Woznicki v. Raydon Corp.
Woznicki v. Raydon Corp.
2019 WL 5703085 (M.D. Fla. 2019)
October 25, 2019
Kelly, Gregory J., United States Magistrate Judge
Summary
The Raydon Defendants filed a motion to quash a notice of a Rule 30(b)(6) deposition. The Court sustained the Raydon Defendants' objections as to two topics, and denied the motion in all other respects. The Court also denied Plaintiff's requests to take the Rule 30(b)(6) deposition on Topics 1-4 within 21 days of the Court's Order denying the Motion.
Additional Decisions
STEPHANIE WOZNICKI, on behalf of herself and all others similarly situated, Plaintiff,
v.
RAYDON CORPORATION, DONALD K. ARIEL, DAVID P. DONOVAN, THE ESOP COMMITTEE OF THE RAYDON CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN, LUBBOCK NATIONAL BANK, DAVID P. DONOVAN 2012 TRUST, ARIEL FAMILY TRUST DATED DECEMBER 18, 2012, PAMELA W. ARIEL, VERNA L. DONOVAN 2012 TRUST, DAVID P. DONOVAN, JR., IRREVOCABLE TRUST DATED JULY 25, 2008, LORI L. WEISS IRREVOCABLE TRUST DATED JULY 25, 2008, NIKI J. DUNCAN IRREVOCABLE TRUST DATED JULY 25, 2008, Defendants
v.
RAYDON CORPORATION, DONALD K. ARIEL, DAVID P. DONOVAN, THE ESOP COMMITTEE OF THE RAYDON CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN, LUBBOCK NATIONAL BANK, DAVID P. DONOVAN 2012 TRUST, ARIEL FAMILY TRUST DATED DECEMBER 18, 2012, PAMELA W. ARIEL, VERNA L. DONOVAN 2012 TRUST, DAVID P. DONOVAN, JR., IRREVOCABLE TRUST DATED JULY 25, 2008, LORI L. WEISS IRREVOCABLE TRUST DATED JULY 25, 2008, NIKI J. DUNCAN IRREVOCABLE TRUST DATED JULY 25, 2008, Defendants
Case No. 6:18-cv-2090-Orl-78GJK
United States District Court, M.D. Florida
Filed October 25, 2019
Counsel
Colin M. Downes, Pro Hac Vice, Robert Joseph Barton, Pro Hac Vice, Block & Leviton LLP, Washington, DC, Loren Bolno Donnell, Sam Jones Smith, Burr & Smith, LLP, St. Petersburg, FL, Daniel M. Feinberg, Pro Hac Vice, Feinberg Jackson Worthman & Wasow LLP, Berkeley, CA, for Plaintiff.Alicia M. Chiu, Jackson Lewis, PC, Orlando, FL, Ashley B. Abel, Pro Hac Vice, Cashida N. Okeke, Pro Hac Vice, Jackson Lewis P.C., Greenville, SC, Eliot T. Burriss, Pro Hac Vice, McDermott Will & Emery LLP, Dallas, TX, Joseph M. Wasserkrug, Kamal Sleiman, Michael Garrett Austin, McDermott, Will & Emery, LLP, Miami, FL, Theodore M. Becker, Pro Hac Vice, Richard J. Pearl, Pro Hac Vice, McDermott Will & Emery LLP, Chicago, IL, for Defendants.
Kelly, Gregory J., United States Magistrate Judge
MOTION: RAYDON DEFENDANTS’ MOTION FOR ENTRY OF PROTECTIVE ORDER (Doc. No. 121)
THEREON it is ORDERED that the motion is GRANTED IN PART AND DENIED IN PART.
I. BACKGROUND.
On April 23, 2019, Plaintiff filed a Class Action Amended Complaint (the “Amended Complaint”), against Defendants. Doc. No. 67. Defendants are Raydon Corporation, the fiduciaries of the Raydon Corporation Employee Stock Ownership Plan (“ESOP”), and the persons that sold shares to the ESOP. Id. at 2. Plaintiff, a participant in the ESOP, alleges the sale caused losses to the ESOP. Id. She asserts various violations of the Employee Retirement Income Security Act of 1974 (“ERISA”). Id. at 24-35. On May 28, 2019, Defendants filed motions to dismiss the Amended Complaint. Doc. Nos. 88, 89.
Specifically, Plaintiff alleges that on September 30, 2015, the Selling Shareholders[1] sold all of Raydon Corporation’s stock to the ESOP for 60.5 million dollars (the “2015 Transaction”). Doc. No. 67 at ¶ 2. Raydon Corporation was “a closely-held private corporation and its stock has not traded on any public market or exchange.” Id. at ¶ 21. The Raydon Defendants include officers and directors of Raydon Corporation, their relatives, and their relatives’ trusts. Id. at ¶¶ 8-17. Defendant Lubbock National Bank (“Lubbock”) was the named trustee of the ESOP and facilitated the 2015 Transaction. Id. at ¶¶ 19, 47.
Plaintiff alleges that Raydon Corporation “had a history of expansion and contractions.” Id. at ¶ 23. Three weeks before the 2015 Transaction, according to Plaintiff, Raydon Corporation’s contract with the Program Executive Office for Simulation, Training and Instrumentation (US Army) (“PEO-STRI”) was terminated for Raydon Corporation’s “fail[ure] to meet technical performance requirements,” making it highly unlikely that Raydon would be obtaining more US Army contracts. Id. at ¶¶ 26, 28, 31.
Plaintiff contends that in April 2015, the Raydon Defendants[2] attempted to sell Raydon Corporation to Cubic Corporation at a much lower transaction price, but Cubic Corporation decided not to buy Raydon Corporation after conducting due diligence. Id. at ¶¶ 33-34. Plaintiff alleges that Lubbock failed to adequately investigate Raydon Corporation and its reliance on the information provided to it regarding Raydon Corporation was not reasonable because, among other reasons, it came from those with a financial interest in the 2015 Transaction. Id. at ¶¶ 35-45.
*2 The 2015 Transaction includes million-dollar payments to Defendants Donald K. Ariel and David P. Donovan (the “Director Defendants”) to not compete with Raydon, in addition to “subordinated notes from Raydon [Corporation] whereby Raydon [Corporation] will pay them millions of dollars in principal and interest for at least 15 years after the transaction date.” Id. at ¶¶ 63-64. Plaintiff asserts that there is “no rational economic basis” for the non-compete agreements because Raydon Corporation is indebted to the Director Defendants for at least fifteen years, and competing with Raydon Corporation would “risk causing Raydon [Corporation] to default on the subordinated notes payments.” Id. at ¶ 65. Also as part of the 2015 Transaction, Raydon Corporation agreed to indemnify the Director Defendants against claims regarding their services as fiduciaries of the ESOP and Lubbock against claims related to the ESOP or its performance of its duties as the ESOP’s trustee. Id. at ¶¶ 75-76.
Following the 2015 Transaction, Lubbock entered into a settlement agreement in Acosta v. Cactus Feeders, Case No. 2:16-cv-00049 (N.D. Tex.). Id. at ¶¶ 67-68. In Acosta, the U.S. Department of Labor filed a lawsuit alleging that Lubbock National Bank caused the Cactus Feeders, Inc. Employee Stock Ownership Plan to pay tens of millions of dollars more than it should have paid for company stock in a December 2012 ESOP transaction.” Id. at ¶ 67. As part of the settlement, Lubbock “agreed to adopt policies and procedures applicable to its services as Trustee of any ESOP in connection with transactions in which the ESOP is purchasing or selling employer securities that are not publicly traded.” Id. at ¶ 68. Plaintiff alleges that the ESOP’s fiduciaries would have know of the Acosta lawsuit and settlement, and this should have prompted Raydon Corporation, the “ESOP Committee and Director Defendants should have conducted an investigation to determine whether ... Lubbock ... had followed appropriate procedures in the ... 2015 ... Transaction and whether the price paid was for fair market value ....” Id. at ¶ 71.
On December 31, 2015, the fair market value of Raydon Corporation’s stock held by the ESOP was 5.11 million dollars. Id. at ¶ 53. On December 31, 2017, it was 4.55 million dollars. Id. at ¶ 53. Based on the above assertions, Plaintiff alleges six causes of action.
○ Count I—Engaging in Prohibited Transaction Forbidden by ERISA §§ 406(a), 29 U.S.C. §§ 1106(a), Against Selling Shareholders and Lubbock
○ Count II—Engaging in Prohibited Transaction Forbidden by ERISA §§ 406(b), 29 U.S.C. §§ 1106(b), Against Selling Shareholders
○ Count III—Breach of Fiduciary Duty Under ERISA §§ 404(a)(1)(A) and (B), 29 U.S.C. §§ 1104(a)(1)(A) and (B) Against Lubbock
○ Count IV—Engaging in Prohibited Transaction Forbidden by ERISA §§ 406(a)-(b), 29 U.S.C. §§ 1106(a)-(b), Against Lubbock and Director Defendants
○ Count V—Breach of Fiduciary Duty Under ERISA §§ 404(a)(1)(A), (B) and (D), 29 U.S.C. §§ 1104(a)(1)(A), (B) and (D) Against Raydon Corporation, the ESOP Committee and Director Defendants
○ Count VI—Violation of ERISA § 410 & ERISA § 502(a)(3) against Lubbock and Director Defendants
Id. at 24-35. Plaintiff seeks, among other things, a declaratory judgment, injunctive relief, disgorgement of profits made through using the ESOP’s assets, an accounting, constructive trusts, equitable liens on funds wrongfully withheld by Defendants, and attorney’s fees and costs. Id. at 36-37.
On June 27, 2019, Plaintiff filed a motion for class certification. Doc. No. 96. On August 14, 2019, Defendants filed their responses to the motion for class certification. Doc. Nos. 98, 102. In support of their responses, Defendants rely on declarations from fifty-five current and former employees (the “Declarants”). Doc. No. 98 at 21-22. On August 22, 2019, Plaintiff filed a motion asking that she be permitted an extension of time to file her reply to the responses, or that she be permitted to file a supplemental submission, as Defendants did not previously disclose the names of the Declarants as those having knowledge of class certification (the “Motion for Supplemental Submission”). Doc. No. 103. Plaintiff also asked to exceed the ten-deposition limit. Id. at 13.
*3 On September 17, 2019, the Court granted the Motion for Supplemental Submission in part. Doc. No. 110. The Court denied Plaintiff’s request to exceed the deposition limitation, but permitted Plaintiff to “file an amended reply to the responses to her motion for class certification that incorporates information obtained from conducting discovery regarding the Declarants ....” Id. at 5-6.
On September 25, 2019, Plaintiff served a notice of depositions for the Raydon Corporation, Brenda Boone, and Valerie Garza, to be taken on October 10 and 11, 2019. Doc. No. 121-1. The notice states that the deposition of the Raydon Corporation is pursuant to Federal Rule of Civil Procedure 30(b)(6), and includes a list of sixteen topics. Id. at 1, 6-9. On October 8, 2019, following discussions with Plaintiff’s counsel, the Raydon Defendants filed a motion for protective order (the “Motion”) regarding the Raydon Corporation deposition.[3] Doc. No. 121. The Raydon Defendants ask the Court to strike or quash the Rule 30(b)(6) deposition notice. Id. at 15. On October 8, 2019, the Court entered an order staying the Raydon Corporation deposition pending a ruling on the Motion and directing Plaintiff to file a response to the Motion on or before October 22, 2019. Doc. No. 122. On October 22, 2019, Plaintiff filed her response to the Motion. Doc. No. 126.
II. ANALYSIS.
Parties may obtain discovery on the following under Federal Rule of Civil Procedure 26(b)(1):
any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.
A party is entitled to the facts relevant to the litigation. Dunkin’ Donuts, Inc. v. Mary’s Donuts, Inc., 206 F.R.D. 518, 520 (S.D. Fla. 2002). The party seeking discovery has the threshold burden of demonstrating that the discovery requested is relevant. Zorn v. Principal Life Ins. Co., No. CV 609–081, 2010 WL 3282982, at *2 (S.D. Ga. Aug. 18, 2010) (citing Canada v. Hotel Dev.-Tex., Ltd., No. 3–07–CV–1443–D, 2008 WL 3171940, at *1 (N.D. Tex. July 30, 2008)). Relevant information need not be admissible at trial, but rather discovery must be “proportional to the needs of the case.” Fed. R. Civ. P. 26(b)(1). “The discovery process is designed to fully inform the parties of the relevant facts involved in their case.” U.S. v. Pepper’s Steel & Alloys, Inc., 132 F.R.D. 695, 698 (S.D. Fla. 1990) (referencing Hickman v. Taylor, 329 U.S. 495, 501 (1947)). “[A] party demanding discovery is required to set forth its requests simply, directly, not vaguely or ambiguously....” Treister v. PNC Bank, No. 05-23207-CIV, 2007 WL 521935, at * 2 (S.D. Fla. Feb. 15, 2007).
When a party receives notice of a deposition under Rule 30(b)(6), it has a duty to prepare a corporate representative who is able to testify about the areas of inquiry in the notice. Fed. R. Civ. P. 30(b)(6). Thus, those areas of inquiry must be narrowly tailored and proportional to the needs of the case. Otherwise, it will be unduly burdensome, if not impossible, for a party to properly prepare its corporate representative.
*4 The Raydon Defendants argue that the Rule 30(b)(6) deposition exceeds the purpose of the Court’s order permitting Plaintiff to file a supplemental reply. Doc. No. 121 at 7-10. This argument is rejected, as the Court’s order did not impose any limits on Plaintiff’s ability to conduct discovery beyond those already contained within the rules governing this litigation. Doc. No. 110.
Although Plaintiff offered to limit the Rule 30(b)(6) deposition occurring on October 10th to the first four topics, the Raydon Defendants argue that this offer was made too late to “allow for necessary interviews of company personnel to determine which persons can speak on which topics and, once completed, identify them to Plaintiff’s counsel and coordinate schedules if possible, for October 10, 2019.” Doc. No. 121 at 10. Plaintiff provided the fourteen days’ notice of the Rule 30(b)(6) deposition as set forth in Local Rule 3.02. Also, this argument is rendered moot by the Court’s order staying the Rule 30(b)(6) deposition pending a ruling on the Motion. Doc. No. 122.
The Raydon Defendants next argue that Plaintiff should attempt to seek this information via other discovery forms, rather than a Rule 30(b)(6) deposition. Doc. No. 121 at 12-13. “Litigants can ordinarily select which available discovery tools they want to use, along with the order in which they want to use them, and courts usually will not force litigants to select another form of discovery (e.g., interrogatories) before permitting a 30(b)(6) deposition ....” S.E.C. v. Merkin, 283 F.R.D. 689, 698 (S.D. Fla.), objections overruled, 283 F.R.D. 699 (S.D. Fla. 2012). Therefore, this argument is rejected.
The following are the first four topics in the Rule 30(b)(6) deposition notice:
1. The circumstances surrounding the drafting and execution of the DECLARATIONS by CLASS MEMBERS, including the persons who drafted the declarations, the information or documents communicated or provided to each of the CLASS MEMBER DECLARANTS, any meetings regarding the DECLARATIONS, information or documents previously provided to each CLASS MEMBER DECLARANT about the 2015 TRANSACTION, this litigation, or the claims in the COMPLAINT[.]
2. The factual basis for the substance of the DECLARATIONS signed by current employees of RAYDON who are CLASS MEMBERS, the information known to each such current employee of RAYDON, and the circumstances by which each such current employee of RAYDON came to acquire knowledge of those facts.
3. The knowledge of each CLASS MEMBER DECLARANT who is a current employee of RAYDON about (a) the effect of a judgment in favor of PLAINTIFF and the CLASS, (b) the current and historical value of RAYDON or of their respective RAYDON stock.
4. For any current or former employee of RAYDON who was asked to but did not sign a declaration in connection with Defendants’ Opposition to Class Certification, the identity of such person, the circumstances about why that person did not sign a declaration and any reasons expressed or known as to why that person did not sign a declaration.
Doc. No. 121-1 at 7.
Regarding the first and second topics, the Raydon Defendants state, “This is an impossible straw man. No corporate representative(s) at Raydon [Corporation] can testify to these topics.” Doc. No. 121 at 11. The Raydon Defendants submitted the Declarations in support of their opposition to the motion for class certification. Doc. Nos. 101, 101-1, 101-2, 101-3, 101-4. They do not state why no corporate representatives for Raydon Corporation can testify regarding circumstances surrounding the drafting of the Declarations or the factual basis for the substance of the Declarations. However, the Court agrees with the Raydon Defendants that the following portions of the second topic would not be known by a corporate representative of the Raydon Corporation: “[T]he information known to each such current employee of RAYDON, and the circumstances by which each such current employee of RAYDON came to acquire knowledge of those facts.” Doc. No. 121-1 at 7. A Raydon Corporation corporate representative also would not have knowledge of the third topic, which asks about the class members’ knowledge. Id.
*5 The Raydon Defendants do not make a specific argument regarding the fourth topic, but contend that the first four topics “seek[ ] to invade the attorney-client privilege and work product protection.” Doc. No. 121 at 13. The Raydon Defendants cite cases from the Northern District of California and the District of New Jersey to support this argument. Id. at 13-14. The cases did not involve moving to quash a notice of a Rule 30(b)(6) deposition. See Tierno v. Rite Aid Corp., No. C 05-02520 TEH, 2008 WL 2705089, at *5 (N.D. Cal. July 8, 2008) (motion to compel plaintiffs to produce declarations of class members); In re Front Loading Washing Mach. Class Action Litig., 2010 U.S. Dist. LEXIS 77440, *13-15 (D. N.J. July 29, 2010) (plaintiffs seeking production of class member declarations in the defendants’ possession).
The attorney-client and work product privileges may not be generally raised against testifying. See Johnson v. Gross, 611 F. App’x 544, 547 (11th Cir. 2015) (blanket privilege assertions are generally unacceptable).[4] Instead, the privilege should be asserted when specific questions are asked during the deposition. See id. (work product privilege must be expressly asserted as to each document); N.L.R.B. v. Modern Drop Forge Co., 108 F.3d 1379 (7th Cir. 1997) (unpublished) (approving procedure requiring deposition and having parties assert their privileges and objections to specific questions asked during the deposition).
The following are the remaining topics listed for the Raydon Corporation deposition:
5. The negotiation and due diligence processes related to the aborted 2015 sale of RAYDON to CUBIC, including the contemplated structure of the sale, the purchase price contemplated in connection with the sale, the circumstances surrounding the termination of the proposed transaction and the reason(s) that CUBIC stated for not purchasing RAYDON.
6. The circumstances surrounding the termination of the Common Driver Trainer contract by PEO-STRI, including the causes for the termination of the Common Driver Trainer contract and the substance of any COMMUNICATIONS involving or among RAYDON employees related to the termination of the Common Driver Trainer contract.
7. An explanation of the origins of and the basis of any revenue projections provided to LUBBOCK or its advisors during ... 2015 and the factual basis for those revenue projections.
8. The circumstances surrounding any workforce reduction or layoff at RAYDON from January 1, 2014 to the present, including the reasons for and quantity of any such workforce reduction or layoff.
9. The substance of any COMMUNICATIONS between employees or agents of RAYDON and LUBBOCK or LUBBOCK’s advisors in connection with the 2015 TRANSACTION, including the substance of any negotiations regarding the terms of the 2015 TRANSACTION and any COMMUNICATIONS relating to the aborted sale to CUBIC or the Common Driver Trainer contract.
10. Identification of the documents, information, or representations provided or made by RAYDON employees or agents to LUBBOCK or its advisors in connection with the 2015 TRANSACTION.
11. The process and analysis or review prior to the 2015 TRANSACTION by which LUBBOCK was selected and/or appointed as the trustee for the ESOP.
12. Negotiations about, discussion about and any analysis of the propriety of the noncompete agreements that were related to or part of the 2015 TRANSACTION.
13. Following the 2015 TRANSACTION, any review or investigation of LUBBOCK’s administration of or activities as trustee of the ESOP, including related to the 2015 TRANSACTION, and the substance of any communications between RAYDON employees and LUBBOCK relating to the settlement of Acosta v. Cactus Feeders, Case No. 2:16-cv-00049 (N.D. Tex.) including specifically but not limited to the letter identified by the RAYDON DEFENDANTS at ECF No. 49 at ¶ 9.
*6 14. The factual basis for each of the affirmative defenses asserted by RAYDON in its Answer (ECF No. 49) to the Complaint (ECF No. 1).
15. The efforts made by RAYDON to search for and produce documents in this litigation.
16. Testimony sufficient to authenticate any documents produced by RAYDON in this litigation or to establish whether any such documents are business records under Fed. R. Evid[.] 803(6) or Fed. R. Evid[.] 803(8).
Doc. No. 121-1 at 7-9. The Raydon Defendants argue that all the topics are overly broad, but do not provide more than this conclusory assertion to support the argument. Doc. No. 121 at 11. The only specific argument made regarding one of the five through sixteen topics is that the fifteenth topic is “premature as the parties have yet to reach an agreement on electronically stored information, much less have conducted related searches.” Id. at 11-12. The fifteenth topic is not limited to electronically stored information, and, even if it was, the Raydon Defendants’ opinion that it is premature is not sufficient to preclude Plaintiff from inquiring about the topic. Accordingly, the Raydon Defendants’ objections to the fifth through sixteenth topics are overruled.
In the response to the Motion, Plaintiff asks that the Court permit her “to (1) take the Rule 30(b)(6) deposition on Topics 1-4 within 21 days of the Court’s Order denying the Motion; and (2) file an amended or supplemental reply in support of class certification within 14 days after completion of the Rule 30(b)(6) on Topics 1-4.” Doc. No. 126 at 15. Requests to the Court must be presented in a motion that complies with Local Rule 3.01. Local Rule 3.01(f). Thus, Plaintiff’s requests are denied.
III. CONCLUSION.
Based on the foregoing, it is ORDERED that the Motion, Doc. No. 121, is GRANTED IN PART AND DENIED IN PART as follows:
1. The Raydon Defendants’ objections are sustained as to the following topics listed in the notice of Rule 30(b)(6) deposition of Raydon Corporation:
a. In the second topic: “[T]he information known to each such current employee of RAYDON, and the circumstances by which each such current employee of RAYDON came to acquire knowledge of those facts[,]” and
b. The third topic;
2. In all other respects, the Motion is DENIED.
DONE and ORDERED at Orlando, Florida, on October 25, 2019.
Footnotes
The Selling Shareholders are Donald K. Ariel, David P. Donovan, David P. Donovan 2012 Trust, Ariel Family Trust Dated December 18, 2012, Pamela W. Ariel, Verna L. Donovan 2012 Trust, David P. Donovan, Jr., Irrevocable Trust Dated July 25, 2008, Lori L. Weiss Irrevocable Trust Dated July 25, 2008, and Niki J. Duncan Irrevocable Trust Dated July 25, 2008. Doc. No. 121 at 1-2.
Specifically, the Raydon Defendants are Raydon Corporation, Donald K. Ariel, David P. Donovan, The ESOP Committee of the Raydon Corporation Stock Ownership Plan, David P. Donovan 2012 Trust, Ariel Family Trust Dated December 18, 2012, Pamela W. Ariel, Verna L. Donovan 2012 Trust, David P. Donovan, Jr., Irrevocable Trust Dated July 25, 2008, Lori L. Weiss Irrevocable Trust Dated July 25, 2008, and Niki J. Duncan Irrevocable Trust Dated July 25, 2008. Doc. No. 121 at 1-2.
The parties were able to resolve their differences regarding the depositions of Brenda Boone and Valerie Garza. Doc. No. 121 at 6.
In this circuit, “[u]npublished opinions are not considered binding precedent, but they may be cited as persuasive authority.” 11th Cir. R. 36-2.