Raines v. Allied Construction Services, Inc.

Background

The plaintiffs are trustees of several multi-employer pension funds governed by the Employee Retirement Income Security Act of 1974 (ERISA). They allege that Allied was required under collective bargaining agreements to make contributions for covered work performed in a specified geographic area. The agreements also allegedly required Allied to arrange for contributions when it subcontracted covered work to a non-union subcontractor or to make the contributions itself.

The trustees allege that, from January 2015 through December 2017, Allied paid Ray’s Drywall at least $2.7 million for construction work for which contributions should have been made. They seek unpaid contributions and an order requiring Allied to provide records for an audit. Allied denies subcontracting work to Ray’s Drywall, characterizes the payments as loans, and denies breaching the agreements. Allied also maintains that it complied with the audit requirements.

The trustees moved under Federal Rule of Civil Procedure 37 to compel answers to six interrogatories and production of documents responsive to fifteen requests. Allied opposed that motion and moved under Rule 26(c) for a protective order limiting discovery from Allied and from Ray’s Drywall, which had received a subpoena for documents and a deposition under Rule 30(b)(6).

Discovery standard

The court applied Rule 26(b)(1), which permits discovery of nonprivileged information relevant to a claim or defense and proportional to the needs of the case. The court also considered Rule 26(c), which permits a protective order for good cause to prevent annoyance, embarrassment, oppression, or undue burden or expense. The court emphasized that it had broad discretion over discovery and that discovery had to be tied to the two claims at issue: alleged unpaid contributions involving Ray’s Drywall and alleged failure to provide information required by the audit.

Rulings on discovery from Allied

The court found that Allied’s proposed compromise largely identified the proper scope of discovery, but expanded the period from 2015–2016 to the entire audit period, January 2015 through December 2017. The permitted discovery was also limited to matters involving the geographic area covered by the collective bargaining agreements.

The court rejected Allied’s proposed method of making certain information available for review at Allied’s offices. It also prohibited Allied from unilaterally redacting responsive information based on its own view that the information was irrelevant. The court said the existing protective order, including confidential and attorneys’-eyes-only designations, adequately addressed Allied’s concerns about sensitive information.

The court ordered Allied to provide complete answers to Interrogatory Nos. 7 and 8. It ruled that Interrogatory Nos. 9, 14, 18, and 19 and Requests for Production Nos. 3, 5, 7, 11, 12, and 13 were overbroad and sought information outside the permissible scope of discovery. Allied was ordered to provide documents responsive to Requests for Production Nos. 6, 14, 15, 18, and 19.

Ray’s Drywall subpoena

Allied’s motion for a protective order concerning the subpoena to Ray’s Drywall was granted in part and denied in part. The court denied Allied’s request to limit discovery to relationships expressly characterized as subcontractor relationships. The trustees’ theory included possible arrangements that were not formally called subcontractor relationships, and the court found Allied had not shown good cause for the proposed limitation.

The court found deposition Topic No. 12 overbroad because it required testimony about any contract Ray’s Drywall entered with any third party that referred or related to Allied. The trustees were required to amend that topic so it more closely matched their theory concerning possible hidden or explicit subcontractor relationships. The court also agreed that discovery from Ray’s Drywall had to focus on the geographic area covered by the collective bargaining agreements.

The court stated that nothing in the order prevented Ray’s Drywall from raising its own objections to the subpoena through an appropriate motion or the court’s informal discovery process.

Disposition

The court ordered that the plaintiffs’ Motion to Compel Discovery was GRANTED IN PART and DENIED IN PART. The defendant’s Motion for Protective Order was also GRANTED IN PART and DENIED IN PART. The order resolved the discovery disputes, not the underlying claims about unpaid contributions or audit compliance.