*1 On June 8, 2016, Chartwell Therapeutics Licensing, LLC (“plaintiff” or “Chartwell”) commenced this action against Citron Pharma LLC (“defendant” or “Citron”), in the Supreme Court of the State of New York in Kings County, raising claims for breach of contract, goods sold and delivered, unjust enrichment, and quantum meruit, and seeking not only monetary damages, but attorney's fees and costs, as well.

Presently before the Court are a series of discovery disputes. On June 16, 2017, Chartwell filed a status report, citing certain deficiencies in Citron's production of documents. On June 19, 2017, Citron filed a response to Chartwell's status report, raising issues relating to Citron's responses to document requests. The parties filed three additional responsive letters on June 29, 2017, July 12, 2017, July 17, 2017, and July 31, 2017.

Plaintiff Chartwell Therapeutics Licensing LLC commenced this action against defendant Citron Pharma LLC for alleged breach of contract and failure to render payments owed pursuant to contractual agreements. Chartwell alleges that on July 21, 2015, Chartwell and Citron entered into a contractual agreement which set forth terms and conditions for the sale of the product “Doxycycline Hyclate” (“Doxy”) in the form of “pharmaceutical tablets and capsules” from Chartwell to Citron which were then resold by Citron to three “specifically identified third-party retailers”: Wal-mart, Publix, and Morris Dickson. (Compl.[1] ¶ 5).

Chartwell alleges that Citron breached the contract by failing to make payment under the July 21, 2015 contract in the form of Transfer Prices and Net Sales Shares. (Id. ¶¶ 15-17). Chartwell claims the contract stipulates that for each purchase order it fulfills, Citron is required to pay Chartwell a “specified Transfer Price” determined by the “type and quantity” of product requested in the purchase order. (Id. ¶ 6). Additionally, Chartwell claims that the contract requires each party to share in the net sales of the product by Citron to third-party customers, amounts which are referred to as the “Net Sales Shares.” (Id. ¶ 7). Consequently, Chartwell believes Citron has “improperly benefitted at Plaintiff's cost and expense.” (Id. ¶ 36).

Chartwell also alleges that Citron violated the contract by “refusing and/or improperly conditioning” Chartwell's attempt to consummate the contractual right to physically examine Citron's records. (Id. ¶ 41). Chartwell claims that Citron “required Plaintiff to accept return of certain product,” which Chartwell argues violates the clause of the contract forbidding Citron from denying or conditioning Chartwell's “contractual right to verify and determine” amounts owed to Chartwell. (Id. ¶¶ 41-42).

On April 10, 2017, Chartwell filed a motion for an order of attachment against Citron's assets. On June 5, 2017, this Court held oral argument on the motion for an order of attachment and also set several discovery deadlines. The parties were Ordered to meet and confer on the remaining discovery disputes; Citron was to provide a privilege log with objections to the document requests provided by Chartwell; and the parties were directed to provide a status report indicating whether there were any remaining discovery issues relating to document requests that could not be resolved.

*2 In a series of letters filed from June 16, 2017 to July 31, 2017, counsel for both Chartwell and Citron raised a number of discovery disputes.

The Federal Rules of Civil Procedure grant parties broad rights to discovery. See FED. R. CIV. P. 26(b). The recently revised Rule 26 allows parties to “obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” FED. R. CIV. P. 26(b)(1). Materials “need not be admissible in evidence to be discoverable.” Id. In other words, “ ‘[r]elevance’ under Rule 26 ‘has been construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on any issue that is or may be in the case.’ ” Crosby v. City of New York, 269 F.R.D. 267, 282 (S.D.N.Y. 2010) (quoting Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978)). However, discovery may not be used to “ ‘to explore matter which does not presently appear germane on the theory that it might conceivably become so.’ ” Id. (quoting In re Fontaine, 402 F. Supp. 1219, 1221 (S.D.N.Y. 1975)). Further, as specified in Rule 26, discovery must be “proportional to the needs of the case.” FED. R. CIV. P. 26(b)(1).

The following are the main discovery disputes raised by the parties thus far.

1) Chartwell's Request for Third-Party Sales Documents

One of the issues discussed during oral argument before the undersigned on June 5, 2017 was Chartwell's request for third-party sales documents, specifically Citron's invoices issued to customers through the Dohmen Life Science Services (DLSS) system and payments received in connection with the invoices, particularly payments by check. Chartwell argued that it needed additional documentation relating to chargebacks provided to Citron's customers, which it estimated at approximately $6 million, and it argued that there was no way to corroborate these chargebacks based solely on the spreadsheets provided by Citron. The Court found that, because these invoices are necessary to determine the Net Sales Share, Citron should be able to obtain the backup data from DLSS, and Chartwell would then be able to depose the DLSS representative who could explain how the chargebacks were calculated.

*3 In a status letter filed on June 16, 2017, Chartwell indicated that it was awaiting Citron's production of certain documents, which Citron indicated it was working to produce, including “numerous categories” of Sales Backup Documentation. In a response filed on June 16, 2017, Citron represented that it was reviewing certain spreadsheets and hard copy documents relating to the Net Sales Share dispute. However, Citron could not provide a specific date for production. Citron also stated that, in response to the subpoena Chartwell issued to DLSS relating to Citron's purchase and resale of Doxy sourced from Chartwell, Citron had reached out to DLSS counsel to determine its position concerning the subpoena and to determine the nature of responsive documents. Citron represented that it had not received any further information from DLSS counsel relating to the subpoena.

In a letter filed on June 19, 2017, Chartwell reiterated its claim that Citron had failed to produce missing backup documentation to substantiate the summary charts which detail Citron's sale of Doxy product to third-party customers, arguing that the Sales Backup Documentation will allow Chartwell to prove the amounts due under the profit share portion of the contract. In a follow-up letter filed on July 12, 2017, Chartwell stated that Citron still had not produced the backup documentation to substantiate the summary charts concerning Citron's sale of Doxy to third-parties, nor had Citron produced Medicaid rebate information.

The Court finds that this information is both relevant and proportional to Chartwell's claims and is required for Chartwell to understand the way Citron has calculated its Net Sales Share. Accordingly, Citron is Ordered to produce all responsive documents by August 11, 2017. If Chartwell has not received a response to its DLSS subpoena, Chartwell should contact the Court and the Court will issue a So Ordered subpoena to DLSS.

2) Chartwell's Request for Internal Communications

In the June 16, 2017 status report, Chartwell alleged that Citron's production of internal communications between Citron employees and representatives regarding the Doxy product was missing metadata fields and thus, Chartwell was unable to review the documents “meaningfully.” Chartwell maintained that the internal communications are highly relevant to the issues at dispute, arguing that the internal communications will provide information about the alleged contract modification that lowered the price of Doxy Product. Chartwell indicated that Citron had agreed to correct the deficiencies by June 19, 2017, but no such corrections had occurred to date and no privilege log was included with the redacted entries. In its June 16, 2017 response, Citron represented that it was working to create the privilege log relating to the internal communications between its employees, which it would produce by June 23, 2017. Although the Court has received numerous letters from the parties, it is unclear if these documents were produced by June 23, 2017.

Based on the parties’ arguments at the June 5, 2017 oral argument and the arguments made in the aforementioned letters, the Court finds that this information is highly relevant to Chartwell's claims. If these documents and/or privilege log were not provided by June 23, 2017, they are Ordered to be provided by August 11, 2017.

3) Chartwell's Request for Documents Responsive to the Eisner Subpoena

In its June 16, 2017 status report, Chartwell also indicated that it was waiting on the production of documents responsive to a subpoena served on Eisner Amper LLP, Citron's accountants. Chartwell claimed that it would be prejudiced by Citron's continued failure to produce the documents.

In its June 16, 2017 response, Citron stated that it was reviewing the documents produced by Eisner Amper for privileged information and relevance and argued that the subpoena is objectionable because it includes Citron's “highly sensitive financial and proprietary information” that is irrelevant to the purchase or sale of Doxy Product. (Def.’s 6/16/2017 Ltr. at 4). In addition, Citron claimed that producing these documents would create an undue burden because of the volume of documents Chartwell seeks.

*4 In a letter dated July 31, 2017, Chartwell indicates that it still has not received any documents pursuant to the Eisner subpoena which was served on May 5, 2017 – almost 3 months ago. The documents were provided by Eisner to Citron on June 1, 2017, but despite the passage of 2 months, Citron has neither provided a single document or privilege log, nor has it provided a date by which it intends to produce such documents.

Moreover, it is unclear what specific information Citron believes is too sensitive to produce. Thus, to the extent that Citron objects to producing certain sensitive financial and proprietary information, Citron should provide the privilege log or produce the documents by August 11, 2017.

4) Citron's Request for Targeted Word Searches of Chartwell's Electronic Files

In its June 16, 2017 responsive letter, Citron raised several issues with respect to Chartwell's discovery responses. Citron represented that, in searching for relevant documents, Chartwell only searched for documents containing the word “Citron” or the domain name for Citron's email “@citronpharma.” According to Citron, these “targeted word searches” have omitted potentially relevant documents.

In a responsive letter filed on June 19, 2017, Chartwell denied Citron's argument that Chartwell's search terms were too narrow, arguing that searching for other relevant documents that do not contain the word “Citron” would be costly and prejudicial. Chartwell admitted that it had initially missed five emails from correspondence between Citron and Chartwell when providing its initial discovery responses, but represented that all five emails were later found and produced on June 1, 2017.

In a letter filed on June 29, 2017, Citron once again proposed that Chartwell conduct a broader search of its data files to include additional search terms. Citron argued that Chartwell has refused to conduct a broader review of its data files to include documents that did not contain the term “Citron.” Citron proposed other relevant search terms, such as the names of Citron employees, particularly the first names of these employees, the retailers to whom Citron resold Doxy (specifically, Wal-Mart, Public, and Morris Dickerson), the Doxy configurations listed in the term sheet, and common terms for the product such as “doxy,” “doxycycline,” and “doxycline hyclate.” Citron requested this Court to Order Chartwell to meet and confer with Citron about search terms and the scope of Chartwell's efforts to identify sources of relevant ESI and paper documents.

On July 12, 2017, Chartwell responded that such an exhaustive search would not be proportional to the needs of the case, since Citron has failed to identify what type of additional responsive documents may exist and could be discovered through a broader search. Chartwell also contended that it would be increasingly costly and prejudicial to restart the discovery process with new search terms. On July 17, 2017, Citron filed its response, reiterating its request that Chartwell expand its search beyond basic search terms and pointed to the search terms suggested in its June 29, 2017 letter. In response to Chartwell's argument that Citron failed to mention what information might be missing from the data files already produced, Citron argued that it “could not possibly know what ESI might be identified by more robust searches.” (Def.’s 7/17/2017 Ltr. at 2).

To the extent Citron seeks data files that name any Chartwell employee who ever sold Doxy or dealt with a Citron employee, the Court finds that the search terms Citron proposes are grossly disproportional to the specific issues raised in the Complaint. Moreover, some of the information Citron seeks, particularly information concerning communications between its own employees and Chartwell's employees, as well as Citron's own sales to third-party retailers, is information that should be in Citron's possession. Finally, Citron's request to include search terms including various Doxy configurations would likely produce an extensive amount of files, and it is unclear what Citron hopes to find in these files. The process of sifting through these files alone to find documents relating to the contract dispute at issue here would outweigh any potential benefit of producing these documents. Absent a further explanation as to what type of information Citron hopes to find in these emails, its relevance to the claims at issue, and why Citron does not have some of this information already – specifically, communications with its own employees – the Court denies Citron's request.

5) Citron's Request for Documents Provided for the Grassi Audits

*5 In its June 16, 2017 letter, Citron also represented that Chartwell had not produced certain reports from Chartwell's accountants, Grassi & Co., in connection with the formal or informal audits Grassi had conducted regarding Citron's purchase of Doxy from Chartwell and Citron's resale of Doxy. Citron notes that its request did not seek production of emails between Chartwell and Grassi that contained the word “Citron” or documents that were originally provided by Citron in connection with the 2015 audit, both of which Chartwell has already produced. Citron also stated that it had not received internal account receivable ledgers, books, or other records containing information relevant to Chartwell's bookkeeping of the amounts due and/or payments received in connection with the sales of Doxy Product to Citron and Citron's sales to third-parties.

In its June 19, 2017 letter, Chartwell represented that it had produced all responsive, non-privileged documents in its possession relating to Grassi's audit that contain the word “Citron” and that any other documentation Grassi reviewed would already be in Citron's possession, since Grassi was retained to perform an audit of Citron's books. It is unclear from Chartwell's response whether it has searched for and produced any hard copy documents, including the audits, formal or informal, prepared by Grassi, or any analyses or other information provided to Grassi other than through emails.

Moreover, despite Chartwell's representation in its July 17, 2017 letter that all relevant documents had been produced, Citron represented that Chartwell had still not produced emails from Chartwell to Grassi concerning Grassi's audit of Citron, which forwarded any documents or data to Grassi for the purposes of the audit. Citron argued that the documents Chartwell had produced to Grassi for purposes of the audit are relevant to the claims at hand because they may contain the proper formula for computing payments due to Chartwell and Chartwell's accounting of those payments.

The Court finds that this information is relevant to Citron's claims. By August 11, 2017, Chartwell is Ordered to search for and provide any documents sent to Grassi or created by Grassi relating to these audits, including all hard copies, or provide an affidavit from someone with knowledge indicating that a search for all documents, including emails and hard copies, has been conducted and there are no additional documents to be produced.

6) Citron's Request for Communications Relating to Doxy Product with Short Expiration Dates and Invoices

Finally, in its June 16, 2017 letter, Citron represented that other outstanding document requests included all of Chartwell's communications relating to its decision to ship Doxy Product with short-dated expiration dates to Citron in May 2017 and potentially missing emails regarding 17 invoices totaling $6.9 million. In its June 19, 2017 letter, Chartwell denied the existence of any missing emails relating to the 17 invoices totaling $6.9 million, claiming that it had produced all relevant documents it possesses. Chartwell also argued that its internal communications relating to its decision to ship Doxy Product with short expiration dates to Citron in May 2017 are irrelevant to any claims and defenses because the expiration date of the product is not in dispute.

Based on Chartwell's representation that neither of the parties disputes the expiration date of the Doxy shipped to Citron, it is unclear how Chartwell's communications relating to its decision to ship Doxy Product with short expiration dates would be relevant to the claims at issue. As for the invoices, the Court accepts Chartwell's representation that it does not possess emails regarding the invoices.

Accordingly, by August 11, 2017, Citron is Ordered to producing the following discovery: 1) sales backup documentation relating to Citron's sale of Doxy to third-parties and Medicaid rebate information; 2) a complete privilege log for redactions contained in its internal communications production, if one has not been provided already; and 3) documents it has in its possession responsive to the DLSS subpoena. As for the documents Chartwell seeks in response to the Eisner subpoena, Citron should provide the privilege log or produce the documents by August 11, 2017.

*6 By August 11, 2017, Chartwell is Ordered to produce any documents it provided to Grassi or that were created by Grassi relating to any audits as to the proper formula for computing payments due to Chartwell in its sale of Doxy to Citron and Chartwell's accounting of those payments, or provide an affidavit from someone with knowledge of the audits verifying that Chartwell has searched for and produced all documents in its possession, including hard copies and electronically-stored documents relating to Grassi's audits.

Citron's request that the Court compel Chartwell to conduct a broader review of Chartwell's data files to include additional search terms is denied. Citron's requests that Chartwell produce communications relating to its decision to ship Doxy with short expiration dates and missing emails regarding invoices totaling $6.9 million are also denied.

SO ORDERED.