Summary of Opinion — Tottenham v. Trans World Gaming Corporation, 00 Civ. 7697 (WK) (S.D.N.Y. June 21, 2002)

Factual and Procedural Background

In 1996 Trans World Gaming Corporation ("TWG") hired Andrew Tottenham as President and CEO. TWG terminated Tottenham on June 16, 2000, and Tottenham brought suit. In its answer to the Second Amended Complaint, TWG asserted counterclaims against Tottenham for unjust enrichment, conversion, and breach of fiduciary duties based on conduct while he was employed. TWG alleged that Tottenham used company funds to purchase one share of stock in another company and to pay personal expenses, including his wife's automobile insurance. TWG served broad document requests seeking, inter alia, all documents concerning any expense or obligation paid by or on behalf of Tottenham or his wife from January 1, 1996 through June 16, 2000, and all documents concerning Tottenham's finances during that period. Tottenham refused to produce the materials, contending the defendant had offered no proof of defalcation. The parties disputed the discovery and the matter was addressed at a telephone conference on June 19, 2002. The Court issued the order resolving the discovery dispute on June 21, 2002.

Legal Issues Presented

Whether TWG may compel production of broad financial and expense-related documents from Tottenham for the period January 1, 1996 through June 16, 2000 in aid of its counterclaims alleging misuse of company funds.
Whether such discovery requests are permissible under Federal Rule of Civil Procedure 26(b)(1) or constitute an impermissible "fishing expedition."

Arguments of the Parties

Defendant's Arguments

TWG asserted that its records indicated Tottenham used company funds to pay his wife's automobile insurance and that Tottenham used company funds to purchase a share of stock.
TWG argued the "only way" to determine whether additional misuse occurred was to obtain broad discovery of Tottenham's expenses and financial records for 1996–2000.

Plaintiff's Arguments

Tottenham refused to produce the requested documents, arguing TWG had "not offered a scintilla of proof" that he diverted company funds to pay personal expenses.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Weber v. Multimedia Entertainment, Inc. (S.D.N.Y. Nov. 24, 1997) 1997 WL 729039, *1	Parties may obtain discovery relevant if reasonably calculated to lead to admissible evidence under Fed.R.Civ.P. 26(b)(1).	Quoted to describe the generally generous standard for relevance in discovery.
Cleveland-Goins v. City of New York (S.D.N.Y. Aug. 30, 1999) 1999 WL 673343, *2	"Discovery ... is not intended to be a fishing expedition" and is meant to flesh out allegations with at least a modicum of objective support.	Used to support limitation on discovery where objective support for generalized fishing is lacking.
Surles v. Air France (S.D.N.Y. July 19, 2001) 2001 WL 815522, *4	Discovery requests cannot be based on pure speculation or conjecture.	Applied to reject speculative, fishing-expedition discovery requests.
United States v. Consolidated Edison Co. of New York (E.D.N.Y. Dec. 15, 1988) 1988 WL 138275, 1-2	Denying motion to compel where requested discovery constituted a fishing expedition to discover additional violations beyond those alleged.	Relied upon to deny broad discovery requests intended to uncover unspecified additional wrongdoing beyond pleaded instances.

Court's Reasoning and Analysis

The Court began with Federal Rule of Civil Procedure 26(b)(1) and acknowledged the generous standard allowing discovery of matters reasonably calculated to lead to admissible evidence, citing Weber. The Court next recognized the limitation that discovery is not a fishing expedition and requires at least a modicum of objective support for broad fishing, citing Cleveland-Goins and Surles. At the June 19, 2002 conference the Court was informed that TWG's records supported two specific allegations: payment of the plaintiff's wife's automobile insurance and the purchase of one share of stock using company funds; both parties agreed the stock purchase occurred (though Tottenham claimed entitlement to it). The Court found TWG had objective support for those specific instances but no objective support for broader assertions that Tottenham "may well have used company money to pay other personal expenses." Applying the cited precedents, the Court concluded that TWG's expansive requests for all expense- and finance-related documents from 1996 through June 16, 2000 constituted an improper fishing expedition and therefore denied those requests. The Court permitted TWG to propound document requests limited to the two specific, supported allegations and held that if TWG later acquires additional objective support for other specific instances of alleged defalcation, it may seek targeted discovery related to those instances.

Holding and Implications

Holding: The Court granted in part and denied in part TWG's motion to compel. The Court ordered that TWG may seek documents relating to the two specific instances for which it had objective support (payment of the wife's automobile insurance and the stock purchase) but denied TWG's broad requests for all documents concerning Tottenham's expenses and finances for the entire Jan. 1, 1996–June 16, 2000 period.

Implications: The direct effect is that discovery is limited to documents tied to the specifically supported allegations; broad, speculative discovery into the plaintiff's entire financial history was disallowed. The opinion does not announce any new legal precedent beyond applying settled discovery principles.

Show full summary ...

ANDREW TOTTENHAM, Plaintiff, v. TRANS WORLD GAMING CORPORATION, a/k/a: TRANS WORLD CORPORATION, Defendant.

ORDER

WHITMAN KNAPP, Senior United States District Judge.

In 1996, Defendant Trans World Gaming Corporation (hereinafter the "Defendant" or "TWG") hired Plaintiff Andrew Tottenham (hereinafter the "Plaintiff" or "Tottenham") as its President and Chief Executive Officer ("CEO"). On June 16, 2000, the Defendant terminated the Plaintiff and, consequently, he initiated these legal proceedings against the company. In responding to the Plaintiff's Second Amended Complaint, the Defendant asserted counterclaims against the Plaintiff for unjust enrichment, conversion, and the breach of fiduciary duties. The latter claim was premised on the Plaintiff's conduct while he was employed as the Defendant's President and CEO.

During that time period, TWG contends that the Plaintiff used TWG's funds to purchase one share of stock in another company for his own personal benefit without the authorization or knowledge of TWG's board of directors. The Defendant further alleges that the Plaintiff also used its funds to pay for his own personal expenses, such as his wife's automobile insurance.

The Defendant now asserts that "if Tottenham used company money to pay for his personal insurance needs, he may well have used company money to pay other personal expenses." June 17, 2002 Daniel P. Goldberg Letter at 2 (hereinafter the "Goldberg Letter"). Since TWG contends that "[t]he only way TWG can make this determination is to obtain discovery from Tottenham," it propounded requests for the following documents: (a) "[a]ll documents concerning any expense or obligation paid by or on behalf of Tottenham or Tottenham's wife from January 1, 1996 up to and including June 16, 2000, including documents sufficient to show the source of funds used to pay such expenses or obligations;" and (b) "[a]ll documents concerning Tottenham's finances from January 1, 1996 up to and including June 16, 2000, including tax returns for tax years 1996 through 2000, inclusive, financial statements, checkbooks, bankbooks, bank statements, and investment account statements." Goldberg Letter at 2. The Plaintiff, however, refuses to produce such documents on the grounds that the Defendant "has not offered a scintilla of proof that `Tottenham defalcated TWG's funds by using company money to pay personal expenses.'" June 17, 2002 David M. Fish Letter at 1 (hereinafter the "Fish Letter"). Since the parties were unable to resolve this discovery dispute, the Defendant has asked this Court to direct the Plaintiff to produce the foregoing documents.

Under Federal Rule of Civil Procedure 26(b)(1), "[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party. . . ." Fed.R.Civ.P. 26(b)(1). In accordance with this generous standard, a party may obtain discovery regarding any matter that is relevant to the parties' claims if it appears reasonably calculated to lead to the discovery of admissible evidence. See Fed.R.Civ.P. 26(b)(1). See also Weber v. Multimedia Entertainment, Inc. (S.D.N.Y. Nov. 24, 1997) 1997 WL 729039, *1.

"Discovery, however, is not intended to be a fishing expedition, but rather is meant to allow the parties to flesh out allegations for which they initially have at least a modicum of objective support." Cleveland-Goins v. City of New York (S.D.N.Y. Aug. 30, 1999) 1999 WL 673343, *2.

At a conference addressing this discovery dispute conducted via telephone on June 19, 2002, this Court inquired as to the support underlying the Defendant's allegations. The Defendant's counsel informed us that the Defendant's own records indicated that the Plaintiff had used company funds to pay for his wife's automobile insurance. June 19, 2002 Tr. at 2-3. In addition, both parties agreed that the Plaintiff used the Defendant's funds to purchase a share of stock in another company (although the Plaintiff contends that he was entitled to that share). Id. However, the Defendant provided no further information which would support that the Plaintiff purportedly misused company funds on other specific occasions.

Discovery requests cannot be based on pure speculation or conjecture. Surles v. Air France (S.D.N.Y. July 19, 2001) 2001 WL 815522, *4. Here, although the Answer contains allegations with respect to specific instances of defalcation (namely the Plaintiff's alleged misuse of company funds to purchase stock and to pay for his wife's automobile insurance), the Defendant's document requests constitute no more than a fishing expedition to discover additional instances of wrongdoing beyond those already alleged in the Answer. We will not condone such a fishing expedition on the mere speculation that the Plaintiff "may well have used company money to pay other personal expenses," see Goldberg Letter at 2, where the Defendant has not offered any objective support for that contention. See United States v. Consolidated Edison Co. of New York (E.D.N.Y. Dec. 15, 1988) 1988 WL 138275, *1-*2 (denying motion to compel where the requested discovery constituted no more than a fishing expedition by the plaintiff to discover additional violations beyond those alleged in the complaint).

Since the Defendant indicated that there is objective support for its allegation that the Plaintiff breached his fiduciary duties by using the company's money to pay for his wife's automobile insurance and to purchase a share of stock in another company, the Defendant may propound document requests which seek information relating to these allegations. However, for the aforementioned reasons, we will not grant the Defendant's broad request for all documents "concerning any expense or obligation paid by or on behalf of Tottenham or Tottenham's wife from January 1, 1996 up to an including June 16, 2000," or for all documents "concerning Tottenham's finances from January 1, 1996 up to and including June 16, 2000." If the Defendant acquires some modicum of objective support (for example, by relying as it already has on company records) for its contention that the Plaintiff may have used company funds to pay personal expenses on other occasions, then the Defendant may also propound discovery requests for information related to those other specific instances of defalcation.

SO ORDERED.

TOTTENHAM v. TRANS WORLD GAMING CORPORATION, (S.D.N.Y. 2002)