Continental Western Ins. Co. v. Opechee Construction Corp., et al.

2016 DNH 088

• Court: District Court, D. New Hampshire
• Decided: April 25, 2016
• Docket: 15-cv-006-JD
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Continental Western Insurance Company

v. Civil No. 15-cv-006-JD Opinion NO. 2016 DNH 088 Opechee Construction Corporation, et al.

O R D E R

Continental Western Insurance Company (“Continental”)

brings a subrogation action against Opechee Construction

Corporation, the general contractor that built the Hampton Inn

in Dover, New Hampshire, and two plumbing subcontractors, North

American Plumbing & Heating, LLC and Linx Ltd. The claims arise

from extensive water damage at the hotel caused by a pipe

failure. Opechee moves to compel Linx, the hotel’s pipe flange

supplier, to respond to its discovery requests. Linx objects.

Standard of Review

“Parties may obtain discovery regarding any nonprivileged

matter that is relevant to any party's claim or defense and

proportional to the needs of the case.” Fed. R. Civ. P.

26(b)(1). Whether discovery is “proportional to the needs of

the case,” depends on, among other things, “the parties'

relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and

whether the burden or expense of the proposed discovery

outweighs its likely benefit.” Id. If a party fails to respond

to requests for production or interrogatories, the party seeking

discovery may move to compel production of the requested

documents or answers to the interrogatories. Fed. R. Civ. P.

37(a)(3)(B)(iii) & (iv).

The party seeking an order compelling discovery responses

over the opponent’s objection bears the initial burden of

showing that the discovery requested is relevant. Caouette v.

OfficeMax, Inc., 352 F. Supp. 2d 134, 136 (D.N.H. 2005). Once a

showing of relevance has been made, the objecting party bears

the burden of showing that a discovery request is improper.

See, e.g., Gowan v. Mid Century Ins. Co., 309 F.R.D. 503, at 509

(D.S.D. Sept. 11, 2015); Collins v. Bledsoe, 2015 WL 5174021, at

*2 (M.D. Pa. Sept. 2, 2015).

Background

Continental brought this lawsuit against Opechee, Linx, and

North American Plumbing in January of 2015. About nine months

later, the parties learned that Linx had become the subject of a

receivership action in the Rhode Island Superior Court for

Newport County (“the state court”). On October 5, 2015, the

2 state court issued an order appointing Richard J. Land as

permanent receiver over Linx. See Order Appointing Permanent

Receiver, Doc. No. 56-1. That order provided that the

“continuance of the prosecution . . . of any action” against

Linx is “hereby restrained and enjoined.” Id. at ¶ 14. The

order also allowed the receiver to “take possession and charge

of all of the said estate, assets, effects, property and

business” of Linx. Id. at ¶ 3. Linx has represented that

pursuant to the order, the receiver has obtained possession of

Linx’s documents.

A. Previous Order

Opechee’s motion to compel raises issues similar to those

that the court resolved in a previous motion to compel in this

action. See Doc. No. 57. In that motion, the plaintiff,

Continental, moved to compel Linx to respond to its requests for

production and interrogatories. In response, Linx asserted that

it could not produce the requested discovery because the

receiver, who possessed the relevant documents, would not assist

it in responding to discovery. See Doc. No. 58 at 2. In

addition, Linx represented that it was no longer operating and

had no remaining employees to provide the requested information.

Id. Continental did not dispute either representation.

3 In an order dated March 2, 2016, this court denied

Continental’s motion to compel based on Linx’s objections.

Order Denying Motion to Continental’s Motion to Compel

(“Continental Order”), Doc. No. 64. The court first clarified

that the state court’s order did not stay this action. Id. at

4-5. The court then held that Linx could not be compelled to

produce the documents under Federal Rule of Civil Procedure 34,

which only requires parties to produced documents under their

“possession, custody, or control.” Id. at 6 (quoting Fed. R.

Civ. P. 34(a)(1)(A)). As the court explained, based on the

information presented for purposes of Continental’s motion to

compel, Linx did not have possession, custody, or control of the

requested documents because it was undisputed that those

documents were in the possession of the receiver and that Linx

had no right to access them. Id. at 6-7 (“[D]ocuments are

within a party’s control ‘when that party has the right,

authority or ability to obtain those documents upon demand.’”)

(quoting Szulik v. State St. Bank & Tr. Co., 2014 WL 3942934, at

*1 (D. Mass. Aug. 11, 2014)).

The court also held that Linx could not be compelled to

answer Continental’s interrogatories, which required the

participation of its former employees, because Federal Rule of

Civil Procedure 33 does not require a party responding to

4 interrogatories to obtain information from persons not under its

control. Id. at 7-8. In addition, the court concluded that,

given the parties’ respective positions, the information

requested in the interrogatories was not “proportional to the

needs of the case,” and therefore outside the scope of

discovery. Id.

B. Opechee Discovery Requests

Opechee served first sets of requests for production of

documents and interrogatories (together, the “discovery

requests”) on Linx on January 20, 2016. Linx did not respond to

Opechee’s discovery requests within the time required under the

Federal Rules of Civil Procedure. In a conference after that

deadline lapsed, Linx’s counsel informed Opechee’s counsel that

Linx could not respond to the discovery requests because the

receiver, who possesses the relevant documents, would not

participate in discovery unless the state court lifted the stay

provision in its order. Shortly thereafter, Opechee moved to

compel Linx to respond to its discovery requests. See Doc. No.

62.

Discussion

Opechee contends that the discovery requests seek documents

that are relevant to central issues in this action. Linx does

5 not dispute the requested discovery’s relevance, but rather

relies on and incorporates the arguments presented in its

objection to Continental’s motion to compel.1 As discussed in

the prior order, those arguments are premised on Linx’s

representations that it does not possess and cannot obtain the

requested discovery. Continental Order, Doc. No. 64 at 5-6.

Opechee does not dispute Linx’s representations. In its

reply, however, Opechee requests that the court reconsider the

reasoning of its March 2 order denying Continental’s motion to

compel. Opechee argues that Linx’s lack of possession and

control is not fatal to its motion to compel because the court

can order Linx to provide the requested documents “through the

receiver.” Opechee Reply, Doc. No. 69 at 3. In support,

Opechee asserts that “[t]he receiver for Linx should bear the

same obligations to this Court and to the discovery process that

Linx would have borne absent the state court receivership

proceedings.” Id. at 3.

A receiver “does not, by virtue of his or her appointment,

became a party to a pending action against the corporation or

person for whose property the receiver is appointed, but is a

stranger to the action until added or substituted by an order of

1 Linx states that its objection is made “on a limited basis.” Doc. No. 63 at 1. Linx, however, provides no further explanation concerning how its objection is limited.

6 the court wherein the action is pending.” Wolff v. Cash 4

Titles, 351 F.3d 1348, 1355-56 (11th Cir. 2003) (quoting 65 Am.

Jur. 2d Receivers 394)).2 Therefore, absent formal joinder,

receivers are not a “proxy for the [receivership] defendant” and

maintain “legal identities distinct from the entities whose

assets they are charged with marshalling.” See id. at 1355-56 &

n.19 (dismissing receiver’s appeal for lack of standing where it

failed to intervene as a party in the trial court proceedings).

The receiver has not moved to intervene in this action, and

none of the parties has moved to formally join him. Absent a

court order approving such a motion, the receiver is a nonparty

and must be treated accordingly. Therefore, there is no basis

for holding the receiver to the same discovery obligations that

would be required of a party to this action.

Opechee cites several cases that invoke the principle that

a receiver “stands in the shoes” of the entity in receivership

and is bound by that entity’s obligations. See Reply, Doc. No.

69 at 3 (citing Javitch v. First Union Sec., Inc., 315 F.3d 619,

2 See also, Order Appointing Permanent Receiver, Doc. No. 56-1, at ¶3 (granting receiver the power to “intervene or become a party in all suits, actions, or proceedings relating to said estate, assets, effects and property as may in the judgment of the Receiver be necessary or desirable for the protection, maintenance and preservation of the property and assets of said Defendants.”)

7 625 (6th Cir. 2003); Stooksbury v. Ross, 2014 WL 1745665, at *2

(E.D. Tenn. Apr. 30, 2014); Carney v. Montes, 2014 WL 671263, at

*5 (D. Conn. Feb. 21, 2014)). The cited cases, and the

principle on which they rely, concern the receiver’s rights and

obligations relative to the receivership defendant’s assets.

See Javitch, 315 F.3d at 622-23 (holding that receiver is bound

by receivership defendant’s agreement to arbitrate claims to

recover assets); Stooksbury, 2014 WL 1745665, at *3 (declining

to require receiver to pay legal fees of receivership

defendant); Montes, 2014 WL 671263, at *5 (assessing whether

receiver had standing to recover alleged fraudulent transfers

and payments on behalf of entity in receivership).3 None of the

cases concern a receiver’s obligation (or lack of obligation) to

participate in litigation brought against the entity in

receivership.4

3 See also Receiver in the shoes of the entity in receivership-Effect, 65 AMJUR RECEIVERS 116 (“While a receiver takes the res of the receivership estate subject to all existing liens, the rights of creditors remain as they were when the receiver was appointed.”).

4 Opechee also relies on Montblanc-Simplo GMBH v. Colibri Corporation, 692 F.Supp.2d 245 (E.D.N.Y. 2010). In Montblanc- Simplo, the court entered a default judgment against the defendant, who was in receivership, as a discovery sanction for its receiver’s failure to produce discovery in response to the magistrate judge’s order compelling him to do so. Id. at 248- 49. Montblanc-Simplo is inapposite, however, because the receiver (1) participated in the relevant discovery dispute and (2) did not lodge an objection to the discovery requests based

8 Accordingly, the court declines to abandon the reasoning

contained in its March 2 order. As the court explained in that

order, the Federal Rules of Civil Procedure do not require a

party to obtain and produce information that it neither

possesses nor controls. Because Linx represents, and Opechee

does not dispute, that it does not possess and cannot obtain the

requested discovery, it does not have possession or control for

the purposes of this motion to compel. Therefore, Linx cannot

be compelled to produce what it does not have.

Conclusion

For the foregoing reasons, Opechee’s motion to compel (doc.

no. 62) is denied.

__________________________ Joseph A. DiClerico, Jr. United States District Judge April 25, 2016 Cc: John E. Brady, Esq. Christie Burnett, Esq. Doreen F. Connor, Esq. Adam R. Mordecai, Esq. Thomas Paolini, Esq. Matthew F. Renna, Esq. Matthew D. Sweet, Esq. Thomas J Underwood, Jr., Esq. James G. Walker, Esq.

on the defendant’s possession, custody, and control of the requested discovery. See Letter from Receiver’s Counsel at 1, Montblanc-Simplo 1:07-cv-05422-KAM-RLM, Doc. No. 26.