Real Estate Topics Forum :: View topic - Motion filed by Pete and Tony Youngs to force Russ Whitney 4

Guest

Motion filed by Pete and Tony Youngs to force Russ Whitney to reveal his net worth 4

II. IN THE ALTERNATIVE, DEFENDANTS CROSS MOVE TO STAY DISCOVERY UNTIL A DETERMINATION IS MADE REGARDING THE VALIDITY OF PLAINTIFFS' PUNITIVE DAMAGE CLAIMS

As shown above, Plaintiffs' Motion should be denied because they have failed to provide any meaningful basis for their punitive damages claims. If, however, the Court is inclined to permit some discovery as to net worth, Defendants cross move to stay discovery as to net worth until the Court makes a merits determination as to the validity of Plaintiffs' punitive damage claims.
In Plantation Square, the Court, addressing Rule 26 and state law, noted:
Delaying production of a defendant's financial worth from the initial phases of discovery until some later state in the pre-trial litigation does nothing to interfere with the purposes of such discovery under the Federal Rules. Under either the State rule or the Federal Rule, plaintiff will have in hand evidence of defendant's financial condition at the time it becomes necessary for the fact finder to determine punitive liability.
State of Wisconsin Investment Board v. Plantation Square Ass., 761 F. Supp. 1569, 1578 (S.D. Fla. 1991). Courts often require that such financial information be disclosed only after allowing a party to contest the punitive damages claims, see Blount v. Wake Electric Membership Corp., 162 F.R.D. 102, 105 (E.D.N.C. 1993), or only after a finding of liability on such claims. See Koch v. Koch, 1992 U.S. Dist. LEXIS 14094, *24 (D. Kan. 1992). In the Koch case, the court stated:
The plaintiffs seek [any document which evidences the net worth and income of each individual Defendant] insofar as it is relevant to their claim for exemplary damages. Recognizing the relevance of their financial net worth in calculating punitive damages, the defendants propose that their production of this information await the trial and the court's decision on whether the punitive damages claim will go to the jury. The court will require the defendants to produce at trial evidence of their net worth just before close of the plaintiffs' case if the court determines a prima facie case for punitive damages has been presented ... Until a prima facie case is made at trial, the court will not compel production of this evidence.
Id. If the Court does not deny Plaintiffs' Motion to Compel, Defendants move the Court to allow limited discovery consisting of a simple statement of net worth only after the Court has ruled on Defendants' pending Motion to Dismiss and subsequent summary judgment motion (should one be necessary).

III. PLAINTIFFS' RULE 37(a)(4) MOTION FAILS BECAUSE DEFENDANTS WERE SUBSTANTIALLY JUSTIFIED IN MAKING THEIR DISCOVERY RESPONSES

Fed. R.Civ.P. 37(a)(4) provides that reasonable expenses incurred in making a motion to compel discovery are allowed "unless the court finds that ... the opposing party's nondisclosure, response, or objection was substantially justified, or that other circumstances make an award of expenses unjust."
Defendants are substantially justified in not producing documents responsive to Plaintiffs' requests for Russ Whitney and David Keller's personal assets. The Supreme Court has clarified that an individual's discovery conduct should be found "substantially justified" under Rule 37 if it is a response to a "genuine dispute, or if reasonable people could differ as to the appropriateness of the contested action." Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550 (1988) (citations omitted). In addition, the Eleventh Circuit reversed a district court and found substantial justification by party refusing discovery regarding income tax forms. See Maddow v. Procter & Gamble Co., Inc., 107 F.3d 846, 853 (11th Cir. 1997). As noted in Payne v. Howard, each party in a "heated controversy" was required to bear the burden of his own expense in connection with plaintiffs motion to compel discovery where neither had taken position so unjustified as to warrant imposition of costs under Rule 37(a)(4). 75 F.R.D. 465, 472 (D.D.C. 1977); see also Lumpkin v. Bi-Lo, Inc., 117 F.R.D. 451, 454 (M.D.Ga. 1987) (finding substantial justification in a discovery dispute where the case law was conflicting).
The case law clearly supports Defendants' position that there must be, at a minimum, a solid factual predicate for a punitive damages claim before the production of confidential financial statements is required. Plaintiffs have failed to provide any evidence supporting these claims and have failed to explain to this Court how the Second Pete Youngs Aff. or the Third Tony Youngs Aff. make out a cause of action, much less a claim for punitive damages. As discussed above, Defendants can find no basis in either of these affidavits for such a claim.

IV. DEFENDANTS ARE ENTITLED TO AN AWARD OF EXPENSES AND ATTORNEYS' FEES BECAUSE PLAINTIFFS HAVE FAILED TO OFFER SUBSTANTIAL JUSTIFICATION FOR THEIR BASELESS MOTION TO COMPEL

Defendants' cross move for reasonable expenses and attorneys fees as provide by Rule 37(a)(4)(B), which provides in relevant part:
If the motion [to compel] is denied, the court ... shall, after affording an opportunity to be heard, require the moving party or the attorney filing the motion or both of them to pay to the party or deponent who opposed the motion the reasonable expenses incurred in opposing the motion, including attorney's fees, unless the court finds that the making of the motion was substantially justified or that other circumstances make an award of expenses unjust.
Plaintiffs' Motion lacks substantial justification for the excessive discovery requesting all assets and debts over $2,500 of Defendants Russ Whitney and David Keller. Plaintiffs filed their Motion despite their acknowledgement that they are at best only entitled to a simple statement of Defendants' net worth and not specific assets-- "[w]hile we agree with you assessment of the case law that an identification of individual assets is not appropriate at this stage in the proceedings, Plaintiffs' claim for punitive damages does entitle them to discover Defendants' net worth." (See Exhibit 8, January 28, 2004 letter from A. Smith to M. Cannady at p. 5 (emphasis added)).
Moreover, as discussed above, Plaintiffs' Motion lacks even an arguable basis for compelling the production of the highly-sensitive, intrusive, and unduly burdensome information they seek. The Motion only claims -- in a singe sentence -- that the factual support for their request is contained in two affidavits. (Motion at 5). They fail to explain how the facts set forth in these affidavits support their claims for fraud against Mr. Whitney -- and this is the only claimed basis for punitive damages against Mr. Whitney in the Amended Complaint. Moreover, the only claimed basis for punitive damages against Mr. Keller in the Amended Complaint is malicious interference with contractual or business relations, yet the affidavits cited by Plaintiffs' Motion fail even to mention Mr. Keller, much less state a claim for relief against him.
Plaintiffs therefore should be required to reimburse Defendants for reasonable expenses in opposing this motion. See Fed. R.Civ.P. 37(a)(4)(B); see also Alexander v. FBI, 186 F.R.D. 144, 147-48 (D.D.C. 1999) (awarding reasonable expenses when opposing counsel moved to compel responses to personal questions that counsel had previously represented were not appropriate). [FN6] Failure to award such sanctions would only reward Plaintiffs for their misconduct and assist them in driving up the costs of this case -- which is precisely why Rule 37 contains a cost-shifting provision.

FN6. Defendants will provide an explanation of their reasonable costs, including attorneys' fees, incurred in opposing the Motion to Compel at the Court's request.
CONCLUSION

For the foregoing reasons, Defendants respectfully request that the Court deny Plaintiffs' Motion and award Defendants reasonable expenses and attorneys' fees incurred in defending against the Motion. In the alternative, if the Motion is granted, Plaintiff requests that the Court stay discovery as to Mr. Whitney and Mr. Keller's net worth until the Court has had an opportunity to rule on Defendants' Motion to Dismiss and summary judgment motion, should one be necessary.
Appendix not available.
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.
March 22, 2004.

Plaintiff's Memorandum of Law
in Support of Motion to Compel Discovery and to Award Expenses of Litigation

COME NOW, PLAINTIFFS, Pete Youngs and Tony Youngs ("Plaintiffs") and files this their Memorandum of Law in Support of Motion to Compel Discovery and to Award Expenses of Litigation showing the Court as follows:
STATEMENT OF FACTS

On June 19, 2003, Plaintiffs filed the present lawsuit against Defendants Whitney Education Group, Inc., Whitney Leadership Group, Inc., Whitney Information Network, Inc., Russ Whitney, and Dearborn Financial Institute, Inc. On August 1, 2003, Plaintiffs filed a Dismissal as to Dearborn Financial Institute, Inc. On August 12, 2003, Plaintiffs filed their Amended Complaint naming David Keller as a Defendant. In that Amended Complaint, Plaintiffs claim they are entitled to the recovery of punitive damages from each Defendant for the Defendants' willful actions and fraudulent conduct. Plaintiffs have set forth a factual basis for recovery of punitive damages in their Amended Complaint and in Affidavits submitted to this Court. (See Second Affidavit of Pete Youngs; Third Affidavit of Tony Youngs.)
On October 17, 2003, Plaintiffs served their First Requests for Interrogatories on all Defendants. In their responses to request 9 and 10 of Plaintiff Tony Young's First Request for Interrogatories to Defendant Russ Whitney, and Plaintiff Tony Youngs' First Request for Interrogatories to Defendant David Keller; Defendant Russ Whitney and Defendant David Keller (collectively "Defendants") improperly objected and refused to provide any response to Interrogatories 9 and 10 in contravention of both Georgia and Federal Law.
Plaintiff Tony Youngs' Interrogatory No. 9 requested that Defendants "[i] dentify all of your assets currently valued at more than $2,500.00 and the nature of each debt." (See Plaintiff Tony Youngs' First Request for Interrogatories to Defendant Russ Whitney No. 9, and Plaintiff Tony Youngs' First Request for Interrogatories to Defendant David Keller No. 9 (hereinafter "Interrogatory No. 9") attached hereto as Exhibits A & B.) Plaintiff Tony Youngs' Interrogatory No. 10 asked that Defendants "[i]dentify all creditors to whom you are indebted in an amount in excess of $2,500, explaining the nature of each debt." (See Plaintiff Tony Youngs' First Request for Interrogatories to Defendant Russ Whitney No. 10, and Plaintiff Tony Youngs' First Request for Interrogatories to Defendant David Keller No. 10, (hereinafter "Interrogatory No. 10") attached hereto as Exhibits A&B.) Defendants objected to each of these requests on the grounds that they were harassing, unduly burdensome, overly broad, and not reasonably calculated to lead to the discovery of admissible evidence. Defendants provided no further response.
After numerous telephone conference and much correspondence, Defendants continue to refuse to respond to Interrogatories No. 9 and 10. Plaintiffs have accrued legal expenses in the amount of $4,603.50 in attempting to obtain proper responses from Defendants.
ARGUMENT OF LAW AND CITATION OF AUTHORITY

A. The information sought in Tony Youngs' Interrogatories is relevant and discoverable under Federal and Georgia law.

Rule 26 of the Federal Rules of Civil Procedure defines the scope of discovery to include "any matter, not privileged, which is relevant to the subject matter involved in the pending action." Fed.R.Civ.P. 26 (b)(l). This "relevancy requirement is broadly construed," and any "material is relevant if it bears on, or reasonably could Bear on, an issue that is or may be in the litigation." Topol v. Trustees of the Univ. of Penn., 160 F.R.D. 476, 477 (E.D. Pa. 1995); see also, Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1973); In re: Theragenics Corp. Securities Litigation, 205 F.R.D. 631, 636 (N.D. Ga. 2002). Courts construe discovery rules liberally to serve the purposes of discovery; providing the parties with information essential to litigation of all relevant facts, eliminating surprise and promoting settlement. Ferko v. Nat'l Assoc. fo Stock Car Auto Racing. Inc., 218 F.R.D. 125, 132 (E.D. Tex. 2003) (citing Oppenheimer, 437 U.S. at 351); see also, In re: Theragenics Corp., 205 F.R.D. 631. The burden of showing that the requested information is not relevant is on the party resisting discovery. Golden Valley Microwave Foods. Inc. v. Popcorn Co., 132 F.R.D. 204, 212 (N.D. Ind. 1990). Plaintiff Tony Youngs' Requests for Interrogatories 9 and 10 sought information relevant to the issues in this case.
In his Requests for Interrogatories No.'s 9 and 10, Tony Youngs sought information related to the financial condition of Defendants Russ Whitney and David Keller. (See Interrogatory No. 9 and Interrogatory No. 10.) Courts have consistently found that evidence of a defendant's financial worth is relevant, discoverable, and admissible at trial to evaluate a plaintiff's punitive damages claim. Ferko v. NASCAR, 218 F.R.D. at 137 (citing United States v. Big D. Enters., 184 F.3d 924, 932 (8th Cir. 1999) citing City of Newport v. Fact Concerts. Inc., 453 U.S. 247, 270 (1981)). Under Georgia law, the substantive law ruling the case at hand, plaintiffs must allege a factual basis for punitive damages in order to discover evidence of financial worth. O.C.G.A. § 51-12-5.1; Miller v. Crumbley, 249 Ga. App. 403, 548 S.E. 2d 657 (Ga. App. 2001). A defendant's financial information is discoverable, though, upon even the slightest evidentiary showing tending to support such an award. Id.
In the case at hand, Plaintiffs have demonstrated an evidentiary basis for an award of punitive damages in their affidavits. (See Second Affidavit of Pete Youngs. Third Affidavit of Tony Youngs.) Even under Georgia's more stringent punitive damages rule, discovery into the Defendants' financial condition is permissible. Accordingly, this Court must compel Defendants to provide this information to Plaintiffs.

B. Plaintiffs are entitled to recover their expenses of litigation in seeking to have Defendants appropriately respond to Plaintiffs' discovery requests.

Rule 37 of the Federal Rules of Civil Procedure provides that
[i]f a motion is granted or if the disclosure or requested discovery is provided after the motion was filed, the court shall, after affording an opportunity to be heard, require the party ... whose conduct necessitated the motion ... to pay to the moving party the reasonable expenses incurred in making the motion, including attorney's fees.
Such an award is justified so long as the moving party made a good faith effort to obtain the discovery without court action. Fed.R.Civ.P. 37 (a)(4)(A). As evidenced by the Certification filed contemporaneously with this motion, Plaintiffs have made a good faith effort to resolve the dispute and Defendants have not provided the required discovery responses. Plaintiffs have incurred $4,603.50 in attempting to resolve this dispute. (See Affidavit of Jeffrey A. Daxe.)
CONCLUSION

For the foregoing reasons, this Court should grant Plaintiffs' Motion to Compel, ordering Defendants Russ Whitney and David Keller to fully respond to Interrogatories No. 9 and 10 and award Plaintiffs' expenses in an amount not less than $4,603.50.
Appendix not available.
END OF DOCUMENT

Guru ratings | Real estate investment page | Order form | Real estate investment books | Main Reed on Whitney page | Whitney claims vs. Reed research | Status of Whitney vs. Reed lawsuit | Whitney hit and run | Whitney assets | Have information on Whitney? | Review of Building Wealth | Whitney affiliations | Whitney publications | Unauthorized biography of Whitney | Suing Whitney | Whitney and income taxes
John T. Reed, a.k.a. John Reed, Jack Reed, 342 Bryan Drive, Alamo, CA 94507, Voice: 925-820-7262, Fax: 925-820-1259, Email: johnreed@johntreed.com

CONSUMER WARNING NOTICE: I recently saw Russ Whitney on a late night TV infomercial and then attended one of his "free" seminars. Unfortunately I believed all of their LIES and FRAUDULENT CLAIMS and I paid thousands of dollars to go to his "training camps". Needless to say I was clearly ripped off, cheated and lied to by Russ Whitney and his employees (band of thieves). My mistake was not searching the Internet to find out more about Russ Whitney and his company's HORRIBLE reputation for fraud, deception and illegal activities. Had I searched online I would have found out about THOUSANDS of customers being cheated, HUNDREDS of investigations by the Attorney General into the fraud of Russ Whitney and his company's, and that Russ Whitney himself is a CONVICTED VIOLENT FELON and spent years in PRISON. I saved the cached pages from the major search engines of the John Reed lawsuit with Russell Whitney and the TRUTH and FACTS that Reed discovered during his investigation of Whitney. I am posting this information on real estate discussion boards so other people do NOT get cheated and ripped off like I did.