Verso Paper, LLC v. Hireright, Inc.
Filing
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ORDER denying 8 Motion to Review Magistrate Judge Order; denying 9 Motion to Strike. Signed by District Judge Carlton W. Reeves on 6/22/2012. (AC)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
VERSO PAPER, LLC
PLAINTIFF
v.
Cause No. 3:11-MC-628-CWR-LRA
HIRERIGHT, INC.
DEFENDANT
--BANKPLUS
MOVANT
ORDER
Pending before the Court is BankPlus’s objection to the Magistrate Judge’s Order of January
19, 2012. Docket No. 8. The plaintiff has responded in opposition, Docket No. 11, BankPlus has
replied, Docket No. 12, and the matter is ready for review. Also pending is the plaintiff’s motion
to strike, Docket No. 9, which is fully briefed, Docket Nos. 10 and 13. After considering the facts,
arguments, and applicable law, the Court will overrule the objection and deny the motion to strike.
I.
Factual and Procedural History
In 2010, Verso Paper, LLC sued HireRight, Inc. in the United States District Court for the
Central District of California. Docket No. 1, at 1. Verso alleged that HireRight failed to properly
screen a job applicant named Thom Williams, an accountant who had previously pled guilty to
embezzlement in Mississippi state court. Id. at 1-2; see Docket No. 1-1, at 2. This alleged failure
proved costly when Williams was hired and proceeded to embezzle more than $10 million from
Verso. Docket No. 1, at 1-2.
In September 2011, Verso subpoenaed certain records from BankPlus. Id. at 2. Its requests
are reproduced here in their entirety:
Category 1: All documents related to Thom Williams, and any account(s) held in
his name, including, but not limited to the Williams Account, including all
applications, accounts agreements, signature cards, copies of forms of identification,
and any other documents relating to Thom Williams opening any account at
BankPlus, all statements, reports, emails, correspondence, reports, emails, internal
memorandum, or documents related to any and all communications between
BankPlus and Thom Williams, all documents related to ACH transfers, wire
transfers, electronic transfers, deposits, credits, debits, checks, withdrawals, and
other transfers of money into and out of the Williams Account and/or any Thom
Williams account at BankPlus.
Category 2: All documents that evidence the steps BankPlus took to verify that the
information and documentation submitted in connection with the opening of the
Williams Account was true and accurate.
Category 3: All documents relating to BankPlus policies and procedures, including
training manuals, policy manuals, procedure manuals, or other documents, related
to detecting and reporting suspicious activities in customer bank accounts at
BankPlus, including but not limited to all documents relating to all state and federal
laws and regulations applicable to BankPlus regarding detecting and reporting
suspicious activities in customer bank accounts.
Category 4: All documents relating to or reflecting any investigation into Thom
Williams and/or the Williams Account and deposits into that account.
Category 5: All documents, reports, emails or other communications with criminal
or regulatory authorities regarding Thom Williams and/or the Williams Account and
deposits into that account.
Docket No. 1-2, at 2.
BankPlus filed a motion in this Court to quash the subpoena, claiming it was overbroad and
contrary to law. Docket No. 1, at 2-5. Verso’s response explained that the vast majority of the
embezzled funds were transferred to Williams’ personal account at BankPlus, and otherwise
defended the subpoena. Docket No. 4. In rebuttal, BankPlus maintained that it properly moved to
quash at least in part because it did not want to violate Mississippi’s banking confidentiality laws.
Docket No. 5, at 2-3.
The Magistrate Judge held a telephonic hearing on the matter on January 10, 2012, and nine
days later issued an Order granting in part and denying in part the motion. Docket No. 7. Here is
the heart of the ruling:
The statutory authority cited by the parties does not require that the subpoena
be quashed. BankPlus has not shown that any portion of the materials is subject to
a privilege recognized by the federal common law or Mississippi law. Any privacy
rights of Williams were waived when he pled guilty to embezzling these funds. The
primary objection by BankPlus is its concern that Verso is conducting a “fishing
expedition” for information which would support a direct claim against BankPlus for
liability relating to this account. Verso has not denied that the information may be
used for that purpose. Yet BankPlus has cited no authority which would prevent
Verso from acquiring the documents and using them for this purpose, as long as the
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materials may reasonably lead to admissible evidence in the underlying litigation.
The undersigned finds that some of the subpoenaed documents may lead to
the legitimate discovery of admissible evidence in the Hireright case, and no law
authorizes quashing the subpoena. Some of the information sought would only be
tangentially relevant, and the burden on BankPlus outweighs any probative value the
documents might provide. The Court does not know what materials would be a
duplicate production, and BankPlus’s objections to that extent are waived. Any
documents sought which relate to the account at issue shall be produced pursuant to
the subpoena, as Verso should be allowed full access to documents pertaining to its
own stolen money; documents requested that do not relate to the Williams account
shall not be produced.
The undersigned finds that the subpoena shall be quashed only as to Category
No. 3, as this category only applies to BankPlus’s general procedures, unrelated to
the Williams account. The remaining categories relate solely to the Williams
account and shall be produced.
Id. at 4-5.
II.
The Motion to Strike
A.
Background
The Court will first consider Verso’s motion to strike. The Magistrate Judge’s Order notified
the parties that this miscellaneous action would be closed unless an objection was filed on or before
February 6. Id. at 5. BankPlus filed its objection on February 6.
Verso’s motion argues that the objection was untimely because the Magistrate Judge’s docket
entry said that objections were due “2/3/2012.” Docket No. 9. It further contends that Federal Rule
of Civil Procedure 72(a) grants only 14 days for objections to be lodged, which means objections
were due on or before February 2, 2012, regardless of what the Magistrate Judge ordered. Id.
BankPlus agrees that there initially was a discrepancy in the due date, but points out that it
was resolved on January 25, when the Magistrate Judge amended the earlier docket entry and
clarified that objections were due on or before February 6. Docket No. 10 (citing Text Only Order
of Jan. 25, 2012). Its objection was timely, it claims. Id. at 2.
Verso’s reply doubles down on its second argument – that Rule 72(a) prohibited the
Magistrate Judge from extending the period to object, and therefore objections were due on or before
February 2. Docket No. 13.
B.
Discussion
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Verso’s motion will be denied because Rule 72’s 14-day deadline is not jurisdictional.
Douglass v. United Services Auto. Ass’n, 79 F.3d 1415, 1427 (5th Cir. 1996) (en banc) (collecting
cases); see 12 Wright & Miller, Fed. Prac. & Proc. § 3070.1 & n.20 (2d ed. updated Apr. 2012)
(“Even where the rule applies, it is not jurisdictional and the court may choose to consider
arguments not raised in a timely objection.”); Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752,
761 (7th Cir. 2009); Spence v. Superintendent, 219 F.3d 162, 174 (2d Cir. 2000). If the Rule was
jurisdictional, a party’s failure to timely object to a Magistrate Judge’s Report and Recommendation
could never be reviewed. But that is not the case; untimely objections are reviewed for plain error.
Douglass, 79 F.3d at 1428-29.
The Supreme Court recently held that not every rule, “even if important and mandatory,”
should “be given the jurisdictional brand.” Henderson ex rel. Henderson v. Shinseki, 131 S. Ct.
1197, 1203 (2011) (citation omitted). The 14-day rule for objections is likely a claim-processing
rule, because it “seek[s] to promote the orderly progress of litigation by requiring that the parties
take certain procedural steps at certain specified times.” Id. That conclusion is supported by the fact
that an objection from the Order of a Magistrate Judge to a District Judge is not “an appeal from one
court to another court,” but a proceeding within the same court. Id.
In addition, it would be incongruous with the substantive authority granted Magistrate Judges
to deny them the discretion to grant brief extensions of the 14-day deadline. Magistrate and District
Judges are empowered to extend the time for objection and consider late objections. The motion is
denied.
III.
Present Arguments
BankPlus contends that the subpoena is unduly burdensome and therefore violates Rule
45(c)(3)(A)(iv). Docket No. 8. Its main argument is that the subpoena is unlikely to lead to the
discovery of admissible evidence that supports Verso’s precise claims against HireRight. Id. at 1-2.
It asserts it has already produced some of these records in response to an earlier subpoena. Id. &
n.1. BankPlus also claims the subpoena is overbroad: compliance with Category 1 “would require
that BankPlus produce all correspondence directed to or regarding Willliams without regard to
whether or not the correspondence is probative of the issues involved in Verso’s litigation with
HireRight.” Id. at 4. It reurges its same arguments as to Category 5, with the additional contention
that it “is generally prohibited from disclosing communications with law enforcement and regulatory
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authorities.” Id. at 5. Finally, BankPlus asks the Court to bless its research and copying fees, of $50
an hour and $2 per page, respectively. Id. at 6.
In response, Verso argues it is entitled to all documents showing “how Williams withdrew,
distributed or spent the money after stealing it,” which are “exclusively in the possession of
BankPlus.” Docket No. 11, at 4. The documents relate to its specific claims against HireRight, it
says, because they “refute allegations of Verso’s comparative negligence,” show how Williams’
suspicious activities were discovered, and “substantiate the timing and full extent of” Williams’
transfers. Id. at 4-6. Verso denies that a request about a single account holder is unduly
burdensome. Id. at 5-6. Finally, it claims BankPlus’s arguments regarding law enforcement
privileges are vague, opaque, and unsupported. Id. at 7.
In rebuttal, BankPlus contends that Verso already has or should have all the records it needs
regarding Williams’ transactions. Docket No. 12, at 2. It then provides additional legal support for
its claim that the documents sought are not relevant to the HireRight suit. Id. at 3-4.
IV.
Standard of Review
The parties have not addressed how this Court should review a Magistrate Judge’s Order in
a miscellaneous (“MC”) action that quashes in part a subpoena. The Court concludes that it should
reverse the Order only if it is “clearly erroneous or contrary to law,” because the Order resolved a
“pretrial matter pending before the court.” 28 U.S.C. § 636(b)(1)(A); see Fed. R. Civ. P. 72(a)
(establishing clear error review of “pretrial matter[s] not dispositive of a party’s claim or defense”).
This matter is essentially a discovery dispute, which is considered nondispositive of the
claims in the original litigation. Castillo v. Frank, 70 F.3d 382, 385 (5th Cir. 1995); Safespan
Platform Sys., Inc. v. EZ Access, Inc., No. 06-cv-726-A, 2012 WL 777305, *2 (W.D.N.Y. Mar. 8,
2012) (quoting Thomas E. Hoar v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990)); see Pigott
v. Sanibel Development, LLC, No. 07-0083, 2008 WL 2937804, *3 (S.D. Ala. 2008) (“Rulings on
discovery or on evidence . . . are not dispositive rulings in any sense.”) (collecting cases);
Stayinfront, Inc. v. Tobin, No. 05-4563, 2006 WL 3228033, *1-2 (D.N.J. Nov. 3, 2006) (treating
discovery ruling as nondispositive and reviewing for clear error in case where party sought
discovery from non-party).
“A finding of fact is clearly erroneous only if on the entire evidence, the court is left with
the definite and firm conviction that a mistake has been committed.” Am. Cancer Soc. v. Cook, 675
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F.3d 524, 528 (5th Cir. 2012) (quotation marks and citation omitted). Under the clear error standard,
this Court may not reverse a factual finding because it would have decided the matter differently,
and its function is not to decide factual issues de novo. Anderson v. City of Bessemer City, N.C., 470
U.S. 564, 573-74 (1985).
V.
Discussion
Rule 45 states, in relevant part, that “[o]n timely motion, the issuing court must quash or
modify a subpoena that . . . subjects a person to undue burden.” Fed. R. Civ. P. 45(c)(3)(A)(iv).
The moving party has the burden of proof to demonstrate that compliance with the
subpoena would be unreasonable and oppressive. Whether a burdensome subpoena
is reasonable must be determined according to the facts of the case, such as the
party’s need for the documents and the nature and importance of the litigation. To
determine whether the subpoena presents an undue burden, we consider the
following factors: (1) relevance of the information requested; (2) the need of the
party for the documents; (3) the breadth of the document request; (4) the time period
covered by the request; (5) the particularity with which the party describes the
requested documents; and (6) the burden imposed. Further, if the person to whom
the document request is made is a non-party, the court may also consider the expense
and inconvenience to the non-party. A court may find that a subpoena presents an
undue burden when the subpoena is facially overbroad.
Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 818 (5th Cir. 2004) (quotation marks and
citations omitted); see Williams v. City of Dallas, 178 F.R.D. 103, 109 (N.D. Tex. 1998).
Some of BankPlus’s arguments cannot be considered. For example, the Magistrate Judge
found that BankPlus had not shown which materials would constitute a duplicate production, and
therefore concluded that the argument had been waived. Docket No. 7, at 4. BankPlus cannot
resuscitate a waived argument now, and even if it could, it has not attempted to show which
documents have already been produced. That argument is unavailing.
Along similar lines, BankPlus’s objection to the Magistrate Judge’s Order specifically
invoked the bank examination privilege, the government deliberative privilege, and the law
enforcement privilege. Docket No. 8, at 5. But those privileges were not raised in its original
motion to quash, which instead spoke of its own attorney client and work-product privileges, and
then asserted without explanation that it was “prohibited by law from disclosing” government or
regulatory investigations. Docket No. 1, at 4.
It is not enough to assert that the “law” authorizes or prohibits a certain action; a party has
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to explain why and provide citations to relevant authorities. See de la O v. Hous. Auth. of City of
El Paso, Tex., 417 F.3d 495, 501 (5th Cir. 2005) (“perfunctory and conclusional assertions[s]” do
not suffice because “Judges are not like pigs, hunting for truffles buried in briefs”) (citation omitted).
Complete briefing is especially important when the party asserting the “law” has the burden of
proof. And it is one reason why the Local Rules require most motions to be filed with a
memorandum brief containing supporting authorities, which BankPlus did not provide with its
original motion to quash. See L.U. Civ. R. 7(b)(4) (“At the time the motion is served, other than
motions or applications that may be heard ex parte or those involving necessitous or urgent matters,
counsel for movant must file a memorandum brief in support of the motion.”).
Here, because the specific privileges were not briefed before the Magistrate Judge, they
cannot be considered now. See Keelan v. Majesco Software, Inc., 407 F.3d 332, 339 (5th Cir. 2005).
If the confidentiality of certain documents remains a concern, the parties should secure those
documents by use of a protective order.
What remains is to consider the factors of the Wiwa test. The documents sought by Verso
are relevant and important: they describe how approximately $10 million was stolen, show where
the funds went after they left BankPlus, and are reasonably calculated to lead to the discovery of
admissible evidence in the HireRight trial. While the subpoena is broad in that it seeks everything
about Williams and his account(s), it is also somewhat limited in that it seeks information about only
one account holder. It is not clear how much time or effort it will take BankPlus – a non-party, the
Court recognizes – to comply with the subpoena; it has not submitted a cost or time estimate to the
Court. But that deficiency weighs against BankPlus, since it had the burden to prove an undue
burden. To the extent BankPlus is burdened, it may seek reimbursement from Verso for reasonable
expenses for staff time and copying charges.1
For these reasons, BankPlus has failed to prove that the Magistrate Judge clearly erred when
she determined that Categories 1, 2, 4, and 5 of Verso’s subpoena did not constitute an undue
burden.
VI.
Conclusion
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On that note, BankPlus’s proposed $2 per page copying charge is unreasonable. To the extent anything
must be photocopied in our digital era, the Court finds that $0.25 per page is a reasonable charge.
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BankPlus’s objection is overruled and Verso’s motion to strike is denied. BankPlus shall
respond to Categories 1, 2, 4, and 5 of the subpoena.
SO ORDERED, this the 22nd day of June, 2012.
s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE
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