He et al v. Rom et al

Filing 97

Opinion & Order signed by Judge James S. Gwin on 3/10/16. The Court, for the reasons set forth in this order, grants the plaintiffs' motions to compel and denies the motion of defendant Davor Rom for a protective order. All defendants m ust produce documents and respond completely to the interrogatories and the requests for admission within 14 days of the date of this order. The Court will consider the imposition of Rule 37 sanctions should the defendants fail to comply with this order. Finally, the Court denies as moot both of the plaintiffs' substitute motions to compel as well as the motion to strike. (Related Docs. 70 , 71 , 76 , 87 , 88 , and 90 ) (D,MA)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
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RUI HE, et al.,
:
:
Plaintiffs,
:
:
v.
:
:
DAVOR ROM, et al.,
:
:
Defendants.
:
:
:
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Case. No. 1:15-CV-1869

OPINION & ORDER
[Resolving Docs. 70, 71, 76, 87, 88, 90]

JAMES S. GWIN, UNITED STATES DISTRICT JUDGE:
Rui He represents a putative class of investors based in China who invested in, and
claimed to have been scammed by, American real estate investor Davor Rom and his companies
Investor Income Properties, LLC, IIP Ohio, IIP Management, IIP Cleveland Regeneration, LLC,
IIP Cleveland Regeneration 2, LLC, Assets Unlimited, LLC, and IIP Akron, LLC (collectively,
“Defendants”). Discovery in the case is ongoing. Plaintiffs move to compel production from
Defendants. For the foregoing reasons, the Court GRANTS Plaintiffs’ motions to compel in
accordance with this opinion.

I. Procedural Posture
Plaintiffs have filed two motions to compel discovery: one motion against Defendant
Davor Rom; 1 the other against the remaining Corporate Defendants. 2 Defendants opposed. 3
First, Defendants argued that Plaintiffs failed to abide by Local Rules when Plaintiffs exceeded
the page limit and failed to make the required statement of having made a good faith effort to
1

Doc. 70.
Doc. 71.
3
Doc. 79; Doc. 81.
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Gwin, J.
settle the discovery dispute. Second, Defendants opposed the motions on the merits, arguing this
it should not be required to provide discovery until a protective order is filed. Defendant Davor
Rom seeks a protective order. 4 So do the Corporate Defendants. 5
In light of the procedural errors in their original motions, Plaintiffs then re-filed their
motions. 6 However, rather than oppose the motions, Defendants moved to strike the motions,
arguing that they were improper. 7 Defendants argue that Plaintiffs are trying to “reset” the clock
by re-filing the motion, and that the substitute motions are “frivolous” because they deal with the
“same issue now pending before the Court” in the first set of motions. 8
As Defendants concede that the earlier-filed motions are the “same” as the substitute
motions, the Court will rule on the earlier, fully-briefed motions in the interest of judicial
efficiency. Errors in compliance with the Local Rules do not alter the substance of the motions.
As a result, the Court DENIES as moot Plaintiffs’ substitute motions 9 and Defendants’ motion
to strike. 10

II. Legal Standard
Parties may obtain discovery regarding any matter, not privileged, that is relevant to the
subject matter involved in the pending action. 11 Rule 26(b)(1) of the Federal Rules of Civil
Procedure explains that “[i]nformation within this scope of discovery need not be admissible in
evidence to be discoverable.” However, the requests must be “proportional to the needs of the
4

Doc. 76. This motion is fully briefed. Plaintiffs opposed. Doc. 85. Defendant Rom replied. Doc. 91.
Doc. 83. Plaintiffs oppose. Doc. 85. Defendants have not yet filed their reply. See Doc. 96.
6
See Doc. 87 (substitute motion to compel discovery against Davor Rom); Doc. 88 (substitute motion to
compel discovery against other Defendants).
7
Doc. 90.
8
Id.
9
Doc. 87, Doc. 88.
10
Doc. 90.
11
Fed R. Civ. P. 26(b)(1)
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Gwin, J.
case.” 12 A party may request documents that are in the “possession, custody, or control of the
party upon whom the request is served.” 13
Rule 26 was amended in 2015 to include the “proportionality” requirement. However,
the 2015 amendments do not alter the basic tenet that Rule 26 is to be liberally construed to
permit broad discovery. 14
Parties may also petition the court for an order compelling disclosure or discovery. 15
Specifically, Rule 37(a)(2)(B) enables a court to enter an order “compelling an answer, or
designation, production, or inspection” for failure to respond to a Rule 33 interrogatory or a Rule
34 request for production. The rule also provides for sanctions against parties that do not
cooperate with discovery. For purposes of this rule, Rule 37(a)(4) instructs that an “evasive or
incomplete” answer must be treated as a complete failure to answer. Id.

III. Motion to Compel Against Defendant Davor Rom
Plaintiffs move to compel Davor Rom to comply with Plaintiffs’ First Discovery
Request. 16 Plaintiffs raise the following arguments in their motion to compel:

1. In response to Requests for Production 2, 3, 6, 7, 8, 15-30, Defendant Rom has
improperly “directed” Plaintiffs to seek the requests from the Corporate Defendants
instead when “as President, Managing Member, and any other title Rom appointed
himself for those companies, Rom has control and access to such documents.”
12

Id.
Fed. R. Civ. P. 34(a).
14
See United States v. Leggett & Platt, Inc., 542 F.2d 655, 657 (6th Cir. 1976) (commenting that the
“Federal Rules of Civil Procedure authorize ‘extremely broad’ discovery”).
15
Fed. R. Civ. P. 37.
16
Doc. 70-9. Plaintiffs’ First Discovery Requests include Interrogatories 1-20; Requests for Production
1-31; and Request for Admissions 1-44.
13

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2. Defendant Rom has improperly refused to produce documents related to the Defendant
Companies’ governance and operation.
3. Defendant Rom has improperly refused to produce documents with an argument that
there is a need for counsel’s review.
4. Defendant Rom has improperly refused to produce documents with financial information.
5. Defendant Rom has improperly refused to produce documents because it does not have a
protective order.
6. Defendant Rom has improperly refused to produce documents because the parties have
not agreed upon an Electronic Stored Information (ESI) Protocol.

The first four objections are easily dealt with:
The Court agrees with Plaintiffs that Defendant Rom cannot refuse to produce documents
in his “possession, custody, or control” merely because the documents pertain to another of the
Corporate Defendants or even other third parties. Courts have routinely held that corporate
officers, corporate employees, and other third parties have “possession, custody, or control” of
corporate documents for the purposes of Rule 34. 17 Rom must respond to the requests.
The Court agrees with Plaintiffs that Defendant Rom cannot refuse to produce documents
based on the additional time needed for counsel’s review. Under Rule 34(b)(2)(A), a party has
30 days to respond after being served with a request for documents. “A shorter or longer time
may be stipulated to under Rule 29 or be ordered by the court.” 18 Defendant Rom may not
unilaterally decide that he requires more time.

17

8B Fed. Prac. & Proc. Civ. § 2210 (3d ed.). See, e.g., In re Flag Telecom Holdings, Ltd. Secs.
Litigation, 236 F.R.D. 177 (S.D.N.Y. 2006) (Foreign corporation's former senior executive officer had
sufficient control over requested corporate documents to support order compelling him to produce them).
18
Fed. R. Civ. P. 34(b)(2)(A).

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The Court agrees with Plaintiffs that Defendant Rom cannot refuse to produce documents
related to his finances and the finances of his companies. As discussed below, Rom may redact
his social security number and bank account numbers. But Plaintiffs are seeking relevant
discovery related to their claims.
Defendant Rom objects that Plaintiff’s definition of “financial institution” is unclear.
This is by all appearances a dilatory tactic by Defendant. The noted requests (Request for
Production 9, and Interrogatory 12), are sufficiently specific. Plaintiffs seek information on “all
banks, credit unions, or other financial institutions in which down payment, purchase money
and/or rental incomes of Plaintiffs or Class Members were deposited.” 19 Defendant Rom, as a
businessman and real estate investor, can surely identify where he deposited client monies,
regardless of the technical definitions from BusinessDictionary.com and InvestorWords.com, on
which he relies to generate a supposed ambiguity.
Defendant also objects to Request for Production No. 6, which seeks “All closing
documents and title documents of each transaction involving Plaintiffs and Class Members in
connection with the purchasing of Property from Defendant Companies during the Class
Period.” 20 The Class period is clearly defined in the discovery requests as July 1, 2013 to
present. To the extent Defendant Rom has “possession, custody, or control” of the documents
requested, he must produce them, even if he was not a party to any of the transactions.
Moreover, the request is not “vague and overly broad” just because Defendant Rom considers
some documents to be “financing documents” which would be excluded from the request. The
parties must confer to define the scope of “closing documents” if the phrase is unclear to
Defendant Rom.

19
20

Doc. 70-9.
Doc. 79 at 12.

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More generally, Defendant Rom has not made a showing at this time that the requested
documents are not proportional to the needs of the case

A. Protective Order
Defendant Rom has moved for a protective order, and has refused to comply with
discovery requests until the protective order is in place. 21 The Proposed Protective Order allows
any party “in good faith” to designate a document as Confidential or Highly Confidential. 22 By
default, such designated documents will be filed under seal with the Court. 23
Granting a protective order motion is within the trial court’s discretion, but that discretion
“‘is circumscribed by a long-established legal tradition’ which values public access to court
proceedings.” 24
Unwarranted restriction of court documents hampers the public’s ability to act as an
important check on judicial integrity. 25 “Thus, documents filed in the court generally must be
made available to the public.” 26 Moreover, even if all parties jointly seek a protective order or
propose a confidentiality agreement, this does not overcome the general rule against sealing
cases and documents. 27

21

Doc. 76.
Doc. 76-2.
23
Id.
24
Procter & Gamble Co. v. Bankers Trust Co., 78 F.3d 219, 227 (6th Cir. 1996) (quoting Brown &
Williamson Tobacco Corp. v. FTC, 710 F.2d 1165, 1177 (6th Cir. 1983), cert. denied, 465 U.S. 1100
(1984)).
25
Brown & Williamson, 710 F.2d at 1178; see also Wilson v. Am. Motor Corp.,759 F.2d 1568, 1570 (11th
Cir. 1985) (noting that “trials are public proceedings” and access to court records preserves “the rights of
the public, an absent party”).
26
Carter v. Welles-Bowen Realty, Inc., 628 F.3d 790, 790-91 (6th Cir. 2010).
27
Procter & Gambel Co., 78 F.3d at 227 (warning district courts against “abdicat[ing their] responsibility
to oversee the discovery process and to determine whether filings should be made available to the public”
and against “turn[ing] this function over to the parties,” which would be “a violation not only of Rule
26(c) but of the principles so painstakingly discussed in Brown & Williamson”).
22

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In Tinman v. Blue Cross & Blue Shield of Michigan, 28 the court observed that in order to
have confidential information in a court record kept under seal, the movant must make a specific
showing that “disclosure of the information will result in some sort of serious competitive or
financial harm.” 29 This Court agrees that a showing of substantial personal or financial harm is
required to justify an order sealing any documents in its file.
This Court is a public forum, not a private dispute resolution service. Despite this, the
Defendant has asked the Court for blanket authority for the parties to designate documents as
“confidential” and to file them under seal. Defendant Rom, however, does not sufficiently
demonstrate that this case warrants such a broad order.
The parties must redact social security numbers, bank account numbers, and dates of
birth. Otherwise, the documents must be produced by Defendant in compliance with Plaintiffs’
discovery requests. Defendant Rom and Plaintiffs may enter into a private agreement as to the
information. Should Defendant want additional protections, it must make a specific showing to
this Court.

B. ESI Protocol
Finally, Defendant Rom has objected to the requested discovery because Plaintiffs have
not agreed to a protocol for electronically stored information (ESI). To the contrary, according
to the report of the parties’ initial planning meeting, the parties agreed upon the standard protocol
found at Appendix K to the Northern District of Ohio Local Rules. 30 Defendant Rom appears to
have proposed a substitute ESI Protocol in response to Plaintiffs’ motion for production. 31

28

176 F.Supp.2d 743 (E.D. Mich. 2001).
Id. at 745.
30
Doc. 46.
31
Doc. 76 at 2.
29

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Case No. 1:15-CV-1869
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Plaintiffs declined to adopt this altered ESI Protocol. Moreover, approval of this protocol is not
properly before the Court at this time. Defendant Rom cannot refuse to produce materials based
on his desire to make Plaintiffs agree to an additional ESI Protocol. A protocol is already in
place. Defendant has not moved for this Court to implement his proposed protocol, nor has
Defendant shown cause for the Court to do so.
The Court GRANTS Plaintiffs’ motion to compel in accordance with this opinion, and
DENIES Defendant Rom’s motion for a protective order. Defendant Rom must produce
documents and respond completely to the interrogatories and the requests for admission within
fourteen days of this opinion.

IV. Motion to Compel Against Corporate Defendants
Plaintiffs move to compel the Corporate Defendants to comply with Plaintiffs’ First
Discovery Request. 32 Defendants oppose, raising separate objections as to the proportionality
and relevance of Plaintiffs’ discovery requests. 33 Indeed, Defendants concede that they intend to
produce documents over many of the objections that they initially raised and that Plaintiffs
address in their motion. 34 However, in order to expedite discovery, the Court will still address
Plaintiffs’ arguments, and then turn to the additional objections raised by Defendants.

Plaintiffs’ Arguments
Plaintiffs contend that Defendants’ objections to the timeperiod are improper. Plaintiffs’
discovery requests include two timeperiods: the Class Period, defined as July 1, 2013 to present;

32

Doc. 71-1. As described in Doc. 71 at 6-7, the discovery requests across the Corporate Defendants
were nearly identical. The Court will refer to the IIP Ohio requests at Doc. 71-1 for convenience.
33
Doc. 81.
34
Id. at 15.

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Case No. 1:15-CV-1869
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and the Relevant Period, defined as January 1, 2012 to present. 35 The Court agrees with
Plaintiffs that these time periods are reasonable, and proportional to the needs of the case.
Plaintiffs contend that Defendants improperly objected to the discovery requests on the
claim that it did not transact business with Plaintiff Xiaoguang Zheng. Plaintiffs are correct that
Defendants must still conduct searches of their documents for relevant materials to produce. If
Defendants did not conduct business with a particular Named Plaintiff or putative Class Member,
then there will be no materials to disclose. Plaintiffs’ request is proper under Rule 26.
Plaintiffs contend that Defendants are improperly objecting to producing documents
without a protective order or ESI protocol in place. The Corporate Defendants have separately
moved for their own protective order. 36 This motion is not fully briefed because of Defendants’
request for an extension to submit the reply brief. However, as described above, the Court will
not enter the protective order allowing all documents labeled Confidential or Highly Confidential
to be filed under seal. The Court requires the party to make a specific showing.
The Court will wait for the motion to be fully briefed before ruling. But for the time
being, Defendants must make the disclosure. Defendants cannot use the desired protective order
as an excuse to delay discovery. However, until this Court rules on the motion for a protective
order, Plaintiffs’ counsel will not disclose the materials involved with the motion for a protective
order.
Moreover, as described above in Defendant Rom’s motion, the request for an ESI
protocol is also not a proper reason to delay discovery when the parties already agreed at the
initial planning meeting to a protocol.

35
36

Doc. 71-1 at 2.
Doc. 83.

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Case No. 1:15-CV-1869
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Plaintiffs contend that Defendants’ improperly object to various definitions and terms
used in the discovery requests. As described above, “Class Period” and “Relevant Period” are
both properly defined. Defendants’ objections to the definitions of “financial institutions”
“assets,” “debts,” and “Properties” are unfounded. These terms are either specifically defined or
are understandable in the context of the discovery requests. Defendants object to the phrase “real
estate services” in Request for Production No. 28, which reads: “All licenses relating to real
estate services provided by You, including but not limited to licenses for listing, advertising,
selling, brokering, and/or managing Properties.” It is clear that Plaintiffs’ request relates to
licenses. Defendants can reasonably be expected to identify any licenses they have obtained
related to real estate. Defendants’ objections are unfounded. 37

Defendants’ Arguments
Defendants argue that many of Plaintiffs’ requests are not proportional to the needs of the
case, and that Plaintiffs have not narrowed their requests to the new Rule 26 standard adopted in
2015.
While Plaintiffs have made a few extensive requests, their allegations of fraud and illegal
activity are similarly extensive and troubling. Plaintiffs allege that Defendants have improperly
moved around client funds, and made intra-company sales to generate profit, to hide assets and
to commit fraud on members of the putative class. Plaintiffs’ requests for financial documents,
tax returns, accountings, and information on assets are proper.

37

Plaintiffs oppose other objections that Defendants raised in response to the discovery requests. See
Doc. 71 at a17-19. However, Defendants say that they will produce documents despite their objections.
Defendants do not directly respond to Plaintiffs’ arguments. As a result, the Court will abstain from
ruling on these issues at this time. If there appears to be an actual controversy that cannot be resolved
through the meet and confer process, the parties may bring this to the Court’s attention.

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Case No. 1:15-CV-1869
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Interrogatory No. 6 and Request for Production No. 3 request employee information and
personnel files. Given that the allegations are for corporate fraud, breach of contract and various
statutory violations, detailed employee information does not appear to be relevant at this time.
Defendants must produce the names and roles of employees, but not the personnel files.
Interrogatory No. 13 and Request for Production Nos. 2, 11, and 12 request information
on “all companies, entities or legal persons” other than Defendants in whom Defendants own
shares or have other ownership interests. So long as Defendants are in “possession, custody, or
control” of such documents, these requests are properly tailored to the needs of the case.
The Court GRANTS Plaintiffs’ motion to compel in accordance with the above opinion.
Defendants must produce documents and respond completely to the interrogatories and the
requests for admission within fourteen days of this opinion.

V. Conclusion
The Court will consider the imposition of Rule 37 sanctions should the Defendants fail to
comply with this order.
While the Court does not grant a protective order relative to this discovery, the parties are
not to disclose any of the discovered information to anyone outside this litigation. Before any
party files any documents that include “personal information, financial information, medical or
psychiatric information, personnel records, commercially sensitive information that is not
publically available or what contains a trade secret or other confidential research, development,
or commercial information,” the party needs to provide notice to the opposing party to afford
them an opportunity to object to the filing.
Finally, this Court notes that it is apparent that the parties and their counsel have not
made a sincere attempt to cooperate in pretrial discovery and thus encourages all case
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Case No. 1:15-CV-1869
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participants to try to minimize further needless frustration, time, and expense associated with the
discovery process. Any further discovery motions must make specific requests supported by
good cause. Opposition to those motions must address those specific issues directly.
IT IS SO ORDERED.

s/
James S. Gwin
JAMES S. GWIN
UNITED STATES DISTRICT JUDGE

Dated: March 10, 2016

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