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Wolters Kluwer Financial Services Inc. v. Scivantage

November 29, 2007


The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge



To fulfill its promise of providing the fair and ordered administration of justice, our legal system depends upon lawyers and law firms following ethical guidelines. To be sure, zealous advocacy by attorneys is not only expected, it is commendable. Nonetheless, there is a line beyond which such aggressive representation gives way to misconduct.

While frequently under fire, attorney behavior remains largely self-regulating. Lawyers are entrusted with ensuring that both their own conduct and that of their colleagues fall within the bounds of the rules of professional responsibility. Occasionally, as here, this responsibility leads lawyers to bring questionable conduct to the attention of the court. Often, though, to avoid public criticism, lawyers settle amongst themselves without court involvement. And to a large extent, courts-even when aware of the misconduct-are satisfied to allow such self-governance among lawyers.

However, the expectation that lawyers can and will resolve questions of attorney behavior without the intervention of the courts-and thus without the threat of official oversight-is hardly a license for lawyers to sweep transgressions under the proverbial rug by settling out of court. From time to time, a lawyer's misconduct is so grave and so blatant as to demand more. When such lapses occur in the federal courts, it is not only our prerogative but our responsibility to address them and, where appropriate, impose sanctions.*fn1 Indeed, as Canon 3B(3) of the Code of Conduct for U.S. Judges makes clear: "A judge should initiate appropriate action when the judge becomes aware of reliable evidence indicating the likelihood of unprofessional conduct by"*fn2

The instant case, unfortunately, has been marked by a myriad of just such "reliable evidence" of attorney misconduct serious enough that this Court felt compelled to act. Sadly, the nub of the problem may not be just the behavior of one or two attorneys or law firms, but a much broader problem that has affected the practice of law generally over the last twenty or thirty years and has in the eyes of many turned what was once a profession into more of a business.

This distinction between the legal profession and a business was eloquently explained over thirty years ago by the Honorable Charles D. Breitel, while Chief Judge of the New York Court of Appeals:

A profession is not a business. It is distinguished by the requirements of extensive formal training and learning, admission to practice by qualifying licensure, a code of ethics imposing standards qualitatively and extensively beyond those that prevail or are tolerated in the marketplace, a system for discipline of its members for violation of the code of ethics, a duty to subordinate financial reward to social responsibility, and, notably, an obligation on its own members, even in nonprofessional matters, to conduct themselves as members of a learned, disciplined, and honorable occupation. Matter of Freeman, 34 N.Y.2d 1, 7 (1974).

Chief Judge Breitel's assessment echoes that of former Harvard Law School Dean Roscoe Pound, who had earlier defined a profession as "a group.pursuing a learned art as a common calling in the spirit of public service-no less a public service because it may incidentally be a means of livelihood."*fn3

More recently, the New York Committee on the Profession and the Courts more frequently referred to as the "Craco Report" after its Chair Louis Craco observed, the rising number of lawyers and the de-localization of practice have "heightened the commercialization" of the practice of law.*fn4 Gone are the days where the ambit of a numerous and complex, with the stakes continually rising-not only in terms of the issues and amounts in controversy, but in the fees that attorneys earn. The legal profession has seen a transformation wherein the naked competition and singular economic focus of the marketplace have begun to infiltrate the practice of the law, subordinating high standards of service, collegiality, and professionalism as a result. As the Committee further observed: "[t]he rise in the mobility of lawyers weakened the ties to firms, institutions, and communities in which professional standards traditionally had been articulated and enforced.kept in check by the cultural mores of the relatively small legal community."*fn5

Thus, a dismaying erosion of civility in practice has often accompanied the expansion of our legal profession. Such incivility "commonly manifests itself as rudeness, refusal to accommodate a colleague's schedule, judge baiting, or harassment during depositions..[A]lso included under the umbrella are sharp practice tactics such as misrepresenting facts to the court or an adversary and including false information in unsworn documents."*fn6 However, while the idealized notion of the small-town lawyer is an anachronism, the idea that civility among lawyers is incompatible with full and effective representation should not be. Indeed, while Rule 7-101 of the Lawyer's Code of Professional Responsibility obligates a lawyer to provide zealous representation, it provides at the same time that "[a] lawyer does not violate [this responsibility] by acceding to reasonable requests of opposing counsel which do not prejudice the rights of the client, by being punctual in fulfilling all professional commitments, by avoiding offensive tactics, or by treating with courtesy and consideration all persons involved in the legal process."*fn7

So, while our system is by its very nature adversarial, it goes without saying that such a system expects-indeed, requires-a measure of civility. Nor will our system long survive as it is if we tolerate the use of misleading or downright false statements by lawyers-to opposing parties or to the Court itself-in an attempt to secure a favorable outcome for their clients and themselves.

These and other examples of ethical misconduct are quite simply unacceptable. Such conduct is a drain on valuable judicial resources: when, for example, a litigant misleads the Court, it necessarily takes more time for the Court to try and sift through the facts and separate truth from falsehood. As important, incivility and contentiousness tend to undermine public confidence in the efficacy of the legal system. Finally, when a lawyer deviates from ethical norms he or she acts to the serious detriment of the very individuals that have sought his or her counsel with the expectation of competent, acceptable methods of representation.

Let me begin the story of the present case with the underlying sanctions motion. On April 24, 2007, Defendants Scivantage, Adnane Charchour ("Charchour"), Cameron Routh ("Routh"), Gregory Alves ("Alves"), and Sanjeev Doss ("Doss") (collectively, "Defendants") moved for sanctions pursuant to Fed. R. Civ. P. 37, Fed. R. Civ. P. 16(f), 28 USC § 1927 and the inherent powers of the court, and for civil contempt, against Plaintiff Wolters Kluwer Financial Services Inc. ("Plaintiff" or "Wolters Kluwer"), as well as Plaintiff's then-counsel, Dorsey & Whitney ("Dorsey"), and Dorsey's then-lead counsel on this litigation, Kristan Peters ("Ms. Peters" or "Peters") for a variety of wrongs.

While that motion was withdrawn after a settlement had been reached, my concern was that without more the public and the profession would be deprived of their right to know. The parties sought to seal all the papers surrounding all the motions and, with respect to the hearing, that I seal the courtroom and the transcript. While I acceded to these requests it was with the reservation that depending on the testimony some or all of the sealed material would, on notice to the parties, be unsealed. The issues raised by the motion were troubling.*fn8 The sealing and the caveat were to insure that, if proven, the wrongs would see the light of day and, conversely, if unproven, the reputation of those accused would remain unscathed. I scheduled an evidentiary hearing which began on July 23, 2007. That hearing turned out to embrace five days over nearly two months, concluding on September 12, 2007. The following finding of fact come primarily from that proceeding.*fn9


A. Plaintiff's Activities Prior to Initiation of Action

In or about mid-February 2007, Brian Longe ("Longe"), the president of Wolters Kluwer Financial Services (Plaintiff's parent organization), became aware that three former employees of Plaintiff's "Gainskeeper" business unit who had resigned in June 2006 -- i.e., Defendants Cameron Routh, Gregory Alves, and Sanjeev Doss -- were now working for a competing software company, Scivantage, that was bidding against Wolters Kluwer for a contract to provide software for tax lot accounting services. 9/4/07 Tr. 40:7-15; Declaration of Deidra D. Gold, July 10, 2007 ("Gold Decl.") ¶ 1, 6. Longe contacted Deidra Gold ("Gold"), General Counsel for Wolters Kluwer North American Financial Services, as well as Steven Isaacson ("Isaacson") and Hubert "Chip" Zyvoloski ("Zyvoloski"), other Wolters Kluwer in-house counsel, and passed along that information. Gold Decl. ¶ 1, 6; 9/4/07 Tr. 40:7-15, 40:21-41:1. Ms. Gold approved the retention of outside counsel to investigate the matter and determine whether litigation was appropriate. Gold Decl. ¶ 7. Gold recommended Kristan Peters, a partner at Dorsey & Whitney in New York.*fn10 Id.

Ms. Peters, although she had only recently joined Dorsey as a partner in January 2007, had a longstanding relationship with the Wolters Kluwer companies spanning approximately nine years.*fn11 9/11/07 Tr. 152:1-5.

In February and March 2007, Wolters Kluwer, assisted by Ms. Peters, commenced their investigation. Initially, Chip Zyvoloski was assigned to directly supervise the investigation, although he transferred his supervisory role to Steven Isaacson around mid-March. 7/23/07 Tr. 61:15-18; 8/15/07 Tr. 14:9-19.

From Wolters Kluwer's perspective, their allegations against the individual Defendants were largely based on the theory that the three individual Defendants took their knowledge of complicated tax lot accounting transactions and their conceptual knowledge of how Gainskeeper's software tracked those transactions (including their knowledge of certain algorithms), and their knowledge of the tax software business generally, and gave that knowledge to Scivantage (and that Defendants' knowledge constituted protectible "trade secrets").*fn12 Wolters Kluwer did not have evidence that the three Defendants took actual programming code and gave it to Scivantage, or that they even had access to the code.*fn13 See 7/23/07 Tr. 111:17-20 (Zyvoloski testimony); 8/15/07 Tr. 199:13-19, 202:10-14 (Honor testimony). Indeed, the three individual Defendants were management-level employees, not programmers.*fn14 Wolters Kluwer Vice President David Stephens ("Stephens") did, at one point, inform in-house counsel that Defendants had access to the programming code, although that information turned out to be inaccurate.*fn15 See 7/23/07 Tr. 90:1-5, 91:20-92:5; see also 8/15/07 Tr. 51:22-52:6.

During this time, Wolters Kluwer conducted a forensic investigation of Defendants' computers still in its possession to ascertain whether Defendants did, indeed, steal trade secrets, or have access to password-protected information. See Tr. 88:13-89:11 (Zyvoloski testimony). Zyvoloski stated that there was no evidence that Defendants misappropriated trade secrets. See Tr. 89:2-7 (Zyvoloski testimony),*fn16 and none was presented to the Court with Plaintiff's complaint.

During this time, Ms. Peters and Chip Zyvoloski assisted Wolters Kluwer employees to draft Declarations to be attached to the Complaint. Ms. Peters' March 15, 2007 draft of the Declaration of Charles Ross ("Ross"), the General Manager of Gainskeeper, included a reference to the named Defendants being part of the team that had access to the programming code, but Mr. Ross, in his March 16 revision, excised this language.*fn17 Ross testified that it was "not [his] intention" to convey through his declaration that the individual defendants had misappropriated the software code. See 8/15/07 Tr. 156:25-157:3.*fn18

During the drafting of the Complaint, Zyvoloski, and Joseph Honor, the technology manager for Gainskeeper, expressed to Dorsey or Peters their discomfort with Paragraph ¶ 39 of the Complaint, because that paragraph suggested that Wolters Kluwer knew that Defendants had taken software code. See 7/23/07 Tr. 122:3-7, 123:1-5, 124:1-8 (Zyvoloski testimony); 8/15/07 Tr. 204:5-20, 205:4-9 (Honor testified, "I did not feel that it was likely that they would have stolen our software code"). Ms. Peters generally advised Zyvoloski that the "complaint.contained.facts as well as advocacy," and that that paragraph was "advocacy. and within the legal bounds of pleading." See 7/23/07 Tr. 122:2-5. Wolters Kluwer ultimately approved the language Peters proposed in Paragraph ¶ 39. See 8/15/07 Tr. 18:17-19:7 (Isaacson testimony).

B. Plaintiff's Initiation of Action

On Wednesday, March 21, Plaintiff, through their counsel Ms. Peters, applied to this Court ex parte for a Temporary Restraining Order and emergency discovery.*fn19 Ms. Peters attached six Declarations by Wolters Kluwer employees to Plaintiff's Complaint and initial application.*fn20 Ms. Peters advised Wolters Kluwer to seek a TRO.*fn21 Wolters Kluwer reviewed the papers beforehand and authorized the filing of the complaint as well as the seeking of the TRO and expedited discovery.*fn22

Plaintiff, in its complaint, alleged nine state law claims, e.g. misappropriation of trade secrets (and aiding and abetting the same), unfair competition (and aiding and abetting the same), breach of fiduciary duty (and aiding and abetting the same), conversion, unjust enrichment, and breach of contract (and aiding and abetting the same), and one federal claim, i.e. violations of the federal Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(4), (a)(2)(C). Plaintiff premised federal supplemental jurisdiction on the Computer Fraud and Abuse Act claim.*fn23 Plaintiff's allegations centered around the allegation that the three individual Defendants had helped Scivantage produce their software by stealing trade secrets from Plaintiff and passing them along to Defendants, despite the fact that they were bound by nondisclosure agreements, which Plaintiff alleged prohibited disclosure of trade secrets.*fn24 Plaintiff, citing "irreparable harm" to its interests, requested a TRO against Defendants.

Plaintiff's initial application stated that its "work product is in the form of software code," and focused on the confidential nature of that software code.*fn25 See Plaintiff's Memorandum of Law in Support of Order to Show Cause, Mar. 20, 2007 ¶ 6; Pl. Compl. at ¶ 15. Plaintiff described over the course of four paragraphs how its code was password-protected and located in a secure data center to which only certain employees had access. See Pl. Compl. ¶¶ 15-18, Pl. Mem. Law. Mar. 20, 2007 ¶¶ 6-9 (similar), Declaration of Charles Ross, Mar. 20, 2007, ¶¶ 7-10 (similar).*fn26 Paragraph 39 of the Complaint, which Plaintiff's in-house counsel Zyvoloski had expressed discomfort with, stated that "Defendants have been able to jump start their further penetration of the market by using plaintiffs protected and proprietary methods, [and] software code." Pl. Compl. ¶ 39.*fn27 Stephens testified that when he later read the initial application, he agreed it was "misleading to focus on all the code stuff." 8/15/07 Tr. 141:24-142:3.

Ms. Peters, along with Charles Ross, personally visited Chambers to make the application.*fn28 See Declaration of Charles Ross, Mar. 20, 2007, ¶ 2; Tr. 157:17-158:5.

Based on Ms. Peters' ex parte representations, I issued a TRO on March 21, drafted by Plaintiff and modified slightly by the Court, which restrained Defendants from, inter alia, marketing their Maxit product, contacting Plaintiff's current customers, or contacting Plaintiff's employees, pending a hearing which I originally set for Friday, March 23, 2007.*fn29 I struck the portions of Plaintiff's proposed order that provided for restraints upon Defendants' contact with Plaintiff's potential customers.*fn30 The order also provided at Plaintiff's behest for voluminous discovery, depositions, "imaging" of Defendants' computers, and Plaintiff's access to Defendants' computers.

C. Defendants' Appearance in Action

Defendants, represented by Akin Gump Strauss Hauer & Feld LLP, wrote the Court the next day, Thursday, March 22, and stated that "plaintiff's claims clearly lack merit -- and indeed seem calculated to mislead the Court." See Letter of Richard J. Rabin, Mar. 22, 2007.*fn31

After a conference call between the parties that day, I adjourned the TRO hearing to March 28, 2007 and gave several verbal orders.*fn32 After Ms. Peters disagreed with Defendants' written memorialization of the Court's verbal orders, and requested revision of at least one order, I memorialized my Orders on March 23, 2007.*fn33 I ordered Defendants "beginning Monday, March 26, 2007" to arrange for the imaging of the computers of the individual Defendants Doss, Alves, and Routh under the supervision of a "neutral third party," but otherwise excused Defendants from complying with "any" of the remaining discovery or disclosure obligations in my March 21, 2007 Order.*fn34

Defendants remained generally restrained from marketing to Plaintiff's current customers pending the TRO hearing. Additionally, I restrained, at Plaintiff's request, the three individual Defendants Doss, Routh, and Alves from marketing to Plaintiff's potential customers, to the extent those three Defendants knew those entities to be potential customers of the plaintiff.*fn35

Defendants submitted, on March 27, 2007, a Memorandum of Law in opposition and several Declarations by the Defendants.

Prior to the TRO hearing on March 28, 2007, David Stephens expressed his opinion to Ms. Peters and Mr. Isaacson that the "previous focus on code itself was misdirected," and advised Ms. Peters to modify her arguments accordingly. See 8/15/07 Tr. 114:18-115:25, 132:32-133:16.

D. TRO Hearing

At the TRO hearing on March 28, 2007, Defendants generally averred that Plaintiff's lawsuit was bereft of evidence and could only be intended to deliberately mislead the Court, that it was an "abuse of judicial process," and that Plaintiff's real intention was to disrupt its competitor's business.*fn36 See generally 3/27/07 Defendants' Memorandum of Law in Opposition to Plaintiff's Motion for a Preliminary Injunction ("Def. Mem."), at 1-2. Defendants noted, inter alia, that although Plaintiff's complaint mentioned that Plaintiff's software code was protected by password and other, more stringent, means, none of the Defendants had the password for the code while in Plaintiff's employ. Defendants further noted, and Plaintiff did not dispute, that Plaintiff had previously conducted two forensic investigations of its own computers, and did not present evidence of those investigations to the Court. Def. Mem. at 2. Defendants argued, "It is clear why plaintiff proceeded ex parte. [H]ad the plaintiff contacted the Scivantage Parties, and had the court been provided the full truth. this TRO never would have been issued." Def. Mem. at 4.

I began the hearing by asking about Defendants' access to the code.*fn37 Ms. Peters conceded, eventually, that Defendants had no access to source code.*fn38 (That said, at one point, she stated, "Mr. Doss does write code." See Tr. at 6:7-9.)*fn39 She now argued that even though Defendants had no access to source code, the information and knowledge Defendants brought with them to Scivantage constituted "a peculiar combination of these methodologies, know-how, and formulae," and thus constituted a trade secret. See Tr. at 8:20-24. Defendants averred that Defendants' information and knowledge was of IRS public tax regulations and general business practices, and was not a "trade secret." See, e.g., Transcript of Oral Argument, March 28, 2007 ("Tr."), at 35.

Following the hearing, on March 29, 2007, I dissolved the TRO by written Order, but provided for discovery, in accordance with orders given at the TRO hearing.*fn40 I ordered that the "imaging" of up to fifteen of Defendants' computers would "occur" on March 29;*fn41 that Defendants would provide emails and other documents to Plaintiffs by Friday, March 30; and that Defendants could fax objections to the Court by March 29, at 3:00 P.M. After an extensive plea by Plaintiff as to their urgency,*fn42 I also ordered depositions to be expedited and that the four individual Defendants in this action -- Sanjeev Doss, Cameron Routh, Gregory Alves, and Adnane Charchour -- be deposed on April 2 and April 3, 2007. I set April 6 as a date for hearing, in part to accommodate both Plaintiff's lead counsel's personal vacation schedule, and her request for expedited relief.*fn43

E. Defendants' Discovery Objections and Requests

Defendants timely provided objections to Plaintiff's discovery requests by letter on March 29 at 2:56 P.M.*fn44 Defendants, inter alia, represented that production of all documents requested by Plaintiff could not humanly be completed by the next day, March 30.*fn45 Defendants noted that as "imaging" immobilizes a computer while it is "imaged," Defendants could not produce material from computers until the imaging had been completed.*fn46 Defendants also represented that they wished to review the produced material for privilege, confidentiality, and relevance before producing it to Plaintiff. Defendants also provided more specific objections to Plaintiff's discovery requests. Defendants requested reciprocal expedited discovery in a letter of 11:21 AM, and proposed an Order, at 5:53 P.M., that requested depositions of four of Plaintiff's witnesses prior to the upcoming hearing, and reciprocal document discovery, including emails regarding "plaintiff's purposes in bringing this action."

At the close of business, March 29, 2007, I faxed a letter to the parties wherein I ordered that because of the "volume of documents and emails along with the fact that the imaging and the production of emails cannot be done simultaneously," as well as in an effort to accommodate Plaintiff's stated requests to receive discovery before conducting depositions,*fn47 the hearing was adjourned to April 26. Although I ordered "material turned over on a rolling basis," I ordered "completion" by April 5, 2007, with privileged material produced with a privilege log to the Court on that date.*fn48 I stated that "[o]bviously this will require that the depositions be scheduled for later dates. [but] that's plaintiff's choice to make." I granted that reciprocal "depositions and other discovery may be scheduled," and requested a schedule agreed to by the parties with dates of all depositions by April 5. I also addressed several of Defendants' specific objections, overruling some and sustaining others.

Ms. Peters, within an hour and a half of receiving my letter,*fn49 wrote and emailed the Court requesting an immediate conference.*fn50 See Letter of Kristan Peters, Mar. 29, 2007, 7:28 P.M. Ms. Peters stated that the "Court's Order has no dates as to when this discovery [presumably Plaintiffs'] must be produced." (Indeed, that was true, as my letter envisioned that the parties would meet and confer and present a schedule to the Court by April 5). Ms. Peters requested "firm deadlines [to] be set by which Defendants have to abide and produce discovery," despite my letter which set April 5 as Defendants' deadline to produce discovery. Ms. Peters stated that "no imaging has been done yet, in defiance of the Court's order," despite my letter which stated that Defendants would now produce "images of hard drives" by April 5. Ms. Peters also requested an immediate conference to address "my other discovery requests." "which [Defendants] chose to ignore and did not address," despite the fact that indeed, Defendants had not objected to those requests (and that Defendants' deadline to produce discovery pursuant to those requests had now been extended).

On Friday, March 30, after Ms. Peters emailed her intention to seek emergency relief from the Part I emergency motions judge regarding imaging,*fn51 I subsequently reiterated and clarified, via an email, that "all discovery requested by Plaintiff, including imaging, was addressed" in my March 29 letter and, "as stated," was now due on April 5.*fn52 See Email of Mark Noferi, Law Clerk to Judge Baer, 12:16 P.M., Mar. 30, 2007.

F. Plaintiff's Motion to the Part I Emergency Motions Judge to Compel Depositions

Defendants' counsel, at 2:08 A.M. on March 29, 2007, had proposed by email a confidentiality order to Plaintiff to govern discovery in this action, which provided for designations of material as "confidential" or "attorneys' eyes only."*fn53 Defendants' counsel avers that its proposed confidentiality agreement was "standard." See Declaration of James Chou, Apr. 24, 2007 ("Chou Decl.") ¶ 3. Defendants lead counsel Richard Rabin avers that he did not receive a response with any proposed modifications until Ms. Peters called him, late in the day of March 30, with the Court's law clerk on the line. See Reply Declaration of Richard J. Rabin, May 31, 2007 ("Rabin Reply Decl.") at ¶ 9.*fn54

Subsequently, after the close of business on Friday, March 30, 2007, Plaintiff moved the Part I emergency motions judge, the Honorable Kevin Castel, to compel the depositions to go forward on April 2 and 3.*fn55 Rabin Decl. ¶ 15; Peters Decl. ¶ 67.

Ms. Peters subsequently represented to this Court by email that "Judge Castel ordered that the deposition of the four witnesses Monday and Tuesday will be on an attorneys' eyes only basis until such time as the parties can work out a confidentiality agreement to present to Judge Baer for his approval."*fn56 E-mail of Kristan Peters, 5:51 P.M., Mar. 30, 2007. Defendants then represented to this Court that Judge Castel also ordered that the confidentiality order Defendants had previously provided to Plaintiffs on March 29 would apply to this action under further agreement between the parties or further order of this Court. E-mail of Richard Rabin, 2:08 P.M., Apr. 1, 2007. (Defendants' proposed confidentiality order, as discussed infra, prohibited in-house counsel from viewing "attorneys' eyes only" information.)*fn57 Ms. Peters responded, "Judge Castel never saw the agreement and did not comment on its contents one way or another." Email of Kristan Peters, 5:51 P.M. at Rabin Reply Decl. Ex. 6. Ms. Peters confirmed that ""[Judge Castel] said that everything at the Monday and Tuesday depositions would for attorneys' eyes only and there would be no one but the deponent and the attorneys in the depositions until we could come to terms about a confidentiality agreement." Id. Ms. Peters remarked, "I would hope you and I could first get through these depositions." Id.

G. Depositions of Defendants

Defendants produced the four individual Defendants (e.g., Doss, Routh, Alves, and Charchour) for depositions as ordered on Monday, April 2 and Tuesday, April 3. (Defendants also, as noted infra, on Monday, April 2, noticed depositions of Plaintiff's witnesses, and provided document requests to Plaintiff. See Rabin Decl. Ex. 18.)

a. Alves' Deposition

The deposition of Gregory Alves took place on Monday, April 2, 2007, at Dorsey & Whitney's New York offices, starting at 9:25 A.M. It is undisputed that the deposition was "attorneys' eyes only." Notwithstanding this understanding, before the deposition, Ms. Peters introduced Defendants' counsel, James Chou, to two representatives of her client who were present in Dorsey's offices that day -- Joseph Honor, the Gainskeeper "technology manager," and Stevie Conlon, a tax attorney who replaced defendant Doss at Gainskeeper.*fn58 See Chou Decl. ¶ 13; 8/15/07 Tr. 205:15-22.

Joseph Honor testified that generally during the course of these two days of depositions, Ms. Peters, during breaks, disclosed to him and Stevie Conlon the deponents' "general response to some of the answers to her questions in the deposition."*fn59 8/15/07 Tr. 207:1-8, 208:6-12; 9/4/07 Tr. 15:5-10 (Court: ".[D]id she go over questions that had been asked or answers that had been given?" Honor: "To some questions, yes.").*fn60 Honor testified that Ms. Peters, in the course of disclosing information, "asked us to assist her in developing questions." See 9/4/07 Tr. 14:21-15:10.*fn61

At one point, Alves testified regarding the tracking of "wash sales" at the "sublot" level. Ms. Peters asked for a brief recess.*fn62 Ms. Peters left the room, returned with a list of examples relating to the tracking of "wash sales" at the "sublot" level, and began questioning Alves again. See Chou Decl. ¶ 14.*fn63 Defendants' counsel Mr. Chou asked Ms. Peters on the record whether she was sharing "attorneys' eyes only" deposition information with her clients. See Alves Depo. at 171-72. Mr. Chou avers that Ms. Peters was "evasive, appeared uneasy, and would not give a straight answer." See Chou Decl. ¶

15. The deposition transcript bears out Mr. Chou's assertion, although Ms. Peters eventually responded "No" to Mr. Chou's question.*fn64

Ms. Peters alleged towards the end of the deposition that the witness Alves, during his deposition, took unduly long cigarette breaks. Mr. Chou avers, and the record supports, that Ms. Peters attempted to create a false record, as Alves took two short cigarette breaks of ten and six minutes, and that on each occasion Mr. Chou and Alves were waiting for Ms. Peters for several minutes to begin the deposition anew.*fn65 See Chou Decl. at ¶ 18. Ms. Peters does not directly dispute Mr. Chou's factual assertions.

Ms. Peters also attempted to create a record that would show that Alves took an unduly long time to answer questions. See, e.g., Alves Depo. at 240-41.*fn66

Ms. Peters stopped the deposition of her own accord at 2:45 P.M to begin Doss' deposition. See Alves Depo. at 254. Citing her prior allegations of dilatory conduct by Alves, Ms. Peters asserted the ability to redepose Alves again, and (incorrectly) challenged Defendant's counsel's assertion that the Federal Rules of Evidence provide for a deposition of seven hours on one day.*fn67 Ms. Peters also asserted, despite my Order adjourning the deadline for discovery to April 5, and her subsequent decision to compel depositions regardless, that she should re-depose Alves again because Defendants had "failed" to produce written discovery.*fn68

Defendants offered to produce Alves at the end of the day, after Doss' deposition, for the rest of his seven hours. Ms. Peters suggested that was acceptable. At 5:55 P.M., at the end of Doss' deposition, Ms. Peters requested to continue with Alves. Defendants' counsel represented that they would go get him at Akin Gump's offices and bring him back. See Doss Tr. at 131-32. Defendants' counsel represented that they returned with Alves to Dorsey's conference room in 25 minutes, but that nobody was there. Doss' counsel represented that the court reporter was instead in Ms. Peters' office. Chou Decl.

¶¶ 22-24. Exactly 25 minutes after Defendants left, Ms. Peters put on the record that "opposing counsel" hasn't returned and "we'll have to reconvene on another date." See Doss Tr. at 132.*fn69 Ms. Peters also stated on the record that the court reporter "said that she's got a train to catch." Doss. Tr. at 131. However, Defendants' counsel saw the court reporter leaving Dorsey's building two hours later. The court reporter stated that she had been visiting a friend inside the building. Chou Decl. ¶ 26.

b. Doss' Deposition

Prior to Doss' deposition on Monday, April 2, Doss retracted parts of his Declaration submitted with Defendants' opposition to the TRO. Opp'n. to Pl.'s Mot. to Reinstate TRO Ex. 3. At his deposition, Doss admitted that after the initiation of this lawsuit, he had retained possession of certain files, and subsequently deleted them, and that his prior Declaration was inaccurate in this respect. Doss Depo. at 112:40-114:00. For example, Doss admitted that he had retained a copy of a published scholarly article on tax loss accounting that he had authored while at Gainskeeper. Doss Depo. at 115:20-116:10.

While deletion of documents after the onset of litigation is not to be condoned, it was, and is, unclear how consequential those deleted files were to Plaintiff's underlying contentions in this litigation (namely, that Defendants had stolen protectible trade secrets from Plaintiff or breached their nondisclosure agreements). In any event, those deletions, and Doss' lack of truthfulness about them, formed the basis for Ms. Peters' subsequent averments of "spoliation," and essentially all of her future motions against Defendants for sanctions, contempt, and compulsion of evidence. Isaacson, for his part, recalled regarding Doss' March 30 statement that retracted a portion of his Declaration that he "didn't really come to any conclusion" that Doss admitted to perjury. 8/15/07 Tr. 73:4-12.

After the depositions on April 2, clearly denominated "attorneys eyes only," Ms. Peters emailed transcripts of the depositions in ASCII form to Isaacson. Isaacson Decl. ¶ 13; see also WKFS Exhibit 9 (Email of Kristan Peters, Apr. 2, 2007 10:39 P.M.).*fn70

Isaacson read portions of the transcripts and forwarded them to Gold. Isaacson Decl. ¶ 13; 8/15/07 Tr. 16:16-21; Gold Decl. ¶ 14. Gold did not review them at this time (or ever, as it turned out). Gold Decl. ¶ 14. Gold did not forward the transcripts to anyone else at Wolters Kluwer besides her secretary. Id.

c. Routh's Deposition

Routh was deposed at Dorsey's offices beginning at 10:07 A.M. on Tuesday, April 3.*fn71 Four Wolters Kluwer employees were present in Dorsey's offices that day -- David Stephens, Brian Longe, Joseph Honor, and Stevie Conlon. See 8/15/07 Tr. 117:25-119:25 (Stephens testimony).*fn72

At the beginning of the deposition, Defendants' counsel Mr. Chou stated that the deposition was "attorneys' eyes only," which did not include in-house counsel. See Routh Depo. at 7. Ms. Peters disagreed, and volunteered that she had shared the contents of the depositions with "in-house counsel in Minnesota."*fn73 Id. at 8. As Mr. Chou was about to call Mr. Rabin for clarification of the call with Judge Castel, Ms. Peters offered to proceed under "attorneys' eyes only," not including in-house counsel, for the deposition. See id. at 10.

Despite this accord, Chou and Defendants' co-counsel, Peter Guirguis, saw Ms. Peters confer with the Wolters Kluwer employees during a break. Chou Decl. ¶ 30. Honor testified that during this second day of depositions, Ms. Peters again disclosed "generally what was happening in the deposition." 8/15/07 Tr. 208:13-20. Honor described the content that was disclosed as "a lot."*fn74 8/15/07 Tr. 208:21-25. For example, Honor testified that "we had asked [Routh] a question about . if he could recall anyone on the list of the client list that we had, and she had told us that he couldn't recall anybody on that list." 8/15/07 208:25-209:5.*fn75 There is no evidence that Honor would have received information about questions asked in this "attorneys' eyes only" deposition from any source except Ms. Peters.*fn76

During a particular break at 2:32 P.M., David Stephens emailed Cameron Routh's salary information to Ms. Peters and her secretary, Eileen Brennan. See Chou Decl. ¶ 31, Ex. 3. The "To" and From" line of the email are blacked out, so that Stephens' name and the recipient are not visible. See Chou Decl., Ex. 3. Stephens testified that he did not know who blacked out that information, nor why. 8/15/07 Tr. 121:6-21. Ms. Peters used a hard copy of this email to ask Routh questions.*fn77 See Routh Depo. at 285-88.

Upon the completion of Routh's deposition for the full seven hours, Ms. Peters asserted her purported right to continue the deposition after Defendants provided her with written discovery.*fn78 Defendants' counsel noted (again) that Ms. Peters chose to move forward with depositions without documents.*fn79 Regarding Defendants' noticed depositions, Ms. Peters stated, "I have priority in terms of finishing depositions. And I don't have to present anyone for depositions until I finish my depositions."*fn80 See Routh Depo. at 435. Routh's deposition concluded at 6:40 P.M. Id.

d. Charchour's Deposition

Charchour's deposition was originally scheduled for 2 P.M. on Tuesday, April 3, in accordance with Plaintiff's notice. Chou Decl. ¶ 32. As noted, because Defendants' counsel was an hour late for Routh's deposition that day, he offered to continue for an extra hour with Charchour. See Chou Decl. ¶ 28, Ex. 2. During Routh's deposition on Tuesday, April 3, Ms. Peters approached Defendants' counsel Mr. Chou off-record during a break, indicated that she needed the full seven hours to depose Routh, and requested to move Charchour's deposition to another day. See Chou Decl. ¶ 28, Ex. 2. Later, on the record, Defendants' counsel Mr. Chou represented that Charchour was available on Thursday, April 5. See Routh Depo. at 435. Ms. Peters indicated that she preferred to take Charchour's deposition the following week, after receiving document production from Defendants. Defendants' counsel did not object.*fn81

On Wednesday, April 4, at 3:14 P.M., Ms. Peters instead requested of Defendants' counsel to take Charchour's deposition on Friday, April 6, and threatened sanctions if Defendants did not comply.*fn82 See Rabin Decl., Ex. 7. Mr. Rabin responded by email on Thursday, April 5 at 7:19 P.M. that "we are not available" for the following day, April 6, and requested Ms. Peters to provide him with alternate dates.*fn83 See Plaintiff's Motion to Compel Depositions., Apr. 6, 2007, at Ex. F.

On Friday, April 6, 2007, at 9:42 A.M., Ms. Peters put on the record with a court reporter that Defendants' counsel "hasn't shown for a duly noticed deposition," and that the deposition was "put over. because opposing counsel showed an hour and ten minutes late for the deposition on Tuesday." See Transcript of Charchour Depo., Apr. 6, 2007, at 3. The original copy of this transcript later provided to the Court has handwriting on it that reads, "Move for sanctions failed to show." At 12:05 P.M. that day, Mr. Rabin responded and again requested that Ms. Peters provide alternative dates. See Rabin Decl. Ex. 31. At the close of business that day, as discussed infra, Ms. Peters instead filed a motion to, inter alia, compel Charchour's deposition.*fn84 See Plaintiff's Motion to Compel Depositions., Apr. 6, 2007. Subsequently, Ms. Peters proposed April 11 as an alternative date. See Rabin Decl. Ex. 31.

Defendants' counsel rescheduled Charchour's deposition for April 11, 2007. The deposition began at 10:23 A.M.*fn85 See Chou Decl. ¶ 36. Notwithstanding my April 6 email (see infra) to the parties that explicitly stated that depositions would proceed on an "attorneys eyes only" basis, which did not include in-house counsel, Ms. Peters stated that she agreed to this condition "under protest." See Charchour Depo. at 9.*fn86

At the end of Charchour's deposition, notwithstanding my April 6 email (see infra) to the parties that explicitly stated that depositions would be limited to one day and seven hours absent further order of the Court, Ms. Peters again stated her intention to re-depose Charchour after receiving documents from Defendants. See Charchour Depo. at 325.*fn87 Ms. Peters repeatedly threatened further sanctions motions if Defendants did not agree, stating, inter alia, "My client is happy to litigate the matter. If you don't want to produce Mr. Charchour willingly. we'll waste more of his money and his fees."*fn88 See id. at 329, 334.

e. Ms. Peters' Conduct at Depositions, Generally

At various times during these depositions, Ms. Peters either refused to show witnesses documents from which she quoted, showed documents to witnesses from across the table, or refused to provide copies of documents to counsel.*fn89 Ms. Peters also generally refused to allow witnesses, or counsel, to take breaks.*fn90 During Doss' deposition, when Doss' counsel objected to Ms. Peters mischaracterizing Doss' testimony and expressed his intention to approach a Magistrate, Ms. Peters threatened to call security and remove Doss and his counsel from the building.*fn91

These and other examples of Ms. Peters' consistently confrontational behavior throughout depositions are troubling. "The discovery process is, to a substantial degree, dependent upon cooperation between opposing attorneys..The deposition itself is a part of a judicial proceeding, and attorneys have an obligation to conduct themselves with dignity in every phase of such proceedings." HAROLD BAER, JR. AND ROBERT C. MEADE,


H. Further Discovery Disputes

On April 4, at 3:17 P.M., Ms. Peters represented to Defendants' counsel that Judge Castel's "attorneys' eyes only" order "expired."*fn92 See Rabin Decl. Ex. 7. Following that representation, after the close of business that night, Ms. Peters' associate Deidre Sheridan called Defendants' counsel Peter Guirguis regarding Defendants' proposed confidentiality agreement of March 29. Both made clear to each other initially, and over the next few days, that Defendants did not want access for in-house counsel to confidential materials, and Plaintiffs did. See Guirguis Decl. ¶¶ 5-8; Sheridan Decl. ¶¶ 2-9; Guirguis Reply Decl. ¶¶ 5-7.

On April 5, Jeffrey Loop, a first-year associate at Dorsey, inexplicably and apparently without supervision, instructed Dorsey's managing clerk to serve by fax a subpoena duces tecum on Bahwan Cybertek, a third-party contractor whom Scivantage hired to program its source code, without notifying Defendants.*fn93 Rabin Decl. ¶ 46; 9/4/07 Tr. 159:22-162:4. Loop testified that this was merely a "mistake," and that no Dorsey associates or partners had instructed him to serve the third-party subpoena without notice to Defendants. 9/4/07 Tr. 162:5-23.

On April 5, Defendants' deadline to produce documents, Defendants produced approximately 10,000 pages of documents to the Court by CD-Rom, as well as a privilege log.*fn94 Defendants did not, however, produce documents to plaintiff, and instead requested, by written letter at 4:47 P.M., that I order Defendants' proposed Confidentiality Stipulation and Protective Order before they did so. See Letter of Richard Rabin, Apr. 5, 2007. Defendants, in that request, cited Ms. Peters' admitted sharing of information from the depositions with in-house counsel, her representation that Judge Castel's order "expired," and refusal to meaningfully respond to Defendant's proposed confidentiality stipulation. Id.

Defendants additionally requested that as Ms. Peters had recently requested extensive additional document discovery on April 3 (and represented that such discovery was due April 5), the deadline for Defendants' additional production should be extended to April 13, 2007 (albeit that documents should be produced on a "rolling basis"). See Letter of Richard Rabin, Apr. 5, 2007. Defendants requested that the deadline for Plaintiffs' production of discovery be similarly set for April 13 (also albeit that Plaintiffs, in good faith, should produce on a "rolling basis"). Id. Defendants also requested, since Defendants had noticed depositions and Plaintiff had not meaningfully responded, that I order nine depositions starting April 11, 2007. Id.

Ms. Peters, on her part, subsequently wrote the Court on April 6 and proposed a protective order of her own, so as to "remove this apparent obstacle to discovery."*fn95

On April 6, I issued directives to the parties via email. I imposed a confidentiality "standstill," and ordered that all discovery would be on an "Attorneys' Eyes Only" basis (i.e., outside counsel, not in-house counsel). I directed the parties to submit either a joint confidentiality order or separate proposed confidentiality orders by Monday, April 9. I limited depositions to 10 for each side, total, including depositions already taken by Plaintiff.*fn96 I directed the parties to immediately meet and confer and present me with a list of each party's proposed deponents and the place, date, and time of these depositions by April 9, with the proviso that "if agreement is not possible. [the Court] will simply order the depositions and their place and timing [itself]." I adjourned, at Defendants' request, the deadline to respond to Plaintiff's additional document requests to April 13. Similarly, I adjourned the deadline for Plaintiff to provide documents to Defendant. I also provided that Defendants' images in the possession of the third-party vendor should be produced to Plaintiff's counsel after a final ruling on confidentiality.

I. Plaintiff's Motion to Reinstate the TRO

On April 5, Ms. Peters (on behalf of Plaintiff) filed a 2-page motion to reinstate the temporary restraining order against Defendants.*fn97 See "Plaintiff's Motion to Reinstate TRO.", Apr. 5, 2007 ("Pl. TRO Mot."). On April 9, Defendant filed an opposition to Plaintiff's motion, termed the motion "frivolous," and requested fees and costs associated with defending the motion.*fn98 At 7:11 P.M. that day, Ms. Peters requested that the Court "await ruling until such time as plaintiff submits its reply brief to the Court." Email of Kristan Peters, 7:11 P.M., Apr. 9, 2007.

On April 11, Ms. Peters filed a reply. See "Plaintiff's Reply to Defendants' Opposition.", Apr. 11, 2007 ("Pl. TRO Reply"). Procedurally, Ms. Peters "sandbagged" her adversary by not having provided any evidence on three of four points in her original 2-page motion, but then attaching 133 pages of evidence (primarily, but not entirely, in the form of transcripts) in support of her 12-page reply brief. See Wolters Kluwer Fin. Servs. v. Scivantage, 2007 U.S. Dist. LEXIS 27048, at *2-3 (S.D.N.Y. Apr. 12, 2007).

Later, in her Declaration filed with her opposition to the sanctions motion, Ms. Peters averred that she called the Court's law clerk ex parte on April 5 for guidance as to filing the motion to reinstate the TRO. See Peters Decl. ¶ 230. Ms. Peters avers that she mentioned that only "rough draft" transcripts were available. Ms. Peters avers that she asked the clerk whether the Court preferred "rough draft" transcripts or final transcripts at a later date, and that the clerk informed her that the Court preferred final transcripts at a later date. Ms. Peters then avers that she faxed several pages of final transcripts the following day to the Court.*fn99 See generally Peters Decl. ¶¶ 231-32.

Aside from the issue of transcripts, Ms. Peters provided no explanation for why the information in the (new) April 10 Declaration of David Stephens, as well as the (previously-filed) March 20 Declaration of Charles Ross, the March 29 Declaration of Brian Dalia, and the March 30 Declaration of Von Duran, all attached to her reply brief, was not provided in some form with the initial motion. Defendants emailed the Court subsequent to her reply and requested permission to file a sur-reply. See Email of Richard Rabin, Apr. 11, 2007 10:58 A.M. (referring to Plaintiff's "146-page 'reply'," and terming it "new arguments" and "wholly improper"); compare Email of Kristan Peters, Apr. 11, 2007 12:57 P.M.

In any event, on April 12, I denied Plaintiff's motion as procedurally improper gamesmanship, and substantively "bereft" of evidence. I declined to grant Defendant's request for fees, but warned Plaintiff that future improper conduct might warrant sanctions. See Wolters Kluwer Fin. Servs. v. Scivantage, 2007 U.S. Dist. LEXIS 27048, at *4. Substantively, Ms. Peters (on behalf of Plaintiff) provided no new evidence that showed a "likelihood of success on the merits," or "sufficiently serious questions going to the merits," that would have warranted reconsideration of my decision to dissolve the TRO on March 29.*fn100 See id. at *3-4. I made clear that "[a]s a hearing is scheduled for April 26 regarding Plaintiff's application for a TRO, reinstatement can, if it turns out to be appropriate, occur at that juncture." Id. at *4.

J. Plaintiff's Motion for Contempt

Following my April 6 directive imposing a "standstill" and extending Defendants' deadline to produce documents, Ms. Peters moved the same day to, inter alia, hold Defendants in contempt for their failure to produce documents by the previous April 5 deadline.*fn101 Citing "obstruction of discovery," and Defendants' "fail[ure] to move for a protective order pursuant to Fed. R. Civ. P. 26(c)," despite Defendants' request that I "so order" their proposed protective order, Ms. Peters moved for an order of contempt and sanctions in the form of costs of the motion. Pl. Contempt. Mot. at 1-2.*fn102 Ms. Peters also requested that all discovery (presumably including Plaintiff's more recent requests, now due April 13) be provided that same day, April 6, so that Ms. Peters could adequately prepare for upcoming depositions.*fn103

Ms. Peters also moved to compel the re-deposition of Alves (based on his allegedly "dilatory" behavior), compel the re-deposition of Doss, and to compel the deposition of Charchour. See Pl. Contempt. Mot. at 5.*fn104

This motion for contempt was not fully briefed before Plaintiff voluntarily dismissed its case.

K. Defendants' Motion to Dismiss

On Monday, April 9, Defendants filed a motion to dismiss Plaintiff's Complaint. Defendants argued first that the Court lacked subject matter jurisdiction over the action. Defendants noted that Plaintiff's sole federal claim, out of its ten claims, alleged that Defendants violated two provisions of the Computer Fraud and Abuse Act (CFAA),

18 U.S.C. § 1030(a)(4) and 18 U.S.C. § 1030(a)(2)(c).

The Computer Fraud and Abuse Act is a criminal statute that prohibits "unauthorized access" to computers. (As noted, it is now undisputed that Defendants in this action never had access to Plaintiff's code.) Although a civil right of action exists under the Act, no civil right of action generally exists under the two provisions Plaintiffs base their claims upon. See B.U.S.A. Corp. v. Ecogloves, Inc., 2006 U.S. Dist. LEXIS 85988, at *4 n.5 (S.D.N.Y. 2006). As diversity is plainly lacking (given that both Plaintiff Wolters Kluwer and Defendant Scivantage are Delaware corporations), Defendants averred that no subject matter jurisdiction existed. See Defendants' Mem. Law. in Support of Mot. to Dismiss at 4.

Secondly, Defendants argued that Plaintiffs lacked personal jurisdiction over Defendants, as Doss, Routh, and Alves all worked in Massachusetts, where Scivantage is located. Def. Mem. Law at 9-10. Third, Defendants argued that Plaintiffs failed to state a claim on the merits that any "trade secret" was stolen. See Def. Mem. Law. at 13.*fn105

L. Confidentiality Order

As noted, Defendants provided their proposed confidentiality order to Plaintiffs at 2:08 A.M., Thursday, March 29. On Friday, March 30, according to both Plaintiff's and Defendants' counsel, Judge Castel ordered that the depositions would be "attorneys' eyes only" until such time as the parties could work out a confidentiality agreement and present it to Judge Baer. On April 4, Ms. Peters represented that Judge Castel's order had "expired," but directed her associate Deidre Sheridan to negotiate with Defendants. It became clear fairly quickly that Defendants did not want the order to include in-house counsel, and Plaintiffs did.*fn106

Gold received "for the first time" on Thursday, April 5 for her "review and comment" Dorsey's draft of their proposed confidentiality order from Deidre Sheridan. Gold Decl. ¶ 11; 7/23/07 Tr. 33:2-7, 43:18-25. Gold discussed the draft with Mr. Isaacson, Ms. Peters, and one of Ms. Peters' associates on Friday, April 6, 2007. Gold Decl. ¶ 11.

Gold stated that her intention was to allow in-house counsel to have information in part to "comply with [Plaintiff's] internal and external financial reporting responsibilities."*fn107 Gold Decl. ¶ 10; Peters Decl. ¶ 109. Ms. Peters later reiterated that concern on several occasions but with no support for the proposition.*fn108 Gold stated that Wolters Kluwer had recently been involved in a situation where a confidentiality order prohibited the sharing of litigation information with a client, and that Wolters Kluwer counsel had to approach their adversary for permission to share information in order to effect a settlement. 7/23/07 Tr. 33:20-24.*fn109

On Friday, April 6, at 6:23 P.M. (before Easter weekend), Ms. Peters emailed Defendants' counsel and requested that a lawyer for Defendants commit time to work on the confidentiality order over the weekend, to "get it worked out by no later than tomorrow." Rabin Decl. Ex. 12. Defendants' counsel Mr. Guirguis responded at 7:15 P.M. that night, "Please send us the document as soon as it is ready for our review." Rabin Decl. Ex. 13.*fn110

At 7:50 P.M. that evening, Gold sent a fairly lengthy email to Ms. Peters, Isaacson, and Sheridan outlining her thoughts regarding the access that Wolters Kluwer needed. Peters Ex. A.

On Monday, April 9, at 2:01 P.M., Ms. Peters emailed, for the first time, a proposed confidentiality order to Mr. Rabin, eleven days after Defendants had proposed theirs.*fn111 See Rabin Decl. Ex. 14. Shortly thereafter, at 2:50 P.M., Ms. Peters emailed Plaintiff's proposed confidentiality order to the Court, with a four-page letter brief attached.*fn112 See Rabin Decl. Ex. 15. Subsequently, on April 10, Ms. Peters wrote the Court to relate that she "leapt at the opportunity to work cooperatively," "work[ed] through the Easter weekend," and Defendants' counsel "never bothered to respond." "[Mr. Rabin] just submitted his own version with no effort at negotiation; not even a return call." See Letter of Kristan Peters, Apr. 10, 2007, 1:55 P.M.*fn113 Defendants' counsel, on their part, emailed the Court on April 9 at 6:02 P.M. the original Confidentiality Order they proposed to Defendants on March 29. See Email of James Chou, Apr. 9, 2007 at 6:02 P.M.

Defendants' confidentiality order, which Plaintiffs variously had characterized as "wholly inappropriate,"*fn114 "objectionable" and "broadly worded,"*fn115 provided that "confidential" information could generally be disclosed to outside counsel, in-house counsel, and designated directors, officers, and employees, while "Attorneys' Eyes Only" information could generally be disclosed to outside counsel, and experts (under certain restrictions).*fn116

Plaintiffs' proposed Confidentiality Order, in fact, provided for broader disclosure in a more vaguely worded fashion. Plaintiff's proposed order provided that "confidential" information could generally be disclosed to outside counsel, in-house counsel, experts, or former employees. Plaintiff also proposed that "highly confidential" information, if "technical," could generally be disclosed to outside counsel; designated in-house counsel, including Deidre Gold and Steve Isaacson; designated employees, including Plaintiff's employees Joseph Honor and Charles Ross, who currently work on Plaintiff's Gainskeeper program that competes with Defendants' program;*fn117 designated directors and officers, including Plaintiff's President, Brian Longe, and Plaintiff's parent company's CEO, Chris Cartwright;*fn118 and experts (without specific restrictions).*fn119

Under Plaintiff's proposed order, disclosure of "non-technical highly confidential information" was similar to that of "technical highly confidential information," except that disclosure of "non-technical highly confidential information" to in-house counsel was not explicitly conditioned upon prior notice.*fn120

Defendants' proposed order generally provided for a process by which a party could challenge a disclosure of confidential information before such disclosure was made. Plaintiff's proposed order, although it provided that notice be provided "prior" to disclosure for "technical highly confidential information" (but not, as noted, "nontechnical "highly confidential information") did not provide for such a process.*fn121

Defendants described Plaintiff's proposed order as "non-standard."*fn122 Indeed, it appeared strange that in Plaintiff's lawsuit, where the purported theft of Plaintiff's trade secrets was purportedly at issue, Plaintiff's proposed order sought broader access for a far greater number of people with less formal protections against disclosure -- presuming, of course, that discovery would proceed on a reciprocal basis, as purportedly was occurring at this time. Defendants called it a "Trojan Horse designed to permit what plaintiff's case purportedly was designed to stop: the release of one company's trade secrets to individuals at another company." See Rabin Decl., Ex. 16, at 2. Defendants also noted at this time that Plaintiff has "filed multiple pointless motions designed to drown a smaller adversary in legal fees." Defendants contended as well that Plaintiff intended to "leisurely review defendants' highly confidential documents. while defendants patiently await the discovery that they deserve." Id. at 4. Wolters Kluwer employees, however, generally aver that their intention was not to seek discovery of Defendants' trade secrets, such as source code.*fn123

Defendants also informed the Court at this time that Plaintiff had attempted to serve a subpoena to Defendants' third-party software programming consultants for information, including Defendants' source code, without notifying Defendants. See Rabin Decl., Ex. 16 at 4 n.4.

In any event, by written Order on April 12, noting that "[p]rotective orders that limit access to certain documents to counsel and experts only are commonly entered in litigation involving trade secrets," I substantively adopted Defendants' proposed confidentiality Order with minor changes.*fn124 I provided for neutral procedures such that if either party sought access to "attorneys' eyes only" information for either in-house counsel or employees, either party could apply to the Court for such access and provide an affidavit in support.*fn125 Plaintiff never subsequently sought access for its in-house counsel or employees through these procedures.

The Confidentiality Order provides, inter alia, as noted at length in my Opinion of May 23, 2007, that protected material shall not be used in "any other litigation proceeding."*fn126 See generally Wolters Kluwer Fin. Servs. v. Scivantage, 2007 U.S. Dist. LEXIS 37306 (S.D.N.Y. Mar. 23, 2007). The Confidentiality Order provides for neutral procedures to challenge "attorneys' eyes only" designations. See Wolters Kluwer Fin. Servs. v. Scivantage, 2007 U.S. Dist. LEXIS 37306, at *5-6, *6 n.6. That said, the Confidentiality Order provides that "attorneys' eyes only" material shall remain "attorneys' eyes only," and thus unusable in other litigation, until further Order of this Court, or Defendants' provision of consent. See id. at *5-6, *34 n.32; see also Confidentiality Order ¶ 4(c).*fn127 The Confidentiality Order specifically provides that any obligations thereunder survive the termination of this lawsuit, and that this Court retains jurisdiction after the termination of this lawsuit to enforce the terms of the Order. See id. at *26; see also Confidentiality Order ¶ 13.

M. Defendants' Document Production of April 11, and Related Activity

On April 5, as previously noted, Defendants presented approximately 10,000 pages of documents to the Court, along with a privilege log. Defendants, as noted, requested that I sign Defendants' proposed Confidentiality Order before they produced documents to Plaintiff. See Letter of Richard Rabin, Apr. 5, 2007.

On Plaintiff's part, on April 4, Ms. Peters asked Jeffrey Loop, a Dorsey associate, to oversee Plaintiff's document production. See 9/4/07 Tr. 150:12-23. On April 5, pursuant to Defendants' document requests of April 2, Wolters Kluwer provided a substantial number of documents in electronic form to Dorsey for Dorsey's review. See 7/23/07 Tr. 94:6-96:8, 98:2-4. Dorsey then commenced review that day of that substantial number of electronic documents for responsiveness and privilege and the like.*fn128 See Loop Decl. ¶ 5; 9/4/07 Tr. 153:17-154:5, 164:24-165:18.

On April 6, as noted, I imposed a "standstill" and ordered that all discovery be "attorneys' eyes only" until further order. See Rabin Decl. Ex. 8. I also provided that Plaintiff's additional document requests of April 3 would be due Friday, April 13, and that documents requested by Defendants would also be due Friday, April 13.*fn129 Id.

On Saturday, April 7, Mr. Rabin offered to produce documents to Plaintiff under the "attorneys' eyes only" restriction I had ordered. See Rabin Decl., Ex. 31. Ms. Peters, after first requesting that Defendants split documents into several categories (including a category for in-house counsel), then agreed to accept the documents as "attorneys' eyes only." See Peters Decl., Ex. 8. At 7:24 P.M. that day, Mr. Rabin offered to produce the documents on Sunday or Monday, and reiterated the offer at 8:31 A.M. Sunday morning, April 8. Id. Ms. Peters declined the offer, as it was Easter Sunday, and told Mr. Rabin to stop "harassing" her. Id.*fn130 The lack of civility aside, the Court takes some responsibility for not realizing by this time that Plaintiff's counsel was troubled; similarly, with more oversight, her firm might have reached the same conclusion.

On April 8, Mr. Rabin also inquired as to the status of Plaintiff's documents. Ms. Peters, as noted, referred to her document production as "extraordinary." See Peters Decl. Ex. 8. Ms. Peters represented that "we were ready to produce some documents on April 5, but you refused to produce or exchange." and characterized Plaintiff's efforts as an "extraordinary document effort."*fn131 See Peters Decl. Ex. 8.

On April 10, Ms. Peters emailed Mr. Rabin and the Court's law clerk and asked Mr. Rabin, inter alia, "When will you produce the documents that the court has ordered several times that you produce." Email of Kristan Peters, Apr. 10, 2007, 5:53 P.M. On April 11, at 12:23 P.M., Ms. Peters emailed Mr. Rabin and the Court's law clerk again and stated, inter alia, "[W]e are ready willing and able to provide you with documents, even though you only very recently issued your requests, long after I issued mine to you," again cited Mr. Rabin's purported "continuing failure to produce in violation of the Court's orders," cited her emails of Saturday [April 7] "stating the above," and threatened that she would forward those emails to the Court if Mr. Rabin "pretend[ed] not to know where [she] stand[s] on those issues." Email of Kristan Peters, Apr. 11, 2007, 12:23 P.M.

Later that day, April 11, at Charchour's deposition, Ms. Peters, in support of her argument to re-depose Charchour, stated that "We asked you several times Saturday to produce the documents under [attorneys' eyes only]. Mr. Rabin has still refused to do so." Charchour Tr. at 326. Defendants' counsel Mr. Chou stated that ".[W]e have stood ready, as you know, to produce documents since I believe. Friday [April 6]." Charchour Tr. at 330. Ms. Peters retorted twice, "That's a patent lie." Id.

Regarding Plaintiff's documents, Ms. Peters stated then that she was not under a present order to produce (despite my prior admonitions to produce on a "rolling basis").*fn132 Charchour Tr. at 333. Defendants' counsel offered to produce his 10,000 pages that day if Ms. Peters was willing to make an exchange. Charchour Tr. at 335.*fn133

Ms. Peters responded, "Yes. Sure.. We turned around our production of documents much more readily than you have." Id. at 335-36. Ms. Peters represented that she would provide "everything that we've got," and that although she had not asked her associate Jeff Loop how many documents were ready, "as a seasoned counsel doing this for 20 years. the number of documents is [not] what's relevant. What is relevant is the quality of documents.. We've got a significant amount of documents that are quality documents here to produce. today" Id. at 339, 340.

Subsequent to Ms. Peters' conversation with Mr. Chou at the Charchour deposition, Ms. Peters asked Mr. Loop, for the first time, whether the documents were ready, and how many boxes. Loop Decl. ¶ 7; see 9/4/07 Tr. 167:18-168:10.*fn134 Loop informed her that 500 pages of paper documents were available, i.e. the 500 pages of non-confidential, generally publicly available information that Wolters Kluwer had provided Dorsey on or about April 4. Loop Decl. ¶ 8; see also 9/4/07 Tr. 155:9-14. Loop provided those documents to Ms. Peters. 9/4/07 Tr. 154:17-22. Loop informed Ms. Peters that Plaintiff's substantive, and more substantial, documents would be ready for production to Defendants on Friday, April 13, which Loop understood to be the "scheduled date of the exchange." Loop Decl. ¶ 8. It is hard to believe that Mr. Loop understood the timetable and lead counsel did not.

Defendants produced over 50,000 pages of documents, comprised of 22 boxes, to Plaintiff the night of April 11. Rabin Decl. ¶ 44. Plaintiff, in response, produced the aforementioned 500 pages of non-confidential material to Defendants. Rabin Decl. ¶ 43; 9/4/07 Tr. 154:17-155:14; see also Wolters Kluwer Fin. Servs. v. Scivantage, 2007 U.S. Dist. LEXIS 37306, at *7 n.7 (S.D.N.Y. 2007).*fn135 At some point shortly thereafter, Ms. Peters complained to Defendants about their production in paper form and requested production in electronic form.*fn136

On Thursday, April 12, at 6:34 A.M., Ms. Peters emailed Defendants' counsel Mr. Chou and stated that "Mr. Loop has more documents for you today and more again Friday."*fn137 See Def. Ex. 16. Mr. Chou subsequently contacted Mr. Loop at 9:55 A.M., but did not receive a response regarding documents (nor the documents themselves) that day. See Def. Ex. 17.

On Friday, April 13, in the morning, Loop provided Ms. Peters with three DVDRoms containing 27,000 pages of Plaintiffs' documents, which were ready for production. Loop Decl. ¶¶ 8-9; Tr. 9/4/07 Tr. 155:18-22. Ms. Peters, for reasons which will be related infra, did not produce the documents to Defendants that day.

N. Court-Ordered Depositions

On March 29, as noted previously and as clearly as I could, I requested by letter a schedule for depositions, "obviously not to interfere one with the other," agreed to by the parties by Thursday, April 5. Rabin Decl. Ex. 5.

On April 2, Defendants noticed depositions of nine of Plaintiff's witnesses to take place on Tuesday, April 10 through Saturday, April 14.*fn138 Aside from the one deposition scheduled for Saturday, April 14, Defendants' noticed depositions did not conflict with Ms. Peters' vacation that she previously stated would begin on April 13.*fn139 There is scant evidence, however, that Ms. Peters ever took any substantial steps to arrange for the depositions of her witnesses on the dates for which Defendants had initially noticed depositions.*fn140 It is not clear whether Ms. Gold was informed of Defendants' April 2 notices.*fn141

On April 3, as previously noted, Ms. Peters stated she had "priority" and that she "did not have to present anyone for depositions until [she] finish[ed] [her] depositions. See Routh Depo. at 435. On April 4, at 7:43 P.M., Ms. Peters emailed Mr. Rabin, stated that the schedule "will have to be rearranged," and stated that "if you submit it to the Court as is, I will inform the Court that you refused to confer with me." See Rabin Decl. Ex. 20. On April 5, at 1:40 P.M., Ms. Peters communicated to Mr. Rabin her specific objections to Mr. Rabin's proposed depositions. See Rabin Decl. ¶ 29. Mr. Rabin represented that he would confer with his client. See Rabin Decl. ¶ 30.

Within the hour, at 2:21 P.M. that day, Ms. Peters faxed her proposed depositions schedule to the Court. Ms. Peters proposed a list of 14 (and potentially more) additional depositions, not including the four individual Defendants.*fn142 Ms. Peters' first eight proposed depositions directly conflicted with eight of Defendants' nine proposed depositions, despite my prior admonition that depositions were "obviously not to interfere one with the other."*fn143 Ms. Peters listed the deponents' work addresses under their names. Defendants, in their letter of April 5, requested that I order the depositions of Plaintiff's nine witnesses to proceed beginning on April 11. See Rabin Decl., Ex. 20.

On April 6, as previously noted, I directed the parties to immediately meet and confer and present me, if possible, with a list of each party's proposed deponents and their place, date, and time by April 9, with the proviso that "if agreement is not possible. [the Court] will simply order the depositions and their place and timing [itself]." See Rabin Decl. Ex. 8. I limited depositions to 10 for each side, total, including depositions already taken by Plaintiff, and explicitly limited depositions to one day and seven hours, in accordance with Fed. R. Civ. P. 30(d)(2), unless further Order of the Court was provided.*fn144 Id.

On April 9, Defendants provided, pursuant to my April 6 directive, a proposed schedule for depositions of 10 of Plaintiff's witnesses, to begin on April 12 and continue through April 23. Rabin Decl. Ex. 20. Ms. Peters failed to provide an updated proposed schedule pursuant to my directive.*fn145

Accordingly, on April 11, 2007, at 6:06 P.M.,*fn146 by written Order, I ordered sixteen depositions to go forward -- ten by Defendants, who had yet to take a deposition, and six by Plaintiff (given that Plaintiff had already taken four depositions).*fn147 See Rabin Decl. Ex. 22. As at that time, ten business days remained before the April 26 hearing, I scheduled two depositions per day for the next eight business days. Id.

At 8:59 P.M. on April 11, by email, Ms. Peters requested a conference call, stating, without specifying, that "some of the people scheduled for next week are out of state or away on vacation out of the country."*fn148 See Rabin Decl. Ex. 23. Noting that "the plaintiff never bothered to update her proposed schedule," and that "most, if not all [of Defendant's] notices were out as of April 2," I declined, by written endorsement on April 12, to revise my April 11 order. I additionally stated that "if you can agree other dates before the hearing, that's fine; if not, it is doubtful, depending on your adversary's largess, that they will testify" at the April 26 TRO hearing. Id.

For Thursday, April 12, and Friday, April 13, I scheduled depositions of two of Plaintiff's witnesses (David Stephens, on April 12, at 10 AM, and Charles Ross, on April 13, at 10 AM), and depositions of two of Defendants' witnesses (Michael Wiatrak, on April 12, at 9 AM, and Bill Wagner, on April 13, at 4 PM). Ms. Peters was responsible for scheduling depositions for Plaintiff. As described below, none of the four ordered depositions occurred despite the fact that, had Ms. Peters sought their presence, each and every one (as their testimony revealed) would have been available.

a.Ordered Deposition of Plaintiff's Witness David Stephens

David Stephens, as noted, was ordered to be deposed on April 12 at 10 AM. (Defendants, in their proposed deposition schedule of April 9, had proposed that time. See Rabin Decl. Ex. 21.)*fn149 Stephens was in Chicago for a business meeting. See Isaacson Decl. ¶ 16; 8/15/07 Tr. 122:9-10. He had asked Ms. Peters on April 9 whether he should have gone to the conference in Chicago rather than be in New York or Massachusetts, but it is unclear if he received a response. See WKFS Ex. 12.

At 9:23 P.M, Stephens emailed Ms. Peters and stated that he could land in New York at 3:10 P.M. WKFS Ex. 13. Stephens suggested, inter alia, that the deposition could take place at LaGuardia airport, or that it could be done by video conference. Id. There is no evidence Ms. Peters passed on those suggestions to Defendants' counsel.*fn150

The next day, April 12, at 8:02 P.M., Ms. Peters stated that Stephens was not available the next week (the same week as her vacation). 5/24/07 Peters Decl. Ex. 43. Stephens, for his part, testified that although he had a vacation in Tortola from the 13th through the 18th, that he was "available" during that time to come back to New York and had discussed that with Ms. Peters. See 8/15/07 Tr. 124: 1-13; 136:1-137:13.

b. Ordered Deposition of Defendants' Witness Michael Wiatrak

Michael Wiatrak, as noted, was ordered to be deposed on Thursday, April 12 at 9 AM at Scivantage's offices in New Jersey. As noted, the previous night at 9:07 P.M., Ms. Peters stated in her final email that "I guess we will have to. proceed in NJ at 9." Rabin Decl. Ex. 28. Defendants aver that their counsel ...

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