United States District Court, D. South Carolina, Charleston Division
ORDER AND OPINION
Richard Mark Gergel United States District Court Judge
Before
the Court is Plaintiffs motion to compel supplemental
discovery responses regarding Defendants' financial
condition. (Dkt. No. 83.) For the reasons set forth below,
Plaintiffs motion is granted in part and denied in part.
I.
Background
This is
a product liability case arising out of an injury sustained
by Plaintiff Gene Victor Moore allegedly from use of an API
Crusader Climbing Treestand ("Crusader Treestand")
manufactured by Defendants Mainstream Holdings, Inc. and
Global Manufacturing Company, LLC and sold by Defendants BPS
Direct, LLC and Bass Pro, LLC ("Bass Pro
Defendants"). (Dkt. No. 53.) Plaintiff now seeks an
order compelling Defendants to provide all financial
statements and tax returns for all Defendants from 2014
through 2017.[1] The motion is a renewed motion to compel,
previously filed as Docket Number 31, which the Court denied
without prejudice pending a determination that Plaintiff has
made a prima facie showing that he is entitled to punitive
damages. (Dkt. No. 46.) Plaintiff has renewed the motion,
arguing that he has made out a prima facie case and a dispute
of material fact regarding liability and an entitlement to
punitive damages. (Dkt. No. 83.) Defendants oppose the
motion. (Dkt. No. 90.)
II.
Legal Standard
Parties
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."
Fed.R.Civ.P. 37(a)(1).
III.
Discussion
In the
first instance, the Parties, cognizant that the availability
of punitive damages ultimately is affected by whether
Plaintiffs claims can survive summary judgment, dedicate
significant portions of their briefing to argue the merits of
Plaintiff s claims. As the Court has held in recently issued
orders, Plaintiffs claims for strict liability as to
manufacturing defects survives against Defendants Global and
Mainstream, and Plaintiffs remaining three claims, for
negligence, breach of warranty, and under the South Carolina
Unfair Trade Practices Act ("SCUTPA") survive as to
all parties. (Dkt. Nos. 149, 150.)
However,
for the purpose of discovery, the documents related to
Defendants' financial condition only become relevant if
Plaintiff s claim for punitive damages is viable. See,
e.g. Nix v. Holbrook, No. CIV.A. 5:13-02173, 2015 WL
791213, at *3 (D.S.C. Feb. 25, 2015) ("the court
declines at this time to require production of sensitive
financial documents until after Plaintiff has established the
viability of his claim for punitive damages.")
(collecting cases). In the first instance, the Court notes
that punitive damages are not available under South Carolina
law for the breach of warranty claims. See Rhodes v.
McDonald, 345 S.C. 500, 504, 548 S.E.2d 220, 222 (Ct.
App. 2001) ("Had the legislature intended that punitive
damages be available in breach of warranty cases, they could
easily have included a provision providing for the recovery
of damages of that kind."). Further, under the SCUTPA,
the statute itself controls the damages available, and
provides that a court may award treble damages for a
"willful or knowing violation" of the SCUTPA.
See Smith v. Strickland, 314 S.C. 192, 197, 442
S.E.2d 207, 210 (Ct. App. 1994) (holding that "trebled
damages" are "punitive in nature"). Therefore,
under the SCUTPA, as the amount of damages for a willful or
knowing violation is circumscribed by the statute, the
financial condition of Defendants is not relevant under the
SCUTPA.
Therefore,
the sole question is whether Plaintiff can make a prima facie
showing of entitlement to punitive damages for his tort
claims under Illinois law. See Browning-Ferris Indus. of
Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257,
278, 109 S.Ct. 2909, 2921-22, 106 L.Ed.2d 219 (1989)
("In a diversity action, or in any other lawsuit where
state law provides the basis of decision, the propriety of an
award of punitive damages for the conduct in question, and
the factors the jury may consider in determining their
amount, are questions of state law.")[2] Regarding
punitive damages in products liability cases under Illinois
law:
[P]unitive damages may be awarded when the defendant acted
'with fraud, actual malice, deliberate violence or
oppression, or when the defendant act[ed] willfully, or with
such gross negligence as to indicate a wanton disregard for
the rights of others.'... 'A defendant is guilty of
willful and wanton conduct when he demonstrates knowledge
that his conduct poses an increased risk of serious physical
harm to another.' In the product liability context,
punitive damages are appropriate if 'the
manufacturer's conduct evinced a flagrant disregard for
public safety.'
Ross v. Black & Decker, Inc., 977 F.2d 1178,
1187-88 (7th Cir. 1992) (citations omitted).
At this
stage, Plaintiff has clearly made a sufficient prima facie
showing to submit the issue of punitive damages as to
Defendants Global and Mainstream to the jury. As the Court
already held, it is undisputed that the Crusader Treestand
here had a small "burn hole," and that this was
known by the manufacturers as a common by-product of welding.
(Dkt. Nos. 77-1 at 14; 77-10 at ¶ 17; 77-3 at 60.)
Further, Plaintiff identified at least one prior incident,
Vandermast, demonstrating that Defendants Global and
Mainstream knew that a similar, though not identical,
Crusader Treestand split at a planned heel cord hole in the
foot section.[3] (Dkt. Nos. 77-3 at 15-18; 77-14 at 27;
96-19.) See Barton v. Chicago & N.W. Transp.
Co., 325 Ill.App.3d 1005, 1031, 757 N.E.2d 533, 555
(2001) (permitting jury instruction on punitive damages where
evidence of substantially similar occurrences (SSOs) was
admitted at trial). These facts at least raise a prima facie
case that Defendants Global and Mainstream had
"knowledge that [their] conduct poses an increased risk
of serious physical harm to another" and disregarded
public safety issues. Therefore, Plaintiff is entitled to
evidence of Defendant Global and Mainstream's financial
condition.
Defendants
attempt to argue that Defendant Mainstream is an
"improper party" as it was only the holding company
for Defendant Global and, since it did not take part in any
of the manufacturing or sale of the Treestand, could not act
with disregard for Plaintiff (Dkt. No. 90 at 31.) To begin
with, Defendants have not made a motion to dismiss Defendant
Mainstream as an improper party. Regardless, the record
evidence is clear that, although Defendant Mainstream is the
parent company of Defendant Global, the two are inextricably
intertwined. Todd Quiring is the sole shareholder of
Defendant Mainstream and is also the owner of Defendant
Global. (Dkt. No. 76-3 at 4.) Defendant Global also does not
have "any employees that are specifically Global
employees" and instead "the payroll is done through
Mainstream holdings" where some "job duties cross
over." (Id. at 9.) Indeed, Mainstream also
provided the quality assurance policy applicable to the
Crusader Treestand here and provides the customer support for
the API Crusader Treestands, including for prior incidents of
treestand failure such as the Vandermast claim, demonstrating
that they had some knowledge of prior incidents. (Dkt. No.
83-23; 96-9.) There is further some evidence that the
employees who ultimately do work for Global do so "as
directed by Mainstream Holdings." (Dkt. No. 76-3 at 10.)
Defendants reliance on the corporate distinction between
Defendant Mainstream and Defendant Global is therefore
misplaced. There is evidence of Mainstream's direct
actions, through their customer service line and quality
...