For commercial practitioners who happen to be fans of the TV series “The Office,” Dwight Schrute’s “Learn Your Rules, You Better Learn Your Rules” jingle perfectly describes the constant theme of practicing before the New York Commercial Division. Since its inception in 1993, the Commercial Division has garnered the reputation of placing a heavy emphasis on rules for purposes of efficiency. As readers of this blog may know, those who fail to comply with the Commercial Division Rules, and/or the individual practice rules of a particular Commercial Division judge, will suffer the consequences. A recent decision issued by Justice Robert R. Reed illustrates this principle.
In Latin Mkts. Brazil, LLC v McArdle, a renowned conference promoter in the investment management industry (“Plaintiff”), commenced an action in 2020 against two former employees (“Defendants”), alleging that Defendants stole and used its trade secrets to form a competing entity in the same industry. The parties appeared before the Court for a Compliance Conference, and the Court issued a Compliance Conference Order that granted Plaintiff “leave to file a notice of motion to compel forensic inspection of the computers involved in the subject litigation.”
Plaintiff filed a motion to compel Defendants to respond to its discovery demands and produce, among other things, (i) certain computers belonging to Plaintiff, which the parties agreed to by stipulation, (ii) electronic discovery from local hard drives of computers used by Defendants in their business operations, and (iii) responses to Plaintiff’s Second Notice for Discovery and Inspection, and First Set of Interrogatories. Plaintiff argued that it obtained permission to make this discovery motion at the prior Compliance Conference.
In opposition, Defendants argued that Plaintiff’s motion to compel should be denied based on Plaintiff’s noncompliance with Manhattan Commercial Division Justice Robert Reed’s Part 43 Rule 6(h), which states that “discovery motions are discouraged,” and Commercial Division Rule 14, which requires that “discovery disputes are preferred to be resolved through court conference as opposed to motion practice.” In fact, prior to filing their opposition papers, Defendants’ counsel emailed Plaintiff’s counsel, requesting that Plaintiff withdraw its motion on the basis that it was only authorized to file a motion to compel for the “forensic inspection of the computers” at issue. Plaintiff’s counsel refused to withdraw its motion, and argued on reply that it properly included discovery issues that were raised in previous correspondence with the Court, but not addressed in the Compliance Conference Order.
Justice Reed denied Plaintiff’s motion in its entirety on the basis that “the filing of the instant motion was done without leave of court and in direct contravention of Commercial Division Rules 14 and 24, and Part Rule 43 6(h).” Justice Reed cited to a recent decision, Maple Drake Austell Owner, LLC v D.F. Pray, Inc., in which he denied a motion to strike on the basis that defendant “failed to comply with this court’s explicit rules … [by] never submitt[ing] a letter to the court outlining any of the discovery disputes.”
In light of the famous idiom – “penny wise and pound foolish” – practitioners who fail to adhere to the Commercial Division Rules and/or the individual rules of a particular Commercial Division judge are not only wasting their time, but also the court’s time, and their client’s money. In the words of my colleague Matt Donovan,“[c]heck the rules, folks. Always check the rules.”