Innovatus Capital Partners, LLC v. Neuman et al

Filing 157

ORDER: terminating 151 Letter Motion for Local Rule 37.2 Conference. The issues in Innovatus ' s March 3, 2021 Letter and MV Realty's March 8 Response have been carefully considered and should be approached as follows : Innovatus's providing "a clear and meaningful response to the pending interrogatory (which is due on March 15) to identify the 'material' discussed in the Court 's February 11 Order ; it will finally start producing documents regarding its ow n pursuit of RTLs ; and it will answer the Requests for Admissions discussed above without further delay. In addition, it will allow MV Realty to complete its production, and to review the Stifel documents for production, based on the list of methods to be provided by Innovatus on March 15", before Realty is required to proceed further with its production. SO ORDERED. (Signed by Judge Louis L. Stanton on 3/23/2021) (ama)

Case 1:18-cv-04252-LLS Document 157 Filed 03/23/21 Page 1 of 7

IG L ~ ,...
MEMORANDUM ENDORSEMENT

Innovatus Capital Partners , LLC v . Neuman et al .,
(18 Civ . 4252) ; MV Realty , PBC , LLC v . Innovatus Capital
Partners, LLC (18 Civ . 7142)
The issues in Innovatus ' s March 3 , 2021 Letter and MV
Realty's March 8 Response have been carefully considered and
should be approached as follows : Innovatus's providing "a clear
and meaningful response to the pending interrogatory (which is
due on March 15) to identify the ' material ' discussed in the
Court 's February 11 Order ; it will finally start producing
documents regarding its own pursuit of RTLs ; and it will answer
the Requests for Admissions discussed above without further
delay . In addition , it will allow MV Realty to complete its
production , and to review the Stifel documents for production ,
based on the list of methods to be provided by Innovatus on
March 15 ", before Realty is required to proceed further with its
production .
So ordered .
Dated :

New York , New York
March 23 , 2021

b l .j ~
LOUIS L . STANTON
U.S . D. J.

·USDC SON\.
DOCUMENT
ELH TRO\IC\ LL Y FILED
DOC~:

DAT Ef_
lL-E-.D-:_3 / _ _ / 2 J _ z J_ -

Case 1:18-cv-04252-LLS Document 151 Filed 03/03/21 Page 1 of 3
Case 1:18-cv-04252-LLS Document 157 Filed 03/23/21 Page 2 of 7
New York

REITLER

885 Third Avenue, 20 th Floor
New York, NY 10022-4834

REITLER KAILAS & ROSEN BLATT tu'

Tel: [phone]
Fax: [phone]

MEMO ENDORSED

Princeton
5 Vaughn Drive
Princeton, NJ 08540-6313
Tel: [phone]
Fax: [phone]

March 3, 2021

www.reitlerlaw.com

VIA E-FILING
Hon. Louis L. Stanton
United States District Court
Southern District of New York
500 Pearl Street
New York, NY 10007
Re:

Innovatus Capital Partners, LLC v. Neuman, et al., l 8-CV-4252-LLS
MV Realty, PBC, LLC v. Innovatus Capital Partners, LLC, 18-CV-7142-LLS

Dear Judge Stanton:
We are counsel to Innovatus Capital Partners, LLC ("Innovatus"), plaintiff in the first abovereferenced matter and defendant in the second above-referenced matter. I write pursuant to Local
Civil Rule 3 7 .2 to request a pre-motion discovery conference regarding the failure of the MV
Realty Parties 1 to comply with this Court's Memorandum and Order dated December 23, 2020,
which held that Innovatus was entitled to discovery regarding "MV 's methods and profitability."
On January 13, 2020, three weeks after this Court's Memorandum and Order, counsel for the MV
Realty Parties advised Innovatus in writing that it anticipated completing its document production
by February 5, 2021. A copy of counsel's letter of that date is attached hereto as Exhibit A. The
MV Realty Parties have not, in fact, completed their production, although a month has passed since
the date they claimed they would, and are now refusing to produce any documents unless Innovatus
complies with their latest unreasonable demands. There is no basis in law or logic for the position
of the MV Realty Parties.
By Order dated February 11, 2021, this Court directed Innovatus to produce discovery relating to
"the degree, if any, it has used" the materials "generated by Innovatus' efforts ." Innovatus will
fully comply with this Court's Order. However, this Court also held, in that Order, that Innovatus
is entitled to a monetary recovery based on the MV Realty Parties' unjust enrichment from their
use of materials generated by Innovatus. That necessarily requires the MV Realty Parties to
produce documents relating to the extent they have been enriched by their pursuit of RTL
transactions. Capstone Logistics Holdings, Inc. v. Navarretei, at * 17 2018 U.S. Dist. LEXIS
The MV Realty Parties are, collectively, the defendants in the first above-referenced matter and MV Realty,
PBC, LLC, plaintiff in the second above-referenced matter.

268370

Case 1:18-cv-04252-LLS Document 151 Filed 03/03/21 Page 2 of 3
Case 1:18-cv-04252-LLS Document 157 Filed 03/23/21 Page 3 of 7
217876 (S.D.N.Y. Dec. 13, 2018) ("[U]njust enrichment ... restitution [and] disgorgement .. .
remedies are properly measured, in the first instance, by the defendant's net profits enjoyed as a
result of its misconduct.") (citing Restatement (Third) of Restitution and Unjust Enrichment § 5 l
(2011) ("[T]the unjust enrichment of a conscious wrongdoer ... is the net profit attributable to the
underlying wrong.")). The focus of the Court's Orders is on the financial benefit to the MV Realty
Parties, not that of Innovatus, which provided considerable "work, effort, research and thought" to
the MV Realty Parties. Innovatus' financial information has nothing to do with the extent to which
the MV Realty Parties were unjustly enriched by the use of the Confidential Information and
business strategies that Innovatus disclosed to the MV Realty Parties, while the financial
information of the MV Realty Parties is certainly relevant to that determination. It is this discovery
that the MV Realty Parties are improperly refusing to provide, although they have had over two
months to identify and produce such documents, and notwithstanding their prior representation
that they would provide such documentation by February 5, 2021.
Innovatus also seeks a pre-motion conference regarding the failure of two non-party witnesses Stifel, Nicolaus & Company Incorporated ("Stifel") and Realty Holdings USA, LLC ("Realty
Holdings") - to produce any documents in response to Subpoenas Duces Tecum that Innovatus
caused to be served on them. Stifel was served with a Subpoena Duces Tecum in October of 2020,
and served Responses and Objections on November 7, 2020. A copy of Stifel' s Responses and
Objections are attached hereto as Exhibit B. Realty Holdings was served with a Subpoena Duces
Tecum in December of 2020 and served Responses and Objections on January 28, 2021. A copy
of Realty Holdings' Responses and Objections are attached hereto as Exhibit C.
Stifel is a brokerage and investment banking firm which has been retained by the MV Realty
Parties to assist in obtaining financing in connection with the MV Realty Parties' pursuit of RTL
transactions. Accordingly, Stifel has documents relating to the MV Realty Parties' "methods and
profitability," which this Court held to be discoverable in its Memorandum and Order dated
December 23, 2020. Stifel has advised us that they have identified documents responsive to
Innovatus' Subpoena Duces Tecum, and that they have provided such documents to counsel for
the MV Realty Parties to review for a determination as to whether any documents should be
designated "HIGHLY CONFIDENTIAL" pursuant to the Protective Order entered in this case.
We understand that the MV Realty Parties have had such documents in their possession since
December. However, they have failed to permit Stifel to produce any documents responsive to
the subpoena duces tecum. It is beyond time for such documents to be produced by Stifel.
Innovatus also seeks production of RTL transaction documents from Realty Holdings, which has
refused to produce even a single document in response to Innovatus' subpoena duces tecum.
Realty Holdings is the entity created by Steven Daum. The MV Realty Parties have repeatedly
claimed in this case that Mr. Daum and his entities have engaged in RTL transactions since before
Innovatus and the MV Realty Parties began working together in 2017. Mr. Daum's efforts were
the primary factor raised by the MV Realty Parties in their motion for summary judgment. The
MV Realty Parties even introduced an affidavit from a Realty Holdings ' Vice President in support
of that motion, which was largely denied by this Court in its Memorandum and Order dated
December 23, 2020.
In that same Memorandum and Order, this Court held that adjudication of Innovatus' claims in
these cases "may require a comparison of MV 's methods and profitability with those transacting
the other 'thousands of RTL transactions with homeowners around the country' (Def.'s moving

Document 151
03/03/21 Pag e 3 3
Case 1:18-cv-04252-LLS Document 157 Filed 03/23/21 Page 4 of 7

brief, p.14)," a clear reference to Mr. Daum's efforts. A copy of the relevant pages from the MV
Realty Parties' moving brief, cited by this Court, is attached hereto as Exhibit D. As is plain from
the relevant pages of the MV Realty Parties' brief, this Court was not referring to Innovatus in its
reference to page 14 of that brief.
Despite the clear directive from the Court regarding the relevancy of Realty Holdings' efforts to
market RTL contracts, and despite the fact that a copy of this Court's Memorandum and Order has
been provided to counsel for Realty Holdings, Realty Holdings has refused to produce any
documents in response to the Subpoena Duces Tecum served by Innovatus. Accordingly,
Innovatus requests that this Court order Realty Holdings to comply with Innovatus' Subpoena
Duces Tecum.

Respectfully submitted,

Isl Edward P. Grosz
Edward P. Grosz
cc:

Jason C. Raofield (via e-filing)
Theodore Snyder (Counsel for Stifel) (via e-mail)
Heather Middleton (Counsel for Stifel) (via e-mail)
Gregory Locke (Counsel for Realty Holdings) (via e-mail)

Case 1:18-cv-04252-LLS Document 152 Filed 03/08/21 Page 1 of 3
Case 1:18-cv-04252-LLS Document 157 Filed 03/23/21 Page 5 of 7

COVINGTON
BEIJING

BRUSSELS

LOS ANGELES
SHANGHAI

DUBAI

NEW YORK

JOHANNESBURG
SAN FRANCISCO

SILICON VALLEY

LONDON
SEOUL

WASHINGTON

Covington & Burling LLP
One CityCenter
850 Tenth Street, NW
Washington, DC 20001-4956
T [phone]

March 8, 2021
The Honorable Louis L. Stanton
500 Pearl Street, Courtroom 21-C
New York, New York 10007
Re: Innovatus Capital Partners, LLC, v. Neuman et. al. (1:18-cv-04252);

MV Realty, PBC, LLC, v. Innovatus Capital Partners, LLC (1:18-cv07142)
Dear Judge Stanton:
We submit this response to the March 3, 2021 letter from Innovatus (Dkt. 151) requesting
a pre-motion conference regarding the timing of MV Realty's production of documents.
It has been nearly eleven weeks since the Court's summary judgment order, and almost
four weeks since the Court's February 11 discovery order. Whereas MV Realty has produced
hundreds of thousands of pages of documents regarding its RTL business, Innovatus has yet to
produce a single document regarding its independent pursuit of RTLs. Innovatus also continues
to refuse to answer the simple Requests for Admissions we served months ago to establish
whether Innovatus is even using the supposedly valuable methods it claims to have created while
the parties were working together. See Exhibit A, Requests 19-33 (focusing on the methods
identified in Innovatus' written disclosure of Confidential Information, such as "the form of RTL
agreement," "pricing of termination fees," "agents' agreements," "sales pitch or script," "RTL
Completion Checklist," "watermarks" and other confidentiality protocols, etc.). These documents
and Requests for Admissions were the subject of our recent letter motions to the Court, which led
to the February 11 Order directing Innovatus to provide this discovery.

Despite its continued intransigence, Innovatus now complains to the Court that MV Realty
has not yet produced financial information. We told Innovatus that we would produce financial
information, and we have done so today. We look forward to seeing Innovatus' financial
information, because we expect it to show (1) that Innovatus is not using the purportedly valuable
methods itself, and (2) that despite having access to all of those methods, Innovatus has not been
successful. 1
Ignoring both of these points, Innovatus argues only that its financial information is irrelevant to the
entirely separate issue of calculating a restitution remedy. Of course, evidence can be relevant for multiple
reasons. Moreover, Innovatus' argument is based on the Restatement (Third) of Restitution and Unjust
Enrichment, which New York courts have affirmatively and repeatedly declined to adopt. See, e.g., Mortg.
Resolution Servicing, LLC v. JPMorgan Chase Bank, N.A. , No. 15 CV 293-LTS-RWL, 2019 WL 4735387, at
*11 (S.D.N.Y. Sept. 27, 2019) (Rejecting claim for "ill-gotten gains, received at the expense of Plaintiffs"
because "Plaintiffs have proffered no legal foundation for their claim other than their citation of a
Restatement provision that has not been adopted by any New York court."); Hosp . Grp. of Am., Inc. v.
Terrace on the Park, Inc., No. 71386, 1993 WL 127209, at *4 (S.D.N.Y. Apr. 20, 1993) (Rejecting attempt
to recover defendant's profits as unjust enrichment, because "[w]hile this theory might conceivably be
viable under the Restatement.. . New York courts have yet to embrace these sections as law.").
1

Case 1:18-cv-04252-LLS Document 152 Filed 03/08/21 Page 2 of 3
Case 1:18-cv-04252-LLS Document 157 Filed 03/23/21 Page 6 of 7
COVINGTON
March 8,
Page 2

2021

With respect to the directive in the Court's February 11 Order that the parties provide
discovery regarding the "methods both parties have used, and are using, based on the materials
generated by Innovatus' efforts," we have already produced hundreds of thousands of pages of
documents to Innovatus. Our production efforts have focused on the methods identified by
Innovatus in its identification of Confidential Information, and MV Realty has produced
documents corresponding to the items identified by Innovatus (e.g., the form of RTL agreements,
the form of liens, the "sales script," the form of "agent agreements," RTL "confidentiality
protocols," "RTL Checklists," etc.). Innovatus has shown little interest in this evidence, which we
submit is because it shows that MV Realty does not use any of the methods identified by
Innovatus. But we have not stopped there. Innovatus has suggested there may be other methods
it has not yet identified (e.g., methods that are not confidential), and it has at times suggested that
our attempts to distill the methods at issue in this case (based on Innovatus' rambling 21-page
Confidential Information disclosure) is incomplete. At this stage of the litigation, it is critical that
there be no ambiguity or confusion regarding what methods are at issue. Thus, the day after the
February 11 Order, we served an interrogatory asking Innovatus to provide a "list identifying
(separately) each 'method' or other item of 'information' Innovatus furnished to the MV Realty
Parties that was 'generated' by Innovatus based on its 'work, effort, research and thought during
the period the parties worked together." Exhibit B, Request No. 1 (quoting the February 11 Order).
We specifically asked Innovatus to identify that material in a clear and meaningful manner, so
that MV Realty can ensure it has provided all of the discovery required by the Court's February 11
Order. Id. at 7 n.1.
We have told Innovatus that once it provides its response to that interrogatory, which is
now due in a matter of days, we will undertake to complete our production based on Innovatus'
designation of the material it claims to have provided to MV Realty. We have also told Innovatus
that we will review the documents provided by third party Stifel on January 15 (not in December
as Innovatus claims), and that we will not object to the production of any documents by Stifel that
relate to the methods or other information identified by Innovatus. Innovatus has taken a similar
approach with respect to document productions by third parties in response to subpoenas issued
by MV Realty. 2
For Innovatus, the real issue with MV Realty's productions is that the documents show
that MV Realty is pursuing RTLs consistent with the Harrington and Ashenmil patents, and the
disclosures by Daum, and not based on any methods Innovatus claims to have developed when
the parties were working together. The simple fact is that there is no nexus between MV Realty's
activities and the methods purportedly developed by Innovatus. Meanwhile, despite the February
11 Order, Innovatus continues to refuse to provide discovery regarding its own pursuit of RTLs.
We believe that evidence will show that Innovatus is not using those methods itself. We also

Like Stifel, those third parties (one of whom we subpoenaed because it is identified in Innovatus'
Confidential Information disclosure) are subject to a standard contractual obligation permitting Innovatus
to review documents prior to production to determine whether to intervene. On January 19, Innovatus
invoked such a provision with respect to document productions that two separate third parties were
prepared to make to MV Realty. See Exhibits C and D. That was just days after Stifel provided documents
to MV Realty. Innovatus has not yet reviewed the documents provided by those third parties.
2

Case 1:18-cv-04252-LLS Document 152 Filed 03/08/21 Page 3 of 3
Case 1:18-cv-04252-LLS Document 157 Filed 03/23/21 Page 7 of 7

COVINGTON
March 8, 2021
Page3

believe the evidence will show that, even if Innovatus is using some of those methods, it is not
having success. That will provide powerful confirmation that MV Realty's success is not
attributable to any methods supposedly developed by Innovatus.3
The time has come for Innovatus to either prosecute its claim or dismiss this case.
Innovatus argued that evidence regarding its own pursuit of RTLs is irrelevant. The Court found
otherwise in a clear and unambiguous order. Yet Innovatus has done not one thing to comply with
that order. If it actually intends to proceed, it will provide a clear and meaningful response to the
pending interrogatory (which is due on March 15) to identify "the material" discussed in the
Court's February 11 Order; it will finally start producing documents regarding its own pursuit of
RTLs; and it will answer the Requests for Admissions discussed above without further delay. In
addition, it will allow MV Realty to complete its production, and to review the Stifel documents
for production, based on the list of methods to be provided by Innovatus on March 15. At that
point, if Innovatus has additional concerns, we stand ready to meet and confer in good faith. That
is precisely why we agreed to Innovatus' request for a significant extension of the discovery
schedule: to permit the parties to proceed with the path for discovery identified by the Court. In
the meantime, there is no reason for Innovatus to be seeking Court intervention on discovery
issues that have not materialized, and which may never materialize.
Sincerely,

s/ Jason C. Raofield
Jason C. Raofield
cc:

Gregory Locke (Counsel for Realty Holdings) (via email)
Theodore Snyder (Counsel for Stifel) (vie email)
Heather Middleton (Counsel for Stifel) (via email)

Oddly, Innovatus insists the Court previously found (sua sponte) that Daum's financial information is
discoverable, but Innovatus' financial information is not discoverable. That makes no sense. To begin with,
in its pre-motion letter, Innovatus explicitly argues that the only financial information that is relevant is
MV Realty's financial information. Dkt. 151 at 1-2. But it then turns around and argues that Daum's financial
information is relevant. Id. at 2-3. Moreover, Innovatus has the supposedly valuable methods, and if its

3

financial information shows it has not had success, clearly those methods are not the reason for MV Realty's

success.