DNC PARKS & RESORTS AT YOSEMITE, INC v. USA

Filing 123

REPORTED OPINION (Public Version) of the court's April 12, 2018 Opinion and Order issued under seal (see ECF No. 120 ). Signed by Judge Patricia E. Campbell-Smith. (TQ) Service on parties made.

In the United States Court of Federal Claims
No. 15-1034C
(E-Filed: April 25, 2018)1
DNC PARKS & RESORTS AT
YOSEMITE, INC.,
Plaintiff,
v.
THE UNITED STATES,
Defendant,
v.
YOSEMITE HOSPITALITY, LLC,
Third-Party Defendant.

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)
)
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)
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) Motion to Compel, RCFC 37(a)(3)(B);
) Motion to Quash, RCFC 45(d)(3), Motion
) for Protective Order, RCFC 26(c).
)
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)
)
)
)
)
)
)

Thomas P. McLish, Washington, DC, for plaintiff.
John H. Roberson, Trial Attorney, with whom were Chad A. Readler, Acting Assistant
Attorney General, Robert E. Kirschman, Jr., Director, and Claudia Burke, Assistant
Director, Commercial Litigation Branch, Civil Division, United States Department of
Justice, Washington, DC, for defendant.
Elliott J. Stein, Lawrenceville, NJ, for non-party movant.
OPINION & ORDER
CAMPBELL-SMITH, Judge.
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This opinion and order was issued under seal on April 12, 2018. On April 20,
2018, the parties notified the court that no redactions were necessary, ECF No. 122.
Thus, the sealed and public versions of this opinion are identical, except for the
publication date, this footnote, and several typographical errors.

Three discovery motions are currently before the court: (1) defendant’s motion to
compel testimony and documents from non-party Domain Assets, LLC a/k/a CONSOR
Intellectual Asset Management (CONSOR), pursuant to Rule 37(a)(3)(B) of the Rules of
the United States Court of Federal Claims (RCFC), ECF No. 79; (2) plaintiff’s crossmotion to quash and for protective order, pursuant to RCFC 45(d)(3), ECF No. 80; and
(3) CONSOR’s motion to quash and for protective order, pursuant to RCFC 26(c), ECF
No. 100. The motions are fully briefed and ripe for a ruling. For the following reasons,
defendant’s motion is DENIED, plaintiff’s cross-motion is GRANTED, and CONSOR’s
motion is GRANTED.
I.

Background

In September 1993, the parties entered into a contract whereby plaintiff would
provide concession services to a variety of facilities in Yosemite National Park. See Am.
Compl., ECF No. 13 at 2. The contract had an initial term of fifteen years, until
September 30, 2008. The contract was renewed several times, and ultimately expired on
February 29, 2016. See id. Since that time, the concessions have been operated by
Yosemite Hospitality, LLC, the third-party defendant in this case. See ECF No. 50 at 6.
Plaintiff alleges that defendant breached its obligation to ensure that the thirdparty defendant purchased certain intellectual property at a fair price upon termination of
plaintiff’s contract. See Am. Compl., ECF No. 13 at 22-23. In addition, plaintiff alleges
that defendant’s failure to ensure the purchase of that property was a breach of the
covenant of good faith and fair dealing, see id. at 23-24, as well as a violation of the
terms of the prospectus that governed the solicitation of the new concessions contract, see
id. at 24-25.
In 2010, plaintiff hired CONSOR to value its property prior to the termination of
its contract. See ECF No. 80 at 8-9. CONSOR’s valuation was the subject of much
negotiation between plaintiff and defendant, and in the context of those negotiations,
plaintiff provided the CONSOR report itself, in its entirety, to defendant in December
2014. See ECF No. 90 at 7. Defendant now seeks discovery from CONSOR, in the form
of both testimony and documents related to CONSOR’s valuation of plaintiff’s
intellectual property. See ECF No. 79 at 3. Defendant requests extensive and detailed
information relating to the terms of CONSOR’s engagement, all related communications,
as well as the documents and methods used to arrive at its valuation figures. See ECF
No. 79-1 at 82-98. CONSOR has not complied with the discovery requests, prompting
defendant to file the instant motion to compel, ECF No. 79.
Defendant argues that additional discovery related to this report is appropriate
because: “The requested testimony and documents are critical to understanding the basis
of and rebutting DNCY’s claim that it is owed $44 million for its intellectual property
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assets and are, in any event, entirely relevant to DNCY’s historic valuation of its
intellectual property.” ECF No. 79 at 3. Defendant also argues that the discovery it
seeks is relevant to two of the third-party defendant’s affirmative defenses: (1) that the
third-party defendant acted reasonably in relying on defendant’s valuation of plaintiff’s
property, and (2) that plaintiff has unclean hands for failing to disclose the value of its
trademarks earlier than it did. See ECF No. 90 at 8 (citing third-party defendant’s
answer, ECF No. 64 at ¶¶ 194, 198). Plaintiff, however, contends that the 2010
CONSOR report is irrelevant to the current litigation because, as it has repeatedly
informed defendant, plaintiff does not intend to rely on the 2010 CONSOR valuation as
the basis for its alleged damages in this case. See ECF No. 80 at 13. Plaintiff also
opposes the discovery requests on the grounds that CONSOR is a non-testifying expert,
and the information sought is privileged. See ECF No. 80 at 15-22.
As part of its response to defendant’s motion to compel, plaintiff cross-moves to
quash the subpoena and seeks a protective order. See ECF No. 80. CONSOR has also
filed a non-party motion to quash the subpoena for several of the same reasons articulated
by plaintiff. See ECF No. 100 at 13-19 (arguing that CONSOR is a non-testifying expert
and that the information sought is privileged). CONSOR also seeks a protective order
proscribing further discovery by the United States of the communications
between the Plaintiff and CONSOR and the documents prepared by or related
to CONSOR’s work for Plaintiff pursuant to CONSOR’s engagement
agreement dated March 24, 2010 with Paul, Weiss, Rifkind, Warton &
Garrison LLP and Confidential Retention Letters between CONSOR and
Plaintiff dated July 9, 2014 and December 2, 2014.
Id. at 19.
II.

Legal Standards

The rules of this court include a number of sections relating to allowable discovery
and the conduct thereof. While discovery rules “are to be accorded a broad and liberal
treatment[,] . . . discovery, like all matters of procedure, has ultimate and necessary
boundaries.” Hickman v. Taylor, 329 U.S. 495, 507 (1947); see also Micro Motion, Inc.
v. Kane Steel Co., 894 F.2d 1318, 1322 (Fed. Cir. 1990) (“While the Federal Rules of
Civil Procedure unquestionably allow broad discovery, a right to discovery is not
unlimited.”) (citations omitted).
The general scope of discovery in this court is defined, as follows:
[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, considering the importance of the issues at stake in the action, the
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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.
RCFC 26(b)(1). The court “must” limit discovery when the information sought “is
outside the scope permitted by RCFC 26(b)(1).” RCFC 26(b)(2)(C)(iii). Additional
sections of RCFC 26 proscribe discovery related to either materials created in
anticipation of litigation, of non-testifying experts. See RCFC 26(b)(3)-(4).
When a party refuses to comply with requests for relevant and non-privileged
information, including for deposition testimony, the party seeking the information may
move the court to issue an order compelling such compliance. See RCFC 37(a). If,
however, the party from whom discovery is sought believes the requests are improper,
that party may move the court to enter an appropriately tailored protective order. See
RCFC 26(c). When a request that falls outside the scope of permissible discovery is
made through service of a subpoena, the court may quash or modify the subpoena. See
RCFC 45(d)(3).
III.

Analysis

In seeking to compel extensive and detailed discovery responses from CONSOR
relating to its 2010 report, defendant asserts four bases for its contention that the
information sought is relevant, and therefore discoverable. First, defendant states the
information is “critical to understanding the basis of and rebutting [plaintiff’s] claim that
it is owed $44 million for its intellectual property assets.” ECF No. 79 at 3. Plaintiff,
however, represents to the court, and apparently has told defendant numerous times, that
it does not intend to use CONSOR’s 2010 valuation to support its claim for damages in
this litigation. See ECF No. 80 at 13. Instead, plaintiff plans to engage a different expert,
which will conduct its own evaluation. See id. As such, it is information related to the
new expert’s valuation, not CONSOR’s, which will be critical to understanding the basis
of plaintiff’s claim and to defendant’s rebuttal of its calculations.
Defendant further contends that details relating to the CONSOR valuation are
“needed to rebut [plaintiff’s] charge [that defendant] failed to act in good faith and fair
dealing regarding [plaintiff’s] efforts to recover the fair value of its property.” ECF No.
79 at 5. But defendant has failed to explain how information defendant did not possess at
the time the negotiations broke down could impact plaintiff’s claim that defendant failed
to act in good faith.
Second, defendant claims that the information it seeks is “entirely relevant to
[plaintiff’s] historic valuation of its intellectual property.” Id. at 3. It is, of course,
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tautological that a past valuation is relevant to historic valuations. The problem with
defendant’s position, however, is that if plaintiff does not plan to rely on CONSOR’s past
valuation, the court cannot see how the details surrounding the creation of that report are
relevant. To the extent that the new expert relies on “fundamental misconceptions and
errors,” as defendant alleges CONSOR did, defendant will have a full and fair
opportunity to challenge its conclusions. Id. at 6.
Third, defendant argues that the information it seeks is relevant to the third partydefendant’s affirmative defense that it acted reasonably in relying on defendant’s
valuation of plaintiff’s property. See ECF 90 at 8. As with the claim for breach of good
faith and fair dealing, however, a defense that the third-party defendant acted reasonably
must necessarily be predicated on the facts known to it at the time of its actions. Because
the details underlying CONSOR’s engagement were not within either defendant’s or
third-party defendant’s knowledge at the time of defendant’s valuation, those details are
not relevant to establishing the reasonableness of the third-party defendant’s reliance on
defendant’s valuation—even if that valuation was based, in part, on the CONSOR report.
And finally, defendant asserts that the information it seeks is relevant to the thirdparty defendant’s affirmative defense that plaintiff has unclean hands for failing to
disclose the value of its trademarks earlier than it did. See id. It states that the third-party
defendant “alleges that [plaintiff] surreptitiously registered Yosemite-related trademarks
and retained CONSOR in 2010 to value these trademarks, more than four years before
disclosing the existence of the valuation to [defendant] and after ‘[defendant] was well
into the process of drafting a new prospectus for a new concessioner contract.’” Id.
(quoting third-party defendant’s answer, ECF No. 64 at ¶ 198). Defendant fails to
explain, and the court does not see, how the far-reaching discovery it seeks from
CONSOR is relevant to this claim. The nature of the CONSOR engagement and the
documents and methods it used in evaluating plaintiff’s property do not relate to a claim
that plaintiff should have disclosed its assets at an earlier date than it did.
The court concludes that the discovery sought by defendant is not relevant to the
claims and defenses presently before the court. Therefore, the requests do not fall within
the permissible scope of RCFC 26(b)(1). Accordingly, the court hereby quashes the
subpoena, and shall enter an appropriately tailored discovery protective order, pursuant to
RCFC 26(c).
The court recognizes that the CONSOR report, which is already in defendant’s
possession, informed the parties’ negotiations in a significant way prior to this litigation.
The information defendant seeks from CONSOR, however, extends beyond what is
relevant to the claims and defenses presently before the court. If plaintiff seeks to use the
CONSOR report in a manner not currently anticipated, defendant may seek leave of court
to make renewed discovery requests related thereto.

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IV.

Conclusion
For the forgoing reasons:

(1)
Defendant’s motion to compel testimony and documents from non-party
CONSOR, ECF No. 79, is DENIED;
(2)
Plaintiff’s cross-motion to quash and for protective order, ECF No. 80, and
CONSOR’s motion to quash and for protective order, ECF No. 100, are GRANTED;
(3)
The following two subpoenas duces tecum that defendant issued on
CONSOR are hereby QUASHED: a deposition subpoena dated November 7, 2016; and,
an undated document subpoena served on or about January 6, 2017, ECF No. 79-1 at 8298; and
(4)
On or before April 30, 2018, counsel for the parties shall CONFER and
FILE a notice of filing to include the following two attachments:
(a)
An agreed-upon proposed discovery protective order, in accord with
the guidance set forth in this opinion; and
(b)
A redacted copy of this opinion, with any material deemed
proprietary marked out and enclosed in brackets, so that a copy of the opinion can then be
prepared and made available in the public record of this matter.
IT IS SO ORDERED.
s/ Patricia Campbell-Smith
PATRICIA CAMPBELL-SMITH
Judge

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