Challenge Printing Company, Inc. v. Electronics For Imaging Inc.

• Court: District Court, N.D. California
• Decided: April 6, 2022
• Docket: 5:20-cv-04659
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 CHALLENGE PRINTING COMPANY, Case No. 20-cv-04659-EJD (VKD) INC., 9 Plaintiff, ORDER RE PLAINTIFF'S MOTION 10 TO EXTEND DISCOVERY CUT-OFF v. DATES 11 ELECTRONICS FOR IMAGING INC., Re: Dkt. No. 55 12 Defendant.

13 14 Plaintiff Challenge Printing Company, Inc. (“Challenge Printing”) asks for an order 15 extending the fact discovery deadline for the purpose of taking additional discovery of defendant 16 Electronics for Imaging, Inc.’s (“EFI”) financial condition. Dkt. No. 55. The presiding judge has 17 referred the matter to the undersigned for decision. Dkt. No. 65. The Court finds this matter 18 suitable for decision without oral argument. Civ. L.R. 7-11(b). 19 I. BACKGROUND 20 On May 21, 2021, Challenge Printing served a document request on EFI seeking 21 “documents sufficient to identify the net worth of [EFI] as of the following dates: a. January 1, 22 2018, b. January 1, 2019, c. January 1, 2020, d. January 1, 2021, [and] e. June 1, 2021.” Dkt. No. 23 57-4. EFI objected to this requested on several grounds, including relevance. Dkt. No. 57-5. 24 Eventually, the parties resolved their disputes as follows: EFI would produce documents 25 sufficient to show its net worth. See Dkt. Nos. 57 at 6, 57-7, 57-8, 58 at 1. 26 EFI says that on November 17, 2021 it produced ten pages of what it describes as a 27 “consolidated financial statement,” including a “balance sheet” with EFI’s assets and liabilities 1 dispute that EFI’s production shows its assets and liabilities, but it contends that this production 2 was “insufficient” because it “does not sufficiently detail the financial consequence of the 3 acquisition of EFI by a private equity firm . . . for $1.7B.” Dkt. No. 55 at 3. In its reply brief, 4 Challenge Printing elaborates on its complaint, arguing that EFI produced only unaudited financial 5 statements that show “significantly negative net worth,” which EFI believes is inconsistent with 6 public information indicating that a private equity firm acquired EFI for $1.7 billion in 2019. Dkt. 7 No. 58 at 1-2. 8 Fact discovery closed on November 19, 2021. By stipulation of the parties and order of 9 the presiding judge, the parties were required to file any motion to compel discovery by December 10 6, 2021. Dkt. No. 43 at 5. Challenge Printing filed the instant motion on December 6, 2021. 11 II. DISCUSSION 12 The parties disagree about whether Challenge Printing’s motion is timely. While the 13 parties did not comply with this Court’s Standing Order requirements for submitting discovery 14 disputes, because the motion does raise a discovery dispute and was filed by the deadline for 15 motions to compel, the Court will decide the dispute on the merits. 16 The parties agree that evidence of EFI’s current net worth—i.e., the value of all of its 17 assets, minus the total of all of its liabilities—is relevant to Challenge Printing’s punitive damages 18 claim. See Dkt. No. 57 at 10 (citing Vieste, LLC v. Hill Redwood Dev., No. C-09-04024 JSW 19 (DMR), 2011 WL 855831, at *3 (N.D. Cal. Mar. 9, 2011); Dkt. No. 58 at 2 (same). The Court 20 agrees with EFI that Challenge Printing is not entitled to discovery of the financial consequences 21 of an acquisition that occurred in 2019. However, Challenge Printing is entitled to reliable 22 information regarding EFI’s current net worth. 23 Challenge Printing is a private company incorporated in Delaware. Dkt. No. 47 ¶ 2; Dkt. 24 No. 48 ¶ 2. While private companies generally are not required to publicly report their financial 25 statements, they do have other financial reporting obligations. See, e.g., 8 Del. Code § 501 26 (requiring all non-exempt Delaware corporations to pay an annual franchise tax); 8 Del. Code § 27 502 (requiring all non-exempt Delaware corporations to file an annual franchise tax report). For 1 this reason, among others, many private companies prepare audited financial statements.! While 2 unaudited financial statements are not per se unreliable, audited financial statements reflect an 3 auditor’s independent assessment that the company’s financial statements accurately reflect its 4 || financial performance. 5 The record does not include EFI’s ten-page production of its financial statements to 6 || Challenge Printing in November 2021, nor does the record reveal whether EFI has audited 7 financial statements that it elected not to produce. However, if EFI has audited financial 8 statements reflecting its current net worth, it should produce them to Challenge Printing. 9 || Accordingly, the Court orders as follows: 10 If it has not already done so, EFI must produce to Challenge Printing its most recent 11 audited financial statements sufficient to show the value of its total assets and total liabilities, 12 || preferably as of the end of EFI’s fiscal year. If EFI does not have audited financials (whether 13 annual, quarterly, or monthly) for any period of time in 2021 or 2022, then, if it has not already 14 || done so, EFI must instead produce to Challenge Printing its unaudited financial statements 3 15 sufficient to show the value of its total assets and total liabilities as of December 31, 2021 or as of a 16 the close if its most recent fiscal year, whichever is later.” EFI’s production is due by April 22, || 2022. IT IS SO ORDERED. 19 || Dated: April 6, 2022 20 . 28 □ 21 Uniginian®, □□□□□□ VIRGINIA K. DEMARCHI 22 United States Magistrate Judge 23 24 25 26 ' Tn some situations, such as government contracting, private companies are required to have their 07 financial statements audited. 28 The parties may stipulate to EFI’s production of audited and/or unaudited financial statements for different periods of time if they wish without seeking the Court’s approval.