No. 98 CIV. 7724 RPP
United States District Court, S.D. New York
March 30, 2000
Gursky & Ederer, P.C., New York, By Louis S. Ederer, Counsel for Plaintiffs.
Weil, Gotshal & Manges LLP, New York, By Robert G. Sugarman, Counsel for Defendant.
OPINION AND ORDER
*1 Plaintiffs GTFM Inc., Nautica Apparel, Inc., and PRL U.S.A. Holdings, Inc. (“plaintiffs”) move for an order compelling on-site inspection of the computer records of defendant Wal-Mart Stores, Inc. (“Wal-Mart”) and for sanctions in the form of reimbursement of plaintiff's attorneys' fees and expenses incurred in attempting to obtain transactional documents from defendant. Plaintiffs' motion is granted as to both requests.
The Court orders that defendant shall, within thirty days after entry of this Opinion and Order, make available to an expert designated by plaintiffs' counsel all computer records and facilities within defendant's possession, custody, or control, for the purpose of allowing plaintiffs' expert to conduct an on-site inspection of defendant's computer facilities to ascertain whether and how it is possible to extract information about the purchase of goods bearing plaintiffs' trademarks through defendant's Local Purchase Program since January 1997. In addition, defendant shall make available the individual who is most familiar with defendant's computer records and facilities, and in particular the recording, maintaining, back-up, purging and retrieval of Local Purchase computer data, to meet with plaintiffs' expert to explain defendant's computer facilities and to provide reasonable assistance to plaintiffs' expert in his/her efforts to retrieve data about purchases made through the Local Purchase Program. Defendant is ordered to reimburse plaintiffs for all legal and expert fees and expenses reasonably incurred in conducting the on-site inspection of defendant's computer facilities, after such expenses have been submitted to and approved by this Court.
Rule 37(b)(2) of the Federal Rules of Civil Procedure permits the Court, if a party fails to obey an order to provide or permit discovery, to “require the party failing to obey the order or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.” Fed.R.Civ.P. 37(b)(2).
The Second Circuit has explained:
Disciplinary sanctions under Rule 37 are intended to serve three purposes. First, they ensure that a party will not benefit from its own failure to comply. Second, they are specific deterrents and seek to obtain compliance with the particular order issued. Third, they are intended to serve a general deterrent effect on the case at hand and on other litigation, provided that the party against whom they are imposed was in some sense at fault.
Update Art. Inc. v. Modiin Pub., Ltd., 843 F.2d 67, 71 (2d Cir.1988). In Update Art,
the court emphasized “the importance we place on a party's compliance with discovery orders,” and explained that “[s]uch compliance is necessary to the integrity of our judicial process. A party who flouts such orders does so at his own peril.” 843 F.2d at 73.
*2 On December 3, 1998, plaintiffs requested production of all documents, including computer printouts, reflecting defendant's purchase and sale of products bearing plaintiffs' trademarks through the Local Purchase Program since January 1, 1997. (Ederer Decl., Ex. 9.) On December 23, 1998, defendant's counsel wrote a letter stating that only documents showing the purchase and sale of goods offered for sale on November 5, 1998 could be produced. In that letter, defendant's counsel stated: “we object to your request that we produce all transactional documents from Wal-Mart Stores since January 1, 1997, on the grounds that it would be unduly burdensome. Wal-Mart does not have the centralized computer capability to track the purchase and sale of locally purchased goods.” (Ederer Decl., Ex. 12.) Defendant's counsel based his belief about the limited capability of defendant's computer system on a statement of Rob Hey, a senior executive at Wal-Mart, that Wal-Mart's computers could not produce sales information of locally purchased goods for a period longer than five weeks. (Sugarman Decl. 5.)
At a conference on January 13, 1999, the Court questioned defendant about its inability to produce the records requested by plaintiffs and suggested that, for a company of Wal-Mart's sophistication, it was highly unlikely that it did not keep records of the Local Purchase Program at its headquarters. (Ederer Decl., Ex. 19 at 13-14.) At that hearing, counsel for defendant insisted that it was unable to provide the computer printouts requested by plaintiffs. (Id.
at 11-12.) Thereafter, plaintiffs attempted with limited success to discover Local Purchase documents demonstrating additional sales of products bearing plaintiffs' trademarks at the individual store locations. About a year later, on December 14, 1999, plaintiffs deposed Carol Basnaw, a Wal-Mart vice president in the MIS department. At that deposition, Ms. Basnaw revealed that Wal-Mart's computers had the capability to track for more than one year the purchase and sale of goods in the Local Purchase Program. (Ederer. Decl., Ex. 63, at 31.) Therefore, at the time of plaintiffs' discovery request, defendant would have been able to produce the requested computer records dating at least as far back as December 1997. Because the full extent of defendant's computer capability was only recently discovered, however, defendant states that the information requested by plaintiffs in December 1998 is no longer available.
Because of defendant's misrepresentation about its computer capacity, plaintiffs have expended extensive time and money attempting to retrieve the information in other ways. Whether or not defendant's counsel intentionally misled plaintiffs, counsel's inquiries about defendant's computer capacity were certainly deficient. It was plaintiffs' counsel who developed the information that defendant's computer could track local purchases for over a year by deposing Ms. Basnaw. As a vice president in Wal-Mart's MIS department, she was an obvious person with whom defendant's counsel should have reviewed the computer capabilities in December 1998.
*3 Therefore, sanctions in this case serve all three of the purposes enunciated by the Second Circuit in Update Art.
The information requested by plaintiffs in December 1998 is no longer available. To the extent that the lack of specific information about defendant's purchase of counterfeit goods reduces any damages in the case, defendant has benefitted from this delay. In addition, defendant's track record on compliance with discovery requests has been poor both in this case and in other cases. See, e.g.,
Davis v. Wal-Mart Stores, Inc., 979 S.W.2d 30 (Tex.App.1998); Wal-Mart Stores, Inc. v. Lynch, 981 S.W.2d 353 (Tex.App.1998); New v. Wal-Mart Stores, Inc.,
96-8-10571 (Dist. Ct. Jackson Co., Texas, 1996). Hopefully, these sanctions will serve as a deterrent against further discovery abuses by defendant in this case and in future cases.
Therefore, defendant is ordered to pay all plaintiffs' expenses and legal fees unnecessarily expended due to defendant's failure to make an accurate disclosure of its computer capabilities in December 1998. Plaintiffs shall, within thirty days of the entry of this Opinion and Order, make application for such expenses and legal fees, with defendant to file any opposition to such fee application within fifteen days thereafter.
Plaintiffs' motion is granted as to both requests. A conference will be held to determine compliance with this Opinion and Order on May 15, 2000.
End of Document.