Opinion
Civil Action 2:23-cv-03546-DCN
08-09-2024
ERIC BEAUMONT, Plaintiff, v. WALTER SCOTTY BRANCH, an individual; SHEA C. HARRELSON, an individual; AVANTE DIAGNOSTICS LLC, a Delaware entity; BIODXX INC., a Pennsylvania entity; INDEPENDENT CLINICAL LABORATORIES INC., a Florida entity; KOR LIFE SCIENCES LLC, a South Carolina entity; KORPATH HOLDINGS LLC, a South Carolina entity; MEDCOAST LLC, a South Carolina entity; SILVERPATH INC., a Pennsylvania entity; and VIKOR SCIENTIFIC LLC, a South Carolina entity, Defendants.
SNELL & WILMER L.L.P. V.R. Bohman (Pro Hac Vice) Erin Gettel (Pro Hac Vice) SNELL & WILMER L.L.P. BURR & FORMAN LLP BURR & FORMAN LLP Attorneys for Plaintiff Eric Beaumont Ellis R. Lesemann (Fed. ID No. 7168) LESEMANN & ASSOCIATES LLC Attorney for Defendants
SNELL & WILMER L.L.P. V.R. Bohman (Pro Hac Vice) Erin Gettel (Pro Hac Vice) SNELL & WILMER L.L.P. BURR & FORMAN LLP BURR & FORMAN LLP Attorneys for Plaintiff Eric Beaumont
Ellis R. Lesemann (Fed. ID No. 7168) LESEMANN & ASSOCIATES LLC Attorney for Defendants
REPLY IN SUPPORT OF DECLARATION OF ERIN M. GETTEL, ESQ. PURSUANT TO THE COURT'S APRIL 12, 2024 MINUTE ORDER
INTRODUCTION
Under Defendants' theory, discovery obligations can be disregarded so long as appropriate responses are eventually served before the Court rules on a motion to compel. Such an approach would create-and has created in this case-chaos and significant unnecessary burdens on both Plaintiff and this Court. Thankfully, the Rules and caselaw applying those Rules soundly reject Defendants' position. Defendants' compliance with their obligations came only at the expense of tens of thousands of Plaintiff's dollars, and only after the motion to compel was filed. Under the Rules, Defendants must bear the financial consequences of their repeated and pervasive misconduct.
As the parties resisting Rule 37 sanctions, Defendants bear the burden of establishing that one of the Rule's safe harbor provisions applies.Defendants invoke two: They argue that their responses and objections were substantially justified, and that an award of attorney fees would be unjust under the circumstances. As explained below Defendants' objections based on their deliberately misleading partial definition of the term “Laboratory Ventures” were not substantially justified in law or in fact and do not, in any event, justify their pervasive withholdings. Similarly, Defendants fail to demonstrate other circumstances that would render an award of fees unjust, particularly in light of their pervasive failure to comply with the Rules and meet their obligations. Because Defendants fail to carry their burden to show that one of the exceptions applies, Mr. Beaumont is entitled to his fees and costs. And because Mr. Beaumont has shown that the requested fees are reasonable, this Court should award them in their entirety, including the additional fees expended on this reply.
S. Carolina Tel-Con, Inc. v. World Tower Co., Inc., 2012 WL 13006208, at *1 (D.S.C. Aug. 20, 2012) (Herlong Jr., J.) (citing Carr v. Deeds, 453 F.3d 593, 602 (4th Cir. 2006), abrogated on other grounds by Wilkins v. Gaddy, 559 U.S. 34 (2010)).
Mr. Beaumont incorporates the arguments made in the Motion (ECF No. 36) and Reply (ECF No. 43).
ARGUMENT
I. Defendants have not shown that their responses and objections were substantially justified.
A. The only objection Defendants even attempt to justify regards the term “Laboratory Ventures.”
Defendants eventually abandoned every single objection they raised to Mr. Beaumont's discovery. Except for a single objection regarding the term Laboratory Ventures, they do not even attempt to justify their objections. Accordingly, Defendants concede that the hundreds of other objections were meritless and not substantially justified. This alone should result in the award of Mr. Beaumont's fees and costs. But, as demonstrated below, not even Defendants' Laboratory Ventures objection was justified.
B. Defendants misrepresented the definition of the term “Laboratory Ventures” and misrepresent that their objection to this term remained in dispute through April 29.
In the Motion to Compel (“Motion”), Mr. Beaumont explained why Defendants' undeveloped objection to the term “Laboratory Ventures” as vague and improper was improper and insufficient.There, Mr. Beaumont recounted how Defendants had attempted to clarify this objection in their February 2 Discovery Letter by claiming: (1) that it exceeds the terms of the exhibits attached to the Complaint, and (2) that they objected to the term only to the extent it sought information for any companies other than “Independent Clinical Laboratories, Inc., KorPath Holdings, LLC, Silverpath, Inc., d/b/a/ KorGene, Vikor Scientific, LLC, MedCoast, LLC, and Avante Diagnostics, LLC.”Mr. Beaumont explained that Defendants could not shoehorn merits-based arguments into a relevancy objection.
ECF No. 36-1 at 11.
ECF No. 36-1 Ex. T.
ECF No. 36-1 at 11-12 (citing Exhibit T thereto).
Id. at 11, n. 50, 51 (collecting authorities).
In their response to the Motion, Defendants provided only a portion of the definition of “Laboratory Ventures” from Mr. Beaumont's discovery requests to suggest that the term broadened Mr. Beaumont's claims.Those requests provide: “Laboratory Ventures includes Avante, MedCoast,and Vikor and any other entities currently or formerly owned or operated in whole or in part by Mr. Branch or Ms. Harrelson relating to medical laboratory or diagnostic testing from January 1, 2016-present.'” In reply, Mr. Beaumont flagged Defendants' lack of candor and explained that his claims and theories were not new.
ECF No. 43 at 6.
See e.g., ECF No. 36-1 at 41.
ECF No. 43 at 6-7.
ECF No. 44 at 11.
After the April 11 hearing, Counsel for Mr. Beaumont sent Defense Counsel a letter explaining outstanding discovery issues as directed by the Court's April 12 minute order. Among other things, Mr. Beaumont's Counsel pointed out that Defendants' amended discovery responses continued to object to the term “Laboratory Ventures” by using only a portion of the provided definition and omitting the qualifying phrase “relating to medical laboratory or diagnostic testing from January 1, 2016-present” and asked Defense Counsel to “confirm that Defendants have not withheld any documents or information based on their objection to the term Laboratory Ventures and that they have construed this term as defined in Mr. Beaumont's requests.”Defense Counsel responded that “Defendants have construed the term ‘Laboratory Ventures' in the manner currently defined by Plaintiff for the purposes of Plaintiff's discovery requests.”Notably, Plaintiff's definition never changed. Thus, Defendants' current representation that “the term ‘Laboratory Venture' was a point of disagreement between the parties” through the final meet and confer on April 29, 2024,is false. Defendants had long-since abandoned this false and baseless objection, at least as it pertains to the named Defendants.
Ex. A to Gettel Decl.
Ex. B to Gettel Decl.
Defendants' Response in Opposition to Plaintiffs' Request for $76,734 in Attorneys' Fees and Costs (“Fee Opp.”) at 4.
See id.; Ex. C to Gettel Decl. at p. 6-7 (providing detailed summary of issues discussed during April 29 meet and confer, which Defendants did not dispute).
C. Defendants' objection was based on a misleading partial definition and was and is factually and legally baseless.
In response to Mr. Beaumont's Counsel's fee declaration, Defendants argue that their “objections to the term ‘Laboratory Ventures' were substantially justified based on Plaintiff's proffered definition of the term.”In doing so, Defendants finally provide the correct definition, but ignore that their objection was based on their prior misleading partial definition. Still, Defendants argue that the term was objectionable because it has “no plausible relationship with either of the alleged contracts upon which Plaintiff's ever-expanding claims are based” and “expands the scope of Plaintiff's” discovery requests “far beyond the agreements (or evidence of agreement) that Plaintiff relies upon to support Plaintiff's causes of action against Defendants.”As explained in Mr. Beaumont's Motion, “Defendants cannot shoehorn an already-rejected merits-based argument into a relevancy objection to limit the discovery to which Mr. Beaumont is entitled.”“Courts across the country agree that ‘a party cannot refuse to engage in-and is not excused from being subjected to-discovery simply because the discovery is relevant to a claim on which the [resisting] party believes that he will or should prevail.'”Defendants still offer no support for the proposition that they were entitled to withhold discovery based on their merits-based arguments.
Fee Opp. at 6.
Id. at 6-7.
ECF No. 36-1 at 11 (citing Lyman v. Greyhound Lines, Inc., 2022 WL 772752, at *3 (D.S.C. Mar. 14, 2022) (Norton, J.) (explaining that defendant's challenge to the viability of plaintiff's claims in an effort to evade discovery on that claim was specious; defendant had not moved to dismiss or for summary judgment on the claim and, even if it had, such motion would not relieve it of its discovery obligations)).
Id. at 11 (citing Phillips N. Am. LLC v. PROBO Medical, LLC, 2024 WL 707391, at *24 (S.D. W.Va. Feb. 20, 2024) (Goodwin, J.) (cleaned up) (citing Lopez v. Don Herring Ltd., 327 F.R.D. 567, 581 (N.D. Tex. 2018)); Big Dynasty v. FP Holdings, LP, 336 F.R.D. 507, 511-12 (D. Nev. 2020) (collecting caselaw from across eleven jurisdictions and concluding that defendant could not withhold discovery as irrelevant based on merits-based arguments); Third Pentacle, LLC v. Interactive Life Forms, LLC, 2012 WL 27473, at *3 (S.D. Ohio Jan. 5, 2012) (Ovington, J.) (explaining that although a party “may hold a strong belief in the merits of its litigation positions, its strong belief-whether ultimately justified or not-provides no basis for avoiding its discovery obligations created by the Federal Rules of Civil Procedure”)).
Defendants' merits-based arguments are even more unreasonable because the definition for “Laboratory Ventures” is entirely consistent with Mr. Beaumont's claims and theories since day one: that he holds rights and interests in Mr. Branch's and Ms. Harrelson's laboratory ventures.Defendants also ignore that Mr. Beaumont has always relied heavily on the parties' course of dealing and extensive course of performance to establish the Investment Agreements' existence and their terms and not only the exhibits to the Complaint.To illustrate, in concluding that Mr. Beaumont had adequately pled the existence and terms of the Investment Agreements, this Court's analysis was not cabined to Exhibits A and B but looked to, among other things, Mr. Beaumont's allegations regarding payment history, the EKRA misrepresentation, and the ceasepayment email, which plausibly showed that the parties had a meeting of the minds, at least when the contract was initially performed.Defendants' attempts to limit Mr. Beaumont's discovery requests to the scope of Exhibits A and B to the Complaint were thus not only unjustified by the law generally, but also under the facts and law of this case.
ECF No. 1 at 22-23. Mr. Beaumont's motion for leave to amend also explains how the Second Amended Complaint is not a marked departure from the initial Complaint or First Amended Complaint. See ECF No. 34-1.
ECF No. 42 at ¶ 21; ECF No. 21 at ¶ 17; ECF No. 1 at ¶ 17; ECF No. 15 at 13 (“Defendants argue that Mr. Beaumont cannot assert viable contract-based claims based on the NCF Document. But Defendants mischaracterize Mr. Beaumont's allegations as to the August 2017 Investment Agreement. Mr. Beaumont does not allege that the NCF Document is the August 2017 Investment Agreement, nor is the NCF Document ‘central' to his claims. Rather, the NCF document is but one of the many pieces of ‘evidence of' the August 2017 Investment Agreement”) (emphasis in original).
ECF No. 20 at 22 n.6, 23 n.7.
D. Even if Defendants' objection based on the term “Laboratory Ventures” could be justified-it cannot-it does not justify any of their withholdings.
Defendants' objection to the term “Laboratory Ventures” is the only objection that Defendants even attempt to justify. But even if that objection were justified, Defendants do not explain how it justified their withholding of the “overage.” “If there is an objection based upon an unduly broad scope, . . . discovery should be provided as to those matters within the scope which are not disputed.”Defendants clarified in their February 2 Discovery Letter that they objected to the term “Laboratory Ventures” only to the extent it sought information for any companies other than “Independent Clinical Laboratories, Inc., KorPath Holdings, LLC, Silverpath, Inc., d/b/a/ KorGene, Vikor Scientific, LLC, MedCoast, LLC, and Avante Diagnostics, LLC.”That being the case, how could this objection have justified Defendants' withholding of documents pertaining to these entities, let alone pertaining to original defendants Avante, MedCoast, or Vikor? And how could it have justified Defendants' hundreds of other objections and their outright refusal to answer crucial requests targeting the EKRA misrepresentation and how payments to Mr. Beaumont were calculated? It cannot, and it does not.
Curtis v. Time Warner Entertainment-Advance/Newhouse P'ship, 2013 WL 2099496, at *2 (D.S.C. May 14, 2013) (Anderson, J.).
ECF No. 36-1 at 11-12 (citing Exhibit T thereto).
Notably, Defendants offer no explanation for why crucial communications between Ms. Harrelson and Mr. Branch regarding payments to Mr. Beaumont were not disclosed until May 6, 2024.Nor do Defendants explain why the below email from Vikor COO Dan Nodes was not disclosed until that Dated:
Gettel Decl. at 5-6.
(Image Omitted)
That is, Defendants sat on an email in which Vikor's COO wrote to Ms. Harrelson that he “got the backstory on the payments to [Eric Beaumont] from Kelly [Damiano]” (Vikor's Director of Finance) for months, depriving Mr. Beaumont's Counsel of the ability to question Ms. Damiano about this “backstory” at her February 14 deposition despite promising Mr. Beaumont's Counsel that they would supplement their responses in time for that deposition. There is no world in which these belatedly disclosed documents are not responsive and discoverable and Defendants' disingenuous objection to the term “Laboratory Ventures” provides no credible cover for withholding them.
As just one other of numerous examples, Defendant Vikor refused to adequately respond to Interrogatory No. 4 until May 6, 2024. That interrogatory asked Vikor to “[e]xplain in detail how You calculated the amount of the payment You made to Mr. Beaumont in April of 2019.”This payment is particularly significant because it was the first and only payment made after the transition to Vikor before Defendants capped the payments at $7500 per month based on the EKRA misrepresentation. Before the Motion, Vikor responded with a boilerplate “premature,” attorneyclient privilege, and work-product protection objection and refused to answer.Finally, on May 6, 2024, Vikor amended its responses for a second time and finally admitted that the payment was “calculated on the basis of 1.5% of net revenue received in the prior month,”i.e., consistent with the NCF Document and Mr. Beaumont's allegations that the compensation section in the NCF document was provided as proof of his 1.5% interest under the August 2017 Investment Agreement.
ECF No. 36-1 Ex. Q.
Id.
Exhibit A Interrogatory No. 4.
In sum, Defendants have wholly failed to show that their objections based on a misleading partial definition of the term “Laboratory Ventures” were substantially justified. Regardless, even if this objection were substantially justified, it does not explain Defendants' otherwise severely deficient responses and pervasive withholdings.
II. Defendants have not shown that awarding fees is unjust under the circumstances.
A. Defendants' supposed good faith would not render an award of attorney fees unjust.
Defendants also argue that awarding attorney fees would be unjust because they “made a good faith effort to resolve the concerns raised by Plaintiff's counsel regarding Defendants' responses and objections.”On this point, Defendants also complain about the number of discovery requests, including by pointing to the second round of requests served months after the Motion was filed and that are not at issue here.
Fee Opp. at 7-8.
Id. at 8.
Again, as the parties resisting Rule 37 sanctions, Defendants bear the burden of establishing that one of the Rule's exceptions applies. Defendants cite no authority for the proposition that the number of discovery requests, unspecified scheduling conflicts, and the belated addition of new law firms make an award of attorney fees unjust. Driggers does not help Defendants because there, the defendants responded to a substantial portion of the plaintiff's discovery requests by the agreed-upon deadline; there were legitimate disputes regarding some of the objected-to requests, a portion of which were sustained by the district court; and the district court specifically denied plaintiff's arguments regarding allegedly improper boilerplate objections as undeveloped and unsupported.Here, Defendants asserted hundreds of boilerplate objections, and Mr. Beaumont has provided numerous specific examples and pointed to obvious document holes.Further, none of Defendants' challenged objections were sustained because they eventually withdrew them all- after the pending Motion was filed. And Defendants repeatedly failed to comply with even their self-imposed deadlines without alerting Mr. Beaumont or requesting still further extensions.
S. Carolina Tel-Con, Inc., 2012 WL 13006208, at *1.
Driggers v. Costco Wholesale Corp., 2021 WL 2154716, at *2 (D.S.C. May 26, 2021) (Gergel, J.).
ECF No. 36-1 at 10-23.
LightStyles is also of no help to Defendants and is on questionable footing because it imported equitable principles articulated by the Third Circuit as relevant in calculating monetary compensation owed by lawyers who have been found to have violated FRCP 11. Regardless, there, the resisting parties “point[ed] out that they [were] both in bankruptcy and that they [were] represented by a small two-attorney firm appointed by the bankruptcy trustee.”Even accepting that a party's ability to pay was an equitable consideration that could be considered under Rule 37(a)(5)(A), the LightStyles Court declined to find that these circumstances rendered an award of fees unjust.Here, Defendants do not and cannot contend that they lack the ability to pay a fee award.They also made no attempt to resolve the fee issue short of court intervention. Notably, the resisting parties in LightStyles also attempted to argue good faith and their attorneys' lack of prior discovery violations to establish other just circumstances and the court rejected both arguments.That is because “the Rule's mandate controls-unless certain exceptions apply- regardless of whether the party who is the subject of the motion has acted in bad faith.”
Lightstyles, Ltd. ex rel. Haller v. Marvin Lumber and Cedar Co., 2015 WL 4078826 (M.D. Pa. July 6, 2015) (Caldwell, J.).
Id. at *5.
Id.
Id. Unrelatedly, the court did reduce the amount of the fee award because it found that some of the hours expended were not compensable.
Cf Doering v. Union Cnty Bd. of Chosen Freeholders, 857 F.2d 191, 192, 196 n.5 (3rd Cir. 1988) (vacating monetary Rule 11 sanction imposed without consideration of numerous possible mitigating factors, including that the attorney facing sanction reported an annual income of $40,000 and was facing a sanction of $25,000).
LightStyles, 2015 WL 4078826, at *5 (collecting authorities demonstrating that good faith does not constitute substantial justification and that bad faith is not required to award fees and acknowledging but giving no weight to counsel's lack of prior discovery violations).
Turner v. Copart, Inc., 2017 WL 11504215, at *1 (D.S.C. July 7, 2017) (Gossett, J.). It also makes little sense to excuse a party's discovery noncompliance simply because he has hired an attorney who has generally been able to avoid discovery sanctions, or an attorney willing to fall on his sword. Further, Mr. Beaumont has sought fees only against the originally named Defendants, not against Defense Counsel. This is so despite that, when asked at the April 11 hearing, Defense Counsel declined to make clear whether the issues stemmed from his clients or from his law firm.
B. Defendants' continued misconduct belies their assertions of good faith.
Although Mr. Beaumont's second set of discovery requests are not presently before the Court and he need not show Defendants' bad faith, Defendants' most recent responses only confirm Defendants' disregard for their discovery obligations. Notably, while Defendants take issue with the “conditions” placed on their request for an extension to respond to the second round of discovery requests,Defendants omit what those “conditions” were. Mr. Beaumont's Counsel simply requested that Defendants agree to serve full, rule-compliant responses by the extended deadline, to timely meet and confer, and to extend the deadline to file a second motion to compel until 30 days after that meet and confer.Defendants declined that invitation based on an unreasonable interpretation of Mr. Beaumont's Counsel's email-apparently because they did not intend to serve full, rule-compliant responses.
Fee Opp. At 4.
Exhibit B.
As just one of many examples, Mr. Beaumont refers this Court to Vikor's evolving stonewall responses to requests regarding the cease payment-a crucial issue given the importance of the parties' course of performance, including extensive payment history. For context, Interrogatory No. 14 asked Vikor to explain the basis for its decision to stop payments to Mr. Beaumont as reflected in Ms. Damiano's February 15, 2023, cease-payment email.The explanation provided in that email was that “Vikor is currently transitioning the business and will soon be undergoing a restructuring of ownership.”Interrogatory No. 15 asked Vikor to explain in detail the restructuring of ownership referenced in the cease-payment email. Vikor initially flat-out refused to answer this interrogatory.
Ex. A Interrogatory No. 14.
ECF No. 42 at ¶ 70.
Ex. A Interrogatory No. 15.
ECF No. 36-1 Exhibit Q Interrogatory No. 15.
After the Motion was filed, Vikor eventually responded to Interrogatory No. 15 and explained that there were two potential sales of the company, one contemplated between fall of 2021 through summer 2022, and one contemplated between January 2023 through September 2023.Relatedly, in its second amended response to Interrogatory No. 14 regarding the ceasepayment, Vikor provided a variety of explanations for the cease-payment, one of which was that Ms. Damiano rediscovered the “forgotten” recurring payments to Mr. Beaumont during due diligence in connection with the second potential sale.Another explanation was that, at the time of the cease-payment email, “Vikor was also auditing its expenses with the intention of identifying improper expenses or overhead.”Naturally, Mr. Beaumont served discovery requests to follow up on these incredible assertions regarding a central issue in this litigation, but Vikor now refuses to provide any documents regarding the due diligence and internal audit during which the payments to Mr. Beaumont were supposedly rediscovered, including because, in Defendants' view, Mr. Beaumont has no “credible or plausible claim” to ownership in Vikor:
Ex. A Interrogatory No. 15.
Ex. A Interrogatory No. 14. This explanation is, of course, contradicted by the withheld communications between Mr. Branch and Ms. Harrelson provided in the Gettel Declaration as well as the above-included email from Vikor COO Dan Nodes.
Id.
REQUEST NO. 38:
Identify and produce all Documents and Communications regarding the May 19. 2023. letter of intent from Market Street Healthcare Partners, including all Documents and Communications regarding due diligence.
RESPONSE: Objection. Defendant objects to this Request as overly broad and unduly burdensome as it seeks “all documents and communications" without limitation as to time. This claim is not proportionate to the needs of the case, as Plaintiff does not have a credible or plausible claim to ownership of a South Carolina limited liability company in which he never claimed or represented himself to be an owner. Furthermore, the evidence in this case confirms that Plaintiff requested and received fixed monthly payments. He never received any ownership interest in Vikor nor was an ownership interest (along with the corresponding responsibility for losses, taxes, compliance, etc.) ever claimed or disclosed.
REQUEST NO. 51:
Identify and produce all Documents and Communications regarding Vikor's purported audit of expenses and overhead. See Vikor Second Amended Response to Interrogatory No. 14.
RESPONSE: Objection. Defendant objects to this Request on the grounds that it seeks documents not relevant to the claims or defenses nor proportional to the needs of the case. Defendant further objects on the basis that this Request is overly broad and unduly burdensome because it is unlimited as to time and scope. Defendant reserves the right to supplement this response.
These objections are beyond frivolous. Defendants cannot claim good faith while continuing to both improperly shoehorn already-rejected merits-based arguments into their relevancy objections, and to assert other baseless relevancy, proportionality, and scope objections.Defendants' due diligence and internal audit are at issue because Defendants raised them in explanation of their decision to cease payments to Mr. Beaumont. Nevertheless, they now refuse to provide a single page of documents on these topics. It is clear Defendants have learned nothing in the last six months of discovery. They intend to continue disregarding their discovery obligations and obstructing Mr. Beaumont's ability to litigate this case on the merits. Mr. Beaumont is unable to characterize this sustained course of conduct as anything other than bad faith.
See Supra n. 17, 18.
Defendants have failed to carry their burden to show that an award of attorney fees would be unjust. There is nothing unjust about awarding fees against sophisticated Defendants who were given numerous opportunities to comply, then unilaterally took still further opportunities, and eventually withdrew every objection after the Motion to compel was filed. That is particularly true where, as here, they refused to even discuss resolving the fee dispute without the Court's intervention and have plainly demonstrated they intend to continue flouting their discovery obligations in an attempt to spend Mr. Beaumont out of time and out of court.
III. The requested fees are reasonable.
The Gettel Declaration addresses the Barber factors and includes detailed billing statements as well as tables reflecting the hours and rates spent on the five overarching tasks performed in connection with bringing the Motion to Compel. Defendants largely do not dispute the application of the Barber factors but nonetheless claim that the requested fees are “blatantly excessive and unreasonable.”Defendants take issue with the inclusion of “unrelated tasks,” including meet and confer efforts, as well as purportedly unnecessary duplication of efforts, including that two attorneys attended the April 11 status conference.
Barber v. Kimbrell's Inc., 577 F.2d 216, 226 n.28 (4th Cir. 1978).
Fee Opp. at 11.
First, the time expended repeatedly conferring with Defendants over a three-month period to eventually obtain their compliance is time spent “in connection with” bringing the Motion. Practically speaking, awarding fees for this time makes sense and serves the purposes of the Rule by encouraging compliance. If Defendants had complied and served rule-compliant responses in the first instance or as promised, the Motion could have been avoided and both sides would bear their own costs. Because those efforts were effectively ignored by Defendants and Mr. Beaumont was forced to bring the Motion, they are compensable as they were necessarily incurred in connection with the Motion as a prerequisite to bringingand to seeking fees in connection with the Motion. Even if the fees incurred preparing for the first meet and confer and before Defendants blew past their first self-imposed deadline of February 12 were not compensable, this would result in a reduction of $11,079, leaving the majority of the fee request intact. However, not even the first meet and confer would have been necessary had Defendants complied with their obligations, as evidenced by the fact that they have now abandoned each and every challenged objection to Mr. Beaumont's first round of discovery. Defendants' most recent discovery responses and continued refusal to comply with their discovery obligations-which will require still further meet and confers and motion practice-only further highlight why it is both just and necessary for Defendants to bear the brunt of the costs caused by their noncompliance.
Data Locker, Inc. v. Apricorn, Inc., 2013 WL 11901513, * at 1 (D. Kan. Mar. 15, 2013) (O'Hara, J.) (awarding fees incurred in bringing motion to compel and concluding that fees incurred conferring with defendants' counsel in an effort to resolve defendants' objections and resistance to discovery were recoverable, particularly because local rules required conferral before bringing motion to compel) (citing Woodland v. Viacom Inc., 255 F.R.D. 278, 284 (D.D.C. 2008) (fees associated with counsel's telephone calls and emails included in award of fees incurred in filing motion to compel, “particularly in light of ... meet and confer requirement of the Local Rules”)).
LR 7.02 (imposing duty to consult before filing any motion).
Next, although unnecessary duplication of effort is not recoverable, reductions for “duplication” are appropriate “only if the attorneys are unreasonably doing the same work.” “[N]ecessary duplication-based on the vicissitudes of the litigation process-cannot be a legitimate basis for a fee reduction. It is only where the lawyer does unnecessarily duplicative work that the court may legitimately cut hours.”Courts have recognized that time spent in a conference room or internally strategizing is reasonable and is often time well-spent. “In any complex litigation, efficiency derives from organization and coordination rather than lawyers operating independently.”
Johnson v. Univ. College of Univ. of Ala In Birmingham, 706 F.2d 1205, 1208 (11th Cir. 1983); Mitile, Ltd. v. Hasbro, Inc., 2013 WL 5525685, at *2 (E.D. Va. Oct. 4, 2013) (Buchanan, J.) (“It is reasonable and customary for both associates and partners to work on the same motion and their time expended is not duplicative, but appropriate”).
Moreno v. City of Sacramento, 534 F.3d 1106, 1113 (9th Cir. 2008).
See e.g., Matter of Cont'l Illinois Sec. Litig., 962 F.2d 566, 570 (7th Cir. 1992) (noting that because of its value, conference time should not be arbitrarily slashed).
Ramos v. Lamm, 632 F.Supp. 376, 383 (D. Colo. 1986).
Here, the Gettel Declaration and supporting exhibits reflect the unique contributions made by each attorney and the appropriate division rather than duplication of labor between them. Defendants argue that it was unreasonable for Attorney Gettel to attend the April 11 status conference when local counsel could have attended alone. But this was more than a routine status conference, and the Court specifically ordered counsel to attend in person. It was reasonable for the attorney with primary drafting responsibility for the Motion and supporting reply and with knowledge of the relevant documents and remaining deficiencies to attend the hearing along with local counsel. As the Court may recall, Attorney Gettel handled the hearing and was prepared to address all of Defendants' discovery responses to date, including those received the night before the hearing, if the Court was so inclined. Thus, this is not a situation in which out-of-state counsel traveled to a routine, non-substantive status conference simply to spectate. It should also be noted that despite the importance of the Motion and obtaining the outstanding discovery, Attorney Bohman did not attend as a cost-saving measure-savings that have been passed on to Defendants.
Fee Opp. at 11.
Morris v. Bland, 2015 WL 12910631, at *4 (D.S.C. Jan. 15, 2015) (Gergel, J.) (finding four attorneys reasonable for trial; three attorneys reasonable for pretrial conference/hearing on motions in limine; and two attorneys reasonable for status conference and bar meeting that were not complex in nature).
CONCLUSION
As this Court has observed, albeit in the context of deeming privilege objections waived, “[t]he court will not afford parties endless opportunities to comply with their discovery obligations; it expects parties to so comply in the first instance to avoid unnecessary discovery disputes and court intervention.”While Defendants may have avoided the more severe sanction of a finding of privilege waiver, at least for now, there is nothing unjust or unreasonable about ordering Defendants to pay the requested attorney fees, all of which were caused by their pervasive discovery failures which they repeatedly failed to mitigate.
Oppenheimer v. Williams, 2021 WL 5359283, at *4 (D.S.C. Nov. 17, 2021) (Norton, J.).
For these reasons as well as those raised in the Motion, supporting reply brief, and the Gettel Declaration, this Court should award Mr. Beaumont $80,644.45in attorney fees and costs, payable jointly and severally by Defendants Branch, Harrelson, Avante, MedCoast, and Vikor within 30 days of the Court's order.
The fee breakdown is provided in the Gettel Declaration, which sought $76,734.45 in attorney fees and costs. This figure includes an additional $3,910 for the costs of preparing this reply.
Dated: June 14, 2024
EXHIBIT A
Defendant Vikor Scientific LLC's Second Amended Answers to Plaintff's First Set of Interrogatories
EXHIBIT A
DEFENDANT VIKOR SCIENTIFIC LLC'S SECOND AMENDED ANSWERS TO PLAINTIFF'S FIRST SET OF INTERROGATORIES
TO: MICHAEL A. SCARDATO, ESQUIRE, G. WADE LEACH, III, ESQUIRE, VANCE ROBERT BOHMAN, ESQUIRE AND ERIN MICHELLE GETTEL, ESQUIRE
PURSUANT TO Rules 26 and 33 of the Federal Rules of Civil Procedure, Defendant Vikor Scientific, LLC (“Vikor” or “Defendant”), by and through its undersigned counsel, hereby provides second amended responses to Plaintiff Eric Beaumont's (“Plaintiff' or “Beaumont”) First Set of Interrogatories set forth below. Defendant reserves the right to supplement or amend these Answers.
ANSWERS TO INTERROGATORIES
1. Identify all sources, with the corresponding amounts, from which You attempted to or successfully raised, received, solicited, or borrowed Funds.
ANSWER: Objection. Vikor objects to this Interrogatory on the grounds that it seeks information prior to the alleged agreements and after Plaintiff's receipt of the last payment and is therefore, overbroad in scope and time and is disproportional to the needs of the case. Vikor did not raise, receive, solicit or borrow funds from Plaintiff. Defendant further objects to this Interrogatory to the extent it seeks information that is not relevant to the claims and/or defenses raised (i.e. the information sought will not 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.) Vikor further objects to this Interrogatory on the basis that it is unreasonably burdensome as it requests Vikor to identify and describe how “amounts” were received without limitation as to time or scope. Subject to and without waiving the foregoing objection, and Defendant Vikor fully responds to this Interrogatory by referring Plaintiff to bates-labeled as follows:
Defendants 0000606 - 0000608;
Defendants 0000886 - 0000904;
Defendants 0001930 - 0001941;
Defendants 0001942 - 0001963;
Defendants 0001964 - 0001985;
Defendants 0001986 - 0001986; and
Defendants 0002128 - 0002139.
2. Explain in detail the purpose of Vikor, including the nature of the business previously and currently performed by Vikor.
ANSWER: Objection. Vikor objects to this Interrogatory on the grounds that it fails to identify the requested information with reasonable specificity. Vikor further objects to this Interrogatory as seeking narrative responses better requested at depositions. Vikor further objects to this Interrogatory on the grounds that it is overbroad in scope and time.
Subject to and without waiving the foregoing objection, Vikor fully responds to this Interrogatory as follows: Vikor is a market leader in providing targeted, molecular diagnostics.
3. Identify any capital calls (defined as “requests or demands for additional funds from members, partners, shareholders, owners, or investors”) by or for Vikor regardless of whether such contributions were ultimately received.
ANSWER : Objection. Vikor objects to this Interrogatory on the basis that it is overbroad in scope and time and seeks information that is not relevant to the claims and/or defenses raised in this case. Subject to and without waiving the foregoing objection, Vikor states that Vikor has not made any capital calls. Defendant reserves the right to supplement this Answer as discovery is ongoing.
4. Explain in detail how You calculated the amount of the payment You made to Mr. Beaumont in April of 2019.
ANSWER : Upon information and belief, Harrelson and Branch caused Vikor to make a payment of $2,009 in April 2019 to Plaintiff that was calculated on the basis of 1.5% of net revenue received in the prior month, as this had been the method that had been used in making prior payments to Plaintiff. The intention of the payments was to ensure that Plaintiff was repaid the $100,000.00 in funds that Plaintiff advanced to solely MedCoast and $150,000.00 in funds that Plaintiff advanced solely to Mr. Branch along with a return. Although MedCoast's affiliation with NCF ended, and Avante had not built or purchased any laboratories, Mr. Branch and Ms. Harrelson both felt that it was incumbent upon them to make sure that Plaintiff was repaid for the funds provided to MedCoast and Branch and therefore Harrelson and Branch ensured that he was repaid.
In May 2019 and thereafter, as was confirmed with Plaintiff and as had been requested by Plaintiff, Harrelson and Branch caused Vikor to make payments in a fixed amount of $7,500.00 per month to Plaintiff. The payment amount was fixed based on the requirements of federal law as Harrelson, Branch, and Vikor understood them, which was that the Elimination of Kickbacks in Recovery Act (EKRA) prohibited previously allowable payment practices in the laboratory industry. The amount of the payment was determined based on average salaries of sales representatives employed by Vikor in 2019, which was the year in which Vikor also switched the method of calculating its payments to sales employees. The annual salaries typically ranged from $80,000.00 to $100,000.00 in 2019. Twelve monthly payments of $7,500 each is equal to $90,000.00, which was in the middle of that range.
Vikor further states that Mr. Beaumont requested to Branch that payments to Plaintiff be made according to a payment plan in fixed amounts payable on a set date each month. Mr. Beaumont stated that “it would be nice to know how much a month and when in the month you plan to pay me” because “not knowing the when and how much is killing me.”
5. Explain in detail any profit, distributional, or ownership interests currently or previously held in Vikor, including how any payments or distributions are calculated and to whom they are made.
ANSWER : Mr. Branch and Ms. Harrelson are the only members of Vikor and each hold a fifty percent (50%) membership interest. Ms. Harrelson and Mr. Branch are both employees of Defendant Vikor and are paid a salary. Defendant Vikor's additional payments or distributions to Ms. Harrelson and Mr. Branch are not made on a regular schedule but are jointly determined and decided upon by Ms. Harrelson and Mr. Branch without using a fixed formula. When payments from Defendant Vikor to Mr. Branch and Ms. Harrelson occur, they are made in equal amounts in accordance with applicable requirements.
6. Identify all tax preparers, audit firms, and consulting/advisory firms currently or previously engaged by or on behalf of Vikor.
ANSWER : Vikor has engaged Elliott Davis, LLC/PLLC, 100 Calhoun Street, Suite 300, Charleston, SC 29401, Welch, Roberts, Amburn & Hutto LLC 157 East Bay Street, Charleston S.C. 29401, and Tax Guard, LLC, 1750 14 th Street, Suite 201, Boulder, CO 80302. Vikor reserves the right to supplement this Answer.
7. Identify and list all financial accounts, including bank, investment, money market, securities, certificates of deposit, brokerage, credit card, or lines of credit, in the name of Vikor and/or used for the benefit of Vikor and subject to reimbursement, and identify the following information: Name of bank/financial institution, Account name, Account number, Account type, Authorized user(s) and signature card, Date opened, Date closed, Form 1099, 1098 or back-up withholding documents.
ANSWER: Objection. Vikor objects to this Interrogatory on the grounds that it is overbroad in scope and time, is not proportional to the needs of the case, and it seeks information that is not relevant to the claims and/or defenses raised (i.e. the information sought will not 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.) Vikor further objects to this Interrogatory on the basis that it is unreasonably burdensome as it requests Vikor to identify “all” accounts used for the “benefit of Vikor.”
Subject to and without waiving the foregoing objections, Vikor fully responds by referring Plaintiff to Vikor's bank statements for the years 2018, 2019, 2020, 2021, 2022, and 2023, bates-labeled as “Vikor 000001 - Vikor 007997” and produced contemporaneously herein.
8. Identify any person or entity that has held an interest in Vikor, including shareholders or partners, and their respective stock or other ownership interests, inclusive of identification of class if more than one class.
ANSWER : Mr. Branch and Ms. Harrelson are the only members of Vikor and each holds a fifty percent (50%) membership interest.
9. Identify all transactions concerning the sale or transfer of stock or any ownership interests of Vikor.
ANSWER : None.
10. Identify all companies in which Vikor has held any financial or management interest, including subsidiaries.
ANSWER: There are no companies in which Vikor has held a financial or management interest, including subsidiaries. Please also refer to documents bates-labeled “Defendants 0000905 - 0001761.”
11. Identify any Manager(s), Officers, and members of the Board of Directors for Vikor.
ANSWER: Mr. Branch and Ms. Harrelson are the only members of Vikor, and each hold a fifty percent (50%) membership interest. As a further response, please see documents bates-labeled “Defendants 0000660.” They participate equally in decisions and management.
12. Explain in detail the factual and legal basis for Your decision to fix Mr. Beaumont's payments at $7,500 per month as referenced in Mr. Branch's May 23, 2019, email, including when and with whom You made this decision.
ANSWER : Please see Vikor's Answer to Interrogatory No. 4. Additionally, please see the interrogatory responses of Harrelson and Branch, who were the decisionmakers (along with Plaintiff himself) to fix the monthly amount of the payments. Each of these individuals would need to speak to their own state of mind and personal basis for their decisions. Additionally, Vikor responds by stating that the decision to repay the funds advanced by Beaumont in equal monthly installment payments was based, in part, on Mr. Branch's interpretation of EKRA. Defendant further states that the enactment of the EKRA, and the uncertainty as to the breadth and interpretation of its prohibitions, caused a volatile level of confusion throughout the industry. Mr. Branch's concern with running afoul of EKRA in connection with payments for a laboratory business arrangement were justified under the circumstances and had the mutual benefit of ensuring that the parties complied with applicable law. Defendant further states that Beaumont requested that payments be made according to a payment plan in fixed amounts payable on a set date each month. Mr. Beaumont stated that “it would be nice to know how much a month and when in the month you plan to pay me” because “not knowing the when and how much is killing me.”
13. Identify all persons or entities, including but not limited to investors, employees, independent contractors, lenders, or vendors with whom any of Vikor's payment arrangements or obligations changed due to EKRA.
ANSWER : Please see the document bates-labeled Vikor 008298, which is a spreadsheet of Vikor sales representatives/contractors that were transitioned to a flat rate of monthly payments in May 2019 (one month after Plaintiff) and were later transitioned to W-2 employee status. The list includes 139 representatives/contractors.
14. Explain in detail the factual and legal basis for Your decision to cease payments to Mr. Beaumont as reflected in Ms. Damiano's February 15, 2023, e-mail, including when and with whom You made this decision.
ANSWER : Vikor responds that the decision was made by Harrelson and Branch, who had the issue of the continuing monthly payments brought to their attention by Ms. Damiano. In February 2023, the intent was to sell Vikor. Ms. Harrelson and Mr. Branch were considering the possibility of a sale of Vikor, along with KorGene and KorPath, which would have resulted in a change in ownership. For some time, the monthly payments of $7,500.00 to Beaumont had been set up to be paid automatically. When Ms. Damiano asked Harrelson and Branch about the ongoing payments, Harrelson and Branch realized that Beaumont had been repaid significantly more than he had initially advanced to MedCoast and Branch and had been provided a significant return. As a result, based on their belief that the prior obligations had been more than repaid, and their intention to sell Vikor, Harrelson and Branch determined that the payments could be discontinued as there was no further obligation to make payments. In or about the fall of 2021 through the summer of 2022, Ms. Harrelson and Mr. Branch were in discussions with a potential buyer and had engaged in due diligence. The sale did not go through. Thereafter, in or about January of 2023, Ms. Harrelson and Mr. Branch began preliminary discussions with another potential buyer. Over the course of several months, Defendants engaged in due diligence activities, which brought the ongoing automatic payments to Ms. Damiano's attention. Ultimately, the sale did not go through. Defendants discontinued further discussions relating to the potential sale by or about September of 2023. In addition, at the time of Ms. Damiano's email dated February 15, 2023, Vikor was also auditing its expenses with the intention of identifying improper expenses or overhead.
For a number of additional reasons, Vikor understands that MedCoast and Branch would not have had any further payment obligations to Beaumont, including but not limited to: (i) Beaumont was not employed or affiliated with NCF; (ii) the relationship between NCF, Harrelson, and Branch ended; (iii) other than those that were already shared with Beaumont, MedCoast was not receiving any further funds from NCF; (iv) Avante did not ultimately create any proceeds from commercialization that would possibly be payable in part to Beaumont; (v) Avante did not build or purchase any laboratories; (vi) Beaumont was not entitled to receive further monies; (vii) Beaumont had already received more funds than he was entitled to receive; (viii) Beaumont did not advance any funds to Vikor; (ix) the payments to Beaumont had been set on “auto draft” and came to the attention of Ms. Harrelson and Mr. Branch as they reviewed their financials in connection with a potential sale of Vikor, which caused them to realize that Beaumont had been overpaid; (x) Harrelson and Branch believed in good faith that the obligation of MedCoast and Branch had been satisfied; (xi) Beaumont was not a shareholder, owner, member, or officer of Vikor or consider himself to be one, as evidenced by his lack of voting rights and absence of any participation or involvement in the management of Vikor; (xii) upon information and belief, Beaumont never claimed or disclosed any ownership in Vikor to the IRS or state revenue agency, and therefore was not independently entitled to receive payments from Vikor; (xiii) there was no agreement or any meeting of the minds as to further payments to Beaumont; and (xiv) Beaumont received more monies than he was entitled to receive.
15. Explain in detail the restructuring of ownership of Vikor referenced in Ms. Damiano's February 15, 2023, email to Mr. Beaumont, including why such restructuring occurred or is occurring, the timing of such restructuring, and who was or is involved in the restructuring.
ANSWER: Subject to and without waiving the foregoing objection, Defendant fully responds to this Interrogatory by stating that at the time of Ms. Damiano's email dated February 15, 2023, the intent was to sell Vikor. Ms. Harrelson and Mr. Branch were considering the possibility of a potential sale of Vikor, along with KorGene and KorPath, which would have resulted in a change in ownership. In or about the fall of 2021 through the summer of 2022, Ms. Harrelson and Mr. Branch were in discussions with a potential buyer and had engaged in due diligence. The sale did not go through. Thereafter, in or about January of 2023, Ms. Harrelson and Mr. Branch began preliminary discussions with another potential buyer. Over the course of several months, Defendants engaged in due diligence. Ultimately, the sale did not go through. Defendants discontinued further discussions relating to the potential sale by or about September of 2023. Defendant reserves the right to supplement this Answer as discovery is ongoing.
16. Explain in detail the factual and legal basis for Your contention that Mr. Beaumont lent or advanced Funds to Mr. Branch, Ms. Harrelson, or any Laboratory Venture, including the borrower(s), loan term(s), and interest rate(s).
ANSWER : Objection. Vikor objects to the use of the term “Laboratory Venture” as this term encompasses “any other entities currently or formerly owned or operated in whole or in part by Mr. Branch or Ms. Harrelson” and by use of this term, Plaintiff seeks information that is not relevant to the claims and/or defenses raised.
Subject to and without waiving the foregoing objection, Vikor fully responds to this Interrogatory by stating as follows: Plaintiff (Lender) advanced $100,000.00 in funds to MedCoast (Borrower) in connection with MedCoast's efforts to commercialize a testing laboratory. The funding provided by Plaintiff to MedCoast was ultimately debt in the form of a loan or advancement rather than equity, notwithstanding the absence of a formal promissory note, stipulated interest rate, etc. The advancement of funds was repaid initially based on a percentage of net revenues received by MedCoast from NCF. However, that relationship ended before the advancements made by Beaumont were considered by Harrelson and Branch personally to have been repaid. Harrelson and Branch did not want see Beaumont go unrepaid, even though MedCoast's relationship with NCF ended, Avante's intended business did not materialize, and Avante did not build or purchase any laboratories.
Additionally, it is clear that Beaumont's advancements of funds were not intended as an equity or ownership interest, which means that the advancements would be treated as debt. There was no agreement, document, email, or discussion with Mr. Beaumont relating to a membership or stock ownership interest in MedCoast, Vikor, Avante, BioDxx, Independent Clinical Laboratories, KOR Life Sciences, KorPath, or Silverpath. In addition, Beaumont was not involved whatsoever in the management of MedCoast, Vikor, Avante, BioDxx, Independent Clinical Laboratories, KOR Life Sciences, KorPath, or Silverpath. Mr. Beaumont did not seek to participate in the losses, management, and business decisions relating to MedCoast, Vikor, Avante, BioDxx, Independent Clinical Laboratories, KOR Life Sciences, KorPath, or Silverpath, did not share in any losses, or contribute any capital or property. Instead, Beaumont considered himself eligible for fixed monthly payments regardless of what was being received in terms of revenue, just as a lender would. He has never been issued (nor ever requested) a K-1 relating to any ownership percentage, has never been identified as an owner, partner, or member of MedCoast, Vikor, Avante, BioDxx, Independent Clinical Laboratories, KOR Life Sciences, KorPath, or Silverpath on any state or federal tax returns or been identified on any corporate documents as an owner (i.e., EIN Application, Articles of Organization, Subchapter S Conversion Documents, Banking Records, etc.). He has never been required to pay taxes on imputed income. He has never signed any guaranties or been listed with any lender or vendor as an owner. He was not involved in any discussions and decisions relating to business management, financial management, business strategy, and tax matters relating to MedCoast, Vikor, Avante, BioDxx, Independent Clinical Laboratories, KOR Life Sciences, KorPath, or Silverpath.
Defendant reserves the right to supplement this Answer as discovery is ongoing. Furthermore, Beaumont has never claimed an equity interest or a profit-sharing interest with any governmental agency, which he would be required by law to do if he believed himself to have such interests or rights.
May 6, 2024
VERIFICATION
I, Shea Harrelson, have read Vikor Scientific, LLC's Second Amended Answers to Plaintiff's First Set of Interrogatories in the above-referenced matter. I believe, based on reasonable inquiry, that the foregoing answers are true and correct to the best of my knowledge, information, and belief. I declare under penalty of perjury that the foregoing is true and correct.
Shea C. Harrelson
EXHIBIT B
Discovery Extension Correspondence
EXHIBIT B