Dkt. 135: Motion to compel Defendants Steve Borgquist and Brent Borgquist (collectively, the “Borgquist Defendants”) to provide supplemental written responses and produce documents responsive to Plaintiffs' second set of requests for production of documents (“RFPs”): 27 RFPs to Steve Borgquist and 30 RFPs to Brent Borgquist. (See also Plaintiffs' supplemental memo at Dkt. 151.)

Dkt. 138: Motion to compel Defendant Beacon Purchasing LLC f/k/a Banner Purchasing LLC (“Beacon”) to provide supplemental written responses and produce documents responsive to Plaintiffs' third set of RFPs. (No supplemental memos filed.)

For the reasons set forth below, the Court takes OFF CALENDAR the hearings noticed for September 1 and 8, 2020, OVERRULES Defendants' objections, and GRANTS Plaintiffs' motions.

I. BACKGROUND

Plaintiffs allege that during their employment, HPSI's former Managing Director of Operations, Steve Borgquist, and his brother, Brent Borgquist, transferred their loyalty from Plaintiffs to their own planned competing venture, Beacon. (Dkt. 24 at ¶¶ 22-27, 43-55.) Plaintiffs allege that the Borgquist Defendants, aided by HPSI customer Ensign Group, Inc. (“Ensign”) that owns the management interest in Beacon, gathered HPSI's confidential and proprietary information and solicited HPSI's customers on behalf of their own competing venture, both before and after leaving their HPSI employment. (Id. at ¶¶ 56-64.)

II. RULES GOVERNING RESPONSES TO RFPs

A party served with RFPs must provide a timely written response. Fed. R. Civ. P 34(b)(2)(A). “For each item or category, the response must either state that inspection ... will be permitted ... or state with specificity the grounds for objecting to the request, including the reasons.” Fed. R. Civ. P 34(b)(2)(B). “An objection must state whether any responsive materials are being withheld on the basis of that objection.” Fed. R. Civ. P 34(b)(2)(C). If any objection pertains only to part of an RFP, then the response must “specify the part” to which the objection pertains and provide a substantive response to the rest. Id. If a party withholds information on the basis of privilege, then the party must provide a privilege log. Fed. R. Civ. P 26(b)(5). The party resisting discovery bears the burden of demonstrating that the objections asserted justify withholding discovery. Oakes v. Halvorsen Marine Ltd., 179 F.R.D. 281, 283 (C.D. Cal. 1998).

III. THE INSTANT DISCOVERY MOTIONS

The disputed discovery to Borgquist Defendants falls into the following four categories:

There are two disputed RFPs served on Beacon:

(Dkt. 138 at 6.)

Beacon and the Borgquist Defendants provided written responses to all of the disputed RFPs consisting of objections only. Their objections include the following five, identically worded objections:

(Dkt. 135 at 12-14, 22-23, 26-27, 29; Dkt. 138 at 6.)

IV. RULINGS ON DEFENDANTS' OBJECTIONS

A. Objection 2: Confidential Business Information

There is a stipulated protective order with procedures for safeguarding confidential and proprietary business information against misuse. (Dkt. 58.) Defendants have not set forth any reasons why the protective order does not protect their commercial interests adequately. Defendants' objections are OVERRULED.

B. Objection 4: Privacy

District courts have the power to balance privacy and discovery interests by allowing for a protective order when justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. Fed. R. Civ. P. 26(c). Again, given the stipulated protective order that is already in place, Defendants have not identified any likely, prejudicial intrusion into privacy rights (whether their own or those of third parties) that would outweigh Plaintiffs' interest in discovering relevant information. Defendants' privacy-based objections are OVERRULED.

C. Objection 5: Attorney-Client Privilege

Most of the disputed RFPs seek Defendants' communications with third parties. Documents reflecting such communications would generally not be protected from disclosure by the privilege for confidential attorney-client communications. In any event, Plaintiffs explain their position as follows: “Plaintiffs are not interested – and are not seeking – Defendants' privileged documents and Defendants may withhold any privileged information (however unlikely) so long as they identify the same in a privilege log.” (Dkt. 135 at 16.) This is what Federal Rules of Civil Procedure require. Defendants may not rely on blanket attorney-client privilege objections to avoid producing documents. Instead, they must produce a privilege log (1) identifying every responsive document withheld on the basis of privilege, and (2) providing sufficient facts in the log to assess the validity of those privilege claims.

D. Objections 1 and 3: Relevance and Proportionality

*3 The Federal Rules of Civil Procedure provide “a broad definition of relevance for purposes of discovery.” Snipes v. United States, 334 F.R.D. 548, 550 (N.D. Cal. 2020). Parties “may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case ....” Fed. R. Civ. P 26(b)(1).

Defendants do not identify any unique burden associated with locating documents responsive to the disputed RFPs. Rather, Defendants argue that the RFPs are disproportionate to the needs of the case because they are overly broad, a species of relevance argument. The Court, therefore, analyzes Defendants' relevance and proportionality objections together.

Through the meet and confer process, Plaintiffs agreed that Defendants could produce documents in response to these RFPs by (1) running specified search terms, (2) with date parameters of 1/1/17 through 7/2/18, and (3) withholding documents that reflect only personal communications, provided Defendants produce a log identifying all documents withheld as personal communications. (Dkt. 135 at 17.) Based on their prior experience with searching Defendants' electronically stored information and Defendants' contentions that they did not communicate with Plaintiffs' customers pre-termination about Beacon, Plaintiffs predict that the number of “hits” for these searches should be “minimal,” making the request for a log identifying excluded personal communications reasonable. (Id. at 16-17.)

Defendants respond that they have “no issue using Plaintiffs' requested search terms, but the mere fact that one of the proposed search terms pops up does not make the communication relevant to the case[,]” citing the concern that the searches could “hit” on personal communications. (Dkt. 135 at 21.) The crux of the disagreement, therefore, is whether Defendants need to log the search hits withheld.

Given the unique background of this case, including a pending motion for spoliation and facts suggesting that the number of hits for the proposed search terms will be low, Plaintiffs' proposed resolution is more reasonable. It will allow Plaintiffs to know the number of hits and the proportion of documents Defendants withheld, both relevant facts for assessing the completeness of Defendants' production. If after running the search terms, Defendants determine that the number of personal communications is so voluminous as to make producing a log of withheld documents disproportionately burdensome, then the parties can meet and confer again and, if necessary, return to the Court with alternative proposals.

For the date parameters of 7/3/18 through the present, Plaintiffs suggest specific search terms and agree to limit the subject matter of the responsive communications as specified in the motion. (Dkt. 135 at 18.)

Defendants contend, “Any communications between Defendants and the listed entities/individuals after July 2, 2018 would be wholly irrelevant absent a reference or relation to conduct that occurred during Defendants' employment with Plaintiffs.” (Id. at 19.) In other words, Defendants contend that Plaintiffs must demonstrate that Defendants breached their duty of loyalty by communicating with particular HPSI customers about Beacon pre-termination before conducting discovery to learn whether Defendants sought to take that customer from HPSI post-termination. (Id. at 21-22.)

*4 Given the broad scope of permissible discovery, Defendants' proposed limitations on Plaintiffs' discovery of Defendants' post-termination communications with Plaintiffs' customers is too narrow. Such discovery could show that (1) Defendants communicated Plaintiffs' confidential or proprietary information in unauthorized ways, or (2) Defendants solicited Plaintiffs' customers pre-termination, but the pre-termination ESI was lost or deleted. While Defendants argue that topic (1) is irrelevant to Plaintiffs' claims based on Defendants' interpretation of their employment agreements (Dkt. 135 at 19) and provisions of California law (id. at 20), Plaintiffs dispute Defendants' interpretation and the applicability of California law (Dkt. 151), and Plaintiffs may pursue discovery relevant to their theory of the case.

The Court therefore orders that Defendants shall use the search terms specified by Plaintiffs in the motion and log any responsive documents withheld.

Plaintiffs limited these requests to documents from 7/2/18 through the present responsive to certain topics or search terms. (Dkt. 135 at 24.)

Defendants argue, “For the same reasons explained above ... any communications by Defendants with Plaintiffs' vendors post-employment are wholly irrelevant ....” (Id. at 25.) For the same reasons stated above, the Court disagrees.

Defendants also argue, “Defendants cannot agree to provide documents showing all business revenue Beacon/Banner has conducted with McKesson Corporation because it includes revenue for customers that were not customers of HPSI/Aramark which makes the demand both overbroad and irrelevant.” (Id. at 26.) To the extent McKesson was a vendor for Plaintiffs and directed business to Beacon rather than Plaintiffs, however, Defendants' communications with McKesson (limited by the search terms and subject matters proposed by Plaintiffs) could reveal communications relevant to Defendants' alleged wrongdoing and Plaintiffs' damages.

The Court therefore orders that Defendants shall use the search terms specified by Plaintiffs in the motion and log any responsive documents withheld.

Plaintiffs agree to limit RFP no. 40 to Steve and no. 39 to Brent to all sources of income from January 1, 2017 through the present pertaining or relating only to Beacon, BGB Group, Banner Holdings, Banner Properties, any Ensign entity, and/or any Group Purchasing Organization (“GPO”) business or any affiliation with a GPO business. (Dkt. 135 at 28.)

Plaintiffs argue that the Borgquist Defendants' compensation from Beacon is relevant for at least three reasons:

(Id. at 27-28.) Defendants dispute the factual relevancy of [1] and argue that [2] and [3] are irrelevant because their compensation from Beacon is not an allowable measure of damages. (Id. at 28-29.)

Without reaching the parties' arguments concerning points [2] and [3], Plaintiffs have articulated a factual basis as to why the Borgquist Defendants' compensation from Beacon is relevant to Plaintiffs' claims. Defendants counter, “Individuals starting businesses often times receive compensation in return for sweat/mental equity. It is wholly irrelevant whether Steve and/or Brent's capital investment matches their percentage of equity in the company.” (Id. at 28.) This is more an argument about the weight of the evidence sought by the RFPs than the irrelevance of the evidence. Defendants' relevancy objections are therefore OVERRULED.

*5 Plaintiffs argue, “the Borgquists' net worth is directly relevant to Plaintiffs' claim for punitive damages.” (Id. at 30 (citing Zuniga v. W. Apartments, No. 13-4637 JFW(JCx), 2014 U.S. Dist. LEXIS 83135 at *11 (C.D. Cal. Mar. 25, 2014) (granting a motion to compel discovery of defendant's net worth because “defendant's net worth and financial condition are relevant and admissible to establish the appropriate amount of punitive damages”)).)

Defendants counter that net worth discovery is “premature ... until liability is established.” (Dkt. 135 at 31.) Defendants' authority is distinguishable. See U.S. E.E.O.C. v. Giumarra Vineyards Corp. No. 09-2255, 2012 U.S. Dist. LEXIS 14109 at *8-9 (E.D. Cal. Feb. 6, 2012) (declining to compel net worth discovery based, in part, on the improbability of a punitive damages award or even a sizeable general damages award due to discrepant claims, plaintiff's counsel's prosecution of related actions, and defendant's being “fully capable of satisfying even a seven figure judgment”).

The fact discovery cutoff date was July 29, 2020. (Dkt. 122.) In their joint Rule 26(f) report, the parties agreed “that discovery does not need to be phased ....” (Dkt. 37 at 11.) The parties contemplate a jury trial, and they have not stipulated to try punitive damages to the Court after the jury makes findings concerning liability and general damages. Given these deadlines, Plaintiffs will have no opportunity to conduct net worth discovery after “liability is established” by the jury and still present net worth evidence to the jury. The Court, therefore, OVERRULES Defendants' objections based on relevance and prematurity.

Plaintiffs argue, “Beacon's financial statements will reflect Beacon's assets and liabilities, which is relevant to Plaintiffs' damages theories and theory of liability that Ensign Group and/or Ensign Services invested in Beacon in exchange for the Borgquist bringing along Plaintiffs' confidential business information.” (Dkt. 138 at 8.) Plaintiffs also argue that the audited financial statements and other evidence demonstrating Beacon's net worth is relevant to their claim for punitive damages. (Id. at 8-9.)

Defendants respond that “Any income Beacon has generated from customers that have never been customers of Plaintiffs is wholly irrelevant.” (Id. at 9.) Defendants also make the same “prematurity” argument regarding net worth discovery. (Id.). Beacon “offered to provide financial statements and documentation related to the fifteen (15) customers identified by Plaintiffs' expert in his report regarding Plaintiffs' alleged damages in this case[,]” but not more. (Id. at 10.)

For the same reasons discussed above, Beacon's prematurity objection is OVERRULED.

V. CONCLUSION

For these reasons stated herein, the Court exercises its considerable discretion to manage discovery by GRANTING Plaintiffs' motions to compel. Defendants shall produce documents and logs and supplement their written responses to all the disputed RFPs consistent with this Order within fourteen (14) days.

Page citations refer to the pagination imposed by the Court's electronic filing system.