Braman Motors, Inc. v. BMW of N. Am., LLC
Braman Motors, Inc. v. BMW of N. Am., LLC
2021 WL 2580361 (S.D. Fla. 2021)
April 24, 2021
Otazo-Reyes, Alicia M., United States Magistrate Judge
Summary
The court denied Plaintiffs' Motion for Sanctions but required BMW NA to supplement its production of documents related to their "punching" claim. The court found that BMW NA had a duty to supplement its production with the "punching" documents referenced in the SEC Order and any other underlying "punching" documents that were produced to the SEC. The court also denied without prejudice Plaintiffs' request to reopen discovery to conduct depositions related to the SEC documents.
BRAMAN MOTORS, INC., d/b/a BRAMAN BMW, for itself and in the name of the Department of Highway Safety and Motor Vehicles of the State of Florida, for its use and benefit, PALM BEACH IMPORTS, INC., d/b/a BRAMAN MOTORCARS, for itself and in the name of the Department of Highway Safety and Motor Vehicles of the State of Florida, for its use and benefit, and THE DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLES of the State of Florida, for the use and benefit of Braman Motors, Inc. and Palm Beach Imports, Inc., Plaintiffs,
v.
BMW OF NORTH AMERICA, LLC and BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT, Defendants.
BMW OF NORTH AMERICA, LLC, Counter Claimant,
v.
BRAMAN MOTORS, INC., d/b/a BRAMAN BMW, for itself and in the name of the Department of Highway Safety and Motor Vehicles of the State of Florida, for its use and benefit, Counter Defendant
v.
BMW OF NORTH AMERICA, LLC and BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT, Defendants.
BMW OF NORTH AMERICA, LLC, Counter Claimant,
v.
BRAMAN MOTORS, INC., d/b/a BRAMAN BMW, for itself and in the name of the Department of Highway Safety and Motor Vehicles of the State of Florida, for its use and benefit, Counter Defendant
Case No. 17-23360-CIV-GAYLES/OTAZO-REYES
United States District Court, S.D. Florida
Signed April 24, 2021
Counsel
Charles Andrew Gallaer, David Wynn, Pro Hac Vice, Michael P. McMahan, Pro Hac Vice, Russell P. McRory, Pro Hac Vice, Arent Fox LLP, New York, NY, Brian Jay Shack, David Seymour Leibowitz, Braman Management Association, Miami, FL, Curtis Bradley Miner, Stephanie Anne Casey, Roberto Martinez, Colson Hicks Eidson, Coral Gables, FL, Taniel Anderson, Pro Hac Vice, Arent Fox LLP, Washington, DC, for Plaintiff Braman Motors, Inc.Charles Andrew Gallaer, David Wynn, Pro Hac Vice, Michael P. McMahan, Pro Hac Vice, Russell P. McRory, Pro Hac Vice, Arent Fox LLP, New York, NY, Brian Jay Shack, David Seymour Leibowitz, Braman Management Association, Miami, FL, Curtis Bradley Miner, Stephanie Anne Casey, Roberto Martinez, Colson Hicks Eidson, Coral Gables, FL, Taniel Anderson, Pro Hac Vice, Arent Fox LLP, Washington, DC, for Plaintiff Palm Beach Imports, Inc.
Charles Andrew Gallaer, David Wynn, Pro Hac Vice, Michael P. McMahan, Pro Hac Vice, Russell P. McRory, Pro Hac Vice, Arent Fox LLP, New York, NY, David Seymour Leibowitz, Braman Management Association, Miami, FL, Stephanie Anne Casey, Roberto Martinez, Colson Hicks Eidson, Coral Gables, FL, Taniel Anderson, Pro Hac Vice, Arent Fox LLP, Washington, DC, for Plaintiff Terry L. Rhode.
Alison Eggers, James C. McGrath, John R. Skelton, William N. Berkowitz, Eric J. Walz, Pro Hac Vice, Brandon L. Bigelow, Eric J. Walz, Alison Eggers, Pro Hac Vice, James C. McGrath, Pro Hac Vice, John R. Skelton, Pro Hac Vice, William N. Berkowitz, Pro Hac Vice, Brandon L. Bigelow, Pro Hac Vice, Seyfarth Shaw LLP, Boston, MA, Peter Scott Baumberger, Michael F. Suarez, Law Offices of Kubicki Draper, Miami, FL, for Defendant BMW of North America, LLC.
Peter Scott Baumberger, Law Offices of Kubicki Draper, Robert Mark Brochin, Morgan, Lewis & Bockius LLP, Miami, FL, Brandon L. Bigelow, Pro Hac Vice, Seyfarth Shaw, LLP, Boston, MA, for Defendant Bayerische Motoren Werke Aktiengesellschaft Petuelring 130 Munchen 80809 Germany.
Jesse Dean-Kluger, Jesse Dean-Kluger, P.A., Miami, FL, for Defendant The Collection, LLC.
Otazo-Reyes, Alicia M., United States Magistrate Judge
ORDER RE: MOTION FOR SANCTIONS
*1 THIS CAUSE came before the Court upon Plaintiffs Braman Motors, Inc. and Palm Beach Imports, Inc.’s (“Plaintiffs” or “Braman”) Motion for Sanctions [D.E. 179]. This matter was referred to the undersigned pursuant to 28 U.S.C. § 636 by the Honorable Darrin P. Gayles, United States District Judge [D.E. 187]. The undersigned held an Evidentiary Hearing on this matter on December 11, 2020. See Transcript of Evidentiary Hearing on Plaintiffs’ Motion for Sanctions (hereafter, “Transcript”) [D.E. 197-1]. Thereafter, the parties filed post-hearing briefs [D.E. 197, 198, 201, 202]. Having conducted a thorough review of the parties’ written submissions and having considered the evidence adduced at the Evidentiary Hearing, the undersigned DENIES Plaintiffs’ Motion for Sanctions but requires Defendant BMW of North America, LLC (“BMW NA”) to supplement its production of documents as more fully explained below.
BACKGROUND
Plaintiffs bring this action against BMW NA and Bayerische Motoren Werke Aktiengesellschaft (“BMW Ag”) (together, “Defendants”), asserting claims related to Plaintiffs’ BMW franchise dealerships. See Plaintiffs’ Fourth Amended Complaint [D.E. 222]. Plaintiffs allege that Defendants “have unlawfully enhanced their control over their franchised dealer operations ... through their imposition of arbitrary, coercive, and unfair business practices that are intended to or have the effect of enhancing Defendants’ profit while reducing dealer profit.” Id. at 2. Plaintiffs describe one such alleged unfair business practice as
pressuring and attempting to coerce dealers to purchase BMW's excessive inventory and to report vehicles as sold (by “punching” a Retail Delivery Report, or “RDR”), when, in fact, those vehicles still sat unsold on dealers’ lots.
Id. at 19. Plaintiffs further allege that, about the end of 2015, they stopped “punching unsold vehicles” and, as a result, were penalized by Defendants through the deprivation of “substantial bonus money ....” Id. at 20. Plaintiffs’ Motion for Sanctions relates to BMW NA's discovery responses regarding their “punching” claim.
FACTS
The following witnesses testified at the Evidentiary Hearing: Plaintiffs’ counsel Michael McMahan (“Attorney McMahan”); Defendants’ in-house counsel Howard Harris (“Attorney Harris”) and Kevin Healy (“Attorney Healy”); and Defendants’ outside counsel Alison Eggers (“Attorney Eggers”). The following exhibits were admitted into evidence: Braman Exs. 1-13; and BMW NA Exs. 1-7 [D.E. 192, 193]; Transcript [D.E. 197-1 at 13] (admitting all listed exhibits by stipulation of the parties). The witnesses testified as follows:
1. Attorney McMahan and Attorney Eggers were directly involved in the discovery process in this case and agreed on an ESI protocol regarding custodians and search terms.
2. On April 3, 2020, BMW NA responded as follows to Request No. 21 of Plaintiffs’ Fourth Request for Production of Documents, which sought “Documents sufficient to identify the person or persons responsible for devising or authorizing BMW NA's month-end incentive or ‘punching’ programs, and each such authorization for each such program for the period of 2012-2016”:
*2 BMW NA objects to this request to the extent it seeks electronically stored information that was not collected using the search terms and custodians the Parties agreed to use after extensive discussions. BMW NA further objects to this request as duplicative of Request No. 24 in Plaintiff's First Request for Production of Documents. Pursuant to that request, BMW NA agreed to and has produced documents, communications, and studies “related” to dealers “punching” RDRs for BMW vehicles at each month's end or any other time, including, but not limited to documents relating to or concerning such month-end inventories and monetary incentives offered to BMW dealers.
Subject to its objections, BMW NA states that it has already searched for and produced documents responsive to this request.
See Braman Ex. 8; D.E. 179-5 at 14-15.
3. Attorney McMahan interpreted this response to mean that, with respect to “punching,” Plaintiffs “had everything” and ‘there was nothing left to get.” See Transcript [D.E. 197-1 at 28-29].
4. Also on April 3, 2020, BMW NA responded as follows to Request No. 50 of Plaintiffs’ Fourth Request for Production of Documents, which sought: “All documents provided to, communicating with, or discussing the SEC in connection with its investigation into BMW and its punching practices, as announced in the Wall Street Journal on December 24, 2019”:
BMW NA objects to this request because it is overly-broad and seeks documents not relevant to any claim or defense in this case. BMW NA further objects to this request because it seeks highly confidential, competitively-sensitive information about other BMW dealers across the entire BMW network. BMW NA also objects to this request because it does not describe with reasonable particularity the documents to be produced. Rather, it simply requests “all documents” that touch upon the SEC investigation, regardless of their content, time frame, or other characteristics.
BMW NA is withholding documents based on its objections.
See Braman Ex. 8; D.E. 179-5 at 28.
5. Based on meet and confer exchanges, Attorney McMahan interpreted the objection and the withholding of documents to be limited to communications, and not to encompass the “punching” documents underlying the SEC investigation.
6. On September 24, 2020, after fact discovery in this case had closed on August 17, 2020, the SEC issued a Cease and Desist Order against Defendants (hereafter, “SEC Order”) [D.E. 179-1].
7. Upon reviewing the SEC Order, and the quotations to documents that were set forth therein, vis-à-vis BMW NA's production in this case, Attorney McMahan realized that a substantial number of “punching” documents had not been produced by BMW NA.
8. According to Attorney Eggers, after an agreement was reached on an ESI protocol regarding custodians and search terms, Plaintiffs did not request any additional custodians beyond the 16 that had been identified or any additional search terms; therefore, BMW NA limited its document search to the data set based on the 16 custodians. Attorney Eggers believed that all potentially responsive non-privileged documents derived from that data set had been produced.
9. At the time of BMW NA's response to Plaintiffs’ Fourth Request for Production of Documents Request No. 50, Attorney Eggers “had a general understanding that the SEC matter involved many times more custodians than ... the Braman matter.” See Transcript [D.E. 197-1 at 75]. Attorney Eggers also “had a general sense of what was being requested and produced” and she knew that some of it related to “punching.” Id. at 76.
10. From December 2019, when the SEC investigation was announced, until the end of discovery in this case, Attorney Eggers had very limited knowledge of the SEC investigation and BMW NA's response to it because her firm had not been retained to work on that matter.
*3 11. However, after issuance of the SEC Order and after the close of discovery in this case, Attorney Eggers did review some of the documents that BMW NA had produced to the SEC. Documents she reviewed related to the issue of “punching” and included those that were quoted in the SEC Order.
12. Attorney Eggers did not believe she had a duty to supplement BMW NA's disclosures and discovery responses because, in her opinion, BMW NA's disclosures were not incomplete or incorrect.
13. Attorney Harris did not have sufficient knowledge to answer the questions posed to him; therefore, he deferred to Attorney Healy. The latter could not say for certain whether documents provided by BMW NA to the SEC were also provided to BMW NA's outside counsel in this case. However, Attorney Eggers testified that she had reviewed some of those documents.
SANCTIONS REQUEST
Plaintiffs contend that BMW NA's responses to Plaintiffs’ First and Fourth Requests for Production “were—and still are—woefully incomplete and inaccurate” and that “[n]o further showing is required to trigger sanctions under [Fed. R. Civ. P.] 37.” See Plaintiffs’ Post-Hearing Brief [D.E. 197 at 19]. On this basis, Plaintiffs seek a sanctions order against BMW NA: (1) designating as established their factual allegations relating to “punching”; (2) precluding BMW NA from opposing their “punching” claims; (3) dismissing BMW NA's Counterclaim with prejudice; (4) awarding them the fees and costs incurred in connection with “punching” discovery and in prosecuting the Motion for Sanctions; and (5) requiring BMW NA to produce all of its submissions to the SEC. Id. at 19-20. Plaintiffs also seek reopening of fact discovery for 90 days to conduct depositions related to the SEC documents. Id.
DISCUSSION
After issuance of the SEC Order in September 2020, Attorney Eggers became aware of the existence of “punching” documents that had been furnished to the SEC but had not been produced in this case. Attorney Eggers opined that BMW NA had no duty to supplement its production with those documents because its production was complete and correct with respect to the data set derived from the 16 custodians agreed to in the ESI protocol. However, the duty of supplementation imposed by Rule 26 of the Federal Rules of Civil Procedure is not so narrow:
(1) In General. A party who has made a disclosure under Rule 26(a)—or who has responded to an interrogatory, request for production, or request for admission—must supplement or correct its disclosure or response:
(A) in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing; or
(B) as ordered by the court.
Fed. R. Civ. P. 26(e)(1).
Therefore, the undersigned will require BMW NA to supplement its production with the “punching” documents referenced in the SEC Order and any other underlying “punching” documents that were produced to the SEC.
However, the undersigned finds no basis for imposing the discovery sanctions on BMW NA that Plaintiffs seek pursuant to Rule 37 of the Federal Rules of Civil Procedure. Moreover, the undersigned denies without prejudice Plaintiffs’ request to reopen discovery to conduct depositions related to the SEC documents. Plaintiffs may renew this request, if appropriate, after review of the SEC documents.
CONCLUSION
*4 Based on the foregoing considerations, it is
ORDERED AND ADJUDGED that Plaintiffs’ Motion for Sanctions [D.E. 179] is DENIED. It is further
ORDERED AND ADJUDGED that BMW NA shall supplement its production of documents pursuant to Fed. R. Civ. P. 26(e)(1)(B). Within seven days from the date of this Order, BMW NA SHALL PRODUCE the “punching” documents that it produced to the SEC in connection with the agency's investigation of it, including those quoted in the SEC Order.
DONE AND ORDERED in Chambers at Miami, Florida this 24th day of April, 2021.