Venture Communications Cooperative, Inc. v. James Valley Cooperative Telephone Company et al

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
CENTRAL DIVISION
VENTRURE COMMUNICATIONS
COOPERATIVE, INC,
Plaintiff,
vs.
JAMES VALLEY COOPERTIVE
TELEPHONE COMPANY, AND
NORTHERN VALLEY
COMMUNICATIONS, LLC,
Defendants.
3:20-CV-03011-RAL
ORDER GRANTING IN PART
AND DENYING IN PART
MOTION TO COMPEL
In this discovery wrangle, two telecommunication companies have moved to
compel the production of certain materials from a third one. The companies have gone
to great lengths to stake out their positions but, like most disagreements of this kind,
neither is right on everything, leading to a split decision.
BACKGROUND
Venture 	Communications 	Cooperative, 	Inc. 	(“Venture”) 	sued 	James 	Valley
Cooperative 	Telephone 	Company 	(“James 	Valley”) 	and 	Northern 	Valley
Communications, 	LLC 	(“Northern 	Valley”), 	seeking 	compensatory 	and 	punitive
damages. Venture and James Valley are incumbent local exchange carriers1
1See 47 U.S.C. §251 (h)(1) (defining an “incumbent local exchange carrier” as a
telecommunications company that provided local service before the passage of the 1996
(continued. . .)
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that provide broadband services in the rural parts of South Dakota. Northern Valley is a
competitive local exchange carrier.2 Venture claims that it was denied about twenty
million dollars in federal funds because James Valley and Northern Valley knowingly
misrepresented information in filings to the Federal Communications Commission
(“FCC”). Their conduct, Venture says, blocked its ability to receive support funds for
voice and broadband in its service area and violated the Communications Act of 1934.
Venture likewise maintains that James Valley and Northern Valley engaged in tortious
interference with business expectancy, fraud, unfair competition, and an actionable civil
conspiracy.
After several attempts to resolve the document production issues failed and the
parties reached an impasse, James Valley and Northern Valley moved to compel. In it,
they request that Venture must produce three sets of documents: (1) materials depicting
Venture’s 	network 	and 	subscribers 	in 	the 	overlapping 	service 	areas 	it 	has 	with
Northern Valley (“Overlapping Area”); (2) Venture’s cost separations studies for 2017
and 2018; and (3) communications that Venture and its counsel had with a third-party
consultant. Venture opposes the motion, arguing that the first part of it is moot, the
Telecommunications Act).
2See 47 C.F.R. §61.26 (a)(1) (defining a “competitive local exchange carrier” as a
local telecommunications company that competes with established carriers, usually
incumbent local exchange carriers in a service area).
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second 	involves 	irrelevant 	information, 	and 	the 	third 	asks 	for 	privileged
communications. The District Court referred the motion to this Court to rule on.
DISCUSSION
A. Standard
The Federal Rules of Civil Procedure pertaining to discovery “are to be broadly
and liberally construed in order to fulfill discovery’s purposes of providing [the] parties
with ‘information essential to the proper litigation of all relevant facts, to eliminate
surprise, and to promote settlement.’ ”3 A party may obtain discovery of any non-
privileged matter relevant to any claim or defense.4 “Information within [the] scope of
discovery need not be admissible in evidence to be discoverable.”5 Before parties are
required to open the doors of discovery, there must be some “threshold showing of
relevance.”6 “Relevancy…encompass[es] ‘any matter that could bear on, 	or that
reasonably could lead to other matter that could bear on, any issue that is 	or may
be in the case.’”7 Discovery must also be “proportional to the needs of the
3See Marook v. State Farm Mut. Auto Ins. Co., 259 F.R.D. 388, 394 (N.D. Iowa 2009)
(quoting Rolscreen Co. v. Pella Products of St. Louis, Inc., 145 F.R.D. 92, 94 (S.D. Iowa
1992)).
4See Fed. R. Civ. P. 26(b)(1).
5Id.
6Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992).
7Leichtnam v. American Zurich Ins. Co., No. 5:15-CV-05012-JLV, 2018 WL 4701353
(continued. . .)
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case.”8 Once the requesting party has established that the evidence sought is relevant,
the burden shifts to the opposing party who must “show specific facts demonstrating
that the discovery is not relevant or how it is overly broad, burdensome, or
oppressive.”9
“When a party withholds information otherwise discoverable by claiming that
the information is privileged or subject to protection as trial-preparation material,” the
party bears the burden of providing a factual basis for withholding the materials.10 The
asserting party satisfies its burden by providing a detailed privilege log stating the basis
of the claimed privilege of each document in question, together with an explanation
from its counsel.11 The burden of establishing that the privilege applies is harder when
it relates to documents and communications developed by a third-party technical
consultant retained for business purposes and to help counsel provide legal advice.12
at *2 (D.S.D. Sept. 30 2018) (quoting E.E.O.C. v. Woodmen of the World Life Ins. Soc’y, 2007
WL 1217919 at *1 (D. Neb. Mar. 15, 2007)) and Oppenheimer Fund, Inc. v. Sanders, 437 U.S.
340, 351 (1978)).
8Fed. R. Civ. P. 26(b)(1).
9Kirshenman v. Auto-Owners Ins., 280 F.R.D. 474, 481 (D.S.D. 2012).
10Fed. R. Civ. P. 26(b)(5)(A); Gowan v. Mid Century Ins. Co., 309 F.R.D. 503, 508
(D. S.D. 2015); Murphy v. Kmart Corp., 259 F.R.D. 421, 428 (D.S.D 2009).
11See Rabushka ex rel U.S. v. Crane Co. 122 F.3d 559, 565 (8th Cir. 1997).
12See e.g., Guo Wengui v. Clark Hill, PLC, 338 F.R.D. 7, 10-14 (D.D.C. 2021).
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B. Overlap Area Information
1. 	Subscriber Map
Venture has already produced a map file in KMZ (Google Earth) format
depicting its fiber network and building locations in the Overlap Area. The map renders
James Valley and Northern Valley’s request for “a subscriber loop network map”13
moot.14
2. 	Venture Subscribers in the Overlap Area and Their Service Speeds
James Valley and Northern Valley ask for the physical addresses of Venture’s
broadband subscribers in the Overlap Area as of December 31, 2017, in either CSV
(comma-separated values) or Excel format, and the service speeds for those subscribers.
Both parties seek to know where Venture’s subscribers resided and the speeds of their
service, at the time of Venture’s Alternative Connect America Model (“A-CAM”) II
election, to provide a better understanding of what deployment obligations Venture
would have had to make and incur had it received funding from the FCC’s A-CAM II
program. Insight into what facilities Venture had in place in the Overlap Area and who
they were connected to is necessary to comprehend what Venture would have had to
construct had it received the expected A-CAM II funding. Production of the requested
13Def. Mem. at 14 & n. 18 (June 7, 2021).
14See Collins v. St. Paul Fire and Marine Ins. Co., No. 5:15-CV-05047-JLV, 2016 WL
5794722 at ** 5-7 (D.S.D. Sept. 30, 2016); United States v. Morris Inc., No. 4:14-CV-04131-
LLP, 2016 WL 4098592 at *3 (D.S.D. July 28, 2016).
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information is at least relevant to damages and to James Valley and Northern Valley’s
ability to evaluate the legitimacy of any damages model Venture and its experts may
present.
Venture’s arguments to the contrary are unavailing. Not all of Venture’s service
area had fiber, with broadband speeds of 25/3 Mbps or more, at the end of 2017.
Notably, Venture sought virtually identical information, requiring James Valley and
Northern Valley to produce a list of all of its subscribers, including the services and
locations, in the Overlap Area as part of discovery. That the documents requested may
also contain confidential information, some of which may not affect the case, is not a
valid reason to withhold the documents when they are relevant, or may lead to relevant
matters, and there is a confidentiality agreement with an Attorney’s Eyes Only
provision.
3. 	Cost Separations Studies
James Valley and Northern Valley move to compel Venture to produce a copy of it’s
2017 and 2018 cost separations studies. The companies want Venture’s FCC Part 36/69
studies that it must prepare and submit to justify the rates it charges. The 2017 study
was alluded to in the A-CAM II analysis of John Staurulakis, Inc. (“JSI”), Venture’s
consultant, to help Venture predict what the economic impact would be of accepting A-
CAM II funding. The cost studies look to be relevant to analyzing Venture’s outlay if it
had received A-CAM II funding and been required to meet the performance yard sticks
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in the Overlap Area. The 2018 study, submitted before deployment occurred, would
seemingly be the most relevant.
Venture’s relevancy objection rings hollow. The Court is satisfied that James Valley
and Northern Valley have met their burden of showing the 2018 cost separations study
is relevant, as that term is broadly construed. Refusing to produce this study because it
is a single, integrated document is an unacceptable response. And removing portions of
the study could change its meaning and make the same incomplete and unreliable. Any
confidentiality concerns Venture may have can be properly addressed by marking the
study Attorney’s Eyes Only under the protective order, not keeping or stripping pieces
out of it. The redacted version of the 2018 Toll Cost Separations Study is not a passable
substitute because it omits all of the cost information James Valley and Northern Valley
need and does not include the supporting materials that show how costs are applied.
All of the 2018 cost study should therefore be produced.
C. Privileged Communications with JSI
The second part of James Valley and Northern Valley’s motion involves
Venture’s claims of privilege and work product protection over communications among
Venture, its consultants at JSI, and its counsel. These communications are from January
to June 2019 when JSI was helping Venture to evaluate the impact of James Valley and
Northern Valley’s claims of 25/3 broadband service in the Overlap Area. The issue is
whether the communications are privileged or protected, because JSI—a non-
employee—participated in them.
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1. 	Attorney-Client Privilege
The rub between the two sides requires consideration of the “employee
equivalent” doctrine—an outgrowth of the United States Supreme Court’s decision in
Upjohn Co. v. United States.15 In that case, the Supreme Court held that where an
attorney represents a corporation, the corporation’s attorney-client privilege extends
beyond those persons who “control” the corporation and includes other employees
with whom the attorney must consult with to advise the corporation.16
The Eighth Circuit has applied Upjohn to cover communications between
partnership counsel and outside consultants.17 The appeals court reasoned that “ too
narrow a definition of ‘representative of the client’ will lead to attorneys not being able
to confer confidentially with nonemployees who, due to their relationship to the client,
possess the very sort of information that the privilege envisions flowing most freely.”18
According to the court, the consultant at issue was “involved on a daily basis with the
principals of [the partnership] and on [the partnership’s] behalf in the unsuccessful
development that serve[d] as the basis for th[e] litigation,” and was thus “precisely the
sort of person with whom a lawyer would wish to confer confidentially in order to
15 449 U.S. 383 (1981).
16See id. at 391-92.
17See In re Bieter Co. 16 F.3d 929, 937-38 (8th Cir. 1994).
18Id.
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understand [the partnership’s] reasons for seeking representation.”19 The court
concluded that the consultant “was in all relevant respects the functional equivalent of
an employee.”20
Several courts have followed the Eighth circuit’s lead.21 James Valley and
Northern Valley recognize the “employee equivalent” extension of the Upjohn doctrine
but try to distinguish it, maintaining that “JSI’s relationship with Venture is simply not
on par with the facts of the [Eighth Circuit’s decision].”22
19Id. at 938 (citing Upjohn, 449 U.S. at 389).
20Id.
21See e.g., Berisha v. Lawson, 973 F.3d 1304, 1317-20 (11th Cir. 2020); United States v.
Graf, 610 F.3d 1148, 1158-59 (9th Cir. 2010); Tinian Systems, LLC v. Core Campus Columbia
I, LLC, C-A No. 3:15-CV-1102-JFA, 2016 WL 11643760 at ** 1-2 (D.S.C. Aug. 19, 2016);
A.F. v. Providence Health Plan, 173 F.Supp. 3d 1061, 1082-84 (D.Or. 2016); In re Flonase
Anti-Trust Litigation, 879 F. Supp. 2d 454, 457-60 (E.D. Pa. 2012); Western Resources, Inc. v.
Union Pacific Railroad Co., No. 00-2043-CM, 2002 WL 181494 at ** 6-7 (D. Kan. Jan. 31,
2002); Royal Surplus Lines Ins. v. Sofamor Danek Group, 190 F.R.D. 463, 469-72 (W.D. Tenn.
1999); see also F.T.C. GlaxoSmithKline, 294 F.3d 141, 148 (D.C. Cir. 2002) (concluding that
the 	privilege 	extended 	to 	the 	attorney-client 	communication 	shared 	by 	a 	drug
manufacture with its public relations and government affairs consultants where “the
consultants acted as part of team with full-time employees regarding their particular
assignment” and dealt with issues that were “completely intertwined with [the drug
manufacture’s] litigation and legal strategies”); Schaeffer v Gregory Village Partners, L.P.,
78 F.Supp. 3d 1198, 1203-05 (N.D. Cal. 2015) (holding that outside consultant providing
regulatory 	and 	public 	relations 	advice, 	and 	interacting 	directly 	with 	potential
opponents 	in 	litigation, 	was 	the 	“functional 	equivalent” 	of 	an 	employee 	of 	the
defendant property owner).
22
Def. Mem. at 28.
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But by James Valley and Northern Valley’s own admissions, “JSI’s role in
relation to the underlying litigation” was “critical,”23 “advising Venture on issues
related primarily to understanding the FCC’s process for distributing A-CAM II
funding and trying to help Venture maximize it’s A-CAM II funding throughout the
relevant time period.”24 As Venture’s representative, JSI communicated directly with
James Valley and Northern Valley and their CEO to obtain their cooperation and
assistance from them.25 Venture learned from JSI of James Valley and Northern Valley’s
Overlap Area service claims and their effect on Venture’s ability to secure A-CAM II
funding. Without JSI’s information and guidance, Venture’s counsel could not fully
evaluate the predicament Venture was in and provide it with sound guidance.
JSI’s relationship with Venture is the kind that justifies application of the
privilege. JSI was intimately involved, on Venture’s behalf, “in the transaction that
[wa]s the subject of legal services” and “possess[ed] the very sort of information [] the
privilege envisions” Venture’s counsel should have to render informed legal advice on
how to proceed.26
23Def. Mem. at 8.
24
Def. Mem. Ex.18.
25Def. Mem. at 23.
26Upjohn, 449 U.S. at 397-98.
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James Valley and Northern Valley contend that “JSI is not the functional
equivalent of a Venture employee” because “JSI exercised neither management control
over Venture nor was it “involved on a daily basis” with running Venture.”27 Their
contention though goes against the Supreme Court’s rejection of the “control group”
test and the Court’s recognition that non-managerial employees may be considered part
of the corporate client for purposes of the privilege.28 And the contention is that odds
with the Eighth Circuit’s principal holding that the privilege extends to “non-employees
who possess a significant relationship to the client and the client’s involvement in the
transaction that is the subject of legal services,” and who therefore “have the relevant
information needed by corporate counsel” to advise the client.29
Settled Eighth Circuit precedent controls here and requires the denial of James
Valley and Northern Valley’s production request. The attorney-client privilege applies
to communications made among JSI, Venture, and Venture’s counsel and the
production of the same. On this record, JSI was the functional equivalent of Venture’s
employee. Those communications fell within the scope JSI’s duties and were made at
Venture’s behest and to seek legal advice for Venture.30
27Def. Mem. at 27.
28See Upjohn, 449 U.S. at 389, 392.
29Bieter, 16 F.3d at 938.
30See id. at 939-40.
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2. 	Work-Product Doctrine
Regardless, the work-product doctrine protects the disclosure of the documented
communications James Valley and Northern Valley seek. Venture anticipated litigation
with James Valley and Northern Valley and did not augment the risk of them gaining
access to its confidential claims discussions by including JSI in those discussions.
The work-product doctrine is a “qualified” privilege that protects from discovery
“documents and tangible things that are prepared in anticipation of litigation or for trial
by or for another party or its representative (including the other party’s attorney,
consultant, … or agent).”31 “At its core, the [] doctrine shelters the mental processees of
the attorney, providing a privileged area within which he can analyze and prepare his
client’s case “ and protects both “material prepared by agents for the attorney as well
those prepared by the attorney himself.”32
Like other qualified privileges, the privilege derived from the work-product
doctrine may be waived.33 A litigant may, for example, waive work-product protection
by revealing or placing the work-product at issue during litigation.
“[W]ork-product protection is not as easily waived as the attorney-client
privilege.”34 Because the attorney-client privilege is designed to protect confidentiality,
31 Fed. R. Civ. P. 26(b)(3)(A).
32United States v. Nobles, 422 U.S. 225, 238-39 (1975).
33See Nobles, 422 U.S. at 239.
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any disclosure beyond the inner circle is inconsistent with the privilege.35 By contrast,
work-product protection applies to adversaries, “so only disclosing material in a way
inconsistent with keeping it from an adversary waives [the] protection.”36 The vast
majority of circuit courts adhere to the general principle that the voluntary disclosure of
work product waives the protection only when the disclosure is made to an adversary
or is otherwise inconsistent with the purpose of the work-product doctrine itself—to
protect the adversarial process.37
` 	Thus, “disclosure of work-product to a third party does not waive the protection
unless [the] disclosure is made to an adversary in litigation or ‘has substantially
increased the opportunities for potential adversaries to obtain the information.’ ”38
In resisting Venture’s invocation of the work-product doctrine James Valley and
Northern Valley point to, and talk at length about, internal communications among JSI
employees from January 2019, including a comment from one employee that Venture
34United States v. Sanmina Corp., 968 F.3d 1107, 1119 (9th Cir. 2020) (quoting United
States v. Mass. Inst. of Tech., 129 F.3d 681, 687 (1st Cir. 1997)).
35See id.
36Id.
37See Sanmina Corp., 968 F.3d 1120 & n. 7.
38Sanmina Corp., 968 F.3d at 1121(quoting 8 Charles Alan Wright, Arthur R. Miller &
Richard L. Marcus, Federal Practice & Procedure §2024 (3d ed. 2020)).
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should “slow down the sue sue train.”39 That same month, another JSI employee
reached out to James Valley and Northern Valley, on Venture’s behalf, to discuss their
claims and Venture’s potential loss of A-CAM II funding as a result of the claims.40
In January 2019, Venture believed it had legal claims against James Valley and
Northern Valley and may be in litigation with them soon. Venture expressed these
sentiments to JSI and asked it to communicate with James Valley and Northern Valley
and see if there was a way to resolve things. Over the next five months or so, Venture
and its counsel engaged in conversations with JSI about many of the same matters now
at issue.
This sequence of events requires application of the work-product doctrine. The
communications among Venture, its counsel, and JSI about matters in anticipation of
litigation were not “inconsistent with the maintenance of secrecy” from Venture’s
adversaries—James Valley and Northern Valley—to defeat the protections afforded by
the doctrine and require disclosure.
3. 	Privilege Log Descriptions
Contrary to James Valley and Northern Valley’s assertions, Venture’s privilege
log provides decent enough descriptions and clarity about what the documents being
withheld are, or concern. The log is as descriptive, if not more so, than James Valley and
39Def. Mem. 5-6.
40See Pl. Mem. Ex. 6 (June 15, 2021).
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Northern Valley’s own privilege log. That said, Venture’s log was sufficient to provide
James Valley and Northern Valley with as good an understanding as possible of the
“nature of the documents…not produced or disclosed… without revealing [privileged
or protected information].”41
CONCLUSION
James Valley and Northern Valley’s motion to compel Venture to produce a map
of the network and subscribers in the Overlap Area is moot. Venture has already
provided such a map. James Valley and Northern Valley though are entitled to receive a
list of Venture’s subscribers in the Overlap Area and the service speeds for those
subscribers—as of December 31, 2017. The requested information is relevant and within
the scope of allowable discovery. The same is true of Venture’s 2018 cost separations
study. But Venture’s documented communications with its counsel and JSI are
privileged and need not be disclosed.
ORDER
For these reasons, and based on the record before the court, it is ORDERED that
James Valley and Northern Valley’s motion to compel is granted in part and denied in
part. The motion is granted to the extent it seeks production of:
1. 	The physical addresses of Venture’s broadband subscribers in the Overlap
Area as of December 31, 2017;
41
Fed. R. Civ. P. 26(b)(5)(A)(ii).
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2. 	Venture’s subscribed service speeds, including download/upload speeds, for
all of its broadband subscribers in the Overlap Area as of December 31, 2017;
3. 	Venture’s 2018 cost separations study.
But the motion is denied in all other respects.
Dated this 20th day of July 2021, at Pierre, South Dakota.
BY THE COURT:
MARK A. MORENO
UNITED STATES MAGISTRATE JUDGE
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