General Electric Capital Corporation v. Rhino Business Systems, Inc.

Filing 20

ORDER signed by District Judge Kimberly J. Mueller on 4/13/16 ORDERING that (1) GE Capital's Motion to Expedite Discovery is granted and (2) A subpoena commanding Scott McFadden to appear for deposition may issue. (Becknal, R)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware Corporation,
Plaintiff,

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No. 2:16-cv-00029-KJM-CMK

ORDER
v.
RHINO BUSINESS SYSTEMS, INC., a
California Corporation,
Defendant.

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Plaintiff GE Electric Capital Corporation (GE Capital) has filed an unopposed

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Motion for an Order Expediting Discovery to (1) allow GE Capital to depose the principal of

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defendant Rhino Business Systems, Inc. (Rhino), Scott McFadden, and (2) allow additional

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discovery for the purpose of documenting the flow of funds from any disposition of Rhino’s

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customers’ accounts and assets. Mot., ECF No. 8. Rhino’s customers are those persons or

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entities who purchased or leased office equipment from Rhino and for whom GE Capital

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provided financing.

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On January 1, 2016, GE Capital filed the complaint against Rhino, alleging breach

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of contract. See generally ECF No. 1. GE Capital seeks no less than $477,527.23 for Rhino’s

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breach of their Strategic Alliance Agreement (Agreement). ECF No. 1, Ex. A. Rhino was
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subsequently served with the complaint and a summons to appear on January 20, 2016, but has

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yet to respond to the complaint, or to appear. ECF No. 6. GE Capital argues in its separate

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Motion for Right to Attach Order and Writ of Attachment that Rhino has either sold or intends to

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sell substantially all its assets to a company called Ray Morgan RMC, Inc. (Morgan). ECF No. 7

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at 3. GE Capital further argues Morgan has informed certain persons or entities who had

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previously entered into financial arrangements with GE Capital that they no longer need to satisfy

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their obligations to GE Capital. Id. At the hearing for the Motion for Right to Attach Order and

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Writ of Attachment held on March 25, 2016, GE Capital argued that time is of the essence

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because Rhino is out of business, and its assets may have already been sold to Morgan or

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otherwise dissipated. GE Capital noted the opaque nature of Rhino and its actions at this time,

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and the possible existence of other parties it will seek to join to this action.

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GE Capital seeks expedited discovery in an effort to promptly resolve all claims

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against Rhino and identify other potential parties so that only a single proceeding is necessary.

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Generally, Rule 26(d) of the Federal Rules of Civil Procedure provides that “[a]

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party may not seek discovery from any source before the parties have conferred as required by

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Rule 26(f), except . . . when authorized by these rules, by stipulation, or by court order.”

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Fed. R. Civ. P. 26(d). Courts apply a “good cause” standard in considering motions to expedite

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discovery, and parties seeking expedited discovery in advance of a Rule 26(f) conference have the

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burden of showing good cause. New Sensations, Inc. v. Does 1-306, No. 12-1885 GEB EFB,

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2012 WL 5031651, at *2 (E.D. Cal. Oct. 17, 2012); Semitool, Inc. v. Tokyo Electron Am., Inc.,

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208 F.R.D. 273, 276 (N.D. Cal. 2002).

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“Good cause may be found where the need for expedited discovery, in

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consideration of the administration of justice, outweighs the prejudice to the responding party.”

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Id. In determining whether good cause justifies expedited discovery, courts commonly consider

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factors including: “(1) whether a preliminary injunction is pending; (2) the breadth of the

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discovery requests; (3) the purpose for requesting the expedited discovery; (4) the burden on the

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defendants to comply with the requests; and (5) how far in advance of the typical discovery

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/////
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process the request was made.” American LegalNet, Inc. v. Davis, 673 F. Supp. 2d 1063, 1067

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(C.D. Cal. 2009).

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In this case though there is no preliminary injunction pending, there is a pending

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early Motion for Right to Attach Order and Writ of Attachment by which GE Capital seeks to

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attach a potentially diminishing pool of assets. GE Capital seeks fairly narrow discovery from

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Rhino, requesting only the deposition of Mr. McFadden and limited discovery to document the

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stream of revenue from the equipment GE Capital helped finance. The possible sale of all or

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substantially all Rhino assets to Morgan and the barrage of customer complaints GE Capital avers

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it has received provides a reasonable basis for the request. Because Rhino has not yet appeared or

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responded, it cannot claim to be unduly burdened. Lastly, GE Capital cannot reasonably proceed

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with this lawsuit without ascertaining the proper parties and claims. The court finds GE Capital’s

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motion is supported by good cause.

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Accordingly, IT IS HEREBY ORDERED that:

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(1) GE Capital’s Motion to Expedite Discovery is granted and

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(2) A subpoena commanding Scott McFadden to appear for deposition may issue.

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IT IS SO ORDERED.

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DATED: April 13, 2016.

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UNITED STATES DISTRICT JUDGE

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