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Bylin Heating Systems, Inc. et al v. Thermal Technologies

February 28, 2013


The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge


Presently pending before the undersigned is a motion for discovery sanctions filed by plaintiffs Bylin Heating Systems, Inc. ("Bylin Heating") and Roof Ice Melt Systems, Inc. (collectively "plaintiffs") (Dkt. No. 54.) Plaintiffs request that the court impose terminating sanctions against defendant Thermal Technologies, Inc. ("TTI") based on its failure to comply with this court's previous order regarding discovery, several other court orders, and its discovery obligations in general. (Id.) Defendant TTI has not filed any response to the motion.

A hearing on the motion was conducted on February 28, 2013. (Dkt. No. 56.) Elizabeth Stallard appeared on behalf of plaintiffs and no appearance was made on behalf of defendant TTI. After considering plaintiffs' briefing and supporting documentation, the oral argument at the hearing, and other appropriate portions of the record, the undersigned recommends that plaintiffs' motion be granted in part along the terms outlined in this order and findings and recommendations.


The Origins of this Litigation

The background facts are taken from the parties' joint statement previously filed in connection with plaintiffs' motions to compel, unless otherwise indicated. (See Dkt. No. 48.)*fn1

Plaintiff Bylin Heating engineers and supplies commercial and residential winter freeze protection products, including heated roof panel products. Bylin Heating is the exclusive licensee of a patent for an inventive ice dam melting apparatus and system (the "858 Patent"). Various Bylin Heating products incorporate technology from the 858 Patent and are sold in conjunction with the trademarks "Roof Ice Melt Systems," "RIM," and "RIM Systems," of which Bylin Heating is also the exclusive owner. (Dkt. No. 48 at 2.)

In March 2007, Bylin Heating first sued defendant TTI for allegedly infringing on Bylin Heating's patent and trademark rights. Bylin Heating claimed that defendant was manufacturing and selling products that infringed the 858 Patent, and was also using the domain name in violation of Bylin Heating's trademark rights. Subsequently, in March 2009, Bylin Heating and defendant TTI signed a settlement agreement resolving the 2007 lawsuit. The settlement agreement included various provisions and drawings regarding what would constitute a breach of that agreement. (Dkt. No. 48 at 2-3.)

Thereafter, on May 23, 2011, the instant litigation ensued. (Dkt. No. 1.) Plaintiffs primarily allege that defendant TTI breached the settlement agreement by manufacturing and selling certain products in violation of the settlement agreement, failing to transfer the domain name to Bylin Heating, and continuing to use that domain name to divert customers from Bylin Heating. (Dkt. No. 48 at 3; see also Second Amended Complaint, Dkt. Nos. 15, 16.)

As set forth in the parties' joint statement, defendant TTI denies these allegations. Defendant contends that, according to the settlement agreement, its panels would not breach the agreement if specified heating elements were used with the panel systems. According to defendant, it nevertheless voluntarily re-designed its panel systems in accordance with the drawings in the settlement agreement, and replaced old panel systems with new panel systems about six months after execution of the settlement agreement. Defendant maintains that during the brief period in 2009 when old panel systems were sold, only the specified heating elements permitted by the settlement agreement were used. Furthermore, defendant claims that it authorized and made efforts to transfer the domain name. However, because defendant did not own the domain name, plaintiffs had to contact the service provider or owner of the domain name to effectuate the transfer, and plaintiffs allegedly did not do so until after this action was filed. According to defendant, the domain name has since been transferred to plaintiffs. (Dkt. No. 48 at 3.) Defendant asserted counterclaims for declaratory relief, rescission of the settlement agreement, trade libel, slander of title, defamation, unfair competition, and intentional interference with prospective economic advantage. (Dkt. No. 20.)

Procedural History of the Instant Litigation and the Parties' Discovery Disputes On April 19, 2012, the district judge entered a pretrial scheduling order requiring all fact discovery to be completed by December 21, 2012. (Dkt. No. 26.)

Plaintiffs served their Requests for Production, Set One; Requests for Admission, Set One; and Interrogatories, Set One, on July 24, 2012. (Dkt. No. 48 at 4.) Defendant served initial responses to these discovery requests on August 27, 2012, but did not produce any responsive documents at that time pending the negotiation, execution, and court approval of a stipulated protective order. (Id. at 4-5.) On November 8, 2012, plaintiffs filed their first motion to compel, which pertained to these discovery requests. (Dkt. No. 35.) The court ultimately entered a stipulated protective order on November 15, 2012 (dkt. no. 38), and on November 29, 2012, defendant produced 104 pages of documents and served supplemental responses to the Interrogatories, Set One, and Requests for Admission, Set One, but did not serve supplemental responses to the Requests for Production, Set One. (Dkt. No. 48 at 6.) By the time that the parties submitted their joint statement regarding their discovery dispute on December 10, 2012, the primary issues remaining with respect to the above-mentioned discovery requests were that (a) defendant's document production appeared to be incomplete for several reasons; (b) defendant had failed to provide a privilege log and supplemental responses to the Requests for Production, Set One, clarifying whether any documents were still withheld; and (c) defendant had failed to substantively respond to one interrogatory on the grounds that the requested information was confidential and proprietary, despite the fact that a protective order had been entered. (Dkt. No. 48 at 11-13.)

Additionally, on October 17, 2012, plaintiffs propounded their Requests for Production, Set Two, and on October 22, 2012, plaintiffs propounded their Requests for Production, Set Three, and Requests for Admission, Set Two. (Dkt. No. 39-1, ¶¶ 15, 18.) Thereafter, on November 29, 2012, plaintiffs filed their second motion to compel, which pertained to these discovery requests. (Dkt. No. 44.) Similar to the issues raised with respect to plaintiffs' Requests for Production, Set One, plaintiffs complained that they were unable to ascertain whether defendant's production in response to plaintiffs' Requests for Production, Set Two, was complete, because no privilege log had been provided, and the documents that had been produced were ostensibly not organized as they were kept in the usual course of business or by category of request pursuant to Rule 34(b)(2)(E)(i) of the Federal Rules of Civil Procedure. (Dkt. No. 48 at 13.)

The issues regarding defendant's responses to plaintiffs' Requests for Admission, Set Two, and Requests for Production, Set Three, were somewhat different. According to a declaration filed by plaintiffs' counsel, he discovered on October 18, 2012, that Michael Gurr, defendant's president/CEO, may have shifted defendant's operations to a new company, Engineered Roof De-Icing, Inc. ("ERDI"). (Declaration of Courtland C. Chillingsworth, Dkt. No. 39-1, ¶ 17.) When plaintiffs' counsel attempted to access defendant's website, he was apparently redirected to a website for ERDI. (Id.) Organizational documents for ERDI also indicated that Heather Gurr, Michael Gurr's wife, registered ERDI with the State of Utah in September 2012. (Declaration of Elizabeth B. Stallard, Dkt. No. 48-1, ¶ 16, Ex. H.)

Based on the foregoing, plaintiffs became concerned that defendant TTI's operations and customers were being transferred to ERDI in a concerted effort to frustrate plaintiffs' ability to prove their claims and/or collect on a potential judgment against defendant TTI. (Dkt. No. 48 at 14-15.) Thus, plaintiffs' Requests for Admission, Set Two, were primarily targeted at defendant's relationship with ERDI and ERDI's activities (such as basic facts about each entity, the relationship between the entities' officers and employees, the ownership and transfer of domain names between defendant and ERDI, and the transfer of assets between defendant and ERDI). (Dkt. No. 48-3, Ex. M.) Plaintiffs' Requests for Production, Set Three, elicited similar information, requesting documents that supported any denials of the accompanying Requests for Admission, Set Two, as well as document requests that directly pertained to the above-mentioned subject matter. (Id., Ex. N.)

Defendant refused to substantively respond to these discovery requests. Apart from asserting the attorney-client privilege, the work product doctrine, and a few other form objections, defendant primarily asserted that each request was not relevant to the action, nor reasonably calculated to lead to the discovery of admissible evidence. (Dkt. No. 48-3, Exs. M, N.)

In the meantime, while the discovery disputes were ongoing, on October 24, 2012, defendant's counsel, Krista Dunzweiler and M. Taylor Florence of Locke Lord LLP, filed a motion to withdraw as counsel for defendant based on failure to pay outstanding attorneys' fees. (Dkt. No. 32.) Subsequently, on December 11, 2012, the day after the parties' joint statement regarding the discovery motions was filed, the district judge extended the deadline for completion of fact discovery to the deadline of February 1, 2013. (Dkt. No. 49.) Thereafter, on December 14, 2012, the district judge granted defendant's counsel's motion to withdraw and ordered defendant to appear through new counsel within 21 days, i.e., by January 4, 2013. (Dkt. No. 50.)

In a previous November 30, 2012 order, in light of the then-pending motion to withdraw, the undersigned specified that if defendant's counsel were permitted to withdraw, an authorized representative of defendant had to be personally present at the December 20, 2012 hearing on the discovery motions. (Dkt. No. 46.) Subsequently, on December 14, 2012, after the district judge granted the motion to withdraw, the undersigned issued a minute order again emphasizing that the December 20, 2012 hearing on the discovery motions would proceed as scheduled, and that either defendant's new counsel or an authorized representative of defendant must be personally present at the hearing. (Dkt. ...

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