1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ADVANTUS, CORP., Case No.: 19cv1892-CAB (NLS) 12 Plaintiff, ORDER ON MOTION FOR DETERMINATION OF DISCOVERY 13 v. DISPUTE NO. 3 14 SANDPIPER OF CALIFORNIA, INC.; n/k/a DBJ Enterprises, Inc.; PIPERGEAR [ECF No. 186] 15 USA, INC.; INNOVAPRO 16 CORPORATION; and DAVID JACOBS, 17 Defendants. 18 19 Before the Court is the parties’ Joint Motion for Determination of Discovery 20 Dispute No. 3, wherein Plaintiff/Counterdefendant Advantus Corp. (“Advantus”) seeks to 21 compel Defendant/Counterclaimant Innovaparo Corporation (“Innovapro”) to produce 22 full, unredacted versions of two settlement agreements. ECF No. 186. After due 23 consideration and for the reasons set forth below, the Court GRANTS the motion to 24 compel. 25 I. BACKGROUND 26 Advantus is a company that manufactures and distributes military style bags, 27 backpacks, and other luggage items. ECF No. 121 at ¶ 2. It filed this lawsuit against 28 Defendants, alleging that they engaged in false advertising of competing products and 1 labeled their goods as being made in the USA without any basis to do so. Id. at ¶¶ 19-23. 2 Innovapro is alleged to be the manufacturer of Defendants’ competing bags and is also 3 alleged to be have provided capital to the other Defendants and took over the Sandpiper 4 brand. Id. at 31-50. 5 Innovapro asserted counterclaims against Advantus for trademark infringement. 6 ECF No. 150. Innovapro alleges that it owns three trademarks: BUGOUT, BUGOUT 7 GEAR, and BUGOUT GEAR BE READY. Id. at ¶¶ 2, 17-30. Innovapro claims that it 8 and its predecessors have continuously used these marks since at least 2000 on its travel 9 bags. Id. at ¶ 31. Innovapro accuses Advantus of infringing its trademark rights by 10 selling a product called the Blaze Bugout Bag. Id. at ¶ 37. 11 Advantus answered this counterclaim and asserted its own counterclaims. ECF 12 No. 177. Specifically, Advantus alleges that the trademarks are generic, were abandoned, 13 and are invalid due to fraud on the PTO. Id. at ¶¶ 25-35, 47-58, 59-79. 14 The exact details of how Innovapro obtained rights to these trademarks are relevant 15 to the present motion. The BUGOUT GEAR mark was originally assigned to Stephen C. 16 Smith (“Mr. Smith”), who was the principal of a company called Bugout Gear LLC. Id. 17 at ¶ 18, Ex. A. The BUGOUT GEAR BE READY mark was originally assigned to 18 Bugout Gear LLC. Id. at ¶ 23, Ex. B. The BUGOUT mark was originally assigned to 19 Sandpiper. Id. at ¶ 28, Ex. C. Sandpiper assigned all three of these marks to Innovapro 20 in 2018. Id. at ¶¶ 19, 24, 29. 21 In the interim, Sandpiper obtained the BUGOUT GEAR and BUGOUT GEAR BE 22 READY marks from Mr. Smith and his company Bugout Gear LLC. It appears that 23 Sandpiper had an agreement with Mr. Smith and Bugout Gear LLC to use these marks. 24 In 2010, Mr. Smith and Bugout Gear LLC sued Sandpiper for breach of that agreement. 25 ECF No. 186-1 at 5; see Smith v. Sandpiper, No. 10cv353, ECF No. 1 (E.D. Va. July 19, 26 2010). The parties settled the lawsuit in 2011 and entered into a Settlement Agreement 27 and General Release and an Agreement for Transfer of Trademarks and Provision of 28 Consulting Services ( collectively, the “2011 Settlement Agreement”). Subsequently, in 1 2014, Smith sued Sandpiper for breach of the 2011 Settlement Agreement. ECF No. 2 186-1 at 6; see Smith v. Sandpiper of California, Inc., No. 14cv418, ECF No. 1 (E.D. Va. 3 June 6, 2014). This second lawsuit was also resolved by settlement, when the parties 4 entered into a second settlement agreement (the “2014 Settlement Agreement”). 5 Advantus propounded requests for production, seeking documents related to the 6 two lawsuits, including production of the 2011 and 2014 Settlement Agreements. The 7 parties were unable to come to agreement on this issue, and filed the instant motion. 8 II. LEGAL STANDARD 9 Federal Rule of Civil Procedure 26 permits discovery of “any nonprivileged matter 10 that is relevant to any party’s claim or defense and proportional to the needs of the case, 11 considering the importance of the issues at stake in the action, the amount in controversy, 12 the parties’ relative access to relevant information, the parties’ resources, the importance 13 of the discovery in resolving the issues, and whether the burden or expense of the 14 proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). Information 15 need not be admissible to be discoverable. Id. Once the propounding party establishes 16 that the request seeks relevant information, “[t]he party who resists discovery has the 17 burden to show discovery should not be allowed, and has the burden of clarifying, 18 explaining, and supporting its objections.” Superior Commc’ns v. Earhugger, Inc., 257 19 F.R.D. 215, 217 (C.D. Cal. 2009); see Blankenship v. Hearst Corp., 519 F.2d 418, 429 20 (9th Cir. 1975) (requiring defendants “to carry heavy burden of showing why discovery 21 was denied”). 22 “The 2015 amendments to Rule 26(b)(1) emphasize the need to impose ‘reasonable 23 limits on discovery through increased reliance on the common-sense concept of 24 proportionality.’” Roberts v. Clark Cty. Sch. Dist., 312 F.R.D. 594, 603 (D. Nev. 2016) 25 (internal citation omitted). The fundamental principle of amended Rule 26(b)(1) is “that 26 lawyers must size and shape their discovery requests to the requisites of a case.” Id. 27 Both discovery and Rule 26 are intended to provide parties with “efficient access to what 28 is needed to prove a claim or defense, but eliminate unnecessary or wasteful discovery.” 1 Id. 2 The Court has broad discretion in determining relevancy for discovery purposes. 3 Surfvivor Media Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005); see U.S. 4 Fidelity and Guar. Co. v. Lee Investments L.L.C., 641 F.3d 1126, 1136 (9th Cir. 2011) 5 (“District courts have wide latitude in controlling discovery, and [their] rulings will not 6 be overturned in the absence of a clear abuse of discretion.”) (internal quotation and 7 citations omitted). To the extent that the discovery sought is “unreasonably cumulative 8 or duplicative, or is obtainable from some other source that is more convenient, less 9 burdensome, or less expensive,” the court is directed to limit the scope of the request. 10 Fed. R. Civ. P. 26(b)(2). Limits should also be imposed where the burden or expense 11 outweighs the likely benefits. Id. How and when to so limit discovery, or to “issue an 12 order to protect a party or person from annoyance, embarrassment, oppression, or undue 13 burden or expense,” remains in the court’s discretion. Fed. R. Civ. P. 26(c)(1). 14 III. DISCUSSION 15 Advantus propounded the following requests for production: 16 REQUEST FOR PRODUCTION NO. 5: All Documents relating to the Bugout Gear 2010 Lawsuit, to include, without limitation, all pleadings, 17 orders, judgments and/or settlement agreements. 18 REQUEST FOR PRODUCTION NO. 6: All Documents relating to the 19 Bugout Gear 2014 Lawsuit, to include, without limitation, all pleadings, 20 orders, judgments and/or settlement agreement. 21 ECF No. 186-1 at 1, 3.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ADVANTUS, CORP., Case No.: 19cv1892-CAB (NLS) 12 Plaintiff, ORDER ON MOTION FOR DETERMINATION OF DISCOVERY 13 v. DISPUTE NO. 3 14 SANDPIPER OF CALIFORNIA, INC.; n/k/a DBJ Enterprises, Inc.; PIPERGEAR [ECF No. 186] 15 USA, INC.; INNOVAPRO 16 CORPORATION; and DAVID JACOBS, 17 Defendants. 18 19 Before the Court is the parties’ Joint Motion for Determination of Discovery 20 Dispute No. 3, wherein Plaintiff/Counterdefendant Advantus Corp. (“Advantus”) seeks to 21 compel Defendant/Counterclaimant Innovaparo Corporation (“Innovapro”) to produce 22 full, unredacted versions of two settlement agreements. ECF No. 186. After due 23 consideration and for the reasons set forth below, the Court GRANTS the motion to 24 compel. 25 I. BACKGROUND 26 Advantus is a company that manufactures and distributes military style bags, 27 backpacks, and other luggage items. ECF No. 121 at ¶ 2. It filed this lawsuit against 28 Defendants, alleging that they engaged in false advertising of competing products and 1 labeled their goods as being made in the USA without any basis to do so. Id. at ¶¶ 19-23. 2 Innovapro is alleged to be the manufacturer of Defendants’ competing bags and is also 3 alleged to be have provided capital to the other Defendants and took over the Sandpiper 4 brand. Id. at 31-50. 5 Innovapro asserted counterclaims against Advantus for trademark infringement. 6 ECF No. 150. Innovapro alleges that it owns three trademarks: BUGOUT, BUGOUT 7 GEAR, and BUGOUT GEAR BE READY. Id. at ¶¶ 2, 17-30. Innovapro claims that it 8 and its predecessors have continuously used these marks since at least 2000 on its travel 9 bags. Id. at ¶ 31. Innovapro accuses Advantus of infringing its trademark rights by 10 selling a product called the Blaze Bugout Bag. Id. at ¶ 37. 11 Advantus answered this counterclaim and asserted its own counterclaims. ECF 12 No. 177. Specifically, Advantus alleges that the trademarks are generic, were abandoned, 13 and are invalid due to fraud on the PTO. Id. at ¶¶ 25-35, 47-58, 59-79. 14 The exact details of how Innovapro obtained rights to these trademarks are relevant 15 to the present motion. The BUGOUT GEAR mark was originally assigned to Stephen C. 16 Smith (“Mr. Smith”), who was the principal of a company called Bugout Gear LLC. Id. 17 at ¶ 18, Ex. A. The BUGOUT GEAR BE READY mark was originally assigned to 18 Bugout Gear LLC. Id. at ¶ 23, Ex. B. The BUGOUT mark was originally assigned to 19 Sandpiper. Id. at ¶ 28, Ex. C. Sandpiper assigned all three of these marks to Innovapro 20 in 2018. Id. at ¶¶ 19, 24, 29. 21 In the interim, Sandpiper obtained the BUGOUT GEAR and BUGOUT GEAR BE 22 READY marks from Mr. Smith and his company Bugout Gear LLC. It appears that 23 Sandpiper had an agreement with Mr. Smith and Bugout Gear LLC to use these marks. 24 In 2010, Mr. Smith and Bugout Gear LLC sued Sandpiper for breach of that agreement. 25 ECF No. 186-1 at 5; see Smith v. Sandpiper, No. 10cv353, ECF No. 1 (E.D. Va. July 19, 26 2010). The parties settled the lawsuit in 2011 and entered into a Settlement Agreement 27 and General Release and an Agreement for Transfer of Trademarks and Provision of 28 Consulting Services ( collectively, the “2011 Settlement Agreement”). Subsequently, in 1 2014, Smith sued Sandpiper for breach of the 2011 Settlement Agreement. ECF No. 2 186-1 at 6; see Smith v. Sandpiper of California, Inc., No. 14cv418, ECF No. 1 (E.D. Va. 3 June 6, 2014). This second lawsuit was also resolved by settlement, when the parties 4 entered into a second settlement agreement (the “2014 Settlement Agreement”). 5 Advantus propounded requests for production, seeking documents related to the 6 two lawsuits, including production of the 2011 and 2014 Settlement Agreements. The 7 parties were unable to come to agreement on this issue, and filed the instant motion. 8 II. LEGAL STANDARD 9 Federal Rule of Civil Procedure 26 permits discovery of “any nonprivileged matter 10 that is relevant to any party’s claim or defense and proportional to the needs of the case, 11 considering the importance of the issues at stake in the action, the amount in controversy, 12 the parties’ relative access to relevant information, the parties’ resources, the importance 13 of the discovery in resolving the issues, and whether the burden or expense of the 14 proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). Information 15 need not be admissible to be discoverable. Id. Once the propounding party establishes 16 that the request seeks relevant information, “[t]he party who resists discovery has the 17 burden to show discovery should not be allowed, and has the burden of clarifying, 18 explaining, and supporting its objections.” Superior Commc’ns v. Earhugger, Inc., 257 19 F.R.D. 215, 217 (C.D. Cal. 2009); see Blankenship v. Hearst Corp., 519 F.2d 418, 429 20 (9th Cir. 1975) (requiring defendants “to carry heavy burden of showing why discovery 21 was denied”). 22 “The 2015 amendments to Rule 26(b)(1) emphasize the need to impose ‘reasonable 23 limits on discovery through increased reliance on the common-sense concept of 24 proportionality.’” Roberts v. Clark Cty. Sch. Dist., 312 F.R.D. 594, 603 (D. Nev. 2016) 25 (internal citation omitted). The fundamental principle of amended Rule 26(b)(1) is “that 26 lawyers must size and shape their discovery requests to the requisites of a case.” Id. 27 Both discovery and Rule 26 are intended to provide parties with “efficient access to what 28 is needed to prove a claim or defense, but eliminate unnecessary or wasteful discovery.” 1 Id. 2 The Court has broad discretion in determining relevancy for discovery purposes. 3 Surfvivor Media Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005); see U.S. 4 Fidelity and Guar. Co. v. Lee Investments L.L.C., 641 F.3d 1126, 1136 (9th Cir. 2011) 5 (“District courts have wide latitude in controlling discovery, and [their] rulings will not 6 be overturned in the absence of a clear abuse of discretion.”) (internal quotation and 7 citations omitted). To the extent that the discovery sought is “unreasonably cumulative 8 or duplicative, or is obtainable from some other source that is more convenient, less 9 burdensome, or less expensive,” the court is directed to limit the scope of the request. 10 Fed. R. Civ. P. 26(b)(2). Limits should also be imposed where the burden or expense 11 outweighs the likely benefits. Id. How and when to so limit discovery, or to “issue an 12 order to protect a party or person from annoyance, embarrassment, oppression, or undue 13 burden or expense,” remains in the court’s discretion. Fed. R. Civ. P. 26(c)(1). 14 III. DISCUSSION 15 Advantus propounded the following requests for production: 16 REQUEST FOR PRODUCTION NO. 5: All Documents relating to the Bugout Gear 2010 Lawsuit, to include, without limitation, all pleadings, 17 orders, judgments and/or settlement agreements. 18 REQUEST FOR PRODUCTION NO. 6: All Documents relating to the 19 Bugout Gear 2014 Lawsuit, to include, without limitation, all pleadings, 20 orders, judgments and/or settlement agreement. 21 ECF No. 186-1 at 1, 3. 22 Responsive to these two requests, Innovapro produced redacted copies of the 2011 23 Settlement Agreement and 2014 Settlement Agreement. ECF Nos. 186-2, 186-3. The 24 2011 Settlement Agreement was produced with the following sections redacted: (1) 25 section titled “Article 2 Consulting Services;” and (2) under “Article 3 Compensation,” 26 compensation to Mr. Smith. ECF No. 186-2 at 6-8. The 2014 Settlement Agreement was 27 produced with the following sections redacted: (1) “Payments to Smith for Consulting 28 Services;” (2) “Security for Monthly Payments;” (3) “Exhibit A, Product Sales Above 1 $10 Million in 2011, 2012, 2013, 2014, and 2015;” (4) “Consulting Services;” (5) 2 “Consulting Agreement Superseded;” and (6) Confessed Judgement Promissory Note. 3 ECF No. 186-3 at 3-6, 13-15. Advantus seeks to have the full, unredacted versions of 4 these two agreements produced. 5 Advantus advances several reasons for why the unredacted versions of the 6 settlement agreements are relevant to the instant action. First, Advantus argues that 7 courts often find settlement agreements involving intellectual property rights relevant to 8 latter infringement actions, because they relate to at least the issue of damages. ECF No. 9 186-1 at 6-7. Advantus cites cases where courts have ordered information regarding how 10 much was paid to settle the prior trademark claims to be unredacted as relevant to 11 damages and full settlement agreements to be produced as relevant to determine 12 ownership rights. Id. Advantus also argues that the redacted information relates to its 13 affirmative defense of abandonment because the terms of the agreement could show 14 whether Sandpiper had a motive to stop using these marks to lessen its payment 15 obligation to Mr. Smith and also to show potential bias of Mr. Smith as a witness. Id. at 16 9-10. Finally, Advantus also argues that the agreements are relevant to the claim of 17 voidable transfer it asserted against Innovapro relating to the transfer of the assets, 18 including the trademarks, for insufficient consideration and also to successor liability. Id. 19 at 10-11. Innovapro strongly refutes each of these arguments. 20 Of the various arguments that Advantus puts forth, the Court is most persuaded 21 that the full settlement agreements may be relevant to trademark claims, particularly as to 22 damages. The crux of the disagreement of the parties on this issue is whether the 23 redacted portions are related to the subject trademarks. Advantus claims that the redacted 24 portions relate to the consulting services and compensation agreement between Mr. Smith 25 and Sandpiper, and that this information is related to the trademarks because the 26 consulting fees bear on the total compensation that Sandpiper paid for the trademark 27 rights that Innovapro now accuses Advantus of infringing. ECF No. 186-1 at 8-9. 28 Advantus refutes this argument, stating that the consulting agreement is a separate 1 agreement for services rendered by Mr. Smith, apart from the transfer of the trademark 2 rights, and the 2011 Settlement Agreement in fact already contains a provision where 3 Sandpiper agreed to pay $100,000 for the interest in the subject trademarks. Id. at 11-12. 4 Advantus acknowledges that the 2011 Settlement Agreement does include the $100,000 5 payment, but points to evidence suggesting that this was not the full amount. Advantus 6 cites to deposition testimony given by Innovapro’s counsel when the purchase took place, 7 who testified that Sandpiper may have paid 2 million for the trademark rights and that it 8 might have come from a settlement agreement. Id. at 14. Thus, Advantus argues that this 9 testimony shows that Innovapro and its counsel considered the trademarks to be worth 10 more than $100,000. 11 Considering the arguments of the parties, the Court finds that the full settlement 12 agreements, including the consulting sections, meet the relevance threshold under Rule 13 26. Advantus has put forth some evidence suggesting that the full amount Mr. Smith and 14 Bugout Gear LLC received for the trademarks is not simply the $100,000. Advantus may 15 or may not be able to eventually show that the consulting salary was considered by the 16 parties to constitute payment for the trademarks, but that is not required to meet 17 relevance. The evidence must only be reasonably calculated to lead to discovery of 18 admissible evidence. 19 Furthermore, the comparative burden here is small—the settlement agreements 20 have already been produced in their redacted forms. And, as Advantus points out, a 21 protective order is already in place that can serve to protect any confidentiality and 22 competitive harms that Innovapro has regarding the production of the settlement 23 agreements, including an Attorney’s Eyes Only designation. Innovapro does not 24 specifically articulate any harms that it would suffer with disclosure with this higher level 25 of protection. 26 Having found the settlement agreements at least relevant to the trademark claims, 27 the Court GRANTS the motion and orders Innovapro to produce both the 2011 28 Settlement Agreement and 2014 Settlement Agreement as attached to the joint motion, in 1 || their entirety without any redactions. The Court will order that the agreements only be 2 || produced in their entirety with the Attorney’s Eyes Only designation. 3 IV. CONCLUSION 4 After due consideration and for the reasons stated above, Advantus’s motion to 5 ||compel production of the unredacted copies of the 2011 Settlement Agreement and 2014 6 || Settlement Agreement is GRANTED. Innovapro shall produce these agreements to 7 || Advantus within 7 days of this order, under the Attorney’s Eyes Only designation. 8 IT IS SO ORDERED. 9 Dated: February 10, 2021 10 Mie. Lom ul Hon. Nita L. Stormes United States Magistrate Judge
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