Opinion
No. 00-2402-KHV
December 28, 2001
MEMORANDUM AND ORDER
Pending before the Court is Plaintiff's Motion to Compel Discovery (doc. 28). More specifically, Plaintiff seeks to compel an answer to Interrogatory 2 and responses to Request for Production of Documents 3, 5, 6 and 7. For the reasons stated below, Plaintiffs Motion will be granted.
Relevant Factual Background
In November 1996, Defendant and its consortium partner Siemens Aktiengesellschaft ("Siemens") entered into a $384 million contract with China Electric Power Technology Import and Export Corporation ("CETIC") calling for Defendant and Siemens to design and supply equipment and material to be used in constructing a power plant in the Hebei Province of the Peoples Republic of China. In performing its obligations under the contract, Defendant engaged Plaintiff as a subcontractor to design, detail, fabricate and supply structural steel required to house two generators and related auxiliary equipment within the planned power plant. In exchange, Defendant contractually agreed to pay Plaintiff a sum of $21 million.
A dispute subsequently arose between the parties regarding the amount due to Plaintiff under the contract and Plaintiff filed this lawsuit (1) to recover an alleged $1.4 million contract balance and (2) to recover $2.6 million for extra work and late payments. In response, Defendant filed a breach of contract counterclaim against Plaintiff. In addition to actual damages incurred as a result of Plaintiff's alleged breach, Defendant also states in its counterclaim that it is "entitled to receive and did impose liquidated damages upon [Black Veatch] for its unexcused delays in the performance of its Work." Defendant's Answer and Counterclaim at ¶ 9(g) (doc. 12). In the Motion to Compel pending before the Court, Plaintiff seeks complete responses to interrogatories and requests it maintains are relevant to Defendant's counterclaim for liquidated damages.
Discussion
Regardless of whether the contract at issue is construed under the laws of New Jersey or Kansas, a stipulation for damages upon future breach of contract is valid as a liquidated damages clause within such contract if the set amount is determined to be "reasonable." See United Tunneling Enterprises, Inc. v. Havens Constr, Co., 35 F. Supp.2d 789, 794 (D. Kan. 1998) (citing Unified School Dist. No. 315 v. DeWerff, 6 Kan. App. 2d 77, 78, 626 P.2d 1206 (1981) (citations omitted)); Metlife Capital Financial Corp. v. Washington Avenue Assoc., 159 N.J. 484, 502, 732 A.2d 493, 503 (1999).
Plaintiff asserts the contract has a provision requiring legal disputes to be determined under the laws of New Jersey, where Defendant has its principal place of business. It is unnecessary for the Court to decide this issue in ruling on Plaintiffs Motion to Compel here, however, given that both Kansas and New Jersey law require a finding that a liquidated damage clause be reasonable.
The discovery requests in dispute here purport to request information and/or documents relating to the "reasonableness" of the approximately $8 million in liquidated damages sought by Defendant. More specifically, Plaintiff seeks information and documents relating to damages actually sustained by Defendant due to Plaintiffs alleged unexcused delays. Plaintiff argues such actual damages are directly relevant to the reasonableness of the $8 million in liquidated damages imposed.
A. Interrogatory 2
Interrogatory 2 requests Defendant to
state the nature and amount of any actual loss or damage — not the amount computed according to any contract formula — that Foster Wheeler sustained as a result of delays to the Project allegedly caused by Black Veatch, due to its alleged failure to perform its work in accordance with the contract schedule or any milestone dates, its delivery of steel that allegedly required modification, or any other cause.
In its initial response to this interrogatory, Defendant objected on grounds that (1) the request was vague and ambiguous; and (2) the request sought information protected from disclosure by the attorney — client privilege and/or work — product doctrine. Without waiving these objections, Defendant directed Plaintiff to the information set forth in response to Interrogatory 1. Defendant's response to Interrogatory 1 — which requests Defendant to describe and state the amount of all claims that Defendant asserts in this action against Plaintiff — sets forth the following list of both actual and liquidated damages by category and cost:
Actual damages: $ 100,000
a) Targeted Reduction due Foster Wheeler $ 2,000,000 b) Advisory Manday Reductions $ 88,275 c) Black Veatch over — billing for man — months $ 27,844 c) [sic] Costs incurred for QC inspection and expediting $ 135,570 d) Costs incurred for steel modifications by Foster Wheeler $ 488,854 e) Additional construction costs caused by Black Veatch $ 140,000 f) Additional costs caused by Black Veatch's late delivery of critical shipping documents $ 446,106 g) Additional costs caused by Black Veatch's failure to execute properly its work in areas such as quality control, fabrication, supervision . . . $ 198,285 h) Current problems with under — designed structure, which represent an ongoing cost that currently exceeds Subtotal $ 3,624,934 Liquidated Damages: $ 3.312,790 $ 7,957,420 a) Liquidated damages for late steel delivery, TIERS 1-4 $ 2,714,390 b) Liquidated damages for late steel delivery, TIER 5 (supplementary steel) $ 1,930,240 c) Liquidated damages for construction delay Subtotal Grand Total $11,582,354 Plaintiff asserts the information provided by Defendant regarding actual damages sustained is non — responsive and/or deficient. More specifically, Plaintiff argues that the categories set forth as actual damages supplement Defendant's liquidated damage claim for unexcused delays and do not itemize actual damages sustained as a result of unexcused delays — a number Plaintiff needs for comparison purposes in order to determine the reasonableness of the liquidated damages provision of the contract.In response to Plaintiff's assertion. Defendant concedes that a specific computation of actual damages and evidence supporting such damages were not included in either its discovery responses or its initial disclosures. Defendant goes on, however, to direct the Court to statements included in both its discovery responses and in its Rule 26(a)(1) [initial disclosure] pleading, which purportedly inform Plaintiff that the information necessary to compute actual damages is not yet available. Defendant's Response to Plaintiff's Motion to Compel at p. 5 (doc. 32).
With regard to the sufficiency of Defendant's response to Interrogatory 2, the Court notes, as a preliminary matter, that Defendant has failed to provide argument or evidence to support its original objections to the responses based on vagueness, ambiguity and privilege. A party resisting discovery has the burden to support its objection. Etienne v. Wolverine Tube, Inc., 185 F.R.D. 653, 656 (D.Kan. 1999); Hilt v. SFC Inc., 170 F.R.D. 182, 186 (D.Kan. 1997). Defendant has failed to support its objections based on vagueness, ambiguity and privilege; thus, the Court will overrule them.
Instead, Defendant relies solely on its argument that the information necessary to compute actual damages is not yet available. Notwithstanding Defendant's argument, the Court finds that conspicuously missing from Defendant's interrogatory response is a separate list by category and cost of those particular actual damages sustained as a result of Plaintiff's unexcused delays and an affirmation, under oath, declaring that Defendant does not possess the information necessary to compute at this time any additional actual damages sustained as a result of unexcused delays. For this reason, the Court will grant Plaintiff's Motion to Compel with regard to Interrogatory 2 and will order Defendant to respond accordingly.
In its brief, Defendant argues it did not include a computation of actual damages — or evidence to support such damages — in its initial Rule 26(a)(1) disclosures because, again, the information necessary to compute actual damages is not yet available. The Court has not seen the disclosures to which Defendants refer because, although generally cited by both parties in their briefs, neither of the parties produced Defendant's Fed.R.Civ.P. 26(a)(1) pleading as an exhibit.
With regard to Defendant's argument, however, the Court notes that the federal rule regarding initial disclosure of damages entitles parties to a specific computation of damages, including availability for inspection and copying the documents and other evidentiary material on which such computation is based. See Fed.R.Civ.P. 26(a)(1)(C); see, also, Kleiner v. Burns, No. 00-2160-JWL, 2000 WL 1909470 (D. Kan. Dec. 15, 2000) (citing Midwest Grain Prod Inc. v. Envirofuels Mktg, Inc., No. 95-2355-EEO, 1996 WL 445070, at *11 (D. Kan. July 12, 1996)). Parties have a duty, furthermore, to supplement their initial disclosures at appropriate intervals during the discovery period. See Fed.R.Civ.P. 26(e)(1).
B. Requests 5 and 6
Requests 5 and 6 request Defendant to produce "all schedules concerning the Project" and "all documents that recorded the progress of work on the Project, including all as — built schedules, diaries, logs, daily reports and similar documents."
In its initial response to these requests, Defendant objected on grounds that the requests were vague, ambiguous, overly broad, unduly burdensome and seek documents and information that are not relevant and protected from disclosure by the attorney — client privilege and/or work — product doctrine. Without waiving these objections, Defendant stated it would "produce any relevant, discoverable, non-privileged document" responsive to the requests.
Although it is not clear from Defendant's response to these requests what category of documents it deems to be relevant to the claims and defenses set forth in this lawsuit, Defendant's brief in response to Plaintiff's Motion to Compel more specifically sets forth Defendant's position:
Foster Wheeler placed contracts with over 170 different subcontractors and vendors pursuant to the Owner Contract. As such, it should not be surprising that the volume of documents recording "the progress of the work on the Project" is overwhelmingly large and necessarily contains information that is in no way relevant to these proceedings By way of example, Foster Wheeler submits that numerous documents exchanged between Foster Wheeler and various vendors may have no bearing on the parties' disputes but still fall squarely within Plaintiff's request. Consequently, and in an effort to facilitate the discovery process in this case, Foster Wheeler sought to limit its production to this request to those documents that pertain, refer or relate to Black Veatch's work for Foster Wheeler, including impacts caused by Black Veatch' s breaches of this Contract. To require Foster Wheeler to produce documents with the breadth that Plaintiff purports to require would be extremely burdensome and would result in the voluminous production of irrelevant documents.
Defendant's Response to Plaintiffs Motion to Compel at pp. 10-11 (doc. 32) (emphasis in original).
Defendant's brief thus makes clear that Defendant objects to Requests 5 and 6 on grounds that they are overly broad, unduly burdensome and seek documents and information that are not relevant. 1. Overly Broad/Not Relevant
Amended Rule 26(b)(1) provides that "[p]arties may obtain discovery regarding any matter . . . that is relevant to the claim or defense of any party." Fed.R.Civ.P. 26(b)(1). Further, "[r]elevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Id.
Discovery of information "relevant to the subject matter involved in the action," previously allowed as a matter of right under the prior version of Rule 26(b)(1), now can be undertaken only with leave of court or for good cause shown. Since December 1, 2000, amended Rule 26(b)(1) has applied to federal court proceedings insofar as "just and practicable." It is unnecessary to decide whether the former or current version of Rule 26 is applicable here, because the Court finds the documents requested relevant under the current, more narrow version of the Rule.
When the discovery sought appears relevant, the party resisting the discovery has the burden to establish the lack of relevance by demonstrating that the requested discovery (1) does not come within the scope of relevance as defined under Fed.R.Civ.P. 26(b)(1), or (2) is of such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure. Scott v. Leavenworth Unified School Dist. No. 453, 190 F.R.D. 583, 585 (D. Kan. 1999). Similarly, a party resisting discovery on the grounds that a request is overly broad has the burden to support its objection, unless the request is overly broad on its face. Etienne v. Wolverine Tube, Inc., 185 F.R.D. 653, 656 (D. Kan. 1999); Hilt v. SFC Inc., 170 F.R.D. 182, 186 (D. Kan. 1997). When the relevancy of propounded discovery is not apparent, however, its proponent has the burden to show the discovery relevant. Pulsecard, Inc. v. Discover Card Serv., Inc., 168 F.R.D. 295, 309 (D. Kan. 1996).
Pursuant to amended Rule 26(b)(1), the Court finds that Requests 5 and 6 appear on their face to be relevant to Defendant's counterclaim for approximately $3 million in liquidated damages due to construction delays caused by Plaintiff. The Court's finding is grounded in the real possibility that responsive documents — regardless of whether such documents directly relate to Black Veatch's scheduling — may lead to the discovery of admissible evidence.
The Court notes that the touchstone to Plaintiffs discovery requests is not that such discovery will result in evidence which is, or even may be, admissible at trial, but rather that such discovery is "reasonably calculated to lead to the discovery of admissible evidence." Fed.R.Civ.P. 26(b)(1).
Because the Court finds the discovery sought appears relevant on its face, Defendant now has the burden to establish lack of relevance by demonstrating that the requested discovery (1) does not come within the scope of relevance as defined under Fed.R.Civ.P. 26(b)(1), or (2) is of such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure. See Scott v. Leavenworth Unified School Dist. No. 453, 190 F.R.D. at 585.
To that end, Defendant argues those documents that do not pertain, refer or relate to Black Veatch's work for Foster Wheeler are not relevant. The Court, however, is not persuaded by this argument. Utilizing Foster Wheeler's example, the Court cannot say that Project scheduling documents that were exchanged between Defendant and one of its 169 other subcontractors and/or vendors is not reasonably calculated to lead to the discovery of admissible evidence. Moreover, beyond its conclusory assertion of undue burden discussed supra, Defendant fails to allege any potential harm occasioned by production of such documents. Accordingly, and based on the discussion relating to undue burden set forth supra, the Court finds any potential harm is outweighed by the potential relevance of such documents and Plaintiff will be required to produce, or make available for inspection, all documents responsive to Requests 5 and 6.
2. Undue Burden
With regard to Defendant's objection to Requests 5 and 6 based on undue burden, Defendant has submitted no affidavit or other proof demonstrating that fully responding to the document requests at issue would impose an undue burden. A mere assertion that Defendant cannot easily respond to the requests is insufficient to demonstrate undue burden. Those resisting discovery must demonstrate that the time or expense involved in responding to requested discovery is unduly burdensome. Cf. Sentry Ins. v. Shivers, 164 F.R.D. 255, 257 (D. Kan. 1996) (bald assertions of emotional and financial stress do not show undue burden). Whether reviewing, or making available for review by Plaintiff, the documents requested meets that criterion depends on many factors unknown here. The Court may readily assume, for example, that documents relating to Project scheduling are all kept in one location. Reviewing, or making available for review, thousands of documents all stored in one location does not constitute an undue burden.
Defendant has the obligation to provide sufficient detail and explanation about the nature of the burden in terms of time, money and procedure which would be required to provide the requested information. This is necessary to enable the Court to determine the burden imposed by the discovery. Defendant has provided no such detail or explanation. The Court will not speculate that the requested discovery causes undue burden and therefore overrules Defendant's objection on these grounds.
C. Request 7
Request 7 seeks "all financial or accounting documents concerning the Project, including all documents concerning Foster Wheeler's income, payments, expenses or expenditures and all documents reflecting any budgets for such items." Plaintiff maintains such cost information is necessary to determine if, and to what extent, Foster Wheeler sustained actual damages due to delay allegedly caused by Plaintiff and consequently, whether the $8 million in liquidated damages is reasonable or is, in reality, an unenforceable penalty.
Pursuant to amended Rule 26(b)(1), the Court finds that Request 7 appears on its face to be relevant to Defendant's counterclaim for liquidated damages. The Court's finding is grounded in the real possibility that responsive documents — regardless of whether such financial or accounting documents directly relate to Black Veatch — may lead to the discovery of admissible evidence.
In support of relevancy, Defendant again argues documents that do not pertain, refer or relate to Black Veatch's work for Foster Wheeler are not relevant. The Court, again, is not persuaded. Using Defendant's example, the Court cannot say financial information pertaining to loans Defendant obtained in order to finance the project is not reasonably calculated to lead to the discovery of admissible evidence regarding actual damages sustained by Defendant as a result of Plaintiffs alleged delays. Moreover, Defendant again has submitted no affidavit or other proof demonstrating that fully responding to the document requests at issue would be harmful or impose an undue burden. Accordingly, the Court finds any potential harm is outweighed by the potential relevance of such documents and Defendant will be required to produce, or make available for inspection, all documents responsive to Request 7.
Conclusion
Based on the discussion above, Plaintiffs Motion to Compel is granted and Defendant shall provide the information sought in the referenced discovery requests within eleven (11) days from the date of this Order.
IT IS SO ORDERED.
ORDER
A telephone hearing was held in this matter on December 21, 2001. Plaintiff appeared through counsel George D. Wenick and Defendant appeared through counsel David Handley. At issue in the hearing was the parties' Joint Motion for Scheduling Conference and Joint Request to Extend Discovery (doc. 85). Upon consideration of the pleading filed and the arguments of counsel, as well as upon consultation with the trial judge in this matter, the Court grants the parties' Motion and the Scheduling Order in this matter is hereby amended as follows:
(1) The parties shall file final witness and exhibit lists by March 15, 2002. All witness and exhibit lists shall be in the form prescribed by D. Kan. Rule 16.2(e).
(2) All discovery shall be commenced or served in time to be completed by April 12, 2002
(3) The February 12, 2002 final pretrial conference in this matter is reset to April 23, 2002 at 10:00 a.m. in Room #219 at 500 State Avenue, Kansas City, Kansas. Unless otherwise notified, Magistrate Judge David J. Waxse will conduct the conference. The parties shall prepare one proposed final pretrial order, in accordance with D. Kan. Rule 16.2(a). No later than April 16, 2002, defendant shall submit to the Judge who will conduct the conference (but not file with the Clerk's Office) both a printed copy of the proposed pretrial order and a computer diskette (WordPerfect 9.0, or earlier version, 3.5 inch format, labeled with case name and number) containing the proposed pretrial order.
(4) All potentially dispositive motions shall be filed by May 3, 2002.
(5) Upon consultation with the trial judge, the Court resets the June 18, 2002 trial on a trial calendar that will begin on September 3, 2002
IT IS SO ORDERED.
ORDER
Pending before the Court is Defendant's Motion for an Extension of Time for Filing Responses (doc. 100). Defendant represents to the Court that Plaintiff does not object to Defendant's motion for additional response time if the Court grants the parties' pending joint motion to extend discovery. Given the Court's Order entered this same day extending the discovery period in this matter to April 12, 2002, and for good cause shown, Defendant's Motion is granted without objection and the response deadlines for the following motions are hereby extended to January 31, 2002:
(1) Plaintiff's First Motion for Partial Summary Judgment (doc. 92);
(2) Plaintiff's Motion for Leave to File Supplemental Expert Rebuttal Report (doc. 96); and
(3) Plaintiff's Objections to Expert Reports and Motion to Compel Discovery (doc. 97).
IT IS SO ORDERED.