Williams v. Estates, LLC
Williams v. Estates, LLC
2020 WL 13077132 (M.D.N.C. 2020)
November 18, 2020
Webster, Joe L., United States Magistrate Judge
Summary
The Court granted Plaintiffs' motion to compel and ordered Defendants to produce all text and email communications between Craig Brooksby, Hailey Lindsey, or noreply@theestates.com and homeowners since January 1, 2016. The Court also ordered the Parties to submit a proposed protective order to the Court for approval. This ESI is important as it could provide evidence relevant to the case.
Additional Decisions
BRIAN C. WILLIAMS, et al., Plaintiffs,
v.
THE ESTATES, LLC, et al., Defendants
v.
THE ESTATES, LLC, et al., Defendants
1:19CV1076
United States District Court, M.D. North Carolina
Signed November 18, 2020
Counsel
Dhamian A. Blue, Blue LLP, Raleigh, NC, Jonathan T. Dickerson, James C. White, J.C. White Law Group, PLLC, Chapel Hill, NC, for Plaintiffs Brian C. Williams, Maricol Yunaira Tineo De Leon, Jairo Vensrique Leon Da Costa.Jonathan T. Dickerson, James C. White, J.C. White Law Group, PLLC, Chapel Hill, NC, for Plaintiff Mike Gustafson.
David J. Martin, David J. Martin PLLC, Apex, NC, John David Matheny, II, Moorseville, NC, Steven W. Shaw, Law Office of Steven W. Shaw, Mapletoon, UT, for Defendants The Estates LLC, The Estates (UT), LLC, The Estates Real Estate Group, LLC, Timbra of North Carolina, LLC, Versa Properties, LLC, Red Tree Holdings, LLC, Maldives, LLC, Tonya Newell, Carolyn Souther, Lynn Pinder, Craig Orson Brooksby, Avirta, LLC, King Family Enterprises, LLC.
Steven W. Shaw, Law Office of Steven W. Shaw, Mapletoon, UT, David J. Martin, David J. Martin PLLC, Apex, NC, for Defendant GG Irrevocable Trust.
Webster, Joe L., United States Magistrate Judge
ORDER
*1 This matter is before the Court upon Plaintiffs’ motion to compel discovery. (Docket Entry 76.) For the reasons stated herein, the Court grants Plaintiffs’ motion to compel and orders Defendants to respond to Plaintiffs’ discovery requests as set forth below.
I. BACKGROUND
The Estates, LLC, is a membership organization that, along with The Estates (UT), LLC, The Estates Real Estate Group, LLC, and Timbra of North Carolina, LLC, (collectively the “Estates Defendants”), maintains a database of properties in foreclosure in North Carolina and coordinates its members to place bids at foreclosure sales. (Docket Entry 1, Compl. ¶¶ 1, 9-12, 25.) Additional defendants in this case include Versa Properties, LLC, Red Tree Holdings, LLC, and Maldives, LLC (three North Carolina limited liability companies that used the Estates Defendants’ services to submit high bids at foreclosure sales), along with Tonya Newell and Carolyn Souther (individual members involved with The Estates), and Does 1-100 (other conspirators who Plaintiffs expect to uncover during discovery) (with the Estates Defendants, collectively “Defendants”). (Id. ¶¶ 13-20.) Brian C. Williams, Maricol Yunaira Tineo de Leon, and Jairo Vensrique Leon Da Costa (collectively “Plaintiffs”) are individuals who owned homes in North Carolina that were sold in foreclosure proceedings to members or entities using the Estates Defendants’ services. (Id. ¶ 2.)
Plaintiffs filed this antitrust action against Defendants on October 18, 2019. (See generally id.) In their Complaint, Plaintiffs allege that Defendants are liable for violations of the Sherman Act, 15 U.S.C. § 1, unfair and deceptive trade practices pursuant to N.C. Gen. Stat. § 75-1.1, and unjust enrichment under North Carolina common law. (Id. ¶ 4.) Specifically, Plaintiffs allege that by allowing only one member of the Estates to bid at a given foreclosure sale, the Defendants have engaged in unlawful bid rigging. (Id. ¶ 38.)
An initial pretrial conference hearing was held in this matter on May 20, 2020. (Minute Entry dated 5/20/2020.) At that time, the Court stayed discovery pending a ruling on Plaintiffs’ motion to for class certification. (Text Order dated 5/21/2020.) The Court subsequently denied Plaintiffs’ motion for class certification without prejudice to renewal after discovery. (Docket Entry 70.) In that same Order, the Court (1) lifted the stay of discovery, (2) allowed Plaintiffs to immediately serve written discovery on Defendants directed at class certification issues, and (3) ordered that the parties submit a revised Joint Rule 26(f) report covering discovery on class certification issues and on the merits. (Id. at 6.)
The parties thereafter submitted their Joint Rule 26(f) report (Docket Entry 72), which the Court approved without modification. (Docket Entry 73.) Pursuant to the Joint Report, the date for completion of all discovery will be seven months from the Court's Order in response to Plaintiffs’ renewed motion for class certification, which Plaintiffs filed on October 23, 2020. (Docket Entry 72 at 4; Docket Entry 86.) On September 9, 2020, Plaintiffs filed the instant motion to compel discovery. (Docket Entry 76.) On November 4, 2020, the Court ordered the Parties to meet and confer and inform the Court of the outstanding issues related to the motion. (Text Order dated 11/04/2020.) The Parties filed a notice the next day indicating that four primary issues remained. (Docket Entry 90.) The matter came before the Court for a video hearing on November 6, 2020. (Minute Entry dated 11/06/2020.) At the video hearing, the Parties made arguments concerning the discoverability of third-party financial information contained in the Estates database, and the Court instructed the Parties to submit supplemental briefing on this issue. (Id.) The Parties each filed supplemental briefing on November 13, 2020. (Docket Entries 93, 95.)
II. DISCUSSION
*2 Federal Rule 26 provides general rules regarding the scope of discovery:
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). District courts generally have broad discretion in managing discovery, including whether to grant or deny a motion to compel. Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 929 (4th Cir. 1995); Erdmann v. Preferred Research, Inc. of Georgia, 852 F.2d 788, 792 (4th Cir. 1988). “[T]he party or person resisting discovery, not the party moving to compel discovery, bears the burden of persuasion.” Carter Hughes v. Research Triangle Inst., No. 1:11CV546, 2014 WL 4384078, at *2 (M.D.N.C. Sept. 3, 2014) (unpublished) (citation omitted).
As mentioned above, the Parties identified four remaining issues of disagreement relating to Plaintiffs’ motion to compel, which the Court will address in turn.
A. Access to information contained in the Estates database
In their Second Requests for Production of Documents, Plaintiffs requested:
All records in the Estates Database, including any attached documents regarding any properties identified in Interrogatory No. 3 or Interrogatory No. 4.[1] Alternatively, Defendants can provide read-only access to the Estates Database which will enable Plaintiffs to access all data contained in that database.
(Docket Entry 77 at 7; Docket Entry 90 at 1.) At the hearing, Defendants stated that they have already produced approximately 8,000 documents, but that the tedious process of redacting the financial information of third-party members to protect their privacy interests has caused substantial delays. At the hearing and in their supplemental brief, Defendants assert that the content they would redact (bank account numbers and social security numbers) is irrelevant and that Plaintiffs are only seeking it to ascertain damages. (Id.) In their supplemental briefing on this issue, Defendants further argue that “[b]ank accounts and social security numbers are two of the most private and protected pieces of information that an individual can maintain,” and therefore the Court should weigh the relevance of this third-party information against the privacy interests at stake. (Docket Entry 95 at 1-2.) Defendants, however, cite no binding case law to support their position.
*3 Plaintiffs argue that the records contained in the Estates database are relevant to their motion for class certification and to their allegation that Defendants have engaged in a bid-rigging conspiracy. Specifically, Plaintiffs contend that the documents in the database will allow them to identify class members and understand how the Estates’ bidding transactions operate. As such, Plaintiffs contest the characterization of information contained in the database as belonging to third parties. Second, Plaintiffs argue that even if the financial information at issue is from third parties, their information is discoverable despite their privacy concerns because they willingly shared their financial information with the Estates. In other words, Plaintiffs argue, their information now belongs to the Estates, and the parties do not have a valid expectation of it remaining private. In their supplemental briefing, Plaintiffs cite to the Supreme Court's decision in United States v. Miller, which held that financial document subpoenaed from a third-party banks were not the defendant's “private papers,” but rather the “business records of the banks.” (Docket Entry 93 at 1, citing 425 U.S. 435, 440 (1975).) Plaintiffs point to several Fourth Circuit courts that have applied this principle from Miller in the context of a civil action. See, e.g., Robertson v. Cartinhour, No. CIV.A. AW-09-3436, 2010 WL 716221, at *1 (D. Md. Feb. 23, 2010) (unpublished) (“[A] person does not have a general right to or privilege in his banking records held by his bank.”).
The Court finds that the database information and documents Plaintiffs seek are discoverable because they are relevant to Plaintiffs’ motion for class certification and their bid-rigging claims. The burden of production Defendant complains of appears to be largely self-created. Concerns about confidentiality or privacy do not necessarily preclude the discovery of third party personal and financial information, provided that the information is relevant, nonprivileged, and proportional to the needs of the case. See Fed. R. Civ. P. 26(b); Edward v. Genuine Title, LLC, No. CV RDB-14-0081, 2015 WL 8915564, at *8 (D. Md. Dec. 15, 2015) (unpublished) (“In light of the fact that Plaintiffs’ discovery requests have included, and likely will include, the sensitive personal and financial information of absent class members and other third party borrowers ... this Court will enter a Confidentiality Order governing discovery in this matter.”). Absent an assertion of privilege, an expectation of privacy is “not a legitimate basis for shielding [information] from discovery.” Norman v. Beasley Mezzanine Holdings, No. 5:10-CV-211, 2011 WL 13371325, at *2 (E.D.N.C. June 21, 2011) (unpublished). Defendants have not suggested that the information Plaintiffs seek is privileged. (See generally Docket Entry 95.)
A protective order is an appropriate remedy for alleviating concerns about the privacy of confidential information. See Fed. R. Civ. P. 26(c); see also EEOC v. Sheffield Fin., LLC, No. 1:06CV00889, 2007 WL 1726560, at *6 (M.D.N.C. June 13, 2007) (unpublished) (“Federal courts have held that the privacy of any individual and the confidentiality of the files may be protected by an appropriate protective order.”) (internal quotations omitted). At the hearing and in writing, Plaintiffs indicated a willingness to enter into a protective order to ensure the confidentiality of subscriber data. (Docket Entry 90 at 2.)
Therefore, Plaintiffs’ motion to compel is granted as to Defendants’ database records. The Court acknowledges Defendants’ concerns about giving Plaintiffs administrative access to their database. As such, Defendants shall provide an unredacted, electronic copy of all information contained therein. The Court will also order the Parties to meet, confer, and submit a proposed protective order to address Defendants’ concerns about the confidentiality of any sensitive personal or financial information produced.
B. Other foreclosure documents not contained in the Estates database
Plaintiffs requested:
All documents related to the foreclosure sales identified in response to Interrogatory No. 3 or Interrogatory No. 4 that were not produced in Request No. 1.
(Docket Entry 77 at 7; Docket Entry 90 at 2.) Plaintiffs intended that this request serve as a catch-all to capture any documents in Defendants’ possession relating to relevant foreclosure sales maintained in a location other than the Estates database. Based on representations made at a prior conference, Plaintiffs had been under the impression that such documents existed. However, at the hearing, Defendants’ counsel asserted that because the Estates is a virtual company, she believed all information it possesses is contained on its database. Defendants did not object to this request on the grounds of relevance or proportionality.
*4 Therefore, Plaintiff's motion to compel is granted as this request, but only to the extent that Defendants actually possess responsive documents.
C. Communications between the Estates and its Members
Plaintiffs requested:
All communications between the Estates and any Members regarding bidding or foreclosure sales from January 1, 2016 through the present.
(Docket Entry 77 at 10; Docket Entry 90 at 2.) Prior to the hearing, Defendants agreed to produce emails from the address noreply@theestates.com but refused to produce communications from any of the Estates managers. (Docket Entry 90 at 3.) Defendants reiterated this position at the hearing, arguing that Plaintiff's request as written does not include communications by managers or agents of the Estates. Plaintiffs argued that informal communications by the Estates managers are important to understanding how the Estates coordinates bids, given that the Estates does not maintain written training materials or presentations about their services, which Plaintiffs believe was done intentionally. Second, Plaintiffs argued that communications by managers are within the scope of their request because limited liability companies (“LLCs”) act through their managers.
Defendants’ argument that communications by the Estates’ managers are not captured by Plaintiffs’ request is unpersuasive. First, in their first set of discovery requests Plaintiffs defined the “Estates” to include The Estates LLC, the other Estates Defendants and their “officers, directors, employees, agents, representatives ... and persons authorized to act, acting, or purporting to act on their behalf.” (See Docket Entry 6-1 at 2.) Assuming the same definition of the “Estates” applies here,[2] there can be no serious argument that communications by managers are outside the scope of this request. Second, it is axiomatic that LLCs, like any legal entity, act through authorized individuals, such as managers, officers, and employees. See, e.g., Carotrans Int'l, Inc. v. Carolina Recycle Partners, LLC, No. 3:18-CV-448, 2019 WL 3559438, at *2 (W.D.N.C. May 29, 2019) (unpublished), report and recommendation adopted, No. 3:18-CV-448, 2019 WL 3561432 (W.D.N.C. Aug. 5, 2019) (“Managers are agents of North Carolina Limited Liability Companies and may act on behalf of the LLC in the ordinary course of the LLC's business.”) (internal quotations omitted).
At the hearing, Defendants also explained that all individuals who engage in business with the Estates, including carpenters and painters, are given an @theestates.com email address. Therefore, Defendants argued that producing all emails from all @theestates.com emails would generate largely irrelevant communications. Plaintiffs had not been aware of this beforehand. However, the Parties had apparently agreed in the past that “the request encompassed all emails and texts sent by managers Craig Brooksby and Hailey Lindsay.” (Docket Entry 90 at 2.) Plaintiffs have clearly argued how these communications are relevant to understanding the Estates’ bidding protocols. Defendants have not contested the relevance of these manager communications, nor raised coherent arguments about the proportionality of producing this subset of communications. Therefore, the Court grants Plaintiff's motion to compel Craig Brooksby and Hailey Lindsay's text messages and emails and since January 1, 2016, in addition to emails to and from noreply@theestates.com during the same period.
D. Communications between the Estates or its Members and Homeowners
*5 Plaintiff's requested:
All communications between the Estates and any Members on the one hand and homeowners on the other regarding foreclosure sales or the purchase of property from January 1, 2016 to the present.
(Docket Entry 90 at 3.) At the hearing, Plaintiffs acknowledged that Defendants likely do not have communications between members and homeowners in their possession and are therefore seeking this information primarily through subpoenas. Therefore, Plaintiffs were amenable to limiting the request to all communications between the Estates management and homeowners. Defendants did not challenge the relevance or proportionality of the documents requested, but again raised the argument that without naming the managers specifically, the request as written does not capture their communications. Here, as above, the Court does not find Defendants’ argument persuasive. Therefore, Plaintiffs’ motion to compel is granted as to all texts and emails between Craig Brooksby, Hailey Lindsey, or noreply@theestates.com and homeowners since January 1, 2016.
III. CONCLUSION
For the reasons stated herein, IT IS HEREBY ORDERED that Plaintiffs’ motion to compel (Docket Entry 76) is GRANTED to the extent described above. Defendants shall supplement their responses as stated herein no later than thirty (30) days from the date of this Order.
IT IS FURTHER ORDERED that the Parties shall meet, confer, and submit a proposed protective order to the Court for approval no later than ten (10) days from the date of this Order.
Footnotes
Request No. 3 asks Defendants to identify members of the Estates who were the highest bidders at public foreclosure sales in North Carolina in the last four years. Request No. 4 seeks the same information but in relation to foreclosures outside of North Carolina. (Docket Entry 77 at 8.)
Plaintiffs appear to have inadvertently failed to file a copy of their Second Request for Production of Documents in support of their motion to compel, so the Court cannot confirm that the same definition applied to the foregoing requests for production. (See Docket Entry 77 at 7.) However, at the hearing, Plaintiffs’ counsel indicated that “the Estates” was a defined term.