Summary
recognizing that "where the parties are direct competitors, as here, disclosure of customer lists could potentially result in economic harm to the disclosing party" and limiting discovery of plaintiff's customer list to defendants' attorneys
Summary of this case from United States ex rel. Daugherty v. Bostwick Labs.Opinion
02 Civ. 5914 (SAS)
February 27, 2003
For Plaintiff: Marilyn Neiman, Esq. Levisohn, Lerner, Berger Langsam, LLP New York, New York.
For Defendant: Stephanie F. Adwar, Esq. Furgang Adwar, LLP New York, New York.
MEMORANDUM OPINION AND ORDER
Plaintiff Asch/Grossbardt Inc. ("Asch") raised certain discovery problems in a letter dated December 4, 2002, to Magistrave Judge Douglas F. Eaton. Defendant Asher Jewelry Company, Inc. ("Asher") responded in a letter dated December 17, 2002. On December 18, 2002, Judge Eaton held a lengthy telephone conference to resolve the disputes. Judge Eaton memorialized his rulings in a Memorandum and Order dated December 19, 2002 (the "Order"). Plaintiff has filed Objections to that Order and the defendant has filed a response. My rulings regarding those Objections follow.
I. LEGAL STANDARD
Matters involving pretrial discovery are generally considered non-dispositive. See Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990). A district court may modify or set aside any portion of a magistrate judge's non-dispositive order only if it is found to be "clearly erroneous or contrary to law." Fed.R.Civ.P. 72(a); 28 U.S.C. § 636 (b)(1)(A). "`A finding is `clearly erroneous' when there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" Concrete Pipe and Prods. of California, Inc. v. Construction Laborers Pension Trust For S. California, Inc., 508 U.S. 602, 622 (1993) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)). "An order may be deemed contrary to law when it fails to apply or misapplies relevant statutes, case law or rules of procedure." Verschoth v. Time Warner, Inc., No. 00 Civ. 1339, 2001 WL 546630, at *1 (S.D.N.Y. May 22, 2001) (internal quotation marks and citation omitted).
Because magistrate judges are entitled to broad discretion in deciding discovery disputes, a party seeking to overturn or modify a discovery order bears a heavy burden. See Gorman v. Polar Electro, Inc., 124 F. Supp.2d 148, 150 (E.D.N.Y. 2000) (citing Sara Lee, 900 F.2d at 525. Under this deferential standard of review, a magistrate judge's non-dispositive discovery order should only be reversed for abuse of discretion. See Kraebel v. New York City Dep't of Hous. Pres. and Dev., No. 90 Civ. 4391, 1998 WL 41586, at *1 (S.D.N.Y. Feb. 2, 1998).
II. THE OBJECTIONS
Objection 1: Plaintiff objects to the statement that "it appears that the damaqes on the copyright claim will be very modest." Order at 1. Because this statement is pure dicta and does not relate to the discovery disputes referred to Judge Eaton, it does not constitute a ruling. As such, it cannot be appealed. However, it is not the law of the case and will not bind this Court.
Objection 2: Plaintiff objects to the following statement: "It appears to be undisputed that there is a likelihood of confusion in the market place, at least to some degree, concerning Plaintiff's trademark ("Asch/Grossbardt" and Defendant's trademarks ("Ash" and "Asher")." Order at 1. According to plaintiff, the likelihood of confusion in the market place is the subject of defendant's counterclaims and is hotly disputed by the parties. See Plaintiff's Reply to Counterclaims Asserted in Answer to Amended Complaint ¶ 16 (denying the allegation that there has been actual confusion between the Asch/Grossbardt mark and the Ash and Asher marks). This comment is clearly erroneous and is hereby stricken. This ruling merely acknowledges that this issue is disputed by the parties.
Objection 3: Plaintiff objects to the following statements: "In a March 17 letter, Plaintiff claimed that its trademark had priority, but then it learned that Defendant registered `Ash' earlier and that `Ash' is now an incontestible mark." "In view of Plaintiff's March 17 letter, it is beyond dispute that there is some likelihood of confusion." Order at 1. This finding, too, is clearly erroneous. The March 17 letter was never reviewed by the Magistrate Judge as it was never submitted to this Court. In any event, "likelihood of confusion" is a term of art and a question of fact. Merely because plaintiff learned that defendant had registered a similar mark does not prove a likelihood of confusion. The reference to a likelihood of confusion must be stricken from the Order.
Objection 4: Plaintiff objects, in general, to Judge Eaton's denial of its request for defendant's customer list. Plaintiff first argues that the issue of defendant's customer list was not properly before Judge Eaton as this request was made in plaintiff's Second Document Request to which defendant had not yet responded. This procedural objection is easily dismissed. In its December 4 letter, plaintiff states: "The Polaroid factors . . . require discovery of Defendant's customers." Defendant interpreted this as a request for its customer list to which it vehemently objected. See December 17 Letter at 2-3. The issue, therefore, was properly before Judge Eaton.
Plaintiff also objects to the substance of judge Eaton's ruling, maintaining that it needs defendant's customer list, on an "Attorney's Eyes Only" basis, to determine whether there has been actual confusion and/or a likelihood of confusion. Judge Eaton rejected plaintiff's argument regarding the four Polaroid criteria, stating that "[p]laintiff can make its points by testifying about its own customers, or by producing testimony from a few of its own customers, or from an expert witness. It can also testify about the trade show where both parties display their products." Order at 2.
In the usual case, a plaintiff alleges trademark infringement against a defendant who then resists producing its customer list on grounds that such information constitutes confidential commercial information or a trade secret. See, e.g., Liberty Folder v. Curtiss Anthony Corp., 90 F.R.D. 80, 82 (S.D. Ohio 1981); Battle Creek Equip. Co. v. Roberts Mfg. Co., 90 F.R.D. 85, 86 (W.D. Mich. 1981). Here, Asch, as the counterclaim defendant, is seeking the customer list of Asher, the counterclaim plaintiff. This distinction, however, does not dilute the relevance of Asher's customer list on the issues of actual confusion and likelihood of confusion.
Asch's argument that the identity of Asher's customers is also relevant to the issue of damages is less convincing. See Plaintiff's Objections at 11. Here, the alleged infringer is Asch who is claimed to have sold infringing products to its customers. Therefore, it is Asch's customers, not Asher's, that have some relavence to the issue of damages.
Where the parties are direct competitors, as here, disclosure of customer lists could potentially result in economic harm to the disclosing party. The potential harm to Asher must therefore be balanced against Asch's need for the information. See Battle Creek, 90 F.R.D. at 86. See also Drexel Heritage Furnishings, Inc. v. Furniture USA, Inc., 200 F.R.D. 255, 260 (M.D.N.C. 2001) ("A request for a protective order must be made with appropriate specifics and once it is determined that confidential information is being sought, the party opposing confidential treatment must show that the information is sufficiently relevant to outweigh the harm of disclosure.").
Ample precedent exists for limiting disclosure of highly sensitive, confidential or proprietary information to attorneys and experts, particularly when there is some risk that a party might use the information or disseminate it to others who might employ it to gain a competitive advantage over the producing party.Westside-Marrero Jeep Eagle, Inc. v. Chrysler Corp., Inc., No. Civ. A. 97-3012, 1998 WL 186728, at *2 (E.D. La. Apr. 17, 1998) (citing cases). In most cases, "the key issue often is not whether the information will be disclosed, but under what conditions it should be disclosed." Drexel Heritage, 200 F.R.D. at 260.
In order to protect against any "predatory" practices, while still recognizing the broad scope of discovery in federal actions, the following procedure is appropriate. Before Asher is required to disclose its customer list to Asch, the parties shall enter into a protective order. This protective order should: (1) limit access to the requested information to plaintiff's counsel only on an "Attorney's Eyes Only" basis; (2) limit the number of copies of said information that may be circulated among plaintiff's counsel; and (3) limit the use of said information for purposes of the present litigation only. If the information is disclosed to plaintiff or to any person other than plaintiff's counsel, or if the information is used for any purpose other than the defense of the instant litigation, then the protective order would be violated. If the protective order is violated, both Asch and its counsel will be subject to sanctions from this Court as well as any independent action by Asher for damages. Judge Eaton's ruling prohibiting the disclosure of Asher's customer list is therefore modified to permit disclosure subject to these conditions.
This was time orocedure used in Drexel Heritage, 200 F.R.D. an 262-63, and Liberty Folder, 90 F.R.D. at 82-83, to compel the production of supplier and customer lists, respectively.
In addition to this modification, several of plaintiff's objections to specific statements in this portion of the Order must be sustained. For example, the statement: "I find it to be a transparent ploy to obtain an unnecessary competitive advantage" is surplusage and will be stricken. And because plaintiff has stated that it has made its entire customer list available on an "attorney's eyes only" basis, see Plaintiff's Objections Pursuant to Rule 72 to Magistrate's Memorandum and Order at 10, the statement that "Plaintiff has not volunteered to show its own customer list" muss be stricken.
Objection 5: Plaintiff objects to its exclusion from the inspection of defendant's style books and jewelry items. Initially, the inspection is to be done only by plaintiff's attorneys who may take a maximum of twenty-five photographs. Plaintiff's objection to its exclusion is premature as Judge Eaton will decide, after oral argument, "whether there is justification for showing any of the photographs to Plaintiff's officers." Order at 2. Plaintiff will be given the opportunity to renew its objection once Judge Eaton makes his final ruling. The twenty-five photograph limitation, however, is arbitrary. Accordingly, plaintiff's attorneys will not be limited in the number of photographs they may take during their inspection.
Objection 6: Plaintiff objects to Judge Eaton's ruling directing defendant to produce only those brochures, advertisements, marketing materials, catalogs and sales sheets that it intends to offer at trial. There is no basis for this limitation. Recently revised Rule 26(b)(1) states:
Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead so the discovery of admissible evidence.
Here, plaintiff (counterclaim defendant) intends to defend against the trademark counterclaims asserted by defendant by showing that the paucity of advertising materials used by defendant reflects limited or restricted use of the Ash and Asher trademarks. This is akin to an abandonment defense. A trademark is deemed abandoned "[w]hen its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances." 15 U.S.C. § 1127. One such circumstance is the level of advertising expenditures as shown by the number of advertisements purchased over the years. Thus, the material sought by plaintiff is clearly relevant and relates directly to its defense. In addition, production would not be unduly burdensome as defendant need only produce those materials which are in its possession or within its control. For these reasons, Judge Eaton's ruling is overturned. Defendant must produce the materials sought in Request 4 of Plaintiff's Fist Document Request forthwith.
Objection 7: Plaintiff objects to Judge Eaton's limitation requiring defendant to produce only its 2001 and 2002 catalogs to plaintiff's attorneys. For substantially the same reasons stated for sustaining Objection 6, defendant is directed to produce its catalogs from 1983 to the present forthwith.
IT IS THEREFORE ORDERED that the Order of Judge Eaton, as modified above, shall be given full force and effect Discovery is to be completed by March 31, 2003, as scheduled. A final pre-trial conference is scheduled for April 14, 2003 at 4:30p.m.