Interlabservice, OOO v. Illumina, Inc., et al.
Filing
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ORDER Denying #38 Motion for Determination of Discovery Dispute. Signed by Magistrate Judge Karen S. Crawford on 10/17/2016. (knb)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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ORDER RE JOINT MOTION FOR
DETERMINATION OF DISCOVERY
DISPUTE RE: DEFENDANT'S
RESPONSES TO PLAINTIFF'S
REQUEST FOR PRODUCTION OF
DOCUMENTS (SET ONE)
Plaintiff,
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Case No.: 15cv2171-KSC
INTERLABSERVICE, 000, a Russian
limited liability company ,
v.
ILLUMINA, INC., a Delaware
corporation ,
Defendant.
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[Doc. No. 38.]
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Before the Court is the parties' Joint Motion Re: Responses by Defendant to
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Plaintiff's Request for Production of Documents (Set One). [Doc. No. 38.] In the Joint
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Motion, plaintiff seeks an order compelling defendant to provide further responses to
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certain requests for production of documents. For the reasons outlined more fully below,
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the Court finds that plaintiff's request for an order compelling defendant to provide
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further responses to requests for production of documents must be DENIED.
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Background
Plaintiffs First Amended Complaint includes causes of action for breach of
contract and common counts. According to the First Amended Complaint, plaintiff
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Interlabservice, OOO, is a limited liability company based in Russia, and defendant
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Illumina is a Delaware corporation with headquarters in San Diego. [Doc. No. 20, at pp.
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1-2.] Jurisdiction in this case is based on diversity of citizenship. [Doc. No. 20, at p. 2.]
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Plaintiff alleges in the First Amended Complaint that it entered into a series of
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distributor agreements with defendant between 2011 and 2014. Under the terms of these
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agreements, plaintiff was required to provide warranty services to end customers who
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purchased defendant's products through plaintiff. [Doc. No. 20, at pp. 3-4.] According to
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plaintiff, defendant was obligated under these agreements to reimburse plaintiff for the
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expense of providing warranty services and replacement parts to end customers. [Doc.
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No. 20, at p. 4, n 14, 17.]
Plaintiff alleges that defendant breached the distributor agreements by refusing to
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honor its warranty obligations. As a result, plaintiff claims it was forced to provide
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warranty services, supplies, and parts to customers without any compensation from
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defendant. [Doc. No. 20, at pp. 5-6.] Plaintiff's claims for damages caused by
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defendant’s alleged failure to meet its contract obligations exceeds $500,000. [Doc. No.
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20, at p. 7.]
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Defendant has also filed a Cross-Complaint against plaintiff which includes the
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following causes of action: (1) breach of written contract; (2) breach of covenant of good
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faith and fair dealing; (3) breach of fiduciary duty; and (4) intentional interference with
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economic advantage. [Doc. No.2, at p. 1.] The Cross-Complaint claims damages in
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excess of $75,000. [Doc. No.2, at pp. 7-8.]
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Defendant's Cross-Complaint generally alleges that it entered into distributor
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agreements with plaintiff which required plaintiff to "use all commercially diligent efforts
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to market, distribute and support" defendant's medical devices in Russia and to refrain
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from undertaking any "unilateral activities" involving defendant's medical devices after
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the agreement terminated. [Doc. No.2, at p. 3.] In connection with the distributor
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agreements, defendant alleges that it also issued a written power of attorney authorizing
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plaintiff to act as its representative in Russia, so that plaintiff could register defendant's
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products with the Russian government as required under Russian law. [Doc. No.2, at
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p. 3.] Defendant believes plaintiff was aware that defendant could not import, market, or
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sell its medical devices in Russia without "continued registration." [Doc. No. 2, at p. 3.]
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The Cross-Complaint further alleges that the most recent distributor agreement
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expired by its own terms on December 31, 2014. [Doc. No.2, at p. 3.] Without
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defendant's knowledge or consent, defendant alleges that plaintiff secretly and
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maliciously de-registered defendant's medical devices in Russia sometime between
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December 2014 and May 2015. [Doc. No.2, at pp. 3-4.] Defendant's belief is that
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plaintiff de-registered the medical devices in order to disrupt and interfere with
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defendant's relationship with its new distributor and to retaliate against defendant for
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allowing the distributor agreements to terminate without renewal. [Doc. No.2, at pp.
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6-7.] As a result of this de-registration of medical devices, defendant claims it
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experienced an "actual disruption" of its existing and potential business relationships and
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its ability to market and sell its medical devices in Russia through its new distributor.
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Defendant further claims that it incurred attorney's fees and other expenses to reinstate
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registration of its medical devices. [Doc. No.2, at pp. 4-7.]
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Discussion
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"Unless otherwise limited by court order, the scope of discovery is as follows:
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Parties may obtain discovery regarding any non-privileged matter that is relevant to any
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party's claim or defense and proportional to the needs of the case, considering the
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importance of the issues at stake in the action, the amount in controversy, the parties'
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relative access to relevant information, the parties' resources, the importance of the
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discovery in resolving the issues, and whether the burden or expense of the proposed
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discovery outweighs its likely benefit. Information within this scope of discovery need
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not be admissible in evidence to be discoverable." Fed. R. Civ. P. 26(b)(1). "The court
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may, for good cause, issue an order to protect a party or person from annoyance,
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embarrassment, oppression, or undue burden or expense . . . ." Fed. R. Civ. P. 26(c)(1).
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///
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Plaintiff's Document Request Nos. 12, 14, and 15
In Document Request Nos. 12, 14, and 15, plaintiff seeks production of documents
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from 2013 to the present described as defendant's "entire file" on its search for a new
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distributor in Russia; all communications with Nick Bates and Albiogen, OOO; and all
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communications between defendant and Albiogen, OOO. [Doc. No. 38, at pp. 4-6.]
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Apparently, Albiogen, OOO, is another distributor retained by defendant to sell and
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service its products in Russia “after the end of the parties['] contractual relationship."
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[Doc. No. 38, at p. 9-10.] Defendant has objected to these requests as irrelevant and
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overly broad. [Doc. No. 38, at pp. 4-7.]
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Nick Bates is a manager for a wholly-owned subsidiary of defendant and was in
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charge of distribution and sales for defendant in Russia beginning in January 2014. [Doc.
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No. 38, at p. 4-6; Doc. No. 30-3, at p. 1-2.] According to defendant, Albiogen, OOO, is
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"a Russian entity related to the new distributor engaged by [defendant] after its contract
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with [plaintiff] ended per its own terms." [Doc. No. 38, at p. 10.] Mr. Bates submitted a
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Declaration in support of defendant's Motion for Posting of Bond. [Doc. No. 30-3, at pp.
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1-4.] In this Declaration, Mr. Bates set forth his view as to why defendant decided not to
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renew its distributor agreement with plaintiff and "to begin working with a KhimExpert
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company, Albiogen." [Doc. No. 30-3, at p. 3.] According to Mr. Bates, he observed
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“several issues that caused [defendant] to reevaluate [plaintiff] as a distribution partner.”
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[Doc. No. 30-3, at p. 2.] Mr. Bates' Declaration was signed in the United Kingdom under
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penalty of perjury under the laws of the United States. [Doc. No. 30-3, at p. 4.]
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Plaintiff argues that defendant should be ordered to produce all documents
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responsive to Document Request Nos. 12, 14, and 15, because it believes that defendant's
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decision not to renew its distributor relationship with plaintiff was the result of corruption
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and not because of plaintiff’s poor performance. Plaintiff’s theory is that Mr. Bates
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received payments from a new distributor, and, as a result, had a motive to sabotage
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plaintiff s relationship with defendant. In addition, plaintiff suspects that Mr. Bates
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actually "sabotaged" its operations and "caused disruptions" in its relationships with
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customers. [Doc. No. 38, at pp. 4-7.] If defendant is ordered to produce all documents
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responsive to Request Nos. 12, 14, and 15, plaintiff believes it will uncover evidence to
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supports its suspicions and it will then be able to amend the operative First Amended
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Complaint to add new parties and new causes of action. [Doc. No. 38, at pp. 4-7.]
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Plaintiff also argues that documents responsive to Request Nos. 12, 14, and 15 will
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"allow plaintiff to calculate its damages." [Doc. No. 38, at pp. 4-7.] Plaintiff does not
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explain how the requested documents could be used to calculate its alleged damages.
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Defendant argues convincingly that the documents sought in response to
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Document Request Nos. 12, 14, and 15 exceed the scope of discovery permitted under
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Federal Rule 26(b)(l), because the documents do not relate to any party's claim or
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defense. First, plaintiff is seeking an order compelling production of documents to
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uncover facts about defendant's decision to retain a new distributor rather than renew its
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distributor agreement with plaintiff, but the First Amended Complaint does not include
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any allegations indicating there was anything unlawful about the termination of the
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parties' business relationship or the distributor agreement. [Doc. No. 38, at p. 10; Doc.
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No. 20, at pp. 2-7.] Rather, the operative First Amended Complaint narrowly alleges that
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defendant was obligated under the distributor agreements to reimburse plaintiff for the
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expense of providing warranty services and replacement parts to end customers. [Doc.
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No. 20, at p. 4.] The First Amended Complaint further alleges that defendant breached
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the distributor agreements by refusing to honor its warranty obligations, so plaintiff was
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allegedly forced to provide warranty services, supplies, and parts to customers without
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any compensation from defendant. [Doc. No. 20, at pp. 5-6.] None of the documents
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sought in response to Request Nos. 12, 14, and 15 have any bearing on whether defendant
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was obligated to reimburse plaintiff for providing warranty services or replacement parts
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or the amount of damages plaintiff may have incurred because defendant did not meet its
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obligations in this regard.
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Second, the allegations in defendant's Cross-Complaint are also very narrow -- that
plaintiff abused a power of attorney when it canceled defendant's product registration in
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Russia. [Doc. No.2, at pp. 3-7.] None of the documents sought in response to Request
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Nos. 12, 14, and 15 have any bearing on whether plaintiff abused the power of attorney
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by canceling defendant's product registration in Russia. Therefore, the Court agrees with
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defendant's contention that the documents plaintiff is seeking in response to Request Nos.
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12, 14, and 15 do not meet the relevance standard in Federal Rule 26(b)(1).
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Third, the proposed discovery relates to third parties who have not been named in
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the operative First Amended Complaint, and based on the information before the Court, it
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appears that these third parties are located in the United Kingdom and Russia. Plaintiff
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argues that defendant should be ordered to provide full and complete responses to
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Request Nos. 12, 14, and 15, because plaintiff believes that facts uncovered in this
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proposed discovery "would lead plaintiff to amend the complaint to add new parties and
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new causes of action." [Doc. No. 38, at pp. 5-7.] However, it is unclear whether
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jurisdiction could be established over these third parties even if the proposed discovery
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were to support plaintiff s suspicions about Mr. Bates and/or or Albiogen. Nor is there
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anything to indicate plaintiff could successfully move to amend the First Amended
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Complaint to add new parties and causes of action based on its theory that Nick Bates
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and/or Albiogen disrupted and interfered with the parties' business relationship.
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Federal Rule of Civil Procedure 15(a) does provide that a party may seek leave to
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amend its pleading and that "[t]he court should freely give leave when justice so
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requires." Fed.R.Civ.P. 15(a). On the other hand, leave to amend is not unlimited and
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may be denied for reasons "such as undue delay, bad faith or dilatory motive on the part
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of the movant, repeated failure to cure deficiencies by amendments previously allowed,
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undue prejudice to the opposing party by virtue of allowance of the amendment, futility
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of amendment, etc." Foman v. Davis, 371 U.S. 178,182 (1962). For example, in
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Chodos v. West Publishing Co., 292 F.3d 992 (9th Cir. 2002), the Ninth Circuit upheld a
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denial of leave to amend where the moving party was aware of the facts supporting a new
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claim prior to the close of discovery and before making the first amendment to the
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complaint. Id. at 1003.
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On February 12, 2016, this Court issued a Scheduling Order which states in part as
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follows: "Any motion to join other parties, to amend the pleadings, or to file additional
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pleadings shall be filed on or before March 4, 2016. . . . The dates and times set forth
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herein will not be modified except for good cause shown.” [Doc. No. 26, at pp. 1, 5.]
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"A court's evaluation of good cause is not coextensive with an inquiry into the
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propriety of [a proposed] amendment under ... Rule 15." [Citation omitted.] Unlike
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Rule 15( a)' s liberal amendment policy which focuses on the bad faith of the party
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seeking to interpose an amendment and the prejudice to the opposing party, Rule 16(b)' s
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'good cause' standard primarily considers the diligence of the party seeking the
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amendment. The district court may modify the pretrial schedule 'if it cannot reasonably
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be met despite the diligence of the party seeking the extension.' [Citations omitted.]
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Moreover, carelessness is not compatible with a finding of diligence and offers no reason
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for a grant of relief. [Citations omitted.] Although the existence or degree of prejudice to
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the party opposing the modification might supply additional reasons to deny a motion, the
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focus of the inquiry is upon the moving party's reasons for seeking modification.
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[Citation omitted.] If that party was not diligent, the inquiry should end." Johnson v.
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Mammoth Recreations, Inc., 975 F.2d 604,609 (9th Cir. 1992).
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Here, the facts and circumstances presented are not consistent with a finding that
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the interests of justice favor granting any proposed motion by plaintiff to amend the First
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Amended Complaint based on plaintiff s theory that Mr. Bates and/or Albiogen
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unlawfully interfered with the business relationship between plaintiff and defendant. Nor
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are the facts and circumstances presented consistent with a finding that there is "good
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cause" to extend the long-expired deadline of March 4, 2016 to file any motion to amend
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the pleadings or to add new parties.
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The original Complaint in this action was filed in state court on April 29, 2015.
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[Doc. No. 1-2, at p. 3.] The case was then removed to this Court by defendant on
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September 29, 2015 based on diversity of citizenship. [Doc. No. 1.] Mr. Bates, allegedly
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a citizen of the United Kingdom, was named as a defendant in the original Complaint.
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[Doc. No. 1-2, at p. 4.] The original Complaint also included a specific claim against
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Mr. Bates for intentional interference with prospective economic relations that is
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essentially the same as the suspicions plaintiff expresses against Mr. Bates in the current
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Joint Motion. [Doc. No. 1-2, at p. 7.] Specifically, the original Complaint alleges that
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Mr. Bates knew about the distributor relationship between plaintiff and defendant and
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engaged in wrongful conduct to disrupt the relationship. [Doc. No. 1-2, at p. 7.] Plaintiff
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had to have an evidentiary basis for making the allegations against Mr. Bates prior to
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April 29, 2015, when it filed the original Complaint in state court. Cal. Code. Civ. P.
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128.7(b)(3); Fed.R.Civ.P. 11(b)(3). In the Declaration of Mr. Bates, there is also
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evidence to indicate plaintiff was aware in December 2014 that defendant did not plan to
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renew the distributor agreement but instead planned to transition customers to Albiogen
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as its new distributor. [Doc. No. 30-3, at p. 3.]
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On November 5, 2015, plaintiff filed its First Amended Complaint in this Court but
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did not name Mr. Bates as a defendant and did not allege there was any impropriety
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involved in the termination of the distributor agreements. [Doc. No. 20, at pp. 1-9.]
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Discovery in the case began on January 15, 2016, when the parties were ordered to
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complete their initial disclosures. [Doc. No. 24, at p. 2.] Then, in the Scheduling Order
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filed on February 12, 2016, the Court set a deadline of June 30, 2016 for the parties to
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complete all fact discovery in the case. [Doc. No. 26, at p. 1.]
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Based on the information provided with the instant Joint Motion, plaintiff did not
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seek documents from defendant to support its suspicions about Mr. Bates until April 18,
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2016, almost a year after it made the interference allegations against him in the original
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Complaint, and more than a month after the expiration of the March 4, 2016 deadline for
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filing any motions to amend or join other parties. Thus, the facts and circumstances
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presented are highly suggestive of undue delay, a dilatory motive, and lack of good cause
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or diligence. Thus, even if plaintiff discovers evidence to support its suspicions about
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Mr. Bates and/or Albiogen, it appears unlikely plaintiff would be able to succeed on a
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motion to amend to allege interference with the business relationship between plaintiff
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and defendant. Accordingly, the Court finds that plaintiff's request for an order
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compelling defendant to provide further responses to Document Request Nos. 12, 14, and
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Plaintiff's Document Request No. 16
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In Document Request No. 16, plaintiff seeks an order compelling defendant to
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provide access to its "[e]ntire technical support database regarding clients in Russia and
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Kazakhstan since 2011." [Doc. No. 38, at p. 7.] Defendant objects to this request as
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overly broad, vague, and irrelevant. [Doc. No. 38, at pp. 7-8.]
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Plaintiff represents that defendant cut off its access to the database as soon as this
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case was filed. However, plaintiff claims that it needs access to the database, because it
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includes evidence of the warranty breach and the amount of plaintiff's damages. [Doc.
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No. 38, at pp. 7-8.]
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Defendant represents that it already produced records showing "all technical
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support provided to any customer who purchased [defendant's] products through
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plaintiff." [Doc. No. 38, at p. 10.] However, defendant objects to producing additional
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records showing technical support (i.e., warranty services) provided to end customers by
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any distributor other than plaintiff. Defendant argues that information about other
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distributors is not relevant to the narrow issues raised by the allegations in the First
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Amended Complaint -- whether defendant was obligated under the distributor agreements
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to reimburse plaintiff for the expense of providing warranty services and replacement
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parts to end customers and whether defendant breached any such obligation to plaintiff.
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[Doc. No. 38, at p. 11.]
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Without more, it appears that Document Request No. 16 is overly broad and seeks
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production of documents that do not meet the relevance standard of Federal Rule
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26(b)(1). Plaintiff has not offered to make the request more specific. Nor has plaintiff
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explained why it believes the responsive documents defendant has already produced are
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not enough. Based on the information before the Court, it appears that defendant has
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already provided plaintiff with an adequate response to this. Accordingly, the Court finds
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that plaintiff's request for an order compelling defendant to provide a further response to
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Document Request No. 16 must be DENIED.
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Plaintiff's Document Request No. 17
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In Document Request No. 17, plaintiff seeks an order compelling defendant to
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produce all documents showing defendant's sales to customers in Russia from "2011 until
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today.” [Doc. No. 38, at p. 8.] Defendant objects to this request as overly broad, vague,
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and ambiguous. Defendant also objects because it claims that plaintiff already has all
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responsive documents in its possession through December 2014. To the extent plaintiff
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seeks documents reflecting sales after December 2014, defendant argues they are
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irrelevant. [Doc. No. 38, at p. 8-9.]
Defendant also represents in the parties' Joint Motion that it has produced all
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"records reflecting all sales by [defendant] to customers in Russia during the time when
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[plaintiff] was [defendant's] distributor . . . (April 2011 through December 2014)." [Doc.
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No. 38, at p. 11.] On relevance grounds, defendant has not produced and objects to
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producing documents showing sales made to customers in Russia when plaintiff was not
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its distributor. Defendant argues convincingly that documents showing sales made to
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customers while plaintiff was not its distributor have no bearing on the issues raised by
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the parties' pleadings. Plaintiff has not alleged in the First Amended Complaint that
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defendant improperly terminated the distributor agreements or that any subsequent sales
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should have been credited to plaintiff. [Doc. No. 38, at p. 11.]
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Without more, it appears that Document Request No. 17 is overly broad. Plaintiff
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has not offered to make the request more specific. Nor has plaintiff adequately explained
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the relevance of these documents or why it believes the responsive documents defendant
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has already produced are not enough. Based on the information before the Court, it
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appears that defendant has already provided plaintiff with an adequate response to this
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request. [Doc. No. 38, at pp. 8, 11; Doc. No. 38-1, at pp. 2-3.] Accordingly, the Court
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finds that plaintiff's request for an order compelling defendant to provide a further
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response to Document Request No. 17 must be DENIED.
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Conclusion
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Based on the foregoing, IT IS HEREBY ORDERED that plaintiffs request for an
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order compelling defendant to provide further responses to Document Request Nos. 12,
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14, 15, 16, and 17 is DENIED.
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IT IS SO ORDERED.
Dated: October 17, 2016
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