Opinion
Civil No. 01-1108-HA
March 4, 2003
Peter Heuser, Owen Dukelow, Kolisch Hartwell, Portland, Oregon, Eric Bartsch, Marc Al, Sarah Stroebel, Linquist Vennum, Minneapolis, Minnesota, for Plaintiff.
Michael Ratoza, Laura Caldera Taylor, Garvey, Schubert Barer, Portland, Oregon, Bryan P. Coluccio, Lawrence Cock, Steven Kerr, Cable, Langenbach, Kinerk Bauer, Seattle, Washington, for Defendant.
OPINION AND ORDER
Before the court are plaintiff's motion for sanctions (Doc. #290) and defendant's motion to compel (Doc. #309). For the following reasons both motions are granted.
BACKGROUND
On April 9, 2002, Judge Frye granted in part plaintiff's motion to compel the production of defendant's cost documents. Specifically, Judge Frye granted request for production 10:
10. Copies of all job costing reports, cost of goods sold general ledger detail, accounting computer reports, overhead allocation reports, and any other documents you have which relate in any way to your actual costs of producing and manufacturing soy and rice based beverages, including SOY*UM and RICE*UM beverages.
Rather than complying with Judge Frye's order and producing cost documents, plaintiff produced cost summaries that were prepared for litigation. After the case was transferred to this court, a Rule 16 telephonic conference on plaintiff's second motion to compel was held on October 25, 2002. At the conference, defense counsel stated that the documentation responsive to request for production 10 was too voluminous to produce:
Mr. Coluccio: [T]he massive original documents of the company have and remain available for their inspection. There's not been a refusal to produce, but I'm not going to photocopy what would amount to a hundred Bankers Boxes worth of documents.
The Court: All right. They can be made available.
Mr. Coluccio: There is no problem in the sense that we made original business records, voluminous records available at our facility. . . . If they want to come look at them, they're more than welcome to.
The Court: I'm sure they'll be there within the next two weeks.
In accordance with this court's order, the parties scheduled a document inspection for January 6, 2003. Prior to the document inspection, plaintiff sent defendant a proposed document inspection stipulation. This stipulation outlined the relevant documents sought by plaintiff and was communicated to defendant in order to facilitate an efficient inspection. According to the record before the court, defendant did not sign the stipulation or otherwise send a written objection to plaintiff.
Plaintiff traveled to defendant's headquarters in Tualatin, Oregon on January 6, 2003. Contrary to defense counsel's representation to the court and in contravention of the court's order, plaintiff was not allowed to inspect one hundred boxes of documents. During the February 28, 2003, oral argument on this motion, defense counsel admitted that he did not make one hundred boxes of documents available but instead directed plaintiff's lawyers and expert to wait in an empty conference room.
Defense counsel then instructed plaintiff to make particularized requests as to specific documents. After plaintiff made a request, defense counsel would leave the room for periods of up to two hours and return with a small stack of documents. Only 246 pages of documents were produced in two and one-half days. Plaintiff justifiably terminated the wasteful inspection on the third day.
DISCUSSION A. Plaintiff's Motion for Sanctions 1. The Tualatin Inspection
The court is permitted to award costs and fees associated with a discovery request if a party has failed to comply with a prior court order mandating disclosure. Fed.R.Civ.P. 37(b)(2). "[T]he court shall require the party failing to obey the order . . . 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." Id.
Defense counsel's tactics during the Tualatin inspection were without justification. Although defense counsel now claims he did not provide plaintiff with access to one hundred boxes of documents because some of the documents were not relevant to the litigation and others were not specifically requested by plaintiff, such rationalizations were never raised during the October 25, 2002, conference. Instead, defense counsel stated that the "one hundred Bankers Boxes" had not been produced merely because they were too voluminous. In response to this explicit representation, the court ordered plaintiff to travel to Tualatin to inspect the boxes. It is beyond dispute that once plaintiff went to the expense of traveling to Tualatin with an expert, the discovering party was prevented from inspecting the one hundred boxes of documents defense counsel had assured the court would be made available for inspection.
Rule 34(b) requires a party to produce documents "as they are kept in the usual course of business or shall organize and label them to correspond with the categories in the request." If only 246 pages were at issue, there would have been no need for plaintiff's lead counsel, local counsel, and expert to travel to Tualatin. In clear violation of this rule, defendant shuttled between an empty conference room and the location of the original documents, bringing papers to plaintiff in a piecemeal, painstaking fashion.
Defendant produced 246 pages of documents during the Tualatin inspection. Some pages were responsive to plaintiff's request for production 10 — production which Judge Frye ordered on April 9, 2002. Thus, nearly one year and two court orders later, defendant finally complied with the order. Accordingly, plaintiff is entitled to an award of sanctions, as described below.
2. Plaintiff's Third Request for Production
On September 25, 2002, plaintiff served defendant with its third request for production. Rule 34 requires a party to make a written response to a request for production within 30 days of service of the request. Defendant has yet to serve plaintiff with a written response to its third request for production. Defendant asserts to the court that it is not in possession of any of the documents sought by plaintiff's third request. This explanation does not relieve defendant of its duty to provide plaintiff with a written response containing that denial.
3. Sanctions Ordered
Based on the foregoing discussion, plaintiff is awarded the following expenses and fees:
1. Reasonable expenses and fees associated with enforcing Judge Frye's April 9, 2002, order, including any letters written between April 9, 2002, and September 4, 2002, the date plaintiff filed its second motion to compel;
2. Reasonable expenses and fees associated with plaintiff's second motion to compel;
3. Reasonable expenses and fees associated with defendant's January 6, 2003, trip to Tualatin, Oregon to inspect documents with an expert, including the costs associated with preparing the document inspection stipulation and communicating the proposal to plaintiff;
4. Reasonable expenses and fees associated with compelling a response to plaintiff's third request for production;
5. Reasonable expenses and fees associated with rescheduling the deposition of Russ Augenstein, but not the costs and fees associated with the deposition itself;
6. Reasonable expenses and fees associated with plaintiff's motion for sanctions.
Plaintiff shall submit to the court documentation of these costs within 20 days of this order. Defendant is ordered to pay the amount designated by the court within 20 days of the court's approval of plaintiff's cost accounting.
B. Defendant's Motion to Compel and Plaintiff's Outstanding Discovery Requests 1. Plaintiff's Third Request for Production
Defendant shall serve a written response to plaintiff's third request for production within seven days of this order.
2. Plaintiff's Third Set of Interrogatories
On December 6, 2002, plaintiff served defendant with its third set of interrogatories. Defendant objected to the interrogatories, asserting, inter alia, that plaintiff had exceeded the 25 interrogatory limit established by Fed.R.Civ.P. 33(a). The court grants plaintiff leave to serve its third set of interrogatories. The court directs defendant to respond to interrogatories 1, 3, 4, 5, 6, and 7 within seven days of this order. Each interrogatory is reasonably calculated to lead to the discovery of admissible evidence. Fed.R.Civ.P. 26(b)(1). Interrogatory 2 is premature and will be addressed in the course of expert discovery, which ends March 31, 2003.
3. Plaintiff's Proposed Document Stipulation
The parties have cited various sections of the court's April 9, 2002, order as grounds for withholding discovery. The litigation has changed since that order, with new factual allegations and parties being substituted. The parties are advised that to the extent that any portion of this order is inconsistent with the April 9, 2002, order, this order controls.
Citing the need to protect various product formulations, the parties have redacted certain documents or refused to produce other documents altogether. As the court ordered on October 25, 2002, neither party shall withhold discovery on the basis of a product formulation absent "a direct showing of formulation. I'm not going to allow the parties to in any way say that this document goes to formulation in a tangential way. If it's not direct, then you can't claim that you do not have to produce it." A party violating this order is subject to sanctions.
Except for the exclusions outlined below, defendant is ordered to produce all non-privileged documents responsive to the revised document inspection stipulation attached to the declaration of Eric Bartsch in support of plaintiff's motion for sanctions. Any document withheld because of privilege must be properly designated in a privilege log.
Defendant is excused from producing the following documents:
* Master sheet of ingredients
* General ledgers which include detailed accounts for all products and account for the manner in which costs and revenue are allocated, and which describe variances from actual and standard costs for any products except for all sizes of Soy*Um, Rice*Um, and Trader Joe's brand product lines, which shall be produced.
* Monthly and annual sales forecasts for any product except for all sizes of Soy*Um, Rice*Um, and Trader Joe's brand product lines, which shall be produced.
* Monthly and annual sales for any product except for all sizes of Soy*Um, Rice*Um, and Trader Joe's brand product lines, which shall be produced.
* Documents relating to "product loss reserves" except for all sizes of Soy*Um, Rice*Um, and Trader Joe's brand product lines, which shall be produced.
The court's order as to these documents is bilateral. All sections of the document inspection stipulation are binding on both parties. Plaintiff shall produce or make available for inspection all documents in its control which are relevant and responsive to the document inspection stipulation. For example, ¶ 1.d.ix. requests:
Copies of any confidentiality or non-disclosure agreements, private label agreements, toll packing agreements, license agreements, contract packing agreements, requirements/supply agreements, concerning the development, manufacture, packaging, supply, shipment, or stocking of soy or rice-based beverages for Trader Joe's.
This and all other requests in the document inspection stipulation apply to both parties and require each party to produce all relevant, responsive documents in its control.
Neither party shall contend that it does not "possess" or "control" a document because such documents are in the possession of a closely related entity or affiliate. The term "control" includes those documents that the party has the ability to obtain upon demand. See Fed.R.Civ.P. 34(a); U.S. v. Int'l Union of Petroleum and Indus. Workers, 870 F.2d 1450, 1452 (9th Cir. 1989) (holding that a parent company "controls" the documents of its subsidiary for purposes of Rule 34). The non-privileged merger documents authored by Kim Jenkins, the former president of First Light Foods, plaintiff's predecessor, are within plaintiff's control and are discoverable for purposes of Rule 34.
4. Deposition of Russ Augenstein
Within seven days of this order, the parties shall reschedule the deposition of Russ Augenstein. If the parties are unable to cooperate sufficiently to do so, the court will set the date.
5. Defendant's Motion to Compel
Defendant moves to compel responses to the interrogatories and request for production served on plaintiff on December 10, 2001. In its responsive memorandum, plaintiff contends: (1) that all responsive documents have been produced; and (2) defendant may inspect any remaining documents at plaintiff's headquarters in Minnesota. The only category of documents plaintiff refuses to produce involve contracts plaintiff has signed with other customers for producing soy and rice beverage products. See defendant's request for production 46. With the exception of confidentiality and non-disclosure agreements, plaintiff is ordered to produce documents that are responsive to request for production 46. This request is likely to lead to the discovery of admissible evidence because it bears on industry practice and the issue of pricing involved in this case. Plaintiff agrees to produce or make available for inspection the remainder of the information sought in defendant's requests, and defendant's motion to compel is granted. Within seven days of this order, the parties shall schedule a date for the Minnesota inspection. If the parties are unable to cooperate sufficiently to do so, the court will set the date.
CONCLUSION
For the foregoing reasons plaintiff's motion for sanctions (Doc. #290) and defendant's motion to compel (Doc. #309) are granted.
IT IS SO ORDERED