On Tuesday, October 5, 2023, the Supreme Court of the State of New York, County of New York, Commercial Division, ordered Defendants KrunchCash, LLC, KC PCRD Fund, LLC, Jeffrey Hackman, and Sean McGhie PLC to return all non-produced Dropbox documents and destroy related work product. The court also ordered Defendants to reimburse Pursuit $155,977 in attorneys’ fees and costs. The ruling came after Plaintiff Pursuit Credit Special Opportunity Fund, L.P. accused Defendants of improperly accessing and using its confidential information.

The case stemmed from a subpoena issued in September 2022 by Defendants to Ken Parzygnat, Pursuit’s non-employee fund administrator, seeking various documents and communications concerning Parzygnat’s work for Plaintiff. Parzygnat acted as Plaintiff’s paying agent, preparing financial statements and coordinating a financial review of its investments in 2019.

According to the filing, Parzygnat shared an email production with both parties that contained links to Pursuit’s Dropbox account in November 2022. When the Defendants’ principal Jeffrey Hackman accessed the Dropbox links on November 4, he realized they provided access to Pursuit’s entire file directory hosted on Dropbox. Over the next week, Hackman spent several hours each day reviewing Pursuit’s confidential and privileged documents stored in Dropbox. However, Pursuit and its counsel were unaware of this unauthorized access.

On November 7, Pursuit designated all documents from Parzygnat’s production as “Attorney’s Eyes Only” under the parties’ protective order. However, it is unclear if Hackman stopped accessing the Dropbox files at this point, as the evidence presented was inconclusive.

Two weeks later on November 14, Defendants’ counsel sent a letter to Pursuit acknowledging they had downloaded Pursuit’s entire Dropbox contents and intended to use the documents in depositions and court filings. Pursuit then filed an emergency order to show cause, seeking to prevent Defendants from using any improperly accessed Dropbox documents.

At a November 21 hearing, the court issued a temporary restraining order barring Defendants from further Dropbox access. However, in December Pursuit accused KrunchCash of violating this order in a related Florida lawsuit. Both sides filed cross-motions for sanctions.

In its October 2023 decision, the court stated that Defendants’ counsel should have ceased reviewing the DropBox files as soon as they realized they had obtained unauthorized access to Plaintiff’s corporate file directory. Instead, counsel went on the offensive and threatened to use the information gleaned during its clandestine review for litigation advantage.

The court ordered Defendants to return all non-produced Dropbox documents, destroy related work product, and reimburse Pursuit $155,977 in legal fees. The court found that KrunchCash’s method of accessing the DropBox did not violate any laws or ethical standards, and therefore, did not impose any additional sanctions.

A copy of the original filing can be found here.