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Peskoff v. Faber

July 11, 2006

JONATHAN E. PESKOFF, PLAINTIFF,
v.
MICHAEL A. FABER, DEFENDANT.



The opinion of the court was delivered by: John M. Facciola United States Magistrate Judge

MEMORANDUM OPINION

This case was referred to me for the resolution of discovery disputes. Currently pending before me is Plaintiff's Motion to Compel Discovery ("Mot. to Compel"). For the reasons stated herein, plaintiff's motion will be granted in part and denied in part.

I. BACKGROUND

Plaintiff Jonathan Peskoff ("Peskoff") brought this lawsuit against defendant Michael Faber ("Faber") to recover damages for financial injury resulting from Faber's operation of a venture capital fund, called NextPoint Partners, LP, and the fund's related entities. Peskoff alleges fraud in the inducement, breach of fiduciary duty, breach of contract, conversion, common law fraud and deceit, unjust enrichment, and violations of 10 U.S.C. §§ 1962(c) and 1964(c) (Civil RICO). Complaint ("Compl.") ¶¶ 31-68.

NextPoint GP, LLC ("NextPoint GP") is the general partner of the venture capital fund. Id. at ¶ 1. Both Peskoff and Faber were managing members of NextPoint GP. Id. at ¶ 6. As of February 13, 2004, Peskoff was no longer a managing member, but he claims the retention of a membership interest. Id. No limited liability company agreement governing the operation and composition of NextPoint GP was ever signed. Id. at ¶ 7.

The NextPoint Management Company, Inc. ("NextPoint Management") was organized as a vehicle for receiving the management fees due from the venture capital fund to NextPoint GP and for fulfilling NextPoint GP's management responsibilities to the fund. Id. at ¶ 8. Faber's responsibilities included handling routine finances, record keeping, and fund-raising activities. Id. ¶ 17. Peskoff's responsibilities included oversight of the portfolio companies in which the venture capital fund invested and identification and evaluation of potential new investments. Id.

Plaza Street Holdings, Inc. ("Plaza Street") is a corporation controlled solely by Faber that was paid by NextPoint Management for "consulting services." Id. at ¶ 23(a). Among other things, Peskoff alleges that Faber caused NextPoint Management to pay Plaza Street $400,000 for consulting services that were neither needed nor provided and that these payments were for the sole purpose of diverting funds from the NextPoint entities to Faber personally. Id.

Peskoff now moves the Court for two orders: (1) an order compelling non-party Plaza Street to produce, in response to a subpoena duces tecum, certain documents relating to the payments from NextPoint Management to Plaza Street; and (2) an order compelling Faber to produce additional e-mails sent to and authored by Peskoff while he was employed at NextPoint Management. Mot. to Compel at 1.

II. DISCUSSION

A. Plaza Street Documents

At some point during discovery, Peskoff served a subpoena duces tecum on non-party Plaza Street. Plaza Street has refused to produced the requested records and, therefore, Peskoff has moved for an order compelling their production. Peskoff contends that he needs these documents to determine the truth behind Faber's inconsistent explanations as to the purpose of the $400,000 paid to Plaza Street, which has been described to him as both "consulting services" and an "organizational fee." Id. at 4. Peskoff contends that Plaza Street's characterization of the payments, in documents such as its books of account and tax returns, will help him determine their true purpose and that a jury will not be able to determine whether the payments constituted impermissible self-dealing without analyzing the entire course of the transaction. Id. at 4-5. Peskoff further asserts that he needs Plaza Street's financial documents in order to establish his civil RICO claim. Id. at 5.

In opposing Peskoff's motion, Faber and Plaza Street contend that Peskoff already has the information he seeks and that his subpoena is merely a fishing expedition designed to harass and intimidate Faber and the businesses with which he is affiliated. Defendant's and Non-Party Plaza Street's Memorandum in Opposition to Motion to Compel Discovery ("Opp'n") at 1-3. Specifically, Faber contends that Peskoff has already received financial documents that provide the sought after information and, therefore, requiring Plaza Street to produce the subpoenaed documents would be duplicative and an unnecessary burden. Id. at 2-3.

"The Federal Rules of Civil Procedure encourage the exchange of information through broad discovery." In re England, 375 F.3d 1169, 1177 (D.C. Cir. 2004). Under Rule 26(b)(1), a party is entitled to discovery that is "reasonably calculated to lead to the discovery of admissible evidence." Fed. R. Civ. P. 26(b)(1). The party resisting discovery based on relevance "bears the burden of demonstrating that the information sought is not legally relevant." Chubb Integrated Sys. Ltd. v. Nat'l Bank of Wash., 103 F.R.D. 52, 58, n.3 (D.D.C. 1984). Likewise, the party opposing discovery based on burden "must make a specific showing, supported by declaration, as to why the production sought would be unreasonably burdensome." Pleasants v. Allbaugh, 208 F.R.D. 7, 12 (D.D.C. 2002) (citing Pro-Football, Inc. v. Harjo, 191 F. Supp. 2d 77, 80 (D.D.C. 2002). Through his subpoena, Peskoff seeks the following categories of Plaza Street documents:

1. Documents which reflect Defendant's role, responsibilities, duties, ownership interest and/or profit ...


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