ERIN WILDER-DOOMES, Magistrate Judge.
Before the court is a Motion to Compel Appearance for Deposition of Non-Party and responses to Subpoena for Production of Documents and for Order to Show Cause (the "Motion to Compel")
This miscellaneous action was originally instituted in the United States District Court, Eastern District of North Carolina by Defendants seeking an order compelling non-party Smith to: (1) produce documents sought via a Subpoena to Produce Documents, Information, or Objects or to Permit Inspection of Premises in a Civil Action (the "Document Subpoena"); (2) appear for a deposition pursuant to a Subpoena for a deposition (the "Deposition Subpoena"), and (3) appear and show cause why he should not be held in contempt for noncompliance with the Deposition Subpoena.
The underlying action giving rise to Subpoenas is a breach of contract and declaratory judgment action against Defendants filed by InforMD, LLC ("InforMD"), InforMD, LLC v. DocRX, Inc. and Brian Ward, No. 13-533, United States District Court, Middle District of Louisiana (the "Underlying Action"). InforMD's Complaint focuses on alleged breaches of a non-solicitation provision in a Confidentiality, Non-Disclosure, Non-Competition, and Non-Solicitation Agreement (the "November 2011 Agreement") and proper interpretation of provisions in the November 2011 Agreement that allegedly require InforMD to pay DocRX and Ward a certain percentage of gross profits on specified revenue.
On May 4, 2016, this court granted the parties leave to conduct additional discovery, including taking the deposition of Mr. Matt Skellan.
In their Motion to Compel, Defendants assert that Smith is the managing member of OHA, and that Guidry, Daigle, and Massengale are all members of OHA.
On December 20, 2016, the court held a hearing on the Motion to Compel and the Motion to Quash. During the hearing, counsel for Defendants outlined the history of their efforts to obtain information from Mr. Smith, and pointed out that Smith had not filed his Motion to Quash prior to his previously scheduled deposition. Counsel for Defendants also expressed concern regarding the cost Defendants had incurred in seeking documents from Smith and in attempting to take his deposition, and requested that any deposition of Smith, should the court grant the motion, take place in Baton Rouge, Louisiana. Counsel for Smith then explained that certain documents requested by Defendants do not exist and have never existed, and that Smith was willing to produce other documents by the end of the week of the hearing. Counsel for Smith asserted that under the Federal Rules, Smith's deposition should take place in North Carolina. Finally, counsel for Defendants called Ralph Stevens, who Defendants have retained as an expert to calculate their damages, to explain the necessity of certain information requested in the Document Subpoena. Following questioning by counsel for Defendants and counsel for Smith, the court took the matter under advisement.
"Unless otherwise limited by court order, the scope of discovery is 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." Fed. R. Civ. P. 26(b)(1).
"The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." Fed. R. Civ. P. 26(c)(1). Rule 26(c)'s "good cause" requirement indicates that the party seeking a protective order has the burden "to show the necessity of its issuance, which contemplates a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements." In re Terra Intern., Inc., 134 F.3d 302, 306 (5th Cir. 1998).
Fed. R. Civ. P. 45 governs the issuance of subpoenas to obtain discovery from non-parties. The party issuing the subpoena "must take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena." Fed. R. Civ. P. 45(d)(1). On timely motion, the court must quash or modify a subpoena if it requires disclosure of privileged or other protected matter, or otherwise subjects the subpoenaed person to undue burden. Fed. R. Civ. P. 45(d)(3)(A)(iii)-(iv). The moving party has the burden of demonstrating that compliance with the subpoena would be unduly burdensome. See, Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 818 (5th Cir. 2004). To determine whether the third party subpoena presents an undue burden, a court considers the relevance of the information requested, the need for the information, the breadth of the requests, the time period covered by the request, the particularity with which the requested documents are described, and the burden imposed. Id. (citing Williams v. City of Dallas, 178 F.R.D. 103, 109 (N.D. Tex. 1998)). The court may also consider the expense and inconvenience caused to the third party, and may find undue burden when the subpoena is facially overbroad. Id.
In his affidavit, Smith explains that OHA engaged InforMD "to provide sales and service training" and "to assist with identifying potential clients for OHA"
Defendants' position is that "OHA was set up in order for InforMD and InforMD's principals (Daigle, Guidry, and Massengale) to avoid paying royalties that they owed to [Defendants] under the Settlement Agreement. Matthew Skellan, a member of OHA and InforMD, testified in his deposition that OHA was paid by pharmacies for work performed by InforMD."
The Document Subpoena issued to Mr. Smith seeks 12 categories of documents:
The court groups Defendants' document requests into four general categories: (1) requests seeking OHA's financial information (request numbers 1-5); (2) requests seeking information regarding sales and/or work performed by OHA (requests 6, 10, & 11); (3) requests seeking information regarding the general operations of OHA (requests 7-9); and (4) requests seeking Mr. Smith's personal financial information (request 12).
In Mr. Smith's September 16, 2016 objections, he asserts generally that each of these requests is vague, overbroad, and seeks documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence.
Defendants assert that InforMD and certain InforMD Parties used OHA as an "end run" around their alleged obligation to pay Defendants pursuant to the Settlement Documents. Defendants argue that InforMD, rather than OHA, performed certain work but that OHA was paid for that work. Accordingly, the court finds that Defendants' requests for documents seeking OHA's financial information
During the December 20, 2016 hearing, counsel for Mr. Smith asserted that the following documents do not exist and have never existed: (1) monthly financial statements as requested in request 2; (2) a reconciliation as requested in request 5; (3) sales reports as requested in request 6; (4) resolutions of OHA as requested in request 8; (5) minutes of meetings as requested in request 9; and (6) employment agreements as requested in request 10. Counsel for Smith further asserted that Smith could produce the following documents by the end of the week of the hearing: (1) a year-end profit and loss statement in response to request 2; (2) federal tax returns with the names of certain OHA members who are not parties to the Underlying Action redacted in response to request 4; (3) operating agreements in response to request 7; and (4) documents detailing or describing any payments of sales commissions made by OHA in response to request 11. In light of these assertions, the court GRANTS Defendants Motion to Compel responses to requests 2, 4, 5, 6, 7, 8, 9, 10, and 11. The court ORDERS Smith to produce the documents responsive to these requests as discussed during the December 20, 2016 hearing no later than Friday, January 6, 2017. To the extent documents responsive to these requests do not exist, have never existed, and/or are not in Smith's possession, custody, or control, the court ORDERS Smith to submit a verification so stating by Friday, January 6, 2017.
During the hearing, counsel for Smith continued to object to production of any bank statements or general ledgers (request numbers 1 and 3), as well as production of Mr. Smith's K-1 (request number 12). With regard to the bank statements and the general ledger (request numbers 1 and 3), counsel for Smith asserted that these documents contain confidential information regarding other members of OHA as well as information irrelevant to the Underlying Action (including information regarding OHA's mergers and acquisitions consulting work) and that Defendants could obtain the information necessary for their damage calculation via review of other documents. During the hearing, Mr. Stevens explained that OHA's bank statements would be used to verify OHA transactions, and that while the general ledger would likely provide the best information for calculating Defendants' alleged damages, it also likely contained irrelevant information regarding transactions which would not be subject to the Settlement Agreement. Further, Mr. Stevens indicated that he may be able to perform his calculations without general ledger and bank statements. In light of these assertions, the court DENIES Defendants' Motion to Compel production of documents responsive to requests 1 and 3 without prejudice. Following Defendants' review of documents produced in response to requests 2, 4, 5, 6, 7, 8, 9, 10, and 11, Defendants may re-urge a motion to compel production of documents responsive to requests 1 and 3. Any such motion must specifically explain the need for the additional documents in light of the documents already produced.
Finally, with respect to request number 12, the court agrees with Mr. Smith that the request improperly seeks Mr. Smith's personal financial information and that Defendants have "demonstrated no connection between Mr. Smith's personal finances and their clams and defenses in the [Underlying Action]."
As discussed above, the court grants Defendants' Motion to Compel Mr. Smith's responses to the Document Subpoena in part. Accordingly, the court also finds that deposing Mr. Smith following production of the compelled documents is reasonable and relevant. Pursuant to Fed. R. Civ. P. 44(c)(1) and (c)(1)(A), "[a] subpoena may command a person to attend a . . . deposition . . . within 100 miles of where the person resides, is employed, or regularly transacts business in person." The court understands that Smith resides in North Carolina.
Accordingly, Defendants' Motion to Compel Mr. Smith's deposition is GRANTED. This court ORDERS Smith to appear for his deposition at a mutually agreeable location in North Carolina at a date and time to be set be the parties.
Finally, Defendants have moved for an order "requiring Smith to appear and show cause why he should not be held in contempt for his noncompliance with the Subpoena for Deposition. . . ."
Although Smith has waived his objections to service of process for purposes of quashing the Subpoenas, the court does not read that waiver as an admission that Smith was properly served with the Deposition Subpoena on September 11, 2016. Pursuant to Fed. R. Civ. Proc. 45(b)(1), "[s]erving a subpoena requires delivering a copy to the named person and, if the subpoena requires that person's attendance, tendering the fees for 1 day's attendance and the mileage allowed by law." In In re Dennis, 330 F.3d 696, 704 (5th Cir. 2003), the Fifth Circuit explained that "[t]he conjunctive form of [Rule 45] indicates that proper service requires not only personal delivery of the subpoena, but also tendering of the witness fee and a reasonable mileage allowance." Because the mileage allowance was not tendered simultaneously with the witness fee, the In re Dennis court found that the subpoena was not properly served.
Here, it appears that Smith was not personally served with the Subpoenas and that the fees for Smith's attendance and mileage were not provided. To the extent the Subpoenas were technically invalid based on failure to pay the fees for Mr. Smith's attendance and mileage, this court has allowed such defects to be cured. See, Adams v. Dolgencorp, LLC, 2012 WL 1867123, at *1 (M.D. La. May 22, 2012) (noting that subpoena to non-party "without the witness fee is technically invalid;" however, such defect can be cured). However, in light of these deficiencies, the court will not impose sanctions upon Smith for his failure to appear at his previously scheduled deposition, nor will the court require Smith to pay for Defendants' counsel to travel to North Carolina for his to-be-scheduled deposition. Accordingly, Defendants' request for sanctions is DENIED.
For the reasons set forth herein, Defendants' Motion to Compel Appearance for Deposition of Non-Party and Responses to Subpoena for Production of Documents and Order to Show Cause
Defendants' Motion to Compel production of documents pursuant to Document Subpoena requests 2, 4, 5, 6, 7, 8, 9, 10, and 11 is
P. Cosmo Smith's Motion to Quash Document Subpoena requests 2, 4, 5, 6, 7, 8, 9, 10, and 11 is accordingly
Defendants' Motion to Compel production of documents pursuant to Document Subpoena requests 1, 3, and 12 is
Defendants' Motion to Compel P. Cosmo Smith's attendance at his deposition is
Defendants' request for sanctions is
The court will send a copy of this Ruling and Order to counsel for Mr. Smith by facsimile using the information provided in Mr. Smith's Motion to Quash. The Ruling and Order shall be sent to Teri M. Sherman, via facsimile at (215) 568-6603, and Robert H. Jessup, via facsimile at (919) 821-7703.