Oconnor (Burch vs Burch-brief) Blavatnik

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE J. CHRISTOPHER BURCH, JCB INVESTMENTS, LLC, and C. WONDER LLC, Plaintiffs, v. TORY BURCH, EDUARDO HOLSCHNEIDER, JOHN S. HAMLIN, GLEN SENK, ERNESTO ZEPEDA, MARIA ASUNCION ARAMBURUZABALA LARREGUI, ISLA CORAL, S.A. DE C.V., AND TORY BURCH LLC, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) C.A. No. 7921CS TORY BURCH LLC, Counterclaim Plaintiff, v. J. CHRISTOPHER BURCH, JCB INVESTMENTS, LLC, C. WONDER LLC and RIVER LIGHT VENTURE PARTNERS LLC, Counterclaim Defendants. ) ) ) ) ) ) ) ) ) ) ) ) DEFENDANTS TORY BURCH AND TORY BURCH LLC’S BRIEF IN SUPPORT OF THEIR MOTION TO COMPEL PLAINTIFFS TO PRODUCE DOCUMENTS AND COMPLY WITH DISCOVERY OBLIGATIONS EFiled: Dec 03 2012 07:24PM EST Transaction ID 48129673 Case No. 7921CS

Transcript of Oconnor (Burch vs Burch-brief) Blavatnik

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

J. CHRISTOPHER BURCH, JCB INVESTMENTS, LLC, and C. WONDER LLC,

Plaintiffs,

v.

TORY BURCH, EDUARDO HOLSCHNEIDER, JOHN S. HAMLIN, GLEN SENK, ERNESTO ZEPEDA, MARIA ASUNCION ARAMBURUZABALA LARREGUI, ISLA CORAL, S.A. DE C.V., AND TORY BURCH LLC,

Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) ) )

C.A. No. 7921­CS

TORY BURCH LLC,

Counterclaim Plaintiff,

v.

J. CHRISTOPHER BURCH, JCB INVESTMENTS, LLC, C. WONDER LLC and RIVER LIGHT VENTURE PARTNERS LLC,

Counterclaim Defendants.

) ) ) ) ) ) ) ) ) ) ) )

DEFENDANTS TORY BURCH AND TORY BURCH LLC’S BRIEF IN SUPPORT OF THEIR MOTION TO COMPEL PLAINTIFFS TO

PRODUCE DOCUMENTS AND COMPLY WITH DISCOVERY OBLIGATIONS

EFiled: Dec 03 2012 07:24PM EST Transaction ID 48129673 Case No. 7921­CS

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES.............................................................................................. iii

INTRODUCTION............................................................................................................... 1

BACKGROUND................................................................................................................. 7

A. Plaintiffs Seek Expedition, And The Parties Target November 30 For Completing Their Document Productions......................................................................................... 7

B. The Parties Serve Responses And Objections To The Document Requests............................................................................ 8

C. The Parties Meet And Confer On Documents, But Plaintiffs Refuse To Produce Their Search Terms............................. 9

D. Plaintiffs Make An Inadequate And Incomplete Document Production....................................................................... 12

ARGUMENT..................................................................................................................... 16

I. PLAINTIFFS SHOULD BE ORDERED TO COMPLETE THEIR PRODUCTION EXPEDITIOUSLY. ............................................. 16

II. PLAINTIFFS SHOULD BE ORDERED TO EXPAND THEIR LIST OF CUSTODIANS. .............................................................. 18

III. PLAINTIFFS’ FAILURE TO PRODUCE CERTAIN RELEVANT DOCUMENTS IS AN ABUSE OF THE DISCOVERY PROCESS............................................................................ 20

IV. PLAINTIFFS SHOULD BE COMPELLED TO MAKE A RECIPROCAL PRODUCTION OF SAMPLES OF NONRESPONSIVE DOCUMENTS. ......................................................... 22

CONCLUSION ................................................................................................................. 26

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iii.

TABLE OF AUTHORITIES

Page(s) CASES

Bayer Healthcare Pharm. Inc. v. Schering Corp., No. 3548­VCS at 4, 15 (Del. Ch. May 28, 2009) (Transcript) .................................... 16

DeGeer v. Gillis, 755 F. Supp. 2d 909 (N.D. Ill. 2010) ........................................................................... 18

In re Seroquel Prods. Liability Litig., 244 F.R.D. 650 (M.D. Fla. 2007)................................................................................. 24

Klig v. Deloitte LLP, 2010 WL 3489735 (Del. Ch. Sept. 7, 2010) ................................................................ 16

Monier, Inc. v. Boral Lifetile, Inc., 2010 WL 2285022 (Del. Ch. June 3, 2010)................................................................. 16

Nat’l Day Laborer Org. Network, 2012 WL 2878130 (S.D.N.Y. July 13, 2012) ........................................................ 23, 24

Prod. Res. Grp. L.L.C. v. NCT Grp., Inc., 863 A.2d 772 (Del. Ch. Nov. 17, 2004)....................................................................... 16

Sunnen Prods. Co. v. Travelers Cas. & Surety Co. of Am., 2010 WL 743633 (E.D. Mo. Feb. 25, 2010)................................................................ 17

Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D. Md. 2008)..................................................................................... 24

VSI Holdings, Inc. v. SPX Corp., 2004 WL 6047330 (E.D. Mich. Aug. 6, 2004) ............................................................ 18

William A. Gross Constr. Assocs., Inc. v. Am. Mfrs. Mut. Ins. Co., 256 F.R.D. 134 (S.D.N.Y. 2009) ................................................................................. 24

OTHER AUTHORITIES

Gordon V. Cormack & Mona Mojdeh, Machine Learning for Information Retrieval: TREC 2009 Web, Relevance Feedback and Legal Tracks, in NIST Special Publication: SP 500­278, The Eighteenth Text Retrieval Conference (TREC 2009) Proceedings (2009) ............................................................................... 23

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iv. TABLE OF AUTHORITIES (Continued)

Page(s)

Maura R. Grossman & Gordon V. Cormack, Technology­Assisted Review in E­Discovery Can Be More Effective and More Efficient Than Exhaustive Manual Review, XVII Rich. J. L. & Tech. 11 (2011) ............................................................... 23

Quinn Emanuel Urquhart & Sullivan LLP, Predictive coding comes of age (Nov. 19, 2012)......................................................... 24

RULES AND STATUTES

Del. Ct. Ch. R. 34 .............................................................................................................. 17

Del. Ct. Ch. R. 37 .............................................................................................................. 16

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Defendants Tory Burch and Tory Burch LLC respectfully submit this brief

in support of their motion for an order compelling plaintiffs to produce documents and

comply with their discovery obligations pursuant to Chancery Rules 26, 34 and 37 and

their commitments to this Court.

INTRODUCTION

In their motion for expedition, plaintiffs represented to the Court that their

document production would be substantially complete by November 30. That

commitment has turned out to be worthless. On November 30, plaintiffs produced just

10,000 documents.1 Much of plaintiffs’ production was makeweight. Some 3,000 of

those documents were nightly sales updates from Tory Burch stores — mass emails to all

corporate employees. Hundreds of pages more consisted of Google alerts and other

public news dispatches. Missing from plaintiffs’ production were the very documents

bearing on the allegations that they make in their complaint. By way of example only:

· Plaintiffs alleged that Chris Burch was totally open with the company, Tory

and director John Hamlin about his plans for his C. Wonder store and that

he showed them exactly what he was planning to do. Documents to back

this? Not there.

· Plaintiffs alleged that defendants wrongfully torpedoed Project Amethyst,

and that Bidder A “reversed its position in a letter to Mr. Burch dated

1 By contrast, Tory Burch LLC produced more than 26,000 documents and over

68,000 pages.

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August 1.” Only a handful of documents on Project Amethyst were

produced, and the referenced letter was nowhere to be found.

· Plaintiffs alleged that the defendants tortiously interfered with C. Wonder’s

relationships with its vendors, causing it to find alternate, more costly

arrangements. Documents to back this? Not there.

· Plaintiffs alleged that Chris traveled the world to find sources for the

company. Proof that it happened? Minimal. When pressed to produce

Chris’s calendar, plaintiffs initially resisted and then, weeks into the meet­

and­confer process, claimed that they did not know if he kept a calendar.

Are they serious? One document that defendants located in their own files

says that Chris logged 275,000 miles of air travel in 2010,

circumnavigating the globe 11 times. No calendar? Really?

· Plaintiffs alleged that Jorg Mohaupt, the designee of Access Industries’

billionaire founder Len Blavatnik on the Tory Burch LLC board, told his

fellow directors “that he did not see the necessity for a conflicts

investigation committee, that Mr. Burch’s new ventures were a ‘non­issue,’

that Mr. Burch had been exceedingly open about his new brands, and that it

was his opinion that other members of the Board were creating false

allegations for the purpose of forcing Mr. Burch off the Board.” But when

pressed to disclose the extent of the now admitted financial relationship

between Mr. Blavatnik and Mr. Burch, plaintiffs refused. And they told

Access to do the same in response to defendants’ subpoena.

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Plaintiffs’ production in response to requests bearing on the counterclaims,

likewise, is also non­existent. Again, by way of example only:

· The counterclaims allege that Chris asked for and received lists of the

company’s top­selling products in a number of categories. Defendants

have produced hundreds of communications Chris Burch had with Tory

Burch employees in which he badgered them for, and received, inside

information. The mirror images of those documents were missing from

plaintiffs’ production. And what did Chris Burch do with all this

information? Can’t tell. The production does not seem to have covered

that.

· The counterclaims allege that the C. Wonder stores shamelessly copy the

distinctive look of Tory Burch stores:

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But there were no documents produced that show why the C. Wonder store

design evolved from the following July 2010 image (see Ex. 1):

. . . to this design by the time the C. Wonder stores opened:

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Two documents in defendants’ production show that the C. Wonder team

was keenly focused on the Tory Burch store design. The first is an email that Amy

Shecter — who, at the time, was transitioning from Vice President of Global Retail at

Tory Burch to President of C. Wonder — wrote to the manager of the Tory Burch store in

the Short Hills mall alerting the manager that a firm then working on a store design for

Chris’s new venture would be coming by to take pictures of the store. The second is an

email from Nick Matfus, one of Chris Burch’s key executives based in China, in which

he arranged for the drawings for the Tory Burch Short Hills store to be made available to

that same design firm. Exs. 2 & 3.2 Did plaintiffs’ produce these emails? No. Did they

produce the pictures that Shecter arranged to be taken at the Short Hills store? No. Did

they produce the drawings that Maftus provided to Chris’s designers? No. Did they

produce documents showing what happened to the photos and drawings? No.

In short, plaintiffs have produced very few of their own internal

communications. Defendants produced in excess of 2,000 top­level emails between

Chris Burch’s email accounts at Burch Creative Capital and its predecessors and Amy

Shecter.3 Accordingly, unless documents were deleted or destroyed, plaintiffs should

have found and produced all of these Chris/Amy communications, plus much, much

2 All citations herein to exhibits (“Ex. __”) refer to the exhibits annexed to the

Transmittal Affidavit of Shannon E. German, submitted herewith.

3 The company had these emails because Ms. Shecter had an email account at Tory Burch through the summer of 2010.

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more. But plaintiffs’ production contains fewer than 50 top­level email communications

between Chris and the President of C. Wonder.

If this were just a matter of tardiness, defendants would not be bothering

the Court with this motion. But, unfortunately, there is much more going on here. When

plaintiffs submitted their response to defendants’ First Requests for the Production of

Documents, plaintiffs stated for 18 of the requests that that they would produce

documents pursuant to “search parameters to be agreed upon by the parties.” Plaintiffs

also objected to producing any documents at all to an additional 13 requests, stating only

that they would reconsider their position after the parties met and conferred.

But, after having engaged in weeks of meet and confer sessions, with a

commitment from plaintiffs only that they will produce documents to 28 of the 33

requests based on search terms that plaintiffs have still not turned over and have only

agreed to turn over today after learning that defendants were making a motion to compel.

And plaintiffs also have stiff­armed defendants’ request that plaintiffs expand their group

of 16 custodians to include an additional nine individuals, including Mr. Burch’s former

right­hand woman, the president and main designer for his Asian affiliate, 9 Kings, the C.

Wonder director of store interiors and director of store planning, and others plaintiffs

themselves identified as knowledgeable witnesses.

In short, as of today, neither the defendants nor the Court have any idea as

to what process led to plaintiffs’ empty November 30th production, what the plaintiffs are

going to produce in the future, how they will go about finding those documents or when

any additional documents will be produced. This wholesale flouting of discovery

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obligations is unacceptable in any case pending before this Court. It is especially

inappropriate in an expedited litigation.

The Court should order plaintiffs to immediately supplement their

production and provide the same kind of transparency into what they are producing and

how they are producing it that plaintiffs have asked for and received from defendants.

The Court should also order plaintiffs to search for and produce documents from the files

of the additional custodians sought by defendants, and substantially complete production

of documents responsive to defendants’ requests from those files immediately as well.

BACKGROUND

A. Plaintiffs Seek Expedition, And The Parties Target November 30 For Completing Their Document Productions.

On October 2, 2012, plaintiffs filed a complaint alleging that defendants

improperly barred plaintiffs from selling their equity interests in Tory Burch LLC and

tortiously interfered with their right to compete with Tory Burch LLC via a new fashion

brand known as C. Wonder. Shortly after filing their complaint, plaintiffs served on

defendants a set of 22 documents requests. Ex. 4. On October 18, defendants served

document requests on plaintiffs seeking the production of 33 categories of documents.

Ex. 5.

On October 23, plaintiffs moved for expedition. Plaintiffs sought a January

2013 trial date, with document production to be substantially completed by November 30.

At the conference on that motion, the Court stated it would schedule a trial in April 2013

and left the parties to negotiate the details of a pretrial schedule. The parties have, until

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recently, assumed substantial completion of document production by plaintiffs, Tory

Burch and Tory Burch LLC in response to initial document requests would occur on

November 30.

B. The Parties Serve Responses And Objections To The Document Requests.

On November 15, plaintiffs and defendants filed their responses and

objections to outstanding discovery requests. Tory Burch LLC and its founder, Tory

Burch, agreed to conduct a search for and produce responsive, non­privileged documents

in response to every single one of plaintiffs’ requests. See Ex. 6.

Plaintiffs followed a different approach. For 18 of defendants’ requests,

plaintiffs agreed only to provide documents “in accordance with the Search Parameters,”

which plaintiffs defined to mean “search parameters agreed upon by the parties.” Ex. 7,

Response to Request No. 1; see id. Responses to Requests No. 2, 3, 4, 5, 7, 8, 16, 18, 23,

25, 26, 27, 28, 29, 30, 31, 33. For 13 other requests, plaintiffs interposed boilerplate

objections that the requests were “overly broad and unduly burdensome,” among other

grounds. Plaintiffs did not specify what, if anything, responsive to these requests would

be produced. Rather, they stated only that they were “willing to meet and confer.” See

id., Responses to Requests 6, 9, 10, 11, 12, 13, 15, 17, 19, 20, 21, 24, 32.

These requests go to the very core of this case. For example, Request 10 —

which seeks “All documents concerning any information Plaintiffs requested or received

from Tory Burch LLC concerning Tory Burch LLC or any aspect of its business” — goes

directly to defendants’ counterclaim allegations of misappropriation and misuse of

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confidential information. See Counterclaims ¶¶ 74­77, 85, 90, 91, 97­99, 103, 114­20.

Similarly, Request 13 seeks documents “concerning the C. Wonder Brand,” including

more than a dozen specific types of brand­related information, which are plainly relevant

to plaintiffs’ allegations that the C. Wonder brand is “unique” (e.g., Compl. ¶ 50) and

defendants’ contention that it is a “knockoff” of the Tory Burch brand (e.g.,

Counterclaims ¶¶ 3, 50­60). But plaintiffs nonetheless declined to produce any

responsive documents.

C. The Parties Meet And Confer On Documents, But Plaintiffs Refuse To Produce Their Search Terms.

After serving their responses and objections, counsel for plaintiffs

suggested a meet and confer on November 19 regarding custodians, time periods and

search terms. In anticipation of that call, defendants asked plaintiffs to be prepared to

state “precisely what Plaintiffs will be prepared to produce in response to Defendants’

requests,” noting that the call would be “more productive if the parties exchange search

terms in advance.” And defendants informed plaintiffs that they would be using

predictive coding. Ex. 8.

On the November 19 call, defendants explained their hybrid approach to

document review, which included: (i) manual attorney review of potentially relevant hard

copy and electronic files in accessible locations; (ii) traditional keyword searching

(including e­mail domain names and individual terms) followed by manual attorney

review of potentially relevant documents identified by those searches (which included the

terms “Amethyst” and “C. Wonder”); and (iii) computer­assisted review known as

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“predictive coding.” Defendants have disclosed all of the keywords and domains they

used as part of their process. See Exs. 9 & 10.

Defendants also made available to plaintiffs the Wachtell Lipton attorney

who is implementing the predictive coding process in this case. She explained to

plaintiffs that the “Waterloo” predictive coding algorithm being used was trained by

using a set of documents determined to be responsive or non­responsive by attorney

reviewers as well as 99 search terms that defendants disclosed to plaintiffs following that

discussion. See Ex. 9. She also explained that the “seed set” of documents used to train

the algorithm was updated iteratively, such that every responsiveness decision made by

an attorney throughout the entire review was considered in the algorithm’s selection of

further potentially responsive documents. Thus, the “seed set” of training documents for

the algorithm encompasses every document deemed to be either responsive or non­

responsive by an attorney reviewer.

At the end of that discussion, plaintiffs’ counsel stated that the predictive

coding process “seemed robust” and requested that plaintiffs be given access to

defendants’ entire “seed set” — including documents deemed non­responsive in attorney

review. Defendants explained that such a request was tantamount to requesting that all

non­responsive documents reviewed by attorneys be produced. Instead of that

unnecessary and burdensome unilateral production, defendants offered a reciprocal

exchange of a sample of non­responsive, non­privileged documents to test and verify the

results of the differing search methods the parties were utilizing. See Ex. 11.

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Plaintiffs did not share their search terms in advance of that discussion,

refused to provide them on that call, and stated that they were unwilling to do so until

they became comfortable with defendants’ use of predictive coding. The parties

exchanged multiple emails over the next two days, and again met and conferred for

several hours on November 21. See id. Plaintiffs continued to refuse to disclose their

search parameters. Plaintiffs did agree to produce certain documents in response to

certain other requests, but, once again, they based their proposed production on search

terms that they would not disclose. Plaintiffs agreed to memorialize their revised position

in a letter, which they promised to send on November 23. That day and the next came

and went without a response. See Ex. 12.

On the evening of November 25, plaintiffs sent their letter. Plaintiffs made

seven further demands for information concerning predictive coding, including the full

seed set. Ex. 13. Defendants responded to these demands by letter on November 28,

agreeing to produce all responsive documents in its “seed set” and to provide two 1,000

document samples for testing of both the documents deemed non­responsive by the

predictive coding process and by the attorney review team that trained it. Ex. 10.

Defendants again explained that the “seed set” for their predictive coding process

represented every single document that had been reviewed by an attorney and that

plaintiffs’ request would require the production of tens of thousands of non­responsive

documents — a volume of non­responsive documents larger than plaintiffs’ entire

production on November 30.

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Defendants requested, moreover, that any sampling be reciprocal. They did

so because scientific testing has shown that at least as many, if not more, documents will

be missed using plaintiffs’ method of keyword searching as in defendants’ predictive

coding process. As such, defendants’ proposal was that both plaintiffs and Tory Burch

LLC sample 1,000 documents deemed non­responsive by attorney reviewers and another

1,000 documents that were not reviewed by attorneys. Id. at 10­11.

Plaintiffs, however, have refused any reciprocal sampling, and continued to

withhold their search terms until their unilateral demand for sampling was met. They did

so even though they premised their response to 28 of 33 requests on “agreed upon”

search terms that they refused to provide. Nevertheless, defendants have since agreed to

provide non­responsive documents to plaintiffs so that plaintiffs can assess the reliability

of the predictive coding process both initially and at the completion of production. Ex.

14.

D. Plaintiffs Make An Inadequate And Incomplete Document Production.

Not surprisingly, when the parties exchanged productions on November 30,

plaintiffs’ production was wholly inadequate; their responses have not since been

supplemented. See Ex. 15. Plaintiffs produced just 17,035 pages (representing some

10,000 documents). Approximately one­third of the documents consisted of nightly sales

updates from Tory Burch stores that had been emailed en masse to all Tory Burch

corporate employees. And more than five hundred additional documents were nothing

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more than Google alerts and other public news articles. The remainder appears to include

many communications that Tory Burch already had (as one side of the exchange).

Significantly, plaintiffs produced virtually nothing on key issues in their

complaint or defendant’s counterclaims. For example:

a) Plaintiffs allege throughout the complaint that they were forthright

with the Board about C. Wonder before it opened, showing the board “products and

videos regarding the brand” in February 2011. Compl. ¶ 41. They also allege that Chris

laid out the entire C. Wonder concept to Tory at a meeting in Southampton on his iPad

and that he followed up by emailing Tory additional videos and pictures. Compl. ¶ 45.

But there is not a single video file in plaintiffs’ production. And plaintiffs did not

produce the emails Chris says he sent to Tory. Indeed, plaintiffs have not even produced

the email, cited in their complaint, in which Chris Burch disclosed his “actual or potential

conflicts” to the board. See Compl. ¶ 41.

b) Plaintiffs’ complaint holds up Jorg Mohaupt, Access’s

representative on the board, as the only virtuous director on a board that is otherwise

beholden to Tory. E.g., Compl. ¶¶ 49­51. But plaintiffs have not produced

communications between themselves and anyone at Access Industries, and the word

“Mohaupt” is nowhere to be found in their production even though, again, their

complaint cites emails authored by Jorg Mohaupt. See id.

c) Plaintiffs complain that Tory Burch wrongfully interfered with the

Project Amethyst bidding process by “berat[ing]” bidders into reversing course and

imposing as a condition of any deal that Chris enter into a settlement agreement with the

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company. Compl. ¶¶ 81­83. Again, no such documents have been produced. Plaintiffs

failed to produce even the correspondence cited in their complaint showing the purported

change in Bidder A’s in position. See id.

d) In the counterclaims, Tory Burch LLC alleges that Chris Burch

breached his fiduciary duties and contractual obligations under his consulting agreement

by misappropriating the company’s confidential information. The counterclaims cite

eight different categories of confidential information that were provided to Chris Burch in

his role as a consultant, including lists of the company’s top­selling shoes, ready­to­wear

apparel, handbags and small leather goods, among other items; detailed cost information

on a number of the company’s top­selling items, contact information for the factories that

the company was using to manufacture its goods in China; and a breakdown of the cost to

construct one of the company’s stores. Defendants have produced hundreds of emails

showing all of these items were requested by and provided to Chris Burch at his Burch

Creative Capital email accounts. But plaintiffs have not produced the same emails from

their files and have offered no reason why they are missing. The fact that these emails

were not produced raises grave questions about the integrity of plaintiffs’ production.

e) Plaintiffs have also produced very few internal emails of any type

from their own files. As a company that has aggressively built its brand over the last

several years, it makes no sense that so little C. Wonder branding, public relations and

design materials have been produced. Defendants produced in excess of 2,000 top­level

emails between Chris Burch, using his e­mail account at Burch Creative Capital (and its

predecessors), and Amy Shecter, the former Vice President of Global Retail at Tory

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Burch who went on to join C. Wonder as its President. Plaintiffs’ production contains

fewer than 50. Something is not right.

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ARGUMENT

Delaware’s “well established policy of pretrial disclosure . . . is based on a

rationale that a trial decision should result from a disinterested search for truth from all

the available evidence rather than tactical maneuvers based on the calculated

manipulation of evidence and production.” Klig v. Deloitte LLP, 2010 WL 3489735, at

*6­7 (Del. Ch. Sept. 7, 2010) (“Discovery is called that for a reason. It is not called ‘hide

the ball.’”). This Court has “broad discretion to craft a proper remedy for discovery

shortcomings” under Chancery Court Rule 37 and its inherent equitable powers. Monier,

Inc. v. Boral Lifetile, Inc., 2010 WL 2285022, at *3 (Del. Ch. June 3, 2010); see also

Bayer Healthcare Pharm. Inc. v. Schering Corp., No. 3548­VCS at 4, 15 (Del. Ch. May

28, 2009) (Transcript) (granting motion to compel and awarding costs and fees where a

party’s discovery responses were “slow in actually getting to searching” and “should

have been . . . more forthcoming.” ); Prod. Res. Grp. L.L.C. v. NCT Grp., Inc., 863 A.2d

772, 802­03 (Del. Ch. Nov. 17, 2004) (ordering “prompt and complete responses to each

request for production” and awarding costs and attorneys’ fees in response to

“unjustified” objections).

I. PLAINTIFFS SHOULD BE ORDERED TO COMPLETE THEIR PRODUCTION EXPEDITIOUSLY.

As shown above, plaintiffs’ November 30 production was entirely

inadequate, and defendants have no insight as to why categories of documents have been

omitted, including documents cited in the complaint, communications between the owner

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and president of C. Wonder, and documents showing Chris Burch’s request, receipt and

use of Tory Burch LLC’s confidential information, among other things. Until hours

before this motion was filed, plaintiffs had refused to disclose their search terms and only

agreed to provide them under threat of this motion. Even now, defendants do not know

what those terms will be, how long it will take to negotiate them, or why entire categories

of evidence are missing from the production that plaintiffs have made.

Plaintiffs’ delays in providing this information and making a meaningful

production are prejudicing defendants’ ability to prosecute their claims and defenses in

this expedited case. Defendants are seeking judicial intervention because they have no

faith that, without Court involvement, they will receive a complete production in a timely

manner.

From the outset, plaintiffs have obscured their process and delayed delivery

of critical information. Chancery Rule 34 requires that responses to requests for the

inspection or production of documents “state, with respect to each item or category, that

inspection and related activities will be permitted as requested, unless the request is

objected to, in which event the reasons for objection shall be stated.” Del. Ct. Ch. R.

34(b). “If objection is made to part of an item or category, the part shall be specified and

inspection permitted of the remaining parts.” Id. Plaintiffs, however, failed to give

defendants substantive written responses to many of defendants’ requests, as they are

required to do, and instead refused to produce based on boilerplate objections with an

invitation to meet and confer. See Sunnen Prods. Co. v. Travelers Cas. & Surety Co. of

Am., 2010 WL 743633, at *1 (E.D. Mo. Feb. 25, 2010) (“The party resisting discovery

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must show specifically how each interrogatory or document request is not relevant or

how each question is overly broad, burdensome or oppressive.”).

And even when plaintiffs belatedly committed to producing some

documents in writing, they tethered their responses to 28 of 33 requests to “agreed upon”

search terms. But plaintiffs then refused to tell defendants what search terms they were

using, even though defendants were clearly entitled to this information. Where parties

have refused to disclose their search terms, courts have ordered their disclosure. See,

e.g., DeGeer v. Gillis, 755 F. Supp. 2d 909, 917 (N.D. Ill. 2010) (directing producing

party to “identify the individuals searched and search terms it used”); VSI Holdings, Inc.

v. SPX Corp., 2004 WL 6047330, at *3 (E.D. Mich. Aug. 6, 2004) (ordering plaintiff to

“divulge its search methodology and search terms used to locate responsive documents”).

Indeed, as of the filing of this motion, although they have committed to

providing defendants with their search terms, plaintiffs still have not done so. If and

when defendants receive those terms, they no doubt will need to negotiate supplemental

terms to address the gaping holes in plaintiffs’ current production. Defendants request

that the Court compel plaintiffs to complete their production of documents without

further delay.

II. PLAINTIFFS SHOULD BE ORDERED TO EXPAND THEIR LIST OF CUSTODIANS.

On November 14, plaintiffs provided defendants with a list of 16 custodians

they proposed to use in their review. The next day, defendants requested that 12

additional individual custodians be added — including design executives with C.

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Wonder, Mr. Burch’s former right­hand woman, and key players at Chris Burch’s Asian

affiliate, 9 Kings, among others — and asked that plaintiffs search the files of individuals

holding ten corporate positions (including marketing and store managers) at C. Wonder,

if they were not otherwise named.

On November 23, defendants revised their custodian request, narrowing it

to only nine additional named custodians and eight corporate positions. These additional

custodians include individuals involved with the design of the C. Wonder store and the

development of the C. Wonder brand. They also include store managers for the C.

Wonder stores, whose documents may go directly to the issue of customer confusion and

to whether C. Wonder’s customers associated it with the Tory Burch brand.4

Although plaintiffs have had defendants’ proposed additions to plaintiffs’

custodian list for weeks, plaintiffs have not agreed to add any of these custodians.

Plaintiffs have never claimed that adding these additional custodians would be unduly

burdensome or that a search of their files is unlikely to lead to the discovery of relevant

evidence. Accordingly, in light of the expedited nature of these proceedings, plaintiffs

should be ordered to search and produce documents from the files of these additional

custodians without further delay.

4 These additional custodians include individuals that plaintiffs have identified as

knowledgeable. As plaintiffs have designated that response as Highly Confidential, this list of custodians will be provided to the Court when a confidentiality order has been entered.

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III. PLAINTIFFS’ FAILURE TO PRODUCE CERTAIN RELEVANT DOCUMENTS IS AN ABUSE OF THE DISCOVERY PROCESS.

As noted above, certain specific categories of documents have been wholly

omitted from plaintiffs’ production and, based on their responses and objections and the

parties’ meet and confers, there is no reason to believe these important documents will

ever be produced. Defendants seek the Court’s assistance in securing their production.

Chris Burch’s Calendar. Plaintiffs allege that Chris Burch was a “loyal,

diligent and active Director” who, among other things, traveled extensively through

China to source goods for the company. Compl. ¶ 11. The counterclaims allege that

when Mr. Burch was taking these trips (and getting $11 million as a management

consultant to do so) he was actually sourcing copycat products and developing copycat

store furnishings for C. Wonder. Counterclaims ¶¶ 37­39, 50, 55. Plainly, the nature and

scope of Chris’s business travels are a central issue in this case.

Although there are scattered documents concerning travel arrangements in

plaintiffs’ production, and plaintiffs say they will produce others if they happen to come

upon them, no calendar, diary, daybook or planner of any kind has been produced for

Chris Burch. Defendants have been trying to get plaintiffs to commit to produce Mr.

Burch’s calendar since late October. On Friday night, November 30, the day when their

document production was supposed to be substantially complete, plaintiffs’ counsel said

that they still have not been able to find a calendar and do not know whether one even

exists.

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21.

If counsel does not know whether one exists, it is only because they have

not asked the right person or because the person they asked did not give them a candid

response. The documentary record is clear that one was kept. On December 29, 2010,

one of Chris’s assistants, Stefanie Mohr, sent him an email referencing the “travel

calendar we kept during the year” in the course of calculating over 275,000 airline miles

that Chris Burch flew on business trips that year. See Ex. 16. Nothing justifies further

delay in finding these documents: plaintiffs should immediately produce Chris Burch’s

business calendars and diary entries.

Access Documents. Plaintiffs have failed to produce any documents

concerning the business, financial or other relationships between plaintiffs and Tory

Burch LLC member Access Industries (or its board designees). As noted earlier, in

plaintiffs’ production, there is not a single document that bears the last name of Access’s

representative Jorg Mohaupt, and not a single email sent to or received from Access.

Although plaintiffs paid lip service to meeting and conferring on this request in their

responses and objections, it is now apparent that they will not produce these documents.

Not only have they blocked their own discovery on this issue, plaintiffs

have also instructed Access, its principals, and its director­nominees to withhold relevant

documents from their own productions in response to subpoenas issued to them. Access

has agreed to follow this instruction. See Ex. 17. Moreover, plaintiffs have taken the

position that information concerning the financing by Access of, or any investment in, C.

Wonder or Chris Burch’s other businesses is irrelevant and will not be produced.

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22.

Plaintiffs’ position is meritless. Their complaint squarely alleges that

Access’s purportedly impartial director sided with Chris Burch in disputed matters and

held the opinion that “other members of the Board were creating false allegations for the

purpose of forcing Mr. Burch off the Board.” Compl. ¶ 51. Plainly, defendants are

entitled to know the nature and extent of any financial relationships in order to test

plaintiffs’ allegation that Mr. Mohaupt stood as the only paragon of virtue on an

otherwise conflicted board.

Defendants also are entitled to know whether Chris used confidential

financial information obtained from Tory Burch LLC to attract Access and potentially

other investors into C. Wonder or one of Chris’ other business ventures, as it appears

from documents in Tory Burch’s own files that he did.5 If such information was shared,

it would directly undercut plaintiffs’ allegations that Mr. Burch “had not and was not

using any of the Company’s confidential information to benefit his new brands.” Compl.

¶ 50.

IV. PLAINTIFFS SHOULD BE COMPELLED TO MAKE A RECIPROCAL PRODUCTION OF SAMPLES OF NONRESPONSIVE DOCUMENTS.

At this stage, defendants have met and exceeded all of plaintiffs’ demands

for information concerning its predictive coding process short of disclosing every

5 For example, in one J. Christopher Capital investment presentation, Mr. Burch

provides inside financial information about the success of Tory Burch LLC in violation of his confidentiality obligations to the company. But plaintiffs have not produced documents and communications showing how Chris and his team used this presentation or to whom it was shown.

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23.

document that their attorneys reviewed, including offering to produce samples of

documents deemed non­responsive. Defendants have also (a) described that process in

detail, both orally and in writing; (b) made the senior attorney who is implementing this

process available for questioning; (c) agreed to consider supplemental custodians, “seed

documents” and keyword searches that Plaintiffs may suggest in good faith; and (d)

provided scientific evidence independently validating the process.6 Defendants’ offer is

more than reasonable.

In contrast, plaintiffs have refused to conduct any reciprocal testing on their

search methods, despite significant evidence that their keyword searches are less effective

than predictive coding. Plaintiffs’ basic position is that their method of using search

terms and contract attorneys is presumptively sound. But their production proved that

false here.

Indeed, courts have recognized that “[t]here is increasingly strong evidence

that keyword searching is not nearly as effective at identifying relevant information as

many lawyers would like to believe,” Nat’l Day Laborer Org. Network, 2012 WL

2878130 (S.D.N.Y. July 13, 2012) (quotation marks omitted), and that “there is a

growing body of literature that highlights the risks associated with conducting an

6 See, e.g., Maura R. Grossman & Gordon V. Cormack, Technology­Assisted

Review in E­Discovery Can Be More Effective and More Efficient Than Exhaustive Manual Review, XVII Rich. J. L. & Tech. 11 (2011) (Ex. 18); Gordon V. Cormack & Mona Mojdeh, Machine Learning for Information Retrieval: TREC 2009 Web, Relevance Feedback and Legal Tracks, in NIST Special Publication: SP 500­278, The Eighteenth Text Retrieval Conference (TREC 2009) Proceedings (2009) ( Ex. 19).

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24.

unreliable or inadequate keyword search or relying exclusively on such searches.” Victor

Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251, 257 (D. Md. 2008). See also William

A. Gross Constr. Assocs., Inc. v. Am. Mfrs. Mut. Ins. Co., 256 F.R.D. 134, 135­36

(S.D.N.Y. 2009) (citing “well­know[n] limitations and risks” associated with search

terms that have been judicially recognized, including the failure of such terms to capture

context, misspellings or documents containing different words with the same meaning as

the terms selected); Quinn Emanuel Urquhart & Sullivan LLP, Predictive coding comes

of age (Nov. 19, 2012) (“keyword searching is . . . rife with shortcomings . . . . Some

studies suggest that predictive coding identifies at least as many documents of interest as

traditional eyes­on review, with about the same level of inconsistency, and may in fact

offer more accurate review for responsiveness than most manual reviews.”).

Thus, in light of plaintiffs’ inadequate productions, it is just as – if not more

– critical to examine, test and evaluate plaintiffs’ keyword search methodology, as it is to

test defendants’ predictive coding method. See Nat’l Day Laborer Org. Network, 2012

WL 2878130, at *12 (S.D.N.Y. July 13, 2012) (“[U]se of keywords without testing and

refinement (or more sophisticated techniques) will in fact not be reasonably calculated to

uncover all responsive material.”); In re Seroquel Prods. Liability Litig., 244 F.R.D. 650,

662 (M.D. Fla. 2007) (“Common sense dictates that sampling and other quality assurance

techniques must be employed to meet requirements of completeness.”). As one court that

considered the issue explained, keyword searches “may prove to be over­inclusive and

under­inclusive” and the “only prudent way to test the reliability of the keyword search is

to perform some sort of sampling of the documents.” Victor Stanley, 250 F.R.D. at 257,

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25.

262 (finding a party’s choice of keyword searching to be unreasonable when it “neither

identified the keywords selected nor the qualifications of the persons who selected them

to design a proper search,” “failed to demonstrate that there was quality­assurance

testing,” and “failed to carry their burden of explaining what they had done and why it

was sufficient” when its production was challenged).

The reason for plaintiffs’ refusal to submit their searches to testing is

exposed by their production: apparently plaintiffs’ searches have missed many critical

documents going to the core contentions in this litigation. Having asked for and received

defendants’ commitment to produce samples on non­responsive documents, plaintiffs

should be ordered to make a reciprocal production of such samples. This will allow the

Court and the parties to test the accuracy and reliability of the parties’ respective

document productions.

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26.

CONCLUSION

Plaintiffs represented to the Court that they would substantially complete

their document production by November 30. They have dragged their feet instead. This

Court should, accordingly, order that plaintiffs: (i) substantially complete their document

production in response to defendants’ first request for production by December 10,

including by producing all calendars, diaries or similar documents maintained with

respect to J. Christopher Burch’s business activities for the period from July 1, 2008 to

October 1, 2012 (with any purely personal entries redacted) and documents sufficient to

show all business, financial or other relationships between plaintiffs and Access

Industries Inc., Len Blavatnik, Jorg Mohaupt or Peter Thoren, as well as all

communications concerning Tory Burch LLC or C. Wonder; (ii) search the files of the

additional custodians identified by defendants and substantially complete production of

documents responsive to defendants’ requests from those files on the same timetable; (iii)

produce random samples of non­responsive documents that were excluded by their search

terms and deemed non­responsive by attorney reviewers with their supplemental

production on December 10 and upon the completion of document production.

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27.

OF COUNSEL: Marc Wolinsky Stephen R. DiPrima S. Christopher Szczerban Vincent G. Levy Caitlin A. Donovan WACHTELL, LIPTON, ROSEN & KATZ 51 West 52nd Street New York, NY 10019 J. David Mayberry Lindsay Kaplan KILPATRICK TOWNSEND & STOCKTON LLP 607 14th Street, NW Washington, DC 20005 Lisa Pearson John C. Knapp KILPATRICK TOWNSEND & STOCKTON LLP 1114 Avenue of the Americas New York, NY 10036 John C. Knapp KILPATRICK TOWNSEND & STOCKTON LLP 1114 Avenue of the Americas New York, NY 10036

MORRIS, NICHOLS, ARSHT & TUNNELL LLP /s/ Megan Ward Cascio William M. Lafferty (#2755) Megan Ward Cascio (#3785) Shannon E. German (#5172) 1201 N. Market Street Wilmington, DE 19801 (302) 658­9200 Attorneys for Defendant Tory Burch and Defendant/Counterclaim­Plaintiff Tory Burch LLC

December 3, 2012 6791140.3

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