Preview
FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022
NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024
ATTORNEYS AT LAW
90 PARK AVENUE
NEW YORK, NY 10016-1314
212.682.7474 TEL
212.687.2329 FAX
WWW.FOLEY.COM
WRITER’S DIRECT LINE
212.338.3401
bbassoff@foley.com
CLIENT/MATTER NUMBER
065397-0130
March 7, 2024
Via Email
Michael J. Rand
New York Supreme Court, New York County
(Commercial Division)
60 Centre Street, Room 626
New York, NY 10007
mrand@nycourts.gov
Re: Mayville Engineering Company, Inc. v. Peloton Interactive, Inc., Index No. 652735/2022
Dear Mr. Rand:
As you know, we represent Plaintiff Mayville Engineering Company, Inc. (“MEC”). We write
to provide a further update on the status of discovery in this matter, as you requested in your February
20, 2024 email, and in advance of the teleconference on March 11, 2024 to discuss outstanding
discovery disputes between the parties.
As we noted in our February 16, 2024 letter 1 to you, Peloton has refused to provide relevant
information necessary to defend its purported fraudulent inducement counterclaim. After exchanging
numerous letters and meeting and conferring with Peloton’s counsel—including a meet and confer last
Friday per your instruction—Peloton continues to refuse to provide relevant discovery needed to
defend against its fraud counterclaim, and to remedy deficiencies in its Slack message productions.
These subjects are addressed in Sections I-III, infra. Sections IV through VIII address the relief
Peloton seeks in its letter.
I. Peloton Continues to Obstruct and Delay Discovery Material and Necessary to Defend the
Fraud Counterclaim.
This lawsuit was commenced by MEC to recover fixed revenue payments—$107 million in
sum—that Peloton promised to pay under the clear terms of the parties’ Supply Agreement for MEC’s
capacity to manufacture component parts for Peloton’s bikes. Since discovery commenced, what has
been revealed is what is already obvious from the face of the Supply Agreement—that the Supply
Agreement means exactly what it says and that, recognizing its commitments to MEC, Peloton plotted
Attached for reference is MEC’s February 16, 2024 update letter, which incorporates and attaches MEC’s
1
December 1, 2022 second sets of document requests (“Requests”), Peloton’s responses and objections to the same, and
MEC’s December 22, 2023 letter regarding deficiencies in Peloton’s Slack document production. Also attached is MEC’s
February 2, 2024 letter regarding further deficiencies in Peloton’s Slack document production.
AUSTIN DETROIT MEXICO CITY SACRAMENTO TALLAHASSEE
BOSTON HOUSTON MIAMI SALT LAKE CITY TAMPA
CHICAGO JACKSONVILLE MILWAUKEE SAN DIEGO WASHINGTON, D.C.
DALLAS LOS ANGELES NEW YORK SAN FRANCISCO BRUSSELS
DENVER MADISON ORLANDO SILICON VALLEY TOKYO
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Michael J. Rand
March 7, 2024
Page 2
to forestall an eventual lawsuit brought by MEC by stringing MEC along and deflecting its questions
about whether Peloton would perform. 2
As this discovery came to light, Peloton concocted a new strategy to evade liability by bringing
a baseless counterclaim asserting that Peloton was supposedly duped into the Supply Agreement by
preliminary cost and profit margin estimates that MEC provided to Peloton during the early stages of
the parties’ contract negotiations.
After contemplating Peloton’s counterclaim, MEC served the Requests, seeking information
necessary to defend the counterclaim and to show that MEC’s preliminary cost and profit margin
estimates were (1) not material to Peloton’s decision to enter into the Supply Agreement; (2) not relied
upon by Peloton; and (3) to any extent they were relied upon, Pelton’s reliance was not justified.
Within the Requests, MEC postulated Requests 44-47, which seek documents and communications
relating to Peloton’s practices, policies, standards and criteria for negotiating with suppliers, as well
as Request 48, which seeks all documents and communications relating to any precautions or due
diligence that Peloton undertook (if any) to protect itself against the risk of false representations in
connection with negotiating the in-issue Supply Agreement. In making these requests, MEC seeks
only to compel production of documents within the date range of April 2020 through March 2021.3
These Requests are material and necessary to test whether Peloton actually relied on this
information it obtained from MEC (as it alleges in its Counterclaim), and whether Peloton has or had
any best practices for due diligence or verification of information it obtains from suppliers, which is
relevant to the issues of materiality and reliance (as well as the justifiability of any purported reliance
by Peloton). These requests are narrowly tailored, and MEC at this time is only seeking documents
from the narrow date range of April 2020 to March 2021 (less than a year), and accordingly the
discovery should not be burdensome for Peloton to produce. 4
In its responses and objections to these Requests and in clear violation of this Part’s rules,
Peloton asserted generalized and boilerplate relevance, burden, proportionality, and scope objections
to the document requests and refused to produce any documents at all. See Peloton’s Responses and
Objections to MEC’s Second Set of Document Requests; see also Part 54 Rule 32. When the parties
conferred about Peloton’s deficient objections in a February 12, 2024 videoconference, Peloton’s
counsel indicated that Peloton would be willing to produce responsive documents subject to a date
restriction of April 2020 through March 2021, which MEC said that it would consider. Then, on
2
Evidenced by, inter alia, Peloton’s own employees and executives apparent admissions. See December 22 Letter
at 1-3; February 2 Letter at 1-2.
3
MEC reserves the right to request an expanded date range should it discover that responsive material may exist
outside of these date parameters.
4
Although Peloton claims in its letter that it stated it did not agree, at the February 12 teleconference, to produce
all documents responsive to MEC’s requests subject only to agreement on date restrictions, we have no recollection of
discussing that.
2
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March 7, 2024
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February 15, 2024, Peloton reneged on its original proposal and sent MEC a new proposal substantially
limiting the scope of documents that MEC had originally requested. This new proposal speciously
seeks to limit Peloton’s production to “company-wide” and “formal” written due diligence policies
for Requests 44-465 which are unclear qualifications. Further, Peloton’s proposal seeks to erase
Request 44, as Peloton proposes producing the same cherry-picked “company-wide policies, manuals
and training materials (if any)” in response to this Request as it is proposing to produce in response to
Request 45. Yet, Peloton’s proposal ignores the heart of the discovery that MEC seeks from Request
44—factors and criteria that Peloton regularly, ordinarily, or customarily considers in selecting
manufacturers or suppliers whether “company-wide” or not and whether formalized by Peloton or not.
Providently, MEC limited Request 44 to “Documents sufficient to show” such that the Request need
not be narrowed any further.
Like Request 44, Peloton also seeks to improperly restricts Request 48, which was
appropriately narrowed to documents relating to Peloton’s due diligence (if any) in connection with
the parties’ Supply Agreement. Here, Peloton proposes producing only documents “sufficient to
show” due diligence. This is clearly problematic, since it would permit Peloton to pick-and-choose
which documents to produce, and will not allow MEC to see the full picture of Peloton’s diligence on
the Supply Agreement.6
As highlighted in MEC’s February Letter, Peloton’s proposal for Requests 44-47 lack any
assurances that MEC will receive the relevant discovery necessary to defend the Counterclaim—as
Peloton unilaterally proposed to narrow the requests and further stated that it would only produce
documents “if any” exist. Per your instruction, the parties met and conferred again this past Friday to
discuss the issues outlined in the Parties February 16 Letters, including Peloton’s deficient responses
to MEC’s document requests and to obtain assurance that Peloton’s proposal to narrow these requests
would lead to a substantive document production. However, Peloton’s counsel was unable to confirm
whether any of the documents it proposed to produce even exist, and refused to commit to a date
certain when it would confirm whether such documents exist or for production of documents (if any).
Peloton should not be permitted to obfuscate flaws in its counterclaim by producing cherry-
picked documents (if any even exist) on the key fraud elements of materiality and reliance. Peloton
should be instructed to produce all documents responsive to MEC’s Requests, as originally phrased
by MEC, for the period of April 2020 through March 2021. To the extent that the Court is inclined to
deny this request, MEC respectfully requests the opportunity to brief this issue.
5
Peloton also arbitrarily proposes to excise “practices” and “guidelines, checklists, standards, factors or criteria”
from Request 45, and to arbitrarily restrict the due diligence training materials requested in Request 47 to only those offered
or provided to specific employees that MEC has also requested as part of its Request.
6
Peloton indicated that it has already produced documents responsive to Request 48 and that it is continuing to
investigate whether any additional responsive documents remain to be produced.
3
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II. Peloton is Delaying Providing Discovery it Has Already Agreed to Produce, Delaying
Providing Dates of Availability for its Corporate Representatives, and is Refusing to Remedy
Deficiencies in its Privilege Log.
Furthermore, the parties additional meet and confer failed to spring action from Peloton’s
glacial pace on numerous other discovery items. Although Peloton agreed at a meet and confer in the
beginning of February to amend its deficient responses to MEC’s December 1, 2023 supplemental
interrogatories (which seek information necessary to defend Peloton’s counterclaim, including a
computation of Peloton’s purported damages), Peloton still has not done so, nor has it committed to a
date certain by which it will do so (Peloton has said only that it “anticipates” serving amended
interrogatory responses by March 12, which is less than 3 weeks before the existing fact discovery
cutoff). Nor has Peloton committed to a date certain to produce documents relating to its purported
counterclaim damages.
Peloton also for weeks delayed providing dates of availability for its corporate representative
deposition, and then offered only one day—the very last day of fact discovery—March 29.7 Peloton
also delayed for weeks in responding to MEC’s February 12 letter regarding numerous deficiencies in
Peloton’s privilege log—including Peloton’s withholding and redactions of communications with a
third-party consultant on the basis of purported privilege. Peloton waited until nearly midnight on
Friday, March 1 to respond—one business day before this update was due—depriving the parties of
the opportunity to meet and confer.8
Peloton must commit to dates certain by which it will provide amended interrogatory response
and produce documents MEC requested over four months ago, and which Peloton has already agreed
to produce and are not subject to dispute. Peloton must also be more responsive to requests for dates
for its corporate representative deposition—which was noticed over six months ago.
7
MEC subsequently requested additional dates of availability, and Peloton provided a few (all within the waning
days of fact discovery) but MEC’s counsel is not available to take Peloton’s deposition on those dates. Since none of the
dates that Peloton proposed will work, MEC’s counsel proposed a limited extension of the discovery schedule solely to
accommodate this deposition, and proposed dates in early May. Just today, the parties have agreed to schedule the
deposition on May 8, 2024.
8
In the letter, which we received late Friday night, Peloton persisted in its resistance to producing documents for
which we see no meritorious claim for privilege. MEC is still reviewing and analyzing Peloton’s long-overdue response
letter, and considering the positions that Peloton took at today’s meet and confer, and reserves the right to raise these
deficiencies if the parties are unable to resolve them through the meet and confer process.
4
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III. Peloton Continues to Refuse to Produce Google Drive Documents Sent Via Links in
Responsive Messages in its Slack Messages.
On top of hampering discovery into its Counterclaim, Peloton continues to refuse to remedy
deficiencies in its belated Slack production (which Peloton failed to complete by the November 30
deadline set by the Court). Concerningly, Peloton’s production skips various files transmitted in
responsive messages through Google links that are otherwise relevant 9 and should have been produced to
MEC, and despite Peloton’s “Google Drive” being one of the few repositories that Peloton explicitly
agreed to search and produce documents from in the parties ESI Protocol. See NYSCEF 73 at Appendix
B. At the parties meet and confer, Peloton reiterated that it refuses to change its position with respect to
searching for and producing documents from the repository it agreed to produce documents from.
Peloton should be instructed to produce all responsive Google Drive documents that were sent as
links in its Slack production 10, and which it was required to produce under the terms of the parties ESI
Protocol. To the extent that the Court is inclined to deny this request, MEC respectfully requests the
opportunity to brief this issue.
IV. Peloton’s Requests to Compel MEC to Produce Full-Blown ESI Discovery of Its Business
Dealings with other Customers are Baseless and Should be Denied.
Peloton’s update letter requests that the Court compel MEC to produce over four years’ worth of
business data for three of MEC’s largest customers without regard to procedure or burden. This blanket
request, which has already been discussed on numerous occasions and considered by the Court in
November, seeks unfettered discovery on what relates to one aspect of one element (intent) of Peloton’s
counterclaim. It is plainly overbroad, unduly burdensome and disproportionate to the needs of the case.
When Peloton first made its request for this discovery, MEC raised with the Court a prediction
that Peloton would never be satisfied with MEC’s productions in response to its request. Specifically, that
no matter how many documents MEC produced, the discovery would take on a life of its own, morphing
9
For example, and as highlighted in MEC’s February 16 Letter, Peloton fails to produce a document titled “Rhea
Discovery Exit Deck - WIP - Part Deux” referenced in PTON-025358. This is a communication reflecting internal Peloton
discussion surrounding the plans for project Rhea (a new bike project that Peloton offered to MEC as a replacement for the
manufacturing work that Peloton had originally awarded to MEC in the Supply Agreement). Peloton also fails to produce a
document titled “Pegasus Bike+ Program Charter” that was linked in PTON-029500. This message concerns Peloton’s business
planning charter for the Pegasus bike program that MEC was contracted to support.
10
Peloton continues to produce additional Slack messages to MEC. On March 1, 2024, Peloton produced 3,400
additional Slack messages (in response to MEC’s December 22 Letter and February 2 Letter requesting full daily chat
conversations containing highly relevant chat messages) which provide the full daily chat threads for highly relevant
conversations. While MEC’s review of these messages is still underway, it is apparent that the full daily threads provide
vital and necessary context to highly relevant messages. Thus, MEC anticipates making further requests from Peloton to
produce full daily chat threads for highly relevant Slack conversations.
5
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into a costly and burdensome fishing expedition for both the parties and for the Court. Hearing these
concerns, the Court implemented a procedure whereby MEC would produce a sample of documents
relating to costs and expense information for quotes for certain of MEC’s customers, and then the parties
would meet and confer on the need for any further productions. Contrary to Peloton’s assertions, MEC
has complied with this procedure, and to date has produced hundreds of quote documents to Peloton. Yet,
just as predicated, Peloton comes to the Court unjustifiably dissatisfied and seeking to embark on a further
costly and distracting fishing expedition, including full-blown ESI discovery from MEC. We note that
Peloton’s latest letter for the first time argues that such ESI discovery should “start” with production of
Mr. Raber’s documents, but Peloton provides no indication that it would be willing to stop there. More
likely than not, if permitted, it will simply perpetuate Peloton’s endless fishing expedition.
Additional and expansive discovery of MEC’s quotations to its other customers is simply not
warranted. MEC has already provided substantial discovery of its estimated cost and profit information
concerning both Peloton and the requested third-party customers. First, MEC has produced thousands of
documents relating to its internal cost and profit information with respect to Peloton and the Supply
Agreement. Second, with respect to the third-party customers, MEC has produced hundreds of documents
in accordance with the procedure outlined in November. As detailed within MEC’s January 12, 2024 and
February 16, 2024 updates to the Court, these third party quotes reflect a sample of MEC’s quotations for
Deere and PACCAR parts11 from the five-month period when the parties were negotiating the at-issue
Supply Agreement (the period during which Peloton asserts in its counterclaim that MEC purportedly
provided inaccurate cost and profit information to Peloton and on which Peloton purport to have relied
upon in agreeing to enter into the Supply Agreement). While Peloton echoes the same complaint that
MEC is “unilaterally” selecting this five-month window, it again fails to offer any foundation as to why
MEC should produce internal cost and profit information concerning Deere, Oshkosh, and PACCAR for
a broader period of time—for which Peloton seeks from “January 1, 2020 through the date of production.”
In any event, as Peloton notes in its letter, MEC offered as a compromise to produce additional
documents relating to quotes from each of the months in the period that Peloton originally requested—
five quotes from each month for which MEC has not yet produced quote data for both Deere and
PACCAR. Such a production would provide Peloton with hundreds of additional quotes and thousands
of additional datapoints. This is more than sufficient and should conclude discovery on this subject.
Moreover, it is proportionate to the needs of the case and the discrete issue to which these documents are
arguably relevant.
Peloton reiterates its complaint that MEC limits its productions with respect to Deere and
PACCAR to “documents from or related to MEC’s quotation system.” But, as stated in MEC’s February
16 Letter, this is a perfectly legitimate, reasonable and proportionate limitation on this category of
discovery since, as MEC already explained to Peloton (repeatedly and again the parties March 1 meet and
11
MEC does not provide cost or profit information to Oshkosh in the ordinary course of quoting Oshkosh parts.
6
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confer) and provided in its January update to the Court, MEC does not generally share cost or profit
information with Deere or PACCAR outside of this method and MEC.
While again taking issue with MEC’s redaction of irrelevant information in Deere’s quote
documents made at the request of Deere, Peloton reiterates the same arguments without support that they
are “entitled” to view the entire document and not rely on the representation of MEC’s counsel.12 As
MEC has explained numerous times to Peloton, these complaints are unfounded. MEC has only
redacted—pursuant to Deere’s request—Deere’s confidential information, not any of MEC’s pricing
information (which is the information Peloton requested).
Despite the Court’s warning to Peloton against over-litigating discovery issues—specifically, the
issue of MEC’s costs and expenses incurred in connection with the Supply Agreement—Peloton has
overlitigated discovery into MEC’s business dealings with other customers. See July 3, 2023 Decision
and Order on Motion # 3, NYSCEF Doc No. 142 (“the court is dismayed by defendant’s overlitigation of
this discovery issue. [] Further serial relitigation of adverse discovery rulings may result in cost shifting.”).
Peloton’s request—including its request for yet more briefing on these issues through a motion to
compel—should be denied.
V. Peloton’s Request to Re-Depose MEC’s Corporate Representative Should be Denied.
In August 2023, Peloton’s legal team—which includes the co-chairs of Covington’s commercial
litigation practice—made a strategic decision to take an early deposition of MEC’s corporate
representative, instead of waiting to schedule it until after the bulk of fact witness depositions had been
completed, and all discovery disputes had been resolved. Peloton used all 7-hours (and then some) that it
is presumptively entitled to under the Commercial Division rules and did not reserve any time in the event
that new issues arose later in the litigation, such as its counterclaim.
Moreover, Peloton’s lawyers largely used the corporate representative deposition to develop the
allegations that comprise their counterclaim, including asking MEC’s corporate representative about its
quoting practices for other MEC customers—the very subjects on which they seek to re-depose MEC.
Peloton should not be permitted a cumulative and duplicative re-do. See Lacqua v. Staten Is. Univ. Hosp.,
56 A.D.3d 529, 530 (2d Dep’t 2008) (affirming denial of plaintiff’s request for further deposition of
defendant where defendant “had been completely and fully deposed by the plaintiff in 2005, and the
plaintiff failed to demonstrate that a further deposition was necessary”); Czechowski v. Buffalo Niagara
Med. Campus, Inc., 175 A.D.3d 1817, 1818 (4th Dep’t 2019) (affirming denial of request for second
depositions of two witnesses where “the questions that plaintiff intended to ask those witnesses during the
second depositions either called for privileged information, or were not material or relevant to plaintiff's
personal injury action, or were asked and answered during those witnesses’ first depositions”). To the
extent that Peloton has any new questions to ask (which we doubt) regarding the documents that MEC has
12
We note that Peloton has made similar confidentiality redactions in its document production.
7
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produced in response to Peloton’s request for quote documents to other customers, Peloton has already
noticed a deposition of the MEC employee who was assisting counsel in connection with that discovery,
and presumably Peloton will ask him those questions.
An additional corporate representative deposition would also be unduly burdensome. MEC has
already prepared two representatives to testify on Peloton’s corporate representative topics: Todd Butz
(MEC’s CFO) and Ryan Raber. Mr. Butz flew to New York to sit for his deposition, and he (and his
counsel) set aside two days for his testimony—one day in his fact witness capacity and second day in his
corporate representative capacity. At the conclusion of the first day of testimony, Peloton’s counsel, Mr.
Gimel, informed us that they had decided not to proceed with the second day because “today’s deposition
of Mr. Butz covered the topics that we intended to cover in the entity deposition of MEC tomorrow.”
Despite conceding that they had already used a portion of Mr. Butz’s deposition to cover corporate
representative topics, Peloton proceeded devote 7 hours on the record to corporate representative topics
at Mr. Raber’s deposition, and then continued to ask questions on those topics during the fact witness
portion of his deposition on the second day of Mr. Raber’s testimony, even after their corporate
representative time had elapsed.
Simply put, Peloton is not entitled to re-do MEC’s corporate representative deposition, at MEC’s
substantial burden, cost and expense. Peloton’s request should be denied.
VI. Peloton’s Request to Inspect MEC’s ERP Software Systems Relating to Deer, PACCAR and
Oshkosh is Unduly Burdensome, Disproportionate to the Needs of the Case, and Should be
Denied.
Peloton reasserts that MEC’s burden concerns about the voluminous ESI-discovery that Peloton
is seeking will in some way be relieved if it is permitted to inspect MEC’s ERP systems relating to Deere,
Oshkosh and PACCAR, which is used to track manufacturing for parts—not to quote prices for parts for
these customers.13 Peloton’s argument makes no sense, first because MEC’s manufacturing information
for parts for other customers is totally irrelevant to any issue in dispute in the lawsuit. It would also not
alleviate MEC’s burden concerns because Peloton is seeking inspection in addition to (and not in
substitution of) ESI document discovery, and (in addition to being irrelevant) inspection will be highly
and unduly burdensome and invasive as it will require the presence of MEC’s counsel and will take time
away from MEC employees who are familiar with the ERP system.
VII. MEC Should Not be Compelled to Respond to Peloton’s Improper Interrogatories.
As detailed in MEC February 16 Letter, Peloton’s demand to compel responses to its improper
interrogatories should be denied. As an initial matter, Interrogatories 10-13 are poorly disguised
MEC uses a system called “Quoting 3.0” to quote parts for these customers—as we have told Peloton—and the
13
documents and information that MEC has produced to Peloton to date manually were pulled from this system.
8
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contention interrogatories because they contend that MEC has provided cost or profit information to third
parties that is “different” (Peloton’s request does not specify, or otherwise define, what “different” means)
from MEC’s internal cost and profit information (which is what Peloton hopes to establish as part of its
counterclaim). Further, in answering the Interrogatories, MEC would be required to either confirm or
deny that contention. During the parties March 1, 2024 meet and confer, Peloton made no offer to
otherwise amend or compromise on these Interrogatories. Pursuant to Justice Schecter’s Part 54 rules,
which prohibit such contention Interrogatories, Peloton’s demand to compel (or brief to compel) should
be denied.
In addition to the reasons above and similar to the other discovery Peloton seeks, these
interrogatories are overbroad, unduly burdensome, and constitute an unsupported fishing expedition.
Interrogatory 14 is simply not relevant. While Peloton argues that it would “allow Peloton to
ascertain information MEC has continually refused to provide” this is not an argument that the information
is relevant. Such policies, practices, guidelines and standards, even if they existed, will not show whether
(as Peloton alleges, and MEC denies) MEC deceived other customers in a similar manner to Peloton for
purposes of showing fraudulent intent.
MEC should not be compelled to respond to the interrogatories as each are far outside the scope
of proportionate discovery of MEC’s dealings with third parties that has already been put into place.
VIII. Peloton’s Request to Inspect MEC’s MMS System Relating to the Supply Agreement Should be
Denied.
Peloton also reiterates its request to schedule an in-person inspection of MEC’s electronic
manufacturing project tracking system (called “MMS”) to the extent it relates to the Supply Agreement.
This request is unduly burdensome, cumulative and moreover, duplicative of discovery that MEC has
already provided to Peloton. As described in MEC’s February 16, 2024 letter, the categories of
information that Peloton suspects the MMS system contains relate in broad strokes to MEC’s ramp up to
production for the Supply Agreement. MEC has already produced thousands of documents related to this
topic (which is more than sufficient to show MEC’s performance under the Supply Agreement). As MEC
has told Peloton on numerous occasions, the MMS system does not contain any non-cumulative
responsive information. As such, Peloton’s request to compel an inspection of such should be denied. To
the extent the Court is inclined to grant Peloton’s request, MEC respectfully requests an opportunity to
brief this issue.
9
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Respectfully submitted,
/s/ Benjamin I. Bassoff
Benjamin I. Bassoff, Esq.
cc: Counsel of Record (via email)
10
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MEC’s February 16, 2024 Update Letter
and Attachments
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ATTORNEYS AT LAW
90 PARK AVENUE
NEW YORK, NY 10016-1314
212.682.7474 TEL
212.687.2329 FAX
WWW.FOLEY.COM
WRITER’S DIRECT LINE
212.338.3607
bbassoff@foley.com
February 16, 2024
Via EMAIL
Michael J. Rand
New York Supreme Court, New York County (Commercial Division)
60 Centre Street, Room 626
New York, NY 10007
mrand@nycourts.gov
Re: Mayville Engineering Company, Inc. v. Peloton Interactive, Inc., Index No. 652735/2022
Dear Mr. Rand:
As you know, we represent Plaintiff Mayville Engineering Company, Inc. (“MEC”). We write
to provide an update on the status of discovery in this matter, and further pursuant to Justice Schecter’s
Part 54 Rule 21 to request a teleconference to remedy Peloton’s refusal to provide relevant discovery
needed to defend Peloton’s fraud counterclaim, and its refusal to remedy deficiencies in its Slack
message productions.1 These subjects are addressed in Sections I and II, infra. In Section III, MEC
responds to Peloton’s baseless requests to compel yet more discovery of MEC’s business dealings
with its other customers, and its request to inspect MEC’s MMS system.
I. Peloton is Obstructing Discovery, Including Discovery of Documents Material and
Necessary to Defend the Fraud Counterclaim.
MEC initiated this lawsuit to recover fixed revenue payments of approximately $2.2 MM per
month ($107 MM in sum for the Agreement’s term) that Peloton promised to pay under the clear terms
of the parties’ Supply Agreement for MEC’s capacity to manufacture component parts for Peloton’s
bikes. Initially, Peloton confronted this straightforward breach of contract action by denying what the
Supply Agreement plainly states and seeking to dismiss the action. That strategy failed and discovery
revealed that the Supply Agreement means exactly what it says (as evidenced by, among other things,
the apparent admissions of Peloton’s own employees and executives [see December 22 Letter at 1-3
for just a sample from Peloton’s Slack messages]) and further revealed that Peloton—recognizing its
commitments to MEC—plotted to forestall MEC’s lawsuit by (among other things) stringing MEC
along and deflecting its questions about whether Peloton would perform (see id.).
As this discovery came to light, Peloton formed a new strategy to evade liability—bringing a
baseless counterclaim asserting that Peloton, a billion-dollar fitness behemoth and at one time one of
1
Attached here for reference are MEC’s December 1, 2022 second sets of document requests (“Requests”),
which include Requests 44-48 that MEC seeks to compel, as well as Peloton’s responses and objections to the same, and
MEC’s December 22, 2023 letter regarding deficiencies in Peloton’s Slack document production.
AUSTIN DETROIT MEXICO CITY SACRAMENTO TAMPA
BOSTON HOUSTON MIAMI SAN DIEGO WASHINGTON, D.C.
CHICAGO JACKSONVILLE MILWAUKEE SAN FRANCISCO BRUSSELS
DALLAS LOS ANGELES NEW YORK SILICON VALLEY TOKYO
DENVER MADISON ORLANDO TALLAHASSEE SALT LAKE CITY
FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022
NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024
February 16, 2024
Page 2
the most valuable companies in the world, was purportedly somehow duped by preliminary cost and
profit margin estimates that MEC provided to Peloton during the early stages of the parties’ contract
negotiations (well before any facility had been developed for use in the manufacturing project). On
December 1, 2023, MEC served supplemental document requests seeking information necessary to
defend the counterclaim and to show that MEC’s preliminary cost and profit margin estimates (1) were
not material to Peloton’s decision to enter into the Supply Agreement; (2) were not even relied upon
by Peloton; and (3) to the extent they were relied upon, such reliance was not justifiable—and therefore
that Peloton will not be able to prove critical elements of its counterclaim.
Specifically, MEC propounded Requests 44-47, which seek documents and communications
relating to Peloton’s practices, policies, standards and criteria for negotiating with suppliers, as well
as Request 48, which seeks all documents and communications relating to any precautions or due
diligence that Peloton undertook (if any) to protect itself against the risk of false representations in
connection with negotiating the in-issue Supply Agreement. At this time, MEC only seeks to compel
production of documents within the date range of April 2020 through March 2021.2 These Requests
are material and necessary to test whether Peloton actually relied on this information it obtained from
MEC (as it alleges in its Counterclaim), and whether Peloton has or had any best practices for due
diligence or verification of information it obtains from suppliers, which is relevant to the issues of
materiality and reliance (as well as the justifiability of any purported reliance by Peloton). In its
responses and objections to these Requests, Peloton—in violation of this Part’s rules—has asserted
generalized and boilerplate relevance, burden, proportionality, and scope objections to the document
requests and refused to produce any documents at all. See Peloton’s Responses and Objections to
MEC’s Second Set of Document Requests; see also Part 54 Rule 32 (The applicable Supreme Court
rules and Justice Schecter’s Part 54 Rules require “[o]bjections to document requests and
interrogatories [to] be made with specificity in accordance with Commercial Division Rule 11-e(a)
and CPLR 3133(a), respectively; general objections will be summarily overruled.”).
When the parties conferred about Peloton’s deficient objections in a February 12, 2024
videoconference, Peloton’s counsel indicated that Peloton would be willing to produce responsive
documents subject to a date restriction of April 2020 through March 2021, which MEC said that it
would consider. Then, yesterday afternoon—the day this update was originally due—Peloton reneged
on its original proposal and sent MEC a new proposal substantially limiting the scope of documents
that MEC had originally requested.3 Here is a comparison chart of MEC’s Requests and Peloton’s
proposed, limited versions–
2
MEC reserves the right to request an expanded date range should it discover that responsive material may exist
outside of these date parameters.
3
Although Peloton claims in its letter that it stated it did not agree, at the February 12 teleconference, to
produce all documents responsive to MEC’s requests subject only to agreement on date restrictions, we have no
recollection of discussing that.
FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022
NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024
February 16, 2024
Page 3
MEC’s Requests Peloton’s Proposed Revisions and
Limitations
REQUEST NUMBER 44: Company-wide policies, manuals, or training
Documents sufficient to show all factors and materials (if any) utilized by Peloton for
criteria that Peloton regularly, ordinarily, or selecting a supplier for sourcing mechanical
customarily considers in selecting parts for Bikes.
manufacturers or suppliers to manufacture or
supply parts for Peloton’s fitness products,
including but not limited to Bikes.
REQUEST NUMBER 45: Company-wide policies, manuals, or training
All Documents reflecting or containing any materials (if any) utilized by Peloton for
written or recorded policies, practices, selecting a supplier for sourcing mechanical
procedures, manuals, training materials, parts for Bikes.
guidelines, checklists, standards, factors or
criteria utilized by Peloton for sourcing or
procuring – or for selecting manufacturers or
suppliers to manufacture or supply – parts for
Peloton’s fitness products, including but not
limited to Bikes.
REQUEST NUMBER 46: Company-wide policies (if any) for the
Documents and Communications sufficient to precautions, measures, steps, research,
show the precautions, measures, steps, procedures, analyses, and due diligence that
research, procedures, analyses and due Peloton should undertake to protect itself
diligence (if any) that Peloton regularly, against the risk of false material
ordinarily or customarily undertakes to representations or omissions by a
protect itself against the risk of false material counterparty in connection with Peloton's
representations or omissions by a agreements with manufacturers
Preview
FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 ATTORNEYS AT LAW 90 PARK AVENUE NEW YORK, NY 10016-1314 212.682.7474 TEL 212.687.2329 FAX WWW.FOLEY.COM WRITER’S DIRECT LINE 212.338.3401 bbassoff@foley.com CLIENT/MATTER NUMBER 065397-0130 March 7, 2024 Via Email Michael J. Rand New York Supreme Court, New York County (Commercial Division) 60 Centre Street, Room 626 New York, NY 10007 mrand@nycourts.gov Re: Mayville Engineering Company, Inc. v. Peloton Interactive, Inc., Index No. 652735/2022 Dear Mr. Rand: As you know, we represent Plaintiff Mayville Engineering Company, Inc. (“MEC”). We write to provide a further update on the status of discovery in this matter, as you requested in your February 20, 2024 email, and in advance of the teleconference on March 11, 2024 to discuss outstanding discovery disputes between the parties. As we noted in our February 16, 2024 letter 1 to you, Peloton has refused to provide relevant information necessary to defend its purported fraudulent inducement counterclaim. After exchanging numerous letters and meeting and conferring with Peloton’s counsel—including a meet and confer last Friday per your instruction—Peloton continues to refuse to provide relevant discovery needed to defend against its fraud counterclaim, and to remedy deficiencies in its Slack message productions. These subjects are addressed in Sections I-III, infra. Sections IV through VIII address the relief Peloton seeks in its letter. I. Peloton Continues to Obstruct and Delay Discovery Material and Necessary to Defend the Fraud Counterclaim. This lawsuit was commenced by MEC to recover fixed revenue payments—$107 million in sum—that Peloton promised to pay under the clear terms of the parties’ Supply Agreement for MEC’s capacity to manufacture component parts for Peloton’s bikes. Since discovery commenced, what has been revealed is what is already obvious from the face of the Supply Agreement—that the Supply Agreement means exactly what it says and that, recognizing its commitments to MEC, Peloton plotted Attached for reference is MEC’s February 16, 2024 update letter, which incorporates and attaches MEC’s 1 December 1, 2022 second sets of document requests (“Requests”), Peloton’s responses and objections to the same, and MEC’s December 22, 2023 letter regarding deficiencies in Peloton’s Slack document production. Also attached is MEC’s February 2, 2024 letter regarding further deficiencies in Peloton’s Slack document production. AUSTIN DETROIT MEXICO CITY SACRAMENTO TALLAHASSEE BOSTON HOUSTON MIAMI SALT LAKE CITY TAMPA CHICAGO JACKSONVILLE MILWAUKEE SAN DIEGO WASHINGTON, D.C. DALLAS LOS ANGELES NEW YORK SAN FRANCISCO BRUSSELS DENVER MADISON ORLANDO SILICON VALLEY TOKYO FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 2 to forestall an eventual lawsuit brought by MEC by stringing MEC along and deflecting its questions about whether Peloton would perform. 2 As this discovery came to light, Peloton concocted a new strategy to evade liability by bringing a baseless counterclaim asserting that Peloton was supposedly duped into the Supply Agreement by preliminary cost and profit margin estimates that MEC provided to Peloton during the early stages of the parties’ contract negotiations. After contemplating Peloton’s counterclaim, MEC served the Requests, seeking information necessary to defend the counterclaim and to show that MEC’s preliminary cost and profit margin estimates were (1) not material to Peloton’s decision to enter into the Supply Agreement; (2) not relied upon by Peloton; and (3) to any extent they were relied upon, Pelton’s reliance was not justified. Within the Requests, MEC postulated Requests 44-47, which seek documents and communications relating to Peloton’s practices, policies, standards and criteria for negotiating with suppliers, as well as Request 48, which seeks all documents and communications relating to any precautions or due diligence that Peloton undertook (if any) to protect itself against the risk of false representations in connection with negotiating the in-issue Supply Agreement. In making these requests, MEC seeks only to compel production of documents within the date range of April 2020 through March 2021.3 These Requests are material and necessary to test whether Peloton actually relied on this information it obtained from MEC (as it alleges in its Counterclaim), and whether Peloton has or had any best practices for due diligence or verification of information it obtains from suppliers, which is relevant to the issues of materiality and reliance (as well as the justifiability of any purported reliance by Peloton). These requests are narrowly tailored, and MEC at this time is only seeking documents from the narrow date range of April 2020 to March 2021 (less than a year), and accordingly the discovery should not be burdensome for Peloton to produce. 4 In its responses and objections to these Requests and in clear violation of this Part’s rules, Peloton asserted generalized and boilerplate relevance, burden, proportionality, and scope objections to the document requests and refused to produce any documents at all. See Peloton’s Responses and Objections to MEC’s Second Set of Document Requests; see also Part 54 Rule 32. When the parties conferred about Peloton’s deficient objections in a February 12, 2024 videoconference, Peloton’s counsel indicated that Peloton would be willing to produce responsive documents subject to a date restriction of April 2020 through March 2021, which MEC said that it would consider. Then, on 2 Evidenced by, inter alia, Peloton’s own employees and executives apparent admissions. See December 22 Letter at 1-3; February 2 Letter at 1-2. 3 MEC reserves the right to request an expanded date range should it discover that responsive material may exist outside of these date parameters. 4 Although Peloton claims in its letter that it stated it did not agree, at the February 12 teleconference, to produce all documents responsive to MEC’s requests subject only to agreement on date restrictions, we have no recollection of discussing that. 2 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 3 February 15, 2024, Peloton reneged on its original proposal and sent MEC a new proposal substantially limiting the scope of documents that MEC had originally requested. This new proposal speciously seeks to limit Peloton’s production to “company-wide” and “formal” written due diligence policies for Requests 44-465 which are unclear qualifications. Further, Peloton’s proposal seeks to erase Request 44, as Peloton proposes producing the same cherry-picked “company-wide policies, manuals and training materials (if any)” in response to this Request as it is proposing to produce in response to Request 45. Yet, Peloton’s proposal ignores the heart of the discovery that MEC seeks from Request 44—factors and criteria that Peloton regularly, ordinarily, or customarily considers in selecting manufacturers or suppliers whether “company-wide” or not and whether formalized by Peloton or not. Providently, MEC limited Request 44 to “Documents sufficient to show” such that the Request need not be narrowed any further. Like Request 44, Peloton also seeks to improperly restricts Request 48, which was appropriately narrowed to documents relating to Peloton’s due diligence (if any) in connection with the parties’ Supply Agreement. Here, Peloton proposes producing only documents “sufficient to show” due diligence. This is clearly problematic, since it would permit Peloton to pick-and-choose which documents to produce, and will not allow MEC to see the full picture of Peloton’s diligence on the Supply Agreement.6 As highlighted in MEC’s February Letter, Peloton’s proposal for Requests 44-47 lack any assurances that MEC will receive the relevant discovery necessary to defend the Counterclaim—as Peloton unilaterally proposed to narrow the requests and further stated that it would only produce documents “if any” exist. Per your instruction, the parties met and conferred again this past Friday to discuss the issues outlined in the Parties February 16 Letters, including Peloton’s deficient responses to MEC’s document requests and to obtain assurance that Peloton’s proposal to narrow these requests would lead to a substantive document production. However, Peloton’s counsel was unable to confirm whether any of the documents it proposed to produce even exist, and refused to commit to a date certain when it would confirm whether such documents exist or for production of documents (if any). Peloton should not be permitted to obfuscate flaws in its counterclaim by producing cherry- picked documents (if any even exist) on the key fraud elements of materiality and reliance. Peloton should be instructed to produce all documents responsive to MEC’s Requests, as originally phrased by MEC, for the period of April 2020 through March 2021. To the extent that the Court is inclined to deny this request, MEC respectfully requests the opportunity to brief this issue. 5 Peloton also arbitrarily proposes to excise “practices” and “guidelines, checklists, standards, factors or criteria” from Request 45, and to arbitrarily restrict the due diligence training materials requested in Request 47 to only those offered or provided to specific employees that MEC has also requested as part of its Request. 6 Peloton indicated that it has already produced documents responsive to Request 48 and that it is continuing to investigate whether any additional responsive documents remain to be produced. 3 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 4 II. Peloton is Delaying Providing Discovery it Has Already Agreed to Produce, Delaying Providing Dates of Availability for its Corporate Representatives, and is Refusing to Remedy Deficiencies in its Privilege Log. Furthermore, the parties additional meet and confer failed to spring action from Peloton’s glacial pace on numerous other discovery items. Although Peloton agreed at a meet and confer in the beginning of February to amend its deficient responses to MEC’s December 1, 2023 supplemental interrogatories (which seek information necessary to defend Peloton’s counterclaim, including a computation of Peloton’s purported damages), Peloton still has not done so, nor has it committed to a date certain by which it will do so (Peloton has said only that it “anticipates” serving amended interrogatory responses by March 12, which is less than 3 weeks before the existing fact discovery cutoff). Nor has Peloton committed to a date certain to produce documents relating to its purported counterclaim damages. Peloton also for weeks delayed providing dates of availability for its corporate representative deposition, and then offered only one day—the very last day of fact discovery—March 29.7 Peloton also delayed for weeks in responding to MEC’s February 12 letter regarding numerous deficiencies in Peloton’s privilege log—including Peloton’s withholding and redactions of communications with a third-party consultant on the basis of purported privilege. Peloton waited until nearly midnight on Friday, March 1 to respond—one business day before this update was due—depriving the parties of the opportunity to meet and confer.8 Peloton must commit to dates certain by which it will provide amended interrogatory response and produce documents MEC requested over four months ago, and which Peloton has already agreed to produce and are not subject to dispute. Peloton must also be more responsive to requests for dates for its corporate representative deposition—which was noticed over six months ago. 7 MEC subsequently requested additional dates of availability, and Peloton provided a few (all within the waning days of fact discovery) but MEC’s counsel is not available to take Peloton’s deposition on those dates. Since none of the dates that Peloton proposed will work, MEC’s counsel proposed a limited extension of the discovery schedule solely to accommodate this deposition, and proposed dates in early May. Just today, the parties have agreed to schedule the deposition on May 8, 2024. 8 In the letter, which we received late Friday night, Peloton persisted in its resistance to producing documents for which we see no meritorious claim for privilege. MEC is still reviewing and analyzing Peloton’s long-overdue response letter, and considering the positions that Peloton took at today’s meet and confer, and reserves the right to raise these deficiencies if the parties are unable to resolve them through the meet and confer process. 4 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 5 III. Peloton Continues to Refuse to Produce Google Drive Documents Sent Via Links in Responsive Messages in its Slack Messages. On top of hampering discovery into its Counterclaim, Peloton continues to refuse to remedy deficiencies in its belated Slack production (which Peloton failed to complete by the November 30 deadline set by the Court). Concerningly, Peloton’s production skips various files transmitted in responsive messages through Google links that are otherwise relevant 9 and should have been produced to MEC, and despite Peloton’s “Google Drive” being one of the few repositories that Peloton explicitly agreed to search and produce documents from in the parties ESI Protocol. See NYSCEF 73 at Appendix B. At the parties meet and confer, Peloton reiterated that it refuses to change its position with respect to searching for and producing documents from the repository it agreed to produce documents from. Peloton should be instructed to produce all responsive Google Drive documents that were sent as links in its Slack production 10, and which it was required to produce under the terms of the parties ESI Protocol. To the extent that the Court is inclined to deny this request, MEC respectfully requests the opportunity to brief this issue. IV. Peloton’s Requests to Compel MEC to Produce Full-Blown ESI Discovery of Its Business Dealings with other Customers are Baseless and Should be Denied. Peloton’s update letter requests that the Court compel MEC to produce over four years’ worth of business data for three of MEC’s largest customers without regard to procedure or burden. This blanket request, which has already been discussed on numerous occasions and considered by the Court in November, seeks unfettered discovery on what relates to one aspect of one element (intent) of Peloton’s counterclaim. It is plainly overbroad, unduly burdensome and disproportionate to the needs of the case. When Peloton first made its request for this discovery, MEC raised with the Court a prediction that Peloton would never be satisfied with MEC’s productions in response to its request. Specifically, that no matter how many documents MEC produced, the discovery would take on a life of its own, morphing 9 For example, and as highlighted in MEC’s February 16 Letter, Peloton fails to produce a document titled “Rhea Discovery Exit Deck - WIP - Part Deux” referenced in PTON-025358. This is a communication reflecting internal Peloton discussion surrounding the plans for project Rhea (a new bike project that Peloton offered to MEC as a replacement for the manufacturing work that Peloton had originally awarded to MEC in the Supply Agreement). Peloton also fails to produce a document titled “Pegasus Bike+ Program Charter” that was linked in PTON-029500. This message concerns Peloton’s business planning charter for the Pegasus bike program that MEC was contracted to support. 10 Peloton continues to produce additional Slack messages to MEC. On March 1, 2024, Peloton produced 3,400 additional Slack messages (in response to MEC’s December 22 Letter and February 2 Letter requesting full daily chat conversations containing highly relevant chat messages) which provide the full daily chat threads for highly relevant conversations. While MEC’s review of these messages is still underway, it is apparent that the full daily threads provide vital and necessary context to highly relevant messages. Thus, MEC anticipates making further requests from Peloton to produce full daily chat threads for highly relevant Slack conversations. 5 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 6 into a costly and burdensome fishing expedition for both the parties and for the Court. Hearing these concerns, the Court implemented a procedure whereby MEC would produce a sample of documents relating to costs and expense information for quotes for certain of MEC’s customers, and then the parties would meet and confer on the need for any further productions. Contrary to Peloton’s assertions, MEC has complied with this procedure, and to date has produced hundreds of quote documents to Peloton. Yet, just as predicated, Peloton comes to the Court unjustifiably dissatisfied and seeking to embark on a further costly and distracting fishing expedition, including full-blown ESI discovery from MEC. We note that Peloton’s latest letter for the first time argues that such ESI discovery should “start” with production of Mr. Raber’s documents, but Peloton provides no indication that it would be willing to stop there. More likely than not, if permitted, it will simply perpetuate Peloton’s endless fishing expedition. Additional and expansive discovery of MEC’s quotations to its other customers is simply not warranted. MEC has already provided substantial discovery of its estimated cost and profit information concerning both Peloton and the requested third-party customers. First, MEC has produced thousands of documents relating to its internal cost and profit information with respect to Peloton and the Supply Agreement. Second, with respect to the third-party customers, MEC has produced hundreds of documents in accordance with the procedure outlined in November. As detailed within MEC’s January 12, 2024 and February 16, 2024 updates to the Court, these third party quotes reflect a sample of MEC’s quotations for Deere and PACCAR parts11 from the five-month period when the parties were negotiating the at-issue Supply Agreement (the period during which Peloton asserts in its counterclaim that MEC purportedly provided inaccurate cost and profit information to Peloton and on which Peloton purport to have relied upon in agreeing to enter into the Supply Agreement). While Peloton echoes the same complaint that MEC is “unilaterally” selecting this five-month window, it again fails to offer any foundation as to why MEC should produce internal cost and profit information concerning Deere, Oshkosh, and PACCAR for a broader period of time—for which Peloton seeks from “January 1, 2020 through the date of production.” In any event, as Peloton notes in its letter, MEC offered as a compromise to produce additional documents relating to quotes from each of the months in the period that Peloton originally requested— five quotes from each month for which MEC has not yet produced quote data for both Deere and PACCAR. Such a production would provide Peloton with hundreds of additional quotes and thousands of additional datapoints. This is more than sufficient and should conclude discovery on this subject. Moreover, it is proportionate to the needs of the case and the discrete issue to which these documents are arguably relevant. Peloton reiterates its complaint that MEC limits its productions with respect to Deere and PACCAR to “documents from or related to MEC’s quotation system.” But, as stated in MEC’s February 16 Letter, this is a perfectly legitimate, reasonable and proportionate limitation on this category of discovery since, as MEC already explained to Peloton (repeatedly and again the parties March 1 meet and 11 MEC does not provide cost or profit information to Oshkosh in the ordinary course of quoting Oshkosh parts. 6 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 7 confer) and provided in its January update to the Court, MEC does not generally share cost or profit information with Deere or PACCAR outside of this method and MEC. While again taking issue with MEC’s redaction of irrelevant information in Deere’s quote documents made at the request of Deere, Peloton reiterates the same arguments without support that they are “entitled” to view the entire document and not rely on the representation of MEC’s counsel.12 As MEC has explained numerous times to Peloton, these complaints are unfounded. MEC has only redacted—pursuant to Deere’s request—Deere’s confidential information, not any of MEC’s pricing information (which is the information Peloton requested). Despite the Court’s warning to Peloton against over-litigating discovery issues—specifically, the issue of MEC’s costs and expenses incurred in connection with the Supply Agreement—Peloton has overlitigated discovery into MEC’s business dealings with other customers. See July 3, 2023 Decision and Order on Motion # 3, NYSCEF Doc No. 142 (“the court is dismayed by defendant’s overlitigation of this discovery issue. [] Further serial relitigation of adverse discovery rulings may result in cost shifting.”). Peloton’s request—including its request for yet more briefing on these issues through a motion to compel—should be denied. V. Peloton’s Request to Re-Depose MEC’s Corporate Representative Should be Denied. In August 2023, Peloton’s legal team—which includes the co-chairs of Covington’s commercial litigation practice—made a strategic decision to take an early deposition of MEC’s corporate representative, instead of waiting to schedule it until after the bulk of fact witness depositions had been completed, and all discovery disputes had been resolved. Peloton used all 7-hours (and then some) that it is presumptively entitled to under the Commercial Division rules and did not reserve any time in the event that new issues arose later in the litigation, such as its counterclaim. Moreover, Peloton’s lawyers largely used the corporate representative deposition to develop the allegations that comprise their counterclaim, including asking MEC’s corporate representative about its quoting practices for other MEC customers—the very subjects on which they seek to re-depose MEC. Peloton should not be permitted a cumulative and duplicative re-do. See Lacqua v. Staten Is. Univ. Hosp., 56 A.D.3d 529, 530 (2d Dep’t 2008) (affirming denial of plaintiff’s request for further deposition of defendant where defendant “had been completely and fully deposed by the plaintiff in 2005, and the plaintiff failed to demonstrate that a further deposition was necessary”); Czechowski v. Buffalo Niagara Med. Campus, Inc., 175 A.D.3d 1817, 1818 (4th Dep’t 2019) (affirming denial of request for second depositions of two witnesses where “the questions that plaintiff intended to ask those witnesses during the second depositions either called for privileged information, or were not material or relevant to plaintiff's personal injury action, or were asked and answered during those witnesses’ first depositions”). To the extent that Peloton has any new questions to ask (which we doubt) regarding the documents that MEC has 12 We note that Peloton has made similar confidentiality redactions in its document production. 7 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 8 produced in response to Peloton’s request for quote documents to other customers, Peloton has already noticed a deposition of the MEC employee who was assisting counsel in connection with that discovery, and presumably Peloton will ask him those questions. An additional corporate representative deposition would also be unduly burdensome. MEC has already prepared two representatives to testify on Peloton’s corporate representative topics: Todd Butz (MEC’s CFO) and Ryan Raber. Mr. Butz flew to New York to sit for his deposition, and he (and his counsel) set aside two days for his testimony—one day in his fact witness capacity and second day in his corporate representative capacity. At the conclusion of the first day of testimony, Peloton’s counsel, Mr. Gimel, informed us that they had decided not to proceed with the second day because “today’s deposition of Mr. Butz covered the topics that we intended to cover in the entity deposition of MEC tomorrow.” Despite conceding that they had already used a portion of Mr. Butz’s deposition to cover corporate representative topics, Peloton proceeded devote 7 hours on the record to corporate representative topics at Mr. Raber’s deposition, and then continued to ask questions on those topics during the fact witness portion of his deposition on the second day of Mr. Raber’s testimony, even after their corporate representative time had elapsed. Simply put, Peloton is not entitled to re-do MEC’s corporate representative deposition, at MEC’s substantial burden, cost and expense. Peloton’s request should be denied. VI. Peloton’s Request to Inspect MEC’s ERP Software Systems Relating to Deer, PACCAR and Oshkosh is Unduly Burdensome, Disproportionate to the Needs of the Case, and Should be Denied. Peloton reasserts that MEC’s burden concerns about the voluminous ESI-discovery that Peloton is seeking will in some way be relieved if it is permitted to inspect MEC’s ERP systems relating to Deere, Oshkosh and PACCAR, which is used to track manufacturing for parts—not to quote prices for parts for these customers.13 Peloton’s argument makes no sense, first because MEC’s manufacturing information for parts for other customers is totally irrelevant to any issue in dispute in the lawsuit. It would also not alleviate MEC’s burden concerns because Peloton is seeking inspection in addition to (and not in substitution of) ESI document discovery, and (in addition to being irrelevant) inspection will be highly and unduly burdensome and invasive as it will require the presence of MEC’s counsel and will take time away from MEC employees who are familiar with the ERP system. VII. MEC Should Not be Compelled to Respond to Peloton’s Improper Interrogatories. As detailed in MEC February 16 Letter, Peloton’s demand to compel responses to its improper interrogatories should be denied. As an initial matter, Interrogatories 10-13 are poorly disguised MEC uses a system called “Quoting 3.0” to quote parts for these customers—as we have told Peloton—and the 13 documents and information that MEC has produced to Peloton to date manually were pulled from this system. 8 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 9 contention interrogatories because they contend that MEC has provided cost or profit information to third parties that is “different” (Peloton’s request does not specify, or otherwise define, what “different” means) from MEC’s internal cost and profit information (which is what Peloton hopes to establish as part of its counterclaim). Further, in answering the Interrogatories, MEC would be required to either confirm or deny that contention. During the parties March 1, 2024 meet and confer, Peloton made no offer to otherwise amend or compromise on these Interrogatories. Pursuant to Justice Schecter’s Part 54 rules, which prohibit such contention Interrogatories, Peloton’s demand to compel (or brief to compel) should be denied. In addition to the reasons above and similar to the other discovery Peloton seeks, these interrogatories are overbroad, unduly burdensome, and constitute an unsupported fishing expedition. Interrogatory 14 is simply not relevant. While Peloton argues that it would “allow Peloton to ascertain information MEC has continually refused to provide” this is not an argument that the information is relevant. Such policies, practices, guidelines and standards, even if they existed, will not show whether (as Peloton alleges, and MEC denies) MEC deceived other customers in a similar manner to Peloton for purposes of showing fraudulent intent. MEC should not be compelled to respond to the interrogatories as each are far outside the scope of proportionate discovery of MEC’s dealings with third parties that has already been put into place. VIII. Peloton’s Request to Inspect MEC’s MMS System Relating to the Supply Agreement Should be Denied. Peloton also reiterates its request to schedule an in-person inspection of MEC’s electronic manufacturing project tracking system (called “MMS”) to the extent it relates to the Supply Agreement. This request is unduly burdensome, cumulative and moreover, duplicative of discovery that MEC has already provided to Peloton. As described in MEC’s February 16, 2024 letter, the categories of information that Peloton suspects the MMS system contains relate in broad strokes to MEC’s ramp up to production for the Supply Agreement. MEC has already produced thousands of documents related to this topic (which is more than sufficient to show MEC’s performance under the Supply Agreement). As MEC has told Peloton on numerous occasions, the MMS system does not contain any non-cumulative responsive information. As such, Peloton’s request to compel an inspection of such should be denied. To the extent the Court is inclined to grant Peloton’s request, MEC respectfully requests an opportunity to brief this issue. 9 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 Michael J. Rand March 7, 2024 Page 10 Respectfully submitted, /s/ Benjamin I. Bassoff Benjamin I. Bassoff, Esq. cc: Counsel of Record (via email) 10 FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 MEC’s February 16, 2024 Update Letter and Attachments FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 ATTORNEYS AT LAW 90 PARK AVENUE NEW YORK, NY 10016-1314 212.682.7474 TEL 212.687.2329 FAX WWW.FOLEY.COM WRITER’S DIRECT LINE 212.338.3607 bbassoff@foley.com February 16, 2024 Via EMAIL Michael J. Rand New York Supreme Court, New York County (Commercial Division) 60 Centre Street, Room 626 New York, NY 10007 mrand@nycourts.gov Re: Mayville Engineering Company, Inc. v. Peloton Interactive, Inc., Index No. 652735/2022 Dear Mr. Rand: As you know, we represent Plaintiff Mayville Engineering Company, Inc. (“MEC”). We write to provide an update on the status of discovery in this matter, and further pursuant to Justice Schecter’s Part 54 Rule 21 to request a teleconference to remedy Peloton’s refusal to provide relevant discovery needed to defend Peloton’s fraud counterclaim, and its refusal to remedy deficiencies in its Slack message productions.1 These subjects are addressed in Sections I and II, infra. In Section III, MEC responds to Peloton’s baseless requests to compel yet more discovery of MEC’s business dealings with its other customers, and its request to inspect MEC’s MMS system. I. Peloton is Obstructing Discovery, Including Discovery of Documents Material and Necessary to Defend the Fraud Counterclaim. MEC initiated this lawsuit to recover fixed revenue payments of approximately $2.2 MM per month ($107 MM in sum for the Agreement’s term) that Peloton promised to pay under the clear terms of the parties’ Supply Agreement for MEC’s capacity to manufacture component parts for Peloton’s bikes. Initially, Peloton confronted this straightforward breach of contract action by denying what the Supply Agreement plainly states and seeking to dismiss the action. That strategy failed and discovery revealed that the Supply Agreement means exactly what it says (as evidenced by, among other things, the apparent admissions of Peloton’s own employees and executives [see December 22 Letter at 1-3 for just a sample from Peloton’s Slack messages]) and further revealed that Peloton—recognizing its commitments to MEC—plotted to forestall MEC’s lawsuit by (among other things) stringing MEC along and deflecting its questions about whether Peloton would perform (see id.). As this discovery came to light, Peloton formed a new strategy to evade liability—bringing a baseless counterclaim asserting that Peloton, a billion-dollar fitness behemoth and at one time one of 1 Attached here for reference are MEC’s December 1, 2022 second sets of document requests (“Requests”), which include Requests 44-48 that MEC seeks to compel, as well as Peloton’s responses and objections to the same, and MEC’s December 22, 2023 letter regarding deficiencies in Peloton’s Slack document production. AUSTIN DETROIT MEXICO CITY SACRAMENTO TAMPA BOSTON HOUSTON MIAMI SAN DIEGO WASHINGTON, D.C. CHICAGO JACKSONVILLE MILWAUKEE SAN FRANCISCO BRUSSELS DALLAS LOS ANGELES NEW YORK SILICON VALLEY TOKYO DENVER MADISON ORLANDO TALLAHASSEE SALT LAKE CITY FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 February 16, 2024 Page 2 the most valuable companies in the world, was purportedly somehow duped by preliminary cost and profit margin estimates that MEC provided to Peloton during the early stages of the parties’ contract negotiations (well before any facility had been developed for use in the manufacturing project). On December 1, 2023, MEC served supplemental document requests seeking information necessary to defend the counterclaim and to show that MEC’s preliminary cost and profit margin estimates (1) were not material to Peloton’s decision to enter into the Supply Agreement; (2) were not even relied upon by Peloton; and (3) to the extent they were relied upon, such reliance was not justifiable—and therefore that Peloton will not be able to prove critical elements of its counterclaim. Specifically, MEC propounded Requests 44-47, which seek documents and communications relating to Peloton’s practices, policies, standards and criteria for negotiating with suppliers, as well as Request 48, which seeks all documents and communications relating to any precautions or due diligence that Peloton undertook (if any) to protect itself against the risk of false representations in connection with negotiating the in-issue Supply Agreement. At this time, MEC only seeks to compel production of documents within the date range of April 2020 through March 2021.2 These Requests are material and necessary to test whether Peloton actually relied on this information it obtained from MEC (as it alleges in its Counterclaim), and whether Peloton has or had any best practices for due diligence or verification of information it obtains from suppliers, which is relevant to the issues of materiality and reliance (as well as the justifiability of any purported reliance by Peloton). In its responses and objections to these Requests, Peloton—in violation of this Part’s rules—has asserted generalized and boilerplate relevance, burden, proportionality, and scope objections to the document requests and refused to produce any documents at all. See Peloton’s Responses and Objections to MEC’s Second Set of Document Requests; see also Part 54 Rule 32 (The applicable Supreme Court rules and Justice Schecter’s Part 54 Rules require “[o]bjections to document requests and interrogatories [to] be made with specificity in accordance with Commercial Division Rule 11-e(a) and CPLR 3133(a), respectively; general objections will be summarily overruled.”). When the parties conferred about Peloton’s deficient objections in a February 12, 2024 videoconference, Peloton’s counsel indicated that Peloton would be willing to produce responsive documents subject to a date restriction of April 2020 through March 2021, which MEC said that it would consider. Then, yesterday afternoon—the day this update was originally due—Peloton reneged on its original proposal and sent MEC a new proposal substantially limiting the scope of documents that MEC had originally requested.3 Here is a comparison chart of MEC’s Requests and Peloton’s proposed, limited versions– 2 MEC reserves the right to request an expanded date range should it discover that responsive material may exist outside of these date parameters. 3 Although Peloton claims in its letter that it stated it did not agree, at the February 12 teleconference, to produce all documents responsive to MEC’s requests subject only to agreement on date restrictions, we have no recollection of discussing that. FILED: NEW YORK COUNTY CLERK 03/11/2024 11:19 PM INDEX NO. 652735/2022 NYSCEF DOC. NO. 217 RECEIVED NYSCEF: 03/11/2024 February 16, 2024 Page 3 MEC’s Requests Peloton’s Proposed Revisions and Limitations REQUEST NUMBER 44: Company-wide policies, manuals, or training Documents sufficient to show all factors and materials (if any) utilized by Peloton for criteria that Peloton regularly, ordinarily, or selecting a supplier for sourcing mechanical customarily considers in selecting parts for Bikes. manufacturers or suppliers to manufacture or supply parts for Peloton’s fitness products, including but not limited to Bikes. REQUEST NUMBER 45: Company-wide policies, manuals, or training All Documents reflecting or containing any materials (if any) utilized by Peloton for written or recorded policies, practices, selecting a supplier for sourcing mechanical procedures, manuals, training materials, parts for Bikes. guidelines, checklists, standards, factors or criteria utilized by Peloton for sourcing or procuring – or for selecting manufacturers or suppliers to manufacture or supply – parts for Peloton’s fitness products, including but not limited to Bikes. REQUEST NUMBER 46: Company-wide policies (if any) for the Documents and Communications sufficient to precautions, measures, steps, research, show the precautions, measures, steps, procedures, analyses, and due diligence that research, procedures, analyses and due Peloton should undertake to protect itself diligence (if any) that Peloton regularly, against the risk of false material ordinarily or customarily undertakes to representations or omissions by a protect itself against the risk of false material counterparty in connection with Peloton's representations or omissions by a agreements with manufacturers