CCT Enterprises LLC v. Kriss USA Inc

Filing 49

OPINION AND ORDER: Kriss motion to exclude 41 is GRANTED in part, in that the Court will reopen discovery for the limited purpose of allowing Kriss to conduct reasonable follow-up discovery into the Modified PO, and will require CCT to reimburse K riss for the reasonable expenses it incurs in conducting that discovery. Kriss is ORDERED to file a notice, by April 11, 2016, itemizing the reasonable expenses it expects to incur through that discovery. CCT may file any response by April 18, 2016. The Court will then approve the reasonable expenses and reopen discovery for this limited purpose unless CCT chooses to withdraw the document. Kriss is also ORDERED to submit an accounting of the reasonable attorneys fees it incurred in bringing thismotion, by April 11, 2016, with any response by CCT due April 18, 2016. Signed by Judge Jon E DeGuilio on 3/31/2016. (rmn)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
CCT ENTERPRISES, LLC,
Plaintiff,
v.
KRISS USA, INC.,
Defendant.

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Case No. 1:14-CV-249 JD

OPINION AND ORDER
Now before the Court is defendant Kriss USA, Inc.’s motion to exclude material
produced after discovery. [DE 41]. The relevant facts have been set forth and discussed at length
in the party’s filings and during the telephonic hearing on the motion. In short, this is a
commercial dispute between plaintiff CCT Enterprises, LLC, which manufactures component
parts used in firearms, and Kriss USA, Inc., which assembles and sells firearms. Around January
2013, the parties entered an agreement for CCT to manufacture various component parts for
Kriss. The terms of the parties’ agreement were spread over various purchase orders, quotes, and
written and verbal communications. This arrangement continued for over a year, when Kriss
terminated the relationship and purported to withdraw its pending purchase orders. CCT then
filed this suit for breach of contract and promissory estoppel, claiming that Kriss was not entitled
to cancel the orders.
A central point of contention in this matter is what terms the parties agreed to relative to
the cancellation of any purchase orders. Some purchase orders contained a caveat stating, “Either
party can cancel this purchase order at any time with a 30-day advance notification.” [DE 42-1].
The parties also had discussions relative to the cancellation provisions, and as to some of the
purchase orders, may have agreed to cross off the caveat. At a deposition held the day prior to

the close of discovery, a CCT employee testified that as to the very first purchase order between
the parties, he had discussed the cancellation provision with Kriss, and that pursuant to those
discussions, he crossed off the cancellation provision and sent the purchase order back to Kriss.
However, no such document had been produced in discovery, though it would have been
responsive to document requests Kriss propounded over a year earlier. CCT was unable to locate
the document during the deposition, but after subsequent searching, CCT produced the modified
purchase order to Kriss on December 14, 2015, shortly after the close of discovery. Consistent
with the employee’s testimony, the cancellation provision on that document had been crossed
off.
Kriss then filed the present motion to exclude the document under Rule 37(c), arguing
that CCT failed to timely produce the document during discovery and that Kriss had been
prejudiced by its inability to conduct any follow-up discovery on the document, given the close
of discovery. Rule 37(c) states:
If a party fails to provide information or identify a witness as required by Rule 26(a)
or (e), the party is not allowed to use that information or witness to supply evidence
on a motion, at a hearing, or at a trial, unless the failure was substantially justified
or is harmless. In addition to or instead of this sanction, the court, on motion and
after giving an opportunity to be heard:
(A) may order payment of the reasonable expenses, including attorney's fees,
caused by the failure; [or]
....
(C) may impose other appropriate sanctions . . . .
Fed. R. Civ. P. 37(c). “The exclusion of non-disclosed evidence is automatic and mandatory
under Rule 37(c)(1) unless non-disclosure was justified or harmless.” Musser v. Gentiva Health
Services, 356 F.3d 751, 758 (7th Cir. 2004). However, the Seventh Circuit has warned that “‘in
the normal course of events, justice is dispensed by the hearing of cases on their merits.’” Id. at

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759 (quoting Salgado v. General Motors Corp., 150 F.3d 735, 740 (7th Cir. 1998)). Thus, the
Seventh Circuit “urge[s] district courts to carefully consider Rule 37(c), including the alternate
sanctions available,” before excluding evidence that may affect a case’s outcome. Id.
The Court concludes that sanctions are justified under these circumstances, but that
instead of excluding the document, the appropriate course is to reopen discovery for the limited
purpose of allowing Kriss to conduct any follow-up discovery necessary as to the Modified PO,
and to require CCT to pay the reasonable costs of that discovery. To begin with, CCT argues that
its failure to produce the document earlier was an honest oversight, and that it has diligently
discharged its discovery obligations. The Court has no reason to suspect subjective bad faith by
CCT, but that explanation does not undo the prejudice that could accrue to Kriss from the
untimely production of the document, or excuse CCT from responsibility for failing to produce
the document earlier. Nor has CCT been able to explain why this document was not produced
earlier if its search for responsive documents was as diligent as it claims, particularly since this is
a document upon which CCT’s case is founded. CCT had an obligation to timely produce the
document as requested, and it should be CCT that bears the cost for its failure to do so. Fautek v.
Montgomery Ward & Co., Inc., 96 F.R.D. 141, 145 (N.D. Ill. 1982) (“Parties are required to
respond to requests to produce in a complete and accurate fashion. This in turn requires that
parties take reasonable steps to ensure that their responses to requests to produce are complete
and accurate. Ultimate production of the material in question does not absolve a party where it
has failed to produce the material in a timely fashion.”).
That said, the lack of bad faith does weigh against excluding the document entirely
instead of permitting it to cure the prejudice. In that vein, the Court believes that the prejudice to
Kriss can be appropriately remedied by re-opening discovery and requiring CCT to bear the costs

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of that discovery. In arguing that exclusion is the appropriate remedy, Kriss relies heavily on
Davis v. Lakeside Motor Company, Inc., No. 3:10-cv-405, 2014 WL 1316945 (N.D. Ind. Mar.
31, 2014). However, the circumstances in that case were much more aggravating than the
circumstances here, and warranted a more severe sanction. In Davis, the documents in question
were disclosed after the case had been pending for over three years, discovery had been closed
for over a year, dispositive motions had already been ruled on, and a trial date had already been
set. The documents also only came to light when the defendant produced them among its
proposed trial exhibits, and some of them had been in counsel’s possession for over two years
before they were produced. The circumstances of the disclosure and other instances of
misconduct by the defendant also reflected a general indifference to the party’s discovery
obligations. Under those circumstances, the Court concluded that reopening discovery at such a
late stage and further delaying trial was not appropriate, so it excluded the documents. Here,
however, this case is not nearly as old, and a trial date has not yet been set. The document’s
existence was also disclosed during the discovery period, and the document itself was produced
only shortly thereafter. And as just noted, the circumstances here are not indicative of any bad
faith. Therefore, the same result as in Davis is not compelled here.
Imposing no sanction at all would leave Kriss unfairly prejudiced, though, as Kriss would
be deprived of the opportunity to conduct discovery into the document and its authenticity. To
conduct adequate inquiry into the document, it appears reasonable for Kriss to re-depose at least
Mr. Nagel and Mr. Stevenson, the two individuals whose communications allegedly led to the
modification. Kriss has already conducted depositions of both of those individuals, and if CCT
had timely produced the document in question, Kriss could have fully questioned those witnesses
about the document with little expense. But to re-depose them, it will have to schedule, prepare

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for, and attend the additional depositions and also retain court reporters. Accordingly, the Court
believes that it is appropriate to require CCT to reimburse Kriss for those attorneys’ fees and
costs, which would not have been incurred had the document been timely produced. Kriss also
raised the possibility of retaining an expert to analyze the document’s authenticity, which Kriss
asserts has been called into question by the circumstances of its production. To the extent such
an analysis is even feasible and would be reasonable under the circumstances, Kriss may seek
recovery for those expenses also. Kriss may also seek recovery of its expenses in propounding
any additional written discovery that may be necessary. As discussed at the telephonic hearing,
however, the Court will require Kriss to submit an estimate of the reasonable expenses it believes
will be necessary to conduct the appropriate discovery. Should CCT wish to withdraw the
document rather than incur those expenses, it may do so.
Finally, Kriss also seeks an award of attorneys’ fees that it incurred in bringing this
motion. CCT’s only response specific to that request was that it should be denied because Kriss
failed to adequately confer with CCT before filing the motion, as required under the local rules.
Though the Federal Rules of Civil Procedure do not require parties to confer before filing a
motion to exclude under Rule 37(c), Local Rule 37-1(a) imposes such a requirement on “any
discovery motion.” However, the Court finds that Kriss adequately met that requirement. Prior to
filing its motion, Kriss sent a letter to CCT requesting that it agree to the relief that Kriss sought
in its motion, and detailing the factual support for that request. CCT responded by declining to
agree. Under the circumstances, further discussion would likely have been unfruitful, as CCT
was unlikely to withdraw the document voluntarily or agree to pay Kriss’ expenses if discovery
was reopened. Accordingly, the Court will award Kriss its reasonable expenses in bringing the
motion, as authorized by Rule 37(c)(1)(A).

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In summary, Kriss’ motion to exclude [DE 41] is GRANTED in part, in that the Court
will reopen discovery for the limited purpose of allowing Kriss to conduct reasonable follow-up
discovery into the Modified PO, and will require CCT to reimburse Kriss for the reasonable
expenses it incurs in conducting that discovery. Kriss is ORDERED to file a notice, by April 11,
2016, itemizing the reasonable expenses it expects to incur through that discovery. CCT may file
any response by April 18, 2016. The Court will then approve the reasonable expenses and reopen
discovery for this limited purpose unless CCT chooses to withdraw the document. Kriss is also
ORDERED to submit an accounting of the reasonable attorneys’ fees it incurred in bringing this
motion, by April 11, 2016, with any response by CCT due April 18, 2016.
SO ORDERED.
ENTERED: March 31, 2016

/s/ JON E. DEGUILIO
Judge
United States District Court

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