In re Outlaw Labs., LP Litig.
| Decision Date | 05 March 2020 |
| Docket Number | Case No.: 18CV840 GPC (BGS) |
| Parties | IN RE: OUTLAW LABORATORIES, LP LITIGATION |
| Court | U.S. District Court — Southern District of California |
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL
[ECF 116]
Counter-claimant Roma Mikha and Third Party Plaintiff NMRM, Inc. and Skyline Market, Inc. (collectively the "Stores") move to compel Plaintiff Outlaw Laboratory, L.P. ("Outlaw") to provide full and complete responses to the Stores Document Requests 1-7, 10, 13-16 and 19-20 and Interrogatories 1-3 and 5-8 which encompass: demand letters, communications between Outlaw and class members, identification of law firms that represented Outlaw in conjunction with these demand letters, settlement agreements, amounts paid in settlement, documents identifying Outlaw employees, documents showing Outlaws current and former partners, and documents related to the manufacture and sale of Tri-Steel.1 (ECF 116, 138,2 148.) The Stores argue the discovery requests are relevant to class certification and the Stores' class counterclaims against Outlaw and are proportionate to the needs of the case. Outlaw primarily argues the requests are overbroad.
The Stores have alleged counterclaims under the Racketeer Influenced and Corrupt Organizations Act ("RICO") and a recession claim on behalf of a class of similarly situated stores.3 The Stores allege that since at least December 2017, Outlaw, Outlaw's former attorneys Tauler Smith, and Outlaw's principles, Michael Wear and Shawn Lynch, have engaged in a scheme that includes sending demand letters via U.S. mail to small businesses that threaten the store could be held liable for over $100,000 based on false and misleading statements about potential liability for the sale of certain products by the stores. (SACC ¶¶ 2, 26, 82-88.) The SACC alleges Outlaw employs "investigators," some hired through craiglist postings by Outlaw's counsel Tauler Smith, who identify stores selling the products, take pictures of storefronts and shelves in the store with the products and provide that information to others participating in the scheme to target these stores. (SACC ¶¶ 66, 73, 86, 92.) The SACC alleges that Outlaw and its attorneys then send the demand letters with FDA notice attached that falsely indicate the store isillegally selling products in violation of RICO and the Lanham Act. (SACC ¶¶ 2, 23-24, 26-52, 84-86, 88.) The demand letters also allegedly include pictures taken of receipts for purchase of the products by investigators. (SACC ¶¶ 68, 73, 91.) Follow-up communications then offer to settle for increasingly lower amounts, including as low as $2,500. (SACC ¶¶ 3-4, 56, 72, 87, 98.)
The Stores seek to bring these claims on behalf of a Store Class, "All business entities in the Unites States that received a demand letter substantially similar to the letter received by the class representatives" with three subclasses: (1) Sued Stores;4 (2) Threatened Stores;5 and (3) a Payment Class.6 (SACC ¶¶ 77-81.) These subclasses encompass three different outcomes that have resulted from Outlaw's demand letters. Some stores, like defendant Roma Mikha, received the demand letter, removed the products from their shelves (losing out on those sales) based on their initial belief in the false assertions in the demand letter, but did not pay a settlement and were sued. (SACC ¶¶ 33, 77, 89.) Others, like NMRM, received the demand letter, removed the productsfrom the shelves, but did not pay the settlement and were not sued. (SACC ¶¶ 34, 78, 89.) And, still others, like Third Party Plaintiff Skyline Market, removed the products from the shelves and paid a settlement. (SACC ¶¶ 4, 22, 35, 69, 71, 89, 97-99.) The Stores also assert a claim for rescission on behalf of Skyline Market and the class to rescind the settlement agreements entered into with Outlaw (SACC ¶¶ 96-99.)
The actual discovery requests at issue and related definitions are included below as necessary in analyzing the propriety of the discovery by each topic.
The Stores seek to compel responses to both document requests and interrogatories to obtain information and documents the Stores claim is relevant primarily to class certification. Before analyzing the specific requests, the Court outlines the applicable authority.
"A party may serve on any other party a request within the scope of Rule 26(b) to produce any designated documents or electronically stored information." Rule 34(a)(1)(A). The request must describe the document sought "with reasonable particularity" and any "objection must state whether any responsive materials are being withheld on the basis of that objection." Rule 34(b)(2). The requesting party may move to compel the production of responsive documents if a party fails to produce documents. Rule 37(a)(3)(B)(iv).
"An interrogatory may relate to any matter that may be inquired into under Rule 26(b)." Fed. R. Civ. P. 33(a)(2). "Each interrogatory must, to the extent it is not objected to, be answered separately and fully in writing under oath." Rule 33(b)(3). "The grounds for objecting to an interrogatory must be stated with specificity" Rule 33(b)(4). The party propounding the interrogatory may move to compel an answer if the party fails to answer. Rule 37(a)(3)(B)(iii). "If the answer to an interrogatory may be determined byexamining, auditing, compiling, abstracting, or summarizing a party's business records . . . , and if the burden of deriving or ascertaining the answer will be substantially the same for either party, the responding party may answer by" producing or providing an opportunity for the moving party to examine records. Rule 33(d).
As the party seeking to compel discovery, the Stores have "the burden of establishing that [their] request[s] satisfy the relevancy requirements of Federal Rule 26(b)(1)." Louisiana Pac. Corp. v. Money Market 1 Inst. Inv. Dealer, 285 F.R.D. 481, 485 (N.D. Cal. 2012) (citing Soto v. City of Concord, 162 F.R.D. 603, 610 (N.D. Cal. 1995)). Outlaw, as the party opposing discovery, "has the burden of showing that discovery should not be allowed, and also has the burden of clarifying, explaining, and supporting its objections with competent evidence." Id. (citing DIRECTV, Inc. v. Trone, 209 F.R.D. 455, 458 (C.D. Cal. 2002)). "An opposing party can meet its burden by demonstrating that the information is being sought to delay bringing the case to trial, to embarrass or harass, is irrelevant or privileged, or that the person seeking discovery fails to show need for the information." Colaco v. ASIC Advantage Simplified Pension Plan, 301 F.R.D. 431, 434 (N.D. Cal. 2014) (citing Khalilpour v. CELLCO P'ship, No. C 09-02712 CW (MEJ), 2010 WL 1267749, at *3 (N.D.Cal. April 1, 2010)); see also Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 353 n. 17 (1978).
Rule 26(b)(1) provides that "[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit." Fed. R. Civ. P. 26(b)(1). "District courts have broad discretion in controlling discovery" and "in determining relevancy." Laub v. Horbaczewski, 331 F.R.D. 516, 521 (C.D. Cal. 2019) ).
Following the 2015 Amendments to Rule 26, it is clear that "[r]elevancy alone is no longer sufficient—discovery must also be proportional to the needs of the case." In re Bard IVC Filters Prods. Liability Litig., 317 F.R.D. 562, 564 (D. Ariz. 2016). "The court's responsibility, using all the information provided by the parties, is to consider these, [undue burden or expense and importance of information sought,] and all the other factors in reaching a case-specific determination of the appropriate scope of discovery." Fed. R. Civ. P. 26 advisory committee's notes. In deciding whether a request is unduly burdensome, a court must balance the burden to the responding party against the benefit to the party seeking the discovery. Thomas v. Cate, 715 F. Supp. 2d 1012, 1032 (E.D. Cal. 2010)(collecting cases).
As discussed more fully below, (III.B.1), the Court's discretion in controlling discovery extends to whether to allow, and the appropriate scope of, class discovery Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 942 (9th Cir. 2009) () (citing Kamm v. Cal. City Dev. Co., 509 F.2d 205, 209 (9th Cir. 1975)).
Rule 26(b)(2) also requires the court, on motion or on its own, to limit the frequency or extent of discovery otherwise allowed by the rules if it determines that (1) "the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;" (2) "the party seeking discovery has had ample opportunity to obtain the information by discovery in the action;" or (3) "the proposed discovery is outside the scope permitted by Rule 26(b)(1)." Fed. R. Civ. P. 26(b)(2)(C)(i)-(iii).
Under Rule 26(c), a party may move for, or the court may issue, a protective order "to protect a party or person from annoyance, embarrassment, oppression or undue burden or expense." Among numerous options under Rules 26(c) are forbidding disclosure,specifying terms for disclosure, prescribing a different discovery method, and limiting...
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