IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE LAUREN GLASSMAN, Plaintiff/CounterclaimDefendant, v. CROSSFIT, INC. and GREG GLASSMAN, Defendants/CounterclaimPlaintiffs.

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C.A. No. 7717-VCG

PLAINTIFFS COMBINED REPLY IN FURTHER SUPPORT OF HER MOTION TO COMPEL AND IN OPPOSITION TO DEFENDANTS MOTION TO QUASH AND MOTIONS FOR PROTECTIVE ORDERS Plaintiff, Lauren Glassman, by and through her undersigned counsel, respectfully submits this combined (i) Reply in Further Support of Plaintiffs Amended Motion to Compel Defendants to Produce Documents and Answer Interrogatories (Motion to Compel), (ii) Opposition to Defendants Motion to Quash and for a Protective Order to Preclude the Production of Documents By, and Depositions of, THL Credit Advisors LLC and Level Equity Management LLC (Motion to Quash), and (iii) Opposition to Defendants Motion for a Protective Order to Limit Scope of 30(b)(6) Deposition (Motion for Protective Order). Introduction In their July 25, 2012 Opposition to Plaintiffs application for a temporary restraining order (TRO) to stop the Companys purchase of a private aircraft, Defendants stated that Plaintiffs request for emergency relief is moot because the transaction that she seeks to restrain has already occurred. Before receiving the complaint and associated motion papers yesterday, Crossfit had already executed and sent a letter confirming the purchase. (TRO Opp. at 1.)

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In their latest submissions to the Court, Defendants admit that the representations they made to the Court in opposing Plaintiffs TRO application were not true. Indeed, Defendants state that they do not dispute that the letter [instructing the aircraft manufacturer to proceed with the transaction] was not sent until July 26, 2012, two days after Plaintiff filed her Complaint and made her TRO application. (Opp. to Motion to Compel at 14). According to Defendants, their admission, which comes three months after their claimed inadvertent error, should end the inquiry and moots the need for further discovery on these issues. Were it that simple, however, the standard for discovery would lose its meaning. Instead, Defendants latest admission only leads to more questions. Indeed, this is the second misrepresentation Defendants have made to the Court regarding the circumstances of this transaction. 1 Not only did these misrepresentations fundamentally alter the nature of the action, but the credibility of Defendants officers, who have previously submitted affidavits to this Court and will submit other sworn testimony in this proceeding, is now at issue. In the same way, Defendants seek to preclude discovery into Defendant Greg Glassmans provision of Company information to third parties for the purpose of providing financing for his offer to purchase Plaintiffs 50% interest in CrossFit. While Defendants expend significant effort attempting to convince the Court of Plaintiffs ill motives in seeking the requested information, in none of their 30 pages of briefing do Defendants mention that Plaintiff has

During the July 25 hearing on Plaintiffs TRO application, the Court ordered Defendants to notify it 48 hours in advance of any further action Defendants intended to take with respect to the purchase of the aircraft. Less than a week later, Defendants notified the Court that Cirrus Aircraft has demanded additional written assurances from CrossFit that it intends to go forward with the purchase. (Ex. 1 hereto). Through discovery, however, Plaintiff learned that Cirrus Aircraft was not seeking the assurances from CrossFit, but rather requested that Mr. Glassman provide personal assurance with respect to purchase of the aircraft. (See Ex. F to Motion to Compel; 9/6/12 Ltr. to Court from Raymond DiCamillo, Esq. to follow up with Sept. 5 teleconference (Docket #77); Ex. 2 hereto).
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expressly disclaimed any intention of seeking that which Defendants Opposition is looking to protect. Indeed, each of Plaintiffs discovery requests specifically states, With respect to this request, Plaintiff does not, at the present time, seek discovery into the terms of any proposed financing. Instead, Plaintiff is seeking the production of all documents provided to these parties in connection with their consideration of whether to provide such financing. (Exs. B and C to Motion to Compel). Plaintiffs discovery requests are directly relevant to the element of causation as to Defendants counterclaim for breach of fiduciary duty as well as Defendants unclean hands. For these same reasons, Plaintiff also issued subpoenas to two potential third-party investors, THL Credit Advisors LLC and Level Equity Management, LLC (the Subpoenas), which appear to have received, under Defendant Greg Glassmans direction, CrossFits confidential information to potentially finance his purchase of Plaintiffs 50% interest without the protections of any nondisclosure agreement. Like the requests directed to Defendants, the discovery sought from these parties bears directly on Defendants counterclaims. As further set forth below, Plaintiff is entitled to the information she seeks in her motion to compel. Argument The right to obtain discovery is liberally construed. Levy v. Stern, 1996 WL 742818, at *2 (Del. Dec. 20, 1996). Under Court of Chancery Rule 26(b)(1), Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter in the pending action. Th[e Delaware Courts have] long recognized that the purpose of discovery is to advance issue formulation, to assist in fact revelation, and to reduce the element of surprise at trial. Levy, 1996 WL 742818, at *2. Defendants Opposition to Plaintiffs Motion to Compel,

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their Motion for Protective Order, and their Motion to Quash, however, contradict that standard by seeking to turn discovery into a one-way street in their favor, allowing them to shield from disclosure the legitimacy of their acts leading up to the hearing on Plaintiffs TRO application, as well as discovery into issues directly relevant to the element of causation as to Defendants counterclaim and any defenses that Plaintiff may have thereto. Defendants opposition to discovery must, therefore, be denied. I. DEFENDANTS EXCUSES DO NOT JUSTIFY THEIR INTENTIONAL REFUSAL TO RESPOND TO DISCOVERY. As set forth in Plaintiffs Motion to Compel, the parties agreed to serve written responses and objections to the opposing partys discovery requests by August 17, 2012. The Court entered an Order reflecting this deadline on August 14, 2012. On the day before their responses were due, however, Defendants informed Plaintiff that they would not be responding to Plaintiffs discovery and, instead, demanded that she serve new requests that met Defendants standards. (the August 16 Letter; Ex. D to Motion to Compel). Though Defendants now maintain that the August 16 letter, in fact, constituted their responses and objections (Opp. at 7), the letter itself belies such an assertion. And though Defendants seek approval for eventually serving the required responses 11 days later, such service came too late and with too little. Indeed, the responses Defendants served were a mirror image of their August 16 Letter. (See Ex. E to Motion to Compel). They provided Plaintiff with no understanding as to which requests Defendants were objecting and to which requests they were willing to provide responsive documents. Defendants seek to justify their actions by relying on the expedited nature of preliminary injunction proceedings. But Defendants intentional decision to violate the Courts order and to demand that Plaintiff redraft her requests before they would consider submitting a proper

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response do not meet even the minimum standards of expedited discovery. Moreover, none of the cases relied upon by Defendants excuse such an intentional failure to properly respond to written discovery even in an expedited case. (See Opp. to Motion to Compel at 7 (citing Electra Inv. Trust v. Crews, 1999 WL 1204844, at *2 (Del. Ch. Nov. 30, 1999); Reserves Dev. LLC v. R.T. Props., LLC, 2009 WL 3320578, at *1 (Del. Super. Ct. Sept. 21, 2009)). Instead, the law in this area is clear that the failure of a party to object to a document request in a timely manner results in the waiver of any objections. 2 Defendants should be held to this standard. II. PLAINTIFF IS ENTITLED TO THE METADATA FOR THE JULY 24 LETTER. Plaintiff initiated this action in an effort to restrain Defendants from executing the purchase of a corporate aircraft without the consent of a majority of the board of directors. Defendants, in opposing the entry of a temporary restraining order, argued that the request for emergency relief is moot because the transactionhas already occurred. (Opp. to TRO at 1). Defendants went on to explain that [b]efore receiving the complaint and associated motion papersCrossfit had already executed and sent a letter confirming the purchase. (Id.). Defendants attached to their opposition the letter that they claimed was sent to the manufacturer of the aircraft, Cirrus Aircraft (the July 24 Letter). In light of Defendants representation, the Court found, at the July 25 hearing on this application, that the basis for Plaintiffs request had been circumvented by the July 24 Letter and declined to enter a temporary restraining order against the execution of the agreement. See Gower v. Beldock, 1998 WL 200267, at **2-3 (Del. Ch. Apr. 21, 1998) (ruling that any objections to request for production were waived when responses were not timely served); Fingold v. Computer Entry Sys. Corp., 1990 WL 11633 at *1 (Del. Ch. Jan. 26, 1990) (finding that objection to document request based on attorney-client privilege was waived because it was not asserted in a timely manner); see also Standard Chlorine of Del., Inc. v. Sinibaldi, 821 F. Supp. 232, 261-62 (D. Del. 1992) (citing substantial federal precedent and holding that defendants failure to serve timely responses and objections to requests for production constitutes waiver of any and all objections to said request) (citations omitted).
2

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But based on the documents produced by Defendants in discovery, it appeared to Plaintiff that the July 24 Letter was not sent to Cirrus Aircraft until July 26. Plaintiff, thus, requested from Defendants the metadata associated with the letter to determine when it was, in fact, drafted and finalized for sending. After refusing to provide the requested metadata, Defendants now respond to Plaintiffs Motion to Compel by admitting that the July 24 Letter was not provided to Cirrus Aircraft until July 26 and then claiming that, in light of their admission, no further discovery need be taken. 3 But such an admission only leads to more questions. 4 While it may be that the date and time that the [July 24 Letter] was sent (Opp. at 6) is no longer at issue, the relevant questions for purposes of this dispute are when the letter was created and when it was modified, particularly since Defendants were copied to Plaintiffs email to Cirrus Aircraft notifying the
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Defendants Opposition also includes a suggestion that Plaintiff failed to make a request for metadata in her initial discovery requests. Such a suggestion is, however, especially misleading given that Plaintiffs requests sought Defendants production in native format. (Ex. A to Motion to Compel). As Defendants well know, a production of electronically stored information in native format will include the metadata associated with the documents produced. Lorraine v. Markel Am. Ins. Co., 241 F.R.D. 534, 547 (D. Md. 2007) (Grimm, M.J.) (A party therefore can request production of electronically stored information in its native format, which includes the metadata for the electronic document.). Defendants Opposition also appears to fault Plaintiff for not immediately challenging their subsequent refusal to produce documents in the requested native format. But given the number of motions that were already pending before the Court, Plaintiff sought to avoid additional motion practice by waiting to see whether there were any specific documents in Defendants production for which the associated metadata would be beneficial. The July 24 Letter is one such document. As an initial matter, the fact that Defendants waited three months to inform Plaintiff and the Court of their inadvertent error is an issue in itself. Even assuming Defendants did not realize their mistake initially, they certainly discovered it in responding to Plaintiffs request for all documents regarding what time, on July 24, 2012, CrossFit sent the letter from CrossFit to Cirrus Aircraft. (See Ex. A to Motion to Compel). Moreover, Defendants Opposition seeks to minimize their actions by claiming that the misstatement was made, not by Defendants themselves, but by their counsel during oral argument. (See Opp. at 13). However, their paper submission in opposition to the TRO, which Defendants would presumably have reviewed, contained the same misstatement.

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manufacturer that the Companys purchase was unauthorized at approximately 9:30 a.m. PDT and Defendants declined the Courts proposal to enter into a standstill the following day. The metadata associated with the July 24 Letter will, at a minimum, provide answers to these questions. This Court has held that metadata may be especially relevant in a casewhere the integrity of dates entered facially on documentsis at the heart of the dispute. Ryan v. Gifford, 2007 WL 4259557, at *1 (Del. Ch. Nov. 30, 2007) (ordering the production of documents in a format that will permit review of metadata). Indeed, the credibility of Defendants officers has become an issue, both in light of their actions with respect to the July 24 Letter, as well as their misstatement regarding Cirrus Aircrafts request for further assurances relating to the transaction. (See, supra, n.1). And while Defendants would like to rewrite history by suggesting that the Courts decision on Plaintiffs application for a temporary restraining order turned on a balance of the harms (Opp. at 15), the Courts July 25 ruling was clear that the July 24 Letter itself precluded the relief Plaintiff was seeking. The nature of this case has, thus, been permanently altered from one which sought to preclude the taking of an action to one which seeks to recover damages resulting from that action. The only assurance from Defendants that Mr. Glassman will be in a position to pay these damages is that he is entitled to sufficient distributions from CrossFit to fund the purchase price of the aircraft. (See 9/10/12 Affidavit of Greg Glassman; Docket #79). In the present circumstances, this is no assurance at all. Rather than resting on grounds of relevancy, however, Defendants eventually agreed in their Opposition to provide Plaintiff with certain metadata. 5 But what Defendants have agreed to

Defendants agreement comes as a surprise given that Plaintiff asked that Defendants provide her with the requested metadata prior to filing the present Motion to Compel. (Ex. K to Motion to Compel). Had Defendants agreed to provide the metadata in the first instance, this would
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provide is not what Plaintiff has sought to compel. (See Opp. at 12, 15). Plaintiff has requested the metadata associated with the July 24 Letter, not the July 26 email transmitting the letter to Cirrus Aircraft. Plaintiff, therefore, demands that Defendants produce the native file and metadata for all versions of the July 24 Letter that are in Defendants possession, custody, or control. III. DEFENDANTS PROVISION OF COMPANY INFORMATION TO THIRD PARTIES IS RELEVANT TO DEFENDANTS COUNTERCLAIM AND PLAINTIFFS DEFENSES THERETO. Plaintiff is entitled to discovery into any matter, not privileged, which is relevant to the subject matter in this action. As Plaintiffs Motion to Compel explained, Defendants brought a Counterclaim against Plaintiff arising from her provision of CrossFit information to a third party in connection with its purchase of Plaintiffs 50% interest in the Company. Thereafter, Plaintiff learned that Defendant Greg Glassman has also provided information to third parties in connection with his efforts to obtain the financing necessary to acquire Plaintiffs 50% interest in CrossFit. Upon learning of this information, Plaintiff promptly served a second request for production on Defendants, seeking documents provided to any Person that was contacted for the purpose of providing financing in connection with the acquisition of Plaintiffs interest in CrossFit, including but not limited to THL Credit Advisors LLC and Level Equity Management, LLC. (Ex. B to Motion to Compel). Plaintiff further sought documents relating to any nondisclosure or confidentiality arrangement agreed to by Mr. Glassman and any person to

have saved Plaintiff the significant expense associated with bringing the motion and would have saved the Court its time and resources. Regardless, to the extent such discovery will, as Defendants allege, cause them an undue burden, Plaintiff will pay the costs to extract the atissue native files and metadata and offer to send their own electronic discovery provider to provide its services at CrossFits offices, Mr. Glassmans residence(s), or residential office(s). Moreover, and contrary to Defendants suggestion, Plaintiffs discovery vendor has confirmed that metadata can, in fact, be extracted from web-based applications such as Gmail.

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which such information was provided. (Id.). In anticipation of Defendants objections to these requests, Plaintiff made clear in her request that she was not seeking discovery into the terms of any proposed financing, but simply the production of documents provided to these parties in connection with their consideration of whether to provide such financing. (Id.). Plaintiff served Subpoenas on THL Credit Advisors and Level Equity Management, which are, at the present time, the only two parties of which Plaintiff is aware that were provided Company information by Defendant Glassman. (Exs. 3 and 4 hereto). The Subpoenas sought copies of the corporate documents that were provided to these parties by Defendants and documents relating to any nondisclosure or confidentiality arrangement discussed by the parties. Importantly, the Subpoena also contained a disclaimer similar to that contained in the discovery requests that Plaintiff was not seeking any information relating to the terms of any proposed financing. (Id.) Notwithstanding the care Plaintiff took in crafting her Discovery Requests and issuing her Subpoenas, Defendants refused to produce the documents requested or answer the interrogatories propounded. They have also sought to quash the Subpoenas issued to the third parties. Defendants challenge the discovery on the grounds of relevance and, with respect to the Subpoenas, on the grounds that such discovery is duplicative of that sought from Defendants. Neither ground is sufficient to deny Plaintiff access to this information. 6
6

Before reaching the merits of Defendants opposition, Plaintiff must clarify that, contrary to Defendants suggestion, Plaintiff did, in fact, engage in a meet and confer attempt with respect to her Discovery Requests before filing her motion, in response to which Defendants refused to even inform Plaintiff whether they would be responding to her requests or objecting to them in their entirety. (Ex. K to Motion to Compel). Defendants contrary suggestion misstates the record and, in any event, should not have been asserted in their papers. See Czarninski Baier de Adler v. Upper New York Inv. Co., 2012 WL 4847086 (Del. Ch. Sept. 28, 2012) (Defendants conveniently overlook the express limitation that [the Court of Chancery Guidelines] are not to be cited as authority in the context of any dispute before the Court).

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A.

Defendants Must Produce Documents and Answer Plaintiffs Interrogatories.

Defendants briefing spends significant time focusing on the Arizona divorce proceeding and the pending issues in that case, including whether Plaintiff must accept Defendant Glassmans offer to purchase her interest in CrossFit notwithstanding her agreement to sell her interest to third party, Anthos Capital. 7 But the only fact relevant for purposes of this discovery dispute is that Mr. Glassman has provided third parties with Company information in connection with his efforts in Arizona to obtain financing for the purchase. While Defendants would like the Court to believe that Plaintiffs Discovery Requests are being sought to obtain leverage in the Arizona proceeding or to scare off potential lenders, the fact is that what may be gleaned from the Discovery Requests will have no useful purpose in the Arizona proceeding. Instead, this information will allow Plaintiff to defend against the Counterclaim, which Defendants chose to bring as part of the present action. Not surprisingly, however, in over 30 pages of briefing on this issue, Defendants never once inform the Court that Plaintiff expressly carved out from her Discovery Requests any information that could be relevant to the Arizona proceeding, including the terms of any proposed financing. (Exs. B and C to Motion to Compel). Instead, Defendants incorrectly reframe Plaintiffs request as seeking documents related to the lending process. (Opp. at 5). Even a cursory review of Plaintiffs requests, however, makes clear that this is simply not the case.

Defendants have, again, through their briefing, attempted to turn this case into a family court matter by making baseless allegations regarding, for example, Plaintiffs purported attempts to destroy the company that [Mr. Glassman] has spent his life building by not accepting his matching offer. (Motion to Quash at n.1). The reality of the situation, however, is that while Defendant Glassman maintains that his money is just as green as Anthos, he has yet to put forth any indication that he actually has the money to make the purchase. (Id.).

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Failing to establish any ill motives for seeking the disputed discovery, Defendants next try to negate any claim of relevance by distinguishing Defendant Glassmans actions in providing Company information to third parties from those of Plaintiff. In their Opposition, Defendants contend that their breach of fiduciary duty counterclaim is not based on Plaintiffs alleged failure to obtain board of director approval before providing Company information to Anthos. Thus, according to Defendants, the fact that Mr. Glassman provided this information without such approval is not relevant. To accept this theory, however, is to ignore the express words of the Counterclaim. Indeed, the Counterclaim expressly alleges that Plaintiff provided confidential information to Anthos without any prior notice to, or permission fromthe Board of Directors. (Counterclaim at 71 (emphasis added)). It further alleges that Plaintiff intentionally concealed these activities fromthe Board of Directors. (Id. at 73 (emphasis added)). These allegations should, alone, dispel any concern as to the relevancy of Plaintiffs Discovery Requests. But even assuming that the Counterclaim does not say what it says, the relevance of Defendants actions to the present dispute remains clear. Indeed, even if Mr. Glassman had management authority 8 to provide Company information to third parties, the scope of the information provided, as well as the nature of any nondisclosure arrangements put in place to protect the confidentiality of this information, remain at issue. In preparing her defense, Plaintiff is entitled to know whether Defendants provided these parties with similar Company information and whether Defendants sought the protections that their Counterclaim alleges Plaintiff should

Mr. Glassmans reliance on managements authority in providing Company information to these third parties is, at best, misleading, inasmuch as the purported management is comprised of Mr. Glassman himself.

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have obtained when providing information to Anthos. Defendants efforts to foreclose this discovery are, thus, nothing more than an attempt to prevent Plaintiff from preparing her defense. Moreover, the discovery Plaintiff seeks is relevant to refute the element of causation as to Defendants breach of fiduciary duty claim. To the extent that Defendants have provided CrossFits confidential information to two (and possibly more) potential investors without the protections of a nondisclosure agreement, Plaintiff is entitled to discover such information, which would tend to show that any misuse of the Companys information was a result of CrossFits or Greg Glassmans rather than Plaintiffs provision of those materials without such protections. B. Plaintiff Is Also Entitled to Third Party Discovery.

In addition to their relevancy objection, Defendants seek to quash the Subpoenas issued to THL Credit Advisors and Level Equity Management on the grounds that the discovery is more appropriately sought from Defendants. 9 While such a position is convenient to take in the context of a motion to quash, it is not appropriate in this case given that Defendants have objected to each of Plaintiffs Discovery Requests on the grounds that they call[] for the production of information that is not in the possession custody, or control of Defendants or is equally available to Plaintiff. (Exs. H and I to Motion to Compel). If Defendants do not, as they say, possess the requested documents, there can be no basis to oppose the Subpoenas.
9

As a threshold matter, it should be noted that, in ordinary circumstances, Defendants would not have standing to challenge the third party subpoenas on a motion to quash. Indeed, this Court has been clear that when a subpoena is issued to a non-party, a party does not have standing to object to the subpoena unless production of documents pursuant to the subpoena would violate a privilege held by the objecting party. Cede & Co. v. Joule Inc., 2005 WL 736689, at * (Del. Ch. Feb. 7, 2005). Defendants motion to quash was not brought on privilege grounds. But given the limited time remaining to resolve these discovery issues, a resolution on the merits of the third party subpoenas would seem to be the most constructive way to proceed at this juncture.

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Nonetheless, and contrary to Defendants assertions, the information requested from Defendants and that requested from the third parties is not duplicative. By way of example, it is more than conceivable that the third parties may possess internal communications relating to any non-disclosure arrangement that would not be possessed by Defendants. Those documents are called for in Plaintiffs Subpoenas and would not be part of any production made by Defendants. In any event, to the extent that any of Defendants production overlaps with that of the third parties, Plaintiff is entitled to test the truth, accuracy and completeness of [Defendants] discovery responses, especially in the present circumstances where the credibility of Defendants officers has already been called into question. Fitzgerald v. Cantor, 1998 WL 780129, at *1 (Del. Ch. Oct. 23, 1998). This, the Court held, outweighs the risks that the Non-Parties discovery responses will be duplicative of [Defendants] discovery responses and that the discovery may be more easily obtainable from [Defendants]. Id. (ordering discovery even though the discovery was sought by a competitor); Grunstein v. Silva, 2010 WL 1531618, a *4 (Del. Ch. Apr. 13, 2010) (denying request for protective order over defendants assertion that documents requested in subpoena were duplicative of those being sought from defendants and beyond the scope of discovery). Lastly, while Defendants Motion to Quash suggests that the Subpoenas are meant to intimidate or scare off potential sources of financing, the reality is that the Subpoenas were crafted narrowly and specifically, and were purposely constructed in this manner to prevent any concern that Plaintiff was seeking discovery into the proprietary information of the third parties or their decision-making with respect to the financing of Mr. Glassmans proposed acquisition of Plaintiffs interest in CrossFit. Defendants, therefore, have no basis to oppose the requested discovery.

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WHEREFORE, for the foregoing reasons, Plaintiff respectfully requests that the Court grant Plaintiffs Motion to Compel, deny Defendants Motion to Quash and deny Defendants Motion for Protective Order. Plaintiff further requests that the Court grant such further relief as it deems necessary or appropriate. ASHBY & GEDDES, P.A.

Of Counsel: BERGESON, LLP Daniel Bergeson Grace Y. Park 303 Almaden Blvd. Suite 500 San Jose, CA 95110

/s/ Philip Trainer, Jr. (#2788) Philip Trainer, Jr. (#2788) Toni-Ann Platia (#5051) 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, Delaware 19899 (302) 654-1888 Attorneys for Plaintiff/CounterclaimDefendant Lauren Glassman

Dated: October 29, 2012

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