United States District Court, S.D. Ohio, Eastern Division
ALGENON L. MARBLEY JUDGE
OPINION AND ORDER
KIMBERLY A. JOLSON UNITED STATES MAGISTRATE JUDGE
matter is before the Court on John Jack's Renewed Motion
to Compel DeepRock Disposal Solutions, LLC to Produce Records
Responsive to Subpoena (Doc. 96 in 2:16-cv-633), Mr.
Jack's Motion for Leave to File a Reply Brief
Instanter in Support of his Renewed Motion to Compel
(Doc. 106 in 2:16-cv-633), and Mr. Jack's Motion to
Strike South Park Ventures, LLC's Response to the Renewed
Motion to Compel (Doc. 78 in 2:17-cv-808). For the reasons
that follow, Mr. Jack's Motion for Leave to File a Reply
Brief is GRANTED, and his Motion to Strike
and Renewed Motion to Compel are DENIED.
Jack is the manager and a member of Tri-State Disposal, LLC
(“Tri-State”), and former Chief Executive Office
(“CEO”) of Water Energy Services, LLC
(“WES”), a company that built facilities and
operated injection wells for the disposal of waste water
generated by the oil and gas industry in the Appalachian
Basin. Mr. Jack and Dean Grose, who is part owner and
operator of South Park Ventures, LLC (“SPV”),
were WES's sole board members. Tri-State and SPV each
held a fifty percent share in WES.
began construction on its facilities in April 2015, completed
construction in December 2015, and became fully operational
around February 2016. Despite WES becoming fully operational,
its underlying business relationships soured, leaving Mr.
Jack and Tri-State at odds with Mr. Grose and SPV. In the
context of those faltering relationships, WES operated as
such for just a short period of time. Multiple lawsuits
ensued, two of which have been consolidated by this Court and
are currently pending. The Court discusses each lawsuit only
to the extent necessary to resolve the pending Motions.
Jack, v. SPV Ventures, LLC, , 2:16-cv-633
Jack and Tri-State filed the first lawsuit suit against SPV
and Mr. Grose in the Court of Common Pleas for Washington
County, Ohio on June 3, 2016. (Doc. 4 in 2:16-cv-633). SPV
and Mr. Grose removed the action to this Court pursuant to
its diversity jurisdiction on June 30, 2016. The case is now
captioned as Jack, v. SPV Ventures, LLC, ,
2:16-cv-633. Mr. Jack and Tri-State filed the Second Amended
Complaint (the operative complaint) on March 23, 2017. (Doc.
27 in 2:16-cv-633).
to the Second Amended Complaint, a third-party expressed an
interest in purchasing WES in the fall of 2015, even before
WES completed construction of its facilities. (Id.
at ¶ 25). Mr. Jack and Tri-State allege that, although
the offer to purchase WES expired and consequently was
declined, having such an offer prompted SPV, Mr. Grose, and
others to “engage[ ] in a concerted effort to force
Jack to resign from the board of WES, remove him as CEO of
WES and remove him as an employee of WES so they could gain
control of WES.” (Id. at ¶¶ 27-28).
Their motive, Mr. Jack and Tri-State contend, was
financial-removing Mr. Jack “without payment of any
compensation.” (Id. at ¶ 28). Arising
principally from these allegations, Mr. Jack and Tri-State
bring claims for breach of contract based on the WES
Operating Agreement (Count One), breach of fiduciary duties
(Count Two), and defamation resulting in libel and slander
SPV Ventures, LLC v. Jack , No. 2:17-cv-808
a week of Mr. Jack and Tri-State filing the first lawsuit,
SPV filed an action against Mr. Jack and former officers of
WES in the Court of Common Pleas for Washington County,
Pennsylvania. Defendants removed the matter based on
diversity jurisdiction to the United States District Court
for the Western District of Pennsylvania, which transferred
it to this Court in September 2017. (Doc. 26 in 2:17-cv-808).
The second lawsuit is now captioned as SPV Ventures, LLC
v. Jack , No. 2:17-cv-808. The Amended Complaint (the
operative complaint) was filed on March 23, 2017. (Doc. 1-3,
PAGEID #: 97-208 in 2:17-cv-808).
alleges that Mr. Jack and WES's former officers
mismanaged the construction of the WES facility and WES's
financial assets, resulting in WES's default “of
its various obligations to its lenders” and causing WES
to “incur[ ] debt …. in excess of $3, 000,
000.00.” (Id. at ¶ 27, PAGEID #: 101).
Relevant here, SPV alleges that Mr. Jack and WES's former
officers failed to satisfy their duties to obtain proper
rights-of-way for WES's pipeline and, consequently, WES
constructed the pipeline in the incorrect location.
(Id. at ¶¶ 83-85, PAGEID #: 113). SPV also
avers that Mr. Jack and WES's former officers acted to
WES's detriment by “accept[ing] barrels of water
from consumers at a below-market price, ” resulting in
increased royalties to them. (Id. at ¶¶
88-89, PAGEID #: 114).
placed in receivership in July 2016, and the receiver
obtained court approval to sell WES's assets at auction.
(Doc. 24 at 4 in 2:17-cv-808 (citing Am. Compl. ¶¶
46-54 & Ex. D)). WES's assets were sold at auction in
December 2016 to Funds Protection Investment, LLC
(“FPI”), which assigned them to DeepRock Disposal
Solutions, LLC (“DeepRock”). (Id.).
DeepRock explains that its owners include two limited
liability companies, one of which is owned by Mr. Grose.
(Doc. 103 at 16 in 2:16-cv-633). Arising generally from these
allegations, SPV brings claims for breach of fiduciary duties
(Count One) and misrepresentation and fraud (Count Two).
The Discovery at Issue
Jack seeks to compel discovery from DeepRock, which is not a
party to either lawsuit pending in this Court. Mr. Jack
served a subpoena on DeepRock on June 29, 2017 (Doc. 73-2 in
2:16-cv-633), and first moved to compel in January 2018.
(Doc. 73 in 2:16-cv-633). After the Motion was briefed fully,
the Court denied it as premature, finding that many of the
issues were amenable to resolution through continued
discussions. (Doc. 86 at 6-7 in 2:16-cv-633). Consequently,
the Court ordered the parties to meet and confer.
engaging in that process, Mr. Jack opted to withdraw subpoena
requests 1-7, 13, 15, and 18-19, but indicated that the
parties remained at an impasse as to the remaining subpoena
requests, namely requests 8-12, 14, and 16-17. (See
Docs. 96-3, 96-4, 96-5, 96-6 in 2:16-cv-633). The remaining
requests seek production of:
8. All financial statements of DeepRock whether internal or
external, from December 1, 2016 through the Present.
9. All reports and records regarding the barrels of waste
water received by DeepRock at its facility for the period