Skye Orthobiologics, LLC v. CTM Biomedical, LLC
Skye Orthobiologics, LLC v. CTM Biomedical, LLC
2022 WL 17347634 (C.D. Cal. 2022)
October 26, 2022
Castillo, Pedro V., United States Magistrate Judge
Summary
The court granted Plaintiffs' motion to compel in part, ordering Banman and CTM to serve supplemental written discovery responses and documents within fourteen days. However, the court denied the motion to compel with respect to CTM Medical's shareholder distributions, finding that Plaintiffs had failed to show how the documents were relevant or proportional to the needs of the case.
Additional Decisions
SKYE ORTHOBIOLOGICS, LLC, et al., Plaintiff,
v.
CTM BIOMEDICAL, LLC, et al., Defendants
v.
CTM BIOMEDICAL, LLC, et al., Defendants
Case No. CV 20-3444 MEMF (PVCx)
United States District Court, C.D. California
Signed October 26, 2022
Counsel
Ryan D. Saba, John James Aumer, Laura Kelly St. Martin, Michael Forman, Neda Farah, Rosen Saba LLP, El Segundo, CA, Francesca Dioguardi, Justin L. Wilson, Rosen Saba LLP, Beverly Hills, CA, for Plaintiffs Skye Orthobiologics, LLC, Human Regenerative Technologies, LLC.Thomas H. Case, Paul T. Martin, Hennelly and Grossfeld LLP, Los Angeles, CA, Matthew K. Parker, Pro Hac Vice, Hodgson Russ LLP, New York, NY, Robert J. Fluskey, Jr., Pro Hac Vice, Ryan K. Cummings, Pro Hac Vice, Hodgson Russ LLP, Buffalo, NY, for Defendants CTM Biomedical, LLC, Bryan Banman.
Hassan Elrakabawy, Todd A. Cavanaugh, David Vincent Moore, Los Angeles, CA, for Defendants Gardner Rogers, Veterans Medical Distributors, Inc.
Arash Beral, Saam Takaloo, Blank Rome LLP, Los Angeles, CA, for Defendants Mike Stumpe.
Matthew K. Parker, Pro Hac Vice, Hodgson Russ LLP, New York, NY, Robert J. Fluskey, Jr., Pro Hac Vice, Ryan K. Cummings, Pro Hac Vice, Hodgson Russ LLP, Buffalo, NY, Thomas H. Case, Paul T. Martin, Hennelly and Grossfeld LLP, Los Angeles, CA, for Defendants Pablo Seoane, CTM Medical, Inc.
Michael Roy Williams, Carlos Aaron Nevarez, Bienert Katzman Littrell Williams LLP, San Clemente, CA, for Defendants Nathan Boulais.
Castillo, Pedro V., United States Magistrate Judge
ORDER: (1) GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTIONS TO COMPEL FURTHER PRODUCTION OF DOCUMENTS FROM DEFENDANTS BRYAN BANMAN, CTM BIOMEDICAL, LLC AND CTM MEDICAL, INC. (Dkt. Nos. 180, 184); AND (2) GRANTING PLAINTIFFS' MOTION TO FILE DOCUMENTS UNDER SEAL (Dkt. No. 186)
I. INTRODUCTION
*1 On September 20, 2022, Plaintiffs Skye Orthobiologics, LLC and Human Regenerative Technologies, LLC (collectively, “Plaintiffs”) filed two motions to compel production of documents, one against Defendant Bryan Banman (“Banman”) alone, (“Banman MTC,” Dkt. No. 180), and the other against Banman, Defendant CTM Biomedical, LLC (“CTM”) and Defendant CTM Medical, Inc. (“CTM Medical”). (“CTM MTC,” Dkt. No. 184).[1] The parties submitted a Joint Stipulation in connection with each Motion pursuant to Local Rule 37-2, (“Banman MTC Jt. Stip.,” Dkt. No. 180-1; “CTM MTC Jt. Stip.,” Dkt. No. 184-1). Each MTC was also supported by the declarations of Ryan D. Saba (“Saba Decl. Banman,” Dkt. No. 180-2; “Saba Decl. CTM,” Dkt. No. 184-2) and Robert J. Fluskey, Jr. (“Fluskey Decl. Banman,” Dkt. No. 180-11; “Fluskey Decl. CTM,” Dkt. No. 184-12), and attached exhibits.[2] On September 21, 2022, Plaintiffs filed an Application to File Documents Under Seal, (“Under Seal Appl.,” Dkt. No. 186), supported by the Declaration of Ryan D. Saba, (Dkt. No. 187), to which were attached unredacted versions of the redacted publicly-filed documents Plaintiffs wish to file under seal.[3] (Dkt. No. 187-1).
The Court summarily denied Plaintiffs' MTCs on October 4, 2022 because they were filed late in the discovery period and the noticed hearing dates -- October 11 for the CTM MTC and October 12 for the Banman CTM -- would have rendered it impossible for the Court to rule on the motions and for the parties to comply with any production order before the close of fact discovery on October 12, 2022. (Dkt. No. 196). However, the denial was without prejudice to renewing the motions if the District Judge amended the scheduling order to permit further discovery. (Id. at 5). The parties filed a joint stipulation to amend the scheduling order on October 6, 2022, (Dkt. No. 197), which the District Judge granted on October 13, 2022. (Dkt. No. 199). The fact discovery cut-off is now November 15, 2022. (Id. at 2). The Court reopened Plaintiffs' MTCs on October 17, 2022. (Dkt. No. 200).
*2 The Court concludes that Plaintiffs' MTCs are capable of resolution without a hearing. See L.R. 7-15. For the reasons stated below, the Banman MTC and the CTM MTC are each GRANTED IN PART and DENIED IN PART. Banman and CTM shall serve supplemental written discovery responses and documents as required by this Order no later than fourteen days from the date of this Order. Plaintiffs' Application to File Documents Under Seal is GRANTED, except to the extent that this Order cites to a statement for which under seal treatment was requested.
II. ALLEGATIONS OF THE FOURTH AMENDED COMPLAINT
This matter arises from the alleged appropriation of Plaintiffs' trade secrets by Bryan Banman, one of Plaintiffs' former executives, and Banman's creation of a new business, CTM Biomedical, LLC (“CTM”), which competes in the same business space as Plaintiffs. According to the operative Fourth Amended Complaint, CTM Medical is the “sole Member of Defendant CTM.” (“4AC,” Dkt. No. 130, ¶ 8). Banman is the President and only officer of both CTM and CTM Medical, which Plaintiffs claim are alter egos of one another. (Id. ¶¶ 8, 18-20, 58). Plaintiffs allege that Banman and others conspired to violate RICO by misappropriating Plaintiffs' customer lists, customer order history, specific customer pricing/discount rates, pricing lists, sales materials, and billing guidelines to help form CTM and interfere with Plaintiffs' legitimate business interests. (¶ 146).
Banman is sued for violations of RICO (¶¶ 162-181), Conspiracy to Violate RICO (¶¶ 182-187), Misappropriation of Trade Secrets (¶¶ 188-202), Breach of Contract (¶¶ 203-216), Conversion (¶¶ 217-224), Tortious Interference with Contract (¶¶ 233-239), Tortious Interference with Prospective Economic Advantage (¶¶ 240-249), Breach of Fiduciary Duty (¶¶ 250-260), and Breach of Duty of Loyalty (¶¶ 261-267). CTM and CTM Medical are sued, along with Banman, in the causes of action for Misappropriation of Trade Secrets, Conversion, Tortious Interference with Contract, and Tortious Interference with Prospective Economic Advantage. (See id.).
III. PROCEDURAL BACKGROUND
Plaintiffs filed the Fourth Amended Complaint on February 3, 2022. (Saba Decl. Banman ¶ 3). On May 16, 2022, Skye served Request for Production of Documents, Set Seven on Banman. (Id. ¶ 4 & Exh. A). The seventh set of RFPs served on Banman contained RFP Nos. 234-241, all of which except the last one are at issue in the Banman MTC. (Id.). Banman served written responses on June 15, 2022. (Id. ¶ 5 & Exh. B). Plaintiffs' counsel sent Banman's counsel a meet and confer letter on July 8, 2022, (id. ¶ 6 & Exh. C), and the parties met and conferred on August 2, 2022. (Id. ¶ 7 & Exh. D (transcript)).
On July 26, 2022, Skye served Request for Production of Documents, Set Eight on Banman, Request for Production of Documents, Set Ten on CTM, and Request for Production of Documents, Set Three on CTM Medical. (Saba Decl. CTM ¶ 4). The eighth set of RFPs served on Banman contained RFP Nos. 242-243, both of which are at issue in the CTM MTC. (See id., Exh. A). The tenth set of RFPs served on CTM contained RFP Nos. 331-339, all of which except the last two are at issue in the CTM MTC. (See id., Exh. B). The third set of RFPs served on CTM Medical contained RFP Nos. 94-95, the first of which is at issue in the CTM MTC. (See id., Exh. C). Banman, CTM and CTM Medical responded to the RFPs on August 25, 2022. (Id., ¶¶ 5-7 & Exhs. A-C). Counsel for the parties met and conferred on September 2, 2022. (Id. ¶ 8 & Exh. D (transcript)).
IV. STANDARDS
*3 The Court incorporates by reference its discussion of the scope of permissible discovery pursuant to Federal Rule of Civil Procedure 26(b)(1) set forth in its Order Granting in Part and Denying in Part Plaintiffs' Motion to Compel Further Production of Documents and Interrogatory Responses from Defendant Nathan Boulais, issued on October 4, 2022 and docketed at Dkt. No. 195, pages 4-6.
The Court further incorporates by reference its discussion of the requirements for responding to Requests for Production under Federal Rule of Civil Procedure 34 and the prohibition on boilerplate objections in the same October 4, 2022 Order. (Id. at 11-12).
V. DISCUSSION
A. Banman MTC: RFP Nos. 234-240
1. Banman's Communications With CTM Board Members And Investors (RFP Nos. 234-237)
a. Disputed RFPs And Written Responses And Objections
RFP Nos. 234-237 seek, in identical terms, “All Communications between Banman and [Named Individual] regarding CTM Biomedical, LLC from January 1, 2018 to present.” (Banman MTC Jt. Stip. at 1). The Named Individuals are William Moriarty (RFP No. 234), Nick Edouard (RFP No. 235), Audrey Lipke (RFP No. 236), and Jerry Cole (RFP No. 237). (Id.). Banman served identical written responses and objections to all four RFPs, stating:
Banman objects to this request as overbroad and unduly burdensome. Banman objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). The request seeks all communications with non-party [Named Individual] without regard to the subject matter or allegations in the Complaint. The request improperly seeks documents and communications between Banman and a third party that are unrelated to the subject matter of this lawsuit or the allegations in the Complaint. Skye has made no effort to tailor this request to any allegations, claims, or defenses presented in the litigation. Banman objects to this request because it calls for the disclosure of confidential and proprietary business information that bears no relationship to the subject matter of this lawsuit or the allegations in the Complaint. Banman objects to this request because it is designed to harass and is inconsistent with Magistrate Judge Castillo's November 1, 2021 Order (Dkt. 119) and the Central District of California's Civility and Professionalism Guidelines, ¶ 5. Subject to and without waiving any objections, Banman will produce communications with [Named Individual] concerning Skye or HRT, to the extent they exist and have not previously been produced.
(Id. at 5-7) (emphasis in original).
b. The Parties' Contentions
Plaintiffs represent that Moriarty, Edouard, Lipke, and Cole are CTM's “Advisory Board Chairman, Advisory Board Members and a silent investor.” (Banman MTC at 8). Plaintiffs maintain that “CTM's investors and advisors necessarily have knowledge of CTM's business plans and strategies,” including whether CTM used Plaintiffs' trade secrets, and as such, their communications are relevant. (Id. at 9). At the same time, Plaintiffs contend that Banman's offer to produce only those communications that specifically relate to Skye and HRT is “insufficient” because communications could reflect the disclosure or use of Plaintiffs' trade secrets even without specifically mentioning Skye or HRT. (Id.). To the extent that there is any confidential or proprietary business information in the communications, the Protective Order will sufficiently prevent unauthorized disclosure. (Id.). Plaintiffs further state that the request “is narrowly tailored to seek only text messages between Banman and four CTM board members,” and therefore is not overbroad. (Id. at 9-10) (emphasis added).
*4 Banman states that the RFPs as propounded are patently overbroad, disproportionate to the needs of the case, and necessarily call for irrelevant information because they sought “all communications” concerning CTM, regardless of subject matter. (Id. at 10) (emphasis in original). During the meet and confer process, Banman agreed to produce and did produce communications with the four Named Individuals concerning: “Skye or HRT; the formation of CTM; the customers and sales representatives Plaintiffs have identified as allegedly ‘interfered with’; or the other named defendants.” (Id.). Banman thought he had an agreement with Plaintiffs, which Plaintiffs have apparently abandoned by this MTC. (Id.). Because the parties “resolved this dispute on reasonable terms,” Banman contends that the Court should deny the Motion “on that basis alone.” (Id. at 13). Banman specifically states that he has produced “dozens of emails with the Board Advisors,” as well as his text messages with Cole and Moriarty. (Id. at 14). He further states that he “will be producing additional text messages with Edouard.” (Id.). Banman represents that Lipke is his sister-in-law and a silent investor in CTM Med, but is not a CTM board advisor and is “not involved in the business of CTM.” (Id.). Therefore, there are no relevant communications between Lipke and Banman to produce. (Id.).
c. Ruling
The compromise that Banman represents the parties reached during the meet and confer process is an appropriate accommodation of Plaintiffs' right to relevant text messages bearing on the matters at issue in this case and Rule 26's requirement that discovery be proportionate to the needs of the case. Plaintiffs have not shown that Banman's communications with the Named Individuals on any conceivable topic would necessarily be relevant or proportionate. Accordingly, the Banman MTC with respect to RFP Nos. 234-237 is GRANTED IN PART and DENIED IN PART. Banman is ORDERED to produce text messages between Banman and the four Named Individuals (Moriarty, Edouard, Lipke and Cole) limited to Skye or HRT; the formation of CTM; customers and sales representatives Plaintiffs identified as allegedly “interfered with”; or other defendants by the date provided in the conclusion of this Order. Banman shall also serve amended written responses to the RFPs in compliance with the 2015 revisions to Rule 34, including a statement indicating whether any documents are being withheld pursuant to an objection. If no further documents responsive to the RFPs exist beyond those already produced, Banman shall affirmatively so state.
2. Banman's Financial Information (RFP Nos. 238-240)
RFP Nos. 238-239 seek, respectively, “Documents and Communications which identify your [assets/liabilities] in excess of $10,000.” (Banman MTC Jt. Stip. at 14-15). RFP No. 240 seeks “Documents and Communications which establish your current net worth and financial condition.” (Id. at 15). With the additional objection to RFP No. 240 on the grounds that the terms “current net worth” and “financial condition” are vague and ambiguous, Banman served identical written objections to all three RFPs, stating:
Banman objects to this request as overbroad. Banman objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). Banman objects to this request as premature because Plaintiffs have not established liability, any entitlement to actual damages, or any entitlement to punitive damages. Banman objects to this request as duplicative because Plaintiffs have already questioned Banman at length during his deposition about his [assets/liabilities/financial condition]. On the basis of these objections, Banman will not produce documents and communications in response to this request.
(Id. at 15).
b. The Parties' Contentions
Plaintiffs argue that they are entitled to discovery of Banman's financial information because they are seeking both economic and punitive damages, and discovery of a defendant's net worth and financial condition is directly relevant to punitive damages. (Id. at 16). Plaintiffs contend that the documents requested are the “least intrusive means to obtain the financial information,” which is not otherwise readily available. (Id.). Plaintiffs reject Banman's contention that discovery of financial worth should be delayed, noting that federal courts do not predicate financial discovery on a showing of an entitlement to punitive damages. (Id. at 17) (citing Vieste, LLC v. Hill Redwood Dev., 2011 WL 855831, at *2 (N.D. Cal. Mar. 9, 2011)). Plaintiffs similarly reject Banman's contention that the discovery is duplicative of his deposition testimony, as they are entitled to both written and oral discovery of his financial worth. (Banman MTC Jt. Stip. at 17).
*5 Banman denies that his assets, liabilities and financial condition are relevant to this action, and even if they were, he claims to have provided that information to Plaintiffs “on multiple occasions, both verbally and in writing.” (Id. at 18). Banman states that he was questioned in detail about CTM's financial documents during his deposition, and also provided testimony about “each piece of real property he owns and how he owns them (jointly or individually), the nature and amount of mortgages on such real property, personal bank account locations and balances, personal brokerage accounts, cryptocurrency investments, personal credit card balances, cars, personal property, recreational vehicles, and ownership in other entities.” (Id. at 18-19). Banman states that he has also provided “complete responses” to interrogatories inquiring about his assets and liabilities over $10,000. (Id. at 19). As such, Banman maintains that the RFPs seeking financial disclosures are duplicative and disproportionate to the needs of the case. (Id.). Furthermore, Banman argues that the RFPs are “vague and ambiguous” because “it is not clear what precise documents Plaintiffs are seeking beyond what [he] already identified in interrogatory responses.” (Id. at 19-20).
c. Ruling
Banman's argument in his written objections that the RFPs for financial information are premature is not well taken. “While some federal courts have required a prima facie showing [of an entitlement to punitive damages to obtain net worth and financial condition discovery], the majority have not.” Charles O. Bradley Trust v. Zenith Capital, LLC, 2005 WL 1030218, at *3 (N.D. Cal. May 3, 2005) (citing cases); see also E.E.O.C. v. California Psychiatric Transitions, 258 F.R.D. 391, 394 (E.D. Cal. 2009) (“[M]ost courts do not require that a plaintiff establish a prima facie showing of entitlement to punitive damages before discovering the defendant's financial condition.”). As the Bradley Trust noted in its discussion of United States v. Matusoff Rental Co., 204 F.R.D. 396, 399 (S.D. Ohio 2001), if a court delayed discovery of net worth and financial condition until after a showing of liability, the plaintiff would be required either to prove punitive damages to a different jury, or to seek such damages from the same jury after a pause in trial proceedings for weeks or months while the parties conducted financial discovery. Bradley Trust, 2005 WL 1030218 (citing Matusoff Rental, 204 F.R.D. at 401). As a general matter, neither option would appear to be an efficient use of judicial resources.
Furthermore, the Court is not persuaded that just because Banman has addressed his financial condition in deposition testimony and in response to interrogatories, production of documentary evidence to support his prior representations is somehow disproportionate. Plaintiffs are entitled to test the accuracy Banman's prior representations, and the complaint that Plaintiffs are seeking every scrap of paper showing Banman's financial worth is easily addressed by limiting the production to “documents sufficient to show” for a finite period. Accordingly, the Banman MTC is GRANTED IN PART and DENIED IN PART with respect to RFP Nos. 238-240. Banman is ORDERED to produce documents sufficient to show his assets over $10,000, liabilities over $10,000, and overall financial condition for the period beginning February 14, 2020, i.e., two months before the filing of this action, through September 14, 2022 by the date provided in the conclusion of this Order. Banman may redact privileged and confidential information (such as his social security number, bank account numbers, etc.), but shall serve a privilege log of the redactions simultaneously with the production. Banman shall also serve amended written responses to the RFPs in compliance with the 2015 revisions to Rule 34, including a statement indicating whether any documents are being withheld pursuant to an objection.
B. CTM MTC: Banman RFP Nos. 242-243, CTM RFP Nos. 331-337, And CTM Medical RFP No. 94
1. Banman's Documents Relating To 1159424 Ontario Limited (RFP Nos. 242-243)
a. Disputed RFPs And Written Objections
RFP No. 242 served on Banman seeks: “All TD Bank Account monthly statements for 1159424 Ontario Limited from June 1, 2018 to the present.” (CTM MTC Jt. Stip. at 7). RFP No. 243 seeks: “Documents sufficient to identify Your responsibilities at 1159424 Ontario Limited.” (Id.). With certain objections tailored to the specifics of each RFP, Banman served nearly identical objections to the RFPs, stating in relevant part in response to both RFPs:
*6 Banman objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). The request improperly seeks documents that are unrelated to the subject matter of this lawsuit or the allegations in the Complaint. Skye has made no effort to tailor this request to any allegations, claims, or defenses presented in the litigation. Banman objects to this request because it calls for the disclosure of confidential business information that bears no relationship to the subject matter of this lawsuit or the allegations in the Complaint. On the basis of these objections, Banman will not produce documents in response to this request.
(Id.). In addition, Banman specifically objected to the request for 1159424 Ontario Limited (“Ontario Limited”) bank statements in RFP No. 242 on the additional grounds that the request is “overbroad and unduly burdensome,” “calls for the production of documents in the possession of a non-party,” and seeks “all monthly bank account statements over a four year period for a company that is not a party to this lawsuit.” (Id.). Banman specifically objected to the request for documents identifying his responsibilities at Ontario Limited in RFP No. 243 on the additional grounds that the request is “vague and ambiguous,” “seeks documents concerning Banman's responsibilities at a company that is not a party to this lawsuit,” and seeks business information that is not only “confidential,” but also “proprietary.” (Id.).
b. The Parties' Contentions
Plaintiffs state that discovery of Ontario Limited's monthly bank statements is relevant to their RICO claims because of Banman's ownership share in the entity and Ontario Limited's ownership share in CTM Medical, the sole member of CTM. (Id. at 9). Because Ontario Limited, CTM Medical and CTM are “intertwined and interrelated,” Ontario Limited's financials are “equally [as] important as the financials of CTM and CTM Med[ical], which have already been produced.” (Id. at 10). Furthermore, Plaintiffs state that if Ontario Limited is receiving “consultation fees” from CTM, Plaintiffs are entitled to know how the “ill-gotten” monies were received and to whom or to which entity the monies were distributed. (Id.). For the same reasons, Plaintiffs argues that documents disclosing Banman's responsibilities at Ontario Limited are relevant. (Id.). Plaintiffs assert that the fact that Ontario Limited is not a party to this action is irrelevant because Plaintiffs could simply amend the Fourth Amended Complaint to add Ontario Limited as a defendant or as an alter ego of the corporate defendants in this action. (Id. at 11). Additionally, in light of Banman's ownership interest in Ontario Limited, the requested documents are in Banman's possession, even if Ontario Limited itself is not a party. (Id. at 11-12). Plaintiffs maintain that the Protective Order is sufficient to protect Ontario Limited's confidentiality concerns. (Id. at 11). Plaintiffs also state that the RFP for bank statements is not overbroad because they are seeking documents for “a limited timeframe of four years -- June 1, 2018 to the present,” which is the period during which Banman's alleged wrongdoing occurred. (Id.).
Banman argues that the information sought by RFP Nos. 242-243 is “patently irrelevant, confidential information that is well beyond the scope of Federal Rule 26(b).” (Id. at 13). According to Banman, Ontario Limited's only connection to this case is that it is a shareholder in CTM Medical, which is the sole member of CTM, and therefore is “twice-removed” from CTM, the operating company at issue in this case. (Id. at 14). Furthermore, Ontario Limited is a Canadian company that is not a party to this action, and there are no allegations against Ontario Limited in the Fourth Amended Complaint. (Id.). Banman further notes that the only RICO predicate act at issue here is an alleged violation of the Defend Trade Secrets Act (“DTSA”), which allows only three categories of damages: “(1) lost profits of the plaintiff; (2) disgorgement of the defendants' profits; and (3) a reasonable royalty on sales of products made through misappropriation.” (Id.) (citing 18 U.S.C. § 1836(b)(3)(B)). Banman maintains that “CTM has produced all documents and data that could conceivably be relevant to these damages analyses,” including income statements through 2021, and a revenue report on sales to each medical facility, revenue earned through each sales representative, and the doctors who utilized each product. (CTM MTC Jt. Stip. at 14-15). In sum, Banman argues that in light of the “volume of relevant financials already produced,” there is no need for the production of a foreign company's bank statements. Furthermore, Plaintiffs have not issued a subpoena, using the appropriate channels for foreign discovery under the Hague Convention, to obtain discovery from a foreign company. (Id. at 15). Finally, Banman contends that the details of cash flow transactions and bank account numbers are confidential. (Id.).
c. Ruling
*7 Plaintiffs have not shown how Ontario Limited's bank statements are proportionate to the needs of this case compared to CTM's production of financial information, or how Banman's responsibilities at Ontario Limited have any material bearing on the claims and defenses at issue in this action. While these findings are dispositive, the Court also notes that the fact that Plaintiffs waited until the tail end of discovery to propound these RFPs, after have served literally hundreds of other document requests, suggests that Ontario Limited may be something of an afterthought for Plaintiffs and not a key part of the prosecution of their case. Finally, the Court agrees with Banman that if Plaintiffs were truly interested in Ontario Limited, one would have expected that company to have been mentioned in the Fourth Amended Complaint or any of the several prior iterations of Plaintiffs' claims. One would have also expected Plaintiffs to seek the materials requested in RFP Nos. 242-243 through a subpoena served on Ontario Limited using the appropriate channels for international discovery. Accordingly, the CTM MTC with respect to RFP Nos. 242-243 served on Banman is DENIED.
2. CTM (RFP Nos. 331-337)
The disputed RFPs served on CTM in the tenth set of production requests fall broadly into three categories: RFPs seeking financial information (RFP Nos. 331, 337); RFPs seeking information about Ontario Limited (RFP Nos. 332, 336); and RFPs seeking information about Dr. Hiatt's scientific research (RFP Nos. 333, 334, 335).
a. CTM's Financials (RFP Nos. 331 & 337)
(1) Disputed RFPs And Written Objections
RFP No. 331 seeks CTM's “TD Bank Account monthly Statements” for the years 2018 to the present. (CTM MTC Jt. Stip. at 16). CTM served written objections, stating:
CTM objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). CTM's monthly bank account statement for a four year period are not relevant to any allegation, claim, or defense in this lawsuit. CTM objects to this request as premature because Plaintiffs have not established liability, any entitlement to actual damages, or any entitlement to punitive damages. CTM objects to this request as duplicative because CTM has already produced its financial information, balance sheets, and income statements. On the basis of these objections, CTM will not produce documents in response to this request.
(Id.).
RFP No. 337 seeks CTM's “ ‘revenue forecast’ and/or ‘expense forecast’ projections for 2018 to the present” as described by Banman in his deposition. (Id. at 20). CTM served written objections, stating:
CTM objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). Documents concerning CTM's revenue forecast and expense forecast are not relevant to any allegation, claim, or defense in this lawsuit. The request improperly seeks documents that are unrelated to the subject matter of this lawsuit or the allegations in the Complaint. Skye has made no effort to tailor this request to any allegations, claims, or defenses presented in the litigation. CTM objects to this request because CTM has already produced its financial information, balance sheets, and income statements, including its actual revenue and expenses. On the basis of these objections, CTM will not produce documents in response to this request.
(Id.).
(2) The Parties' Contentions
Plaintiffs argue that CTM's bank statements are relevant to their RICO claims, and reject the argument that the RFP seeking bank statements is premature. (Id. at 16-17). Plaintiffs further argue that the request is not duplicative because “CTM has not already produced its financial information, balance sheets, and income statements as alleged,” (id. at 17), “including its actual revenue and expenses.” (Id. at 21). With respect to the RFP for revenue and expense forecasts, Plaintiffs note that Banman testified that he used rough revenue forecasts as a projection for upcoming years, and claim that they are entitled to Banman's forecasts to determine “whether CTM is misappropriating Plaintiffs' confidential, proprietary and trade secret information to create its own revenue forecast and/or expense forecast.” (Id.).
*8 CTM maintains that its bank account statements are irrelevant and note that Plaintiffs have made “no effort to tie any allegation or cause of action to the need for these bank statements.” (Id.). CTM further states that it is “beyond reasonable dispute that CTM has produced its income statements, balance sheets, and sales data by medical facility, physician, and sales representative. Plaintiffs have offered no explanation as to what additional, relevant information bank statements would provide.” (Id. at 22). With respect to its revenue/expense forecasts, CTM states that it “has agreed to produce the limited forecast data that it possesses. This issue is moot.” (Id. at 24).
(3) Ruling
While the Court has found that Ontario Limited's bank statements are not proportional to the needs of this case, the same cannot be said for CTM's bank statements. It goes without saying that CTM is a primary focus of this action and its financial transactions are highly relevant to Plaintiffs' claims. It is not possible for the Court to resolve the parties' dueling contentions about the completeness of CTM's production related to its finances based on the information provided. However, in light of the centrality of CTM's role in this action, it is not disproportionate to require CTM to produce its readily-available bank statements to either fill in any gaps in its production of financial information or to confirm the accuracy of information already produced. Furthermore, because CTM has agreed to produce the forecast data that Plaintiffs seek, there is no real dispute to resolve. Accordingly, the CTM MTC with respect to RFP Nos. 331 and 337 served on CTM is GRANTED. CTM shall produce its TD Bank Account monthly Statements for the period from January 1, 2018 through September 30, 2022 and the forecast data referred to in Banman's deposition testimony by the date provided in the conclusion of this Order.
b. CTM's Documents Relating To 1159424 Ontario Limited (RFP Nos. 332 & 336)
(1) Disputed RFPs And Written Objections
RFP No. 332 seeks a copy of CTM's “agreement with 1159424 Ontario Limited (discussed on page 49 of Bryan Banman's Deposition, Volume I).” (CTM MTC Jt. Stip. at 17). RFP No. 336 seeks documents “sufficient to identify [CTM's] payments to 1159424 Ontario Limited from June 1, 2018 to the present.” (Id.). CTM served nearly identical objections to these RFPs, stating:
CTM objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). [CTM's agreement with 1159424 Ontario Limited is/Documents concerning payments to non-party 1159424 Ontario Limited are] not relevant to any allegation, claim, or defense in this lawsuit. The request improperly seeks a document that is unrelated to the subject matter of this lawsuit or the allegations in the Complaint. Skye has made no effort to tailor this request to any allegations, claims, or defenses presented in the litigation. On the basis of these objections, CTM will not produce documents in response to this request.
(Id. at 17, 20).
(2) The Parties' Contentions
Plaintiffs contend that CTM's agreement with Ontario Limited is relevant because Banman testified that Ontario Limited received a consulting fee from CTM Medical, which is the sole member of CTM. (Id. at 17). For the same reason, Plaintiffs argue that they are entitled to discovery of CTM's payments to Ontario Limited. (Id. at 20). CTM maintains that its agreement with and payments to Ontario Limited are irrelevant, and note that Plaintiffs have provided “no rationale” as to why this information would be relevant. (Id. at 22).
CTM argues that the mere fact that there is an “ownership structure” linking Ontario Limited to CTM through CTM Medical “does not provide Plaintiffs with carte blanche to obtain all documents regarding financial transactions between these companies or their bank account statements.” (Id.). CTM asserts that during the parties' meet and confer on this topic, Plaintiffs “effectively admitted that their request for CTM's agreement with the Ontario Company is nothing more than an inappropriate fishing expedition.” (Id.). During that conference, when Plaintiffs' counsel was asked to explain why the CTM-Ontario Limited agreement was relevant, counsel stated:
*9 Because it would be interesting to know what agreement Ontario Ltd. had with CTM. I don't know. I don't know what could be in it, but what we have is a contract between the defendant in this case and its [sic], I guess parent of a parent, as you described it. And so I think it's important to know what that agreement is. It may shed light onto something, it may not, but certainly I think it's a relevant document for this case.
(3) Ruling
For the reasons stated above, Plaintiffs have failed to show that information relating to Ontario Limited is relevant or proportionate to the needs of this case. Accordingly, the CTM MTC with respect to RFP Nos. 332 and 336 served on CTM is DENIED.
c. CTM's Documents Relating To Dr. Hiatt's Scientific Research (RFP Nos. 333, 334 & 335)
(1) Disputed RFPs And Written Objections
RFP Nos. 333, 334 and 335 seek documents “containing, referencing, or relating to Dr. Hiatt's research notes and data generated” to create three papers that were used as deposition exhibits: (1) “Human Placental-Derived Connective Tissue Matrix Reduces Mast Cell-Mediated Inflammation and Promotes Constructive Tissue Remodeling in vivo” (Depo. Exh. 239; RFP No. 333); (2) “Human Placental-Derived Connective Tissue Matrix Is Antibacterial for Common Surgical Site Infection Isolates” (Depo. Exh. 240; RFP No. 334); and (3) “Human Placental-Derived Connective Tissue Matrix Reduces Sinonasal Mucosal Inflammation and Reduces Mucosal Polypoid Changes in vivo” (Depo Exh. 241; RFP No. 335). (CTM MTC Jt. Stip. at 17-19). CTM served identical written objections to all three RFPs, stating:
CTM objects to this request as overbroad and unduly burdensome. CTM objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). The Court has already ruled that documents concerning scientific research and clinical studies related to the performance of CTM products are not relevant to this action. See Case No. 2:21-mc-1018 (DMG) (PVCx), Dkt. 48 at 21-23. On the basis of these objections, CTM will not produce documents in response to this request.
(Id.).
(2) The Parties' Contentions
Plaintiffs state that they are “not requesting documents concerning the scientific research and clinical studies related to the performance of CTM, but rather Dr. Hiatt's notes and data generated to create scientific research and clinical studies related to the performance of CTM products.” (Id. at 18). According to Plaintiffs, Dr. Hiatt “once worked for Skye doing research,” and as such, Plaintiffs are entitled to discovery into whether CTM and Banman misappropriated Plaintiffs' trade secrets in testing its products, particularly because Dr. Hiatt testified that to gather the research for her white papers, “she started testing Vivex products and ‘finished with CTM.’ ” (Id.) (quoting Saba Decl. CTM, Exh. G at 44:13-19 and 45:11-20). Plaintiffs therefore contend that “CTM has been presenting a research paper touting the performance of ‘CTM products’ that were, in fact, researched using entirely different products.” (Id. at 18).
CTM argues that the Court has already determined that materials relating to scientific research and clinical studies of CTM products are not relevant to the claims at issue in this case. (Id. at 23). CTM explains:
*10 In the Court's October 28, 2021 decision on a motion to quash non-party subpoenas Plaintiffs issued to certain companies in Indiana, the Court held: “Banman/CTM's Motion to Quash is GRANTED IN PART to the extent that it seeks to exclude from production materials relating to scientific research and clinical studies of CTM products. Skye/HRT appear to concede, and the Court agrees, that scientific research and clinical studies related to the performance, as opposed to the make up or composition, of CTM products currently on the market are not relevant to the claims and defenses in the California Action.”
(Id.) (quoting Banman v. Skye Orthobiologics, LLC, C.D. Cal. Case No. 21-mc-1018 DMG (PVCx), Dkt. No. 48, at 22, submitted as Exhibit 1 to Fluskey Decl. CTM). CTM further states that the Southern District of Indiana adopted this conclusion in quashing Plaintiffs' non-party subpoena to Dr. Hiatt “relating to scientific research, laboratory analysis, and clinical studies of CTM products.” (CTM MTC Jt. Stip. at 23) (quoting Fluskey Decl. CTM, Exh. 2, at 11).
CTM further argues that Plaintiffs' attempt to argue around the Court's finding by stating that they are not seeking “scientific research and clinical studies” related to the performance of CTM products, but rather Dr. Hiatt's “notes and data” generated to create the scientific research and clinical studies, is nonsensical as Dr. Hiatt's “notes and data are documents concerning the scientific research and clinical studies related to the performance of CTM products.” (Id. at 24) (emphasis in original). Additionally, Dr. Hiatt testified that she never performed research on any Skye product and was never compensated by Plaintiffs for any such work. (Id.) (citing Fluskey Decl. CTM, Exh. 3, at 112:2-4 and 74:1-19). CTM also contends that production of Dr. Hiatt's notes would implicate privacy concerns because her notes and data “would necessarily involve identifying patients who used a particular product and whether they were included in the CTM product analysis.” (Id. at 24).
(3) Ruling
The Court has already found that scientific research and clinical studies related to the performance, as opposed to the make up or composition, of CTM products currently on the market are not relevant to the claims and defenses in this action. Plaintiffs' attempt to somehow distinguish Dr. Hiatt's notes about her research from the substance of her scientific findings is difficult to understand and entirely unpersuasive. Accordingly, the CTM MTC with respect to RFP Nos. 333, 334 and 335 served on CTM is DENIED.
3. CTM Medical Shareholder Distributions (RFP No. 94)
a. Disputed RFP And Written Objections
RFP No. 94 served on CTM Medical seeks “Documents sufficient to identify the amounts of distribution or dividends paid to CTM Med shareholders from 2018 to the present.” (CTM MTC Jt. Stip. at 25). CTM Medical objected to the request on the following grounds:
CTM Med objects to this request because it calls for irrelevant information that is beyond the scope of Federal Rule 26(b). Documents concerning distributions or dividends paid to CTM Med shareholders are not relevant to any allegation, claim, or defense in this lawsuit. The request improperly seeks documents that are unrelated to the subject matter of this lawsuit or the allegations in the Complaint. Skye has made no effort to tailor this request to any allegations, claims, or defenses presented in the litigation. CTM Med objects to this request because it is designed to harass and is inconsistent with Magistrate Judge Castillo's November 1, 2021 Order (Dkt. 119) and the Central District of California's Civility and Professionalism Guidelines, ¶ 5. On the basis of these objections, CTM Med will not produce documents in response to this request.
*11 (Id.)
b. The Parties' Contentions
Plaintiffs summarily argue that they are entitled to know what distributions are made by CTM Medical and to whom, stating that “the amounts of distribution[s] or dividends paid to CTM Med shareholders from 2018 to the present [are] directly relevant to Plaintiffs' claims against Defendants, and Plaintiffs' prayer for relief for economic damages and punitive damages in this action.” (Id. at 26). CTM Medical contends that despite having had multiple opportunities, Plaintiffs still have not provided “any justification for the requested documents beyond the conclusory statement that the documents are ‘directly relevant ....’ ” (Id. at 26). According to CTM Medical, at the meet and confer, Plaintiffs' counsel argued that distributions would indicate that CTM Medical is making profits and that the profits are being distributed, and as such, the percentage of the profits that are being distributed would be “important” for Plaintiffs to know. (Id.) (quoting Saba Decl. CTM, Exh. D, at 6:23 - 7:4). However, CTM Medical notes that Plaintiffs have already received its “financial statements that show the company's net income, which reveals the company's profits -- whether distributed or retained.” (CTM MTC Jt. Stip. at 26). CTM Medical argues that distributions to individual shareholders of CTM Medical would not address any liability issues related to Plaintiffs' claims, or have any relevance to Plaintiffs' damages claims, as they have no bearing on allowable damages under the DTSA: Plaintiffs' actual loss, unjust enrichment, or reasonable royalty. (Id. at 27). Furthermore, CTM Medical contends that because Plaintiffs “have what they need to conduct their liability and damages analysis for this case,” production of documents relating to CTM Medical's distributions would be disproportionate to the needs of this case. (Id.).
c. Ruling
Plaintiffs have failed to show how CTM Medical's shareholder distributions are in any way relevant or proportional to the needs of this case. Conclusory assertions of relevance without explanations as to the reason are unpersuasive. Accordingly, the CTM MTC with respect to RFP No. 94 served on CTM Medical is DENIED.
VI. ORDER
For the foregoing reasons, Plaintiffs' MTC is GRANTED IN PART and DENIED IN PART. Banman and CTM are ORDERED to serve supplemental written discovery responses and documents as required by this Order no later than fourteen days from the date of this Order.
IT IS SO ORDERED.
Footnotes
The caption of the Joint Stipulation to the CTM MTC erroneously states that Plaintiffs are seeking further responses to nine RFPs from Banman and to one RFP from CTM Medical. (Dkt. No. 184-1). In fact, Plaintiffs are seeking further responses to two RFPs from Banman, seven RFPs from CTM, and one RFP from CTM Medical. (CTM MTC at 1-2). Because the RFPs propounded on CTM and CTM Medical predominate, for ease of reference and to distinguish that MTC from the MTC seeking documents from Banman alone, the Court will refer to the MTC at Dkt. No. 184 as the “CTM MTC.”
When citing to the exhibits attached to the Saba and Fluskey declarations, the Court will follow each exhibit's internal pagination, not the CM/ECF-generated pagination on the Court's docket.
Portions of the CTM MTC Joint Stipulation were redacted in the public version of the document. While the Court will generally cite to the public version, it is understood that any references to portions of the Joint Stipulation that were redacted will be to the unredacted version attached to Saba's Declaration at Dkt. No. 187-1. To the extent that the Court discloses a particular statement in the Joint Stipulation for which under seal filing was requested, the request to file that particular statement under seal is DENIED.