Opinion
Case No. 12-30500-svk Adversary No. 12-2734
04-02-2013
In re John L. McCardle and Michelle L. McCardle, Debtors. Spike, LLC, Plaintiff, v. John L. McCardle, Defendant.
THE FOLLOWING ORDER IS APPROVED AND ENTERED AS THE ORDER OF THIS COURT:
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United States Bankruptcy Judge
Chapter 11
DECISION AND ORDER DENYING
REQUEST FOR PROTECTIVE ORDER
Spike, LLC ("Spike") filed a Complaint seeking to determine that a debt owed by John L. McCardle (the "Debtor") is nondischargeable. Spike alleges that when the Debtor was the sole officer and member of Nationwide Recycling, LLC ("Nationwide"), Spike paid Nationwide to destroy certain pallets of energy drink manufactured by Spike. Rather than destroy the energy drink, according to the Complaint, Nationwide sold or allowed the product to be sold. Spike contends that the Debtor's resulting debt should not be discharged in this Chapter 11 bankruptcy due to the Debtor's fraud, embezzlement or willful and malicious injury. The Complaint seeks a liquidation of the debt, including punitive damages. Initially, Spike demanded a jury trial; when the Court required Spike to file a brief in support of that demand, Spike withdrew the jury trial request.
The Debtor sought to take a Rule 30(b)(6) deposition of Spike's representative in Milwaukee, where the adversary proceeding is pending. Spike moved for a protective order under Federal Rule of Civil Procedure 26(c), made applicable in bankruptcy proceedings by Bankruptcy Rule 7026. Spike wants the deposition to take place at Spike's principal place of business in Colorado Springs, Colorado, or, in the alternative, Spike requests that the Debtor be ordered to pay Spike's expenses for traveling to Milwaukee.
Federal Rule of Civil Procedure 30(b)(6) applies here pursuant to Bankruptcy Rule 7030.
To support the request for a protective order, Spike submitted the affidavits of its outside general counsel Thomas Overton and CFO Tracey Corsi. The affidavits confirm that Spike's principal place of business is Colorado Springs and represent that Overton has traveled on business only once and Corsi has never traveled on business for Spike. Spike is represented by local counsel in this adversary proceeding. Neither Spike's affidavits nor its brief in support of the protective order includes any information about Spike's financial condition, the cost of travel to Milwaukee, or unequivocally identifies the deponents Spike would designate in response to the Debtor's Rule 30(b)(6) notice.
The Debtor filed an affidavit stating that in 2012, Spike sued him in the Circuit Court for Waukesha County Wisconsin and took his deposition in the Milwaukee area. Attorney Overton, Spike's general counsel, attended. Spike also hired an investigator who appeared at least twice in the area to make his investigation. In opposing the protective order, the Debtor's attorney points out that the Debtor has been unable to pay his attorney a retainer for this Chapter 11 case. The Debtor's monthly operating reports confirm the Debtor's financial difficulty. His latest report as of January 2013 shows cash on hand of $676.23, with net income of $947.47.
Rule 26(c) allows the court to issue a protective order on a showing of good cause "to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.]" Without explaining how much it would cost or expressly identifying its representative for the deposition, Spike claims that incurring the travel and lodging expenses for one or more persons to travel to Milwaukee would be an undue burden or expense under the Rule.
In Doe Run Peru S.R.L. v. Handy & Harman Refining Group, Inc. (In re Handy), 295 B.R. 179, 182 (Bankr. D.Conn. 2003), the court stated: "When a corporation is a party, there is a presumption in favor of conducting depositions of the corporation in its principal place of business, but 'the presumption is not a strong one and operates primarily where other factors do not favor any particular site for depositions.'" (quoting Buzzeo v. Board of Educ., 178 F.R.D. 390, 392 (E.D.N.Y. 1998). The Buzzeo court listed the factors in determining where to conduct a Rule 30(b)(6) deposition as cost, convenience, and litigation efficiency. Id. This Court can appropriately consider the deponent's financial position and that of the corporate party for which the deponent works. Leist v. Union Oil Co., 82 F.R.D. 203, 204 (E.D. Wis. 1979). In Cadent Ltd. v. 3M Unitek Corp., 232 F.R.D. 625, 629 (C.D. Cal. 2005), the court recognized that the party seeking the protective order bears the burden of proving hardship, and absent "evidence showing a specific and particular need for such protective order," the request should be denied.
Here, Spike has not provided any details about the financial burden of sending a representative from Colorado Springs to Milwaukee for a deposition. Spike's brief does not even specifically identify the witness Spike would designate. Spike implies that Attorney Overton may be the designee, and that the Debtor would therefore be responsible for payment of Attorney Overton's fees at his hourly rate. But Attorney Overton's affidavit does not aver that he is an "officer, director or managing agent," or that he ever had conversations or agreements with the Debtor. Spike does not explain how an outside general counsel qualifies as the officer, director or managing agent with knowledge about the allegations of the complaint, and specifically, the person who had agreements and conversations with the Debtor. The Court rejects the suggestion that the Debtor should pay the hourly rate of Spike's outside general counsel to participate in a deposition, particularly when there is no evidence that the attorney is even the appropriate designee. The other potential designee is Tracey Corsi. Spike does not explain how much it would cost for her to travel to Milwaukee for a deposition, or the burden imposed on Spike. If there are dozens of people who meet the criteria in the Debtor's Rule 30(b)(6) notice, the Court certainly would not order all of them to come to Milwaukee. But assuming that Ms. Corsi is the only designee, Spike has failed to demonstrate undue burden or expense.
Spike sued the Debtor in a Wisconsin state court and was obviously prepared to prosecute that lawsuit before the Debtor's bankruptcy intervened. Spike is represented locally by the same law firm that represented Spike in the state court litigation, and was ready to incur the expense of a jury trial before determining that option was not appropriate in dischargeability litigation. Given the complete lack of evidence that it would be an undue financial burden for Spike to send one or two witnesses to Milwaukee for deposition and the obvious financial burden it would place on the Debtor's counsel to travel to Colorado Springs, Spike has failed to meet its burden of proof. To the extent that more than two witnesses are necessary for this deposition, Spike can renew its request for a protective order.
The parties also can consider conducting the additional depositions by video conference or telephone and sharing the cost.
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IT IS THEREFORE ORDERED: Spike's request for a protective order is denied; and
IT IS FURTHER ORDERED: Spike's request that the Debtor pay for Spike's airfare, hotel and meals is denied.