Donovan Meuchel a/k/a Donavon Meuchel v. Red Trail Energy, LLC
No. 20230127
IN THE SUPREME COURT STATE OF NORTH DAKOTA
MARCH 7, 2024
2024 ND 44
the Honorable Rhonda R. Ehlis, Judge.
AFFIRMED.
Opinion of the Court by Bahr, Justice.
Justin D. Hager, Bismarck, ND, for plaintiff and appellant.
Robin W. Forward (argued), Bismarck, ND, and Jessica L. Knox (on brief), Minneapolis, MN, for defendant and appellee.
Meuchel v. Red Trail Energy
No. 20230127
Bahr, Justice.
[¶1] Donavon Meuchel appeals from a judgment dismissing his complaint requesting
I
[¶2] Meuchel is a member and investor of Red Trail, a limited liability company. In October 2021, Meuchel commenced this action against Red Trail after his initial attempts to obtain information from Red Trail failed. Meuchel sought the information after Red Trail solicited bids for a project that involved drilling two groundwater monitoring wells as part of a carbon dioxide capture project. Meuchel‘s company had submitted an unsuccessful bid. Meuchel claimed a right to the information as a member of Red Trail under
[¶3] Red Trail answered, asserting Meuchel was not entitled to the information under
[¶4] In December 2022, the district court held a bench trial, limited to whether Red Trail violated
II
[¶5] This Court‘s standard of review after a bench trial is well established:
“In an appeal from a bench trial, the district court‘s findings of fact are reviewed under the clearly erroneous standard of review, and its conclusions of law are fully reviewable.” Larson v. Tonneson, 2019 ND 230, ¶ 10, 933 N.W.2d 84. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all of the evidence, we are convinced a mistake has been made. Id. The court‘s findings are presumptively correct. Id. “[T]he district court is the determiner of credibility issues and we will not second-guess the district court on its credibility determinations.” Id.
Zavanna, LLC v. GADECO, LLC, 2023 ND 142, ¶ 5, 994 N.W.2d 133.
III
[¶6] Meuchel argues the district court erred in denying his request for information when it determined he did not have a right to the requested information from Red Trail.
[¶7] Red Trail is a board-managed limited liability company. The North Dakota Uniform Limited Liability Company Act, codified at
- In a member-managed or board-managed limited liability company, the following rules apply:
On reasonable notice, a member may inspect and copy during regular business hours, at a reasonable location specified by the company, any record maintained by the company regarding the activities, financial condition, and other circumstances of the company, to the extent the information is material to the rights and duties of the member under the operating agreement or this chapter. - The company shall furnish to each member:
- Without demand, any information concerning the activities, financial condition, and other circumstances of the company which the company knows and is material to the proper exercise of the rights and duties of the member under the operating agreement or this chapter, except to the extent the company can establish that it reasonably believes the member already knows the information; and
- On demand, any other information concerning the activities, financial condition, and other circumstances of the company, except to the extent the demand or information demanded is unreasonable or otherwise improper under the circumstances.
- The duty to furnish information under subdivision b also applies to each member to the extent the member knows any of the information described in subdivision b.
(Emphasis added.)
[¶8] Under
[¶9] When interpreting and applying a uniform law‘s provisions, this Court may look to comments “from the official editorial board for guidance[.]” Shafer v. Scarborough, 2022 ND 233, ¶ 21, 982 N.W.2d 864. The comments to this uniform law explain, “For the meaning of ‘material’ as applied to information, see Section 409(f), comment.” Unif. Ltd. Liability Co. Act (2013) § 410 cmt. subsection (a)(2)(A), 6C U.L.A. 115 (2016). The comment to section 409(f) reads, “Here and elsewhere in this act, information ‘is material if there is a substantial likelihood that a reasonable [decision maker] would consider it important in deciding how to vote’ or take other action under this act or the operating agreements.” Id. § 409 cmt. subsection (f), 6C U.L.A. 111 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). See also Merriam-Webster‘s Collegiate Dictionary 765 (11th ed. 2005) (defining “material” as “having real importance or great consequences“); American Heritage Dictionary 772 (2d Coll. ed. 1985) (defining “material” as “[o]f importance to a case; relevant“). In the context of records inspection, courts have held “[t]he determination of the reasonableness of a member‘s request for the inspection of records of a limited liability company will depend on the circumstances of the case and is addressed to the court‘s discretion.” 54 C.J.S. Limited Liability Companies § 38 (Aug. 2023 Update).
[¶10] Neither party moved to admit an operating agreement for Red Trail into evidence. Therefore, the district court limited its analysis to
[¶11] Further, under
[¶12] Meuchel argues the district court‘s analysis is flawed and incorrect. He argues that, although the operating agreement was not produced at trial, Red Trail‘s CEO testified that Meuchel as a member held both governance rights and financial rights, including being able to run for the board of governors and to vote for and request things to be on the annual meeting. Meuchel contends this “unrefuted testimony” shows that in denying information to him, Red Trail infringed on his rights to bring up information at the annual meeting, to possibly run for the board, or to suggest the board needed changes.
[¶13] Red Trail responds it was Meuchel‘s burden to prove the demanded records and information are material to his rights and duties as a member under
[¶14] Meuchel largely bases his right to information on the testimony of Red Trail‘s CEO. He does not rely on the operating agreement or provide a contrary statutory interpretation. Meuchel challenges the district court‘s factual findings regarding “materiality” and “reasonableness.”
[¶15] We review the district court‘s findings of fact under the clearly erroneous standard of review. We review the court‘s exercise of its discretion in deciding a member‘s information request under
[¶16] In exercising its discretion, the district court considered a member‘s rights in the context of a board-managed LLC governed by
[¶17] The district court‘s findings of fact supporting its decision were not induced by an erroneous view of the law, there is evidence to support the findings, and after reviewing all of the evidence we are not convinced a mistake has been made. On the basis of the court‘s “materiality” and “reasonableness” findings, we conclude disclosure of the bidding process was not mandated under the statute. Therefore, under the facts as found by the court, the court did not abuse its discretion in denying Meuchel‘s request for information.
IV
[¶18] Meuchel argues the district court erred in awarding attorney‘s fees to Red Trail after denying his motion to compel.
[¶19] Under
If the motion [to compel] is denied, the court may issue any protective order authorized under Rule 26(c) and must, after giving an opportunity to be heard, require the movant, the attorney filing the motion, or both to pay the party or deponent who opposed the motion its reasonable expenses incurred in opposing the motion, including attorney‘s fees.
“[T]he court must not order this payment if the motion was substantially justified or other circumstances make an award of expenses unjust.”
[¶20] The district court found Meuchel served a document on Red Trail labeled “Rule 37 Certification.” After identifying alleged deficiencies in Red Trail‘s discovery responses, the document stated, “In an effort to secure the information without court intervention, you will be granted until 5:00 p.m. on Thursday, March 10, 2022 to secure the information and provide it according to the rules. Failure to do so will result in a Motion to Compel.” Red Trail responded to the document by sending Meuchel a letter explaining its answers and suggesting the parties have a conference to discuss the matter. Meuchel responded by bringing his motion to compel.
[¶21] The district court made the following findings:
Plaintiff‘s counsel did not confer, nor did he attempt to confer with Defendant‘s counsel before making this Motion to Compel Discovery. His Rule 37 Certification is a demand pleading, telling Defendant‘s counsel what is going to happen if they do not comply. Plaintiff‘s counsel did not send an email, a letter or even make a telephone call in an attempt to “confer” or amicably resolve the issue. . . . .
Plaintiff‘s counsel did not confer with Defendant‘s counsel. He simply issued a demand.
. . . .
Defendant‘s counsel sent a letter after receiving the Rule 37 Certification pleading, explaining their answers. They also suggested that they would be open to a teleconference to discuss the matter. That also did not occur. A good faith effort to resolve this issue before court intervention did not occur.
. . . .
In looking at the totality of the circumstances, this Court finds that the Plaintiff did not make a good faith effort to meaningfully discuss the discovery dispute, and did not make a genuine attempt to resolve the dispute through non-judicial means.
Based on its findings, the court denied Meuchel‘s motion and awarded Red Trail its attorney‘s fees and costs for the motion.
[¶22] After another hearing, the district court awarded attorney‘s fees of $6,516.46. The court acknowledged 16.5 hours of work “may seem excessive,” but notes it did not find any duplicative billing and was unwilling to penalize the “thorough job in creating and preparing” Red Trail‘s response to the motion.
[¶23] Meuchel argues the district court erred in finding he failed to confer or attempt to confer in good faith because he essentially failed to make a phone call. He argues the exhibit letters demonstrate the refusal to comply with discovery was a continuation of Red Trail‘s refusal to provide the information. Meuchel‘s counsel asserts he sincerely believed it would have been a waste of time for both parties to hold a phone conference and argues the amount of attorney‘s fees awarded was unjust.
[¶24]
[¶25] The North Dakota Rules of Civil Procedure do not define what constitutes good faith under
[¶26] Although
[¶27] Good faith conferral or attempts to confer generally require more than mere demand letters or emails. Conferring requires a party actually communicate by phone or in person, or at least sincerely attempt to do so. See, e.g., Arnold v. ADT Sec. Servs., Inc., 627 F.3d 716, 721 (8th Cir. 2010) (holding district court properly granted a motion to compel and did not clearly err in finding defendant “attempted to confer with Plaintiffs in good faith” when defendant repeatedly attempted to confer regarding the incomplete discovery responses and notified plaintiffs of the discovery deficiencies by letter before seeking court intervention); Robinson v. Potter, 453 F.3d 990, 994-95 (8th Cir. 2006) (holding district court did not abuse its discretion in denying motion to compel when movant failed to show parties attempted to confer to resolve discovery request); Tijerina-Salazar v. Venegas, No. 19-CV-00074-DC-DF, 2021 WL 6011137, at *7 (W.D. Tex. Dec. 20, 2021) (holding a single letter and an alleged call “placed eight days after the letter was sent, and four weeks before the motion was filed,” was insufficient to show plaintiff attempted to establish a “two-way communication“); Cardoza v. Bloomin’ Brands, Inc., 141 F.Supp.3d 1137, 1145 (D. Nev. 2015) (denying motion to compel concluding a meet and confer was insufficient when devoid of meaningful discussion of the specific objections); Engleman v. United States, No. 4:14CV00601 JLH, 2015 WL 12696094, at *1 (E.D. Ark. Sept. 24, 2015) (“Writing a demand letter and stating a deadline does not constitute conferring in good faith.“); Compass Bank v. Shamgochian, 287 F.R.D. 397, 398-99 (S.D. Tex. 2012) (stating movant must at least attempt a “two-way communication . . . to genuinely discuss any discovery issues and to avoid judicial recourse,” and not “treat the informal negotiation process as simply a formal prerequisite to judicial review of the discovery dispute“); In re Johnson, 408 B.R. 115, 120-21 (Bankr. S.D. Ohio 2009) (stating conferring must be a personal or telephonic consultation during which the parties engage in meaningful discussion regarding their positions).1
[¶28] As explained in Shuffle Master, the “conferment” component of performance “requires a party to have had or attempted to have had an actual meeting or conference“:
Such an obligation is clear from the plain meaning of the word “confer“, which derives from the Latin roots com meaning “together” and ferre meaning “to bring.” Hence, the word literally translates as “to bring together.” The Court therefore finds that in order to bring a proper motion to compel under
Rule 37(a)(2)(B) , a moving party mustpersonally engage in two-way communication with the nonresponding party to meaningfully discuss each contested discovery dispute in a genuine effort to avoid judicial intervention.
[¶29] The holding in PHI Financial Services supports the district court‘s findings and conclusion in this case. In PHI Financial Services, in addition to writing a letter, the movant attempted to contact the respondent to confer. The court found the movant attempted to confer in good faith before seeking the order to compel because it did not seek the motion until “after multiple exchanges,” including an actual attempt to confer. 2016 ND 114, ¶ 13. The respondent‘s “inaction in answering the remaining interrogatories over the course of nearly two months and several communications indicates the parties were unlikely to resolve the dispute without judicial intervention.” Id. Here, Meuchel sent a demand and did not attempt to communicate by phone or in person regarding the discovery disputes.
[¶30] The district court found Meuchel did not attempt to confer with Red Trail; he simply issued a demand. The court‘s findings Meuchel never actually discussed or attempted to discuss the discovery disputes with Red Trail are not clearly erroneous. Based on the court‘s findings, the court did not abuse its discretion in awarding attorney‘s fees under
[¶31] The court is considered an expert in deciding the amount of attorney‘s fees, and the amount and reasonableness of the fees will not be overturned absent a clear abuse of discretion. Trosen v. Trosen, 2022 ND 216, ¶ 48, 982 N.W.2d 527; Riemers v. State, 2008 ND 101, ¶ 8, 750 N.W.2d 407. Meuchel has not demonstrated the court abused its discretion in awarding the amount of attorney‘s fees.
V
[¶32] We affirm the judgment.
[¶33] Jon J. Jensen, C.J.
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
Douglas A. Bahr