United States District Court, W.D. Kentucky,

at Louisiville.

MAFCOTE INDUSTRIES, INC., and Royal Consumer Products, LLC., Plaintiff

v.

AVERITT EXPRESS, INC., Defendant.

 

Civil Action No. 3:10–CV–00036–CRS–JDM.

Nov. 13, 2012.

 

Stuart E. Alexander, III, Tilford, Dobbins, Alexander, PLLC, Louisville, KY, for Plaintiff.

 

Emily L. Pagorski, Stoll, Keenon, Ogden, PLLC, Louisville, KY, Kenneth M. Bryant, Kevin C. Baltz, Sepideh C. Khansari, Miller & Martin PLLC, Nashville, TN, for Defendant.

 

MEMORANDUM OPINION AND ORDER

CHARLES R. SIMPSON III, District Judge.

PROCEDURAL HISTORY

*1 Mafcote Industries, Inc. and Royal Consumer Products, LLC. (“Plaintiffs”) sued Averitt Express, Inc. (“Defendant”) in state court for breach of contract related to the interstate transportation of Plaintiffs’ goods. Defendant removed the case to this court (DN 1), and moved to dismiss the Complaint on the ground that the Carmack Amendment to the Interstate Commerce Act, 19 U.S.C. § 14706, preempted Plaintiffs’ state law claim (DN 6). Plaintiffs then moved to dismiss the Complaint and requested permission to amend the Complaint (DN 8).

 

Plaintiffs’ Amended Complaint seeks damages under the Carmack Amendment for Defendant’s damage to Plaintiffs’ goods and asserts claims for delay and consequential damages for the fees and penalties Plaintiffs’ incurred through Defendant’s noncompliant deliveries to Plaintiffs’ customers (DN 16). Defendant asserted counterclaims for breach of contract, unjust enrichment, and declaratory judgment (DN 21) and filed a Motion for Summary Judgment against the Plaintiffs (DN 42).

 

BACKGROUND

Before the court is Defendant’s Motion for Summary Judgment, in which the Defendant contends that a valid contract existed between the parties, which included the Defendant’s tariff. In the alternative, the Defendant contends that the court should reform the contract to include Defendant’s tariff, or that the “unclean hands doctrine” bars Plaintiffs’ recovery (DN 42). If applicable, the Defendant’s tariff would discharge Defendant’s liability for “any loss of use, revenue, or profit or business opportunities or indirect, incidental, consequential, special, punitive or exemplary damages, even if [Defendant] is informed or is otherwise aware or should be aware of the possibility or likelihood of such damages.” (DN 21).

 

In support of its Motion for Summary Judgment the Defendant alleges that Plaintiffs deceptively amended the transportation contract to exclude Defendant’s tariff and then signed and returned the contract without alerting the Defendant to the amendment (DN 21, ¶ 13–14). Thus, the Defendant contends that Plaintiffs’ amendment was not effective and that the Defendant’s tariff is, or should be, included in the contract because the Defendant performed under the contract with the understanding that its tariff was applicable (DN 21).

 

Plaintiffs argue that during contract negotiations the Defendant knew the Plaintiffs were subject to their customers’ penalties for Defendant’s late or noncompliant deliveries (DN 45). Accordingly, Plaintiffs contend that they intended to exclude the Defendant’s tariff from the contract and hold the Defendant liable for penalties and fees caused by the Defendant’s late deliveries (DN 16). Plaintiffs allege (1) that the transportation contract excludes Defendant’s tariff, and (2) that the Defendant is liable for the foreseeable consequential damages—the penalties Plaintiffs’ customers imposed against them for Defendant’s delay, damage, and improper shipping documentation (DN 16, ¶¶ 7, 11, 18–19).

 

I

*2 Federal Rule of Civil Procedure 56(a) states that “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FN1 A party moving for summary judgment bears the initial burden of specifying a basis for its motion by demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Not every factual dispute between the parties will prevent summary judgment, and the disputed facts must be material. They must be facts which, under the substantive law governing the issue, might affect the outcome of the suit.   Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). After the moving party meets this burden, the nonmoving party bears the burden of showing “specific facts showing that there is a genuine issue for trial.”   Id. at 248 (quoting First Nat’l Bank v. Cities Serv. Co., 391 U.S. 253, 288 (1968)). Thus, the ultimate burden of demonstrating the existence of a genuine issue of material fact lies with the party opposing the motion. See id. at 247–48.

 

FN1. Although both parties’ cite Fed.R.Civ.P. 56(c) as the summary judgment standard, the Federal Rules of Civil Procedure as amended in 2010 identify the summary judgment standard in section 56(a). Fed.R.Civ.P. 56 advisory committee’s note.

 

However, the evidence must be construed in the light most favorable to the party opposing the motion. Matsushida Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting U.S. v. Diebold Inc., 369 U.S. 654, 655 (1962)). Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge. Anderson, 477 U.S. at 255. The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor. Id.

 

The Defendant requests summary judgment regarding three issues: (1) whether a valid contract, which included Defendant’s tariff, existed between the parties; or (2) whether the court should reform the contract to include the Defendant’s tariff, based on the theory that Plaintiffs’ fraudulently altered the proposed contract to exclude the tariff, and (3) whether the “unclean hands doctrine” bars Plaintiffs from recovering damages from the Defendant (DN 42).

 

In response, the Plaintiffs argue (1) that their amendment to the contract made clear that they did not intend to include Defendant’s tariff such that it would limit Defendant’s liability for Plaintiffs’ customers’ penalties for the Defendant’s nonconforming delivery (DN 45, 4); (2) that the Defendant accepted the exclusion of its tariff by performing under the contract (DN 45, 10–11); and (3) that the bills of lading (“BOL”) that accompanied Defendant’s deliveries, establish the Defendant’s liability for consequential damages (DN 45, 9–10).

 

It is uncontested that in early 2009 the parties commenced negotiations for a transportation contract under which the Defendant would transport Plaintiffs’ goods (DN 42). During negotiations two people were primarily responsible for the negotiations, T.J. Clayton for the Defendant and Sam Asher for the Plaintiffs (DN 42–2, 3). On March 12, 2009, after weeks of negotiation, Defendant’s representative emailed the Plaintiffs a “proposed contract” stating, “for your review [ ] this is an effective proposal [,] if you guys are in agreement [ ] please have this signed off on and back over to me and we can get started.” The Defendant attached the “Transportation Agreement” to the email which had been signed by the Defendant’s Executive Vice President and Chief Operating Officer, Wayne Spain (DN 42–5, 4–5).

 

*3 On April 8, 2009, almost one month later, Plaintiffs replied to the Defendant’s proposed contract by emailing Defendant’s representative T.J. Clayton, “[p]lease provide us with you [sic] mailing address. We would like to send you the signed copies of the freight contract. Please confirm once you receive it so we can proceed with moving some of the freight to you.” (DN 45). One day later, on April 9, 2009, Plaintiffs mailed a revised contract to the Defendant’s legal department which was signed by Plaintiffs’ President, Steve Schulman (DN 42–5, 4–5). Plaintiffs also enclosed a letter stating: “Enclosed please find three (3) copies of your Transportation Agreement which we have signed. Please countersign the agreements and return two (2) originals to us.” (DN 42–5, 4–5). Although Plaintiffs amended the proposed contract in several places, the only contested amendment is a typewritten statement regarding Defendant’s tariff where Plaintiffs added language stating that the tariffs “relate only to rates for freight classification and not to terms and conditions of service.” (DN 44–2).

 

The Defendant alleges that Plaintiffs fraudulently altered the agreement to exclude the Defendant’s tariff without notifying the Defendant (DN 42–5, 5). Plaintiffs counter-argue that their April 9, 2012 contract controls because they requested countersignatures (DN 45), which should indicate to the Defendant that Plaintiffs made changes to the terms of Defendant’s proposed contract. Otherwise, Plaintiffs contend that they would have no need to request an additional signature as Defendant’s Executive Vice President and Chief Executive Officer had already signed the proposed contract (see DN 42). Thus, Plaintiffs’ argue that the Defendant was on notice that the Plaintiffs modified the contract (see DN 45).

 

As the nonmoving party, Plaintiffs must offer evidence demonstrating a genuine issue of material fact. Celotex Corp., 477 U.S. at 322. A “mere scintilla of evidence is insufficient” because there must be evidence on which a jury could find for the nonmoving party. McLean v. Ontario, Ltd., 224 F.3d 797, 800 (6th Cir.2000) (quoting Anderson, 477 U.S. at 252)). Plaintiffs allege that evidence from the negotiation indicates that Plaintiffs did not intend to include Defendant’s tariff in the contract (DN 45, 2). Plaintiffs’ primary negotiator, Sam Asher, stressed Plaintiffs’ concern about meeting their customers’ requirements for timely shipments and conforming deliveries (DN 45–5). Asher stated that Plaintiffs had a “robust requirement for ontime shipments, [and] execution, and [that] nonconformities to those executions result in penalties [imposed against the Plaintiffs].” (DN 45–5).

 

Plaintiffs contend that Asher repeatedly expressed concern throughout the negotiation that Plaintiffs found it unacceptable for the Defendant’s tariff to limit Plaintiffs’ claims for damages for late or nonconforming deliveries. Asher stated he “discussed [the tariff] pretty hot and heavy a couple—at least a couple times because of the fact that [Plaintiffs] knew that the Staples account was such a challenge to us, and again, it was centered around that particular issue [of the tariff].” (DN 45–5, 32). Also, the Defendant knew before March 12, 2009, when the Defendant emailed the proposed agreement, that the Plaintiffs did not intend to incorporate the tariff. Defendant’s primary negotiator, T.J. Clayton, stated early in negotiations that “[Plaintiffs] did not want the Averitt 100 to be applied and any rules tariff as it was related to the contract or the carriage, they did not want that to apply.” (DN 45–4, 18–19).

 

*4 There is no dispute that after the Plaintiffs submitted their contract with changed language that they followed-up with the Defendant by asking “were there any questions or any issues from the contract itself.” (DN 45, 9). The Defendant did not respond, but later performed freight service for the Plaintiffs (DN 45). Based on these undisputed facts it is clear to the court that the original contract submission from the Defendant to the Plaintiffs constitutes an offer. See RESTATEMENT (SECOND) OF CONTRACTS § 24 OFFER DEFINED (1981). “An offer is the manifestation of willingness to enter a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Id.; Klein v. Citizens Union Nat’l Bank, 136 S.W .2d 770, 773 (Ky.1940) (citing RESTATEMENT (FIRST) OF CONTRACTS § 32 REQUIREMENT OF CERTAINTY OF AN OFFER (1932)); see U.S. v. Hardy, 916 F.Supp. 1373, 1380 (W.D.Ky.1995).

 

However, the Plaintiffs did not accept Defendant’s offer. Rather, Plaintiffs made a counter-offer, which is “made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.” RESTATEMENT (SECOND) OF CONTRACTS § 39 COUNTER–OFFERS (1981); Gen. Motors Corp. v. Herald, 833 S.W.2d 804, 807 (Ky.1992) (Leibson, J., dissenting) (noting that courts should apply counter-offer analysis instead of focusing on questions of fact regarding whether an offer is withdrawn or simply being considered). A counter-offer terminates an offeree’s power of acceptance and effectively operates to reject the offer unless the offeror maintains a contrary intention. Id. A counter-offer must also be capable of being accepted. Id. Plaintiffs’ counter-offer included all of the Defendant’s original contract terms except with respect to eliminating the Defendant’s tariff, and was also capable of being accepted because it was signed by Plaintiffs’ president (see DN 45). Here, Plaintiffs’ counter-offer operated as a rejection of the Defendant’s offer. See Gen. Motors Corp., 833 S.W.2d at 807.

 

The Defendant argues that Plaintiffs’ counter-offer was deceptive or fraudulent (DN 21). Under Kentucky law, “[f]raud inducing a contract may be waived by affirmance that is equivalent to ratification of the contract by the party who claimed to have been deceived into entering into it.” Hampton v. Suter, 330 S.W.2d 402, 406 (Ky.1959). One way in which ratification may be shown is when a party “accepted the benefits thereof or acted in a manner inconsistent with repudiation.” Id.

 

The Defendant’s argument is weakened because the changes in the Plaintiffs’ counteroffer (1) were clear and obvious on the face of the contract; (2) were neither secretly located nor concealed in small typeface; (3) were mailed along with a letter requesting countersignature, which indicated that Plaintiffs’ were making a counter-offer because the Defendant had already signed the proposed contract. If the Plaintiffs were simply accepting the Defendant’s proposed signed offer, Plaintiffs’ would have had no reason to request a countersignature. Moreover, (4) Plaintiffs sent three copies of their counter-offer, at the Defendant’s request, to the Defendant’s legal department—a department which is expected to have knowledge of contract formation (see DN 45).

 

*5 Also, it is undisputed that the Defendant began transporting Plaintiffs’ goods after Plaintiffs’ submitted their signed counter-offer (see DNs 42–5, 5–6 and 45, 9). Plaintiffs contend that although they never received the countersigned contracts, it was Plaintiffs’ experience that their customers and suppliers often received contract terms and confirmed assent by performance rather than by providing written confirmation (DN 45, 9 fn. 5). Therefore, the Defendant’s argument regarding fraud fails because the undisputed facts indicate that the Plaintiffs’ counter-offer was not fraudulent, and that the Defendant did not repudiate the terms of the counter-offer.

 

The question before the court is whether Plaintiffs’ counter-offer was accepted. There is no evidence that the Defendant accepted in writing, but abundant evidence of acceptance by performance. “Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by performance which operates as a return promise.” RESTATEMENT (SECOND) OF CONTRACTS § 50 ACCEPTANCE OF OFFER DEFINED; ACCEPTANCE BY PERFORMANCE; ACCEPTANCE BY PROMISE (1981); Vermillion v. Marvel Merch. Co., 234 S.W.2d 673, 674 (Ky .1950) (holding that beginning performance is “unequivocal acceptance of [a contract] in its entirety.”). Beginning the “invited performance” is an acceptance by performance under RESTATEMENT (SECOND) OF CONTRACTS § 62 EFFECT OF PERFORMANCE BY OFFEREE WHERE OFFER INVITES EITHER PERFORMANCE OR PROMISE (1981). Although the offeror can “insist on any mode of acceptance … in case of doubt, an offer is interpreted as inviting the offeree to choose between acceptance by promise and acceptance by performance.” Id. at cmt. a.

 

Moreover, Kentucky courts find a unilateral offer accepted by tendered performance. Whitewood v. Robert Bosch Tool Corp., 3:04CV631–H, 2006 WL 2873426 (W.D.Ky. Oct. 3, 2006), aff’d, 323 F. App’x 397 (6th Cir.2009) (applying Kentucky law). “[A]n acceptance of an offer by part performance in accordance with the terms of the offer is sufficient to complete the contract.” Id. It is “well settled that if the offer requests a return promise and the offeree … actually does or tenders what he was requested to promise to do, there is a contract if such performance is completed or tendered.” Allied Steel & Conveyors, Inc. v. Ford Motor Co., 277 F.2d 907, 911 (6th Cir.1960), construed in Whitewood, 2006 WL 2873426. The Defendant cites no authority to oppose Plaintiffs’ argument that their counter-offer excluded the Defendant’s tariff to prevent it from limiting Plaintiffs’ claims for damages from the Defendant (DN 45, 20–21).

 

In addition to the facts stated previously, Plaintiffs’ claims against the Defendant for late or untimely delivery, broken pallets, and faulty paperwork, should have alerted the Defendant that Plaintiffs intended to recover the penalties their customers’ imposed against them for the Defendant’s mistakes (see DN 45). It is also undisputed that the Defendant began transporting the Plaintiffs’ goods after receiving Plaintiffs’ counter-offer and that the Defendant continued transporting Plaintiffs’ goods for almost six months, during which time Plaintiffs continued to submit claims for their customers’ penalties to the Defendant (DN 21–4). Based on these facts, the Defendant accepted the Plaintiffs’ counter-offer by performance. See Whitewood, 2006 WL 2873426; see Allied Steel, 277 F.2d at 910–11.

 

II

*6 The Defendant also argues for the equitable remedy of contract reformation on the theory that Plaintiffs’ fraudulently altered the contract (DN 21, 9–11). However, based on the undisputed facts we see no fraud. Thus, reformation is not warranted.

 

Reformation is authorized “when, because of fraud or mutual mistake, the writing does not reflect the intentions and understandings of the party seeking relief.” Cartwright v. Mfr. & Traders Trust Co., No.2006–CA–002307–MR, 2008 WL 5264277, at *3 (Ky.Ct.App. Sept. 23, 2009); see also Mayo Arcade Corp. v. Bonded Floors Co., 41 S.W.2d 1104, 1108 (Ky.Ct.App.1931). The goal of reformation is to respond to genuine instances of fraud or mistake without undermining the expectation that the plain meaning of contract terms will be enforced. Id. To strike the balance between remedying fraud and maintaining the contracting parties’ expectations, Kentucky courts insist that the contracting parties exercise “at least the degree of diligence which may be fairly expected from a reasonable person.” Id. Under Cartwright, the defendant must present clear and convincing evidence of mutual mistake, and evidence that “they acted with the diligence of a reasonable person.” Id.

 

The Defendant alleges: (1) that Plaintiffs deceptively made changes to Defendant’s tariff provision in their counter-offer on a supplemental part of the document instead of the body; (2) that Plaintiffs neither handwrote nor initialed their changes; and (3) that Plaintiffs failed to inform the Defendant of the changes when they signed and returned the contract several weeks after the Defendant emailed its offer (DNs 42–5, 11 and 47).

 

However, as discussed above, the changes in the Plaintiffs’ counter-offer (1) were clear and obvious; (2) were neither secretly located nor concealed in small typeface; (3) were mailed along with a letter requesting countersignature; and (4) further, Plaintiffs sent their counter-offer directly to the Defendant’s legal department (DN 45).

 

The court is not moved by the Defendant’s contentions that Plaintiffs’ fraudulently amended the offer which the Defendant had already signed (DN 42–5, 11). Here, there is no evidence of fraud or mutual mistake. Therefore, the court is not persuaded to intervene and reform the contract.

 

The Defendant also requests reformation based on the Plaintiffs’ alleged misrepresentation (see DN 42–5, 9–11). THE RESTATEMENT (SECOND) OF CONTRACTS: WHEN A MISREPRESENTATION PREVENTS FORMATION OF A CONTRACT § 163 (1981) states:

 

If a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract, his conduct is not effective as a manifestation of assent.

 

Accordingly, the Defendant’s manifestation of assent would only trigger the misrepresentation rule if the Defendant neither knew nor had a “reasonable opportunity to know of the character or essential terms” of Plaintiffs’ counter-offer. See id. Here, the Defendant’s misrepresentation argument fails because, as the court already discussed, the Defendant had reason to know Plaintiffs’ counter-offer would exclude the Defendant’s tariff.FN2

 

FN2. The court will not readdress the Defendant’s argument that Plaintiffs’ fraudulent modifications rendered the counteroffer voidable, as this argument fails. “If a party’s manifestation of assent is induced by either a fraudulent or material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable.” RESTATEMENT (SECOND) OF CONTRACTS: WHEN A MISREPRESENTATION MAKES A CONTRACT VOIDABLE § 164 (1981). Here, for a misrepresentation to make the counter-offer voidable (1) the Plaintiffs must have made a fraudulent or material misrepresentation, and (2) the Defendant must have been justified in relying on it. The court will not readdress fraud, misrepresentation, or Defendant’s reasonableness in relying on Plaintiffs’ alleged misrepresentation..

 

III

*7 Plaintiffs’ argue that the BOL that accompanied the Defendant’s deliveries establish Defendant’s liability for consequential damages. Plaintiffs contend that for each of Defendant’s deliveries that later warranted a claim for loss, damage, or noncompliant delivery, the parties also executed a BOL (DN 45, 9). Under Kentucky law, a carrier is liable to the party entitled to recover under the bill of lading for any actual loss or injury to the property unless the carrier limits its liability under a tariff pursuant to the Interstate Commerce Act. Toledo Ticket Co. v. Roadway Express, Inc ., 133 F.3d 439, 441 (Ky.Ct.App.1998); see 49 U.S.C.A. § 14706.

 

Here, the BOL (DN 45–13) stated:

 

The [Defendant] Carrier shall be liable for interest on any claims not paid within 30 days and for attorneys’ fees and disbursements in connection with the collection thereof, and for consequential damages resulting from failure of delivery as herein specified. The delivery dates herein specified shall be deemed of the essence and the carrier shall be liable for consequential damages to the Shipper [Plaintiff] or consignee for late delivery, including but not limited to fines by any customer levied upon the Shipper for delay or failure of delivery.

 

It is the responsibility of the Carrier to maintain shipment integrity. Customer of Shipper is to receive all items in shipment on the same day at the same time or Carrier will be responsible for any actual or consequential damages.

 

The BOL reinforces Plaintiffs’ intent to hold the Defendant liable for “consequential damages resulting from failure of delivery” and “consequential damages to the shipper or consignee for late delivery.” (DN 45–13) The Defendant neither addressed Plaintiffs’ argument that the BOL established the Defendant’s liability nor cited any law to the contrary (DNs 42–5 and 47).

 

Although Plaintiffs do not allege that a BOL accompanied each delivery, they contend that “most if not all of the deliveries at issue” used the BOL provided by Plaintiffs (DN 45, 9). The BOL liability provision may control at least some of the disputed claims, thus summary judgment in favor of the Defendant is not appropriate.

 

IV

The Defendant argues that the doctrine of unclean hands bars Plaintiffs’ recovery (DN 42). Under Kentucky Law, the unclean hands doctrine “is a rule of equity that forecloses relief to a party who has engaged in fraudulent, illegal, or unconscionable conduct.” Suter v. Mazyck, 226 S.W.3d 837, 843 (Ky.Ct.App.2007). Although the doctrine is broad in application it “will not apply to all misconduct or to ‘every act smacking of deceit’ in relation to the matter in which relief is sought.” Id. (quoting Parriss’ Adm’r v. John W. Manning & Sons, 144 S.W.2d 490, 492 (Ky.1940)). Also, the transaction in which there was misconduct must be connected to the matter in litigation. Id. (quoting Eline Realty Co. v. Foreman, 252 S.W.2d 15, 19 (Ky.1952)).

 

*8 The Defendant alleges that the unclean hands doctrine applies because Plaintiffs engaged in fraudulent conduct by amending the contract without advising the Defendant of the alterations (DN 42–5, 12). Under the analysis made earlier, we view the Plaintiffs’ contract as a counteroffer. Additionally, the Defendant does not allege that Plaintiffs’ actions were either illegal or unconscionable to satisfy the unclean hands doctrine. There is no evidence that Plaintiffs’ fraudulently submitted their counter-offer. Therefore, the Defendant’s argument fails. See Suter 226 S.W.3d at 843.

 

Therefore, motion having been made and for the reasons set forth herein and the court being otherwise sufficiently advised, IT IS HEREBY ORDERED AND ADJUDGED that the motion of the Defendant, Averitt Express, Inc. for summary judgment (DN 42) is DENIED.

 

IT IS SO ORDERED.

United States District Court,

E.D. Wisconsin.

UNITED STATES of America, Plaintiff,

v.

Thomas H. BUSKE, Defendant.

 

No. 09–CR–65.

Nov. 13, 2012.

 

Stephen A. Ingraham, United States Department of Justice, Milwaukee, WI, for Plaintiff.

 

Michael J. Fitzgerald, Fitzgerald Law Firm SC, Milwauke, WI, for Defendant.

 

DECISION AND ORDER

LYNN ADELMAN, District Judge.

*1 In this mail fraud and money laundering case the government alleges that defendant Thomas Buske, the owner of a trucking firm, defrauded the S.C. Johnson Company (“SCJ”) by submitting fraudulent invoices for transportation services, which an SCJ insider, Milt Morris, approved in exchange for kick-backs. In a previous motion, defendant sought discovery from the government regarding its communications with SCJ, arguing that the government and SCJ improperly coordinated their efforts in this and a previous civil suit SCJ filed against defendant and others. I largely denied that motion but authorized pre-trial subpoenas under Fed.R.Crim.P. 17(c).

 

Defendant then issued subpoenas to two federal agents and three attorneys for SCJ (one in-house lawyer and two lawyers who represented SCJ in the civil suit). The government and SCJ moved to quash the subpoenas,FN1 and I held a hearing on February 13, 2012. At the hearing, the parties agreed to obtain modification of a protective order issued in the civil case SCJ filed against defendant. Defense counsel indicated that some of the materials subject to the Rule 17 subpoenas were produced in civil discovery; he agreed to review the civil discovery and then advise the court of the status of his requests upon completion of that review. I agreed to this proposal and set the case for status regarding the subpoenas/motions to quash on April 13, 2012 and for trial on October 1, 2012. I also set a March 27, 2012 deadline for defendant to file a motion to dismiss. On the agreement of the parties, I later extended the motion deadline to April 27, 2012, and adjourned the status to June 1, 2012. Defendant filed a motion to dismiss based on double jeopardy and improper coordination, along with a request for an evidentiary hearing, on April 27, 2012.

 

FN1. The government moves to quash the subpoenas issued to the agents as well as the SCJ attorneys. See United States v. Raineri, 670 F.2d 702, 712 (7th Cir.1982) (holding that the government had standing to move to quash subpoena issued to third party).

 

On May 30, 2012, on defendant’s unopposed request, I adjourned the June 1, 2012, status and directed the parties to advise the court if and when they would like to reset a hearing to discuss the outstanding subpoenas and motions to quash. I further indicated that I would issue a written decision on the motion to dismiss. On July 26, 2012, I denied defendant’s motion without a hearing. On August 10, 2012, again on the agreement of the parties, I adjourned the trial to January 2013.

 

On October 25, 2012, defendant filed a status report regarding the subpoenas, in which he asks that I now rule on the motions to quash, given the approaching trial date. I directed the government and SCJ to respond to defendant’s submission, which they have done. The matter is ready for decision.

 

I. APPLICABLE LEGAL STANDARD

Rule 17(c) permits subpoenas for papers, documents, data, or other objects, which the court may direct be produced before trial. Fed.R.Crim.P. 17(c)(1). “On motion made promptly, the court may quash or modify the subpoena if compliance would be unreasonable or oppressive.” Fed.R.Crim.P. 17(c)(2).

 

Rule 17(c) is not intended to serve as a broad discovery device, see United States v. Nixon, 418 U.S. 683, 698–99, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974); United States v. Hardy, 224 F.3d 752, 755 (8th Cir.2000), but rather functions “to expedite the trial by providing a time and place before trial for the inspection of subpoenaed materials,” Bowman Dairy Co. v. United States, 341 U.S. 214, 220, 71 S.Ct. 675, 95 L.Ed. 879 (1951). In order to gain access, the defendant must show that the subpoenaed document is relevant and admissible, requested with adequate specificity, and not otherwise procurable reasonably in advance of trial by the exercise of due diligence. The defendant must further demonstrate that he cannot properly prepare absent pre-trial production and inspection, and that the failure to obtain such inspection may tend unreasonably to delay the trial. Finally, the application must be made in good faith and not intended as a general “fishing expedition.” See Nixon, 418 U.S. at 699–700; United States v. Tokash, 282 F.3d 962, 971 (7th Cir.2002); United States v. Ashman, 979 F.2d 469, 495 (7th Cir.1992).

 

*2 The Rule does not permit defendants to comb through records in an effort to find a defense to a criminal charge; instead, it allows only for the gathering of specifically identified documents reasonably believed to contain evidence relevant to an admissible issue at trial. Tokash, 282 F.3d at 971. The need for evidence to impeach witnesses is generally deemed insufficient to require production in advance of trial under Rule 17(c). Nixon, 418 U.S. at 701; Hardy, 224 F.3d at 756.FN2

 

FN2. Defendant cites district court cases from other circuits suggesting that strict application of the Nixon standard to a defense subpoena would be improper. See, e.g., United States v. Tucker, 249 F.R.D. 58 (S.D.N.Y.2008); United States v. Nachamie, 91 F.Supp.2d 552 (S.D.N.Y.2000). However, the Seventh Circuit has adopted the Nixon test in this context.I will in considering the instant motions be mindful of the fact that a defendant, who lacks the ability to employ the grand jury’s investigative powers, stands in a different position than the government in obtaining materials from third parties. However, the motions should be considered under the Nixon/Tokash standards.

 

II. DISCUSSION

A. Subpoenas Directed to Government Agents

The subpoenas issued to the two agents seek: “A copy of all e-mails, text messages, instant messages, letters, notes, memoranda, cell phone records, or documentation of any kind reflecting or relating to correspondence or other communication between you and S.C. Johnson, from January 1, 2004, to the present.” (R. 77 Ex. 3 & 4, attachment A, footnote omitted.) First, this is essentially the same information defendant sought from the government in his previous discovery motion, and he provides no authority for the use of Rule 17(c) to obtain material from individual government employees that he could not obtain via discovery. See United States v. Orena, 883 F.Supp. 849, 867 (E.D.N.Y.1995) (holding that a defendant may not obtain through Rule 17(c) documents protected from disclosure pursuant to Rule 16, and granting the government’s motion to quash subpoenas directed at the Office of the United States Attorney and the Federal Bureau of Investigation).

 

Second, defendant’s request fails the test of specificity, requesting a broad range of documents over an eight+ year period. See United States v. Morris, 287 F.3d 985, 991 (10th Cir.2002) (quashing as insufficiently specific a subpoena for “all records, documents, reports, telephone logs, etc., surrounding the investigation”). Similarly, compliance with such a request would be unduly burdensome. See United States v. Booth, No. 2:08–cr–00283, 2011 WL 6139062, at *2 (D.Nev. Dec.9, 2011) (finding over-broad a subpoena using “the words ‘any,’ ‘all,’ and ‘any and all’ in many of the forty separate requests for broad categories of information”).

 

Third, defendant fails to show admissibility, offering only speculation that enforcement will permit the gathering of useful impeachment material (which is not, in any event, a generally accepted pre-trial use of Rule 17(c), see Nixon, 418 U.S. at 701). Defendant argues that the materials may show bias and improper coordination between SCJ and the government, evidencing a “departure from the proper administration of criminal justice.” United States v. Kordel, 397 U.S. 1, 13, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970). As explained in detail in my orders denying defendant’s motion for discovery and his motion to dismiss, I see nothing improper in cooperation between an alleged victim of crime and the prosecution.

 

I have reviewed the table attached to defendant’s response brief, which summarizes the parallels in major civil and criminal events, and again fail to discern anything nefarious. Defendant will certainly be free to cross-examine cooperating witnesses regarding bias, but he fails to show how production of this broad range of communications will further that endeavor. Nor does he provide a sufficient explanation as to how or why SCJ’s cooperation with the government would make the agents biased. As indicated in my previous discovery order, law enforcement agents who investigate alleged crimes and recommend charges necessarily believe that someone has been victimized or they would not refer the matter to prosecutors. This does not make them biased. Defendant’s allegations of improper colluding fall short.FN3 For these reasons, I grant the government’s motion to quash the subpoenas served on the agents. FN4

 

FN3. Defendant cites United States v. Segal, 276 F.Supp.2d 896 (N.D.Ill.2003), in support of a request for in camera production and inspection of these materials, but in that case the defendant alleged that witnesses may have been passing hacked information on to the government. Defendant makes no similarly specific allegation of wrongdoing in this case.

 

FN4. Of course, the government must continue to comply with its obligations under Local Rule 16, the Jencks Act, and Brady/Giglio. Any communications with SCJ falling within those parameters must be timely produced. In his status report, defendant complains that he has not received any additional materials. The court assumes that the government understands and complies with its obligations, and that the absence of further production simply means there is nothing more to produce. Defendant argues that correspondence, including e-mails and text messages, by agents Levinson and Ricchio (likely government witnesses) with SCJ qualify as Jencks and open file material and must be produced. However, defendant fails to explain how all such communications would qualify as “statements” under 18 U.S.C. § 3500(e).

 

B. Subpoenas Direct to SCJ

*3 The subpoenas directed to SCJ’s outside lawyers contain ten items, the subpoena to the in-house lawyer the same ten plus one more, as follows:

 

1. A copy of all e-mails, text messages, instant messages, letters, notes, memoranda, cell phone records, or documentation of any kind reflecting or relating to correspondence or other communication between you and S.C. Johnson, from January 1, 2004, to the present.

 

2. A copy of the internal investigation, which began “in mid-March, 2004, as referred to by Inspector Michael Levinson in his affidavit in support of a search warrant for Milt Morris’ office…. This request includes, but is not limited to, a copy of all the materials referenced in the Levinson affidavit, which are:

 

a. selected e-mail messages in the company’s computer system;

 

b. the forensic review of the company-issued computers of the director and deputy director of the transportation department;

 

c. a review of certain documents examined in the director’s work area;

 

d. the interviews with four former transportation department employees, including the employee who oversaw payments to trucking company vendors; a secretary of the deputy director; a secretary of the director; and an assistant to the director;

 

e. the interview of the company’s former accounts payable manager;

 

f. the reports of private investigators hired to follow Milt Morris, or perform other tasks pursuant to the investigation.

 

3. A copy of any other related internal investigation conducted by S.C. Johnson or any outside body concerning its Transportation Department, other than the internal investigation referred to by Inspector Levinson in his search warrant affidavit, concerning the years 1999–2004.

 

4. A copy of all notes, memoranda, or documentation of any kind pertaining to any interview performed by S.C. Johnson, its lawyers or investigators, of any potential government witness in this case [list of 67 names attached].

 

5. A copy of all correspondence and documentation of all communication between S.C. Johnson, its lawyers and investigators, and any potential government witness, and/or the witness’s lawyer, if any. This request includes, but is not limited to:

 

a. a copy of the letter from Kirkland & Ellis to Peter O’Malley concerning cooperation, dated April 14, 2009, as referred to by O’Malley in his July 2, 2009, letter to AUSA Stephen Ingraham (filed in Case No. 08–CR–325 (E.D.Wis) on July 2, 2009);

 

b. a copy of the letter dated September 28, 2007, sent by O’Malley to S.C. Johnson regarding settlement, and the letter sent by S.C. Johnson in response, as referred to by O’Malley in his October 11, 2007, interview with Mr. Ingraham and SA Ricchio (153);

 

6. The identity of any S.C. Johnson employee fired, demoted, reassigned, or who took early retirement as a consequence of conduct related to the allegations in the criminal indictment or the S.C. Johnson civil lawsuit against Mr. Buske, and a copy of the S.C. Johnson Human Resources file for those individuals;

 

*4 7. A copy of any S.C. Johnson Human Resources file for any potential government witness in this case. Although it appears that he was not interviewed by the government, this request also includes Morris’ supervisor, Ronald Ellifson;

 

8. A copy of all audits and performance reviews or evaluations of the S.C. Johnson Transportation Department, concerning the years 1999–2004;

 

9. A copy of all correspondence or other communication received by S.C. Johnson from any person complaining about, criticizing or raising concerns about the conduct of Milt Morris, and the response by S.C. Johnson, if any;

 

10. An S.C. Johnson Transportation Department employee, Dave Fogarty, was interviewed on November 4, 2004, by Inspector Levinson, Gayle Kosterman, and attorney Jeff Willian from Kirkland & Ellis. Mr. Fogarty stated that he “knows for certain fuel surcharge money is going directly to Milt [Morris],”—i.e., kickbacks (446). As to this:

 

a. Produce a copy of all materials from S.C. Johnson, its lawyers or investigators, documenting the fact that Mr. Fogarty made this assertion, in substance, prior to November 4, 2004, to any person employed by or affiliated with S.C. Johnson in any fashion;

 

b. Produce a copy of all documents from S.C. Johnson, its lawyers or investigators, that would have supported this assertion by Mr. Fogarty at the time it was made (i.e., documents in existence as of November 4, 2004).

 

11. A copy of any amended federal tax return filed by S.C. Johnson for the tax years 1999, 2000, 2001, 2002, 2003, or 2004, which S.C. Johnson filed as a consequence of the conduct of Thomas Buske and/or Milton Morris, or any coconspirator of Thomas Buske and/or Milton Morris, as alleged by S.C. Johnson in S.C. Johnson & Son, Inc. v. Milton E. Morris, et al., Case No. 04–CV–1873 (Racine County).

 

(R. 77 Ex. 5, attachment A.) I address each in turn.

 

1. SCJ Correspondence with the Government

For essentially the same reasons set forth above, I will grant the motions to quash regarding request 1. The request is over-broad and unspecific, and defendant fails to demonstrate the relevance of this correspondence. See United States. v. Reyes, 239 F.R.D. 591, 606 (N.D.Cal.2006) (quashing a subpoena that adopted a particular theory of defense and then cast a wide net with the goal of reeling in something to support it).

 

The court rejected a similar defense request for Rule 17(c) subpoenas in United States v. Wittig, 247 F.R.D. 661 (D.Kan.2008). In that case, the defendant, accused of defrauding his employer, requested subpoenas directed to the employer’s counsel for correspondence between the company and the United States Attorney’s Office, arguing that these documents might show improper collusion between the government and the company. Id. at 662–63. The court rejected the request, finding that the proposed subpoenas resembled discovery requests, employing such terms as “any and all” documents or communications, or “includes, without limitation.” Id. at 664. The court also rejected the defendant’s claim that he might be able to use the information in the impeachment of company employees who might testify for the government, noting that the need for evidence to impeach witnesses is generally insufficient to require its production in advance of trial under Rule 17(c). Id.

 

*5 In his October 25 status report, defendant indicates that given the volume of discovery produced in the civil case it is not possible to determine whether SCJ produced all of its communications with government agents; only SCJ knows that, and he contends that it would not be feasible for defense counsel to manually search for responsive documents. He therefore asks that SCJ be required to provide the Bates pages of the civil discovery concerning its communications with government agents. However, defendant provides no authority for shifting this burden to SCJ. Further, it is unclear from the status report the extent to which defendant has completed his review of the civil discovery over the past eight months; nor does it appear that counsel have resolved the issue of the protective order regarding some of these materials.

 

2. The 2004 Internal Investigation

In this request, defendant seeks a copy of the 2004 internal investigation SCJ completed regarding this matter, which Investigator Levinson referenced in his search warrant application for Morris’s office. He also seeks various related materials. This request is sufficiently specific, as least concerning the investigation report; it also appears to be relevant, as it pertains directly to the alleged offense in this case.

 

In its reply, SCJ states that it did not give a written “internal investigation report” to the government in October 2004. Rather, it orally reported to the government its belief that it was a victim of a crime perpetrated by Morris and others. It further indicates that, other than as protected by attorney-client privilege and the work product doctrine, the internal investigation that it conducted was detailed in both deposition and trial testimony, and non-privileged documents were produced as part of the civil action; those materials are in the possession of defendant’s civil counsel.

 

In his status report, defendant does not indicate whether he has located any such report(s) in the civil discovery. Rather, he quotes from SCJ’s counsel’s statements at the February 13, 2012 status, where she indicated that to the extent such materials were provided to Levinson, they would be in government files already. (R. 89 at 21:11–13.) However, she later stated: “As to an internal investigation written report itself, no such thing exists.” (Id. at 22:10–11.) But then said: “In terms of what was produced, I just don’t have it at my fingertips as to whether or not we maintained that as a unique separate file.” (Id. at 22:23–25.) In its November 6 reply, SCJ indicates that its lawyers have, since the February 13, 2012 conference, reviewed their files to confirm that they do not have records of any documents provided to Levinson in October 2004. “It is also the recollection of counsel that information was shared orally and that no documents were specifically provided to Mr. Levinson at the time he submitted an affidavit in support of a search warrant for the office of Milt Morris.” (R. 110 at 2.) It is still unclear whether an actual internal investigative report exists.

 

*6 In an effort to bring this matter to resolution, I will rule as follows: To the extent that SCJ possesses an internal investigative report, the substance of which it shared with Levinson and/or the government, it must be produced. See, e.g., United States v. Bergonzi, 216 F.R.D. 487, 495–98 (N.D.Cal.2003) (directing disclosure of internal investigation conducted by law firm into alleged fraud where the company disclosed the documents to the government); see also Reyes, 239 F.R.D. at 604 (“It makes no difference whether a privilege-holder copies a written text, reads from a written text, or describes a written text to an outside party. The purpose and effect is the same in all cases; the transmission of privileged information is what matters, not the medium through which it is conveyed.”).

 

3. Any Other Internal Investigations for 1999–2004

In his status report, defendant indicates that an internal investigation of the SCJ Transportation Department, conducted for SCJ by Hector Diaz, was produced in civil discovery, and that he can locate it without the need for Bates numbers from SCJ.

 

SCJ indicates that there are no other non-privileged internal investigations. Defendant, quoting a portion of SCJ’s counsel’s statement at the February 13 hearing, contends that some additional documents may have been shared with the government. In its reply, SCJ’s lawyer indicates that her statement was misconstrued. I need not delve into this any further. This request, seeking “any other related internal investigation” of the SCJ Transportation Department for the years 1999–2004, reads like a civil discovery request for production, rather than a properly focused Rule 17(c) demand. The motion to quash it will be granted. See Bowman Dairy Co., 341 U.S. at 220 (“Rule 17(c) was not intended to provide an additional means of discovery.”).

 

4. SCJ Correspondence with Potential Witnesses

Defendant’s request for “all notes, memoranda, or documentation of any kind pertaining to any interview” performed by SCJ with “any potential government witness,” including sixty-seven possible people, is, as phrased, over-broad. FN5 As noted above, courts regularly deny/quash subpoenas phrased in this manner. See, e.g., Booth, 2011 WL 6139062, at *2; Wittig, 247 F.R.D. at 664; United States v. Shanahan, No. S1–4:07 CR 175, 2008 WL 619213, at *4 (E.D.Mo. Mar.3, 2008); United States v. Louis, No. 04 CR 203, 2005 WL 180885, at *5 (S.D.N.Y. Jan. 27, 2005); see also United States v. Noriega, 764 F.Supp. 1480, 1493 (S.D.Fla.1991) (“If the moving party cannot reasonably specify the information contained or believed to be contained in the documents sought but merely hopes that something useful will turn up, this is a sure sign that the subpoena is being misused.”).

 

FN5. Defendant indicates that it appears SCJ and the government jointly interviewed at least thirteen government witnesses.

 

It also appears that most if not all of the responsive documents would be hearsay. See Reyes, 239 F.R.D. at 600 (finding that law firms’ records of witness interviews would be inadmissible hearsay).FN6 Defendant argues that witness statements may be admissible as prior consistent or inconsistent statements, or can be used to refresh recollections. Even if I might be inclined to order production of witness statements from people who actually testify, defendant fails to sufficiently narrow his request. Finally, defendant fails to refute SCJ’s work product argument regarding interviews conduct by its lawyers alone. See, e.g., Sandra T.E. v. South Berwyn School Dist. 100, 600 F.3d 612, 622 (7th Cir.2010).FN7

 

FN6. The Reyes court noted that while the documents sought in that case could be used for impeachment purposes, Rule 17(c) does not entitle a defendant to the pre-trial production of impeachment material. Id. at 601. The court concluded that in that case it would be appropriate to order the items produced for in camera inspection so that the court could review the material and disclose it if and when it became ripe for impeachment. Id. However, that procedure is appropriate only if the defendant satisfies the specificity requirement. In Reyes, the court found that the documents “sought were, at least in part, the very impetus for such the government’s prosecution of Reyes.” Id. In the present case, defendant makes no similar showing of specificity regarding this request for communications regarding some sixty-seven people, who may or may not be witnesses at trial.

 

FN7. I assume the government has, consistent with Local Rule 16(a)(2), produced all reports of interviews with witnesses it possesses.

 

5. Correspondence with Government Witnesses

*7 In this request, defendant seeks correspondence by SCJ with any government witness, e.g., Peter O’Malley. However, the government has indicated that O’Malley will not be a witness at trial. Defendant now argues that SCJ should be ordered to produce any correspondence that it had with “any other government witness in this case.” (R. 105 at 12.) This request is insufficiently specific, and the motion to quash will be granted.

 

6. SCJ Personnel Files of Terminated Employees

Defendant has withdrawn this request.

 

7. SCJ Personnel Files of Government Witnesses

Defendant seeks SCJ personnel files for potential government witnesses. I grant the motion to quash this request. First, defendant provides no clear indication as to what he expects to find in these files or how it would be relevant and admissible. He suggests that the files may contain impeachment material, but this is also speculation and, in any event, impeachment material is not generally a proper subject of a Rule 17(c) subpoena.

 

Second, this request implicates the privacy interests of the employees at issue. See, e.g., United States v. Dale, 155 F.R.D. 149, 152 (S.D.Miss.1994); see also United States v. Shrader, No. 1:09–0270, 2010 WL 2836752, at *4 (S.D.W.Va. July 20, 2010) (“Courts have often considered privileges and privacy interests in determining whether or not Rule 17(c) subpoenas should be quashed.”). Defendant suggests that in camera inspection could solve this problem, but because he fails to get over the initial hurdles I decline to order that.

 

Finally, at least some of this material is available in the civil discovery. In his status report, defendant indicates that his civil counsel requested twenty-eight files, and SCJ produced two—Milt Morris’s and Katie Scheller’s. These were the two files defendant specifically mentioned in his previous briefs opposing the motion to quash. However, these files are, defendant indicates, subject to a protective order in the civil case which prohibits civil counsel from sharing them with criminal defense counsel. Defendant states: “Rather than spend time going back to the Racine County Circuit Court—a court with no authority or jurisdiction over this case—to amend the protective order to allow undersigned counsel to have access to those two files, this Court should enforce the subpoena. SCJ should be ordered to produce the requested personnel files to this Court.” (R. 105 at 12.) I adjourned this matter in part to permit counsel to obtain the necessary modifications of the Racine protective order. In its reply to defendant’s status report, SCJ states that defendant’s counsel never responded to a June 28, 2012 e-mail from SCJ’s counsel asking to discuss and finalize a confidentiality agreement. To the extent that defendant can obtain these documents reasonably in advance of trial by the exercise of due diligence, his subpoena must be quashed. Defendant specifies no other files.

 

8. Audits/Performance Reviews of SCJ Transportation Department

*8 Defendant has withdrawn this request.

 

9. Correspondence About Milt Morris

In his status report, defendant indicates that he will obtain this material from civil counsel.

 

10. Documents Related to Dave Fogarty’s Assertion

Defendant indicates that he will also obtain this material from civil discovery.

 

11. SCJ Amended Tax Returns 1999–2004

Finally, defendant seeks copies of SCJ’s amended tax returns for the years 1999 to 2004, arguing that if the allegation that he and Morris stole $15 million from the company is true, then SCJ filed returns for those years overstating its business expenses; the company should, on discovering the theft, have filed amended returns to accurately report this loss. A failure to file amended returns would, defendant contends, be inconsistent with a claim of large scale fraud. If SCJ filed such returns, defendant wants check the amount it reported as theft.

 

Defendant fails to show that such documents would be relevant and admissible at trial. This trial will be about defendant’s alleged conduct, not SCJ’s tax obligations. Permitting the introduction of this evidence would also force a detour into matters of corporate accounting, which would serve only to unnecessarily prolong the trial and confuse the jury. The motions to quash regarding this request will be granted.

 

In any event, at the February 13, 2012 status, I asked SCJ’s counsel whether SCJ filed amended returns. She now indicates SCJ did not do so. Thus, this request is also moot.

 

III. CONCLUSION

THEREFORE, IT IS ORDERED that the motions to quash are GRANTED IN PART as stated herein.