Opinion
Civil Nos. 02cv192BTM(AJB), 02cv199BTM(AJB), 02cv218BTM(AJB), 02cv308BTM(AJB), 02cv589BTM(AJB), 02cv1438BTM(AJB)
August 16, 2002
[Docket Nos. 132, 136, 140]
DISCOVERY ORDER
Presently before the Court is Plaintiffs Motion to Compel the Deposition of Defendant Atlantic Coast Federal Bank's Person Most Knowledgeable and for Further Responses to Special Interrogatories; Plaintiffs Motion to Compel Further Production of Documents from Defendant Ameriana Bank Trust; and Plaintiffs Motion to Compel Further Discovery from Defendant Sky Bank. These motions are appropriate for submission on the papers and without oral argument pursuant to Local Rule 7.1(d)(1) and the hearing set for August 12, 2002, is vacated. For the reasons outlined below, Plaintiff's Motion to Compel the Deposition of Defendant Atlantic Coast Federal Bank's Person Most Knowledgeable and for Further Responses to Special Interrogatories is GRANTED IN PART AND DENIED IN PART; Plaintiffs Motion to Compel Further Production of Documents from Defendant Ameriana Bank Trust is GRANTED IN PART AND DENIED IN PART; and Plaintiffs Motion to Compel Further Discovery from Defendant Sky Bank is GRANTED IN PART AND DENIED IN PART.
Discussion
As a preliminary matter, on May 22, 2002, this Court issued an Order lifting the stay on discovery solely with respect to the issue of personal jurisdiction. The present motions ensued. The motions to dismiss are set to be heard before District Judge Barry T. Moskowitz on September 12, 2002.
(I) Lewd Standard Regarding Personal Jurisdiction.
As mentioned above, Defendants have filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2). The district court may exercise personal jurisdiction over Defendant "if jurisdiction is proper under California's long-arm statute and if that exercise of jurisdiction accords with federal constitutional due process principles." Fireman's Fund Ins. Co. v. National Bank of Cooperatives, 403 F.3d 888, 893 (9th Cir. 1996). California's long-arm statute provides that jurisdiction may be exercised over nonresident defendants "on any basis not inconsistent with the Constitution of this state or of the United States." Cal. Civ. Proc. Code § 410.10. Because "California's jurisdictional statute is coextensive with federal due process requirements, the jurisdictional inquiries under state law and federal due process merge into one analysis." Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). "[D]ue process requires only that . . . [the defendant] have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Unless otherwise noted, all future citations to "Rule" refer to the Federal Rules of Civil Procedure.
The Ninth Circuit has interpreted Internal Shoe as allowing two types of personal jurisdiction — general and specific. "General personal jurisdiction, which enables a court to hear cases unrelated to the defendant's forum activities, exists if the defendant has `substantial' or `continuous and systematic' contacts with the forum state." Fields v. Sedgwick Associated Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). Specific jurisdiction allows the Court to exercise jurisdiction over a defendant whose forum-related acts gave rise to the action before the court. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); Roth, 942 F.2d at 620.
The Ninth Circuit has articulated a three-part test for determining whether specific personal jurisdiction comports with due process: "(1) the defendant must have done some act purposely to avail himself of the privilege of conducting activities in the forum; (2) the claim must arise out of the defendant's forum-related activities; and (3) the exercise of jurisdiction must be reasonable." Fields, 796 F.2d at 302. Where the defendants present "a compelling case that jurisdiction would be unreasonable," there is no need to address the first two prongs of the test. Id. at 302. On the other hand, "`[o]nce purposeful availment has been established, the forum's exercise of jurisdiction is presumptively reasonable. To rebut that presumption, a defendant must present a compelling case that the exercise of jurisdiction would, in fact, be unreasonable.'" Roth, 942 F.2d at 625 (quoting Shute v. Carnival Cruise Lines, 897 F.2d 377, 386 (9th Cir. 1990), rev'd on other grounds, 499 U.S. 595 (1991)).
1. Plaintiffs Motion to Compel the Deposition of Atlantic Coast Federal Bank's Person Most Knowledgeable and for Further Responses to Special Interrogatories
A. Rule 30(b)(6) Deposition
On June 13, 2002, Plaintiff RLI Insurance Company ("Plaintiff" or "RLI"), served a notice of deposition on Defendant, Atlantic Coast Federal Bank ("Defendant" or "Atlantic"), pursuant to Fed.R.Civ.P. 30(b)(6). The categories of examination set forth in the deposition notice, as they pertain to personal jurisdiction in California, included: (1) communications, solicitations and any investigation prior to Atlantic's purchase of an interest in the "lease pools" from Defendant Commercial Money Center ("CMC"); (2) Atlantic's purchase of an interest in the lease pools; (3) the servicing of the lease pools by CMC's subsidiary, Defendant Commercial Servicing Corporation ("CSC"), and any monitoring of the lease pools by Atlantic, as well as the money received by Atlantic from the lease pools; and (4) any other contacts between Atlantic and California, including liens, lawsuits and bankruptcies filed in this state, as well as loans, investments, marketing and Internet banking in California.
On July 1, 2002, Atlantic produced its President, Robert Larison ("Larison"). Plaintiff maintains that as the deposition progressed, it became patently clear that Atlantic had failed to produce an adequate Rule 30(b)(6) witness. Mot. at 4. Atlantic opposes on the basis that RLI seeks to take another corporate deposition to ask questions that have already been answered, questions that cannot be answered, and questions that it wishes it had asked but did not. Opp'n at 3. Specifically, Atlantic argues, that after a day and a half of the corporate and individual deposition of the President of Atlantic, after another day of the deposition of Atlantic's outside counsel and its law firm, after requests for admission, interrogatories, and requests for production, RLI moves to retake certain depositions and seeks supplementation of interrogatory responses where none is called for. Id. In short, Atlantic argues that "RLI seeks a second bite of the apple." Id. The Court disagrees.
A review of the deposition transcript indicates that Atlantic fell short of its duty to produce a knowledgeable, prepared witness to testify. See Pl's Ex F. Indeed, as Plaintiff points out, the fact that outside counsel testified and did in fact provide responses to approximately 30 of RLI's 50 unanswered questions, does not excuse Atlantic's obligations pursuant to Rule 30(b)(6). Reply at 2. Based thereon, Plaintiff's motion to compel a further Rule 30(b)(6) deposition is GRANTED. Consistent therewith, the deposition is limited to the categories of unanswered jurisdictionally related questions from Larison's deposition and shall not exceed four (4) hours in duration. Atlantic is admonished that Larison shall be fully prepared to address the outstanding categories of issues.
B. Interrogatories
At issue here are Interrogatories 1(a), 1(c), 1(e), 5, 7, and 8. See Pl's Ex. K L 9. Special Interrogatories 1(a), 1(c), and 1(e) correspond to Requests for Admission 1, 3, and 5.
Special Interrogatory 1(a) (Request for Admission 1)
Request for Admission 1 directed Atlantic to admit that it "authorized" the appointment of CMC as the servicing agent for lease pool numbers AAM0200105 and AAM0200106. Pl's Ex. L at 3. Special Interrogatory 1(a) relates to the aforementioned Request for Admission and requests: "For each Request for Admission served herewith for which your answers is other tan an unqualified admission, specifically state all facts which support your response." Ex. K at 3.
In its initial response, Atlantic stated that "Atlantic did not authorize the appointment of CMC. That was to be accomplished by RLI." Pl's Ex. M at 4. Thereafter, Atlantic supplemented its response. See Pl's Ex. Q. RLI maintains that the supplemental response is really an objection which has been waived as untimely. Reply at 8. Moreover, RLI maintains that Atlantic has provided no facts from its investigation for which it denies authorizing the appointment of CMC and only makes self-serving legal conclusions about fiduciary duties, yet claims "authorizing" is an inherently ambiguous term.
Here, while Atlantic's supplemental response does in fact incorporate an objection which the Court finds untimely, the response also states the "the Sales and Servicing Agreement ("SSA") speaks for itself and must be interpreted in light of RLI's fiduciary duties to Atlantic. RLI should have appointed a subservicer as to whom it performed sufficient due diligence and was capable of properly performing its duties . . ." See Pl's Ex. Q at 5-6. Atlantic denied the request for admission and followed up with the facts it maintains support its answer. While Atlantic's response is argumentative in nature, the Court agrees that Atlantic is not be required to interpret the agreement for RLI. Therefore, the motion to compel with regard to Special Interrogatory 1(a) is DENIED.
Special Interrogatory 1(c) (Request for Admission 3)
Request for Admission 5 directs Atlantic to admit that a separate defendant CMC, "is subject to personal jurisdiction in California for any suit arising out the sales and servicing agreement." Ex. L at 3. Special Interrogatory 1(c) again seeks additional facts when the response to the Request for Admission is anything but an unqualified admission. Here, RLI seeks an Admission followed by additional facts in support of a disputed conclusion of law. Because the Request for Admission itself is inappropriate, the motion to compel with regard to Special Interrogatory 1(c) is DENIED. (See Abbot v. United States, 177 F.R.D. 92, 93 (S.D. N.Y. 1997) where the Court found that an objection should lie where the request for admission seeks a response on a disputed conclusion of law.)
Special Interrogatory 1(e) (Request for Admission 5)
Request for Admission 3 directs Atlantic to admit that it "is an assignee of CMC's interest in RLI's lease bonds and claims against RLI in that capacity." Ex. L. At 5. Atlantic indicated in its response that insufficient discovery has been taken to make this legal determination. Opp'n at 14. RLI argues that Atlantic needs to provide the facts to support how it received an assignment of RLI's lease bond, based on its denial that it received the assignment from CMC. Mot. at 13.
Pursuant to Special Interrogatory 1(e), the Court agrees with RLI that to the extent Atlantic has facts to support the receipt of an assignment, said facts need to be disclosed. (See Marchand v. Mercy Med. Ctr., 22 F.3d 933, 937 n. 4 (9th Cir. 1994) where the Ninth Circuit indicated that a request for admission may request an application of law to fact.) Based therein, Plaintiff's motion to compel with regard to Special Interrogatory No. 1 is GRANTED.
Special Interrogatory No. 5
Special Interrogatory No. 5 asks Atlantic to "[d]escribe in detail, including the date, source and substance, any solicitations made to you related to your purchase of an interest in lease pool numbers AAM0200105 and AAM0200106. Ex. K. Atlantic imposed a series of objections and subject to those objections, answered as follows:
Mr. Larison received a telephone call from Cohane Rafferty regarding the leases two and three months prior to Atlantic's purchase of the lease pools. Atlantic also received promotional materials from Cohane Rafferty. Cohane Rafferty is in New York.
Opp'n at 15. There is some evidence that Atlantic represented to RLI that additional information would be forthcoming. Reply at 9. Atlantic has, however, failed to provide additional information. In any event, Atlantic maintains this is all the information it has, and the response has been verified. As such, the motion to compel with regard to Special Interrogatory No. 5 is DENIED.
Special Interrogatory No. 7
Special Interrogatory No. 7 asks Atlantic to "[d]escribe in detail any investigation and/or research you performed regarding CSC prior to your purchase of an interest in lease pools AAM0200105 and AAM0200106. Ex. K at 4. Atlantic referred RLI to the deposition testimony on this subject that RLI had recently elicited from Atlantic's President. Atlantic, then by way of a supplemental response indicated that "Sam Murrow of Atlantic contacted several banks listed on a reference list provided by Cohane Rafferty, including but not limited to, Net Bank in regard to the lease pools." Opp'n at 16.
Here, it is insufficient for Atlantic to point RLI's attention to the depositional testimony referred to in its response. Therefore, the motion to compel with regard to Special Interrogatory No. 7 is GRANTED.
Special Interrogatory No. 8
Special Interrogatory No. 8 asks Atlantic to "[d]escribe in detail any investigation and/or research you performed regarding the performance of the leases encompassed within lease pool numbers AAM0200105 and AAM0200106 prior to your purchase of an interest in said lease pools. RLI objects to Atlantic's "piecemeal approach to providing discovery," and indicates that Atlantic has stated that it would provide additional information with regard to this Interrogatory. A review of the record, however, indicates that Atlantic has responded to this interrogatory. Specifically, in its supplemental responses, Atlantic provided that "Atlantic notes that it conducted no investigation and research of the lease pools in California prior to signing the SSA." Based on this representation and in light of Atlantic's duty of candor to the Court, the motion to compel with regard to Interrogatory No. 8 is DENIED.
2. Plaintiffs Motion to Compel Further Production of Documents From Ameriana Bank Trust
Plaintiffs Motion to Compel Further Production of Documents From Defendant Ameriana Bank Trust ("Defendant" or "Ameriana") alleges that Ameriana failed to produce two categories of documents. As to the first category of documents, relating to Ameriana's investment in a second CMC lease pool, RLI has indicated that Ameriana has since complied. Based therein, with regard to this category of documents, Plaintiffs motion to compel is DENIED as moot.
Pre-Contractual Solicitation Materials
In its first document request to Ameriana, RLI sought all documents that related to all transactions between Ameriana and CSC, and all transactions between Ameriana and Anthony and Morgan. Mot. at 3. The solicitation materials included pro forma contracts between Ameriana, CMC, CSC, and specific information about the on-going transactions anticipated by sales and servicing agreement eventually entered into among CMC, CSC, and Anthony and Morgan. In short, these documents summarized the entire transaction. Defendant does not object to the disclosure of said documents subject to Court order, after the Court has considered whether or not the confidentiality agreement disables Ameriana from producing the documents. Defs Statement at 2.
Plaintiff argues first, that the confidentiality agreement Ameriana signed, only protected the interests of Rafferty Capital before the contracts were entered by precluding any other use by Ameriana of the information disclosed before Ameriana decided whether to invest in the CMC lease pools. Reply at 2. Second, Plaintiff maintains that even if the pre-contractual agreement had been intended to survive Ameriana's entry into the relationship with CMC, RLI and CSC, that agreement, standing alone, cannot preclude later discovery under the Rules of Civil Procedure. Id. In support of this theory, Plaintiff points to the authority of a district court in the Northern District of Illinois that found a confidentiality agreement does not prevent the disclosure of the document. See Medical Waste Technologies v. Alexian Brothers Medical Center, 1998 WL 387706, *6 (N.D. Ill. 1998).
In Medical Waste Technologies, the court opined that "[i]f entities involved in litigation were able to shroud all of their documents with `confidentiality agreements' which prevented their disclosure, our system of discovery would become nothing but a sham. Id. Here, as in Medical Waste Technologies, the Court finds the confidentiality agreement at hand does not preclude production of the documents pursuant to this litigation. The Court therefore GRANTS Plaintiffs motion with regard to these documents and orders production forthwith.
3. Plaintiffs Motion to Compel Further Discovery from Sky Bank
Here, Plaintiff maintains that outstanding document requests exist regarding (1) production of information pertaining to the origin of wire transfers received by Sky Bank from CMC up to four times per month over a period of a year, (2) fifty-seven (57) pages of missing documents or faxes within the bates range SKY 00552 to SKY 00827, (3) production of documents involving a parent of Sky Bank (Sky Financial Solutions) with an office in California, and (4) production of documents pertaining to Sky Bank's loans to Guardian VI and Guardian IX, proceeds of which were to invest in CMC lease pools. In addition, Plaintiff seeks an order compelling Sky Bank to produce a deponent to testify concerning general jurisdiction issues. Mot. at 1.
Sky Bank's Records Relating to Wire Transfers Received from CMC
Plaintiff argues that Defendant Sky Bank agreed to produce "wire transfer records of all funds related to Guardian Capital XVIII, LLC and Guardian Financial Group" in responding to RLI's request for production of documents. Mot. at 4 citing Ex. 3, Response No. 8. Plaintiff argues that this information is directly relevant to specific jurisdiction issues as it establishes money being wired from CMC to Sky Bank on a consistent and systematic basis. Mot at 4. Plaintiff further argues that the money relates to CMC lease pools being serviced out of California in which Sky Bank has been assigned the right to the vast majority of the income stream. Id.
Sky Bank opposes the motion to compel on the basis that RLI's motion does not seek to compel discovery on any specific document request. The Court finds this assertion is without merit however, based on the fact that Defendant did in fact indicate in response to Request for Production No. 8, Set One, that "[t]he Sky Bank wire transfer records of all funds . . . will be produced." Id.
On July 31, 2002, Sky Bank produced the documents related to the origins of wire transfers and is continuing to search for the additional documents that RLI requested. Opp'n at 6. While RLI goes to great lengths to explain how Sky Bank's delinquent production was solely designed to prejudice RLI's ability to fairly oppose the motion to dismiss, the record before the Court indicates that production is near complete with regard to the wire transfers. Nevertheless, to the extent that any more documents exist, the motion to compel with regard to the wire transfer information is GRANTED.
Sky Bank asserts that it is continuing to search for the additional documents that RLI has requested here.
Fifty Seven Pages of "Missing" Documents
Plaintiff argues that fifty seven pages of documents were missing from Sky Bank's production in the bates range of SKY 00552 to SKY 00829. Mot. at 7. RLI asserts that these missing documents relate to the CMC/Sky Bank/Guardian wire transfer transactions. Id. Sky Bank asserts that it has reviewed its files and determined that no pages are in fact missing. Opp'n at 7. In it's opposition, Defendant has verified to the Court that no "missing" documents exist. Nonetheless, it is difficult to understand the nonsequential nature of the bates stamps.
RLI seeks an order compelling a Rule 30(b)(6) deposition concerning the one hundred and thirty pages of wire transfers produced on July 31, 2002. Based on the limited amount of time before the September 12, 2002, hearing on the motion to dismiss, and Defendant's untimely production of the documents, RLI's request for a deposition of the person most knowledgeable is GRANTED. The Court also finds inquiry into the fifty-seven pages of missing documents is appropriate. Consistent with the Federal Rules of Civil Procedure, the deposition is limited in duration to seven (7) hours absent stipulation or further order of the Court. Plaintiff may inquire regarding the wire transfers and the fifty-seven pages of missing documents only.
Production of Documents Relating to General Jurisdiction Issues
RLI contends that after the deposition of Sky Bank's specific jurisdiction corporate designee concluded, counsel discussed the possibility that stipulations could be reached relating to Sky Financial Solutions, a subsidiary of Sky Bank's parent company with a California office. Mot. at 8. Plaintiff maintains that it relied on this proposed stipulation in deciding to refrain from serving a second set of document demands to Sky Bank relating to general jurisdiction issues. Id. Plaintiff asserts that subsequent meet and confer meetings failed and therefore requests an order requiring Sky Bank to produce its files relating to the Guardian VI and Guardian IX transactions, and ordering the production of documents relating to Sky Financial Services' contacts in the state of California. Id. In opposition, Defendant argues that RLI never served a document request related to either (1) Sky Financial Solutions' contacts with California, or (2) the Guardian VI and Guardian IX transactions. Moreover, Defendant asserts that any such request is entirely outside of the scope of discovery for the limited purposes of jurisdiction. Specifically, Defendant maintains that Sky Bank does not allege that Sky Bank Financial Solutions is in any way involved in the transactions at issue in this case. Id. Moreover, Defendant argues, Sky Bank's transactions with Guardian VI and IX are not the subject of this litigation.
Despite the dispute as to the relevance of these files, Defendant has agreed to produce its files related to Guardian VI and IX to avoid any further unnecessary and wasteful legal expense. Based therein, with regard to the files, assuming Defendant has produced these files, the motion to compel is DENIED as moot.
Rule 30(b)(6) Depositions
Sky Bank has also agreed to produce two corporate designees, Mr. Maiberger and Ms. Bowman, who will testify regarding Sky Financial Solutions and its operations in California and general jurisdiction issues. The depositions were set to go forward the week of August 12, 2002. Plaintiff requests an order mandating that the depositions go forward. Plaintiffs motion is GRANTED and the depositions shall proceed as scheduled.
Lastly, Plaintiff seeks Issue Sanctions relating to Sky Bank's repeated failure to produce wire transfer records and failure to produce fifty seven pages of documents within Sky Bank's transfer file. The Court declines to impose sanctions.
Conclusion
Based on the foregoing, Plaintiff's Motion to Compel the Deposition of Defendant Atlantic Coast Federal Bank's Person Most Knowledgeable and for Further Responses to Special Interrogatories is GRANTED IN PART AND DENIED IN PART; Plaintiffs Motion to Compel Further Production of Documents from Defendant Ameriana Bank Trust is GRANTED IN PART AND DENIED IN PART; and Plaintiff's Motion to Compel Further Discovery from Defendant Sky Bank is GRANTED IN PART AND DENIED IN PART.
Consistent with this Order, all documents shall be produced on or before August 26, 2002, and all depositions shall proceed on or before August 30, 2002, at Plaintiff's convenience.
IT IS SO ORDERED.