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Pineda Transportation, LLC v. Fleetone Factoring, LLC

United States District Court, M.D. Tennessee, Nashville Division

June 24, 2019

PINEDA TRANSPORTATION, LLC, PINEDA INVESTMENT GROUP, LLC, And GULF EXPRESS, LLC, Plaintiffs,
v.
FLEETONE FACTORING, LLC, WEX BANK, and MICHAEL STURM, Defendants.

          MEMORANDUM

          ALETAA. TRAUGER, UNITED STATES DISTRICT JUDGE

         FleetOne Factoring, LLC (“FleetOne”) and Wex Bank (“Wex”) have filed a Motion for Sanctions or, in the Alternative, to Compel (Docket No. 55), to which Pineda Transportation, LLC, Pineda Investment Group, LLC (collectively, “Pineda”), and Gulf Express, LLC (“Gulf Express”) have filed a Response (Docket No. 62), and FleetOne and Wex have filed a Reply (Docket No. 65). FleetOne and Wex have also filed a Motion for Summary Judgment (Docket No. 59), to which Pineda and Gulf Express have filed a Response (Docket No. 66), and FleetOne and Wex have filed a Reply (Docket No. 68). For the reasons set out herein, each motion will be granted in part and denied in part.

         I. BACKGROUND

         Pineda and Gulf Express are companies engaged in the trucking industry. FleetOne and Wex are affiliated companies engaged in the business of factoring, a type of third-party collection of accounts receivable. Michael Sturm, who was named individually as a defendant but who has not been served with the plaintiffs' Complaint, is the Chief Credit Officer of FleetOne.

         Factoring, as the parties have described it, involves a company selling its invoices to a third party who immediately pays a percentage of the invoices and then invoices the company's customers and collects the funds. Each of the plaintiffs alleges that it had a contract with defendants under which the defendants bought plaintiffs' invoices for a percentage of their face value. The plaintiffs contend that the defendants were supposed to invoice the plaintiffs' customers and collect the payments. The defendants were entitled to collect 1.5% for their service fees and were supposed to place any remaining balance recovered into reserve accounts for the plaintiffs. The plaintiffs allege that the defendants failed to invoice the plaintiffs' customers, failed to pay out reserve amounts collected on invoices to the plaintiffs, failed to process and post payments made by the plaintiffs' customers to the plaintiffs' accounts, and the defendants charged back invoices for amounts greater than the defendants advanced or were due. In the First Amended Complaint, Pineda alleged breach of contract (alternatively, breach of the duty of good faith and fair dealing) and fraud (alternatively, constructive fraud), and all of the plaintiffs alleged violations of civil RICO. (Docket No. 31.)

         On March 15, 2018, Wex and FleetOne filed a Motion to Dismiss. (Docket No. 38.) On May 9, 2018, the court granted the motion in part and denied it in part, dismissing the plaintiffs' civil RICO claims and claims for declaratory relief, which left only Pineda's fraud and breach of contract claims pending. (Docket No. 44 at 1.) On June 13, 2018, the court entered an Initial Case Management Order (“ICMO”). (Docket No. 49.) The ICMO set a deadline of June 26, 2018, for the parties to exchange initial disclosures pursuant to Fed.R.Civ.P. 26(a)(1) and a deadline of February 16, 2019 for the completion of all written discovery and depositions. (Id. at 2.)

         The plaintiffs did not produce initial disclosures by the June 26 deadline. On July 15, 2018, counsel for the defendants sent counsel for the plaintiffs an e-mail requesting the disclosures. (Docket No. 57-1.) The defendants received no disclosures and, on August 2, 2018, counsel for the defendants sent counsel for the plaintiffs another e-mail, asking, this time, whether it would be necessary for the defendants to file a motion to compel the disclosures. (Docket No. 57-2.) The defendants received no response, and, on August 22, 2018, counsel for the defendants sent a letter, apparently transmitted via e-mail as a scanned document, demanding that the disclosures be made within the next two days, or else the defendants would be forced to file a motion to compel. (Docket No. 57-3.)

         The plaintiffs eventually served the defendants with initial disclosures on September 5, 2018, before any motion to compel was filed. (Docket No. 57 ¶ 4.) The next day, counsel for the defendants responded with a deficiency letter. (Docket No. 57-4.) The letter identified a number of ways in which the plaintiffs' disclosures were incomplete and required supplementation. First, the defendants complained that the identifying information for some of the individuals and entities disclosed was insufficient. Second, the defendants argued that the methodology by which the plaintiffs' claimed damages had been calculated was not sufficiently explained. Third, the defendants found a statement made by the plaintiffs regarding insurance to be unclear. (Id. at 2.) Gary C. Shockley, one of the defendants' attorneys, has filed a Declaration stating that, as of May 1, 2019, the defendants had received no response to the deficiency letter. (Docket No. 57 ¶ 5.)

         On November 21, 2018, the defendants served their First Set of Interrogatories and First Request for Production of Documents on the plaintiffs. (Docket No. 57-5.) Counsel for the defendants sent follow-up communications on January 3, 2019 and March 5, 2019, seeking responses to the discovery requests and the deficiency letter. (Docket Nos. 57-6, -7.) Finally, on April 10, 2019, counsel for the defendants and counsel for the plaintiffs met in person. At the in-person meeting, the parties agreed that the plaintiffs would file their responses to the outstanding discovery requests on April 19, 2019, and the Rule 30(b)(6) depositions of the plaintiffs would be completed on May 6 and 7. (Docket No. 57 ¶ 9; Docket No. 58 ¶ 2.) On April 11, 2019, the parties filed a joint motion to extend the deadlines for completing discovery and filing dispositive motions, in light of the plaintiffs' failures to provide the required information and documents. (Docket No. 53.) The court granted the motion. (Docket No. 54.)

         As the close of business on the April 19, 2019 deadline approached, the plaintiffs had not yet provided the promised responses. Shockley sent an e-mail inquiring about the status of the discovery to the plaintiffs' attorney, John Tennyson. Tennyson did not respond until April 22, 2019, when he sent a response e-mail, apologizing and explaining that he was still working with Pineda on the responses. (Docket No. 57-8.) As of the May 1, 2019 Shockley Declaration, the plaintiffs had still failed to provide the responses. (Docket No. 57 ¶ 9.) The plaintiffs have also failed to serve any interrogatories, requests for document production, requests for admissions, or notices of deposition of their own, nor did the plaintiffs disclose any experts by their expert disclosure deadline in the ICMO. Finally, the plaintiffs have failed to serve the sole individual defendant in this case, Michael Sturm. (Docket No. 57 ¶¶ 11-13.)

         On April 26, 2019, the court held a discovery dispute telephone conference with the parties, as required by the ICMO before the defendants could file a motion to compel or for sanctions. (See Docket No. 49 at 2-3.) On May 1, 2019, FleetOne and Wex filed a motion seeking sanctions against the plaintiffs based on their failures to provide the required and agreed-to materials. (Docket No. 55.) FleetOne and Wex request, first, that the plaintiffs' claims be dismissed. In the alternative, they request that the court hold that the plaintiffs are precluded from relying on any evidence that would have been responsive to the discovery obligations that they violated. Finally, the defendants argue that, if the court does not dismiss the plaintiffs' claims or order preclusion of evidence, the court should at least enter an order compelling the plaintiffs to produce the relevant materials immediately and awarding attorney's fees to FleetOne and Wex. On May 8, 2019, FleetOne and Wex filed a Supplemental Declaration from Shockley stating that, although the parties had agreed for Rule 30(b)(6) depositions to begin on May 6, 2019, no one from plaintiff's side had showed up to the agreed location on that date. After waiting thirty minutes, Shockley dismissed the court reporter and videographer. (Docket No. 58 ¶¶ 1-4.)

         The plaintiffs filed a Response on May 15, 2019, along with Declarations by Tennyson and Tennyson's co-counsel, James Wiggington. (Docket Nos. 62-64.) Tennyson admits that he failed to provide the plaintiffs' initial disclosures in a timely fashion, but he claims that he did not receive the deficiency letter and, therefore, did not believe that the initial disclosures were defective. (Docket No. 63 ¶¶ 8-9.) Wiggington states that he did receive the deficiency letter by e-mail but did not notice it at the time. He takes responsibility for that error. (Docket No. 64 ¶¶ 9, 13.) Tennyson states that he has “attempted to respond” to the defendants' discovery requests, but has had difficulty communicating with his clients and obtaining the necessary documents. (Id. ¶ 11.) He also claims that he has received several ongoing productions of documents from his clients that have required his review, leading to further delay, but that he is now diligently working to provide the requested documents and information. (Id. ¶¶ 13, 15.) Tennyson admits that he is at fault for failing to provide the materials or request additional time for doing so. (Id. ¶ 16.) With regard to the scheduled deposition, Tennyson explains that he had believed, from the parties' telephone conversations, that the deposition had been canceled due to the plaintiffs' failure to produce necessary documents in advance of questioning. (Id. ¶ 14.) On the same day that the plaintiffs filed their response, FleetOne and Wex filed a Motion for Summary Judgment. (Docket No. 59.)

         II. LEGAL STANDARD

         A. Motions to ...


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