Case 2:11-cv-01556-JS-ETB Document 14 Filed 07/07/11 Page 1 of 6 PageID #: 339

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK JOHN R. RICONDA, Plaintiff, -againstMARC SHERMAN, EDWARD L. CUMMINGS, ROBERT W. VAN HELLEMONT, R. KEITH ELLIOT, JOHN F. CUNNINGHAM, AND GEOFF SMITH, Defendants. RULE 26(F) JOINT DISCOVERY PLAN Plaintiff John R. Riconda (Plaintiff) and Defendants Marc Sherman, Edward L. Cummings, Robert W. Van Hellemont, R. Keith Elliot and Geoff Smith (Defendants) hereby submit their Rule 26(f) Joint Discovery Plan as follows: A. CHANGES TO RULE 26(A) INITIAL DISCLOSURES Pursuant to Rule 26(f)(1) the Parties state that Plaintiffs Initial Disclosures under Rule 26(a) will be served July 7, 2011. Defendants will serve their Initial Disclosures by July 12, 2011. At this time, the Parties are not aware of other changes that should be made to the timing, form, or requirement for disclosure under Rule 26(a)(1). B. SUBJECTS OF DISCOVERY Plaintiffs Statement of Facts: This action arises out of acts of fraud, self-dealing and breach of fiduciary duty by the Defendants, who were the directors and officers of QSGI, Inc. and QSGI-CCSI, Inc. two Florida-based public companies that are now Debtors in a Chapter 11 proceeding in the United States Bankruptcy Court for the Southern District of Florida. In July 2008, under the stewardship of the Defendants, QSGI purported to buy John Ricondas company, Judge Joanna Seybert Magistrate Judge E. Thomas Boyle Civil Action No. 11-CV-01556

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Contemporary Computer Services, Inc. (CCSI), in exchange for a $10 million, 10% promissory note. John Riconda also received shares in QSGI. QSGI pledged the stock and assets of CCSI back to John Riconda as security for its payment obligations under the promissory note. Yet QSGI never paid a dollar of that purchase price to Riconda. To make matters worse, immediately following the transaction, QSGI pledged all of its assets including the stock and assets of CCSI to a lender called Victory Park Management, LLC, in order to secure a multi-million loan. Because QSGI defaulted on its payment obligation, John was entitled to reclaim CCSI from QSGI. However, because QSGI had given Victory Park a lien on CCSIs assets (including its cash and receivables), John Riconda had to spend hundreds of thousands of dollars and more than a year in litigation with Victory Park, in order to reclaim CCSI free and clear of any encumbrances. The Defendants are personally liable for John Ricondas losses because they committed acts of fraud, self-dealing and breaches of fiduciary duty and their duty of loyalty to John Riconda. First, on the Defendants watch, QSGI intentionally filed disclosures with the SEC containing falsified inventory figures inflated by millions of dollars. The filings misrepresented the financial stability of QSGI. John Riconda relied on these filings in agreeing to enter into the sale transaction with QSGI. Following the transaction, QSGI and the individual Defendants owed Riconda a fiduciary duty because QSGI had pledged the stock of CCSI to Riconda as collateral for the promissory note, and Defendants had a duty not to impair that collateral. Defendants also owed John Riconda a fiduciary duty as a shareholder of QSGI. By falsifying QSGIs SEC disclosures and/or allowing the Company to file falsified documents with the SEC, the Defendants breached -2-

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those duties and are personally liable for John Ricondas damages. This misconduct also damaged Riconda because Victory Park relied on the false SEC filings in lending millions of dollars to QSGI a loan that was secured by the stock and assets of CCSI (i.e., which QSGI purported to own). At least some of the Defendants are presently under investigation by the SEC for this misconduct. Defendants also breached their fiduciary duty to John Riconda in other ways as well. For instance, QSGI pursued an aggressive strategy of buying used computers for resale. But QSGI paid a hugely inflated price for the used computers causing the company to hemorrhage cash because the seller was Keystone Memory Group, a company owned and managed by Defendant Marc Shermans sister. As a result of Defendants misconduct, John Riconda suffered damages in excess of $2,572,000. Riconda filed its complaint on February 25, 2011 in New York Supreme Court, County of Suffolk. On March 30, 2011, the Defendants removed the case to the Eastern District of New York based on diversity jurisdiction. In April 2011, the Defendants filed their motions to dismiss and motion to transfer venue to the Southern District of Florida. Defendants have not filed an Answer to the Complaint. John Riconda anticipates filing papers in opposition to Defendants various motions on or before July 14, 2011. Plaintiff anticipates taking discovery with respect to the subjects set forth above and the other allegations set forth in the complaint. Defendants Statement of Facts: Defendants will provide their statements of facts for inclusion in the Rule 26(f) Joint Discovery Plan by July 12, 2011.

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C.

DISCOVERY OF ELECTRONICALLY STORED INFORMATION The Parties anticipate conducting discovery of electronically stored information

and the measures taken to preserve such information. The Parties shall confer on the form in which electronically stored information shall be produced. D. CLAIMS OF PRIVILEGE AND WORK PRODUCT At this time the Parties are not aware of any concerns regarding claims of privilege or the work product doctrine. E. LIMITATIONS ON DISCOVERY Discovery shall be limited as provided under the Federal Rules of Civil Procedure. F. PROPOSED CASE MANAGEMENT SCHEDULE The parties propose a case management schedule as set forth in the attached Proposed Case Management Order.

Dated: July 7, 2011. New York, New York

By:

/s Joshua A. Berman Joshua A. Berman KELLEY DRYE & WARREN LLP 101 Park Avenue New York, New York 10178 Telephone: (212) 808-7800 Email: jberman@kelleydrye.com

Attorney for Plaintiff John R. Riconda

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Dated: July 7, 2011. Melville, New York

By: /s Richard A. Kraslow Richard A. Kraslow RICHARD A. KRASLOW, P.C. 425 Broad Hollow Road, Suite 206 Melville, New York 11747 (631) 756-8300 Email: rakpc@aol.com Attorney for Defendants Marc Sherman, Edward L. Cummings, Robert W. Van Hellemont, R. Keith Elliot and Geoff Smith

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CERTIFICATE OF SERVICE I, Joshua A. Berman, hereby certify that on this 7th day of July, 2011, a true and correct copy of the foregoing document was served upon all counsel of record via ECF electronic filing.

/s/ Josh A. Berman Josh A. Berman