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Municipal Revenue Services, Inc. v. Xspand

February 20, 2007


The opinion of the court was delivered by: Judge Jones

Magistrate Judge Blewitt


On November 15, 2006, we held oral argument with counsel regarding Plaintiff's Motion to Compel Defendants' compliance with the Court's Orders of July 26, 2006 and September 11, 2006. (Doc. 195).*fn1 Plaintiff seeks the Court to direct Defendants to comply with each item listed on its November 6, 2006 status report (Doc. 215), and it seeks Defendants to produce additional documents with respect to its discovery requests which this Court has previously ordered Defendants to provide.*fn2

Plaintiff's Motion to Compel has been briefed and is ripe for disposition. (Docs. 205 & 216). Exhibits have been attached to Plaintiff's Motion and Defendants' Brief. (Docs. 195 & 216). Plaintiff also submitted Exhibits at the November 15, 2006 oral argument. Both parties, as directed submitted a status report regarding Plaintiff's Motion. (Docs. 215 & 217).*fn3

After hearing argument from counsel regarding the latest discovery dispute centering around the Plaintiff's Motion to Compel (Doc. 195), we now resolve this outstanding discovery Motion. (Doc. 195).

Plaintiff requested the Court to order Defendants to comply with each item listed on its status report. (Doc. 215). Since Plaintiff has itemized the disputed categories of documents for which it is seeking Defendants to provide additional documents, we shall adopt those categories herein. (Doc. 215, items A.-H., pp. 2-9). We now address these categories seriatim.

A. Documents Relating to Various Aspects of the Business Relationship Between the Defendants

Plaintiff has detailed its documents requests which are at issue herein. (Doc. 215, pp. 2-4). At oral argument, Plaintiff provided the Court with a copy of a Term Sheet between Defendants BSC and Xspand, which we had marked as Plaintiff #1. This document was previously Bates Stamped as X2405-X2427. Plaintiff argued that it wants the documents showing what BSC is doing with Xspand, in terms of business relationships, and it wants to show that Xspand is merely acting for BSC in the market place. Plaintiff seeks cash flow documents between BSC and Xspand. As support for this request, Plaintiff contends that BSC played a role in payments made to Xspand executives. In its status report, Plaintiff also summarized what additional documents it seeks from Defendants. MRS contends that numerous documents have not been produced by the Defendants, despite the Court's Order, including documents reflecting payments made by Bear Stearns to support Xspand's business, Bear Stearns' payment of legal fees on behalf of Xspand, Bear Stearns' purchase of Xspand's business, consultant and compensation agreements, evidence of meetings attended by Bear Stearns' John Garzone, and many other documents. (Doc. 215, p. 4).

Initially, Defendants argued that Plaintiff's present Motion to Compel is in reality a Motion for Reconsideration of the Court's July 26, 2006 Memorandum and Order. As such, Defendants contend Plaintiff's Motion is untimely. Defendants stated that Plaintiff is rehashing items which the Court has already ruled upon in its stated Memorandum and Order.

We do not find, for the most part, that Plaintiff's present Motion is a reconsideration request, and we shall consider it.

Defendants specifically argued with respect to Item A. that Plaintiff offered no evidence that there are other responsive documents to Plaintiff's discovery requests which Defendants still have failed to produce. As Defendants noted, Item A. corresponds to Item 1. of the parties' May 17, 2006 Status Report, Doc. 126. The May 17, 1006 Status Report also listed the relevant discovery requests of Plaintiff which relate to Item A. for present purposes.

Defendants stated that Paul Scura, at his August 5 deposition, addressed the relationship between BSC and Xspand, and he described the joint venture between them. Defendants stated that this Court has ordered the production of the Term Sheet between Defendants to Plaintiff, and Plaintiff has received it. Defendants stated that BSC and Xspand did not really follow the provisions of the Term Sheet as verified by Scura in his deposition. Defendants contended that the business relationship between BSC and Xspand was in the Term Sheet and it was given to Plaintiff. Thus, Defendants stated that they complied with this Court's July 26, 2006 Order. Defendants claimed that Plaintiff also wants the money flow between BSC and Xspand to try and show an agency relationship between them. Counsel for Xspand represented that no joint venture agreement exists between BSC and Xspand.

In reply, Plaintiff argued that the Court, in its July 26, 2006 Order, allowed it to pursue the relationship between BSC and Xspand, and to get the documents relative to its Item #1. of the May 17, 2006 Status Report, Doc. 126. At the November 2006 oral argument, Plaintiff submitted its Exhibit Plaintiff #2, which is an e-mail dated September 29, 2005 from Douglas Badaszewski of Xspand to Thomas Moore of Chester City Council regarding an advance amount to present to BSC's credit committee with an attached copy of the City's executed Resolution authorizing the sale of its tax claims. (Bates Stamped CC01323-CC01326, & CC01530).

Plaintiff contends that BSC is really directing Xspand, is funding Xspand, is determining how much to pay Xspand's consultants, and is really running Xspand. Thus, Plaintiff seeks more documents regarding the business relationship between BSC and Xspand. Plaintiff stated that BSC purchased Xspand in 2006, and it also seeks documents regarding the purchase of Xspand by BSC, which Plaintiff stated that Defendants will not produce.

Plaintiff also submitted at oral argument, Exhibits Plaintiff #3, #4 and #5, which are additional e-mails Defendants provided to Plaintiff during discovery.*fn4 The Plaintiff's exhibits deal with e-mails regarding a summary for the City of Chester on advances for its tax liens, expected fees from Allegheny's liens, and a review by BSC personnel, including Garzone, of a draft regarding the purchase of Delaware's liens.

As sur-reply to Plaintiff, Defendants argued that Plaintiff can re-depose Scura and depose Garzone and ask them questions regarding the relationship between BSC and Xspand. Defendants claimed that the documents they have given to Plaintiff have described the relationship between BSC and Xspand. Defendants also stated that they gave Plaintiff transactional documents regarding Defendants' purchase of tax liens from taxing authorities in Pennsylvania, and claimed that Plaintiff now wants to see all transactions of Defendants in Pennsylvania. Defendants argued that Plaintiff's claims relate to allegations that Xspand and BSC made improper comments about Plaintiff and its product to Pennsylvania taxing authorities. Defendants contended that now Plaintiff seeks documents from its competitor dealing with every possible deal Defendants worked on in Pennsylvania, regardless of whether Defendants reached an agreement to purchase the tax liens, and that Plaintiff seeks documents regarding all-encompassing aspects of Defendants' businesses that are not relevant to its claims and are beyond the Court's directive in its July 26, 2006 Order.

As final word with respect to Item A., Plaintiff stated that the Term Sheet Defendants provided to it does not comply with this Court's July 2006 Order. Plaintiff claimed that at the November 2006 oral argument, this was the first time it was aware that there was no joint venture agreement between BSC and Xspand. Thus, Plaintiff argued that the only way it can show an agency relationship between BSC and Xspand is by trying to follow the flow of money. Plaintiff submitted an additional exhibit with respect to Item A., namely PPTS's Trade Authorization Memo regarding BSC's approval of payment for PPTS's legal fees. However, we agree with Defendants that Plaintiff's Exhibit #6 does not relate to this case as it was clearly dealing with PPTS's reimbursable legal fees and costs with respect to its purchase of tax liens from Cuyahoga County, Ohio. Plaintiff's claims in the present case deal with Pennsylvania taxing authorities. In any event, Plaintiff claimed that it cannot simply depose Garzone in order to obtain all of the information it needs regarding the business relationship between the Defendants since it does not yet have all the necessary documents from Defendants. Plaintiff also stated that in its Document Request #12, it requested Xspand's payment of money to consultants in Pennsylvania, and contended that BSC continues to make these payments. Defendants responded that Plaintiff's request regarding the fees Defendants paid to consultants was denied by the Court.

In our July 26, 2006 Memorandum, with respect to Item #1 of the May 17, 2006 Status Report, Doc. ...

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