ELECTRONICALLY FILED - 2019 Oct 28 11:11 AM - HORRY - COMMON PLEAS - CASE#2018CP2607249

STATE OF SOUTH CAROLINA IN THE COURT OF COMMON PLEAS

COUNTY OF HORRY FIFTEENTH JUDICIAL CIRCUIT

School District of Horry County and

C.A. No. 2018-CP-26-07249
Horry County,

Plaintiffs,
MOTION TO COMPEL AND TO AMEND
SCHEDULING ORDER
v.

City of Myrtle Beach and Myrtle Beach

Air Force Base Redevelopment Authority,

Defendants.

BACKGROUND

The Plaintiffs’ first cause of action is for a declaratory judgment that, among other things,

the Defendants have misused TIF funds—which are taxpayer monies. The Plaintiffs’ fourth cause

of action is for an accounting regarding how the Defendants have spent TIF funds. The Plaintiffs’

third, fifth, and eighth causes of action are designed to recover TIF funds that the Defendants have

misused. But none of these claims can be fully addressed by the Plaintiffs or by the Court until the

Defendants provide full and complete responses to the Plaintiffs’ discovery requests that are aimed

at two key variables: (1) how much TIF revenue has come to the Defendants; and (2) how the

Defendants have spent those funds.

I. October 17th Status Conference

To date, despite producing over 39,000 pages of documents and feigning good-faith

cooperation with discovery, the Defendants have obstructed the Plaintiffs’ ability to access data

that would reveal how they have used those taxpayer resources described above. The Plaintiffs

previously sought a status conference with the Court to discuss the Defendants’ discovery conduct
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and to prepare the case’s next steps. On October 17, 2019, the Court held a telephone status

conference, which concluded with the Court instructing the parties as follows:

(1) The Plaintiffs were to have their accounting/auditing experts contact the Defendants’
financial officers directly to identify exactly what information the Plaintiffs’ experts
would need to analyze the financial issues of this case;

(2) The Defendants’ financial officers were to cooperate with the Plaintiffs’ experts,
including providing the requested data in a usable format where possible;

(3) The Plaintiffs’ experts were then to assess how much time they needed to analyze the
requested information after receiving it from the Defendants; and

(4) The parties would report the results of this interaction to the Court during another
telephone status conference, to be held at 1:00 PM on October 25, 2019.

II. Interactions Following October 17th Status Conference

At the conclusion of the October 17th Status Conference, Plaintiffs immediately complied

with the Court’s oral instructions. The very next day, the Plaintiffs’ accounting/auditing experts

(McAbee, Schwartz, Halliday & Co.) sent a letter to Ken Shelton, Chief Financial Officer for the

City of Myrtle Beach, and Buddy Styers, Executive Director of the Redevelopment Authority, in

which they identified a series of items requested from each public body. A copy of that

correspondence is attached as Exhibit A.

On October 22nd, the City responded to the Plaintiffs’ expert by providing some, but not

all, of the requested information. A copy of that correspondence is attached as Exhibit B. Notably,

the City refused to re-produce transaction-level data that it had previously provided in “greenbar”

format. As the Plaintiffs explained to the Court during the October 17th status conference, that

format renders the data contained therein unusable. Based on other materials that the City has

produced to date, it is obvious that the City could readily “print-to-PDF” that same data and

provide it to the Plaintiffs, which would make the data usable by an accountant or auditor. The

City, however, has consistently refused to do so.

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As such, that afternoon, counsel for the Plaintiffs responded to an email from counsel for

the City: “Thanks for passing this along, but it looks like the City still isn’t producing some

information in a usable format. We’ll have Mr. Halliday [the accounting/auditing expert] interface

directly with your client to get those materials.” A copy of that email correspondence is attached

as Exhibit C.

The next day, counsel for the City responded that the Rules of Civil Procedure do not

require any additional cooperation from the City, and the City would not provide any additional

cooperation, documents, or information despite the Court’s oral instructions from October 17th.

After mischaracterizing virtually everything that has happened in discovery to date, the City’s

attorney concluded: “Please be advised that the City will do nothing further in regard to production

of documents for this ‘forensic audit.’” A copy of that email correspondence is attached as Exhibit

D.

For its part, the Redevelopment Authority confirmed that it does not have any of the

information sought by the Plaintiffs’ expert, meaning that the discovery at issue involves the City

of Myrtle Beach alone.

III. Preparations for October 25th Status Conference

The bits of information that the City dribbled out in response to the Plaintiffs’ experts’

correspondence reveal some remarkable information. According to the City’s recently produced

information, it appears as if the City has expended over $1.1 million in TIF funds to service bonds

that the City itself issued in 2012, which are not TIF-based redevelopment bonds. It also appears

as if the City has spent over $2.3 million in TIF funds on items under the label “Community

Development” that are inconsistent with the data shown on the City’s CAFRs, which it has

repeatedly held out as the Gold Standard for evidence in this case. And it appears that the City is

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retaining nearly $10 million in TIF revenues in cash over and above any funding needed to fulfill

the remaining expenses associated with its current 2016 TIF bond obligations.

In light of these significant issues—which potentially reveal millions of misused taxpayer

dollars—that have come to light since the October 17th status conference, the Plaintiffs provided

the Court with a letter from their accounting/auditing experts that outlined these points and

described the additional information that the City is withholding that is needed to fully discover

the claims raised in the complaint. A copy of that letter and its attachments is attached as Exhibit

E.

In response to that letter, counsel for the City requested that the status conference be

postponed, that the Court disregard the expert’s letter because it was “without verification” (bold

in original), and then insisted that no proceedings in the case should be on the record with a court

reporter present because no formal motion was pending. A copy of that email chain is attached as

Exhibit F.

This motion follows that request by counsel for the City.

ARGUMENT

Discovery in South Carolina follows a familiar standard: it is to be broad in order to

facilitate the truth-finding function of the court. See, e.g., Scott v. Greenville Housing Auth., 353

S.C. 639, 652, 579 S.E.2d 151, 158 (Ct. App. 2003) (“The gist and gravamen of the discovery

rules mandate full and fair disclosure to prevent a trial from becoming a guessing game or one of

ambush for either party. Essentially, the rights of discovery articulated by the rules give the

attorney the means to prepare for trial.”).

Here, the Plaintiffs have sought through discovery transaction-level detail regarding the

TIF funds so that they will be able to determine what TIF money went into the City, and how that

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money was spent. These requests include inter alia Interrogatories 5, 6, 7, and 11, and Requests

for Production 8, 10, 11, 12, 13, 15, 16, and 17. Copies of those discovery requests and the City’s

written answers and objections to each are attached as Exhibit G.

The City responded to the Plaintiffs’ discovery requests by producing in excess of 39,000

pages. Despite that massive document dump, the City’s written responses contained no index to

how those materials were organized, nor did the City even identify which portions of that

production responded to each interrogatory or document request, as specifically required by Rule

33(c) for interrogatories and Rule 34(b) for document requests.

As such, the Plaintiffs began exchanging emails with counsel for the City, during which

the City began revealing where within the sea of documents certain data and information could be

located. To date, the City still has not supplemented its written responses to identify which portions

of its enormous document dump address each specific interrogatory and document request.

Over the course of that email exchange, the City repeatedly took the position that it did not

need to provide any further guideposts about where certain information was because, in its view,

responsive data would be easy to find if anyone simply flipped through its 39,000-page production.

Despite refusing to conform its production to the requirements of the South Carolina Rules

of Civil Procedure, the City stated that it was “ready, willing, and able to assist in the timely

conduct of” a “forensic audit” of its use of TIF funds. The Plaintiffs took the City up on that offer,

and stated that they needed “transaction level detail of all receipts and expenditures for the ‘Air

Base Tax Increment Revenue Fund’ from inception of the Fund to present.” Once again, the City

responded that it had already provided that information and that it would be “readily identifiable”

by glancing at the 39,000-page production. A copy of this series of emails is attached as Exhibit

H.

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Because of the City’s continued refusal to properly respond to the Plaintiffs’ discovery

requests, the Plaintiffs requested a status conference with the Court to address the ongoing

discovery issues and the upcoming deadline for the parties to conduct preliminary discovery.

During that status conference, the Plaintiffs understood the Court to have instructed the parties to

cooperate in good faith on identifying how to get the Plaintiffs the transaction-level data in a usable

format, and to report back as to how much time would be needed to complete discovery once that

data was provided.

As described above, the Plaintiffs have endeavored to meet the Court’s oral instructions

from the October 17th status conference. Yet, the City still refuses to identify which documents

respond to each interrogatory and document request, and it still refuses to provide the Plaintiffs’

experts with the City’s Project Transaction Report in a “print-to-PDF” format that is actually

usable, rather than insisting that the Plaintiffs’ experts consume an extra month or more of time

re-keying the data from the unusable “greenbar” format. See Rule 34(b)(1), SCRCP (authorizing

the Court to require a party to produce electronically stored information “in a form or forms that

are reasonably usable”).

CONCLUSION

Accordingly, pursuant to Rules 26, 33, 34, and 37, SCRCP, the Plaintiffs move the Court

for an order directing the Defendants to (1) supplement their written discovery responses to

identify which document or documents responds to each interrogatory and each request for

production; and (2) produce the City’s Project Transaction Report in a “print-to-PDF” format so

that it will be usable by the Plaintiffs’ experts.

Additionally, because the City’s obstruction has thrown the discovery timeline far off

course, the Plaintiffs respectfully request that the Court extend the deadline for the parties to

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complete this preliminary discovery by a period of five weeks following the City’s production of

the materials described above. This is the time frame that the Plaintiffs’ experts estimate they will

need to review and analyze that data once it is provided to them in a usable format.

Pursuant to Rule 11, SCRCP, counsel affirms that it attempted to resolve the issues

discussed herein, but that the parties were not able to do so.

Respectfully submitted,

WOMBLE BOND DICKINSON (US) LLP

By: /s/ Kevin A. Hall

S.C. Bar No. 15063
kevin.hall@wbd-us.com
M. Todd Carroll
S.C. Bar No. 74000
todd.carroll@wbd-us.com
Bryant S. Caldwell
S.C. Bar No. 102206
bryant.caldwell@wbd-us.com
1221 Main Street, Suite 1600
Columbia, South Carolina 29201
(803) 454-6504

Attorneys for Horry County School District

HARRISON WHITE P.C.

By: /s/ Marghretta H. Shisko

S.C. Bar No. 100106
mshisko@spartanlaw.com
John B. White
S.C. Bar No. 5996
jwhite@spartanlaw.com
178 W. Main Street (29306)
P.O. Box 3547
Spartanburg, South Carolina 29304
(864) 585-5100

Attorneys for Horry County School District

October 28, 2019