Opinion
Case No. 2:04-CV-318.
September 1, 2006
OPINION AND ORDER
This is a diversity action, removed to this Court, in which Bank One ("plaintiff or Bank One") seeks recovery in connection with the alleged breach by defendants, Echo Acceptance Corporation ("EAC") and EchoStar Communications Corporation (collectively "defendants") of an indemnification agreement and a guaranty in connection with the resolution of certain litigation. This matter is before the Court on the Motion of Plaintiff Bank One to Compel Discovery (" Plaintiff's Motion to Compel"). Doc. No. 47. For the reasons set forth below, Plaintiff's Motion to Compel is GRANTED in part.
I. FACTS AND PROCEDURAL HISTORY
The following facts are taken from Judge Marbley's December 10, 2004, Opinion and Order, wherein he granted defendants' motion to dismiss plaintiff's duty to defend claim and denied defendants' motion to dismiss plaintiff's duty to indemnify claim and breach of guaranty claim:
On August 24, 1994, Bank One and Echo Acceptance Corporation ("EAC") entered into a Private Label Revolving Credit Plan Agreement (the "Credit Agreement") through which Bank One provided financing for Defendants' satellite dish customers. Under the agreement, EAC, through its own sales force, was to sell the home satellite dish equipment and offer its customers a Bank One credit card to help finance the purchase. The credit card bore the name of both Bank One and EAC and involved an open-ended financing plan. Because EAC's sales force would actually be making the sales, Bank One insisted on including a broad indemnification clause in the Credit Agreement. Bank One wanted to protect itself against any misconduct by EAC's sales force. . . .
In addition, Bank One attempted to protect its interests by accepting a separate written guaranty from EchoStar [Communications Corporation ("EchoStar")], EAC's parent, guaranteeing EAC's performance of the indemnity provision. Bank One had a similar credit agreement and almost identical selling arrangement with two other entities, Consumer Satellite Systems ("CSS") and Home Cable.
Doc. No. 28 (" Opinion and Order") at 1-2.
In 1998, approximately 73,000 credit card holders, 55,000 of whom had bought satellite dishes from defendants and their dealers, eventually joined a Tennessee state court class action, Hunter v. Bank One, Civil Action No. 98-3948 (Tenn. Cir. Ct. Jul. 19, 2002) ("the Hunter class action"), against Bank One claiming negligent investigation, negligent monitoring of sales, negligent design of a financial product, negligent implementation and monitoring of financial product and negligent supervision and training of sales agents. Opinion and Order at 3. The class also alleged that defendants and their dealers used deceptive, fraudulent, and misleading sales tactics to encourage customers to purchase the satellite dishes with the financing plan. Id. However, neither EchoStar nor any of its subsidiaries was named in the lawsuit. Id.
Plaintiff, believing that the Hunter class action arose in part out of EAC's actions, including EAC's breach of the Credit Agreement's covenant prohibiting deceptive sales practices, contacted EAC on four occasions demanding indemnification. Id. at 4. Although EAC acknowledged at least one of plaintiff's letters, EAC did not oblige plaintiff's requests for indemnification. Id.
On July 19, 2002, plaintiff entered into a settlement agreement in the Hunter class action. Id. Plaintiff now demands from defendants in this action indemnification for all funds paid pursuant to that settlement. Id. Defendants deny they have a duty to indemnify plaintiff. Id.
On March 12, 2004, plaintiff filed its initial Complaint against defendants in the Court of Common Pleas for Franklin County, Ohio, alleging that defendants acted in breach of their duty to indemnify for settlement costs, plaintiffs' expenses, and plaintiff's own legal costs in defending the underlying Hunter class action. Id. On April 23, 2004, defendants removed the case to this Court based on diversity jurisdiction, 28 U.S.C. § 1332.
On May 18, 2004, defendants filed a motion to dismiss this action for failure to state a claim upon which relief can be granted. Doc. No. 8. On December 10, 2004, Judge Marbley dismissed plaintiff's claim of breach of duty to defend but let stand plaintiff's claims of breach of indemnification and guaranty agreements. Opinion and Order, Doc. No. 28.
On November 4, 2005, plaintiff filed Plaintiff's Motion to Compel, Doc. No. 47, and on December 27, 2005, defendants filed Defendants' Memorandum in Opposition to Motion of Plaintiff Bank One to Compel Discovery (" Defendants' Memorandum Contra"), Doc. No. 48. On January 9, 2006, plaintiff filed its Reply in Support of Plaintiff Bank One's Motion to Compel Discovery (" Plaintiff's Reply"). Doc. No. 49.
On February 13, 2006, this Court entered an Agreed Order Staying Case Pending Mediation. Doc. No. 52. On April 10, 2006, the parties filed a Joint Report to the Court Regarding Mediation and Motion to Compel. Doc. No. 54. In that report, the parties informed the Court that the mediation attempt was unsuccessful. Additionally, the parties informed the Court that plaintiff still seeks production of the documents at issue in Plaintiff's Motion to Compel; defendants contend that, after a reasonable good faith search, they have produced all documents in their possession, custody or control responsive to plaintiff's legitimate discovery requests. Thus, Plaintiff's Motion to Compel is ripe for this Court's consideration.
II. STANDARD
Rule 37 of the Federal Rules of Civil Procedure permits a discovering party to file a motion for an order compelling discovery if another party fails to respond to discovery requests, provided that the motion to compel includes a certification that the movant has in good faith conferred or attempted to confer with the party failing to respond to the requests. Fed.R.Civ.P. 37.
Additionally, the Local Rules of this Court provide, in pertinent part:
Objections, motions, applications, and requests relating to discovery shall not be filed in this Court, under any provision in Rules 26 and 37, Fed.R.Civ.P., unless counsel have first exhausted among themselves all extra-judicial means for resolving the differences. After extrajudicial means for the resolution of differences about discovery have been exhausted, then in lieu of immediately filing a motion under Rules 26 and 37, Fed.R.Civ.P., and S.D. Ohio Civ. R. 37.2, any party may first seek an informal telephone conference with the judicial officer assigned to supervise discovery in the case.
S.D. Ohio Civ. R. 37.1. The Court is satisfied that the prerequisites to a motion to compel have been met in this case.
Determining the proper scope of discovery falls within the broad discretion of the trial court. Lewis v. ACB Business Services, Inc., 135 F.3d 389, 402 (6th Cir. 1998). Rule 34 of the Federal Rules of Civil Procedure provides for discovery of documents in the "possession, custody or control" of a party, provided that the documents "constitute or contain matters within the scope of Rule 26(b)." Fed.R.Civ.P. 34(a).
In turn, Rule 26(b) provides that "[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party. . . ." Fed.R.Civ.P. 26(b)(1). Relevance for discovery purposes is extremely broad. Miller v. Fed. Express Corp., 186 F.R.D. 376, 383 (W.D. Tenn. 1999). "The scope of examination permitted under Rule 26(b) is broader than that permitted at trial. The test is whether the line of interrogation is reasonably calculated to lead to the discovery of admissible evidence." Mellon v. Cooper-Jarrett, Inc., 424 F.2d 499, 500-01 (6th Cir. 1970).
III. ANALYSIS
In Plaintiff's Motion to Compel, plaintiff contends that defendants have refused to produce documents related to consumer complaints, defendants' authorized dealers providing financing through Bank One, defendants' refusal to indemnify plaintiff and documents related to the contractual relationship between Bank One and EAC. Motion to Compel at 2. Additionally, plaintiff contends that defendants' objections are improper, particularly those based on privilege. Id. In Defendants' Memorandum Contra, defendants argue that plaintiff is not entitled to the discovery it seeks because (A) plaintiff's claims are without merit, (B) defendants' responses are not deficient, and (C) defendants' objections are proper.
A. Merits of Plaintiff's Claims
Defendants contend that "the Court should consider the basis for Bank One's lawsuit when weighing its Motion to Compel further discovery." Defendants' Memorandum Contra at 2. Defendants argue:
On or about March 3, 1998 the aforementioned class action lawyers filed the Hunter Class Action against Bank One, alleging that the terms of Bank One's revolving credit agreement with Home Cable Concepts' consumers were unfair. Although the putative class representatives were two Home Cable Concepts customers, the lawsuit did not name Home Cable Concepts or any other satellite distributor. During the course of the Hunter Class Action litigation neither Defendants nor any other satellite distributor were named as parties. Defendants were not served with discovery from either the Hunter Class Action plaintiffs or Bank One. Neither the Hunter Class Action plaintiffs nor Bank One propounded discovery from Defendant EAC's independent retailer distributors and never deposed any of Defendant EAC's independent retailer distributors. Notwithstanding the lack of discovery in the Hunter Class Action related to either Defendants or independent retailers, Bank One argues "the conduct of defendants' Dealers, . . . gave rise to the liability and damages incurred by Plaintiff in the Hunter class action." (Pl. Mot. Compel at p. 2.)
It is settled that "[d]iscovery will therefore not be a `fishing expedition' for an otherwise claimless plaintiff." Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F.2d 674, 680 (6th Cir. 1988).Id. at 2-3. Defendants' argument is not well-taken.
Defendants have already presented these precise arguments to this Court in their motion to dismiss, which were rejected by Judge Marbley:
In sum, the Court finds that Plaintiff's complaint sets forth allegations sufficient to make out a claim that Defendant breached its contractual obligation to indemnify Bank One. In a further proceeding, Bank One may be able to establish that it provided adequate notice, the underlying suit arose out of or resulted from Defendants' conduct, and the settlement was reasonable.Opinion and Order at 16, Doc. No. 28. Therefore, plaintiff is not fairly characterized as a "claimless plaintiff" engaging in a fishing expedition.
Fed.R.Civ.P. 26(b) provides that "[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party. . . ." Fed.R.Civ.P. 26(b)(1). Plaintiff seeks, and is entitled to discover, information related to its claim that defendant EAC acted in breach of its contractual obligation to indemnify plaintiff, including discovery related to whether plaintiff provided adequate notice, whether defendants' conduct, including the conduct of defendants' dealers, gave rise to the Hunter class action and whether the Hunter class action settlement was reasonable. See Opinion and Order at 16. These areas of inquiry are "reasonably calculated to lead to the discovery of admissible evidence," Mellon., 424 F.2d at 500-01, and are therefore proper subjects of discovery.
B. Sufficiency of Defendants' Responses
In Plaintiff's Motion to Compel, plaintiff argues that defendants' responses are deficient with regard to the following discovery requests: (1) complaints lodged by consumers against EAC's dealers who offered Bank One financing to their customers; (2) defendants' refusal to indemnify plaintiff; and, (3) documents related to the contractual relationship between defendants and plaintiff.
1. Customer complaints and dealer files
Defendants have produced some customer complaints in response to plaintiff's discovery requests. However, defendants and plaintiff disagree as to the relevant time period and the scope of the discoverable materials. Plaintiff's discovery requests seek documents for the period that defendants financed satellite equipment and service through the Private Label Revolving Credit Plan Agreement between Bank One and EAC, i.e., from 1994 to 1997, as well as any period thereafter when defendants received complaints arising from the financing provided to these customers. Motion to Compel at 8. Defendants assert that plaintiff's requests are not reasonably calculated to lead to the discovery of admissible evidence, are overly broad and are overly burdensome and expensive. Defendants' Memorandum Contra at 3-4. Plaintiff, however, replies that it is entitled to the discovery for the requested time because the allegations made in the Hunter class action were not made until 1998 and the settlement was not reached and the class claimants not fully identified until 2001. Plaintiff's Reply at 6-7. Further, plaintiff contends that,
EAC's transformance into DNCC did not cause EAC's customers to cease to exist. Rather, these customers continued their relationships with Bank One and EAC, which is evident by the complaints EAC customers advanced long after that date [1997].Id. at 7. Plaintiff's argument is well-taken.
Plaintiff alleges that Bank One's contractual arrangement with EAC ended in 1996 when EAC ceased its daily operations as EAC and was transformed into Dish Network Credit Corporation ("DNCC").
As Judge Marbley concluded in the Opinion and Order denying defendants' motion to dismiss plaintiff's claim of duty to indemnify, a significant issue in this case is whether defendants' conduct gave rise to the Hunter class action. Opinion and Order at 16. Plaintiff is entitled to discover what actions, if any, taken by defendants' dealers may have given rise to the Hunter class action.
Accordingly, the Court finds that the relevant time period for discovery related to consumers who received Bank One financing and then filed complaints against defendants or defendants' dealers is 1994 through the present.
Plaintiff also seeks production of documents relating to consumer complaints regarding the sale, purchase or financing of satellite dish equipment or programming. Plaintiff's Motion to Compel at 7-11. After plaintiff filed its motion to compel, defendants produced approximately thirty boxes of customer files and thirty boxes of dealer files. Defendants' Memorandum Contra at 6 n. 5. Defendants argue that that production satisfies plaintiff's request. Id. at 8. Plaintiff, however, contends that there must be more documents responsive to this request because a large number of customer complaints referred to dealers not included in the dealer files. Plaintiff's Reply at 3-4 (for example, "Via Cable, U.S. Rural Cable, Value Vision, Modern Communications, Ltd., Brasat Inc, American Cable and dozens more were all dealers identified in customer complaints as having made misrepresentations about the terms of financing; however, none of those dealer files were available for inspection.")
Information relating to the dealers named in the complaints financed through Bank One is clearly relevant to the issues in the action and is reasonably calculated to lead to the discovery of admissible evidence. Key to plaintiff's claim for indemnification is whether the Hunter class action arose out of or resulted from defendants' conduct. See Opinion and Order at 16. The conduct of defendants' dealers could lead to relevant on this issue. Accordingly, defendants must produce the dealer files for the dealers identified in the complaints from consumers who financed through Bank One.
Additionally, plaintiff seeks production of electronic databases used to manage each of EAC and DNCC's customer accounts, as responsive to plaintiff's requests related to complaints and dealers. Plaintiff's Reply at 4. The Court is satisfied that this electronic information is relevant and reasonably calculated to lead to the discovery of admissible evidence for the same reasons that complaints kept in hard copy are relevant. Consequently, to the extent that the information kept on the database is not duplicative of the hard copy complaints, defendants must produce EAC's customer dispute information (including related information dealing with investigations and results) available through defendants' computer databases dealing with disputes by consumers who financed through Bank One.
2. Documents related to defendants' refusal to indemnify plaintiff
Plaintiff also defendants to determine whether they are in possession of documents related to their decision not to indemnify plaintiff. Plaintiff's Motion to Compel at 15-19. Defendants responded that "Defendants' counsel represented to Bank One's counsel that other documents had not been located after a reasonable and good faith search and that Defendants would supplement as necessary." Defendants' Memorandum Contra at 12. Plaintiff does not reply to this representation. It therefore appears that there no longer exists a dispute between the parties in this regard.
3. Documents related to the contractual relationship between defendants and plaintiff
Plaintiff's motion originally asked that defendants be compelled to produce all documents in their possession regarding or referring to the Credit Plan Agreement between EAC and plaintiff. Plaintiff's Motion to Compel at 19-20. Defendants represent that they have produced all documents responsive to this request, Defendants' Memorandum Contra at 13-14, and plaintiff does not reply to this representation. Again, it appears that this issue no longer requires consideration by the Court.
C. Defendants' objections
Plaintiff argues that defendants' objections to its discovery requests were blanket objections and improper under the Federal Rules of Civil Procedure. Plaintiff's Motion to Compel at 5-7. Plaintiff contends that this is especially true with regard to defendants' objections based on privilege. Id. However, plaintiff does not contend that defendants have improperly withheld documents, except for those discussed supra, nor does plaintiff base its motion to compel on defendants' claim of privilege. In fact, it appears that defendants have produced a privilege log, see Defendants' Memorandum Contra 7-8, the sufficiency of which plaintiff does not contest. The Court therefore declines to further consider plaintiff's motion in this regard. WHEREUPON Plaintiff's Motion to Compel, Doc. No. 47, is GRANTED in part. Defendants are ORDERED to produce the dealer files for the dealers identified in the complaints from consumers who financed through Bank One from the beginning of the contractual time period in 1994 through the present as well as EAC's customer dispute information available through their electronic database for disputes by consumers who financed through Bank One for the same time period.