Hayden v. Urvan
Hayden v. Urvan
2022 WL 20703963 (S.D. Fla. 2022)
October 14, 2022
Matthewman, William, United States Magistrate Judge
Summary
Defendant filed a motion to compel production of documents related to securities transactions and investments, which was partially granted and partially denied by the Court. After new evidence was presented, the Court granted a renewed motion to compel and ordered Plaintiff to produce all relevant documents by a certain deadline. However, Defendant now seeks clarification and enforcement against Plaintiff for failing to comply with the order.
Additional Decisions
MATTHEW HAYDEN, Plaintiff/Counter-Defendant,
v.
STEVEN F. URVAN, Defendant/Counter-Plaintiff.
v.
SEA PURITY, LLC, a Wyoming limited liability company, and BREW FIRST, INC., a Wyoming corporation, Third-Party Defendants
v.
STEVEN F. URVAN, Defendant/Counter-Plaintiff.
v.
SEA PURITY, LLC, a Wyoming limited liability company, and BREW FIRST, INC., a Wyoming corporation, Third-Party Defendants
Case No. 21-cv-82051-SMITH/MATTHEWMAN
United States District Court, S.D. Florida
Signed October 14, 2022
Counsel
Fred Alan Cunningham, Matthew Thomas Christ, Domnick Cunningham & Yaffa, Palm Beach Gardens, FL, Lauren Elizabeth Johnson, Adam Rabin, Havan Morgan Clark, Rabin Kammerer Johnson, P.A., West Palm Beach, FL, for Plaintiff/Counter-Defendant.Joanne M. O'Connor, Steven Jeffrey Rothman, Hanna Beth Rubin, Michael James Gore, Jones Foster P.A., West Palm Beach, FL, for Defendant/Counter-Plaintiff.
Lauren Elizabeth Johnson, Adam Rabin, Havan Morgan Clark, Rabin Kammerer Johnson, P.A., West Palm Beach, FL, Fred Alan Cunningham, Domnick Cunningham & Yaffa, Palm Beach Gardens, FL, for Third-Party Defendant Brew First, Inc.
Lauren Elizabeth Johnson, Adam Rabin, Havan Morgan Clark, Rabin Kammerer Johnson, P.A., West Palm Beach, FL, for Third-Party Defendant Sea Purity LLC.
Matthewman, William, United States Magistrate Judge
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT/COUNTER-PLAINTIFF STEVEN F. URVAN'S MOTION FOR CLARIFICATION OF COURT ORDER AND TO ENFORCE COURT ORDER, OR, IN THE ALTERNATIVE, FOR SANCTIONS [DE 109]
*1 THIS CAUSE is before the Court upon Defendant/Counter-Plaintiff Steven F. Urvan's (“Defendant”) Motion for Clarification of Court Order and to Enforce Court Order Against Plaintiff/Counter-Defendant Matthew Hayden or, in the Alternative, for Sanctions Pursuant to Rule 37(b)(2)(A)(i) & (ii) and 37(b)(2)(c) (“Motion”) [DE 109]. Plaintiff/Counter-Defendant Matthew Hayden (“Plaintiff”) has filed a Response [DE 111], and Defendant has filed a Reply [DE 112]. Thus, the matter is now ripe for review.
I. BACKGROUND
As laid out in the Court's previous Order [DE 106], on May 5, 2022, Defendant filed a Motion to Overrule Objections and Compel Production (“Initial Motion”) [DE 54]. After the matter was fully briefed, the Court held a hearing on Defendant's Initial Motion on May 27, 2022, via Zoom VTC. During that hearing, the Court granted in part and denied in part Defendant's Initial Motion, reducing its ruling to a June 2, 2022 Order Granting in Part and Denying in Part Defendant's Motion to Overrule Objections and Compel Production (“June 2, 2022 Order”) [DE 65].
In the Court's June 2, 2022 Order, the Court first stated that the case “is not an SEC enforcement action,” noting thereafter that the case was “still in the early stages of discovery, with no deposition having yet been taken.” [R. 65 at 4]. Accordingly, at that time, the Court granted Defendant's Initial Motion “to the extent Defendant s[ought] documents responsive to Document Requests #25, 30, 31, 36, 37, and 38 that [we]re related to the Gunbroker.com and Brew First, Inc. transactions or investments,” but denied Defendant's Initial Motion “to the extent that Defendant s[ought] documents unrelated to the Gunbroker.com or Brew First, Inc. transactions or investments.” Id. at 5. In doing so, the Court noted as follows:
While the Court is not going to require Plaintiff to produce discovery unrelated to Gunbroker.com or Brew First, Inc. at this point, the Court's finding is without prejudice to Defendant's ability to renew its request (after proper conferral), if it can do so in good faith, once the case is more fully developed and the alleged need arises for broader discovery. For example, if Plaintiff is indeed going to be relying upon the January 31, 2014 ‘no-action’ letter by the SEC as a defense, and that becomes clear, the Court may require additional discovery to make sure Defendant is afforded sufficient discovery to litigate its case.
Thereafter, in Defendant's Renewed Motion to Overrule Objections and Compel Production Against Plaintiff/Counter-Defendant Matthew Hayden (“Renewed Motion”) [DE 97], utilizing the language from this Court's June 2, 2022 Order, Defendant asserted “that there is now a good-faith basis to renew the [Initial] Motion as to Request No. 31 based on Hayden's recent deposition testimony, including statements indicating that Hayden (1) relies on the ... ‘no action’ letter and (2) has received compensation for actively soliciting a broad spectrum of potential investors.” [DE 97 at 3]. Defendant therefore requested that the Court grant the Renewed Motion “and compel the production of documents responsive to Request Number 31 in its entirety without limitations.” Id. at 6.
*2 Notably, Request 31 provides as follows:
All Documents and Communications that relate to any investment, acquisition, merger, or Securities that You solicited, marketed, procured, or sold, or participated in the solicitation, marketing, sale, procurement, acquisition or merger, since January 1, 2017. This request includes: (a) all Communications with any Person regarding or relating to any investment, acquisition, merger, or Securities; (b) all representations made to any Persons regarding or relating to any investment, acquisition, merger, or Securities; (c) marketing or advertising material regarding or relating to any investment, acquisition, merger, or Securities; and (d) all Documents relating to compensation You received or should have received in connection with the same (including, but not limited to, fee schedules, commission or compensation agreements or documents reflecting such arrangements).
[DE 54-1 at 7]. However, in Defendant's Reply to the Renewed Motion [DE 102], Defendant noted that he “clarified in the meet-and-confer held prior to the filing of the [I]nitial Motion ... that [Request 31] seeks documents relating to transactions in which Hayden solicited, procured the sale of, sold, or participated in the solicitation, procurement, or sale of securities.” [DE 102 at 5]. Defendant thus contended that Request No. 31—as clarified—sought “evidence necessary to litigating [Defendant's] securities claims and defenses and Hayden's claimed exception.” Id. at 6.
Relying upon Defendant's “clarified” request, during the September 16, 2022 hearing on Defendant's Renewed Motion, the Court granted the Renewed Motion, ordering the following:
1. Plaintiff Hayden shall produce all non-privileged documents regarding transactions in which Hayden solicited, procured the sale of, sold, or participated in the solicitation, procurement, or sale of securities, during the time period of January 1, 2017, through October 18, 2021.
2. Plaintiff Hayden shall also produce all documents showing, establishing, or evidencing compensation he received for raising capital, providing advice, or acting as a broker, during the time period of January 1, 2017, through October 18, 2021.
[DE 106 at 4] (footnote and emphasis omitted). The Court directed Plaintiff to produce such documents on or before September 20, 2022. Id.
During the September 16, 2022 hearing, when the Court stated its ruling, neither party expressed any confusion over the definition of “transactions.” Now, nearly four weeks after the Court's Order Granting Defendant's Renewed Motion (“September 16, 2022 Order”) [DE 106], and three weeks after the fact discovery cutoff deadline, Defendant seeks clarification and to enforce the Court's September 16, 2022 Order, or in the alternative, for sanctions pursuant to Rules 37(b)(2)(A)(i) & (ii) and 37(b)(2)(c) of the Federal Rules of Civil Procedure. This request comes just one week before the October 18, 2022 dispositive motion deadline. [DE 101].
II. MOTION, RESPONSE, AND REPLY
A. Defendant Urvan's Motion [DE 109]
*3 In Defendant's Motion, Defendant states that, after reviewing Plaintiff's September 22, 2022 production (extended from September 20, 2022, upon agreement of the parties), Defendant “believed that there were several deficiencies, which resulted in a conference call on September 30, 2022.” [DE 109 at 4]. With respect to the first deficiency, after speaking with Plaintiff about production related to the first category of documents in the Court's September 16, 2022 Order (the “transactions”), Defendant states that “the limited number of communications (i.e., approximately 15 emails) produced was a result of counsel's interpretation of the Order as requiring Hayden to product documents only if they represented Hayden's participation in a successful sale of securities; specifically, Hayden's counsel interpreted ‘transaction’ to mean only ‘actually completed transactions.’ ” Id. Utilizing several dictionary definitions of “transaction,” Defendant argues that Plaintiff's interpretation of “transaction’ is erroneous. Id. at 4–5.[1]
As to the second deficiency, with respect to the second category of documents in the Court's September 16, 2022 Order (the compensation documents), Defendant notes that on October 10, 2022, Plaintiff emailed Defendant stating that several compensation records should have been produced, and would be produced by the end of the week. Id. Thus, “[i]n other words, Hayden's counsel agreed that they had failed to comply with the order and [would] be producing additional court-ordered documents by a date 24 days after that originally ordered, 22 days after an extended deadline granted by the Court, and four days—including a weekend—before the dispositive motion deadline, of October 18.” Id. (emphasis omitted). Defendant notes that “[t]he late date at which Hayden finally intends to produce the records, withheld in violation of this Court's order, will undoubtedly prejudice Urvan with respect to his counsel's ability to review and analyze the records for inclusion in a motion for summary judgment.” Id. at 8. Indeed, Defendant notes that “Urvan's counsel were [already] precluded from using the documents in the deposition of Hayden's and Brew First's expert witness on October 4.” Id.
Accordingly, Defendant requests clarification of the September 16, 2022 Order as to the definition of “transactions” and for Plaintiff to comply with said Order without delay in light of the October 18, 2022 dispositive motion deadline. Id. at 9. Alternatively, Defendant requests sanctions against Plaintiff pursuant to Rules 37(b)(2)(A)(i) & (ii) and 37(b)(2)(c) of the Federal Rules of Civil Procedure. Id. at 9–10.
B. Plaintiff Hayden's Response [DE 111]
In Plaintiff's Response, Plaintiff notes that during the September 30, 2022 telephone call with Urvan's counsel, “Urvan's counsel, Michael Gore, expressed surprise at the Court's use of the term ‘transaction’ in its Order, and was seemingly unaware that Urvan's Reply, signed by another member of Urvan's legal team, repeatedly referenced ‘transaction.’ ” Id. With that being said, Plaintiff contends that his “interpretation of the Court's (and Urvan's) use of the word ‘transaction’ to mean ‘actually completed transactions’ or instances where a security was sold, arose from a good faith interpretation of the Court's order informed by Urvan's Reply, and the common and prevailing definition of ‘transaction.’ ” Id. at 3–4.
In support of his interpretation, Plaintiff notes that Defendant's Reply: (1) referenced the scope of Defendant's request no longer being “broad sweeping”; and (2) included a “clarified” statement that Urvan was only seeking documents “relating to transactions in which Hayden solicited, procured the sale of, sold, or participated in the solicitation, procurement, or sale of securities.” Id. Further, Plaintiff notes that “Urvan's Reply focused, as a basis for his renewed motion, on Hayden's testimony that he received compensation for raising capital or providing advice to effectuate a security transaction.” Id. And, Plaintiff notes the “common, prevailing definition” of the term “transaction.” Id. Thus, according to Plaintiff, “[g]iven this context, Hayden (and counsel) had no reason to believe a dispute would even exist as to Hayden's reliance on the common definition of ‘transaction.’ ” Id.
*4 Next, with respect to Plaintiff's production of additional documents by the end of this week, Plaintiff states that his decision “arose as a result of the parties’ meet and conferral process, as contemplated by Rule 7.1.” Id. at 6. Plaintiff explains that he “did not believe the Order contemplated the production of the actual compensation records (e.g., W2s) themselves. Id.[2]
Finally, Plaintiff takes issue with the length of Defendant's Motion. Id. Plaintiff requests that, should the Court consider imposing sanctions, that he be allowed “to file a supplemental memorandum fully addressing the merits of Urvan's request for sanctions, since the remedy requested is drastic.” Id.
C. Defendant Urvan's Reply [DE 112]
In reply, Defendant first notes that his reference to Request #31 no longer being the “broad sweeping” one that Plaintiff made it out to be was “intended ... to reflect his attempts to respond to the concerns of Hayden's counsel by specifying the documents sought. Urvan's statement did not, on the other hand, indicate an intent to narrow the request as greatly as Hayden saw fit.” [DE 112 at 2]. Defendant then argues that Plaintiff's interpretation of “transactions” ignores the context of the required production. Id. Specifically, Plaintiff was ordered to produce “documents relating to transactions in which Hayden solicited, procured the sale of, sold, or participated in the solicitation, procurement, or sale of securities.” Id. at 2–4. Defendant contends that Plaintiff's isolation of the term “transaction” from its context is improper. See id. at 4. Moreover, in support of his argument that Plaintiff has relied upon an improper definition of transactions, Defendant supports his position by citing case law from this district which suggests a more expansive definition of “transaction.” Id. at 3 (citing In re January 2021 Short Squeeze Trading Litig., No. 21-2989-MDL, 2022 WL 3682083 (S.D. Fla. Aug. 11, 2022)).
With respect to the required production of “compensation” documents, Defendant notes that, despite Plaintiff's reference to documents being produced as part of the conferral process, Plaintiff acknowledged in an email that the documents “should have [already] been produced.” Id. at 5. And, although Defendant's Motion sought sanctions in the alternative, Defendant now argues that sanctions are warranted, as “[r]egardless of Hayden's intent, the failure to produce the documents at issue has severely prejudiced Urvan's ability to defend against Hayden's claims and pursue Urvan's counterclaims.” Id. Defendant states this prejudice “cannot be cured by compelled production that Urvan will not receive until the dispositive motion deadline is a week or less away.” Id.
III. RULING
The Court has carefully considered the relevant law, Defendant's Motion, Plaintiff's Response, Defendant's Reply, as well the entire docket in this case. Based on the foregoing, it is hereby ORDERED that Defendant's Motion [DE 109] is GRANTED as follows:
1. With respect to the Court's requirement that Plaintiff Hayden produce “all non-privileged documents regarding transactions in which Hayden solicited, procured the sale of, sold, or participated in the solicitation, procurement, or sale of securities, during the time period of January 1, 2017, through October 18, 2021,” the Court states the obvious that “transactions” includes more than actually completed transactions. Clearly, a “transaction” can be a completed transaction or a failed or terminated transaction. The use of the word “solicitation” implicates instances in which Plaintiff attempted to induce others to purchase securities but was not successful. Accordingly, on or before Monday, October 17, 2022, Plaintiff shall supplement his response to include these additional documents and produce all responsive additional documents to Defendant by that date.
*5 2. As to the Court's requirement that Plaintiff Hayden “produce all documents showing, establishing, or evidencing compensation he received for raising capital, providing advice, or acting as a broker, during the time period of January 1, 2017, through October 18, 2021,” Plaintiff shall produce the additional documents referenced in the parties’ papers on or before Monday, October 17, 2022. The ruling was clear and unambiguous, and Plaintiff failed to timely comply.
3. The Court is cognizant that the dispositive motion deadline is October 18, 2022. However, this last-minute situation is partially attributable to the parties’ continued bickering, Plaintiff's dilatory conduct, Defendant's use of certain “clarified” language in its Reply to the Renewed Motion [DE 102]—which it seems, hardly clarified the issue—and to Defendant's decision to wait until October 10, 2022 to file the instant Motion, despite becoming aware of an issue on September 30, 2022.
4. The Court is frustrated by this last-minute discovery dispute, erupting nearly four weeks after the close of fact discovery. In light of Plaintiff's production of certain documents that it apparently agrees should have been produced earlier, and in light of Plaintiff's reading of the definition of “transaction” to ignore the “solicitation” aspect of the Court-ordered production, the Court finds that sanctions and/or fee shifting may be appropriate against Plaintiff and its counsel pursuant to Federal Rule of Civil Procedure 37(a)(3)(B)(iv) and 37(a)(5)(A) due to the Court's granting herein of Defendant's Motion [DE 109]. The Court will reserve jurisdiction to award Defendant his expenses and attorney's fees, and will enter a further order in this regard as deemed necessary and appropriate a later date and time. As part of that later order, the Court will provide Plaintiff and its counsel a further opportunity to respond as to the sanctions and cost shifting issue.
However, the Motion [DE 109] is DENIED as follows:
1. While fee shifting under Rule 37(a)(3)(B)(iv) and 37(a)(5)(A) may be appropriate, the Court finds that the more serious sanctions sought under Rule 37(b) are inappropriate at this juncture on this record. Some of the prejudice that Defendant has allegedly suffered is a result of his own dilatory conduct in bringing this matter before the Court in a belated manner. Thus, the Court declines to impose those more serious sanctions at this time. However, depending upon whether or not Plaintiff fully and timely complies with this Order, further, more serious sanctions may be considered if timely raised before the Court.
DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County, in the Southern District of Florida, this 14th day of October, 2022.
Footnotes
Defendant also notes potential self-collection issues with Plaintiff's production. [DE 109 at 5].
Plaintiff also briefly addresses self-collection issues. Plaintiff contends that Defendant misunderstood Plaintiff's counsel's statement during the September 30, 2022 meet and confer. [DE 111 at 5]. Plaintiff states that “Hayden's input was sought to ensure production was overinclusive, instead of underinclusive.” Id.