Edu-Science (USA) Inc. v. Intubrite, LLC, No. 3:2012cv01078 - Document 142 (S.D. Cal. 2015)

Court Description: ORDER denying 121 Cross-Motion to Quash Subpoena; granting in part and denying in part 122 Motion to Compel Production of Documents. IntuBrite shall produce documents responsive to: amended RFP No. 135; and shall produce documents responsive to RFP Nos. 136, 139, 140 and 141-142 as amended by the Court. Production shall be completed within 14 calendar days of the date of this Order. Signed by Magistrate Judge Jill L. Burkhardt on 6/17/2015. (jah)

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1 2 UNITED STATES DISTRICT COURT 3 4 SOUTHERN DISTRICT OF CALIFORNIA EDU-SCIENCE (USA) INC., Case No.: 12cv1078 BAS (JLB) Plaintiff, 5 ORDER: vs. (1) DENYING INTUBRITE’S MOTION TO QUASH SUBPOENA; AND 6 INTUBRITE, LLC, 7 Defendant. (2) GRANTING IN PART AND DENYING IN PART EDU-USA’S MOTION TO COMPEL 8 9 [ECF Nos. 121, 122] 10 11 Presently before the Court is Defendant IntuBrite’s (“IntuBrite”) Motion to Quash 12 Subpoena (ECF No. 121), and Plaintiff Edu-Science’s (“Edu-USA”) Motion to Compel 13 Production of Documents (ECF No. 122). For the reasons set forth below, the Motion to 14 Quash Subpoena is DENIED and the Motion to Compel is GRANTED in part and 15 DENIED in part. 16 I. BACKGROUND 17 On February 16, 2013, Edu-USA sued IntuBrite for breach of contract. (ECF No. 18 2.) In its First Amended Complaint, Edu-USA alleges that IntuBrite breached its contract 19 to purchase custom-manufactured instruments for tracheal intubation from Edu-USA. 20 1 12cv1078 BAS (JLB) 1 (ECF No. 97 at 5.) According to Edu-USA, although IntuBrite paid for some of the 2 product, IntuBrite did not fulfill its obligations under the contracts. (Id.) 3 IntuBrite, in its First Amended Counterclaim, alleges that the products delivered 4 were defective and untimely. (ECF No. 99.) IntuBrite further claims it paid fully for the 5 products it actually received. (Id. at 5.) IntuBrite asserts seven claims against Edu-USA 6 and Counter Defendant Edu-Science (HK) LTD (“Edu-HK”): (1) breach of contract; (2) 7 breach of the implied warranty of merchantability; (3) negligence; (4) intentional 8 interference with prospective economic advantage; (5) negligent interference with 9 prospective economic advantage; (6) intentional misrepresentation of fact; and (7) 10 negligent misrepresentation of fact. (ECF No. 99.) 11 Edu-HK, in its Third Amended Cross-Complaint, asserted three claims against 12 IntuBrite and Cross Defendant Robert Hicks: (1) intentional misrepresentation; (2) 13 fraudulent non-disclosure; and (3) negligent misrepresentation. (ECF No. 98.) On March 14 10, 2015, Edu-HK’s Third Amended Cross-Complaint was dismissed without prejudice for 15 failure to properly allege falsity. (ECF No. 118 at 5.) 16 On March 23, 2015, this Court issued a Minute Order setting a briefing schedule for 17 cross-motions to resolve the parties’ pending discovery disputes. (ECF No. 120.) On 18 March 27, 2015, Edu-USA filed a Motion to Compel Production of Documents and 19 IntuBrite filed a Motion to Quash Subpoena. (ECF Nos. 122, 121.) 20 // 2 12cv1078 BAS (JLB) 1 2 II. THE INSANT MOTIONS A. Motion to Compel 3 Edu-USA’s Motion seeks a Court order compelling IntuBrite to produce documents 4 responsive to six Requests for Production (“RFPs”): 135; 136; 139; and 140-142. (ECF 5 No. 122-1.) The RFPs can be organized into three categories. RFP No. 135 seeks financial 6 statements. (Id. at 4.) RFP Nos. 136 and 140-142 seek sales projections and sales 7 forecasts.1 (Id. at 5-6.) And RFP No. 139 seeks customer lists. (Id. at 6.) Edu-USA argues 8 that these requests seek relevant information and that such discovery is necessary to allow 9 it to rebut IntuBrite’s counterclaims for damage to customer relationships and lost future 10 profits. (Id. at 5.) Furthermore, such discovery is necessary to allow Edu-USA to “fully 11 and completely respond to and cross-examine IntuBrite’s expert testimony [regarding] 12 damages.” (Id. at 4.) 13 IntuBrite argues that the documents sought are irrelevant and that the requests violate 14 IntuBrite’s right of privacy. (ECF No. 123 at 2-5.) “While the privilege that protects 15 financial and proprietary information is not absolute, where there is no doubt that the 16 information requested implicates traditional notions of what is private information, the 17 burden is on the requesting party to demonstrate that the information needs of the case 18 outweigh the need for non-disclosure.” (Id. at 5 (citing Davis v. Leal, 43 F. Supp. 2d 1102, 19 20 RFP Nos. 140-142 seek securities law filings and investment documents because “those documents almost always contain financial projections . . . .” (ECF No. 122-1 at 6.) 1 3 12cv1078 BAS (JLB) 1 1110 (E.D. Cal. 1999).) IntuBrite argues that Edu-USA fails to meet this burden. (ECF 2 No. 123 at 5.) 3 B. Motion to Quash 4 IntuBrite moves to quash Edu-USA’s Subpoena that requests, “without limitation of 5 any kind, all IntuBrite’s financial records from . . . third party [Moss Adams LLP].” (ECF 6 No. 121 at 1.) The subpoena requests “‘[a]ll documents, financial records, financial 7 documents and financial statements relating to or pertaining to IntuBrite, LLC.” (Id. (citing 8 Exhibit 1).) IntuBrite objects on the grounds that the subpoena: (1) seeks irrelevant 9 information; and (2) violates IntuBrite’s right to privacy. (Id. at 2-5.) 10 Edu-USA argues that the documents sought are relevant to the claims and 11 counterclaims in the instant action and that IntuBrite’s privacy concerns do not outweigh 12 Edu-USA’s interest in obtaining relevant discovery. (ECF No. 124 at 3-4.) 13 The parties, through meet and confer efforts, have narrowed the scope of the 14 Subpoena. (Id. at 3.) Accordingly, the Subpoena has been limited to seek the following 15 documents: balance sheets, profit and loss statements, income and expense statements, 16 statements of cash flow, and accounts receivable journals from the date IntuBrite was 17 formed through the end of 2013 or the date IntuBrite began selling a video laryngoscope 18 product, whichever is later. (Id. at 3.) As amended, the Subpoena mirrors Edu-USA’s 19 amended RFP No. 135. (See ECF No. 122-1 at 3-4.) 20 // 4 12cv1078 BAS (JLB) 1 III. LEGAL STANDARD 2 The Federal Rules of Civil Procedure generally allow for broad discovery, 3 authorizing parties to obtain discovery regarding “any nonprivileged matter that is relevant 4 to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). Also, “[f]or good cause, the 5 court may order discovery of any matter relevant to the subject matter involved in the 6 action.” Id. Relevant information for discovery purposes includes any information 7 “reasonably calculated to lead to the discovery of admissible evidence,” and need not be 8 admissible at trial to be discoverable. Id. District courts have broad discretion to determine 9 relevancy for discovery purposes. See Hallett v. Morgan, 296 F.3d 732, 751 (9th Cir. 10 2002). Similarly, district courts have broad discretion to limit discovery where the 11 discovery sought is “unreasonably cumulative or duplicative, or can be obtained from some 12 other source that is more convenient, less burdensome, or less expensive.” Fed. R. Civ. P. 13 26(b)(2)(C)(i). Limits should be imposed where the burden or expense outweighs the 14 likely benefits. Fed. R. Civ. P. 26(b)(2)(C)(iii). 15 Rule 37 of the Federal Rules of Civil Procedure enables the propounding party to 16 bring a motion to compel responses to discovery. Fed. R. Civ. P. 37(a)(3)(B). “The party 17 seeking to compel discovery has the burden of establishing that its request satisfies the 18 relevancy requirements of Rule 26(b)(1). Thereafter, the party opposing discovery has the 19 burden of showing that the discovery should be prohibited, and the burden of clarifying, 20 explaining or supporting its objections.” Bryant v. Ochoa, 2009 WL 1390794 at *1 (S.D. 5 12cv1078 BAS (JLB) 1 Cal. May 14, 2009). Those opposing discovery are “required to carry a heavy burden of 2 showing” why discovery should be denied. Blankenship v. Hearst Corp., 519 F.2d 418, 3 429 (9th Cir. 1975). 4 Federal Rules of Civil Procedure 26 and 45 govern discovery from nonparties by 5 subpoena. See Exxon Shipping Co. v. U.S. Dep’t of Interior, 34 F.3d 774, 779 (9th Cir. 6 1994) (applying both rules to motion to quash subpoena). Specifically, under Federal Rule 7 of Civil Procedure 45(a)(1)(C), any party may serve a subpoena commanding a nonparty 8 “to produce documents, electronically stored information, or tangible things . . . .” The 9 subpoena may command the production of documents which are “not privileged” and are 10 “relevant to any party’s claim or defense” or “reasonably calculated to lead to the discovery 11 of admissible evidence.” Fed. R. Civ. P. 26(b)(1). 12 A party that is not the recipient of the subpoena has standing to challenge the 13 subpoena “where its challenge asserts that the information is privileged or protected to 14 itself.” Diamond State Ins. Co. v. Rebel Oil Co., 157 F.R.D. 691, 695 (D. Nev. 1994). 15 Upon a timely motion, the court issuing such a subpoena shall quash or modify it if it 16 determines that the subpoena “requires disclosure of privileged or other protected matter, 17 if no exception or waiver applies; or subjects a person to undue burden.” Fed. R. Civ. P. 18 45(c)(3)(A)(iii)-(iv). 19 // 20 // 6 12cv1078 BAS (JLB) 1 2 IV. ANALYSIS A. IntuBrite’s Response and Objections 3 In response to the six RFPs that are the subject of the instant Motion to Compel, 4 IntuBrite responds with largely identical objections. The standard objection is as follows: 5 13 Objection. The second request for production does not include a signature as required by Federal Rules of Civil Procedure, Rule 26(g)(1); therefore, Responding Party has no duty to act on this request for production under Federal Rules of Civil Procedure, Rule 26(g)(2).2 Objection is also made on the grounds that EDU-USA lacks standing to sue because it is not currently a corporation in good standing with the Delaware Secretary of State.3 Responding Party also objects on the ground that this request seeks documents that are not relevant to EDU-USA’s claims or reasonably calculated to lead to discovery of admissible information as it requests information not related to the time frame of the transactions between EDU-USA and IntuBrite and not related to EDU-USA’s claims. Further objection is made on the grounds that this request for production is overly broad and without reasonable limitation in its scope. Objection is further made on the grounds that this request fails to describe with reasonable particularity each item or category of items to be produced. Responding Party also objects on the ground that this request invades Responding Party’s right to privacy by seeking Responding Party’s confidential financial information. 14 (ECF No. 122-3 at 3-4.) To the extent that a response differs from the one provided above, 15 the Court will identify the specific variation. 16 // 6 7 8 9 10 11 12 17 18 2 19 20 The Court notes that an amended copy of the discovery requests, signed in ink, has been supplied to IntuBrite. (See ECF No. 126 at 2, FN 1.) Accordingly, the issue is now moot and the Court declines to address IntuBrite’s signature objection. 3 Neither party addresses this objection in their briefing, nor does IntuBrite provide authority supporting this objection. Accordingly, the Court will not consider it. 7 12cv1078 BAS (JLB) 1 B. RFP No. 135 and the Moss Adams Subpoena4 2 Edu-USA’s amended RFP No. 135 seeks the following: balance sheets, profit and 3 loss statements, income and expense statements, statements of cash flow, and accounts 4 receivable journals from the date IntuBrite was formed through the end of 2013 or the date 5 IntuBrite began selling a video laryngoscope product, whichever is later. (ECF No. 122-1 6 at 3-4.) 7 The parties’ briefing – for all six RFPs – focuses almost exclusively on the relevancy, 8 overbroad, and privacy objections. Edu-USA argues that RFP No. 135 seeks relevant 9 information within a relevant timeframe. The requested financial documents are 10 “necessary to allow Edu-USA to . . . cross-examine Intubrite’s expert testimony regarding 11 damages,” and are relevant to “assess the competitive situation in Intubrite’s market as 12 reflect in . . . actual sales and financial performance.” (ECF No. 122-1 at 4-5.) Edu-USA 13 further argues that, given IntuBrite’s existing counterclaims for intentional and negligent 14 interference with a prospective economic advantage, the financial documents from the 15 extended timeframe are relevant and the need for such discovery outweighs IntuBrite’s 16 privacy concerns. (Id. at 5.) 17 IntuBrite argues that its financial statements are irrelevant because they “have no 18 connection at all to the existence of any alleged contract, the breach of any alleged contract, 19 20 4 As the amended versions of these two requests seek the same documents from the same timeframe, the Court’s analysis will address them together. (See ECF Nos. 122-1 at 3; 124 at 3.) 8 12cv1078 BAS (JLB) 1 performance under any alleged contract, or any damages allegedly suffered by EDU-USA 2 . . . .” (ECF No. 123 at 3.) IntuBrite objects to the extended timeframe of this request, 3 arguing that because IntuBrite does not seek damages beyond November 2012, this 4 extended timeframe is irrelevant. Furthermore, the financial information sought is private 5 and Edu-USA has not shown that the “needs of this case outweigh the need for non- 6 disclosure of IntuBrite’s confidential private information.” (Id. at 5.) 7 The Court finds that RFP No. 135, as amended, seeks financial documents relevant 8 to the claims, counterclaims, and defenses in the instant action. While the documents may 9 not have a connection to Edu-USA’s breach of contract claim, they are certainly relevant 10 to IntuBrite’s counterclaims and damages models. Furthermore, the Court finds that the 11 extended timeframe – from the date IntuBrite was formed through the end of 2013 or the 12 date Intubrite began selling a video laryngoscope product, whichever is later – is relevant 13 and is not overbroad. IntuBrite offers no reason, let alone a compelling reason, why the 14 damages models should end at November 2012. Even if IntuBrite is not seeking damages 15 past this date, financial data continuing past November 2012 is relevant in light of 16 IntuBrite’s counterclaims. Accordingly, IntuBrite’s relevancy and overbroad objections 17 are OVERRULED. 18 As IntuBrite correctly points out in its Opposition, the privilege provided for private 19 financial and proprietary information is not absolute. (ECF No. 123 at 5.) Rather, the 20 burden is on the requesting party to demonstrate that its interest in relevant information 9 12cv1078 BAS (JLB) 1 outweighs the producing party’s need for non-disclosure. The right to privacy “is subject 2 to balancing the needs of the litigation with the sensitivity of the information/records 3 sought.” Davis v. Leal, 43 F. Supp. 2d 1102, 1110 (E.D. Cal.1999); see also Womack v. 4 Metro. Transit Sys., 2010 WL 2178962, at *3 (S.D. Cal. May 26, 2010) (balancing privacy 5 rights of third parties with discovery rights of civil litigants.) 6 With respect with RFP No. 135, IntuBrite’s privacy interests must yield to 7 disclosure of the financial documents requested. The documents sought are relevant to the 8 counterclaims in this case and have a direct impact on damages models and expert 9 testimony. Accordingly, the Court OVERRULES Plaintiffs’ privacy objection. 10 C. RFP No. 136 11 Edu-USA’s RFP No. 136 seeks: “All documents in [IntuBrite’s] possession, custody 12 or control relating to or pertaining to any sales projections or sales forecasts prepared by 13 [IntuBrite] and/or on [IntuBrite’s] behalf at any time.” (ECF No. 122-3 at 4.) IntuBrite 14 responds with the same objections listed in Section A. (Id. at 4-5.) 15 The Court OVERRULES IntuBrite’s relevancy objection. The requested 16 documents are relevant given IntuBrite’s counterclaims for intentional and negligent 17 interference with a prospective economic advantage. Furthermore, the financial documents 18 are relevant to damages calculations and expert testimony. 19 For the reasons provided above, IntuBrite’s privacy objection is OVERRULED. 20 IntuBrite’s overbroad objection is SUSTAINED in part. The request is amended to 10 12cv1078 BAS (JLB) 1 include the following timeframe limitation: all documents in IntuBrite’s possession, 2 custody or control relating to or pertaining to any sales projections or sales forecasts 3 prepared by IntuBrite and/or on IntuBrite’s behalf from the date IntuBrite was formed to 4 the end of 2013 or the date IntuBrite began selling a video laryngoscope, whichever is 5 later. 6 D. RFP No. 139 7 RFP No. 139 seeks: “A list of [IntuBrite’s] customers for each year from the date 8 [IntuBrite was] formed to present.” (ECF No. 122-3 at 6.) However, in its Memorandum, 9 Edu-USA clarifies that it is seeking customer lists to the extent they exist in specific reports 10 referred to as “Sales by Customer Detail Reports.” (ECF No. 122-1 at 6.) IntuBrite’s 11 response mirrors the response set forth in Section A except for its privacy objection. (ECF 12 No. 122-3 at 6.) IntuBrite “objects on the ground that this request invades Responding 13 Party’s right to privacy by seeking Responding Party’s confidential trade secret 14 information by seeking Responding Party’s client list.” (Id.) 15 IntuBrite claims that its client list is confidential and should not be compelled in 16 light of the protection afforded to trade secrets. (ECF No. 122-3 at 6.) “Client lists can 17 receive trade secret protection if they satisfy the requirements of Cal. Civ. Code § 18 3426.1(d).” Hilderman v. Enea TekSci, Inc., 551 F. Supp. 2d 1183, 1201 (S.D. Cal. 2008). 19 While IntuBrite responds that its client list is a trade secret and objects to producing it, 20 IntuBrite fails to address this objection in its briefing. There is no discussion of whether 11 12cv1078 BAS (JLB) 1 IntuBrite’s customer list meets the requirements for protection as a trade secret. 2 Accordingly, IntuBrite has not established that its privacy interests outweigh Edu-USA’s 3 interests in obtaining discovery, at least with respect to the most relevant time period. 4 Furthermore, IntuBrite has already produced the Sales by Customer Detail Reports 5 through November 2012.5 The dispute at issue between the parties is the production of 6 Sales by Customer Detail Reports from November 2012 to the present. Edu-USA asserts 7 that it is entitled to the production of these reports “at least through the end of 2013 or when 8 Intubrite began selling the video laryngoscope, whichever is later,” but further argues it 9 should get the reports through the present. (ECF No. 122-1 at 6.) IntuBrite objects to 10 producing the report up to the present. Edu-USA does not set forth persuasive arguments 11 as to how its interest in customer sales reports after the end of 2013, or when IntuBrite 12 began selling the video laryngoscope, outweighs IntuBrite’s interest in protecting its 13 current customer data. 14 The Court has already found the extended timeframe from to the end of 2013 or 15 when IntuBrite began selling the video laryngoscope to be relevant. Accordingly, 16 IntuBrite’s relevancy objection is OVERRULED as to that time period. IntuBrite’s 17 privacy and overbreadth objections are GRANTED as to the time period after the end of 18 2013 or the date IntuBrite began selling the video laryngoscope. As such, Edu-USA’s 19 20 IntuBrite provided the Report to its expert – Mr. Basney – who in turn produced the Report to EduUSA. (ECF No. 122-1 at 6.) 5 12 12cv1078 BAS (JLB) 1 motion to compel RFP 139 is GRANTED in part in that IntuBrite is ordered to produce 2 Sales by Customer Detail Reports for the period from November 2012 to the end of 2013 3 or when IntuBrite began selling the video laryngoscope, whichever is later. 4 E. RFP No. 140 5 RFP No. 140 seeks: “All documents [IntuBrite has] submitted to any federal and/or 6 state governmental agency pursuant to the securities laws of the United States, the State of 7 California, or any other state.” (ECF No. 122-3 at 6.) IntuBrite asserts the same response 8 and objections listed in Section A. 9 Edu-USA contends that the requested documents are relevant because those 10 documents will likely contain “financial projections, management’s discussions of the 11 results of past operations (and the reasons for such performance) and forward-looking 12 statements and projections about future business results.” (ECF No. 122-1 at 6.) Relying on Edu-USA’s proffered basis for requesting these documents, the Court 13 14 finds that RFP No. 140 is largely duplicative of RFP No. 136. 6 15 containing discussions about past results and the reasons for those results are not likely to 16 be captured by RFP No. 136. The Court finds that these documents are relevant in light of 17 IntuBrite’s position that its “damages include loss of sales and loss of marketplace 18 momentum, since IntuBrite did not have all of the supply it required.” (ECF No. 99 at 7.) However, documents 19 20 District courts have broad discretion to limit discovery where the discovery sought is “unreasonably cumulative or duplicative . . . .” Fed. R. Civ. P. 26(b)(2)(C)(i). 6 13 12cv1078 BAS (JLB) 1 Accordingly, the Court OVERRULES IntuBrite’s objections but amends RFP No. 140 as 2 follows: All documents [IntuBrite has] submitted to any federal and/or state governmental 3 agency pursuant to the securities laws of the United States, the State of California, or any 4 other state, that discuss the results of past operations and the reasons for those results. 5 F. RFP Nos. 141-142 6 RFP No. 141 seeks: “All private placement memoranda, and/or any other documents 7 used or intended to solicit investment funds, prepared by [IntuBrite] or on [IntuBrite’s] 8 behalf (including all drafts thereof).” (ECF No. 122-3 at 7.) RFP No. 142 seeks: “All 9 documents in [IntuBrite’s] possession, custody or control relating to or pertaining to 10 communications between IntuBrite and potential investors, including correspondence, 11 memoranda, and emails with potential investors and documents provided to potential 12 investors.” (Id. at 8.) IntuBrite asserts the same objections raised in Section A, with the 13 following additional objection asserted in response to RFP No. 142: “Responding Party 14 also objects on the ground that this request invades Responding Party’s right to privacy by 15 seeking Responding Party’s, and its investors’, confidential financial information.” (ECF 16 No. 122-3 at 8.) 17 Edu-USA seeks the above listed documents in order to obtain “financial projections, 18 management’s discussions of the results of past operations (and the reasons for such 19 performance), and forward-looking statements and projections about future business 20 results.” (ECF No. 122-1 at 6.) 14 12cv1078 BAS (JLB) 1 In light of Edu-USA’s proffered relevancy argument, the Court finds RFP Nos. 141 2 and 142 to be relevant but overbroad as drafted. If narrowed to align with Edu-USA’s 3 purported need for the information, RFP Nos. 141 and 142 would be limited to those 4 investor documents that refer to or reflect “financial projections, management’s 5 discussions of the results of past operations (and the reasons for such performance), and 6 forward-looking statements and projections about future business results.” So narrowed, 7 the requests are relevant and not overbroad, and Edu-USA’s interest in the discovery 8 prevails when weighed against the privacy interest asserted by IntuBrite. Accordingly, the 9 Motion to Compel is DENIED in part and GRANTED in part as to RFP Nos. 141 and 10 142. IntuBrite is to produce documents responsive to RFP Nos. 141 and 142 that refer to 11 or reflect financial projections, management’s discussions of the results of past operations 12 (and the reasons for such performance), and forward-looking statements and projections 13 about future business results. 14 V. CONCLUSION 15 For the reasons set forth above, IntuBrite’s Motion to Quash Subpoena (ECF No. 16 121) is DENIED in light of the amended language agreed to by the parties during the meet 17 and confer process.7 Edu-USA’s Motion to Compel Production of Documents (ECF No. 18 122) is GRANTED in part and DENIED in part. IntuBrite shall produce documents 19 20 7 See ECF No. 124 at 3. 15 12cv1078 BAS (JLB) 1 responsive to: amended RFP No. 135; and shall produce documents responsive to RFP 2 Nos. 136, 139, 140 and 141-142 as amended by the Court. Such production shall be 3 completed within 14 calendar days of the date of this Order. 4 5 IT IS SO ORDERED. Dated: June 17, 2015 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 16 12cv1078 BAS (JLB)

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