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Association of Equipment Manufacturers v. Burgum

United States District Court, D. North Dakota

December 17, 2019

Association of Equipment Manufacturers, AGCO Corporation, CNH Industrial America LLC, Deere & Company, and Kubota Tractor Corporation, Plaintiffs,
v.
The Hon. Doug Burgum, Governor of the State of North Dakota, in his official capacity, and The Hon. Wayne Stenehjem, Attorney General of the State of North Dakota, in his official capacity, Defendants, North Dakota Implement Dealers Association, Intervenor-Defendant.

          AMENDED AND CORRECTED SUPPLEMENTAL ORDER RE ORDER COMPELLING DISCOVERY AND ORDER RE MOTION FOR ATTORNEY FEES

          Charles S. Miller, Jr., Magistrate Judge

         I. BACKGROUND

         A. This case generally

         Plaintiffs AGCO Corporation, CNH Industrial America, Deere & Company, and Kubota Tractor Corporation are manufacturers of farm equipment. Plaintiff Association of Equipment Manufacturers is a not-for-profit trade association that represents and promotes the legal and business interests of its 900-plus members, including the plaintiff manufacturers in this case.

         Defendant Doug Burgum is the Governor of the State of North Dakota and defendant Wayne Stenehjem its Attorney General (collectively the “State”). Intervenor-defendant North Dakota Implement Dealers Association (“NDIDA”) is a trade association for approximately 115 franchised North Dakota farm equipment dealers.

         In this action, plaintiffs have sought to enjoin the enforcement of amendments enacted by the North Dakota Legislature in 2017 to N.D.C.C. chapters 51-07 and 51-26[1] by 2017 N.D. Sess. Laws Ch. 354 (Senate Bill 2289) entitled “AN ACT to amend and reenact sections 51-07-01.2, 51-07-02.2, and 51-26-06 of the North Dakota Century Code, relating to prohibited practices under farm equipment dealership contracts, dealership transfers, and reimbursement for warranty repair.” Plaintiffs contend the enacted amendments (hereinafter “SB 2289”) violate: (1) the Contract Clause of the United States Constitution, U.S. Const. art. I, § 10; (2) the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq.; (3) the federal trademark statute, 15 U.S.C. § 1051 et seq. (the Lanham Act); (4) the Commerce Clause of the United States Constitution, U.S. Const. art. I, § 8, cl. 3; and (5) interstate price regulation provisions found at 15 U.S.C. § 13 et seq. (the Robinson-Patman Act).

         On December 14, 2017, District Judge (then Chief Judge) Hovland preliminarily enjoined enforcement of SB 2289 on the grounds it likely violates the Contract Clause of the Constitution and that certain of its provisions are expressly prohibited and preempted by the Federal Arbitration Act. Ass'n of Equip. Mfrs., No. 1:17-cv-151, 2017 WL 8791104, at *11 (D.N.D. Dec. 17, 2017) (“Ass'n of Equip. Mfrs.”). Defendants appealed the order, limiting their appeal to the court's conclusions with respect to the Contract Clause.

         On August 2, 2019, the Eighth Circuit affirmed the grant of the preliminary injunction, stating in summary the following:

For these reasons, the State has not carried its burden of showing a significant and legitimate public purpose underlying Senate Bill 2289. The district court thus did not err in concluding that the manufacturers were likely to succeed on the merits of their Contract Clause claim. The State does not challenge the scope of the preliminary injunction, so the question whether it should be limited to retroactive applications of SB 2289, or to certain provisions of the law, is not presented at this juncture. The motions to supplement the record are denied. The district court's order granting a preliminary injunction is affirmed.

Ass'n of Equip. Mfrs. v. Burgum, 932 F.3d 727, 734 (8th Cir. 2019). On September 19, 2019, the Eighth Circuit denied defendants' petition for rehearing and rehearing en banc. Id. at 727.

         B. Plaintiffs' document requests and motion to compel

         During the course of discovery, plaintiffs served defendants with document requests pursuant to Fed R. Civ. P. 34. The predicate instructions to the requests stated that plaintiffs were seeking responsive documents from January 1, 2015, through the date of the trial. They also defined SB 2289 by its official name, i.e., “AN ACT to amend and reenact sections 51-07-01.2, 51-07-02.2, and 51-26-06 of the North Dakota Century Code, relating to prohibited practices under farm equipment dealership contracts, dealership transfers, and reimbursement for warranty repair.”

         The State and NDIDA filed a joint response to plaintiffs' document requests, [2] stating initially with respect to Document Request No. 4:

Document Request No. 4: All documents relating to the drafting, preparation, enactment, or passage of Senate Bill 2289.
Response: Objection. The State has no documents responsive to this request other than which is already publicly-available. NDIDA objects to this Request because it implicates documents that are covered under attorney-client privilege. Further, NDIDA objects to this Request because it also implicates documents protected from disclosure as attorney workproduct. Otherwise, NDIDA has no other documents responsive to this Request. NDIDA will produce an appropriate privilege log.

         On March 23, 2018, one week prior to the expiration of the March 30, 2018 deadline for completing discovery and after plaintiffs had deposed NDIDA's President and CEO, defendants served an amended response to Document Request No. 4 as follows:

Amended Response: Objection. The State has no documents responsive to this request other than which is already publicly-available. NDIDA objects to this Request because it implicates documents that are covered under attorney-client privilege. Further, NDIDA objects to this Request because it also implicates documents protected from disclosure as attorney workproduct. NDIDA also objects because this request implicates documents protected from disclosure under it and its members' First Amendment Privilege to engage in political activities as free speech and to not have such activities or speech chilled or otherwise used against them. Finally, the State and NDIDA interprets the above request to only reference those documents relating to the above that post-date the introduction of SB 2289. Further, the North Dakota Legislature, not NDIDA, drafts and prepares legislation, including SB 2289. Without waiving those objections above, NDIDA states that at the time of its initial response, investigation for potentially-responsive documents was ongoing and none had been found. As the investigation has continued, responsive documents have been discovered and those non-privileged, responsive documents will be provided. Otherwise, NDIDA will produce an appropriate privilege log.

         Several days later, defendants' counsel identified responsive documents postdating the introduction of SB 2289 that were claimed to have been discovered after the initial response. Some of the documents were turned over to plaintiffs. A greater number were withheld on First Amendment privilege grounds. Also, for the first time, a privilege log of withheld documents was served on March 26, 2018. Notably, the privilege log referenced only documents that postdated the introduction of SB 2289 and claimed the First Amendment privilege. No documents were listed as being withheld based on claims of attorney-client or work-product privileges-even documents generated after the introduction of SB 2289 and notwithstanding the continued reference to these privileges in the amended response to Document Request No. 4.

         Plaintiffs subsequently filed a motion to compel discovery seeking an order compelling NDIDA to:

1. fully respond to plaintiffs' Document Request No. 4, including production of documents predating the introduction of SB 2289; and
2. require its President and CEO to sit for a supplemental deposition to cover the topics that were objected to during his deposition on First Amendment associational privilege grounds.

         NDIDA opposed the motion.

         C. The order granting the motion to compel

         On July 2, 2019, the undersigned issued an order granting in part the motion to compel discovery. Ass'n of Equip. Mfrs., 2019 WL 2871093 (D.N.D. July 2, 2019). At the outset, the undersigned rejected NDIDA's argument that plaintiffs' motion was untimely given the lateness and suspect timing of NDIDA's revised disclosures.[3] The undersigned also rejected NDIDA's contention that Document Request No. 4 did not extend to documents related to the drafting of SB 2289 prior to its formal introduction. The State's and NDIDA's last-minute “rewriting” of Document Request No. 4 was deemed unreasonable given the clear language of the Request and the fact NDIDA had represented in its motion to intervene as a reason why intervention should be permitted:

NDIDA also helped draft this bill [SB 2289], which means NDIDA has firsthand knowledge of the purpose of the bill and other evidence. This knowledge and evidence is critical to showing that the bill does not violate the Lanham Act, the Robinson-Patman Act, or the Constitution.

         Turning to NDIDA's more meritorious arguments, the undersigned agreed that some of what was being withheld was likely First Amendment privileged. However, the court expressed doubts that it all would be and concluded that an in camera inspection of the documents was prudent under the circumstances.

         Finally, NDIDA argued that the withheld information and documents were irrelevant. With respect to documents related to the drafting of SB 2289, the undersigned concluded some that were nonprivileged might be relevant and that NDIDA was estopped from claiming lack of relevancy upon what it had asserted in its motion to intervene. While not specifically addressed in the order, what the undersigned believed might be of some relevance was NDIDA's final draft of the legislative language that it provided to the sponsors it had lined up to introduce its draft bill. By comparing that document to what was formally introduced as SB 2289, one could determine the exact extent to which NDIDA was the “drafter” of SB 2289. In granting the motion to compel, the undersigned assumed that at least the draft of what NDIDA provided to its legislative sponsors would be produced given that any claim of privilege would be specious for reasons discussed later.

         The undersigned further concluded that what also might be of some relevance given NDIDA's role in drafting SB 2289 (again putting aside the question of weight and any applicable privileges) would be any statements that NDIDA had made about SB 2289's purpose. In concluding that information reflecting NDIDA's role as drafter of SB 2289 and possibly statements about its purpose may be of some relevance, the undersigned relied upon: (1) United States Supreme Court precedent in which the Court had looked to material outside of the text of a challenged law and its legislative history in First Amendment Free Exercise and Fourteenth Amendment Equal Protection cases when legislative purpose was an issue; (2) prior cases in which the Eighth Circuit had considered material outside of the text of a challenged statute and its legislative history (or functional equivalent) in considering legislative purpose in both dormant Commerce Clause and Contract Clause cases; and (3) the fact that Judge Hovland had in one instance relied upon material outside of the legislative record in considering the purpose of SB 2289 in his order granting the preliminary injunction, i.e., a press release issued by the NDIDA after its passage.

         As a result of what was decided, NDIDA was ordered to produce documents relating to the drafting, preparation, enactment, and passage of SB 2289, including those that predate the introduction of SB 2289, but excluding any documents for which there was a legitimate claim of privilege. With respect to the latter, the undersigned ordered NDIDA to: (1) prepare an updated privileged log listing all document being withheld based upon any claim of privilege; and (2) file with the court under seal all documents being withheld based upon a claim of privilege pursuant to the First Amendment.

         As for that part of the motion to compel seeking a supplemental deposition of NDIDA's President and CEO, the undersigned concluded that certain lines of questioning by plaintiffs in the deposition that was taken were simply attempts to “muck around” in the internal affairs of NDIDA, likely First Amendment privileged, and, in any event, irrelevant.[4] Nonetheless, the undersigned concluded that plaintiffs should have some opportunity to depose NDIDA's President and CEO with respect to any withheld documents that were ordered produced along with any lines of inquiry that the court deemed not to be First Amendment privileged. Consequently, the undersigned ordered a supplemental deposition following the production of the documents ordered produced and the undersigned's resolution of the First Amendment privileged issues.

         D. NDIDA's motions for a stay and for reconsideration, plaintiffs' motion for fees and costs, and the filing of documents for court review and a revised privilege log

         NDIDA filed motions for a stay of the order compelling discovery pending the Eighth Circuit's decision on the motion for preliminary injunction and for reconsideration, which the undersigned denied on July 18, 2019. While those motions were pending, plaintiffs filed its motion for attorney fees and costs, claiming $55, 566-a breathtakingly huge number.

         On July 17, 2019, NDIDA served an amended privilege log identifying the documents that it was withholding based on a claim of First Amendment privilege. The amended privilege log also identified for the first time documents being withheld based on a claim of attorney-client and/or work-product privileges, both before and after SB 2289's filing. On the same date, NDIDA forwarded to the court copies of the documents being withheld based only on a claim of First Amendment privilege for in camera inspection. Documents claimed to be privileged based upon claims of both First Amendment privilege and attorney-client or work-product privileges were not included.

         E. The Eighth Circuit's decision rendering irrelevant the withheld documents and information-at least as to the Contract Clause claim

         The extent to which legislative history and material outside of the official legislative record should be considered, if at all, in addressing whether SB 2289 had been passed for an improper purpose in violation of the Contract Clause was front and center in the appeal of Judge Hovland's order granting the preliminary injunction. The State and NDIDA argued the legislative record was relevant and demonstrated that SB 2289 was passed in part to address economic problems of farmers and rural farm communities that went beyond the narrow interests of the equipment dealers who are the immediate, if not primary, beneficiaries of SB 2289. The State and NDIDA also argued, however, that material outside of what they characterized to be the “official” legislative record was immaterial, including, NDIDA's role in drafting SB 2289. Ass'n of Equip. Manufacturers v. Burgum, No. 18-1115, 2018 WL 2234314, at **5-16 (Appellant-Intervenor's Reply Brief, May 18, 2018).

         Plaintiffs in their briefing on appeal also relied upon the legislative record to support their argument that SB 2289 was passed for an illegitimate purpose-except when it arguably did not. However, contrary to the State and NDIDA, plaintiffs contended that highly probative as to SB 2289's purpose were: (1) the fact that SB 2289 been drafted by NDIDA; (2) certain statements attributed to NDIDA made outside of the legislative record that purportedly demonstrated SB 2289's illegitimate purpose; and (3) NDIDA's extensive lobbying efforts. Ass'n of Equip. Manufacturers v. Burgum, No. 18-1115, 2018 WL 2017937, at **26-45 (Appellees' Response Brief, April 26, 2018).

         In deciding the State had not carried its burden of showing a significant and legitimate public purpose underlying SB 2289, the Eighth Circuit panel in a 2-1 decision refused to consider its legislative history and looked only to its text. In relevant part, the panel majority stated:

The State's primary argument is that even if SB 2289 substantially impairs the manufacturers' contractual rights, the legislation reasonably advances a significant and legitimate public purpose, so the impairment is constitutional. In Equipment Manufacturers Institute, South Dakota conceded that the purpose of a similar law was “to level the playing field between manufacturers and dealers, ” 300 F.3d at 860, and this court concluded that the conceded purpose did not qualify as a “significant and legitimate public interest.” Id. at 861. North Dakota makes no such concession and asserts that this law furthers a significant public interest in serving farmers and rural communities. But the mere assertion of a conceivable public purpose is insufficient to justify a substantial impairment of contractual rights. Virtually all legislation enacted by multi-member bodies will be motivated by multiple purposes in the minds of individual legislators, but those subjective intentions are not controlling. Whether the law passes constitutional muster requires a more discerning inquiry into the Act's structure and design.
In evaluating the present North Dakota law governing contracts between manufacturers and dealers, the State “bears the burden of proof in showing a significant and legitimate public purpose underlying the Act.” Id. at 859. The state legislature declined to follow the examples of the legislatures in Blaisdell and Keystone Bituminous, which included well-supported findings or purposes within their duly enacted laws, so any significant and legitimate public purpose must be discerned from the design and operation of the legislation itself. Statements in the legislative history of individual legislators, lobbyists, or advocates that the law would benefit farmers and rural communities are insufficient. Special-interest groups cannot establish that legislation serves a broad societal interest simply by ensuring that the record contains testimony or floor statements about a law's conceivable public benefits.

Ass'n of Equip. Mfrs. v. Burgum, 932 F.3d 727, 731-33 (8th Cir. 2019) (italics added).

         Likewise, consistent with its focus on the text alone, the panel majority did not mention and apparently did not rely upon (1) the fact that the NDIDA was the principal drafter of SB 2289, or (2) any statements made by NDIDA about the purpose of SB 2289-whether made outside of the legislative record or as a part of it. Id. at 730-34. This, coupled with what the panel majority had to say about statements of “lobbyists” and “special interest groups, ” albeit with a different focus, supports the conclusion that the panel implicitly deemed the evidence irrelevant.[5]

         F. NDIDA's renewed request for reconsideration in light of the Eighth Circuit's decision and plaintiffs' response in opposition

         Following the Eighth Circuit's decision, NDIDA again urged reconsideration of the order granting the motion to compel, arguing that the documents and information being sought by plaintiffs are now clearly irrelevant in light of the Eighth Circuit's decision. In response, plaintiffs conceded the panel's decision appears to make irrelevant what they were seeking in the motion to compel with respect to its Contract Clause claim. However, they argued the panel's decision might not be the final word because the State and NDIDA had petitioned for a rehearing and en banc review, arguing, in part that the panel ...


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