The Loan Source Inc. v. Newity LLC
1:22-cv-01255
D. Del.Jun 25, 2025Check TreatmentDocket
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
THE LOAN SOURCE INC. and THE 1993
STEVEN D. KRAVITZ FAMILY TRUST,
Plaintiffs,
v.
NEWITY LLC and ACAP SME, LLC,
Defendants.
Civil Action No. 22-cv-01255-GBW
ACAP SME, LLC,
Counterclaim Plaintiff,
v.
THE LOAN SOURCE INC. and THE 1993
STEVEN D. KRAVITZ FAMILY TRUST,
Counterclaim Defendants.
MEMORANDUM ORDER
AND NOW, this 25th day of June 2025, having reviewed and considered the respective filings
of Plaintiffs The Loan Source Inc. (“TLS”) and the 1993 Steven D. Kravitz Family Trust (the
“Trust”) (collectively “Plaintiffs”) and Defendants ACAP SME, LLC’s (““ACAP”) and Newity
LLC’s (“Newity”) (collectively “Defendants”) concerning the discovery disputes between the
parties, which have been fully briefed (D.I. 111, D.I. 112), the Court HEREBY ORDERS as
follows:
1. With respect to Plaintiffs’ request to compel Defendants to comply with RFP 19 seeking
documents sufficient to show Defendants’ efforts to settle a lawsuit commenced by the
former employer of Defendants’ executives, the request is GRANTED. Defendants claim
that the documents are “irrelevant.” D.I. 112 at 2. However, as Plaintiffs state, the
information is relevant because the “parties” contract required ACAP to secure SBA [U.S.
Small Business Administration] approval.” D.I. 111 at 2. Since Plaintiffs allege that
Defendants “re-affirmed their obligation to obtain the SBA’s approval” by settling the
ExWorks litigation, it is relevant information if Defendants made any efforts to resolve the
ExWorks litigation. Jd. Defendants further contend that they cannot produce this
information because it is confidential under two Illinois protective orders (D.I. 112 at 2),
but Plaintiffs stipulate that the information can be protected under the protective order in
this case (D.I. 111 at 2). Thus, Defendants must produce documents sufficient to show
their efforts to settle the ExWorks litigation and may designate which information they want
under the protective order in this case.
2. With respect to Plaintiffs’ request to compel Defendants to comply with RFP 26 seeking
documents sufficient to show Defendants’ relationship with Northeast Bank (“NEB”), the
request is GRANTED. The Court accepts Defendants’ contention that “ACAP is not
withholding any documents generated after a reasonable search related to its business with
NEB.” D.I. 112 at 2. However, with respect to Newity, its interactions with NEB are
relevant to “whether NEB treats ACAP and Newity as separate entities.” D.[. 111 at 2.
Thus, Defendant Newity must produce materials sufficient to show its relationship with
NEB. :
3. With respect to Plaintiffs’ request to compel Defendants to comply with RFP 46 seeking
documents and communications between ACAP and Newity regarding their revenue,
distributions, income, profits, and compensation, the request is DENIED as MOOT. The
Court accepts Defendants’ representation that they are not aware of specific documents
“between ACAP and Newity” that have not been produced under the parties’ agreed search
terms. D.I. 112 at 2; see Personal Audio LLC v. Google LLC, 1:17-cv-01751-CFC (D. Del.
Jan. 9, 2025) (denying as moot RFPs where the producing party represents that “after
reasonable searches, it has either not found responsive records or, to the extent it has, it has
produced such [requested] materials”).
4. With respect to Plaintiffs’ request to compel Defendants to comply with RFPs 25 and 28
seeking materials related to Defendants’ servicing costs resulting in the alleged
“overdistribution” of ~$1.3 million to TLS, the request is DENIED. First, ACAP has
already produced an Excel spreadsheet detailing its loan servicing costs. D.I. 111 at 2; D.I.
112 at 2. Second, the backup for the loan servicing costs that Plaintiffs seek, including the
invoices and pay statements, would not be proportional to the needs of the case.
Defendants explain that these documents are “mostly stored with a cloud-based vendor
requiring a human to pull each individual document.” 112 at 3; see D.I. 112, Ex. C
4 1-2 Declaration of Samson Lam, Executive Vice President of Finance for Newity). This
method would take at least 120-160 hours of time for one of the two accounting
professionals (D.I. 112 at 3), and Plaintiffs have not demonstrated a need for these
documents proportional to this burden. Thus, the request is denied because it is out of
proportion to the needs of the case.
5. With respect to Plaintiffs’ request to compel Defendants to comply with Interrogatory No.
10 and describe how they calculated the alleged overdistribution, the request is DENIED.
Interrogatory No. 10 asks Defendants to “[e]xplain the process you used to prepare monthly
Disbursement Statements,” which Defendants answered. D.I. 111-1, Ex. A at 13-14.
Plaintiffs did not request Defendants to describe how they calculated the alleged
overdistribution.
6. With respect to Plaintiffs’ request to compel Defendants to comply with RFPs 10, 15, 16
and 20 seeking documents, communications, and information related to the stock purchase
agreement, the request is GRANTED. Plaintiffs claim that Defendants have not produced
documents “related to their understanding and performance of key provisions of the [stock □
purchase agreement] in dispute.” DJ. 111 at 3. In their answering brief, Defendants did
not state whether they have produced these documents. Thus, to the extent that they have
not done so, Defendants must produce the documents, communications, and information
related to the stock purchase agreement.
7. With respect to Plaintiffs’ request to compel Defendants to supplement Interrogatories 4,
5, and 8, the request is DENIED. Plaintiffs claim that Defendants have not identified
documents as part of their responses to these Interrogatories. However, Defendants did
identify documents by bates label in its response to these Interrogatories. D.I. 112 at 3;
D.L. 111-1, Ex. A at 10-13.
8. With respect to Plaintiffs’ request to compel Defendants to comply with RFPs 28, 31-39,
44, 45, and 48 seeking documents and communications relevant to the relationship between
ACAP and Newity, the request is GRANTED. Defendants assert that the Court should
reject this discovery request because “Plaintiffs newly argue that ACAP and Newity are
‘alter egos’ and not the same entity, the grounds on which this Court denied Newity’s
motion to dismiss.” D.J. 112 at 3 (emphasis removed). This assertion is without merit.
Defendants seem to make the argument that “alter egos” is a meaningfully different legal
term than “same entity,” but this argument is grounded in semantics. Plaintiffs are clearly
making the argument that ACAP and Newity are the same entity, i.e., that Defendants are
the same organization with the alter egos of ACAP and Newity. Defendants’ semantics
quibble is no reason to deny discovery. Thus, provided they have not already done so,
Defendants must produce documents and communications relevant to the relationship
between ACAP and Newity.
9. With respect to Plaintiffs’ request for Defendants to Amend the Privilege Log, the request
is DENIED. Defendants provide a side-by-side visual of the parties’ respective privilege
logs. D.I. 112 at 3. From this table, it’s clear that Defendants adhere to the facets of “a
traditional privilege log (describing who sent, received, and was copied on a document,
along with its format and the basis for withholding).” Medex, Inc. v. TDS Operating, Inc.,
No. 18-cv-1662-MN, 2021 WL 4709978, at *2 (D. Del. Oct. 8, 2021).!
10. All supplements and productions required by ACAP and/or Newity in this Order shall be
completed on or before July 9, 2025.
A Elng
GREGORY B. WILLIAMS
UNITED STATES DISTRICT JUDGE
' Defendants explain that the names of the individuals involved in each privilege entry do not
appear in the letter brief because their privilege log lists all parties to each communication in
separate columns from the description. D.I. 112 at 3 n.3.