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Citing Proportionality Concerns, Court Grants Plaintiff’s Motion for Protective Order: eDiscovery Case Law

In Noble Roman’s, Inc. v. Hattenhauer Distrib. Co., No. 1:14-cv-01734-WTL-DML (S.D. Ind. Mar. 24, 2016), Indiana Magistrate Judge Debra McVicker Lynch, citing proportionality concerns, granted the plaintiff’s motion for a protective order and ordered that the defendant was prohibited from obtaining the discovery sought by the defendant’s subpoenas from a major shareholder of the plaintiff.

Case Background

In this royalty dispute between parties, the defendant filed a counterclaim contending that the franchise agreements did not permit the type of audits requested by the plaintiff and that “the audits were based on flawed – and knowingly flawed – methodology and are invalid.”  To support its counterclaim, the defendant filed subpoenas seeking information from a major shareholder (Privet Fund) of the plaintiff that included production of 23 categories of documents and Rule 30(b)(6) testimony from shareholder witnesses.

The plaintiff asserted that the subpoenas were an “improper fishing expedition” and that they sought information “outside the proper bounds of discovery”, contending that the shareholder’s Schedule 13D shows it did not begin to amass large amounts of the plaintiff’s shares until after the plaintiff made the business decision to conduct audits of its non-traditional franchisees like the defendant company.  While the court denied the plaintiff’s request to quash the defendant’s subpoenas, it allowed the plaintiff to seek relief through a motion for protective order, which the plaintiff did.

Judge’s Ruling

Determining that the plaintiff “would be required to devote employee time and effort, as well as attorney time, effort, and expense, to review the documents requested by Hattenhauer from Privet Fund, and to devote substantial attorney time and expense for traveling to, preparing for, and cross-examining Privet Fund Rule 30(b)(6) deponent witness(es) in Atlanta, Georgia”, Judge Lynch ruled that the plaintiff had standing to challenge the subpoenas, even though they were issued against a non-party.

With regard to the information requested in the defendant’s subpoenas, Judge Lynch stated that “[t]he categories of information are wide-ranging and include essentially all documents and information relating to Privet Fund’s November and December 2015 letters to Noble Roman’s board of directors, to Privet Fund’s investigation and analysis of Noble Roman’s operations, management, finances, and business plans, and to Privet Fund’s acquisition of Noble Roman’s stock. The subpoenas also seek any documents and information about Noble Roman’s audits of its franchisees.”

Continuing, Judge Lynch cited Rule 26(b), stating that the defendant “beats the drum of ‘relevancy.’ It asserts that all of its deposition topics and document requests are ‘relevant.’ That’s not good enough. Hattenhauer never attempts to demonstrate that the discovery is in any way proportional to the needs of this case, considering such things as the amount in controversy, the importance of the information in resolving contested issues, whether the burden of the discovery outweighs its likely benefits, whether the information can be obtained from other and more convenient sources, or whether the information is cumulative to other discovery Hattenhauer has obtained.”

As a result, Judge Lynch found that “Hattenhauer’s documents and deposition subpoenas to Privet Fund constitute discovery run amok. Asking Privet Fund to provide every document and every piece of information it has – including information it may have obtained orally from Noble Roman’s personnel – about every aspect of Noble Roman’s business operations, finances, marketing plans, and management structure is discovery too far afield from the contested issues in this case.”  Therefore, Judge Lynch granted the plaintiff’s motion for a protective order.

So, what do you think?  Were the defendant’s information requests disproportionate to the case?  Or should its subpoenas have been granted?  Please share any comments you might have or if you’d like to know more about a particular topic.

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