IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

Zachary Lester, et al., :

 

Plaintiffs, : Case No. 2:11-cv-00850

 

v. :

 

Wow Car Company, Ltd., : JUDGE EDMUND A. SARGUS, JR.

et al., Magistrate Judge Kemp

:

Defendants.

 

OPINION AND ORDER

This matter is before the Court to consider defendants’

joint motion to quash the subpoena and/or for a protective order.

(Doc. #81). For the reasons set forth below, the motion will be

denied.

I. Background

This case involves a dispute over the purchase of a used car

by plaintiffs Zachary and Brandi Lester. The Lesters returned

the car to the seller twice within the first week they owned it,

and the engine blew six days after the purchase. As a result of

these events, the Lesters filed a lawsuit in the Court of Common

Pleas for Knox County, Ohio, which was removed to this Court on

September 21, 2011. The Lesters filed an amended complaint on

July 31, 2012, and a second amended complaint on August 26, 2013.

There has been considerable debate in this case concerning

who actually sold the car to the Lesters. It appears to be

defendants’ position that the Lesters bought their car from Amy

Hartzler, who was operating Wow Car Company as a dba. However,

the Lesters claim that Amy Hartzler and Max R. Erwin, Sr., who,

they claim have both a business and a personal relationship,

operated Wow Car Company as a joint venture and that the two of

them either created or maintained other businesses for the

purpose of shielding that joint venture from liability. More

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specifically, they claim that Mr. Erwin owned or operated Wow Car

Company, Ltd. (“Wow Ltd.”), Wow’s eventual successor, and a

company called Marmax Enterprises LLC (“Marmax”) as an alter ego

for Wow and Wow, Ltd. and that he used that company to purchase

inventory for the Wow businesses. The Lesters also allege that

Ms. Hartzler owns Mid-Ohio Motor Funding Group, Ltd., which

provides funding to another business owned by Ms. Hartzler, the

Hartzler-Erwin Group LLC. The Lesters claim that the HartzlerErwin Group LLC is also used to operate Wow and is an alter ego

for Wow and Wow Ltd. 

Consistent with the Lesters’ theory that Ms. Hartzler and

Mr. Erwin are using other entities for the purposes of escaping

liability, the Lesters filed a second amended complaint against a

number of defendants including Ms. Hartzler dba Wow, Wow Ltd.,

Mr. Erwin dba Wow, Mid-Ohio Motor Funding Group, Ltd., the

Hartzler-Erwin Group LLC, and Marmax. In that complaint (Doc.

80), the Lesters have pleaded claims for breach of an express

warranty, breach of the implied warranty of merchantability,

breach of the implied warranty of fitness for a particular

purpose, deceptive trade practices, violations of the Truth in

Lending Act, violations of the Ohio Consumer Sales Practices Act,

and alter ego. On September 9, 2013, defendants moved to dismiss

portions of the second amended complaint; that motion is still

pending. 

On August 23, 2013, the Lesters served a subpoena on a nonparty The Home Loan Savings Bank (“Home Loan”). That subpoena

asked Home Loan to produce

Copies of the following documents for all accounts

bearing the signatory authority of, or in the name(s) of:

a) Amy Hartzler; 

b) Max R. Erwin, Sr.;

c) Wow Car Company;

d) Wow Car Company, Ltd.;

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e) Mid-Ohio Motor Funding Group, Ltd.;

f) The Hartzler-Erwin Group, LLC; and

g) Marmax Enterprises, LLC.

1. Documents pertaining to all open or closed

checking, savings, or other deposit or accounts in

the name of or under signature authority of any of

the named parties or entities, including but not

limited to:

a. Signature cards;

b. Articles of Incorporation;

c. Articles of Organization;

d. Bank statements for the period January 1,

2010 through the present;

e. Applications to open bank accounts,

whether approved or denied, and any

supporting documentation submitted with said

applications; and

f. Applications to open accounts for credit,

whether approved or denied, and any

supporting documentation submitted with said

applications.

2. Records of communications you have for each of

the named parties and entities.

(Doc. #81, Ex. A). On September 5, 2013, defendants filed a

joint motion to quash the subpoena served upon Home Loan “and/or

for a protective order forbidding the disclosure or discovery of

the requested bank documents.” Id. at 1. In the motion,

defendants argue that “[t]here are simply no relevant banking

records related to the sale of the car that have not already been

produced,” and that the Lesters’ attempt to obtain the

information is “nothing short of harassment” and “most certainly

not an effort to obtain evidence relevant to this case.” Id. at

5-6 (emphasis in original). Defendants likewise argue that the

Lesters should not obtain the information in connection with

their joint venture claim, because the required elements “are

wholly absent from plaintiffs’ complaint.” Id. at 6. Similarly,

defendants assert that the alter ego claim is premature and can

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only be asserted if liability is first established against the

principal parties. Id. at 7. In sum, defendants contend that

the requested discovery is a “fishing expedition” and that the

subpoena should be quashed or a protective order should be issued

to prevent the Lesters from obtaining the discovery. Id. at 8. 

Finally, defendants contend that the subpoena violated Fed. R.

Civ. P. 26(d) because “there has been no conference of the

parties related to the Lesters’ second amended complaint” and

“four of the Defendants” have not “been officially served with a

copy of the second amended complaint yet.” Id. at 9.

In their opposing memorandum, the Lesters construe the basis

for defendants’ motion to be their (erroneous, according to the

Lesters) belief that the “joint venture and alter ego allegations

. . . are subject to dismissal.” (Doc. #87 at 2). The Lesters

dispute that, of course, and they argue that as long as the

claims remain part of the case, the defendants have identified

“no justifiable reason” to quash the subpoena or issue a

protective order. Id. at 2-3. According to the Lesters, the

banking records are discoverable because they are relevant to the

joint venture, alter ego, and successor liability allegations in

the second amended complaint. Id. at 4. Further, the Lesters

allege that they have done all of the conferring required by Fed.

R. Civ. P. 26(f) and are entitled to pursue discovery even as it

relates to new parties to the case. 

In their reply memorandum, defendants reiterate their

position that it is “unfair to subject [them] to highly intrusive

prying . . . into their personal and business affairs before

Plaintiffs have obtained a judgment on Hartzler, the only person

who could possibly found to be primarily liable. . . .” (Doc.

#92 at 2-3). Alternatively, they argue that the Lesters have not

shown that the documents sought are relevant to any of their

claims. 

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II. Discussion

The Court first addresses defendants’ argument that the

subpoena was issued in violation of Fed. R. Civ. P. 26(d). Rule

26(d) provides that discovery may not ordinarily begin prior to

the Rule 26(f) conference. In this case, the Rule 26(f) report

reflects that counsel for both sides met and conferred on May 8,

2012. (Doc. #27). The rule does not require a second or a third

conference to be held subsequent to the filing of an amended

complaint even if it joins new parties. Defendants have not

cited any cases which imply such a requirement or suggest that

every time a new party is added, discovery must stop until that

party appears and participates in a Rule 26(f) conference. 

Certainly, if a newly-joined party can show some prejudice from

being subjected to discovery soon after the party is served with

a summons and complaint, the Court has the power to issue an

appropriate order to protect the party’s rights. But that is not

the argument which defendants have made here. In the absence of

such an argument, the Court will not quash the subpoena or issue

a protective order just because there are now parties to the case

who were not there when the original Rule 26(f) conference was

held.

There is a potential standing question here based upon the

fact that none of the parties who have moved to quash the

subpoena are its targets. Although a party generally lacks

standing to seek to quash a subpoena issued to a nonparty, see

Wright & Miller, Federal Practice and Procedure, Civil 3d §2459,

p. 435, an exception is made if the information sought implicates

a party’s personal right or privilege. See Hendricks v. Total

Quality Logistics, LLC, 275 F.R.D. 251, n.1 (S.D. Ohio 2011). 

The Lesters do not dispute that the exception applies here, where

the information sought from the non-party consists of defendants’

banking records. (Doc. #87 at 3). This Court agrees that

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defendants have standing to file a motion to quash the subpoena

issued to Home Loan. See Riding Films, Inc. v. John Does, No.

2:13-cv-46, 2013 WL 3322221, at *4 (S.D. Ohio July 1,

2013)(noting that personal rights or privileges supporting a

claim of standing have been recognized with respect to bank

records). It now turns to the merits of defendants’ arguments.

As this Court noted previously, the pleadings reflect a

significant dispute concerning who actually sold the used car to

the Lesters, or, more accurately, who can properly be held liable

for the Lesters’ various claims against the seller. See Opinion

and Order of August 12, 2013, Doc. #78, at 1. In opposing the

motion to quash, the Lesters argue that “[t]he documents sought

will lead to information that will verify or disprove the

existence of transactions and the operation of Wow Car Company

through accounts other than those directly in the name of Wow Car

Company and Hartzler.” (Doc. #87 at 4). In other words, the

Lesters claim that the information sought is relevant to the

joint venture, alter ego, and successor liability allegations in

the second amended complaint. 

There is no question that bank records may well contain

information relating to these types of claims. See, e.g., Trans

Pacific Ins. Co. v. Trans-Pacific Ins. Co., No. 90-2531, 1991 WL

152302 (E.D. Pa. Aug. 2, 1991) (finding that the requested bank

documents were relevant and “may provide further evidence of the

alter-ego status of the [defendant corporations]”). 

Consequently, the information sought from Home Loan is relevant

to establish the financial relationships between defendants, and

that such information could lead to a determination of the

individual, entity, or entities responsible for selling the

vehicle to the Lesters. Because the discovery sought is relevant

on its face to claims in the second amended complaint, or is, at

the least, reasonably calculated to lead to the discovery of

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evidence relevant to those claims, defendants have “the burden to

establish lack of relevance.” Hendricks, 275 F.R.D. at 253. 

Defendants have not met that burden. 

What defendants are really arguing is not that the documents

which the Lesters have subpoenaed are irrelevant to their joint

venture or alter ego claims, but rather that discovery on such

claims is premature - that is, until the Court decides if these

claims can survive the motion to dismiss, the Lesters should not

be allowed to pursue discovery on these claims. That is coupled

with an argument that the information is sensitive and the

discovery is intrusive. Defendants are, in essence, asking this

Court to stay discovery pending determination of their pending

motion to dismiss. 

A stay of discovery for any reason is a matter ordinarily

committed to the sound discretion of the trial court. See

Chrysler Corp. v. Fedders Corp., 643 F.2d 1229, 1240 (6th Cir.

1981). In ruling upon a motion for a stay, the Court is required

to weigh the burden of proceeding with discovery upon the party

from whom discovery is sought against the hardship that would be

worked by a denial of discovery. See Marrese v. American Academy

of Orthopedic Surgeons, 706 F.2d 1488, 1493 (7th Cir. 1983). 

Additionally, the Court is required to take into account any

societal interests that are implicated by either proceeding or

postponing discovery. See id. When a stay, rather than a

prohibition, of discovery is sought, the burden upon the parties

requesting the stay is less than if they were requesting a total

freedom from discovery. See id.

The argument that discovery should be stayed pending the

resolution of a dispositive motion is typically unpersuasive. 

See, e.g., Gray v. First Winthrop Corp., 133 F.R.D. 39, 40 (N.D.

Cal. 1990) (stating that if the Federal Rules of Civil Procedure

had contemplated that a pending dispositive motion would stay

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discovery, they would contain a provision to that effect). This

Court has often observed that the occasions when it has granted

such a stay are few, arising where there are issues of immunity

from suit, or a narrow legal issue that is evaluated easily in

order to determine whether the dispositive motion has merit. 

Despite the fact that stays of discovery during the pendency

of dispositive motions are rarely granted, the Court does

consider each such motion on its individual merits. In Heartland

Jockey Club Ltd. v. Penn National Gaming, Inc., 2009 WL 5171829,

at *4 (S.D. Ohio Dec. 21, 2009), this Court noted that it: 

takes seriously its obligation to manage discovery and

recognizes that there are cases where the plaintiff's

claim is so tenuous, and the potential injury to either

private or societal interests from unfettered discovery

is so great, that the Court must limit or preclude

discovery in order to strike the proper balance between

the competing interests involved.

Id. That does not appear to be the case here, and defendants

have not really argued that it is. Rather, whether the Lesters

properly assert a joint venture claim or whether the principal

parties are ultimately liable are not issues that are resolved

easily in order to determine whether the motion to dismiss will

likely be granted. Consequently, and in the exercise of its

discretion, the Court will not stay discovery pending a

resolution of the motion to dismiss.

Defendants do make a valid point about the sensitivity of

some of the information subpoenaed. Usually, however, that is

not a reason to preclude discovery altogether (unless the

potential for harm to the defendants outweighs the potential

benefit to the plaintiffs), but may justify restrictions on the

use and dissemination of the information. That is something the

parties are free to consider, but it does not justify quashing

the subpoena.

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III. Conclusion 

For the reasons set forth above, the Lesters’ motion to

quash the subpoena and/or for a protective order is denied. 

(Doc. #81). The requested documents shall be produced within

fourteen days of the date of this order.

IV. Procedure for Seeking Reconsideration

Any party may, within fourteen days after this Order is

filed, file and serve on the opposing party a motion for

reconsideration by a District Judge. 28 U.S.C. §636(b)(1)(A),

Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt.

I., F., 5. The motion must specifically designate the order or

part in question and the basis for any objection. Responses to

objections are due fourteen days after objections are filed and

replies by the objecting party are due seven days thereafter. 

The District Judge, upon consideration of the motion, shall set

aside any part of this Order found to be clearly erroneous or

contrary to law.

This order is in full force and effect, notwithstanding the

filing of any objections, unless stayed by the Magistrate Judge

or District Judge. S.D. Ohio L.R. 72.3.

/s/ Terence P. Kemp 

United States Magistrate Judge

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