United States District Court, S.D. California
ORDER GRANTING PLAINTIFF'S REQUEST FOR IMPOSITION OF SANCTIONS AGAINST DEFENDANTS FOR FAILURE TO PRODUCE DISCOVERY DOCUMENTS; DENYING PLAINTIFF'S REQUEST FOR AN ORDER OF CONTEMPT AGAINST DEFENDANTS [DOC. NO. 61]
WILLIAM V. GALLO, Magistrate Judge.
Plaintiff Sherwin-Williams ("Plaintiff") makes paints and coatings for cars. (Doc. No. 31 at 1.) Defendants JB Collision Services, Inc. ("Defendant JB Collision") and JJT, Inc. ("Defendant JJT") are auto body shops. Id . On or about September 10, 2008, Defendant JB Collision entered into a Supply Agreement with Plaintiff. (Doc. No. 1 at 2.) Pursuant to the Supply Agreement, Defendant JB Collision agreed to exclusively use Plaintiff's automotive paint and coating products from September 10, 2008, until the date upon which net sales, as defined by the Supply Agreement, totaled $1, 300, 000. Id . In consideration for Defendant JB Collision's agreement to exclusively purchase all of its requirements for automotive paints, coatings, and related products for the duration of the contract term, Plaintiff agreed to provide products to JB Collision at a discount. Id. at 3.
On or about May 29, 2011, Defendant JJT entered into a Supply Agreement with Plaintiff. (Doc. No. 17 at 2.) Pursuant to the Supply Agreement, Defendant JJT agreed to exclusively use Plaintiff's automotive paint and coating products from May 29, 2011, until the date upon which net sales, as defined by the Supply Agreement, totaled $250, 000. Id . In addition, Defendant John Tyczki ("Defendant Tyczki") signed a guaranty on May 10, 2011, personally guaranteeing Defendant JJT's performance under the Supply Agreement. Id.
From September of 2008 until January of 2013, Defendants purchased automotive paint, coatings, and related products pursuant to the Supply Agreements with Plaintiff. (Doc. No. 1 at 3; Doc. No. 17 at 2-3.) In January of 2013, Plaintiff alleges that Defendants breached the parties' Supply Agreements by discontinuing all of their requirements for automotive paints, coatings, and related products exclusively from Plaintiff. Id . By letter dated February 28, 2013, Plaintiff notified Defendants of their breach of contract. Id.
On August 20, 2013, Plaintiff filed two complaints asserting breach of contract claims against Defendants JB Collision, JJT, and Tyczki, and Defendants filed counterclaims for breach of contract, breach of implied warranties of merchantability and fitness, concealment and fraud, intentional misrepresentation, negligent misrepre-sentation, breach of covenant of good faith and fair dealing, and unjust enrichment. (Doc. No. 31 at 2.) The crux of Defendants' counterclaims is that Plaintiff's products were not satisfactory. Id.
II. PLAINTIFF'S INSTANT MOTION FOR CONTEMPT AND SANCTIONS
A. PLAINTIFF'S ARGUMENT
In its Discovery Motion, Plaintiff argues that Defendants should be held in contempt and sanctioned for withholding discovery and lying to the Court. (Doc. No. 61-1 at 5, 10-11.) Plaintiff seeks reasonable attorney's fees for bringing its Discovery Motion. Id.
Plaintiff claims that, on October 17, 2014, Defendants produced nearly 3, 000 pages of discovery documents containing Defendants' business records and invoices with Plaintiff's competitor, Keystone Automotive ("Keystone") from 2008 to 2014. (Doc. No. 69 at 3.) Plaintiff alleges that the records show that Defendants purchased tens of thousand of dollars of products that they have denied purchasing under oath throughout this litigation. Id . Plaintiff claims that Defendants' actions are in contempt of Court and reveal that they have perjured themselves. Id.
Plaintiff argues that, for months, it has sought to obtain Defendants' records reflecting any purchases of paint and associated products from sellers other than Plaintiff between September of 2008 and March of 2013. (Doc. No. 61-1 at 5.) It claims that Defendants have repeatedly sworn under oath that no documents exist because during those years they exclusively purchased and used Plaintiff's paint and associated products. Id . Plaintiff asserts that Defendants told this Court the same thing in discovery dispute briefing and oral argument. Id . However, Plaintiff claims that the recently disclosed documents demonstrate that Defendants purchased thousands of dollars of paint and associated products from Keystone and Spies-Hecker (an Axalta/DuPont paint line) from September of 2008 through March of 2013. Id . Plaintiff contends that it learned of these purchases by seeking all documents used in a prior arbitration between Defendants and Keystone. Id . Plaintiff claims that, after confronting Defendant Tyczki with this information during deposition, it asked Defendants to produce their invoices for all purchases from Keystone between 2008 and 2013. Id . Plaintiff argues that, although Defendants have stated numerous times under penalty of perjury that they do not have such documents, those statements are demonstrably false as Defendants have no justification to blatantly "forget" tens of thousands of dollars of purchases. Id. at 10.
Plaintiff claims that Defendants are in contempt of this Court's August 15, 2014, Discovery Order, which ordered, "Defendants shall respond to Plaintiff's [Request for Production of Documents] RFP No. 10. If Defendants do not have any documents responsive to this request, they shall indicate so in a verified response." (Doc. No. 61-1 at 10.) Plaintiff now requests that Defendants be held in contempt and sanctioned for lying to this Court, obstructing this litigation, and continuing to withhold documents ordered to be produced by this Court on August 15, 2014. (Doc. No. 61-1 at 5-6; citing Doc. No. 47.)
B. DEFENDANTS' ARGUMENT
In their Opposition to Plaintiff's Discovery Motion, filed on October 17, 2014, Defendants deny lying to the Court, and state they have not purchased any paint products or coatings from any supplier other than Plaintiff during the terms of the Agreements. (Doc. No. 70 at 2.) Defendants note that they did purchase after-market or used vehicle parts from a competitor, which are "indisputably unrelated products." Id . Defendants claim that they reasonably believed that these parts and other non-paint products purchased from Plaintiff's competitor did not fall within the scope of Plaintiff's ...