ORDER GRANTING MOTION TO COMPEL, DIRECTING POSTING OF COLLATERAL, IMPOSING CIVIL SANCTION, DENYING IN PART MOTION TO QUASH, AND DIRECTING SUBMISSION OF STIPULATED PROTECTIVE ORDER

THOMAS L. LUDINGTON, District Judge.

I.

On March 14, 2016, Plaintiff Liberty Mutual Insurance Company filed a motion to compel Defendants to comply with this Court's June 15, 2016 Order directing Defendants to post $12,500,000 in cash collateral with Liberty on or before June 17. See Pl.'s Mot. Compel, ECF No. 60. This is the second motion to compel that Liberty has filed alleging non-compliance by Defendants with an order of this Court. See Pl.'s Mot. Compel, ECF No. 55.

As explained in the Court's June 15, 2016 Order, the posting of cash collateral by indemnitors (here, Defendants) is an important element to the operation of construction performance and completion bonds. This obligation exists under the bond contracts irrespective of the likelihood that the incomplete projects (which Defendants are admittedly unable to complete) will be profitable. It matters only that Liberty has received claims for payment from subcontractors. Liberty has no obligation to finance accounts payable on the construction projects with its own funds. The parties have bargained under the contract to assign that responsibility to Defendants. The June 15, 2016 Order puts into effect that obligation. Defendants, by representation of Liberty, have not complied with the directive to post cash collateral.

Defendants responded to Liberty's motion by claiming that they have been unable to post the necessary collateral because it has been difficult to secure appropriate financing. This is Defendants' first representation that they are unable to meet the posting requirement in the bond. Defendants represent that they "need additional time to pursue possible financing. Otherwise, bankruptcy is likely." Pl.'s Resp. 2, ECF No. 65. That may be, but because Defendants have not sought the protections of a bankruptcy proceeding, they are still under court order to post the required collateral. They concede that they have not complied with the Court's order.

Plaintiff's motion to compel compliance will be granted. Defendants will be given one week from the entry of this order to post the required $12.5 million in collateral. If Defendants do not post collateral within one week, they will be subject to a daily $2,500 civil sanction, to be paid to Plaintiff. Plaintiff shall file a notice on the Court's docket when Defendants meet their collateral posting requirement.

II.

On June 29, 2016, Defendants filed a motion to quash or, alternatively, for a protective order. ECF No. 63. Defendants seek to quash a subpoena that Plaintiff served upon First Federal of Northern Michigan seeking 20 years of information concerning Defendants' assets and liabilities (including personal financial information). Defendants argue that the subpoena is unduly burdensome, overbroad, and irrelevant.

Under Rule 26, "[p]arties 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." Fed. R. Civ. P. 26(b)(1). Defendants concede that this information is relevant to Plaintiff's claims because this Court entered an order permitting discovery into Defendants' assets for the purposes of determining Defendants' ability to meet their collateral posting requirement. Defendants stand as indemnitors on the bond agreements with Plaintiff. Thus, any losses incurred by Plaintiff must be borne by Defendants. That is part of the rationale behind the collateral posting requirement. Thus, the financial health of Defendants is entirely relevant. Defendants' motion to quash will be denied.1

Defendants also seek a protective order. Because discovery into the finances of Defendants may raise sensitive information related to both Defendants and non-parties, a protective order against the public disclosure of personal financial information is appropriate. The parties will be directed to submit a stipulated protective order setting forth terms for the disclosure and use of such information.

III.

Accordingly, it is ORDERED that Plaintiff Liberty Mutual's Motion to Compel, ECF No. 60, is Granted.

It is further ORDERED that Defendants are DIRECTED to post collateral with Liberty Mutual in the amount of $12,500,000.00 on or before August 4, 2016. Beginning on August 5, 2016, Defendants are subject to a daily civil sanction of $2,500 for each day they do not post the required collateral with Plaintiff Liberty. Defendants are to pay any sanction amount to Plaintiff Liberty the day it becomes due.

It is further ORDERED that Defendants' Motion to Quash, ECF No. 63, is DENIED in part.

It is further ORDERED that the parties are DIRECTED to submit a stipulated protective order in compliance with the terms set forth above on or before August 1, 2016.