United States District Court, S.D. California
LF CENTENNIAL LIMITED, a British Virgin Islands corporation, Plaintiff,
Z-LINE DESIGNS, INC., a Nevada corporation; and DOES 1-100, inclusive, Defendant.
ORDER DETERMINING JOINT MOTION FOR DETERMINATION OF
DISCOVERY DISPUTE NO. 3 AND GRANTING LFCL'S MOTION TO
COMPEL AND FOR SANCTIONS [DKT. NOS. 68, 70].
Nita L. Stormes United States Magistrate Judge
an action for breach of a Licensing Agreement that resulted
from patent litigation between the predecessor of plaintiff
LF Centennial, LTD (LFCL) and defendant Z-Line Designs. In
the Licensing Agreement LFCL__ LFCL believes that not all
royalties are being paid and is now suing for breach of
contract and an accounting. By way of this motion LFCL seeks
to (1) compel Z-Line to produce a Rule 30(b)(6) witness for
deposition who is sufficiently educated and knowledgeable
regarding the noticed topics to provide proper testimony; and
(2) attorney's fees and costs for the deposition. For the
following reasons, the court GRANTS
LFCL's motion to compel and for sanctions.
March 15, 2017 LFCL conducted two Rule 30(b)(6) depositions.
It deposed Z-Line's CFO Marcie Martinez on six deposition
topics related to the Licensed Products and payment of
royalties. It also deposed Z-Line's president James
Sexton regarding the purported oral agreement between Mr.
Sexton and Ken Whalen, the late president of Whalen Furniture
Manufacturing, Inc. (WFM), the predecessor of LFCL, where
they allegedly agreed to __ LFCL complains
that neither deponent prepared for the depositions, including
by reviewing any documents. Further, as explained below, LFCL
could not question Ms. Martinez about outstanding documents
because they had not yet been produced.
Ms. Martinez, she did not appear to know which of
Z-Line's products were covered under the License
Agreement. Dalton Decl. Ex. 5, Martinez Depo., 12:5-15:18.
She testified that even though she is the one who decides
whether to include certain products in the report, she could
not explain why certain products were included on the
spreadsheet documenting royalty payments. Id. at 38:
1-13; 15:16-16:11; 37: 7-25; 39:5-40:7; 40:25-42:23. As for
Mr. Sexton's deposition, he testified that he did not
know when the oral agreement was made, who else knew about it
and whether it was ever discussed with other employees.
Dalton Decl. Ex. 6, Sexton Depo., 19:2-19; 20:19-25;
on March 17, 2017 the parties filed Joint Discovery Motion
No. 2. Dkt. No. 56. That dispute involved a motion to compel
where LFCL sought financial information necessary to
determine whether Z-Line paid sufficient royalties under the
Licensing Agreement. Specifically, LFCL served Requests for
Production (RFPs) that asked for all documents regarding
licensed products that reflect sales (No. 1), revenue (No.
2), allowances and credits (No. 3), tax and shipping charges
or returns (No. 4), net sales amount (No. 5), and
communications pertaining to those categories of documents
(Nos. 6-10). In response, Z-Line produced a 5800 spreadsheet
that refers to all of its products without identifying the
licensed products subject to the Licensing Agreement. It did
not produce any source documents such as purchase orders,
invoices or other documents relevant to sales, revenues or
the net sales amounts for the licensed products.
generally argued that it could not produce the source
documents themselves because they sold hundreds of products
in large volumes and it would be burdensome to produce the
invoices. Jt. Disc. Mtn. No. 2 (Dkt. No. 56), p.13. But they
did not provide any specifics as to burden. Instead, they
focused their opposition on these points: (1) the joint
motion was filed late; (2) the spreadsheet was sufficiently
responsive to allow LFCL to conduct an audit; and (3) LFCL
could have authenticated the spreadsheet during the CFO's
deposition. Id., pp.11-17.
court granted LFCL's motion to compel because it found
that Z-Line failed to carry its burden to show why the court
should deny discovery of the highly relevant information. The
court ordered Z-Line to fully respond to RFP Nos. 1-10 by
April 28, 2017. Z-Line did not file a motion for
reconsideration or Rule 72 objections with the District Judge
in response to the court's order. And it did not produce
the court-ordered discovery.
Standards for Discovery.
can obtain discovery of non-privileged information so long as
is relevant to any party's claim or defense and
proportional to the needs of the case, considering the
importance of the issues at stake in the action, the amount
in controversy, the parties' relative access to relevant
information, the parties' resources, the importance of
the discovery in resolving the issues, and whether the burden
or expense of the proposed discovery outweighs its likely
Fed. R. Civ. P. 26(b)(1). Discoverable information need not
be admissible. Id. Once the propounding party
establishes that the request seeks relevant information,
“[t]he party who resists discovery has the burden to
show discovery should not be allowed, and has the burden of
clarifying, explaining, and supporting its objections.”
Superior Commc'ns v. Earhugger, Inc.,
257 F.R.D. 215, 217 (C.D.Cal.2009); see Blankenship v.
Hearst Corp., 519 F.2d 418, 429 (9th Cir.1975)
(requiring defendants “to carry heavy burden of showing
why discovery was denied”).
responding party has a duty to prepare for a Rule 30(b)(6)
When a party receives a Rule 30(b)(6) deposition notice, it
must designate a knowledgeable person to fully prepare and
“unevasively answer questions about the designated
subject matter.” Bd. of Trs. of the Leland Stanford
Junior Univ. v. Tyco Int'l Ltd., 253 F.R.D. 524, 526
(C.D. Cal. 2008) (internal quotations omitted).
“[B]ecause Rule 30(b)(6) explicitly requires a company
to have persons testify on its behalf as to all matters
reasonably available to it, . . . the Rule
‘implicitly requires persons to review all matters
known or reasonably available to [the corporation] in
preparation for the [Rule] 30(b)(6) deposition.'”
Id. The deponent need not have personal knowledge of
the designated subject matter. Id.
F.C.C. v. Mizuho Medy Co., Ltd., 257 F.R.D. 679, 681
(S.D. Cal. 2009) (Stormes, J.) (emphasis in original).
Additional Deposition Regarding Royalty Payments.
Martinez was designated to testify as to these topics on
behalf of Z-Line as its person most knowledgeable:
1. Z-Line Designs' sales of the “Licensed
Products” (as that term is defined in the July 26, 2013
Settlement and License Agreement (“the
Agreement”)) in the United States from July 26, 2013 to
2. Z-Line Designs' revenues from sale of the
3. The royalties paid by Z-Line Designs to LF Centennial
Limited and Whalen Furniture Manufacturing, Inc. relating to
Z-Line's sales of the “Licensed
4. Z-Line Designs' “allowances and credits”
(as discussed in paragraph 3.1 of the Agreement) relating to
Z-Line's sale of the “Licensed
5. Z-Line Designs' “tax or shipping charges or
returns” (as discussed in paragraph 3.1 of the
Agreement) relating to Z-Line's sale of the
6. Z-Line Designs' “net sales amount” (as
discussed in paragraph 3.1 of the Agreement) relating to
Z-Line's sale of the “Licensed
Dalton Decl., Ex. 2.
argues that Ms. Martinez's failure to prepare for the
deposition compels a further deposition where she is
adequately prepared to testify on behalf of the company.
Z-Line argues that it was LFCL who was not prepared to ask
questions it needed to prosecute this case. Z-Line also
complains that its CFO-who testified that she created the
spreadsheet that details the royalty payments-should not have
been expected to testify as to what is a “Licensed
Product” because the deposition notice did not list
that as a topic.
to case law in this circuit interpreting Rule 30(b)(6), LFCL
is entitled to the corporation's knowledge from
the corporation's person most knowledgeable as to the
noticed topic. See, e.g., Louisiana Pacific Corp. v.
Money Market 1 Institutional Investment Dealer, 285
F.R.D. 481, 485-486 (N.D. Cal. 2012) (stating “The
corporation has a duty to educate its witnesses so they are
prepared to fully answer the questions posed at the
deposition”) (citation omitted). “The
designee's role is to provide the entity's
interpretation of events and documents.” Id.
at 486 (citation omitted). As to scope, “the
‘reasonable particularity' requirement of Rule
30(b)(6) cannot be used to limit what is asked of the
designated witness at a deposition.” Id.
(citation and quotations omitted).
the “notice establishes the minimum about
which the witness must be prepared to testify, not the