ASI, Inc. v. Aquawood, LLC

Background

ASI, Inc., formerly known as Aviva Sports, Inc., brought an action against Manley Toys, Ltd., alleging that several defendants operating as a Racketeer Influenced and Corrupt Organizations Act enterprise engaged in fraudulent transfers to avoid paying a judgment owed to ASI. ASI also alleged that an overlapping group of defendants were alter egos of one another.

The court appointed a special master to oversee discovery. The special master substantially adopted ASI’s proposed discovery schedule in a Third Amended Scheduling Order. Defendants objected to deadlines requiring production of general ledgers, bank statements, tax records, and the Manley email server. They also objected to the absence of a deadline concerning search terms.

Financial records

ASI had requested tax records, general ledgers, and bank statements from defendants. In an earlier discovery ruling, the court ordered Aquawood to produce its bank statements and tax returns. The court emphasized that this earlier order did not address the other defendants, and ASI had not moved to compel those records from the other defendants.

The special master’s scheduling order stated that “all Defendants” had to produce ledgers, bank statements, and tax records. The court held that the special master had authority to require all defendants to produce those records, but it was unclear whether the special master intended the scheduling order to do so. The court therefore resubmitted defendants’ objections concerning the financial records to the special master for further deliberations and clarification.

Manley email server

The scheduling order also required the Chan Defendants to produce the Manley email server. ASI claimed that Manley’s liquidators told it that the Chan/Hong Kong Defendants had custody of the server. Defendants disputed that assertion and argued that ASI had not supported it before the special master.

The court stated that the record did not show that ASI had moved to compel production of the server in this case. It was also unclear whether the special master had determined that defendants had custody of the server or relevant emails, or whether the special master had considered the parties’ arguments. The court resubmitted defendants’ objections concerning the email server to the special master for further deliberations and clarification, including whether ASI had to file a motion to compel.

Search-term deadlines

Defendants objected to the absence of deadlines for exchanging or establishing search terms. Unlike the other objections, the court found an ample record showing that both the magistrate judge and the special master had heard the parties’ positions on search terms. The magistrate judge had also denied Aquawood’s motion for a protective order concerning that issue.

The court concluded that, where the special master had considered the parties’ arguments and exercised discretion not to include an action in the scheduling order, there was no abuse of discretion. The court therefore denied defendants’ objections to the absence of search-term deadlines.

Disposition

The court ordered that defendants’ objections to producing general ledgers, bank statements, tax records, and the Manley email server were resubmitted to the special master. It denied defendants’ objections to the absence of deadlines for search terms. The order addressed discovery administration and did not decide the underlying allegations about fraudulent transfers or alter-ego liability.