Global Oil Tools, Inc. v. Barnhill et al
Filing
245
ORDERED that 231 Motion to Compel Production of Documents is GRANTED IN PART and DENIED IN PART. FURTHER ORDERED that 235 Motion to Compel Production of Chase Bank Financial Records is DENIED. Signed by Magistrate Judge Karen Wells Roby on 4/23/2014. (cml)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
GLOBAL OIL TOOLS, INC.
CIVIL ACTION
VERSUS
NO: 12-1507
WILFRED J BARNHILL, ET AL.
SECTION: “J” (4)
ORDER
Before the Court are Defendants, Wilfred J. Barnhill, Brian Barnhill, Diane Barnhill and
Barnhill Industries, Inc., (collectively “Defendants”) Motion to Compel Production of Documents
(R. Doc. 231) and Motion to Compel Production of Chase Bank Financial Records (R. Doc.
235). These motions are also opposed. See R. Doc. 237-38.The motion was noticed for submission
and originally scheduled to be heard on April 9, 2014, but was reset and heard by oral argument on
April 16, 2014.
I.
Background
This is not a matter of first instance before this Court.1 This action was instituted on behalf of
Plaintiff, Global Oil Tools (“Global Oil”)2 pursuant to the Racketeer Influence and Corrupt
Organizations Act (18 U.S.C. § 1962) (“RICO”), the Lanham Act, 15 U.S.C. § 1125 (“Lanham
Act”), as well as Louisiana law, for an allegedly fraudulent scheme whereby Defendants, Wilfred
and Diane Barnhill, established competing companies, Downhole-Surface Manufacturing, LLC., and
1
A full background of this case is set forth in this Court’s Order and Reasons (R. Doc. 193) granting in
part and denying in part Plaintiffs’ Global Oil Tools, Inc., Lyamec Corporation, Global Oil Tools Libya, Inc., and
Riad Ghariani’s Motion to Dismiss (R. Doc. 176).
2
See R. Doc. 116, p. 1-3. Wilfred Barnhill allegedly served as Global Oil Tools' president until 2011.
Wilfred Barnhill's wife, Diane Barnhill, was also employed by Global Oil Tools. Id. Brian Barnhill, Wilfred and
Diane Barnhill's son, was Global Oil Tool's Vice President, Financial Officer, and Treasurer. According to the
amended complaint, in 2007, Lyamec Corporation, Inc., acquired ownership of Global Oil.
Global International Tools, misappropriated trade secrets, company resources, business
opportunities, customers, and stole Global Oil’s property and inventory (R. Doc. 201-1, p. 1-2).
As to the instant motions, the Court shall first address Defendants’ Motion to Compel
Production of Documents (R. Doc. 231), which seeks an Order from this Court compelling
production of documents of monies paid by Global Oil for salaries, expenses, and investor dividends
that would explain Global Oil’s financial decline, from Global Oil, Lyamec, Inc., and Global Oil
Lybia, Inc. See R. Doc. 231. Defendants contend that this information is relevant to their defense
and their successor-in-interest claims in the consolidated matter. Id.
The next motion before the Court is Defendants’ Motion to Compel Production of Chase
Bank Financial Records (R. Doc. 235), seeking an Order from this Court compelling Global Oil
to produce said records as Defendants contend that they are relevant to the instant matter because
they support the Barnhills’ defense and bear on the credibility of Global Oil and Riad Ghariani. See
R. Doc. 235. Defendants contend that this information is relevant because they recently deposed a
corporate secretary of Global Oil, who gave testimony that Ghariani divested financial control from
the Barnhills by depositing all the funds from an $800,000, letter of Credit into a Chase Bank
account that the Barnhills could not access. Id. at 1. As a result, Defendants contend that Ghariani
took control of the day to day operations, also allegedly issued false invoices in order to receive a
greater advance of the letter of credit and then misappropriated the excess funds for his own benefit.
Id. Therefore Defendants seek an Order from this Court compelling production of these account
documents from Global Oil.
II.
Standard of Review
Federal Rule of Civil Procedure (“Rule”) 26(b)(1) provides that “[p]arties may obtain discovery
regarding any non-privileged matter that is relevant to any party’s claim or defense.” Fed. R. Civ. P.
2
26(b)(1). The Rule specifies that “[r]elevant information need not be admissible at the trial if the
discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Id. The
discovery rules are accorded a broad and liberal treatment to achieve their purpose of adequately
informing litigants in civil trials. Herbert v. Lando, 441 U.S. 153, 176 (1979). Nevertheless, discovery
does have “ultimate and necessary boundaries.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340,
351 (1978) (quoting Hickman v. Taylor, 329 U.S. 495, 507 (1947)). Furthermore, “it is well
established that the scope of discovery is within the sound discretion of the trial court.” Coleman v.
American Red Cross, 23 F.3d 1091, 1096 (6th Cir.1994).
Under Rule 26(b)(2)(C), discovery may be limited if: (1) the discovery sought is unreasonably
cumulative or duplicative, or is obtainable from another, more convenient, less burdensome, or less
expensive source; (2) the party seeking discovery has had ample opportunity to obtain the discovery
sought; or (3) the burden or expense of the proposed discovery outweighs its likely benefit. Id. In
assessing whether the burden of the discovery outweighs its benefit, a court must consider: (1) the
needs of the case; (2) the amount in controversy; (3) the parties’ resources; (4) the importance of the
issues at stake in the litigation; and (5) the importance of the proposed discovery in resolving the
issues. Id. at 26(b)(2)(C)(iii).
Rule 34 provides that a party may request another party to produce “any designated documents
or electronically stored information ... stored in any medium from which information can be
obtained.” Id. at 34(a)(1)(A). This request “must describe with reasonable particularity each item
or category of items to be inspected.” Id. at 34(b)(1)(A). “The party to whom the request is directed
must respond in writing within 30 days after being served.” Id. at 34(b)(2)(A). “For each item or
category, the response must either state that inspection ... will be permitted as requested or state an
objection to the request, including the reasons.” Id. at 34(b)(2)(B). Although Rule 34 does not
3
provide that untimely objections are waived, the Fifth Circuit has found that the waiver provision
applies equally to Rule 34. See In re United States, 864 F.2d 1153, 1156 (5th Cir. 1989).
III. Analysis
A.
Defendants’ Motion to Compel Production of Documents
Defendants seek an Order from this Court compelling production of documents of the finances
of Global Oil for salaries, expenses, and investor dividends that would explain Global Oil’s financial
decline, from Global Oil, Lyamec, Inc., and Global Oil Lybia, Inc. See R. Doc. 231. Defendants
contend that this information is relevant to their defense and their successor-in-interest claims in the
consolidated matter. Id.
The Barnhills contend that Riad Ghariani played a much larger role, was in control of the
finances and engaged in self-interested transactions which may have been fraudulent. See R. Doc.
231-1, p. 1. As such, the Barnhills contend that the discovery being sought is relevant because (1)
they believe that this information will establish that the Barnhills were not in control of global Oil’s
finances at all times and (2) that Ghariani’s actions caused Global Oil’s finances to deteriorate. Id.
This dispute surrounds the following discovery requests:
1.
Records of Salaries or Expenses
Request for Production Number 9 – to Global Oil; to Global Libya, at RFP # 3 sought
“all documents evidencing costs incurred by Global Oil to manufacture drawings for
Global Libya from 2005 through 2012.”
Global Oil objected to Request No. 9 on the basis that it is overbroad and not reasonably
calculated to lead to the discovery of admissible evidence. Global Oil indicated that “Global Oil
Tools Libya” was a joint venture or a related company that Global Oil was involved in. Therefore,
the allegations that Ghariani, the Director of Global Oil Tools from 2007, would have used Global
Oil’s resources to benefit Global Oil Tools Libya is immaterial, as the companies were involved
4
with one another. Furthermore, counsel for Global Oil indicated that counsel for the Barnhills
already produced the information he requested in a spreadsheet prepared by his clients. Counsel for
the Barnhills acknowledge receipt of the information.
After considering the arguments of the parties, the Court found that the interrelation of the
companies did not support the Barnhills’ allegations that this information would be relevant to their
claim. Further, the Court finds that the production of this information would be duplicative. As such,
the Barnhills request was denied.
The next request is:
Request for Production Number 10 –which sought “all documents that demonstrate
the funds that Global Oil has paid to Riad Ghariani or R Raymond, Guillermo Licona
and Ben Gala for the relevant period, including, but not limited to, amounts paid for
salaries and expenses such as travel expenses, personal accounting, housing allowances,
car payments, drivers, and/or cell phones.”
Global Oil objected on the basis of this information seeking information that is not reasonably
calculated to lead to discovery of admissible evidence, noting that these claims were already
dismissed by the Court, and are overly broad and unduly burdensome. See R. Doc. 238, p. 8.
During oral argument, counsel for the Barnhills argued that they have allegations that Ghariani
used his own personal companies to loan money to Global Oil at an interest rate to pay his own
personal salary when the company no longer had any cash. He also argued that there were
allegations that Ghariani spent outlandish amounts of money on non-Global Oil business related
travel expenses, which the Barnhills contend could be found in the information requested here.
In opposition, counsel for Global Oil argued that no reimbursement claims or shareholder
derivative suits are a part of this action, therefore, he believed this information was not relevant to
the instant action. He also represented to the Court that the Barnhills were already provided with
copies of all relevant tax returns for the Barnhills and Ghariani for the relevant period, which set
5
forth the salaries and expenses of each of these individuals.
Although the Court indicated that the tax returns would not set out specific reimbursement
request information, Global Oil indicated that the Barnhills already possessed a spreadsheet with
some individual expenses for the relevant period as was defined by the Court.
In response, counsel for the Barnhills indicated that because the tax returns did not include an
itemization on expenses by Ghariani, he wanted to get a copy of the itemization records to compare
it with the tax records. However, the Court sustained Global Oil’s objection of overbreadth because
the request was not limited in time.
Therefore, as a compromise, counsel for the Barnhills agreed to the previously defined
limitation of 2008, as set forth by this Court. As to the specific information, the Court found that
producing additional information as to salaries and data that is included on the tax returns already
produced would be burdensome, therefore, Global Oil only had to supplement their response by
providing expense records from 2008 to the time the Barnhills left the company for Ghariani / R
Raymond only because the records of Guillermo Licona and Ben Gala, two parties who worked for
an independent financing company, are not relevant to this action. As such, Defendants’ request was
granted in part, ordering Global Oil to produce the expense records from 2008 to the time the
Barnhills left the company for Ghariani / R Raymond.
2.
Dividends and Bank Records
The next set of requests the Barnhills seek to compel are those related to the Shareholder
Sinking Fund. These requests are:
Request for Production 11 – to Global Oil; to Global Lyamec, at RFP #1; sought “any
and all records of shareholder dividends issued by Global Oil Tools from 2005 to 2012,”
and Request 13 sought “any and all financial records for the bank account referred to
as the ‘Shareholder Sinking Fund,’ ‘Sinking Fund,’ or ‘Shareholder Fund’ from 2005
to 2012.”
6
Global Oil objected to Requests 11 and 13 on the basis that they seek information not
reasonably calculated to lead to the discovery of admissible evidence and regarding claims already
dismissed, and are overly broad and unduly burdensome. See R. Doc. 231.
During oral argument counsel for the Barnhills indicated that these records are relevant even
if this Court has already dismissed the Barnhills negligent mismanagement claims because the
information may still be relevant to the Barnhills’ defense in establishing that Global Oil was
allegedly in financial decline by acts other than the Barnhills before the alleged theft of business
opportunities. Furthermore, the Barnhills argued that the records may also evidence that Global Oil
was not in a position financially to gain business opportunities that the Barnhills allegedly
misappropriated.
Counsel for the Barnhills also indicated that he believes these records are relevant because
they will help to establish that Ghariani may have been placing Global Oil money into non-corporate
accounts for non-business purposes. Furthermore, counsel for the Barnhills indicated that there was
one transaction in particular, which will be addressed in the second motion below, that was not
properly documented and he wanted these records to help him establish where the money went and
what it was used for.
In opposition, counsel for Global Oil indicates that not only had they already produced some
bank records, but they had already produced other balance sheets to defendants, which is evidenced
by the fact that the Barnhills knew of the existence of the dividend that was issued by Ghairani.
Therefore, it contended that the Barnhills did not need any more information than they were already
given. Counsel for Global Oil also raised the fact that the Barnhills’ request sought information
outside of the previously defined relevancy period, without providing a concrete factual basis.
Upon further questioning, counsel for the Barnhills could not point to any additional facts
7
which substantiated his claim for financial records which date outside of the relevancy period.
Therefore, the Court found that the Defendants’ request seemed more akin to a fishing expedition
than an actual need for the information. As such, Defendants’ request was denied.
3.
Financial Records for Lyamec and Global Libya
Request For Production Numbers 2, 3, and 5 to Global Libya seek production of “all records
of shareholder dividends and cost records incurred by Global Oil Tools from 2005 to 2012;” “any
and all federal tax returns and state tax returns, including all attachments, from 2005 to 2012;” and
“any and all financial statements and bank records, including all attachments, for Lyamec from 2005
to 2012.” See R. Doc. 238, p. 11, citing Requests for Production Nos. 1-3 to Lyamec, Doc. 231-7,
231-8.
In opposition, Global Oil contends that Lyamec and Global Libya are not parties to suit 121507, and although these matters have been consolidated, the Barnhills’ reason for trying to obtain
these records is specious, as they claim these records will “bear directly on Ghariani’s competence
as a director and the credibility of his claim that his other companies are profitable in the millions.”
See Doc. 231-1 at 8. Global Oil contends that this is immaterial however, Ghariani’s claim in an
email years ago that he had other companies which were profitable in the millions has nothing to
do with these suits, as Ghariani did not allege that those companies were Lyamec or Global Libya
and the Barnhills do not claim otherwise. Therefore, Global Oil contends that these documents are
irrelevant to the instant action and have nothing to do with Ghariani’s management, but rather are
merely an attempt of Defendants to conduct “a fishing expedition for financial information related
to Lyamec and Global Libya.” which has nothing to do with Global Oil Tools’ claims or even the
Barnhills’ purported defense that Mr. Ghariani mismanaged Global Oil Tools.
During oral argument, counsel for the Barnhills contended that these claims are predicated on
8
the Barnhills argument that Lyamec is the successor-in-interest to one of two companies, either a
company named “Grifco” or Global Libya. Counsel for the Barnhills also argued that they
propounded discovery requests to Lyamec for them to produce any documents that would
substantiate whether they have assumed this liability. However, Global Oil responded that no such
documents existed.
Furthermore, Global Oil argued that this Court already spoke to the issue of shareholder
dividends relevancy in a prior request. As a result, this request should also be denied on that basis.
As to the financial documents sought in Requests 3 and 5, Global Oil argues that no express
assumption of liability would be found in a tax return or financial document, as they would not show
evidence of a corporate identity transfer.
The Court agreed and held that Request Number 2, 3 and 5, which sought production of
shareholder dividend information and financial documents, and is therefore denied.
C.
Defendants’ Motion to Compel Production of Chase Bank Financial Records
As to Defendants second motion,(R. Doc. 235), they seek an Order from this Court compelling
Global Oil to produce records as Defendants contend that they are relevant to the instant matter
because they support the Barnhills’ defense and bear on the credibility of Global Oil and Riad
Ghariani. See R. Doc. 235. Defendants contend that this information is relevant because they
recently deposed a corporate secretary of Global Oil, Susan Fielding, who gave testimony that
Ghariani divested financial control from the Barnhills by depositing all the funds from an $800,000,
letter of Credit into a Chase Bank account that the Barnhills could not access. Id. at 1. As a result,
Defendants contend that Ghariani took control of the day to day operations, also allegedly issued
false invoices in order to receive a greater advance of the letter of credit and then misappropriated
the excess funds for his own benefit. Id. Therefore Defendants seek an Order from this Court
9
compelling production of these account documents from Global Oil.
In opposition, Global Oil contends that Defendants believe that a Chase Bank account,
involving an Order from Sunline Petroleum Services, Ltd. is relevant to their defenses in the instant
action based on the testimony of Global Oil’s secretary, Ms. Fielding. Global Oil contends that Ms.
Fielding testified that Global Oil director, Riad Ghariani, divested financial control from the
Barnhills by depositing all the funds from the Sunline transaction into a Chase bank account which
the Barnhills could not access. She also testified allegedly, that Ghariani used his control over those
funds to dictate how Global’s day-to-day business should be run. See R. Doc. 237, p. 2.
However, Global Oil contends that these claims are no longer relevant to the instant action as
Judge Barbier dismissed the Defendants’ claims based upon the allegations related to the Sunline
transaction, as he indicated that “these claims would be derivative claims, and as non-shareholders
the Barnhills have no standing to complain about mismanagement of Global Oil Tools.” Id. citing
R. Docs. 193 and 172. Therefore, Global Oil contends that because the claims related to the Sunline
transaction have been dismissed from this action, they have not sufficiently explained why they need
the actual bank account records related to the Sunline transaction. Id. at p. 3. Lastly, Global Oil
contends that Defendants’ Motion actually demonstrates that they have all the information they need
related to the Sunline transaction, and therefore their motion should be denied.
After considering the arguments of the parties, the Court concluded that the deposition
testimony already acknowledged that this account was not controlled by the Barnhills. Therefore,
the Court finds that the Chase Bank account transaction records are not relevant. As such, the
defendants’ request is denied.
IV. Conclusion
IT IS ORDERED that Defendants’ Motion to Compel Production of Documents (R. Doc.
10
231) is GRANTED IN PART and DENIED IN PART.
IT IS GRANTED as to Request for Production Number 10 in part, as to Global Oil
supplementing their response by providing expense records from 2008 to the time the Barnhills left
the company for Ghariani / R Raymond.
IT IS DENIED as to Defendants’ Request for Production Numbers 11 and 13 to Global Oil;
Request for Production Number 1 to Lyamec; Request For Production Numbers 2, 3, and 5 to Global
Libya; Request for Production Number 9 to Global Oil and Request for Production Number 3 to
Global Libya.
IT IS FURTHER ORDERED that Defendants’ Motion to Compel Production of Chase
Bank Financial Records (R. Doc. 235) is DENIED.
New Orleans, Louisiana, this 23rd day of April 2014
KAREN WELLS ROBY
UNITED STATES MAGISTRATE JUDGE
11
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?