Daniels et al v. Spencer Gifts, LLC et al
Filing
212
MEMORANDUM Opinion and Order Signed by the Honorable Martin C. Ashman on 2/14/2012:Mailed notice(tlp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
HEATHER DANIELS and
URBAN BRATZ, LLC,
Plaintiffs,
v.
SPENCER GIFTS, LLC, et al.
Defendants.
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Case No. 10 C 5345
Judge Robert W. Gettleman
Magistrate Judge
Martin C. Ashman
MEMORANDUM OPINION AND ORDER
Plaintiffs Heather Daniels and Urban Bratz, LLC ("Plaintiffs") have brought this action
against Defendants Spencer Gifts, LLC ("Spencer Gifts"), Spencer Gifts Holding, LLC, and
Spencer Gifts Online, LLC ("Defendants") for violations of the Copyright Act, 17 U.S.C.
§ 101 et seq., the Lanham Act, 15 U.S.C. § 1125(a), and various state laws. Plaintiffs design and
sell children's apparel with original graphic designs. Defendants operate a nationwide chain of
gift stores. According to Plaintiffs, Heather Daniels created and copyrighted an original design
for a T-shirt titled "Sorry Boys, My Daddy Says I Can't Date 'Till I'm 30" and submitted it to
Defendants for consideration as an item to be sold in stores. Plaintiffs allege that Defendants
misappropriated this copyrighted design and began selling identical shirts in Spencer Gifts stores
and on the company's website.
Shortly after this suit was filed, Plaintiffs served discovery requests on Defendants on or
around August 26, 2010. On September 23, 2010, Plaintiffs filed a motion for sanctions based
on Defendants' alleged failure to answer these requests properly. District Judge Robert
Gettleman referred the motion to this Court for a decision pursuant to N.D. Ill. Rule 72.1.
Plaintiffs later withdrew that motion, filed two new sanctions motions, two supplemental
sanctions motions, and a motion to compel. As the supplemental motions incorporated Plaintiffs'
earlier motions, the Court denied the initial motions without prejudice. Before the Court now are
Plaintiffs' two supplemental motions for sanctions and the motion to compel. After multiple
hearings and two forensic examinations, the Court finds that Plaintiffs' motions should be
denied.
I. Procedural Background
This dispute centers around Plaintiffs' belief that Defendants have failed to produce
discovery responses that adequately account for the number of "Sorry Boys" shirts Spencer Gifts
ordered (or cancelled), paid for, and sold. The details of this dispute are complex and have been
exhaustively briefed by the parties. In its simplest terms, Plaintiffs believe that Defendants
ordered up to 95,500 shirts and have not properly accounted for approximately 70,000 of those
orders. The parties agree that Spencer Gifts purchased the "Sorry Boys" shirts through its
vendor, Tee Shirt Central, and not from Plaintiffs directly. Spencer Gifts did so electronically by
using a third party, known as SPS Commerce ("SPS"), which provides business-to-business
integration for ordering and shipping commerce through a computer-based system that
exchanges business information between companies in a standard format. SPS then sent the
order information it received to Tee Shirt Central. In turn, Tee Shirt Central shipped the shirts
directly to Spencer Gifts. Defendants gave the merchandise SKU (Stock Keeping Unit)
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numbers, seven of which were assigned to the various kinds of "Sorry Boys" shirts purchased
from Tee Shirt Central.
On August 26, 2010, Plaintiffs filed a motion for expedited discovery and attached their
discovery requests to it. District Judge Gettleman granted Plaintiffs' motion and ordered
Defendants to respond to the discovery requests by September 20, 2010. (Dckt. 8). The
Defendants did so in a timely manner. On September 23, however, Plaintiffs filed their first
motion for sanctions, claiming that Defendants had violated Judge Gettleman's discovery order
by refusing to hand over all the documents Plaintiffs sought. (Dckt 22). Judge Gettleman
referred the motion to this Court.1 Several months later, Plaintiffs filed two motions for
sanctions and then a supplemental motion that incorporated the earlier filings. (Dckt. 77). The
1
The motion claimed that Judge Gettleman's September 1, 2010 discovery order
overruled Defendants' discovery objections, even though Defendants had not asserted their
specific objections at that point. (Dckt. 22 at ¶ 25). The Court notes this fact because Plaintiffs
have raised similar issues concerning their discovery requests and Judge Gettleman's order that
have given the Court some pause. For example, Plaintiffs claimed at the January 25, 2012
hearing that in granting the expedited discovery motion, Judge Gettleman ordered Defendants to
produce specific items such as forensic computer data on a "bit-by-bit" basis, as sought in a
number of requests for production. In their motion to compel discussed below, Plaintiffs also
claim that their August 26, 2010 motion for expedited discovery sought "to compel Spencer to
produce documents[.]" (Dckt. 140 at 1- 2).
Examination of Judge Gettleman's order and the transcript of the hearing on which it was
based shows that this account is not accurate. Plaintiffs state that Defendants answered their
discovery requests on September 27, 2010. (Dckt. 140 at 2). However, Defendants responded on
September 20, as Judge Gettleman ordered. Moreover, Plaintiffs' expedited discovery motion
did not seek to "compel" answers from Defendants, at least in the ordinary meaning of that term.
It is difficult to understand how they could have done so, as the discovery requests were
apparently first delivered to Defendants on the same day as the expedited discovery motion was
submitted, and only two days after the case was itself filed. Contrary to the implication of
Plaintiffs' representation to this Court, Judge Gettleman did not address any of the specific items
included in Plaintiffs' discovery requests; he only ordered that discovery should be expedited and
that both parties should preserve relevant evidence. (Dckt. 8 and Dckt. 151 at Ex. H).
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supplemental motion alleged, inter alia, that Defendants misstated the number of shirts sold,
falsely represented that Spencer Gifts did not keep records on a store-by-store basis, and
intentionally scrambled produced data. Functioning as much as a motion to compel as one for
sanctions, Plaintiffs asked the Court to order Defendants to produce all of its computer records
on a bit-by-bit basis and turn over all records of internet sales. In the alternative, Plaintiffs
sought the harsh sanction of default judgment.
At the hearing on Plaintiffs' motion, it became clear that a number of issues concerning
what Defendants had actually produced and how that production should be interpreted could not
be decided based on the parties' briefs. For instance, Defendants admitted to certain errors in its
original production, though some of the initial mistakes had already been corrected. Central to
the parties' dispute was Plaintiffs' allegation that Spencer Gifts ordered 95,500 shirts. Defendants
contended that Spencer Gifts received fewer than 25,000 shirts. Accordingly, the Court ordered
Defendants to provide an affidavit clarifying various fact issues related to these claims.
On May 12, 2011, the Chief Financial Officer for SPS, Kim Nelson, signed an affidavit
stating that the seven "Sorry Boys" SKUs showed that Spencer Gifts issued purchase orders in a
total amount of 24,865 shirts. She also testified that Tee Shirt Central invoiced Spencer Gifts for
a total of 24,874 shirts. (Dckt. 130 at Ex. D). Plaintiffs filed further objections, and the Court
held a hearing on May 23, 2011. The parties again disputed the underlying fact issues of how
many "Sorry Boys" shirts had been ordered, cancelled, or sold. The Court made clear that such
factual disputes were not within the scope of the issues referred by Judge Gettleman and were
matters that went to the merits of Plaintiffs' underlying claims at trial. Instead, the only relevant
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issues were whether Defendants had adequately responded to Plaintiffs' discovery requests and
whether sanctions were warranted.
Based on the parties' differences on the reliability and interpretation of Defendants'
production, the Court ordered that a forensic exam of the SKUs at issue should take place at
Defendants' place of business. All seven of the "Sorry Boys" SKUs were included, and access
was granted to Defendants' database and other sources for additional financial information.
Plaintiffs were allowed to chose their own forensic expert, to copy the database in native format,
and to be accompanied by their counsel at the exam. (Dckt. 137).
Unfortunately, the subsequent forensic exam did not end the dispute between the parties.
Plaintiffs filed a status report on the forensic exam, claiming that their expert, Joseph Caruso,
had been prevented by Defendants from conducting the exam himself and was required to relay
his requests through an employee of the Defendants. (Dckt. 142 at 7). On July 26, 2011,
Plaintiffs also filed a motion to compel the production of certain emails they claimed Defendants
had failed to turn over as part of Plaintiffs' August 2010 discovery requests. (Dckt. 140).
In order to achieve some resolution of the parties' ongoing disagreement, the Court
ordered the parties to work out a joint electronic query concerning all the issues Plaintiffs wished
to explore in a second forensic exam. The Court laid particular stress on the need for
cooperation between the parties. A letter by Defendants' counsel dated August 8, 2011 reflects
what appears to be the terms agreed to during a recess at the August 1 hearing. (Dckt. 198 at Ex.
4). These included, among other things, inquiries concerning Spencer Gifts' proprietary
merchandise and inventory system, Spencer's Integrated Retail Information System ("SIRIS"),
and its use of the PeopleSoft financial accounting package, which records Spencer Gifts'
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accounts payable and receivable. (Id.). Plaintiffs requested minor changes to the queries. (Dckt.
201 at Ex. G). The exam went forward, and Defendants produced the results on or around
August 17, 2011. As before, however, further controversy resulted from this effort, and
Plaintiffs filed a second supplemental motion for sanctions on September 21, 2011. Plaintiffs
claimed that Defendants failed to produce forensics after August 2010, attempted to conceal
SKU 0220588, and tried to hide a variety of other data allegedly responsive to Plaintiffs'
requests. (Dckt. 156).
II. Discussion
The two sanctions motions currently pending seek the harsh sanction of default judgment
based on allegations that the Defendants deliberately concealed evidence, altered information,
and acted to obstruct the discovery process. Like the initial motion for sanctions (Dckt. 22),
however, they also seek to compel discovery and are essentially hybrid documents that are both
motions to compel and motions for sanctions. In fact, the great majority of this Court's efforts
has been directed towards clarifying what Plaintiffs are requesting, what Defendants have
produced, and whether any relevant information exists that has not been turned over to Plaintiffs.
The Court decides these issues by first turning to Plaintiffs' motion to compel and then taking up
the motions for sanctions.
A.
The Motion to Compel
A party may file a motion to compel under Fed. R. Civ. P. 37 whenever another party
fails to respond to a discovery request or when its response is insufficient. Fed. R. Civ. P. 37(a).
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Courts have broad discretion in resolving such disputes and do so by adopting a liberal
interpretation of the discovery rules. Wilstein v. San Tropai Condo. Master Assoc., 189 F.R.D.
371, 375 (N.D. Ill. 1999). Federal Rule of Civil Procedure 26(b)(1) provides that the "[p]arties
may obtain discovery regarding any non privileged matter that is relevant to any party's claim or
defense." Fed. R. Civ. P. 26(b)(1). Discoverable information is not limited to evidence
admissible at trial. Instead, such information is relevant "if the discovery appears reasonably
calculated to lead to the discovery of admissible evidence." Id.
Plaintiffs' requests for production included the following demand as Request No. 8:
Produce exact forensic copies (i.e. bit-by-bit copies) of all database files, e-mail
or other files maintained on servers or mainframes or microcomputers containing
electronically stored information relative to the amount and cost of production
info children and infant apparel generated by SPENCER bearing the design
"Sorry Boys."
Although Plaintiffs claim in general terms that two of their other discovery requests sought email
communications, they fail to specify what those requests were. The Court does not address
issues that have not been raised, and it limits its discussion to the sole request cited by Plaintiffs
in their motion.
Plaintiffs contend that Defendants responded to Request No. 8 by producing only two
email communications that Plaintiffs themselves already possessed. The first, dated March 23,
2009, involves a brief email exchange between Spencer Gifts' associate buyer, Cori Totoro, and
Heather Daniels in which Ms. Daniels invited Ms. Totoro to view her merchandise on a website
designed for it. The second, dated February 9, 2010, is a response to Heather Daniels' inquiry as
to whether Spencer Gifts was interested in carrying her line of clothing. Cori Totoro responded
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that she was the company's buyer for children's wear and that Ms. Daniels could send her
information about her merchandise. (Dckt. 140 at Ex. D).
Plaintiffs argue that Defendants have failed to produce many other emails allegedly in
their possession that are responsive to Plaintiffs' request. As an initial matter, the scope of this
demand significantly exceeds what was sought in Request No. 8. Plaintiffs contend at this point
that Defendants must turn over all emails "germane to this case." But Request No. 8 did not
include such an exceptionally broad and unspecific category of information. It only sought
emails concerning "the amount of sales and cost of production" related to the "Sorry Boys"
shirts. Only the narrower discovery request stated in Request No. 8 is at issue here.
Plaintiffs rely first on an affidavit of a former employee, Kelsie Bailey, who worked for
Spencer Gifts for two months in 2010. Ms. Bailey stated that the store she worked in received
emails encouraging stores to promote the "Sorry Boys" shirts and to place them at eye level.
Ms. Bailey did not claim that the emails she received contained any information about the shirts'
cost or that she sent emails to Spencer Gifts on the number of shirts she sold. (Dckt. 140 at
Ex. H). As such, Ms. Bailey's testimony has no relevance to the information sought in Request
No. 8 and does not suggest that Defendants have discoverable communications they failed to
produce.
Equally unpersuasive is an email between Ms. Daniels and a Spencer Gifts employee
named Joyce Wilson, in which Ms. Daniels invited Ms. Wilson to "check out" the website for the
"Sorry Boys" shirts. (Dckt. 140 at Ex. G). Plaintiffs contend that this email shows that
Defendants must possess other emails that should have been produced. But Ms. Daniels' email
merely introduced the shirts to Ms. Wilson and does not contain any information about the costs
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of production or the merchandise. Presuming that Defendants even had a copy of this email,
they were not required to produce it in response to Request No. 8, and it does not suggest that
they have other emails that they failed to turn over.
Next, Plaintiffs point to a written conversation Ms. Daniels had on Facebook.
Ms. Daniels sent out a message on that website offering to pay former or current store managers
for information on how Spencer Gifts keeps store records. A person named Whitney Mathis
responded by stating, in part, that the "[h]ighest selling items are emailed to us from the district."
(Dckt. 140 at Ex. J). This response does not provide a basis for concluding that Defendants are
concealing other emails on the costs of the "Sorry Boys" shirts. There is no cognizable evidence
of who Ms. Mathis is, if or when she worked for Spencer Gifts, or what personal knowledge she
has of the "Sorry Boys" shirts – which are never mentioned in her message. Ms. Mathis does not
even state that the emails she received contained any information on costs or sales.
Moreover, even if Ms. Mathis' response could be construed to include the shirts, as well
as the financial information associated with them, Defendants had no duty to preserve emails that
pre-dated the initiation of this suit. When a party first reasonably foresees that litigation is on
the horizon, it is required to suspend its ordinary policies governing how information is retained
or destroyed and to put into place a litigation hold to preserve relevant material. Krumwiede v.
Brighton Associates, L.L.C., No. 05 C 3003, 2006 WL 1308629, at *8 (N.D. Ill. May 8, 2006).
Plaintiffs have not made any argument that Defendants should have anticipated the filing of this
suit before it was initiated on August 24, 2010. Thus, Plaintiffs have failed to demonstrate why
Defendants were obligated to preserve emails, or any other documents concerning the "Sorry
Boys" shirts, prior to that date.
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Plaintiffs note that Defendants admit that they made changes to various purchase orders
for the shirts and argue that associated emails must exist for these changes. However, the fact
that Defendants may have placed changes to their purchase orders for the "Sorry Boys" shirts is
not evidence that they currently possess emails relevant to Plaintiffs' request. As noted above,
Defendants placed its orders electronically through SPS and presumably did not rely on written
email communications. Plaintiffs point to deposition testimony of SPS's Vice-President of
Technology, Ann Knapp, as evidence that such change orders can take place outside of the SPS
system. Ms. Knapp did testify that it is "possible" that a purchaser like Spencer Gifts can adjust
orders without using the SPS system, but she also stated that she was unable to answer any
specific question as to whether Defendants did so. (Dckt. 140 at Ex. L). Plaintiffs appear to
assume that Defendants must have done so and that, as a result, they have emails related to the
cancellation or changes made to certain "Sorry Boys" orders. Clearly, however, the mere
possibility that SPS's clients could use some other means for changing orders is not a reason for
finding that Defendants did so or that they currently possess emails responsive to Request No. 8.
See Inter-Med, Inc. v. ASI Medical, Inc., No. 09-CV-383, 2010 WL 2854288, at *2 (E.D. Wis.
July 18, 2010 ("Mere '[s]peculation that there is more will not suffice'") (quoting Hubbard v.
Potter, 247 F.R.D. 27, 29 (D.D.C. 2008)).
As a result, Plaintiffs have not shown any ground for finding that Defendants have not
turned over all discoverable emails relevant to Plaintiffs' Request No. 8. Plaintiffs' motion to
compel is denied.2
2
At the January 25, 2012 hearing, Defendants proffered a chart to the Court indicating
that it produced additional emails on September 1, 2011 as discovery documents SP002426 to
(continued...)
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B.
The Sanctions Motions
As noted above, Plaintiffs seek both sanctions and the production of documents. The
Court attempted to resolve this dispute at the May 23, 2011 hearing by focusing attention on the
database in which Defendants store the information Plaintiffs sought. Following the hearing, the
Court issued an order on June 14 that stated, in part:
On or before June 27, 2011, a forensic expert retained by Plaintiffs shall be
granted access to Spencer Gifts' database and other sources of
electronically-stored financial and numerical information (including backups) at
its corporate headquarters in Egg Harbor Township, New Jersey, or such other
location where such database or information may be kept, to review and copy the
portions of said database and other sources that contain financial and/or numerical
information on orders, purchases, receipts, sales, inventory, and costs of SKUs
02147551, 02147569, 02147577, 02205854, 02205862, 00205870, 02205888.
The database and other sources shall be made available to, and can be copied by,
Plaintiffs' forensic expert in native format; that is, in the file structure defined by
the original creating application.
(Dckt. 137). The terms of this order condensed the disparate arguments that had been presented
earlier and constitute the scope of the issues that are currently in dispute. Although the issues
raised prior to the Court's June 14, 2011 order are important, particularly for the sanctions
portion of Plaintiffs' motions, the primary issues at stake are Defendants' responsiveness to
Plaintiffs' demands under the electronic access granted in the Court's order. To clarify the wide
2
(...continued)
SP002634. The Court has reviewed the pages referenced in Defendants' chart on a disc provided
by the parties. Without further explanation, it is unclear what emails documents SP002426 to
SP002634 actually contain. The pages include tabulations of transaction and store identification
numbers, cashiers' names, and sales prices. These tabulations begin prior to SP002426 and
extend well beyond SP002634. Defendants' chart identifies the same pages as part of their May
12, 2011 production concerning inventory and sales information. This does not change the
Court's analysis of the motion to compel, however, because Plaintiffs have not presented any
argument linking Defendants' supplemental email production to the instant motion.
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range of arguments that have been raised in this case, the Court addresses the sanctions portion
of Plaintiffs' motions first and then turns to the discovery issues.
1.
Sanctions
Courts have the power to impose discovery sanctions either pursuant to Fed. R. Civ. P.
37(b)(2), which requires the violation of a court order, or under its own "inherent power to
impose sanctions for the abuse of the judicial system, including the failure to preserve or produce
documents." Northington v. H & M Int'l, No. 08 C 6297, 2011 WL 663055, at *12 (N.D. Ill.
Jan. 12, 2011); see also Barnhill v. United States, 11 F.3d 1360, 1367 (7th Cir. 1993) (stating
that this power stems from a court's authority to manage its own affairs). The analysis is the
same under either standard. Danis v. USN Communications, Inc., No. 98 C 7482, 2000 WL
1694325, at *30 (N.D. Ill. Oct. 20, 2000). Sanctions can include the dismissal of a case upon a
showing that a party's noncompliant actions have been based on willfulness, bad faith, or fault.
Collins v. Illinois, 554 F.3d 693, 696 (7th Cir. 2009) (citation omitted). See also Phillips Med.
Sys. Int'l, B.V. v. Bruetman, 982 F.2d 211, 214 (7th Cir. 1992) (stating that Rule 37 sanctions are
"available to penalize balky litigants and to deter others who might otherwise ignore discovery
orders").
Plaintiffs have based their numerous sanctions motions on alleged violations of court
orders, but they have also included a wide range of ancillary allegations concerning the behavior
of Defendants' counsel. These claims range from Plaintiffs' initial contention that Defendants
violated Judge Gettleman's September 1, 2010 discovery order, to allegations that Defendants
concealed documents, to serious accusations of "obstructionism" (August 1, 2011 hearing) and
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"unprofessional conduct" (Dckt. 53 at 2) by Defendants' counsel. These allegations are
frequently intertwined in Plaintiffs' briefs, which rely on both the results of the discovery
production and counsel's acts to argue that Defendants should be sanctioned. For the sake of
clarity, the Court separates these arguments and first addresses claims concerning the behavior of
Defendants and their counsel.
After the parties met at Spencer Gifts' headquarters on June 23, 2011 to carry out the
forensics ordered by the Court, Plaintiffs filed a status report on the events that had occurred.
Their view was clear and to the point: Defendants impeded the forensic exam and prevented
their expert Joseph Caruso from even touching the database or from entering his own queries to
search Defendants' records. (Dckt. 142). Plaintiffs underscored this point at the August 1
hearing by stating that Defendants had intentionally prevented them from accessing the database,
an allegation that essentially claims that Defendants violated the Court's June 14, 2011 order.
The evidence associated with the forensic exam presents a very different picture.
Contrary to the implications of Plaintiffs' representations to this Court, Mr. Caruso's forensic
report states that he "made the decision to abide by the predetermined method setup by the
defendants," not that he was denied a chance to submit his own queries or was otherwise
prevented from conducting the exam on his own terms. (Dckt. 142, Ex. 2 at 2). Indeed,
Plaintiffs admitted at the August 1 hearing that he did not ask to see any particular data at the
exam. Far from being obstructionist, Defendants sent Plaintiffs a letter on July 1, 2011 offering
its computers to Mr. Caruso once again in order to access the information he believed was
needed. (Dckt. 142 at Ex. D). Plaintiffs declined to accept the invitation, stating that only a
properly-conducted exam would suffice. (Id.). But the forensic exam ordered by this Court had
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already taken place, and Plaintiffs' expert did not submit the queries that Plaintiffs now claimed
were necessary. In response, Defendants again issued a return invitation to Plaintiffs at the
August 1 hearing, stating in strong terms: "We want this done. And we stand before you today
to make the same commitment to this court. Send him back. Do whatever you want to do."
(Dckt. 198 at Ex. 3 at 12). Such evidence contradicts Plaintiffs' claim that Defendants impeded
the first exam or acted in any manner that was contrary to the Court's directive.
In order to resolve this dispute, the Court allowed the parties to conduct a second forensic
exam, and as it had before, the Court emphasized the need for cooperation. To that end, the
parties were required to confer with one another during a recess at the August 1 hearing. This
meeting was attended by Spencer Gifts' Director of Merchandise Management Systems, Ann
Arena, and Plaintiffs' second forensic expert, Alan Ness. The parties later stated in open court
that they had reached an agreement on the terms to be used at the second exam. On August 8,
2011, Defendants' counsel memorialized these terms in a letter. The letter set forth data and
detailed search terms related to financial and numerical data, Spencer Gifts' SIRIS Management
System, as well as vendor, invoice, and advanced shipping tables. (Dckt. 198 at Ex. 4). Plaintiffs
subsequently asked Defendants to refine these terms to some degree in order to capture
additional information. (Dckt. 156 at Ex. L; Dckt. 201 at Ex. G).
Unhappy with the results of the exam, Plaintiffs filed a second supplemental motion for
sanctions on September 21, 2011, alleging that Defendants' behavior again violated the Court's
order; Defendants allegedly mistyped one SKU number on purpose to see if Plaintiffs would
notice, deliberately filtered data, and were, in general, "obstructionists and concealers."
(Dckt. 184 at 13). Plaintiffs filed the motion without first notifying Defendants that they had any
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objection to the data produced at the second exam and without complying with the "meet and
confer" requirements of Local Rule 37.2. According to Plaintiffs, any attempt along these lines
would have been futile.
The Court rejects these characterizations and finds that Defendants' conduct did not
violate any court order or involve acts that merit sanctions. Plaintiffs are correct that the "meet
and confer" requirement of Local Rule 37.2 does not apply if the meeting would be
unproductive. In re Sulfuric Acid Antitrust Litig., 231 F.R.D. 351, 356 (N.D. Ill. 2005). But the
evidence supports the opposite conclusion: Defendants' representations in open court, combined
with their July 1, 2011 letter inviting Plaintiffs to repeat the first forensic exam, indicate a
continuing willingness, even an eagerness, to resolve the issues at hand. Defendants' General
Counsel underscored that intent at the hearing by stating: "If Mr. Ness wants to get on a plane
and fly to New Jersey and do a personal inspection, I'm happy to do it tomorrow. We want this
over[.]" (Dckt. 184 at 16). Plaintiffs were obligated to make some attempt to resolve their
differences with Defendants before filing a sanctions motion on the unfounded premise that
Defendants were "obstructionists and concealers." Any claim that sanctions are appropriate
based on Defendants' alleged recalcitrant and obstructionist behavior is seriously misplaced.
Plaintiffs also claim that sanctions should be imposed because the materials Defendants
produced are incomplete, misleading, and are better described as "garbage" instead of proper
discovery. (May 23, 2011 hearing). At times, Plaintiffs characterize these acts as spoliation, but
the general thrust of their arguments is that Defendants have withheld or altered information, not
that they destroyed it. Under Fed. R. Civ. P. 37, a party that fails to disclose evidence "is not
allowed to use that information . . . at a trial, unless the failure was substantially justified or is
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harmless." Fed. R. Civ. P. 37(c)(1). The Rule also allows a court to dismiss an action or enter
default judgment, if a harsh sanction is appropriate. Id. See also Dotson v. Bravo, 202 F.R.D.
559, 575 n.103 (N.D. Ill. 2001) ("Falsifying evidence is grounds for the imposition of the
sanction of dismissal") (internal quote and citation omitted).
Part of the Court's June 14, 2011 order allowed Plaintiffs to search for information
related to SKU 02205888. By all accounts, the query for the number "02205888" was entered by
omitting one "8," thereby yielding incomplete results. Plaintiffs contend that Defendants
deliberately entered an incorrect SKU number in order to conceal data. (Dckt. 156 at 3).
According to Plaintiffs, if "02205888" had been properly typed, the results would have shown
that Defendants ordered 21 units of "Sorry Boys" "onesies" as part of that SKU.3 (Dckt. 156 at
3).
Even assuming this last statement is accurate, it falls far short of the standard required for
sanctions. Plaintiffs must show that Defendants acted with the intent to hide evidence. This
requires them to explain why Defendants would have actively sought a second forensic exam,
correctly entered six of the seven SKU numbers, and then intentionally omitted an "8" in the last
number so that they could conceal information. Plaintiffs have presented no argument on this
point. A more reasonable explanation is that whoever entered the SKU number made a
typographical error that could have been corrected at Plaintiffs' request. In fact, the Defendants
offered to do so at the September 26, 2011 hearing and stated that they first learned of the error
3
In their reply, Plaintiffs claim that when the SKU number was corrected, Plaintiffs
discovered an additional 1,724 units. (Dckt. 201 at 6). Defendants state that the correction did
not result in any changes in Spencer Gifts' purchase orders. (Dckt. 198 at Ex. 9). The parties'
dispute over this issue does not change the Court's reasoning.
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when they received the sanctions motion. See Docket 184 at 16 ("We're happy to do it. We'll do
it till the cows come home"). Defendants later corrected the mistake. (Dckt. 201 at 6).
Plaintiffs also claim that Defendants intentionally provided incomplete data at the second
exam by placing a stop date of August 2010 to "the forensics." (Dckt. 201 at 2). Plaintiffs do not
explain what "the forensics" means in this context, but insofar as it refers to the query terms
agreed to in Court and memorialized in Defendants' August 8, 2011 letter (Dckt. 198 at Ex. 10),
Plaintiffs fail to state what search terms were violated, or what specific requests they made that
were ignored by Defendants. Moreover, Defendants explain that they stopped buying "Sorry
Boys" shirts at the end of August 2010, though they continued to sell items as late as April 2011.
No evidence supports a finding that Defendants knowingly attempted to disguise data after they
stopped purchasing the shirts.
Plaintiffs have long complained that Defendants produced sales data that were
intentionally scrambled in an attempt to disguise the true sales and inventory figures for the
"Sorry Boys" shirts. (Dckt. 77 at 3). In an earlier sanctions motion, Plaintiffs elaborated on this
claim by alleging that none of the SKU entries provided by Defendants were arranged in a
discernable pattern and that it "is axiomatic that no business would manage records . . . in this
fashion." (Dckt. 53 at 6). However, Spencer Gifts' Merchandise Manager, Gina Bowman,
provided a sworn declaration stating in detail how the data at issue was arranged, the reasons for
doing so, and why it was not deliberately altered as Plaintiffs claim. (Dckt. 156 at Ex. B).
Plaintiffs have provided no reasonable explanation as to why Ms. Bowman's testimony is not
credible or why it does not explain the format in which Defendants' initial discovery response
was produced. Whether or not Spencer Gifts' means for collecting and storing data constitutes
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an unreasonable business practice, there is no evidence that Defendants' explanation of it is not
accurate.
Along the same lines, Plaintiffs have also claimed on many occasions that Defendants
and their out-of-state counsel lied by telling Plaintiffs that Spencer Gifts does not maintain sales
records on a store-by-store basis. Yet, Spencer Gifts' Senior Director of Inventory, Nicholas
Campanale, has sworn that the company does not keep "written reports of each and every
transaction at each and every Spencer Gifts store." (Dckt. 107 at ¶ 7). Instead of maintaining
store-by-store records, Spencer Gifts must generate them by means of specialized search terms.
(Id. at ¶ 9). Moreover, even assuming that Defendants' original production was "scrambled" as
Plaintiffs claim, they admit in their first supplemental motion that "Defendant's [sic] immediately
attempted to remedy their intentional errors" when Plaintiffs filed a subsequent motion for
sanctions. (Dckt. 77 at 3). This is not how a party acts when it deliberately seeks to hide
information from discovery. Thus, no ground exists for finding that Defendants acted with the
intent to hide information or that they were unwilling to remedy any defect when the problem
was brought to their attention.4
4
Insofar as Plaintiffs claim that Defendants destroyed data in violation of Judge
Gettleman's September 7, 2010 order to preserve evidence, Plaintiffs have not shown that any
spoliation took place. Ms. Bowman testified that Spencer Gifts routinely deletes order and
shipment data "from its internal computer inventory system and balances for items that have not
been received." (Dckt. 106 at ¶ 8). Plaintiffs have not produced any evidence showing that
Defendants deleted any relevant data after this case was filed. Plaintiffs contend that other
records must exist because no company would keep records in this manner. The relevant
question, however, is not whether Defendants' business plan is reasonable, but whether any
evidence provides a ground for rejecting Ms. Bowman's sworn statement. The Court finds that
no such evidence has been presented.
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Finally, Plaintiffs contend that Defendants lied about their inventory and purchase
records because Plaintiffs have discovered that Spencer Gifts uses an undisclosed means for
replenishing inventory. When inventory reaches a pre-determined low point, a purchase order is
automatically transmitted to SPS by means of the software program ViaWare, presumably
creating purchase orders that are in addition to those produced by Defendants. (Dckt. 77 at 6).
Plaintiffs rely on a mishmash of trade articles and advertisements, including one from the
internet site "www.supplychainbrain.com." (Dckt. 77 at Ex. E). The article is dated July 1, 2005,
long before Defendants began purchasing the "Sorry Boys" shirts, and no evidence supports a
conclusion that Spencer Gifts even continues to use ViaWare. Moreover, the article does not
state what Plaintiffs claim. As its name suggests, ViaWare appears to be a warehouse
management system that controls the flow of goods between individual stores and Spencer Gifts'
warehouse, not direct orders from individual stores to SPS. Plaintiffs buttress their argument
with additional website pages concerning other software programs allegedly used by Spencer
Gifts. But even assuming Spencer Gifts used any of the programs cited in these pages when it
ordered and sold the "Sorry Boys" shirts, none of Plaintiffs' publications mention SPS. Thus, the
claim that Spencer Gifts uses ViaWare or the other programs to place orders with SPS is based
on unwarranted speculation instead of evidence.
Defendants admit that their discovery responses have not always been fully accurate.
Information for one of the SKUs was omitted in Defendants' first production, and data entry
errors also took place. (Dckt. 105 at 2-3). Standing alone, however, mistakes are not a ground
for sanctions under Rule 37 unless the offending party has wilfully violated a court order or
behaved in a manner that requires a court to exercise its inherent power. Based on the parties'
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briefs and the many discussions that have taken place in open court, the Court finds that no
evidence supports a conclusion that Defendants have violated a court order, wilfully obstructed
discovery, or altered, withheld, or destroyed relevant evidence. Plaintiffs' supplemental motion
for sanctions (Dckt. 77) and second supplemental motion for sanctions (Dckt. 156) are denied to
the extent that they seek to impose sanctions on Defendants.
2.
Discovery
Plaintiffs' second supplemental sanctions motion, together with the terms agreed to by the
parties as part of the August 1, 2011 hearing, leave three broad categories of information at issue
in this discovery dispute: (1) inventory and purchase data, (2) data related to Defendants' use of
PeopleSoft, and (3) miscellaneous items such as emails, internet sales, and FedEx records. Many
of the arguments presented, especially in the first category, have relied on claims that specific
numbers of "Sorry Boys" shirts either were, or were not, ordered and received. As the Court
noted on several occasions, however, the determination of such issues involving the merits of
Plaintiffs' claims is reserved to the finder of fact at trial, and the Court considers them only
insofar as it is necessary to assess the pending motions. The only salient issue in those motions
is whether Defendants have produced the discoverable evidence it possesses that is responsive to
Plaintiffs' requests. Accordingly, the Court makes no finding of fact concerning the number of
shirts that Defendants actually ordered or received.
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a.
Inventory and Purchase Data
Spencer Gifts manages its inventory transactions and merchandise data by means of its
in-house SIRIS system. A letter from Defendants on August 8, 2011 memorialized the parties'
agreements concerning the queries, or SQLs, that would be submitted to Defendants' database
concerning the SIRIS issues.5 These included SQLs on various "tables" maintained in the
database, including those for purchase orders, SKUs, receiving records, advance shipping
notices, FedEx data, and invoice tables. (Dckt. 198 at Ex. 10). Plaintiffs responded to
Defendants' letter on August 10 by requesting, in relevant part, one additional SQL table. On or
around August 17, Defendants produced the results of the SIRIS queries. This included purchase
order information involving 550,000 rows of data on twelve Excel spreadsheets, data for
receivables consisting of 517,000 rows, and 490,000 rows of invoice information. (Dckt. 198,
Ex. 4 at 3). Plaintiffs claim this is insufficient.
Much of Plaintiffs' argument on the inventory issue is based on Mr. Ness's September 9,
2011 declaration, which claimed that the produced SIRIS data had several defects.6 These
included an incomplete vendor list and "unexplained gaps" in the SIRIS material.7 Ness also
5
A SQL, or structured query language, is a declarative language used to manage data in
relational database management systems. Such queries convert the "0"s and "1"s of
electronically stored information into a decipherable format.
6
The Court notes with some concern that Ness was later required to withdraw a part of
his declaration, which stated that Defendants ordered more merchandise than they disclosed.
(Dckt. 198, Ex. 22 at ¶ 6). At his deposition, he conceded that the basis for this conclusion was
the fact that one purchase order had been entered twice. (Dckt. 201, Ex. A at 211).
7
Plaintiffs claim in other portions of their motions that Defendants have not provided
data related to all their vendors, including the offshore "vendor sub" 12958, which allegedly
involves a Latin American vendor. Defendants have consistently stated that Tee Shirt Central
was the only vendor that sold the "Sorry Boys" shirts to them, and that Plaintiffs' request
(continued...)
- 21 -
stated in broad terms that Defendants had improperly placed filters on their queries that
intentionally concealed certain data.8 (Dckt. 156 at Ex. M). Several countervailing facts
undermine the force of these statements. For one, Defendants pointed out at the January 25,
2012 hearing that Plaintiffs not only already have their inventory statement, they attached it as an
exhibit to their reply brief. (Dckt. 201 at Ex. P). The form purports to be a "Perpetual Inventory
Transaction Summary" for the relevant SKUs from November 1, 2009 to April 21, 2011.
Plaintiffs' reply brief fails to show why this document is inaccurate or insufficient.
Moreover, Ness's declaration does not specify what the alleged "gaps" in Defendants'
production encompass. In their second supplemental motion, Plaintiffs also fail to explain what
the gaps involve, claiming instead that they show a conflict between the SIRIS and PeopleSoft
transaction data. Plaintiffs refer the Court, without further explanation, to the data analysis that
was attached as an exhibit to Ness's declaration. By contrast, Defendants address the issue
directly. They make clear that the imbalance Ness noted between SIRIS and PeopleSoft stems
7
(...continued)
improperly seeks data concerning all of Spencer Gifts' non-"Sorry Boys" merchandise.
Moreover, Defendants argue that the spreadsheets produced to Plaintiffs show that no orders
were ever placed with vendor sub 12958. Plaintiffs have not produced any evidence or argument
showing why they are entitled to such broad information. Their discovery demands for this data
are denied.
8
In addition, Ness stated that bit-by-bit mirror images of the computers of Cori Totoro
and Rosanne Segers were not produced. Plaintiffs' second supplemental sanctions motion seeks
the production of these images. Although the Court's July 14, 2011 order included both Spencer
Gifts' database and "other sources of electronically-stored financial and numerical information
(including backups)," this language did not expressly contemplate the personal computers of
individual employees. Plaintiffs may be entitled to explore such electronic sources upon a
showing of need, but their motion merely states that Defendants did not produce images of
Totoro's and Segers' computers. This presents no argument on why such production is necessary
or what information would be produced that is not available on Spencer Gifts' own database.
Plaintiffs' discovery request on this issue is denied.
- 22 -
from the fact that, as discussed more fully below, the PeopleSoft data were kept only from
May 2010 through August 2010, whereas the relevant SIRIS data extend from November 2009
through August 2010. (Dckt. 198 at 9). Plaintiffs' reply brief does not address Defendants'
account of the alleged gaps, thereby failing to show that any discrepancy actually exists between
the SIRIS and PeopleSoft data.
In his declaration, Ness claimed that the gaps and other errors in Defendants' production
stemmed from their failure to comply with the terms agreed to at the August 1, 2010 hearing.
(Dckt. 156, Ex. M at ¶¶ 12-13). Plaintiffs expand on this claim by stating in their reply brief that
Defendants failed to run one of the receiving record tables for SIRIS, three of which were
specified in the August 8, 2010 letter memorializing the parties' SQL agreement. However,
Plaintiffs do not cite any evidence to support this claim. Ness did not state that in his
declaration, and Plaintiffs fail to point to any testimony to that effect in his deposition. The
Court notes that Ness admitted that he obtained receiving record procurement data as a result of
the second exam. (Dckt. 201, Ex. A at 105-110, 222-23). If this was insufficient, Plaintiffs must
specify the error they believe is involved. As it stands, however, Plaintiffs have not shown
which, if any, of the three receiving record tables agreed to was not queried at the second exam.
Instead, Plaintiffs point to an assortment of letters and emails, one of which is dated
July 18, 2010 and contains detailed SQL requests from Ness to Defendants. (Dckt. 201 at 3).
Clearly, these elaborate requests pre-date the terms agreed to at the August 1 hearing. The very
purpose of the second exam was to rectify alleged errors in the first exam in order to bring this
dispute to an end. The parties expended considerable time and effort in agreeing on SQLs at the
August 1 hearing and in undertaking the second forensic exam. If Plaintiffs believed their
- 23 -
July 18 SQLs were crucial and were not encompassed by the terms set forth in Defendants'
August 8 letter, they should have stated that fact in their August 10 response or at some other
time before the second exam was conducted. Doing so at this point is futile. Thus, insofar as
Plaintiffs contend that Defendants should have run different queries, or that they should be
required to undergo yet a third forensic exam, the time for seeking electronic information from
Defendants' database has come and gone. In fact, it has done so twice.
As for the filters referred to in Ness's declaration, it is again unclear what specific
component of the queries is at issue. Plaintiffs have argued in several hearings that Defendants
did not produce responsive data after August 2010. Plaintiffs' generalized complaint of
unwarranted filters fails to show why Defendants possess relevant post-August 2010 data.
Ms. Arena testified that Spencer Gifts stopped buying the "Sorry Boys" shirts from Tee Shirt
Central at that time and that no purchase records exist from September 2010 forwards.
(Dckt. 198 at Ex. 4). Ness admitted in his deposition that he did not mention the filters in his
supplemental report and that if the SQLs were to be changed, he could not say that the results
would be significantly different. See Dckt. 201, Ex. A at 69 ("I don't know if that materially
affected the results . . . But I know that there are filters that possibly constrain the results")
(emphasis added). This fails to show why additional discovery is required. If the Court were to
order a further electronic search based on these allegations of filtered data, it would have no
clear idea of what new information was being sought or what specific changes to the second set
of SQLs would justify a third forensic exam.
Equally important, the basis for much of Plaintiffs' arguments supporting their request for
further discovery on this issue is not well founded. Plaintiffs argue that Defendants are actively
- 24 -
concealing information about the number of shirts they ordered and sold and recently raised the
alleged number of ordered shirts from 95,500 to 101,244 units. This number is based on an
arithmetic calculation by CPA Charles Nelson, who appears to have added up numbers on
documents provided to him with pre-circled figures.9 (Dckt. 198 at Ex. 21). Defendants have
rebutted Plaintiffs' claims by submitting declarations of representatives of each of the three
entities involved in the relevant transactions – Spencer Gifts (which bought the shirts), SPS
(which recorded the orders and sent them to Tee Shirt Central), and Tee Shirt Central (which
shipped the shirts to Spencer Gifts). SPS states that it received orders for 24,865 shirts. Tee
Shirt Central states that it shipped Spencer Gifts 24,883 shirts. Spencer Gifts states that it
received 24,860 shirts. (Dckt. 198 at Exs. 12 - 14). The exact number of shirts ordered is outside
the scope of this proceeding, but Plaintiffs have not provided any evidence to counter these
sworn statements and have not shown why Defendants have undisclosed documents that are
relevant to the issue at hand.10
After carefully examining the entire record, the Court believes that the evidence strongly
suggests that the real dispute between the parties concerns the proper method for interpreting
what has already been produced. Many of Plaintiffs' arguments are based on inferences derived
9
Defendants later filed a motion to strike Nelson's affidavit. (Dckt. 179). The Court
denied it on the ground that all relevant evidence should be considered. Having done so, the
Court finds that based on the arguments set forth in Defendants' motion, Nelson's affidavit has
little or no probative value to this dispute.
10
At the hearings, Defendants explained the discrepancy of 23 shirts between what Tee
Shirt Central claims was shipped and the number actually received as natural "slippage" in the
packaging and unpackaging of the shirts. Gina Bowman, Spencer Gifts' merchandise manager,
also testified that "[i]t is not uncommon for suppliers to ship less than the ordered number of a
certain item, or even fail to ship any quantity of an ordered item at all." (Dckt. 156 at Ex. B).
- 25 -
from their understanding of the available evidence. A specific example illustrates this point.
Plaintiffs earlier claimed that Purchase Order 554966 proves that Spencer Gifts lied about the
number of shirts in its inventory. (Dckt. 54 at 10). According to Plaintiffs, the purchase order
shows that Spencer Gifts ordered at least 221 shirts, but the corresponding purchase order
information from SPS allegedly shows that Spencer Gifts actually received 444 shirts as part of
order 554966. In response, Defendants point out that SPS's Rule 30(b)(6) witness testified that
SPS's data do not provide information as to what was shipped, thereby undermining an essential
part of Plaintiffs' claim. (Dckt. 198 at Ex. 16). They also state that Plaintiffs failed to distinguish
between purchase orders and cancellation orders and that they aggregated the numbers in some
of these different types of orders. In support, Defendants have provided an exceptionally
detailed analysis of the entire history of purchase order 554966. This account attempts to
demonstrate that Defendants made at least eight subsequent changes to the original order and
eventually cancelled it entirely. In addition, Defendants have also carefully described what they
believe to be the proper method of analyzing all their inventory and accounting data.
While the Court does not find that Defendants' interpretation of their purchase records is
correct, Plaintiffs have not provided any meaningful response to it or explained why further
discovery would reveal additional relevant data. At a minimum, Plaintiffs must present some
argument as to why Defendants' understanding of their own records is incorrect and explain why
some other means of making sense of the data indicates that further discovery is required. In the
absence of such an explanation, Plaintiffs' motions are denied on this issue.
b.
PeopleSoft
- 26 -
Spencer Gifts uses the financial accounting program, PeopleSoft, to record accounts
payable and receivable for all of its merchandise, including the "Sorry Boys" shirts. (Dckt. 198 at
Ex. 4). Plaintiffs argue that the PeopleSoft material produced as a result of the two forensic
exams is insufficient. In support, they cite Mr. Ness's generalized conclusion that Defendants
did not provide all of the PeopleSoft data that Plaintiffs requested. (Dckt. 156 at Ex. M). As
before, however, Ness's declaration does not state what specific material is missing. Plaintiffs'
second supplemental motion is no more helpful, stating only that there are unexplained gaps and
data that do not match. (Dckt. 156 at 3).
As with the SIRIS issue, these claims fail to account for Defendants' explanation of their
accounting records. Ms. Arena testified that Defendants ran a query on the PeopleSoft database
to extract payment information for the relevant SKUs. The data that resulted from this search
only extended from May 18, 2010 to the point Defendants stopped buying the "Sorry Boys"
shirts in August 2010 because Spencer Gifts did not use PeopleSoft for purchase orders before
May 18, 2010. (Dckt. 198, Ex. 4 at 4-5). Moreover, Spencer Gifts does not keep revenue
information in PeopleSoft on a SKU-by-SKU basis. The Court notes that Mr. Ness
acknowledged in his deposition that not all companies that use PeopleSoft keep such records on
that basis. (Dckt. 201, Ex. A at 122).
Instead of using PeopleSoft, Spencer Gifts keeps revenue data on a SKU-by-SKU basis
in its Auditworks system. Plaintiffs claim in their second supplemental motion that Defendants
failed to provide their complete Auditworks data. Plaintiffs provide almost no argument in their
brief as to why the Auditworks production is incomplete, however, and overlook that issue
entirely in their last reply. The Court cannot address arguments that have not been presented.
- 27 -
The record shows that Defendants produced their Auditwork documents to Plaintiffs on two
different occasions.
Plaintiffs appear to support their argument by relying on an affidavit of a former Spencer
Gifts store manager, Angelia Merza, to claim that Defendants had a "'back office' auditing
system" prior to 2007 that tracked changes on a SKU-by-SKU basis. It is not entirely clear what
this claim has to do with PeopleSoft or Auditworks, but Plaintiffs' reliance on Ms. Merza's
affidavit to show the existence of a "'back office' auditing system" for invoices is misplaced.
Ms. Merza stopped working for Spencer Gifts in May 2007, and she does not mention
PeopleSoft or any other "auditing system." Plaintiffs claim that Merza shows that Spencer Gifts
could track "changes via invoice in 2007 with SKU by SKU detail." (Id. at 8). This is not
entirely accurate. She stated that in 2007 she could "access historical data" and "drop ship
invoices" on this basis, but she made no mention of an auditing system and gave no testimony
concerning how Spencer Gifts' database maintained the company's revenue. Ms. Merza did not
claim to have knowledge about Spencer Gifts' company-wide procedure for keeping records, and
her testimony falls short of being evidence that Spencer Gifts has withheld discoverable
evidence from Plaintiffs. Plaintiffs' motions are denied on this issue.
c.
FedEx, Emails, and Internet Data
Plaintiffs also asked Defendants to produce all FedEx records in their possession that
relate to the "Sorry Boys" shirts. Although this category does not necessarily fall within the
"financial and numerical information" specified in the Court's June 14,2011 order, Defendants
did so. This production did not include all the information sought by Plaintiffs because
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Defendants do not keep such records for more than one year in the ordinary course of business.
Plaintiffs contended at the last hearing that the FedEx records will show what Spencer Gifts
shipped despite the fact that FedEx shipping slips do not state the contents of the package being
sent. According to Plaintiffs, the shipping slips also contain an invoice number that can be
cross-checked with other data to reveal shipments, order changes, or cancellations.
This argument fails to show that further discovery is necessary on this issue. Defendants
have already produced their purchase order changes, and Plaintiffs provide no reason to assume
that cross-referencing FedEx records would reveal any information that has not already been
disclosed. Plaintiffs' second supplemental motion is based on a claim that Defendants can easily
contact FedEx to obtain the records, but that argument is equally applicable to Plaintiffs
themselves. As Defendants have represented that they have turned over all the FedEx records
they have, Plaintiffs' motions are denied on this issue.
Plaintiffs contend that Defendants have also withheld data concerning sales of the
"Sorry Boys" shirts through Spencer Gifts' website. In support, Plaintiffs point to a receipt for a
December 4, 2010 internet sale. The receipt identifies the product as SKU 02205854. Plaintiffs
claim that the document that Defendants produced showing internet transactions does not
cross-reference a sale on that date for SKU 02205854. (Dckt. 77 at 7). In response, Defendants
contend that Plaintiffs have once again misunderstood the nature of Defendants' records.
Spencer Gifts' senior inventory director, Nicholas Campanale, testified that all internet orders for
"Sorry Boys" shirts are assigned SKU 02205584 as a default number no matter what product is
actually ordered. Only when the shirt is shipped does the order reflect the item's true SKU.
- 29 -
Mr. Campanale attached an exhibit to his declaration showing that Defendants had accounted for
the internet order relied on by Plaintiffs. (Dckt. 156 at Ex. H).
Plaintiffs also rely on Mr. Ness's testimony that the produced documents show that less
than 1% of Spencer Gifts' sales were made through the internet and that such a low figure was
"surprising." (Dckt. 201, Ex. A 116). Defendants explained at the last hearing that the 1% figure
represented the totality of internet sales because Spencer Gifts is primarily a store-based
company. This may be a lower figure than would be the case for other companies, but no
evidence suggests that Defendants have misrepresented the nature of Spencer Gifts' business
model or that additional documents concerning internet sales exist. Plaintiffs' motions are denied
on this point.
Finally, Plaintiffs re-assert an expanded version of their arguments concerning
unproduced emails related to the "Sorry Boys" shirts. This claim goes beyond the narrower
scope of the motion to compel discussed above to include "all relevant emails." (Dckt. 156 at 4).
Plaintiffs claim in general terms that it belies logic to believe that no additional emails exist.
(Dckt. 201 at 10). Instead of evidence, however, Plaintiffs point to Ness's deposition testimony
that Defendants chose to "cut off the end date" of the emails that were produced. (Id., Ex. A at
179). As Defendants have repeatedly explained, however, they stopped buying the "Sorry Boys"
shirts at the end of August 2010 and did not preserve pre-lawsuit emails. Defendants had no
duty to preserve emails before the time this suit was filed, which coincides with the cessation of
"Sorry Boys" purchases. This fact, combined with Defendants' representation that they have
searched all their databases for emails that are responsive to Plaintiffs' request for emails,
- 30 -
persuades the Court that no evidence supports Plaintiffs' claim that Defendants are withholding
emails. Plaintiffs' motions are denied on this issue.
III. Conclusion
For all these reasons, the Court finds that Plaintiffs have not shown any ground for
ordering Defendants to conduct an additional forensic exam of their database or that Plaintiffs
should be allowed to search any other electronically-stored financial and numerical information
possessed by Defendants. Plaintiffs have not demonstrated a reason for concluding that
Defendants withheld discoverable evidence, obstructed the discovery process, or violated a court
order. As Defendants have represented that they have produced all the relevant evidence in their
possession, they will not be allowed to use any document that has not already been produced in
any subsequent proceeding in this case, absent a further order on this issue. Accordingly,
Plaintiffs' motion to compel [Dckt. 140], first supplemental motion for sanctions [Dckt. 77], and
second supplemental motion for sanctions [Dckt. 156] are denied.
ENTER ORDER:
Dated: February 14, 2012.
__________________________________________
MARTIN C. ASHMAN
United States Magistrate Judge
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