Acceleration Products v. Arikota et al

Filing 124

MEMORANDUM DECISION AND ORDER granting 104 Motion to Compel; granting 104 Motion to Amend Scheduling Order. Signed by Magistrate Judge Brooke C. Wells on 3/14/16 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
ACCELERATION PRODUCTS, INC. dba
ATHLETIC REPUBLIC, a North Dakota
corporation,,

MEMORANDUM DECISION AND ORDER
GRANTING MOTION TO COMPEL
Case No. 2:14-cv-00252-JP

Plaintiff,
v.

District Judge Jill Parrish

ARIKOTA, INC., an Arizona corporation;
ECLECT, LLC, an Arizona limited liability
company; MICHAEL BIRKELAND, an
individual; CAROL BIRKELAND, an
individual; and KRISTOPHER BIRKELAND,
an individual;,

Magistrate Judge Brooke Wells

Defendants.

Pending before the court is Plaintiff Acceleration Products, Inc. dba Athletic Republic,
Motion to Compel discovery from Defendant Kristopher Birkeland and to Extend the Scheduling
Order. 1 After considering the memoranda of the parties, and relevant case law, the court has
determined that oral argument is unnecessary and as set forth below the court GRANTS the
motion. 2
This case concerns the alleged breach of a franchise licensing agreement and the
unlawful use of trademarks and copyrighted materials. Plaintiff developed “a unique system to
operate performance sports training centers” which provides high level training to athletes. 3
Defendants entered into a licensing agreement with Plaintiff to operate two training centers

1

Docket no. 104.

2

DUCivR. 7-1(f).

3

Complaint ¶11, docket no. 4.

located in the Scottsdale and Tempe Arizona areas. Subsequent to these agreements things
turned south and the instant case ensued.
According to Plaintiff, Defendant Kristopher Birkeland (Birkeland) has “failed to submit
Initial Disclosures, respond to discovery requests, produce documents or provide dates for a Rule
34 inspection of the athletic facilities at issue in this case, despite the fact that this discovery was
served almost a year ago.” 4 This failure “has prevented Plaintiff from uncovering critical
information necessary to take meaningful depositions and file appropriate dispositive motions
within the Amended Scheduling Order’s current deadlines.” 5 Plaintiff moves the court for an
order (i) compelling Birkeland to provide Initial Disclosures, answers to Plaintiff’s
Interrogatories, responses to Plaintiff’s Requests for Production of Documents along with
responsive documents and dates for a Rule 34 inspection of the athletic facilities and (ii)
extending the Amended Scheduling Order’s remaining deadlines by four months so Plaintiff can
complete any necessary discovery and bring any appropriate dispositive motions. 6
In opposition, Mr. Birkeland “hereby reminds the court that he was granted Bankruptcy
by the United States Bankruptcy Court with a discharge order on April 3, 2015.” 7 Further, Mr.
Birkeland says he cannot comply with a Rule 34 inspection because he does not have ownership
or control of the equipment nor access to the locations Plaintiffs want to inspect. In a sur-reply
Defendant argues he has been advised by his bankruptcy counsel that Plaintiff is “incorrect in
assuming any contractual obligation post discharge and that their continued harassment via
phone calls should constitute in sanctions from the court if continued.” 8 Mr. Birkeland does not
4

Mtn. p. 2.

5

Id.

6

Id.

7

Response p. 1, docket no. 107.

8

Sur-reply response p. 1, docket no. 109.

cite to any case law to support his assertion nor does he respond to the case law cited to by
Plaintiff in its memoranda. Plaintiff also contests Mr. Birkeland’s allegations of harassment
stating that Mr. Birkeland has actually initiated phone calls contacting Plaintiff’s counsel rather
than Plaintiff’s counsel harassing Mr. Birkeland into responding to the requested discovery.
Plaintiff agrees with Mr. Birkeland that any money obligations he owed to Plaintiff were
discharged in the bankruptcy proceeding. Plaintiff is not interested in those obligations. Instead,
Plaintiff seeks to enforce the various non-compete obligations Defendant owes pursuant to
certain agreements. These include “the obligation to refrain from operating or otherwise being
affiliated with The Rise or any health fitness or other business competitive to Plaintiff located at
either 9171 East Bell Road in Scottsdale, Arizona, 8270 S. Kyrene Road, Tempe, AZ, or within
10 miles of an entity licensed to use Plaintiff’s trademarks or patent rights.” 9 Plaintiff also seeks
to depose Mr. Birkeland arguing that his bankruptcy questioning is not the same as that sought
here because the scope of that examination was limited by the bankruptcy code.
The court is persuaded by Plaintiffs arguments and the case law cited to in support of its
position. For example, in Kennedy v. Medicap Pharmacies, Inc. 10 the debtors sought to
discharge an injunction that issued from a prior breach of a covenant not to compete. Their
request was denied by both the bankruptcy court and the district court. On appeal the Sixth
Circuit affirmed those rulings holding a breach of a covenant not to compete was not a “claim”
and therefore was not dischargeable in the bankruptcy proceedings. 11 In similar fashion, the

9

Pla. Reply p. 3, docket no. 108.

10

267 F.3d 493 (6th Cir. 2001).

11

Id. at 406.

Seventh Circuit in Matter of Udell 12 found that the right to equitable relief for the breach of a
covenant not to compete was not dischargeable in a bankruptcy proceeding. 13
All equitable claims, however, do not survive bankruptcy proceedings. “Claims for
equitable relief are dischargeable under the bankruptcy code if they can be ‘reduced to a
monetary obligation.’” 14 This court found such a circumstance in Derma Pen, LLC v.
4EverYoung Ltd. where 4EverYoung’s specific performance claim could be alternatively
satisfied with monetary damages. 15
Here, Plaintiff’s claims for violations of various non-compete obligations are not readily
convertible into a monetary equivalent. Therefore the court finds these equity based claims
survived Mr. Birkeland’s bankruptcy proceedings. The court further finds that the discovery
sought by Plaintiff relates to these claims and is relevant under the broad standards of Rule 26.
Accordingly, Plaintiffs motion is GRANTED.
The court is also persuaded that the previous questioning of Mr. Birkeland in the
bankruptcy proceedings is not the equivalent of that sought here by Plaintiff. The court therefore
grants Plaintiffs request to depose Mr. Birkeland.

12

18 F.3d 403 (7th Cir. 1994).

13

Id. at 408.

14

Dalvit v. United Airlines, Inc., 2009 WL 4894025 *4 (10th Cir. 2009) (quoting Ohio v. Kovacs, 469 U.S. 274, 282
(1985)).

15

2015 WL 641618 (D.Utah 2015).

ORDER
For the foregoing reasons Plaintiffs Motion to Compel Discovery and to Extend
Scheduling Order is GRANTED. The parties are ORDERED to submit a new proposed
scheduling order within thirty (30) days from the date of this order.
IT IS SO ORDERED.

DATED this 14 March 2016.

Brooke C. Wells
United States Magistrate Judge