General Environmental Science Corp. v. Horsfall

136 F.R.D. 130, 1991 U.S. Dist. LEXIS 4616, 1991 WL 52481
CourtDistrict Court, N.D. Ohio
DecidedApril 4, 1991
DocketNo. 1:90-CV-1340
StatusPublished
Cited by8 cases

This text of 136 F.R.D. 130 (General Environmental Science Corp. v. Horsfall) is published on Counsel Stack Legal Research, covering District Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
General Environmental Science Corp. v. Horsfall, 136 F.R.D. 130, 1991 U.S. Dist. LEXIS 4616, 1991 WL 52481 (N.D. Ohio 1991).

Opinion

ORDER

BATTISTI, District Judge.

Before the court are: (1) Plaintiff General Environmental Science Corp.’s (“GES”) Motion to Compel; (2) Defendants Biosys Corporation (“Biosys”), Gustavo Gysler, John L. Strauss and Frank L.‘ Horsfall’s Motion for a Protective Order; (3) Defendants Biosys and Gysler’s Motion for a Protective Order Against a Deposition in the United States; and (4) Defendant Hors-fall’s Motion to Compel Discovery.

The facts of this case were stated by the court in a previous opinion. General Environmental Science Corp. v. Horsfall, 753 F.Supp. 664 (N.D.Ohio 1990). Further details are best left to be raised in the context of the motion to which they are most relevant.

I. PLAINTIFF’S MOTION TO COMPEL

At the heart of the discovery dispute between the two parties is information about the Biosphere Corporation (“Biosphere”), a non-party Swiss corporation. The Defendants have refused to answer interrogatories and deposition questions or to provide documents which relate to Biosphere. The Defendants argue that Biosphere is an active, separate and distinct entity, and therefore, need not respond to discovery requests arising from a civil action in the courts of the United States.

Plaintiff, on the other hand, alleges that the Biosphere is a sham, created for the dual purpose of evading discovery and illegally competing with GES. Plaintiffs further claim that since Gysler, Horsfall and Strauss are owners and officers of [132]*132Biosphere, they can be compelled to produce documents which are in their control, provided that the information is discoverable.

Due to the importance of this issue to the orderly development of this action, the court heard arguments from the parties in open court on February 6, 1991. For the reasons stated herein, the Plaintiffs Motion to Compel is Granted, and the Court adopts the Plaintiffs Proposed Confidentiality Order.

The court will focus first on Plaintiffs request for documents. Federal Rule of Civil Procedure 34 provides for discovery of documents in the “possession, custody or control” of a party to an action, provided that the documents “constitute or contain” matters within the proper scope of discovery as defined in Rule 26(b). The questions before the court, therefore, are whether the documents concerning Biosphere are discoverable, and if so whether they are in the control of the Defendants. On these issues, the evidence presented by the Plaintiff is overwhelming.

It is clear that the Plaintiff is not attempting to conduct a fishing expedition, but instead, seeks to acquire documents that go to the very heart of its allegations that the Defendants have engaged in a fraudulent scheme to appropriate GES trade secrets and proprietary information.

The key to Plaintiffs argument is the Affidavit of Karl F. Ehrlich, taken July 25, 1990 and affixed to Plaintiffs Motion to Compel as Exhibit F (hereinafter the “Ehrlich Affidavit”), which provides independent support for Plaintiffs version of the facts.

Ehrlich is the co-founder of Aquare-search Ltd. (“Aquaresearch”), a GES customer, and a Biosys acquisition target.1 Ehrlich Affidavit at ¶ 1. During August, 1989, Strauss and Horsfall travelled to Aquaresearch’s headquarters in Quebec to propose its acquisition by ABT. Id. at ¶ 5. Ehrlich claims to have been told that: (1) the three principals of ABT were Gysler, Strauss and Horsfall; (2) Strauss provided marketing expertise, Gysler administered the company and provided expertise in structuring shell corporations, and Horsfall provided technical support in the microbiology area; (3) ABT planned to apply for patents for products and processes similar to those used and marketed by GES; and (4) because of this product overlap Horsfall and Strauss were not publicly acknowledged as principals of ABT.2 Id. at ÍI 6.

Ehrlich further claims to have been told that ABT, at that time operating as the X-0 Corporation (“X-0”), was “entering into a contract with GES that they never intended to honor, and that they planned in the future to break ... as soon as they could set up their own production facilities[,] and that they would use product variability and potency as a basis for breaking the contract and competing. Id. at 8. Ehrlich makes a similar claim in a December 29, 1989 letter to Gysler and Strauss in which he states:

We were told that the patents were submitted in the UK but that you are not identifiable, because your attorneys or secretary or whomever are listed as in charge of ABT. This was necessary as I understand because of your non-compete contract with GES, which you intend to break, based on product nonconsistency, once you have developed your own production facilities.

Id., Exhibit 3. On May 4,1990 and May 15, 1990, Gysler sent letters to GES attempting to repudiate the contract between GES and X-0 on the basis of product variability. Plaintiffs Supplemental Brief in Opposition [133]*133to Defendants Biosys Corporation and Gustavo Gysler’s Motion to Dismiss, Exhibit D.

The events leading up to this litigation lend a great deal of credibility to Ehrlich’s statements, including the claim that Gysler was represented as an expert in the formation of shell corporations. Notably, on May 4, 1990, the date of the first letter attempting to repudiate the X-0 Contract, Biosphere was formed, with Gysler listed as its Managing Director.

The documents sought are relevant and appear reasonably calculated to lead to the discovery of admissable evidence.

The court, therefore, looks to the law concerning the scope of the term “control” as used in Rule 34. In the context of Rule 34, “[c]ontrol is defined not only as possession, but as the legal right to obtain the documents requested upon demand.” Searock v. Stripling, 736 F.2d 650, 653 (11th Cir.1984).

Initially in arguing this motion, the parties focused on the relationship between Biosys and Biosphere. The Plaintiff claimed, and still claims, that Biosys and Biosphere are alter egos that have repeatedly exercised control over the others’ documents and proprietary information.

A particularly stark example of this is presented by two letters, dated August 3, 1990, from Gysler to a Biosys/Biosphere client, Eldorado. Reply Memorandum in Support of Plaintiff’s Motion to Compel Discovery, Exhibits I & J. The first letter, written on Biosys stationery and signed on behalf of Biosys, informs Eldorado that some contamination has been found in the “old product.” The second letter, written on Biosphere stationery and signed on behalf of Biosphere, states that “the recent quality problem found by Biosys ... in the old Bioclean product has no relation to the new Bioclean II UHC Concentrate product, produced by us in Switzerland, which we have recently shipped to you.” Both letters, however, are signed by Gysler, have the same address, phone number and fax number, and significantly, have fax label headings that identify them as communications from Biosphere.

In addition, through the discovery process, the Defendants have provided to the Plaintiff other documents which, according to their fax label headings, were sent by Biosphere.

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Cite This Page — Counsel Stack

Bluebook (online)
136 F.R.D. 130, 1991 U.S. Dist. LEXIS 4616, 1991 WL 52481, Counsel Stack Legal Research, https://law.counselstack.com/opinion/general-environmental-science-corp-v-horsfall-ohnd-1991.