Gramercy Group Inc. v. D.A. Builders, LLC

Filing 173

ORDER Granting In Part And Denying In Part Defendants' (1) Motion To Compel Deposition Testimony Of Vincent Parziale And (2) Motion To Compel Deposition Testimony Of Gregg Jenkinson And Craig Lebel. " Based on the foregoing, Defendants Moti ons (Doc. Nos. 130 & 137 ) are HEREBY GRANTED IN PART AND DENIED IN PART."Signed by MAGISTRATE JUDGE KEVIN S.C. CHANG on 11/8/17. (cib, )CERTIFICATE OF SERVICEParticipants registered to receive electronic not ifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
GRAMERCY GROUP, INC.,
Plaintiff,
vs.
D.A. BUILDERS, LLC aka D.A.
BUILDERS; DAVID A. ALCOS
III; JOHN DOES 1-20; JANE
DOES 1-10; DOE CORPORATIONS
1-10; DOE PARTNERSHIPS 1-10;
OTHER ENTITIES 1-10,
Defendants.
____________________________

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CIVIL NO. 16-00114 JMS-KSC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
(1) MOTION TO COMPEL
DEPOSITION TESTIMONY OF
VINCENT PARZIALE AND (2)
MOTION TO COMPEL DEPOSITION
TESTIMONY OF GREGG JENKINSON
AND CRAIG LEBEL

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
(1) MOTION TO COMPEL DEPOSITION TESTIMONY OF VINCENT
PARZIALE AND (2) MOTION TO COMPEL DEPOSITION TESTIMONY
OF GREGG JENKINSON AND CRAIG LEBEL
Before the Court are Defendants’ 1) Motion to Compel
Deposition Testimony of Vincent Parziale, filed October 11,
2017, and 2) Motion to Compel Deposition Testimony of Gregg
Jenkinson and Craig Lebel, filed October 16, 2017.

After

careful consideration of the parties’ submissions, counsel’s
arguments, and the applicable law, the Court HEREBY GRANTS IN
PART AND DENIES IN PART the Motions for the reasons
articulated below.
BACKGROUND
As the Court and the parties are well acquainted
with the factual history of this case, the Court includes only

those facts relevant to the disposition of the subject
Motions.
On February 19, 2016, prior to the commencement of
this action, Plaintiff proposed an Amendment to Subcontract
and General Release (“Proposed Amendment”) to Defendant D.A.
Builders.

In support of Plaintiff’s pending motions for

summary judgment (“MSJs”), Vincent Parziale, Plaintiff’s
President/CEO, has submitted multiple declarations that
include attestations about the Proposed Amendment.

Parziale

described the Proposed Amendment, prepared by counsel Marie
Ann Hoenings, as a good faith attempt to resolve an escalating
legal dispute.

He also made a number of representations

concerning the terms of the Proposed Amendment.
Defendants deposed Parziale, Gregg Jenkinson, and
Craig Lebel on October 5, October 11, and October 12, 2017,
respectively.

During each deposition, Plaintiff’s counsel

invoked Federal Rule of Evidence (“FRE”) 408 and/or attorneyclient privilege and instructed the deponents not to respond
to questions concerning the Proposed Amendment or about funds
transferred between Plaintiff and general contractor dck/FWF.
Defendants elected to adjourn the depositions early
given the parties’ dispute about defense counsel’s line of
questioning.

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The present Motions followed.
LEGAL STANDARD
Federal Rule of Civil Procedure (“FRCP”) 26
provides:
Parties 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.
Information within this scope of discovery need
not be admissible in evidence to be
discoverable.
Fed. R. Civ. P. 26(b)(1).

Relevance “has been construed

broadly to encompass any matter that bears on, or that
reasonably could lead to other matter that could bear on, any
issue that is or may be in the case.”

Oppenheimer Fund, Inc.

v. Sanders, 437 U.S. 340, 351 (1978).

At the same time, it

has its “ultimate and necessary boundaries.”

Id.

“District

courts have broad discretion in determining relevancy for
discovery purposes.”

Surfvivor Media, Inc. v. Survivor

Prods., 406 F.3d 625, 635 (9th Cir. 2005) (citing Hallett v.
Morgan, 296 F.3d 732, 751 (9th Cir. 2002)).
The 2015 amendment to FRCP 26 added proportionality
as a requirement for obtaining discovery.

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Thus, “relevancy

alone is no longer sufficient to obtain discovery, the
discovery requested must also be proportional to the needs of
the case.”

Centeno v. City of Fresno, Case No. 1:16-cv-00653-

DAD-SAB, 2016 WL 7491634, at *4 (E.D. Cal. Dec. 29, 2016)
(citing In re Bard IVC Filters Prod. Liab. Litig., 317 F.R.D.
562, 564 (D. Ariz. 2016)).

Addressing all proportionality

considerations does not rest solely with the party seeking
discovery.

Fed. R. Civ. P. 26(b)(1) advisory committee’s note

to 2015 amendment.

Instead, “[t]he parties and the court have

a collective responsibility to consider the proportionality of
all discovery and consider it in resolving discovery
disputes.”

Id.
District courts have broad discretion to limit

discovery where the discovery sought is “unreasonably
cumulative or duplicative, or can be obtained from some other
source that is more convenient, less burdensome, or less
expensive.”

Fed. R. Civ. P. 26(b)(2)(C).

Limits also should

be imposed where the requesting party has had ample
opportunity to obtain the information through discovery in the
action or the discovery is outside the scope of permissible
discovery under FRCP 26(b)(1).

Id.

When a deponent fails to respond to a question, the
party seeking discovery may file a motion to compel.

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Fed. R.

Civ. P. 37(a)(3)(B)(i).

“When taking an oral deposition, the

party asking a question may complete or adjourn the
examination before moving for an order.”

Fed. R. Civ. P.

37(a)(3)(C).
ANALYSIS
Defendants seek to compel testimony from Parziale,
Jenkinson, and Lebel about the factual circumstances
surrounding the Proposed Amendment and Plaintiff’s claims
against dck/FWF.

Plaintiff counters that the requested

testimony is protected by FRE 408 and the attorney-client
privilege.
As an initial matter, the Court finds that the
requested discovery is relevant and proportional to the needs
of the case.

Plaintiff injected Parziale’s statements into

the litigation by submitting declarations in support of its
MSJs.

The statements bear on the parties’ claims and defenses

and Plaintiff will not be unduly burdened by further
questioning that will occur during the continued depositions
that Defendants are entitled to complete.

This is

particularly true where, as here, the premature adjournment of
the depositions was caused by Plaintiff’s counsel’s
instruction that the deponents not respond to the line of
questioning at issue here.

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Having concluded that the subject discovery is
relevant and proportional, the Court now considers whether the
attorney-client privilege or FRE 480 preclude Defendants from
obtaining the requested deposition testimony.
A.

Attorney-Client Privilege Does Not Bar All Questioning
Plaintiff erroneously cites and relies on federal

law with respect to its attorney-client privilege arguments.
State law governs the attorney-client privilege in diversity
cases.

Fed. R. Evid. 501 (“[I]n a civil case, state law

governs privilege regarding a claim or defense for which state
law supplies the rule of decision.”); In re Cal. Pub.
Utilities Comm’n, 892 F.2d 778, 781 (9th Cir. 1989) (“In
diversity actions, questions of privilege are controlled by
state law.”); Blueearth Biofuels, LLC v. Hawaiian Elec. Co.,
Inc., No. 09-00181 DAE-KSC, 2010 WL 11425708, at *3 (D. Haw.
May 11, 2010) (citing KL Group v. Case, Kay & Lynch, 829 F.2d
909, 918 (9th Cir. 1987)).

The party asserting attorney-

client privilege has the burden of establishing its existence
and validity.

Dicenzo v. Izawa, 68 Haw. 528, 536, 723 P.2d

171, 176 (1986).

To be protected by the privilege,

“confidential communications [must be] made for the purpose of
facilitating the rendition of professional legal services.”
Haw. R. Evid. 503(b); Save Sunset Beach Coalition v. City and

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Cty. of Honolulu, 102 Hawai‘i 465, 484-85, 78 P.3d 1, 20-21
(2003).

According to the Hawaii Supreme Court, the privilege

may be invoked when the following is established:
(1) where legal advice of any kind is sought (2)
from a professional legal adviser in his [or
her] capacity as such, (3) the communication
relating to that purpose, (4) made in confidence
(5) by the client, (6) are at his [or her]
instance permanently protected (7) from
disclosure by himself or by the legal adviser,
(8) except the protection be waived.
Id. at 485, 78 P.3d at 21 (quoting Sapp v. Wong, 62 Haw. 34,
38, 609 P.2d 137, 140 (1980)).

The privilege applies to

communications to and from the attorney.

Metzler Contracting

Co. LLC v. Stephens, 642 F. Supp. 2d 1192, 1202 (D. Haw.
2009).

There may be no privilege when a third party is

present during the attorney-client communications, or when
there is an absence of an attorney-client relationship.

Id.

at 1203.
It is well-established that attorney-client
communications must involve legal advice or services.

Haw. R.

Evid. 503(b); Sunset Beach, 102 Hawai‘i at 485, 78 P.3d at 21.
However, the request for advice need not be express.

The

“privilege exists to protect not only the giving of
professional advice to those who can act on it but also the
giving of information to the lawyer to enable him to give
sound and informed advice.”

Upjohn Co. v. United States, 449
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U.S. 383, 390 (1981).

The U.S. Supreme Court has explained

that
A fact is one thing and a communication
concerning that fact is an entirely different
thing. The client cannot be compelled to answer
the question, “What did you say or write to the
attorney?” but may not refuse to disclose any
relevant fact within his knowledge merely
because he incorporated a statement of such fact
into his communication to his attorney.
Id. at 395-96 (citation and quotations omitted).
Plaintiff argues that the requested testimony is
protected by the attorney-client privilege because Parziale,
Jenkinson, and Lebel’s understanding and knowledge of complex
legal issues arise solely from the advice of counsel or from
conversations with counsel.

According to Plaintiff, because

Parziale, Jenkinson, and Lebel’s knowledge is inextricably
intertwined with information relayed by counsel, the
deposition questions are tantamount to asking them for
privileged communication with counsel.

The Court disagrees.

The attorney-client privilege does not bar
Defendants from eliciting some of the requested testimony from
Parziale, Jenkinson, and Lebel merely because they might have
learned or obtained factual information or knowledge from
counsel.

The questions presented to the deponents do not

exclusively concern attorney-client communications; they are
largely factual and pertain to matters central to this case.
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Plaintiff opened the door by submitting Parziale’s
declarations in support of its MSJs.

It cannot use

information in a effort to prevail against Defendants, then
assert attorney-client privilege to prevent discovery about
that very information.

Consequently, while Defendants may not

ask Parziale, Jenkinson, or Lebel to divulge privileged
communications, they may inquire about the Proposed Amendment
and the attendant circumstances, as set forth in Parziale’s
declarations.
B.

FRE 408
Plaintiff also relies on FRE 408 to preclude the

subject deposition questions.

In doing so, Plaintiff

conflates relevance and admissibility.

FRE 408 states that

evidence of “furnishing, promising, or offering--or accepting,
promising to accept, or offering to accept--a valuable
consideration in compromising or attempting to compromise the
claim” or “conduct or a statement made during compromise
negotiations about the claim” are “not admissible--on behalf
of any party--either to prove or disprove the validity or
amount of a disputed claim or to impeach by a prior
inconsistent statement or a contradiction.”
408(a) (emphases added).

Fed. R. Evid.

“The prohibition on using compromise

negotiations is therefore limited and the rule does not bar

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the admission of such negotiations for other permissible
purposes.”

Phoenix Sols. Inc. v. Wells Fargo Bank, N.A., 254

F.R.D. 568, 584 (N.D. Cal. 2008); Fed. R. Evid. 408(b) (“The
court may admit this evidence for another purpose, such as
proving a witness’s bias or prejudice, negating a contention
of undue delay, or proving an effort to obstruct a criminal
investigation or prosecution.”).
FRE 408 is not, as Plaintiff claims, a privilege
precluding the discovery of relevant information.

It does not

protect settlement negotiations from discovery and “[o]n its
face, the rule applies to the admissibility of evidence at
trial, not to whether evidence is discoverable.”
Sols., 254 F.R.D. at 584.

Phoenix

Insofar as discovery rules do not

affect the admissibility of evidence, FRE 408 “does not
require any special restriction on Rule 26.”

Id. (citation

and quotation omitted).
The Motions are granted to the extent Defendants
seek testimony about factual information or the deponents’
knowledge related to the Proposed Amendment and/or the claims
against dck/FWF.

As explained above, FRE 408 does not

foreclose the discovery of settlement negotiations, and
Plaintiff may not use it as a shield to preclude the
examination of witnesses about the Proposed Amendment or other

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settlement negotiations.1
C.

Continued Depositions and Additional Time
Defendants request that they be permitted to

complete the subject depositions in Honolulu, Hawaii, and that
they be granted an additional 1.25 hours to depose Parziale.
FRCP 30(d) limits a deposition to “one day of 7 hours.”
R. Civ. P. 30(d).

Fed.

However, “[t]he court must allow additional

time consistent with Rule 26(b)(1) and (2) if needed to fairly
examine the deponent or if the deponent, another person, or
any other circumstance impedes or delays the examination.”
Id.
Because the Court has concluded that Plaintiff’s
counsel’s assertion of the attorney-client privilege and FRE
408 was largely improper, an additional 1.25 hours to depose
Parziale is necessary to fairly examine him and complete the
deposition.
As for the location of the continued depositions,
the Court orders that Parziale, Jenkinson, and Lebel appear on
the West Coast, in a city and on a date agreed to by the
parties.

This compromise location is equitable because

1

Because multiple discovery disputes have been presented
to the Court about the applicability of FRE 408, the Court
emphasizes that Plaintiff may not invoke FRE 408 to preclude
any discovery.
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additional depositions are expected be taken in that
geographic region.
For these reasons, the Court GRANTS IN PART AND
DENIES IN PART the Motions as follows:
1.

Jenkinson is directed to respond to the questions on
page 5 of the Reply and Lebel is directed to respond
to questions regarding the terms of the Proposed
Amendment. Questioning is not limited to the
foregoing.

2.

Parziale is directed to respond to questions on
pages 7-8 of the Reply. These questions do not
implicate the attorney-client privilege. Parziale
is further directed to respond to the questions on
pages 8 (starting at the bottom of the page)-9 of
the Reply, though only to the extent a response does
not implicate the attorney-client privilege.
Questioning is not limited to the foregoing. As
explained above, the privilege does not apply merely
because Parziale might have obtained information
from counsel.

3.

Jenkinson and Lebel shall appear for the completion
of their depositions on the West Coast on a date and
at a time agreed to by the parties.

4.

Parziale shall appear for the completion of his
deposition on the West Coast on a date and at a time
agreed to by the parties. The Court finds that an
additional 1.25 hours beyond the time remaining from
the initial deposition is necessary to fairly
examine him.

5.

The Court, exercising its discretion, declines to
award fees and costs.2

2

FRCP 37(a)(5)(C) provides: “If the motion is granted
in part and denied in part, the court may issue any protective
order authorized under Rule 26(c) and may, after giving an
opportunity to be heard, apportion the reasonable expenses for
the motion.” Fed. R. Civ. P. 37(a)(5)(C).
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CONCLUSION
Based on the foregoing, Defendants’ Motions (Doc.
Nos. 130 & 137) are HEREBY GRANTED IN PART AND DENIED IN PART.
IT IS SO ORDERED.
DATED:

Honolulu, Hawaii, November 8, 2017.

_____________________________
Kevin S.C. Chang
United States Magistrate Judge

CV 16-00114 JMS-KSC; Gramercy Group, Inc. v. D.A. Builders, LLC, et al.; ORDER
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ (1) MOTION TO COMPEL
DEPOSITION TESTIMONY OF VINCENT PARZIALE AND (2) MOTION TO COMPEL DEPOSITION
TESTIMONY OF GREGG JENKINSON AND CRAIG LEBEL

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