CMI Roadbuilding, Inc v. Iowa Parts, Inc et al
ORDER re 128 Motion to Compel: Plaintiffs' motion to compel is granted in part, plaintiffs' motion for sanctions is denied, and plaintiffs' motion for leave and for additional time to depose defendant pursuant to Rule 30(b)(6) is granted, provided that each party bear its own fees and costs (see text of Order). Signed by Chief Magistrate Judge CJ Williams on 9/21/2017. (skm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
CMI ROADBUILDING, INC., and CMI
IOWA PARTS, INC.,
TABLE OF CONTENTS
INTRODUCTION ............................................................................. 1
PROCEDURAL BACKGROUND ......................................................... 2
III. PLAINTIFFS’ MOTION TO COMPEL .................................................. 3
IV. THE KING DEPOSITION AND PLAINTIFFS’ MOTION FOR LEAVE ....... 16
V. PLAINTIFFS’ MOTION FOR SANCTIONS .......................................... 21
VI. CONCLUSION .............................................................................. 24
This case is before the Court on plaintiffs’ resisted motion to compel discovery,
to impose sanctions, and for leave and additional time to conduct a Rule 30(b)(6)
deposition. (Doc. 128). Defendant filed its timely resistance, and plaintiffs filed a timely
(Docs. 129, 130).
Both parties included exhibits with their filings. These
attachments have been considered. For the reasons stated below, the Court grants in part
This case concerns allegations by CMI Roadbuilding, Inc. and CMI Roadbuilding
Ltd. (plaintiffs) that defendant Iowa Parts, Inc. (defendant) misappropriated trade secrets
in the form of engineering documents acquired by and exclusively licensed to plaintiffs
in violation of state and federal law. (Doc. 81). Plaintiffs also pled common law
conversion and unjust enrichment claims seeking, among other remedies, compensation
for defendant’s use of plaintiffs’ proprietary information and trade secrets. (Id.).
Discovery for this case began in 2016. A general protective order was entered on
August 17, 2016, pursuant to the parties’ joint motion. (Doc. 37, 38). In September of
2016, plaintiffs brought their first motion to compel discovery, seeking production of
engineering documents in defendant’s possession. (Doc. 41). Subsequently, defendant
filed an unresisted motion for a second protective order, arguing that plaintiffs’
production request encompassed sensitive information that had no bearing on this case
and, therefore, requested that this Court require plaintiffs to identify the trade secrets or
proprietary information at issue. (Docs. 48, 48-1). At a hearing on the motion to compel,
defendant agreed to produce approximately 1,000 pages of plans, specifications, and
drawings, notwithstanding its objection that these included documents not related to this
lawsuit. (Doc. 50).
On October 24, 2016, the Court entered an order granting in part plaintiffs’ motion
to compel in light of this agreement. (Id.). On November 9, 2016, the Court entered an
order summarily granting defendant’s unresisted motion for a protective order to the
extent that it was not inconsistent with the order on the motion to compel. (Doc. 53).
Defendant maintains that plaintiffs have yet to articulate the particular trade secrets
defendant is alleged to have misappropriated. (Doc. 129, at 4).
In May 2017, defendant produced engineering documents pursuant to the October
2016 order to compel and, under the protective order, designated the documents as being
for “Attorney’s Eyes Only.” Plaintiffs filed a motion requesting that this designation be
reduced to “Confidential” to permit inspection by certain persons. On May 26, 2017,
the Court granted plaintiffs’ motion. (Doc. 109).
The instant motion marks the parties’ third discovery dispute in this case. In their
motion, plaintiffs seek to compel defendants to supplement production of documents
identified in plaintiffs’ initial discovery requests.
(Doc. 128). Plaintiffs claim that
information gathered during the depositions of Yvonne Bardwell, Suzy Hartley, and Jay
King purportedly shows that defendant has failed to produce responsive financial
documents. (Doc. 128-1 at 3, 4). Additionally, plaintiffs request that the Court impose
sanctions against defendant on the grounds that defendant has abused the discovery
process and frustrated plaintiffs’ fair examination of Bardwell, Hartley, and King. (Doc.
128, at 1). Finally, plaintiffs request leave and additional time to conduct a Rule 30(b)(6)
deposition of defendant. (Id.). Pursuant to Local Rule 37(a), plaintiffs aver to have
conferred in good faith with defendant in an attempt to resolve these issues. (Id.).
Discovery was scheduled to close on August 9, 2017. (Doc. 62).
PLAINTIFFS’ MOTION TO COMPEL
Plaintiffs’ motion aims to compel supplemental production of certain financial and
accounting records pertaining to defendant’s business. In their initial written discovery
requests, plaintiffs sought, inter alia, production of the following documents, which are
now the subject of dispute:
a) “any and all documents, including invoices, bills, receipts and contracts
relating to Iowa Parts, Inc.’s purchase of materials, tools, or machinery to be
utilized in the manufacturing of products sold by Iowa Parts, Inc. from 2006
to the present”;
b) “any and all State and Federal tax returns for Defendant Iowa Parts, Inc. from
2006 to the present”;
c) “any and all pro-forma income statements or balance sheets, statements of cash
flow, budgets, and other bookkeeping paperwork related to Defendant Iowa
Parts, Inc.’s operation between 2006 and the present”; and
d) “all monthly income statements for Defendant Iowa Parts, Inc., showing the
revenue and expenses generated by that entity (fixed and variable).”
(Doc. 128-1, at 7-8). Subsequently, in a March 10, 2017, letter addressed to defense
counsel (hereinafter “March 10 letter”), plaintiffs’ counsel extended what the Court takes
to be an offer to narrow the scope of the foregoing production requests. (Doc. 128-8).
The letter stated that there remained “basic information which must be provided” by
defendant, including defendant’s records of sales and costs of production “since 12/31/10
relating to the asphalt plant, concrete plant, and landfill and dirt compaction equipment
product lines that is for a part or component for a product manufactured by [defendant],
its subsidiaries and/or affiliates.” (Doc. 128-8, at 1-2). These narrowed requests have
been incorporated into plaintiffs’ motion. (Doc. 128-1, at 8).
On March 30, 2017, defendant responded to plaintiffs’ demand for supplemental
production explaining that, “[w]ith respect to sales and costs of production, Iowa Parts
is not able to search for responsive documents based upon a drawing number, type, or
description.” (Doc. 128-9, at 1). Defendant claimed that it had received over 15,000
purchase orders since 2010, but acknowledged that “[i]f Iowa Parts is provided with a
part number, [it is] able to identify related purchase orders that would need to be manually
searched.” (Id.). Plaintiffs do not claim to have provided a list of part numbers to date,
although they have identified 3,600 engineer drawings which plaintiffs allege contain
trade secrets. (Docs. 129-1, at 1, 130, at 3). Notably, these drawings have been
identified by spreadsheet, but the drawings themselves remain unproduced. (Id.).
Plaintiffs acknowledge that defendant has produced at least 42 pages of financial
and accounting information in response to its requests, including a “Sales by Rep
Summary” for the years 2011 through 2016, as well as balance sheets and profit and loss
statements for the same time span. (Doc. 128-1, at 4). Plaintiffs argue, however, that
defendant has withheld additional responsive documents to which plaintiffs are entitled.
Plaintiffs point to deposition testimony by Bradwell, Hartley, and King as evidence
that accessible, unproduced financial records exist. Plaintiffs claim these records include
financial statements, sales reports, commission reports, and account receivables, which
are collectively in the possession of defendant’s sole shareholder, Mike Hawkins, and
also available on defendant’s computer system. (Id., at 9). Further, billing records,
employee records, and non-compete contracts are located in the filing cabinet in Hartley’s
office. (Id.). “[A]ccount receivable reports for all companies or individuals who have
purchased products from [defendant], historical records of commissions for all sales of
products, and a list of the pre[ ]-paid expenses” are all allegedly available on defendant’s
computer system. (Id.). Finally, plaintiffs allege that Bardwell used state and federal
income tax documents, information about employees’ gross earnings, profit and loss
statements, balance sheets, and bank statements. (Id.). Plaintiffs ask the Court to compel
defendant’s production of these materials, as well as defendant’s payroll reports, income
and expense statements, and retained earnings, which were used by Bardwell in the course
of her employment. (Id., at 9-10).
In its resistance, defendant argues that supplemental production is not required.
Its position, in essence, is that plaintiffs’ demand is overly broad and unduly burdensome.
Defendant claims that plaintiffs have failed to sufficiently particularize the trade secrets
alleged to have been misappropriated, resulting in defendant’s inability to identify
relevant financial documents. (Doc. 129, at 3-4). Citing the Court’s November 9, 2016,
protective order, defendant argues that plaintiffs are required to identify the relevant trade
secrets before compelling discovery from defendant. (Id., at 4). Additionally, to the
extent that it is able to determine the scope of relevant discovery, defendant claims that
the documents plaintiffs identify in their motion pertain to defendant’s general business
operations and are largely irrelevant to this trade secret litigation. (Id., at 5, 7). Although
defendant admits that “a small percentage” of the documents plaintiffs seek relate to the
products and designs identified thus far (id., at 7), defendant contends that locating and
producing these documents would “involve the manual review of 15,000 plus
documents.” (Id., at 9-10).
Standards for Compelling Production
In analyzing the merits of plaintiffs’ motion to compel, the Court looks to the
Federal Rules of Civil Procedure regarding the scope of discovery and the obligation of
the parties. Rule 26(b)(1) provides:
Unless otherwise limited by court order, the scope of discovery is as
follows: 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); see also FED. R. CIV. P. 34(a) (providing for discovery by
production requests within the scope of Rule 26(b)). A party has an ongoing obligation
to supplement discovery answers in a timely manner if it learns that a previous response
was incomplete or incorrect, or where the party is so ordered by a court. FED. R. CIV.
P. 26(e)(1). “[A] party resisting production bears the burden of establishing lack of
relevancy or undue burden.” St. Paul Reinsurance Co. v. Commercial Fin. Corp., 198
F.R.D. 508, 511 (N.D. Iowa 2000).
Rule 26(b) is widely acknowledged to be “liberal in scope and interpretation,
extending to those matters which are relevant and reasonably calculated to lead to the
discovery of admissible evidence.” Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th
Cir. 1992) (citation omitted).
The reach of the rule is not bound by the rules of
admissibility, as discovery “is a[n] investigatory tool intended to help litigants gain an
understanding of the key persons, relationships, and evidence in a case.” Liguria Foods,
Inc. v. Griffith Labs., Inc., No. C 14-3041-MWB, 2017 WL 976626, at *7 (N.D. Iowa
Mar. 13, 2017) (alteration in original) (quoting Sentis Grp., Inc. v. Shell Oil Co., 763
F.3d 919, 925 (8th Cir. 2014)). Nevertheless, “this often intoned legal tenet should not
be misapplied so as to allow fishing expeditions in discovery,” and “[s]ome threshold
showing of relevance must be made before parties are required to open wide the doors of
discovery and to produce a variety of information which does not reasonably bear upon
the issues in the case.” Hofer, 981 F.2d at 380. Accordingly, a district court “must limit
the frequency or extent of discovery otherwise allowed . . . if it determines that . . . the
burden or expense of the proposed discovery outweighs its likely benefit” in light of the
factors enumerated by Rule 26(b)(1). WWP, Inc. v. Wounded Warriors Family Support,
Inc., 628 F.3d 1032, 1039 (8th Cir. 2011) (alteration in original) (quoting FED. R. CIV.
Plaintiffs’ Broad Requests for Financial and Accounting Documents
The parties’ current dispute concerns not one, but two categories of discovery to
which plaintiffs claim to be entitled. On the one hand is the broader category of financial
and accounting records arguably responsive to paragraphs 21, 27, 39, and 40 of plaintiff’s
original written discovery request. On the other hand are the records relating to sale of
and production costs for replacement parts designed to be used in certain equipment made
by other companies, as identified by plaintiffs’ March 10 letter. The Court will address
the broader category before proceeding to the narrower.
There is no doubt that certain information relating to defendant’s finances is
relevant to the issue of damages and is subject to discovery in this case. “Discovery is
not limited to the merits of a case,” and may be necessary for developing other issues.
Pudlowski v. The St. Louis Rams, LLC, 829 F.3d 963, 964 (8th Cir. 2016) (applying the
limits of discovery to issues of jurisdiction). For instance, defendant’s general accounting
records will be relevant for preparing plaintiffs’ case on the issue of punitive damages
under the common law conversion claim. See N. Dakota Fair Hous. Council, Inc. v.
Allen, 298 F. Supp.2d 897, 899 (D.N.D. 2004) (“A plaintiff seeking punitive damages
is entitled to engage in discovery relating to the defendant’s financial worth in advance
of trial. The discovery of financial records of a defendant in order to prepare a case on
the issue of punitive damages is permissible.”). Additionally, plaintiffs correctly assert
in their reply that evidence regarding the profits defendant has earned from replacement
parts developed from the designs at issue will be necessary for proving compensatory
damages, as well as for establishing the independent economic value element of plaintiffs’
state law misappropriation claim. See NCMIC Fin. Corp. v. Artino, 638 F. Supp.2d
1042, 1076-77 (S.D. Iowa 2009) (describing the requirement under Iowa Code § 550.2(4)
that a trade secret derive independent economic value from its secrecy).
But relevance is only one side of the equation. In order to be enforceable, a
request for production must also be proportional to the needs of the case, considering,
among other factors, the parties’ relative access to the information, the importance of the
discovery in resolving the issues, and the relative burdens and benefits of the proposed
discovery. FED. R. CIV. P. 26(b)(1). Here, plaintiffs request far more discovery than is
necessary to support their articulated needs at this stage of the case. Defendant has
already produced yearly balance sheets and sales records that provide plaintiffs with a
general accounting of defendant’s operation. Although these documents may not offer
the particular sales information plaintiffs seek for the purpose of showing lost profits and
trade secret value, plaintiffs have not demonstrated that further production of general
business documents such as employee records, non-compete contracts, state and federal
income tax documents, bank statements, and payroll reports would provide that
information beyond the discovery already obtained. The deposition testimony cited by
plaintiffs may establish that these documents are readily available to defendant, but the
information contained appear to be cumulative and the marginal possible benefit derived
from access to the documents would be outweighed by the burdens defendant would incur
in their production.
Nonetheless, the Court acknowledges plaintiffs’ need for documents probative of
the profits derived from plaintiffs’ alleged trade secrets.
Certain sales reports,
commission reports, account receivables, billing records, and income and expense
statements may be useful to this end. Yet, because these records presumably contain
information specific to individual transactions rather than the general operation of
defendant’s business, the question of relevance returns to the fore. Defendant claims that
“[o]nly a small percentage” of these documents relate to the products and designs at issue.
(Doc. 129, at 7). As plaintiffs fail to make a threshold showing as to which or how many
of the responsive documents in the possession of Bardwell, Hartley, and Hawkins are
relevant to proving defendant’s profits from the disputed parts, the Court declines to grant
plaintiffs’ broad demands for supplemental production pursuant to paragraphs 21, 27, 39,
and 40 of their initial written discovery requests. Hofer, 981 F.2d at 380. Moreover,
the Court is persuaded that the burden and costs of production of any relevant information
would be disproportionately high, given the volume of documents at issue, to the marginal
value of the additional information.
Plaintiffs’ Narrower Request for Records of Sales and Production Costs
Plaintiffs’ narrower request prompts a more nuanced analysis. Pursuant to their
March 10 letter to defense counsel, plaintiffs request records created on or after
December 31, 2010, pertaining to the sales of and production costs for parts or
components of products designed for use in a “product manufactured by Iowa
Manufacturing, Standard Havens, Cedarapids, Cedarapids/Standard Havens, CMI
Corporation, [or] Terex” and relating to “the asphalt plant, concrete plant, and landfill
and dirt compaction equipment product lines.” (Doc. 128-8, at 1-2). Records responsive
to the request for sales records are electronically available on defendant’s computer
system, although documents predating July of 2016 must be accessed through different
software. (Docs. 129-5, at 85-86, 87-89:7;129-7, at 220-21).
The Court understands defendant’s objection to plaintiffs’ narrower request to be
twofold. Defendant first argues that the request fails to meet Rule 26(b)’s relevance
prong, as it encompasses sales and production records that may not relate to plaintiffs’
trade secrets. In support of this argument, defendant asserts that plaintiffs have failed to
sufficiently particularize the trade secrets at issue in this case, and, as a result, plaintiffs
are unable to determine whether even the limited requests of plaintiffs’ March 10 letter
would yield documents that would ultimately be relevant to this case.
alternatively argues that producing reports of sales and production costs related only to
the product lines identified by plaintiffs’ letter will be unduly burdensome and thus
disproportionate to the needs of the case. Defendant states that it “has [received] over
15,000 purchase orders” since 2010 and that it can screen these orders for responsive
documents only if provided with a part number. (Doc. 129, at 9).
Since the Advisory Committee’s 2000 amendments, parties may obtain, as of
right, only discovery “relevant to any party’s claim or defense;” discovery that relates to
the “subject matter” of the case but is not relevant to any claim or defense may only be
obtained on court order. 8 WRIGHT & MILLER, FED. PRAC. & PROC. § 2008, at 129-30
(3d ed. 2010). In none of its iterations has Rule 26(b) ever contemplated the strict
requirements of Federal Rule of Evidence 401. See FED. R. EVID. 401 (requiring that
relevant evidence meet a two pronged test for probativeness and materiality); FED. R.
CIV. P. 26(b) (“Information within this scope of discovery need not be admissible in
evidence to be discoverable.”); FED. R. CIV. P. 26(b) Advisory Committee’s Note to
1946 amendment (“The amendments . . . make clear the broad scope of examination and
that it may cover not only evidence for use at the trial but also inquiry into matters
themselves inadmissible as evidence but which will lead to the discovery of such
evidence.”). Rather, “[s]ince decisions as to relevance . . . are made for discovery
purposes well in advance of trial, a flexible treatment of relevance is required and the
making of discovery, whether voluntary or under court order, is not a concession or
determination of relevance for purposes of trial.” FED. R. CIV. P. 26(b)(1) Advisory
Committee’s note to 1970 amendment. Ultimately, relevancy decisions are “intrinsically
ad hoc.” WRIGHT & MILLER, supra 10, § 2008, at 146.
Bearing these principles in mind, it must first be observed that although plaintiffs’
March 10 letter requests sales and cost information for parts related to defendant’s
“asphalt plant, concrete plant, and landfill and dirt compaction equipment product lines,”
(Doc. 128-8, at 1-2), plaintiffs allege misappropriation only with regard to defendant’s
asphalt plant product line. (Doc. 81, at 7). Allegations as to the other product lines were
made only against a party that has since been dismissed. (Docs. 81, at ¶¶ 40-44; 85).
Plaintiffs have not made a threshold showing of relevance as to a need for financial
documents pertaining to products beyond the asphalt plant line. Therefore, records of
sales and costs for parts related to the concrete plant and landfill and dirt compaction
equipment product lines are not relevant with regard to plaintiffs’ claims against
The Court does find, however, that the request for records of sales and production
costs for the line of asphalt plant parts identified by plaintiffs’ March 10 letter is within
the scope of relevant discovery permitted by Rule 26(b). At the center of this litigation
is plaintiffs’ belief that these parts were developed using misappropriated trade secrets
found in the engineering drawings plaintiffs acquired. Plaintiffs state that they seek the
requested documents in order to calculate the profits defendant has earned from these
products. (Doc. 130, at 2). Should plaintiffs prove at trial that these products were
indeed developed from plaintiffs’ trade secrets, evidence of these profits will be necessary
to prove compensatory damages, as well as to establish the independent economic value
of the secrets themselves. (Id.). Furthermore, plaintiffs have tailored their request to
encompass only those records related to parts used on equipment manufactured by six
entities whose “intellectual property, trade secrets, trademarks, and engineering
documents” have been acquired by plaintiffs. (See Doc. 81, at 2-3). Thus, to the extent
it pertains to the asphalt plant product line, plaintiffs’ request seeks information relevant
to their claims in this suit.
Defendant contends that the scope of relevant discovery in this case is narrower
than even plaintiffs’ tailored request. Defendant argues that only sales and cost records
pertaining to those products actually developed from the drawings plaintiffs allege to be
trade secrets should be discoverable, and that plaintiffs have failed to specify those trade
secrets at issue. Defendant points to the rule observed in several jurisdictions that “[i]n
cases involving trade secret misappropriation, . . . the party alleging misappropriation
must identify its trade secrets with reasonable particularity.” (Doc. 129, at 3 (citing
DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676 (N.D. Ga. 2007))).
According to DeRubeis, several rationales motivate the rule that a plaintiff alleging
misappropriation must particularize its trade secrets prior to discovery. These include:
(1) If discovery on defendant’s trade secrets were automatically permitted,
lawsuits might regularly be filed as “fishing expeditions” to discover the
trade secrets of a competitor; (2) until the trade secret plaintiff has identified
the trade secrets at issue with some specificity, there is no way to know
whether the information sought is relevant; (3) it is difficult for a defendant
to mount a defense until it has some indication of the trade secrets allegedly
misappropriated, and (4) requiring the plaintiff to state its claimed trade
secrets prior to engaging in discovery ensures that it will not mold its cause
of action around the discovery it receives.
Switch Commc’ns Grp. v. Ballard, No. 2:11-CV-00285-KJD-GFW, 2012 WL 2342929,
at *4 (D. Nev. June 19, 2012) (summarizing DeRubeis, 244 F.R.D. at 680-81). The
Court finds these rationales counsel against requiring the plaintiffs in this case to reduce
their already-narrowed discovery request to a yet finer grain.
Neither the goal of
preventing a “fishing expedition” to discover trade secrets, nor the goal of preventing
plaintiffs’ post hoc shaping of claims would be achieved by applying the DeRubeis rule
here. The instant motion simply seeks production of accounting information necessary
for proving damages and for establishing the value element of plaintiffs’ misappropriation
claim; plaintiffs do not seek information likely to advance the merits of any new claim or
earn them a competitive edge in the marketplace. Additionally, the present specificity of
plaintiffs’ request does not prejudice defendant’s ability to mount its defense, nor does it
leave defendant without guidance as to what information is relevant to the claims at issue.
Defendant is well-apprised of the particular product line plaintiffs take to be at issue, and
plaintiffs have identified 3,600 engineering drawings alleged to contain trade secrets.
DeRubeis is unpersuasive here.
Thus, the Court finds that with the exception of those records related to the
concrete plant and landfill and dirt compaction product lines, the records of costs and
sales requested by plaintiffs’ March 10 letter meet the bar of Rule 26(b) relevance in light
of plaintiffs’ theory that the products to which those documents relate were developed, at
least in part, from plaintiffs’ trade secrets. Although trial may reveal that some of the
parts among this group were not developed from plaintiffs’ alleged trade secrets, it would
be imprudent to preclude discovery based on that possibility.
The relevance of a
discovery request should be evaluated in light of the information sought, rather than by
speculation as to whether the information produced will be found material at trial. See
Transamerica Life Ins. Co. v. Moore, 274 F.R.D. 602, 608 (E.D. Ky. 2011) (“[A]
discovery request should be considered to be seeking relevant information if there is any
possibility that the information sought may be relevant to a claim or defense raised.”
(emphasis altered) (internal quotation marks omitted)); Goodyear Tire & Rubber Co. v.
Kirk’s Tire & Auto Servicenter of Haverstraw, Inc., 211 F.R.D. 658, 663 (D. Kan. 2003)
(stating that discovery should be granted where “the information sought may be
relevant.” (emphasis added)).
Defendant argues that, even if the records of sales and costs of production sought
by plaintiffs’ March 10 letter are relevant, the financial costs of satisfying the request
would outweigh any benefits. Defendant fails to meet its burden regarding this argument.
After scrutinizing the parties’ briefing on the issue, the mechanics of defendant’s
records management system remain unclear to the Court.
Defendant suggests that
producing documents relevant only to the products identified by plaintiffs’ request would
require a manual review of 15,000 purchase orders. (Doc. 129, at 9-10). Although
plaintiffs have offered a list of engineering documents alleged to contain trade secrets,
which contain design numbers and descriptions, defendant claims that defendant is not
able to search its computer system by design number or description, meaning that a
manual search would be required. (Id. at 9). However, plaintiffs point to the deposition
of Jay King as evidence that purchase orders may be searched by job number or vendor
number. (Docs. 128-1, at 11, 129-7, at 220:4-22). Plaintiffs argue that these parameters
may be used in combination to efficiently search for responsive documents. (Doc. 1281, at 11).
Defendant has consistently maintained both in its March 30, 2017, letter and in its
Rule 30(b)(6) deposition that producing responsive records in the manner suggested by
plaintiffs is not “as simple as [plaintiffs] mak[e] it sound.” (Doc. 129-7, at 224:15-16).
Defendant concedes, however, that “[i]f Iowa Parts is provided with a part number, [it
is] able to identify related purchase orders that would need to be manually searched.”
(Doc. 129, at 9 (emphasis omitted)). Defendant does not appear to argue that this
“manual searching” would be unduly burdensome. Further, defendant does not present
a reason as to why it must be provided part numbers for parts made for use in a product
relating to the asphalt plant product line. Defendant is the seller of the parts in question,
and has not persuasively disclaimed its access to that information. Nor has defendant
indicated how many part numbers may fall within that category. As the party resisting
production of relevant documents, defendant bears the burden of explaining why
identifying the part numbers for these products and searching for responsive purchase
orders would be disproportionate to the needs of the case. This burden has not been met.
Additionally, defendant does not address its ability to identify and produce other
documents responsive to the March 10 letter. In light of plaintiffs’ claims that Hartley,
Bardwell, and Hawkins possess certain sales reports, commission reports, account
receivables, billing records, and income and expense statements responsive to their initial
discovery requests, the Court is unconvinced that there exist no documents beyond
purchase orders which would constitute records of sales and costs of production for the
asphalt plant product line.
In short, defendant has not shown that the burden of producing records responsive
to plaintiffs’ narrow request would outweigh plaintiffs’ critical need for the light they
will shed on the profitability of the disputed products. Therefore, plaintiffs’ motion to
compel discovery is granted in part. Defendant is ordered to produce any records
created on or after December 31, 2010, that defendant can locate by searching for a
product number and that consist of a record of sale or production cost of a part made for
Iowa Manufacturing, Standard Havens, Cedarapids, Cedarapids/Standard Havens, CMI
Corporation, or Terex equipment and relating to the asphalt plant product line. Defendant
will have thirty (30) days from the date of this Order to complete this production.
THE KING DEPOSITION AND PLAINTIFFS’ MOTION FOR LEAVE
The Court turns next to plaintiffs’ motion for leave and additional time to depose
defendant pursuant to Rule 30(b)(6). Plaintiffs seek the Court’s leave pursuant to Federal
Rule of Civil Procedure 30(d)(1), and further request that the Court order defendant to
pay plaintiffs’ attorneys’ fees and costs as provided by Rule 30(d)(2). The motion rests
on plaintiffs’ claim that defendant’s corporate designee, Jay King, was unprepared and
unresponsive during his deposition, effectively thwarting plaintiffs’ ability to conduct a
fair examination of defendant.1
A. King’s Deposition
On July 11, 2017, plaintiffs deposed Jay King, defendant’s general manager and
Rule 30(b)(6) corporate designee. (Doc. 129-7, 30:12). Pursuant to plaintiffs’ Rule
30(b)(6) notice, King was to testify regarding fourteen different subject matters,
including: defendant’s library of engineering documents; sales by defendant relating to
the parts at issue; defendant’s sales relationship with Maxam Equipment; particular
engineering documents prepared for or provided by certain entities; purchases,
agreements, and communications with vendors relating to the disputed parts;
communications with customers; public disclosures of engineering documents; and “gray
books” relating to the disputed parts. (Doc. 128-15, at 4-7). King stated that he had
been designated at the advice of defendant’s counsel to testify regarding all of these
Plaintiffs also assert their dissatisfaction with the knowledge and preparedness of deponents
Suzy Hartley and Yvonne Bardwell. (Doc. 128-1, at 13-14). However, beyond the claim that
these persons were “identified by [defendant] as having the most knowledge of accounting and
issues relating to [defendant’s] taxes,” (id. at 14), plaintiffs present no authority supporting a
requirement of preparedness for persons deposed under the vehicle of Rule 30(a)(1). In any
event, plaintiffs do not seek leave for additional time to depose Hartley and Bardwell, and,
therefore, the Court will not entertain these complaints.
topics, and that he had received plaintiffs’ notice prior to the deposition. (Doc. 129-7,
Near the start of the deposition, plaintiffs’ counsel questioned King regarding his
preparation to be examined on the topics described in the notice. King stated that he had
not reviewed any documents between the time he received the notice and the time of his
deposition. (Doc. 129-7, at 12:19-22). He further stated that he had not met with any
of defendant’s officers or directors or conferred with any other employee with regard to
any of the topics in the notice. (Id., at 12:23-13:4). Plaintiffs cite to instances on ten of
the fourteen topics wherein King fails to answer a question or admits to unpreparedness.
(Doc. 128-1, at 12-13 (citing excerpts)). In plaintiffs’ view, these examples show that
King “was not knowledgeable of any of the topics for which he was produced to testify
and . . . [that] [defendant] deliberately limited his preparation.” (Id., at 12).
Defendant argues that plaintiffs mischaracterize King’s preparedness by cherrypicking his testimony and misrepresenting the extent of King’s ability to respond to
questions knowledgably. (See 129, at 13-14). Defendant further asserts that King’s vast
personal knowledge of defendant’s operation made additional preparation unnecessary.
(Id., at 12). Defendant claims that King’s knowledge was sufficient “to testify on all
matters except for [those questions seeking] specific information contained in documents
that could not be retained by a normal person.” (Id., at 14).
B. The Standard for Deposition Preparedness
Unlike other deponents, persons deposed as corporate designees under rule
30(b)(6) must testify on matters “not only within his or her personal knowledge, but also
on matters reasonably known by the responding entity.” All. for Glob. Justice v. District
of Columbia, 437 F. Supp.2d 32, 37 (D.D.C. 2006) (citation omitted); see also FED. R.
CIV. P. 30(b)(6) (stating a designee “must testify about information known or reasonably
available to the organization”). Accordingly, “[i]f no current employee has sufficient
knowledge to provide the requested information, the party is obligated to prepare one or
more witnesses so that they may give complete, knowledgeable and binding answers on
behalf of the corporation.” Dravo Corp. v. Liberty Mut. Ins. Co., 164 F.R.D. 70, 75
(D. Neb. 1995) (citation, internal quotation marks, and alteration omitted)).
Proper preparedness for a Rule 30(b)(6) deposition requires the good faith of both
parties. “[T]he requesting party must reasonably particularize the subjects about which it
wishes to inquire.” Dwelly v. Yamaha Motor Corp., 214 F.R.D. 537, 540 (D. Minn. 2003);
see also FED. R. CIV. P. 30(b)(6) (requiring that the notice describe the matters for
examination with “reasonable particularity”). A deposing party may not demand that a
corporate designee be prepared to speak with encyclopedic authority. See generally Murphy
v. Kmart Corp., 255 F.R.D. 497, 506 (D.S.D. 2009). In return, “the responding party
must make a conscientious, good-faith effort to designate knowledgeable persons . . .
and to prepare them to fully and unevasively answer questions about the designated subject
matter.” Dwelly, 214 F.R.D. at 540 (citations and internal quotation marks omitted).
A court may levy “appropriate sanction[s] for a corporation’s inadequate
designation” in response to a Rule 30(b)(6) notice. See Cedar Hill Hardware & Const.
Supply, Inc. v. Ins. Corp. of Hannover, 563 F.3d 329, 345 (8th Cir. 2009); see also FED.
R. CIV. P. 30(d)(2).
However, a court should be hesitant to award sanctions for
unpreparedness where the focus of a deposition becomes counsel’s critique of a designee’s
knowledge, rather than an effort to reach substantive information. See Custom Hardware
Eng’g & Consulting, Inc. v. Dowell, No. 4:10CV000653 ERW, 2012 WL 4108930, at
*4 (E.D. Mo. Sept. 18, 2012) (declining to award sanctions on the basis of a Rule
30(b)(6) deponent’s responses when the record “suggest[ed] that counsel was more
concerned with documenting his dissatisfaction with the witness’s attempts to respond to
questions, than he was with obtaining meaningful answers”).
As an alternative to sanctions, an ineffective Rule 30(b)(6) deposition may be
remedied by a second deposition of the corporation. Pursuant to Federal Rule of Civil
Procedure 30(a)(2), a party must obtain the Court’s leave to conduct a deposition if the
deponent has already been deposed in the case. Where “the deponent, another person,
or any other circumstance” has impeded fair examination, the court must allow additional
time consistent with Rule 26(b). FED. R. CIV. P. 30(d)(1).
The Court finds some support for both parties’ characterizations of Jay King’s
testimony upon its own review of his deposition. King responded competently to many
questions germane to his knowledge as defendant’s general manager, including questions
about employees (Doc. 129-7, at 32:22-33:24); defendant’s dealings with its primary
vendors (id. at 50:14-51:12); and even a lengthy series of questions regarding defendant’s
engineering practices (see generally id. at 59:10-68:23). Yet, in general it appears
defendant failed in its obligation to prepare King to speak on behalf of the corporation.
According to plaintiffs’ tally, King’s examination produced over fifty “don’t know”
answers to questions. (Doc. 130, at 5). King candidly admitted that he did “[b]asically
nothing” to prepare for the deposition. (Doc. 129-7, at 11:2-12). This lack of any
preparatory measure on behalf of King or defendant to ready King for the deposition does
not reflect a “conscientious, good-faith effort” to prepare a knowledgeable designee.
However, the issue then becomes whether any amount of effort could have
prepared King to respond knowledgably to all of plaintiffs’ questions. In response to
plaintiffs’ counsel’s suggestion that King’s ignorance had been willful, King responded
that he “could have spent months preparing and may not have had the right . . . answers.”
(Id., at 211:6-14). Indeed, throughout the deposition, plaintiffs’ counsel pressed King
on questions demanding extreme exactitude. In one instance, counsel asked:
Q. How many pages of blueprints of Standard Havens does [defendant]
have in its possession at its headquarters here in Cedar Rapids? I want the
A. Don’t know the exact number.
Q. How many for Iowa Manufacturing?
A. Don’t know the exact number.
Q. How many for Cedarapids?
A. Don’t know the exact number.
(Id., at 31:11-19). In another instance, counsel asked:
Q. Did you meet with everyone [in defendant’s sales staff] and review all
of [their email] communications with customers so you could identify
[th]em for me here today and discuss [th]em with me?
A. No, I did not.
Q. Why not?
A. It would take every day of the last six months to do it.
(Id., at 38:19-39:1).
A good-faith effort to prepare a corporate designee does not
contemplate preparation to the level of specificity or breadth reflected in plaintiffs’
counsel’s quizzing. What these examples also show is that if plaintiffs sought answers to
such specific areas of information, then their Rule 30(b)(6) notice failed to “reasonably
particularize the subjects” about which it would inquire in the examination. See Dwelly,
214 F.R.D. at 540. In addition to other broad and ambiguous categories, plaintiffs’
notice generally sought information regarding defendant’s entire library of engineering
documents and over six years’ worth of communications with customers and vendors.
(Doc. 128-15, at 5-6). Absent from the notice was plaintiffs’ apparent expectation that
King would be able to list every blueprint and recall every email. Information of such
breadth and detail exceeds the scope of any designee’s ability to properly prepare,
particularly when the notice was not more specific. See Murphy, 255 F.R.D. at 505-06
(finding insufficient specificity where plaintiff’s notice sought information regarding the
entire “corporate history of Kmart Corporation, Kmart Holding Corporation, Sears
Corporation, and Sears Holdings Corporation for the last ten (10) years . . . and the
bankruptcy in 2001.”).
Finding that both parties failed in their obligations under Rule 30(b)(6), the Court
declines to impose sanctions on the basis of King’s unpreparedness. However, the Court
grants leave for additional time for plaintiff to depose defendant pursuant to the
requirements of Rule 30(b)(6), with each party to bear its own costs and fees. This
deposition must be completed within thirty (30) days following the entry of this Order.
Plaintiffs are instructed to serve on defendant a notice describing the topics to be
examined with sufficient specificity.
Defendant must subsequently provide a
representative or representatives adequately prepared to speak on the topics identified.
PLAINTIFFS’ MOTION FOR SANCTIONS
Having found that defendant conducted discovery at least partially improperly, the
Court now turns to the issue of sanctions. Plaintiffs move for sanctions on two bases:2
First, defendant’s failure to produce documents responsive to plaintiffs’ written requests
for financial records “stonewall[ed] Plaintiffs’ ability to gather relevant information”
(Doc. 128-1, at 12); Second, defendant’s Rule 30(b)(6) corporate designee, Jay King, as
well as deponents Suzy Hartley and Yvonne Bardwell, were unprepared and unresponsive
during their depositions, “imped[ing] Plaintiffs’ ability to discover admissible evidence
and frustrat[ing] Plaintiffs’ fair examination of [defendant].” (Id. at 14). Plaintiffs
request that the Court impose sanctions pursuant to its authority under Federal Rules of
Civil Procedure 26(g)(3), 30(d)(2), 37(b)(2)(A)(i)-(iv), and 37(c). (Doc. 128-1, at 17).
Beyond the grounds addressed below, Plaintiffs also call for sanctions in light of what they
construe as admissions by Jay King that defendant “provided Plaintiffs with irrelevant documents
and that its answers/responses to Plaintiffs’ written discovery were not accurate.” (Doc. 128-1,
at 16 (citing King’s deposition)). The Court finds this claim to be without merit. Based on the
deposition excerpts cited by plaintiffs, the Court is unable to conclude that defendant’s production
or responses were unreasonable, unduly burdensome, served for an improper purpose, or not
grounded in law. See FED. R. CIV. P. 26(g)(1)(B).
Specifically, plaintiffs ask the Court to order defendant to “pay for the cost of [the] second
[Rule 30(b)(6)] deposition, including attorneys’ fees for [p]laintiff’s counsel’s
preparation, travel time, the time for taking the deposition and any court reporter fees
for any required depositions,” as well as “reasonable expenses and attorney[s’] fees for
preparing [plaintiffs’ instant motion].” (Doc. 128-1, at 18-19).
Federal Rule of Civil Procedure 26(g)(1) requires that an attorney certify that
every discovery disclosure is complete and correct as of the time it is made, and that
every discovery response be consistent with Rule 26. Rule 26(g)(3) provides that a court
“must” impose appropriate sanctions “[i]f a certification violates this rule without
substantial justification.” The Rule provides that “[t]he sanction may include an order to
pay the reasonable expenses, including attorney’s fees, caused by the violation.” FED.
R. CIV. P. 26(g)(3). Additionally, Federal Rule of Civil Procedure 37(c) provides, in
relevant part, that a party who fails to supplement a discovery response “is not allowed
to use that information . . . to supply evidence on a motion, at a hearing, or at a trial,
unless the failure was substantially justified or is harmless.” FED. R. CIV. P. 37(c)(1).
The Rule also permits the Court to assess monetary or non-monetary sanctions against
the offending party. (Id.).
Federal Rule of Civil Procedure 30(d)(2) permits the Court to impose an
appropriate sanction on a person who “impedes, delays, or frustrates the fair
examination” of a Rule 30 deponent. Federal Rule of Civil Procedure 37(b)(2) authorizes
a variety of sanctions to be levied against a corporate party whose officer, director,
manger, or Rule 30(b)(6) designee “fails to obey an order to provide or permit
discovery.” Unlike Rules 26(g)(3) and 37(c), which require imposition of sanctions
where a party violates discovery rules without substantial justification, Rules 30(d)(2)
and 37(b)(2) are permissive in nature, and may be applied at the Court’s discretion. See
Sec. Nat. Bank of Sioux City, IA v. Jones Day, 800 F.3d 936, 941 (8th Cir. 2015)
(reviewing Rule 30(d)(2) sanctions for abuse of discretion); Avionic Co. v. Gen.
Dynamics Corp., 957 F.2d 555, 558 (8th Cir. 1992) (reviewing Rule 37(b)(2) sanctions
for abuse of discretion).
Because defendant’s failure to adequately prepare a corporate designee for the
Rule 30(b)(6) deposition was due in part to the insufficiency of plaintiffs’ notice, the
Court declines to impose sanctions under Rules 30(d)(2) or 37(b)(2). The final question
to be resolved is whether sanctions are warranted for defendant’s failure to produce
documents in response to the demand of plaintiffs’ March 10 letter. Despite defendant
turning over 42 pages of financial documents responsive to plaintiffs’ broad written
discovery requests, defendant has not produced any records informative as to the sales or
costs of production of the particular products at issue. Nevertheless, the Court finds that
defendant was substantially justified in this failure in light of defendant’s reasonable
objections to the appropriateness of plaintiffs’ requests. See Kamps v. Fried, Frank,
Harris, Shriver & Jacobson L.L.P., 274 F.R.D. 115, 118 (S.D.N.Y. 2011) (stating that
a party’s resistance to discovery is sufficiently justified “if there is a ‘genuine dispute,’
or ‘if reasonable people could differ as to the appropriateness’” of the request (quoting
Pierce v. Underwood, 487 U.S. 552, 565 (1988)).
Defendant reasonably resisted plaintiffs’ broad discovery requests for financial and
accounting information on grounds of irrelevance and disproportionality. As explained
above, plaintiffs’ sweeping requests for general financial information are only relevant in
light of their claim for punitive damages, and are disproportionate to the needs of the
case beyond the sampling of documents defendant has produced. Additionally, with
respect to the narrower requests of plaintiffs’ March 10 letter, defendant’s objections to
relevance on the basis of DeRubeis were reasonable, if unavailing. While the Court finds
application of DeRubeis unnecessary in the context of this discovery dispute, the Court
acknowledges defendant’s reliance on the Court’s November 9, 2016, protective order
(Doc. 53), which defendant construes to require plaintiffs further specify the alleged trade
Plaintiffs’ request for imposition of sanctions under Rules 26(g)(3) and 37(c) is
For the reasons set forth herein, plaintiffs’ motion to compel is granted in part,
plaintiffs’ motion for sanctions is denied, and plaintiffs’ motion for leave and for
additional time to depose defendant pursuant to Rule 30(b)(6) is granted, provided that
each party bear its own fees and costs.
IT IS SO ORDERED this 21st day of September, 2017.
Chief United States Magistrate Judge
Northern District of Iowa
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?