Preview
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
EXHIBIT 2
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
BOIES
SCHILLER
FLEXNER
December 5, 2019
Via E-Mail and Federal Express
William P. Harrington, Esq.
Bleakley Platt & Schmidt, LLP
One North Lexington Avenue
White Plains, NY 10601
Re: Goldstein et al. v. Houlihan/Lawrence Inc.,
No. 60767 /2018 (N.Y. Sup. Ct., Westchester Cty.)
Dear Mr. Harrington:
I write on behalf of Plaintiffs in opposition to Houlihan Lawrence's letter
dated November 14, 2019 seeking a protective order. No such order is warranted.
Houlihan Lawrence's request is merely another effort in its campaign to avoid class
certification discovery, this time by seeking to stay all further discovery before
Plaintiffs have even obtained basic documents from key executives and file locations
or taken a single deposition.
The discovery expense imposed on Houlihan Lawrence by this case pales in
comparison to the hundreds of millions of dollars it has collected in sales
commissions on notoriously risky dual-agent transactions. The class certification
determination in this action will affect the rights and interests of the thousands of
consumers who were deprived of Houlihan Lawrence's undivided and undiluted
loyalty when making one of the most important financial decisions of their life. It is
vitally important that the determination is made based on a fair, true, and complete
record.
Houlihan Lawrence's requested protective order should be denied so that the
more important work of forcing Houlihan Lawrence to at long last fulfill its
discovery obligations can begin. Plaintiffs look forward to receiving the In-House
Bonus e-mails and other discovery discussed below, but many of Plaintiffs' most
important discovery requests still remain outstanding and require resolution.
Plaintiffs look forward to the start of a new phase of discovery characterized by
swift progress.
BOIES SCHILLER FLEXNER LLP
333 Main Street, Armonk, NY 10504 I (t) 914 749 8200 I (f) 914 749 8300 I www.bsfllp.com
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 2 of 10
1. No protective order is warranted
Houlihan Lawrence's letter confirms that there has been no material change
since the Court denied Houlihan Lawrence's motion to dismiss, appointed a Special
Discovery Master, and directed class certification discovery to proceed. Instead,
Houlihan Lawrence's request for a protective order amounts to a "time out" to
re-hash its previously asserted arguments about the scope of discovery, at needless
expense and delay.
Houlihan Lawrence claimed at our October 22, 2019 discovery conference
that the First Department's February 2019 Tozzi decision was a "game-changer,"
requiring dismissal of Plaintiffs' claims and a protective order to halt further
discovery. 1 Tellingly, Houlihan Lawrence chose not to address that case or
otherwise seek to revisit the Court's motion-to-dismiss decision at the following
week's status conference with the Court, and relegates Tozzi to a footnote in its
November 14 "protective order" letter.
Houlihan Lawrence no longer asserts that Tozzi broke new ground, admitting
that it merely "confirms" that parties are bound by documents they sign (at 3, n. 1).
Tozzi adds nothing to the core argument Houlihan Lawrence made in its motion to
dismiss, that "each Plaintiff executed the statutory disclosure form, demonstrating
consent to Houlihan Lawrence's dual agency." Dkt. 343 at 8. The Court correctly
rejected that argument, holding that the signed forms didn't foreclose Plaintiffs'
claims. Dkt. 370.
Moreover, Tozzi involved an entirely different claim than those at issue in
this case. The plaintiff in Tozzi had hired the defendant as his personal assistant.
The defendant was also a real estate salesperson, and assisted the plaintiff in
negotiating and executing on a residential property purchase. Plaintiff claimed that
he did not know that the defendant had held herself out as his broker on the deal,
ultimately collecting the nearly $300K buy-side real estate commission. He
contested the commissions, claiming that he thought the defendant was acting as his
personal assistant, not an agent entitled to a commission. The First Department
affirmed the trial court's dismissal because numerous documents-including the
1 Tozzi was decided two months before the Court's motion-to-dismiss decision in April,
three months before your appointment as Discovery Master in May, five months before the
time to reargue or appeal the motion-to-dismiss decision expired in June, nearly six months
before Houlihan Lawrence obtained Plaintiffs' document production and took their
depositions in August, and nearly seven months before the parties' post-deposition status
conference with the Court in September. Yet Houlihan Lawrence first raised its "Tozzi"
argument on October 22, just as its string of prior excuses for avoiding discovery were
running out.
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 3 of 10
plaintiffs signed purchase agreement, a correction to that agreement, e-mails, and
the statutory disclosure form-all made clear that the defendant was acting as a real
estate agent on the plaintiffs behalf. Tozzi v. Mack, 169 A.D.3d 547 (1st Dep't 2019).
Thus, Tozzi merely affirms the unremarkable proposition that a statutory disclosure
form is proof of an agent's disclosure of a single-agency relationship with a
consumer. It does not concern or address the issue of whether a statutory
disclosure form, standing alone, is sufficient to discharge a broker's disclosure
obligations to make full and frank disclosure before acting as a dual agent.
Rather than focus on its previously touted "Tozzi" argument which does not
withstand scrutiny, Houlihan Lawrence instead reverts to its already well-worn
argument that the Court's motion-to-dismiss decision means that it is certain to
prevail on class certification no matter what additional discovery may show. The
Court already considered and rejected that argument and instead appointed a
Discovery Master to oversee pre-certification discovery. 2 And Houlihan Lawrence
has already repeated that argument throughout discovery proceedings, beginning
with its first written submission to you on July 1, 2019. See July 1 Letter at 3-4.
At bottom, Houlihan Lawrence argues that because it has produced some
discovery pertaining to class certification, discovery should stop. That is not how
discovery works: Plaintiffs are entitled to full discovery, including materials that
refute Houlihan Lawrence's arguments on class certification.
CPLR 3101(a) provides for "full disclosure of all matter material and
necessary in the prosecution or defense of an action, regardless of the burden of
proof." "Material and necessary" is "interpreted liberally to require disclosure."
Allen v. Crowell-Collier Pub., 21 N.Y.2d 403,406 (1968). "The test is one of
usefulness and reason." Id. "If there is any possibility that the information is sought
in good faith for possible use as evidence-in-chief or in rebuttal or for cross-
examination, it should be considered material." Matter of Grover S., 2019 WL
5057591, *1 (2d Dep't Oct. 9, 2019). CPLR 3101 "envisages a maximum disclosure
of facts with a minimum of judicial supervision." Wiseman v. Am. Motors Sales, 103
A.D.2d 230,232 (2d Dep't 1984).3
2 See, e.g., Hr'g Tr. 9:6-13, Apr. 30, 2019 (Houlihan Lawrence argued unsuccessfully the
lawsuit could not be certified and thus pertained solely to individual plaintiffs, such that
"the discovery needs, therefore, are entirely different than when we were here the last
time").
3 Houlihan Lawrence's cited cases are inapposite and do not support entry of its requested
protective order. See Martin v. Palisades Collection, LLC, 2012 WL 2930791 (N.Y. Sup. Ct.
June 27, 2012) (inapposite case precluding pre-certification merits discovery); Wornow v.
Register.com, 2004 WL 5487788 (N.Y. Sup Ct., Feb.19, 2004) (same); Severin v. Platinum
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 4 of 10
Ignoring these well-settled principles favoring disclosure, Houlihan
Lawrence argues against further discovery because it claims (at 4) to have produced
"documents sufficient to address each class certification element." The standard is
not whether "Houlihan Lawrence has produced documents pertaining to the
analysis" of each class certification factor (id.), but whether it has made full
disclosure as required by New York law. Plaintiffs are not limited to documents
cherry-picked by Houlihan Lawrence to skew the record on class certification.
Houlihan Lawrence's invitation to restrict discovery by pre-judging the
outcome of class certification has been squarely rejected by courts. See, e.g., Manno
v. Healthcare Revenue Recovery Grp., LLC, 2012 WL 4192987, at *3 (M.D. Fla. Sept.
18, 2012) ("Defendant does not cite a single case where discovery on a class
certification issue was denied because the class action was arguably doomed to
fail. ... Indeed, it strikes this Court as untenable to rule at this stage that Plaintiffs
class certification motion fails and, at the same time, Plaintiff is not entitled to the
very discovery that may establish an essential element of the class."); see also
Medina v. Enhanced Recovery, 2017 WL 5196093 at *7-*8 (M.D. Fla. Nov. 9, 2017)
("Defendant's belief that Plaintiffs' claims ultimately will fail due to the rieed for
individualized inquiry does not, at this stage of the proceedings, prohibit discovery
on these issues. Such an argument is akin to saying that a party need not respond to
a discovery request because, in the opinion of that party, the requested information
won't help the opposition's case all that much. But such has never been the rule in
discovery which is broader than the scope of admissible evidence."); La brier v. State
Farm Fire & Cas., 314 F.R.D. 637, 643 (W.D. Mo. 2016) ("State Farm cannot withhold
for months the very information that LaBrier has sought for purposes of class
certification and the merits, then claim Labrier cannot meet her burden of proof and
that State Farm therefore should not have to produce the missing data.").
Home Health Care, 2017 WL 4168213 (N.Y. Sup. Ct. Sept. 15, 2017) (plaintiff provided court
with "no way of knowing what, if any, information [she] currently possess and what
additional information [she] requires"); Gewanterv. Quaker State Oil Ref, 87 A.D.2d 970
(4th Dep't 1982) (plaintiff sought unnecessary information about identity of persons within
the class that plaintiff sought to represent); Martin A. v. Gross, 171 A.D.2d 491 (1st Dep't
1991) (court found the plaintiffs document requests seeking "a massive number of
documents" overbroad (in part because preliminary injunction had already been entered in
plaintiffs favor and class certification motion held in abeyance) but gave leave to serve a
proper request); Alvarez v. Just Salad, 2019 WL 1975551 (N.Y. Sup. Ct. Apr. 24, 2019) (court
found plaintiffs claims "amorphous," "not substantiated ... as to the putative class
members," with no evidence that claims "were based on company-wide policies" -all unlike
here, where additional plaintiffs came forward after suit was filed, and documents show that
misconduct extends well beyond Plaintiffs' transactions and indicate that Houlihan Lawrence's
widespread undisclosed dual agency is the result of company-wide policies and practices).
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 5 of 10
Even if it were proper to pre-judge the merits of class certification, Houlihan
Lawrence's arguments are flawed. Houlihan Lawrence reasons that, because the
Court predicted that the "ultimate resolution" of Plaintiffs' claims might require
some "individual analysis of each transaction," Plaintiffs' class certification motion is
doomed to fail (at 3). But predominance of issues among class members is all that is
required-"not identity or unanimity." City of N.Y. v. Maul, 14 N.Y.3d 499,514
(2010). 4 The significance of any individualized determination must be assessed
together with numerous common issues oflaw and fact subject to common class-
wide proof. For example, the question of "what was said and what disclosure, if any,
were made to each plaintiff' is subject to generalized proof. See, e.9., In re Prudential
Ins. Co., ofAm. Sales Practices Litig., 148 F.3d 283, 290 (3d Cir. 1998) (certification
appropriate for claims based on oral misrepresentations or omissions made
pursuant to a "common course of conduct"); Moore v. Paine Webber, Inc., 306 F.3d
1247, 1255 (2d Cir. 2002) (certification appropriate for claims based on oral
misrepresentations or omissions that are materially uniform in nature).
2. Houlihan Lawrence refuses to produce relevant material
Houlihan Lawrence's feigned confidence in its chances at class certification
depends upon withholding common evidence that class members received untimely
and inadequate disclosure. Core deficiencies in Houlihan Lawrence's production
remain. Houlihan Lawrence still has not:
• Conducted a transparent, systematic search of its shared drives, InCrowd
database, and files of key document custodians;
• Produced corporate reports, internal memos, and other private statements
regarding the company's corporate strategy to grow market share and dual
agency policies and practices; or
• Produced any of the "thousands upon thousands of inter-office emails
encouraging fellow agents to sell the listing, keep it 'in house' to get the
added bonus" that will show the culture of undisclosed dual agency that
pervades Houlihan Lawrence.
4 CPLR 901 "clearly envisions authorization of class actions even where there are subsidiary
questions oflaw or fact not common to the class." Weinberg v. Hertz, 116 A.D.2d 1, 5 (1st
Dep't 1986); see also Friar v. Vanguard Holding Corp., 78 A.D.2d 83, 91 (2d Dep't 1980)
(where common issues predominate, the class should be certified even if "questions to each
individual may remain after resolution of the common questions").
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 6 of 10
The discovery rulings to date have already been extremely accommodating
to concerns raised by Houlihan Lawrence regarding the scope of pre-certification
discovery:
• Rather than direct Houlihan Lawrence to collect documents from Chris and
Stephen Meyers, the individuals most knowledgeable about the centralized
scheme at the heart of this case, Houlihan Lawrence was asked only to locate
records relating to public remarks given by them at company~wide events.
• Rather than direct Houlihan Lawrence to systematically search its shared
drives, one of the most important sources of relevant information in virtually
any case, Houlihan Lawrence was permitted to provide Plaintiffs only with a
folder and file tree of those drives.
• Rather than direct Houlihan Lawrence to collect documents from its sales
agents, even though CPLR 3101 provides for full disclosure from an agent of
a party, Plaintiffs were encouraged to subpoena the sale agents themselves.
Six weeks after the October 22 discovery conference, Houlihan Lawrence has
failed to perform even under those accommodations, including by failing to report
on its efforts to locate records relating to company-wide events and failing to
produce a tree report for its corporate shared drive that contains file names. 5 It has
also failed to provide term-level hit count reports relating to its collection from Jim
Gricar and Toni Crystal. Further, on December 3, Houlihan Lawrence's counsel
announced that it now also represents certain non-party sales agents and issued
blanket objections on their behalf to production of documents in response to the
subpoenas Plaintiffs served on them shortly after the October 22 conference.
While Houlihan Lawrence tries to make much of the discovery it has already
provided, more than 80% of the documents it has produced to date consist of the
sample transaction files the Court directed Houlihan Lawrence to produce even
before appointing a Special Discovery Master, as well as the related Transaction
Detail Sheets. Houlihan Lawrence's other documents have been collected and
produced principally using ad hoc unilateral, self-serving procedures, and relate in
large part to the named Plaintiffs' transactions.
In November 2019, nearly four months after Houlihan Lawrence was
directed at the July 18 conference to produce documents from the custodial files of
Jim Gricar and Toni Chrystal and its InCrowd database, Houlihan Lawrence
5 Plaintiffs brought the corporate shared drive deficiency to Houlihan Lawrence's attention
on November 20, 2019. Houlihan Lawrence did not respond, but instead produced all of its
folder and file tree reports today, just hours before this submission was due, effectively
preventing Plaintiffs from evaluating them before today's submission.
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 7 of 10
produced approximately 1,300 documents from those sources (though 99% of them
appear to be from Ms. Chrystal's files). Plaintiffs cannot fully evaluate that
production because Houlihan Lawrence continues to refuse to turn over the term-
by-term hit count information Plaintiffs requested in July and that you directed
Houlihan Lawrence to provide at the October 22 conference. Houlihan Lawrence's
InCrowd production was limited to a single document, and Houlihan Lawrence
continues to refuse cooperation in developing a method for collection and
production from In Crowd.
3. Houlihan Lawrence should produce relevant material
A. In-House Bonus e-mails
Houlihan Lawrence should collect and produce e-mails regarding its In-
House Bonus program from Houlihan Lawrence personnel (office managers, office
administrators, sales agents, etc.) in the Scarsdale, Bronxville, and White Plains
offices during the Class Period, using the following In-House Bonus-related search
terms, which Plaintiffs proposed to Houlihan Lawrence on October 24, 2019:
• ("In-house" or "In house" or "inhouse") w/5 bonus
• (get! OR eam! OR pocket! OR collect!) w/5 bonus
• ("both sides or dual! Or designat!) w/5 bonus
• IHB
This is an appropriately tailored search for highly relevant documents that
Plaintiffs have good reason to believe exist. Current and former Houlihan Lawrence
agents have informed Plaintiffs (anonymously) that Houlihan Lawrence agents are
"bombarded with emails encouraging in house deals," with "thousands upon
thousands of inter-office emails encouraging fellow agents to sell the listing, keep it
'in house' to get the added bonus."
Houlihan Lawrence tries to minimize these "thousands upon thousands" as
each a "one-off communication"-ignoring that collectively they provide powerful
evidence of the culture of undisclosed dual agency that pervades Houlihan Lawrence
and the critical role the In-House Bonus plays in advancing Houlihan Lawrence's
scheme to boost in-house sales.
Houlihan Lawrence's unsubstantiated statements that the efforts required to
locate and produce these e-mails would impose an "inordinate burden" are
unavailing. Houlihan Lawrence asserts merely that the agents whose e-mails are to
be searched can't be identified using a single "readily accessible list." Houlihan
Lawrence provides no evidence or reason to believe that the electronic search
would be technologically difficult for its IT staff to perform. And Houlihan
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 8 of 10
Lawrence's speculation that the proposed terms "will generate many hits but few
responsive documents" is belied by the narrowness of Plaintiffs' proposed search.
Tellingly, Houlihan Lawrence fails to substantiate its burden arguments with
any actual hit count information on even a sample of the proposed document
custodians. This is consistent with Houlihan Lawrence's practice of withholding key
hit count information that would facilitate orderly discovery. Houlihan Lawrence
has also unreasonably refused to provide term-by-term hit counts for its Gricar and
Chrystal custodian collections and for its agent-to-agent communications related to
the named Plaintiffs' transactions, even though providing such information is
standard practice and imposes no meaningful burden. See, e.g., Finisar Corp. v.
Nistica, Inc., 2014 WL 12887160, at* 3 ("The Court expects that if a party insists that
a search term results in too many hits, the party will have run the search and will be
able to provide the opposing party with the number of hits and specific examples of
irrelevant documents captured by the search. Blanket statements that certain
search terms are unduly burdensome do not constitute meeting and conferring in
good faith.").
B. Non-MLS transactions
Houlihan Lawrence relies solely on its already-rejected "too late" argument
to oppose Plaintiffs' request for transaction files for a sample of the nearly 1,000
non-MLS dual-agent transactions Houlihan Lawrence only recently revealed it
brokered during the Class Period. Plaintiffs' request is timely given that their
investigation is continuing and discovery is ongoing, but also because
representations made by Houlihan Lawrence on which Plaintiffs and the Court
relied have now been proven incorrect.
The sample transaction files the Court directed Houlihan Lawrence to
produce were selected exclusively from a list of dual-agent transactions generated
by Houlihan Lawrence from MLS data. Plaintiffs and the Court consented to that
process because Houlihan Lawrence represented "without equivocation" that the
only way it could identify its dual-agent transactions was using MLS data. 6 Houlihan
Lawrence was the party in position to know. It now brazenly argues "shame on you
for believing us."
In April 2019, Plaintiffs learned that Houlihan Lawrence could identify its
non-MLS (and other) dual-agent transactions using the same Profit Power database
6See Hr'g Tr. 13:17-24, Oct. 18, 2018 ("Our people are telling us without equivocation that the only
way they can find out whether there is a dual agency transaction is they need to go to the MLS
computer system and look at that system and harvest the information off that computer system.
That's step one. That will tell us whether there is a dual agency, your Honor.").
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 9 of 10
from which it generated and produced the Transaction Detail Sheets. Houlihan
Lawrence initially argued, "formulating a search that would yield reliable results
would not be possible" (July 1 Letter at 6), but admitted at the October 22 discovery
conference that it had successfully identified nearly 1,000 non-MLS dual-agent
transactions.
In directing Houlihan Lawrence to produce the sample transaction files, the
Court overruled Houlihan Lawrence's burden and relevance objections and sought
to ensure that Plaintiffs could extrapolate the results of their transaction file review
across the entire class. The Court specifically rejected Houlihan Lawrence's
proposal of a non-statistical sample as a "waste of time."
The requested production would require negligible effort by Houlihan
Lawrence (1-2 files per office), ensure the statistical integrity of the prior Court-
ordered sample, and permit analysis of Houlihan Lawrence's policies and practices
with respect to non-MLS transactions (i.e., "pocket listings").
C. Showing Time reports
A real estate agent must make agency-related disclosures to consumers
before acting as a dual agent, which typically occurs no later than the first property
showing. Houlihan Lawrence does not dispute that its agency disclosure obligations
are triggered at "first substantive contact" or deny that it can generate a report from
its Showing Time database for each sample transaction showing the date and time of
each showing of the property. The Showing Time reports will permit Plaintiffs to
assess whether Houlihan Lawrence made timely disclosure before acting as a dual
agent in each sample transaction.
Houlihan Lawrence contends that the timeliness of its agency disclosure is
irrelevant because the Court found that there is no private right of action under Real
Property Law Section 443. The obligation to make full disclosure and obtain
informed consent before acting as a dual agent is no less a bedrock principle of New
York agency law simply because it is now also a statutory obligation. See Goldstein v.
Dep't of State, Div. of Licensing Servs., 144 A.D.2d 463,464 (2d Dep't 1988)
("[B]ecause of a broker's fiduciary duties, he has the affirmative duty not to act for a
party whose interests are adverse to those of the principal, unless he has the
consent of the principal given after full knowledge of the facts."); Klein v. Twentieth
Century-Fox Int'! Corp., 201 Misc. 132 (N.Y. Sup. Ct. 1951) (A "broker must act with
candor toward his employer, and is under a general duty to promptly disclose to his
principal such information as he may possess or obtain in his employment affecting
the transaction in which he is engaged, so that the principal may seasonably take
any steps which he deems essential to his interests.").
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018
NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020
William P. Harrington, Esq.
December 5, 2019
Page 10 of 10
The information found in the Showing Time Reports supplements and relates
directly to the other transaction-related information contained in the sample
transaction files. It is maintained in an electronic database, and Houlihan Lawrence
identifies no material burden in collecting and producing this relevant material.
* * *
For the foregoing reasons, Houlihan Lawrence's request for a protective
order should be denied and a prompt discovery conference set to move discovery
forward.
Respectfully,
y?---~~
Jeremy Vest
cc: Counsel for Defendant (via e-mail)
Preview
FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 EXHIBIT 2 FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 BOIES SCHILLER FLEXNER December 5, 2019 Via E-Mail and Federal Express William P. Harrington, Esq. Bleakley Platt & Schmidt, LLP One North Lexington Avenue White Plains, NY 10601 Re: Goldstein et al. v. Houlihan/Lawrence Inc., No. 60767 /2018 (N.Y. Sup. Ct., Westchester Cty.) Dear Mr. Harrington: I write on behalf of Plaintiffs in opposition to Houlihan Lawrence's letter dated November 14, 2019 seeking a protective order. No such order is warranted. Houlihan Lawrence's request is merely another effort in its campaign to avoid class certification discovery, this time by seeking to stay all further discovery before Plaintiffs have even obtained basic documents from key executives and file locations or taken a single deposition. The discovery expense imposed on Houlihan Lawrence by this case pales in comparison to the hundreds of millions of dollars it has collected in sales commissions on notoriously risky dual-agent transactions. The class certification determination in this action will affect the rights and interests of the thousands of consumers who were deprived of Houlihan Lawrence's undivided and undiluted loyalty when making one of the most important financial decisions of their life. It is vitally important that the determination is made based on a fair, true, and complete record. Houlihan Lawrence's requested protective order should be denied so that the more important work of forcing Houlihan Lawrence to at long last fulfill its discovery obligations can begin. Plaintiffs look forward to receiving the In-House Bonus e-mails and other discovery discussed below, but many of Plaintiffs' most important discovery requests still remain outstanding and require resolution. Plaintiffs look forward to the start of a new phase of discovery characterized by swift progress. BOIES SCHILLER FLEXNER LLP 333 Main Street, Armonk, NY 10504 I (t) 914 749 8200 I (f) 914 749 8300 I www.bsfllp.com FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 2 of 10 1. No protective order is warranted Houlihan Lawrence's letter confirms that there has been no material change since the Court denied Houlihan Lawrence's motion to dismiss, appointed a Special Discovery Master, and directed class certification discovery to proceed. Instead, Houlihan Lawrence's request for a protective order amounts to a "time out" to re-hash its previously asserted arguments about the scope of discovery, at needless expense and delay. Houlihan Lawrence claimed at our October 22, 2019 discovery conference that the First Department's February 2019 Tozzi decision was a "game-changer," requiring dismissal of Plaintiffs' claims and a protective order to halt further discovery. 1 Tellingly, Houlihan Lawrence chose not to address that case or otherwise seek to revisit the Court's motion-to-dismiss decision at the following week's status conference with the Court, and relegates Tozzi to a footnote in its November 14 "protective order" letter. Houlihan Lawrence no longer asserts that Tozzi broke new ground, admitting that it merely "confirms" that parties are bound by documents they sign (at 3, n. 1). Tozzi adds nothing to the core argument Houlihan Lawrence made in its motion to dismiss, that "each Plaintiff executed the statutory disclosure form, demonstrating consent to Houlihan Lawrence's dual agency." Dkt. 343 at 8. The Court correctly rejected that argument, holding that the signed forms didn't foreclose Plaintiffs' claims. Dkt. 370. Moreover, Tozzi involved an entirely different claim than those at issue in this case. The plaintiff in Tozzi had hired the defendant as his personal assistant. The defendant was also a real estate salesperson, and assisted the plaintiff in negotiating and executing on a residential property purchase. Plaintiff claimed that he did not know that the defendant had held herself out as his broker on the deal, ultimately collecting the nearly $300K buy-side real estate commission. He contested the commissions, claiming that he thought the defendant was acting as his personal assistant, not an agent entitled to a commission. The First Department affirmed the trial court's dismissal because numerous documents-including the 1 Tozzi was decided two months before the Court's motion-to-dismiss decision in April, three months before your appointment as Discovery Master in May, five months before the time to reargue or appeal the motion-to-dismiss decision expired in June, nearly six months before Houlihan Lawrence obtained Plaintiffs' document production and took their depositions in August, and nearly seven months before the parties' post-deposition status conference with the Court in September. Yet Houlihan Lawrence first raised its "Tozzi" argument on October 22, just as its string of prior excuses for avoiding discovery were running out. FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 3 of 10 plaintiffs signed purchase agreement, a correction to that agreement, e-mails, and the statutory disclosure form-all made clear that the defendant was acting as a real estate agent on the plaintiffs behalf. Tozzi v. Mack, 169 A.D.3d 547 (1st Dep't 2019). Thus, Tozzi merely affirms the unremarkable proposition that a statutory disclosure form is proof of an agent's disclosure of a single-agency relationship with a consumer. It does not concern or address the issue of whether a statutory disclosure form, standing alone, is sufficient to discharge a broker's disclosure obligations to make full and frank disclosure before acting as a dual agent. Rather than focus on its previously touted "Tozzi" argument which does not withstand scrutiny, Houlihan Lawrence instead reverts to its already well-worn argument that the Court's motion-to-dismiss decision means that it is certain to prevail on class certification no matter what additional discovery may show. The Court already considered and rejected that argument and instead appointed a Discovery Master to oversee pre-certification discovery. 2 And Houlihan Lawrence has already repeated that argument throughout discovery proceedings, beginning with its first written submission to you on July 1, 2019. See July 1 Letter at 3-4. At bottom, Houlihan Lawrence argues that because it has produced some discovery pertaining to class certification, discovery should stop. That is not how discovery works: Plaintiffs are entitled to full discovery, including materials that refute Houlihan Lawrence's arguments on class certification. CPLR 3101(a) provides for "full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof." "Material and necessary" is "interpreted liberally to require disclosure." Allen v. Crowell-Collier Pub., 21 N.Y.2d 403,406 (1968). "The test is one of usefulness and reason." Id. "If there is any possibility that the information is sought in good faith for possible use as evidence-in-chief or in rebuttal or for cross- examination, it should be considered material." Matter of Grover S., 2019 WL 5057591, *1 (2d Dep't Oct. 9, 2019). CPLR 3101 "envisages a maximum disclosure of facts with a minimum of judicial supervision." Wiseman v. Am. Motors Sales, 103 A.D.2d 230,232 (2d Dep't 1984).3 2 See, e.g., Hr'g Tr. 9:6-13, Apr. 30, 2019 (Houlihan Lawrence argued unsuccessfully the lawsuit could not be certified and thus pertained solely to individual plaintiffs, such that "the discovery needs, therefore, are entirely different than when we were here the last time"). 3 Houlihan Lawrence's cited cases are inapposite and do not support entry of its requested protective order. See Martin v. Palisades Collection, LLC, 2012 WL 2930791 (N.Y. Sup. Ct. June 27, 2012) (inapposite case precluding pre-certification merits discovery); Wornow v. Register.com, 2004 WL 5487788 (N.Y. Sup Ct., Feb.19, 2004) (same); Severin v. Platinum FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 4 of 10 Ignoring these well-settled principles favoring disclosure, Houlihan Lawrence argues against further discovery because it claims (at 4) to have produced "documents sufficient to address each class certification element." The standard is not whether "Houlihan Lawrence has produced documents pertaining to the analysis" of each class certification factor (id.), but whether it has made full disclosure as required by New York law. Plaintiffs are not limited to documents cherry-picked by Houlihan Lawrence to skew the record on class certification. Houlihan Lawrence's invitation to restrict discovery by pre-judging the outcome of class certification has been squarely rejected by courts. See, e.g., Manno v. Healthcare Revenue Recovery Grp., LLC, 2012 WL 4192987, at *3 (M.D. Fla. Sept. 18, 2012) ("Defendant does not cite a single case where discovery on a class certification issue was denied because the class action was arguably doomed to fail. ... Indeed, it strikes this Court as untenable to rule at this stage that Plaintiffs class certification motion fails and, at the same time, Plaintiff is not entitled to the very discovery that may establish an essential element of the class."); see also Medina v. Enhanced Recovery, 2017 WL 5196093 at *7-*8 (M.D. Fla. Nov. 9, 2017) ("Defendant's belief that Plaintiffs' claims ultimately will fail due to the rieed for individualized inquiry does not, at this stage of the proceedings, prohibit discovery on these issues. Such an argument is akin to saying that a party need not respond to a discovery request because, in the opinion of that party, the requested information won't help the opposition's case all that much. But such has never been the rule in discovery which is broader than the scope of admissible evidence."); La brier v. State Farm Fire & Cas., 314 F.R.D. 637, 643 (W.D. Mo. 2016) ("State Farm cannot withhold for months the very information that LaBrier has sought for purposes of class certification and the merits, then claim Labrier cannot meet her burden of proof and that State Farm therefore should not have to produce the missing data."). Home Health Care, 2017 WL 4168213 (N.Y. Sup. Ct. Sept. 15, 2017) (plaintiff provided court with "no way of knowing what, if any, information [she] currently possess and what additional information [she] requires"); Gewanterv. Quaker State Oil Ref, 87 A.D.2d 970 (4th Dep't 1982) (plaintiff sought unnecessary information about identity of persons within the class that plaintiff sought to represent); Martin A. v. Gross, 171 A.D.2d 491 (1st Dep't 1991) (court found the plaintiffs document requests seeking "a massive number of documents" overbroad (in part because preliminary injunction had already been entered in plaintiffs favor and class certification motion held in abeyance) but gave leave to serve a proper request); Alvarez v. Just Salad, 2019 WL 1975551 (N.Y. Sup. Ct. Apr. 24, 2019) (court found plaintiffs claims "amorphous," "not substantiated ... as to the putative class members," with no evidence that claims "were based on company-wide policies" -all unlike here, where additional plaintiffs came forward after suit was filed, and documents show that misconduct extends well beyond Plaintiffs' transactions and indicate that Houlihan Lawrence's widespread undisclosed dual agency is the result of company-wide policies and practices). FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 5 of 10 Even if it were proper to pre-judge the merits of class certification, Houlihan Lawrence's arguments are flawed. Houlihan Lawrence reasons that, because the Court predicted that the "ultimate resolution" of Plaintiffs' claims might require some "individual analysis of each transaction," Plaintiffs' class certification motion is doomed to fail (at 3). But predominance of issues among class members is all that is required-"not identity or unanimity." City of N.Y. v. Maul, 14 N.Y.3d 499,514 (2010). 4 The significance of any individualized determination must be assessed together with numerous common issues oflaw and fact subject to common class- wide proof. For example, the question of "what was said and what disclosure, if any, were made to each plaintiff' is subject to generalized proof. See, e.9., In re Prudential Ins. Co., ofAm. Sales Practices Litig., 148 F.3d 283, 290 (3d Cir. 1998) (certification appropriate for claims based on oral misrepresentations or omissions made pursuant to a "common course of conduct"); Moore v. Paine Webber, Inc., 306 F.3d 1247, 1255 (2d Cir. 2002) (certification appropriate for claims based on oral misrepresentations or omissions that are materially uniform in nature). 2. Houlihan Lawrence refuses to produce relevant material Houlihan Lawrence's feigned confidence in its chances at class certification depends upon withholding common evidence that class members received untimely and inadequate disclosure. Core deficiencies in Houlihan Lawrence's production remain. Houlihan Lawrence still has not: • Conducted a transparent, systematic search of its shared drives, InCrowd database, and files of key document custodians; • Produced corporate reports, internal memos, and other private statements regarding the company's corporate strategy to grow market share and dual agency policies and practices; or • Produced any of the "thousands upon thousands of inter-office emails encouraging fellow agents to sell the listing, keep it 'in house' to get the added bonus" that will show the culture of undisclosed dual agency that pervades Houlihan Lawrence. 4 CPLR 901 "clearly envisions authorization of class actions even where there are subsidiary questions oflaw or fact not common to the class." Weinberg v. Hertz, 116 A.D.2d 1, 5 (1st Dep't 1986); see also Friar v. Vanguard Holding Corp., 78 A.D.2d 83, 91 (2d Dep't 1980) (where common issues predominate, the class should be certified even if "questions to each individual may remain after resolution of the common questions"). FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 6 of 10 The discovery rulings to date have already been extremely accommodating to concerns raised by Houlihan Lawrence regarding the scope of pre-certification discovery: • Rather than direct Houlihan Lawrence to collect documents from Chris and Stephen Meyers, the individuals most knowledgeable about the centralized scheme at the heart of this case, Houlihan Lawrence was asked only to locate records relating to public remarks given by them at company~wide events. • Rather than direct Houlihan Lawrence to systematically search its shared drives, one of the most important sources of relevant information in virtually any case, Houlihan Lawrence was permitted to provide Plaintiffs only with a folder and file tree of those drives. • Rather than direct Houlihan Lawrence to collect documents from its sales agents, even though CPLR 3101 provides for full disclosure from an agent of a party, Plaintiffs were encouraged to subpoena the sale agents themselves. Six weeks after the October 22 discovery conference, Houlihan Lawrence has failed to perform even under those accommodations, including by failing to report on its efforts to locate records relating to company-wide events and failing to produce a tree report for its corporate shared drive that contains file names. 5 It has also failed to provide term-level hit count reports relating to its collection from Jim Gricar and Toni Crystal. Further, on December 3, Houlihan Lawrence's counsel announced that it now also represents certain non-party sales agents and issued blanket objections on their behalf to production of documents in response to the subpoenas Plaintiffs served on them shortly after the October 22 conference. While Houlihan Lawrence tries to make much of the discovery it has already provided, more than 80% of the documents it has produced to date consist of the sample transaction files the Court directed Houlihan Lawrence to produce even before appointing a Special Discovery Master, as well as the related Transaction Detail Sheets. Houlihan Lawrence's other documents have been collected and produced principally using ad hoc unilateral, self-serving procedures, and relate in large part to the named Plaintiffs' transactions. In November 2019, nearly four months after Houlihan Lawrence was directed at the July 18 conference to produce documents from the custodial files of Jim Gricar and Toni Chrystal and its InCrowd database, Houlihan Lawrence 5 Plaintiffs brought the corporate shared drive deficiency to Houlihan Lawrence's attention on November 20, 2019. Houlihan Lawrence did not respond, but instead produced all of its folder and file tree reports today, just hours before this submission was due, effectively preventing Plaintiffs from evaluating them before today's submission. FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 7 of 10 produced approximately 1,300 documents from those sources (though 99% of them appear to be from Ms. Chrystal's files). Plaintiffs cannot fully evaluate that production because Houlihan Lawrence continues to refuse to turn over the term- by-term hit count information Plaintiffs requested in July and that you directed Houlihan Lawrence to provide at the October 22 conference. Houlihan Lawrence's InCrowd production was limited to a single document, and Houlihan Lawrence continues to refuse cooperation in developing a method for collection and production from In Crowd. 3. Houlihan Lawrence should produce relevant material A. In-House Bonus e-mails Houlihan Lawrence should collect and produce e-mails regarding its In- House Bonus program from Houlihan Lawrence personnel (office managers, office administrators, sales agents, etc.) in the Scarsdale, Bronxville, and White Plains offices during the Class Period, using the following In-House Bonus-related search terms, which Plaintiffs proposed to Houlihan Lawrence on October 24, 2019: • ("In-house" or "In house" or "inhouse") w/5 bonus • (get! OR eam! OR pocket! OR collect!) w/5 bonus • ("both sides or dual! Or designat!) w/5 bonus • IHB This is an appropriately tailored search for highly relevant documents that Plaintiffs have good reason to believe exist. Current and former Houlihan Lawrence agents have informed Plaintiffs (anonymously) that Houlihan Lawrence agents are "bombarded with emails encouraging in house deals," with "thousands upon thousands of inter-office emails encouraging fellow agents to sell the listing, keep it 'in house' to get the added bonus." Houlihan Lawrence tries to minimize these "thousands upon thousands" as each a "one-off communication"-ignoring that collectively they provide powerful evidence of the culture of undisclosed dual agency that pervades Houlihan Lawrence and the critical role the In-House Bonus plays in advancing Houlihan Lawrence's scheme to boost in-house sales. Houlihan Lawrence's unsubstantiated statements that the efforts required to locate and produce these e-mails would impose an "inordinate burden" are unavailing. Houlihan Lawrence asserts merely that the agents whose e-mails are to be searched can't be identified using a single "readily accessible list." Houlihan Lawrence provides no evidence or reason to believe that the electronic search would be technologically difficult for its IT staff to perform. And Houlihan FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 8 of 10 Lawrence's speculation that the proposed terms "will generate many hits but few responsive documents" is belied by the narrowness of Plaintiffs' proposed search. Tellingly, Houlihan Lawrence fails to substantiate its burden arguments with any actual hit count information on even a sample of the proposed document custodians. This is consistent with Houlihan Lawrence's practice of withholding key hit count information that would facilitate orderly discovery. Houlihan Lawrence has also unreasonably refused to provide term-by-term hit counts for its Gricar and Chrystal custodian collections and for its agent-to-agent communications related to the named Plaintiffs' transactions, even though providing such information is standard practice and imposes no meaningful burden. See, e.g., Finisar Corp. v. Nistica, Inc., 2014 WL 12887160, at* 3 ("The Court expects that if a party insists that a search term results in too many hits, the party will have run the search and will be able to provide the opposing party with the number of hits and specific examples of irrelevant documents captured by the search. Blanket statements that certain search terms are unduly burdensome do not constitute meeting and conferring in good faith."). B. Non-MLS transactions Houlihan Lawrence relies solely on its already-rejected "too late" argument to oppose Plaintiffs' request for transaction files for a sample of the nearly 1,000 non-MLS dual-agent transactions Houlihan Lawrence only recently revealed it brokered during the Class Period. Plaintiffs' request is timely given that their investigation is continuing and discovery is ongoing, but also because representations made by Houlihan Lawrence on which Plaintiffs and the Court relied have now been proven incorrect. The sample transaction files the Court directed Houlihan Lawrence to produce were selected exclusively from a list of dual-agent transactions generated by Houlihan Lawrence from MLS data. Plaintiffs and the Court consented to that process because Houlihan Lawrence represented "without equivocation" that the only way it could identify its dual-agent transactions was using MLS data. 6 Houlihan Lawrence was the party in position to know. It now brazenly argues "shame on you for believing us." In April 2019, Plaintiffs learned that Houlihan Lawrence could identify its non-MLS (and other) dual-agent transactions using the same Profit Power database 6See Hr'g Tr. 13:17-24, Oct. 18, 2018 ("Our people are telling us without equivocation that the only way they can find out whether there is a dual agency transaction is they need to go to the MLS computer system and look at that system and harvest the information off that computer system. That's step one. That will tell us whether there is a dual agency, your Honor."). FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 9 of 10 from which it generated and produced the Transaction Detail Sheets. Houlihan Lawrence initially argued, "formulating a search that would yield reliable results would not be possible" (July 1 Letter at 6), but admitted at the October 22 discovery conference that it had successfully identified nearly 1,000 non-MLS dual-agent transactions. In directing Houlihan Lawrence to produce the sample transaction files, the Court overruled Houlihan Lawrence's burden and relevance objections and sought to ensure that Plaintiffs could extrapolate the results of their transaction file review across the entire class. The Court specifically rejected Houlihan Lawrence's proposal of a non-statistical sample as a "waste of time." The requested production would require negligible effort by Houlihan Lawrence (1-2 files per office), ensure the statistical integrity of the prior Court- ordered sample, and permit analysis of Houlihan Lawrence's policies and practices with respect to non-MLS transactions (i.e., "pocket listings"). C. Showing Time reports A real estate agent must make agency-related disclosures to consumers before acting as a dual agent, which typically occurs no later than the first property showing. Houlihan Lawrence does not dispute that its agency disclosure obligations are triggered at "first substantive contact" or deny that it can generate a report from its Showing Time database for each sample transaction showing the date and time of each showing of the property. The Showing Time reports will permit Plaintiffs to assess whether Houlihan Lawrence made timely disclosure before acting as a dual agent in each sample transaction. Houlihan Lawrence contends that the timeliness of its agency disclosure is irrelevant because the Court found that there is no private right of action under Real Property Law Section 443. The obligation to make full disclosure and obtain informed consent before acting as a dual agent is no less a bedrock principle of New York agency law simply because it is now also a statutory obligation. See Goldstein v. Dep't of State, Div. of Licensing Servs., 144 A.D.2d 463,464 (2d Dep't 1988) ("[B]ecause of a broker's fiduciary duties, he has the affirmative duty not to act for a party whose interests are adverse to those of the principal, unless he has the consent of the principal given after full knowledge of the facts."); Klein v. Twentieth Century-Fox Int'! Corp., 201 Misc. 132 (N.Y. Sup. Ct. 1951) (A "broker must act with candor toward his employer, and is under a general duty to promptly disclose to his principal such information as he may possess or obtain in his employment affecting the transaction in which he is engaged, so that the principal may seasonably take any steps which he deems essential to his interests."). FILED: WESTCHESTER COUNTY CLERK 01/22/2020 09:40 AM INDEX NO. 60767/2018 NYSCEF DOC. NO. 564 RECEIVED NYSCEF: 01/22/2020 William P. Harrington, Esq. December 5, 2019 Page 10 of 10 The information found in the Showing Time Reports supplements and relates directly to the other transaction-related information contained in the sample transaction files. It is maintained in an electronic database, and Houlihan Lawrence identifies no material burden in collecting and producing this relevant material. * * * For the foregoing reasons, Houlihan Lawrence's request for a protective order should be denied and a prompt discovery conference set to move discovery forward. Respectfully, y?---~~ Jeremy Vest cc: Counsel for Defendant (via e-mail)