Opinion
Jeffrey J. Lederman, Diana Ng, Counsel for Counter-Claimant(s).
Christopher Ashworth, Counsel for Counter-Defendant(s).
ORDER DENYING O-NET'S(1) MOTION IN LIMINE; (2) MOTION FOR SUMMARY JUDGMENT; (3) MOTION TO DISMISS
RONALD WHYTE, District Judge.
Counter-defendant O-Net Communications HK Ltd.'s ("O-Net") omnibus motion in limine , motion for summary judgment, and motion to dismiss were heard on July 9, 2004. For the reasons set forth below, the motion in limine is denied without prejudice, and the motion for summary judgment and dismissal are denied.
I. BACKGROUND
This is a dispute over the payment for (1) the sale of goods between Kaifa Technology ("Kaifa") and E-Tek Dynamics, Inc. ("E-Tek") (E-Tek later merged with JDS Uniphase Corp. ("JDSU")); and (2) the sale of goods between E-Tek and later JDSU, and O-Net. O-Net was spun off by Kaifa. JDSU contends that Kaifa and O-Net agreed that amounts owing between (1) JDSU and Kaifa and (2) between JDSU and O-Net, were to be credited and offset against each other. (First Am. Countercl. ¶ 25.) Kaifa, however, denies such an agreement existed (Kaifa Answer to Countercl. ¶ 25), and alleges that JDSU owes it $3.1 million (Ng. Decl. in Support of JDSU's Opp'n ("Ng Decl."), Ex. H at 2:11-13). JDSU believes much of this debt to Kaifa should be reduced by the amount due to JDSU from O-Net. JDSU also argues Kaifa is liable for the debts of O-Net under an alter ego theory of liability.
The factual background underlying this dispute is set forth in greater detail in this court's March 25, 2004 Order Denying O-Net's Motion to Dismiss.
II. ANALYSIS
1. Motion In Limine
JDSU has produced a November 15, 2001 email from Lynn Fisk, an accounts receivable manager at JDSU, discussing the offset of O-Net and Kaifa invoices. (Decl. Fisk in Support of Opp'n ("Fisk Decl."), Ex. D.) The email concludes with the statement: "Currently, O-Net has no outstanding balance with JDSU Shared Services and Kaifa HK has a credit balance of $189, 776.68." (Id.) O-Net has seized upon this sentence as "proof" that O-Net was not indebted to JDSU prior to November 15, 2001. Further, O-Net argues that JDSU has failed to produce any other evidence, as part of its Fed.R.Civ.P. 26(a) initial disclosures, that show any indebtedness incurred by O-Net to JDSU subsequent to November 15, 2001. O-Net now moves, pursuant to Fed.R.Civ.P. 37, to bar JDSU from introducing any additional documents showing O-Net's indebtedness to JDSU that were not contained in its Rule 26 disclosure.
JDSU claims to have produced 2700 pages of documents in support of JDSU's counterclaims as part of its inital disclosures. (Ng. Decl. ¶ 4.)
Fed. R. Civ. P. 37(c)(1) states in relevant part: "A party that without substantial justification fails to disclose information required by Rule 26(a) or 26(e)(1)... is not, unless such failure is harmless, permitted to use as evidence at a trial, at a hearing, or on a motion any witness or information not so disclosed." The rule provides two exceptions to this sanction: (1) if the party's failure to disclose is substantially justified; and (2) if the failure to disclose is harmless. Id . O-Net has failed to identify any specific documents that it seeks to bar through this motion in limine. It rather merely seeks to preclude JDSU from offering documents not disclosed. Although O-Net is correct that a party is required to disclose all documents that support its claims, the court is not at this stage of the litigation willing to bar JDSU from offering any later discovered documents that fall within one of the discovery exceptions. Therefore, O-Net's motion in limine is denied.
2. Motion for Summary Judgment
O-Net argues the final sentence of the November 15, 2001 email is evidence that O-Net owed no debt to JDSU. O-Net contends no evidence shows O-Net incurred additional debt to JDSU after November 15, 2001. Thus, O-Net concludes summary judgment should be granted in its favor.
O-Net, however, not only mischaracterizes JDSU's theory of liability, but also appears to exclusively and unjustifiably rely on what it says is the undisputed meaning and content of the November 15, 2001 email. JDSU contends that it is not liable for the debt Kaifa has brought suit to collect because that debt should be offset by O-Net's debt to JDSU. Kaifa argues that O-Net is a separate legal entity, and no offset agreement was in place. Resolving the amount of O-Net's liability to JDSU, if any, is dependent on resolving the factual dispute as to whether Kaifa, O-Net, E-Tek, and JDSU entered an agreement to offset the debts against each other. The November 15, 2001 email does not resolve this issue.
The subject of the November 15th email is the effect of Kaifa/O-Net offsets on JDSU's accounts receivables. (Fisk. Decl., Ex. D.) In explaining how she concludes that O-Net has no outstanding balance to JDSU, Fink states "I applied the $3, 391, 015.38 to clear the O-Net open invoices which left a balance of $247, 305.75. This remaining balance was cleared by the Kaifa HK transfer... leaving a remaining credit balance on Kafia HK account of $189, 776.68." (Id.) What this explanation makes clear is that the conclusion that O-Net owed nothing to JDSU on November 15th is based on the assumption that the parties were crediting and offsetting at least $3, 391, 015 in debt. If Kaifa's position is proven to be correct, and no offset agreement was in place, then Fink's conclusion of O-Net's liability would be based on a false assumption. In that case, the email would not support the proposition O-Net seeks to prove on this motion. Therefore, given the early stages of this litigation, the court finds it premature to grant summary judgment.
O-Net objects to declarations filed by Fisk and Noli Aspuria, an accounts payable processor for JDSU, on a variety of bases including hearsay. The objections might have merit if the declarations were offered for the truth of the assertions in them. However, their purpose was to show on what information, whether true or not, the Fisk November 15th email was based. If those assumptions are wrong (as Kaifa contends) then the email conclusion that O-Net owed no debt to JDSU is wrong. The court is unwilling to grant summary judgment for O-Net without resolution by summary judgment of Kaifa's claim or at least an opportunity for JDSU to discover whether Kaifa has a basis for its claim that there was no offset agreement.
3. Motion to Dismiss
O-Net's motion to dismiss is dependent on its success on its motion in limine. Therefore, O-Net's motion to dismiss for failure to state a claim must be denied. Similarly, O-Net's argument that the amount in controversy is insufficient to establish diversity jurisdiction is without merit.
III. ORDER
For the foregoing reasons, the court denies without prejudice O-Net's motion in limine , and denies O-Net's motions for summary judgment and to dismiss.