United States District Court, D. New Mexico
PHILMAR DAIRY, LLC; ARCH DIAMOND, LLC; MOONSTONE DAIRY, LLC; and HENDRIKA DAIRY, LLC, Plaintiffs/Counter-Defendants,
ARMSTRONG FARMS, and RANDY ARMSTRONG, Defendants/Counterclaimants.
ORDER GRANTING IN PART PLAINTIFFS' MOTION TO
COMPEL AND DENYING PLAINTIFFS' MOTION FOR LEAVE TO
DISCLOSE ADDITIONAL EXPERT WITNESS
R. SWEAZEA UNITED STATES MAGISTRATE JUDGE
MATTER comes before the Court on Plaintiffs'
March 26, 2019 motion to compel discovery (Doc. 90) and
Plaintiffs' motion for leave to disclose an additional
expert witness. (Doc. 94). As for the former, Plaintiffs
sought, but were refused, Defendants' tax returns and
yearend income statements and balance sheets. In the latter,
Plaintiffs ask to add Jan Hendrickx, Ph.D. as an expert to
opine based on satellite imagery that, contrary to
Defendants' claims, no fire occurred at Armstrong Farms
in August 2017. In response, Defendants contend Plaintiffs
have failed to establish a prima-facie case for
punitive damages entitling them to sensitive financial
records, the discovery is premature even if Plaintiffs
satisfy their burden, and the requests are insufficiently
tailored to protect Defendants' privacy interests.
Defendants also maintain Plaintiffs cannot justify adding Dr.
Hendrickx past the expert-disclosure deadline.
reviewed the parties' submissions as well as the record,
the Court exercises its discretion to order production of the
financial records but to preclude Dr. Hendrickx's late
point in the litigation, the facts are well known. The
parties' briefing on both motions highlights their
respective positions. The Court does not repeat the facts
here except as are necessary to the analysis below.
of Financial Records
Federal Rule of Civil Procedure 26(b)(1), “[p]arties
may obtain discovery regarding any nonprivileged matter that
is relevant to any party's claim or defense and
proportional to the needs of the case.” “The
scope of discovery under the federal rules is broad.”
Gomez v. Martin Marrietta Corp., 50 F.3d 1511, 1520
(10th Cir. 1995). Rule 26 “contemplates discovery into
any matter that bears on or that reasonably could lead to
other matter[s] that could bear on any issue that is or may
be raised in a case.” Anaya v. CBS Broad.,
Inc., 251 F.R.D. 645, 649-50 (D.N.M. 2007) (internal
quotations marks omitted). The Court is given “wide
discretion in balancing the needs and rights of both
plaintiff and defendant.” Gomez, 50 F.3d at
1520 (internal quotation marks omitted).
“normal civil procedure discovery regarding a
defendant's financial condition is not permitted before
entry of judgment.” Griego v. Douglas, 2018
U.S. Dist. LEXIS 88562, at *10 (D.N.M. May 24, 2018)
(citation omitted). Discovery related to punitive damages is
an exception to this rule. See Id. Under what
circumstances that exception applies is disputed here.
Defendants maintain Plaintiff's must make a
prima-facie showing of entitlement to punitive
damages before Plaintiffs may obtain financial records.
Defendants also insist that even if a prima-facie
case exists, discovery should not be allowed until a jury
Defendants say Plaintiffs are, at most, entitled to a
statement of net worth, not the tax returns and balance
sheets Plaintiffs seek.
Court acknowledges the varied practice federal courts follow
in addressing discovery where punitive damages are at issue.
Compare Accountable Health Sols., LLC v. Wellness Corp.
Sols., LLC, 2017 U.S. Dist. LEXIS 119532, at * 6, 16 (D.
Kan. July 31, 2017) (observing that “a majority of
federal courts permit pretrial discovery of financial
information of the defendant without requiring plaintiff to
establish a prima facie case” but staying production
“until the District Judge determines whether
Plaintiffs' claim for punitive damages survive any
dispositive motion”) with Pedroza v. Lomas Auto
Mall, Inc., 2008 U.S. Dist. LEXIS 117200, at *5-6
(D.N.M. July 10, 2008) (joining “the majority of state
and federal courts [that] . . . permit discovery of a
defendant's net worth without requiring the plaintiff to
establish a prima-facie case for punitive damages” and
explaining the “opposing party's interest in
nondisclosure and confidentiality can usually be adequately
protected by a protective order restricting dissemination of
the documents and the information within”).
differences in approach are best explained by the broad
discretion federal courts enjoy to balance competing
interests. In this case, the Court strikes that balance in
favor of immediate disclosure. First, Plaintiffs have
plausibly alleged an entitlement to punitive damages.
“New Mexico recognizes that, although punitive damages
are not normally available for a breach of contract, a
plaintiff may recover punitive damages when a defendant's
breach was malicious, fraudulent, oppressive, or committed
recklessly with a wanton disregard for the plaintiff's
rights.” Anderson Living Tr. v. ConocoPhillips
Co., 952 F.Supp.2d 979, 1046 (D.N.M. 2013) (citing
Romero v. Mervyn's, 784 P.2d 992, 998 (N.M.
allege numerous facts and circumstances in support of their
claim of punitive damages. Central to this case is whether
Plaintiffs agreed to bear the risk of loss of hay stored at
Armstrong Farms but already paid for by Plaintiffs.
Defendants insist the parties agreed at their initial meeting
to shift the risk of loss from Defendants to Plaintiffs for
hay stored at Armstrong Farms. (Doc. 55-2). Plaintiffs
dispute the existence of such an agreement. Plaintiffs point
out the parties' original arrangement did not include
storage; it called for hay Defendants produced to be weighed,
tested, immediately delivered to Plaintiffs' dairies, and
be paid for by Plaintiffs. (Doc. 60-3). Plaintiffs explain
there was no reason for Plaintiffs and Defendants to have
discussed or agreed to shift the risk of loss-no storage was
necessary because Plaintiffs were to pay as Defendants
delivered it to the dairies. Later delays in the delivery of
hay, Plaintiffs maintain, occurred because Defendants could
not secure a means of timely transporting the hay, not
because Plaintiffs requested for storage. (Id.).
According to Plaintiffs, Defendants fabricated a convenient
story about a hay fire-and a shift in the risk of loss-that
allegedly occurred in August 2017 destroying 2, 647 tons of
hay Plaintiffs had paid for, but Defendants had not
delivered. (Id.). Plaintiffs contend that they were
not informed of the alleged fire until February 2018.
also allege that Defendants falsified the results of hay
quality tests that were actually undertaken by Defendants by
increasing the relative feed value (“RFV”) for
the hay as shown on Defendants' invoices above the actual
RFV test result, and by including RFV test results on
invoices where, in fact, the hay's RFV had not been
tested as required by the parties' agreement. (Doc. 90).
Finally, Plaintiffs claim that Defendants invoiced Plaintiffs
for hay after the date of the alleged fire and
undertook to sell off assets and go out of business at the
end of the 2017 farming season, knowing all the while that
they would not be able to deliver the quantity of hay that
had been ...