Preview
FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018
NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022
EXHIBIT 2
(REDACTED)
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Jeremy C. Vest Chrysler Center
212 692 6718 666 Third Avenue
jvest@mintz.com New York, NY 10017
212 935 3000
mintz.com
April 20, 2022
Via E-Mail
Mr. William P. Harrington
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:
In accordance with the Fourteenth Report and Recommendation (“R&R”), I
write to identify the disputes that require resolution at Friday’s status conference.
The Fourteenth R&R balanced the parties’ interests by postponing issuance
of class notice for several months to allow Houlihan Lawrence (“HL”) to first
identify arbitration signatories, while setting a discovery schedule aimed at
readying the case for trial by the end of the year. Having gotten its preferred class
notice schedule, HL now seeks once again to bog Plaintiffs down in interminable
discovery disputes, including, as discussed further below, by refusing to produce a
single document other than its dual-agent transaction files and seeking a “global
extension of time” to avoid today’s deadline for the substantial completion of
document discovery. Plaintiffs request immediate issuance of a Fifteenth R&R
compelling HL to collect and produce the documents identified below, to avoid
rewarding HL’s continuing bad faith with what it wants the most—delay.
1. Absent class member depositions
While it is well-settled the absent class members are not parties for discovery
purposes, In re Allergan Generic Drug Pricing Sec. Litig., 2021 U.S. Dist. LEXIS
13078 at *6, Plaintiffs have agreed that they will not call absent Class members to
testify at trial in exchange for HL abandoning its effort to depose approximately 200
absent Class members.
BOSTON LONDON LOS ANGELES NEW YORK SAN DIEGO SAN FRANCISCO WASHINGTON
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
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2. Class member list
HL recently produced a list of Class members generated by searching its
Profit Power database (the “Profit Power List”), but it omits thousands of dual-
agent transactions on a similar list that HL previously generated from Multiple
Listing Services (the “MLS List”). HL asserts that the MLS List is “less accurate,”
but it has not explained why nor accounted for the thousands of transactions
missing from the Profit Power List. HL’s disavowal of the MLS List is especially
troubling because it previously represented to the Court, “without equivocation,”
that the MLS was “the only way” to “find out whether there is a dual agency
transaction.” Ex. 1, Hon. L. Jamieson Hr’g Tr. (Oct. 18, 2018) at 11:20-13:22.
3. Discovery schedule
HL recently advised that it intended to seek a “global extension of time,”
including of today’s deadline for the substantial completion of document discovery,
due solely to Plaintiffs’ requested production of HL’s dual-agent transaction files.
Ex. 2, Letter from R. MacGill to J. Vest, Apr. 11, 2022. But the schedule set by the
Fourteenth R&R accounted for HL’s purported need to “retrieve, scan and review”
“approximately 19,575 paper transaction files” to identify Class members
purportedly subject to arbitration. See Ex. 3, Letter from R. MacGill to W.
Harrington, Feb. 10, 2022. That work must necessarily be complete by next week’s
deadline for HL to produce a list of purported arbitration signatories. See
Fourteenth R&R at ¶ 12. Plaintiffs’ requested production of HL’s dual-agent
transaction files therefore provides no basis to relax the current schedule.
4. Document production
4.1. Merits document custodians and search terms
Plaintiffs seek collection from ten custodians using the same search terms
previously approved by the Discovery Referee for the pre-class certification
collections from Ms. Dalton and Mr. Arlt (the “Approved Search Terms”). These
custodial collections will obviate the need for a systematic collection from HL’s
corporate shared drives and InCrowd, eliminating two issues that protracted pre-
class certification discovery.
4.1.1. Christopher and Stephen Meyers
HL’s interrogatory responses identified Christopher and Stephen Meyers as
among the five persons most knowledgeable about its agency and In-House Bonus
policies. Ex. 4. HL now cites “prior rulings” to oppose designating them as merits
document custodians, but the Discovery Referee merely exempted Christopher and
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Stephen Meyers from pre-class certification discovery. HL asserts that Ms. Dalton
and Mr. Arlt are adequate substitute custodians, but that is not the standard for
discovery, neither of them were HL’s chief policy-makers, and Christopher and
Stephen Meyers were not just former owners and chief executives, but
. Plaintiffs seek collection from Christopher
and Stephen Meyers using the Approved Search Terms and four others designed to
capture documents relating to HL’s agency disclosure script, market-share growth
strategy, and efforts to boost in-house sales. See infra at §§ 5.12 and 5.13.
4.1.2. Geoffrey Berry and Cynthia Landis
During pre-class certification discovery, HL designated a single office
manager as a general document custodian, Mr. Arlt (Scarsdale). Plaintiffs now seek
collection from only two additional managers, Geoffrey Berry (White Plains) and
Cynthia Landis (Bronxville), both of whom are sufficiently important that Plaintiffs
deposed them during pre-class certification discovery without the benefit of their
documents and then relied heavily on their testimony and In-House Bonus e-mails
in support of class certification. HL has agreed only to “consider” designating them
as custodians while inexplicably objecting to collecting from them using the
Approved Search Terms. Ex. 2, Letter from R. MacGill to J. Vest, Apr. 11, 2022.
4.1.3. Leading sales agents
HL intends to rely at trial on the testimony of an unspecified number of sales
agents to try to demonstrate that it did not act an undisclosed, non-consensual dual
agent on a class-wide basis. Ex. 6, Letter from R. MacGill to J. Vest, Mar. 21, 2022.
Plaintiffs therefore seek to search the custodial files of six leading sales agents
using the Approved Search Terms to assess whether, when, and to what extent they
disclosed dual agency and the In-House Bonus to clients. By comparison, HL
sought discovery from 200 absent class members before Plaintiffs agreed not to
introduce absent class member testimony at trial.
5. HL’s discovery responses
HL agreed to produce its dual-agent transaction files but refused to produce a
single other responsive document except those that it intends to rely on at trial to
prove its own case. See Ex. 7, HL Discovery Responses, April 11, 2022. In addition
to ordering HL to collect and produce documents from the custodians identified
above, the Discovery Referee should order HL to conduct a reasonably diligent
inquiry for the following documents.
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5.1. Previously withheld merits documents (Request No. 1)
HL insisted on bifurcation of pre-class certification discovery and limited its
pre-class certification document production to documents relevant to class
certification. HL should therefore be required to produce documents responsive to
Plaintiffs’ pre-class certification requests that it previously collected but withheld
on the ground that they were not relevant to class certification.
5.2. Ms. Dalton’s weekly executive meeting notes (Request No. 3)
HL refuses to search for and produce
Ms. Dalton’s
notes are likely among the best evidence of HL’s corporate priorities and strategy.
5.3. Dual-agent transaction files (Request No. 4)
As noted above, HL refuses to produce its dual-agent transactions files in
accordance with the schedule set by the Fourteenth R&R.
5.4. “Transaction Detail Sheets” (Request No. 5)
A Transaction Detail Sheet (“TDS”) is an electronic record maintained by HL
for each transaction in the same database that HL used to generate the Profit
Power List. A TDS identifies the parties to the transaction, HL’s gross commission,
and the split of that commission with HL sales agents. See, e.g., Ex. 8 and Ex. 9.
HL produced a TDS for every Sample Transaction during pre-class certification
discovery. Plaintiffs now need the TDS for the remaining dual-agent transactions
to identify the commission that each Class member seeks to recover.
.
5.5. Sales commission checks (Request No. 6)
Plaintiffs seek production of a copy of the sales commission check that HL
received in connection with every dual-agent transaction to verify the accuracy of
the gross commission reported by HL for each transaction on the TDS.
5.6. In-House Bonus eligibility (Request Nos. 7-9)
Plaintiffs’ motion for class certification showed that HL had a duty to disclose
its In-House Bonus to every client before seeking their consent to dual agency. See
Dkt. 688 at 25-27 and Dkt. 1037 at 8-10. HL countered that it owed disclosure, if at
all, only to those clients whose sales agents were eligible to receive an In-House
Bonus. See Dkt. 1036 at 11-13. Because the Court did not resolve this issue,
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Plaintiffs seek production of documents sufficient to show, on an annual basis
throughout the Class period, the In-House Bonus eligibility of every sales agent.
5.7. In-House Bonus payments (Request No. 10)
In the event the Court determines that HL owed a disclosure obligation only
to those Class members whose agents received an In-House Bonus, Plaintiffs seek
documents sufficient to show any In-House Bonus paid by HL in connection with a
dual-agent transaction, which are necessary to identify the members of the
potential In-House Bonus sub-Class. According to HL’s Commission Processor,
5.8. Arbitration agreements (Request No. 11)
Plaintiffs reserve their rights but expect that HL will satisfy their request for
production of any arbitration agreement purportedly signed by a Class member
through its production of its dual-agent transaction files.
5.9. Performance reviews and self-evaluations (Request Nos. 12 and 13)
5.10. Employment agreements (Request No. 14)
During pre-class certification discovery, HL produced the employment
agreements for two office managers, see, e.g., Ex. 14, which confirm their profit-
sharing bonus compensation, but not for Ms. Dalton, Mr. Arlt, or Ms. Landis.
5.11. List of closed transactions (Request No. 16)
The Court previously ordered HL to produce the aforementioned MLS List,
showing the approximately 10,000 dual-agent transactions brokered by HL during
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the Class period, but HL refuses to produce a list of all of its closed transactions,
which would show the share of HL’s business attributable to dual agency.
5.12. Efforts to boost in-house sales (Request Nos. 17 and 18)
Plaintiffs’ motion for class certification showed that HL sought to increase its
in-house sales as part of its strategic response to the 2008 housing crisis, Dkt. 688
at 12-16, and the Court cited that “orchestrated ‘strategy’ to increase in-house sales”
as a basis for granting Plaintiffs’ motion, Dkt. 1072 at 10. Plaintiffs expect that
most of the communications responsive to these requests are located in the
custodial files of Christopher and Stephen Meyers.
5.13. “Disclosure and Prompt Sheet” (Request No. 19)
Plaintiffs’ motion for class certification showed that HL standardized its
agency disclosure by giving “agents a ‘Disclosure and Prompt Sheet,’” which
Plaintiffs argued was a “script for presenting the Form,” Dkt. 688 at 8, and the
Court cited that “script” as a basis for granting Plaintiffs’ motion, Dkt. 1072 at 10.
Plaintiffs therefore seek evidence relating to the drafting, corporate approval, and
internal dissemination of the script.
5.14. Native-file e-mails (Request No. 20)
During pre-class certification discovery, Plaintiffs sought production of 60 e-
mails in native file format with associated metadata intact, see Dkt. 575 at 5, Letter
from J. Vest to W. Harrington, Jan. 27, 2020, but suspended pursuit of those e-
mails to expedite completion of pre-class certification discovery, see Dkt. 577 at 3, n.
1. Plaintiffs require the native-file production to assess the e-mails’ authenticity.
5.15. Plaintiffs’ transaction documents (Request Nos. 21-24)
During pre-class certification discovery, Plaintiffs sought production of every
e-mail during the relevant period between the sales agents involved in the named
Plaintiffs’ transactions, id., but also suspended pursuit of those e-mails to move the
case forward. See Dkt. 577 at 3, n. 1. HL collected e-mails relating to the named
Plaintiffs’ transactions using only a single search term—the relevant property
address. Dkt. 575 at 5-6. HL’s crude search method therefore likely failed to collect
the sales agents’ most informal and candid communications.
5.16. Communications with HomeServices (Request No. 24)
HL refuses to produce its communications with HomeServices regarding dual
agency and its In-House Bonus even though
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Plaintiffs expect that most of the
responsive communications are located in the custodial files of Christopher and
Stephen Meyers.
5.17. HomeServices purchase agreement (Request No. 25)
As noted above, the Court recognized that evidence that HL used undisclosed,
non-consensual dual agency as part of an “orchestrated ‘strategy’ to increase in-
house sales” supported their claim for class-wide relief. Dkt. 1072 at 10. Proof that
Christopher and Stephen Meyers reaped millions, if not tens of millions, from the
sale of HL to HomeServices helps establish their motive to engage in that wrongful
conduct. To the extent that HomeServices has a right to recoup some or all of what
it paid Christopher and Stephen Meyers if Plaintiffs are successful, the purchase
agreement bears on their interest and bias as well. The windfall that Christopher
and Stephen Meyers reaped from HomeServices is also discoverable because “a
defendant’s wealth is ‘material to the assessment of punitive damages.” Trussell-
Slutsky v. Mcilmurray, 184 A.D.3d 891, 893 (2d Dep’t 2020).
5.18. Ethical or disciplinary complaints (Request No. 26)
The Fourth R&R directed HL to “produce documents sufficient to show any
disciplinary action (including withheld commission checks) taken by HLI against
any office managers or sales agents in the Scarsdale, Bronxville and White Plains
office for failure to comply with agency disclosure obligations regarding dual agency
by May 18, 2020.” Dkt. 574 at 16. Plaintiffs now seek documents sufficient to show
any lawsuits or disciplinary actions filed against HL or its sales agents.
5.19. Insurance agreements (Request No. 28)
New York law permits discovery of the “existence and contents of any
insurance agreement” available to HL to satisfy any judgment that Plaintiffs may
obtain. CPLR 3101(f). Disclosure of all primary and excess policies is required to
“facilitate and encourage settlement.” CPLR 3101(f) & Practice Commentary. HL
directed Plaintiffs to the action filed by an insurer against HL seeking a declaration
of non-coverage, but Plaintiffs are entitled to know whether HL has any other
potential coverage.
5.20. Separation agreements (Request No. 29)
HL produced its separation agreement with the former Irvington office
manager, Brian Levine, see Ex. 15, but not with Christopher Meyers, Ms. Dalton,
Mr. Gricar, and Mr. Arlt, all of whom are expected to testify at trial and have
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separated from HL. Any cooperation agreement between them and HL is relevant
to their credibility.
5.21. Corporate profits (Request Nos. 30 and 31)
As noted above, the millions, if not tens of millions, that HL and Christopher
and Stephen Meyers reaped from HL’s undisclosed, non-consensual dual agency,
whether through the sale of HL to HomeServices or in annual compensation or
profit distributions, bears on their motive to illicitly boost in-house sales and
Plaintiffs’ request for punitive damages.
* * *
The foregoing (as well as Plaintiffs’ forthcoming response to the issues that
HL seeks to raise on Friday) demonstrate that HL’s litigation strategy is to
proliferate discovery disputes based on the cynical calculation that it can win by
losing simply by putting off trial another day. Plaintiffs request immediate
issuance of the Fifteenth R&R to ensure completion of discovery by the end of the
year as contemplated by the Fourteenth R&R.
Regards,
Jeremy Vest
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EXHIBIT 1
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EXHIBIT 2
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156 E. Market Street
Suite 1200
Indianapolis, IN 46204
www.MacGillLaw.com
Robert D. MacGill
317.906.5085
Robert.MacGill@MacGillLaw.com
Via Email
April 11, 2022
Jeremy Vest
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Chrysler Center
666 Third Avenue
New York NY 10017
William Ohlemeyer
Boies Schiller Flexner LLP
333 Main Street
Armonk, NY 10504
RE: Discovery Responses,
Goldstein et al. v. Houlihan Lawrence, Inc.,
No. 60767/2018 (N.Y. Sup. Ct., Westchester Cty.)
Dear Counsel,
We write to respond to your March 21, 2022 correspondence and requests for production.
We have enclosed our formal responses and objections to your document requests.
As to your correspondence, the so-ordered Fourteenth Report and Recommendation
required Plaintiffs’ document custodian and search term requests to be reasonable. In our view,
your request for six (6) custodians and one hundred sixty (160) search terms is not reasonable in
light of the extraordinary discovery efforts taken by Houlihan Lawrence to date.
Houlihan Lawrence will consider making a supplemental production from the custodial
files of Geoff Berry and Cindy Landis using a reasonable number of narrow search terms to
guide its review. The one hundred sixty (160) terms you suggest do not meet these requirements.
Your request for the custodial files of Christopher and Stephen Meyers is inconsistent
with prior rulings in this case. Our prior wide-ranging production from the files of Dalton and
Arlt render any further searching of their files unnecessary.
Finally, we intend to request a global extension of time in light of the voluminous
physical file review required to obtain the corporate transaction files you have requested. Please
let us know by April 18, 2022 if you object to such an extension of time.
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Jeremy Vest
William Ohlemeyer
April 11, 2022
Page 2
Best regards.
Very truly yours,
Robert D. MacGill
cc: Matthew Ciulla, Alfred Donnellan, Nelida Lara, Alexander Pantos
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EXHIBIT 3
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156 E. Market St.
Suite 1200
Indianapolis, IN 46204
www.MacGillLaw.com
Robert D. MacGill
317.442.3825
Robert.MacGill@MacGillLaw.com
Via Email
February 10, 2022
William P. Harrington, Esq.
Bleakley Platt & Schmidt, LLP
One North Lexington Avenue
White Plains, NY 10601
RE: Case Management Plan
Goldstein et al. v. Houlihan Lawrence, Inc. No. 60767/2018 (N.Y. Sup. Ct.,
Westchester Cty.)
Dear Bill:
We write to provide Houlihan Lawrence’s proposed Case Management Plan (“CMP”)
and further detail on the first aspect of the proposed CMP: identification of class members.
Thirty Percent (30%) of Seller Class Members, and Some Buyer Class Members,
Have Agreed to Arbitrate.
On December 20, 2018, the Court entered a Stipulation between Plaintiffs and Houlihan
Lawrence regarding arbitration rights. Exhibit 2. In the Stipulation, Houlihan Lawrence “advised
plaintiffs that certain purported class members have executed arbitration agreements during the
period referred to in the amended complaint.” Id. at 1. Plaintiffs stipulated that any participation
in this case “shall not constitute a waiver or otherwise prejudice defendants’ rights CPLR § 7503
or Article 75 of the CPLR to enforce the Arbitration Agreements.” Id.
Subsequently, during the briefing on class certification, Houlihan Lawrence documented
that approximately thirty percent (30%) of sellers in Plaintiffs’ class executed arbitration
agreements, based upon a sampling approach. Exhibit 1 at 7–8 ¶¶ 4–10 (explaining review
protocol); id. at 12–21 (list of arbitration agreements present within statistically representative
sample); id. at 22–25 (summary of versions of arbitration agreements located to date).1 Plaintiffs’
expert, NERA, confirmed that the sample used by Houlihan Lawrence was statistically
representative of the entire class. Exhibit 1 at 2–3 ¶¶ 4–7 (explaining sampling protocol and
statistical representativeness findings of NERA); id. at 26–41 (Plaintiffs’ transmission of NERA
study confirming statistical representativeness). Certain buyers within the class also executed
1
To increase efficiency, we have omitted the voluminous contract attachments to Exhibit 1. We would be pleased to
supply these attachments upon request.
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arbitration agreements with Houlihan Lawrence. See, e.g., Exhibit 3 (one example of an executed
buyer arbitration agreement).
Arbitrating Class Members Must Be Removed From the Class in Favor of Arbitration.
New York has a “strong public policy which underlies arbitration,” which extends to the
arbitration of breach of fiduciary duty claims. Harris v. Shearson Hayden Stone, Inc., 441
N.Y.S.2d 70, 74 (1st Dept. 1981).
Where some members of a putative class are “required to arbitrate their claims,” they
“cannot be a part of the putative class.” Gaston v. Doral Inv. Grp., LLC, 2020 N.Y. Misc. LEXIS
1788, at *7 (Kings Cty. 2020); see also Troshin v. Stella Orton Home Care Agency, Inc., 2021
N.Y. Misc. LEXIS 1002, at *9 (N.Y. Cty. 2021) (the “scope of the prospective class must…be
limited” to non-arbitrating persons); Brown v. Twenty-First Century Fox, 2017 NY Slip Op
51988(U), at *15 (Bronx Cty., Nov. 13, 2017) (refusing to permit plaintiff to add an arbitrating
class representative).
Here, at least thirty percent of the sellers, and some buyers, in the class agreed to arbitrate
this dispute. They must be removed from the class and sent to arbitration, and this should be
done as part of the class member identification protocol.
Any Dispute Regarding the Arbitration Agreements Has Been Delegated to the Arbitrator
Under New York and United States Supreme Court Precedent.
The arbitrator, not the Court, must decide any of Plaintiffs’ challenges to arbitration. The
incorporation of the AAA Rules in an arbitration agreement “demonstrate[s] the parties’ clear
and unmistakable intent to delegate the threshold arbitrability question to the AAA.” Anima
Grp., LLC v. Emerald Expositions, LLC, 138 N.Y.S.3d 858, 858 (1st Dept. 2021) (AAA Rule
7(a) delegates arbitrability questions); see also AAA Rule 7(a)2 (“The arbitrator shall have the
power to rule on his or her own jurisdiction, including any objections with respect to the
existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or
counterclaim.”); Exhibit 1 at 23, 25 (Version 1 and 3 incorporating AAA Rules); Exhibit 1 at 24
(Version 2 delegating to arbitrator any disputes “relating to the formation, enforceability,
applicability or interpretation” of the arbitration clause).
The Westchester County Supreme Court agrees. Matter of 33 Calvert Props. LLC v.
AMEC LLC, 135 N.Y.S.3d 767, 776-78 (Westchester Cty. 2020) (“In the context of contracts
incorporating the AAA rules, New York courts have held that where there is a broad arbitration
clause and the parties' agreement specifically incorporates by reference the AAA rules providing
that the arbitration panel shall have the power to rule on its own jurisdiction, courts will leave the
question of arbitrability to the arbitrators.”). And the United States Supreme Court has held that
even wholly groundless requests to arbitrate threshold questions of arbitrability must be sent to
the arbitrator. Henry Schein, 139 S. Ct. 524, 529 (2019).
2
https://adr.org/sites/default/files/Commercial%20Rules.pdf
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Houlihan Lawrence Requires Approximately Sixteen (16) to Twenty-Two (22) Weeks to
Identify the Arbitrating Class Members.
The arbitration agreements executed between the 30% of seller class members and
Houlihan Lawrence are only available in paper files. Exhibit 4 ¶ 6. Currently, only 425 paper
contracts have been scanned, because the sampling protocol developed by Plaintiffs’ expert,
NERA, required only 425 contracts. Exhibit 1 at 2 ¶ 4. The remaining approximately 19,575
paper transaction files at issue need to be retrieved, scanned, and reviewed in order to determine
which class members agreed to arbitrate this dispute.
These 19,575 physical, paper transaction files are “kept in various storage locations” and
are currently “stored as they are in the ordinary course of business—intermingled with other
irrelevant transaction files.” Exhibit 4 ¶¶ 4, 8. The files will first need to be identified, sorted,
physically retrieved, and boxed for delivery. Id. ¶ 9. This will take six (6) to eight (8) weeks
using a “team of individuals to undertake a diligent search.” Id. ¶ 10.
After this six (6) to eight (8) week retrieval protocol, the files will need to undergo the
following steps:
(A) the paper file must be physically retrieved, and any binding or
other foreign materials must be removed from the physical file;
(B) the paper file must be scanned using a scanner;
(C) the digital file must be assigned a file name with a unique
identifier;
(D) the digital file must be loaded into an electronic database;
(E) the digital file must be converted into the correct format (for
example, a TIFF format);
(F) the digital file must be subjected to optical character
recognition (OCR);
(G) finally, the digital files must be indexed.
Exhibit 5 ¶ 6. The files are then ready for review and categorization for arbitration agreements.
Id. ¶¶ 6-8. This scanning and review process will take approximately ten (10) to fourteen (14)
weeks (starting from the time the boxes are delivered) using a team from Consilio, a reputable
ESI vendor with approximately 4,000 ESI professionals worldwide. Id. ¶¶ 8, 2.
Therefore, Houlihan Lawrence requires a total of approximately sixteen (16) to twenty-
two (22) weeks to identify the arbitrating class members in this case.
To the extent other information about the class members is required by Plaintiffs, current
information indicates that the “consumer’s name is available within the transaction file, and his
or her email address may also be available.” Exhibit 4 ¶ 5. Therefore, the protocol described
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NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022
William P. Harrington, Esq.
February 10, 2022
Page 4
above will also assist Plaintiffs in identifying all class members, not just arbitrating class
members.
Houlihan Lawrence’s Proposed CMP Provides Appropriate and Reasonable Time to
Identify Class Members.
Houlihan Lawrence’s proposed CMP is attached as Exhibit 6. It provides a structured
approach by which discovery and briefing should proceed. Houlihan Lawrence’s intent with this
proposal is to ensure that class members are appropriately identified and prompt notice to them is
provided.
Identification and notice are predicates to next steps in the case. Identification and notice
must be accomplished prior to adjudicating the rights of persons who are in fact class members.
Once these predicates to proceeding are accomplished, the case management milestones can
proceed. Those proposed by Houlihan Lawrence in Exhibit 6 are reasonable.
Houlihan Lawrence is, of course, open to a two-step process instead. First, Houlihan
Lawrence could devote the next twenty-two (22) weeks to retrieving and reviewing the 19,575
paper transaction files to identify (A) non-arbitrating class members, and (B) the approximately
thirty (30%) percent of class members who must be removed in favor of arbitration. Second, the
Referee could then set all subsequent case management deadlines once class members are
identified and provided notice.
* * *
We look forward to discussing the above issues on Friday. Thank you for your assistance.
Best regards.
Very truly yours,
Robert D. MacGill
cc: Matthew Ciulla, Alfred Donnellan, Nelida Lara, Jeremy Vest
FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018
NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022
EXHIBIT 4
FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018
NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF WESTCHESTER
___________________________-_________________________-----.·---------X
PAMELA GOLDSTEIN,
ELLYN & TONY BERK, as Administrators DEFENDANT'S RESPONSES AND
PLAINTIFFS'
of the Estate of Winifred Berk, and PAUL OBJECTIONS TO
BENJAMIN, on behalf of themselves FIRST SET OF INTERROGATORIES
and all others similarly situated,
Index No. 60767/2018
Plaintiffs,
-against- Hon. Linda S. Jamieson
HOULIHAN/LAWRENCE INC.,
Preview
FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 EXHIBIT 2 (REDACTED) FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 Jeremy C. Vest Chrysler Center 212 692 6718 666 Third Avenue jvest@mintz.com New York, NY 10017 212 935 3000 mintz.com April 20, 2022 Via E-Mail Mr. William P. Harrington 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: In accordance with the Fourteenth Report and Recommendation (“R&R”), I write to identify the disputes that require resolution at Friday’s status conference. The Fourteenth R&R balanced the parties’ interests by postponing issuance of class notice for several months to allow Houlihan Lawrence (“HL”) to first identify arbitration signatories, while setting a discovery schedule aimed at readying the case for trial by the end of the year. Having gotten its preferred class notice schedule, HL now seeks once again to bog Plaintiffs down in interminable discovery disputes, including, as discussed further below, by refusing to produce a single document other than its dual-agent transaction files and seeking a “global extension of time” to avoid today’s deadline for the substantial completion of document discovery. Plaintiffs request immediate issuance of a Fifteenth R&R compelling HL to collect and produce the documents identified below, to avoid rewarding HL’s continuing bad faith with what it wants the most—delay. 1. Absent class member depositions While it is well-settled the absent class members are not parties for discovery purposes, In re Allergan Generic Drug Pricing Sec. Litig., 2021 U.S. Dist. LEXIS 13078 at *6, Plaintiffs have agreed that they will not call absent Class members to testify at trial in exchange for HL abandoning its effort to depose approximately 200 absent Class members. BOSTON LONDON LOS ANGELES NEW YORK SAN DIEGO SAN FRANCISCO WASHINGTON MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C. FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 MINTZ Mr. William P. Harrington April 20, 2022 Page 2 2. Class member list HL recently produced a list of Class members generated by searching its Profit Power database (the “Profit Power List”), but it omits thousands of dual- agent transactions on a similar list that HL previously generated from Multiple Listing Services (the “MLS List”). HL asserts that the MLS List is “less accurate,” but it has not explained why nor accounted for the thousands of transactions missing from the Profit Power List. HL’s disavowal of the MLS List is especially troubling because it previously represented to the Court, “without equivocation,” that the MLS was “the only way” to “find out whether there is a dual agency transaction.” Ex. 1, Hon. L. Jamieson Hr’g Tr. (Oct. 18, 2018) at 11:20-13:22. 3. Discovery schedule HL recently advised that it intended to seek a “global extension of time,” including of today’s deadline for the substantial completion of document discovery, due solely to Plaintiffs’ requested production of HL’s dual-agent transaction files. Ex. 2, Letter from R. MacGill to J. Vest, Apr. 11, 2022. But the schedule set by the Fourteenth R&R accounted for HL’s purported need to “retrieve, scan and review” “approximately 19,575 paper transaction files” to identify Class members purportedly subject to arbitration. See Ex. 3, Letter from R. MacGill to W. Harrington, Feb. 10, 2022. That work must necessarily be complete by next week’s deadline for HL to produce a list of purported arbitration signatories. See Fourteenth R&R at ¶ 12. Plaintiffs’ requested production of HL’s dual-agent transaction files therefore provides no basis to relax the current schedule. 4. Document production 4.1. Merits document custodians and search terms Plaintiffs seek collection from ten custodians using the same search terms previously approved by the Discovery Referee for the pre-class certification collections from Ms. Dalton and Mr. Arlt (the “Approved Search Terms”). These custodial collections will obviate the need for a systematic collection from HL’s corporate shared drives and InCrowd, eliminating two issues that protracted pre- class certification discovery. 4.1.1. Christopher and Stephen Meyers HL’s interrogatory responses identified Christopher and Stephen Meyers as among the five persons most knowledgeable about its agency and In-House Bonus policies. Ex. 4. HL now cites “prior rulings” to oppose designating them as merits document custodians, but the Discovery Referee merely exempted Christopher and FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 MINTZ Mr. William P. Harrington April 20, 2022 Page 3 Stephen Meyers from pre-class certification discovery. HL asserts that Ms. Dalton and Mr. Arlt are adequate substitute custodians, but that is not the standard for discovery, neither of them were HL’s chief policy-makers, and Christopher and Stephen Meyers were not just former owners and chief executives, but . Plaintiffs seek collection from Christopher and Stephen Meyers using the Approved Search Terms and four others designed to capture documents relating to HL’s agency disclosure script, market-share growth strategy, and efforts to boost in-house sales. See infra at §§ 5.12 and 5.13. 4.1.2. Geoffrey Berry and Cynthia Landis During pre-class certification discovery, HL designated a single office manager as a general document custodian, Mr. Arlt (Scarsdale). Plaintiffs now seek collection from only two additional managers, Geoffrey Berry (White Plains) and Cynthia Landis (Bronxville), both of whom are sufficiently important that Plaintiffs deposed them during pre-class certification discovery without the benefit of their documents and then relied heavily on their testimony and In-House Bonus e-mails in support of class certification. HL has agreed only to “consider” designating them as custodians while inexplicably objecting to collecting from them using the Approved Search Terms. Ex. 2, Letter from R. MacGill to J. Vest, Apr. 11, 2022. 4.1.3. Leading sales agents HL intends to rely at trial on the testimony of an unspecified number of sales agents to try to demonstrate that it did not act an undisclosed, non-consensual dual agent on a class-wide basis. Ex. 6, Letter from R. MacGill to J. Vest, Mar. 21, 2022. Plaintiffs therefore seek to search the custodial files of six leading sales agents using the Approved Search Terms to assess whether, when, and to what extent they disclosed dual agency and the In-House Bonus to clients. By comparison, HL sought discovery from 200 absent class members before Plaintiffs agreed not to introduce absent class member testimony at trial. 5. HL’s discovery responses HL agreed to produce its dual-agent transaction files but refused to produce a single other responsive document except those that it intends to rely on at trial to prove its own case. See Ex. 7, HL Discovery Responses, April 11, 2022. In addition to ordering HL to collect and produce documents from the custodians identified above, the Discovery Referee should order HL to conduct a reasonably diligent inquiry for the following documents. FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 MINTZ Mr. William P. Harrington April 20, 2022 Page 4 5.1. Previously withheld merits documents (Request No. 1) HL insisted on bifurcation of pre-class certification discovery and limited its pre-class certification document production to documents relevant to class certification. HL should therefore be required to produce documents responsive to Plaintiffs’ pre-class certification requests that it previously collected but withheld on the ground that they were not relevant to class certification. 5.2. Ms. Dalton’s weekly executive meeting notes (Request No. 3) HL refuses to search for and produce Ms. Dalton’s notes are likely among the best evidence of HL’s corporate priorities and strategy. 5.3. Dual-agent transaction files (Request No. 4) As noted above, HL refuses to produce its dual-agent transactions files in accordance with the schedule set by the Fourteenth R&R. 5.4. “Transaction Detail Sheets” (Request No. 5) A Transaction Detail Sheet (“TDS”) is an electronic record maintained by HL for each transaction in the same database that HL used to generate the Profit Power List. A TDS identifies the parties to the transaction, HL’s gross commission, and the split of that commission with HL sales agents. See, e.g., Ex. 8 and Ex. 9. HL produced a TDS for every Sample Transaction during pre-class certification discovery. Plaintiffs now need the TDS for the remaining dual-agent transactions to identify the commission that each Class member seeks to recover. . 5.5. Sales commission checks (Request No. 6) Plaintiffs seek production of a copy of the sales commission check that HL received in connection with every dual-agent transaction to verify the accuracy of the gross commission reported by HL for each transaction on the TDS. 5.6. In-House Bonus eligibility (Request Nos. 7-9) Plaintiffs’ motion for class certification showed that HL had a duty to disclose its In-House Bonus to every client before seeking their consent to dual agency. See Dkt. 688 at 25-27 and Dkt. 1037 at 8-10. HL countered that it owed disclosure, if at all, only to those clients whose sales agents were eligible to receive an In-House Bonus. See Dkt. 1036 at 11-13. Because the Court did not resolve this issue, FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 MINTZ Mr. William P. Harrington April 20, 2022 Page 5 Plaintiffs seek production of documents sufficient to show, on an annual basis throughout the Class period, the In-House Bonus eligibility of every sales agent. 5.7. In-House Bonus payments (Request No. 10) In the event the Court determines that HL owed a disclosure obligation only to those Class members whose agents received an In-House Bonus, Plaintiffs seek documents sufficient to show any In-House Bonus paid by HL in connection with a dual-agent transaction, which are necessary to identify the members of the potential In-House Bonus sub-Class. According to HL’s Commission Processor, 5.8. Arbitration agreements (Request No. 11) Plaintiffs reserve their rights but expect that HL will satisfy their request for production of any arbitration agreement purportedly signed by a Class member through its production of its dual-agent transaction files. 5.9. Performance reviews and self-evaluations (Request Nos. 12 and 13) 5.10. Employment agreements (Request No. 14) During pre-class certification discovery, HL produced the employment agreements for two office managers, see, e.g., Ex. 14, which confirm their profit- sharing bonus compensation, but not for Ms. Dalton, Mr. Arlt, or Ms. Landis. 5.11. List of closed transactions (Request No. 16) The Court previously ordered HL to produce the aforementioned MLS List, showing the approximately 10,000 dual-agent transactions brokered by HL during FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 MINTZ Mr. William P. Harrington April 20, 2022 Page 6 the Class period, but HL refuses to produce a list of all of its closed transactions, which would show the share of HL’s business attributable to dual agency. 5.12. Efforts to boost in-house sales (Request Nos. 17 and 18) Plaintiffs’ motion for class certification showed that HL sought to increase its in-house sales as part of its strategic response to the 2008 housing crisis, Dkt. 688 at 12-16, and the Court cited that “orchestrated ‘strategy’ to increase in-house sales” as a basis for granting Plaintiffs’ motion, Dkt. 1072 at 10. Plaintiffs expect that most of the communications responsive to these requests are located in the custodial files of Christopher and Stephen Meyers. 5.13. “Disclosure and Prompt Sheet” (Request No. 19) Plaintiffs’ motion for class certification showed that HL standardized its agency disclosure by giving “agents a ‘Disclosure and Prompt Sheet,’” which Plaintiffs argued was a “script for presenting the Form,” Dkt. 688 at 8, and the Court cited that “script” as a basis for granting Plaintiffs’ motion, Dkt. 1072 at 10. Plaintiffs therefore seek evidence relating to the drafting, corporate approval, and internal dissemination of the script. 5.14. Native-file e-mails (Request No. 20) During pre-class certification discovery, Plaintiffs sought production of 60 e- mails in native file format with associated metadata intact, see Dkt. 575 at 5, Letter from J. Vest to W. Harrington, Jan. 27, 2020, but suspended pursuit of those e- mails to expedite completion of pre-class certification discovery, see Dkt. 577 at 3, n. 1. Plaintiffs require the native-file production to assess the e-mails’ authenticity. 5.15. Plaintiffs’ transaction documents (Request Nos. 21-24) During pre-class certification discovery, Plaintiffs sought production of every e-mail during the relevant period between the sales agents involved in the named Plaintiffs’ transactions, id., but also suspended pursuit of those e-mails to move the case forward. See Dkt. 577 at 3, n. 1. HL collected e-mails relating to the named Plaintiffs’ transactions using only a single search term—the relevant property address. Dkt. 575 at 5-6. HL’s crude search method therefore likely failed to collect the sales agents’ most informal and candid communications. 5.16. Communications with HomeServices (Request No. 24) HL refuses to produce its communications with HomeServices regarding dual agency and its In-House Bonus even though FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 MINTZ Mr. William P. Harrington April 20, 2022 Page 7 Plaintiffs expect that most of the responsive communications are located in the custodial files of Christopher and Stephen Meyers. 5.17. HomeServices purchase agreement (Request No. 25) As noted above, the Court recognized that evidence that HL used undisclosed, non-consensual dual agency as part of an “orchestrated ‘strategy’ to increase in- house sales” supported their claim for class-wide relief. Dkt. 1072 at 10. Proof that Christopher and Stephen Meyers reaped millions, if not tens of millions, from the sale of HL to HomeServices helps establish their motive to engage in that wrongful conduct. To the extent that HomeServices has a right to recoup some or all of what it paid Christopher and Stephen Meyers if Plaintiffs are successful, the purchase agreement bears on their interest and bias as well. The windfall that Christopher and Stephen Meyers reaped from HomeServices is also discoverable because “a defendant’s wealth is ‘material to the assessment of punitive damages.” Trussell- Slutsky v. Mcilmurray, 184 A.D.3d 891, 893 (2d Dep’t 2020). 5.18. Ethical or disciplinary complaints (Request No. 26) The Fourth R&R directed HL to “produce documents sufficient to show any disciplinary action (including withheld commission checks) taken by HLI against any office managers or sales agents in the Scarsdale, Bronxville and White Plains office for failure to comply with agency disclosure obligations regarding dual agency by May 18, 2020.” Dkt. 574 at 16. Plaintiffs now seek documents sufficient to show any lawsuits or disciplinary actions filed against HL or its sales agents. 5.19. Insurance agreements (Request No. 28) New York law permits discovery of the “existence and contents of any insurance agreement” available to HL to satisfy any judgment that Plaintiffs may obtain. CPLR 3101(f). Disclosure of all primary and excess policies is required to “facilitate and encourage settlement.” CPLR 3101(f) & Practice Commentary. HL directed Plaintiffs to the action filed by an insurer against HL seeking a declaration of non-coverage, but Plaintiffs are entitled to know whether HL has any other potential coverage. 5.20. Separation agreements (Request No. 29) HL produced its separation agreement with the former Irvington office manager, Brian Levine, see Ex. 15, but not with Christopher Meyers, Ms. Dalton, Mr. Gricar, and Mr. Arlt, all of whom are expected to testify at trial and have FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 MINTZ Mr. William P. Harrington April 20, 2022 Page 8 separated from HL. Any cooperation agreement between them and HL is relevant to their credibility. 5.21. Corporate profits (Request Nos. 30 and 31) As noted above, the millions, if not tens of millions, that HL and Christopher and Stephen Meyers reaped from HL’s undisclosed, non-consensual dual agency, whether through the sale of HL to HomeServices or in annual compensation or profit distributions, bears on their motive to illicitly boost in-house sales and Plaintiffs’ request for punitive damages. * * * The foregoing (as well as Plaintiffs’ forthcoming response to the issues that HL seeks to raise on Friday) demonstrate that HL’s litigation strategy is to proliferate discovery disputes based on the cynical calculation that it can win by losing simply by putting off trial another day. Plaintiffs request immediate issuance of the Fifteenth R&R to ensure completion of discovery by the end of the year as contemplated by the Fourteenth R&R. Regards, Jeremy Vest FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 EXHIBIT 1 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 EXHIBIT 2 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 156 E. Market Street Suite 1200 Indianapolis, IN 46204 www.MacGillLaw.com Robert D. MacGill 317.906.5085 Robert.MacGill@MacGillLaw.com Via Email April 11, 2022 Jeremy Vest Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. Chrysler Center 666 Third Avenue New York NY 10017 William Ohlemeyer Boies Schiller Flexner LLP 333 Main Street Armonk, NY 10504 RE: Discovery Responses, Goldstein et al. v. Houlihan Lawrence, Inc., No. 60767/2018 (N.Y. Sup. Ct., Westchester Cty.) Dear Counsel, We write to respond to your March 21, 2022 correspondence and requests for production. We have enclosed our formal responses and objections to your document requests. As to your correspondence, the so-ordered Fourteenth Report and Recommendation required Plaintiffs’ document custodian and search term requests to be reasonable. In our view, your request for six (6) custodians and one hundred sixty (160) search terms is not reasonable in light of the extraordinary discovery efforts taken by Houlihan Lawrence to date. Houlihan Lawrence will consider making a supplemental production from the custodial files of Geoff Berry and Cindy Landis using a reasonable number of narrow search terms to guide its review. The one hundred sixty (160) terms you suggest do not meet these requirements. Your request for the custodial files of Christopher and Stephen Meyers is inconsistent with prior rulings in this case. Our prior wide-ranging production from the files of Dalton and Arlt render any further searching of their files unnecessary. Finally, we intend to request a global extension of time in light of the voluminous physical file review required to obtain the corporate transaction files you have requested. Please let us know by April 18, 2022 if you object to such an extension of time. FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 Jeremy Vest William Ohlemeyer April 11, 2022 Page 2 Best regards. Very truly yours, Robert D. MacGill cc: Matthew Ciulla, Alfred Donnellan, Nelida Lara, Alexander Pantos FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 EXHIBIT 3 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 156 E. Market St. Suite 1200 Indianapolis, IN 46204 www.MacGillLaw.com Robert D. MacGill 317.442.3825 Robert.MacGill@MacGillLaw.com Via Email February 10, 2022 William P. Harrington, Esq. Bleakley Platt & Schmidt, LLP One North Lexington Avenue White Plains, NY 10601 RE: Case Management Plan Goldstein et al. v. Houlihan Lawrence, Inc. No. 60767/2018 (N.Y. Sup. Ct., Westchester Cty.) Dear Bill: We write to provide Houlihan Lawrence’s proposed Case Management Plan (“CMP”) and further detail on the first aspect of the proposed CMP: identification of class members. Thirty Percent (30%) of Seller Class Members, and Some Buyer Class Members, Have Agreed to Arbitrate. On December 20, 2018, the Court entered a Stipulation between Plaintiffs and Houlihan Lawrence regarding arbitration rights. Exhibit 2. In the Stipulation, Houlihan Lawrence “advised plaintiffs that certain purported class members have executed arbitration agreements during the period referred to in the amended complaint.” Id. at 1. Plaintiffs stipulated that any participation in this case “shall not constitute a waiver or otherwise prejudice defendants’ rights CPLR § 7503 or Article 75 of the CPLR to enforce the Arbitration Agreements.” Id. Subsequently, during the briefing on class certification, Houlihan Lawrence documented that approximately thirty percent (30%) of sellers in Plaintiffs’ class executed arbitration agreements, based upon a sampling approach. Exhibit 1 at 7–8 ¶¶ 4–10 (explaining review protocol); id. at 12–21 (list of arbitration agreements present within statistically representative sample); id. at 22–25 (summary of versions of arbitration agreements located to date).1 Plaintiffs’ expert, NERA, confirmed that the sample used by Houlihan Lawrence was statistically representative of the entire class. Exhibit 1 at 2–3 ¶¶ 4–7 (explaining sampling protocol and statistical representativeness findings of NERA); id. at 26–41 (Plaintiffs’ transmission of NERA study confirming statistical representativeness). Certain buyers within the class also executed 1 To increase efficiency, we have omitted the voluminous contract attachments to Exhibit 1. We would be pleased to supply these attachments upon request. FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 William P. Harrington, Esq. February 10, 2022 Page 2 arbitration agreements with Houlihan Lawrence. See, e.g., Exhibit 3 (one example of an executed buyer arbitration agreement). Arbitrating Class Members Must Be Removed From the Class in Favor of Arbitration. New York has a “strong public policy which underlies arbitration,” which extends to the arbitration of breach of fiduciary duty claims. Harris v. Shearson Hayden Stone, Inc., 441 N.Y.S.2d 70, 74 (1st Dept. 1981). Where some members of a putative class are “required to arbitrate their claims,” they “cannot be a part of the putative class.” Gaston v. Doral Inv. Grp., LLC, 2020 N.Y. Misc. LEXIS 1788, at *7 (Kings Cty. 2020); see also Troshin v. Stella Orton Home Care Agency, Inc., 2021 N.Y. Misc. LEXIS 1002, at *9 (N.Y. Cty. 2021) (the “scope of the prospective class must…be limited” to non-arbitrating persons); Brown v. Twenty-First Century Fox, 2017 NY Slip Op 51988(U), at *15 (Bronx Cty., Nov. 13, 2017) (refusing to permit plaintiff to add an arbitrating class representative). Here, at least thirty percent of the sellers, and some buyers, in the class agreed to arbitrate this dispute. They must be removed from the class and sent to arbitration, and this should be done as part of the class member identification protocol. Any Dispute Regarding the Arbitration Agreements Has Been Delegated to the Arbitrator Under New York and United States Supreme Court Precedent. The arbitrator, not the Court, must decide any of Plaintiffs’ challenges to arbitration. The incorporation of the AAA Rules in an arbitration agreement “demonstrate[s] the parties’ clear and unmistakable intent to delegate the threshold arbitrability question to the AAA.” Anima Grp., LLC v. Emerald Expositions, LLC, 138 N.Y.S.3d 858, 858 (1st Dept. 2021) (AAA Rule 7(a) delegates arbitrability questions); see also AAA Rule 7(a)2 (“The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.”); Exhibit 1 at 23, 25 (Version 1 and 3 incorporating AAA Rules); Exhibit 1 at 24 (Version 2 delegating to arbitrator any disputes “relating to the formation, enforceability, applicability or interpretation” of the arbitration clause). The Westchester County Supreme Court agrees. Matter of 33 Calvert Props. LLC v. AMEC LLC, 135 N.Y.S.3d 767, 776-78 (Westchester Cty. 2020) (“In the context of contracts incorporating the AAA rules, New York courts have held that where there is a broad arbitration clause and the parties' agreement specifically incorporates by reference the AAA rules providing that the arbitration panel shall have the power to rule on its own jurisdiction, courts will leave the question of arbitrability to the arbitrators.”). And the United States Supreme Court has held that even wholly groundless requests to arbitrate threshold questions of arbitrability must be sent to the arbitrator. Henry Schein, 139 S. Ct. 524, 529 (2019). 2 https://adr.org/sites/default/files/Commercial%20Rules.pdf FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 William P. Harrington, Esq. February 10, 2022 Page 3 Houlihan Lawrence Requires Approximately Sixteen (16) to Twenty-Two (22) Weeks to Identify the Arbitrating Class Members. The arbitration agreements executed between the 30% of seller class members and Houlihan Lawrence are only available in paper files. Exhibit 4 ¶ 6. Currently, only 425 paper contracts have been scanned, because the sampling protocol developed by Plaintiffs’ expert, NERA, required only 425 contracts. Exhibit 1 at 2 ¶ 4. The remaining approximately 19,575 paper transaction files at issue need to be retrieved, scanned, and reviewed in order to determine which class members agreed to arbitrate this dispute. These 19,575 physical, paper transaction files are “kept in various storage locations” and are currently “stored as they are in the ordinary course of business—intermingled with other irrelevant transaction files.” Exhibit 4 ¶¶ 4, 8. The files will first need to be identified, sorted, physically retrieved, and boxed for delivery. Id. ¶ 9. This will take six (6) to eight (8) weeks using a “team of individuals to undertake a diligent search.” Id. ¶ 10. After this six (6) to eight (8) week retrieval protocol, the files will need to undergo the following steps: (A) the paper file must be physically retrieved, and any binding or other foreign materials must be removed from the physical file; (B) the paper file must be scanned using a scanner; (C) the digital file must be assigned a file name with a unique identifier; (D) the digital file must be loaded into an electronic database; (E) the digital file must be converted into the correct format (for example, a TIFF format); (F) the digital file must be subjected to optical character recognition (OCR); (G) finally, the digital files must be indexed. Exhibit 5 ¶ 6. The files are then ready for review and categorization for arbitration agreements. Id. ¶¶ 6-8. This scanning and review process will take approximately ten (10) to fourteen (14) weeks (starting from the time the boxes are delivered) using a team from Consilio, a reputable ESI vendor with approximately 4,000 ESI professionals worldwide. Id. ¶¶ 8, 2. Therefore, Houlihan Lawrence requires a total of approximately sixteen (16) to twenty- two (22) weeks to identify the arbitrating class members in this case. To the extent other information about the class members is required by Plaintiffs, current information indicates that the “consumer’s name is available within the transaction file, and his or her email address may also be available.” Exhibit 4 ¶ 5. Therefore, the protocol described FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 William P. Harrington, Esq. February 10, 2022 Page 4 above will also assist Plaintiffs in identifying all class members, not just arbitrating class members. Houlihan Lawrence’s Proposed CMP Provides Appropriate and Reasonable Time to Identify Class Members. Houlihan Lawrence’s proposed CMP is attached as Exhibit 6. It provides a structured approach by which discovery and briefing should proceed. Houlihan Lawrence’s intent with this proposal is to ensure that class members are appropriately identified and prompt notice to them is provided. Identification and notice are predicates to next steps in the case. Identification and notice must be accomplished prior to adjudicating the rights of persons who are in fact class members. Once these predicates to proceeding are accomplished, the case management milestones can proceed. Those proposed by Houlihan Lawrence in Exhibit 6 are reasonable. Houlihan Lawrence is, of course, open to a two-step process instead. First, Houlihan Lawrence could devote the next twenty-two (22) weeks to retrieving and reviewing the 19,575 paper transaction files to identify (A) non-arbitrating class members, and (B) the approximately thirty (30%) percent of class members who must be removed in favor of arbitration. Second, the Referee could then set all subsequent case management deadlines once class members are identified and provided notice. * * * We look forward to discussing the above issues on Friday. Thank you for your assistance. Best regards. Very truly yours, Robert D. MacGill cc: Matthew Ciulla, Alfred Donnellan, Nelida Lara, Jeremy Vest FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 EXHIBIT 4 FILED: WESTCHESTER COUNTY CLERK 07/06/2022 09:14 PM INDEX NO. 60767/2018 NYSCEF DOC. NO. 1402 RECEIVED NYSCEF: 07/06/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF WESTCHESTER ___________________________-_________________________-----.·---------X PAMELA GOLDSTEIN, ELLYN & TONY BERK, as Administrators DEFENDANT'S RESPONSES AND PLAINTIFFS' of the Estate of Winifred Berk, and PAUL OBJECTIONS TO BENJAMIN, on behalf of themselves FIRST SET OF INTERROGATORIES and all others similarly situated, Index No. 60767/2018 Plaintiffs, -against- Hon. Linda S. Jamieson HOULIHAN/LAWRENCE INC.,