Pursuit Partners, LLC v. UBS AG
Pursuit Partners, LLC v. UBS AG
2012 WL 1624242 (Conn. Super. Ct. 2012)
April 3, 2012
Brazzel-Massaro, Barbara, Superior Court Judge
Summary
The plaintiffs failed to comply with the court-ordered discovery, resulting in the court ordering them to respond to each discovery request and provide documents, including ESI such as emails. The defendant was also awarded attorneys fees and costs for pursuing the motion. The court ordered the plaintiffs to provide documents and to provide the defendant with sufficient information to adequately determine what documents had been searched.
Note: This is an unpublished decision. Check your jurisdiction’s rules about citing unpublished decisions before citing this case to a court.
PURSUIT PARTNERS, LLC et al.
v.
UBS AG et al
v.
UBS AG et al
No. FSTX08CV084013452
Superior Court of Connecticut, Judicial District of Stamford–Norwalk
April 03, 2012
Brazzel-Massaro, Barbara, Superior Court Judge
INTRODUCTION
*1 The parties to this action have been engaged in ongoing disputes concerning discovery requests. On October 5, 2010, the defendant UBS filed a Motion to Compel responses to the production of documents. After argument, this court entered orders specifically related to the discovery dispute. The defendant, UBS, now comes to the court and requests that the action be dismissed for the failure of the plaintiff to comply with this court order of November 23, 2010. The defendants submitted a motion dated September 13, 2011 with memorandum and exhibits in support of the motion to dismiss. The plaintiffs have submitted a memorandum in opposition dated October 3, 2011. The defendant replied on October 24, 2011. The court heard argument on November 18, 2011.
FACTUAL BACKGROUND
This action involves claims concerning the purchase of several collateralized debt obligations (CDO'S) by the plaintiffs which resulted in a substantial loss as a result of the credit ratings downgrades in the market. The plaintiff, Pursuit Partners, LLC (“Pursuit”) is a small hedge fund that engaged in discussions and thereafter an agreement to purchase CDO'S from the defendant UBS. The plaintiffs filed a thirty-count complaint that seeks relief against the defendant UBS as well as others because of allegations including fraud, misrepresentation and numerous other causes of action. The factual background is more specifically set forth in the decision dated September 8, 2009 on the application for a prejudgment remedy [48 Conn. L. Rptr. 557].
The defendant UBS submitted detailed requests for documents to the plaintiffs on a number of occasions. In October 2010, the defendants filed a motion for compliance with the court alleging the plaintiffs' failure to provide the documentation and the plaintiffs' objections to the production of various documents. On November 23, 2010, the court entered orders addressing the production request and ordered that the plaintiffs provide the documents in response to a number of inquiries that the defendants contend are necessary to defend this action. The defendant now contends that the plaintiffs have not complied with the court's November 23, 2010 order because the agent of Pursuit, Mr. Canales, did not respond to questions posed during the course of his deposition as the agent and counsel instructed him not to answer. Mr. Canales has no records as to how he collected the documents provided in the responses, some of the documents produced were illegible, there were documents that were not provided by the plaintiffs although they were provided by other witnesses (former employees) or as part of other proceedings, and the plaintiffs failed to provide e-mails by Pursuit analysts or other available information in full.
The plaintiffs reply that there was a thorough review and they dispute any intentional noncompliance by the plaintiff. The plaintiffs contend that any omissions were merely a mistake. The plaintiffs further contend that the defendants were not prejudiced by the non-production of some of the documents because the defendant has received them through other measures.
DISCUSSION
*2 The defendant contends that although ordered to comply, the plaintiffs have failed to produce relevant and complete documents that are responsive to the request for production. In particular, the defendants contend that it became obvious during the course of review of the document production that the agent for Pursuit, Mr. Frank Canales, did not provide adequate search terms or data among other deficiencies because the production was missing many documents that had been discovered through other means or failed to include any documentation. The defendant argues that the plaintiffs in undertaking the response for the production request did so in an irresponsible, careless, and haphazard manner with no documentation to support the methods used to comply. As a result, the defendant contends that it is impossible to determine if the plaintiffs have complied with the court order for production and the method of complying with the order was done in such bad faith that the sanction of dismissal is appropriate. The defendant brings this motion pursuant to Practice Book § 13–14 for failure to comply with discovery. This section provides in part: (a) If any party ... has failed to comply with a discovery order made pursuant to Section 13–13 ... or has failed otherwise substantially to comply with any other discovery order made pursuant to Sections 13–6 through 13–11, the judicial authority may, on motion, make such order as the ends of justice require; (b) Such order may include the following: “(1) the entry of a nonsuit or default against the party failing to comply; (2) the award to the discovering party of the cost of the motion, including a reasonable attorneys fee; (3) the entry of an order that the matters regarding which the discovery was sought or other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order; and (4) the entry of an order prohibiting the party who has failed to comply from introducing designated matters in evidence ...”
The plaintiffs' inability to outline or summarize by category and file the method it used to search for the responsive documents is the impetus for the belief that the plaintiffs did not conduct a thorough and appropriate responsive search. Couple this with the defendant's receipt of undisclosed documents through other persons or searches establishes a valid basis for the defendants to express concern that there are additional documents that have not been disclosed and that the plaintiffs have failed to comply with the November 23 court order. In Osborne v. Osborne, 2 Conn.App. 635, 637, 482 A.2d 77 (1984), the court stated that, “careful attention must be paid to the prompt and orderly handling of discovery. Trial courts should not countenance unnecessary delays in discovery and should unhesitatingly impose sanctions proportionate to the circumstances.”
There are three factors to consider in determining if the court should find that the plaintiffs have failed to comply with the court order for the disclosure of a series of documents pursuant to the requests for production and thus enter sanctions. “First, the order to be complied with must be reasonably clear ... Second, the record must establish that the order was in fact violated. Third, the sanction imposed must be proportional to the violation.” (Internal quotation marks omitted.) Wexler v. DeMaio, 280 Conn. 168, 179, 905 A.2d 1196 (2006).
*3 In considering the factors set forth in Wexler the court finds that the court orders are clear. The plaintiffs in their response do not challenge or question the clarity of the order but instead set forth a series of searches made by Mr. Canales in response to the' order and a number of reasons why some documents were not produced. The Plaintiffs' Memorandum in Opposition to this motion provides a sufficient basis to find that the plaintiffs were well aware of the parameters of the court order for the production requests.
As to the second factor, the courts relies upon the memorandum of the parties and the argument of counsel. The parties' arguments in this regard offer conflicting positions. The defendant contends that the plaintiffs have been calculating in their failure to provide documentation and point to the deposition testimony as well as the discovery of documents which are responsive to the production requests that were obtained from other parties or in other forums. The plaintiffs' response to these allegations of improper production responses are varied. The plaintiffs deny that they failed to satisfy the court order and offer rationale for the non-production of certain documents such as the analysts reports. The plaintiffs justify some of the responses with the argument that the defendants have received the documents, even if through other sources, and thus they are not prejudiced. The plaintiffs also argue that many of the documents had already been produced and therefore the plaintiffs did not include these documents a second time in response to the court order because of the unnecessary time and cost that may be incurred to re-produce.[1]There is a difference of opinion as to whether the documents were in fact produced and whether the agent for the plaintiffs, Mr. Canales, adequately responded to the deposition inquiries.[2] The defendants argue that the lack of any written record by Mr. Canales, who was the sole person responsible for the search, demonstrates an unreasonable and incomplete search performance. This is not an action where one or both of the parties has completely ignored their disclosure requirements. However, it is not to say that if a party provides some of the relevant documents and withholds others that this absolves the party from sanctions or dismissal. It may be that producing only parts of the request is more harmful than producing none because it places the opposition in a comfort zone believing it has received all documents when in fact this is a false sense of full compliance.
It is certainly disingenuous for a party to profess that it has produced all relevant documents only to have another witness appear, such as Mr. Fontana, at a deposition with 122 documents that were never produced and then to say, oh well, you got them so there is no prejudice.
The plaintiffs in their opposition provide a list of different steps taken by Mr. Canales to meet the discovery obligations. Each of the steps are reliant upon the subjective review of the Pursuit files by Mr. Canales and his choice to determine which search terms for documents are responsive to the production request. The subjective nature of this request is evident from the plaintiffs' argument that in the original response to the production request the plaintiffs produced 36,648 pages of documents and after the November 23 court order it again reviewed the files, injected new search terms, and located approximately 74,000 pages of documents in compliance. (Plaintiffs' Memorandum in Opposition to the Motion to Dismiss at 7.) The discovery of almost twice the number of documents does raise questions of the thoroughness and accurate review of the Pursuit documents.
*4 This additional discovery heightens an already questionable search because the agent for the plaintiffs cannot provide specifics as to how he searched for the documents. The fact that Mr. Canales embarked upon this document production but failed to have any sense of order such as the specific search terms utilized, the files searched or the method of the search understandably raises great concern as to the seriousness and professionalism with which it was approached. The method of search is uncertain and appears haphazard. This lack of attention to detailing the discovery methods which led to the imprecise disclosure of relevant documents is a violation of the court order. Plaintiffs were aware that the first search was inadequate and yet did not conduct the second search in a manner that would allow all parties to be secure in knowing every file and every document was searched to satisfy the court order. At this time, given the disclosure by Mr. Fontana and discovery of other documents as part of the Alpha Beta Capital Partners case in the New York Supreme Court, it is clear the plaintiffs violated the court order for production. The court is not able to determine completely and to what extent the plaintiffs have not satisfied the court order as a result of the plaintiffs' actions in failing to document the specific search terms or files. The argument and memorandum establish that at a minimum through the deposition of Mr. Canales that: 1) He selected the documents for relevance; 2) he failed to document how he conducted the search; 3) he could not explain why some documents provided by others were not produced; 4) he provided illegible and disorganized documents although his documents were legible; 5) he did not review any “personnel” files contrary to the discovery requests; 6) he did not produce e-mails and contends that contrary to other deposition testimony there are none; 7) he chose not to provide the monthly analyst reports requested and instead provided a summary; and 8) the testimony of Mr. Fontana and Mr. Rivera refer to documents not provided in reference to communications with rating agencies. These findings, among others, make it clear that there has been a violation of the court order for production and thus the second factor has been proven by the defendant. Having determined that the first two factors have been satisfied, the court now looks to determine what, if any, sanctions should be awarded. The defendants have requested that the court dismiss the action because of the noncompliance. Such a result is severe. The defendant has also requested that the court find that none of the documents may be used during the course of trial of this matter. This, too, at this juncture of action is too severe and broad as a sanction.
In determining the proper sanction the court considers: “(1) the cause of the [party's] failure to respond to the posed questions, that is, whether it is due to inability rather than the willfulness, bad faith, or fault of the [party]; (2) the degree of prejudice suffered by the opposing party, which in turn may depend on the importance of the information requested to that party's case; and (3) which of the available sanctions would, under the particular circumstances, be an appropriate response to the disobedient party's conduct.” Pavlinko v. Yale New Haven Hospital, 192 Conn. 138, 144, 470 A.2d 246 (1984). The defendant argues that the failure to respond was willful and in bad faith. As noted above, in viewing what the plaintiffs did or did not do in response to the court's orders to comply it is difficult to decipher what actions the plaintiffs took because there is no documentation outlining the steps taken, the search terms utilized or the areas of documentation explored.
*5 The defendant has requested that this court enter a judgment of dismissal which is the most severe sanction that can be issued by the court. The Supreme Court has held that such a sanction is appropriate “not only to penalize those whose conduct warrants such a sanction but also to deter those who might be tempted to such conduct in the absence of such deterrent. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639 (1976).” Pavlinko v. Yale New Haven Hospital, 192 Conn. at 145. “The decision to enter sanctions ... and if so, what sanctions or sanctions to impose, is a matter within the sound discretion of the trial court.” (Internal quotation marks omitted.) Evans v. General Motors Corp., 277 Conn. 496, 523, 893 A.2d 371 (2006).
The defendant relies upon the case of Asztalos v. Stop and Shop Supermarket, 2000 WL 327450 (Conn.Super.2000) [26 Conn. L. Rptr. 598], in which the court entered sanctions of dismissal because the plaintiff continued to answer falsely about her prior falls and injuries that were similar to the claims and also continually avoided providing written documentation of prior injuries and treatment. The plaintiff in Aszaltto obviously knew about any prior injuries and treatment and could not claim ignorance or forgetfulness. The court found that the plaintiff had withheld discoverable information, intentionally mislead her opponent and failed to disclose relevant and discoverable information in a timely fashion. The plaintiff had been given many opportunities to comply and the parties were engaged in jury selection with the defendant in a position of not being provided all of the discovery. The jury trial was delayed but the court determined that the failure to disclose was willful and that the defendant was prejudiced because of the plaintiff's failure to completely and honestly comply with the discovery requests. There was no doubt that there were documents that would adversely impact the plaintiff's action but they had purposely failed to produce. The facts in Aszlatto are very different from the facts in this discovery dispute. Here, the plaintiffs contend they have provided all of the documents which are responsive to the requests and for some of the documents the plaintiffs did not produce for a second time documents produced earlier or from another source. The defendant while being appropriately skeptical given the uncertainty as to how the search was conducted by Mr. Canales have not provided sufficient facts to rise to the level of demonstrating a willful or bad faith production.
The plaintiffs argue that there is no prejudice to the defendant even if the court should determine that the discovery was delayed because the defendant has had access to many of the documents during the course of discovery and has had the opportunity to incorporate the documents into its defense. The parties have conducted a number of depositions and engaged in an ongoing exchange of large numbers of documents. Some of the difficulty has been in the format of the documents that made them difficult to read or decipher and thus to weigh relevance. Thus, there is some impact to the defendant but there are opportunities available to the defendant to negate this and other possible discovery documents to avoid any prejudice. The defendant contends that the plaintiffs through their designated agent for a deposition improperly refused to answer a number of questions. The plaintiffs contend that the instruction not to answer was appropriate and the defendant had a second and third opportunity to ask questions at the subsequent depositions of the parties. While the plaintiffs may be correct in their statement that the defendant had another deposition of Mr. Canales to inquire into other areas, the fact that there is another deposition does not relieve the deponent from answering relevant questions during the deposition as an agent. However, the availability of another deposition certainly lessens the prejudice and impacts the argument of bad faith by the defendant. Additionally, this court is not viewing the deposition testimony in and of itself to determine if there was an improper objection but has reviewed the argument to determine if there is a pattern of noncompliance which requires relief from the court.
*6 The defendant has requested the very harsh sanction of dismissal which would preclude the plaintiffs from being able to bring this action to a full trial. Although there are a series of events that demonstrate noncompliance, none of the evidence before this court satisfies the willful or intentional actions by the plaintiffs to violate the court's order. Instead, the plaintiffs have admitted that certain documents were not disclosed but they contend it was a mistake either because of the search terms utilized or a mistake in judgment in choosing to reduce what they viewed as unnecessary expense or time to produce documents already available. Additionally, the plaintiffs contend that as to some categories such as emails there are no documents and there is no definitive evidence otherwise. The plaintiffs argue that they are a small business with reduced finances and personnel that makes it difficult to respond to the discovery. This is not a basis to excuse the plaintiffs from total compliance with the document request. The plaintiffs' obvious failure to provide documents and to, at a minimum, provide the defendant with sufficient information to adequately determine what documents have been searched is problematic. The degree of prejudice to the defendant is fortunately not monumental but is significant because for instance, they have been unable to determine whether there are key documents that address the interaction with rating agencies or a recognition of the downgrade of the market at any time. This uncertainty stems from the method of searching the documents with no record as to how or what was reviewed. Although the plaintiffs contend they did a thorough search the evidence proves otherwise in this case.
Therefore, in order to adequately address the plaintiffs' noncompliance with the court-ordered discovery, the only appropriate sanction is to order the plaintiffs to once again respond to each discovery request, noting as to the response who was responsible for the search of documents, what search terms were utilized and which files were accessed in the response. If documents are available from another source such as a former employee, the plaintiffs are to indicate the employee and specific documents in their possession as well as any documents that are not in their possession but may be available from another source such as the Alpha Beta Capital Partners legal action. Any documents which have already been produced must be specifically noted in response with a reference to the date when produced and a Bates number or description of the document. Before producing the documents, the plaintiffs are responsible for verifying that they are in legible form. The plaintiffs shall comply with this order no later than the close of business on May 2, 2012.
ATTORNEYS FEES AND COSTS
The defendant requests that the court award fees and costs that have been incurred by UBS in filing the motion to dismiss as a result of withholding discovery documents. The plaintiffs contend that the court should not grant dismissal or sanctions of the preclusion of the use of these documents from evidence but does not specifically argue in objection to the request for an award of attorneys fees for the failure to comply with court orders. It is obvious that the plaintiffs have not fully complied but the action is fortunately in the stages where the impact can be corrected. However, the defendant should be awarded attorneys fees and costs for pursuing this motion and obtaining full disclosure of the documents. The defendant is to submit the appropriate motion, affidavit(s) and exhibit(s) in support of the request for attorneys fees no later than May 2, 2012. The plaintiffs shall respond by June 1, 2012 and any reply shall be submitted by June 15, 2012.
Footnotes
Although the plaintiffs argue that the cost factor and time to produce documents a second time was the reason they were not produced, they failed to make any notation within the discovery response that would alert the defendant to the fact that they already had possession of the documents and provide either Bates number or descriptions to provide full discovery.
The plaintiffs in their response provide a series of searches and production response by the plaintiffs through searches by Mr. Canales which provided over 100,000 pages of documents to the defendants. The plaintiffs produced approximately 70,000 pages after the court order between December 10 and December 16, 2010. According to the defendant, the deposition testimony of Mr. Canales as agent for Pursuit improperly objected to inquiries about the documents but the defendant conduct additional depositions of Mr. Canales which afforded them ample opportunity to explore some of the inquiries.