Signed January 21, 2016
Eric R. Thompson, Robin Taylor Symons, Gordon & Rees, LLP, Miami, FL, Holly L.K. Heffner, Richard P. Sybert, Gordon & Rees, LLP, San Diego, CA, Frederick Dyer Page, Ben Ziggy Williamson, Holland & Knight, LLP, Jacksonville, FL, Ivy Mara Choderker, Lewis Anten, Lewis Anten, a Professional Corportation, Encino, CA, for Plaintiff/Counter-Defendant.
Frederick Dyer Page, Ben Ziggy Williamson, Holland & Knight, LLP, Jacksonville, FL, Ivy Mara Choderker, Lewis Anten, Lewis Anten, a Professional Corportation, Encino, CA, for Defendants/Counter-Claimants.
*1 Before the Court are the defendants' motion for a protective order, Doc. 140, and the plaintiff's motion to compel, Doc. 145. The plaintiff opposes the defendants' motion, Doc. 150, and the defendants oppose the plaintiff's motion, Doc. 149. The Court heard arguments on the motions. The Court will separately decide the requests for expenses in bringing the motions, Doc. 140 at 12; Doc. 145 at 12, and the other pending discovery motions, Docs. 138, 141.
The plaintiff alleges the following facts. Doc. 103. It is a Hong Kong company that makes toys and sells them around the world, including in the United States. Doc. 103 6. In 2010, it developed a chalk holder that looks like a big number two pencil. Doc. 103 11, 12. It obtained a copyright and design patents on the chalk pencil and sold it with success, including to Toys “R” Us starting in 2012 and Dolgencorp starting in 2011. Doc. 103 13–17. In 2014, Toys “R” Us and Dolgencorp stopped ordering chalk pencils from the plaintiff and began selling substantially similar ones made by Ja-Ru. Doc. 103 20–28. It sues Ja-Ru, Toys “R” Us, and Dolgencorp for asserted copyright infringement, patent infringement, trade-dress infringement, and unfair competition. Doc. 103 35–59. It seeks declaratory relief, injunctive relief, actual damages, the defendants' profits from their chalk-pencil sales, treble damages, exemplary damages, punitive damages, interest, attorney's fees, and costs. Doc. 103 at 15–17. It contends the amount in controversy is large (perhaps exceeding seven figures) considering the potential for treble and punitive damages. Doc. 145 at 9.
The defendants deny copyright and patent infringement, Docs. 110, 111, 112, ask the Court to dismiss the trade-dress-infringement and unfair-competition claims, Doc. 113, and bring counterclaims seeking declarations that the copyright, first design patent, and any asserted trade dress is invalid and unenforceable and that the defendants have neither infringed nor competed unfairly, Doc. 110 at 12–22; Doc. 111 at 10–18; Doc. 112 at 12–20. Their affirmative defenses include that the copyright and first design patent are invalid and unenforceable because they do not satisfy statutory requirements and the plaintiff failed to disclose that the chalk pencil is a derivative work. Doc. 110 67, 70, 71, 73; Doc. 111 67, 69−71; Doc. 112 67−>70. They contend the amount in controversy is small, emphasizing that the allegedly infringing chalk pencils retailed for $2 to $3, the defendants discontinued buying them after the plaintiff notified them of alleged infringement, and the total profits of all defendants are approximately $80,000. Doc. 140 at 2−3.
Foremost, Rule 1 provides that the rules “should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” The recent addition of “and the parties” places shared “responsibility to employ the rules in the same way.” Fed. R. Civ. P. 1, Advisory Comm. Notes (2015 Amend.). “Effective advocacy is consistent with—and indeed depends upon—cooperative and proportional use of procedure.” Id.
*2 Rule 26(b)(1) provides that a party “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, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” The recent restoration of those factors to their original place in defining the scope of discovery reinforces the parties' obligation to consider them in propounding and responding to discovery requests. Fed. R. Civ. P. 26, Advisory Comm. Notes (2015 Amend.).
Rule 26(b)(2)(B) provides that a “party need not provide discovery of electronically stored information [ (ESI) ] from sources the party identifies as not reasonably accessible because of undue burden or cost.” On a motion to compel or for a protective order, “the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost.” Fed. R. Civ. P. 26(b)(2)(B). If the party makes that showing, “the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C)” (“the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive”; “the party seeking discovery has had ample opportunity to obtain the information by discovery in the action”; or “the proposed discovery is outside the scope permitted by Rule 26(b)(1)”). Id.
“The court may specify conditions.” Id.
“Good cause” is hard to define but “generally signifies a sound basis or legitimate need to take judicial action” after balancing the interests involved. In re Alexander Grant & Co. Litigation, 820 F.2d 352, 356 (11th Cir. 1987).
Rule 26(c)(1) provides that a party from whom discovery is sought may move for a protective order, and the court may, for good cause, issue an order to protect the party from undue burden or expense, including by forbidding the disclosure or discovery, limiting the scope of the disclosure or discovery, and specifying the terms for the disclosure or discovery. Similarly, Rule 37(a) provides a party may move for an order compelling disclosure or discovery, including if a party fails to respond or provides evasive or incomplete responses to interrogatories or requests for production.
Rule 26(f) requires parties to include in their discovery plan their “views and proposals on ... any issues about disclosure, discovery, or preservation of [ESI], including the form or forms in which it should be produced.” “When the parties do anticipate disclosure or discovery of [ESI], discussion at the outset may avoid later difficulties or ease their resolution.” Fed. R. Civ. P. 26, Advisory Comm. Notes (2006 Amend.). “When a case involves discovery of [ESI], the issues to be addressed during the Rule 26(f) conference depend on the nature and extent of the contemplated discovery and of the parties' information systems.” Id.
“It may be important for the parties to discuss those systems, and accordingly important for counsel to become familiar with those systems before the conference.” Id.
“With that information, the parties can develop a discovery plan that takes into account the capabilities of their computer systems.” Id.
In cases involving large amounts of ESI, the parties may need to agree on search terms. The Sedona Conference
®, Principle 6 The Middle District Discovery Handbook
, Part VIII.D., includes suggested topics for an effective Rule 26(f) conference. It adds that the “Court's e-discovery goal is to facilitate fair, open, proportional discovery of the facts underlying a dispute so that it is resolved on the merits and not by gamesmanship. This requires cooperation among counsel.” Id.
at Part VIII.A.
“The discovery of [ESI] ... stands on equal footing with the discovery of paper documents.” Id.
*3 Rule 30(b)(6) provides that “a party may name as the deponent a public or private corporation ... and must describe with reasonable particularity the matters for examination.” “The named organization must then designate one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf; and it may set out the matters on which each person designated will testify.” Fed. R. Civ. P. 30(b)(6). “The persons designated must testify about information known or reasonably available to the organization.” Id.
Rule 34(a)(1)(A) provides that a party may serve a request within the scope of Rule 26(b) upon another party to produce “any designated documents or [ESI] ... stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.” Rule 34(b)(1)(C) provides that a party requesting documents “may specify the form or forms in which [ESI] is to be produced.” Rule 34(b)(2)(D) provides that if the responding party objects to the specified form, it must state the form or forms it intends to use. Rule 34(b)(2)(E) provides that if a request does not specify a form for producing ESI, absent stipulation or court order, the responding party should produce ESI in the form in which it is “ordinarily maintained” or a form that is “reasonably usable.” And Local Rule 3.03(e) provides, “counsel should utilize computer technology to the maximum extent possible in all phases of litigation.” See also
Doc. 98-1 at 4 (“The Court encourages the exchange of discovery requests on diskette.”).
The defendants ask the Court to enter a protective order limiting questioning on some matters in the plaintiff's Rule 30(b)(6) notices. Doc. 140. Considering the authority; the claims, counterclaims, and defenses; the discovery already produced; the parties' arguments; and the limitations suggested by the parties in correspondence to each other and at oral argument on the motions, the Court grants the motion in part.
For 2b to each defendant, a representative for each defendant should be prepared to testify about the general factors used to calculate the figures offered as total gross profits, and, based on each representative's own understanding of “fixed costs,” “variable costs,” and “incremental costs,” if those costs were used and what they were. The representative should also be prepared to explain the figures on the worksheets already provided to the plaintiff. This ruling substantially accords with the limitations suggested by the parties at oral argument.
For 4f to Ja-Ru, a representative for Ja-Ru should be prepared to testify about any intellectual-property related demand or cease-and-desist letter received in the last five years that led to a discontinuation of the product or other type of settlement. This ruling considers Ja-Ru's ability to easily provide the information in light of its limited corporate structure, the relevancy of the information to any willfulness for deciding damages and attorney's fees, and the limitations suggested at oral argument. For 4f to Toys “R” Us and Dolgencorp, a representative for each of those companies should be prepared to testify about if and how the company maintains information about intellectual-property related demand or cease-and-desist letters received in the last five years that led to a discontinuation of the product or other type of settlement and a general approximation of the number (more than 100; less than 100). If the testimony accords with defense counsel's understanding that the companies handle tens of thousands of products and neither maintains the information in collective form (relying instead on lawyers who come and go), no further discovery would be warranted considering relevancy and proportionality. If the testimony does not, the Court will consider any appropriate follow-up request not resolved by meeting and conferring.
*4 For 1a to Toys “R” Us and Dolgencorp, a representative for each of those companies should be prepared to testify about if and how the company maintains customer communications about a product. If the testimony accords with defense counsel's understanding that the companies deal with certain types of communications only on a store-by-store basis, no further discovery would be warranted on those communications considering relevancy and proportionality. If the testimony does not, the Court will consider any appropriate follow-up request not resolved by meeting and conferring.
For 4c to Toys “R” Us and Dolgencorp, besides the above specific matters, a representative for each of those companies should be prepared to testify about whether the company has a company-wide document-retention policy and, if so, what that is; if, how, and where the company maintains the emails and internet search histories of persons in the company's Rule 26(a)(1) disclosure; whether the company has a company-wide system, program, or database for collecting data relating to the claims, counterclaims, and defenses; and general information about the systems, programs, or databases accessed to obtain the already produced documents. This ruling considers relevancy, the size of the case, the size of the companies, and the overbreadth of the description. This ruling should provide the plaintiff assurance that potential sources of discovery have not been overlooked absent an ESI agreement while recognizing the proportionality factors.
The parties' Rule 26(f) plan was to “work together in good faith to try to agree to a stipulated agreement regarding the disclosure and discovery of [ESI].” Doc. 125 at 6. In retrospect, that was too simplistic and too optimistic. The plaintiff now asks the Court to compel the parties to enter into a mutually agreeable ESI agreement or the one the plaintiff provides absent an agreement, compel the defendants to provide mutually agreeable search terms and date ranges governing the search of ESI, compel the defendants to produce all ESI to their requests for production, and permit them to reopen yet-to-be-conducted depositions to the extent the defendants do not produce that ESI. Doc. 145. Considering the authority; the claims, counterclaims, and defenses; and the parties' arguments; the Court denies the motion without prejudice.
The plaintiff's argument goes something like this: the case involves ESI, the plaintiff anticipates seven-figure damages if successful on all matters, the defendants are large companies, the defendants have not produced ESI in the requested form, and the parties cannot reach an ESI agreement; thus, the Court should order them to agree on one or enter one offered by the plaintiff and order them to provide electronic versions of the documents already produced. Doc. 145. The defendants' response goes something like this: it would be unduly burdensome to duplicate their discovery efforts and the plaintiff is seeking ESI discovery greatly disproportionate to the amount in controversy solely to exact revenge on its competitor, hurt its competitor's relationship with two major customers, and extort purchase agreements through settlement. Doc. 149.
With today's ubiquitous use of electronic devices and systems, ESI will almost always be part of a case. But that an ESI agreement will therefore almost always be part of a case does not follow considering the proportionality factors; thus the problem with the plaintiff's argument. Although an upfront, mutually acceptable ESI agreement is preferred to avoid unnecessary delay and discovery disputes, there are cases—this is one of them—in which the parties cannot agree on whether one is warranted. In light of the above rulings, the current record, the evident unlikelihood that the parties could agree on any search terms and date ranges, and defense counsel's agreement to provide metadata for any already produced document upon the plaintiff's request and explanation for need, the Court sees no present reason to compel the defendants to enter into an ESI agreement or order the other requested relief. For any future document production, absent a reasonable objection, the defendants should produce the documents in the form requested by the plaintiff.
*5 The Court grants in part the defendants' motion for a protective order, Doc. 140, denies without prejudice the plaintiff's motion to compel, Doc. 145, and defers ruling on the requests for expenses in bringing the motions, Doc. 140 at 12; Doc. 145 at 12.
Ordered in Jacksonville, Florida, on January 21, 2016.
End of Document.