Rice v. Rutledge Road Associates, LLC et al
Filing
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ORDER denying without prejudice Plaintiff's 38 Motion to Compel. Signed by Magistrate Judge David Keesler on 6/15/2016. (kby)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL ACTION NO. 1:15-CV-269-MR-DCK
PATRICIA RICE,
)
)
Plaintiff / Counterclaim Defendant,
)
)
v.
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RUTLEDGE ROAD ASSOCIATES, LLC, and )
GULFSTREAM CAPITAL CORPORATION, )
)
Defendants.
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GULFSTREAM CAPITAL CORPORATION, )
)
Third Party Plaintiff,
)
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v.
)
)
STEPHEN D. RICE,
)
)
Third Party Defendant.
)
)
ORDER
THIS MATTER IS BEFORE THE COURT regarding Plaintiff’s “Motion To Compel”
(Document No. 38). This motion has been referred to the undersigned Magistrate Judge pursuant
to 28 U.S.C. § 636(b), and immediate review is appropriate. Having carefully considered the
motion and the record, the undersigned will deny the motion.
BACKGROUND
Plaintiff Patricia Rice (“Plaintiff” or “Rice”) initiated this action with the filing of a
“Petition” (Document No. 2-1) (the “Complaint”) in the state District Court of Tulsa County,
Oklahoma, on July 2, 2015, against Rutledge Road Associates, LLC (“RRA”) and Gulfstream
Capital Corporation (“Gulfstream”) (together “Defendants”). The Complaint involves “an alleged
multiparty contract or agreement entered into on or before July 11, 2013, arising from a dispute in
the bankruptcy proceeding of Stephen D. Rice, Third Party Defendant and Plaintiff’s husband.”
(Document No. 41, p.1). The case was removed to the United States District Court for the Northern
District of Oklahoma on July 27, 2015.
The “Counterclaim Of Defendant Gulfstream Capital Corporation” (Document No. 17)
was filed on October 23, 2015. Gulfstream’s Counterclaim includes an “identical third-party claim
against Stephen D. Rice (“Mr. Rice”),” and Gulfstream also filed a separate “Third-Party Claim…”
on October 23, 2015. (Document No. 17, p. 1); (Document No. 18).
On December 1, 2015, this matter was transferred from Oklahoma to this Court, and
assigned to District Judge Martin Reidinger and Magistrate Judge Dennis Howell. See (Document
No. 26). On December 22, 2015, Judge Howell issued a “Pretrial Order And Case Management
Plan” (Document No. 34) including the following deadlines: discovery completion – September
1, 2016; mediation – September 15, 2016; motions – October 1, 2016; trial – March 13, 2017.
Plaintiff’s “Motion To Compel” (Document No. 38) and “Brief In Support…” were filed
April 19, 2016. By the pending motion, Plaintiff seeks “an Order compelling compliance with
certain subpoenas served on Burt Langley, PC; Matney & Associates, PA; and Dixon Hughes
Goodman LLP (“the Objecting Parties”) pursuant to Rule 45(d)(2)(B)(i).” (Document No. 38,
p.1).
Burt Langley, PC (and/or Gulfstream) filed its “Response To Motion To Compel”
(Document No. 40) on May 5, 2016;
“Rutledge Road Associates, LLC’s Response In
Opposition…” (Document No. 41) was filed on May 6, 2016; and the “Brief Of Dixon Hughes
Goodman LLP In Response…” (Document No. 42) was filed on May 9, 2016. Following Dixon
Hughes Goodman LLP’s response, this matter was reassigned to the undersigned as the referral
Magistrate Judge on May 11, 2016.
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“Plaintiff’s Reply Brief To Defendant Rutledge Road Associates, LLC’s Response…”
(Document No. 43) was filed on May 12, 2016. Plaintiff has indicated that she does not intend to
file a reply to Gulfstream’s response, but she has failed to file a reply, or notice of intent not to
reply, related to Dixon Hughes Goodman LLP’s response. See (Document No. 43, p.1, n.1; and
Local Rule 7.1 (E)). As such, the pending motion is now ripe for review and disposition.
STANDARD OF REVIEW
Rule 26 of the Federal Rules of Civil Procedure provides that:
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 benefit.
Information within this scope of discovery need not be admissible
in evidence to be discoverable.
Fed.R.Civ.P. 26(b)(1). The rules of discovery are to be accorded broad and liberal construction.
See Herbert v. Lando, 441 U.S. 153, 177 (1979); and Hickman v. Taylor, 329 U.S. 495, 507
(1947). However, “[t]he court may, for good cause, issue an order to protect a party or person
from annoyance, embarrassment, oppression or undue burden or expense.” Fed.R.Civ.P. 26(c)(1).
Whether to grant or deny a motion to compel is generally left within a district court’s broad
discretion. See Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922, 929 (4th
Cir. 1995) (denial of motions to compel reviewed on appeal for abuse of discretion); Erdmann v.
Preferred Research Inc., 852 F.2d 788, 792 (4th Cir. 1988) (noting District Court’s substantial
discretion in resolving motions to compel); and LaRouche v. National Broadcasting Co., 780 F.2d
1134, 1139 (4th Cir. 1986) (same). A party’s failure to provide or permit discovery may result in
sanctions including the following: reasonable expenses caused by the failure; default judgment
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against the disobedient party; or treating as contempt of court the failure to obey any order. See
Fed.R.Civ.P. 37(b) - (d).
DISCUSSION
By the instant motion, Plaintiff seeks to compel compliance with three subpoenas it served
on or about April 4 or 7, 2016, on three non-parties to this lawsuit, Burt Langley, PC; Matney &
Associates, PA; and Dixon Hughes Goodman LLP (“the Objecting Parties”). (Document No. 39);
see also (Document Nos. 39-2, 39-5, and 39-8). Each of the subpoena recipients objected.
(Document Nos. 39-3, 39-6, and 39-9). In addition, Burt Langley, PC, Defendant RRA, Matney
& Associates, P.A., and Dixon Hughes Goodman LLP have filed responses in opposition to the
pending motion to compel. See (Document Nos. 41, 42, and 43).
The undersigned will address each of the subpoenas in turn.
A. Burt Langley, PC Subpoena
Burt Langley PC (“Burt Langley”) is a law firm representing Defendant Gulfstream in this
case, as well as in bankruptcy proceedings in Oklahoma. (Document No. 39, p.1; Document No.
40, p.2). “Gulfstream was a judgment creditor of Rice and one of his limited liability companies.”
(Document No. 40, p.2).
Plaintiff contends that Burt Langley “is a material witness in this case, in addition to
counsel for one of the Defendants.” (Document No. 39, p.3). Plaintiff’s subpoena to Burt Langley
includes the demand for “[a]ny communication whatsoever” between Burt Langley and “any
person and/or entity regarding any of the claims, defenses, issues, and facts in this litigation and/or
in the bankruptcy case filed by Stephen Rice.” (Document No. 39-2, p.4) The subpoena further
demands “communications with any attorney and/or person involved with any loans that were
financed and/or refinanced by defendant Rutledge Road Associates, [LL]C and/or MMR
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Properties, LLC. . . . [and] includes any communications with any person not mentioned above
which refer to and/or expressly mention Stephen Rice and/or Patricia Kolling aka Patricia Rice.”
Id.
Burt Langley immediately sent its objections to Plaintiff’s counsel. (Document No. 39-3).
The objections include arguments that: (1) many of the documents sought are protected by
attorney-client or attorney work-product privileges, or are not relevant to any party’s claim or
defense in this litigation; (2) all the documents requested are in the custody of one or more parties
and can be obtained more easily from the party through normal discovery channels, and nonprivileged communications have already been produced; and (3) the demanded production is
unduly burdensome and Plaintiff has not shown that there is not a less invasive means to obtain
equivalent information. (Document No. 39-3, p.1).
In its “Response To Motion To Compel” (Document No. 40), Burt Langley first notes that
“Plaintiff has not yet issued discovery requests of any kind to Gulfstream,” its client and a
Defendant in this action. (Document No. 40, p.1) (emphasis added). Burt Langley then contends
that there is little case law addressing requests for documents from opposing counsel, although
many courts have addressed the similar question of whether or not a deposition of litigation counsel
is proper. (Document No. 40, p.3).
Specifically, Burt Langley relies on Shelton v. American Motors Corp., 805 F.2d 1323 (8th
Cir. 1986), which sets forth a three part test for determining whether a deposition of opposing
counsel should be allowed. (Document No. 40, p.3). The Shelton decision held that circumstances
where a court should order the taking of opposing counsel’s deposition “should be limited to where
the party seeking to take the deposition has shown that (1) no other means exist to obtain the
information than to depose opposing counsel, . . .; (2) the information sought is relevant and
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nonprivileged; and (3) the information is crucial to the preparation of the case.” Shelton, 805 F.2d
at 1327 (internal citation omitted).
Burt Langley acknowledges that Shelton has not been adopted by the Fourth Circuit Court
of Appeals, but cites several district courts within the Fourth Circuit that have applied Shelton.
(Document No. 40, pp.3-4) (citations omitted). Burt Langley makes a compelling argument that
if Shelton is applied here, Plaintiff has failed to establish any of the circumstances identified above.
(Document No. 40, pp.4-7). Burt Langley further argues that the request is unduly burdensome
and seeks the mental impressions and trial strategy of opposing counsel. (Document No. 40, pp.79).
Finally, and perhaps most importantly, Burt Langley argues that Defendant Gulfstream has
already voluntarily produced, on February 1, 2016, non-privileged communications responsive to
the Burt Langley subpoena, and that Plaintiff has not suggested that such production was
incomplete, nor has she requested any additional documents from Gulfstream.
As noted above, Plaintiff has indicated without further explanation that it does not intend
to reply to Gulfstream’s arguments in response. (Document No. 43, p.1, n.1). Presumably,
Plaintiff is referring to Burt Langley’s “Response…” (Document No. 40), since it does not appear
that Gulfstream has filed a separate response. Regardless, Plaintiff’s failure to reply means the
Court is denied the benefit of Plaintiff’s view of Shelton’s applicability here, as well as Plaintiff’s
response to the other assertions in the Burt Langley/Gulfstream response.
Based on the foregoing, the undersigned is not persuaded that the likely benefit of the relief
requested by Plaintiff outweighs the burden and expense, or that it is proportional to the needs of
the case. In particular, Burt Langley contends, and Plaintiff has not refuted, that some or all of the
information requested by the subpoena has already been provided. The undersigned finds that it
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is likely more appropriate, efficient, and cost-effective, for Plaintiff to first seek relevant and nonprivileged discovery from the other parties in this action before seeking, or duplicating a search,
with non-parties.
Under the circumstances, the undersigned will deny the motion to compel without
prejudice as to the “Subpoena…” (Document No. 39-2) issued to Burt Langley, PC.
B. Matney & Associates Subpoena
Matney & Associates, P.A. (“Matney”) is a law firm representing Defendant RRA.
(Document No. 39, p.2). Plaintiff contends that Matney, like Burt Langley, “is both a material
witness and counsel for a party in this case.” (Document No. 39, p.5). Plaintiff’s subpoena to
Matney, like the one served on Burt Langley, includes the demand for “[a]ny communication
whatsoever” between Matney and “any person and/or entity regarding any of the claims, defenses,
issues, and facts in this litigation and/or in the bankruptcy case filed by Stephen Rice.” (Document
No. 39-5, p.4). The subpoena further demands “communications with any attorney and/or person
involved with any loans that were financed and/or refinanced by defendant Rutledge Road
Associates, C and/or MMR Properties, LLC. . . . [and] includes any communications with any
person not mentioned above which refer to and/or expressly mention Stephen Rice and/or Patricia
Kolling aka Patricia Rice.” Id.
Matney also immediately provided an “Objection To Subpoena” (Document No. 39-6). In
that objection Matney contends that the subpoena commands production of documents that will be
included in response to a request for documents served on Defendant RRA. Id. Matney also
argues that the subpoena subjects it and RRA to undue burden and expense, especially since the
same information has been requested from RRA. Id.
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Plaintiff acknowledges that Matney has asserted that the “Subpoena…” (Document No.
39-5) requests documents that will be provided by Defendant RRA, but argues that “it is
conceivable that Matney is in possession of documents which are responsive to the subpoena but
not to the discovery request to its client.” Id.
Defendant RRA, joined by Matney, filed a “…Response In Opposition...” to the pending
motion. (Document No. 41, pp.10-16). Matney and RRA assert that a subpoena was also served
on the law firm Titus Hillis Reynolds Love Dickman & McCalmon (“Titus Firm”), who
represented RRA in Oklahoma. (Document No. 41, p.10). Matney and RRA contend that their
“Response…” is also filed in regard to the Titus Subpoena. (Document No. 41, p.12). Because
the pending “Motion To Compel” fails to argue for, or even mention, production related to a Titus
Subpoena, the undersigned will decline to address a “response” regarding a non-existent motion
for relief.
Matney and RRA principally argue that the information requested by the subpoena(s) is
duplicative and can be obtained from a more convenient source. (Document No. 41, pp.14-15).
In addition, it is noted that the subpoena(s) specifically request communications between the
Matney Firm and the Titus Firm. (Document No. 41, p.15). Matney and RRA argue that these
two firms represented RRA in the underlying action and the prior bankruptcy action, and that the
requested communications between these two firms are privileged. Id.
In conclusion, RRA and Matney request that the motion to compel be “denied without
prejudice to afford Plaintiff the opportunity, upon receiving and reviewing RRA’s response to
RFP” to issue a revised subpoena if necessary and appropriate. (Document No. 41, p.16).
Plaintiff has declined to reply to the arguments by RRA and Matney regarding the
subpoena issued on Matney.
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Based on the foregoing, the undersigned will deny the motion to compel, without prejudice,
as requested by Matney and RRA.
C. Dixon Hughes Goodman LLP Subpoena
Dixon Hughes Goodman LLP (“Dixon Hughes”) is an accounting firm that has performed
accounting services, including tax preparation, for Defendant RRA. (Document No. 39, p.2). On
April 7, 2016, Plaintiff served a subpoena on Dixon Hughes that included requests for: (1) all tax
returns, balance sheets, leases, financial statements, and any other files and documents used in
preparing tax returns for RRA and MMR Properties, LLC for the years 2012-2015; (2) copies of
all information used to assist RRA in obtaining a refinance of property owned by RRA; (3) any
communication and files used for, or referring to any valuation of RRA; (4) copies of all W-2s
prepared for RRA between 2012-2015; (5) copies of all documents and communications
referencing any change in ownership of RRA shareholders between 2012-2015; (6) any and all
contracts or agreements between RRA and Wells Fargo; and (7) any and all correspondence
between any representative of RRA and any representative of Wells Fargo. (Document No. 39;
Document No. 39-8, p.4).
Plaintiff states that she “understands that it [Dixon Hughes] cannot produce the requested
documents without consent of its client or a court order.” (Document No. 39, p.6). Plaintiff then
asserts that she requested consent from RRA’s counsel via email on April 7, 2016, the same day it
served the subpoena, but got no response. Id.
In objecting to the subpoena, Dixon Hughes also notes that the subpoena commands
production of tax return information that cannot be produced absent the taxpayer’s consent or a
court order. (Document No. 39-9, p.1) (citing 26 U.S.C. § 7216; N.C.Gen.Stat. § 75-28). Dixon
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Hughes further argues that other information requested by the subpoena is similarly protected
and/or subjects Dixon Hughes to an undue burden. (Document No. 39-9, pp.1-2).
Dixon Hughes reiterates these same points in its response to the motion to compel.
(Document No. 42). Dixon Hughes goes on to assert that it is “a third-party with absolutely no
interest in this lawsuit, and should be protected from undue burden.” (Document No. 42, p.2).
Moreover, Dixon Hughes notes that the subpoenaed information could be produced by Defendant
RRA. Id. Finally, Dixon Hughes requests that if it is ordered to produce documents, such
production should be conditioned upon Plaintiff’s payment to Dixon Hughes for its time and
expenses. Id.
Defendant RRA’s response also addresses the subpoena served on Dixon Hughes.
(Document No. 41, pp.1-10). RRA argues that the subpoena “violates the Federal Rules of Civil
Procedure commanding non-[relevant] information and information that is overbroad, and by
requesting information that would impose an undue burden and expense on RRA and Dixon.”
(Document No. 41, p.5).
RRA persuasively notes that the Rules require courts to limit discovery that is
“unreasonably cumulative or duplicative, or can be obtained from some other source that is
more convenient, less burdensome, or less expensive . . . .”
Id. (quoting Fed.R.Civ.P.
26(b)(2)(C)) (emphasis added). In addition, RRA notes that Rule 45(d)(1) requires a party issuing
a subpoena to “take reasonable steps to avoid imposing undue burden or expense on a person
subject to the subpoena.” Id.
In conclusion, RRA requests that Plaintiff’s motion to compel be “denied without prejudice
to afford Plaintiff the opportunity to issue a Subpoena that requests relevant information and is
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properly limited in scope and in time in accordance with the Federal Rules of Civil Procedure.”
(Document No. 41, p.10).
Plaintiff’s only reply to any of the responses and in support of its motion solely addresses
RRA’s argument that the financial information requested of Dixon Hughes is not relevant.
(Document No. 43). In doing so, Plaintiff argues that certain RRA financial information is
relevant, but does not argue in further support of its motion to compel. Specifically, Plaintiff does
not refute RRA’s (or Dixon Hughes’) arguments that the subpoena is overbroad or that there are
less burdensome, less expensive, and non-duplicative ways to seek the requested information. Id.
Based on all the arguments before the Court, the undersigned is persuaded that the motion
to compel should be denied without prejudice. Plaintiff is directed to seek the relevant, nonprivileged information she needs related to the claims and defenses in this case from the parties in
this case. If the parties’ responses and production are inadequate and/or incomplete, Plaintiff may
pursue renewed subpoenas and/or motion(s) to compel, narrowly tailored to the proportional needs
of discovery in this case.
At this time, the Court will decline to award any costs or fees related to the motion to
compel. The Court will take such requests under advisement, and may reconsider an award of
costs or fees at a later date.
IT IS, THEREFORE, ORDERED that Plaintiff’s “Motion To Compel” (Document No.
38) is DENIED WITHOUT PREJUDICE, as directed herein.
SO ORDERED.
Signed: June 15, 2016
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