Groskop v. S&T Bank

• Decision Date: 26 August 2020
• Docket Number: S-19-0255,S-19-0254
• Citation: 471 P.3d 274
• Parties: Daniel GROSKOP, AS TRUSTEE OF the BLACK DIAMOND LIQUIDATING LITIGATION TRUST, Appellant (Plaintiff), v. S&T BANK, Appellee (Defendant). S&T Bank, Appellant (Defendant), v. Daniel Groskop, as Trustee of the Black Diamond Liquidating Litigation Trust, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

471 P.3d 274

Daniel GROSKOP, AS TRUSTEE OF the BLACK DIAMOND LIQUIDATING LITIGATION TRUST, Appellant (Plaintiff),

v.S&T BANK, Appellee (Defendant).

S&T Bank, Appellant (Defendant),

v.Daniel Groskop, as Trustee of the Black Diamond Liquidating Litigation Trust, Appellee (Plaintiff).

S-19-0254

S-19-0255

Supreme Court of Wyoming.

August 26, 2020

Representing Daniel Groskop: Tyler T. Dugger, Tolliver Law Firm, P.C., Billings, Montana.

Representing S&T Bank: Patrick J. Murphy and Keith J. Dodson, Williams, Porter, Day & Neville, P.C., Casper, Wyoming.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

GRAY, Justice.

[¶1] In 2010, Black Diamond Energy and Black Diamond Energy of Delaware (together, "the BDE Companies"), and seventeen limited partnerships (the "Limited Partnerships"), sued S&T Bank ("the Bank"). The Complaint alleged, among other things, that the Bank's lending policies in the wake of the 2008 economic recession caused severe financial loss to the Limited Partnerships managed by the BDE Companies. Following the resolution of various procedural issues, the Bank filed its Answer to Plaintiffs’ Complaint in 2012.¹ In 2015, the Limited Partnerships formed a Liquidating Litigation Trust ("the Trust") pursuant to the partnership agreement. The Trust appointed Daniel Groskop, a former financial manager for the BDE Companies, as Trustee. When we refer to Mr. Groskop in this opinion, it is in his capacity as Trustee. Mr. Groskop was substituted for the Limited Partnerships as the true party in interest in 2017, on the condition that any claims the BDE Companies had against the Bank were to be dismissed with prejudice. The BDE Companies had no further involvement in these proceedings.

[¶2] After Mr. Groskop's substitution and as the litigation progressed, discovery disputes arose. The Bank filed a motion to compel production, a motion for additional sanctions, and three motions to dismiss. The district court entered two orders compelling discovery to no avail. Then, Mr. Groskop failed to prepare for the Rule 30(b)(6) deposition after designating himself as the 30(b)(6) deponent. In light of Mr. Groskop's noncompliance with the district court's orders and the Wyoming Rules of Civil Procedure, the district court dismissed the case with prejudice. Mr. Groskop timely appealed.

ISSUE

[¶3] We consolidate and rephrase the parties’ issues into a single issue:²

Did the district court abuse its discretion when it dismissed the case with prejudice?

FACTS

A. Background

[¶4] The BDE Companies were the general managing partners for seventeen Limited Partnerships. Collectively, the Limited Partnerships represented approximately 3800 members (the "Limited Partners"). In 2002, the Bank began lending money to the BDE Companies through a line of credit. The original loan agreement underwent numerous amendments, primarily increasing the line of credit and extending the maturity date of the loan. In early 2008, the BDE Companies requested another increase to the line of credit—raising the BDE Companies’ debt to nearly $30 million—and another extension of the loan due date. The Bank agreed to the increase and extension on the condition that the BDE Companies execute control agreements with the Bank. The BDE Companies granted the Bank a security interest in and control over all assets of the BDE Companies and the Limited Partnerships. Black Diamond Energy Partners 2001-A Ltd. v. S & T Bank , 2012 WY 84, ¶ 11, 278 P.3d 738, 741 (Wyo. 2012). The BDE Companies also agreed to retain one of three consulting companies from a list provided by the Bank to assist in a restructuring plan.

[¶5] The BDE Companies chose Morris Anderson and Associates, and Morris Anderson provided a chief restructuring officer. Morris Anderson worked with the BDE Companies for approximately two months. Efforts to salvage the BDE Companies were unsuccessful, and they defaulted on their loan in 2009.

B. Relevant Procedural History

[¶6] The BDE Companies and Limited Partnerships sued the Bank in August 2010, alleging that the Bank's "domination and control" of the BDE Companies caused financial loss to the Limited Partners. They alleged that under the control agreements, the Bank mishandled company assets. They also claimed that Morris Anderson, as a de facto agent of the Bank, mismanaged the restructuring efforts.

[¶7] In 2015, the Limited Partnerships created a Liquidating Litigation Trust.³ The Trust was to provide a vehicle for any distributions of assets owed the Limited Partners, including any favorable judgment rendered in this lawsuit.⁴ Mr. Groskop, a former employee in the BDE Companies’ accounting department, was named Trustee and substituted as Plaintiff in place of the Limited Partnerships. The Limited Partnerships and Mr. Groskop certified that Mr. Groskop was able to represent the Limited Partners’ interests. The district court dismissed the BDE Companies’ claims with prejudice. Mr. Groskop filed a First Amended Complaint in May 2017, broadly incorporating the same allegations made in the original Complaint.

C. The Bank's January 2019 Motion to Compel

[¶8] From the outset there were discovery disputes. These disputes culminated in 2019 when in January, the Bank filed a motion to compel discovery. The motion alleged that, despite numerous "meet and confer" letters to Mr. Groskop, he failed to produce crucial documents and information directly related to the allegations in the First Amended Complaint. The Bank claimed that Mr. Groskop violated W.R.C.P. 33 and 34 and asserted privilege on nonprivileged documents.

[¶9] The Bank charged that Mr. Groskop did not comply with his W.R.C.P. 33 discovery obligations when he failed to verify two sets of interrogatories.⁵ Counsel for Mr. Groskop signed the first set of interrogatories on his behalf. The Bank complained that Mr. Groskop, not counsel, was the proper party to sign and that counsel had not signed under oath. The Bank also maintained that it had not received a signed response to the second set of interrogatories.

[¶10] The Bank asserted that Mr. Groskop failed to comply with his W.R.C.P. 34 discovery obligations.⁶ He failed to adequately respond or object to well over one hundred requests for production which were served on him. The unanswered requests sought documents from both the BDE Companies and the Limited Partnerships including monthly letters sent to the Limited Partnerships from the BDE Companies, the Limited Partnerships’ Internal Revenue Service Schedule K-1 reports,⁷ and other Limited Partnership financial data. The Bank argued these documents were critical to its defense; were in Mr. Groskop's control; and that the failure to produce them hindered the Bank's ability to prepare its case.

[¶11] The Bank alleged Mr. Groskop failed to produce other key documents. Specifically, in 2011, the original plaintiffs had subpoenaed Morris Anderson seeking information and documents related to restructuring efforts. Morris Anderson, in response to the subpoena, had provided relevant documents to original counsel for the BDE Companies and the Limited Partnerships.⁸ The Bank requested discovery of these documents from Mr. Groskop in March 2016, but, by January 2019, they had not been produced. Mr. Groskop claimed that he had already provided these documents through an electronic database. The Bank denied that the documents were included in that database and asserted that its efforts to obtain them by other means had been unsuccessful. It contended that the Limited Partnerships’ claim that they were damaged by the Bank's control of Morris Anderson made discovery of these documents crucial.

[¶12] Mr. Groskop produced more than 100 banker boxes of unorganized and irrelevant documents forcing the Bank to look for the proverbial "needle in a haystack." In addition, he produced a large, unorganized online database forcing the Bank to sort through a copious amount of electronic information without guidance. The Bank asserted Mr. Groskop's failure to provide documents as they were kept in the usual course of business violated W.R.C.P. 34.⁹

[¶13] Finally, the Bank took issue with Mr. Groskop's privilege log. It argued numerous documents listed as privileged were discoverable. It requested the production of these documents or, in the alternative, that the court conduct an in camera review to determine which documents should be produced.

D. The District Court's March 2019 Order Compelling Discovery

[¶14] At the March 13, 2019 hearing, the district court orally granted the Bank's motion to compel and ordered Mr. Groskop to comply by April 1, 2019. The district court memorialized this ruling in an Order Compelling Discovery dated March 28, 2019. It directed Mr. Groskop to personally provide verified answers to the Bank's first and second sets of interrogatories. It required Mr. Groskop to respond to the Bank's requests for production and to submit documents listed in his privilege log for an in camera review. On June 3, 2019, it entered an Order Awarding Attorneys’ Fees and Costs to the Bank to be paid by Mr. Groskop within thirty days.

E. The Bank's Motion for Additional Sanctions

[¶15] Mr. Groskop filed supplemental responses to discovery by the April 1 cutoff. The Bank filed a Motion for Additional Sanctions on April 18, 2019. It argued that Mr. Groskop did not adhere to the court's order and that Mr. Groskop had control "over significantly more documents than what he ha[d] produced."¹⁰ In essence, he had simply "doubled down on [his] previous position that he ha[d] already complied with his discovery obligations." Mr. Groskop again failed to produce any documents related to the BDE Companies or Limited Partnerships, particularly financial statements and internal communications documenting the collapse of the BDE Companies. Mr. Groskop refused to produce the Morris Anderson documents and raised a new argument—he was not required to produce them because he had not been substituted as the true party in interest at the time...