In the Matter of John Kapon, et al., Appellants,v.William I. Koch, Respondent.BriefN.Y.February 19, 2014APL-2013-00163 New York County Clerk’s Index No. 102660/12 Court of Appeals STATE OF NEW YORK In the Matter of a Petition to Quash Subpoena Ad Testificandum and/or for a Protective Order JOHN KAPON and JUSTIN CHRISTOPH, Petitioners-Appellants, against WILLIAM I. KOCH, Respondent-Respondent. >> >> BRIEF FOR RESPONDENT-RESPONDENT MORVILLO ABRAMOWITZ GRAND IASON & ANELLO P.C. Attorneys for Respondent-Respondent 565 Fifth Avenue New York, New York 10017 212-880-9460 Date Completed: October 11, 2013 Of Counsel: Edward M. Spiro To Be Argued By: Edward M. Spiro Time Requested: 30 Minutes In Connection with an action pending in the Superior Court of the State of California entitled: William I. Koch v. Rudy Kurniawan, BC421581 TABLE OF CONTENTS Page 2781640.5 03 - i - I. QUESTION PRESENTED ......................................................................... 1 II. INTRODUCTION ...................................................................................... 1 III. BACKGROUND ...................................................................................... 4 A. The New York Action (Koch v. Acker). ........................................... 5 B. The California Action (Koch v. Kurniawan), And Koch’s Subpoenas For Discoverable Information. ....................................... 6 C. Kurniawan’s Arrest And Indictment. ............................................... 8 D. The Supreme Court Denies Appellants’ Petition To Quash Or For A Protective Order. ............................................................... 9 E. The Appellate Division Affirms. .................................................... 10 IV. ARGUMENT .......................................................................................... 11 A. The Courts Below Did Not Err In Declining To Quash The Subpoenas. ...................................................................................... 12 1. New York Law Has Long Promoted Liberal Nonparty Discovery. ............................................................ 12 a) Nonparty Discovery Was Liberal Even Under CPLR 3101’s Old “Special Circumstances” Requirement. .............................................................. 14 b) The Legislature Amended 3101 To Eliminate “Special Circumstances” And Make Nonparty Discovery Easier To Obtain. ..................................... 15 2. CPLR 3119 Did Not Disrupt the “Well Settled” Rule Under CPLR 3101 That The Party Challenging Discovery Must Show The Disclosure Is “Utterly Irrelevant.” ........................................................................... 19 3. Even If Koch Had The Burden To Prove Relevance, He Has Done So. .................................................................. 23 Page 2781640.5 03 - ii - B. The Supreme Court And Appellate Division Did Not Commit A “Clear Abuse Of Discretion” In Declining To Limit The Use Of Appellants’ Depositions. .................................. 26 1. Koch Seeks Appellants’ Depositions In Good Faith To Develop Evidence In The California Action. ................. 26 a) Discovery Orders In Another Case Cannot Justify A Use Limitation. .......................................... 28 b) The Criminal Action Against Kurniawan Does Not Justify A Use Limitation. ................................... 30 2. The Courts Below Appropriately Declined To Rule Whether Appellants’ Yet-To-Be-Provided Deposition Testimony Is Admissible In A Separate New York Action. .................................................................................. 32 V. CONCLUSION ........................................................................................ 34 TABLE OF AUTHORITIES Page(s) 2781640.5 03 - iii - Cases 148 Magnolia, LLC v. Merrimack Mut. Fire Ins. Co., 62 A.D.3d 486 (1st Dep’t 2009) ....................................................... 11, 30 Abbadessa v. Sprint, 291 A.D.2d 363 (2d Dep’t 2002) ............................................................ 25 AGH Distribs., Inc. v. Silvertone Fasteners, Inc., 105 A.D.2d 648 (1st Dep’t 1984) ........................................................... 31 Allen v. Crowell-Collier Publ. Co., 21 N.Y.2d 403 (1968) ............................................................................. 13 Am. Express Prop. Cas. Co. v. Vinci, 63 A.D.3d 1055 (2d Dep’t 2009) ............................................................ 27 Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327 (1988) ............................................................................. 21 Application of Ayliffe & Companies, 166 A.D.2d 223 (1st Dep’t 1990) ........................................................... 21 Catalano v. Moreland, 299 A.D.2d 881 (4th Dep’t 2002)..................................................... 16, 22 Catskill Ctr. for Conservation & Dev., Inc. v. Voss, 70 A.D.2d 753 (3d Dep’t 1979) .............................................................. 15 Cirale v 80 Pine St. Corp., 35 N.Y.2d 113 (1974) ............................................................................. 14 Deering Milliken Research Corp. v. Leesona Corp., 27 F.R.D. 440 (E.D.N.Y. 1961) .............................................................. 27 Devlin v. Transp. Commc’ns Int’l Union, No. 95 Civ. 0752 (JFK)(JCF), 2000 WL 28173 (S.D.N.Y. Jan. 14, 2000) ....................................................................................................... 28 Page(s) 2781640.5 03 - iv - Dioguardi v. St. John’s Riverside Hosp., 144 A.D.2d 333 (2d Dep’t 1988) ............................................................ 17 Dove v. Atl. Cap. Corp., 963 F.2d 15 (2d Cir. 1992) ..................................................................... 26 Garnot v. LaDue, 45 A.D.3d 1080 (3d Dep’t 2007) ............................................................ 28 Gersten v. New York Hosp., 81 A.D.2d 632 (2d Dep’t 1981) .............................................................. 15 Gertz v. Richards, 233 A.D.2d 366 (2nd Dep’t 1996) .......................................................... 22 Getman v. Petro, 266 A.D.2d 688 (3d Dep’t 1999) ............................................................ 11 Hub City Solid Waste Servs. v. City of Compton, 186 Cal. App. 4th 1114 (Cal. Ct. App. 2010) ......................................... 24 Hyatt v. State Franchise Tax Bd., 105 A.D.3d 186 (2d Dep’t 2013) ............................................................ 21 In re Aerco Int’l, Inc., 40 Misc. 3d 571 (Sup. Ct. Westchester Cty. 2013) ................................ 20 In re Am. Anthracite & Bituminous Coal Corp., 22 F.R.D. 504 (S.D.N.Y. 1958) .............................................................. 27 In re New York Cnty. DES Litig., 171 A.D.2d 119 (1st Dep’t 1991) ........................................................... 16 Johnson Foils, Inc. v. Huyck Corp., 61 F.R.D. 405 (N.D.N.Y. 1973) ............................................................. 27 Kapon v. Koch, 105 A.D.3d 650 (1st Dep’t 2013) ........................................... 2, 10, 20, 29 Kelly v. Shafiroff, 80 A.D.2d 601 (2nd Dep’t 1981) ............................................................ 15 Page(s) 2781640.5 03 - v - Kenford Co., Inc. v. Erie Cnty., 41 A.D.2d 586 (4th Dep’t 1973)................................................. 14, 15, 17 Koch v. Acker, 2013 NY Slip Op 31572(U) (Sup. Ct. N.Y. Cty. July 10, 2013) ........... 26 Koch v. Greenberg, 07 Civ. 9600 (S.D.N.Y.) ................................................................... 28, 29 Kooper v. Kooper, 74 A.D.3d 6 (2d Dep’t 2010) ............................................................ 16, 17 Ledonne v. Orsid Realty Corp., 83 A.D.3d 598 (1st Dep’t 2011) ....................................................... 12, 21 Mangiaracina v. New York Tel. Co., 105 A.D.2d 695 (2d Dep’t 1984) ............................................................ 24 Matter of Brandon’s Estate, 55 N.Y.2d 206 (1982) ............................................................................. 24 McDonald v. Gore Mt. Ski Lift Corp., 30 A.D.2d 931 (3d Dep’t 1968) .............................................................. 14 Morris Stulsaft Found. v. Superior Ct., 245 Cal. App. 2d 409 (Cal. Ct. App. 1966) .............................................. 6 Sagorsky v. Malyon, 12 F.R.D. 486 (S.D.N.Y. 1952) ........................................................ 28, 29 Schlosser v. Schlosser, 7 Misc. 3d 1012(A) (Sup. Ct. N.Y. Co. 2005) ....................................... 17 Schroder v. Consol. Edison Co., 249 A.D.2d 69 (1st Dep’t 1998) ............................................................. 16 Slabakis v. Drizin, 107 A.D.2d 45 (1st Dep’t. 1985) ...................................................... 14, 16 Tannenbaum v. City of New York, 30 A.D.3d 357 (1st Dep’t 2006) ............................................................. 17 Page(s) 2781640.5 03 - vi - Tener v. Cremer, 89 A.D.3d 75 (1st Dep’t 2011) ............................................................... 18 Those Certain Underwriters at Lloyds, London v. Occidental Gems, Inc., 11 N.Y.3d 843 (2008) ............................................................................. 11 Troy Sand & Gravel Co., Inc. v. Town of Nassau, 80 A.D.3d 199 (3d Dep’t 2010) .................................................. 14, 16, 17 United States v. Kurniawan, 2013 WL 2325238 (S.D.N.Y. Apr. 8, 2013) ...................................... 8, 12 Velez v. Hunts Point Multi-Serv. Ctr., 29 A.D.3d 104 (1st Dep’t 2006) ....................................................... 17, 21 Villano v. Conde Nast Pub., Inc., 46 A.D.2d 118 (1st Dep’t 1974) ............................................................. 15 Watts v. Peekskill Bell, Inc., 147 A.D.2d 838 (3d Dep’t 1989) ............................................................ 18 Williams v. Johnson & Johnson, 50 F.R.D. 31 (S.D.N.Y. 1970) .......................................................... 27, 29 Wiseman v. Am. Motors Sales Corp., 103 A.D.2d 230 (2d Dep’t 1984) ............................................................ 15 Statutes Cal. Evid. Code § 1101(b) .................................................................................. 6 Cal. Evid. Code § 813 ....................................................................................... 31 CPLR 3101(a) ............................................................................................ passim CPLR 3119 ................................................................................................. passim General Business Law §§ 349-50 ....................................................................... 5 Page(s) 2781640.5 03 - vii - Medical Treatises and Publications 7A Carmody-Wait 2d § 42:337 ......................................................................... 19 L. 1984, ch. 294, § 2 ......................................................................................... 15 New York Bill Jacket, 2010 S.B. 4256, Ch. 29 .................................... 19, 20, 23 P. Connors, CPLR 3101 cmt. C3101:22 ..................................................... 13, 18 Payne & Zalayet, 1 Modern New York Discovery § 8:33.90 (2d ed. 2013) ....................... 20 Siegel, N.Y. Prac. § 345 (5th ed.) ..................................................................... 16 I. QUESTION PRESENTED Did the Supreme Court and the Appellate Division commit a “clear abuse of discretion” in declining to quash or limit deposition subpoenas served under CPLR 3119 seeking testimony “material and necessary” to an out-of-state action? II. INTRODUCTION In a thorough opinion, the Supreme Court denied the petition of Appellants John Kapon (“Kapon”) and Justin Christoph’s (“Christoph”) (collectively, “Appellants”) to quash subpoenas that Respondent William I. Koch (“Koch”) served on them. The Appellate Division, First Department affirmed, holding that “so long as the information sought is ‘material and necessary’ to the prosecution or defense of an action, it shall be disclosed,” and that the Supreme Court correctly concluded that Koch’s subpoenas (“Subpoenas”) were proper. Koch served the Subpoenas pursuant to CPLR 3119 as part of discovery in his California fraud lawsuit against notorious wine counterfeiter Rudy Kurniawan (“Kurniawan”). Appellants are personally familiar with the facts of Koch’s California action (the “California Action”) because their employer, Acker, Merrall & Condit Company (“Acker”), was the intermediary through which Kurniawan committed his years-long fraudulent scheme to sell counterfeit wine. Appellant Kapon was directly involved in the scheme by purportedly inspecting and personally vouching for the authenticity of Kurniawan’s counterfeit wine. - 2 - Appellants possess information relevant to the California Action, and this information is not reasonably available from any other source. The Supreme Court and Appellate Division also declined to preclude use of the depositions in another action pending in New York State Court, reserving that issue for a more appropriate court to decide. Appellants are apparently worried that complying with the Subpoenas will implicate or incriminate them in Kurniawan’s fraudulent scheme. They therefore brought this meritless appeal. Appellants cannot and do not come close to showing, as they must, that the Supreme Court’s Order was a “clear abuse of discretion.” First, the courts below did not err in requiring Appellants to show that the Subpoenas seek information “irrelevant to the prosecution of the California [A]ction”. Kapon v. Koch, 105 A.D.3d 650, 651 (1st Dep’t 2013). CPLR 3119 is consistent with New York’s long-established policy of liberal disclosure from nonparties. Indeed, the statute expressly states that subpoenas issued under Section 3119 are subject to the general principles governing ordinary New York subpoenas. CPLR 3119(d). Under these general principles, “relevant” material is discoverable, and on a motion to quash, the subpoenaed nonparty bears the burden of establishing that the information sought is “utterly irrelevant.” Appellants did not and cannot carry this burden. - 3 - In any event, this Court need not resolve who bears the burden of proving irrelevance of a discovery request in this case. Even if the Court concludes that Koch now bears the burden to establish that the depositions seek relevant testimony from Appellants, Koch has more than satisfied that burden. Appellants do not deny that they possess relevant information. Nor could they. Appellants were directly involved with facilitating, and have knowledge of, the fraud at issue in the California Action. Moreover, and although no longer required by law, Koch has shown that information Appellants possess is not reasonably available from any other source. Second, the Supreme Court did not abuse its discretion in declining to impose unjustified, ex ante limits on the use of the Appellants’ deposition testimony. Koch seeks Appellants’ depositions for the California Action. The Supreme Court correctly declined to prejudge whether the depositions would also be admissible in another New York action that Koch currently has pending against Acker (Appellants’ company) in the Supreme Court (the “New York Action”). Appellants’ fear that discovery they provide may be used against them in another proceeding is not a legitimate basis to deny or restrict the discovery Koch seeks. In any event, Appellants could seek a use limitation from the California court presiding over the California Action or from Justice Shulman, who is presiding over the New York Action, if and when necessary. As the Supreme Court here - 4 - acknowledged, it is not well situated to evaluate whether restrictions ought to be imposed, and the Appellate Division correctly concluded that Appellants had failed to make a showing supporting such restrictions. Appellants have offered no reason for this Court to reverse the Appellate Division’s Order. The Appellate Division should be affirmed. III. BACKGROUND Respondent Koch is a collector of fine and rare wine. Record (“R.”) at 90. Kurniawan was a seller of purported fine and rare wine. Id. at 90; 92. Acker is a New York-based wine auction house and retailer that for years sold Kurniawan’s wines. Id. at 90. Appellant Kapon is the CEO, and former Auction Director, of Acker and a business and personal associate of Kurniawan. Id. at 2. Appellant Christoph is a former and current employee of Acker. Id.1 At auctions and private transactions that Acker hosted, advertised, and organized in 2005 and 2006, Kurniawan sold Koch at least 149 bottles of purportedly fine and rare wine which Koch later determined to be counterfeit. At all relevant times, Kapon and Christoph were employed by Acker and directly involved in the sales of 1 Between February 2003 and April 2005, Christoph worked as an auction coordinator, collecting wine and inventory information from prospective consignors in preparation for auction. Id. at 107. He then went to work for Christie’s auction house in New York before returning to Acker in the summer of 2010. In his current position, Christoph works in the Acker auction department pricing wine and editing catalogs. - 5 - Kurniawan’s wines. Kurniawan sold these bottles as part of a widespread, years- long plot to defraud wine collectors and the wine-buying public. Koch paid Acker more than $1.4 million for the 149 bottles, and Acker earned a significant commission fee on these sales. Id. at 90-91. Additionally, Koch is informed and believes that Kurniawan sold and attempted to sell many other bottles of counterfeit wine to other customers at Acker auctions and private sales. Id. at 465. A. The New York Action (Koch v. Acker). On April 23, 2008, Koch filed suit against Acker (the “New York Action”), specifically identifying five of the 149 bottles in bringing claims for, among other things, violations of New York’s consumer protection statute, General Business Law §§ 349-50. At the time he filed his complaint, Koch knew neither that Kurniawan had consigned the bottles to Acker, nor the scope of Kurniawan’s fraud. Koch later learned Kurniawan was the consignor, that Kurniawan sold wines at Acker auctions on numerous occasions, and that Kurniawan and Acker had an extensive and undisclosed financial history. For example, on November 23, 2008, Kurniawan filed an affidavit of confession of judgment with the New York Supreme Court, confessing that he owed Acker more than $10 million in unpaid loans, unpaid invoices, and attorneys’ fees. Id. at 114. In connection with this debt, Kurniawan granted Acker a security interest in his wine, artwork, and other - 6 - personal effects. Id. at 115. The affidavit further reveals that Kurniawan agreed to pay Acker’s costs in defending against any claim that wine Kurniawan sold to Acker, Koch, or another specific third party is not authentic. Id. at 116. Thus, Kurniawan agreed to pay Acker’s costs in defending the New York Action. B. The California Action (Koch v. Kurniawan), And Koch’s Subpoenas For Discoverable Information. In September 2009, Koch sued Kurniawan for fraud in California. Koch amended his complaint in May 2011. Among the relevant factual issues in the California Action are: (i) Kurniawan’s representations to Acker and others regarding the authenticity of his wine; (ii) Kurniawan’s defense that he is not liable for selling counterfeit wine because Acker authenticated his wines; (iii) Kurniawan’s defense that the wines he consigned to Acker might not be the wines Acker sold Koch; (iv) Kurniawan’s scienter in selling counterfeit wine through Acker; (v) Kurniawan’s motive to defraud; and (vi) Kurniawan’s pattern or modus operandi in committing such fraud through auction houses like Acker.2 Kurniawan has argued in the California Action that he is not responsible for any counterfeit wine that Koch purchased because he relied on Kapon and Acker to authenticate the wines. R. 552-54. 2 See Cal. Evid. Code § 1101(b) (permitting admission of such evidence in fraud actions); Morris Stulsaft Found. v. Superior Ct., 245 Cal. App. 2d 409, 422-23 (Cal. Ct. App. 1966) (holding defendant’s other similar frauds relevant and discoverable). - 7 - As the intermediaries through which Kurniawan executed his fraudulent scheme, Acker, its CEO Kapon, and its employee Christoph have highly relevant and discoverable information regarding issues relevant to the California Action. Acker, Kapon, and Christoph uniquely know the details of the Acker auctions and sales at issue in the California Action, and of representations that Kurniawan made to Acker (and vice versa) in connection with them. Kapon personally vouched for the wines Kurniawan was consigning, and in one Acker auction catalog, stated that “[f]or the past two weeks, I have spent almost every day in a professional warehouse inspecting thousands of bottles from what I am now convinced is the greatest cellar in America” and that “there was not one bad, off, or questionable wine [among Kurniawan’s wine collection]. Not one.”3 Kapon has details that would tend to support Koch’s allegations in the California Action or rebut Kurniawan’s defenses. Among other things, Appellants have discoverable information regarding Acker’s inspections of Kurniawan’s wines, Kurniawan’s representations to Acker regarding those wines, the chain of custody of the wines from Kurniawan’s facilities to Acker’s facilities and ultimately to Koch as the buyer, and whether other purchasers have claimed to 3 11/30/2012 Affirmation of Adam L. Pollock in Opposition to Appellants John Kapon and Justin Christoph’s Stay Application before Appellate Division (“Pollock Aff.”), Ex. 1 (January 27 & 28 Acker Auction Catalog). - 8 - Acker that they too purchased counterfeit wine that was consigned by Kurniawan. On multiple occasions, Acker sold or attempted to sell wines consigned by Kurniawan that were returned or withdrawn because of serious concerns regarding their authenticity, and Acker, Kapon, and Christoph uniquely know the details of these transactions. See R. 152-58; 185; 465 (“Kurniawan sold counterfeit wine on multiple occasions, including at least four auctions conducted by [Acker]”). To obtain this relevant information, Koch served the Subpoenas on Kapon and Christoph on January 20 and February 23, 2012, respectively. Id. at 41 & 51. Kapon and Christoph refused to comply, offering a series of shifting, inconsistent objections, before eventually filing their petition to quash. Id. at 485; 503-506. C. Kurniawan’s Arrest And Indictment. On March 8, 2012, Kurniawan was arrested by the FBI in his California home. In the corresponding criminal complaint against him, the United States set forth the various offenses Kurniawan committed, including the details of his fraudulent sale of counterfeit wine. Id. at 130. A search of Kurniawan’s home, conducted by the FBI, revealed evidence of an elaborate wine counterfeiting operation. Id. at 180. On May 9, 2012, Kurniawan was indicted on four counts, including for selling counterfeit wines through Acker. Id. at 460. The criminal action against Kurniawan is pending, and trial is set for December 2013. United States v. Kurniawan, 2013 WL 2325238 (S.D.N.Y. Apr. 8, 2013). - 9 - D. The Supreme Court Denies Appellants’ Petition To Quash Or For A Protective Order. Appellants, apparently concerned that they may have to finally testify regarding their relationship with Kurniawan and their knowledge of, and role in, his wine counterfeiting operation, sought to quash the Subpoenas. R. 28. On October 15, 2012, the Supreme Court (Justice Stallman) issued an order denying Appellants’ petition to quash the Subpoenas. Id. at 6. In its thorough opinion, the Supreme Court held that, even if the now-defunct “special circumstances” test still applied to obtaining discovery from nonparties like Appellants, Koch had satisfied it. Id. at 15 (“On this petition, it is academic whether Schroder remains good law, or whether the party seeking discovery from a non-party must show that the relevant information sought could not be obtained from other sources”). As the Supreme Court held, Koch “has demonstrated that the information he seeks from petitioners is not reasonably available from Kurniawan, or from any other source.” Id.4 Next, the Supreme Court held that Appellants’ proposed protective order was overbroad, and Appellants had made no showing that any confidential 4 The Supreme Court also rejected Appellants’ other arguments, including that Koch should be required to wait until he deposes Kurniawan before deposing Appellants, id. at 4-5, and that the scope of Appellants’ deposition should be restricted to the 149 bottles specifically identified in the California Action. Id. at 9-10. - 10 - information or trade secrets would be disclosed at either deposition. Id. at 12-14. The Supreme Court also denied Appellants’ meritless request for it to rule on the admissibility of their deposition testimony in the New York Action, and instead encouraged Appellants to seek such relief from a more appropriate forum. Id. at 15. Nevertheless, the Supreme Court permitted Appellants to object to deposition questions—subject to later review by the Supreme Court—if Appellants legitimately believed the answer would divulge confidential information or Acker’s trade secrets. Id. at 14-15.5 E. The Appellate Division Affirms. Without disputing that the Subpoenas seek information highly relevant to the California Action, Appellants appealed to the Appellate Division. Id. at 4. Appellants argued primarily that a heightened standard of review under CPLR 3119 should apply to the Subpoenas served on them, and that the Supreme Court should have imposed restrictions on their deposition testimony. On April 25, 2013, the Appellate Division affirmed the Supreme Court’s order in full, finding that the Supreme Court had “providently exercised its discretion in denying petitioners’ motion.” Kapon v. Koch, 105 A.D.3d 650, 651 5 The Supreme Court noted that the California court overseeing discovery in the California Action had likewise rejected a protective order. Id. at 12. Nonetheless, the Supreme Court permitted Appellants to petition the California court to limit disclosure of their deposition testimony. Id. at 15. - 11 - (1st Dep’t 2013). In so ruling, the Appellate Division recognized that it must treat the Subpoenas “in the same way that it would treat a subpoena to a non-party witness in a New York case”—that is, no “heightened standard” applies. Id. The Appellate Division explained that “so long as the information sought is ‘material and necessary’ to the prosecution or defense of an action, it shall be disclosed.” Id. (citing CPLR 3101(a)). Applying this standard, the Appellate Division held that the Subpoenas should not be quashed because Appellants had “failed to show that the requested deposition testimony is irrelevant to the prosecution of the California action.” Id. The Appellate Division likewise affirmed the denial of the protective order, finding that Appellants “failed to articulate a sufficient, nonspeculative basis for … imposing restrictions on the … use of their deposition testimony.” Id. IV. ARGUMENT “The trial court is afforded broad discretion in supervising disclosure and its determinations will not be disturbed unless that discretion has been clearly abused.” Those Certain Underwriters at Lloyds, London v. Occidental Gems, Inc., 11 N.Y.3d 843, 845 (2008); see also 148 Magnolia, LLC v. Merrimack Mut. Fire Ins. Co., 62 A.D.3d 486, 487 (1st Dep’t 2009); Getman v. Petro, 266 A.D.2d 688, 690 (3d Dep’t 1999) (“It is well settled that a trial court has broad discretionary power in controlling discovery and disclosure, and only a clear abuse of discretion will prompt appellate action.” (internal quotations omitted)). Appellants cannot - 12 - point to any abuse of discretion, much less a clear abuse of discretion, in the Orders below. Appellants cannot show that the Supreme Court or the Appellate Division abused their broad discretion by (a) declining to quash Subpoenas where Appellants failed to establish that the information sought is “utterly irrelevant” and Koch demonstrated that the discovery sought is relevant; or (b) declining to limit the use of Appellants’ depositions, where the California court presiding over the Kurniawan matter and the New York court presiding over the Acker matter are each better equipped to determine whether that testimony will be admissible in those actions, and CPLR 3119 does not require that this Court rule on that issue. In permitting Koch to obtain the deposition testimony sought, the Supreme Court and the Appellate Division providently exercised their discretion. A. The Courts Below Did Not Err In Declining To Quash The Subpoenas. 1. New York Law Has Long Promoted Liberal Nonparty Discovery. CPLR 3101 mandates “full disclosure of all matter material and necessary to the prosecution or defense of an action” from a party or “any other person, upon notice stating the circumstances or reasons such disclosure is sought or required.” CPLR 3101(a)(4); see also Ledonne v. Orsid Realty Corp., 83 A.D.3d 598, 599 (1st Dep’t 2011) (internal quotations omitted). “The words, ‘material and - 13 - necessary,’ are…to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason.” Allen v. Crowell-Collier Publ. Co., 21 N.Y.2d 403, 406 (1968); see also id. at 407 (“Although there may seem to be a little more immediacy and substantiality to the word ‘material’ than to ‘relevant’ – the term contained in the more liberal Federal statute – we believe that a broad interpretation of the words ‘material and necessary’ is proper.”). CPLR 3101’s mandate for broad disclosure follows from the premise that “one’s ability to obtain disclosure from a nonparty may be central to the outcome of the case.” P. Connors, CPLR 3101 cmt. C3101:22. In particular, a nonparty “will likely not have the same interests in the litigation and may store or retain the information differently” than a party, and “information obtained from a nonparty may have a greater impact on a jury.” Id. In arguing that the “structure” of CPLR 3119 and 3101 somehow imposes burdens found nowhere in the statutory language, Appellants claim that “some history is helpful.” Brief for Petitioners-Appellants (“Brief”) at 10. Unfortunately, they mischaracterize that history. In truth, the history shows that courts have long favored broad and liberal discovery, not only from parties, but also from nonparties. - 14 - a) Nonparty Discovery Was Liberal Even Under CPLR 3101’s Old “Special Circumstances” Requirement. Until 1984, CPLR 3101(a)(4) required a party seeking disclosure from a nonparty to establish “adequate special circumstances” justifying disclosure, and to obtain a court order to depose a nonparty witness. Cirale v. 80 Pine St. Corp., 35 N.Y.2d 113, 116 (1974). In theory, “special circumstances” meant that a party seeking disclosure needed to show the disclosure sought was not reasonably available from any other source. See McDonald v. Gore Mt. Ski Lift Corp., 30 A.D.2d 931 (3d Dep’t 1968), abrogation recognized by Troy Sand & Gravel Co., Inc. v. Town of Nassau, 80 A.D.3d 199, 202 (3d Dep’t 2010). But in practice, the “special circumstances” language was interpreted liberally to permit full and broad disclosure of any nonparty information useful in preparing for trial. Slabakis v. Drizin, 107 A.D.2d 45, 46 (1st Dep’t 1985) (“The cases have interpreted the statutory requirement liberally to give effect to the strong policy favoring full disclosure to adequately prepare for trial.”). In Kenford Co., Inc. v. Erie Cnty., 41 A.D.2d 586 (4th Dep’t 1973), the Fourth Department explicitly adopted a permissive nonparty disclosure policy first advocated by Professor David Siegel. This “liberal construction of CPLR 3101(a)(4)” provided that “disclosure against a nonparty witness should be just as - 15 - broad in the state practice as it is in the federal,”6 and that any barrier imposed by the “special circumstances” language “is truly a nominal one.” Id. Thus, the Kenford court explained, “[a] mere showing by the lawyer that he needs such witness’s pretrial deposition in order to prepare fully for the trial should suffice as a ‘special circumstance.’” Id. This “liberal construction” of CPLR 3101(a)(4) was thereafter “adopted by … every other Appellate Division in this State.” Wiseman v. Am. Motors Sales Corp., 103 A.D.2d 230, 240 (2d Dep’t 1984) (citing Gersten v. New York Hosp., 81 A.D.2d 632 (2d Dep’t 1981); Kelly v. Shafiroff, 80 A.D.2d 601, 602 (2nd Dep’t 1981); Catskill Ctr. for Conservation & Dev., Inc. v. Voss, 70 A.D.2d 753 (3d Dep’t 1979); Villano v. Conde Nast Pub., Inc., 46 A.D.2d 118, 120 (1st Dep’t 1974)). b) The Legislature Amended 3101 To Eliminate “Special Circumstances” And Make Nonparty Discovery Easier To Obtain. In 1984, the Legislature eliminated the “special circumstances” language in CPLR 3101(a)(4), and likewise dispensed with the requirement of a court order for nonparty disclosure in connection with New York actions.7 L. 1984, ch. 294, § 2, effective September 1, 1984. Although Appellants present a revisionist history in 6 Federal Rule of Civil Procedure 26, the federal counterpart to CPLR 3101, draws no distinction between discovery from parties and nonparties. Fed. R. Civ. P. 26. 7 Even after the 1984 amendment, out-of-state litigants seeking to depose a nonparty New York witness still needed a court order. - 16 - which “the Appellate Divisions have struggled to interpret the 1984 Amendment,” Brief at 12, the basic significance of the 1984 amendment has always been clear: it served to make disclosure from nonparties even easier than it had been previously. See Siegel, N.Y. Prac. § 345 (5th ed.) (“With the abolition of the ‘special circumstance’ requirement …, the obtaining of disclosure from nonparties should be easier now than ever before in New York practice.”). As the First Department explained in In re New York Cnty. DES Litig., 171 A.D.2d 119, 124 (1st Dep’t 1991), “[t]he liberal construction accorded the ‘special circumstances’ language in the pre–1984 statute has been carried forward to the amended statute.” See, e.g., Slabakis, 107 A.D.2d at 48 (attorney’s mere statement that nonparty’s “pretrial deposition is needed to prepare for trial and the witness has knowledge of the [relevant] factual issues … is sufficient to support the requested disclosure.”) Every Appellate Division has now acknowledged that “special circumstances” are no longer required for non-party disclosure. See Schroder v. Consol. Edison Co., 249 A.D.2d 69, 70 (1st Dep’t 1998) (“There is no longer any necessity for ‘special circumstances.’”); Kooper v. Kooper, 74 A.D.3d 6, 16 (2d Dep’t 2010) (“We hereby disapprove the further application of the ‘special circumstances’ standard.”); Troy Sand & Gravel Co., 80 A.D.3d at 202 (“the requirement of ‘special circumstances’ … is no longer applicable”); Catalano v. Moreland, 299 A.D.2d 881 (4th Dep’t 2002) (“We reject the … contention that - 17 - plaintiffs were required to demonstrate special circumstances before being entitled to disclosure from a nonparty pursuant to CPLR 3101(a)(4)”). Where post- amendment courts purported to apply the outmoded “special circumstances” test, it was apparently the result of improper reliance on caselaw abrogated by the 1984 Amendment. See, e.g., Tannenbaum v. City of New York, 30 A.D.3d 357, 359 (1st Dep’t 2006) (citing Dioguardi v. St. John’s Riverside Hosp., 144 A.D.2d 333 (2d Dep’t 1988) superseded by statute as recognized by Kooper, 74 A.D.3d at 18). Although the Second and Third Departments have suggested “that something more than mere relevance is required” for nonparty discovery, they refer to 3101(a)(4)’s requirement that the subpoenaing party provide “notice stating the circumstances or reasons such disclosure is sought or required.” Kooper, 74 A.D.3d at 18; Troy Sand & Gravel, 80 A.D.3d at 201-02 (quoting 3101(a)(4)). Such notice, however, is “truly … nominal.” Kenford, 41 A.D.2d 586; see Velez v. Hunts Point Multi-Serv. Ctr., 29 A.D.3d 104, 110 (1st Dep’t 2006) (opposition to motion to quash constituted sufficient notice under 3101(a)(4): “The purpose of [the notice] requirement is presumably to afford a nonparty who has no idea of the parties’ dispute or a party affected by such request an opportunity to decide how to respond.”); see also Schlosser v. Schlosser, 7 Misc. 3d 1012(A) (Sup. Ct. N.Y. Co. 2005) (subpoena need not “include particularized information concerning the nature of the proceeding or a specific - 18 - reason for requesting the witness’s testimony or documents. It is sufficient that the [non-party] is informed that a lawsuit has been commenced by a particular plaintiff against a particular defendant and that the witness is needed to testify and give evidence that is relevant to that proceeding.”). No further support for the “something more” premise can be found in the statutory language of CPLR 3101 or 3119. To the extent that a subpoena issued under CPLR 3101 or 3119 imposes a burden on a nonparty, commentators have argued that the issue can be resolved with cost-shifting alone. See P. Connors, CPLR 3101 cmt. C3101:22 (“As long as the party seeking disclosure defrays the production costs of the nonparty . . . , she should be afforded the opportunity to gain relevant information from entities or persons other than parties.”). Courts have adopted this approach, especially in the context of electronically stored information that can sometimes be expensive to recover or restore. See Tener v. Cremer, 89 A.D.3d 75, 82 (1st Dep’t 2011) (where nonparty showed that produced subpoenaed electronic data would be burdensome but nevertheless “ha[d] the ability to produce the data, the court should allocate the costs of this production to [subpoenaing party].”); Watts v. Peekskill Bell, Inc., 147 A.D.2d 838, 839 (3d Dep’t 1989) (affirming denial of nonparty’s motion for protective order, but requiring “plaintiff to defray certain expenses associated with the discovery.”). If the subpoenaing party assumes some or all of the nonparty’s - 19 - cost of compliance, any alleged burden should not disrupt the party’s right to full and broad nonparty disclosure.8 2. CPLR 3119 Did Not Disrupt the “Well Settled” Rule Under CPLR 3101 That The Party Challenging Discovery Must Show The Disclosure Is “Utterly Irrelevant.” In 2011, the New York Legislature enacted CPLR 3119 in order to make nonparty New York disclosure more accessible to out-of-state litigants. CPLR 3119; see New York Bill Jacket, 2010 S.B. 4256, Ch. 29 (“The Act sets forth an efficient and inexpensive procedure for[] litigants to depose out-of-state individuals and for the production of discoverable materials that may be located outside the trial state.”). In enacting the statute, New York adopted the Uniform Interstate Depositions and Discovery Act and further advanced the state, national, and federal trend of broad nonparty discovery. See 7A Carmody-Wait 2d § 42:337 (act is applied and construed “to promote uniformity of the law with respect to its subject matter among states that enact it.”). Specifically, CPLR 3119(b) eliminated the need for an out-of-state litigant to obtain a court order before issuing a subpoena to a nonparty New York witness for information relevant to the out-of-state action. Although the statute “recognize[d] that the discovery state has a significant interest in protecting its residents … from 8 Here, of course, the discovery at issue concerns deposition testimony and not production of documents or electronically stored information. - 20 - unreasonable or burdensome discovery requests,” New York Bill Jacket, 2010 S.B. 4256, Ch. 29, it did not purport to modify New York’s substantive disclosure law. To the contrary, and as the Appellate Division recognized, “the statute expressly states that the standards that are generally applicable to depositions set forth in CPLR article 31 are also applicable to out-of-state subpoenas issued under CPLR 3119(b).” Kapon v. Koch, 105 A.D.3d 650 (1st Dep’t 2013); CPLR 3119(d) (“Sections two thousand three hundred three, two thousand three hundred five, two thousand three hundred six, two thousand three hundred seven, two thousand three hundred eight and this article apply to subpoenas issued under subdivision (b) of this section.” (emphasis added)). In other words, the Legislature determined that the State’s extant policy of liberal nonparty discovery under CPLR 3101 adequately protects the rights of New York nonparty witnesses. See Payne & Zalayet, 1 Modern New York Discovery § 8:33.90 (2d ed. 2013) (“Subpoenas issued in New York pursuant to the Uniform Act provisions are subject to the general rules governing domestic subpoenas”). For these reasons, the Appellate Division correctly held that “[a] heightened standard of review does not apply to applications brought pursuant to CPLR 3119(e) for a protective order or to quash an out-of-state subpoena.” Kapon, 105 A.D.3d at 650; see In re Aerco Int’l, Inc., 40 Misc. 3d 571 (Sup. Ct. Westchester Cty. 2013) (following Kapon). - 21 - Under these “general rules governing domestic subpoenas,” it is “well settled that a motion to quash a subpoena duces tecum should be granted only where the materials sought are utterly irrelevant to any proper inquiry.” Velez, 29 A.D.3d at 112 (nonparty movants “failed to demonstrate that [materials sought] were utterly irrelevant.”); see also Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327, 331-32 (1988) (“An application to quash a subpoena should be granted only where the futility of the process to uncover anything legitimate is inevitable or obvious or where the information sought is utterly irrelevant to any proper inquiry.” (internal quotation marks and citations omitted)); Hyatt v. State Franchise Tax Bd., 105 A.D.3d 186, 201 (2d Dep’t 2013) (“Generally, the standard to be applied on a motion to quash a subpoena duces tecum is whether the requested information is utterly irrelevant to any proper inquiry” (internal citations omitted)). Moreover, it is the party resisting discovery who “bears the burden of establishing that the requested documents and records are utterly irrelevant.” Ledonne, 83 A.D.3d at 599 (internal quotations omitted); Hyatt, 105 A.D.3d at 201 (“The person challenging the subpoena bears the burden of demonstrating the utter irrelevancy of the demands.”). The party resisting discovery likewise faces the burden of proving prejudice or hardship if he or she seeks to quash on that basis. Application of Ayliffe & Companies, 166 A.D.2d 223, 224 (1st Dep’t 1990) - 22 - (affirming denial of motion to quash out of state nonparty subpoenas where “the claims of hardship asserted by appellant … are conclusory and unsupported by the record.”). Appellants do not cite cases upsetting this assignment of burden. Although Catalano v. Moreland, 299 A.D.2d 881 (4th Dep’t 2002), held “that plaintiffs failed to demonstrate that the documents they sought were material and necessary,” as a practical matter the materials sought were utterly irrelevant. After affirming that the CPLR amendment “eliminate[d] the ‘special circumstances’ requirement,” the Catalano court determined that the hospital bylaws the plaintiffs sought had no feasible connection as a matter of law to the plaintiffs’ medical malpractice claims. Id. Appellants do not argue, as they would have to in order to quash the Subpoenas, that the information Koch seeks is “utterly irrelevant” to the California Action. CPLR 3101(a). Recognizing that they cannot meet this burden, Appellants misstate the law. Without citing any direct authority, Appellants argue that the “structure” of CPLR 3119 somehow turns basic New York discovery law on its head, by placing the burden of proving relevance on the party seeking discovery. Brief at 16. The position is unsupported by caselaw. See Gertz v. Richards, 233 A.D.2d 366 (2nd Dep’t 1996). And it is unsupported by the statutory language of 3119, which expressly states that CPLR 3101, et seq., “applies to subpoenas issued under subdivision (b) of this section.” CPLR 3119(d). - 23 - Under CPLR 3119, New York courts evaluate an out-of-state subpoena like an ordinary non-party subpoena under CPLR 3101. Placing the burden on the party seeking discovery would be antithetical to New York’s liberal policy of nonparty disclosure. It would also result in motion practice on nearly every subpoena because the party served with the subpoena would have no incentive to comply until the subpoenaing party moved to compel upon a showing the information sought is relevant. The regime advocated by Appellants (but rejected by the CPLR and caselaw) is contrary to the 1984 Legislature’s goal of eliminating the need for a court order to serve a nonparty subpoena, and contrary to the 2011 Legislature’s goal of establishing “an efficient and inexpensive procedure for[] litigants to depose out-of-state individuals.” New York Bill Jacket, 2010 S.B. 4256, Ch. 29. 3. Even If Koch Had The Burden To Prove Relevance, He Has Done So. Even if this Court accepted Appellants’ invitation to change the burden on non-party subpoenas and require the subpoenaing party to prove relevance of the information sought, Koch satisfies that burden here. The deposition testimony Koch seeks from Appellants is both relevant to the California Action and admissible in that action. Acker is the intermediary through which Kurniawan executed his fraud and Kapon and Christoph were directly involved in the transactions at issue in the - 24 - California Action. Appellants possess information directly relevant to, for example, Kurniawan’s defense that Acker authenticated his wines, and Kurniawan’s defense that the wines he gave Acker might not be the wines Acker sold Koch.9 Appellants have not offered any argument or evidence that the information Koch seeks is irrelevant or inadmissible. To the extent Appellants have knowledge of issues concerning Kurniawan’s counterfeit wines, and they surely do, CPLR 3101 and 3119 requires them to provide it. To the extent Appellants do not have such knowledge, they could so state at their depositions. Appellants also cannot credibly claim that complying with the Subpoenas would impose any undue burden or prejudice. Koch seeks depositions, and has offered to hold them on mutually convenient dates and at convenient locations. The cost to appear and provide deposition testimony would be minimal, especially in comparison to the substantial resources Appellants have devoted to multiple rounds of briefing in challenging the Subpoenas. 9 Appellants also possess information regarding other occasions on which Kurniawan sold or attempted to sell counterfeit wines, and others who have claimed that they purchased Kurniawan’s counterfeit wine through Acker. Under both New York and California law, it is well-established that a fraud defendant’s “similar acts” are relevant and discoverable. See, e.g., Matter of Brandon’s Estate, 55 N.Y.2d 206, 211 (1982); Mangiaracina v. New York Tel. Co., 105 A.D.2d 695, 696 (2d Dep’t 1984); Hub City Solid Waste Servs. v. City of Compton, 186 Cal. App. 4th 1114, 1132 (Cal. Ct. App. 2010). The court in the California Action has already held that Kurniawan’s other dealings in counterfeit wine are properly discoverable. Pollock Aff. Ex. 5 at 2 (6/20/2012 California Court Order) (ordering Kurniawan to produce, among other things, all documents concerning the inauthenticity of any wines ever in his possession during the period April 1, 2003 to end of 2008). - 25 - Finally, the Supreme Court was correct in ruling that the rejection of the “special circumstances” standard is “academic” on Appellants’ petition, because Koch has met it. R. 15. Appellants have information that Kurniawan himself may not have. Moreover, Kurniawan is incarcerated in federal prison and claims “[i]t will be impossible . . . to respond to discovery or otherwise participate meaningfully in [the California Action] without implicating his Fifth Amendment rights against self-incrimination or potentially prejudicing his criminal defense.” Id. at 581. All discovery against Kurniawan has been stayed pending the criminal action (while non-party discovery is permitted to proceed). Id. at 668. Kurniawan has asserted that he would not provide substantive testimony at a deposition anyway, but would “assert his Fifth Amendment right against self-incrimination in response to any question . . . related to his involvement with the sale of counterfeit wine.” Id. at 583. Even if Kurniawan were to provide substantive testimony, he is a con man facing federal criminal fraud charges. Koch could reasonably expect any testimony he provides to be untruthful, misleading, or incomplete, and the Supreme Court properly exercised its discretion in holding that Koch is entitled to nonparty testimony in order to challenge, confirm or supplement testimony Kurniawan may give. See Abbadessa v. Sprint, 291 A.D.2d 363, 363 (2d Dep’t 2002) (court “providently exercised its discretion in permitting” deposition of nonparty where nonparty’s testimony could prove or disprove party’s assertions). - 26 - B. The Supreme Court And Appellate Division Did Not Commit A “Clear Abuse Of Discretion” In Declining To Limit The Use Of Appellants’ Depositions. 1. Koch Seeks Appellants’ Depositions In Good Faith To Develop Evidence In The California Action. Appellants claim, without evidence or basis, that Koch seeks discovery only to use in the New York Action. Brief at 16-18. This claim is especially misguided given that, after this appeal was perfected and the record closed, the court in the New York Action reopened discovery into Acker’s relationship with Kurniawan. Brief at 4, n.2; Koch v. Acker, 2013 NY Slip Op 31572(U) (Sup. Ct. N.Y. Cty. July 10, 2013) (ordering the parties to “complete discovery on th[e] limited issue” of Acker’s relationship with Kurniawan). As a result, Appellants’ allegation that Koch is somehow “seeking to take discovery in [this] action to circumvent a discovery deadline in another” makes no sense. Brief at 17. There is no deadline to circumvent. In truth, Appellants fear that their deposition testimony will inculpate them in Kurniawan’s fraud, a fact damaging to them in the New York Action. But this fear is not a proper basis on which to issue a protective order. See Dove v. Atl. Cap. Corp., 963 F.2d 15, 19 (2d Cir. 1992) (“[W]here the discovery sought is relevant to . . . the federal case, the mere fact it may be used in other litigation does not mandate a protective order.”). The opposite is true. Appellants’ central role in - 27 - Kurniawan’s fraud confirms that the Subpoenas are proper, and that Appellants possess information material and necessary to the California Action. Appellants cite no law holding that a subpoena should be limited merely because it might yield information that is also relevant to another action. Instead, a long line of federal courts in this state have held that “it is no objection … that the [discovery] may be used in some other action or proceeding, if it is relevant to the pending … action.” See In re Am. Anthracite & Bituminous Coal Corp., 22 F.R.D. 504, 508 (S.D.N.Y. 1958); Deering Milliken Research Corp. v. Leesona Corp., 27 F.R.D. 440, 441 (E.D.N.Y. 1961) (“It is settled law that discovery processes are proper even though the depositions may be used in some collateral proceeding.”); Williams v. Johnson & Johnson, 50 F.R.D. 31, 32 (S.D.N.Y. 1970) (“[T]here is no merit to the all-encompassing contention that the fruits of discovery in one case are to be used in that case only.”). Therefore, a subpoena will not be limited because of factual overlap with another action. Johnson Foils, Inc. v. Huyck Corp., 61 F.R.D. 405, 410 (N.D.N.Y. 1973) (emphasis added) (“unless it can be shown that the discovering party is exploiting the instant litigation solely to assist in other litigation before a foreign forum, … courts do allow full use of the information in other forums.”). New York State courts have embraced the same rule, quashing a subpoena because of factual overlap only where the subpoena was served “merely for purposes of discovery” in the other litigation. Am. Express Prop. Cas. Co. v. - 28 - Vinci, 63 A.D.3d 1055, 1056 (2d Dep’t 2009) (emphasis added); Garnot v. LaDue, 45 A.D.3d 1080, 1083 (3d Dep’t 2007). To justify limiting use of the depositions, Appellants would therefore have to show that Koch’s “‘sole,’ ‘primary’ or ‘real’ purpose in commencing this action was to use the [discovery] procedure” to develop evidence for the New York Action. Sagorsky v. Malyon, 12 F.R.D. 486, 487 (S.D.N.Y. 1952); see also Devlin v. Transp. Commc’ns Int’l Union, No. 95 Civ. 0752 (JFK)(JCF), 2000 WL 28173, at *7 (S.D.N.Y. Jan. 14, 2000). As the Supreme Court and Appellate Division have already held, Appellants can show no such thing. a) Discovery Orders In Another Case Cannot Justify A Use Limitation. In lieu of any legitimate evidence to suggest that Koch seeks the depositions in bad faith, Appellants point to discovery orders in another case in another jurisdiction concerning other causes of action against other defendants. See Brief at 18. First, they point to a discovery request Koch served on Christie’s auction house in Koch v. Greenberg, 07 Civ. 9600 (S.D.N.Y.) – in other words, a different party in a different action before a different court. Next, Appellants point to subpoenas that Koch served on Appellants in the Greenberg case. These out-of- jurisdiction discovery requests are irrelevant to the questions presented in this appeal. Furthermore, in both instances, the Magistrate Judge supervising discovery - 29 - approved Koch’s discovery requests, albeit subject to certain limitations. Nevertheless, on the basis of these orders, Appellants improperly ask the Court to presume that Koch must be predisposed to seeking discovery in one action for use in another. But the orders do not support this claim. As the Appellate Division held, Appellants have “failed to articulate a sufficient, nonspeculative basis for … imposing restrictions on the scope and use of their deposition testimony.” Kapon, 105 A.D.3d at 650.10 First, Magistrate Judge Freeman did not find, as New York and federal law requires in order to impose a use limitation, that Koch’s “sole” or “primary” purpose in seeking the discovery at issue was to use it in another litigation. Sagorsky, 12 F.R.D. at 487; Williams, 50 F.R.D. at 32. Instead, Judge Freeman approved the discovery Koch sought from Appellants in the Greenberg matter, and issued a use limitation as a mere prophylactic measure. R. 244. Respectfully, such a prophylactic limitation was improper under the law. In any event, Judge Freeman’s decision to impose such a limitation does not support Appellants’ baseless claim that Koch seeks their depositions for an ulterior purpose. 10 Appellants also suggest there is some significance to the fact that Koch took Christoph’s deposition in Greenberg but not Kapon’s. The reason Koch declined to depose Kapon is clear: Koch obtained the information he needed for the Greenberg case from Christoph, and no longer needed to depose Kapon at that time. Rather than demonstrate discovery abuse, Koch’s judicious use of nonparty discovery demonstrates the opposite. - 30 - Second, the courts below were not in any way bound by Magistrate Judge Freeman’s orders in a different jurisdiction under different facts and different circumstances. See 148 Magnolia, 62 A.D.3d at 487. The Supreme Court and Appellate Division properly exercised their discretion in determining that Appellants could not establish a “nonspeculative basis” for the sweeping use limitation they seek, let alone meet the demanding legal standard required for such a limitation. b) The Criminal Action Against Kurniawan Does Not Justify A Use Limitation. Next, Appellants suggest that the status of the Kurniawan criminal case somehow proves that Koch does not seek their depositions for the California Action. Brief at 16-17. But Appellants do not deny that they have intimate and relevant knowledge of Kurniawan’s fraud. Incredibly, they argue that they should be able to withhold their knowledge because Kurniawan is so obviously guilty that Koch will win the California Action even without it. Brief at 17. As the Appellate Division explained, this argument is far too speculative to issue any sort of protective order. Appellants hypothesize that Kurniawan will “surely” plead guilty in the criminal case. Brief at 17; see 1/28/2013 Kapon Brief at 12 (“judge does not have to be a fortune teller to predict that Kurniawan will plead guilty to the federal charges”). But they have been wrong in this prediction once already and they will - 31 - likely be wrong again. Kurniawan has not pled guilty, and gives no indication that he will. Instead, his trial is set for December. Even if Appellants’ fanciful prediction proves correct (this time) and Kurniawan pleads guilty, the parties cannot predict what collateral estoppel effect such a hypothetical plea might have on the California Action. The parties cannot predict the charges to which Kurniawan might hypothetically plead guilty, or whether the facts hypothetically admitted might overlap with the facts of the California Action. Thus, Appellants’ claim that “the California Action will be all but over” is baseless. Brief at 17. Indeed, under California law, it may be that no adverse inference could be drawn from Kurniawan’s invocation of his Fifth Amendment privilege at trial. See Cal. Evid. Code § 813. And the California court presiding over the California Action has not ruled whether Kurniawan’s arrest or the criminal charges against him will be admissible in the California Action. Regardless, “[t]he clear policy of this state is to favor full and broad disclosure” of relevant information, not to require courts to speculate about the likelihood that one side will prevail and thereby obviate the need for certain discovery. AGH Distribs., Inc. v. Silvertone Fasteners, Inc., 105 A.D.2d 648, 649-50 (1st Dep’t 1984). - 32 - 2. The Courts Below Appropriately Declined To Rule Whether Appellants’ Yet-To-Be-Provided Deposition Testimony Is Admissible In A Separate New York Action. Finally, neither the language nor spirit of CPLR 3119 compelled the courts below to determine whether Appellants’ deposition testimony is admissible in the New York Action. If Appellants believe that their deposition testimony is inadmissible in the New York Action, they have a simple remedy: seek to exclude the testimony in the New York Action. They offer no plausible reason why the New York court presiding over the New York Action against Acker would not fully protect Appellants’ interests. The Supreme Court ruling on Appellants’ motion to quash should not and could not have evaluated whether yet-to-be- provided deposition testimony should be admissible in a separate action pending before another judge in the Supreme Court. Nothing about the “division of responsibility that 3119 contemplates” suggests otherwise. Brief at 18. Appellants insist that any use limitation must be imposed “at the outset,” but they offer no support for this disingenuous claim. Brief at 19 (emphasis in original). What Appellants really want is three bites at the apple. They have already sought a use limitation from the Supreme Court (first bite) and from the court in the California Action with respect to documents (second bite). Brief at 19, n.9 (“appellants and AMC requested the California court to preclude Koch from using the documents [produced pursuant to the Subpoenas] in the New York - 33 - Action”). If Appellants are dissatisfied with the orders of this Court or of the California court, then Appellants will surely take their third bite and seek the same limitation from the court in the New York Action. This Court should not interpret CPLR 3119 to encourage or tolerate such improper forum shopping. - 34 - V. CONCLUSION For all the foregoing reasons, and those set forth in the Supreme Court’s and the Appellate Division’s Orders, Koch respectfully requests that this Court affirm the Appellate Division’s Order. Dated: New York, New York October 11, 2013 MORVILLO ABRAMOWITZ GRAND IASON & ANELLO P.C. By: _______________________________ Edward M. Spiro Adam L. Pollock 565 Fifth Avenue New York, New York 10017 (212) 856-9600 - and - John C. Hueston (not admitted in New York) Bruce A. Wessel (not admitted in New York) Moez M. Kaba IRELL & MANELLA LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, California 90067 (310) 277-1010 Attorneys for Respondent-Respondent William I. Koch