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Ad Astra Recovery Services, Inc. v. Heath

United States District Court, D. Kansas

June 12, 2019

AD ASTRA RECOVERY SERVICES, INC., Plaintiff,
v.
JOHN CLIFFORD HEATH, ESQ., et al., Defendants.

          MEMORANDUM AND ORDER

          ANGEL D. MITCHELL U.S. MAGISTRATE JUDGE

         This matter comes before the court on Plaintiff's Motion to Compel the Production of Documents by Defendants (ECF No. 48). Plaintiff asks the court to compel defendants to produce documents concerning their income and compensation. Defendants oppose the motion. For the reasons stated below, the motion is granted in part and denied in part.

         I. BACKGROUND

         Plaintiff Ad Astra Recovery Services, Inc. (“Ad Astra”), a debt collector and credit agency, alleges the “defendants engaged in a fraudulent credit-repair scheme designed to bombard debt collectors with false credit dispute letters with the intention of deceiving debt collectors . . . and frustrating their efforts to collect legitimate debts.” (Compl. ¶ 3 (ECF No. 1).) Defendants deny these allegations. Ad Astra asserts mail fraud, wire fraud, and conspiracy claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§1962(c) and (d). Ad Astra also asserts Kansas common law claims for fraud and tortious interference with existing contractual relationships. The defendants are John C. Heath, Attorney at Law, PLLC, doing business as Lexington Law Firm; Lexington Consumer Advocacy, LLC; John Clifford Heath, Kevin Jones, Adam C. Fullman; and Progrexion Teleservices, Inc. and Progrexion Holdings, Inc. The individual defendants are attorneys with Lexington Law, and the Progrexion defendants are the law firm's printer and mass mailer.

         The present discovery dispute involves: (1) requests for production of documents (“RFPs”) that Ad Astra served on Lexington Law, the individual defendants, and the Progrexion defendants (collectively “the Lexington Law defendants”) and (2) Ad Astra's request that the court compel production of documents used to create a “Master License Tracking Chart” (“the chart”) produced by the Lexington Law defendants that shows payments made by the Lexington Law firm to various Progrexion entities. The RFPs seek documents concerning these defendants' income, compensation, and finances generally. The Lexington Law defendants objected to these RFPs on the grounds that, among other things, they are not proportional to the needs of the case and are overly broad. On February 28, 2019, Ad Astra filed a motion to compel (ECF No. 33) concerning these and other discovery requests.

         On April 4, 2019, the undersigned conducted an in-person discovery conference with the parties, during which the court ruled from the bench on the majority of Ad Astra's motion (ECF No. 42). The court found the Lexington Law defendants' RFP responses largely failed to comply with Fed.R.Civ.P. 34(b)(2)(B), which requires a responding party to “state with specificity the grounds for objecting to the request, including the reasons” because the Lexington Law defendants asserted impermissible boilerplate, categorical objections. The court overruled most of the Lexington Law defendants' proportionality objections, finding that they were largely unsupported. The court also noted the Lexington Law defendants' response brief had failed to address the discovery requests concerning compensation information raised in Ad Astra's motion to compel, thereby waiving their objections to these discovery requests.[1] The court therefore granted this portion of Ad Astra's motion to compel as unopposed and found that Ad Astra had met its burden to show the information was facially relevant. The undersigned encouraged the parties to have an ongoing dialogue about a less invasive way for Ad Astra to obtain this information.

         Following the April 4 hearing, the parties further conferred about compensation information, but they were unable to reach an agreement. Ad Astra sent the Lexington Law defendants a proposal to narrow the RFPs to certain categories of information, but the Lexington Law defendants responded by producing an even narrower category of documents. One of the documents produced was the chart, which defense counsel previously represented was created for the purpose of litigation but now represents was created during the normal course of business. After the parties reached an impasse, the undersigned granted Ad Astra leave to file another motion to compel concerning income and compensation documents.

         II. LEGAL STANDARD

         Fed. R. Civ. P. 26(b)(1) defines the scope of discovery. Under the rule, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” In other words, considerations of both relevance and proportionality now expressly govern the scope of discovery. Fed.R.Civ.P. 26(b)(1) advisory committee's note to the 2015 amendment. Relevance is “construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978); see Rowan v. Sunflower Elec. Power Corp., No. 15-9227, 2016 WL 3745680, at *2 (D. Kan. July 13, 2016) (applying Oppenheimer after the 2015 amendment); see also Kennicott v. Sandia Corp., 327 F.R.D. 454, 469 (D.N.M. 2018) (analyzing the 2015 amendment and concluding that it did not change discovery's scope but clarified it, and therefore Oppenheimer still applies).

         When a responding party fails to make a disclosure or permit discovery, Fed.R.Civ.P. 37(a) permits the discovering party to file a motion to compel. The party seeking discovery bears the initial burden to establish relevance, but it does not bear the burden to address all proportionality considerations. See Landry v. Swire Oilfield Servs., L.L.C., 323 F.R.D. 360 (D.N.M. 2018) (discussing the effect of the 2015 amendment on the party seeking discovery); Gen. Elec. Capital Corp. v. Lear Corp., 215 F.R.D. 637, 640 (D. Kan. 2003) (stating the moving party bears the initial burden to demonstrate relevance); Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992) (“Some threshold showing of relevance must be made before parties are required to open wide the doors of discovery and to produce a variety of information which does not reasonably bear upon the issues in the case.”); Fed.R.Civ.P. 26(b)(1) advisory committee's note to the 2015 amendment (noting that the amendment “does not place on the party seeking discovery the burden of addressing all proportionality considerations” and that “the parties' responsibilities [on a discovery motion] would remain the same as they have been”).

         Relevance, however, is often apparent on the face of the request. See Johnson v. Kraft Foods N. Am., Inc., 238 F.R.D. 648, 652-53 (D. Kan. 2006). When the discovery sought appears relevant on its face, or the discovering party has established relevance, the party resisting discovery bears the burden to support its objections. See Ehrlich v. Union Pac. R.R. Co., 302 F.R.D. 620, 624 (D. Kan. 2014) (holding the party resisting discovery bears the burden to show why a discovery request is improper); Martin K. Eby Const. Co. v. OneBeacon Ins. Co., No. 08-1250-MLB-KGG, 2012 WL 1080801, at *3 (D. Kan. Mar. 29, 2012) (“Once this low burden of relevance is established, the legal burden regarding the defense of a motion to compel resides with the party opposing the discovery request.” (emphasis supplied)). The party resisting discovery does not carry this burden by asserting “conclusory or boilerplate objections that discovery requests are irrelevant, immaterial, unduly burdensome, or overly broad.” Sonnino v. Univ. of Kan. Hosp. Auth., 221 F.R.D. 661, 670 (D. Kan. 2004). Rather, an objecting party “must specifically show in its response to the motion to compel, despite the broad and liberal construction afforded by the federal discovery rules, how each request for production or interrogatory is objectionable.” Id. at 670-71.

         III. RFPs SEEKING FINANCIAL INFORMATION

         The court turns first to Ad Astra's motion to compel the Lexington Law defendants to respond in full to RFPs seeking financial information. Specifically, these include RFP Nos. 75, 77, 78, and 83, issued to Lexington Law; RFP Nos. 34-39, and 41, issued to Progrexion Holdings; RFP Nos. 34-39, and 41 issued to Progrexion Teleservices; RFP Nos. 19, 20, and 25, issued to Mr. Jones; RFP Nos. 20, 21, and 26, issued to Mr. Heath; and RFP Nos. 21, 22, and 27, issued to Mr. Fullman. The parties address these RFPs categorically, and so the court will do the same.

         Ad Astra argues the information sought is relevant to its RICO claims. The Lexington Law defendants initially objected that these RFPs were not proportional to the needs of the case because they are overly broad. In response to this motion to compel, the Lexington Law defendants continue to rely on these objections, and they also assert that the RFPs are harassing. The court has already heard the parties' arguments as to these discovery disputes-both through the briefings on Ad Astra's first motion to compel and in person at the April 4 discovery conference, where the undersigned overruled most of the Lexington Law defendants' objections. Out of an abundance of caution, the court allowed the Lexington Law defendants a second bite at the apple to try to tailor this dispute to a more workable solution and/or to substantiate their objections in subsequent briefing. However, as set forth below, after ...


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