Advantus, Corp. v. Sandpiper of California, Inc. ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ADVANTUS, CORP., Case No.: 19cv1892-CAB (NLS) 12 Plaintiff, ORDER ON MOTION FOR DETERMINATION OF DISCOVERY 13 v. DISPUTE NO. 2 14 SANDPIPER OF CALIFORNIA, INC.; n/k/a DBJ Enterprises, Inc.; PIPERGEAR [ECF No. 165] 15 USA, INC.; INNOVAPRO 16 CORPORATION; and DAVID JACOBS, 17 Defendants. 18 19 Before the Court is Plaintiff Advantus, Corp.’s (“Advantus”) Motion for 20 Determination of Discovery Dispute No. 2. ECF No. 165. Because the motion was not 21 filed as a joint motion per the Chamber Rules, the Court ordered Defendants Sandpiper of 22 California, Inc. (“Sandpiper”), Pipergear USA, Inc. (“Pipergear”), and David Jacobs 23 (“Jacobs”) (collectively, the “Jacobs Defendants”) to oppose and Plaintiff to file a reply. 24 ECF No. 166. On September 25, 2020, the Jacobs Defendants filed an opposition (ECF 25 No. 170), and Plaintiff filed a reply on October 2, 2020. After due consideration and for 26 the reasons set forth below, the Court GRANTS Plaintiff’s motion to compel discovery 27 from the Jacobs Defendants. 28 // 1 I. BACKGROUND 2 Plaintiff is a company that manufactures and distributes military style bags, 3 backpacks, and other luggage items. ECF No. 121 at ¶ 2. It filed this lawsuit against the 4 Jacobs Defendants and Innovapro Corporation (“Innovapro”), alleging that they engaged 5 in false advertising of competing products and labeled their goods as being made in the 6 USA without any basis to do so. Id. at ¶¶ 19-23. 7 The discovery at issue in this motion consists of the following: (1) Plaintiff’s 8 Second Set of Requests for Production to Pipergear (ECF No. 165-3 at 2-82); (2) 9 Plaintiff’s Second Set of Interrogatories to Pipergear (ECF No. 165-3 at 82-100); (3) 10 Plaintiff’s First Set of Requests for Production to David Jacobs (ECF No. 165-3 at 101- 11 133); (4) Plaintiff’s Interrogatories to David Jacobs (ECF No. 165-3 at 133-136); (5) 12 Plaintiff’s Second Set of Interrogatories to Sandpiper (ECF No. 165-3 at 136-155). The 13 Jacobs Defendants served responses to the discovery on July 23, 2020. ECF No. 165-2 at 14 1. After failed attempts to meet and confer on the responses to this discovery, Plaintiff 15 filed the instant motion. 16 II. DISCUSSION 17 A. Jacobs Defendants’ Opposition 18 As a threshold matter, the Court will first address the Jacobs Defendants’ 19 opposition to this motion. The opposition primarily agrees that the Court should grant 20 the motion, but argued that the Court should deny the request for immediate responses. 21 ECF No. 170 at 2. Specifically, the Jacobs Defendants argue that the Court should not 22 rule on the objections at this time, that they be permitted 60 days to supplement responses 23 and produce documents, the parties to further meet and confer after the supplement, and 24 then submit to the Court a modified statement of any unresolved issues. Id. at 4. Plaintiff 25 opposes this proposal, arguing that it would essentially give Defendants a do-over on 26 what they should have done in the first place, reward them for not engaging in the meet 27 and confer process, and may disrupt the case schedule. ECF No. 174. 28 Plaintiff details the attempts to meet and confer prior to filing this motion. The 1 parties initially scheduled a conference for August 13 to discuss the discovery responses 2 and objections. ECF No. 165-2 at 2. On August 12, the Jacobs Defendants’ counsel, Mr. 3 Ramey, communicated that he needed to reschedule the conference and it was reset for 4 August 17. Id. Plaintiff’s counsel called Mr. Ramey at the scheduled time on August 17, 5 but could not reach him and left a voicemail. Id. at 2-3. Having not heard back by 6 August 21, Plaintiff’s counsel sent a letter outlining the issues with the responses and 7 requesting a response by August 28. Id. at 3. Still not having heard back, Plaintiff’s 8 counsel left voicemails for Mr. Ramey on September 2, 3, and 4, and followed each of 9 the calls with emails—which all went unanswered. Id. Finally, on September 8, 2020, 10 Plaintiff’s counsel emailed Mr. Ramey with a draft of this discovery dispute, stating that 11 day was the deadline to file it under the Court’s Chamber Rules. Id. An assistant called 12 from Mr. Ramey’s office stating that he would not be available until the following day. 13 Id. Because of the pending deadline, Plaintiff filed this motion later on September 8. 14 Counsel for the Jacobs Defendants does not dispute Plaintiff’s accounting of the 15 meet and confer efforts. Rather, Mr. Ramey argues that the lack of communication was 16 due to one of his staff being exposed to Covid-19 and his demands on other cases. See 17 ECF No. 170-1 at ¶¶ 45-50. This does not excuse the lack of communication over 18 several weeks, between August 12 through September 8, which Mr. Ramey does not 19 dispute. Further, while the Court appreciates Mr. Ramey’s detailing of his diligence in 20 reviewing and getting documents ready for production after September 8 (see ECF No. 21 170-1 at ¶¶ 37-44), the Court does not find that this excuses the lack of participation in 22 the meet and confer process. As detailed further below, the Court will not order 23 immediate compliance, giving the Jacobs Defendants additional time to produce 24 documents, but the Court will rule on the issues presented in Plaintiff’s motion to 25 minimize further delay in the case. 26 B. Individual Discovery Issues 27 a. Interrogatories 28 As to the interrogatories for all Jacobs Defendants, Plaintiff states that their 1 responses have not been verified as required under Federal Rule of Civil Procedure 2 33(b)(1). ECF No. 165-2 at 5. The Court GRANTS the motion to compel as to this 3 issue, and ORDERS each Jacobs Defendant to provide verified responses to Plaintiff’s 4 interrogatories within 21 days of this order. 5 b. Sandpiper’s Responses 6 Plaintiff argues that Defendant Sandpiper never provided actual responses to its 7 request for production. ECF No. 165-2 at 4. Rather, what Plaintiff received was a 8 duplicate of Pipergear’s responses, with objections that apply to Pipergear and not 9 Sandpiper. Id. Plaintiff argues that the time for response has now long passed, and any 10 objections are waived. Id. The Court agrees and accordingly, GRANTS the motion to 11 compel as to this issue. Sandpiper is ordered to respond to and produce documents 12 responsive to Plaintiff’s requests for production within 21 days of this order. Any 13 objections are deemed waived. 14 c. Specific Objections 15 As to the other Jacobs Defendants who gave objections in response, Plaintiff 16 argues that several are unwarranted and should be overruled by the Court. The Court will 17 address each of them in turn. 18 False Advertising Overbreadth Objection 19 Plaintiff argues that the Court should reject Defendants’ objection suggesting that 20 Plaintiff’s false advertising claims are only “alleged to be a single false representation to 21 a military exchange buyer.” ECF No. 165-2 at 6. Plaintiff argues that, in fact, its 22 allegations about false advertising are much broader. Id. 23 After review of the operative complaint in this case, the Court agrees. Plaintiff 24 alleges that Defendants have been falsely advertising that their products were made in the 25 USA since 2013, including at least the following: a statement on the FAQ section of their 26 product website, in their product catalog listings, their flag symbol legend, the “About” 27 section of their Facebook page, in oral communications to buyers at events at the Armed 28 Forces Exchanges, and on their business cards. ECF No. 121 at ¶¶ 21-23. 1 Given these allegations, this objection is OVERRULED. Defendants may not 2 limit their production of documents using this objection and temporally are limited to 3 January 2013 as specified in Plaintiff’s requests’ general instructions. 4 Other Overbreadth Objections 5 Plaintiff argues that Defendants otherwise attempt to limit their responses to its 6 requests for production by stating that the requests are too broad and not proportional to 7 the case. Plaintiff does not explicitly identify what exact Requests for Production are 8 affected by which issue, so the Court will address the issues presented below and hold the 9 parties to apply its rulings in good faith as to all requests for production that are affected. 10 Alter Ego 11 Plaintiff argues that Defendants attempt to limit their responses by stating that the 12 alter ego theory of liability only contains two elements and should be limited to the time 13 period around Sandpiper’s alleged misrepresentations to buyers at the Army and Air 14 Force Exchange. ECF No. 165-2 at 7. 15 First, at to the temporal issue, the objection is OVERRULED. As discussed 16 above, the false misrepresentation allegations are broader than just the one Armed Forces 17 Exchange event and should reach back to January 2013. See ECF No. 121 at ¶¶ 21-23. 18 Second, as to what information may go to establish alter ego liability, Defendants 19 are correct that it is a two factor test: (1) where there is “such unity of interest and 20 ownership that the separate personalities of the corporation and the individual no longer 21 exist” and (2) whether “if the acts are treated as those of the corporation alone, an 22 inequitable result will follow.” Pac. Mar. Freight, Inc. v. Foster, No. 10-CV-0578-BTM- 23 BLM, 2010 WL 3339432, at *6 (S.D. Cal. Aug. 24, 2010). However, many factors go 24 into this calculation, including for example “commingling of funds, failure to maintain 25 minutes or adequate corporate records, identification of the equitable owners with the 26 domination and control of the two entities, the use of the same office or business 27 locations, the identical equitable ownership of the two entities, the use of a corporation as 28 a mere shell, instrumentality or conduit for a single venture or the business of an 1 individual, and the failure to adequately capitalize a corporation.” Id. 2 Under this legal framework, the Court agrees with Plaintiff that information 3 regarding commingling of assets and funds, holding out one entity as liable for the debts 4 of another, and disregard for corporate formalities would be relevant information and 5 proportional to the needs of the case. Indeed, many of these factors have been alleged in 6 the complaint. Plaintiff alleges that Defendant Jacobs founded both Sandpiper and 7 Pipergear and exerted control over both companies, shifted money between them, 8 directed employees of one to perform services for the other, made “loans” between one 9 and the other without formal accounting, and that Pipergear and Sandpiper shared offices 10 and did not engage in business with each other at arms-length. ECF No. 121 at ¶¶ 11-18. 11 Thus, this objection is OVERRULED. Defendants may not withhold any 12 documents under this objection with regard to requests seeking information regarding the 13 relationship between Mr. Jacobs, Sandpiper, and Pipergear. 14 Voidable Transfer 15 Plaintiff argues that information sought in its requests are also relevant to its 16 voidable transfer claim. For this claim, Plaintiff alleges that in August 2018, Sandpiper 17 transferred assets to Defendant Innovapro, without the proper process, and Innovapro did 18 not in turn provide reasonably equivalent value for the assets. ECF No. 121 at ¶¶ 93-103. 19 During this time, Sandpiper forgave loans owed by Mr. Jacobs and Pipergear. Id. Thus, 20 Plaintiff argues that evidence sought in its requests concerning what the actual 21 relationship was between Sandpiper and Innovapro would be relevant to this claim as 22 well. 23 The Court also agrees with Plaintiff on this issue. Defendants must produce 24 documents responsive to Plaintiff’s requests for production regarding the relationship 25 between Sandpiper and Innovapro. Defendants must also produce documents regarding 26 the loans around August 2018 discussed in Plaintiff’s brief (ECF No. 165-2 at 8) and the 27 2018 Asset Purchase Agreement with Innovapro and documents related to this 28 transaction, including any loans forgiven (ECF No. 165-2 at 9). 1 Conspiracy 2 Plaintiff’s allegations also include that Innovapro, Sandpiper, and Pipergear all 3 conspired together to falsely advertise their products as being made in the USA. ECF 4 No. 121 at ¶¶ 87-92. Thus, Plaintiff argues that information sought from Pipergear 5 concerning its operations and communications with Sandpiper during the time period 6 affecting the false advertising claim is relevant and should be produced, as relevant to 7 conspiracy as well as alter ego, direct liability, and voidable transfer. 8 The Court again agrees with Plaintiff on this issue. Defendants must produce 9 documents responsive to Plaintiff’s requests for production regarding Pipergear’s 10 operations and with relationship with Sandpiper that are relevant to the conspiracy claim. 11 Financial Information 12 Plaintiff seeks information regarding Sandpiper and Pipergear’s revenue and costs 13 related to any of their products claimed to be made in the United States as relevant to 14 disgorgement of profits, which Plaintiff seeks as part of its damages. ECF No. 165-2 at 15 9-10. Plaintiff also seeks documents bearing upon Defendants’ actions and motives 16 relating to false marketing and advertising of the products as relevant to establishing 17 whether the violation was willful. Id. 18 Plaintiff asserts a claim for false advertising under the Lanham Act, 15 U.S.C. § 19 1125(a)(1)(B). ECF No. 121 at ¶¶ 53-65. As part of its damages, Plaintiff requests that 20 Defendants account for and pay all profits realized from sale of the allegedly falsely 21 advertised products. Id. at 15. As Plaintiff points out, the Supreme Court recently ruled 22 in Romag Fasteners, Inc. v. Fossil, Inc. that willfulness is not required in order for 23 Plaintiff to be awarded a disgorgement of profits award in a Lanham Act case, but 24 willfulness is still a “highly important consideration.” 140 S. Ct. 1492, 1497 (2020). 25 Thus, Plaintiff’s motion to compel is GRANTED in this regard. Any financial 26 documents that would establish Defendants’ profits for the relevant products, including 27 revenue and costs, as well as documents that would go toward whether the alleged false 28 advertising was willful are relevant and should be produced. 1 Mark Riley Documents 2 Plaintiff also claims that Defendants have not produced documents responsive to 3 their requests for production that are in the custody of their former accountant, Mark 4 Riley. ECF No. 165-2 at 12-13. Defendants themselves served a subpoena on Mr. Riley 5 to get these documents. Defendants’ counsel states that he now is in possession of at 6 least some documents from Mr. Riley and has reviewed them. ECF No. 1701-1 at 28-31. 7 He has uncovered a potential issue with attorney client privilege (which will be addressed 8 below, and also believes some pertinent documents may be missing (for example, 9 documents related to purchases, sales, and agreements). Id. 10 To the extent the Defendants are now in possession of non-privileged documents 11 from Mr. Riley that are responsive to Plaintiff’s requests for production, Defendants must 12 produce those to Plaintiff on a rolling basis. To the extent that Defendants’ counsel 13 continues to identify missing documents, the Court assumes that Defendants’ counsel has 14 been diligent in obtaining them from Mr. Riley in the month between when counsel filed 15 his declaration until the present day. These documents must be produced to Plaintiff 16 pursuant to the timeline set in this Order. Accordingly, Plaintiff’s motion to compel as to 17 these documents is GRANTED. 18 Attorney Client Privilege 19 Plaintiff raises two issues concerning attorney client privilege. First, Plaintiff 20 states that it seeks documents sufficient to show certain information, for example, 21 Pipergear’s indebtedness to Sandpiper at from year-end 2013, 2014, through the date of 22 loan forgiveness as related to the fraudulent transfer claim. ECF No. 165-2 at 10-11. 23 Defendants have objected to some of these requests on attorney client privilege grounds. 24 Id. Plaintiff argues that financial documents like these should be produced and are 25 unlikely to be privileged because attorney review of a document does not make the 26 document privileged. Id. Second, with regard to Mr. Riley’s documents, in Defendants’ 27 opposition, their counsel states that some of the documents are privileged because they 28 contain communications between Mr. Riley and an attorney, Dan Navigato, regarding the 1 FTC’s complaint against Defendants. ECF No. 170-1 at ¶ 25, 29-30. 2 Currently, it does not appear that any privilege log has been produced. Before the 3 Court can evaluate any privilege issues, Defendants must produce a privilege log to 4 Plaintiff if they are going to withhold any documents from themselves or Mr. Riley on 5 privilege grounds. Thus, the Court ORDERS Defendants to produce a privilege log, 6 along with the document production. In evaluating whether documents are privileged 7 and preparing the privilege log, the Court expects Defendants to be cognizant of and 8 faithfully apply the the law surrounding attorney client privilege.1 9 III. CONCLUSION 10 After due consideration and for the reasons stated above, Plaintiff’s motion to 11 compel production from Defendants is GRANTED. The Court ORDERS the Jacobs 12 Defendants to: 13 (1) Provide to provide verified responses to Plaintiff’s interrogatories within 21 14 days of this order; 15 (2) Sandpiper is ordered to respond to and produce documents responsive to 16 Plaintiff’s requests for production within 21 days of this order; 17 (3) Defendants Jacobs and Pipergear must produce documents responsive to 18 Plaintiff’s request for production in accordance with this order, particularly 19 as to the objections above that have been overruled, within 21 days of this 20 order; 21 22 23 1 “The attorney-client privilege protects confidential communications between attorneys and clients, which are made for the purpose of giving legal advice.” United States v. 24 Richey, 632 F.3d 559, 566 (9th Cir. 2011). The advice sought must be of a legal nature. 25 Dunfee v. Truman Capital Advisors, LP, No. 12-CV-1925-BEN DHB, 2013 WL 6118361, at *5 (S.D. Cal. Nov. 20, 2013). The work product privilege protects 26 documents only if they were prepared in anticipation of litigation. F.T.C. v. Grolier, Inc., 27 462 U.S. 19, 25 (1983). Simple lawyer review of a document, without more, does not make the document privileged. Phillips v. C.R. Bard, Inc., 290 F.R.D. 615, 647 (D. Nev. 28 1 (4) Defendants must produce to Plaintiff a privilege log for any documents that 2 are being withheld for any privilege within 21 days of this order. This log 3 must be sufficiently detailed such that Plaintiff, and the Court if necessary, 4 can make a determination of whether the privilege has been properly 5 asserted. 6 IT IS SO ORDERED. 7 ||Dated: October 26, 2020 g Mite. Lemme 9 Hon. Nita L. Stormes 10 United States Magistrate Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28