Chavez v. Blue Sky Natural Beverage Co. et al

Filing 292

ORDER (1) DENYING PLAINTIFF'S REQUEST FOR SANCTIONS AND (2) GRANTING DEFENDANT'S MOTION FOR LEAVE TO FILE A SUR-REPLY (Dkt. Nos. 272, 289). Signed by Magistrate Judge Jacqueline Scott Corley on 10/11/2011. (ahm, COURT STAFF) (Filed on 10/12/2011)

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1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 9 Northern District of California United States District Court 10 11 CHRIS CHAVEZ, on behalf of himself and all others similarly situated, 12 13 14 15 16 Plaintiff, v. BLUE SKY NATURAL BEVERAGE CO., et al., Case No.: 06-06609 JSW (JSC) ORDER (1) DENYING PLAINTIFF’S REQUEST FOR SANCTIONS AND (2) GRANTING DEFENDANTS’ MOTION FOR LEAVE TO FILE A SUR-REPLY (Dkt. Nos. 272, 289) Defendants. 17 18 Now pending before the Court is Plaintiff’s motion for sanctions. (Dkt. Nos. 258, 287.) 19 20 Plaintiff requests “monetary, evidentiary and instructional sanctions” on the grounds that 21 Defendants’ late and deficient production of documents prejudiced Plaintiff by preventing him 22 from taking depositions and authenticating documents. Defendants respond that Plaintiff’s 23 24 motion is untimely, Defendants did not engage in discovery violations, and Judge Chen 25 already ruled against Plaintiff on these issues. After a careful review of the materials provided 26 by both parties, Plaintiff’s motion is DENIED, although the Court will allow Plaintiff limited 27 28 1 2 discovery to address the prejudice to Plaintiff from Defendants’ belated production of three documents. 3 4 BACKGROUND 1. Procedural History 5 6 Plaintiff Chavez brings this action on behalf of himself and other individuals who 7 purchased any beverage in the United States bearing the Blue Sky mark or brand, alleging that 8 Defendants mischaracterized New Mexico as the origin of the “Blue Sky” beverage line. This 9 10 Northern District of California United States District Court 11 12 13 action was initially brought in San Francisco superior court, but Defendants subsequently removed the case to federal court. The district court thereafter granted Defendants’ motion to dismiss. (Dkt. No. 40.) On appeal, the Ninth Circuit reversed and remanded. (Dkt. No. 50.) The district court later granted Plaintiff’s motion for class certification (Dkt. No. 120), and by 14 15 order filed September 27, 2011, the court denied Plaintiff’s and Defendants’ motions for 16 summary judgment. (Dkt. No. 291.) 17 After the case was remanded from the Ninth Circuit, Plaintiff again raised discovery 18 19 issues initially made in a motion to compel filed before the lawsuit was dismissed. (Dkt. Nos. 20 58, 36.) The district court thereafter ordered Defendants to comply with certain of Plaintiff’s 21 discovery requests. Specifically, the district court directed Defendants to “on or before 22 23 October 15, 2009, produce documents in response to the outstanding document requests listed 24 in Doc #58 at 2. In the event of further dispute regarding the adequacy of defendants’ 25 production, the parties shall bring the matter to the court’s attention . . . not later than October 26 27 30, 2009.” (Dkt. No. 61.) The document requests to which the order referred were Hansen 28 2 1 2 3 Beverage Company production numbers 1, 2, 4-10, and 12-20 and Blue Sky Natural Beverage Company production numbers 4 and 6-9. (Dkt. No. 58 at 2.) On October 30, 2009, Plaintiff contacted the district court to enumerate complaints 4 5 6 7 about Defendants’ compliance with the court’s order. (Dkt. No. 73.) Defendants acknowledged that several discovery disputes remained, but denied wrongdoing. (Dkt. No. 74.) After additional briefing and a hearing, the district court issued a second order on 8 9 December 30, 2009, which compelled Defendants to produce certain documents. Although Northern District of California Plaintiff requested sanctions, the district court deferred a ruling “until defendants are given an 11 United States District Court 10 opportunity to comply with the compelled production. If defendants’ supplemental 12 production is unsatisfactory, plaintiff may serve and file a memorandum requesting the court 13 14 15 to decide whether sanctions may be appropriate.” (Dkt. No. 87 at 7.) Discovery closed on September 3, 2010. Under Civil Local Rule (“L.R.”) 37.3, any 16 motion to compel fact discovery must be filed not more than seven days after the fact 17 18 discovery cutoff. Plaintiff filed no such motion but instead, on November 11, 2010, filed a 19 “Motion for Discovery Sanctions.” (Dkt. No. 170.) Among other things, Plaintiff complained 20 that notwithstanding the district court’s 2009 orders, Defendants refused to identify which 21 22 sources of discoverable material they had examined, but it was nonetheless apparent that 23 Defendants had “failed adequately to search for and produce discoverable materials from even 24 easily accessible sources.” (Dkt. No. 170 at 2.) Defendants opposed Plaintiff’s contentions 25 26 27 28 (Dkt. No. 177), and the district court referred the issue to then-Magistrate Judge Chen, who considered substantial briefing by both sides (Dkt. Nos. 171,177, 192, 198-201, 205-06, 21327, 230, and 244) and held two hearings on these and other discovery issues. 3 1 Judge Chen issued an order on January 26, 2011 and another on February 1, 2011 2 disposing of all pending motions, including the motion for discovery sanctions. (Dkt. Nos. 3 236, 247 (the “Orders”).) Among other directions, the court ordered Defendants to search 4 5 6 7 their central file server for searchable documents based on the custodian and search list agreed to by the parties and to search the local hard drives of additional custodians as agreed upon by the parties. (Dkt. No. 236 at 2.) The court did not, however, award any sanctions. (Dkt. Nos. 8 9 236, 247.) Indeed, at oral argument the court explained that he was not “sympathetic to Northern District of California hearing a sanctions motion . . . because that should have been addressed by traditional motions 11 United States District Court 10 to compel.” (Dkt. No. 209 at 4:11-13.) 12 Defendants appear to have complied with Judge Chen’s order; indeed, Plaintiff notes 13 14 that after Judge Chen’s order, Defendants produced “an additional 11,633 pages of 15 documents, which dwarfs the 8270 pages of documents they had produced in the entire case 16 until that point.” (Dkt. No. 258 at 1.) Plaintiff nonetheless filed a further motion on April 8, 17 18 2011 seeking enforcement of the Orders and additional relief (Dkt. No. 258), which led to 19 additional briefing by both parties (Dkt. Nos. 262-63, 266, 269, 271-72) as well as 20 administrative motions (Dkt. Nos. 268, 270, and 272), all of which were transferred to this 21 22 Court on June 9, 2011. (Dkt. No. 274.) At the request of the Court, the parties filed a joint 23 statement outlining eight issues ripe for decision by this Court. (Dkt. No. 278.) The Court 24 held a hearing on July 7, 2011 which resolved all the issues, except for issues 6-7, related to 25 26 27 28 4 1 2 Plaintiff’s renewed request for sanctions, and issue 8, related to the cost of discovery.1 (Dkt. No. 282.) The remaining issues are as follows: 3 6. Whether the Court should recommend an adverse inference instruction, similar to the instruction plaintiff referenced in Dkt. #258, pp. 14-15? 7. Whether the Court should award Plaintiff attorneys’ fees and costs in the amount of $137,516.67? 4 5 6 7 (Dkt. No. 278 at 2.) 8 Following the hearing, the parties filed supplemental briefs on Plaintiff’s sanctions 9 10 request (Dkt. Nos. 283, 287), and Defendants moved to file a sur-reply. (Dkt. No. 289.) Northern District of California United States District Court 11 DISCUSSION 12 There are two sanctions issues before this Court: whether an adverse inference is 13 14 appropriate and whether monetary sanctions in the form of attorneys’ fees and costs are 15 warranted. At the July 7, 2011 hearing, and in light of Judge Chen’s denial of Plaintiff’s 16 17 November 2010 sanctions request, the Court limited Plaintiff’s sanctions motion to the 18 argument that documents Defendants produced in response to Judge Chen’s January and 19 February 2011 orders reveal that Defendants did not comply with the district court’s August 20 2009 discovery order and that Plaintiff has been prejudiced by the failure—in other words, to 21 22 arguments that Plaintiff could not have made to Judge Chen in connection with his earlier 23 orders. 24 1. The Newly Produced Documents 25 Plaintiff complains that it was not until March 2011, in response to Judge Chen’s 26 27 28 Orders, that Defendants produced over 11,000 pages of documents, including at least three 1 As neither party briefs issue 8, the Court concludes the parties resolved this issue among themselves. 5 1 2 3 material documents that should have been produced earlier. First, Defendants belatedly produced “Talking Points” related to the design of the Blue Sky cans because, Plaintiff alleges, Defendants initially unreasonably narrowed their electronic search query in local hard 4 5 drives to documents that matched “Blue Sky and Santa Fe and (New Mexico or N.M. or 6 NM).” Second, Defendants failed to search the documents of custodian Russell Stirmell, who 7 was Defendants’ former Midwest Regional Sales Manager, until ordered by Judge Chen to do 8 9 so. After the ordered search, Defendants produced what Plaintiff contends is a material email Northern District of California from Mr. Stirmell dated August 23, 2006. Finally, Defendants failed to produce an email 11 United States District Court 10 from Marketing Vice President Gregg Arends to website designer The Buddy Group, which 12 Plaintiff contends is highly relevant. Plaintiff asserts that all of these documents should have 13 14 been produced, at the latest, in response to the district court’s 2009 orders. Plaintiff therefore 15 argues he is entitled to an adverse instruction and monetary sanctions because Defendants’ 16 late production cost Plaintiff the ability to take depositions about the documents or even 17 18 19 authenticate them. (Dkt. Nos. 258 at 5-7, 287.) 2. The Requested Sanctions 20 21 22 23 a. Adverse Inference “An adverse inference instruction may be appropriate where a party’s bad faith or gross negligence has resulted in either the spoliation of evidence or failure to turn over relevant 24 25 evidence.” Karnazes v. County of San Mateo, 2010 WL 2672003 at *2 (N.D. Cal. July 2, 26 2010). In Karnazes, despite repeated court orders to do so, the plaintiff failed to make her 27 treating physician available for deposition and failed to produce the physician’s treatment 28 6 1 notes. Here, Plaintiff cites numerous examples to justify a finding that Defendants acted in 2 bad faith or with gross negligence (Dkt. No. 258 at 14), but even assuming Plaintiff is correct 3 that the district court’s 2009 orders required Defendants to produce all electronically stored 4 5 6 7 information (“ESI”), including responsive documents located on Defendants’ central server, the argument that Defendants should be sanctioned for failing to do so were expressly made to and ruled on by Judge Chen. (Dkt. Nos. 170, 174, 226, 244.) The only new issue—production 8 9 of documents in response to Judge Chen’s orders and any prejudice arising from the content Northern District of California of these newly produced documents—does not justify the adverse inference Plaintiff seeks. 11 United States District Court 10 Plaintiff is, in effect, asking the Court to impose an adverse inference sanction because 12 Defendants complied with Judge Chen’s orders. 13 14 15 Although Plaintiff speculates as to what documents may have been destroyed or not produced, there is no evidence of spoliation at this juncture. See Hamilton v. Signature Flight 16 Support Corp., 2005 WL 3481423 at *8 (N.D. Cal. Dec. 20, 2005) (stating that to determine 17 18 prejudice in the context of spoliation, the test “is whether there is a reasonable possibility, 19 based on concrete evidence, that access to the evidence which was destroyed or altered, and 20 which was not otherwise obtainable, would produce evidence favorable to the objecting 21 22 23 24 party”) (internal quotation marks and citation omitted). b. Monetary Sanctions Plaintiff also “renews his previous request” for attorney’s fees and costs in the amount 25 26 27 28 of $137,516.67. (Dkt. No. 258 at 15.) This is the amount of sanctions Plaintiff requested in his November 2010 motion for sanctions. He contends that such monetary sanction is mandatory under Federal Rule of Civil Procedure 37(b)(2). 7 1 2 3 As explained above, however, Judge Chen previously ruled on Plaintiff’s November 2010 motion in two orders after additional briefing and two hearings, and he chose not to order monetary sanctions; instead, he ordered Defendants to perform additional searches and 4 5 produce additional documents. (Dkt. Nos. 236, 247.) Plaintiff now makes the same 6 argument he made then: that Defendants made “inadequate, half-hearted and belated efforts to 7 search for electronic or paper documents.” (Dkt. No. 170-1 at 28.) The only difference is that 8 9 in response to Judge Chen’s Orders issued in response to Plaintiff’s motion for sanctions, Northern District of California Defendants now have produced relevant, material documents. Thus, without forthrightly 11 United States District Court 10 saying so, or complying with Local Rule 7-9, Plaintiff is essentially asking this Court to 12 reconsider Judge Chen’s implicit denial of Plaintiff’s motion for sanctions. Plaintiff gives this 13 14 Court no reason to do so. Accordingly, Plaintiff’s renewed request for monetary sanctions is 15 denied. 16 c. Prejudice From the Late Production 17 18 19 20 While the Court concludes that an adverse inference and monetary sanctions are not appropriate in these circumstances, the bottom line is that Defendants produced certain relevant and responsive documents long after the discovery cut-off. While Plaintiff bears 21 22 some of the responsibility for this delay, Defendants, too, share responsibility as they had to 23 be ordered—at least four times—to produce responsive discovery. (Dkt. Nos. 61, 87, 236, 24 247.) The question then is what to do about Plaintiff’s asserted inability to authenticate and 25 26 27 obtain information about the three material documents produced in March 2011. Now that it is apparent that—short of a negotiated resolution—the case is going to trial, the Court 28 8 1 2 3 concludes that the proper approach is to allow limited, narrow discovery regarding these three documents. Accordingly, the parties are ordered to meet and confer regarding additional limited 4 5 6 7 discovery on the three documents, should Plaintiff desire to proceed with such discovery. First, the parties should consider the question of authentication, an issue that can be addressed by stipulation. Second, the parties should address the question of the authorship and approval 8 9 of the “Talking Points.” This, too, is a question that can be addressed informally by Northern District of California stipulation, and the Court encourages the parties to consider such a resolution. Third, the 11 United States District Court 10 parties should discuss depositions, if necessary, of Russell Stirmell and Gregg Arends. Any 12 such limited discovery shall take place forthwith. The parties are therefore ordered to provide 13 14 the Court with a written joint status report on any further limited discovery arising from the 15 three documents on or before October 21, 2011. 16 CONCLUSION 17 18 19 20 For the reasons explained above, the Court in its discretion denies Plaintiff’s motion for monetary and other sanctions. Plaintiff, however, is allowed to take limited discovery on the three material documents identified in Docket No. 258 as discussed above. The parties shall 21 22 provide the Court with a joint written update on such discovery and their meet and confer 23 efforts on or before October 21, 2011. Defendants’ motion for leave to file a sur-reply (Dkt. 24 No. 289) is GRANTED. 25 26 27 IT IS SO ORDERED. Dated: October 11, 2011 _________________________________ JACQUELINE SCOTT CORLEY UNITED STATES MAGISTRATE JUDGE 28 9

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