Opinion
USDC#: 2:02 CV 1068 TC
August 19, 2003
ORDER GRANTING MOTION FOR PROTECTIVE ORDER AND DENYING MOTION TO COMPEL
Defendant Ida Baty moved for a protective order and Plaintiffs moved to compel. The discovery at issue in both motions is related to Defendant Baty' personal financial records and to her prior spouse.
Docket no. 18, filed July 1, 2003.
Docket no. 22, filed July 21, 2003.
Factual Background
Plaintiffs allege that Defendants' fraudulent actions and reckless misconduct caused Plaintiffs' investments to lose $1.8 million in value, Plaintiffs allege they met Defendant Pyeatt in October 2000 and thereafter invested and dealt with him. Twenty paragraphs in the complaint recite Plaintiffs' many contacts with Pyeatt. By contrast, the allegations against Baty are sparse. She is alleged to reside in Washington state; to be an unlicensed investment advisor; to be, with Pyeatt, the "alter ego" of an LLC and corporation; and to have every conceivable agency relationship with the other defendants. The securities fraud and common law fraud causes of action are only alleged against Pyeatt, while all other claims name all defendants. Claims for relief include damages, rescission and restitution. There is no claim for punitive damages.
Complaint, docket no. 1, filed September 25, 2002, pages 1-2.
Complaint, paragraph 15.
Complaint, paragraphs 16-34.
Complaint, paragraph 7.
Complaint, paragraph 8.
Complaint, paragraph 9.
Complaint, paragraph 14.
Complaint, First Cause of Action, page 9, and Fifth Cause of Action, page 16.
Complaint, Prayer for Relief, pages 21-22.
Discovery Sought
Neither party has provided the court with the specific discovery at issue, but both refer to this as a dispute over personal "financial records," including "personal bank accounts and tax returns" and information relating to Baty's former spouse. The dispute apparently arises out of Plaintiffs' First Set of Discovery Requests to Ida F. Baty and Baty's deposition conducted June 20, 2003.
Plaintiffs' Memorandum in Opposition to Defendant Ida F. Baty's Motion for a Protection Order . . . ("Plaintiffs' Memorandum), docket no 23, filed July 21, 2003, page 2.
Memorandum in Support of Defendant Ida Baty's Motion for Protective Order ("Baty Memorandum"), docket no 19, filed July 1, 2003, page 2. See also Plaintiffs' Memorandum, page 2. Plaintiffs' Memorandum, page 11.
Baty Memorandum, page 2.
Plaintiffs' Memorandum, page 12; Declaration of Erik A. Christiansen, docket no. 24, filed July 21, 2003, paragraph 5.
Letter, Erik A. Christiansen to Joe Cartwright, June 25, 2003, attached as Exhibit A to Declaration of Erik A. Christiansen, docket no. 24, filed July 21, 2003.
Permissible Scope of Discovery
Liberal discovery is fundamental to a system founded on notice pleading, in which parties may not get all information in the pleadings, but should have full access to information before trial. "Consistent with this approach, Rule 26(b)(1) specifies that, `Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party . . .' In turn, Rule 26(b)(2) imposes general limitations on the scope of discovery in the form of a `proportionality test'" that takes into account availability from other sources, other opportunity to discover the same information, and the burden and expense relative to the case and expected benefit of discovery. Thus, the first test on these paired motions is whether the information sought is "relevant to the claim or defense of any party." Then, if relevance is shown, the limitation factors may be examined.Baty's Personal Financial Information
Plaintiffs offer several reasons to justify their request for Baty's personal financial information, including bank account records and tax returns:
• to show defendant's experience and expertise, if any, in trading securities for others;
• [to] prove the amounts of compensation Baty received for her trading of securities for Plaintiffs, as well as the source of the commission payments she received;
• to trace and investigate what happened to Plaintiffs' funds;
• to see, for example, if Baty in some manner commingled her personal funds with those of the Plaintiffs;
• to provide a precise roadmap of the downward spiral of the Plaintiffs' funds, and the source of funds received by Baty for her trades made with Plaintiffs' funds; and
• to establish Baty's net worth for punitive damages purposes.
Plaintiffs' Memorandum, pages 6-7.
It is hard to imagine how Baty's personal financial records will show her experience and expertise. They are not relevant to that purpose. The complaint does not seek any remedies related to "tracing" money, and as Plaintiffs admit, "Plaintiffs did not allege that Baty placed Plaintiffs' funds in Baty's own account," so a "roadmap" of the funds is not relevant. Plaintiffs allege a loss by those to whom money was entrusted. The fact of that loss does not depend on invading Baty's personal financial data, particularly on a complaint so devoid of any allegation of her wrong-doing. Her compensation may be relevant to the case, but only tangentially. The core of the case is the loss, not what happened to the money. Even if her compensation is relevant, there are certainly less burdensome and intrusive ways of showing the compensation, if any, that she received on these transactions.
Id.
The financial information would be relevant on the issue of punitive damages. But punitive damages are not pled and no acts by Baty are alleged that would justify imposition of such relief.
Plaintiffs claim that they do not need to plead for punitive damages, but how else does such an important issue become a "claim" on which discovery is permitted? The cases Plaintiffs cite are not on point. In Scuttieri v. Page, 808 F.3d 785 (11th Cir. 1987) the prayer for relief did not mention punitive damages though the body of the complaint did. Teel v. United Technologies, 953 F. Supp. 1534 (S.D. Fla. 1997) dealt with specific pleadings requirements under a Florida statute not applicable here.
Information Regarding Baty's Spouse
Baty's Memorandum states that she was divorced from her former spouse in 1997, three years before the events alleged in the Complaint. Plaintiffs offer almost fantastic speculations to justify their discovery on this subject. The complaint contains no hint of these theories.
Defendant Ida Baty's Memorandum in Support . . ., docket no. 25, filed August 12, 2003, page 4 (emphasis added).
It is conceivable that Baty transferred ill gotten funds to another person's account. It also is conceivable that Baty's former spouse will have knowledge concerning her experience and training in trading securities for others, as well as Baty's assets and sources of income, all of which relate to not only what happened to Plaintiffs' funds, but also to Baty's net worth. Furthermore, it is reasonable to surmise that Baty's former spouse could potentially have played a part in defendants [sic] scheme, or cooperated with Baty in absconding with Plaintiffs' funds.
Plaintiffs' Memorandum, page 11.
Plaintiffs conclude that these conjurations compel the conclusion that discovery must b permitted; "It follows, therefore, that information about Baty's spouse is discoverable."
Id.
Plaintiffs' `conceptions,' `surmises,' and `potentials' are not persuasive. Plaintiffs' have failed to show that the information on Baty's spouse is relevant to a claim or defense in this case.
Conclusion
The court should not permit the discovery of Baty's personal finances nor should it permit the discovery related to her former spouse.
ORDER
IT IS HEREBY ORDERED that Defendant Ida Beatty's motion for a protective order is GRANTED and Plaintiffs' motion to compel is DENIED. Neither party is awarded attorney's fees and expenses.
Docket no. 18, filed July 1, 2003.
Docket no. 22, filed July 21, 2003.