I. Introduction

*1 On October 4, 2019, Plaintiff Intex Recreation Corp. (“IRC” or “Plaintiff”) filed the present action against Bestway (USA), Inc. (“Bestway USA”), Bestway Global Holding Inc. (“Bestway Global”), Bestway (Hong Kong) International, Ltd. (“Bestway-Hong Kong”) and Bestway Inflatables & Materials Corporation (“Bestway Inflatables”). Dkt. 1. On November 26, 2019, Plaintiff filed a First Amended Complaint (“FAC” (Dkt. 19)). On September 30, 2022, Plaintiff filed a Second Amended Complaint (“SAC” (Dkt. 85)) which is the operative one.

The SAC names Bestway USA and Bestway Inflatables (collectively, “Bestway” or “Defendants”) and advances six causes of action: (1) false advertising under 15 U.S.C. § 1125(a), (2) unfair competition under the California Business & Professions Code § 17200 et seq., (3) false advertising pursuant to California Business & Professions Code § 17500 et seq., (4) common law unfair competition, (5) infringement of U.S. Patent No. 9,254,240 and (6) infringement of U.S. Patent No. 10,165,869. Dkt. 85 ¶¶ 76–122.

On October 30, 2023, Judge Eick issued an order (the “Magistrate Order” (Dkt. 154)) in response to Defendants' Motion to Compel Plaintiff's ESI Custodians and Documents (the “Motion to Compel” (Dkt. 149)). The Magistrate Order compelled IRC, pursuant to the parties' Stipulation and Order Regarding Electronic Discovery (the “ESI Order” (Dkt. 108)), to identify e-mail custodians and produce e-mails (the “Requested Intex Xiamen Materials”) from non-party Intex Industries Xiamen Co. Ltd. (“Intex Xiamen”).

On November 6, 2023, Intex filed an Ex Parte Application for Stay of Ruling on Defendants' Motion to Compel (the “Application for Stay” (Dkt. 155)) seeking a stay of its discovery obligations based upon its intent to file a motion for review of the Magistrate Order. The Application was denied on November 9, 2023. Dkt. 157 (the “Order re Stay”).

On November 10, 2023, IRC filed a Motion for Review (the “Motion for Review” (Dkt. 158)) that sought a reversal of the Magistrate Order with respect to the Requested Intex Xiamen Materials. Dkt. 158 at 6–7. On December 22, 2023, Bestway filed a Motion to Show Cause Why Plaintiff Should Not Be Held in Contempt for Failing to Comply with Court Orders (the “Motion to Show Cause” (Dkt. 164)), including the ESI Order, Magistrate Order and Order re Stay. On February 5, 2024, a hearing was held on both motions, and they were taken under submission. Dkt. 191.

On February 22, 2024, the parties filed a joint report describing certain informal discovery requests made by Bestway with respect to whether the President of IRC, Tien Zee (“Zee”), has control of Intex Xiamen. Dkt. 195 (“February 22 Report”). The February 22 Report stated that IRC had agreed to produce certain information in response to these requests, and that Zee had agreed to sit for a deposition on the limited issue of his authority to require Intex Xiamen to provide documents to IRC. Id. ¶ 5.

On March 11, 2024, an order issued in which the Motion for Review was denied, and the Motion to Show Cause was deferred to provide IRC with a final opportunity to comply in light of the affirmance of the Magistrate Order. Dkt. 202 (“March 11 Order”). The March 11 Order concluded that the parties were required to provide a joint report within 30 days as to IRC's efforts to receive the ESI from Intex Xiamen, as well as the status of any further discovery on the issue of Zee's control, and the parties' collective and/or respective views on whether to proceed with respect to the Motion to Show Cause. Id. at 11–12.

*2 On March 26, 2024, IRC filed a status report regarding Intex Xiamen's compliance with the March 11 Order. Dkt. 212 (“March 26 Report”). The March 26 Report attached an e-mail from IRC's counsel stating: “Intex Xiamen has agreed to provide the requested ESI for the three custodians to the extent such information is in Intex Xiamen's custody, possession, or control and subject to any further objections that may arise upon review of the ESI.” Dkt. 212-1 at 2.

On April 10, 2024, the parties filed a joint status report. Dkt. 219 (“April 10 Report”). The April 10 Report includes the parties' respective and conflicting positions as to whether IRC was complying with the Magistrate Order and March 11 Order, and whether the Motion to Show Cause should proceed.

On May 1, 2024, recognizing that the April 10 Report raised “certain remaining disputes that are not subject to any pending motion or application,” an order issued that set deadlines for the parties to meet and confer and file “an updated joint status report as to any developments in the discovery process, and any related motion(s) or application(s) that arise from any ongoing discovery disputes stated in [the April 10 Report].” Dkt. 222 (“May 1 Order”). Any such motion(s) or application(s) were to be supported with a consolidated brief not to exceed 10 pages, and a consolidated opposition of the same length. Based on a review of such materials, “a determination [would] be made whether to take the matters under submission, schedule a hearing on such matter(s), and/or to refer any matter(s) to Magistrate Judge Eick.” Id. Bestway was also ordered to include its position on the Motion to Show Cause in such filings. Id.

On June 1, 2024, in response to the May 1 Order, Bestway filed a Motion Related to the Court's Order. Dkt. 240–241 (“Bestway's Consolidated Motion”).[1] On June 10, 2024, IRC filed an opposition. Dkt. 244 (the “Opposition”).

For the reasons stated below, the Motion to Show Cause (Dkt. 164) and Bestway's Consolidated Motion (Dkt. 240) are DENIED WITHOUT PREJUDICE.

II. Analysis

Bestway's Consolidated Motion seeks the entry of an order “holding [Plaintiff] in civil contempt” and requiring the following:

Dkt. 240 at 2.

This is construed as a renewal of the prior Motion to Show Cause, and a new motion to compel certain discovery as to IRC's legal control over Intex Xiamen. Because these informal discovery requests were not discussed or ordered by the Magistrate Order or March 11 Order, they are appropriately considered separately from the Motion to Show Cause for failure to comply with those orders. Each motion is addressed separately in the following discussion.

A. Renewed Motion to Show Cause (Dkt. 164, Dkt. 240)

*3 It is well-established that “courts have inherent power to enforce compliance with their lawful orders through civil contempt.” Shillitani v. United States, 384 U.S. 364, 370 (1966); see Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991). Punishment for civil contempt is usually considered to be remedial and is designed to enforce compliance with a court order. United States v. Powers, 629 F.2d 619, 627 (9th Cir. 1980).

An order finding that a party is in contempt is appropriate “[i]f a person disobeys a specific and definite court order” by failing to take “all the reasonable steps within his power to [ensure] compliance with the court's order.” In re Crystal Palace Gambling Hall, Inc., 817 F.2d 1361, 1365 (9th Cir. 1987) (citing Shuffler v. Heritage Bank, 720 F.2d 1141, 1146 (9th Cir. 1983)) (quotation marks and brackets omitted). In the Ninth Circuit, a party alleging that another person should be held in civil contempt must establish by clear and convincing evidence that the alleged contemnor (1) “violated the court order,” (2) “beyond substantial compliance,” (3) “not based on a good faith and reasonable interpretation of the order.” Lab./Cmty. Strategy Ctr. v. L.A. Cnty. Metro. Transp. Auth., 564 F.3d 1115, 1123 (9th Cir. 2009) (quotations omitted).

Once a prima facie showing of civil contempt is made, the burden shifts to the alleged contemnor to “produce evidence explaining his noncompliance.” United States v. Ayres, 166 F.3d 991, 994 (9th Cir. 1999) (quotations omitted). Although the inability to comply with a court order may be a defense to contempt, the party asserting that defense must show “categorically and in detail” why compliance is impossible. FTC v. Affordable Media, LLC, 179 F.3d 1228, 1240-41 (9th Cir. 1999). It is well-established that a party petitioning for an adjudication that another party be found in civil contempt does not have the burden of showing that the other party has the capacity to comply with the court's order. E.g., NLRB v. Trans Ocean Export Packing, Inc., 473 F.2d 612, 616 (9th Cir. 1973).

Courts have “broad equitable power to order appropriate relief in civil contempt proceedings,” SEC v. Hickey, 322 F.3d 1123, 1128 (9th Cir. 2003). When considering a sanction to make a party comply with a court order, the court should consider “the character and magnitude of the harm threatened by continued contumacy, and the probable effectiveness of any suggested sanction in bringing about the result desired.” United States v. United Mine Workers, 330 U.S. 258, 304 (1947).

Bestway contends that Intex has failed to comply with the Magistrate Order and the March 11 Order in two main respects. First, by producing ESI from only two, rather than three, Intex Xiamen custodians. Dkt. 241 at 8–9. Second, by failing to produce all responsive Intex Xiamen non-custodial ESI and documents, and to properly supplement interrogatory responses, in light of the finding that IRC has legal control over such information. Id. at 9–10. Each is addressed in sequence.

The parties do not dispute that the Magistrate Order, which was approved by the March 11 Order, required IRC to identify three Intex Xiamen custodians. Instead, the dispute centers on whether production of ESI is required from all three custodians, or only two “preferred” custodians of Bestway's choosing from that group of three.[2]

*4 Bestway argues that the Magistrate Order specifically ordered the production of ESI from three Intex Xiamen custodians. Id. at 9. It also contends that IRC's counsel expressly acknowledged this obligation in its e-mail, which stated: “[I]n a good faith effort to abide by the [March 11 Order], Intex Xiamen has agreed to provide the requested ESI for the three custodians.” Id. (quoting Dkt. 212-1 at 2). Thus, Bestway seeks an order compelling IRC to produce ESI for a third custodian by a date certain, and for IRC to be held in contempt for failing to comply with prior orders.

IRC responds that, although it was required to identify three potential custodians, it is only required to produce ESI from two of those three custodians pursuant to the original ESI Order. Dkt. 244 at 8–9. The ESI Order states “[T]he parties agree that they shall exchange a listing of all likely e-mail custodians and a specific identification of the seven most significant listed e-mail custodians ...” Dkt. 108 at 11 (emphases added). The basis for Bestway's prior Motion to Compel was that IRC identified only four e-mail custodians employed at IRC. Dkt. 144 at 6–7. Thus, Bestway identified three additional placeholder custodians from Intex Xiamen. Dkt. 144-4 at 3. When IRC refused to update its list of custodians on the ground that it lacked control over Intex Xiamen's ESI, Bestway then moved to compel IRC to “disclose its seven most significant ESI custodians, which should not be limited to direct employees of [IRC], and collect and produce documents responsive to Bestway's email requests.” Dkt. 144 at 41. The Magistrate Order granted Bestway's Motion to Compel, resolving the issue of legal control in Bestway's favor; the March 11 Order upheld this decision. Dkt. 154; Dkt. 202.

IRC now cites a separate provision of the ESI Order, and argues that it distinguishes between its obligations to identify likely custodians, from its obligations to produce ESI from those custodians. Dkt. 244 at 9. The ESI Order provision states that “[e]ach requesting party shall limit its e-mail production requests to no more than six custodians per producing party for all such requests.” Dkt. 108 at 12 (emphasis added). In light of this provision, IRC contends that, because it has already produced ESI for four IRC custodians, it need only produce ESI for two Intex Xiamen custodians, i.e., not all three that have been identified. Dkt. 244 at 6. This provision was not discussed in either the Magistrate Order or March 11 Order, nor was it raised in the parties' briefing as to Bestway's Motion to Compel.

Bestway argues that IRC has waived this argument by failing to raise it in its opposition to Bestway's Motion to Compel. Dkt. 241 at 9. Although IRC should have raised this earlier in the interest of judicial and party efficiency, the Motion to Compel focused on IRC's failure to comply with the identification of seven custodians, and did not specifically state that it also was seeking the production of e-mails from all seven of those identified. Thus, IRC did not waive the issue.

Further, Bestway has not established a prima facie showing of civil contempt. Because the Magistrate Order and March 11 Order did not reach the issue of whether production was required from all three disclosed Intex Xiamen custodians, Bestway has failed to establish by clear and convincing evidence that IRC has violated the orders or otherwise adopted an unreasonable interpretation of them. Thus, civil contempt is not warranted on this basis. Instead, this new issue may be raised before Judge Eick through a separate motion to compel.

*5 The second issue is whether IRC has produced all relevant Intex Xiamen non-custodial ESI and documents, and properly supplemented interrogatory responses, in accordance with the prior orders. IRC does not dispute that it was required to do so in light of the Magistrate Order and March 11 Order that determined that it had legal control over Intex Xiamen's ESI. See Dkt. 244 at 9–10. However, Bestway contends that “IRC has failed to produce relevant non-custodial ESI from Intex Xiamen, or substantively supplement its interrogatory responses with necessary information” because it has not produced any discovery “relate[d] to conception, design, development, reduction to practice, or testing of commercial embodiments of the Asserted Patents.” Dkt. 241 at 6–7. Bestway argues that “IRC has used this opportunity to fortify its own case by [only] producing Intex Xiamen information that is helpful to support its causes of action.” Id. at 10. IRC responds that it has complied with the requests, and Bestway's arguments are “rooted in speculation” based solely on the “volume and content of the production.” Dkt. 244 at 10.

Bestway has not shown by clear and convincing evidence that IRC has failed to comply with the prior orders, which do not specifically discuss the volume or content of non-custodial ESI that must be produced. IRC does not dispute that it is required to provide such information in light of the finding that it has control over Intex Xiamen's ESI, and has stated that it intends to provide any non-privileged documents responsive to Bestway's requests. Id. To the extent that Bestway has issues with the scope of the production, this does not establish clear non-compliance with prior orders because they did not specifically discuss that scope. Instead, this new issue may be raised before Judge Eick through a separate motion to compel.

For the foregoing reasons, Bestway has not established a prima facie showing of civil contempt. Therefore, the Motion to Show Cause (Dkt. 164) is DENIED WITHOUT PREJUDICE. The issues raised in Bestway's Consolidated Motion may be raised through a new motion before Judge Eick.

Bestway's Consolidated Motion also seeks an order compelling IRC to provide certain discovery contemplated in the February 22 Report as to its control over Intex Xiamen, including a deposition of Zee on that limited topic. Dkt. 241 at 10.

Bestway contends that, because IRC still disputes that it has legal control over Intex Xiamen despite the prior orders, further discovery as to the IRC and Intex Xiamen relationship is necessary to ensure IRC's compliance. Id. at 10–11. IRC responds that it already provided certain information in response to Bestway's informal requests, and that any further discovery, including the deposition of Zee, became unnecessary upon the issuance of the March 11 Order, which addressed the issue of control. Dkt. 244 at 11–12. Further, IRC states that Bestway has never served a deposition notice for Zee, nor any formal discovery requests on this issue, and that for these reasons, “there is nothing for the Court to resolve or compel.” Id. at 11.

IRC's position is the more persuasive one. Although Bestway seeks an order compelling IRC to “uphold its commitment” to engage in such discovery (Dkt. 241 at 5), it has neither established that IRC is violating the prior orders in a manner that would warrant this remedy, or that it has made formal discovery requests through the appropriate channels that now warrant the Court's involvement. This issue may be raised instead with Judge Eick.

III. Conclusion

For the reasons stated in this Order, Bestway's Consolidated Motion and the Motion to Show Cause are DENIED WITHOUT PREJUDICE to the issues being raised pursuant to Local Rule 37 before Judge Eick, in accordance with his rules and procedures.

IT IS SO ORDERED.