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J.A.H. Enterprises, Inc. v. BLH Equipment, L.L.C.

United States District Court, M.D. Louisiana

July 12, 2017

J.A.H. ENTERPRISES, INC.
v.
BLH EQUIPMENT, L.L.C.,

          ORDER

          RICHARD L. BOURGEOIS, JR. UNITED STATES MAGISTRATE JUDGE.

         Before the Court is Defendants' Motion to Compel (R. Doc. 86) filed on May 31, 2017 under seal without leave of court.[1] Defendants request oral argument. (R. Doc. 86-5). The motion is opposed. (R. Doc. 93).[2]

         Also before the Court is Plaintiff's Motion to Compel Discovery Responses (R. Doc. 87) filed on May 31, 2017. Plaintiff requests oral argument. (R. Doc. 87-1). The Motion is opposed. (R. Doc. 92).

         There is no need for oral argument as requested by the parties.

         I. Background

         On May 27, 2014, J.A.H. Enterprises, Inc., which does business as “Henderson Auctions, ” (“Plaintiff” or “Henderson Auctions”) initiated this action in the 21st Judicial District Court, Livingston Parish, Louisiana, naming as defendants BLH Equipment, L.L.C. (“BLH”), James Blake Everett (“Blake Everett”), Sam Everett, and ELA Mission, L.L.C. (“ELA”) (collectively, “Defendants”). (R. Doc. 1-2, “Petition”).

         On May 31, 2016, Henderson Auctions filed an Amended Complaint. (R. Doc. 31, “Am. Compl.”). Henderson Auctions alleges that it acquired the former M/V Crown Casino vessel for approximately $600, 000, expended approximately $300, 000 to maintain, moor, and prepare the vessel for resale, and that it partnered with Blake Everett to sell the vessel and split the profits equally. (Am. Compl. ¶¶ 10-12). Henderson Auctions alleges that “Blake and Sam Everett came to Louisiana repeatedly in efforts to sell the casino vessel” and that “[t]hese two defendants eventually reached an agreement in Louisiana in mid-2013 with a buyer named Dr. Rhodes.” (Am. Compl. ¶ 13). Henderson Auctions alleges that both Blake and Sam Everett represented to Jeffrey Henderson and Janet Henderson Cagley, the owners of Henderson Auctions, that the sale price would include a cash payment of $350, 000 and title to a property in Kosiusko, Mississippi known as the “Ivey House.” (Am. Compl. ¶ 13).

         Henderson Auctions alleges that Blake Everett then set up ELA, a Mississippi limited liability company to which only Blake Everett is a member, to take ownership of the Ivey House despite the parties' agreement to place ownership into the hands of a co-owned limited liability company. (Am. Compl. ¶¶ 14-15). Henderson Auctions further alleges that Sam and Blake Everett actually contracted to obtain $460, 000 from Dr. Rhodes without informing Henderson Auctions, with the intention of splitting the additional $110, 000 amongst themselves and Marvin Henderson. (Am. Compl. ¶¶ 16-17).

         Henderson Auctions alleges that in March of 2014, Blake and Sam Everett agreed to list the Ivey House for $750, 000 without disclosing the listing to Ms. Cagley. (Am. Compl. ¶¶ 20-21). Henderson Auctions alleges that Blake and Sam Everett scheduled the auction of the Ivey House and its items and that Sam Everett “personally participated in the sale of the antiques and contents from the Ivey House without disclosing to Henderson Auctions the fact of the sale or that the proceeds were going to be diverted to his, Blake Everett's, or BLH Equipment's coffers.” (Am. Compl. ¶ 22). Henderson Auctions further alleges that after it learned of the sale of the Ivey House's furniture, fixtures, and equipment, it obtained “a temporary restraining order from a Mississippi state court requiring the escrow of any proceeds of the sale of the assets and an injunction against the sale of the Ivey House” and “obtained an agreement with Nick Clark . . . to retain the proceeds from the sale until further notice.” (Am. Compl. ¶ 23).

         Based on the foregoing, Henderson Auctions asserts that Sam Everett, Blake Everett, and/or BLH “obtained an undisclosed commission and/or benefits from the seller of the casino vessel, misrepresented the sales price of the casino vessel to Henderson Auctions, retained approximately $110, 000.00 in funds over and above $340, 000.00 wired to Henderson Auctions as the sales price to Dr. Rhodes, retained all funds from the sale of the furniture, fixtures and equipment at the Ivey House, as well as funds from the Ivey House itself, in derogation of obligations owed to Henderson Auctions to pay off the approximate $700, 000.00 in expenses related to the M/V Crown Casino.” (Am. Compl. ¶ 25).

         Henderson Auctions further alleges that Blake Everett has sought from Henderson Auctions, on behalf of himself or BLH, the amount of at least $551, 877 from various transactions involving the sales and/or usage of certain equipment. (Am. Compl. ¶ 26). Henderson Auctions asserts that it does not owe any money to the Defendants, and that it has lost approximately $570, 000 on transactions involving Blake Everett. (Am. Compl. ¶ 27). With regard to the other transactions forming the basis of the counterclaim asserted by Sam Everett's co-defendants, Henderson Auctions asserts that “Sam Everett has been an active participant in the transactions . . ., including repeated travels to Louisiana to participate in negotiations with third parties and Henderson Auctions (including meetings with Marvin Henderson).” (Am. Compl. ¶ 36).

         Henderson Auctions seeks to recover damages and/or declaratory relief for the following causes of action: (1) Breach of Fiduciary Duty; (2) Breach of Contract/Bad Faith Breach of Contract; (3) Detrimental Reliance; (4) Conversion/Fraud/Misrepresentation; (5) Declaratory Judgment; and (6) Demand for Accounting. (Am. Compl. ¶¶ 38-67).

         BLH, Blake Everett, and ELA filed an Answer and Counterclaim in response to Henderson Auction's original Petition. (R. Doc. 6). BLH, Blake Everett, and ELA assert, among other things, an affirmative defense of “offset by amount amounts owed by Plaintiff to defendants.” (R. Doc. 6 at 2).

         BLH alone raises a counterclaim against Henderson Auctions for “Breach of Contract/Bad Faith Breach of Contract” and “Demand for Accounting.” (R. Doc. 6 at 13-21). BLH alleges that beginning in 2012, it had an arrangement with Henderson Auctions whereby it would identify property for auction, Henderson Auctions would finance the purchase of the items if interested and auction off the items, and BLH and Henderson Auctions would split 50% of the profit. (R. Doc. 6 at 15). BLH references a spreadsheet of the transactions in its pleading, which appears to be attached as an exhibit to a separate motion to dismiss. (R. Doc. 5-3). This spreadsheet provides an accounting of various purchases of items from October 4, 2012 through March 4, 2014 and indicates a balance due to BLH from Henderson Auctions in the amount of $601, 877. (R. Doc. 5-3).

         II. Law and Analysis

         A. 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 33 and 34 provide a party with 30 days after service of the discovery to respond or object. See Fed. R. Civ. P. 33(b)(2) and 34(b)(2)(A). If a party fails to respond fully to discovery requests made pursuant as to Rules 33 and 34 in the time allowed by the Federal Rules of Civil Procedure, the party seeking discovery may move to compel disclosure and for appropriate sanctions under Rule 37. An “evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer or respond.” Fed.R.Civ.P. 37(a)(4).

         B. Defendants' Motion to Compel (R. Doc. 86)

         Defendants represent that on May 26, 2017, Plaintiff provided them “with a spreadsheet dated May 24, 2017 [that Plaintiff] prepared in accordance with Federal Rule of Evidence 1006.” (R. Doc. 86-1 at 2). Defendants seek an order requiring Plaintiff “to produce the source documents it used to prepare its 1006 summary or, in the alternative, make those documents available for inspection and copying.” (R. Doc. 86-1 at 2). Defendants represent that Plaintiff contends that the source documents have already been provided to Defendants. (R. Doc. 86-1 at 2). Defendants attached “sample” documents produced by Plaintiff. (R. Doc. 86-2). Defendants did not submit a copy of the spreadsheet dated with their Motion to Compel.

         In opposition, Plaintiff asserts that “[a]t the time that [the] Rule 1006 exhibits were produced, [Plaintiff] had already produced recordings of each auction where equipment was sold and documents showing the item numbers for equipment, purchase price(s), date(s) of acquisition, expenses, dates of sale, the identity of the buyers, each buyer's invoice, the amount of the sale's price, and whether the transaction was profitable.” (R. Doc. 93 at 1). Plaintiff further assets that it only became evident a few days before the discovery deadline that Defendants “wanted the actual checks, wire receipts, or credit card receipts, etc., by which third parties had paid for each piece of equipment after each auction, ” ...


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