Opinion
CIV. 04-4170-KES.
November 2, 2005
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO COMPEL DISCOVERY AND DENYING DEFENDANT'S MOTION TO MODIFY PROTECTIVE ORDER
Plaintiff, Pinnacle Pizza Company Inc., alleges claims for breach of contract, unjust enrichment, and a violation of SDCL 37-5A-66(7), the South Dakota Franchise Protection Act, related to the alleged misappropriation of its marketing campaign to sell "Hot n' Ready" pizzas at its Little Caesars restaurants. Pinnacle moves to compel responses to its discovery requests. Defendant, Little Caesar Enterprises, Inc., (LCE) objects to producing the documents requested. The parties have reached an agreement on many of the discovery disputes, but Pinnacle's discovery Request #17, LCE's alleged boilerplate objections, and Pinnacle's request for backup emails are still in dispute.
On April 18, 2005, the parties stipulated to the entry of a protective order, which limited disclosure of confidential information to the attorneys of record and owners, officers, directors, and managing agents of LCE and Pinnacle. LCE now moves to amend the protective order to prevent Pinnacle's owners from viewing its confidential financial information, and it seeks additional security restrictions on the material it discloses.
DISCUSSION
"Rule 26(b) of the Federal Rules of Civil Procedure is widely recognized as a discovery rule which is liberal in scope and interpretation, extending to those matters which are relevant and reasonably calculated to lead to the discovery of admissible evidence." Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992). A party seeking discovery is merely required to make a threshold showing of relevance that is broader than relevance in the context of admissibility. Id. The party resisting production of discovery bears the burden of establishing lack of relevancy or that complying with the request would be unduly burdensome. St. Paul Reinsurance Co., v. Commercial Financial Corp., 198 F.R.D. 508, 511 (N.D. Iowa 2000).
1. Request for Production of Documents #17
Pinnacle moves to compel a response to Request for Production of Documents #17, which seeks "[a]ll documents constituting financial statements for all reporting periods . . . for LCE and any and all LCE affiliates." LCE has given a financial statement to Pinnacle's counsel, with the understanding that counsel not share the information with Pinnacle until this court has ruled on the protective order modification issue. LCE offered Pinnacle's counsel the opportunity to view an audited copy of the financial statement and question LCE executives during the review, so they could check the accuracy of the non-audited version LCE produced. LCE produced a redacted version of the statement for Jim Fisher and Mike Nichols, the owners of Pinnacle Pizza Company. The redacted version includes monthly revenue statements for each LCE zone, but redacts expenses and profits.
LCE opposes further discovery of its financial statements because it is concerned that the information will wind up in the hands of its competitors. It further alleges that the audited financial statements are not relevant because they are identical to the reports disclosed to Pinnacle's counsel, except that they contain footnotes that are unrelated to the lawsuit.
Pinnacle contends that LCE's response to its request for financial statements is insufficient. First, the alleged injury at the heart of the case was inflicted on Jim Fisher and Mike Nichols as owners of Pinnacle. Pinnacle argues that Fisher and Nichols should be permitted to view the financial information that would provide the remedy for their claims, if they are successful. As owners of three Little Caesars franchises, Fisher and Nichols also want to provide their opinions on the value of the allegedly misappropriated business idea.
Second, Pinnacle contends that it needs full disclosure of all relevant financial information, including audited financial statements, because LCE's profit from the allegedly misappropriated ad campaign is the central issue of the case. Thus, Pinnacle needs to know the sources of LCE's profits. Pinnacle argues that the audited financial reports are the most accurate source of financial data, and that the footnotes and other information not found in the previously disclosed reports are relevant because they put the data in the proper context.
Finally, Pinnacle argues that the request is not burdensome to a corporation the size of LCE, and that as franchisees of LCE, it shares LCE's interest in keeping sensitive financial data out of the public eye.
If Pinnacle prevails under any of its causes of action, the financial information would be relevant to the issue of remedies and damages. An audited report is likely to be the most accurate source of financial information relevant to the issue of damages, because it has been verified by a CPA. The full report, including footnotes, may include relevant facts not found in the previously disclosed report. Courts interpret Rule 26 liberally when asked to determine the scope of discoverable material, in part to make sure that parties have the facts relevant to the case. See St. Paul Reinsurance, 198 F.R.D. at 511. Thus, the court finds that Pinnacle has made the threshold showing of relevancy to obtain discovery of the audited financial reports. See Hofer, 981 F.2d at 380.
The burden to produce the requested information is not excessive because LCE already possesses the audited financial statements. Furthermore, this discovery request is not burdensome for a corporation the size of LCE. The court is persuaded by Pinnacle's argument that it shares LCE's interest in maintaining the secrecy of LCE's sensitive financial data. Furthermore, the court notes that the audited reports are subject to the protective order to which both parties agreed. Accordingly, Pinnacle's motion to compel discovery is granted as to Request for Production #17, and LCE is ordered to provide an unredacted copy of its audited financial statement to Pinnacle.
2. Pinnacle's Request for Backup Files of Emails
In Request for Production #3, Pinnacle requested backup files of emails referring to "Hot n' Ready." LCE stated that it hired a technician to search its backup files for responsive documents, and found approximately 6600 documents referring to the campaign. LCE stated that it expected to review the material and provide a copy of the disk to Pinnacle by October 18, 2005. The court has now been informed that LCE provided to Pinnacle a copy of the computer disk, which was made from the LCE "backup tapes" for June 10, 13-37, 21-24, 27-30, July 1, 4-8, 11-15, and 18-21, 2005. Thus, the motion to compel is denied as moot.
3. LCE's Allegedly Boilerplate Objections
LCE objected to Pinnacle's Requests for Production #3, 4, 9, 13, 18-21, 23, 25-27, 29, 31, and 32, on the grounds that they were "burdensome" or "overbroad." LCE contends that it made its objections in good faith, and only objected to those portions of the discovery requests it believed were overbroad or burdensome. The mere statement that a request for production is burdensome or overbroad is not adequate to state a proper objection. St. Paul Reinsurance, 198 F.R.D. at 511. The party resisting discovery must show specifically how each interrogatory or request for production is overly broad, burdensome, or oppressive. Id. at 512.
LCE has withdrawn its objections to #21, 26 and 32. Number 3 is the request for backup emails discussed in Part 2 of this order.
A. Request for Production #4 — Speeches
In Request #4, Pinnacle asked for "All documents constituting, describing or otherwise referring to speeches or presentations concerning `HOT N' READY' or any derivative thereof." Pinnacle informed LCE that this includes notes referring to the speeches. LCE produced nearly 1300 pages of speeches or presentations to its franchisees referring to "Hot n' Ready."
LCE objects to the portion of the request seeking documents "describing or otherwise referring" to speeches or presentations on the grounds that it is unduly burdensome and that the evidentiary value of any of these documents is outweighed by the burden of locating them. LCE contends that it is unduly burdensome because of the "voluminous amount of speeches." The court finds that the request is not unduly burdensome for a company the size of LCE, and that notes for the speeches are relevant to the case because they may provide context for the information contained in the speech. Pinnacle's motion to compel is granted as to Request for Production #4.
B. Request for Production #9 — Advertising
In this request, Pinnacle asked for "All documents constituting, describing or otherwise referring to your advertisements using the phrase `HOT N' READY' or any derivative thereof." LCE produced mailings to its franchisees describing "Hot n' Ready" advertising that franchisees could use, produced samples of ads that were actually used, and provided a videotape and CD with additional ads. LCE objects to the request for "all" documents "constituting, describing or otherwise referring" to ads. Def.'s Final Disc. Report at 5. Because the advertising campaign and the reasons for the advertisements are highly relevant to the litigation and because LCE has not explained why this request is unduly burdensome or irrelevant, Pinnacle's motion to compel is granted as to Request for Production #9. See St. Paul Reinsurance, 198 F.R.D. at 512.
C. Request for Production #13 — LCE Patents Trademarks
Pinnacle requested "All documents constituting, describing or otherwise referring to copies of patents, trademarks or other intellectual registrations you hold other than `Little Caesar.'" LCE produced its trademark applications for "Hot n' Ready". LCE objects to the request to produce its other 116 applications for trademark, copyright, or patent registration. Because profit derived from "Hot n' Ready" is the only issue in this case, the court finds that the request for other intellectual property protections is not relevant. See Hofer, 981 F.2d at 380. Accordingly, Pinnacle's motion to compel discovery is denied as to Request for Production #13.
D. Request for Production #18 — Strategic Plans
This request seeks "All documents constituting, describing, or otherwise referring to strategic plans, projections, or studies concerning `HOT N' READY', or any derivative thereof." LCE does not object to producing the plans, projections, or studies. It objects to the request for documents "describing or otherwise referring to" such documents. "Even if relevant, discovery is not permitted where no need is shown, or compliance would be unduly burdensome, or where harm to the person from whom discovery is sought outweighs the need of the person seeking discovery."Miscellaneous Docket Matter #1 v. Miscellaneous Docket Matter #2, 197 F.3d 922, 925 (8th Cir. 1999) (quoting Micro Motion, Inc. v. Kane Steel Co., 894 F.2d 1318, 1323 (Fed. Cir. 1990)). Pinnacle has not explained why it needs every document referring to plans or studies instead of just the plans or studies. The court agrees that this request is overbroad and unduly burdensome. Accordingly, Pinnacle's motion to compel is denied as to Request for Production #18.
E. Request for Production #19 — Agendas Task Lists
Pinnacle requested "All documents constituting, describing or otherwise referring to agendas, board minutes or task lists concerning or mentioning `HOT N' READY' or any derivative thereof." LCE and Pinnacle agreed as to which committee notes would be produced, but LCE objects to the request for "task lists" on vagueness and overbreadth grounds. LCE contends that it is overbroad because of the size of the company and the many different levels of management giving direction to subordinates. The court agrees that the request for task lists is burdensome and vague and not likely to produce relevant evidence. Accordingly, the motion to compel is denied as to Request for Production #19. See Miscellaneous Docket Matter #1, 197 F.3d at 925.
F. Request for Production #20 #29 — Communications with Franchisees
In Request #20, Pinnacle sought "All documents constituting, describing, or otherwise referring to communications between you or any LCE affiliate and any Little Caesars franchisee concerning `HOT N' READY', or any derivative thereof." In #29, Pinnacle requested "To the extent not covered by the foregoing requests, all documents constituting, describing or otherwise referring to any communications (oral, electronic, or written), correspondence, meetings, or discussions between you and any franchisee, or between any LCE affiliate, and any franchisee in regard to the use of the phrase `HOT N' READY,' or any derivative thereof."
LCE contends that it has already produced at least 3000 pages of documents in this category in response to Pinnacle's requests for speeches, advertising, "Hot n' Ready" manuals, and communications with Pinnacle. LCE objects to these requests because it has hundreds of franchises whose files it would have to search, and that anything related to "Hot n' Ready" would just deal with day-to-day operations. LCE has proposed a compromise in which it would produce responsive documents from franchises that test marketed "Hot n' Ready" before it was adopted by the entire chain.
Although this request is certainly burdensome, it is not unduly burdensome. Pinnacle alleges that LCE stole its "Hot n' Ready" campaign and required all of its franchises to adopt it. Limiting discovery to responsive documents from the early test marketers of the "Hot n' Ready" product is not warranted because the substantive issues and remedies (if any) involve the use of the campaign by all LCE franchises. Accordingly, Pinnacle's motion to compel is granted as to Request for Production #20 and #29.
G. Request #23 #25 — Projected Sales and Marketing Studies
In #23, Pinnacle requested "All documents from any time constituting, describing or otherwise referring to your projected sales due to `Hot n' Ready,' or any derivative thereof." In #25, Pinnacle requested marketing reports. LCE produced the sales projects and marketing studies, but objects to the "describing or otherwise referring to" portion of the requests. The court finds that the "describing or otherwise referring to" portion of the requests is unduly burdensome, and that the value of further discovery on these requests is outweighed by the burden on LCE because LCE has already produced the substantive information that Pinnacle sought in these requests. Accordingly, Pinnacle's Motion to Compel is denied as to Request #23 and #25. See Miscellaneous Docket Matter #1, 195 F.3d at 925.
H. Request #27 — Affirmative Defenses
Pinnacle requested "All documents constituting, describing or otherwise referring to or relevant to your affirmative defense that Pinnacle's claims are barred by the doctrines of waiver, estoppel by laches or estoppel by acquiescence." LCE contends that it began to use "Hot n' Ready" in 2000, and that it did not receive notice of Pinnacle's claim until June of 2003. LCE objects to the portion of the request for documents "relevant" to laches, because it could include every document related to "Hot n' Ready" prepared before Pinnacle filed its complaint in October 2004. LCE points out that the documents produced in response to the other requests, and the documents that accompanied its application to the U.S. Patent and Trademark Office, were relevant to its laches defense. LCE also maintains that it is not planning on introducing any other documents to support its laches defense. LCE, therefore, contends that further discovery on this issue is unnecessary.
In light of LCE's contention that it has complied with this request by responding to Pinnacle's other requests, and its representation to the court that it will not attempt to introduce any other documents related to its affirmative defenses, the court denies Pinnacle's motion to compel as to Request #27.
I. Request #31 — Manuals
Pinnacle requested "All documents constituting, describing, or otherwise referring to any handbooks, manuals, or other similar informative or instructive literature regarding `HOT N' READY', or any derivative thereof, or any plan, program, project or system in any way associated with that name." LCE produced the manuals, but objects to the "describing or otherwise referring to" portion of the requests. The court finds that the "describing or otherwise referring to" portion of the request is unduly burdensome, and that the value of further discovery on these requests is outweighed by the burden on LCE because LCE has already produced the substantive information that Pinnacle sought in this request. Accordingly, Pinnacle's Motion to Compel is denied as to Request #31. See Miscellaneous Docket Matter #1, 195 F.3d at 925.
4. LCE's Motion to Modify the Protective Order
LCE moves to modify the protective order to prevent Pinnacle from viewing its financial information and to place additional security measures on its documents while in Pinnacle's possession. LCE is a privately owned company that goes to great lengths to keep its profit margins and other financial information secret from its competitors because its pricing structure gives it a market advantage over its competition. LCE offered to bring the relevant documents to Pinnacle's attorneys and allow them to review the documents instead of disclosing copies of the documents to Pinnacle. Pinnacle objected to the proposal.
The court may issue protective orders "which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden." Fed.R.Civ.P. 26(c). Rule 26(c) recognizes the need to safeguard trade secrets and other confidential commercial information. Id. In this case, however, a protective order that will prevent disclosure of sensitive information to third parties has already been granted. As franchisees, Pinnacle would also be harmed by disclosure of private financial information to LCE's competitors. Furthermore, Pinnacle's expertise in reviewing and understanding the financial information and in assisting its attorneys in comprehending the financial information is necessary to properly prepare for trial. Thus, the court finds that the original protective order is sufficient to prevent public disclosure of sensitive financial data to LCE's competitors. Accordingly, LCE's motion to modify the protective order is denied.
Accordingly, it is hereby
ORDERED that Pinnacle's motion to compel (Docket 44) responses to Requests for Production is granted as to Request #4, #9, #20, and #29, and denied as to the remaining requests.
IT IS FURTHER ORDERED that LCE's motion to modify the protective order (Docket 54) is denied.