Cobb et al v. Ramey Motors, Inc. et al
Filing
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MEMORANDUM OPINION AND ORDER: It is ORDERED that Defendants' 104 MOTION to Quash is DENIED. It is further ORDERED that the documents requested in the Subpoena shall be produced subject to the Protective Order 28 entered on May 2, 2008. Signed by Magistrate Judge R. Clarke VanDervort on 12/15/2014. (cc: counsel of record) (mjp)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
BLUEFIELD DIVISION
JAMES W. COBB and SHERYL D. COBB, )
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Plaintiffs,
)
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v.
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RAMEY MOTORS, INC., et al.,
)
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Defendants.
)
CIVIL ACTION NO. 1:07-00280
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants, Ramey Motors, Inc., B & R Enterprises, Inc., and
James C. Ramey, Sr.’s Motion to Quash Subpoena on Tetrick & Bartlett, PLLC and Memorandum
of Law in Support. (Document Nos. 104-05.) Tetrick & Bartlett is not a party to the instant action
but is the outside certified public accounting and consulting firm for Defendant Ramey Motors, Inc.,
and prepares all of Defendants’ financial information. (Document No. 105 at 5.) In their Motion,
Defendants seek to prohibit the production of 12-month end of year statements and 3 month
statements for Ramey Motors, Inc., from 2007-2013, as requested in the Subpoena served by
Plaintiffs on July 17, 2014, upon Tetrick & Bartlett. (Id.) Defendants contend that the information
contains trade secrets, commercial information, and confidential information which should not be
disclosed, and is intended to be used in a manner that will produce prejudicial bias against
Defendants. (Document No. 104 at 5-7.) Defendants further contend that Plaintiffs should have filed
a motion to compel as the information initially was requested from and objected to by Defendants
in discovery. (Id. at 8-9.) In response to Defendants’ Motion, Plaintiffs assert that the requested
material is relevant to their claim for damages and that the information can be produced pursuant
to the previously agreed upon Protective Order. (Document No. 110.)
This action concerns an asset purchase agreement entered into on November 1, 2006,
between Plaintiffs and Defendant James C. Ramey, Sr., president of Ramey Motors, Inc. and B&R
Enterprises, Inc., in which Plaintiffs were to purchase two of Defendants’ automobile dealerships,
a Chrysler dealership and a Toyota dealership. (Document No. 1 at 10-14.) The parties agreed to
close the sale thirty days after Plaintiffs received (1) approval from Toyota Motor Sales and Daimler
Chrysler Corporation of Plaintiffs’ assumption of the dealerships and (2) approval of bank financing
for the purchase of the two dealerships. (Id. at 11.) Plaintiffs agreed promptly to take the action
necessary to secure these approvals and Defendants agreed to cooperate fully with Plaintiffs to
obtain the franchises. (Id.) Plaintiffs agreed to pay the purchase price of $8,000,000.00, and paid a
$10,000.00 non-refundable down payment which was to be credited toward the purchase price upon
execution of the agreement. (Id. at 11-12.)
Plaintiffs allege in their Complaint that they took the necessary action to obtain financing
for the purchase of the two dealerships, and had obtained financing as of March 19, 2007.
(Document No. 1 at 3-4.) Plaintiffs took additional steps to secure Toyota’s and Daimler Chrysler’s
approval of their assumption of Defendants’ dealerships, and on March 29, 2007, Plaintiffs assert
that without warning, Defendants wrote to Plaintiffs and rescinded their offer to sell their two
dealerships pursuant to the terms of the Agreement. (Id. at 4-5.) Upon receipt of the letter, Plaintiff
James W. Cobb contacted Defendant James W. Ramey, Sr., who advised that he would continue to
honor his obligations under the Agreement. (Id. at 5-6.) Plaintiffs assert that on April 2, 2007,
however, that Defendant Mr. Ramey again rescinded the Agreement. (Id. at 6.)
Plaintiffs filed their Complaint on May 4, 2007, seeking specific performance of the Asset
Agreement and damages for breach of contract. (Document No. 1.) On May 2, 2007, Defendants
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filed a Complaint in the Circuit Court of Mercer County seeking declaratory judgment against
Plaintiffs. (Document No. 1, Civil Action No. 1:07-cv-00378). That matter was removed to this
Court on June 11, 2007, and this Court consolidated the two cases by Order entered July 26, 2007.
(Document Nos. 1 and 9.) By Memorandum Opinion and Order entered October 27, 2014, Senior
District Judge Faber denied the parties’ Motions for Summary Judgment. (Document No. 115.)
As a threshold matter, the Court notes that Defendants have standing to object to the
subpoena served on Tetrick & Bartlett, PLLC. “Ordinarily, a party does not have standing to
challenge a subpoena issued to a nonparty unless the party claims some personal right or privilege
in the information sought by the subpoena.” U.S v. Idea, 118 Fed.Appx. 740, 744 (4th Cir. Jan. 4,
2005); see also, Singletary v. Sterling Transport Co., Inc., 289 F.R.D. 237, 239 (E.D.Va. 2012).
Although the subpoena is directed to Tetrick & Bartlett, PLLC, Defendants clearly have
demonstrated that they have a personal right to their financial documents, and therefore, possess the
right to move to quash or modify the subpoena served on Tetrick & Bartlett requesting those
documents.
Addressing the merits of the Motion, Defendants assert that the requested documents are not
relevant beyond their use in valuation of the “lost bargain amounts” by Plaintiffs’ economic expert,
Dan Selby. (Document No. 105 at 9.) To the extent Plaintiffs request the documents for use by Mr.
Selby, Defendants assert that they would be unfairly prejudiced if Plaintiffs were able to submit a
new expert report one month prior to trial and that Plaintiffs have waived their right to request the
documents and amend Mr. Selby’s report with trial only one month away. (Id. at 9-10.) Defendants
assert that Mr. Selby completed his expert report on December 30, 2012, but Plaintiffs did not
request the additional financial documents until July 17, 2014. (Id. at 9.) Defendants assert that if
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Plaintiffs were permitted to produce a new expert report approximately one month before trial,
presently scheduled on January 6, 2015, “Defendant would likely not have time to amend its expert
economic report, to the extent that it rebuts Plaintiff’s report.” (Id.) Plaintiffs respond that damages
are a central issue in dispute in this action, and therefore, the subpoenaed documents are relevant.
(Document No. 110 at 4.) Plaintiffs explain that Mr. Selby opines that Plaintiffs suffered a several
million dollar loss and Defendants’ expert, Mr. Roesner, opines that Plaintiffs lost nothing because
their business venture would have failed. (Id.) Plaintiffs contend that the subpoenaed documents will
show whether or not Defendants profited from the Toyota and Daimler Chrylser franchises, which
may disprove Mr. Roesner’s testimony regarding the benefit of the lost bargain. (Id. at 4-5.)
Rule 45(d) permits the Court to quash or modify a subpoena under certain circumstances.
Fed.R.Civ.P. 45(d)(3)(B). Relevance, however, remains the foundation for any request for
production, regardless of the avenue chosen for its request. Rule 45 therefore, codifies the relevancy
standards set forth in Rule 26. See Cook v. Howard, 484 Fed. Appx. 805, 812 (4th Cir. Aug. 24,
2012); Schaaf v. SmithKline Beecham Corp., 233 F.R.D. 451, 453 (E.D. N.C. 2005); In Re: C.R.
Bard, Inc., Pelvic Repair Sys. Prod. Liab. Litig., 2014 WL 1660386 (S.D. W.Va. Apr. 22, 2014).
“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s
claim or defense. . . . “ Fed. R. Civ. P. 26(b)(1). “Relevant information need not be admissible at the
trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.”
Id.
Plaintiffs alleged in their Complaint that they suffered damages in excess of $2,000,000.00
as a result of the alleged breach of contract, which included but was not limited to their down
payment toward the purchase price, their expenses incurred in seeking and securing financing,
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expenses incurred in seeking approval of their dealership applications to Toyota and Daimler
Chrysler, and the present value of Defendants’ dealerships or alternatively the lost profit. (Document
No. 1 at 8-9.) Plaintiffs’ economic expert, Dan Selby, opined on December 30, 2012, that the value
of Plaintiffs’ lost bargain was in the range of $2,786,081.00 to $3,932,380.00. (Document No. 110,
Exhibit 1.) As Mr. Roesner opines that Plaintiffs’ venture would have failed, it is clear that the issue
of damages is an integral issue to the case, and therefore, the requested financial documents are
relevant. To the extent that Defendants challenge any further report from Mr. Selby, they may file
the appropriate motion in limine.
Defendants argue that the subpoena should be quashed because the requested documents
contain trade secrets, commercial information, and confidential financial information. (Document
No. 105 at 5-7.) Relying on this District Court’s decision in Massey Coal Servs., Inc. v. Victaulic
Co. of Am., 249 F.R.D. 477, 482 (S.D. W.Va. 2008), Defendants assert that the financial documents
constitute confidential commercial information, which if disclosed, would cause them substantial
economic harm. (Id. at 6.) Defendants contend that their corporations are privately held and that the
information contained in the documents virtually is non-existent outside of the corporations; only
a small number of employees have access to their financial information; that they have taken
numerous measures to guard the secrecy of the financial documents; that the information is valuable
because it sets forth revenues and expenses and profits and margins, all of which demonstrates
Defendants’ competitive strategies; that they have paid considerable amounts to accounting firms
to develop the information; and that it would be unlawful to obtain the information without
Defendants’ consent, as it is subject to the accountant-client confidentiality privileges. (Id. at 6-7.)
In response, Plaintiffs assert that the requested documents fail to qualify for trade secret
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protection under the holding of Massey Coals Services, and that Defendants previously produced
documents that they now contend should be exempt from production. (Document No. 110 at 5.)
Plaintiffs further assert that Defendants failed to offer any evidence as to the number of employees
who know the contents of the financial documents, the amount paid to Tetrick & Bartlett, PLLC, and
the efforts Defendants took to protect the information. (Id. at 6.) Defendants deny having produced
previously any of the requested financial documents. (Document No. 111 at 2.)
Rule 45 permits a Court to quash or modify a subpoena if the subpoena requires disclosure
of a “trade secret or other confidential research, development, or commercial information.” Fed. R.
Civ. P. 45(d)(3)(B)(i). The subpoenaed party bears the burden of demonstrating that the information
is confidential and proprietary. Rule 45(d)(3)(B)(C) nevertheless permits the Court to require
production of confidential commercial documents, as an alternative to quashing or modifying a
subpoena, if the requesting party “shows a substantial need for the . . . material that cannot be
otherwise met without undue hardship.” Fed. R. Civ. P. 45(d)(3)(C). The burden shifts to the
requesting party to demonstrate that the substantial need cannot be met without undue hardship.
“Confidential commercial information, within the meaning of Fed.R.Civ.P. 45(d)(3)(B)(I)
and its counterpart Fed.R.Civ.P. 26(c)(1)(G), is more than just routine business data; instead, it is
important proprietary information that provides the business entity with a financial or competitive
advantage when it is kept secret, and results in financial or competitive harm when it is released to
the public.” In re Boston Scientific Corp. Pelvic Repair Sys. Prod. Liab. Litig., 2014 WL 1329944
(S.D. W.Va. Mar. 31, 2014)(M.J. Eifert). In Massey Coal Services, this Court defined confidential
commercial information as “information, which if disclosed, would cause substantial economic harm
to the competitive position of the entity from whom the information was obtained.” Massey Coal
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Services, 249 F.R.D. at 482. In determining whether information is to be treated as a trade secret,
the Court in Massey Coal Services suggested that the Court consider the factors set forth in the
Restatement of Torts:
(1) the extent to which the information is known outside of [the] business; (2) the
extent to which it is known by employees and others involved in [the] business; (3)
the extent of measures taken by [the business] to guard the secrecy of the
information; (4) the value of the information to [the business] and to [its]
competitors; (5) the amount of effort or money expended . . . in developing the
information; (6) the ease or difficulty with which the information could be properly
acquired or duplicated by others.
Massey Coal Services, 249 F.R.D. at 482.
The subpoenaed documents consist of twelve month end of year financial statements for
Ramey Motors, Inc., from 2007 through 2013, and thirteen month financial statements for Ramey
Motors, Inc., from 2007 through 2013. (Document No. 101.) Addressing the factors set forth in
Massey Coal Services, Defendants indicate that their corporations are privately held and that their
financial information is not known outside of the business, with few employees having access to the
financial information. (Document No. 105 at 6.) Defendants do not indicate how many employees
have access to such information. Defendants further assert that the information sets forth its business
strategies. (Id. at 6-7.) Although Defendants indicate that they take measures to protect the secrecy
of their financial information and pay considerable sums to accountants to generate the information,
they fail to explain how they protect the information or how much they pay to develop the
information. Thus, the Court finds that Defendants have failed to meet their burden and that the
subpoenaed documents do not constitute trade secrets within the meaning of Rule 45(d)(3).
Nevertheless, the Court finds that the documents do constitute sensitive, commercial, financial
information which are entitled to protection. Accordingly, in the absence of actual prejudice to
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Defendants, the Court holds that the requested financial documents must be produced pursuant to
the Subpoena and subject to the terms and conditions set forth in the Protective Order (Document
No. 28.), entered on May 2, 2008. Accordingly, it is hereby ORDERED that Defendants’ Motion
to Quash is DENIED. It is further ORDERED that the documents requested in the Subpoena shall
be produced subject to the Protective Order (Document No. 28.), entered on May 2, 2008.
In accordance with Rule 72(a) of the Federal Rules of Civil Procedure, the ruling set forth
above on this non-dispositive motion may be contested by filing, within 14 days, objections to this
Order with the District Court. If objections are filed, the District Court will consider the objections
and modify or set aside any portion of the Order found clearly to be erroneous or contrary to law
The Clerk is requested to send a copy of this Order to counsel of record.
ENTER: December 15, 2014.
R. Clarke VanDervort
United States Magistrate Judge
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