KLLM Transp. Servs., LLC v. JBS Carriers, Inc.
KLLM Transp. Servs., LLC v. JBS Carriers, Inc.
2014 WL 12976124 (S.D. Miss. 2014)
March 19, 2014

Wingate, Henry T.,  United States District Judge

Protective Order
Failure to Produce
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Summary
The court ordered KLLM to produce a copy of its dedicated services contract with Tyson Foods, Inc. and a verified statement from an employee regarding the contract. KLLM objected to the request, citing confidentiality concerns, but the court dismissed the motion and upheld the Magistrate Judge's order. The parties agreed to a Protective Order to protect the confidentiality of the document, and the court found that this was sufficient to address any confidentiality concerns.
KLLM TRANSPORT SERVICES, LLC PLAINTIFF
v.
JBS CARRIERS, INC. DEFENDANT
CIVIL ACTION NO. 3:12-CV-116-HTW-LRA
United States District Court, S.D. Mississippi, Northern Division
Filed March 19, 2014

Counsel

Bradley C. Moody, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Cable Matthew Frost, Jon Stephen Kennedy, Wilson Elser Moskowitz Edelman & Dicker, LLP, Jackson, MS, for Plaintiff.
Benjamin Lyle Robinson, Taylor, Wellons, Politz & Duhe, LLC, Madison, MS, Brian G. Eberle, Pro Hac Vice, Sherman & Howard, LLC, Denver, CO, for Defendant.
Wingate, Henry T., United States District Judge

ORDER

*1 Before the court is plaintiff KLLM Transport Services, LLC's, Motion to Review Magistrate's Order [docket no. 102]. The motion is opposed by defendant JBS Carriers, Inc. Having reviewed the arguments presented by the parties, this court is determined to deny the motion and uphold the Magistrate Judge's order compelling discovery. Further, because this court already issued an opinion regarding the motion for partial summary judgment on July 26, 2013 [docket no. 137] the motion to file a surreply in support of the motion for partial summary judgment [docket no. 122] is dismissed as moot.
 
I. BACKGROUND
This lawsuit involves a breach of contract claim filed by plaintiff KLLM Transport Services, LLC (“KLLM”) against defendant JBS Carriers, Inc. (“JBS”). KLLM had a Transportation Agreement with Pilgrim's Pride Corporation (“PPC”). JBS, however, acquired PPC when the corporation filed for bankruptcy. JBS also hired two of KLLM's former employees, who had signed non-compete agreements before leaving KLLM.
 
These two events, understandably, caused friction between KLLM and JBS. In response, the two corporations entered into a Settlement Agreement on December 1, 2010. In that Settlement Agreement, JBS agreed not to solicit any of KLLM's employees or customers. Settlement Agreement ¶ 1-2. JBS also agreed that:
[t]he current contract between KLLM and Pilgrim's Pride shall be honored and continued for its stated duration and no early opt-out or termination of such contract will occur. KLLM will continue to provide services and pricing levels as stated in such contract.
Settlement Agreement, ¶ 5.
 
On December 11, 2011, PPC wrote a letter to KLLM informing it that “[p]ursuant to Article 4, Section 4.2 of the [Transportation] Agreement, this letter shall serve as PPC's thirty (30) days prior written notice of termination of the dedicated fleet services, effective January 15, 2012 (‘Termination Effective Date’).” PPC provided no reason for its termination. JBS has suggested that KLLM, having just entered into a new contract with Tyson Foods, Inc. (“Tyson”), allowed its quality standards to slip with regard to the PPC contract. Subsequently, KLLM filed this lawsuit against JBS for breach of contract.
 
The motion presently before the court, asking this court to overturn the Magistrate Judge's Order [docket no. 95] of February 26, 2013, arose due to difficulties the parties encountered during discovery. JBS compounded various interrogatories regarding KLLM's financial situation and contractual relationships. JBS was dissatisfied with the following responses:
INTERROGATORY NO. 7: Explain in detail each and every effort Plaintiff has made since December 13, 2011 to mitigate the damages it claims in this action.
RESPONSE: KLLM sold to Pilgrim's Pride ten of the trailers formerly used by KLLM to perform under Schedule A. In addition, KLLM solicited drivers, hired drivers, attempted to sell trucks and trailers, sold trucks and trailers, reallocated equipment and employees, terminated employees, and sought new and additional hauling contracts.
*2 INTERROGATORY NO. 8: Identify each and every business or person Plaintiff has contacted since December 13, [2011] to obtain work or provide services.
RESPONSE: KLLM objects to this Discovery Request because it is overly broad and unduly burdensome. KLLM further objects, as this Discovery Request seeks confidential, proprietary information about KLLM's operations. JBS Carriers is a competitor of KLLM, and as such, JBS Carriers would gain a competitive advantage by reviewing KLLM's confidential, proprietary information.
* * *
DOCUMENT REQUEST NO. 21: All federal income tax returns filed by Plaintiff from January 1, 2009 to the present.
RESPONSE: KLLM objects to this Discovery Request because it seeks confidential, proprietary information about KLLM's finances. KLLM further objects, as this Discovery Request is not reasonably calculated to lead to the discovery of admissible evidence.
DOCUMENT REQUEST NO. 22: All of Plaintiff['s] profit and loss statements, balance sheets, cash flow statements, transaction details and expense information, and any similar documents covering the periods from January 1, 2009 to the present.
RESPONSE: KLLM objects to this Discovery Request because it seeks confidential, proprietary information about KLLM's finances. KLLM further objects, as it is not reasonably calculated to lead to the discovery of admissible evidence.
* * *
DOCUMENT REQUEST NO. 26: All documents relating to or identifying each and every business or person Plaintiff has contacted since December 13, [2011] to obtain work or provide services.
RESPONSE: KLLM objects to this Discovery Request because it is overly broad and unduly burdensome. KLLM further objects, as this Discovery Request seeks confidential, proprietary information about KLLM's operations, disclosure of which would provide JBS a competitive advantage.
DOCUMENT REQUEST NO. 30: All written contracts or other agreements entered into between KLLM and any person or company other than Pilgrim's Pride from November 29, 2009 to the present pursuant to which KLLM provided dedicated hauling services.
RESPONSE: KLLM objects to this Discovery Request on the grounds that it seeks materials that are not relevant to this action and which contain confidential and/or proprietary information, which is not discoverable. Moreover, the requested documents are not relevant to any claim or defense asserted in this litigation.
Memorandum in Support of Motion to Compel, docket no. 36.
 
JBS filed a Motion to Compel [docket no. 35]. JBS argued that it required access to KLLM's business contracts, attempted business contacts, tax returns, and profit and loss statements in order to mount its two major defenses: (1) that KLLM's business relationship with Tyson, PPC's competitor, resulted in a decline in services to PPC, giving PPC cause to cancel the Transportation Agreement; and (2) that KLLM failed to mitigate its damages. KLLM filed its Response in Opposition to the Motion to Compel [docket no. 48], claiming that the information JBS seeks is confidential, overbroad, and irrelevant. After hearing oral arguments in this matter, the Magistrate Judge granted the Motion to Compel [docket no. 35] and ordered KLLM to produce the following under the “Highly Confidential” provisions of the Protective Order [docket no. 27]:
*3 2. Plaintiff shall produce to Defendant copies of Plaintiff's year-end profit and loss statements, balance sheets and cash flow statements for 2009 through 2012.
3. Plaintiff shall produce to Defendant a copy of Plaintiff's dedicated services contract with Tyson Foods, Inc. (“Tyson”) entered into in or about August 2011. In addition, Plaintiff's employee Brandon Woods shall respond to the question he was asked as to whether Tyson required Plaintiff to use a separate facility other than Mt. Pleasant for the services to be provided under the service contract with Tyson (Brandon Woods' deposition transcript, page 94, lines 17:20). Brandon Woods will respond to the subject question through a verified statement that will be made part of the errata sheet for Mr. Woods' deposition.
4. Plaintiff shall produce to Defendant copies of (a) Plaintiff's dedicated service contracts with Butterball, Frito-Lay, and Plaintiff's invoices to Butterball and Frito-Lay for the period between February 1, 2012 and November 30, 2012, and (b) any other contracts Plaintiff entered into for new dedicated service customers for which Plaintiff hauled goods between February 1, 2012 and November 30, 2012, and Plaintiff's invoices to those dedicated services customers during that period. Plaintiff shall also produce to Defendant copies of Plaintiff's invoices for other new customers for which KLLM hauled goods between February 1, 2012 and November 30, 2012, as well as copies of representative samples of any contracts between KLLM and three of those new customers (the latter issue represents a compromise reached by the parties following the conclusion of oral argument with the Court to address concerns over the volume of information subject to the Court's Order). Plaintiff shall be entitled to redact from any contracts and invoices it produces the names of its customers, subject to providing sufficient information to enable Defendant to determine which contracts and invoices relate to a particular customer. If the Plaintiff will incur significant costs in providing the redacted invoices and the parties cannot reach an agreement regarding the payment of the costs, the Court will consider ordering the Defendant to share in paying those costs.
Order Regarding Defendant's Motion to Compel, docket no. 95.
 
Thereafter, KLLM filed this Motion to Review Magistrate's Order [docket no. 102]. KLLM argues that the Magistrate Judge's order compelling discover on KLLM's contract with Tyson and KLLM's finances was contrary to law.
 
II. JURISDICTION
This court has jurisdiction pursuant to Title 28 U.S.C. § 1332[1], commonly referred to as diversity jurisdiction. To find diversity subject-matter jurisdiction, this court must be convinced that the plaintiff is completely diverse from the defendant, meaning that the plaintiff cannot hold the same state citizenship as that of the defendant. Elam v. Kan. City S. Ry. Co., 635 F.3d 796, 812 (5th Cir. 2011). In the case of a corporation, it holds citizenship in the state of its incorporation and state where it has its principal place of business. Title 28 U.S.C. § 1332(c)(1).[2]
 
*4 Where a federal court exercises subject-matter jurisdiction under Title 28 U.S.C. § 1332, the court, sitting in Mississippi, applies Mississippi law to the substantive issues in accordance with the Erie Doctrine. Erie v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under the Erie Doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law. Foradori v. Harris, 523 F.3d 477, 486 (5th Cir. 2008) (citing Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 426-427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996)).
 
This court is satisfied that KLLM is a Mississippi limited liability company. KLLM, therefore, is a Mississippi citizen. JBS is a Delaware corporation with its principal place of business in Colorado. JBS, therefore, is a citizen of Delaware and Colorado. Since the amount in controversy is met for § 1332 subject-matter jurisdiction—$75,000.00, exclusive of interest and costs—this court finds that it has diversity jurisdiction.
 
III. STANDARD OF REVIEW
Pursuant to Rule 72(a)[3] of the Federal Rules of Civil Procedure, Local Rule 72(a)(1)[4], and Title 28 U.S.C. § 636(b)(1)(A)[5], the district court must set aside or modify a Magistrate Judge's nondispositive order regarding a discovery dispute if it is found to be clearly erroneous or contrary to law. Alldread v. City of Grenada, 988 F.2d 1425, 1434 (5th Cir. 1993). This standard is highly deferential, and the court will not overturn the Magistrate Judge's order unless it is clear that a mistake has been committed. See Collett v. Socialist Peoples' Libyan Arab Jamahiriya, 448 F.Supp.2d 92, 95 (D.C.C. 2006).
 
IV. ANALYSIS
*5 KLLM objects to two rulings in the Magistrate Judge's Order [docket no. 95]. First, KLLM objects to releasing its contract with Tyson. Second, KLLM objects to releasing its financial information.
 
A. Tyson Contract
KLLM objects to the Magistrate Judge's order that KLLM produce its contract with Tyson. KLLM notes that its contract with Tyson requires confidentiality and “[t]he terms, conditions, and all other details ... shall not, without Shipper's (Tyson) prior written consent be disclosed by Carrier (KLLM), its employees or agents to a third person.” Motion for Review of Magistrate's Order at 4, docket no. 102 at 4. KLLM is concerned that being forced to disclose the contract might negatively impact its relationship with Tyson.
 
In this same vein, KLLM is a major competitor with JBS. Likewise, PPC is a major competitor with Tyson. KLLM argues that it has a legitimate business concern about releasing the contents of this contract to the signatories' major rivals.
 
Further, KLLM evinces some concern over the security this court could provide to protect the confidentiality of the Tyson contract. KLLM points to the case of Bradley v. Cooper Tire & Rubber Co., 2008 WL 5156616 (S.D. Miss. Dec. 5, 2008), in which unauthorized persons gained access to confidential material that should have been sealed under a protective order.
 
In response, JBS notes that pre-trial discovery is intended to be broad. Rule 26(b)(1) of the Federal Rules of Civil Procedure permits parties to “obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense .... Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” JBS claims that it is seeking the Tyson contract in order to demonstrate that KLLM was dedicating more resources to Tyson and less to PPC, giving PPC cause to terminate the Transportation Agreement. JBS also claims that it is seeking the Tyson contract because it may provide evidence that KLLM does not have unlimited resources and does not qualify as a lost-volume seller.
 
A lost-volume seller is a seller of goods or services who, after the buyer breaches the contract, can resell the good or service to another buyer “who would have bought identical goods from the seller's inventory even if the original buyer had not breached.” BLACK'S LAW DICTIONARY (9th ed. 2009). The lost-volume seller, had it not been for the breach of contract, could have made two sales, and, therefore, is entitled to lost profits. Id.
 
To the extent that KLLM is concerned about confidentiality, JBS argues that the Protective Order [docket no. 27], to which the parties agreed, provides ample protection through the classification of the document as “Highly Confidential.” JBS also notes that it has hired outside counsel to handle this case, so JBS and PPC insiders will not be reviewing the evidence directly.
 
*6 In support of its argument, JBS points to Channel Control Merchants, LLC v. Davis, 2012 WL 1365743 (S.D. Miss. Apr. 19, 2012), in which the court compelled discovery of “confidential and sensitive” documents because they were pertinent and because the protective order that the parties had agreed to would address any concerns about confidentiality.
 
JBS also distinguishes the Bradley case. In Bradley, notes JBS, unauthorized parties gained access to the confidential documents because the party had not followed the proper procedure to seal the document as required by the protective order. Bradley, 2008 WL 5156616 at *2. So long as KLLM files the contract pursuant to the “Highly Confidential” procedures in the Protective Order [docket no. 27], says JBS, KLLM need not fear that third parties will gain access to the Tyson contract.
 
Further, argues JBS, KLLM cannot claim that the alleged confidentiality clause in the Tyson contract shields it from discovery. Courts have frequently required parties to produce documents that are confidential or sensitive. See,e.g., Channel Control Merchants, 2012 WL 1365743; see, e.g., Cut-Heal Animal Care Prods., Inc. v. AgriSales Assocs., Inc., 2009 WL 2145575 (W.D. Tex. July 14, 2009). JBS argues that if the confidentiality clause had preclusive effect, then courts would never be able to compel production of confidential business records.
 
This court agrees with JBS and the Magistrate Judge. The Tyson contract is likely to lead to admissible and relevant evidence. Further, the Protective Order is sufficient to protect the confidentiality of this document.
 
B. Financial Information
KLLM also objects to being required to produce its year-end profit and loss statements, balance sheets, and cash flow statements for 2009 through 2012. KLLM argues that it is seeking damages for the breach of a single, discreet contract, and JBS's request, which seeks three years of financial information, is overbroad. KLLM also argues that it is a lost-volume seller, meaning that it was capable of making other sales in addition to the one breached. Bill's Coal Co. v. Bd. of Pub. Utils., 887 F.2d 242, 245 (10th Cir.1989). As such, KLLM says JBS's mitigation theory does not apply, and JBS does not need such sweeping discovery. Furthermore, KLLM again states that the financial information is confidential and that it might be seen by unauthorized persons.
 
In response, JBS states that it needs KLLM's financial information in order to develop its own defense to KLLM's claims of lost profits. KLLM's complaint alleges lost profit damages that resulted when its trucking fleet remained idle after the alleged breach of contract. Damages for lost profits must be established with reasonable certainty. Se. Med. Supply, Inc. v. Boyles, Moak & Brickell, 822 So.2d 323, 328 (Miss.Ct.App. 2002). If KLLM intends to pursue damages for lost profits, then JBS contends that it should be allowed to review KLLM's year-end profit and loss statements, balance sheets, and cash flow statements.
 
Further, JBS asserts that KLLM's lost-volume seller theory does not insulate it from discovery on KLLM's financial situation. Even if KLLM is a lost-volume seller, KLLM would only be relieved of a duty to mitigate damages. JBS, however, is still entitled to evidence of what the lost profit damages are. JBS also asserts that it is challenging KLLM's claimed status as a lost-volume seller. Therefore, JBS says it is entitled to conduct discovery to challenge KLLM's claimed status, as well as to support its argument that KLLM had a duty to mitigate.
 
*7 Again, this court agrees with JBS and the Magistrate Judge. JBS's discovery requests are calculated to uncover admissible evidence and the Protective Order is in place to address any of KLLM's confidentiality concerns.
 
V. CONCLUSION
For the foregoing reasons, this court dismisses KLLM's Motion to Review Magistrate's Order [docket no. 102]. This court is satisfied that the Magistrate's Judge's order is not clearly erroneous nor contrary to law. JBS's requests are calculated to discover admissible evidence and the Protective Order is sufficient to address any confidentiality concerns. KLLM shall release the requested documents in compliance with the Magistrate Judge's order. Furthermore, the motion to file a surreply [docket no. 122] is dismissed as moot.
 
SO ORDERED, this the 19th day of March, 2014

Footnotes
Title 28 U.S.C. § 1332(a)(1) states: “The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... citizens of different States”
Title 28 U.S.C. § 1332(c)(1) states in its pertinent part: “[A] corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business ....”
Rule 72(a) of the Federal Rules of Civil Procedure states:
Nondispositive Matters. When a pretrial matter not dispositive of a party's claim or defense is referred to a magistrate judge to hear and decide, the magistrate judge must promptly conduct the required proceedings and, when appropriate, issue a written order stating the decision. 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.
Rule 72(a)(1) of the Local Uniform Civil Rules of the United States District Courts for the Northern and Southern Districts of Mississippi states:
A party aggrieved by a magistrate judge's ruling may appeal the ruling to the assigned district judge. The appeal is perfected by serving and filing objections to the ruling within fourteen days after being served with a copy of the ruling, specifying the grounds of error. Objections must be filed and served upon the other party or parties and will be promptly transmitted to the assigned district judge and to the magistrate judge. The opposing party or parties must either file a response to the objection or notify the district judge that they do not intend to respond within fourteen days of service of the objections.
Title 28 U.S.C. § 636(b)(1)(A) states in its pertinent part: “.... A judge of the court may reconsider any pretrial matter ... where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law.”