North Alabama Fabricating Company, Inc. v. Bedeschi Mid-West Conveyor Company, LLC et al

Filing 60

MEMORANDUM AND ORDER granting in part and denying in part 55 Defendant Bedeschi Mid-West Conveyor Company, LLC's Motion for Protective Order. The motion is DENIED to the extent it seeks to prohibit any inquiry of Bedeschi's Fed. R. Civ. P . 30(b)(6) witnesses regarding Bedeschi's financial ability at the time Bedeschi made the alleged misrepresentations serving as the basis for Plaintiff's fraud claims. The motion is GRANTED to the extent it seeks to stay any inquiry of Bedeschi's Rule 30(b)(6) witnesses regarding Bedeschi's current financial ability or condition. Signed by Magistrate Judge Teresa J. James on 8/1/2017. (byk)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NORTH ALABAMA FABRICATING
COMPANY, INC.,
Plaintiff,
v.
BEDESCHI MID-WEST CONVEYOR
COMPANY, LLC; DEARBORN
MID-WEST CONVEYOR COMPANY;
LARRY HARP; and BRAXTON JONES,
Defendants.

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Case No. 16-cv-2740-DDC-TJJ

MEMORANDUM AND ORDER
This matter is before the Court on the Motion for Protective Order (ECF No. 55) filed by
Defendant Bedeschi Mid-West Conveyor Company, LLC (“Bedeschi”). Defendant Bedeschi
requests entry of a protective order under Fed. R. Civ. P. 26(c) prohibiting any inquiry of its Fed.
R. Civ. P. 30(b)(6) witnesses regarding Bedeschi’s financial ability to compensate Plaintiff for the
amounts claimed in the Complaint.
On July 6, 2017, Plaintiff served its Amended Rule 30(b)(6) Notice upon Defendant
Bedeschi requesting that Bedeschi produce one or more witnesses to appear for deposition on
August 3, 2017 to testify concerning the matters described in twenty-two topics. Topic No. 14
seeks testimony regarding “Bedeschi’s financial ability to compensate [Plaintiff] for the amounts
claimed in the Complaint.”1 Bedeschi objects to producing any Rule 30(b)(6) witness to testify
regarding this topic because it would, in effect, be a “judgment debtor’s exam” and is therefore
improper until such time as a judgement is actually obtained. Bedeschi also argues that Plaintiff

1

Am. Notice of Dep., ECF No. 55-1.

must establish that its claim for punitive damages is not spurious before it can obtain discovery
relating to Bedeschi’s financial worth. Finally, Bedeschi asks the Court, if it decides to permit such
inquiry, to stay any deposition testimony regarding Bedeschi’s “financial ability to compensate”
Plaintiff until after Bedeschi has the opportunity to challenge the viability of the punitive damage
claim before the District Judge.
Plaintiff opposes the motion, arguing that Bedeschi ignores the fact that its financial ability
to pay Plaintiff is relevant to Plaintiff’s fraud claims as alleged in the Complaint. Second, in regard
to Plaintiff’s punitive damage claim, the pleadings and the Court’s previous denial of Bedeschi’s
motion to dismiss establish that such claim is “not spurious” and so Bedeschi’s argument that
discovery of its financial condition should be delayed is without merit.
The Court finds Topic No. 14, Bedeschi’s financial ability to compensate Plaintiff for the
amounts claimed in the Complaint, seeks deposition testimony relevant to Plaintiff’s two fraud
claims. Specifically, the testimony would be relevant to Plaintiff’s allegations that Bedeschi
knowingly made false misrepresentations between September 2015 and July 2016 that it would
pay Plaintiff all the increased costs and expenses arising from Bedeschi’s accelerated shipment
schedule.2 Thus, Bedeschi’s financial ability at the time Bedeschi made the alleged
misrepresentations is relevant to Plaintiff’s fraud claims and allegations. The Court therefore
denies Bedeschi’s request for a protective order prohibiting any inquiry of its Fed. R. Civ. P.
30(b)(6) witnesses regarding Topic No. 14 to the extent it relates to Bedeschi’s financial ability or

2

Compl. ¶¶23, 46–48, ECF No. 1.

2

condition at the time Bedeschi allegedly made the alleged misrepresentations serving as the basis
for Plaintiff’s fraud claims.
With regard to any inquiry regarding Bedeschi’s financial condition for purposes of
establishing Plaintiff’s claim for punitive damages, generally information about a party’s current
net worth or financial condition is relevant to the issue of punitive damages.3 “When a punitive
damages claim has been asserted by the plaintiff, a majority of federal courts permit pretrial
discovery of financial information of the defendant without requiring plaintiff to establish a prima
facie case on the issue of punitive damages.”4 But a plaintiff seeking discovery of the defendant’s
financial condition in support of a claim for punitive damages must show the claim is not
spurious.5 To prove a claim is not spurious, a party must provide specific factual allegations to
support its claim for punitive damages.6

3

Gust v. Wireless Vision, L.L.C., No. 15-2646-KHV, 2015 WL 9462078, at *5 (D. Kan. Dec. 24,
2015) (citing Mid Continent Cabinetry, Inc. v. George Koch Sons, Inc., 130 F.R.D. 149, 152 (D. Kan.
1990)). See also Aerotech Res., Inc. v. Dodson Aviation, Inc., No. 00-2099-CM, 2001 WL 395397, at *2 (D.
Kan. Apr. 11, 2001) (“[I]f a plaintiff has alleged sufficient facts to claim punitive damages against a
defendant, information of the defendant’s net worth or financial condition is relevant because it can be
considered in determining punitive damages.”).
4

Mid Continent Cabinetry, 130 F.R.D. at 151.

5

See id. at 152 (plaintiff must show that his claim for punitive damages was not spurious in order
to be entitled to discovery of the defendant’s financial condition). See also Heartland Surgical Specialty
Hosp., LLC v. Midwest Div., Inc., No. 05-2164-MLB-DWB, 2007 WL 950282, at *13 (D. Kan. Mar. 26,
2007) (“[T]he Court need only find that the claims for punitive damages are not spurious for discovery [of
the defendants’ financial information] to proceed.”).
6

Gust, 2015 WL 9462078, at *5; See also McCloud v. Bd. of Geary Cty. Comm'rs, No.
06-1002-MLB-DWB, 2008 WL 1743444, at *4 (D. Kan. Apr. 11, 2008) (finding plaintiffs provided
sufficient factual background to establish that their claim for punitive damages was not spurious);
Heartland, 2007 WL 950282, at *13 (finding plaintiff made allegations sufficient to support its punitive
damages claims).

3

In this case, Defendants have already filed a motion to dismiss for failure to state a claim
with respect to Plaintiff’s fraud and fraudulent suppression claims. District Judge Crabtree denied
that motion to dismiss on May 8, 2017.7 Plaintiff is seeking punitive damages based upon these
fraud claims.8 Under Kansas law, a plaintiff making a claim for punitive damages has the “burden
of proving, by clear and convincing evidence in the initial phase of the trial, that the defendant
acted toward the plaintiff with willful conduct, wanton conduct, fraud or malice.”9
Plaintiff alleges in the Complaint that Bedeschi, its president and CEO Larry Harp, and
project manager Braxton Jones knowingly and willfully made misrepresentations to Plaintiff about
material facts.10 Plaintiff further alleges Bedeschi, Harp, and Jones knew their misrepresentations
were false, did not intend to perform the acts they promised, and made the misrepresentations of
material fact willfully to deceive Plaintiff.11 Plaintiff further alleges these acts and omissions were
“willful, wanton, malicious, oppressive, reckless and/or were undertaken with the intent to
defraud.”12
The Court finds Plaintiff has shown its punitive damages claim is not spurious. However,
the Court finds that any inquiry into Bedeschi’s current financial ability or condition as it relates to

7

May 8, 2017 Mem. & Order, ECF No. 31.

8

Compl. at 13.

9

K.S.A. 60-3701(c).

10

Compl. ¶¶46–47.

11

Compl. ¶¶48–49.

12

Compl. ¶¶50, 60.

4

Plaintiff’s claim for punitive dam
p
mages is prem
mature at thi time. The Court theref
is
fore grants
Bedeschi request to stay any su depositio testimony until after B
i’s
o
uch
on
y
Bedeschi has the opportu
unity
3
to challen the viability of the punitive dam
nge
p
mage claim on a motion f summary judgment.13
n
for
y

IT IS THEREFORE OR
T
RDERED th Defendan Bedeschi’s Motion for Protective O
hat
nt
s
r
Order
(ECF No 55) is gran in part an denied in part. The m
o.
nted
nd
n
motion is DEN
NIED to the extent it see to
e
eks
prohibit any inquiry of Bedeschi’s Fed. R. Ci P. 30(b)( witnesses regarding B
a
o
iv.
(6)
s
Bedeschi’s
financial ability at the time Bedeschi made th alleged m
he
misrepresenta
ations servin as the basi for
ng
is
ms.
NTED to the extent it se
e
eeks to stay a inquiry o
any
of
Plaintiff’s fraud claim The motion is GRAN
i's
b)(6) witness regarding Bedeschi’s current fina
ses
g
s
ancial ability or conditio
y
on.
Bedeschi Rule 30(b
IT IS FURTH
T
HER ORDE
ERED each party bear it own expen related t the filing o the
ts
nses
to
of
motion.
T
DERED.
IT IS SO ORD
Dated August 1, 2017, at Kansas City Kansas.
D
t
y,

Teresa J. J
James
U. S. Mag
gistrate Judge
e

13
3

See Heartland, 2007 WL 950282, at *14 (staying p
L
*
production of discovery reg
f
garding the cu
urrent
informatio of the plain
on
ntiffs’ net worth or financia condition r
al
relevant to the issue of punitive damages until
e
s
after a rul
ling on any di
ispositive mot
tion directed to the claim f punitive d
for
damages).

5