Technology in Partnership, Inc. v. Rudin
1:10-cv-08076
| S.D.N.Y. | Aug 30, 2012Background
- TIP is a closely-held NY company formed to provide computer consulting; Rudin and Baker were TIP’s key figures.
- TIP and Rudin signed (unexecuted) Shareholder Agreement and Rudin signed an Employment Agreement containing arbitration clauses; neither agreement was fully executed but treated as controlling.
- Defendants moved to dismiss on statute of limitations; Accountant Defendants prevailed on 12(b)(6) motion; Rudin Defendants’ motion denied on the arbitration issue in 2011.
- Court ordered Baker to testify about when he learned of the alleged fraud; ordered production of documents, and discovery disclosures by TIP and defendants.
- TIP alleged TIP’s books and records from 1997–2004 were not produced; Rudin defendants later produced a desktop server claimed to be the TIP Server, while TIP claimed it lacked data before 2006.
- Post-discovery, TIP sought sanctions for alleged spoliation and misrepresentation about the TIP Server; court ultimately denied sanctions and denied arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of arbitration | TIP argues defendants waited too long to raise arbitration, causing prejudice. | Rudin Defendants contend timely, after Baker deposition showed arbitration clause validity. | Arbitration not compelled; waiver found due to prolonged litigation and prejudice. |
| Arbitrability of RICO claims | RICO claims fall within arbitration under the clause; disputes should be arbitrated. | Arbitration clause covers claims arising out of the agreements; all defendants’ claims angle through Rudin. | RICO arbitrable for Edward Rudin, but waiver blocked arbitration entirely. |
| Discovery and sanctions under Rule 37 | Rudin Defendants failed to comply with discovery orders; sanctions warranted for spoliation and misrepresentation. | Production complied; server identity and data gaps explained; no sanctions warranted. | Sanctions denied; court found defendants complied with orders to produce records and server evidence. |
Key Cases Cited
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. Supreme Court 1983) (strong federal policy favoring arbitration)
- JLM Indus., Inc. v. Stolt-Nielsen S.A., 387 F.3d 163 (2d Cir. 2004) (arbitrability and scope; doubts resolved in favor of arbitration)
- Cotton v. Slone, 4 F.3d 176 (2d Cir. 1993) (waiver not lightly inferred; factors for waiver)
- Brookridge Funding Corp. v. Nw. Huma. Res., Inc., 170 F. App’x 170 (2d Cir. 2006) (three-factor test for waiver; prejudice paramount)
- La Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 626 F.3d 156 (2d Cir. 2010) (waiver analysis; prejudice from prolonged litigation)
- Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99 (2d Cir. 2002) (sanctions and court’s discretion under Rule 37)