Opinion ID: 2724252
Heading Depth: 2
Heading Rank: 1

Heading: Defendants’ Motion for Further Discovery

Text: Federal Rule of Civil Procedure 56(d) states, “If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time . . . to take discovery; or (3) issue any other appropriate order.” Fed. R. Civ. P. 56(d) (emphasis added). Due to this discretionary language, appellate courts “review a district court’s decision as to the scope of discovery, including the denial of additional time for discovery, under an abuse of discretion standard.” Jordan v. City of Detroit, No. 12–2296, 557 F. App’x 450, 455 (6th Cir. Feb. 21, 2014). See also Audi AG v. D’Amato, 469 F.3d 534, 541 (6th Cir. 2006). “An abuse of discretion occurs when the reviewing court is left with the definite and firm conviction that the trial court committed a clear error of judgment.” United States v. Hunt, 521 F.3d 636, 648 (6th Cir. 2008) (internal quotation marks omitted). Therefore, this Court may only reverse the district court’s conclusion as to Defendants’ motion if it finds that the ruling was arbitrary, unjustifiable, or clearly unreasonable.
“A party invoking [the] protections [of Rule 56(d)] must do so in good faith by affirmatively demonstrating . . . how postponement of a ruling on the motion will enable him . . . to rebut the movant’s showing of the absence of a genuine issue of fact.” Willmar Poultry Co. v. Morton-Norwich Prods., Inc., 520 F.2d 289, 297 (6th Cir. 1975). This Court examines a number of factors when determining whether the district court abused its discretion in failing to grant a motion for further discovery: (1) [W]hen the appellant learned of the issue that is the subject of the desired discovery; (2) whether the desired discovery would have changed the ruling below; (3) how long the discovery period had lasted; (4) whether the appellant was dilatory in its discovery efforts; and (5) whether the appellee was responsive to discovery requests. No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 11 Plott v. Gen. Motors Corp., Packard Elec. Div., 71 F.3d 1190, 1196–97 (6th Cir. 1995) (internal citations omitted); CenTra, Inc. v. Estrin, 538 F.3d 402, 420 (6th Cir. 2008). This Court’s main inquiry is “whether the moving party was diligent in pursuing discovery.” Dowling v. Cleveland Clinic Found., 593 F.3d 472, 478 (6th Cir. 2010).7 In the instant case, Defendants’ attorney filed a declaration with their motion, asserting that Defendants were diligent in their pursuit of discovery and that the Plott factors weighed in their favor. However, when determining whether the district court abused its discretion, this Court may only reverse upon a finding that the ruling was arbitrary, unjustifiable, or clearly unreasonable. In the instant case, there is sufficient evidence that the Plott factors were not applied in a clearly unreasonable, arbitrary, or unjustifiable manner. First, Defendants knew of the issues that were the subjects of the desired discovery early on in the proceedings, and they were aware that they no longer had access to their records two days after the complaint was filed against them. Second, it does not appear that the desired discovery would have changed the final outcome below.8 Although Defendants are correct that the thousands of pages of exhibits submitted by the FTC were cherry-picked to present the best evidence against Defendants, it is 7 According to the D.C. Circuit, “A . . . motion requesting time for additional discovery should be granted ‘almost as a matter of course unless the non-moving party has not diligently pursued discovery of the evidence.’” Convertino v. U.S. Dep’t of Justice, 684 F.3d 93, 99 (D.C. Cir. 2012) (quoting Berkeley v. Home Ins. Co., 68 F.3d 1409, 1414 (D.C. Cir. 1995)). Similarly, the First Circuit has stated that [c]onsistent with the salutary purposes underlying Rule 56(f), district courts should construe motions that invoke the rule generously, holding parties to the rule’s spirit rather than its letter . . . . This does not mean, however, that Rule 56(f) has no bite or that its prophylaxis extends to litigants who act lackadaisically; use of the rule not only requires meeting several benchmarks, but also requires due diligence both in pursuing discovery before the summary judgment initiative surfaces and in pursuing an extension of time thereafter. In other words, Rule 56(f) is designed to minister to the vigilant, not to those who slumber upon perceptible rights. Resolution Trust Corp. v. N. Bridge Assocs., 22 F.3d 1198, 1203 (1st Cir. 1994) (citation omitted). (Rule 56(f) is now designated as Rule 56(d).) 8 Defendants assert that they needed access to their computer files to establish that they purchased “scrubbed lists” of leads that were in compliance with the MARS Rule. This is the one piece of evidence requested by Defendants that conceivably could have altered the outcome below in some small way. No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 12 not clear how additional evidence would have established a dispute of material fact on any of the issues in this case. Defendants claim that access to more consumer contracts would show that the actual written representations made to consumers directly contradict and actually correct Defendants’ verbal communications. However, the record already contains numerous contracts between consumers and each of the three American corporate defendants. Adding more contracts to the record would not have led to a different outcome. Defendants also claim that bank records, bank statements, and other corporate records would have established the corporate hierarchy to prove that Benhaim and Michaels neither controlled nor knew of the unlawful business practices of the corporations. However, hundreds of pages of evidence already in the record, including official bank records and receipts, list Benhaim and Michaels in various leadership positions with each of the corporations. Emails and formal corporate documents already in the record establish that Benhaim and Michaels served as and represented that they were either president or vice president of each of the corporate entities, including the Canadian corporations. Finally, Defendants assert that they should have been given the opportunity to access documents showing that they changed their business models to comply with the newly-changed laws. The record, however, contains sufficient evidence of each corporation’s activities during the period of time from 2010 through 2012. It is difficult to see how most of the requested evidence would have changed the outcome below. The third Plott factor does not weigh in either party’s favor. Although the discovery period was abbreviated, it lasted for nearly five months, which was a sufficient amount of time for Defendants to conduct some discovery. The fourth Plott factor does not weigh strongly in either party’s favor. Although Defendants repeatedly notified the district court that they could not obtain their records and attempted some means of discovery, they did not file a formal discovery request until June 18, 2013, and they did not pursue other meaningful forms of discovery. No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 13 Early on in the proceedings, Defendants hired Canadian counsel to seek return of Defendants’ property from the Canadian authorities. In fact, Defendants notified the court that on or about May 20, 2013, the Canadian authorities agreed to return their documents. However, as of the filing of their motion, Defendants had not yet received those records. During hearings and conferences, Defendants repeatedly reminded the district court and the magistrate judge that they continued to lack access to their own records. Defendants issued subpoenas on January 3, 2013, directing the DOJ to produce documents and information within 30 days of service. However, as the DOJ’s letter in response to that request indicates, the subpoenas were invalid because they failed to comply with DOJ regulations and civil procedure rules, and even had they been valid, DOJ’s regulations barred production of the documents. Defendants did not attempt to follow up on that letter, challenge its legal assertions, or narrow their requests. They filed a notice of discovery dispute with the court on June 5, 2013, alleging that the FTC and the DOJ were not cooperating with their requests for assistance in obtaining files from the RCMP. Defendants failed to attempt other methods for obtaining their desired materials. For example, although the RCMP eventually turned over their files, it is possible that they could have obtained them earlier by following procedures pursuant to Canada Criminal Code § 490.9 Additionally, rather than submitting complaint after complaint that the DOJ failed to comply with their requests for documents, Defendants could have used other methods to obtain many of those documents, including serving proper subpoenas on banks, payment processors, or other entities, taking depositions of the consumers whose declarations already appeared in the record, or serving interrogatories on co-Defendants who were no longer parties in the case. Although there is some evidence in the record that Defendants pursued their materials in a diligent manner, they failed to file a formal request for production until one month before the relevant discovery deadline. They only filed the instant motion for additional discovery on July 25, 2013, more than three weeks after the July 1, 2013 deadline for completing discovery needed 9 This process may not be as useful as the FTC asserts because it appears that there is an exception for records in an ongoing investigation. No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 14 to support or defend dispositive motions and days after the July 22, 2013 deadline for filing opposition to the motion for summary judgment. Finally, the fifth Plott factor does not weigh in either party’s favor. Defendants claim that the FTC was dilatory in responding to Defendant’s first discovery request. This “request” was an email entitled “Discovery request” sent from Defendants’ counsel to the FTC on May 9, 2013. The entire email requests as follows: (1) “Please send us all of the discovery that you have not turned over”; (2) “Please send us your intended witness list”; and (3) “Please inform us the results of your ordered discussion with the Department of Justice regarding discovery in this case.” (R. 163-1, 7/24/2013 Email, at 4104.) The first of these requests was improper because it did not follow required procedure and did not describe with particularity the items sought. See Fed. R. Civ. P. 34. Although the FTC objected to the “request” on those grounds and others, the FTC offered to voluntarily produce documents it received in response to civil investigative demands and subpoenas issued since the complaint was filed. The second request for the FTC’s intended witness list was also improper because the parties were not required to file witness lists until three days prior to the final pre-trial conference scheduled for September 17, 2013. The third request was for the FTC to provide information about a discussion with the DOJ regarding discovery in their case. The FTC responded in a letter that they were never ordered to discuss discovery with the DOJ, yet “[they would] inform [Defendants] of the results of [their] discussion when there [was] something to report.” (R. 163-2, 5/13/2013 Email, at 4108.) Defendants filed a notice of discovery dispute regarding the above-referenced request, and that dispute was resolved through a June 7, 2013 minute order requiring the FTC to produce supplemental disclosures and particular documents. The FTC produced those documents on June 17, 2013, but Defendants found that they had not received all relevant materials in the FTC’s possession. On June 18, 2013, Defendants served the FTC with their first formal request for production, seeking access to the documents seized by the Canadian government. The FTC turned those documents over in encrypted form just days before the deadline for filing an opposition to the motion for summary judgment. Although the FTC appears to have taken its time in remitting those documents, it was within its right to do so because it complied with court No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 15 deadlines for responding to production requests. Therefore, the fifth Plott factor does not weigh strongly in either party’s favor. Defendants assert that “there was absolutely no reason that the District Court could not have granted E.M.A. Defendants the additional time they requested in their Rule 56(d) Motion . . . because E.M.A. Defendants’ business practices were already ‘enjoined . . .’ and their businesses had been ‘completely shuttered.’” Defs.’ R. Br. at 15. This is true. However, Defendants had wrongly taken millions of dollars from American consumers who continued to face financial struggles caused by their interactions with Defendants. As a result, further delay of the proceedings and the ultimate restitution award could have caused great prejudice to consumers. Although Defendants may have belatedly expended some efforts in their pursuit of discovery, and discovery might have provided some minimal evidence to counter the FTC’s claims, the district court did not abuse its discretion in denying Defendants’ Rule 56(d) motion.