On May 30, 2024, the Appellate Division, First Department unanimously affirmed the Decision and Order of the Supreme Court (Justice J. Cohen) sanctioning Defendants KrunchCash LLC, KC PCRD Fund LLC, and Jeffrey Hackman and their counsel for obtaining unauthorized access to the live cloud-storage environment of Plaintiff Pursuit Credit Special Opportunity Fund LP and refusing Pursuit’s repeated requests to clawback those materials. Defendant-Appellants originally gained access to Pursuit’s Dropbox cloud storage environment through a link they obtained through non-party discovery that was inadvertently still active. Instead of notifying Pursuit of the access to the Dropbox, Defendant-Appellants, understanding that they were in Pursuit’s live corporate files which contained confidential and privileged materials, reviewed the materials for over one week and then attempted to weaponize the materials gleaned from those materials in a letter to Pursuit demanding that Pursuit withdraw its claims. The trial court granted a temporary restraining order against Defendant-Appellants in November 2022, and then in October 2023 granted a protective order over the Dropbox materials and sanctioned Defendant-Appellants over $150,000 based on Pursuit’s unnecessarily incurring legal fees in order to procure a clawback of the materials.

On appeal, the Appellate Division agreed that the trial court was within its discretion to impose sanctions as appropriate and necessary to prevent Defendants-Appellants’ abuse of the discovery process and to compensate Pursuit for the harm to Pursuit in being forced to press its motion. The First Department noted that pursuant to the Rules of Professional Conduct, Rule 4.4(b), counsel was obligated to notify Pursuit of the inadvertent access and should not have used the questioned materials. 

The appellate court’s decision can be found here. Slarskey LLC attorneys Renee Bea, Evan Fried, Ricky Weingarten, and Kimberly Grinberg represented Pursuit in the trial court and on appeal.