GMO Gamecenter USA, Inc. v. Whinstone US, Inc.

Background

GMO Gamecenter USA, Inc. and GMO Internet Group, Inc. sued Whinstone US, Inc. for allegedly breaching a 2019 colocation services agreement under which Whinstone was to provide a facility to house and operate GMO’s bitcoin-mining machines. Whinstone filed counterclaims alleging that GMO breached the same agreement. The parties’ pleadings placed their alleged good-faith conduct during the agreement’s performance and termination at issue.

Magistrate Judge Katherine H. Parker supervised discovery, which is the exchange of information and evidence before trial. At an August 7, 2024 conference, Judge Parker ruled on two disputes relevant to this order. She denied GMO’s request for documents referring to GMO or the agreement indirectly, as part of a group of hosting customers or contracts. She also required GMO to narrow third-party discovery requests directed to Aroosh Thillainathan and Northern Data AG through a formal request for assistance from a foreign court, because some requests were phrased as legal questions or were too open-ended and vague.

GMO’s Objection Regarding Hosting-Agreement Documents

GMO argued that Whinstone had treated GMO as part of a group of “legacy” hosting customers and may have decided to terminate those contracts for its own financial benefit. GMO contended that documents discussing the group’s contracts could show Whinstone’s motive and whether it acted in bad faith when terminating GMO’s agreement. Whinstone responded that it had already searched using GMO’s proposed terms, reviewed the results, and produced responsive documents. It characterized GMO’s new request as an unclear demand for an internal investigation.

The district court found that GMO had clarified a narrower request: documents and communications referring to GMO or the agreement as part of a group of hosting customers or contracts Whinstone sought to terminate. The court held that these materials were relevant because the agreement and the parties’ allegations made good faith and bad faith issues in the dispute, and because the documents could shed light on Whinstone’s motive.

The court sustained this objection in part. It did not decide whether the requested discovery was proportional to the needs of the case, whether production would be unreasonably cumulative or duplicative, or whether the request needed further narrowing. Those issues had not been briefed before the district court or decided by Judge Parker.

GMO’s Objection Regarding Third-Party Discovery

The court overruled GMO’s second objection. Under the standard governing objections to a magistrate judge’s non-dispositive pretrial order, the district court could change the ruling only if it was clearly mistaken or contrary to law. The court concluded that GMO had not met that demanding standard.

The court agreed that some proposed questions improperly sought opinions about the meaning and current legal effect of provisions in the agreement. GMO could ask what Thillainathan understood the provisions to require when the agreement was signed or what business purpose a provision served, but it could not require him to give a legal opinion about the provisions’ current effect. The court also agreed that other questions were too open-ended and vague. GMO’s general assertion that the requests concerned topics directly at issue did not explain why Judge Parker’s ruling was clearly mistaken or contrary to law.

Disposition

The court sustained in part and overruled in part GMO’s objections. The Clerk of Court was directed to close the motion at Docket Number 181.