Opinion
Civil Action No. 97-0590 (PLF).
April 26, 2005
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Papst's Objections to the Ruling of the Special Master Concerning the Production of Financial Documents. On June 14, 2004, the Special Master ruled that Papst must produce:
all periodic financial statements up to and including April 15, 2002, for Papst Licensing, Papst Motoren, and any Papst party to this action, including without limitation statements of cash flow, tax returns, income statements, balance sheets, statements of retained earnings and notes thereto.See Special Master's June 14, 2004 Letter Ruling at 9. On October 16, 2004, the Special Master denied Papst's motion for reconsideration of the June 14, 2004 Ruling. Upon consideration of Papst's objections, Minebea's opposition and Papst's reply, the Court will adopt the majority of the June 14, 2004 Letter Ruling. The Court will not, however, order any Papst party to disclose its tax returns.
Papst relies heavily on New York law, which, although it may be the substantive law of some of the claims in this case, is not the discovery law applied by this Court. As the Court has previously stated, the Federal Rules of Civil Procedure and relevant D.C. Circuit case law applies in this case with respect to discovery, and "the scope of discovery in federal civil cases is broad."Floyd-Mayers v. American Cab Co., 130 F.R.D. 278, 278-79 (D.D.C. 1990) (ordering defendant to respond to discovery requests for financial information); see also Open Housing Center, Inc. v. Kings Highway Realty, No. CV-93-0766, 1993 U.S. Dist. LEXIS 15927, (E.D.N.Y. Nov. 8, 1993) ("[F]ederal common law and not New York law, governs resolution of this and all matters concerning pre-trial discovery.").
Trial in this case begins in June. Although Minebea has expressed its willingness to waive trial by jury, see Minebea Parties' Position Regarding Trial by Jury, Papst continues to demand a jury trial "on all liability and damage issues." Papst's Statement Regarding Demand for Jury Trial. The Court agrees with the Special Master that pretrial discovery of Papst's financial status is appropriate at this time so as not to unduly delay resolution of this case. See Tillery v. Lynn, 607 F. Supp. 399, 402 (S.D.N.Y. 1985). Questions regarding admissibility of this type of evidence may resolved at trial on a case-by-case basis.
The Court is concerned, however, with the scope of the proposed discovery. To the extent that the documents at issue relate to punitive damages, and Papst's ability to pay punitive damages, then all that is required would be a financial affidavit for each of the Papst parties to this action in the form of a balance sheet listing assets and liabilities and a general statement of each party's net worth. Minebea, however, claims that the financial documents themselves are relevant to liability. It argues:
In connection with Minebea's violation of license rights, patent exhaustion, and patent misuse counts, Papst's financial documents may demonstrate, inter alia: 1) that Papst breached the 1995 Agreement by extracting and attempting to extract a second payment from Minebea's customers for incorporating authorized Minebea products into their hard disk drives, and 2) the scope and extent of Papst's double-royalty scheme. With respect to Minebea's claims for fraudulent concealment, breach of fiduciary duty, conversion, unjust enrichment, and an accounting, Papst's financial documents may demonstrate inter alia, that: 1) Georg Papst was double-dealing with Joint Venture customers while he was geschaftsfuhrer of the Joint Venture, to the detriment of the Joint Venture; 2) Georg Papst was involved in other questionable transactions while he was geschaftsfuhrer of the Joint Venture, to the detriment of the Joint Venture; 3) Papst received royalties from hard disk drive motor manufacturers based upon patents it represented to Minebea as so-called Drive patents; and 4) Papst received huge payments for patents which should have been assigned to the Joint Venture.
Minebea's Memorandum of Points and Authorities in Opposition to Papst's Untimely Objection to the Special Master's Ruling Concerning the Production of Financial Documents at 7-8. It is the Court's understanding that "all documents showing royalties received by Papst Licensing relating to spindle motors or Hard Disk Drives up to and including April 15, 2002" already should have been produced since Papst has not objected to that portion of the Special Master's ruling. See Special Master's June 14, 2004 Letter Ruling at 9. The Court, however, accepts Minebea's argument that other of Papst's financial documents may also be relevant to the issue of liability. The Court therefore will order the production of the majority of these documents. At this point, however, the Court cannot see any justification for the disclosure of any party's tax returns.
Although Minebea apparently did not raise these arguments before the Special Master in the first instance, they were raised during the briefing of Papst's motion for reconsideration.
Accordingly, it is hereby
ORDERED that Papst's Objections to the Ruling of the Special Master Concerning the Production of Financial Documents are REJECTED; it is
FURTHER ORDERED that the Special Master's Ruling Concerning the Production of Financial Documents is AFFIRMED and ADOPTED, with the limited exception that Papst will not produce its tax returns; it is
FURTHER ORDERED that Papst must produce all periodic financial statements up to and including April 15, 2002, for Papst Licensing, Papst Motoren, and any Papst party to this action, including without limitation statements of cash flow, income statements, balance sheets, statements of retained earnings and notes thereto; and it is
FURTHER ORDERED that Papst shall produced the required documents on or before May 6, 2005.
SO ORDERED.