COX et al v. SHERMAN CAPITAL LLC et al
Filing
535
ORDER granting in part and denying in part Plaintiffs' #501 Fourth Motion to Compel; denying Plaintiffs' #513 Motion for Oral Argument on Fourth Motion to Compel (see Order). Signed by Magistrate Judge Mark J. Dinsmore on 2/2/2016. (SWM)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
ANDREW COX,
LUCINDA COX,
STEPHANIE SNYDER,
ROBERT GOODALL,
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Plaintiffs,
vs.
SHERMAN CAPITAL LLC,
SHERMAN FINANCIAL GROUP LLC,
LVNV FUNDING LLC,
RESURGENT CAPITAL SERVICES, LP,
JOHN DOES 1-50,
SHERMAN ORIGINATOR LLC,
UNKNOWN S CORPORATION,
Defendants.
No. 1:12-cv-01654-TWP-MJD
ORDER ON FOURTH MOTION TO COMPEL
This matter is before the Court on Plaintiffs’ Fourth Motion to Compel. [Dkt. 501.]
Based upon the following, the Court GRANTS IN PART and DENIES IN PART Plaintiffs’
Motion.
I.
Background
In this action, Plaintiffs allege Defendants violated the Fair Debt Collection Practices Act
(“FDCPA”) and Racketeer Influenced and Corrupt Organizations Act (“RICO”) when attempting
to collect on Plaintiffs’ credit card debts. Discovery has been an arduous process in this case
punctuated by multiple conferences with the Court and discovery-related motions. This Motion
to Compel stems from a non-party subpoena served by Plaintiffs upon Moody’s Analytics, Inc.
(“Moody’s”). Rather than producing responsive documents directly to Plaintiffs, Moody’s
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produced the documents (“Moody’s documents”) to Defendants, prompting a telephonic
discovery conference with the Court. On October 16, 2015, the Court ordered Defendants to
produce the Moody documents with a log identifying any documents withheld from production
and the basis for withholding. [Dkt. 466.] The Court also ordered Defendants to produce any
withheld or redacted documents to the Court for in camera review. Plaintiff then filed this
Motion seeking an order compelling Defendants to produce unredacted versions of the Moody
documents, along with previously requested tax documents and corporate organizational
documents.
II.
Legal Standard
The Federal Rules of Civil Procedure allow parties to “obtain discovery regarding any
nonprivileged matter that is relevant to any party's claim or defense.” See Fed. R. Civ. P.
26(b)(1). Evidence is relevant if it has any tendency to make the existence of any fact of
consequence to determining the action more probable or less probable than it would be without
the evidence. Fed. R. Evid. 401. Relevant information “need not be admissible in evidence to be
discoverable.” Fed. R. Civ. P. 26(b)(1). The objecting party bears the burden of establishing
why a particular discovery request is improper. Kodish v. Oakbrook Terrace Fire Prot. Dist., 235
F.R.D. 447, 450 (N.D. Ill. 2006).
III.
Discussion
At the heart of this dispute lies the question of whether it is appropriate for Defendants to
withhold portions of documents produced by Defendants based upon Defendants’ unilateral
determination that the information is not relevant to the litigation. Although Defendants cite a
number of cases where courts have allowed a party to redact non-relevant portions of documents,
redaction of otherwise discoverable documents is the exception rather than the rule. What
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constitutes relevant information is often a matter of judgment, and even “irrelevant information
within a document that contains relevant information may be highly useful to providing context
for the relevant information.” EEOC v. Dolgencorp, LLC, 2015 WL 2148394 at *3 (N.D. Ill.
2015) (internal citation omitted); see also In re State St. Bank & Trust Co. Fixed Income Funds
Inv. Litig., Nos. 08–1945, 08–333, 2009 WL 1026013, at *1 (S.D.N.Y. Apr. 8, 2009)
(“[Unilateral] redactions are generally unwise. They breed suspicions, and they may deprive the
reader of context.”).
Upon review of the documents, the Court finds that Defendants properly withheld certain
documents. However, Defendants failed to establish much of the information it redacted is
sufficiently sensitive to warrant redaction on the basis of relevance. This is especially true in
light of the protective order in place in this case. Therefore, the Court orders production of the
documents as outlined below.
A. Moody’s Documents Withheld
At the Court’s direction, Defendants provided Plaintiffs with a log of documents
produced by Moody’s in response to the non-party subpoena. [Dkt. 505-4] Defendants grouped
the documents withheld into three general categories:
1. Sherman Financial Statements
Defendants produced financial statements of Sherman Financial Group for 2011, 2012,
and 2013, as this is the relevant time period for financial records addressed by the parties’
protective order, and prior orders of the Court. [Dkts. 300 at 8, 356 at 9-10, 366 at 1.] The
Moody’s production included financial statements from prior and subsequent years. Defendants
withheld these documents as “highly sensitive and confidential” and outside the scope of the
protective order. The Court has previously addressed the scope of this type of information that
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must be produced and agrees that documents outside the 2011, 2012, 2013 time period may be
withheld from the Moody’s document production.
2. Reporting Documents
These are documents Defendants provided to Moody’s to allow Moody’s to perform
detailed credit analyses for the notes issued to lenders. Defendants contend these documents
contain proprietary and sensitive business information that does not relate to Plaintiffs’ claims.
Plaintiffs do not respond directly to Defendants’ arguments, instead asserting generally that they
are entitled to all of the Moody documents in unredacted form as Moody’s produced them to
Defendants.
Despite the fact that Plaintiffs have a detailed log of the Moody documents withheld from
production, they failed to makes specific arguments as to why these “reporting documents” are
relevant to the litigation. The documents largely consist of charts and graphs that Defendants
refer to as “performance statistics,” many of which relate to time periods outside the relevant
time period in this action. In the absence of some rebuttal from Plaintiffs as to Defendants’
argument in favor of withholding these documents, the Court finds it would be improper to
compel production.
3. BMO Consulting Report
Defendants contend this document also contains proprietary and sensitive business
information not relevant to the litigation. Specifically, Defendants assert the report contains
analyses of borrowing base calculations, disclosure of collection performance, servicer fee
information, cash distributions, collections outsourcing, collateral testing and cash processing.
[Dkt. 511 at 24.] Again, Plaintiffs fail to rebut Defendants’ argument with any assertions of
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relevance specific to this document. In the absence of such a showing, the Court finds it would
be improper to compel production of the BMO Consulting Report as well.
B. Moody Documents Redacted
The majority of documents produced by Defendants in redacted form relate to LVNV’s
financing of its purchase of charged-off credit card receivables. [Dkt. 511 at 20.] These
documents include multiple versions of LVNV’s Receivables Financing Agreement (“RFA”) and
documents that are ancillary to the RFA, such as servicing agreements, opinion letters and
purchasing commitments. The document log reflects titles such as Second Amended and
Restated Receivables Financing Agreement as amended by First Amendment and Third
Amendment to Amended and Restated Servicing Agreement.
Defendants redacted various contract provisions from these agreements on the basis that
the provisions were the product of private negotiations and their public disclosure could cause
competitive harm to Defendants. However, as noted above, discovery in this matter is subject to
a protective order. Unlike in the case cited by Defendants, Plaintiffs here are not seeking to
publicly file these agreements. Cf. In re NCAA Student-Athlete Name and Likeness Licensing
Litigation, 2012 WL 5395039, at *2 (N.D. Cal. 2012). Likewise, Defendants redacted the
identities of lending and facilitating banks on the basis that they are “not involved in this
litigation.” [Dkt. 511 at 23.] Plaintiffs assert the heart of this case is the “ownership” of the debts
at issue and the identity of these lenders may lead to that information. [Dkt. 504 at 13.] Upon
review of the documents, the Court finds some are redacted to such a degree as to make it
difficult to understand the context of the agreement and impossible to identify the parties
involved. Moreover, Defendants have not established that discovery of this information is
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improper in light of the protective order. Therefore, Defendants shall produce to Plaintiffs in
unredacted form each of the redacted documents from the Moody production.
C. Tax Documents
Of the Defendants, only Sherman Capital LLC files a federal tax return and only
Sherman Financial Group LLC and Resurgent Capital Services LP prepare audited financial
statements. [Dkt. 511 at 15.] On February 9, 2015, these entities produced these financial
documents for 2011, 2012 and 2013. Id. Plaintiffs still seek clarification that they have indeed
received all of the tax documents to which they are entitled. Plaintiffs request the Court require
Defendants to disclose “the tax returns, including as schedules, for any corporate parent or
grandparent that includes LVNV’s income on its tax returns.” [Dkt. 504 at 18.] Defendants
maintain they have already produced all of these documents and object to Plaintiffs’ request to
the extent it may seek documents outside of the 2011, 2012, 2013 time period.
As noted, the Court has previously addressed the appropriate time period relating to the
production of this type of financial information and has limited that time period to information
regarding the years 2011, 2012 and 2013. [Dkts. 300 at 8, 356 at 9-10, 366 at 1.] Defendants
represent that all responsive information has been produced. Plaintiffs cite no evidence to the
contrary, aside from an undefined suspicion that they have not received all of the responsive
documents. A failure by Defendants to produce all responsive documents would subject
Defendants to sanctions for violations of the Court’s prior orders and lead to a serious inquiry
into counsels’ compliance with their Rule 11 obligations. Such an inquiry can only be initiated
by separate motion on the basis of some evidence of a violation; a mere suspicion is insufficient.
See Corley v. Rosewood Care Center, Inc. of Peoria, 388 F.3d 990, 1012 (7th Cir. 2004) (a
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motion for sanctions must describe the specific conduct alleged to violate Rule 11). No further
inquiry in this regard will be undertaken by the Court based upon the record presently before it.
D. Corporate Organizational Documents:
Plaintiffs seek unredacted “organizational documents,” however do not define this term
or specify the documents they seek. In the initial brief, Plaintiffs refer to organizational
documents in relation to the documents sought by a subpoena duces tecum during the 30(b)(6)
deposition. Based on this reference, Defendants believe Plaintiffs are referring to the Amended
and Restated Operating Agreement of LVNV, the Seventh Amended and Restated Liability
Company Agreement of Sherman Financial Group LLC and the Fourth Amended and Restated
Limited Liability Company Agreement of Sherman Capital, LLC. [Dkt. 511 at 27.] These
documents are included in the redacted Moody documents the Court ordered to be produced in
an unredacted form.
IV.
Conclusion
Based on the foregoing, the Court GRANTS IN PART and DENIES IN PART
Plaintiffs’ Fourth Motion to Compel. [Dkt. 501.] On or before February 5, 2016, Defendants
shall produce in unredacted form the redacted Moody’s documents as listed in the document log
filed at Docket No. 505-4, as well as unredacted versions of any other documents produced by
Defendants with redactions in this matter. Plaintiffs may use the unredacted versions of those
documents as needed for their prosecution of this matter only; however, if Plaintiffs wish to file
any document produced by Moody and redacted by Defendants, or any other document produced
by Defendants on a redacted basis, only the redacted version may be filed with the Court unless
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and until Plaintiffs seek and are granted leave to file specific additional portions of the document
that were originally redacted by Defendants. 1
Defendants’ Motion for Oral Argument on Plaintiffs’ Fourth Motion to Compel [Dkt.
513] is DENIED; the Court determined that oral argument was unnecessary to its determination
of Plaintiffs’ motion.
Dated: 02 FEB 2016
Distribution:
Robert D. Cheesebourough
ruaneagle@aol.com
Matthew D. Boruta
CHEESEBOUROUGH & BORUTA
boruta17@hotmail.com
Amy E. Romig
PLEWS SHADLEY RACHER & BRAUN
aromig@psrb.com
Frederick D. Emhardt
PLEWS SHADLEY RACHER & BRAUN
emhardt@psrb.com
George M. Plews
PLEWS SHADLEY RACHER & BRAUN
gplews@psrb.com
1 If Plaintiffs wish to file a document produced or provided to them with redactions and cite to the
redacted portions of that document in support of their response to a motion for summary judgment or
otherwise, Plaintiffs may seek leave of the Court to file specific portions of the redacted material on an
unredacted basis. In the alternative, Plaintiffs may file the redacted document and cite to the redacted
portion within their brief, following which Plaintiffs may seek leave of the Court to file the portion of the
document cited on an unredacted basis.
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Peter M. Racher
PLEWS SHADLEY RACHER & BRAUN
pracher@psrb.com
Amy E. Romig
PLEWS SHADLEY RACHER & BRAUN LLP
aromig@psrb.com
F. Ronalds Walker
PLEWS SHADLEY RACHER & BRAUN LLP
rwalker@psrb.com
James A. Rolfes
REED SMITH LLP
jrolfes@reedsmith.com
Michael L. DeMarino
REED SMITH LLP
mdemarino@reedsmith.com
Nicholas G. Whitfield
REED SMITH LLP
10 South Wacker Drive
Chicago, IL 60606-7507
Thomas L. Allen
REED SMITH LLP
tallen@reedsmith.com
Timothy R. Carraher
REED SMITH LLP
tcarraher@reedsmith.com
Stephanie Snell Chaudhary
RILEY BENNETT & EGLOFF LLP
schaudhary@rbelaw.com
James W. Riley, Jr.
RILEY BENNETT & EGLOFF LLP
jriley@rbelaw.com
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