Best Buy Stores, L.P., Plaintiff, v. Developers Diversified Realty Corp., et al., Defendants Civil No. 05-2310 (DSD-JJG) United States District Court, D. Minnesota Filed January 05, 2007 Counsel Robert A. Machson, Robert A. Machson & Associates, LLC, Weston, CT, Thomas C. Mahlum, Robins Kaplan LLP, Mpls, MN, Joel Allan Mintzer, Blue Cross and Blue Shield of Minnesota, St. Paul, MN, for Plaintiff. James L. DeFeo, Pro Hac Vice, Thomas L. Feher, Thompson Hine, Cleveland, OH, Jennifer A. Lesny Fleming, Pro Hac Vice, Steven S. Kaufman, Pro Hac Vice, Kaufman & Company, LLC, Cleveland, OH, Martin S. Chester, D. Charles MacDonald, Faegre Baker Daniels LLP, Mpls, MN, for Defendants Graham, Jeanne J., United States Magistrate Judge ORDER *1 The above matter came to the undersigned on December 19, 2006 for resolution of discovery motions (Doc. Nos. 148, 161, 171). Robert A. Machson, Esq., and Thomas C. Mahlum, Esq. appeared on behalf of plaintiff Best Buy Stores (Best Buy). Dena M. Kobasic, Esq., appeared on behalf of the defendants. Being duly advised of all the files, records, and proceedings herein, IT IS HEREBY ORDERED THAT: 1. The defendants’ motion for sanctions (Doc. No. 148) is GRANTED in accordance with the instructions in this order. 2. The defendants’ motion to compel (Doc. No. 161) is GRANTED IN PART AND DENIED IN PART in accordance with the instructions in this order. 3. Best Buy’s motion for sanctions and to compel discovery (Doc. No. 171) is GRANTED IN PART AND DENIED IN PART in accordance with the instructions in this order. 4. With respect to Best Buy’s initial sets of discovery served on April 5 and April 11, 2006; its second set of discovery served onMay22, 2006; its third set of requests for production of documents served on June 30, 2006; its “third set” of interrogatories and requests for production of documents served at some date thereafter; its Rule 30(b)(6) notice of deposition served on October 17, 2006; the defendants’ first set of discovery served on June 12, 2006; and their Rule 30(b)(6) notice of deposition served on May 5, 2006: a. The parties shall respond as required by this order. b. For any remaining matters not addressed by this order, either the parties have not brought a motion to compel or they have lodged appropriate objections, and therefore, further motions to compel shall not be permitted. 5. On or before February 2, 2007: a. Best Buy shall produce one or more Rule 30(b)(6) designees, for deposition by the defendants that are knowledgeable, on Topics 1,2, 4, 5,6,7 and 17 of the notice of deposition served on May 5, 2006, in accordance with the instructions in this order. b. Best Buy shall produce leases and insurance policies, as well as analyses or other documents related to costs paid under them, that provided the basis for its decision to proceed with the current litigation. c. The defendants shall produce all documents that show how they calculated insurance charges under the leases at issue in this litigation, including those that show how charges were determined for the first dollar program. d. The defendants shall disclose costs and revenues of the first dollar program for properties and leases at issue in this litigation, including any loss runs under that program. e. The defendants shall produce one or more Rule 30(b)(6) designees, for deposition by Best Buy, on Topic 3 of the notice of deposition dated October 17, 2006. f. Consistent with this Court’s order of June 29, 2006, the previously described discovery obligations shall be limited to the lease years at issue in this matter. 6. The defendants shall file affidavits, demonstrating good cause why the Cyncynatus memo should be kept confidential, on or before January 19, 2007. Best Buy may file a response to the affidavits regarding this issue on or before January 26, 2007. *2 7. Local Rule 37.1 provides, “[N]o motion for modification of discovery or disclosure requirements will be entertained unless it is accompanied by a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the matter without Court action.” a. In accordance with this rule, prior to any future discovery motions, the parties shall make a good faith effort to meet and confer. b. Future motions shall be accompanied by a certification explaining the parties’ efforts to meet and settle disputes. Disclosure of correspondence between the parties shall not be sufficient to meet this requirement. c. Failure to comply with these requirements may result in summary denial of future discovery motions. 8. Local Rule 37.2 provides, “Any discovery motion ... shall include, in the motion itself or an attached memorandum, ... a specification of the discovery in dispute, and ... a verbatim recitation of each interrogatory, request, answer, response, and objection which is the subject of the motion or a copy of the actual discovery document which is the subject of the motion.” a. In accordance with this rule, future discovery motions shall specify precisely what discovery request is in dispute, what objection was lodged against the request, and why this objection lacks merit. b. A general characterization of matters sought in discovery, or the objections against such discovery, shall not be sufficient to meet this requirement. c. Failure to comply with these requirements may result in summary denial of future discovery motions. 9. A party that fails to comply with the instructions in this order shall be subject to any sanctions this Court deems appropriate. 10. No costs or attorney fees will be granted in connection with the parties’ motions. 11. The following memorandum is incorporated by reference. Dated this 4th day of January, 2007. MEMORANDUM A. Introduction This dispute arises out of several commercial leases. Plaintiff Best Buy operates retail locations in sixteen malls. It claims that its landlords or their managers, the seventeen defendants, have overcharged insurance and maintenance costs for common areas. Best Buy brings action for breach of contract, breach of fiduciary duty, and declaratory judgment. The primary concern in this litigation, however, is insurance. The leases generally provide that the defendants assume liability for certain property damage and personal injury claims. Instead of a charge-back of these costs, the leases require Best Buy to pay a proportionate share of insurance coverage. The record suggests that the defendants structure this insurance in the following way. Under a blanket policy that covers all the defendants’ properties, the defendants pay a $100,000 deductible and the insurer is only liable to the extent claims exceed this amount. The defendants pay all lesser claims out of their own pockets, in what the parties refer to as the “first dollar program.” For insurance charges under the leases, Best Buy pays a proportional share into not just the blanket policy, but also the first dollar program. The manner in which the defendants calculate the cost, and decide an appropriate charge for, the first dollar program is the issue at the heart of this litigation. *3 The defendants contend that, even though they have not retained an insurer to provide first dollar coverage, they charge an amount consistent with such coverage. To do so, they consult with their insurance broker, which supplies a quote or “indication” from various insurers of the potential cost for first dollar program. Best Buy counters that, even if the defendants receive such an indication, the defendants do not adequately explain how first dollar coverage is calculated. It implies that, if the defendants were required to disclose precisely how first dollar cover coverage is determined, there would be evidence of overcharges or fraud. In a related argument, Best Buy also appears to challenge whether the first dollar program constitutes insurance within the meaning of the lease. The parties now bring three discovery motions as follows. B. Defendants’ Motion for Sanctions Asserting that Best Buy appointed a Rule 30(b)(6) designee without sufficient knowledge, the defendants move for sanctions. The defendants served Best Buy with a Rule 30(b)(6) notice of deposition on May 4, 2006, asking that Best Buy produce witnesses with knowledge about seventeen topics. Best Buy did not object to the notice. Instead, it designated Katherine Kuntz, its senior facilities manager after much, what could vaguely be called, communication between the parties of who would be designated. But at her deposition on June 15, 2006, Kuntz admitted that she lacked knowledge about several topics in the notice. She identified three others at Best Buy as persons with knowledge. Rule 30(b)(6) provides in relevant part, A party may in the party’s notice and in a subpoena name as the deponent a public or private corporation ... and describe with reasonable particularity the matter on which examination is requested. In that event, the organization so named shall designate one or more officers, directors, or managing agents, or other persons who consent to testify on its behalf, and may set forth, for each person designated, the matters on which each person will testify. When a corporation receives a notice of deposition under Rule 30(b)(6), it cannot simply rely on the personal knowledge of a single designee. The corporation has an obligation, in good faith, to prepare a person to testify about a particular topic. That designee is expected to testify as to the knowledge of the entire corporation. PPM Finance, Inc. v. Norandal USA, Inc., 392 F.3d 889, 894-95 (7th Cir. 2004); Dwelly v. Yamaha Motor Corp., 214 F.R.D. 537, 540 (D.Minn. 2003); Arctic Cat, Inc. v. Injection Research Specialists, Inc., 210 F.R.D. 680, 682-83 (D.Minn. 2002). Where a corporation fails to designate an appropriate witness, or where that witness is not adequately prepared to testify to specified topics, then a party may compel the corporation to supply a substitute designee. Sony Elecs., Inc. v. Soundview Techs., Inc., 217 F.R.D. 104, 112 (D.Conn. 2002); Arctic Cat, Inc., 210 F.R.D. at 683. The deposition topics in the defendants’ Rule 30(b)(6) notice for which it is alleged that Ms. Kuntz was not prepared, may be summarized as follows: Topics 1 and 2 seek all information about the corporate structure of Best Buy; the identity of its officers, directors, and “principal shareholders”; and the identity of all those involved in commercial leasing arrangements. Topics 4, 5, and 12 seek information about the policies and procedures Best Buy uses for determining whether to enter leases. Topics 6 and 7 asks for terms of all leases Best Buy has entered, as well as all proposed leases it has rejected due to unsatisfactory insurance terms. Topic 17 seeks information about all litigation by Best Buy involving insurance terms in leases. *4 On Topics 1 and 2, Kuntz was able to identify the corporate offices responsible for handling commercial leases, and she described the decision making structure in those offices. However, she was unable to provide information regarding its officers and directors or a detailed explanation of the general corporate structure of Best Buy. Granted, some of these details may be more easily obtained through written discovery and one designee may not know all details of all 17 topics, but it was Best Buy’s option to object and/or designate more than one person for the deposition and make this clear from the beginning. Accordingly, Best Buy must produce other Rule 30(b)(6) witnesses for Topics 1 and 2. For Topics 4, 5, and 12, Kuntz explained that Best Buy had no corporate policies that control insurance terms in its commercial leases. She admitted that Best Buy has a master lease that it uses in negotiations, but she did not know its terms or its provisions on insurance. Kuntz also stated that there were circumstances where a lease may have been rejected due to insurance terms, but she was not prepared to testify about any particular procedures. Because Kuntz was not adequately prepared to testify on these topics, it is appropriate for Best Buy to produce another designee in this area. Topics6, 7, essentially asked Best Buy to produce a witness with detailed knowledge of all existing and proposed commercial leases. Regardless of whether Best Buy engaged in good faith preparation of its designee, preparation on such broad topics is not reasonable given the court’s ruling, to be described in the next section, regarding Best Buy leases. Accordingly, Best Buy need only designate a person for topics 6 & 7 if it is someone other than Ms. Kuntz who has knowledge of the leases referred to in the Amended Complaint or those compared to the leases in such complaint. With regard to Topic 17, Best Buy must designate a person with knowledge of any such litigation, or indicate that no such litigation as described has occurred or is occurring. The defendants seek sanctions in the amount $2,727.00 for the need to return for these further Rule 30(b)(6) depositions. While the Court is not enamored either with the tone set in this Rule 30(b)(6) deposition or the lack of communication which could have resolved the issue before the deposition, the Court does not believe monetary sanctions are appropriate at this time. Ms. Kuntz was an important witness for defendants to depose and whether or not the other designees could have been completed that same day is speculative. Defendants’ Motion to Compel The defendants also move to compel, asserting that Best Buy has not adequately responded to their first set discovery. In the memorandum supporting this motion, the defendants generally did not specify particular discovery requests, but instead outlined six categories of documents to be produced. Pursuant to the directions of this Court at the motion hearing, the defendants identified discovery requests that support the first two of the six categories. The following analysis is limited to those categories. Through Interrogatory No. 16, the defendants seek information about fees and insurance Best Buy pays under its commercial leases. Through Interrogatory No. 23, the defendants ask Best Buy to produce documents that support its contention that it has been overcharged for insurance. These requests are commensurate with the defendants’ first category, which includes all documents about insurance policies held by Best Buy and costs paid under them. And through Interrogatory No. 12, the defendants seek all documents about leases negotiated or executed by Best Buy, a request which is substantially identical to the defendants’ second category. *5 In its answers to these discovery requests, Best Buy has agreed to produce relevant evidence. Opposing the motion to compel, Best Buy argues that the defendants seek irrelevant matters that are not discoverable. Rule 26(b)(1) permits discovery as to any matter “that is relevant to the claim or defense of any party,” and it may include information “not admissible at trial if the discovery seems reasonably calculated to lead to the discovery of admissible evidence.” This standard is liberally applied in a manner that advances the discovery of useful evidence and promotes the efficiency of litigation. See Credit Lyonnais, S.A. v. SGC Int’l, Inc., 160 F.3d 428, 430 (8th Cir. 1998). The defendants contend that the motives of Best Buy, when entering commercial leases, are relevant to the dispute in this action. They argue that they are entitled to explore the reasons why Best Buy chose to commence this litigation. These arguments are best framed in the context of Best Buy’s claim for breach of fiduciary duty. As a general proposition, an action for breach of fiduciary duty requires the plaintiff to show that it had some reason to repose its trust and confidence in the defendant. See Murphy v. Country House, Inc., 240 N.W.2d 507, 512 (Minn. 1976); see generally 37 Am.Jur.2d Fraud and Deceit § i33 (2001). Assuming that Best Buy reposed its trust and confidence in the defendants, its reasons may have arisen out of its experiences in the context of other insurance and lease arrangements. And it appears that Best Buy suspected the defendants, and had reason to believe there was a breach of this trust, after comparing its leases with the defendants with other leases. These matters may relate to its claim for breach of fiduciary duty, and so they are reasonably calculated to lead to the discovery of admissible evidence. In the two categories proposed by the defendants, they arguably seek all leases and insurance policies that either have been negotiated or executed by Best Buy. Given the broad sweep of these requests, not all these matters are likely to lead to the discovery of relevant evidence. But the leases and insurance policies, or related documents regarding costs paid under them, that were compared to the leases and policies in dispute in this case, may explain why Best Buy suspected a breach of trust. This Court concludes these comparison documents, or any related analysis of these documents, are relevant and discoverable. C. Best Buy’s Motion to Compel and for Sanctions Best Buy brings its own motion to compel and raises several issues. One is a general request to compel responses to multiple sets of written discovery, which in part challenges the defendants’ failure to adequately search electronic sources. Another is that the defendants have failed to appoint an appropriate Rule 30(b)(6) designee. The last challenges an “attorneys eyes only” designation for a document, the “Cyncynatus memo,” which allegedly explains how the defendants handle common area insurance for their tenants. 1. Written Discovery Like the defendants, Best Buy for the most part did not specify particular discovery requests, but instead generally referred to various sets of discovery. Pursuant to the directions of this Court at the motion hearing, Best Buy identified six specific discovery requests at issue. The following analysis is limited to these requests. *6 Three are from the first set of discovery that Best Buy served to the defendants on April 5, 2006. Through Requests for Production Nos. 1, 2, and 4, Best Buy seeks information about how the defendants calculated insurance charges under the leases, as well as general information about the operation of the first dollar program. By an order on June 29, 2006, the defendants were required to answer these requests without objection. The record shows the defendants have disclosed documents showing the indications, from its insurance broker, which allegedly form the basis for calculating charges under the first dollar program. And the defendants have disclosed documents showing how these charges are allocated to tenants at various properties. But the defendants have not yet disclosed any documents that show how charges under the first dollar program are calculated, explaining the process through which the indications were used to determine charges under that program. Because these issues involve the primary dispute in this matter, they are relevant to Best Buy’s claims. The defendants, therefore, shall be required to produce responsive documents. The defendants have represented that such documents may exist, but that the cost to retrieve them from an electronic archive may be prohibitive. They invoke recent amendments to Rule 26, which passed on December 1, 2006, which address such concerns about electronic discovery. Rule 26(b)(2)(B) now provides in relevant part, A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause .... Although case law has yet to discuss the impact of this rule, both the plain language of the rule and the Advisory Committee Comment indicate that the responding party has the burden to show that electronic information is not reasonably accessible. See Fed. R. Civ. P. 26, Advisory Committee Comment (2006). The defendants offer no proof, aside from conclusory statements, about the cost to obtain documents from electronic archives. So this concern cannot shield the defendants from discovery here. The remaining three requests are Interrogatory Nos. 6, 7, and 8. These requests are from a third set of discovery, that Best Buy evidently served at some point after June 30, 2006, to which the defendants responded on August 15, 2006. Best Buy asks the defendants to identify their costs and revenues under the first dollar program for several lease years. The defendants object on the basis of relevancy and overbreadth. Assuming that the defendants operate the first dollar program as, or in lieu of, insurance for common areas, information about costs and revenues generated by the program would be relevant. Consistent with the previous analysis, this information may provide insight about how the defendants calculate charges under the first dollar program. By the time it served this set of discovery, Best Buy learned that the defendants maintain “loss run” records. These records account for all liabilities against the first dollar program, as well as whether these claims required a claim against the defendants’ blanket policy. Best Buy demanded loss run records, but the defendants assert that these matters are irrelevant. *7 While there is a dispute about how the cost versus “loss run” issue should be framed, the court is convinced the loss run records are at least reasonably calculated to lead to admissible evidence regarding the costs borne by the first dollar program. Thus, these matters are within the scope of Best Buy’s discovery requests. However, in its requests for cost and revenue information, Best Buy has not limited its inquiry to the leases at issue in this case. It arguably seeks complete disclosure of all costs and revenues, for all the lease years at issue, for all of the defendants’ leases. The defendants’ objection on the basis of overbreadth is well founded, and their production shall be limited to those properties which are at issue in this litigation. 2. Rule 30(b)(6) Designee Best Buy also challenges the Rule 30(b)(6) designee appointed by the defendants. Best Buy served the defendants with a Rule 30(b)(6) notice of deposition on October 17, 2006. In relevant part, the notice asked the defendants to produce a witness with knowledge of the first dollar program, especially the means by which charges under the program are calculated. The defendants made Catherine Kroll, director of risk management for defendant Developers Diversified Realty Corporation, available for depositiononNovember17, 2006. Under examination, Kroll admitted that she did not know how charges under the first dollar program were calculated, and she identified two others as persons with knowledge about the topic. As noted previously, this issue is relevant and subject to discovery. The defendants shall make witnesses available for deposition on this topic. 3. Protective Order Designation Through discovery in this matter, Best Buy obtained a memorandum from the defendants. This memorandum was prepared by Jerry Cyncynatus, an employee of the defendants whose exact job title or responsibilities are not disclosed in the record. The memorandum explains the insurance provisions of the defendants’ leases. When the defendants produced this memorandum, it was marked “attorneys eyes only” in accordance with the protective order the parties stipulated to in this matter. Best Buy now challenges this designation, arguing that the memorandum was intended for public disclosure. The defendants counter that, even though public disclosure was originally contemplated, dissemination now would result in harm. For a protective order that keeps documents confidential, the proponent of the order has the burden to establish good cause. Chicago Tribune v. Bridgestone/Firestone, Inc., 263 F.3d 1304, 1313-14 (11th Cir. 2001); General Dynamics Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1212 (8th Cir. 1973). Based on the current record, this Court lacks sufficient information to make an informed ruling on this question. The defendants will be given time to submit appropriate affidavits in support of their argument for confidentiality, and Best Buy will be given an opportunity to respond. Once these submissions are received, this Court will take the question under advisement without further hearing. JJG