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T.A. Ahern Contractors Corp. v. Dormitory Authority of State of New York

March 19, 2009


The opinion of the court was delivered by: Eileen A. Rakower, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

Plaintiff, T.A. Ahern Contractors Corp. ("Ahern"), brings this action for breach of contract, quantum meruit, and unjust enrichment in connection with a public improvement construction project known as Jacobi Medical Center Modernization Program-Phase I ("the project" or "project"), located in the Bronx, New York. Ahern alleges that, pursuant to the parties' contract, Ahern was to construct a portion of the project over twenty-two months, beginning in April of 2002, and that various breaches of contract by defendant, the Dormitory Authority of the State of New York ("DASNY") delayed Ahern's completion of the project, causing Ahern to incur damages.

Presently before the court are motions by both Ahern and DASNY for orders pursuant to CPLR §3124, compelling one another to produce electronic and other discovery relating to the project.

With respect to Ahern's motion, Ahern seeks the production of archived e-mails from DASNY employees relating to the project and other electronic documents. Ahern asserts that project-related e-mails to and/or from DASNY employees will demonstrate that DASNY caused Ahern to be delayed in its performance of the contract.*fn1 In support of its motion, Ahern submits an Amended Notice of Motion; Affirmation of Robert J. Fryman in Support and Affirmation of Good Faith, with copies of the pleadings; Ahern's documents requests and DASNY's objections and responses; copies of compliance conference orders; and letters from Ahern and DASNY regarding the present discovery dispute annexed as exhibits. DASNY has submitted an Affirmation in Opposition to Ahern's motion to compel, annexing as exhibits correspondence between counsel for Ahern and DASNY regarding the present discovery dispute; DASNY's privilege log; and DASNY's own document request to Ahern. In addition, DASNY has annexed affidavits from Leigh Favitta, Director of Information Systems from DASNY; and Heidi B. Grygiel, Esq., Evidence Acquisition Director of the Office of the Chief Information Officer for the New York City Law Department, counsel for DASNY. Ahern submitted a Reply Affirmation in further support of its motion.

In response to Ahern's request for electronic data, DASNY has identified 27 DASNY employees whose e-mail accounts are likely to contain information relevant to the project. However, according to DASNY, the great majority of these employees did not create project-specific folders in their e-mail accounts, and thus it was necessary to collect these individuals' entire mailboxes (i.e., their inboxes, sent items, and any other folders within the mailbox). This amounted to approximately 35 gigabytes ("GB") of electronic data in the form of e-mails and attached documents. DASNY estimates that, using a standard industry conversion rate of pages per GB, DASNY has collected over 2.5 million pages from the 27 e-mail accounts.

Further, the e-mail service utilized by DASNY employees - Microsoft Outlook ("Outlook") - does not allow for mailbox-wide searches which could potentially locate project-specific e-mails and/or documents. Instead, each individual e-mail and its attachment(s), if any, would have to be accessed and reviewed for relevant and/or privileged material. Accordingly, DASNY has taken the position that it is necessary to hire an electronic discovery vendor which has the capability of running complex search strings through every mailbox and its attachments simultaneously to retrieve project-related data. DASNY contends that the retention of discovery vendors is a typical practice in cases where there is a substantial volume of electronic data from which discovery is sought by a litigant. Counsel for DASNY has communicated to counsel for Ahern both personally and in writing that it is willing to hire a vendor to perform this search and produce all responsive data upon confirmation that Ahern is willing to bear the expenses of hiring the vendor, estimated to be approximately $35,000 (or $1,000/GB).

Ahern takes the position that it should not have to pay the expenses of retrieving the project-related data from the 27 DASNY employees' mailboxes, and that DASNY impermissibly seeks to foist the expense of reviewing its own electronic data upon Ahern. Accordingly, Ahern argues that DASNY should bear the cost of hiring the electronic discovery vendor; or alternatively, that DASNY should be compelled to provide the contents of the entire mailboxes of the 27 DASNY employees subject to a stipulation of confidentiality, and Ahern itself will undertake the search for project-related e-mails and/or attachments.*fn2

DASNY, in its own motion, seeks an order pursuant to CPLR §3124 compelling Ahern to produce all relevant e-mails and other electronic documents in its possession pertaining to the project; as well as document discovery in the form of the general ledgers of Ahern and its affiliate, Ahern Painting Contractors, Inc. ("Ahern Painting"), financial statements for the years encompassing Ahern's contract performance, and copies of cancelled checks which support Ahern's claimed expenses. DASNY in support of its motion has submitted a Notice of Motion; an Affirmation in Support of DASNY's Motion and Affirmation of Good Faith; and an Affidavit of Richard Weller, CPA for DASNY. DASNY also submits copies of the pleadings, Ahern's Summary of Claim, DASNY's First Notice for Discovery and Inspection and Ahern's Response, several letters between counsel regarding the discovery issues addressed in the instant motion, compliance conference orders, and a copy of General Conditions of the project contract as exhibits. In opposition to DASNY's motion, Ahern has submitted an Affirmation of Robert J. Fryman, which has annexed as exhibits Ahern's own motion to compel and reply affirmation in support; a printout cataloguing 1,292 pages of financial records already produced by Ahern; Ahern's Response and Objections to DASNY's First Notice for Discovery and Inspection; and prior correspondence between counsel for DASNY and Ahern regarding the discovery issues at issue in the instant motion. DASNY has submitted a Reply Affirmation in further support of its motion.

With respect to DASNY's demands for financial records from Ahern, DASNY argues that, although Ahern has produced 1,292 pages of financial records related to the project, it is also entitled to Ahern's audited and unaudited financial statements, the general ledgers, and checks paid by Ahern for expenses incurred on the project. DASNY contends that this information is essential to verifying the accuracy and/or veracity of the damages claimed by Ahern. Further, DASNY claims that access to Ahern's general ledger and financial statements is required in order to ascertain Ahern's expenses representing home office overhead, since Ahern's accounting system did not allocate overhead expenses on a job-by-job basis, and thus Ahern's overhead relating specifically to the project is not documented in the project-specific job cost ledger.

DASNY concedes that its CPA, Richard Weller, was previously provided with access to the financial records of Ahern and Ahern Painting Contractors, Inc. ("Ahern Painting"); and that he conducted a three-week audit of these records in March 2006. Mr. Weller also conducted a review of Ahern and Ahern Painting's records for a period of three days in November 2007. In short, the parties agree that DASNY has had the opportunity to review and audit Ahern's financial statements for the years 2003-2006. However, DASNY claims that Mr. Weller had not copied most of the records, and that records which Mr. Weller had retained had been marked up for auditing purposes.

In opposition to DASNY's motion to compel Ahern's financial records and the general ledgers, Ahern contends that the general ledgers and financial statements will provide no further details with respect to alleged costs related to the project. Accordingly, Ahern asserts that the general ledgers and company-wide financial statements sought by DASNY are irrelevant to this action.

With respect to DASNY's motion to compel Ahern's production of project-related e-mails and other electronic data, DASNY alleges that, despite numerous requests to counsel for Ahern to identify and/or produce all relevant electronic discovery, Ahern has failed to provide DASNY with any information pertaining to project-related electronic data in Ahern's custody.

In response, Ahern contends that, in discussions between counsel, Ahern has expressed its willingness to provide DASNY with electronic discovery on the same terms and conditions as DASNY's production of ...

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