“SXP and Mamalakis have succeeded in obscuring, apparently running through, I don’t know, 20 or $30 million.” Mr. Lee Kaplan Page 19 & 20 of Court Transcript.
MR. MCINTURF: ..We know that SXP started operating and we now know from the receiver’s forensic accountant that in the two and a half years they operated, they (SXP Analytics) made $44 about million in trading profits on a trading capital of million and so
–
THE COURT: Then why are they in bankruptcy?
MR. MCINTURF: Yeah, good question. And the receiver filed a lawsuit against Mr. Mamalakis saying that the recently reason that it’s defunct is because Mr. Mamalakis siphoned all the money out, and so that lawsuit is now pending up in Wisconsin. The other measure of damages that I expect to be included in our expert report —
THE COURT: Did he say it was siphoned off by anybody else or just Mr. Mamalakis?
MR. MCINTURF: Just Mr. Mamalakis.
emmanuel-mamalakis-sxp-analytics-court-transcript-2-28-2014-28-released-6-18-2014
Case 4:09-cv-04039
Document 493 Filed in TXSD on 03/20/14 Page 1 of 32
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
QUANTLAB TECHNOLOGIES LTD. . C.A. NO. H-09-4039
(BVI), et al . HOUSTON, TEXAS 4.
VS. .
. FEBRUARY 28, 2014
VITALIY GODLEVSKY, et al
. 2:30 P.M. to 3:14 P.M.
TRANSCRIPT of MOTION HEARING
BEFORE THE HONORABLE KEITH P. ELLISON
APPEARANCES:
UNITED STATES DISTRICT JUDGE
FOR THE PLAINTIFFS:
MR. LEE L. KAPLAN
MR. TYLER G. DOYLE
Smyser Kaplan Veselka LLP 700 Louisiana St
Suite 2300
Houston, Texas 77002
MR. ALLAN H. NEIGHBORS IV Little Mendelson PC
1301 McKinney
Suite 1900
Houston, Texas 77010
MR. TIM MCINTURF Quantlab Financial, LLC 4200 Montrose Blvd Suite 200
Houston, Texas 77006
Proceedings recorded by mechanical stenography, transcript 25 produced by computer-aided transcription.
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 2 of 32 2
APPEARANCES CONTINUED
FOR DEFENDANT VITALIY GODLEVSKY:
FOR DEFENDANTS ANDRIY KUHARSKY, ANNA MARAVINA:
OFFICIAL COURT REPORTER:
MR. TIMOTHY C. JOSEF Josef Law Firm, PLLC 811 Dallas St
Suite 1010M
Houston, Texas 77002
MR. DAVID C. HOLMES
Law Offices of David C.
Holmes
13201 NW Freeway Suite 800
Houston, Texas 77040
MS. KATHY L. METZGER U.S. Courthouse
515 Rusk
Room 8004
Houston, Texas 77002 713-250-5208
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 3 of 32 3
PROCEEDINGS
THE COURT: All right. I know you’ve probably already
gone over this with Ms. Metzger, but let’s do the appearances of counsel one more time, beginning with the plaintiffs.
MR. KAPLAN: Lee Kaplan and Ty Doyle and Allan Neighbors and Tim McInturf for the plaintiffs, Your Honor.
THE COURT: Thank you.
MR. HOLMES: David Holmes for Kuharsky and Maravina. MR. JOSEF: Timothy Josef for Defendant Godlevsky. THE COURT: Thank you very much.
Okay. Have you conferred further about the password for Dr. Kuharsky? Where do we stand on that?
MR. HOLMES: No, we have not.
THE COURT: Sorry?
MR. HOLMES: No, we have not.
THE COURT: Okay. I don’t know if this is susceptible
to a Court order. Let me hear from Dr. Kuharsky’s counsel first. I mean, is there something you need from me as to this password?
MR. HOLMES: Well, I mean, I don’t know, to tell you the truth. This is — it’s been dragging on for three months, and what we’ve said over and over again is that if Dr. Kuharsky has enough time to play with it, there’s a good chance he’s going to be able to come up with whatever combination he had.
I think what they arranged last time — I guess Mr. Kaplan was
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 4 of 32 4
. 1 actually there. I wasn’t — was a short meeting, I believe at
. 2 Mr. Kaplan’s office. But that’s what we’ve been saying. If
. 3 you want us to get — be able to get into that computer and so
. 4 he can figure out what his log-in was, whatever it may have
. 5 been, the only way we’re going to get that taken care of is for
. 6 them to give him either the laptop or an image of the laptop
. 7 and let him basically play with it and eventually he’s going to
. 8 figure it out.
. 9 THE COURT: Okay. Let me hear from the plaintiffs.
. 10 MR. KAPLAN: That’s always an option. He came in, I
. 11 don’t remember the day, and spent about 30 minutes with the
. 12 imaged computer and said, “Well, I can’t figure it out.” And,
. 13 you know, the way we left it — Mr. Holmes wasn’t there and,
. 14 you know, I don’t want to communicate with somebody’s client,
. 15 but obviously if they want to look at the imaged computer,
. 16 we’ve got one. They can come look at it as much as they want.
. 17 I don’t know when and how they’re willing to do that. They’ve
. 18 never offered and never given us any ideas, but if they want to
. 19 do it, we’ve got it.
. 20 THE COURT: Well, where is the disconnect here? I
. 21 mean, it seems like such an obvious step that needs to be
. 22 taken. I mean, what do I do, order him to go try to retrieve
. 23 the password?
. 24 MR. KAPLAN: Your Honor, it would seem to me that
. 25 Dr. Kuharsky would want to remember his password.
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 5 of 32
5
. 1 THE COURT: Yeah.
. 2 MR. KAPLAN: He doesn’t need an invitation, but
. 3 extending the invitation. We extended it once. He came
. 4 half an hour and said, “I don’t get anything.” If he wants to
. 5 come and spend a lot of time looking at the imaged computer,
. 6 fine. We’re not standing in the way of that happening. And I
. 7 don’t want to — you know, we haven’t sent a request every
. 8 week, “Have you got any more news for me? What are you willing
. 9 to do?” It’s just they haven’t done anything about it. But
. 10 the computer is available. When they’d like to look at it,
. 11 give me a phone call. They can do it at my office. They can
. 12 do it at Pathway. And they can spend — we’ll give them a
. 13 conference room and good coffee at our office. They can do it
. 14 as long as they think there’s a chance of remembering
. 15 something.
. 16 THE COURT: Okay. Mr. Holmes?
. 17 MR. HOLMES: Why don’t they just — they say they have
. 18 an image of the computer. They also have the computer itself.
. 19 Why don’t they just drop it off at my office. I’ll get it to
. 20 Dr. Kuharsky. I mean, why do we have to do this at Pathway?
. 21 Why do we have to try to arrange for Dr. Kuharsky to be in
. 22 Houston, to go to Mr. Kaplan’s office? If they really want to
. 23 know what’s there, just give us the computer and I’ll get it to
. 24 him and he’ll figure it out.
. 25 THE COURT: Well, I mean, given all of the problems
we’re for
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 6 of 32 6
. 1 we’ve had in discovery, I can see why they want to retain some
. 2 control over the computer.
. 3 MR. HOLMES: Well, but they have an image of it. They
. 4 just told you that. So if he goes through in that computer —
. 5 that is his Singletick computer and if it’s something that he
. 6 goes through and monkeys with it, in figuring it out, what
. 7 difference does it make? They still have the image or the
. 8 original, whichever one they want. That’s not really the
. 9 issue. Wherever this computer is, it is his computer. I
. 10 cannot imagine why they would not be willing to give it back to
. 11 him, given that they have a copy.
. 12 THE COURT: Mr. McInturf.
. 13 MR. MCINTURF: Lee won’t let me talk, but he’s talking
. 14 to Mr. Allan, so I’m going to talk.
. 15 MR. KAPLAN: This is Mr. McInturf from Quantlab, Your
. 16 Honor.
. 17 MR. MCINTURF: From my perspective, the way
. 18 Dr. Kuharsky left it, was he came in and he looked at the
. 19 computer, fooled around with it a little bit and said, “I can’t
. 20 do it.” And then, you know, we reached out and said, “Okay.
. 21 What are you going to do?” And it’s just been radio silence.
. 22 And my perception is that Dr. Kuharsky has throughout this case
. 23 engaged in a strategy of denials that turned out to be false,
. 24 delays that are unnecessary, and then finally destruction of
. 25 evidence. I think this password — the encryption itself and
Case 4:09-cv-04039 Document 493
Filed in TXSD on 03/20/14 Page 7 of 32 7
. 1 then the password are just
. 2 THE COURT: Well,
. 3 as to whether I do order further sanctions and it will
. 4 certainly weigh in my decision as to what instruction is
. 5 appropriate on spoliation. But I would much rather just have
. 6 the password produced than any of those things.
. 7 MR. MCINTURF: Your Honor, I’ll speak right to that.
. 8 In this hearing today is the first time our side has ever heard
. 9 that if we would send him an image of it and he played with it,
. 10 it would get worked out. That had never been offered before.
. 11 We don’t have a problem preparing an image, sending it to him,
. 12 and letting him play with it. So if that’s all it takes, we
. 13 offer that.
. 14 MR. HOLMES: How many pleadings have I said that in,
. 15 Your Honor? The fact that you’ve read this and you know about
. 16 the issue, I’ve said it in pleading over and over and they have
. 17 never reached out to me and said, “How do you want to solve
. 18 this?” They file pleadings, and I come back and say that. But
. 19 if they’re willing to do that today, we have a resolution, so
. 20 hooray.
. 21 THE COURT: Okay. All right. Let’s do that. Let’s
. 22 have it produced, and then ask Dr. Kuharsky to be back with a
. 23 response within 15 days.
. 24 Okay. Now, we need to the turn the issue of
. 25 scheduling. We need to set an entirely new schedule. We were
another delay and so –
I mean, it will weigh in my decision
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 8 of 32 8
. 1 thinking
. 2 terms of
3 4
that December of 2014 might be the best we could do in getting this case to trial.
MR. KAPLAN: Your Honor, I can respond to this –
THE COURT: Yes.
MR. KAPLAN: — to some extent. From our standpoint,
. 6 the stumbling block is what do we do about Singletick. Now,
. 7 you may recall the e-mail in which Dr. Kuharsky said three
. 8 months is not enough and we can run out the clock. Once — we
. 9 did not want to sue Singletick. And one way or another, we
. 10 hope the Kuharsky Singletick computer, the encrypted one, would
. 11 solve the question. Get it enough time to analyze it and we
. 12 can either say not a problem or we believe there is a problem.
. 13 And, you know, everything that’s happened in the last six or
. 14 eight months has only increased our suspicions. The computer
. 15 was put out of our — you know, put out of our ability to get
. 16 to it, and I won’t go through all of that.
. 17 But one of the things we have gotten from
. 18 Singletick the first time around with our very modest amount of
. 19 discovery was the business plan that they submitted to
. 20 Singletick, in which they explicitly said — this is page 4.
. 21 I’ve got multiple copies of this. This hasn’t been filed with
. 22 the court yet, but I’ve got copies of it for everybody. And
. 23 I’ve tabbed the page. If I may —
. 24 MR. HOLMES: Are we really going to go through all of
. 25 this?
5
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 9 of 32 9
MR. KAPLAN: Well, I’m going to explain why we have a scheduling problem, Your Honor. I’m going to be quick about it. AndmayIhandthisto–
THE COURT: You can give a copy to Ms. Lyons.
MR. KAPLAN: — the Court and a copy for your law clerk. And I’ve tabbed what is disturbing to us, most disturbing. And we found this from the Singletick discovery. It says — this is their proposal to get funding for a start-up for Singletick. It says in that first bullet point, “Knowledge of what models have and have not worked historically so that research can focus on correlations and indicators used to fine-tune the robust models.” And there’s other stuff in there, but that’s pretty explicitly telling Singletick, we’re going to work off what we’ve done before.
And then the funder — we’ve translated the e-mails we got from Singletick, and I have copies of that as well. And I believe — I don’t remember if the originals were stamped AEO by —
MR. DOYLE: They were stamped confidential.
MR. KAPLAN: Confidential by Singletick. And I have, once again, copies for the Court and your law clerk, if I may hand them up. This is —
THE COURT: Thank you.
MR. KAPLAN: — some e-mails, and I’ll cut to the chase. VBL is Boris, the funder. Of course, Godlevsky and
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 10 of 32 10
. 1 Kuharsky are involved in this discussion. And what Boris asks
. 2 on page 1 — I’m sorry, on page 2, when they’re having that
. 3 argument about sharing IP — because you remember we talked
. 4 about the agreement and they were trying to get the right to
. 5 use it separately, that is, Kuharsky and Godlevsky, as well as
. 6 with the new venture. It’s clear that Boris understood that
. 7 it’s not only the ideas you have possessed the last ten —
. 8 that’s ten years — and have twice proved their worth, that of
. 9 course being at Quantlab and SXP, and then he’s talking about
. 10 creating the third time.
. 11 So these are just things that have increased our
. 12 suspicions, and we have to make a decision about whether to sue
. 13 Singletick. The idea was the Kuharsky computer may put that to
. 14 rest, not just for what’s on it, but, for example, whether
. 15 there have been thumb drives attached to it and those materials
. 16 got downloaded and they’re somewhere else out there. Because
. 17 if we merely had an injunction — if we, for example, got this
. 18 computer and cordoned it off and it wasn’t used anymore but we
. 19 saw that it had been — everything had been downloaded into a
. 20 thumb drive,
. 21 where it is.
22
. 23 Singletick.
. 24 the computer
. 25 client certainly suspects, decide we have to include them.
we would have to go search for that and figure out
So we were trying not to add a party, not to sue That’s our issue. If we can get to the bottom of situation, we hope we’ll exclude them, or as my
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 11 of 32 11
. 1 THE COURT: Well, that would be a major change to this
. 2 litigation.
. 3 MR. KAPLAN: Well, not really, because these people
. 4 are the brains of the operation, Kuharsky and Godlevsky.
. 5 THE COURT: Well, I’m sure we would have to go back to
. 6 a new schedule though.
. 7 MR. KAPLAN: Well, if I can elaborate just a second.
. 8 Because we got stymied on the computer and we really thought
. 9 finally we were going to get an answer on all of this, we then
. 10 sent another subpoena to Singletick. We’re trying every way we
. 11 can to run this to ground, and we had to go through the
. 12 Wisconsin Federal Court again. We’ve served the subpoena. We
. 13 got a call two or three days before their response date last
. 14 week from Ms. Mederson, asked us for another week. I want to
. 15 be in the best position possible with that court, so I agreed
. 16 to give her another week for the response, not for the
. 17 documents or whatever materials, because we’ve asked for
. 18 things. She pretty much gave me to understand, they will give
. 19 us a little bit of stuff, but we’re going to get objections to
. 20 the heart of what we want. So we’re going to have to go
. 21 through motion practice up there to try this secondary avenue,
. 22 which we’re going though only because of Dr. Kuharsky’s
. 23 convenient loss of memory. So it is an issue for us.
. 24 And I have a couple of alternate suggestions.
. 25 One is that we come back here in 60 days and you then set the
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 12 of 32 12
. 1 trial date, 60 to 90. We by then hopefully will know the
. 2 result of that and/or this password controversy. And the other
. 3 is you set it for March and we will simply work as hard as we
4 can. We 5
6
7
need a new parties deadline. The Court then can — THE COURT: Set what for March?
MR. KAPLAN: Set the trial for March.
THE COURT: As in next month?
MR. KAPLAN: 2015. No, 2015. And we will do the best
. 9 we can to make our decision about Singletick as soon as we
. 10 either get a password and get information or complete the
. 11 motion practice up there, because they successfully argued that
. 12 that had to happen up there, and then we’ll make that decision.
. 13 I mean, I had talked to Ms. Loewe a little bit about your
. 14 availability. And if we had been able to resolve this, you
. 15 know, we would be looking at a trial in September, October.
. 16 This is a problem. We know we need the time to analyze
. 17 whatever we get, then we have the completion of the expert
. 18 reports, as well as the fact discovery, and we’ll go forward.
. 19 So those were my two suggestions. Either have us come back in
. 20 early May and set a date then and we’ll have an answer for you
. 21 about Singletick, or just set it in March of 2015.
. 22 THE COURT: Okay. Thank you.
. 23 Mr. Holmes?
. 24 MR. HOLMES: For about four years now, I’ve been
. 25 telling you that Quantlab’s game is to drag this out and wear
8
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 13 of 32 13
. 1 our clients down, and they’ve pretty much done that at this
. 2 point. I don’t know that any of the defendants are going to
. 3 make it to the finish line in this case just because they’re
. 4 all running out of resources. As I understand it, Singletick
. 5 is pretty much defunct at this point, because the Russian
. 6 investors pulled out after Quantlab made them spend all this
. 7 money and put all this into place. I don’t know that for a
. 8 fact, because I’m not Singletick’s counsel, but that’s what I’m
. 9 getting from my client, is that’s pretty much gone. So
. 10 effectively, Dr. Kuharsky —
. 11 THE COURT: Is your client not working anymore?
. 12 MR. HOLMES: That’s my understanding, he is not
. 13 working. And that’s also true of Dr. Godlevsky. But the — I
. 14 don’t know the exact status up there, what’s going on with
. 15 Singletick. But as far as I can tell, it’s pretty much dead.
. 16 So here my client is seven years after he left Quantlab and
. 17 every employer he has been hit with this stuff. Any employer
. 18 he goes to is going to be hit with this stuff, and he’s pretty
. 19 much a wreck and I suspect that’s going to be true of the other
. 20 defendants. All I can say is I’ve been saying — telling you
. 21 this story now for four years, and unfortunately — I know
. 22 you’ve done what you thought was right, but unfortunately it
. 23 appears that a lot of the things I’ve been telling you are
. 24 going to turn out to be true. And I know that’s not your
. 25 intent, but that is, nonetheless, the reality. So all I can
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 14 of 32 14
. 1 say make this as fast as possible.
. 2 And the one thing, as I’ve said over and over
. 3 again, that they keep making excuses to keep from giving us
. 4 these expert reports. You just, you know, said my motion for
. 5 summary judgment is premature. Well, we respect your ruling,
. 6 but they’ve never even shown any damages or what their damages
. 7 model would be. The only files they’ve ever shown us are
. 8 things like that file that was — comes from the work of Gauss.
. 9 At some point we would just urge you to make them come forward
. 10 with something.
The story I’ve been getting from Mr. Kaplan
new theory is going to be that somehow my clients we — they stole their trade secrets and that
11
. 12 lately is the
. 13 admitted that
. 14 none of this is really an issue. But you know better than
. 15 that. But I don’t know that my clients — that any of these
. 16 parties are going to make it to the finish line. I don’t know
. 17 that we have the resources left. But the longer you stretch it
. 18 out, the less the chances are that you’ll even have any
. 19 defendants left to try at the end.
. 20 THE COURT: Well, one thing about this case is that
. 21 from the very first, you have maintained what you just said,
. 22 and Quantlab has maintained that there’s been enormous theft of
. 23 its property. Your response has always been it was obsolete
. 24 and unhelpful to anyone even if their motives were sinister,
. 25 which you certainly deny. If that’s true, then I think this
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 15 of 32 15
. 1 would be a very easy case to settle. I mean, I would have
. 2 thought that your client could have produced all of his files
. 3 forthwith and it could have been shown to anybody’s
. 4 satisfaction that he hadn’t taken any valuable information with
. 5 him. Instead we’ve had a terrible time in discovery, just
. 6 getting that what I would have thought was almost a Rule 26
. 7 disclosure, all that information. So I take the point that
. 8 I’ve whatever, I have —
. 9 MR. HOLMES: Yeah, I don’t mean to blame you.
. 10 THE COURT: — had the case last longer than it should
. 11 have, but a lot of things that should have been automatic that
. 12 are automatic in most big case litigation was not automatic
. 13 here, and I think that’s been the problem.
. 14 MR. HOLMES: Well, there was only one factor, let’s
. 15 not forget, and that’s the FBI.
. 16 THE COURT: That’s true.
. 17 MR. HOLMES: You know, the vast bulk of this stuff, my
. 18 client couldn’t have produced from day one, because he didn’t
. 19 have it. The FBI had it. And we were going to have to deal
. 20 with that issue no matter what. And that’s not your fault, my
. 21 fault, Mr. Kaplan’s fault, or anybody else’s. That’s just one
. 22 of the realities we had to deal with in this case, that the
. 23 great bulk of everything that was at issue was in the hands of
. 24 the FBI, and there’s nothing we can do about that. But, again,
. 25 if you look at it from our point of view, which is that
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 16 of 32 16
. 1 Quantlab’s motivation is to keep these guys out of the market
. 2 from competing with them, well, they’ve succeeded.
. 3 THE COURT: Well, if it really were the case that your
. 4 client and the other defendants hadn’t taken anything and it
. 5 really were the case that your client and others in truth have
. 6 no assets, then I would think lawyers as good as you guys could
. 7 resolve that. I would have thought you could have explained to
. 8 the satisfaction of the plaintiffs that there is no sensitive
. 9 information that was purloined and that neither in this country
. 10 nor in another country does any of the defendants have any
. 11 money. I mean, that should have been simple to prove, if that
. 12 is, in fact, the case. But when the discovery was not
. 13 forthcoming and we’re still dealing with this now, I do
. 14 understand why plaintiff is suspicious of the defendants’
. 15 motives, just as you’re suspicious of Quantlab’s motives.
. 16 MR. HOLMES: Right.
. 17 THE COURT: Well, I mean, if your client is not
. 18 working, is he getting unemployment? What’s he doing?
. 19 MR. HOLMES: I really don’t know. He comes in to
. 20 Houston from time to time because his daughter still lives here
. 21 with his ex-wife. So I don’t even — I really haven’t seen him
. 22 that much since the — I think I’ve seen him in the flesh maybe
. 23 twice since we had the hearing. So I don’t really know
. 24 everything that’s going on with him. I know that Ms. Maravina
. 25 is living in Canada now and does not come back down here very
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 17 of 32 17
. 1 often. But other than that, I really don’t know what their
. 2 personal situation is. All I know is that my client has
. 3 indicated to me that the Russian investor has pulled out of
. 4 Singletick or at least has never funded it and whether that’s
. 5 all — again, my information is all secondhand.
. 6 THE COURT: Yeah.
. 7 MR. HOLMES: But my understanding is that company is
. 8 pretty much defunct and that Mr. Kuharsky has indicated to me
. 9 that he’s out looking for a job, but, of course, any time he
. 10 applies for a job, you know, this is going to pop up. So he’s
. 11 not in a good place, but I haven’t actually talked about his
. 12 circumstances —
. 13 THE COURT: He should be highly incentivized to get
. 14 this case resolved, just as Quantlab should be. I mean,
. 15 Quantlab is spending a lot of money, too. If there really were
. 16 nothing else going on except run out the clock, I wouldn’t have
. 17 thought it would have been worth that much, especially what,
. 18 six, seven years after these employees left. I think in this
. 19 highly specialized area and highly technical area, I would have
. 20 thought the technology would have changed beyond recognition in
. 21 that period.
. 22 MR. HOLMES: Yeah, sure. But that’s — like I say, I
. 23 wish I could tell you it’s going to resolve that way, but I can
. 24 almost say certainly it will not. And we are — at least for
. 25 now we’re still walking down the litigation road. And all I
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 18 of 32 18
. 1 can say is that I feel fairly confident that once we get to the
. 2 point of finding out what they claim to have found, this case
. 3 is going to fall apart. But the longer that goes — even for
. 4 all I know, there may be a point at which Dr. Kuharsky is
. 5 pro se in the case and that is what it will be.
. 6 THE COURT: Anybody want to respond, from the
. 7 plaintiffs?
. 8 MR. KAPLAN: Well, we are going to have expert reports
. 9 to the extent of what we’ve been able to do thus far sometime
. 10 before — I think your current deadline is May 3rd or —
. 11 THE COURT: It is, yeah.
. 12 MR. KAPLAN: — May 2nd. And we are working on that
. 13 as hard as we can. As far as stalling the case, you know,
. 14 obviously somebody keeps handing us excuses why the case isn’t
. 15 moving and that’s because they have this lapse of memory. Now,
. 16 we have not moved to reconsider your order. I think that would
. 17 be futile at this point. We probably will provide you some
. 18 more evidence from the experts that provide more information
. 19 about what’s happened.
. 20 THE COURT: That’s fine. I still haven’t —
. 21 MR. KAPLAN: But, you know, I don’t know what to say
. 22 about the others, except we’ll image the computer again. That
. 23 takes — apparently there’s some effort involved in doing that,
. 24 a new image, not the old image, because he may have fiddled
. 25 with it. We’ll give him a new image, and we will FedEx it to
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 19 of 32 19
. 1 wherever Mr. Holmes tells me to FedEx it.
. 2 MR. HOLMES: My office.
. 3 MR. KAPLAN: Okay. I mean, we’ll FedEx it directly to
. 4 the client and wherever they are, but we will make that happen
. 5 as soon as we can. And I’m merely suggesting the date that I’m
. 6 suggesting, because in addition to myself having two
. 7 arbitrations scheduled in late 2014, the practicalities of what
. 8 we can get done here bother me. And a trial in December or
. 9 January runs up on the December holidays and with out-of-town
. 10 people, it’s very —
. 11 THE COURT: But isn’t it a fairly simple case? I
. 12 mean, Quantlab will put witnesses on the stand to say these
. 13 guys left under difficult circumstances and they had a lot of
. 14 files and everybody agrees they had a lot of files and the
. 15 Court is going to give you a spoliation instruction.
. 16 The other side is going to say, We took these —
. 17 we didn’t take anything. We had forgotten we had some of these
. 18 on our home computers. In any event, it’s all antiquated now
. 19 and Quantlab hadn’t identified any loss.
. 20 That sounds like a fairly simple trial. It’s
. 21 pure credibility, pure credibility.
. 22 MR. KAPLAN: Well, you heard in the two days all the
. 23 reasons why what Pathway had already identified is not credible
. 24 and there’s a larger mountain than that that we’ll have to go
. 25 through, and then there’s a damage problem. SXP and Mamalakis
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 20 of 32 20
. 1 have succeeded in obscuring, apparently running through, I
. 2 don’t know, 20 or $30 million. And we are using forensic
. 3 people to try to help us get that; and we had to do that
. 4 through the receiver, who hired some former FBI agent.
. 5 Singletick, you know, we don’t really know. We’re getting some
. 6 secondhand information about —
. 7 THE COURT: What’s the nature of your
. 8 That these guys siphoned some of your clients?
. 9 MR. KAPLAN: Well, you can’t say that
damages though?
a given trade is
on, instead they
. 10 a trade you would have made and made the money
. 11 did. So I think one of our theories is going to simply be a
. 12 royalty or an unjust enrichment theory, where we look at how
. 13 much money we spent to do all the research that they have
. 14 avoided doing. And it’s tens of millions of dollars. It’s a
. 15 significant amount of money. And I’ll let Tim speak to this
. 16 for a moment.
. 17 THE COURT: So they’ve taken all your mature
. 18 technology that had been — involved sweat equity of 10 or 20
. 19 million dollars and worked off that?
. 20 MR. KAPLAN: Or more. Now, remember, let me just say
. 21 one more thing, what I just talked about in that document,
. 22 fine-tuning the robust models, our robust models. They don’t
. 23 have to do the fine-tuning. That’s not just a one-stage
. 24 booster rocket. That’s getting them very close and now they’re
. 25 fine-tuning for more developments. Quantlab is a very
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 21 of 32 21
. 1 profitable company, but they’re making profits they had no
. 2 right to make. At least that’s what we say. I understand
. 3 that’s not something that they’re going to admit in the hearing
. 4 today.
. 5 THE COURT: But, again, I think that’s a credibility
. 6 issue.
. 7 MR. MCINTURF: Your Honor, let me speak to the damages
. 8 issue. And Mr. Holmes says that there’s, you know, no clear
. 9 damages here in this case. The Court is aware in these theft
. 10 of trade secret cases that the different types of damages are
. 11 frequently equitable in nature. So from the evidence you’ve
. 12 already heard from Pathway, plus all the more that you’re going
. 13 to hear, clearly they had and have possession of Quantlab
. 14 property. Obviously we’re going to want injunctive relief.
. 15 THE COURT: I don’t think it’s ever been denied as —
. 16 MR. MCINTURF: Yeah.
. 17 THE COURT: — to whether that Quantlab information is
. 18 of any value.
. 19 MR. MCINTURF: Well, I think that’s right. But the —
. 20 and, of course, you make a good point, that that’s just going
. 21 to require a credibility determination. They’re going to get
. 22 up there and say it’s not and our people are going to get up
. 23 there and say it is. As far as the other measures of damages,
. 24 there’s the unjust enrichment measure. We know that SXP
. 25 started operating and we now know from the receiver’s forensic
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 22 of 32 22
1 accountant that in the two and a half years they operated, they
. 2 made $44
. 3 about $2
4 5
million in trading profits on a trading capital of million and so –
THE COURT: Then why are they in bankruptcy?
MR. MCINTURF: Yeah, good question. And the receiver filed a lawsuit against Mr. Mamalakis saying that the
. 6 recently
. 7 reason that it’s defunct is because Mr. Mamalakis siphoned all
. 8 the money out, and so that lawsuit is now pending up in
. 9 Wisconsin. The other measure of damages that I expect to be
. 10 included in our expert report —
. 11 THE COURT: Did he say it was siphoned off by anybody
. 12 else or just Mr. Mamalakis?
. 13 MR. MCINTURF: Just Mr. Mamalakis. The other measure
. 14 I expect to be included in our report is the one that you and
. 15 Mr. Kaplan were speaking about, and that is, the theft of the
. 16 mature technology and how much it costs Quantlab — or their
. 17 avoided costs in developing — starting from where Quantlab
. 18 was. And I think a conservative estimate, you know, I mean,
. 19 conservative estimate of that number is going to be in excess
. 20 of $50 million. And, you know, they obviously can’t pay that,
. 21 but nonetheless, we’ve got unjust enrichment of $44 million and
. 22 we’ve got $50 million worth of technology they took. There’s
23 going to 24
25 they can
be serious damages.
THE COURT: And what is your basis for thinking that pay that?
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 23 of 32 23
. 1 MR. MCINTURF: I’m saying I don’t know that they can.
. 2 I don’t know that, and it’s not my fault, you know, that they
. 3 can’t.
. 4 MR. KAPLAN: Well, remember that is another issue.
. 5 The bank records that, oh, I sent money to the Ukraine or to
. 6 Russia, to my relatives and trying to help them out and it was
. 7 the bank account that was set up in a secretive way. For us to
. 8 chase assets, we need a judgment, because we have not gotten
. 9 discovery from defendants and I’m —
. 10 MR. HOLMES: That is not true.
. 11 THE COURT: I’ll give you your turn when Mr. Kaplan is
. 12 finished.
. 13 MR. KAPLAN: Let’s put it this way: We don’t regard
. 14 it as sufficient discovery. And I understand their position is
. 15 they’ve given us everything they have. Okay? But you can’t go
. 16 into another country and say, I want to know everything there
. 17 is to know about somebody without at least a judgment. And
. 18 whether we’ll be successful enforcing a judgment in one of
. 19 those other countries is another question. And we are,
. 20 contrary to the accusations here, interested in getting that
. 21 judgment so we can do that. We can’t do it without a judgment.
. 22 So all I can say is the most impatient person in this room is
. 23 undoubtedly me. And everything about my approach to this case,
. 24 I have tied to move it along, and it’s very frustrating. It’s
. 25 frustrating just to my personality. So all I can say is we
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 24 of 32 24
. 1 would like to move it along and they, we believe, have created
. 2 the reasons why it isn’t moving along.
. 3 So that’s why I suggest what we suggest. We’ll
. 4 make a decision about Singletick as soon as we can. We have
. 5 been working with the experts on what they have. And obviously
. 6 the Court will exercise its discretion about scheduling and
. 7 adding parties.
. 8 THE COURT: Mr. Holmes, I said you could respond. Do
. 9 you want to say anything?
. 10 MR. HOLMES: Yeah, we’ve produced everything that
. 11 Mr. Kuharsky has and the Ukrainian Bank records. He was lucky
. 12 to get his money out of the country when the Ukrainian banks
. 13 went into trouble in 2008 and 2009. But as far as I know,
. 14 there’s been no money over there in years.
. 15 But as for the damages model, we’ll argue this
. 16 another day, of course, but I’ll leave you with the question:
. 17 All these things that Mr. McInturf was saying about the SXP are
. 18 interesting, about the unjust enrichment, but how do you get
. 19 damages against Dr. Kuharsky? Because he isn’t SXP. He’s not
. 20 liable as a conspirator with SXP. He was an employee of sorts
. 21 with SXP. He’s not liable for profits that SXP may have made.
. 22 If they can even prove that they — somehow SXP’s technology
. 23 got jump started with Quantlab’s stuff, which to date they’ve
. 24 never shown us any proof of that other than hot air, if they
. 25 prove that, how is Dr. Kuharsky liable for that? I’ll leave
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 25 of 32 25
. 1 you with that rhetorical question, and we’ll return to this
. 2 another day.
. 3 THE COURT: Well, Dr. Kuharsky might be liable for it
. 4 because he might have been the one who carried the secrets from
. 5 his home or his brain to SXP.
. 6 MR. HOLMES: Well, if they can actually prove
. 7 something like that, maybe, but so far as of today, we’ve never
. 8 seen that and I’m still waiting to see it.
. 9 THE COURT: It’s a tail chaser. They say the reason
. 10 you’ve never seen it is the defendants have made documents
. 11 unavailable. So, as I say, this is no different from where we
. 12 were years ago. We’re still arguing about the same thing.
. 13 MR. MCINTURF: And, Your Honor, I just want to say one
. 14 more thing, because I get, you know, personally hurt when
. 15 Mr. Holmes keeps saying, you know, Quantlab is vindictive and
. 16 all they want to do is keep my guys from ever working again and
. 17 whatnot, and nothing could be farther from the truth. What we
. 18 have in this case, and you’ve seen some of these documents, is
. 19 we have Dr. Kuharsky and Dr. Godlevsky basically threatening
. 20 Quantlab that if we didn’t pay them $50 million at the time
. 21 they left, they were going to take our stuff and see how much
. 22 it was really worth, is the quote. And then we have now all
. 23 the documents we’ve seen and all the computer files we’ve seen
. 24 of them actually taking it and building SXP and that being
. 25 talked about as being Quantlab’s system but just with slight
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 26 of 32 26
modifications and now we’re starting to see with Singletick that, okay, so this is going to be the same system that you’ve had here and here and here. And the courts are not a good place. Because the reality is that even after this lawsuit is over, we’re never going to know that they don’t have our stuff and they’re not doing it again. But I just want to leave the Court with a point. Quantlab is not on some crazy witch hunt here, you know.
THE COURT: Has it lost other technical employees? MR. MCINTURF: Has it — sir?
THE COURT: Has it lost other technical employees? MR. MCINTURF: Yeah, we have absolutely lost other
technical employees and –
THE COURT: And lawsuits did not follow?
MR. MCINTURF: Sometimes they did and sometimes they
didn’t. Now, he’s going to say that we sue everybody. We have had probably just as many that there weren’t lawsuits with than there were. And I would strongly take issue with Mr. Holmes saying that Quantlab is just, you know, vindictive and sues everybody, because he doesn’t know what evidence was available in those cases either.
MR. HOLMES: Well, I’ll just mostly pass on that, but I think I would just ask again, if Quantlab is not vindictive, then why are they spending this much money to go after a bunch of broke guys?
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 27 of 32 27
THE COURT: Well, I think here we come back to this — the disagreement that has haunted the case from the beginning. They think your clients — or your client and other defendants are well-moneyed.
MR. HOLMES: I wish.
THE COURT: I don’t have an opinion on that. I don’t have an opinion on that. I mean, for somebody who’s unemployed, you know, flying to Houston and paying you are things that cost money. I don’t know what his source of income is, I just don’t know.
Mr. McInturf?
MR. MCINTURF: Well, I was just going to say, Your
Honor, it’s a matter of public record from Dr. Kuharsky and
Ms. Maravina’s recent divorce, that — you know, we don’t know the value of all the assets they divided up, but she got two of the residences, he got one, and he’s paying her $400,000 for something. And, you know, I asked is that a complete list, and the answer is “no.” You know, not all of the records are even public. But it’s not like he’s indigent.
THE COURT: Okay. Well, do you want to try to piece together something in a way of a schedule or are you — do you think we need to await developments of Singletick?
MR. KAPLAN: If I had a preference, Your Honor, it’s for us to come back and see you around May 1st and by that time we will propose a schedule to you. If that’s not sufficient
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 28 of 32 28
. 1 for the Court, I will send a proposed schedule in next week.
. 2 But it will be for, like, a March trial.
. 3 THE COURT: And what is going to take so long?
. 4 MR. KAPLAN: Well —
. 5 THE COURT: Hearing from the experts or preparing a
. 6 dispositive motion?
. 7 MR. KAPLAN: Well, the work that Pathway does, it’s
. 8 very difficult and when you’re piecing stuff together, as they
. 9 are, it’s hard. And the defendants have successfully made it
. 10 all much harder. If we could get this computer — I mean, you
. 11 know, it’s mind-boggling that somebody would be working with a
. 12 computer in July and have forgotten — the most recent
. 13 computer, with the most important stuff for his next venture,
. 14 and he’s forgotten the password. If we could get the password
. 15 and get into that, then, according to what they know, three
. 16 months should be enough for us to get an answer to the
. 17 question. It’s just very hard work. When they take out this
. 18 piece, we’re pushed back further. And we may — you know, we
. 19 may be — if we can’t get the password from Dr. Kuharsky and we
. 20 can’t get discovery from Singletick, which is possible, then
. 21 we’ll be put to a hard decision. I don’t know how long the
. 22 motion practice will take up there, but I anticipate — because
. 23 I gave them an extension until today, and I had not received
. 24 it — I haven’t looked at my e-mail now. But I wouldn’t be
. 25 surprised to get it after of hours.
Case 4:09-cv-04039 Document 493
Filed in TXSD on 03/20/14
Page 29 of 32 29
. 1 THE COURT: What
. 2 MR. KAPLAN: The
. 3 THE COURT: All right.
. 4 MR. KAPLAN: And then we have motion
. 5 there, where we have to put together a motion
. 6 explain what’s gone on, get a hearing up there, get an order,
. 7 then get this or not, I don’t know which, and then analyze it.
. 8 So if in the best day in the world, tomorrow, Singletick gave
. 9 us everything, in three months from now we would have an
. 10 answer, according to what they know. They know how hard this
now, I’m sorry? Singletick response
to our subpoena.
. 11 is from their
. 12 things, where
. 13 we’ll run out
. 14 for me.
15
. 16 them to agree
. 17 explanation that’s supported by the documents and just the
. 18 normal knowledge of court practices. That’s where we are.
. 19 MR. HOLMES: As I’ve said in our papers, that laptop
. 20 is far more valuable to Mr. Kaplan and Quantlab as long as
. 21 it’s — as it is still unusable, because we’re going to hear
. 22 about this over and over and over again.
. 23 THE COURT: Well, then I would think that he would
. 24 be — your client would be motivated to spend more than a half
. 25 hour trying to work through it all.
own e-mail, about needing three months to do they said three months isn’t enough time and the deadlines. So, you know, it’s frustrating
So that’s why we’re where we are. I don’t expect
that we’re being fair with them, but that’s an
practice up to compel,
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 30 of 32 30
. 1 MR. HOLMES: Well, that’s all they — that was right
. 2 before Thanksgiving. That’s when they made it available. And
. 3 as you know, you’ve read my pleadings, I’ve been saying in
. 4 pleading after pleading since then, why, you know — you know,
. 5 if they will send this to us, we will work on it some more.
. 6 And today we hear from Mr. McInturf, oh, we never reached out.
. 7 They never reached out to us. I mean, this has gone on for
. 8 three months. Any time during that period they could have
. 9 said, “Here you go.” But, you know, we keep hearing the same
. 10 themes over and over again. The question was, what to do with
. 11 the scheduling order. Our position is set it as fast as
. 12 possible and let’s get on with this, but —
. 13 THE COURT: Okay.
. 14 MR. HOLMES: — if we come back in 60 days when
. 15 they’re done with Singletick, then it’s going to be something
. 16 else, and that’s the way it’s been going on for four years now.
. 17 MR. KAPLAN: I hate to respond. I was there.
. 18 Dr. Kuharsky — I mean, I set aside the afternoon. I don’t
. 19 remember if it was the Tuesday of that Thanksgiving week or the
. 20 Friday or the Saturday. But we scheduled it for whichever day.
. 21 We all came down, and I was going to sit there as long as
. 22 possible. I wanted to run him out of excuses. He played with
. 23 it for about half an hour. My suspicion is when he figured out
. 24 it was an imaged computer and he couldn’t fiddle with it, then
. 25 there was no point. But he played with — well, that’s my
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 31 of 32 31
. 1 suspicion. I have no way of proving that.
. 2 MR. HOLMES: Come on.
. 3 MR. KAPLAN: But we sat there and at the end of 20 or
. 4 30 minutes, he said, “I can’t do anything with this. I don’t
. 5 have any ideas,” and he walked out. And I couldn’t, you know,
. 6 cross-examine him or, I mean, I wasn’t going to. Mr. Holmes
. 7 didn’t want to come, that’s fine. But in the last three
. 8 months, the idea that somehow we’re supposed to have a new
. 9 idea? Nobody has ever said, if you’ll just send me an imaged
. 10 computer and give me months, so we will.
. 11 THE COURT: Well, you-all apparently can’t even agree
. 12 on whether that’s been offered or not. I mean, that’s how wide
13 the gulf 14
. 15 if we’re
. 16 find a scrap of paper or, you know, I don’t know, but he
. 17 certainly has never told us there’s a place he could look or
. 18 there’s something else he could do. He just said, “I can’t
. 19 figure out the password” and left. You know, I had sat aside
. 20 multiple hours. When he said he was done, he was done. We
. 21 didn’t escort him out, I mean. But we’ll try to, you know,
. 22 take care of this latest excuse as well.
. 23 THE COURT: May 7th, May 8th are available at 2:30.
. 24 Will that work?
. 25 MR. KAPLAN: I haven’t figured out how to just punch
is now.
MR. KAPLAN: So we will do that. And then, you know, lucky, Dr. Kuharsky will stumble on the password or
Case 4:09-cv-04039 Document 493 Filed in TXSD on 03/20/14 Page 32 of 32 32
in the date. I have to scroll to it real quickly. Any time on May 7th. The Fifth Circuit conference is May 8th and 9th, I think, and I don’t know, but May 7th is fine, Your Honor.
THE COURT: Okay. I’m not going to the conference. May 7th, 2:30, will that work?
MR. HOLMES: As far as I know, yeah.
THE COURT: Okay. Is there anything else we can do
today?
MR. KAPLAN: Thank you, Your Honor. (Concluded at 3:14 p.m.)
I certify that the foregoing record of proceedings in the of my ability.
/s/
Kathy L. Metzger Official Court Reporter
***
is a correct transcript from the above-entitled cause, to the best
Date
milwaukeenewspolitics 