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Rankine v. Roller Bearing Co., of America, Inc.

United States District Court, Ninth Circuit

August 5, 2013

JOYCE M. RANKINE, an individual; and LAWRENCE S. STANTON, an individual, Plaintiffs,
v.
ROLLER BEARING COMPANY OF AMERICA, INC., et al. Defendants.

ORDER DENYING DEFENDANT ROLLER BEARING COMPANY OF AMERICA, INC.'S MOTION TO QUASH SUBPOENA [ECF Nos. 73 and 75]

BARBARA L. MAJOR, Magistrate Judge.

Currently before the Court is Defendant Roller Bearing Company of America, Inc.'s motion to quash a subpoena served by Plaintiffs Joyce Rankine and Lawrence Stanton on a third-party, The Boeing Company ("Boeing"). ECF No. 75. Boeing did not object to the subpoena. Having reviewed all of the briefing and supporting exhibits submitted by the parties, the Court DENIES Defendant's motion for the reasons set forth below.

FACTUAL & PROCEDURAL BACKGROUND[1]

Baxter Rankine and Plaintiff Lawrence Stanton were the sole owners and shareholders of All Power Manufacturing, Inc. ("APM"), a manufacturer of aerospace bushings. On September 12, 2006, they sold all of their shares of APM to Defendant Roller Bearing Company of America, Inc. ("RBC"). ECF No. 58 at 3-4. As part of a Stock Purchase Agreement in connection with the sale, RBC executed two promissory notes - one in favor of Baxter Rankine, and one in favor of Lawrence Stanton. Id . Both notes were payable in full on September 12, 2007. Id . Shortly after the promissory notes were executed, Baxter Rankine died, and his wife, Plaintiff Joyce Rankine, became the successor-in-interest to his right to payment under his note. ECF No. 1-1 at 4, Exh. A.

Defendant did not fulfill the payments due under either note by September 12, 2007. Instead, two days before the notes became due, Defendant exercised its right of set-off, claiming that it became exposed to Mexican income taxes. Id. at 5. Plaintiffs disputed that any taxes were owed. On August 11, 2009, the parties executed amendments to both notes, extending the date for payment to June 30, 2012, and limiting Defendant's right of set-off. Id . Plaintiffs allege that Defendant did not make any payments due under either note. Id.

On July 20, 2012, Plaintiffs filed a complaint in state court against RBC and unnamed Defendants. On August 22, 2012, Defendant RBC removed the lawsuit to this Court. ECF No. 1. Plaintiffs' complaint alleges two causes of action for breach of contract relating to Defendant's failure to fulfill its obligations under both promissory notes. Id.

On September 4, 2012, Defendant RBC filed an answer denying the allegations. ECF No. 4. RBC also filed a counterclaim asserting nine causes of action against Plaintiffs. ECF No. 5. Specifically, RBC alleges that prior to the execution of the Stock Purchase Agreement, key APM employees misappropriated and divulged to third parties APM's trade secret information, and then formed a competing business which later became known as Caliber Aero, LLC. Id . RBC further alleges that Plaintiffs failed to provide RBC with all of the intellectual property assets necessary to operate APM. Id.

RBC filed a First Amended Counterclaim on January 23, 2013. ECF No. 42. On February 5, 2013, Plaintiffs moved to dismiss RBC's First Amended Counterclaim on the grounds that any misconduct by key APM employees alleged by RBC occurred after the sale of APM to RBC. ECF No. 43-1 at 4. On May 9, 2013, District Judge Irma E. Gonzalez issued an order denying Plaintiffs' motion to dismiss RBC's First Amended Counterclaim. ECF No. 70. Plaintiffs subsequently filed an answer denying the allegations set forth in RBC's counterclaims. ECF No. 71.

On June 5, 2013, Plaintiffs deposed Thomas Williams, RBC's general counsel, pursuant to a Rule 30(b)(6) notice. ECF No. 76 at 3-5; ECF No. 76 at 1-7. Mr. Williams testified about an ongoing dispute between RBC and Boeing regarding whether RBC has to pay royalties to Boeing in relation to licensing agreements or assist letters between APM and Boeing. Id . The parties characterize this dispute and its relation to the instant litigation in different ways. Plaintiffs argue that "RBC now contends that in May of 2013 it discovered Plaintiffs breached the parties' Stock Purchase Agreement by failing to disclose the existence of the license agreements between All Power Manufacturing and Boeing." ECF No. 76 at 2. RBC frames the dispute as follows:

RBC alleges that Plaintiffs misrepresented that the assist letters All Power used to acquire PMAs and TSOs from Boeing were All Power's intellectual property, which they had owned and sold to RBC. However, RBC alleges Plaintiffs had knowledge that such intellectual property was not theirs to sell, and instead was the property of Boeing. Now, following the sale of All Power to RBC, Boeing is demanding that RBC pay royalty/licensing fees before it permits RBC to sell its parts and acquire its PMAs and TSOs.

ECF No. 77 at 2.[2] Regardless of how the dispute is characterized, it is clear that the substance and timing of the PMAs and TSOs between APM and Boeing are relevant to the instant litigation, as are the parties' and Boeing's understanding regarding the applicability of the agreements.

On June 13, 2013, Plaintiffs served a subpoena on Boeing[3] seeking six (6) categories of documents related to Boeing's licensing and royalty agreements with APM: licensing agreements between Boeing and APM related to products sold pursuant to PMAs or TSOs (requests 1 and 2), correspondence between Boeing and RBC and/or RBC's subsidiaries related to the payment of fees for products sold by APM pursuant to PMAs or TSOs (requests 3 and 4), and draft agreements between Boeing and RBC or RBC's subsidiaries related to products sold by APM pursuant to PMAs or TSOs (requests 5 and 6). ECF No. 75-1 at 5, Exh. A. On July 3, 2013, RBC filed an ex parte motion to quash the subpoena. ECF No. 73. Boeing did not file a motion to quash the subpoena, nor did it join in or support RBC's motion. After considering the motion, the Court found ex parte relief to be inappropriate and issued a briefing schedule. ECF No. 74. RBC subsequently filed an amended motion to quash the subpoena in accordance with the Court's briefing schedule. ECF No. 75. Plaintiffs filed an opposition on July 12, 2013. ECF No. 76. RBC filed a reply on July 18, 2013, and the Court took the matter under submission pursuant to Local Rule 7.1(d)(1). ECF No. 77.

LEGAL STANDARD

The federal rules generally allow for broad discovery, authorizing parties to obtain discovery regarding "any matter, not privileged, that is relevant to any party's claim or defense." Fed.R.Civ.P. 26(b)(1). A matter is relevant when it seeks admissible evidence or when the evidence is "reasonably calculated to lead to the discovery of admissible evidence." Id . To the extent that the discovery sought is "unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive, " the court is directed to limit the scope of the request. Fed.R.Civ.P. 26(b)(2). Limits ...


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