JIANGMEN KINWAI FURNITURE DECORATION CO. LTD v. IHFC PROPERTIES, LLC et al
Filing
141
MEMORANDUM OPINION and ORDER signed by JUDGE CATHERINE C. EAGLES on 8/31/2015. For these reasons and the reasons stated in open court on August 6, 2015, it is ORDERED that Kinwai's motion to lift stay and vacate protective order, (Doc. 83 ), is DENIED. It is further ORDERED that the motion for protective order and to quash subpoenas filed by IHFC and the subpoenaed entities, (Doc. 85 ), is GRANTED. IHFC and the subpoenaed entities are entitled to recover reasonable expenses, which the Court will consider pursuant to the schedule established in open court on August 6, 2015. (Butler, Carol)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
JIANGMEN KINWAI FURNITURE
DECORATION CO. LTD,
Plaintiff,
v.
IHFC PROPERTIES, LLC, et al.,
Defendants.
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1:14-CV-689
MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
This is a dispute over who breached a lease of showroom space used at the High
Point Furniture Market. Well into the discovery period, the plaintiff-tenant, through
counsel Venus Springs, initiated a series of discovery procedures seeking to obtain
voluminous materials and information about entities that own or are affiliated with the
defendant-landlord. The landlord and other subpoenaed entities have shown that the
discovery is not likely to lead to admissible evidence, harassing, overbroad, and unduly
burdensome. The tenant has shown no justification for the discovery. At the conclusion
of a hearing on these motions, the Court issued protective orders and required the tenant
to pay reasonable costs and expenses. This Order memorializes that decision.
I.
BACKGROUND
The plaintiff, Jiangmen Kinwai Furniture Decoration Co. Ltd, (“Kinwai”), sued
the defendants IHFC Properties, LLC, and Zuo Modern Contemporary, Inc., in August
2014, alleging that it entered into a valid lease with IHFC for showroom space and that
IHFC breached the lease by moving Kinwai to a different location within the building, by
constructively evicting Kinwai from the leased space, and by breaching the duty of good
faith and fair dealing arising out of the lease. (See Doc. 1 at ¶¶ 7-13, 51-71.) Kinwai
further alleged that Zuo sought to have Kinwai removed from the leased space so it could
move in and thereby tortiously interfered with Kinwai’s contract relationships with IHFC.
(See Doc. 1 at ¶¶ 20-23, 35-37, 78-82; see also Doc. 37 at 3.) Finally, Kinwai alleged
that IHFC and Zuo violated North Carolina’s Unfair and Deceptive Trade Practices Act
and committed civil conspiracy. (Doc. 1 at ¶¶ 72-77, 83-85.)
The basic facts are undisputed and have been known to all parties since before the
litigation began. Kinwai leased space in the International Home Furnishings Center
(“IHF Center”) from IHFC, the owner of the building. (Doc. 1 at ¶ 7; Doc. 23 at ¶ 7.) In
the late summer of 2014, IHFC notified Kinwai that it would be moving Kinwai’s space
from the fifth floor of the IHF Center to the seventh floor of that building, pursuant to a
relocation clause in the parties’ lease. (Doc. 1 at ¶¶ 11, 15, 26-27; Doc. 23 at ¶¶ 11, 15,
26-27.) Kinwai objected to the relocation, contending that the new space was not
“equivalent” to the old space as required by the relocation clause. (Doc. 1 at ¶¶ 27-28,
38-39; see also Doc. 4 at 1-2.) IHFC eventually moved Kinwai’s personal property out
of the fifth floor space. (Doc. 1 at ¶¶ 41-43; Doc 23 at ¶ 43.) Zuo moved into the fifth
floor space and exhibited there during the October 2014 market. (See Doc. 37 at 3.)
2
Kinwai did not participate in the October 2014 market. (See Doc. 35 at ¶ 6; Doc.
37 at 3.) It rented space from an entity unaffiliated with IHFC for the April 2015 market
and exhibited there. (See Doc. 35 at ¶ 12; Doc. 37 at 4; Doc. 37-1 at ¶¶ 10-11.)
The lease itself identifies Kinwai as the tenant and IHFC as the landlord. (Doc. 11 at 1.) IHFC has admitted that it signed the lease and has never denied the terms of the
lease or that it is a party to the lease. (See, e.g., Doc. 23 at ¶¶ 7-8, 26-27.) In fact, IHFC
has relied on the language of the lease to defend the case from the very beginning, (e.g.,
Doc. 6 at 1-3), and has brought counterclaims against Kinwai based on the lease. (Doc.
31 at 9-14.)
The identities of the persons acting on behalf of IHFC have been known since the
beginning of the case. Kinwai’s representative communicated with Richard Krapfel, the
leasing agent for IHFC, and Thomas Mitchell, the president of Home Furnishings, before
filing suit, (see Doc. 16-3 at ¶ 7; Doc. 6-1 at ¶¶ 1-3, 7; Doc. 4-6 at 1), and the relocation
letter came from Mr. Krapfel’s boss, Julie Messner. (Doc. 4-3; Doc. 6-1 at ¶ 3.) Sharon
Cumberbatch filed an affidavit in support of IHFC’s opposition to Kinwai’s motion for a
temporary restraining order within days of the filing of the lawsuit. (Doc. 6-3.) Both
IHFC and Kinwai listed these four people as persons with relevant knowledge in their
initial Rule 26 disclosures.1 (See Doc. 102-17 at 1-2, 9.)
1
IHFC also listed a former employee, Thomas Loney, as having knowledge, (see Doc. 10217 at 2), but Mr. Loney has not been mentioned since in Court filings, so the Court will limit its
discussion to the other four witnesses.
3
IHFC has put forth these persons as acting on its behalf and has never taken any
position that could be construed as a denial that these persons were acting on behalf of
IHFC in connection with its dealings with Kinwai and Zuo. (See, e.g., Docs. 6-1, 6-3;
Doc. 23 at ¶¶ 15, 24; Doc. 72-2 at 4-5, 8-11.) Kinwai has known that these persons were
connected with an entity known has International Market Centers (“IMC”) since at least
August 1; the relocation letter from Ms. Messner was on IMC letterhead, (Doc. 4-3), Ms.
Cumberbatch’s first affidavit stated that she was “Director of Lease Administration for
[IMC], which owns IHFC,” (Doc. 6-3 at ¶ 1), and when Kinwai identified Mr. Krapfel,
Ms. Messner, Ms. Cumberbatch, and Mr. Mitchell as witnesses, it explicitly associated
them with IMC at a Las Vegas address. (Doc. 102-17 at 9.)
II.
THE DISCOVERY AT ISSUE
The discovery at issue consists of, first, a deposition subpoena issued in early May
2015 by Kinwai to the Securities and Exchange Commission, (Doc. 72-1), and, second,
several subpoenas duces tecum issued by Kinwai in late June 2015 to entities associated
with IHFC. (Docs. 85-1 to 85-3.) Kinwai purportedly wanted the SEC to testify about a
legal memorandum IHFC filed in connection with Kinwai’s motion to amend, matters
related to a potential public offering by IHFC’s parent corporation, and other
organizational and financial matters of IHFC parents and affiliates.2 (See Doc. 72-1;
2
The subpoena stated that the topics for the deposition were included in an attachment. (See
Doc. 72-1 at 1, 4-6.) In the copy of the subpoena mailed to IHFC’s counsel, the only document
attached was a copy of a brief filed by IHFC in connection with Kinwai’s motion to amend.
(Compare Doc. 70-1, with Doc. 72-1; see also Doc. 73 at 1.) Kinwai’s counsel, Ms. Springs,
represented to the Court that the subpoena sent to the SEC had more attachments, including a
4
Doc. 72 at 4-6.) Kinwai wants non-parties IMC Manager LLC, International Market
Centers, LP, and IMC OP, LP,3 (Docs. 85-1 to 85-3), to provide 10 categories of
documents covering everything from the purchase or transfer of ownership of any entity
that owns or owned the IHF Center to copies of internal memoranda concerning how the
IHF Center is operated to any information provided to the SEC concerning any property
the entities own in High Point, North Carolina, to a document called the “Stax Survey.”
(See, e.g., Doc. 85-1 at 6.)
IHFC filed a motion for protective order as to the SEC deposition subpoena, (Doc.
70), which, because of the short time frame, the Magistrate Judge granted “to the extent
that the deposition of the SEC shall be stayed until there is further proof from [Kinwai] as
to the relevancy of the deposition testimony which the party seeks.” (Doc. 75.) Soon
thereafter, Kinwai filed the instant motion to lift this stay. (Doc. 83.) IHFC and the
page entitled “Topics of Inquiry.” (See Doc. 72-1 at 4-6.) These topics are significantly broader
than the matters discussed in the brief. See discussion infra. The Court has accepted statements
of counsel as evidence when those statements related to the way discovery has been conducted,
such as dates subpoenas were mailed or received, as counsel are officers of the Court stating
matters within their personal knowledge. To the extent there are conflicts and the matter is
material, the Court has made credibility determinations and finds as stated herein. Beyond these
housekeeping matters, however, the Court does not consider statements of fact in briefs to be
evidence unless they are supported by citation to evidence of record. See L.R. 7.2; see also
Adjabeng v. GlaxoSmithKline, LLC, No. 1:12-CV-568, 2014 WL 459851, at *3 (M.D.N.C. Feb.
5, 2014) (collecting cases holding that counsel’s unsworn statements in briefs are not evidence).
3
For convenience, the Court will refer to these three companies as “IMC” or “the
subpoenaed entities.” The subpoena to IMC Manager, LLC, is found at Doc. 85-1. The
subpoena to IMC OP, LP, is found at Doc. 85-2. The subpoena to International Market Centers,
LP, is found at Doc. 85-3. These subpoenas seek identical categories of information from each
subpoenaed entity. (E.g., Doc. 85-1 at 6.)
5
subpoenaed entities filed a motion for protective order as to the subpoenas duces tecum.
(Doc. 85.)
IHFC contends that the discovery sought by way of the SEC deposition is
overbroad, harassing, unduly burdensome, and not relevant to any claim or defense. (See
Docs. 71, 101.) IHFC and the subpoenaed entities make the same contention as to the
subpoenas duces tecum and also contend that the subpoenas did not comply with various
technical requirements of Rule 45. (See Docs. 85, 86.)
The documents and topics overwhelmingly concern transactions, finances, and
operations of IHFC and various affiliated companies. (E.g., Doc. 85-1 at 6.) Kinwai
contends that this discovery is relevant to its effort to establish whether other entities
affiliated with IHFC might also be liable to Kinwai. (See Doc. 84 at 5-6; Doc. 102 at 811; Doc. 123 at 6-7.) Specifically, Kinwai contends that it is entitled to discovery about
whether Mr. Krapfel and others were acting as employees of or on behalf of other entities
when they decided to and did relocate Kinwai’s showroom space. (See Doc. 102 at 911.) Another document called the “Stax Survey” is included as a separate item in the
subpoenas to IMC, which Kinwai says is relevant to damages. (See Doc. 102 at 16; Doc.
85-1 at 6; see also Doc. 122 at 4-5.)
III.
ANALYSIS
A. Liability of Other Entities
None of the requested documents or deposition topics have even a whiff of
potential relevance to the pending claims, counterclaims, or defenses in this case. Kinwai
6
has never contended that any of the documents have anything to do with the decision by
IHFC to relocate Kinwai or the implementation of that decision, with the specific
showroom spaces at issue, or with Kinwai’s decision to refuse to accept the new space
and to move their showroom to another location. While Kinwai contends in a conclusory
fashion that it needs this information to respond to summary judgment motions and for
trial, (Doc. 102 at 3), it has offered no coherent explanation for this contention. The only
coherent reason proffered by Kinwai is its contention that the documents and the
deposition will help it identify potential tortfeasors. (See Doc. 84 at 6; Doc. 102 at 11.)
IHFC contends that to the extent the discovery seeks information about other
entities that might be responsible for the actions of Mr. Krapfel and others, it cannot lead
to discovery of relevant evidence because by the time Kinwai served the discovery, the
Court had denied Kinwai’s motion to add two IHFC affiliates as defendants and had
denied Kinwai’s motion to reconsider. (See, e.g., Doc. 101 at 4-6.) Kinwai contends that
it is still entitled to determine the identities of the entities that employed Mr. Krapfel and
others and cites two Ninth Circuit cases in support. (See Doc. 84 at 5.)
Those cases, Wakefield v. Thompson, 177 F.3d 1160 (9th Cir. 1999), and Gillespie
v. Civiletti, 629 F.2d 637 (9th Cir. 1980), involved John Doe defendants and are not
exactly on point. See Wakefield, 177 F.3d at 1163; Gillespie, 629 F.2d at 642-43.
Nonetheless, if a person has acted on behalf of or as an agent/employee of an entity and
those acts give rise to possible liability of the principal/employer, then the identity of the
principal has potential relevance. E.g., Gillespie, 629 F.2d at 642-43. The potential is
7
reduced, however, when the Court has denied a motion to add some of the alleged
principals as defendants, (see Doc. 41), but nonetheless the potential relevance remains.
That, however, does not mean that Kinwai is entitled to any discovery it wants
simply by asserting that the information sought is relevant to employment and agency.
The discovery must actually seek that information, and it must seek it in a manner that is
not overbroad and not unduly burdensome or expensive, taking into account, inter alia,
the importance of the discovery in resolving the issues in the case. See Fed. R. Civ. P.
26(b)(2)(C); Nicholas v. Wyndham Int’l, Inc., 373 F.3d 537, 543 (4th Cir. 2004). The
discovery here does neither.
The deposition topics listed for the SEC are not limited to identifying the entities
for which Mr. Krapfel and others worked; they are substantially broader and seek, for
example, “[a]ll communications with the registrant, members of any law firms,
accounting firms, engineering firms, consulting firms, and external auditors concerning
the Public Registration Statement and the organizational structure and management of
IMC, Inc. and any agreements or contracts between or among the related entities that
affect the properties in High Point, North Carolina.” (Doc. 72-1 at 6.) Kinwai has not
explained how communications with law firms, auditors, and others could possibly have
anything to do with identifying for whom Mr. Krapfel and others work.
To the extent the topics do address the agency-principal question, Kinwai has not
explained why it has reason to believe that the SEC would know for whom, in addition to
IHFC, Mr. Krapfel and others might have acted when undertaking the actions at issue
8
here. It is patently ridiculous to think that the SEC would know anything about whether
these four individuals were acting as agents for IHFC or any other affiliated entity when
each took actions in connection with relocation of one tenant from one small showroom4
in the summer and fall of 2014.
Nor do the subpoenas to IMC ask for any documents concerning the employment
or agency of the four individuals. (E.g., Doc. 85-1 at 6.) The two items that might
potentially have some connection to this issue are grossly overbroad as they are not
limited to the relevant time, task, employee, or even to the IHF Center building. (E.g.,
Doc. 85-1 at p. 6 ¶¶ 7, 8.) Such an overbroad request “unfairly places the onus of nonproduction on the recipient of the request and not where it belongs—upon the person who
drafted such a sloppy request.” James Madison Project v. C.I.A., No. 1:08CV1323
(GBL), 2009 WL 2777961, at *4 (E.D. Va. Aug. 31, 2009).
In the subpoenas to IMC, Kinwai also seeks organizational documents, documents
related to transactions between and among entities related to IHFC, and documents
submitted to the SEC in connection with a potential public offering. (E.g., Doc. 85-1 at
6.) These document requests are extraordinarily broad. For example, Kinwai defined the
word “documents” to include all “drafts . . . , amendments, modifications, notes, changes
or side correspondence, and each non-identical copy” and all emails. (Doc. 85-1 at 5.)
The general topics are also very broad. For example, Item 9 asks for “[a]ny
Documents that [y]ou provided to the SEC concerning property in High Point, North
4
The IHF Center has approximately 3.5 million square feet of showroom space. (Doc. 6-1 at
¶ 2.) Kinwai’s showroom space was approximately 5600 square feet. (Id. at ¶ 5.)
9
Carolina that are not currently publicly available to the general public on EDGAR.”
(Doc. 85-1 at p. 6 ¶ 9.) The request is not limited to the building in which Kinwai leased
space, nor is it limited in time. Item 5 asks for any “Documents concerning how the [IHF
Center] . . . is managed, owned or operated.” (Doc. 85-1 at p. 6 ¶ 5.) This request is not
limited in time and would include thousands of emails, discussing scores of other leases
and much confidential information. (See Doc. 85-4 at 11.)
Kinwai similarly requests “[a]ll documents . . . concerning the purchase of any
entity that owns or owned the [IHF Center], including, without limitation, purchase and
sale agreements, stock purchase agreements, assignments of contracts, assignments of
leases and rents, property management agreements, and board resolutions.” (Doc. 85-1 at
p. 6 ¶ 1.) This would cover, among other things, drafts of agreements and any emails or
other correspondence related to such a purchase. (See Doc. 85-1 at 5 (defining
Documents” as, inter alia, “all recorded or retrievable electronic data or communications
such as electronic mail”).) It would also require production of confidential agreements
and related documents in a complex financial transaction involving lenders, investors,
and properties unrelated to the building at issue in this case. (See Doc. 85-4 at 9.)
The identity of the owner of IHFC is a matter of public record, (see Doc. 53), and
it is undisputed that IHFC owns the building in which Kinwai leased showroom space.
(E.g., Doc. 31 at ¶ 5.) Moreover, the only persons affiliated with IHFC that either side
has identified as taking actions connected with the events at issue are Mr. Krapfel, Ms.
Messner, Ms. Cumberbatch, and Mr. Mitchell, each of whom has already testified in
10
various forms, including verifications, affidavits, and depositions, about their
employment. (E.g., Docs. 6-1, 6-3, 35 at 7, 40-6, 66-1.)
Kinwai does not explain why it needs any of these documents, much less this
volume of documents. Indeed, its arguments concerning the need for this information are
conclusory, usually unsupported by citation to the record, all over the lot, and often
incoherent. What it comes down to is Kinwai’s desire to undertake a deep-sea fishing
expedition in the financial and operational records of IHFC and its affiliates.
It may well be that, within the broad categories of documents and deposition
topics, there could be something potentially relevant. That, however, does not justify a
fishing expedition. As well summarized by Magistrate Judge Auld of this Court:
A subpoena imposes an undue burden on a party when a subpoena is
overbroad. A subpoena is overbroad if it does not limit the documents
requested to subject matter relevant to the claims or defenses. For that
reason, courts have frequently concluded that a subpoena for an entire file
constitutes an overbroad request where that file likely contains both
relevant and irrelevant information.
Champion Pro Consulting Grp., Inc. v. Impact Sports Football, LLC, No. 1:12CV27,
2014 WL 6686727, at *4 (M.D.N.C. Nov. 26, 2014) (opinion of Auld, M.J.) (internal
quotation marks and citations omitted). Mr. Krapfel and the three others have provided
information in this case under oath about their employment, and, given the public nature
of the identities of IHFC’s parent entities and the limited relevance that the whole topic
has to the case, the discovery sought is grossly overbroad.
IHFC and the subpoenaed entities have also established that providing the
requested discovery is unduly expensive and burdensome. (See Doc. 86 at 8-10; Doc.
11
122 at 5-7.) As discussed supra, the possibility that a deposition of the SEC would lead
to any potentially relevant evidence is almost nil. It would be unduly burdensome to pay
the cost and expense of traveling to Washington, D.C., for a fishing-expedition deposition
overwhelmingly likely to lead to no potentially relevant evidence. (See Docs. 70, 71.)
Moreover, Kinwai has not attempted to show the Court that written discovery of the SEC,
which the Magistrate Judge specifically found would be less burdensome, (see Doc. 75),
has been unsuccessful. Finally, one of the purposes of the deposition appears to be to ask
questions about communications not on the public record, (e.g., Doc. 72-1 at p. 6 ¶¶ 3-4),
which are certain to contain confidential business information. Such a deposition is
highly likely to lead to disputes over confidentiality.
The subpoenaed entities have filed verified objections to the subpoenas duces
tecum, (see Doc. 85-4), which Kinwai has not challenged with anything other than
conclusory assertions. The subpoenaed entities have established that the subpoenas were
served on the North Carolina registered agents of the subpoenaed entities on June 19,
2015, and required compliance one week later in Charlotte, North Carolina, on June 26,
2015, (Doc. 85-4 at ¶ 4), that the subpoenaed entities maintain their principal places of
business in Nevada, (Doc. 85-4 at ¶ 6), where the subpoenaed documents are located,
(Doc. 85-4 at ¶ 9), that there would be thousands of responsive documents requiring
“countless” hours to retrieve, review for privilege, and organize for production, (see, e.g.,
Doc. 85-4 at 9 (discussing Item 1)), and that many of the documents are confidential.
(Doc. 85-4 at ¶ 23.)
12
It could not be clearer that it would be an undue burden to require these three
Nevada companies to produce in North Carolina thousands of documents related to a
multitude of topics in one week. Even if there was more time, the significant burden
required for production and the resources required to deal with the likely satellite
litigation that would result over questions of confidentiality and privilege are completely
out of proportion to any tangential relevance the documents might have.
B. The Stax Survey
Kinwai contends that the Stax Survey is relevant to its claim for damages because
it concerns the importance of the High Point Furniture Market. (See Doc. 102 at 16; see
also Doc. 122 at 4.) According to Kinwai, it has “significant loss from failure to
participate in a market so crucial to its business” and needs the Stax Survey to defend
against IHFC’s contention that Kinwai’s loss is minimal. (Doc. 102 at 16.)
IHFC admitted that the Furniture Market is important to the market participants.
(See Doc. 1 at ¶ 10; Doc. 23 at ¶ 10.) It is undisputed that the Stax Survey concerns other
properties in addition to the IHF Center and more than 150 market participants, including
properties and participants at a furniture market in Las Vegas, (see Doc. 102 at 16; Doc.
85-4 at 14), and there is no reason to believe it includes information about the value of
any particular leased space, much less the space Kinwai says it was entitled to keep.5
5
IHFC and the subpoenaed entities have provided evidence that the Stax Survey is a “survey
of exhibitors and buyers attending the furniture markets in High Point and Las Vegas which Bain
Capital Partners L.P. . . . commissioned as part of its evaluation of investing in a venture that
acquired various showroom properties in both cities.” (Doc. 85-4 at 14.)
13
Kinwai’s conclusory assertion that “[t]he Stax Survey directly supports Kinwai’s
position,” (Doc. 102 at 16), has no evidentiary support.6 Even if the Stax Survey is
“repeatedly referred to [by] IMC in its public disclosure statement,” (Doc. 102 at 16), a
factual assertion that is also unsupported by specific citation to evidence of record,7 that
does not make it likely to lead to relevant evidence; this case has nothing to do with a
public offering.
IHFC has admitted the fact that Kinwai says it needs the Stax Survey to prove.
The subpoenaed entities have established that the Stax Survey is a confidential business
document with only tangential relevance to the case. Under these circumstances, the
Court will grant the motion for protective order and to quash subpoenas.
C. Other Issues
Kinwai contends that IHFC does not have standing to move to quash the SEC
deposition subpoena or the subpoenas to IMC. (Doc. 84 at 2; Doc. 102 at 3-4.) Like
many of Kinwai’s arguments, this is a red herring.
As to the subpoenas to IMC, Kinwai ignores that the motion for protective order
and to quash subpoenas is filed by the subpoenaed entities themselves, along with IHFC.
6
Kinwai’s “evidence” is a link to a page on the SEC website with what appears to be a blank
document an individual would fill out before using the Stax Survey and merely reflects that the
Stax Survey appears in IMC’s Registration Statement. (See Doc. 102 at 16 n.10.)
7
The Court has no duty to “scour the record” for evidence to support a party’s arguments,
see infra note 9, and it certainly has no duty to wade through thousands of pages on the SEC
website for that purpose.
14
(See Doc. 85 at 1; Doc. 85-4 at 2.) The subpoenaed entities obviously have standing to
challenge subpoenas issued to them. Kinwai’s position is without merit and frivolous.
The Court need not decide if IHFC has standing to move to quash a subpoena to
the SEC, a third party. First, it is appropriate for the Court to quash the subpoena on its
own motion, in view of its significant overbreadth, the undue burden and costs it would
impose on IHFC to travel to Washington, D.C., to attend a fishing-expedition deposition,
and the additional satellite litigation related to protecting confidential information such a
deposition would likely spawn. (See Text Order July 2, 2015 (noting that the Court has
inherent authority to supervise discovery).) Second, IHFC has also moved for a
protective order pursuant to Rule 26(c), (see Doc. 70; Doc. 101 at 2), and that rule
explicitly allows a party to move for a protective order in an appropriate case. See Fed.
R. Civ. P. 26(c). It can hardly be doubted that a litigant who receives notice of a
deposition to be held several hundred miles away of a deponent who is highly unlikely to
have any information relevant to the case is being subjected to undue burden and
expense, which is one of the many reasons a protective order can issue. See id.
D. Costs and Expenses
IHFC moved for its costs and expenses in the original motion to quash the
subpoena to the SEC, (see Doc. 70 at 3), and IHFC and the subpoenaed entities moved
for their costs and expenses in connection with their motion to quash. (See Doc. 85 at 8;
Doc. 85-4 at 15.) Kinwai had notice of those requests and an opportunity to respond both
15
in briefing and in person at a hearing. (See Docs. 72, 101, 102; Minute Entry Aug. 6,
2015.)
Rule 37(a)(5) applies to the award of expenses in connection with a motion for
protective order. Fed. R. Civ. P. 26(c)(3). Under Rule 37(a)(5), the Court must require
the losing party to pay the winning party’s reasonable expenses, including attorneys’ fees,
unless the losing party’s discovery effort was substantially justified or other
circumstances make an award of expenses unfair. See Fed. R. Civ. P. 37(a)(5).
Kinwai’s attempt to depose the SEC was not justified and there are no
circumstances making an award of expenses unfair. There was never any real possibility
that the SEC would know anything about who Mr. Krapfel and others worked for or
about statements made by IHFC in a brief. The financial topics were so overbroad that
they constituted an obvious fishing expedition. See id.
The document categories in subpoenas to IMC were similarly overbroad, as
discussed supra. The subpoenas were also unduly burdensome and expensive given the
volume of responsive documents and the very short time frame given to comply.
Kinwai’s explanation for why it needed these voluminous documents did not match the
document requests themselves. The document requests were significantly broader than
required to obtain information about the one question with possible relevance. Beyond
that, Kinwai’s arguments were conclusory, and Kinwai never coherently explained the
link between the actual documents requested and any issue pending in the case.
16
While a finding of bad faith and harassment is not necessary to support an award
of expenses, e.g., HSBC Bank USA, Nat’l Ass’n v. Resh, No. 3:12-cv-00668, 2013 WL
2177873, at *5 (S.D. W. Va. May 20, 2013) (opinion of Eifert, M.J.), it is an additional
basis for concluding that the discovery was not justified. Here, there is a great deal of
direct and circumstantial evidence to indicate that Kinwai’s real purpose was not to
discover potentially useful evidence but rather to harass and annoy IHFC and its affiliates
and to increase litigation costs. This evidence easily supports the finding that Kinwai
sought this discovery in bad faith and for the purpose of harassing IHFC and its affiliates,
and the Court so finds.
For example, Kinwai waited until one week before the SEC deposition to mail a
copy of the SEC subpoena to IHFC’s counsel, even though it had served the SEC several
weeks before. (See Doc. 70 at ¶¶ 2-3, 8.) When it finally did mail a copy to IHFC’s
counsel, it did not include all the attachments. See supra note 2. The subpoenas to IMC
were issued just 12 days before the close of discovery, (see, e.g., Doc. 85-1 at 2;
Scheduling Order Oct. 10, 2014), and Kinwai did not timely serve IHFC’s counsel with
copies; instead, he only learned of the subpoenas when contacted by his client. (See Doc.
85 at 2; Doc. 85-4 at 3 n.1.)
Similarly, no one who really wanted to identify the potential principals of Mr.
Krapfel and others would go about it the way Kinwai has done. A sensible attorney and a
responsible client would serve a simple interrogatory or request to admit. Statements to
17
the Court by Kinwai’s counsel that it did file such interrogatories are not supported by the
record and were indeed misleading to the Court.8
Kinwai has repeatedly filed kitchen-sink briefs supported only by stream-ofconsciousness argument. Most of these arguments are unsupported by citation to the
record or the law.9 For example, in one brief, Kinwai contends that “IHFC deliberately
lied” about who operated the IHF Center. (Doc. 123 at 1.) It provides no citation to the
record to support this very serious accusation, (see Doc. 123 at 1), nor does it provide any
evidence that IHFC does not own the IHF Center. Kinwai similarly asserts as fact
information about IHFC’s loans and security agreements, but it again provides no citation
to evidence of record. (See Doc. 123 at 3-4.) In another brief, Kinwai’s counsel spends
two pages purporting to explain how buyers of businesses “typically” act “in a standard
8
Ms. Springs has also attempted to make hay with testimony by IHFC’s Rule 30(b)(6)
witness, Ms. Cumberbatch, that she was employed by IMC Manager, LLC, and that she did not
know whether IMC Manager, LLC, had the authority to “manage the entity [IHFC] itself.” (See
Doc. 109 at 5-11; Doc. 109-2 at 60.) Because the meaning of the phrase “manage the entity
itself” is completely mysterious, and Ms. Springs did not explain it to the witness, it is not
surprising that Ms. Cumberbatch could not provide an answer to that question. Ms.
Cumberbatch explained several times the role of IMC Manager, LLC, and answered numerous
questions about how IHFC is operated. (E.g., Doc. 109-2 at 28-30.)
9
The Court has no duty to scour the record—which constitutes hundreds of pages—to find
evidence to support or refute a party’s factual statements that do not include a reference to
evidence of record. See Stephenson v. Pfizer Inc., 49 F. Supp. 3d 434, 437 n.1 (M.D.N.C. 2014)
(noting that the Court has no obligation to “investigat[e] the basis of claimed facts”), appeal
docketed, No. 14-2079 (4th Cir. Oct. 9, 2014); see also Ritchie v. Glidden Co., 242 F.3d 713, 723
(7th Cir. 2001) (noting that “a court is not required to scour the record in search of evidence to
defeat a motion for summary judgment” (internal quotation marks omitted)). Nor does the Court
have a duty to conduct legal research to support or refute a party’s unsupported legal argument.
Hughes v. B/E Aerospace, Inc., No. 1:12CV717, 2014 WL 906220, at *1 n. 1 (M.D.N.C. Mar. 7,
2014) (“A party should not expect a court to do the work that it elected not to do.”).
18
transaction,” but she cites no cases or other authority for her contentions, nor does she
ever explain why these “typical” practices make any difference in this case, (see Doc. 84
at 7-9), which has nothing to do with buying or selling a business. Some arguments
border on incoherent.10
Other arguments show a marked disregard for accuracy. For example, Kinwai
argued that the motion to quash the subpoenas to IMC should be denied because IHFC
did not have standing, (see Doc. 102 at 3-4); this completely ignored the fact—apparent
from the second sentence of the motion to quash—that the motion to quash and for
protective order is filed by both IHFC and by the subpoenaed entities. (See Doc. 85 at 1.)
Kinwai has repeatedly stated that it has tort claims pending, (e.g., Doc. 84 at 5), which is
inaccurate. (See Doc. 1.) Kinwai’s counsel has represented to the Court that Kinwai first
10
For example, Ms. Springs makes the following argument, which the Court reproduces in
full as it is unable to sensibly summarize it:
Kinwai has now conducted IHFC’s 30(b)(6) deposition for which an employee of
IMC Manager, LLC was the only corporate witness. IMC Manager LLC actually
appears to be the entity that is suing the plaintiff in the name of IHFC Properties,
LLC but it has not provided any source of legal authority for such actions and the
court has not required any authority. The plaintiff could not come in the court and
sue on behalf of its neighbor without some proof it was attorney-in-fact for its
neighbor. Plaintiff did not seek to pierce the corporate veil because there is
ordinarily no veil when a company publishes on the public record on a federal
government website that it owns and operates the [IHF Center] and that it “aims
to be a single integrated business.” Apparently IHFC has reserved the veil for use
only during court appearances. The parent and its affiliates have direct liability
and single enterprise liability, both of which plaintiff has pursued.
(Doc. 123 at 4.) As best the Court can tell, Kinwai appears to be arguing that it needs this
discovery to prove that the defendant actually in the case, who admits to owning the building,
signing the lease, and acting through Mr. Krapfel and others to relocate Kinwai, might
nonetheless not be liable to Kinwai for any breach of contract.
19
learned at Mr. Krapfel’s deposition in January 2015 that he was employed by an IMC
entity and not IHFC. (See Doc. 84 at 6-7.) Yet Kinwai’s own Rule 26 disclosures
specifically identify Mr. Krapfel as associated with IMC, not IHFC. (See Doc. 102-17 at
9.) Kinwai asserts that the documents compelled by the IMC subpoenas “are all related
to the High Point facility,” (Doc 102 at 14), a statement that is patently untrue.
Document Request 9 asks for “any documents that [y]ou provided to the SEC concerning
property in High Point, North Carolina,” (see, e.g., Doc. 85-1 at 6), and it is clear from
Mr. Krapfel’s deposition that these entities own other properties in addition to the Center
in High Point. (Doc. 130-3 at 16.)
The Court could go on with many more examples. These suffice, however, to
support the Court’s finding of bad faith.
IV.
CONCLUSION
The deposition of the SEC was not reasonably calculated to obtain relevant
information, and it would be unduly burdensome and unduly expensive to require IHFC
to pay the costs and expenses associated with traveling to Washington, D.C., for a
fishing-expedition deposition. The subpoenas to IMC were not reasonably calculated to
obtain relevant information and failed to allow a reasonable time to comply, as they
demanded the subpoenaed entities produce documents covering many topics spanning
many years in less than one week. Responsive documents would be voluminous, (see
Doc. 85-4 at ¶ 19), and would include confidential commercial and financial information
that is not generally available to the public. (See Doc. 85-4 at ¶ 23.) Compliance would
20
be unduly burdensome and expensive, especially given the nature of the information
sought in light of the actual disputes in the case.
Under these circumstances, the Court will grant the motion for protective order
and to quash the IMC subpoenas, (Doc. 85), and deny Kinwai’s motion to vacate and lift
the stay prohibiting the SEC deposition. (Doc. 83.) The discovery sought by Kinwai was
not justified and is not unfair, and an award of costs and expenses is appropriate.
For these reasons and the reasons stated in open court on August 6, 2015, it is
ORDERED that Kinwai’s motion to lift stay and vacate protective order, (Doc. 83), is
DENIED. It is further ORDERED that the motion for protective order and to quash
subpoenas filed by IHFC and the subpoenaed entities, (Doc. 85), is GRANTED. IHFC
and the subpoenaed entities are entitled to recover reasonable expenses, which the Court
will consider pursuant to the schedule established in open court on August 6, 2015.
Signed this the 31st day of August, 2015.
__________________________________
UNITED STATES DISTRICT JUDGE
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