North Alabama Fabricating Company, Inc. v. Bedeschi Mid-West Conveyor Company, LLC
2:16-cv-02740
D. Kan.Aug 1, 2017Background
- Plaintiff North Alabama Fabricating sued Bedeschi Mid-West Conveyor and two individuals alleging fraud and seeking punitive damages for alleged false promises to pay increased costs tied to an accelerated shipment schedule.
- Plaintiff served an Amended Rule 30(b)(6) notice including Topic No. 14: Bedeschi’s financial ability to compensate Plaintiff for the amounts claimed.
- Bedeschi moved for a protective order to prohibit inquiry into its financial condition, arguing such inquiry is equivalent to a judgment-debtor exam and premature until judgment, and that discovery on net worth for punitive damages should be delayed until the punitive claim’s viability is established.
- Plaintiff opposed, arguing Bedeschi’s financial ability at the time of the alleged misrepresentations is relevant to the fraud claims and that the punitive-damages claim is not spurious given the Complaint and the court’s prior denial of a motion to dismiss.
- Magistrate Judge James denied the protective order as to financial condition at the time of the alleged misrepresentations (relevant to fraud), but granted a stay as to discovery into Bedeschi’s current financial condition for punitive damages until Bedeschi has an opportunity to challenge the punitive claim’s viability on dispositive motion or summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Topic No. 14 (financial ability) is discoverable as to Bedeschi’s condition at the time of alleged misrepresentations | Financial ability at the time is relevant to fraud claims | Such inquiry is improper and equivalent to a judgment-debtor exam and premature | Denied protective order as to financial condition at the time of alleged misrepresentations — discoverable |
| Whether discovery into current financial condition for punitive damages may proceed now | Punitive damages discovery is appropriate because claim is not spurious and net worth is relevant to punitive damages | Discovery of current net worth should be delayed until punitive claim is shown viable | Granted stay of discovery into current financial condition for punitive damages until Bedeschi can challenge the punitive claim on dispositive motion/summary judgment |
| Standard for permitting pretrial discovery into defendant’s financial condition for punitive damages | If punitive claim is not spurious, majority rule permits pretrial discovery of financial info | Require plaintiff to first establish punitive claim prima facie or obtain judgment | Court applied rule that plaintiff must show punitive claim is not spurious; found plaintiff met that threshold but still stayed current-net-worth discovery as premature |
| Allocation of costs for the motion | Plaintiff sought relief; no special cost-shifting requested | Defendants sought protective order and stay; requested relief only | Each party to bear its own expenses related to the motion |
Key Cases Cited
- Mid Continent Cabinetry, Inc. v. George Koch Sons, Inc., 130 F.R.D. 149 (D. Kan. 1990) (where punitive damages asserted, pretrial discovery of defendant’s financial condition is generally permitted if the punitive claim is not spurious)