First American Bankcard, Inc. v. Smart Business Technology, Inc. et al

Filing 154

ORDER AND REASONS GRANTING IN SUBSTANTIAL PART AND DENYING IN LIMITED PART 136 Motion to Compel as set forth in document. IT IS ORDERED that, if plaintiff seeks such an award, it must file a new motion no later than June 16, 2017, supported by the affidavit of its counsel and in the manner required by Local Rule 54.2, to fix the amount of such an award. Signed by Magistrate Judge Joseph C. Wilkinson, Jr on 5/24/2017. (my)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
FIRST AMERICAN BANKCARD, INC.

CIVIL ACTION

VERSUS

NO. 15-638

SMART BUSINESS
TECHNOLOGY, INC. ET AL.

SECTION “N” (2)

ORDER AND REASONS ON MOTION
This is an action asserting various state law claims pending in this court under the
court’s diversity of citizenship jurisdiction. Plaintiff, First American Bankcard, Inc., seeks
damages, alleging that defendants provided it with deficient and defective services relating
to the design, manufacture and hosting of software products for use by plaintiff in
processing cash advance and check cashing at casinos.
Plaintiff filed a Motion to Compel Discovery and for Reasonable Expenses against
one of the defendants, Smart Business Technology, Inc. Record Doc. No. 136. The motion
seeks additional responses to plaintiff’s Interrogatories Nos. 6, 8, 10, 13, 14 and 15 and
Requests for Production Nos. 3, 6, 7, 36, 37, 42 and 43. Defendant filed a timely
opposition memorandum, Record Doc. No. 145, and plaintiff was permitted to reply.
Record Doc. No. 152. Having considered the motion papers, the record and the applicable
law, IT IS ORDERED that the motion is GRANTED IN SUBSTANTIAL PART AND
DENIED IN LIMITED PART.
The motion is granted as to Interrogatories Nos. 6, 8, 10 and 15, and all objections
are overruled, subject to the limitation contained herein. Specifically, defendant has

offered nothing sufficient to support or establish its objections on grounds of
disproportionality and undue burden and expense outweighing the likely benefit of this
highly relevant discovery. The amendment to Fed. R. Civ. P. 26(b)(1) that incorporated
the proportionality component into the threshold definition of the scope of discovery
does not place on the party seeking discovery the burden of addressing all
proportionality considerations. Nor is the change intended to permit the
opposing party to refuse discovery simply by making a boilerplate objection
that it is not proportional. The parties and the court have a collective
responsibility to consider the proportionality of all discovery and consider it
in resolving discovery disputes. . . . A party requesting discovery, for
example, may have little information about the burden or expense of
responding. A party requested to provide discovery may have little
information about the importance of the discovery in resolving the issues. .
. . A party claiming undue burden or expense ordinarily has far better
information – perhaps the only information – with respect to that part of the
determination.
Federal Civil Judicial Procedure and Rules at p. 150 (quoting Advisory Committee Notes
to the 2015 Amendments to the Federal Rule of Civil Procedure) (Thomson Reuters 2017)
(emphasis added). In this instance, defendant has offered nothing more than a boilerplate
proportionality objection, without providing any information concerning burden or expense
that the court would expect to be within defendant’s own knowledge.
IT IS ORDERED, however, in the exercise of the court’s responsibility to consider
the proportionality of all discovery, that the time period as to which Interrogatories Nos. 6
and 15 must be answered is limited to the time period alleged in the complaint as the period
of the business relationship between the parties, June 8, 2009 to the date when plaintiff

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“elected to permanently end its relationship” with defendant.

Record Doc. No. 1

(Complaint) at ¶¶ 18, 33.
The motion is granted as to Interrogatories Nos. 13 and 14. All objections are
overruled. The limited responsive information provided in response to these interrogatories
is deficient. Again, defendant has offered nothing more than a boilerplate proportionality
objection, without providing any information concerning burden or expense that the court
would expect to be within defendant’s own knowledge. In addition, the vague reference
to “responsive Documents” that defendant says it will produce fails to comply with the
specificity requirements of Fed. R. Civ. P. 33(d)(1). Defendant must answer these
interrogatories by providing all responsive information within its corporate knowledge.
In addition, I note that the copy of interrogatory answers provided to me in
connection with this motion does not include the verification of interrogatory answers,
sworn under oath, required by Fed. R. Civ. P. 33(b)(1)(B), (3) and (5). The required
verification must be provided.
As to the disputed requests for production, the motion is granted as to Requests for
Production Nos. 3, 6, 7, 36, 37 and 42. The objections are overruled because they are
absurd in this context. A discovery ruling is interlocutory and non-dispositive. The
requested materials are clearly relevant and within the scope of discovery. The fact that
they are ordered produced for discovery purposes in no way pretermits the court’s
resolution of the ultimate, dispositive issues defendant objects are “disputed.” Almost all
claims or defenses as to which discovery is sought are disputed. A protective order
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sufficient to address defendant’s concerns about the use to which these materials may be
put is already in place, Record Doc. No. 139, and these materials may be produced subject
to that protective order, if appropriate. Defendant must provide new written responses to
each request clearly stating, without objection, either that all responsive materials in its
possession, custody or control are being produced or that it has no responsive materials in
its possession, custody or control.
For the first time in its opposition memorandum, though not in its Rule 34(b) written
responses and/or objections to these requests, defendant argues that it “does not have
possession of the requested data” because it “is no longer a going concern” and, upon its
business demise, the materials “remained in the hands of [its] former owners and top
officers, co-defendants Fuente and Romero.” Record Doc. No. 145 at p. 4 (emphasis
added). This argument is unpersuasive for two reasons.
First, because defendant did not assert this argument in its Rule 34(b) written
responses, the objection has been waived. See Poulos v. Naas Foods, Inc., 959 F.2d 69, 74
(7th Cir. 1992) (party “waived any objection to production by failing to object when
disclosure was due”); Marx v. Kelly, Hart & Hallman, P.C., 929 F.2d 8, 10, 12-13 (1st Cir.
1991) (objections to requests for production were waived by failure to make timely
objections); McLeod, Alexander, Powell & Apffel v. Quarles, 894 F.2d 1482, 1484 (5th
Cir. 1990) (vague objections lacking in specificity held invalid); In re United States, 864
F.2d 1153, 1156 (5th Cir. 1989) (“[A]s a general rule, when a party fails to object timely
to interrogatories, production requests, or other discovery efforts, objections thereto are
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waived.”); accord Autotech Techs. Ltd. P’ship v. Automationdirect.Com, Inc., 236 F.R.D.
396, 398 (N.D. Ill. 2006); Brown-Stahlman v. Charter Trust Co., No. 04-CV-322-SM, 2006
WL 680874, at *1 (D.N.H. Mar. 16, 2006); Banks v. Office of Senate Sgt.-at-Arms, 222
F.R.D. 7, 21 (D.D.C. 2004).
Second, a party’s obligation to produce materials in the Rule 34 production and
inspection process extends beyond mere possession. Defendant’s obligation is to produce
such materials or electronically stored information (“ESI”) that are within its possession,
custody or control. Fed. R. Civ. P 34(a)(1).
Rule 34's definition of possession, custody, or control, includes more
than actual possession or control of [documents]; it also contemplates a
party’s legal right or practical ability to obtain [documents] from a [nonparty] to the action. Moreover, [a] party must make a reasonable search of
all sources reasonably likely to contain responsive documents. The term “all
sources” includes plaintiff’s attorney, expert, insurance company, accountant,
spouse, agent, etc. Typically, what must be shown to establish control over
documents in the possession of a non-party is that there is a relationship,
either because of some affiliation, employment or statute, such that a party
is able to command release of certain documents by the non-party person or
entity in actual possession.
Duarte v. St. Paul Fire & Marine Ins. Co., No. EP-14-CV-305-KC, 2015 WL 7709433,
at *5 (W.D. Tex. Sept. 25, 2015) (quotations omitted) (citing S. Filter Media, LLC v.
Halter, No. 13-116-JJB-RLB, 2014 WL 4278788, at *5 (M.D. La. Aug. 29, 2014); Luv N’
Care Ltd. v. Groupo Rimar, No. 14-2491, 2015 WL 3756308, at *2 (W.D. La. June 15,
2015); White v. State Farm Mut. Auto. Ins. Co., No. 09-000991-BAJ-DLD, 2011 WL
3423388, at *2 & n.3 (M.D. La. Aug. 4, 2011)).

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“The concept of ‘control’ . . . is often highly fact-specific, [but certainly includes
when] the party to whom the request is made has the legal right to obtain the document,
even though in fact it has no copy.” 8B C. Wright, A. Miller, M. Kane, R. Marcus and A.
Steinman, Federal Practice & Procedure § 2210 (3d ed.) (avail. on Westlaw) (hereafter
“Wright & Miller”) (citing U.S. Int’l Trade Comm’n v. ASAT, Inc., 411 F.3d 245 (D.C.
Cir. 2005); Searock v. Stripling, 736 F.2d 650, 653 (11th Cir. 1984); Costa v. Kerzner Int’l
Resorts, Inc., 277 F.R.D. 468 (S.D. Fla. 2011); Colon v. Blades, 268 F.R.D. 129 (D.P.R.
2010); In re NTL, Inc. Secs. Litig., 244 F.R.D. 179 (S.D.N.Y. 2007); Mt. Hawley Ins. Co.
v. Felman Prod., Inc., 269 F.R.D. 609 (S.D. W. Va. 2010)) (emphasis added). Factors to
consider in determining whether a party has “control” of materials include “whether the
litigant . . . could secure materials from [a] nonparty corporation to meet its own business
needs, and whether, by virtue of stock ownership or otherwise, one . . . effectively controls
the other.” Id. text at n.8. “[Under some circumstances courts interpret the control concept
to go beyond whether the litigant has a legal right to obtain materials and focus on practical
ability to obtain them.” Id. text at n.12 (emphasis added).
Because a corporation or other business entity may act only through the persons
connected with it, possession, custody or control includes that exercised by the party’s
employees, agents and managers. As “former owners and top officers” of defendant,
Fuente and Romero are precisely the kinds of individuals who owe an obligation to their
ex-corporate employer to provide the requested materials upon request and from whom the
corporate defendant would be expected to have a practical ability to obtain them. Counsel
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for defendant points out that the same materials have recently been requested from codefendants Fuente and Romero. It appears, however, that responses from them are not yet
due. One way or the other, the requested materials must be produced to plaintiff. To avoid
duplication and cumulation, IT IS ORDERED that counsel for all defendants must confer
immediately upon receipt of this order and coordinate their production of these materials,
if they exist, since their former close relationship establishes that, among them, they have
possession, custody or control.
The motion is denied, at least at this time, as to Request for Production No. 43,
which requests broad-ranging forensic imaging of defendant’s “computer/server” systems.
Unlike the discovery that is the subject of the interrogatories and requests for production
addressed above, neither the relevance nor the proportionality of the forensic imaging
sought by this request are readily apparent to the court. Neither party has provided
anything more than the conclusory statements of its counsel in the way of useful
information needed to conduct a meaningful proportionality analysis that would prompt me
to compel the forensic imaging sought in Request No. 43.
Forensic imaging of defendant’s computers is within the scope of ESI discovery
contemplated by Fed. R. Civ. P. 34(a)(1)(A). At the same time, however, such requests are
also subject to the proportionality limitations applicable to all discovery. The Official
Advisory Committee Notes to the 2006 Amendments to Rule 34 relating to electronic
discovery of the type sought in Request No. 43 caution: “The addition of [computer]
testing and sampling to Rule 34(a) with regard to . . . electronically stored information is
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not meant to create a routine right of direct access to a party’s electronic information
system, although such access might be justified in some circumstances. Courts should
guard against undue intrusiveness resulting from inspecting or testing such systems.”
Advisory Committee Notes to 2006 Amendments, quoted in Federal Civil Judicial
Procedure and Rules at p. 171 (Westlaw Pamph. 2017 ed.).
Thus, while forensic computer imaging is “not uncommon in the course of civil
discovery, . . . ‘[c]ourts have been cautious in requiring the mirror imaging of computers
where the request is extremely broad in nature and the connection between the computers
and the claims in the lawsuit are unduly vague or unsubstantiated in nature.’” John B. v.
Goetz, 531 F.3d 448, 459-60 (6th Cir. 2008) (quoting Balboa Threadworks, Inc. v. Stucky,
No. 05-1157-JTM-DWB, 2006 WL 763668, at *3 (D. Kan. Mar. 24, 2006)) (citations
omitted). “[C]ompelled forensic imaging is not appropriate in all cases, and courts must
consider the significant interests implicated by forensic imaging before ordering such
procedures . . . .” Id. at 460.
The remainder of the discovery compelled by this order appears proportionally
sufficient to plaintiff’s needs at this time, without exceeding the proportionality limit by
ordering the broad requested forensic imaging. If the production required by this order and
further developments prove otherwise, plaintiff may refile its motion as to Request No. 43,
but only after counsel for both sides confer in detail between themselves and with their
technical advisers and develop evidence-based information concerning importance, access,

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burden, costs, etc., sufficient to establish whether the requested forensic imaging is
proportionally appropriate.
IT IS ORDERED that all interrogatory answers, including the required verification;
and written responses to requests for production, together with actual production of all
responsive materials, must be provided by defendant to plaintiff no later than June 16,
2017.
The motion is granted insofar as it seeks an award of attorney’s fees and costs
incurred in connection with this motion, but only in part. Fed. R. Civ. P. 37(a)(5)(C)
provides: “If the motion is granted in part and denied in part, the court may . . . , after
giving an opportunity to be heard, apportion the reasonable expenses for the motion.”
(Emphasis added). This motion has been granted in substantial part and denied in limited
part. Accordingly, an award of reasonable fees and costs will be made, but only insofar as
an appropriate portion of the total amount relates to the portion of this motion that was
granted, if plaintiff can establish those fees and costs. IT IS ORDERED that, if plaintiff
seeks such an award, it must file a new motion no later than June 16, 2017, supported by
the affidavit of its counsel and in the manner required by Local Rule 54.2, to fix the amount
of such an award.

24th
New Orleans, Louisiana, this _________ day of May, 2017.

JOSEPH C. WILKINSON, JR.
UNITED STATES MAGISTRATE JUDGE
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