First Financial Security, Inc. v. Jones et al

Filing 50

ORDER DENYING 47 DEFENDANTS' MOTION FOR RELIEF FROM NONDISPOSITIVE PRETRIAL ORDER. Signed by Judge Beth Labson Freeman on 8/11/2017. (blflc2S, COURT STAFF) (Filed on 8/11/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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FIRST FINANCIAL SECURITY, INC.,
Plaintiff,

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v.

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United States District Court
Northern District of California

Case No. 17-cv-00773-BLF

MICHAEL W JONES, et al.,

ORDER DENYING MOTION FOR
RELIEF FROM NONDISPOSITIVE
PRETRIAL ORDER

Defendants.

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Before the Court is Defendants’ motion for relief from a nondispositive order (“Order”)1

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issued by Magistrate Judge Nathanael M. Cousins, which granted Plaintiff’s discovery request for

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documents from third party Fidelity & Guaranty Life Insurance Company (“Fidelity”). See Order,

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ECF 44; Mot., ECF 47. Plaintiff First Financial Security, Inc. (“Plaintiff”) is a life insurance

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brokerage agency that brings claims against Defendants for allegedly orchestrating a mass

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resignation of 1,400 licensed insurance sales contractors who left to work for Plaintiff’s

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competitor, non-party FEG. As part of its damages theory, Plaintiff seeks disgorgement of

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Defendants’ profits through sales by the team of contractors previously employed by Plaintiff. On

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June 20, 2017, Plaintiff served a subpoena duces tecum (“subpoena”) on Fidelity with a

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compliance date of July 7, 2017. Defendants filed a motion to quash the subpoena, which was

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denied without prejudice, and the parties filed a joint discovery letter brief on the issue. ECF 40.

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Defendants mischaracterize their request as an objection to the Magistrate Judge’s “Report and
Recommendation.” ECF 47. Judge Cousins’ order is a nondispositive pretrial order that is
properly governed by Federal Rule of Civil Procedure 72(a).

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Judge Cousins issued the order granting Plaintiffs’ discovery request on July 21, 2017. ECF 44.

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The Court has considered Judge Cousins’ order and Defendants’ motion. For the reasons

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discussed below, the motion is DENIED.

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I.

LEGAL STANDARD
A district court may refer nondispositive pretrial matters to a magistrate judge under

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28 U.S.C. § 636(b)(1)(A). The district court “may reconsider any pretrial matter under this

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subparagraph (A) where it has been shown that the magistrate judge’s order is clearly erroneous or

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contrary to law.” 28 U.S.C. § 636(b)(1)(A); see also Fed. R. Civ. P. 72(a). On review of a

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nondispositive order, “the magistrate’s factual determinations are reviewed for clear error, and the

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magistrate’s legal conclusions are reviewed to determine whether they are contrary to law.” Perry

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United States District Court
Northern District of California

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v. Schwarzenegger, 268 F.R.D. 344, 348 (N.D. Cal. 2010). This standard is highly deferential –

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the district judge may not simply substitute his or her judgment for that of the magistrate judge.

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Grimes v. City and Cnty. of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991).
When a discovery order centers on a magistrate’s determination of relevance, “the standard

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of review in most instances is not the explicit statutory language, but the clearly implicit standard

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of abuse of discretion.” Geophysical Sys. Corp. v. Raytheon Co., Inc., 117 F.R.D. 646, 647

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(C.D.Cal.1987). The court should not disturb the magistrate’s relevance determination except

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where it is based on “an erroneous conclusion of law or where the record contains no evidence on

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which [the magistrate] rationally could have based that decision.” Wolpin v. Philip Morris Inc.,

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189 F.R.D. 418, 422 (C.D. Cal. 1999) (citation omitted). The implicit abuse of discretion standard

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does not apply to portions of a magistrate judge’s discovery order not concerned with relevance.

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Perry, 268 F.R.D. at 348; accord Wolpin, 189 F.R.D. at 422–23.

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II.

DISCUSSION
Judge Cousins’ Order stems from Plaintiff’s efforts to obtain discovery from third party

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Fidelity regarding the amounts Defendants received from selling their products through Plaintiff’s

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former team of contractors. Defendants argue that the subpoena is premature and seeks irrelevant

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documents. Joint Discovery Letter 1, ECF 40. On July 21, 2017, Magistrate Judge Cousins

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granted Plaintiff’s discovery request, subject to the entry of a protective order in this action. See
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Order, ECF 44. The parties entered a stipulated protective order on July 31, 2017. ECF 46. Judge

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Cousins determined that Defendants’ concerns could be addressed by a protective order, and

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determined that the “far off” discovery deadline did not render Plaintiff’s request premature.

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Order, ECF 44.

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In filing this motion for relief, Defendants request this Court to modify Judge Cousins’
order and quash the subpoena for lack of relevance, which they claim Judge Cousins failed to

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address in his order. Mot., ECF 47. The scope of discovery under the Federal Rules of Civil

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Procedure is extremely broad. “Parties may obtain discovery regarding any nonprivileged matter

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that is relevant to any party’s claim or defense…Information within this scope of discovery need

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not be admissible in evidence to be discoverable.” Fed. R. Civ. P. 26(b)(1). A relevant matter is

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United States District Court
Northern District of California

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“any matter that bears on, or that reasonably could lead to other matters that could bear on, any

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issue that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, 98

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S.Ct. 2380, 2389, 57 L.Ed.2d 253 (1978). Relevancy “should be construed ‘liberally and with

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common sense’ and discovery should be allowed unless the information sought has no conceivable

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bearing on the case.” Soto v. City of Concord, 162 F.R.D. 603, 610 (N.D.Cal.1995) (citation and

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quotation omitted).

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In considering Defendants’ objections, this Court is to review the magistrate’s

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determination of relevance for abuse of discretion, and will only disturb the order if it is based on

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“an erroneous conclusion of law or where the record contains no evidence on which [the

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magistrate] rationally could have based that decision.” See EEOC v. Peters’ Bakery, 301 F.R.D.

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482, 484 (N.D. Cal. 2014) (quoting Wolpin, 189 F.R.D. 418, 422 (C.D. Cal. 1999). Plaintiff

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argued in the record before Judge Cousins that the documents sought from Fidelity are relevant to

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its damages theory. Joint Discovery Letter 1, ECF 40. While the Court recognizes that Judge

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Cousins did not explicitly address relevance, his determination that the documents sought are

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relevant to Plaintiff’s damages theory is clearly subsumed within the order granting Plaintiff’s

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request. Further, this Court’s independent review of the discovery request and the arguments

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made by both parties leads the Court to conclude that under the liberal standard for relevance, the

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documents Plaintiff requests are relevant and reasonably calculated to lead to the discovery of
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admissible evidence of damages. Judge Cousins did not abuse his discretion in his determination

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that the documents sought by Plaintiff are relevant. As for timing, Defendants have not shown

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prejudice that is not cured by the protective order.
For the foregoing reasons, the Court finds that Judge Cousins’ decision to allow the

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discovery subject to a protective order fell well within his discretion and was not clearly erroneous

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or contrary to law. The parties’ protective order should be able to adequately protect Defendants’

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concerns regarding the confidential and sensitive financial nature of the documents. Moreover,

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Fidelity itself has the right to object or file a third party motion to quash the subpoena. To the

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extent Plaintiff attempts to disclose the discovery publicly, Defendants have the right to file a

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motion to seal the documents. Accordingly, the motion for relief from Judge Cousins’ order is

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United States District Court
Northern District of California

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DENIED.

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IT IS SO ORDERED.

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Dated: August 11, 2017
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BETH LABSON FREEMAN
United States District Judge

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