Scott Hutchison Enterprises, Inc. v. Cranberry Pipeline Corporation et al, No. 3:2015cv13415 - Document 291 (S.D.W. Va. 2016)
Court Description: MEMORANDUM OPINION and ORDER denying Defendants' 181 Renewed MOTION to Compel Production of Plaintiff's Financial Information; granting Plaintiff's 182 MOTION for Sanctions; directing Defendants to pay Plaintiff reimbursement of attorneys' fees and costs as more fully set forth herein within thirty (30) days of the date of this Order. Signed by Magistrate Judge Cheryl A. Eifert on 11/30/2016. (cc: counsel of record) (jsa)
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Scott Hutchison Enterprises, Inc. v. Cranberry Pipeline Corporation et al Doc. 291 IN TH E U N ITED STATES D ISTRICT COU RT FOR TH E SOU TH ERN D ISTRICT OF W EST VIRGIN IA H U N TIN GTON D IVISION SCOTT H U TCH ISON EN TERPRISES, IN C., Plain tiff, v. Cas e N o .: 3 :15-cv-13 4 15 CRAN BERRY PIPELIN E CORPORATION an d CABOT OIL & GAS CORPORATION , D e fe n d an ts . MEMORAN D U M OPIN ION an d ORD ER On Novem ber 18, 20 16, the parties appeared for a hearing on Defendants’ Renewed Motion to Com pel Production of Plaintiff’s Financial Inform ation, (ECF No. 181), and Plaintiff’s Motion for Sanctions, (ECF No. 182). Having considered the written m aterials and the argum ents presented by counsel, the Court D EN IES Defendants’ m otion to com pel and GRAN TS Plaintiff’s m otion for sanctions as set forth below. I. Re le van t Facts This civil action involves a gas pipeline owned by Defendants, which is located on real property purchased by Plaintiff for the purpose of developing a residential subdivision (“Ridgewood Subdivision”). The pipeline (also referred to as the “C-10 0 4 pipeline”) is 13 m iles in length, crosses over land in both Wayne and Cabell counties, and was constructed by Owens Illinois Glass Com pany in approxim ately 1962. In 1970 , Defendants, or a subsidiary or predecessor of Defendants, purchased the C-10 0 4 pipeline and has used it to transport gas since its purchase. 1 Dockets.Justia.com The dispute between the parties arose in 20 13 when Plaintiff began im provem ents on an existing roadway in the Ridgewood Subdivision, which involved excavating the earth above and around the pipeline. When Defendants learned of the excavation activities, they requested that Plaintiff cease work, fearing that the pipeline would rupture and potentially cause bodily injury, or even death. Plaintiff ceased operations, and the property has been sitting, undeveloped, since that tim e. Plaintiff alleges that Defendants’ pipeline renders the Ridgewood Subdivision undevelopable. Consequently, Plaintiff has asserted a variety of claim s against Defendants, including trespass, unjust enrichm ent, and negligence. In turn, Defendants filed a counterclaim , asserting inter alia that they have a prescriptive easem ent for the portion of the C-10 0 4 pipeline located in the Ridgewood Subdivision. Defendants claim that they did not receive perm ission from Plaintiff or any prior owner of the Ridgewood Subdivision to place, operate, or m aintain the C-10 0 4 pipeline; that they have operated the pipeline continuously for m ore than ten years; that the operation of the C-10 0 4 pipeline has been open and notorious; and that the operation of the pipeline has been adverse to Plaintiff and his predecessors in title to the Ridgewood Subdivision. II. D e fe n d an ts ’ Re n e w e d Mo tio n to Co m p e l Pro d u ctio n o f Plain tiff’s Fin an cial In fo rm atio n During the course of discovery, Defendants m oved to com pel production of Plaintiff’s state and federal incom e tax returns, financial statem ents, and restated financial statem ents for the years 20 11 through 20 15. Defendants argued that the inform ation was highly relevant to Plaintiff’s dam ages; in particular, its claim for the alleged loss of profits that Plaintiff would have realized from the sale of residential lots at the Ridgewood Subdivision. 2 Ultim ately, the Court issued an Order com pelling Plaintiff to produce its “financial statem ents (or portions thereof), or sim ilar docum ents, for the years 20 11 through 20 15 that reflect Plaintiff’s operational expenses, losses, and profits related to the developm ent of residential subdivisions.” (ECF No. 123 at 8). The Court denied the m otion insofar as it sought production of financial records for Plaintiff’s other business operations, such as its car washes, noting that Plaintiff was not claim ing a loss of past profits; rather, it was seeking the loss of future profits related only to the Ridgewood Subdivision, an anticipated but not yet ongoing venture. (Id.). The Court also denied the request for Plaintiff’s tax returns, stating that “[i]f financial records exist reflecting Plaintiff’s history and experience in sim ilar residential developm ent ventures, then Defendants should learn from that financial inform ation whether there is any data that can be used for com parison and extrapolation,” but “at this juncture, no com pelling reason for the production of tax returns has been dem onstrated by Defendants.” (Id. at 9). Defendants have now renewed the foregoing m otion to com pel on the basis that Plaintiff’s “overall financial inform ation is directly relevant and necessary to the calculation of future lost business profits because certain expenses used to calculate the com pany’s profits or losses are not reflected on the incom e statem ent produced,” including “the m oney that [Plaintiff] paid for the property itself and the com pany’s general overhead.” (ECF No. 181 at 3). Defendants argue that other critical inform ation is not reflected in the financial records already produced. Specifically, Defendants contend that the records do not dem onstrate how Plaintiff accounts for depreciation of real property, in the event Plaintiff takes depreciation expense related to the Ridgewood Subdivision. 3 Defendants also explain that they need to review all of the requested financial records to advance their argum ent that Plaintiff’s general overhead expenses should be distributed evenly across the com pany’s business operations, including an allocation to the Ridgewood Subdivision, which would reduce Plaintiff’s future lost profits in this action. Defendants claim that, otherwise, Plaintiff could attribute such expenses to business operations other than the Ridgewood Subdivision and artificially inflate the future lost profits calculation of that com ponent of the business. Defendants contend that because Plaintiff—a corporation with all of its business enterprises under one um brella—is seeking loss profits, Defendants should be able to review the com pany’s overall financial inform ation; not just portions of inform ation related to the Ridgewood Subdivision. In response, Plaintiff argues that Defendants are incorrectly treating the claim ed dam ages as a loss of past incom e suffered by an existing business, as opposed to a loss of potential profits from the inability to develop a specific property. (ECF No. 215 at 5). Plaintiff asserts that Defendants do not require additional financial docum ents to determ ine the purchase price of the property because it is stated in the deed, which was produced to Defendants. (Id. at 2). Further, regarding how the purchase price will factor into future lost profits, Plaintiff points out that it produced to Defendants incom e statem ents from Island Estates, the only other residential subdivision developed by Plaintiff. (Id. at 3). According to Plaintiff, these incom e statem ents show how Plaintiff allocated corporate overhead and expenses to its sole business venture involving the developm ent of a residential subdivision. Because the financial records of Island Estates were prepared before this litigation, Plaintiff argues that they are inherently reliable and accurately reflect the m anner by which Plaintiff would account for general overhead and 4 expenses in the Ridgewood Subdivision. Plaintiff contends that its Rule 30 (b)(6) witness, Laya Hutchinson, testified regarding the Island Estates’ incom e statem ents, explaining that Plaintiff deducted a portion of the property’s purchase price as an expense from the sale of each lot. She further testified that a sim ilar deduction would be taken in the case of the Ridgewood Subdivision when the land was developed and the lots were sold. (Id.). As far as general overhead, Plaintiff indicates that all of its past overhead expenses relate solely to the corporation’s other business ventures; because Plaintiff has not started to develop Ridgewood Subdivision, there are no overhead expenses for that property. (Id. at 1). Plaintiff adds that its expert witness took into account the estim ated costs of developing Ridgewood Subdivision; therefore, Defendants have all of the relevant financial inform ation. In reply, Defendants state that their purpose in seeking the financial inform ation is to ascertain how Plaintiff accounted for the purchase price of the property in calculating the com pany’s profits or losses; for exam ple, Defendants state that “if [Plaintiff] is taking depreciation deductions on the property, that would be relevant for how the com pany could calculate profit or loss in the future upon the sale of the property.” (ECF No. 255 at 1). Regarding general overhead, Defendants state that Plaintiff “should not be perm itted to ‘cherry pick’ which aspect of the com pany it wishes to advance to recover lost profits and sim ultaneously shield the rest of the com pany from scrutiny.” (Id. at 2). Without access to this financial inform ation, Defendants allege that Plaintiff can m anipulate the alleged profit on the subject property by shifting all overhead expenses to other aspects of the com pany’s operations. (Id.). During oral argum ent, Defendants again raised the possibility that Plaintiff was depreciating the property and further argued that Plaintiff would have to allocate som e 5 of its general business overhead to the Ridgewood Subdivision, both of which would affect the projected loss of profits. Defendants argued that without the rem aining financial inform ation, they were unable to effectively cross-exam ine the experts on these considerations. In response, Plaintiff’s counsel represented that Plaintiff was not depreciating the property and did not expect to incur any additional overhead to develop the subdivision, because Scott Hutchinson intended to do the labor him self. In any event, Plaintiff indicated that the costs related to developing the property, even those that were associated with the work Mr. Hutchinson intended to perform , were accounted for in the engineering expert’s report. Considering these argum ents, the undersigned finds that Defendants do not provide any new inform ation or testim ony to support their renewed m otion for financial inform ation. As Plaintiff em phasizes, Defendants have received incom e statem ents and financial docum entation related to all of Plaintiff’s business ventures involving residential subdivisions. Moreover, Defendants have had an opportunity to depose a Rule 30 (b)(6) witness on the corporation’s financial practices. Defendants have received the deed to Ridgewood Subdivision, which shows the purchase price, as well as expert reports outlining the estim ated costs of developing the property and the estim ated sale price of each lot. Defendants have obtained the settlem ent agreem ent between Dr. Lavery and Plaintiff reflecting any incom e attributable to Plaintiff related to the Ridgewood Subdivision. Thus, Defendants possess inform ation regarding the purchase price of the Ridgewood Subdivision, any incom e associated with the subdivision, the m ethod by which Plaintiff allocated and accounted for costs and expenses incurred in developing a sim ilar residential subdivision, the projected costs and expenses associated with developing the Ridgewood Subdivision, the projected sale price of the lots, and the 6 dam ages associated with the interruption in the developm ent process. With respect to overhead expenses, Defendants’ claim s are speculative at best. Defendants provide no factual basis to establish the relevancy of Plaintiff’s past overhead expenses. For exam ple, Defendants provide no evidence that Plaintiff considered such expenses in its previous residential developm ent project, Island Estates. In fact, the parties’ argum ents suggest the contrary. Further, Defendants offer no testim ony, expert opinions, or evidence of any kind to dem onstrate that Plaintiff’s current operating expenses should be attributed to the Ridgewood Subdivision. Defendants are free to challenge the am ounts projected, the m ethod of allocation, the categories of expenses claim ed, or any other portions of Plaintiff’s calculations through cross exam ination, expert testim ony, or whatever tactic they see fit. However, they have failed to dem onstrate that they are likely to find within Plaintiff’s rem aining financial docum ents any undiscovered inform ation that would help them do so. Thus, for the reasons stated above, the Court D EN IES Defendants’ Renewed Motion to Com pel Production of Plaintiff’s Financial Inform ation. III. Plain tiff’s Mo tio n fo r San ctio n s A. Th e Partie s ’ Po s itio n s Addressing the other pending m otion, Plaintiff filed interrogatories and docum ent requests, seeking evidence relied upon by Defendants to support their prescriptive easem ent claim . In particular, Plaintiff asked Defendants to identify evidence showing that the placem ent of the C-10 0 4 pipeline through the Ridgewood Subdivision was without perm ission and was adverse or hostile to the ownership rights of Plaintiff or its predecessors. Plaintiff also requested the production of any docum ents supporting the proposition that Defendants had a prescriptive easem ent related to the 7 C-10 0 4 pipeline’s placem ent in the Ridgewood Subdivision. (ECF No. 182-1 at 2-3). In response, Defendants ultim ately produced 4,447 pages of docum ents m aintained in a file labeled the C-10 0 4 “pipeline file.” Upon receiving and reviewing the pipeline file, Plaintiff issued notices of Rule 30 (b)(6) deposition, dem anding that the defendants supply a corporate designee to testify regarding the pipeline file docum ents and explain how those docum ents were responsive to Plaintiff’s original discovery requests. After receiving the notices, Defendants’ counsel wrote a letter to Plaintiff’s counsel, objecting to the scope of the proposed depositions. Defendants advised that the pipeline file contained all docum ents in Defendants’ possession related to construction, operation, m aintenance, repair, and relocation of the C-10 0 4 pipeline. For the first tim e, defense counsel explained to Plaintiff’s counsel that the entire pipeline file was produced, not because it contained direct evidence of adverse or hostile possession, but rather, because it did not contain any evidence of perm ission to lay the C-10 0 4 pipeline across the Ridgewood Subdivision. Thus, the absence of docum entation was proof that neither Defendants, nor their predecessors, had perm ission to place the pipeline on Plaintiff’s property. Further, defense counsel indicated that the file was produced to dem onstrate continuous and open use of the pipeline over the years. Notwithstanding this clarification, Defendants agreed to produce a Rule 30 (b)(6) designee to testify about how the pipeline file docum ents were relevant to their prescriptive easem ent claim . However, they refused to produce a witness to testify “regarding” the docum ents without further specificity as som e of the docum ents were decades old and were created before Defendan ts owned and operated the pipeline. When the parties were unable to agree on the scope of inquiry, Defendants filed a m otion for a protective order. In the m otion, Defendants reiterated their agreement to produce a Rule 8 30 (b)(6) witness to testify about the pipeline file docum ents and their relevance to the issues of perm ission, adverse possession, and continuous and open use of the property at issue. Still, Defendants argued that it would be overly burdensom e to prepare a 30 (b)(6) witness to testify “regarding” all 4,447 pages of the pipeline file. Defendants asked the Court to place parameters on the scope of the questioning and to require Plaintiff’s counsel to specify in advance the particular docum ents and issues that they expected to raise with the witness. The undersigned held a hearing on the m otion for protective order on Septem ber 19, 20 16. During the hearing, Plaintiff’s counsel indicated that they had reviewed the volum inous production and wanted to explore the reasons why Defendants believed the docum ents were relevant and how each docum ent supposedly proved Defendants’ alleged prescriptive easem ent. Plaintiff’s counsel confirm ed that they never intended to question the corporate representative about factual events and circum stances underlying the creation of the docum ents. Consequently, Defendants agreed to the proposed line of questioning, but m aintained that a protective order was still necessary to ensure that Defendants were not expected to prepare witnesses beyond the expressed relevance of the docum ents. For that reason, and bearing in m ind the significant obligation of a party to properly prepare its Rule 30 (b)(6) designee, the Court granted the Motion for Protective Order, placing the following burden on Defendants and lim itation on the scope of inquiry: “Defendants shall produce designees that are prepared to testify regarding the relevancy of the pipeline file docum ents and the role the docum ents play in supporting Defendants’ claim s and defenses. Conversely, Defendants are not required to prepare the witnesses to testify regarding the factual circum stances, events, or details underlying the docum ents, or the various reasons for 9 creation of the docum ents.” (ECF No. 162 at 6-7). Defendants designated Cabot Oil & Gas Corporation’s com pliance and corrosion engineer, Robert L. Barrett, as their Rule 30 (b)(6) witness, and his deposition was taken on October 6, 20 16. (ECF No. 182-3). Thereafter, Plaintiff filed the instant Motion for Sanctions, arguing that sanctions are warranted under (1) Fed. R. Civ. P. 37 because Mr. Barrett was not a properly prepared or knowledgeable 30 (b)(6) witness and (2) Fed. R. Civ. P. 26(g) because Defendants’ counsel im properly verified that he reviewed the “over 4,40 0 pages of docum ents” produced to Plaintiff and certified that they were responsive to the discovery requests. (ECF No. 183 at 1). Plaintiff attached a statem ent of fees and expenses, indicating that it had incurred a total $ 19,493.32 for its counsel to review the docum ent production and to take the Rule 30 (b)(6) deposition. (ECF No. 182-2). In opposition to Plaintiff’s Motion, Defendants argue that sanctions are not warranted because (1) Plaintiff did not attem pt to confer with Defendants before filing the m otion as required by Local Rule of Civil Procedure 37.1(b); (2) Defendants did not violate a court order; and (3) the identification of the pipeline file docum ents as responsive to the discovery requests was “em inently reasonable” under Rule 26(g). (ECF No. 237 at 10 ). Defendants disagree that Mr. Barrett was not adequately knowledgeable or qualified to serve as their Rule 30 (b)(6) witness. Further, Defendants assert that Plaintiff has no right to decide who is the proper person to serve as Defendants’ Rule 30 (b)(6) designee. (Id.). Defendants argue that Mr. Barrett testified consistently with their position that the absence of perm ission in the pipeline file supported their prescriptive easem ent claim ; further, Defendants state that Mr. Barrett testified that the pipeline docum ents show the continuous operation of the pipeline as a whole since its construction in 1960 . (Id. at 12). As far as the adequacy of Mr. Barrett’s preparation, 10 Defendants contend that three to four hours of docum ent review was reasonable given the lim ited scope of the deposition topics and the fact that Mr. Barrett regularly reviewed pipeline files. (Id. at 13). Regarding Mr. Barrett’s testim ony and the responsiveness of the docum ents to Plaintiff’s discovery requests, Defendants argue that Plaintiff is m aking the sam e type of circum stantial evidence argum ent that they claim is im proper from Defendants. (Id. at 16). While Defendants claim that the absence of perm ission in the file shows that perm ission did not exist, Plaintiff argues that perm ission for other sections of the pipeline shows that Defendants m ust have had perm ission for the pipeline to traverse the property at issue. (Id.). Therefore, Defendants assert that the pipeline file docum ents are relevant as circumstantial evidence. (Id.). Further, Defendants indicate that the file is relevant because the pipeline operated as a linear unit and docum ents concerning construction, operation, m aintenance, repair, or relocation of any section of it were relevant to show the continuous, open, and adverse use of the section of the pipe on the subject property. (Id.). Finally, Defendants point to the fact that they discovered docum ents such as deeds, easem ents, and licenses in 11 other pipeline files; therefore, they argue that the absence of such docum ents in the C-10 0 4 pipeline file indicates a lack of any type of perm ission. With respect to sanctions, Defendants m aintain that Plaintiff’s statem ent of attorney’s fees is insufficient and that the fees and expenses were not reasonably necessary. (Id. at 17). Defendants focus on the fact that Plaintiff’s attorney’s fees were not identified by date and that Plaintiff’s counsel flew a private plane and rented a car for the 30 (b)(6) deposition as opposed to driving. (Id.). Finally, Defendants claim that the fees and expenses were unnecessary because Plaintiff already knew Defendants’ 11 position and “did not have to conduct the deposition to find out.” (Id.). B. An alys is La ck o f Ce r t ifica t io n u n d e r L. R . Civ . P. 3 7.1 As an initial m atter, the undersigned addresses Defendants’ argum ent that Plaintiff’s request for sanctions should be denied because Plaintiff failed to com ply with L. R. Civ. P. 37.1(b), which requires parties to m ake a good faith effort to confer in person or by telephone to narrow the areas of disagreem ent before filing a discovery m otion, including a m otion for sanctions. Certainly, the failure of a party to com ply with L. R. Civ. P. 37.1(b) m ay provide a basis for the presiding judicial officer to deny a m otion for sanctions. See HSBC Bank USA, Nat. Ass'n v. Resh, No. 3:12– cv– 0 0 668 20 13 WL 2177873, at *6 (S.D. W. Va. May 20 , 20 13). However, a court has discretion in m anaging its discovery issues and m ust address m otions for sanctions on a case-by-case basis. Here, the undersigned finds that the Local Rule does not preclude an award of sanctions for two reasons. First, unlike other sections of Rule 37, neither Rule 37(b) nor Rule 26(g) requires a m eet-and-confer session before a party m ay request sanctions. Consequently, certification of good faith efforts to m eet and confer are not a condition precedent under these federal rules to an award of sanctions. Second, the parties have already conferred about the docum ent production and the scope of the Rule 30 (b)(6) deposition, and these m atters were the subject of a discovery hearing. Therefore, the parties’ fundam ental disagreem ents were already narrowed, fully briefed, and argued prior to the Rule 30 (b)(6) deposition. It is highly im probable that additional discussion between Plaintiff’s counsel and Defendants’ counsel regarding Plaintiff’s request for sanctions would have narrowed the issues in dispute any further. 12 Sa n ct io n s u n d e r R u le 2 6 ( g ) Plaintiff requests sanctions under Rule 26(g) on the basis that Defendants im properly certified that the 4,447 pages of docum entation produced to Plaintiff were responsive to Plaintiff’s discovery requests. Federal Rule of Civil Procedure 26(g) provides that discovery responses m ust be signed by the responding party or party’s attorney certifying to the best of the person’s “knowledge, inform ation, and belief form ed after reasonable inquiry” that the discovery responses are, in relevant part, “consistent with [the Federal Rules of Civil Procedure],” “not interposed for any im proper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation,” and “neither unreasonable nor unduly burdensom e or expensive, considering the needs of the case, prior discovery in the case, the am ount in controversy, and the im portance of the issues at stake in the action.” Fed. R. Civ. P. 26(g)(1)(B). The Rule further provides that “[i]f a certification violates this rule without substantial justification,” the court “m ust im pose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both,” which “m ay include an order to pay the reasonable expenses, including attorney’s fees, caused by the violation.” Fed. R. Civ. P. 26(g)(3). In this case, Plaintiff served the following discovery requests: IN TERROGATORY N O. 6 : Please identify each and every piece of evidence this Defendant has showing the initial and continued placem ent of the C-10 0 4 pipeline within the Ridgewood Subdivision occurred without the perm ission of any and all predecessors in interest in the property, or the Plaintiff in this action. AN SW ER: Defendant is in the process of gathering docum ents reflecting the installation and operation of the C10 0 4 pipeline. Other than the authorization from the City of Huntington described in response to Interrogatory No. 5, 13 Defendant is unaware of any docum entation that reflects perm ission granted by Plaintiff or any prior owner of the Ridgewood Subdivision. FIRST SU PPLEMEN TAL AN SW ER: See docum ents bearing bates num bers CABOT 0 0 0 29 – 0 0 4476 set forth in the enclosed disc. IN TERROGATORY N O. 7: What evidence does this Defendant rely on to show that the placem ent of the C-10 0 4 pipeline within the Ridgewood Subdivision was adverse, or hostile to the true ownership interest of the predecessors in interest to the property, or the plaintiff in this action. AN SW ER: Defendant has not identified all evidence on which it will rely to show that the placem ent of the C-10 0 4 pipeline within the Ridgewood Subdivision was adverse, or hostile to the true ownership interest of the predecessors in interest to the property, or the plaintiff in this action. Defendant has operated the C-10 0 4 pipeline for over fifty years, including the portion of the pipeline that runs along a road known as Woodland Drive located in the Ridgewood Subdivision. The pipeline was identified by m ultiple m arkers in various locations in the Ridgewood Subdivision. FIRST SU PPLEMEN TAL AN SW ER: See docum ents bearing bates num bers CABOT 0 0 0 29 – 0 0 4476 set forth in the enclosed disc. RFP N O. 6 : Copies of all docum ents of any type which support the propositions that this Defendant has any type of prescriptive easem ent or right of way which allows the at issue pipeline to run across the real estate owned by the Plaintiff. RESPON SE: See docum ents bearing bates num bers CABOT 0 0 0 0 0 6-0 0 0 0 28. Defendant is still in the process of searching for and gathering available docum ents reflecting the installation and operation of the C-10 0 4 pipeline. Other than the authorization from the City of Huntington described in response to Interrogatory No. 5, Defendant is unaware of any docum entation that reflects perm ission granted by Plaintiff or any prior owner of the Ridgewood Subdivision. FIRST SU PPLEMEN TAL RESPON SE: See docum ents bearing bates num bers CABOT 0 0 0 0 29 – 0 0 4476 set forth in the enclosed disc. 14 (ECF No. 237 at 2-3). As shown above, Defendants initially provided reasonable responses to Plaintiff’s discovery requests. Moreover, the notation that Defendants were still searching for relevant inform ation was an appropriate way to notify Plaintiff that a search was ongoing and additional m aterials m ight be forthcom ing. However, Defendants’ supplem ental responses—particularly to the interrogatories—sim ply did not com ply with the requirem ents or spirit of the federal discovery rules, and for that reason, the certification of the supplem ental responses violated Rule 26(g)(1)(B). Federal Rule of Civil Procedure 33(d) allows a party to supply business records in response to an interrogatory “if the burden of deriving or ascertaining the answer will be substantially the sam e for either party.” Fed. R. Civ. P. 33(d). When business records are produced in response to an interrogatory, the producing party m ust specify the records to be reviewed, “in sufficient detail to enable the interrogating party to locate and identify them as readily as the responding party could.” Fed. R. Civ. P. 33(d)(1). As indicated by the advisory notes to Rule 33, a responding party abuses the process by directing an interrogating party to a m ass of records, without specifying by category and location the relevant docum ents. See Fed. R. Civ. P. 33 advisory com m ittee note to 1980 am endm ent. Sim ilarly, when answering a request for the production of docum ents under Rule 34, the producing party m ust respond to each requested item or category separately, so that the interrogating party can discern which docum ents apply to which request. Fed. R. Civ. P. 34(b)(2)(B). Here, Plaintiff asked in interrogatory No. 6 for the identification of evidence that showed the C-10 0 4 pipeline was placed through the Ridgewood Subdivision without 15 perm ission. Interrogatory No. 7 sought the identity of evidence relied upon by Defendants to dem onstrate its adverse or hostile possession of the Ridgewood Subdivision property. In response to both interrogatories, Defendants attached the entire pipeline file. Defendants did not identify which particular docum ents in the file answered which interrogatory, did not provide any explanation for the relevance of the com plete file to each interrogatory, and did not specify where in the pipeline file responsive inform ation could be located. Defendants likewise attached the entire pipeline file in response to the request for production of all docum ents supporting Defendants’ claim of a prescriptive easem ent. Defendants do not dispute Plaintiff’s contention that none of the 4,447 pages in the pipeline file directly discusses perm ission or lack of perm ission for placem ent of the C-10 0 4 pipeline, adverse possession of the Ridgewood Subdivision, or open and continuous use of the C-10 0 4 pipeline through the Ridgewood Subdivision. Rather, Defendants contend that they produced the entire pipeline file precisely because it lacked any direct evidence concerning perm ission for placem ent of the pipeline. Defendants explain that any perm ission obtained for placem ent of the C-10 0 4 pipeline through the Ridgewood Subdivision would have been placed in the pipeline file. Consequently, the absence of such docum entation is “circum stantial evidence” that perm ission was never obtained. The undersigned finds two fundam ental flaws with Defendants’ post-production explanation for their supplem ental interrogatory answers. First, Defendants im plied by their supplem ental responses that the attached docum ents contained evidence showing a lack of perm ission or adverse possession when, in truth, they did not. Not until a ft e r Plaintiff’s counsel had conducted a thorough review of each page did Defendants explain 16 their “absence of docum entation” argum ent. Consequently, Plaintiff’s counsel spent hours scouring all 4,447 pages looking for notations that Defendants knew, in advance, did not exist. Defendants argue that producing the pipeline file in response to Interrogatory Nos. 6 and 7 was “em inently reasonable,” because the questions required them to “prove a negative.” The undersigned disagrees. Contrary to Defendants’ suggestion, responsive m aterials directly discussing a lack of perm ission or adverse possession m ight have been in Defendants’ custody or control.1 It was this direct evidence that Defendants were asked to identify. Therefore, it was exceedingly unreasonable for Defendants to supply thousands of pages of docum ents, without context or explanation, which could only be interpreted as relevant to perm ission and adverse possession when accom panied by the pertinent context and explanation. Defendants further argue that even if the pipeline file is not directly responsive to the interrogatories, it is responsive to the request for production of docum ents, which asked Defendants to supply “docum ents of any type which support the propositions that this Defendant has any type of prescriptive easem ent or right of way which allows the at issue pipeline to run across the real estate owned by Plaintiff.” Defendants assert that, consequently, Plaintiff’s counsel would have been required to review the pipeline file anyway. While there is som e m erit to Defendants’ position on this point, the undersigned finds that the failure of Defendants to explain in advance the role of the 1 Exam ples of such docum entation include: (1) correspondence from one of Plaintiff’s predecessors in interest refusing to grant perm ission for the construction of a pipeline through the Ridgewood Subdivision, (2) internal com m unications or m em oranda prepared by Defendants or their predecessors discussing the lack of written perm ission or an easement on file, and (3) due diligence docum ents created at the tim e the pipeline was purchased by Defendants, which confirm ed the failure of Defendants’ predecessor to obtain an easement or license. All of these types of docum ents would have been directly responsive to the interrogatories. 17 pipeline file in relation to the interrogatories caused Plaintiff’s counsel to alter the m anner in which they reviewed the pipeline file. Certainly, if Plaintiff’s counsel had been told before their review that the pipeline file was being produced to show an absence of docum entation discussing perm ission for placem ent of the C-10 0 4 pipeline, counsel would not have spent hours searching for that very docum entation. Accordingly, the Court finds that Defendants’ supplem ental responses to Interrogatory Nos. 6 and 7 caused Plaintiff to needlessly incur additional attorneys’ fees. Second, Defendants’ justification for indiscrim inately producing the pipeline file in response to Plaintiff’s interrogatories is disingenuous. Defendants assert that the pipeline file was produced to show the absence of any docum entation reflecting perm ission for the pipeline’s placem ent. If true, then it is significant that Defendants did not, until questioned and ordered by the Court, also produce the C-10 0 4 “land file,” which “includes deeds, easem ents, and other land-related docum ents for the pipeline.” (Id. at 4). By Defendants’ own adm ission, any docum ents reflecting perm ission for the pipeline “would likely have been placed in the pipeline file o r la n d file .” (Id.) (em phasis added). Defendants contend that neither file includes any perm ission relating to the real property at issue, yet Defendants only produced the pipeline file. Therefore, if Defendants truly believed that the interrogatories required them to “prove a negative,” they should have contem poraneously produced the land file. While the Court does not intend to suggest that the production of both files would have been a proper response to the interrogatories, the above factor underm ines Defendants’ post-production explanation concerning the reasonableness of providing the pipeline file. The term “docum ent dum p” is often used to refer to the production of volum inous and m ostly unresponsive docum ents without iden tification of specific pages or portions 18 of docum ents which are responsive to the discovery requests. See, e.g., U.S. S.E.C. v. Elfindepan, S.A., 20 6 F.R.D. 574, 576– 77 (M.D.N.C. 20 0 2); Stooksbury v. Ross, 528 F. App'x 547, 550 (6th Cir. 20 13). Such a tactic can bury relevant evidence and force the receiving party to expend considerable tim e and expense parsing through docum ents in order to glean inform ation which m ay be relevant. In this case, the Court agrees with Plaintiff that Defendants’ actions constituted a “docum ent dum p” and were im proper under the discovery rules. When attaching the pipeline file to the supplem ental responses, Defendants im properly certified that the production was consistent with the discovery rules and was not unreasonable or unduly burdensom e. Therefore, the Court finds that sanctions are warranted under Rule 26(g)(3). Sa n ct io n s u n d e r R u le 3 7( b ) Equally troubling are the circum stances surrounding the Rule 30 (b)6) deposition in this case. Rule 37(b) authorizes the Court to im pose sanctions where a party or person designated under Rule 30 (b)(6) fails “to obey an order to provide or perm it discovery.” Fed.R.Civ.P. 37(b)(2)(A). Plaintiff asserts that the Court ordered Defendants to present a Rule 30 (b)(6) witness who could testify regarding the relevance and applicability of the docum ents in the pipeline file to the claim s and defenses in the case. Nonetheless, Defendants presented a witness that was unprepared to answer reasonable questions on the topics approved for the deposition. It is well-established across jurisdictions that “[p]roducing an unprepared [Rule 30 (b)(6)] witness is tantam ount to a failure to appear.” United States v. Tay lor, 166 F.R.D. 356, 363 (M.D.N.C.), aff'd, 166 F.R.D. 367 (M.D.N.C. 1996). The corporation or entity nam ed in a 30 (b)(6) notice “m ust m ake a good-faith effort to designate people with knowledge of the m atter sought by the opposing party and to adequately prepare 19 its representatives so that they m ay give com plete, knowledgeable, and nonevasive answers in deposition.” Spicer v. Universal Forest Prod., E. Div., Inc., No. 7:0 7CV462, 20 0 8 WL 4455854, at *3 (W.D. Va. Oct. 1, 20 0 8). In the event that a party or person produces an unprepared 30 (b)(6) witness, the Court m ay im pose any of the sanctions listed in Rule 37(b)(2)(A)(i)-(vi), which range from the im position of costs to the entry of default judgm ent. Fed. R. Civ. P. 37(d)(3). Further, “[i]nstead of or addition to” the foregoing sanctions, the Court “m ust require the party failing to act, the attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circum stances m ake an award of expenses unjust. Id. Defendants explicitly agreed, and were then ordered by the Court, to produce a witness to testify “regarding the relevancy of the pipeline file docum ents and the role the docum ents play in supporting Defendants’ claim s and defenses.” (ECF Nos. 162 at 6-7, 237 at 5-6). Notably, Defendants challenged the scope of Plaintiff’s Rule 30 (b)(6) Notices, but did not object to this topic. (ECF No. 237 at 5-6). However, at the Rule 30 (b)(6) deposition, Defendants offered an individual who, while knowledgeable about the “operation of the pipeline,” had no knowledge of the claim s and counterclaim s in this action. (ECF No. 182-3 at 7). It is axiom atic that an individual who has no knowledge of the claim s and defenses will be hard-pressed to provide accurate testim ony connecting the docum ents at issue to those claim s and defenses. It is clear from the deposition transcript that Mr. Barrett was not adequately prepared to explain how the docum ents in the pipeline file were relevant to Defendants’ claim s and defenses. Defendants explicitly agreed to designate an individual to explain how the docum ents produced were relevant and responsive to the interrogatories. 20 Further, “a corporation is expected to create an appropriate witness or witnesses from inform ation reasonably available to it if necessary.” QBE Ins. Corp. v. Jorda Enterprises, Inc., 277 F.R.D. 676, 689 (S.D. Fla. 20 12) (citing W ilson v. Lakner, 228 F.R.D. 524, 529 (D. Md. 20 0 5). This m ay include “inform ation [that] was transm itted through the corporation’s lawyers.” Id. (citing Great Am . Ins. Co. of N .Y. v. Vegas Const. Co., 251 F.R.D. 534, 542 (D. Nev. 20 0 8). Not only is a corporate designee required to “testify about facts within the corporation’s collective knowledge, […] but the designee m ust also testify about the corporation’s position, beliefs and opinions. Id. (citing Great Am ., 251 F.R.D. at 539; Tay lor, 166 F.R.D. at 362 (designee presents corporation's “position,” its “subjective beliefs and opinions” and its “interpretation of docum ents and events”)). Defendants assert in their m em orandum that the pipeline file docum ents are relevant to Plaintiff’s discovery requests because they show the continuous, open, and adverse use of the section of pipeline at issue. (ECF No. 237 at 5). However, that position was not reflected with any detail in Mr. Barrett’s testim ony. Mr. Barrett provided only a rote response stating that the file showed the absence of perm ission, but continuous use; this testim ony only potentially touched on som e of the elem ents stated in Defendants’ m em orandum . (ECF No. 182-3). While the Court can extrapolate from Defendants’ m em orandum and representations at the hearing that som e of the pipeline file docum ents m ay be relevant to Defendants’ claim s or defenses in this action, that testim ony was not com m unicated in the Rule 30 (b)(6) deposition. Defendants were obligated to prepare Mr. Barrett to provide “com plete, knowledgeable, and nonevasive answers” on behalf of Defendants regarding each of the docum ents contained in the pipeline file. Spicer, 20 0 8 WL 4455854, at *3. This was not done. 21 Finding that Defendants failed to produce an adequately prepared Rule 30 (b)(6) witness in this case, the Court considers the issue of appropriate sanctions. As noted, a range of sanctions is available for producing an unprepared Rule 30 (b)(6) witness. Of the available sanctions, Plaintiff asks for an award of attorneys’ fees and costs. The undersigned concludes that an award of som e portion of the claim ed attorneys’ fees and costs is equitable in view of Defendants’ violations. C. Calcu latio n o f Atto rn e ys ’ Fe e s an d Co s ts Plaintiff requests reim bursem ent of $ 19,493.32 in attorneys’ fees and costs. When calculating an award of reasonable fees and costs, the Court m ust “determ ine a lodestar figure by m ultiplying the num ber of reasonable hours expended tim es a reasonable rate.” Robinson v. Equifax Inform ation Services, LLC, 560 F.3d 235, 243 (4th Cir. 20 0 9) (citing Grissom v. The Mills Corp., 549 F.3d 313, 320 (4th Cir. 20 0 8)). The United States Court of Appeals for the Fourth Circuit has identified twelve factors to consider when m aking this determ ination, including the following: (1) the tim e and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the attorney’s opportunity costs in pressing the instant litigation; (5) the custom ary fee for like work; (6) the attorney’s expectations at the outset of the litigation; (7) the tim e lim itations im posed by the client or circum stances; (8) the am ount in controversy and the results obtained; (9) the experience, reputation and ability of the attorney; (10 ) the undesirability of the case within the legal com m unity in which the suit arose; (11) the nature and length of the professional relationship between attorney and client; and (12) attorneys’ fees awards in sim ilar cases. Robinson, 560 F.3d at 243-244 (citing J ohnson v. Ga. Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974)). Beginning with the hourly rate, the Court notes that Plaintiff is represented by an associate attorney and two experienced litigators. The three attorneys were actively 22 involved in discovery, and they each spent tim e either reviewing docum ents or participating in the Rule 30 (b)(6) deposition. Plaintiff requests hourly rates of $ 350 .0 0 for Mr. Fredeking and Mr. Biser and $ 250 .0 0 for Mr. Poole, but does not provide any inform ation as to how these rates com pare to the rates charged in the com m unity by sim ilarly situated and experienced attorneys perform ing sim ilar tasks. Notwithstanding the lack of this com parison, the Court can take notice that reviewing documents and deposing a Rule 30 (b)(6) designee are tasks routinely perform ed by litigation attorneys. Therefore, a reasonable hourly rate in this case would be one consistent with the m arket rate of a general litigator practicing within the Southern District of West Virginia. Id. HSBC Bank USA, Nat. Ass'n v. Resh, No. 3:12– cv– 0 0 668 20 13 WL 2177873, at *6 (S.D. W. Va. May 20 , 20 13) (citing Ply ler v. Evatt, 90 2 F.2d 273, 277 (4th Cir. 1990 )). The duty to provide evidence of the prevailing hourly rate rests with the party seeking an award of fees. Id. Plaintiff did not provide evidence of prevailing hourly rates. However, Defendants did not object to the rates set forth by Plaintiff, and the proposed hourly rates are com parable to those awarded in other cases in this district for other types of litigation. See Resh, 20 13 WL 2177873, at *6 (collecting cases). Therefore, the undersigned finds that the hourly rates requested by Plaintiff are reasonable for the type of work perform ed (real property litigation); the skill required to perform the services rendered (analyzing discovery responses, preparing for and conducting a 30 (b)(6) deposition, and seeking sanctions for a failure to com ply with the discovery rules); the custom ary fee for such work; and the experience, reputation, and ability of Plaintiff’s attorneys. Having determ ined the reasonable hourly rates in this case, the Court next exam ines the num ber of hours claim ed by Plaintiff. Rule 37 and Rule 26(g)(3) allow the 23 Court to award the reasonable expenses, including attorney’s fees, that were caused by the disobedient party’s (or counsel’s) failure. The undersigned finds that som e tim e incurred in reviewing the pipeline file was clearly “caused by” the Defendants’ failures to abide by the discovery rules when producing the pipeline file. On the other hand, at least a portion of the tim e spent reviewing the pipeline file would have been incurred by Plaintiff, as som e portion of the file is relevant to Defendants’ prescriptive easem ent claim , particularly to show the continuous operation and use of the pipeline. In regard to the Rule 30 (b)(6) deposition, if Defendants had properly responded to the interrogatory requests, Plaintiff m ay not have required a Rule 30 (b)(6) deposition to explain the relevance of the docum ents. The m anner in which Defendants supplied the pipeline file created confusion, and that confusion resulted in the Rule 30 (b)(6) deposition. Defendants added to the confusion (and sim ultaneously waived an argum ent that the Rule 30 (b)(6) deposition was unnecessary) by explicitly agreeing to produce a witness who could testify about the relevance of each docum ent in the pipeline file. Therefore, the Court finds that a portion of the tim e expended reviewing the pipeline file and conducting the Rule 30 (b)(6) deposition is attributable to Defendants’ noncom pliance with the discovery rules. Defendants argue that Plaintiff’s fees and expenses are not supported by adequate evidence and were not reasonably necessary. (ECF No. 237 at 18). Defendants challenge Plaintiff’s statem ent of attorney’s fees, pointing out that it contains “an even 20 hours” each for two attorneys to review the docum ents, but does not specify the date(s) that the tim e was incurred, the activities on each date, and the am ount of tim e spent on each date. (Id. at 17). Further, Defendants contend that the 16 hours of travel for the 30 (b)(6) deposition was unnecessary because Plaintiff “knew full well what Defendants [sic] 24 position was before the deposition” and “did not have to conduct the deposition to find out.” (Id.). “When reviewing a fee petition, the Court m ust exclude any hours that are excessive, redundant, or otherwise unnecessary.” Allen v. Monsanto Com pany , 20 0 7 WL 18590 46 at *2 (S.D.W.Va., J une 26, 20 0 7) (citing Hensley y v. Eckerhart, 461 U.S. 424, 434, 10 3 .Ct. 1933, 76 L.Ed.2d 40 (1983)). “Counsel for a prevailing party has a duty to exercise ‘billing judgm ent’ to ‘exclude from a fee request hours that are excessive, redundant or otherwise unnecessary, just as a lawyer in private practice ethically is obligated to exclude such hours from his fee subm ission. . .’” Daly v. Hill, 790 F.2d 10 71, 10 79 (4th Cir. 1986) (quoting Hensley , 461 U.S. at 434)). Defendants produced 4,447 pages of docum ents. Despite Plaintiff’s failure to provide the dates on which the docum ents were reviewed, Plaintiff provided sufficient support for the Court to conclude that the forty hours incurred was reasonable and related to docum ent review. Given the num ber of pages in the pipeline file, Plaintiff’s attorneys spent approxim ately thirty-two seconds reviewing each page, which is an objectively reasonable pace. As previously stated, a percentage of the tim e spent in docum ent review would have been incurred despite Defendants’ ill-advised m anner of production. Nonetheless, given that the docum ents were im properly produced in response to the interrogatories, and the m anner of production heightened the attention given to the docum ents by Plaintiff’s counsel, the undersigned finds that Plaintiff is entitled to reim bursem ent of one-half of the tim e spent in docum ent review. Two attorneys reviewed the docum ents, each spending equal am ounts of tim e, at rates of $ 250 .0 0 and $ 350 .0 0 per hour. Therefore, the Court deducts 10 hours of tim e at each rate for a total of $ 6,0 0 0 . 25 In regard to the deposition, two of Plaintiff’s attorneys attended the Rule 30 (b)(6) deposition, and Plaintiff seeks reim bursem ent for both fees. Plaintiff offers no argum ent to justify why it was necessary for two attorneys to attend the deposition, and the Court does not independently find any evidence that it was necessary given the scope and purpose of the deposition. Plaintiff does not challenge the am ount of tim e spent on the deposition and the Court finds that it represents a reasonable figure given the fact that counsel traveled from Huntington, West Virginia to Pittsburgh, Pennsylvania for the deposition and the deposition itself lasted alm ost two hours. The attorneys had the sam e rate of $ 350 .oo per hour and each expended 8 hours related to the deposition. Therefore, the Court deducts $ 2,80 0 from the attorney’s fees requested by Plaintiff. Aside from Defendants’ argum ent that the Rule 30 (b)(6) deposition was not reasonably necessary, which the Court finds to be without m erit, Defendants’ only challenge to Plaintiff’s claim ed expenses is that Plaintiff’s counsel should have driven to the deposition rather than flying in a private plane and renting a car. Som ewhat surprisingly, in this case, the expenses would have been the sam e, if not m ore, for counsel to drive to the deposition. Plaintiff’s claim ed expenses total $ 1,0 0 3.372 for airplane rental, airplane fuel, and a rental car. However, Plaintiff claim s only 8 hours in attorney’s fees related to the deposition. Round-trip travel by car between Huntington, West Virginia and Pittsburgh, Pennsylvania is approxim ately 9 hours. Therefore, factoring in travel tim e, the nearly two-hour deposition, parking, and at least one m eal, Plaintiff could easily have incurred 11 hours in attorney’s fees related to the deposition. Plaintiff would have also been entitled to m ileage reim bursem ent at the current 2 Plaintiff also requests $ 819.51 for “docum ent copying,” but provides no cogent explanation as to why Plaintiff found it necessary to copy all of the documents for the deposition. Therefore, that expense is denied. 26 standard IRS rate of 54 cents per m ile for approxim ately 556 m iles, totaling $ 30 0 .24. Therefore, given the additional hours of attorney’s fees at a rate of $ 350 .0 0 per hour and the m ileage reim bursem ent, it would likely have been equally as expensive for Plaintiff’s counsel to drive to the deposition. Defendants do not challenge the rem ainder of Plaintiff’s claim ed expenses. Plaintiff subm its a bill totaling $ 90 .44 for lunch. The receipt is not item ized, but based on the cost and the fact that no other m eal receipts are included, it appears that the receipt included lunch for both attorneys. Thus, the Court will split the bill in half and award only half of the claim ed m eal expenses to Plaintiff. Overall, deducting $ 2,80 0 in redundant attorney’s fees and $ 45.22 in lunch expenses related to the 30 (b)(6) deposition, as well as another $ 6,0 0 0 in attorney’s fees related to reviewing the pipeline file from the claim ed total of $ 19,493.32, the Court finds that Plaintiff is entitled to reim bursem ent of attorneys’ fees and costs in the total am ount of Te n Th o u s an d Six H u n d re d Fo rty-Eigh t D o llars an d Te n Ce n ts ( $ 10 ,6 4 8 .10 ) . Defendants are ORD ERED to pay Plaintiff this am ount within th irty ( 3 0 ) d ays of the date of this Order. The Clerk is instructed to provide a copy of this Order to counsel of record. EN TERED : Novem ber 30 , 20 16 27
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