Pittsburgh Logistics Systems, Inc. v. GlobalTranz Enterprises, Inc.

Filing 42

ORDER granting in part and denying in part 27 Motion to Compel ; denying 27 Motion for Attorney Fees; denying without prejudice 36 Motion to Compel ; granting in part and denying in part 21 Motion to Compel. Signed by Magistrate Judge Patricia D. Barksdale on 5/25/2018. (Barksdale, Patricia)

United States District Court
Middle District of Florida
Jacksonville Division
PITTSBURGH LOGISTICS SYSTEMS, INC.,
Plaintiff,
V.

NO. 3:17-CV-8-J-32PDB

GLOBALTRANZ ENTERPRISES, INC.,
Defendant.

Order
Before the Court are three motions to compel discovery and award expenses:
one by Pittsburgh Logistics Systems, Inc. (“PLS”), Doc. 36, and two by GlobalTranz
Enterprises, Inc. (“GlobalTranz”), Docs. 21, 27. The motions are opposed, though some
issues have been resolved. Docs. 23, 30, 38. The Court heard arguments on January
25 and May 8. Docs. 24, 39. The discovery deadline is June 18. Doc. 41.
I.

Background
In the complaint, PLS alleges these facts.
PLS provides transportation logistics services. Doc. 1 ¶ 7. PLS spends

significant resources training account executives; gives them access to proprietary
and confidential information; and requires them to sign non-compete agreements that
restrict them for two years from using or disclosing confidential information,
providing competitive logistics services in North America, soliciting PLS customers,
and soliciting PLS employees to leave PLS. Doc. 1 ¶¶ 10–12.
GlobalTranz competes directly with PLS. Doc. 1 ¶ 13. As part of its business
model, GlobalTranz foregoes training and pirates experienced account executives

from competitors. Doc. 1 ¶ 13. GlobalTranz solicited PLS employees to leave PLS and
take PLS customers and confidential information with them despite that PLS warned
GlobalTranz they were bound by the non-compete agreements. Doc. 1 ¶¶ 16, 17.
In October 2016, PLS and GlobalTranz entered a confidential written
agreement. Doc. 1 ¶ 18. In the agreement, GlobalTranz promised to not disclose
confidential information acquired from PLS, to not disclose the nature or purpose of
the agreement, and to not solicit PLS employees for two years. Doc. 1 ¶ 19. To further
its continuing and unlawful recruitment of PLS employees, GlobalTranz used and
disclosed the confidential information. Doc. 1 ¶ 21.
Based on those allegations, PLS claims GlobalTranz tortiously interfered
with relationships with PLS customers and PLS account executives and breached the
agreement. Doc. 1 ¶¶ 30–39. PLS seeks declaratory relief, injunctive relief, damages,
costs, and attorney’s fees. Doc. 1 at 5–8. According to PLS’s expert, PLS has suffered
damages exceeding $20 million, including approximately $4 million in lost profits and
approximately $7 to $21 million in costs to recruit and train new employees.
In a prior motion, PLS moved to compel discovery from GlobalTranz. Doc. 12.
The Court denied the motion without prejudice to renewing any argument after the
parties conferred to resolve the matter. Doc. 17.
II.

Authority
Federal Rule of Civil Procedure 1 provides that the rules “should be construed,

administered, and employed by the court and the parties to secure the just, speedy,
and inexpensive determination of every action and proceeding.” The rule places
shared “responsibility to employ the rules in the same way.” Fed. R. Civ. P. 1,
Advisory Comm. Notes (2015 Amend.). “Effective advocacy is consistent with—and
indeed depends upon—cooperative and proportional use of procedure.” Id.

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Rule 26(b)(1) provides that a party “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 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.”
If an action is based on diversity jurisdiction, the forum state’s law controls
attorney-client privilege. Bradt v. Smith, 634 F.2d 796, 800 (5th Cir. Unit A 1981).
Under Florida law, “A client has a privilege to refuse to disclose, and to prevent any
other person from disclosing, the contents of confidential communications when such
other person learned of the communications because they were made in the rendition
of legal services to the client.” Fla. Stat. § 90.502(2). The privilege protects only
disclosures necessary to obtain informed legal advice. Genovese v. Provident Life and
Accident Ins. Co., 74 So. 3d 1064, 1067 (Fla. 2011). The burden of establishing the
privilege is on the person claiming it. Southern Bell Tel. & Tel. Co., 632 So. 2d 1377,
1383 (Fla. 1994).
Rule 33(b)(4), governing interrogatories, provides that grounds for objecting to
an interrogatory must be specific, and any ground not timely stated is waived unless
the court excuses untimeliness for good cause. Rule 34(b)(2)(B), governing requests
for production, provides, “For each item or category, the response must either state
that inspection and related activities will be permitted as requested or state with
specificity the grounds for objecting to the request, including the reasons.” The rule
further provides, “An objection must state whether any responsive materials are
being withheld on the basis of that objection. An objection to part of a request must
specify the part and permit inspection of the rest.” Fed. R. Civ. P. 34(b)(2)(C). A party
must respond in writing to an interrogatory or request for production within 30 days
of service. Fed. R. Civ. P. 33(b)(2); 34(b)(2)(A). “Nowhere in the rules is it provided
that a litigant may, at his option, just ignore interrogatories and similar discovery
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documents. A party who does so, does so at the peril of inviting drastic remedy.”
Dorrough v. Mullikin, 563 F.2d 187, 191 (5th Cir. 1977).
Rule 37(a) provides that a party may move for an order compelling disclosure
of discovery, including if a party fails to respond or provides evasive or incomplete
responses to interrogatories or requests for production. If a court grants a motion to
compel discovery, or discovery is provided after its filing, “the court must, after giving
an opportunity to be heard, require the party … whose conduct necessitated the
motion, the party or attorney advising that conduct, or both to pay the movant’s
reasonable expenses incurred in making the motion, including attorney’s fees.” Fed.
R. Civ. P. 37(a)(5)(A). “But the court must not order this payment if: (i) the movant
filed the motion before attempting in good faith to obtain the disclosure or discovery
without court action; (ii) the opposing party’s nondisclosure, response, or objection
was substantially justified; or (iii) other circumstances make an award of expenses
unjust.” Fed. R. Civ. P. 37(a)(5)(A)(i−iii). Nondisclosure, a response, or an objection is
substantially justified if reasonable people could differ on its appropriateness.
Maddow v. Proctor & Gamble Co., Inc., 107 F.3d 846, 853 (11th Cir. 1997). “If the
motion is granted in part and denied in part, the court may …, after giving an
opportunity to be heard, apportion the reasonable expenses for the motion.” Fed. R.
Civ. P. 37(a)(5)(C).
III.

Analysis

A.

PLS’s Motion to Compel
PLS’s motion to compel concerns communications between GlobalTranz and

PLS employees allegedly recruited by GlobalTranz, communications among the “deal
team” involved in the failed transaction underlying the October 2016 confidential
written agreement, redactions in produced documents unsupported by a privilege log,
information about customers for whom former PLS employees worked while
associated with GlobalTranz, and Rule 30(b)(6) testimony. Doc. 36.
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As stated in GlobalTranz’s response and discussed at the May 8 hearing, most
issues in the motion appear to have been resolved through discovery provided after
filing the motion (including thousands of pages provided just a few business days
before the May 8 hearing). An unresolved issue concerns redactions in some provided
emails and spreadsheets. At the May 8 hearing, GlobalTranz submitted unredacted
versions for an in camera, ex parte review. The unredacted versions are on the record
as a sealed attachment to the hearing minutes. Doc. S40-2. The undersigned has
undertaken that review and concludes GlobalTranz satisfied its burden of showing
the attorney-client privilege applies; the redacted communications are clearly
communications to counsel seeking legal advice. See Genovese, 74 So. 3d at 1067.
The Court denies PLS’s motion to compel, Doc. 36, without prejudice to raising
any issue after an opportunity to comprehensively review the recently provided
discovery and conferral with GlobalTranz’s counsel on any continued disputed issue.
B.

GlobalTranz’s Motions to Compel
GlobalTranz’s motions to compel concern three sets of interrogatories and five

sets of requests for production, Docs. 21-1–21-3; 27-1–27-2, in which GlobalTranz
seeks documents and information in areas relating to claims, defenses, and damages.
Much of the discovery is sought to support GlobalTranz’s contention that PLS
customers and employees left for reasons unrelated to GlobalTranz, including PLS’s
retention of only approximately five of a hundred trainees annually.
The Court grants the motions to compel, Docs. 21, 27, except regarding certain
discovery requests. For any interrogatory or request for production concerning PLS’s
alleged loss of goodwill, PLS need not provide any discovery because PLS’s counsel
stated at the May 8 hearing that PLS no longer seeks damages based on PLS’s loss
of goodwill. For any interrogatory or request for production concerning “customer A,”
PLS need not provide any discovery beyond what it has already provided because
GlobalTranz’s counsel stated at the May 8 hearing that GlobalTranz has what it
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needs concerning customer A. For any request for production seeking documents
relating to all PLS employees since 2015 and any reduction-in-force, PLS need not
provide discovery beyond information and documents related to specified persons and
former-PLS-employees-turned-GlobalTranz-agents because the discovery is not
proportional to the needs of the case considering the factors in Rule 26(b)(1). The
burden of collecting the documents for hundreds of employees and any reduction-inforce overwhelms any relevance the information may have. For any interrogatory or
request for production referencing employees who replaced PLS-employees-turnedGlobalTranz-agents, PLS need not respond because, as PLS’s counsel explained at
the May 8 hearing, PLS does not directly replace one employee with another. For any
interrogatory or request for production concerning PLS exiting certain markets and
changing lines of credit, PLS need not provide responsive documents but must, as
agreed by the parties at the May 8 hearing, answer any request for admission on
those topics. The discovery deadline will not apply to any such request.
For the remaining interrogatories or requests for production, subject to the
confidentiality agreement the parties reached for this litigation, PLS must provide
nonprivileged responsive discovery it has not yet provided. The discovery relates to
claims or defenses, and there is no indication the discovery is not proportional to the
needs of the case.
The discovery that must be provided includes the identities of lost customers,
why they left, the revenue they had generated, and the PLS employees with whom
they had worked. The discovery relates to the claims and underlying allegations that
the non-compete agreements restricted PLS employees from soliciting PLS
customers, see Doc. 1 ¶ 12, GlobalTranz solicited PLS employees to take PLS
customers, see Doc. 1 ¶ 16, GlobalTranz interfered with PLS relationships with PLS
customers and PLS suffered damages, see Doc. 1 ¶¶ 31–33, and GlobalTranz caused
PLS customers to end relationships with PLS, see Doc. 1 ¶ 42. Even under the
“brokerage capacity” theory of damages PLS intends to pursue, the discovery relates
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to the defense that capacity would have been diminished for reasons having nothing
to do with GlobalTranz. The identities also relate to the injunctive relief PLS seeks—
an order prohibiting GlobalTranz from soliciting business from, accepting business
from, or providing services to any PLS customers acquired through wrongful acts, see
Doc. 1 at 8.
The discovery that must be provided also includes documents relating to
recruitment, training, and promotion. The discovery relates to the bulk of the
damages PLS claims. As PLS answered in response to an interrogatory, “As a result
of Defendant’s wrongful and unlawful conduct PLS has incurred millions of dollars
in damages. For each brokerage employee wrongfully solicited and hired by
GlobalTranz, PLS has lost considerable amounts in the recruiting and training
invested[.]” Doc. 21-1 at 35. For specific costs of things like campus interviews, preemployment testing, job testing, and recruiting costs, PLS may use a sampling to
satisfy the requests (as GlobalTranz found satisfactory at the January 25 hearing). If
training costs for each class remained approximately the same during the relevant
time period, the training cost for every class need not be provided.
The discovery that must be provided also includes documents relating to the
failed transaction, which relates to the defense that the transaction failed for reasons
other than improper motivation or conduct by GlobalTranz. Given the undoubted
significance of the failed transaction to PLS, it is unlikely the “internal memos” and
“handful” of emails PLS has provided relating to the failed transaction constitute the
universe of responsive documents. If PLS provides nothing further, by June 4, 2018,
PLS must provide an affidavit explaining the efforts used to find responsive emails,
including the places searched and the search terms used. By June 8, 2018, counsel
must collaborate on any additional search terms or alternative protocol to search for
PLS’s emails relating to the failed transaction beyond those already provided, as the
parties had done for the similar discovery request to GlobalTranz by PLS.

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In granting in part GlobalTranz’s motions to compel, the Court finds no waiver
through untimely or no responses. On untimely responses to GlobalTranz’s earlier
round of discovery requests, the Court accepts the representation of PLS’s counsel
that “[d]uring numerous conversations and emails between counsel there were
various discussions regarding extensions for PLS’ discovery responses in connection
with larger discussions relating to GlobalTranz’s continued failure to produce
documents[.]” Doc. 23 at 3. On no responses to GlobalTranz’s latest round of discovery
requests, the Court finds PLS’s decision to await a ruling on issues on the earlier
round of discovery requests understandable because some discovery in both rounds
was overlapping.
C.

Expenses
An award of expenses is unwarranted. Some of the discovery requests were too

broad, substantial justification supports positions taken on both sides, each side’s
discovery conduct has been questioned, and the previous motion to compel caused
GlobalTranz to provide documents but GlobalTranz did not have to pay expenses.
IV.

Conclusion
The Court denies without prejudice PLS’s motion to compel, Doc. 36, and

grants in part and denies in part GlobalTranz’s motions, Docs. 21, 27. PLS must
provide the outstanding discovery to GlobalTranz by June 11, 2018 (in addition to
any affidavit as directed by June 4, 2018).
Done in Jacksonville, Florida, on May 25, 2018.

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c:

Counsel of record

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