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Murphy v. Gospel for Asia, Inc.

United States District Court, W.D. Arkansas, Fayetteville Division

June 4, 2018

GARLAND D. MURPHY, III, M.D., and PHYLLIS MURPHY, Individually and on behalf of all others similarly situated PLAINTIFFS
v.
GOSPEL FOR ASIA, INC.; GOSPEL FOR ASIA-INTERNATIONAL; K.P. YOHANNAN; GISELA PUNNOSE; DANIEL PUNNOSE; DAVID CARROLL; and PAT EMERICK DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE

         Currently before the Court are:

• A Motion for Protective Order (Doc. 85) and Brief in Support (Docs. 86, 87)[1] filed by Defendants Gospel for Asia, Inc., Gospel for Asia-International, K.P. Yohannan, Gisela Punnose, Daniel Punnose, David Carroll, and Pat Emerick; and Plaintiff Garland D. Murphy's and Phyllis Murphy's Response in Opposition (Doc. 92);
• Plaintiffs' Second Motion for Sanctions (Doc. 94), Statement of Facts (Doc. 95), Brief in Support (Docs. 96 and 97), and Declaration (Doc. 98); Defendants' Response in Opposition (Docs. 100, 101); and Plaintiffs' Reply (Doc. 103); and
• Plaintiffs' Motion for Sanctions based on Fabricated Documents (Doc. 104), Statement of Facts (Docs. 105, 108), and Brief in Support (Docs. 106, 107); Defendants' Response in Opposition (Docs. 110, 111); and Plaintiffs' Reply (Docs. 117, 118).

         For the reasons given below, Defendants' Motion for a Protective Order is DENIED, and Plaintiffs' Second Motion for Sanctions is GRANTED. However, for reasons that will become clear below, the Court will defer ruling on Plaintiffs' Motion for Sanctions based on Fabricated Documents. Finally, the Court gives notice of its intent to appoint a Special Master and sets forth an abbreviated briefing schedule to allow the parties to be heard on the appointment of such a master, as required by Federal Rule of Civil Procedure 53.

         I. BACKGROUND[2]

         The aforementioned motions all center on a discovery dispute that has plagued the litigation of this case and forestalled its progress since at least September 2017. As this Court has repeated in several orders and conferences since then, the underlying lawsuit concerns Plaintiffs' allegations that Defendants and their international affiliates and partners have defrauded donors by diverting donations that were earmarked for specific purposes to different uses without these donors' knowledge. Given the extent of the Defendants' operations and the number of individuals Plaintiffs claim have been defrauded, Plaintiffs seek to represent a class of such donors and have asserted various causes of action against Defendants, including Civil RICO and fraud.

         The fundamental question in this case has always been whether these entities have in fact redirected donated money in violation of promises that were made to their donors around the world. However, Plaintiffs' attempts to discover whether the named Defendants, or organizations that they control, have evidence by which this fundamental question could be answered have largely been stymied by, inter alia, renewed versions of previously denied objections, several unsuccessful rounds of discovery and, as the Court has explained elsewhere and again below, Defendants' failure to obey clearly worded directives issued by this Court and to respond in good faith to Plaintiffs' discovery requests. The Court now turns to the pending motions.

         II. DEFENDANTS' MOTION FOR A PROTECTIVE ORDER

         The Court has given an extensive review of the procedural history of this case in its prior Order on the Motion for Leave to Serve Discovery (Doc. 44), in the Order setting a hearing on Plaintiffs' First Motion for Sanctions (Doc. 63), and during the hearing on that Motion held on February 16, 2018. Therefore, while the Court will not needlessly spill more ink here and incorporates by reference its prior comments, suffice it so say that it is not ruling in a vacuum on any of these motions. It is certainly not ruling in a vacuum on Defendants' current motion for a protective order, which seeks relief as to a request for production ("RFP") that was first included in a discovery set the Court allowed Plaintiffs to serve back on November 21, 2017.

         Nevertheless, it does bear repeating why the parties currently find themselves in this predicament. The set of discovery that began this nine-month dispute focused on 179 different categories of items for which donations were solicited by Gospel for Asia and its affiliates. Plaintiffs sought evidence that donations earmarked for these items were actually spent on these items. After their attempts to discover this information through interrogatories and RFPs were hampered by objections, Plaintiffs came at the problem from a different angle by using requests for admission ("RFA") under Rule 36. So, for each of the 179 donation categories, Plaintiffs propounded six separate RFAs and one RFP that asked Defendants to produce all responsive documents in their possession, custody, or control. However, this discovery set was quite voluminous because of the sheer number of donation categories, so Plaintiffs ultimately decided to request leave to serve the discovery. On November 21, 2017, after rejecting several objections from Defendants, the Court granted leave and Plaintiffs served the discovery set on the same day. A month later, Defendants served their responses. After reviewing the responses, Plaintiffs felt that Defendants were giving evasive answers and repeating objections that had already been overruled by the Court. Therefore, they requested that Defendants amend their responses. After multiple email exchanges in January of 2018, Defendants refused to supplement their responses. On January 8, 2018, Plaintiffs' counsel sent an email to the Court requesting a telephone conference to discuss the impasse. Because the parties informed the Court that their communication had so far been limited to emails, the Court instructed the parties to confer in person or by telephone to attempt to resolve the dispute and referred all parties to the Court's prior order allowing the discovery as well as to various provisions of the Rules of Civil Procedure dealing with RFAs, RFPs, and various provisions of Rule 37 concerning sanctions for violating a discovery order. The resulting telephone conference ultimately did not resolve the conflict, so Plaintiffs filed their first Motion for Sanctions (Doc. 54). Defendants responded to the motion on February 2, 2018 (Doc. 61), and the Court ultimately set a hearing (Doc. 63).

         After requiring all named parties and at least one lead attorney for each party to appear in person at this hearing, the Court issued an Order (Doc. 67) finding that several parts of the Defendants' discovery responses were evasive and ordering Defendants to amend their responses. In particular, because the Court found that current responses obscured whether Defendants were actually in possession of (or still searching for) responsive documents that would show whether expenditures designated for specific items were actually spent on those items, the Court gave special instructions as it related to the RFPs. In particular, because Defendants had represented to the Court that they had "given [Plaintiffs] the documents that show the expenditures, "[3] (while leaving the door open that other documents might exist in the field) the Court ordered that Defendants' responses to each RFP be split into two categories: general evidence and specific evidence. General evidence would be documents showing that donated money had been spent in the field, but it either would not correspond to a particular designation code or would not be a document that was specific in showing how much money was either requested or spent on particular items. Specific evidence, on the other hand, would be for the types of items that had been discussed during the hearing, e.g. transmittal letters, receipts, or request letters from the diocese, that would help Plaintiffs track how much money was ultimately spent on particular projects. See, e.g., Doc. 67, p. 9. The Court ordered that the amended responses be served within three weeks. The parties subsequently reached an agreement, ultimately approved by the Court, to extend this response deadline by a week. On March 16, when the Court and the Plaintiffs anticipated that Defendants would finally provide responsive documents or pinpoint documents that had already been produced linking earmarked donations to expenditures, the Court instead received a Motion for a Protective Order (Doc. 85) seeking relief from the alleged burden of responding to the RFPs.

         Despite the fact that these RFPs had been included in identical form in the original request for discovery that Plaintiffs served back on November 21, 2017, it was only on the due date to comply with the Court's explicit order, (not at the sanctions hearing or during the four weeks that Defendants had to respond), that Defendants first made the argument that the burden of responding to the requests now justified a protective order. Having recited the relevant history, the Court now turns to the merits of the motion.

         Rule 26(c) provides that "[t]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." Rule 26 adopts a proportionality standard that requires courts to consider whether the requested discovery is warranted in light of "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). When faced with a discovery dispute, "[t]he court's responsibility, using all the information provided by the parties, is to consider these and all the other factors in reaching a case-specific determination of the appropriate scope of discovery." Fed.R.Civ.P. 26 advisory committee's notes.

         The Court need not linger long on most of the reasons listed in Defendants' Motion, for many of the stated reasons for seeking the protective order relate to objections that have been repeatedly rejected by this Court beginning as long ago as November 2017 when Plaintiffs were first granted leave to serve the discovery. The Court is no more persuaded by those reasons now than it was then.

         However, Defendants do support their motion with a few reasons that bear further comment. Three in particular are especially worth mentioning: that responding to these RFPs would be unduly expensive, that these documents are not in the possession, custody, or control of the named Defendants, and that this is merits-based discovery that should be delayed until after class certification is ruled on.

         A. Added Costs

         Initially, the Court rejects, for several reasons, Defendants' untimely assertion that responding to the RFPs would pose unreasonable costs.

         First, the Court had already informed Defendants during the infancy of the discovery dispute that any overly-burdensome request should prompt the party to seek a protective order on the front end. Therefore, the fact that Defendants waited until long after November 2017 when they were first served with the RFPs to request relief factors against their pursuit of a protective order now. Defendants attempt to justify their tardiness by arguing that the Court greatly increased the burden of responding to the RFPs when it remarked that the fact that responsive documents were abroad was not the Plaintiffs' problem at this point given the Court's finding that Defendants had stymied Plaintiffs' prior discovery efforts by renewing overruled objections and serving evasive responses. To the extent that Defendants now argue that the Court's order is what prompted the additional burden, it is curious that Defendants would renew this objection when the Court had already overruled it during the hearing when it ordered these types of specific documents to be produced and in light of comments that Defendants' counsel made during the hearing.[4] Moreover, that Defendants would wait to renew this objection and first seek protection on this basis after the close of business on the due date underscores this Court's conclusion that this is another example of repeated conduct by Defendants to evade providing responsive documents going to the heart of this case.

         Second, any additional costs Defendants incur by responding to the Court's orders are justified given the Court's findings that discovery in this case has been severely hampered by Defendants' abusive conduct. It has long been noted that "the spirit of the rules is violated when advocates attempt to use discovery tools as tactical weapons rather than to expose the facts and illuminate the issues by . . . unnecessary use of defensive weapons or evasive responses. All of this results in excessively costly and time-consuming activities that are disproportionate to the nature of the case, the amount involved, or the issues or values at stake." Fed.R.Civ.P. 26 advisory committee's notes.

         Finally, given the posture of this putative class action, the amount in controversy, and the fact that this discovery goes to the very heart of the issues for trial, the Court continues to conclude that production of these documents at Defendants' expense is appropriate and proportional under Rule 26. Thus, it rejects the argument that the costs of responding are sufficient to justify a protective order, especially given Plaintiffs' nine-month quest to find answers to the questions they began asking in August 2017.

         B. ...


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