Shanta Inc v. Nautilus Insurance Company

Filing 48

ORDER granting 39 Motion to Compel; granting 40 Motion to Expedite, as more fully set out. Signed by Honorable David L. Russell on 8/16/16. (jw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
SHANTA, INC. D/B/A
GREEN CARPET INN,
Plaintiff,
v.
NAUTILUS INSURANCE
COMPANY,
Defendant.

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CIV-15-872-R

ORDER
This matter comes before the Court on the Motion to Compel, filed by Defendant, Nautilus
Insurance Company (Doc. No. 39).1 Plaintiff responded to the motion, noting in his response that
certain documents were provided to Defendant following the filing of the motion to compel. Having
considered the parties’ submissions, the Court finds as follows.
Plaintiff filed this action alleging breach of contract and bad faith with regard to the
Defendant’s failure to pay certain claims made on the insurance policy covering the Green Carpet
Inn in Oklahoma City following a May 2013 tornado. Defendant served discovery requests on
Plaintiff on January 8, 2016, and as of the filing of the instant motion, Defendant had not received
documents responsive to certain requests. Specifically Defendant addresses the following:
Request for Production No. 24:
If you are making a claim under the Policy for loss of business income as a result of
the May 31, 2013 tornado, please produce all documents that you contend support
your claim.
Request for Production No. 25

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Defendant also filed a Motion to Expedite Consideration of the Motion To Compel (Doc. No. 40), which was
in essence granted by the Court’s Order shortening the response and reply time, and is therefore GRANTED.

Please produce a detailed profit and loss statement for the years ending December
31, 2008 through December 31, 2012.
Request for Production No. 26
Please produce a detailed monthly profit and loss statement for the period January
2013 through September 2013.
Request for Production No. 27
Please produce your corporate tax returns, with all supporting schedules, for the past
five (5) years.
Plaintiff made no responsive production with regard to Requests 25 through 27, stating that
responsive documents would be produced with regard to 25 and 26, and objecting to production of
the tax returns. With regard to Request for Production No. 24, Plaintiff directed Defendant to
documents previously produced, specifically those Bates stamped Shanta 0001 through Shanta 0368.
Defendant contends that Mr. Patel, one of two shareholders in Shanta, Inc., along with his wife,
admitted in his June 24, 2016 deposition that he had responsive documents, including tax returns,
daily occupancy reports and documents to support the calculation of lost business income. In its
reply brief Defendant acknowledges Plaintiff’s late production of certain documents but contends
Plaintiff still has not produced tax returns in response to Request for Production No. 27, or daily
occupancy statistics (including rooms available and rooms occupied) and daily revenue totals for
May 1, 2012 through September 30, 2012, and for January 2013 through 2015.
In response to the Motion to Compel Plaintiff contends that Mr. Patel struggles with English
and as a result failed to produce to Shanta’s counsel the documents Defendant sought that Plaintiff’s
counsel had been requesting. Plaintiff’s counsel contends that he finally was able to obtain relevant
documents by requesting the same from Shanta’s accountant, specifically monthly financial
statements for August 2012 and all of 2013, which, with the exception of November and December
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2013, were produced August 1, 2016.2 In lieu of financial statements for those two months, the
general ledger and back-up information were apparently produced to Defendant on August 5, 2016.
Plaintiff objects to production of corporate tax returns.
Despite Plaintiff’s contention that its tax returns are confidential and that ordering production
thereof would invade its privacy, the Court concludes that in light of Plaintiff’s claim for loss of
business income related to the Green Carpet Inn that Defendant is entitled to discovery of the tax
returns sought. Although Plaintiff has provided some financial information, the numbers provided
do not in many instances appear consistent. That is, Plaintiff’s “Occupancy Report” for the period
of January 1, 2013 through May 31, 2013 indicates that during that 151 day period the hotel had
11089 occupied rooms, for a percentage occupancy of 78.12% and revenue of $335,355.80.
However, according to the Statement of Revenue and Expenses prepared by Plaintiff’s accountant
monthly for this same time frame, the business reflected total revenue of approximately $170,000.00
Plaintiff provided copies of its response to an audit completed by Defendant for purposes of
establishing the premiums, which included various “Monthly Hotel Room Tax Reports,” which
identified the gross receipts of the Green Carpet Inn. The total of the amounts reported from January
through May 31, 2013 is approximately $70,000. Thus, without tax returns, it appears unlikely that
Defendant will be able to determine the true nature of Plaintiff’s lost business income as a result of
damage to the hotel caused by the tornado. Plaintiff is hereby ordered to produce the returns for
2011 through 2015 within fifteen days of entry of this Order.

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Plaintiff’s counsel states that he received financial statements on July 11, 2016, but for some unknown reason
did not provide those to Defendant until August 1, 2016, when he provided Defendant with a copy of Mr. Curry’s expert
report.

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The same holds true with regard to Defendant’s request for daily occupancy statistics for the
period of May 1,2012 through September 30, 2012 and for all of 2013 through 2015. Although there
may be explanations for the inconsistencies, those explanations are not readily apparent from any
of the financial records the parties have provided to the Court. Accordingly, Plaintiff is hereby
ordered to provide the daily occupancy reports and statistics for the hotel for the period identified
herein within fifteen days of entry of this Order.
Defendant requests sanctions for Plaintiff’s failure to timely respond to Defendant’s
discovery. Pursuant to Rule 37(a)(5), “[i]f the motion (to compel) is granted—or if the disclosure
of requested discovery is provided after the motion was filed—the court, must, after giving an
opportunity to be heard, require the party or deponent whose conduct necessitated the motion, the
party or attorney advising that conduct, or both to pay the movant’s reasonable expenses in making
the motion, including attorney’s fees.” There are three exceptions, only one of which is potentially
applicable herein, that other circumstances make the award unjust. Plaintiff’s counsel argues that
the fact that English is not Plaintiff’s first language, he is a native of India, makes it difficult to
obtain the proper responsive documents from him, despite repeated requests by counsel.
The Court finds no basis in the Plaintiff’s submissions for denying attorney’s fees, which
were requested in Defendant’s motion. It should have been apparent that the issue of loss of income,
while not the sole issue herein, is nevertheless a primary issue to be resolved in this litigation. As
such, counsel is tasked with working with Plaintiff to ensure that the required production is made
in a timely manner. The Court hereby orders the parties to confer within seven days of this Order
to attempt to reach an agreement regarding the amount of reasonable fees and expenses incurred as
a result of Defendant’s motion to compel. If the parties are unable to agree, Defendant shall file a

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verified accounting of its fees incurred as a result of filing the motion to compel, and Plaintiff shall
have twenty-one days to respond thereto. Defendant may file a reply within seven days of Plaintiff’s
response.
Finally, Defendant requests and Plaintiff does not oppose granting Defendant a sixty-day
extension of time for filing its expert witness list and expert report, measured from the date of
Plaintiff’s production of the requested financial information. This matter is currently set on the
Court’s November 2016 trial docket. Granting Defendant’s request would, in light of the deadlines
previously established, render Defendant’s list and disclosures a day before the November trial
docket. This would, of course, preclude any challenge by Plaintiff to Defendant’s expert witnesses
if the case is retained on the November trial docket. Accordingly, the Court hereby GRANTS
Defendant’s requested extension, and its disclosures and reports are due sixty days from the date on
which Plaintiff makes the required supplemental production. The matter is hereby stricken from the
November trial docket and reset to the February 2017 docket. All dispositive and Daubert motions
shall be filed not later than December 1, 2016. Discovery is to be completed by January 3, 2017.
Designations of deposition testimony to be used at trial must be filed by February 1, 2017, with
objections and counter-designations due February 6, 2017. The parties final pretrial report, proposed
jury instructions and requested voir dire are due not later than February 1, 2017.
For the reasons set forth herein, Defendant’s Motion to Compel is GRANTED.
IT IS SO ORDERED this 16th day of August, 2016.

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