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Protecting the identity of your LLC members, LP partners in litigation, Part II: Strategies for discovery

Christina Berish March 17, 2015

You want to protect the identity of your business’ owners, but your opponent issued discovery requesting a copy of your organizational chart and/or information on the identities of your LLC members or LP partners. You are probably left wondering: How does my company get through this lawsuit without disclosing information on our ownership structure?

While the rules of discovery in most jurisdictions are broad – most require not only the production of admissible evidence, but also the production of documents and information which could lead to the discovery of admissible evidence – here are a few strategies for safeguarding the identities of your owners: 

  1. Object. You likely think the requested information on your ownership structure is irrelevant to the lawsuit. If that is the case, consult your lawyer and object to the discovery. 

    And be careful about how you state your objection. If this issue is important to your company, stand your ground. Do not object and then provide limited information, a “conditional response” (“subject to and notwithstanding these objections …”), unless the jurisdiction allows a conditional response. More and more jurisdictions are determining that a conditional response waives your objection.
    Compare Heller v. City of Dallas, 303 F.R.D. 466, 486-490 (N.D. Tex. 2014) and Sherwin-Williams Co. v. JB Collision Serv., Inc., No. 13-CV-1947-LAB (WVG), 2014 WL 3388871 (S.D. Cal. July 9, 2014) with Thermapure, Inc. v. Giertsen Co. of Ill., Inc., No. 10-C-4724, 2013 WL 1222330 (N.D. Ill. March 25, 2013). If it is important to your business to protect this information and the information is not relevant to the case, take a stand and object.

  2. Be cognizant of limits on discovery. Know what limitations your jurisdiction and judge have promulgated on discovery. If the court limits discovery to 25 interrogatories and the opposing side sought the identity of your LLC members or LP partners in interrogatory No. 26, use that as a basis to refrain from answering. To know the limitations, check the jurisdiction’s most up-to-date rules as discovery rules are constantly changing. Also check your judge’s standing order as your particular judge may have significantly limited discovery without your opponent realizing it. For instance, for years, Illinois did not limit the number of requests to admit which could be issued. Under this system, litigants would issue hundreds of requests to admit, but some judges discreetly limited the permissible number to just a few in their standing orders. So check standing orders for limitations on discovery – your opponent may have failed to.

    Also, depending on the jurisdiction, the rules may prohibit duplication of discovery. If that is the case, object to written discovery seeking the identity of your owners on the basis that you are willing provide the information in depositions. On many occasions, the case will settle before depositions occur or other issues may become more pressing at deposition.

  3. Negotiate, negotiate, negotiate. There may be ways to negotiate your way out of disclosing the information or limiting what is disclosed. If both sides are business entities, the parties may agree that neither side needs to disclose information on corporate structure. If the opposing side persists, you may offer to refrain from seeking other sensitive information in exchange for a reprieve on this issue.

    Another way to handle this is to offer a stipulation or to answer a request to admit regarding the very specific information your opposing party wants to know. For instance, if the opposing party wants to know that XYZ corporation is the ultimate parent company of your business, depending on the circumstances, you may want to agree to a stipulation acknowledging that rather than producing numerous documents on corporate structure. For greater control over the language used, offer to provide an affidavit or draft the stipulation. Proposed compromises of this sort may also help if the issue is raised with the judge as the judge may agree that this compromise reasonably accommodates the need for the information with the burden of producing it.

  4. Employ Rule 33(d). If your case is pending in federal court, Rule 33(d) allows you, in lieu of answering an interrogatory, to give the requesting party an opportunity to inspect your books and records to create their own summary of the information. If you force the opposing side to make a trip to review your books and records, depending on the importance of the information, the requesting party may give up the trip. By making the information available, rather than objecting, the opposing side may realize this is not a smoking gun issue. Many states have a rule similar to FRCP 33(d).

  5. Waiver. Some courts require parties to bring discovery disputes to the court’s attention within 30 days. If your opponent missed the deadline, it could have waived the issue.

Depending on the circumstances and your judge, one of more of these strategies may protect information on your business’ owners.

Practice Pointer: If your case is pending in federal court, be careful. Under Rule 37(a)(5)(a) of the Federal Rules of Civil Procedure, a party losing a discovery dispute may be required to pay the opposing party’s attorneys’ fees related to the dispute. In that situation, depending on whether the information is relevant, it may be wiser to negotiate a favorable protective order before discovery begins. 

For additional strategies, please see Part I of this article: Protecting the Identity of Your LLC Members & LP Partners in Litigation, Part I: Motions to Remand.

Christina Berish is a partner in Thompson Coburn's Business Litigation Practice Group. She can be reached at (312) 580-2329 or cberish@thompsoncoburn.com.