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Clearly Food & Beverage Co., Inc. v. Top Shelf Beverages, Inc.

United States District Court, W.D. Washington, Seattle

March 18, 2015

THE CLEARLY FOOD & BEVERAGE CO., INC., Plaintiff,
v.
TOP SHELF BEVERAGES, INC., Defendant.

ORDER

JAMES L. ROBART, District Judge.

I. INTRODUCTION

This matter comes before the court on Plaintiff Clearly Food & Beverage Co., Inc.'s ("Clearly") motion for sanctions. (Mot. (Dkt. # 68).) Clearly requests attorneys' fees for the costs it incurred due to Defendant Top Shelf Beverages, Inc.'s ("Top Shelf") late production of certain documents. ( See Mot. at 7-8; see generally Reply (Dkt. # 88).) Having considered the submissions of the parties, the balance of the record, and the relevant law, and deeming oral argument unnecessary, the court GRANTS Clearly's motion for sanctions.

II. BACKGROUND

Just five weeks before trial was scheduled to begin and two months after discovery had closed, Top Shelf produced approximately 30 relevant emails for the first time. ( See Sched. Ord. (Dkt. # 21); Bilick Decl. (Dkt. # 67) Ex. A ("Kelly Email").) Top Shelf's counsel explained the late production to Clearly on the basis that "[a]s we were preparing the exhibit list for the pretrial statement and speaking to our client about related issues, we realized that about 30 relevant documents (emails) had not yet been produced due to email accounts that were thought to have been linked not actually being linked." (Kelly Email.) Top Shelf added two of the newly produced emails to its trial exhibit list. (Kelly Decl. (Dkt. # 86) ¶ 17.) Additionally, some of the emails appeared to contradict the deposition testimony of Top Shelf's two principals, Alison Zarrow and Caleb Cargle. (Mot. at 5.)

As a result of the newly produced evidence, the court struck the trial date and reopened discovery to permit Clearly (1) to ensure that all relevant documents had been produced, (2) to re-depose the witnesses whose testimony the new evidence implicated, and (3) to supplement its opposition to Top Shelf's previously filed motion for summary judgment. (2/3/15 Order (Dkt. # 80).) The court deferred ruling on Clearly's motion for sanctions until it received additional briefing on the issue. ( Id. ) That briefing is now before the court.

In its briefing, Top Shelf offers the following excuses for its late production. Five weeks before the trial, as Top Shelf's attorney, Mr. Kelly, was preparing Top Shelf's trial exhibit list, he conferred with Mr. Cargle and Ms. Zarrow "asking to see if they had any documents they wished to include in the exhibit list that perhaps [his] office had overlooked." (Kelly Decl. ¶ 12.) Mr. Cargle identified at least one email that had been overlooked, and, during that same conversation, he located the email and provided it to Mr. Kelly. ( Id. ¶ ¶ 13-14.) Upon recognizing that the email had not yet been produced, Mr. Kelly undertook a search for similar documents, and ultimately discovered and produced to Clearly the 30 additional emails discussed above. ( Id. ¶¶ 15-17; Kelly Email.)

The email Mr. Cargle identified had been sent to the email address gourmetca@gmail.com. ( Id. ¶ 14.) This email account had been used jointly by Ms. Zarrow and Mr. Cargle when they first started their business. (Cargle Decl. (Dkt. # 87) ¶ 8.) Mr. Kelly states that he entered into an "oral stipulation" with Clearly's previous counsel that Top Shelf did not have to produce emails sent from and received by the gourmetca@gmail.com account ( id. ¶¶ 4-5), but provides no documentation of such an agreement. Mr. Kelly and Mr. Cargle apparently believed that producing only documents sent from and received by Caleb's personal email account, Caleb.Cargle@gmail.com, would adequately capture all of the emails sent to the gourmetca@gmail.com account. ( See Cargle ¶¶ 5-7; Kelly Decl. ¶¶ 18-20.)

III. ANALYSIS

A. Rule 37(c)

Federal Rule of Civil Procedure 37(c) permits a court to issue sanctions for a party's failure to provide information as required by Rule 26(a) or (e). Fed.R.Civ.P. 37(c)(1); see also Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). As relevant here, Rule 26(a) requires a party to provide, without awaiting a discovery request, a copy of all documents that it may use to support its claims or defenses. Fed.R.Civ.P. 26(a); see also Finley v. Hartford Life & Acc. Ins. Co., 249 F.R.D. 329, 331 (N.D. Cal. 2008). Rule 26(e) requires a party to supplement or correct its Rule 26(a) disclosures and other discovery responses "in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect." Fed.R.Civ.P. 26(e)(1)(A).

The Ninth Circuit gives "particularly wide latitude to the district court's discretion to issue sanctions under Rule 37(c)(1)." Yeti by Molly, Ltd., 259 F.3d at 1106. Permissible sanctions include, among other things, "payment of the reasonable expenses, including attorney's fees, caused by the failure" to disclose or supplement. Fed.R.Civ.P. 37(c)(1)(A). Sanctions, however, are inappropriate if a party's failure to disclose the required information was "substantially justified or harmless." Fed.R.Civ.P. 37(c)(1); Yeti by Molly, Ltd, 259 F.3d at 1106. The party facing sanctions bears the burden of proving harmlessness or substantial justification. Yeti by Molly, Ltd, 259 F.3d at 1106.

B. Application to Top Shelf

Clearly requests sanctions under Rule 37(c) in the form of the attorneys' fees that it incurred as a result of Top Shelf's untimely production. ( See Mot. at 7-8; see generally Reply.) Top Shelf maintains that, because it produced the emails as soon as Top Shelf's attorney learned of their existence, it has complied with Rule 26(e)'s requirement to supplement disclosures and therefore cannot be sanctioned under Rule 37(c). ( See Resp. (Dkt. # 85).) That argument overlooks the fact that Rule 37(c) also applies to violations of Rule 26(a), which requires a party to provide, without awaiting a discovery request, a copy of all documents that it may use to support its claims or defenses. Fed.R.Civ.P. 26(a). Top Shelf has ...


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