*1 THIS CAUSE is before the Court upon the following: (1) Defendant/Counterclaim Plaintiff Steven F. Urvan's Motion to Overrule Objections and Compel the Production of Documents and Better Answers to Request for Production & Interrogatories (“Motion”) [DE 72]; (2) Third-Party Defendant Brew First, Inc.’s Response in Opposition [DE 74]; and (3) Defendant/Counterclaim Plaintiff Steven F. Urvan and Third-Party Defendant Brew First, Inc.’s (“the parties”) Joint Notice [DE 75], filed pursuant to the Court's July 13, 2022 Paperless Order [DE 73]. The Court held a hearing on the Motion via Zoom video teleconference (VTC), on July 22, 2022.

Defendant/Counterclaim Plaintiff Steven F. Urvan (“Urvan”) filed an Amended Counterclaim and Amended Third-Party Complaint on April 28, 2022. [DE 51]. In the Third-Party Complaint, Urvan alleges that around February 2018, Plaintiff Hayden introduced him to Third-Party Defendant Brew First, Inc (“Brew First”) “a start-up company supposedly aiming to reinvigorate the hospitality and restaurant experience through use of a state-of-the-art tap system that allows customers to produce their own craft beverages.” [DE 51 at 3].

Urvan alleges that Plaintiff Hayden held himself out as an owner/agent of Brew First and that Plaintiff was a controlling shareholder. Id. at 3–4. In that capacity, Urvan contends that Plaintiff Hayden (and therefore also Brew First) represented to him (and others) that Brew First needed $50,000 in investment proceeds to become profitable. Id. at 4. In reliance on the “misrepresentations and omissions as to Brew First's true financial condition,” Urvan states that in May 2018, he invested “$64,000 in Brew First through 50x50 Investments, LLC.” Id. However, according to Urvan, his “investment did not get Brew First to profitability” and was instead an attempt “to keep Brew First from collapsing, [as it] had an urgent need for cash.” Id. at 4–5.

Urvan further contends that in August 2020, Brew First was insolvent, leading Plaintiff Hayden to seek Urvan's advice “on what could be done to save Brew First from failure.” Id. at 5. In this regard, Urvan states that Plaintiff Hayden “wanted Urvan to take on an active role in Brew First, including serving as chairman of the board and providing ‘adult supervision’ to ensur[e] good decisions.’ ” Id. (alteration in original). Accordingly, Urvan “offered to provide management consulting, sales strategy, introductions, and assistance in hiring a team leader to build sales in return for warrants representing a controlling interest in Brew First,” to which Plaintiff Hayden purportedly agreed. Id. Indeed, Urvan contends that Plaintiff Hayden “induced [him] to provide consulting and strategic advisory services for the benefit of Brew First and Hayden's investment in Brew First.” Id. at 6.

Thereafter, according to Urvan, around September 2020, Plaintiff Hayden was “soliciting and advising others to invest in Brew First, and was seeking to raise capital for Brew First through crowdfunding.” Id. At this time, Urvan states that Plaintiff Hayden “pressured Urvan and his business partner, Kevin O'Connell ... to invest capital in Brew First, soliciting a $500,000 investment [and] asserting that ‘[f]rom a capital perspective we are out of time.’ ” Id. (alteration in original). Urvan alleges that “[b]y November 17, 2020, Hayden was so desperate to save Brew First that he advised Urvan, ‘We have no cash ... If we can't raise cash we will have no business. Please help us out.’ ” Id. at 7 (alteration in original). Moreover, Urvan alleges that in March 2021, when “Brew First [then] experienced supply chain challenges from a lack of working capital, Hayden again solicited an investment from Urvan of ‘at least’ $500,000 in Brew First.” Id. However, Urvan declined to make another investment at that point. Id. at 8.

*2 Because Urvan alleges he was not compensated for his consulting and strategic advisory services, and because of the purported misrepresentations of Plaintiff Hayden and Third-Party Defendant Brew First, Urvan alleges the following causes of action involving Brew First: vicarious liability, against Brew First (Count VI); direct liability, against Brew First (Count VII); violation of section 517.301, Florida Statutes, against Plaintiff Hayden and Brew First (Count VIII); violation of section 517.12, Florida Statutes, against Plaintiff and Brew First (Count IX); and violation of section 517.12, Florida Statutes, against Brew First (Count X). Id. at 12–21.

Notably, as part of Count VIII, Urvan contends that “[i]n connection with the rendering of investment advice or in connection with the offer, sale, or purchase of an investment or security, [Hayden and Brew First] by acts of both omission and commission, made false statements of material fact.” Id. at 15. Urvan also states that, “[a]mong other things, [Hayden and Brew First] made representations to Urvan ...about Brew First's solvency, financial status, and true financial condition, which were false and [known to be false] at the time the statements were made.” Id. at 15–16. With respect to Count IX, Urvan alleges that Hayden and Brew First acted as a “dealer” or “investment adviser” under section 517.021, Florida Statutes, without being properly registered, in violation of sections 571.12(1) and (4), Florida Statutes. Id. at 17–19. And, as part of Count X, Urvan asserts that Brew First was an “issuer” of securities under section 517.021 that failed to register, in violation of section 517.12. Id. at 20–21. Thus, pursuant to section 517.211, Florida Statutes, Urvan argues that he is entitled to rescission or damages. Id. at 17–21.

Third-Party Defendant Brew First has not yet filed an Answer to the Third-Party Complaint, and has instead filed a Motion to Dismiss [DE 56]. That motion remains pending before the Court.

A. Urvan's Motion [DE 72]

Counterclaim Plaintiff Urvan begins by citing to Counts IX, X, and VIII of the “Amended Counterclaim and Amended Third-Party Complaint,” arguing both that “the purchase of securities issued by Brew First is subject to rescission due to Brew First's failure to register” and that “misrepresentations and omissions were made relative” to Urvan's investment in Brew First. [DE 72 at 2]. According to Urvan—as it pertains to Brew First's defense against failing to register—Brew First relies “on the following exemptions from registration: (1) Section 4(a)(2) of the Securities Act of 1933 (‘Act’) (2) Rule 506(b) of the Act; and (3) §§ 517.061(11) and 517.12(3), Fla. Stat.” [DE 72 at 2].

With respect to section 4(a)(2), Urvan states that such exemption “only applies to ‘transactions ... not involving any public offering,’ i.e., private offerings” and that “[t]he following non-exclusive factors serve as guideposts in performing the private offering analysis: ‘[1] the number of offerees and their relationships to each other and the issuer [and the information available to the offerees due to those relationships], [2] the number of units offered, [3] the size of the offering, and [4] the manner of the offering.’ ” [DE 72 at 2] (alteration in original) (internal citations omitted) (quoting 15 U.S.C. § 77(d)(2) and Doran v. Petroleum Mgmt. Corp., 545 F.2d 893, 900 (5th Cir. 1977)). Urvan thereafter argues that the use of “general solicitation” by an offeror is inconsistent with a section 4(a)(2) exemption. [DE 72 at 3].

*3 Similarly, Urvan states that Rule 506(b) “prohibits ‘general solicitation’ if an offering is to be deemed a private offering.” [DE 72 at 3] (citing 17 C.F.R. § 230.502(c)). And, as to section 517.12(3), Urvan contends that not only is “general solicitation” prohibited, but before a sale, there is a requirement that each purchaser must be “provided with or given reasonable access to, full and fair disclosure of all material information.” [DE 72 at 3] (quoting § 517.061(11)(a)2–3, Fla. Stat.). But regardless of which exemption Brew First is proceeding under, Urvan contends that it is Brew First that bears the burden of proof in satisfying any claimed exemption. Id.

With this information as a backdrop, Urvan argues that “[i]nformation regarding who was solicited, how they were solicited, and what information was shared with them is necessary for Urvan to test the exemptions, including whether Brew First engaged in general solicitation.” Id. Urvan also notes that he “has ... brought claims against Brew First under § 517.301, Fla. Stat. for misrepresentations and omissions regarding Brew First's financial condition, cash-flow, and business plan; the way Brew First conducted business; and the legitimacy of the investment” and has alleged “that in 2020, Brew First was insolvent.” Id. at 4. Thus, “[f]or the foregoing reasons, Urvan sought discovery from Brew First pertaining to its other offerees and financial condition.” Id.

While these reasons generally demonstrate Urvan's overall position, Urvan analyzes each of the discovery disputes at issue—Document Requests #7, #13, #34, #42(c), #42(k), and Interrogatory #4(i)(E)—briefly stating his position as to each. Id. at 4–7. Specifically, as to Requests #7 and #13, Urvan argues that “[t]he requested information is relevant to the exemptions asserted by Brew First [and whether the] exemptions fail due to use of ‘general solicitation.’ ” Id. at 4–5. Urvan additionally argues that the information is relevant to his fraud-based claims. Id. at 5. With respect to Requests #34, #42(c), #42(k), and Interrogatory #4(i)(E), Urvan argues that “[t]he requested items are directly related to Brew First's financial condition both before and after the Brew First Transaction and would reveal (a) whether the representations made to Urvan were false at the time of their making and (b) the current value of the investment.” Id. at 6. He states that “the information may also lead to evidence of motive or intent.” Id. at 6.

B. Brew First's Response [DE 74]

To begin, Third-Party Defendant Brew First, Inc. states that Urvan's discovery requests are “overbroad and request irrelevant information.” [DE 74 at 1]. Moreover, Brew First states that such requests “are both unnecessary and disproportionate to the needs of the case.” Id.

After framing the relevant allegations, as it pertains to the document requests at issue (and Interrogatory #4(i)(E)), Brew First argues: (1) that it produced documents showing its use of proceeds from 2017–2018; (2) that Brew First's communications and agreements with other potential and actual investors are irrelevant to Urvan's claims and Brew First's defenses; and (3) that Brew First's tax returns, additional financials, and board minutes are not relevant to any of Urvan's misrepresentation claims. Id. at 3–5.

With respect to the former, Brew First states that it produced its Profit and Loss statement for 2018 and 2019, and its Balance Sheet for 2017–19. Id. at 3. Brew First contends that “[t]he Profit and Loss statement has detailed descriptions of Brew First's cost of goods sold and expenses for 2018 and 2019, and the Balance Sheet has detailed descriptions of all Brew First's liabilities from 2017–2019.” Id. Thus, Brew First argues that it has provided documents that are fully responsive to the discovery requests and interrogatory at issue. Id.

*4 Next, as to Brew First's communications and agreements with other potential and actual investors, Brew First states that the communications and agreements are “far removed from the issues in this case.” Id. According to Brew First, these documents—comprising Requests #7 and #13—“will require Brew First to conduct an invasive and burdensome search, [and] are irrelevant to Urvan's claims that Brew First made misrepresentations to Urvan, that Brew First was required to register as a dealer or issuer, or to Brew First's defenses to such claims.” Id.

Specifically, as it pertains to Brew First's claimed exemptions, Brew First notes that, “[w]hile Urvan cites to Doran v. Petroleum Mgmt. Corp., 545 F.2d 893 (5th Cir. 1977) to list the ‘factors’ courts use to analyze whether the private offering exemption applies, this case and the SEC Notice to which Urvan cites are pre-regulation D authorities.” [DE 74 at 4]. Brew First then argues that, “[s]ince the creation of Regulation D, courts have recognized that there is more than one method of showing exemption status for an offering, including compliance with Regulation D.” Id. And, Brew First states that it “has already produced to Urvan the Regulation D filings it made with the SEC to qualify as exempt from registration.” Id. But in any event, Brew First argues that “general solicitation” involves “things such as advertisements in newspaper and television and radio broadcasts, and ... does not apply to individual communications with potential investors.” Id. (citing IPOnet, No-Action Letter, July 26, 1996 (1996 WL 431821 (SEC)).

Finally, as to Brew First's tax returns, additional financials, and board minutes (Requests #34, #42(c), and #42(k)), Brew First argues that it is “improper ... for Urvan to obtain every single document related to Brew First's financials for four years in order to discover information that is not already alleged in Urvan's Third-Party Complaint.” [DE 74 at 4]. According to Brew First, “[t]he only particular allegation Urvan makes of a representation related to Brew First's financials is that, in 2018, Hayden and Brew First claimed ‘Brew First needed $50,000 in investment proceeds to become profitable,’ which Urvan asserts was false.” Id. at 4–5.

Rule 26(b)(1) of the Federal Rules of Civil Procedure defines the scope of discovery as “any non-privileged 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, the parties' relative access to relevant information, the parties' resources, the importance of the discovery, and whether the burden of the discovery outweighs the likely benefit. Fed. R. Civ. P. 26(b)(1). “It is well established that the courts must employ a liberal standard in keeping with the purpose of the discovery rules.” Davis v. Nationwide Ins. Co. of Am., No. 19-cv-80606, 2020 WL 7480819, at *3 (S.D. Fla. Dec. 18, 2020). To this end, “the burden of showing that the requested discovery is not relevant to the issues in the case is on the party resisting discovery.” Dunkin' Donuts, Inc. v. Mary's Donuts, Inc., No. 01-0392-CIV, 2001 WL 34079319, at *2 (S.D. Fla. Nov. 1, 2001).

However, Rule 26(b) allows discovery “through increased reliance on the commonsense concept of proportionality.” In re: Takata Airbag Prod. Liab. Litig., 15–2599–MD, 2016 WL 1460143, at *2 (S.D. Fla. Mar. 1, 2016) (quoting Chief Justice John Roberts, 2075 Year–End Report on the Federal Judiciary 6 (2015)); Reuter v. Physicians Cas. Risk Retention Grp., No. 16-80581-CV, 2017 WL 395242, at *2 (S.D. Fla. Jan. 27, 2017). “Proportionality requires counsel and the court to consider whether relevant information is discoverable in view of the needs of the case.” Office Depot, Inc. v. Elementum Ltd., No. 19-CV-81305, 2020 WL 5506445, at *3 (S.D. Fla. Sept. 14, 2020) (citing Tiger v. Dynamic Sports Nutrition, LLC, Case No. 15-cv-1701, 2016 WL 1408098, at *2 (M.D. Fla. Apr. 11, 2016)).

*5 The Court has carefully considered Urvan's Motion [DE 72], Third-Party Defendant Brew First's response [DE 74], the parties' Joint Notice [DE 75], the discovery requests and responses, argument of counsel during the July 22, 2022 Zoom VTC hearing, as well as the entire docket in this case. After careful consideration, the Court finds as follows:

A. Requests #7 and #13.

Under Urvan's First Request for Production to Third-Party Defendant, Urvan requests “[a]ll agreements, offering documents, and subscription agreements relating to or with any Person who was solicited, invested in or purchased Securities issued by Brew First from January 1, 2017 through December 31, 2018” as part of Request #7. [DE 72-2 at 3]. Similarly, Urvan requests “[a]ll Communications with each Person who was solicited or offered Securities issued by Brew First, or solicited to invest in Brew First, Inc., from January 1, 2017 through December 31, 2018” as part of Request #13. Id. at 5.

The Court finds that Requests #7 and #13 (as narrowed below) are relevant to Urvan's claims in this case, and to Brew First's contention within its discovery responses that it was not required to register as a “broker,” “dealer,” “investment adviser,” or “issuer” under Florida or federal law. Moreover, as Urvan is seeking rescission or damages with respect to these arguments, the Court finds these requests are also proportional to the needs of the case. The Court therefore finds that Urvan is entitled to production of documents responsive to Requests #7 and #13 (as narrowed below) and overrules the majority of Brew First's objections concerning these requests. See Fed. R. Civ. P. 26(b)(1); Office Depot, Inc., 2020 WL 5506445, at *3. However, with respect to Request #13, the Court does find “all communications” to be overbroad.[1] Accordingly, the Court limits “all communications” to all communications relating to raising capital or making an investment in Brew First.

In making this determination as to Requests #7 and #13, the Court specifically notes that in its June 2, 2022 “Order Granting in Part and Denying in Part Defendant's Motion to Overrule Objections and Compel Production” [DE 65]—which addressed Urvan's arguments that Plaintiff Hayden was acting as a broker or unlicensed advisor—the Court limited Urvan's production requests to the extent he was seeking documents unrelated to the Gunbroker.com or Brew First transactions or investments. [DE 65 at 5]. It would be somewhat inconsistent to now limit Urvan's requests concerning exemption-related discovery as to Brew First itself.

Moreover, despite Brew First's argument that Urvan relies on pre-Regulation D authority (specifically, to Doran), courts continue to apply Doran even after the enactment of Regulation D. See APA Excelsior III, L.P. v. Premiere Tech., Inc., No. 03-15552, 2004 WL 6064402, at *4 (11th Cir. Sept. 23, 2004); Barron v. Lampley, No. 15-cv-0038, 2015 WL 12591006, at *13 (N.D. Ga. June 22, 2015). And, Brew First's citation to a 1996 No-Action Letter concerning the definition of “general solicitation” is unavailing, considering the differences in the types of communications that exist between 1996 and today.

B. Request #34

As part of Request #34 of Urvan's First Request for Production to Third-Party Defendant, Urvan seeks “[c]omplete copies of all state and federal income tax returns filed by Brew First for the years 2018, 2019, 2020, and 2021, including all accompanying schedules, any attachments to returns and all worksheets used in preparing same, and requests for any tax extensions.” [DE 72-2 at 9].

*6 With respect to this request, during the July 22, 2022 Zoom VTC hearing, the parties agreed that no tax returns exist for 2020 or 2021. Thus, Brew First shall not be required to produce what does not exist. However, as to the state and federal income tax returns filed by Brew First for the years 2018 and 2019, including all accompanying schedules, and any attachments to returns, the Court does find that they are relevant and proportional to the needs of this case. See Fed. R. Civ. P. 26(b)(1); Office Depot, Inc., 2020 WL 5506445, at *3. Indeed, Urvan has advanced allegations concerning Brew First's financials and seeks sworn financial information that may bear upon such. But to the extent Urvan seeks all worksheets used in preparing the 2018 and 2019 tax returns, or requests for any tax extensions, the Court finds that a request for those documents is not proportional to the needs of this case. Thus, Brew First need not produce the worksheets or requests for any tax extensions.

C. Requests #42(c) and 42(k)

With respect to Requests #42(c) and (k) of Urvan's First Request for Production to Third-Party Defendant, Urvan seeks, “[a]s it relates to Brew First, for each year of 2018, 2019, 2020, and 2021, Documents or Documents showing”: (c) “[u]naudited (i.e., internal) financial statements”; and (k) “[b]oard minutes.” [DE 72-2 at 10, 12].

First, as it pertains to Request #42(c), in light of the Court's finding as to Request #34 and the production ordered herein, the Court finds that Urvan's request for Brew First's “unaudited (i.e., internal) financial statements” is not proportional to the needs of the case at this time. See Fed. R. Civ. P. 26(b)(1); Office Depot, Inc., 2020 WL 5506445, at *3. Specifically, Brew First has already provided its Profit and Loss statement for 2018 and 2019, and its Balance Sheet for 2017–19. [DE 74 at 3]. And now, the Court has ordered production of Brew First's state and federal income tax returns for 2018 and 2019. However, if there is an argument that can subsequently be made at a later date as to why financial statements need to be produced, and if Urvan can state a good faith basis—after proper conferral and after examining Brew First's 2018 and 2019 tax returns and the other discovery produced—Urvan may renew his request for unaudited financial statements for the Court's determination.

Next, as to Request #42(k), in the parties' Joint Notice [DE 75] prepared in anticipation of the July 22, 2022 Zoom VTC hearing, Urvan clarified that he is seeking board minutes relating to raising capital or sales and production of machines.[2] With this limitation in mind, the Court finds that Request #42(k)—as limited to board minutes relating to: (1) raising capital or (2) sales and production of machines, is relevant and proportional to the needs of the case, as such information is relevant to the claims and defenses in this case. See Fed. R. Civ. P. 26(b)(1); Office Depot, Inc., 2020 WL 5506445, at *3. Consequently, Brew First shall produce such information.

D. Interrogatory #4(i)(E)

Finally, as part of Urvan's First Set of Interrogatories, Urvan requests that Brew First:

[DE 72-1 at 6]. The Court finds that this interrogatory—Interrogatory #4(i)(E)—is vague, overbroad, and disproportionate to the needs of the case. See Fed. R. Civ. P. 26(b)(1); Office Depot, Inc., 2020 WL 5506445, at *3. Moreover, in light of the other documents produced, or required to be produced as part of this Order, the Court finds that any description of Brew First, Inc.’s use of proceeds would be unnecessary and wasteful.

*7 Based on the foregoing, it is ORDERED AND ADJUDGED as follows:

DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County, in the Southern District of Florida, this 27th day of July, 2022.