Holtec Int'l v. ARC Machs., Inc.

HOLTEC INTERNATIONAL and HOLTECMANUFACTURING DIVISION, INC., Plaintiffs, v. ARC MACHINES, INC., Defendant.

Civil Action No. 17-397

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

May 25, 2021

Magistrate Judge Maureen P. Kelly

Re: ECF Nos. 169, 174 and 176

MEMORANDUM ORDER

Presently before the Court is a Motion to Compel, ECF No. 169, filed on behalf of Defendant ARC Machines, Inc. ("AMI"). AMI seeks an order requiring Plaintiffs Holtec International and Holtec Manufacturing Division, Inc. (collectively, "Holtec") to produce the pleadings and briefs filed in arbitration proceedings between Holtec and Pandjiris, Inc., ("Pandjiris"). The arbitration resolved Holtec's claims against Pandjiris relative to allegedly faulty equipment manufactured and installed by AMI pursuant to a sales contract with Pandjiris. Holtec opposes the Motion to Compel on relevance and prejudice grounds and separately, through a Motion to Quash, ECF Nos. 174 and 176, seeks an order precluding AMI's access to the documents through a subpoena issued by AMI to Pandjiris.

Upon review of the motions and briefs in support and in opposition to the pending Motion to Compel, ECF Nos. 173, 174, and 176, and for the following reasons, the Motion to Compel is granted and the Motion to Quash is denied.¹

I. LEGAL STANDARD

Federal Rule of Civil Procedure 26(b)(1) defines the permissible scope of discovery as follows:

Unless otherwise limited by court order, the scope of discovery is as follows: Parties 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, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

Fed. R. Civ. P. 26(b)(1).

A party who has received evasive or incomplete discovery responses may seek a Court order compelling disclosures or discovery of the materials sought. Fed. R. Civ. P. 37(a). The party moving to compel discovery bears the initial burden of proving the relevance of the requested information. Morrison v. Phila. Hous. Auth., 203 F.R.D. 195, 196 (E.D. Pa. 2001). Once that initial burden is met, "the party resisting the discovery has the burden to establish the lack of relevance by demonstrating that the requested discovery (1) does not come within the broad scope of relevance as defined under Fed. R. Civ. P. 26(b)(1), or (2) is of such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure." In re Urethane Antitrust Litig., 261 F.R.D. 570, 573 (D. Kan. 2009).

Rulings on the proper scope of discovery, and the extent to which discovery may be compelled, are matters consigned to the Court's discretion and judgment. It has long been held that decisions relating to the scope of discovery permitted under Rule 26 also rest in the sound discretion of the Court. Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 90 (3d Cir. 1987).

II. DISCUSSION

AMI's defense to Holtec's claims rests in large part upon the arbitration award entered in favor of Pandjiris. AMI asserts that the Pandjiris arbitration panel determined that production delays suffered by Holtec did not result from a defect in equipment provided by Pandjiris, including the AMI equipment. Thus, AMI argues that collateral estoppel bars Holtec's attempted relitigation of equipment-related issues previously decided against it. ECF No. 102 at 18-21; ECF No. 169 at 2.

This Court resolved AMI's pre-discovery Motion for Summary Judgment on collateral estoppel grounds as follows:

Under Pennsylvania law, collateral estoppel bars a party from litigating an issue if these four elements are satisfied: (1) the issue decided in a prior action is identical to the one presented in the later action, (2) the prior action resulted in a final judgment on the merits, (3) the party against whom collateral estoppel is asserted was a party to the prior action or was in privity to the prior action, and (4) the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior action. Rue v. K-Mart Corp., 552 Pa. 13, 713 A.2d 82, 84 (1998). As the party seeking to effect an estoppel, AMI "has the burden of demonstrating the propriety of its application." Suppan v. Dadonna, 203 F.3d 228, 233 (3d Cir. 2000).

AMI's burden begins with demonstrating the identity of issues in the arbitration. Whether the same issues are involved is established "by showing that the same general rules govern both cases and that the facts of both cases are indistinguishable as measured by those rules." McKenna v. Metro. Life Ins. Co., 126 F. App'x 571, 576 (3d Cir. 2005) (quoting Suppan, 203 F.3d at 233). AMI contends that the issues are identical, despite Holtec's assertion of direct equitable, contract, breach of warranty and negligence claims against AMI for AMI's alleged repeated failure to repair the equipment. On this basis alone, estoppel is inappropriate given that the arbitrators' ruling is limited to Holtec's claims against Pandjiris for its supply of allegedly defective equipment. SeeRaytech Corp. v. White, 54 F.3d 187, 193 (3d Cir. 1995) ("even if all four requirements of collateral estoppel are met, changes in "controlling" facts, that is, facts "essential to a judgment" will render collateral estoppel inapplicable in a subsequent action raising the same issues").

AMI's burden to establish that collateral estoppel bars this action becomes insurmountable for the fourth factor - whether Holtec was provided a full and fair opportunity to litigate the issues at bar. AMI does not challenge Holtec's contentionthat the arbitrators precluded discovery directed at AMI employees and excluded testimony from AMI employees regarding repeated failed attempts to repair the power supply equipment. If true, it cannot be said that Holtec had a full and fair opportunity to litigate its claims.

AMI cites Witkowski v. Welch, 173 F.3d 192 (3d Cir. 1999) to support the application of estoppel even when a plaintiff contests the scope of prior arbitration. ECF No. 104 at 20. In Witkowski, however, the court was presented with a full transcript of arbitration proceedings to permit it to assess the issues litigated and the evidentiary rulings that allegedly impeded

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