United States District Court, N.D. California
ORDER RE MOTION FOR SANCTIONS Re: Dkt. No. 50
JOSEPH C. SPERO, Magistrate Judge.
This case arises out of Defendants' alleged breach of two separate settlement agreements relating to Defendants' Belly Band product. Presently before the Court is Plaintiff's Motion for Sanctions Against Defendants for Failing to Comply with Court Order ("Motion"). A hearing on the Motion was held on Friday, March 21, 2014 at 9:30 a.m. For the reasons stated below, the Motion is GRANTED in part and DENIED in part.
A. Procedural Background
In 2006, Plaintiff filed suit in this Court asserting trademark infringement and unfair competition claims against Defendants based on allegations that Defendants' Belly Band was confusingly similar to Plaintiff's Bella Band product and Bella Band marks. That case ended when the parties entered into a settlement agreement ("the Trademark Settlement Agreement"). In 2008, Plaintiff filed an action in this Court asserting claims of patent infringement and unfair competition against the same Defendants. That case ended when the parties entered into another settlement agreement ("the Patent Settlement Agreement"). In this action, Plaintiff alleges that Defendants have breached both settlement agreements by, inter alia, selling and advertising a maternity band that holds up pants or skirts.
On October 4, 2013, after two extensions of the deadline to respond, Defendants produced their first responses to Plaintiff's document requests. Declaration of Ilene H. Goldberg in Support of Plaintiff Ingrid & Isabel, LLC's Motion for Sanctions ("Goldberg Decl.") ¶ 3. Plaintiff asserted Defendants' responses were insufficient and the parties met and conferred but were unable to resolve their disputes. Id. ¶¶ 3-5. On December 3, 2013, Defendants' counsel sent Plaintiff's counsel an email stating, "[y]ou have received everything that my clients say they have that would be responsive to any of the document requests." Id. ¶ 7 & Ex. H. Subsequently, the parties submitted a joint letter to the Court setting forth their discovery disputes. On December 20, 2013, the Court issued an order requiring that:
(1) Defendants shall produce all documents referring or relating to customer comments or complaints on Belly Band products to the extent that they are responsive to Categories 10, 11, 15, 17, and 54; Defendants shall provide a declaration that (a) details the methods used to search for such documents and (b) states that no further documents were found other than those produced; (2) Defendants shall produce all documents responsive to Category 49; Defendants shall provide a declaration that (a) details the methods used to search for such documents and (b) states that no further documents were found other than those produced; and (3) Defendants shall not be ordered to produce documents requested by any of the other categories.
Docket No. 37 ("December 20 Order"). The Court further ordered that "Defendants shall make the necessary productions and provide the necessary declarations within thirty days of this Order."
On January 21, 2014, Defendant Helen Tekce, who jointly manages Baby Be Mine, LLC ("BBM") with Defendant Isabelle Gartner, submitted a declaration describing the efforts Defendants had made to comply with the Court's order. Docket No. 44 ("Tekce January 21 Decl."). In the declaration, Tekce states that: 1) Gartner was in Germany between December 15, 2013 and January 8, 2014; 2) Tekce was in England between December 20, 2013 and January 3, 2014; and 3) Defendants began their efforts to comply with the Court's order after Gartner and Tekce returned from Europe. Id. ¶ 3. As of January 21, 2014, the date they were to have complied with the Court's order, Gartner and Tekce had determined that they "need[ed] to retain a computer expert to assist [them]" in retrieving communications from customers on the BBM website. Id. Defendants stated, "[w]e will produce all relevant documents that the computer expert might locate." Id. ¶ 3(l). In the declaration, Tekce also described efforts relating to the other customer comments and financial documents that the Court had ordered produced. Id. ¶¶ 3-4.
On January 23, 2014, Defendants retained Kevin Andle, of We Care Computers, LLC, to restore deleted emails from two of their computers. Declaration of Kevin Andle in Opposition to Plaintiff's Motion for Sanctions ("Andle Decl.") ¶ 2. On February 4, 2014, Defendants' counsel sent an email to Plaintiff's counsel stating: "Last week our clients retained a computer expert and the expert was able to locate additional documents. We will produce them once Denise Bate stamps them." Declaration of Peter W. Craigie in Support of Defendants' Opposition to Plaintiff's Motion for Sanctions ("Craigie Decl.") ¶ 3 & Ex. B. Denise is the legal assistant to Robert Levin, who represents Defendants but is not counsel of record in this case. Id. According to Craigie, Denise had difficulty Bates stamping the documents because she was out sick with pneumonia, so on February 18, 2014, he forwarded the new documents to Plaintiff without the Bates stamps. Id. ¶ 3. A few days later, on February 21, 2014, Defendants produced 948 of the documents - now with Bates stamps - to Plaintiff. Id. Another 88 Bates-stamped documents were produced on February 24, 2014. Id. Defendants produced additional financial documents on February 28, 2014. Declaration of Ilene H. Goldberg in Support of Plaintiff Ingrid & Isabel, LLC's Motion for Sanctions (Docket No. 62) ("Goldberg Reply Decl.") ¶ 9 & Ex. B.
In the meantime, on February 10, 2014, Plaintiff filed the instant Motion. In the Motion, Plaintiff asserted that: 1) Defendants had not produced all documents responsive to the requests listed in the Court's December 20 Order; and 2) the declaration provided by Defendants was not sufficiently detailed in describing how Defendants searched for responsive documents, making it impossible to determine whether their efforts were reasonable and diligent. Motion at 3-4. Plaintiff asked the Court to impose sanctions, including: 1) an award of attorneys' fees and costs incurred as a result of Defendants' failure to comply with the Court's order; and 2) an order requiring that Defendants disclose all of their hard drives and provide Plaintiff with access to their Amazon Seller account and all of their email accounts. Motion at 14. In addition, Plaintiff asked the Court to prohibit Defendants from opposing Plaintiff's claims that Defendants' Belly Band product holds up skirts and jeans, from opposing Plaintiff's damages calculation, and from introducing any opposing evidence with respect to the damages calculation in this case. Id.
In their Opposition, Defendants argue that the imposition of sanctions is not justified because they have made diligent efforts to comply with the Court's order and have not acted in bad faith. Opposition at 1-3. Defendants also provide a supplemental declaration by Tekce providing additional details regarding the specific efforts Defendants had made to comply with the Court's order. See Supplemental Declaration of Helen Tekce in Opposition to Plaintiff's Motion for Sanctions ("Tekce Supp. Decl.").
In its Reply, Plaintiff argues that Defendants' efforts with regard to the production of documents required under the December 20 Order continue to be inadequate and that "critical evidence" - including customer comments lost as a result of third-party document retention policies, handwritten comments sent to BBM, and Belly Bands that were returned to BBM as defective - has been destroyed as a result. Reply at 4. Plaintiff asserts it has been prejudiced not only by Defendants' failure to produce important evidence but also by the late production of the evidence. Id. at 7-8. In particular, because the documents were produced only a few days prior to several scheduled depositions in Connecticut, Plaintiff's counsel was unable to adequately prepare for the depositions and will need to return to Connecticut to complete them. Goldberg Reply Decl., ¶¶ 4-9. Plaintiff's counsel asserts that this prejudice was compounded by Defendants' improper designation of some of the new documents as Attorneys' Eyes Only and their initial refusal to remove these designations, which prevented Plaintiff's counsel from reviewing these documents with their client prior to the depositions. Id. ¶¶ 4-7. According to Plaintiff's counsel, Defendants did not agree to remove the improper Attorneys' Eyes Only designations until they arrived at the depositions. Id. ¶ 7.
Plaintiff continues to seek the sanctions requested in the Motion, as well as additional monetary sanctions to cover the fees and costs associated with returning to Connecticut to complete depositions and for filing the Reply brief and appearing at the Motion hearing. Id. ¶¶ 31-32. Plaintiff also seeks to recover fees and costs incurred in subpoenaing documents directly from BBM's third-party vendors. Id. ¶ 30. Finally, Plaintiff asks the Court to order, in addition to the relief described above, that Defendants "make a full and complete production of requested documents (including all customs documents)." Reply at 10.
B. Specific Disputes
Plaintiff points to numerous areas in which it contends Defendants have failed to produce evidence and documents responsive to their requests. A summary of the main disputes as to this evidence is provided below.
1. Documents on Defendants' Computers
email communications between Defendants and their customers stored on Defendants' computers:
At the time the Motion was filed, Defendants had not produced any email communications between Defendants and their customers. Goldberg Decl. ¶ 9. Tekce testified at her January 20, 2014 deposition that Defendants deleted emails from customers after issues were resolved. Id., Ex. K at 46-47. Similarly, she stated in her supplemental declaration that BBM routinely deletes emails due to the volume of email that it receives. Tekce Supp. Decl., ¶ 21. However, she also stated that Defendants had "not deleted any relevant emails since the inception of this lawsuit last year." Id. ¶ 21. In contrast, Defendants' office manager, Michele Klimczak, testified at her February 26, 2014 deposition that only in the last three months (that is, sometime in late November 2013) had she been instructed to save emails; moreover, she had forgotten these instructions until she was asked about it at her deposition and had continued to delete emails from customers. Goldberg Reply Decl., Ex. C at 56-57. After Defendants retained Kevin Andle (in late January 2014), they produced some email communications that had been deleted. Tekce Supp. Decl., ¶ 1. According to Tekce, she, Gartner and Klimscak spent "weeks" going through "thousands of emails" to determine which ones were relevant to Plaintiff's requests, id. ¶ 4, but Klimscak testified at her deposition that she has never reviewed any emails. Goldberg Reply Decl., ¶ 20 & Ex. C at 49-51. Plaintiff asserts it cannot be sure it ...