DTE Electric Company et al v. Toshiba American Energy Systems Corporation et al

Filing 93

ORDER granting 77 Motion to Compel Deposition; Granting in part and holding Remainder in Abeyance Motion to Compel written discovery (ECF No. 78 ); and granting in part 85 Motion to Seal.. Signed by Magistrate Judge Curtis Ivy, Jr. (SKra)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DTE ELECTRIC COMPANY and
CONSUMERS ENERGY
COMPANY,
Plaintiffs/Counter Defendants,
v.
TOSHIBA AMERICAN ENERGY
SYSTEMS CORPORATION and
TOSHIBA CORPORATION,
Defendants/Counter Claimants.
____________________________/

Case No. 22-10847
F. Kay Behm
United States District Judge
Curtis Ivy, Jr.
United States Magistrate Judge

ORDER GRANTING MOTION TO COMPEL DEPOSITION (ECF No. 77);
GRANTING IN PART AND HOLDING REMAINDER IN ABEYANCE
MOTION TO COMPEL WRITTEN DISCOVERY (ECF No. 78); and
GRANTING IN PART MOTION TO SEAL (ECF No. 85)
Plaintiffs DTE Electric Company and Consumers Energy Company sue
Defendants Toshiba American Energy Systems Corporation (“TAES”) and
Toshiba Corporation for breach of a contract to overhaul and upgrade a power
plant in Ludington, Michigan. TAES is a subsidiary of Toshiba; Toshiba
guaranteed TAES’s work on the power plant. Plaintiffs allege that Defendants
delivered defective work and services. (ECF No. 1). In their counterclaim,
Defendants allege that Plaintiffs owe them for completed work and that Plaintiffs
are obstructing Defendants’ completion of the work on the power plant. (ECF No.
17).

On April 19, 2024, Plaintiffs moved to compel a deposition and
supplemental responses to written discovery. (ECF Nos. 77, 78). They also
moved to seal certain documents and portions of their reply brief. (ECF No. 85).
Discovery matters were referred to the undersigned. (ECF No. 36). The Court
held a hearing on these motions on May 30, 2024.
A.

General Discovery Principles
Parties may obtain discovery related to any nonprivileged matter 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. Fed. R. Civ. P. 26.
Information within this scope of discovery need not be admissible in evidence to
be discoverable. Id. “Although a [party] should not be denied access to
information necessary to establish her claim, neither may a [party] be permitted to
‘go fishing,’ and a trial court retains discretion to determine that a discovery
request is too broad and oppressive.” Superior Prod. P’ship v. Gordon Auto Body
Parts Co., 784 F.3d 311, 320-21 (6th Cir. 2015) (citing Surles ex rel. Johnson v.
Greyhound Lines, Inc., 474 F.3d 288, 305 (6th Cir. 2007)). A party seeking

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discovery may move for an order compelling an answer, designation, production,
or inspection. Fed. R. Civ. P. 37.
B.

Motion to Compel Deposition (ECF No. 77)
Plaintiffs move to compel the deposition of Kentaro Takagi, who was

President of Defendant Toshiba America Energy Systems Corporation (“TAES”)
from 2019 to 2022. This period is important because in 2019 Plaintiffs began to
discover defects in some of the work performed by Toshiba. They insist that
deposing Mr. Takagi is necessary because he was at the center of the parties’
discussions about defects; he authored and received correspondence between the
parties and participated in meetings regarding the defective work and
disagreements. (ECF No. 77, PageID.1247). For example, Mr. Takagi emailed
Plaintiffs’ representatives stating that he discussed certain issues with another
high-level TAES officials, and said the company was preparing a corrective action
plan. (ECF No. 77-8, PageID.1293). Plaintiffs contend that Defendants have
identified Mr. Takagi as an important witness because Mr. Takagi is listed on their
lay witness list and identified as a person with knowledge in response to
interrogatories three times. (ECF No. 77, PageID.1248).
Defendants note that, though Mr. Takagi is no longer President of TAES, he
is currently the Chairman and CEO of TAES, as well as TAI and TIC (other
Toshiba entities), so he is still a high-level official at the company. And they
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contend that Mr. Takagi does not have unique, special knowledge of the events
giving rise to his lawsuit. Though his name appears in over a thousand documents,
another high-ranking TAES official, TAES Vice President Scott Torvik, appears
on many thousands more. (ECF No. 82, PageID.1571-72). Plaintiffs deposed Mr.
Torvik for two days in his official capacity and as the company’s 30(b)(6) witness
just days after they filed this motion. Other Toshiba officials who participated in
the meetings listed in Plaintiffs’ motion have also been made available for
deposition. (Id. at PageID.1572). Defendants take issue with Mr. Takagi being
identified as “an important witness.” They insist that although he was named as a
lay witness early in this litigation, they have no intent to call him as a witness at
trial because he had little day-to-day involvement in the overhaul project. (Id. at
PageID.1572-73). Mr. Takagi said as much in his affidavit. (ECF No. 82-2,
PageID.1583). Defendants seek a protective order precluding the deposition
because Mr. Takagi does not have unique knowledge of the issues and because
jumping to the “apex” of the organization without first exhausting other sources is
inappropriate.
Federal Rule of Civil Procedure 26(c) allows the Court to issue protective
orders for good cause shown to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense, including that the
disclosure or discovery not be had, or that the disclosure or discovery be limited to
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certain matters. Fed. R. Civ. P. 26(c). The party seeking a protective order has the
burden of showing that good cause exists for the order. Nix v. Sword, 11 F. App’x
498, 500 (6th Cir. 2001). To show good cause, the movant must articulate specific
facts showing “clearly defined and serious injury resulting from the discovery
sought and cannot rely on conclusory statements.” Id. (citations and internal
quotation marks omitted). This showing must be made even when considering the
deposition of a high-ranking, “apex” official. See Serrano v. Cintas Corp., 699
F.3d 884, 901 (6th Cir. 2012) (“Even in cases where we have considered
extensively a corporate officer’s knowledge and, thus, capacity to provide
information relevant to the case, we have declined to credit a [corporate officer’s]
bald assertion that being deposed would present a substantial burden, and still
required the corporate officer to meet Rule 26(c)(1)’s requirements.”) (quotation
omitted). “[I]n this Circuit, depositions of high-level executives are addressed the
same as any other potential witness: by examining relevance, proportionality, and
(where a protective order is sought), whether there are specific facts showing that
the deposition would lead to a clearly defined and serious injury.” Eight Mile
Style, LLC v. Spotify USA Inc., 2022 WL 20936608, at *6 (M.D. Tenn. Mar. 31,
2022) (citing id.).
Mr. Takagi has relevant knowledge, even if he does not have the most
knowledge or knowledge of day-to-day interactions and decisions. He was the
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President of TAES when Plaintiffs started discussing issues with the work. There
is no authority suggesting that a deponent have day-to-day knowledge or be
included on a certain number of documents or correspondences. As the decisionmaker at TAES, he has enough relevant knowledge to make him a useful deponent.
Plaintiffs stated at the hearing that they have not yet deposed a decision-maker
from TAES. Plaintiffs also explained at the hearing that Mr. Takagi was the gobetween for Toshiba in Japan and TAES in the United States. Toshiba took part in
the issues raised here, so discussion between Mr. Takagi and others could be
relevant.
The next issue to address is whether taking Mr. Takagi’s deposition would
be so burdensome as to lead to a clearly defined and serious injury. Defendants
insist that deposing Mr. Takagi would be “unduly burdensome” because requiring
him to sit for a deposition in Chicago or Detroit would take him away from his
current roles as CEO and Chairman. (ECF No. 82, PageID.1576). First, Plaintiffs
offered to depose him in Houston, where he resides, so travel is no longer a
burden. Second, his losing some work time to prepare for and attend this
deposition is not unduly burdensome, nor is it a clearly defined and serious injury.
“[I]t’s not enough for a high-level executive to merely claim that sitting for a
deposition will be unduly burdensome; rather, the high-level executive must also
specifically show that he or she will suffer ‘one of the harms listed in Rule
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26(c)(1)(a) . . . to warrant a protective order.’” Davis v. SIG Sauer, Inc., 2023 WL
3292869, at *2 (E.D. Ky. May 5, 2023) (quoting Serrano, 699 F.3d at 901).
The parties cite the Court’s holdings in other cases to support or distinguish
from their arguments. Both cases are distinguishable. The Court precluded the
deposition of the Oakland County Sheriff in Overall v. Oakland County, 2022 WL
3511068 (E.D. Mich. Feb. 4, 2022), because the information sought was irrelevant,
it was unlikely the sheriff had personal knowledge of some department matters,
and even on topics the sheriff would have personal knowledge, there was no
attempt to obtain the information elsewhere first. Similarly, in Lyngaas v. Solstice
Benefits, Inc., 2023 WL 6302998 (E.D. Mich. Sept. 27, 2023), the Court precluded
the deposition of the defendant’s CEO because the case was in the early stage of
litigation and the plaintiff had not attempted to gather information from other
sources who may be more familiar with the issues. The information here is
relevant, Mr. Takagi will have relevant personal knowledge to offer, and this case
is in the late stages of the litigation. Thus, neither case supports precluding Mr.
Takagi’s deposition.
The other crucial differences are the issues at stake and the amount in
controversy. It should not come as a surprise that the president of a defendant
corporation would be deposed in a $500 million case. Given the amount in
controversy, the deposition is proportional to the needs of the case. Since
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Defendants have offered no more than the assertion that it would be a burden for
Mr. Takagi to be deposed and that he does not have day-to-day knowledge, the
motion to compel the deposition is GRANTED. The parties must confer on a date
most convenient for all parties for the deposition.
C.

Motion to Compel (ECF No. 78)

Plaintiffs’ motion to compel concerns three groups of discovery requests: (1)
Defendant Toshiba’s actual costs incurred in refurbishing the plant, (2) Toshiba’s
disclosures to third parties during a corporate sale process about its liabilities
and/or this lawsuit, and (3) complete responses to contention interrogatories. At
the hearing, Defendants’ counsel stated that supplemental responses to the
contention interrogatories would be provided at the end of this week. The Court
will hold a ruling on those interrogatories in abeyance. After Plaintiffs review the
responses and confer with Defendants, they will inform the Court whether the
disputes are resolved. If not resolved, the Court will likely schedule a status
conference.
1.

Cost Data – Documents Request No. 49

Plaintiffs seek an itemization of Toshiba’s (encompassing both TAES and
Toshiba Corporation) actual costs incurred in performing its work on the
Ludington power plant. Plaintiffs are seeking damages for the cost of re-doing the
work on the power plant, so they contend that this information is relevant to that
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amount of damages. Toshiba objected to this request. Toshiba argues that actual
costs are irrelevant because they do not make a fact of consequence more or less
probable in this breach of contract case. It insists that how much it cost to perform
the work as far back as 2012 has no bearing on what it might cost Plaintiffs to
perform similar work again. (ECF No. 81, PageID.1535). It notes that the costs to
Toshiba do not inform Plaintiffs’ damages if Plaintiffs did not incur those costs
themselves. (Id. at PageID.1536).
Aside from irrelevance, Toshiba argues that it has already produced
responsive documents by way of invoices received from subcontractors and
detailed summaries of their subcontractor expenses incurred. Toshiba also
produced Project Financial Summaries showing costs incurred broken down by
unit, and further broken down by materials, labor, and subcontractor. (Id. at
PageID.1537). Toshiba asserts that the invoices reflect all the costs incurred in the
project. Plaintiffs insist that the produced “snapshot” reports do not contain the
comprehensive data they are looking for, i.e., an export or report from the relevant
accounting systems reflecting costs categorized according to the work breakdown
structure Toshiba used for the project. (ECF No. 78, PageID.1316).
The actual cost of the project is relevant to damages. Experts could look at
the data, adjust for inflation and other costs, and give an estimate as to how much it
would cost Plaintiffs to fix Defendants’ work, if Defendants are found liable, based
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on how much it cost to do the work in the first instance. The parties strenuously
contested the form of the data. It appears that Defendants have given Plaintiff
piecemeal invoices or other documents, but not a document containing all the
information for the whole project in one place. Defendants’ counsel acknowledged
that Defendants use certain accounting software that keeps such data, but was
unsure as to whether the software could provide a single document with all the
information. Parties are required to produced documents in the manner they are
normally kept but are not required to create new documents in discovery.
Defendants must try to provide the cost data requested through this software, if
such a collection of data exists or is possible in this software. Toshiba need not
create a new document for Plaintiffs. Supplemental production, if any, is due
within 21 days of this Order.
2.

Corporate Sale Documents

Toshiba Corporation conducted a corporate sale process in 2022-2023, in
which third parties were invited to submit proposals to purchase the entire
company. Potential buyers were provided information about Toshiba’s business
and assets and liabilities. Plaintiffs believe that Toshiba likely included
information, including descriptions of defective work and the cost to remedy those
defects, about the issues in this case because of the potential $500 million liability.
(ECF No. 78, PageID.1313, 1317). Plaintiffs issued two documents requests.
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Request No. 37 seeks all documents made available to potential buyers regarding
the project or the lawsuit. In Request No. 38, they sought all communications with
representatives of the potential buyers about the project or the lawsuit.
Toshiba notes that although Plaintiffs referenced Requests Nos. 37 and 38,
they made no argument relevant to No. 38’s request for communications with
potential buyers but it suffers the same defects as Request No. 37. (ECF No. 81,
PageID.1542, n. 5). Toshiba argues that what it may or may not have represented
to potential buyers about the project or this litigation will not make a fact of
consequence more or less probable, and Plaintiffs did not show how such
information is relevant. (Id. at PageID.1542-43). Toshiba contends that the
requests exceed the needs of this case because it requests documents made
available to all potential bidders, not just the company to whom Toshiba was sold
in late 2023. (Id. at PageID.1543).
Plaintiffs insist the information is relevant. For instance, if Toshiba
provided its bidders with assessments of defects or potential defects in its work, or
the amount it would cost to fix the defects, those documents would be relevant.
(ECF No. 78, PageID.1328-27). They also argue that there cannot be any burden
in producing these because these documents would have already been produced to
the potential buyers.

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The Court finds that documents given to and communications with
prospective buyers concerning the issues in this litigation are relevant. For
example, if Toshiba shared its view of its potential liability with buyers, its view is
relevant to the issues. The evidence could also go toward credibility. Toshiba’s
argument that it would be burdensome to produce such documents because
Plaintiffs seek them from all bidders and not just the winning company is not well
taken. Toshiba said it solicited bids from a few companies, not many companies.
Thus, it does not appear that there are an overly voluminous amount of documents
that would need to be produced here.
Toshiba must produce documents in response to requests 37 and 38 within
21 days of this Order. If burden and overbreadth become an issue, the parties
should confer on narrowing the scope of documents. If no agreement is reached,
the parties are directed to contact chambers to schedule a status conference.
D.

Motion to Seal (ECF No. 85)

Plaintiffs moved to file their reply to their motion to compel written
discovery and two of three exhibits under seal. More specifically, they intend to
file redacted copies of an excerpt of a deposition, a document produced by
Toshiba, and a small portion of their reply brief because these items were marked
confidential by Defendants because disclosure “could cause significant harm to
Defendants’ competitive and financial position.” (ECF No. 85, pageID.1606-07).
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The Sixth Circuit has long recognized a “strong presumption in favor of
openness” in court records. Rudd Equip. Co., Inc. v. John Deere Constr. &
Forestry Co., 834 F.3d 589, 593 (6th Cir. 2016) (citing Brown & Williamson
Tobacco Corp. v. FTC, 710 F.2d 1165, 1179 (6th Cir. 1983)). The “heavy” burden
of overcoming that presumption rests with the party seeking to seal the records.
Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., 825 F.3d 299, 305 (6th Cir.
2016). The moving party must show that it will suffer a “clearly defined and
serious injury” if the judicial records are not sealed. Id. at 307. This burden must
be met even if no party objects to the seal, and it requires a “document-bydocument, line-by-line” demonstration that the information in the document meets
the “demanding” requirements for the seal. Id. at 308. In delineating the injury to
be prevented, “specificity is essential.” Id. Typically, “only trade secrets,
information covered by a recognized privilege (such as attorney-client privilege),
and information required by statute to be maintained in confidence (such as the
name of a minor victim of a sexual assault)” are enough to overcome the
presumption of access. Id. Should the Court order a document to be sealed, the
Court must articulate why the interests supporting nondisclosure are compelling,
why the interests supporting public access are not as compelling, and why the
scope of the seal is no broader than necessary. Id. at 306.

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The motion is GRANTED IN PART. At the hearing, Defendants’ counsel
conceded that the deposition transcript excerpts need not be sealed so long as they
are only excerpts of the deposition attached to the reply brief. Since it is only a
small excerpt attached to the reply brief, it will not be sealed. The document (ECF
No. 86-1) will be sealed. The document shows Toshiba’s estimated and budgeted
costs for certain work. The reply brief will not be sealed. The sentences or
portions of sentences that would be sealed reveal information that was discussed
on the record and which does not reveal Toshiba’s business practices or procedures
in a way that would cause harm.
Plaintiffs are directed to file an unsealed version of the reply brief and
deposition excerpt. The document attached to the reply may be filed under seal.
Plaintiffs should accomplish this within 5 days of this Order.
IT IS SO ORDERED.
The parties here may object to and seek review of this Order, but are
required to file any objections within 14 days of service as provided for in Federal
Rule of Civil Procedure 72(a) and Local Rule 72.1(d). A party may not assign as
error any defect in this Order to which timely objection was not made. Fed. R.
Civ. P. 72(a). Any objections are required to specify the part of the Order to which
the party objects and state the basis of the objection. When an objection is filed to
a magistrate judge’s ruling on a non-dispositive motion, the ruling remains in
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effect unless it is stayed by the magistrate judge or a district judge. E.D. Mich.
Local Rule 72.2.

Date: June 3, 2024

s/Curtis Ivy, Jr.
Curtis Ivy, Jr.
United States Magistrate Judge

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