Denim Habit, LLC v. NJC Bos., LLC
| Decision Date | 23 May 2016 |
| Docket Number | 13-CV-6084 (ADS)(SIL) |
| Parties | DENIM HABIT, LLC, Plaintiff, v. NJC BOSTON, LLC, STEVEN SIMON, and DONALD SHAPIRO Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Presently before the Court are two motions to compel the production of damages-related discovery filed by Defendants NJC Boston, LLC ("NJC Boston"), Steven Simon, and Donald Shapiro (collectively, "Defendants"). See Docket Entry ("DE") [72], [74]. In the first motion, Defendants seek an Order compelling Plaintiff Denim Habit, LLC ("Plaintiff" or "Denim Habit") to produce documents concerning legal fees and costs that the law firm Brown Rudnick LLP ("Brown Rudnick") charged during the course of representing Denim Habit in this action (the "Legal Fees Motion"). See DE [72]. In the second motion, Defendants seek an Order compelling Plaintiff to produce documents responsive to Defendants' February 7, 2014 Request for Production of Documents (the "Document Demand Motion"). See DE [74]. For the reasons set forth herein, the Legal Fees Motion and the Document Demand Motion are each granted in part and denied in part.
The complete factual and procedural background of this action is discussed at length in a November 19, 2015 Memorandum of Decision and Order in which the Honorable Arthur D. Spatt granted Plaintiff's motion for summary judgment ), and is incorporated herein by reference. See DE [54]. Nevertheless, the following facts provide relevant context for the instant motions.
In the 1990s, non-party James Gurrieri created the National Jean Company brand and began selling men and women's clothing at various locations in the state of New York. See Sum. J. Op. at 2. In April 2004, Gurrieri and Defendant Steven Simon agreed to establish a franchise system in order to expand the National Jean Company brand to Boston, Massachusetts. Id. at 3. Accordingly, an entity known as National Jean Franchise Corporation ("NJ Franchise Corp.") was formed to serve as the corporate franchisor, and Defendant NJC Boston was formed to serve as the corporate franchisee. Id. Thereafter, NJ Franchise Corp. and NJC Boston entered into two substantially similar franchise agreements for retail store locations in Newtown Centre, Massachusetts and Wellesley, Massachusetts (the "Franchise Agreements"). Id. at 4, 16.
In or about May 2010, Gurrieri sold NJ Franchise Corp. to non-party new owners, and on or about August 19, 2013, those new owners sold NJ Franchise Corp. to Plaintiff Denim Habit.1 Id. at 18; see also Defendants' Motion to CompelProduction of Information Regarding Legal Fees and Costs ("Legal Fees Mot."), DE [72], Ex. A. Brown Rudnick represented Denim Habit in its purchase of NJ Franchise Corp. See Legal Fees Mot. ¶ 6. Upon its purchase of NJ Franchise Corp., Denim Habit became the corporate franchisor under the Franchise Agreements, and NJC Boston remained the corporate franchisee. See Sum. J. Op. at 18-19. For reasons discussed at length in the Summary Judgment Opinion, the franchise relationship between Denim Habit and NJC Boston ultimately deteriorated, and on or about October 15, 2013, Denim Habit provided NJC Boston a written notice of termination of the Franchise Agreements. Id. at 24-31.
By way of Complaint dated November 1, 2013, Denim Habit commenced this action, seeking: (i) damages for breach of the Franchise Agreements and breach of personal guarantees executed in conjunction with the Franchise Agreements, and (ii) a judgment declaring that the Franchise Agreements were terminated and that NJC Boston was required to comply with the relevant termination provisions contained therein.2 See Compl., DE [1], ¶¶ 30-73. Defendants asserted counterclaims for breach of the Franchise Agreements, breach of the implied covenant of good faith and fair dealing, and unfair and deceptive acts and practices. See Countercls., DE [6], ¶¶ 89-101. Relevant for purposes of this action, on May 11, 2015, Denim Habit filed amotion for summary judgment, seeking: (i) judgment in its favor on its breach of contract and breach of guarantee causes of action, and (ii) dismissal of Defendants' counterclaims. See DE [39].
On November 19, 2015, Judge Spatt granted Denim Habit's motion for summary judgment in its entirety. See Sum. J. Op. at 62. Judge Spatt noted, however, that "the parties did not specifically brief the issue of damages in connection with this motion, and the prayers for relief in the respective complaints do not allege any precise dollar amount due to the Plaintiff." Id. at 55. Accordingly, Judge Spatt referred the matter to this Court to conduct a hearing and provide a recommendation as to the appropriate measure of Plaintiff's damages. Id. Thereafter, the Court held status conferences on January 20, 2016 and April 5, 2016, and the parties exchanged damages-related discovery. See DE [64], [68]. At the April 5, 2016 status conference, the parties represented that certain discovery disputes existed, and the Court set a briefing schedule on Defendants' anticipated motion to compel. See DE [68]. The Legal Fees Motion and the Document Demand Motion followed.
On April 19, 2016, Defendants filed the Legal Fees Motion, seeking production of: (i) each and every communication between Denim Habit and Brown Rudnick with respect to how Brown Rudnick would be compensated for rendering legal services in this matter; (ii) the applicable fee agreements between Denim Habit and Brown Rudnick in connection with this case; and (iii) copies of checks and other documentsreflecting payments, if any, on invoices for legal fees and costs in connection with this action. See DE [72]. Defendants argue, among other things, that "Brown Rudnick and Denim Habit decided to commence the instant litigation as a way of mitigating damages with respect to the law firm's past errors and/or omissions" in representing Denim Habit. Id. at ¶ 16. Specifically, Defendants claim that "Brown Rudnick failed to advise [Denim Habit] to conduct the specific kinds of due diligence that are normally conducted in the acquisition of a franchise company." Id. at ¶ 7. Accordingly, Defendants argue that, "in light of the Brown Rudnick-Denim Habit plan, a contingent fee agreement may very well be in existence," and that "such an agreement would impact the award of legal fees and costs in this case." Id. at ¶ 16.
In opposition, Plaintiff argues, among other things, that an award of attorneys' fees will be based on Brown Rudnick's legal fee invoices, which have already been produced. See Memorandum of Law in Opposition to Defendants' Motion to Compel Production of Information Regarding Legal Fees and Costs ("Pl.'s Legal Fees Opp'n"), DE [73], at 2-3. According to Plaintiff, "Defendants' demands are completely irrelevant and unduly burdensome when there is no dispute over the production of detailed legal bills containing all pertinent information." Id. at 2.
On April 26, 2016, Defendants filed the Document Demand Motion, seeking production of documents responsive to five demands contained in Defendants' February 7, 2014 Request for Production of Documents. See DE [74]. Specifically, the documents identified in the Document Demand Motion include: (i) Plaintiff'scomplete federal and state tax returns from 2013, 2014, and 2015; (ii) "Plaintiff's business reputation"; (iii) "Plaintiff's failure to pay its debts, liabilities, and expenses"; (iv) calculation of the amounts alleged to be due as set forth in a September 11, 2013 demand letter from Plaintiff; and (v) calculation of the amounts alleged to be due pursuant to the Complaint. Id. In opposition, Plaintiff explained that certain responsive documents had been produced or were forthcoming, but argued that the remaining requests were vague, overly broad, or irrelevant. See Letter in Opposition to Defendants' Document Demand Motion ("Pl.'s Doc. Demand Opp'n"), DE [75].
Pursuant to Fed. R. Civ. P. 26:
Parties 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, 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.
Fed. R. Civ. P. 26(b)(1). Information "is relevant if: '(a) it has any tendency to make a fact more or less probable than it would be without the evidence; and (b) the fact is of consequence in determining the action." Vaigasi v. Solow Mgmt. Corp., No. 11 Civ. 5088, 2016 WL 616386, at *11 (S.D.N.Y. Feb. 16, 2016) (quoting Fed. R. Evid. 401). Moreover, "[t]he party seeking the discovery must make a prima facie showing that the discovery sought is more than merely a fishing expedition." Evans v. Calise, No. 92 Civ. 8430, 1994 WL 185696, at *1 ; see also Mandell v. The Maxon Co., Inc., No. 06 Civ. 460, 2007 WL 3022552, at *1 (S.D.N.Y. Oct. 16, 2007) (). Itis well-established that "[m]otions to compel are left to the court's sound discretion." Mirra v. Jordan, No. 13-CV-5519, 2016 WL 889683, at *2 (S.D.N.Y. Feb. 23, 2016); see also Liberty Mut. Ins. Co. v. Kohler Co., No. 08-CV-867, 2010 WL 1930270, at *2 ().
Applying the standards outlined above, and for the reasons set forth herein, the Legal Fees Motion and the Document Demand Motion are each granted in part and denied in part.
Under the American Rule, "it is well established that attorney's fees...
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