Youngevity International, Corp. v. Smith et al

Filing 625

REPORT AND RECOMMENDATION Re: (1) Defendants' and Counterclaiman Plaintiffs' Motion for Terminating Sanctions or, in the alternative, issue, evidentiary, and monetary sanctions (ECF No. 552 ); (2) Plaintiffs' and Counterclaim Defenda nts' Ex Parte Motion to Strike or, in the alternative, to Stay (ECF No. 554 ); and (3) Request for Oral Argument (ECF No. 586 ). The Court RECOMMENDS that Wakaya's motion for terminating sanctions or, in the alternative, for issue, eviden tiary, and monetary sanctions (ECF No. 552) and Youngevity's request for oral argument (ECF No. 586) be DENIED. The Court recommends that Wakaya's motion for sanctions be denied WITHOUT PREJUDICE. The Court further RECOMMENDS that Youngevit y's ex parte motion to trike (or dismiss) or, in the alternative, to stay (ECF No. 554) be DENIED. The Court alternatively RECOMMENDS that Youngevity's ex parte motion to dismiss be GRANTED. No later than April 23, 2019, any party to this action may file written objections with the Court and serve a copy on all parties. Any reply to the objections shall be filed with the Court and served on all parties no later than April 30, 2019. Signed by Magistrate Judge Jill L. Burkhardt on 4/9/2019.(aef)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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YOUNGEVITY INTERNATIONAL,
CORP., et al.,

Case No.: 16-cv-00704-BTM (JLB)
REPORT AND
RECOMMENDATION RE: (1)
DEFENDANTS’ AND
COUNTERCLAIM PLAINTIFFS’
MOTION FOR TERMINATING
SANCTIONS OR, IN THE
ALTERNATIVE, ISSUE,
EVIDENTIARY, AND MONETARY
SANCTIONS (ECF NO. 552); (2)
PLAINTIFFS’ AND
COUNTERCLAIM DEFENDANTS’
EX PARTE MOTION TO STRIKE
OR, IN THE ALTERNATIVE, TO
STAY (ECF NO. 554); AND (3)
REQUEST FOR ORAL ARGUMENT
(ECF NO. 586)

Plaintiffs,
v.
TODD SMITH, et al.,
Defendants.

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AND RELATED COUNTERCLAIMS.

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On June 22, 2018, Defendants and Counterclaim Plaintiffs (collectively, “Wakaya”)

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filed a motion for terminating sanctions or, in the alternative, for issue, evidentiary, and

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monetary sanctions. (ECF No. 552.) On June 29, 2018, Plaintiffs and Counterclaim

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Defendants (collectively, “Youngevity”) filed an ex parte motion to strike (or dismiss)

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Wakaya’s motion or, in the alternative, to stay the motion. (ECF No. 554.) On September
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16-cv-00704-BTM (JLB)

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5, 2018, Youngevity filed a motion for oral argument regarding ECF Nos. 552, 581, and

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583. (ECF No. 586.) On January 11, 2019, Youngevity’s ex parte motion was referred to

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this Court for disposition. (ECF No. 606.)

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For the following reasons, the Court RECOMMENDS that the Honorable Barry

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Ted Moskowitz, United States District Judge, DENY Wakaya’s motion for terminating

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sanctions or, in the alternative, for issue, evidentiary, and monetary sanctions (ECF No.

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552), and Youngevity’s request for oral argument (ECF No. 586). To the extent Judge

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Moskowitz adopts this report and recommendation, the Court RECOMMENDS that

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Youngevity’s ex parte motion to strike (or dismiss) or, in the alternative, to stay (ECF No.

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554) be DENIED. However, to the extent Judge Moskowitz declines to adopt this report

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and recommendation and determines terminating, issue, and/or evidentiary sanctions are

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appropriate, the Court alternatively RECOMMENDS that Judge Moskowitz GRANT

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Youngevity’s ex parte motion to dismiss Wakaya’s motion, without prejudice, in light of

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the current stay.

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I.

BACKGROUND

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A.

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Youngevity and Wakaya are both multi-level companies that rely on distributors to

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sell their products. Youngevity alleges, inter alia, that Wakaya impermissibly seduced its

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top distributors into leaving Youngevity and forming Wakaya, resulting in substantial

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losses to Youngevity. (See ECF No. 269 at 50-55.) In the Fourth Amended Complaint,

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which is the operative complaint, Youngevity brings the following causes of action against

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one or more of the Wakaya defendants: (1) violation of the Lanham Act (false or

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misleading advertising); (2) violation of California Business and Professions Code §§

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17200, et seq. (“UCL”); (3) intentional interference with prospective economic advantage;

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(4) breach of contract; (5) intentional interference with contract/inducing breach of

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contract; (6) misappropriation of trade secrets; (7) misappropriation of name and likeness;

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(8) violation of the Lanham Act (trademark infringement); (9) breach of fiduciary duty;

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and (10) breach of duty of loyalty. (See id. at 9-77.)

Factual Background

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Wakaya, in turn, alleges that Youngevity impermissibly and unilaterally cancelled

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contracts with former Youngevity distributors that joined Wakaya and engaged in other

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hostile tactics to stunt Wakaya’s growth. (ECF No. 404 at 16-27.) In the Second Amended

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Counterclaim, the operative counterclaim, Wakaya brings the following counterclaims

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against one or more of the Youngevity counterclaim defendants: (1) declaratory judgment;

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(2) breach of contract; (3) breach of the covenant of good faith and fear dealing; (4)

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conversion; (5) [withdrawn]; (6) tortious interference with existing economic relations; (7)

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tortious interference with prospective economic advantage—Youngevity; (8) tortious

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interference with prospective economic advantage—Youngevity, Briskie, Steve Wallach;

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(9) defamation; (10) false light; (11) business disparagement; (12) violation of the UCL;

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and (13) fraud/negligent misrepresentation. (See id. at 28-38.)

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B.

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On March 23, 2016, Youngevity commenced this action against Wakaya. (See ECF

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No. 1.) On December 21, 2016, Youngevity filed a Third Amended Complaint for

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Damages and Injunctive Relief against Wakaya. (See ECF No. 64.) On February 23, 2017,

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Wakaya filed a First Amended Answer [to the Third Amended Complaint] and [Amended]

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Counterclaim against Youngevity. (See ECF No. 83.) In the Counterclaim, Wakaya

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brought the following counterclaims against one or more of the Youngevity counterclaim

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defendants: (1) declaratory judgment; (2) breach of contract; (3) breach of the covenant of

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good faith and fear dealing; (4) conversion; (5) tortious interference with existing economic

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relations; (6) tortious interference with existing economic relations; (7) tortious

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interference with prospective economic advantage; (8) tortious interference with

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prospective economic advantage; (9) defamation; (10) false light; (11) business

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disparagement; (12) violation of the UCL; and (13) fraud/negligent misrepresentation.

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(See id. at 39-76.)

Relevant Procedural Background

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On March 9, 2017, Youngevity filed a special motion to strike all of Counterclaims

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Six, Seven, Nine through Eleven, and Part of Twelve in the Counterclaim pursuant to the

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California anti-SLAPP statute. (See ECF No. 90.) Youngevity also moved to dismiss
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Counterclaims One through Five, Seven, Eight, part of Twelve, and part of Thirteen under

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the “first to file” rule.

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Counterclaims One through Five on the grounds that those claims are subject to binding

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arbitration; and/or dismiss Counterclaims One, Four through Eleven, and Thirteen pursuant

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to Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6). (See id.)

(See id.)

In the alternative, Youngevity moved to dismiss

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On April 5, 2017, in the interest of maintaining the confidentiality of sensitive

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information exchanged between the parties, the Court entered a Stipulated Protective Order

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(“Protective Order”) that allows the parties to designate information produced to the other

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side as “Confidential” or “Confidential—For Counsel Only.” (ECF No. 103.) Information

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designated “Confidential—For Counsel Only” may only be viewed by counsel (including

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support staff) of the receiving party, and by approved independent experts. (Id. at 4-5.)

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On December 13, 2017, Judge Moskowitz granted in part and denied in part

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Youngevity’s motion to strike and/or dismiss.

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Youngevity’s anti-SLAPP motion, Judge Moskowitz ordered Counterclaims Six, Seven,

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and Nine through Twelve stricken “[t]o the extent . . . [they are] based on allegations

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concerning statements directly made within the Verified Complaint,” and Counterclaim

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Eleven stricken in its entirety. (Id. at 26-27.) Judge Moskowitz also granted Youngevity’s

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motion to dismiss Counterclaims Five and Eleven with leave to amend. (Id. at 27.)

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Thereafter, on December 28, 2017, Wakaya filed a Second Amended Counterclaim. (ECF

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No. 404.)

(See ECF No. 330.)

Pursuant to

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On January 1, 2018, Youngevity filed an interlocutory appeal of Judge Moskowitz’s

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December 2017 Order on the motion to strike and/or dismiss to the Ninth Circuit. (See

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ECF No. 411.)

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On January 4, 2018, Youngevity moved the Court ex parte for an order staying all

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action on Counterclaims Six, Seven, and Nine through Twelve in Wakaya’s Counterclaim

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pending the Ninth Circuit’s decision on appeal. (See ECF No. 412.) In its reply,

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Youngevity requested to stay proceedings on all of Wakaya’s counterclaims. (ECF No.

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513.)
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On July 16, 2018, Judge Moskowitz granted Youngevity’s motion for a partial stay

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of the proceedings pending the interlocutory appeal. (See ECF No. 560.) In the Order,

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Judge Moskowitz added: “The Court will rule on the remaining motions for summary

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judgment for Plaintiffs’ and Counterclaim Defendants’ affirmative claims and

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counterclaims eight and thirteen[]. However, pursuant to this Court’s power to control its

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own docket and with considerations of judicial economy in mind, the Court will then stay

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the entire case until the Ninth Circuit’s resolution so that all causes of action proceed to

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trial together.” (Id. at 2-3.) The Court also denied as premature the pending summary

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judgment motions on Counterclaims One through Four, Six, Seven, and Nine through

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Twelve (see ECF Nos. 418, 419, 421-431, 433, 435, 437, 438, 441, 444, 445). (Id. at 3.)

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The parties were granted leave to resubmit their motions depending on the judgment of the

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Ninth Circuit. (Id.)

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On August 7, 2018, Judge Moskowitz held oral argument on several motions for full

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or partial summary judgment filed by the parties. (See ECF No. 578.) Following oral

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argument, Judge Moskowitz ruled on some of the motions, granting them in part and

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denying them in part. (See ECF Nos. 292, 293, 296, 302, 303, 304, 322, 339, 582, 590,

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591, 592, 595, 598.) However, a few motions for full or partial summary judgment remain

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pending before the Court. (See ECF Nos. 300, 439, 559.)

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On January 24, 2019, the Ninth Circuit issued a Memorandum disposition

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dismissing in part, affirming in part, and reversing in part Judge Moskowitz’s December

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2017 Order. (Youngevity Int’l Corp., et al v. William Andreoli, et al. (“Youngevity”), No.

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18-55031 (9th Cir.), ECF No. 48 (Jan. 24, 2019).) On February 7, 2019, Wakaya filed a

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petition for rehearing en banc. (Id. at ECF No. 49 (Feb. 7, 2019).) The petition for

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rehearing en banc was denied on April 1, 2019. (ECF No. 623.)

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C.

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The Court held an Early Neutral Evaluation Conference in this case on February 28,

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2017 (ECF No. 86), and issued a Scheduling Order on March 2, 2017 (ECF No. 87). In

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the Scheduling Order, the Court ordered that all discovery, including expert discovery, be

Discovery Background

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completed by August 18, 2017. (ECF No. 87 at 1.) The Scheduling Order advised the

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parties that:

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All discovery, including expert discovery, shall be completed by all parties by
August 18, 2017. “Completed” means that all discovery under Rules 30-36
of the Federal Rules of Civil Procedure, and discovery subpoenas under Rule
45, must be initiated a sufficient period of time in advance of the cut-off date,
so that it may be completed by the cut-off date, taking into account the times
for service, notice and response as set forth in the Federal Rules of Civil
Procedure. Counsel shall promptly and in good faith meet and confer with
regard to all discovery disputes in compliance with Local Rule 26.1(a).
The Court expects counsel to make every effort to resolve all disputes without
court intervention through the meet and confer process. If the parties reach
an impasse on any discovery issue, counsel shall file an appropriate motion
within the time limit and procedures outlined in the undersigned magistrate
judge’s chambers rules. A failure to comply in this regard will result in a
waiver of a party’s discovery issue. Absent an order of the court, no
stipulation continuing or altering this requirement will be recognized by
the court.

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Discovery motions must be filed in the time and manner directed by
Magistrate Judge Burkhardt (see Judge Burkhardt’s Civil Chambers Rules on
Discovery Disputes available on the Court’s website). All discovery motions
must be filed within 30 days of the service of an objection, answer, or response
which becomes the subject of dispute, or the passage of a discovery due date
without response or production, and only after counsel (and any unrepresented
parties) have met and conferred to resolve the dispute and complied with
Section IV.B. of Judge Burkhardt’s Civil Chambers Rules.

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(Id. at 1-2 (emphasis in original).)

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On June 12, 2017, the Court issued an amended Scheduling Order which required

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that all discovery, including expert discovery, be completed by September 22, 2017. (ECF

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No. 132 at 1-2.)

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On September 15, 2017, Judge Moskowitz extended the discovery cutoff from

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September 22, 2017 to October 19, 2017 for the purpose of deposing certain witnesses.

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(ECF No. 193.) The Court also extended the time for the parties to take the deposition of

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David Roth to November 20, 2017. (See ECF Nos. 208, 244.)

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On October 11, 2017, the Court extended the discovery cutoff deadline to

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October 24, 2017 for the purpose of deposing expert witness Dr. Anne T. Coughlan. (ECF

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No. 224.)

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On November 6, 2017, Youngevity filed a Fourth Amended Complaint for Damages

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and Injunctive Relief. (See ECF No. 269.) Therefore, on November 28, 2017, Youngevity

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filed a motion for leave to conduct additional discovery relevant to the new parties and

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causes of action in the Fourth Amended Complaint, which had been filed after the close of

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fact discovery. (ECF No. 283.) The Court subsequently granted in part and denied in part

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the motion. (ECF No. 406.) Youngevity was granted leave to conduct certain discovery

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on or before February 23, 2018. (Id.)

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On March 27, 2018, the parties filed a joint motion for leave to depose expert

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witnesses Dr. Richard Rucker and Dr. Joshua Plant. (ECF No. 536.) The joint motion was

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granted and the parties were given leave to depose the witnesses on or before

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April 27, 2018. (ECF No. 537.) The parties have neither requested nor been granted any

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additional leave to reopen discovery.

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D.

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Wakaya’s Motion for Terminating Sanctions or, in the Alternative, for
Issue, Evidentiary, and Monetary Sanctions (ECF No. 552)

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On June 22, 2018, Wakaya filed its motion for terminating sanctions or, in the

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alternative, for issue, evidentiary, and monetary sanctions. (ECF No. 552.) In its motion,

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Wakaya requests that the Court enter an order “terminating the claims and defenses of

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[Youngevity] with prejudice and granting default judgment in favor of Wakaya on all

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counterclaims based on Youngevity’s egregious conduct that has rendered a fair trial on

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the merits impossible.” (ECF No. 552-1 at 7.) Wakaya contends that “lesser sanctions

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would be ineffective at protecting the sanctity of these proceedings.” (Id.) However, if the

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Court does not find that Youngevity’s conduct warrants terminating sanctions, Wakaya

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requests in the alternative that the Court impose issue and evidentiary sanctions relevant to

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the claims and defenses most directly affected by Youngevity’s alleged misconduct. (See

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id. at 29.)
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Wakaya bases its motion on the following alleged misconduct of Youngevity: (1)

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producing 4.2 million pages of documents that were all designated “Confidential—For

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Counsel Only” and were 80 percent non-responsive; (2) producing a revised production

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that violates the Court’s December 21, 2017 Order (ECF No. 362), in that it contains both

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non-responsive and mis-designated documents and omits key documents; (3) refusing to

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produce data on which it seeks to rely; (4) stymying discovery from third parties aligned

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with Youngevity; (5) conducting improper self-help discovery outside the normal

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discovery process; and (6) intentionally violating the Protective Order entered in this case

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on at least seven occasions. (See ECF No. 583 at 3.)

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As a result of this alleged misconduct, Wakaya seeks the following relief: (1)

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terminating sanctions as to Youngevity’s claims and defenses; and (2) the granting of

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default judgment in favor of Wakaya on all counterclaims. (ECF No. 552-1 at 7, 9, 29-30.)

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In the alternative, Wakaya requests that the Court impose issue and evidentiary sanctions

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as follows:

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

Youngevity be precluded from relying on any documents it has
produced in this litigation (due to alleged improper productions);

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Youngevity be required to return and destroy all copies of Wakaya’s
productions (due to alleged violations of the Court’s Protective Order);

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Youngevity be prohibited from relying on any documents in Wakaya’s
productions to support its claims or defenses (due to alleged violations
of the Court’s Protective Order);

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Youngevity to identify all parties to which it has disclosed Wakaya’s
“Confidential—For Counsel Only” information (due to alleged
violations of the Protective Order);

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Youngevity be prohibited from introducing any data or derivative data
from its distributor database (due to alleged failure to produce data from
Youngevity’s distributor database and to identify the distributors
alleged to have been cross-recruited);

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The jury be directed to infer that the data in Youngevity’s distributor
database would be favorable to Wakaya and not support Youngevity’s
claims or defenses, including any claim for damages (due to alleged
failure to produce data from Youngevity’s distributor database and to
identify the distributors alleged to have been cross-recruited);

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The following issues related to Counterclaims Six, Seven, and Nine
through Twelve be taken as established (due to Youngevity’s alleged
failure to produce documents regarding the publication of statements in
the Verified Complaint):

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Youngevity distributed the Verified Complaint and other filings
and that such distribution did not fall within the scope of any
privilege;

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Youngevity distributed the Verified Complaint and other filings
with actual malice and knowledge of their falsity;

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Wakaya has been harmed by the distribution of the Verified
Complaint and other filings; and

o

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Youngevity’s distribution of the Verified Complaint and other
filings to businessforhome.org and others was not privileged;

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Youngevity be prohibited from introducing any evidence of damages
related to its Lanham Act claims (due to alleged disclosure of the
“Confidential—For Counsel Only” damages report containing Wakaya
financial information in violation of the Protective Order); and

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It be taken as established that Youngevity tortiously interfered with
Wakaya’s relationship with Rick Anson and Livewell (Counterclaim
Six) (due to allegedly engaging in self-help discovery).

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(See id. at 7, 29-30.)

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Wakaya also contends that Youngevity should be ordered to reimburse the fees and

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costs of its motion and all other fees and costs associated with its misconduct. (See id. at

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30-31.)

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E.

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Youngevity’s Ex Parte Motion to Strike (or Dismiss) or, in the
Alternative, to Stay Wakaya’s Motion (ECF No. 554)

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After Wakaya filed its motion for sanctions, Youngevity filed an ex parte motion

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requesting that the Court strike (or dismiss) with prejudice or, in the alternative, stay

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Wakaya’s motion. (See ECF No. 554 at 6.) Youngevity contends that Wakaya’s motion

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should be stricken or dismissed as procedurally deficient because Wakaya (1) failed to

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meet and confer in advance of filing as required by Local Civil Rule 26.1(a), and (2)

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improperly brought its motion for sanctions before the district judge in an attempt to

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circumvent this Court’s discovery rules and procedures, including the requirement to meet

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and confer. (Id. at 6-7.)

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In the alternative, Youngevity contends that Wakaya’s motion should be stayed

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pending resolution of Youngevity’s appeal because (1) the law requires the Court to stay

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all proceedings related to a cause of action subject to an appeal from an Anti-SLAPP order,1

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and (2) a motion for sanctions is pending, see ECF Nos. 337 and 557, covering some of the

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same alleged conduct and staying the present motion would help avoid inconsistent

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rulings.2 (Id. at 7-8.)

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II.

LEGAL STANDARDS

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A.

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Rule 37(b)(2)(A) provides that “[i]f a party . . . fails to obey an order to provide or

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permit discovery, including an order under Rule 26(f), 35, or 37(a), the court where the

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action is pending may issue further just orders.” Fed. R. Civ. P. 37(b)(2)(A). Such orders

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may include:

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Federal Rule of Civil Procedure 37

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Youngevity filed its ex parte motion before Judge Moskowitz granted
Youngevity’s motion for a partial stay of the proceedings pending the interlocutory appeal.
(See ECF No. 560.)
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The pending motion for sanctions has now been resolved. (See ECF No. 605.)
Accordingly, the Court finds that a stay is not warranted on this basis.
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(i)

directing that the matters embraced in the order or other designated
facts be taken as established for purposes of the action, as the prevailing
party claims;

(ii)

prohibiting the disobedient party from supporting or opposing
designated claims or defenses, or from introducing designated matters
in evidence;

(iii)

striking pleadings in whole or in part;

(iv)

staying further proceedings until the order is obeyed;

(v)

dismissing the action or proceeding in whole or in part;

(vi)

rendering a default judgment against the disobedient party; or

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(vii) treating as contempt of court the failure to obey any order except an
order to submit to a physical or mental examination.

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Fed. R. Civ. P. 37(b)(2)(A)(i)-(vii). Instead of, or in addition to, these sanctions, the court

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must order the disobedient party, the attorney advising that party, or both to pay the

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reasonable expenses, including attorney’s fees, caused by the failure to obey, unless the

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failure was substantially justified or other circumstances make an award of expenses unjust.

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Fed. R. Civ. P. 37(b)(2)(C).

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Rule 37(c)(1) further provides that “[i]f a party fails to provide information or

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identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that

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information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the

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failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). In addition to

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or instead of this sanction, the court, on motion and after giving an opportunity to be heard

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may (1) order payment of the reasonable expenses, including attorney’s fees, caused by the

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failure, (2) inform the jury of the party’s failure, and (3) impose other appropriate sanctions,

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including any of the orders listed in Rule 37(b)(2)(A)(i)-(vi). Fed. R. Civ. P. 37(c)(2).

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“The very purpose of Rule 37 is to insure compliance with discovery orders.”

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Grimes v. City & Cnty. of S.F., 951 F.2d 236, 240-41 (9th Cir. 1991). “Without adequate

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sanctions the procedure for discovery would be ineffectual.” Id. (quoting C. Wright & A.

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Miller, Federal Practice and Procedure: Civil § 2281 (1970 & Supp. 1988)). “To that
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end, Rule 37 is flexible: ‘The sanctions enumerated in the rule are not exclusive and

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arbitrary but flexible, selective, and plural. The court may, within reason, use as many and

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as varied sanctions as are necessary to hold the scales of justice even.’” Id. (quoting Wright

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& Miller, § 2284).

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However, the district court’s authority to issue the sanctions is subject to the

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following limitations: (1) the sanction must be just; and (2) the sanction must specifically

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relate to the particular claim at issue in the order. United States v. Nat’l Med. Enters., Inc.,

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792 F.2d 906, 910 (9th Cir. 1986) (citing Rubin v. Belo Broad. Corp., 769 F.2d 611, 615

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(9th Cir. 1985); Prof’l Seminar Consultants, Inc. v. Sino Am. Tech. Exch. Council, Inc.,

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727 F.2d 1470, 1474 (9th Cir. 1984)). Furthermore, a compensatory award is limited to

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the “actual losses sustained as a result of the contumacy.” Id. (citing Shuffler v. Heritage

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Bank, 720 F.2d 1141, 1148 (9th Cir. 1983)).

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B.

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A district court has the inherent power “to manage [its] own affairs so as to achieve

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the orderly and expeditious disposition of cases.” Link v. Wabash R.R. Co., 370 U.S. 626,

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630-31 (1962). Local Civil Rule 83.1(a) provides that the district court has the discretion

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to impose “any and all sanctions authorized by statute or rule or within the inherent power

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of the court, including, without limitation, dismissal of any actions, entry of default, finding

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of contempt, imposition of monetary sanctions or attorneys’ fees and costs, and other lesser

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sanctions,” for the failure of counsel, or of any party, to comply with the Court’s Local

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Rules, with the Federal Rules of Civil or Criminal Procedure, or with any order of the court.

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See CivLR 83.1(a).

Court’s Inherent Powers

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Dismissal under the court’s inherent powers is justified in extreme circumstances, in

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response to abusive litigation practices, and to ensure the orderly administration of justice

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and the integrity of the court’s orders. See Halaco Eng’g Co. v. Costle, 843 F.2d 376, 380

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(9th Cir. 1988) (citing Nat’l Med. Enters., Inc., 792 F.2d at 912; Fjelstad v. Am. Honda

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Motor Co., 762 F.2d 1334, 1338 (9th Cir. 1985); Wyle v. R.J. Reynolds Indus., Inc., 709

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F.2d 585, 589 (9th Cir. 1983)).
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16-cv-00704-BTM (JLB)

1

When determining whether a case should be dismissed under its inherent powers,

2

the court “must determine (1) the existence of certain extraordinary circumstances, (2) the

3

presence of willfulness, bad faith, or fault by the offending party, (3) the efficacy of lesser

4

sanctions, (4) the relationship or nexus between the misconduct drawing the dismissal

5

sanction and the matters in controversy in the case, and finally, as optional considerations

6

where appropriate, (5) the prejudice to the party victim of the misconduct, and (6) the

7

government interests at stake.” Id.

8

C.

9

Civil Local Rule 26.1 provides that “[t]he court will entertain no motion pursuant to

10

Rules 26 through 37, Fed. R. Civ. P., unless counsel will have previously met and conferred

11

concerning all disputed issues.” CivLR 26.1(a). The rule further provides that “[i]f counsel

12

for the moving party seeks to arrange such a conference and counsel for the party against

13

whom the motion is made willfully refuses or fails to meet and confer, the judge . . . may

14

order a payment of reasonable expenses, including attorney’s fees, pursuant to Rule 37,

15

Fed. R. Civ. P. and Civil Local Rule 83.1.” Id. “At the time of filing any motion with

16

respect to Rules 26 through 37, Fed. R. Civ. P., counsel for the moving party must serve

17

and file a certificate of compliance with this rule.” CivLR 26.1(b).

Meet and Confer Requirements

18

In addition, Rule 37 provides that any motion for an order compelling disclosure or

19

discovery “must include a certification that the movant has in good faith conferred or

20

attempted to confer with the person or party failing to make disclosure or discovery in an

21

effort to obtain it without court action.” Fed. R. Civ. P. 37(a)(1).

22

The Court’s Scheduling Order issued in this case further states:

23

If the parties reach an impasse on any discovery issue, counsel shall file an
appropriate motion within the time limit and procedures outlined in the
undersigned magistrate judge’s chambers rules. A failure to comply in this
regard will result in a waiver of a party’s discovery issue. Absent an
order of the court, no stipulation continuing or altering this requirement
will be recognized by the court.

24
25
26
27
28

13
16-cv-00704-BTM (JLB)

1

Discovery motions must be filed in the time and manner directed by
Magistrate Judge Burkhardt (see Judge Burkhardt’s Civil Chambers Rules on
Discovery Disputes available on the Court’s website). All discovery motions
must be filed within 30 days of the service of an objection, answer, or response
which becomes the subject of dispute, or the passage of a discovery due date
without response or production, and only after counsel have met and conferred
to resolve the dispute and requested an informal teleconference with the
Court.

2
3
4
5
6
7

(ECF No. 87 at 1-2 (emphasis in original).)

8

III.

9

DISCUSSION
A.

Motion for Sanctions

10

As noted above, Wakaya seeks sanctions based on the following alleged misconduct

11

of Youngevity: (1) producing 4.2 million pages of documents that were all designated

12

“Confidential—For Counsel Only” and were 80 percent non-responsive; (2) producing a

13

revised production that violates the Court’s December 21, 2017 Order (ECF No. 362), in

14

that it contains both non-responsive and mis-designated documents and omits key

15

documents; (3) refusing to produce data on which it seeks to rely; (4) stymying discovery

16

from third parties aligned with Youngevity; (5) conducting improper self-help discovery

17

outside the normal discovery process; and (6) intentionally violating the Protective Order

18

entered in this case on at least seven occasions. (See ECF No. 583 at 3.) The Court will

19

address each allegation of misconduct below.

20

1.

Contents of Initial and Revised Production

21

Wakaya contends that Youngevity should be sanctioned for engaging in an initial

22

“document dump” of 4.2 million pages of allegedly mostly non-responsive documents (all

23

of which were mass-designated “Confidential—For Counsel Only”) and then for violating

24

the Court’s December 21, 2017 Order (“Production Order”) (ECF No. 362) with its

25

subsequent document production.

26

a.

Background

27

On August 17, 2017, the parties left a joint voicemail with the Court concerning a

28

discovery dispute regarding Youngevity’s production, including Youngevity’s designation
14
16-cv-00704-BTM (JLB)

1

of all documents as “Confidential—For Counsel Only,” its failure to provide native

2

documents, its refusal to produce its distributor database, and its failure to produce its

3

genealogy. (ECF No. 157.) The Court held a Discovery Conference on August 18, 2017

4

and issued a briefing schedule with a motion filing deadline of August 28, 2017. (ECF No.

5

159.)

6

On September 25, 2017, the parties left a joint voicemail with the Court seeking

7

assistance with two discovery disputes, including a dispute over documents produced by

8

Youngevity. (ECF No. 205.) The Court held a telephonic Discovery Conference on

9

September 27, 2017 and addressed Youngevity’s production which included over two

10

million allegedly non-responsive documents. (ECF No. 208.) The Court instructed

11

Wakaya’s counsel to find out the cost of technology-assisted review (“TAR”) to sort the

12

responsive from the non-responsive documents and instructed the parties to then meet and

13

confer to determine if they could strike a compromise.

14

On October 3, 2017, the parties left a joint voicemail with the Court regarding a

15

discovery dispute related to the review of Youngevity’s document production. (ECF Nos.

16

212, 214.) The Court provided additional guidance at a telephonic Discovery Conference

17

on October 5, 2017 and directed the parties to further meet and confer. (ECF No. 215.)

18

The Court subsequently set a briefing schedule for Wakaya to move for an order for

19

Youngevity to bear the costs of conducting TAR on Youngevity’s document production,

20

with a motion deadline of October 16, 2017. (ECF No. 222.)

21

On October 16, 2017, Wakaya filed a motion to compel proper productions, claiming

22

that Youngevity “chose not to review any of their documents and instead dump[ed] over

23

4.2 million pages of documents” on Wakaya. (ECF No. 232 at 3.) Wakaya requested that

24

the Court enter an order compelling Youngevity to properly produce their relevant and

25

responsive documents at their own cost, produce their “hit list” of documents responsive

26

to the mutually agreed-upon list of search terms, and award Wakaya attorney’s fees and

27

costs related to bringing the motion and the costs incurred in reviewing the prior improper

28

productions. (Id. at 11.)
15
16-cv-00704-BTM (JLB)

1

The Court granted Wakaya’s motion to compel in some respects. (ECF No. 362.)

2

In its Production Order, the Court ordered Youngevity to satisfy its discovery obligations

3

with respect to the July 21, 2017 and August 22, 2017 productions and the production of

4

an additional 700,000 yet-to-be-produced documents. (Id. at 21.) The Court further

5

ordered that Youngevity, at its option, do one of the following:

6

1)
By December 26, 2017, provide its hit list to Wakaya; by
January 5, 2018, conclude the meet and confer process as to mutually
acceptable search terms based upon the hit list results; by January 12, 2018,
run the agreed upon search terms across Youngevity’s data; by
February 15, 2018, screen the resulting documents for responsiveness and
privilege; and by February 16, 2018, produce responsive, non-privileged
documents with only appropriate designations of “confidential” and “AEO”
(said production to include that subset of the not-previously-produced
700,000 documents that are responsive and non-privileged); or

7
8
9
10
11
12

2)
By December 26, 2017, provide the not-previously-produced
700,000 documents to Wakaya without further review; pay the reasonable
costs for Wakaya to conduct a TAR of the 700,000 documents and the July
21, 2017 and August 22, 2017 productions for responsiveness; by January
24, 2018, designate only those qualifying documents as “confidential” or
“AEO”; by that date, any documents not designated in compliance with this
Order will be deemed de-designated.

13
14
15
16
17
18

(Id. at 21-22.)

19

In addition, the Court ordered Youngevity to pay Wakaya for the reasonable

20

expenses, including attorney’s fees, Wakaya incurred as a result of Youngevity’s failure to

21

abide by the Protective Order’s requirements with respect to the designation of confidential

22

documents, and to pay the reasonable expenses associated with Wakaya’s efforts to re-

23

designate documents from Youngevity’s July 21, 2017 and August 22, 2017 productions.

24

(Id. at 22.) This included costs relating to Wakaya’s negotiations with Youngevity to re-

25

designate documents and participation in discovery conferences with the Court regarding

26

the issue. (Id.) Wakaya was not, however, entitled to the costs it incurred in reviewing

27

Youngevity’s productions for other matters, such as deposition or trial preparation. (Id.)

28

///
16
16-cv-00704-BTM (JLB)

1

On February 2, 2018, the parties left three voicemails relating to the Court’s

2

Production Order. (ECF No. 515.) The Court granted the parties a three-day extension of

3

their meet and confer deadlines over any disputed fees and costs, payment of fees and costs,

4

and the filing of any motion for fees and costs. (Id.) The parties were ordered resolve their

5

disputes about the cost bill by February 7, 2018, or file a motion for fees and costs on or

6

before February 15, 2018. (Id.) No motion was filed.

7

b.

Analysis

8

As an initial matter, to the extent Wakaya seeks sanctions based on Youngevity’s

9

initial production of 4.2 million unreviewed documents, this complaint has already been

10

raised with, and resolved by, the Court. As discussed above, this was the subject of a

11

previous motion to compel. The Court granted the motion to compel, fashioned a remedy,

12

and ordered Youngevity to pay Wakaya’s fees and costs. Accordingly, the Court finds that

13

this aspect of Wakaya’s complaint does not independently warrant additional sanctions.

14

Next, with respect to the revised production made pursuant to the Court’s December

15

21, 2017 Production Order, there is no dispute that Youngevity provided Wakaya with its

16

Hit List on December 22, 2017. (ECF Nos. 581-2 at 3; 581-3 at 13.) Counsel for the

17

parties then met and conferred telephonically and via e-mail regarding the search terms to

18

employ on all imaged data from Youngevity’s devices. (ECF No. 581-2 at 3.) After

19

applying the agreed-upon search terms to all of Youngevity’s imaged data, 1,248,016

20

documents remained. (Id. at 3-4.)

21

Youngevity represents that counsel first removed from the database and prepared for

22

production all documents “clearly responsive to Wakaya’s Requests for Production” issued

23

to Youngevity. (Id. at 4; see also ECF No. 581-3 at 15-18.) Through this process,

24

Youngevity identified 254,082 documents for production. (Id.) Youngevity, with the

25

guidance of e-discovery vendor Oasis Discovery, then used TAR to determine which of

26

the remaining 1,029,934 documents were responsive to Wakaya’s Requests for Production.

27

(See id.; see also ECF No. 581-1 at 3-7.) As part of this review, Youngevity’s counsel

28

manually coded documents as responsive or non-responsive and ran targeted searches to
17
16-cv-00704-BTM (JLB)

1

identify non-responsive documents. (Id. at 4-5.) Youngevity completed its TAR process

2

on February 15, 2018. (Id.)

3

Youngevity claims that due to time constraints it did not have time to conduct a

4

document-by-document review for confidentiality designations.

5

Youngevity ran search terms on responsive documents it believed would indicate whether

6

such files should be designated as “Confidential” or “Confidential—For Counsel Only”

7

under the Protective Order.

8

designations only identified 22% of responsive documents as Confidential and 17% as

9

“Confidential—For Counsel Only.” (Id. at 6.)

(Id. at 5-6.)

(Id.)

Therefore,

Youngevity contends that the resulting

10

The parties agree that Youngevity completed its revised production of approximately

11

274,774 documents consisting of 1,189,174 pages (the “Revised Production”) on February

12

16, 2018, the deadline provided in the Court’s Production Order. (ECF Nos. 552-4 at 3;

13

581-2 at 6; see also ECF Nos. 552-4 at 8-9; 552-3 at 3; 581-1 at 7.) Upon producing the

14

Revised Production, counsel for Youngevity believed and indicated to Wakaya that it had

15

complied with its obligation under the Court’s Production Order and stated that it expected

16

Wakaya to delete its original production. (See id.; see also ECF Nos. 552-4 at 8-9; 581-2

17

at 6.)

18

After producing the documents, Youngevity further represented to Wakaya that the

19

Revised Production included “all documents in Youngevity’s possession responsive to

20

Wakaya’s document requests, including documents used at depositions and in motions

21

practice, subject to all objections Youngevity ha[d] made in response to Wakaya’s requests

22

for production.” (ECF No. 552-4 at 7.) Youngevity also represented that the Revised

23

Production included responsive documents from the set of 700,000 documents that had not

24

previously been produced. (Id.) In addition, Youngevity stated that although it intended

25

for its Revised Production to supplant all prior productions, it “does not intend to delete

26

and does not ask Wakaya to delete documents previously entered into the record at

27

depositions and in court filings,” and the parties can refer to them by their original bates

28

number. (Id.)
18
16-cv-00704-BTM (JLB)

1

In its motion for sanctions, Wakaya claims that the Revised Production remains

2

riddled with problems. (ECF No. 552-1 at 14.) Wakaya contends that its own TAR process

3

identified 23,565 responsive documents from the first production that were not included in

4

the Revised Production. (Id. at 15-16.) Wakaya also contends that “[k]ey documents used

5

in depositions and summary judgment briefing are missing” and “[n]umerous other critical

6

documents have never been produced but are known to exist.” (Id. at 16.) Wakaya further

7

contends that the Revised Production contains approximately 75,000 documents that were

8

never previously produced but are allegedly responsive to Wakaya’s document requests,

9

as well as approximately 200,000 documents that it considers nonresponsive and irrelevant.

10

(Id. at 14-18.) In addition, Wakaya contends that Youngevity over-designated documents

11

as “Confidential—For Counsel Only.” (Id. at 18.)

12

Wakaya

specifically

identifies

a

contract

between

Youngevity

and

13

businessforhome.org (“BFH”) and related emails as important documents which are

14

missing from the Revised Production.

15

transmitting the Verified Complaint are missing from the Revised Production, despite

16

testimony from Steve Wallach and Dave Briskie indicating they exist. (Id. at 16-17.) Other

17

than these documents, Wakaya claims that although it is aware of other missing documents,

18

“given the myriad problems with Youngevity’s productions, it is impossible to ascertain

19

the full scope of missing information.” (Id. at 17.) Wakaya contends that Youngevity’s

20

“failure to properly produce responsive documents directly violates both Judge Burkhardt’s

21

instructions in her [Production Order] and Youngevity’s independent obligations.” (Id.)

(Id. at 16.)

Wakaya also notes that emails

22

Based on the foregoing, the Court finds that the alleged misconduct by Youngevity

23

with respect to the Court’s Production Order does not rise to the level of sanctionable

24

conduct. Youngevity provided its Hit List to Wakaya, the parties met and conferred, and

25

then Youngevity ran the agreed-upon search terms, screened the resulting documents for

26

responsiveness and privilege, and produced what it fairly believed were responsive, non-

27

privileged documents with appropriate “Confidential” and “Confidential—For Counsel

28

Only” designations by February 16, 2018. (See ECF No. 581-2.)
19
16-cv-00704-BTM (JLB)

1

Thereafter, Youngevity contends that the parties met and conferred on two issues

2

concerning the Revised Production, and both were resolved without court intervention.

3

(See ECF Nos. 581 at 14-15; 581-2 at ¶¶ 15-16.) Youngevity further contends that Wakaya

4

made no other inquiries concerning the Revised Production, and the parties did not meet

5

and confer on any subsequent issues relevant to that production. (Id. at 15.) Wakaya does

6

not dispute these representations.

7

Predictive coding or TAR has emerged as a far more accurate means of producing

8

responsive ESI in discovery than manual human review of keyword searches. Progressive

9

Cas. Ins. Co. v. Delaney, No. 2:11-CV-00678-LRH, 2014 WL 3563467, at *8 (D. Nev.

10

July 18, 2014); see also Hyles v. New York City, No. 10CIV3119ATAJP, 2016 WL

11

4077114, at *2 (S.D.N.Y. Aug. 1, 2016) (“[I]n general, TAR is cheaper, more efficient and

12

superior to keyword searching.”). “Studies show it is far more accurate than human review

13

or keyword searches which have their own limitations.” Id. (collecting studies); see also

14

In re Lithium Ion Batteries Antitrust Litig., No. 13MD02420 YGR (DMR), 2015 WL

15

833681, at *3 (N.D. Cal. Feb. 24, 2015) (“[A] problem with keywords is that they often

16

are overinclusive, that is, they find responsive documents but also large numbers of

17

irrelevant documents.”); but see T.D.P. v. City of Oakland, No. 16-CV-04132-LB, 2017

18

WL 3026925, at *5 (N.D. Cal. July 17, 2017) (finding that keyword searches were not

19

necessarily inadequate and such a determination was fact specific).

20

Courts have determined that responding parties are best situated to evaluate the

21

procedures, methodologies, and technologies appropriate for preserving and producing

22

their own electronically stored information. See Hyles, 2016 WL 4077114, at *3. If the

23

requesting party later demonstrates deficiencies in the responding party’s production, the

24

responding party may have to re-do its search, but that is not necessarily a basis for court

25

intervention, much less a basis for sanctionable conduct. See id.

26

Technology-assisted review of ESI does require an “unprecedented degree of

27

transparency and cooperation among counsel” in the review and production of ESI

28

responsive to discovery requests. Progressive Cas. Ins. Co., 2014 WL 3563467, at *10.
20
16-cv-00704-BTM (JLB)

1

In this regard, courts typically “have required the producing party to provide the requesting

2

party with full disclosure about the technology used, the process, and the methodology,

3

including the documents used to ‘train’ the computer.” Id.

4

Here, the parties agreed on the search terms and Youngevity has disclosed the

5

technology, process, and methodology it used to generate the Revised Production. (See

6

ECF Nos. 581-1; 581-2 at ¶¶ 5-10, 14-15.) It also appears that Youngevity has been

7

responsive to Wakaya’s concerns regarding the Revised Production and has conducted

8

additional searches and provided additional information upon request. Although the parties

9

disagree over the relevance of certain documents, such a dispute does not support sanctions,

10

particularly where the contention is that the produced documents are over-inclusive.

11

Additionally, the parties dispute why certain documents were not included in the Revised

12

Production. There may be myriad reasons for these omissions, see, e.g., ECF No. 581 at

13

18-19 (emails that lack context may be overlooked by TAR); however, it appears that

14

Wakaya attached several of the so-called “missing” documents, such as those related to

15

BFH, to its motions for summary judgment with Youngevity bates stamps, thus indicating

16

that they had been produced by Youngevity at some point and there was no attempt to hide

17

the documents. (See, e.g., ECF No. 437-3 at 14-23.)

18

Based on the foregoing, the Court declines to find that Youngevity violated the

19

Court’s Production Order and that it should be subject to sanctions. To the extent that

20

Wakaya initially disputed the responsiveness of the documents, the completeness of the

21

production, or Youngevity’s “Confidential—For Counsel Only” and “Confidential”

22

designations, the Court finds that it should have met and conferred with Youngevity and

23

raised its concerns pursuant to Section IV of Judge Burkhardt’s Civil Chambers Rules.

24

Based on the representations of the parties, many, if not all, of the issues Wakaya raised

25
26
27
28
21
16-cv-00704-BTM (JLB)

1

with respect to certain documents could potentially have been resolved if the parties had

2

met and conferred.3 (See, e.g., ECF No. 581-2 at ¶¶ 15-19.)

3

2.

Distributor Database

4

Wakaya also claims that sanctions are warranted because it specifically requested

5

that Youngevity identify with particularity every distributor Youngevity alleges was cross-

6

recruited in violation of Youngevity’s Policies and Procedures, and Youngevity has refused

7

to identify any particular distributor and has continued to refuse to produce data from its

8

distributor database sufficient for Wakaya to test Youngevity’s claims of cross-recruiting.

9

(ECF No. 552-1 at 18-19.)

10

The parties previously raised this issue before the Court in August 2017. On August

11

17, 2017, the parties left a joint voicemail with the Court concerning a discovery dispute.

12

(ECF No. 157.) The Court held a telephonic Discovery Conference on August 18, 2017.

13

(ECF No. 159.) During the Discovery Conference, counsel for the parties raised, inter alia,

14

the issue of Youngevity’s failure to produce its entire distributor database and Wakaya’s

15

corresponding failure to produce its genealogy. The parties discussed sending their

16

respective genealogies to a third-party vendor, with all attorneys participating in a phone

17

call to the vendor to provide instructions on how to come up with a list of employees that

18

worked at both companies. The Court was persuaded that Youngevity should provide to

19

Wakaya any data it shared with its expert and any data it intended to rely upon at trial. The

20

parties were directed to continue their meet and confer efforts and, if those efforts were

21

unsuccessful, the parties were to file briefs in accordance with a briefing schedule provided

22

by the Court for any remaining issues.

23
24
25
26
27
28

3
Each party has an ongoing duty to supplement its discovery responses “in a
timely manner if the party learns that in some material respect the disclosure or response
is incomplete or incorrect, and if the additional or corrective information has not otherwise
been made known to the other parties during the discovery process or in writing.” Fed. R.
Civ. P. 26(e)(1). The Court expects that the parties have been complying, and will continue
to comply, with their obligation to supplement throughout the course of this litigation.
22
16-cv-00704-BTM (JLB)

1

Following the Discovery Conference, the Court issued a Minute Order stating that,

2

“During the conference, a number of discovery matters were resolved informally and the

3

briefing schedule below was discussed. In the event that the parties are unable to resolve

4

issues relating to the production of genealogy information through meet and confer efforts,

5

plaintiff may file a motion.” (Id.) The order provided a briefing schedule which required

6

the moving party to file a motion on or before August 28, 2017. (See id.) No motion was

7

filed.

8

Based on information provided to the Court, it appears that the parties continued to

9

meet and confer regarding the production of Youngevity’s distributor database after August

10

2017 and as of May 2018, had still not resolved the issue. (See ECF Nos. 581-2 at 8-9;

11

583-1 at ¶ 23, Exh. E; 376-1 at 380-81.) However, in accordance with Judge Burkhardt’s

12

Civil Chambers Rules, “[a]ny requests to extend the time by which parties must conclude

13

the meet and confer process or file discovery motions should be made by filing a joint

14

motion no less than 10 calendar days in advance of the discovery motion deadline at issue.”

15

(See Judge Burkhardt’s Civil Chambers Rules at IV(A).) The parties did not do so. (See

16

ECF No. 87 at 2 (“If the parties reach an impasse on any discovery issue, counsel shall file

17

an appropriate motion within the time limit and procedures outlined in the undersigned

18

magistrate judge’s chambers rules. A failure to comply in this regard will result in a

19

waiver of a party’s discovery issue. Absent an order of the court, no stipulation

20

continuing or altering this requirement will be recognized by the court.”) (emphasis

21

in original).)

22

The parties had a substantial disagreement about whether and how Youngevity

23

should provide Wakaya with access to data in Youngevity’s distributor database. Wakaya

24

could have brought the matter to the Court in a timely-filed motion to compel. Wakaya

25

opted against this course of action. Wakaya now seeks sanctions for Youngevity’s failure

26

to meet Wakaya’s expectations with respect to Youngevity’s discovery obligations. With

27

respect to all aspects of relief requested by Wakaya except those related to Youngevity’s

28

use of data from its distributor database at trial, the Court recommends that Wakaya’s
23
16-cv-00704-BTM (JLB)

1

motion be denied. With respect to any request related to Youngevity’s use of evidence at

2

trial, the Court recommends that Wakaya’s motion be denied without prejudice, as any

3

determination about the use of this evidence at trial is better made in the context of the trial

4

itself, once it is known what trial issues remain and the specific evidence upon which the

5

parties intend to rely.

6

3.

Violations of the Protective Order

7

Wakaya further claims that terminating or issue and evidentiary sanctions are

8

warranted for Youngevity’s violations of the Protective Order. (ECF No. 552-1 at 23-29.)

9

a.

Background

10

On October 30, 2017, the Court held a Discovery Conference regarding alleged

11

violations of the Protective Order. (ECF No. 262.) On November 16, 2017, the Court held

12

a second Discovery Conference regarding the alleged violations. (ECF No. 280.) No relief

13

was granted or denied during the conferences. (Id.)

14

A month later, on December 18, 2017, Wakaya filed a motion for sanctions and for

15

an order to show cause regarding violations of the Protective Order. (ECF No. 337.) In its

16

motion, Wakaya alleged that Youngevity’s counsel violated the Protective Order by

17

disclosing information designated as “Confidential” or “Confidential—For Counsel Only”

18

on six separate occasions. (See ECF Nos. 337; 420 at 3.) Specifically, Wakaya alleged

19

that Youngevity violated the Protective Order by (1) publicly filing, in three separate

20

pleadings, the start dates of two Wakaya distributors derived from a document that was

21

designated as “Confidential—For Counsel Only”; (2) disclosing the “Confidential—For

22

Counsel Only” start date of a distributor to deponents during their depositions; and (3)

23

providing Plaintiff and Counterclaim Defendant Steve Wallach with an expert report

24

designated as “Confidential—For Counsel Only,” which he specifically references in his

25

deposition testimony. (ECF No. 420 at 3-5.)

26

The Court subsequently issued a Report and Recommendation granting in part

27

Wakaya’s motion. (ECF No. 557.) The Court determined that Youngevity violated the

28

Protective Order and issued sanctions in the form of Wakaya’s reasonable attorney’s fees
24
16-cv-00704-BTM (JLB)

1

and costs incurred in filing the motion, meeting and conferring, and participating in

2

conferences before the Court related to the dispute. (Id. at 13.) The Court further

3

recommended that Wakaya’s request for sanctions in the following forms be denied

4

without prejudice: (1) striking the portions of Steve Wallach’s Rule 30(b)(6) testimony that

5

were “sourced from an [Confidential—For Counsel Only] document”; (2) prohibiting

6

Youngevity from introducing any additional testimony as to its Lanham Act damages,

7

except through the testimony of Mr. Bergmark; (3) requiring Youngevity to show cause as

8

to why it and its counsel should not be referred to Judge Moskowitz for a finding of civil

9

contempt; and (4) requiring Youngevity’s counsel to refrain from any further violations of

10

the Protective Order. (Id. at 14.) The Court noted that “Wakaya fail[ed] to demonstrate

11

specific injury or prejudice resulting from Youngevity’s violations of the [P]rotective

12

[O]rder.” (Id. at 15.)

13

After review of the Report and Recommendation and all objections (see ECF Nos.

14

561, 567, 571, 574), Judge Moskowitz adopted the Report and Recommendation but

15

vacated the award of attorney’s fees to Wakaya. (ECF No. 605.) Judge Moskowitz stated

16

that “[e]ven if Youngevity did make improper disclosures in the few instances of which

17

Wakaya complains in the . . . motion, the circumstances are not sufficiently extreme as to

18

warrant sanctions.” (Id. at 4.) He further noted that Wakaya had made no showing of bad

19

faith or prejudice. (Id.)

20

b.

Analysis

21

Wakaya now argues that terminating or issue and evidentiary sanctions are

22

warranted for Youngevity’s violations of the Protective Order, including those previously

23

addressed by the Court. (ECF No. 552-1 at 23-29.) In its motion, Wakaya incorporates its

24

prior motion by reference and relies on the same violations. (See ECF No. 552-1 at 23,

25

n.6.) Wakaya also asserts one additional violation that it discovered on or about January

26

19, 2018. (See ECF Nos. 552-1 at 27-28; 552-4 at 5, 42; 423-3 at 229.) The document at

27

issue in the new violation – an attorney-created document derived from Wakaya’s

28

“Confidential—For Counsel Only” Genealogy Report–was first presented at the deposition
25
16-cv-00704-BTM (JLB)

1

of Maxandra Desrosiers, which was taken on August 25, 2017. (See ECF Nos. 552-1 at

2

28; 423-3 at 224; 581 at 24 n.4.) At the deposition, Youngevity’s counsel represented that

3

he was introducing a “Confidential—For Counsel Only” document before he questioned

4

Ms. Desrosiers about its contents. (See ECF Nos. 552-1 at 27-28; 552-4 at 41; 581-3 at

5

300.) Wakaya did not object to the use of the specific document at the time of the

6

deposition, but rather asked that the portion of the deposition transcript in which the

7

document was discussed be designated “Confidential—For Counsel Only.” (ECF No. 581-

8

3 at 300-02.)

9

Youngevity subsequently filed the document and deposition transcript in redacted

10

form4 as exhibits to one of Youngevity’s motions for summary judgment. (ECF No. 423-

11

3 at 223-29.) On the docket, the document is clearly identified as Exhibit 28 to the

12

deposition of Ms. Desrosiers. (See id.) In its opposition to the summary judgment motion,

13

Wakaya objected to Youngevity’s use of the document as it was of unknown origin. (See

14

ECF No. 466 at 6, n.1.) Judge Moskowitz denied Youngevity’s motion for summary

15

judgment as premature, as it related to a counterclaim stayed during the interlocutory

16

appeal. (ECF No. 560.) Therefore, Judge Moskowitz did not rule on the objection, and

17

both the deposition transcript and document remain on the docket in redacted form.

18

Wakaya contends that it has been prejudiced by Youngevity’s “pattern and practice

19

of ‘excerpting’ or ‘redacting’ [“Confidential—For Counsel Only”] documents” without

20

informing Wakaya. (ECF No. 552-1 at 28.) Wakaya states that “it is impossible to

21

determine the full extent to which Wakaya’s most-sensitive information has been disclosed

22

23
24
25
26
27
28

4

Concurrently with filing the redacted version of these documents in support
of its motions for summary judgment, Youngevity moved to file the unredacted forms of
these documents, under seal. (ECF No. 446.) Youngevity represented that these
documents had been designated as “Confidential” or “Confidential—For Counsel Only”
by Wakaya under the Protective Order and, after meeting and conferring with Wakaya,
Youngevity had filed redacted versions of the documents. (Id.) The motion to seal was
granted without objection and the unredacted versions were lodged under seal. (See ECF
Nos. 453; 454-2 at 223-29.)
26
16-cv-00704-BTM (JLB)

1

or to what extent testimony has been or will be influenced by information to which the

2

witness should never have been privy.” (ECF No. 583 at 12.) For the reasons set forth

3

below, the Court finds that Wakaya is not entitled to sanctions premised on Youngevity’s

4

alleged violations of the Protective Order.

5

First, as to Wakaya’s claim for sanctions based on its allegations raised in its earlier

6

motion, the Court has already determined that despite any violations of the Protective Order

7

raised in that motion, Wakaya is not entitled to sanctions based on those violations. (See

8

ECF No. 605.)

9

determined that it had failed to establish any bad faith or prejudice. (See id. at 4.) Under

10

the “law of the case” doctrine, a court is precluded from reconsidering an issue that has

11

already been decided by the court, unless the first decision was clearly erroneous, an

12

intervening change in the law has occurred, the evidence is substantially different, other

13

changed circumstances exist, or manifest injustice would otherwise result. United States

14

v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997) (citing Thomas v. Bible, 983 F.2d 152, 154

15

(9th Cir. 1993)). “Failure to apply the doctrine of the law of the case absent one of the

16

requisite conditions constitutes an abuse of discretion.” Id. (citing Thomas, 983 F.2d at

17

155). None of those conditions exist here.

Moreover, Judge Moskowitz, in ruling on Wakaya’s prior motion,

18

Second, as to Wakaya’s claim for sanctions based on the new alleged violation, for

19

the same reasons set forth by Judge Moskowitz in his order denying sanctions, the Court

20

finds that the new alleged violation is not sanctionable. First of all, the Court finds that

21

Youngevity created Exhibit 28 using information from documents produced by Wakaya

22

designated “Confidential—For Counsel Only,” and yet Youngevity failed to mark the

23

document “Confidential—For Counsel Only” and publicly filed an insufficiently redacted

24

version of Exhibit 28 on the docket.

25

precautions to prevent the unauthorized or inadvertent disclosure” of confidential

26

information, in violation of the Protective Order. However, Youngevity’s conduct was not

27

sufficiently egregious to warrant sanctions. Moreover, Wakaya has failed to establish

28

prejudice and has failed to take any action to mitigate its concerns regarding the disclosure

Thus, Youngevity failed to take “reasonable

27
16-cv-00704-BTM (JLB)

1

of its sensitive information. In this regard, the Court notes that Wakaya was made aware

2

that the document was designated “Confidential—For Counsel Only” and had no bates-

3

stamp, thus indicating that it had not been produced by a party, before it was introduced as

4

an exhibit at Ms. Desrosiers’ deposition. Wakaya had an opportunity to object during the

5

deposition, but did not do so. See J. Burkhardt Civ. Chambers R. ¶ IV(E). In addition,

6

despite Wakaya’s awareness of Youngevity’s public filing of the redacted document in

7

support of its motion for summary judgment in January 2018, Wakaya has not moved to

8

have the document filed under seal. For these reasons, the Court finds that sanctions

9

premised on violations of the Protective Order are not warranted.5

10

4.

Third-Party Discovery

11

Wakaya also seeks sanctions based on Youngevity’s alleged “concerted and

12

deliberate effort to derail discovery” from third parties. (ECF No. 552-1 at 20.) Wakaya

13

claims that it served approximately eleven third-party subpoenas on Youngevity

14

distributors and other affiliated individuals, and that each of these third parties was

15

represented by Youngevity’s counsel. (Id.) In response to the subpoenas, Wakaya states

16

that approximately six third parties produced no documents, while the remaining five third

17

parties produced relatively few documents. (ECF No. 552-4 at 4.) In addition, several of

18

the third parties who refused to produce documents directed Wakaya to Youngevity’s

19

allegedly problematic production, asserting that the documents were in Youngevity’s

20

custody or control. (ECF Nos. 552-1 at 20; 552-4 at 4.)

21

The record reflects that the subpoenas at issue were served on or about June 26,

22

2017. (See ECF No. 581-3 at 253.) The parties responded to the subpoenas in July and

23

August 2017. (See id. at 255-81; see also ECF No. 581-2 at 10.) Rule 45 of the Federal

24

25
26
27
28

5

Again, with respect to any request related to Youngevity’s use of the evidence
at trial, the Court recommends that Wakaya’s motion be denied without prejudice, as any
determination about the use of this evidence at trial is better made in the context of the trial
itself, once it is known what trial issues remain and the specific evidence upon which the
parties intend to rely.
28
16-cv-00704-BTM (JLB)

1

Rules of Civil Procedure provides that “the serving party may move the court for the district

2

where compliance is required for an order compelling production or inspection.” Fed. R.

3

Civ. P. 45(d)(2)(B)(i). Wakaya never filed a motion to compel. (See ECF Nos. 583 at 10;

4

581 at 21.) To the extent a discovery dispute arose between the parties concerning the

5

third-party subpoenas, the dispute was subject to the Court’s discovery dispute process.

6

(See ECF No. 87 at 1-2; see also ECF Nos. 333; 583 at 10.) As Wakaya failed to bring a

7

motion within the time limitations provided by Judge Burkhardt’s Civil Chambers Rules,

8

the Court finds that any dispute has been waived.

9

Furthermore, the Court finds that Wakaya has failed to establish that it is appropriate

10

to punish Youngevity for the alleged failure of third parties to properly comply with

11

subpoenas, even if those third parties are represented by the same counsel. See Fed. R.

12

Civ. P. 45(g) (“The court for the district where compliance is required . . . may hold in

13

contempt a person who, having been served, fails without adequate excuse to obey the

14

subpoena or an order related to it.” (emphasis added)).

15

5.

Contacting Control Group Members

16

Lastly, Wakaya bases its motion for sanctions on Youngevity allegedly repeatedly,

17

intentionally, and improperly asking non-party Rick Anson to provide Youngevity with

18

information and documents belonging to Wakaya, including litigation strategy. (ECF No.

19

552-1 at 22.) Wakaya asserts that Mr. Anson was Wakaya’s VP of Product Development

20

until January 2017, at which time Mr. Anson ended his relationship with Wakaya and

21

joined Youngevity. (Id. at 21-22.) Wakaya further contends that it is aware of “numerous

22

other instances” in which Youngevity was in contact with Wakaya vendors and

23

Ambassadors requesting product samples and improperly seeking confidential

24

information. (Id. at 23.)

25

a.

Background

26

On February 12, 2016, Wakaya entered into a Royalty Agreement with Mr. Anson

27

and a License Agreement with Mr. Anson’s company, Livewell. (ECF No. 426-2 at 3.)

28

The Royalty Agreement required Mr. Anson to maintain the secrecy of Wakaya’s
29
16-cv-00704-BTM (JLB)

1

confidential information and prohibited him from engaging in any competing business for

2

a period of one year following the termination of the Royalty Agreement. (ECF No. 426-

3

3 at 6-14). The License Agreement provided Wakaya with the exclusive, worldwide right

4

to use Livewell’s technology in Wakaya’s products. (Id. at 16-30.)

5

Youngevity commenced the present lawsuit on March 23, 2016. (ECF No. 1.) In

6

the Second Amended Counterclaim, the operative counterclaim, filed on December 28,

7

2017, Wakaya brings a counterclaim against Youngevity for tortious interference with

8

existing economic relations (Counterclaim Six).6 (See ECF No. 404 at ¶¶ 212-17.)

9

Counterclaim Six focuses on Youngevity’s contacts with then-Wakaya employee Mr.

10

Anson beginning “at least as early as October 2016.” (Id. at ¶¶ 159-183.) In support of

11

this counterclaim, Wakaya alleges that “Youngevity and its agents intentionally interfered

12

with [the relationship between Wakaya and Livewell/Mr. Anson] when, on information

13

and belief, it contacted [Mr.] Anson—then Vice President of Product Development at

14

Wakaya—and republished or republicized its defamatory allegations, thereby convincing

15

[Mr.] Anson to terminate his and LiveWell’s relationship with Wakaya.” (See id. at ¶ 215.)

16

On July 27, 2017, the parties left a joint voicemail with the Court representing that

17

they had reached an impasse with respect to two discovery disputes. (ECF No. 144.) The

18

Court held a telephonic Discovery Conference on July 28, 2017. (ECF No. 145.) The

19

parties resolved the first discovery dispute related to the subpoena of Mr. Johnson. (Id.)

20

However, the parties were unable to resolve their dispute related to the privilege log issue

21

and were instructed to file cross-motions on that issue. (Id.) On August 7-8, 2017, the

22

parties filed their motions. (See ECF Nos. 150-151, 154-155.) The question presented in

23

the parties’ briefing involved claims of attorney-client and common-interest privileges

24

between Youngevity and Mr. Anson. (See ECF No. 146 at 3.) The parties disputed the

25
26
27
28

This counterclaim first appeared in Wakaya’s First Amended Answer and
[Amended] Counterclaim filed on February 23, 2017. (ECF No. 83.)
6

30
16-cv-00704-BTM (JLB)

1

extent to which Mr. Anson and Youngevity were communicating under a common-interest

2

privilege during the latter part of 2016. (Id.)

3

The Court subsequently denied Wakaya’s motion to compel production of

4

unredacted communications and granted Youngevity’s cross-motion on the privilege log

5

issue. (ECF No. 198.) The Court concluded that Youngevity did not waive work product

6

protection by forwarding work product to counsel for Livewell and Mr. Anson because the

7

parties shared a common legal interest. (Id. at 11.) The Court explained:

8
9
10
11
12
13
14

At the time of the email communications [dated December 14, 2016 and
December 15, 2016], all parties had or were preparing to assert legal claims
against Wakaya. Youngevity and Wakaya were already engaged in litigation.
Livewell and Anson were preparing to assert their claims against Wakaya in
the Notices that were sent two days later, on December 16, 2016.
Accordingly, counsel for Youngevity, Livewell and Anson shared legal
advice related to their common legal claims against Wakaya. The parallels
between the Notices and Youngevity’s allegations in the instant litigation
evidence this common legal strategy.

15

(Id. at 9.) The Court further found that Youngevity met its burden to show that the email

16

communications were privileged. (Id. at 12.) Wakaya filed objections to the Court’s order.

17

(ECF No. 218.) Judge Moskowitz overruled the objections. (ECF No. 290.)

18

On January 10, 2018, Wakaya filed a motion for summary judgment on its tortious

19

interference with existing economic relations counterclaim (Counterclaim Six). (See ECF

20

No. 426.) Judge Moskowitz denied Wakaya’s motion for summary judgment as premature,

21

as it concerned a counterclaim on appeal, and Judge Moskowitz had granted Youngevity’s

22

request for a stay of the counterclaim. (See ECF No. 560.)

23

b.

Analysis

24

To substantiate its request for sanctions, Wakaya relies primarily on the facts it set

25

forth in its motion to compel production of unredacted communications (ECF No. 155),

26

and its motion for summary judgment on its intentional interference with existing economic

27

relations counterclaim (Counterclaim Six) (ECF No. 426-2). (See ECF No. 552-1 at 21-

28

22.) In both its motion to compel and its motion for summary judgment, Wakaya details
31
16-cv-00704-BTM (JLB)

1

an alleged series of contacts between Mr. Anson and Youngevity and others during the

2

time Mr. Anson was Wakaya’s VP of Product Development.

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21

The alleged contacts included:
 October 19, 2016 email from Steve Wallach (Youngevity’s CEO) to
Mr. Anson stating: “Here is Peter’s contact information. Peter
[Arhangelsky] is the Attorney we work most directly with regarding
Wakaya issues. I will give Peter a heads up that one of your Attorney’s
may be calling him soon.” (ECF No. 426-3 at 32.)
 October 24, 2016 email from Mr. Anson to Mr. Wallach. Mr. Anson
introduced (and copied on the email) Jesse Vycital, a “key person in the
development of the nutritional hydration system with over eight years
of product design” and “[s]pecializing in ingredient formulations of
[Wakaya’s] tablets.” (ECF No. 426-3 at 34-47.) The email attached
what Wakaya claims is “a detailed proposal for a Youngevity
nutritional hydration system essentially identical to Wakaya’s product.”
(ECF No. 426-2 at 4.)
 November 4, 2016 email from Mr. Anson to Mr. Wallach and Dave
Briskie (Youngevity’s CFO) stating that “I was told some new
information I would like to share with you when you have a moment.”
(ECF No. 426-3 at 49.) Follow up emails indicate that Mr. Anson and
Mr. Briskie spoke. (Id. at 51.)
 November 16, 2016 and December 2, 2016 emails from Mr. Anson to
Todd Smith (Wakaya’s owner) regarding the concerns of Livewell
shareholders relating to, among other things, a lawsuit filed by
Youngevity against Wakaya relating to Prop 65 in San Francisco
Superior Court on November 10, 2016. (ECF No. 426-3 at 55-60, 91.)

22
23
24
25
26
27
28

 November 30, 2016 email from Todd Smith to Mr. Anson concerning
Youngevity’s litigation claims regarding Prop 65, which Mr. Anson
forwarded to Mr. Wallach as an FYI. (ECF No. 426-3 at 59-60.)
 November 30, 2016 email from Mr. Wallach to Mr. Anson attaching a
link to the Prop 65 complaint. (ECF No. 426-3 at 185.)
 On December 16, 2016, counsel for Livewell and Mr. Anson sent
Wakaya a Notice of Default under each of the Agreements which
32
16-cv-00704-BTM (JLB)

1

Wakaya alleges “repeated a number of the false allegations about
Wakaya, its business practices, and its products—allegations contained
in and parroted from Youngevity’s Prop. 65 Complaint and the Verified
Complaint in this case.” (ECF Nos. 426-2 at 4; 426-3 at 62-87.)

2
3
4

 January 2, 2017 email from Mr. Anson to Mr. Wallach attaching a “one
year pro-forma including updated COG’s and revenue figures” and
discussing a potential position with Youngevity, including salary and
royalty figures. (ECF No. 426-3 at 167-68.)

5
6
7
8

In addition, Steve Wallach testified in his deposition that Mr. Anson reached out to

9

him for a meeting in or around late October 2016. (ECF No. 426-3 at 172.) Mr. Anson

10

and Mr. Wallach met and discussed Livewell technology and Mr. Anson’s family and his

11

history. (Id. at 172-73.) Mr. Anson informed Mr. Wallach that Wakaya was in breach of

12

the Livewell agreement and asked questions about Youngevity’s Prop 65 complaint against

13

Wakaya. (Id. at 173.) Mr. Anson also informed Mr. Wallach that he had a nondisclosure

14

agreement with Wakaya and was meeting with other companies in addition to Youngevity.

15

(Id.)

16

Based on the foregoing, Wakaya claims that it is not only entitled to judgment as a

17

matter of law, but also to discovery sanctions. (See ECF Nos. 426, 552.) Wakaya contends

18

that “[i]t is highly improper for a party to contact a litigation opponent’s employee (even

19

more so a member of the control group), mine that employee for confidential information,

20

and obtain confidential documents outside of normal discovery.” (ECF No. 552-1 at 22.)

21

Wakaya also contends that “Youngevity’s deliberate and surreptitious self-help deprived

22

Wakaya of the protections afforded by the [Federal Rules of Civil Procedure], which would

23

have allowed Wakaya to prevent the dissemination of privileged communications, lodge

24

appropriate objections to discovery requests, and appropriately designate under the

25

Protective Order.” (Id.)

26

Wakaya cites Xyngular Corp. v. Schenkel, 200 F. Supp. 3d 1273 (D. Utah 2016),

27

aff’d sub nom. Xyngular v. Schenkel, 890 F.3d 868 (10th Cir. 2018) for the proposition that

28

“[p]arties anticipating litigation may not engage in self-help by improperly gathering a
33
16-cv-00704-BTM (JLB)

1

potential adversary’s property,” and that conduct that “amounts to an end-run around the

2

Federal Rules of Civil Procedure, including the rules governing discovery and the orderly

3

exchange of information relevant to the disputes presented for resolution in [the] courts,”

4

may be subject to serious sanctions. Id. at 1317. The Court does not disagree with these

5

general propositions. See, e.g., Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69

6

F.3d 337, 348 (9th Cir. 1995) (quoting Wyle, 709 F.2d at 591) (“It is well settled that

7

dismissal is warranted where . . . a party has engaged deliberately in deceptive practices

8

that undermine the integrity of judicial proceedings: ‘courts have inherent power to dismiss

9

an action when a party has willfully deceived the court and engaged in conduct utterly

10

inconsistent with the orderly administration of justice.’”).

11

The instant case is not Xyngular. In Xyngular and similar cases relied upon by

12

Wakaya, the allegation of the moving party was that the opposing party had contacted one

13

of its employees with the intention of obtaining internal, non-public information and

14

documents belonging to the moving party for use in pending or anticipated litigation,

15

thereby circumventing discovery law and procedures. (See ECF Nos. 552-1 at 22-23; 583

16

at 10-11.) The moving party identified specific information wrongfully obtained outside

17

of lawful discovery mechanisms.7 Here, Wakaya does not identify any internal documents

18

or non-public information belonging to Wakaya that Youngevity allegedly improperly

19

obtained from Mr. Anson for use in this litigation.8 Moreover, Wakaya filed a counterclaim

20

21
22
23
24
25
26
27
28

7

See e.g., Glynn v. EDO Corp., No. JFM-07-01660, 2010 WL 3294347, at *1
(D. Md. Aug. 20, 2010) (finding that the moving party had proven by clear and convincing
evidence that the opposing party had “wrongfully acquired non-public, internal . . .
information” from an employee of the moving party); Bell v. Lockheed Martin Corp., No.
CV 08-6292 (RBK/AMD), 2010 WL 11450407, at *5 (D.N.J. June 30, 2010) (finding that
the critical inquiry is whether the documents taken by the opposing party were the moving
party’s property and whether the opposing party was authorized to take the property).
8

Wakaya maintains that it is due to “Youngevity’s problematic productions”
that Wakaya is unaware of the “full extent” of what Mr. Anson may have relayed to
34
16-cv-00704-BTM (JLB)

1

(Counterclaim Six) on December 28, 2017,9 based upon the same complained-of contacts

2

by Youngevity, alleging that by those actions Youngevity intentionally and tortiously

3

interfered with Wakaya’s economic relations with Livewell and Mr. Anson. And the relief

4

Wakaya seeks in its sanctions motion for this conduct is telling:

5
6
7

Because Youngevity engaged in improper self-help discovery, including with
Rick Anson, it be taken as established that Youngevity tortiously interfered
with Wakaya’s relations with [Mr.] Anson and Livewell.

8

(ECF No. 552-1 at 30.) In the form of a discovery sanctions motion, Wakaya is asking the

9

Court to evaluate its allegations in support of Counterclaim Six, find the facts in its favor,

10

and, as a sanction, make a finding that Youngevity tortiously interfered with its economic

11

relations. That is not a discovery sanctions motion—that is a motion for summary

12

judgment.

13

Moreover, as to Wakaya’s claims that Youngevity is subject to sanctions because it

14

was in contact with other Wakaya vendors and Ambassadors requesting product samples

15

and improperly seeking confidential information, the Court finds that Wakaya has not

16

established that these contacts constitute sanctionable conduct. Rule 37 contemplates

17

sanctions for violations of the discovery rules and the Court’s orders, but Wakaya points

18

to no such violations in its motion. In addition, Wakaya has not established how Mr.

19

Wallach’s communications with David Smith, the owner of one of Wakaya’s vendors (see

20

ECF Nos. 552-1 at 23; 552-4 at ¶ 10, Exh. D), for example, constitutes such a violation or

21

undermines the integrity of the judicial proceedings or the rightful determination of this

22

case. See Anheuser-Busch, Inc., 69 F.3d at 348 (quoting Wyle, 709 F.2d at 591) (“Due

23
24
25
26
27
28

Youngevity (ECF No. 552 at 22-23), but Wakaya fails to identify any information allegedly
improperly obtained by Youngevity from Mr. Anson.
9

As previously noted, this counterclaim first appeared in Wakaya’s First
Amended Answer and [Amended] Counterclaim filed on February 23, 2017. (ECF No.
83.)
35
16-cv-00704-BTM (JLB)

1

process concerns . . . require that there exist a relationship between the sanctioned party’s

2

misconduct and the matters in controversy such that the transgression ‘threaten[s] to

3

interfere with the rightful decision of the case.’”).

4

For the foregoing reasons, the Court finds that Wakaya has not established that

5

sanctions are appropriate with respect to Youngevity’s contacts with Mr. Anson or other

6

Wakaya vendors and Ambassadors.

7

6.

Totality of Conduct

8

Wakaya contends that any one of the alleged violations addressed above would be

9

sufficient to impose case-dispositive sanctions, but “[t]aken together, Youngevity’s

10

discovery misconduct more than supports even the harshest sanctions from this Court.”

11

(ECF No. 552-1 at 12.) Therefore, although the Court has determined that the alleged

12

violations do not independently rise to the level of sanctionable conduct, it also considers

13

whether the alleged violations, taken together, warrant sanctions. The Court finds that they

14

do not. The most troublesome allegations have already been addressed by the Court on

15

prior motions to compel or for sanctions. The remaining alleged violations do not rise to

16

the level of sanctionable conduct. And taken together, Wakaya has failed to establish that

17

Youngevity either violated the Court’s orders or otherwise has engaged in a totality of

18

conduct that warrants the sanctions sought by Wakaya.

19
20
21
22
23
24
25
26
27

7.

Summary

In conclusion, the Court is reminded of Judge Moskowitz’s January 10, 2019 Order,
in which he stated:
The parties have engaged in scorched earth litigation reminiscent of Mad
Magazine’s cartoon Spy vs. Spy. . . . Youngevity and Wakaya are seeking to
use the litigation to inflict a mortal wound on each other’s businesses. The
attorneys have unfortunately taken up their clients’ attitude. Each side is lying
in wait for the other to make a mistake so that it can then jump out,
proclaiming gotcha.
(ECF No. 605 at 2.)

28
36
16-cv-00704-BTM (JLB)

1

The Court finds that Wakaya’s motion, while grounded in some legitimate concerns,

2

is another attempt to inflict a mortal wound. As discussed above, many of the issues raised

3

by Wakaya’s motion had already been raised before this Court, and many could have and

4

should have been raised using the Court’s discovery dispute procedures. During the course

5

of this litigation, both parties have demonstrated not only a keen awareness of Judge

6

Burkhardt’s Civil Chambers Rules and the requirements set forth in the Court’s scheduling

7

orders, but they have demonstrated their ability to comply with them on numerous

8

occasions. (See, e.g., ECF Nos. 93, 96, 98, 107, 108, 131, 134, 140, 141, 142, 143, 144,

9

145, 150, 151, 154, 155, 157, 159, 175, 177, 179, 194, 205, 208, 212, 214, 215, 222, 223,

10
11
12

226, 227, 232, 262, 280, 273, 281, 278, 448, 515, 541, 594.)
For all the reasons stated above, the Court RECOMMENDS that Wakaya’s motion
for sanctions be denied.

13

B.

14

After Wakaya filed its motion for sanctions, Youngevity filed an ex parte motion

15

requesting that the Court strike (or dismiss) with prejudice or, in the alternative, stay

16

Wakaya’s motion. (See ECF No. 554 at 6.) Youngevity contends that Wakaya’s motion

17

should be stricken or dismissed as procedurally deficient because Wakaya (1) failed to

18

meet and confer in advance of filing as required by Local Civil Rule 26.1(a), and (2) failed

19

to comply with the discovery dispute procedure set forth in Judge Burkhardt’s Chambers

20

Rules and is improperly circumventing the Court’s rules by not filing a discovery motion.

21

(Id. at 6-7.)

Ex Parte Motion to Strike (or Dismiss) or, in the Alternative, to Stay

22

The Court does not find merit in Youngevity’s motion to strike (or dismiss) with

23

prejudice Wakaya’s motion on the grounds that it is procedurally deficient. Neither the

24

federal and local rules, nor this Court’s chambers rules, require a party to meet and confer

25

prior to filing a Rule 37 motion for sanctions. See Fed. R. Civ. P. 37(b) (no meet and confer

26

requirement); CivLR 83.1 (no meet and confer requirement); Judge Burkhardt’s Civil

27

Chambers Rules ¶ IV(A) (requiring the parties to meet and confer before it will address

28

“discovery disputes”); cf. Mausner v. Marketbyte LLC, No. 12CV2461 NLS (MDD), 2014
37
16-cv-00704-BTM (JLB)

1

WL 12059009, at *2-3 (S.D. Cal. Apr. 4, 2014) (Stormes, J.) (denying motion for

2

terminating sanctions for a failure to meet and confer where there was no basis to bring the

3

motion “under Rule 37(b), which might otherwise excuse the filing of a [meet and confer]

4

certificate”). Therefore, the Court finds that Wakaya is not in violation of any meet and

5

confer requirement with respect to the filing of this motion. In addition, as Wakaya’s

6

motion for sanctions may materially affect the course of litigation and requests dispositive

7

relief, the motion was properly filed before the district judge, and is being handled on a

8

report and recommendation basis. See 28 U.S.C. § 636(b)(1), Fed. R. Civ. P. 72(b); CivLR

9

72.1; see also Grimes, 951 F.2d at 240.

10

In the alternative, Youngevity contends that Wakaya’s motion should be stayed

11

pending resolution of Youngevity’s appeal of the Court’s anti-SLAPP order. (See ECF

12

Nos. 554 at 7-8; 330; 411.) On July 16, 2018, Judge Moskowitz automatically stayed

13

Wakaya’s Counterclaims Six, Seven, and Nine through Twelve because they are subject to

14

the anti-SLAPP appeal. (ECF No. 560 at 2.) Judge Moskowitz also stayed Counterclaims

15

One through Four which are similarly subject to the interlocutory appeal, but on different

16

grounds. (Id.) Judge Moskowitz stayed Counterclaims One through Four on the basis that

17

the Ninth Circuit’s ruling may have a significant effect on the Court’s disposition of those

18

counterclaims. (Id.)

19

“The filing of a notice of interlocutory appeal divests the district court of jurisdiction

20

over the particular issues involved in that appeal.” Breazeale v. Victim Servs., Inc., No.

21

14-CV-05266-VC, 2015 WL 13687730, at *1 (N.D. Cal. Sept. 14, 2015) (citing Griggs v.

22

Provident Consumer Disc. Co., 459 U.S. 56, 58 (1982); City of L.A., Harbor Div. v. Santa

23

Monica Baykeeper, 254 F.3d 882, 886 (9th Cir. 2001)). However, the district court retains

24

jurisdiction over matters except “those aspects of the case involved in the appeal.” Id.

25

(quoting Griggs, 459 U.S. at 58).

26

Under California law, an appeal of a denial of an anti-SLAPP motion automatically

27

stays further trial court proceedings on causes of action related to the motion. Makaeff v.

28

Trump Univ., LLC, No. 10-CV-940-IEG WVG, 2011 WL 613571, at *2 (S.D. Cal. Feb.
38
16-cv-00704-BTM (JLB)

1

11, 2011) (citing Varian Med. Sys., Inc. v. Delfino (“Varian”), 35 Cal. 4th 180, 186 (2005)).

2

“In determining whether a proceeding is embraced in or affected by the appeal, [a court]

3

must consider the appeal and its possible outcomes in relation to the proceeding and its

4

possible results.” Id. (citing Varian, 35 Cal. 4th at 189). Whether a matter is “embraced

5

in” or “affected by” an order depends on whether the post-order proceedings on the matter

6

would have any effect on the effectiveness of the appeal. Varian, 35 Cal. 4th at 189

7

(citation omitted). “If so, the proceedings are stayed; if not, the proceedings are permitted.”

8

Id. By contrast, an appeal does not stay proceedings on ancillary or collateral matters

9

which do not affect the order on appeal, even though the proceedings may render the appeal

10
11

moot. Id. at 191, 195 & n.8.
In a Memorandum disposition filed on January 24, 2019, the Ninth Circuit held as

12

follows:

13

26

We reverse the district court’s decision not to strike those portions of
Wakaya’s counterclaims based on the republication of the Verified Complaint
and the Youngevity press release, which summarized the substance of the
Verified Complaint.
California’s litigation privilege applies to
communications made in judicial proceedings, see Cal. Civ. Code § 47(b),
and extends to communications regarding such judicial proceedings made to
people with “a substantial interest in the outcome of the pending litigation,”
see Abraham v. Lancaster Cmty. Hosp., 217 Cal. App. 3d 796, 823 (1990);
see also Argentieri v. Zuckerberg, 8 Cal. App. 5th 768, 783–84 (2017)
(indicating that the litigation privilege protects statements made to persons
with a “substantial interest” in the litigation, but not statements made to “the
general public through the press”). For this reason, the republication of the
Verified Complaint and the dissemination of the Youngevity press release to
its distributors and the marketing community (which had such a substantial
interest) constitute protected speech. [footnote omitted.] Therefore, to the
extent Wakaya’s counterclaims are based on the republication of the Verified
Complaint and Youngevity’s press release, Wakaya cannot carry its burden of
showing there is a probability that it will prevail on those claims, see Cal. Civ.
Proc. Code § 425.16(b).
(Youngevity, ECF No. 48 at 3-4.) The Ninth Circuit also affirmed “the district court’s

27

denial of Youngevity’s motion to dismiss or compel arbitration.” (Id. at 4.) Upon receiving

28

the Ninth Circuit’s decision, Wakaya filed a petition for rehearing en banc. (Id. at ECF

14
15
16
17
18
19
20
21
22
23
24
25

39
16-cv-00704-BTM (JLB)

1

No. 49.) On April 1, 2019, the Ninth Circuit denied the petition for rehearing en banc.

2

(ECF No. 623.) However, a party has 90 days from the date of such a denial to file a

3

petition for writ of certiorari in the United States Supreme Court. See Sup. Ct. R. 13.

4

Accordingly, the appeal remains pending and the case remains partially stayed.

5

In its motion for terminating sanctions, Wakaya requests, in part, that the Court enter

6

an order “granting default judgment in favor of Wakaya on all counterclaims.” (ECF No.

7

552-1 at 31.) Alternatively, Wakaya requests issue and evidentiary sanctions. (Id. at 29-

8

30.) Upon consideration of the foregoing, the Court finds that Wakaya’s requests for

9

terminating sanctions, as well as for issue sanctions directed at Counterclaims Six, Seven,

10

and Nine through Twelve, at a minimum, would affect the order on appeal.10 To the extent

11

Judge Moskowitz is inclined to adopt the report and recommendation and deny the

12

imposition of sanctions, the Court finds that the stay is not implicated, and recommends

13

that Youngevity’s ex parte motion to strike (or dismiss) or, in the alternative, to stay be

14

DENIED. Conversely, to the extent Judge Moskowitz is inclined not to adopt the report

15

and recommendation in its entirety and concludes that terminating sanctions or issue

16

sanctions which go to Counterclaims Six, Seven, or Nine through Twelve may be

17

appropriate, the Court alternatively recommends that Youngevity’s ex parte motion to

18

dismiss be GRANTED, without prejudice, in light of the stay of Wakaya’s Counterclaims

19

One through Four, Six, Seven, and Nine through Twelve.

20

IV.

CONCLUSION

21

For the foregoing reasons, the Court RECOMMENDS that Wakaya’s motion for

22

terminating sanctions or, in the alternative, for issue, evidentiary, and monetary sanctions

23
24
25
26
27
28

10

For example, Youngevity requests that “it be taken as established that . . .
Youngevity distributed the Verified Complaint and other filings and that such distribution
did not fall within the scope of any privilege.” (See ECF No. 552-1 at 30.) This request
would clearly affect the order on appeal. See Varian, 35 Cal. 4th at 190 (“A trial court
proceeding . . . affects the effectiveness of an appeal if the possible outcomes on appeal
and the actual or possible results of the proceeding are irreconcilable.”).
40
16-cv-00704-BTM (JLB)

1

(ECF No. 552) and Youngevity’s request for oral argument (ECF No. 586) be DENIED.

2

However, with respect to any request related to Youngevity’s use of evidence at trial, the

3

Court recommends that Wakaya’s motion for sanctions be denied WITHOUT

4

PREJUDICE, as any determination about the use of this evidence at trial is better made

5

in the context of the trial itself, once it is known what trial issues remain and the specific

6

evidence upon which the parties intend to rely.

7

In addition, to the extent Judge Moskowitz adopts this report and recommendation,

8

the Court further RECOMMENDS that Youngevity’s ex parte motion to strike (or

9

dismiss) or, in the alternative, to stay (ECF No. 554) be DENIED. Conversely, to the

10

extent Judge Moskowitz is inclined not to adopt the report and recommendation in its

11

entirety and concludes that terminating sanctions or issue sanctions which go to

12

Counterclaims Six, Seven, or Nine through Twelve may be appropriate, the Court

13

alternatively RECOMMENDS that Youngevity’s ex parte motion to dismiss be

14

GRANTED, without prejudice, in light of the stay of Wakaya’s Counterclaims One

15

through Four, Six, Seven, and Nine through Twelve.

16

IT IS ORDERED that no later than April 23, 2019, any party to this action may

17

file written objections with the Court and serve a copy on all parties. The document should

18

be captioned “Objections to Report and Recommendation.”

19

IT IS FURTHER ORDERED that any reply to the objections shall be filed with

20

the Court and served on all parties no later than April 30, 2019. The parties are advised

21

that failure to file objections within the specified time may waive the right to raise those

22

objections on appeal of the Court’s order. See Martinez v. Ylst, 951 F.2d 1153, 1156 (9th

23

Cir. 1991).

24
25

IT IS SO ORDERED.
Dated: April 9, 2019

26
27
28
41
16-cv-00704-BTM (JLB)