FA ND CHEV, LLC v. Kupper
FA ND CHEV, LLC v. Kupper
2023 WL 6554364 (D.N.D. 2023)
July 24, 2023
Hochhalter, Clare R., United States Magistrate Judge
Summary
The court granted the defendant's motion to redesignate discovery materials from attorneys' eyes only to confidential and ordered the plaintiffs to produce any inventory documents they are able to obtain and the 2022 financial statements. The court denied the defendant's request for sanctions and additional depositions, finding that the plaintiffs' refusal to disclose information was substantially justified.
Additional Decisions
FA ND Chev, LLC and FA ND SUB, LLC, Plaintiffs,
v.
Robert Kupper; Bismarck Motor Company; and BMC Marine LLC d/b/a/ Moritz Sport & Marine, Defendants.
BAPTKO, Inc., Plaintiff/Counter Defendant,
v.
Foundation Automotive Corp., an Alberta Corporation; FA ND CHEV, LLC; and FA ND SUB, LLC, Defendants/Counter Claimants
v.
Robert Kupper; Bismarck Motor Company; and BMC Marine LLC d/b/a/ Moritz Sport & Marine, Defendants.
BAPTKO, Inc., Plaintiff/Counter Defendant,
v.
Foundation Automotive Corp., an Alberta Corporation; FA ND CHEV, LLC; and FA ND SUB, LLC, Defendants/Counter Claimants
Case No. 1:20-cv-138
United States District Court, D. North Dakota
Filed July 24, 2023
Counsel
Robin Wade Forward, Stinson LLP, Bismarck, ND, Andrew Blake Albaugh, Pro Hac Vice, Beltzer Bangert & Gunnell, LLP, Anna Sweat Day, Pro Hac Vice, Kensye N. Wood, Pro Hac Vice, Holland & Knight LLP, Maxwell N. Shaffer, Pro Hac Vice, Leland Shaffer LLP, Denver, CO, for Plaintiffs.Grant Bakke, Randall J. Bakke, Bradley Neuman Wiederholt, David R. Phillips, Shawn A. Grinolds, Bakke Grinolds Wiederholt, Bismarck, ND, for Defendant Robert Kupper.
Ryan J. Joyce, William J. Behrmann, Evenson Sanderson PC, Bismarck, ND, for Defendant Bismarck Motor Company.
Anthony J. Anderson, Nicholas Mino, William P. Harrie, Nilles Law Firm, Fargo, ND, for Defendant BMC Marine LLC.
Hochhalter, Clare R., United States Magistrate Judge
ORDER
*1 On November 23, 2022, Defendant Robert Kupper (“Kupper”) filed a “Motion to Compel Discovery and for Sanctions.” (Doc. No. 138). Kupper requests this Court redesignate discovery materials produced by Plaintiffs in the FA ND Chev case (“Plaintiffs”) from attorneys’ eyes only (“AEO”) to confidential and order Plaintiffs to stop “misusing” the AEO designation. (Doc. No. 139). Kupper also requests the Court compel discovery of “monthly dealer financial statements for 2022” and “damages/inventory documents” from Plaintiffs, award him attorneys’ fees and costs, sanction Plaintiffs, and order additional depositions. (Id.). For the reasons articulated below, the motion is GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
This action arises following a business transaction involving the sale and purchase of motor vehicle and service businesses (“dealerships”) in June 2019. The transaction consisted of Kupper selling five Chevrolet and Subaru dealerships located in and around Mandan, North Dakota. This transaction also included non-competition and non-solicitation agreements between Kupper and Plaintiffs. The members of FA ND Chev, LLC are Chuck Kramer, Jr. and Foundation Auto Holdings, LLC. Foundation Auto Holdings, LLC is owned by Foundation Automotive U.S. Corp. (“FA”).
Plaintiffs allege that Kupper violated the agreements “almost immediately” by conspiring “to take back” the business Kupper had sold to Plaintiffs. (Doc. No. 77). Plaintiffs assert Defendants engaged in recruiting multiple employees away from Plaintiffs, and that Kupper publicly defamed Plaintiffs’ business reputation. (Id.). “Plaintiffs are alleging damages in the nature of lost profits, loss of goodwill, loss of valuable employees, loss of clients and customers, the impairment of Plaintiffs’ future earning capacity, and damage to business reputation.” (Doc. No. 69) (quotations omitted). Defendants deny these allegations and Kupper asserts any employees who have left Plaintiffs’ businesses did so because of Plaintiffs’ mismanagement. (Id.).
On May 11, 2023, Judge Traynor issued an order consolidating the FA ND Chev case with the related BAPTKO case. In the BAPTKO case, BAPKTKO, Inc. alleges when it sold the dealerships to FA the asset purchase agreement included an earn out provision that entitled BAPTKO to payments each calendar year once certain conditions were met. (No. 1:21-cv-183, Doc. No. 3). BAPTKO alleges the FA entities breached the asset purchase agreement when they failed to pay BAPTKO under the terms of the earn out provision. (Id.).
II. LEGAL STANDARD
A. Scope of Discovery
Rule 26(b)(1), Fed. R. Civ. P., defines the scope of discovery 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.
*2 However, the Court, in its discretion, may limit discovery otherwise allowed by the rules if:
(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or
(iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).
Fed. R. Civ. P. 26(b)(2)(C). The moving party must establish some level of relevancy for the discovery it is requesting before the Court “open[s] wide the doors of discovery” to information that is irrelevant to the issues of the case. Hofer v. Mack Trucks Inc., 981 F.2d 377, 380 (8th Cir. 1992).
The scope of discovery under Rule 26(b) is extremely broad. Gowan v. Mid Century Ins. Co., 309 F.R.D. 503, 508 (D.S.D. 2015) (citation omitted). “The reason for the broad scope of discovery is that [m]utual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession.” 8 Wright & Miller, Fed. Prac. & Proc. §§ 2007, 3637 (1970) (quoting Hickman v. Taylor, 329 U.S. 495, 507–08 (1947)).
Fischer v. United States Life Ins. Co., No. 1:19-cv-152, 2021 WL 6278458, at *2 (D.N.D. Nov. 16, 2021), on reconsideration, sub nom. Fischer v. United States Life Ins. Co. in the City of New York, No. 1:19-cv-152, 2021 WL 6278461 (D.N.D. Dec. 8, 2021).
B. Rule Governing Payment of Expenses
Under Fed. R. Civ. P. 37(a)(5), if a court grants a party's motion to compel the court must:
require the party or deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees. But the court must not order this payment if:
(i) the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action;
(ii) the opposing party's nondisclosure, response, or objection was substantially justified; or
(iii) other circumstances make an award of expenses unjust.
C. The Protective Order
The parties in the Kupper litigation agreed to the Court entering a protective order and the Court adopted it on March 19, 2021.[1] Under the terms of the protective order, a party may designate certain information as AEO provided the following terms are met:
Certain Confidential Information that constitutes sensitive personal confidential information or sensitive business or trade secrets that the designating Party believes in good faith is entitled to a higher level of protection because its disclosure of would be highly damaging to the Producer (the “Confidential Attorneys’ Eyes’ Only Information”), may be designated in writing by the Party as “Confidential Attorneys’ Eyes Only.”
(Doc. No. 30). A party may also challenge the designation made by another party by providing written notice with the legal basis for the challenge. (Id.). The party receiving the objection has ten days to respond, and if the parties cannot resolve the issue they may seek the Court's intervention. (Id.).
III. DISCUSSION
A. Redesignation of Materials Produced as Attorneys’ Eyes Only
*3 Kupper argues Plaintiffs improperly marked financial and inventory documents, information related to Chuck Kramer's resignation, and information related to the alleged sexual harassment of Kelsey Hanson by Kevin Kutschinski as AEO. Because of these markings Kupper could not view the information and was asked to leave the room when it was discussed during depositions.
This Court previously considered the issue of producing information under the AEO designation when the same Plaintiffs had reservations about producing information to Kupper. (Doc. Nos. 61, 161). It ultimately concluded Kupper's counsel should be able to share the information with Kupper himself. (Doc. No. 161). Similarly, the Court has, on multiple occasions, informed the parties of its reservations when parties produce information with AEO designations because it prevents a client from working with his or her counsel to aid in the case. Since that time, the nature of the case has changed as the Defendants have filed motions for summary judgment. The Court has also denied the parties’ requests to file under seal certain documents produced under the protective order because “the Parties have essentially attempted to continue to litigate this matter in secret.” (Doc. No. 247).
Here, the parties do not dispute the information at issue is discoverable. It also may prove necessary for resolution of this case. Further, the protective order prohibits using information produced under it for any other purpose “except for the prosecution or defense of this litigation unless authorized by further order of this Court.” (Doc. No. 30). This provision should alleviate any concerns of Plaintiffs, and the Court previously designated material as confidential when the Plaintiffs had similar concerns. (Doc. No. 161). The Court does not believe the information at issue warrants AEO designations. The Court has also required Kupper to publicly file some of the information at issue which was attached to the underlying motion as examples. (Doc. No. 247). Therefore, the remaining information shall be redesignated as confidential under the terms of the protective order.
B. Production of Inventory Documents and 2022 Dealer Financial Statements
Kupper requests the Court order Plaintiffs to produce inventory documents and 2022 financial statements. Kupper informs the Court he was able to receive some of the inventory documents directly from General Motors (“GM”) with a subpoena. Plaintiffs argue they do not have access to the inventory documents through the GM database because it only maintains the documents for three months. They assert they are working with GM to obtain all available documentation. Plaintiffs shall produce any of the inventory documents at issue they currently have in their possession or are able to obtain from GM.
Kupper further asserts Plaintiffs are withholding the 2022 financial statements based on Kupper's previous misuse of documents produced under the protective order in the BAPTKO litigation. Plaintiffs do not dispute this notion. However, the Court consolidated the cases on May 11, 2023. (Doc. No. 218). Given this consolidation, the parties’ impasse regarding using discovery material from one case to another has become unworkable. The parties must find a way forward in the discovery process to reach a resolution of the underlying litigation, especially when their disputes involve the disclosure of otherwise relevant information. The parties’ previous tactics have already required extensive time to resolve and resulted in the delay of trial and additional costs. The 2022 financial statements are relevant, and Plaintiffs must produce them to Kupper.
C. Sanctions and Additional Depositions
*4 Kupper requests the Court sanction Plaintiffs and provide him additional depositions and additional time to conduct depositions. The Court does not believe sanctions and an award of costs and fees are appropriate under the circumstances. Kupper presents no information that Plaintiffs acted in bad faith when they made AEO designations pursuant to the protective order that Kupper himself agreed to abide by. Further, prior to the consolidation, Plaintiffs had appropriate concerns with Kupper's ability to abide by the protective order given his disregard for it when using documents in the BAPTKO litigation. The Plaintiffs’ refusal to disclose information was substantially justified under the circumstances. Fed. R. Civ. P. 37(a)(5).
Kupper also requests more time for depositions and additional Rule 30(b)(6) depositions at Plaintiffs’ expense. Kupper provides no basis for his request other than he has not been provided certain documents, and Kupper was not allowed to look at documents marked AEO. However, Kupper was represented by counsel at the time these depositions occurred. Nothing prevented his counsel from asking questions about the AEO documents. Further, Kupper's request for more time in depositions on documents not yet produced is premature. Kupper has not received the documents and has yet to review them. Without reviewing the documents, it is inconceivable that Kupper can determine which questions he needs to ask about them, if any.
IV. CONCLUSION
For the reasons articulated above, the Court GRANTS Kupper's request to redesignate the AEO materials at issue to confidential and for Plaintiffs to produce any inventory documents they are able to obtain and the 2022 financial statements. The Court DENIES Kupper's request for sanctions and additional depositions.
IT IS SO ORDERED.
Dated this 24th day of July, 2023.
Footnotes
It is clear since the time the Court entered the protective order, it has created time consuming and costly issues related to the disclosure of otherwise discoverable information.