United States District Court, D. Colorado
WESTERN CONVENIENCE STORES, INC. and Plaintiff/Counterclaim Defendant,
SUNCOR ENERGY (U.S.A.) INC., Defendant/Counterclaim Plaintiff, And SUNCOR ENERGY (U.S.A.) Inc., Third-Party Plaintiff,
HOSSEIN TARAGHI, and DEBRA LYNN TARAGHI, Third-Party Defendants.
ORDER REGARDING DILLON COMPANIES, INC.'S MOTION FOR FEES AND COSTS
CRAIG B. SHAFFER, Magistrate Judge.
This matter comes before the court on non-party Dillon Companies, Inc. ("Dillon") Motion for Fees and Costs (doc. #226) filed on April 26, 2013. With the instant motion, Dillon seeks to recover attorney fees and costs incurred in (1) "responding to four subpoenas submitted to Dillon and a former Dillon employee by Plaintiffs, " (2) "responding to Western's motions to re-designate or provide public access to documents containing Dillon's trade secrets that Dillon produced in reliance upon the Supplemental Protective Order, " and (3) "filing motions to restrict public access to documents designated as secret' under the Supplemental Protective Order... that Western filed with the Court with no restrictions on public access in violation of the Supplemental Protective Order." See Dillon's Motion for Fees and Costs, at 1-2. More specifically, Dillon contends that as a non-party, it was served with "discovery requests that were overly burdensome and totally unrelated to this litigation, " id. at 37, and that "required Dillon to disclose its trade secrets to a direct competitor." Id. at 40. Dillon insists that the requested $122, 202.50 in attorney fees and $26, 547.32 in costs reflects its reasonable "steps throughout this matter to minimize fees and expenses." Id. at 41.
Plaintiffs Western Convenience Stores ("WCS") and Western Truck One, LLC ("WTC") (collectively "Western") filed their Response to Dillon's Motion for Fees and Costs (doc. #239) on June 11, 2013, arguing that "Dillon has not met its Rule 45 burden for cost or fee shifting and [that] any costs or fees to which Dillon could conceivably be entitled should be offset by the very substantial expense incurred by Plaintiffs as a result of Dillon's efforts to avoid and delay production." See Plaintiffs' Response, at 2. Indeed, Western maintains that cost-shifting in this case would be inappropriate as Dillon initially
refused to produce any responsive documents, refused to engage in meaningful discussions regarding the scope of the subpoena requests, made contradictory representations regarding availability of responsive documents and [electronically stored information], and delayed any production at all for more than four months until the Court denied its motion to quash.... [E]ven after the Court denied Dillon's motion, Dillon caused additional unnecessary expense and detriment to Plaintiffs by filing and refusing to withdraw additional motions and objections which were entirely, or largely moot...
Id. at 2-3. Western does not challenge Dillon's motion to the extent it seeks "hard' costs incurred in complying with Plaintiffs subpoenas, but fixes that amount at $3, 388.55. Western opposes Dillon's internal costs of $24, 470.56 and all of its requested attorneys fees.
Dillon filed a Reply in Support of Motion (doc. #247) on July 12, 2013. Once again, Dillon insists that it "engaged in a massive six month production of 98, 437 pages of documents for Western's benefit" and that it "incurred several hundred thousand dollars in attorney fees and costs and lost hundred hours of employee time in this matter." Dillon seeks an order "requiring Western, jointly and severally, to pay Dillon $122, 202.50 for its attorney fees and $26, 546.32 for its costs for a total of $148, 749.82."
After reviewing the parties' briefs, which total 357 pages and 40 exhibits, as well hearing transcripts and submissions filed over the course of this litigation, I have gained a greater appreciation for the Supreme Court's observation that a request for fees and costs "should not result in a second major litigation." Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). If counsel for Western and Dillon had expended even a fraction of this same energy in working together from the outset in a cooperative manner, this dispute could have been avoided. That salient point seems to be lost in the parties' barrage of cross-accusations. With this Order, the court will attempt to bring closure to this discovery dispute.
The court presumes the parties' familiarity with the procedural history of the litigation and, therefore, will only summarize those facts necessary to place the instant motion and the court's analysis in context. That said, I apologize to the uninitiated reader for the length of the following factual recitation.
Western Convenience Stores, Inc. is a Colorado corporation, owned by Hossein Taraghi and his wife, that operates 42 convenience stores in Colorado and Nebraska, selling as its principal products gasoline and diesel fuel. As an independent retailer, WCS is a "discounter, " that sells only unbranded fuel. Suncor is in the business of refining and selling petroleum products, including gasoline and diesel fuel, to retailers such as WCS. Suncor also sells certain name brand fuels through its own retail business. Suncor operates two refineries and terminals in Commerce City, Colorado and one terminal in Grand Junction, Colorado. From 2004 to 2011, WCS purchased 70-80% of its fuel from Suncor. Western Truck One is a Colorado limited liability company owned by Hossein Taraghi that transports petroleum products by truck for WCS.
On January 17, 2007, Suncor and WCS entered into a "Master Product Purchase and Sale Agreement" (hereinafter "Master Agreement") under which WCS purchased fuel on a $3 million line of credit extended by Suncor, with payment by electronic funds transfer due ten days after WTO loaded the fuel. On May 20, 2011, Suncor informed WCS that henceforth it would require prepayment for shipments of fuel. Believing this violated the Master Agreement, WCS instructed its bank not to honor draw requests made by Suncor. Thereafter, Suncor discontinued all fuel sales to WCS. Since May 23, 2011, WCS has continued to operate by purchasing fuel from other suppliers.
Plaintiffs initiated this lawsuit on June 20, 2011. On February 1, 2012, Plaintiffs filed an Amended Complaint (doc. #43) asserting six claims for relief: (i) price discrimination in violation of the Robinson-Patman Act, 15 U.S.C. § 13, based on Suncor's alleged sale of fuel on preferential terms to "favored retailers" (such as Dillon Companies, Inc.); (ii) breach of the Master Agreement by, among other things, improperly suspending WCS' purchasing ability, withdrawing credit terms to WCS without cause, and engaging in price discrimination; (iii) breach of contract by revoking WTO's ability to receive fuel from third-party sellers through Suncor's terminal; (iv) tortious interference with contract by wrongfully interfering with the Plaintiffs' "performance of their agreements and relationships with middlemen;" (v) tortious interference with contract, in that Suncor's revocation of terminal access to WTO interfered with a contract between WTO and WCS; and (vi) a violation of C.R.S. § 6-2-108, in that Suncor engaged in unlawful restraint of trade by offering secret rebates or refunds to favored purchasers without offering those same terms to Plaintiffs. Suncor asserted a counterclaim for breach of contract, based upon WCS' alleged failure to pay for fuel received from Suncor. Defendant also filed a Third-Party Complaint (doc. # 37) alleging that Mr. Taraghi and his wife failed to honor their personal guaranty of WCS' contractual obligations to Suncor.
To establish a Robinson-Patman Act claim, Western Convenience Stores, Inc. must make a prima facie showing:
(i) two or more contemporaneous sales by the same seller to different buyers at different prices; (ii) of commodities of like grade and quality; (iii) at least one of the sales was made in interstate commerce; (iv) the discrimination had the requisite effect on competition generally; and (v) the discrimination caused injury to WCS. If WCS carries its burden of demonstrating these elements, Suncor may avail itself of an affirmative defense by showing that its price discrimination "was made in good faith to meet an equally low price of a competitor."
See Western Convenience Stores, Inc., 2013 WL 4775894, at *3 (D. Colo. Sept. 5, 2013). From the outset of this litigation, Western has alleged that Suncor "engaged in price discrimination by charging WCS more for fuel than it charges WCS's competitors, including Dillon Companies, Inc. d/b/a King Soopers Fuel Center." See Complaint (doc. #1), at ¶ 25. See also Amended Complaint, at ¶ 25.
On November 17, 2011, I held a Fed.R.Civ.P. 16 scheduling conference and entered a scheduling order. During that conference, counsel were advised that they could not file an opposed discovery motion without first complying with the "meet and confer" requirement in Fed.R.Civ.P. 26(c)(1) and 37(a)(1), and D.C.COLO.LCivR 7.1A. If the parties were unable to resolve their discovery dispute through the "meet and confer" process, they were required to arrange a telephone conference, on the record, with me. If, at the end of the court-supervised conference, the discovery dispute was still unresolved, the court would direct a party to file a motion and set an expedited briefing schedule to ensure the motion was decided promptly. See Courtroom Minutes/Minute Order (doc. #27).
This court signed the parties' proposed stipulated Protective Order on March 12, 2012. Under the terms of that Protective Order (doc. #49), "[a]ny Party to this action or any non-party may designate any Discovery Material produced by it as Confidential Information' or Highly Confidential Information.'"
For purposes of this Protective Order, "Highly Confidential Information" affords a higher level of protection for Discovery Material and is to be used only for extremely sensitive information, the disclosure of which may cause substantial competitive or business injury to the Designating Party or which would give a competitor or a customer a competitive advantage over other competitors or customers of the Designating Party.... Except as provided in subparagraphs (d) and (e), below, Counsel for a Receiving Party may NOT disclose "Highly Confidential Information" and/or any information derived from such Information to the officers, directors, owners, shareholders, principals or employees (except and not including in-house counsel) of the Receiving Party ("Excluded Persons")...
See Protective Order, at ¶¶ 3 and 9 (emphasis in original). Cf. Layne Christensen Co. v. Purolite Co., 271, F.R.D. 240, 248 (D. Kan. 2010) (while there is "no absolute privilege for trade secrets or similar confidential information, " a court may, for good cause, issue a protective order requiring that trade secrets or confidential commercial information be disclosed only under specified conditions).
Plaintiffs served their First Set of Interrogatories and Requests for Production of Documents on Suncor on February 28, 2012. Western sought, in part, contract documents between Suncor and Dillon, and various categories of data "regarding each load of Fuel sold in the Pertinent Geographic Area and Pertinent Time Frame to WCS" and other fuel purchasers, including Dillon. Plaintiffs also broadly sought production of "all Communications and Documents which memorialize, relate to or reflect discounts to Fuel Purchasers during the Pertinent Time Frame and in the Pertinent Geographic Area, " as well as "all Communications and Documents relating to disputed facts alleged with particularity in the pleadings." See Exhibit C (doc. #52-3) attached to Plaintiffs' Motion to Compel. Although it objected to many of Western's defined terms and discovery requests, Suncor indicated on April 2, 2012, that it would provide, subject to objection, "the requested, specified data it has in its possession... for WCS and [Dillon], " as well as its contract documents with WCS and Dillon.
Thereafter, on May 2, 2012, Plaintiffs moved to compel "Suncor financial and accounting data for the years 2007 through 2011" in order to "determine what Off-Invoice discounts and/or rebates were provided by Suncor to the Favored Retailers, " including Dillon. See Plaintiff's Motion to Compel (doc. #52), at 4. Western's motion, however, did not address its First Request for Production, which sought data regarding each load of fuel sold to Dillon during the Pertinent Time Frame and within the Pertinent Geographic Area, or its Second Request for Production, which asked for all contract documents between Suncor and Dillon. After allowing multiple extensions of time to complete briefing, on June 25, 2012 I granted in part and denied in part Western's motion to compel and directed Suncor to produce responsive documents within two weeks.
A. Western's First Subpoena
Even as they were pursuing discovery from Suncor, Plaintiffs issued a subpoena duces tecum (the "First Subpoena") on or about April 26, 2012, directing the Dillon Companies, Inc. to produce 9 categories of documents specifically relating to the "Pertinent Time Frame" and "Pertinent Geographic Area." See Exhibit A (doc. #57-1) attached to Motion to Quash or Modify Subpoena. Plaintiffs requested inter alia,
1. "all contract documents between [Dillon] and Suncor;"
2. "all communications between [Dillon] and Suncor referring or relating to any Discount;"
5. "such ESI and other Documents as will identify the Net Price for each delivery of Fuel purchased by [Dillon] from Suncor...;"
7. "such ESI as will identity... each customer on each credit or debit card purchase of Fuel from [Dillon] at retail;"
8. "such ESI and other Documents as will disclose the daily pump price at each of Your Retail Sites for each Fuel type (regular or premium gasoline, E85 or diesel); "and
9. "such ESI and other Documents as will disclose the results of all retail Fuel Price surveys done by You or on Your behalf, or on which You rely."
In addition, Request No. 10 required Dillon to disclose "all reports and research studies, examinations, investigations, surveys or analysis... done by [Dillon] or on [Dillon's] behalf relating to the characteristics of consumer demand for Fuel, or competition at the retail level, " but did not limit this particular request to the Pertinent Time Frame or Geographic Area.
The subpoena duces tecum defined the terms "document" and "documents" to include "all manner of exemplification of information in the broadest sense provided for by the Federal Rules of Civil Procedure, including... the originals, the best available copies where originals are not available, and all non-identical copies and drafts whether different because of notes made thereon or otherwise, " as well as "computer records, email records" and "all copies of Documents by whatever means made." Western separately defined "ESI" to include "information created, manipulated, communicated, stored and best utilized in digital form." The subpoena required production by May 18, 2012, but Dillon produced no documents or materials on or before the return date.
On May 18, 2012, Dillon filed a Motion to Quash or Modify Subpoena (doc. #57), refusing to produce any information responsive to the First Subpoena. While conceding that "Dillon and Plaintiffs are competitors in the sale of fuel to consumers" within the Pertinent Geographic Area, Dillon argued that Western sought information that was not relevant or necessary to its antitrust claims against Suncor and that Dillon would suffer competitive harm if required to disclose confidential or proprietary information in response to Request Nos. 7, 8, 9 and 10. Dillon also asserted that Plaintiffs' requests encompassed an "extraordinary quantity of documents" the production of which "would require an extraordinary amount of time from Dillon's employees and cause an extreme disruption to Dillon's operations." See Motion to Quash or Modify Subpoena, at 8 and 9. A supporting affidavit executed by corporate counsel stated in conclusory terms that
To comply with the Subpoena, Dillon would be forced to undertake a search of millions of documents in thousands of different locations.... Because of the enormous quantity of information requested, Dillon is unable to calculate the amount of time compliance would require.
See Exhibit B (doc. #57-2) at ¶¶ 2 and 3, attached to the Motion to Quash or Modify Subpoena.
Plaintiffs responded to Dillon's Motion on June 11, 2012. As a threshold matter, Western argued the motion should be denied based upon Dillon's repeated refusal "to engage in efforts to reach any compromise regarding the subpoena requests, or to produce documents responsive to requests that were not even arguably objectionable." While insisting that the subpoena duces tecum sought relevant information, Plaintiffs also noted that Dillon failed to provide any factual basis for its broad assertion of undue burden. Western further suggested that Dillon's proprietary information could be adequately protected with a "Highly Confidential" designation under the Protective Order.
In its reply brief (doc. #85), Dillon again argued that the existing Protective Order "would allow disclosure of any of [Dillon's] trade-secret information to Plaintiffs' principals" as "Plaintiffs can offer no assurance of attorney-eyes only' protection for Dillon's trade secret information." Dillon denied that it had failed to satisfy its meet-and-confer obligation under D.C.COLO.LCivR 7.1A, given Plaintiffs' counsel's refusal to compromise or withdraw any of the requests set forth in the subpoena. Notably, Dillon's Reply did not elaborate on its claim of undue burden.
On July 16, 2012, this court heard argument on Dillon's motion to quash. In response to the court's concern over the paucity of information in corporate counsel's affidavit, Dillon's attorney conceded that the affiant was "painting in broad strokes" and only intended to provide a "snapshot of the time and effort that will go into producing" responsive documents. See Transcript of Proceedings on July 16, 2012 (doc. #121) at 10 and 11. But see, e.g., International Brotherhood of Teamsters, Airline Division v. Frontier Airlines, Inc., No. 11-cv-02007-MSK-KLM, 2012 WL 1801979, at *7 (D. Colo. May 16, 2012) (noting that the party opposing discovery as unduly burdensome can sustain their burden of persuasion only "by providing sufficient details or a compelling showing of undue burden' to obviate the overwhelming preference for requiring that relevant discovery materials be exchanged"); Ohio Valley Environmental Coalition, Inc. v. United States Army Corps of Engineers, No. 1:11MC35, 2012 WL 112325, at *2 (N.D. W.Va. Jan. 12, 2012) ("the party claiming undue burden as a basis for a motion to quash is held to a high burden of proof which requires the party to demonstrate the actual manner and extent of the burden and the injurious consequences of insisting compliance with the subpoena'"). Counsel further acknowledged that he did not know how his client maintained ESI or whether it had the capability to search for responsive data, notwithstanding Dillon's "undue burden" objection to Request No. 9 which sought responsive information maintained in electronic form. See Transcript of Proceedings on July 16, 2012, at 14. Given those factual deficiencies, I found Dillon had not substantiated its claim of undue burden. Cf. Malibu Media, LLC v. John Does 1-15, No. 12-2077, 2012 WL 3089383, at *5 (E.D. Pa. July 30, 2012) (noting that the party seeking to quash a subpoena bears the heavy burden of demonstrating that the requirements of Rule 45 are satisfied).
Indeed, many of the arguments advanced by Dillon's counsel during the July 16 hearing collapsed upon closer scrutiny. Dillon challenged as unduly burdensome Request No. 4 that sought "such ESI or other Documents as will identify all [pertinent] retail sites, locations and outlets... where You sold Fuel at retail." As I pointed out during the hearing, compliance with this request did not require production of all documents and all ESI pertaining to every relevant retail outlet, but simply the production of a document or discrete ESI that identified each outlet. See Transcript of Proceedings on July 16, 2012, at 16-17. It defied logic to suggest that Dillon could not readily (and inexpensively) identify its own stores. Dillon's counsel also continued to insist that Request No. 8 required his client to divulge trade secrets. I noted that Western simply asked for "the daily pump price" for fuel at pertinent retail outlets; information that would have been immediately available to any consumer driving by or purchasing fuel from those stores. Finally, Dillon's counsel insisted that the existing Protective Order was inadequate to protect his client's trade secrets given the possibility that proprietary information might be revealed to Western's principals or employees. While I refused to presume that Plaintiffs' counsel would condone any violation of the Protective Order, I observed that "nothing prevents Dillon from asking me to impose a more stringent protective order." Id. at 28.
During the July 16th hearing, the court did express concern over the breadth of Western's subpoena. Western's counsel insisted that he had propounded "reasonable requests" that "were narrowed to what is relevant to my case." See Transcript of Proceedings on July 16, 2012, at 41. This court expressed some skepticism. Although Request No. 1 sought "all [pertinent] Contract Documents" between Dillon and Suncor, Western's counsel conceded that the same documents had been the subject of a Rule 34 request directed to Suncor and that he was still in discussions with Suncor's attorney to complete that production. Counsel insisted, however, that his client was not required "to rely on Suncor to find out all the documents." Id. at 36. But compare Soto v. Castlerock Farming and Transport, Inc., 282 F.R.D. 492, 505 (E.D. Cal. 2012) ("In general, there is a preference for parties to obtain discovery from one another before burdening non-parties with discovery requests.") and State Farm Mutual Automobile Insurance Co. v. Accurate Medical, P.C., No. CV 2007-0051(ENV)(MDG), 2007 WL 2993840, at *1(E.D.N.Y. Oct. 10, 2007) ("[N]othing in the Federal Rules of Civil Procedure requires a litigant to rely solely on discovery obtained from an adversary instead of utilizing subpoenas."). Request No. 7 sought credit and debit card numbers for "each customer on each credit or debit card purchase of fuel" at every Dillon outlet in Colorado, even if there was no competing WCS store within a 25 mile radius. Similarly, Request No. 10 was not limited to a particular geographic area or specific period of time, but rather sought "all reports and research, studies, examinations, investigations, surveys or analysis" (together with 17 discrete types of information) "relating to the characteristics of consumer demand for Fuel or competition at the retail level." Read literally, Request No. 10 encompassed all responsive documents generated "since the day Dillon started selling fuel." See Transcript of Proceedings on July 16, 2012 at 45. During his colloquy with the court, Western's counsel eventually conceded that Dillon did not become a Suncor customer until 2009 and, thus, the relevant time period could not extend back to 2007 as the subpoena mandated. Id. at 68.
At the conclusion of the July 16 hearing, the court admonished Western and Dillon to work cooperatively "in a way that allows discovery to go forward efficiently." Id. at 50.
The problem that I've got, ... is [Western has] asked for stuff that I think is too broad. [Dillon has] raised objections that are not factually supported.... Now, my question is:... how can we approach this discovery in a way that moves this process forward, that focuses on what you really need, and get you that stuff in some phased way?... So stop thinking like advocates, stop thinking as adversaries and start helping me to figure out a way that I can move this case forward, because that's ultimately my only objective.
Id. at 50-51 and 67. Plaintiffs' counsel indicated that he would take the court's guidance to heart and "do this without taking any more of your time." Id. at 67.
On July 25, 2012, Western submitted a Status Report Regarding Dillon Companies' Motion to Quash Subpoena (doc. #89). Western reported that Plaintiffs were willing to "substantially narrow" their subpoena requests and had conferred with Dillon's outside counsel on July 18, 2012 "in an effort to reach agreements regarding a mutually acceptable scope of each subpoena request." However, Dillon's outside counsel apparently had "been unable to confer" with client representatives having final decision-making authority. In a Second Status Report (doc. #92) dated August 1, 2012, Western advised that
Despite follow-up requests by [Plaintiffs' counsel], Dillon has not provided any Documents responsive to any of the 10 subpoena requests (as narrowed by Plaintiff's agreement), any commitment to provide any such Documents, or any substantive information as to Dillon's position regarding any of the 10 subpoena requests (again, as narrowed by Plaintiff's agreements).
Plaintiffs asked for a hearing on the earliest available date. I set that hearing for August 17, 2012 at 2:00 pm.
On August 17, 2012 at 1:58 pm, Dillon filed its Status Report re: Plaintiffs' Subpoena (doc. #94). Dillon reiterated its belief that Request Nos. 7, 8, 9 and 10 sought the production of trade secret information that required "extra protection." Dillon argued that this trade secret information "should only be produced under a protective order providing attorneys' eyes only' protection, " and asked the court to enter such an order. Although the court had invited Dillon to submit such an order during the hearing on July 16, Dillon's Status Report did not include a proposed order for the court's or Western's consideration. Rather than moving the discovery process forward, Dillon continued to raise the "protective order" issue as an excuse for its non-compliance.
Although Request No. 8 purportedly encompassed trade secret information, Dillon indicated that it would be "willing to produce this information only if Western is willing to pay for retrieval." Dillon also suggested that such retrieval efforts would require approximately 200 employee hours at a total cost of $10, 000, and the purchase to two servers at an estimated cost of $70, 000. As for Request No. 7, Dillon refused to produce responsive documents, but suggested that the burden of complying the subpoena would be significant.
While Dillon is unable to estimate the time and expense involved in retrieving data for millions of transactions for hundreds of thousands of consumers, it has requested that its third-party vendor provide such an estimate.
Dillon said that even if Request No. 9 did not involve trade secrets, it "would not be willing to produce [responsive information] because of the time and expense involved." Dillon reported that it had "not conducted" any research responsive to Request No. 10.
Dillon's Status Report indicated that it was producing contract documents responsive to Request No. 1. Dillon also conceded that it had responsive documents that had not been included in Suncor's production of contract documents, thus suggesting that Plaintiffs' counsels' decision to err on the side of caution had been well-founded. Dillon also said that it was producing lists of its Colorado and Nebraska retail fuel outlets in response to Request No. 4, and reported that it had no materials responsive to Request No. 6. As for Request Nos. 2 and 3, Dillon stated that it would produce responsive information only "if Western agrees to pay all expenses related to the search, " including time expended by Dillon employees or expenses incurred by a vendor hired to undertake the search. Dillon claimed that it would be "extremely difficult to locate documents responsive to Request No. 5.
Invoices - [Dillon] estimated that it will take 400 hours to locate what invoices can be found. At $50 per hour this would cost the requesting party $20, 000. The search would take many months, possible over a year to search the records within [Dillon's] possession. There is no guarantee as to what [Dillon] will be able to find. Bills of Lading - [Dillon] estimates that it will take 800 hours to locate what Bills of Lading can be found. At $50 per hour this would cost the requesting party $40, 000. The search would take many months, possible over a year to search the records within [Dillon's] possession. There is no guarantee as to what [Dillon] will be able to find.
Dillon's Status Report did not include an affidavit or any other documentation to support these time and cost estimates. Dillon made its first production of documents at the August 17, 2012 hearing, limited to 25 pages of contract documents between Suncor and Dillon and a list of Dillon stores located in the Pertinent ...