NATURAL PACK, INC. et al v. SYNDICATE SALES, INC, et al
ORDER ON DEFENDANTS' MOTION FOR DEFAULT AND TO DISMISS WITH PREJUDICE - For the reasons stated above, the Court DENIES the Defendants' Sanctions Motion (Filing No. 179 ; Filing No. 181 ). However, Natural Pack is ORDERED to pay to the Defendants their reasonable expenses, including attorney's fees, caused by Natural Pack's failure to fulfill its discovery obligations and its failure to comply with the Court's discovery Order. It is the Court's expectation th at the parties can agree on an amount. Defendants may submit a statement of their reasonable expenses, including attorney's fees, for the Court's approval. Once approved, Natural Pack shall pay that amount within thirty (30) days. Natural Pack is forewarned that their failure to comply with this sanction, may result in additional sanctions. (See Order.) Signed by Judge Tanya Walton Pratt on 3/31/2021. (NAD)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NATURAL PACK, INC.,
SYNDICATE SALES, INC., DEL DEMAREE, JR., )
LAURA D. SHINALL, MICHAEL A. WILLIAMS, )
THOMAS C. LUNSFORD, GUY MARKUS, and
DAVID C. CLARK,
Case No. 1:20-cv-00219-TWP-DLP
ORDER ON DEFENDANTS' MOTION FOR DEFAULT
AND TO DISMISS WITH PREJUDICE
This matter is before the Court on the Motion for Default (Filing No. 179) and Motion to
Dismiss with Prejudice (Filing No. 181) ("Sanctions Motion") filed by Defendants Syndicate
Sales, Inc., Del Demaree, Jr., Laura D. Shinall, Michael A. Williams, Thomas C. Lunsford, David
C. Clark, and Guy Markus (collectively, "Defendants"). Plaintiff Natural Pack, Inc. ("Natural
Pack") initiated this action to assert claims for misappropriation of trade secrets, breach of contract,
trademark and trade dress infringement, and other related claims against the Defendants. After
Natural Pack failed to fulfill its discovery obligations, the Defendants filed their Sanctions Motion.
For the following reasons, the Court denies the Sanctions Motion but grants an award of costs
and attorney's fees to the Defendants.
To put it mildly, this case has been zealously litigated by both sides. On September 12,
2019, Natural Pack filed its original complaint in California state court, asserting nine claims
against the Defendants (Filing No. 73-1 at 2). On October 15, 2019, the Defendants removed the
case to the U.S. District Court for the Central District of California (Filing No. 1). The Defendants
then filed a motion to dismiss or in the alternative a motion to transfer venue, and the case was
transferred to this U.S. District Court for the Southern District of Indiana on January 21, 2020
(Filing No. 53 at 2).
Natural Pack's claims center on a non-disclosure agreement and the misappropriation of
trade secrets for stabilized moss and moss products. On June 22, 2020, the Court ruled on
Defendants' partial motions to dismiss and dismissed all the claims brought against Syndicate
Sales' officers and directors as well as all the claims that were preempted by the Uniform Trade
Secrets Act (Filing No. 149 at 23). The claims remaining after the dismissal Order are: (1)
violation of the Uniform Trade Secrets Act against Syndicate Sales and Markus, (2) breach of
contract against Syndicate Sales, (3) violation of the Lanham Act against Syndicate Sales, and (4)
violation of California statutory and common law trademark infringement against Syndicate Sales.
Natural Pack had also moved the Court for the issuance of a preliminary injunction on its
claims; however, on July 6, 2020, the Court denied Natural Pack's motion for preliminary
injunction (Filing No. 150). That same day, Natural Pack filed the operative Amended Complaint,
realleging the four surviving claims and adding Syndicate Sales' officers and directors as
defendants as to the Uniform Trade Secrets Act claim (Filing No. 153 at 9). The Defendants
promptly filed a motion to dismiss the sole claim against Syndicate Sales' officers and directors,
which the Court denied (Filing No. 238).
During the course of the litigation, the Defendants served numerous discovery requests
upon Natural Pack. On March 25, 2020, the Defendants served requests for production of
documents; on April 10, 2020, Natural Pack requested an extension of time to serve discovery
responses, and the Defendants agreed to the requested additional two weeks. Natural Pack again
requested an extension on May 1, 2020, this time for three weeks, and the Defendants again agreed.
On May 29, 2020, Natural Pack contacted the Defendants and requested another extension. The
Defendants agreed to another two-week extension for substantive responses.
On June 12, 2020, at the end of the last two-week extension, Natural Pack notified the
Defendants that despite its obligation to do so, it would not be able to provide substantive responses
to the Defendants' interrogatories. Natural Pack did not reference the delinquent document
production. Counsel for the parties conferred regarding the discovery dispute on June 19, 2020.
Natural Pack's counsel indicated he would provide responses to the Defendants' interrogatories on
July 1, 2020, but he could not provide a date by which document production would begin. When
interrogatory responses were provided, in several instances, Natural Pack's interrogatory responses
referred to documents that would be produced in response to the Defendants' request for production
of documents, rendering those interrogatory responses effectively meaningless.
On July 16, 2020, the parties, represented by counsel, participated in a discovery
conference with the Magistrate Judge (Filing No. 169). Natural Pack acknowledged that it violated
its discovery obligation, but provided no justification for its failure. Later that day, two of the
attorneys for Natural Pack filed a motion to withdraw their appearances, (Filing No. 164), which
was granted on July 17, 2020 (Filing No. 165). Also on July 17, 2020, the two remaining attorneys
for Natural Pack filed their motion to their withdraw appearances (Filing No. 166), which was
granted on July 22, 2020 (Filing No. 170), thereby leaving Natural Pack, a corporation, without
attorney representation. The Court ordered Natural Pack to obtain counsel within fourteen days
of the Order. Id. On August 4, 2020, Natural Pack filed a motion for additional time to obtain
counsel (Filing No. 172), which the Court granted (Filing No. 174).
At a July 16, 2020 discovery conference, the Magistrate Judge ordered Natural Pack to
fulfill its discovery obligations and respond to the Defendants' discovery requests. The production
of documents was ordered to begin by August 3, 2020, and to be completed by August 14, 2020.
Natural Pack did not comply with this Order.
Because Natural Pack failed to comply with the Court's discovery Order, and because it
failed to produce any documents for almost five months, on August 18, 2020, the Defendants filed
the pending Sanctions Motion (Filing No. 179; Filing No. 181). On August 26, 2020, Natural
Pack's present counsel entered their appearances (Filing No. 182; Filing No. 185). On September
3, 2020, the parties, again represented by counsel, participated in a discovery conference with the
Magistrate Judge (Filing No. 193).
On November 17, 2020, Natural Pack filed a notice with the Court of its discovery efforts
and production of documents (Filing No. 213). On December 8, 2020, discovery was stayed in the
case, and the discovery deadlines were vacated (Filing No. 220). Thereafter, new discovery
deadlines were established in the case (Filing No. 222).
Pursuant to the Federal Rules of Civil Procedure, the district court has discretion in
directing the discovery process in litigation, and it has broad discretion in determining whether a
discovery violation has occurred and warrants sanctions. See David v. Caterpillar, Inc., 324 F.3d
851, 857 (7th Cir. 2003). Rule 37 states,
If a party or a party's officer . . . fails to obey an order to provide or permit discovery,
. . . the court where the action is pending may issue further just orders. They may
include the following:
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party . . . .
Fed. R. Civ. P. 37(b)(2)(A). Rule 37(b) additionally provides,
Instead of or in addition to the orders above, the court must order the disobedient
party, the attorney advising that party, or both to pay the reasonable expenses,
including attorney's fees, caused by the failure, unless the failure was substantially
justified or other circumstances make an award of expenses unjust.
Fed. R. Civ. P. 37(b)(2)(C) (emphasis added).
Once the party moving for sanctions has shown a failure to comply with a discovery order,
district courts are guided by several factors in deciding whether to impose sanctions: (1) the
offending party's culpability, (2) the prejudice or surprise to the party against whom the evidence
is offered, (3) the ability of the party to cure the prejudice, and (4) the likelihood of disruption to
the trial. See David, 324 F.3d at 857.
In their Sanctions Motion, the Defendants ask the Court to enter default against Natural
Pack and dismiss the case with prejudice as a sanction for Natural Pack's discovery violations.
Defendants point out that some courts within the Seventh Circuit have held that there must be a
finding of willfulness or bad faith before a default judgment can be entered as a sanction.
However, other courts in this Circuit have not required such a finding. The Defendants argue that
regardless of whether willfulness or bad faith must be shown, Natural Pack has acted willfully and
in bad faith. They argue that Natural Pack's "open violation of discovery orders" supports a finding
of bad faith. And their heir failure to comply with the Court's discovery Order is not the only
instance of bad faith in this case. Defendants contend that Natural Pack has shown an ability to
gather documents and present them where and when it suits its interests, but to not gather and
present documents when it does not. For example, Natural Pack was able to review and produce
information related to its sales and its purported trade secrets, as well as gather affidavits from
purported customers who were allegedly confused by certain packaging in response to the
Defendants' motion to dismiss and in support of Natural Pack's request to have the preliminary
injunction motion decided on the briefing. At the same time, Natural Pack has stonewalled the
Defendants in their efforts to obtain documents to support their defenses and evaluate Natural
Pack's claims. Natural Pack's history of producing information where it suits it, and refusing to
produce information ordered by the Court, can only be described as a willful, knowing disregard
of its discovery obligations in defiance of the Court's discovery Order.
The Defendants argue that Natural Pack's refusal to comply with the Court's Order has
severely prejudiced their ability to defend this case. The Defendants cannot proceed with
depositions, work with expert witnesses, or prepare a motion for summary judgment without these
documents. The Defendants continue to have a multi-million dollar lawsuit hanging over them
and continue to incur attorney's fees but are blunted by Natural Pack's dilatory conduct.
In response, Natural Pack argues the Defendants seek the most severe sanction possible—
dismissal with prejudice of a plaintiff's case. See Panwar v. Access Therapies, Inc., 2014 WL
820023, at *8 (S.D. Ind. Mar. 3, 2014). Default judgment, which can be imposed on defendants,
is the equivalent of dismissal with prejudice, which can be imposed on a plaintiff, and such a
sanction "should be used only in extreme situations, or when other less drastic sanctions have
proven unavailing." Id. Natural Pack points out that the Seventh Circuit has held that "[t]he drastic
nature of a dismissal with prejudice requires the action to be used only in extreme situations, when
there is a clear record of delay or contumacious conduct, or when other less drastic sanctions have
proven unavailable." Rice v. City of Chicago, 333 F.3d 780, 784 (7th Cir. 2003). Natural Pack
argues this case simply does not meet that standard.
In their defense, Natural Pack asserts the Magistrate Judge only orally ordered production
of documents for the first time at the discovery conference on July 16, 2020. No written order to
that effect was issued. Natural Pack explains that it does not suggest that it was free to ignore the
Magistrate Judge's oral Order simply because it was not in writing, but the absence of a written
order may explain, in part, prior counsel's failure to appreciate the seriousness of the situation.
Prior counsel moved to withdraw the day after the discovery conference and was granted leave to
withdraw on July 22, 2020. Thus, Natural Pack was without counsel between the date of the entry
for the discovery conference, July 22, 2020, and August 26, 2020, when current counsel entered
their appearances. That period of time included the dates that the Magistrate Judge orally set for
production—August 3 to August 14, 2020. Without counsel, Natural Pack was unaware of how
to comply with the Magistrate Judge's oral Order.
Natural Pack explains that, since the appearance of new counsel on August 26, 2020, it has
engaged in an extensive process of assembling documents for the collection, review, and
production of documents responsive to the Defendants' extremely broad requests for production.
Natural Pack officials have expended approximately 324 person-hours in doing so, and counsel
have spent approximately another 70 person-hours on document production issues. As a result,
Natural Pack has produced 1,507 documents responsive to the Defendants' requests, totaling more
than 8,000 pages, and it has identified more than 44,000 additional documents for review and
While Natural Pack recognizes that it did not comply with the Magistrate Judge's oral Order
to produce and the deadline, it contends that failure is a result in part, of the withdrawal of prior
counsel. In addition, the delay was caused as result of the massive effort needed to produce
electronic documents in the required format and designations consistent with the Court's protective
order and the Defendants' incredibly broad requests. Natural Pack argues this case simply does
not involve the sort of egregious, repeated violations of discovery that is typically required for
dismissal as a sanction. It contends, on the very first failure to meet a court-ordered deadline, the
Defendants have asked the Court to impose the most severe sanction. Natural Pack argues such
an extreme sanction is not warranted on these facts.
In reply, Defendants point out that Natural Pack failed to produce a single document in this
lawsuit until September 14, 2020, more than one year after it filed its complaint. They contend
that Natural Pack finally produced some documents the day before it filed its response in
opposition to the Defendants' Sanctions Motion, in an apparent effort to create the impression that
it has complied with its discovery obligations. Instead, Natural Pack has not complied with its
obligations, and has further violated two Court Orders regarding its discovery responses as well as
the Case Management Order. Natural Pack first refused to comply with the Court's production
Order from the parties' July 16, 2020 discovery conference requiring the completion of Natural
Pack's document production by August 14, 2202. Natural Pack then disregarded the Court's
September 3, 2020 directive that Natural Pack would need to file a motion to seek additional time
to produce any documents. However, instead of filing a motion, Natural Pack disregarded the
Court's Order and produced approximately 8,000 pages of documents on September 14, 2020.
Natural Pack proclaimed that it would take an additional two months to produce additional
documents. Defendants argue that Natural Pack continues to set its own schedule with respect to
its discovery responses contrary to this Court's orders. Natural Pack also has violated multiple
deadlines in the Case Management Order with its self-proclaimed schedule for responding to the
Defendants' discovery requests. Thus, the Defendants argue, Natural Pack's election to ignore the
Court's Orders and simply proceed with discovery at its own pace demonstrates its complete and
willful disregard for its discovery obligations and the Court's Orders, warranting the sanction of
dismissal of this lawsuit.
Upon review of the litigation history and discovery process in this case, the Court agrees
that Natural Pack's ignorance of their discovery obligations, refusal to produce any documents,
and disobedience of the Court's discovery order is in no way acceptable. However, this case does
not present a set of facts that are so egregious that dismissal with prejudice is warranted. There is
no indication that Natural Pack destroyed, altered, or manipulated evidence, and it has not brazenly
and repeatedly violated numerous discovery orders. Natural Pack's newly retained counsel
promptly began responding to discovery requests and has produced numerous documents to the
Natural Pack did not fulfill its discovery obligations, but there is no indication that its
actions were in bad faith. While Natural Pack's failure to produce documents hindered the
Defendants' ability to defend against the case for a time, it appears from the case docket that any
prejudice has been cured by the extension of various discovery and other case management
deadlines and by the production of numerous documents to the Defendants. Additionally, despite
the delay, the Defendants have been able to file a dispositive motion.
Natural Pack was warned by the Magistrate Judge and opposing counsel that the lack of
retained counsel would not excuse its failure to fulfill its discovery obligations. But the fact that
Natural Pack was not represented by counsel during the time period for discovery set by the
Magistrate Judge hampered its ability to respond effectively to discovery. On the other hand, there
were a number of months after discovery had been served upon Natural Pack when it still was
represented by counsel and could have produced documents. The Court takes these facts into
consideration when determining that a sanction of expenses and attorney's fees against Natural
Pack is warranted. The Court declines to dismiss Natural Pack's case as a discovery sanction;
however, the Court orders Natural Pack to pay to the Defendants their "reasonable expenses,
including attorney's fees, caused by [its] failure." Fed. R. Civ. P. 37(b)(2)(C). Natural Pack has
not shown that its failure to fulfill its discovery obligations and its failure to comply with the
Court's discovery Order were substantially justified or that other circumstances make an award of
For the reasons stated above, the Court DENIES the Defendants' Sanctions Motion (Filing
No. 179; Filing No. 181). However, Natural Pack is ORDERED to pay to the Defendants their
reasonable expenses, including attorney's fees, caused by Natural Pack's failure to fulfill its
discovery obligations and its failure to comply with the Court's discovery Order. It is the Court's
expectation that the parties can agree on an amount. Defendants may submit a statement of their
reasonable expenses, including attorney's fees, for the Court's approval. Once approved, Natural
Pack shall pay that amount within thirty (30) days. Natural Pack is forewarned that their failure
to comply with this sanction, may result in additional sanctions.
Arend J. Abel
COHEN & MALAD LLP
Scott Stuart Morrisson
KRIEG DEVAULT LLP
Michael Wesley McBride
COHEN & MALAD LLP
Marc T. Quigley
KRIEG DEVAULT LLP
Kevin Christopher Rasp
O'HAGAN MEYER LLC
Daniel C. DeCarlo
LEWIS BRISBOIS BISGAARD AND
John R. Terpstra
LEWIS, BRISBOIS, BISGAARD AND
Thomas S. Kidde
LEWIS BRISBOIS BISGAARD AND
Brian C. Vanderhoof
LEWIS BRISBOIS BISGAARD AND
Donald E. Lake, III
LEWIS BRISBOIS BISGAARD AND
Clint D. Robison
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