Ross v. Brigade Leveraged Capital Structure Fund , LTD
Filing
26
ORDER denying 1 Motion to Quash. IT IS ORDERED that Ross's motion to quash her deposition subpeona 1 is DENIED. Signed by Judge Susan P. Watters on 8/5/2014. (EMH, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
FILED
AUG 0 5 201'
Clerk, U S District Court
District Of Montana
CHERYL ROSS,,
Billings
CV 14-95-BLG-SPW
Plaintiff,
ORDER DENYING MOTION
TO QUASH DEPOSITION
SUBPOENA
vs.
BRIGADE LEVERAGED CAPITAL
STRUCTURES FUND, LTD.,
Defendant.
Plaintiff Cheryl Ross ("Ross") filed this action seeking the Court's Order
quashing a deposition subpoena served upon her. (Doc. 1). Alternatively, she seeks
a protective order. (Id). Ross also requested a hearing on her motion. (Id.). After
reviewing the parties' memorandums, the Court has determined that a hearing is not
necessary. For the reasons set forth below, the Court denies Ross's motion.
I.
BACKGROUND 1
Ross's deposition subpoena is part of bankruptcy proceedings in the United
States Bankruptcy Court for the Southern District of Florida. The bankruptcy
1
The Court derived the background information from the parties' filings and
related exhibits respecting the instant motion. (Docs. 1, 2, 12, and 24).
1
proceedings resulted from the financial collapse of the Fontainebleau Resort and
Casino ("the Fontainebleau Project") in Las Vegas, Nevada, a failed project
resulting in debt obligations of approximately $1.8 billion. Defendant Brigade
Leveraged Capital Structures Fund, Ltd. ("Brigade") and other creditors in the
bankruptcy proceedings (collectively "Term Lenders") issued the deposition
subpoena as part of the bankruptcy proceedings.
The Term Lenders also are plaintiffs in a related lawsuit pending in Nevada
state court ("Nevada state court action"). In that action, the Term Lenders are suing,
among others, the general contractor for the Fontainebleau Project - Tumberry
West Construction ("TWC"). The Term Lenders are seeking to recover
approximately $1 billion in damages for alleged false certifications made by TWC
and others in connection with monthly loan disbursement requests and through an
allegedly fraudulent set of books kept by TWC and others that hid from the Term
Lenders the true progress, scope, and cost of the Fontainebleau Project. Ross was a
TWC employee involved with creation and maintenance of the allegedly fraudulent
books at issue in the Nevada state court action.
The Term Lenders seek Ross's deposition testimony in connection with a
recently-filed motion by the Trustee in the bankruptcy action. The Trustee seeks
approval of a settlement with director and officer defendants in the bankruptcy
adversary proceedings. The Trustee also seeks entry of a so-called "Bar Order" as a
2
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condition to the settlement. A Bar Order would bar the Term Lenders from
pursuing their claims in the Nevada state court action against the bankruptcy
proceedings director and officer defendants.
The bankruptcy court has scheduled an evidentiary hearing on the Bar Order
motion for September 11 and 12, 2014, and has given the parties until August 22,
2014, to conduct discovery. The bankruptcy court, at the hearing, will attempt "to
determine whether an exception to the prohibition of the Bar Order against the
Term Lenders' truly independent claims is equitable and justified." In re:
Fontainebleau Las Vegas Holdings, LLC, et al., 09-21481-BKC-AJC (Bankr. S.D.
Fla. July 11, 2014) (Doc. 2-7 at 9). To make this determination, the bankruptcy
court likely will have to determine, among other things, whether claims in the
Nevada state court action are "viable" and, thus, whether a Bar Order should issue.
The Term Lenders seek Ross's testimony as part of their discovery in preparation
for the evidentiary hearing.
Respecting the matter before this Court, Brigade served the deposition
subpoena on Ross July 11, 2014. (Doc. 1 at 1). Ross filed her motion to quash on
July 17, 2014. (Id.) Brigade filed its opposition brief on July 24, 2014, and also
filed an unopposed motion to expedite briefing and resolution ofRoss's motion to
quash. (Doc. 11 ).
Magistrate Judge Ostby, to whom this case was originally assigned, held a
3
telephonic status conference with counsel on July 25, 2014. Judge Ostby then
issued an Order setting a July 31, 2014 deadline for Ross to file her reply brief.
(Doc. 17). On July 28, 2014, this case was reassigned to the undersigned. On July
31, 2014, Ross filed her reply brief. (Doc. 24 ).
II.
SUMMARY OF PARTIES' ARGUMENTS
Ross argues that the Court should quash her deposition subpoena for two
principle reasons. First, Ross argues that she has no information relevant to the
bankruptcy court's inquiry into whether that matter's settlement is fair and
equitable. (Doc. 2 at 5-6, 10-13). She argues that: (1) the individuals for whom
she worked and to whom she reported at TWC already have been deposed in this
and other related litigation in other courts rendering her testimony unnecessary, (id.
at 3); (2) she "has no knowledge concerning the viability of the claims in the
Nevada" state court action, id. at 5; and (3) she is "a mid-level former employee
[who] cannot bind the company ... and hasn't worked for TWC since April 2009[,]"
(id. at 6).
The second principle reason Ross seeks to have her deposition subpoena
quashed is that being deposed would unduly burden her. (Id.) at 5-8. She argues
that: (1) being deposed "places a burden on her and her family[,]" (id. at 5); (2) she
"should not be forced to miss more time from her employment in Montana or be
oppressed by the natural and inherent stress associated with being deposed[,]"
4
especially since she does not have any relevant information, (id. at 6); and (3) she
"has labored under the threat of subpoena and depositions long enough[ ]" and
"must be protected from the undue burdens and harassing effect that a deposition
invariably takes on a witness and her family[,]" (id.)
In response, Brigade first argues that Ross "has personal, first-hand
knowledge" of matters "directly relevant to an expedited motion to approve a
settlement recently filed by the Trustee in the Fontainebleau bankruptcy." (Doc. 12
at 2, 15-18). Brigade argues that: ( 1) Ross is a percipient witness to alleged fraud
by TWC and the project developer, Fontainebleau Resorts, LLC ("FBR"), (id. at 3);
(2) Ross "was the contract administration manager for TWC who created and
oversaw the two sets of books on the Project, one she called the 'real' books (that
were shared only among the defendants) and the other she called the 'bank' books
(that were provided to the lenders and understated by hundreds of millions of
dollars the anticipated costs to complete the Project)[,]" (id. at 3-4); (3) Ross's
testimony is relevant to the bankruptcy court's determination of whether the Term
Lenders' claims in the Nevada state court action are "viable," which determination
will affect whether the bankruptcy court issues a Bar Order that would preclude the
Term Lenders' claims in the Nevada state court action, (id. at 4-5); and (4) the fact
that other people may also have knowledge or have already been deposed does not
insulate Ross from providing her testimony because her "views of how the Term
5
Lenders should conduct their discovery do not govern[,]" and her testimony will not
be superfluous in the absence of a stipulation of liability by defendants in the
Nevada state court action, (id. at 17-18).
Second, Brigade argues that Ross will not be unduly burdened by a one-day
deposition. (Id. at 18). Brigade notes that Ross contends that a deposition will
cause her to miss two days of work - one for the 7-hour deposition and one to
prepare for the deposition with her counsel. Because she already met with her
counsel to prepare for a later-cancelled deposition in the Nevada state court action,
Brigade argues, "her preparation time might well be shortened." (Id.) Also,
Brigade maintains, it is "willing to reschedule Ms. Ross's deposition at a time
convenient for her [consistent with the bankruptcy court's scheduling order],
including on a weekend or other day she is not working." (Id.) Finally, Brigade
notes that Ross cited no authority supporting her assertion that she will "be
oppressed by the natural and inherent stress associated with being deposed[ ] " and
maintains that if such stress "were a basis to quash a subpoena, few would survive."
(Id. at 18-19).
In her reply brief, Ross argues that the Term Lenders have premised their
opposition to Ross's motion to quash "primarily on the testimony of their attorney,
Kirk Dillman." (Doc. 24 at 2-10). Ross argues that Dillman's Declaration filed in
support of the Term Lenders' opposition is factually unsupported and procedurally
6
defective, and that the exhibits to the opposition do not support the Term Lenders'
arguments. Thus, Ross argues, Court should not consider any of them. (Id.) Ross
also argues that because the Term Lenders already have the deposition transcripts of
TWC principals and of directors and officers ofFBR, they do not need Ross's
testimony because it would be unnecessarily redundant. (Id. at 10-12). Finally,
Ross argues that the Term Lenders' offer to depose Ross on a day that she does not
work would still cause her undue burden because, even with this accommodation,
she would have to give up a weekend or other non-work day. (Id. at 12).
III.
LEGAL STANDARD
"[P]re-trial discovery is ordinarily 'accorded a broad and liberal treatment."'
Hickman v. Taylor, 329 U.S. 495, 507 (1947); see also Shoen v. Shoen, 5 F.3d
1289, 1292 (9th Cir. 1993). "Parties may obtain discovery regarding any
nonprivileged matter that is relevant to any party's claim or defense .... For good
cause, the court may order discovery of any matter relevant to the subject matter
involved in the action. Relevant information need not be admissible at the trial if
the discovery appears reasonably calculated to lead to the discovery of admissible
evidence." Fed. R. Civ. P. 26(b)(l). The broad right to discovery embodied in this
Rule "is based on the general principle that litigants have a right to every man's
evidence, and wide access to relevant facts serves the integrity and fairness of the
judicial process by promoting the search for the truth." Shoen v. Shoen, 5 F.3d
7
1289, 1292 (9th Cir. 1993) (quoting U.S. v. Bryan, 339 U.S. 323, 331 (1950))
(internal quotation marks omitted).
Under Rule 45(a)(l)(B), 2 a party may serve a subpoena upon a non-party,
commanding the non-party to attend a deposition. "[T]he scope of discovery
through subpoena is the same as that applicable to Rule 34 and other discovery
rules." Rule 45 Advisory Committee Notes, 1970 Amendment. The non-party
receiving the subpoena, however, may file a motion to quash or modify the
subpoena. Rule 45(d)(3). The rule provides, in relevant part, as follows:
(3) Quashing or Modifying a Subpoena.
(A)
When Required. On timely motion, the court for the district
where compliance is required must 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);
(iii)
requires disclosure of privileged or other protected matter,
if no exception or waiver applies; or
(iv)
subjects a person to undue burden.
Rule 45(d)(3).
Respecting whether the subpoena inflicts undue burden upon its recipient,
2
References to rules are to the Federal Rules of Civil Procedure unless
otherwise noted.
8
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"non-party status is a significant factor to be considered .... " Whitlow v. Martin,
263 F.R.D. 507, 512 (C.D. Ill. 2009). In Schaafv. SmithKline Beecham Corp., the
court explained that "in the context of evaluating subpoenas issued to third parties, a
court 'will give extra consideration to the objections of a non-party, non-fact
witness in weighing burdensomeness versus relevance.'" 233 F.R.D. 451, 453
(E.D. N.C. 2005) (citation omitted).
"Although irrelevance is not among the litany of enumerated reasons for
quashing a subpoena found in Rule 45, courts have incorporated relevance as a
factor when determining motions to quash a subpoena." Moon v. SCP Pool Corp.,
232 F.R.D. 633, 637 (C.D. Cal. 2005) (citing Goodyear Tire & Rubber Co. v. Kirk's
Tire & Auto Servicenter, 211 F.R.D. 658, 662 (D. Kan. 2003)).
The party moving to quash a subpoena bears the burden of persuasion.
Erickson v. Microaire Surgical Instruments, LLC, 2010 WL 1881946 at *2 (W.D.
Wash., May 6, 2010) (citing Moon, 232 F.R.D. at 636-37 (C.D. Cal. 2005)).
Whether to quash or modify a subpoena lies within the district court's wide
discretion. See, e.g., Jeff D. v. Otter, 643 F.3d 278, 289 (9th Cir. 2011) (noting that
"a district court has wide discretion in controlling discovery.") (quoting Little v.
City ofSeattle, 863 F.2d 681, 685 (9th Cir. 1988)).
IV.
DISCUSSION
As noted, Ross seeks to quash the deposition subpoena arguing only that she
9
has no relevant information and that sitting for a deposition would be unduly
burdensome for her. The Court is not persuaded.
Respecting whether Ross's anticipated testimony falls within Rule 26(b)(l)'s
standard for relevance, the Court concludes that it clearly does. Brigade argues that
Ross likely has first-hand knowledge concerning alleged fraud committed by
defendants in the Nevada state court action. As a TWC employee, she is alleged to
have "authored monthly internal spreadsheets ... that assembled the anticipated costs
to complete the Project TWC was actually building ... [and allegedly] referred to
these internal reports as the 'real' books (that were shared only among the
defendants) as contrasted with the 'bank' books Ms. Ross also kept (that were
provided to the lenders and understated by hundreds of millions of dollars the
anticipated costs to complete the Project)." (Doc. 12-1 at 'II 11). Such information
is clearly relevant to the issue before the bankruptcy court - i.e., whether the Term
Lenders' claims in the Nevada state court action are "viable," which determination
will, in tum, affect whether the bankruptcy court issues a Bar Order that would
preclude the Term Lenders' claims in the Nevada state court action.
Although some ofRoss's anticipated testimony may already be known to or
suspected by Brigade, it is not evident on the current record that it would be so
cumulative or superfluous as to be inadmissible or to warrant an order quashing the
subpoena and precluding the deposition. Rule 26(b )( 1), of course, does not require
10
that relevant information be admissible. Rather, it requires only that the
information sought in discovery appear "reasonably calculated to lead to the
discovery of admissible evidence." Rule 26(b )(1 ). Here, Ross's anticipated
testimony clearly satisfies Rule 26(b )( 1).
Second, respecting whether Ross would be unduly burdened by having her
deposition taken, the Court concludes that she would not. In her brief, Ross
provides some non-specific, conclusory statements that she and her family would be
burdened by the deposition because she "has labored under the threat of subpoena
and depositions long enough[,]" and that she "must be protected from the undue
burdens and harassing effect that a deposition invariably takes on a witness and her
family." (Doc. 2 at 5-6) But Ross has provided no specific evidence or argument
that convinces the Court that being deposed would impose upon her any
unnecessary burden. Although she maintains that a deposition will cause her to
miss two days of work, (Declaration of Cheryl Ross, Doc. 2-6 at 'II 10), Brigade
represents that it is willing to schedule her deposition at a convenient time including on a weekend or other day Ross is not working - provided the setting
complies with the bankruptcy court's scheduling order. Thus, any burden to Ross
could be readily alleviated and, at worst, would be minimal.
Mindful that Ross is not a party to either the bankruptcy action or the Nevada
state court action, the Court has afforded her objections to the subpoena "extra
11
consideration" in weighing burdensomeness against relevance. Schaaf, 233 F.R.D.
at 453. In so doing, the Court, for the reasons already stated, concludes that any
burden to Ross does not outweigh the relevance of her anticipated deposition
testimony. If, as Ross argues, she "has no personal knowledge of these matters"
(Doc. 24 at 2), her deposition is unlikely to be lengthy and any burden is likely to
be slight.
Based on the foregoing, the Court will deny Ross's motion to quash her
deposition subpoena. In addition, for the following reasons, the Court also will
deny Ross's alternative request for a protective order requiring compliance with the
subpoena only in the event that the bankruptcy court denies the motion for a Bar
Order.
A party, like Ross here, who seeks, in the alternative to an order quashing a
deposition subpoena, to limit discovery by requesting a protective order under Rule
26( c) must show a particular and specific need for the order. See Blankenship v.
Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975); see also Foltz v. State Farm Mut.
Auto. Ins. Co., 331 F.3d 1122, 1130 (9th Cir. 2003) ("broad allegations of harm,
unsubstantiated by specific examples or articulated reasoning, do not satisfy the
Rule 26( c) test") (citation omitted); Deford v. Schmid Prods. Co., 120 F .R.D. 648,
653 (D. Md. 1987) (requiring party seeking protective order to provide "specific
demonstrations of fact, supported where possible by affidavits and concrete
12
examples, rather than broad, conclusory allegations of potential harm"). As noted
in the foregoing discussion, Ross's anticipated testimony is directly relevant to the
issue of whether the bankruptcy court should issue the Bar Order. Having to
provide deposition testimony will not be unduly burdensome to Ross. And she has
failed to demonstrate the requisite particular and specific need for the protective
order. See Blankenship, 519 F.2d at 429; Foltz, 331 F.3d at 1130.
V.
CONCLUSION
Based on the foregoing, IT IS ORDERED that Ross's motion to quash her
deposition subpoena (Doc. 1) is DENIED.
DATED this
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United States District Judge
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