BMO Harris Bank, N.A. v. Richert Funding, LLC
BMO Harris Bank, N.A. v. Richert Funding, LLC
2017 WL 11627485 (N.D. Ga. 2017)
July 3, 2017
Totenberg, Amy, United States District Judge
Summary
The court found that documents related to BMO's investigation of the default on the ABL Loan, records of BMO's forensic accounting regarding invoices BMO claims were fraudulent, and communications between BMO and ABL's principals, the Lestingers, since the default on the ABL Loan were protected by the work product privilege and declined to compel production of them. The court also found that BB&T was entitled to attorneys' fees as a sanction under Rule 45 and awarded BB&T $10,135.85 in fees and $15.00 in expenses. Lastly, the court discussed the importance of the public's right to access judicial proceedings and the need to balance this right with the parties' interest in keeping certain information confidential.
Additional Decisions
BMO HARRIS BANK, N.A., Plaintiff,
v.
RICHERT FUNDING, LLC, DWIGHT RICHERT, and BART GARBRECHT, Defendants
v.
RICHERT FUNDING, LLC, DWIGHT RICHERT, and BART GARBRECHT, Defendants
CIVIL ACTION NO. 1:15-cv-3886-AT
United States District Court, N.D. Georgia, Atlanta Division
Filed July 03, 2017
Counsel
Jeffrey Alan Daxe, Moore Ingram Johnson & Steele, LLP, Marietta, GA, William J. Dorsey, Katten Muchin Rosenman, LLP, Chicago, IL, for Plaintiff.Michael W. Ullman, Ullman & Ullman, P.A., Baca Raton, FL, Steven G. Hall, Robert G. Brazier, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Joseph William Watkins, Watkins Lourie Roll & Chance, P.C., Atlanta, GA, for Defendant Richert Funding, LLC.
Michael W. Ullman, Ullman & Ullman, P.A., Baca Raton, FL, Steven G. Hall, Robert G. Brazier, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Atlanta, GA, for Defendants Dwight Richert, Bart Garbrecht.
Totenberg, Amy, United States District Judge
ORDER
*1 On June 2, 2016, the Court referred this matter to Magistrate Judge John K. Larkins to assist in conducting an all-day discovery conference with the parties in an effort to resolve several discovery disputes and “in the interest of judicial economy and litigation efficiency” to handle future discovery disputes. Since that time, Judge Larkins has undertaken the herculean task of resolving what appears from the docket to be a constant barrage of discovery disputes over a six month period. No good deed goes unpunished.
Despite the Court's best intentions in appointing Judge Larkins to resolve the parties' discovery disputes “as expeditiously possible,” Defendants have filed Objections to three of Judge Larkins' discovery Orders. Unfortunately, because neither these discovery Orders nor Defendants' Objections were submitted by the Clerk's office to the undersigned in the ordinary course, the resolution of these disputes has been delayed.
This Order addresses the following pending items:
(1) Defendants' Objections [Doc. 87] to the Magistrate Judge's September 26, 2016 Order [Doc. 85] denying Defendants' Motion to Compel [Doc. 83];
(2) Defendants' Objections [Doc. 119] to the Magistrate Judge's December 27, 2016 Order [Doc. 115] denying Defendants' Motion to Compel [Doc. 95] production of documents from Non-Party Branch Banking & Trust (“BB&T”) and granting BB&T's request for attorney's fees;
(3) BB&T's Declaration [Doc. 118] in support of request for attorney's fees [Doc. 101] and Defendants' Objections [Doc. 139] on the issue of attorney's fees related to the Motion to Compel;
(4) Defendants' Motion to Strike [Doc. 147] BB&T's request for sanctions under 28 U.S.C. § 1927 [Doc. 135]
(5) Defendants' Objections [Doc. 123] to the Magistrate Judge's December 27, 2016 Order [Doc. 116] denying Defendants' Motion to Compel [Doc. 95] production of documents from Plaintiff BMO Harris Bank, N.A. (“BMO”) and granting, in part, Plaintiff's request for attorney's fees;
(6) Plaintiff's Motion to Strike [Doc. 126] Defendants' Objections [Doc. 123] to the Magistrate Judge's December 27, 2016 Order [Doc. 116] as untimely;
(7) Defendants' Motion for Enlargement of Time [Doc. 137] to file Objections [Doc. 123] to the Magistrate Judge's December 27, 2016 Order [Doc. 116] (filed after the fact);
(8) Plaintiff's Motion for Extension of Time to Respond [Doc. 138] to Defendants' Objections [Doc. 123] to the Magistrate Judge's December 27, 2016 Order [Doc. 116];
(9) Defendants' Motion for Oral Argument [Doc. 125] on Defendants' Objections [Docs. 87, 119, 123] to Magistrate Judges discovery Orders [Docs. 85, 115, 116];
(10) Parties' Consent Motion to Amend Scheduling Order [Doc. 114];
(11) Motions for Leave to File Matters Under Seal [Docs. 124, 128, 132]; and
(12) Defendants' Motion for Case Management Conference [Doc. 148].
Because oral argument is not necessary for resolution of these disputes, the Court DENIES Defendants' Motion for Oral Argument on Defendants' Objections to the Magistrate Judge's discovery Orders [Doc. 125].
I. BACKGROUND[1]
*2 On or about October 10, 2011, Defendant Richert Funding and A.B.L. Farms, Inc. (“ABL”), entered into a factoring agreement under which Richert Funding obtained an interest in ABL's accounts receivable by making purchase price advances to ABL. [Doc. 8 ¶¶ 12-13.] According to the Amended Complaint, by 2014, Richert Funding's exposure under the factoring arrangement was in excess of $7 million, and Richert Funding owned virtually all of ABL's accounts receivables and invoices, and was preparing financial statements for ABL.
On or about October 21, 2014, BMO entered into a credit agreement with ABL, pursuant to which BMO agreed to make a $5 million loan to ABL. As a condition to funding the loan, ABL represented to BMO Harris that, as of the date of funding the loan, BMO would have a first priority security interest in all of ABL's assets, including ABL's accounts receivable. The loan is subject to a 75% guaranty from the United States Small Business Administration (“SBA”).
In connection with making the loan to ABL, BMO obtained a loan payoff agreement from Richert Funding on October 21, 2014. BMO alleges that it relied on the letter of agreement to close the loan and fund a payoff to Richert Funding of the existing loan in the amount of $3.9 million. Among other things, the letter stated that Richert Funding's loan to ABL had been repaid and satisfied in full; that Richert Funding terminated and released all pledges, guarantees, security interests, liens, mortgages, and other encumbrances granted to Richert Funding by ABL; and that Richert Funding agreed to release and deliver to BMO any collateral currently in Richert Funding's possession pertaining to ABL, including payments received by Richert Funding under the accounts receivable that had been collateral under the factoring agreement. In connection with the ABL Farms loan, the SBA provided a guaranty, which BMO contends is conditioned on BMO exhausting all available rights and remedies against the loan parties.
According to BMO, those statements were false. Unbeknownst to BMO Harris, six days earlier, on October 15, 2014, Richert Funding had entered into a separate factoring agreement with ABL in which Richert Funding memorialized an additional $1.5 million in existing indebtedness secured by the same accounts receivable that Richert Funding would later represent had been released and delivered to BMO as collateral for its loan. From October 2014 through August 2015, Defendants allegedly conspired with ABL to divert millions of additional dollars representing proceeds of BMO's collateral to Richert Funding.
During the summer of 2015, ABL and its affiliate Southern Melon Distributors, Inc. (“Southern Melon”) were involved in a purported check kite scheme using ABL's accounts at BMO and Southern Melon's accounts at Branch Banking & Trust (“BB&T”) in an attempt to inflate their apparent assets. BB&T became aware of the scheme on Friday August 14, 2015. Later that day, BB&T advised BMO of the purported check kite.
On November 6, 2015, BMO brought this suit against Richert Funding, Dwight Richert, and Bart Garbrecht asserting claims of fraud, fraudulent inducement, civil conspiracy to commit fraud, conversion, civil conspiracy to commit conversion, tortuous interference, and unjust enrichment.
II. STANDARD OF REVIEW
Under 28 U.S.C. § 636(b)(1)(A) and Federal Rule of Civil Procedure 72(a), the District Judge must consider timely objections made to the Magistrate Judge's decision on a non-dispositive matter and set aside any part of the order that is clearly erroneous or is contrary to law. 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a). Clear error is a “highly deferential standard of review,” and a finding is clearly erroneous “when although there is evidence to support it, the reviewing court on the entire evidence is left with definite and firm conviction that a mistake has been committed.” Holton v. City of Thomasville School District, 425 F.3d 1325, 1350 (11th Cir. 2005).
III. DISCUSSION
A. Magistrate Judge's September 26, 2016 Order [Doc. 85] denying Defendants' Motion to Compel [Doc. 83] and Defendants' Objections [Doc. 87]
*3 On September 26, 2016, Magistrate Judge Larkins entered an Order denying Richert's request to overrule BMO's privilege assertions and to compel “complete responses” to several interrogatories and document requests. Richert asserts objections to the Magistrate Judge's Order regarding a single interrogatory – Interrogatory No. 6. Interrogatory No. 6 asks BMO to:
Describe what transpired with respect to the guaranty provided by the SBA (the “SBA Guaranty”) for the ABL Loans by: (a) Identifying the division(s) of BMO and Identify the personnel involved in any decision as to whether to make a claim against the SBA Guaranty, (b) Identifying whether a claim was made on the SBA Guaranty, (c) Identifying the basis for the decision to make or not make a claim on the SBA Guaranty, (d) Identifying any Communications with the SBA regarding the SBA Guaranty, and (e) Identifying any Documents relating to any claim made against the SBA Guaranty.
(Defs.' Mot. Ex. 1, Doc. 83-1 at 71-72.) BMO responded as follows:
RESPONSE NO. 6
BMO objects to this Interrogatory on the grounds that it is overbroad, unduly burdensome, and not reasonably calculated to lead to the discovery of admissible evidence, and seeks information that is protected by the attorney-client privilege, joint interest privilege, and attorney work product. Subject to and without waiving its objections, BMO refers Defendants to the publicly available information on the www.sba.gov website.
(Id.)
Richert asserts this information is relevant to its defense of BMO's fraud claim and BMO's contention that it reasonably relied on Richert's payoff letter in issuing the loan to ABL. Richert contended in its motion that the joint interest privilege, also referred to as the common interest privilege, does not apply to BMO's communications with the SBA because their common interest is solely commercial in nature. Richert asked the Magistrate Judge to “compel full and complete discovery responses” and “compel BMO to produce all materials within in its possession, custody or control responsive to the SBA Requests” withheld on the basis of the common or joint interest privilege. (See Mot., Doc. 83.)
In response, BMO contended that the parties agreed at the June 2, 2016 discovery conference with Magistrate Judge Larkins to limit the scope of discovery to documents pre-dating the filing of the litigation on November 6, 2015. For this reason, BMO represented that to the extent such communications exist, they post-date the filing of the lawsuit and are therefore non-responsive to Richert's discovery requests. BMO further asserted that the communications are protected by the common interest/joint privilege doctrine because: (a) the SBA's role in the litigation is nearly identical to that of an insurer, (b) BMO's losses caused by Richert's fraud are subject to reimbursement by the SBA to the extent not satisfied by ABL or Richert, and (c) as a result BMO may be called upon to update the SBA concerning the progress of the litigation or to coordinate with the SBA concerning the conduct of the litigation. (Resp., Doc. 85 at 2-3.) Richert offered no arguments in reply.
Magistrate Judge Larkins denied Richert's Motion to Compel, without prejudice, declining to revisit the parties' agreement regarding the discovery cut-off date for responsive information and based on BMO's representation that all communications were outside of the agreed upon scope of discovery. As a result, Magistrate Judge Larkins further declined to issue an advisory opinion on the application of the common interest doctrine.
Richert filed Objections, asserting that the Magistrate Judge erred in finding: (1) that the scope of discovery in connection with this discovery dispute is limited to the period of January 1, 2013 through November 6, 2015 (i.e., predating the filing of this case), in express reliance upon BMO's misinterpretation of the Court's June 2, 2016 ruling concerning the scope of Richert's production to BMO; (2) that this Court's June 2, 2016 ruling governed the scope of the interrogatories issued by Mr. Richert in this case; and (3) that any decision regarding BMO's common interest privilege objection would constitute a mere advisory opinion.
1. Temporal Scope of Discovery
*4 Richert asserts that Magistrate Judge Larkins erred in accepting BMO's inaccurate representation that the parties agreed that November 6, 2015 is the applicable discovery cutoff date. According to Richert, this agreement only applied to Richert's production of documents and ESI in response to BMO's first set of document requests that were the subject of the June 2, 2016 discovery conference over which Magistrate Judge Larkins presided. Richert points to the transcript of the June 2nd discovery conference in which Judge Larkins summarized the agreed resolution of a dispute regarding Richert's production of ESI, and indicated that “[t]he date range for this review ... is from January 1, 2013 to November 6, 2015.” (Tr., Doc. 50 at 3-4.)
According to BMO, however, the agreement is not so limited. Instead, BMO contends that early in the course of written discovery, counsel agreed to limit discovery to the period preceding the filing of the lawsuit, both sides agreed that no documents post-dating the litigation would be produced, and that both BMO and Richert have limited their document productions to documents dated before November 6, 2015. At least one exception was made for information related to Richert's financial condition for purposes of punitive damages. BMO concedes that the transcript of the parties' agreement does not accurately reflect the intended mutuality of the discovery cutoff, but because Judge Larkins was present for many of counsel's discussions, his decision to apply the agreed upon date-restriction to Richert's discovery requests was reasonable.
Although the Court agrees with BMO that Magistrate Judge Larkins' decision not to second guess the parties' agreement – absent any reason offered by Richert – was reasonable at the time, his denial of Richert's motion without prejudice left the door open to revisiting the issue. In light of Richert's Objections, which could have been raised before Magistrate Judge Larkins in a Reply, the Court finds that applying the strict discovery timeline limitation to the information sought in Richert's Interrogatory No. 6 is not appropriate under the circumstances.[2] Because of the continuing nature of the relationship and the contractual agreement between BMO and the SBA as expressly described by BMO – i.e., BMO's obligation to update the SBA concerning the progress of the litigation or to coordinate with the SBA concerning the conduct of the litigation in order to pursue a right of reimbursement for its losses – non-privileged information post-dating this lawsuit is particularly relevant and directly responsive to this discovery request. And while Richert's arguments before the Magistrate Judge indeed focused on the production of potentially privileged “communications,” the actual scope of information requested in Interrogatory No. 6 is broader. BMO has offered no explanation for its refusal to respond to Richert's request for non-privileged information such as the identity of the BMO division(s) and personnel involved in any decision as to whether to make a claim against the SBA Guaranty, whether a claim was made on the SBA Guaranty, and the identification of communications with the SBA regarding the SBA Guaranty and any documents relating to any claim made against the SBA Guaranty.[3] The identification of the documents as requested, as opposed to the actual production of the documents, does not waive any properly asserted claims of privilege.
2. Application of Common Interest Privilege
*5 Because the Court finds that the scope of discoverable information sought in Interrogatory No. 6 is not properly limited to the time period preceding the filing of the lawsuit by BMO, the Court must address the merits of BMO's privilege assertion left open by the Magistrate Judge's Order.
The joint or common interest privilege is an exception to the general rule that disclosure of documents protected by the work product doctrine or attorney client privilege constitutes a waiver of the protection. Jones v. Tauber & Balser, P.C., 503 B.R. 510, 517-18 (N.D. Ga. 2013); Chattanooga-Hamilton Cty. Hosp. Auth. v. Hosp. Auth. of Walker, 4:14-CV-0040-HLM, 2015 WL 11622949, at *6 (N.D. Ga. May 11, 2015) (Murphy, J.) Parties who share “strong common interests” may also share privileged or protected material without waiving the privilege or protection. See McKesson Corp. v. Green, 597 S.E.2d 447, 452 (Ga. Ct. App. 2004) (recognizing this rule in the context of the work product doctrine). “Whether the common interest privilege has been invoked is a fact-intensive inquiry dependent on the content of the communication and whether an agreement was made in furtherance of a common interest.” Gold Cross EMS, Inc. v. Children's Hosp. of Ala., No. CV 113-081, 2015 WL 128181, at *10 (S.D. Ga. Jan. 8, 2015); Chattanooga-Hamilton Cty. Hosp. Auth., 2015 WL 11622949, at *6. The common interest doctrine “is not an independent source of privilege or confidentiality,” it only applies to protect documents which otherwise fall under some privilege. Fireman's Fund Ins. Co. v. Great Am. Ins. Co. of New York, 284 F.R.D. 132, 139 (S.D.N.Y. 2012). So “[i]f a communication is not protected by the attorney-client privilege or the attorney work-product doctrine, the common interest doctrine does not apply.” Id. Thus, the Court must first determine whether the information at issue is properly subject to either the attorney client or work product privilege.
Rule 26(b)(5) expressly requires a party asserting privilege to “describe the nature of the documents” not disclosed “in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.” Fed. R. Civ. P. 26(b)(5)(A)(ii). See, e.g., Williams, 274 F.R.D. at 697; Carnes v. Crete Carrier Corp., 244 F.R.D. 694, 698 (N.D. Ga. 2007). “The party asserting the attorney-client privilege ... bears the burden to provide a factual basis for its assertions. This burden is met when the party produces a detailed privilege log stating the basis of the claimed privilege for each document in question, together with an accompanying explanatory affidavit from counsel.” Carnes v. Crete Carrier Corp., 244 F.R.D. 694, 698 (N.D. Ga. 2007). Blanket and general assertions of a claim of privilege do not provide sufficient detail about the documents to enable the plaintiff or the court to determine whether the withheld documents were privileged. Universal City Dev. Partners, Ltd. v. Ride & Show Eng'g, Inc., 230 F.R.D. 688, 695 (M.D. Fla. 2005); Williams, 274 F.R.D. at 697.
Here, in its response to Richert's Interrogatory No. 6, BMO has made a blanket assertion that Richert seeks information that is “protected by the attorney-client privilege, joint interest privilege, and attorney work product,” and because it deemed the information non-responsive, has failed to provide a privilege log. As a result, the Court cannot determine in the first instance whether the information is properly subject to protection from disclosure in discovery.
*6 Assuming arguendo that some privilege does apply, the Court finds that BMO has failed to meet its burden to show that the common interest privilege applies under the circumstances presented here. BMO asserts that its relationship with the SBA is akin to that of an insurer and its insured, relying on cases holding that an insurer's communications with the attorney assigned to represent the insured under an insurance policy are generally protected by this common interest or joint privilege. See, e.g., Underwriters Ins. Co. v. Atlanta Gas Light Co., 248 F.R.D. 663, 670-71 (N.D. Ga. 2008) (Carnes, J.) (finding that the attorney-client privilege protects communications regarding the progress of a case between the insurer and the counsel the insurer retained to represent the insured); Jones v. Tauber & Balser, P.C., 503 B.R. 510, 517-18 (N.D. Ga. 2013) (finding that communications between professional liability insurer and lawfirm retained to counsel insured regarding potential liability were protected under common interest doctrine). In these cases, the common or joint interest hinges on the fact that the insurance company retains an attorney on behalf of its insured for the purpose of providing legal representation or advice. BMO has not cited any analogous case law in the context of a lender and guarantor.
The common interest doctrine, however, “does not apply where parties share information to further a commercial transaction between legally separate entities, rather than to further a common legal strategy.” Chattanooga-Hamilton Cty. Hosp. Auth., 2015 WL 11622949, at *8 (citing cases) (finding that communications between defendants during negotiation with bank of management agreement were not subject to common interest privilege because parties had, at most, only a common commercial interest rather than a shared legal interest); see also In re Tom's Foods Inc., 345 B.R. 795, 799 (Bankr. M.D. Ga. July 13, 2006) (finding that joint defense privilege did not apply to e-mails requesting guidance from attorney concerning how the debtor's board of directors and management should respond to the debtor's financial distress, where the substance of the e-mails concerned the debtor's business affairs); Infinite Energy, Inc. v. Econnergy Energy Co., No. 1:06CV124-SPM/AK, 2008 Wl 2856719, at *2-3 (N.D. Fla. July 23, 2008) (noting that the common interest doctrine did not apply where the parties' interest was business-related, rather than an interest relating to litigation); Gulf Islands Leasing, Inc. v. Bombadier Capital, Inc., 215 F.R.D. 466, 472-73 (S.D.N.Y. May 29, 2003) (“A concern to ensure the payment of money is commercial in nature and does not qualify for protection under the common interest rule.”); Titan Inv. Fund II. L.P. v. Freedom Mortg. Corp., C.A. No. 09C-10-259 WCC, 2011 WL 532011, at *4 (Del. Super. Ct. Feb. 2, 2011) (“As a general rule, application of the common interest privilege is appropriate where it is clear that the parties were collaborating and sharing information in furtherance of a joint legal strategy or objective, rather than simply seeking legal advice with regard to a commercial transaction.” (emphasis in original)); Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 160 F.R.D. 437, 447 (S.D.N.Y. 1995) (the common interest doctrine does not encompass a joint business strategy which happens to include as one of its elements a concern about litigation). Here, BMO has shown only that it shares with the SBA the common interest that the loan to ABL is repaid. Accordingly, the Court finds that BMO has failed to meet its burden of demonstrating that the joint or common interest privilege applies to the information requested by Richert relating to the SBA Guaranty.
Accordingly, WITHIN FIFTEEN 15 DAYS of this Order, the Court DIRECTS BMO to respond to Interrogatory No. 6 and produce a proper privilege log of any documents withheld based on the assertion of attorney-client or work product privilege that complies with the standards set out by this Court in Meade v. General Motors, LLC, --- F. Supp. 3d ---, 2017 WL 1455094 (N.D. Ga. April 21, 2017) (Totenberg, J.).
B. Magistrate Judge's December 27, 2016 Order [Doc. 115] denying Defendants' Motion to Compel [Doc. 95] production of documents from Non-Party Branch Banking & Trust (“BB&T”) and Defendants' Objections [Docs. 119, 129]
*7 On December 27, 2016, Magistrate Judge Larkins entered an Order denying Richert's Motion to Compel the production of documents from non-party BB&T in response to a Subpoena seeking records relating to BB&T's account holder, non-party Southern Melon Distributors, Inc. (“Southern Melon”). Richert seeks to discover facts relating to a check kiting scheme that ABL Farms and its affiliate company Southern Melon were purportedly involved in using ABL's accounts at BMO and Southern Melon's accounts at BB&T in 2015 in an effort to inflate their apparent assets and hide their cash flow issues.
On September 14, 2016,[4] Richert Funding served a Subpoena on nonparty BB&T to produce documents relating to BB&T's banking relationship with Southern Melon. (Doc. 95-1.) The Subpoena requested ten broad categories of electronic and hard-copy documents, including: (1) every agreement entered into between Southern Melon and BB&T; (2) all “hard-copy and electronically stored native files for each BB&T account used by Southern Melon”; (3) all checks issued by ABL from a BMO bank account and deposited in a Southern Melon BB&T account; (4) all checks issued by Southern Melon from a BB&T account and made payable to ABL; (5) all checks issued by Southern Melon from a BB&T account and made payable to any plaintiff in the “PACA Lawsuit” from October 2014 through December 2015; (6) “the single most precise and thorough” document that shows “each repayment” Southern Melon made to BB&T with respect to any loan that BB&T made to Southern Melon and the “source of funds”; (7) all documents BB&T received from Southern Melon in connection with BB&T's underwriting and due diligence with respect to any loans, extensions of credit, or “financial accommodations” that BB&T made to Southern Melon; (8) all communications from January 2014 to the present between BB&T and any of Southern Melon, ABL, or their principals, Danny and Aaron Letsinger; (9) “[t]he single most precise and thorough” document that summarizes each overdraft Southern made from each Southern bank account; and (10) “[t]he single most precise and thorough” document that summarizes each overdraft Southern made from each Southern bank account. (Doc. 95-1 at 5-6.)
After BB&T filed an Objection to the Subpoena, Richert filed a Motion to Compel, and Magistrate Judge Larkins held a hearing on December 12, 2016. Magistrate Judge Larkins denied the motion, ruling that Richert had failed to give reasonable time for compliance with the Subpoena and failed to show the relevance of the requested documents to BMO's claims and Richert's defenses in this action. Because BB&T agreed to produce documents previously produced to the plaintiffs in the PACA Lawsuit, consisting of 3,012 pages of documents as also responsive to Requests 1 through 7 of Richert's Subpoena, Magistrate Judge Larkins directed BB&T to produce the documents to Richert upon payment of the $1,190.50 cost for production. These documents have now been provided.
*8 On January 10, 2017, Richert filed an Objection to the Order only as to the denial of the Motion to Compel documents in response to Request 10 for “[a]ll non-privileged documents and ESI in connection with which BB&T became aware of a possible check kiting scheme between Southern and ABL.” (Doc. 119 at 6.) BB&T objected to producing documents in response to Request 10, asserting that
the requested documents have no apparent relevance to the claims of BMO Harris that Richert committed fraud or fraudulently induced BMO Harris into funding a $5 million loan to ABL, of which $3.9 million was to pay off Richert, that Richert converted proceeds of the ABL Accounts that belonged to BMO Harris, that Richert conspired with ABL to defraud BMO Harris and convert its property, that Richert tortuously interfered with the lending relationship between BMO Harris and ABL, and that Richert was unjustly enriched through receipt of $3.9 million from BMO Harris and BMO Harris's collateral, or any possible defense of Richert thereto.
(Doc. 95-2 at 14-15.) BB&T further objected to the Subpoena on the grounds that the request was not proportional to the needs of the parties and that the cost of reviewing and producing the documents “would result in BB&T incurring a significant expense that should be shifted to Richert, pursuant to Fed. R. Civ. P. 45(d)(2)(B)(ii) and ... [that] [t]his cost will greatly exceed the $1,000.00 offered by Richert for copying costs.” (Id. at 2, 15.)
In its Motion to Compel, Richert asserted that “the Subpoena requests documents relevant to one or more of the parties' claims and defenses, including, without limitation, the existence of a superseding or intervening event which in whole or in part caused BMO's losses and were not the result of any purported fraud by Richert Funding, whether the ABL/Southern check kiting scheme evidences BMO's failure to properly administer its loans with ABL, and that any losses BMO suffered were due to BMO's actions or inactions, or the actions of third-parties, and not those of Richert Funding.” (Doc. 95 at 8-9.) Richert further asserted that “the bank records evidencing the transactions that gave rise to ABL's check kiting scheme are likely relevant to the analysis that would be performed by an expert witness in order to evaluate the factual issues and formulate opinions and testimony based upon ABL's check kiting scheme having caused and/or having contributed to any losses BMO purportedly suffered.” (Id. at 9-10.)
Magistrate Judge Larkins found that Richert's relevancy assertions were purely conclusory and that Richert made “no attempt to demonstrate how evidence surrounding the apparent check kite could shift any loss that could be ultimately attributable to it [by virtue of the alleged fraud] onto another party.” (Order, Doc. 115 at 10.) The Order notes that at oral argument, counsel for Richert asserted that the evidence could show that BMO Harris should have been aware of the check kiting, through its due diligence and credit investigation of ABL, at an earlier date, and, if it had been, it may not have extended the subject loan to ABL or otherwise undertaken steps to limit its losses. (See id. at 11; see also Tr., Doc. 130 at 4-6.) Magistrate Judge Larkins was skeptical of how evidence relating to the check kiting scheme discovered several months after the October 2014 and May 2015 ABL loans could be relevant to BMO's due diligence and administration of the loans. When asked by Magistrate Judge Larkins at the hearing, Richert's counsel responded that he did not know and was unable to offer an explanation.[5] (Order, Doc. 115 at 11; Tr., Doc. 130 at 5-6.) As a result, Magistrate Judge Larkins found that “Richert Funding had not made a credible argument that any amount of due diligence on BMO's part could have uncovered a check kite scheme before BMO entered into the loan agreement or advanced funds” or that “BMO could have mitigated its damages based on events that occurred after the loan was extended.” (Order, Doc. 115 at 11-12.) He thus concluded that Richert had failed to show that evidence of BB&T's or BMO's discovery of the check kite had any bearing on the claims or defenses in this case. (Id. at 12.)
*9 Richert asserts that the Order erred in finding that Richert had failed to demonstrate the relevance of these documents because Richert's ability to present its defense in this case will be hindered if Richert is precluded from obtaining discovery concerning facts relating to the check kiting scheme. According to Richert, BMO did not properly administer and monitor its lending relationship with ABL, and was thus responsible for its own losses. Richert contends that although BB&T appears to have only first discovered the check kiting scheme in August 2015, the check kiting scheme was an end result of months of financial distress which appears to have been ignored by BMO or not properly addressed due to BMO's improper administration of its lending relationship with ABL.[6] These assertions are apparently based on the documents BB&T did ultimately produce, which according to BB&T contain all the account information Richert needs to analyze when any check kiting began.
In its Objections to the Order, Richert asserts that BB&T's investigation of Southern's and ABL's check kiting scheme is relevant because the records may establish the existence of ABL's check kiting scheme, the date BB&T identified when Southern first commenced issuing checks to ABL from the BB&T bank account without having sufficient funds in the account to cover the checks, Southern's requests for BB&T to approve any overdrafts made on its bank account, and communications between BB&T and BMO or between BB&T and Southern regarding Southern's cash flow issues that gave rise to Southern's kiting of checks. Like the Magistrate Judge, this Court simply cannot see how records relating to Southern's account with BB&T are relevant to establishing Richert's defenses in this action relating to BMO's handling of ABL's account. See Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351–52 (1978) (“ ‘[D]iscovery, like all matters of procedure, has ultimate and necessary boundaries.’ Discovery of matter not ‘reasonably calculated to lead to the discovery of admissible evidence’ is not within the scope of Rule 26(b)(1).”) (citing Hickman v. Taylor, 329 U.S. 495, 501, 507 (1947)). It appears to the Court that the relevant records for Richert's asserted defenses would be those in BMO's possession relating to ABL's checking account activity and evidence of BMO's knowledge of ABL's alleged cash flow issues.
Accordingly, the Court is not persuaded by Richert's Objections and finds that the Magistrate Judge committed no clear error in denying the Motion to Compel documents from BB&T relating to the purported check kiting scheme perpetrated by its account holder Southern Melon.
C. Magistrate Judge's Order granting BB&T's request for fees related to the Motion to Compel [Doc. 115], BB&T's Declaration [Doc. 118] in support of request for attorney's fees [Doc. 101], and Defendants' Objections [Doc. 139] to award of fees
BB&T requested an award of attorney's fees and costs in connection with its Response in opposition to Richert's Motion to Compel documents related to the check kiting scheme. Richert did not file a reply and therefore did not oppose the request prior to objecting to the Magistrate Judge's Order.
Magistrate Judge Larkins determined that BB&T should recover its fees and expenses in opposing Richert's Motion to Compel because Richert failed to take reasonable steps to protect BB&T from undue burden and expense as required under Fed. R. Civ. P. 45(d)(1). Magistrate Judge Larkins found that: (1) Richert served a Subpoena with an unreasonable date of compliance (9 days) and then took a hard-nosed approach with respect to BB&T's relevancy and undue burden objections; (2) the requests were extraordinarily broad in both scope and time, even though Richert contended in its motion that just records pertaining to the check kite scheme are relevant; and (3) despite its bare assertions that the documents were relevant, Richert was unwilling to limit the scope of the Subpoena prior to filing the Motion to Compel. Thus, “given the lack of relevance of the materials, the breadth of the requests, and Richert Funding's unwillingness or inability to articulate why the requested material is relevant,” Magistrate Judge Larkins concluded that it was not reasonable for Richert to “insist on complete compliance with the subpoena – especially on such a tight time deadline” or “to move to compel BB&T to produce all responsive documents.” (Doc. 115 at 19.)
*10 The Order directed BB&T to submit evidence of its fees and expenses incurred in connection with responding to the Motion to Compel and the reasonableness of those fees. On January 10, 2017, Paul Durdaller, counsel for BB&T, submitted a Declaration and attached billing records for September through December 2016 detailing the time he and his co-counsel, Brian Levy, billed in connection with Richert's Subpoena and the Motion to Compel. Although no itemized billing records for January 2017 were provided, Mr. Durdaller's Declaration includes time from January incurred in connection with preparing the application for the fees and expenses awarded by the Magistrate Judge. According to the Declaration, the standard hourly rate for Mr. Durdaller was reduced from $415/hour to $370/hour and the standard hourly rate for Mr. Levy was reduced from $325/hour to $290/hour. (Durdaller Decl., Doc. 118 ¶ 6.) In addition, BB&T's counsel applied an across the board percentage discount to the hours billed ranging from 5% to 15%.
As of January 10, 2017, BB&T contends it incurred a total of $13,067.35 in attorneys' fees and $15.00 in expenses solely in connection with responding to the Motion to Compel, summarized as follows:
(Id. ¶ 16.) BB&T has highlighted the billing entries that correspond to the hours it contends are directly related to the response to the Motion to Compel. (See Doc. 118 at 12-15.) BB&T also provides a monthly summary of fees including the additional $8,422.70 incurred in responding to the Subpoena, as follows:
(Id. ¶ 14.)
Richert objects both to the award of fees and the amount of fees requested by BB&T.
1. Whether BB&T is Entitled to Attorneys' Fees as Sanction under Rule 45
Richert asserts that the Magistrate Judge's fee award should be reversed because: (1) an imposition of monetary sanctions under Rule 45(d)(1) requires a finding of bad faith; (2) Magistrate Judge Larkins improperly focused on the relevance of the requested documents rather than the alleged burden imposed on BB&T; (3) BB&T failed to satisfy its heavy burden of proving undue burden and hardship; and (4) BB&T forced Richert into the position of having to move to compel because BB&T unreasonably refused to produce any documents or ESI and thwarted Richert's efforts to avoid imposing any undue burden or expense. The Court addresses each of these arguments in turn.
Rule 45, governing the production of documents by a nonparty, requires that “[a] party or attorney responsible for issuing and serving a subpoena must take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena.” Fed. R. Civ. P. 45(1); see, e.g., Equal Employment Opportunity Comm'n v. Sirdah Enterprises, Inc., 1:13-CV-03657-RWS-RGV, 2015 WL 12630686, at *3–4 (N.D. Ga. Feb. 25, 2015) (Vineyard, M.J.); Ubiquiti Networks, Inc. v. Kozumi USA Corp., 295 F.R.D. 517, 527 (N.D. Fla. 2013), objections overruled, 981 F. Supp. 2d 1207 (N.D. Fla. 2013) (“Rule 45(c)(1) imposes on the issuer of the subpoena an affirmative duty to avoid imposing undue burden or expense on the non-party.”); Southeastern Mechanical Services, Inc. v. Brody, Civil Action No. 1:09–CV–0086–GET–SSC, 2009 WL 3095642, at *2 (N.D. Ga. June 22, 2009) (Cole, M.J.). “This duty reflects a balancing between the litigants' need to obtain information from non-parties and the need to protect outsiders to the litigation from having to incur undue burden and expense.” Ubiquiti Networks, Inc., 295 F.R.D. at 527; see also W. Convenience Stores, Inc. v. Suncor Energy (U.S.A.) Inc., 11-CV-01611-MSK-CBS, 2014 WL 1257762, at *21 (D. Colo. Mar. 27, 2014) (“It is generally recognized that a non-party involuntarily embroiled in civil litigation should not be subjected to undue burden or significant expense merely by virtue of having received a subpoena.”)
Rule 45(c)(1) further “provides that the court must impose sanctions, ‘which may include ... reasonable attorney's fees — on a party or attorney’ who fails to ‘take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena.’ ” Southeastern Mechanical Services, Inc., 2009 WL 3095642, at *3 (quoting Fed. R. Civ. P. 45(c)(1)); XTO Energy, Inc. v. ATD, LLC, CIV 14-1021 JB/SCY, 2016 WL 1730171, at *31 (D. N.M. Apr. 1, 2016) (“If an attorney does not comply with” Rule 45(d)(1)'s duty to take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena, “the court ‘must enforce this duty and impose an appropriate sanction—which may include lost earnings and reasonable attorney's fees.’ ”); W. Convenience Stores, Inc. v. Suncor Energy (U.S.A.) Inc., 11-CV-01611-MSK-CBS, 2014 WL 1257762, at *21 (D. Colo. Mar. 27, 2014) (“Rule 45(d)(1) requires the court to impose ‘appropriate sanctions’ if the party or attorney issuing and serving a subpoena fails to ‘take reasonable steps to avoid imposing undue burden or expense’ on the non-party recipient.”); Huntair, Inc. v. Climatecraft, Inc., 254 F.R.D. 677, 679 (N.D. Okla. 2008) (“Rule 45(c)(1) requires the attorney issuing the subpoena to take reasonable steps to avoid imposing undue burden or expense on the person subject to the subpoena, and directs that the court ‘shall enforce this duty.’ ”); Fed. R. Civ. P. 45(c)(1) (providing that “[t]he issuing court must enforce this duty and impose an appropriate sanction—which may include lost earnings and reasonable attorney's fees—on a party or attorney who fails to comply”).
*11 Relying on the Ninth Circuit's decision in Mount Hope Church v. Bash Back!, Richert argues that Magistrate Judge Larkins's fee award should be reversed because he did not find Richert acted in bad faith and because Richert advanced a good faith argument in support of the Subpoena and Motion to Compel. But Mount Hope does not support Richert's position. Rather, the court in Mount Hope specifically rejected the argument that Rule 45 requires a finding of bad faith before sanctions may be imposed, noting that even a good faith violation of Rule 45's requirement to avoid imposing an undue burden is subject to sanctions under the rule:
we have held that bad faith is sufficient to invoke Rule 45(c)(1) sanctions. But we have never stated that bad faith is necessary, and we do not do so now. More precisely, bad faith is a sufficient ground for sanction, but it is not a necessary ground if Rule 45(c)(1) is otherwise violated in good faith. Several district courts have similarly held that bad faith is sufficient but not necessary for Rule 45(c)(1) sanctions. We also agree with district court decisions suggesting that Rule 45 places more emphasis on the recipient's burden than on the issuer's motives.
Mount Hope Church v. Bash Back!, 705 F.3d 418, 428–29 (9th Cir. 2012) (citations omitted)[7].
The Court agrees, based on the text of Rule 45 and the case law interpreting the Rule. A party's “good faith in issuing a subpoena is not sufficient to avoid sanctions under Rule 45(c)(1) if a party has issued the subpoena in violation of the duty imposed by that Rule” to take reasonable steps to avoid imposing undue burden or expense on the person subject to the subpoena. Huntair, Inc., 254 F.R.D. at 679; Mount Hope, 705 F.3d at 428; Georgia-Pac. LLC v. Am. Int'l Specialty Lines Ins. Co., 278 F.R.D. 187, 190 (S.D. Ohio 2010) (“So long as the duty to avoid imposing an undue burden is violated, it is of no consequence that the party or attorney who served the subpoena acted in good faith.”); Builders Ass'n of Greater Chicago v. City of Chicago, 2002 WL 1008455 at *3 (N.D.Ill. May 13, 2002); Liberty Mutual Ins. Co. v. Diamante, 194 F.R.D. 20, 23 (D. Mass. 2000). Thus, in determining whether an award of attorney's fees as a sanction under Rule 45 is warranted, the relevant question is whether there has been a breach or violation of counsel's duty to take reasonable steps to avoid imposing undue burden or expense upon the person subject to the subpoena. Huntair, Inc., 254 F.R.D. at 679; Builders Ass'n of Greater Chicago, 2002 WL 1008455 at *3.
Richert's argument that Magistrate Judge Larkins erred in considering the relevance of the documents rather than Richert's intended need and BB&T's potential hardship is incorrect; relevancy is a key consideration. In determining whether a subpoena presents an undue burden, courts consider (1) the relevance of the information requested, (2) the requesting party's need for the documents, (3) the breadth of the document request, (4) the time period covered by the request, (5) the particularity with which the documents are described, and (6) the burden imposed, including the expense and inconvenience to a nonparty to whom a request is made. Southeastern Mechanical Services, Inc., 2009 WL 3095642, at *3 (citing Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 818 (5th Cir. 2004); Ubiquiti Networks, Inc., 295 F.R.D. at 521, n.2 (Bozeman v. Chartis Cas. Co., Case No. 2:10–cv–102–FtM–36SPC, 2010 WL 4386826, *3–4 (M.D. Fla. Oct. 29, 2010)); Moore v. Hartman, 241 F.R.D. 59, 63 (D.C. 2007); Williams v. City of Dallas, 178 F.R.D. 103, 109 (N.D. Tex. 1998)(Fitzwater, J.); Cf. EEOC v. Ford Motor Credit Co., 26 F.3d 44, 47 (6th Cir. 1994) (the court must weigh “the likely relevance of the requested material ... against the burden ... of producing the material”). Magistrate Judge Larkins equally considered each of these factors in determining whether to award BB&T its attorney's fees as a sanction under Rule 45.
*12 Richert asserts that BB&T offered only bare assertions of undue burden, failed to provide Richert with any facts to support its argument that the Subpoena would cause BB&T undue burden and expense, and that the Magistrate Judge failed to cite any such facts in the Order. BB&T objected to the Subpoena, stating that the cost of reviewing and producing the materials would result in BB&T incurring a significant expense that would greatly exceed the $1,000 offered by Richert for copying costs. (Doc. 95-2 at 2.) Magistrate Judge Larkins found that BB&T's undue burden objection was explicitly tailored to the circumstances of the case, and found it readily apparent after oral argument that, due to its breadth, the subpoena did not provide BB&T with adequate time to complete the production in compliance with the letter of the subpoena. During the hearing, counsel for BB&T explained that the ESI review and production through a third-party vendor would result in a tremendous burden, require dozens of hours of review of sensitive financial information protected under the Bank Secrecy Act, and cost BB&T tens of thousands of dollars. Accordingly, the record sufficiently establishes that BB&T's objection to the burdensomeness of Richert's Subpoena was entirely reasonable and legitimate.
Finally, Richert asserts that Judge Larkins should have taken greater consideration of the fact that BB&T placed Richert in the position of having to file a Motion to Compel because BB&T refused to produce any documents or ESI in direct violation of the Federal Rules of Civil Procedure. (Doc. 139 at 8.) As Magistrate Judge Larkins recognized in his Order, along with a host of other courts, Rule 45 expressly permits the person commanded to produce documents or electronically stored information to serve an objection on the party or attorney designated in the subpoena, which relieves the non-party of its responsibility to produce any documents in response to the subpoena. Fed. R. Civ. P. 45(d)(2). The burden shifts to the requesting party to then move to compel in response to that objection, so long as the order compelling production protects the non-party from “significant expense resulting from compliance.” Fed. R. Civ. P. 45(c)(2)(B). See also W. Convenience Stores, Inc., 2014 WL 1257762, at *21; Georgia-Pac., 278 F.R.D. at 190; Southeastern Mechanical Services, Inc., 2009 WL 3095642, at *2. Neither BB&T's filing of its Objection nor its refusal to produce the documents absent either a court order or an agreement by Richert to limit the scope of its document requests, precludes an award of BB&T's attorney's fees. More importantly, BB&T attempted to resolve the dispute by agreeing to produce the documents relating to its account with Southern Melon previously produced in the PACA litigation, albeit on conditions that were objectionable to Richert, including that the limited production would satisfy BB&T's obligations in full under the subpoena. Richert, on the other hand, made no attempt to limit the scope of its requests prior to filing the Motion to Compel, contrary to its assertion here that it made good faith efforts to resolve BB&T's objections.
Accordingly, the Court finds that the Magistrate Judge did not err in finding that Richert failed to “take reasonable steps to avoid imposing undue burden or expense” on BB&T in connection with the Subpoena and AFFIRMS the decision to impose sanctions.
2. Whether BB&T's Requested Attorneys' Fees and Expenses are Reasonable
Richert does not dispute the hourly rates charged by BB&T's counsel. However, Richert disputes BB&T's request for “duplicate” fees and fees incurred for services performed outside the scope of the Order. Richert argues that any fees awarded should be limited to the time associated directly with responding to the Motion to Compel as ordered by Magistrate Judge Larkins. Richert objects to an award of any fees associated with responding to the Subpoena, preparing for and attending the hearing on the Motion to Compel, preparing the fee request, or responding to its Objection to the discovery Order. Richert asserts that out of the 41.1 hours identified and itemized in the billing records, only 11 hours were spent responding to the Motion to Compel.[8] Thus, Richert seeks to limit the award to $2,494.00.[9]
*13 Specifically, Richert opposes the following entries as outside the scope of the Order:
In response, BB&T asserts that it should recover the fees associated with counsel's preparation and attendance at the court-ordered hearing on the Motion to Compel because those fees were incurred in opposing the Motion to Compel as contemplated in the Magistrate Judge's Order. The Court agrees that these fees are not outside the scope of the Order and are compensable under Rule 45's cost-shifting sanction provision.
BB&T further asserts that the following additional categories of time entries were incurred in connection with opposing the Motion to Compel:
[1] reviewing the Court's order setting the briefing schedule and hearing date, [2] an analysis of the prior discovery disputes between Richert and BMO to determine if any of the disputes related to the check-kiting scheme, [3] reviewing filings relating to a concurrent motion to compel filed by Richert seeking documents relating to BMO's investigation of the check-kiting scheme, [4] discussions with counsel for BMO regarding the discovery disputes with Richert, [5] reviewing Judge Totenberg's order rejecting Richert's inconsistent discovery positions whereby it attempted to redact discovery from this action from production in the PACA Litigation on the basis that it was not relevant, and [6] making a last-ditch effort to resolve the dispute over the Subpoena prior to the Hearing.
(Doc. 144 at 12-13.) With the exception of the entries for BB&T's counsel's review of the Magistrate Judge's Orders setting the hearing and ruling on the Motion to Compel and counsel's efforts to resolve the dispute over the Subpoena, the Court agrees with Richert that the remaining disputed entries are not compensable under Rule 45 as contemplated by the Magistrate Judge's Order.
Additionally, Richert objects to “redundant” billing entries where Mr. Durdaller and Mr. Levy both charge for performing the same tasks, asserting that BB&T should only be able to recover for one attorney's time. Norman v. Hous. Auth. of City of Montgomery, 836 F.2d 1292, 1301–02 (11th Cir. 1988) (“In making adjustments to hours claimed, the district court is charged with deducting for redundant hours ... where more than one attorney represents a client.”). Richert specifically objects to Mr. Durdaller and Mr. Levy each billing for reviewing the Motion to Compel, preparing BB&T's Response in opposition to the Motion to Compel, and participating in the hearing, as follows:
In response, BB&T argues that its use of two attorneys constituted a reasonable exercise of counsel's billing judgment because: (1) BB&T utilized Mr. Levy at a lower billable rate to prepare the initial draft of the Response brief that was then reviewed and edited by Mr. Durdaller as lead counsel; and (2) though Mr. Durdaller argued for BB&T at the hearing, Mr. Levy's presence was necessary because he was the only counsel who participated in the efforts to resolve the dispute over the Subpoena and was able to clarify responses to Judge Larkins' questions based on his first-hand knowledge. The Court also takes into consideration that BB&T reduced the hourly rates of its counsel in connection with this matter and applied a discount to the majority of the hourly fees requested. Under these circumstances, the Court finds that the work of Mr. Durdaller and Mr. Levy was not redundant and each made distinct contributions to BB&T's representation in the matter. Norman, 836 F.2d 1292, 1302 (11th Cir. 1988) (“There is nothing inherently unreasonable about a client having multiple attorneys, and they may all be compensated if they are not unreasonably doing the same work and are being compensated for the distinct contribution of each lawyer.”) Nonetheless, the Court finds that the time billed by both Mr. Durdaller and Mr. Levy in connection with preparation and attending the hour-long December 12th hearing is excessive and will award them each 1 hour for preparation and 1 hour for the actual hearing.
Finally, Richert objects to BB&T's request to recover fees for the month of January 2017 because no description of the fees or evidence to support them was provided and any fees incurred in January, two months after BB&T filed its Response in opposition to the Motion to Compel, would be outside of the scope of the Order.[10] BB&T waited until the filing of its Reply to provide the detailed and itemized description of its billing entries associated with substantiating its fee request and the additional fees incurred in filing its Reply (and thus deprived Richert of the opportunity of responding as to the reasonableness of the time entries). In doing so, BB&T incurred additional fees from Mr. Durdaller in preparing a Supplemental Declaration to accompany the January 2017 billing records that could have been avoided had BB&T filed a summary description with the initial request/Declaration. BB&T is entitled to be compensated for a reasonable number of hours in preparing its request for fees. Yule v. Jones, 766 F. Supp. 2d 1333, 1341–42 (N.D. Ga. 2010) (finding that compensable activities include preparing and litigating the request for attorneys' fees); Cruz v. Hauck, 762 F.2d 1230, 1233–34 (5th Cir.1985) (allowing compensation for preparing and litigating fee request). Under the circumstances, the Court has independently evaluated the entries and eliminated any time beyond what is minimally reasonable. Because the Court finds that the 26.6 hours BB&T spent in connection with its fee request is excessive, the Court will reduce the amount of the award as specified in the summary chart below.
*15 The Court denies BB&T's request to award fees associated with responding to the Subpoena as outside the scope of the Magistrate Judge's Order. Accordingly, the Court limits BB&T's fee award to the hours reflected in the highlighted billing entries from November and December 2016, (Doc. 118 at 12-15) totaling $11,178.35, and the hours associated with BB&T's fee request in January and February, 2017 totaling $8,124.00.
The following chart summarizes the hours excluded from the total award:
In addition, the Court has reduced the following hours to exclude unreasonably excessive time associated with the hearing, and BB&T's fee request and Reply, as summarized below:
Thus, the Court will award BB&T $10,135.85 in fees and $15.00 in expenses under Rule 45(d)(1), calculated as follows: Plaintiffs' total fee request of $19,302.35 for November 2016 through February 2017 in connection with Motion to Compel and Attorneys' Fee Request minus the total excluded and reduced fees of $9,166.50 = $10,135.85 total fee award. The Court DIRECTS Defendants to remit payment to BB&T in the amount of $10,150.85 WITHIN 30 DAYS of this Order.
D. Defendants' Motion to Strike [Doc. 147] BB&T's request for sanctions under 28 U.S.C. § 1927 [Doc. 135]
*16 In its Response to Richert's Objection to the Magistrate Judge's Order denying Richert's Motion to Compel BB&T to produce the documents in response to the Subpoena, BB&T requested that this Court impose additional sanctions on Richert pursuant to 28 U.S.C. § 1927 for Richert's “continuation of the bad faith and hard-nosed discovery tactics” against BB&T in objecting to the Magistrate Judge's Order. Richert has moved to strike the request for sanctions as both procedurally improper because it was not brought by motion and substantively unmeritorious absent bad faith on Richert's part.
The Eleventh Circuit has set forth the following standard for awarding sanctions under Section 1927:
The plain statutory language of section 1927 makes clear that this section is not a “catch-all” provision for sanctioning objectionable conduct by counsel. To justify an award of sanctions pursuant to section 1927, an attorney must engage in unreasonable and vexatious conduct; this conduct must multiply the proceedings; and the amount of the sanction cannot exceed the costs occasioned by the objectionable conduct. For sanctions under section 1927 to be appropriate, something more than a lack of merit is required. The statute was designed to sanction attorneys who willfully abuse the judicial process by conduct tantamount to bad faith.
“Bad faith” is the touchstone. Section 1927 is not about mere negligence. A determination of bad faith is warranted where an attorney knowingly or recklessly pursues a frivolous claim or engages in litigation tactics that needlessly obstruct the litigation of nonfrivolous claims.
Schwartz v. Millon Air, Inc., 341 F.3d 1220, 1225 (11th Cir. 2003) (internal citations and quotation marks omitted). This standard is markedly different from the sanctions standard under Rule 45 discussed above. Under the circumstances here, the Court finds that additional sanctions under 28 U.S.C. § 1927 are not warranted. Accordingly, the Court DENIES BB&T's request for additional sanctions asserted in its Response to Richert's Objection [Doc. 135] and DENIES Richert's Motion to Strike the request [Doc. 147].
E. Magistrate Judge's December 27, 2016 Order [Doc. 116] denying Defendants' Motion to Compel [Doc. 95] production of documents from Plaintiff BMO Harris Bank, N.A., subject to privilege, Defendants' Objections to Order [Doc. 123], and miscellaneous related motions [Doc. 126, 137, 138]
On December 27, 2016, Magistrate Judge Larkins denied Richert's Motion to Compel Plaintiff BMO to produce (a) records associated with BMO's investigation of the default on the ABL Loan, (b) records of BMO's forensic accounting regarding invoices BMO claims were fraudulent, and (c) communications between BMO and ABL's principals, the Lestingers, since the default on the ABL Loan.
Richert's request for BMO's records of its investigation of ABL's default focuses on the revelation of the check kiting scheme. Judge Larkins declined to compel production of the investigation records, finding they were protected by the work product privilege. Richert's request for a forensic accounting review is based on its contention that BMO has failed to identify, which, if any of the invoices it claims Richert fraudulently listed in representations to BMO in connection with the ABL loan. Judge Larkins declined to compel production of the records relating to BMO's forensic accounting because BMO represented no documents exist that identify by entry the invoices that BMO believes are fraudulent.[11]
*17 Richert's request for BMO's communications with the Letsingers is based on Richert's belief that BMO reached some quid pro quo agreement with the Letsingers that no claims would be brought against them for the default in exchange for testimony to support BMO's claims against Richert. Judge Larkins declined to compel production of communications between BMO and the Letsingers because (i) Richert had not identified any actual Rule 34 request for production calling for documents containing such communications, and (ii) Richert was permitted to question BMO's Rule 30(b)(6) deponent regarding the existence of an alleged agreement between BMO and the Letsingers. Magistrate Judge Larkins also ordered Richert to pay BMO's attorney's fees associated with Richert's motion seeking the Lestinger communications, finding that Richert's motion was not substantially justified under Rule 37(a)(5)(B).
On January 13, 2017, Richert filed an Objection to the Magistrate Judge's Order, arguing that:
- The Order applied the wrong standard in determining what was admissible evidence and accepted unsworn and unsupported assertions of counsel in a privilege log as its primary source of substantive evidence;
- The Order accepted general inferences from a Declaration in lieu of actual evidence, and failed to recognize the complete absence of evidence supporting Plaintiff's claim of privilege;
- The Order shifted the initial burden of proof to the Richert Defendants, requiring them to demonstrate the documents were not privileged;
- The Order erroneously denied Defendants' request to compel identification of the documents Plaintiff claims were fraudulent;
- The Order denied relief necessitated by Plaintiff's failure to present a knowledgeable witness on a critical topic in the agreed 30(b)(6) Deposition Notice of BMO; and
- The Order improperly imposed sanctions on Defendants.
(Doc. 123 at 4.) BMO moved to strike Richert's Objection as untimely. (Doc. 126.)
Under Rule 72(a) governing Magistrate Judge's orders on nondispositve pretrial matter, including discovery motions, “[a] party may serve and file objections to the order within 14 days after being served with a copy. A party may not assign as error a defect in the order not timely objected to. The district judge in the case must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Fed. R. Civ. P. 72(a) (emphasis added). Thus, the deadline for Richert to file its Objection to Magistrate Judge Larkins' December 27, 2016 Order was January 10, 2017. Richert's Objection, filed on January 13, 2017 is therefore untimely under Rule 72(a). Id.; see 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3069 (3d ed. 2014) (“[The objection [under Rule 72(a)] should be served within the time allowed ... after service of a copy of the order, and failure to object in time leads to waiver of any objections ... Should a party fail to make timely objections, it has no right to review by the district judge of the action taken by the magistrate judge.”) (citing cases); see also Smith v. Sch. Bd. of Orange Cty., 487 F.3d 1361, 1365 (11th Cir. 2007) (“We have concluded that, where a party fails to timely challenge a magistrate's nondispositive order before the district court, the party waived his right to appeal those orders in this Court.”); Farrow v. West, 320 F.3d 1235, 1249 n. 21 (11th Cir.2003) (holding that a pro se litigant waived his right to appellate review of a magistrate's nondispositive order by not objecting to the order before the district court, as required by Fed.R.Civ.P. 72(a)); but see Anderson v. Hale, 159 F. Supp. 2d 1116 (N.D. Ill. 2001) (stating that the deadline for filing objections to the magistrate judge's report is not jurisdictional, and the court has discretion to consider late objections).
Indeed, Richert recognized the timeliness problem in the Objection itself, but asserted that the deadline was properly calculated using the three day mail rule despite its removal from Federal Rule of Civil Procedure 6(d), effective December 1, 2016, for filings served by electronic means. In the Objection, Richert contended that the three day mail rule remained in effect under the 2017 version of this Court's Local Rules.
*18 In response to BMO's Motion to Strike and in a separate Motion for Enlargement of Time [Doc. 137] filed after-the-fact, Richert asks the Court to exercise its discretion to grant Richert a three day extension of time in order to consider the Objection as a result of Richert's “excusable neglect” in miscalculating the filing deadline. The Court finds Richert's excuses to be disingenuous under the circumstances. The Local Rules of this Court were also amended to reflect the change in Federal Rule 6(d), as noticed on the Court's website beginning on November 10, 2016. Richert's counsel contends an extension of time is warranted based on his reliance on a copy of the 2017 version of the Georgia Court Rules and Procedure Volume II, Federal, published by Thompson Reuters, containing this Court's Local Rules, which clearly states that it is only current through November 1, 2016. Richert thus asserts that “counsel's failure to check the US District Court's website to verify that the version of the Local Rules published by Thomson Reuters was accurate was an inadvertent mistake.” (Doc. 127 at 4.)
Thompson Reuter's “2017” version of this Court's Local Rules (which does not incorporate the December 2016 amendments to the Federal Rules of Civil Procedure) includes the 2016 version of Court's administrative procedures for electronic filing, which provided that “[t]he three-day rule of Federal Rule of Civil Procedure 6(d) for service by mail shall also apply to service by electronic means.” LR, NDGa. App'x. H § II(B)(4). (See Def.'s Resp., Ex. 1, Doc. 127-1.) It therefore should have been clear that once the revisions to the Federal Rules went into effect, the three day mail rule would no longer be applicable to electronic filings in this Court. Richert's counsel, Stephen Hall, does not contend that he was unaware of the December 1, 2016 revision to Federal Rule 6(d). Rather, Mr. Hall contends that he has “found that different Courts have crafted different local rules to modify, supplement or change application of the Federal Rules of Civil Procedure (‘FRCP’) in their District. These ‘local rules’ take precedence over the FRCP in the district where they have been adopted.” (Hall Decl. ¶ 5, Doc. 127-2.) But that is simply not true with respect to Rule 6(d) which prescribes timelines for service. As both Local Rule 1.1(C) and Federal Rule of Civil Procedure 83(a)(1) provide, a Local Rule may not trump an inconsistent Federal Rule. See LR 1.1(C), NDGa. (“These rules supplement the Federal Rules of Civil Procedure and shall be construed so as to be consistent with those Rules ... except that the rules shall not apply to those proceedings where they may be inconsistent with rules or provisions of law specifically applicable thereto.”); Fed. R. Civ. P. 83(a)(1) (providing that a “local rule must be consistent with” the federal rules); Nat'l Sav. Bank of Albany v. Jefferson Bank, 127 F.R.D. 218, 220 (S.D. Fla. 1989) (“Local Rules may regulate litigation practice in a particular district ‘in any manner not inconsistent’ with the Federal Rules.”)[12] Rule 6(d) was amended to ease the task of computing time and to eliminate complications resulting from application of the three day mail rule to electronic filings. Fed. R. Civ. P. 6(d) advisory Committee's note to 2016 amendment. So, a conflicting local rule purporting to retain the 3 day mail rule for electronic service of filings would not control over Federal Rule 6(d).
*19 Richert's basis for “excusable neglect” thus lacks merit and credibility, especially in light of Richert having timely filed its Objection to the Magistrate Judge's discovery Order regarding the BB&T Subpoena entered the same day as the Order on the BMO discovery dispute. Accordingly, the Court GRANTS Plaintiff's Motion to Strike [Doc. 126] Defendants' Objections [Doc. 123] to the Magistrate Judge's December 27, 2016 Order [Doc. 116] as untimely, DENIES Defendants' after-the fact Motion for Enlargement of Time to file Objections [Doc. 137], and DENIES AS MOOT Plaintiff's Motion for Extension of Time to Respond to Defendants' Objections [Doc. 138].
Even if the Court were to consider Richert's untimely Objections, the Court would not find any error by the Magistrate Judge in denying Richert's Motion to Compel. The Declaration of Dawn Sparr, the Vice President of BMO's Special Assets Management Unit, along with the timeline evident from BMO's privilege log are sufficient to show that the documents were properly withheld under the work product privilege. See United States ex rel. Bibby v. Wells Fargo Bank, N.A., 165 F. Supp. 3d 1319, 1324 (N.D. Ga. 2015) (“The party seeking shelter under the work product doctrine bears the burden of establishing that the documents it seeks to protect were prepared in anticipation of litigation. This burden may be satisfied through a privilege log and affidavits from counsel, the party, its agents, or its employees, and by any of the traditional ways in which proof is produced in pretrial proceedings.”); Carnes v. Crete Carrier Corp., 244 F.R.D. 694, 697-98 (N.D. Ga. 2007) (same).
Richert's contentions to the contrary do not dispel Sparr's testimony that BMO immediately engaged its internal and external counsel to direct and participate in an investigation to evaluate its litigation options. See Bibby, 165 F. Supp. 3d at 1325 (N.D. Ga. 2015) (“[A] document created because of the prospect of litigation does not lose its protection just because it also serves a secondary, non-litigation purpose ... This holds true even for documents created as part of an investigation.); Adams v. City of Montgomery, 282 F.R.D. 627, 634 (2012) (holding that although the City routinely conducted internal investigations, which would not always be entitled to work product protection, this particular investigation was instigated as a result of a direct threat of litigation, and was protected); see also Camacho v. Nationwide Mutual Ins. Co., 287 F.R.D. 688, 694 (N.D.Ga.2012) (finding that insurance claim files are generally not work product in early stages of investigation, but become work product “[o]nce litigation is imminent”). And Richert's argument that the documents are not protected work product because BMO was required to perform the investigation under the terms of the SBA Guaranty is not persuasive. “[D]ocuments prepared in the ordinary course of business, pursuant to public requirements unrelated to litigation, or for other non-litigation purposes are not protected if they were not also created ‘because of’ or for use in litigation.” Id. (emphasis added); Adams, 282 F.R.D. at 633.
Nor does this Court find any merit in Richert's assertion that Magistrate Judge Larkins erred in denying Richert's request to compel production of all communications between BMO and the Letsingers because BMO's 30(b)(6) deponent was unable to provide substantive responses during her deposition about the communications. Magistrate Judge Larkins previously determined in an October 24, 2016 discovery Order, to which no objection was made, that the scope of the 30(b)(6) witnesses' testimony was limited to whether there was an agreement between BMO and the Letsingers and, if there was, the contents of such an agreement. (See Order, Doc. 91 at 11.) Richert implies that BMO must have secured the Letsingers' cooperation and voluntary testimony because BMO has not sued the Letsingers for their role in the fraud. But BMO has asserted a claim against its debtor, ABL, in the PACA litigation based on ABL's outstanding loan obligations of $8,288,828.06. (See Civil Action No. 1:15-cv-3171-AT, Doc. 106, PACA Proof of Claim by Claimant BMO Harris Bank N.A.) As ABL's assets are subject to a statutory PACA trust, the exclusive method of presenting claims against ABL's assets is through the Court approved mandated PACA claims procedure. (See Consent Injunction and Agreed Order Establishing PACA Claims Procedure, Doc. 25; Interim Scheduling Order Regarding PACA Claims Procedure, Doc. 54.) BMO's 30(b)(6) corporate representative testified that the only communications about a potential agreement between BMO and the Letsingers were regarding a potential resolution of BMO's claim against ABL in the PACA litigation via a consent judgment, but that BMO had not entered into an agreement with the Letsingers “regarding how, when, or under what conditions BMO will take additional steps to collect the money owed to BMO by ABL and the Letsingers.” (Sparr Dep., Doc. 99-3 at 12-13.)
*20 As for Richert's request for an identification of invoices BMO claims were fraudulently offered to induce BMO into the loan with ABL, the Magistrate Judge did not err in accepting BMO's representation that no documentation of a breakdown of invoices exists and that Richert would be able to explore this issue with BMO's forensic accounting expert.
Finally, with respect to the Magistrate Judge's limited award of sanctions under Rule 37 for the motion to compel communications, Richert offers no compelling argument that the award was erroneous. Richert asserts only that because the motion was pursued with substantial justification and should have been granted, the decision to award fees was clear error. “However, to avoid further expenditure of Court and party resources, Defendants do not object to the amount of Plaintiff's fee request” of $6,655.08. (Defs.' Resp. to Pl.'s Fee Application, Doc. 134 ¶¶ 3-4.) Accordingly, the Court AFFIRMS the decision to impose sanctions and DIRECTS Defendants to remit payment to Plaintiff in the amount of $6,655.08 WITHIN 30 DAYS of this Order.
F. Motions for Leave to File Matters Under Seal [Docs. 124, 128, 132]
The Richert Defendants have filed Motions to File Under Seal their Objections to the Magistrate Judge's Order denying their Motion to Compel [Doc. 124], their Response to Plaintiff's Motion to Strike and Motion to Enlarge Time Under FRCP 6(b) [Doc. 128], and their Revised Response to Plaintiff's Motion to Strike and Motion to Enlarge Time Under FRCP 6(b) [Doc. 132]. The sole basis for each motion to seal these documents in their entirety is that “the subject filings refer to documents Plaintiff has designated as confidential and the Magistrate has ordered be treated as confidential.” (Docs. 124, 128, 138.) And although Defendants further state that they “will confer with Plaintiff and see if Plaintiff consents to reduction of the text placed under seal,” there have been no responses to these motions by Plaintiff and no further supplementation of the motions by Defendants.
Defendants' motions fail to comply with this Court's directives in Section III(f) of its Standing Order regarding Confidentiality Agreements, Protective Order, and Motions to Seal, which provides:
i. Legal Standards Governing Public Access to Judicial Proceedings
In this Court, confidentiality of proceedings is the exception, not the rule. See Chicago Tribune Co. v. Bridgestone/Firestone, Inc., 263 F.3d 1304, 1311 (11th Cir. 2001) (“The common-law right of access to judicial proceedings, an essential component of our system of justice, is instrumental in securing the integrity of the process.”); Newman v. Graddick, 696 F.2d 796, 803 (11th Cir. 1983) (“The historic presumption of access to judicial records must be considered in the balance of competing interests.”). Federal Rule of Civil Procedure 26 allows a court to enter a protective order rendering documents or portions thereof unavailable to the public after a showing of good cause. Good cause is determined by balancing the public's “interest in obtaining access” against the “party's interest in keeping the information confidential.” Id. at 1315; see also In re Estate of Martin Luther King, Jr., Inc. v. CBS, Inc., 184 F. Supp. 2d 1353, 1363 (N.D. Ga. 2002) (quotation and citation omitted) (stating that “even where no third party challenges a protective order, the judge is the primary representative of the public interest in the judicial process and is duty-bound therefore to review any request to seal the record (or part of it)”).
*21 Mere agreement by the parties that documents should be designated as confidential does not automatically satisfy the Rule 26(c) good cause standard. See Chicago Tribune, 263 F.3d at 1313; CBS, 184 F. Supp. 2d at 1362 (“calling a document confidential does not make it so in the eyes of the court; these consensual protective orders merely delay the inevitable moment when the court will be called upon to determine whether Rule 26(c) protection is deserved, a decision ultimately rooted in whether the proponent demonstrates ‘good cause.’ ”). Good cause will generally only be established where the materials (e.g., documents or testimony) contain trade secrets, personal identifying information, and sensitive commercial information, where public disclosure would result in “annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c)(1).
Where a party satisfies the good cause standard and information is filed under seal, the party is also entitled to the protection from public disclosure of such information through its being quoted verbatim in the pleadings, motions, and briefs filed with the Court. The mere reference or discussion of confidential information, however, does not warrant sealing of the entire document and all attachments to be filed. Instead, the Court is only interested in sealing or filing in a redacted format very specific portions of documents that contain or refer to confidential information. See Romero v. Drummond Co., 480 F.3d 1234, 1245-46 (11th Cir. 2007) (“Material filed in connection with any substantive pretrial motion, unrelated to discovery, is subject to the common law right of access .... A motion that is presented to the court to invoke its powers or affect its decisions, whether or not characterized as dispositive, is subject to the public right of access.”) (internal quotations and citations omitted).
ii. Procedure for Requesting the Court to Seal Information
“It is the general policy of this Court not to allow the filing of documents under seal without a Court order, even if all parties consent to the filing under seal.” LR App H, Section II(J), NDGa. To request to file material under seal, the Parties should follow the mechanism described in Section II(J) of Appendix H to the Court's Local Civil Rules. If a document contains some discrete material that is deemed confidential and subject to protection from public disclosure under Rule 26(c), the Parties will be entitled to redact only those portions of the document deemed confidential. The Court cautions that only in rare instances will it be appropriate to seal an entire document from public access. Thus, pleadings, motions, or briefs which mention or reference a document containing confidential information, without disclosing the nature or contents of the protected information, shall not be sealed or filed in a redacted format. Where it is necessary for the Parties to quote or disclose protected confidential information in pleadings, motions, or briefs, the Parties shall file redacted versions of their pleadings, motions, or briefs.
As Defendants made no attempt to meet the good cause standard before filing their motions to seal, the motions [Docs. 124, 128, 132] are DENIED WITHOUT PREJUDICE. The parties are DIRECTED to CONFER WITHIN FIVE (5) DAYS of this Order as to what material should remain under seal and what portions of the documents can be filed in a redacted form on the public docket.
G. Parties' Consent Motion to Amend Scheduling Order [Doc. 114] and Defendants' Motion for Case Management Conference [Doc. 148]
The Parties' Consent Motion to Amend Scheduling Order [Doc. 114], which sought an extension of time to complete expert discovery pending Judge Larkins' rulings on Richert's Motions to Compel, is MOOT. Because Richert filed Objections to Magistrate Judge Larkins' discovery Orders, the parties did not follow the expert discovery deadlines outlined in their proposed amended scheduling order. Recognizing this, Defendants subsequently filed a Motion for a Case Management Conference [Doc. 148], to discuss scheduling, to set and clarify deadlines, and to discuss the status of the case and progress of discovery.
*22 Because a conference with Court may be unnecessary if the parties can agree on a proposed schedule, the Court will DENY Defendants' Motion for a Case Management Conference at this time. The parties are DIRECTED to confer and submit a revised expert discovery plan WITHIN 21 DAYS of this Order. If the parties cannot agree on a proposed schedule, they are DIRECTED to contact Magistrate Judge Larkins's chambers to schedule a conference with Judge Larkins. This matter is REFERRED back to Magistrate Judge Larkins for all future discovery related matters.
IV. CONCLUSION
As set forth in more detail above, the Court enters the following order on the pending objections and motions:
(1) The Court SUSTAINS IN PART Defendants' Objections [Doc. 87] to the Magistrate Judge's September 26, 2016 Order [Doc. 85] denying Defendants' Motion to Compel [Doc. 83] and DIRECTS Plaintiff to respond to Defendant's Interrogatory No. 6 and produce a privilege log WITHIN FIFTEEN 15 DAYS of this Order;
(2) The Court OVERRULES Defendants' Objections [Doc. 119] to the Magistrate Judge's December 27, 2016 Order [Doc. 115] denying Defendants' Motion to Compel [Doc. 95] production of documents from Non-Party Branch Banking & Trust (“BB&T”) and granting BB&T's request for attorney's fees, AFFIRMS the Magistrate Judge's award of sanctions under Fed. R. Civ. P. 45, and DIRECTS Defendants to remit payment to BB&T in the amount of $10,150.85 WITHIN 30 DAYS of this Order;
(3) The Court DENIES Defendants' Motion to Strike [Doc. 147] BB&T's request for sanctions under 28 U.S.C. § 1927 [Doc. 135] and DENIES BB&T's request for sanctions;
(4) The Court GRANTS Plaintiff's Motion to Strike [Doc. 126] Defendants' Objections [Doc. 123] to the Magistrate Judge's December 27, 2016 Order [Doc. 116] as untimely, AFFIRMS the Magistrate Judge's award of attorney's fees as sanctions under Fed. R. Civ. P. 37, and DIRECTS Defendants to remit payment to Plaintiff in the amount of $6,655.08;
(5) The Court DENIES Defendants' Motion for Enlargement of Time [Doc. 137] and DENIES AS MOOT Plaintiff's Motion for Extension of Time to Respond [Doc. 138] to Defendants' Objections [Doc. 123];
(6) The Court DENIES Defendants' Motion for Oral Argument [Doc. 125] on Defendants' Objections [Docs. 87, 119, 123] to Magistrate Judges discovery Orders [Docs. 85, 115, 116];
(7) The Court DENIES WITHOUT PREJUDICE Defendants' Motions for Leave to File Matters Under Seal [Docs. 124, 128, 132] and DIRECTS the parties to confer WITHIN FIVE (5) DAYS of this Order as to what material should remain under seal and what portions of the documents can be filed in a redacted form on the public docket;
(8) The Court DEEMS MOOT the Parties' Consent Motion to Amend Scheduling Order [Doc. 114], DENIES WITHOUT PREJUDICE Defendants' Motion for Case Management Conference [Doc. 148], and DIRECTS the parties to confer and submit a revised expert discovery plan WITHIN 21 DAYS of this Order.
IT IS SO ORDERED this 3rd day of July, 2017.
Footnotes
The factual background provided in this Order is taken from the Magistrate Judge's Orders, Plaintiff's Complaint, and the parties' subsequent filings.
The Court notes, however, that it will not consider arguments that could have been, but were not raised before the Magistrate Judge with respect to any future disputes. Williams v. McNeil, 557 F.3d 1287, 1292 (11th Cir.2009) (noting that district judge has discretion to decline to consider arguments that were not raised before the magistrate judge and that a contrary rule “would effectively nullify the magistrate judge's consideration of the matter and would not help to relieve the workload of the district court”); U.S. v. Graham, 2014 WL 2922388, at *1 (N.D.Ga. 2014).
The Court recognizes that identifying the basis for the decision to make or not make a claim on the SBA Guaranty likely entails revealing information subject to the attorney-client and/or work product privileges.
At 5:01 p.m. on Friday, September 9, 2016, counsel for Richert emailed a copy of a different version of the Subpoena to Paul Durdaller, counsel for BB&T in the PACA litigation. At 9:45 a.m. on Monday September 12, 2016, Mr. Durdaller's co-counsel, Brian Levy, responded via email to Richert's counsel that their firm was not authorized to accept service of a Subpoena on behalf of BB&T. Richert did not present these facts to the Magistrate Judge for consideration of the timeliness of the service of the Subpoena. Whether Richert should be given the benefit of 2 additional business days (Monday and Tuesday) for service as a result of BB&T's litigation counsel's refusal to accept service of the Subpoena would not impact the Court's conclusion here.
The day after Richert filed the Motion to Compel on November 3, Judge Larkins entered an Order on November 4 scheduling a hearing on the motion for December 12. Neither Richert's lead counsel, Micheal Ullman, nor co-counsel, Stephen Hall or Robert Brazier, attended the December 12th hearing on Richert's Motion to Compel. Instead, Joseph Watkins, who entered an appearance on behalf of Richert five days earlier on December 8th, argued the motion at the hearing. After learning that Judge Larkins inquired why Richert's lead counsel was not present at the hearing, on December 13, the day after the hearing, Mr. Ullman filed a Notice of Unavailability on the docket giving notice that “during this week and commencing on December 14, 2016, he will be unavailable for seven to ten days due to a preplanned surgical procedure.” (Doc. 112.) Mr. Ullman had not previously filed a leave of absence in connection with his procedure, he did not request that the December 12th hearing on his motion be rescheduled to accommodate his schedule, and he did not otherwise inform Judge Larkins of his unavailability prior to the hearing. Nor did he request permission to file a post-hearing supplemental brief to address the issues raised by Judge Larkins at the hearing. The Court appreciates that Mr. Ullman was not in a position to attend the hearing in the days preceding his scheduled surgical procedure. However, the circumstances indicate other measures could have been taken to address his absence at the hearing. While Richert does not object on this basis, the Court finds that Judge Larkins properly relied on counsel present at the hearing on behalf of Richert.
Richert also contends that throughout 2015 and over a period of months prior to BB&T's discovery of the check kiting scheme, BMO sanctioned dozens of overdrafts by ABL from its account. While this may or may not be true, however, Richert fails to explain how this would negate its own separate alleged fraudulent conduct in connection with inducing BMO into the loan with ABL.
The Court in Mount Hope found that the church had fulfilled its Rule 45(c)(1) duties to narrowly tailor the subpoena and that the subpoena did not pose an undue burden. 705 F.3d at 429. Under those circumstances, the court stated that “bad faith would be necessary to uphold the sanction,” and held that “absent undue burden imposed by an oppressive subpoena, a facially defective subpoena, or bad faith on the part of the requesting party, Rule 45(c)(1) sanctions are inappropriate.” Id. at 429-30. Here, because the Magistrate Judge did find that Richert's subpoena subjected BB&T to undue burden, a finding of bad faith was unnecessary.
Richert also objects to a handful of entries which fail to sufficiently describe the task performed and are therefore not compensable. The Court has reviewed and considered these entries in its determination of an appropriate sanctions fee award. Any time excluded by the Court on this basis is reflected in the Court's summary chart at the end of this section.
Richert does not identify the entries associated with its tally of hours or fee calculation. According to BB&T's Response, Richert's request represents only 3 time entries for reviewing the Motion to Compel and preparing an initial draft of a response brief: (1) $232.00 on November 3, 2016, for Mr. Levy to review the Motion to Compel (0.8 hours); (2) $1,247.00 on November 14, 2016, for Mr. Levy to prepare the initial draft of the Response Brief (4.3 hours); and (3) $1,015.00 on November 15, 2016, for Mr. Levy to continue preparing the initial draft of the Response Brief (3.5 hours). (Doc. 144 at 7.)
BB&T initially requested an award of $1,889.00 in fees incurred through January 10, 2017 in connection with the preparation of the Declaration in support of the fee award. But in its Reply and the Supplemental Declaration, BB&T seeks total fees of $8, 124.00 through February 13, 2017, which includes fees incurred in preparation of the fee Declarations as well as fees incurred in connection with its reply to Richert's Objection.
BMO also indicated in its Response to Richert's Motion to Compel that the identity of fraudulent invoices will be the subject of the testimony of BMO's forensic accountant.
The Court in Nat'l Sav. Bank of Albany v. Jefferson Bank found that “[b]ecause Local Magistrate Rule 4(a)(1) and Rule 72(a) prescribe different time periods within which to object to a non-dispositive pretrial order by a Magistrate, they are plainly inconsistent. Moreover, in addition to prescribing different time periods, the two rules prescribe different dates which trigger the appeal time. The Local Rule grants 4 days from the date the Magistrate files the order, while the Federal Rule imposes a 10–day deadline from the entry date of the order. Accordingly, Rule 72(a)'s 10–day time prescription from date of entry controls and overrides Local Magistrate Rule 4(a)(1)'s attempt to impose a 4–day prescription from date of filing.” 127 F.R.D. at 220.