Phoenix Drilling, Inc. v. East Resources, Inc., et al

Filing 67

ORDER/OPINION granting 48 Motion to Compel. Defendants shall have 21 days from the date of entry of this Order to fully respond to Interrogatories 6 and 9 and Request for Production 23. Counsel for Plaintiffs is directed to file with the Court an d serve on Plaintiffs within 14 days of entry of this Order an accounting of the fees and costs necessitated in filing this motion. Counsel for Defendants shall file any objections to Plaintiffs' claims of costs and fees and the amounts claimed, within 7 days of the filing of the accounting. Only if both a claim for fees and an objection thereto are filed, will the Court then schedule a hearing to provide Defendants an opportunity to be heard prior to the awarding of any expenses. Signed by Magistrate Judge John S. Kaull on 3/13/2012. (kd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

PHOENIX DRILLING, INC.,
Plaintiff and Counterclaim Defendant,
and
BRADLEY LIGGETT and
DENNIS CHIDESTER,
Intervenor Plaintiffs,

vs.

CIVIL ACTION NO. 1:11CV08

EAST RESOURCES, INC.,
EAST RESOURCES MANAGEMENT, LLC., and
SWEPI, LP.,
Defendants and Counterclaimants,
vs.
BRADEN DRILLING, LLC.,
Counterclaim Defendant.

ORDER/OPINION
On the 12th day of January, 2012, Plaintiffs filed a Motion to Compel [Docket Entry 48]. On
January 7, 2012, Plaintiffs’ Motion to Compel was referred to the undersigned [Docket Entry 50].
On February 2, 2012, Defendants East Resources, Inc., East Resources Management, LLC, and Swepi,
LP (collectively “Defendants”) filed their Response to the Motion [Docket Entry 56]. On February
8, 2012, Plaintiffs filed a Reply [Docket Entry 62]. The Court finds the issues involved in the motion
are not complex and therefore do not require a hearing.

The Amended Complaint in this case was filed against the three Defendants named in the
motion in State Court on December 21, 2010 [D.E. 1]. On January 26, 2011, Defendants removed
the action to this Court [D.E. 1]. The Answer to the Amended Complaint was filed on February 28,
2011 [D.E. 10], and an Amended Answer on March 11, 2010 [D.E. 13]. These parties filed their joint
Rule 26(f) Report on March 10, 2011. A Scheduling Order was entered on October 3, 2011 [D.E.
38].1
Plaintiffs served “Plaintiff’s First Set of Combined Discovery Requests to Defendants” on
October 20, 2011 [D.E. 39]. On November 16, 2011, Defendants requested a two week extension,
and the parties agreed to a mutual two week extension [Exhibit 2]. On December 5, 2011, Defendants
requested another ten days’ extension, and the parties again agreed to a mutual extension [Exhibit 3].
On December 15, 2011, Defendants served “Defendants [sic] Objections to Plaintiff’s First Set of
Interrogatories and Requests for Production of Documents” [Exhibit 4]. A review of the document
indicates Defendants inexplicably did not respond in any manner to Interrogatories 1, 2, 3, 4, 5, 8, 10,
11, 14, 15, or 17, or Requests 4, 8, 20, or 25. As to the Interrogatories and Requests to which
Defendants did respond on December 15, the response to every Interrogatory and Request was solely
an objection, with the exception of Requests 10 and 11, regarding experts, which Defendants stated
would be supplied in accordance with the Court’s scheduling order. The objection to nearly every
request was that it was “overly broad, unduly burdensome, and not reasonably calculated to lead to
discovery of admissible evidence.” In brief, absolutely no information was provided in response to
the discovery requests, despite the extensions of time.

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Other activity took place in the interim, including other parties being added as
intervenors and counterclaimants. The Court notes, however, that the parties involved in this
motion were named in the original complaint.
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On December 19, 2011, counsel for Plaintiffs wrote to counsel for Defendants, first noting the
numerous requests to which Defendants did not respond at all, and second noting the requests
addressed resulted solely in objections, with no information provided whatsoever [Exhibit 5]. On
December 21, the parties conferred by telephone. According to a letter from Plaintiffs’ counsel to
Defendants’ counsel, which Defendants do not dispute, Defendants advised during the phone
conference: “East Resources, Inc., is having some trouble extracting information and documentation
from its computer system and you believe that it may be a week or two before you will be able to
extract it or determine that it is non-extractable.” In the letter, counsel for Plaintiffs agreed to wait
for further responses until December 28, 2011 [Exhibit 6].
According to a letter written by Plaintiffs’ counsel to Defendants’ counsel on December 28,
2011, counsel did confer by telephone that date [Exhibit 7]. Counsel for Plaintiffs agreed to “forget”
Requests 16, 17, 18, and 19. Defendants appeared to be “willing to provide [] some of the
documentation and information at issue.” They also appeared to resolve the issues regarding
Interrogatory 7 and Requests 21 and 22.
Plaintiffs’ counsel agreed to narrow the scope of Interrogatory 6 and Request 23 to “lawsuits
involving allegations of fraud, breach of contract, tortious interference with business relations, and/or
equitable estoppel/detrimental reliance,” and also agree to limit the requests to lawsuits filed between
January 1, 2005, and the date of the letter. Those requests remain disputed, however, as does
Interrogatory 9. Significantly, Defendants at that point had still not responded in any way to 11
interrogatories and 4 requests for production.
On January 4, 2012, counsel for Defendants emailed counsel for Plaintiffs, advising:
I have quite a bit more information to discuss with you and some more items that we
can probably agree upon following up on our conversation last week. I am out today
with some kind of head and chest flu, but I hope to be up and running enough to be

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back at work tomorrow. I will give you a call tomorrow to discuss if that works for
you.
Counsel for Plaintiffs replied: “That works. I hope you feel better.” [Exhibit 8].
On January 11, 2012, Plaintiffs’ counsel emailed Defendants’ counsel advising that, despite
counsel’s assurances that responses would be filed on January 9, 2012, he had still not received any
response whatsoever to the 11 interrogatories and 4 requests for production to which Defendants did
not object [Exhibit 9].
The Motion to Compel was filed the next day, January 12, 2012. On January 26, 2012,
Defendants requested and were granted an extension of time to respond to the motion to compel “as
the parties continue to discuss the substance of that motion and the Defendants [sic] responses
thereto.”
Defendants filed their Responses to the discovery requests on January 27, 2012, more than
three months after the requests were first served. They filed their Response to the Motion to Compel
on February 2, 2012.
Still in dispute are Interrogatories 6 and 9 and Request for Production 23.
Interrogatory No. 6 and the response thereto are as follows:
INTERROGATORY NO. 6: Please list each and every lawsuit that has been filed
against East Resources, Inc. In the past ten (10) years, including:
(a) the names of all parties;
(b) the jurisdiction;
(c) the venue;
(d) the civil action number;
(e) the name(s) of the attorney(s) representing the adverse party or parties;
(f) the telephone number(s), if known, of each and every attorney who represented the

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adverse party or parties in the lawsuit against East Resources, Inc.,;
(g) the general allegations and specific causes of actions set forth in the complaint;
(h) the ultimate resolution of the lawsuit (settlement, dismissal, trial, etc.);
(I) the amount of money paid by East Resources, Inc. or on behalf of East Resource,
Inc. to satisfy the judgment or settlement obligations.
ANSWER: The Defendants object to the information sought relative to all lawsuits
against East Resources for the past ten years as being irrelevant, overly broad and not
reasonably calculated to least to the discovery of admissible evidence.

Request for Production 23 and the Response thereto are as follows:
REQUEST FOR PRODUCTION NO. 23:Please provide copies of each and every
complaint that has ever been filed against East Resources, Inc. which includes
allegations of fraud, breach of contract, tortious interference with business relations,
and/or equitable estoppel, detrimental reliance.
RESPONSE: The information sought by request number 23, requesting copies of
every complaint that has ever been filed against East Resources alleging fraud, breach
of contract, tortious interference with business relations, and/or equitable
estoppel/detrimental act, is overly broad, unduly burdensome and not reasonably
calculated to lead to discovery of admissible evidence.

The Court notes that Plaintiffs subsequently narrowed the scope of both the Interrogatory and
the Request for Production to include information regarding lawsuits filed between January 1, 2005,
to the present, and involving only allegations of fraud, breach of contract, tortious interference with
business relations, and/or equitable estoppel/detrimental reliance.
Interrogatory 9 and the response thereto are as follows:
INTERROGATORY NO. 9: Please state the compensation Defendant East
Resources, Inc. paid to its executives (including the CEO, COO, CFO, all other
executive level employees and members of the company’s Board of Directors) for the
years 2000 through 2010.

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ANSWER: The Defendants object to the information sought by interrogatory number
9 and that information paid to all executives for an eleven year time period of East
Resources is neither relevant nor reasonably calculated to lead to discovery of
admissible evidence.

First, general objections to discovery are, at the very least, disfavored. See, i.e., PLX, Inc.
v. Prosystems, Inc., 220 F.R.D. 291 (N.D.W.Va. 2004); Momah v. Albert Einstein Medical Center,
164 F.R.D. 412 (E.D.Pa. 1996)(holding that “mere recitation of the familiar litany that an
interrogatory or a document production request is ‘overly broad, burdensome, oppressive and
irrelevant’ will not suffice”)(quoting Josephs v. Harris Corp., 677 F.2d 985 (3d Cir. 1982)).
Defendant’s subsequent response to the motion to compel only serves to underscore the inadequacy
of the actual original discovery responses. As to Interrogatory 6 and Request 23, Defendant argues,
in pertinent part:
This is a very specific case with very specific facts. Past litigation involving ERI,
including those outside of the state of West Virginia, has absolutely no bearing on this
action. While Plaintiff’s counsel agreed that Interrogatory No. 6 needed to be
narrowed to reflect Request No. 23 and should be limited to lawsuits filed between
January 1, 2005 and today . . . the narrowing of prior litigation information to “fraud,
breach of contract, tortious interference with business relations, and/or equitable
estoppel/detrimental reliance” over a seven year period still results in an unwarranted
fishing expedition for irrelevant information in hopes of invoking punitive damages.
Due process does not allow such a tactic.
As to Interrogatory 9, Defendant argues:
Likewise, Interrogatory No. 9, which asks for the executive compensation of ERI
executives from 2000 through 2010, is not reasonably calculated to lead to admissible
evidence. Plaintiff explains that it is relevant as to punitive damages and the fact that
it believes an ERI employee stated that ERI did not have the cash to consummate an
agreement with Phoenix. These two distinct uses for this information are both
unwarranted. First, net worth, not executive compensation, is what is relevant for
punitive damages in West Virginia . . . Second, if the Plaintiff wanted to know if cash
was available during the time frame it alleges ERI agreed to purchase an interest in
Phoenix, it could have simply asked that question in a discovery request. Instead, it

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is trying to pry into executive compensation as opposed to asking a direct question,
which would have yielded a response that would make an inquiry into executive
compensation unnecessary. Simply put, executive pay is not a relevant consideration
for punitive damages. While net worth is relevant, that information has been fully
provided.
Second, the Court does find significant the undisputed fact that the responses, based solely
on the requests being “overly broad, unduly burdensome and not reasonably calculated to lead to
discovery of admissible evidence,” were filed nearly two months after service of the requests, and
after two requests for extensions of time were granted by Plaintiffs. In fact, the response to every
single discovery request was an objection, while 11 interrogatories and 4 requests for production were
not addressed in any way whatsoever. The Court does not find that the objections to these requests,
as argued in the response to the motion to compel, required “additional time and resources to locate
. . . including the examination of multiple servers and individual laptops that were not centrally
located given the sale of the company.”
For this reason alone, the Court finds Plaintiff’ motion to compel should be granted. The
Court shall, however, discuss each of the items separately. F.R.C.P. 26(b)(1) provides:
Parties may obtain discovery regarding any nonprivileged matter that is relevant to
any party’s claim or defense . . . . Relevant information need not be admissible at the
trial if the discovery appears reasonably calculated to lead to the discovery of
admissible evidence.
Defendants do not argue that the information sought in any of the requests is privileged or
confidential.
The “discovery rules are to be accorded a broad and liberal treatment.” Hickman v. Taylor,
329 U.S. 495, 67 S.Ct. 385, 91 L.Ed.451 (1947). However, the discovery sought must be relevant
F.R.C.P. 26(b)(1); see also Herbert v. Lando, 441 U.S. 153, 99 S.Ct 1635, 60 L.Ed.2d 115 (1979).
In striking the appropriate balance, “[d]istrict courts enjoy nearly unfettered discretion to control the

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timing and scope of discovery and impose sanctions for failures to comply with its discovery orders.”
Hinkle v. City of Clarksburg, 81 F.3d 416 (4th Cir. 1996). “Discovery requests may be deemed
relevant if there is any possibility that the information may be relevant to the general subject matter
of the action.” Marker v. Union Fidelity Life Ins. Co., 125 F.R.D. 121 (M.D.N.C. 1989). Federal
Rule of Evidence 401 defines “relevant evidence” as “evidence having any tendency to make the
existence of any fact that is of consequence to the determination of the action more probable or less
probable than it would be without the evidence.”
The issue is therefore whether the information is relevant to any party’s claim or defense.
Plaintiffs’ complaint includes claims of fraud and tortious interference with business relations.
Plaintiffs claim that Defendants made an offer of $8,750,000.00 for a 35% interest in Plaintiff’s
business in order to induce Plaintiff to reject an offer of $20,000,000.00 plus incentives for the sale
of the business to another entity. Plaintiffs further claim that at the time Defendants made the offer,
they knew, or should have known they did not have the cash flow to pay the $8,750,000.00.
Defendants deny that they asked Plaintiffs to reject the other entity’s proposed offer, and
further deny that, as an incentive, they offered to purchase a 35% ownership in Plaintiff’s business
for $8,750,000.00. They also deny the claim that when it was time for them to pay the purchase price,
they claimed that did not have the cash on hand.
Plaintiffs claim they are entitled to punitive damages for fraud.
Regarding Interrogatory No. 6 and Request No. 23, the Court finds the information requested
appears reasonably calculated to lead to the discovery of admissible evidence. In Culbertson v. Jno.

McCall Coal Co., 275 F.Supp. 662, 676 (DCWVa 1967), the Court held:
The law seems to be well settled that in civil cases, where fraud is an issue, evidence
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of other fraud of like character, committed by the same party, at or about the same
time, is admissible to indicate a scheme, plan or design on his part broad enough to
include the act in question. 20 Am.Jur. (Evidence) Sec. 303, pages 281-282, gives
the general rule thusly:
‘The law in civil cases, as well as in criminal cases, permits proof of
acts other than the one charged which are so related in character,
time, and place of commission as to tend to support the conclusion
that they were part of a plan or system or as to tend to show the
existence of such a plan or system. Thus, when one's motive, malice,
or ill will or his intention or good or bad faith in doing or omitting to
do certain acts becomes an issue, his acts, statements, and conduct on
other occasions which have a bearing upon his motive or intention
upon the occasion in question are competent evidence. Where several
forgeries were a part of the same transaction and tend to show a
common plan or scheme, evidence of other forgeries or alterations is
admissible upon an issue of forgery or alteration in a civil case.
Where fraud is an issue, evidence of other similar frauds perpetrated
by the same person on or about the same time, is admissible
particularly where the acts are all part of one general scheme or plan
to defraud.’
In States v. Riss & Co., Inc., 139 W.Va. 1, 80 S.E.2d 9, it is said that,
‘In an action to recover the value of a cargo allegedly destroyed by
fire following an accident, evidence of other accidents involving
similar cargo, in which the cargo was allegedly destroyed by fire,
which accidents occurred closely in point of time with the accident
in question, is admissible under the defense of fraud to show a
general plan or scheme or intent to defraud.’
In the case of Shingleton Bros. v. Lasure, 122 W.Va. 1, 6 S.E.2d 252, Syl. 1, it is
stated,
‘In a civil case there may be proof of acts other than the one involved
if they be so related in character, time and circumstances as to tend
to establish a plan or system inclusive of the act in suit.’
In the case of First National Bank of Pennsboro v. Barker, 75 W.Va. 244, 83 S.E.
898, Syl. 4 reads as follows:

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‘To prove, in a civil action, the perpetration of a criminal or
fraudulent act by any person, evidence of other similar acts done by
him, conduct on his part, importing the same and his admissions
thereof are admissible, provided they are so connected in time,
purpose and character as to indicate a scheme, plan or design on his
part, broad enough to include the act in question.’
In the case of Piedmont Bank v. Hatcher, 94 Va. 229, 26 S.E. 505, the Court held
that where fraud in the sale of property is an issue, evidence of other frauds of like
character, committed by the same party, at or about the same time, is admissible. The
Court held that large latitude is always given to the admission of evidence where the
charge is fraud.
In the case of Miles F. Bixler Company v. Dunsmore, 109 W.va. 727, 156 S.E. 72,
the Court held that evidence of an agent's fraud, in procuring a similar order, was
admissible to corroborate defendant's testimony as to fraud.
In the case of Baldwin v. Warwick (C.C.A. 9th Cir), 213 F.2d 485, Syl. 3 reads as
follows:
‘In action by real estate dealer for damages on ground that
defendants, pursuant to conspiracy between them, had defrauded
dealer by trick and device inducing amnesia in him by means of
drugged drinks with result that he had sustained gambling losses,
testimony of other real estate men showing similar experiences they
had had with defendants was admissible for limited purpose of
showing existence of over-all scheme on defendants' part.’
In the case of Osborne v. Holt and Woodson, 92 W.Va. 410, Syl. 1, 114 S.E. 801
reads as follows:
‘Evidence of similar representations, made to others, by one
soliciting subscriptions to the capital stock of a corporation, to induce
purchases of such property, are admissible in a suit for damages by
one who purchases stock on the faith of fraudulent representations,
not as evidence of the statements made to the plaintiff in such suit,
but as showing the inclination of mind of the party charged with
making the representations on the subject.’
In the case of Wilson v. Carpenter's Administrator, 91 Va. 183, 21 S.E. 243, a suit
to cancel a contract on account of false representations by an agent, the Court held
that evidence of similar statements made by the agent to other people at other times,
though not competent to prove what occurred when the contract in question was
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made, might be ‘introduced to show the bent of the agent's mind.
Thus, the evidence offered by Culbertson, tending to show the practicing of fraud
and deceit by McCall against Pine Oaks, in a similar transaction, over a similar
period of time, and in the same general area, though not competent to prove the
misconduct charged by Culbertson in the instant case, nevertheless is admissible for
the purpose of showing ‘the bent of the agent's (McCall's) mind,’ or as said by the
Court in the case of Osborne v. Holt, supra, for the purpose of ‘showing the
inclination of mind’ of McCall, the agent.
The Court finds the information requested in Interrogatory 6 and Request 23, as later narrowed by
Plaintiffs, appears reasonably calculated to lead to the discovery of admissible evidence. The Court
notes that Defendants rebuffed Plaintiffs’ offer to narrow the requests; however, under its power
pursuant to F.R.Civ.P. 26(b)(2)(C)(iii) the Court shall limit both the interrogatory and the request to
information regarding lawsuits filed between January 1, 2005, to the present, and involving only
allegations of fraud, breach of contract, tortious interference with business relations, and/or equitable
estoppel/detrimental reliance.

Regarding Interrogatory 9, the Court reiterates that Defendant’s general response, that the
information is neither relevant nor reasonably calculated to lead to discovery of admissible evidence,
especially where made two months after the request was made, and after two extensions of time, is

inappropriate.
The Court also finds that the information may lead to discovery of admissible evidence, even
if not ultimately admissible. Plaintiffs allege that an offer was made by Defendants, which was not
withdrawn; they further allege that Defendants later stated they did not have the cash available to pay
Plaintiffs, and asked Plaintiffs to wait. Meanwhile, Plaintiffs allegedly lost the opportunity to sell to
another buyer. Defendant denies each and every one of these claims. The Court finds that the amount
of compensation paid to executives is relevant in that it may indicate whether Defendants had cash

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on hand at the time of the alleged deal, before that time, or after. A significant change, either up or
down, in such compensation may also be relevant to Plaintiffs’ allegations of fraud, and for purposes
of punitive damages. Defendants did not object on the basis of the information being confidential,
unduly burdensome, or overly broad. The Court therefore does not require any change to that
interrogatory.
For all the above reasons, Plaintiffs’ Motion to Compel [D.E. 48] is GRANTED. Defendants
shall have twenty-one (21) days from the date of entry of this Order to fully respond to Interrogatories
6 and 9 and Request for Production 23.
Pursuant to F.R.Civ.P. 37(a)(5)(A):
[T]he 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 incurred in making the motion,
including attorney’s fees. But the court must not order this payment if:
(i) the movant filed the motion before attempting in good faith to obtain the disclosure
or discovery without court action;
(ii) the opposing party’s nondisclosure, response, or objection was substantially
justified; or
(iii) other circumstances make an award of expenses unjust.

Counsel for Plaintiffs is therefore directed to file with the Court and serve on Plaintiffs within
fourteen (14) days of entry of this Order an accounting of the fees and costs necessitated in filing this
motion. Counsel for Defendants shall file any objections to Plaintiffs’ claims of costs and fees and
the amounts claimed, within seven (7) days of the filing of the accounting. Only if both a claim for
fees and an objection thereto are filed, will the Court then schedule a hearing to provide Defendants
an opportunity to be heard prior to the awarding of any expenses.

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It is so ORDERED.
The United States Clerk for the Northern District of West Virginia is directed to provide a
copy of this order to counsel of record.
DATED: March 13, 2012

]É{Ç fA ^tâÄÄ
JOHN S. KAULL
UNITED STATES MAGISTRATE JUDGE

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