Noble Roman’s, Inc. v. Hattenhauer Distrib. Co., No. 1:14-cv-01734-WTL-DML, 2016 WL 1162553 (S.D. Ind. Mar. 24, 2016)
In this case, the court granted Plaintiff’s motion for a protective order and ordered that Defendant was prohibited from obtaining the discovery sought from Plaintiff’s shareholder by the at-issue subpoenas. In reaching its conclusion, the court undertook analysis of recently-amended Fed. R. Civ. P. 26(b)(1), highlighting the principle of proportionality, and ultimately concluded that Defendant’s subpoenas constituted “discovery run amok” and “fail[ed] the proportionality test under Rule 26(b).”
In this dispute over royalties between Plaintiff, the franchisor, and Defendant, the franchisee, Defendant filed a counterclaim alleging that Plaintiff was not permitted to conduct the audit that uncovered its alleged underpayment of royalties and that the true impetus for the audits and their “flawed methodology” was Plaintiff’s “poor financial condition.” In support of its counterclaim, Defendant served a subpoena upon a “major shareholder” of the plaintiff, seeking production of 23 “wide-ranging” categories of documents and Rule 30(b)(6) testimony, essentially amounting to “every document and every piece of information it has … about every aspect of [Plaintiff’s] business operations, finances, marketing plans, and management structure.” In its motion for a protective order, Plaintiff argued that Defendant had been permitted to pursue discovery from the plaintiff regarding its counterclaims and that the information sought from the third party shareholder did not “materially advance those theories but [was] a fishing expedition that should not be permitted.”
In response to Plaintiff’s motion, Defendant “beat the drum of ‘relevancy’” but “never attempt[ed] to demonstrate that the discovery [wa]s in any way proportional to the needs of the case.” That, the court determined, was “not good enough.”
Following two examples illustrating the “abject disproportionality” of the requests, including Defendant’s failure to explain why the shareholder’s analysis of Plaintiff’s management practices and financial prospects was “reasonably necessary,” the court found that Defendant’s “documents and deposition subpoenas … constitute[d] discovery run amok.” Declaring, that the subpoenas “fail[ed] the proportionality test under 26(b),” the court granted the motion for a protective order.
A full copy of the court’s order is available here.