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Ameritox, Ltd., A Texas Limited Partnership v. Millennium Laboratories

December 14, 2012

AMERITOX, LTD., A TEXAS LIMITED PARTNERSHIP, PLAINTIFF,
v.
MILLENNIUM LABORATORIES, INC. A CALIFORNIA CORPORATION, DEFENDANT. STERLING FUND MANAGEMENT, LLC AND STEVEN TASLITZ, THIRD-PARTY RESPONDENTS.



The opinion of the court was delivered by: Judge John W. Darrah

MEMORANDUM OPINION AND ORDER

This matter comes before the Court on Third-Party Respondents Sterling Fund Management, LLC and Steven Taslitz's Motion to Quash Millennium Laboratories, Inc.'s Subpoenas. For the reasons provided below, the Respondents' Motion to Quash is granted.

BACKGROUND

Ameritox, Ltd. filed suit in the Middle District of Florida against Millennium Laboratories, Inc. ("Millennium"), relating to Millennium's alleged unfair billing practices. (Mot. to Quash at 1-2.) Ameritox and Millennium are competitors in the urine drug testing industry. (Id.) In the Florida suit, Ameritox alleges, against Millennium, claims of false advertising, unfair practices, and unfair competition, in addition to state statutory violations. (Id. at 4.) Millennium alleges counterclaims of the same nature against Ameritox. (Id.)

In the midst of discovery in this Florida litigation, Millennium issued subpoenas on "Sterling Partners" (a trade name of Third-Party Respondent Sterling Fund Management, LLC) ("Sterling") and Sterling's Chairman and Senior Managing Director, Steven Taslitz. (Id. at 5.) Sterling is a private equity firm in the business of managing funds invested in companies, with active investments in over twenty-five companies. (Id.) Sterling manages investments for Ameritox. (Id.) While Sterling manages investments for many companies, including Ameritox, Sterling is not in the business of urine drug testing. (Id. at 7.) Sterling does not advise Ameritox how to perform its urine drug testing, nor does Sterling advise Ameritox on its billing practices, or any of Ameritox's other day-to-day activities. (Id.) Both Sterling and Taslitz have indicated that they have limited or no knowledge regarding Ameritox's urine drug testing, billing, and selling practices. (Id.)

In the subpoena of Sterling, Millennium seeks production of documents and communications regarding: (1) ownership or equity interest in Ameritox; (2) Ameritox's business model, growth strategy, financial performance, sales team, board meetings, billing practices; (3) Ameritox's drug testing and analysis services, specimen collection, and the issue of insurance coverage; and (4) offers by Ameritox to health care providers for equity or ownership interest in any company that conducts urine drug testing. (Id. at Ex. C.) Millennium also served subpoenas on Taslitz for the production of documents and a deposition. (Id. at 5.) In the subpoena of Taslitz, Millennium seeks the production of documents and communications relating to: (1) Taslitz's job positions with any company or partnership, including board membership; (2) entities with ownership or equity interest in Ameritox; (3) Ameritox's business model, growth strategy, financial performance, employees, board of directors, business operations, billing policies; and (4) Ameritox's specimen collection, urine drug testing, and analysis. (Id. at Ex. D.)

Sterling and Taslitz now move to quash these subpoenas pursuant to Fed. R. Civ. P. 45, arguing the subpoenas are unduly burdensome, or in the alternative, for a protective order precluding Respondents to respond to the subpoenas. Millennium opposes the motion to quash.

LEGALSTANDARD

Federal Rule of Civil Procedure 45(c)(3) governs the quashing of subpoenas. A court is required to quash a subpoena where: (1) it fails to allow a reasonable time for compliance, (2) requires a non-party to travel more than 100 miles (with some exceptions), (3) requires disclosure of privileged or protected information, or (4) subjects a person to undue burden. Fed. R. Civ. P 45(c)(3)(A). Furthermore, a district court may limit any discovery that is "unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; [or] the party seeking discovery has had ample opportunity to obtain the information . . . or . . . the burden or expense of the proposed discovery outweighs its likely benefit . . . ."

Fed. R. Civ. P. 26(b)(2)(C). If the information sought would not "assist[] in the exploration of a material issue" in the case, then a subpoena should be quashed.

CSC Holdings, Inc. v. Redisi, 309 F.3d 988, 993 (7th Cir. 2002) (Redisi); Israel Travel Advisory Serv., Inc. v. Israel Identity Tours, Inc., 61 F.3d 1250, 1254 (7th Cir. 1995). A subpoena may be quashed or limited by the district court when "the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive" or when the burden of the proposed discovery outweighs its likely benefit. Fed. R. Civ. P. 26(b)(2)(C).

As with other discovery issues, whether to grant a motion to quash is within the sound discretion of the district court. United States v. Ashman, 979 F.2d 469, 495 (7th Cir. 1992).

ANALYSIS

Sterling and Taslitz seek to quash Millennium's subpoenas, arguing the subpoenas are unduly burdensome and that the information requested is overbroad and irrelevant. To demonstrate the undue burden, the movant must provide "affirmative and compelling proof." United States v. Amerigroup Illinois, ...


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