U.S. Equal Employment Opportunity Commission v. MJC, Inc. et al

Filing 129

ORDER Reversing Magistrate Judge's Order Denying Plaintiff's Request For Production of Defendants' Financial Records re 103 . The court reverses the Magistrate Judge's denial of EEOC's Request Nos. 28 and 29. The court o rders Defendants to produce balance sheets for the years 2017, 2018, and, to the extent available, 2019. The remainder of the Magistrate Judges order filed on May 6, 2019 is affirmed. Signed by JUDGE SUSAN OKI MOLLWAY on 6/17/2019. (cib) Modified motion link to 103 in place of document number 128 on 6/18/2019 (cib).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
U.S. EQUAL EMPLOYMENT
OPPORTUNITY COMMISSION,

)
)
)
Plaintiff,
)
)
vs.
)
)
MJC, INC.; GAC AUTO GROUP,
)
INC. dba CUTTER MAZDA OF
)
HONOLULU; and DOES 1-10
)
INCLUSIVE,
)
)
Defendants.
_____________________________ )

Civ. No. 17-00371 SOM-WRP
ORDER REVERSING MAGISTRATE
JUDGE’S ORDER DENYING
PLAINTIFF’S REQUEST FOR
PRODUCTION OF DEFENDANTS’
FINANCIAL RECORDS

ORDER REVERSING MAGISTRATE JUDGE’S ORDER DENYING PLAINTIFF’S
REQUEST FOR PRODUCTION OF DEFENDANTS’ FINANCIAL RECORDS
I.

INTRODUCTION.
Plaintiff U.S. Equal Employment Opportunity Commission

(“EEOC”) appeals from a ruling by the Magistrate Judge that
denied two discovery requests, Request Nos. 28 and 29.
103. 1

ECF No.

Those requests seek discovery regarding the monthly

revenue, expenses, assets, and liabilities of Defendants MJC,
Inc. and GAC Auto Group, Inc. dba Cutter Mazda of Honolulu
(collectively, “Defendants”).
The court concludes that discovery of Defendants’
financial records is relevant to EEOC’s claim for punitive
damages, but that discovery going beyond Defendants’ current net

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Though titled a “Motion For Reconsideration,” EEOC’s motion is
clearly intended to be an appeal from the Magistrate Judge’s
order.

worth is disproportional to the needs of the case.

As a result,

the court reverses the Magistrate Judge’s order with respect to
Request Nos. 28 and 29 and tailors the remedy as follows:
Defendants shall produce their balance sheets for the years
2017, 2018, and, to the extent available, 2019.
Because neither party appeals any other portion of the
Magistrate Judge’s order, the remainder of the order is
affirmed.
II.

BACKGROUND.
EEOC is suing Defendants for allegedly discriminating

against Ryan Vicari on the basis of his hearing disability.
No. 1.

ECF

A summary of the discovery process thus far is provided

in the background section of the Magistrate Judge’s order.
No. 95, PageID #s 1294-95.

ECF

The court incorporates the

Magistrate Judge’s background section and recites below only
those facts necessary to decide the issues before it.
On April 3, 2019, EEOC filed a “Motion to Compel
Further Response to Document Requests.”

ECF No. 70.

Its motion

sought Defendants’ response to the following requests, among
others:
REQUEST NO. 28:
Please IDENTIFY and produce all DOCUMENTS
that pertain, regard or relate to monthly
revenue generated and expenses incurred for
MJC, Inc. and GAC Auto Group, Inc. dba

2

Cutter Mazda of Honolulu from January 1,
2013 to the present.
REQUEST NO. 29:
Please IDENTIFY and produce all DOCUMENTS
that pertain, regard or relate to assets and
liabilities for MJC, Inc. and GAC Auto
Group, Inc. dba Cutter Mazda of Honolulu
from January 1, 2013 to the present.
ECF No. 70-2, PageID # 457; ECF No. 103.
In an order filed on May 6, 2019, the Magistrate Judge
granted in part and denied in part EEOC’s motion.

ECF No. 95.

The Magistrate Judge denied Request Nos. 28 and 29, reasoning
that the requests “are overly broad, seek documents outside of
the relevant time period, and seek documents that are not
relevant to the claims and defenses in this litigation.”

ECF

No. 95, PageID #s 1312-13.
On May 15, 2019, EEOC appealed the Magistrate Judge’s
ruling only with respect to Request Nos. 28 and 29.

ECF No.

103.
III.

STANDARD OF REVIEW.
Magistrate judges have the authority to “hear and

determine any pretrial matter pending before the court, except a
motion for injunctive relief, for judgment on the pleadings, for
summary judgment, to dismiss or quash an indictment or
information made by the defendant, to suppress evidence in a
criminal case, to dismiss or to permit maintenance of a class

3

action, to dismiss for failure to state a claim upon which
relief can be granted, and to involuntarily dismiss an action.”
28 U.S.C. § 636(b)(1)(A).

The Federal Rules of Civil Procedure

reflect this statutory authority, with Rule 72(a) providing that
a district judge may refer to a magistrate judge for
determination “a pretrial matter not dispositive of a party’s
claim or defense.”

Such motions, including discovery motions,

are customarily referred to magistrate judges in this district.
See Local Rule 72.3.
An appeal from a magistrate judge’s ruling on a
nondispositive matter may be brought pursuant to Local Rule
74.1.

A magistrate judge’s order on a nondispositive matter, or

any portion of the order, may be reversed or modified by the
district court only if it is “clearly erroneous or contrary to
law.”

28 U.S.C. § 636(b)(1)(A); Local Rule 74.1.

“[R]eview

under the ‘clearly erroneous’ standard is significantly
deferential, requiring a ‘definite and firm conviction that a
mistake has been committed.’”

Concrete Pipe & Prods. v. Constr.

Laborers Pension Tr., 508 U.S. 602, 623 (1993) (quoting United
States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).

A

magistrate judge’s nondispositive order is “contrary to law”
when the magistrate judge “fails to consider an element of the
applicable legal standard.”

Durham v. Cty. of Maui, 742 F.

Supp. 2d 1121, 1127 (D. Haw. 2010).
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IV.

ANALYSIS.
In its Request Nos. 28 and 29, EEOC seeks “all

DOCUMENTS that pertain, regard or relate” to Defendants’ monthly
revenue, expenses, assets, and liabilities from 2013 to present.
ECF No. 70-2, PageID # 457.

EEOC argues that the Magistrate

Judge’s denial of these requests should be reversed because
Defendants’ financial records are relevant to its claim for
punitive damages.

ECF No. 103, PageID #s 1357, 1362.

The court agrees with EEOC and concludes that the
Magistrate Judge’s denial of Request Nos. 28 and 29 is clearly
erroneous.

However, discovery of documents dating back to 2013

and of documents unrelated to Defendants’ assets and liabilities
are disproportional to the needs of the case.

The court

therefore restricts Request Nos. 28 and 29 to only Defendants’
balance sheets for the years 2017, 2018, and, to the extent
available, 2019.
A.

Financial Records Going To Defendants’ Net Worth
Are Relevant To EEOC’s Request For Punitive
Damages.

Rule 26 of the Federal Rules of Civil Procedure
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
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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.
Fed. R. Civ. P. 26(b)(1).

“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)).
“In the punitive damages context, it is firmly
established that a detailed inquiry into the size of defendant’s
business and financial worth is relevant to the determination of
punitive damages.”

Baykeeper v. Kramer Metals, Inc., Civ. No.

07-3849 DDP (FMOx), 2009 WL 10671577, at *3 (C.D. Cal. Feb. 27,
2009) (citations omitted); see also Am. Auto. Ins. Co. v. Haw.
Nut & Bolt. Inc., Civ. No. 15-00245 ACK-KSC, 2017 WL 662977, at
*7 (D. Haw. Feb. 16, 2017) (“Discovery of a defendant’s
financial information is in fact permissible when punitive
damages are sought.”) (citations omitted); Sherwin v. Infinity
Auto Ins. Co., No. 2:11-cv-00043-JCM-LRL, 2011 WL 4500883, at *3
(D. Nev. Sept. 27, 2011) (“[W]hen a claim for punitive damages
is asserted, a defendant’s financial condition is a proper
subject of discovery.” (internal quotations and citation
omitted)); Momot v. Mastro, No. 2:09-cv-00975-RLH-LR, 2011 WL
1833349, at *3 (D. Nev. May 13, 2011) (“A defendant’s financial
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condition is relevant to the pursuit of punitive damages.”
(citation omitted)).

Defendants appear to concede as much,

stating “it is generally accepted that financial records
reflecting a defendant’s current net worth may be discoverable
as they relate to punitive damages.”

ECF No. 113, PageID

# 1522.
The Complaint seeks punitive damages as a form of
relief.

ECF No. 1, PageID # 7 (requesting that the court

“[o]rder Defendants to pay [Vicari] punitive damages for its
malicious and/or reckless conduct in an amount to be determined
at trial”).

EEOC was therefore entitled to seek discovery going

to Defendants’ financial condition.

Without such discovery,

EEOC will be unable to establish an appropriate amount of
punitive damages at trial (should EEOC make a prima facie
showing that punitive damages are warranted).
In denying Request Nos. 28 and 29, the Magistrate
Judge did not mention EEOC’s claim for punitive damages, 2 but
stated only that the requests “are overly broad, seek documents
outside of the relevant time period, and seek documents that are
not relevant to the claims and defenses in this litigation.”
ECF No. 95, PageID #s 1312-13.

Because documents going to

Defendants’ financial condition are relevant to EEOC’s claim for
2

In its motion to compel, EEOC raised this same argument
regarding the relevancy of financial records to its claim for
punitive damages. See ECF No. 70, PageID #s 425-26.
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punitive damages, the Magistrate Judge clearly erred in denying
Request Nos. 28 and 29 in their entirety.
B.

The Court Narrows EEOC’s Request Nos. 28 And 29
To Cover Balance Sheets From 2017 To Present.

While Requests Nos. 28 and 29 seek relevant discovery,
“relevancy alone is [not] sufficient to obtain discovery, the
discovery requested must also be proportional to the needs of
the case.”

Am. Auto., 2017 WL 662977, at *2 (quoting Centeno v.

City of Fresno, Civ No. 1:16-cv-00653-DAD-SAB, 2016 WL 7491634,
at *4 (E.D. Cal. Dec. 29, 2016)).

By seeking “all” documents

relating to Defendants’ monthly revenue, expenses, assets, and
liabilities from 2013 to present, Requests No. 28 and 29 seek
discovery disproportional to the needs of the case.
“When allowing discovery into a defendant’s financial
records related to a punitive damages claim, courts generally
limit the time period for production to such information to
reflect the defendant’s current condition” or current net worth.
Momot, 2011 WL 1833349, at *5 (citations omitted); see also S.
Cal. Hous. Rights Ctr. v. Krug, No. CV06-1420SJOJCX, 2006 WL
4122148, at *2 (C.D. Cal. Sept. 5, 2006) (“A defendant’s net
worth and financial condition are relevant and admissible to
establish the appropriate amount of punitive damages” (citations
omitted)).

Two years’ worth of financial records is generally

considered sufficiently “current” for punitive damages purposes.

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See, e.g., Coachman v. Seattle Auto Mgmt. Inc., Case No. C17-187
RSM, 2018 WL 1640893, at *4 (W.D. Wash. Apr. 5, 2018) (limiting
discovery of financial records to two years); Sherwin, 2011 WL
4500883, at *3 (same); EEOC v. Cal. Psychiatric Transitions, 258
F.R.D. 391, 395 (E.D. Cal. Jun. 18, 2009) (same); Krug, 2006 WL
4122148, at *2 (same).

This court limits discovery of

Defendants’ financial records to the past two years.
Further, “net worth” is “calculated as the excess of
total assets over total liabilities.”
(11th ed. 2019).

Black’s Law Dictionary

Balance sheets include the value of assets and

liabilities and therefore provide sufficient information to
determine net worth.

See id. (defining “balance sheet” as “[a]

statement of a financial position as of the statement’s date,
disclosing the value of assets, liabilities, and equity.”); see
also Coachman, 2018 WL 1640893, at *4 (W.D. Wash. Apr. 5, 2018)
(limiting requests to balance sheets and income statements of
cash flow); Sherwin, 2011 WL 4500883, at *3 (limiting requests
to “defendant’s financial statement, including a balance sheet
and profit[ ]loss statement”).

EEOC does not explain why it

needs information regarding Defendants’ monthly revenue and
expenses.

To ensure that discovery is proportional with the

needs of the case, the court limits discovery to Defendants’
balance sheets.

See Cal. Psychiatric Transitions, 258 F.R.D. at

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395 (limiting discovery requests when “[t]he requested time
period and the types of documents imposed are excessive”).
Defendants argue that Request Nos. 28 and 29 do not
seek net worth and therefore should be denied, citing Kim v.
Crocs, Inc., Civ. No. 16-00460 JMS-KJM, 2018 WL 4868964 (D. Haw.
Jul. 13, 2018).

In Kim, the Magistrate Judge reasoned that

“[t]he parties’ lengthy punitive damages arguments are . . .
misplaced” because the plaintiffs’ request “seeks discovery of
gross revenue and profit, not net worth.”
Defendants’ reliance on Kim in inapposite.

Id. at * 3.
Unlike the request

in Kim, EEOC’s requests seek discovery of Defendants’ assets and
liabilities--i.e., the exact information needed to calculate net
worth.

Kim does not suggest that this court should deny Request

Nos. 28 and 29 on the ground that they do not include the term
“net worth.”
Request Nos. 28 and 29 are limited as follows:
Defendants shall produce balance sheets for the years 2017,
2018, and, to the extent available, 2019.
C.

This Court Need Not Address EEOC’s Argument That
The Magistrate Judge Failed To Address
Proportionality.

EEOC further argues that the Magistrate Judge’s ruling
on Request Nos. 28 and 29 was contrary to law because the
Magistrate Judge failed to address proportionality.
103, PageID #s 1368-71.

ECF No.

Because the Magistrate Judge’s ruling
10

is set aside for other reasons, this court need not address
EEOC’s proportionality argument.
V.

CONCLUSION.
The court reverses the Magistrate Judge’s denial of

EEOC’s Request Nos. 28 and 29.

The court orders Defendants to

produce balance sheets for the years 2017, 2018, and, to the
extent available, 2019.

The remainder of the Magistrate Judge’s

order filed on May 6, 2019 is affirmed.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, June 17, 2019.

/s/ Susan Oki Mollway
Susan Oki Mollway
United States District Judge
U.S. Equal Employment Opportunity Commission v. MJC, Inc. et
al., Civ. No. 17-00371 SOM-WRP; ORDER REVERSING MAGISTRATE
JUDGE’S ORDER DENYING PLAINTIFF’S REQUEST FOR PRODUCTION OF
DEFENDANTS’ FINANCIAL RECORDS.

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