Robert L. Citroen, Law Corp. v. Micron Optics, Inc.

ROBERT L. CITROEN, LAW CORPORATION, a Nevada corporation, Plaintiff, v. MICRON OPTICS, INC., a Georgia corporation, Defendant.

MICRON OPTICS, INC., a Georgia corporation, Counterclaimant, v. ROBERT L. CITROEN, LAW CORPORATION, a Nevada corporation,ROBERT L. CITROEN, an individual, Counter-Defendants.

3:16-cv-00570-RCJ-WGC

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

August 28, 2017

ORDER

Re: ECF No. 42

Before the court is Defendant/Counterclaimant Micron Optics, Inc.'s (Micron) Motion to Compel Income and Tax Records. (ECF Nos. 42, 42-1 to 42-16.) Plaintiff/Counter-Defendants Robert L. Citroen, Law Corporation and Robert L. Citroen, an individual (collectively, Citroen) filed a response. (ECF No. 45.) Micron filed a reply (ECF Nos. 48, 48-1 to 48-5), as well as a supplemental reply (ECF Nos. 50, 50-1 to 50-4). The court held a hearing on the motion on August 25, 2017, where it heard argument from the parties. (Minutes at ECF No. 51.) The court issues the instant Order granting Micron's motion.

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I. BACKGROUND

A. Robert L. Citroen, Law Corporation's Complaint

Robert L. Citroen, Law Corporation sued Micron in State court on August 18, 2016. (ECF No. 1-1 at 4.) The complaint alleges that Citroen and Micron entered into an assignment agreement that was characterized as a settlement payment to resolve claims for amounts due for advice and services provided but not paid for. The complaint alleges that Micron agreed to pay Citroen a total of $500,000 ($12,500 per quarter per year for ten years). Micron made payments on July 1, 2014, October 1, 2014, in all four quarters of 2015, and in January and April of 2016, but thereafter purportedly refused to pay, asserting the payments were for legal services. Citroen contends that Micron breached the agreement, and also includes claims for unjust enrichment, conversion, anticipatory breach and misrepresentation.

B. Micron's Counterclaims

Micron removed the action to federal court on October 3, 2016 (ECF No. 1), and shortly thereafter filed its answer and counterclaims against Robert L. Citroen, Law Corporation and Robert L. Citroen individually (ECF No. 5). Micron claims that Citroen provided (or represented they were providing) outside legal services to Micron until sometime in November 2011. Micron alleges that Citroen is the president of Citroen Law Corporation, Micron's former legal counsel, and was a member of Micron's board of directors from 2000 until November 14, 2011. Micron states that in 2004, Micron Optics International AG (MOIAG) was formed as an entity under the laws of Liberia to operate as an independent reseller of Micron's products in Asia. MOIAG's stock was held equally by Karlsson & Bergkvist (Schweiz) A.B. (K&B) and Metallikon A.G. until 2014.

Micron claims that Citroen failed to disclose that he was operating, controlling and/or had an ownership interest in Metallikon, which held half of MOIAG's shares. Micron goes on to allege that MOIAG profited from its relationship with Micron and distributed profits to shareholders, including Citroen (through Metallikon) and that Citroen received distributions while he was legal counsel/board member to Micron. Micron avers that Citroen and others set up another entity, Technica, S.A., for their own financial benefit, and that Citroen's wife was an undisclosed owner/operator of both MOIAG and Technica. Micron asserts that Citroen, through a fiduciary position with Micron, used these entities to funnel profits and structure the $500,000 payoff from Micron and improperly received self-paymentsthrough fraud.

Micron alleges that the agreement referenced by Citroen was precipitated by an agreement entered into by Micron with K&B and Metallikon for the sale of MOIAG, where K&B and Metallikon agreed to sell their shares of issued stock of MOIAG to Micron for $100,000, and the agreement also included a provision for settlement of a purported debt for services provided by Sades Establissements Karoly (SADEK) to MOIAG and owed by MOIAG, which was to be assumed by Micron. This included payment of $500,000 to SADEK in quarterly installments of $12,500. The same date the agreement was entered into, SADEK assigned its interest to Citroen. According to Micron, Citroen's interest in the agreement was not disclosed to or approved by Micron's board of directors or shareholders. Micron made 7 quarterly payments, for a total of $87,500.

Micron contends that in 2008, Citroen had resigned his law license after pleading guilty to a felony of possession of five or more false identification documents and false statements, but failed to disclose this to Micron while still billing it for legal services. Micron did not discover this until March of 2016, along with his financial interests in Metallikon, MOIAG and Technica, and stopped making the quarterly payments.

C. Discovery Requests

In discovery, Micron requested documents and information relating to Citroen's financial interests in the entities involved in the alleged MOIAG fraud scheme. In its initial set of requests for production of documents, it sought, inter alia, documents reflecting income, funds or benefits from any source from January 1, 2004 to the present, as well as tax returns for the past fifteen years, including attachments, schedules and forms. (ECF No. 42-4 at 5, Requests 1, 3.) Citroen objected to the first request on grounds that it was overbroad; unclear regarding the use of the terms "funds" and "benefits"; that the documents were in Micron's possession; and that it sought confidential, privileged documents that are unrelated to this lawsuit. (ECF No. 42-5 at 4.) Without waiving the objections, Citroen stated it did not have any documents reflecting income, funds or benefits from Micron. (Id.) In response to the request for tax returns, Citroen objected that the request was overbroad and sought confidential, privileged documents unrelated to this case. (ECF No. 42-5 at 4-5.) Without waiving the objections, Citroen responded that it had no responsive documents. (Id.)

The parties met and conferred, and Micron explained that it sought the documents in connection with its allegations that Citroen had an ownership/financial interest in the above-described entities related to the fraudulent scheme. (ECF Nos. 42-6 at 2-6, 42-2 at 7-8 ¶ 7, 42-7 at 2.) During the meet and confer, Micron's counsel contends that Citroen's counsel represented that Citroen no longer had any records or tax documents responsive to the requests, saying: "he is an old man and doesn't keep copies of things." (Id.) Following the meet and confer, Citroen served supplemental responses, but they did not significantly differ from the original responses. (ECF No. 42-8.) Citroen's counsel reiterated that Citroen "do[es] not have many of the documents that you requested." (ECF No. 42-7 at 2.)

In light of the representation that Citroen did not have the documents requested, Micron served a second set of discovery asking for executed authorizations to allow Micron to obtain the tax records directly from the IRS; for documentation of income, funds or benefits received from MOIAG, Technica, Metallikon, K&B and SADEK; and, for the name and contact information for Citroen's accountants and tax preparers/consultants used to prepare tax returns. (ECF Nos. 42-9 at 5, 42-11 at 5, 42-10 at 5-6, and 42-12 at 5.)

Citroen responded with objections, and produced no documents. Citroen objected to the request for authorizations for the tax returns on the basis that it was not a request for production, was ambiguous, unlimited as to time, sought confidential, privileged information, and was unrelated to this case. (ECF No. 42-13 at 3, ECF No. 42-14 at 4.)

In response to the requests for documents of income, funds or benefits received from the other entities, Citroen objected that the requests were overbroad, unlimited as to time, sought irrelevant information, and were ambiguous. (ECF No. 42-13 at 4-6; ECF No. 42-14 at 4-6.) Without waiving the objections, they responded that they did "not believe there are any documents reflecting any payments" from these entities in the past ten years. (Id.)

As to the request for contact information for accountants and tax preparers/consultants, Citroen objected that the requests were ambiguous, unlimited as to time, sought confidential, privileged information, and sought irrelevant information. (ECF No. 42-15 at 3-4, ECF No. 42-16 at 3-4.)

The parties met and conferred again on July 3, 2017. (ECF No. 42-2 at 5 ¶¶ 20-22.) Citroen maintained that the information sought was confidential and not relevant, while Micron continued toassert that the information was relevant to its counterclaims. (Id.) Citroen represented it would produce any 1099s from those entities, but refused to provide the information for the accountants and tax preparers/consultants or authorize the release of the tax returns. (Id.)

On July 7, 2017, Citroen represented it did not receive a 1099 from SADEK, MOIAG, Technica, or Metallikon and would supplement their response, but as of July 20, 2017, they had not done so. (ECF No. 42-2 at 6 ¶ 24.)

D. Motion to Compel

In its motion to compel, Micron seeks an order compelling Citroen to produce income and tax records from 2004 to the present, and to pay its costs and attorney's fees incurred in connection with bringing this motion. It maintains that the records are directly relevant to its defenses and counterclaims.

In their response, Citroen asserts that they already responded that they do not have the discovery sought by Micron. (ECF No. 45 at 2.) Citroen also asserts that Micron has not shown the information sought is relevant to its claims or defenses, that it has a compelling need for the information, and that it cannot be obtained from another source that is more convenient, less burdensome and less expensive. Citroen contends that the tax returns would not assist Micron because while they would show the total income received by Citron, they would not show the source. The...