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Diamant v. Akush

February 3, 2006


The opinion of the court was delivered by: William H. Pauley III, District Judge


By letter motion dated December 15, 2005, Plaintiff Luc Vets Diamant ("Luc Vets") moves to compel deposition testimony from Defendant Aharon Akush ("Akush") and for sanctions against him.*fn1

Specifically, Luc Vets contends that Akush's counsel improperly instructed him not to testify about his personal assets at his prior deposition on the ground that such information was irrelevant. Additionally, Luc Vets contends that Akush's counsel improperly instructed him not to answer questions about the identity of his customers on the ground that such questions implicated the disclosure of a "trade secret" to Luc Vets, one of Akush's competitors in the diamond business.

The Federal Rules authorize "discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party." Fed. R. Civ. 26(b)(1). When discovery proceeds by deposition, "[a]ll objections made at the time of the examination . . . shall be noted . . . upon the record of the deposition; but the examination shall proceed, with the testimony being taken subject to the objections." Fed. R. Civ. P. 30(c). Additionally, counsel "may instruct a deponent not to answer only when necessary to preserve a privilege, to enforce a limitation directed by the court, or to present a motion under Rule 30(d)(4)." Fed. R. Civ. P. 30(d)(1). Thereafter, the parties may resolve the dispute in one of two ways. First, the deponent may seek a protective order pursuant to Rules 26(c) and 30(d). Alternatively, the party taking the deposition may move pursuant to Rule 37(a)(2)(B) to compel the testimony it seeks. "There is . . . little functional difference between the two courses of action, since in both cases the party resisting discovery has the burden of supporting its position." Riddell Sports Inc. v. Brooks, 158 F.R.D. 555, 558 (S.D.N.Y. 1994).

I. Akush's Personal Assets

Lack of relevancy is not a proper ground for instructing a witness not to answer deposition questions. Chloe Shipping Corp. v. Mediterranean Shipping Co., No. 97 Civ. 6764 (SHS) (DFE), 1999 WL 675985, at *1 (S.D.N.Y. Aug. 30, 1999); HCC, Inc. v. RH & M Machine Co., No. 96 Civ. 4920 (PKL) (RLE), 1997 WL 675334, at *2 (S.D.N.Y. Oct. 30, 1997). Thus, Akush's counsel's instruction to Akush not to answer questions concerning his personal assets was improper.

Moreover, such evidence is relevant. Luc Vets seeks to pierce the corporate veil of Akush's former corporation, A.G. Fancy, N.Y., Inc. ("AGF"), and hold Akush personally liable for AGF's debts. In this regard, Luc Vets alleges that Akush "treated AGF as his alter ego and completely disregarded corporate formalities in conducting AGF's business." (Compl. ¶ 20.) Luc Vets also alleges that Akush "commingled AGF's funds with that of his own, paid for his personal expenses with AGF funds, and used AGF's corporate form at his whim . . . when it was convenient for him to do so." (Compl. ¶ 21.) Thus, evidence of Akush's personal assets during the time of AGF's existence is relevant to Luc Vets' claim, or "reasonably could lead to other matter that could bear on, any issue that is or may be in the case." Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978); see also Fed. R. Civ. P. 26(b)(1) ("For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action.").

As such, Luc Vets is entitled to discovery into the personal assets of Akush up to and including the time that AGF was dissolved at the end of April 2004. Akush is directed to answer such questions at his continued deposition.

II. Customer Lists

Luc Vets also claims that Akush has utilized his other companies "as a mere continuation of AGF in a fraudulent effort to avoid the liabilities of AGF." (Compl. ¶ 34.) Toward this end, the identity of Akush's customers since dissolving AGF is relevant because Luc Vets alleges that Akush continues to operate the business of AGF through various corporate entities "by doing business with most, if not all of the same customers." (Compl. ¶ 15.)

Nonetheless, the instruction of Akush's counsel not to answer questions that could implicate disclosure of a trade secret was proper and, in fact, necessary to maintain protection over such information. See Wilson v. Martin County Hosp. Dist., 149 F.R.D. 553, 555 (W.D. Tex. 1993); Whicker v. Consol. Rail Corp., No. 85 C 6137, 1988 WL 31460, at *1 (N.D. Ill. Mar. 30, 1988); Am. Hangar, Inc. v. Basic Line, Inc., 105 F.R.D. 173, 175 (D. Mass. 1985); Int'l Union of Elec., Radio & Mach. Workers v. Westinghouse Elec. Corp., 91 F.R.D. 277, 279 (D.D.C. 1981). Having refused to answer, Akush now bears the burden of establishing that his customer list constitutes a trade secret and that the line of questioning should not be permitted at his continued deposition. See Bristol-Meyers Squibb Co. v. Rhone-Poulenc Rorer, Inc., No. 95 Civ. 8833 (RPP), 1998 WL 2829, at *2 (S.D.N.Y. Jan. 6, 1998); Riddell Sports, 158 F.R.D. at 558.

A customer list may be protected against disclosure as a trade secret if "the information it contains is not otherwise readily ascertainable." N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38, 44 (2d Cir. 1999). In assessing whether a trade secret exists, New York courts look to the following factors:

(1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the business to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended by the business in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 407 (1993) (quoting Restatement of Torts ยง 757, comment b); accord N. ...

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