United States District Court, N.D. California
ORDER REGARDING DISCOVERY LETTERS RE: DKT. NOS. 71,
73
KANDIS
A WESTMORE UNITED STATES MAGISTRATE JUDGE
Plaintiff
Magic Link Garment Ltd. filed the instant suit against
Defendant ThirdLove, Inc., alleging breach of contract and
misappropriation of trade secrets and proprietary materials.
(First Amended Compl. (“FAC”) at 1, Dkt. No. 9.)
Defendant has filed counterclaims, alleging that
Plaintiff's products were defective and that Plaintiff
has wrongfully interfered with Defendant's business
relationships with third-parties. (Def.'s Counterclaims
¶¶ 1-2, Dkt. No. 22.)
Pending
before the Court are two identical discovery letters
concerning Defendant's interrogatories and requests for
production (“RFP”), filed on October 11 and 15,
2019.[1](Discovery Letters, Dkt. Nos. 71, 73.)
I.
BACKGROUND
Plaintiff
is a manufacturer and designer of custom products, including
women's undergarments. (FAC ¶ 9.) Defendant is a bra
and women's underwear company that sells its products
online. (Def.'s Counterclaims ¶ 1.) Around 2012 or
2013, Defendant contracted with Plaintiff to produce bras and
other undergarments. (FAC ¶ 10; Def.'s Counterclaims
¶ 8.) The parties never entered into a master agreement;
instead, Defendant would place purchase orders
(“PO”), and Plaintiff would produce and ship the
products under the specific invoices. (FAC ¶ 12;
Def.'s Counterclaims ¶ 10.)
On
December 21, 2017, Plaintiff sent PO #542 for TL 50A bras.
(Def.'s Counterclaims ¶ 13; Joint Case Management
Conference St. (“CMC St.”) at 1.) Defendant began
receiving the product in 2018, but alleges that the product
was of significantly worse quality. (Def.'s Counterclaims
¶ 13.) Defendant also alleges that Plaintiff had started
subcontracting the manufacture of its products to
third-parties, which was a breach of the agreements between
the parties. (Def.'s Counterclaims ¶¶ 15-16.)
Plaintiff alleges that there were no such problems with its
product, and that Defendant asserted such problems as pretext
to not pay for Plaintiff's product that Defendant had
accepted and sold to its customers. (CMC St. at 2.) Defendant
then sought to cancel other POs (PO #619, 620, 624, 625, 626,
627, 629, 630, 631, 632, and 633) under which Plaintiff had
already completed tens of thousands of products.
(Id.; see also FAC ¶ 15.) Defendant
also withheld payment on outstanding invoices and stopped
ordering product from Plaintiff. (Def.'s Counterclaims
¶ 16.)
Defendant
alleges that in response, Plaintiff “embarked on a
campaign against” Defendant. (Def.'s Counterclaims
¶ 17.) For example, Defendant had a relationship with V
Shapes Moulders Ltd. (“VSM”), a manufacturer of
foam cups for bras. (Def.'s Counterclaims ¶ 18.)
Defendant asserts that personnel from Plaintiff informed
personnel from VSM that Defendant “was delinquent in
its payments, without disclosing the quality problems that
had led [Defendant] to withhold payment from
[Plaintiff].” (Def.'s Counterclaims ¶ 20.)
Defendant also asserts that Plaintiff urged VSM to stop
shipping bra cups for Defendant, resulting in VSM stopping
shipment of its products to Defendant's manufacturers.
(Def.'s Counterclaims ¶ 21.)
II.
LEGAL STANDARD
Under
Rule 26, in a civil action, a party may obtain discovery
“regarding any non-privileged matter that 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 benefit.”
Fed.R.Civ.P. 26(b)(1). Additionally, the court must limit the
frequency or extent of discovery if it determines that:
“(i) the discovery sought is unreasonably cumulative or
duplicative, or can be obtained from some other source that
is more convenient, less burdensome, or less expensive; (ii)
the party seeking discovery has had ample opportunity to
obtain the information by discovery in the action; or (iii)
the proposed discovery is outside the scope permitted by Rule
26(b)(1).” Fed.R.Civ.P. 26(b)(2)(C).
III.
DISCUSSION
A.
Subcontracting
First,
Defendant seeks information about Plaintiff's
subcontracting of Defendant's products. (Discovery
Letters at 1.) Defendant asserts that subcontracting was not
permitted, and was one of the reasons Defendant withheld
payment and rejected products from Plaintiff. (Id.;
see also Def.'s Counterclaims ¶¶
15-16.) Defendant further states that there is
“extensive evidence” of Plaintiff's
representations that it would not subcontract Defendant's
products, but that Plaintiff admitted in deposition and its
discovery responses that some of Defendant's products
were made by subcontractors. (Id. at 1-2.) Defendant
also points to pictures of Defendant's products being
produced at one of Plaintiff's subcontractors.
(Id. at 2.)
Plaintiff
responds that there is no evidence that Plaintiff agreed not
to subcontract, and that the allegedly defective products
were manufactured at Plaintiff's Cambodia facility,
rather than the subcontractor depicted in Defendant's
pictures. (Discovery Letters at 3.) Plaintiff also argues
that no discovery on this topic should be permitted because
Defendant failed to produce the pictures - which include five
smartphone videos and over 100 photographs, taken on January
24, 2018 - until October 9, 2019, five days after fact
discovery cut off. (Id. at 2.)
The
Court finds that information about Plaintiff's
subcontracting of Defendant's products is discoverable,
to the extent it concerns product produced under POs that are
at issue in this litigation. Even if the product at issue did
not include the allegedly defective products produced under
PO #542, Defendant has asserted that it rejected or canceled
product under other POs due to the subcontracting
issue. (Def.'s Counterclaims ΒΆΒΆ 15-16
(referring to the withholding of payment on multiple invoices
due to the subcontracting issue).) Additionally, while
Plaintiff argues that it does not have to disprove the
existence of an agreement not to subcontract to prove its
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