United States District Court, D. Colorado
ZACH GEIGER, ROBERT ABELARDO, ADAM GOLDSTEIN, and RYAN KING, Plaintiffs,
Z-ULTIMATE SELF DEFENSE STUDIOS LLC, PAUL TAYLOR, KRIS ESZLINGER, FRANK LEY, HANS PROSCH, MASTERS UNITED 11, LLC, KATA 7, LLC, Z-ULTIMATE MARTIAL ARTS SUPPLIES LLC, Z-ULTIMATE SPECIALIZED ACCOUNTING LLC, Z-ULTIMATE UNIVERSITY OF MARTIAL ARTS PROFESSIONALS LLC, Z-ULTIMATE SULF DEFENSE STUDIOS, MASTERS UNITED I LLC, MASTERS UNITED 12 LLC, MASTERS UNITED III LLC, MASTERS UNITED V LLC, Z-ULTIMATE EVENTS LLC, A L MARTIAL ARTS, INC., WLC MANAGEMENT, INC., MASTERS UNITED VI LLC, MASTERS UNITED 8 LLC, MASTERS UNITED 15 LLC, UNITED PARTNERS-BROOMFIELD LLC, UNITED PARTNERS-CENTENNIAL LLC, UNITED PARTNERS-CHICAGO #4 LLC, UNITED PARTNERS-COLORADO SPRINGS 1 LLC, UNITED PARTNERS-DENVER LLC, UNITED PARTNERS-DENVER SOUTH LLC, UNITED PARTNERS-FORT COLLINS LLC, UNITED PARTNERS-GLENVIEW LLC, UNITED PARTNERS-HIGHLANDS RANCH LLC, UNITED PARTNERS-HIGHLANDS RANCH 2 LLC, UNITED PARTNERS-KANSAS CITY #3 LLC, UNITED PARTNERS-KANSAS CITY 1 LLC, UNITED PARTNERS-KANSAS CITY #4 LLC, UNITED PARTNERS-KEN CARYLE LLC, UNITED PARTNERS-LAFAYETTE LLC, UNITED PARTNERS-LAKEWOOD LLC, UNITED PARTNERS-LEAWOOD LLC, UNITED PARTNERS-LITTLETON LLC, UNITED PARTNERS-LONGMONT LLC, UNITED PARTNERS-OLATHE LLC, UNITED PARTNERS-OVERLAND PARK NORTH LLC, UNITED PARTNERS-OVERLAND PARK SOUTH LLC, UNITED PARTNERS-PARKER LLC, UNITED PARTNERS-SKOKIE LLC, UNITED PARTNERS-SMOKEY HILL LLC, UNITED PARTNERS-THORNTON LLC, UNITED PARTNERS-WEST ARVADA LLC, UNITED PARTNERS-WESTMINSTER LLC, UNITED PARTNERS-WHEAT RIDGE LLC, Z-ULTIMATE COLORADO SPRINGS, Z-ULTIMATE DENVER, Z-ULTIMATE HIGHLANDS RANCH EAST, Z-ULTIMATE PARKER, Z-ULTIMATE SMOKEY HILLS, and WILLIAM CLARK, Defendants.
ORDER REGARDING PLAINTIFFS' RENEWED MOTION TO COMPEL DISCOVERY, SECOND MOTION TO COMPEL DISCOVERY, AND MOTION FOR SANCTIONS AND CONTEMPT OF COURT
NINA Y. WANG, Magistrate Judge.
This matter is before the court on Plaintiffs Zach Geiger, Robert Abelardo, Adam Goldstein, and Ryan King's Renewed Motion to Compel Discovery, Second Motion to Compel Discovery, and Motion for Sanctions and Contempt of Court (the "Motion"). [#68, filed September 26, 2014]. The Motion was referred to this Magistrate Judge pursuant to the Order Referring Case dated January 29, 2014 [#4] and memorandum dated September 29, 2014 [#69]. This court has carefully considered the Motion and related briefing, the entire case file, the comments offered by the Parties during the March 2, 2015 Motion Hearing, as well as applicable case law. For the following reasons, the Motion is GRANTED in part and DENIED in part.
BACKGROUND AND PROCEDURAL HISTORY
Plaintiffs, martial arts instructors formerly associated with Defendants, filed their Complaint on January 28, 2014 on behalf of themselves and other allegedly similarly situated individuals seeking back pay and other damages allegedly owed under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq. [#1]. On February 5, 2014, Plaintiffs amended their Complaint to raise six claims for relief: (1) a declaration that the plaintiffs are "classified employees under state and federal law"; (2) for violation of the FLSA by failing to pay wages at least equal to the minimum wage plus overtime compensation; (3) for fraud in classifying the plaintiffs as independent contractors rather than employees; (4) for negligent misrepresentation based on the independent contractor classification; (5) for civil conspiracy to improperly classify the plaintiffs as independent contractors; and (6) to pierce the corporate veil based on alter ego and undercapitalization. [#22].
An explanation of Defendants' corporate structure is helpful for supplying context to the pending motion. In September 2010, a number of the individual Defendants severed their relationship with United Studios of Self Defense, Inc. and formed Z-Ultimate Self Defense Studios, LLC ("Z-Ultimate"), which is the licensor of the Z-Ultimate name. Z-Ultimate studios are independently owned and operated and a significant number of them were formed as United Partner limited liability companies, typically identified by location of the studio. [#49-1 at ¶ 7]. Each United Partner entity is responsible for paying the instructors it employs. [ Id. at ¶ 19]. Defendants Eszlinger, Prosch, and Clark hold ownership interests in several studios through the use of limited liability companies organized as "Masters United [number] LLC, " which are organized by state. [#49 at 2]. Defendants represent that Z-Ultimate is not a parent company to the Masters United entities or the United Partner entities, does not employ martial arts instructors or keep records, and does not recruit, hire, schedule for work, supervise, fire, or pay instructors. [ Id. ]
Defendants filed an Answer to the Amended Complaint on February 28, 2014. [#25]. Plaintiffs filed an Unopposed Motion to Dismiss Masters United X, Inc. on June 24, 2014, which District Judge Blackburn granted the same day. [#31, #32]. On July 8, 2014, Magistrate Judge Boland held a Scheduling Conference at which he ordered the Parties to complete discovery by January 9, 2015 and file dispositive motions by February 9, 2015. [#36, #37].
On July 29, 2014, Plaintiffs filed their "First Motion to Compel Discovery" taking issue with Defendants' responses to Interrogatories 1-4 and Requests for Production 1-10. [#43]. On August 5, 2014, Plaintiffs filed a "First Motion for Joinder of Additional Z-Ultimate Defendants, " seeking leave to join an additional 83 entities as Z-Ultimate Enterprise Defendants. [#46]. On August 20, 2014, Plaintiffs filed a Motion for Temporary Restraining Order and Order for Spoliation Sanctions, seeking entry of default or, alternatively, an adverse jury instruction on the basis that certain Z-Ultimate Profit and Loss Statements were altered prior to being produced during the discovery process. [#52] Defendants filed a Response to that Motion the same day. [#54]. Judge Blackburn denied Plaintiffs' request for a temporary restraining order [#57] and referred the issue of spoliation to Judge Boland. [#59].
On August 21, 2014, Judge Boland held a Motion Hearing on Plaintiffs' Motion to Compel and Motion for Joinder. He granted Plaintiffs' Motion to Compel to require (1) "full answers to Interrogatories 3 and 4, " and (2) "production of all documents responsive to Requests for Production 1, 2, 3, 4, 5, 6, 7, 8, and 9, " to be produced on or before September 5, 2014; and he awarded Plaintiffs their reasonable expenses incurred in submitting the Motion to Compel. [#56]. He also granted Plaintiff's Motion to Join, thereby increasing the total number of named Defendants in this action to 116. [ Id. ] Plaintiffs filed a Motion for Conditional Collective Action Certification and Notice Approval on August 27, 2014. [#62]. Judge Blackburn granted that Motion for Conditional Collective Action Certification on March 10, 2015 [#110], and on March 30, 2015, Defendants filed a List of Chief Instructors from March 20, 2011 to the present. [#113].
On September 26, 2014, Plaintiffs filed the pending Motion. [#68]. The Original Defendants filed a Response on October 17, 2014 ("Response") [#83], and Plaintiffs filed their Reply on October 31, 2014. [#84].
On October 3, 2014, Judge Boland held an evidentiary hearing on Plaintiffs' Motion for Spoliation Sanctions, took the motion under advisement, and instructed the Parties to submit written closing arguments. On November 12, 2014, Judge Boland granted the Motion, finding that the "evidence clearly establishes" that the Profit and Loss Statements were altered in bad faith. The court found, however, that the resulting prejudice to Plaintiff was slight because either the information was available elsewhere or the probative value of the evidence was not great, and therefore sanctioned Defendants in the form of payment for Plaintiffs' reasonable expenses incurred in connection with the despoiled discovery. [#85].
On December 10, 2014, Judge Boland held a Status Conference at which he vacated the deadlines for completing discovery, filing dispositive motions, and disclosing expert witnesses, ordered the Parties to file a status report within ten days of a ruling by Judge Blackburn on Plaintiffs' Motion for Conditional Collective Action Certification, and ordered the Parties to file a motion by December 18, 2014 to vacate and/or reset the Trial Preparation Conference and Final Pretrial Conference and trial. [#96]. The Parties filed the Motion to Vacate on December 18 [#101], which is currently pending.
On February 9, 2015, this action was reassigned to the undersigned Magistrate Judge. [#107]. On March 2, 2015, I held a hearing on the pending Motion that extended approximately three hours. I took the Motion under advisement and ordered Mr. Francis, defense counsel, to provide a Notice of Representation identifying all named Parties whom he represents. [#108]. On March 6, 2015, counsel submitted that Notice [#109], which indicates that of the 122 named Defendants, counsel of record represents 99.
In their Motion, Plaintiffs' arguments center around three categories of discovery requests: (1) the discovery requests that were subject to Judge Boland's August 21 Order [#56]; (2) discovery requests that were due just prior to the filing of the instant Motion; and (3) discovery requests and subpoenas that were due just after the filing of the instant Motion ("September 28 Discovery"). At the March 2 hearing,  the court entertained argument on all three categories of documents, because Defendants responded to arguments related to the third category [#83, at 13-14] and Plaintiffs then replied [#84].
Having now set out the framework of the instant discovery disputes, the court turns to their disposition.
A. Unrepresented Defendants
As an initial matter, the docket for this action indicates that the corporate Defendants joined pursuant to the August 21 Order have not been served and no attorney has entered an appearance on their behalf. A corporation cannot appear pro se. See Rowland v. Cal. Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194, 201-03 (1993). See also Harrison v. Wahatoyas, L.L.C., 253 F.3d 552, 556 (10th Cir. 2001) (explaining that a corporation may only "appear in court through an attorney and not through a non-attorney corporate officer appearing pro se."). To the extent Mr. Francis and Mr. Glenn represent Defendants for which they have not entered an appearance, they are directed to do so. As for the Unrepresented Defendants, there is no indication that Plaintiffs have properly served any of these Unrepresented Defendants even after Defendants' Notice of Representation filed on March 6, 2015. [#109]. Plaintiffs are instructed to effect proper service no later than April 15, 2015, so that such Unrepresented Defendants may enter this action and respond to Plaintiffs' Amended Complaint. To the extent Plaintiffs fail to file the appropriate returns of service with the Clerk's Office by that date, Plaintiffs are ordered to show cause why such Unrepresented Defendants should not be dismissed for lack of proper service under Rule 4(m) of the Federal Rules of Civil Procedure.
B. Outstanding Discovery
As the Parties in this matter are well aware, Federal Rule of Civil Procedure 26(b)(1) authorizes discovery of "any nonprivileged matter that is relevant to any party's claim or defense-including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know of any discoverable matter." This Rule permits "party-controlled" discovery "regarding any non-privileged matter that is relevant to the claim or defense of any party" and "court-permitted" discovery upon a showing of good cause of "any matter relevant to the subject matter involved in the action." In re Cooper Tire & Rubber Co., 568 F.3d 1180, 1188 (10th Cir. 2009). Relevancy is broadly construed, and a request for discovery should be considered if there is "any possibility" that the information sought may be relevant to the claim or defense of any party. See, e.g., Sheldon v. Vermonty, 204 F.R.D. 679, 689-90 (D. Kan. 2001).
However, all discovery is subject to the proportionality limitations imposed by Rule 26(b)(2)(C). See Fed.R.Civ.P. 26(b)(1). Therefore, while the court may order discovery of any matter relevant to the issues involved in the action, it " must limit the frequency or extent of discovery" under certain circumstances. Fed.R.Civ.P. 26(b)(2)(C)(i)-(iii) (emphasis added). It is incumbent upon the court to consider how much discovery is reasonable in a given case in light of the claims and defenses asserted, the significance of the discovery sought to the propounding party, and the costs and burden to the producing party. See id. The Federal Rules of Civil Procedure also permit a court to restrict or preclude discovery when justice requires in order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. See Fed.R.Civ.P. 26(c).
"When the discovery sought appears relevant, the party resisting the discovery has the burden to establish the lack of relevancy by demonstrating that the requested discovery (1) does not come within the scope of relevance as defined under Fed.R.Civ.P. 26(b)(1), or (2) is of such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure." Simpson v. Univ. of Colo., 220 F.R.D. 354, 359 (D. Colo. 2004) (citations omitted). In moving to compel further answers, the burden is on the proponent of additional discovery to prove that the opposing party's answers are incomplete. Bayview Loan Servicing, LLC v. Boland, 259 F.R.D. 516, 518 (D. Colo. 2009) (citing Daiflon, Inc. v. Allied Chemical Corp., 534 F.2d 221 (10th Cir. 1976) ("appellees had the burden of proving the answer to their interrogatory was indeed incomplete"). The Advisory Committee Note to the 2000 Amendment to Rule 26(b)(1) directs courts to involve themselves in discovery disputes to determine whether discovery is relevant to the parties' claims or defenses, and if not, to determine whether "good cause exists for authorizing it so long as it is relevant to the subject matter of the action."
1. Renewed Motion to Compel
Judge Boland ordered (1) full answers to Interrogatories 3 and 4, and (2) production of all documents responsive to Requests for Production 1, 2, 3, 4, 5, 6, 7, 8, and 9. [#56, the "August 21, 2014 Order"]. Defendants were required to produce these answers and documents on or before September 5, 2014. Id.
Plaintiffs assert that following the August 21, 2014 Order, they discovered new information demonstrating that Defendants' response to Interrogatory 1 is incomplete, and ask the court to revisit their Motion to Compel as to this Interrogatory. Plaintiffs further assert that Defendants have failed to comply with the August 21, 2014 Order as to Interrogatories 3 and 4, and Requests for Production 2, 3, 4, 5, 6, 7, and 9. Defendants argue that they have complied with the August 21, 2014 Order to the best of their ability and that Plaintiffs are abusing the discovery process.
Interrogatory No. 1 asked Defendants to "[i]dentify and list the name, address, telephone and email contact information for any bookkeeper or accountant who has performed work for a Z-Ultimate entity, including which entity they worked for and for what time period." Originally, Defendants responded by identifying Heidi Applehans; Shvonne Avalos; Annette Gomez; Niza Guerrero; Molly Ashworth; Jordan Penman; James Herzog; Bill Sampson; Chris Diaz; Todd Aimer; David Lloyd; Dennis Brookman; Mike Millard; Alen Babyan; and Juan Flores. [#68-1 at 16-17].
Plaintiffs claim that subsequent investigation has revealed Defendants hid or withheld identities of bookkeepers and accountants. For support, Plaintiffs rely on deposition testimony given in a different matter by Shavonne Avalos, a bookkeeper for an accounting company owned and operated by Defendant Eszlinger. [#68 at 3-4]. Defendants respond that they provided the names and addresses of the bookkeepers and accountants for all of the Defendants, including the recently hired Debbie Nash, that the court already ruled that their response was sufficient, and that Ms. Avalos's two-year old testimony does not identify the name of another bookkeeper. [#83 at 4]. In addition, Defendants affirmatively represent to the court in their paper that "There are no other bookkeepers." [ Id. ]
A review of the cited testimony does not support Plaintiffs' argument that Ms. Avalos "stated that Defendants use separate bookkeepers or accounts for their Masters United entities, as well as for some of their other supporting business entities." [#68 at 4; #68-1]. Rather, Ms. Avalos testified that she did not do accounting for any other Z-Ultimate or Kris Eszlinger related entities, other than Black Ink. [#68-1, at 39:3-10; 65:21-25; 76:23-77:11]. In addition, this testimony was taken of Ms. Avalos in 2012 in a different matter, and it is unclear to this court whether Ms. Avalos was ever asked about the specific Defendants named in this action. [ Id. ] Plaintiffs' arguments amount to an assumption that there must be more bookkeepers, but the record before the court does not currently support an affirmative finding that there are additional bookkeepers. Therefore, Plaintiffs' Motion with respect to Interrogatory No. 1 is denied.
In reaching this determination, however, the court expressly relies upon the representations made by Defendants pursuant to Rule 26(g)(1)(B) of the Federal Rules of Civil Procedure and defense counsel pursuant to Rule 11(b) of the Federal Rules of Civil Procedure and reminds Defendants and defense counsel of their continuing obligations of supplemental disclosure under Rule 26(e) of the Federal Rules of Civil Procedure. That Rule clearly obligates a party who has responded to an Interrogatory to supplement or correct its response in a timely manner if the party learns that in some material respect, the response is incomplete or incorrect, or the corrective information has not otherwise been made known during discovery. Fed.R.Civ.P. 26(e)(1). This obligation extends to all of the Defendants represented by Messrs. Francis and Glenn.
Interrogatory No. 3 asked Defendants for "any communication or discussion between any defendant and any employee concerning this lawsuit, any subject in this lawsuit, the plaintiffs, or their counsel." The Interrogatory asked Defendants to "provide details of (1) what was communicated, (2) who communicated it, (3) to whom was it communicated, and (4) when this communication took place including any notes evidencing this communication."
Plaintiffs claim that Defendants have provided "a cursory answer for Defendant Clark, but no answer whatsoever for any of the other Individual Defendants." [#68 at 4]. Defendants respond that the other individual Defendants have not discussed this lawsuit or the allegations of the lawsuit with instructors "because plaintiffs' counsel has alleged that the defendants have engaged in witness intimidation." [#83 at 18].
Neither Party appears to have provided the court with a copy of either Interrogatory No. 3, or the response thereto, as part of the motions papers. While Plaintiffs cite Ex. D to their Motion [#68 at 4], that exhibit contains no response to Interrogatory No. 3. [#68-1 at 18]. Therefore, the court has nothing to consider with respect to the sufficiency of the response, and Plaintiffs' Motion as to Interrogatory No. 3 is denied.
Interrogatory No. 4 asked Defendants to "List every entity ("United Partner" or otherwise) associated with any Defendant that employed a Chief Instructor from April 1, 2005 (including the entities physical address, current mailing address, email, phone number, and dates of operation); and fully ...