Coty Inc. et al v. Excell Brands, LLC

Filing 83

MEMORANDUM OPINION AND ORDER re: 72 MOTION for Sanctions filed by Vera Wang Licensing LLC, Coty B.V., Coty Inc., Calvin Klein Cosmetics Corporation, Ate My Heart Inc., Calvin Klein Trademark Trust, Calvin Klein, Inc., V.E.W., Ltd. In light of the foregoing, Plaintiffs' motion for sanctions is GRANTED. Specifically, exercising its broad discretion to craft appropriate sanctions, the Court precludes Excell from introducing any factual testimony or doc uments at trial regarding: (1) the ingredients and chemical compositions of the liquid scent (or "juice") of each fragrance at issue; (2) its compliance with applicable U.S. health, labeling, and consumer safety laws; and (3) tests or studies, including laboratory or scientific reports or quantitative or qualitative analyses concerning the juice or package of its fragrances. (Docket No. 72). Additionally, Excell is ordered to reimburse Plaintiffs for their "reasonable exp enses, including attorney's fees," caused by its failure to produce adequately prepared witnesses, including the attorney's fees incurred in connection with both Rule 30(b)(6) depositions (albeit discounted to reflect the fact that Excell's witnesses were apparently prepared to provide testimony on topics other than those discussed above), preparation of Plaintiff's June 2, 2016 letter motion (Docket No. 67), and preparation of this motion (Docket No. 72). Cou nsel shall confer in an effort to reach agreement on what constitutes "reasonable expenses." Barring agreement, Plaintiffs shall submit a fee application, supported by contemporaneous billing records, no later than thirty days from this Memorandum Opinion and Order; Excell shall file any opposition within two weeks of any application. Absent leave of Court, Plaintiffs may not file a reply. By Order entered on June 14, 2016, the Court directed the parties to submit their propos ed joint pretrial order and related materials within two weeks of the Court's ruling on the present motion. In light of the upcoming holidays, the Court extends that deadline to thirty days from the date of this Memorandum Opinion and Order . The parties should be prepared to go to trial approximately two weeks thereafter (although the Court's trial calendar may result in a later trial date). Moreover, the parties shall immediately advise the Court by joint letter if they are in terested in a referral to the assigned Magistrate Judge for purposes of settlement. The Clerk of Court is directed to terminate Docket No. 72. (As further set forth in this Memorandum Opinion and Order.) (Signed by Judge Jesse M. Furman on 12/9/2016) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------------- X
:
COTY INC., et al.,
:
:
Plaintiffs,
:
:
-v:
:
EXCELL BRANDS, LLC,
:
:
Defendant.
:
:
---------------------------------------------------------------------- X

12/09/2016

15-CV-7029 (JMF)
MEMORANDUM OPINION
AND ORDER

JESSE M. FURMAN, United States District Judge:
Plaintiffs, owners of several popular perfume brands, bring intellectual property claims
against Defendant Excell Brands, LLC (“Excell”) relating to the sale of allegedly lower-grade
“knock offs” of Plaintiffs’ fragrances. Plaintiffs now move, pursuant to Rule 37 of the Federal
Rules of Civil Procedure, for sanctions on the ground that Excell failed to produce for a Rule
30(b)(6) deposition a corporate representative adequately prepared to testify regarding several
relevant aspects of Excell’s business. For the reasons stated below, their motion is granted.
BACKGROUND
On February 19, 2016, Plaintiffs served Excell with a Rule 30(b)(6) deposition notice
seeking a witness to testify about, among other things, the ingredients and chemical composition
of Excell’s fragrances (Topic No. 8); Excell’s compliance with applicable health, labeling, and
consumer laws (Topic No. 10); and tests or studies regarding the liquid scent (or “juice”) and
packaging of Excell’s fragrances (Topic No. 11). (Docket No. 73 (“Faris Decl.”), Ex. A). Excell
initially designated Nicholas Ferullo, a retail salesperson at the company, as its corporate
representative. (Faris Decl. ¶ 5). At his deposition on April 27, 2016, however, Ferullo was

1

unable to answer questions on the three topics above, as he concededly lacked the requisite
technical knowledge and was not prepared. (See Docket No. 55, Ex. B (“Ferullo Depo.”)).
When asked who at the company would be more knowledgeable about the topics at issue, Ferullo
identified the company president, Wayne Hamerling. (Ferullo Depo. 182). 1
Plaintiffs moved for an order compelling Excell to produce another Rule 30(b)(6) witness
who could testify on the aforementioned topics. (Docket No. 50). At a conference held on the
record on May 10, 2017, the Court granted Plaintiff’s application and ordered Excell “to produce
a witness who can testify as to all [three] topics.” (Docket No. 65 (“Transcript”) 13). The Court
expressly warned Excell to make sure that the witness was “adequately prepared, whether that
means briefing the president of the company or anyone else . . . ; whether it means obtaining
information from the vendor in India, or what have you, basically making sure that they [were]
adequately prepared.” (Id.). The Court noted that, if the new witness was not prepared,
sanctions — including attorney’s fees and preclusion of evidence — might be appropriate. (Id.
at 14).
Excell produced its second Rule 30(b)(6) witness — Andrew Pfau, a board member and
investor — on May 18, 2016. (Faris Decl., Ex. C (“Pfau Depo.”)). Pfau — like Ferullo — had
not spoken to Hamerling or any other Excell employee in preparation for his testimony; nor had
he consulted with Excell’s Indian vendors. (Id. at 12-13). In fact, in answer to the question of
what he had done to prepare for his testimony, Pfau responded “[n]ot much,” that he had “read”
some documents and spoken only to Excell’s counsel. (Id. at 12). Thereafter, Plaintiffs filed the
instant motion, seeking attorney’s fees and an order precluding Excell from introducing at trial

Hamerling himself was presumably unavailable to testify, as he had invoked his Fifth
Amendment privilege in response to Plaintiffs’ questions about the business. (Faris Decl. ¶ 9).
So too had Excell’s general counsel, controller, and wholesale manager. (Id.).
1

2

any factual testimony or documents concerning: (1) the ingredients and chemical compositions
of the liquid scent (or “juice”) of each fragrance at issue; (2) Excell’s compliance with applicable
health, labeling, and consumer safety laws; and (3) tests or studies, including laboratory or
scientific reports or quantitative or qualitative analyses concerning the juice or package of
Excell’s fragrances. (Docket No. 72).
DISCUSSION
Rule 30(b)(6) permits a party to notice the deposition of a corporate entity. The named
organization “must then designate” a corporate representative “to testify on its behalf.” Fed. R.
Civ. P. 30(b)(6). More specifically, the person designated “must testify about information
known or reasonably available to the organization.” Id. In fact, “the corporate deponent has an
affirmative duty to make available” a person able “to give complete, knowledgeable and binding
answers on its behalf.” Reilly v. Natwest Markets Grp. Inc., 181 F.3d 253, 268 (2d Cir. 1999)
(internal quotation marks omitted). If the designated witness lacks “personal knowledge
concerning the matters set out in the deposition notice,” then “the corporation is obligated to
prepare them so that they may give knowledgeable answers.” Spanski Enters., Inc. v. Telewizja
Polska, 07-civ-930 (ALC) (GWG), 2009 WL 3270794, at *3 (S.D.N.Y. Oct. 13, 2009); see, e.g.,
Eid v. Koninkliike Luchtvaart Maatschappii N.V., 310 F.R.D. 226, 228 (S.D.N.Y. 2015) (noting
that an organization “must make a conscientious good faith endeavor . . . to prepare [its
designated] persons in order that they can answer fully, completely, [and] unevasively, the
questions posed . . . as to the relevant subject matters” (internal quotation marks omitted)).
If a party fails to comply with a court order to produce a competent Rule 30(b)(6)
witness, Rule 37 allows the court to impose sanctions. Such sanctions may include “directing
that the matters embraced in the order or other designated facts be taken as established for

3

purposes of the action, as the prevailing party claims,” or “prohibiting the disobedient party from
supporting or opposing designated claims or defenses.” Fed. R. Civ. P. 37(b)(2)(A).
Additionally, “the court must order the disobedient party . . . 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). “A district
court has wide discretion in sanctioning a party for discovery abuses,” whether acting pursuant to
its inherent power or Rule 37. Reilly, 181 F.3d at 267. Nevertheless, for the Court to impose
sanctions in connection with a Rule 30(b)(6) deposition, “the inadequacies in a deponent’s
testimony must be egregious and not merely lacking in desired specificity in discrete areas.”
Kyoei Fire & Marine Ins. Co., Ltd. v. M/V Maritime Antalya, 248 F.R.D. 126, 152 (S.D.N.Y.
2007); see also, e.g., Agniel v. Cent. Park Boathouse LLC, No. 12-CV-7227 (NRB), 2015 WL
463971, at *2 (S.D.N.Y. Jan. 26, 2015) (noting that courts are reluctant “to award sanctions on
the basis of deficient Rule 30(b)(6) testimony when counsel fail to make a good faith effort to
resolve the deficiencies or when the application for sanctions appears tactically motivated”).
Applying those standards here, the Court concludes that sanctions are warranted. The
Court explicitly ordered Excell to produce a witness who was prepared to testify about the
noticed topics, whether that meant debriefing the company’s president or the company’s Indian
suppliers. But Pfau was patently unprepared to do so, answering “I don’t know” almost forty
times during his two-hour deposition, always in response to questions about the noticed topics.
(Docket No. 74 at 9). For example, when asked about the significance of a certain range of
ingredients, Pfau responded: “I am not a chemist, I wouldn’t know.” (Pfau Depo. 26). He was
similarly unable to answer questions about the meaning of certain numbers (“I can speculate, but
I do not [know]”), about what sort of testing was used to select Excell’s perfume compositions

4

(“I don’t know”), or what the safety reports produced by Excell’s suppliers are used for (“It is
not my role or area of expertise, so I don’t know.”) (See id. 26-28). Moreover, by Pfau’s own
admission, he did “[n]ot much” to prepare for the deposition; he spoke only to Excell’s trial
counsel and failed to speak with either the company’s president or its Indian vendors. (See Pfau
Depo. 12). Given that Pfau lacked a background in chemistry and had no involvement in the
day-to-day operations of Excell — indeed, he was not, and is not, even an Excell employee —
the need for him to gather additional information prior to his deposition was manifest. His
failure to do so, despite the Court’s order, is egregious and worthy of sanctions. See Agneil,
2015 WL 463971, at *3 (holding that the defendant had “neglected its obligation to prepare its
Rule 30(b)(6) witnesses to give complete and knowledgeable answers as to all of the matters
specified in the deposition notice” where the witness testified that he had “neither consulted with
[defendant’s] employees nor reviewed any documents in preparation for the Rule 30(b)(6)
deposition and that his only preparation was an hour-and-a-half-long meeting with his attorney”).
In arguing otherwise, Excell insists that its designated witness was under no obligation to
obtain information from the company’s Indian vendors because they are third parties. (Docket
No. 76, at 3-4). But that argument is beside the point in light of the fact that Pfau did not even
speak to Excell’s president — whom Ferullo had identified as the person at the company with
knowledge on the topics at issue. (Ferullo Depo. 182). Moreover, Excell’s argument finds no
support in either the language of Rule 30(b)(6), which calls for testimony “about information
known or reasonably available to the organization,” Fed. R. Civ. P. 30(b)(6) (emphasis added),
or case law, which requires a company witness to gather information from sources “under its
control,” including “documents, past employees, or other sources,” Eid, 310 F.R.D. at 229
(emphasis added) (internal quotation marks omitted); see also Twentieth Century Fox Film Corp.

5

v. Marvel Enters., Inc., No. 01-civ-3016, 2002 WL 1835439 (AGS) (HB), at *4 (S.D.N.Y. Aug.
8, 2002) (“[T]he same principle that is applied to interrogatories and document requests should
also be applied to determine the scope of a party’s obligation in responding to a Rule 30(b)(6)
notice of deposition. There is no logical reason why the sources researched by a party in
responding to a discovery request should be dependent on the particular discovery vehicle used;
in all cases, the responding party should be obligated to produce the information under its
control.”); Securities Ins. Co. of Hartford v. Trustmark Ins. Co., 218 F.R.D. 29, 34 (D. Conn.
2003) (“In light of the affirmative duty imposed by Rule 30(b)(6), [defendant’s] corporate
representative was obliged to gain some understanding of the underlying facts, regardless of the
source identifying the underlying facts, and to answer questions accordingly.). Here,
substantially for the reasons stated by Plaintiffs in their reply memorandum of law (Docket No.
77, at 3), Excell exercised the “requisite degree of control” over its Indian vendors for
information in their possession to be “reasonably available” to the company. Eid, 310 F.R.D. at
229.
CONCLUSION
In light of the foregoing, Plaintiffs’ motion for sanctions is GRANTED. Specifically,
exercising its broad discretion to craft appropriate sanctions, the Court precludes Excell from
introducing any factual testimony or documents at trial regarding: (1) the ingredients and
chemical compositions of the liquid scent (or “juice”) of each fragrance at issue; (2) its
compliance with applicable U.S. health, labeling, and consumer safety laws; and (3) tests or
studies, including laboratory or scientific reports or quantitative or qualitative analyses
concerning the juice or package of its fragrances. (Docket No. 72). Additionally, Excell is
ordered to reimburse Plaintiffs for their “reasonable expenses, including attorney’s fees,” caused

6

by its failure to produce adequately prepared witnesses, including the attorney’s fees incurred in
connection with both Rule 30(b)(6) depositions (albeit discounted to reflect the fact that Excell’s
witnesses were apparently prepared to provide testimony on topics other than those discussed
above), preparation of Plaintiff’s June 2, 2016 letter motion (Docket No. 67), and preparation of
this motion (Docket No. 72). Counsel shall confer in an effort to reach agreement on what
constitutes “reasonable expenses.” Barring agreement, Plaintiffs shall submit a fee application,
supported by contemporaneous billing records, no later than thirty days from this Memorandum
Opinion and Order; Excell shall file any opposition within two weeks of any application. Absent
leave of Court, Plaintiffs may not file a reply.
By Order entered on June 14, 2016, the Court directed the parties to submit their
proposed joint pretrial order and related materials within two weeks of the Court’s ruling on the
present motion. In light of the upcoming holidays, the Court extends that deadline to thirty days
from the date of this Memorandum Opinion and Order. The parties should be prepared to go to
trial approximately two weeks thereafter (although the Court’s trial calendar may result in a later
trial date). Moreover, the parties shall immediately advise the Court by joint letter if they are
interested in a referral to the assigned Magistrate Judge for purposes of settlement.
The Clerk of Court is directed to terminate Docket No. 72.

SO ORDERED.
Dated: December 9, 2016
New York, New York

7