Vitamins Online v. Heartwise et al
Filing
155
ORDER granting 55 Motion to Compel; granting 76 Motion to Take Deposition from Richard Meirowitz; granting 97 Motion for Sanctions. See Memorandum Decision and Order for details. Signed by Magistrate Judge Paul M. Warner on 3/31/2016. (srs)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
VITAMINS ONLINE, INC.,
MEMORANDUM DECISION AND
ORDER
Plaintiff/Counterclaim Defendant,
Case No. 2:13-CV-00982-DAK-PMW
v.
HEARTWISE, INC. et al
Defendants/Counterclaim Plaintiffs.
District Judge Dale A. Kimball
Magistrate Judge Paul M. Warner
District Judge Dale A. Kimball referred this matter to Magistrate Judge Paul M. Warner
pursuant to 28 U.S.C. § 636(b)(1)(A). 1 Before the court are the following three motions: (1)
Vitamins Online, Inc.’s (“Plaintiff”) motion to compel Heartwise, Inc. d/b/a NatureWise
(“Defendant”) to produce sample products; 2 (2) Plaintiff’s motion for sanctions for an alleged
spoliation of evidence; 3 and (3) Defendant’s motion seeking to reopen fact discovery for the
limited purpose of deposing non-party Richard Meirowitz. 4
1. Plaintiff’s Motion to Compel
On October 30, 2013, Plaintiff served Defendant a copy of the Complaint alleging unfair
1
See docket no. 59.
2
See docket no. 55.
3
See docket no. 97.
4
See docket no. 76.
competition and false and misleading advertising of Defendant’s Garcinia Cambogia and green
coffee dietary supplements. 5 Specifically, Plaintiff alleges that the dietary supplements were
falsely advertised because they did not meet the label claims for the products. On July 18, 2014,
Plaintiff served Defendant with its second discovery request, which included a request for
“samples of each [lot] of [Defendant’s] Products” 6 at issue in this case, in order to test
Defendant’s products to determine their contents.
Defendant answered that it would “produce samples of each [lot] of [its] Products that
exist and which are in its possession.” 7 Nevertheless, Defendant did not produce any samples.
After several attempts to cure the deficiency, Plaintiff filed the instant motion to compel.
Plaintiff seeks production of at least one sample bottle of each of the following: product
GCE500-180 lot numbers 3657, 4082 (expiration November 2016), 4082 (expiration January
2017), 3761, and 3844. Plaintiff also requests that the court grant costs and fees incurred in
bringing the motion. In response, Defendant argues that regulations under the Food and Drug
Administration (“FDA”) require it to retain a certain quantity of each batch of its products so that
they may be tested or examined by the FDA if necessary. Defendant contends that it has only the
amount of bottles required by the FDA for some of its products, and compelling it to produce
those bottles to Plaintiff for testing will render it non-compliant with the FDA’s regulations and
possibly subject it to sanctions.
The court concludes that Defendant must produce the samples requested sufficient for
5
See Docket no. 2.
6
Docket no. 56, Ex. A
7
Id. at Ex. B
2
testing as set forth in Plaintiff’s motion. While the court understands Defendant’s concern
regarding the FDA’s regulations, this order compelling production of the samples should serve as
protection against any potential sanction imposed by the FDA for failure to abide by its
regulations. Accordingly, Plaintiff’s motion to compel is GRANTED. However, the court
denies Plaintiff’s request for costs and fees incurred in bringing the motion.
2. Motion for Sanctions
Plaintiff seeks sanctions against Defendant for the destruction of samples of numerous
batches of product at issue in this case related to Plaintiff’s claims of false advertising.
Specifically, Plaintiff alleges that after this case was filed, Defendant destroyed, or caused to be
destroyed some samples of its products in order to prevent Plaintiff from testing those products
for compliance with Defendant’s label and advertising assertions. Defendant contends that once
it learned of the accusations by Plaintiff that its products did not meet their label specifications, it
had its products tested in order to combat those accusations. Defendant maintains that this
conduct was a reasonable response to the accusations leveled against it by Plaintiff and that its
actions do not constitute spoliation of evidence. Defendant further argues that even assuming a
finding of spoliation, it did not possess the requisite intent and bad faith for an adverse inference
instruction as a sanction, and any prejudice Plaintiff suffered was minimal.
Plaintiff asserts that Defendant’s products subject to this motion can be placed into the
following three categories: (1) products for which there are no existing samples to test
(“Category 1 Products”); (2) products for which there are only two bottles remaining, which
Defendant has failed to produce based on the FDA regulations requiring it to retain samples
(“Category 2 Products”); and (3) products for which Defendant has three or four bottles, of
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which it is willing to produce only one or one-half of one bottle to Plaintiff for testing
(“Category 3 Products”). Plaintiff provided a table listing the lot numbers for Defendant’s
products based on how many bottles of each product Defendant has retained.
In response, Defendant contends that Plaintiff’s table makes it appear as though there are
numerous lots that Defendant destroyed (or failed to preserve) for which sanctions are warranted.
According to Defendant, a majority of those lots have already been tested for at least some of the
allegedly false statements that go to Plaintiff’s false advertising claim. Defendant further asserts
that there are only a few lots for which no testing results are available and there are only a few
lots that are lacking test results with respect to only one or two of the allegedly false statements.
In essence, Defendant argues that of the total 32 lots that have some type of test deficiency, 19
lots fall within Plaintiff’s “Category 2” or “Category 3,” meaning that Defendant has retained at
least two bottles of each of those lots. And, thus, Defendant concludes, there are only 13 lots for
which there is no way to obtain test results regarding the statements Plaintiff alleges are false.
Defendant contends that because it acted reasonably and in good faith with respect to those
products, sanctions are inappropriate in this case.
Spoliation of evidence is “‘the destruction or significant alteration of evidence, or the
failure to preserve property for another’s use as evidence in pending or reasonably foreseeable
litigation.’” Asher Assocs. v. Baker Hughes Oilfield Operations, No. 07-cv-01379, 2009 WL
1328483, at *5 (D. Colo. May 12, 2009) (quoting West v. Goodyear Tire & Rubber Co., 167 F.3d
776, 779 (2d Cir. 1999)). “[L]itigants have a duty to preserve documents or materials . . . that
may be relevant to ongoing and potential future litigation.” Philips Elecs. N. Am. Corp. v. BC
Technical, 773 F. Supp. 2d 1149, 1196 (D. Utah 2011). The duty to preserve may be triggered by
4
the filing of a lawsuit, but if a party is on notice that future litigation is likely, the duty to
preserve may arise before a lawsuit is filed. See id. “A spoliation sanction is proper where (1) a
party has a duty to preserve evidence because it knew, or should have known, that litigation was
imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.”
Burlington N. & Santa Fe Ry. v. Grant, 505 F.3d 1013, 1032 (10th Cir. 2007).
“If spoliation has occurred, a court may impose a variety of sanctions including
dismissal, judgment by default, preclusion of evidence, imposition of an adverse inference, or
assessment of attorney’s fees and costs.” Jones v. Norton, No. 2:09-CV-730-TC, 2014 WL
909569, at *1 (D. Utah Mar. 7, 2014). “The severity of the sanction selected should be a
function of and correspond to the willfulness of the spoliator’s destructive act and the prejudice
suffered by the non-spoliating party.” United States v. Koch Indus., 197 F.R.D. 463, 483 (N.D.
Okla. Aug. 6, 1998). “When deciding whether to sanction a party for the spoliation of evidence,
courts have considered a variety of factors, two of which generally carry the most weight: (1) the
degree of culpability of the party who lost or destroyed the evidence, and (2) the degree of actual
prejudice to the other party.” Jordan F. Miller Corp. v. Mid-Continent Aircraft Service, Inc., No.
97-5089, 1998 WL 68879, *4 (10th Cir. Feb. 20, 1998).
In the Tenth Circuit, to impose an adverse inference as a spoliation sanction, Plaintiff
must demonstrate that (1) Defendant destroyed evidence that it had a duty to preserve, (2)
Plaintiff was prejudiced by the destruction of the evidence, and (3) Defendant acted in bad faith.
See Moreno v. Taos County Bd. of Com’rs, 587 Fed.Appx. 442, 444 (10th Cir. 2014). The court
will address each factor in turn.
First, the court concludes that Defendant failed to preserve evidence that it had a duty to
5
preserve. Defendant became aware that Plaintiff was in the process of initiating a lawsuit against
it for false advertising on or about October 2, 2013, and Plaintiff filed the Complaint shortly
thereafter, on October 28, 2013. The Complaint was served on Defendant on October 30, 2013.
Despite its knowledge concerning this lawsuit, Defendant provided samples of Category 1, 2,
and 3 Products to third-party testing facilities to be tested after it had a duty to preserve evidence
relevant to this action. By sending the only available samples of many of these batches to be
tested, Defendant has prevented Plaintiff from inspecting and testing the Category 1 and 2
Products to prove its false advertising claims. Defendant also has refused to produce any amount
of the Category 3 that would leave Defendant in possession of less than two bottles of any
particular batch pursuant to the FDA regulations discussed above.
Second, the court likewise concludes that Plaintiff was prejudiced by the failure to
preserve the evidence. Defendant’s actions have prevented Plaintiff from determining the full
scope of its claims. Indeed, Defendant set forth the following argument in its opposition
memorandum to Plaintiff’s Motion for Partial Summary Judgment of Willful False Advertising:
[Plaintiff] fails to proffer any evidence demonstrating which lots/batches of [Defendant’s]
product were sold during the time that this [allegedly false advertisement] was made by
[Defendant]. Accordingly, even assuming arguendo that there are batches/lots of
[Defendant] Garcinia Cambogia product that did contain less than [the advertised
amount], [Plaintiff] cannot show that any such batch/lot failed to meet label claims
because it cannot prove that the batch/lot was sold during the period of time when the
statement appeared on the label, online, or in marketing material. 8
Had Defendant not destroyed the Category 1 Products, Plaintiff would be able to match
the label claims to each lot, and then test each lot to see whether the product met the label claims.
However, by sending the Category 1 products off for testing after Defendant’s duty to preserve
8
Docket no. 73 at 25.
6
evidence attached Defendant has assured that Plaintiff cannot prove which claims were on the
labels of those products and whether those products actually met the label claims. Accordingly,
this court concludes that Plaintiff has been prejudiced by Defendant’s failure to preserve
evidence.
Finally, the court concludes that Defendant acted in bad faith when it failed to preserve
samples of its products. “Bad faith, or culpability, ‘may not mean evil intent, but may simply
signify responsibility and control.’” Philips, 773 F. Supp. 2d at 1203 (quoting Phillip M. Adams
& Assocs., L.L.C. v. Dell, Inc., 621 F. Supp. 2d 1173, 1193 (D. Utah 2009)). Accordingly, a party
acts in bad faith when it destroys the evidence over which it exercises responsibility and control
to preserve. The Complaint in this matter had already been filed and Defendant chose to send its
limited supply of products to be tested, thereby destroying any remaining products for testing by
Plaintiff. Further evidence of bad faith arises from Defendant’s argument that it could not
produce the limited products it did possess because the FDA regulations required it to retain at
least two bottles of every lot until at least one year after the expiration of the lot. However,
rather than preserving this evidence, Defendant sent those Category 1 products for testing,
destroying even the bottles it claims it was required to retain per FDA regulations. In addition,
Defendant did not regularly test its products prior to this litigation. Thus, the court concludes
that these facts together demonstrate bad faith on the part of Defendant in taking affirmative
actions to destroy these products after this lawsuit was filed.
Based on the foregoing, Plaintiff’s motion is GRANTED. As for the Category 1
Products, Plaintiff is entitled to entry of an adverse inference instruction that the labels of the
Category 1 Products each bore all of the allegedly false ingredient claims alleged in the
7
Complaint and that the products failed to meet those label claims. When jury instructions are
due, Plaintiff shall submit a proposed jury instruction consistent with this order to Judge Kimball
who will then approve the final instruction before it is provided to the jury.
As for the Category 2 and Category 3 Products, because of the limited supply of products
to test, Plaintiff proposes that the parties submit proposed testing methodologies and facilities to
the court and allow the court to specify which third party facility/facilities will test the products
using which testing methodologies. Each party would then be precluded from challenging the
reliability of the methodology used to test the products. Defendant did not oppose this proposal
in its memorandum in opposition. However, rather than have the court decide initially, within
fourteen (14) days of the date of this order, the parties shall again attempt to stipulate to the
testing facility and the methodologies for testing the remaining products. If the parties cannot so
stipulate, each party shall submit to the court its proposed testing methodologies and facilities
and the court will decide which facility and methodologies shall be used.
3. Defendant’s Motion to Depose Richard Meirowitz
Defendant seeks to reopen fact discovery for the limited purpose of deposing non-party
Richard Meirowitz. Through the course of discovery in the lawsuit, Defendant has encountered
myriad reviews and comments posted by Mr. Meirowitz who is an attorney living in New York
and an Amazon “top reviewer” on various pharmaceutical products on Amazon, including
Defendant’s products. As discovery has progressed, Defendant has discovered the extensive
nature of Mr. Meirowitz’s involvement and prominence in the Amazon community, and has
unearthed disparaging comments that he made about Defendant as a company and of its
products.
8
Specifically, Defendant asserts that the purpose for deposing Mr. Meirowitz is to
determine whether he is, in fact, doing more than merely writing product reviews or
independently commenting on Amazon forums and threads. For example, Defendant explains
that in several of Mr. Meirowitz’s posts and comments regarding Defendant’s products on
Amazon, he purports to have actual ingredient-based product information that is not otherwise
available to the public. Defendant concedes that while it may be possible that Mr. Meirowitz
obtained this information by sending Defendant’s products to an independent lab for testing, it is
more likely than not that he obtained the information from Plaintiff for publication in his
Amazon reviews. Defendant asserts that both Mr. Meirowitz and Plaintiff have not been candid
about their communications with one another and the influence that Mr. Meirowitz has attempted
to achieve as an “Amazon Top Reviewer” to dissuade the Amazon community from purchasing
Defendant’s products. As such, Defendant believes that Mr. Meirowitz is not merely a product
reviewer, but an agent of Plaintiff.
On January 27, 2015, Defendant served Plaintiff with a notice of intent to serve a
subpoena on Mr. Meirowitz. On February 9, 2015, Defendant served a subpoena on Mr.
Meirowitz. Defendant asserts that, while on a telephone call with Mr. Meirowitz, Mr. Meirowitz
initially disavowed any relationship with Plaintiff, but soon after sent a letter changing his
position and claimed an attorney-client privilege with Plaintiff. Defendant subsequently
withdrew the subpoena. Then on May 15, 2015, during a meet and confer with Plaintiff’s
counsel, Defendant discussed the possibility of issuing a second subpoena and deposing Mr.
Meirowitz after the close of fact discovery. After the meet and confer, Plaintiff sent an email to
Defendant agreeing not to object “to [Defendant] taking the deposition of Mr. Meirowitz after
9
the close of discovery as ‘untimely so long as the subpoena [was] served on Mr. Meirowitz prior
to the close of discovery on May 29.’” 9 Plaintiff contends that its agreement did not prevent it
from objecting on grounds of irrelevancy, burdensomeness, and untimeliness if Mr. Meirowitz
was served after May 29, 2015. On May 29, 2015, Defendant sent a notice of intent to serve the
subpoena on Mr. Meirowitz to Plaintiff and sent the subpoena for service on Mr. Meirowitz.
However, the subpoena was not served on Mr. Meirowitz until June 1, 2015.
Plaintiff and Mr. Meirowitz filed a motion to quash the subpoena in the United States
District Court for the Southern District of New York. That court granted Plaintiff’s motion on
grounds of untimeliness (although the subpoena was merely one day late). As such, this court
need only determine whether to reopen fact discovery for the limited purpose of deposing Mr.
Meirowitz.
“Whether to extend or reopen discovery is committed to the sound discretion of the trial
court.” Smith v. United States, 834 F.2d 166, 169 (10th Cir. 1987). Under rule 6(b) of the
Federal Rules of Civil Procedure, the court may extend discovery for good cause and excusable
neglect. See Fed. R. Civ. P. 6(b). The Tenth Circuit has held that courts should weigh six factors
when considering whether to reopen discovery:
1) whether trial is imminent, 2) whether the request is opposed, 3) whether
the non-moving party would be prejudiced, 4) whether the moving party
was diligent in obtaining discovery within the guidelines established by
the court, 5) the foreseeability of the need for additional discovery in light
of the time allowed for discovery by the district court, and 6) the
likelihood that the discovery will lead to relevant evidence.
Smith, 834 F.2d at 169. In this matter, a firm trial date has not yet been set, thus this factor
9
Docket No. 81 at 12.
10
weighs in favor of reopening discovery. Because Plaintiff opposes the deposition, the second
factor weighs against reopening discovery.
The third factor addresses whether the Plaintiff would be prejudiced. See Smith, 834 F.2d
at 169. Here, Plaintiff claims prejudice from the additional expense of the deposition. However,
expense alone is usually not enough to show prejudice. See Glob. Fitness Holdings, LLC v. Fed.
Recovery Acceptance, Inc., No. 2:13-CV-00204-DN, 2015 WL 1467352, at *2 n.44 (D. Utah
Mar. 30, 2015) (citing cases holding that expense alone will not equal legal prejudice). The court
finds no other prejudice against the Plaintiff. Thus, the third factor weighs in favor of reopening
discovery.
The fourth factor addresses whether the moving party was diligent in obtaining discovery
within the guidelines established by the Court. See Smith, 834 F.2d at 169. As noted by the
United States District Court for the Southern District of New York, Defendant should have
“sought an extension of the discovery period under Federal Rule of Civil Procedure 16(b),” but
failed to do so. 10 Instead, Defendant served a subpoena to a non-party after the end of fact
discovery. This court concludes that Defendant’s failure to seek an extension constitutes
excusable neglect. See Fed. R. Civ. P. 6(b). The length of delay was short. Defendant served the
subpoena on Mr. Meirowitz one business day after the cutoff of fact discovery. Defendant
explains that it misunderstood its agreement with Plaintiff and believed that Plaintiff would be
satisfied if Defendant provided notice to Plaintiff by the end of fact discovery, which Defendant
did. While the misunderstanding may have been caused by Defendant’s lack of attention, the
Defendant’s actions appear to be in good faith. Defendant scheduled the deposition for June 16,
10
Docket No. 82, Exhibit 7.
11
2015. But for the untimeliness of the subpoena, there appears no reason Plaintiff would have
objected to the date of the subpoena. Plaintiff fails to challenge sufficiently the relevancy or
burdensomeness of the deposition. Thus, Defendant’s failure to seek an extension was the result
of excusable neglect. The court concludes that Defendant was diligent in attempting to depose
Mr. Meirowitz.
The fifth factor addresses the foreseeability of the need for additional discovery in light
of the time allowed for discovery by the Court. See Smith, 834 F.2d at 169. In this case, the
court’s initial scheduling order set October 22, 2014, as the last day of discovery. 11
Subsequently, the court twice extended fact discovery. During the last extension, Defendant
learned of Mr. Meirowitz and initially attempted to depose him in February 2015, but withdrew
the subpoena based on representations by Mr. Meirowitz and Plaintiff. Regardless of
Defendant’s agreement with Plaintiff, Defendant foresaw the need to depose Mr. Meirowitz on
May 15, 2015. Thus, the court finds that the fifth factor does not weigh for or against reopening
discovery.
The sixth factor addresses the likelihood that the discovery will lead to relevant evidence.
See Smith, 834 F.2d at 169. Pursuant to Fed. R. Civ. P. 26(b)(1), any discovery sought must be
relevant. “Relevant information need not be admissible at trial if the discovery appears
reasonably calculated to lead to the discovery of admissible evidence.” Id. “The district court
has broad discretion over the control of discovery, and [the Tenth Circuit] will not set aside
discovery rulings absent an abuse of that discretion.” See Sec. & Exch. Comm’n v. Merrill Scott
& Assocs., Ltd., 600 F.3d 1262, 1271 (10th Cir. 2010) (quotations and citations omitted).
11
Docket No. 29 at 2.
12
Plaintiff has accused Defendant of manipulating the Amazon.com review system. The
possibility that Plaintiff has engaged in the same nefarious conduct is relevant to this case. The
information sought by Defendant is likely to be relevant to the claims and defenses in the case.
Thus, the sixth factor weighs in favor of reopening discovery.
Weighing the relevant factors, the court concludes that amending the scheduling order to
extend fact discovery to April 29, 2016, for the limited purpose of allowing Defendant to depose
non-party Richard Meirowitz is warranted. As such, Defendant’s motion to depose Mr.
Meirowitz is GRANTED.
CONCLUSION
Based on the foregoing, IT IS HEREBY ORDERED that:
(1)
Plaintiff’s motion to compel is GRANTED as set forth above;
(2)
Plaintiff’s motion for sanctions is GRANTED as set forth above; and
(3)
Defendant’s motion to reopen fact discovery for the limited purpose of deposing Mr.
Meirowitz is GRANTED.
IT IS SO ORDERED.
DATED this 31st day of March, 2016.
BY THE COURT:
PAUL M. WARNER
United States Magistrate Judge
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