Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-00903/USCOURTS-casd-3_06-cv-00903-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Breach of Contract

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06cv0903

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

J&M ASSOCIATES, INC.,

Plaintiff,

v.

NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH, PA, et

al.,

Defendants. 

 

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Case No. 06-CV-0903-W (JMA)

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANT’S

MOTION FOR AN ORDER COMPELLING

THE PRODUCTION OF ITEMS

RELATING TO PLAINTIFF’S CLAIM

FOR LOSS OF FUTURE PROFITS

[Doc. 115] 

Defendant National Union Fire Insurance Company of

Pittsburgh, PA (“National Union”) has filed a letter brief in

support of its motion for an order compelling the production of

items relating to Plaintiff J&M Associates, Inc.’s (“J&M’s”)

claim for loss of future profits. J&M opposes. For the reasons

set forth below, National Union’s motion is GRANTED IN PART and

DENIED IN PART.

I. BACKGROUND

National Union seeks an order compelling the production of

the following items:

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National Steel and Shipbuilding Company.

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(1) E-mails between J&M and NASSCO,1 dated between 2004 and

2005, and after September 14, 2006;

(2) A download of J&M’s “Quickbooks” data for certain

accounts regarding individual workers sent by J&M to

NASSCO between 2002 and 2007;

(3) The invoices for work orders from NASSCO between 2002

and 2007;

(4) J&M’s tax returns between 2002 and 2007; and

(5) The same documentation for J&M Marine & Industrial, LLC

(“J&M Marine”).

Def.’s Br. at 1.

As part of its damages, J&M claims the loss of future

profits it incurred after NASSCO apparently ended its

relationship with J&M. National Union seeks the above documents

in order to determine whether NASSCO truly terminated J&M because

of the coverage decision by National Union at issue in this

litigation, and if so, whether J&M’s claimed damages for lost

profits are supported and reasonable. Id. at 1-2. 

II. DISCUSSION

A. J&M Was Not Required to Provide the Above-Described

Financial Information in Connection With Its Initial

Disclosures

National Union first argues that the above-described

financial information should have been provided by J&M in

connection with the initial disclosure requirements of Fed. R.

Civ. P. (“Rule”) 26(a)(1)(A)(ii) and (iii). Id. at 2-3. Under

the express language of the Rule, however, a party need only

provide, as part of its initial disclosures, “documents,

electronically stored information, and tangible things” that it

“may use to support its claims or defenses” as well as “a

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computation of each category of damages claimed” and “the

documents or other evidentiary material . . . on which each

computation is based, including materials bearing on the nature

and extent of injuries suffered.” Fed. R. Civ. P.

26(a)(1)(A)(ii)-(iii) (emphases added). “The initial disclosure

obligation of subdivisions (a)(1)(A) and (B) has been narrowed to

identification of witnesses and documents that the disclosing

party may use to support its claims or defenses. . . . A party

is no longer obligated to disclose witnesses or documents,

whether favorable or unfavorable, that it does not intend to

use.” Fed. R. Civ. P. 26 Advisory Committee Notes, 2000

Amendment (emphasis added). 

Therefore, a party need not produce every piece of

information or documentation bearing on damages, but rather only

that information upon which the party’s computation of damages is

based. Although some of the information now sought by National

Union could have been included in J&M’s initial disclosures, this

is not necessarily so, and the Court does not find that all of

the information now requested should have been provided at the

initial disclosure stage. Rather, it seems to the Court that if

National Union desired the specific documents and materials it

now seeks, it should have propounded discovery requests for this

information. Thus, unless J&M intends to use any of the abovedescribed financial information at a pretrial conference, to

support a motion, at trial, or in discovery (see Fed. R. Civ. P.

26 Advisory Committee Notes, 2000 Amendment, defining “use”), it

was not obligated to provide the information now sought by

National Union as part of its initial disclosures. 

Case 3:06-cv-00903-W-JMA Document 137 Filed 12/02/08 Page 3 of 13
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Moreover, J&M served its initial disclosures on September

11, 2006, nearly two years before National Union filed this

motion. Def.’s Br., Ex. 1. The time for National Union to

contend that J&M’s initial disclosures were deficient has long

since passed.

B. National Union’s Motion to Compel Regarding Its

Requests for Production of Documents Is Not Barred by

Paragraph 5 of the Court’s Scheduling Order

Paragraph 5 of the Case Management Conference Order

Regulating Discovery and Other Pretrial Proceedings issued by the

Court on November 6, 2006 provides as follows:

All disputes concerning discovery shall be brought to

the attention of Magistrate Judge Adler no later than

thirty (30) days following the date upon which the

event giving rise to the dispute occurred. For oral

discovery, the event giving rise to the discovery

dispute is the completion of the transcript of the

affected portion of the deposition. For written

discovery, the event giving rise to the discovery

dispute is the service of the response. Counsel are

required to meet and confer prior to contacting the

Court regarding all discovery disputes pursuant to the

requirements of Local Rules 16.5(k) and 26.1(a).

Nov. 6, 2006 Order [Doc. 30] at ¶ 5 (emphasis in original). The

clear import of this requirement is that counsel must meet and

confer promptly after a discovery dispute arises and, if counsel

are unable to resolve the dispute, they must contact the Court

within the thirty day period after the dispute arises. In this

instance, the dispute arose upon the service of J&M’s responses

to National Union’s Requests for Production of Documents, which

occurred on June 20, 2008. Therefore, National Union’s counsel

should have met and conferred with J&M’s counsel and notified the

Court of the discovery dispute by no later than July 21, 2008. 

Instead, National Union’s counsel waited until July 17, 2008 to

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inform J&M of National Union’s position that J&M’s responses to

the document requests were deficient (Def.’s Br. at 2 & Ex. 4),

and waited until August 21, 2008 to provide its first

notification to the Court of the dispute, thirty-one (31) days

after the deadline for doing so. 

Although National Union technically violated Paragraph 5 of

the Court’s Case Management Order, the Court finds that the

circumstances do not warrant prohibiting National Union from

proceeding with this motion. National Union’s current counsel,

R. Gaylord Smith, Esq., did not enter the case until June 20,

2008 [Doc. 100], the same day J&M served its discovery responses. 

Although the prudent course of action would have been for Mr.

Smith to contact the Court to seek a continuance of the “30-day

rule” set forth in Paragraph 5 (the Court very likely would have

granted such a request) while he familiarized himself with the

case, the Court finds that Mr. Smith did not take an unreasonable

amount of time, in view of the situation, to analyze the case,

review the discovery responses, and attempt to resolve the

discovery dispute informally. 

The Court thus finds that National Union’s motion regarding

its requests for production of documents is not barred by

Paragraph 5 of the Court’s Case Management Order.

C. The Missing E-mails Between J&M and NASSCO

National Union seeks e-mails from 2004 and 2005 between J&M

and NASSCO or, if the e-mails have been destroyed, an order to

show cause why a preclusion order should not be issued on J&M’s

loss of profits claim, or an order granting access to J&M’s

servers to perform an electronic recovery of the e-mails. 

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National Union also seeks e-mails dated after September 14, 2006. 

National Union argues that the e-mails chronicle the daily

dealings between J&M and NASSCO, and document NASSCO’s requests

for workers from J&M, NASSCO’s satisfaction or lack thereof with

J&M’s performance, and J&M’s ability to perform under the labor

supply contract between it and NASSCO after Hurricane Katrina. 

These e-mails, National Union contends, “go to the heart of J&M’s

claim regarding the decline in orders from NASSCO.” Def.’s Br.

at 3. During the telephonic Discovery Conference conducted by

the Court on November 24, 2008, National Union’s counsel also

argued that the e-mails may provide information regarding the

impact of NASSCO’s decision in 2004 to transition from exclusive

bidding by J&M to supply workers to a competitive bidding system

in which staffing supply businesses other than J&M could also

participate in bidding on and supplying workers to NASSCO.

National Union asserts that J&M should have produced the emails in response to Requests for Production Nos. 22, 23, 25, 26

and 27. These requests seek the following:

Request No. 22: Any and all DOCUMENTS evidencing,

constituting, reflecting, or RELATED TO NASSCO not

continuing to do business with you.

Request No. 23: All DOCUMENTS evidencing,

constituting, reflecting, or RELATED TO the basis of

YOUR contention that because NATIONAL UNION did not

agree to provide coverage to NASSCO for the MELENDEZ

LAWSUIT under the POLICY, NASSCO cancelled and/or did

not renew its contracts with YOU or did not continue to

do business with YOU.

Request No. 25: All DOCUMENTS evidencing,

constituting, reflecting, or RELATED to all

COMMUNICATIONS between YOU and NASSCO related to the

MELENDEZ LAWSUIT, the VARIS BROWN LAWSUIT, the MELENDEZ

CLAIM, and the VARIS BROWN CLAIM.

Request No. 26: All DOCUMENTS evidencing,

constituting, reflecting or related to YOUR clients for

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whom YOU provide temporary staffing services from

January 1, 1998 to present.

Request No. 27: All DOCUMENTS evidencing,

constituting, reflecting or RELATED TO contracts and/or

agreements YOU entered into with others to provide

temporary workers and/or temporary staffing services

from January 1, 1998 to present.

Def.’s Requests for Produc. of Docs., Nos. 22, 23, 25, 26 and 27,

Def.’s Br., Ex. 2. After receiving J&M’s responses to its

document requests, National Union’s counsel sent an e-mail on

July 17, 2008 requesting the production of any e-mail traffic

between NASSCO and J&M from the “height of the [staffing] program

in 2004 to the present.” Def.’s Br., Ex. 4. In response, J&M

produced, as a courtesy in its view, some thirty e-mails, dated

between January 3, 2006 and September 14, 2006, and advised that

e-mails prior to 2006 had been deleted. Def.’s Br. at 3 & Ex. 5. 

J&M argues that National Union never requested the e-mails

it now wants, and, citing Rule 34's requirement that requests for

production describe with “reasonable particularity” each item or

category of items to be inspected, contends that if National

Union wanted the e-mails, it should have specifically asked for

them. Pl.’s Br. at 2, citing Fed. R. Civ. P. 34(b)(1)(A). The

Court disagrees, and finds that the e-mails currently sought are

potentially responsive to Request Nos. 22, 23 and 25. That is,

if the e-mails reflect the reason that NASSCO did not continue to

do business with J&M, then they are relevant and responsive to

Request No. 22. If the e-mails reflect that NASSCO ceased doing

business with J&M because of National Union’s coverage decision

in the Melendez matter, then they are relevant and responsive to

Request No. 23. Finally, if the e-mails reflect communications

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The Court sustains J&M’s objections to Request Nos. 26 and 27 on

the basis that the requests are “so vague and broad, that [they] would

be nearly impossible to comply with.” Pl.’s Resps. to Def.’s Requests

for Produc. of Docs., Nos. 26-27, Def.’s Br., Ex. 3. Request No. 26

in particular is, on its face, overbroad. Request No. 27 is overbroad

to the extent it seeks all documents arising out of J&M’s contractual

relations, which is how National Union appears to be construing this

Request, rather than simply J&M’s contract documents. 

3

Litigants have a duty to preserve evidence which is known, or

reasonably should be known, to be relevant to the action. Baliotis v.

McNeil, 870 F. Supp. 1285, 1290 (M.D. Pa. 1994). The duty to preserve

extends to the period before litigation when a party reasonably should

know that the evidence may be relevant to anticipated litigation. 

E*Trade Secs. LLC v. Deutsche Bank AG, 230 F.R.D. 582, 588 (D. Minn.

2005). 

8 06cv0903

between J&M and NASSCO regarding the Melendez and Brown claims

and lawsuits, then they are relevant and responsive to Request

No. 25. The problem is that because the e-mails from 2004

through 2005 were deleted, it cannot be said with certainty

whether they are responsive to these Requests.2

During the November 24, 2008 telephonic Discovery

Conference, counsel for J&M advised that it was J&M’s practice to

delete e-mails at the end of each calendar year for the preceding

calendar year. For example, e-mails from 2004 were deleted at

the end of 2005, and e-mails from 2005 were deleted at the end of

2006. Contrary to J&M’s argument that there is no obligation to

preserve documents until a document request seeking such

documents is served, the Court believes that it is clear that a

party has a duty to preserve all potentially relevant documents,

including e-mails, once a lawsuit is reasonably probable or

filed.3 This lawsuit commenced on March 16, 2006, when J&M filed

its original complaint in the Superior Court of California,

County of San Diego, and J&M’s counsel, James Holtz, Esq., was

involved in representing J&M as of October 5, 2005, after

coverage had already been denied by National Union. See Doc. 1;

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Def.’s Br., Ex. 6. The Court finds that J&M had an obligation to

preserve documents as of late 2005, in that litigation was surely

anticipated by that time, and that no potentially relevant emails should have been deleted thereafter.

Accordingly, because the e-mails may contain relevant

information, and because the 2004 and 2005 e-mails should not

have been deleted, National Union’s request for an order granting

access to J&M’s servers to perform an electronic recovery of the

e-mails is GRANTED. J&M’s counsel shall forthwith provide

information to National Union regarding the location of any

personal computers and/or servers which may contain e-mails

between J&M and NASSCO dated between 2004 and 2005. National

Union shall retain an independent professional to conduct an

electronic recovery of these e-mails. The electronic recovery

shall be performed at National Union’s own expense without

prejudice to its right to seek reimbursement of such expenses

from J&M in the future. Counsel shall meet and confer regarding

an appropriate protocol for the electronic recovery in order to

ensure that any non-relevant or personal information is

adequately protected from recovery. Any e-mails electronically

recovered shall be provided directly to J&M’s counsel for review;

J&M’s counsel shall then, within fourteen (14) days, produce any

e-mails relevant to the claims or defenses in this case and

responsive to Request Nos. 22, 23 and 25. 

As for the e-mails dated after September 14, 2006, J&M’s

counsel advised during the November 24, 2008 telephonic Discovery

Conference that there are no such e-mails which are relevant or

responsive to National Union’s document requests. Thus, the

Court DENIES National Union’s request for these e-mails.

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D. Quickbooks, Invoices, and Tax Returns

National Union also seeks financial information from J&M

including a download of J&M’s “Quickbooks” data for accounts

numbered 4000 (Income - Sales), 5010 (Gross Temp Employee Wages),

and 5030 (Temp Employee Per Diem) regarding individual workers

furnished by J&M to NASSCO between 2002 and 2007, the invoices

for work orders from NASSCO between 2002 and 2007, and J&M’s tax

returns between 2002 and 2007. National Union asserts that J&M

should have produced these materials in response to Requests for

Production Nos. 20 and 28. These requests seek the following:

Request No. 20: All DOCUMENTS evidencing,

constituting, reflecting or RELATED TO YOUR financial

condition, including but not limited to, financial

statements, profit and loss statements, accounting

records, audits, and tax returns, from January 1, 1998

to present.

Request No. 28: All DOCUMENTS evidencing,

constituting, reflecting, or RELATED TO YOUR profits

and losses from January 1, 1998 to present.

Def.’s Requests for Produc. of Docs., Nos. 20 and 28, Def.’s Br.,

Ex. 2. J&M set forth various objections to these requests,

including that the requests were “vague, ambiguous, and

overbroad,” and, without waiving its objections, produced yearly

profit and loss statements for the years 2002 through 2007 in

response thereto. Pl.’s Responses to Requests for Produc. of

Docs., Nos. 20 and 28 & Ex. D, Def.’s Br., Ex. 3. After counsel

met and conferred, J&M produced its monthly profit and loss

statements. Def.’s Br., Ex. 7. 

The Court agrees with J&M’s position that the Quickbooks

data and the NASSCO invoices were never requested by National

Union. Request Nos. 20 and 28, which sought documents related to

J&M’s “financial condition” and “profits and losses”, cannot be

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said to reasonably encompass the detailed and specific data that

National Union now seeks. The Court can only compel the

production of documents actually asked for in discovery. If

National Union wanted this information, it should have described

it with “reasonable particularity.” Fed. R. Civ. P. 34(b)(1)(A). 

Here, National Union failed to articulate its request for

information of this type until July 17, 2008, when it requested

“business records showing the staffing requests from NASSCO”

(Def.’s Br., Ex. 4), and failed to specifically ask for the

Quickbooks data until August 14, 2008 (id., Ex. 8-001), well

after the close of discovery. Its attempt to shoehorn these

current requests for information into previous document requests

is, in the Court’s view, an attempt to conduct discovery past the

discovery cutoff. The Court thus DENIES National Union’s request

for an order compelling J&M to produce this information. 

As to J&M’s tax returns, although National Union

specifically sought this information via Request No. 20, National

Union failed to meet and confer with J&M on this issue at any

time prior to the filing of this motion. See Def.’s Br., Exs. 4,

8 and 10 (consisting of counsel’s meet and confer efforts). The

clear import of Paragraph 5 of the Court’s Case Management

Conference Order is that counsel must meet and confer regarding

all disputed issues before such issues are presented to the

Court. See also Civ. L.R. 26.1 a. (“The court shall entertain no

motion pursuant to Rules 26 through 37, Fed. R. Civ. P., unless

counsel shall have previously met and conferred concerning all

disputed issues.”) That did not occur here. The Court thus

DENIES National Union’s request for an order compelling J&M to

produce its tax returns.

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E. Documents Relating to J&M Marine

National Union argues the Court should order the production

of financial documents relating to J&M Marine. J&M Marine,

however, is not a named party in this case, and there is no

indication that National Union ever sought financial documents

relating to J&M Marine through discovery, via either a document

request upon J&M or a subpoena duces tecum upon J&M Marine

itself. The first time that National Union appears to have asked

for or even mentioned financial documents relating to J&M Marine

was in National Union’s counsel’s July 17, 2008 e-mail to J&M’s

counsel. See Def.’s Br., Ex. 4. Again, the Court can only

compel the production of documents actually asked for in

discovery. National Union did not, through formal discovery,

request the production of, or subpoena, the documents it now

seeks. 

Furthermore, National Union has not convinced the Court that

it should order J&M to produce documents relating to J&M Marine,

which appears to be a separate and distinct entity, on an alter

ego or single enterprise theory. National Union has demonstrated

only that J&M and J&M Marine had the same owners and/or

shareholders, had some of the same employees, conducted similar

staffing services businesses, and were insured under the same

insurance policy. In order to establish an alter ego

relationship between J&M and J&M Marine, however, National Union

would have to show that J&M Marine “is so organized and so

controlled, and its affairs . . . so conducted, as to make it

merely an instrumentality, agency, conduit, or adjunct” of J&M. 

See Las Palmas Associates v. Las Palmas Center Associates, 235

Cal. App. 3d 1220, 1249 (1991) (emphasis and citation omitted). 

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National Union has not done so. In addition, neither of the

authorities cited by National Union provides any guidance

regarding the propriety of obtaining discovery from a non-party

entity on the basis that it is an alleged single enterprise with

a party in the case. 

It would have been easy enough for National Union to seek

documents from or about J&M Marine. Here again, it appears to

the Court that National Union is attempting to conduct discovery

past the discovery cutoff by shoehorning its current requests for

information into previous document requests. 

Accordingly, National Union’s request for documents relating

to J&M Marine is DENIED.

III. CONCLUSION

Based on the foregoing, National Union’s motion for an order

compelling the production of items relating to J&M’s claim for

loss of future profits is GRANTED IN PART and DENIED IN PART. 

Specifically, National Union’s motion for an order compelling the

production of e-mails between J&M and NASSCO dated between 2004

and 2005 is GRANTED IN PART, as set forth in further detail

above. National Union’s motion is DENIED in all other respects. 

IT IS SO ORDERED.

DATED: December 2, 2008

Jan M. Adler

U.S. Magistrate Judge

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