Free Motion to Compel - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Case No. 03-cv-2669-MSK-PAC LEPRINO FOODS COMPANY, Plaintiff,
v.

BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; BIG-D CONSTRUCTION CORP., a Utah corporation; and Does 1-100, inclusive, Defendants/Counterclaimants, BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; BIG-D CONSTRUCTION CORP., a Utah corporation; and Does 1-100, inclusive, Third Party Plaintiffs,
v.

MARELICH MECHANICAL CO., INC. dba UNIVERSITY MA RELICH MECHANICAL, a California corporation, Third Party Defendant. MARELICH MECHANICAL CO., INC. dba UNIVERSITY MARELICH MECHANICAL, a California corporation, Third Party Plaintiff/Counterclaimant,
v.

BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; FEDERAL INSURANCE COMPANY, an Indiana corporation; FRICK COMPANY, and Roes 20 through 80, inclusive, Counterdefendant/Third Party Defendants. PLAINTIFF'S SECOND MOTION TO COMPEL DISCOVERY FROM DEFENDANTS BIG-D CONSTRUCTION CORP.-CALIFORNIA AND BIG-D CONSTRUCTION CORP. - AND CERTIFICATE OF COMPLIANCE WITH FED. R. CIV. P. 37(a)(2)(A) AND D.C.COLO.LCivR 7.1A

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Plaintiff Leprino Foods Company ("Leprino" or "Plaintiff"), through its counsel, Campbell Bohn Killin Brittan & Ray, LLC, respectfully moves the Court pursuant to Fed. R. Civ. P. 37 for an Order compelling Defendants Big-D Construction Corp. ("Big-D Construction") and Big-D Construction Corp. ­ California ("Big-D California")

(collectively "Big-D") to produce documents as set forth below. As grounds for this motion, Leprino states as follows: I. BACKGROUND AND STATUS OF CASE A. Introduction. Big-D has stymied Leprino's discovery efforts from the inception of this case and has substantially hindered Leprino's ability to prepare for trial. This is the second time Leprino has been forced to ask this Court to order Big-D to comply with appropriate discovery requests. Throughout this litigation, Big-D has been recalcitrant, failed to make discovery, and impeded efforts to take depositions. Leprino sought to avoid involving the Court by attempting to negotiate informal resolutions with Big-D on discovery issues, primarily by re-scheduling multiple depositions and repeatedly inquiring as to the status of documents not produced. B. Nature of the Lawsuit. This action arises from the delay in the completion of construction of Leprino's cheese manufacturing and dairy storage facility in Lemoore, California (hereinafter referred to as the "Lemoore West Project"). Leprino entered into a general contract with Big-D ("General Contract"), by which Big-D was responsible for, among other things, the timely completion of construction of the Lemoore West Project and the timely delivery of

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the Lemoore West Project to Leprino. The issues in the case include various breaches of contract by Big-D resulting from its failure to timely complete construction of the Lemoore West Project. Leprino contends, among other things, that the delay was caused by the failures of Big-D and its subcontractors to properly manage the building schedule, its failure to manage and insure that certain subcontractors provide the requisite labor for the job and efficiently perform the work; in a nutshell, Big-D failed to properly coordinate the construction work and otherwise perform its contractual obligations in a timely manner, thus breaching the General Contract's requirement to deliver the Lemoore West Project by a date certain. Leprino incurred nearly $27 million in losses because of the improper delay in the completion of the Lemoore West Project. Big-D alleges that the delays were driven by design changes of the owner (i.e., Leprino), and that fault lies with the owner or its architect/engineer. It seeks roughly $2.6 million in additional and extended overhead costs, defined in the General Contract as "general conditions costs." Big-D does not seek any additional direct compensation because it was paid a percentage of the total cost of the project as its fee. Leprino has held back approximately $3.5 million of the final contract amount, well below the damages caused by Big-D. The only dispute in this regard is Leprino's contractual right to protect itself by withholding money based on damages caused by Big-D's delay. Critical issues include Big-D's ability to withstand a judgment entered against it in favor of Leprino and the true relationship between the various Big-D entities. From earlier discovery in this case, Leprino learned of other Big-D entities that may also be alter egos of the others. Despite objection by Big-D, Leprino was granted

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leave to file its Supplemental and Amended Complaint and Jury Demand to include two such entities, i.e., Big-D Corporation and Big-D Capital Corp. Leprino also has served additional discovery requests on Big-D concerning, among other things, its alter egos, and Big-D's responses to those discovery requests are due by October 14, 2005. Accordingly, Leprino requests that the types, nature and extent of the discovery sought through this Motion to Compel be required from the other Big-D entities that have been added to this case as Defendants (Big-D Corporation and Big-D Capital Corp.). C. Discovery That is the Subject of This Motion. Leprino seeks discovery through interrogatories concerning the relationship between the various Big-D entities, including Big-D Construction and Big-D California, because it believes that Defendants are mere alter egos and the assets of both should be available to satisfy any judgment against either in Leprino's favor. This is a

customary line of discovery, but one that Big-D has continually sought to thwart. On November 24, 2004, Leprino propounded Plaintiff's First Set of

Interrogatories and Second Set of Requests for Production of Documents and/or Tangible Things ("Second Set of Discovery") to Big-D. (A true and correct copy of Leprino's Second Set of Discovery is attached hereto as Exhibit 1). Big-D served

Defendants' Responses to Plaintiff's First Set of Interrogatories and Second Set of Requests for Production of Documents and/or Tangible Things ("Big-D's Responses") on or about January 3, 2005. (A true and correct copy of Big-D's Responses are

attached hereto as Exhibit 2). In connection with Big-D's Responses, Big-D produced documents labeled Big D 00001-00090, Big D 00107-00152 and Big D 00223-00243.

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Although, Big-D's Responses stated that the documents labeled Big D 00091-00106 and Big D 00153-00223 were to be stamped "Confidential / Attorney Eyes Only" and would be produced to Leprino, it was only after multiple letters and discussions with BigD's counsel that those documents were finally produced to Leprino. (See, e.g., Patrick Markham's September 7, 2005 letter to Big-D's counsel, a true and correct copy of which is attached hereto as Exhibit 3). Further, Big-D's Responses are evasive and intended to prevent the discovery efforts of Leprino. Big-D contends Leprino's

document requests seek irrelevant information as to the issue of alter ego; however, the documents sought are relevant to that issue. Big-D California continues to contend it is a separate entity from Big-D Construction, which Leprino seeks discovery to establish. D. Fed. R. Civ. P. 37(a)(2)(B) and D.C.COLO.LCivR 7.1A Certification. After receiving Big-D's Responses, Leprino's counsel persistently and

continuously communicated with counsel for Big-D by telephone and written correspondence in a vain effort to obtain the information and documents sought herein without wasting the Court's time by way of motions practice. Despite Leprino's best efforts, which culminated in the September 7, 2005 letter from Leprino's co-counsel, Patrick Markham to Big-D's counsel Frank J. Hughes, Big-D has failed and refused without any legal basis whatsoever to produce the documents Leprino is now fo rced to seek through this motion. (See, Exhibit 3). II. OUTSTANDING DISCOVERY Big-D has failed and refused to produce documents in response to Leprino's Requests for Production of Documents No. 3, 4, 5, 9, 10, 11, and 17 contained in

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Plaintiff's Second Set of Discovery; these documents are critical to Leprino's ability to assess the validity of Big-D's contentions regarding the existence or absence of the alter ego status of Big-D Construction and Big-D California. Pursuant to

D.C.COLO.LCivR 37.1, each request and each of Big-D's responses thereto are set forth verbatim below, in addition to a statement identifying what documents have not been produced: Request for Production of Documents No. 3 All financial statements, income statements, profit and loss statements, balance sheets, and state and federal tax returns for the preceding five (5) calendar years for Big-D California. Response: Big-D California objects to providing any requested information that goes beyond the year 2000, which is the year the construction contract made the subject matter of this litigation was executed between Big-D California and Plaintiff (executed in September 2000). Financial information beyond that period of time is irrelevant to the claims made by Plaintiff. Regardless, Big-D California had no operations in 1999. Big-D California further objects to the production of its federal income tax returns as the tax returns contain redundant information that is already being provided by Big-D California. The tax returns contain redundant information

related to income, capitalization and loans that may be relevant to the alter-ego

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assertions made by Plaintiff. This portion of the request is therefore overly broad and burdensome. Subject to and without waiving the foregoing , Big-D California will produce its Financial Statements from 2000-2003, which are stamped as

"Confidential/Attorney Eyes Only" and subject to the terms of the Order. They are labeled as "Big-D 00091-98". Leprino's Statement in Response: Big-D California has failed and refused to produce any of its profit and loss statements, and state and federal tax returns for the preceding five calendar years as requested in Request for Production No. 3. Big-D California also failed and refused to produce any financial information whatsoever for the year 2004. Request for Production of Documents No. 4 All financial statements, income statements, profit and loss statements, balance sheets, and state and federal tax returns for the preceding five (5) calendar years for Big-D. Response: Big-D objects to the production of these documents as this request seeks irrelevant information to the issue of alter ego. Specifically, the Plaintiff has alleged that Big-D is the parent corporation of Big-D California. In Boughton v. Cotter Corporation, 65 F.3d 823 (10th Cir. 1995), the Tenth Circuit evaluated ten factors to determine whether a subsidiary is the instrumentality of a parent corporation. None of the ten factors relate to the financial condition of the parent

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corporation, Big-D herein. Thus this request seeks irrelevant information that will not lead to the discovery of admissible evidence. Leprino's Statement in Response: Big-D Construction has failed and refused to produce any of its profit and loss statements, and state and federal tax returns for the preceding five calendar years as requested in Request for Production No. 4. Big-D Construction also failed and refused to produce any financial information whatsoever for the year 2004. Request for Production of Documents No. 5 All payroll account or bank account statements utilized for the payment of employee payroll, wages or salary for Big-D California for the preceding five (5) years. Response: Big-D California objects to the production of these documents as this request seeks irrelevant information to the issue of alter ego. Specifically, the Plaintiff has alleged that Big-D is the parent corporation of Big-D California. In Boughton v. Cotter Corporation, 65 F.3d 823 (10th Cir. 1995), the Tenth Circuit evaluated ten factors to determine whether a subsidiary is the instrumentality of a parent corporation. None of the ten factors relate to the subsidiary's payment of payroll, rather the issue is the source of funds for the payroll, i.e., whether the funds came from the parent corporation or subsidiary. As this request fails to seek information relating to the source of funding for payroll, it seeks irrelevant information that will not lead to the discovery of admissible evidence.

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Big-D California further objects to the time parameters of this request as Big-D California had no operations in 1999. Subject to and without waiving the foregoing objections, see the attached documents labeled "Big-D 00237-243", the Employee Lease Agreement between Big-D California and Big-D Management Corp. and "Big-D 00230-236", the Employee Lease Agreement between Big-D and Big-D Management Corp. Leprino's Statement in Response: Although Big-D California produced the Employee Lease Agreement referenced in its response, Big-D California has failed and refused to produce any payroll account or bank account statements showing the amounts paid for wages and/or salary for the employees it "leases." Request for Production of Documents No. 9 All board minutes, minute books, records, notes, journals, ledgers, or reports codifying board meetings relating to the corporate affairs of Big-D California for the preceding five (5) years. Response: The minutes of Board of Director's meetings and Shareholders' meetings will be produced under a stamp of "Confidential" and will be produced in accordance with the terms of the Order. They are labeled as "Big-D 00153-198" for Board of Director Meeting Minutes and labeled as "Big-D00199-223" for the Shareholder Meeting Minutes.

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Leprino's Statement in Response: Big-D California has failed and refused to produce any meeting notes or reports codifying board meeting for Big-D California as requested in Request for Production No. 9. Request for Production of Documents No. 10 All bank statements, reconciliation reports, cancelled checks, check stubs, deposit slips, receipts, ledgers, or journal entries of Big-D California reflecting payments received or monies transferred from Big-D for the preceding five (5) years. Response: Big-D California objects to producing the requested information due to the voluminous nature of the request. Big-D California, in accordance with F.R.C.P. 26 is providing a summarizing spreadsheet of the of the money transfers from Big-D to Big-D California, and as further described in response to Interrogatory No. 5, which is attached and labeled as "Big-D 00224". Leprino's Statement in Response: With the exception of the summarizing spreadsheet referenced in its response, Big-D California has failed and refused to produce any documents pursuant to Request for Production No. 10. Leprino still demands inspection of the documents requested. Request for Production of Documents No. 11 All bank statements, reconciliation reports, cancelled checks, check stubs, ledgers, or journal entries of Big-D reflecting payments made or monies transferred to Big-D California for the preceding five (5) years.

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Response: See Response to Request for Production No. 10, as this request seeks the same information asked in reverse. No. 5. Leprino's Statement in Response: With the exception of the summarizing spreadsheet referenced in the response to Request for Production No. 10, Big-D Construction has failed and refused to produce any documents pursuant to Request for Production No. 11. Leprino still demands inspection of the documents requested. Request for Production of Documents No. 17 All documents reflecting the allocation of profits of Big-D California for the preceding five (5) years. Response: Big-D California objects to this request because it fails to identify any document or category of documents with any degree of specificity, and rather seeks "all documents". Subject to and without waiving the foregoing objection, see Response to Request for Produc tion No. 3 that will be produced subject to the terms of the Order and stamped "Confidential/Attorney Eyes Only". Leprino's Statement in Response: Although Big-D California has finally produced the documents labeled "Big D 00091-98" that it states are in response to Request for Production No. 3 and references in its response to Request for Production No. 17, those documents do not identify Big-D California's allocation of its profits. Thus, Big-D Also see response to Interrogatory

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California has failed and refused to produce any documents responsive to Request for Production No. 17. III. LEGAL ANALYSIS AND ARGUMENT A. Legal Standards for Motion to Compel Discovery. A motion to compel production is the procedure to enforce discovery where the responding party has responded to the request but: (1) interposes unfounded objections to the request; (2) fails to state the inspection will be permitted as requested; (3) fails to permit inspection as requested; or (4) makes incomplete or evasive responses. Fed. R. Civ. P. 37(a)(2), (3). Evasive or incomplete disclosures, answers, or responses are "to be treated as a failure to disclose, answer, or respond." Fed. R. Civ. P. 37(a)(3). The party who resists discovery has the burden to establish that discovery should not be allowed, and has the burden of clarifying, explaining, and supporting its objections. See, e.g., Simpson v. University of Colorado, 220 F.R.D. 354, 359 (D. Colo. 2004). B. Leprino Has Good Cause To Compel Big-D's Production Of Financial Documents And Is Entitled To Inspect Those Documents. Fed. R. Civ. P. 26(b)(1) provides that, "Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party . . . . Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Fed. R. Civ. P. 26(b)(1) (emphasis added). Leprino seeks an order compelling Big-D to produce the documents outlined above including all financial documents, without objection. The corporate financial

documents sought by Leprino are directly related to the Lemoore West Project and are

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relevant pursuant to Rule 26(b)(1) to Leprino's claims in this lawsuit. The objections in Big-D's Responses set forth above, asserting the Boughton v. Cotter Corporation alterego factors, are of no consequence and do not support Big-D's improper refusal to produce the relevant financial documents sought by Leprino. While Big-D has

reluctantly produced some corporate financial documents in this litigation, Big-D now seeks to use the Boughton case in an unpersuasive attempt to escape its obligation to produce other relevant documents requested by Leprino. Big-D California's financial documents as requested by Leprino are relevant and necessary to, among other things: (a) Establish whether or not Big-D California and Big-D Construction are two separate entities for the purpose of isolating liability; or (b) Verify Big-D California's claim that it is a separate entity from Big-D Construction. In order to gain an understanding of a corporation's structure and relationship to its parent company, it is necessary to review corporate financial documents. If, indeed, Big-D California is an entirely separate entity from Big-D Construction, Big-D California should provide the requested financial information willingly and allow the issue to be closed. However, Big-D California's unwillingness to comply with Leprino's Second Set of Discovery leaves the issue open for interpretation. Leprino therefore requests an order that Big-D produce all documents detailed above. C. Leprino Is Entitled To Production Of All Documents Requested. Prior to the parties beginning depositions in this case, Big-D verified to Leprino that Big-D produced all of its documents. However, at the first two depositions, Big-D produced a total of 6 binders of documents not previously discovered to Leprino. Big-D

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offered no explanation for its failure to produce documents previously requested by Leprino. Leprino believes that Big-D will continue to produce documents on a

piecemeal basis, hindering Leprino's ability to prepare its case for trial. Because of the complexity of the issues in this case, Leprino is entitled to the prompt and complete production of all documents in Big-D's possession that are relevant to this case or that are likely to lead to the discovery of admissible evidence. D. Big-D's Refusal to Produce Documents to Leprino Requires the Imposition of Sanctions Against Big-D. Absent appropriate justification for its recalcitrant and obstructionist tactics (and it should be noted that this is the second time in this case that Leprino has had to force Big-D to answer legitimate discovery requests through a motion with the Court), the Court must impose sanctions against Big-D for its failure to properly answer and respond to Leprino's Second Set of Discovery. Among other things, Federal Rule of Civil Procedure 37(a)(4)(A) provides, in relevant part: If the motion is granted, or if the disclosure or requested discovery is provided after the motion was filed, the court shall, after affording an opportunity to be heard, require the party or deponent whose conduct necessitated the motion or the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in making the motion, including attorney's fees. Fed. R. Civ. P. 37(a)(4)(A)(emphasis added). There are at least three reasons why it is proper to sanction Big-D for the attorneys' fees and costs incurred by Lepri no in compelling Big-D and its counsel to comply with their discovery obligations. First, this is the second time Leprino has had to seek the assistance of the Court to force Big-D to answer discovery. Second, Big-D has failed without basis to respond to the requests for

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production of documents in Leprino's Second Set of Discovery as served. Third, Big-D ignored numerous informal requests to comply with the discovery, necessitating the filing of this motion. Leprino is entitled to the discovery as propounded, and Big-D's refusal to produce documents is a detriment to Leprino's ability to analyze, prepare and present its case at trial. IV. CONCLUSION Big-D's record of repeated refusals and failures to produce discovery in this case are a calculated abuse of the discovery process by Big-D in an effort to undermine Leprino's ability to prosecute its case. Therefore, Leprino respectfully requests the Court enter orders as follows: A. Compelling Big-D to produce all of the requested documents identified

above in Section II, Outstanding Discovery, fully and completely within five days of the entry of the order compelling such production; B. Imposing appropriate sanctions against Big-D and its counsel including,

but not limited to, awarding Leprino its attorneys' fees and costs incurred in bringing this motion, filing a reply and appearing on this motion; and C. Providing any further relief the Court deems appropriate.

Respectfully submitted this 14th day of October, 2005. LEPRINO FOODS COMPANY

By:

s/ Michael G. Bohn One of Its Attorneys

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Michael G. Bohn Bret M. Heidemann Campbell Bohn Killin Brittan & Ray, LLC 270 St. Paul Street, Suite 200 Denver, Colorado 80206 Telephone: (303) 322-3400 Facsimile: (303) 322-5800 [email protected] [email protected] Patrick T. Markham, Esq. Jacobson & Markham 8880 Cal Center Drive, #100 Sacramento, California 95826 Telephone: (916) 854-5969 Facsimile: (916) 854-5965 [email protected]

CERTIFICATE OF SERVICE I hereby certify that on the 14th day of October, 2005, I electronically filed the foregoing PLAINTIFF'S SECOND MOTION TO COMPEL DISCOVERY FROM DEFENDANTS BIG-D CONSTRUCTION CORP.-CALIFORNIA AND BIG-D CONSTRUCTION CORP. - AND -CERTIFICATE OF COMPLIANCE WITH FED. R. CIV. P. 37(a)(2)(A) AND D.C.COLO.LCivR 7.1A with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following email addresses: Francis (Frank) J. Hughes at [email protected] Patrick Quinn Hustead at [email protected] Peter J. Ippolito at [email protected] Richard Carl Kaufman at [email protected] Patrick T. Markham at [email protected] John David Mereness at [email protected] C. Michael Montgomery at [email protected] Daniel James Nevis at [email protected] N. Kathleen Strickland at [email protected]

s/ Cori Atteberry Cori Atteberry, Legal Assistant

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