COR Clearing, LLC v. Calissio Resources Group, Inc. et al

Filing 230

ORDER granting in part and denying in part #199 Plaintiff's Motion to Compel as stated herein. Ordered by Senior Judge Lyle E. Strom. (JAB)

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEBRASKA
COR CLEARING, LLC, a Delaware )
limited liability company,
)
)
Plaintiff,
)
)
v.
)
)
CALISSIO RESOURCES GROUP,
)
INC., a Nevada corporation,
)
ADAM CARTER, an individual,
)
SIGNATURE STOCK TRANSFER,
)
INC, A Texas corporation; and )
DOES 1-50,
)
)
Defendants.
)
______________________________)

8:15CV317

MEMORANDUM AND ORDER

This matter is before the Court on the motion of the
plaintiff, COR Clearing, LLC, to compel discovery responses
(Filing No. 199).

The matter has been fully briefed.

Nos. 200, 201, 215, 216, and 223.

See Filing

After review of the motion,

the parties’ briefs and accompanying indexes of evidence, and the
relevant law, the Court finds as follows.
BACKGROUND
On August 26, 2015, COR Clearing LLC (“COR” or
“plaintiff”) filed its first complaint against Calissio Resources
Group, Inc. (“Calissio”), Adam Carter (“Carter”), Signature Stock
Transfer, Inc. (“Signature”), and Does 1-50 (Filing No. 1).
Plaintiff’s complaint alleged three causes of action including:
(1) a request for declaratory judgment; (2) unjust enrichment;

and (3) fraud.

See id. at 9-13.

The complaint alleged that

defendants “calculated [a] scheme to defraud the marketplace and
the clearing system in order to obtain millions of dollars from
unsuspecting market participants by exploiting a weakness in the
dividend payment system of the third-party Depositary [sic] Trust
Clearing Corporation (“DTCC”).”

(Id. at 1).

On November 10, 2015, following a hearing, the Court
denied COR’s expedited motion (Filing No. 20) for the appointment
of a limited purpose receiver (Filing No. 80).

On December 8,

2015, the Court denied Signature’s motion (Filing No. 29) to
dismiss (Filing No. 85).

On April 21, 2016, the Court granted

plaintiff’s application (Filing No. 108) for default judgment
against Calissio Resources Group, Inc. (Filing No. 109).

On May

23, 2016, the Court granted plaintiff’s motion (Filing No. 94) to
compel TD Ameritrade Clearing, Inc. (“TDAC”) “to produce
documents and things responsive to [plaintiff’s] subpoena served
on or about December 4, 2015.”

(Filing No. 116).

On August 2, 2016, the Court granted plaintiff leave to
file an amended complaint (Filing No. 122).

The amended

complaint (Filing No. 123) added four brokerage defendants,
namely, National Financial Services, LLC (“NFS”), TDAC, E-Trade
Clearing, LLC (“E-Trade”), and Scottrade, Inc. (“Scottrade”)
(collectively the “Clearing Firm Defendants”).
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On December 9,

2016, the Court denied the Clearing Firm Defendants’ joint motion
(Filing No. 137) to dismiss the amended complaint (Filing No.
160).

On January 25, 2017, COR sought and was granted leave to

again amend its complaint (Filing Nos. 171 and 174).1

On January

30, 2017, COR filed its Second Amended Complaint (Filing No.
175).

On February 10, 2017, NFS filed its answer (Filing No.

181).

On February 13, 2017, defendants TDAC and Scottrade filed

their respective answers (Filing Nos. 183 and 184).

On February

15, 2017, E-Trade filed its answer (Filing No. 186).
On March 6, 2017, the Court issued its Third Amended
Final Progression Order (Filing No. 193). On April 3, 2017,
Signature brought a motion to compel COR’s production of 43
different requests for production (Filing No. 194).

On June 2,

2017, the Court denied Signature’s motion to compel (Filing No.
228).

On April 14, 2017, COR brought the instant motion seeking

to compel certain discovery responses (Filing No. 199).
LAW
Federal Rule of Civil Procedure 26(b)(1) allows
[p]arties [to] 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

1

COR’s motion to amend was unopposed.
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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. Information
within this scope of discovery need
not be admissible in evidence to be
discoverable.
Fed. R. Civ. P. 26(b)(1).

The United States Supreme Court has

held that discovery under Rule 26 should be “construed broadly to
encompass 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, 98 S. Ct. 2380, 57 L. Ed. 2d 253 (1978).

However, this

broad interpretation and liberal application of the rule does not
provide unlimited discovery.

Oppenheimer, 437 U.S. at 351; see

also Hickman v. Taylor, 329 U.S. 495, 507, 67 S. Ct. 385, 91 L.
Ed. 451 (1947) (stating “discovery, like all matters of
procedure, has ultimate and necessary boundaries.”).
Initially “[t]he party seeking discovery must satisfy
some threshold showing of relevancy before discovery is
required.”

Lubrication Technologies, Inc. v. Lee’s Oil Service,

LLC, Civil No. 11-2226 (DSD/LIB), 2012 WL 1633259, at *2 (D.
Minn. April 10, 2012) (internal citation omitted).

However,

“[o]nce that threshold has been met, the resisting party ‘must
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show specifically how . . . each . . . [request for production]
is not relevant or how [the discovery] is overly broad,
burdensome, or oppressive.’”

Lubrication Technologies, 2012 WL

1633259, at *2 (quoting St. Paul Reinsurance Co., Ltd. v.
Commercial Financial Corp., 198 F.R.D. 508, 512 (N.D. Iowa 2000))
(alterations in original).
“Determinations of relevance in discovery rulings are
left to the sound discretion of the trial court . . . .”

Hayden

v. Bracy, 744 F.2d 1338, 1342 (8th Cir. 1984) (internal citations
omitted).

District courts may limit “the scope of discovery

after balancing a number of interests.”

Slate v. American

Broadcasting Companies, Inc., 802 F. Supp. 2d 22, 26 (D.D.C.
2011) (citing In re Sealed Case (Medical Records), 381 F.3d 1205,
1215 (D.C. Cir. 2004) (additional citations and quotations
omitted)).
DISCUSSION
COR seeks an order compelling the Clearing Firm
Defendants “to designate a 30(b)(6) witness to testify as to
certain topics and to produce documents . . . .”
at 1).

(Filing No. 199

Specifically, COR seeks to compel Rule 30(b)(6)

deposition testimony on deposition topics 2, 18, 41, and 42
(Filing No. 200).

In addition, COR seeks to compel the

production of documents to Requests for Production (“RFP”) 10-11
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(First Set), 2, 9 (as to NFS and E-Trade only), 25, and 26
(Second Set), and 15 and 18 (First Set) (Id.).

The Court will

discuss each in turn.
A. Deposition Topic No. 2 and RFP Nos. 10-11 (First Set) and
RFP No. 2 (Second Set)
The deposition topic COR seeks in Topic No. 2 asks for:
[t]he manner in which [the Clearing
Firm Defendants] are compensated
for the services [they] provide to
[their] customers, including, but
not limited to, per trade revenues,
account maintenance-related
revenues, revenues relating to
float, revenues relating to margin
loans and any other such revenue or
fee. By way of example, this
[t]opic would include the average
revenue per customer for the abovelisted categories. For purposes of
this [t]opic, the relevant time
period is June 1, 2015 through the
present.

(Filing No. 200 at 3).
Along with Topic No. 2, COR seeks RFP Nos. 10-11 (First
Set) and RFP No. 2 (Second Set) (Id. at 3-5).

RFP No. 10 asks

for “[d]ocuments and [c]ommunications sufficient to show [the
Clearing Firm Defendants’] policies and guidelines regarding
float revenue.”

(Id. at 4).

RFP No. 11 asks for “[d]ocuments

and [c]ommunications sufficient to show any money received by
[the Clearing Firm Defendants] from any customer whose account
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was credited with any money related to any Calissio Dividend or
any money received by [the Clearing Firm Defendants] as a result
of services you provided to any such customer.”

(Id.).

RFP No.

2 (Second Set) seeks “[a]ll [d]ocuments relating to the manner in
which [the Clearing Firm Defendants] are compensated for the
services [they] provide customers, including, but not limited to,
per trade revenues, account maintenance-related revenues,
revenues relating to float, revenues relating to margin loans,
and any other such revenue or fee.”

(Id.).

COR contends that each of the foregoing discovery
requests is relevant to COR’s claims and the Clearing Firm
Defendants’ defenses (Id.).

Specifically, COR argues that these

discovery requests seek to discover ways the Clearing Firm
Defendants
may have been enriched via their
receipt of the funds and decision
to transfer those funds to
customers who had no entitlement
thereto, including the compensation
the [Clearing Firm Defendants]
received for the services they
provided to such customers, float
revenue . . . received on the
principal sums . . . and any use of
due bill payments to satisfy
customers’ debts . . . .
(Id. at 5).
The Clearing Firm Defendants object to these requests
as being overly broad, unduly burdensome, and irrelevant to the
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claims and defenses of the case (Filing No. 215 at 4).

They

claim COR’s requests seek “a vast amount of proprietary
information about the Clearing Firm Defendants’ businesses in
general.”

(Id. at 5) (footnotes omitted) (emphasis in original).

In addition, the Clearing Firm Defendants contend that RFP No. 11
“seeks . . . personal financial information of thousands of
customers . . . notwithstanding that the Clearing Firm Defendants
have already produced customer account information relating to
the Calissio dividend.”

(Id.).

The Court finds that plaintiff has sufficiently
established its threshold showing of relevancy as required under
Rule 26(b)(1).

The Court further finds that the Clearing Firm

Defendants have failed to sufficiently show why the foregoing
discovery sought by COR is overly broad, unduly burdensome and/or
irrelevant.

The Court will, therefore, grant COR’s motion to

compel with respect to deposition Topic No. 2, RFP Nos. 10-11
(First Set), and RFP No. 2 (Second Set).
B. Deposition Topic No. 18 and RFP No. 9 (Second Set) -NFS
and E-Trade only
The deposition topic COR seeks in Topic No. 18 asks for
information regarding the “handling of any fraudulent or
allegedly fraudulent dividends” from January 1, 2014, to the
present (Filing No. 200 at 5).

In connection with Topic No. 18,
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COR seeks RFP No. 9 (Second Set) (Id.).

This RFP seeks “[a]ll

[d]ocuments regarding [NFS’s and E-Trade’s] previous handling of
any fraudulent or allegedly fraudulent dividends or due bills.”
(Id.).
COR argues these discovery requests are “not only
relevant to the reasonableness of the actions the [Clearing Firm]
Defendants took with respect to Calissio’s fraudulent due bill
scheme, but may also reflect on the [Clearing Firm] Defendants’
ability to take action so as to prevent the consummation of fraud
. . . .”

(Id. at 6).

In addition, COR’s brief in support of its

motion to compel provides that an agreement with TDAC and
Scottrade was reached with respect to this discovery dispute “by
narrowing this request to any fraudulent or allegedly fraudulent
dividends that had been brought to the attention of TDAC’s or
Scottrade’s in-house legal departments.”

(Id.).

NFS and E-Trade object to these discovery requests as
unduly burdensome and irrelevant to the claims and defenses in
this litigation (Filing No. 215 at 7).

NFS and E-Trade also

claim that RFP No. 9 (Second Set) is “vague, overly broad and
outside the time period relevant to this action and would require
. . . a search involving numerous custodians . . . [and with
respect to the documents sought,] would be enormously expensive
and time-consuming.”

(Id. at 7-8) (internal citations omitted).
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NFS and E-Trade further argue that COR has failed to explain how
the reasonableness of NFS’s and E-Trade’s actions “bears upon its
claims for unjust enrichment and conversion” or how “prior
‘handling of fraudulent or allegedly fraudulent due bills’ could
even be[] analogized to the facts of this case.”

(Id. at 8)

(citing Filing No. 200 at 4).
The Court finds that COR has sufficiently satisfied its
initial relevancy burden.

However, the Court also finds that NFS

and E-Trade have shown that the scope of COR’s requests with
respect to Topic No. 18 and RFP 9 (Second Set) as requested,
should be narrowed.

Therefore, in accordance with its discretion

provided by Rule 26(b)(1), the Court will narrow this request in
the same way that was done by COR, TDAC, and Scottrade.
Deposition Topic No. 18 and RFP 9 (Second Set) will only apply to
any fraudulent or allegedly fraudulent dividends that have been
brought to the attention of NFS’s and E-Trade’s in-house legal
departments during the time period from January 1, 2014, to the
present.

The Court will thus grant COR’s motion to compel with

this narrowing modification.

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C. Deposition Topic No. 41 and RFP No. 25 (Second Set)
Deposition Topic No. 41 seeks “[t]he costs associated
with creating, building, or maintaining, customer goodwill,
including costs associated with marketing, costs to acquire
customer (including per/customer acquisition costs), and other
such information” from June 1, 2015, to the present (Id. at 6).
RFP No. 25 (Second Set) seeks “[a]ll [d]ocuments relating to”
deposition Topic No. 41 (Id.).

The Court finds that even if COR

has satisfied its initial relevancy burden under Rule 26(b)(1),
this discovery request should be denied.

The Clearing Firm

Defendants have satisfied their burden and shown these discovery
requests to be too vague and too broad.

Therefore, the Court

will deny COR’s motion with respect to deposition Topic No. 41
and RFP No. 25 (Second Set).
D. Deposition Topic No. 42 and RFP No. 26 (Second Set)
Similar to deposition Topic No. 41, Topic No. 42 seeks
to determine
[t]he impact on [the Clearing Firm
Defendants’] customer acquisition,
retention, and maintenance costs,
or the impact on the efficacy of
[the Clearing Firm Defendants’]
customer acquisition, retention,
maintenance efforts from: (i)
collection of debts of . . .
customers . . . (ii) the payment of
unearned windfall funds to . . .
customers; (iii) the success of
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. . . customers in earning positive
returns on capital; (iv) negative
publicity; (v) customer complaints
. . . . [From] June 1, 2015 to the
present.
(Id. at 8).

RFP No. 26 (Second Set) seeks “[a]ll [d]ocuments”

relating to deposition Topic No. 42 (Id.).
Like the discovery requests discussed above in section
C, the Court finds that even if COR has satisfied its initial
relevancy burden under Rule 26(b)(1), this request should be
denied.

The Clearing Firm Defendants have satisfied their burden

and shown these discovery requests to be too vague and too broad.
Therefore, the Court will deny COR’s motion with respect to
deposition Topic No. 42 and RFP No. 26 (Second Set).
E. RFP Nos. 15 and 18 (First Set)
RFP No. 15 (First Set) seeks
[a]ll [d]ocuments and
[c]ommunications sufficient to show
instances in which [the Clearing
Firm Defendants] have reversed due
bill credits . . . from 2011present, including, but not limited
to, documents sufficient to show
the reasons for the reversal, the
authority on which [the Clearing
Firm Defendants] relied on to make
such a reversal, and the outcome of
the reversal.
(Id. at 9).

RFP No. 18 (First Set) seeks “[a]ny and all

[c]ommunications with the DTCC regarding any reversal of a

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payment or transaction from 2011-present, including but not
limited to, the Calissio Dividend.”

(Id.).

COR contends these RFP are “relevant to establishing
that the [Clearing Firm Defendants] had the authority and ability
to reverse the due bill credits and that they have taken such
corrective actions in the past.”

(Id.).

However, the Clearing

Firm Defendants oppose these RFP as being overly broad, unduly
burdensome, and irrelevant (Filing No. 215 at 12).

The Clearing

Firm Defendants specifically argue that because COR “has not
alleged and cannot allege any process, regulatory or judicial,
directing the Clearing Firm Defendants to take corrective
actions,” these requests seek information about responses to “the
normal course to a court order or regulatory directive that never
occurred here.”

(Id. at 13) (emphasis in original) (internal

marks and cite omitted).
Plaintiff has sufficiently established its threshold
showing of relevancy as required under Rule 26(b)(1).

The

Clearing Firm Defendants have failed to sufficiently show why the
foregoing discovery sought by COR is overly broad, unduly
burdensome and/or irrelevant.

The Court will, therefore, grant

COR’s motion to compel with respect to RFP Nos. 15 and 18 (First
Set).

Accordingly,

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IT IS ORDERED:
1) Plaintiff’s motion to compel is granted in part and
denied in part.
2) Plaintiff’s motion to compel is granted as to
deposition Topic No. 2 and RFP Nos. 10-11 (First Set) and RFP No.
2 (Second Set).
3) Plaintiff’s motion to compel is granted but modified
as to deposition Topic No. 18 and RFP No. 9 (Second Set) as to
NFS and E-Trade in accordance with this memorandum opinion.
4) Plaintiff’s motion to compel is denied as to
deposition Topic No. 41 and RFP No. 25 (Second Set).
5) Plaintiff’s motion to compel is denied as to
deposition Topic No. 42 and RFP No. 26 (Second Set).
6) Plaintiff’s motion to compel is granted as to RFP
Nos. 15 and 18 (First Set).
DATED this 9th day of June, 2017.
BY THE COURT:
/s/ Lyle E. Strom
____________________________
LYLE E. STROM, Senior Judge
United States District Court

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