Apex Colors Inc v. Chemworld International Limited, Inc. et al

Filing 582

OPINION AND ORDER: The Court hereby DENIES the Motion for Order to Compel Supplemental Production of Finos Documents and Forensically-Imaged Hard Drive of Molnar Computer 562 . The Court ORDERS that Defendants PAY Plaintiff its reasonable expenses incurred in opposing this motion and ORDERS Plaintiff to FILE, on or before 3/22/2018, a verified itemized statement of reasonable expenses incurred in opposing this motion. Signed by Magistrate Judge Paul R Cherry on 3/8/2018. (jss)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
APEX COLORS, INC.
Plaintiff,
v.
CHEMWORLD INTERNATIONAL LIMITED,
INC., CHEMWORLD INTERNATIONAL
LIMITED, LLC, ATUL MODI, MANOJ MODI,
and PAUL BYKOWSKI,
Defendants.

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Cause No.: 2:14-CV-273-PRC

OPINION AND ORDER
This matter is before the Court on a Motion for Order to Compel Supplemental Production
of Finos Documents and Forensically-Imaged Hard Drive of Molnar Computer [DE 562], filed by
Defendants Paul Bykowski, Atul Modi, Manoj Modi, Chemworld International Limited, Inc., and
Chemworld International Limited, LLC on February 14, 2018. Plaintiff Apex Colors, Inc. filed a
response on February 27, 2018, Defendants filed a reply on February 28, 2018, Apex filed a surreply on March 1, 2018, and Defendants filed a sur-response on March 1, 2018.
BACKGROUND
Finos LLC’s members were Apex Colors, Inc. and Jim and Eric Boggess. In October 2012,
Finos LLC was dissolved. The terms of the settlement agreement governing the dissolution provide
that the documents and data in the physical possession of Jim and Eric Boggess became their
property: “[A]s of the Effective Date the Trustee shall assign to and the Boggesses and/or Boggess
Holdings will have the right to retain and use those assets of Finos that the Trustee or the Boggesses
have in their possession or control, including but not limited to the inventory, cash and accounts
receivable.” (Preliminary Injunction Hearing Ex. 13); (ECF 574) (sealed). The Boggesses moved
at least some, if not all, of the property in their physical possession to their business location in

Kentucky. The item in dispute on the instant motion is a computer used by Chris Molnar when he
was working for Finos (“Finos computer”), which was in the possession of the Boggesses at the time
of the dissolution and became the Boggesses’ property.
During the course of discovery in this case, Apex learned that the Finos computer was in the
possession of the Boggesses, who are not parties to this litigation. Having served the Boggesses with
a subpoena for materials relevant to this litigation and having instituted a subpoena enforcement
action, Apex communicated with the Boggesses in mid-August 2017, asking for full access to the
entire Finos computer without search term limitations on the basis that it was a computer used at
Finos by a Finos employee. (ECF 571-1, Ex. A, p. 2-3). Later in August, the Boggesses confirmed
that they were able to get the computer running such that third-party vendor One Source should be
able to image the computer directly and proposed that, with Apex’s consent, One Source proceed
to image the computer. Id. at p.1. However, the Boggesses proposed that One Source run a date filter
and provide all documents and files dated prior to October 31, 2012, the approximate date that the
Finos computer was transferred from the Finos facility in Portage, Indiana, to the Boggesses’ facility
in Kentucky. The end-date filter was proposed by the Boggesses because, after that date, the Finos
computer was used for a limited time by NeoNos. Id. NeoNos is a competitor of both Apex and
Defendants. Apex agreed, and One Source proceeded to image the computer, to run the October 31,
2012 end-date filter, and to produce the data to Apex. Id.; (ECF 562-3, Ex. C, p. 1).
On October 5, 2017, Apex informed Defendants that “One Source has imaged and is
providing us with the computer used by Chris Molnar. It is Attorneys Eyes Only for Defendants. If
you would like a copy you can order it through Jason Hale (copied here). Please discuss cost and
delivery options with him.” (ECF 562-3, Ex. C, p. 1).

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On October 11, 2017, Defendants contacted Jason Hale, writing that Defendants understood
that “you have imaged Chris Molnar’s computer from Finos, LLC,” that Defendants would like a
copy, but that Defendants would like a cost and shipping estimate. The same date, Hale responded,
“To clarify, are you asking for the data production that was provided to [counsel for Apex] or the
forensic image of the computer? The data provided to [counsel for Apex] was a subset of the data
stored on the computer.” (ECF 562-4, Ex. D, p. 1).
A month later, on November 12, 2017, Defendants contacted Jason Hale, asking for the cost
of both the data production to counsel for Apex and as well as the cost for the entire forensic image.
(ECF 562-5, Ex. E, p. 1). On November 14, 2017, Hale provided the cost for each of the two
options. (ECF 562-6, Ex. F, p. 1).
On November 14, 2017, counsel for the Boggesses asked Jason Hale to confirm that the same
date filter that was used to provide documents to counsel for Apex would be used in providing a full
forensic image to Defendants. (ECF 562-7, Ex. G, p. 1). Hale clarified that a full forensic image
would include all files on the system, regardless of the date or type. Id. Hale explained, “If we’re
limited to turning over files based on date, etc., a copy of the production previously provided to
[counsel for Apex] would probably be best.” Id. Counsel for Defendants was copied on this email
from Hale. Id.
Based on the documentation before the Court, the next contact by Defendants regarding the
Finos computer occurred on February 12, 2018, when counsel for Defendants sent an email to
counsel for Apex, counsel for the Boggesses, and Jason Hale in which Defendants assert that they
believe that they are entitled to the entire forensic image of the Finos computer as responsive to their
2014 and 2017 Requests for Production of Documents served on Apex. (ECF 562-8, Ex. H, p. 1).

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Therein, Defendants contend either that Apex should review the forensic image and produce
responsive documents to Defendants as a supplement or that the entire image should be turned over
to Defendants for an independent review of the contents.
The same date, Apex responded that Apex agrees that Defendants have a right to what Apex
received from the Rule 45 subpoena served on the Boggesses and that Apex believed that
Defendants had received all the materials. (ECF 562-9, Ex. I, p. 2). Apex specified that it had
received production on the Macola and Commence databases as well as from the Finos computer
(at issue on this motion) and that it was Apex’s understanding that the materials had either been
provided to Defendants and/or that Defendants had been offered the materials for a production fee
payable to One Source. Id. Apex objected that Defendants had no basis for asserting a right to more
materials than what Apex received through the subpoena. Id. Apex noted that Defendants chose not
to enforce their own subpoena against the Boggesses. Id.
Apex also informed Defendants that Apex does not have control over Eric Boggess’ property
or anything in Eric Boggess’ possession as of the signing of the settlement agreement governing the
dissolution of Finos, LLC. (ECF 562-10, Ex. J, p. 1); (ECF 571-1, Ex. B, p. 1). Apex reminded
Defendants that Apex obtained access to some of the documents over Eric Boggess’ objection,
through motion practice before the Court. (ECF 562-10, Ex. J, p. 1); (ECF 571-1, Ex. B, p. 1). And,
Apex reiterated that Apex has directed One Source to make available to Defendants what has been
made available to Apex. (ECF 562-10, Ex. J, p. 1); (ECF 571-1, Ex. B, p. 1).
Defendants then filed the instant motion to compel.

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ANALYSIS
In the instant motion, Defendants ask the Court to compel Apex to produce to Defendants
the full forensic image of the Finos computer hard drive.1 Defendants argue that the full forensic
image of the Finos computer is responsive to requests for production of documents served by
Defendants on Apex in 2014 and 2017; that Apex, as the Boggesses’ former business associate at
Finos, has “control” within the meaning of Federal Rule of Civil Procedure 34 over the Finos
computer currently in the possession of the Boggesses; and that, as a result, Apex has a duty to
produce the full forensic image of the Finos computer to Defendants.
Federal Rule of Civil Procedure 34 provides that a party may be compelled to produce
electronically stored information “in the responding party’s possession, custody, or control.” Fed.
R. Civ. P. 34(a)(1). The Seventh Circuit Court of Appeals has found that for purposes of Rule 34,
“control” means “a legal right to obtain.” Thermal Design, Inc. v. Am. Soc’y of Heating,
Refrigerating & Air-Conditioning Eng’gs, Inc., 755 F.3d 832, 838-39 (7th Cir. 2014) (quoting Dexia
Credit Local v. Rogan, 231 F.R.D. 538, 542 (N.D. Ill. 2004)). The burden is on the party seeking
discovery to show that the nonmovant has control over the documents sought. Williams v. Angie’s
List, Inc., No. 1:16-CV-878, 2017 WL 1318419, at *2 (S.D. Ind. Apr. 10, 2017) (quoting McBryar
v. Int’l Union of United Auto. Aerospace & Agr. Implement Workers of Am., 160 F.R.D. 691, 695
(S.D. Ind. 1993) (citing Nat’l Util. Serv., Inc. v. Nw. Steel & Wire Co., 426 F.3d 222, 225 (7th Cir.
1970))).

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Although there appears to be some confusion as to whether one or two computers are at issue, the evidence
of record and the briefing by the parties indicates that there is one Finos computer, formerly used by Chris Molnar at
Finos and subsequently possessed by the Boggesses, at issue on this motion.

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First, it appears that Defendants believe that there is something additional on the full forensic
image of the Finos computer that is relevant to this litigation but that was not given to Apex as part
of the production via One Source with the October 31, 2012 end-date limitation. (ECF 562-9, Ex.
I, p. 2). However, the correspondence between Apex, the Boggesses, and One Source indicates that
the only limitation on the production to Apex from the full forensic image of the Finos computer was
the October 31, 2012 end-date limitation. And, Defendants have not argued that they are entitled to
information dated after October 31, 2012, at which point the computer was in the possession and
control of and was being used by the Boggesses and/or NeoNos, who are not parties to this litigation.
Second, the evidence before the Court is that Defendants have been given or given access
to all of the documents, data, and forensic images that Apex has obtained from the Boggesses
through the subpoena enforcement action by Apex against the Boggesses, including the production
from the Finos computer. Apex was not given a full forensic image of the Finos computer hard
drive. Thus, Apex has fulfilled its obligation under Rule 34 with regard to the information it
obtained through the subpoena served on the Boggesses.
Third, Defendants have not met their burden of showing that Apex “controls” information,
documents, data, or physical property in the possession of the Boggesses. Defendants argue that the
hard drive of the Finos computer, which is in the possession of third parties Jim and Eric Boggess,
is in Apex’s “control” within the meaning of Rule 34 because Apex was previously in business with
Jim and Eric Boggess as joint members of Finos, LLC from 2002 to 2012. In other words,
Defendants argue that Apex must produce responsive documents in the possession of “Apex’s
former business partners” beyond those that Apex has obtained through its own non-party discovery
efforts. (ECF 563, p. 1).

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Defendants offer no evidence or legal authority that Apex, as a former member of Finos,
LLC, has “control” within the meaning of Rule 34 over the Finos computer that is now rightfully
in the possession and control of the Boggesses as provided for in the Finos, LLC dissolution
settlement agreement. The Boggesses are Apex’s former business partners; there is no evidence that
Apex has any control over the Boggesses’ current business. Moreover, the Finos dissolution and the
related settlement agreement occurred in October 2012, well before this litigation was instituted;
there is no evidence that Apex entered into the Finos, LLC dissolution settlement agreement in
October 2012 for the purpose of transferring property into the possession of the Boggesses to avoid
Apex’s Rule 34 obligations in this litigation, which was filed in 2014. To the extent Defendants seek
additional information from the Boggesses not in the current possession of Apex obtained through
the subpoena enforcement action (all of which has been made available to Defendants), Defendants
should have sought the information directly from the Boggesses. It appears that Defendants did not
do so.
Finally, in the prayer for relief in its motion, Defendants ask the court to order Jim and Eric
Boggess to relinquish possession of all Finos data and documents in their possession and return them
to Apex to be used as evidence in this suit. However, Defendants have not brought the instant
motion against the Boggesses. Any relief sought by Defendants in this motion against Jim and Eric
Boggess is not properly before the Court.
The Court denies the Motion to Compel.
In its response brief, Apex asks that Defendants be required to pay Apex’s fees and costs
associated with having to respond to the motion under Rule 37 and/or 28 U.S.C. § 1927. Defendants
do not respond to this request. Pursuant to Federal Rule of Civil Procedure 37(a)(5)(B), which

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governs when a motion to compel is denied, the Court awards Apex its reasonable expenses incurred
in responding to the motion. The motion was neither substantially justified nor do other
circumstances make an award of expenses unjust. The Court finds that additional sanctions
requested by Apex based on Defendants’ Local Rule 37-1 certification are not warranted.
CONCLUSION
Based on the foregoing, the Court hereby DENIES the Motion for Order to Compel
Supplemental Production of Finos Documents and Forensically-Imaged Hard Drive of Molnar
Computer [DE 562].
The Court ORDERS that Defendants PAY Plaintiff its reasonable expenses incurred in
opposing this motion and ORDERS Plaintiff to FILE, on or before, March 22, 2018, a verified
itemized statement of reasonable expenses incurred in opposing this motion, including the expenses
incurred related to the Motion for Leave to File Sur-Reply and to the Sur-Reply.
So ORDERED this 8th day of March, 2018.
s/ Paul R. Cherry
MAGISTRATE JUDGE PAUL R. CHERRY
UNITED STATES DISTRICT COURT

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