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Rice v. Electrolux Home Products, Inc.

United States District Court, M.D. Pennsylvania

June 17, 2016

ELAINE RICE, individually and on behalfof all others similarly situated, Plaintiff,

          Order Filed 03/28/2018


          Matthew W. Brann, United States District Judge

         I. BACKGROUND

         The instant motion to compel arises during the course of a products liability suit that alleges, among other causes of action, defective design, failure to warn, and breach of warranty claims.[2] The action percolated up when Plaintiff Elaine Rice of Havertown Township, Delaware County, Pennsylvania allegedly touched the handle of a hot microwave that sat above her stovetop.[3] Counsel for Plaintiff readily admits that Ms. Rice did not require any medical treatment after touching the hot microwave. As they continue to unwind, the facts of this case have reminded the Court of a remark by the American novelist Gertrude Stein: sometimes, "there is no there there."

         Nevertheless, the parties have become mired in a dispute as to whether the Defendant must produce certain documents that reside overseas with its third-party suppliers, Sharp Appliances Thailand Ltd. and Midea Microwave and Electrical Appliances Manufacturing Co. Ltd. Because Defendant entered into purchase agreements with those suppliers that contain explicit litigation assistance provisions, the answer to the pending dispute is that the Defendant must in fact turn over those documents to Plaintiff. The issue is fully briefed and the Court has held oral argument. Consistent with the following analysis, Plaintiff's motion to compel will be granted.

         II. LAW

         "It is well established that the scope and conduct of discovery are within the sound discretion of the trial court. . . and that after final judgment of the district court. .. our review is confined to determining if that discretion has been abused."[4] "To find such abuse it is usually necessary to conclude that there has been an interference with a substantial right... or that the discovery ruling is seen to be a gross abuse of discretion resulting in fundamental unfairness in the trial of the case."[5]Thus, the Third Circuit has forewarned litigants that it "will not interfere with a trial court's control of its docket except upon the clearest showing that the procedures have resulted in actual and substantial prejudice to the complaining litigant."[6]

         "Discovery need not be perfect, but discovery must be fair."[7] "The responses sought must comport with the traditional notions of relevancy and must not impose an undue burden on the responding party."[8] "[T]he scope of [ ] discovery is not without limits."[9] As such, "[d]iscovery should be tailored to the issues involved in the particular case."[10] As Federal Rule of Civil Procedure 26(b)(1) states:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering 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. Information within this scope of discovery need not be admissible in evidence to be discoverable.

         "To determine the scope of discoverable information under Rule 26(b)(1), the Court looks initially to the pleadings."[11] In ascertaining which materials are discoverable and which are not, a district court must distinguish between requests that "appear[ ] reasonably calculated to lead to the discovery of admissible evidence/' and demands that are "overly broad and unduly burdensome."[12] "[T]he discovery rules are meant to be construed quite liberally so as to permit the discovery of any information which is relevant and is reasonably calculated to lead to the discovery of admissible evidence."[13] "As an initial matter, therefore, all relevant material is discoverable unless an applicable evidentiary privilege is asserted. The presumption that such matter is discoverable, however, is defeasible."[14]

         Federal Rule of Civil Procedure 37(a)(3)(B) states that "[a] party seeking discovery may move for an order compelling an answer, designation, production, or inspection." "In order to succeed on a motion to compel discovery, a party must first prove that it sought discovery from its opponent."[15] "The party seeking the discovery has the burden of clearly showing the relevancy of the information sought."[16]

         III. ANALYSIS

         A. The clear text of the purchase agreements that Defendant executed with its third-party suppliers grant Defendant the requisite quantum of "control" contemplated by Federal Rule of Civil Procedure 34.

         Federal Rule of Civil Procedure 34(a)(1), with the Court's emphasis added, provides in pertinent part that:

A party may serve on any other party a request within the scope of Rule 26(b) to produce and permit the requesting party or its representative to inspect, copy, test, or sample the following items in the responding party's possession, custody, or control: any designated documents or electronically stored information ... or any designated tangible things.

         Thus, "[t]he test for the production of documents is control, not location."[17] Applying that rule, the dispositive issue on this motion is whether Defendant "controls" the requested discovery, despite that discovery being located with third-party suppliers overseas. "The concept of 'control' has been construed broadly."[18] Specifically, "[i]f the producing party has the legal right or the practical ability to obtain the documents, then it is deemed to have 'control/ even if the documents are actually in the possession of a non-party."[19] As then Chief Judge Anthony J. Scirica, writing for the United States Court of Appeals for the Third Circuit in Mercy Catholic Medical Center v. Thompson explained, "so long as the party has the legal right or ability to obtain the documents from another source upon demand, that party is deemed to have control."[20]

         In, Societe Internationale Pour Participations mdustrielles Et Commerciales, S. A. v. Rogers, the Supreme Court of the United States, addressing the issue of "control" as to a corporation who asserted that it did not have the legal right to produce sought-after documents, recognized that the outcome to such a dispute "depends upon the circumstances of a given case" and "is sufficiently flexible to be adapted to the exigencies of particular litigation."[21] In that case, the Court upheld a district court's order compelling discovery despite the compelled company's "fear of punishment under the laws of its sovereign."[22]

         The Societe Internationale Court reasoned that production was appropriate because the discovery sought "might have a vital influence upon [the] litigation" and because the compelled party "[was] in a most advantageous position to plead with" the third-party.[23] Several federal courts interpreting the Societe Internationale decision have confirmed that the case's "language indicates a direction to lower courts to closely examine the actual relationship between two corporations and guard against not just fraud and deceit, but also sharp practices, inequitable conduct, or other false and misleading actions whereby corporations try to hide documents or make discovery of them difficult."[24] "Certainly, this broad construction ... is consonant with American civil process which puts a premium on disclosure of facts to ascertain the truth as the means of resolving disputes."[25]

         The existence of a contractual right to access or otherwise require production of documents held in third-party hands is often a dispositive factor in disputes such as these. Federal courts have found that parties possessed an adequate quantum of control to compel discovery held in the possession of third parties in each of the following instances:

• In a dispute where the documents sought "relate[d] to a transaction that the defendant worked on, " the third party "played a significant role in the transaction, " and the defendant had "in the normal course of business obtained documents from [the third-party] related to this transaction/' the United States District Court for the District of New Jersey held that "[t]he facts of this case support a finding that defendant [ ] has easy and customary access to the [third-party] documents involving this transaction and [ ] possesses the ability to obtain such documents from [the third party] for its usual business needs. One such business need is to provide highly relevant documents in litigation."[26]
• Based upon contractual language that granted the party to a lawsuit the ability to "require[ | the agent to produce any documents of any kind that relate in any way to the activities of [the third party] governed by . .. this Agreement at any reasonable time upon request, " the United States District Court for the Western District of Washington held that the party had control over the requested documents.[27] Such was true even though the agreement "require[d] it to obtain permission before disclosing some [third-party] documents to outside parties, " because "[t]here [was] no apparent basis for such an objection" and because "any disclosure to Plaintiffs would be subject to the parties' existing confidentiality agreement."[28]
• In a case where relevant documents were held by a third-party, the United States District Court for the District of New Jersey nevertheless found that those documents were in defendants control for the purposes of discovery because the defendant "himself would have a right to access the documents or obtain copies of them."[29]
• In a services contract context, the United States District Court for the District of Massachusetts held that where the defendant's contract with a third-party granted the defendant "the right, upon reasonable notice, to examine and copy the information, " the information was discoverable.[30]
• In the subcontractor setting, where the subcontractor was "employed ... to conduct the audit and receive documents, " and thereby agreed to make available pertinent files "at all reasonable times, for review and obtaining any necessary information, " the Third Circuit held that the "the documents were accessible to the [contracting party] and within its control."[31]
• In the services contract setting, the United States District Court for the District of New Jersey held that the pertinent language from defendant's agreements "plainly indicat[ed] that it ha[d] control over and access to its agents' closing files" and "had the requisite control over requested documents, " where the underlying contractual provisions included that the third-party must "[m]aintain and carefully preserve all records . . . [and] [p]ermit [the defendant] to examine, audit and copy all financial information and records upon reasonable prior notice."[32] The court wrote that "[i]t logically follows that a litigating party has control of documents if a contractual obligation requires a non-party to provide requested documents to the litigating party upon demand."[33]

         In light of the foregoing decisions, the text of Defendant's purchase agreements with its third-party suppliers in this matter grants it adequate "control" over the requested discovery. (Xxxxx)


         (Xxxxx)[34], [35], [36]

         As a straightforward matter of contractual interpretation, I would conclude that these provisions afford Defendant sweeping rights to demand cooperation and discovery productions from its suppliers. The language in (Xxxxx) clearly requires the suppliers to take affirmative actions to assist Defendant in discovery and to meet its requests. The language explains that the supplier "shall": "cooperate, " "provide, " and "take all steps necessary."

         As to the instant request, the third-party suppliers (Xxxxx). This cooperation is triggered simply by Defendant's (Xxxxx).[37] Those are the rights that the Defendant bargained for when it executed the purchase agreements. It cannot now renege on those rights in a manner orchestrated to avoid fair discovery.

         Contract interpretation is an "attempt to ascertain the intent of the parties and give it effect/' and "[w]hen the words of an agreement are clear and unambiguous, the intent of the parties is to be ascertained from the language used in the agreement."[38] When determining whether the language of an agreement is clear or ambiguous, the Court assumes that the parties intend "all provisions in the agreement [to] be construed together and . . . given effect."[39] The "focus ... is upon the terms of the agreement as manifestly expressed, rather than as, perhaps, silently intended."[40]

         Accordingly, the Court assumes generally that the parties have given words their "commonly accepted and plain meaning, " but also recognizes "that every agreement is made and to be construed with due regard to the known characteristics of the business to which it relates . . . and hence the language used in a contract will be construed according to its purport in the particular business, although this results in an entirely different conclusion from what would have been reached had the usual meaning been ascribed to those words."[41]

         Interpretation is not concerned with the parties' "post hoc judgment[s] ... as to what should have been, " and the Court will not "rely upon a strained contrivancy" to establish ambiguity.[42] "The Court, rather, seeks to be faithful to the meaning that the parties-given their positions at the time of contracting-would have given their words ex ante."[43] "Thus, when the terms of a voluntary contract are clear and unambiguous, as here, the contracting parties are bound by those terms, and a court is powerless to rewrite the contract to make it more reasonable or advantageous for one of the contracting parties."[44]

         Applying these principles to the contractual language presently before the Court, the unambiguous intent animating the purchase agreements, as evidenced by their clear text, is that the third-party suppliers agreed to "cooperate" with discovery when Defendant came asking for their input. The plain English definitions of "cooperate" include "to work together: to work with another person or group to do something"; "to be helpful by doing what someone asks or tells you to do"; and "to act in a way that makes something possible or likely: to produce the right conditions for something to happen."[45]

         This means that the third-party suppliers must produce the sought-after discovery when Defendant requests it, and conversely, that when Plaintiff requests it, Defendant must then produce it to her. To the extent that Defendant and the third-party suppliers somehow sought to evade discovery through their business arrangements, the plain language of their agreements forbids it.

         Equally important, in the contractual setting, one party's right is another's obligation. That is why legal practitioners so often explain that in any good contract, both parties give some things up, but get some things in return. Accordingly, Defendant's third-party suppliers are on notice that when this Court holds that the pertinent discovery provisions of the purchase agreements grant Defendant the right to obtain that discovery, it is simultaneously holding that, by those same words, the third-party suppliers have obligated themselves to produce the information and otherwise comply with Defendant's requests. Necessarily, should the third-party suppliers resist such production, this Court would find it quite straightforward to hold, in a breach of contract suit between Defendant and its suppliers, that failure to abide by (Xxxxx) of their own purchase agreements rendered the third-party suppliers in dereliction of their contractual duties.

         Defendant also contends that it would be more appropriate for Plaintiff to conduct its third-party discovery through the procedures provided for by the Hague Convention. That argument was evaluated and squarely rejected by the United States District Court for the Southern District of New York of In re Flag Telecom Holdings, Ltd. Securities Litigation.[46] In that case, the court considered an argument whereby "defendants insist[ed] ...

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