COX et al v. SHERMAN CAPITAL LLC et al

Filing 88

ORDER granting Pltfs' #77 Motion to Compel (see Order). Signed by Magistrate Judge Mark J. Dinsmore on 6/13/2013. (SWM)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

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Plaintiffs,
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) Civil Action No. 1:12-cv-01654-TWP-MJD
vs.
) CLASS ACTION
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SHERMAN CAPITAL LLC; MEETING
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STREET PARTNERS II INC.; SHERMAN
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FINANCIAL GROUP LLC; SHERMAN
) JURY TRIAL REMANDED
CAPITAL MARKETS LLC; LVNV
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FUNDING LLC; RESURGENT CAPITAL
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SERVICES LP; SHERMAN ORIGINATOR
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LLC; SHERMAN ORIGINATOR III, LLC;
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SHERMAN ACQUISITION, LLC;
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BENJAMIN W. NAVARRO; LESLIE G.
GUTIERREZ; SCOTT E. SILVER; KEVIN P. )
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BRANIGAN; ROBERT A. RODERICK;
KENNET KENDALL; and JOHN DOES 1-50, )
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Defendants.
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ANDREW COX, LUCINDA COX, and
STEPHANIE SNYDER, Individually and on
behalf of others similarly situated,

ORDER ON MOTION TO COMPEL DEPOSITION ANSWERS
This matter comes before the Court on Andrew Cox, Lucinda Cox, and Stephanie
Snyder’s (“Plaintiffs”) Motion, on behalf of themselves and the Class, to Compel Deposition
Answers, filed on May 31, 2013. [Dkt. 77.] For the following reasons, the Court hereby
GRANTS Plaintiffs’ motion.
I. Background
This is a class action suit that alleges fraud, unjust enrichment, racketeering, and
violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692. [Dkt. 77 at 1.] Plaintiffs

filed their Complaint on November 9, 2012. [Dkt. 1]. In response, Defendants Sherman Capital
LLC et al. (“Defendants”) filed a Motion to Dismiss alleging, in part, that Plaintiffs lack personal
jurisdiction over all Defendants, other than LVNV Funding LLC (“LVNV”). [Id. at 1-2.] Upon
initial difficulty in conducting discovery, and after subsequent related motions, this Court
Granted a prior Motion to Compel, limiting discovery to the issue of personal jurisdiction. [Dkt.
55 at 3.] Plaintiffs argue that Defendants’ continued refusal to allow individuals to answer
questions relating to ownership interests in and involvement with LVNV does not comply with
said Order, and move, again, to compel responses from the Defendants.
II. Discussion
Rule 37 permits a motion to compel a required disclosure upon “evasive or incomplete
disclosure, answer, or response.” Fed. R. Civ. P. 37(a). A required disclosure, as defined by
Rule 26, includes information that a party “may use to support its claims,” and “[f]or good cause,
the court may order discovery of any matter relevant” to the issues of the case. Fed. R. Civ. P.
26 (a)(1)(A), (b)(1) (emphasis added). This Court has “broad discretion in discovery matters,
[including a] motion to compel discovery.” Packman v. Chicago Tribune Co., 267 F.3d 628, 646
(7th Cir. 2001) (citing Kalis v. Colgate-Palmolive Co., 231 F.3d 1049, 1056 (7th Cir. 2000)).
Defendants argue that the questions posed violate the Court’s Order to limit discovery to
the issue of personal jurisdiction. [Dkt. 55 at 3.] Specifically, Defendants believe that any
questions pertaining to Defendants’ ownership interest in and involvement with LVNV are
intended to uncover facts that would support Plaintiffs’ racketeering and securities fraud claims,
not facts that would establish personal jurisdiction. [Dkt. 83 at 1-2.] Plaintiffs assert that it is
possible to establish personal jurisdiction over out-of-state individuals, such as the deposed
individuals, when such an individual has substantial control over the corporation, when the in-

state entity the individual is involved with is a shell corporation, and when the individual has
actively solicited consumers in the forum state. [Dkt. 78 at 5.]
This Court finds Defendants’ ownership interest in and involvement with LVNV and the
other corporate defendants relevant to the establishment of personal jurisdiction. While courts
presume that companies are separate entities, clear evidence can overcome this presumption
when: (1) “an agency relationship can be perceived,” (2) one company asserts greater-thannormal control over the other, and (3) where one company is “merely an empty shell.” Wesleyan
Pension Fund, Inc. v. First Albany Corp., 964 F. Supp. 1255, 1261-62 (S.D. Ind. 1997) (citing,
among others, Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 336 (1925) (presumption
of separate entities); Donatelli v. National Hockey League, 893 F.2d 459, 465-66 (1st Cir.1990)
(clear and convincing evidence of an agency relationship or greater than normal control can
overcome the presumption); Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 420
(9th Cir.1977) (evidence of an agency relationship or a shell company can overcome the
presumption)). This indicates that Defendant companies other than LVNV could theoretically be
subject to personal jurisdiction in this Court.
Additionally, when a court has personal jurisdiction over an entity, it also has personal
jurisdiction over individuals who (1) have a combined controlling ownership of the company and
(2) simultaneously run the company, such as officers or directors. Id. at 1262 (citing Dakota
Indus., Inc. v. Ever Best Ltd., 28 F.3d 910, 915 (8th Cir.1994) (two shareholders, each with onethird ownership, who also ran the company were subject to personal jurisdiction); Davis v. Metro
Prods., Inc., 885 F.2d 515, 522-23 (9th Cir.1989) (two shareholders, each with one-half
ownership, who also served as the company’s sole officers and directors were subject to personal
jurisdiction)). Because it is possible to establish personal jurisdiction over the Defendants in this

manner, answers to the line of questioning at hand could indeed lead to “[r]elevant information.”
Fed. R. Civ. P. 26(b)(1).
Defendants also argue that Plaintiffs have not made the prima facie showing necessary to
demonstrate that an alter-ego theory of veil-piercing discovery is appropriate. [Dkt. 83 at 1.]
This argument would be valid in a reply brief to Plaintiffs’ response to Defendants’ Motion to
Dismiss, but it is currently premature. Plaintiffs move to compel answers from Defendants so
that they may gather the very evidence that would help them make such a prima facie showing
in their response to Defendants’ Motion to Dismiss, which they have not filed yet because of
Defendants’ refusal to answer these questions. Without the answers to these questions regarding
Defendants’ ownership interest in and involvement with LVNV, Plaintiffs argue, it is impossible
to adequately respond to Defendants’ Motion to Dismiss, and the Court agrees. A defendant,
while withholding the chicken, cannot demand a plaintiff to produce its egg.
Therefore, the Court invokes its broad discretion and GRANTS Plaintiffs’ Motion to
Compel Deposition Answers [Dkt. 77], lifting all prior limitations as to the scope of this
discovery, save those imposed by the Federal Rules of Civil Procedure. This order specifically
vacates the portion of the Court’s prior order limiting the scope of discovery to personal
jurisdiction. [Dkt. 55 at 3.] The lifting of that limitation is necessary to prevent any further
improper avoidance by Defendants of this necessary discovery and is without prejudice to
Plaintiffs’ ability to conduct more complete depositions of the relevant individuals at a later date.
Additionally, in light of the granting of Plaintiff’s motion, Rule 37(a)(5) provides in
relevant part that “the court must, after giving an opportunity to be heard, require the party or
deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or
both to pay the movant’s reasonable expenses incurred in making the motion, including

attorney’s fees.” Fed. R. Civ. P. 37(a)(5)(A). Accordingly, Plaintiff may, within forty days of
the date of this order, file a request for the award of any such expenses. Defendants and their
counsel may respond within fourteen days thereafter and Plaintiffs may file a reply within seven
days of any response.
III. Conclusion
For the aforementioned reasons, the Court hereby GRANTS Plaintiffs’ Motion to
Compel Deposition Answers from Defendants Kennet Kendall, Robert Broderick, Kevin
Branigan, Scott Silver, Leslie Gutierrez, and Benjamin Navarro. [Dkt. 77.]

Date: 06/13/2013

Distribution:
All Electronically Registered Counsel

Mark J. Dinsmore
United States Magistrate Judge
Southern District of Indiana