Opinion
Civil Action Number 04-840 Section "L" (4).
December 22, 2004
ORDER REASONS
Pending before the Court is the Defendant's Motion to Compel Discovery Responses. This motion was taken under submission by the Court on November 24, 2004. For the following reasons, the Motion to Compel is GRANTED in part and DENIED in part.
I. BACKGROUND
Plaintiff Intralox, LLC, is a Louisiana company that designs, manufactures and sells plastic modular conveyor belts and accessories ("PMB products"). Intralox is the largest seller of PMB products and has a 70 percent share of the American market. Defendant Habasit Belting, Inc., is a Delaware corporation that has its principal place of business in Georgia. Like Intralox, Habasit also designs and manufactures conveyor belts and related accessories for use in various commercial and industrial settings to transport people and materials. Habasit is a relative newcomer to the PMB market, and supplies plastic modular conveyor belt systems to approximately 5 percent of the total American market.
Intralox works with original equipment manufacturers (OEMs) to develop conveyor belt systems to suit their needs. The company rarely charges clients for the design and intellectual property expended in consultations with these manufacturers. The Plaintiff asserts that some of Intralox's competitors have taken advantage of Intralox's free consultations by attempting to sell conveyor belts to customers with whom Intralox has shared its intellectual property and system designs. Intralox asserts that it has lost sales to competitors who have relied on the benefit of Intralox's intellectual property and consulting work.
Intralox avers that it has taken steps to allow it to more systematically maintain its high level of service, reward repeat customers with better discounts on products, and better protect its intellectual property from competitors. One technique Intralox uses to retain customers is to offer preferred supplier agreements (PSAs) to customers who select Intralox as their preferred supplier. The preferred supplier agreements lock customers who use Intralox's consulting and design services into contracts for the sale of Intralox's modular conveyor systems. Intralox asserts that the preferred supplier agreements generally contain no legal sanction for violating the terms of the agreement, and no customer ever has suffered a legal penalty for violation of the agreement. The Plaintiff asserts that the agreements simply allow Intralox to offer its products, and its intellectual property, at a better price. Intralox states that it continues to sell its products to customers who wish to purchase products from competing manufacturers on an individual sale, lowest price only, basis. Intralox does not condition these job-by-job sales on the use of Intralox's consulting services.
In March 2004, Intralox's President received a letter from Defendant Habasit's counsel demanding that Intralox cease and desist from false advertising and unfair competition in the market for the sale of modular plastic belting. Habasit's letter indicated that Habasit perceived statements made by Intralox to its customers to be "false and misleading" as they related to both Intralox and Habasit. Habasit also indicated that it was concerned with what it perceived to be Intralox's anticompetitive conduct:
Intralox is also engaging in other forms of unfair competition which have injured and continue to injure Habasit. Intralox is insisting upon exclusive dealing relationships with its customers for the purpose of stifling competition from Habasit and other suppliers. Such exclusive dealing relationships constitute an improper exercise and maintenance of Intralox's market power with respect to the sale of plastic modular belting products and services, and serve no legitimate pro-competitive business purpose.
The letter expressed Habasit's belief that Intralox's conduct violated numerous federal and state laws, including the Lanham Act, various trade libel laws, state tort law, unfair competition laws, tortious interference with business relationships, and deceptive trade practices acts. Habasit claimed to have been injured by Intralox's conduct and demanded that Intralox cease and desist from making representations to its customers about both Intralox's and Habasit's products. The letter warned that if Intralox did not cease its conduct, Habasit would consider its legal rights and seek redress for Intralox's improper and anticompetitive conduct.
Shortly after receiving the letter, Intralox initiated a declaratory judgment action pursuant to 28 U.S.C. § 2201. Intralox sought a declaration that its conduct did not violate the Clayton Act, the Sherman Act, the Lanham Act, did not constitute trade libel, did not constitute intentional interference with contractual relations, and did not constitute deceptive trade practices or violate "little FTC Acts." Defendant Habasit answered the complaint seeking the declaration, denying the allegations. In its answer, Habasit asserts counterclaims for false advertising, violations of the Louisiana Unfair Trade Practices Act, trade libel and product disparagement, slander, tortious interference with business relations, and tortious unfair competition.
On May 19, 2004, Habasit filed a Motion to Dismiss Counts I and II (Count I seeks a declaration that Intralox's conduct does not violate § 3 of the Clayton Act; Count II seeks a declaration that there is no violation of the Sherman Act) of Intralox's complaint. On July 2, 2004, the Court issued an Order and Reasons granting Habasit's Motion to Dismiss Counts I and II. Counts III through VI of Intralox's complaint remain. These counts seek declaration that Intralox's conduct does not violate the Lanham Act false advertising provisions, does not constitute trade libel, does not constitute intentional interference with business relations, and does not constitute deceptive trade practices or violate "little FTC Acts."
II. Defendant's Motion to Compel Discovery Responses
Pursuant to Federal Rule of Civil Procedure 37 and Local Rule 37.1, Habasit moves the Court to compel Intralox to provide full and complete responses to Defendant's First Set of Interrogatories to Plaintiff and Defendant's Request for Production of Documents to Plaintiff. On August 3, 2004. Habasit served Intralox with Defendant's First Interrogatories and Requests for Production of Documents ("Habasit's Discovery Requests"). According to Habasit, Intralox is relying on the Court's July 2, 2004 order dismissing the antitrust counts from Intralox's complaint as justification for refusing to provide full interrogatory responses or to produce certain documents that Habasit believes are necessary to adequately defend against Intralox's claims and to prosecute Habasit's counterclaims. The parties engaged in a discovery conference on October 15, 2004, during which Intralox allegedly reaffirmed its position that it would not provide responses to produce documents that have any relation to antitrust issues without a Court order, regardless of their relevance to Habasit's counterclaims. Therefore, Habasit brings this motion to demonstrate that Intralox's objections to Habasit's Interrogatories numbers 6 and 21, and Document Request numbers 36-38, 44, 52, 53, 55, 56, 59, and 63 are wholly without merit. (Habasit's Exhibit A). Additionally, Habasit asserts that it is entitled to recover all reasonable expenses, including attorney's fees, if this motion is granted. Intralox responds that Habasit's discovery requests are overbroad, unduly burdensome, and seek irrelevant information. While Intralox objects to producing every document relating to competition in the entire PMB market, Intralox agrees to producing all of its corporate documents referencing its competition with Habasit in the PMB market.
Intralox also argues that many of the discovery requests seek confidential, commercially sensitive information. However, the parties entered into a protective order signed by the Court on October 15, 2004 which protects such proprietary information. Therefore, whether or not the Habasit's Discovery Requests seek confidential information should not be a problem.
LAW AND ANALYSIS
A. Habasit's Discovery Requests
Pursuant to Federal Rule of Civil Procedure 26, Habasit is entitled to discovery regarding any non-privileged matters relevant to the defense of claims against Habasit and to prosecution of counterclaims brought by Habasit. "Relevancy is broadly construed and a request for discovery should be considered relevant if there is any possibility that the information sought may be relevant to the subject matter in the action or if there is any possibility that the information sought may lead to the discovery of admissible evidence." Garcel, Inc. v. Hibernia Nat. Bank, 2002 WL 100605 at *2 (E.D. La. 2002); see also Fed.R.Civ.P. 26(b)(1). Courts have recognized that, though discovery rules are to be broadly applied, discovery should not be a boundless fishing expedition. Garcel, 2002 WL 100605 at *2. Furthermore, discovery should be limited if the "burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case . . . and the importance of the proposed discovery in resolving the issues." Fed.R.Civ.P. 26(b)(2).
The extent of discovery that the Court should permit is dependant upon the issues presented in the case. Intralox seeks declaration that Intralox's conduct does not violate the Lanham Act's false advertising provisions, does not constitute trade libel, does not constitute intentional interference with business relations, and does not constitute deceptive trade practices or violate "little FTC Acts." These claims require proof that Intralox did not injure Habasit by making false statements about Intralox's product to Intralox's audience, knowingly disparaging Habasit's product, or knowingly causing a business contract between Habasit and someone with whom Habasit had a business relationship to be breached. Additionally, Habasit has asserted counterclaims for false advertising, violations of the Louisiana Unfair Trade Practices Act, trade libel and product disparagement, slander, tortious interference with business relations, and tortious unfair competition. In order to succeed on its counterclaims, Habasit must prove that Intralox committed "fraud, misrepresentation, deception or other unethical conduct" with respect to Habasit. Tubos de Acero de Mex., S.A. v. Am. Int'l Inv. Corp., 292 F.3d 471, 480 (5th Cir. 2002), citing, Omnitech Intern., Inc. v. Clorox Co., 11 F.3d 1316, 1332 (5th Cir. 1994). Habasit's discovery requests should not be permitted if they seek responses that are overly burdensome or would not reasonably lead to admissible evidence.
Logan v. Burgers Ozark Country Cured Hams, Inc., 263 F.3d 447, 462 (5th Cir. 2001) (sets forth the elements of a Lanham Act false advertising claim).
Aubil v. CBS 60 Minutes, 67 F.3d 816 (9th Cir. 1995) (explaining trade libel).
Islami v. Covenant medical Center, Inc., 822 F. Supp. 1361, 1388-1389 (N.D. Ia. 1992) (sets forth the elements of a claim of intentional interference with business relations).
Intralox has objected to Habasit's Interrogatories numbers 6 and 21, and Document Request numbers 36-38, 44, 52, 53, 55, 56, 59, and 63. Request numbers 36 and 53 seek all documents regarding Intralox's perception and analysis of competition with other entities engaged in the marketing and sale of PMB products. (Habasit's Exhibit A, pages 1 and 3). Habasit argues that this information is directly related to Intralox's efforts to thwart Habasit's entry into the PMB market. However, these requests are extremely vague and would impose an unjustified burden on Intralox. Habasit fails to show the relationship between these documents and any alleged unethical conduct on the part of Intralox with respect to Habasit's entry into the PMB market. Rather, compelling responses to Request numbers 36 and 53 would enable Habasit to go on a prohibited "fishing expedition" through all of Intralox's business documents having anything to do with Intralox's analysis of its competition in the PMB market.
Request numbers 37, 38, and 63 seek all documents related to Intralox's pricing, discounts, incentives and rebates offered to actual or potential PMB customers generally and pursuant to its partner agreements specifically, in the last five (5) years. (Habasit's Exhibit A, pages 2 and 4) According to Habasit, these documents are directly related to Habasit's unfair competition counterclaim, in which Habasit alleges preferential treatment by Intralox to specific customers in order to keep them from engaging in business with Habasit. While Request number 37 and 38 do seek information that could reasonably lead to evidence that Intralox engaged in unfair competition and unfair trade practices, Request number 63 is overly burdensome and unreasonably cumulative. Fed.R.Civ.P. 26(b)(2). Specifically, Request number 63 asks for "[a]ll documents which reflect (a) the price (including discounts, rebates and other price adjustments) at which Intralox has sold PMB products, equipment or services to customers in North America during the relevant time period; and (b) the average variable costs of such sales." (Habasit's Exhibit A, page 4). In Request numbers 37 and 38, Habasit has already asked for documents relating to pricing, sales incentives, and rebates. Request number 63 seeks that same information, but also would require Intralox to provide all of its prices for PMB products in general. There is no permissible reason why Habasit needs Intralox to make such a broad disclosure of prices. Habasit's problems with Intralox are mainly fueled by Intralox's PSAs and other incentive programs that Habasit claims are unfair and improper. Requests 37 and 38 adequately seek documents that are reasonably calculated to lead to evidence regarding these pricing approaches. However, Request number 63 would require Intralox to provide information that is too broad to be considered reasonably calculated to lead to admissible evidence. Any relevant evidence that may be discovered through Intralox's response to Request number 63 would also be obtained through Request numbers 37 and 38.
In Request number 44, Habasit asks for all documents relating to Intralox's response to potential or actual entry by any competitor into the PMB market. (Habasit's Exhibit A, page 2). Habasit claims that this request is designed to seek evidence showing that Intralox changed its advertising, marketing, and business model in response to Habasit's entry into the PMB market. Though Intralox argues that the request is vague, this request simply asks for documents that would indicate how Intralox responded to the entry of competitors. Such information is relevant in determining whether Intralox competed unfairly with Habasit or has otherwise conducted its business operations in an unethical manner when compared to Intralox's response to other competitors. "Any competitor" is an identifiable group about which Intralox would not be burdened in gathering relevant documents.
Request number 52 asks for all documents prepared for use by Intralox to explain Intralox's discounts and incentives with respect to PMB products. (Habasit's Exhibit A, page 3). As Habasit argues, this request is directly related to Habasit's claims that Intralox made special concessions to certain customers as part of its effort to unfairly compete with Habasit. Furthermore, these documents are clearly related to the judgment that Intralox seeks declaring that Intralox did not violate the false advertising provisions of the Lanham Act. This request is neither vague nor overbroad because Habasit has limited the request to refer to only PMB products.
Request number 55 seeks all documents related to Intralox's terms and conditions of sale for PMB products and services during the relevant time period. (Habasit's Exhibit A, page 3). Intralox claims that this request is improper because it relates to antitrust claims that are no longer in the case. However, Request number 55 is not only relevant to an antitrust claim. Rather, this request asks for information that would reveal whether Intralox changed its terms and conditions of sale in response to Habasit's entry into the PMB market. This information goes to the heart of Habasit's claim that Intralox engaged in unfair trade practices by luring customers away from Habasit in an unethical or deceptive manner.
In Request number 56, Habasit seeks all documents evidencing complaints related to Intralox's marketing and/or pricing practices relating to PMB products. (Habasit's Exhibit A, pages 3-4). Habasit claims that this information is relevant because it demonstrates whether customers' reacted negatively to Intralox's changes upon Habasit's entry into the market. Habasit, though, fails to demonstrate how such information is relevant to the issues presented in this case. The reaction of customers is immaterial to whether Habasit was injured by any illegal business practices engaged in by Intralox. It is true that, through Intralox's customer complaints, Habasit may stumble upon information indicating that Intralox committed "fraud misrepresentation, deception or other unethical conduct." However, as previously stated, such a fishing expedition is impermissible.
Finally, in Request number 59, Habasit asks for all agreements with Intralox's customers, employees, or agents related to the potential entry of Habasit into the PMB market. (Habasit's Exhibit A, page 4). This information is certainly reasonably calculated to lead to the discovery of relevant and admissible evidence. Intralox's response to this request might indicate whether Intralox engaged in any impermissible business agreements in order to unfairly restrict Habasit's presence in the PMB market. This request is precise and is not overbroad. Habasit specifically asks for information that relates to agreements that Intralox undertook upon Habasit's entry into the PMB market, which is an issue that is at the very center of this case. Therefore, Intralox's objections to Request number 59 are unfounded.
B. Attorney's Fees
Federal Rule of Civil Procedure 37(a)(4)(A) provides that:
If [a motion to compel discovery] is granted or if the disclosure or requested discovery is provided after the motion was filed, the court shall, after affording an opportunity to be heard, require the party . . . whose conduct necessitated the motion . . . to pay to the moving party the reasonable expenses incurred in making the motion, including attorney's fees . . ."
Furthermore, pursuant to Fed.R.Civ.P. 37(a)(4)©), if the motion to compel discovery is granted in part and denied in part, the court may, "after affording an opportunity to be heard, apportion the reasonable expenses incurred in relation to the motion among the parties and persons in a just manner." Theses expenses should be assessed against the nonmoving party "unless the court finds that the motion was filed without the movant's first making a good faith effort to obtain the disclosure or discovery without court action." Fed.R.Civ.P. 37(a)(4)(A).
In this case, Habasit did make a good faith effort to obtain the discovery without court action. Habasit submitted its discovery requests to Intralox and also participated in a discovery conference with Intralox, in which Intralox indicated that it would not provide further discovery responses without a court order. (Memorandum in Support of Defendant's Motion to Compel Discovery at 2). However, Fed.R.Civ.P. 37(a)(4)(A) also provides that expenses should not be assessed against the nonmovant if the nonmovant's "nondisclosure, response, or objection was substantially justified, or that other circumstances make an award of expenses unjust." Intralox has been producing documents in good faith and is merely trying to avoid the expense of responding to overbroad and unduly burdensome discovery requests. Habasit requested very extensive discovery and initially submitted eighty-seven (87) document requests to Intralox. (Defendant Habasit Belting, Inc.'s Reply memorandum in Support of Its Motion to Compel Discovery at 2-3). At the October 15, 2004 discovery conference, Habasit agreed to withdraw over twenty (20) of those requests. (Id.). Of the twenty-two (22) requests to which Intralox objected, Habasit moved to compel discovery for ten (10) of them. (Id.) Intralox did not make a sweeping refusal to produce the requested documents. Rather, Intralox responded to over forty (40) of Habasit's requests and objected to those requests against which it justifiably believed it had a valid argument. Therefore, an award of expenses would be unjust in this situation.
III. CONCLUSION
For the foregoing reasons, Defendant Habasit's Motion to Compel Discovery is GRANTED as to Request numbers 37, 38, 44, 52, 55, and 59. Defendant Habasit's Motion to Compel Discovery is DENIED as to Request numbers 36, 53, 56, and 63. The Court also denies movant's request for cost and fees.