Monterey Bay Military Housing, LLC et al v. Pinnacle Monterey LLC et al

Filing 163

ORDER Re: Discovery Dispute Joint Report #5 122 . Signed by Magistrate Judge Howard R. Lloyd on 4/2/2015. (hrllc1, COURT STAFF) (Filed on 4/2/2015)

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*E-Filed: April 2, 2015*

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

NOT FOR CITATION

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United States District Court

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SAN JOSE DIVISION

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MONTEREY BAY MILITARY HOUSING,
LLC; et al.,

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Plaintiffs,
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No. C14-03953 BLF (HRL)
ORDER RE: DISCOVERY DISPUTE
JOINT REPORT #5

v.
[Re: Docket No. 122]

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PINNACLE MONTEREY LLC; et al.,

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Defendants.
____________________________________/

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Plaintiffs sue Defendants for “a series of systematic frauds” relating to Defendants’
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management of military housing at the Presidio of Monterey and Fort Irwin. Fourth Am. Compl. ¶
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2. Non-party Lincoln Military Housing (“LMH”) manages privatized military housing facilities
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located in California and has obtained property and general liability insurance for the properties it
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manages.
In November 2014, Defendants served a subpoena duces tecum on various LMH entities.

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LMH provided Pinnacle with written objection to the subpoena pursuant to Federal Rule of Civil
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Procedure 45(d)(1) and (d)(2)(B), arguing that it would be burdensome to produce documents
responsive to each of Pinnacle’s requests. Pinnacle subsequently narrowed the scope of the

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subpoena to request documents sufficient to show the cost of property and general liability
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insurance on a per-unit or per $100 of total insured value basis incurred for each of the projects
defined by the subpoena. LMH objects to the subpoena as narrowed on the basis that the

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information sought is not relevant and contains confidential and proprietary business information.

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In Discovery Dispute Joint Report #5, Pinnacle seeks an order compelling LMH to comply with the

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narrowed scope of the subpoena. LMH argues that the subpoena should be quashed on the grounds

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that (1) the documents sought are not relevant to the issues in this action, and (2) the documents

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sought constitute confidential and sensitive business information of a competitor.

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Rule 45 of the Federal Rules of Civil Procedure authorizes the issuance of a subpoena

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commanding a non-party to attend and testify; produce designated documents, electronically stored

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information, or tangible things in that non-party’s possession, custody or control; or permit the

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inspection of premises. Fed. R. Civ. P. 45(a)(1)(A)(iii). The scope of discovery through a Fed. R.

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Civ. P. 45 subpoena is the same as that applicable to Fed. R. Civ. P. 34 and the other discovery

For the Northern District of California

United States District Court

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rules. Fed. R. Civ. P. 45 advisory committee’s note (1970).
Parties may obtain discovery about any nonprivileged matter that is relevant to any party’s

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claim or defense. Fed. R. Civ. P. 26(b)(1). “Relevance under Rule 26(b)(1) is construed more

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broadly for discovery than for trial.” Truswal Sys. Corp. v. Hydro-Air Eng’g, Inc., 813 F.2d 1207,

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1211 (Fed. Cir. 1987). “Relevant information need not be admissible at the trial if the discovery

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appears reasonably calculated to lead to the discovery of admissible evidence.” Fed. R. Civ. P.

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26(b)(1).

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Discovery is not unfettered, however. A court must limit the extent or frequency of

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discovery if it finds that (a) the discovery sought is unreasonably cumulative or duplicative or can

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be obtained from a source that is more convenient, less burdensome or less expensive; (b) the party

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seeking discovery has had ample opportunity to obtain the information through discovery; or (c) the

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burden or expense of the discovery sought outweighs its likely benefit, considering the needs of the

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case, the amount in controversy, the parties’ resources, the importance of the issues at stake, and the

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importance of the discovery in resolving those issues. Fed. R. Civ. P. 26(b)(2)(C)(i)-(iii).

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Fed. R. Civ. P. 45(d)(3)(B) provides that the court may quash or modify a subpoena if it

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requires: “(i) disclosing a trade secret or other confidential research, development, or commercial

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information; or (ii) disclosing an unretained expert’s opinion or information that does not describe

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specific occurrences in dispute and results from the expert’s study that was not requested by a

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party.” Additionally, Fed. R. Civ. P. 45(c)(3) provides that the court must quash or modify a

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subpoena that imposes an undue burden.

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The claims in this action fall under three main categories: (1) that Pinnacle concealed its use

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of military projects in the Master Insurance Plan to subsidize the insurance rates paid for personal

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assets owned by several of the defendants; (2) that Pinnacle concealed the payment to itself of

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administrative fees and surplus from a general liability loss fund the details of which defendants

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never fully disclosed; and (3) that Pinnacle concealed the fee it paid itself in connection with

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renter’s insurance.

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The narrowed subpoena seeks information that is not relevant or calculated to lead to the

For the Northern District of California

United States District Court

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discovery of admissible evidence. The subpoena requests documents fundamentally unrelated to the

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underlying claims in that it (1) seeks documents relating not to Monterey or Irwin, but to any

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“privatized military housing units in California owned or managed by recipient of subpoena,” and

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(2) seeks documents concerning the procurement of insurance by a different property manager, with

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a different portfolio makeup, under different conditions, under a different set of property

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management agreements.

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In addition, the documents and information sought by the subpoena seeks confidential

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information from a nonparty competitor relating to its business operations. Pinnacle’s narrowed

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subpoena seeks LMH’s insurance submissions to the market that contain information about LMH’s

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business operations and business practices that is otherwise not public. For example, Pinnacle seeks

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a “listing of properties and values provided for each renewal of insurance at the Project.” This

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contains sensitive and confidential information about the properties LMH manages (i.e. locations,

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values, loss history, of properties owned/managed by LMH and insurance rating information).

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Nonparty discovery may not be used unnecessarily to discover confidential information of a

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competitor. See United States v. CBS, Inc., 103 F.R.D. 365, 368 (C.D. Cal. 1984) (finding that

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“[t]he need to protect the Nonparty Witnesses from disclosure of [confidential or privileged]

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information was particularly acute in this case because the defendants and the Nonparty Witnesses

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are direct competitors and customers”).

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Accordingly, Pinnacle’s request for an order compelling LMH to comply with the narrowed
scope of the subpoena is denied. LMH’s request to quash the subpoena is granted.
IT IS SO ORDERED.
Dated: April 2, 2015
HOWARD R. LLOYD
UNITED STATES MAGISTRATE JUDGE

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For the Northern District of California

United States District Court

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C14-03953 BLF (HRL) Notice will be electronically mailed to:

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Alice Y Chu

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Amanda D. Donson

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Andrew Lee Mathews

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Cindy Hamilton

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Daniel G. Hildebrand

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Donna Marie Welch [e-mail], [e-mail],
[e-mail], [e-mail]

[e-mail], [e-mail], [e-mail]
[e-mail], [e-mail], [e-mail]
[e-mail]

[e-mail], [e-mail], [e-mail]
[e-mail]

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Douglas R. Young

[e-mail], [e-mail]

Ian David Burkow

[e-mail]

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For the Northern District of California

United States District Court

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Jeffrey L. Willian [e-mail], [e-mail],
[e-mail], [e-mail]

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Jessica Jane Bluebond-Langner

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Kara L. Arguello

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Karen P. Kimmey

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Lindsay Erin Hutner

[e-mail], [e-mail], [e-mail]

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Marc Howard Cohen

[e-mail]

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Thomas Edward Dutton

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William J. Goines

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Yates McLaughlin French

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Counsel are responsible for distributing copies of this document to co-counsel who have not
registered for e-filing under the court’s CM/ECF program.

[e-mail]

[e-mail], [e-mail]
[e-mail], [e-mail], [e-mail]

[e-mail], [e-mail]

[e-mail], [e-mail], [e-mail]
[e-mail]

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