ED&F Man Capital Markets Ltd. v. JVMC Holdings Corp

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ED&F CAPITAL MARKETS )

LTD, et al. )

) No. 18 C 5704

Plaintiffs, )

) District Judge Steven C. Seeger

v. )

) Magistrate Judge Jeffrey Cummings

JVMC HOLDINGS CORP. )

(f/k/a/ RJO HOLDINGS CORP.), et al. )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiffs ED&F Capital Markets Ltd., ED&F Man Financial Services Holdings Ltd., and

ED&F Man Financial Capital Markets MENA Ltd. (collectively “plaintiffs”) brought this action

against defendants JVMC Holdings Corp. (“RJO”), Gerald Corcoran, Jamal Oulhadj, and Daniel

Staniford (collectively “defendants”) for the alleged violation of the Defend Trade Secrets Act,

18 U.S.C. § 1836 et seq. and several counts of state law including breach of contract, breach of

business relations, and unjust enrichment. (Dckt. #37). Plaintiffs and defendants are

commodities and futures brokers who operate in over 60 countries. Plaintiffs allege that

defendants used “bribery, theft, and deceit” to infiltrate plaintiffs’ business in Dubai, United

Arab Emirates in order to establish their own operation there. (Id. at ¶1). Currently before the

Court are the motions to compel filed by both plaintiffs and defendants. For the reasons stated

below, plaintiffs’ motion to compel (Dckt. #120) is granted and defendants’ motion to compel

(Dckt. #112) is granted in part and denied in part.

I. Legal Standard

A party may file a motion to compel under Federal Rule of Civil Procedure 37 whenever

another party fails to respond to a discovery request or when its response is insufficient.

Fed.R.Civ.P. 37(a). Courts have broad discretion in resolving such disputes and do so by

adopting a liberal interpretation of the discovery rules. Chicago Reg. Council of Carpenters v.

Pension Fund v. Celtic Floor Covering, Inc., 316 F.Supp.3d 1044, 1046 (N.D.Ill. 2018). Federal

Rule of Civil Procedure 26(b)(1) provides that the “[p]arties may obtain discovery regarding any

nonprivileged matter that is relevant to any party’s claim or defense.” Fed.R.Civ.P. 26(b)(1); see

also Motorola Sols., Inc. v. Hytera Communications Corp., 365 F.Supp.3d 916, 924 (N.D.Ill.

2019) (“Relevance focuses on the claims and defenses in the case, not its general subject

matter”). Discoverable information is not limited to evidence admissible at trial. Instead, such

information is relevant “if the discovery appears reasonably calculated to lead to the discovery of

admissible evidence.” Fed.R.Civ.P. 26(b)(1).

Nonetheless, “relevance alone does not translate into automatic discoverability under

Federal Rule of Civil Procedure 26.” Motorola, 365 F.Supp.3d at 924. In particular:

the discovery sought must not only be relevant, but it must be ‘proportional’ to

the needs of the case, ‘considering the importance of the issues at stake in the

action, the amount in controversy, the parties’ relative access to relevant

information, the parties’ resources, the importance of the discovery in resolving

the issues, and whether the burden or expense of the proposed discovery

outweighs its likely benefits.’

Id., quoting Lechuga v. Magallanes, No. MO:16-CV-00269-RAJ-DC, 2017 WL 8181556, at *1

(W.D.Tex. July 7, 2017). Once the moving party has made a preliminary showing that “the

discovery it seeks is relevant to the case and proportional to the needs of the party,” Sanchez v.

City of Fort Wayne, No. 118CV00397HABSLC, 2019 WL 6696295, at *2 (N.D.Ind. Dec. 9,

2019) (citing cases), “[t]he party opposing discovery has the burden of proving that the requested

discovery should be disallowed.” Id. (internal quotation marks omitted).

II. Plaintiffs’ Motion to Compel

On May 8, 2020, the Court issued a memorandum opinion and order denying defendants’

motion for a protective order that set out the factual allegations involved in this case. (Dckt.

#154). As the Court stated, defendants began soliciting four of plaintiffs’ key employees – Benji

Chtromberg, Sayyed Hussain, Omar Khan, and Mark Smith1 – to leave their employment and

join defendants’ Dubai office, RJO MENA [Middle East and North Africa]. After defendants

responded to plaintiffs’ document requests (“the Original Production”), defendants obtained new

counsel in June and August 2019. Defendants’ new attorneys determined that prior counsel had

inadvertently produced documents that were both irrelevant and confidential. Accordingly,

defendants provided plaintiffs with a replacement production on December 4, 2019 that redacted

some of the previous materials and altered the confidentiality designations of a number of

documents. (“the Altered Production”). An additional production of documents was made on

December 18, 2019 (the “Supplemental Production”). The Supplemental Production included 18

documents, six of which were heavily redacted copies of defendant RJO’s board minutes and

presentations.

A. Defendants Must Produce Unredacted Versions of RJO’s Board Minutes

Plaintiffs ask that defendants be required to turn over unedited versions of RJO’s board

minutes. Plaintiffs claim that these minutes were responsive to their Request Nos. 43 and 44,

which sought documents and communications related to “Plaintiffs; the Diverted Trade,

1 Plaintiffs label these four brokers as “the Corrupted Employees.” The Court adopts defendants’ less

pejorative label of “the Relevant Brokers.”

conception, formation, hiring, operating strategy and employee poaching for the RJO MENA

office location; and this Action.” (Dckt. #120, Ex. D at 15).

To illustrate what is at stake, plaintiffs have submitted three of the six board notes that

defendants produced in redacted form:

1. An RJO board presentation dated February 7, 2018. This document contains 19

pages, 17 of which are entirely redacted. One page contains the statement: “Sales & Business

Development [REDACTED] & Dubai.” Another page states that RJO interviewed 16 brokers,

hired five of them, and placed the Relevant Brokers under contract for starting dates of April 1

and May 15, 2018. (Id. at Ex. F).

2. RJO board meeting minutes for April 25, 2018. This document contains six pages.

Four pages are fully redacted; one identifies the persons present at the meeting; and one contains

substantive material concerning defendants’ due diligence on the brokers’ hiring, the marketing

required to acquire accounts, and start-up plans for the Dubai office. (Id. at Ex. G).

3. RJO board meeting minutes for July 26, 2019. This document also contains six

pages. Four are redacted; one announces the meetings’ participants; and one states that RJO

MENA currently had more brokers than anticipated and that its budget was “currently behind

due to the delayed onboarding of one broker.” (Id. at Ex. H).

Defendants argue that they were entitled to redact all six of the documents in dispute

before producing them to a competitor because of their irrelevance and confidentiality. The

Court disagrees. As the Court found in its May 8, 2020 memorandum opinion, the parties’

November 15, 2019 Amended Confidentiality Order permits defendants to designate any highly-

sensitive documents as “confidential – for attorney’s eyes only” if their disclosure would “result

in a defined and serious injury.” (Dckt. #31 at ¶3). The Court does not reiterate its reasoning

here; instead, it finds that the Amended Confidentiality Order fully protects defendants’ sensitive

information for the reasons the Court explained in its prior order. (Dckt. #154 at 7-9).

As in their earlier motion for a protective order, defendants also place great stress on the

claim that parties are entitled to redact irrelevant information from responsive documents and

cite a series of cases to that effect. The Court expressed its agreement with that general

conclusion, (id. at 6), but found that it did not apply to defendants’ earlier motion. It also has no

application here. The cases that defendants rely on found that a party could redact material

based on relevance only after the court undertook an in camera review of the disputed

documents. See RBS Citizens, N.A. v. Husain, 291 F.R.D. 209 (N.D.Ill. 2013); Beauchem v.

Rockford Prod. Corp., No. 01 C 50134, 2002 WL 1870050 (N.D.Ill. Aug. 13, 2002). By

contrast, defendants have not submitted any of the materials they redacted. The Court therefore

cannot find that the removed information is irrelevant to the claims or defenses in this case.

That said, defendants claim that everything that they removed was both irrelevant and

confidential. The Amended Confidentiality Order is therefore sufficient to protect all the

redactions that defendants have made. Defendants are instructed to provide unredacted version

of the board minutes in question to plaintiffs within 7 business days of the issuance of this order.

B. Plaintiffs Must Respond to Document Request No. 1

In addition to hiring the Relevant Brokers, defendants also recruited non-parties Paul

Whetstone and Brad Hart from the firm of Tullett Prebon (“the Tullett Brokers”). Request No. 1

in plaintiffs’ document requests asked defendants to turn over “[a]ll documents and

communications related to RJO’s and/or Defendants’ efforts to recruit Paul Whetstone and/or

Bradley Hart, including any related communications between You and Tullett Prebon.” (Dckt.

#120, Ex. B at 6). Defendants objected to the request on several grounds but responded in detail

to its relevance as follows:

Efforts to recruit Paul Whetstone and Bradley Hart to join [RJO MENA] and any

related communications between Defendants and Tullett Prebon were not relevant

to Plaintiffs’ claims in this case because Paul Whetstone and Bradley Hart were

not employed by Plaintiffs when they were recruited to join RJO MENA, and

Plaintiffs have alleged no claim, nor could they allege any claim, arising from or

related to the recruitment of Paul Whetstone and Bradley Hart to join RJO

MENA.

(Id.). 2

Plaintiffs argue that their request is relevant based on an October 23, 2017 email from

defendant Staniford to RJO’s marketing head Mark Sachs. The email inquired about defendants’

due diligence inquiry into Tullett Broker Brad Hart and Relevant Broker Sayyed Hussain, neither

of whom had yet resigned their former employment and signed on with defendants. The email

also mentions “the specific relationships” that the brokers would be “onboarding” to RJO and the

revenues that might be generated by those relationships. Staniford then wrote – somewhat

unclearly – as follows:

Contracts out but no signatures yet – not economic issues at this point but some

small detail to be ironed out this week. Concerns run high on tullet’s [sic] ability

and desire to pursue action – if the prospect account by detail is not mission

critical then I would elect to leave it be for [P]aul [Whetstone] and [B]rad – we

have their volumes ltm [sic] and they confirm (actually outperform) my initial

expectations[.]

As for [S]ayyed I can run this down in 48 hours so should not be a problem[.]

(Id., at Ex. C at 2).

2 Defendants claim in their response brief that the absence of a formal allegation in the First Amended

Complaint concerning the Tullett Brokers means that information about them would not be relevant under

Federal Rule of Evidence 401. Even if defendants were correct about this (and the Court does not decide

the issue one way or the other), it does not matter: “[a]t this stage the Court is only concerned with

relevance under Federal Rule of Civil Procedure 26(b)(1), not relevance and admissibility under Federal

Rule of Evidence 401.” Laudicina v. City of Crystal Lake, 328 F.R.D. 510, 519 (N.D.Ill. 2018).

Plaintiffs argue that Staniford’s “concerns” about Tullett’s willingness “to pursue action”

about Hart’s prospective accounts suggests “a consciousness of guilt” about how defendants

were recruiting all the brokers. Since Staniford was unwilling to pursue information from the

Tullett Brokers but not Hussain, Request No. 1 would allegedly cast light on “Plaintiffs’ claims

that Defendants knowingly, willfully, and intentionally misappropriated Plaintiffs’ Confidential

Information and induced the [Relevant Brokers] to violate contractual and fiduciary duties owed

to Plaintiffs.” (Dckt. #120-1 at 11). Plaintiffs contend that makes communications about the

Relevant Brokers relevant to (1) plaintiffs’ intentional tort claims and (2) defendants’ affirmative

defense of “fair competition.” The Court agrees concerning the affirmative defense and

therefore does not address plaintiffs’ tort allegations.

Both the corporate and the individual plaintiffs stated as their First Affirmative Defense

that plaintiffs’ claims – including the tort of an intentional interference with business relations –

are barred “because Defendants acted with justification at all relevant times, consistent with

fair competition, for a legitimate business purpose in furtherance of their own lawful interests

and by means that are lawful.” (Dckt. #42 at 45; Dckt. #104 at 28). It is well established that

Illinois law permits a defense of fair competition against the tort of intentional interference with

business relations. See Cromeens, Holloman, Sibert, Inc. v. AB Volvo, 349 F.3d 376, 398 (7th

Cir. 2003) (stating that “a defendant may have a privilege to compete that defeats an action for

intentional interference with prospective business advantage”) (citing Soderlund Bros., Inc. v.

Carrier Corp., 663 N.E.2d 1, 8 (Ill.App.Ct. 1995)). The defense is restricted by the nature of the

defendant’s actions, however, so that “the competitor’s privilege is not available to those who

use wrongful means to interfere” – including fraud, deceit, intimidation, or deliberate

disparagement. Foboha GmbH v. Gram Tech., Inc., No. 08 C 0969, 2008 WL 4619795, at *5

(N.D.Ill. Oct. 15, 2008) (internal quotes and citation omitted); see also Chicago’s Pizza, Inc. v.

Chicago’s Pizza Franchise Ltd. USA, 893 N.E.2d 981, 994 (Ill.App.Ct. 2008).

Request No. 1 is relevant to this affirmative defense, though the issue is more complex

than plaintiffs state. The October 2017 email clearly conveys Staniford’s concern that Tullett

Prebon was willing and able “to pursue action” against defendants – a worry that did not apply to

plaintiffs.3 His anxiety was serious enough for him to back away from obtaining information

from Hart but did not prevent him from approaching Hussain. Plaintiffs claim that the email

shows Staniford’s “consciousness of guilt,” but that overstates what the emails says. Staniford

was clearly concerned about something. It is unclear, however, if that involved a fear of being

caught in wrongdoing or was merely the type of reasonable worry that might be part of one

company’s attempt to recruit important employees from another – perhaps unusually aggressive

– competitor.

At his deposition, Staniford attempted to show that the second explanation was the basis

of the email. He testified – repeatedly – that his real worry was “about everyone’s well-being

and everyone’s restrictive covenants” and therefore wanted to ensure that all parties involved in

the recruitment were “going at it by the book.” (Dckt. #128, Ex. A at 4). Even accepted as true,

that does not explain why Staniford was worried about “action” from Tullett Prebon but not from

ED&F MENA about Hussain’s recruitment. Plaintiffs claim that – just like the Tullett Brokers –

the Relevant Brokers were also bound by restrictive covenants that were still in effect when the

email was written. Indeed, one of plaintiffs’ key allegations is that defendants knew that the

3 Defendants object that plaintiffs already know from defendants’ discovery responses that Tullett Prebon

did not take any legal action against them. Defendants’ responses, however, were made on October 9,

2019, (Dckt. #120, Ex. B at 10), two years after Staniford’s October 2017 email. The relevant issue is

what Staniford was concerned about when he wrote the email. The communication is cryptic in some

regards, but it strongly implies that Staniford was anxious about the possibility of litigation (“[c]oncerns

run high on tullet’s ability and desire to pursue action”).

Relevant Brokers were breaching their contractual obligations and had already obtained

confidential information from them. (Dckt. #37 at ¶¶ 40-42, 65). Staniford did not explain why

his concern about “everyone’s restrictive covenants” caused him to back off from the Tullett

Brokers but not Hussain. To the contrary, his willingness to “run down” the same information

with Hussain that he would not pursue from Whetstone suggests – though it certainly does not

prove, as plaintiffs imply – that Staniford may have formed different kinds of relationships with

these prospective recruits that made him less concerned about potential legal action from

plaintiffs than from Tullett Prebon.

The issue would be clearer if the October 2017 email stated what it was that Staniford

was trying to find out from these two sets of brokers. The email is vague, however, and

Staniford said at his deposition that he could not recall what it was that he intended to “run

down” with Hussain. (Dckt. #145, Ex. E at 17). He was also unclear what he meant by

“prospect account by detail.” Staniford initially stated that he did not recall what that phrase

meant. He then said that it ordinarily referred to accounts that he could “onboard and assign to

brokers” but that its meaning in the context of the October 2017 email was protected by the

attorney-client privilege. (Id. at 14-16). Staniford’s intent became even more uncertain at the

close of the deposition when he conceded after detailed questioning that he could not provide

any explanation of the email’s meaning: “I don’t remember crafting this email or what

transpired after. So I’m not going to guess as to what my thoughts were at the time.” (Id. at Ex.

F at 15) (emphasis added).

Despite Staniford’s disavowal of the email’s meaning, three points are clear: (1) the e-

mail draws a nexus between the Tullett Brokers, the Relevant Brokers, and defendant Staniford;

(2) it implies a serious concern about litigation from Tullett but not from plaintiffs; and (3)

Staniford stated a willingness to act more freely with Husain than with the Tullett Brokers. The

email does not appear to be direct evidence of wrongdoing (as plaintiffs claim), but it shows

enough unaccounted connections between the recruitment of the Tullett Brokers and the

Relevant Brokers to make it relevant to defendants’ “fair competition” defense.

Defendants’ remaining objections are overruled. Defendants claim that Request No. 1 is

overly broad and would lead to additional discovery requests concerning every broker that

defendants have hired. To the contrary, the request is limited in scope and time: it only concerns

two individuals and a brokerage firm with whom defendants allegedly had communications over

a limited period of time. Plaintiffs state that the Tullett Brokers have a special significance to

their claims, moreover, and nothing supports an inference that a cascade of additional discovery

would ensue by requiring defendants to answer Request No. 1. Indeed, plaintiffs expressly

disavow any intent to seek such broad discovery.

Plaintiffs’ motion is granted as to this issue. Defendants are directed to respond to

Request No. 1 within fourteen (14) days of the issuance of this order.

III. Defendants’ Motion to Compel

On February 21, 2020, defendants filed their motion to compel seeking the disclosure of

additional information concerning plaintiffs’ alleged trade secrets, evidence related to several

categories of the damages that plaintiffs claim they have suffered, and documents relevant to

plaintiffs’ broker recruitment and termination practices. Plaintiffs subsequently produced a

number of additional documents that they claim have rendered some of defendants’ requests

moot. The Court has accounted for those submissions as addressed below and finds that

defendants’ motion should be granted in part and denied in part.

A. Plaintiffs Should Respond to Interrogatories Concerning Trade Secrets

In their Interrogatory No. 1, defendants asked plaintiffs to identify “any trade secret or

confidential information” that plaintiffs alleged had been misappropriated by defendants. (Dckt.

#112 at Ex. A). This included information related to plaintiffs’ “specialized software system” for

executing trades that plaintiffs claim defendants learned about “through the bribery of Plaintiffs’

employees.” (Dckt. #37 at ¶22). Along similar lines, Interrogatory No. 8 asked plaintiffs to

identify “each ‘trade secret’ You allege was misappropriated.” (Dckt. #112 at Ex. B). Plaintiffs

objected that discovery was ongoing for both requests; that some of the relevant information was

already in defendants’ possession; and that “at the very least” the trade secrets could be

identified by a range of specific production documents that plaintiffs identified by bates numbers

and broad descriptions such as “client lists,” “compensation and bonus structure,” and “rate

information.” (Id.).

These responses fail to satisfy plaintiffs’ discovery obligations. By their own admission,

the categories of trade secrets that plaintiffs identify in their responses are only representative

examples of those that could be at issue in this case. Rule 33, however, states that a responding

party must answer interrogatories “fully in writing under oath.” Fed.R.Civ.P. 33(b)(3) (emphasis

added); see also Equal Rights Ctr. v. Post Properties, Inc., 246 F.R.D. 29, 32 (D.D.C. 2007) (“A

party to whom an interrogatory is propounded must provide true, explicit, responsive, complete,

and candid answers.”) (internal quotes and citation omitted). Plaintiffs claim that they are not

required to do more than provide examples of trade secrets, (Dckt. #127 at 4), but “[t]he

requirement is that [a party] needs to be exhaustive, not just provide examples.” Remy Inc. v.

Tecnomatic, S.P.A., No. 1:11-CV-00991-SEB, 2013 WL 1331002, at *2 (S.D.Ind. Mar. 28,

2013). As defendants point out, moreover, the plaintiff in a trade secrets case “bears the burden

of identifying its trade secrets with specificity.” IDS Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581,

583-84 (7th Cir. 2002).4

Plaintiffs also object to responding in full to Interrogatories No. 1 and 8 on the ground

that much of the information that defendants seek is already in their possession in one form or

another. Even if that is true, plaintiffs cannot decline to respond to these requests on the ground

that defendants might be able to ferret out what they are asking for by some other means. “A

party is not prevented from obtaining an interrogatory response just because the information

requested by the interrogatory is similar to other discovery already obtained.” Beijing Choice

Elec. Tech. Co. v. Contec Med. Sys. USA Inc., No. 18 C 0825, 2020 WL 1701861, at *6 (N.D.Ill.

Apr. 8, 2020). Defendants point out that 31,000 pages of documents have already been produced

in this case. The burden for identifying the parts of that production that contain responsive

information falls on plaintiffs as the answering party – not on defendants.

The Court also agrees with defendants that plaintiffs must do more than identify a list of

documents that contain the information that defendants are seeking. They must also provide a

narrative response to these interrogatories that provides the information that is sought. Plaintiffs

appear to believe a written response is unnecessary because the relevant documents generally

consist of email communications with attachments “that contain information readily identifying

as trade secrets.” (Dckt. #127 at 5). Defendants, however, are not required to guess what parts

of the email attachments contain trade secrets. Plaintiffs shall therefore provide a written

response that responds in full to Interrogatories Nos. 1 and 8.

4 Plaintiffs assert that they may uncover more trade secrets that defendants have misappropriated during

the course of discovery. However, this possibility does not relieve plaintiffs of their obligation to fully

identify the allegedly misappropriated trade secrets of which they are now aware. If plaintiffs learn of

any additional trade secrets that they believe were misappropriated, they must supplement their discovery

responses as required by Rule 26(e).

B. Damages Discovery

Defendants also submitted a number of interrogatories and document requests related to

several aspects of the damages that plaintiffs claim they have suffered. These include: (1)

information concerning the loss of plaintiffs’ trading commissions, (2) plaintiffs’ increased costs

to retain their employees, and (3) various requests concerning plaintiffs’ claim that they

experienced a “diminution in the value of their business” due to defendants’ alleged wrongdoing.

(Dckt. #37 at ¶7). The Court addresses each of these issues in turn.

1. Plaintiffs must provide their trading loss calculations

Defendants first identify three categories of discovery on plaintiffs’ trading losses that

they argue require additional responses from plaintiffs: (1) losses related to trades that the

departing brokers would have transacted had they not left their employment (Document Request

No. 28; Interrogatory No. 8); (2) the identity of each customer involved in plaintiffs’ losses, the

amount of the loss, and the method used to calculate it (Interrogatory No. 5); and (3) information

concerning the performance and forecasts for plaintiffs’ futures and financial desks in Dubai

(Document Requests Nos. 7-8, 13, 15).

In their response, plaintiffs state that they have produced all the documents in their

possession that demonstrate their lost trading commissions and that they did so in the manner in

which those documents are kept in the ordinary course of business. Plaintiffs add, however, that

they are now able to produce the same data to defendants in a form that provides a more

“granular” view of their losses. Furthermore, plaintiffs claim that they will also turn over

documents related to their trading desks but that no documents exist concerning their cost of

capital or the profitability of the departing brokers. (Dckt. #127 at 8-9). Defendants do not

dispute the adequacy of these documents in their reply brief; instead, they only pursue arguments

related to their damages-related interrogatories. (Dckt. #137 at 6-7). The Court therefore finds

that plaintiffs have adequately responded to Document Requests Nos. 7-8, 13, 15 and 28.

Defendants’ motion is denied on these requests.

That said, plaintiffs claim in another part of their response that they should not be

required to quantify all of their trading losses until expert discovery is completed. Plaintiffs

concede that they have made “preliminary damages calculations,” (Dckt. #127 at 13), but cite

United States ex rel. Tyson v. Amerigroup Ill., Inc., 230 F.R.D. 538 (N.D.Ill. 2005) to argue that

they should not have to provide that information at this time. The Court disagrees that Tyson

supports plaintiffs’ position. Unlike here, the interrogatory in dispute in Tyson did not ask for a

party’s damage calculations. Instead, it sought a detailed description of the opposing party’s

“theory or theories and method or methods for calculating damages.” Id. at 540 (emphasis

added). The court found – and this Court agrees – that involves an issue best left to expert

discovery where the methods for calculating damages can be set out in appropriate detail. By

contrast, plaintiffs are only being asked to turn over the damages calculations they admit they

have already made. Those calculations are relevant, and plaintiffs must produce them. See

Sauer v. Exelon Generation Co., LLC, No. 10 C 3258, 2011 WL 3584780, at *9 (N.D.Ill. Aug.

15, 2011) (ordering the disclosure of damages calculations prior to the closure of expert

discovery). Defendants’ motion is granted on this issue.

2. Plaintiffs should disclose some, but not all, of the costs required for

retaining employees at this time

Defendants also propounded a number interrogatories and documents requests

concerning the increased costs that plaintiffs incurred in trying to retain those employees who did

not leave them to join defendants’ Dubai operation. Defendants cite two distinct categories of

discovery requests that, unfortunately, plaintiffs do not distinguish between in their response.

a. Interrogatory No. 6

Interrogatory No. 6 asked plaintiffs to identify the current and former employees for

whom plaintiffs allege damages due to increased retention costs, together with the amount of

damages associated with them. Plaintiffs responded to the first part of the request by identifying

(1) the four Relevant Brokers and (2) six retained brokers. Plaintiffs did not identify any amount

of damages for any of these employees. (Dckt. #112 at Ex. B).

Plaintiffs specifically allege in their amended complaint that they were required to raise

the salary of six employees who did not leave with the Relevant Brokers and gave them “an

extraordinary bonus.” (Dckt. #37 at ¶67). Those six employees are presumably the six retained

brokers identified in plaintiffs’ interrogatory response. Plaintiffs must therefore identify the

bonus and pay raises associated with these six brokers within fourteen (14) days of the entry of

this order. This is not a complex calculation, and it does not take an expert to determine the

amount of a bonus or a salary increase. Insofar as other damages claims may be related to any of

the employees that plaintiffs identified in response to Interrogatory No. 6, the Court agrees with

plaintiffs that any further disclosure should be reserved for expert discovery.

b. Plaintiffs are not required to respond to requests concerning brokers in

comparable positions

Defendants also issued a series of supplementary requests seeking documents regarding

policies, compensation, and incentive plans for plaintiffs’ brokers who did not leave their

employment. (Second Document Request No. 5; Third Document Request No. 9, 14, 34).

Plaintiffs responded that they would produce documents for the departing brokers (Requests No.

5 and 14) but that the requests were otherwise irrelevant and disproportionate to the needs of the

case.

The Court agrees that plaintiffs are not required to respond further to these document

requests. Under Rule 26(b)(1), discovery must be relevant and proportional to the needs of a

case – a requirement that involves two prongs that must both be satisfied. See, e.g., Samsung

Elecs. Am., Inc. v. Yang Kun Chung, 321 F.R.D. 250, 279 (N.D.Tex. 2017) (citing cases).

Defendants claim these requests are relevant because responsive documents would test plaintiffs’

claim that the increased costs associated with the retained brokers identified in Interrogatory No.

5 were proximately caused by the need to prevent their recruitment by defendants. The best test

for that issue, however, is discovery directly related to the brokers that plaintiffs have identified.

Even if the requests were relevant, moreover, defendants have not addressed plaintiffs’ objection

that they are disproportionate to the case. “Relevancy alone is no longer sufficient – discovery

must also be proportional to the needs of the case.” In re Bard IVC Filters Prod. Liab. Litig.,

317 F.R.D. 562, 564 (D.Ariz. 2016). Defendants overlook that plaintiffs operate on a world-

wide basis and that their discovery requests concern more than 100 other brokers. (Dckt. #127 at

11-12). Thus, information on incentive plans, commissions schedules, and other policies related

to all comparable brokers goes far beyond the six retained brokers that plaintiffs claim are

relevant to their damages claims. The Court agrees that these particular requests are not

proportionate to the needs of the case and defendants’ motion is therefore denied as to this set of

document requests.

3. Plaintiffs are not required to provide consultant documents concerning

plaintiffs’ business harm

a. Document Request No. 4

In their Third Document Request No. 4, defendants asked plaintiffs to produce

documents related to facts or analyses prepared by plaintiffs’ “consultants or advisors, regarding

the estimated impact of this litigation” on plaintiffs’ business operations. That included an

estimate of plaintiffs’ damages related to the alleged harm to plaintiffs’ business reputation.

(Dckt. #112 at Ex. C). Plaintiffs responded by claiming that such documents were protected by

the attorney-client privilege and/or the work product doctrine.

The Court agrees that documents prepared by plaintiffs’ litigation consults are protected

by the work product doctrine and are not discoverable. Federal Rule 26(b)(3)(A) states that “a

party may not discover documents and tangible things that are prepared in anticipation of

litigation or for trial by or for another party or its representative (including the other party’s

attorney, consultant, surety, indemnitor, insurer, or agent).” Courts have interpreted this to mean

that “[w]hen experts serve as litigation consultants, the work-product privilege generally applies

to materials reviewed or generated by them in that capacity.” S.E.C. v. Reyes, No. C06-04435

CRB, 2007 WL 963422, at *1 (N.D.Cal. Mar. 30, 2007).

Defendants note, however, that plaintiffs have not included the documents they claim are

privileged in their privilege log. Plaintiffs are directed to remedy that oversight by including all

the documents that are responsive to Request No. 4 in an amended privilege log showing “the

date, the author and all recipients, along with their capacities, the subject matter of the document,

the purpose for its production and a specific explanation of why the document is privileged.”

RBS Citizens, 291 F.R.D. at 218.

b. Document Request No. 2

In addition to Request No. 4, defendants’ motion also asks plaintiffs to respond to Third

Document Request No. 2, which sought documents on communications that plaintiffs had with

past or present lenders, acquirors, new hires, or “the public” concerning ED&F MENA’s

financial condition or any allegation that plaintiffs have made in this case. (Dckt. #112 at Ex. C).

Unfortunately, plaintiffs overlook this document request in their response, and defendants

ignore it in their reply. (Dckt. #127 at 10; Dckt. #137 at 7-8). On January 16, 2020, however,

plaintiffs sent defendants a letter concerning the parties’ discovery disputes that included these

third-party communications. Plaintiffs reiterated their original response to Request No. 2 that

any third-party communications concerning plaintiffs’ allegations were already included in

plaintiffs’ prior document production. (Dckt. #112 at Ex. G). Defendants complain in their

motion that they have been unable to locate these documents. Plaintiffs are therefore directed to

identify the bates numbers of the documents they produced that are responsive to this aspect of

Request No. 2.

The January 16, 2020 letter does not clarify plaintiffs’ objections to producing third-party

communications related to ED&F MENA’s financial condition. Plaintiffs’ original discovery

response objected that (1) plaintiffs had already produced documents on their financial condition,

(2) not all third-party communications on this issue were relevant to the case, and (3) the

attorney-client privilege and work product doctrine protected at least some communications.

The Court agrees that requiring plaintiffs to turn over all communications on ED&F MENA’s

financial condition is overly broad. However, communications that concern plaintiffs’ allegation

that their financial condition was harmed by the Relevant Brokers’ departure are relevant to their

claims. Plaintiffs are directed to produce documents that are responsive to that issue to the

extent that they have not been produced already. Insofar as plaintiffs have already produced

them, they should identify these documents to defendants by bates numbers. Any relevant

documents that plaintiffs believe are protected by a privilege should be included in the amended

privilege log. 5

5 The Court has addressed the business harm issue by assuming that the documents sought in Requests

No. 2 and 4 are defendants’ primary concern because this section of their reply brief is exclusively

C. Plaintiffs are not required to respond to requests concerning recruitment or

termination policies

Defendants submitted numerous interrogatories and document requests related to

plaintiffs’ recruitment and termination practices. (Second Document Requests No. 2-3; Third

Document Requests No. 1, 6, 31; Second Interrogatories No. 4, 9). They seek information such

as plaintiffs’ communications with brokers who work for other competitors, their “onboarding”

of other firms’ customers, and issues related to the termination of plaintiffs’ employees.

Defendants contend that documents concerning the termination or departure of other

brokers – including plaintiffs’ employee “headcount” over time – would show the Relevant

Brokers’ “true motive” for leaving their employment with plaintiffs. The Court disagrees with

this reasoning because the obvious source for discovering the Relevant Brokers’ motive is the

brokers themselves, and defendants have not shown why additional discovery is needed on this

issue. In addition, only two of the seven requests that defendants cite in their motion actually

concern termination or departure issues: Third Document Request No. 31 asks for documents on

“any and all” employees whom plaintiffs terminated; Second Interrogatory No. 9 asks for the

names and contact information for all ED&F MENA employees who left their employment after

January 1, 2015. (Dckt. #112 at Exs. C & F). These requests are neither relevant nor

proportional to this case. The termination and/or departure of plaintiffs’ other employees is not

at issue in plaintiffs’ amended complaint. Contrary to defendants’ claim, moreover, requests

involving the termination of “any and all” of plaintiffs’ employees would show nothing about

plaintiffs’ “headcount” or why the Relevant Brokers left their employment.

concerned with the production of such documents and addresses arguments that plaintiffs made about

Request No. 4.

Defendants expand on these termination issues by also seeking information on various

aspects of plaintiffs’ business operations such as the “onboarding of new customers” (Id., Ex. C

at Req. 1), employment agreements that plaintiffs entered into with newly-hired employees (Id.,

Ex. E at Req. 3), and the entities from whom plaintiffs’ hired employees who were already

bound by agreements with their former employers. (Id. at Ex. F at Int. 4). Defendants claim that

these issues are relevant to their “fair competition” defense addressed earlier, supra at Section

II(B), because discovery would show that plaintiffs engaged “in the exact same conduct” that

defendants are alleged to have done. (Id. at 15). That is, defendants suggest that plaintiffs’

recruitment practices have given them “unclean hands” that is relevant to the fair competition

defense – though defendants do not explain what that relevance is.

Defendants’ motion is denied as to these requests. Even if plaintiffs engaged in the

practices that defendants suggest, the requests have no relevance to a claim or defense in this

case. They are clearly unrelated to plaintiffs’ own claims. The requests are also irrelevant to

defendants’ affirmative defenses, which do not include a defense of unclean hands. As for fair

competition, defendants do not cite any authority for the proposition that an opposing party’s

misconduct with unrelated third parties has any bearing on such a defense. Furthermore, it is

well established that “unclean hands” cannot be invoked when it concerns third-parties who are

unconnected to the transactions at issue in a lawsuit. See Zahl v. Krupa, 850 N.E.2d 304, 309

(Ill.App.Ct. 2006) (“The doctrine of unclean hands applies if a party seeking equitable relief is

guilty of misconduct, fraud, or bad faith toward the party against whom relief is sought and if

that misconduct is connected with the transaction at issue in the litigation.”) (emphasis added).

Defendants’ motion to compel is granted in part and denied in part. Plaintiffs shall

respond to those parts of the motion that are granted within fourteen (14) days of the entry of this

order.

CONCLUSION

For the reasons stated above, plaintiffs’ motion to compel (Dckt. #120) is granted and

defendants’ motion to compel (Dckt. #112) is granted in part and denied in part.

ENTER:

United States Magistrate Judge

Dated: June 25, 2020

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