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Beltran, v. Interexchange, Inc.

United States District Court, D. Colorado

February 16, 2018

JOHANA PAOLA BELTRAN, LUSAPHO HLATSHANENI, BEAUDETTE DEETLEFS, ALEXANDRA IVETTE GONZALEZ, JULIANE HARNING, NICOLE MAPLEDORAM, LAURA MEJIA JIMENEZ, and SARAH CAROLINE AZUELA RASCON, Plaintiffs,
v.
INTEREXCHANGE, INC., USAUPAIR, INC., GREATAUPAIR, LLC, EXPERT GROUP INTERNATIONAL INC., d/b/a Expert AuPair, EURAUPAIR INTERCULTURAL CHILD CARE PROGRAMS, CULTURAL HOMESTAY INTERNATIONAL, CULTURAL CARE, INC., d/b/a Cultural Care Au Pair, AUPAIRCARE INC., AU PAIR INTERNATIONAL, INC., APF GLOBAL EXCHANGE, NFP, d/b/a Au Pair Foundation, AMERICAN INSTITUTE FOR FOREIGN STUDY, d/b/a Au Pair in America, AMERICAN CULTURAL EXCHANGE, LLC, d/b/a GoAuPair, AGENT AU PAIR, A.P.EX. AMERICAN PROFESSIONAL EXCHANGE, LLC, d/b/a ProAuPair, 20/20 CARE EXCHANGE, INC., d/b/a The International Au Pair Exchange, ASSOCIATES IN CULTURAL EXCHANGE, d/b/a GoAu Pair, and GOAUPAIR OPERATIONS, LLC, Defendants.

          ORDER GRANTING PLAINTIFFS' MOTION FOR RECONSIDERATION AND VACATING IN PART DOC. # 624, PREVIOUS ORDER DENYING IN PART PLAINTIFFS' MOTION TO COMPEL RESPONSE TO DOCUMENT REQUEST NO. 16

          CHRISTINE M. ARGUELLO United States District Judge

         This matter is before the Court on Plaintiffs' Motion for Reconsideration of the Order (Doc. # 624) Denying Motion to Compel Production of Defendant American Institute for Foreign Study's Financial Records (the “Motion for Reconsideration”). (Doc. # 786.) Because Plaintiffs adequately allege misrepresentation by Defendant American Institute for Foreign Study (“AIFS”) and the disclosure of new information, Plaintiffs' Motion for Reconsideration is granted.

         I. BACKGROUND AND PROCEDURAL HISTORY

         Plaintiffs' Motion for Reconsideration concerns the discovery of financial information from only one Defendant, AIFS. AIFS operates five programs “for purposes of foreign study or cultural exchange, ” (Doc. # 814 at 3); relevant here is its Au Pair in America (“APIA”) program.

         Plaintiffs made their First Request for the Production of Documents on March 3, 2016. (Doc. # 787-2.) Document Request Number 16 requested from each Defendant:

Your audited or unaudited financial statements, including documents sufficient to show your annual revenue and income derived from participating in the au pair program during each year in which you have participated in the program.

(Id. at 7) (emphasis added). Plaintiffs filed their Motion to Compel Response to Document Request No. 16 from Defendants Apex, 20/20, Agent Au Pair, AIFS, Au Pair Care, Au Pair International, Cultural Care, Expert Au Pair, and Go Au Pair (the “Motion to Compel”) on March 13, 2017. (Doc. # 507.)

         On March 23, 2017, Defendant AIFS produced a six-page document, purporting to comply with Request No. 16. (Doc. # 515-8 at 4-9 (redacted.)) Each page reflects one year between 2009 and 2014 and contains eleven generic fields of information, such as “Revenues” and “Selling, General & Administrative Allocated Overhead.” (Id.) AIFS explained to Plaintiffs:

AIFS creates and maintains a single annual financial statement for all of its programs and entities; it does not maintain isolated financial statements for the APIA Program. Accordingly, the consolidated information contained in AIFS' financial statements incorporates data above five programs that are entirely unrelated to the instant litigation. . . . Notwithstanding, [the six-page document is] financial information prepared and compiled by [AIFS], which accurately demonstrates the actual revenue, allocated expenses and income of its APIA Program for the years 2009 through 2014. This information . . . allows Plaintiffs to make any and all financial contentions desired for the years relevant to the instant action.

(Id. at 3) (emphases added.)

         Defendant AIFS timely responded to Plaintiffs' Motion to Compel on March 27, 2017, citing to the six-page document as evidence that “AIFS has provided Plaintiffs with information and data about the APIA's Program ‘annual revenue and income' as well as its allocated expenses.” (Doc. # 515 at 4) (emphasis added). Defendant AIFS argued that it was not required by law or regulation to makes its financial statements public and emphasized to the Court that “AIFS consolidated financial statements do not demonstrate revenue, expenses and income that is attributable solely to APIA.” (Id. at 3-4.) Other named Defendants also responded, see (Doc. # 511, 607, 513, 517), and Plaintiffs replied in support of their Motion to Compel on April 3, 2017 (Doc. # 528).

         United States Magistrate Judge Kathleen M. Tafoya granted Plaintiffs' Motion to Compel as to all named Defendants except AIFS in an Order on July 24, 2017 (“July 24 Order”). (Doc. # 624.) The Magistrate Judge found that: (1) the financial information sought by Plaintiffs was relevant; (2) Defendants had a legitimate expectation of confidentiality; (3) Plaintiffs had a compelling need to the information; and (4) the information was not available from other sources. (Id. at 15.) She therefore ordered named Defendants to “comply fully” with Request No. 16 and to “provide to Plaintiffs their audited or unaudited financial statements, including documents to show their annual revenue and income derived from participating in the au pair program during the period January 1, 2009 through present.” (Id.)

         With regard to AIFS, however, the Magistrate Judge denied Plaintiffs' Motion to Compel because she concluded that “AIFS has satisfied its burden of production with respect to [Request No. 16].” (Id. at 17.) The Magistrate Judge emphasized AIFS' argument that as to APIA individually, financial statements “sufficient to show annual revenue and income derived from participating in the au pair program . . . do not exist and strict compliance with the request is therefore impossible.” (Id. at 16.) She also restated AIFS' position that the six-page production, “albeit in a different format, provides [Plaintiffs] all the information that would be covered by Plaintiffs' request.” (Id.) Finding that Plaintiffs did not “further state why the [six-page] production was inadequate, ” the Magistrate Judge concluded that “Plaintiffs ha[d] failed in their burden ‘to prove that the answers before the [C]ourt are incomplete, inadequate, or false.'” (Id. at 16-17.) Accordingly, the Magistrate Judge concluded that AIFS had fulfilled its burden of production by producing the six-page document. (Id. at 17.)

         Several weeks after the July 24 Order, Plaintiffs deposed AIFS' CEO, William Gertz.[1] See (Doc. # 787-8.) Mr. Gertz testified that he is responsible for “oversight and management” of AIFS and five other divisions and is “generally familiar” with the financials of AIFS. (Id. at 8, 30.) He stated that AIFS “do[es] have a way” of “accounting internally how each program uses [AIFS'] support divisions, ” though he was unsure of the details of internal accounting. (Id. at 19) (emphasis added.) Similarly, he also testified that AIFS has financial statements that include revenues and costs and that the financial statements are delineated “by division.” (Id. at 25) (emphasis added); see also (id. at 27). When shown the six-page document AIFS had produced to Plaintiffs in March 2017, Mr. Gertz said that he did not know where it came from and did not recognize its format. (Id. at 25.) Mr. Gertz acknowledged that he could not discern from the document any details of APIA's finances, such as how much APIA spent on marketing or how much revenue comes from host family fees versus au pair fees. (Id. at 31-32.)

         After Mr. Gertz's deposition, Plaintiffs contacted AIFS' counsel and again requested AIFS' financial statements on November 3, 2017. (Doc. # 787-1.) Plaintiffs stated that Mr. Gertz's deposition made clear that “segregated financial statements do exist” and that “the financial information that had been produced to Plaintiffs was inadequate and incomplete.” (Id. at 2.) According to Plaintiffs, ...


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