United States District Court, N.D. California
ORDER RE: PLAINTIFF'S MOTION TO COMPEL DOCUMENTS Dkt. Nos. 92-4, 104 & 122
JACQUELINE SCOTT CORLEY, Magistrate Judge.
Plaintiffs Marjeed Seifi and Tracy Deakin bring this putative class action against Defendant Mercedes-Benz USA, LLC, alleging certain defects in vehicles equipped with two particular engines. In the discovery dispute currently pending before the Court Plaintiffs contend that Defendant should be required to produce documents of Daimler AG, Defendant's parent company. (Dkt. No. 92-4.) Having had the benefit of oral argument on November 6, 2014, and having considered the parties' initial joint letter brief and their supplemental briefs regarding Defendant's legal right to documents in its parent corporation's possession, the Court DENIES Plaintiffs' motion to compel.
Plaintiffs filed this putative class action under the Class Action Fairness Act seeking to represent a class of similarly situated individuals who purchased or leased certain Mercedes-Benz vehicles equipped with M272 and M273 engines for (1) breach of express warranty; (2) violations of the Unfair Competition Law ("UCL"); and (3) violations of the Consumer Legal Remedies Act ("CLRA"). Plaintiffs contend that Defendant sold vehicles containing a defect which causes the balance shift gear of the M272 engine and the idle gear of M273 engine to wear prematurely, repair of which is very expensive. Plaintiffs allege that Defendant was aware of the defect at the time the vehicles were sold, but concealed it from consumers. The district court granted a motion to dismiss the breach of warranty claim and any damages claims under the CLRA as to vehicles containing the M273 engine and referred the case to this Magistrate Judge for discovery.
Plaintiffs seek to compel Defendant to produce documents of Daimler AG, "the German parent company and manufacturer of Mercedes-Benz vehicles at issue in this action." (Dkt. No. 92-4.) In particular, Plaintiffs take issue with Defendant's general objection to its Interrogatories and Document Requests which states that
MBUSA objects to each and every Request to the extent it seeks to require MBUSA to respond on behalf of any entity other than MBUSA or to the extent it seeks information not in MBUSA's possession, custody, or control. MBUSA specifically objects to plaintiff's definitions of "YOU" and "YOUR" to the extent those terms include any entity other than MBUSA because inclusion of other entities besides MBUSA renders such definitions overbroad, unduly burdensome, harassing, and oppressive, and Requests using those definitions would impermissibly seek information not within MBUSA's possession, custody, and control. Accordingly, all responses herein are made by and on behalf of MBUSA alone and no other entity or person.
(Dkt. No. 97-1 at 4 (Defendant's Document Request Responses, Objection 5) & Dkt. No. 97-2 (Defendant's Interrogatory Responses, Objection 5).) Although Plaintiffs did not initially move to compel with respect to any particular document request, and instead, challenged Defendant's general objection, Plaintiffs' supplemental brief identifies nine document requests that they contend demand documents that are within Defendant's control.
A. The Legal Control Test in the Ninth Circuit
Under Federal Rule of Civil Procedure 34, a party must produce any documents under its "possession, custody, or control." The party seeking the documents bears the burden of demonstrating that the responding party exercises such control. United States v. Int'l Union of Petroleum & Indus. Workers, 870 F.2d 1450, 1452 (9th Cir. 1989). In the Ninth Circuit, a "practical ability to obtain the requested documents" from a related organization is not enough to constitute control because the related organization "could legally-and without breaching any contract-[ ] refuse to turn over such documents." In re Citric Acid Litig., 191 F.3d 1090, 1107-08 (9th Cir. 1999). Instead, "control" is defined as "the legal right to obtain documents upon demand." Id. at 1107-08.
Plaintiffs' reliance on a decision in a related class action brought in the United States District Court for the Western District of Louisiana to show Defendant's "control" of its parent corporation's documents is unavailing. See Dugas et al v. Mercedes-Benz USA, LLC, No. 12-2885 (W.D. La. Aug. 5, 2014) (Dkt. No. 123). In considering whether Mercedes-Benz was obligated to produce Daimler AG documents, the Dugas court held that "a sufficiently intimate relationship between subsidiary and parent [exists] to justify disregarding the formal corporate separation for the limited purpose of civil discovery." (Dkt. No. 97-3 at 9.) The court concluded that Mercedes-Benz had such control because (1) it was undisputed that there was a commonality of ownership; (2) the two corporations exchanged documents during the ordinary course of business; and (3) Daimler was involved in the transaction from which the lawsuit arose (manufacture of the vehicles at issue). Dugas' holding, however, is contrary to the Ninth Circuit's legal control test as it is, in effect, a holding that Defendant has the practical ability to obtain from its parent the sought-after documents. Under binding Ninth Circuit law, such a showing is not enough. In re Citric Acid Litig., 191 F.3d. at 1107-08.
Plaintiffs' citation to AFL Telecommunications LLC v. SurplusEQ.com Inc., No. 11-1086, 2012 WL 2590557, at *2 (D. Ariz. July 5, 2012), is likewise unpersuasive. (Dkt. No. 92-4 at 3:6-4:3.) Although the AFL court noted the Ninth Circuit's Citric Acid legal control test, it applied a "more expansive" definition of legal control, relying on the Third Circuit's decision in Gerling International Insurance Co. v. Commissioner, 839 F.2d 131, 140-41 (3rd Cir. 1988). AFL Telecommunications LLC, 2012 WL 2590557, at *2. In particular, the AFL court adopted language from Gerling observing that "[w]here the relationship is thus such that the agent-subsidiary can secure documents of the principal-agent to meet its own business needs and documents helpful for use in the litigation, the courts will not permit the agent-subsidiary to deny control for purposes of discovery by an opposing party." Id. (citing Gerling, 839 F.2d at 140). The court suggested that under Gerling the legal control test would capture a subsidiary that was the exclusive seller of its parent's products in the United States. AFL Telecommunications LLC, 2012 WL 2590557, at *2. Based on evidence that the plaintiff was a wholly-owned subsidiary of the parent corporation whose documents were sought, as well as the exclusive authorized United States distributor, and that the exclusive licensee relationship between the parent corporation and plaintiff-subsidiary corporation was formed just so plaintiff could bring the lawsuit, the court found that plaintiff had sufficient legal control over the source code sought and ordered it produced.
AFL 's interpretation of the legal control test is contrary to that of other district courts within the Ninth Circuit, including several within this district which have "required parties to establish that a subsidiary has a legal right to obtain documents from its parent on demand before compelling those parties to produce documents." Dugan v. Lloyds TSB Bank, PLC, No. 12-02549, 2013 WL 4758055, at *2 (N.D. Cal. Sept. 4, 2013) (collecting cases regarding the same). Further, even if the Court were to find AFL's rationale persuasive-which it is not-Plaintiff has not made the same showing here. Plaintiffs have simply alleged that Mercedes-Benz is a United States distributor and subsidiary of Daimler AG. Plaintiff also suggests that because Defendant has produced some Daimler AG documents it must have access to all such documents and databases. This falls well below the showing necessary to establish legal control: Plaintiffs must show that Defendant has the legal right to compel production of the documents from Daimler. Further, Plaintiffs provide no response to Defendant's contention that it is a "sales and servicing subsidiary, so it has some items on, e.g., replacing parts...[b]ut [it] does not ...