Omega Patents, LLC v. Fortin Auto Radio, Inc., 2006 WL 2038534 (M.D. Fla. July 19, 2006)
After patent infringement litigation was resolved through a settlement agreement in which Fortin was granted a license to practice certain patents, Omega Patents filed this lawsuit to enforce the settlement agreement, believing that certain royalties from the patents were being under-reported. In this opinion, the court granted plaintiff’s motion for sanctions to be imposed against one of the defendants under Rule 37(d).
Defendant Directed Electronics, Inc. (“Directed”) filed a Motion to Transfer the case to California and a Motion to Stay Discovery. Omega served a number of discovery requests on Directed, but Directed did not respond to the requests while its Motions to Transfer and Stay Discovery were pending. Omega filed motions to compel documents to be produced and the deposition of a Directed corporate representative. On April 27, 2006, the court denied Directed’s Motion to Transfer and denied as moot the Motion to Stay Discovery. The court further ordered Directed to "produce responsive documents within 11 days of the date of this Order" and "produce its corporate representative for deposition" on May 18, 2006.
Omega argued that Directed failed to comply with the Court’s Order – producing only a small portion of its documents and a 30(b)(6) witness who was unprepared to respond to issues in the case – and sought sanctions against Directed. Directed defended its sluggish production of email as follows:
As to emails produced, Directed admits that it only produce a handful of emails (five Bates-numbered pages) in the initial disclosure, but has since supplemented its initial production with 2,000 additional pages of electronic documents within 30 days of the initial production. Directed argues that it could not have produced them sooner without incurring undue burden and expense; it was only able to produce the 2,000 pages "after it performed a detailed and exhaustive key word search of all its electronic records to find documents that were responsive to Omega’s requests." Directed searched "many tens of thousands of electronic documents in its active and archived databases and email systems, back-up devices and the personal hard drives and storage devices of Directed employees, [which] resulted in over seventeen thousand (17,000) potentially relevant documents which had to be organized, compiled, reviewed, Bates stamped and converted into the appropriate format."
The court faulted Directed for “unilaterally and erroneously” deciding that it was not required to produce responsive documents once it filed its Motion to Stay Discovery. “Pursuant to the Federal Rules of Civil Procedure and the Local Rules, and the Case Management and Scheduling Order, discovery proceeds without regard to whether a motion to stay discovery is filed; nowhere in the rules is a motion to stay discovery is self-executing.” (Footnote omitted.) The court continued:
Rather than prepare to produce the responsive documents in an expedited manner once the Court granted Directed an additional eleven days following the April 27, 2006 Order to produce them, Directed took its time conducting the search of its electronic databases and did not “supplement” its original production until more than one month later, on June 12, 2006, and well after the deposition of its designated corporate representative. Directed fails to adequately explain its delay in producing the 2,000 pages of emails, other than to vaguely claim (without supporting sworn affidavits) that it could not have produced them sooner without incurring “undue burden and expense.”
The court further rejected Directed’s argument that preparation of discovery responses before the court had ruled on the Motion to Dismiss would have been a “needless” exercise if the motion were granted. The court pointed out that the only viable option was a transfer of the case to another federal forum, so any discovery conducted “would be equally valid and appropriate in the other federal forum.”
The court concluded that Directed’s failure to produce 2,000 documents from its email system until June 12, 2006 was without substantial justification. In accordance with Rule 37(d), the court ordered Directed to pay sanctions to Omega in the amount of $1,500, stating: “While this may not provide complete recompense for the difficulties entailed here, the Court considers that this sum is commensurate with the circumstances and should serve as an adequate reminder of the obligations of litigants and their counsel to conduct litigation in this Court in a spirit of cooperation and not obfuscation.”