Preview
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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
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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 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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AD
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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
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("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
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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.
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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.
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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
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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
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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
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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
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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
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