Summary
overruling prematurity objection and denying motion to reconsider previous order compelling disclosure of financial information because defendant did not show plaintiff's punitive damages claim was spurious
Summary of this case from Lykins v. Certainteed Corp.Opinion
No. 01-2113-CM.
February 7, 2002
MEMORANDUM AND ORDER
Pending before the Court is Defendant Shawnee Mission Ford, Inc.'s ("Defendant") Motion for Protective Order (doc. 35) and Motion for Reconsideration (doc. 43). For the reasons stated below, both Motions are denied.
Relevant Facts
This case arises out of the purchase of two automobiles by Plaintiffs Scott and Terresa Roberts and Plaintiff Jourdan Penn. Among other things, Plaintiffs allege fraud, misrepresentation and violations of state and federal consumer protection statutes. Plaintiffs seek both compensatory and punitive damages.
On December 6, 2001, this Court entered an Order compelling Defendant to completely respond to certain of Plaintiffs' Interrogatories and Requests for Production of Documents. Included within the Order was the requirement that Defendant identify and produce various financial records. Although Defendant produced a number of the compelled documents, it filed a Motion for Protective Order with regard to the following requests:
• All financial statements concerning your financial status or affairs prepared by or for Shawnee Mission Ford, at any time from January 1, 1988 through the present.
• Any profit and loss statement prepared by or for Shawnee Mission Ford for any period between January 1, 1988 and the present.
• All federal and state income tax returns for the years 1988 through 2000 filed by Shawnee Mission Ford or on its behalf.
In addition to this Motion for Protective Order, Defendant also filed a Motion to Reconsider that portion of the December 6, 2001 Order requiring it to produce documents responsive to the referenced requests.
Discussion
• Defendant Shawnee Mission Ford's Motion for Protective Order
Before reaching the substantive issues presented by the request for protective order, the Court will address Plaintiffs' argument that the Motion should be summarily denied based on Defendant's alleged failure to confer with opposing counsel prior to filing the Motion. Defendant disagrees and states that it did attempt to confer with opposing counsel Bernard Brown prior to filing the Motion, but was told by Mr. Brown's office that Mr. Brown was out of town on business.
Although the Motion currently pending before the Court includes the required declaration stating Defendant attempted to confer with opposing counsel in an attempt to resolve the discovery dispute at issue, the Court is not persuaded Defendant's single attempt to reach Mr. Brown by telephone satisfies the "good faith" standard set forth in local and federal rule. By way of example, the Court notes that the pleading filed in response to Defendant's Motion for Protective Order was filed one day after the Motion was filed and was signed by another attorney within Mr. Brown's office. Notwithstanding the Court's concern in this regard, the Court will consider the substantive issues raised by Defendant in its Motion. Counsel strongly are advised, however, to "reasonably confer" as defined herein before filing future motions.
Fed.R.Civ.P. 26(c) directs movants to include with a motion for protective order "a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the dispute without court action." D.Kan. Rule 37.2 states in pertinent part that "[e]very certification required by Fed.R.Civ.P. 26(c) and 37 . . . related to the efforts of the parties to resolve discovery or disclosure disputes shall describe the steps taken by all counsel to resolve the issues in dispute." These requirements "encourage resolving discovery disputes without judicial involvement." Cotracom Commodity Trading Co. v. Seaboard Corp , 189 F.R.D. 456, 459 (D.Kan. 1999). "Failure to confer or attempt to confer may result in unnecessary motions. When the court must resolve a dispute that the parties themselves could have resolved, it must needlessly expend resources that it could better utilize elsewhere." Pulsecard, Inc. v. Discover Card Servs., Inc , 168 F.R.D. 295, 302 (D.Kan. 1996). In support of its request for a protective order shielding the requested financial documents from discovery, Defendant states that "such information is highly confidential as Shawnee Mission Ford is a closely-held corporation whose financial information is not readily available to the public." Defendant's Motion at p. 2 (doc. 35). Confidentiality does not equate to privilege Folsom v. Heartland Bank, No. Civ. A. 98-2308-GTV, 1999 WL 322691, *2 (May 14, 1999) (citing Federal Open Mkt. Comm. v. Merrill , 443 U.S. 340, 362 (1979)). Although information is not shielded from discovery on the sole basis that the information is confidential, a party may, as Defendant does here, request the court enter a protective order pursuant to Fed.R.Civ.P. 26(c) as a means to protect such confidential information. While the decision whether to enter a protective order is within the Court's discretion, see Thomas v. International Bus. Mach , 48 F.3d 478, 482 (10th Cir. 1995), Fed.R.Civ.P. 26(c) nevertheless requires that the party seeking the protective order provide "good cause" for the order. Specifically, Rule 26(c) provides that upon a showing of good cause, a court "may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." The party seeking a protective order has the burden to demonstrate good cause Sentry Ins. v. Shivers , 164 F.R.D. 255, 256 (D.Kan. 1996). In determining whether good cause exists to issue a protective order that prohibits the dissemination of documents or other materials obtained in discovery, "the initial inquiry is whether the moving party has shown that disclosure of the information will result in a `clearly defined and very serious injury.'" Zapata v. IBP, Inc , 160 F.R.D. 625, 627 (D.Kan. 1995) (quoting Koster v. Chase Manhattan Bank , 93 F.R.D. 471, 480 (S.D.N.Y. 1982)) (internal quotations omitted). The moving party must also make "a particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements." Gulf Oil Co. v. Bernard , 452 U.S. 89, 102 n. 16 (1981). Upon consideration of the arguments presented, the Court finds Defendant has failed to make the "particular and specific demonstration of fact" required to establish that disclosure of the information requested will result in a "clearly defined and very serious injury." Accordingly, the Court will deny the request for protective order shielding the documents from discovery by Plaintiffs. The nature of the requested discovery, nevertheless, warrants protection from unnecessary dissemination. When the court denies a motion to compel in full or in part, it may at its discretion enter any protective order authorized under Fed.R.Civ.P. 26(c) See Fed.R.Civ.P. 37(a)(4)(B) and (C). The Court finds good cause to protect the confidentiality of the requested financial documents and information. Accordingly, the Court orders that any documents and/or information provided in response to the referenced requests are hereby deemed confidential. Plaintiffs shall use them for no purpose other than this litigation. At the conclusion of this action and any appeals, Plaintiffs shall return to Defendant all such confidential information and copies thereof
• Defendant Shawnee Mission Ford's Motion to Reconsider
Defendant's Motion to Reconsider concerns that portion of the December 6, 2001 Order granting Plaintiffs' Motion to Compel and requiring it to produce the financial documents referenced above. By way of background, the Court granted Plaintiffs' original Motion to Compel the financial documents at issue based on the fact that Defendant failed to timely object or respond to the requests in the first instance, failed to respond to Plaintiffs' "golden rule" letter and failed to respond to Plaintiffs' Motion to Compel filed with the Court. In addition to granting Plaintiffs' Motion to Compel, the Court also found Defendant had waived the right to lodge objections to the requests at issue.
Defendant argues in its Motion to Reconsider that it would be manifestly unjust to require it to produce the requested financial documents because (1) the referenced documents are highly confidential; (2) the referenced documents are irrelevant at this stage of the litigation; and (3) the task of producing the referenced documents would place an undue burden upon Defendant.
D.Kan. Rule 7.3 limits the circumstances under which reconsideration may be sought. Defendant contends reconsideration is proper under the third basis enumerated within the Rule, i.e., "the need to correct clear error or prevent manifest injustice."
The Court is not persuaded by Defendant's argument. With regard to Defendant's first and third grounds — confidentiality and undue burden — the Court already has found, supra , that Defendant has failed to present sufficient facts to support a finding of any harm related to undue burden and confidentiality if the documents are ordered produced.
Defendant's second ground for reconsideration is based on lack of relevance. More specifically, Defendant states that, while Plaintiffs have plead punitive damages, they have not shown they have the right to proceed on such claim and thus production of the financial documents at this stage of litigation is premature. Although Defendant has waived its right to lodge objections to the referenced discovery based on relevance, the Court will address the substantive issues related to this argument.
With regard to the relevancy of financial information to the issue of punitive damages prior to a finding by the trier of fact with regard to liability for punitive damages, this Court recently held that "[i]f a plaintiff has alleged sufficient facts to claim punitive damages against a defendant, information of the defendant's net worth or financial condition is relevant because it can be considered in determining punitive damages." Aerotech Resources, Inc. v. Dodson Aviation, Inc . , No. Civ. A. 00-2099-CM, 2001 WL 3953979, at *2 (D.Kan. Apr. 11, 2001) (citing Audiotext Communications Network, Inc. v. U.S. Telecom, Inc . , Civ. A. No. 94-2395-GTV, 1995 WL 625962, *3 (D.Kan. Oct. 5, 1995)). "The party seeking discovery generally `need not establish a prima facie case on the issue of punitive damages before it can obtain pretrial discovery of [the other party's] financial statements and tax returns." Id . (emphasis in original) (citing Mid Continent Cabinetry, Inc. v. George Koch Sons, Inc . , 130 F.R.D. 149, 152 (D.Kan. 1990). A respondent's interest in the nondisclosure and confidentiality of its financial records can usually "be adequately protected by a protective order" restricting dissemination of the documents and the information within. Id . To discover a party's financial condition in light of a claim for punitive damages, requesting parties generally must show the claim for punitive damages is not spurious. Id .
Plaintiff's appear to have alleged sufficient facts to claim punitive damages against Defendants. Further, Defendants have made no showing that Plaintiffs' punitive damage claims are spurious. The Court therefore finds the financial information requested relevant to the issue of punitive damages and finds Defendant's assertion of manifest injustice with regard to this issue to be without merit.
Plaintiff's reliance on a decision to the contrary in American Maplan Corp. v. Heilmayr, Case No. 00-2512-JWL (D.Kan. Sept. 19, 2001) is misplaced. In Maplan, Judge Lungstrum held that production of requested financial discovery was not relevant until after a jury finds a defendant liable for punitive damages. Id. In so doing, Judge Lungstrum specifically stated that "[w]hile other judges in the district may permit pretrial discovery of such information, this Court's practice is to defer until after trial on liability the discovery of financial data relating to punitive damages." Id. Unlike Maplan, the district court judge in Aerotech Resources, Inc. v. Dodson Aviation, Inc., No. Civ. A. 00-2099-CM, 2001 WL 3953979, is Judge Murguia, the same district court judge assigned to this case.
Conclusion
Based on the discussion above, Defendant's Motion for Protective Order (doc. 35) and Motion for Reconsideration (doc. 43) are hereby denied and production and/or inspection of the referenced documents and information shall be completed by February 15, 2002.It is further ordered that all financial documents and/or information provided in response to the referenced requests are hereby deemed to be confidential and Plaintiffs shall use them for no purpose other than this litigation. At the conclusion of this action and any appeals, Plaintiffs shall return to Defendant all such confidential information and copies thereof.
IT IS SO ORDERED.