United States District Court, M.D. Louisiana
CHEVRON TCI, INC.
CAPITOL HOUSE HOTEL MANAGER, LLC, ET AL.
RICHARD L. BOURGEOIS, JR. UNITED STATES MAGISTRATE JUDGE
the Court is Plaintiff's Motion for Protective Order (R.
Doc. 24). In lieu of filing a separate opposition, Defendants
filed a Motion to Compel (R. Doc. 27), which is also before
the Court. Plaintiff then filed a memorandum serving both as
an opposition to Defendants' Motion to Compel and as a
reply in support of Plaintiffs' Motion for Protective
Order. (R. Doc. 33). Defendants filed a reply in support of
their Motion to Compel (R. Doc. 41) with exhibits filed under
seal (R. Doc. 42) (sealed).
before the Court is Defendants' Motion for Protective
Order (R. Doc. 28). The motion is opposed. (R. Doc. 30).
Defendants filed a reply. (R. Doc. 36).
a breach of contract action in which Chevron TCI, Inc.
(“Plaintiff” or “Chevron TCI” or
“CTCI”) alleges that it is entitled to recover
approximately $11 million from Capitol House Hotel Manager,
LLC (“Capital House Manager”) and/or the Wilbur
Marvin Foundation (“WMF”) (collectively,
“Defendants”). (R. Doc. 1, “Compl.”).
alleges that in 2005, it invested in Capitol House Hotel
Operating Company, LLC (“Capital House Operator”)
“which was formed to lease, hold, maintain, and operate
a hotel and commercial space in downtown Baton Rouge, now
know as the Hilton Capital Center.” (Compl. ¶ 7).
CTCI represents that the “project was eligible for the
federal Historic Tax Credit (HTC) program, which encourages
private sector investment in the rehabilitation and re-use of
historic buildings.” (R. Doc. 24-1 at 3).
represent that on December 19, 2005, Capital House Manager,
Capital House Operator, and Capital House Hotel Development
Company, LLC (“Capital House Owner”) were
organized as limited liability companies under Louisiana law.
(R. Doc. 27-1 at 4). Defendants assert that Capital House
Owner leased the hotel to Capital House Operator and
“there was an historic tax credit pass-through
agreement allowing CTCI to receive the income tax credits,
even though the entity in which it invested (Operator) did
not own the building that was being improved.” (R. Doc.
27-1 at 4). CTCI represents that under Capital House
Operator's operating agreement, Capital House Manager
would manage Capital House Operator and CTCI would receive
tax credits for an investment of $11, 909, 779, payable in
two installments, which CTCI paid. (R. Doc. 24-1 at 3).
December 29, 2005, CTCI entered into a Purchase Agreement
with Capital House Manager with a six-month “put option
period” to elect to sell its membership interest in
Capital House Operator to Capitol House Manager. (Compl.
¶ 8; see R. Doc. 1-1). That same day, Plaintiff
also entered into a Guaranty Agreement with WMF in which WMF
guaranteed all obligations of Capitol House Manager within
the Purchase Agreement. (Compl. ¶ 9; see R.
Doc. 1-2). The Purchase Agreement has been amended several
times, with the seventh and final amendment providing that
the purchase option period ended on December 31, 2015.
(Compl. ¶ 10-11; see R. Docs. 1-3, 1-4). In
addition, each of the Amended and Restated Purchase
Agreements contains an acknowledgement that the Guaranty
Agreement remains in full effect except to the extent the
Purchase Agreement is amended. (Compl. ¶ 12;
see R. Docs. 1-3, 1-4).
House Operator was under IRS audits with respect to
CTCI's claimed historic tax credit for the years
2006-2011. (R. Doc. 27-1 at 6). Defendants assert that during
this audit CTCI took the position that it was a “true
partner” with Capital House Operator and, accordingly,
could avail itself of the full historic tax credit, but
ultimately settled with the IRS by receiving two-thirds of
the historic tax credit. (R. Doc. 27-1 at 6-7).
represent that on September 5, 2012, Capital House Owner and
Capital House Operator “terminated the lease between
them” and Capital House Owner sold the hotel, including
fixtures and other assets, to a third party. (R. Doc. 27-1 at
5). Defendants assert that Capital House Operator “was
terminated and dissolved” in light of the language of
Section 2.5(A)(i) of its Operating Agreement. (R. Doc. 27-1
at 5). Defendants further assert that CTCI
consented to the sale and termination of the lease, and CTCI
lost its right to a put option payment in light of the
termination of Capital House Operator as an entity. (R. Doc.
27-1 at 6). CTCI argues that Louisiana law has additional
requirements for the termination of a limited liability
company, notwithstanding the language in Capital House
Operator's Operating Agreement. (R. Doc. 33 at 3).
House Operator was also under an IRS audit with respect to
CTCI's claimed historic tax credit for the years
2012-2013. (R. Doc. 27-1 at 6-7). Defendants represent that
during this audit CTCI signed a Form 870-PT agreeing with the
IRS' conclusion that Capital House Operator was
terminated as an entity in 2012 given the termination of the
lease and sale of assets. (R. Doc. 27-1 at 7).
November 19, 2015, CTCI demanded Capitol House Manager to
purchase its interest in Capital House Operator for $10, 554,
519. (Compl. ¶ 13). Neither Capital House Manager nor
WMF paid the amount sought. (Compl. ¶ 14). CTCI is now
seeking recovery for breach of the Purchase Agreement and
instant discovery motions concern written discovery served on
CTCI and certain topics of the parties' Rule 30(b)(6)
deposition. The main disputes with respect to the discovery
at issue is whether and to what extent information regarding
other historic tax credit investments entered into between
CTCI with third parties, including any representations CTCI
made to the IRS with respect to those investments and other
agreements drafted by counsel for CTCI for the purposes of
those investments, fall within the scope of discovery.
Defendants assert that statements made by CTCI to the IRS
with respect to these other investments “could be an
admission and likely will be an admission against its
interest in this suit” should CTCI have taken the
position that it had “substantial risk” in those
other investments. (R. Doc. 27-1 at 7). Defendants further
assert that because counsel for CTSI drafted the agreements
at issue in this action, other purchase, guaranty, and
operating drafted by counsel for CTCI constitute relevant
information with respect to whether Capital House Operator
was terminated and dissolved prior to the put option and, if
so, whether that dissolution renders the put option
unenforceable. (R. Doc. 27-1 at 16-20). CTCI objects to the
discovery sought on various bases, including relevance,
proportionality, and confidentiality concerns.
Law and Analysis
Legal Standards for Discovery
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).
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)).
a party withholds information otherwise discoverable by
claiming that the information is privileged or subject to
protection as trial-preparation material, the party must: (i)
expressly make the claim; and (ii) describe the nature of the
documents, communications, or tangible things not produced or
disclosed--and do so in a manner that, without revealing
information itself privileged or protected, will enable other
parties to assess the claim.” Fed.R.Civ.P. 26(b)(5)(A).
Blanket assertions of a privilege are unacceptable, and the
court and other parties must be able to test the merits of a
privilege claim. United States v. El Paso Co., 682
F.2d 530, 541 (5th Cir. 1982) (citing United States v.
Davis, 636 F.2d 1028, 1044 n. 20 (5th Cir. 1981)).
of the Federal Rules of Civil Procedure provides for the
service of written interrogatories. A party seeking discovery
under Rule 33 may serve interrogatories on any other party
and the interrogatory “may relate to any matter that
may be inquired into under Rule 26(b).” Fed.R.Civ.P.
of the Federal Rules of Civil Procedure provides for the
discovery of documents and tangible items. A party seeking
discovery must serve a request for production on the party
believed to be in possession, custody, or control of the
documents or other evidence. Fed.R.Civ.P. 34(a). The request
is to be in writing and must set forth, among other things,
the desired items with “reasonable
particularity.” Fed.R.Civ.P. 34(b)(1)(A).
must respond or object to interrogatories and requests for
production. See Fed. R. Civ. P. 33(b)(2);
Fed.R.Civ.P. 34(b)(2)(A). This default date may be modified
by stipulation between the parties. Fed.R.Civ.P. 29(b). If a
party fails to respond fully to discovery requests in the
time allowed by the Federal Rules of Civil Procedure, the
party seeking discovery may move to compel responses 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.
30(b)(6) governs deposition notices directed to
organizations. In the deposition notice, the party
“must describe with reasonable particularity the
matters for examination.” Fed.R.Civ.P. 30(b)(6). In
response, the organization must designate an agent or other
person to testify on its behalf “about information
known or reasonably available to the organization.”
Id. “The duty to present and prepare a Rule
30(b)(6) designee goes beyond matters personally known to
that designee or to matters in which that designee was
personally involved. The deponent must prepare the designee
to the extent matters are reasonably available, whether from
documents, past employees, or other sources.”
Brazos River Auth. v. GE Ionics, Inc., 469 F.3d 416,
433 (5th Cir. 2006). The court may limit a Rule 30(b)(6)
deposition notice to the extent it requests the organization
to designate an agent to testify on topics of information
that are overly broad, vague, or ambiguous. See,
e.g., Scioneaux v. Elevating Boats, LLC,
No. 10-0133, 2010 WL 4366417, at *3 (E.D. La. Oct. 20, 2010)
(quashing deposition notice where the plaintiff failed to
particularize the topics of discussion in Rule 30(b)(6)
deposition notice); In re Katrina Canal Breaches
Consolidates Litigation, No. 05-4182, 2008 WL 4833023
(E.D. La. July 2, 2008) (granting motion for protective order
to the extent topics listed in a 30(b)(6) notice were overly
broad, vague and ambiguous); Padana Assicurazioni-Societa
Azioni v. M/V Caribbean Exp., No. 97-3855, 1999
WL 30966 (E.D. La. Jan. 21, 1999) (denying motion to compel
Rule 30(b)(6) deposition where the notice was insufficiently
CTCI's Motion for Protective Order (R. Doc. 24) and
Defendants' Motion to Compel (R. Doc.
Motion for Protective Order (R. Doc. 24) and Defendants'
Motion to Compel (R. Doc. 27) concern Defendant's
Requests for Production Nos. 19, 20, 35-37 (R. Doc. 24-2),
Interrogatory Nos. 6-10 ...