Hoehl Family Found. v. Roberts
Hoehl Family Found. v. Roberts
2021 WL 3677837 (D. Vt. 2021)
May 27, 2021
Crawford, Geoffrey W., United States District Judge
Summary
The court granted the Foundation's motion to compel by requiring the parties to negotiate search terms or other search procedures that are specifically tailored to produce the Alternative Investment records relating to the Foundation. The court also required Defendants to specify which documents or information (if any) are being withheld on the basis of any of the “boilerplate” objections within 30 days, and any such objections not accordingly tied to specific documents or information will be deemed waived after that time.
Additional Decisions
THE HOEHL FAMILY FOUNDATION, Plaintiff,
v.
RONALD L. ROBERTS, JOHN P. AUBIN, KEVIN D. GABORIAULT, EIDEARD GROUP, LLC, and ROBERTS ASSET MGT., LLC, a/k/a ROBERTS ASSET MANAGEMENT, LLC, Defendants
v.
RONALD L. ROBERTS, JOHN P. AUBIN, KEVIN D. GABORIAULT, EIDEARD GROUP, LLC, and ROBERTS ASSET MGT., LLC, a/k/a ROBERTS ASSET MANAGEMENT, LLC, Defendants
Case No. 5:19-cv-229
United States District Court, D. Vermont
Signed May 27, 2021
Counsel
Daniel J. Martin, Esq, Navah C. Spero, Esq, Gravel & Shea PC, Burlington, VT, for Plaintiff.Lawrence G. Green, Esq, Pro Hac Vice, Burns & Levinson LLP, Boston, MA, Matthew S. Borick, Esq, Downs Rachlin Martin PLLC, Burlington, VT, for Defendants.
Crawford, Geoffrey W., United States District Judge
ORDER ON MOTION TO COMPEL (Doc. 84)
*1 The Hoehl Family Foundation (the “Foundation”) has filed a ten-count Amended Complaint against the above-captioned defendants—individuals and companies involved in providing investment management services to the Foundation. The claims concern the use of $1 million in Foundation funds to purchase an equity interest in G-Form, LLC (“G-Form”), a manufacturer of protective sports equipment. (See Doc. 11.) The court granted Defendants’ motion for partial dismissal in part on October 15, 2020, dismissing Count X and the portions of Counts I and II that were brought against Mr. Roberts and Mr. Aubin. (Doc. 76.)
Currently pending is the Foundation's February 2, 2021 Motion to Compel. (Doc. 84.) The Foundation asserts that Defendants have improperly refused to provide discovery regarding: “(1) all of the Alternative Investments in its own portfolio, (2) the investments the Related Entities made into those same entities, (3) the investments Defendants made into those entities, and (4) the investments Defendants’ other clients made into those same entities.” (Id. at 4–5 (footnote omitted).)[1] The Foundation further argues that Defendants have improperly used “boilerplate” objections to deflect multiple discovery requests and that Defendants have failed to timely update document productions regarding the value of G-Form. (Id. at 13, 14.)
Defendants oppose the Foundation's motion. (Doc. 90.) The Foundation asserts that “[u]nlike many motions to compel, in which a small subset of discovery requests are the subject of the motion, this Motion relates to broad, conceptual categories of documents Defendants refuse to produce.” (Doc. 95 at 2.) The Foundation maintains that “[t]hese disagreements on the scope of discovery impact almost every response provided by Defendants and will remain a roadblock to completing discovery.” (Id.)
The parties’ opposing views regarding the scope of discovery are reflected in their descriptions of the nature of this case. The Foundation asserts that the case is about “Defendants’ construction of an improper investment portfolio, their choice to make investments outside of their authority to do so, and the conflicts of interest that drove those decisions.” (Doc. 84 at 4.) Defendants maintain that the case is about “one investment of $1 million made by Eideard on behalf of Plaintiff.” (Doc. 90 at 1.) The court heard argument on the motion on April 29, 2021.
Background
The court's October 15, 2020 Order on Defendants’ Motion for Partial Dismissal summarizes the allegations in the Amended Complaint. (See Doc. 76.) On June 22, 2012, the Foundation entered into an investment management agreement (the “IMA” or “Agreement”) with the Eideard Group, LLC (“Eideard”). (See Doc. 11-1.) The IMA stated that Eideard would use its resources and judgment to identity suitable investments for the Foundation's assets, including traditional investments and “alternative investments (private equity funds, hedge funds and real estate partnerships).” (Id. at 2.) The IMA gave Eideard “full investment discretion to implement, supervise, manage and monitor the Foundation portfolio.” (Id. at 4.) Notwithstanding that discretion, the IMA noted that Eideard's Code of Ethics “requires the prior approval of any question of securities in a limiting offering (e.g., private placement) or an initial public offering.” (Id. at 18.)
*2 The Foundation alleges that, on March 31, 2017, Eideard and two of its principals—Mr. Aubin and Mr. Roberts—“transferred $1 million of the Foundation's funds to G-Form, LLC (“G-Form”), a Rhode Island company on the verge of financial collapse in exchange for an equity interest in G-Form.” (Doc. 11 ¶ 1.) The Foundation further alleges that the G-Form investment “violated the self-dealing and excess business holdings penalty provisions applicable to tax-exempt private foundations under the Internal Revenue Code.” (Id. ¶ 2.)[2] According to the Foundation, those provisions of the Internal Revenue Code caused the Foundation to incur a $300,000 excise tax penalty as a result of the G-Form investment. (Doc. 11 ¶ 2.) The Foundation further alleges that after it discovered the G-Form investment, it learned that its investment advisors had invested Foundation funds in “other risky and illiquid investments” that are “inconsistent with the Foundation's purpose” and that violated the obligations that Eideard, Mr. Aubin, and Mr. Roberts owed to the Foundation under relevant law. (Id. ¶ 5.)
At the time of the Amended Complaint, the Foundation had concluded that it suffered a loss of its $1 million investment in G-Form and was “evaluating the remainder of the investment portfolio that the Investment Adviser Defendants created.” (Id. ¶ 68.) The Foundation stated that it had “already identified a number of additional investments that are inappropriate for a charitable foundation.” (Id.) The Foundation also alleged that it anticipated “additional losses—including opportunity cost—in connection with these investments.” (Id.)
Since the filing of the Amended Complaint, it appears that the parties have been able to agree on the identities of most or all of the relevant Alternative Investments that Eideard selected for investment on the Foundation's behalf. The Foundation would apparently be satisfied with discovery as to fourteen Alternative Investments. (See Doc. 84 at 6; see also Doc. 84-9.)[3] Mr. Roberts states in an affidavit that Eideard invested in approximately ten Alternative Investments on behalf of the Foundation. (Doc. 90-1 ¶ 5.) The Foundation has served discovery requests broadly seeking all documents related to Alternative Investments. (See Doc. 84-7.) The Foundation has supplied Defendants with a list of 27 suggested search terms “[i]n an effort to decrease the burden on the Defendants.” (Doc. 84 at 6; Doc. 84-9.) The suggested search terms appear to be the names or variations on the names of the Alternative Investments.
Analysis
I. Procedural Issues
A. Local Rule 26(c)(3)
In its motion, the Foundation refers to Local Rule 26(c)(3), which generally requires that a memorandum supporting a motion to compel include “a specific, verbatim listing of each discovery item sought or opposed, including the reason the item should be allowed or disallowed.” The Foundation asserts that compliance with Local Rule 26(c)(3) is impossible in this case “because of the sheer number of requests implicated by the Defendants’ positions.” (Doc. 84 at 5 n.3.) As noted above, the Foundation describes its motion as relating to “broad, conceptual categories of documents Defendants refuse to produce.” (Doc. 95 at 2.) Defendants do not argue that the Foundation's motion should be denied for failure to comply with Local Rule 26(c)(3), and the court concludes that the issues are sufficiently clear in this case that insistence on a catalogue of each pertinent discovery item would be fruitless. See Pietrangelo v. Alvas Corp., 664 F. Supp. 2d 420, 431 (D. Vt. 2009) (“Although the Court generally requires full compliance with its Local Rules, the Court may also excuse non-compliance where ‘strict application of the local rules would lead to an unjust result.’ ” (quoting Phoenix Glob. Ventures, LLC v. Phoenix Hotel Assocs., Ltd., 422 F.3d 72, 75 (2d Cir. 2005))).
B. Ripeness
*3 Second, the Foundation views part of Defendants’ opposition to the Motion to Compel as an argument that the motion is “premature or moot because Defendants intend to supplement some of their discovery responses.” (Doc. 95 at 1.) The Foundation insists that its motion deals primarily with items that are outside the scope of any promised supplementation and that the motion is ripe for decision. (Id. at 2.) The court understands from the parties’ filings and from their statements at the April 29, 2021 hearing that Defendants are continuing to produce documents but that there are categories of discovery that Defendants decline to produce. The court therefore concludes that there is a live, ripe discovery dispute.
II. Scope of Discovery: “Alternative Investments” and Other Investors
All parties recognize the general rule regarding the scope of discovery specified in Rule 26(b)(1):
Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.
Fed. R. Civ. P. 26(b)(1). “Discovery rules are to be accorded a broad and liberal treatment ... to effectuate their purpose that civil trials in the federal courts no longer need be carried on in the dark.” Jenkins v. Miller, No. 2:12-cv-184, 2021 WL 1115928, at *1 (D. Vt. Mar. 24, 2021) (alteration in original; quoting Ratliff v. Davis Polk & Wardwell, 354 F.3d 165, 170 (2d Cir. 2003)). At the same time:
A district court may limit the frequency or extent of use of the discovery methods otherwise permitted under the federal rules if it determines that (1) the discovery sought is unreasonably cumulative or duplicative, or more readily obtainable from another source; (2) the party seeking discovery already has had ample opportunity to obtain the information sought; or (3) the burden or expense of the proposed discovery outweighs its likely benefit.
Id. at *2 (cleaned up). “The party seeking discovery bears the initial burden of proving the discovery is relevant, and then the party withholding discovery on the grounds of burden [or] expense ... bears the burden of proving the discovery is in fact ... unduly burdensome and/or expensive.” Id. (alterations in original; quoting Citizens Union of City of N.Y. v. Att'y Gen. of N.Y., 269 F. Supp. 3d 124, 139 (S.D.N.Y. 2017)).
A. “Alternative Investments” in the Foundation's Portfolio
The Foundation asserts that it is entitled to discovery related to any investment in the Foundation's own portfolio. (Doc. 84 at 6.) Defendants contend that they have already produced “massive documentation” as to the Alternative Investments. (Doc. 90 at 3.) They maintain that, apart from G-Form, the Foundation has failed to articulate “any specific loss for any specific investment caused by any alleged mismanagement or wrongdoing of Defendants.” (Id.) In Defendants’ view, the Foundation has not identified any “Alternative Investment” that is “legitimately at issue,” and that electronic discovery of all such investments would be burdensome and expensive. (Id. at 5.) In its reply, the Foundation argues that Defendants’ production of some documents is not a basis to deny discovery of the remaining documents, and that Defendants’ claim of “undue burden” is unsupported. (Doc. 95 at 3–5.)
1. Relevance
*4 The court begins by considering whether the Foundation has met its initial burden of showing that the requested discovery is relevant. The Foundation argues that Defendants have conceded the relevance of the Alternative Investments. The Foundation also asserts that—because the Amended Complaint alleges that Defendants made a variety of improper investments using the Foundation's assets—the Foundation is entitled to discovery relating to any investment in the Foundation's portfolio. The court considers these arguments in turn.
a. Whether Defendants Have Conceded Relevance
The Foundation asserts that Defendants have conceded the relevance of the Alternative Investments by propounding discovery themselves about those investments. (Doc. 84 at 8.) Defendants respond that they filed their own discovery requests in order to either “(1) obtain clear information beyond Plaintiff's vague and conclusory allegations of ‘risky’ and ‘inappropriate’ investments or (2) confirm that no such information existed.” (Doc. 90 at 4.) Defendants state that the discovery they requested seeks “identification of specific claims of losses and detailed explanations of misconduct or other wrongdoing that caused such losses with respect to each of the alternative investments made by Eideard.” (Id.) In light of that explanation, the court cannot conclude that Defendants’ own discovery requests about the Alternative Investments amount to a concession that all materials relating to the Alternative Investments are relevant.
Similarly, the court rejects the Foundation's suggestion that Defendants conceded relevance by stating in its opposition to the Motion to Compel that “Defendants have produced massive documentation to date as to the alternative investments.” (Doc. 90 at 3.) The fact that Defendants have produced some documentation relating to the Alternative Investments might be construed as a concession that the documents already produced are relevant. But Defendants have explicitly asserted that the additional materials that the Foundation seeks are not relevant. (See, e.g., Doc. 84-7 at 19 (responding to request for production of “all Documents related to any Alternative Investments held by Eideard, either directly or indirectly” by objecting that, among other things, the request “seeks irrelevant information”).)
b. Specificity of Loss
Defendants maintain that apart from G-Form, the Foundation has failed to articulate “any specific loss for any specific investment caused by any alleged mismanagement or wrongdoing of Defendants.” (Doc. 90 at 3.) Defendants assert that, with the exception of the “Nanocomp” investment, all of the other Alternative Investments resulted in positive returns for the Foundation. (See Doc. 90-1 ¶ 6.) The Foundation disagrees, referring to its January 12, 2021 Response to Defendants’ Second Set of Interrogatories and Requests to Produce. (See Doc. 84-11, Doc. 95 at 4 n.4.)
In that response, the Foundation identified three examples of losses from Alternative Investments:
• $1,000,000 investment in G-Form, LLC – allegedly a total loss;
• $165,000 investment in Eideard Venture Capital I, LLC (Nanocomp Technologies, Inc.) – allegedly a total loss;
• $100,000 investment in Eideard Venture Capital II, LLC (Primary Bank) – no returns; valued at $99,189.
(See Doc. 84-11.) The Foundation also states that it “continues to evaluate and quantify damages based on the performance of each investment.” (Id. at 4.) The Foundation further claims that it has been harmed by the “opportunity cost associated with the funds that Defendants improperly invested.” (Id.) According to the Foundation, “[h]ad these funds been invested in traditional investments, Plaintiff would have benefitted from the returns associated with the market conditions.” (Id.)
*5 At the April 29, 2021 hearing, the Foundation also argued that the IMA prohibited Eideard from investing the Foundation's assets in any Alternative Investments that were private offerings without obtaining prior approval. The Foundation maintains that it can seek nominal damages for claims arising from such unauthorized investments even if the investments produced a positive return.
The court concludes that the Foundation has met its initial burden on the relevance of the Alternative Investments purchased on the Foundation's behalf. In addition to G-Form, the Foundation has alleged a specific loss with respect to Nanocomp and Primary Bank. Since the Foundation has been able to quantify losses as to those particular investments, it is not clear why the Foundation has not specified losses regarding any of the other Alternative Investments; as Defendants suggest, it may be because the other investments performed well. In any case, all of the identified Alternative Investments are relevant because—even if they produced positive returns—the Foundation's allegations indicate that the investments were unauthorized under the IMA. In those cases, nominal damages might be available.
The court accordingly concludes that the Foundation has met its initial burden of proving that the requested discovery is relevant. The court turns next to the remaining elements of the analysis. Defendants have the burden of proving each of the remaining elements.
2. Cumulative or Duplicative
Defendants argue that the discovery the Foundation seeks is unreasonably cumulative because “Defendants have already provided voluminous discovery on the alternative investments.” (Doc. 90 at 6.) The Foundation maintains that its possession of a “subset of relevant documents, selected by Defendants, is insufficient to deny discovery of the remaining documents Defendants retain in their possession.” (Doc. 95 at 3.)
The parties’ arguments on this point are presented at a high level of generality. The court can therefore reach only a general conclusion. The fact that Defendants have already produced voluminous discovery does not relieve them of the obligation to produce additional responsive documents. Royal Park Invs. SA/NV v. Deutsche Bank Nat'l Trust Co., No. 14-CV-04394 (AJN) (BCM), 2017 WL 7512815, at *10 (S.D.N.Y. Dec. 29, 2017). However, “[w]here a request is duplicative or cumulative of other discovery already provided, [Defendants] may refer [the Foundation] to the previously produced discovery, provided that such a referral is sufficiently specific to allow [the Foundation] to identify the actual responsive documents previously produced.” E.E.O.C. v. Wal-Mart Stores, Inc., No. 99-CV-453(S), 2001 WL 1725300, at *7 (W.D.N.Y. Sept. 28, 2001).
3. The Foundation's Opportunity to Obtain the Information
Defendants argue that “Plaintiff and its counsel have had more than ample opportunity to identify specific losses and acts of wrongdoing.” (Doc. 90 at 6.) For the reasons above, the court concludes that the Foundation has met its initial burden of showing specific loss.
4. Undue Burden Analysis
Finally, Defendants argue that conducting electronic searches related to the other Alternative Investments will result in “excessive burdens and costs.” (Doc. 90 at 6.) In support, Defendants refer to the March 2, 2021 affidavit of Mr. Roberts, which includes the following statement:
If the Defendants were required to proceed with electronic discovery as to each of the alternative investments, the task would be excessively burdensome and expensive, and indeed insurmountable. Eideard made investments on behalf of numerous clients to each of the same alternative investments as on behalf of HFF [the Foundation]. Any electronic search for any one of these alternative investments would necessarily implicate extensive files of every other Eideard client so invested. The records of Eideard's clients are confidential. It would be insurmountable to segregate out records only relating to HFF, and when all is said and done, the search would not produce any material information beyond the extensive files already produced by the Defendants.
*6 (Doc. 90-1 ¶ 11.) The Foundation maintains that Defendants have presented only “vague claims of undue burden” that are unsupported. (Doc. 95 at 5.) At the April 29, 2021 hearing, counsel for Defendants represented that running a search on the Foundation's 27 suggested search terms would produce between 110,000 and 180,000 additional documents.
Producing a large number of electronic documents is not necessarily unduly burdensome or expensive. See Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 318 (S.D.N.Y. 2003) (“Electronic evidence is frequently cheaper and easier to produce than paper evidence because it can be searched automatically, key words can be run for privilege checks, and the production can be made in electronic form obviating the need for mass photocopying.”). Instead, “whether production of documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format (a distinction that corresponds closely to the expense of production).” Id.
For the reasons discussed below, the court agrees with Defendants that the Foundation is not entitled to discovery of the Alternative Investments held by most other Eideard clients. Therefore, while the set of 110,000 to 180,000 documents might be reasonably accessible, it is unclear whether the same is true for the subset of those documents that relate only to the Foundation. Mr. Roberts states in his affidavit that it would be “insurmountable to segregate out records only relating to HFF.” (Doc. 90-1 ¶ 11.) But he does not explain why that is so. That is inadequate. See In re Application of Bloomfield Inv. Res. Corp., 315 F.R.D. 165, 168 (S.D.N.Y. 2016) (party with burden to show undue burden must supply “particularized evidence” such as “an affidavit of a person with knowledge of the record keeping system explaining in detail the basis of the objection”).
For instance, Defendants have not explained why the 27 suggested search terms could not be modified to also include a connection to the Foundation. Some of the Foundation's other suggested search terms appear to include Boolean operators (see Doc. 84-9 at 1), so presumably a search related to the Alternative Investments could be crafted more narrowly than simply searching for the names of the Alternative Investments themselves. Moreover, if manual review is the only way to segregate the Alternative Investment records relating to the Foundation, it might still be possible to conduct a manageable search limited to a particular time period, or by limiting the search to the Alternative Investments that resulted in the most significant losses: Nanocomp and Primary Bank.
Since the Foundation is not entitled to discovery of the Alternative Investments held by most other Eideard clients, the court will deny the Foundation's motion to compel insofar as that motion seeks to compel Defendants to simply produce the results of the Foundation's 27 proposed search terms related to the Alternative Investments. At the same time, since Defendants have not met their burden of proving undue burden, the court will grant the Foundation's motion to compel by requiring the parties to negotiate search terms or other search procedures that are specifically tailored to produce the Alternative Investment records relating to the Foundation.
B. “Alternative Investments” by Others
*7 In addition to requests for discovery concerning Alternative Investments in the Foundation's own portfolio, the Foundation seeks discovery relating to Alternative Investments held by the Related Entities, by Defendants’ other clients, and by Defendants themselves. Since the parties’ briefing does not include sufficient discussion about whether to compel production of materials concerning Alternative Investments by Defendants themselves, the court does not reach that issue here. See Brunette v. City of Burlington, Vt., No. 2:15-cv-00061, 2018 WL 4146598, at *37 (D. Vt. Aug. 30, 2018) (declining to address inadequately briefed issue). The court focuses on whether to compel production of documents concerning Alternative Investments by the Related Entities and by Defendants’ other clients.
1. Related Entities
As noted above, the Foundation defines “Related Entities” as entities that are “owned or majority-owned by the Hoehls, including BDP, LLC; R&A Venture Capital III, LLC; and Hoehl Family Partners, LLC.” (Doc. 84 at 1.) The Foundation asserts that “each Related Entity is a disqualified person in the excess business holdings analyses and understanding the investment each made into G-Form is central to proving the Plaintiff's claims relating to violations of the tax code, breach of fiduciary duty, consumer fraud and negligent misrepresentation.” (Id. at 10.) Relevant to the Alternative Investments, the Foundation contends: “The Complaint alleges that Defendants improperly invested both the Foundation and Related Entities in the same investments which constituted a conflict of interest on the part of the Defendants, created a tax penalty for the Foundation, and breached Defendants’ fiduciary duties.” (Id. at 9.)
Defendants assert that the Foundation's requests for discovery regarding the Related Entities should be denied because none of those entities are parties to this action and because Defendants’ production of documents regarding G-Form will include documents that pertain to or reference the Related Entities. (Doc. 90 at 8.) Defendants state that they “believe that their G-Form production will reasonably address Plaintiff's concern.” (Id. at 9.) In reply, the Foundation insists that it must “examine the common investments held by the Related Entities and the Foundation” in order to resolve the dispute over whether Defendants “improperly invested the Foundation and Related Entities in the same investments.” (Doc. 95 at 6.)
It appears that Defendants’ agreement to produce “everything G-Form” will include investments that the Related Entities made into that particular investment. But the Foundation also seeks discovery regarding the Related Entities’ investments in all other Alternative Investments. The court accordingly focuses on that issue.
At the April 29, 2021 hearing, Defendants stated that they have placed $320,000 in escrow with which they are prepared to indemnify the Foundation as to any tax penalty stemming from the Internal Revenue Code's self-dealing and excess business holdings provisions. Although counsel for the Foundation stated that Defendants had previously failed to make that indemnification offer without conditions, the court required the parties to confer and work out an escrow agreement and resolve that component of the case. The court therefore considers whether the Related Entities’ positions in the Alternative Investments might be relevant to any of the Foundation's other claims.
The Foundation offers no basis for finding that it was necessarily improper for Defendants to recommend the same investments for multiple different clients. The Related Entities’ positions in the Alternative Investments might have been improper under their respective investment agreements or the Internal Revenue Code, but the Related Entities are not pursuing claims arising out of any such impropriety in this case, and the Foundation cannot pursue such claims on the Related Entities’ behalf.
*8 The Foundation asserts that the requested discovery is relevant to show Defendants’ motive. According to the Foundation, “Defendants were motivated to invest the Foundation's money in risky alternative investments because other clients’ assets, including the Related Entities’ assets, were in jeopardy if the alternative investment failed.” (Doc. 95 at 6.) But Mr. Roberts has conceded in his affidavit that “Eideard made investments on behalf of numerous clients to each of the same alternative investments as on behalf of HFF.” (Doc. 90-1 ¶ 11.) The court concludes that this testimony is sufficient for the Foundation to establish its point about Defendants’ alleged motive; the requested discovery would be cumulative or duplicative on that issue.
At the April 29, 2021 hearing, the Foundation suggested that proof of Defendants’ failure to detect tax issues with the Related Entities’ positions in the Alternative Investments would be relevant to prove the Foundation's claim that Defendants were negligent in failing to detect the same issues as to the Foundation. The court concludes that Defendants’ alleged negligence in identifying tax issues can be explored sufficiently with discovery that focuses on Defendants’ work for the Foundation and with reference to an overview of Eideard's experience that Defendants have committed to produce (see Doc. 90 at 11). Negligence as to other clients is only marginally relevant to any alleged negligence as to the Foundation. Such marginal relevance suggests that the burden of discovery into the Related Entities’ positions in the Alternative Investments outweighs any likely benefit in this case.
2. Other Eideard Clients
The Foundation argues that the Amended Complaint and Defendants’ own claims and defenses show that investments made for other Eideard clients are relevant. (Doc. 84 at 10.) Defendants maintain that the Foundation's requests for discovery regarding other Eideard clients should be denied or are moot. (Doc. 90 at 11.) For reasons similar to those regarding the Related Entities, the court declines to compel the Foundation's requested discovery as to the other Eideard clients.
Similar to its claim regarding Related Entities, the Foundation contends that Defendants were motivated to invest the Foundation's money in G-Form because Mr. Roberts had already loaned or invested other clients’ assets in G-Form and all of those assets were at risk. (Doc. 84 at 11.) But as noted above, Mr. Roberts has conceded that Eideard made investments on behalf of numerous clients to each of the Alternative Investments. The court concludes that this testimony is sufficient for the Foundation to establish its point about Defendants’ alleged motive; the requested discovery would be cumulative or duplicative on that issue.
The Foundation also appears to assert that its requests regarding other Eideard clients are relevant to Eideard's experience in providing services similar to those provided to the Foundation. (See Doc. 90 at 11.) This is similar to the Foundation's argument that the Related Entities’ positions in the Alternative Investments would be relevant to prove the Foundation's claim that Defendants were negligent. The court rejects the Foundation's position on this point as to Eideard's other clients for the same reasons as stated above regarding the Related Entities. See supra.
The Foundation argues that Defendants have conceded the relevance of other Eideard clients “by claiming that the services Eideard provided to the Foundation were not ‘in commerce.’ ” (Doc. 84 at 11.) As discussed in the court's October 15, 2020 Order, Defendants sought dismissal of Count VII—the Foundation's claim under the Vermont Consumer Protection Act (“VCPA”)—on the grounds that the transactions comprising the alleged unfair and deceptive practices occurred only in private dealings, not “in commerce” as required by Foti Fuels, Inc. v. Kurrle Corp., 2013 VT 111, 195 Vt. 524, 90 A.3d 885. (See Doc. 76 at 31.) The court concluded that the Foundation had successfully stated a plausible claim that Eideard, Mr. Aubin, and Mr. Roberts were engaged “in commerce” under the VCPA. (Id. at 39.)
*9 On this point, Defendants state that “Eideard does not deny that, as a general matter, it provides services to clients in commerce.” (Doc. 90 at 12.) But Defendants maintain that “[t]he point Eideard raised concerning Plaintiff's VCPA claim was specifically with respect to the Hoehl family and the fact that the longstanding relationship that led to the IMA ... was already well-established.” (Id.) The court agrees with Defendants on this issue; Eideard's argument that the transactions at issue were not “in commerce” does not amount to a concession that all materials relating to other Eideard clients are relevant.
Finally, the Foundation contends that Eideard “directly placed certain clients within the scope of discoverable information by identifying in Defendants’ Initial Disclosures specific Eideard clients or client representatives, such as Jerry Tarrant, Richard E. Tarrant, Jr. and Richard E. Tarrant Sr., as possessing relevant information related to Eideard's investment reporting practices.” (Doc. 84 at 12.) Defendants agree that they have identified representatives of two Eideard clients “as potentially having discoverable information.” (Doc. 90 at 12.) But Defendants say that discoverable information is “on the narrow issues of Eideard's experience and investment reporting practices.” (Id.) The court agrees that the identifications in Defendants’ Initial Disclosures do not open the door to discovery of all materials relating to other Eideard clients.
III. “Boilerplate” Objections
As amended effective December 1, 2015, Fed. R. Civ. P. 34(b)(2)(C) states that an objection to a request to produce “must state whether any responsive materials are being withheld on the basis of that objection” and that “[a]n objection to part of a request must specify the part and permit inspection of the rest.” Fed. R. Civ. P. 34(b)(2)(C). The 2015 amendment was designed to “end the confusion that frequently arises when a producing party states several objections and still produces information, leaving the requesting party uncertain whether any relevant and responsive information has been withheld on the basis of the objections.” Fed. R. Civ. P. 34(b)(2)(C) advisory committee's note to 2015 amendment. “The producing party does not need to provide a detailed description or log of all documents withheld, but does need to alert other parties to the fact that documents have been withheld and thereby facilitate an informed discussion of the objection.” Id. “An objection that states the limits that have controlled the search for responsive and relevant materials qualifies as a statement that the materials have been ‘withheld.’ ” Id.
As amended, Rule 34(b)(2)(C) works together with amended Rule 34(b)(2)(B), which requires that objections to requests to produce must be stated “with specificity.” Fed. R. Civ. P. 34(b)(2)(B). The committee notes explain that “[t]he specificity of the objection ties to the new provision in Rule 34(b)(2)(C) directing that an objection must state whether any responsive materials are being withheld on the basis of that objection.” Fed. R. Civ. P. 34(b)(2)(B) advisory committee's note to 2015 amendment. Notably, the 2015 amendments to Rule 34 “affect[ ] the daily work of every litigator” and have caused at least one court to issue a “discovery wake-up call” to encourage counsel to update their practices. Fischer v. Forrest, No. 14 Civ. 1304 (PAE) (AJP), 2017 WL 773694, at *1 (S.D.N.Y. Feb. 28, 2017). This court has described “boilerplate” discovery responses as inadequate. See Goldberg v. Dufour, No. 2:17-cv-00061, at 6 (D. Vt. Apr. 24, 2020) (“ ‘Boilerplate’ objections to requests for production and interrogatories are generally deemed waived.”); Sullivan v. Saint-Gobain Performance Plastics Corp., No. 5:16-cv-125, at 10 n.3 (D. Vt. June 10, 2019), ECF No. 293 (citing cases).
*10 As discussed above, the court is excusing compliance with Local Rule 26(c)(3) in this instance. The court is therefore ruling at a high level of generality here and is not reviewing each discovery request or the objections that Defendants have interposed. However, the court is mindful of the Foundation's contention that almost 100 of Defendants’ responses to discovery requests include variations on the objection that the request is “vague, overly broad, unduly burdensome, and harassing; it seeks irrelevant information; it is not proportional to the needs of the case or reasonably calculated to lead to the discovery of admissible evidence.” (Doc. 84 at 13–14.) Defendants maintain that their objections are appropriate for each of the requests at issue. (Doc. 90 at 10.)
The court orders as follows. Within 30 days, Defendants must specify which documents or information (if any) are being withheld on the basis of any of the “boilerplate” objections. Any such objections not accordingly tied to specific documents or information will be deemed waived after that time.
IV. Supplementation Regarding Valuation of G-Form
At the April 29, 2021 hearing, counsel for the Foundation clarified that they specifically seek the December 2020 G-Form “Unit Purchase Agreement.” Counsel for Defendants agreed that they would produce that document. It appears that this issue is therefore moot.
Conclusion
Plaintiff's Motion to Compel (Doc. 84) is GRANTED IN PART and DENIED IN PART. The motion is denied insofar as it seeks to compel discovery of Alternative Investments held by Eideard clients other than the Foundation. The motion is also denied insofar as it seeks to compel Defendants to simply produce the results of the Foundation's 27 proposed search terms related to the Alternative Investments. However, since Defendants have not met their burden of proving undue burden, the court will grant the Foundation's motion to compel by requiring the parties to negotiate search terms or other search procedures that are specifically tailored to produce the Alternative Investment records relating to the Foundation.
The Motion is also granted insofar as it seeks an order deeming “boilerplate” objections to be waived. Within 30 days, Defendants must specify which documents or information (if any) are being withheld on the basis of any of the “boilerplate” objections. Any such objections not accordingly tied to specific documents or information will be deemed waived after that time.
Dated at Burlington, in the District of Vermont, this 27th day of May, 2021.
Footnotes
The Foundation describes “Alternative Investments” as “any investment that is not a traditional investment (e.g., publicly-traded stocks, bonds, cash), including without limitation, venture capital funds, private placements, private equity, hedge funds, and real estate partnerships.” (Doc. 84 at 4 n.2.) The Foundation defines “Related Entities” as entities that are “owned or majority-owned by the Hoehls, including BDP, LLC; R&A Venture Capital III, LLC; and Hoehl Family Partners, LLC.” (Id. at 1.)
Section 4941 of the Code imposes excise taxes for “self-dealing” between a disqualified person and a private foundation as defined in that section of the Code. I.R.C. § 4941. Section 4943 of the Code imposes excise taxes on the “excess business holdings” of any private foundation, generally defined as “the amount of stock or other interest in the enterprise which the foundation would have to dispose of to a person other than a disqualified person in order for the remaining holdings of the foundation in such enterprise to be permitted holdings.” I.R.C. § 4943(c).
The fourteen Alternative Investments appear to be: Saturn Partners, Knopp, American Made, YieldStreet, OhMD, Equus, Xpress, Nanocomp, Primary Bank, R&A Venture Capital, Eideard Venture Capital, Trilantic, TEP Access, and BPG. (Doc. 84-9.)