United States District Court, N.D. Iowa, Cedar Rapids Division
Williams, Chief United States Magistrate Judge.
PLAINTIFFS' MOTION TO COMPEL
KING DEPOSITION AND PLAINTIFFS' MOTION FOR LEAVE .......
PLAINTIFFS' MOTION FOR SANCTIONS
case is before the Court on plaintiffs' resisted motion
to compel discovery, to impose sanctions, and for leave and
additional time to conduct a Rule 30(b)(6) deposition. (Doc.
128). Defendant filed its timely resistance, and plaintiffs
filed a timely reply. (Docs. 129, 130). Both parties included
exhibits with their filings. These attachments have been
considered. For the reasons stated below, the Court grants in
part plaintiffs' motions.
case concerns allegations by CMI Roadbuilding, Inc. and CMI
Roadbuilding Ltd. (plaintiffs) that defendant Iowa Parts,
Inc. (defendant) misappropriated trade secrets in the form of
engineering documents acquired by and exclusively licensed to
plaintiffs in violation of state and federal law. (Doc. 81).
Plaintiffs also pled common law conversion and unjust
enrichment claims seeking, among other remedies, compensation
for defendant's use of plaintiffs' proprietary
information and trade secrets. (Id.).
for this case began in 2016. A general protective order was
entered on August 17, 2016, pursuant to the parties'
joint motion. (Doc. 37, 38). In September of 2016, plaintiffs
brought their first motion to compel discovery, seeking
production of engineering documents in defendant's
possession. (Doc. 41). Subsequently, defendant filed an
unresisted motion for a second protective order, arguing that
plaintiffs' production request encompassed sensitive
information that had no bearing on this case and, therefore,
requested that this Court require plaintiffs to identify the
trade secrets or proprietary information at issue. (Docs. 48,
48-1). At a hearing on the motion to compel, defendant agreed
to produce approximately 1, 000 pages of plans,
specifications, and drawings, notwithstanding its objection
that these included documents not related to this lawsuit.
October 24, 2016, the Court entered an order granting in part
plaintiffs' motion to compel in light of this agreement.
(Id.). On November 9, 2016, the Court entered an
order summarily granting defendant's unresisted motion
for a protective order to the extent that it was not
inconsistent with the order on the motion to compel. (Doc.
53). Defendant maintains that plaintiffs have yet to
articulate the particular trade secrets defendant is alleged
to have misappropriated. (Doc. 129, at 4).
2017, defendant produced engineering documents pursuant to
the October 2016 order to compel and, under the protective
order, designated the documents as being for
“Attorney's Eyes Only.” Plaintiffs filed a
motion requesting that this designation be reduced to
“Confidential” to permit inspection by certain
persons. On May 26, 2017, the Court granted plaintiffs'
motion. (Doc. 109).
instant motion marks the parties' third discovery dispute
in this case. In their motion, plaintiffs seek to compel
defendants to supplement production of documents identified
in plaintiffs' initial discovery requests. (Doc. 128).
Plaintiffs claim that information gathered during the
depositions of Yvonne Bardwell, Suzy Hartley, and Jay King
purportedly shows that defendant has failed to produce
responsive financial documents. (Doc. 128-1 at 3, 4).
Additionally, plaintiffs request that the Court impose
sanctions against defendant on the grounds that defendant has
abused the discovery process and frustrated plaintiffs'
fair examination of Bardwell, Hartley, and King. (Doc. 128,
at 1). Finally, plaintiffs request leave and additional time
to conduct a Rule 30(b)(6) deposition of defendant.
(Id.). Pursuant to Local Rule 37(a), plaintiffs aver
to have conferred in good faith with defendant in an attempt
to resolve these issues. (Id.).
was scheduled to close on August 9, 2017. (Doc. 62).
PLAINTIFFS' MOTION TO COMPEL
motion aims to compel supplemental production of certain
financial and accounting records pertaining to
defendant's business. In their initial written discovery
requests, plaintiffs sought, inter alia, production
of the following documents, which are now the subject of
a) “any and all documents, including invoices, bills,
receipts and contracts relating to Iowa Parts, Inc.'s
purchase of materials, tools, or machinery to be utilized in
the manufacturing of products sold by Iowa Parts, Inc. from
2006 to the present”;
b) “any and all State and Federal tax returns for
Defendant Iowa Parts, Inc. from 2006 to the present”;
c) “any and all pro-forma income statements or balance
sheets, statements of cash flow, budgets, and other
bookkeeping paperwork related to Defendant Iowa Parts,
Inc.'s operation between 2006 and the present”; and
d) “all monthly income statements for Defendant Iowa
Parts, Inc., showing the revenue and expenses generated by
that entity (fixed and variable).”
(Doc. 128-1, at 7-8). Subsequently, in a March 10, 2017,
letter addressed to defense counsel (hereinafter “March
10 letter”), plaintiffs' counsel extended what the
Court takes to be an offer to narrow the scope of the
foregoing production requests. (Doc. 128-8). The letter
stated that there remained “basic information which
must be provided” by defendant, including
defendant's records of sales and costs of production
“since 12/31/10 relating to the asphalt plant, concrete
plant, and landfill and dirt compaction equipment product
lines that is for a part or component for a product
manufactured by [defendant], its subsidiaries and/or
affiliates.” (Doc. 128-8, at 1-2). These narrowed
requests have been incorporated into plaintiffs' motion.
(Doc. 128-1, at 8).
March 30, 2017, defendant responded to plaintiffs' demand
for supplemental production explaining that, “[w]ith
respect to sales and costs of production, Iowa Parts is not
able to search for responsive documents based upon a drawing
number, type, or description.” (Doc. 128-9, at 1).
Defendant claimed that it had received over 15, 000 purchase
orders since 2010, but acknowledged that “[i]f Iowa
Parts is provided with a part number, [it is] able to
identify related purchase orders that would need to be
manually searched.” (Id.). Plaintiffs do not
claim to have provided a list of part numbers to date,
although they have identified 3, 600 engineer drawings which
plaintiffs allege contain trade secrets. (Docs. 129-1, at 1,
130, at 3). Notably, these drawings have been identified by
spreadsheet, but the drawings themselves remain unproduced.
acknowledge that defendant has produced at least 42 pages of
financial and accounting information in response to its
requests, including a “Sales by Rep Summary” for
the years 2011 through 2016, as well as balance sheets and
profit and loss statements for the same time span. (Doc.
128-1, at 4). Plaintiffs argue, however, that defendant has
withheld additional responsive documents to which plaintiffs
point to deposition testimony by Bradwell, Hartley, and King
as evidence that accessible, unproduced financial records
exist. Plaintiffs claim these records include financial
statements, sales reports, commission reports, and account
receivables, which are collectively in the possession of
defendant's sole shareholder, Mike Hawkins, and also
available on defendant's computer system. (Id.,
at 9). Further, billing records, employee records, and
non-compete contracts are located in the filing cabinet in
Hartley's office. (Id.). “[A]ccount
receivable reports for all companies or individuals who have
purchased products from [defendant], historical records of
commissions for all sales of products, and a list of the pre[
]-paid expenses” are all allegedly available on
defendant's computer system. (Id.). Finally,
plaintiffs allege that Bardwell used state and federal income
tax documents, information about employees' gross
earnings, profit and loss statements, balance sheets, and
bank statements. (Id.). Plaintiffs ask the Court to
compel defendant's production of these materials, as well
as defendant's payroll reports, income and expense
statements, and retained earnings, which were used by
Bardwell in the course of her employment. (Id., at
resistance, defendant argues that supplemental production is
not required. Its position, in essence, is that
plaintiffs' demand is overly broad and unduly burdensome.
Defendant claims that plaintiffs have failed to sufficiently
particularize the trade secrets alleged to have been
misappropriated, resulting in defendant's inability to
identify relevant financial documents. (Doc. 129, at 3-4).
Citing the Court's November 9, 2016, protective order,
defendant argues that plaintiffs are required to identify the
relevant trade secrets before compelling discovery from
defendant. (Id., at 4). Additionally, to the extent
that it is able to determine the scope of relevant discovery,
defendant claims that the documents plaintiffs identify in
their motion pertain to defendant's general business
operations and are largely irrelevant to this trade secret
litigation. (Id., at 5, 7). Although defendant
admits that “a small percentage” of the documents
plaintiffs seek relate to the products and designs identified
thus far (id., at 7), defendant contends that
locating and producing these documents would “involve
the manual review of 15, 000 plus documents.”
(Id., at 9-10).
Standards for ...