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Bayou Industrial Sales, L.L.C. v. Petro-Valve, Inc.

United States District Court, M.D. Louisiana

June 16, 2017

BAYOU INDUSTRIAL SALES, L.L.C.
v.
PETRO-VALVE, INC.

          ORDER

          RICHARD L. BOURGEOIS, JR. UNITED STATES MAGISTRATE JUDGE

         Before the Court is Petro-Valve, Inc.'s (“Petro-Valve”) Motion to Compel (R. Doc. 35) filed on April 27, 2017. Petro-Valve seeks an order requiring supplemental responses to requests for production served on Bayou Industrial Sales, L.L.C. (“Bayou”) on February 1, 2016 (R. Doc. 35-7), and Keith Foote and David Foote on June 7, 2016 (R. Doc. 35-2; R. Doc. 35-3). The Motion to Compel is opposed. (R. Doc. 43).

         Also before the Court is Petro-Valve's Motion for Extension of Time to File Expert Reports (R. Doc. 36) filed on April 28, 2017. Petro-Valve seeks an order extending its deadline to provide expert reports to Bayou until 21 days after the Court rules on the pending Motion to Compel. The Motion for Extension of Time to File Expert Reports is opposed. (R. Doc. 42).

         Because the foregoing motions involve related issues, the Court considers will consider them together.

         I. Background

         Petro-Valve is a distributor of industrial valves. Petro-Valve and Bayou entered into a Consulting Agreement with an effective date of April 21, 2014 for an “agreement term” of three years. (R. Doc. 1-2 at 7-8). Through the Consulting Agreement, Bayou agreed to perform certain “outside sales” for Petro-Valve in return for a “Base Payment” of $42, 083.33 per month ($505, 000.00 annually), predetermined expense reimbursements, and commissions.

         At the time the parties entered into the Consulting Agreement, the sole members of Bayou were David Foote and Kevin Barre. (R. Doc. 15 at 3; see R. Doc. 15-1). On May 2, 2014, Bayou amended its Articles of Organization to identify its sole members as David Foote Consulting, LLC, Keith Foote, LLC, and Barre Industrial, LLC. (R. Doc. 15 at 3; See R. Doc. 15-1).

         On September 29, 2014, a corporate representative of Petro-Valve notified David Foote and Keith Foote (collectively, “the Footes”) that Petro-Valve was cancelling the Consulting Agreement effective that day. (R. Doc. 43-2). The corporate representative stated that the Consulting Agreement “included Kevin Barre and this agreement should have been cancelled when he departed.” (R. Doc. 43-2). Furthermore, the corporate representative stated that a “new employment agreement” that the parties had been discussing would be effective that day upon cancellation of the Consulting Agreement and that the employment agreement would be provided to the Footes by the end of the day. (R. Doc. 43-2).

         On October 6, 2014, the Footes entered into employment agreements with Petro-Valve providing them with respective annual salaries of $125, 000 (David Foote) and $200, 000 (Keith Foote) as Territory Sales Managers for Petro-Valve. (R. Doc. 14-1 at 1-8). The Footes also entered into Nondisclosure Agreements with Petro-Valve. (R. Doc. 14-1 at 9-16).

         On March 17, 2015, Bayou again amended its Articles of Organization to identify its sole members as David Foote Consulting, LLC (the sole member of which is David Foote), Keith Foote, LLC (the sole member of which is Keith Foote). (R. Doc. 15 at 3; See R. Doc. 15-1).

         On April 9, 2015, Bayou initiated the instant breach of contract action in state court. (R. Doc. 1-2 at 3-6, “Petition”). Bayou alleges that prior to cancellation of the Consulting Agreement, Petro-Valve made base payments to Bayou in the amount of $180, 719, 71. (Petition, ¶ 11). Bayou claims that it is owed $44, 999.97 in base payments, as well as certain commissions, prior to the cancellation of the Consulting Agreement. (Petition, ¶¶ 12-13). Bayou also claims that it is owed base payments in the amount of $1, 289, 280.32 that would have been payable from the date the Consulting Agreement was cancelled through the end of the three-year term of the contract. (Petition, ¶ 16). Finally, Bayou claims that it is entitled to an additional $252, 499.98 in base payments that it was entitled to receive at the end of the three-year term of the contract if it did not engage in certain business activity for 6 months after the Consulting Agreement's expiration. (Petition, ¶¶ 17-18).

         Petro-Valve removed the action on May 3, 2015. (R. Doc. 1).

         On November 6, 2015, the Court entered into the record Petro-Valve's Amended Answer, Counterclaim, and Third Party Complaint. (R. Doc. 14). Among other affirmative defenses, Petro-Valve asserts that the Consulting Agreement was modified by the parties in light of Kevin Barre's departure from Bayou; that Petro-Valve had the right to terminate the Consulting Agreement; that the subsequent entry of employment agreements by Petro-Valve and the Footes constituted a novation of the Consulting Agreement; and that Bayou's claims are barred by fraud and/or fraud in the inducement. (R. Doc. 14 at 4-5).

         In its counterclaims against Bayou and third-party demands against the Footes, Petro-Valve asserts that it hired Bayou and entered into the Consulting Agreement in reliance on representations that Bayou and the Footes “had the ability to bring in $15-$20 million a year in business from Louisiana customers.” (R. Doc. 14 at 6). According to Petro-Valve, only after it opened a branch in Louisiana based on these representations did it became clear that neither Bayou nor the Footes had the ability to bring in $15-$20 million in business in Louisiana. (R. Doc. 14 at 7). Petro-Valve further allege that the Footes represented that “it was essential that they become employees of Petro-Valve so that they could have access to confidential customer information” not available to them under the Consulting Agreement. (R. Doc. 14 at 7). Petro- Valve further represents that the Footes terminated their employment on or about April 9, 2015, and, in violation of their Nondisclosure Agreements, “downloaded and forwarded to their personal email addresses confidential and trade secret information of Petro-Valve in violation of their Nondisclosure Agreements.” (R. Doc. 14 at 8). Petro-Valve brings causes of action against Bayou and/or the Footes for common law fraud, fraud in the inducement, breach of contract, theft and misappropriation of trade secrets, and conspiracy. (R. Doc. 14 at 8-10). Petro-Valve seeks recovery of exemplary damages and attorney's fees. (R. Doc. 14 at 11-12).

         On February 1, 2016, Petro-Valve served requests for production on Bayou. (R. Doc. 35-7).

         On February 25, 2016, the Footes filed a Counterclaim against Petro-Valve. (R. Doc. 25). The Footes allege that they are “owed sums by Petro-Valve, Inc. under the terms of their employment with Petro-Valve, Inc. in the form of salary, commissions, and paid vacation time.” (R. Doc. 25 at 1). The Footes are demanding Petro-Valve “to pay all sums due and owning” by Petro-Valve, and for payment of penalties and attorney's fees as set forth in La. R.S. 23:632. (R. Doc. 25 at 2).

         On March 17, 2016, Petro-Valve filed an Answer to the Footes' Counterclaim. (R. Doc. 29). Among other things, Petro-Valve raises the affirmative defendant that to the Footes are barred from recovery to the extent they “failed to focus 100% of their time and effort on Petro-Valve, or received income or compensation from Bayou Industrial Sales, LLC, or other company, while employed with Petro-Valve, their claims are barred by prior breach of their employment agreements.” (R. Doc. 29 at 2).

         On June 7, 2016, Petro-Valve served requests for production on Keith Foote and David Foote. (R. Doc. 35-2; R. Doc. 35-3).

         On June 28, 2016, the Court entered a Joint Protective Order into the record. (R. Doc. 31). This protective order allows the parties to designate information as “confidential” prior to production and restricts the use of such confidential information.

         On July 21, 2016, Bayou provided its initial objections and responses to Petro-Valve's requests for production. (R. Doc. 35-8).

         On April 5, 2017, counsel held a telephone discovery conference regarding the responses provided by Bayou and the absence of any responses by the Footes. According to an e-mail memorializing the conference by defense counsel, Bayou agreed to produce documents responsive to Request Nos. 36-42, 45-53, 56, 70-76, 79-80, and 86 by April 20, 2017; Petro-Valve would file a motion to compel Bayou to respond to Request Nos. 26-28; and the Footes would provide responses to the outstanding discovery requests on or before April 20, 2017. (R. Doc. 35-6).

         On April 20, 2017, Keith Foote and David Foote provided their initial objections and responses to Petro-Valve's requests for production. (R. Doc. 35-5).[1]

         On April 21, 2017, Bayou provided supplemental responses to Petro-Valve's requests for production. (R. Doc. 35-9).

         On April 27, 2017, the deadline for it to provide expert reports, Petro-Valve filed its Motion to Compel. (R. Doc. 35). Petro-Valve argues that because responses were not provided to the requests for production within the 30-day limit provided by Rule 34, all objections to the request for production are waived. In the alternative, Petro-Valve argues that the objections are without merit. Petro-Valve seeks recovery of fees associated in bringing the motion in the amount of $4, 900. (R. Doc. 35-13).

         On April 28, 2017, Petro-Valve filed its Motion for Extension of Time to File Expert Reports. (R. Doc. 36). In support of the motion, Petro-Valve asserts that until the Court rules upon the motion to compel, and it obtains the discovery sought, it “does not have sufficient information to provide to its expert so that he may render an opinion” on Petro-Valve's counterclaims and third party claims. (R. Doc. 36 at 2).

         The current discovery deadline is July 14, 2017. (R. Doc. 48).

         II. Law and Analysis A.Petro-Valve's Motion to Compel

         1. Legal Standards

         “Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.” Fed.R.Civ.P. 26(b)(1). The court must limit the frequency or extent of discovery if it determines that: “(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).” Fed.R.Civ.P. 26(b)(2)(C).

         “The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed.R.Civ.P. 26(c)(1). Rule 26(c)'s “good cause” requirement indicates that the party seeking a protective order has the burden “to show the necessity of its issuance, which contemplates a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements.” In re Terra Int'l, Inc., 134 F.3d 302, 306 (5th Cir. 1998) (quoting United States v. Garrett, 571 F.2d 1323, 1326 n.3 (5th Cir. 1978)).

         Rules 34 provides a party with 30 days after service of the discovery to respond or object. See Fed. R. Civ. P. 34(b)(2)(A). If a party fails to respond fully to discovery requests made pursuant as to Rule 34 in the time allowed, the party seeking discovery may move to compel disclosure and for appropriate sanctions under Rule 37. An “evasive or incomplete disclosure, ...


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