Trilegiant Corp. v. Sitel Corp.

Citations: 272 F.R.D. 360; 2010 U.S. Dist. LEXIS 121490; 2010 WL 4668950Docket: No. 09 Civ. 6492 (BSJ)(JCF)

Court: District Court, S.D. New York; November 14, 2010; Federal District Court

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Trilegiant Corporation has initiated legal action against Sitel Corporation for breach of contract and negligence due to Sitel's failure to preserve audio recordings of telephonic sales, which Trilegiant claims were mandated by their contract. Sitel, seeking to compel discovery from Trilegiant, argues that it needs information related to the alleged breach and the actual damages incurred by Trilegiant due to the missing recordings. 

The background reveals that Trilegiant entered a contract with ClientLogic Operating Corporation, Sitel's predecessor, on September 12, 2005, which included several Statements of Work (SOWs) governing telemarketing services and metrics, including a Vendor Standards Manual. This Manual required ClientLogic to maintain "proofs of enrollment" (POEs) for four years and imposed a $250 fine for each unproduced recording. After ClientLogic merged with Sitel in 2007, Sitel became responsible for the contract. 

Trilegiant requested POEs from September 28, 2006, to September 1, 2007, but Sitel was unable to provide any, leading Trilegiant to claim liquidated damages totaling $33,500,000 or actual damages due to negligence, including lost profits and reputational harm. Sitel disputes the incorporation of the Manual into the contract and claims the fine provision is an unenforceable penalty. Sitel's motion for discovery includes requests for information regarding the Manual's development, actual lost customers, and various financial details from Trilegiant. The court granted Sitel's motion in part and denied it in part, with specific requests to be addressed in further proceedings.

Parties in legal proceedings may seek discovery for any nonprivileged matter relevant to claims or defenses, with relevance being broadly interpreted. Information does not need to be admissible at trial, provided it could lead to admissible evidence. The burden to demonstrate relevance lies with the party requesting discovery, and once established, the responding party must justify limiting it. Courts may restrict discovery if it is cumulative, obtainable from a more convenient source, if the requesting party had sufficient opportunity to gather the information, or if the discovery's burden outweighs its benefits based on various factors. General objections regarding relevance or burden are inadequate to deny discovery. Discovery can only be limited in cases of bad faith, harassment, irrelevance, or privilege.

Sitel’s motion to compel includes eight requests for documents related to the interpretation of a liquidated damages provision in the Manual and the parties’ intentions regarding its incorporation into the contract and Statement of Work (SOW). The requests encompass other contracts, agreements, SOWs, and manuals involving Trilegiant that reference liquidated damages or fines, along with drafts and communications related to the Manual's development. The central issue is the enforceability and incorporation of the fine provision in the Manual. Relevant information may include other similar agreements involving the plaintiff and how provisions were negotiated or drafted, suggesting that Trilegiant must produce documents regarding liquidated damages and related contract language.

Sitel's discovery requests primarily focus on understanding the actual damages Trilegiant claims to have incurred due to Sitel's failure to provide Proofs of Enrollment (POEs) for 134,000 customers. The requests include identifying those customers, details on how the damages were calculated, information on customer disputes related to the lack of POEs, and Trilegiant's policies on handling these issues. Trilegiant contends that these requests are irrelevant, arguing that the enforcement of the liquidated damages clause should not depend on actual damages, as established by New York law. They assert that they previously communicated their intention to limit claims to cover costs incurred from transferring services to a new vendor after Sitel's breach. 

Trilegiant acknowledges that liquidated damages can be enforced when actual damages are challenging to ascertain and the stipulated amount is not excessively disproportionate. However, they argue that actual damages remain relevant for evaluating the enforceability of the liquidated damages clause, as they inform the anticipated harm at the time of contracting. While Trilegiant is willing to stipulate to certain actual damages, Sitel's requests for detailed customer information are deemed excessively cumulative. The relevance of the requested information must be weighed against the burden of producing it, and Sitel's broad request for customer details from a large cohort is considered unreasonably cumulative and duplicative.

Trilegiant contends that specific information requested by Sitel is unnecessary if Trilegiant can provide documentation proving that Sitel should have had at least 134,000 Points of Engagement (POEs) corresponding to sales made during the relevant period, along with evidence of financial aspects of their contract. Trilegiant argues that Sitel's request for all documents related to individuals solicited under any agreement is overly burdensome. However, requests for documents concerning specific groups within the 134,000, such as customers lost or those disputing sales, are deemed appropriate and pertinent to assessing Trilegiant's damages. Additionally, information regarding any government actions against Trilegiant for failing to maintain POEs is relevant to evaluating the proportionality of contract provisions and potential damages.

Trilegiant also raises objections to Sitel's discovery requests, asserting that many interrogatories exceed the scope defined by Local Civil Rule 33.3, which limits such requests to names of knowledgeable witnesses, damage computations, and descriptions of relevant documents. Consequently, Sitel's motion to compel is denied for Interrogatories 18, 22, 23, 25, 28, and 29, as document requests are a more effective means of obtaining the needed information. Furthermore, contention interrogatories are not to be served until discovery concludes, making Sitel’s motion to compel regarding Interrogatory 25 premature. Lastly, Trilegiant criticizes Sitel for not adhering to Local Civil Rule 37.1, which requires detailed presentation of each discovery request in the motion, although this issue is rendered moot by previous discussions.

Trilegiant asserts that its inability to respond to Sitel's arguments on interrogatories and document requests is due to Sitel's alleged failures; however, the extensive communications between the parties mitigate any substantial prejudice to Trilegiant's position. Trilegiant also claims Sitel did not comply with Local Civil Rule 37.2, which requires an informal conference before filing a motion to compel. Despite the lack of a formal request for such a conference, past discussions have addressed the discovery issues adequately, allowing the court to proceed with Sitel's motion. Trilegiant objects to Sitel exceeding the interrogatory limit under Rule 33 of the Federal Rules of Civil Procedure; however, since many interrogatories were rejected for local rule violations, this objection is moot. 

Regarding Request for Production of Documents 8, which seeks Trilegiant’s federal income tax returns from 2003 onwards, the court finds that Sitel has not demonstrated the necessary relevance and compelling need for such documents, as the relevance of Trilegiant’s overall profits is weak. The financial documents already required should suffice for assessing damages related to Sitel’s breach of contract. 

Several of Sitel’s interrogatories are found to be duplicative of document requests, leading to a denial of Sitel’s motion to compel concerning Interrogatories 8, 9, 12, 13, 14, and 15. Request for Production of Documents 11, initially deemed premature, is now valid as the discovery period nears its close, and Trilegiant is ordered to comply, limited to documents not previously produced. Similarly, Trilegiant's objection to Interrogatory 20 as premature is overruled; this interrogatory pertains to damage calculations and is timely.

Trilegiant claims its disclosures concerning Requests for Production of Documents 5, 6, 9, 14, 15, 19, 22, 24, 28, and 29 are complete, but Sitel has not specified any missing documents to warrant further response. Trilegiant is reminded of its obligation under Rule 26(e) to supplement disclosures as needed.

Trilegiant’s response to Sitel’s Request for Admission 1 is deemed sufficient, resulting in the denial of Sitel’s motion to compel a response to this request. Sitel's motion to compel discovery is granted in part and denied in part. Trilegiant must comply with Sitel’s discovery requests listed in the Appendix within 30 days. The Appendix details the dispositions of various interrogatories and requests, indicating which were granted or denied based on specific grounds such as duplicative nature, local rules, or scope issues. Notably, several requests were granted for actual damages (AD) or liquidated damages (LD), while others were denied for reasons including being premature or moot. The case applies New York law, as specified by the contract’s choice-of-law provision.