SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
THE PEOPLE OF THE STATE OF NEW YORK, by
ERIC T. SCHNEIDERMAN, Attorney General ofthe
State ofNew York,
JOHN C. MOORE, ROBERT HINKLE, MICHAEL
LAKOW, DIANA PIKULSKI, HAYWARD R.
PRESSMAN, LESLIE PRIGGEN, JOHN S. RAINEY,
MARGARET SANTULLI, AND THOROUGHBRED
RETIREMENT FOUNDATION, INC.,
Index No. 401004-12
lAS Part 61
Hon. Anil C. Singh
PLAINTIFFS' MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS'
MOTION TO STAY DISCOVERY PENDING APPEAL
Plaintiffs, the People of the State ofNew York, by their attorney, ERIC T.
SCHNEIDERMAN, Attorney General ofthe State ofNew York ("Attorney General"),
respectfully submit this Memorandum of Law, together with the Affidavit of David E. Nachman,
in opposition to Defendants' Motion to Stay Discovery Pending Appeal.
Having failed in their Hail Mary attempt to obtain the dismissal of the Attorney General's
lawsuit at the pleadings stage, the directors and officers ofthe Thoroughbred Retirement
Foundation, Inc. ("TRF"), now seek to delay these proceedings further by taking a needless
appeal from the Court's decision denying their motion to dismiss and demanding a stay of
1 "Defs. Mem." refers to the Memorandum of Law in Support of Defendants' Motion to Stay
Discovery Pending Appeal, dated September 21,2012. Citations to "Ostrager" refer to the
Affidavit of Barry R. Ostrager, dated September 21,2012. Citations to "Nachman" refer to the
Affidavit of David E. Nachman, sworn to September 27,2012.
discovery for many months pending the results oftheir appeal. So unwilling are Defendants to
let the Attorney General find out what's really going on at TRF's farms and with its horses, that
TRF has refused, without any legal basis, to await the Court's decision on its baseless motion to
stay discovery: it takes the arrogant and untenable position that the mere pendency of its motion
relieves TRF of any obligation even to "deal with" the Attorney General's discovery demands.
These stonewalling tactics, blatantly improper in any situation, are particularly objectionable in a
case where the health and welfare of more than 1,000 retired Thoroughbred race horses are at
The claim that substantial harm will result from complying with the Attorney General's
routine discovery demands is absurd in a case where Defendants are represented by one ofthe
world's largest law firms, which has its bills in this litigation paid by TRF insurance proceeds
and has ample experience managing discovery in cases involving millions of pages of
documents. Moreover, the upcoming inspections will be conducted by the Attorney General's
own veterinary experts and therefore require next to no TRF time or resources, and,
notwithstanding Defendants' heated rhetoric, the document discovery sought by the Attorney
General is targeted and reasonable and the universe of responsive documents likely is not large,
given that TRF has a small staff and only one office.
Further delay, on the other hand, will be highly prejudicial to the Attorney General's
efforts to vindicate the public's interest in the proper administration ofTRF and to protect the
horses in its charge from neglect and suffering, and will not serve the interests ofjudicial
economy. While the appeal that is the basis for TRF's motion to stay has virtually no chance of
2 On September 26,2012, the Attorney General was informed by counsel to Defendants, "It is
the TRF's position that the pending motion stay's [sic] the TRF's obligation to deal with the
discovery notices inasmuch as proceeding with the discovery you have requested could moot the
motion." Nachman Ex. 8.
succeeding, it will be many months before it is resolved. We are fast approaching winter, the
time of year when the chronic inadequacy ofthe support and care that TRF provides at many of
its facilities is exacerbated by the higher costs of maintaining the horses in cold weather
conditions. TRF's strenuous resistance to inspections by outside experts is alarming, and casts
doubt on its renewed assertions that the herd remains in excellent health. Documents recently
obtained by the Attorney General demonstrate that TRF's financial situation continues to
deteriorate and its debt continues to mount, despite its much-vaunted fundraising initiatives in
recent months. In these circumstances, additional delay in moving this case forward to trial
could have dire consequences for the horses that it is the mission of TRF to safeguard.
Defendants seek a stay of discovery under Section 220I of the Civil Practice Law and
Rules ("CPLR"), pending the outcome of their appeal ofthe Court's September 17,2012
Decision and Order denying Defendants' motion to dismiss in all respects (the "Order,,).3
Section 2201 provides that "the court in which an action is pending may grant a stay of
proceedings in a proper case, upon such terms as may be just." CPLR § 2201. A stay "can easily
be a drastic remedy" and should only be granted for "[s]ome excellent reason." SIEGEL,
PRACTICE COMMENTARIES, McKinney's Cons. Laws ofNew York, Book 7B, C:2201:7. See, e.g.,
Congel v. Malfitano, Index No. 2007/220, 2010 WL 8354946 (Sup. Ct. Dutchess Co. March 22,
2010) ("Before imposing a stay, the court must ensure the case merits the remedy's drastic
nature. ") (citations omitted). Indeed, "the existence of a pending appeal, standing alone, does
3 Defendants also purport to seek a stay under CPLR § 5519(c), which provides that a court "may
stay all proceedings to enforce the judgment or order appealed from pending an appeal"
(emphasis added). Because the Order (Ostrager Ex. A) is only the denial of a motion to dismiss,
enforcement is not at issue, and therefore Section 5519(c) is not a proper statutory basis for
seeking a stay of proceedings in this action.
not merit the remedy." Id. See also Integra Bank North v. Gordon, 164 Misc.2d 691, 695 (Sup.
Ct. Chautauqua Co. 1995) (same). The stay sought by Defendants would only unnecessarily
delay the proceedings to remove the defendant directors from the TRF board and further
jeopardize the safety of the TRF herd.
I. Proceeding with Discovery Will Not Cause Substantial Harm to TRF
Proceeding with the discovery that the Attorney General seeks in this action will not
cause "substantial, unnecessary harm to Defendants" or interfere with TRF's fundraising efforts.
Defs. Mem. at 2,3. The Amended Notice of Entry and Inspection and To Produce Documents
("Amended Notice") (Ostrager Ex. F) simply seeks access to TRF facilities for the Attorney
General's veterinary inspectors, as well as ancillary records for review incidental to the
inspections, such as horse inventory lists and records of recent veterinarian visits. Defendants
conceal from the Court the fact that the Amended Notice was served on TRF on May 7, 2012,
over four months ago. Nachman' 2. Not only did TRF fail to object to the Amended Notice as
burdensome at the time, it readily agreed in writing to "facilitate and cooperate with [the]
contemplated inspections" and produce the documents sought on an expedited basis, within 10 or
20 days. See id. , 3, Exs. 1,2. This is the very same Amended Notice and agreed timetable for
production that Defendants now unconvincingly decry as "'Rambo' discovery tactics." Defs.
Mem. at 4. The Court should not sanction Defendants' effort to renege on their commitment to
pennit the inspections. Defendants have had ample time -- over four months -- to prepare the
limited documentary materials sought by the Amended Notice and notify TRF's facilities.
The document discovery sought by the Attorney General's Notice to Produce Documents,
served on September 20,2012 (''Notice to Produce") (Ostrager Ex. E) is riot "outrageous," nor
4 While it may be that many charities rely heavily on end-of-year fundraising, TRF's largest
fundraising push of the year, its annual gala in Saratoga Springs, New York, already took place
on August 5, 2012.
will it require ''tremendous expenditures of the lRF's time and money," as Defendants claim.
Defs. Mem. at 2,5. Notwithstanding Defendants' hyperbole, the actual requests for documents
cover only 6 pages ofthe Notice to Produce and simply identify core documents relevant to the
Attorney General's claims. See Ostrager Ex. Eat 5-10. Many of the requests seek narrow
categories of basic corporate records that should be readily retrievable from TRF's files.
Defendants emphasize that TRF is "a small not-for-profit corporation with a four-person staff,"
Defs. Mem. at 2, but this merely suggests that the task of producing the requested documents
should not be onerous because the materials are unlikely to be voluminous or scattered across
Defendants' protestations that they do not have the staff resources to locate and copy
responsive documents for production ring particularly hollow in light of the enormous litigation
support resources available to Defendants through their counsel, Simpson Thacher & Bartlett
LLP ("Simpson Thacher"), "one of the world's leading global law firms." Nachman Ex. 4. At
least two Simpson Thacher attorneys, partner Barry Ostrager and associate Jonathan Zelig, are
working on this case, and no fewer than three members of the firm's support staff (two
paralegals and the managing clerk) are copied on all electronic filings in this case. See id. 6,
Ex. 5. The Defendants are using the proceeds of an insurance policy to pay their legal fees, and
counsel has indicated that he intends to rely on the availability of that multi-million dollar war
chest to litigate this case as vigorously as he and his clients deem necessary. Id. 4, Ex. 3.
Certainly Defendants' motion practice in the litigation thus far, including motion papers seeking
S See, e.g., Notice to Produce Requests Nos. 7 (board meeting minutes and documents
identifying current and former directors), 12 (documents identifying TRF bank and credit card
accounts), 17 (documents identifying current and former TRF employees and contractors), 18
(lRF's written policies), 21 (director and officers liability insurance policy and related
dismissal of over 350 pages, demonstrates their wherewithal to engage in a "scorched earth"
legal defense. The Attorney General is confident that the Simpson Thacher attorneys, paralegals
and other members of the team handling this case for Defendants are skilled and experienced at
rapidly collecting and producing documents in response to discovery demands on behalf of the
II. A Stay of Discovery Would Prejudice the Attorney General's Efforts to Safeguard
the Welfare ofTRF's Horses
A stay of discovery for many months pending Defendants' appeal will be highly
prejudicial to the Attorney General's efforts to vindicate the public's interest in the proper
administration ofTRF and the protection of the living animals in its charge, with winter around
the comer and every indication that more horses will suffer and die from the combination of
inadequate care and seasonal conditions. It is critical that the inspections ofTRF horses and
facilities proceed, because the herd has not been evaluated systematically by any outside
veterinary expert since early 2011, when Dr. Stacey Huntington uncovered scores of
undernourished and distressed horses and a pervasive failure to provide basic maintenance care
to the herd, but was fired by the TRF board before she could complete her inspections.
The horses continue to be at high risk in part because TRF's fmances remain in total
disarray. Recent TRF financial reports demonstrate that TRF has "veered further offplan" with
a budget variance of$142,000 as of July 31, 2012, and a projected cash shortfall of$86,000 in
November for a three-month period alone. Nachman Ex. 6. As of the beginning of September
2012, TRF had a grand total of $6,500 in unrestricted cash in its general operating account, with
approximately $423,000 in unpaid bills at the time, much of it overdue to the facilities that care
for the horses. Id. TRF also has sunken deeper into debt: the financial reports reveal additional,
previously undisclosed borrowing of $350,000 as of late July. Id.
The need to identify TRF horses at risk of serious and imminent hann and swiftly seek
corrective action, as well as the public's interest in this case proceeding to trial, far exceeds any
minor inconvenience that complying with the Attorney General's ordinary discovery demands
may pose to the Defendants.
III. A Stay Pending Resolution of Defendants' Appeal Will Not Serve the Interests of
Staying discovery in this action pending resolution of Defendants' appeal will not serve
the interests ofjudicial economy. It is Defendants' meritless appeal and the instant motion -- not
the Attorney General's discovery demands -- that are needlessly taxing scarce judicial resources.
In the words ofTRF's Chairman, defendant John C. Moore, as reported by the press recently,
'''This is going to proceed toward a trial.'" Nachman Ex. 7. Ultimately no judicial resources
would be saved by delay in these proceedings pending the denial of Defendants' appeal. The
three cases cited by Defendants each involved parallel proceedings in another state or federal
trial court with overlapping factual or legal issues, a factor not present in this litigation.
Foodservice Distribs., Inc. v. PricewaterhouseCoopers LLP, 291 A.D.2d 323, 324 (Ist Dep't
2002) (denying CPLR § 2201 motion for stay based on pendency of related action in the same
court to the extent it seeks stay of discovery). Here, the Court properly denied Defendants'
motion to dismiss in a straightforward and well-reasoned Order, which the Attorney General
fully expects will be affIrmed on appeal. Defendants have "failed to proffer any circumstances
to merit the exceptional relief [they are] requesting beyond the mere truism that moving forward
with discovery ... would be a waste ofjudicial resources in the event that [they are] successful
6 See Defs. Mem. at 3,4,5, citing Morreale v. Morreale, 84 A.D.3d 1187 (2d Dep't 2011) (stay
pending related Surrogate's Court proceeding), Chan v. Zoullas, 943 N.Y.S.2d 790 (Sup. Ct.
N.Y. Co. 2012) (stay pending related federal court action), and Zonghetti v. Jeromack, 541
N.Y.S.2d 235 (2d Dep't 1989) (stay pending related criminal proceedings). None ofthese cases
granted a stay based on the pendency of an appeal, much less an appeal of an interlocutory order.
with [their] appeals." op. cit. (denying CPLR § 2201 stay where appeals "are in very
early stages of development"). Given the burdens on the court Defendants' assertion
that a stay pending their appeal -- only just filed -- would necessitate a delay of only "a couple of
months" (Defs. Mem. at 6) is not realistic. During the many months that the appeal is pending,
discovery in this action should proceed without the need for significant intervention by the
Court, barring obstructionism or further dilatory tactics from the Defendants.
For the reasons set forth above, the Court should deny motion for a stay and
direct that discovery proceed expeditiously.
ERIC T. SCHNEIDERMAN
Attorney General ofthe State ofNew York
SCOTT R. WILSON
Senior Advisor and Special Counsel
to the Attorney General
Office of the Attorney General of the State
120 25th Floor
New New York 10271
Tel. (212) 416-8050
Atty. Reg. No. 4601068
JASON R. Bureau Chief, Charities Bureau
DAVID E. NACHMAN, Enforcement Section Chief and Senior Counsel
CLAIRE EVANS, Assistant Attorney General
Index No.: 401004-12
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
THE PEOPLE OF THE STATE OF NEW YORK, by ERIC T.
SCHNEIDERMAN, Attorney General of the State of New York,
- against -
JOHN C. MOORE, ROBERT HINKLE, MICHAEL LAKOW,
DIANA PIKULSKI, HAYWARD R. PRESSMAN, LESLIE
PRIGGEN, JOHN S. RAINEY, MARGARET SANTULLI, AND
THOROUGHBRED RETIREMENT FOUNDATION, INC.,
PLAINTIFFS' MEMORANDUM OF LAW IN OPPOSITION
TO DEFENDANTS’ MOTION TO STAY DISCOVERY
ERIC T. SCHNEIDERMAN,
Attorney David Nachman
120 Broadway, Charities Bureau
New York, NY 10271
Tel. (212) 416-8390