Wayne Michael Putnam v. Hon Ernesto Scorsone Judge, Fayette Circuit Court
2016 SC 000369
| Ky. | Mar 20, 2017Background
- Putnam and Gudeman are trustees of voting trusts holding ~90% of CBA Pharma stock; they and Whitman control CBA and related companies that developed a cancer drug.
- Phelps loaned millions to the defendants' digital camera companies; in 2003 he received 2,000,000 shares of CBA Pharma in exchange for releasing debts; later diagnosed with Lewy body dementia.
- Litigation over defaults and guarantees produced a jury finding Phelps lacked capacity; a judgment exceeding $12 million was entered against Putnam, Gudeman, Whitman, and the camera companies.
- The Phelps family (as judgment creditors) pursued post-judgment discovery to identify assets, obtaining a trial-court order compelling production of business account information and financial records for companies in which Putnam and Gudeman have an interest.
- Putnam and Gudeman sought a writ of prohibition to block discovery as to CBA Pharma records, arguing irrelevance and risk of disclosure of confidential, competitively sensitive information; the Court of Appeals initially denied for lack of standing, this Court reversed on standing and remanded for merits.
- On remand the Court of Appeals denied the writ on the merits, finding the requested discovery relevant to collection efforts and noting a negotiated protective order addressed confidentiality concerns; the Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Availability of writ of prohibition to block post-judgment discovery | Putnam: discovery of CBA Pharma records is irrelevant and risks disclosure of trade secrets; writ necessary to prevent injustice | Phelps family: discovery is relevant to collect judgment from companies controlled by Putnam and Gudeman; protective order protects confidentiality | Writ unavailable; discovery relevant and protective order mitigates confidentiality concerns |
| Relevance of documents from companies in which judgment debtors have an interest | Putnam: CBA Companies were not parties and not obligors, so their records are unrelated | Phelps family: Putnam and Gudeman control and derive benefits from CBA; funds may have shifted from camera companies to CBA; records could identify collectible assets | Court: records reasonably calculated to lead to admissible evidence about assets; relevancy satisfied |
| Claim of trade-secret/confidentiality privilege to avoid production | Putnam: confidentiality and competitive harm justify blocking production or in-camera review | Phelps family: protective order resolves confidentiality, Putnam failed to provide detailed showing or privilege log | Court: absent in-camera submission or detailed log, and with protective order, no showing of substantial miscarriage of justice; production required |
| Standing to challenge discovery | Putnam previously argued lack of standing; Supreme Court earlier held they had standing to seek writ | Phelps family: discovery pertains to entities not named as parties | Court: Putnam and Gudeman have concrete interest as controlling shareholders/trustees; standing established; merits reviewed and writ denied |
Key Cases Cited
- Hoskins v. Maricle, 150 S.W.3d 1 (Ky. 2004) (sets standards for issuing writs of prohibition)
- Grange Mut. Ins. Co. v. Trude, 151 S.W.3d 803 (Ky. 2004) (discusses relevancy in discovery and exceptions where writ may be appropriate)
- Bender v. Eaton, 343 S.W.2d 799 (Ky. 1961) (recognizes "certain special cases" exception for writs)