Case 9:11-cv-80880-KLR Document 64 Entered on FLSD Docket 05/01/2012 Page 1 of 19

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 MOTION TO COMPEL COMPLIANCE WITH MARCH 16, 2012 ORDER AND FOR SANCTIONS FOR NONCOMPLIANCE Defendants International Business Machines Corporation and IBM Global Financing (collectively, Defendants or IBM), hereby move this Court, pursuant to Rules 26, 33, 34 and 37 of the Federal Rules of Civil Procedure, to: (1) compel QSGI to comply with the Courts Order to completely respond to the pending discovery requests; and (2) impose appropriate sanctions on QSGI for its failure to comply with that order. The grounds supporting this motion are set forth in the accompanying memorandum of law and supporting declaration of Benjamin Diessel, executed May1, 2012, with exhibits thereto.

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Dated: May 1, 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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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 MEMORANDUM OF LAW IN SUPPORT OF IBMS MOTION TO COMPEL COMPLIANCE WITH MARCH 16, 2012 ORDER AND FOR SANCTIONS FOR NONCOMPLIANCE Defendants International Business Machines Corporation and IBM Global Financing (collectively, Defendants or IBM), hereby move this Court, pursuant to Rules 26, 33, 34 and 37 of the Federal Rules of Civil Procedure, to: (1) compel QSGI to comply with the Courts Order to completely respond to the pending discovery requests; and (2) impose appropriate sanctions on QSGI for its failure to comply with that order. PRELIMINARY STATEMENT IBM served its Request For the Production of Documents (Document Requests) and First Set of Interrogatories (Interrogatories) several months ago (collectively, Discovery Requests). Following QSGIs repeated and unexcused failures to respond to these requests, the Court ordered QSGI to provide complete written responses and document production by April 2, 2012. QSGI failed to comply with this Courts Order in both respects, and ignored IBMs good faith efforts to address QSGIs noncompliance, resulting in this motion. QSGI has provided effectively no responses to IBMs Interrogatories that seek the factual bases for QSGIs primary claims in this lawsuit, such as any factual basis for IBM

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having changed a policy in 2007 relating to resale of used IBM mainframe computers or IBM applying that purported policy in disparate fashion. QSGI states, cryptically, that it does not have all the information sought by IBM. One possible reason for QSGIs lack of information is that QSGI destroyed or lost a substantial portion of QSGIs relevant documents after QSGI anticipated this lawsuit with IBM. If QSGIs document destruction and loss precludes complete answers, QSGI should so state, unequivocally, and should be bound by that representation. Otherwise, QSGI should be compelled to comply with the Order and answer the Interrogatories in full. QSGI also failed to complete its document production by the Courts April 2, 2012 deadline. QSGI admits that at the time its production was due, it failed to produce documents responsive to a majority of the document requests, purportedly because QSGI did not have them at this time or because they were with the SEC. In fact, however, as far as IBM can tell, QSGI has not produced documents that are in its possession. To make matters worse, to the extent that QSGI has produced documents, QSGIs incomplete productions are effectively unusable by IBM as produced because QSGI refused to provide (as previously agreed) technical information necessary to load (and thus review) these productions. IBM requests that the Court order QSGI to comply with the Courts prior Order by providing complete responses to IBMs Interrogatories and Document Requests, including completing its document productions in accordance with the agreed-upon ESI protocol, by one week from the date of the Courts Order on this motion. IBM has had to expend substantial resources to seek relief from this Court and to remediate QSGIs failure to provide compliant and usable document productions. IBM accordingly also asks the Court to sanction QSGI, including ordering QSGI to pay the substantial costs borne by IBM made necessary by QSGIs conduct. 2

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BACKGROUND A. QSGI Repeatedly Ignored Deadlines for Discovery Responses

IBM served its Document Requests on November 11, 2011, see May 1, 2012 Declaration of Benjamin Diessel (Diessel Decl.), Ex. 1, and its Interrogatories on December 6, 2011, see Diessel Decl., Ex. 2. The Federal Rules required QSGI to answer IBMs Document Requests and Interrogatories by December 12, 2011, and January 5, 2012, respectively. See Fed. R. Civ. P. 34(b)(2), 33(b)(2). IBM agreed in good faith to five extensions for QSGI to respond.1 Each time, QSGI ignored the extended deadline. IBM was thus forced to seek relief from the Court to compel responses from QSGI. (Mot. to Compel Pl.s Resps. to Defs. Disc. Reqs. and Mem. of Law in Supp. of Defs. Motion (Motion to Compel) (Feb. 15, 2012, ECF No. 40).) QSGI opposed the motion, asking that the Court excuse its failure to respond on the purported basis that QSGIs documents were in the possession of McDonald Hopkins LLC (QSGIs SEC counsel), and because approximately 400 bankers boxes of QSGI documents produced to the SEC had not been returned. (See Pl.s Resp. to Defs. Mot. to Compel Resps. to Defs. Disc. Reqs. (QSGIs Response to Motion to Compel) 4 (Mar. 2, 2012, ECF No. 43).) QSGI represented to the Court that it would provide rolling discovery that it anticipated would be completed by the first week of April. (See id. 6.) B. QSGIs Destruction and Loss of Documents

On March 12, 2012, IBM deposed QSGIs CEO, Marc Sherman, concerning QSGIs document destruction and retention. Mr. Sherman testified that QSGI took no steps to

IBM agreed to allow QSGI additional time to respond to IBMs Discovery Requests on: December 7, 2011; January 5, 2012; January 19, 2012; January 27, 2012; and February 8, 2012. See Motion to Compel, pp. 1-3 (Feb. 15, 2012, ECF No. 40-1); Reply in Supp. of Mot. to Compel Pl.s Resps. to Defs. Disc. Reqs. (IBMs Reply), pp. 3-4 (March 12, 2012, ECF No. 44).

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preserve documents relevant to this lawsuit at any time.2 Mr. Sherman further testified that a substantial portion of QSGIs documents relevant to its mainframe resale business have been destroyed or lost.3 Mr. Sherman testified that essentially the only remaining QSGI documents that QSGI has are those that were maintained by McDonald Hopkins.4 Since this time, McDonald Hopkins has made these documents available to QSGIs counsel in this case for review and production. See infra p. 9, nn. 122-133. C. QSGI Ordered To Respond Completely by April 2, 2012

On March 16, 2012, the Court granted IBMs motion to compel in relevant part, and ordered QSGI to completely respond to [IBMs] pending discovery requests by April 2, 2012. (March 16, 2012 Order (Order) (Mar. 16, 2012 2, ECF No. 50).) 5 Thus, to comply with the Courts Order, QSGI needed to provide complete responses to IBMs Interrogatories and complete its document production responsive to IBMs Document Requests by April 2, 2012.

March 12, 2012, Rule 30(b)(6) Deposition of Marc Sherman, Diessel Decl., Ex. 4, at 94:15-20 (Q. Did QSGI take any steps in 2007 to preserve documents relating to this present lawsuit? A. No. Q. Did QSGI take any steps at any point in time to preserve documents for this lawsuit? A. No.).
3

Id. at 87:8-10 (A. The Minnesota hard copy documents were destroyed sometime in 2009 when paying the bill was out of our control.); 158:17-20 (Q. So for purposes of this lawsuit, QSGI has no hard copy documents at all, correct? . . . A. Correct.); 109:22-110:1 (Q. So as far as this lawsuit is concerned, the books, records, and documents relating to QSGIs hardware division are gone, right? . . . A. Correct.); 104:4-7 (Q. So for purposes of this lawsuit, whatever was on those servers is gone? . . . A. Yes.).
4

Id. 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.).
5

The Court also granted IBMs Motion to Dismiss QSGIs Complaint that same week, dismissing QSGIs claims without prejudice. See Order Granting Motion to Dismiss (Mar. 14, 2012, ECF No. 49). Thereafter, QSGI filed its Second Amended Complaint, which featured essentially the same contentions as the prior complaint. See Second Am. Compl. (Mar. 28, 2012, ECF No. 53). IBM moved to dismiss QSGIs Second Amended Complaint on April 16, 2012. See Mot. to Dismiss With Prejudice Pl.s Second Am. Compl. and Mem. of Law in Supp. of Defs. Mot. (Apr. 16, 2012, ECF No. 54-1). That motion is pending before the Court.

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D.

QSGIs Deficient Responses To Interrogatories

On April 2, 2012, the Courts deadline to respond, QSGI served responses to IBMs Interrogatories. These responses for the most part provided no substantive response at all.6 (See Pl.s Unverified Resp. to Defs. First Set of Interrogs. (Interrogatory Response), Diessel Decl., Ex. 8.) For example, QSGI failed to respond completely to IBMs Interrogatory No. 1. QSGIs lawsuit is premised on IBM purportedly changing a policy in 2007 relating to resale of used IBM mainframe computers, which, according to QSGI, IBM did not apply to its own resale of used IBM mainframe computers. (See Second Am. Compl. 29-33.) IBMs Interrogatory No. 1 seeks QSGIs factual bases for these central contentions. Yet, QSGI merely directed IBM to its own 2007 pricing guide, which QSGI cites for the proposition that modifications to Z series mainframes are not permitted for six-months. See Interrogatory Response No. 1. This IBM document recites in relevant part a long-standing policy7; it contains no information at all about any policy change (the purported basis for QSGIs lawsuit), much less any factual support for IBM applying such a policy change in disparate fashion. QSGI also failed to provide any substantive answer to IBM Interrogatories Nos. 2-6. These interrogatories request information concerning QSGIs primary contentions in this lawsuit that its business of buying and reselling used IBM mainframe computers was adversely impacted by IBMs purported change in policy in 2007.8 (See Second Am. Compl. 34-43.)

Pursuant to Local Rule 26.1(h)(2), Appendix 1, attached hereto, quotes the interrogatories for which IBM seeks to compel complete responses, quotes QSGIs responses, and states the deficiency of the responses and the bases for compelling QSGI to respond completely to the interrogatories.
7

See Defs. Mot. to Seal Defs. Mot. to Dismiss With Prejudice Pl.s Second Am. Compl., Dep. Tr. of Marc Sherman and IBMs Announcement Letter, Ex. 3.
8

For example, these interrogatories request information concerning QSGIs inventory of IBM mainframe computers (Interrog. No. 2), requests by QSGI or its customers for changes to IBM mainframe computers (Interrog. No. 3), sales lost as a result of IBMs purported conduct (Interrog. No.

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Nevertheless, as to each of these interrogatories, QSGI answered that it does not have all the information requested within its custody or control. See Interrogatory Response Nos. 2-6. QSGI thus offered no substantive answer, just a reference to two cursory exhibits, neither of which is responsive to the interrogatories for which they are cited.9 E. QSGIs Deficient Document Production

Despite QSGIs representation to the Court that it would provide rolling discovery, see QSGIs Response to Motion to Compel 6, QSGI produced no documents until March 30, 2012, one business day before the Courts deadline. (Diessel Decl. 7.) The March 30, 2012 production failed to comply with the parties agreed upon format for electronic production and was effectively unusable as produced. (Id. 7-8.) QSGI, for example, failed to provide certain technical files necessary for IBM to load (and thus review) the production. (Id. 7.) Many of the documents, contrary to the parties agreement, were produced without metadata that is required for an orderly review, and the rest were produced without regard to the metadata fields agreed to by the parties. (Id.) Further complicating IBMs review of this production was its disorganized and unexplained file structure. (Id.) IBM immediately advised QSGI of these deficiencies and of QSGIs agreed-to obligations. (Id. 8.) But QSGI refused to make a compliant production and instead advised IBM that it should make a motion to the Court (QSGIs sole correspondence on these subjects). (Id. 10.)
4), QSGIs transactions involving IBM mainframe computers (Interrog. No. 5), and the impact of the purported policy change (Interrog. No. 6).
9

QSGI did not explain the provenance of these exhibits or what they purport to describe. But in any event, the information on the face of the exhibits is unresponsive. Exhibit 1 is an unelaborated list of purported machine types, models, serial numbers and locations. Exhibit 2 provides a list of purported Prospective Sales from 2009, including purported customers and machines. These exhibits do not contain the requested information concerning QSGIs inventory of IBM mainframe computers, the impact of the purported policy change, requests to IBM by QSGI or its customers for parts and microcode to reconfigure used IBM mainframes, sales lost as a result of IBMs conduct or QSGIs transactions involving IBM mainframe computers. See Interrogatory Response; Apr. 11, 2012 Letter from B. Diessel to J. Bauta, Diessel Decl., Ex. 10.

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On April 2, 2012, QSGI served its written responses to IBMs Document Requests. In these written responses, QSGI admitted that it did not produce documents in response to several document requests. (See Pl.s Resp. to Defs. IBM and IBM Global Financings Req. for Prod. of Docs. (Document Request Response), Diessel Decl., Ex. 7.) For example, QSGI admits that it did not produce documents responsive to at least eight document requests because QSGI does not have responsive documents at this time.10 (See Document Request Response Nos. 3-4, 9-10, 21, 28-30.) Furthermore, as to 21 additional document requests, QSGI referred IBM to 382 boxes of relevant documents that QSGI previously produced to the SEC and have not as yet been made available to IBM.11 The same day, after learning from QSGIs SEC counsel, McDonald Hopkins, that it had arranged for the return to QSGI of the 382 boxes of documents previously produced to the SEC, IBM wrote QSGI a letter concerning the status of these boxes and seeking access to these materials. (Diessel Decl. 5, 12.) QSGI failed to respond. (Id. 12.)
10

These requests seek documents responsive to QSGIs central allegations in this case. See Doc. Reqs. Nos. 3-4 (documents supporting QSGIs allegation that prior to 2007 IBM sold QSGI the means for mainframe modification, and that the six-month rule did not apply to IGF or its customers); Doc. Reqs. Nos. 9-10 (documents concerning requests for and purchases of microcode, parts, upgrades and/or downgrades to used IBM mainframes); Doc. Reqs. No. 21 (documents concerning the sale of used IBM mainframes); and Doc. Reqs. Nos. 28-30 (documents concerning QSGIs allegations of IBMs monopoly power and that IBM and IGF have engaged in unfair and deceptive trade practices, and the definition of the alleged geographic market of the United States of America).
11

The SECs subpoena pursuant to which these documents were produced overlaps in substantial part with IBMs Document Requests. See IBMs Reply, Declaration of Laura Besvinick (Besvinick Decl.), Ex. B, In re QSGI, Inc., SEC Subpoena Served on QSGI, Inc., Bankr. Pet. No. 09-23658, Doc. 211-1 (Subpoena). For example, both request documents concerning: IBMs alleged anticompetitive practices and the financial impact of these practices on QSGI (compare Subpoena L-M with Doc. Reqs. Nos. 13-15, 18); QSGIs customers and sales to customers (compare Subpoena Q with Doc. Reqs. Nos. 6-7); QSGIs inventory, including any change in its value (compare Subpoena J, K, R with Doc. Reqs. Nos. 5, 10, 14, 18); and QSGIs finances and accounting practices (compare Subpoena GH with Doc. Reqs. No. 19). Given the relevance of the SEC materials to IBMs Document Requests, it is unsurprising that QSGI has referred to these materials in answering IBMs Document Requests. See Doc. Req. Resp. Nos. 1-2, 5-8, 16, 22-27, 31-34, 36-37, 39-40. However, it is unacceptable that QSGI did not preserve these materials prior to producing them to the SEC at a time when it anticipated filing suit against IBM and therefore has yet to produce them to IBM in this litigation. See pp. 12-13, nn. 1617.

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Also on April 2, 2012, QSGI requested from IBM a brief extension to the morning of April 3, 2012, to provide its document production. (Id. 9.) IBM agreed and stated that it expected QSGI to make a complete and compliant production of material responsive to the Document Requests by the morning of April 3, 2012. (Id.) On April 3, 2012, QSGI made another production of effectively unusable electronic documents. (Id. 13.) QSGI did not state whether this installment completed its production. (Id.) In fact, it did not. On April 5, 2012, without advance notice or relief from this Courts Order, QSGI delivered an additional, equally unusable production of electronic documents. (Id.) Noting that QSGIs production had continued past the Courts deadline, on April 11, 2012, IBM asked QSGI if it had completed its document production. (Id. 16.) IBM also again inquired into the 382 boxes of documents that QSGI previously produced to the SEC. (Id.) QSGI once again did not respond, and in fact still has not responded as of the date of this writing. (Id.) F. IBMs Efforts To Remediate QSGIs Noncompliant Productions

The noncompliant March 30, April 3 and April 5, 2012 productions comprise the totality of QSGIs production pursuant to the Courts Order. (Id. 13.) Because QSGI produced these documents in a format not usable by IBM for electronic review, IBM has been forced to engage the services of a vendor to remedy the productions deficiencies. (Id. 14.) IBMs vendor, among other measures, had to develop a custom computer program to convert QSGIs electronic productions into a format that could be loaded electronically. (Id.) IBM expects this additional work to cost tens of thousands of dollars. (Id.) IBMs vendor was eventually able to load these documents on April 22, 2012, following over two weeks of diligent work. (Id.) IBM has therefore just recently begun its review of these productions. (Id.)

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G.

Apparent Failure To Produce Remaining Documents

Subsequent to QSGIs March 30, April 3 and April 5, 2012 incomplete productions, McDonald Hopkins provided representations to IBM concerning QSGIs documents.12 McDonald Hopkins represented that it had arranged for the SEC to provide QSGIs counsel, Juan Bauta, with 382 boxes of hard copy documents previously produced by QSGI to the SEC. (Diessel Decl. 18.) McDonald Hopkins also represented that in addition to a collection of electronic documents (from which QSGI has apparently made its March 30, April 3 and April 5, 2012 electronic productions), it also possessed: a QSGI server with six hard drives; 39 disks containing email archives; four DVD disks; 21 back-up tapes; and an electronic production previously provided to the SEC comprising approximately four million pages (distinct from the 382 boxes).13 (See id. 18-19.) McDonald Hopkins has provided these materials to QSGIs counsel in this case. (See id. ) As far as IBM can tell, however, QSGI has produced no documents from these sources. (Id. 20.) IBM asked QSGI in correspondence about its apparent failure to produce documents from these sources, but this request has also gone unanswered. (Id. 21.) H. IBMs Good Faith Efforts To Address QSGIs Noncompliance

IBM has endeavored to address QSGIs failure to comply with the Courts Order without involving the Court. But QSGI failed to respond to IBMs correspondence on these issues, including correspondence dated: March 31, 2012 (outlining the deficiencies in QSGIs March 30, 2012 production and providing details as to how to remedy); April 2, 2012 (requesting that QSGI specify whether it had provided complete written responses to IBMs
12

QSGIs unresponsiveness forced IBM to seek discovery from McDonald Hopkins to determine what documents McDonald Hopkins had provided to QSGIs counsel in this case. Diessel Decl. 5.
13

McDonald Hopkins also represented that it has made available for QSGIs review 50 McDonald Hopkins files relating to services provided by McDonald Hopkins, which McDonald Hopkins will produce to QSGI post-inspection for relevancy and privilege. Diessel Decl. 18.

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Document Requests); April 2, 2012 (requesting access to the boxes of documents produced to the SEC); and April 11, 2012 (requesting complete responses to IBMs Discovery Requests, confirmation on whether QSGI has completed its document production, information regarding QSGIs noncompliant production and access to the documents produced to the SEC). On April 19, 2012, IBM called QSGIs counsel to discuss these discovery issues. QSGIs counsel did not answer, and IBMs counsel left a voice message. (Diessel Decl. 17.) This message, too, went unanswered. (Id.) On April 23, 2012, IBM requested a meet and confer by April 27, 2012, concerning QSGIs noncompliance with this Courts Order. (Id. 21.) IBM advised QSGI that if it failed to respond by that date, IBM would be forced to file a motion with the Court. (Id.) QSGI again failed to respond.14 (Id.) ARGUMENT QSGI has violated this Courts Order, prejudicing IBMs ability to prepare its defense and forcing IBM to file a motion to compel compliance with the Courts Order. To address the substantial costs borne by IBM in addressing noncompliance with the Courts Order and to prevent additional delays and discovery violations, IBM also seeks sanctions. A. Relevant Law

When facing a court order with which a litigant believes he is unable to comply, he should realize the need to communicate . . . with the court . . . explaining his inability to do what the court has ordered. Moon v. Newsome, 863 F.2d 835, 838-39, n.5 (11th Cir. 1989) (quotation marks omitted); see also Siddiq v. Saudi Arabian Airlines Corp., No. 6:11-cv-69,

14

Indeed, the only correspondence IBM received from QSGI during that week was QSGIs request to extend its deadline to file its response to IBMs motion to dismiss by 10 days and an email on Saturday stating that QSGIs counsel and witness were unavailable for a deposition noticed for the following Tuesday. Diessel Decl. 22.

10

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2012 WL 390496, at *3-4 (M.D. Fla. Feb. 1, 2012) (imposing monetary sanctions on noncompliant party that did not serve discovery by court-ordered deadline and failed to seek an extension to comply with courts order). Where a party fails to comply with a courts prior discovery order, a court may order that party to respond completely to outstanding discovery requests. See Aztec Steel Co. v. Fla. Steel Corp., 691 F.2d 480, 482 (11th Cir. 1982) (affirming district courts imposition of sanctions for appellants failure to comply with trial courts second order to compel discovery). [A]n evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer or respond. Maus v. Ennis, No. 6:10-cv-1904, 2011 WL 6319176, at *6 (M.D. Fla. Dec. 1, 2011) (Baker, Mag.) (quoting Fed. R. Civ. Pro. 37(a)(4)) (internal quotation marks omitted) adopted by No. 6:10-cv-1904, 2011 WL 6319179 (M.D. Fla. Dec. 16, 2011). Courts have broad authority to sanction parties who defy the Federal Rules and flout discovery obligations. See Gratton v. Great Am. Commcns, 178 F.3d 1373, 1374-75 (11th Cir. 1999) (The district court . . . has broad authority under Rule 37 to control discovery, including dismissal as the most severe sanction.); Serra Chevrolet, Inc. v. General Motors Corp., 446 F.3d 1137, 1150-51 (11th Cir. 2006) (The district court has broad discretion [to impose sanctions] and this is especially true when the imposition of monetary sanctions is involved. (internal quotation marks omitted)). B. This Court Should Compel QSGI To Comply With Its Order

QSGIs incomplete Interrogatory Responses fail to comply with this Courts Order to provide complete responses. In response to interrogatories seeking the factual bases for QSGIs primary contentions underlying its purported claims, QSGI provided no substantive answers at all. For example, in response to Interrogatory No. 1 seeking all of QSGIs factual bases for its contentions that IBM changed a policy in 2007 and applied that policy in disparate fashion, QSGI merely referred IBM to an unresponsive document. QSGI, stating that it did not 11

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have all the information requested, likewise failed to provide substantive answers to IBM Interrogatories Nos. 2-6 concerning, among other things, the purported adverse impact on QSGI of this purported policy change and referred IBM to two unresponsive exhibits. QSGIs nonresponses to these interrogatories do not comply with the Courts Order. See Maus, 2011 WL 6319176, at *5-6. If QSGI cannot provide responsive answers to these interrogatories, whether due to its document destruction and loss or otherwise, QSGI should so state unequivocally and be bound by that admission. Cf. Alliance to End Repression v. Rochford, 75 F.R.D. 438, 440 (N.D. Ill. 1976) (sanctioning party whose document destruction made it impossible for them to answer interrogatories). Failing such a representation, QSGI should be ordered to comply with the Courts Order. QSGIs incomplete document production similarly fails to comply with the Courts Order. QSGI admitted that it did not produce documents responsive to at least eight document requests, purportedly because QSGI does not have those documents at this time, and did not produce documents responsive to many more document requests because those documents were with the SEC. The time for QSGI to locate, review and produce responsive documents, which was set by this Court as April 2, 2012, has come and gone. And QSGIs obligation extends to the materials maintained by McDonald Hopkins, which comprise some of the only remaining sources of QSGI documents following QSGIs substantial document destruction.15 Yet, as far as IBM can tell (and QSGI has never responded to the contrary), QSGI has not produced documents from several of the sources of documents in its possession including QSGIs server, disks of email archives, back-up tapes and the four million-page electronic production to the SEC. Moreover, QSGI had within its possession after anticipating
15

See Jans v. The GAP Stores, Inc., No. 6:05-cv-1534-Orl-31JGG, 2006 WL 2691800 (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).

12

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litigation with IBM highly relevant documents comprising the 382 boxes that it later produced to the SEC.16 QSGI had an obligation to keep a copy of these materials, but chose not to.17 QSGIs decision to turn over highly relevant materials to the SEC should not excuse its failure to provide responsive documents to IBM by the Courts deadline. QSGIs incomplete production, which appears to omit documents from the foregoing sources, is inexcusable and a violation of this Courts Order. QSGI should be ordered to review these sources for responsive material and produce responsive materials to IBM within a week of this Courts Order.18 C. The Court Should Sanction QSGI for Its Noncompliance

QSGIs failure to comply with the Courts Order warrants the imposition of sanctions. See Gratton, 178 F.3d at 1374-75.19 At the filing of this motion, more than 150 days have elapsed since IBM first served its Document Requests. QSGIs failure to provide this basic discovery continues to prejudice IBMs ability to prepare its defense. If QSGI had a doubt

16

QSGI purportedly believed that it had an actionable claim against IBM since at least 2007. See QSGI Inc., Quarterly Report (Form 10-Q) at 12 (Nov. 14, 2007), Mot. to Dismiss With Prejudice Pl.s Second Am. Compl. and Mem. of Law In Supp. of Defs. Mot., Besvinick Decl. Ex. 1. The SEC subpoena pursuant to which QSGI produced its documents was not served until 2009. See Subpoena.
17

See E-Terra, LLC v. Sars Corp., No. 3:08-CV-123, 2010 WL 431965, at *2 (D. Alaska Feb. 3, 2010) (noting that plaintiff may have a claim for spoliation if certain evidence was not ultimately recovered from a non-party, where defendant transferred the only copy or copies of the evidence to the nonparty); In re NTL, Inc. Sec. Litig., 244 F.R.D. 179, 197 (S.D.N.Y. 2007) (Peck, Mag.) (noting that a party failed in its obligation to preserve relevant material, and thus spoliated evidence (assuming the other requirements for spoliation [were] met), if it transferred documents and ESI that it had an obligation to preserve to a non-party without itself preserving (or insuring that [the non-party] would preserve) such information for possible production in [the] litigation), affd, No. 02-Civ-7377, 2007 WL 1518632 (S.D.N.Y. May 17, 2007).
18

The Court should order QSGI to conduct a thorough responsiveness review prior to producing these documents to IBM. IBM should not have to spend further time or money to wade through documents dumped by QSGI on IBM in the 11th hour of fact discovery.
19

The Federal Rules of Civil Procedure provide that sanctions are appropriate here on several grounds. See Fed. R. Civ. P. 37(b) (noncompliance with this Courts Order); id. 33(b), 37(d) (failure to provide complete answers to the interrogatories); and id. 37(a) (bad faith and willful conduct in discovery requiring this motion).

13

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as to its ability to comply with the Courts Order, its recourse was to seek an extension, not to ignore the Courts deadline. See Siddiq, 2012 WL 390496, at *3-4. Moreover, QSGIs conduct in providing its incomplete productions in a format not readily usable by IBM has substantially delayed IBMs review. (Diessel Decl. 14.) IBM expects to pay tens of thousands of dollars for the conversion of QSGIs production to a format that can be reviewed in an orderly fashion. (Id.) IBM should not be required to bear the cost of QSGIs refusal to provide timely and compliant discovery. See, e.g., Power v. Williams, No. 3:09-cv-594, 2010 WL 431921, at *1, n.2 (M.D. Fla. Feb. 5, 2010) (Discovery imposes several costs on the litigant from whom discovery is sought. These burdens include time spent searching for and compiling relevant documents . . .) (quoting Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1368 (11th Cir. 1997) (quotation marks omitted)); Broad. Music, Inc. v. Bourbon St. Station, Inc., No. 3:09-cv-468, 2010 WL 376619, at *4 (M.D. Fla. Jan. 26, 2010) (ordering payment of expenses on motion to compel by a date certain). CONCLUSION For the foregoing reasons, IBM respectfully requests that the Court grant IBMs motion to compel compliance with the Courts March 16, 2012 Order and sanctions for violating the same.

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Pursuant to Local Rule 7.1(a)(3)(A), I hereby certify that counsel for the movant has conferred with all parties or nonparties who may be affected by the relief sought in this motion in a good faith effort to resolve the issues but has been unable to resolve the issues. Dated: May 1, 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 15

Case 9:11-cv-80880-KLR Document 64 Entered on FLSD Docket 05/01/2012 Page 18 of 19

CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on this 1st day of May 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 Laura Besvinick Florida Bar No. 391158

Case 9:11-cv-80880-KLR Document 64 Entered on FLSD Docket 05/01/2012 Page 19 of 19

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