Barbara v. Martnemax, Inc., 12-CV-368 (ARR)(RER)

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Docket Number12-CV-368 (ARR)(RER)
Decision Date09 May 2013


12-CV-368 (ARR)(RER)


Dated: May 9, 2013



ROSS, United States District Judge:

Plaintiffs object to an order of Magistrate Judge Ramon E. Reyes denying their motion to compel production of certain documents. For the reasons explained below, I affirm in part and remand in part, in light of the possible relevance of motive to plaintiffs' claim.


I assume familiarity with the facts of the case from previous orders. Of relevance here, plaintiffs served defendant with a second demand for documents on March 12, 2013. See Dkt. #62, at 2. According to plaintiffs, defendant refused to produce documents in response to the following demands:

1. All documents and communications concerning a multi-million dollar loan obtained by [MarineMax CEO William H.] McGill in or about 2003, which came due, in part or in full, in 2007;
4. All documents and communications related to non-privileged recommendation, guidance or advice McGill and [MarineMax CFO Michael H.] McLamb received regarding sale of their own MarineMax stock in 2007, as well as MarineMax Board minutes in

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which those sales or the possibility of those sales were discussed; and
5. All documents and communications relating to MarineMax business plans or corporate strategy for the years 2006 to 2009.

Id. (alterations in original). Plaintiffs stated' in a discovery conference with Judge Reyes, Dkt. #59, at 14-15, 17-19, and repeat here, Dkt. #62, at 2-5, that the purpose of these documents is to "show motive in proving allegations that MarineMax violated its explicit and implicit covenants of good faith to abide by its contractual obligations," id. at 2. Judge Reyes succinctly summarized his basis for denying plaintiffs' motion to compel production of the documents as follows:

I see motive as irrelevant and here's why.

First, in her March 7th opinion and order Judge Ross indicated that the defendants' motive is at best, and I'm using her words, relevant only to the scienter element of a fraud claim. It's irrelevant to the plaintiffs' breach of contract. That's the first reason.

Second reason is as I read the amended complaint and look at Judge Ross' decision, I see the breach of the covenant of good faith and fair dealing as virtually the same as the plaintiffs' breach of contract [claim]. So motive is irrelevant to breach of contract. New York law is clear on that. And the way the breach of contract claim is pled and has been construed by Judge Ross is either there was an expressed provision in a contract that required good faith efforts to lift the stock restriction or there was an implied provision in the contract. And so this is a breach of contract case, not a breach of the covenant of good faith and fair dealing the way I see it. So I'm inclined — and motive is not relevant to breach of contract, so I'm inclined to deny the request.

Dkt. #59, at 13-14. Plaintiffs appeal Judge Reyes' ruling on the basis that, under Second Circuit case law, motive can be relevant to a claim of breach of the implied covenant of good faith and fair dealing. Dkt. #62, at 2 (citing cases).

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I. Standard of Review

In reviewing a magistrate's order on a pretrial matter that is not dispositive of a party's claim or defense, the district court will modify or set aside the order only if it is "clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A); accord Fed. R. Civ. P. 72(a); Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990). A decision is "clearly erroneous" when the court is, '"upon review of the entire record, [] left with the definite and firm conviction that a mistake has been committed.'" McAllan v. Von Essen, 517 F. Supp. 2d 672, 678 (S.D.N.Y. 2007) (quoting United States v. Snow, 462 F.3d 55, 72 (2d Cir. 2006)) (alteration in original). "It is well-settled that a magistrate judge's resolution of a nondispositive matter should be afforded substantial deference and may be overturned only if found to have been an abuse of discretion." Id. (internal quotation marks omitted).

Federal Rule of Civil Procedure 26 permits parties to obtain discovery related to any non-privileged matter that is "relevant to any party's claim or defense." Fed. R. Civ. P. 26(b)(1). The Advisory Committee Note to the 2000 amendment to Rule 26(b)(1) states:

The rule change signals to the court that it has the authority to confine discovery to the claims and defenses asserted in the pleadings, and signals to the parties that they have no entitlement to discovery to develop new claims or defenses that are not already identified in the pleadings.

Fed. R. Civ. P. 26(b)(1) advisory committee's note. Accordingly, discovery "may not be used as a fishing expedition to discover additional instances of wrongdoing beyond those already alleged." Wells Fargo Bank. N.A. v. Konover, No. 3:05CV1924(CFD)(WIG), 2009 WL 585430, at *5 (D. Conn. Mar. 4, 2009) (internal quotation marks omitted). '"The party seeking discovery

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must make a prima facie showing that the discovery sought is more than merely a fishing expedition."' Id. (quoting Evans v. Calise, No. 92 Civ 8430 (PKL), 1994 WL 185696, at *1 (S.D.N.Y. May 12, 1994)). Rule 26(b)(1) '"does not allow a party to roam in shadow zones of relevancy and to explore matter which does not presently appear germane on the theory that it might conceivably become so.'" Id. (quoting Evans, 1994 WL 185696, at *1). Courts afford broad discretion in magistrates' resolution of discovery disputes. Shipkevich v. Staten Island Univ. Hosp., No. 08-CV-1008 (FB)(JMA), 2012 WL 4442621, at *1 (E.D.N.Y. Sept. 25, 2012); 287 Franklin Ave. Residents' Ass'n v. Meisels, No. 11-CV-976(KAM)(JO), 2012 WL 1899222, at *3 (E.D.N.Y. May 24, 2012); Garcia v. Benjamin Grp. Enter. Inc., 800 F. Supp. 2d 299, 403 (E.D.N.Y. 2011). A party seeking to overturn a discovery order consequently "bears a heavy burden." Mental Disability Law Clinic v. Hoean, 739 F. Supp. 2d 201, 203-04 (E.D.N.Y. 2010).

II. Relevance of Motive

Before examining plaintiffs' discovery demands, I must correct something I said in a prior order. In my March 7, 2013 opinion and order I affirmed Judge Reyes' ruling that plaintiffs could not compel production of "[a]ll documents and communications with shareholders other than Plaintiffs," Dkt. #39, at 2, concerning stock restrictions. See Dkt. #52, at 16-17. Plaintiffs argued that such information was needed to show that defendant treated plaintiffs differently from other shareholders as part of an overall scheme to frustrate plaintiffs' efforts to sell their stock. Id. at 16. I rejected this argument in part because, I stated, motive "is irrelevant to [plaintiffs'] claim for breach of contract." Id. at 17.

This statement was in error and caused confusion. Although motive is, in general, irrelevant to a breach of contract claim, see Globe Refining Co. v. Landa Cotton Oil Co., 190

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U.S. 540, 547 (1903) ("The motive for the breach commonly is immaterial in an action on the contract."); Koufakis v. Carvel, 425 F.2d 892,906 (2d Cir. 1970), plaintiffs' claim here is that defendant breached the contract by failing to lift restrictions on plaintiffs' stock without a good faith basis for doing so. I held in my December 4, 2012 opinion and order that such a claim could arise from the "Good Faith Efforts" clause of the contract, or from the covenant of good faith and fair dealing implicit in every New York contract. Dkt. #28, at 33-34. Either way, an allegation of bad faith is integral to plaintiffs' claim. Moreover, because there is no contract...

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