2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4 * * * 5 T1 Payments, LLC, Case No. 2:19-cv-01816-APG-DJA 6 Plaintiff, 7 Order v. 8 New U Life Corporation, 9 Defendant. 10 And related counterclaims. 11 12 13 This is a breach of contract action arising out of a credit card processing agreement 14 between Plaintiff T1 Payments and Defendant New U Life. New U has asserted counterclaims 15 against T1 Payments, T1 Payments Limited, TGlobal Services Limited, Donald Kadson, Debra 16 Karen King, Amber Fairchild, (collectively, the “T1 Parties”), Lefebvre International 17 Corporation, Marc Lefebvre (collectively, the “Lefebvre Parties”) and Payvision, B.V. Both 18 New U and the T1 Parties have moved to compel each other to respond to discovery requests. 19 (ECF Nos. 157 and 158). Because the Court finds that certain of New U’ requests are not 20 proportional, it grants New U’s motion in part. Because the Court finds that the T1 Parties can 21 first attempt to obtain the information they seek via their deposition of Marc Lefebvre, the Court 22 denies the T1 Parties’ motion as premature. The Court finds these matters properly resolved 23 without a hearing. LR 78-1. 24 I. Background. 25 T1 Payments sued New U after, as T1 Payments alleges, New U terminated the credit card 26 processing agreement between the two parties early. (ECF No. 1 at 2). T1 Payments argues that 27 this was a default under the agreement and thus, it is entitled to retain funds that New U held in 1 affiliated with T1 Payments—the T1 Parties—and Payvision. (ECF No. 85). New U argued that 2 these counterclaim defendants engaged in a scheme to manufacture the alleged “default” to 3 unlawfully retain New U’s funds. (See id. at 2-3). Discovery has since been stayed as to 4 Payvision—based in the Netherlands—while the Court resolves whether it has jurisdiction over it. 5 (ECF No. 148). 6 Now, New U argues that the T1 Parties have inadequately responded to New U’s 7 interrogatories and requests for production directed to TGlobal and T1 Payments. (ECF No. 157). 8 T1 Payments argues that New U has inadequately responded to its requests for production. (ECF 9 No. 158). Both parties ask the Court to compel responses. 10 II. Standard. 11 If a party resists discovery, the requesting party may file a motion to compel. See Fed. R. 12 Civ. P. 37(a)(1), (a)(3)(B)(iii)-(iv) (“A party seeking discovery may move for an order 13 compelling an answer, [or] production ... if ... (iii) a party fails to answer an interrogatory 14 submitted under Rule 33; or (iv) a party fails to produce documents ... as requested under Rule 15 34.”). The motion must include a threshold showing that the requested information falls within 16 the scope of discovery under Rule 26. See Sanhueza v. Lincoln Technical Institute, Inc., No. 17 2:13-cv-2251-JAD-VCF, 2014 WL 6485797, at *2 (D. Nev. Nov. 18, 2014) (citing Hofer v. Mack 18 Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992)). To be discoverable under Federal Rule of Civil 19 Procedure 26(b)(1), information must be: (1) relevant to any party’s claim or defense; and 20 (2) proportional to the needs of the case. Fed. R. Civ. P. 26(b)(1). The party opposing discovery 21 has the burden of showing that the discovery is, among other things, irrelevant, overly broad, or 22 unduly burdensome. See Fosbre v. Las Vegas Sands Corp., No. 2:10-cv-00765-APG-GWF, 2016 23 WL 54202, at *4 (D. Nev. Jan. 5, 2016) (citing Graham v. Casey’s General Stores, 206 F.R.D. 24 251, 253-54 (S.D. Ind. 2000)). To meet this burden, the objecting party must specifically detail 25 the reasons why each request is objectionable. See Fosbre, 2016 WL 54202, at *4. 26 Federal Rule of Civil Procedure 26(b)(2)(C) further limits discovery and allows the Court 27 to restrict discovery where it is “outside the scope of Rule 26(b)(1).” Fed. R. Civ. P. 1 26(b)(2)(C), the Court “should consider the totality of the circumstances, weighing the value of 2 the material sought against the burden of providing it, and taking into account society’s interest in 3 furthering the truth-seeking function in the particular case before the court.” Caballero v. Bodega 4 Latina Corp., No. 2:17-cv-00236-JAD-VCF, 2017 WL 3174931, at *3 (D. Nev. July 25, 2017) 5 (internal citations and quotations omitted). Fed. R. Civ. P. 26 gives the Court broad discretion to 6 “tailor discovery narrowly and to dictate the sequence of discovery.” See id. (internal citations 7 and quotations omitted). 8 III. Discussion. 9 A. The Court grants New U’s motion to compel in part. 10 INTERROGATORY NO. 1: State the date, time and amount of each deposit of NEW U LIFE 11 FUNDS1 received by TG2 at any point in time on an item-by-item 12 basis. 13 New U argues that it is entitled to a response to this interrogatory because it is entitled to 14 know where its money is being held. It explains that Donald Kadson testified that Payvision held 15 some of New U’s funds. This contradicted Maria Alida Johanna Ruijters-Terpsra—Payvision’s 16 representative—who testified that Payvision paid New U’s funds to TGlobal. 17 The T1 Parties respond that there is nothing to compel in response to this interrogatory. 18 They explain that the statements by Payvision’s representative answers the question of the 19 location of New U’s money. And further, the funds are commingled, so the T1 Parties argue that 20 it would be impossible to itemize which funds are New U’s. 21 22 1 “NEW U LIFE FUNDS” is defined as funds flowing from “any and all transactions submitted 23 by NEW U LIFE for processing pursuant to the CPPA.” “NEW U LIFE” means and refers to New U Life Corporation, New U Life Limited, and their officers, directors, agents, employees 24 and representatives, including but not limited to Alexy Goldstein and Matt Hutka.” The “CPPA” 25 “means and refers to the Merchant Services Application and Card Payment Processing Agreements between T1 Payments LLC and NEW U LIFE signed by Alexy Goldstein on or 26 about October 26, 2018 and October 30, 2018, and any and all addenda and appendices thereto.” 27 2 “TG” means and refers to “TGlobal Services Limited and its officers, directors, agents, employees and representatives, including but not limited to Donald Kadson, Debra King and 1 In reply, New U argues that the T1 Parties cannot point to another party’s deposition to 2 answer the interrogatories, especially because the deposition does not fully answer the 3 interrogatory. To the T1 Parties’ argument that the funds were commingled, New U offers a 4 suggestion: that the T1 Parties should give the responsive information for each deposit into the 5 TGlobal account and calculate how much of each deposit consisted of funds attributable to New 6 U’s processing activity. 7 The Court is unconvinced by the T1 Parties’ arguments that the information sought by this 8 interrogatory is irrelevant, overbroad, or unduly burdensome. Rather, it would serve to clarify a 9 specific contradiction that New U has uncovered in this litigation and is relevant to New U’s 10 claims of conversion. New U has also offered to amend its request to contemplate commingled 11 deposits. Because the relationship between New U and the T1 Parties was short—approximately 12 two weeks—the updated request is inherently limited, and the T1 Parties have not described how 13 providing responsive information would be unduly burdensome. The Court thus grants New U’s 14 motion to compel a response to this interrogatory. 15 INTERROGATORY NO.
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2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4 * * * 5 T1 Payments, LLC, Case No. 2:19-cv-01816-APG-DJA 6 Plaintiff, 7 Order v. 8 New U Life Corporation, 9 Defendant. 10 And related counterclaims. 11 12 13 This is a breach of contract action arising out of a credit card processing agreement 14 between Plaintiff T1 Payments and Defendant New U Life. New U has asserted counterclaims 15 against T1 Payments, T1 Payments Limited, TGlobal Services Limited, Donald Kadson, Debra 16 Karen King, Amber Fairchild, (collectively, the “T1 Parties”), Lefebvre International 17 Corporation, Marc Lefebvre (collectively, the “Lefebvre Parties”) and Payvision, B.V. Both 18 New U and the T1 Parties have moved to compel each other to respond to discovery requests. 19 (ECF Nos. 157 and 158). Because the Court finds that certain of New U’ requests are not 20 proportional, it grants New U’s motion in part. Because the Court finds that the T1 Parties can 21 first attempt to obtain the information they seek via their deposition of Marc Lefebvre, the Court 22 denies the T1 Parties’ motion as premature. The Court finds these matters properly resolved 23 without a hearing. LR 78-1. 24 I. Background. 25 T1 Payments sued New U after, as T1 Payments alleges, New U terminated the credit card 26 processing agreement between the two parties early. (ECF No. 1 at 2). T1 Payments argues that 27 this was a default under the agreement and thus, it is entitled to retain funds that New U held in 1 affiliated with T1 Payments—the T1 Parties—and Payvision. (ECF No. 85). New U argued that 2 these counterclaim defendants engaged in a scheme to manufacture the alleged “default” to 3 unlawfully retain New U’s funds. (See id. at 2-3). Discovery has since been stayed as to 4 Payvision—based in the Netherlands—while the Court resolves whether it has jurisdiction over it. 5 (ECF No. 148). 6 Now, New U argues that the T1 Parties have inadequately responded to New U’s 7 interrogatories and requests for production directed to TGlobal and T1 Payments. (ECF No. 157). 8 T1 Payments argues that New U has inadequately responded to its requests for production. (ECF 9 No. 158). Both parties ask the Court to compel responses. 10 II. Standard. 11 If a party resists discovery, the requesting party may file a motion to compel. See Fed. R. 12 Civ. P. 37(a)(1), (a)(3)(B)(iii)-(iv) (“A party seeking discovery may move for an order 13 compelling an answer, [or] production ... if ... (iii) a party fails to answer an interrogatory 14 submitted under Rule 33; or (iv) a party fails to produce documents ... as requested under Rule 15 34.”). The motion must include a threshold showing that the requested information falls within 16 the scope of discovery under Rule 26. See Sanhueza v. Lincoln Technical Institute, Inc., No. 17 2:13-cv-2251-JAD-VCF, 2014 WL 6485797, at *2 (D. Nev. Nov. 18, 2014) (citing Hofer v. Mack 18 Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992)). To be discoverable under Federal Rule of Civil 19 Procedure 26(b)(1), information must be: (1) relevant to any party’s claim or defense; and 20 (2) proportional to the needs of the case. Fed. R. Civ. P. 26(b)(1). The party opposing discovery 21 has the burden of showing that the discovery is, among other things, irrelevant, overly broad, or 22 unduly burdensome. See Fosbre v. Las Vegas Sands Corp., No. 2:10-cv-00765-APG-GWF, 2016 23 WL 54202, at *4 (D. Nev. Jan. 5, 2016) (citing Graham v. Casey’s General Stores, 206 F.R.D. 24 251, 253-54 (S.D. Ind. 2000)). To meet this burden, the objecting party must specifically detail 25 the reasons why each request is objectionable. See Fosbre, 2016 WL 54202, at *4. 26 Federal Rule of Civil Procedure 26(b)(2)(C) further limits discovery and allows the Court 27 to restrict discovery where it is “outside the scope of Rule 26(b)(1).” Fed. R. Civ. P. 1 26(b)(2)(C), the Court “should consider the totality of the circumstances, weighing the value of 2 the material sought against the burden of providing it, and taking into account society’s interest in 3 furthering the truth-seeking function in the particular case before the court.” Caballero v. Bodega 4 Latina Corp., No. 2:17-cv-00236-JAD-VCF, 2017 WL 3174931, at *3 (D. Nev. July 25, 2017) 5 (internal citations and quotations omitted). Fed. R. Civ. P. 26 gives the Court broad discretion to 6 “tailor discovery narrowly and to dictate the sequence of discovery.” See id. (internal citations 7 and quotations omitted). 8 III. Discussion. 9 A. The Court grants New U’s motion to compel in part. 10 INTERROGATORY NO. 1: State the date, time and amount of each deposit of NEW U LIFE 11 FUNDS1 received by TG2 at any point in time on an item-by-item 12 basis. 13 New U argues that it is entitled to a response to this interrogatory because it is entitled to 14 know where its money is being held. It explains that Donald Kadson testified that Payvision held 15 some of New U’s funds. This contradicted Maria Alida Johanna Ruijters-Terpsra—Payvision’s 16 representative—who testified that Payvision paid New U’s funds to TGlobal. 17 The T1 Parties respond that there is nothing to compel in response to this interrogatory. 18 They explain that the statements by Payvision’s representative answers the question of the 19 location of New U’s money. And further, the funds are commingled, so the T1 Parties argue that 20 it would be impossible to itemize which funds are New U’s. 21 22 1 “NEW U LIFE FUNDS” is defined as funds flowing from “any and all transactions submitted 23 by NEW U LIFE for processing pursuant to the CPPA.” “NEW U LIFE” means and refers to New U Life Corporation, New U Life Limited, and their officers, directors, agents, employees 24 and representatives, including but not limited to Alexy Goldstein and Matt Hutka.” The “CPPA” 25 “means and refers to the Merchant Services Application and Card Payment Processing Agreements between T1 Payments LLC and NEW U LIFE signed by Alexy Goldstein on or 26 about October 26, 2018 and October 30, 2018, and any and all addenda and appendices thereto.” 27 2 “TG” means and refers to “TGlobal Services Limited and its officers, directors, agents, employees and representatives, including but not limited to Donald Kadson, Debra King and 1 In reply, New U argues that the T1 Parties cannot point to another party’s deposition to 2 answer the interrogatories, especially because the deposition does not fully answer the 3 interrogatory. To the T1 Parties’ argument that the funds were commingled, New U offers a 4 suggestion: that the T1 Parties should give the responsive information for each deposit into the 5 TGlobal account and calculate how much of each deposit consisted of funds attributable to New 6 U’s processing activity. 7 The Court is unconvinced by the T1 Parties’ arguments that the information sought by this 8 interrogatory is irrelevant, overbroad, or unduly burdensome. Rather, it would serve to clarify a 9 specific contradiction that New U has uncovered in this litigation and is relevant to New U’s 10 claims of conversion. New U has also offered to amend its request to contemplate commingled 11 deposits. Because the relationship between New U and the T1 Parties was short—approximately 12 two weeks—the updated request is inherently limited, and the T1 Parties have not described how 13 providing responsive information would be unduly burdensome. The Court thus grants New U’s 14 motion to compel a response to this interrogatory. 15 INTERROGATORY NO. 2: IDENTIFY3 each bank account where TG has held NEW U LIFE 16 FUNDS at any point in time. 17 18 New U argues that the answers to this interrogatory are relevant to its claims that TGlobal 19 tortiously converted New U’s funds to third party bank accounts. This information—account 20 number, name and address of the bank, and beneficiary name—is basic, New U argues, and not 21 burdensome to provide. New U has also agreed to limit the time frame for this interrogatory to 22 2018-2019. 23 The T1 Parties make irrelevant arguments in response to this interrogatory. They claim 24 that the responses would somehow reveal information about other merchants that New U would 25 misuse, and which would not reveal the transfer of funds because the funds were commingled. 26
27 3 “IDENTIFY” when used in reference to a bank account means “stating the name and address of 1 However, the interrogatory doesn’t seek merchant information or the information about the 2 transfer of funds. And while the T1 Parties argue that the amount and location of the account are 3 undisputed, they also refuse to identify the account at issue. Nor does the information sought 4 have to relate to an element of one of New U’s claims, as the T1 Parties argue. 5 The Court is not convinced by the T1 Parties’ arguments against responding to this 6 interrogatory. Rather, the information sought is relevant and proportional to New U’s theories in 7 the litigation. The Court thus grants New U’s motion to compel with respect to this interrogatory, 8 limited to information from 2018 to 2019. 9 INTERROGATORY NO. 3: State the current balance of NEW U LIFE FUNDS being held in 10 each account IDENTIFIED by YOU in response to Interrogatory 11 No. 2. 12 New U argues that this information is relevant to its question of where its funds are being 13 held. The T1 Parties, however, argue that they have already produced responsive information to 14 this request and that they would be unable to extrapolate the amounts attributable to New U from 15 other amounts held in this account. However, again, the T1 Parties do not identify or state any 16 balance held in this (or these) accounts. The Court is not convinced that the T1 Parties have 17 produced responsive information and thus grants New U’s motion to compel a response to this 18 interrogatory. To the extent that the T1 Parties cannot extrapolate an amount attributable to New 19 U, they must provide the total amount held in each account. 20 INTERROGATORY NO. 4: 21 IDENTIFY each third party bank account to which TG has transferred NEW U LIFE FUNDS at any point in time. 22 23 The T1 Parties respond to this request that there is nothing to compel because they have 24 never transferred any New U funds from any TGlobal bank account to any third-party bank 25 account. New U replies that this response leaves open the possibility that its funds were 26 transferred from an account held by another related party other than TGlobal. New U explains 27 that it is not comfortable with this possibility because, in their initial response to this 1 the “TG Parties” defined in the interrogatory. Because the interrogatory asks that the T1 Parties 2 identify any third-party bank to which TGlobal transferred New U’s funds—regardless of 3 whether the funds originated in TGlobal’s account—the Court finds that the T1 Parties’ response 4 is evasive. The Court grants New U’s motion to compel a non-evasive response to this 5 interrogatory. 6 INTERROGATORY NO. 5: For each bank account IDENTIFIED by YOU in response to 7 Interrogatory No. 4, state the date, time, and amount of each transfer 8 of NEW U LIFE FUNDS to such account on an item-by-item basis. 9 Like its response to interrogatory No. 5, the T1 Parties argue that there is nothing further 10 to compel because they never transferred any funds from the TGlobal account, and the funds 11 remain in the TGlobal account to this day. New U, however, argues that the T1 Parties did not 12 include this information when responding to the interrogatory and that, including it in the 13 response to the motion to compel is insufficient. The Court agrees. If the T1 Parties assert that 14 they have never transferred any funds and the New U funds remain in the TGlobal account, they 15 should supplement their interrogatory response with this answer. To the extent that New U’s 16 funds were commingled, the T1 Parties should provide the date, time, and amount of transfers 17 from the account to any third-part accounts beginning from October 26, 2018 (the date the 18 agreement between New U and T1 was executed) to the present. The Court thus grants New U’s 19 motion to compel a response to this interrogatory. 20 INTERROGATORY NO. 6: 21 Describe all debits to NEW U LIFE FUNDS from any bank account IDENTIFIED by YOU in response to Interrogatory No. 2 on an 22 item-by-item basis, including debits for fees, chargebacks, refunds, and disbursements, by stating the date, amount and purpose of each 23 debit. 24 25 New U moves to compel this information, arguing that it is particularly vital to its claims 26 after Donald Kadson testified that some portion of New U’s funds are held by Payvision, and that 27 profit is being “stripped” from the bank account where New U’s funds are held. The T1 Parties 1 fees, chargebacks, refunds, and disbursements with resect to funds processed for New U. They 2 further explain that these funds were not debited from any account over which TGlobal had 3 control, only from Payvision’s accounts. New U replies that this response fails to identify debits 4 from TGlobal’s account where—as Ruijters-Terpsra testified—Payvision sent New U’s funds. 5 The Court finds this information relevant to New U’s claims and goal to clarify where its funds 6 have moved. The Court also finds that this information is proportionate under New U’s 7 limitation, asking for responsive information from May 13, 2019 to the present. The Court thus 8 grants New U’s motion to compel a response to this interrogatory. To the extent that these 9 accounts contain commingled funds, the T1 Parties should identify all debits and disbursements. 10 INTERROGATORY NO. 14 IDENTIFY each MERCHANT4 whose transactions have been 11 processed through TG’s MERCHANT ACCOUNT5 (under a 12 submerchant account or otherwise) since December 13, 2016. 13 INTERROGATORY NO. 15: For each MERCHANT IDENTIFIED by YOU in response to 14 Interrogatory No. 14, state the start and end dates of processing and the total volume of MERCHANT TRANSACTIONS6 processed. 15 16 New U argues that this information is relevant to its theory that T1 illegally aggregated 17 New U’s transactions with those of other merchants, that the information will reveal potential 18 witnesses, and can demonstrate that the T1 Parties had a pattern of terminating merchant accounts 19 after a short period of time. New U also asserts that it is willing to limit this request to 2018-2019 20
21 4 “MERCHANT” means and refers to any business that submitted transactions for processing pursuant to a written agreement with TG or any TG-RELATED ENTITY. “TG RELATED 22 ENTITY” “means and refers to T1 Payments LLC, T1 Payments Limited, and any other entity 23 that is owed or controlled by Donald Kadson, Debra King or Amber Fairchild, or any other officer or director of TG, T1 Payments LLC or T1 Payments Limited. 24 5 “MERCHANT ACCOUNT” “means and refers to any and all merchant accounts opened by TG 25 at PAYVISION pursuant to the December 13, 2016 merchant agreement between TG and PAYVISION, including but not limited to the 2017 amendments and any and all other 26 amendments, addenda and appendices thereto. 27 6 “MERCHANT TRANSACTIONS” means “any and all transactions submitted by a MERCHANT for processing pursuant to a written agreement with TG or any TG-RELATED 1 to assuage any burden it might impose. The T1 Parties vehemently object. They explain that the 2 information sought is overbroad, unduly burdensome, and untimely. They argue that they process 3 transactions for thousands of merchants so even gathering responsive information limited to the 4 2018-2019 period would put a tremendous strain on T1 Payments’ single remaining employee. 5 They also argue that the information has nothing to do with the relationship between the T1 6 Parties and New U but is an attempt by New U to introduce character evidence and subpoena new 7 witnesses with only a short time left in discovery. The T1 Parties explain that New U had time to 8 seek additional witnesses and subpoenaing them now would create a massive discovery record. 9 In reply, New U argues that it needs this information to see whether the T1 Parties really 10 cannot identify which funds are New U’s because they are commingled. New U also asserts that 11 the information is not available publicly and New U has no other way of obtaining it. Finally, 12 New U reasserts in conclusory fashion that the information is not broad and claims that the T1 13 Parties have not explained why it would be burdensome to gather it. 14 The Court is not convinced that the relevance of this information outweighs the burden 15 described by the T1 Parties. While New U doubts the T1 Parties’ representations regarding the 16 commingled nature of funds and the strain placed on T1 Payments’ single employee, the Court 17 does not believe New U’s doubt—without more—justifies these broad requests. Additionally, it 18 appears that one of the main reasons New U seeks this information is to identify other merchants 19 to subpoena. But this case has been going on since 2019 and is reaching the end of its discovery 20 phase. New U also fails to explain why or how this information would show that the T1 Parties 21 were illegally aggregating transactions to justify the breadth of the requests. The Court thus 22 denies New U’s motion to compel a further response to these requests. 23 REQUEST FOR PRODUCTION NO. 10: All DOCUMENTS7 that evidence, constitute, refer and/or relate to 24 the December 13, 2016 merchant agreement between TG and 25
26 7 “DOCUMENTS” means “handwritten, printed, Photostat, recorded, written, graphic, photographic, magnetic, or electronic matter (including, without limitation, audio and/or video 27 tape recordings, electronic mail, and material for computer use), including all original and duplicates, and includes the original or a copy of handwritten, typewritten, printed, and every PAYVISION, including but not limited to the 2017 amendments and 1 any and all other amendments, addenda and appendices thereto. 2 3 New U moves for this Court to compel the T1 Parties to produce an unredacted copy of 4 Appendix 1 to the agreement that the T1 Parties produced in response to this request for 5 production. The T1 Parties did not respond to this portion of New U’s motion. Because the 6 failure of an opposing party to file points and authorities in response to any motion constitutes a 7 consent to granting of the motion, the Court grants New U’s request. See LR 7-2(d). The T1 8 Parties must produce an unredacted copy of Appendix 1. 9 REQUEST FOR PRODUCTION NO. 94: All DOCUMENTS that refer and/or relate to any disputes between 10 T1 and any MERCHANT since January 1, 2017. 11 REQUEST FOR PRODUCTION NO. 96: 12 All COMMUNICATIONS between T1 (including its lawyers) and any MERCHANT (including any lawyer representing the 13 MERCHANT) regarding, relating and/or referring to DISPUTED FUNDS8 since January 1, 2017. 14 15 New U argues that it requires the information in these requests to determine whether 16 seventeen Better Business Bureau complaints against T1 Payments are accurate to make its 17 racketeering and intentional fraud claims. The T1 Parties argue that the requests are overbroad 18 and unduly burdensome, particularly on the one remaining employee who would have to dig 19 through thousands of emails and documents to find responsive information. The T1 Parties also 20 explain that some of the information may have been lost in a “data transfer gone awry.” New U 21 replies that the T1 Parties’ law firm should be capable of helping with gathering the data that 22 would be difficult for the T1 Parties’ single employee. New U also argues that it only recently 23 24
25 including computer hard discs, letters, words, pictures, sounds, symbols, or combinations of 26 them.” 27 8 “DISPUTED FUNDS” is defined as “MERCHANT TRANSACTION proceeds held by T1 as reserves, suspended funds, or setoff funds that are the subject of a dispute between T1 and the 1 learned of the spoliated evidence by the data transfer and thus the T1 Partis should supplement 2 their responses to explain how and when the evidence was lost or destroyed. 3 The T1 Parties have made a compelling argument that the burden of these requests 4 outweigh their relevance. While New U argues that these documents could show a pattern and 5 intent by the T1 Parties, the T1 Parties have explained that the effort required of its single 6 employee to provide this information is enormous. Moreover, the information ultimately 7 produced might not show what New U seeks. As requested, the information sought may be 8 relevant, but is disproportionately vast. The Court thus limits these requests. New U must 9 identify five complaints to the Better Business Bureau for which T1 Parties shall provide 10 responsive information. Because it is only raised briefly in passing by both sides, the Court 11 declines to rule on the data-transfer-gone-awry issue. 12 REQUEST FOR PRODUCTION NO. 95: 13 All COMMUNICATIONS9 between T1 (including its lawyers) and any MERCHANT (including any lawyer representing the 14 MERCHANT) regarding, relating and/or referring to any Early Termination Fee assessed by T1 or any T1-RELATED ENTITY 15 since January 1, 2017. 16 REQUEST FOR PRODUCTION NO. 97: 17 All COMMUNICATIONS between T1’s lawyer and any MERCHANT (including any lawyer representing the 18 MERCHANT) regarding, relating and/or referring to any Early Termination Fee assessed by T1 or any T1-RELATED ENTITY 19 since January 1, 2017. 20 21 New U argues that this information is relevant to showing whether the T1 Parties had a 22 pattern of wrongfully using the early termination fee as a pretext for keeping merchants’ money. 23 New U also explains that it seeks to use this information to identify other potential witnesses. 24 New U offers to limit this request to only ask for a list of each merchant who was charged an 25 early termination fee. 26 27 9 “COMMUNICATIONS” means “any oral or written exchange or transmission of words, whether in-person, telephonic, computerized, or through any other medium, including email, chat 1 The T1 Parties respond that the request is unduly burdensome because it would require the 2 single remaining employee to manually search through thousands of individual merchant files to 3 find out whether an early termination fee was imposed. On the other hand, the T1 Parties point 4 out that New U has access to at least some of this information because its attorneys have 5 represented other merchants with similar claims against the T1 Parties. In reply, New U does not 6 address this argument, but argues that the T1 Parties did not thoroughly explain why the search 7 for this information would be burdensome on the single employee. 8 The Court finds the T1 Parties’ arguments compelling. The T1 Parties have argued that 9 New U already has access to some of the information it seeks, but nonetheless seeks to compel 10 the T1 Parties’ single employee to conduct an expansive manual search. New U has not 11 responded to this argument, but instead sought to discredit the T1 Parties’ concern with the 12 breadth of the request. Because this request is disproportionally burdensome and potentially 13 duplicative in comparison to its relevance—especially because New U may have another source 14 for this information—the Court denies New U’s motion to compel responses to these requests. 15 B. The Court denies T1 Payments’ motion to compel. 16 In determining whether settlement agreements and negotiations may be discoverable, 17 courts use two different approaches: (1) the Rule 26 standard or; (2) the “particularized showing” 18 standard. See Robert E. Larsen, Navigating the Federal Trial, § 19:32 (2021). While the United 19 States District Court for the District of Nevada has not chosen one approach over the other, it has 20 noted that “[s]ome courts require a party seeking disclosure of a confidential settlement 21 agreement to make a particularized showing of a likelihood that admissible evidence will be 22 generated by disclosure of the terms of the confidential settlement agreement.” E&R Venture 23 Partners, No. 2:16-cv-02959-RFB-GWF, 2017 WL 1734023, at *2 (D. Nev. May 2, 2017). 24 There is no federal privilege preventing the discovery of settlement agreements and 25 related documents. Board of Trustees of Leland Stanford Junior University v. Tyco Intern. Ltd., 26 253 F.R.D. 521, 523 (N.D.Cal. 2008); Lofton v. Verizon Wireless (VAW) LLC, 308 F.R.D. 276, 27 282 (N.D. Cal. 2015); and Thermal Design, Inc. v. Guardian Building Products, Inc., 270 F.R.D. 1 Congress enacted Federal Rule of Evidence 408 to promote the settlement of disputes by limiting 2 the admissibility of settlement materials, rather than prohibiting their discovery. 253 F.R.D. at 3 523 (quoting In re Subpoena Issued to Commodity Futures Trading Commission, 370 F.Supp.2d 4 201, 211 (D.D.C. 2005)). Under Rule 408, evidence of compromise offers or settlement 5 negotiations are inadmissible to prove or disprove the validity or amount of a disputed claim. See 6 Fed. R. Evid. 408. Such evidence may, however, be admitted for other purposes. E&R Venture 7 Partners, 2017 WL 1734023, at *2. 8 Although not amounting to a recognized privilege, public policy generally favors 9 confidential settlements because they often assist parties in resolving their disputes by mutual 10 agreement. Accordingly, “[t]he secrecy of a settlement agreement and the contractual rights of 11 the parties thereunder deserve court protection.” Kalinauskas v. Wong, 151 F.R.D. 363, 365 (D. 12 Nev. 1993). There are, however, limits to such protection. E&R Venture Partners, LLC, 2017 13 WL 1734023 at *2. 14 For example, under Federal Rule of Evidence 408, evidence of a settlement agreement 15 may be admissible to prove witness bias or prejudice. Fed. R. Evid. 408. Courts in this district 16 have also found the amount of a settlement appropriate to show offset. See Chartered 17 Development Corp. v. Allstate Insurance Co., No. 2:06-cv-01309-LDG-LRL, 2009 WL 18 10692853, at *4 (“Courts can and do compel disclosure of settlement agreements to allow parties 19 to determine the extent of their liability…[however] Transcontinental has failed to show why any 20 information other than the amounts are necessary to calculate any potential offset…”). 21 Here, the Court denies the T1 Parties motion to compel as premature because they can 22 obtain information about the settlement agreement and negotiations to show bias and offset 23 during depositions. The T1 Parties seek to compel two categories of documents: (1) the 24 settlement agreement between the Lefebvre Parties and New U and all documents and 25 communications between the Lefebvre Parties and New U as part of the settlement; and (2) all 26 documents exchanged between New U and the Lefebvre Parties that refer or relate to any of the 27 parties or claims in the case, regardless of whether they pertain to settlement. (ECF No. 158). 1 information to the second category of documents; thus, the Court denies the T1 Parties’ motion to 2 compel regarding those documents. See LR 7-2(d). However, the T1 Parties argue that they are 3 entitled to the settlement agreement between the Lefebvre Parties and New U and all documents 4 and communications surrounding it. 5 As a preliminary matter, the Court finds the “particularized showing” standard persuasive 6 here. This district has both acknowledged the use of this approach and the public policy behind 7 giving greater protection to confidential settlement agreements than Rule 26 provides. So does 8 this Court. However, the Court is not convinced that the T1 Parties have failed to carry their 9 burden under the “particularized showing” standard. While the Court declines to decide whether 10 the T1 Parties are entitled to each piece of information they have requested in the form they have 11 requested it at this stage, the T1 Parties have made a particularized showing that they require 12 settlement information to establish bias and offset. 13 However, the T1 Parties have not demonstrated a particularized showing that they need 14 the settlement agreement itself and the communications surrounding the negotiations. Rather, it 15 appears that they can obtain this information during their deposition of Marc Lefebvre. The T1 16 Parties have asserted that New U’s refusal to provide any information at all about the settlement 17 agreement and negotiations during a meet and confer prompted this motion. (ECF No. 163 at 4). 18 This suggests that the T1 Parties’ discovery needs could have been met had New U simply 19 answered their questions. But the T1 Parties have an upcoming opportunity to ask these 20 questions relevant to bias and offset: Marc Lefebvre’s deposition. Asking these questions at the 21 deposition would balance the T1 Parties’ entitlement to information about bias and offset with 22 New U’s entitlement to a level of protection over its confidential settlement agreement and 23 negotiations. The Court thus denies the T1 Parties motion to compel as premature. 24 25 26 27 1 IT IS THEREFORE ORDERED that New U’s motion to compel (ECF No. 157) is 2 granted in part as outlined in this Order. 3 IT IS FURTHER ORDERED that the T1 Parties’ motion to compel (ECF No. 158) is 4 denied as premature. 5 6 DATED: November 17, 2021 7 DANIEL J. ALBREGTS 8 UNITED STATES MAGISTRATE JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27