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Alliance Industries, Inc. v. Longyear Holding

July 21, 2010


The opinion of the court was delivered by: Hon. Hugh B. Scott


Before the Court is the latest motion of plaintiff/counterclaim defendant Alliance Industries ("Alliance") to compel (Docket No. 63*fn1 ; cf. Docket No. 44 (plaintiff's motion for extension of time and to compel discovery)). Alliance also moved for an expedited hearing (Docket No. 64; cf. Docket No. 45), which the Court granted in part by holding Scheduling Order deadlines in abeyance pending resolution of Alliance's motion (Docket No. 65); this Order also considers amending the present schedule. Responses to Alliance's latest motion were due on or before May 14, 2010, with any reply due on or before May 26, 2010, and that motion was then deemed submitted (without oral argument) on May 26, 2010 (id.).

In a previous Order, this Court granted in part plaintiff's motion for extension of the Scheduling Order to complete discovery and granted defendant's cross motion for a protective Order (Docket No. 62); familiarity with that (and prior Orders) is presumed.


This is a diversity stockholders' suit arising from the purchase of stock in a corporation to acquire its subsidiary and subsequent disposition of funds in an escrow account created as part of the transaction (see Docket No. 1, Compl.). As summarized in an earlier motion (see Docket No. 23, Order at 2; see also Docket No. 9 (motion)), Alliance alleged that Longyear "has articulated two claims against millions of dollars in escrow funds that were due to be released to Alliance on or about April 30, 2008. In wrongfully asserting its claim to the escrow funds, the defendant has maintained that Alliance failed to make it aware of certain facts and information during the course of the due diligence phase prior to the consummation of the underlying transaction on December 6, 2006" (Docket No. 11, Pl. Atty. Affirm. ¶ 7). Longyear negotiated to acquire Alliance's subsidiary, Prosonic Corporation. Through its attorneys, Longyear was given access to an online "data room" of documents produced during the due diligence phase and negotiation of the deal. One set of documents disclosed that Prosonic's employee health care costs were capped at one figure but, subsequent to acquiring Prosonic, Longyear learned that Prosonic paid an employee twice the capped maximum to care for that employee's child due to a catastrophic illness. (Docket No. 1, Compl. ¶¶ 10-12, 20, 44-52; Docket No. 12, Ans. ¶¶ 87-91, 93-95, 97, Ex. C; Docket No. 31, Pl. Atty. Aff. ¶¶ 3-7, Ex. 1). Alliance claims that Longyear breached the stock purchase agreement by not making a claim against an insurance policy for this loss (Docket No. 1, Compl. ¶ 48). Alliance claims that it sustained damages and seeks specific performance and a declaration requiring release of the remainder of the deposit in the escrow account (id. ¶ 52). Alliance claims that Longyear breached its obligation under the stock purchase agreement to notify Alliance of the Florida tax audit of Prosonic for tax years 2004 through 2006 (Docket No. 1, Compl. ¶¶ 20, 38-41, 43).

Longyear answered and asserted Counterclaims (Docket No. 12); Alliance in turn filed its Reply to the Counterclaims (Docket No. 17). On June 24, 2009, Alliance then moved to amend this Reply to assert an additional affirmative defense (Docket No. 31, Pl. Atty. Aff. ¶¶ 2, 8, 9, Ex. 2), which was granted (Docket No. 37), and Alliance filed its amended Reply on (Docket No. 38).

The Court entered (Docket No. 27) and later amended (Docket No. 43) the Scheduling Order, with discovery due to be completed by February 24, 2010, and dispositive motions by May 25, 2010 (Docket Nos. 27, 43). The Order granting Alliance's motion for extension of discovery period extended discovery to April 15, 2010 but retained the subsequent deadlines (Docket No. 62, Order at 10).

Alliance's Motion to Compel

On April 12, 2010, Alliance seeks complete responses to certain interrogatories it posed; documents responsive to its second document demand and a privilege log of documents Longyear withheld as privileged; documents requested during the Rule 30(b)(6) depositions of Colin Seegmiller and Todd Hendricksen and the deposition of Ira Kane, a Longyear employee; and production of a Rule 30(b)(6) representative knowledgeable of tax benefits sought and received by Longyear, aside from Seegmiller (Docket No. 63, Pl. Attys' Jt. Affirm. ¶ 5; see Docket No. 68, Pl. Reply at 1-2). Alliance previously had moved to compel the deposition of a Rule 30(b)(6) representative of Longyear (see Docket No. 44), which was deemed to be moot given the scheduled deposition of Seegmiller (see Docket No. 62, Order at 10-11). But during Seegmiller's deposition, he testified that he did not have knowledge about the tax benefits sought or actually received by Longyear (Docket No. 63, Pl. Attys' Jt. Affirm. ¶ 5d.)*fn2 .

Defendant Longyear contends that it provided the relevant and requested items, that Alliance failed to communicate with Longyear to avoid this motion practice, Alliance had not articulated how the items sought are relevant to a claim or defense or specified what it sought, and Alliance waited past the motion to compel deadline to file at "the eleventh hour" (Docket No. 66, Def. Memo. at 1). Longyear argues that the Court should protect it from abusive litigation tactics of duplicative discovery by different means, the deposition of corporate representatives and interrogatories (id. at 12-14). Alliance counters that, while there is some overlap in its discovery, Longyear fails to show any duplicative production by indicating that the same materials were produced by different means (Docket No. 68, Pl. Reply Memo. at 4-5).

Alliance in its reply reiterates that Longyear has failed to properly or fully respond to the pending interrogatories and document demands (id. at 5-10, 10-13).

The details of the remaining controverted discovery is discussed below.


I. Plaintiff's Motion ...

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