Case 9:11-cv-80880-KLR Document 90 Entered on FLSD Docket 06/08/2012 Page 1 of 9

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA QSGI, INC., Plaintiff, v. IBM GLOBAL FINANCING and INTERNATIONAL BUSINESS MACHINES CORPORATION, Defendants.

Case No. 9:11-cv-80880-KLR

IBMS REPLY IN SUPPORT OF IBMS MOTION FOR SANCTIONS FOR FAILURE TO ATTEND A RULE 30(b)(6) DEPOSITION AND INDIVIDUAL DEPOSITION Pursuant to Rule 37 of the Federal Rules of Civil Procedure, International Business Machines Corporation and IBM Global Financing (collectively, Defendants or IBM) submit this reply memorandum in support of their motion for sanctions for QSGIs failure to attend the deposition of its Chief Executive Officer, Marc Sherman (Motion). BACKGROUND IBMs Motion seeks sanctions for QSGIs failure to attend the duly noticed deposition of Mr. Sherman. First, there is no question that IBM provided timely notice of Mr. Shermans deposition in compliance with Local Rule 26.1. QSGI does not dispute that it received written notice of Mr. Shermans deposition eight days prior to the date of the deposition. QSGI also concedes that it received a second written notice seven days prior to the date of the deposition, but it argues (erroneously) that this notice was somehow insufficient because it was received after 5:00 p.m. QSGIs arguments that IBM should bear the expenses associated with Mr. Shermans failure to appear miss the mark. QSGI hypothesizes that an IBM attorney

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already in Miami could have taken Mr. Shermans deposition, presumably obviating certain expenses incurred by IBM. IBM is entitled to choose its representation and divide responsibility for depositions among different attorneys (as QSGI has also done in this action). IBMs expenses in this regard are therefore entirely reasonable. QSGI also suggests that its recent, untimely document production on May 10, 2012 would have made another deposition of Mr. Sherman inevitable. Even if true, this fact would be irrelevant to the reasonable expenses already incurred by IBM. In any event, QSGI should not be permitted to benefit from its continuing disregard for its discovery obligations. QSGI should have provided complete discovery responses, including complete document production, by April 2, 2012, in compliance with Magistrate Judge Vitunacs March 16, 2012 Order. QSGIs May 10, 2012 production violated this Order. Moreover, QSGI continues willfully to violate this Order through its failure to complete its document production or provide complete responses to IBMs interrogatories. Accordingly, pursuant to Federal Rule 37, QSGIs payment of IBMs reasonable expenses is the just result. ARGUMENT A. QSGI DOES NOT CONTEST TIMELY NOTICE.

QSGI does not dispute that it twice received written notice of the deposition of Mr. Sherman at least seven days prior to Mr. Shermans May 8, 2012 deposition. See S.D. Fla. L.R. 26.1(i) (requiring seven (7) days notice in writing of a deposition upon oral examination to take place in Florida). IBM provided proper written notice eight days in advance of the May 8 deposition in its April 30 email. (Mot., May 15, 2012, Declaration of Benjamin H. Diessel (May 15, 2012, Diessel Decl.), Ex. 15 (May

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16, 2012, ECF No. 81-2).) QSGI does not contest its receipt or the validity of this notice, and thus has conceded proper notice. Moreover, QSGI admits that it received a second notice on May 1, seven days in advance of the May 8 deposition. This notice, too, complied with Local Rule 26.1. Contrary to QSGIs argument, it is irrelevant that QSGI received the May 1 notice after 5:00 p.m. (See Pls. Resp. to Defs. Mot. for Sanctions for Failure to Attend a Rule 30(b)(6) Dep. and Individual Dep. (Opposition), at 2-3 (May 29, 2012, ECF No. 87) (conceding that the [Local] Rule does not specifically impose a 5:00 PM deadline . . . .).) Both of these notices meet the letter and spirit of the Local Rule, and QSGIs subsequent failure to attend Mr. Shermans deposition warrants sanctions.1 See Samadi v. Bank of Am., N.A., No. 11-13561, 2012 WL 1128697, at *1 (11th Cir. Apr. 4, 2012). B. QSGI SHOULD PAY IBMS REASONABLE EXPENSES.

Where, as here, a party presents no argument that its failure to attend was justified or its payment of expenses would be unjust, payment of reasonable expenses is required under the Federal Rules. Fed. R. Civ. P. 37(d)(3) (stating that the court must require the party failing to act, the attorney advising that party, or both to pay the reasonable expenses, including attorneys fees, caused by the failure [to appear for a deposition], unless the failure was substantially justified or other circumstances make an award of

QSGIs argument that IBMs notice somehow does not meet the spirit of the Local Rules is entirely without basis. See Opp. at 2-3. IBM cooperated with and accommodated QSGI by noticing Mr. Shermans deposition for May 8, 2012a date provided by QSGI. See May 15, 2012, Diessel Decl., Ex. 13 (Mr. Sherman is available for deposition the week of May 7, 2012 (i.e., including May 8)). QSGIs contention on this score that cooperation and civility is a concept foreign to IBMs counsel, see Opp. at 2, is a particularly surprising assertion, since the courtesy of a phone call or email from QSGIs counsel prior to IBMs counsel traveling to Miami for Mr. Shermans deposition would have obviated this motion.

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expenses unjust); see also Perry v. Modern Hometech, Inc., No. 6:07-cv-1755-Orl19KRS, 2009 WL 1140121, at *2 (M.D. Fla. Apr. 28, 2009). QSGIs arguments that IBM should nevertheless bear the cost of QSGIs failure to attend this duly noticed deposition are without merit. QSGI first contends that an attorney for IBM already present in Miami could have deposed Mr. Sherman, presumably obviating certain travel expenses incurred by IBM. There is no basis for this argument. IBM has the right to choose its representation. Dividing responsibility for different depositions among different attorneys is hardly unreasonable, especially in an antitrust lawsuit such as this one, in which QSGI purports to seek millions of dollars in alleged damages. QSGI has likewise divided responsibility for depositions among a number of different attorneys.2 IBMs expenses are therefore reasonable. QSGI also suggests that it should not be ordered to pay IBMs expenses because IBM purportedly would have sought another deposition of Mr. Sherman due to QSGIs recent, untimely document production. This argument is equally unavailing. Whether IBM would have sought another deposition of Mr. Sherman is entirely irrelevant to the issue of whether QSGI should be responsible for the reasonable expenses already incurred by IBM for QSGIs failure to attend Mr. Shermans deposition. IBM properly noticed Mr. Shermans deposition; QSGI, Mr. Sherman and counsel failed to appear; and QSGI has provided no legitimate reason for its failure. IBM is entitled to sanctions.

Specifically, Juan Bauta, Case Dam, David Finger and Amanda Kessler have made appearances on behalf of QSGI at the five depositions conducted thus far in this matter.

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Moreover, QSGI should not benefit from its repeated violations of court orders and evasions of its discovery obligations, including its untimely document production.3 After QSGIs and Mr. Shermans failure to appear at the May 8 deposition, IBM sought to reschedule the deposition, and agreed with QSGI to set May 21, 2012 as the new date. (June 8, 2012, Declaration of Benjamin H. Diessel (June 8, 2012, Diessel Decl.) 4.) Subsequent to that agreement, on May 10, QSGI belatedly produced a large volume of its documents,4 in violation of Magistrate Judge Vitunacs March 16, 2012 Order. (Id. 3,
3

QSGI filed this action in August 2011. IBM served document requests and interrogatories in November and December 2011, respectively. IBM agreed in good faith to five extensions for QSGI to respond to these discovery requests. Each time, QSGI ignored the extended deadlines, forcing IBM to seek relief from the Court. See Mot. to Compel Pl.s Resps. to Defs. Disc. Reqs. and Mem. of Law in Supp. of Defs. Mot. (Feb. 15, 2012, ECF No. 40); Reply in Supp. of Mot. to Compel Pl.s Resps. to Defs. Disc. Reqs. (March 12, 2012, ECF No. 44). The Court ordered QSGI to provide complete document production and written responses to the interrogatories by April 2, 2012. See March 16, 2012 Order (March 16, 2012, ECF No. 50). QSGI failed to do either, forcing IBM to again seek relief from the Court. See IBMs Mot. to Compel Compliance with March 16, 2012 Order and for Sanctions for Noncompliance (May 1, 2012, ECF No. 64); IBMs Reply in Supp. of Its Mot. to Compel Compliance with March 16, 2012 Order and for Sanctions for Noncompliance (May 11, 2012, ECF No. 77). The Court again ordered QSGI to complete its production and completely respond to IBMs interrogatories by June 4, 2012. See May 22, 2012 Order at 2-3 (May 22, 2012, ECF No. 85) (noting the Courts frustrat[ion] with QSGIs inaction concerning its discovery obligations and admonishing QSGI that it would be sanctioned if QSGI fail[ed] to comply with this Order). QSGI failed to do either by June 4, and now is in willful violation of these Orders. See Pl.s Objs. to Magistrate Judge Ann E. Vitunacs Order, Dated May 22, 2012, on Defs. Mot. to Compel at 13-17 (June 4, 2012, ECF No. 88) (admitting failure to complete review and production of documents and refusing completely to respond to the interrogatories on the purported basis that QSGI has not had an opportunity to review its documents yet).
4

QSGI mischaracterizes this belated production as documents from Third Party McDonald Hopkins. See Opp. at 3. McDonald Hopkins is QSGIs SEC counsel. The documents it possessed are QSGIs documents and have at all relevant times been in QSGIs custody and control. See Mar. 12, 2012 Rule 30(b)(6) Dep. of Marc Sherman, June 8, 2012, Diessel Decl., Ex. 1, at 169:18-23 (Q. So other than these documents that you selected and sent to Mr. Bauta, is it true that QSGI does not have any documents other than those in the possession of McDonald Hopkins . . . A. That would be correct.); see also Jans v. The GAP Stores, Inc., No. 6:05-cv1534-Orl-31JGG, 2006 WL 2691800, at *1-3 (M.D. Fla. Sept. 20, 2006) (ordering documents within the possession of a partys counsel produced because those documents are within control of the party). These documents were received by IBMs local counsel on Friday, May 11, 2012, who further sent these documents to Cravaths offices for receipt on Monday, May 14, 2012. June 8, 2012, Diessel Decl. 5. Due to the noncompliant production format, it took IBM several days thereafter to determine the quantity and contents of this production. Id. 6.

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5, 6; see supra n.3.) IBM then sought to reschedule Mr. Shermans deposition so that, in the interest of efficiency for all concerned, IBM could review these newly-produced documents prior to Mr. Shermans deposition. (June 8, 2012, Diessel Decl. 7.) IBM should not be penalized for choosing to do the rational, reasonable thing here. QSGI should not be permitted to use its untimely document production, the latest in a string of discovery abuses, as a reason to avoid reimbursing IBM for expenses it reasonably incurred in connection with QSGIs failure to attend a duly noticed deposition. CONCLUSION For the foregoing reasons, IBM respectfully requests that the Court grant IBMs motion for sanctions and order QSGI to pay IBMs reasonable expenses and attorneys fees.

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Dated: June 8, 2012 Respectfully submitted, /s/ Laura Besvinick Laura Besvinick Florida Bar No. 391158 HOGAN LOVELLS US LLP 200 South Biscayne Blvd. Suite 400 Miami, FL 33131 Telephone: 305-459-6500 Facsimile: 305-459-6550 laura.besvinick@HoganLovells.com Evan R. Chesler* Richard J. Stark* Teena-Ann V. Sankoorikal* CRAVATH, SWAINE & MOORE LLP Worldwide Plaza 825 Eighth Avenue New York, NY 10019 Telephone: 212-474-1000 Facsimile: 212-474-3700 echesler@cravath.com rstark@cravath.com tsankoorikal@cravath.com Ty Cobb* Eric J. Stock* HOGAN LOVELLS US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 Telephone: 202-637-5600 Facsimile: 202-637-5910 Ty.Cobb@HoganLovells.com Eric.Stock@HoganLovells.com *Admitted Pro Hac Vice Counsel for Defendants IBM Global Financing and International Business Machines Corporation

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on this 8th day of June 2012, I electronically filed the foregoing document with the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served this day on all counsel of record or pro se parties identified on the attached Service List in the manner specified, either via transmission of Notices of Electronic Filing generated by CM/ECF or in some other authorized manner for those counsel or parties who are not authorized to receive electronically Notices of Electronic Filing.

/s/ Laura Besvinick

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QSGI, INC. SERVICE LIST Juan Pablo Bauta, II Ferraro Law Firm 4000 Ponce de Leon Blvd Suite 700 Miami, FL 33146 Phone: 305-375-0111 Fax: 305-379-6222 Case A. Dam Ferraro Law Firm 4000 Ponce de Leon Blvd Suite 700 Miami, FL 33146 Phone: 305-375-0111 Fax: 305-379-6222 Email: cxd@ferrarolaw.com

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA QSGI, INC., Plaintiff, v. IBM GLOBAL FINANCING and INTERNATIONAL BUSINESS MACHINES CORPORATION, Defendants.

Case No. 9:11-cv-80880-KLR

DECLARATION OF BENJAMIN H. DIESSEL Benjamin H. Diessel, declares as follows: 1. I am an attorney at the law firm of Cravath, Swaine & Moore LLP,

and counsel to Defendants IBM Global Financing and International Business Machines Corporation (collectively, Defendants or IBM) in the above-captioned action. I submit this declaration in support of IBMs Reply in Support of IBMs Motion for Sanctions for Failure to Attend a Rule 30(b)(6) Deposition and Individual Deposition. 2. Attached as Exhibit 1 is a true and correct copy of excerpts from

the transcript of the March 12, 2012 Rule 30(b)(6) deposition of Marc Sherman. 3. On April 5, 2012, after the Courts April 2, 2012 deadline for

completion of QSGIs document production, QSGI produced documents to IBM. On April 11, 2012, IBM sent a letter to QSGI that memorialized this untimely production and asked QSGI to clarify whether it had completed its production of documents. QSGI did not respond to this letter. 4. On May 8, 2012, following QSGIs and Mr. Shermans failure to

attend the May 8, 2012 deposition, I spoke with QSGIs counsel to reschedule this

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deposition. We agreed that Mr. Shermans deposition would be rescheduled for May 21, 2012. 5. On May 10, 2012, QSGI sent a hard drive containing a document

production to Hogan Lovells US LLP (Hogan), IBMs local counsel in Miami. This production was received by Hogan on Friday, May 11, 2012. Hogan in turn sent the hard drive to the offices of Cravath, Swaine & Moore LLP, who received the hard drive containing the document production on Monday, May 14, 2012. 6. Because QSGI produced this document production in a format

noncompliant with the parties agreement concerning Electronically Stored Information, IBM and its document vendor spent several days determining the contents and quantity of this document production. IBM determined that this document production comprises the majority of QSGIs electronic document production in this action. 7. Following IBMs analysis of this document production and its

determination that it comprises a substantial volume of documents, IBM engaged QSGI concerning Mr. Shermans deposition. In an email dated May 16, 2012, IBM requested that Mr. Shermans deposition be rescheduled from May 21, 2012, to a later date so that IBM could review QSGIs recent document production. In the alternative, IBM offered to go forward with Mr. Shermans deposition on May 21, 2012, if QSGI agreed to continue the deposition after IBM reviewed the document production. QSGI

-2-

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Case 9:11-cv-80880-KLR Document 90-2 Entered on FLSD Docket 06/08/2012 Page 1 of 5

EXHIBIT 1

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In The Matter Of:

QSGI, INC., et al. v. IBM GLOBAL FINANCING, et al.

___________________________________________________

MARC SHERMAN Vol. 1

March 12, 2012
___________________________________________________

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MARC SHERMAN - 3/12/2012 Page 168 1 2 3 4 15:02:07 5 6 7 8 9 15:02:23 10 11 12 13 14 15:02:31 15 16 17 18 19 15:02:49 20 21 22 23 24 15:03:03 25
A. Q. answers. Q. Does QSGI have any documents other than

those in the possession of McDonald Hopkins? A. as well. Q. A. What documents does Juan have? Juan sent me over -MR. BAUTA: Let me tell you don't tell him Well, there are some documents that Juan has

anything, any conversations you and I have had. We still have attorney-client here remember. Okay? THE WITNESS: Yep.

To be clear, I obviously don't want those That's not what I want to know. What documents does Juan have? Just as part of the discovery there are

things that he asked me to provide to him that I have sent. Q. to him? MR. BAUTA: Well, I'm going to ask you to Without What categories of documents have you sent

define for him what "categories" means. that he is going to become very close to

disclosing something that he shouldn't, and rather than instruct him not to answer it at all, I'm going to give you a chance to fix it.

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MARC SHERMAN - 3/12/2012 Page 169 1 2 3 4 15:03:26 5 6 7 8 9 15:03:55 10 11 12 13 14 15:04:07 15 16 17 18 19 15:04:23 20 21 22 23 24 15:04:38 25
A. Q. Q. The documents that you sent to Mr. Bauta, do

you know how many documents that set comprised? A. Q. I don't off the top of my head. What sources -- where did you find those

documents? A. I had some PowerPoint presentations sitting

around my office, I had some documents that were in an old credenza that I had sitting from some conference calls. Q. A. Q. Was it greater than a hundred documents? No. So other than these documents -- would it be

accurate to say that you individually selected these and provided them to Mr. Bauta? A. I had to look through some things that I had

hanging around my office, and I found them and I sent them off to him. Q. So other than these documents that you

selected and sent to Mr. Bauta, is it true that QSGI does not have any documents other than those in the possession of McDonald Hopkins? MR. BAUTA: Objection to the form.

That would be correct. So the next sentence of the response states,

"McDonald Hopkins, LLC, who is most familiar with

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MARC SHERMAN - 3/12/2012 Page 170 1 2 3 4 15:04:53 5 6 7 8 9 15:05:01 10 11 12 13 14 15:05:16 15 16 17 18 19 15:05:29 20 21 22 23 24 15:05:39 25
A. Q. the universe of QSGI documents, informed Plaintiff's counsel that the Firm possessed approximately 400 gigabytes of documents in its database and approximately 400 bankers boxes of additional documents in a warehouse located in New Jersey." Do you see that? Um-hm. Now, the 400 boxes, those are the boxes that

were produced to the SEC, correct? A. Q. I assume so, yes. Do you have an understanding as to what the

400 gigabytes of documents are? A. Q. I have no idea. Would it be accurate that these

400 gigabytes of documents are the only QSGI documents that exist presently? MR. BAUTA: Objection to form. No

speculating, please. A. Q. Please repeat the question. Yeah. Is it true that -- is it the case

that these 400 gigabytes of documents in the database are the only QSGI documents that presently exist? A. Q. I don't know. Do you know of any other documents that

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