Sabre Indus., Inc. v. Waller
Sabre Indus., Inc. v. Waller
2020 WL 12814252 (C.D. Ill. 2020)
July 15, 2020
Long, Eric I., United States Magistrate Judge
Summary
The court considered the admissibility of ESI related to Sabre's damages claim, including financial information. The court also considered the tolling period of the non-compete clause and the admissibility of the corporate defendant's wealth. Waller acknowledged that Sabre had disclosed all requested information.
Additional Decisions
SABRE INDUSTRIES, INC., Plaintiff,
v.
TRAVIS WALLER and ACCURATE PROBUILD SOLUTIONS, LLC, Defendants.
TRAVIS WALLER, Counter-Plaintiff,
v.
SABRE INDUSTRIES, INC., Counter-Defendant
v.
TRAVIS WALLER and ACCURATE PROBUILD SOLUTIONS, LLC, Defendants.
TRAVIS WALLER, Counter-Plaintiff,
v.
SABRE INDUSTRIES, INC., Counter-Defendant
Case No. 18-2111
United States District Court, C.D. Illinois
Signed July 15, 2020
Counsel
Kenneth M. Wentz, III, Jackson Lewis PC, Omaha, NE, Julia Pearce Argentieri, Jackson Lewis PC, Chicago, IL, for Plaintiff/Counter-Defendant.Randall B. Gold, Fox & Fox SC, Monona, WI, for Defendants/Counter-Plaintiff.
Long, Eric I., United States Magistrate Judge
ORDER
*1 This matter is before the Court on cross-motions to compel filed by Plaintiff/Counter-Defendant, Sabre Industries, Inc. (“Sabre”) and Defendant/Counter-Plaintiff, Travis Waller (“Waller”). Both parties filed responses in opposition. For the reasons provided below, Sabre's Motion to Compel Discovery from Defendants Travis Waller and Accurate Probound Solutions, LLC (#26) is GRANTED in part and DENIED in part; and Waller's Motion to Compel Discovery Responses (#29) is DENIED.
I. Background
Sabre's Complaint alleges that Waller breached his fiduciary and contractual duties to Sabre by forming a competing business, Accurate Probound Solutions, LLC (“APS”), while still employed by Sabre. Sabre further alleges Waller violated their contractual non-compete agreement that barred Waller from competing with Sabre's business within a 50-mile radius for a 12-month period following the end of Waller's employment with Sabre. See Amended Complaint, Exhibit, ¶ 9(a). Sabre alleges that Waller emailed himself Sabre's customer list prior to leaving his employment with Sabre (before he helped found APS) and that Waller sought business with former Sabre customers in violation of the non-compete. Waller filed a Counterclaim against Sabre alleging Sabre failed to pay him the target bonus to which he was entitled during his employment.
Sabre's Motion to Compel seeks two categories of information: (1) a full list of APS's customers including a complete set of APS's customer invoices, and (2) APS's complete financial statements, tax return documents, credit card receipts and statements, bank statements, and loan documents. Waller objects to the disclosure of all these documents.
Waller's Motion seeks to compel Sabre to produce evidence of who, when, why, and how much other formerly similarly situated MUTI employees were paid in bonuses. Sabre argues these documents are irrelevant to Waller's Counterclaim.
II. Legal Standard
Federal Rule of Civil Procedure 26(b)(1) provides that the
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).
Pursuant to Rule 34(b)(2)(A), “[t]he party to whom the request is directed must respond in writing within 30 days after being served.” Under Rule 37(a), “[o]n notice to other parties and all affected persons, a party may move for an order compelling disclosure or discovery.” The district court exercises significant discretion in ruling on a motion to compel. Gile v. United Airlines, 95 F.3d 492, 495-496 (7th Cir. 1996). It may grant or deny the motion in whole or in part. Id. In exercising its discretion, the district court may deny discovery to protect a party from undue burden. Uppal v. Rosalind Franklin University of Medicine and Science, 124 F.Supp.3d 811, 813 (N.D. Ill. 2015).
III. Analysis
a. Sabre's Motion to Compel
i. Customer List
*2 First, Sabre seeks a full list of APS's customers and a complete set of APS's customer invoices. Sabre further requests that the Court compel Defendants to supplement their production of invoices for the two APS clients identified as former Sabre customers, Parallel Infrastructure and Central States Tower.[1]
Sabre argues that the full customer list is relevant under Fed. R. Civ. P. 26(b)(1) as it relates to Sabre's claims for breach of contract, specifically breach of the non-compete covenant. The parties' non-compete covenant provides in relevant part:
Employee agrees that during the Employee's employment, and for a period of twelve (12) months following the end of the Employee's employment with Sabre for any reason (“Non-Compete Period”) the Employee agrees that he or she shall not directly or indirectly, : (i) own, manage, operate, participate in, consult with, be employed by, or work for any business which manufactures, designs, or sells products or services competitive with Sabre, including but not limited to Sabre Industries, within 50 miles of any location where Employee provided services or supervised the providing of services provided that, with respect to such businesses, if Employee's activities and responsibilities are unrelated to the activities and responsibilities that Employee performed for Sabre, and Employee provides reasonable proof to Sabre to that effect, then this Paragraph 8(a) does not apply; and (ii) sell or offer for sale any competing products or services with those offered or under active development by Sabre to any customers, clients or accounts of Sabre or its affiliates with which Employee had any contact or association, or about which Employee obtained Confidential Information, during the last twelve (12) months of employment.
See Amended Complaint, Exhibit 1, ¶ 9(a).
Sabre argues that it should be permitted to compare APS's entire customer list to determine if the list includes any additional Sabre customers other than the two already identified. Waller first maintains that Sabre's motion is untimely because Sabre has already submitted its expert damage report that quantifies its damages claim. Additionally, Waller argues that the customer list is irrelevant to Sabre's claim for damages. Waller cites to deposition testimony of Sabre's current and former executives who identify Central States Tower and Parallel Industries as the only Sabre customers now with APS. At the same time, Waller acknowledges one additional Sabre customer for which APS has done business, Metro Net Technologies.
Waller's objection based on untimeliness is unfounded. Sabre sought disclosure of the customer list before disclosing Sabre's own expert's damage report. Waller cannot now argue Sabre's request is untimely when Waller's own refusal to disclose the list is what caused the delay.
Furthermore, while Sabre and Waller have only identified two or possibly three Sabre customers, Sabre should have the opportunity to identify any other former Sabre customer served by APS. The only way for Sabre to identify any other former customers is to compare a list of APS customers to Sabre's customer list. For this reason, APS's customer list is relevant to Sabre's claim for breach of contract under Fed. R. Civ. P. 26(b)(1).
*3 At the same time, the Court is sympathetic to the confidential nature of APS's customer list. Defendants raise the concern that Sabre might seek to contact, subpoena, or otherwise potentially interfere with APS's relationship with its customers.
In order to both preserve the confidentiality of APS's customer list and to allow Sabre reasonable discovery to identify any overlapping clients, the Court compels APS to disclose its customer list to Sabre's counsel within 7 days of this order and that the document be restricted to attorneys' eye only. Sabre's counsel can then compare APS's customer list with Sabre's customer list and identify any matching customers. All remaining customers of APS's list will remain confidential and will not be identified to Sabre.
Second, Sabre seeks disclosure of the customer invoices. The invoices are relevant to Sabre's claim for damages because the invoice totals will allow Sabre to calculate its lost business. However, only the invoices of former Sabre customers are relevant. Therefore, after Sabre's attorneys create a list of overlapping customers, Sabre may request all customer invoices from the identified Sabre customers. Defendants must produce these select invoices within 14 days of receiving the document request.
Along the same lines, Defendants must supplement their disclosures for the two customers already identified: Central States Tower and Parallel Industries. Sabre maintains that under their employment contract, once an employee violates the contract, the provisions continue until a period of twelve months have expired without a violation.[2] Under Sabre's position, all Central States Tower and Parallel Industries' invoices are relevant to the damages calculation. If Sabre can establish a violation of the non-compete contract as to Central States Tower and Parallel Industries and show that the twelve-month tolling provision applies to non-compete violations, then the ongoing customer invoices will be relevant to Sabre's claim for damages. The Court directs Defendants to supplement their disclosure as to Central State Tower and Parallel Industries within 14 days and to continue to supplement until the case is resolved.
ii. Financial Documents
Sabre seeks APS's complete financial statements, tax return documents, credit card receipts and statements, bank statements, and loan documents. Sabre argues these records are relevant to its claim for punitive damages under the Illinois Trade Secrets Act.
Under the Illinois Trade Secrets Act, “if willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subsection (a).” 765 ILCS 1065/4. Waller agrees that punitive damages are available under the Illinois Trade Secrets Act, but argues that a corporate defendant's financial condition is generally not relevant. Waller further argues that Sabre's request for three years of financial records is excessive and not proportionate to the case.
*4 Even the cases cited by Waller acknowledge that the financial status of the defendant is a relevant consideration in calculating punitive damages in Illinois. Deal v. Byford, 537 N.E.2d 267, 272 (Ill. 1989) (“Evidence regarding the financial status of a defendant is simply one relevant consideration to be weighed by the judge or jury in determining an appropriate award of punitive damages.”); see also Leyshon v. Diehl Controls North America, Inc., 946 N.E.2d 864, 878-79 (Ill. App. 1st Dist. 2010) (where the plaintiff presented evidence of the corporate defendant's financial information in seeking punitive damages).[3] While the Court makes no ruling at this stage whether Plaintiff will be permitted to introduce evidence of Defendants' financial status at trial, the information is discoverable.
Sabre seeks credit card receipts (or in the alternative credit card statements), financial statements, tax return documents, bank statements, and loan documents for a three-year period. This request is excessive. In Illinois cases, the plaintiffs generally sought the defendant's financial statements. Leyshon, 946 N.E.2d at 879; Central Bank – Granite City v. Ziaee, 544 N.E.2d 1121, 1127 (Ill. 5th Dist. 1989); Pickering v. Owens-Corning Fiberglas Corp., 638 N.E.2d 1127, 1139 (Ill. 5th Dist. 1994). However, the request for credit card receipts, tax return documents, bank statements, and loan documents as they relate to punitive damages is too much. Additionally, only APS's current net worth is relevant to Sabre's claim for punitive damages. Therefore, the Court compels Defendants to produce APS's financial statements from June 2019 through June 2020. If the case proceeds to trial, Defendants will be required to supplement this disclosure to show their current net worth at the time of trial.[4]
Sabre further argues the bank records, including loan documents, are relevant to identify whether Waller breached his fiduciary duties while still employed at Sabre Industries. Sabre believes Waller was paying himself from APS while still employed with Sabre. A review of APS's bank records is the most efficient way to determine whether Waller started the process of founding APS while still employed with Sabre. Accordingly, the Court compels Defendants to disclose APS's bank records, including statements and loan documents dated March 2017 through September 2017 (APT was registered as a business on May 15, 2017, and Waller left Sabre on August 4, 2017).
As detailed above, Sabre's Motion to Compel is granted in part and denied in part.
b. Waller's Motion to Compel
Waller's Motion seeks to compel Sabre to produce evidence of who, when, why, and how much other formerly similarly situated MUTI employees were paid in bonuses.[5] Waller argues this evidence is related to his Counterclaim that Sabre failed to pay Waller contractually mandated work bonuses.
*5 Paragraph 6 of the employment contract provides that an “[e]mployee shall be eligible for a 30% target bonus under MUTI's[6] historical incentive plans for at least the near future. Given the attainment of pre-established goals set by the President - Sabre Services Group, this bonus will be paid in cash in the year following the applicable performance period.” See Amended Complaint, Exhibit, ¶ 6.
Waller alleges Sabre failed to pay him the 30% target bonus for the years 2013-2017. According to Waller, whether other MUTI employees received their bonuses is relevant to evaluating whether Waller was unfairly denied his bonus. Sabre argues that only the contract between Waller and Sabre is relevant to Waller's contractual claim.
The contract language provided Sabre would pay the bonus if Waller attained pre-established goals. The plain language of the contract indicates that Waller's performance alone would determine his bonus. The contract clearly provides that Waller had to meet a pre-established goal to earn that bonus. In other words, the performance of other employees had no bearing on the bonus Waller received.
Even if other employees who were situated similarly to Waller received a bonus when he did not, the plain language of the contract allowed for Sabre to deny Waller a bonus as long as he did not meet the pre-established goals. Similarly, Waller can demonstrate the breach he claims by proving he in fact met those pre-established goals. So, even without considering the privacy interest of these non-party employees, the information Waller seeks is irrelevant. Instead, only Waller's own performance is relevant to his Counterclaim. Waller's Motion to Compel (#29) is denied.
IV. Conclusion
In conclusion, Sabre's Motion to Compel (#26) is granted in part and denied in part, and Waller's Motion to Compel (#29) is denied.
1. Within 7 days of this order, Defendants' shall provide APS's complete customer list to Sabre's counsel. The customer list shall be restricted to attorneys' eyes only. Within 14 days of receiving the customer list, Sabre shall provide a list of all overlapping customers, if any, to Defendants. Defendants must produce the invoices for these customers within 14 days of receiving the list of overlapping customers.
2. Defendants must supplement their disclosures for Central States Tower and Parallel Industries within 14 days of this order.
3. Defendants must produce APS's financial statements from June 2019 through June 2020 within 14 days of this order.
4. Defendants must disclose APS's bank records, including statements and loan documents dated March 2017 through September 2017 within 14 days of this order.
Footnotes
The parties agree that APS was working with at least two of Sabre's former clients: Parallel Infrastructure and Central States Tower. Defendants previously disclosed information about these two customers, and Sabre asks the Court to compel ongoing supplemental disclosure relating to these two customers.
Paragraph 16 of the contract reads: “if the Employee breaches Paragraph 8, the Employee shall be bound by the restrictions in paragraph 8, above, until a period of twelve (12) months have expired without a violation of such restrictions.” Paragraph 8 refers to severance pay, while paragraph 9 contains the non-compete clause. While it is not clear at this stage whether the contract included a 12-month tolling period under the non-compete clause, the ongoing invoices remain relevant to Sabre's claim that the relevant period does not end until Waller goes 12 months without a violation of the employee contract.
The question of admissibility of a corporate defendant's wealth is more complicated within the Seventh Circuit. See Donald v. Wexford Health Sources, Inc., 266 F.Supp.3d 1097 (C.D. Ill. 2017) (citing Zazu Designs v. L'Oreal, S.A., 979 F.2d 499 (7th Cir. 1992))(concluding that the Seventh Circuit's notation that a defendant's financial condition is irrelevant for the purposes of calculating punitive damages was dicta in Zazu Designs).
If there is any indication that Defendants have intentionally dissipated assets, this request might be subject to reconsideration.
Waller's Motion also contains an argument relating to Plaintiff's disclosure of financial information relating to Sabre's damages claim. While Waller complains about the delayed disclosure, he acknowledges that Sabre has disclosed all requested information.
MUTI stands for Midwest Underground Technology Inc., a subsidiary company of Sabre.