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Bartch v. Barch

United States District Court, D. Maryland

January 14, 2020

BARTCH Plaintiffs,
BARCH, et al, Defendants.


          J. Mark Coulson United States Magistrate Judge

         This report and recommendation addresses David Joshua Bartch's (“Plaintiff”) Motion to Compel nonparty Culta to comply with a previously-issued subpoena. (ECF No. 1). The Court has reviewed Culta's Opposition (ECF No. 3), as well as Plaintiff's Reply. (ECF No. 5). On January 6, 2020, in accordance with 28 U.S.C. § 636, and Local Rules 301 and 302, Judge Bennett referred this case to me for a report and recommendation concerning the Motion to Compel. (ECF No. 8). For the reasons set forth below, I respectfully recommend that this Court, GRANT in part and DENY in part Plaintiff's Motion to Compel.

         I. BACKGROUND

         The pending motion is an offshoot of a suit filed by Plaintiff against Defendants Mackie A. Barch and Trellis Holdings Maryland (collectively “Defendants”) in the United States District Court for the District of Colorado. (ECF No. 1-1). These parties are in the medical marijuana business, and contest ownership rights in Culta, a medical marijuana business in Maryland, which is not a party to the underlying action. (ECF No. 3-1 at 1).[1] Of note, Defendant Barch is also a “manager”[2] at Culta.

         Plaintiff contends that he and Defendant Barch agreed to partner “50/50 and share their equity interests” in Culta, in addition to businesses in other states that had “legalized medical marijuana.” Id. As outlined within the Complaint, Culta and its predecessor incurred numerous changes in the number of investors, classes of shares, and value of those shares since originally formed in June of 2015. (ECF No. 1-1 at 4-12). These changes loosely tracked Maryland's foray into medical marijuana, an odyssey that continues today.

         In 2017, the disputed equity (Plaintiff's share of Defendants' equity in Culta) was transferred to Defendant Trellis Holdings Maryland (“Trellis”). (ECF No. 2-1 at 2). Later in that same year, Plaintiff requested this interest be transferred to him, however, this did not occur. (ECF No. 1-1 at 3). Accordingly, Plaintiff contends that Defendants improperly retained Plaintiff's share. (ECF No. 2-1 at 2). Plaintiff seeks a declaratory judgment and recovery based on “Defendants' theft of [Plaintiff's] 50% ownership rights” of Trellis' shares in Culta. (ECF No. 1-1 at 2).

         In an effort to substantiate these claims, Plaintiff served Culta with a document subpoena from the District of Colorado. Id. Through their own efforts, the parties have narrowed the areas of dispute, however, three points of contention remain. All three areas relate to Plaintiff's claim for damages in the Colorado action, specifically the monetary value of the disputed shares (as an alternative to their return). This, in turn, requires Plaintiff to ascertain the percentage of ownership of Culta that the disputed shares represent, and the overall value of Culta (so as to quantify the dollar value of that percentage). To use a hypothetical example, if Trellis owns 40% of Culta, and Culta is valued at $1, 000, 000, Trellis' interest is worth $400, 000. In turn, this would potentially entitle Plaintiff to $200, 000 (by way of return of shares or money damages), should he prove his claims.

         II. RULE OF LAW

         Federal Rule of Civil Procedure 45 governs subpoenas issued to third parties.[3] Document discovery, whether through Rule 45 or Rule 34, remains subject to the general discovery provisions of Rule 26. Rule 26(b) provides that a district court may limit discovery if it concludes: “(i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit.” Nicholas v. Wyndham Int'l, Inc., 373 F.3d 537, 543 (4th Cir. 2004). A trial court should consider “the relevance of the discovery sought, the requesting party's need, and the potential hardship to the party subject to the subpoena” when considering the propriety of enforcing a subpoena. Heat & Control, Inc. v. Hester Indus., 785 F.2d 1017, 1024 (Fed. Cir. 1986). Echoing this, Rule 45(d)(3) empowers a court to modify a subpoena to the extent is seeks sensitive or privileged information or subjects the recipient to undue burden. In the context of subpoenas issued to third parties (as is the case here), a court “will give extra consideration to the objections of a non-party, non-fact witness in weighing burdensomeness versus relevance.” Indem. Ins. Co. v. Am. Eurocopter LLC, 227 F.R.D. 421, 426 (M.D. N.C. 2005).


         With respect to the pending Motion to Compel, Plaintiff seeks information from Culta to evaluate the extent of Defendant Trellis' ownership interest in Culta (of which Plaintiff seeks 50%), and information to permit Plaintiff to quantify the dollar value of that interest. As set forth in Request 14 of the subpoena at issue, Plaintiff first seeks “All documents referring to any valuation of Culta and or/its member interests.” (ECF No. 2-2 at 4). Second, as set forth in Request 15, Plaintiff seeks “Culta's financial statements (including but not limited to income statements, balance sheets, and cash flow statements) and financial forecasts from the times of its formation to the present.” Id. Finally, Plaintiff seeks a copy of Culta's First Amendment to its Third Amended and Restated Operating Agreement with less redactions. (ECF No. 5 at 4).

         Culta opposes these requests and argues: (1) Plaintiff has failed to demonstrate either the relevance or the necessity of the documents sought; (2) Plaintiff improperly seeks to impose a very substantial and unreasonable burden on Culta; and (3) the information sought is highly sensitive and confidential. (ECF No. 3-1). Accordingly, Culta requests that this Court “deny the Motion to Compel, dismiss this action with prejudice, and award Culta all costs allowable under Rule 45(d)(1).” (ECF No. 3 at 1). These objections are addressed in turn.

         1. Relevance

         Plaintiff has established the relevance of the categories of information sought. As explained in detail above, the information sought relates to Culta's valuation and, in turn, the worth of the Culta shares that Plaintiff contends were wrongfully appropriated from him. Culta's argument that disclosure of such information in advance of judgment is premature misses the mark. (ECF No. 3-1 at 6-7). To the contrary, Plaintiff seeks the information in order to prove a damage alternative in this case, in the event the ...

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