In re Outlaw Labs., LP Litig.

• Decision Date: 22 October 2020
• Docket Number: Case No.: 18CV840 GPC (BGS)
• Parties: IN RE: OUTLAW LABORATORIES, LP LITIGATION
• Court: U.S. District Court — Southern District of California

IN RE: OUTLAW LABORATORIES, LP LITIGATION

Case No.: 18CV840 GPC (BGS)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

October 22, 2020

ORDER DENYING TAULER SMITH'S MOTION TO COMPEL COMPLIANCE WITH SUBPOENAS

[ECF 255]

I. INTRODUCTION

Third-party defendant Tauler Smith LLP ("Tauler Smith") has filed a Motion to Compel Compliance with Subpoenas. (ECF 255.) The Subpoenaed Parties¹ have filed a Joint Opposition and Counter Motion to Quash and Tauler Smith has filed a Reply in support of its Motion. (ECF 259, 264.)²)

For the reasons set forth below, the Motion to Compel is DENIED.

II. BACKGROUND

A. Claims in Consolidated Action

The Court has summarized the claims, counterclaims, and third-party claims of this consolidated action in detail in numerous prior orders on discovery disputes. The Court incorporates those summaries here and only briefly summarizes the case here. (ECF 177 at I.; ECF 215 at II.; ECF 230 at II.; ECF 246 at II; ECF 265 at II.)

This consolidated action encompasses two cases brought by Outlaw Laboratory, LP against retail stores. (Case Nos. 18cv840 ("DG in PB") and 18cv1882 ("SD Outlet").) Three stores, Roma Mikha, NMRM, Inc., and Skyline Market, Inc. (collectively the "Stores") have filed counterclaims as a class action on behalf of themselves and other targeted stores against Outlaw and its former counsel, Tauler Smith, under the Racketeer Influenced and Corrupt Organizations Act ("RICO") along with a rescission claim. ("Second Amended Counter Claims ("SACC") [ECF 114].)

Outlaw's claims were premised on the defendant stores selling "male-enhancement pills, . . . 'the Enhancement Products'" with packaging indicating they were all natural, but allegedly containing undisclosed drugs with Outlaw claiming it lost out on sales of its products to those products. (ECF 147 at 1, 3-6; ECF 209 (San Diego Outlet action).) Summary Judgment was granted to defendants in the DG in PB action, and a motion for judgment on the pleadings and subsequent motion for reconsideration in the San Diego Outlet action were granted dismissing with prejudice all of Outlaw's claims. (ECF 147, 209, 251.)

The Stores counterclaims under RICO are being brought on behalf of a class of similarly situated stores. (ECF 114.) The SACC alleges Outlaw, Tauler Smith, and Outlaw's principles, Michael Wear and Shawn Lynch, have engaged in a scheme that includes sending demand letters 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 allegesOutlaw employs "investigators," some hired 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 that falsely indicate Outlaw sells a competitive product, TriSteel, in retail stores through the United States and that the store is illegally selling products in violation of RICO and the Lanham Act. (SACC ¶¶ 2, 15, 23-24, 26-52, 66-68, 84-86, 88, 92.) 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.)

III. DISCUSSION

A. Parties Positions

Tauler Smith seeks to compel compliance with the subpoenas, however, Tauler Smith never explains in its Motion what it seeks in the subpoenas. It very briefly indicates it "must obtain documents and testimony" to establish the Subpoenaed Parties' role in the sale of the "SUBJECT PRODUCTS." (ECF 255-1 at 3.) Although not entirely clear, it appears Tauler Smith is arguing it is seeking evidence that Trepco is engaged in a RICO conspiracy with stores that are selling Trepco's products and that this conspiracy is a defense for Tauler Smith in this case. (Id. at 4.) Tauler Smith also argues sales of the subject products may show sales to the stores continued after the stores received the demand letters. This, Tauler Smith asserts, would mean the stores suffered no damages, presumably from lost sales. Tauler Smith also asserts it has not been able to obtain this information from the Stores. (Id.) Tauler Smith cites the Stores' response to a Request for Production of Documents ("RFP"), Exhibit H, and asserts it indicates that the Stores have claimed they have no responsive documents. (Id.) Tauler Smith asserts the information it seeks can easily be generated from "spin reports" and transaction history. (Id. at 4-5.) Tauler Smith does quote deposition testimony that indicates "spin reports"can be run, although as to transaction history at stores, it only indicates transactions are recorded when scanned at the cash register. (Id. at 5 n.4.) There is no explanation where that information is compiled or how it would be extracted.

As discussed in more detail below, the Subpoenaed Parties oppose the Motion for numerous reasons. They argue the information and documents sought are not relevant, are subject to attorney-client privilege, should have been obtained from the parties in this case rather than the non-parties subpoenaed, some were not properly served, and some are unenforceable as to certain subpoenaed parties for violating Rule 45's 100-mile requirement. (ECF 259 at 6-8 (no relevance), 8-9 (should have been obtained from parties), 10-12 (attorney-client privilege), 12-13 (service), 14 (beyond 100 miles).) Additionally, they argue Tauler Smith has attempted to circumvent the untimeliness of this Motion in two respects. First, Tauler Smith reissued subpoenas in May that were originally issued in March 2020 and objected to in April 2020 to restart the time to raise the exact same dispute. (Id. at 2-3, 4-5, 14.) Second, even as to the second set of subpoenas, Tauler Smith raised this dispute a second time, thirty days after the first time it was raised, to avoid its untimeliness. (Id. at 3-5, 14-16.)

B. Analysis

The Court begins with the two issues Tauler Smith and the Subpoenaed Parties both, at least in part, address in their briefing: (1) whether the discovery sought it relevant and (2) whether Tauler Smith could have obtained this discovery from a party in this case rather than burdening non-parties. Because the Court finds the sought discovery is not relevant and some of it could have been obtained from the parties in this case, the Court need not reach the additional issues of service and whether that challenge was waived, untimeliness by Tauler Smith, and whether the discovery sought it subject to attorney client privilege. The Court also notes that there may be other issues with these subpoenas or responses that have not been raised in the briefing. However, the Court is not going to create arguments for the Subpoenaed Parties or Tauler Smith that they have not made for themselves.

"The scope of discovery through a subpoena under Rule 45 is the same as the scope of discovery permitted under Rule 26(b)." Intermarine, LLC v. Bevrachtingskantoor, B.V., 123 F. Supp. 3d 1215, 1217 (N.D. Cal. 2015); see also Fed. R. Civ. P. 26(b)(1) (describing the scope of discovery). In this respect, parties cannot obtain discovery through a Rule 45 subpoena that is not within the scope of Rule 26(b)(1) and (2). "A party or lawyer responsible for issuing and serving a subpoena therefore must take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena." Id. (citing Fed. R. Civ. P. 45(d)(1)).

"An evaluation of undue burden requires the court to weigh the burden to the subpoenaed party against the value of the information to the serving party and, in particular, requires the court to consider . . . such factors as relevance, the need of the party for the documents, the breadth of the document request, the time period covered by it, the particularity with which the documents are described and the burden imposed.'" Moon v. SCP Pool Corp., 232 F.R.D. 633, 637 (C.D. Cal. 2005) (quoting Travelers Indem. Co. v. Metro. Life Ins. Co., 228 F.R.D. 111, 113 (D. Conn. 2005))

In determining whether a subpoena imposes an undue burden, the Court may also evaluate whether the discovery sought through a Rule 45 subpoena of a nonparty is available from a party in the case. See e.g. Moon, 232 F.R.D. at 638 (finding subpoena imposed undue burden because discovery sought could be obtained from a party in the case) (citing Dart Indus. Co., Inc. v. Westwood Chem. Co., 649 F.2d 646, 649 (9th Cir.1980) and Haworth, Inc. v. Herman Miller, Inc., 998 F.2d 975, 978 (Fed. Cir. 1993)) (emphasis added). "Courts are particularly reluctant to require a non-party to provide discovery that can be produced by a party." Amini Innovation Corp. v. McFerran Home Furnishings, Inc., 300 F.R.D. 406, 410 (C.D. Cal. 2014). "[N]onparties subject to discovery requests deserve extra protection from the courts." Intermarine, 123 F. Supp. 3d at 1218-19 ("[T]he Court notes that the Ninth Circuit has long held that nonparties subject to discovery requests deserve extra protection from the courts.") (quoting HighTech Med. Instrumentation, Inc. v. New Image Indus., Inc., 161 F.R.D. 86, 88 (N.D.Cal.1995).

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)...