UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Quentin Keefe

v. Civil No. 20-cv-195-JD Opinion No.

LendUS, LLC

O R D E R

Quentin Keefe brings claims against his former employer,

LendUS, LLC as the successor of Regency Mortgage Corporation,

seeking to enforce the terms of the Executive Incentive Bonus

Program under the Employee Retirement and Income Security Act

(“ERISA”) and state law. LendUS brings related counterclaims

against Keefe. Keefe moves to compel LendUS to produce copies

of audited financial statements and tax returns, which LendUS

has refused to produce based on a variety of objections.

Standard of Review

Under the federal rules, “[p]arties may obtain discovery

regarding any nonprivileged matter that is relevant to any

party’s claim or defense and proportional to the needs of the

case.” Fed. R. Civ. P. 26(b)(1). After providing notice and

making the necessary effort to resolve the discovery issue, a

party may move to compel another party to produce requested

documents. Fed. R. Civ. P. 37(a)(1) & 37(a)(3)(B). The moving

party bears the burden of making an initial showing that the requested documents are relevant, and if that showing is made,

the opposing party bears the burden of showing that the

requested production is improper.1 Philips Med. Sys. P.R., Inc.

v. Alpha Biomedical & Diagnostic Corp.,

, at *4

(D.P.R. Jan. 15, 2021); Caouette v. OfficeMax, Inc.,

(D.N.H. 2005).

Background2

Keefe was a co-founder and chief executive officer of

Regency Mortgage Corporation. In December of 2014, Keefe sold

Regency to RPM Holdings I, LLC. Keefe was employed by RPM as

president and chief executive officer of Regency. Keefe alleges

that LendUS became the successor in interest to Regency after

Regency was reincorporated on January 12, 2017, and after a

later name change. In its amended answer, LendUS asserts that

the allegations about successor status are legal conclusions and

denies the allegations to the extent a response is required.

1 Although LendUS states in the caption to its objection to the motion to compel that a hearing is requested on the motion, it did not comply with the requirements of Local Rule 7.1(d). Therefore, no hearing was held.

2 The background information is taken in part from the amended complaint, as provided in the court’s order granting in part and denying in part LendUS’s motion to dismiss. Doc. no. 20.

2 Keefe received salary and benefits provided by the

Executive Incentive Bonus Program (“Program”). The Program

states that its purpose is to retain Keefe as an executive

employee of Regency by providing him “with an opportunity to

receive annual bonuses and a long-term interest in the profits

of Regency.” Doc. 11-1, at *2. The Program also was “intended

to be exempt from the reporting and disclosure requirements of

Title I of ERISA because it is an unfunded plan maintained by an

employer for the purpose of providing benefits for a select

group of management or highly compensated employees.”

Article II provides the terms for annual bonuses, and Article

III provides for the settlement of interest in net profits.

In the amended complaint, Keefe alleges that under the

Program he was entitled to an annual bonus and that he received

annual bonuses for the fiscal years 2015 through 2017. He

alleges that he was also entitled to an annual bonus for 2018,

which has not been paid. He alleges that the annual bonus

amount for 2018 was 20% of the net profits for that fiscal year,

which was at least $1,027,116.

Keefe also alleges that he was entitled to a settlement

bonus after his termination. He alleges that the bonus

settlement amount “is the equivalent of the then-present value

of Keefe’s twenty percent (20%) interest in Net Profits of the

Business.” Doc. no. 11, ¶ 28. He further alleges that the

3 bonus settlement was payable within sixty days after the

termination of his employment. He asserts that the bonus

settlement amount is at least $3,592,471 and has not been paid.

Keefe alleges that he was an employee of LendUS after

Regency was reincorporated. He attempted to negotiate with the

chief executive officer of LendUS for early retirement but that

effort was unsuccessful. LendUS terminated Keefe’s employment

on December 31, 2018.

When he was unable to obtain the benefits that he believed

he was due, Keefe brought suit. Keefe alleged three claims

under ERISA and also alleged claims for breach of contract and

breach of the covenant of good faith and fair dealing. Count I,

which sought enforcement of the annual bonus for 2018 under

ERISA, has been dismissed. Count II seeks enforcement of the

bonus settlement amount under ERISA. Counts III, IV, VI, and

VII allege state law claims for breach of contract and breach of

the implied duty of good faith and fair dealing. In Count V,

Keefe seeks attorneys’ fees under ERISA. LendUS brings

counterclaims against Keefe for breach of loyalty, breach of the

covenant of good faith and fair dealing, interference with

business relations, and breach of contract.

4 Discussion

Keefe moves to compel LendUS to produce copies of its

audited financial statements for fiscal years 2015-2018 “with

outside CPA’s opinion letter and all footnotes” and LendUS’s

federal and state tax returns for fiscal years 2015-2018. Doc.

no. 45, at *2. In its responses to the discovery requests,

LendUS objected on the grounds that the requested discovery is

not relevant, material, or reasonably calculated to lead to the

discovery of admissible evidence because the issues in the case

“relate exclusively to the finances of Regency, not the totality

of LendUS.”

LendUS also objected on the grounds that the

requested information was protected by work product and attorney

client privileges and is beyond the scope of discovery under

Rule 26. In response to the motion to compel, LendUS argues

that its audited financial statements are not relevant, that the

information is otherwise available, and that discovery is barred

by its right to privacy.

A. Relevance

In support of his motion, Keefe states that he needs and

his expert witness has requested copies of LendUS’s audited

financial statements and tax returns to evaluate “certain

allocated intercompany expenses including whether such costs are

being increased and applied by LendUS to its Regency division in

5 order to depress the value of Keefe’s claims.” Doc. 45, at *1.

LendUS contends that Keefe’s discovery must be limited to

financial information about Regency, which it represents has

already been produced.

As LendUs sets forth in its objection, Keefe’s annual bonus

and bonus settlement amounts, as provided in the Program, are

calculated from the annual net profits and losses of Regency.

The calculation of net profits and losses is to be made “in

accordance with GAAP” and in a manner that is consistent “with

past practice for Regency’s audited financial statements.”3 Doc.

47, at *4. Net profits and losses are the net income or net

loss of Regency.

Keefe states that he is seeking the requested information

in order to calculate the net profits of Regency for his bonus

calculations. He contends that he needs the audited financial

statements and tax returns of LendUS to see what company

expenses were allocated to Regency, from other parts of the

company or from other divisions, so that his expert can

determine what profits and losses were appropriately allocated

to Regency for purposes of the net profits and losses

calculation. Keefe is not proposing, as LendUS charges, that

his bonuses are based on the entire net profits of LendUS.

3 GAAP refers to Generally Accepted Accounting Principles.

6 LendUS does not dispute that it began allocating expenses

among its divisions by 2018, while Keefe was employed there. It

also does not dispute that Regency’s net profits and losses are

relevant to Keefe’s claims for bonuses. Keefe has shown that

the requested information is relevant to the determination of

net profits and losses for purposes of calculating the bonuses

that he claims in this case.

Therefore, the relevancy requirement is satisfied.

B. Available Elsewhere

LendUS contends that the requested discovery is improper

because the same information is available through other sources

and from information already disclosed.4 LendUS has produced

financial statements from the Regency and MFI divisions, which

are not audited. Keefe is seeking audited financial statements

and tax returns and contends that the disclosed information is

insufficient for its expert’s evaluation. LendUS has not shown

that Keefe is required to seek financial information through

4 To the extent LendUS now argues that it has a right to privacy with respect to the requested information, that objection was not raised in response to the discovery requests and has been waived. Katz v. Liberty Power Corp., LLC,

, at *2 (D. Mass. June 26, 2020). Further, the parties agreed to a protective order, and LendUS has not shown that the order is insufficient to protect sensitive information. LendUS states in its objection that it was filing a motion for another protective order, but no such motion was filed.

7 other discovery means rather than directly through production of

the requested financial documents.

C. Reasonable Expenses

In the conclusion to the motion, Keefe requests an award of

fees and costs under Federal Rule of Civil Procedure

37(a)(5)(A). When a motion to compel is granted and after

giving the nonmoving party an opportunity to be heard, the court

must order payment of the moving party’s reasonable expenses

incurred in filing the motion, unless reasons or circumstances

exist that weigh against the award. Fed. R. Civ. P.

37(a)(5)(A). Therefore, as provided below, Keefe is given the

opportunity to file a motion for an award of reasonable

expenses, and LendUS is given an opportunity to respond. That

determination will be made in response to the motion and

response.

Conclusion

For the foregoing reasons, Keefe’s motion to compel

(document no. 45) is granted. LendUS shall produce the

discovery requested in Keefe’s First Set of Requests for

Production of Documents, Requests Nos. 9 and 10 and may

designate that certain responses are subject to the protective

order, if appropriate.

8 Keefe may file a motion for an award of reasonable expenses

incurred in filing this motion on or before August 25, 2021,

which shall be supported by appropriate affidavits and billing

records. LendUS may file a response within fourteen days after

the motion is filed.

SO ORDERED.

______________________________ Joseph A DiClerico, Jr. United States District Judge

August 11, 2021

cc: Counsel of record.

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