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Inc. v. Shutler Cabinets, Inc.

Supreme Court of West Virginia

January 24, 2018

KAHLE'S KITCHENS, INC., Petitioner
v.
SHUTLER CABINETS, INC., Respondent

          Submitted: January 17, 2018

         Appeal from the Circuit Court of Marshall County The Honorable David W. Hummel, Jr., Judge Civil Action No. 16-C-65

          Matthew G. Chapman, Esq. Burns White LLC Wheeling, West Virginia Counsel for Petitioner

          James G. Bordas, Jr., Esq. James B. Stoneking, Esq. Bordas & Bordas, PLLC Wheeling, West Virginia Counsel for Respondent

         SYLLABUS BY THE COURT

         1. "In reviewing challenges to the findings and conclusions of the circuit court, we apply a two-prong deferential standard of review. We review the final order and the ultimate disposition under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a clearly erroneous standard. Questions of law are subject to a de novo review." Syllabus Point 2, Walker v. W.Va. Ethics Comm'n, 201 W.Va. 108, 492 S.E.2d 167 (1997).

         2. "When Rule 45 of the West Virginia Rules of Civil Procedure is used as a discovery device as permitted in W.Va. R. Civ. P. 34, Rule 45 is subject to all of the discovery provisions, including, but not limited to, the scope of discovery outlined in W.Va. R. Civ. P. 26(b)(1), which permits discovery only of matters that are relevant to the subject matter involved in the pending action, not privileged, and are, or are likely to lead to the discovery of, admissible evidence." Syllabus Point 4, Keplinger v. Va. Elec. and Power Co., 208 W.Va. 11, 537 S.E.2d 632 (2000).

          KETCHUM, JUSTICE.

         Petitioner Kahle's Kitchens, Inc. ("Plaintiff Kahle") filed a lawsuit in Pennsylvania against a plywood distributor. In connection with its Pennsylvania lawsuit, Plaintiff Kahle sought discovery information from a West Virginia company, Respondent Shutler Cabinets, Inc. ("Shutler"). Shutler is a nonparty to the litigation in Pennsylvania. Plaintiff Kahle filed a petition for a subpoena duces tecum with the Circuit Court of Marshall County seeking, in essence, all of Shutler's business records for a one-year period, including its customers' names and addresses. Shutler filed a motion to quash the subpoena arguing that it was overbroad and unduly burdensome. Shutler also requested an award of attorney fees. The circuit court granted Shutler's motion to quash and awarded Shutler attorney fees and costs.

         On appeal, Plaintiff Kahle argues that the circuit court erred by granting the motion to quash and by awarding attorney fees to Shutler. After review, we affirm the circuit court's order quashing the subpoena. We affirm, in part, and reverse, in part, the circuit court's award of attorney fees and remand this matter to the circuit court for further proceedings consistent with this Opinion.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiff Kahle is currently in litigation in Pennsylvania against Distributor Services, Inc. ("Defendant Distributor"). Plaintiff Kahle alleges that it purchased plywood that was infested with "wood[-]boring insects" from Defendant Distributor between December 2011 and June 2012. Defendant Distributor denied this allegation and stated that any insect infestation originated at Plaintiff Kahle's facility. During discovery, Defendant Distributor identified Shutler as a customer who received plywood from the same shipments as the allegedly infested plywood received by Plaintiff Kahle. Shutler is a cabinet manufacturer located in Moundsville, West Virginia, that has operated a furniture business for thirty-one years.

         Plaintiff Kahle obtained a "Subpoena to Produce Documents and/or Things for Discovery" from the Pennsylvania court directed to Shutler. It provides:

Within twenty (20) days after service of this Subpoena, you are ordered by the Court to produce the following documents and/or things:
1. Any and all documents and/or other tangible items that refer, relate to or evidence in any way, shipments of any products received from Distributor Services, Inc., its subsidiaries, affiliates or assigns from September 1, 2011 through September 1, 2012.
2. Any and all documents and/or other tangible items that refer, relate to, or evidence in any way, any orders or projects installed and/or completed by Shutler Cabinets, its subsidiaries, affiliates, contractors, agents, customers and/o [sic] assigns, between September 1, 2011 and September 1, 2012, including the name and address of the customers.
3. Any and all documents and/or other tangible items that refer, relate to, or evidence in any way, the presence of wood boring insects or other similar pests at Shutler Cabinets or at any of the installed and/or completed orders or projects identified in response to No. 2, above.
4. Any and all documents and/or other tangible items that refer, relate to or evidence in any way, communications, electronic or otherwise, between Shutler Cabinets and any customers identified in response to No. 2, above, and/or Distributor Services, Inc. regarding wood boring insects or other similar pests, or that otherwise relates to this litigation from September 1, 2011 to the present.

         On April 8, 2016, Plaintiff Kahle filed a "Petition for Deposition and Subpoena Duces Tecum in Aid of Out-of-State Litigation Pursuant to Rule 28(d)" with the Circuit Court of Marshall County. Rule 28(d) of the West Virginia Rules of Civil Procedure provides:

Depositions for Use in Foreign Jurisdictions. Whenever the deposition of any person is to be taken in this State pursuant to the laws of another state or of the United States or of another country for use in proceedings there, any court having general civil jurisdiction in the county wherein the deponent resides or is employed or transacts his business in person may, upon petition, make an order directing issuance of a subpoena as provided in Rule 45, in aid of the taking of the deposition.

         Additionally, Plaintiff Kahle mailed a copy of this petition to Shutler and attached a cover letter requesting production of the documents sought by the subpoena. Shutler asserts that upon receiving this petition, it contacted counsel for Plaintiff Kahle and

specifically informed [Kahle] that Shutler Cabinets has never had any issue with wood boring insects and has never been informed of any issues with wood boring insects by its customers . . . Shutler Cabinets also specifically advised [Kahle] that the subpoena was vastly overbroad and sought disclosure of confidential and proprietary information.

         Shutler asserts that it offered to provide an affidavit to Plaintiff Kahle stating that it had never had any issues with wood-boring insects. Plaintiff Kahle refused this offer.

         On April 27, 2016, Shutler filed a motion to quash the subpoena with the circuit court, raising the following objections to Plaintiff Kahle's requested subpoena: (1) it sought confidential and proprietary commercial business records, including customer information; (2) it failed to demonstrate that the requested information was relevant to the Pennsylvania litigation; (3) it failed to demonstrate that the requested information regarding the communications between Defendant Distributor and Shutler was unavailable from Defendant Distributor; and (4) it was an attempt to obtain detailed customer information from a business competitor. Shutler also requested an award of attorney fees and costs.

         The circuit court granted Shutler's motion to quash and awarded Shutler attorney fees and costs by order entered on May 2, 2016.[1] Following entry of the circuit court's order, Plaintiff Kahle filed a motion to alter or amend judgment pursuant to Rule 59(e) of the West Virginia Rules of Civil Procedure. In response to Plaintiff Kahle's Rule 59(e) motion, Shutler submitted an affidavit from the president of the company, David L. Shutler, to the circuit court, stating: (1) Shutler has been in business for thirty-one years; (2) Shutler has never had any issues with wood-boring insects; (3) Shutler's customers have never reported any issues with wood boring insects; and (4) Shutler considers its customers names and addresses, as well as its work orders, home diagrams, invoices, contracts and payment information to be confidential and proprietary commercial information and "takes all steps reasonably necessary to protect the same from disclosure to third-parties."

         By order entered on July 11, 2016, the circuit court denied Plaintiff Kahle's Rule 59(e) motion concluding that "[a] subpoena is not properly issuable to a third party such as Shutler to compel the third party to produce confidential and proprietary business and commercial information in a speculative attempt to obtain evidence to refute defenses made in claims in litigation with another commercial entity." The circuit court further concluded that Plaintiff Kahle "simply presented speculative arguments and baseless allegations and again forced Shutler to incur attorney fees and costs to protect its confidential and proprietary business and commercial information." The circuit court therefore awarded Shutler "reasonable attorney fees and costs."

         Following entry of this order, Shutler provided Plaintiff Kahle with a fee request which included its billing records listing the fees it had incurred. According to the circuit court, Plaintiff Kahle did not respond to this fee request. Thereafter, Shutler filed a fee petition with the circuit court. Plaintiff Kahle filed a number of objections to this fee petition, including an objection to the hourly rates charged by Shutler's counsel.[2] The circuit court determined that the hourly rates requested by counsel for Shutler "were fully supported by their affidavits and by independent proof, and were consistent with their qualifications and level of experience." The circuit court therefore granted Shutler a fee award of $7, 782.50 by order entered on December 19, 2016. Plaintiff Kahle appeals the circuit court's orders denying its motion to alter or amend and awarding Shutler attorney fees and costs.

         II. STANDARD OF REVIEW

         Plaintiff Kahle appeals two circuit court orders. Generally, when reviewing a circuit court's order, we apply the following standard of review:

In reviewing challenges to the findings and conclusions of the circuit court, we apply a two-prong deferential standard of review. We review the final order and the ultimate disposition under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a ...

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