Kalter v. Keyfactor, Inc.

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JACQUELINE KALTER, an individual, Case No.: 21-cv-1707-L-DDL 12 Plaintiff, ORDER GRANTING PLAINTIFF’S 13 v. MOTION TO COMPEL PRODUCTION OF DOCUMENTS 14 KEYFACTOR, INC., ET. AL., FROM DEFENDANT KEYFACTOR, 15 Defendants. INC. 16 [Dkt. No. 52] 17 18 Before the Court is Plaintiff Jacqueline Kalter’s Motion to Compel Production of 19 Documents from Defendant Keyfactor, Inc. in response to Plaintiff’s Requests for 20 Production of Documents, Set One, No. 11 (“RFP 11”). Dkt. No. 52. Plaintiff seeks to 21 compel production of certain financial information from Defendant to support her claims 22 for economic and punitive damages. The Court GRANTS the Motion. 23 / / / 24 / / / 25 / / / 26 / / / 27 / / / 28 / / / 1 I. 2 BACKGROUND 3 On April 7, 2022, Plaintiff served Defendant with Set One of her Requests for 4 Production of Documents. RFP 11 seeks the following: 5 Please produce all Documents reflecting the operating income, financial statements, or net worth of Keyfactor from January 1, 6 2019 through the present. 7 8 Dkt. No. 52-1 at 8. On June 24, 2022, Defendant served its initial response with the 9 following objections to RFP 11: 10 Defendant incorporates by reference each and every one of the objections set forth in the General Objections into this response 11 by way of this reference as though fully set forth herein. 12 Defendant objects to this request on the grounds that it is overbroad in time and scope, burdensome, oppressive and 13 harassing. Defendant objects to this request to the extent it seeks 14 documents that are private, confidential, and proprietary. Defendant further objects to this request on the grounds that it is 15 vague, ambiguous and unintelligible as phrased, in turn, 16 preventing Defendant from responding without speculation. Defendant further objects to this request on the grounds that it is 17 premature and seeks documents that are neither relevant nor 18 reasonably calculated to lead to the discovery of admissible evidence. 19 20 On July 8, 2022, the parties engaged in meet and confer efforts concerning 21 Defendant’s responses to Plaintiff’s discovery requests. See Dkt. No. 52-1 at 2, ¶ 5. On 22 July 18, 2022, Plaintiff’s counsel stated its understanding of the parties’ agreement to 23 narrow the scope of time for which Defendant’s financial records and information were 24 requested: 25 20. RFP 11: Keyfactor will produce documents reflecting the current operating income, financial statements, and net worth of 26 Keyfactor from the most recently completed 2021 fiscal year. 27 28 See id. at 29. Defendant disputes that it agreed to supplement this response. 1 II. 2 LEGAL STANDARD 3 The Federal Rules of Civil Procedure permit a broad scope of discovery: “Parties 4 may obtain discovery regarding any nonprivileged matter that is relevant to any party’s 5 claim or defense and proportional to the needs of the case . . . .” Fed. R. Civ. P. 26(b)(1). 6 “Information within this scope of discovery need not be admissible in evidence to be 7 discoverable.” Id. “Evidence is relevant if: (a) it has any tendency to make a fact more or 8 less probable than it would be without the evidence; and (b) the fact is of consequence in 9 determining the action.” Fed. R. Evid. 401. 10 A motion to compel discovery is appropriate when a party fails to answer an 11 interrogatory or fails to produce documents in response to a request for production. 12 Fed. R. Civ. P. 37(a)(3)(B)(iii)-(iv). An evasive or incomplete answer or response is 13 treated as a failure to answer or respond. Fed. R. Civ. P. 37(a)(4). The party seeking to 14 compel discovery bears the burden of establishing that the requested discovery is relevant 15 to a claim or defense, while the party opposing discovery has the burden to show that the 16 discovery should be prohibited, as well as the burden of clarifying, explaining, and 17 supporting its objections. See FlowRider Surf, Ltd. v. Pacific Surf Designs, Inc., No. 15- 18 cv-1879-BEN-BLM, 2016 WL 6522807, at *2 (S.D. Cal. Nov. 3, 2016). 19 III. 20 DISCUSSION 21 A. The Parties’ Positions 22 Plaintiff argues that the information requested in RFP 11 is “relevant and essential 23 to Plaintiff’s damages claims, including for economic and punitive damages.” Dkt. No. 52 24 at 7. Plaintiff further explains that Defendant’s financial statements and other documents 25 reflecting Defendant’s financial condition will help her prove general economic damages 26 27 28 1 and expected loss of future income as a result of losing her sales position. See Dkt. 52 at 2 8. Defendant does not dispute that financial documents may be relevant to establishing 3 punitive damages but contends that “Keyfactor’s finances – in any way, shape, or form – 4 are not discoverable until Plaintiff makes a prima facie showing of a triable issue regarding 5 punitive damages.” Dkt. No. 53 at 8. 6 B. Plaintiff Is Entitled To Discovery Relevant To Punitive Damages 7 “[W]here a plaintiff states a claim for punitive damages, a defendant’s financial 8 information is relevant.” Toranto v. Jaffurs, No. 16CV1709-JAH (NLS), 2018 WL 9 6062516, at *3 (S.D. Cal. Nov. 20, 2018). The question is whether Plaintiff is entitled to 10 this information now, as she contends, or whether Defendant is correct that discovery 11 relating to punitive damages is appropriate only after a finding of liability. 12 Although the “Ninth Circuit has not defined the parameters of the dissemination of 13 financial information during discovery when punitive damages are alleged . . . [t]he 14 approach employed by the majority of federal courts is that a plaintiff seeking punitive 15 damages is entitled to discover information relating to the defendant’s financial condition 16 in advance of trial without making a prima facie showing that he is entitled to recover such 17 damages.” E.E.O.C. v. Cal. Psychiatric Transitions, 258 F.R.D. 391, 394-95 (E.D. Cal. 18 2009) (citation omitted). See also Echostar Satellite LLC v. Viewtech, Inc., 19 No. 07CV1273-W (AJB), 2009 WL 10672432, at *2 (S.D. Cal. July 11, 2009) (“When a 20 punitive damages claim is asserted, the majority of federal courts permit pretrial discovery 21 of financial information without requiring the Plaintiff to establish a prima facie case on 22 the issue of punitive damages.”). “The countervailing approach is that plaintiff must first 23 allege specific facts sufficient to support a claim for punitive damages.” E.E.O.C., 258 24 25 26 27 1 Because this Order resolves Plaintiff’s entitlement to the requested documents to establish punitive damages, the Court does not address Plaintiff’s contention that the 28 1 F.R.D. at 395 (holding that plaintiff was entitled to punitive damages discovery under 2 either approach). 3 Multiple decisions from this District have followed the majority approach. See, e.g., 4 Echostar Satellite LLC, 2009 WL 10672432, at *2-3; Toranto, 2018 WL 6062516, at *3- 5 4; L.S. v. Oliver, No. 19cv746-JLS-LL, 2019 WL 4849174, at *3 (S.D. Cal. Oct. 1, 2019); 6 Thai v. County of Los Angeles, No. 15cv583-WQH (NLS), 2022 WL 2873214, at *2-3 7 (S.D. Cal. July 21, 2022). As explained by the Echostar Satellite court, “the requirement 8 that Plaintiffs establish a prima facie case applies to the admissibility of evidence about 9 financial status, not its discoverability. To require a prima facie showing of entitlement to 10 punitive damages before the completion of discovery would be to ignore one purpose of 11 discovery, to locate evidence to support a claim before trial.” Echostar Satellite LLC, 2014 12 WL 12639317, at *2. Moreover, “to deny discovery of net worth until Plaintiffs can make 13 a showing of a prima facie case at trial would only lead to delay and confusion while 14 Plaintiffs digest the information.” Id. 15 The cases cited by Defendant are distinguishable. In Brooks v. Motsenbocker 16 Advanced Devs., Inc., No. 07cv773-BTM-NLS, 2008 WL 2446205 (S.D. Cal. June 13, 17 2008), the Court recognized that the plaintiff was “entitled to discovery on Defendants’ 18 financial information.” Id. at *5. However, given the pending motion for summary 19 judgment that would resolve the punitive damages issue, Brooks found that “requiring the 20 extensive production at this point in the litigation appears to be an inefficient use of the 21 parties’ resources” and that “Plaintiffs will suffer no prejudice in postponing the production 22 of Defendants’ financial information until after the ruling on the summary judgment 23 motion, and only if the issue of punitive damages remains relevant.” Id. at *5. Here, in 24 contrast, there is no pending motion for summary judgment, and the efficiency concerns 25 cited by Brooks are not at issue. See L.S., 2019 WL 4849174, at *3 (distinguishing Brooks 26 where no pending motion for summary judgment); Toranto, 2018 WL 6062516, at *4 27 (same). 28 / / / 1 Garcia v. City of Imperial, 270 F.R.D. 566 (S.D. Cal. 2010) involved claims against 2 individual police officers for alleged excessive use of force, which “implicate[d] an 3 additional layer of liability analysis on the question of qualified immunity for police 4 officers. Under those circumstances, the court concluded that the plaintiff was not entitled 5 to discovery regarding the defendant officers’ personal finances absent some showing of 6 entitlement to punitive damages.” Vieste, LLC v. Hill Redwood Dev., No. C-09-04024 JSW 7 DMR, 2011 WL 855831, at *2 (N.D. Cal. Mar. 9, 2011) (distinguishing Garcia and 8 ordering discovery on punitive damages). 9 The Court elects to follow the majority approach and holds that Plaintiff is not 10 required to make a prima facie showing of her entitlement to punitive damages prior to 11 obtaining discovery relevant to punitive damages. Plaintiff seeks “documents reflecting 12 the current operating income, financial statements, and net worth of Keyfactor from the 13 most recently completed 2021 fiscal year.” The Court finds the one-year time limitation 14 to be reasonable given that “[c]ourts have typically held two years worth of financial 15 information to be sufficient.” L.S., 2019 WL 4849174, at *4. Defendant shall produce 16 balance sheets, statements of income, and statements of cash flow from the most recent 17 fiscal year for which they are available. See id. The existing protective order will 18 adequately protect this information from unwarranted disclosure. Id. at *3. 19 C. The Boundaries of Appropriate Advocacy 20 Defendant’s opposition brief cites E.E.O.C. v. Cal. Psychiatric Transitions, 258 21 F.R.D. 391, 394-95 (E.D. Cal. 2009), as holding that “discovery of financial information 22 proper only where plaintiff submitted sufficient evidence showing defendant ‘allegedly 23 acted in reckless disregard of the [plaintiff’s legal] rights.’” Dkt. No. 53 at 5. Defendant’s 24 description of E.E.O.C. is demonstrably incorrect because, contrary to Defendant’s 25 representation, E.E.O.C. did not adopt the “countervailing view.” Rather, E.E.O.C. 26 expressly found that “under either approach, Plaintiff has met its burden.” E.E.O.C., 258 27 F.R.D. at 395. 28 / / / 1 The Court directed Defendant to file supplemental briefing addressing the accuracy 2 of its citation to E.E.O.C. In its supplemental brief, Defendant acknowledges that E.E.O.C. 3 described a split of authority and that Defendant’s parenthetical citation to E.E.O.C. 4 (asserting that E.E.O.C. adopted the minority view advocated by Defendant) “was the 5 result of overzealous advocacy.” Dkt. No. 58 at 2. 6 The Court appreciates counsel’s duty to zealously advocate on their client’s behalf 7 and that, at times, “overzealous advocacy” may result. For example, Defendant’s 8 opposition brief asserts that “[c]ase law is legion” in support of Defendant’s position that 9 punitive damages discovery is appropriate only after a finding of liability. Dkt. No. 53 at 10 10. But Defendant’s brief fails to point out that this is, in fact, the minority position or 11 explain how case law can be “legion” in support of a minority position. That being said, 12 the erroneous use of a stray word, while ill-advised, might be attributable to “overzealous 13 advocacy” and overlooked by the Court. 14 “Overzealous advocacy” is one thing, but it is entirely another to mischaracterize the 15 holding of a case. Counsel has “a duty to verify that its citations to legal authority are 16 accurate,” and “[f]ailure to do so not only constitutes ineffective advocacy, but also 17 implicates counsel’s reputation and duty of candor to the Court.” Somers v. Express Scripts 18 Holdings, No. 115CV01424JMSDKL, 2017 WL 1332145, at *10 (S.D. Ind. Apr. 11, 19 2017). To be clear, the Court agrees with Defendant that “[t]he existence of competing 20 approaches does not foreclose a good-faith contention that one approach, and not the other, 21 should apply.” Dkt. No. 58 at 3. But that presupposes that counsel acknowledge the 22 existence of competing approaches (which Defendant did not) and accurately cite the 23 authority in support of either approach (which Defendant did not). Defense counsel are 24 directed to ensure that all future filings in this matter fulfill their duty of candor to the 25 Court. 26 Defendant’s supplemental brief should have ended with a simple acknowledgement 27 that its citation to E.E.O.C. was inaccurate. But Defendant attempts to turn the brief to its 28 own advantage by accusing Plaintiff of “fail[ing] to address or raise this issue at all” and | |} contending that Plaintiffhas made an “implicit concession and failure to oppose application 2 || of the standard advocated by Defendant.” Dkt. No. 58 at 3. This argument is outside the 3 || scope of what the Court ordered and is utterly meritless as well. Plaintiff's brief correctly 4 the £.E.0.C. Court’s statement of the majority approach. Dkt. No. 52 at 6. Moreover, 5 || the idea that Plaintiff “failed to oppose application of the standard advocated by Defendant” 6 ||is wrong given that the Court precluded the parties from filing reply briefs on the motions 7 ||to compel, meaning Plaintiff was unable to respond to Defendant’s subsequently-filed 8 || opposition to her motion. The fact that Defendant would view a supplemental brief caused 9 || by its own failure to properly cite authority as an opportunity to seek a tactical advantage 10 ||demonstrates poor judgment to say the least. 11 IV. 12 CONCLUSION 13 For the foregoing reasons, the Court GRANTS Plaintiff's Motion to Compel 14 || Production of Documents from Defendant Keyfactor, Inc. Defendant shall produce 15 ||documents responsive to RFP 11 no later than November 21, 2022. 16 IT IS SO ORDERED. 17 ||Dated: November 7, 2022 18 Teal lho Honorable David D. Leshner United States Magistrate Judge 22 23 24 25 26 27 28 °