Swift Beef Company v. Alex Lee, Inc.
Filing
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MEMORANDUM AND ORDER granting 1 Motion to Quash; finding as moot 8 Motion to Compel. Signed by Magistrate Judge Kenneth G. Gale on 10/31/18. (df)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
SWIFT BEEF COMPANY,
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Plaintiff,
vs.
ALEX LEE, INC.,
Defendant.
Case No. 18-0105-EFM-KGG
MEMORANDUM & ORDER ON
MOTION TO QUASH THIRD-PARTY SUBPOENA
Now before the Court is the “Motion to Quash Subpoenas” filed by nonparty Vantage Foods NC LP (“Vantage”). (Doc. 1.) Also pending is the “Motion
to Compel Compliance with Subpoena” filed by Plaintiff Swift Beef Company
(“Swift”). (Doc. 8.) Having reviewed the submissions of the parties, the Court is
prepared to rule.
FACTS
This case results from a third-party subpoena served on Vantage in a
contract dispute pending in the United States District Court for the Western
District of North Carolina (“underlying lawsuit”). The underlying lawsuit results
from “positive statements” by Defendant Alex Lee “that it will not substantially
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perform its obligations under two agreements with Swift Beef – a Lease
Agreement and a Purchase Agreement (collectively, ‘Agreements’) – that involve a
meat further processing and packaging plant located in Lenoir, North Carolina
(‘Lenoir Plant’).” (Doc. 9, at 1.) Alex Lee’s counterclaims include two for breach
of contract “contending that it may immediately terminate the Agreements because
Swift Beef purportedly failed to ‘use commercially reasonable efforts to produce’
meat products ‘efficiently and at competitive cost.’” (Id., at 1-2.)
Vantage previously operated the Lenoir plant that is currently owned by
Defendant and the subject of the underlying lawsuit. Vantage has no contractual or
business relationships with either of the parties in the underlying lawsuit. Vantage
also has no ongoing business operations, no revenue, no employees, and exists
essentially as a defunct entity. Its only office is in Wichita, Kansas.
Swift served a subpoena on Vantage on May 29, 2018. Vantage contends
that this initial subpoena was “procedurally defective and substantively flawed.”
(Doc. 2, at 2.) Swift served a second subpoena on June 12, 2018, “[i]n an effort to
resolve Vantage Foods’ objection to the first subpoena on the grounds that it was
defective by requiring production in Raleigh, North Carolina instead of Wichita,
Kansas . . . .” (Doc. 9, at 9.)
Vantage concedes that the “procedural defects were corrected by Swift’s
issuance of [the] modified subpoena . . . .” (Doc. 2, at 2.) Even so, Vantage argues
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that both subpoenas “should be quashed in their entirety and Vantage Foods should
not be required to produce any of the items Swift requests.” (Doc. 2, at 2.) Based
on the arguments contained in Swifts response to Vantage’s motion to quash as
well as Swift’s own motion to compel, the Court finds any issues regarding the
initial subpoena are now moot and will focus only on the modified subpoena of
June 12, 2018.
According to Vantage, the subpoena consists of “twenty-five sweeping
requests for documents covering almost every conceivable aspect of Vantage
Food’s obsolete business relationship with Alex Lee and Alex Lee’s subsidiaries.”
(Id., at 3.) Vantage has summarized the categories of requested documents as
follows:
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All agreements and contracts between Vantage Foods
and Alex Lee and its related entities, Merchants
Distributors and Lowes Foods;
Internal and external communications regarding Vantage
Foods ceasing operations of the Lenoir Plant;
Documents and communications around termination of
contracts and agreements between Vantage Foods and
Alex Lee;
Documents showing volume of production by Vantage
Foods while it operated the Lenoir Plant;
All documents related to complaints by Alex Lee and its
related entities to Vantage Foods during their
relationship;
Communications between Vantage Foods and Alex Lee
concerning the Initial Subpoena;
Vantage Foods’ labor costs associated with its operation
of Alex Lee's Lenoir Plant;
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Drawings and photos of Vantage Foods’ operation of the
Lenoir Plant; and
Documents tracking, analyzing or assessing the accuracy
of Alex Lee’s forecasting of meat products to be shipped
by Vantage Foods from the Lenoir Plant to Alex Lee and
its related entities.
(Id., at 3-4.)
Concurrently with the filing of its response (Doc. 10) to Vantage’s “Motion
to Quash Subpoenas,” Swift filed its “Motion to Compel Compliance with
Subpoena Directed to Non-Party.” (Doc. 8.) The arguments raised by Swift in
support of its motion to compel mirror those raised in its response to Vantage’s
motion. (Compare Doc. 8 to Doc. 10.)
ANALYSIS
A.
Legal Standards.
Fed.R.Civ.P. 26(b) states that
[p]arties 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 state 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.
As such, the requested information must be nonprivileged, relevant, and
proportional to the needs of the case to be discoverable.
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Discovery relevance is broadly construed. AKH Co., Inc. v. Universal
Underwriters Ins. Co., 13-2003-JAR-KGG, 2015 WL 4523578, at *2 (D. Kan.
July 27, 2015). As such, “discovery should be considered relevant if there is any
possibility the information sought may be relevant to the subject matter of the
action.” Id. “Federal Rule of Civil Procedure 26(c) confers broad discretion on
the trial court to decide when a protective order is appropriate and what degree of
protection is required.” Layne Christensen Co. v. Purolite Co., 271 F.R.D. 240,
244 (D. Kan. 2010) (quoting Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36
(1984)).
Fed.R.Civ.P. 45 governs subpoenas, with section (d) of that Rule relating to
“protecting a person subject to a subpoena” as well as “enforcement.” Subsection
(d)(1) of the Rule states that
[a] party or attorney responsible for issuing and serving a
subpoena must take reasonable steps to avoid imposing
undue burden or expense on a person subject to the
subpoena. The court for the district where compliance is
required must enforce this duty and impose an
appropriate sanction – which may include lost earnings
and reasonable attorney's fees – on a party or attorney
who fails to comply.
Subsection (d)(2)(B) relates to objections to subpoenas and states that
[a] person commanded to produce documents or tangible
things or to permit inspection may serve on the party or
attorney designated in the subpoena a written objection to
inspecting, copying, testing, or sampling any or all of the
materials or to inspecting the premises – or to producing
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electronically stored information in the form or forms
requested. The objection must be served before the
earlier of the time specified for compliance or 14 days
after the subpoena is served. If an objection is made, the
following rules apply:
(i) At any time, on notice to the commanded
person, the serving party may move the court for
the district where compliance is required for an
order compelling production or inspection.
(ii) These acts may be required only as directed in
the order, and the order must protect a person who
is neither a party nor a party’s officer from
significant expense resulting from compliance.
Subsection (d)(3)(A) requires the District Court to quash or modify a subpoena
that: (i) fails to allow a reasonable time to comply; (ii) requires a person to comply
beyond the geographical limits specified in Rule 45(c); (ii) requires disclosure of
privileged or other protected matter, if no exception or waiver applies; or (iv)
subjects a person to undue burden. Thus, the Court must balance Plaintiffs’ needs
for the information with the potential for undue burden or expense imposed on the
third-party respondent.
B.
Relevance.
Vantage contends that when it conferred with Swift regarding the relevance
of the categories of information listed in the subpoena, “Swift’s only explanation is
that the document requests are relevant to whether Alex Lee was entitled to
terminate a lease agreement it had with Swift.” (Doc. 2, at 10; citing Doc. 2-2, at
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18 [cited as Doc. 2-D, at 2].) Vantage compiles Swifts requests into four
categories:
1) Requests 1, 4, 5, 6, 8, 9, 10, 12, and 23 all seek
documents concerning Vantage Foods’ contracts and
agreements with Alex Lee and its subsidiaries.
2) Requests 2, 3, 7, 11, 20, and 13 seek documents and
communications shared between Vantage Foods and
Alex Lee and its subsidiaries.
3) Requests 14, 15, 16, 21, 22, 24, and 25 seek highly
confidential details about Vantage Foods’ operations at
the Lenoir Plant, including production volumes, labor
costs, blueprints, and internal analyses.
4) Requests 17, 18, and 19 seek documents concerning
complaints Vantage Foods may have received from Alex
Lee and its subsidiaries.
(Doc. 2, at 10.)
As Vantage points out, Swift’s claims against Alex Lee sound in contract as
do two of Alex Lee’s counterclaims. Vantage argues that its contracts with Alex
Lee “are separate and completely unrelated to the disputes between Swift and Alex
Lee, [thus] they cannot be used to support or defend any of the contract claims in
this case.” (Id., at 11.) The remaining counterclaims relate to “fraud, conversion,
and deceptive practices” Alex Lee alleges against Swift. As Vantage states,
“[n]otably missing is any mention of Vantage Foods.” (Id., at 12.) As such,
Vantage argues that its “business records simply cannot shed any light” on legal
disputes concerning the conduct of Swift and Alex Lee. (Id.)
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Swift responds that the categories of requested information “are targeted to
seek information relevant to Alex Lee’s counterclaims and arguments raised in the
North Carolina Lawsuit.” (Doc. 10, at 5.)
For instance, two document requests . . . seek copies of
the agreements between Vantage Foods and Alex Lee
relating to the Lenoir Plant and Vantage Foods’
preparation and shipment of products from that facility to
Alex Lee. This information is relevant not only for
context relating to the relationship between Vantage
Foods and Alex Lee, but for assessing Swift Beef’s
performance in comparison to Vantage Foods’
performance at the Lenoir Plant and whether the same
parameters apply for comparing their respective
performance.
(Id.) Vantage replies that “[l]ogically, comparison of the requested Vantage Foods
data from a completely different time period would not offer any evidence of
whether Swift's conduct was reasonable or whether its costs were ‘competitive’
during its performance under the Purchase Agreement with Alex Lee.” (Doc. 13,
at 6.)
The Court agrees with Vantage that the relevance to the issues in the
underlying lawsuit of this comparison between performances of different entities
(one of which is not a party to this law suit) during different time periods is
suspect.1 This is particularly true given Vantage’s assertion that Swift produced a
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This is also true regarding requests for information relating to topics such as Vantage’s
forecasting of shipments, labor costs, operations, and productivity.
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“different product mix for Alex Lee . . . .” (Id. (internal citation omitted).) Given
the burden imposed on Vantage and proportionality of the information requested to
the needs of the case, discussed infra, the Court finds that Swift has not established
the relevance of the information requested.
C.
Undue Burden & Proportionality.
Fed.R.Civ.P. 45(d) states that a court must quash a subpoena that “subjects a
person to undue burden.” “Courts are required to balance the need for discovery
against the burden imposed on the person ordered to produce documents, and the
status of a person as a non-party is a factor that weighs against disclosure.”
Goodyear Tire & Rubber Co. v. Kirk's Tire & Auto Servicenter, 211 F.R.D. 658,
662-663 (D. Kan. 2003). “Whether a subpoena imposes an undue burden upon a
witness is a case-specific inquiry that ‘turns on such factors as relevance, the need
of the party for the documents, the breadth of the document request, the time
period covered by it, the particularity with which the documents are described and
the burden imposed.’” Speed Trac Techs., Inc. v. Estes Express Lines, Inc., Case
No. 08-212-KHV, 2008 WL 2309011, at *2, (D. Kan. June 3, 2008) (quoting
Heartland Surg. Specialty Hosp., LLC v. Midwest Div., Inc., Case No. 05-2164MLB-DWB, 2007 WL 2122437, at *4 (D. Kan. July 20, 2007).
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Vantage argues that the modified subpoena is unduly burdensome on its
face. (Doc. 2, at 15.) Upon analysis of the factors to be considered, the Court
finds the subpoena to be unduly burdensome.
As discussed above, the relevance of the information requested is dubious.
Additionally, the burden on Vantage to comply with the production is significant.
Swift argues that Vantage has provided no evidence that responding to the
subpoena would be unduly burdensome. (Doc. 10, at 16-20.) The Court disagrees.
Vantage is a defunct entity and would have to rely on high-level employees
of its affiliated entities to compile the information. (Doc. 2, at 15.) Vantage
contends that “the effort to respond would be extremely time-consuming” because
the documents are kept in storage in Pennsylvania and “are not cataloged or
organized in a way that would make them easily identifiable.” (Id.) Searching for
ESI would be equally daunting as such information was not universally maintained
when Vantage ceased operations. (Id., at 15-16.) All things considered, Vantage
estimates it would take hundreds of hours to complete a
comprehensive search for documents responsive to its
requests. Any personnel available to assist with this
project work for Vantage Foods’ affiliated entities.
Complying with the Subpoenas would take them away
from their normal job duties and could negatively affect
the operations of Vantage Foods’ affiliated entities.
(Id., at 16 (internal citations omitted).) As such, the Court finds that compliance
with the subpoena to be unduly burdensome on its face. This is particularly true
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when Swift concedes that certain of the categories of discovery sought are
“duplicative since they seek the same information separately from Alex Lee and its
two primary food distribution and retail operating companies . . . .” (Doc. 9, at 10;
Doc. 10, at 5.)
Concurrently, the information requested by the subpoena is not
proportionate to the needs of the case, pursuant to Fed.R.Civ.P. 26(b)(1). The Rule
mandates that the Court consider “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.” Id.
As discussed above, the subpoena is unduly burdensome on its face.
Vantage’s “relative access” to the information is tenuous. As a defunct entity,
Vantage has limited resources, particularly in light of the burdensomeness of
complying with the subpoena. The limited relevance of the information means it
has limited “importance . . . in resolving the issues” present in this lawsuit.
Further, Vantage contends that “to the extent any of the documents requested in the
Subpoenas are relevant to this case, they were likely stored on Alex Lee’s systems
and Alex Lee should have access to them.” (Doc. 2, at 17.)
Swift responds that it “is not in a position to know if Alex Lee has the same
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information as Vantage Foods, nor whether a particular document in Vantage
Foods’ possession may differ in version or have additions or omissions when
coming from two different sources.” (Doc. 10, at 22.) The Court is not persuaded
that the assumed benefit of potentially obtaining what may or may not constitute
“different versions” of the same document outweighs the significant burden
imposed on Vantage. Further, just as Swift is “not in a position to know if Alex
Lee has the same information as Vantage Foods,” there is no evidence that these
entities – one of which is defunct – possess “differing” information. The Court
will not compel compliance with a subpoena that appears to constitute a fishing
expedition.
All things considered, the information requested by the subpoena has limited
relevance and is not proportional to the needs of the case. Further, Vantage has
established that its production would be unduly burdensome. As such, the “Motion
to Quash Subpoenas” (Doc. 1) filed by non-party Vantage Foods is GRANTED.
Concurrently, the “Motion to Compel Compliance with Subpoena” filed by
Plaintiff Swift Beef Company (Doc. 8) implicates the same issues as the motion
filed by Vantage – relevance, the scope of discovery, proportionality, etc. (See
Doc. 9, at 16-22.) Because the subpoena has been quashed, Swift’s motion (Doc.
8) is DENIED as moot.
IT IS SO ORDERED.
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IT IS THEREFORE ORDERED that the “Motion to Quash Subpoenas”
filed by non-party Vantage Foods (Doc. 1) is GRANTED.
IT IS FURTHER ORDERED that the “Motion to Compel Compliance with
Subpoena” filed by Plaintiff Swift Beef Company (Doc. 8) is DENIED as moot.
IT IS SO ORDERED.
Dated at Wichita, Kansas, on this 31st day of October, 2018.
S/ KENNETH G. GALE
KENNETH G. GALE
United States Magistrate Judge
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