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  • George-Alex Popescu v. Forexware, Llc Commercial Division document preview
  • George-Alex Popescu v. Forexware, Llc Commercial Division document preview
  • George-Alex Popescu v. Forexware, Llc Commercial Division document preview
  • George-Alex Popescu v. Forexware, Llc Commercial Division document preview
						
                                

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FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF DOC. NO. 129 RECEIVED NYSCEF: 04/06/2018 Thomas J. Foley Stefan Savic SHIPKEVICH PLLC 65 Broadway, STE 508 New York, New York 10006 Telephone: (212) 252-3003 Facsimile: (888) 568-5815 tfoley@shipkevich.com ssavic@shipkevich.com Attorneys for Defendant SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK GEORGE-ALEX POPESCU, Index No.: 654488/2016 Judge Eileen Bransten Plaintiff, - against - Mot. Seq. MEMORANDUM OF LAW IN FOREXWARE, LLC, SUPPORT OF DEFENDANT'S MOTION FOR PROTECTIVE ORDER 1 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF DOC. NO. 129 RECEIVED NYSCEF: 04/06/2018 TABLEOFCONTENTS TABLE OF AUTHORITIES ............................................................................................................ 3 PRELIMINARY STATEMENT 1 ...................................................................................................... STATEMENT OF FACTS ............................................................................................................... 3 ARGUMENTS.................................................................................................................................. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 6 I. THE COURT IS JUSTIFIED IN EXERCISING ITS DISCRETION TO ISSUE A PROTECTIVE ORDER TO PREVENT UNREASONABLE ANNOYANCE AND EXPENSES AND PREVENT ABUSE OF DISCOVERY................................................ 6 A. Popescu acting to protect his companies is not why he was terminated, nor is it the basis of the counterclaims, so litigating his justification to do so is unreasonable................................................................................................... 7 B. The Complaint contradicts the unreasonable examination topics and financial discovery sought............................................................................................. 8 C. The Counterclaims here do not necessitate the further discovery sought or examination topics pursued............................................................................ 8 D. The Adversary Bankruptcy Proceedings should not be pre-litigated here.....9 II. A PROTECTIVE ORDER LIMITING IMPROPER TOPICS AT DEPOSITION IS WARRANTED HERE TO PREVENT UNREASONABLE ANNOYANCE AND EXPENSES AND PREVENT ABUSE OF DISCOVERY.............................................. 10 III. PROTECTIVE ORDER DENYING OR LIMITING THE WHOLESALE PRODUCTION FROM RELATED PROCEEDINGS IS WARRANTED HERE BECAUSE THE IMPROPER REQUEST ISAN UNREASONABLE ANNOYANCE AND EXPENSE. 13 "Production" A. Wholesale of the financial documents from adversary proceedings is burdensome and not as straightforward as Plaintiff self- servingly describes. ...................................................................................... 13 B. Protective order limiting the whole production from related proceedings is warranted here because the request is an unreasonable annoyance and 14 expense......................................................................................................... C. Production of the financial documentation now sought would be disproportionate, unreasonable, costly, and prejudicial as itwould turn this litigation into a pre-litigation of the transfers at issue in the adversary bankruptcy proceedings................................................................................ 16 C ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2 of 21 AD FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF DOC. NO. 129 RECEIVED NYSCEF: 04/06/2018 TABLE OF AUTHORITIES Cases Albert v. Time Warner Cable, 255 A.D.2d 248 (1st Dep't 1998).................................................................................................. 17 Allen v. Crowell-Collier Pub. Co., 21 N.Y.2d ~ ~ 403 (1968)............................................................................................................... 18 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 9, Astudillo v. St.Francis-Beacon Extended Care Facility, Inc., 12 A.D.3d 469 (2d Dep't 2004)....................................................................................................... 9 Bell v Cobble Hill Health Ctr., Inc., 22 A.D.3d 620 (2nd Dep't 2005).................................................................................................. 18 .................................................................................................. Ferguson v. City of N.Y., 280 A.D. 2d 382 (1st Dep't 2001)................................................................................................. 17 Ferraro v. New York Telephone Co., 94 A.D.2d 784 (2nd Dep't 1983).................................................................................................. 13 .................................................................................................. Haller v N. Riverside Partners, 189 A.D.2d 615 (1st Dep't 1993).............................................................................................. 9, 18 Hertz Corporation v. Avis, Inc., 106 A.D.2d 246 (1st Dep't 1985).................................................................................................. 13 2d 257 Roman 202 Catholic A.D.2d Saratoga 257 Harness Church (1st of Dep't Racing the Inc. Good Shepherd v. Tempco Systems, 1994).................................................................................................... v. 9 ...................................................................................................9 Roemer, 274 A.D.2d 887 (3d Dep't 2000).................................................................................................. 17 .................................................................................................. Rules CPLR § 3101 ...................................................................................................................................... 9 CPLR § 3103 ...................................................................................................................................... 9 Fed. R. Civ. P. 9................................................................................................................................ 13 R. Civ. P. 12.............................................................................................................................. 13 ed. R. Bankr. P. 7012...................................................................................................................... 13 3 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 1 of 18 ("Forexware" "Defendant" Defendant and Counter-Plaintiff Forexware, LLC or "Defendant"), by its attorneys, Shipkevich PLLC, respectfully submits this memorandum of law in support of its order to show cause for a protective order, pursuant to CPLR 3103 (a), limiting the scope of the examination topics at deposition of the representative of the defendant corporate entity and denying or otherwise limiting the open-ended request for financial documents produced in BT Prime Ltd. v. Boston Technologies Powered Forexware et. al. (Case No. 15-10745- by LLC, F JB/Adversary Proceeding 15-01043) (hereafter "Adversary Proceeding 1501043") sought by ("Popescu" "Plaintiff' Plaintiff and Counter-Defendant George-Alex Popescu or "Plaintiff"). PRELIMINARY STATEMENT This discovery dispute, the first one between the parties, came about after Plaintiff asserted that the financial documents itreceived from Defendant was somehow insufficient without providing any explanation or specificity. Instead of detailing the purported insufficiency, Plaintiff sought access to all documents produced in the unrelated adversary bankruptcy proceeding pending in another jurisdiction. Plaintiff fails to name, otherwise specify, or even categorize, any document sought from the adversary bankruptcy proceeding; he simply wants them all. As of the date of filing this motion over 11,000 documents consisting of over 73,000 pages have been produced by Defendant in response to Plaintiff's demands for discovery and production. Production has been extensive, expensive and not remotely close to proportionate, let alone necessary, as relating to Plaintiff's sole claim and Defendant's related counterclaims concerning a very narrow timeframe at issue here. To narrow the discovery and the issues in controversy, the parties formulated and agreed to a stipulation with document references identifying the acts by Popescu that Defendant asserts to have justified his termination. The same stipulation further limits the events forming grounds for Defendant's counterclaims. Those acts relate to Popescu's disloyalty to Forexware, and include conduct through which he put his own self-interests first in ways that were 4 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 2 of 18 inconsistent with Forexware interests and, thus, his duties as Forexware's employee. That conduct by Popescu also breached his duties, responsibilities, and obligations under the Employment Agreement. Popescu pleaded only that grounds for his termination did not exist, which he cannot now maintain in the face of communications produced evidencing sufficient grounds. Thus, Popescu is now morphing his position to argue that his acts were justified and that he is some sort of whistleblower. This new position relates to transfers of money between entities he managed and entities that include Defendant that Popescu alleges were illicit.However, this new position is a red herring as is his argument that the financial production now sought if needed to defend against "employment" counterclaims. Popescu is trying to use his matter as a vehicle to litigate the entities' correctness of Defendant's and other responses to a market event that affected Popescu's companies. Turning this action into a litigation of those issues would cause unreasonable annoyance and expense to Defendant as well as prejudicing Defendant by forcing itto litigate issues that formed no part of the grounds for Popescu's termination or the basis of the resulting counterclaims. Plaintiff, as far as has been inadequately explained to Defendant, now considers Defendant's financial production to date to be insufficient (for reasons stillnot specified despite requests to do so prior to the current motion practice) and seeks carte blanche to explore all confidentially marked financial records produced in adversary bankruptcy proceedings in Massachusetts to which Defendant is a party. Permitting the wholesale production of the confidential financial documentation now sought would be disproportionate, unreasonable, costly, and prejudicial as it would turn this litigation into irrelevant examination of transfers determination of which is pending in the adversary bankruptcy proceedings. Moreover, and for same reasons, the Court should limit the topics that the entity defendant representative can be deposed on to exclude areas irrelevant to the grounds for Popescu's termination. 5 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 3 of 18 This Court should grant a protective order limiting the scope of the examination topics at deposition of the defendant corporate representative and denying the request for financial documents produced in the adversary bankruptcy proceedings. FACTS1 STATEMENT OF FACTS The Parties and Their Relationship Forexware provides foreign exchange software and technology solutions for foreign exchange broker-dealers, and other financial institutions, offering technology that connects foreign exchange brokerage firms to other global financial institutions. (¶ 2.) Popescu part-founded Boston Technologies, Inc. ("BTI"), a company that engaged in currency trading, and which Popescu expanded to provide currency brokerage services forming the Companies" companies BT Prime Ltd. and Boston Prime Limited (collectively "Popescu's Companies"). (¶ 3.) In April 2014 Popescu's BTI suffered approximately $3M in losses in one evening due to an apparent technology glitch and Popescu sought a buyer for the assets of BTI and its affiliates. (¶ 4.) Popescu approached Forexware regarding a sale soon thereafter. (¶ 5.) The Employment Agreement On July 11, 2014, Forexware, Popescu, individually, and other entities entered into a complex purchase agreement providing for the acquisition of Popescu's Companies through a two-stage closing process (¶ 6.) An employment agreement giving Popescu the position as Head of Strategy with Forexware was incorporated as an exhibit to that larger agreement but constituted its own Agreement" agreement between Forexware and Popescu, only (hereinafter "Employment Agreement"). (¶ 7.) On July 11, 2014, the firstclosing under that agreement took place and consisted of the purchase of only the assets of Popescu's Companies. (¶ 8.) However, as both an owner and executive, Popescu 1 All references herein are to the Affirmation of Thomas J. Foley in Support of Motion for Protective Order filed concurrently with this memorandum of law. 6 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 4 of 18 retained full responsibility to oversee and manage BT Prime and Boston Prime operations, and utilized his BTI personnel to do so, while simultaneously being under obligations under the APA to facilitate and deliver the second closing. (¶ 9.) Under the terms of the Employment Agreement, Popescu's "Position, Duties and Responsibilities" included, inter alia, serving Forexware and its affiliates faithfully and conscientiously and to the best of his ability promote the interests and reputation of Forexware and itsaffiliates. (¶ 10.) Popescu also agreed not to make, use, or permit to be used any confidential information other than for the exclusive benefit of the Company and for no other purpose. (¶ 11.) Popescu Acts Disloyally and in Breach of the Employment Agreement On Thursday, January 15, 2015, the Swiss National Bank ("SNB") announced that it no longer would hold the Swiss Franc at a fixed exchange rate to the Euro, causing upheaval in the foreign currency market and Popescu Companies sustained significant losses. (¶ 12.) Popescu then took steps in breach of the terms of the Employment Agreement and his duties, responsibilities, and obligations under the Employment Agreement. (¶ 13.) Popescu also acted disloyally to his employer, Forexware, and in a way inconsistent with his duties as Forexware's employee. (¶ 14.) Notice and Proposed Examination Topics for The Defendant Entity Deposition Considerable time and efforts were made by Defendant, at Plaintiff's repeated request, to identify the acts that Defendant says provides the grounds for Popescu's termination and basis of Defendant's two remaining counterclaims for faithless servant and breach of the Employment Agreement. (¶ 15.) To narrow the scope of discovery the parties agreed and executed the "Popescu Acts" Acts stipulation. (¶ 16.) Despite that stipulation, Plaintiff noticed examination topics were so broad and facially contradicting the very purpose of Popescu Acts stipulation. (¶ 17.) Defendant requested clarification how proposed examination topics 2, 3, 4, 5, and 6 (discussed in detail in Argument 7 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 5 of 18 section II below) are material to the claims or defenses here. (¶ 18.) That clarification was not provided. (Id.) "Production" of the financial documents from adversary bankruptcy proceedings Adversary Proceeding 1501043 was initiated in March 2015 with a complaint that sought the turnover of records in the possession of the defendants (by operation of the assets purchase discussed above), which included various Forexware entities and individuals employed by them. (¶ 19.) As per a stipulation there dated April 30, 2015, the defendants, including Forexware, were to produce certain materials identified on an attached exhibit, as well as additional items either ordered by the Bankruptcy Court or as agreed to by the parties. (¶ 20.) From the face of this stipulation Forexware was only providing access to BT Prime of its own property, records, and information which Popescu himself knows since he was retained as a consultant to BT Prime in those proceedings and worked with BT Prime's accountants and lawyers regarding this stipulation and production. (¶ 21.) That stipulation also includes BT Prime's acknowledgment that "Forexware makes no representation or warranty as to the accuracy or completeness of any Debtor Materials (BT Prime's) . . . northe extent to which Forexware has possession, custody or control over property, records, and information of the Debtor..." ." Debtor . . and that the Bankruptcy Court "shall retain jurisdiction for the purpose of interpreting, enforcing" implementing and the Stipulation. (¶ 22.) Defendant already requested of Plaintiff to: (1) specify what is incomplete and why Plaintiff insufficient" "believe(s) that ForexWare's production of financial documents has been and what is meant by ForexWare's "financial production", (2) why Plaintiff in this matter, regarding his termination of employment, thinks that any documents produced pursuant to the so ordered stipulation between counsel for Forexware and counsel for debtor, BT Prime, is relevant since the claims there are obviously much different than the ones here, and (3) why Plaintiff does not, or has not previously in the course of compliance with Defendant's discovery demands, sought from 8 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 6 of 18 counsel for BT Prime. (¶ 23.) Plaintiff has stillnot provided any such specification, clarification or explanation in response to the above. (Id.) "Cause" The provisions of the Employment Agreement regarding "cause" The Employment Agreement, in relevant part, defines as meaning: "that the Management concludes, in good faith and after reasonable investigation, that . .. (ii)the Employee engaged in a conduct constituting willful misconduct relating to the Employer, or fraud; or (iii)the respect." Employer breached his obligations or covenants under this Agreement in any material (emphasis added) (¶ 24.) Forexware was only required under the Employment Agreement to investigate and terminate in good faith, both of which Forexware did. (Id.) The legitimacy or illegitimacy of the transfers / margin calls is irrelevant to why Popescu was terminated. (Id.) ARGUMENTS I. THE COURT IS JUSTIFIED IN EXERCISING ITS DISCRETION TO ISSUE A PROTECTIVE ORDER TO PREVENT UNREASONABLE ANNOYANCE AND EXPENSES AND PREVENT ABUSE OF DISCOVERY. The Court should issue a protective order to prevent unnecessary annoyance, expenses and prejudice towards Defendant. CPLR § 3101(a) broadly defines the scope of disclosure as "all matter material and necessary in the prosecution or defense of an action, regardless of the burden proof." of Allen v. Crowell-Collier Pub. -Co., Co., 21 N.Y.2d 403 (1968). The words, "material and necessary," are interpreted literally so as to require disclosure of "any facts bearing on the controversy which will assist preparation for trialby sharpening the issues and reducing delay and prolixity." reason." Id. at 407. The test is one of "usefulness and Id. The burden of showing that the disclosure sought is improper is upon the party seeking the protective order. Roman Catholic Church of the Good Shepherd v. Tempco Systems, 202 A.D.2d 257, 258 (1st Dep't 1994). However, overly broad or unnecessarily burdensome demands may be considered palpably improper. Hailer v à Riverside Partners, 189 A.D.2d 615, 616 (1st Dep't 1993). However, CPLR 9 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 7 of 18 abuse," § 3103(a), entitled "[p]revention of authorizes courts to issue a "protective order denying, device." limiting, conditioning or regulating the use or any disclosure Such orders are issued "to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any courts." person or the CPLR § 3103(a). Thus, this Court has statutory authority to supervise discovery in order to avoid abuse of the discovery process. When the disclosure process is abused, a protective order that abuse is and proper. Astudillo v. St.Francis- eliminating necessary See, e.g., Beacon Extended Care Facility, Inc., 12 A.D.3d 469, 469 (2d Dep't 2004). A. Popescu acting to protect his companies is not why he was terminated, nor is itthe basis of the counterclaims, so litigating his justification to do so is unreasonable. Plaintiff attempts to justify the production now sought and the deposition examination topics pursued by misrepresenting the pleading of the counterclaims here. Popescu acted disloyally to Forexware putting his own interests first which were inconsistent with Forexware interests and his duties as Forexware's employee as well as breaching his duties, responsibilities, and obligations under the Employment Agreement. Plaintiff has represented that because some of Defendant's allegations include Popescu acting to "further a misleading claim that Forexware acted illicitlyin call" making a margin then determination that the margin call was illicitjustifies Popescu's action, thus negating the grounds for his termination. This is misleading, inaccurate and even concedes that Plaintiff accepts that some of his external communications were facially improper, or why else would that impropriety need to be justified. Part of why Popescu was terminated was because he engaged in communications behind his employers back and contrary to his employer's interests, and influenced other Forexware employees to also do so. Moreover, Forexware's allegation concerning Popescu's communication to a regulator in the United Kingdom relates to the numerous false staff' statements about "senior executives and at Forexware, but has nothing to do with the transfers / margin calls. The manner of Popescu's disloyalty and breach of trust and obligations that provided 10 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018 01:33 PM INDEX NO. 654488/2016 NYSCEF Popescu DOC. NO. v. 129 Forexware, LLC Index No. RECEIVED 654488/2016 NYSCEF: 04/06/2018 Page 8 of 18 grounds for his termination is not excused be a determination of the illicitness of the margin calls. Illicitor not, Popescu went behind his employer's back. B. The Complaint contradicts the unreasonable examination topics and financial discovery sought. Let us be reminded here that the Complaint alleges that in "early 2015 Forexware suffered losses" significant trading which is now contradicted by discovery which shows that it was the Popescu Companies that suffered the losses. The Complaint then alleges that part of Forexware's "response" Agreement" obligations" was "to breach the Employment to "avoid its to Plaintiff. The permitting" Complaint asserts only that "conditions the termination for cause "did not exist", thus "violated" the termination the Employment Agreement. Complaint, Dkt. No. 1, 11. Now, because production to date establishes sufficient grounds for termination, the position has changed from one where Forexware was alleged to have retaliated against Popescu motivated by their financial condition, to a position where Plaintiff now concedes that some of his external communications were facially improper, but that his acts were justified because he was protecting his companies following an alleged illicitmargin call, which itwas not. However, nowhere in the Complaint does the legitimacy or illegitimacy of the transfers / margin calls arise as it isirrelevant to why Popescu was terminated. This is supported by discovery to date and the Acts Stipulation. C. The Counterclaims here do not necessitate the further discovery sought or examination topics pursued. There are two pending counterclaims, faithless servant and breach of contract. Damages related to the former are limited to getting back what was paid to Popescu, evidence of which has been produced via records evidencing compensation paid and isbeyond established. Damages related to the breach of contract relate to damage to goodwill, the cost to replace employees, lost revenue, sales, customers and funds in business accounts in an amount to be proved at trial. Defendant's February 9, 2018, production (one of six productions) alone included invoices, spreadsheets, and 11 of 21 FILED: NEW YORK COUNTY CLERK 04/06/2018