Filed: Jun. 19, 2014
Latest Update: Mar. 02, 2020
Summary: testing requests. Cascade does not argue that the discovery, it seeks from CCMI is relevant to these new claims., 3, The Washington district court denied KFI's first motion for, reconsideration of the district court's dismissal of counterclaims, related to its cashmere labeling on April 14, 2014.
United States Court of Appeals
For the First Circuit
No. 13-2302
CASCADE YARNS, INC.,
Plaintiff, Appellant,
v.
KNITTING FEVER, INC.; DESIGNER YARNS, LTD.; EMMEPIEFFE, SRL;
FILATURA PETTINATA V.V.G. DI STEFANO VACCARI & C.(S.A.S.); SION
ELALOUF; JAY OPPERMAN; DEBBIE BLISS; DOES 1-5,
Defendants,
CASHMERE AND CAMEL HAIR MANUFACTURERS INSTITUTE,
Third Party, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Lynch, Chief Judge,
Howard and Kayatta, Circuit Judges.
Robert J. Guite and Sheppard, Mullin, Richter & Hampton LLP on
brief for appellant Cascade Yarns, Inc.
Robert J. Kaler, and Holland & Knight, LLP on brief for
appellee Cashmere and Camel Hair Manufacturers Institute.
June 19, 2014
LYNCH, Chief Judge. This appeal arises from a discovery
dispute in litigation between two yarn manufacturers, Cascade
Yarns, Inc. ("Cascade") and Knitting Fever, Inc. ("KFI"), in the
Western District of Washington. Cascade, the plaintiff in the
Washington action, accused KFI of making false representations
about the cashmere content of its yarns.
The recipient of the discovery request at issue in this
case, Cashmere and Camel Hair Manufactures Institute ("CCMI"), is
a nonprofit corporation that offers confidential tests of the fiber
content of cashmere samples to its members, as well as retailers
and suppliers of cashmere and camel hair goods. CCMI is not a
party to the Washington action, but Cascade subpoenaed documents
from CCMI in Massachusetts related to its confidential fiber
testing program and possible correspondence with KFI. Not
satisfied with the redacted documents CCMI had produced in response
to the subpoena, Cascade moved to enforce the subpoena in
Massachusetts federal district court, arguing that the documents it
sought from CCMI were relevant to its claims against KFI. A
magistrate judge denied Cascade's motion to compel, and the
district court affirmed the magistrate judge's order. Though faced
with a formidable abuse of discretion standard of review and the
dismissal of all of its claims in the Washington case, Cascade,
undaunted, has appealed. Finding there was no abuse of discretion
in the denial of this discovery, we affirm.
-2-
I.
On May 24, 2010, Cascade sued KFI in federal district
court in Washington asserting, inter alia, unfair competition and
RICO claims based on KFI's alleged mislabeling of the cashmere
content of some of its yarns. On May 18, 2011, Cascade served a
subpoena on CCMI seeking two categories of documents: (1) CCMI's
correspondence with KFI or its agents; and (2) "[a]ll documents
related to yarn distributed by [KFI], such as [a] request for fiber
testing or results of such a test." The subpoena listed twelve
brand names under which KFI yarns are sold but indicated that the
request was not limited only to those brands.
CCMI objected to the subpoena but produced 101 documents
on August 19, 2011, which it had redacted and designated as "highly
confidential" as permitted by a Stipulated Protective Order in the
Washington action.1 The documents included eleven requests for
fiber-content testing of yarn samples in 2006 and responses
thereto; CCMI had redacted the names of the parties making those
testing requests.
In a letter to CCMI's counsel, Cascade's counsel
disagreed that the documents were "highly confidential" and sought
production of additional documents, including correspondence
between CCMI and KFI. CCMI refused to waive the confidentiality of
1
The Washington district court later ruled that the
documents ought be marked as only "confidential," not "highly
confidential," pursuant to its order.
-3-
the documents it had produced and objected to the balance of
Cascade's subpoena as "overbroad, unduly burdensome, and [requiring
CCMI] to search through years of its files looking for information
of marginal relevance to the basic issues in [Cascade's] case."
On December 8, 2011, Cascade moved to compel CCMI's
compliance with the subpoena in Massachusetts federal district
court. Cascade asserted that the documents it sought were relevant
to its case as plaintiff -- that is, to its unfair competition and
RICO claims against KFI -- because (1) they relate to yarn products
that Cascade alleged were mislabeled and (2) unredacted copies of
the testing requests that CCMI had produced might show KFI's
knowledge of its cashmere mislabeling. CCMI opposed the motion on
January 6, 2012. KFI chose not to get involved in this discovery
dispute.
Cascade's motion was referred to a magistrate judge, who
held a hearing on February 2, 2012. At that hearing, CCMI's
attorney stated that KFI had not submitted any yarn samples to CCMI
for testing and that the requests for testing of KFI yarns had
mostly come from small retailers. These non-party smaller
retailers, in turn, had relied on CCMI's promise of
confidentiality. CCMI also explained that the test results had, at
best, limited probative value to Cascade's mislabeling claims
because they were merely preliminary scans of the fiber content of
the submitted yarn samples.
-4-
The magistrate judge denied Cascade's motion on February
6, 2012 "for reasons set forth in the opposition of [CCMI], a non-
party to the underlying litigation." The order cited Fed. R. Civ.
P. 26(b)(2)(C)(iii), which directs a court to limit discovery if
"the burden or expense of the proposed discovery outweighs its
likely benefit . . . ." The magistrate judge, citing Continental
Datalabel, Inc. v. Avery Dennison Corp., No. 10-mc-10176-RGS, 2010
WL 2473154 (D. Mass. June 15, 2010), gave special consideration to
CCMI's status as a non-party without any interest in the underlying
dispute between the two yarn manufacturer parties, neither of whom
was a dues-paying member of the nonprofit. See
id. at *1 (denying
motion to enforce subpoena on non-party where non-party had already
complied with requests that were not overbroad or intrusive). The
magistrate judge also viewed Cascade's request for CCMI's
confidential test results of the cashmere content of sample yarns
as more or less an attempt to co-opt CCMI's expertise and
imprimatur for its own benefit (and without payment). See In re
Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig.,
249
F.R.D. 8, 12-13 (D. Mass. 2008).
The district court affirmed the magistrate judge's order,
to which Cascade had objected, on September 20, 2013. See Fed. R.
Civ. P. 72(a) (directing district court to modify or set aside a
magistrate judge's order in a nondispositive matter if it is
"clearly erroneous" or "contrary to law").
-5-
While CCMI and Cascade have litigated this discrete
discovery dispute in Massachusetts district court, several
developments in the underlying Washington action have greatly
narrowed the relevance of the documents Cascade seeks from CCMI.
First, by October 2012 -- months before the Massachusetts district
court affirmed the discovery ruling in favor of CCMI -- the
Washington district court had already dismissed all of Cascade's
claims against KFI.2 See Cascade Yarns, Inc. v. Knitting Fever,
Inc., 905 F. Supp. 2d 1235 (W.D. Wash. 2012); Cascade Yarns, Inc.
v. Knitting Fever, Inc., No. C10-861RSM,
2012 WL 2565067 (W.D.
Wash. Jun. 29, 2012). Second, the Washington district court also
dismissed KFI's counterclaims against Cascade alleging that Cascade
had made false statements regarding the cashmere content of KFI's
yarns.3 See Cascade Yarns, Inc. v. Knitting Fever, Inc., No. 2:10-
cv-00861 (W.D. Wash. Sep. 10, 2013), ECF No. 962. When Cascade
entered the notice of appeal in this case, only KFI's counterclaims
alleging Cascade's false statements as to the milk protein fiber
2
In April 2013, Cascade filed a new suit against KFI
alleging that KFI had failed to properly identify the country of
origin of certain yarns. Cascade does not argue that the discovery
it seeks from CCMI is relevant to these new claims.
3
The Washington district court denied KFI's first motion for
reconsideration of the district court's dismissal of counterclaims
related to its cashmere labeling on April 14, 2014. On April 24,
2014, KFI filed a second motion for reconsideration, which is
currently pending before the district court.
-6-
content of its yarns had not been dismissed. Cascade's original
claims against KFI did not concern the milk fiber content of yarns.
Given that CCMI tests only for cashmere fibers, not milk
protein, the requested documents are now arguably relevant only to
a much narrower set of issues. As to the second category of
requested documents, Cascade contends that disclosure of the
identity of the retailers that submitted the KFI yarn testing
requests to CCMI is now relevant to KFI's damages against Cascade
arising out of pending counterclaims. The argument is that those
requests are relevant because they show another reason, independent
of Cascade, for retailers to have stopped purchasing KFI yarns.
Cascade also asserts that evidence that KFI relied on analysis done
by Professor Kenneth Langley, retained by CCMI to do preliminary
fiber testing, could support a defense for Cascade of "unclean
hands."
As to the first category of subpoenaed documents, CCMI's
correspondence with KFI or its agents, Cascade makes no specific
claim of relevance to the now-narrowed issues pending in the
Washington action. Cascade complains only that CCMI has withheld
responsive documents. CCMI has represented to this court, however,
that it has not had any correspondence with KFI or its agents.4
4
CCMI's counsel explained that he has communicated with
KFI's counsel regarding CCMI's objections to a similar subpoena it
received several months earlier in a separate action brought
against KFI in the United States District Court for the Eastern
District of Pennsylvania. The plaintiff in that case, a KFI
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II.
We reject CCMI's threshold argument that the appeal is
moot given the status of the Washington action. Whether the appeal
was worth pursuing is a different matter than whether it is moot.
Cascade has explained that the documents it seeks are
still relevant to its defense against counterclaims that were not
dismissed. In addition, there is still a motion for
reconsideration pending before the Washington district court that
concerns KFI's cashmere-related counterclaims. As a result, we
decide this appeal on the merits.
Discovery orders are reviewed for abuse of discretion.
Cusumano v. Microsoft Corp., 162 F.3d 708, 713 (1st Cir. 1998).
"Under that standard, 'we may reverse a district court only upon a
clear showing of manifest injustice, that is, where the lower
court's discovery order was plainly wrong and resulted in
substantial prejudice to the aggrieved party.'" In re Subpoena to
Witzel,
531 F.3d 113, 117 (1st Cir. 2008) (emphasis added) (quoting
Saldana-Sanchez v. Lopez-Gerena,
256 F.3d 1, 8 (1st Cir. 2001)).
We decline to disturb the district court's ruling that
Cascade's interest in the contested discovery, even at the time of
that ruling, was slim compared to the burdens on the opponent of
customer, was represented by the same attorneys representing
Cascade in the pending Washington action against KFI. The district
court in Pennsylvania dismissed the case in March 2013. Cascade
does not argue that this correspondence between attorneys is
relevant to the Washington action.
-8-
the discovery, CCMI. The district court accorded appropriate
weight to the fact that CCMI is a stranger to the underlying
litigation. Cusumano, 162 F.3d at 717 ("[C]oncern for the unwanted
burden thrust upon non-parties is a factor entitled to special
weight in evaluating the balance of competing needs."); cf.
Heidelberg Ams., Inc. v. Tokyo Kikai Seisakusho, Ltd., 333 F.3d 38,
42 (1st Cir. 2003) (upholding district court order quashing
subpoena on non-party to underlying litigation where there was
imbalance between the need for the subpoena and the burden sought
to be placed on the non-party).
Cascade's arguments do not overcome the "high hurdle" of
showing a discovery order is both "plainly wrong" and has resulted
in "substantial prejudice." In re Subpoena to Witzel, 531 F.3d at
117. Cascade has not even bothered to address the "substantial
prejudice" prong of the review standard, which is itself a
sufficient basis for upholding the challenged discovery ruling.
See
id. at 120. As to the "plainly wrong" element, Cascade relies
primarily on a factually distinct, unpublished case from the
District of Maine, McFadyen v. Duke University, No. 2:12-mc-196-
KHR,
2012 WL 4895979 (D. Me. Oct. 12, 2012).5
5
In McFadyen, the defendant, Duke University, sought
correspondence between a non-party academic and the plaintiffs,
former members of the Duke lacrosse team. The plaintiffs had sued
Duke University over its handling of an investigation regarding a
dancer who had accused Duke lacrosse team members of certain crimes
in 2006 after she had performed at a team party. The plaintiffs
admitted they had given interviews to the academic on this very
-9-
Cascade also makes the bold assertion that the magistrate
judge's order, which the district court affirmed, lacked a legal
and factual basis. That order cited both rules and case law, which
were directly relevant. The discovery order was plainly not "based
on an incorrect legal standard or a misapplication of the law." Ji
v. Bose Corp., 626 F.3d 116, 122 (1st Cir. 2010) (quoting In re
Subpoena to
Witzel, 531 F.3d at 117) (internal quotation mark
omitted). The district court's factual findings, including that
CCMI was a disinterested party to the Washington action, are also
supported by the record. Accordingly, there was no abuse of
discretion even well before the Washington court pared down the
litigation before it.
III.
For the reasons stated, the district court's order
denying Cascade's motion to enforce the subpoena is affirmed.
Costs are awarded to CCMI.
topic, and the district court enforced the subpoena, reasoning that
the plaintiffs could not "invo[ke] the shield of privacy while
pursuing claims against Duke based upon the very events about which
they spoke with [the academic]." 2012 WL 4895979, at *4. In
contrast, here, CCMI has represented that it has neither
corresponded with nor received test requests from KFI.
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