Creative Mobile Technologies, LLC. v. Verifone Systems, Inc. et al

Filing 44

MEMORANDUM AND ORDER: For the foregoing reasons, the plaintiff's application to compel production of documents is denied and the defendants' is granted. The plaintiffs are directed to produce promptly documents responsive to the defendants& #039; Request for Documents No. 29 in compliance with the October 24 Order. All discovery deadlines are extended by 30 days: fact discovery will be completed by March 3, 2014; initial expert reports and related materials exchanged by April 1, 2014; r ebuttal expert reports and related materials exchanged by April 30, 2014; all expert discovery completed by May 30, 2014. (Expert Discovery due by 5/30/2014, Fact Discovery due by 3/3/2014.) (Signed by Magistrate Judge James C. Francis on 2/4/2014) Copies Mailed By Chambers. (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
CREATIVE MOBILE TECHNOLOGIES, LLC : 13 Civ. 0349 (MMB) (JCF)
:
Plaintiff,
:
MEMORANDUM
:
AND ORDER
- against :
:
VERIFONE SYSTEMS, INC. and
:
VERIFONE MEDIA, LLC, d/b/a
:
VERIFONE MEDIA SOLUTIONS, f/k/a
:
CLEAR CHANNEL TAXI MEDIA, LLC,
:
:
Defendants.
:
- - - - - - - - - - - - - - - - - -:
VERIFONE MEDIA, LLC and VERIFONE
:
SYSTEMS, INC.,
:
:
Counter Claimant,
:
:
- against :
:
CREATIVE MOBILE TECHNOLOGY, LLC,
:
:
Counter Defendant. :
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
This

action

concerns

an

agreement

related

to

sales

of

advertising on Passenger Information Monitors (“PIMs”) in taxicabs.
At issue in the discovery application brought by plaintiff Creative
Mobile Technologies, LLC (“Creative Mobile”) are revenue documents
of defendant VeriFone Media Solutions (“VeriFone Media”), its
affiliate

VeriFone

Transportation

Services,

Inc.

(“VeriFone

Transportation”), and their parent company, defendant VeriFone
Systems, Inc. (“VeriFone”).

The defendants, for their part, seek

to compel the plaintiff to produce revenue documents connected with
the launch of the relevant technology in certain markets other than
New York.

For the reasons that follow, the plaintiff’s request is
1

denied and the defendants’ application is granted.
Background
According to the Complaint, Creative Mobile entered into a
Sales Representation Agreement (the “Agreement”) with the Clear
Channel Taxi Media, LLC (“Clear Channel”), the predecessor to
VeriFone Media, pursuant to which Creative Mobile would develop the
necessary technology for the PIMs and install up to 5,000 screens
in New York City taxis, while Clear Channel would be the exclusive
seller of advertisements on those screens. (Complaint (“Compl.”),
attached as Exh. A to Notice of Removal, ¶¶ 1-2, 7).

In return,

Clear Channel agreed to pay Creative Mobile a monthly amount for
each installed screen, to share revenues from the advertising on
Creative Mobile’s screens once a certain amount of revenue was
reached, and to share revenue derived from its placement of
advertising on screens not installed by Creative Mobile.

(Compl.,

¶¶ 8-9).

In addition, the parties promised that, should either

have

opportunity

the

to

develop

or

participate

in

similar

advertising in markets outside of New York City, the other would
have a right of first refusal to partner in the enterprise.
(Compl., ¶ 10).

Creative Mobile asserts that the provision for

revenue-sharing on non-Creative Mobile screens survives termination
of the Agreement.

(Letter of John L. Gardiner dated Dec. 20, 2013

(“Pl. Memo.”) at 1-2).
The plaintiff alleges that, after Clear Channel was purchased
by VeriFone -- Creative Mobile’s “primary competitor for in-taxi
technology in New York City” -- and renamed VeriFone Media, the
2

defendants breached the Agreement by “refus[ing] to supply data and
information necessary to enable [Creative Media] to calculate the
amounts due under the Agreement,” “plac[ing] advertisements on non[Creative Mobile] screens without paying [] the revenues [VeriFone
Media] had agreed to share,” and “plac[ing] advertisements in
taxicabs using similar technology, outside of New York City,
without first offering the opportunity to [Creative Mobile].”
(Compl., ¶¶ 14, 17).
Since the filing of Creative Mobile’s letter motion to compel,
its application has narrowed considerably.

In the dispute that

remains, Creative Mobile demands production of VeriFone’s, VeriFone
Media’s, and VeriFone Transportation’s “books and records for
January 1, 2010 through the present as they relate to the placement
of ads on [VeriFone Transportation’s] PIMs in New York City.”
(Letter of John L. Gardiner dated Jan. 21, 2014 (“Reply”) at 8;
Letter of Orin Snyder dated Jan. 24, 2014 (“Sur-reply”), at 1-2).
The plaintiff argues it needs these documents to conduct a forensic
audit, necessitated by the defendants’ “manipulation of revenue
recognition” -- specifically, a practice of recognizing revenue
from placement of advertisements on non-Creative Mobile PIMs not at
VeriFone Media, but rather at VeriFone Transportation, which is
neither a party to the Agreement nor a party in this action.

(Pl.

Memo. at 8-9; Reply at 8-9).
The defendants assert that Creative Mobile is not abiding by
a prior discovery order, which ruled that the defendants “are
entitled to documents that will allow them to contest plaintiff’s
3

capability of exercising the right of first refusal and providing
in-taxi media services outside of New York” (Order dated October
24, 2013 (“October 24 Order”) at 2), because it has agreed to
produce only documents “sufficient to demonstrate that [Creative
Mobile] was financially capable and/or technologically capable of
launching similar Technology.”1

(Plaintiff/Counterclaim-Defendant

Creative Mobile Technologies, LLC’s Responses and Objections to
Defendants’ Second Set of Document Requests (“Pl. Responses”),
attached as Exh. C to Def. Memo., at 4; Def. Memo. at 8; Reply at
11).
Discussion
A.

Books and Records

Generally, “[p]arties may obtain discovery regarding any
nonprivileged matter that is relevant to any party’s claim or
defense.”

Fed. R. Civ. P. 26(b)(1).

relevance,

for

concept.”

purposes

of

discovery,

“Although not unlimited,
is

an

extremely

broad

Condit v. Dunne, 225 F.R.D. 100, 105 (S.D.N.Y. 2004);

see also Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351
(1978).

“Relevant information need not be admissible at the trial

if the discovery appears reasonably calculated to lead to the
discovery of admissible evidence.”
1

Fed. R. Civ. P. 26(b)(1).

The

The defendants also contend that, although Creative Mobile
“agreed to run search terms to produce documents in response to
[the defendants’] Request [for Documents] No. 28, it has not yet
produced a single responsive document.” (Letter of Orin Snyder
dated Jan. 6, 2014 (“Def. Memo.”), at 8). In response, Creative
Mobile asserts that it is completing its review of documents in
response to the document request, and expects its rolling
production to be complete by February 4, 2014. (Reply at 10-11).
I therefore assume that this dispute is moot.
4

burden

of

demonstrating

discovery.

relevance

is

on

the

party

seeking

See, e.g., Mandell v. The Maxon Co., No. 06 Civ. 460,

2007 WL 3022552, at *1 (S.D.N.Y. Oct. 16, 2007).
Once relevance has been shown, it is up to the responding
party to justify curtailing discovery.

AIU Insurance Co. v. TIG

Insurance Co., No. 07 Civ. 7052, 2008 WL 5062030, at *9 (S.D.N.Y.
Nov. 25, 2008) (citing Condit, 225 F.R.D. at 106).

“[T]he court

must limit the frequency or extent of discovery” when:
(i) the discovery sought is unreasonably cumulative or
duplicative, or can be obtained from some other source
that is more convenient, less burdensome, or less
expensive;
(ii) the party seeking discovery has had ample
opportunity to obtain the information by discovery in the
action; or
(iii) the burden or expense of the proposed discovery
outweighs its likely benefit, considering the needs of
the case, the amount in controversy, the parties’
resources, the importance of the issues at stake in the
action, and the importance of the discovery in resolving
the issues.
Fed. R. Civ. P. 26(b)(2)(C).
There is no question that the books and records requested are
relevant, and the defendants do not appear to argue otherwise.
Instead, they charge that the request is overbroad and duplicative,
and

that

the

deposition.

information

requested

can

be

(Def. Memo. at 5; Sur-reply at 1-2).

obtained
I agree.

through
As the

defendants point out, they have produced “a comprehensive and
detailed Financial Spreadsheet that provides all of the information
relevant

to

[Creative

Mobile’s]

alleged

damages,”

including

VeriFone Transportation’s digital advertising revenue. (Def. Memo.
5

at 4; Sur-reply at 2).
(or

agreed

to

In addition, the defendants have produced

produce)

“thousands

of

supporting

advertising

contracts,” which will “provide the backup for these revenue
figures” by showing “how much money each advertiser agreed to pay
for every advertisement placed by [VeriFone Media] on non-party
[VeriFone Transportation’s] PIMs.”

(Sur-reply at 1-2).

Questions

regarding the reason that such revenue was booked at VeriFone
Transportation can be posed during deposition.

(Sur-reply at 1).

There is no need for Creative Mobile to examine years of the books
and

records

of

the

defendants

and

non-party

VeriFone

Transportation.
B.

Right of First Refusal

As noted above, in response to my October 24 Order finding
that the defendants are entitled to documents that will allow them
to challenge whether Creative Mobile had the capacity to exercise
the right of first refusal, the plaintiff has agreed to produce
documents “sufficient to demonstrate that [Creative Mobile] was
financially capable and/or technologically capable of launching
similar Technology” in specified markets.

(Pl. Responses at 4).

Creative Mobile contends that this “proposal is in accordance with
the Order.”

(Reply at 11).

The plaintiff is mistaken.
test

whether

Creative

Mobile

The defendants must be able to
was

capable

of

partnering

with

VeriFone Media in launching PIM technology in markets other than
New York City.

The plaintiff’s proposal, as written, will not

provide the defendants with the tools to do that. Instead, it will
6

limit

discovery to only those

Mobile's

position that

documents

it was,

indeed,

that

support

capable

of

Creative

doing

so.

Creative Mobile cannot limit its production in such a manner.
plaintiff

must

comply with

the

October

24

Order

The

in producing

documents in response to the defendants' Request for Documents No.
29.
Conclusion
For the

foregoing

reasons,

the plaintiff's application to

compel production of documents is denied and the defendants'
granted.

is

The plaintiffs are directed to produce promptly documents

responsive

to the defendants'

Request

compliance with the October 24 Order.

for Documents No.

29

in

All discovery deadlines are

extended by 30 days: fact discovery will be completed by March 3,
2014;

initial expert reports and related materials exchanged by

April

1,

2014;

rebuttal

expert

reports

and

related

materials

exchanged by April 30, 2014; all expert discovery completed by May
30, 2014.

SO ORDERED.

JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
Dated: New York, New York
February 4, 2014

7

Copies mailed this date to:
John L. Gardiner, Esq.

Skadden,
, Slate, Meagher & Flom, L.L.P.

4 Times Square

New York, NY 10036

Orin Snyder, Esq.

Gibson Dunn & Crutcher, LLP

200 Park Avenue, 48th Floor

New York, NY 10166

8