Free Response to Motion - District Court of Colorado - Colorado

Case 1:00-cv-02325-MSK-MEH

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Honorable Marcia S. Krieger Civil Action No. 00-cv-2325-MSK-OES SIERRA CLUB, and MINERAL POLICY CENTER, Plaintiffs, v. CRIPPLE CREEK & VICTOR GOLD MINING COMPANY, ANGLOGOLD ASHANTI (COLORADO) CORPORATION, ANGLOGOLD ASHANTI NORTH AMERICA, INC., and GOLDEN CYCLE GOLD CORPORATION, Defendants; and Civil Action No. 01-cv-2307-MSK-OES SIERRA CLUB, and MINERAL POLICY CENTER, Plaintiffs, v. CRIPPLE CREEK & VICTOR GOLD MINING COMPANY, ANGLOGOLD ASHANTI (COLORADO) CORPORATION, ANGLOGOLD ASHANTI NORTH AMERICA INC., and GOLDEN CYCLE GOLD CORPORATION, Defendants.

ANGLOGOLD DEFENDANTS' RESPONSE TO PLAINTIFFS' MOTION TO COMPEL WITH ACCOMPANYING LEGAL AUTHORITY

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Defendants Cripple Creek & Victor Gold Mining Company (" CC&V" AngloGold ), Ashanti (Colorado) Corp. (" AngloGold Colorado" and AngloGold Ashanti North America Inc. ), (" AngloGold North America" (collectively the " ) AngloGold Defendants" hereby respond to ) Plaintiffs' Motion to Compel [#228] (" Motion" and accompanying Brief in Support of ) Plaintiffs' Motion to Compel [#229] (" Brief" ). The Court set January 3, 2005 as the final date for all discovery in this case. See Rule 16 Pre-Trial Order (a/k/a "Scheduling Order") [#177] at 4, ¶ 4(b). At the March 25, 2005 final pretrial conference, Plaintiffs requested additional time for discovery on remedies which the Court granted. See Reporter'Transcript (Final Pretrial Conference) [#224] (" s Pretrial Transcript" at ) 21:13 ­ 24:25; and 26:1-8. Pursuant to that limited grant of authority for additional discovery, Plaintiffs served Defendants with the following three discovery requests: (a) Plaintiffs' Interrogatories and Request for Production of Documents dated March 25, 2005 (two interrogatories and 10 requests for production of documents); (b) Plaintiffs' Rule 34 Request to all Defendants for Entry Upon Land for Inspection and Other Purposes in Case No. 00-MK-2325 (OES) dated April 14, 2005 (request to see nine categories of areas in the vicinity of the Cresson Mine); and (c) Plaintiffs' First Supplemental Request for Production of Documents dated April 27, 2005 (two requests for production of documents). After the AngloGold Defendants responded to each, Plaintiffs complained that the responses were insufficient and, in addition, requested the production of other documents that had not previously been requested. See, e.g., E-mails from Mr. Weiner to Messrs. Troyer and Sherwood dated May 25 and 26, 2005 attached hereto as Exhibit A. In response, the AngloGold Defendants explained why their discovery responses were sufficient under the circumstances,

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and why the AngloGold Defendants would not respond to what amounted to an informal and untimely third request for production of documents. See E-mails from Mr. Troyer to Mr. Weiner dated May 24 and 29, 2005 attached hereto as Exhibit B. Notwithstanding those explanations, Plaintiffs now seek to compel the following discovery:1 a. From CC&V: tax returns, statements of operating expenses, and loan reconciliation schedules; and From AngloGold Colorado and AngloGold North America: various corporate financial documents.

b.

For the reasons explained below, Plaintiffs' Motion should be denied. A. Discovery Request Pertaining to CC&V. 1. Tax Returns.

Given the limitations imposed by the Court during the March 25, 2005 final pre-trial conference, Plaintiffs' discovery is limited to facts related solely to the remedy phase of this case. During that phase, the Court may take into account the " economic impact of the penalty on" Defendants. 33 U.S.C. § 1319(d). Thus, the relevant inquiry as to CC&V is the financial the condition of CC&V. The document that best describes the financial condition of an entity is an audited financial statement. Other documents -- like tax returns -- may touch on an entity's financial condition but they either do not provide the whole picture or they provide information related to other matters (e.g., what is the "taxable income"?). Further, the information contained in those other documents would be duplicative of the information contained in the audited financial statement. To produce all of the documents that may touch on an entity's financial condition
1

It is not clear from either Plaintiffs' Motion or their Brief what documents Plaintiffs are actually seeking. The AngloGold Defendants' characterization of Plaintiffs' request is taken from the form Order attached to Plaintiffs' Motion.

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would be " unreasonably cumulative or duplicative."See Fed.R.Civ.P. 26(b)(2). Thus, in response to Plaintiffs' broad request, CC&V produced its audited financial statements for the years requested.2 Each statement includes the equivalent of a balance sheet, list of assets and liabilities, net worth statement, and earnings statement. Further, the independent auditor' s certification on each of those audited financial statements explains in relevant part: In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cripple Creek and Victor Gold Mining Company (a Joint Venture) at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States. See, e.g., " Financial Statements, Cripple Creek and Victor Gold Mining Company (A Joint Venture), Years ended December 31, 2004, 2003 and 2002 with Report of Independent Auditors" (attached hereto as Exhibit C) at 1 (emphasis added). Plaintiffs believe that CC&V'tax returns should be produced as well. The basis for s Plaintiffs' insistence upon tax returns is their belief " based on consultations with tax authorities," that the information contained in the tax returns are considerably more detailed and "reasonably likely" to lead to the discovery of admissible evidence. Motion at 3. However, Plaintiffs do not identify who/what their tax authority is. No affidavit is attached to Plaintiffs' Motion from a tax authority that explains whether Plaintiffs' claim is true or not. Nor do any of the cases Plaintiffs

2

The document request at issue reads as follows: For each Defendant, please produce the following documents dated from January 1, 2000 to the present: all corporate financial statements, corporate balance sheets, list of assets and liabilities, net worth reports, annual reports, bank statements, earnings statements, state and federal tax returns, cash on hand reports, and/or SEC filings (10-K or other financial disclosures).

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cite in their Brief support their claim that tax returns are preferable to audited financial statements or that tax returns must be produced in addition to audited financial statements. Moreover, the additional "detail" in tax returns is not related to an entity's financial condition. Instead, the details set out in the various schedules and calculations submitted with a tax return "are designed solely to comply with the rules concerning the development of 'taxable income'." Affidavit of Michael E. Braun (attached hereto as Exhibit D) at 2, ¶ 3. As such, "[t]ax returns are not intended nor designed to provide information regarding a taxpayer's financial condition." Id. When comparing tax returns and audited financial statements, "the best way to assess the financial condition of a company is through audited financial statements prepared in accordance with generally accepted accounting principles." Id. at 3, ¶ 4. In sum, Plaintiffs' request for tax returns in addition to the audited financial statements that were produced is unreasonably cumulative or duplicative because, unlike the audited financial statements, the tax returns do not address the relevant inquiry -- the financial condition of CC&V. Rather, the tax returns provide duplicative information, and information related to the calculation of " taxable income."Thus, under Fed.R.Civ.P. 26(b)(2), the Court should deny Plaintiffs' request to compel the production of CC&V'tax returns. Cf. Cummings v. General s Motors Corporation, 365 F.3d 944, 954 (10th Cir. 2004) (it is appropriate under Rule 26 to deny a motion to compel discovery that is overly broad in scope and duplicative of prior requests); and Koch v. Koch Industries, Inc., 203 F.3d 1202, 1237-38 (10th Cir. 2000). 2. Other Documents

In their Motion, Plaintiffs are also requesting two other categories of documents: statements of operating expenses, and loan reconciliation schedules. These categories of

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documents were not specified in either of Plaintiffs' requests for production of documents. two Instead, they appeared for the first time in e-mail messages from Plaintiffs' counsel dated May 25 and 26, 2005. See Exhibit A. Even if these e-mail messages could be interpreted as a third request for production of documents, they were too late. The AngloGold Defendants received the e-mail messages less than one week before the second discovery deadline of June 1, 2005, far short of the 30-day response period provided by the Rules. In an effort to avoid the untimeliness problem, Plaintiffs claim that the documents listed in counsel'e-mail messages " s clearly fall in the category of 'corporate financial statements'." Motion at 3. CC&V disagrees. The CC&V audited financial statements produced were certified to fairly represent the financial condition of CC&V " conformity with accounting principles in generally accepted in the United States."Exhibit C at 1. Thus, any documents not appearing in these audited financial statements would not fall within the category of "corporate financial statements" Plaintiffs claim. Therefore, CC&V was not required to produce them and as Plaintiffs' request to compel such production should be denied.3 B. Discovery Request Pertaining To AngloGold Colorado and AngloGold North America. Contrary to Plaintiffs' claim, AngloGold Colorado and AngloGold North America are not refusing to produce their respective financial documents. Nor are these Defendants attempting to ignore the scheduling requirements imposed by the Court. Rather, AngloGold Colorado and
3

It should be noted that CC&V'audited financial statements do include a " s Statement of Operations" listing the " operating expenses" CC&V which, arguably, addresses Plaintiffs' for request for " statements of operating expenses."As for loan schedules, the audited financial statements list all of CC&V's liabilities including, without limitation, a loan payable; and the Statements of Cash Flows (also included within the audited financial statements) provides information on how that loan is being increased and/or retired over time. To the extent Plaintiffs are seeking something else, it is not a document that clearly falls within the category of "corporate financial statements" and, therefore, need not be produced.

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AngloGold North America have agreed to produce the information when it becomes relevant. This compromise approach is necessary here because: (a) the documents to be produced are confidential business information (" CBI" 4 and (b) Plaintiffs have demonstrated an ); unwillingness (inadvertent or otherwise) to comply with the requirements of the local rules as well as the Stipulated Protective Order for CBI materials in this case. See, e.g., Order Lifting Seal [#212]. Under the proposed compromise, AngloGold Colorado and AngloGold North America will produce the documents if: (a) the Court finds that AngloGold Colorado or AngloGold North America are liable for any of the causes of action; and (b) that Defendant intends to claim an inability to satisfy the remedy imposed by the Court for that cause of action. Plaintiffs are not prejudiced by this compromise. Plaintiffs have already represented to the Court that the remedy phase of the trial should be bifurcated and tried separately. In response to the Court'question on ways to bifurcate the case, Plaintiffs' s counsel stated: Your Honor, Magistrate Judge Schlatter bifurcated issues of liability from issues of remedy in Civil Action 01-MK-2307. I think that'the logical way to do this. s Pretrial Transcript [#224] at 20:17 ­ 21:12. Thus, under the compromise, the AngloGold Colorado and AngloGold North America financial documents relevant to the remedy phase, if any, would be produced in a timely manner prior to trial on that phase of the case. Plaintiffs would then have an ample opportunity to review that information and prepare their remedy case. For the reasons explained above, Plaintiffs' Motion to Compel should be denied.

4

Contrary to Plaintiffs' suggestion, the compromise approach proposed for the production of the AngloGold Colorado and AngloGold North America documents is not based on privilege. Thus, Plaintiffs' reliance on Hickman v. Taylor, 329 U.S. 495 (1947) and Peat, Marwich, Mitchell & Co. v. West, 748 F.2d 540 (10th Cir. 1984), cert. dismissed, 469 U.S. 1199 (1985) is misplaced.

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Respectfully submitted this 20th day of June, 2005.

By

/s Eugene J. Riordan, Esq. Eugene J. Riordan, Esq. Lisa C. Ledet, Esq. VRANESH AND RAISCH, LLP P.O. Box 871 Boulder, CO 80306-0871 Telephone: (303) 443-6151 Fax: (303) 443-9586 and Robert C. Troyer, Esq. HOGAN & HARTSON, LLP 1200 17th St., Ste. 1500 Denver, CO 80202 Telephone: (303)899-7300 Fax: (303)899-7333 E-mail: [email protected]

ATTORNEYS FOR DEFENDANTS CRIPPLE CREEK & VICTOR GOLD MINING COMPANY, ANGLOGOLD ASHANTI (COLORADO) CORP., and ANGLOGOLD ASHANTI NORTH AMERICA INC.

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CERTIFICATE OF MAILING I hereby certify that on this 20th day of June, 2005, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: [email protected], [email protected], [email protected], [email protected], [email protected], [email protected]

/s Eugene J. Riordan ___________________________________

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