United States District Court, D. Kansas
STEVEN M. VIOLETTA, Plaintiff,
STEVEN BROTHERS SPORTS MANAGEMENT, LLC, et al., Defendants.
MEMORANDUM AND ORDER
E. BIRZER, UNITED STATES MAGISTRATE JUDGE.
24, 2017, the Court held an in-person hearing to discuss the
following pending motions:
• Plaintiff s Motion to Amend Complaint (ECF No.
• Defendants' Motion for Leave to File Amended
Answer and Counterclaims (ECF No. 57);
• Plaintiffs Motion to Compel Discovery (ECF No.
• Parties' Joint Motion to Extend All Deadlines
(ECF No. 78).
appeared through counsel, Boyd A. Byers and Sharon E. Rye.
Defendants appeared through counsel, Aaron J. Good. After
consideration of both the arguments of counsel and the
parties' briefing, the Court announced the following
rulings at the hearing: Plaintiffs Motion to Amend Complaint
(ECF No. 50) was GRANTED; Defendants'
Motion for Leave to File Amended Answer (ECF No.
57) was GRANTED as unopposed; and the parties'
Joint Motion to Extend All Deadlines (ECF No.
78) was GRANTED in part and DENIED in part
(see Order, ECF No. 85). The Court deferred ruling
on Plaintiffs Motion to Compel Discovery (ECF No.
75) pending Defendants' submission and the
Court's in camera review of specific documents contained
in Defendants' third privilege log (Order, ECF No. 85).
reviewed the parties' briefing, the oral arguments of
counsel, and the documents submitted in camera, the Court is
now prepared to rule. For the reasons set forth below,
Plaintiff's Motion to Compel Discovery (ECF No.
75) is GRANTED in part and
DENIED in part. Additionally, the Court
addresses the other pending motions discussed at hearing.
Steven M. Violetta was hired in August 2015 as the Chief
Executive Officer of three hockey franchises owned and
operated by defendants Steven Brothers Sports Management, LLC
(“SBSM”), Brandon Steven, and Rodney Steven.
After approximately seven months on the job, Defendants
terminated Plaintiff's employment. He then filed this
federal claim on June 10, 2016, alleging the three defendants
failed to pay him under the bonus and commission provisions
of the parties' Employment Agreement, and failed to pay
him all wages due to him under the Kansas Wage
Paymentlaws. In his Complaint, Plaintiff also
claims Defendants violated the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”) by failing to
provide him notice and offer him continuation of his group
health coverage, and violated the Employee Retirement Income
Security Act of 1974 (“ERISA”) by refusing to
provide copies of his employee benefit plan documents. His
initial Complaint seeks a Court order directing Defendants to
provide the requested plan documents, remedial measures for
the COBRA and ERISA violations, and compensatory damages,
statutory penalties, costs and attorney fees for all claims.
the oral rulings announced at the July 24 hearing, Plaintiff
filed his First Amended Complaint (ECF No. 86). In his
amended pleading, Plaintiff kept his original claims, and
added age discrimination (“ADEA”) claims and an
additional ERISA claim for breach of fiduciary duty. The
Amended Complaint also names five additional defendants,
including Steven Brothers Sports Management of Allen, LLC
(“SBSM-A”) and Johnny Steven (who, together with
the original defendants are referred to as the “Steven
brothers”). Plaintiff also named three Genesis Health
Club defendants: Genesis Health Clubs Management, Inc.;
Genesis Health Clubs Management, LLC; and Genesis Health
Club, Inc. (collectively, “Genesis”). In his
Amended Complaint, Plaintiff claims all Defendants are
jointly and severally liable for his claims. He alleges SBSM,
SBSM-A, and Genesis function as an integrated enterprise,
because they “have interrelated operations, common
ownership, common financial control, common management at the
top level, and centralized control of human resources.”
(ECF No. 86, ¶ 32.) Plaintiff claims SBSM and SBSM-A
shared his services and control over his position, and there
was no real separation between the Steven brothers, on the
one hand, and SBSM, SBSM-A, and Genesis, on the other. (ECF
No. 86, ¶¶ 33-34.)
entry of a scheduling order in this case was initially
postponed, and discovery limited, in order to allow the
parties to attempt early mediation (Order, ECF No. 18). After
early mediation was unsuccessful, a Scheduling Order was
entered on January 20, 2017 (ECF No. 28). This schedule has
continued to govern this case leading up to the filing of the
recent motions, each of which is discussed below.
Plaintiff's Motion to Amend Complaint (ECF No.
motion seeking to amend his Complaint was his first request
for amendment. As noted above, he sought amendment to add an
ADEA claim, an additional ERISA claim for breach of fiduciary
duty, and to add five defendants, including SBSM-A; Johnny
Steven, and three Genesis defendants. Although the Court
orally granted Plaintiff's motion (ECF No. 85), and the
Amended Complaint was recently filed (ECF No. 86), the Court
briefly explains the rationale behind its ruling.
may amend its pleading as a matter of course under
Fed.R.Civ.P. 15(a)(1), either before the responding party
answers or within 21 days after service of a responsive
pleading. However, in cases such as this, where the time to
amend as a matter of course has passed, without the opposing
party's consent a party may amend his pleading only by
leave of the court under Rule 15(a)(2).
15(a)(2) provides leave “shall be freely given when
justice so requires, ” and the decision to allow an
amendment is within the sound discretion of the
court. The court considers a number of factors in
deciding whether to allow an amendment, including timeliness,
prejudice to the other party, bad faith, and futility of
amendment.In exercising its discretion, the court
must be “mindful of the spirit of the federal rules of
civil procedure to encourage decisions on the merits rather
than on mere technicalities.”The Tenth Circuit
acknowledged that Rule 15 is intended “to provide
litigants ‘the maximum opportunity for each claim to be
decided on its merits rather than on procedural niceties,
'” especially in the absence of bad faith by
an offending party or prejudice to a non-moving
Issues Regarding Amendment
do not dispute SBSM-A may be added as a party. Nor do they
argue there exists any undue delay, dilatory motive, prior
failure to cure deficiencies, or undue prejudice. They oppose
the amendment only on grounds of futility and bad faith,
citing four primary arguments: 1) the ADEA claim is
time-barred; 2) Plaintiff lacks standing to make an ERISA
claim for breach of fiduciary duty; 3) Plaintiff's
attempt to add the Genesis defendants is in bad faith; and 4)
Plaintiff fails to state a claim against Johnny Steven
because he is exempt from liability under the Kansas LLC law.
Each of Defendants' contentions is addressed below.
ADEA Claim is Not Untimely as Pleaded
Defendants' Response (ECF No. 54) to Plaintiff's
motion to amend, they argue his ADEA claim is untimely
because he filed his Charge of Discrimination with the Equal
Employment Opportunity Commission (“EEOC”) too
late. In Plaintiff's First Amended Complaint, he alleges
he was terminated on March 11, 2016 (ECF No. 86, ¶ 23).
Defendants claim they actually terminated him a month
earlier, on February 11, 2016. Although the parties dispute
what date the actual termination took place, at this stage,
the Court reviews claims of futility under a motion to
dismiss standard. In doing so, “the court must accept
as true all well-pleaded factual allegations and view them in
the light most favorable to the pleading
party.” Viewing the well-pleaded allegations in
the light most favorable to Plaintiff, the Court accepts
Plaintiff's contention he was terminated in March.
filed his EEOC Charge on December 6, 2016. In their Response,
Defendants claim his EEOC charge was filed on Dec. 9, 2016.
However, it is clear from the Charge itself, attached to
Plaintiff's Reply (ECF No. 63, Ex. B), Plaintiff filed
with the EEOC on December 6 and Defendants received their
copy on December 9, 2016. Therefore, the remaining question
before the Court is whether the 270 days between March 11,
2016 (Plaintiff's alleged termination date) to December
6, 2016 (Plaintiff's filing of the EEOC charge) was
within the time required by law.
July 24, 2017 hearing, Defendants conceded much of its
arguments regarding timeliness were based upon their
incorrect reading of the EEOC filing date. Additionally,
Defendants announced that, after a review of Plaintiff's
Reply brief and the authority contained therein, they
abandoned their arguments regarding the timeliness of
Plaintiff's proposed ADEA claim. Therefore, without
further analysis, the Court accepts the ADEA claims as timely
Plaintiff Does Not Clearly Lack Standing to Make an
ERISA Claim for Breach of Fiduciary
also argue Plaintiff's new ERISA claim, for breach of
fiduciary duty, is duplicative of his original ERISA claim
for failure to produce plan documents.
further contend Plaintiff lacks standing to bring a breach of
fiduciary claim, because 29 U.S.C. §1109 creates
liability to the plan itself, but does not allow an
individual to make a claim for personal damages against a
plan fiduciary. Plaintiff rebuts this argument by noting
Defendants ignore other sections of the ERISA statutes,
sections 1132(a)(2) and 1132(a)(3), that permit this type of
District of Kansas case, Sigurdson v. Southmark-Nat'l
Heritage, Inc., specifically permitted a similar claim
to proceed. In Sigurdson, the plaintiff
alleged the defendants breached their fiduciary duty by
failing to send COBRA notices. Although the court
acknowledged a plaintiff cannot bring a private cause of
action for money damages against plan fiduciaries for breach
of a fiduciary duty, it also noted “an individual
beneficiary may sue ‘in a representative capacity on
behalf of the plan as a whole.'”
review of Sigurdson, Plaintiff appears to state at
least a plausible claim under 29 U.S.C. § 1132(a)(2) or
§ 1132(a)(3). During the hearing, Defendants admitted
Plaintiff may appropriately bring a section 1132 claim, but
argued whether he brings his fiduciary duty claim on behalf
of the plan itself-as required-is unclear. However, the
broadness of the claim can be narrowed through discovery and
crystalized before the entry of a Pretrial
Order. Additionally, the new claim does not
appear duplicative of the original ERISA claim. Plaintiff is
permitted under Fed.R.Civ.P. 8(a)(3) to assert alternative
theories. Because discovery may reveal any Defendant to be
only an administrator or only a fiduciary, Plaintiff's
claims against all Defendants are protected by including both
theories at this stage of litigation. Because Plaintiff is
permitted to bring alternative theories, and the claim
appears plausible, on its face, the Court will not prevent
assertion of the ERISA breach of fiduciary duty claim on the
basis of futility.
Plaintiff's Attempt to Add the Genesis Defendants is Not
in Bad Faith
contend Plaintiff seeks the addition of the Genesis
defendants in bad faith, because Plaintiff did not first
attempt to discover which Defendant(s) are the proper
administrators of the benefits plans before seeking to add
Genesis. Rather than add additional parties, Defendants argue
Plaintiff should have first asked more pointed discovery
questions or contention interrogatories. But Plaintiff
contends the bulk of his dealings with Defendants regarding
his COBRA and plan document inquiries were largely with
Genesis employees. In fact, the documents identified in
Defendants' privilege log (see discussion
infra Section V., Plaintiff's Motion to Compel)
demonstrate that Genesis employees were heavily involved in
responding to Plaintiff's requests for information.
order for the party opposing amendment to succeed on a claim
of bad faith amendment, “[t]he movant's bad faith
must be apparent from evidence of
record.”“Bad faith” is defined as
“dishonesty of belief, purpose or
motive.” But given the Genesis defendants'
apparent relationship with the SBSM and Steven brothers'
defendants, and Plaintiff's dealing with them, the Court
perceives no apparent bad faith on Plaintiff's part.
Although Plaintiff acknowledges his claims could be narrowed
through discovery, such as Rule 30(b) depositions, his claims
against the Genesis defendants do not appear dishonest or
borne of some ulterior motive. Therefore, the Court will not
bar Plaintiff's amended complaint on the basis of bad
Plaintiff's Claim against Johnny Steven is Not
argue Plaintiff's claim against Johnny Steven is futile,
in part because a core claim of the lawsuit is
Plaintiff's breach of contract claim, and Johnny Steven
was not a signatory to Plaintiff's employment agreement.
Defendants also contend K.S.A. § 17-7688 exempts a
member or manager of an LLC from personal liability, and
Plaintiff's claim against Johnny personally cannot
survive. But Plaintiff maintains he seeks to hold Johnny
Steven liable in his personal capacity as permitted by both
ERISA and the KWPA. Plaintiff also argues he sets forth
sufficient allegations to support an alter ego argument, or
piercing the corporate veil, to hold Johnny Steven personally
liable for any violations committed by SBSM and SBSM-A.
do not refute Plaintiff's claim that all three Steven
brothers are partial owners of SBSM & SBSM-A, with Rodney
and Brandon each owning 45% and Johnny owning 10% of the
companies. And, although K.S.A. § 17-7688 may exempt a
member or manager of an LLC from personal liability,
generally, both the KWPA and ERISA could impose personal
liability on Johnny if Plaintiff is successful in piercing
the corporate veil. This will be a highly fact-dependent
issue, and rather than prohibit Plaintiff from pursuing this
claim at the outset, the Court finds it more appropriate to
permit Plaintiff to conduct discovery on the topic and
determine its viability in a later dispositive motion. The
claims are well-pleaded, and the Court does not find the
claims against Johnny Steven to be clearly futile.
Conclusion on Amendment
their stated arguments addressed above, Defendants fail to
present any argument regarding the prejudice they might face
if the amendment were permitted. As the party opposing the
amendment, Defendants bear the burden to demonstrate undue
prejudice within the meaning of Rule 15. Given
Defendants' complete disregard of this “most
important factor, ” the Court finds Defendants
failed to demonstrate prejudice sufficient to prohibit the
proposed amendment. And, considering the nature of the new
claims, the relationship between the original and proposed
defendants, and the procedural posture of the litigation, the
Court struggles to discern any true injustice which would
occur from adding the new claims and additional defendants.
The deadlines in this matter will be revised, at the
parties' request (see discussion infra
Section VI., Joint Motion to Extend All Deadlines). This new
schedule will provide the parties with adequate time to
conduct discovery and will permit all Defendants with
sufficient opportunity to fully defend the new claims.
absence of undue delay, bad faith, futility, or prejudice to
the opposing party, “leave to amend should, as the
rules require, be freely given.” Finding
Plaintiff's proposed amendment is timely, not futile,
lacking bad faith, and causes no undue prejudice to
Defendants, the Court prefers this case to proceed on its
full merits. In the interests of justice, the Court
allows Plaintiff to amend his Complaint as announced at
Defendants' Motion for Leave to file Amended Answer and
Counterclaims (ECF No. 57)
sought to add two counterclaims against Plaintiff, alleging:
(1) violations of the Kansas Uniform Trade Secrets Act, and
(2) violations of the Computer Fraud and Abuse Act. After
Defendants filed their motion (ECF No. 57), Plaintiff
indicated in his Response (ECF No. 65) he did not oppose
Defendants' amendment, but asked that the filing of
Defendants' amended pleading be postponed until after
Plaintiff was permitted to file his amended complaint. These
positions were confirmed at the July 24, 2017 hearing.
the Motion for Leave to file Amended Answer and Counterclaims
(ECF No. 57) unopposed, the Court orally granted the motion
and ordered Defendants to file their amended pleading after
Plaintiff filed his Amended Complaint (see Order,
ECF No. 85). Defendants recently filed their Answer to the
Amended Complaint and Counterclaims (ECF No. 88).
Plaintiff's Motion to Compel Discovery (ECF No.
addition to his request to amend, Plaintiff also seeks to
compel certain discovery responses from Defendants. Plaintiff
served four sets of requests for production (RFP) on
defendants SBSM, Rodney Steven, and Brandon Steven, beginning
with the first set on July 28, 2016 and ending with the final
requests sent December 15, 2016 (Pl.'s Mem., ECF No. 76).
After various discussions and agreements between the parties,
Defendants responded to these requests on January 9, 2017.
Since then, the parties have continued to confer in an effort
to resolve the ongoing disputes regarding Defendants'
responses. Due to the parties' continuing
efforts, neither party raises the issue of timeliness
concerning Plaintiff's motion.
Compliance with D. Kan. Rule 37.2
the briefing, and during the in-person hearing, the parties
demonstrated their multiple attempts to resolve their
differences on the pending discovery issues. Therefore, the
Court is satisfied they have sufficiently conferred as
required by D. Kan. Rule 37.2 and Fed.R.Civ.P. 37(a)(1).
However, despite their attempts, the parties could not
resolve all disputes, leading to the instant motion.
the parties' efforts, two primary discovery issues
remained for discussion at the July 24, 2017 hearing. First,
Plaintiffs seek disclosure of documents related to the sale
of the Allen Americans franchise. Second, Plaintiff requests
production of information included on Defendant's
privilege log. Those documents were delivered to the chambers
of the undersigned on July 24, 2017. The Court has reviewed
the documents and is now prepared to rule. Each category of
information is addressed in turn.
Documents Related to the Sale of the Allen Americans
Franchise (Plaintiff's RFP Nos. 25-26)
February 2017, SBSM-A sold its Allen Americans hockey
franchise to a Texas company, Allen Hockey Team, LLC (ECF No.
79, at 1). Months earlier, in Plaintiff's initial
discovery requests, he sought information regarding the
potential sale. Plaintiff's Request for Production No. 25
seeks “all documents relating to the sale or potential
sale of Allen Americans.” In Request No. 26, he asks
Defendants to produce “all documents provided by SBSM
to [any] current potential buyer, ” with various types
of documents included in the request. Although these
requests, as written, appear quite broad, over the past
several months Plaintiff agreed to limit the requests to the
following four topics:
(1) communications with prospective buyers or the eventual
buyer that reference Plaintiff;
(2) communications and documents relating to performance of
the franchise during the 2015-2016 season, when Plaintiff was
(3) communications with prospective buyers or the eventual
buyer during [the time frame] when Plaintiff was employed by
SBSM and the month immediately after his termination in March
2016-through the end of April 2016; and
(4) a copy of the final sales agreement.
(ECF No. 76 at 3.) Defendant initially objected to producing
any responsive documents, but later agreed to produce only
e-mail communications that specifically reference Plaintiff
by name (sought by Plaintiff under Topic 1, above).
object to additional production, in part because they contend
the information sought is irrelevant to Plaintiff's
claims. They also believe the requested information is
duplicative of financial documents already produced; and
claim some of the information is no longer in Defendants'
possession, but in the new owners' possession, and the
new owner is unresponsive.
claims his requests have been sufficiently narrowed. He
asserts any financial representations surrounding the sale
are relevant to demonstrate the organization was performing
well financially, which would disprove Defendants' claims
they fired him for cause when the companies failed to meet
financial goals. The information could also refute
Defendants' claim they did not owe Plaintiff bonuses
because he failed to reach financial benchmarks. Plaintiff
contends there should be some type of “due
diligence” file Defendants made available to potential
buyers, and believes the representations made to those
potential buyers are contradictory to Defendants' claims
in this case regarding their financial position. Plaintiff
asks that Defendants bear any cost of any
“spoliation” related to information solely in the
new owner's possession, because he served his discovery
requests long before the sale was finalized.
addressing the arguments of the parties, the Court must first
examine the appropriate standard for determining the
relevance of the information Plaintiff seeks.
Legal Standard - Relevance
Civ. P. 26(b)(1) permits discovery of “any
non-privileged matter that is relevant to any party's
claim or defense.” Additionally, the scope of discovery
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.
is to be “construed broadly to encompass any matter
that bears on, or that reasonably could lead to other matter
that could bear on” any party's claim or
party seeking discovery meets its initial, minimal burden to
demonstrate its request is relevant, on its face,
the resisting party cannot rely upon conclusory statements
that the requested discovery is irrelevant. It
“must either demonstrate the discovery sought does not
come within the broad scope of relevance defined in Rule
26(b)(1), or that it is of such marginal relevance that the
potential harm caused by the discovery would outweigh the
presumption in favor of broad
disclosure.” On the other hand, if the relevancy of
the discovery request is not readily apparent on its face,
the party seeking the discovery bears the burden to
demonstrate the request is relevant. As a general rule,
relevancy is determined on a case-by-case