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Ello v. Brinton

United States District Court, N.D. Indiana, Hammond Division

January 5, 2016

ANTHONY E. ELLO and EVELYN ELLO, Counter-Defendants.



         This matter is before the Court on a Motion to Quash Time-Barred Subpoenas and for a Protective Order [DE 59], filed by Defendants Gary Brinton and Seven Peaks Marketing Chicago, LLC, (SPMC) on July 14, 2016, and on a Motion for Sanctions and to Re-Open Discovery for a Limited Purpose [DE 61], filed by Plaintiffs Anthony E. Ello and Evelyn Ello on July 15, 2016.

         I. Background

         This case arises out of a dispute concerning a lease between Plaintiffs and Defendants for a bowling alley in Indiana. Plaintiffs allege that Defendants improperly terminated the lease in June 2014 and seek damages from both SPMC and Defendant Brinton. Even though Defendant Brinton was not personally a party to the lease, Plaintiffs allege that he is nonetheless personally liable for Plaintiffs' claims against SPMC because he failed to observe corporate formalities in operating SPMC.

         On June 30, 2016-one day before the close of discovery-Plaintiffs issued the following four subpoenas:

1. A subpoena to King & McCleary, LLC, Defendants' accountants in Utah, requesting all documents relating to Defendant Brinton, including but not limited to tax returns and financial statements for the years 2012-2015; all documents relating to several non-party entities Plaintiffs allege Defendant Brinton owns; and all documents relating to SPMC, including tax returns, financial documents, company filings, and loan applications for the years 2012-2015.
2. A subpoena to Bryan Ottley, an employee of Chase Bank in Utah, requesting all documents relating to Defendant Brinton for the years 2012-2015; all documents relating to the several non-party entities Plaintiffs allege Defendant Brinton owns; and all documents relating to SPMC from 2012 to the present.
3. A subpoena to the Secretary of State, Division of Corporation and Commercial Code requesting all documents relating to Defendant Brinton, including tax returns and financial statements, for the years 2013-2014; all documents relating to the non-party entities Plaintiffs allege Defendant Brinton owns; and all documents relating to SPMC, including all filings for the years 2013-2014.
4. A subpoena to Horizon Bank, a bank in Indiana, requesting all documents relating to Defendant Brinton, including personal financial statements, loan applications, and “supporting documentation”; and all documents relating to SPMC, including but not limited to financial statements, loan applications, and “supporting documentation.”

See DE 61-13.

         II. Local Rule Compliance

         In briefing and filing their motions, both sides frequently violated the Northern District of Indiana's Local Rules and the guidelines established in the CM/ECF User Manual. For example, Local Rule 7-1(e) provides, “Supporting and response briefs . . . ordinarily must not exceed 25 pages, ” yet Defendants' response to Plaintiffs' Motion for Sanctions is almost 40 pages. Defendants also included a “motion” for leave to exceed the page limit as an attachment to the response, see DE 81-4, in violation of Rule 7-1's command that motions be filed separately.

         Similarly, Plaintiffs filed a “Motion for Sanctions and to Re-Open Discovery for a Limited Purpose” containing two separate requests. See N.D. Ind. L.R. 7-1. Plaintiffs' counsel also failed to file a certification that he met and conferred with Defendants' counsel in an attempt to resolve the discovery disputes before filing the discovery motion. See N.D. Ind. L.R. 37-1 (“A party filing any discovery motion must file a separate certificate that the party has conferred in good faith . . . with other affected parties in an effort to resolve the matter.”) (emphasis added).

         However, in the interest of justice, the Court will consider the merits of the parties' arguments notwithstanding the parties' failure to comply with the Local Rules. The Court CAUTIONS the parties that future filings that do not comply with the Local Rules and the CM/ECF User Manual may be denied on that ground.

         III. Defendants' Motion to Quash & Plaintiffs' Motion to Re-Open Discovery

         In their Motion to Quash, Defendants ask the Court to quash the four subpoenas on several grounds, including that the subpoenas are untimely. Plaintiffs provide some argument against quashing the subpoenas, but they also filed a Motion to Re-Open Discovery in an attempt to cure the subpoenas' timeliness problem.

         A. Discovery Deadline

         Defendants argue that the subpoenas Plaintiffs issued on June 30 were untimely because they were served only one day before the July 1, 2016, discovery deadline, with a response date of July 15, 2016. As a result, Defendants say, the Court should quash the subpoenas because they improperly required compliance two weeks after the discovery deadline. See Gordon v. Northeastern REMC, No. 1:02-CV-171, 2003 WL 21919179, at *2 (N.D. Ind. June 2, 2003) (“Discovery requests not filed in sufficient time to allow the opponent to respond within the discovery period are untimely and the opponent is under no duty to comply.”); Dreyer v. GACS, Inc., 204 F.R.D. 120, 123 (N.D. Ind. 2001) (“In short, Rule 45 Subpoenas . . . are subject to the same time constraints that apply to all of the other methods of formal discovery.”).

         Plaintiffs do not contend that the subpoenas were timely. Instead they argue that “the subpoenas were issued [on June 30, 2016, ] due to the delay tactics of Defendants and their improper and untimely supplementation of the Rule 26 disclosures.” DE 64 at 2. Regarding the alleged “delay tactics, ” Plaintiffs argue that their attorney attempted to schedule various depositions as early as April 2016, but due to multiple scheduling conflicts with Defendants' schedule the depositions were not conducted until the very last week of discovery. Information gleaned from these depositions, Plaintiffs say, called for more discovery.

         Plaintiffs also argue that at “the eleventh hour in the discovery process, ” Defendants supplemented their initial disclosures. A review of the supplemental disclosures, dated two days before the close of discovery, shows that Defendants disclosed “documents regarding Seven Peaks Marketing Chicago, L.C.'s legal status, formation, membership, bank accounts, inner workings, payroll companies, tax returns and other financial data.” DE 61-8. These documents were not listed in Defendants' original January 2016 disclosures. See DE 61-10.

         Put simply, Plaintiffs ask for more time to complete discovery. Under Federal Rule of Civil Procedure 6, “[w]hen an act may or must be done within a specified time, the court may, for good cause, extend the time . . . before the original time or its extension expires . . . or on motion made after the time has expired if the party failed to act because of excusable neglect.” Fed.R.Civ.P. 6(b)(1). To determine whether a party's neglect in allowing the discovery deadline to expire was excusable, the Court must take “into consideration all relevant circumstances including the danger of prejudice to the non-moving party, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.” Marquez v. Mineta, 424 F.3d 539, 541 (7th Cir. 2005) (quotations and citations omitted).

         Plaintiffs' Motion to Re-Open Discovery was filed on July 15, 2016, two weeks after discovery closed. So the Court must determine whether Plaintiffs failed to act within the discovery period because of “excusable neglect.” Fed.R.Civ.P. 6(b)(1). Plaintiffs blame Defendants' late disclosures and deposition scheduling as the reasons for Plaintiffs' delay in issuing the subpoenas and requesting more time for discovery.

         The documents Plaintiffs seek through the subpoenas, however, are documents Plaintiffs should have known they needed the day they filed their original complaint in August 2014. Plaintiffs' Complaint [DE 1] and their Amended Complaint [DE 24] both allege that Defendant Brinton ignored corporate formalities in running SPMC, meaning he might be held personally liable for Plaintiffs' alleged damages. Indeed, Plaintiffs acknowledge that the documents they seek through the subpoenas are “related to Defendants' operation of their corporate entities and allegedly commingled assets.” DE 65 at 3. Why Plaintiffs did not seek documents concerning Defendant Brinton's relationship with SPMC long before the discovery deadline is unclear. Defendants assert, and Plaintiffs do not disagree, that Plaintiffs did not seek any discovery before the depositions in the final week of June.

         On the other hand, Defendants did supplement their initial disclosures the very week that discovery was set to close. The supplemental disclosures included information about documents relevant to Plaintiffs' alter ego theory of liability, namely the documents concerning SPMC's operations and finances. Furthermore, an email exchange between Defendants' counsel and Plaintiffs' counsel shows that Plaintiff tried to schedule Defendant Brinton's deposition as early as April, but Defendants' counsel asked that the deposition be rescheduled and further delayed in responding to Plaintiffs' counsel's requests for possible dates. See DE 61-14. Had the deposition been conducted sooner, Plaintiff might have had an opportunity to follow up with appropriate discovery requests before the discovery period expired.

         When Defendant Brinton's deposition was finally taken on June 27, 2016, he repeatedly refused to testify about SPMC's inner workings, arguing that he was not noticed as a designated witness under 30(b)(6) and was testifying as an individual rather than as the limited liability company's representative. See generally DE 61-2. Indeed, the notice for Defendant Brinton's deposition did not “describe with reasonable particularity” that Defendant Brinton would be questioned about SPMC's inner workings and finances as required by Rule 30(b)(6). See DE 81-1.

         However, counsel for Defendants acknowledges that she received a 30(b)(6) notice from Plaintiffs' on May 11, 2016. DE 81 at 23. The notice scheduled the deposition of the “person most knowledge of the formation, organization, and corporate structure of Seven Peak (sic) Marketing, LLC” for “Monday, June 21, 2016 at 1:00 p.m.” DE 81-1. Plaintiffs sent the 30(b)(6) notice along with deposition notices for Scott Brinton and Matthew Phair-two other witnesses in this case. DE 81 at 23. The parties eventually rescheduled the depositions for the last week of June, causing Plaintiffs' counsel re-noticed the depositions. See DE 61-14. But Plaintiffs' counsel did not re-notice a deposition for a SPMC representative, instead noticing Defendant Brinton only in his individual capacity. DE 81-1.

         The parties disagree on why Defendant Brinton was not re-noticed to testify as a representative of SPMC. Plaintiffs' counsel asserts that Defendants' counsel told him Defendant Brinton would testify in both his individual and representative capacity at the June 27 deposition. Plaintiffs' counsel went so far as to ask Defendant Brinton if he had ever seen the 30(b)(6) notice for the previously scheduled June 21 deposition. DE 61-2. Defendants' counsel says that she never told Plaintiffs' counsel that Defendant Brinton would be available as both as an individual and a company representative. DE 81 at 23.

         In any case, Defendant Brinton did testify generally about SPMC, but he declined to go into any meaningful detail, in effect denying Plaintiffs an opportunity to analyze the merits of their alter ego theory of liability. And Defendants did not seek to stop the deposition “to preserve a privilege, to enforce a limitation ordered by the court, or to present a motion” to terminate or limit the deposition under Rule 30(d)(3). Fed.R.Civ.P. 30(c)(2). To make matters worse, discovery closed only three days after Defendant Brinton's deposition, leaving insufficient time for Plaintiffs to re-notice him as a 30(b)(6) witness.

         Although Plaintiffs could have acted earlier in seeking information about SPMC's business information, Defendants' delay in scheduling key depositions and in disclosing important information justifies extending the discovery deadline. Plaintiffs tried to depose Defendant Brinton earlier, but Defendants asked that the depositions be delayed. And the confusion about whether Defendant Brinton would or would not testify about SPMC's inner workings, coupled with how close to the deadline his deposition was scheduled, prevented Plaintiffs from discovering information important to their alter ego theory of liability.

         Furthermore, Plaintiffs had no control over when Defendants decided to supplement their disclosures. This is the strongest justification for extending discovery. Allowing discovery to close despite Defendants' late disclosure would deny Plaintiffs the opportunity to fully determine how Defendants' disclosure affects their case.

         Accordingly, the Court finds that Plaintiffs' neglect was excusable and finds good cause to extend the discovery deadline. Although Plaintiff asked the Court to reopen discovery for a “limited purpose” without a definite end date, the Court declines to leave the parties without a definitive close of discovery. Accordingly, the Court extends the discovery deadline to March 31, 2017. See Fed. R. Civ. P. 6(b)(1).

         As discussed below, whether the subpoenas are invalid as a matter of law is a question for another court. Even if the subpoenas are invalid, the parties may continue to engage in other forms of discovery consistent with the limitations set forth in the parties' 26(f) Report [DE 47] and this Court's previous discovery orders. To conserve judicial resources, Plaintiffs may wish to voluntarily withdraw their subpoenas to pursue other more efficient means of obtaining the information sought in the subpoenas.

         B. Notice

         Defendants also argue that the subpoenas did not comply with the notice requirements of Federal Rule of Civil Procedure 45 in that Defendants did not receive notice of the subpoenas until July 5, 2016-five days after the subpoenas were served on the non-parties. Plaintiffs do not respond Defendants' notice arguments.

         Rule 45(a)(4) provides, “If the subpoena commands the production of documents, electronically stored information, or tangible things . . . then before it is served on the person to whom it is directed, a notice and a copy of the subpoena must be served on each party.” The purpose of the notice requirement is to “enabl[e] other parties to object or to serve a subpoena for additional materials.” Fed.R.Civ.P. 45, Advisory Committee Notes.

         Counsel for Defendants represents that she could not locate binding authority concerning what the Court should do in light of Plaintiff's failure to provide proper notice under Rule 45(a)(4). The Court's own review of relevant case law reveals differing outcomes. Compare Duke v. Performance Food Grp., Inc., 594 Fed.Appx. 829, 832 (5th Cir. 2014) (“The district court did not abuse its discretion by admitting documents obtained by serving a subpoena without notice to the opposing party.”), and Fujikara Ltd. v. Finisar Corp., No. 5:13-CV-03345, 2015 U.S. Dist. LEXIS 135871, at *12-13 (N.D. Cal. May 14, 2015) (declining to quash subpoenas for failure to give prior notice because there was no prejudice from the ...

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