Spin Master, Ltd. v. Bureau Veritas Consumer Products Services, Inc. et al
Filing
19
ORDER granting 1 Motion to Quash; granting 2 Motion to Seal. Signed by Hon. H. Kenneth Schroeder, Jr on 9/3/2013. (KER)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
SPIN MASTER LTD.,
Plaintiff,
11-CV-1000A (Sr)
v.
BUREAU VERITAS CONSUMER PRODUCTS
SERVICE, INC. and
EUROFINS PRODUCT SAFETY LABS, INC.,
Defendants.
DECISION AND ORDER
This case was referred to the undersigned by the Hon. Richard J. Arcara,
pursuant to 28 U.S.C. § 636(b)(1), for all pretrial matters and to hear and report upon
dispositive motions. Dkt. #17.
Currently before the Court is Eurofins Product Safety Labs’ (“Eurofins’”),
motion to quash subpoenas issued by Spin Master, Ltd. (“Spin Master”), upon Daniel P.
Goldberg and Dorit Ungar, Eurofins’ attorneys in Spin Master, Ltd. v. Bureau Veritas
Consumer Products Service, Inc., 08-CV-923, and the products liability class action
lawsuit pending in the Northern District of Illinois; entering a protective order preventing
Spin Master from deposing Mr. Goldberg and Ms. Ungar or obtaining their documents;
and imposing sanctions pursuant to Rule 45(c)(1) of the Federal Rules of Civil
Procedure and 28 U.S.C. § 1927 for Spin Master’s improper conduct in issuing the
subpoenas . Dkt. #1. For the following reasons, the motion is granted.
BACKGROUND
Spin Master commenced distribution of Aqua Dots for retail sale in April of
2007. In June of 2007, Spin Master retained defendant Bureau Veritas Consumer
Products Services, Inc. (“Bureau Veritas”), to conduct live animal toxicity testing on
Aqua Dots. Bureau Veritas engaged defendant Eurofins to perform oral acute toxicity
animal tests pursuant to 16 C.F.R. § 1500.3(c)(2)(i)(A), which defines acute toxicity as
any substance producing death within 14 days in half or more than half of a sufficient
group of white rats when a single dose from 50 milligrams to 5 grams per kilogram of
body weight is administered orally.
Eurofins noted difficulty in getting the rats to ingest the beads and
reported on August 10, 2007 that
38 spheres of each color of the pellets from the above
product provided by the Sponsor were placed into an
appropriate container and covered with 10 ml of corn oil by
[Eurofins]. The prepared sample was then placed into an
incubator for 72 hours at 37-39EC. The resulting extract
solution was considered to be the test substance.
***
The test substance was administered orally at a dose level
of 5,000 mg/kg to three female rats following the Up-Down
procedures described in PSL’s test method P203, ACTS and
Federal Hazardous Substances Act, 16 CFR, Section
1500.3, 1999. All animals survived, gained body weight and
appeared active and healthy during the study. There were
no signs of gross toxicity, adverse pharmacological effects
or abnormal behavior. Based on these results, the test
substance is not considered to be toxic according to 16
CFR, Section 1500.3(c)(2)(i)A), 1999.
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On November 7, 2007, Aqua Dots were recalled after children ingested
the dots and became comatose due to the presence of 1,4-butanediol, a chemical
which metabolized into gamma-hydroxy butyrate (“GHB”), a/k/a the date rape drug.
Following the recall, Spin Master, through its counsel, Ronald Rothstein,
responded to requests for information from the Consumer Product Safety Commission
(“CPSC”). By letter dated October 17, 2008, Mr. Rothstein informed the CPSC of the
chronology and summary of testing by multiple independent certified testing labs and
provided the following information with respect to the Bureau Veritas/Eurofins Acute
Oral Toxicity Testing:
On or about June 6, 2007, Spin Master Ltd. contacted
Bureau Veritas Consumer Products Services (“BVCPS”) to
request that it evaluate its Aqua Dots beads for acute oral
toxicity as defined in and tested per 16 CFT 1500.3(c)(2)(i).
Spin Master requested this testing in response to concerns
expressed by QVC regarding the possibility of absorption of
PVA from Aqua Dots by the digestive tract. . . .
BVCPS engaged Eurofins Product Safety
Laboratories, Inc. (“Eurofins”) to conduct the testing. On
information and belief, Eurofins completed the test following
the Up-Down procedures described in PLS’s test protocol
P203, ACTS and Federal Hazardous Substances Act, 16
CFR, Section 1500.3(c)(2)(i), which requires animal testing.
Lori Trock of BVCPS reported that Eurofins
experienced difficulty in breaking down the Aqua Dots beads
such that the lab animals would ingest them, resulting in a
delay. BVCPS reported in late July that Eurofins found a
new method and the results should be available in two
weeks. On August 10, 2007, Spin Master received a formal
report that the beads were not toxic according to 16 CFR
1500.3(c)(2)(i).
Eurofins’ report to BVCPS stated that Eurofins tested
the beads using corn oil in order to dose the lab animals.
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Eurofins reported that the animals survived, gained body
weight, appeared active and healthy during the study, and
showed no signs of gross toxicity, adverse pharmacological
effects or abnormal behavior. Based on these results,
Eurofins issued its formal report finding that the beads were
not considered to be toxic according to 16 CFR
1500.3(c)(2)(i). BVCPS approved the Eurofins report and
certified Aqua Dots as non-toxic.
In the MDL putative class action lawsuit, Spin Master
subpoenaed Eurofins’ test documents relating to the animal
study and those documents are being provided in response
to this Request. In addition, Spin Master’s counsel deposed
Eurofins employees Carolyn Lowe and Jennifer Durando on
October 15, 2008. . . . Through the Eurofins documents and
employee depositions, it was learned that Eurofins first
attempted to soak 38 beads in distilled water for 72 hours,
but that sample preparation was deemed a failure by
Eurofins because the beads absorbed the water and stuck
together. Eurofins next tried to grind new beads (not those
that had been soaked in water) using a coffee grinder, but
the result was deemed not capable of being dosed to the lab
animals. Eurofins next soaked 38 new beads in corn oil,
and at the end of 72 hours it took the resulting corn oil and
used it to dose the lab animals. Eurofins did not measure
the extent to which the beads had dissolved into the corn oil.
Eurofins treated the corn oil solution as though it were
comprised entirely of the test beads in determining the 5,000
mg/kg dosage for each test animal, as prescribed by 16 CFR
1500.3(c)(2)(i).
In its complaint, filed December 17, 2008, Spin Master alleges that the
toxicity test was flawed because the animals did not ingest the dots, but were given
corn oil in which the dots had been soaked, and that the dosing of animals did not
conform with the federal regulation setting forth the oral toxicity animal test for a child’s
toy, to wit, 16 C.F.R. § 1500.3(c)(2)(i)(A). Spin Master seeks more than $100 million in
damages due to defendants’ gross negligence and negligence.
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By letter dated June 19, 2009, Mr. Rothstein responded to the CPSC’s
request that Spin Master assess its compliance with the Federal Hazardous
Substances Act and the reporting requirements of the Consumer Product Safety Act. In
that letter, Mr. Rothstein argues, inter alia, that Aqua Dots are not toxic.
By Decision and Order entered August 24, 2011, the Court denied Spin
Master’s motion for a protective order to prevent the enforcement of a subpoena issued
by Eurofins upon Mr. Rothstein. Dkt. #132. In reaching that conclusion, the Court
determined that
Mr. Rothstein clearly possesses relevant information
regarding the factual basis for Spin Master’s position before
the CPSC, to wit, Aqua Dots are not toxic. That position is
integral to the resolution of the central question in this
matter, to wit, whether Eurofins’ toxicity testing was flawed.
As the individual responding to requests for information from
the CPSC, Mr. Rothstein is in the best position to answer
questions regarding communications between Spin Master
and the CPSC and identify the sources of information relied
upon in crafting those communications. “Although his
responses are not likely to be based on firsthand knowledge,
that limitation alone should not preclude [Eurofins] from
examining in the most effective way possible the sources of
information upon which the [position] is based.” Tailored
Lighting v. Osram Sylvania Products, 255 F.R.D. 340, 345
(W.D.N.Y. 2009).
As to the risk of encountering privilege and work-product
issues, the Court is satisfied that the scope of the subpoena
is sufficiently narrow as to minimize that risk. The subpoena
does not suppose to question Mr. Rothstein as to his
communications with Spin Master employees, but rather his
communications with the CPSC. As Magistrate Judge Cox
determined, the non-compulsory disclosure of information to
an investigating government agency waived any protection
such information may have enjoyed pursuant to the attorney
work product doctrine. See In re Steinhardt Partners, L.P., 9
F.3d 230 (2d Cir. 1993).
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With respect to the extent of discovery already conducted,
the Court has concluded that efficiency will be served by
permitting the deposition of Mr. Rothstein during these early
stages of discovery, as this will permit defendants to readily
identify documents relied upon by Mr. Rothstein and
individuals with first hand information regarding the
underlying facts of this matter.
08-CV-923 at Dkt. #132. Plaintiff appealed that Order, which was affirmed by the Hon.
Richard J. Arcara. 08-CV-923 at Dkt. #156.
On September 26, 2011, Spin Master served subpoenas, captioned in the
Southern District of New York, upon Eurofins’ counsel, Daniel Goldberg and Dorit
Ungar. Dkt. #3, pp.2-9. The subpoenas seek to examine Mr. Goldberg and Ms. Ungar
on their communications with the CPSC following the CPSC’s request to review
discovery in this action. Dkt. #3 & Dkt. #4-1. Ms. Ungar’s subpoena also seeks
examination of any communication between Ms. Ungar and
• any employee, officer, or director of Spin Master outside of
the presence of counsel for Spin Master;
• any relatives of any employee, officer or director of Spin
Master outside of the presence of counsel for Spin Master;
• any relatives of any in house attorney or outside attorney of
Spin Master outside of the presence of counsel for Spin
Master; and
• her client, her law firm and her client’s insurance carriers
related to the communications set forth above.
Dkt. #3-1, p.8.
Mr. Goldberg declares that his only communication with the CPSC
concerning Spin Master or Aqua Dots occurred in September 2011 when CPSC
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counsel Seth Popkin contacted him to follow up on the documents previously produced
to the CPSC at Spin Master’s request. Dkt. #4, ¶¶ 4 & 6. Specifically, Mr. Goldberg
declares that he conversed with CPSC counsel Seth Popkin twice regarding the dates
of document production and bates numbers, as well as the specific location within those
documents where Spin Master claimed Aqua Dots were toxic. Dkt. #4, ¶ 4. More
specifically, Mr. Goldberg recalls that he directed Mr. Popkin to Spin Master’s amended
complaint and transcript of the March 24, 2011 oral argument before the undersigned in
08-CV-923. Dkt. #12. In an e-mail to Spin Master’s counsel, Ron Rothstein, dated
October 13, 2011, seeking withdrawal of the subpoenas, Mr. Goldberg explained that
the CPSC asked us for information about the scope of your
document productions in terms of bates numbers and
production dates so that they could confirm they have
received everything from you, and they asked where they
might find in the production or record information on certain
discrete issues, in response to which I directed them to
publicly available information. That is the sum total of my
communications with the CPSC in connection with Spin
Master, none of which has any bearing on any issue in this
case.
Dkt. #4-3, p.2.
Ms. Ungar declares that her only communications with the CPSC
concerning this matter occurred in June/July of 2010 and in September of 2011 and
were limited to a discussion of documents produced in 08-CV-923. Dkt. #3 & Dkt. #11.
Ms. Ungar states that Spin Master’s counsel was copied on her e-mail communication
with respect to the CPSC’s request for documents and that the only other
communications she had with CPSC counsel was a telephone call where Mr. Popkin
inquired about the scope of Spin Master’s document production in this case and the
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location in the record of Spin Master’s comments about the toxicity of Aqua Dots and an
inquiry as to the bates numbers and dates of defendants’ last document production to
Spin Master. Dkt. #3. With respect to the remainder of the subpoena, Ms. Ungar
declares that she attended a Sabbat dinner at which Ronnen Harary, Spin Master’s coCEO, and Douglas Rothstein, the brother of Spin Master’s counsel, were also invited
guests. Dkt. #4. Ms. Ungar declares that she “had no discussions with Messrs. Harary
or Douglas Rothstein about the merits of this action, and my communication with them
about the case was limited to identifying who I was.” Dkt. #3.
Although Spin Master electronically filed a redacted declaration from Mr.
Harary in response to defendant’s motion to quash the subpoena and presumably
provided an unredacted copy of the declaration to the Hon. Alvin K. Hellerstein in the
Southern District of New York, Spin Master failed to comply with the Court’s Order
dated January 15, 2013 directing the parties to provide unredacted copies of their
motion papers to the undersigned. Dkt. #18. However, in her reply declaration, Ms.
Ungar recounts that Mr. Harary declared that Ms. Ungar “discussed the substance of
the litigation, [my] views of the case, stated [I] would win this case and attempted to
portray [his] company’s position in this litigation negatively.” Dkt. #11, ¶ 5. Ms. Ungar
denies this characterization of their interaction and emphasizes that Mr. Harary
identifies nothing of substance that was allegedly discussed. Dkt. #11, ¶ 5.
The motion was transferred to this district on consent of all parties by
Order of the Hon. Alvin K. Hellerstein on October 31, 2011. Dkt. #14.
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DISCUSSION AND ANALYSIS
Spin Master argues that the subpoenas are warranted because counsel
for Bureau Veritas has disclosed that the CPSC had engaged him in discussion on
“issues relevant to this case and the CPSC’s separate investigation of Aqua Dots.” Dkt.
#7, ¶ 4. Spin Master further argues that Eurofins’ arguments in support of the
deposition of Mr. Rothstein estop them from opposing the depositions of Mr. Goldberg
and Ms. Ungar. Dkt. #7, ¶ 7.
“The deposition-discovery regime set out by the Federal Rules of Civil
Procedure is an extremely permissive one to which courts have long accorded a broad
and liberal treatment to effectuate their purpose that civil trials in the federal courts
[need not] be carried on in the dark.” In re Friedman, 350 F.3d 65, 69 (2d Cir. 2003)
(internal quotation omitted); See Fed. R. Civ. P. 26(b)(1) (“Parties may obtain discovery
regarding any matter, not privileged, that is relevant to the claim or defense of any
party.”). “However, pursuant to Rule 26(c), the court may limit discovery even if the
information sought is relevant.” Tisby v. Buffalo General Hosp., 157 F.R.D. 157, 170
(W.D.N.Y. 1994); Coyne v. Houss, 584 F. Supp. 1105, 1109 (E.D.N.Y. 1984); See Rule
26(c) (“The court may, for good cause, issue an order to protect a party or person from
annoyance, embarrassment, oppression, or undue burden or expense.”).
“Courts have been especially concerned about the burdens imposed on
the adversary process when lawyers themselves have been the subject of discovery
requests, and have resisted the idea that lawyers should routinely be subject to broad
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discovery.” Friedman, 350 F.3d at 70; see U.S. v. Yonkers Bd. of Educ., 946 F.2d 180,
185 (1991) (“depositions of opposing counsel are disfavored.”). Among the myriad
reasons for such concern is the prospect of “intruding on attorney-client privilege.” Id.
Morever, courts recognize that “even a deposition of counsel limited to relevant and
non-privileged information risks disrupting the attorney-client relationship and impeding
the litigation.” Sea Tow Int’l, Inc. v. Pontin, 246 F.R.D. 421, 424 (E.D.N.Y. 2007)
(citations omitted). As a result, the Court of Appeals for the Second Circuit has
instructed district courts to consider “all of the relevant facts and circumstances to
determine whether the proposed deposition would entail an inappropriate burden or
hardship,” including, but not limited to, “the need to depose the lawyer, the lawyer’s role
in connection with the matter on which discovery is sought and in relation to the
pending litigation, the risk of encountering privilege and work-product issues, and the
extent of discovery already conducted.” Id. at 72.
In the instant case, in contrast to the subpoena seeking to depose Mr.
Rothstein as to the factual basis for his contradictory communications to the CPSC
regarding the toxicity of Aqua Dots, Spin Master has not articulated any basis to believe
that Mr. Goldberg or Ms. Ungar’s communications with the CPSC proffered factual
information relevant to the prosecution or defense of this action. Defendant’s
cooperation with the CPSC’s investigation of Aqua Dots is not sufficient to justify
depositions of defendant’s counsel. See New York Indep. Contractors Alliance, Inc. v.
Highway Rd. and St. Constr. Laborers Local Union 1010, 07-CV-1830, 2008 WL
5068870, *6 (E.D.N.Y. Nov. 24, 2008) (”A subpoena seeking to depose opposing
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counsel should be quashed when the attorney’s role is limited to legal representation.”).
In addition, Spin Master has proffered no basis to believe that deposing Ms. Ungar as
to her interaction with either it’s co-CEO or it’s counsel’s brother will lead to relevant
evidence. See Petersen v. Vallenzano, No. 89 Civ. 5346, 1996 WL 252376, at *6
(S.D.N.Y. May 13, 1996) (denying defendant’s request to depose plaintiff’s counsel for
failure “to indicate the relevance of the deposition testimony . . .to the substance of any
issue in this action”).
As set forth in Rule 45(c)(1) of the Federal Rules of Civil Procedure, when
a party issues a subpoena without taking “reasonable steps to avoid imposing undue
burden or expense on a person subject to the subpoena,” the court must “impose an
appropriate sanction – which may include lost earnings and reasonable attorney’s fees
– on [the] party or attorney who fails to comply.” In a circumstance, such as this, where
“a subpoena should not have been issued, literally everything done in response to it
constitutes an ‘undue burden or expense’ within the meaning of . . . Rule 45(c)(1).”
Molefi v. Oppenheimer Trust, No. 03 CV 5631, 2007 WL 538547, at *3 (E.D.N.Y. Feb.
15, 2007), quoting Builders Ass’n of Greater Chicago, No. 96 C 1122, 2002 WL
1008455, at *4 (N.D. Ill. May 13, 2002).
In addition to its authority pursuant to Rule 45(c)(1), the Court retains its
inherent authority to impose attorney’s fees “when a party has acted in bad faith,
vexatiously, wantonly, or for oppressive reasons.” Kenney, Becker, LLP v. Kenney, No.
06 Civ. 2975, 2008 WL 681452, at * (S.D.N.Y. Mar. 10, 2008), quoting Chambers v.
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NASCO, 501 U.S. 32, 45-46 (1991). “In order to impose sanctions pursuant to its
inherent power, a district court must find that: (1) the challenged claim was without a
colorable basis and (2) the claim was brought in bad faith, i.e., motivated by improper
purposes such as harassment or delay.” Id., quoting Schlaifer Nance & Co. v. Estate of
Warhol, 194 F.3d 323, 326 (2d Cir. 1999). As the Court has determined that Ms.
Ungar’s interaction with Mr. Harary and Douglas Rothstein lacks relevance to the
prosecution or defense of this action and that there is an obvious distinction between
the facts warranting the deposition of Ronald Rothstein and the circumstances
surrounding Mr. Goldberg and Ms. Ungar’s interaction with the CPSC, it follows that the
subpoenas were issued without a colorable basis. Moreover, the inquiry into Ms.
Ungar’s interaction with Mr. Harary and Douglas Rothstein can be ascribed no
legitimate purpose. Accordingly, sanctions, in the form of reasonable attorney’s fees
incurred as a result of the issuance of the subpoena’s are appropriate pursuant to both
Rule 45(c)(1) and the Court’s inherent authority.
CONCLUSION
For the reasons set forth above, Eurofins’ motion to quash subpoenas
issued by Spin Master upon Daniel P. Goldberg and Dorit Ungar, Eurofins’ attorneys in
Spin Master, Ltd. v. Bureau Veritas Consumer Products Service, Inc., 08-CV-923, and
the products liability class action lawsuit pending in the Northern District of Illinois is
granted. In addition, Spin Master shall pay Eurofins the cost, including reasonable
attorneys’ fees, generated in response to the issuance of subpoenas upon Mr.
Goldberg and Ms. Ungar. If the parties are unable agree as to the appropriateness of
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Eurofins’ attorneys’ fees, an application shall be submitted to the Court, by notice of
motion for award of attorneys’ fees, within 60 days of the entry of this Order.
SO ORDERED.
DATED:
Buffalo, New York
August 29, 2013
s/ H. Kenneth Schroeder, Jr.
H. KENNETH SCHROEDER, JR.
United States Magistrate Judge
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