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Motion filed by Pete and Tony Youngs to force Russ Whitney to reveal his net worth 2

II. DEFENDANTS' CROSS MOTION TO STAY DISCOVERY UNTIL A DETERMINATION IS MADE REGARDING THE VALIDITY OF PLAINTIFFS' PUNITIVE DAMAGE CLAIM SHOULD BE DENIED BECAUSE A STAY WOULD IMPEDE THE DISCOVERY PROCESS AND PREVENT PLAINTIFFS FROM ADEQUATELY PREPARING FOR THE DEPOSITIONS OF RUSS WHITNEY AND DAVID KELLER.

Defendants next argue that, if this Court is inclined to compel discovery of Russ Whitney's and David Keller's financial information, the discovery should be stayed until such time that the Court can rule on the merits of Plaintiffs' punitive damage claims.
In support of their position. Defendants cite State of Wisconsin Investment Board v. Plantation Square Ass., 761 F. Supp. 1569 (S.D. Fla. 1991), in which the Court for the Southern District of Florida was deciding whether a Florida statute was superceded by Rule 26 of the Federal Rules of Civil Procedure. In reviewing Florida Statutes § 768.72, the Court held that the provision in Florida's punitive damage statute requiring a finding that punitive damages are appropriate before allowing discovery of the net worth of a defendant did not conflict with Fed. R.Civ.P. 26 which provides for liberal discovery. Plantation Square, 761 F. Supp. at 1578.
The Florida statute at issue in Plantation Square differs markedly from O.C.G.A. § 51- 12-5.1. Under the Florida statute, a plaintiff cannot even make a claim for punitive damages until evidence is introduced into the record supporting such a claim. Fla. Stat. Ann. § 768.72 (1). Discovery on the question of net worth can, thus, only ensue upon the evidentiary showing that punitive damages are warranted. Fla. Stat. Ann. § 768.72 (1). O.C.G.A. § 51-12-5.1 contains no such restriction. While a plaintiff must make a specific prayer for punitive damages in his complaint, there is no requirement that the plaintiff provide evidence supporting such an award before engaging in discovery on the issue. O.C.G.A. § 51-12-5.1.
There is no case in Georgia or the Federal Courts holding that a plaintiff, once having asserted evidence tending to support punitive damages, is then prohibited from engaging in discovery regarding a defendants financial worth. As discussed above. both through affidavits and their Amended Verified Complaint, Plaintiffs have provided evidentiary support for their punitive damages claims. Staying the discovery process on this issue is not in keeping with Georgia's punitive damages law.
Additionally, such a stay would have the effect of prohibiting Plaintiffs from adequately preparing for Russ Whitney's and David Keller's depositions. David Keller's deposition is currently scheduled for May 13, 2004. Russ Whitney's deposition is scheduled for June 2, 2004. The discovery period in this case is currently scheduled to expire on June 4, 2004. Counsel for Defendants has indicated Defendants' unwillingness to take depositions outside of this period, or to jointly request that this Court extend the discovery period due to the months the Parties spent working on the language of a Protective Order. Therefore, Plaintiffs are working with all diligence, and will be required to elicit all pertinent information from Defendants during the two depositions currently scheduled; and will not likely be permitted a second chance to depose Defendants on their financial status after this Court has had a chance to rule on the issue of punitive damages. [FN1] This constriction on Plaintiffs' discovery is certainly not anticipated by Fed. R.Civ.P. 26 and its liberal discovery mandate. Defendants' attempt to thwart Plaintiffs discovery on this issue is contrary to Georgia law on this matter and done with an eye toward avoiding any deposition testimony on the question of financial worth.

FN1. A second deposition of these two Defendants would be time consuming and wasteful of Plaintiffs' resources.

III. PLAINTIFFS, NOT DEFENDANTS, ARE ENTITLED TO AN AWARD OF EXPENSES BECAUSE DEFENDANTS RESPONSES WERE NOT SUBSTANTIALLY JUSTIFIED AND PLAINTIFFS WERE WITHIN THEIR RIGHTS IN BRINGING THE INSTANT MOTION.

Defendants argue that they, not Plaintiffs, are entitled to an award of expenses under Fed. R.Civ.P. 37(a)(4)(B) because Defendants' objections were substantially justified and because Plaintiffs have offered no substantial justification in support of their Motion to Compel. Plaintiffs provide a plethora of justification for their motion in both their original Memorandum and in this reply. The law on this issue is clear that financial worth is relevant to punitive damages and, is therefore discoverable. See. e.g., Fed. R.Civ.P. 26 (b)( 1), O.C.G.A. § 51-12-5. 1 Miller v. Crumbly, 549 Ga. App. 403.
Defendants recognize this in their Memorandum opposing Plaintiffs motion and even cite to numerous cases holding that, at the very least, information N concerning net worth is discoverable. (See Defendants' Response to Plaintiffs' Motion for Order to Compel Discovery and award Costs of Litigation and Defendants' Cross Motion to Stay Discovery Concerning Defendants' Net Worth and Memorandum of Law in Support Thereof pp. 18-19. citing, among others, Porter v. Ogden, Newell, & Welch. 241 F.3d 1334, 1340(11th Cir. 2001) (permitting discovery of information relating to net worth after plaintiffs offered some evidence supporting punitive damages under Florida's stricter standard)).
As pointed out in Defendants' argument, Plaintiffs were willing to compromise on this point and accept information concerning net worth. This, despite the fact that Plaintiffs believe evidence of assets and debts in excess of a certain amount ($2,500.00 in this case) is the best indicator of the financial position of a defendant and therefore, the information Plaintiffs need to adequately assess their case and prepare for the remainder of the discovery process.
Because Defendants' conduct necessitated this Motion to Compel, under Fed. R.Civ.P. 37, this Court should award Plaintiffs the expenses of compelling Defendants to disclose discoverable information.
CONCLUSION

For the foregoing reasons. along with all the grounds set out in Plaintiffs' Motion to Compel Discovery and Memorandum of Law in Support of same, this Court should grant Plaintiffs' Motion to Compel and award Plaintiffs all necessary costs of obtaining this relevant, discoverable information.
END OF DOCUMENT

United States District Court, N.D. Georgia.
Pete YOUNGS and Tony Youngs, Plaintiffs,
v.
WHITNEY EDUCATION GROUP, INC., Whitney Leadership Group, Inc., Whitney
Information Network, Inc., Russ Whitney, and David Keller, Defendants.
Civil Action File No. 1:03-CV-1697-TWT.
April 5, 2004.

Defendants' Response to Plaintiffs' Motion
for Order to Compel Discovery and Award Costs of Litigation and Defendants' Cross Motion to Stay Discovery

Concerning Defendants' Net Worth and Memorandum of Law in Support Thereof

NOW COME defendants WHITNEY EDUCATION GROUP, INC. ("WEG"), WHITNEY LEADERSHIP GROUP, INC. ("WLG"), WHITNEY INFORMATION NETWORK, INC. ("WIN"), RUSS WHITNEY (collectively, the "Whitney Defendants"), and DAVID KELLER (collectively, "Defendants"), and respond to Plaintiffs' Motion for Order to Compel Discovery And Award Costs of Litigation (the "Motion"). Defendants respectfully request that the Court deny Plaintiffs' Motion and grant Defendants reasonable expenses and attorneys fees incurred in responding to Plaintiffs' meritless motion. In the alternative, should the Court grant Plaintiffs' Motion, Defendants move to stay discovery on net worth until the Court has made a determination as to the validity of Plaintiffs' punitive damages claim by ruling on the pending Motion For Judgment On The Pleadings or a subsequent motion for summary judgment (should such a motion become necessary).
INTRODUCTION

The issue before the Court is whether Plaintiffs have unleashed the right to demand a list of every asset and liability exceeding $2,500 by merely alleging conclusory claims for punitive damages. This is a lawsuit brought by two former WEG seminar instructors who are disappointed that they voluntarily resigned from a lucrative business arrangement with WEG. While Plaintiffs may be disappointed, they have no viable claims against any Defendants -- a point demonstrated by Defendants' recently filed Motion For Judgment On The Pleadings.

Plaintiffs simply seek to use this lawsuit -- and the concomitant expense, distraction, and negative publicity -- as leverage for a new business deal with WEG or to force a settlement. Plaintiffs' scorched-earth litigation strategy started with the filing of an unwarranted motion for temporary restraining order, and was followed by voluminous discovery requests and discovery disputes where there should be none. Plaintiffs sought and received an eight month discovery track (twice the normal for a copyright case), and twenty depositions per side (twice the normal). They served 20 different written discovery request documents -- i.e., 20 different sets of interrogatories, requests for admission, and document production requests -- which comprised approximately 200 pages. They refused to sign a run-of-the mill protective order, necessitating months of legal wrangling, motion practice, and a hearing. They now have begun what no doubt will be a series of unnecessary and unfounded motions relating to discovery.

The precise issue in Plaintiffs' Motion is whether Defendants Russ Whitney and David Keller must provide responses to interrogatories that request a list of every asset and liability worth more than $2,500, including a full description and identification of each such asset and liability. The stated rationale for this request is that punitive damages are "at issue" in this case and Plaintiffs seek to determine these individual Defendants' net worth.

Both federal and state courts recognize the intrusiveness of discovery into an individual's net worth -- particularly when the plaintiff seeks the details of assets and liabilities. Courts in the Eleventh Circuit and Georgia, as well as in other jurisdictions across the country, recognize the important role of trial courts in placing reasonable limits on discovery of an individual's net worth. Most courts refuse to allow discovery into net worth until the plaintiff has established a viable claim for punitive damages. This can occur after an initial phase of trial in which liability and perhaps the entitlement to punitive damages is established, it can occur after summary judgment briefing, or it can occur once the plaintiff presents an evidentiary basis for punitive damages. Merely making conclusory allegations of willful misconduct does not entitle a plaintiff to discovery of a person's financial assets. Indeed, the Georgia law upon which Plaintiffs base their punitive damages claim requires that the plaintiff demonstrate evidentiary support for such a claim before discovery as to net worth will be permitted.

In this case, Plaintiffs' sole argument is that two affidavits they have submitted demonstrate an entitlement to punitive damages. However, Plaintiffs fail to explain what facts in these affidavits establish fraud and malicious interference with contract or business relations -- the only claims for which Plaintiffs seek punitive damages. Instead, Plaintiffs merely cite these affidavits in conclusory fashion, leaving it to the Court and Defendants to figure it out for themselves. Not only have Plaintiffs failed to carry their burden by explaining the factual basis for their Motion, but examination of the affidavits Plaintiffs submitted reveals that they fail to state facts sufficient to make out a fraud or malicious interference claim, let alone support a claim for punitive damages. In fact, the affidavits do not even mention Mr. Keller.

Accordingly, Defendants respectfully request that the Court deny Plaintiffs' Motion. Defendants also respectfully request that the Court award Defendants their expenses and attorneys' fees incurred in responding to this Motion as it was brought without substantial justification. Indeed, Plaintiffs have acknowledged in writing that an identification of individual assets is not appropriate at this stage in the proceedings, yet they persisted in filing the Motion in hopes of increasing leverage for settlement.
FACTS

I. FACTS UNDERLYING THIS LAWSUIT

A. WEG's Foreclosure Seminars

Defendant WEG is in the business of providing a variety of post-secondary educational services relating to financial investing, including training programs, seminars, and publications. (Declaration of Russell A. Whitney, attached hereto as Exhibit 1 ("Whitney Decl."), at ¶ 6). WEG currently concentrates its efforts in the areas of real estate investing, business development, asset protection, stock investment training, and financial management. Id.
Defendant WIN is WEG's parent company. Id. at ¶ 2. Defendant Russ Whitney is the Chairman and CEO of both WIN and WEG. Id. Mr. Whitney also is the President of Defendant WLG, which owns copyrights to WIN's and WEG's educational materials.
Among the many courses offered by WEG is an advanced training course ("ATC") in foreclosure - i.e., investing in properties in foreclosure or approaching foreclosure. Id. at ¶¶ 7-10, 21. WEG's Foreclosure ATC provides students with information and ideas about how to purchase such property, to repair and improve it, and to sell it for a profit. Id. at ¶ 21. WEG's Foreclosure ATC is taught by instructors hired by WEG to conduct seminars, which are marketed and organized by WEG and its related companies.
In approximately 1997, WEG hired Plaintiffs Tony and Pete Youngs to teach WEG's Foreclosure ATC. Id. at ¶ 19. Prior to hiring the Youngs, WEG had provided some foreclosure and pre-foreclosure training to students. Id. at ¶ 20. Indeed, most of WEG's trainers have experience with foreclosure and pre- foreclosure because these subjects overlap with many of WEG's other ATC courses. Id.
The Youngs used their own materials for the seminars, which were subject to WEG's review and approval. Id. at ¶ 22. WEG jointly created with the Youngs most or all of the agendas, curriculum, and evaluations for the Foreclosure ATCs. Id. at ¶ 22. WEG was solely responsible for advertising, marketing, and promoting the Foreclosure ATCs taught by the Youngs. Id. WEG paid the Youngs a fixed amount for each student attending the Foreclosure ATCs taught by the Youngs. Id.
The Youngs worked for WEG teaching WEG's Foreclosure ATCs through 2003. Id. at ¶ 23. During this time, they agreed to be photographed and recorded by Abbott Video, Inc., which assigned these rights to WEG, WIN, and Mr. Whitney. Id.
In August 2002, WEG began a process of updating and improving its contracts with seminar instructors. Id. at ¶ 24. Most trainers elected to sign the new contract. Id. The Youngs elected not to sign the new contract, see id., apparently because it required that the Youngs assign certain copyrights to WEG. (See Third Affidavit of Tony Youngs, attached hereto as Exhibit 2 ("Third Tony Youngs Aff."), at ¶ 7; Second Affidavit of Pete Youngs, attached hereto as Exhibit 3 ("Second Pete Youngs Aff."), at ¶ 5). The Youngs made a number of counterproposals to WEG, which were rejected. (See Third Tony Youngs Aff. at ¶ 9).
On March 21, 2003, the Youngs notified WEG that they wanted to terminate any agreement they had with WEG. (Whitney Decl. at ¶ 24). They continued to work, under the 60-day notice provision of the original Training Agreement, until May 18, 2003, when they presented their final WEG Foreclosure ATC. Id. They then offered to sell WEG their seminar materials for $2 million. Id. at ¶ 26. WEG preferred, however, to develop its own materials for the Foreclosure ATC, as it had done for other ATC courses, to make the materials more professional looking and homogeneous with the other WEG publications and course materials. Id.
After the Youngs gave their 60-day notice to WEG in March 2003, WEG hired Defendant David Keller, a former WEG student with years of experience in foreclosures, to be a WEG trainer for the Foreclosure ATC. Id. at ¶ 25. WEG asked Mr. Keller to create, with the help of WEG staff, a new manual for the Foreclosure ATC. Id. at ¶ 26. Neither Mr. Keller nor any other WEG employee copied the Youngs' materials when drafting the new WEG Foreclosure ATC manual. Id. at ¶27.

B. The Millionaire Real Estate Mentor Book

In the summer of 2000, Mr. Whitney approached several of WEG's instructors, including the Youngs, about participating in a book about real estate investing. Id. at ¶ 29. The Youngs agreed to include some of their ideas and information in the book, and contributed to the effort in 2000, 2001, and 2002. Id. at ¶ 29. WIN hired a ghostwriter named Jacquelyn Lynn to help Mr. Whitney write the book entitled Millionaire Real Estate Mentor: The Secrets To Financial Freedom Through Real Estate Investing (Dearborn 2003) ("Millionaire Real Estate Mentor"). See id. Mr. Whitney has published other books, including Building Wealth (1995), a financial bestseller, and Hurdles & Pitfalls of Real Estate Investing (1984), which includes a chapter on pre-foreclosures. Id. at 15. Ms. Lynn summarized information she learned from WEG trainers, including the Youngs, WEG publications, and Mr. Whitney's previous books to help write the Millionaire Real Estate Mentor book. Id. at ¶ 32.
The Youngs agreed to assist Ms. Lynn and provide information to her in exchange for credit in the book. (See Third Tony Youngs Aff. at ¶ 2; Second Pete Youngs Aff. at ¶ 5; Whitney Decl. at ¶ 30). Plaintiffs fail to point out in their Motion that they did, in fact, receive such credit. (Whitney Decl. at ¶ 30; see also cover and pp. 313-317 of Millionaire Real Estate Mentor, attached hereto as Exhibit 4).