Preview
FILED: NEW YORK COUNTY CLERK 12/12/2016 03:40 PM INDEX NO. 653476/2013
NYSCEF DOC. NO. 125 RECEIVED NYSCEF: 12/12/2016
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
------------------------------------------------------------------------X
PETER STERN and EXPRESS TRADE CAPITAL, INC.
Plaintiffs, Index No. 653476/2013
-against-
ATTORNEY’S AFFIRMATION
IN REPLY
OLEG ARDACHEV, AIR CARGO SERVICES L.L.C.,
DELEX INC., DELEX AIR CARGO, LLC, a Delaware
limited liability company, and DELEX AIR CARGO, LLC.
a Washington limited liability company.
Defendants.
------------------------------------------------------------------------X
Robert Bondar, an attorney duly admitted to practice in the Courts of this state, hereby affirms
the following under penalty of perjury:
1. I am the attorney for Defendants, and I am fully familiar with all the proceedings in this
action.
2. I submit this Affirmation in Reply to Plaintiffs’ Opposition to the Defendants’ motion to
to quash Plaintiffs’ Subpoena Duces Tecum (the ‘Subpoena’), directed at the non-party
Defendants’ corporate accountant Douglas Milo, CPA, and for Protective Order, pursuant
to CPLR 3103(a), “denying, limiting, conditioning or regulating” discovery sought by
Plaintiffs.
3. Plaintiffs’ opposition is based on two apparent grounds, namely that, a.) Defendant
Ardachev has “committed fraud by attempting to divert ACS’s assets”, and b.) that
Plaintiff’s proposed Confidentiality Agreement would protect Defendants’ financial
information, apparently rendering Defendants’ instant motion unnecessary. Aff. Seidman
at 5, 13.
1
1 of 8
4. As set forth below, Plaintiff’s arguments lack merit and Defendant’s motion should be
granted in its entirety.
a. Plaintiffs’ subpoena should be quashed because it seeks information that is
“palpably improper” and “utterly irrelevant to any proper inquiry” of the
issues of this matter
5. Plaintiffs seek information that is “palpably improper” and “utterly irrelevant to any
proper inquiry” of the issues of this matter, see Accent Collections, Inc. v Cappelli
Enters., Inc., 84 A.D.3d (2 Dept. 2011); Garcia v Jamber Rlty., Inc., 264 A.D.2d 809 (2
Dept. 1999).
6. "A disclosure request is palpably improper if it seeks information of a confidential and
private nature that does not appear to be relevant to he issues in the case". Saratoga
Harness Races, Inc. v Roemer, 274 A.D.2d 887 (3 Dept. 2000).
7. As an initial matter, Plaintiffs, by issuing the instant subpoena, attempt to circumvent the
discovery procedures and abuse the legal process. Plaintiffs claim that Defendants have
failed to produce “substantially all of the documents” sought by Plaintiffs’ discovery.
That is not true – on June 3, 2016, Defendants had fully produced all relevant, material,
non-privileged documents and records, which were in their possession, custody and
control. Exhibit G.
8. The Defendants had objected to the production of privileged and confidential financial
information, which is not at all relevant to the issues of this action. Unable to receive the
information through proper channels, Plaintiffs improperly attempt to obtain the same
privileged and confidential information from the Defendants’ individual and corporate
accountant under the guise of the issuance of subpoena. However, since the confidential
2
2 of 8
nature of sought discovery has not changed, whether it is demanded from the Defendants
themselves or from their accountant, Plaintiffs’ subpoena must still be quashed, in whole
or in part, and Defendants should be granted the protective order to shield them from the
abusive practices of the Plaintiffs.
9. Plaintiffs seek highly sensitive commercial information and confidential financial
records, such as the Defendants’ tax returns, corporate formation and organizational
documents, operational and financial information, bank records, list of assets, and money
transfer records. The demanded information and records indisputably constitute
commercially sensitive secret information, which is privileged and cannot be discovered
absent a strong showing of necessity, which has not been demonstrated by the Plaintiffs
to any degree of certainty.
10. It is well-established law in New York, that tax records are not discoverable absent a
strong showing of necessity, e.g. they must be relevant to the issues in the case, because
they contain information of a confidential and private nature.
11. Accordingly, Plaintiff’s demand of Defendants’ tax returns is palpably improper, since it
seeks “information of a confidential and private nature that is not relevant to the issues in
this case”. Otto v. Triangle Aviation Services, Inc. 258 A.D.2d 44 (2 Dept. 1999). The
plaintiff's tax records are discoverable upon a strong showing of necessity, i.e., that they
contain the relevant information which cannot be obtained from any alternative source
(see, Consentino v. Schwartz, 155 A.D.2d 640 (2 Dept. 1989), Mayo, Lynch & Assoc. v.
Fine, 123 A.D.2d 607(2 Dept. 1986), Briton v. Knott Hotels Corp., 111 A.D.2d 62 (1
Dept. 1985).
3
3 of 8
12. However, according to the Plaintiffs’ Complaint, the only issue to be determined in this
action is whether either Defendant Ardachev (see Affidavit of Douglas Milo, CPA) or
Defendant Delex Inc., (see Affidavit of Arthur Hish) breached the terms of the
Agreement by failing to pay the agreed-upon price for the purchase of Plaintiffs’ 50%
ownership interest in ACS.
13. Clearly, the records and information demanded by Plaintiffs’ are not reasonably
calculated to lead to the discovery of any admissible evidence of the alleged breach,
which may only be gleaned from the contract itself, and possibly from the surrounding
communications between the parties and their conduct.
14. Defendants’ proprietary and confidential corporate records and financial information
(other than ACS’s, which was provided) are completely immaterial and irrelevant to
Plaintiffs’ claims in this action.
15. Plaintiffs’ allegations of fraud peppered throughout their opposition papers are nothing
but a “red herring”, designed to divert the Court’s attention from the facts that this action
is neither a supplementary proceeding, whereby Plaintiffs would be judgment creditors of
the Defendants, attempting to enforce a money judgment, nor is this an action seeking
damages for fraudulent conveyance.
16. Plaintiffs provide no conceivable justification for such an extremely broad subpoena
request, they make no showing that this information is material and necessary to the
prosecution of their claim, and they wholly fail to demonstrate necessity of the demanded
information.
17. “Plaintiff's request for defendant's payroll tax records for 2004 was also not material and
necessary for the prosecution of her claims, and plaintiff failed to demonstrate a strong
4
4 of 8
showing of overriding necessity to overcome the confidentiality of such information (see
Editel, N.Y. v. Liberty Studios, 162 A.D.2d 345 (1st Dept.1990); Lukowsky v. Shalit,
160 A.D.2d 641 (1st Dept.1990).”
18. Accordingly, the Court should quash Plaintiffs’ subpoena and grant Defendants’
Protective Order pursuant to CPLR 3103(a), “denying, limiting, conditioning or
regulating” discovery sought by Plaintiffs.
b. Defendants should be granted Protective Order limiting or denying sought
discovery to prevent abuse
19. Plaintiffs abuse the discovery process by demanding confidential and commercially
sensitive business information from their direct competitors, the Defendants herein. As
such, Defendants seek protective order to prevent significant commercial disadvantage
and undue prejudice resulting from Plaintiffs’ unreasonably broad demands.
20. As set forth in the moving papers, Plaintiff EXPRESS TRADE CAPITAL, INC. is in
direct competition with the corporate Defendants, as all are in the business of logistics
and freight-forwarding of cargo by air, land and sea. See Complaint at ¶8, and Exhibit D,
annexed to Defendants’ motion.
21. Plaintiffs do not dispute the fact, but attempt to qualify it by contending that “Freight
forwarding and logistics services are only a small part” of Plaintiffs business. Plaintiffs’
Memorandum of Law at p.7. Plaintiffs then contradict themselves, boldly stating,
“Plaintiffs do not compete with the Defendants in the marketplace”. Id., p.9.
22. Although logistics may be only a small portion of Plaintiffs’ business, it is the
Defendants’ entire business. Defendants rationally consider Plaintiffs to be their direct
5
5 of 8
competition in the freight forwarding business. Accordingly, Defendants object to the
production of the commercially sensitive information, and the disclosure of its trade
secrets, to its competitor and hereby seek the protective order against Plaintiffs’
unwarranted intrusion into its business.
23. Plaintiffs are not even conceivably entitled to the information they demand. Given
Plaintiffs’ Complaint allegations, which are that Defendants failed to pay Plaintiffs for
their share of ACS, the Plaintiffs subpoena to Defendants’ corporate accountant is
nothing but a crude ‘fishing expedition’. It seeks proprietary and secret information
which belongs to Plaintiffs’ direct competitor, and which is clearly not available to the
members of general public - without any basis in law or fact. Such information, if
disclosed, would result in extreme and undue prejudice to Defendants and would
disadvantage their business interests and trade secrets. Clearly, a proposed
Confidentiality Order does not alleviate Defendants’ concerns, because the sought
information is still going to be available to their direct competitor.
24. It is obvious that the proprietary information that Plaintiffs seek to obtain does not bear
on the issues of liability and damages.
25. Plaintiffs contend that the requested documents “are relevant to prove the value of ACS
and the amount of damages caused by Ardachev’s fraud.” Plaintiffs’ Memorandum of
Law at p.6.
26. Nothing could be further from the truth. As set forth above, Plaintiffs’ claims stem from
the alleged Sale Agreement, which if nothing else, does contain a definite price term.
Therefore, the value of ACS is completely immaterial to Plaintiffs’ claims. Similarly,
6
6 of 8
Plaintiff’s claims in their Complaint against Ardachev do not include fraud. As such, any
claims for fraud damages are expressly not a part of this action.
27. Accordingly, Plaintiff’s requests are neither tailored to the issues of this action, nor are
reasonably calculated to obtain the information relevant to Plaintiffs’ allegations in the
complaint, and must therefore be quashed.
28. Delex considers its list of assets, payments, and records of transfers (Subpoena requests
No. 12-15), as its trade secrets. Although there is generally no accepted definition of a
trade secret, one which has been cited with approval by the Court of Appeals is “any
formula, pattern, device or compilation of information which is used in one's business,
and which gives one an opportunity to obtain an advantage over competitors who do not
know or use it”. Ashland Management v. Janien, 82 N.Y.2d 395 (1993).
29. “In New York, when trade secrets are sought by an adverse party in litigation, the burden
of establishing that the information sought is a trade secret lies with the disclosure
objectant. If that burden is met, the party seeking disclosure must show that the
information appears to be indispensable and cannot be acquired in any other way”. Curtis
v. Complete Foam Insulation Corp., 116 A.D.2d 907 (3d Dept.1986) citing Drake v.
Herrman, 261 N.Y. 414, 185 N.E. 685 (1933).
30. Defendants have amply demonstrated that the information sought by Plaintiffs is both not
“indispensable” to the their claims against Defendants and is a protected trade secret.
Accordingly, Defendants request that this Court issues a protective order pursuant to
CPLR 3103(a), “denying, limiting, conditioning or regulating” disclosure demanded by
the Plaintiffs.
7
7 of 8
DATED: Brooklyn, New York Respectfully submitted,
December 11, 2016
By: /s/ Robert Bondar
Robert Bondar, Esq.
Attorney for Defendants
28 Dooley Street, 3rd floor
Brooklyn, New York 11235
Telephone (347) 462-3262
8
8 of 8
Preview
FILED: NEW YORK COUNTY CLERK 12/12/2016 03:40 PM INDEX NO. 653476/2013 NYSCEF DOC. NO. 125 RECEIVED NYSCEF: 12/12/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------------------X PETER STERN and EXPRESS TRADE CAPITAL, INC. Plaintiffs, Index No. 653476/2013 -against- ATTORNEY’S AFFIRMATION IN REPLY OLEG ARDACHEV, AIR CARGO SERVICES L.L.C., DELEX INC., DELEX AIR CARGO, LLC, a Delaware limited liability company, and DELEX AIR CARGO, LLC. a Washington limited liability company. Defendants. ------------------------------------------------------------------------X Robert Bondar, an attorney duly admitted to practice in the Courts of this state, hereby affirms the following under penalty of perjury: 1. I am the attorney for Defendants, and I am fully familiar with all the proceedings in this action. 2. I submit this Affirmation in Reply to Plaintiffs’ Opposition to the Defendants’ motion to to quash Plaintiffs’ Subpoena Duces Tecum (the ‘Subpoena’), directed at the non-party Defendants’ corporate accountant Douglas Milo, CPA, and for Protective Order, pursuant to CPLR 3103(a), “denying, limiting, conditioning or regulating” discovery sought by Plaintiffs. 3. Plaintiffs’ opposition is based on two apparent grounds, namely that, a.) Defendant Ardachev has “committed fraud by attempting to divert ACS’s assets”, and b.) that Plaintiff’s proposed Confidentiality Agreement would protect Defendants’ financial information, apparently rendering Defendants’ instant motion unnecessary. Aff. Seidman at 5, 13. 1 1 of 8 4. As set forth below, Plaintiff’s arguments lack merit and Defendant’s motion should be granted in its entirety. a. Plaintiffs’ subpoena should be quashed because it seeks information that is “palpably improper” and “utterly irrelevant to any proper inquiry” of the issues of this matter 5. Plaintiffs seek information that is “palpably improper” and “utterly irrelevant to any proper inquiry” of the issues of this matter, see Accent Collections, Inc. v Cappelli Enters., Inc., 84 A.D.3d (2 Dept. 2011); Garcia v Jamber Rlty., Inc., 264 A.D.2d 809 (2 Dept. 1999). 6. "A disclosure request is palpably improper if it seeks information of a confidential and private nature that does not appear to be relevant to he issues in the case". Saratoga Harness Races, Inc. v Roemer, 274 A.D.2d 887 (3 Dept. 2000). 7. As an initial matter, Plaintiffs, by issuing the instant subpoena, attempt to circumvent the discovery procedures and abuse the legal process. Plaintiffs claim that Defendants have failed to produce “substantially all of the documents” sought by Plaintiffs’ discovery. That is not true – on June 3, 2016, Defendants had fully produced all relevant, material, non-privileged documents and records, which were in their possession, custody and control. Exhibit G. 8. The Defendants had objected to the production of privileged and confidential financial information, which is not at all relevant to the issues of this action. Unable to receive the information through proper channels, Plaintiffs improperly attempt to obtain the same privileged and confidential information from the Defendants’ individual and corporate accountant under the guise of the issuance of subpoena. However, since the confidential 2 2 of 8 nature of sought discovery has not changed, whether it is demanded from the Defendants themselves or from their accountant, Plaintiffs’ subpoena must still be quashed, in whole or in part, and Defendants should be granted the protective order to shield them from the abusive practices of the Plaintiffs. 9. Plaintiffs seek highly sensitive commercial information and confidential financial records, such as the Defendants’ tax returns, corporate formation and organizational documents, operational and financial information, bank records, list of assets, and money transfer records. The demanded information and records indisputably constitute commercially sensitive secret information, which is privileged and cannot be discovered absent a strong showing of necessity, which has not been demonstrated by the Plaintiffs to any degree of certainty. 10. It is well-established law in New York, that tax records are not discoverable absent a strong showing of necessity, e.g. they must be relevant to the issues in the case, because they contain information of a confidential and private nature. 11. Accordingly, Plaintiff’s demand of Defendants’ tax returns is palpably improper, since it seeks “information of a confidential and private nature that is not relevant to the issues in this case”. Otto v. Triangle Aviation Services, Inc. 258 A.D.2d 44 (2 Dept. 1999). The plaintiff's tax records are discoverable upon a strong showing of necessity, i.e., that they contain the relevant information which cannot be obtained from any alternative source (see, Consentino v. Schwartz, 155 A.D.2d 640 (2 Dept. 1989), Mayo, Lynch & Assoc. v. Fine, 123 A.D.2d 607(2 Dept. 1986), Briton v. Knott Hotels Corp., 111 A.D.2d 62 (1 Dept. 1985). 3 3 of 8 12. However, according to the Plaintiffs’ Complaint, the only issue to be determined in this action is whether either Defendant Ardachev (see Affidavit of Douglas Milo, CPA) or Defendant Delex Inc., (see Affidavit of Arthur Hish) breached the terms of the Agreement by failing to pay the agreed-upon price for the purchase of Plaintiffs’ 50% ownership interest in ACS. 13. Clearly, the records and information demanded by Plaintiffs’ are not reasonably calculated to lead to the discovery of any admissible evidence of the alleged breach, which may only be gleaned from the contract itself, and possibly from the surrounding communications between the parties and their conduct. 14. Defendants’ proprietary and confidential corporate records and financial information (other than ACS’s, which was provided) are completely immaterial and irrelevant to Plaintiffs’ claims in this action. 15. Plaintiffs’ allegations of fraud peppered throughout their opposition papers are nothing but a “red herring”, designed to divert the Court’s attention from the facts that this action is neither a supplementary proceeding, whereby Plaintiffs would be judgment creditors of the Defendants, attempting to enforce a money judgment, nor is this an action seeking damages for fraudulent conveyance. 16. Plaintiffs provide no conceivable justification for such an extremely broad subpoena request, they make no showing that this information is material and necessary to the prosecution of their claim, and they wholly fail to demonstrate necessity of the demanded information. 17. “Plaintiff's request for defendant's payroll tax records for 2004 was also not material and necessary for the prosecution of her claims, and plaintiff failed to demonstrate a strong 4 4 of 8 showing of overriding necessity to overcome the confidentiality of such information (see Editel, N.Y. v. Liberty Studios, 162 A.D.2d 345 (1st Dept.1990); Lukowsky v. Shalit, 160 A.D.2d 641 (1st Dept.1990).” 18. Accordingly, the Court should quash Plaintiffs’ subpoena and grant Defendants’ Protective Order pursuant to CPLR 3103(a), “denying, limiting, conditioning or regulating” discovery sought by Plaintiffs. b. Defendants should be granted Protective Order limiting or denying sought discovery to prevent abuse 19. Plaintiffs abuse the discovery process by demanding confidential and commercially sensitive business information from their direct competitors, the Defendants herein. As such, Defendants seek protective order to prevent significant commercial disadvantage and undue prejudice resulting from Plaintiffs’ unreasonably broad demands. 20. As set forth in the moving papers, Plaintiff EXPRESS TRADE CAPITAL, INC. is in direct competition with the corporate Defendants, as all are in the business of logistics and freight-forwarding of cargo by air, land and sea. See Complaint at ¶8, and Exhibit D, annexed to Defendants’ motion. 21. Plaintiffs do not dispute the fact, but attempt to qualify it by contending that “Freight forwarding and logistics services are only a small part” of Plaintiffs business. Plaintiffs’ Memorandum of Law at p.7. Plaintiffs then contradict themselves, boldly stating, “Plaintiffs do not compete with the Defendants in the marketplace”. Id., p.9. 22. Although logistics may be only a small portion of Plaintiffs’ business, it is the Defendants’ entire business. Defendants rationally consider Plaintiffs to be their direct 5 5 of 8 competition in the freight forwarding business. Accordingly, Defendants object to the production of the commercially sensitive information, and the disclosure of its trade secrets, to its competitor and hereby seek the protective order against Plaintiffs’ unwarranted intrusion into its business. 23. Plaintiffs are not even conceivably entitled to the information they demand. Given Plaintiffs’ Complaint allegations, which are that Defendants failed to pay Plaintiffs for their share of ACS, the Plaintiffs subpoena to Defendants’ corporate accountant is nothing but a crude ‘fishing expedition’. It seeks proprietary and secret information which belongs to Plaintiffs’ direct competitor, and which is clearly not available to the members of general public - without any basis in law or fact. Such information, if disclosed, would result in extreme and undue prejudice to Defendants and would disadvantage their business interests and trade secrets. Clearly, a proposed Confidentiality Order does not alleviate Defendants’ concerns, because the sought information is still going to be available to their direct competitor. 24. It is obvious that the proprietary information that Plaintiffs seek to obtain does not bear on the issues of liability and damages. 25. Plaintiffs contend that the requested documents “are relevant to prove the value of ACS and the amount of damages caused by Ardachev’s fraud.” Plaintiffs’ Memorandum of Law at p.6. 26. Nothing could be further from the truth. As set forth above, Plaintiffs’ claims stem from the alleged Sale Agreement, which if nothing else, does contain a definite price term. Therefore, the value of ACS is completely immaterial to Plaintiffs’ claims. Similarly, 6 6 of 8 Plaintiff’s claims in their Complaint against Ardachev do not include fraud. As such, any claims for fraud damages are expressly not a part of this action. 27. Accordingly, Plaintiff’s requests are neither tailored to the issues of this action, nor are reasonably calculated to obtain the information relevant to Plaintiffs’ allegations in the complaint, and must therefore be quashed. 28. Delex considers its list of assets, payments, and records of transfers (Subpoena requests No. 12-15), as its trade secrets. Although there is generally no accepted definition of a trade secret, one which has been cited with approval by the Court of Appeals is “any formula, pattern, device or compilation of information which is used in one's business, and which gives one an opportunity to obtain an advantage over competitors who do not know or use it”. Ashland Management v. Janien, 82 N.Y.2d 395 (1993). 29. “In New York, when trade secrets are sought by an adverse party in litigation, the burden of establishing that the information sought is a trade secret lies with the disclosure objectant. If that burden is met, the party seeking disclosure must show that the information appears to be indispensable and cannot be acquired in any other way”. Curtis v. Complete Foam Insulation Corp., 116 A.D.2d 907 (3d Dept.1986) citing Drake v. Herrman, 261 N.Y. 414, 185 N.E. 685 (1933). 30. Defendants have amply demonstrated that the information sought by Plaintiffs is both not “indispensable” to the their claims against Defendants and is a protected trade secret. Accordingly, Defendants request that this Court issues a protective order pursuant to CPLR 3103(a), “denying, limiting, conditioning or regulating” disclosure demanded by the Plaintiffs. 7 7 of 8 DATED: Brooklyn, New York Respectfully submitted, December 11, 2016 By: /s/ Robert Bondar Robert Bondar, Esq. Attorney for Defendants 28 Dooley Street, 3rd floor Brooklyn, New York 11235 Telephone (347) 462-3262 8 8 of 8