v. H&R Block Eastern Enterprises, Inc.
ORDER granting in part and denying in part 21 Motion to Quash; granting in part and denying in part 21 Motion. Within 10 days of the date this Order is served, she must produce all of HRB's subpoenaed documents. In addition, the Court Ord ers the movants to pay HRB $1500 for its fees and expenses on this matter. The Clerk is directed to Administratively Close this case if there are no more filings within 21 days of the date this order is served. Signed by Magistrate Judge G. R. Smith on 5/15/17. (wwp)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
CATHY S. CONAWAY, individually
and in her capacity as the
CONSERVATOR of BETTY L.
SANKS, and SANKS ENTERPRISES,
H&R BLOCK EASTERN
(Pending in the United States District
Court for the Western District of
Unfolding here is the next wave in satellite litigation spawned by
a Missouri fraud case. Cathy S. Conaway, individually and as
conservator for her mother, joined with Sanks Enterprises, Inc. (SEI)
-- her mother’s tax-preparation business -- in moving to partially
quash Fed. R. Civ. P. 45 subpoenas arising out of that case, H&R
Block Eastern Enterprises, Inc. v. Sanks , CV416-206 (W.D. Mo.)
(“ Sanks ” litigation). MC416-011, doc. 1, as amended , doc. 2. H&R
Block (HRB) filed Sanks against her brother, Claude Sanks, claiming
that he defrauded it. It then subpoenaed SEI-related documents from
Cathy, who brought this action to quash that subpoena. MC416-011,
doc. 3; doc. 1-2. Inclined to rule in HRB’s favor, the Court paused so
the movants could find new counsel after theirs withdrew.
v. H & R Block Eastern Enterprises, Inc .,
F. Supp. 3d ___, 2017
WL 626759 at *4 (S.D. Ga. Feb. 15, 2017).
Once re-represented, the movants (hereafter for convenience,
collectively “Cathy”) renewed their quash motion.
Doc. 21. The
parties, Cathy claimed, have
resolved many areas of dispute over the subpoenas as they were
originally tendered. However, disputes remain[ed] with respect
to information sought by HRB relating to (i) personal financial
information of [Cathy] and her mother, Betty C. Sanks, for
whom [Cathy] acts as Conservator and Guardian; and, (ii) the
financials, customers, and employees of the Company, a
corporation of which Betty C. Sanks is the sole shareholder.
Id . at 2.
Many of her concerns turned on disclosing proprietary
information to a competitor. Doc. 21 at 7 (objecting to Subpoena
Request 10 because “HRB is using its litigation with [Claude] to
obtain detailed financial information concerning a competitor of
HRB’s in the Savannah market.”). In that regard,
[c]ourts can quash or limit ( e.g ., via protective order) a subpoena
if it requires “disclosing a trade secret or other confidential
research, development, or commercial information.” Fed. R. Civ.
P. 45(d)(3)(B)(i). But “there is no absolute privilege for trade
secrets and similar confidential information.” Festus & Helen
Stacy Found., Inc. v. Merrill Lynch, Pierce Fenner, & Smith Inc .,
432 F. Supp. 2d 1375, 1380 (N.D. Ga. 2006) (quoting Fed. Open
Mkt. Comm. of Fed. Reserve Sys. v. Merrill , 443 U.S. 340, 362
(1979)). Instead, “courts weigh the claim to privacy against the
need for disclosure, and commonly enter a protective order
restricting disclosure.” Festus & Helen , 432 F. Supp. 2d at 1380.
Such an order may require that “a trade secret or other
confidential . . . commercial information . . . be revealed only in a
specified way.” Fed. R. Civ. P. 26(c)(1)(G).
Herrera-Velazquez v. Plantation Sweets, Inc ., 2015 WL 5613195 at * 5
(S.D. Ga. Sept. 23, 2015). But in such cases, the Court reasoned, the
parties should show the Court why a protective order can’t be
hammered out to cover such concerns. 1 Doc. 22 at 3-4.
Cathy’s other objections went to HRB’s request for documents that are “sufficient
to show” the existence of something like revenue levels (Subpoena Request 10, doc.
21 at 7), or the relationship between corporate entities (Subpoena Request 13, doc. 21
at 9). That’s objectionable, this Court concluded, because it’s vague and essentially
asks another to disclose work product -- assemble enough documents/data sufficient
to prove something exists, crosses a legal threshold, etc. At most a requestor can
seek documents evidencing or reflecting a fact, not “sufficient to show” its existence
or effect -- easily a trap for the unwary. Doc. 22 at 3-4.
HRB insists that “sufficient to show” limits the scope of such requests “so that the
[m]ovants [will] not have to produce every responsive document, and [can] instead
produce any documents that would ‘show’ ( i.e. provide) the desired information.”
Doc. 27 at 8-9. Hence, Cathy can produce “any readily-accessible materials that [will]
provide the information sought by the request, without having to undertake a full,
expansive search for every potentially responsive document.” Id. That’s a sensible,
alternative explanation, especially since Cathy jumps on the more onerous
interpretation to justify her non- and under-production of documents, and otherwise
support her quash motion. Doc. 29 at 6. The Court will apply HRB’s more userfriendly interpretation here and grant Cathy’s quash motion only to that extent ( i.e. ,
The Court shared those guiding principles while directing the
parties to first confer before further involving it. Doc. 22 at 4 (citing
Hernandez v. Hendrix Produce, Inc ., 2014 WL 953503 at *1 (S.D. Ga.
Mar. 10, 2014) (applying duty to confer requirement in the Rule 45
context); St. Johns Ins. Co. v. Nautilus Ins. Co ., 2008 WL 1897572 at
* 1 (M.D. Fla. Apr. 28, 2008) (same for motions to quash and to
compel in a subpoena-based discovery dispute)). Fees, the Court
warned, would be assessed for any bad faith shown. Id . at 4.
The parties have since conferred but failed to resolve the matter,
so Cathy’s renewed quash motion (doc. 21) must now be addressed.
HRB opposes and demands $2500 in bad faith fees. Doc. 27. It
accuses her of failing to confer in good faith and, with new counsel,
changing previous positions and adding new -- but now untimely, thus
waived -- objections.
Id. at 5. Claude, meanwhile, is challenging
discovery sanctions levied by the Sanks district court.
See In re
Claude L. “Bobby” Sanks, Jr., No. 17-1593 (8th Cir. filed May 1, 2017)
(his latest brief on his Mandamus Petition to reverse the district
court’s sanctions order again him and his counsel).
she need only comply using that qualifier). HRB, in the meantime, might want to
couple that qualifier with its future subpoena requests.
I. FACTUAL BACKROUND
The determinations this Court must now make are best
understood by first reviewing HRB’s factual assertions in its Sanks
appeal-opposition brief. That lawsuit, HRB explains,
arises from [Claude] Sanks’ sale of a tax business to [HRB]
under an Asset Purchase Agreement (“APA”) at the end of 2014.
After [HRB] paid [Claude] $1,150,000 for the business, [HRB]
learned [Claude] had committed fraud, and could not deliver the
business as promised. In fact, [Claude] had known all along that
his sister, [Cathy], disputed [Claude’s] ownership of the business
and planned to keep operating it at its original location after the
sale. None of this was disclosed to [HRB]. Instead, [Claude]
fraudulently convinced [HRB] that it would need to “move” the
business to a new location based on false representations the
existing property was being sold. Then, after the sale, [Claude]
continued to visit the original office, and personally processed
the payroll for his sister’s continued operation of the business
there -- meanwhile, continuing to falsely assure [HRB] he would
deliver the business to it.
Sanks , No. 17-1593, HRB’s April 19, 2018 Mandamus Response Brief
at (CM/ECF page) 11 (cites omitted). Claude, says HRB, also engaged
in additional post-sale malfeasance, all of which directly injured
[HRB], diverted away the very clients of the business [Claude]
committed to sell to [HRB], and violated the parties’ contracts.
In 2015, following the sale of the tax business to [HRB], [Claude]
worked as a[n HRB] employee, ostensibly to help transition
clients to [HRB]. Unbeknownst to [HRB], however, [Claude]
launched a competing business, “Tax & Accounting Services,”
and, while employed by [HRB], diverted away [HRB]’s clients to
that business. Then, in 2016, [Claude] went to work for two
independently-owned franchise tax businesses, including one
owned by his family, and again diverted away the clients he had
contracted to deliver to [HRB] back to himself. [Claude’s]
actions directly violated noncompetition and nonsolicitation
covenants [Claude] entered into under the APA (the
Id. at 12.
In this case HRB seeks communications between Cathy “and
[Claude] from January 1, 2011, through the present[,] related to tax
preparation services, [etc.],” doc. 1-2 at 4, in quest of evidence to
support HRB’s Sanks -trial burden that it was fraudulently promised
one thing (an entire tax-prep business), yet delivered another (an
empty shell, more or less). Citing the relatively liberal discovery
standard, 2 HRB wants to subpoena documents reasonably thought to
show whether anyone passively (if not actively) abetted Claude’s
fraud. It also seeks documents supporting or negating the SEI
ownership claims made by brother and sister, bearing in mind that it’s
entirely reasonable to suspect familial collusion of some sort. Id. at 56.
Claude, for that matter, responds in Sanks by accusing HRB of
“present[ing] a grossly inaccurate version of the record, wrought with
The same liberal relevancy standards of Fed. R. Civ. P. 26 apply to Rule 45
determinations like this. Hernandez, 2014 WL 953503 at *1 n. 3.
misrepresentations and exaggerations concerning [his] alleged
conduct in discovery.” Claude’s May 1, 2017 Mandamus Brief at 17.
For example: “[HRB] claims that the District Court in Georgia, where
Cathy Conaway was served with a subpoena, independently reached
the conclusion that Conaway’s role in this case is suspect, in an Order
concerning Conaway’s motion there to quash [HRB]’s subpoenas.” Id.
at 19. As this Court’s last Order reflects, it never stated that, but
simply assumed “briefing facts” to be true since no one here has
bothered to support asserted facts with affidavits or any other
evidence. See Conaway , 2017 WL 626759 at *4 n. 4.
It is against this highly contentious background that the Court
turns to Cathy’s renewed motion to quash. Doc. 21.
Cathy’s renewed quash motion advances little more than routine
objections (HRB asks too much, seeks irrelevant or proprietary or
burdensome matters, etc.). Doc. 21. HRB, in contrast, rolls heavy
thunder in quest of documents it says it needs for the June 5, 2017
Sanks trial. Doc. 27 at 3. As noted, it has already won discovery
sanctions against Claude in Sanks. Likewise here, it accuses Cathy of
sanctionable conduct. Its counsel teleconferenced with Cathy’s lawyer
on March 31, 2017, during which counsel promised that Cathy would
“attempt to search for documents and inform HRB what documents
she found, what documents [m]ovants would produce, what
documents [m]ovants would continue to withhold from production,
and the reasons why.” Doc. 27 at 7-8.
Yet, while it’s been up against this Court’s twice-extended (to
April 26, 2017) deadline to resolve this matter, doc. 26, “HRB has not
received any response to its final email communication on this issue,
sent April 21, 2017.” Doc. 27 at 8; see also doc. 27-4 (email exchange
showing counsel’s promise to respond, then failing to do so). HRB
thus complains that it’s been stonewalled. In that respect, the Court
notes that it has yet to be shown any communication thereafter, other
than Cathy’s latest (May 9, 2017) Reply Brief, doc. 29.
Of course, this Court tolerates no stonewalling, perjury, 3 or even
passively obstructive conduct. 4 In that regard, it is conspicuous that
Lying under oath, either live or “on paper,” is a criminally prosecutable offense .
See United States v. Roberts , 308 F.3d 1147, 1155 (11th Cir. 2002) (defendant's falsely
subscribing to statement in his habeas petition that he had not previously filed a
§ 2255 motion was "material" for purposes of perjury prosecution; statement fooled
the clerk of the court into accepting the "writ" for filing, and led the magistrate judge
to consider its merits until she discovered that the "writ" was a successive § 2255
Cathy has simply let her renewed quash motion sit, with no updating,
much less a conference certification, 5 or any showing that she engaged
in a meaningful effort to confer. And her motion packs a lengthy list
of subpoena requests with routine objections (overbroad, duplicative,
overlapping requests, etc.) that should have been resolved through a
See, e.g. , doc. 21 at 5-6 (objecting to two
documents relating to two unrelated individuals on privacy grounds);
id. at 6-7 (“sufficient to show” objection -- “Movants cannot be
expected to know [HRB’s] subjective understanding of what is
motion in disguise); United States v. Dickerson , CR608-36, doc. 1 (S.D. Ga. Dec. 11,
2008) (§ 2255 movant indicted for perjury for knowingly lying in his motion seeking
collateral relief from his conviction); id ., doc. 47 (guilty verdict), cited in Irick v.
United States , 2009 WL 2992562 at * 2 (S.D. Ga. Sept. 17, 2009); see also Colony Ins.
Co. v. 9400 Abercorn, LLC , 866 F. Supp. 2d 1376, 1378 n. 2 (S.D. Ga. 2012).
See Carter v. Belk, Inc ., 2015 WL 4274425 at * 1 (S.D. Ga. July 13, 2015)
(sanctioning party’s violation of duty to confer requirement).
The Court ordered the parties to confer, and thus contemplated (though it failed to
expressly require) a conference certification. Cf. S.D. Ga. Loc. R. 26.5(c) (“Counsel
are reminded that Fed. R. Civ. P. 26(c) and 37(a)(1) require a party seeking a
protective order or moving to compel discovery to certify that a good faith effort has
been made to resolve the dispute before coming to court.”). No matter. If the briefs
reflect that the parties failed to comply with the Court’s directive, then sanctions are
warranted. The instant briefs reflect that failure, and sanctions therefore are
To be sure, there are substantial grounds raised against
disclosure, and they boil down to protecting proprietary data like
client lists -- the lifeblood of a tax preparation business: Customers
walk in the door, or are referred by others, or respond to advertising,
then can come back each tax year. They’re valuable. Cathy doesn’t
want HRB to get her customer list. She points out, for example, that
on the HRB/Claude Asset Purchase Agreement she sees no evidence
that he sold a “customer list” to HRB. Maybe HRB, she intimates, is
trying to unfairly get that asset from her here. Doc. 21 at 19. But
that’s grist for the attorney-conference mill. Lawyers object,
compromises are reached.
Rather than attempt that here, Cathy has rested on over 20
pages of “grist” level objections, then asks the Court to slog through
it. Worse, HRB illuminated Cathy’s failure to confer, in response to
which she announced her intent to file a Reply Brief, doc. 28, so the
Court awaited her “failure-to-confer” explanation. But that brief
sinks her ship. Doc. 29.6 She does cite case law for the proposition
Her lawyer also has been filing “bad scans” with this Court. Docs. 28 & 29. Every
E-filed document should be “machine readable” because it enables users to search it
using key words, and also mark and copy text from it. Producing a “machine
that otherwise waived (by failing to object) Rule 45 subpoena
objections can be overlooked if “the subpoena is overbroad on its face
and exceeds the bounds of fair discovery and the subpoenaed witness
is a non-party acting in good faith.” Doc. 29 at 2 (citing Moon v. SCP
Pool Corp., 232 F.R.D. 633, 636-37 (C.D. Cal. 2005) (a nonparty’s
failure to timely make objections to a subpoena duces tecum generally
waives them, but in unusual circumstances and for good cause, the
failure to act timely will not bar consideration of such objections)). Of
course, that’s irrelevant because the Court ordered Cathy to sit down
with HRB’s counsel and work out her objections, and she obviously
has not. In fact, in response to HRB’s charge that she violated the
Court’s “confer” order, 7 she (in her Reply Brief) doesn’t dispute the
readable” .pdf file, which is required for E-filing, is easy. Most word processors have
a “publish to .pdf” or “print to .pdf” drop-down option under a “File,” then “Print”
command. Counsel should use that feature, which produces a machine-readable .pdf.
Parties must not print out a document and then run it through a mechanical
scanner, which counsel here apparently has been doing (her E-filings have not been
machine readable, thus hampering Court operations). That method fails to produce a
machine-readable .pdf. Counsel should contact the Clerk’s office should additional
guidance be needed. The Court ORDERS her counsel to in all cases comply with
this directive, which applies to all E-filers before this Court.
A direct order ordinarily is unnecessary because S.D. Ga. Loc. R. 26.5(c) reminds
“that Fed. R. Civ. P. 26(c) and 37(a)(2) require a party seeking a protective order or
moving to compel discovery to certify that a good faith effort has been made to
resolve the dispute before coming to court.” Id. “That rule is enforced.” Hernandez
email chain, which unmistakably shows no meaningful effort to
confer. At best it contains an as-yet unmet promise to produce
documents. Cathy now tries to minimize that by stating what she
should have timely told HRB’s counsel while conferring with him:
[Cathy] concedes that she has not provided [HRB] with any
requested documents since the March 31, 2017 phone call. This
is not, however, due to any lack of attention or effort on [her]
behalf. . . . In fact, since March 31, 2017, [Cathy] has been
searching records, researching contacts to reach IT and website
providers to determine whether [SEI] has computer access to the
documents [HRB seeks].
For example, [Cathy] took the time to locate and contact the
website administrator who provided email services for
Sanksincometax.com from the website’s creation until the
present. The website creator had left the state of Georgia, so she
was difficult to find. She informed [Cathy] that she had filed for
bankruptcy in 2013 and no longer had any email records or
other information from her business. . . . [Cathy] has also
attempted to obtain text messages from her cell phone service
provider. However, [she] has been unable to obtain these
records thus far. . . .
Doc. 29 at 5.
The Court disbelieves her. First, the subpoena seeks documents
in her possession. It does not (nor does the law) require her to contact
v. Hendrix Produce, Inc. , 2014 WL 953503 at * 1 (S.D. Ga. Mar. 10, 2014).
Conferences, for that matter, must be meaningful. Hernandez v. Hendrix Produce,
Inc., 297 F.R.D. 538, 540 (S.D. Ga. 2014); State Farm Mut. Auto. Ins. Co. v. Howard ,
296 F.R.D. 692, 697 (S.D. Ga. 2013).
third parties and retrieve documents from them . For that matter, the
spirit of cooperation would induce any reasonable person to simply
disclose such third parties for HRB to independently subpoena.
Instead, Cathy lollygagged and, when confronted, basically claimed
“these things take time,”
then disclosed “above-and-beyond”
document retrieval attempts. But with an email chain that betrays at
best a lackadaisical attitude, this smacks of a run-out-the-clock
pretense. Doc. 27-4. And that follows a quash-renewal motion that
otherwise reads like a first-wave response to a document request (as
opposed to a meaningful, post-attorney-conference distillation) while
resting on a generalized promise to produce records “soon.” Too, the
Court twice extended its “confer” deadline to enable informal
resolution. Docs. 24 & 25. Only when HRB called her out on this did
Cathy provide explanations that simply go off the reservation ( i.e. ,
contacting third parties, doc. 29 at 5).
These actions evince more manipulation than cooperation. And
discovery, it must be remembered, is supposed to be self-executing.
Leaks v. Target Corp ., 2015 WL 4092450 at *1 n. 1 (S.D. Ga. July 6,
2015); Bottoms v. Liberty Life Assur. Co. of Boston , 2011 WL 6181423
at * 4 (D. Colo. Dec. 13, 2011) (“Rule 26(g) imposes an affirmative
duty to engage in pretrial discovery in a responsible manner that is
consistent with the spirit and purposes of Rules 26 through Rule 37,
and obligates each attorney to stop and think about the legitimacy of a
discovery request, a response thereto, or an objection.”) (quotes and
cite omitted). That means the parties are supposed to cooperate and
confer before consuming Court resources. They have not, the blame is
properly affixed to Cathy, and bad-faith sanctions are warranted.
Accordingly, the Court GRANTS only in part and otherwise
DENIES Cathy’s quash-renewal motion. Doc. 21. Within 10 days of
the date this Order is served, then, she therefore must produce all of
HRB’s subpoenaed documents subject to:
(a) HRB’s “sufficient to show” qualification 8 noted supra, n. 1;
(b) the condition that document turnover be made to HRB
counsel’s (and their staff’s) “eyes only,” where it encompasses
customer lists, SEI employee data, or similar proprietary and
This means, for example, that Cathy is free to respond, as she did to Subpoena
Request 13, that “[HRB is] already in possession of sufficient documents to show that
Sanks Income Tax and Business Services is merely a trade name of Sanks
Enterprises, Inc.” Doc. 21 at 9 (emphasis added).
personal privacy data ( e.g. , the SEI bank account statements
noted on doc. 21 at 6). 9
In addition, the Court ORDERS the movants to pay HRB $1500
for its fees and expenses on this matter. 10 Finally, the Clerk is
DIRECTED to ADMINISTRATIVELY CLOSE this case if there
are no more filings within 21 days of the date this Order is served.
SO ORDERED , this 15th day of May, 2017.
UNITED STATES MAGISTRATE JUDGE
SOUTHERN DISTRICT OF GEORGIA
This, incidentally, is what routinely agreed-to protective orders do (enable the
lawyers to litigate claims while preventing one business from unfairly exploiting
another’s competitive, proprietary data). HRB may, upon a good cause showing,
return to this Court on a motion for leave to expand such disclosure.
HRB has simply not demonstrated, through the emails it cites (doc. 27-4) and timeconsumption that it describes, doc. 27 at 8, that the $2500 that it seeks is reasonable.
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