Smith v. Elva Group, The et al
MEMORANDUM DECISION- finding as moot 68 Motion for Protective Order; granting in part and denying in part 78 Motion for Sanctions. See Memorandum Decision for details. Signed by Magistrate Judge Dustin B. Pead on 5/15/15. (jmr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, NORTHERN DIVISION
LOREE SMITH, an individual
Case No. 1:13-cv-00028-DS-DBP
District Judge David Sam
THE ELVA GROUP, LLC, a Utah limited
liability company; STERLING TRUST
COMPANY, a Texas corporation; ARMAND
FRANQUALIN individually, DESTINY
FUNDING, LLC, a Utah limited liability
company; EQUITY TRUST COMPANY, a
successor-in-interest to Sterling Trust
Magistrate Judge Dustin B. Pead
This matter was referred to the Court under 28 U.S.C. § 636(b)(1)(A). This dispute
involves Plaintiff’s investment in an alleged Ponzi scheme, using funds held by Defendant
Equity Trust (“Equity”) as custodian of Plaintiff’s self-directed IRA. Plaintiff alleges that Equity
transferred $42,000 to an alleged Ponzi scheme without Plaintiff’s permission. Plaintiff also
alleges that this is not the first incident involving both Equity and the investment into which
Plaintiff’s funds were transferred.
The case is before the Court on Plaintiff’s motion to compel and for sanctions. (Dkt. 78.)
The District Court partially granted and denied the motion with respect to Plaintiff’s request to
compel certain discovery responses to “Set Two.” (Dkt. 78.) Specifically the motion was granted
as to categories 5, 6, and 8. (Dkt. 95 at 14.) The District Court denied the MTC as to all
remaining categories. (Id. at 14, 25.) Thus, this Court examines the two topics not decided by the
District Court: first, whether to compel additional initial disclosures, and second, whether to
award Plaintiff expenses, fees, and sanctions for bringing the motion.
Next, the parties dispute whether Plaintiff properly moved to extend discovery. Even if
Plaintiff moved to extend discovery, Equity argues that she stipulated to not extend discovery
when the parties submitted the Joint Statement on Status, Stipulations and Scheduling. (Dkt. 91.)
Finally, the parties discussed the case at length, including discussion of the discovery
completed to date. The parties also discussed the portion of the Motion to Compel addressed by
the District Court. While the Court appreciates this information as a helpful background, this
Decision does not disturb any portion of the Motion to Compel decided by the District Court.
Plaintiff is not entitled to additional initial disclosures from Defendant Equity
Plaintiff seeks to compel Equity to supplement its initial disclosures with the identity and
contact information of any current and former Equity employees that have information relevant
to Plaintiff’s case. (Dkt. 78 at 36.) Equity’s initial disclosures at one time included a catchall
provision for any “[o]ther current or former employees of Equity Trust” who are likely to have
helpful information. (E.g. Dkt. 78-1.) Ultimately, Equity removed the catchall provision from
their amended initial disclosures. Plaintiff believes Equity should have identified additional
witnesses that Plaintiff believes have relevant information to her case.
The Court agrees with Equity; Rule 26 only requires it to disclose witnesses that it may use at
trial, not witnesses helpful to Plaintiff. Rule 26 only requires a party to disclose witnesses it may
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use “to support its claims or defenses . . . .” Fed. R. Civ. P. 26(a)(1)(A)(i). A failure to properly
disclose a witness may result in exclusion of the witness from subsequent hearings. Fed. R. Civ.
P. 37(c)(1). Plaintiff has not demonstrated that Equity failed to meet its initial disclosure burden.
Further, even to the extent Equity did fail to disclose a witness, the appropriate remedy is
exclusion, not compelled disclosure.
Plaintiff’s request for monetary sanctions is denied.
Plaintiff seeks fees and expenses for her bringing the motion to compel. Before the District
Court, Plaintiff was only partially successful in her motion to compel. Likewise, this Court has
denied Plaintiff’s lone remaining request to compel discovery. In such circumstances the Court
“may, after giving an opportunity to be heard, apportion the reasonable expenses for the motion.”
Fed. R. Civ. P. 37(a)(5)(C). The Court denies Plaintiff’s request for fees and expenses because
Plaintiff was only partially successful before the District Court, and she is unsuccessful on her
motion to compel initial disclosures. Further, the circumstances here do not otherwise justify an
award of expenses or fees to Plaintiff.
There is no motion to extend all fact discovery before the Court. While Plaintiff contends that
she requested a discovery extension in her Motion to Compel and for Sanctions, the proposed
order does not indicated that she sought a discovery extension. (See Dkt. 78-2.) Likewise, the
parties apparently stipulated to a number of discovery issues and Equity and their counsel
understood that this stipulation disposed of Plaintiff’s request to extend discovery. (Dkt. 91.)
This stipulation was filed after the Motion to Compel and the stipulation specifically
contemplated Plaintiff’s request to extend discovery and extinguished Plaintiff’s request to
extend discovery. (E.g. id. at 1.) Accordingly, the Court concludes there is no pending motion to
extend discovery properly before it.
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Nonetheless, the Court recognizes that a liberal reading of Plaintiff’s Motion to Compel
suggests she could have been making an effort to extend discovery, at least for the specific
subjects on which she moved to compel. Accordingly, the Court will consider whether to extend
discovery to allow depositions related to the items compelled by the District Court. Specifically,
the Court will examine whether a discovery extension should be granted for the deposition of
Equity’s internal investigator (identified during oral argument as Ms. Jackson), and the
depositions of “the employees who received the subsequent statements” 1 (“Employees”).
A. Discovery shall be extended only to allow Plaintiff to take the deposition
of Equity’s internal investigator
The parties agree that the Court should look at six factors to determine whether there is good
cause to amend the scheduling order:
Whether trial is imminent;
Whether the request is opposed;
Prejudice to the non-moving party;
Diligence by the moving party;
Foreseeability of the need for additional discovery in light of the time allowed for
discovery by the district court;
6. The likelihood the discovery will lead to relevant evidence.
(Dkt. 86 at 8–9; Dkt. 87 at 4.)The Court finds as follows regarding those issues:
1. Trial is not imminent.
Plaintiff correctly notes that courts have found trial not imminent even when trial was more
proximate than this one. This factor weighs in favor of an extension.
2. The request is opposed.
Equity opposes the request to extend discovery. This factor weighs against an extension.
Equity alleged in its cross-claim that it took certain actions pursuant to “subsequent statements
to Equity Trust . . . .” (Dkt. 29 at 28.)
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3. Defendant may suffer some prejudice as a result of reopened discovery
in the form of disproportionate discovery.
The parties have already engaged in prolonged discovery in this matter, despite the relatively
small amount in controversy ($42,000). Nonetheless, Equity rightly conceded during oral
argument that the prejudice arguments against extending discovery were not as strong with
respect to the internal investigator’s deposition. This factor weighs against an extension to take
the Employee depositions, but in favor of the internal investigator’s deposition.
4. Plaintiff narrowly demonstrated sufficient diligence as it pertains to the
Several events suggest Plaintiff was not perfectly diligent during discovery. First, Equity
stipulated to three discovery extensions. Plaintiff attempts to blame Equity for her delay, but
Equity’s conduct does not explain Plaintiff’s delay in seeking additional information on these
issues sooner, whether by deposition notice or otherwise. Specifically, despite having ETC00043
since mid-2014, Plaintiff never made a discovery request to identify its authors, nor did Plaintiff
request to depose them prior to the close of discovery.
Nonetheless, while Plaintiff did not file a motion to compel the depositions of these
individuals, or notice them during the discovery period, she at least sought documents related to
these individuals in her Motion to Compel (although, that motion was filed only after the close of
fact discovery). Giving Plaintiff the benefit of the doubt, she may have only realized the need for
a deposition of the internal investigator after her Motion to Compel was partially granted. During
the hearing before the District Court, Equity indicated there is no such report, but it would
identify the person who conducted the internal investigation. (Dkt. 95 at 22.) Likewise, during
oral argument before this Court, Plaintiff indicated that counsel made attempts to contact the
internal investigator. Based on the foregoing, this factor weighs slightly in favor of an extension
to take the investigator’s deposition, but against taking the Employee depositions.
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5. The need for additional discovery was not “foreseeable” 2 because the
District Court allowed a period of about one year for fact discovery.
Plaintiff blames Equity by arguing that its conduct necessitated the discovery here; however
Plaintiff does not address the amount of time the District Court provided. Plaintiff had over a
year to complete discovery, but elected to take her first deposition nearly eight months after she
filed this case. This factor weighs against an extension. See Smith v. United States, 834 F.2d 166,
169 (10th Cir. 1987) (finding eight-month period during which depositions could have been
taken to be sufficient)
6. The deposition of the internal investigator appears relevant, but the
Employee depositions do not.
Plaintiff meets the threshold requirements of relevance for the proposed deposition of the
internal investigator. The investigator is likely to have information relevant to the issues in this
case and may be able to provide helpful factual detail. Depositions of the Employees, on the
other hand, are not reasonably calculated to lead to discovery of admissible evidence. The
Employees made data entries on a document Equity produced during discovery in 2014: ETC
00043. This record appears to memorialize internal communications at Equity regarding the
transfer of Plaintiff’s funds. Equity proffered that a high volume of these transactions takes place
each day. It is thus unlikely that these employees will remember the details of each transaction.
Moreover, even if they did, the record itself contains the Employees’ contemporaneous notes of
the communications. Thus, this factor weighs against taking the Employee’s depositions, but in
favor of taking the internal investigator’s deposition.
Foreseeability turns on whether the discovery period ordered by the court was so short it was
foreseeable that an extension would be necessary. Smith v. United States, 834 F.2d 166, 169–70
(10th Cir. 1987).
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Based on the Court’s findings above, and for the reasons stated on the record during the May
15, 2015 hearing, the Court will grant Plaintiff’s request to extend discovery for the limited
purpose of deposing the internal investigator, and will deny the request to extend discovery to
depose the Employees. Plaintiff has until June 15, 2015 (thirty days from the hearing) to depose
the investigator. The parties may extend this deadline by mutual agreement until no later than
June 30, 2015.
Civility and Professionalism
Counsels’ conduct unfortunately warrants mentioning here. Both in the briefing and during
oral argument the Court witnessed conduct that fails to meet the Utah Standards of
Professionalism and Civility imposed on litigants practicing in this District. See D.U. Civ. R. 831.1(g). Both parties in this matter have implied or overtly suggested that their opponent has acted
with improper motives, or not in good faith. This conduct is improper under Standards 1 and 3:
Lawyers shall advance the legitimate interests of their clients, without reflecting any ill-will
that clients may have for their adversaries, even if called upon to do so by another. Instead,
lawyers shall treat all other counsel, parties, judges, witnesses, and other participants in all
proceedings in a courteous and dignified manner.
Neither written submissions nor oral presentations should disparage the integrity,
intelligence, morals, ethics, or personal behavior of an adversary unless such matters are
directly relevant under controlling substantive law.
D.U. Civ. R. App’x V. The Court intentionally omits any particular reference to either party’s
conduct. Each side has acted contrary to these Standards. Instead, the Court issues a warning to
each side to follow the Utah Standards of Professionalism and Civility, at all times. As the rules
indicate, this extends both to written and oral submissions. Future violations may result in
adverse consequences for the parties, their counsel, or both. Additionally, the Court wishes to
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clarify that it refers to these matters not to embarrass or impugn counsel. Instead, the Court is
merely attempting to nip a problem in the proverbial bud.
Equity’s Motion for Protective Order is moot.
Equity Trust moved for a protective order prohibiting the depositions of two of its
employees: Jeff Thompson and Jeff Kelly. (Dkt. 68.) The parties filed a joint statement
indicating that this motion is moot. (Dkt. 91 at 4.) During oral argument, the parties confirmed
that this motion is moot. Accordingly, the Court finds the motion is moot. (Dkt. 68.)
Based on the foregoing, the Court hereby
DENIES IN PART AND GRANTS IN PART Plaintiff’s Motion to Compel. (Dkt. 78.)
Plaintiff may take the deposition of Equity’s internal investigator, Ms. Jackson, no later than
June 15, 2015. The parties may stipulate to extend this deadline to no later than June 30, 2015.
The remaining requests in the Motion to Compel are denied, including the request for fees and
expenses. This Decision does not impact the portions of the Motion already determined by the
District Court, nor the motion for reconsideration recently filed by Plaintiff.
FINDS MOOT Equity’s Motion for Protective Order. (Dkt. 68.)
Dated this 15th day of May, 2015.
By the Court:
Dustin B. Pead
United States Magistrate Judge
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