Court Defines Scope of Discovery in a Fraud Case by Allowing and Denying Discovery Motions Based on Proportionality and Relevance

4 Jun 2018

In TMJ Group, LLC v. IMCMW Holdings, Plaintiff TMJ Group, LLC claims that Defendant IMCMV Holdings fraudulently induced it to make investments in two Margaritaville restaurants.

Plaintiff argues that it obtained financing for these investments from First NBC Bank (FNBC). According to Plaintiff, IMCMV Holdings altered financial statements so that FNBC would approve the financing.

Under the Federal Rules of Civil Procedure (FRCP), parties in a civil dispute can obtain discovery regarding nonprivileged matters that are relevant and proportional to the needs of the case. When determining the proportionality of discovery in a case, various criteria can be considered. For instance, the Court may consider the parties’ ability to access information. In addition, the importance of discovery in resolving the issues inherent in the case may also be taken into consideration.

In its motion to compel discovery, TMJ seeks documents that include tax returns and other financial statements for Margaritaville restaurants that are not named in this case. According to TMJ, a financial expert with IMCMV Holdings relied on the financials of these other restaurants while convincing it to make the investments. IMCMV Holdings called these financials irrelevant and disproportional to the needs of the case.

According to the Court, the financial statements for the other restaurants are not relevant or proportional to the case because. TMJ has performance indicators from these financial statements.  In addition, the Court also agreed that the relevance of these documents to the case did not justify the burden of production. With respect to these documents, the Motion to Compel is denied.

However, TMJ had a second motion to compel the product of text messages between itself and IMCMV Holdings. According to TMJ, several IMCMV Holdings employees were involved in the disputed transactions and may have text messages relevant to the case. The Court finds that text messages involving the disputed transactions are relevant and proportional to the needs of the case.