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Scarborough v. National Association of Surety Bond Producers

February 7, 2007


The opinion of the court was delivered by: Reggie B. Walton United States District Judge


Edmund Scarborough, Dr. Larry Wright, George Gowen, and three corporations (collectively "the plaintiffs" or "the NASBP plaintiffs") bring this action against the National Association of Surety Bond Producers ("NASBP" or "the defendant"), alleging common-law claims of libel, invasion of privacy, and interference with contractual and business relations in connection with the NASBP's Spring 2005 publication of an article concerning a Criminal Alert Notice ("CAN") issued by the Department of the Army, which purportedly falsely implicated the plaintiffs in surety fraud.*fn1 Complaint ("Compl.") ¶¶ 23-48. On January 13, 2006, this case ("NASBP Case") was transferred to this judicial district from the United States District Court for the Middle District of Florida for possible consolidation with the plaintiffs' related Privacy Act action against three federal agencies, including the United States Department of Defense ("DOD").*fn2 Transfer Order at 2, Scarborough v. NASBP, Civ. No. 06-79 (RBW) (D.D.C. Jan. 13, 2006) (transferring case and stating that this Court "will determine if the cases are appropriate for consolidation, or if this case should eventually be returned to the Middle District of Florida for dispositive motions or trial"); see also Scarborough v. Harvey, Civ. No. 05-1427 (RBW) ("Privacy Act Case"). Currently before the Court is the Defendant's Motion to Consolidate for Purposes of Discovery pursuant to Federal Rule of Civil Procedure 42(a) ("Def.'s Mot.") and the Plaintiffs' Motion to Re-Transfer Case to the Middle District of Florida ("Pl.'s Mot.").*fn3 For the reasons set forth below, the Court will deny the defendant's motion to consolidate and grant the plaintiffs' motion to re-transfer the case to the United States District Court for the Middle District of Florida.*fn4

I. Factual Background

In or around March 2005, Special Agent Christopher Hamblen of the Department of the Army's Criminal Investigation Division created Criminal Alert Notice No. 0006-04-CID274 in connection with his investigation into the allegedly fraudulent issuance of individual surety bonds to the United States government.*fn5 Privacy Act Complaint ¶¶ 12-15. The Privacy Act plaintiffs allege that this CAN implicates them in "fraudulent and criminal activities" and contains "personal and confidential information about [them] including, but not limited to, [their] name[s], financial history, associations, entrepreneurial activities, business interests[,] and business addresses." Id. ¶¶ 28, 30-32. The Privacy Act plaintiffs further allege that "[m]uch of the information about [them] in . . . [the] CAN is inaccurate, misleading, or false." Id. ¶ 33.

Finally, the plaintiffs allege that "[t]he CAN is conspicuously marked 'FOR OFFICIAL USE ONLY' at the top and bottom of each page."*fn6 Compl. ¶ 21; see also Privacy Act Compl. ¶ 26.

Following its creation, the CAN was purportedly disseminated by e-mail to contracting offices within the Department of Defense ("DOD"), personnel within the Small Business Administration, and "private contractors, [the] [p]laintiffs' competitors, and other unauthorized persons."*fn7 Id. ¶ 66; see id. ¶¶ 37-67 (recounting all of the alleged disclosures of the CAN). Also among the entities to which the CAN was allegedly disclosed was defendant NASBP, "an international organization of professional surety bond producers and brokers representing over 5,000 persons." Id. ¶ 37; see id. ¶¶ 37-40 (recounting the alleged disclosure to the NASBP).*fn8 As part of its business activities, the NASBP publishes Pipeline, a periodic newsletter available in both hard copy and electronic form.*fn9 Compl. ¶ 7.

Sometime in April or May 2005, the NASBP published the April/May 2005 issue of the Pipeline newsletter, which contained an article concerning the CAN ("Pipeline Article"), a summary of the article, entitled "Army Releases Criminal Alert Notice," and a full copy of the CAN's text. Compl. ¶¶ 13-19; Privacy Act Compl. ¶¶ 38-40. The summary of the Pipeline Article directed readers to the location of the article's full version, which in turn referred them to a copy of the text of the CAN in both the electronic and hard copy versions of the newsletter. Compl. ¶¶ 14-19. The summary and the Pipeline Article each stated that "[the] NASBP recently received a Criminal Alert Notice (CAN) from . . . the Army Criminal Investigation Command (CID) out of Phoenix, AZ, regarding individuals or entities submitting false payment/performance/bid bonds on numerous DOD contracts throughout the United States." Id. ¶¶ 14, 17. The plaintiffs allege that this statement "was drafted solely by [the] NASBP and accuses the named [p]laintiffs [in the NASBP Case] of committing criminal acts." Id. ¶ 17. The plaintiffs further allege that the publication and dissemination of the Pipeline Article by the NASBP, "including the Summary and linked/attached CAN," caused those who read the article to falsely believe that the plaintiffs were, inter alia, under investigation by the federal government for the issuance of fraudulent surety bonds. Id. ¶ 25.

On July 20, 2005, the Privacy Act plaintiffs filed a sixteen-count action in the United States District Court for the District of Columbia against the Department of the Army, the DOD, and the Small Business Administration ("Privacy Act defendants"), alleging that the defendants' disclosure and dissemination of confidential and sensitive information concerning the plaintiffs in connection with Special Agent Hamblen's investigation and the subsequent issuance of the CAN-including the disclosure of the CAN to the NASBP-had violated various provisions of the Privacy Act, 5 U.S.C. § 552a et seq. (2000).*fn10 Privacy Act Compl. ¶¶ 87-213 (detailing the alleged Privacy Act violations); see also id. ¶¶ 87-98 (alleging that the Department of the Army violated the Privacy Act by disclosing the CAN to the NASBP).

On August 19, 2005, the plaintiffs filed this current action in the United States District Court for the Middle District of Florida against the NASBP,*fn11 raising three common-law claims and alleging (1) that the statements made in the Pipeline Article concerning the CAN "were false and defamatory and were published maliciously and/or with knowledge of or reckless disregard for their falsity," Compl. ¶ 26; (2) that the Pipeline Article "was published with knowledge of the effects it would have and the false light in which [the] [p]laintiffs would be cast, or in reckless disregard of such effects and false light," and that it "personally violated [the] [p]laintiffs' right of privacy and held up information about [the] [p]laintiffs to public gaze by exposing private facts about [the] [p]laintiffs to the public and casting [the] [p]laintiffs in a false light," id. ¶¶ 37-38; and (3) that "[b]y intentionally and maliciously publishing false and defamatory statements about [the] [p]laintiffs, and in publishing statements that cast [the] [p]laintiffs in a false light and held them up to public gaze, [the] NASBP has intentionally . . . interfered with [the] [p]laintiffs' existing and prospective contractual and business relations with [various entities]," id. ¶ 46.

On November 17, 2005, the NASBP moved to transfer this case from the Middle District of Florida to this Court for consolidation with the Privacy Act Case for all purposes, including trial, pursuant to 28 U.S.C. § 1404(a) (2000). Specifically, the NASBP's motion stated that:

[U]pon transfer, [the NASBP] intends to seek consolidation of the NASBP Case [and the Privacy Act Case]. . . . [N]otwithstanding that these two cases involve different defendants and different theories of liability, consolidation pursuant to [Rule 42(a)] is necessary and appropriate, and transfer of the NASBP Case is an indispensable first step toward such consolidation.

Defendant's Motion to Transfer for Purpose of Consolidation, Scarborough, et al. v. Nat'l Ass'n of Surety Bond Producers, Civ. No. 05-1544 (TBM) (M. D. Fla. Nov. 17, 2005); see also Pls.' Mem. at 12; Def.'s Opp. at 7 (conceding that "at the time it sought transfer, [the] NASBP contemplated the likely possibility of consolidation for all purposes"). The Middle District of Florida granted the defendant's motion on December 27, 2005, finding that the NASBP Case "involves questions of law or fact common to those in [the Privacy Act Case]" and transferring the NASBP Case to this Court "for all further proceedings." Transfer Order at 1-2. In doing so, the Florida district court stated that this Court would "determine if the cases are appropriate for consolidation, or if this case should eventually be returned to the Middle District of Florida for dispositive motions or trial." Id. at 2.

In March 2006, the defendant moved to consolidate this case with the Privacy Act Case "for purposes of discovery only," arguing that the consolidation for discovery and document production "is a necessary and appropriate means for this Court to avoid unnecessary costs and delay," to promote interests of judicial economy and efficiency, and to streamline duplicative depositions and discovery requests.*fn12 Def.'s Mot. at 8; see generally id. at 4-8. Contrary to its representation before the Middle District of Florida, the defendant now "does not seek consolidation of the two cases for trial." Id. at 8; see Def.'s Mem. at 9 (stating that "[the] NASBP proposes consolidation only for the limited purpose of discovery . . . such that the two cases would still be tried separately"); see also Def.'s Opp. at 7 (explaining that "[i]t was only after transfer had already taken place that [the] NASBP understood that the government would likely decline to agree to a single trial for both cases, at which point consolidation for the more limited purpose of discovery became the most viable alternative"). Finally, the defendant asserts that the requested consolidation for discovery "will not unfairly prejudice any party." Def.'s Mot. at 4; see also Def.'s Mem. at 9.

The NASBP plaintiffs and the Privacy Act plaintiffs both filed oppositions to the defendant's motion to consolidate, arguing that (1) the two cases "present such dissimilar operative facts and issues that consolidation will not result in economies of any kind or nature," Privacy Act Pls.' Opp. at 4; see also Pls.' Mem. at 4-6; (2) the plaintiffs will be prejudiced if the cases are consolidated for discovery, given the risk of disclosure of protected information in the event that the parties' depositions are conducted simultaneously, Pls.' Mem. at 9 (asserting that "there is certain information that could be elicited during the deposition of a government witness that will violate the Privacy Act if [the] NASBP is in the room"); see also Privacy Act Pls.' Opp. at 13 (arguing that "[t]rying to build an artificial barrier to separate the information [the] NASBP is entitled to obtain from what it is not presents a challenge that is unnecessary, if not practically impossible, [when conducting a consolidated deposition]"), and therefore the likelihood of discovery disputes in one case "[that] will necessarily delay the progress of both cases," Privacy Act Pls.' Opp. at 10; see also id. at 9-11; Pls.' ...

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