Mikhlyn et al v. Bove et al

Filing 77

TRANSCRIPT of Proceedings held on June 18, 2009, before Judge Reyes. Court Transcriber Fiore Reporting and Transcription Service, Inc., Telephone number 203-929-9992. Transcript may be viewed at the court public terminal or purchased through the Court Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 7/21/2009. Redacted Transcript Deadline set for 7/31/2009. Release of Transcript Restriction set for 9/28/2009. (Rocco, Christine)

Mikhlyn et al v. Bove et al

Doc. 77

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

MIKHLYN, et al.,

* * Plaintiffs, * * v. * * BOVE, et al., * * Defendants. * * ****************

Case No. 08-CV-03367(CPS) Brooklyn, New York June 18, 2009 10:40 a.m.

TRANSCRIPT OF CIVIL CAUSE FOR PRETRIAL CONFERENCE BEFORE THE HONORABLE RAMON E. REYES, JR. UNITED STATES MAGISTRATE JUDGE APPEARANCES: For the Plaintiffs: DANIEL AKSELROD, ESQ. ERIC WERTHEIM, ESQ. Van Mandel P.C. 80 Wall Street, Suite 1115 New York, NY 10005 BORIS KOGAN, ESQ. Boris Kogan & Associates 277 Broadway, Suite 701 New York, NY 10007

For the Defendants:

Proceedings recorded by electronic sound recording, transcript produced by transcription service.
Fiore Reporting and Transcription Service, Inc. 67Elaine Drive Shelton, Connecticut 06484 [phone]

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(Proceedings commenced at 10:40 a.m.) MR. AKSELROD: through the cracks, too. THE COURT: Okay. That was an issue that Mr. Kogan -- that we initially just let slip

MR. AKSELROD: had raised. THE COURT:

Okay.

Let's --

MR. AKSELROD: MR. KOGAN: issues that -MR. AKSELROD: MR. KOGAN:

But --

Your Honor, there are some outstanding

Yes.

-- we could probably resolve now, but

-- and there are some issues that we would -- I think a conversation might -THE COURT: MR. KOGAN: Okay. -- might help and -Great.

MR. AKSELROD: MR. KOGAN:

-- one -- if I may begin putting some

issues on the agenda that we could resolve today -THE COURT: MR. KOGAN: THE COURT: Sure. -- if that's okay? I was -- what I was going to do is go

one by one and say what are your outstanding issues and what are your outstanding issues. Let's work through them, get

them done so we can tee this case up for Judge Sifton to
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decide. MR. AKSELROD: Your Honor, I believe there are

three broad categories of documents that are important and in contention that are an issue between us. One has to do with communications between and among the parties, and in particular, e-communications; that is, chats and emails. That would be communications between

the sides during the course of their business relation and I guess between each side meaning my client -- my clients who are husband and wife, between them, and between Ana Bove and Polina, the individuals on the two sides of the cases. THE COURT: chat? MR. AKSELROD: Well, the reason why there's a Your clients were talking by email and

great deal of chat -- no, not with -THE COURT: Don't they --- not so much --

MR. AKSELROD: THE COURT:

Okay. -- with each other.

MR. AKSELROD: THE COURT:

All right. I mean, that's what it's come down

MR. AKSELROD: to; people -THE COURT:

Okay. -- sitting next to each other

MR. AKSELROD:

writing each other emails, but not so much between them, but
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there was a regular course of chat and email principally because Polina is in Israel. So obviously they're not getting on the phone to Israel every day and spending the money, so there's kind of this group discussions that were going on every day between and among the various parties on the computer. THE COURT: Emails shouldn't be a problem. I

mean, you'd think that you could -- I don't know what the retention policy is of their email providers, but you should be able to go back as far as you can -MR. AKSELROD: THE COURT: don't know. MR. AKSELROD: Let me contrast the productions. Well, let me --

-- and get them produced, but chats I

We produced about, I think, 1,500 pages of chats that involve some combination of our people and their people -THE COURT: How do you get chats? They're on chat -- chat is like

MR. AKSELROD:

real time discussion; MSN chat, where people are actually -THE COURT: And they keep -- MSN keeps -Well, it's on your -- it's from our

MR. AKSELROD: computer.

I don't think -THE COURT: Oh. -- they went to MSN. It just -- it

MR. AKSELROD: records.

There's a log that's created.

It becomes data on
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your computer, just like other things. THE COURT: Okay.

Okay?

MR. AKSELROD:

We got that from our clients.

We

produced it before we even reviewed it.

We also produced They

several hundred emails between my individual clients.

produced, I think, four pages of chats and no emails between them. You should note, Your Honor, we actually produced several emails between them, Ana and Polina. none. Now there's something wrong with that on several fronts. One is we're talking about at least two computers Polina's in Israel. Ana's here for much of It's mirrored on all They produced

on their side. the time.

This stuff is on computers.

the computers. There's no reason why there shouldn't be thousands of chats and emails on one or both of their computers. Even

if they, you know, purported to delete it, it's still on the computer and it's questionable whether they can say they deleted it because they found things over the course of the case that they, you know, either like or have produced in the case. If you have that, where's the rest of it? This is going to be -- you know, this has to be resolved in some way either by if we have to go into the hard drives or we're going to get into spoliation practice
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because the communications are critical in this case.

This

was a family business, there's no real contracts, and you have to go through this to get the flavor of what both the nature of the relationship was and what did or did not happen during key parts in the chronology of events. It's

just not right that we produce 1,500 pages and they produce four. THE COURT: MR. KOGAN: Mr. Kogan? There are a couple things that are One is that when -- in April

important to note, Your Honor.

of 2008 when my client was kicked out of the business, my client walked out with a computer. Then she received a phone call from their attorney saying it's our computer, you got to bring it back and returned that computer. That computer is the computer from

which they were able to produce all these emails and chats. That's our computer. produced those. The fact that that computer was used for the bulk of the communication is the reason why these documents are in existence. So the reason why it was there -- the emails That would have been -- we would have

specifically I'm talking about -- is because that's -- on that computer that's all through 2008. Now, my -THE COURT: That was -203-929-9992

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MR. KOGAN: THE COURT: MR. KOGAN: THE COURT: MR. KOGAN:

My client is Ana -That was --- Ana Bove. Okay. Ana -- Ana's -- Ana had a computer

which she was using in -- she was living at the Mikhlyns' home, if Your Honor recalls, and when -- she took the computer in April of '04 and then they demanded the return of that computer so they have it. That's the computer on

which the majority of the -- of their production came from. Now, that's -- I'm -- that deals with emails. chats are actually more interesting. It appears that the The

Mikhlyns have been recording those chats, logging them in all along. They were planning this. My clients were not planning anything and had no reason to activate this feature. I asked them about this

issue and they did not intentionally record any chats and did not intentionally maintain a log of communications, unlike the Mikhlyns who have been doing this for quite a while. THE COURT: This log that you discussed, is that

something that automatically happens or is it something that you have to activate? MR. AKSELROD: produced some chats. I don't know the answer, but they

Why those are there and not others, I
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don't understand. It also -- you know, this -- it may be that Ana Bove returned the computer. to you, I'm returning it. She has a computer. There's email saying it belongs But Polina Dolginov is in Israel.

Certainly, the emails between Ana and

Polina have to be produced. These people were in constant communication with each other on computers. There's -- you know, this stuff --

it cannot be that they don't have -- we have -- we produced emails between them. MR. KOGAN: And yet they -Well, that's because that's the

computer that was used for those communications and of course those -- all those communications are on that computer. THE COURT: any other computer? MR. KOGAN: No, Ana did use another computer in -So she didn't use -- Ana didn't use

from what I understand, she had a computer from 2001 and in 2007 she got married and left that computer in Israel. that computer was given away. have it anymore. And the majority of the communications that she had -- well, I mentioned the other computer that primarily was used by -- at the Mikhlyns' home. THE COURT: Okay, so the only two computers she
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And

It was not -- she doesn't

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had during the period were the first computer that was left in Israel and given away and then the other computer that she returned? MR. KOGAN: And I believe that there was another I'm not

laptop that was more -- of more recent vintage. sure exactly when.

I think it was around either 2007 or 2008 after that computer was left in Israel, and that's the computer from which the bulk of the -- the bulk of our production came from. And we produced many, many thousands of emails. Those emails that we did produce, the records which were -my client intentionally made an effort to maintain and preserve their -- those were communications with clients. Those were all saved and there were, I would say, tens of thousand of emails that were preserved because they had been client oriented or vendor oriented or customer oriented and these folks, both sides, made it their business to make sure that all of that was preserved for the benefit of good customer relations. Customer returns an item or customer asks a question about an item, all of that was preserved and everybody made an effort to do that. My client had no purpose -- no reason -- I'm making an inquiry trying to find out if there are any other
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places where something was saved intentionally or unintentionally other than the computer that we have. THE COURT: MR. KOGAN: THE COURT: MR. KOGAN: Or any other computers were used? Right. What about Polina? Polina did not -- the records that we

produced were either Polina had the same records or if she had something that supplemented, we produced that as well. I'm -- in other words, and Polina did also have -I don't have the exact dates on which she replaced her system, but she had computer failures that -- throughout these years. This is from 2002 until now.

Several times her computer was replaced and we're trying to find out if there were any incidents of backing up or hard drive that was replaced or any of that. I don't

know have the chronology of that, but I'm trying to find out if there are any other additional records. I do know that there -- I have some objection to generalizing and saying that all communications between Polina and Ana are subject to disclosure because I don't think that all communications between the Mikhlyns are subject to disclosure. clients are friends. There are plenty of communications that do not relate to the subject matter of this lawsuit, the business.
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They're husband and wife and my

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They if -- and to the extent that they do not, I do not believe that they're appropriate to be for disclosure. THE COURT: You're not asking for them, are you? Not -- well, here's the problem,

MR. AKSELROD: Your Honor.

It's tricky with respect to the communications

to draw lines -THE COURT: Well, I --- because -- and I'll give you

MR. AKSELROD: examples -THE COURT: you're going to say.

I don't think he's -- I know what You're going to -- you know, they

could start on a different topic -MR. AKSELROD: THE COURT: business -MR. AKSELROD: It's not just that. There are Right.

-- in an email and go into the

things that are subtle that a person reviewing their client's documents in good faith might not realize the significance of and I'll give you an example. Okay?

Part of our story, our clients -- and we've produced chats and/or emails that are -- we think support this. We did it in the injunction practice and in

discovery. We say there came a time in 2007 that Polina was bought out. Her share of the business was bought out and we
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have some both chats and Ana was actually forwarding our clients' emails about what was being talked about with Polina. Then later on we say Ana left the business, They denied both of those things.

basically left it to us. Okay?

Now obviously if you're looking at emails and the emails are talking about that, and I think there were emails about that because Ana was telling our clients, that's obvious. There was also comes a time where there's emails

from Polina to my clients saying where's Ana, I can't find Ana, I'm trying to reach Ana. Well, if they were still in business together and these things never happened, why are they emailing my clients -- why is she emailing my clients looking for Ana? It kind of suggests they're not together in business if she can't even find the woman. It's supportive of the idea that, A, Polina left the business and later on Ana left the business and they're not operating and working together, or else why would she be sending my clients these emails? that I have trouble with. THE COURT: MR. KOGAN: Well, you -If I could respond, Your Honor. Calling the person whose Ana It's that kind of thing

lived in the Mikhlyns' house.

house it is -- or emailing have you -- do you know where Ana
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is, I've been trying to get in touch with her is -- it doesn't prove anything and to claim somehow that my client -- Ana -- there -- these two claims that Polina was bought out or that Ana abandoned the business or walked out, the second one has no legal significance in that if it is a partnership, if you walk out of a partnership, the partnership dissolves by law. And they don't agree that the

business dissolved by law and it had to be liquidated. And if it is a corporation, you can't abandon a corporation. You can't say I'm walking out of my shares.

I'm a shareholder, I'm an owner of the company, and I walked out. A week later I come back and I say I did not walk out.

I changed my mind. There's no legal significance so the claim -there's no colorable claim. There are few of these claims

are being made here that they have -- they want to go into an inquiry into communications between my client -- clients which do not involve the subject matter of the lawsuit -THE COURT: MR. KOGAN: THE COURT: Well, you see --- in a fishing expedition and -This is precisely why you need to Okay. You're

talk, as opposed to write emails and letters. not entitled to all of the emails. about planning a trip to Cancun. that.
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They could be talking You don't need to see

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MR. AKSELROD: THE COURT:

Okay.

But there's the -- the subtleties

you're talking about that arguably have a bearing on the case, you need to make Mr. Kogan aware of that. you talk -MR. AKSELROD: Okay. THE COURT: -- and you try to focus. I mean, That's why

that's putting aside the issue of whether we could even get to these emails -MR. AKSELROD: THE COURT: Right. From

-- whether they exit anymore.

what I'm hearing, just dealing with Ana, I don't know that there's anything I can do. MR. AKSELROD: THE COURT: I think --

If the computer was given up and you

have that computer, if this other computer in Israel is wherever it is and there are no other computers, what can we do? MR. AKSELROD: I think what I will have to do is -

- and again, it will be subject to a procedure if they're going to be allowed to, you know, eliminate certain ones is we'll have to subpoena the service providers. that's what you were getting at earlier on. MR. KOGAN: And that should -I think We'll just --

MR. AKSELROD: At least with respect to emails -Fiore Transcription Service, Inc. 203-929-9992

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MR. KOGAN:

-- should be done.

That would

circumvent any -- there's no reason for us to spend resources on attempting to excavate something from a dead computer, perhaps. Perhaps, I don't know. Identify the service providers -I think they know who they are. Yes.

THE COURT: MR. KOGAN:

MR. AKSELROD: MR. KOGAN:

Everybody knows who they are. We do.

MR. AKSELROD: MR. KOGAN:

There are only one or two providers

and we can just subpoena them and then everything is produced. fishing. At that point only -- the other objection they You know, then we would have to come up with a There's no secrets and there's no reason to go

reasonable procedure in which we would -- I don't want to know about their personal life any more than they're entitled to know about my clients' emails that do not have to do with -THE COURT: Well let's think that through.

Obviously your clients have spousal privilege. MR. AKSELROD: THE COURT: Yes.

Right? Yes.

MR. AKSELROD: THE COURT:

I don't know that your clients have
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any friend privilege?

I don't know how to -- there's no That's one of --

protective order in this case, is there? MR. KOGAN: one -MR. AKSELROD: we've -MR. KOGAN:

We -- actually, we're negotiating

We slowly -- at a turtle's pace

We can -- actually, we're close on

that and I could articulate I -- I'd like Your Honor's participation in that. phrase and -THE COURT: MR. KOGAN: THE COURT: Okay. We'll get to that then. We're very close to it. There's one

-- we're a minute away from there. Subpoena the service providers. Okay.

MR. AKSELROD: THE COURT:

Share obviously with Mr. Kogan what

you get from them, and if we haven't worked out the protective order before you get the documents from the service providers, you will treat them confidential attorney's eyes only. clients. MR. AKSELROD: THE COURT: Okay. You don't even show them to your

And if in reviewing the emails and

chats there's anything of a nature such that your clients don't -- it's unrelated to this case, your clients don't want even the attorneys to have it, we'll all proceed with
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the assumption that, you know, you'll let them know and then you will give that back and to keep no copies. It's got to be -- you know, it's got to be clearly, you know, in left field and have nothing bearing on this case. MR. AKSELROD: up with a list -THE COURT: type of thing. MR. KOGAN: From both sides. I guess we need all There Like a -- like some sort of clawback We will talk about and I guess come

email addresses that we use for the communications. had to -- there has to be -THE COURT: MR. KOGAN: THE COURT: MR. KOGAN: Yes.

-- some cooperation in order to -Yes. -- be able to -Okay, turning -- should we get to I know it's --

MR. AKSELROD: category two now, Judge? THE COURT:

Yes, please. -- going to take a while. You may recall

MR. AKSELROD:

A second category is copyrights.

that obviously we had motion practice about whether they were going to be able to amend their complaint to add numerous copyrights for specific designs and they were allowed do that.
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I have been repeatedly asking for the copyright applications and registrations and while nobody says no and objects, I don't have them yet. You may recall when this case up and we had a -- I think a telephone conference about the motion, you know, you said I wasn't going to be prejudiced on the discovery front about that -- about, you know, these additions of -- you know, there was one copyright in the original pleading of theirs. Now there's, I don't know, 4,200 -- I don't know Okay?

how many there are.

They were doing it on an ongoing basis, they told There were applications pending. THE COURT: And some of them have since been -Some have been --

MR. AKSELROD: THE COURT: MR. KOGAN:

-- approved, right? Yes. Now, it's hard to understand why I

MR. AKSELROD: don't have them.

One, not only are they not objected to and they're obviously central to the cases, I would have thought, first of all, one of the law firms would have had them as a basis for their pleadings and I inferred, maybe incorrectly, that they were involved in actually filing them because it was happening during the case, yet I don't have anything. THE COURT: What's the deal with the copyrights?
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MR. KOGAN:

Your Honor, it's very interesting the

nature -- the process here -- if I can take a moment to explain the process by which the business is -- has developed. My client, as your -- as the Court may recall, is a graduate of Israel's premier design school. She's a --

and she has been a designer her entire life and she is -she has traveled throughout Europe, spent six figures on identifying designs that are in the public record -- that are in the public domain that are not copyrightable from publications from the 1800s, had then improved on those designs, making them unique and copyrightable, as the copyright office has -- that the PTO has confirmed that really it is -- she does have a copyright in those. Now, the fact that my client elaborated and improved on those original designs is something that at this moment is being disputed by the plaintiffs who claim that these designs are not copyrightable altogether. And the

problem that we have in producing the applications and the registrations, we don't want to give them the -- what they don't have. And that is what my client took is the originals, spent six figures on buying and then improving on, and once they have that, they can go ahead and plagiarize to their heart's content -Fiore Transcription Service, Inc. 203-929-9992

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THE COURT: MR. KOGAN: THE COURT:

Well --- in both ways. No, if something is copyrighted, there

is a notice -- or, PTO has it and anybody can take a look and see what it is. This -- she has this copyright.

You know, I understand maybe the underlying application has additional information in it, but that can be cured by producing it for attorney's eyes only. MR. AKSELROD: THE COURT: Well, I --

You're not a design person, are you? I got to tell you, Your Honor, I

MR. AKSELROD:

mean, if that's your ruling, I'll take attorney's eyes only. I have to say respectfully the idea that it's somehow secrecy that's blocking this is absurd. You're

talking about a copyrighted -- first of all, you've made copyright claims and on a number of fronts, not just copyrightability, we challenge it. First of all, we challenge in a number of instances who actually did the so-called improvement, the digitizing. That's number one. Perfect. Okay? That's exactly -Who actually did it is an

MR. KOGAN:

MR. AKSELROD:

That's -- I don't even know what's in your -- I

don't know which things -MR. KOGAN: That's exactly -- that is exactly the
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issue, Your Honor.

I would like everybody to produce now

simultaneously to Your Honor under seal in a box -THE COURT: MR. KOGAN: seal. I'm not doing it. Okay, so somebody has to do that under

Maybe we can do that simultaneously to -- but I don't

want them to produce after I've produced my clients' -- my client demonstrate this is how we improved on these original designs, they come back and say no, no, this was our idea. Let them produce now these original designs and how they've improved on them simultaneously; everybody does it at the same time, because what we believe they intend to do is after our production, they will come back and say yes, this was my idea. I'm the one who came up with the idea of elaborating on this 1800 -- the 1880s magazine and changing this particular alphabet font from two dimensional to three dimensional, for instance. We would like that to be done simultaneously so they cannot thereafter come up with a claim that this was their idea and this is how they did it, because we're going to be able to substantiate that at this point that it was uniquely our idea, our design. MR. AKSELROD: Your Honor, this is not rational.

You heard from counsel, which is correct, the process here is to go get either a public domain image from these public
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domain websites or magazines or in some instances, I believe actually from a not public domain where images were licensed under limited terms. You take it, you put it into the

computer, you digitize it, quote, unquote, and then you press buttons that like you press a button and it maybe adds a color in an area that was black. It's called digitizing. I just -- how -- the actual end product is out there because they're selling it on their website and we're selling it on our website. There's no secret about what the It's out That's the process.

improved image or whatever you want to call it is. there being sold by both of us. We have it on our

computers, they have it on their computers -THE COURT: Yes, but --- because they took it, and the

MR. AKSELROD:

original thing is some public domain thing -THE COURT: So what's the problem with

simultaneous production of copyright registrations and -MR. AKSELROD: register any copyrights. I don't have any -- we didn't But I don't know how you can file

something in a public office, get a copyright, and then say it's like secret. I don't understand that.

We could probably go to Washington and get the application. How is this secret? This is not secret stuff.

This is not some secret -- it's a copyright case.
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How could you file copyright claims and say I'm not going to give you the stuff? MR. KOGAN: It doesn't make any sense.

Your Honor, their objection did not

specify one issue and it's lacking in that one aspect. Their -- they say we don't have anything -- any copyright applications. I understand that.

But do they have any claims that they have somehow improved on those public domain designs -- if they can substantiate that now and we have all the designs -everybody has all the end result. Everybody has that.

But what they don't have, because they didn't do it, is the public domain designs themselves and the process by which they were changed from public domain to this improved image which was -- which is copyrightable. don't have that and they can't produce it. And if we're going to do simultaneous production, there will be either nothing from their side and everything from our side or maybe they'll come up with something and which case the -- those -- there'll be a dispute about who improved designs number 1 through 50, because they will have the process by which they claimed to have improved them -THE COURT: Well, did you ask them in written They

discovery request for documents establishing that they've improved on these public domain designs? MR. KOGAN: Not in those words, but we've asked
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for -THE COURT: right -MR. KOGAN: -- the documentation -- right, we did I don't know that those are the

ask about the designs to which they make claim, how is it that they are entitled to those designs. So ultimately

that's -- in a roundabout way, that's what we were -THE COURT: Uh-huh. From our end, to the extent we have

MR. AKSELROD:

-- you know, I'm not sure if counsel has the same understanding as I do about how this stuff is even done. Okay? MR. KOGAN: No, I don't, but I have a different

understanding because my client did it -THE COURT: Look if --

MR. AKSELROD: I'll produce that stuff -MR. KOGAN: -- and knows exactly how it's done. I'm willing to produce anything

MR. AKSELROD:

that shows evidence of what our people created or people other than Ana Bove created without -- this is not attorney's eyes only stuff. THE COURT: MR. KOGAN: THE COURT: So then what's the -Absolutely --- if -- then what's the harm with I mean -203-929-9992

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MR. AKSELROD:

Fine, I'll do it before.

I'll

produce -- if it's not already in our production whatever we -- you know, we'll talk about it. I'll produce it before.

I think we've produced some stuff already. MR. KOGAN: Your Honor, if we can come up with a

procedure for that, then it's not a problem. MR. AKSELROD: I'll produce -THE COURT: All right. So you're going to -Simultaneous

MR. AKSELROD: production, fine. THE COURT:

That's fine.

Copyright applications and

registrations on the one hand and -MR. AKSELROD: THE COURT: Process --

-- whatever else on the other.

MR. AKSELROD: Creative process -MR. KOGAN: Whatever they can claim -- whatever

they claim is the backup or the proof that they contributed to the improvement -THE COURT: MR. KOGAN: THE COURT: Okay. -- of public domain designs. All right.

What's the third issue? MR. AKSELROD: The third issue is money, which is, I know Mr.

you know, finances, who got what, who paid what.

Kogan I think in our early conferences and conversations
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this was his primary issue. We have sort of in pieces, because it's a lot of stuff, been sort of systematically producing bank statements, PayPal account records, eBay, there was a credit card company called 2Checkout, and our internal -- you know, QuickBooks, thousands of pages of financial records. THE COURT: Both -For the business.

MR. AKSELROD: THE COURT:

For the business? Now, there has been both ways.

MR. AKSELROD:

We've been uncertain, frankly, and kind of dancing around each other about the issue of quote, unquote personal financial records. And I told Mr. Kogan in my letter I've actually come around to the view that there should be no such distinction; that everybody -- because of the nature of the way the business was run, that, you know, the personal don't think they're personal. ours are truly personal. -- I

He doesn't think things of

Everything should be produced.

But the bottom line is we've made a systematic production. from them. In particular, records of a type that we've produced showing them getting hundreds of thousands of dollars, for example, straight from the credit card company
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that accepted credit card payments, I asked for that stuff. I didn't think it was in dispute from our early conferences. I haven't received that. Now, you know, one of the reasons why I'm saying we got to get rid of this concept of personal was there was a period of about a year or so where the girls were -- you know, they set up these domain names and websites -- were in the business and while my people were helping them in various ways, consulting, we weren't in the business yet. Okay? Mr. Kogan says during that period they never had separate quote, unquote business account. Now there was no

corporation, so, you know, they didn't have like a DBA -they just used their personal accounts. And because they're

personal, Mr. Kogan says you can't get them. My view is if that's the way you do business, that's a business account as well as a personal account. You got to produce the stuff. You can't have everything

together and just say because I put my name on it, instead of doing business as ABC Embroidery, it's personal. Now -- and again, I'm saying this works both ways. We've got to produce our personal -- there's a number of reasons why I think we should. That's just one of them.

I think we should just drop this idea of personal and just get everybody's finances on the table.
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I think we

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have to.

It was just not run and managed in a kind of

airtight, you know, way that a big company would be run and to get the complete picture, everybody's got to put their bank accounts and stuff on the table. MR. KOGAN: From 2002 through 2004, it's From

undisputed that the business belonged to my clients.

2004 until 2005, my clients say that the Mikhlyns were -actually, it's the Mrs. was a designer. THE COURT: 2002 to 2004 -It was -Yes.

MR. AKSELROD: THE COURT:

-- undisputed that it was their --

MR. AKSELROD: Yes, late -- I don't know the extent of -- you know, that's one of the things we're trying to explore in discovery. I don't know the extent of their sales whatever, but it is true that the girls started this without us initially. They came up with domain names and they were at

some level of activity, upgrading the business from I think like late 2002 through 2003 and we got involved in 2004. THE COURT: Okay. So really what we're -- are you

looking for personal bank records from 2002 to 2004? MR. AKSELROD: difference. Those are -- there is no

It's a hundred percent commingling. No -You know what I mean?
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THE COURT:

MR. AKSELROD:

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THE COURT:

No, but if your clients aren't

involved in the business, what do you need their -MR. AKSELROD: I'll tell you why. There's two

reasons; one sort of factual about the stories each side is putting up and one is legal. They make it seem in their pleadings and in the motion practice that they had already kind of established a successful business and we were just hired as employees to do some, you know, discreet task to -- for storage of thread or something. I don't remember what was said. Maybe

different things were said in the various payments. I mean, our view -- we doubt that, at a minimum, upon information and belief. We don't think the business

became successful until we got involved. And I have no idea whether they had $10 worth of sales or a hundred dollars worth of sales or a million dollars worth of sales till we got involved. So it has to

do with just the story of how this business came to be what it is. That's number one. Number two, it goes right to the heart of their trademark claims. They repeatedly assert -- you know, they

make the allegations about how they were using all the various trade names and website names on a regular basis and established its success on the internet before we were involved and among customers.
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You know, for purposes of the trademark analysis, certainly for secondary meaning -- for example, using your name or using ABC -- the extent of your success, sales, profits, that's a relevant factor to determine whether you have established a trademark. So that's the legal reason. This isn't a thing

I'm not claiming the money. where we say that's our money. THE COURT:

With the records from 2002 through --

beginning of 2004 whenever it is, are you looking for unredacted or redacted? MR. AKSELROD: I certainly want to see -- well, I don't care if

certainly unredacted as to money coming in.

-- I don't care if they bought dresses or whatever, what they spent their money on. THE COURT: Well -Although it's relevant because it

MR. AKSELROD:

has to do with profitability -THE COURT: It's got --- so it's hard to say.

MR. AKSELROD: THE COURT:

It's got -- well, the money coming in

has to be coming in from the business, not -MR. AKSELROD: THE COURT: Right.

-- coming in from, you know -I'm not aware of them getting money

MR. AKSELROD: any other way.

I'm not sure that's an issue, but -203-929-9992

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MR. KOGAN:

Your Honor, I --- they can tell me.

MR. AKSELROD: THE COURT: MR. KOGAN:

I have no idea. -- I don't believe that he would be

entitled to anything other than something that would support gross receipts, and that would be reflected on bank statements, not -- and bank statements to the extent that they show gross receipts. In other words, at that point if our client spent it on whatever, it really is irrelevant and I understand that the key there would be gross receipts, THE COURT: MR. KOGAN: not --

Well, I think -- I mean, he --- not profitability. I wouldn't have

MR. AKSELROD:

Gross receipts and spending on

MR. KOGAN:

Well, the spending on business I don't

know that he would be entitled to see every check that we spent on the business. At this point I think that the gross

receipts would address his concern -THE COURT: Whether it was a profitable company --

I mean, that's a fair point. MR. KOGAN: THE COURT: Is irrelevant really though. Whether is a profitable company or not I mean, you could
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have a completely -MR. AKSELROD: meaning -THE COURT: -- you're spending it like Kozlowski Well, it doesn't go to secondary

on, you know, thousands of dollars of ice sculptures -MR. AKSELROD: THE COURT: Right. But if you're pulling

-- for parties.

in, you know, a fair amount of money and just -- you're just hemorrhaging it, that's not -MR. AKSELROD: But it does go to the first point

about whether did this business first become profitable when my people got involved in it, which my people believe is the case, but we don't know a hundred percent certain because they're going to come into court and say these girls made this great business and these people are just brought in to do as menial, you know, ABC you do this. And our position

is when we got involved this business took off. There's actually some evidence of that because profits quadrupled after -- or revenues quadrupled after we got involved. THE COURT: Well, that's revenue. We're entitled --

MR. AKSELROD: THE COURT: MR. KOGAN: THE COURT:

That's revenue. That's all that matter, really. That's revenue.
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MR. AKSELROD: MR. KOGAN:

It's not all --

It's really all about revenue. It's not all that matters. I think

MR. AKSELROD:

profits matter too because if you're losing money -THE COURT: Does it --- you don't have a good business.

MR. AKSELROD: THE COURT:

Is it really -- is -- look, I'm going The question is whether it's going

to give him the records.

to -- whether and to what exact -- actually, to what extent they're going to be redacted. Is it really that big of a deal? I mean, they're

going to show on their bank statements -- personal bank statements, you know, whatever was coming in from PayPal, whatever income from the business, and then, you know, what was going out to support the business. much? Is there really that

I mean, I don't know how the business was structured.

Is it, you know -MR. KOGAN: I don't know. I don't know. I can't

THE COURT:

And it could also -- you know, I mean,

part of it could be their efforts to promote the business. Maybe they had expenditures to, you know -MR. KOGAN: THE COURT: MR. KOGAN: And I do --- advertise or -I do have some other concern there
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that I do know that my clients have expressed.

They spent

six figures on buying those public domain magazines from the 1800. They traveled all through Europe to college these items and I don't want to disclose all my sources to -- in other words, they sought these out, they're not easy to locate, they are -- this information is not out there. don't -THE COURT: MR. KOGAN: But -They can't go out there today and buy They

what my client has bought. THE COURT: MR. KOGAN: THE COURT: But there's got to be a way of -So -- I could redact --- redacting and identify -- you know,

somehow identifying that this is, you know, business promotion or whatever you want to call it. MR. KOGAN: I can do that. I'm just saying I

would like to be able to redact certain specific information that would allow them to -- it goes to the protective order, really. That portion I'd like to be able to redact -THE COURT: I mean, I think all these business

records are going to be attorney's eyes only unless there's a strong need to show them to the clients and to -MR. KOGAN: one issue clear. But the -- I'd like to just to make

At this point we're talking about my
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clients' records that have to do with how they ran the business from 2002 to 2004. When we say all these records, there are some that are very different in that we have only been discussing the -- my clients' business records which are really personal bank accounts through which they ran the business. not incorporated or set up as a separate entity. The Mikhlyns have been commingling personal and -they -- there was a corporation established, but they did deposit sums in their personal bank accounts, none of which -- not a single account has been disclosed despite what counsel says. THE COURT: Well, I think he's -I'm coming around to the view that It was

MR. AKSELROD: all of us -MR. KOGAN:

I understand, but I just --

MR. AKSELROD: -- have to do that now. MR. KOGAN: THE COURT: There was -It's a two -- it's always a two-way

street in this courtroom, so -MR. KOGAN: There was a discussion before that Whatever was produced was

somehow there was production.

only business records and I only received the tax returns two days ago. I don't know if they're complete. I don't

know if they're -- if this was an S Corp.
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there are K-1's if they're included or not. I know for a fact I did not receive any personal tax returns and I know for a fact that they commingled to such an extent that the business has been paying for mortgage payments on their homes, for -- I think about $400 a month on liquor stores. thousands. THE COURT: MR. KOGAN: THE COURT: MR. KOGAN: THE COURT: All right. Look, look -There are food expenses in the

There's, you know --- we're not litigating the case here. There's -You're going to produce -You want --

MR. AKSELROD: MR. KOGAN:

-- complete commingling -You want my answer or not?

MR. AKSELROD: THE COURT: street. MR. AKSELROD: THE COURT:

You're -- no, you're -- it's a two-way

Right.

Personal bank records are fair game.

The only issue is to what extent you're going to redact them. MR. AKSELROD: THE COURT: Okay.

And you need to be careful on what you

argue because it may come back and bite you in the butt, because you might not be able to redact that for your
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client.

So I'm going to leave it to you to try to work out.

I think it's fair game though. So that's 2002 to 2004 from you. I mean, is there

any -- there's no issue with you for your clients' 2002 to 2004 because they weren't involved. MR. AKSELROD: THE COURT: MR. KOGAN: THE COURT: Right.

Is that right? That's correct. Okay. So then 2004 going forward I

don't see any reason to have a different rule, unless -MR. KOGAN: I'd like to point out that from 2004

were -- the only other concern -- I guess there -- no, they would be the same. THE COURT: no, no -MR. KOGAN: From '04 to '05, there's some period When did -- I mean, at some point --

of time in which -- through which my client says that Inga Mikhlyn was worked only as a designer, meaning she had specific tasks of design, not bookkeeping, nothing else, for a period of time from '04 to '05 and after that some -actually, I don't know, maybe it's during '04. And then later on at some point they have Mikhlyns run the operation in the U.S. in its entirety, meaning they are -- they warehouse, they get the bookkeeping, they do -they pay the vendors, all the payments are done through
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them. THE COURT: MR. KOGAN: Uh-huh. Of course, the shots are called from Their story is So from 2004

-- by my client, at least that's our story.

that they -- that we're partners at that time.

until -- or some point in '04 through '08, I guess both sides have personal financial records which are relevant. THE COURT: MR. KOGAN: THE COURT: MR. KOGAN: Okay. And then -Same ruling. -- from 2008 on we have a significant

dispute because while they concede that my client is -- was a partner -- both my clients were partners in the company, they claim one has abandoned or walked out and the other one has been bought out. Which by the way, they don't deny that

even in that buyout they did not pay the buyout amount that they claim to have agreed on. So the issue is they claim that we would have to give them business records from 2008 on because they claim that my clients have continued with the business. From 2008

we have a split and that was the subject of motions before Judge Sifton. Neither side was able to demonstrate the

likelihood of success on the merits on that to Judge Sifton's satisfaction to obtain a TRO at that point and a -THE COURT: Preliminary -203-929-9992

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MR. KOGAN:

-- preliminary injunction.

And

without a colorable claim, I do not believe that they have any entitlement to business records from 2008 on for our businesses, while we do have the right to discovery on their business from 2008 on because they acknowledged that we are partners in their business. So there is no -- it doesn't mirror -- from that point on, there's a distinct split and if -- I believe there should be a bifurcated process after which -- in other words, if they prevail -- if we get to trial -- if they prevail on -- and are able to show a colorable claim on their entitlement somehow to our business going forward, they would be entitled to discovery of financials on the business from 2008 after the divorce, so to speak. But at this point I do not believe that they have made that colorable showing. THE COURT: MR. KOGAN: THE COURT: injunction. MR. AKSELROD: Yes. THE COURT: It's not -- you know, it's not on the Well --- didn't think so. Well, this is on a preliminary Judge Sifton --

Go ahead. MR. AKSELROD: First of all, Your Honor, we have a
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corporate plaintiff, as well as our individuals.

This

business was run through a corporation, ABC All Consulting. On paper, my clients are the only shareholders, officers, directors, if you will, of the company. They're a -- it's a complaining entity here against what Ana -- the focus of our lawsuit, which we started this case, was what happened after the divorce. You know, Mr. Kogan and I talk about the divorce and the marriage period. That's the focus of our lawsuit.

He's more focused on what happened when we were together because Ana claims that money's owed to her and we took more of the money, whatever. We're focused on what happened after. We say you

went and basically misappropriated various business assets to benefit your knew company and attacked us and defamed us, et cetera. our claims. Number two, this issue of partnership, you know, Judge Sifton resolved -- this is one issue Judge Sifton resolved and a small part of the decision on the injunctions. He said if you use the -- we did allege The period after the divorce is the spotlight of

partnership in our complaint. But Judge Sifton said in his decision, and he cited New York law and I'm aware of these cases now, that when you use the corporate form, that's it.
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partnership.

It's a corporation.

Now they've added in their amended pleadings to, I guess, tailor to that that since we're the only shareholders of record, that Ana's a de facto shareholder. maybe she isn't. Okay? Maybe she is,

But we're talking about a -I think the partnership

there's a corporate aspect to this.

thing has largely fallen away despite our best pleading efforts. We're talking about a corporation that claims it owned these things. It owned the business and the assets

and the websites and that Ana walked off. And after we tried to discuss a buyout for her for her share of the business, whatever it was, she took what we claim to be our assets to build her new competing business, attacked us -- in fact, we did get relief from the judge on this business of, you know, defamation attacking. The only party that got relief in the injunction was us, and the judge said she had to stop saying that basically we were doing illegal things and didn't have rights in the stuff we were selling. We were injured very badly by that. you know, our income went down. to climb back up. So like in any case like this, we're saying we were damaged. We're saying they have unjust enrichment by
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Our money --

It took my clients a while

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the behavior they engaged in, in those businesses. just -THE COURT: Okay.

That's

MR. AKSELROD:

-- classic stuff that's subject to

discovery in a case like this. THE COURT: MR. KOGAN: THE COURT: MR. KOGAN: All right. I'm --

Your Honor, I -Go ahead. I'm sorry. If the Court would like me

to brief this issue, I would like to take 10 days to brief that. I believe that the proper procedure for that kind of a claim is for them to make a colorable claim, some kind of a showing, and despite counsel's efforts at this time, Judge Sifton had written an extensive decision and it is the opposite of what he claims. He's misreading the decision

specifically with respect to that finding by the judge. The implication of there being a corporation and no partnership is not that all of a sudden my clients' claim is reduced to nil. It's the contrary.

It's that it's showing that the plaintiffs' claim is just inconsistent with the law and that they have treated this business in a way that it cannot be interpreted according to their interpretation. THE COURT: Okay. Here's what we're going to do.
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You have an uphill battle, but I'll take a letter brief no more than five pages. Hold on. Do I wait to respond to that, Your

MR. AKSELROD: Honor? THE COURT:

Hold on, hold on -I don't know what the law is.

MR. AKSELROD: THE COURT:

-- hold on. Yes.

MR. AKSELROD: THE COURT:

June 26th, and then July 3rd is a No

similar -- is the written response, same five pages. reply. All right.

That is the only outstanding issue -One last thing on our side --

MR. AKSELROD: THE COURT:

-- on the three categories. One last thing on our side is that

MR. AKSELROD:

I think our second document request is -- the response is about six weeks overdue. MR. KOGAN: issue. Your Honor, that's the subject of this

They want post-divorce documents and we are That's really the subject of this -Okay. I --

objecting to that.

THE COURT: MR. KOGAN: THE COURT: my first reaction.

-- issue. I have bifurcated things, but it's not And

My first inclination, I should say. I don't

as far as I see it, there's a lot of discretion.
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know that there's any law that says I have to do it that way or any -- so you got an uphill battle, but I'm keeping an open mind. MR. KOGAN: issues -THE COURT: MR. KOGAN: Yes. -- for a moment? Your Honor, can I proceed to my

With regard to the protective order, I think we're going to be able to work that out and if we -- we had one distinction that I would like to make -- counsel and I have only disagreed about one item. The commercially sensitive

documents, counsel wanted them to be attorney's eyes only. I have some concerns with regard to personal banking records. I understand that.

But at the same time, his clients' business records -- in order for me to analyze the business records in their entirety, I have to look at his clients' personal business records because there's so much commingling. it's his clients' -THE COURT: MR. KOGAN: THE COURT: Personal records. I'm sorry -You got to look at the personal No,

banking records and the business banking records -MR. KOGAN: THE COURT: In order to have the complete picture. -- together.
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MR. KOGAN:

Correct.

And I need to be able to

review that with my client.

So if we mark that commercially

sensitive, attorney's eyes only, I don't get to review that with my clients. And I need that in -- because that is -- those are the business records. records with my client. case. THE COURT: If we're going to be redacting things I can't not review the business It hampers my preparation of the

so the personal banking records are not going to reflect a timeshare purchase in Boca or whatever -MR. KOGAN: THE COURT: business related. Right. You know, it's just going to be

What's the problem? Just business related? I don't

MR. AKSELROD:

have a problem with just business related. MR. KOGAN: Okay.

What --

MR. AKSELROD:

I don't know -- I'm not sure even

what the argument is about since we haven't gotten there yet. MR. KOGAN: Okay -This is just talking about the

MR. AKSELROD:

language of the protective -MR. KOGAN: Right. We haven't had a fight about -203-929-9992

MR. AKSELROD:

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THE COURT:

No, no.

No, no, I think --

MR. AKSELROD: MR. KOGAN:

-- whether some particular --

There was one comment that --- bank record --

MR. AKSELROD: MR. KOGAN:

You made one comment and I'm trying to

resolve that one last comment so we could sign it today. And that's the only thing that's standing in the way of resolving it. If we have -- if we redact the business

records as the Court is proposing, then -THE COURT: MR. KOGAN: Personal records. -- the personal records to take out

anything that's not business related, then you shouldn't have a problem -- it will still constitute commercially sensitive, in essence, but I'd like commercially sensitive materials to be not attorney's eyes only. Commercially

sensitive materials would be -- or at least let's have the -THE COURT: How -I can't speak in the abstract about

MR. AKSELROD:

THE COURT:

Let's carve out --- what is and is not --

MR. AKSELROD: THE COURT:

-- carve -- I wouldn't --

MR. AKSELROD: -- commercially sensitive. THE COURT: I wouldn't do that. I would somehow

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carve out these records -MR. KOGAN: THE COURT: As a separate category, okay. -- as a separate category so you can

show them to your clients in an effort to litigate the case. I mean, so have them as a separate category, maybe. I'm -MR. AKSELROD: I'll tell you -- I mean, just -Maybe

again, I -- these two subjects weren't together in my mind until right now, but I mean, it seems to me like, for example, if in a quote, unquote, you know, personal bank statement income from the business is shown, that to me is not commercially sensitive. You could show that to your client that there was -- you know, that a deposit from the business, whether it's payment, salary, whatever -- for both of us, that's not commercially sensitive, nor is money going out that's business related -MR. KOGAN: You know what? So maybe we need --

MR. AKSELROD: MR. KOGAN:

-- commercially sensitive.

Okay. We'll just talk about it. I --

MR. AKSELROD: MR. KOGAN:

We need to talk about that because -Yes.

MR. AKSELROD: MR. KOGAN:

-- my -- okay. That's not -203-929-9992

MR. AKSELROD:

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MR. KOGAN:

We had a different understanding of

THE COURT: MR. KOGAN:

Okay. -- and I thought that that's what you

were trying to accomplish by -THE COURT: All right. Okay.

MR. AKSELROD: MR. KOGAN: THE COURT: you can't work it out. MR. KOGAN:

-- changing the phrasing. You'll talk and you'll let me know if

The next issue for me was there was an

email list of customers that began -- there was an email list of customers that began in 2002 when my clients started the business. At some point they had tens of thousands of customers on that email list. Later on they had a couple of

hundred thousand customers on that list. There must be records that show that customer list expanding throughout the years. records. I don't have any of those

They have those records, they have the customer

list, and they have whatever records show as it was expanded throughout the years. I don't have that at all. list itself. They have -Is this -203-929-9992

They have the entire

THE COURT:

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MR. KOGAN: THE COURT:

-- documentation on every customer -Is this an issue? Yes, it's a huge issue.

MR. AKSELROD: THE COURT:

Why? This is ground zero for us of This is a -- you

MR. AKSELROD:

confidentiality and business sensitivity.

know, a list of 250,000 customers with emails that obviously I do not -- certainly do not want in Ana Bove's hands, because it certainly has obvious competitive relevance. Discovery relevance, I don't see it. My clients don't want to produce it at all. in business. She's

She has lots of these customers because they

have control of the websites. By the way, this is a repackaging of something they sought and failed to get in the injunction part of the case. Make them give us the list of customers. The court

wouldn't give that. I don't want turning it over, A, because it's sensitive and there's already a history of Ana doing extra judicial things to interfere with our business. things with the -- talked about the eBay store. to do it once before. She's done She tried

I don't want to give her the list for

her to be able to use it competitively. Now, at the end of the day if they win the case, maybe that ends up being hers -Fiore Transcription Service, Inc. 203-929-9992

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THE COURT:

What do you need the --- on the merits.

MR. AKSELROD: THE COURT:

What do you need -I don't know.

MR. AKSELROD: THE COURT: MR. KOGAN:

-- the list for? Like I said, it's not so much the

snapshot of today, it's the list as it evolved throughout the years. They have all those records from the beginning.

In fact, they have records on every single customer and every single purchase from the beginning. It's like the

back-end record for each customer of a retail business. So they -THE COURT: MR. KOGAN: Can --- they have it all and we cannot And

demonstrate how the business had grown without that. they have that -THE COURT: MR. KOGAN: THE COURT: Well --- in its entirety. So --

MR. AKSELROD:

That could be done without -- if

there -- if this is true, and I don't know if technically it's this true, maybe we can proffer the growth -- some type of growth data without giving you the emails of customers. MR. KOGAN: Why would they be entitled to do that

and we would not be entitled to hold back all of our bank
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