1ST Class Legal (I.S.), Ltd. v. Niro, et al.

Northern District of Illinois, ilnd-1:2016-cv-06793

MEMORANDUM by Niro Law, Ltd. in Opposition to motion to compel, {{40}}

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Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 1 of 12 PageID #:546 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION 1st CLASS LEGAL (I.S.), LTD., a foreign) Corporation,)) Plaintiff,)) No. 16 C 6793 v.)) Judge Dow RAYMOND NIRO, et al.,)) Magistrate Judge Finnegan Defendants.) RESPONSE OF NIRO LAW, LTD. TO 1ST CLASS' MOTION TO COMPEL On October 24, 2016, 1st Class issued document requests 1 through 59. Sixteen days later, before responses were due or served, it issued requests 61 through 86. Taken together, they constitute an ill-formed and ill-considered haze of redundancy, the product of a party that knows neither what it is doing nor what it wants. 1st Class' motion to compel is the apple that has fallen not far from that tree. We address each of 1st Class' complaints herein, but we wish to note that the bulk of what 1st Class is complaining about is not objections in the nature of, "We have these documents but we won't give them to you," but rather "Your request is so broadly and poorly phrased that we are unable to fashion a meaningful search, but will do our best to give you what we think you might properly be looking for." We have done just that. 1. Niro Law's General Objections. 1st Class' argument begins with an attack on Niro Law's use of "general" objections, featuring 1st Class' inclusion of nearly two pages of block quotes to the effect that general objections cannot be vague and generalized, and must be incorporated into individual responses. 1 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 2 of 12 PageID #:547 This is an odd complaint. Niro Law's general objections are few in number and clear in effect. Niro Law objected to 1st-Class created "Rules" that purport to impose obligations greater than those imposed by the Federal Rules; it objected to the use and incredibly broad definition of "referring or relating to," because that use and definition make it all but impossible to fashion an effort to search for responsive documents 1 (and noted that in response to such requests, it would make reasonable efforts to produce documents referring to the subject matter at issue); it objected to "Rule of Construction No. 9" as incomprehensible 2; and it objected to producing the documents at the time and place identified in the requests (a moot point at this juncture, as thousands of pages of documents have been produced, and thousands more are awaiting production upon resolution of issues regarding a proposed protective order (Dkt. 28), bringing the total to about 10,000 pages of documents. Contrary to 1st Class' suggestion, those general objections are properly incorporated into individual responses. 2. Privilege and Privacy. As 1st Class describes it (Dkt. 40 at 3), its "loan" arrangement with Niro Law permitted it to "become, essentially, a client-related party coming within the attorney-client privilege" for purposes of the litigation it was helping to fund. Now that 1st Class is adverse to Niro Law, this raises, at a minimum, some sensitive issues regarding the protection of the Niro Law clients. The Master Loan Agreement provides (at paragraph 32) that 1st Class "undertakes to keep strictly confidential and, except as expressly provided herein, not to disclose to any person, all 1 1st Class claims in its motion (Dkt. 40 at 8) that it had defined the phrase "referring or relating to" "to mean 'pertaining to,'" but this is plainly false. It actually defined the phrase to mean "consisting of, summarizing, describing, or referring or otherwise pertaining to in any way." This definition did not tighten the phrase; it broadened it. 2 That "rule" provided: "Each request for production shall be construed independently and not with reference to any other request for purposes of this limitation." 2 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 3 of 12 PageID #:548 information that it has acquired from the Borrower about the Borrower, the Borrower's Client, the matters at issue in the Proceedings," etc. But given that 1st Class has now accused Niro Law of materially breaching the Master Loan Agreement (thus meaning that 1st Class could conceivably take the position that it is no longer bound by that agreement), a proper sensitivity to the interests of Niro Law's clients led Niro Law to propose that materials that might be entitled to protection as work product or other privilege (much of which was already provided to 1st Class during the time when the parties were operating pursuant to the Master Loan Agreement, but which Niro Law has no objection to producing in discovery) be produced in this litigation subject to a plain vanilla protective order (specifically, the "model" order contained on the court's website). We made that proposal in November 2016 (before the responses to 1st Class' document requests were even due), and it was not until February 2017 that 1st Class finally rejected it (thus giving rise to Niro Law's motion for entry of protective order, Dkt. 28). In the meantime, during one of counsels' lengthy meet-and-confer calls on discovery issues, the issue of a privilege log arose. The undersigned indicated that aside from the documents being held back pending resolution of the protective order issue, there were very few documents as to which any privilege was being asserted, and that we could produce a privilege log within days. We also noted, however, that in the event a protective order was not entered, we would need to carefully assess those thousands of documents being held back, potentially adding some or all to any privilege log. 1st Class' counsel Mr. Mazer indicated that if Niro Law submitted a privilege log that did not include those documents, he would take the position that Niro Law had waived any opportunity to add them later. In light of this position, the undersigned informed Mr. Mazer that Niro Law would withhold its privilege log pending resolution of the protective order issue. In the event that an appropriate protective order is entered by the court, Niro Law will be able to produce properly labeled documents without delay, and to produce a privilege log for the very 3 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 4 of 12 PageID #:549 small handful of privileged documents. In the event there is no protective order entered, Niro Law will promptly undertake the time-consuming process of reviewing those thousands of additional documents and ascertaining whether production is appropriate, or whether privilege must be invoked. To the extent this is an issue at all, it is an issue of 1st Class' own making. 3. Specific Document Requests. a. "Borrower's costs" and "borrower's client costs and disbursements." 1st Class' first specific argument relates (as 1st Class describes it, Dkt. 40 at 8) to "Requests for documents relating to 'borrower's costs' and 'borrower's client costs and disbursements' incurred and paid pursuant to the CSLAs. (Requests 17-25)." One might fairly wonder how such a subject area would give rise to nine separate document requests; it is in fact more than nine, as quickly evidenced by 1st Class' admission (although it does not seem to think it is an admission) that in Niro Law's Amended Response to requests 71 and 72, Niro has already agreed to produce "billing records and documents identifying client costs." (Dkt. 40 at 8.) This means two things: It means there are at least 11 separate document requests going to the same subject; and it means that Niro Law has already agreed to produce records that would appear to provide 1st Class what it might reasonably be looking for. What else is Niro Law supposed to search for and produce? Every document "referring or relating to" (subject to the definition quoted in n.1, supra) any cost or disbursement? We are at a loss to understand what that would even entail, and it would plainly outstrip any interest 1st Class may have in understanding how its funds were used. Niro Law's objections were proper, as was its agreement to produce billing records and documents identifying client costs. 4 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 5 of 12 PageID #:550 b. Niro Law's Performance of "Conditions Precedent." Paragraphs 17 through 20 of the Master Loan Agreement appear under the heading "Conditions Precedent." 3 1st Class claims this is the subject of its requests 42 through 44 (each of which seeks "all documents which you contend satisfies [sic] all of the conditions precedent set forth in paragraphs 17-20" of the MLA) and request 70 ("If you contend that Borrower was not required to satisfy an of the conditions precedent set forth in paragraphs 17 through 20, inclusive, of the [MLA], produce all documents which support said contention"). In fact it is also the subject of requests 66 through 69 (each of which seeks documents that Niro "contend[s]" satisfy the "conditions precedent" in paragraphs 17, 18, etc. of the MLA). Here again, we have (at least) eight requests going to the same subject. And for what? Not one of the subject MLA provisions is properly regarded as a condition precedent for anything, and Niro Law has not "contended" to the contrary. We examine them separately. Paragraph 17 requires Niro Law to provide a written statement to 1st Class confirming that each case being funded is being conducted on a contingent-fee basis. Paragraph 18 provides that such statement include confirmation that Niro Law has a valid retainer agreement with the client. Regardless of whether this "statement" is a "condition precedent" to anything, or whether Niro Law is making any "conten[tion]" on point, isn't this request subsumed in Request No. 1 ("all documents constituting communication" between Niro Law and 1st Class), as to which Niro Law has already agreed to identify and produce responsive documents? Of course it is, just as it is subsumed by Request No. 35, which specifically seeks (and in response to which Niro Law specifically agreed to identify and produce) the "written statements" referred to in paragraph 17. 4 3 Paragraph 1 of the MLA provides: "Headings in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement." 4 1st Class has also separately requested (and Niro Law has agreed to identify and produce) retainer agreements between the firm and the clients covered by the CSLAs. (Request Nos. 32-34.) 5 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 6 of 12 PageID #:551 Paragraph 19 provides that "Lender" (that means 1st Class) has purchased or shall purchase shares in the Niro Law clients whose cases are being funded, and thus become entitled to receive certain attorney-client information. If this is a "condition precedent" on anyone (we're not so sure), it places a burden of performance on 1st Class, not Niro. It is nonsensical to ask Niro Law to produce documents that it contends apply to someone else's performance of its obligation, particularly when Niro Law has made no such contention. Paragraph 20 provides that Niro Law owes its clients objective professional judgment; that it shall not permit 1st Class to direct or become involved in litigation strategies; that 1st Class cannot interfere with Niro Law's obligations to its clients; and that Niro Law's clients must consent in writing to the loan. Is 1st Class seeking every document in which Niro Law exercised its objective professional judgment on behalf of its clients? Every document where it declined to permit 1st Class to interfere with that judgment? Every document where 1st Class declined to try to interfere? Such requests would be absurd and unfulfillable, and all in a case where no one has raised any issue regarding Niro Law's satisfaction of its obligations to its clients. The one provision of paragraph 20 that could give rise to a reasonable request (the Niro Law clients' written consent to the loan) is already the subject of (at least) three other requests (Nos. 39- 41), as to each of which Niro Law has agreed to identify and produce responsive documents. We are at a loss to understand why 1st Class would waste the court's time on such an ill- considered issue. c. Documents Relating to the Underlying Proceedings. Each of 1st Class' Request Nos. 45 through 47 seek all documents "referring or relaing [sic] to" each proceeding or litigation involving each of the Niro Law clients covered by a CSLA. Niro Law stands by its objections that these requests are grossly overbroad, and phrased in such a way 6 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 7 of 12 PageID #:552 that makes it impossible for Niro Law to undertake a search for responsive documents, and is not a request proportional to the needs of the case. While 1st Class says in passing (Dkt. 40 at 10) that Niro Law "refuses to produce any of its files" for the proceedings, this is manifestly untrue. See Responses to Requests 10 (complaints filed); 23, 24 and 25 (documents Niro Law provided 1st Class referring to or regarding the litigation); 26, 27 and 28 (judgments and documents to show settlement payments); 29, 30 and 31 (documents to show fees or costs recovered); Nos. 36, 37 and 38 (documents Niro Law provided 1st Class listing the cases under each CSLA); Nos. 54, 55 and 56 (documents Niro Law provided 1st Class informing 1st Class of material developments in the cases funded and matters that might affect the outcome of those cases); Nos. 57, 58 and 59 (documents Niro Law provided 1st Class containing "relevant facts" about the cases). d. Utilization of Loaned Funds. Here 1st Class complains of the responses to Request Nos. 48 through 50 and 71, 72 and 77; 1st Class claims in its motion that these "relat[e] to utilization of loaned funds," but the reality of the requests is not nearly so focused. Nos. 48 through 50 seek "all check ledgers, cancelled checks, general ledgers or other documents referring or relating to" Niro Law's "utilization" of the loan funds; No. 71 seeks every document "referring or relating to" the use of the funds received for payment of costs incurred in the proceedings; No. 72 makes the same request for funds received for payment of "properly incurred costs incurred by [Niro Law's] client;" and No. 77 seeks every document "referring or relating to" the utilization of the funds. This obviously overlaps to a substantial degree with the issues raised in subsection (a) above (addressing subsection (a) of 1st Class's request-specific arguments), regarding documents relating to "borrower's costs" and "borrower's client costs and disbursements." And so we note again 1st Class' admission that in Niro Law's Amended Response to requests 71 and 72, Niro has already agreed to produce "billing records and documents identifying client costs." (Dkt. 40 at 8, 11.) 7 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 8 of 12 PageID #:553 1st Class says this is insufficient, but never even attempts to explain why. What claim or defense does this go to for which the documents offered will not suffice? It is well established that money is fungible, and 1st Class' effort to seek every document "consisting of, summarizing, describing, or referring or otherwise pertaining to in any way" (that is 1st Class' definition of "referring or relating to") to where millions of dollars went (1st Class alleges it was more than $3.5 million, Dkt. 1 ¶ 10) is well out of proportion to any legitimate need. This is discovery by very blunt instrument. The requests are grossly overbroad and ill-defined, and in no way proportional to any of the claims or defenses in the case. Niro Law stands by its objections (and by the fact that it has already agreed to produce billing records and documents identifying client costs). e. Proceeds Received. 1st Class next complains of Niro Law's responses to Request Nos. 51 through 53, relating to (as 1st Class phrases it) "proceeds received" in connection with the funded cases. We must note that 1st Class has not simply asked for documentation identifying proceeds received, but rather for "all documents referring or relating to" [defined as "consisting, summarizing, describing, referring or otherwise pertaining in any way"] to such proceeds. This is, again, overly broad and not remotely proportional to the needs of the case. As noted above, Niro Law has already agreed to identify and produce all judgments and nonprivileged documents sufficient to permit 1st Class to ascertain settlement payments received on claims for the funded clients (Response to Request Nos. 26, 27 and 28), as well as to demonstrate fees received or costs recovered (Response to Request Nos. 29, 30 and 31). 1st Class has provided no basis for requiring more, and its requests as drafted are objectionable for the reasons stated. 8 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 9 of 12 PageID #:554 f. Mitigation 1st Class next complains of what it describes as requests relating to mitigation of damages. What those requests actually seek are: All documents referring or relating to applications for loans from anyone other than 1st Class during 2013 through 2016 (Request No. 73); all financial statements of Niro Law from 2013 through 2016 (Request No. 74); and all documents referring or relating to any applications for litigation funding from non-1st Class sources, with no time restriction (Request No. 82). As to Request No. 74, 1st Class makes not the slightest effort to explain how Niro Law's financial statements go to its claim for mitigation. The request is overly intrusive and utterly irrelevant. It is none of 1st Class' business. Niro Law stands by its objection. As to Requests No. 73 and 82 (which are of course somewhat overlapping), 1st Class' requests are not nearly as narrow as its "mitigation" argument would suggest or could support. If 1st Class wants to know what steps (if any) Niro Law took to mitigate its damages when 1st Class breached its funding obligations, let it ask; it has not done so. If 1st Class wants to know if Niro Law sought substitute litigation funding for the clients/cases as to which 1st Class breached its funding obligations, then let it ask that. It has not done so. What it has done, once again, is to issue overbroad blunderbuss requests that are in no way proportional to the needs of any party's claims or defenses. Niro Law stands by its objections. g. Settlements, judgments, payments. 1st Class never tires of repetition. Its next argument concerns "documents relating to settlement, judgment, or payments" on the funded clients/cases, referring to its Request Nos. 26 through 31 and 83. As noted multiple times here, Niro Law has already agreed to identify and produce all judgments and nonprivileged documents sufficient to permit 1st Class to ascertain settlement payments received on claims for the funded clients (Response to Request Nos. 26, 27 and 9 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 10 of 12 PageID #:555 28), as well as to demonstrate fees received or costs recovered (Response to Request Nos. 29, 30 and 31). 1st Class now says that this does not satisfy its desire to receive "documents concerning any resolution of the action, regardless of whether they were settled or resolved by judgment." (Dkt. 40 at 12; emphasis by 1st Class.) Here 1st Class ignores its own requests! Requests 26 through 28 are each limited to documents relating to "resolution by way of settlement or judgment"; 29 through 31 pertain to fees received; and 83 seeks documents regarding payments by Niro Law to 1st Class. Nowhere does 1st Class request documents concerning resolution of funded matters by means other than judgment or settlement. Niro has agreed to produce documents related to the requests that 1st Class has made (although some are awaiting resolution of the protective order issue, since many settlement agreements contain confidentiality provisions). h. Ambiguity of Responses. 1st Class' final complaint is that 35 individual request responses are supposedly "ambiguous" as to whether requested documents are being produced. This is unfounded. Each response indicates that Niro law will undertake to identify and produce documents located in the places known to or reasonably believed by Niro Law to contain them. We believe that agreeing to produce documents located after a search of places where they might be located is indicative of diligent production (as is the fact that nearly 10,000 pages have been produced or are waiting to be produced pending resolution of the protective order issue). 1st Class says that as to its Request No. 12 (communications with Ron Hofer concerning 1st Class), Niro Law "seems to be claiming" that some of its communications with Hofer pertain to representation on another matter (other than the clients/matters governed by the MLA and CSLAs). Niro Law does not simply "seem to be claiming" this; its response to Request No. 12 is quite explicit on this point: 10 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 11 of 12 PageID #:556 Niro Law objects to this request in that it could encompass communication between Niro Law and its client Grail Semiconductor, since Grail employed Ron Hofer and Grail did business with 1CL that is not the subject of this case. In responding to this request, Niro Law will exclude that scope from this request. There is no ambiguity, only clarity. Hofer was employed by Grail, a Niro Law client not in any way connected with the MLA or CSLAs; that client and Grail did business together. Niro Law's representation of Grail, and Niro Law's communication with Grail's employee in connection with that representation, has no relevance to this case, and 1st Class has not even attempted to come up with an argument to the contrary. The only other individual request discussed by 1st Class in its final argument is Request No. 13, regarding communications between Niro Law and Richard Gilbert. Again, the response is quite explicit that because Judge Gilbert (a retired California judge who served as an independent director of former Niro Law client Grail) was employed by Grail, which did business with 1st Class that is not a part of this case, Niro Law's communications with its client are not relevant or discoverable in this case. CONCLUSION 1st Class' 86 requests for production of documents are needlessly complex, repetitive and overly broad. Niro Law's objections have been focused and appropriate, and Niro Law has already produced (or agreed to produce) thousands of documents sufficient to satisfy 1st Class' need for "non-privileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action" and the other factors identified in Rule 26(b)(1), Fed. R. Civ. P. 1st Class' motion, like its requests, is ill-founded and needlessly repetitive. It was not substantially justified, and should be denied. Moreover, pursuant to Rule 37(a)(5)(B), the court should "require the movant, the attorney filing the motion, or both to pay the party. . . who 11 Case: 1:16-cv-06793 Document #: 47 Filed: 03/13/17 Page 12 of 12 PageID #:557 opposed the motion its reasonable expenses incurred in opposing the motion, including attorney's fees." Respectfully submitted, /s/ Matthew D. Tanner Matthew D. Tanner Peter S. Roeser ROESER BUCHEIT & GRAHAM LLC Two N. Riverside Plaza, Suite 1850 Chicago, Illinois 60606 (312) 300-2522 CERTIFICATE OF SERVICE Matthew D. Tanner hereby certifies that he caused this opposition to be served upon all counsel of record via the court's electronic docketing system on March 13, 2017. /s/ Matthew D. Tanner 12