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In re NTL Inc. Securities Litigation


May 3, 2006


The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.


Defendant NTL Europe, Inc. ("Europe") objects to an order by Magistrate Judge Andrew Peck, made on April 25, 2006, and seeks a stay pending resolution of the objections.


The first of the actions consolidated under this caption was commenced in April 2002 against an entity then known as NTL Inc. ("Old NTL") and others. A few weeks later, NTL filed for bankruptcy protection. The plan of reorganization eventually confirmed saw the emergence of two separate companies, Europe and NTL Inc. ("New NTL"). Europe remains a defendant in these actions. New NTL is not a party.

On April 11, 2006, plaintiffs in 02 Civ. 7377 moved for sanctions against both Europe and NTL Inc. Judge Peck held a conference on the following day during which the Court was advised that about 50 boxes of documents that were warehoused in England were in the process of being shipped to the United States for review by the plaintiffs.*fn1 The matter occasioned no controversy until Judge Peck asked counsel for New NTL who was paying for the production. He responded that he had understood that the plaintiffs were to pay. Judge Peck responded that "[t]he plaintiffs are not paying for it now" and that the "NTL defendant [Europe] is paying for it, unless somebody has a better idea."*fn2 He went on to direct that the documents be produced on a rolling basis commencing on April 17 and ending no later than April 28, "all costs to be borne by defendant NTL."*fn3 He then solicited "[a]ny applications, discussions, or any comments" from counsel Europe. The following then took place:*fn4

MS HARDISTER [counsel for Europe]: I understand, your Honor. That's fine. THE COURT: That's fine, meaning you're consenting, or, that's fine, meaning you hear it?

MS. HARDISTER: I'm consenting.

A telephone conference took place on April 25 during which counsel for the class plaintiffs indicated that the 50 boxes of documents still had not been received and that he had been assured by counsel for Europe and New NTL that they could expect to have them in their hands by the end of the week.*fn5 After some further discussion concerning document production, Judge Peck directed Europe "to produce any additional documents beyond the 50 boxes that need to be produced and to update their discovery responses to indicate whether they have made full productions subject to whatever objections there were that have not already been overruled."*fn6 At that point, Mr. Schwartz, the partner in charge of the case for Europe, asked the Court to reconsider its ruling, complaining that he had been out of the country and unable to attend the April 12, 2006 conference.*fn7 When Judge Peck rejoined that "counsel attending have to be prepared or they have to at least tell the court they are not prepared to argue,"*fn8 Mr. Schwartz retorted that he was "not in a position to comply because I have no control over the documents and I am going to be forced to appeal this ruling."*fn9

Following the conference, it appears that Europe allowed the April 28 deadline to pass without complying with Judge Peck's order. It made the present motion on that day, although it did not proceed by order to show cause or otherwise seek to expedite its stay application.

On May 2, 2006, Judge Peck denied Europe's motion for reconsideration. Among other things, he pointed out that Ms. Hardister had expressly consented to the order. He expressed the view that Mr. Schwartz and his firm, Skadden Arps, considered it appropriate for Ms. Hardister to appear for Europe at virtually all court conferences and that it was not appropriate for them to attempt to "get a second bite at the apple because Mr. Schwartz apparently does not like what Ms. Hardister agreed to."

It now is clear from Europe's objections that it claims that documents in the hands of New NTL are not in its possession, custody and control and that it therefore cannot be compelled to produce them.


A principal focus of the stay motion is on the likelihood that Europe will persuade the Court that Judge Peck committed an error of law or relied upon a clearly erroneous finding of fact.

It is common ground that the obligation of a litigant to produce documents is limited to materials in its possession, custody or control. The question therefore is whether there was sufficient basis for Judge Peck to conclude that documents in the hands of New NTL are within te possession, custody or control of Europe.

For present purposes, the Court note only that Europe and New NTL are parties to an agreement that provides in pertinent part as follows:

"For a period of ten years from the date of this Agreement, each party shall, and shall procure that its Group Companies shall, allow the other party and its personnel to have access to . . . and . . . take copies of all documents, records or other materials containing any information which that party . . . might reasonably require to be able to comply with their respective legal, regulatory, accounting or filing obligations."*fn10

On the face of it, then, there is a compelling case that New NTL is obliged to furnish Europe with whatever documents Europe may request for purposes of this litigation.

To be sure, Europe makes a logic-chopping, circular argument: (1) it can be compelled to produce only documents in its possession, custody or control, (2) it therefore has no legal obligation to produce documents that are in the hands of New NTL, and (3) absent such a legal obligation, it has no power to require Europe to give it the documents. But the argument seems unlikely to prevail for a host of reasons.

To begin with, it is quite doubtful that the parties to the agreement intended such a crabbed reading. In view of the fact that New NTL has been producing documents in this action voluntarily, the practice of the parties clearly suggests a broader view.

More basically, Ms. Hardister consented to the order in question. Thus, whatever might have been the case at the outset, Europe now is under a legal obligation to produce documents in the hands of New NTL. It is an obligation that it voluntarily assumed.

In any case, the argument is especially unappealing in view of the facts that Europe appears to have adopted its present position at least in part out of pique and that it rather cavalierly allowed the deadline fixed by Judge Peck to slide by, uncomplied with, without making a serious effort to obtain a stay.


The motion for a stay of Judge Peck's order is denied. The Court will rule on the objection to the order on or after May 10, 2006 in order to afford plaintiffs and any other interested parties an opportunity to file papers before then.


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