Preview
FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022
NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: COMMERCIAL DIVISION
RedHill Biopharma Ltd., Index No. 653200/2022
Plaintiff, Part 61 / Hon. Nancy M. Bannon
v. Mot. Seq. No. 11
Kukbo Co., Ltd., Return Date: June 11, 2024
Defendant.
DEFENDANT KUKBO CO., LTD.’S MEMORANDUM OF LAW
IN OPPOSITION TO PLAINTIFF’S MOTION FOR SANCTIONS
AND IN SUPPORT OF DEFENDANT’S CROSS-MOTION FOR SANCTIONS
JIPYONG LLC
Jinhee Kim (pro hac vice)
Somin Jun (pro hac vice)
jinheekim@jipyong.com
smjun@jipyong.com
26F Grand Central A
14 Sejong-daero, Jung-gu
Seoul 04527, Republic of Korea
BAKER & HOSTETLER LLP
Melissa M. Carvalho
Brittany A. Yantis
mcarvalho@bakerlaw.com
byantis@bakerlaw.com
45 Rockefeller Plaza
New York, New York 10111-0100
(212) 589-4200
Attorneys for Defendant
Kukbo Co., Ltd.
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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT............................................................................................... 1
FACTUAL BACKGROUND .................................................................................................. 2
A. The Parties Contract for Kukbo To License RedHill’s COVID-19 Treatment,
Opaganib. ..................................................................................................................... 2
B. RedHill Files the Lawsuit and Announces Default Without Effecting Service on
Kukbo........................................................................................................................... 2
C. RedHill Moves to Dismiss Kukbo’s Counterclaims and Attempts to Stay
Discovery, But Fails. .................................................................................................... 3
D. The Parties Engage in Extensive Discovery and Kukbo Notes That Discovery
Relating to the November PO is Lacking. ................................................................... 4
E. The Parties Meet and Confer Regarding RedHill’s Suspicion of Spoliation. .............. 5
F. Key Witnesses Are Deposed and Kukbo Learns of the Existence of Internal
RedHill Records Relating to the November PO. ......................................................... 6
G. The Parties Meet and Confer Regarding the November PO. ....................................... 8
ARGUMENTS ......................................................................................................................... 8
A. REDHILL’S MOTION SHOULD BE DENIED BECAUSE IT FAILED TO
FOLLOW THE REQUISITE PROCEDURE BEFORE FILING A
DISCOVERY-BASED MOTION FOR SANCTIONS. ............................................... 8
B. REDHILL’S MOTION SHOULD BE DENIED AS A MATTER OF LAW. .............. 9
1. Kukbo Had No Obligation to Preserve Evidence At the Alleged Time of
Spoliation ......................................................................................................... 9
2. No Records Were Destroyed With Any Culpable State of Mind ................... 10
(a) Kukbo Preserved All Documents Necessary and Relevant to
this Litigation, Issuing a Litigation Hold on or about December
14, 2022.............................................................................................. 10
(b) Kukbo Identified All Key Players and Ensured Their Records
Were Preserved .................................................................................. 10
(c) Kukbo's Document Retention Policy Is Not “Egregious” Under
Either Korean or New York Standards. .............................................. 11
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3. RedHill Cannot Prove that Kukbo Failed to Preserve Relevant Evidence
........................................................................................................................ 12
4. Even If Certain Documents Were Missing, RedHill Was Not Prejudiced.
........................................................................................................................ 12
(a) All Documents Claimed to be “Missing” Were in RedHill’s
Possession. ......................................................................................... 13
(b) RedHill Cannot Establish Any “Missing” Documents Were
Relevant. ............................................................................................ 13
(c) RedHill Chose Not To Take Third Party Depositions of Ahn
and Choi. ............................................................................................ 14
C. KUKBO’S MOTION SHOULD BE GRANTED AND REDHILL SHOULD
BE SANCTIONED FOR BRINGING A FRIVOLOUS MOTION. .......................... 15
1. RedHill Made Several Representations That Are False. ................................ 15
2. RedHill’s False Accusations Stem from Mere Speculation Unsupported
by Factual Evidence. ...................................................................................... 16
CONCLUSION ...................................................................................................................... 18
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TABLE OF AUTHORITIES
Page(s)
Cases
Duluc v. AC & L Food Corp.,
119 A.D.3d 450 (N.Y. App. Div. 1st Dep't 2014) ......................................................... 9, 12
GenOn Mid-Atl., LLC v. Stone & Webster, Inc.,
282 F.R.D. 346 (S.D.N.Y. 2012), aff'd, No. 11 CV 1299 HB, 2012 WL
1849101 (S.D.N.Y. May 21, 2012) .......................................................................... 9, 13, 17
Hutchinson v. N.Y. City Health and Hospitals Corp.,
172 A.D.3d 1035 (N.Y. App. Div. 2nd Dep't 2019) .......................................................... 14
Jean-Pierre v. Touro Coll.,
40 A.D.3d 819 (N.Y. App. Div. 2nd Dep’t 2007) ............................................................. 14
Kronisch v. United States,
150 F.3d 112 (2d Cir. 1998)............................................................................................... 14
Morgan v. Art Found. Ltd. v. McKenzie,
2020 WL 5836438 (S.D.N.Y. Sept. 30, 2020) ............................................................. 13, 17
Orbit One Commc'ns, Inc. v. Numerex Corp.,
271 F.R.D. 429 (S.D.N.Y. 2010) ....................................................................................... 14
In re Pfizer Inc. Sec. Litig.,
288 F.R.D. 297 (S.D.N.Y. 2013) ....................................................................................... 13
Pilatich v. Town of New Baltimore,
188 A.D.3d 1386 (N.Y. App. Div. 3d Dep’t 2020) ........................................................... 15
R.F.M.A.S., Inc. v. So,
271 F.R.D. 13 (S.D.N.Y. 2010) ................................................................................... 13, 17
Residential Funding Corp. v. DeGeorge Financial Corp.
306 F.3d 99 (2d Cir. 2002)................................................................................................. 13
Turner v. Hudson Transit Lines, Inc.,
142 F.R.D. 68 (S.D.N.Y. 1991) ......................................................................................... 14
VOOM HD Holdings LLC v. EchoStar Satellite LLC,
93 A.D.3d 33 (N.Y. App. Div. 1st Dep't 2012) ............................................................. 9, 10
Zubulake v. UBS Warburg, LLC,
220 F.R.D. 212 (S.D.N.Y. 2003) ................................................................................... 9, 11
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Rules
CPLR 2215................................................................................................................................. 1
Other Authorities
N.Y. Comp. Codes R. & Regs. tit. 22, § 130-1.1............................................................. 1, 2, 16
24 N.Y. Jur. 2d Costs in Civil Actions § 54 ............................................................................ 15
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Defendant Kukbo Co., Ltd. (“Kukbo” or “Defendant”) submits this Memorandum of
Law (1) in opposition to Plaintiff RedHill Biopharma Ltd.’s (“RedHill” or “Plaintiff”) Motion
for Sanctions (NYSCEF Doc. No. 206) (the “Motion” or “Mot.”); and (2) in support of
Defendant’s Cross-Motion for sanctions pursuant to CPLR 2215 and N.Y. Comp. Codes R. &
Regs. tit. 22, § 130-1.1.
PRELIMINARY STATEMENT
RedHill brings a frivolous motion, distorting the truth and disregarding the law and
facts, solely to paint Kukbo in a bad light. Ironically, RedHill’s Motion is antithetical to how
RedHill has been describing this case all along: “a straightforward breach of contract” with no
need for any discovery.1 (Mot. at p. 6 of 137).
Because RedHill has access to all communications and documentation relating to the
parties’ agreements, dealings, and Opaganib, RedHill has had no genuine need for additional
discovery from Kukbo and waited until now to bring the Motion instead of raising the discovery
issues with the Court, as it is required to do under both this Part’s rules as well as the Rules of
the Commercial Division.2 The Court should deny RedHill’s Motion on that basis alone.
Even if the Court were to overlook these rule violations, RedHill’s Motion should be
denied because (i) RedHill presented no support for the alleged spoliation by Kukbo, and (ii)
RedHill suffered no prejudice by the alleged spoliation. Stripped of all the red herrings,
RedHill’s only explanation for bringing the Motion is that Kukbo did not produce what
“RedHill would have expected to see.” (Mot. at p. 21 of 137). Tellingly, RedHill cannot even
articulate what Kukbo did not produce. Instead, RedHill accuses Kukbo of “malfeasance” and
having an “egregious document retention policy” which complies with Korean legal standards.
1
See Transcript from the discovery conference regarding RedHill’s Motion to Stay, NYSCEF Doc. No. 62 at
5:14-16.
2
See Rules 35-37, Part 61; see also Commercial Division Rule 14, stating “[d]iscovery disputes are preferred to
be resolved through court conference as opposed to motion practice” and that “counsel for the moving party shall
submit a letter to the court […] outlining the nature of the dispute and requesting a telephone conference.”
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As such, RedHill’s Motion is not only frivolous but also resounds with ignorance.
Accordingly, Kukbo cross-moves for sanctions against RedHill for filing a motion that is
“completely without merit in law and cannot be supported by a reasonable argument,” and
aimed at maliciously injuring Kukbo with false factual statements. N.Y. Comp. Codes R. &
Regs. tit. 22, § 130-1.1.
FACTUAL BACKGROUND
A. The Parties Contract for Kukbo To License RedHill’s COVID-19 Treatment,
Opaganib.
In October 2021, at the height of the COVID-19 pandemic, RedHill and Kukbo entered
into a Subscription Agreement (“SA”) whereby Kukbo paid $5 million to secure an exclusive
license to distribute Opaganib in South Korea, which RedHill represented was on the verge of
getting regulatory approvals in the US, EU, and UK. (Affirmation of Somin Jun, dated June 4,
2024 [“Jun Aff.”] Ex. 1). Two weeks after Kukbo paid $5 million for RedHill’s American
Depository Shares (“ADS”) at $6.04 per share in accordance with the parties’ agreement,
Kukbo was blindsided when RedHill made a public offering of its ADS on November 19, 2021
(the “November PO”) at roughly half the price paid by Kukbo. (Jun Aff. Ex. 2).
Also unbeknownst to Kukbo, by around January 2022, RedHill knew that Opaganib
would not be approved without a confirmatory study. RedHill withheld this information from
Kukbo and did not even allocate any funds in its budget, or otherwise plan for, a confirmatory
study for Opaganib. (Jun Aff. Ex. 41, 44:18-45:16). On March 14, 2022, RedHill and Kukbo
executed an Exclusive License Agreement (“ELA”) whereby Kukbo was granted the right to
sell Opaganib in Korea. (Jun Aff. Ex. 4). However, to date, Opaganib has not been approved
for sale anywhere in the world.
B. RedHill Files the Lawsuit and Announces Default Without Effecting Service on
Kukbo.
On September 2, 2022, RedHill filed a Complaint against Kukbo, NYSCEF Doc. No.
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2 (“Complaint”), seeking $6.5 million under the SA and the ELA. RedHill did not effect
service on Kukbo in accordance with the Hague Convention on the Service Abroad until
November 21, 2022. (Jun Aff. Ex. 6). However, in its press release dated November 7, 2022,
RedHill announced that “[l]itigation against Kukbo [was] initiated without counter-arguments
from Kukbo and a favorable judgment is expected within weeks.” (Jun Aff. ¶ 8).
Kukbo pointed out the erroneous disclosure and informed RedHill of its intent to bring
counterclaims on November 24, 2022. (Jun Aff. Ex. 8). RedHill responded on December 1,
2022 that Kukbo had “already defaulted in New York State Court, and RedHill will be seeking
a default judgment against Kukbo immediately.” (Jun Aff. Ex. 9).
On December 16, 2022, Kukbo filed its Answer with Counterclaims to Plaintiff’s
Complaint (“Counterclaims”), NYSCEF Doc. No. 20, alleging claims against RedHill for
rescission, breach of contract, anticipatory repudiation, fraudulent inducement, fraudulent
misrepresentation, negligent misrepresentation, and breach of the covenant of good faith and
fair dealing.
C. RedHill Moves to Dismiss Kukbo’s Counterclaims and Attempts to Stay Discovery,
But Fails.
On January 19, 2023, Kukbo served its first set of written discovery requests consisting
of 88 requests for admission (“RFAs”), 14 interrogatories (“ROGs”), and 52 requests for
production (“RFPs”). (Jun Aff. Ex. 10). Kukbo also served deposition notices for two high-
level officials at RedHill. (Id.).
On the same date, RedHill filed a Motion to Dismiss Kukbo’s Counterclaims (“MTD”).
(NYSCEF Doc. Nos. 38-43) and sought to stay all discovery. At a discovery conference on
February 21, 2023, Justice Ostrager denied RedHill’s request to stay discovery and ordered the
parties to enter into a Preliminary Conference Order pursuant to the Commercial Division
Rules. (NYSCEF Doc. No. 57). The Preliminary Conference Order was entered on March 3,
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2023. (NYSCEF Doc. No. 64).
The Court subsequently held a virtual hearing on RedHill’s motion to dismiss Kukbo’s
Counterclaim on May 8, 2023 (NYSCEF Doc. No. 89). The Court dismissed Kukbo’s Counts
I, II, VII, and X (for rescission, negligent misrepresentation, and breach of covenant of good
faith and fair dealings), and sustained Counts III, IV, V, VI, VIII and IX (for anticipatory
repudiation, breaches of contract, fraudulent inducement and fraudulent misrepresentation).
The Court found, among other things, that “the breach of contract claims have been adequately
stated and that the documentary evidence fails to conclusively establish a defense to the
asserted claims as a matter of law.” (Id.).
On June 7, 2023, RedHill filed a Motion to Reargue its Motion to Dismiss (“MTR”).
(NYSCEF Doc. Nos. 91-92). A virtual hearing was held on August 10, 2023, where the Court
denied RedHill’s renewal motion holding that “RedHill failed to demonstrate that the Court
misapprehended or overlooked a significant matter of law or fact” and that the MTR was based
on the Court’s dicta or on an issue requiring “fact-intensive analysis that cannot be the basis
for a pre-answer motion to dismiss.” (NYSCEF Doc. No. 101).
D. The Parties Engage in Extensive Discovery and Kukbo Notes That Discovery
Relating to the November PO is Lacking.
On March 7, 2023, RedHill sent its responses and objections to Kukbo’s first set of
written discovery requests. (Jun Aff. Ex. 11). On March 31, 2023, before the written discovery
deadline, Kukbo served its second set of requests on RedHill, and RedHill served its first set
of requests on Kukbo. (Jun Aff. Ex. 12). Kukbo’s second set of written discovery requests
consisted of 22 RFAs and 31 RFPs. (Id.). RedHill’s discovery requests consisted of 21 ROGs
and 31 RFPs. (Jun Aff. Ex. 13).
In its first set of RFPs to RedHill, Kukbo propounded several requests relating to the
November PO (Jun Aff. Ex. 10). Specifically, RFP No. 39 requested “[a]ll documents and
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communications exchanged between [RedHill] and [RedHill’s] Board of Directors concerning
the November PO.” (Id.). RedHill objected to RFP No. 39 and refused to produce documents
“unless and until Kukbo narrows the scope of the Request in a manner that clarifies the
information being sought and its relevance to the claims and defenses being asserted in this
action.” (Jun Aff. Ex. 11). In its letter dated April 20, 2023, Kukbo explained that RedHill’s
communications surrounding the November PO were directly relevant to its fraudulent
inducement claim. (Jun Aff. Ex. 14).
Between April and July 2023, RedHill and Kukbo exchanged multiple rounds of
correspondence regarding their respective discovery requests. (Jun Aff. Exs. 14; 15; 20; 22;
23; 24; 25; and 26). The parties began producing documents in May 2023. (Jun Aff. Ex. 19 &
21).
During a meet and confer on June 7, 2023, the parties discussed the productions and
each party’s plan to serve deposition notices. (Jun Aff. ¶ 37). In its letter dated July 13, 2023,
RedHill stated that it would “undertake a reasonable search of sources likely to have responsive
information” from August 1, 2021 through the SA’s execution—which was not a timeframe
accepted by Kukbo. (Jun Aff. Ex. 24). The parties held another meet and confer on July 13,
2023 during which RedHill represented that it “was in the process of reviewing documents and
would be producing responsive materials on a rolling-basis by the end of August.” (Jun Aff. ¶
42). Kukbo also offered to make supplemental productions as necessary. (Id.).
E. The Parties Meet and Confer Regarding RedHill’s Suspicion of Spoliation.
RedHill raised the issue of spoliation with Kukbo for the first time in its letter dated
September 27, 2023. (Jun Aff. Ex. 28). RedHill claimed that “Kukbo failed to preserve
evidence” because two individuals who were previously identified as witnesses were no longer
employed by Kukbo. (Id.).
Kukbo immediately responded to RedHill’s accusation of spoliation in its letter dated
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September 28, 2023. (Jun Aff. Ex. 29). Kukbo pointed out, among other things, that “Kukbo’s
production cannot be incomplete simply because it does not include documents [RedHill]
imagined might exist” such as “an internal valuation of Opaganib”. (Id.)
On September 29, 2023, RedHill sent a letter to Kukbo claiming that “Kukbo does not
have evidence to support its Counterclaims and that Kukbo has terminated the sole witnesses
who could corroborate or rebut Kukbo’s allegations while anticipating this litigation.” (Jun
Aff. Ex. 30).
In its response dated October 6, 2023, Kukbo pointed out that spoliation was “nothing
more than a red herring” but offered the following explanations to address RedHill’s concern:
(Jun Aff. Ex. 33).
concern"
Based on the above, we believe your "spoliation is nothing more than a red herring
to sidestep the insufficiency and tardiness of RedHil>s compliance with its discovery
obligations. However, in the spirit of resolving discovery disputes without having to file
multiple discovery motions, Kukbo offers the following information. (1) The custodians of
documents reviewed and produced were Mr. James K. Ahn, Mr. Jung Hoon (Ken) Choi, Mr.
custodians'
Young Seok Kim, and Mr. Keun Hyo Choi. (2) Wereviewed the entirety of these
documents for relevance and responsiveness to RedHil>s RFP, the total count of which
exceeded 600. (3) The date of employment termination for Mr. James Ahn and Mr. Jung
Hoon Choi is May 31, 2023 and March 18, 2022, respectively. (4) The entirety of Kukbo's
business record including any E5I of its employees is stored in a cloud server and retained for
a minimum of 3 years. (5) Kukbo has maintained all ESI relating to its business with RedHill,
irrespective of a litigation hold notice issued upon retention of legal counsel for this matter.
On October 13, 2023, RedHill made its second supplemental document production
followed by its third production on October 20, 2024, fourth production on November 14, 2023,
and fifth supplemental production on January 22, 2024. (Jun Aff. Exs. 34; 35; 39 & 42). Kukbo
made its second supplemental production on October 24, 2023. (Jun Aff. Ex. 36).
F. Key Witnesses Are Deposed and Kukbo Learns of the Existence of Internal
RedHill Records Relating to the November PO.
On October 27, 2023, RedHill took the deposition of Mr. Young Seok Kim in his
individual capacity and as Kukbo’s corporate designee. (Jun Aff. Ex. 37). During the deposition,
RedHill asked questions regarding Kukbo’s policy regarding usage of personal emails and its
document retention policy, to which Mr. Kim answered as follows: (Id.).
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Q. When employees use e-mail addresses other than their @kukbo.com
email address to conduct business, does Kukbo maintain and
preserve those emails?
A. […] So, for the e-mails in the Kukbo server that is stored in the server,
only the last e-mail of a mail chain is stored.
Q. So, how does that happen? How does Kukbo store your personal e-
mails? Does Kukbo access to your personal e-mail account?
A. […] in the Kukbo e-mail policy, it doesn’t stipulate that you have to
use Kukbo e-mail account. So, employees can use personal mail
account, but if any e-mail is work-related, that e-mail has to be
stored in Kukbo’s server.
(Id. at 39:1-13, 39:18-23) (emphasis added).
Q. So, it’s your responsibility, and that’s why you were cc’d on every e-
mail, to store things on the server, correct?
A. That’s correct.
Q. And if you weren’t on the email, would someone else do it?
A. It’s not likely.
(Id. at 40:23-41:4).
RedHill’s questions on document retention and use of personal email addresses spanned
approximately four pages of the transcript. (Id. at pp. 38-41). Mr. Kim answered all questions
until RedHill’s counsel had no more to ask. (Id.). According to Mr. Kim, Kukbo had only four
individuals “working on the [RedHill] business” and he was responsible for saving all
documents related to RedHill on which he was copied. (Id.).
Kukbo took the depositions of four RedHill employees, including Ms. Patricia Anderson
on November 10, 2023, Mr. Guy Goldberg on November 15, 2023, Mr. Gilead Raday on
November 29 and 30, 2023, and Mr. Adi Frish on January 30, 2024. (Jun Aff. Exs. 40, 41 ¶¶ 57,
59, 60, and 64). Of the four, Mr. Goldberg was designated by RedHill as its corporate designee
to testify on “[a]ll facts related to RedHill’s November PO.” (Jun Aff. Ex. 32). During his
deposition, Kukbo learned of RedHill’s internal records pertaining to its Board of Directors’
decision on the November PO. (Jun Aff. Ex. 40; 55:10-13). Such record, although responsive
to Kukbo’s RFP, was not produced by RedHill. Mr. Goldberg also testified that he was not the
person most knowledgeable at RedHill concerning the noticed topic. (Id. at 56:4-10).
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G. The Parties Meet and Confer Regarding the November PO.
The Court held a status conference on March 14, 2024. At the conference, Kukbo raised
the issue of RedHill’s failure to produce a corporate designee prepared to testify concerning
the November PO and failure to produce relevant documents. (Id.). The Court ordered the
Parties to “meet and confer regarding the issue” by March 25, 2024. (NYSCEF Doc. No. 118).
On March 19, 2024, Kukbo sent a letter to RedHill requesting that it
(i) produce a witness able and prepared to testify regarding the November PO or (ii) provide
written responses with supporting documents. (Jun Aff. Ex. 43). In its response, dated March
22, 2024, RedHill’s counsel stated that “the board decision approving the November PO was
made on November 17, 2021” and that RedHill would produce redacted minutes of the board
meetings. (Jun Aff. Ex. 44). Kukbo responded on March 25, 2024 that Redhill’s letter
“confirms that [it has] purposefully withheld a responsive document” and that Kukbo would
seek sanctions and move to quash or exclude any evidence RedHill attempts to introduce
improperly. (Jun Aff. Ex. 45). On March 29, 2024, RedHill produced alleged Board of
Directors minutes with redactions. (Jun Aff. Ex. 46).
ARGUMENTS
A. REDHILL’S MOTION SHOULD BE DENIED BECAUSE IT FAILED TO
FOLLOW THE REQUISITE PROCEDURE BEFORE FILING A DISCOVERY-
BASED MOTION FOR SANCTIONS.
Under Part 61 Rule 35, a party faced with an unresolved discovery issue is “required
[…] to request a discovery conference with the court to attempt to resolve the issue(s)” before
making a motion.3 RedHill failed to follow the requisite procedures and to seek a discovery
conference with the Court. This alone should be the basis for this Court to deny the Motion.
Rule 37, Part 61 Rules.
3
Rule 35, part61-rules.pdf (nycourts.gov).
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B. REDHILL’S MOTION SHOULD BE DENIED AS A MATTER OF LAW.
A party seeking sanctions for spoliation must “establish that (1) the party with control
over the evidence had an obligation to preserve it at the time it was destroyed; (2) the records
were destroyed with a ‘culpable state of mind;’ [and] (3) the destroyed evidence was ‘relevant
to the moving party’s claim or defense.’” Duluc v. AC & L Food Corp., 119 A.D.3d 450, 451
(N.Y. App. Div. 1st Dep’t 2014). Further, sanctions will not be imposed unless “the movant
has suffered prejudice.” GenOn Mid-Atl., LLC v. Stone & Webster, Inc., 282 F.R.D. 346, 353
(S.D.N.Y. 2012), aff’d, No. 11 CV 1299 HB, 2012 WL 1849101 (S.D.N.Y. May 21, 2012).
RedHill fails to establish all three requirements and did not suffer any prejudice.
1. Kukbo Had No Obligation to Preserve Evidence At the Alleged Time of
Spoliation
RedHill cannot demonstrate that Kukbo had an obligation to preserve evidence at the
time it allegedly destroyed it. New York courts have held that “a reasonable anticipation of
litigation arises when an organization is on notice of a credible probability that it will become
involved in litigation, […].” VOOM HD Holdings LLC v. EchoStar Satellite LLC, 93 A.D.3d
33, 43 (N.Y. App. Div. 1st Dep’t 2012). Once a party reasonably anticipates litigation, it must
suspend its routine document retention/destruction policy and put in place a “litigation hold”
to ensure the preservation of relevant documents. Id. at 36 (quoting Zubulake v. UBS Warburg,
LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)).
Kukbo did not reasonably anticipate litigation until May 26, 2022, when RedHill
emailed Kukbo and referred to the possibility of taking steps to protect its rights against Kukbo.
(Jun Aff. Ex. 5). Until then, Kukbo had no notice that it would become involved in litigation
and thus had no obligation to preserve evidence. See VOOM HD Holdings LLC, 93 A.D. at 43.
RedHill argues that Kukbo “filed its answer and counterclaims, alleging Kukbo anticipated
litigation as of November 23, 2021.” (Mot. at 4). RedHill has concocted a fiction to make its
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Motion work. The paragraph RedHill cites from the Counterclaims merely states that the
parties held a conference call in which they discussed the dropping share price after the
November PO. (NYSCEF Doc. No. 20, ¶ 78). At the time, Kukbo could not possibly have
harbored any intention to sue RedHill because its only intention was to obtain the license to
RedHill’s COVID-19 treatment. Similarly, RedHill had also no reason to sue Kukbo in
November 2021. RedHill’s argument that Kukbo anticipated litigation in November 23, 2021
is nonsensical.
2. No Records Were Destroyed With Any Culpable State of Mind
RedHill cannot establish that Kukbo ever destroyed any evidence relevant to RedHill’s
claims or defenses, let alone with any “culpable statement of mind”. For purposes of spoliation,
a “culpable state of mind” includes “ordinary negligence” and “[f]ailures which support a
finding of gross negligence, when the duty to preserve electronic data has been triggered,
include: (1) the failure to issue a written litigation hold, when appropriate; (2) the failure to
identify all of the key players and to ensure that their electronic and other records are preserved;
and (3) the failure to cease the deletion of e-mail.” VOOM HD Holdings LLC, 93 A.D. at 45.
(a) Kukbo Preserved All Documents Necessary and Relevant to this
Litigation, Issuing a Litigation Hold on or about December 14, 2022.
RedHill claims that “Kukbo failed to issue a litigation hold” (Mot. at 11), but notes that
Kukbo “alleges it implemented a litigation hold when legal counsel was hired.” (Mot. at 14).
RedHill’s argument is inconsistent and incoherent. Regardless, Kukbo issued a litigation hold
as soon as it was served with the Complaint. (Jun Aff. Ex. 10). Further, prior to the litigation
hold, Kukbo preserved all documents relevant to RedHill.
(b) Kukbo Identified All Key Players and Ensured Their Records Were
Preserved
RedHill also argues that Kukbo failed to preserve communications from its most
knowledgeable individuals. (Mot. at 15). Mr. Kim’s deposition testimony proves exactly the
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opposite. (Jun Aff. Ex. 37: 40:14-41:4). As Mr. Kim explained, the only Kukbo employees
involved in the business transaction with RedHill were Mr. Kim, James K. Ahn, Jung Hoon
(Ken) Choi, and Geun Hyo Choi. (Jun Aff. Ex. 37; 23:24-24:6). Mr. Kim was copied on nearly
all emails related to RedHill and was responsible for storing, and in fact did store, all relevant
communications and documents on the company’s server. (Id.; 40:23-41:1). Mr. Kim’s practice
was consistent with Kukbo’s internal policy which required its employees to save and retain
documents and communications relevant to Kukbo’s business in the company server through
either work email account or personal email account. (Id.; 40:14-41:4).
(c) Kukbo's Document Retention Policy Is Not “Egregious” Under Either
Korean or New York Standards.
RedHill attempts to argue that Kukbo’s document retention policy is “egregious” under
New York standards. (Mot. at 14). There is nothing “egregious” about Kukbo’s retention policy
Even upon threat of litigation, a company is not required to “preserve every shred of
paper, every e-mail or electronic document, and every backup tape.” Zubulake, 220 F.R.D. at
217. Zubulake states that “[i]n recognition of the fact that there are many ways to manage
electronic data, litigants are free to choose how [document retention] is accomplished.” Id at
218.
Kukbo’s document retention policy is to retain all documents in its system for a three
year period. (Jun Aff. Ex. 37; 41:5-9). Kukbo allowed its employees to use their personal
emails to conduct work due to its slow server, and there was no obligation for Kukbo’s
employees to use their work email account. (Id.; 38:17-25). Kukbo’s practice was to manually
store emails sent to, or received by, its employees including those exchanged using personal
accounts. (Id.; 39:5-9).
Under Zubulake Kukbo is “free to choose how [document retention] is accomplished.”
220 F.R.D. at 218. Further, there is no law in Korea requiring a company to establish its own
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domain or ban employees from using personal email account to conduct work. Even if every
company in every country should conform to New York standards as RedHill posits, RedHill
has cited to no New York law banning the use of personal emails to conduct company business.
3. RedHill Cannot Prove that Kukbo Failed to Preserve Relevant Evidence
The list of emails which RedHill claims to be missing from Kukbo’s production (shown
on Exhibit A of RedHill’s Motion) undermines, rather than supports, RedHill’s spoliation claim.
Of the 104 allegedly missing documents listed in Exhibit A of RedHill’s Motion, (i) 85 were
emails sent and received prior to a time when Kukbo could reasonably anticipate litigation and
definitely before the litigation hold; (ii) 12 were emails that Kukbo either did produce or
produced a near duplicate; and (iii) 7 were emails which were not produced because they were
unresponsive to RedHill’s RFP or objected to based on RedHill having “equal or greater access
than Kukbo.” (Mot., Ex. A).
RedHill compares the volume of Kukbo’s production with its own production to
insinuate that Kukbo must have withheld responsive documents. RedHill is misconceived.
The reason for the difference is simply that (i) Kukbo sought far more RFPs than RedHill; and
(ii) the vast majority of evidence relevant to the parties’ dispute are solely within RedHill’s
control, such as voluminous submissions to various regulatory authorities and clinical study
results of Opaganib. The fact that Kukbo’s production is far smaller than RedHill’s is irrelevant
to this Motion.
4. Even If Certain Documents Were Missing, RedHill Was Not Prejudiced.
Once courts find that there was spoliation of evidence by one party, courts then look “to
the extent that the spoliation of evidence may prejudice a party […].” Duluc, 119 A.D.3d at
451-52. “Where the discovery violation involves spoliation or withholding of evidence, the
absence of prejudice can be shown by demonstrating, for example, that the other parties were
able to obtain the same evidence from another source, or that during discovery they never asked
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for the evidence later shown to have been spoliated.” R.F.M.A.S., Inc. v. So, 271 F.R.D. 13, 25
(S.D.N.Y. 2010). “A court should never impose sanctions of any sort unless there has been a
showing of – inferential or otherwise – that the movant has suffered prejudice.” GenOn Mid-
Atl., LLC v. Stone & Webster, Inc., 282 F.R.D. 346, 353 (S.D.N.Y. 2012), aff’d, No. 11 CV 1299
HB, 2012 WL 1849101 (S.D.N.Y. May 21, 2012).
Here, even if Kukbo had spoliated certain evidence (which is denied), RedHill could
not possibly have been prejudiced for the following reasons.
(a) All Documents Claimed to be “Missing” Were in RedHill’s Possession.
Emails sent to or from a custodian are not permanently lost or unrecoverable if they are
replaceable through other sources. R.F.M.A.S., Inc. v. So, 271 F.R.D. at 25; see Morgan v. Art
Found. Ltd. v. McKenzie, 2020 WL 5836438, at *19 (S.D.N.Y. Sept. 30, 2020) (holding that
deleted emails obtainable from other parties and non-parties were not “permanently
lost”); GenOn Mid-Atlantic, LLC v. Stone & Webster, Inc., 282 F.R.D. 346, 359 (S.D.N.Y.
2012) (explaining that spoliation sanctions are not warranted if “the information was preserved
in other locations”).
Here, the emails between Kukbo and RedHill that Kukbo purportedly “failed to produce”
were not “permanently lost or unrecoverable” as they were in RedHill’s possession.
(b) RedHill Cannot Establish Any “Missing” Documents Were Relevant.
A party seeking sanctions must make a showing that the lost materials were relevant.
See In re Pfizer Inc. Sec. Litig., 288 F.R.D. 297, 315 (S.D.N.Y. 2013). “The party seeking an
adverse inference must adduce sufficient evidence from which a reasonable trier of fact could
infer that ‘the destroyed or unavailable evidence would have been of the nature alleged by the
party affected by its destruction.’” Residential Funding Corp. v. DeGeorge Financial Corp.
306 F.
Preview
FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION RedHill Biopharma Ltd., Index No. 653200/2022 Plaintiff, Part 61 / Hon. Nancy M. Bannon v. Mot. Seq. No. 11 Kukbo Co., Ltd., Return Date: June 11, 2024 Defendant. DEFENDANT KUKBO CO., LTD.’S MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFF’S MOTION FOR SANCTIONS AND IN SUPPORT OF DEFENDANT’S CROSS-MOTION FOR SANCTIONS JIPYONG LLC Jinhee Kim (pro hac vice) Somin Jun (pro hac vice) jinheekim@jipyong.com smjun@jipyong.com 26F Grand Central A 14 Sejong-daero, Jung-gu Seoul 04527, Republic of Korea BAKER & HOSTETLER LLP Melissa M. Carvalho Brittany A. Yantis mcarvalho@bakerlaw.com byantis@bakerlaw.com 45 Rockefeller Plaza New York, New York 10111-0100 (212) 589-4200 Attorneys for Defendant Kukbo Co., Ltd. 1 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 TABLE OF CONTENTS Page PRELIMINARY STATEMENT............................................................................................... 1 FACTUAL BACKGROUND .................................................................................................. 2 A. The Parties Contract for Kukbo To License RedHill’s COVID-19 Treatment, Opaganib. ..................................................................................................................... 2 B. RedHill Files the Lawsuit and Announces Default Without Effecting Service on Kukbo........................................................................................................................... 2 C. RedHill Moves to Dismiss Kukbo’s Counterclaims and Attempts to Stay Discovery, But Fails. .................................................................................................... 3 D. The Parties Engage in Extensive Discovery and Kukbo Notes That Discovery Relating to the November PO is Lacking. ................................................................... 4 E. The Parties Meet and Confer Regarding RedHill’s Suspicion of Spoliation. .............. 5 F. Key Witnesses Are Deposed and Kukbo Learns of the Existence of Internal RedHill Records Relating to the November PO. ......................................................... 6 G. The Parties Meet and Confer Regarding the November PO. ....................................... 8 ARGUMENTS ......................................................................................................................... 8 A. REDHILL’S MOTION SHOULD BE DENIED BECAUSE IT FAILED TO FOLLOW THE REQUISITE PROCEDURE BEFORE FILING A DISCOVERY-BASED MOTION FOR SANCTIONS. ............................................... 8 B. REDHILL’S MOTION SHOULD BE DENIED AS A MATTER OF LAW. .............. 9 1. Kukbo Had No Obligation to Preserve Evidence At the Alleged Time of Spoliation ......................................................................................................... 9 2. No Records Were Destroyed With Any Culpable State of Mind ................... 10 (a) Kukbo Preserved All Documents Necessary and Relevant to this Litigation, Issuing a Litigation Hold on or about December 14, 2022.............................................................................................. 10 (b) Kukbo Identified All Key Players and Ensured Their Records Were Preserved .................................................................................. 10 (c) Kukbo's Document Retention Policy Is Not “Egregious” Under Either Korean or New York Standards. .............................................. 11 i 2 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 3. RedHill Cannot Prove that Kukbo Failed to Preserve Relevant Evidence ........................................................................................................................ 12 4. Even If Certain Documents Were Missing, RedHill Was Not Prejudiced. ........................................................................................................................ 12 (a) All Documents Claimed to be “Missing” Were in RedHill’s Possession. ......................................................................................... 13 (b) RedHill Cannot Establish Any “Missing” Documents Were Relevant. ............................................................................................ 13 (c) RedHill Chose Not To Take Third Party Depositions of Ahn and Choi. ............................................................................................ 14 C. KUKBO’S MOTION SHOULD BE GRANTED AND REDHILL SHOULD BE SANCTIONED FOR BRINGING A FRIVOLOUS MOTION. .......................... 15 1. RedHill Made Several Representations That Are False. ................................ 15 2. RedHill’s False Accusations Stem from Mere Speculation Unsupported by Factual Evidence. ...................................................................................... 16 CONCLUSION ...................................................................................................................... 18 ii 3 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 TABLE OF AUTHORITIES Page(s) Cases Duluc v. AC & L Food Corp., 119 A.D.3d 450 (N.Y. App. Div. 1st Dep't 2014) ......................................................... 9, 12 GenOn Mid-Atl., LLC v. Stone & Webster, Inc., 282 F.R.D. 346 (S.D.N.Y. 2012), aff'd, No. 11 CV 1299 HB, 2012 WL 1849101 (S.D.N.Y. May 21, 2012) .......................................................................... 9, 13, 17 Hutchinson v. N.Y. City Health and Hospitals Corp., 172 A.D.3d 1035 (N.Y. App. Div. 2nd Dep't 2019) .......................................................... 14 Jean-Pierre v. Touro Coll., 40 A.D.3d 819 (N.Y. App. Div. 2nd Dep’t 2007) ............................................................. 14 Kronisch v. United States, 150 F.3d 112 (2d Cir. 1998)............................................................................................... 14 Morgan v. Art Found. Ltd. v. McKenzie, 2020 WL 5836438 (S.D.N.Y. Sept. 30, 2020) ............................................................. 13, 17 Orbit One Commc'ns, Inc. v. Numerex Corp., 271 F.R.D. 429 (S.D.N.Y. 2010) ....................................................................................... 14 In re Pfizer Inc. Sec. Litig., 288 F.R.D. 297 (S.D.N.Y. 2013) ....................................................................................... 13 Pilatich v. Town of New Baltimore, 188 A.D.3d 1386 (N.Y. App. Div. 3d Dep’t 2020) ........................................................... 15 R.F.M.A.S., Inc. v. So, 271 F.R.D. 13 (S.D.N.Y. 2010) ................................................................................... 13, 17 Residential Funding Corp. v. DeGeorge Financial Corp. 306 F.3d 99 (2d Cir. 2002)................................................................................................. 13 Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68 (S.D.N.Y. 1991) ......................................................................................... 14 VOOM HD Holdings LLC v. EchoStar Satellite LLC, 93 A.D.3d 33 (N.Y. App. Div. 1st Dep't 2012) ............................................................. 9, 10 Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) ................................................................................... 9, 11 iii 4 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 Rules CPLR 2215................................................................................................................................. 1 Other Authorities N.Y. Comp. Codes R. & Regs. tit. 22, § 130-1.1............................................................. 1, 2, 16 24 N.Y. Jur. 2d Costs in Civil Actions § 54 ............................................................................ 15 iv 5 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 Defendant Kukbo Co., Ltd. (“Kukbo” or “Defendant”) submits this Memorandum of Law (1) in opposition to Plaintiff RedHill Biopharma Ltd.’s (“RedHill” or “Plaintiff”) Motion for Sanctions (NYSCEF Doc. No. 206) (the “Motion” or “Mot.”); and (2) in support of Defendant’s Cross-Motion for sanctions pursuant to CPLR 2215 and N.Y. Comp. Codes R. & Regs. tit. 22, § 130-1.1. PRELIMINARY STATEMENT RedHill brings a frivolous motion, distorting the truth and disregarding the law and facts, solely to paint Kukbo in a bad light. Ironically, RedHill’s Motion is antithetical to how RedHill has been describing this case all along: “a straightforward breach of contract” with no need for any discovery.1 (Mot. at p. 6 of 137). Because RedHill has access to all communications and documentation relating to the parties’ agreements, dealings, and Opaganib, RedHill has had no genuine need for additional discovery from Kukbo and waited until now to bring the Motion instead of raising the discovery issues with the Court, as it is required to do under both this Part’s rules as well as the Rules of the Commercial Division.2 The Court should deny RedHill’s Motion on that basis alone. Even if the Court were to overlook these rule violations, RedHill’s Motion should be denied because (i) RedHill presented no support for the alleged spoliation by Kukbo, and (ii) RedHill suffered no prejudice by the alleged spoliation. Stripped of all the red herrings, RedHill’s only explanation for bringing the Motion is that Kukbo did not produce what “RedHill would have expected to see.” (Mot. at p. 21 of 137). Tellingly, RedHill cannot even articulate what Kukbo did not produce. Instead, RedHill accuses Kukbo of “malfeasance” and having an “egregious document retention policy” which complies with Korean legal standards. 1 See Transcript from the discovery conference regarding RedHill’s Motion to Stay, NYSCEF Doc. No. 62 at 5:14-16. 2 See Rules 35-37, Part 61; see also Commercial Division Rule 14, stating “[d]iscovery disputes are preferred to be resolved through court conference as opposed to motion practice” and that “counsel for the moving party shall submit a letter to the court […] outlining the nature of the dispute and requesting a telephone conference.” 6 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 As such, RedHill’s Motion is not only frivolous but also resounds with ignorance. Accordingly, Kukbo cross-moves for sanctions against RedHill for filing a motion that is “completely without merit in law and cannot be supported by a reasonable argument,” and aimed at maliciously injuring Kukbo with false factual statements. N.Y. Comp. Codes R. & Regs. tit. 22, § 130-1.1. FACTUAL BACKGROUND A. The Parties Contract for Kukbo To License RedHill’s COVID-19 Treatment, Opaganib. In October 2021, at the height of the COVID-19 pandemic, RedHill and Kukbo entered into a Subscription Agreement (“SA”) whereby Kukbo paid $5 million to secure an exclusive license to distribute Opaganib in South Korea, which RedHill represented was on the verge of getting regulatory approvals in the US, EU, and UK. (Affirmation of Somin Jun, dated June 4, 2024 [“Jun Aff.”] Ex. 1). Two weeks after Kukbo paid $5 million for RedHill’s American Depository Shares (“ADS”) at $6.04 per share in accordance with the parties’ agreement, Kukbo was blindsided when RedHill made a public offering of its ADS on November 19, 2021 (the “November PO”) at roughly half the price paid by Kukbo. (Jun Aff. Ex. 2). Also unbeknownst to Kukbo, by around January 2022, RedHill knew that Opaganib would not be approved without a confirmatory study. RedHill withheld this information from Kukbo and did not even allocate any funds in its budget, or otherwise plan for, a confirmatory study for Opaganib. (Jun Aff. Ex. 41, 44:18-45:16). On March 14, 2022, RedHill and Kukbo executed an Exclusive License Agreement (“ELA”) whereby Kukbo was granted the right to sell Opaganib in Korea. (Jun Aff. Ex. 4). However, to date, Opaganib has not been approved for sale anywhere in the world. B. RedHill Files the Lawsuit and Announces Default Without Effecting Service on Kukbo. On September 2, 2022, RedHill filed a Complaint against Kukbo, NYSCEF Doc. No. 2 7 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 2 (“Complaint”), seeking $6.5 million under the SA and the ELA. RedHill did not effect service on Kukbo in accordance with the Hague Convention on the Service Abroad until November 21, 2022. (Jun Aff. Ex. 6). However, in its press release dated November 7, 2022, RedHill announced that “[l]itigation against Kukbo [was] initiated without counter-arguments from Kukbo and a favorable judgment is expected within weeks.” (Jun Aff. ¶ 8). Kukbo pointed out the erroneous disclosure and informed RedHill of its intent to bring counterclaims on November 24, 2022. (Jun Aff. Ex. 8). RedHill responded on December 1, 2022 that Kukbo had “already defaulted in New York State Court, and RedHill will be seeking a default judgment against Kukbo immediately.” (Jun Aff. Ex. 9). On December 16, 2022, Kukbo filed its Answer with Counterclaims to Plaintiff’s Complaint (“Counterclaims”), NYSCEF Doc. No. 20, alleging claims against RedHill for rescission, breach of contract, anticipatory repudiation, fraudulent inducement, fraudulent misrepresentation, negligent misrepresentation, and breach of the covenant of good faith and fair dealing. C. RedHill Moves to Dismiss Kukbo’s Counterclaims and Attempts to Stay Discovery, But Fails. On January 19, 2023, Kukbo served its first set of written discovery requests consisting of 88 requests for admission (“RFAs”), 14 interrogatories (“ROGs”), and 52 requests for production (“RFPs”). (Jun Aff. Ex. 10). Kukbo also served deposition notices for two high- level officials at RedHill. (Id.). On the same date, RedHill filed a Motion to Dismiss Kukbo’s Counterclaims (“MTD”). (NYSCEF Doc. Nos. 38-43) and sought to stay all discovery. At a discovery conference on February 21, 2023, Justice Ostrager denied RedHill’s request to stay discovery and ordered the parties to enter into a Preliminary Conference Order pursuant to the Commercial Division Rules. (NYSCEF Doc. No. 57). The Preliminary Conference Order was entered on March 3, 3 8 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 2023. (NYSCEF Doc. No. 64). The Court subsequently held a virtual hearing on RedHill’s motion to dismiss Kukbo’s Counterclaim on May 8, 2023 (NYSCEF Doc. No. 89). The Court dismissed Kukbo’s Counts I, II, VII, and X (for rescission, negligent misrepresentation, and breach of covenant of good faith and fair dealings), and sustained Counts III, IV, V, VI, VIII and IX (for anticipatory repudiation, breaches of contract, fraudulent inducement and fraudulent misrepresentation). The Court found, among other things, that “the breach of contract claims have been adequately stated and that the documentary evidence fails to conclusively establish a defense to the asserted claims as a matter of law.” (Id.). On June 7, 2023, RedHill filed a Motion to Reargue its Motion to Dismiss (“MTR”). (NYSCEF Doc. Nos. 91-92). A virtual hearing was held on August 10, 2023, where the Court denied RedHill’s renewal motion holding that “RedHill failed to demonstrate that the Court misapprehended or overlooked a significant matter of law or fact” and that the MTR was based on the Court’s dicta or on an issue requiring “fact-intensive analysis that cannot be the basis for a pre-answer motion to dismiss.” (NYSCEF Doc. No. 101). D. The Parties Engage in Extensive Discovery and Kukbo Notes That Discovery Relating to the November PO is Lacking. On March 7, 2023, RedHill sent its responses and objections to Kukbo’s first set of written discovery requests. (Jun Aff. Ex. 11). On March 31, 2023, before the written discovery deadline, Kukbo served its second set of requests on RedHill, and RedHill served its first set of requests on Kukbo. (Jun Aff. Ex. 12). Kukbo’s second set of written discovery requests consisted of 22 RFAs and 31 RFPs. (Id.). RedHill’s discovery requests consisted of 21 ROGs and 31 RFPs. (Jun Aff. Ex. 13). In its first set of RFPs to RedHill, Kukbo propounded several requests relating to the November PO (Jun Aff. Ex. 10). Specifically, RFP No. 39 requested “[a]ll documents and 4 9 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 communications exchanged between [RedHill] and [RedHill’s] Board of Directors concerning the November PO.” (Id.). RedHill objected to RFP No. 39 and refused to produce documents “unless and until Kukbo narrows the scope of the Request in a manner that clarifies the information being sought and its relevance to the claims and defenses being asserted in this action.” (Jun Aff. Ex. 11). In its letter dated April 20, 2023, Kukbo explained that RedHill’s communications surrounding the November PO were directly relevant to its fraudulent inducement claim. (Jun Aff. Ex. 14). Between April and July 2023, RedHill and Kukbo exchanged multiple rounds of correspondence regarding their respective discovery requests. (Jun Aff. Exs. 14; 15; 20; 22; 23; 24; 25; and 26). The parties began producing documents in May 2023. (Jun Aff. Ex. 19 & 21). During a meet and confer on June 7, 2023, the parties discussed the productions and each party’s plan to serve deposition notices. (Jun Aff. ¶ 37). In its letter dated July 13, 2023, RedHill stated that it would “undertake a reasonable search of sources likely to have responsive information” from August 1, 2021 through the SA’s execution—which was not a timeframe accepted by Kukbo. (Jun Aff. Ex. 24). The parties held another meet and confer on July 13, 2023 during which RedHill represented that it “was in the process of reviewing documents and would be producing responsive materials on a rolling-basis by the end of August.” (Jun Aff. ¶ 42). Kukbo also offered to make supplemental productions as necessary. (Id.). E. The Parties Meet and Confer Regarding RedHill’s Suspicion of Spoliation. RedHill raised the issue of spoliation with Kukbo for the first time in its letter dated September 27, 2023. (Jun Aff. Ex. 28). RedHill claimed that “Kukbo failed to preserve evidence” because two individuals who were previously identified as witnesses were no longer employed by Kukbo. (Id.). Kukbo immediately responded to RedHill’s accusation of spoliation in its letter dated 5 10 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 September 28, 2023. (Jun Aff. Ex. 29). Kukbo pointed out, among other things, that “Kukbo’s production cannot be incomplete simply because it does not include documents [RedHill] imagined might exist” such as “an internal valuation of Opaganib”. (Id.) On September 29, 2023, RedHill sent a letter to Kukbo claiming that “Kukbo does not have evidence to support its Counterclaims and that Kukbo has terminated the sole witnesses who could corroborate or rebut Kukbo’s allegations while anticipating this litigation.” (Jun Aff. Ex. 30). In its response dated October 6, 2023, Kukbo pointed out that spoliation was “nothing more than a red herring” but offered the following explanations to address RedHill’s concern: (Jun Aff. Ex. 33). concern" Based on the above, we believe your "spoliation is nothing more than a red herring to sidestep the insufficiency and tardiness of RedHil>s compliance with its discovery obligations. However, in the spirit of resolving discovery disputes without having to file multiple discovery motions, Kukbo offers the following information. (1) The custodians of documents reviewed and produced were Mr. James K. Ahn, Mr. Jung Hoon (Ken) Choi, Mr. custodians' Young Seok Kim, and Mr. Keun Hyo Choi. (2) Wereviewed the entirety of these documents for relevance and responsiveness to RedHil>s RFP, the total count of which exceeded 600. (3) The date of employment termination for Mr. James Ahn and Mr. Jung Hoon Choi is May 31, 2023 and March 18, 2022, respectively. (4) The entirety of Kukbo's business record including any E5I of its employees is stored in a cloud server and retained for a minimum of 3 years. (5) Kukbo has maintained all ESI relating to its business with RedHill, irrespective of a litigation hold notice issued upon retention of legal counsel for this matter. On October 13, 2023, RedHill made its second supplemental document production followed by its third production on October 20, 2024, fourth production on November 14, 2023, and fifth supplemental production on January 22, 2024. (Jun Aff. Exs. 34; 35; 39 & 42). Kukbo made its second supplemental production on October 24, 2023. (Jun Aff. Ex. 36). F. Key Witnesses Are Deposed and Kukbo Learns of the Existence of Internal RedHill Records Relating to the November PO. On October 27, 2023, RedHill took the deposition of Mr. Young Seok Kim in his individual capacity and as Kukbo’s corporate designee. (Jun Aff. Ex. 37). During the deposition, RedHill asked questions regarding Kukbo’s policy regarding usage of personal emails and its document retention policy, to which Mr. Kim answered as follows: (Id.). 6 11 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 Q. When employees use e-mail addresses other than their @kukbo.com email address to conduct business, does Kukbo maintain and preserve those emails? A. […] So, for the e-mails in the Kukbo server that is stored in the server, only the last e-mail of a mail chain is stored. Q. So, how does that happen? How does Kukbo store your personal e- mails? Does Kukbo access to your personal e-mail account? A. […] in the Kukbo e-mail policy, it doesn’t stipulate that you have to use Kukbo e-mail account. So, employees can use personal mail account, but if any e-mail is work-related, that e-mail has to be stored in Kukbo’s server. (Id. at 39:1-13, 39:18-23) (emphasis added). Q. So, it’s your responsibility, and that’s why you were cc’d on every e- mail, to store things on the server, correct? A. That’s correct. Q. And if you weren’t on the email, would someone else do it? A. It’s not likely. (Id. at 40:23-41:4). RedHill’s questions on document retention and use of personal email addresses spanned approximately four pages of the transcript. (Id. at pp. 38-41). Mr. Kim answered all questions until RedHill’s counsel had no more to ask. (Id.). According to Mr. Kim, Kukbo had only four individuals “working on the [RedHill] business” and he was responsible for saving all documents related to RedHill on which he was copied. (Id.). Kukbo took the depositions of four RedHill employees, including Ms. Patricia Anderson on November 10, 2023, Mr. Guy Goldberg on November 15, 2023, Mr. Gilead Raday on November 29 and 30, 2023, and Mr. Adi Frish on January 30, 2024. (Jun Aff. Exs. 40, 41 ¶¶ 57, 59, 60, and 64). Of the four, Mr. Goldberg was designated by RedHill as its corporate designee to testify on “[a]ll facts related to RedHill’s November PO.” (Jun Aff. Ex. 32). During his deposition, Kukbo learned of RedHill’s internal records pertaining to its Board of Directors’ decision on the November PO. (Jun Aff. Ex. 40; 55:10-13). Such record, although responsive to Kukbo’s RFP, was not produced by RedHill. Mr. Goldberg also testified that he was not the person most knowledgeable at RedHill concerning the noticed topic. (Id. at 56:4-10). 7 12 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 G. The Parties Meet and Confer Regarding the November PO. The Court held a status conference on March 14, 2024. At the conference, Kukbo raised the issue of RedHill’s failure to produce a corporate designee prepared to testify concerning the November PO and failure to produce relevant documents. (Id.). The Court ordered the Parties to “meet and confer regarding the issue” by March 25, 2024. (NYSCEF Doc. No. 118). On March 19, 2024, Kukbo sent a letter to RedHill requesting that it (i) produce a witness able and prepared to testify regarding the November PO or (ii) provide written responses with supporting documents. (Jun Aff. Ex. 43). In its response, dated March 22, 2024, RedHill’s counsel stated that “the board decision approving the November PO was made on November 17, 2021” and that RedHill would produce redacted minutes of the board meetings. (Jun Aff. Ex. 44). Kukbo responded on March 25, 2024 that Redhill’s letter “confirms that [it has] purposefully withheld a responsive document” and that Kukbo would seek sanctions and move to quash or exclude any evidence RedHill attempts to introduce improperly. (Jun Aff. Ex. 45). On March 29, 2024, RedHill produced alleged Board of Directors minutes with redactions. (Jun Aff. Ex. 46). ARGUMENTS A. REDHILL’S MOTION SHOULD BE DENIED BECAUSE IT FAILED TO FOLLOW THE REQUISITE PROCEDURE BEFORE FILING A DISCOVERY- BASED MOTION FOR SANCTIONS. Under Part 61 Rule 35, a party faced with an unresolved discovery issue is “required […] to request a discovery conference with the court to attempt to resolve the issue(s)” before making a motion.3 RedHill failed to follow the requisite procedures and to seek a discovery conference with the Court. This alone should be the basis for this Court to deny the Motion. Rule 37, Part 61 Rules. 3 Rule 35, part61-rules.pdf (nycourts.gov). 8 13 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 B. REDHILL’S MOTION SHOULD BE DENIED AS A MATTER OF LAW. A party seeking sanctions for spoliation must “establish that (1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the records were destroyed with a ‘culpable state of mind;’ [and] (3) the destroyed evidence was ‘relevant to the moving party’s claim or defense.’” Duluc v. AC & L Food Corp., 119 A.D.3d 450, 451 (N.Y. App. Div. 1st Dep’t 2014). Further, sanctions will not be imposed unless “the movant has suffered prejudice.” GenOn Mid-Atl., LLC v. Stone & Webster, Inc., 282 F.R.D. 346, 353 (S.D.N.Y. 2012), aff’d, No. 11 CV 1299 HB, 2012 WL 1849101 (S.D.N.Y. May 21, 2012). RedHill fails to establish all three requirements and did not suffer any prejudice. 1. Kukbo Had No Obligation to Preserve Evidence At the Alleged Time of Spoliation RedHill cannot demonstrate that Kukbo had an obligation to preserve evidence at the time it allegedly destroyed it. New York courts have held that “a reasonable anticipation of litigation arises when an organization is on notice of a credible probability that it will become involved in litigation, […].” VOOM HD Holdings LLC v. EchoStar Satellite LLC, 93 A.D.3d 33, 43 (N.Y. App. Div. 1st Dep’t 2012). Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents. Id. at 36 (quoting Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)). Kukbo did not reasonably anticipate litigation until May 26, 2022, when RedHill emailed Kukbo and referred to the possibility of taking steps to protect its rights against Kukbo. (Jun Aff. Ex. 5). Until then, Kukbo had no notice that it would become involved in litigation and thus had no obligation to preserve evidence. See VOOM HD Holdings LLC, 93 A.D. at 43. RedHill argues that Kukbo “filed its answer and counterclaims, alleging Kukbo anticipated litigation as of November 23, 2021.” (Mot. at 4). RedHill has concocted a fiction to make its 9 14 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 Motion work. The paragraph RedHill cites from the Counterclaims merely states that the parties held a conference call in which they discussed the dropping share price after the November PO. (NYSCEF Doc. No. 20, ¶ 78). At the time, Kukbo could not possibly have harbored any intention to sue RedHill because its only intention was to obtain the license to RedHill’s COVID-19 treatment. Similarly, RedHill had also no reason to sue Kukbo in November 2021. RedHill’s argument that Kukbo anticipated litigation in November 23, 2021 is nonsensical. 2. No Records Were Destroyed With Any Culpable State of Mind RedHill cannot establish that Kukbo ever destroyed any evidence relevant to RedHill’s claims or defenses, let alone with any “culpable statement of mind”. For purposes of spoliation, a “culpable state of mind” includes “ordinary negligence” and “[f]ailures which support a finding of gross negligence, when the duty to preserve electronic data has been triggered, include: (1) the failure to issue a written litigation hold, when appropriate; (2) the failure to identify all of the key players and to ensure that their electronic and other records are preserved; and (3) the failure to cease the deletion of e-mail.” VOOM HD Holdings LLC, 93 A.D. at 45. (a) Kukbo Preserved All Documents Necessary and Relevant to this Litigation, Issuing a Litigation Hold on or about December 14, 2022. RedHill claims that “Kukbo failed to issue a litigation hold” (Mot. at 11), but notes that Kukbo “alleges it implemented a litigation hold when legal counsel was hired.” (Mot. at 14). RedHill’s argument is inconsistent and incoherent. Regardless, Kukbo issued a litigation hold as soon as it was served with the Complaint. (Jun Aff. Ex. 10). Further, prior to the litigation hold, Kukbo preserved all documents relevant to RedHill. (b) Kukbo Identified All Key Players and Ensured Their Records Were Preserved RedHill also argues that Kukbo failed to preserve communications from its most knowledgeable individuals. (Mot. at 15). Mr. Kim’s deposition testimony proves exactly the 10 15 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 opposite. (Jun Aff. Ex. 37: 40:14-41:4). As Mr. Kim explained, the only Kukbo employees involved in the business transaction with RedHill were Mr. Kim, James K. Ahn, Jung Hoon (Ken) Choi, and Geun Hyo Choi. (Jun Aff. Ex. 37; 23:24-24:6). Mr. Kim was copied on nearly all emails related to RedHill and was responsible for storing, and in fact did store, all relevant communications and documents on the company’s server. (Id.; 40:23-41:1). Mr. Kim’s practice was consistent with Kukbo’s internal policy which required its employees to save and retain documents and communications relevant to Kukbo’s business in the company server through either work email account or personal email account. (Id.; 40:14-41:4). (c) Kukbo's Document Retention Policy Is Not “Egregious” Under Either Korean or New York Standards. RedHill attempts to argue that Kukbo’s document retention policy is “egregious” under New York standards. (Mot. at 14). There is nothing “egregious” about Kukbo’s retention policy Even upon threat of litigation, a company is not required to “preserve every shred of paper, every e-mail or electronic document, and every backup tape.” Zubulake, 220 F.R.D. at 217. Zubulake states that “[i]n recognition of the fact that there are many ways to manage electronic data, litigants are free to choose how [document retention] is accomplished.” Id at 218. Kukbo’s document retention policy is to retain all documents in its system for a three year period. (Jun Aff. Ex. 37; 41:5-9). Kukbo allowed its employees to use their personal emails to conduct work due to its slow server, and there was no obligation for Kukbo’s employees to use their work email account. (Id.; 38:17-25). Kukbo’s practice was to manually store emails sent to, or received by, its employees including those exchanged using personal accounts. (Id.; 39:5-9). Under Zubulake Kukbo is “free to choose how [document retention] is accomplished.” 220 F.R.D. at 218. Further, there is no law in Korea requiring a company to establish its own 11 16 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 domain or ban employees from using personal email account to conduct work. Even if every company in every country should conform to New York standards as RedHill posits, RedHill has cited to no New York law banning the use of personal emails to conduct company business. 3. RedHill Cannot Prove that Kukbo Failed to Preserve Relevant Evidence The list of emails which RedHill claims to be missing from Kukbo’s production (shown on Exhibit A of RedHill’s Motion) undermines, rather than supports, RedHill’s spoliation claim. Of the 104 allegedly missing documents listed in Exhibit A of RedHill’s Motion, (i) 85 were emails sent and received prior to a time when Kukbo could reasonably anticipate litigation and definitely before the litigation hold; (ii) 12 were emails that Kukbo either did produce or produced a near duplicate; and (iii) 7 were emails which were not produced because they were unresponsive to RedHill’s RFP or objected to based on RedHill having “equal or greater access than Kukbo.” (Mot., Ex. A). RedHill compares the volume of Kukbo’s production with its own production to insinuate that Kukbo must have withheld responsive documents. RedHill is misconceived. The reason for the difference is simply that (i) Kukbo sought far more RFPs than RedHill; and (ii) the vast majority of evidence relevant to the parties’ dispute are solely within RedHill’s control, such as voluminous submissions to various regulatory authorities and clinical study results of Opaganib. The fact that Kukbo’s production is far smaller than RedHill’s is irrelevant to this Motion. 4. Even If Certain Documents Were Missing, RedHill Was Not Prejudiced. Once courts find that there was spoliation of evidence by one party, courts then look “to the extent that the spoliation of evidence may prejudice a party […].” Duluc, 119 A.D.3d at 451-52. “Where the discovery violation involves spoliation or withholding of evidence, the absence of prejudice can be shown by demonstrating, for example, that the other parties were able to obtain the same evidence from another source, or that during discovery they never asked 12 17 of 25 FILED: NEW YORK COUNTY CLERK 06/04/2024 11:53 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 370 RECEIVED NYSCEF: 06/04/2024 for the evidence later shown to have been spoliated.” R.F.M.A.S., Inc. v. So, 271 F.R.D. 13, 25 (S.D.N.Y. 2010). “A court should never impose sanctions of any sort unless there has been a showing of – inferential or otherwise – that the movant has suffered prejudice.” GenOn Mid- Atl., LLC v. Stone & Webster, Inc., 282 F.R.D. 346, 353 (S.D.N.Y. 2012), aff’d, No. 11 CV 1299 HB, 2012 WL 1849101 (S.D.N.Y. May 21, 2012). Here, even if Kukbo had spoliated certain evidence (which is denied), RedHill could not possibly have been prejudiced for the following reasons. (a) All Documents Claimed to be “Missing” Were in RedHill’s Possession. Emails sent to or from a custodian are not permanently lost or unrecoverable if they are replaceable through other sources. R.F.M.A.S., Inc. v. So, 271 F.R.D. at 25; see Morgan v. Art Found. Ltd. v. McKenzie, 2020 WL 5836438, at *19 (S.D.N.Y. Sept. 30, 2020) (holding that deleted emails obtainable from other parties and non-parties were not “permanently lost”); GenOn Mid-Atlantic, LLC v. Stone & Webster, Inc., 282 F.R.D. 346, 359 (S.D.N.Y. 2012) (explaining that spoliation sanctions are not warranted if “the information was preserved in other locations”). Here, the emails between Kukbo and RedHill that Kukbo purportedly “failed to produce” were not “permanently lost or unrecoverable” as they were in RedHill’s possession. (b) RedHill Cannot Establish Any “Missing” Documents Were Relevant. A party seeking sanctions must make a showing that the lost materials were relevant. See In re Pfizer Inc. Sec. Litig., 288 F.R.D. 297, 315 (S.D.N.Y. 2013). “The party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that ‘the destroyed or unavailable evidence would have been of the nature alleged by the party affected by its destruction.’” Residential Funding Corp. v. DeGeorge Financial Corp. 306 F.