exhaustive Manual Review, XVII Rich. J. L. & Tech. 11 (2011) (Ex. 18); Gordon V. Cormack & Mona Mojdeh, Machine Learning for Information Retrieval: TREC 2009 Web, Relevance Feedback and Legal Tracks, in NIST Special Publication: SP 500278, The Eighteenth Text Retrieval Conference (TREC 2009) Proceedings (2009) ( Ex. 19).
24.
unreliable or inadequate keyword search or relying exclusively on such searches.” Victor
Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251, 257 (D. Md. 2008). See also William
A. Gross Constr. Assocs., Inc. v. Am. Mfrs. Mut. Ins. Co., 256 F.R.D. 134, 13536
(S.D.N.Y. 2009) (citing “wellknow[n] limitations and risks” associated with search
terms that have been judicially recognized, including the failure of such terms to capture
context, misspellings or documents containing different words with the same meaning as
the terms selected); Quinn Emanuel Urquhart & Sullivan LLP, Predictive coding comes
of age (Nov. 19, 2012) (“keyword searching is . . . rife with shortcomings . . . . Some
studies suggest that predictive coding identifies at least as many documents of interest as
traditional eyeson review, with about the same level of inconsistency, and may in fact
offer more accurate review for responsiveness than most manual reviews.”).
Thus, in light of plaintiffs’ inadequate productions, it is just as – if not more
– critical to examine, test and evaluate plaintiffs’ keyword search methodology, as it is to
test defendants’ predictive coding method. See Nat’l Day Laborer Org. Network, 2012
WL 2878130, at *12 (S.D.N.Y. July 13, 2012) (“[U]se of keywords without testing and
refinement (or more sophisticated techniques) will in fact not be reasonably calculated to
uncover all responsive material.”); In re Seroquel Prods. Liability Litig., 244 F.R.D. 650,
662 (M.D. Fla. 2007) (“Common sense dictates that sampling and other quality assurance
techniques must be employed to meet requirements of completeness.”). As one court that
considered the issue explained, keyword searches “may prove to be overinclusive and
underinclusive” and the “only prudent way to test the reliability of the keyword search is
to perform some sort of sampling of the documents.” Victor Stanley, 250 F.R.D. at 257,
25.
262 (finding a party’s choice of keyword searching to be unreasonable when it “neither
identified the keywords selected nor the qualifications of the persons who selected them
to design a proper search,” “failed to demonstrate that there was qualityassurance
testing,” and “failed to carry their burden of explaining what they had done and why it
was sufficient” when its production was challenged).
The reason for plaintiffs’ refusal to submit their searches to testing is
exposed by their production: apparently plaintiffs’ searches have missed many critical
documents going to the core contentions in this litigation. Having asked for and received
defendants’ commitment to produce samples on nonresponsive documents, plaintiffs
should be ordered to make a reciprocal production of such samples. This will allow the
Court and the parties to test the accuracy and reliability of the parties’ respective
document productions.
26.
CONCLUSION
Plaintiffs represented to the Court that they would substantially complete
their document production by November 30. They have dragged their feet instead. This
Court should, accordingly, order that plaintiffs: (i) substantially complete their document
production in response to defendants’ first request for production by December 10,
including by producing all calendars, diaries or similar documents maintained with
respect to J. Christopher Burch’s business activities for the period from July 1, 2008 to
October 1, 2012 (with any purely personal entries redacted) and documents sufficient to
show all business, financial or other relationships between plaintiffs and Access
Industries Inc., Len Blavatnik, Jorg Mohaupt or Peter Thoren, as well as all
communications concerning Tory Burch LLC or C. Wonder; (ii) search the files of the
additional custodians identified by defendants and substantially complete production of
documents responsive to defendants’ requests from those files on the same timetable; (iii)
produce random samples of nonresponsive documents that were excluded by their search
terms and deemed nonresponsive by attorney reviewers with their supplemental
production on December 10 and upon the completion of document production.
27.
OF COUNSEL: Marc Wolinsky Stephen R. DiPrima S. Christopher Szczerban Vincent G. Levy Caitlin A. Donovan WACHTELL, LIPTON, ROSEN & KATZ 51 West 52nd Street New York, NY 10019 J. David Mayberry Lindsay Kaplan KILPATRICK TOWNSEND & STOCKTON LLP 607 14th Street, NW Washington, DC 20005 Lisa Pearson John C. Knapp KILPATRICK TOWNSEND & STOCKTON LLP 1114 Avenue of the Americas New York, NY 10036 John C. Knapp KILPATRICK TOWNSEND & STOCKTON LLP 1114 Avenue of the Americas New York, NY 10036
MORRIS, NICHOLS, ARSHT & TUNNELL LLP /s/ Megan Ward Cascio William M. Lafferty (#2755) Megan Ward Cascio (#3785) Shannon E. German (#5172) 1201 N. Market Street Wilmington, DE 19801 (302) 6589200 Attorneys for Defendant Tory Burch and Defendant/CounterclaimPlaintiff Tory Burch LLC
December 3, 2012 6791140.3