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Erus Builders LLC v. Volt Solar Systems Inc.

United States District Court, D. Arizona

June 7, 2016

Erus Builders LLC, Plaintiff,
Volt Solar Systems Incorporated, et al., Defendants.


          Honorable John Z. Boyle United States Magistrate Judge

         Pending before the Court are Plaintiff Erus Builders, LLC’s Ex Parte Application to Amend Case Management Order, or Alternatively, to Vacate Dates and Schedule New Case Management Conference (Doc. 64), Erus’ Notice of Joinder of Parties Pursuant to Rules 15 and 20 of the Federal Rules of Civil Procedure (Doc. 66), [1] Erus’ Motion to Compel Deposition of Defendant Malcolm Adler (MAdler) (Doc. 69), and MAdler’s Motion for a Referral to a Magistrate Judge for a Settlement Conference (Doc. 94). Below, the Court addresses these Motions.

         I. Motion to Amend Case Management Order

         Erus requests the Court extend the discovery deadlines in this matter because: (1) the Court previously stayed the proceedings for two months; (2) MAdler’s discovery responses are incomplete; (3) Wells Fargo did not produce full documents in response to a subpoena; (4) Erus seeks to add additional parties to this action “which will not only require additional discovery, but will affect the scope and breadth of the issues and claims in this case"; and (5) MAdler cancelled his deposition with one day's notice because he was advised by counsel not to answer any questions besides his name or biographical information pursuant to his Fifth Amendment rights. (Doc. 64 at 3-5.)

         Defendants Jerome Wenger (JWenger) and Sharon Airman (SAltman) oppose Erus' Motion. (Doc. 74.) Specifically, they contend that they believe there is no basis for liability against them in this action, the Court should deny Erus' request to add additional parties, and Erus has had sufficient time to complete discovery. MAdler has not responded to Erus' Motion, and the time to do so has passed. LRCiv 7.2(c).

         As detailed below, the Court will grant Erus additional time to depose MAdler, and will grant in part and deny in part Erus' request to add new parties. Accordingly, the Court will extend the case management deadlines in this matter as follows:

• The deadline for completing MAdler's deposition is September 16, 2016.
• The deadline for completing fact discovery is October 28, 2016.
• The parties shall provide full and complete expert disclosures by August 26, 2016.
• Rebuttal expert disclosures shall be completed by September 23, 2016.
• Expert depositions shall be completed by October 28, 2016.
• Dispositive motions shall be filed no later than December 16, 2016.

         II. Motion to Compel MAdler's Deposition [2]

         a. Background

         On November 2, 2015, Erus noticed the deposition of MAdler for November 13, 2015, in Philadelphia. (Doc. 69-4 at 2-3.) The parties also scheduled the depositions of JWenger and SAltman for the previous day, November 12, 2015, in Philadelphia. (Doc. 69 at 3.) MAdler's counsel, Robert Mann, asserts that on November 10, 2015, he learned that MAdler had received an SEC subpoena. (Doc. 78 at 2.) After a preliminary investigation, Mr. Mann asserts, MAdler decided to invoke his Fifth Amendment privilege to questions asked during his deposition. (Id.) Mr. Mann informed counsel of MAdler’s decision the day before MAdler was to be deposed. (Id.) It appears that the parties, after the other depositions were completed on November 12, 2015, put their positions on the record:

Q. Mr. Adler, my name is Paul Frame. I represent Erus Builders in this matter, and I understand there’s something you want to put on the record about this deposition.
A. Yes.
Q. Okay. Go ahead, sir.
A. On the advice of counsel, I invoke my right under the Fifth Amendment of the United States Constitution and all applicable state constitutions not to answer on the grounds I may incriminate myself.
MR. FRUTKIN: So I’ll put on the record that with respect to any substantive question, other than his name or basic biographical information, that would be his response, and that applies to any question based on a pending government investigation.
MR. FRAME: Okay.
MR. HARVEY: This is Mr. Harvey. I would ask a series of questions at this deposition if it wasn’t asked by the plaintiff about my client’s noninvolvement in this deposition -- Ms. Altman’s noninvolvement and the fact that there’s no basis for liability against either of my clients. And do I understand that he would answer -- he would refuse to answer all those question on the same basis?
MR. FRUTKIN: Correct. And so, to the extent that you have any questions that he’s -- that he would otherwise respond to, we’ll preserve the record for you just as much as Erus, that he refused to respond to those questions as well on Fifth Amendment grounds.
MR. HARVEY: Okay. Well, we -- you know, I understand your position. We don’t agree with it. We think that there’s probably a lot of questions he could answer. We reserve the right to move to compel as necessary, but I understand your position, and there’s no sense bringing him down.
. . . .
MR HARVEY: Just to clarify, this was the deposition that was going to take place tomorrow. Counsel just called me at my office upstairs and asked me to come down. They advised that this was going to happen. And so we’re doing this in lieu of having Mr. Adler appear at his deposition tomorrow. And make this -- and I understand what you’re saying is, he would invoke his Fifth Amendment rights to anything related to this beyond his name.
MR. FRUTKIN: Correct. And with that being said, obviously, there may come a time where there is more information known specifically about what the scope of the inquiry is that would allow him the ability to respond to various questions; however, right now, he’s invoking that with respect to any question whatsoever, so that we’re clear.

(Doc. 69-8 at 4-7.)

         Erus now moves to compel the Deposition of MAdler. (Doc. 69.) Erus contends that MAdler improperly cancelled his deposition the day before it was scheduled to take place, after Erus’ counsel had traveled to the East Coast, based on an assertion that his Fifth Amendment rights protect him from testifying in this matter.[3] Erus also requests the Court order MAdler to pay Erus’ attorneys’ fees caused by his failure to appear at his deposition. (Id. at 8.)

         MAdler opposes Erus’ Motion, arguing that Erus failed to comply with the Court’s Scheduling Order, Erus failed to meet and confer regarding rescheduling MAdler’s deposition, Erus chose to cancel the deposition, MAdler did not fail to appear, MAdler’s current counsel was not aware of the SEC Subpoena until November 10, 2015, and MAdler has a right to invoke his Fifth Amendment rights. (Doc. 78 at 3-15.) MAdler further seeks his attorney’s fees incurred in having to respond to Erus’ Motion to Compel. (Id. at 16.)

         b. Discussion

         As an initial matter, the Court’s Case Management Order provides the following:

         6. Discovery Disputes

a. The parties may not file written discovery motions without leave of Court. [] If a discovery dispute arises, the parties must promptly contact the Court to request a telephonic conference concerning the dispute. The Court will seek to resolve the dispute during the telephonic conference, and may enter appropriate orders based on the conference. The Court may order briefing, if necessary.
b. Parties shall not contact the Court concerning a discovery dispute without first seeking to resolve the matter through personal or telephonic consultation and sincere effort as required by LRCiv 7.2(j). Any briefing ordered by the Court must also comply with LRCiv 7.2(j).

(Doc. 36 at 4.)[4] Here, Erus did not seek leave before filing its Motion to Compel in violation of the Court's Case Management Order, which has caused delay and the parties to incur additional and unnecessary fees in resolving this dispute. Erus acknowledges in its Reply that it failed to comply with the Court's Case Management Order, but asserts it did so "in hopes of expediting [the] process." (Doc. 85 at 8.)

         The parties must fully comply with the Court's Orders. Such compliance is NOT optional.

         Although the Court could deny or strike Erus' Motion for its failure to comply with the Court's Case Management Order, in the interest of judicial economy, the Court will address Erus' Motion based on the parties' briefing.

         As the parties appear to agree, the Fifth Amendment privilege must be invoked on a question-by-question basis. (Doc 69 at 7-8; Doc. 78 at 13.) Specifically, "[t]he only way the privilege can be asserted is on a question-by-question basis, and thus as to each question asked, [MAdler] has to decide whether or not to raise his Fifth Amendment right." Doe v. Glanzer, 232 F.3d 1258, 1263 (9th Cir. 2000); see also United States v. Seifert, 648 F.2d 557, 560 (9th Cir. 1980) ("[A] non-party witness cannot refuse to take the stand. His privilege arises only when he asserts it as to a question put to him, and it is for the court to say whether he is entitled to the privilege."); United States v. Tsui, 646 F.2d 365, 367 (9th Cir. 1981) ("Even when the District Court is satisfied that the witness has a valid Fifth Amendment claim with regard to some issues, the court must permit the questioning to establish the scope of the witness' claim and to determine whether there are other issue as to which the witness would not be able to assert the privilege."). Therefore, a "blanket claim of privilege is simply not sufficient." Davis v. Fendler, 650 F.2d 1154, 1160 (9th Cir. 1981).

         Here, it appears from the record that MAdler conveyed his intent to assert his Fifth Amendment rights to almost all of Erus' questions. However, those questions were never asked. Therefore, the Court cannot determine whether invocation of his Fifth Amendment rights in response to Erus' questions is proper.

         Erus is entitled to depose MAdler because he is a named party. See Fed. R. Civ. P. 30(a)(1). And, as stated above, a blanket assertion of Fifth Amendment protections is not a sufficient basis on which to not answer questions during a properly noticed deposition. Accordingly, the Court will order MAdler to appear for a properly noticed deposition. The parties shall have until September 16, 2016 to complete the deposition. This deadline will allow the Court time to address any discovery disputes regarding MAdler's deposition prior to the fact discovery cut off[5] MAdler may not assert a blanket claim of privilege to all potential questions posed by Erus. MAdler may, instead, refuse on Fifth Amendment grounds to answer any "questions which present a 'real and appreciable danger of self-incrimination.'" McCoy v. Comm'r, 696 F.2d 1234, 1236 (9th Cir. 1983) (quoting United States v. Neff, 615 F.2d 1235, 1238 (9th Cir. 1980)).

         The Court will deny the parties' requests for fees. Erus' counsel was already in Philadelphia for other depositions, did not contact the Court when the issue arose, and filed a Motion to Compel not authorized by the Court's Case Management Order. The Court will also deny MAdler's request for attorneys' fees because, as detailed above, his blanket invocation of his Fifth Amendment rights was not appropriate.[6]

         III. Motion to Add Parties

         Ems seeks to add eight new defendants: (1) Aztec Solar Power LLC (ASP); (2) Aztec Solar Renewables, Inc. (ASR); (3) Skreem Studios, LLC (Skreem); (4) Martin Consultants, Inc. (Martin Consultants); (5) Allstar Consulting and Entertainment, Inc. (Allstar); (6) Jeffrey Martin (JMartin); (7) Thomas Moore (TMoore); and (8) Bruce Wenger (BWenger). (Doc. 66 at 2-7.) In its "Notice, " Erus asserts various claims against these new parties. (Id. at 1-2.)

         JWenger and SAtlman oppose Erus' Motion, arguing that Erus failed to comply with the Local Rules of Civil Procedure, and adding the parties Erus identifies would be futile. (Doc. 75.) In reply, Erus attached a proposed First Amended Complaint that includes new allegations and claims against the individuals and entities Erus seeks to add. (Doc. 84.) On April 12, 2016, the Court ordered the parties to submit supplemental briefing regarding whether any of Erus' proposed amendments are futile. (Doc. 95.) On April 26, 2016, Erus submitted a Supplemental Brief. (Doc. 98.) On May 10, 2016, Defendants MAdler, JWenger, and SAirman filed Responses to Erus' Supplemental Brief. (Docs. 110, 111.)[7]

         a. Amendment Standard ...

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