Datatreasury Corporation v. Wells Fargo & Company et al

Filing 585

RESPONSE to Motion re #522 MOTION to Compel Certain Documents Relating to Defendant First Citizens Bancshares, Inc.'s Jurisdictional Challenge filed by First Citizens Bancshares, Inc., First Citizens Bank & Trust Company. (Attachments: #1 Exhibit Exhibit A BancShares' Objections and Responses to Requests for Admissions#2 Exhibit Exhibit B BancShares' Objections and Responses to Interrogatories#3 Exhibit Exhibit C Cover letters showing the bates ranges of the production#4 Exhibit Exhibit D Excerpts to John Gray's deposition#5 Text of Proposed Order Proposed Order)(Carlson, Larry)

Case 2:06-cv-00072-DF-CMC

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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION

DATATREASURY CORPORATION
Plaintiff
CIVIL ACTION NO. 2:06-CV - 72JURY TRIAL DEMANDED

WELLS FARGO & COMPANY, et al.
Defendants.

FIRST CITIZENS BANCSHARES, INC. S RESPONSE TO MOTION TO COMPEL
First Citizens BancShares, Inc. ("BancShares ), subject to its Motion to Dismiss for Lack
of Personal Jurisdiction,

fies its response to DataTreasury Corporation s ("DataTreasury

Motion to Compel Certain Documents Relating to Defendant First Citizens BancShares, Inc.'s
Jurisdictional Challenge ("Motion to Compel"
On June 1 ,

2006, BancShares filed its motion to dismiss for lack of personal jurisdiction.

From the outset, DataTreasury has been unable to show any basis for asserting jurisdiction over
BancShares ,
despite the requirement that a pary must have a sound

factual predicate for

jurisdiction before fiing suit in Texas. On the same day that DataTreasur filed its response to
BancShares ' motion to dismiss, DataTreasury filed a motion for jurisdictional
discovery in an

effort to find this proof. After obtaining BancShares ' responses to numerous interrogatories and

requests for admissions, BancShares ' document production ,

and over five hours of deposition

testimony from a BancShares executive, DataTreasury stil canot show that jurisdiction exists.

Now, after fiing its amended response to BancShares ' motion to dismiss , and after realizing it

stil canot make the necessary showing to create personal jurisdiction, DataTreasury asks this
Cour to order even more discovery. But BancShares already has provided the jurisdictional

Dockets.Justia.co

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discovery to which DataTreasury is entitled. DataTreasury has been given its opportity to
make its jurisdictional case, and DataTreasury s jurisdictional fishing expedition must come to
an end.

DataTreasury failed to confer with BancShares regarding the alleged discovery
deficiencies.
Local Rule CV -7(h)

requires parties to make a good faith attempt to resolve discovery

matters without cour intervention. Contrary to DataTreasury s certificate of conference and the

statements in its Motion to Compel, BancShares ' counsel received no communications from
DataTreasury about the alleged discovery deficiencies. Specifically, BancShares ' counsel did

not receive the letter that DataTreasury attached to its Motion to

Compel and which was

addressed to lead counsel for BancShares. BancShares received this letter, for the first time
when it received the Motion to Compe1. And DataTreasury s counsel never called BancShares
counsel to discuss the issues raised in the Motion to Compel.

II.

BancShares has fully satisfied its obligation to provide discovery related to its
jurisdictional defense.

On December 8,

2006, the Cour granted limited jurisdictional discovery that allowed
and to

DataTreasury to serve written discovery " dealing specifically with jurisdictional issues "
depose one corporate representative regarding " the
in its Motion to Dismiss. See

jurisdictional issues

" that BancShares raised

Order (Docket Entry 394 (December 8 , 2006)). BancShares has
BancShares responded to DataTreasury

complied fully with this order.
admissions and eighteen interrogatories.

s twelve requests for

See

Exhibits A and B. BancShares also produced over
s document requests. See

1500 pages of documents in response to DataTreasury

Exhibit C.

Finally, BancShares presented Mr. John Gray, a senior vice president who is the manager

BancShares is not accusing plaintiffs counsel of intentionally misleading the court.
that the letter was either inadvertently not sent or somehow lost in the mail.

BancShares presumes

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financial reporting for BancShares, as a 30(b)(6) witness.

See

Exhibit D (Transcript

of the

Deposition of John Gray (February 7, 2007) at 7:22 - 8:7 ("Gray Deposition
provided testimony for over five hours. Id.

)l

Mr. Gray

at 211: 13.

Despite all of this discovery, DataTreasury stil has no evidence to support its assertion

that BancShares is subject to personal jurisdiction in Texas.

See

First Citizens BancShares
Inc.'s

Inc.'s Reply to Plaintiffs Amended Response to Defendant First Citizens BancShares ,
Motion to Dismiss for Lack of

Personal Jurisdiction (Docket No. 540 (Feb.

23 , 2007)).

Tellingly, DataTreasury in its Amended Response attached neither BancShares ' responses to
DataTreasury
s requests for admissions or

interrogatories nor any of

the documents

that

BancShares produced. 3

When lack of personal jurisdiction is clear,
purpose and should be denied. See Wyatt v.

as in this case

, further discovery serves no

Kaplan 686 F.2d

276 ,

284 (5th Cir. 1982).

The

declarations that BancShares has submitted to this Court demonstrate that no jurisdiction exists
over BancShares. BancShares '

jurisdictional discovery confirmed this

fact. The

additional

discovery that DataTreasury now seeks does not bear on the jurisdictional issues , as eXplained
below, and merely imposes an undue burden on BancShares. In fact, the paries find themselves

in the same position they held before DataTreasury conducted its jurisdictional discovery.
DataTreasury, fearful that it canot
surive BancShares '

motion to dismiss , asks this Cour to
But

order additional

discovery in hopes that it

may find some jurisdictional basis.

DataTreasury s jurisdictional fishing expedition must end.

DataTreasury has had two

opportunities to make its jurisdictional showing and has failed each time.
While the cover page for the deposition

transcript indicates that the entire deposition is designated

Confidential - For Outside Counsel Only, " BancShares clarifies that it has designated only page 72 , lines 8- 15 as Confidential- For Outside Counsel Eyes Only, and page 72 is not submitted with this Response. DataTreasury attached only Mr. Gray s deposition , two public documents it had attached in its original Response , and a court order from another case.

);

,'

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III.

The documents that DataTreasury seeks exceed jurisdictional discovery.
DataTreasury has not shown its entitlement to the broad discovery that it seeks from

BancShares. BancShares has provided the limited jurisdictional discovery that the Court granted

DataTreasury. DataTreasur now demands ten broad categories of documents, but makes no
effort to explain why it needs those documents for the jurisdictional issues before the Cour.
Paries seeking jurisdictional discovery must explain why the requested documents are pertinent.
See Quazzani- Chahdi
v. Greensboro News

Record, Inc. 2005 WL 2372178 (S.D. Tex. Sept.

, 2005) ("A district court may thus refuse discovery where a party has failed to show how

further inquiry would affect the cour' s jurisdictional determination or make at least a preliminary

showing of personal jurisdiction.

see also Medical Solutions, Inc. v.

Change Surgical LLC

- F. Supp.2d -' 2006 WL 3833949 (D.

C. Dec. 29, 2006) ("Where there is no showing of

how jurisdictional discovery would help plaintiff discover anything new it (is) inappropriate to
subject (defendants) to the burden and expense of discovery.''' (citation omitted)). DataTreasury

fails to satisfy this basic requirement. In fact, DataTreasury lists the document categories , and
then conclusorily states as its entire

analysis that the documents "are unquestionably relevant to
Motion to

determine the veracity of these positions. "

Compel at 3. While DataTreasury cites a
DataTreasury never

Fifth Circuit decision that lists certain

factors for an alter ego analysis ,

explains how the requested documents even concern those factors. In addition , DataTreasury has

not even pled alter ego as a jurisdictional basis

see

First Amended Complaint for Patent

Infringement (Docket No. 3 (March 28 , 2006), but now apparently rests its Motion to Compel

solely on the need to obtain documents ostensibly related to such an analysis.

The specific categories that DataTreasury lists almost exclusively encompass documents
that have no bearing on the jurisdictional analysis. To the extent that a category may cover some

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relevant information, BancShares already has produced that information. The following analysis

demonstrates these deficiencies in each of DataTreasury s listed categories, some of which are
grouped together for convenience.

Documents related to financial matters

Through the following four categories,

DataTreasury impermissibly

demands

every document related to every penny that has flowed between BancShares and its
subsidiaries ,
whether in the form of dividends or BancShares'

reimbursement to its

subsidiary FCB&T for services performed for BancShares:

month to First Citizens Ban & Trust ("FCB&T")

(AJll documents related to the management fee that (BancsharesJ pays every for services that FCB&T employees perform for Bancshares, including the most recent schedule reflecting same that Mr. Gray created(. J"

(AJll documents related to BancShares payments made to FCB&T for FCB&T's
performance of

services related to dealing with investor and stock issues of

Bancshares(.

(AJll documents reflecting the flow of fuds between FCB&T and Bancshares including all documents reflecting dividend payments, shared expenses, and other financial documents(.

(AJll documents reflecting shared services, manpower,
Bancshares , FCB&T, and Ironstone Bank(.

and finances between

The minutia that DataTreasury requests, however, does not support or controvert the existence of

jurisdiction over BancShares. For example, the exact amount of dividends that BancShares has

received from its subsidiaries
jurisdictional analysis.

or the

calculation of those dividends

does not impact the

Similarly, the exact services performed each month for which

BancShares reimburses its subsidiary FCB&T has no jurisdictional weight. DataTreasury
requests seek documents well beyond jurisdictional discovery.

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In addition, Mr. Gray in his deposition provided any information that DataTreasury could
possibly require about these categories, even if they

encompassed jurisdictionally-relevant
that

information. For example,

as to the "management fee"

BancShares pays to FCB&T, Mr.

Gray explained the fee, who calculates it, how it is calculated, when it is paid, and why it is paid.

Exhibit D at 15:4 - 18:19.

He even approximated the

amount of the fee and explained that no

written agreement exists that governs the fee.

Id.

at 24:12 - 24:19. As for dividend payments

Mr. Gray also provided ample testimony.

He testified that FCB&T pays dividends to
Id.

BancShares ,

while IronStone

Bank does not.

at 77:10-21.

He also explained that the

dividends from FCB&T are BancShares' primary source of income , and, importantly, that this
information is available on the 10-Ks that BancShares fies and that

it has produced in this

lawsuit.

Id.

at 77:10-

, 143:12 - 144:17.

Insurance applications and policies

DataTreasury in the following two categories requests a host of insurance applications
and policies, but fails to explain their jurisdictional relevance:
(A Jll insurance applications signed by officers or directors of Bancshares, or that reference Bancshares and its subsidiares in any way(.

(AJll insurance policies that have been issued to Bancshares but that also provide coverage for Bancshares' subsidiaries , including FCB&T(.

The fact is that these documents have no such relevance. Even the Fifth Circuit case on which
DataTreasury rests its entire Motion to Compel in no maner suggests that an insurance policy

issued in the name of a parent company and its subsidiaries
analysis.

is relevant to the jurisdictional

See Gundle Lining Constr. Corp.

v.

Adams County Asphalt 85 F.3d 201 (5th Cir.

1996) (cited in Motion to Compel at 3 & n. l). Even if such information were relevant, Mr. Gray

testified about such policies, providing DataTreasur with any information that it could possibly

...
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require. Mr. Gray testified that he is responsible for obtaining these insurance policies ,

that

First Citizens BancShares, Inc. and its direct and indirect subsidiaries " are the named insureds

and why the policies are issued in this maner. Exhibit D at 28:21 - 30:18. Given Mr. Gray

testimony, DataTreasury already possesses more information

about BancShares ' insurance

policies than it is entitled to obtain through jurisdictional discovery.
Board and committee meeting minutes

DataTreasur s request for the minutes of each board meeting
held by BancShares and

and committee meeting

FCB&T oversteps by a wide margin the permissible scope of

jurisdictional discovery on this topic. DataTreasury s requests include:

(AJll minutes and other documents related to all meetings of the Boards of Directors of Bancshares and FCB&T (this should actually be one set of
documents , seeing as how these are joint Boards that meet simultaneously)(.

(AJll minutes from all committee meetings for the committees of the Boards of Directors for Bancshares and FCB&T(.)
Courts consistently reaffirm the "general rule"
that "cours wil not because of

stock ownership

or interlocking directorship disregard the separate legal identities of corporations. .

BMC

Software Belgium, N V.

v.

Marchand 83 S.

3d 789,

798 (Tex. 2002) (citation omitted);

see

also Gardemal v. Westin

Hotel Co.

186 F. 3d 588 594 (5th Cir. 1999) (" (OJne- hundred percent
even together, an insuffcient basis for

ownership and identity of directors and officers are ,

applying the alter ego theory.

It follows from this general rule that the extent of

permissible discovery on this subject concerns solely whether and the extent to which the boards
for BancShares and FCB&T overlap, and even then that information does not suffice to establish
an alter ego relationship and discard the general rule that upholds the corporate form.

See BMC

Software Belgium 83 S.

3d at 798. DataTreasur is not entitled to obtain every document

related to the workings of those distinct boards.

..

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BancShares has provided to DataTreasury the permissible discovery related to its and
FCB&T's boards and committees. In his deposition , Mr. Gray explained when the boards meet

who attends the board

meetings, which committees meet

jointly, and how the minutes are

prepared. Exhibit D at 83:10 - 86:16 , 91:11 - 94:18. Some of this information also is available

from publicly-available documents that BancShares

has produced to

DataTreasury.

For
the

example , BancShares has produced a Proxy Statement from March 2006 that describes

various committees that BancShares and its subsidiaries have established.
DataTreasury even used this document to question Mr. Gray about those

Id.

at ex. 18.

committees.

Id.

130:7 - 131:24.

In

light of this testimony and the document production , DataTreasury s current

request for the minutes from each of those committee and board meetings , as well as unspecified
documents related to" those meetings, is a baseless attempt to engage in a fishing expedition.
Communications.

between the Offcers and Directors

DataTreasury requests an unspecified category of " communications " that in no maner

satisfies the requirement to describe requested documents with " reasonable particularity. "
R. Civ. Proc. 34(b). DataTreasur demands:

Fed.

(AJll communications and documents of any nature transmitted between the

Officers and Directors of Bancshares and the Offcers and Directors of its
subsidiaries FCB&T and Ironstone Ban(.)

This request for "all communications " between categories of individuals is patently overbroad

and uneasonable. If DataTreasury believes certain communications exist that are relevant to
jurisdictional issues ,

it should have tailored its request. DataTreasury s failure to do so precludes
See Schlafly v.

its request for this amorphous category of documents.

Caro-Kann Corp. ,

155

DataTreasury erroneously suggests that the board-meeting minutes for BancShares and FCB&T are joint. testified that "there are minutes that are maintained for the meeting of the board of directors of First Citizens BancShares , Inc. and. . . separate minutes maintained for the meeting of the board of directors of First Citizens Bank & Trust Company. See Ex. D (Gray
See

Motion to Compel at 2. On the contrar, Mr. Gray unambiguously

Dep. ) at 173:14-23.

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3d 565 ,

1998 WL 205766 (Fed. Cir. 1998) (affirming the denial of a motion to compel because

the party seeking discovery failed to pose the request with reasonable paricularity).

Business Transactions

in

Texas

DataTreasury seeks documents responsive to an ambiguous request for which , if any
responsive documents do exist, BancShares has already provided. DataTreasury demands the

production of the following:
(DJocuments responsive to Request for Production No. 23 concerning documents related to business transactions in Texas conducted by BancShares ' Officers and

Directors(.)
BancShares objected to Request for Production No. 23 in par
transactions in Texas " is ambiguous.

because the

phrase "business
BancShares

If DataTreasury means by this phrase
exist. In fact,

conducting business in Texas, no such documents

BancShares in its Motion to
not

Dismiss and the accompanying declaration made clear that BancShares has not and does
currently conduct business in Texas. See

Defendant First Citizens BancShares , Inc.'s Motion to

Dismiss (Docket Entry 84), Exhibit A (Declaration of John Gray) at

12. If, on the other

hand , the request is meant to encompass mere contacts with Texas , even if those contacts do not

represent or relate to business conducted in Texas , then BancShares already has produced those
documents. BancShares produced documents

related to three possible " contacts "
See

with Texas.

Mr. Gray testified about all three potential contacts.
202:21.

Exhibit D at 155:12- 157:24 , 198:22-

BancShares is unaware of any other documents in its possession , custody, or control

that would fall within a reasonable construction of Request for Production No. 23.

These three potential contacts would relate solely, if at all , to a theory of general jurisdiction , which First Citizens BancShares , Inc.'s Reply to Plaintiffs Amended Response to See Defendant First Citizens BancShares , Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction at 1 n.2 and 4DataTreasury has not asserted.

(Docket No. 540 (Feb. 23 , 2007)).

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IV.

DataTreasury s Motion to Compel should be denied in its entirety.
DataTreasury s Motion to Compel should be denied in its entirety because extensive

jurisdictional discovery has already been accomplished.

BancShares has produced documents

responded to requests for admissions and interrogatories, and presented a 30(b)(6) witness who
provided accurate and thorough testimony in response to DataTreasury s questions.

The

discovery conducted to date reveals that additional discovery is unecessar and duplicative and
that the documents DataTreasury seeks do not relate to any
jurisdictional issues in this case.

DataTreasury bears the burden of demonstrating the need for specific information bearing on the
relevant jurisdictional issue.

See Quazzani- Chahdi

2005 WL 2372178 ("A district court may

thus refuse discovery where a party has failed to show how further inquiry would affect the
court' s

jurisdictional determination or make at least a preliminar showing

of personal

jurisdiction.

Medical Solutions - F.Supp.2d -' 2006 WL 3833949 (" Where there is no
it (is)

showing of how jurisdictional discovery would help plaintiff discover anything new
inappropriate to subject (defendants) to the burden and expense of

discovery.''' (citation

omitted)). DataTreasury has failed to meet this burden.

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Dated: March -' 2007.

Respectfully submitted

Isl

Lary D. Carlson

Larr D. Carlson,

Attorney-in-Charge Texas State Bar No. 03814500 Mail: lar. carlson(fbakerbotts. com Fernando Rodriguez, Jr. Texas State Bar No. 24005048 Mail: fernando. rodriguez(fbakerbotts. com David O. Taylor Texas State Bar No. 24042010 Mail: david. taylor(fbakerbotts. com BAKER BOTTS L.L.P. 2001 Ross Avenue, Suite 600 Dallas , Texas 75201

Telephone: [phone]
Facsimile: [phone]

Donalt J. Eglinton
Mail: dje(fwardandsmith. com WARD AND SMITH, P. Post Office Box 867 New Bern, North Carolina 28563

Telephone: [phone] Facsimile: (252) 672- 5477

ATTORNEYS FOR DEFENDANTS FIRSTCITIZENS BANK & TRUST COMPANY AND FIRST CITIZENS BANCSHARES, INC.

CERTIFICATE OF SERVICE

I certify that on March -' 2007 , all counsel who are deemed to have consented to electronic service are being served with a copy of this document via electronic transmission.
Lary D. Carlson

I sl

Larr D. Carlson