Jackson Family Wines, Inc et al v. Diageo North America, Inc. et al

Filing 102

ORDER GRANTING IN PART PLAINTIFFS MOTION TO COMPEL FINANCIAL INFORMATION (Dkt. No. 93). Signed by Magsitrate Judge Jacqueline Scott Corley on 10/31/2013 (ahm, COURT STAFF) (Filed on 10/31/2013)

1
2
3
4
5
6
7

IN THE UNITED STATES DISTRICT COURT

8

FOR THE NORTHERN DISTRICT OF CALIFORNIA

9
10

Northern District of California

United States District Court

11
12
13

JACKSON FAMILY WINES, INC., et al.,
Plaintiffs,
v.

14
15
16
17

Case No. 11-5639 EMC (JSC)
ORDER GRANTING IN PART
PLAINTIFFS’ MOTION TO COMPEL
FINANCIAL INFORMATION
(Dkt. No. 93)

DIAGEO NORTH AMERICA, INC., et
al.,
Defendants.

18
19

Plaintiffs wine companies have sued their competitors, Diageo North America, Inc. and

20

Diageo Chateau & Estate Wines Co. for trademark infringement. Now pending before the

21

Court is a joint discovery letter brief regarding a financial document dispute. Plaintiffs seek to

22

strike Defendants’ damages expert report on the ground that Defendants have refused to

23

produce documents upon which their expert relied. In the alternative, Plaintiffs seek

24

production of the documents, further depositions, and an award of costs. Plaintiffs also seek

25

Defendants’ yearly brand-level profit-and-loss statements (“P&L statements”). After

26

carefully considering the parties’ submissions, and having had the benefit of oral argument,

27

Plaintiffs’ motion is granted as to the production of documents and further depositions and

28

1

costs, but denied as to their request to strike the expert report and for production of P&L

2

statements.

3
4

BACKGROUND
Defendants disclosed Christine Hammer as their damages expert. In her initial expert

De Lye product by deducting from gross revenues advertising and promotions (“A&P”) costs

7

and overhead expenses of two dollars per case shipped. Plaintiffs’ damages expert (Mr.

8

Gutzler) apparently did not deduct such costs; in his supplemental report he explained that he

9

did not do so because he did not understand the basis for the deduction of such costs and that

10

Plaintiffs did not have the information sufficient to identify any such costs. In particular, he

11
Northern District of California

report, Ms. Hammer computed the profit and loss attributed to Defendants’ challenged Crème

6

United States District Court

5

noted that Defendants’ controller could not identify any increased overhead costs incurred by

12

Defendants as a result of the launch of the challenged Crème De Lye brand.

13

In her supplemental expert report in response, Ms. Hammer explained that her

14

valuation of Defendants’ profit includes deductions from brand revenues for a percentage of

15

the general corporate A&P and overhead expenses, even if those expenses did not increase

16

upon the introduction of the Crème De Lye brand. In her opinion this deduction is appropriate

17

given that the Crème de Lye brand benefited from those expenditures. She thus allocated a

18

percentage of the general corporate A&P and overhead to Crème de Lys based on its

19

percentage of Defendants’ total shipping volume.

20

Defendants, however, have not produced all of the documents upon which Ms.

21

Hammer relies to compute her corporate A&P and overhead deduction. Nor have they

22

produced documents showing the total shipment volume and the Crème de Lys shipment

23

volume during the relevant time period. Further, during Plaintiffs’ deposition of Defendants’

24

controller, Defendants instructed the witness not to provide Plaintiffs with the numbers of

25

Defendants’ total shipment volume, total A&P costs, and total overhead. (Dkt. No. 92-7, Ex.

26

4 at 135-39.) Ms. Hammer was also instructed during her deposition not to disclose certain

27

figures. (Dkt. No. 92-5, Ex. 2 at 195.)

28

2

1

During the meet and confer process Defendants finally offered to produce the sought-

2

after financial information, upon certain conditions. First, Plaintiffs had to agree to treat the

3

information as highly confidential, including at trial, which meant that it would agree that all

4

of Plaintiffs’ employees would have to be cleared of the courtroom when and if the

5

information is discussed. Second, with respect to further depositions as a result of the

6

disclosure of the information, the parties would reserve their rights to seek relief from the

7

court, but that they would also have to agree to bear their own costs with respect to the costs

8

of such further depositions. Plaintiffs refused these conditions and their motion to compel

9

followed. Plaintiffs now move to strike Ms. Hammer’s opinions regarding the deduction of a

Northern District of California

percentage of corporate A&P and overhead on the ground that “Defendants have refused to

11
United States District Court

10

produce these documents.” (Dkt. No. 92-3 at 2). In the alternative, they ask the Court to order

12

Defendants to produce the relevant financial documents, allow Plaintiffs to further depose the

13

controller and Ms. Hammer, and order Defendants to pay all costs and expenses incurred as a

14

result of their delay.

15
16

DISCUSSION
The sought-after financial documents are relevant and discoverable. As Defendants’

17

expert relied upon the documents they should have been produced. Defendants have

18

explained that because the information is so highly confidential—the crown jewels—they did

19

not want to produce the information absent an agreement from Plaintiffs that at trial Plaintiffs

20

would agree to maintain the information attorney’s eyes only. That was not the only condition

21

to their production, however; Defendants also insisted that should the Court order that further

22

depositions are warranted, the parties would bear their own costs.

23

Following the hearing on the motion, Defendants now agree to produce the financial

24

documents Ms. Hammer relied upon, without condition. (See Dkt. No. 101.) However,

25

because Defendants failed to include these documents with Ms. Hammer’s supplemental

26

report, at her deposition, or anytime Plaintiffs requested them before or after the deposition,

27

Defendants violated Federal Rule of Civil Procedure 26(a)(2)(B)(ii), which requires disclosure

28

3

1

with the expert report of “the facts or data considered by the witness in forming” her opinions.

2

Defendants admittedly did not disclose such facts or data here.

3

The Court accordingly orders that Plaintiffs shall be allowed to reconvene Ms.

4

Hammer’s deposition for no longer than 90 minutes. The Court further orders that Defendants

5

shall pay for two hours of counsel’s time related to the reconvened deposition. See Fed. R.

6

Civ. P. 37(c)(1)(A) (providing that if a party fails to provide information as required by Rule

7

26(a), the court “may order payment of the reasonable expenses, including attorney’s fees,

8

caused by the failure”). Given this remedy, the Court declines to strike Ms. Hammer’s

9

testimony. In addition, the Court denies Plaintiffs’ request to reconvene Mr. Mulhall’s

Northern District of California

deposition because Plaintiffs have failed to show that such further deposition is needed. If

11
United States District Court

10

Ms. Hammer’s deposition reveals some reason that warrants reconvening Mr. Mulhall’s

12

deposition, the parties can meet-and-confer on the issue and, if unresolved, bring the matter to

13

the Court’s attention. Finally, Plaintiffs’ request that Defendants pay the costs for Mr. Gutzler

14

to analyze the newly produced documents and prepare a supplemental report is also denied as

15

even if the documents were timely produced he would have had to expend time to analyze

16

such documents.

17

Regarding the supposed unproduced P&L statements, Defendants reiterated at the

18

hearing on the motion that all such documents that exist have already been produced. The

19

Court accordingly denies Plaintiffs’ motion to the extent it seeks production of these P&L

20

statements.
CONCLUSION

21
22

For the reasons stated above, the Court orders as follows:

23

1. Defendants shall produce the documents upon which Ms. Hammer relied to

24

compute her corporate A&P and overhead deduction by Wednesday, October 30, 2013.

25

2. Plaintiffs are allowed to depose Ms. Hammer for an additional 90 minutes.

26

3. Defendants shall pay for two hours of counsel’s time related to the reconvened

27
28

Hammer deposition.
IT IS SO ORDERED.

4

1
2

Dated: October 31, 2013
_________________________________
JACQUELINE SCOTT CORLEY
UNITED STATES MAGISTRATE JUDGE

3
4
5
6
7
8
9
10

Northern District of California

United States District Court

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

5