Steel Erectors, Inc. v. AIM Steel International, Inc.
Filing
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ORDER granting 11 Motion to Compel; denying 16 Motion to Compel; denying 17 Motion to Seal Document ; denying 18 Motion for Extension of Time to Complete Discovery. Signed by Magistrate Judge G. R. Smith on 1/4/16. (bcw)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
STEEL ERECTORS, INC., for the use )
and benefit of the United States of
)
America,
)
)
Plaintiff,
)
Case No. CV415-208
V.
)
AIM STEEL INTERNATIONAL, INC.,)
Defendant.
ORDER
Several weeks ago, the Court deferred ruling on plaintiff's motion
to compel defendant to supplement its Fed. R. Civ. P. 7.1 corporate
disclosure statement (doc. 11) by naming its foreign parent company.
Doc. 15. Plaintiff offered poor reasons to compel, but, given Rule 7.1's
mandate (parties must file disclosure statements) and AIM's failure to
address the proper legal standard (Local Rule 79.7) for shielding its
statement from plaintiff, the Court elected to give AIM additional time to
move to seal. Id. It has now done so. Doc. 17. In addition, plaintiff's
original motion to compel (doc. 11) remains pending, as well as a motion
to compel AIM to supplement its interrogatory responses by naming its
foreign parent (doc. 16). Finally, the parties jointly move for an
extension of time to complete discovery. Doc. 18.
A. AIM's Motion to Seal
Under Local Rule 79.7, "[a]ny person desiring to have any matter
placed under seal shall present a motion setting forth the grounds why
the matter presented should not be available for public inspection.
The burden rests upon the moving party to justify.. . sealing.... [That
party] must rebut the presumption of the openness derived from the
First Amendment by showing that closure is essential to preserve some
higher interest' and is narrowly tailored to serve that interest."
"[G]eneral assertions," however, "are not enough. The party wishing to
seal a court record must be specific because permanent sealing (sought
here) must be narrow." United States v. Bradley, 2007 WL 1703232 at *
3 (S.D. Ga. June 11, 2007) (footnote added).
AIM's "higher interest" is decreasing competition in the
international steel fabrication market in which it competes. See doc. 17
at 4. That market, says AIM, has very high entry barriers because of
' Defining what constitutes a "higher interest" furthered by sealing proves difficult,
but one court has characterized it as disclosure that would not promote the values
associated with public scrutiny of the judicial process. See United States v. Sattar,
471 F. Supp. 2d 385, 388 (E.D.N.Y. 2007).
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costs "associated with initial organization, [and] startup." Id. at 3. AIM
entered the market because its parent company (a foundation based in
Panama) located funding for the venture.
Id.
Keeping private "the
identity and sources of initial investment of its parent company," will,
AIM says, "keep the barrier of entry. . . high, [and] thereby decreas[e]
the competition between and among USA-based steel fabricators."
Id.
Hence, AIM concludes, "its privacy interests outweigh the public's right
of access."
Id.
In plaintiff's view, however, anti-competitive business
interests, absent a recognized privilege or some other legitimate purpose,
cannot outweigh the public's interest in the openness of judicial
proceedings. Doc. 19 at 3.
The Court agrees. AIM, a foreign corporation owned by a foreign
parent, seeks to shield itself from disclosure obligations ordinarily facing
any domestic corporation. Take, for example, a Georgia corporation
owned by a Delaware parent. Nothing enables the Georgia company to
avoid including the parent in its Rule 7.1 disclosure statement. Indeed,
the Rule specifically mandates disclosure of "any parent corporation."
Fed. R. Civ. P. 7.1(a)(1) (emphasis added).
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More importantly, AIM offers no reason why its business interests
outweigh' the public interest in disclosure of companies with whom a
federal judge may have a conflict of interest .3 Instead, it states that (1)
entering the international steel market requires much capital; (2) its
parent company provided that capital; and (3) revealing the identity of
its parent would, somehow, allow other companies access to capital
sufficient to enter the international steel market and in doing so reduce
AIM's market share. Doc. 17 at 2-3. That all may be true, but nowhere
in that reasoning does AIM explain why its interest exceeds the public's
interest in disclosure, particularly when, as here, "public access plays a
significant positive role in the functioning of the particular process in
question." Press-Enter. Co. v. Sup. Ct. of Cal. for Riverside Ct y., 478 U.S.
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Recall that parties wishing to seal filings "must rebut the presumption of the
openness derived from the First Amendment by showing that closure is essential to
preserve some higher interest and is narrowly tailored to serve that interest." L.R.
7.1.1 (emphasis added). AIM's interests thus must "outweigh" or "exceed" the
public's.
Corporate disclosure statements exist "to assist district judges in determining
whether they might have a financial interest in a corporate entity that is related to a
corporate party in a case before them and therefore requires their recusal." 5
WRIGHT & MILLER, FED. PRAC. & PROC. Civ. § 1197 (3d ed. 2010). Recusal issues
involve "[t]he operations of the courts and the judicial conduct of judges," and thus
are "matters of utmost public concern." Bradley, 2007 WL 1703232 at * 1 (quoting
Romero v. Drummond Co., 480 F.3d 1234, 1245 (11th Cir. 2007)).
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1, 8 (1986). Put differently, AIM sufficiently describes its interest, but
fails to explain the weight of its interest vis-à-vis the public's.
That's not enough. Every party wishing to seal a filing cares deeply
about preventing disclosure and many describe their interest in detail.
But only those whose interest is more important than the public's
interest in disclosure receive sealing consideration. AIM has not shown
that its interest rises to that level. Its motion to seal (doc. 17) therefore
is DENIED and plaintiff's first motion to compel is GRANTED (doc.
11). AIM must file, within 7 days of the date this Order is served, an
unredacted corporate disclosure statement that lists "any parent
corporation," whether foreign or domestic. Fed. R. Civ. P. 7.1(a)(1).
B. Plaintiff's Motion to Compel Interrogatory Responses
In a related motion to compel, plaintiff seeks more a more detailed
response to its interrogatory asking AIM to reveal its foreign parent.
Doc. 16. Specifically, plaintiff wants to know the identity of AIM's
parent, its contact information, how it has participated in the
construction projects underlying this lawsuit, and how much (if any)
funding it has provided with respect to the projects. Doc. 16 at 1-2. AIM
objected to identifying its parent on relevancy grounds, but revealed that
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it "has had no participation in either of the two projects," and "has
provided no funding." Id. at 2.
Because the Court today requires AIM to identify its parent in its
Rule 7.1 statement, and because AIM already provided adequate
responses to portions of plaintiff's interrogatory (its parent played no
role in and provided no funding for the projects at issue), all that remains
to compel (or not) is its parent's contact information.
Motions to compel are governed by the rules of discovery, which:
'require the disclosure of all relevant information so that ultimate
resolution of disputed issues in any civil action may be based on a
full and accurate understanding of the true facts. . . .' Gonzalez v.
ETourandTravel, Inc., 2014 WL 1250034 at * 2 (M.D. Fla. Mar. 26,
2014) (quotes and cite omitted). Hence, '[t]he scope of discovery
under [Fed. R. Civ. P. 26(b)(1)] is broad and includes 'discovery
regarding any matter, not privileged, which is relevant to the
claims or defense of any party involved in the pending action.'
Hickman v. Taylor, 329 U.S. 495, 507-08, 67 S.Ct. 385, 91 L.Ed. 451
(1947).' Id. Those resisting discovery must 'show specifically how
the objected-to request is unreasonable or otherwise unduly
burdensome.' Id.
Claims and defenses determine discovery's scope. Chudasama v.
Mazda Motor Corp., 123 F.3d 1353, 1368 (11th Cir. 1997).
'Evidence is relevant if it has any tendency to make the existence of
any fact or consequence more or less probable than it would be
without the evidence.' United States v. Capers, 708 F.3d 1286, 1308
(11th Cir. 2013).' Gonzalez, 2014 WL 1250034 at * 2.
Daniel Def., Inc. v. Remington Arms Co., LLC, 2015 WL 6142883 at * 2
(S.D. Ga. Oct. 19, 2015).
Plaintiff claims that AIM breached a contract by failing to pay for
work plaintiff performed on two construction projects for the federal
government. See doc. 1 at 2-3. If, says plaintiff, AIM's parent company
underfunded AIM or otherwise caused AIM to breach its contracts,
plaintiff may have a claim against the parent. Doe. 16 at 3. It wants
contact information ostensibly so it can propound discovery aimed at
uncovering whether such a claim exists. Id. at 4.
Its parent's identity (and thus parental contact info), argues AIM,
is not relevant to plaintiffs claims because "[t]here has not been a single
piece of information in this matter referring or implying any involvement
by ATM's parent organization." Doe. 20 at 3. Indeed, "AIM has testified
The recent changes to the Federal Rules of Civil Procedure (in particular, Rule 26),
although substantive and substantial, do not change the definition of relevance.
Instead, they reemphasize and highlight requirements already present in the Rules,
like proportionality. See Fed. R. Civ. P. 26. advisory committee note (2015)
("Restoring the proportionality calculation to Rule 26(b)(1) does not change the
existing responsibilities of the court and the parties to consider proportionality. . .
Sibley v. Choice Hotels Int'l, 2015 WL 9413101 at * 2 (E.D.N.Y. Dec. 22, 2015)
("While proportionality factors have now been incorporated into the Rule 26(b)(1)
definition, those factors were already a part of Federal discovery standards,
appearing in Rule 26(b)(2)(C)(iii)."). It remains true today both that claims and
defenses provide discovery's outer bounds and that "the court is inclined to err in
favor of discovery rather than against it.' McCleod v. Nat'l R.R. Passenger Corp.,
2014 WL 1616414 at * 3 (S.D. Ga. Apr. 22, 2014) (quotes and citation omitted)."
Remington, 2015 WL 6142883 at * 2.
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that the parent organization that owns AIM had no participation in
either of the projects that are the subject of this lawsuit, and further that
the parent organization that owns ATM provided no funding with respect
to either of the projects." Id.
Too, says AIM, for the same reasons its identity is irrelevant, "{t]he
identity of AIM's parent organization is not proportional to the needs of
this case." Id. at 4. Because "AIM's parent organization has not been
identified in any way as having any involvement in the issues in this
lawsuit," it cannot possibly have information relevant to "the simple
breach of contract issues between the parties." Id. Allowing discovery
into the parent-child relationship thus would, according to AIM, impose a
disproportionate (and thus unwarranted) "financial burden on the
parties in this simple breach of contract lawsuit." Id. at 5.
Given AIM's existing response to plaintiffs interrogatory -- that its
parent company had no involvement with and provided no funding for
the construction projects at issue -- further discovery into the parentchild relationship is not relevant or "proportional to the needs of the
case." Fed. R. Civ. P. 26(b)(1). Plaintiff's Complaint contains two runof-the-mill breach of contract claims against AIM. AIM's parent,
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however, apparently played no role in either alleged breach. See doc. 16
at 2 ("[T[he foreign entity that owns AIM . . . was not involved in any
way with. . . had no participation in. .. [and] provided no funding with
respect to the two projects which are the subject of this lawsuit.").
Allowing discovery -- particularly "complicated and complex" discovery
that "may involve treaties or agreements with foreign governments"
(doe. 18 at 2) -- based solely on plaintiffs pure speculation' and in the
face of existing discovery responses indicating no involvement by AIM's
parent in the contracts at issue would needlessly increase the expense of
this litigation and, in doing so, subvert Rule 26(b)(1)'s goal of
"guard[ing] against redundant or disproportionate discovery." Fed. R.
Civ. P. advisory committee note (2015). Hence, plaintiffs motion to
compel interrogatory responses is DENIED. Doe. 16.
Plaintiff contends that it "may have claims against the parent entity of [AIM], if
Plaintiff can show that the parent made a financial decision not to properly fund
[AIM] and allowed [AIM] to default on its subcontracts, or other acts of commission
or omission took place." Doe. 16 at 3. That's nothing more than a hypothetical
without any support in the record, or connection to the Complaint's allegations.
Speculation should never bait a relevancy hook, especially here, where potentially
expensive international discovery would ensue.
C. Conclusion
Because AIM's Rule 7.1 statement must include its parent,
plaintiffs motion to compel (doc. 11) is GRANTED' and AIM's motion
to seal is DENIED. Doc. 17. AIM must file, within 7 days of the date
this Order is served, an unredacted corporate disclosure statement that
lists "any parent corporation," whether foreign or domestic.
Plaintiffs motion to compel interrogatory responses (doc. 16),
however, is DENIED. The parties' joint motion to extend discovery 75
days also is DENIED. 7 Doc. 18.
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Under Fed. R. Civ. P. 37(a)(5), when a party's motion to compel succeeds, courts
"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," unless "the opposing party's nondisclosure, response, or objection
was substantially justified[,] or . . . other circumstances make an award of expenses
unjust." Although plaintiff technically prevailed on its Rule 7.1-related motion to
compel (doe. 11), the Court awards no expenses. AIM, though ultimately a loser,
made a good faith argument for not disclosing its parent's identity. Perhaps more
importantly, the Court's decision to compel disclosure rested on First Amendment
and public interest principles, not on any arguments plaintiff made in support of its
motion. Reflecting that rationale, granting plaintiffs motion to compel is simply a
corollary of denying AIM's motion to seal and not a product of any independent merit
plaintiffs motion possessed. An award of expenses therefore would be unjust.
' The parties sought a discovery extension in case the Court allowed further inquiry
into AIM's parent's identity. Doe. 18 at 1. Although it has compelled AIM to file an
unredacted Rule 7.1 statement that includes its parent, the Court refuses to compel
AIM to respond to plaintiff's parent-based interrogatory. It did so on relevancy and
proportionality grounds, which means that any future discovery plaintiff aims at
AIM's parent as a result of the Rule 7.1 disclosure quite likely would fall on the same
sword should AIM move for a protective order or plaintiff to compel (again). Put
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SO ORDERED, this
day of January, 2016.
UNITE STATES MAGISTRATE JUDGE
SOUTHERN DISTRICT OF GEORGIA
differently, this Order likely obviates the need for further discovery into AIM's
parent and thus also the need for a discovery extension. If that's not the case, the
parties remain free to file additional downwind motions.
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