Rasby et al v. Pillen
ORDER granting Deborah Rasby's Motion to Compel 77 , except the discovery sought shall be limited to the period ending December 31, 2013. James D. Pillen shall have until November 1, 2016, to supplement his discovery responses in accordance with this order. Deborah Rasby may issue a subpoena, consistent with this order, for responsive discovery not produced by him. Ordered by Magistrate Judge Thomas D. Thalken. (TRL)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
JAMES D. PILLEN,
This matter is before the court on Deborah Rasby’s (Rasby) Motion to Compel
(Filing No. 77).
Rasby seeks further answers to interrogatories, production of
documents, and leave to serve subpoenas on non-party accountants to obtain
information about the financial condition of Progressive Swine Technologies, Inc. (PST)
and other companies owned or controlled by James D. Pillen (Pillen). Rasby filed a
brief (Filing No. 79) and an index of evidence (Filing No. 78) in support of the motion.
Pillen filed a brief (Filing No. 83) and an index of evidence (Filing No. 82) opposing
additional discovery. Rasby did not file a reply.
This case arises from the parties’ business relationship, which culminated in an
agreement between them for Pillen to purchase Rasby’s business ownership interest in
associated companies such as PST, a management company for various entities
dealing with pork production including farms, feed mills, and swine genetics. See Filing
No. 5 - Amended Complaint ¶¶ 7-8, 11. PST began operations on January 1, 1994,
when Pillen held a 90% interest and Rasby held the remaining 10%. Id. ¶ 8. Each
party received a salary from 2001 to 2011. Id. ¶ 9. Since 1994 PST paid distributions
to the parties based on their ownership interests, with Rasby receiving approximately
$2,250,471 between the years 2000 through 2011. Id. ¶ 10. Rasby alleges she learned
Pillen was using their company assets to benefit himself and his personal companies to
Id. ¶¶ 12-16.
Rasby states she confronted Pillen with her
information, but he became hostile and refused to discuss it. Id. ¶ 16. In May of 2011,
Rasby decided to retire from PST with the understanding she would still receive monthly
Id. ¶ 17.
After Rasby’s retirement, Pillen increased his salary from
$110,000 to $1,000,000 and stopped making distribution payments. Id. ¶¶ 19-21. On
April 13, 2012, Pillen offered to purchase Rasby’s interest in the companies at less than
market value and warned her he planned to liquidate PST and stop cash distributions
from her other companies. Id. ¶¶ 23-24, 26. Rasby understood if she retained her
business interests she would have substantial tax liability exposure without the income
or distributions to pay it. Id. ¶¶ 22, 24, 27. Rasby alleges Pillen’s agent told her Pillen
“was going to ‘F’ with her” and he threatened to “blow up PST” so she “would be looking
for work again.” Id. ¶ 28. Rasby searched for investors to buy her interest but, due to
Pillen’s actions, investors refused. Id. ¶ 29. Pillen gave Rasby two weeks to agree to
sell to him or he would close PST. Id. ¶ 30. On June 29, 2012, Rasby executed the
Unit Purchase Agreement, selling her interests in the companies to Pillen. Id. ¶ 31.
Based on these facts, Rasby alleges Pillen forced her to enter into the Purchase
Agreement by virtue of his threats and actions, which destroyed her ability to make a
voluntary choice and affected her actions and state of mind. Id. ¶¶ 35-37. In addition to
misrepresentation (Count II), securities fraud (Count III), loss of corporate opportunities
(Count IV), and breach of fiduciary duty (Count V) against Pillen. Id. ¶¶ 35-65.
Pillen generally denies liability on Rasby’s claims. See Filing No. 15 - Answer.
Additionally, Pillen alleges Rasby engaged in “wrongdoings in how [she] accounted for
PST expenses” while working as an accountant. Id. at 10-11. Moreover, Pillen asserts
claims for breach of contract for filing this lawsuit in violation of the express terms of the
Purchase Agreement (First Counterclaim), breach of fiduciary duty (Second
Counterclaim), breach of duty of loyalty (Third Counterclaim), unjust enrichment (Fourth
Counterclaim), fraud (Fifth Counterclaim), conversion (Sixth Counterclaim), and civil
extortion (Seventh Counterclaim). Id. at 13-17. Rasby generally denies liability on
Pillen’s counterclaims. See Filing No. 18.
The parties’ current discovery dispute arose when Rasby requested production of
documents from Pillen and the accounting firm of Kruse, Schumacher & Smejkal
(Kruse). See Filing No. 79 - Brief p. 2. Initially, on March 10, 2016, Rasby served a
notice of her intent to subpoena financial information from Kruse. See Filing No. 50 2
Notice & Ex. 1 Proposed Subpoena. Pillen filed a timely objection. See Filing No. 52 Certificate of Service. Subsequently, the parties agreed Rasby would seek additional
information and documents from Pillen prior to proceeding with the subpoena. See
Filing No. 78 - Vogt Aff. ¶ 5. The parties exchanged requests and responses from June
through August, 2016. See Filing No. 79 - Brief p. 2 (citing correspondence). Counsel
for the parties conferred but were unable to agree on the scope of relevant financial
information responsive to the discovery requests, in the context of Rasby’s claims. See
Rasby argues the discovery sought is relevant to this lawsuit, which is “an action
to set aside a release and obtain the fair value for the interest [she] formerly owned in
business entities in which [Pillen] retains his interest.” See Filing No. 79 - Brief p. 1.
Specifically, Rasby contends the financial information is relevant to “damages for
[Pillen’s] breach of the corporate opportunity doctrine in establishing multiple
businesses in addition to PST . . . which were engaged in businesses related to the
business of PST without offering to [Rasby] and PST the opportunity to participate in
ownership of those businesses.” Id. Therefore, Rasby asserts, this lawsuit, “relates
entirely to the financial condition of PST and other companies owned or controlled by
[Pillen] and [his] actions which divested Ms. Rasby of her interest in those companies.”
Id. at 4. Rasby contends the proposed subpoena seeks records to establish Pillen
“made intentional misrepresentations regarding his plans to furnish money to related
entities and to demonstrate the value of those entities for which Ms. Rasby should have
been given the opportunity for ownership.” Id. Finally, Rasby states Pillen’s expert
witness criticized Rasby’s expert witness for failure to consider certain of this requested
Pillen argues the requests are neither relevant nor proportional to the needs of
the case. See Filing No. 83 - Response p. 3. Pillen contends the requests are overly
broad by virtue of seeking records covering the period after Rasby’s buyout and beyond
those entities she had an interest in, such as Pillen’s personal financial records and the
records of companies with which only he has been affiliated. Id. at 3-4. Pillen suggests
the relevant time period ends on the effective date of the buyout because Rasby alleges
damages suffered based on the difference between the amount of her payout and “the
actual value of her shares on or about June 29, 2012.” Id. at 4 (quoting Filing No. 82 Ex. 3 Plaintiff’s Initial Disclosures p. 6-7). Further, Pillen contends Rasby’s claims are
based on alleged conduct, events, and opportunities occurring prior to January 1, 2012.
Id. at 4-6.
Next, Pillen argues the outside companies about which Rasby seeks
financial information were unrelated to the policies and purposes of PST and Rasby’s
other business interests, even though they were managed by PST, and thus do not bear
on the corporate opportunity claims. Id. at 6-7. Finally, Pillen attempts to shield his own
personal financial information from discovery because Rasby alleges claims associated
with the financial condition of PST. Id. at 8.
“Broad discovery is an important tool for the litigant, and so ‘[r]elevant information
need not be admissible at the trial if the discovery appears reasonably calculated to
lead to the discovery of admissible evidence.’”
WWP, Inc. v. Wounded Warriors
Family Support, Inc., 628 F.3d 1032, 1039 (8th Cir. 2011) (alteration in original)
(quoting Fed. R. Civ. P. 26(b)(1)).
The federal rules provide for broad, but not
Parties may obtain discovery regarding any nonprivileged
matter that is 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
Fed. R. Civ. P. 26(b)(1). Accordingly, relevant information includes “any matter that
bears on, or that reasonably could lead to other matter that could bear on, any issue
that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340,
351 (1978); see Fed. R. Civ. P. 26(c)(1). Mere speculation that information might be
useful will not suffice; litigants seeking to compel discovery must describe with a
reasonable degree of specificity the information they hope to obtain and its importance
to their case. See Cervantes v. Time, Inc., 464 F.2d 986, 994 (8th Cir. 1972). Once
the requesting party meets the threshold relevance burden, generally “[a]ll discovery
requests are a burden on the party who must respond thereto. Unless the task of
producing or answering is unusual, undue or extraordinary, the general rule requires the
entity answering or producing the documents to bear that burden.” Continental Ill.
Nat’l Bank & Trust Co. of Chicago v. Caton, 136 F.R.D. 682, 684-85 (D. Kan. 1991)
(citation omitted). The court has authority to limit the scope of discovery. Roberts v.
Shawnee Mission Ford, Inc., 352 F.3d 358, 361 (8th Cir. 2003).
Rasby has met her burden of demonstrating the relevance of the discovery
sought. The requests and proposed subpoenas seek information bearing on her claims
about the value of PST and Pillen’s conduct with respect to PST. Rasby’s allegations
also encompass the value and financial information from Pillen and companies he
owned or controlled.
Pillen’s arguments about the precise relative importance or
connection of the outside companies to PST and Rasby or the merits of Rasby’s claims
need not be resolved at this stage. Rasby has shown the requested information bears
on her claims and are appropriate even when considering the pertinent factors
indicative of the proportional needs of the case. Nevertheless, Rasby fails to sustain
her burden for the time period listed in the requests as “through the present.” However,
a reasonable period of time would incorporate the period shortly after her buyout.
Accordingly, the court finds the requests should be limited to two years after her buyout,
which is the period ending December 31, 2013. For these reasons, Rasby’s motion will
be granted in part. Upon consideration,
IT IS ORDERED:
Deborah Rasby’s Motion to Compel (Filing No. 77) is granted, except the
discovery sought shall be limited to the period ending December 31, 2013.
James D. Pillen shall have until November 1, 2016, to supplement his
discovery responses in accordance with this order.
Deborah Rasby may issue a
subpoena, consistent with this order, for responsive discovery not produced by him.
Dated this 17th day of October, 2016.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge
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