Lifeguard Licensing Corp. et al v. kozak et al

Filing 162

ORDER denying 107 Motion for Sanctions. The defendants have not establishedthat the plaintiffs should be held in contempt or sanctioned for discovery violations. Therefore, their Motion for Contempt and Sanctions (Docket no. 107) is denied. SO ORDERED. (Signed by Magistrate Judge James C. Francis on 1/31/2017) Copies transmitted this date By Chambers. (anc)

directions in Lifeguard II.

(Defendants’ Memorandum of Law in

Support of Motion for Contempt and Sanctions (“Def. Memo.”) at 1.
In Lifeguard I, finding that the plaintiffs had not conducted
a sufficient search of their electronically-stored information or
physical filing systems, I ordered them to conduct a further search
for discoverable material. 2016 WL 3144049, at *4. I also ordered
them to turn over discovery from prior litigation concerning the
relevant trademarks, even if it was held by the plaintiffs’ prior
counsel.

Id.

at

*5.

The

plaintiffs’

apparently

deficient

production in response to that order prompted a second motion to
compel, which resulted in an order requiring the plaintiffs to
produce, in relevant part, (1) settlement agreements concerning the
trademarks at issue, Lifeguard II, 2016 WL 4733157, at *5; (2)
royalty reports, income statements, monthly financial statements,
and earning reports, id.; (3) documents in Lifeguard’s possession,
custody, or control concerning licenses and sub-licenses of the
trademarks, id. at *3; and (4) documents in Lifeguard’s possession,
custody, or control concerning a prior action against GoGo Sports,
Inc., id. at *4.
sought

market

I denied the defendants’ motion to the extent it
surveys

relating

to

the

genericness

of

the

trademarks, noting that Ruben Azrack, the principal of Lifeguard,
had asserted that the company had “never conducted a genericness
survey.”

Id.

As to documents in category (3) -- licenses and sub-

licenses -- I ordered each plaintiff to “provide a declaration by
a person with personal knowledge outlining the search that was
performed and the results” in the event that “no additional
2

[responsive] documents [were] discovered.”

Id. at *3.

I also

extended the fact discovery deadline, which originally expired on
October 11, 2016, exclusively for the purpose of production of
these documents or declarations.

Id. at *6.

The plaintiffs appealed Lifeguard II to the extent that it
required

them

to

produce

settlement

agreements

(Plaintiffs’

Objection to a Portion of Magistrate Judge Francis’ Discovery Order
at 2) and that part of the order was -- eventually -- stayed (Order
dated Oct. 3, 2016). The Honorable Lorna G. Schofield rejected the
appeal in October 2016.
5936887, at *1.

Lifeguard Licensing Corp., 2016 WL

Fact discovery is closed.

Discussion
A court may punish a party’s failure to comply with a court
order where (1) the order violated was clear and unambiguous; (2)
the proof of noncompliance is clear and convincing; and (3) the
contemnor was not reasonably diligent in attempting to comply. See
City of New York v. Local 28, Sheet Metal Workers’ International
Association, 170 F.3d 279, 282-83 (2d Cir. 1999).
In the alternative, sanctions -- including harsh sanctions
such as dismissing the case or precluding evidence -- may be
imposed pursuant to Rule 37(b)(2) of the Federal Rules of Civil
Procedure.

When determining the appropriate sanction to impose

under Rule 37, courts in this Circuit weigh several factors,
including “(1) the willfulness of acts underlying noncompliance;
(2)

the

efficacy

of

lesser

sanctions;

(3)

the

duration

of

noncompliance; and (4) whether the noncompliant party was on notice
3

that it faced possible sanctions.”

Sentry Insurance A Mutual Co.

v. Brand Management, Inc., 295 F.R.D. 1, 5 (E.D.N.Y. 2013).

If a

litigant succeeds in its Rule 37(b)(2) sanctions motion, “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).
A.
By

Settlement Agreements
October

documents

28,

related

2016,

to

the

plaintiffs

settlements

with

six

had

produced

different

seven

alleged

infringers: Wild Side West, Inc.; J&C; New York Breeze, LLC; L&L
Wings, Inc.; GoGo Sports, Inc.; and Breezin’ Up, Inc. (Declaration
of Thomas P. Heed dated Oct. 31, 2016 (“Heed Oct. Decl.”), ¶ 6 &
Exh. B, pp. 2-11 (Wild Side West), 12 (J&C), 13-19 (New York
Breeze), 20-33 (L&L Wings), 34-72 (GoGo Sports), 73-78 (Breezin’
Up).1

Ann Arbor notes that, during discovery, the plaintiffs

“produced cease-and-desist letters addressed to 30 businesses
[that]

were

not

subsequently

sued,”

including

the

Gap

and

Victoria’s Secret, “but have failed to produce a single settlement
agreement thereto.”

(Defendants’ Reply Memorandum in Support of

Motion for Contempt and Sanctions (“Reply”) at 5; Heed Oct. Decl.,
¶ 5 & Exh. C).

In addition, Ann Arbor asserts that since 2009,

Lifeguard has been involved in nine trademark infringement cases

1

I have used the page numbers assigned by the court’s
Electronic Case Filing system.
4

that did not go to trial, but produced settlement agreements for
only six of these cases.
E).

(Reply at 5; Heed Oct.Decl., ¶ 6 & Exh.

Benjamin Tebele, who is the principal of Popularity, and Mr.

Azrack each state that he has produced all of the settlement
agreements that he has located.

(Declaration of Ruben Azrack date

Oct. 23, 2016 (“Azrack Decl.”), ¶ 5; Declaration of Benjamin Tebele
dated Oct. 23, 2016 (“Tebele Decl.”), ¶ 4).
Underpinning the order in Lifeguard II is the notion that a
declaration from the principals of Lifeguard and Popularity that
they had searched for documents responsive to a particular request
and produced all that they had located would be sufficient to
satisfy their discovery obligations as to that request.
Lifeguard II, 2016 WL 4733157, at *3-4.

See

Indeed, Ann Arbor appears

to agree that such a declaration would be effective to show that
those obligations have been discharged, as it complains about the
lack of a declaration in connection with the plaintiffs’ responses
to a request for documents regarding the termination of a license
with Warnaco, discussed below.
Mr.

Tebele

additional

have

asserted

responsive

But here, as noted, Mr. Azrack and

under

documents

penalty
exist.

required to produce documents that exist.”

of
A

perjury
litigant

that
“is

no

only

Barton Group, Inc. v.

NCR Corp., No. 08 Civ. 5679, 2009 WL 6509348, at * 1 (S.D.N.Y. July
22, 2009).
B.

Royalty Reports

According to Ann Arbor, Lifeguard produced royalty reports for
three

licensees

but

produced

no
5

income

statements,

monthly

financial statements, or earnings reports.
P.

Heed

dated

Sept.

30,

2016

(“Heed

(Declaration of Thomas
Sept.

Decl.”),

¶

21).

Popularity produced three spreadsheets: one showing gross revenue
related to sales of products bearing the trademarks and two showing
unit sales by product number for those products, one for each of
the years 2015 and 2016.

(Heed Sept. Decl., ¶ 29).

In response,

Mr. Azrack and Mr. Tebele each asserted that his company “does not
create (or have created on its behalf) income statements/monthly
financial statements or earning reports relating to the Lifeguard
brand.”

(Azrack Decl., ¶ 2; Tebele Decl., ¶ 2).

The plaintiffs

further point out that Lifeguard’s personnel comprise Mr. Azrack
and an assistant, both of whom divide their time among Lifeguard
and Mr. Azrack’s “numerous other businesses,” concluding, “It is
not the least bit surprising that a company that consists of two
part time staff does not create income statements/monthly financial
statements or earning reports.”

(Plaintiffs’ Memorandum of Law

(“Pl. Memo.”) at 3).
Ann Arbor points out two areas of concern.

The declarations

of Mr. Azrack and Mr. Tebele do not state that Lifeguard and
Popularity have no income statements, monthly financial statements,
or earnings reports, but rather that neither has any relating to
the Lifeguard brand.

(Reply at 7).

However, I fail to see how

income statements related to other, non-Lifeguard marks would be
relevant here. Second, Ann Arbor alleges that Mr. Tebele testified
during his deposition that Popularity employed over one hundred
people and that the company had an accounting firm to produce
6

financial statements.

(Reply at 8 n.4).

Ann Arbor wonders why a

company of that size would not produce the financial statements
requested.

(Reply at 8).

But Ann Arbor has not submitted the

deposition transcript in connection with this motion (nor has the
relevant deposition testimony been submitted in connection with any
of the other motions within my purview), so I am unable to review
it in context.
C.

Licenses and Sub-Licenses

Ann Arbor complains that Lifeguard Licensing did not produce
any documents relating to the termination of a license with Warnaco
other than a single “inconsequential email.” (Def. Memo. at 9). In
light of this allegedly deficient production, Ann Arbor insists
that “[a]ny reasonable reading of [Lifeguard II] makes it clear
that [Lifeguard] must either turn over all documents relating to
the termination of [the license] . . . or ‘provide a declaration by
a person with personal knowledge outlining the search that was
performed and the results.’” (Def. Memo. at 9 (quoting Lifeguard
II, 2016 WL 4733157, at *4)).

Ann Arbor is wrong on both counts.

First, the email is not “inconsequential,” as it indicates
that the termination was the result of a failure to renew the
license.

That is bolstered by Warnaco’s response to Ann Arbor’s

subpoena stating that the company “did not terminate the Lifeguard
License,” but rather merely did not renew it (Objections and
Responses of Non-Party Warnaco Swimwear, Inc. to Subpoena dated
June 17, 2016, attached as Exh. C to Declaration of Gerry Grunsfeld
dated Oct. 23, 2016 at 8), and by Mr. Azrack’s declaration stating
7

that the “matter was discussed over the phone and Warnaco did not
need to generate any documentation” because “[i]t simply did not
provide [Lifeguard] with a renewal request” (Azrack Decl., ¶ 4).
Second, by its terms, Lifeguard II ordered Lifeguard to provide a
declaration only “[i]f no additional documents [were] discovered.”
2016 WL 4733157, at *4.

Lifeguard did produce an additional

document. To be sure, a less crabbed reading of Lifeguard II might
have been warranted in the circumstances of this case.

However, I

cannot say that Lifeguard violated the letter of the order.
Moreover, Mr. Azrack and Mr. Tebele have asserted that they
searched for responsive documents and did not locate any.

(Azrack

Decl., ¶ 3; Tebele Decl, ¶ 3).
D.

GoGo Sports Litigation

These documents have been turned over, albeit late. (Reply at
6-7).

Although that is less than ideal, I will neither hold

plaintiffs in contempt nor sanction them on this ground.
E.

Marketing Surveys

Ann Arbor’s Reply claims:
In [Lifeguard II], this Court denied Defendants’
motion to compel with respect to Request No. 8,
“documents related to whether the trademarks are generic,
including market surveys.” In denying this request, the
Court relied on a declaration from Ruben Azrak.
On October 19, 2016, Plaintiffs produced an expert
report from Jerre Swann, critiquing a market survey that
had been performed during the Gogo Sports matter . . . .
Material responsive to market surveys was originally
requested in January 2016. It was requested a second
time in June 2016. Repeatedly, until October 19, 2016,
Plaintiffs have denied any such material exists. Their
recent production of such materials shows otherwise.
(Reply at 9-10 (emphasis omitted)(citations omitted)).
8

Again, Ann Arbor does not have its facts exactly right.
Lifeguard II noted that Ann Arbor focused in its second motion to
compel on “the lack of market surveys in the production.”
4733157, at *4.

2016 WL

Relying on a declaration of Mr. Azrack stating

that Lifeguard had “never conducted a genericness survey,” I denied
the motion to compel as to that issue.

Id.

The document that

Lifeguard has produced is an expert report commenting on a market
survey assertedly “performed during the GoGo Sports matter” (Reply
at 9), but not by Lifeguard.
Azrack’s

declaration

focused

(Heed Oct. Decl., Exh. H).
on

market

surveys

performed

Mr.
at

Lifeguard’s behest.
In any case, Ann Arbor now has what is apparently the only
document reasonably available that is responsive.
F.

Plaintiffs’ Counsels Emails to Co-Counsel

Ann Arbor objects to the following emails from plaintiffs’
counsel Gerald Grunsfeld to their former co-counsel:
Unfortunately, defense counsel gets a kick out of being
confrontational and so they continue to cc you although
I have told them not to.
Please ignore all correspondence from them. I am handling
all discovery issues.
And then, after a response from former co-counsel
Thanks cameron and I’m sorry they were hassling you. I
have such contempt for them.
(Reply at 3; Heed Oct. Decl., Exh. A).
show

that

plaintiffs’

actions

“purposeful and contumacious.”
I disagree.

during

These emails assertedly
this

litigation

are

(Reply at 2).

Instead, I see an appropriate division of labor
9