United States District Court, D. South Carolina, Beaufort Division
ORDER AND OPINION
Richard M. Gergel, United States District Court Judge.
matter is before the Court on Defendant/Third-Party Plaintiff
Choate Construction Company's ("Choate") motion
to compel (Dkt. No. 215). For the reasons set forth below,
the Court grants in part and denies in part the motion.
Chapman Coyle Chapman & Associates Architects, AIA was
responsible for the design and oversight of the construction
of amenity facilities for Plaintiff Hampton Hall LLC,
including a golf clubhouse, fitness center, and community
clubhouse. (Dkt. No. 34 at ¶ 3.) Defendant Choate
Construction Company ("Choate") was the general
contractor. (Dkt. No. 34 at ¶ 7.) Plaintiff filed the
present action on May 12, 2017. (Dkt. No. 1-1.) On February
14, 2018, Choate filed a third-party complaint against
several of its subcontractors involved with the construction
at issue. (Dkt. No. 38.) Choate now moves to compel
discovery from Plaintiff Hampton Hall, arguing that Hampton
Hall has withheld existing documents responsive to
Choate's document requests that are allegedly in the
possession of closely related entities. (Dkt. No. 215.)
Choate also seeks an order compelling production of
maintenance budgets and documents regarding Hampton
Hall's reserve fund. (Id.) Hampton Hall opposes
the motion. (Dkt. No. 223.) Choate filed a reply. (Dkt. No.
to a civil litigation may obtain discovery regarding
"any nonprivileged matter that is relevant to any
party's claim or defense" so long as the information
is "proportional to the needs of the case...."
Fed.R.Civ.P. 26(b)(1). The scope of discovery permitted by
Rule 26 is designed to provide a party with information
reasonably necessary to afford a fair opportunity to develop
her case. See, e.g., Nat'l Union Fire Ins. Co. of
Pittsburgh, P.A. v. Murray Sheet Metal Co., Inc., 967
F.2d 980, 983 (4th Cir. 1992) (noting that "the
discovery rules are given 'a broad and liberal
treatment'") quoting Hickman v. Taylor, 329
U.S. 495, 507 (1947). The court "must limit the
frequency or extent of discovery...if it determines that the
discovery sought is unreasonably cumulative or duplicative,
or can be obtained from some other source that is more
convenient, less burdensome, or less expensive."
Fed.R.Civ.P. 26(b)(2)(C)(i). "The scope and conduct of
discovery are within the sound discretion of the district
court." Columbus-Am. Discovery Grp. v. Atl. Mut.
Ins. Co., 56 F.3d 556, 568 n.16 (4th Cir. 1995); see
also Carefirst of Md, Inc. v. Carefirst Pregnancy Ctrs.,
334 F.3d 390, 402 (4th Cir. 2003) ("Courts have broad
discretion in [their] resolution of discovery problems
arising in cases before [them].") (internal quotation
marks omitted). To enforce the provisions of Rule 26, under
Federal Rule of Civil Procedure 37, a "party may move
for an order compelling disclosure or discovery."
Rule of Civil Procedure 34 permits a party to request
documents under a responding party's "possession,
custody, or control[.]" Fed.R.Civ.P. 34(a).
"Control does not require legal ownership or actual
physical possession of documents at issue; rather
'documents are considered to be under a party's
control when that party has the right, authority, or
practical ability to obtain the documents from a non-party to
the action."' Grayson v. Cathcart, No.
2:07-00593-DCN, 2013 WL 1401617, at *3 (D.S.C. Apr. 8, 2013)
the "specific form of the corporate relative involved
does not matter, i.e., whether it is a parent,
sister, or subsidiary corporation." Steele Software
Sys., Corp. v. DataQuick Info. Sys., Inc., 237 F.R.D.
561, 564 (D. Md. 2006). Instead, courts look at a variety of
factors to determine whether a party has control over
documents that are in the possession of a nonparty.
Id. Important factors include: corporate structure
of party/non-party; non-party's connection to transaction
at issue in litigation; degree that non-party will benefit
from outcome of case; whether related entities exchange
documents in ordinary course of business; whether non-party
has participated in litigation; common relationships between
party and its related non-party entity; ownership of
non-party; overlap of directors, officers, and employees;
financial relationship between entities; relationship of
parent corporation to underlying litigation; and agreements
among entities. See E.I. DuPont de Nemours & Co. v.
Kolon Indus., Inc., 286 F.R.D. 288, 292 (E.D. Va. 2012)
citing Steele Software Sys., Corp., 237 F.R.D. at
record evidence demonstrates that Toll Brothers, a
construction company, created a variety of subsidiaries to be
involved in the development and management and Hampton Hall.
Specifically, Toll SC, L.P. is one of two partners that make
up Hampton Hall. (Dkt. No. 223-1 at 6.) Toll SCLP was
involved in building the amenities at Hampton Hall.
(Id. at 4.) Further, the overlaying homeowners'
association ("HOA") at Hampton Hall, the Club,
created a financial subset, Toll Golf, to deal with all
related golf related expenses. (Id. at 14.) While
generally expenses between Hampton Hall HO A and Toll Golf
are kept separate, approximately five percent of the expenses
overlap. (Id.) Further, Toll Golf works for the
Club, Hampton Hall's HOA. (Id.) Most
importantly, Hampton Hall is the owner of Toll Golf.
documents of Toll SCLP and Toll Golf clearly fall under the
"control" of Plaintiff Hampton Hall. Toll SCLP is a
member of Hampton Hall and was involved in the amenity
building project, and therefore have a close corporate
structure, are connected to the construction at issue in this
litigation, likely will be affected by the outcome of this
litigation and have a common and longstanding relationship
directly connected to the buildings at issue in the
litigation. Further, representations related to other
pleadings in this case demonstrate that Hampton Hall is able
to obtain documents from Toll related entities. (Dkt No. 224
at 3.) Documents in the possession of Toll Golf are also
clearly under the control of Hampton Hall. In addition to
owning Toll Golf, they regularly share documents, manage the
same development, and were solely created as a financial
subset to handle golf operations. Finally, as the golf
clubhouse is at issue in the litigation, Toll Golf is
connected to the litigation and likely will be affected by
this litigation's outcome. Therefore, Hampton Hall must
produce the documents retained by Toll SC, L.P. and Toll Golf
that are responsive to Choate's document requests.
however, has made no showing that documents possessed by Toll
Architecture or Eastern States Engineering are effectively
under the "control" of Hampton Hall or that Hampton
Hall would have any practical ability to obtain the
documents. The only information presented to the Court
indicates that Toll Architecture and Eastern States
Engineering are subsidiaries of Toll Brothers created to
handle architecture and engineering on their construction
projects. (Dkt. No. 223-1 at 10 - 12.) Eastern States
Engineering handles engineering projects nationwide, and
testimony indicates that Toll Architecture handles projects
under 5, 000 square feet. (Id.) Importantly, the
record evidence indicates that Toll Architecture did not
perform any architecture work at Hampton Hall. (Id.
at 12.) The testimony also indicates that Eastern States
Engineering may similarly have not performed any work at
Hampton Hall. (Id.) Further, besides sharing a
parent organization, the record evidence does not demonstrate
any other corporate overlap or business relationship between
the parties. Therefore, at this time, the Court cannot
conclude that Hampton Hall effectively has
"control" over documents retained by Toll
Architecture and Eastern States Engineering. To the extent
Choate seeks documents from those entities and cannot show
the requisite "control," a subpoena is the proper
vehicle to request the relevant documents.
further requested an order compelling documentation regarding
Hampton Hall's maintenance budgets and the amount of
capital in Hampton Hall's reserve fund. It is unclear to
the Court whether these documents exist, but to the extent
Hampton Hall has or had budgets, including if they are now
retained by another entity on behalf of Hampton Hall, Hampton
Hall is directed to produce those documents. Hampton Hall
further responded that there is no remaining reserve fund.
Nonetheless, to the extent documentation exists regarding a
reserve fund, Hampton Hall is directed to produce the
under Rule 37(a)(5), if a motion to compel is granted a court
must award costs and attorneys' fees unless it finds the
motion premature, the nondisclosure "substantially
justified," or an award of expenses otherwise
"unjust." At this time the Court declines to award
costs and fees as Hampton Hall provided substantial
justification for their initial nondisclosure based on the
documents being in the possession of a non-party. However,
now that the Court clarified Fed.R.Civ.P. 34(a)(1) regarding
the requirement of ...