Peerless Industries, Inc. v. Crimson AV, LLC

Filing 181

Opinion and Order Signed by the Honorable Joan H. Lefkow on 3/22/2013:Mailed notice(mad, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

PEERLESS INDUSTRIES, INC.,

Plaintiff,
v.
CRIMSON AV LLC, and VLADIMIR
GLEYZER,
Defendants.

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No. 11 C 1768
Hon. Joan H. Lefkow

OPINION AND ORDER
Presently before the court are objections filed by defendants, Crimson AV, LLC
(“Crimson”) and Vladimir Gleyzer (“Gleyzer”), to Judge Cox’s rulings on June 27, 2012,
January 8, 2013, and February 7, 2013.1 The objections relate to discovery motions filed by
plaintiff, Peerless Industries, Inc.’s (“Peerless”) [dkts. 102, 140, and 163]. For the foregoing
reasons, Crimson and Gleyzer’s objections are denied and Judge Cox’s rulings from June 27,
2012, January 8, 2013, and February 7, 2013 are affirmed.2

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Crimson and Gleyzer’s objections were timely filed within 14 days of Judge Cox’s respective
rulings and are properly before the court. See Fed. R. Civ. P. 72(a); 28 U.S.C. § 636(b)(1)(A).
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The court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1338, 1367 and
venue is proper under 28 U.S.C. §§ 1391(b) and 1400(b).

BACKGROUND
Peerless claims that Crimson and Gleyzer are liable based on their manufacture and sale
of television mounts.3 On May 23, 2007, Peerless entered into a supply agreement with
Sycamore Manufacturing Co., Ltd. (“Sycamore), a Chinese manufacturer. As of approximately
March 29, 2010, Peerless terminated the supply agreement with Sycamore. On May 20, 2010,
Crimson was incorporated as a limited liability company with the Illinois Secretary of State.
Gleyzer, who previously worked at Peerless, began working for Crimson on August 1, 2010 as
managing director after Sycamore’s president, Baohua “Tony” Jin, inquired if Gleyzer would be
interested in starting a company in the United States. Beginning in July 2010, Sycamore began
shipping audio-visual equipment to Crimson from China and Crimson began producing
television mounts for sale in the United States. Peerless alleges that Crimson, with the help of
Sycamore and Gleyzer, based the design of its television mounts on Peerless’s confidential
designs and drawings thus giving rise to its claim for damages.
On October 24, 2011, Judge Cox granted Peerless’s request to deem Sycamore
documents within Crimson’s control under Federal Rule of Civil Procedure 34, which requires a
party to products relevant documents in its possession, custody, or control when requested to do
so by another party. See Fed. R. Civ. P. 34; Dkt. 82. Peerless had sought from Crimson emails
and computer-aided design drawings of the accused products on Sycamore’s servers. Judge Cox,
noting that a sufficient relationship existed between Crimson, Sycamore, and Jin, found that
Peerless met its burden under Rule 34 in compelling Crimson to produce Sycamore documents.

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Peerless seeks damages for patent infringement, violation of the Illinois Trade Secrets Act, and
violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The court dismissed
Peerless’s claims for violation of the Illinois Trade Secrets Act and civil conspiracy. See Dkt. 110.

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Judge Cox found that Jin was a “principal of both Crimson and Sycamore, and that he
exercise[d] a considerable amount of financial and managerial control over both corporations.”
(Dkt. 82 at 2.)
On January 23, 2012, Peerless filed a motion to compel its third set of requests for
documents sent to Crimson and Gleyzer. On January 26, 2012, the parties agreed that Crimson
and Gleyzer would produce the documents by February 15, 2012. On that date, Crimson and
Gleyzer produced 5,000 pages of documents; however, Peerless argued that this production was
incomplete. On March 5, 2012, Peerless filed a motion for sanctions, which on March 13, 2012,
Judge Cox granted in part and denied in part. Judge Cox instructed Crimson and Gleyzer to
produce the remaining documents by March 27, 2012. Peerless again argued that Crimson and
Gleyzer’s document production was incomplete and filed a renewed motion for sanctions.
On June 27, 2012, Judge Cox granted in part Peerless’s motion for sanctions finding that
Crimson and Gleyzer’s production was incomplete. Judge Cox ruled that Crimson and Gleyzer
were to produce within 14 days “all documents from Sycamore, all relevant documents from Mr.
Gleyzer’s personal files, complete metadata for all emails, all documents relating to plaintiff’s
documents requests Nos. 2, 3, 5, 7, 9–13, 18, 19, 22, 27–30, 32, and 33, and a complete and
unmodified collection of detail and assembly drawings.” (Dkt. 100 at 6.) Judge Cox
additionally awarded costs to Peerless in connection with bringing its three prior motions for
sanctions finding that “defendants have habitually failed to meet deadlines and to heed the
instructions of the Court.” (Id.)
On July 11, 2012, Crimson and Gleyzer filed a combined motion to reconsider and
objection to Judge Cox’s June 27, 2012 order. They argued that they produced all of the

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documents relevant to Peerless’s request in their possession. In addition, they provided
declarations from Gleyzer and Jin. Gleyzer stated that he provided electronic files and produced
hard drives of the requested Crimson computers to an e-discovery consultant for imaging and
preservation although he was not involved in performing the searches for documents from these
computers. Jin stated that he had provided documents or electronic files and technical drawings;
Sycamore did not keep all versions of every drawing; and that they could not find emails
between Gleyzer and Sycamore prior to Gleyzer being hired by Crimson. On July 19, 2012,
Judge Cox denied the motion for reconsideration of her June 27, 2012 order ruling that “[i]f
defendant does not have further production, then the defendant is instructed to state as much
under verification.” (Dkt. 104.)
On November 14, 2012, Peerless deposed Gleyzer, who was Crimson’s Rule 30(b)(6)
witness. During the deposition, Gleyzer was unable to answer questions about Sycamore’s
document production and retention for purposes of this litigation. Peerless filed a renewed
motion for sanctions based on Crimson and Gleyzer’s failure to produce Sycamore’s documents.
Peerless also filed a motion to compel the deposition of Jin in the Northern District of Illinois.
On January 8, 2013, Judge Cox granted Peerless’s motions ruling that Crimson and Gleyzer
failed to show that they adequately searched for the documents Peerless had requested. Judge
Cox also found that Jin is a managing agent of Crimson for purposes of Rule 30(b)(1) and that
Peerless could compel his deposition in the Northern District of Illinois. Crimson and Gleyzer
subsequently filed a motion for a protective order requesting that Jin’s deposition proceed by
video conference; however, on February 7, 2013, Judge Cox denied that request.

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LEGAL STANDARD
Rule 72(a) governs a district court’s review of a magistrate judge discovery-related
decision. Fed. R. Civ. P. 72(a); Banks v. Enova Fin., No. 10 C 4060, 2012 WL 5995729, at *2
(N.D. Ill. Nov. 30, 2012). Under Rule 72(a), the district court reviews a magistrate judge’s
ruling on a non-dispositive matter under a “clearly erroneous” standard of review. Fed. R. Civ.
P. 72(a); 28 U.S.C. § 636(b)(1)(A). Under the clear error standard, the district court may
overturn a magistrate judge’s determination only if the district court “is left with the definite and
firm conviction that a mistake has been made.” Weeks v. Samsung Heavy Indus. Co., 126 F.3d
926, 943 (7th Cir. 1997). “In general, a magistrate judge’s choice between two permissible
views of the facts will not meet the clearly erroneous standard.” Banks, 2012 WL 5995729, at
*2; see also Webb v. CBS Broadcasting, Inc., No. 08 C 6241, 2011 WL 842743, at *2 (N.D. Ill.
Mar. 8, 2011). A party “may obtain discovery regarding any matter that is relevant and not
privileged.” Semien Life Ins. Co. of N. Am., 436 F.3d 805, 813 (7th Cir. 2006) (citing Fed. R.
Civ. P. 26(b)(1)). Rule 34 provides that “a party may request, among other things, the
production of documents that ‘constitute or contain matters within the scope of Rule 26(b)’ and
are in the custody or control of another party.” Gile v. United Airlines, Inc., 95 F.3d 492, 495
(7th Cir. 1996) (quoting Fed. R. Civ. P. 34(a)).
ANALYSIS
I.

June 27, 2012 Order
Crimson and Gleyzer contend that Judge Cox made the following incorrect findings in

her June 27, 2012 order: (1) Crimson and Gleyzer failed to identify a single document that came
from Sycamore; (2) they failed to provide all relevant documents from Gleyzer’s personal files;

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(3) they did not produce complete metadata; (4) they failed to specifically answer certain
document requests made by Peerless; and (5) they failed to produce detail drawings until the day
Peerless filed its third motion for sanctions. They also rely on Gleyzer and Jin’s declarations to
show that they complied with Peerless’s discovery requests. See Dkts. 102-1, 102-2.
First, Crimson and Gleyzer argue that Judge Cox erred in finding that documents
produced from Sycamore were not identifiable. For example, they note that emails from
Sycamore are identifiable by email address and detail drawings produced by Sycamore are
clearly identified in the lower right hand corner. The Sycamore documents also contain Chinese
characters. Peerless contends that Crimson and Gleyzer failed to identify, through bates
numbers or metadata, which documents came from Sycamore. Crimson and Gleyzer argue that
Peerless could deduce which documents came from Sycamore rendering explicit identification
unnecessary. Judge Cox’s determination that Crimson and Gleyzer failed to adequately specify
the Sycamore documents is not clearly erroneous. Peerless requested that Crimson and Gleyzer
note which documents came from Sycamore and they failed to do so.
Second, Crimson and Gleyzer also provide that they produced personal files from
Gleyzer’s computer; however, Peerless argues that the production of these documents was
deficient. Crimson and Gleyzer rely on Gleyzer’s declaration, which provided that he produced
the hard drives of the requested Crimson computers to an e-discovery consultant for imaging and
preservation. (Dkt. 102-2.) While he was not involved in the search performed on these
computers, Gleyzer believed that responsive documents would be located on the hard drives.
This declaration was not provided until after Judge Cox issued her June 27, 2012 order.
Moreover, it does not indicate that Crimson and Gleyzer searched the hard drives and that all

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responsive documents from the computers were produced. Accordingly, Judge Cox did not err
in finding that Crimson and Gleyzer failed to produce Gleyzer’s personal files.
Third, Crimson and Gleyzer argue that they produced all of the metadata requested by
Peerless, but Peerless contends that Crimson and Gleyzer failed to produce all of the required
metadata and in the correct format. Peerless notes that Crimson and Gleyzer did not produce
author information, information about whether the file was stored, and revision histories for
computer-aided designs. In addition, Crimson and Gleyzer’s production process changed the
format in which the metadata was produced. Based on the deficiencies identified by Peerless,
Judge Cox did not err in ruling that Crimson and Gleyzer’s production was also insufficient.
Fourth, Crimson and Gleyzer argue that they produced all of the design drawings. They
also rely on Jin’s declaration, which was submitted after Judge Cox’s June 27, 2012 ruling. Jin’s
declaration, however, notes that “Sycamore does not keep all versions of every drawing.
Superseded versions get destroyed periodically, with only the current version being retained.”
(Dkt. 102-1.) Jin’s declaration does not conclusively answer whether all the design drawings
have been produced. It merely provides that some drawings were destroyed while the most
current version was retained. Accordingly, Judge Cox did not err in finding that Crimson and
Gleyzer failed to produce the requested design drawings.
Last, Crimson and Gleyzer argue that Peerless cannot identify the specific documents
that they have failed to produce. In addition, they contend that the declarations of Gleyzer and
Jin demonstrate that they have searched for the documents requested by Peerless. The
declarations, as noted by Peerless, do not definitively state that all requested documents have
been produced. Furthermore, Crimson and Gleyzer have not produced the verification that Judge

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Cox requested. Judge Cox thus did not err in entering sanctions against Crimson and Gleyzer for
failing to produce the requested documents in her June 27, 2012 order.
II.

January 8, 2013 Order
A.

Sycamore’s Documents

Crimson and Gleyzer contend that Judge Cox erred in granting Peerless’s renewed
motion for sanctions after Gleyzer’s deposition. During his deposition, Gleyzer was unable to
answer questions regarding Sycamore’s computer and backup systems, what searches were
performed, which employees would have relevant information, whether a document hold had
been implemented, or whether employees at Sycamore were contacted regarding Peerless’s
document requests. Based on an earlier finding “of the control or ‘close coordination’ between
the two companies,” (Dkt. 132 at 7), Judge Cox ruled that Crimson and Gleyzer’s “hands-off”
approach to the document production, which placed their burden to collect documents from
Sycamore on an outside vendor, was insufficient. Id.
Crimson and Gleyzer argue that Gleyzer was Crimson’s Rule 30(b)(6) witness, and as
such, could not answer questions about how Sycamore retained and collected documents. Judge
Cox previously ruled that a sufficient relationship existed between Crimson, Sycamore, and Jin,
finding that Peerless met its liberal burden under Rule 34 in compelling Sycamore documents
from Crimson. (Dkt. 82.) Gleyzer’s deposition, moreover, revealed a disconnect between
Crimson and Sycamore for purposes of responding to Peerless’s document requests. Jin and
Gleyzer’s subsequent declarations do nothing to show that Crimson and Gleyzer have fully
complied with Peerless’s document requests. Judge Cox informed Crimson and Gleyzer that this
problem could be obviated if they provided a verification that no additional responsive

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documents exist. But they have failed to do so and rely on their previous declarations, which do
not pass muster. Cf. In re Subpoena Duces Tecum to Ingeteam, Inc., No. 11-MISC-36, 2011 WL
3608407, at *1 (E.D. Wis. Aug. 16, 2011) (“[I]n the context, of either Rule 34 (production of
documents by party to litigation) or Rule 45 (production of documents by third-parties to
litigation), relevant documents cannot be hidden by a parent corporation overseas, even though
the court does not have personal jurisdiction over the foreign parent.”). Accordingly, Judge Cox
did not err in granting Peerless’s renewed motion for sanctions after Gleyzer’s recent deposition.
B.

Deposition of Jin

In her January 8, 2013 order, Judge Cox also ruled that Jin was Crimson’s managing
agent for the purpose of Rule 30(b)(1) and that he could be deposed in the Northern District of
Illinois. Crimson and Gleyzer argue that Jin was not Crimson’s managing agent and that he
should not have to bear the burden of traveling from China to the Northern District of Illinois for
his deposition.
Under Rule 30(b)(1), a party is entitled to identify and notice a deposition for a managing
agent. Fed. R. Civ. P. 30(b)(1); Playboy Enter. Int’l., Inc. v. Smartitan (Singapore) Pte. Ltd.,
No. 10 C 4811, 2011 WL 5529928, at *1 (N.D. Ill. Nov. 14, 2011). Courts look to the following
factors to determine whether an individual is a managing agent: “(1) whether he has general
powers allowing him to exercise judgment and discretion in corporate matters; (2) whether he
can be relied on to testify, at the corporation’s request, in response to the discovery proponent’s
demands; (3) whether there are any other employees who have more authority than the
individual in regard to information concerning the subject matter at issue in the case; (4) his
general responsibilities respecting the matters involved in this litigation; and (5) whether he can

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be expected to identify with the interests of the corporation.” Murata Mfg. Co. v. Bel Fuse, Inc.,
242 F.R.D. 470, 476 (N.D. Ill. 2007).
Judge Cox previously ruled that Jin was a “principal of both Crimson and Sycamore, and
that he exercise[d] a considerable amount of financial and managerial control over both
corporations.” (Dkt. 82 at 2.) In finding that Jin is a managing agent of Crimson, Judge Cox
concluded that Jin satisfied nearly every factor of the aforementioned test. Namely, Judge Cox,
relying on Gleyzer’s testimony, found that,
(1) ‘Sycamore is essentially Crimson,’ (2) ‘[Mr.] Jin is the center of the Crimson
entity,’ (3) Sycamore pays for Crimson’s inventory, (4) Sycamore pays for
Crimson’s operating expenses, (5) Crimson and Mr. Jin jointly decide what products
Crimson will sell, (6) Crimson does not send Sycamore purchase orders to receive
products, and (7) Mr. Jin pays Mr. Gleyzer.
(Dkt. 132, at 3; Dkt. 82 at 2.)
Crimson and Gleyzer contend that Peerless has not clearly established that Jin exercises
judgment and discretion regarding Crimson’s corporate matters.4 Peerless, however, need not
make the showing advocated by Crimson and Gleyzer. Peerless need only demonstrate “that
there is at least a close question as to whether the witness is a managing agent” to compel Jin’s
deposition. Malletier v. Dooney & Bourke, Inc., No. 04 Civ. 5316, 2006 WL 3476735, at *14
(S.D.N.Y. Nov. 30, 2006) (internal quotation marks omitted). Peerless has made this showing,
noting for example, that Jin has provided three declarations in connection with this lawsuit and

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Crimson and Gleyzer additionally argue that Jin’s role in the present lawsuit is not a sufficient
basis for seeking his deposition, and that Peerless and Sycamore are currently arbitrating the same
allegations Peerless leveled against Crimson and Gleyzer in the present lawsuit. Crimson and Gleyzer
argue that allowing Jin’s deposition in the case would be an abuse of process considering the pending
arbitration between Peerless and Sycamore. Despite the ongoing dispute between Peerless and Sycamore,
the close relationship between Jin, Sycamore, and Crimson make a deposition of Jin as a managing agent
of Crimson under Rule 30(b)(1) appropriate.

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that Crimson’s interests are aligned with those of Sycamore. Based on Gleyzer’s testimony and
Peerless’s evidence, the relationship between Jin, Sycamore, and Crimson is intertwined such
that Judge Cox did not err in concluding that Jin is a managing agent of Crimson for purposes of
Rule 30(b)(1) and compelling his deposition in the Northern District of Illinois.
III.

February 7, 2013 Order
Jin currently lives in China. In their objection to Judge Cox’s January 8, 2013 ruling,

Crimson and Gleyzer requested that Jin’s deposition proceed via video conference should he be
deemed to be a managing agent of Crimson. Crimson and Gleyzer, however, did not offer this
conciliation to Judge Cox before she issued her January 8, 2013 order. Subsequently, they filed
a motion for a protective order to allow Jin’s deposition to proceed via video conference at a
mutually agreeable time. Peerless notes, however, that Chinese law prohibits Jin’s deposition
from proceeding in China without approval from the government of the People’s Republic of
China.5 Absent such approval, participants in the deposition could be subject to imprisonment.
In light of this authority, Judge Cox did not err in denying Crimson and Gleyzer’s request that
the deposition proceed via video conference in China. Accord Fausto v. Credigy Servs. Corp.,
251 F.R.D. 427, 430 (N.D. Cal. 2008) (“The [plaintiffs] argue persuasively that there is good
cause to hold these deposition in the United States rather than Brazil: according to the U.S.
Department of State, it apparently is illegal for American lawyers to take depositions in Brazil
and they do so at risk of imprisonment.”).

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Peerless cites to a bulletin from the United States Department of State titled “China Judicial
Assistance,” which provides in relevant part that “China does not permit American attorneys in China to
take depositions for use in foreign courts. Participation in such activity could result in the arrest,
detention or deportation of the American attorneys and other participants.” (Dkt. 158 at 12.)

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Alternatively, Crimson and Gleyzer argue that Jin’s deposition should proceed via video
conference at a location closer to Jin and identify Taiwan as a potential venue.6 In support,
Crimson and Gleyzer also submit a declaration from Jin who states that traveling to Chicago will
entail substantial costs and require more than 30 hours of travel. (Dkt. 144-1.) Jin also states
that his work requires him to be in China and that traveling to the United States for his
deposition will cause a hardship to him and his business. (Id.) “[C]ourts have great discretion in
designating the location of taking a deposition.” Mintel Int’l Grp., Ltd. v. Neergheen, No. 08 C
3939, 2008 WL 4148524, at *1 (N.D. Ill. Sep. 3, 2008). A presumption exists that a managing
agent under Rule 30(b)(1) should be deposed in the district of the corporation’s principal place
of business. See, e.g., In re Outsidewall Tire Litig., 267 F.R.D. 466, 471 (E.D. Va. 2010) (“[A]
foreign corporation’s Rule 30(b)(6) and managing agent witnesses should presumptively be
deposed in the district of the corporation’s principal places of business.”).
In considering the hardship that Jin contends he will suffer, the court is not convinced
that Judge Cox’s ruling that Jin appear for a deposition in the Northern District of Illinois was
erroneous. As noted by Peerless, Jin will have to travel outside of China for the deposition
regardless of where it takes place. Although Jin contends that traveling for the deposition will
render a hardship on him and his business, he is a managing agent of Crimson, which is located
in Illinois as are its attorneys and the attorneys for Peerless. Jin has not provided a sufficient
basis to overcome the presumption of having the deposition take place in the Northern District of

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Because Crimson and Gleyzer did not present Taiwan as an alternative venue in their objection
to Judge Cox’s February 7, 2013 order, it was not properly preserved for this court’s review. See Fed. R.
Civ. P. 72(a). Still, to streamline this process, the court will consider the argument.

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Illinois. Accordingly, Crimson and Gleyzer’s objection to Judge Cox’s ruling denying their
request for a protective order is denied.
CONCLUSION AND ORDER
Crimson and Gleyzer’s objections to Judge Cox’s June 27, 2012, January 8, 2013, and
February 7, 2013 rulings [dkts. 102, 140, and 163] are denied. The court affirms Judge Cox’s
well reasoned orders.

Dated: March 22, 2013

Enter: _____________________________
JOAN HUMPHREY LEFKOW
United States District Judge

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