throbber
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`BREX INC.,
`)
`)
`Plaintiff / Counterclaim
`)
`Defendant,
`)
`)
`)
`)
`)
`)
`)
`
`v.
`DIZHE SU,
`
`Defendant / Counterclaim
`Plaintiff.
`
`C.A. No.: 2022-0758-MTZ
`
`
`
`PLAINTIFF BREX INC.’S OPPOSITION TO DEFENDANT DIZHE SU’S
`FIRST MOTION TO COMPEL
`Plaintiff/Counterclaim-Defendant Brex Inc. (“Brex”), by and through its
`
`undersigned counsel, respond to the motion to compel (the “Motion”) filed by
`
`Defendant/Counterclaim-Plaintiff Dizhe Su (“Su”) on November 1, 2023.
`
`INTRODUCTION
`
`The facts of this case are straightforward and undisputed. During the due
`
`diligence period leading up to a merger between Brex and Su’s company Pry
`
`Financials, Inc. (“Pry”), Su made multiple misrepresentations that neither he nor Pry
`
`were parties to litigation. (See Su’s Answer ¶ 9 (“Defendant admits that Pry did not
`
`disclose the Beowawie Litigation in written diligence responses.”); see also Su’s
`
`Answer ¶ 11 (“Defendant admits that . . . he did not inform Brex that he and Pry
`
`were parties to the Beowawie Litigation prior to execution” of the Merger
`
`Agreement)). Unbeknownst to Brex, Su and Pry were defendants in a fraud lawsuit,
`
`
`
`
`
`PUBLIC VERSION FILED -
`DECEMBER 6, 2023
`
`EFiled: Dec 06 2023 03:42PM EST
`Transaction ID 71561442
`Case No. 2022-0758-MTZ
`
`

`

`to which Brex was subsequently named as a defendant following Brex’s merger with
`
`Pry.1 (Su’s Answer ¶ 12). After Brex was added as a defendant to the fraud lawsuit,
`
`Su finally “apologized for the nondisclosure.” (Su’s Answer ¶ 15). Based on Su’s
`
`misrepresentations to Brex, Brex’s Board terminated his employment for “Cause,”
`
`which is defined to include the commission of “theft, fraud, a breach of trust, or any
`
`material act of dishonesty” or “engaging in other misconduct which materially
`
`impairs the performance of such [employee’s] duties,” among other things. (Motion
`
`Exhibit 1 § 2.8(e)).
`
`Despite the facts of this case being undisputed, Brex has already agreed to
`
`review over 37,000 documents from 22 search terms for relevant documents.
`
`(Motion Exhibit 12 at 3). Inexplicably, Su’s Motion hyperbolically accuses Brex of
`
`engaging in “bad faith” based on a flurry of misleading statements about Brex’s
`
`search for relevant documentation. (Motion at 3). For example, Su asserts that Brex
`
`has “refuse[d] to collect ESI from any of its Board members.” (Motion at 3). But
`
`Brex has collected ESI from its board members in the form of communications
`
`between Brex’s employees and Brex’s Board. (Motion Exhibit 12 at 2 (informing
`
`
`1 Su misleadingly suggests that Brex was aware that Su and/or Pry were
`defendants in the fraud litigation prior to the merger. (Motion at 7). That is
`inaccurate. Brex was not aware that Su or Pry were defendants in the fraud litigation
`until after Brex was added as a defendant to the litigation post-merger.
`
`2
`
`
`
`
`
`
`
`

`

`Su that Brex would be searching across the entire company)). Similarly unfounded,
`
`Su claims that Brex has not provided a “compliant” hit report, but Brex has provided
`
`the number of hits for each search Su asked to be run. (Motion Exhibit 12 at 3).
`
`While the hit report noted there were some terms that resulted in errors (such as a
`
`39+ element search), Brex asked Su to break up these terms or reformat them so that
`
`there would be no errors. (See Exhibit A (“Email from M. Turbenson dated Nov.
`
`15, 2023”) at 3).
`
`The Court should deny Su’s Motion as it is devoid of factual or legal support.
`
`BREX’S DISCOVERY EFFORTS
`
`Contrary to Su’s claims, Brex has provided significant information and
`
`documents based on Su’s discovery requests. Brex has searched over 37,000
`
`documents that were located by running searches for 22 search terms. Specifically,
`
`Brex collected email communications for all Brex email accounts for the following
`
`terms: (1) “Beowawie,” (2) “inDinero,” (3) “Dizhe,” (4) “Mah,” (5) “Thirty
`
`AROUND million,” (6) “(Andy OR Su OR Pry) AROUND (For AROUND cause),”
`
`(7) “(Andy OR Su OR Pry) AND (Loss AROUND trust),” (8) “21STCV04269,”
`
`(9) “Angeles AROUND Court,” (10) “Beaudet,” (11) “Department AROUND 50,”
`
`(12) “Ten AROUND million,” and (13) “huge loss of trust.” Brex further has
`
`collected and reviewed communications (emails and alternative means of
`
`communication, such as Slack) and documents stored on Google Drive for the
`
`
`3
`
`
`
`
`
`

`

`following custodians: former employee Ryan Marsh, former employee Patrick
`
`Ekeruo, Art Levy, Adam Lesman, and Cosmin Nicolaescu): (14) “Andy,”
`
`(15) “Defendant,” (16) “Court,” (17) “Lawsuit,” (18) “Litigation,” (19) “Disclose,”
`
`(20) “Termin*,” (21) “Fire,” and (22) “For AROUND cause.”2 (Motion Exhibit 12
`
`at 3).
`
`On August 23, 2023, Brex made its first production of 712 documents
`
`(BREX_000001–BREX_017296). On November 2, 2023, Brex made its second
`
`production of 668 documents (BREX_017297–BREX_023578). Brex has further
`
`provided hit counts for broken-out search terms for a 39+ element search term:
`
`“(Andy OR Su OR Pry) /30 (cause OR breach OR invest! OR talk! OR ask! OR disc!
`
`OR fir! OR term! OR resig! OR merg! OR stock OR cash OR trust OR fraud OR lie!
`
`OR non! OR indem! OR consid! OR interv! OR loss OR law! OR case OR part! OR
`
`sue! OR litig! OR defen! OR answ! OR motion OR demur OR million OR
`
`consideration OR equity OR stock OR vest! OR leave),” which has resulted in over
`
`657,561 hits. (See Exhibit A).3 Further, as mentioned in the Motion, Brex has
`
`
`2 Google Vault has various best practices for searching, including the use of
`specific search operators. See, e.g., Use Operators to Refine a Search in Vault,
`Google Vault Help, https://support.google.com/vault/answer/2474474?hl=en (last
`accessed Nov. 29, 2023).
`3 These terms are not the subject of Su’s Motion and are disclosed to the Court
`to counter any suggestion that Brex is engaging in “bad faith.” Brex and Su are
`currently discussing which of those terms/hits Brex will review.
`
`4
`
`
`
`
`
`
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`

`

`searched for and produced relevant text messages from employees Art Levy, Cosmin
`
`Nicolaescu, and Adam Lesman. Finally, Brex has responded to 82 interrogatories
`
`served by Su.
`
`On October 23, 2023—prior to Su filing this Motion—Brex agreed to
`
`supplement its interrogatory responses to list documents and communications made
`
`during Brex’s investigation into Su, as well as the documents and communications
`
`relied upon by Brex’s Board in terminating Su’s employment. (See Exhibit B
`
`(“Email from B. Alleman dated October 23, 2023”); Exhibit C (“Amended Second
`
`Set of Interrogatories”) at 15–21). Brex served the agreed-upon supplemental
`
`interrogatory responses on November 8, 2023. (Exhibit C).
`
`ARGUMENT
`
`I.
`
`Brex Has Searched Documents and Communications It Has Control
`Over With Regard to Board Communications
`Under Chancery Court Rule 34(a), a party is only required to search for and
`
`produce documents that are in the party’s “possession, custody or control.” See
`
`Fitzgerald v. Cantor, No. 16297-NC, 1998 WL 842278, at *1 (Del. Ch. Nov. 16,
`
`1998) (“No Court can compel a litigant to produce documents it does not have.”).
`
`Here, Su misleadingly states that Brex has not searched for communications
`
`with Brex’s Board. This argument is inaccurate for at least four reasons. First, as
`
`Brex has previously indicated to Su, Brex’s companywide searches capture all
`
`
`
`5
`
`
`
`
`
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`

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`communications for individuals with a Brex.com email address. (Motion Exhibit 14
`
`at 4 (“Brex has agreed to collect documents for the following terms across all
`
`company emails (which, for clarity, include the ‘@brex.com’ email domain)”)).
`
`Among the six board members who decided to unanimously terminate Su’s
`
`employment for “Cause,” two board members (Co-Founder Henrique Dubugras and
`
`Co-CEO Pedro Franceschi) have @brex.com email accounts and, thus, their
`
`communications have been collected and searched. The remaining board members
`
`who participated (Meyer Malka, Anu Hariharan, Victor Lazarte, and Thasunda
`
`Brown Duckett) do not have @brex.com email accounts. Instead, communications
`
`with those board members are sent to their respective companies’ emails. For
`
`example, Ms. Brown Duckett is employed by TIAA and communications are sent to
`
`her TIAA email account. Similarly, communications to Mr. Lazarte are sent to his
`
`Wildlife Studios email account; communications to Ms. Hariharan were sent through
`
`her Y Combinator email account4; and communications to Mr. Malka are sent to his
`
`Ribbit Capital email account. Brex does not have possession, custody, or control of
`
`entities like TIAA or the other entities and, thus, has no ability to search those
`
`accounts.
`
`
`4 Ms. Hariharan concluded her service on Brex’s board on March 23, 2023.
`6
`
`
`
`
`
`
`
`
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`

`

`Second, Brex oftentimes sends communications to its Board by carbon
`
`copying “board-comms@brex.com.” Those emails have been collected and
`
`reviewed under Brex’s companywide searches.
`
`Third, Brex has collected and searched communications sent from Brex
`
`employees to Brex’s Board. (Motion Exhibit 14 at 4–5). Brex agreed to perform
`
`expanded searches on the individuals generally involved in the investigation of Su—
`
`Adam Lesman, Patrick Ekeruo, Art Levy, Cosmin Nicolaescu, and Ryan Marsh.
`
`(Motion Exhibit 14 at 4–5). To the extent any of these individuals involved in the
`
`investigation sent a communication to the Brex Board, that communication was
`
`searched and reviewed. Brex has also detailed the information and documents that
`
`were presented to Brex’s Board. (Exhibit C at 21–22). Thus, while Brex is unable to
`
`search the specific email accounts of four current or former members of Brex’s
`
`Board, it has been able to review the communications with Brex’s Board and anyone
`
`with a @brex.com email account (including two members of the Brex Board).
`
`Furthermore, despite the foregoing, the basis for the Board’s decision is
`
`known and undisputed. Su lied to Brex prior to the consummation of the merger with
`
`Pry and did not disclose the litigation even after the merger was consummated until
`
`he was questioned by Brex. (Exhibit D (“Action by Unanimous Written Consent of
`
`the Board of Directors”)). During conferrals, Su’s counsel stated that the reason for
`
`their demands regarding the Brex Board was based on an unpled conspiracy theory
`
`
`7
`
`
`
`
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`

`

`that “Brex’s Board hatched a plot premised on a prediction that Mr. Su would lie on
`
`multiple occasions.” (Motion Exhibit 14 at 7). Farfetched and unpled conspiracy
`
`theories depending on a suggestion that Brex’s Board predicted Su would lie are no
`
`basis for demanding burdensome, duplicative discovery.
`
`II. Brex Has Disclosed the Information Considered by the Board, and Su’s
`Request Otherwise Seeks Privileged Communications.
`“A client has a privilege to refuse to disclose and to prevent any other person
`
`from disclosing confidential communications made for the purpose of facilitating
`
`the rendition of professional legal services to the client . . . between the client or the
`
`client’s representative and the client’s lawyer or the lawyer’s representative.” Del.
`
`R. Evid. 502(b). A party “can rely on the privilege to prevent discovery of any
`
`communications with its legal counsel, such as its counsel’s presentation at the board
`
`of directors’ meeting . . . .” Cincinnati Bell Cellular Sys. Co. v. Ameritech Mobile
`
`Phone Serv., No. 13389, 1995 WL 347799, at *2 (Del. Ch. May 17, 1995).
`
`Here, Brex’s former in-house attorneys Ryan Marsh and Patrick Ekeruo led
`
`an oral presentation to Brex’s Board alongside outside counsel Alex Kaufman.
`
`(Exhibit C at 21–22). Prior to Su filing the Motion, Brex agreed to provide all
`
`“factual information communicated during this presentation.” (Exhibit B; Exhibit C
`
`at 21–22). Brex has described the facts presented to the Board, including:
`
`
`
`
`
`Su did not disclose his or Pry Financials, Inc.’s involvement in the
`case captioned 290 Beowawie LLC v. InDinero, No. 21STCV04269
`8
`
`
`
`
`
`
`
`

`

`(Los Angeles Super. Ct.) during due diligence leading up to the Brex-
`Pry merger;
`
`
`
`Brex merged with Pry Financials, Inc. without knowledge that either
`Mr. Su or Pry Financials, Inc. were parties to the 290 Beowawie case;
`and
`
`
`
`Brex was sued as part of the 290 Beowawie case after the Brex-Pry
`merger.
`(Exhibit C at 22). To the extent Su claims to still be seeking this information, the
`
`request is moot, and when Su filed the Motion, he knew that Brex had agreed to
`
`supplement its Interrogatory Response with this information. (Exhibit B).
`
`
`
`To the extent that Su seeks the specific communications or descriptions of the
`
`communications made to the Board, those communications are privileged. Brex will
`
`serve a privilege log for privileged written communications by the Court’s deadline
`
`of January 10, 2024. Any request for the Court to determine privilege prior to either
`
`party exchanging a privilege log is premature.
`
`III. Brex Has Disclosed the Text Messages that Are Relevant to this Action.
`
`Su’s argument regarding imaging cellphones presents a demand in need of a
`
`dispute. As Su notes, Brex has reviewed and disclosed text messages that are relevant
`
`to this action, including text messages from Art Levy and Cosmin Nicolaescu. (See
`
`Motion Exhibit 15 (Levy text messages); Motion Exhibit 14 at 6 (Nicolaescu text
`
`message)). There are few text messages because Brex’s practice was not to conduct
`
`business (or something as sensitive as the investigation into Su) over a personal
`
`
`
`9
`
`
`
`
`
`
`
`

`

`cellphone. (Motion Exhibit 14 at 5–6). The exception to this practice occurred
`
`specifically with communications with Su because either he: (1) did not yet have a
`
`Brex email account around the time of the merger on March 17, 2022; or (2) was on
`
`an extended leave of absence from April 2022 through the date of the termination of
`
`his employment on August 2, 2022, during which he was generally not reachable via
`
`his Brex email.
`
`Su demanded Brex collect text messages of five individuals: Ryan Marsh, Art
`
`Levy, Cosmin Nicolaescu, Adam Lesman, and Patrick Ekeruo. Ryan Marsh and
`
`Patrick Ekeruo are former employees and, thus, Brex is unable to search their
`
`cellphones at this time.5 However, Brex has produced text messages of Art Levy and
`
`Cosmin Nicolaescu, and has searched for responsive text messages from Adam
`
`Lesman. Su does not contend that the text messages produced by Brex are
`
`unreadable and offers no other reason that Brex would need to image the personal
`
`cellphones of its employees. The only conceivable basis for Su’s request to image
`
`
`5 Su’s Motion attaches text messages of Don Slater and Wilson Jian (who
`became a Brex employee after the Pry merger). (Motion Exhibits 17, 18). Su has
`never asked Brex to search for text messages involving Slater or Jian, as neither
`employee was involved in the investigation into Su. To the extent Su is now
`demanding that Brex image all of its employees’ phones, that request is entirely
`overbroad and unwarranted. Su’s text messages with Levy and James Reggio are not
`related to any fact at-issue in this action. (Motion Exhibit 16).
`
`10
`
`
`
`
`
`
`
`

`

`the phones of Levy or Nicolaescu is to cause undue disruption and increase discovery
`
`burdens and costs on Brex.
`
`Because Brex has searched for and produced text messages from Art Levy,
`
`Cosmin Nicolaescu, and Adam Lesman, the Court should deny Su’s demand that
`
`Brex image their personal cell phones.
`
`IV. Contrary to Su’s Contention, Brex Has Provided a Hit Report
`
`Su states that Brex “refuses to provide a hit report.” (Motion at 13). That
`
`statement is misleading. Brex has provided a list of demanded search terms with the
`
`number of documents hit based on the sources and custodians searched. (Motion
`
`Exhibit 12). That list is by definition a “hit report.” See, e.g., Alight Sols. v.
`
`Thomason, No. 20 C 3043, 2021 WL 5119111, at *5 (N.D. Ill. Nov. 3, 2021)
`
`(remarking a “hit report” details “the ‘hits’ each search term uncovered”). Su argues
`
`that this is not a hit report because it does not include information like “the number
`
`of hits with families.” (Motion at 13). But Su does not cite any authority for his
`
`argument that a hit report must include detailed statistical information beyond the
`
`number of hits to be “Delaware-compliant.” Brex has not refused to review
`
`documents responsive to any search term based on merely the number of documents
`
`that would be collected when families are searched. Moreover, including such
`
`information would only increase the number of documents to be searched, so it
`
`makes little sense why Su seeks the additional information.
`
`11
`
`
`
`
`
`
`
`

`

`Su next represents that Brex has moved “forward primarily with its self-
`
`selected search terms.” (Motion at 13). This is, again, misleading. Brex has collected
`
`documents for 22 search terms proposed by Su. As Brex has explained, terms like
`
`“Department” resulted in numerous mis-hits for the 5,743 documents, resulting in
`
`“thousands of documents about the departments in Brex or in other companies.”
`
`(Motion Exhibit 14 at 8 n.5). Brex has not refused to run any search terms. Brex ran
`
`the two length search strings and encountered an error. Su does not move to compel
`
`Brex to search any specific terms.
`
`Finally, Su suggests that Brex cannot run terms using Google Vault and,
`
`instead, must hire a third-party vendor, but Su does not seek any relief based on this
`
`argument. (Motion at 14). As emphasized in Section 7(b)(i) of the “Guidelines to
`
`Help Lawyers Practice in the court of Chancery,” there is no “‘one-size-fits-all’
`
`approach to the collection and review of documents.” Su does not cite any authority
`
`suggesting that Google Vault cannot be used to perform searches for responsive
`
`documents, particularly where undersigned counsel is performing the review of the
`
`collected documents.
`
`V. The Court Should Not Award Fees or Costs
`
`Only if a motion to compel is granted in its entirety is the Court required to
`
`award fees unless “opposition to the motion was substantially justified or that other
`
`circumstances make an award of expenses unjust.” Del. Ch. Ct. R. 37(a)(4)(A).
`
`
`12
`
`
`
`
`
`

`

`Where a party does not prevail on the majority of a motion to compel, a request for
`
`fees should be denied. See Brown v. Matterport, Inc., No. 2021-0595-LWW, 2023
`
`WL 3830501, at *7 n.60 (Del. Ch. June 5, 2023) (citing Summit Fire & Sec. LLC v.
`
`Kolias, No. 2022-0460-MTZ, 2022 WL 3572827, at *4 (Del. Ch. Aug. 19, 2022)).
`
`Here, Su’s request for fees should be denied for at least two reasons. First, Su
`
`is unlikely to prevail on any aspect of his Motion. Each request is either improper
`
`or—in the case of disclosing facts communicated to Brex’s Board—moot. Before
`
`Su filed his Motion, Brex agreed to provide such information and then provided such
`
`information within the time promised. (Exhibits B, C).
`
`Brex’s opposition is also substantially justified. While Su states that his
`
`position is based on “clear Delaware law and Guidelines,” he notably does not cite
`
`any such law or the Guidelines to support his position about what is allegedly
`
`required to be included in a hit report. His Motion is also based on hyperbole that iss
`
`entirely unsupported by the evidence attached to the Motion.
`
`CONCLUSION
`For the foregoing reasons, the Court should deny Su’s Motion to Compel.
`
`Dated: November 29, 2023
`
`OF COUNSEL:
`
`Craig Solomon Ganz
`Mitchell Turbenson
`
`BALLARD SPAHR LLP
`
`/s/ Elizabeth S. Fenton
`Elizabeth S. Fenton (#5563)
`Brittany M. Giusini (# 6034)
`R. Michael Lindsey (#2711)
`
`
`
`13
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`
`
`
`

`

`BALLARD SPAHR, LLP
`1 East Washington Street, Suite 2300
`Phoenix, AZ 85004-2555
`Tel.: 602.798.5400
`Fax: 602.798.5595
`Email: ganzc@ballardspahr.com
` turbensonm@ballardspahr.com
`
`
`
`919 N. Market Street, 11th Floor
`Wilmington, DE 19801-3034
`Tel.: (302) 252-4465
`
`Attorneys for Plaintiff / Counterclaim
`Defendant Brex Inc.
`
`
`WORDS: 2,981
`
`14
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`

`

`CERTIFICATE OF SERVICE
`
`
`
`I hereby certify that on December 6, 2023, I caused a true and correct copy
`
`of the foregoing Public Version of Plaintiff Brex Inc.’s Opposition to Defendant
`
`Dizhe Su’s First Motion to Compel to be served by File & ServeXpress
`
` upon the following counsel of record:
`
`Sean Meluney, Esquire
`William M. Alleman Jr., Esquire
`MELUNEY ALLEMAN & SPENCE LLC
`1143 Savannah Rd, Suite 3-A
`Lewes, Delaware 19958
`
`Attorneys for Defendant/Counterclaim Plaintiff
`Dizhe Su
`
`
`/s/ Elizabeth S. Fenton
`Elizabeth S. Fenton (No. 5563)
`
`
`
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`
`
`

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