BERNARD G. SKOMAL, Magistrate Judge.
Counter-claimant Roma Mikha and Third Party Plaintiff NMRM, Inc. and Skyline Market, Inc. (collectively the "Stores") move to compel Plaintiff Outlaw Laboratory, L.P. ("Outlaw") to provide full and complete responses to the Stores Document Requests 1-7, 10, 13-16 and 19-20 and Interrogatories 1-3 and 5-8 which encompass: demand letters, communications between Outlaw and class members, identification of law firms that represented Outlaw in conjunction with these demand letters, settlement agreements, amounts paid in settlement, documents identifying Outlaw employees, documents showing Outlaws current and former partners, and documents related to the manufacture and sale of Tri-Steel.
The Stores have alleged counterclaims under the Racketeer Influenced and Corrupt Organizations Act ("RICO") and a recession claim on behalf of a class of similarly situated stores.
The Stores seek to bring these claims on behalf of a Store Class, "All business entities in the Unites States that received a demand letter substantially similar to the letter received by the class representatives" with three subclasses: (1) Sued Stores;
The actual discovery requests at issue and related definitions are included below as necessary in analyzing the propriety of the discovery by each topic.
The Stores seek to compel responses to both document requests and interrogatories to obtain information and documents the Stores claim is relevant primarily to class certification. Before analyzing the specific requests, the Court outlines the applicable authority.
"A party may serve on any other party a request within the scope of Rule 26(b) to produce any designated documents or electronically stored information." Rule 34(a)(1)(A). The request must describe the document sought "with reasonable particularity" and any "objection must state whether any responsive materials are being withheld on the basis of that objection." Rule 34(b)(2). The requesting party may move to compel the production of responsive documents if a party fails to produce documents. Rule 37(a)(3)(B)(iv).
"An interrogatory may relate to any matter that may be inquired into under Rule 26(b)." Fed. R. Civ. P. 33(a)(2). "Each interrogatory must, to the extent it is not objected to, be answered separately and fully in writing under oath." Rule 33(b)(3). "The grounds for objecting to an interrogatory must be stated with specificity" Rule 33(b)(4). The party propounding the interrogatory may move to compel an answer if the party fails to answer. Rule 37(a)(3)(B)(iii). "If the answer to an interrogatory may be determined by examining, auditing, compiling, abstracting, or summarizing a party's business records . . ., and if the burden of deriving or ascertaining the answer will be substantially the same for either party, the responding party may answer by" producing or providing an opportunity for the moving party to examine records. Rule 33(d).
As the party seeking to compel discovery, the Stores have "the burden of establishing that [their] request[s] satisfy the relevancy requirements of Federal Rule 26(b)(1)." Louisiana Pac. Corp. v. Money Market 1 Inst. Inv. Dealer, 285 F.R.D. 481, 485 (N.D. Cal. 2012) (citing Soto v. City of Concord, 162 F.R.D. 603, 610 (N.D. Cal. 1995)). Outlaw, as the party opposing discovery, "has the burden of showing that discovery should not be allowed, and also has the burden of clarifying, explaining, and supporting its objections with competent evidence." Id. (citing DIRECTV, Inc. v. Trone, 209 F.R.D. 455, 458 (C.D. Cal. 2002)). "An opposing party can meet its burden by demonstrating that the information is being sought to delay bringing the case to trial, to embarrass or harass, is irrelevant or privileged, or that the person seeking discovery fails to show need for the information." Colaco v. ASIC Advantage Simplified Pension Plan, 301 F.R.D. 431, 434 (N.D. Cal. 2014) (citing Khalilpour v. CELLCO P'ship, No. C 09-02712 CW (MEJ), 2010 WL 1267749, at *3 (N.D.Cal. April 1, 2010)); see also Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 353 n. 17 (1978).
Rule 26(b)(1) provides that "[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit." Fed. R. Civ. P. 26(b)(1). "District courts have broad discretion in controlling discovery" and "in determining relevancy." Laub v. Horbaczewski, 331 F.R.D. 516, 521 (C.D. Cal. 2019) (citing Hallett v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002) and Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005)).
Following the 2015 Amendments to Rule 26, it is clear that "[r]elevancy alone is no longer sufficient—discovery must also be proportional to the needs of the case." In re Bard IVC Filters Prods. Liability Litig., 317 F.R.D. 562, 564 (D. Ariz. 2016). "The court's responsibility, using all the information provided by the parties, is to consider these, [undue burden or expense and importance of information sought,] and all the other factors in reaching a case-specific determination of the appropriate scope of discovery." Fed. R. Civ. P. 26 advisory committee's notes. In deciding whether a request is unduly burdensome, a court must balance the burden to the responding party against the benefit to the party seeking the discovery. Thomas v. Cate, 715 F.Supp.2d 1012, 1032 (E.D. Cal. 2010)(collecting cases).
As discussed more fully below, (III.B.1), the Court's discretion in controlling discovery extends to whether to allow, and the appropriate scope of, class discovery Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 942 (9th Cir. 2009) ("District courts have broad discretion to control the class certification process, and `[w]hether or not discovery will be permitted . . . lies within the sound discretion of the trial court.'") (citing Kamm v. Cal. City Dev. Co., 509 F.2d 205, 209 (9th Cir. 1975)).
Rule 26(b)(2) also requires the court, on motion or on its own, to limit the frequency or extent of discovery otherwise allowed by the rules if it determines that (1) "the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;" (2) "the party seeking discovery has had ample opportunity to obtain the information by discovery in the action;" or (3) "the proposed discovery is outside the scope permitted by Rule 26(b)(1)." Fed. R. Civ. P. 26(b)(2)(C)(i)-(iii).
Under Rule 26(c), a party may move for, or the court may issue, a protective order "to protect a party or person from annoyance, embarrassment, oppression or undue burden or expense." Among numerous options under Rules 26(c) are forbidding disclosure, specifying terms for disclosure, prescribing a different discovery method, and limiting disclosure to certain matters.
Most of the discovery requests discussed below concern discovery sought for purposes of certifying and maintaining the Stores' SACCs as a class action. Specifically, the Stores argue the discovery sought is necessary to show numerosity, commonality, and typicality under Rule 23(a) as well as predominance, ascertainability,
"Rule 23 of the Federal Rules of Civil Procedure contains two sets of class certification requirements set forth in Rule 23(a) and (b)." Moyle v. Liberty Mut. Retirement Ben. Plan, 823 F.3d 948, 964 (9th Cir. 2016) (citations omitted); see also Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (Explaining that in addition to proving Rule 23(a)'s requirements are met, "[t]he party must also satisfy through evidentiary proof at least one of the provisions of Rule 23(b).").
"Rule 23(a) requires parties seeking class certification to establish: (1) that the class is so large that joinder of all members is impracticable (numerosity); (2) that there are one or more questions of law or fact common to the class (commonality); (3) that the named parties' claims are typical of the class (typicality); and (4) that the class representatives will fairly and adequately protect the interests of other members of the class (adequacy of representation)." Ellis v. Costco Wholesale Corp., 657 F.3d 970, (9th Cir. 2011). (citing Fed. R. Civ. P. 23(a)).
"Rule 23(a)(1) requires the party seeking certification to show the `class is so numerous that joinder of all members is impracticable." In re Packaged Seafood Prods. Antitrust Litig., 332 F.R.D. 308, 318 (S.D. Cal. 2019) (quoting Rule 23(a)(1)). While there is no "fixed numerical threshold," the Ninth Circuit has observed that 40 members is generally sufficient and less than 15 is too small. Rannis v. Recchia, 380 Fed. Appx 646, 651 (9th Cir. May 27, 2010) (citing Gen. Tel. Co. of the Nw., Inc. v. EEOC, 446 U.S. 318, 330 (1980)).
Commonality
The test of typicality is "whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Parsons v. Ryan, 754 F.3d 657, 685 (9th Cir. 2014) (citing Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir.1992)). A plaintiff can show typicality by "showing [plaintiff's] injuries . . . arose `from the same event or practice or course of conduct that gave rise to the claims of other class members and [their] claims were based on the same legal theory." Ramirez v. Transunion, LLC, ___ F.3d ___, 2020 WL 946973 at *17 (9th Cir. Feb. 27, 2020).
One
Among the matters a court may consider in the Rule 23(b)(3) analysis is "the likely difficulties in managing a class action." Rule 23(b)(3)(D) (emphasis added); see also Brisenos, 844 F.3d at 1127 (describing "the manageability criterion of the superiority requirement" in Rule 23(b)). "Rule 23(b)(3) requires that a class action be `superior to other available methods for fairly and efficiently adjudicating the controversy,' and it specifically mandates that courts consider the likely difficulties in managing a class action.'" Briseno, 844 F.3d at 1127-28 (citing Rule 23(b)(3)). Although the Ninth Circuit has also observed in rejecting the creation of an administrative feasibility requirement that "`courts should not refuse to certify a class merely on the basis of manageability concerns." Id. at 1128 (quoting Mullins v. Direct Digital, LLC, 795 F.3d 654, 663 (7th Cir. 2015) (other citations omitted). "Rule 23(c) enables district courts to divide classes into subclasses or certify a class as to only particular issues." Briseno, 844 F.3d at 1128 (citing Rule 23(c)(4)-(5)).
Rule 23(b)(3)'s predominance requirement demands that "questions of law or fact common to class members predominate over any questions affecting only individual members." Vaquero v. Ashley Furniture Indus., Inc., 824 F.3d 1150, 1154 (9th Cir. 2016) ("The Supreme Court has noted that, `if anything, Rule 23(b)(3)'s predominance criterion is even more demanding than Rule 23(a).").
As noted above, the Stores SACC include claims for violation of RICO. In considering whether discovery is relevant for purposes of class certification and maintenance, the underlying claims are important. Accordingly, the Court also sets out the elements of the Stores' RICO claim for the analysis that follows. Because one of the district judge's decisions
In re Outlaw, LP Litig., 352 F.Supp.3d 992, 1000 (S.D. Cal. 2018).
Before proceeding to the categories of discovery raised in the Motion and the appropriate scope of that discovery, the Court addresses two overarching issues related to class discovery: (1) Outlaw's assertion that the Stores should be precluded from obtaining any class discovery prior to class certification and (2) in general whether the Stores need the discovery requested for purposes of class certification.
Many of the discovery requests at issue in this Motion seek discovery for purposes of establishing one of Rule 23's requirements. In moving to compel further responses to these discovery requests, the Stores have explained how the discovery sought is relevant and necessary to meet specific class certification requirements. In opposition, Outlaw has not disputed the Stores' relevancy arguments as to the specific class certification requirements. Instead, Outlaw argues their scope should be limited and argues that the undersigned should refuse to allow class discovery until the Stores' request to certify a class is granted. It appears Outlaw is arguing that the Stores should not be allowed any class discovery prior to class certification. The Court addresses these two overarching issues before addressing the parties' arguments on the scope of the discovery requests by topic. (III.B.3.)
Precertification discovery "lies within the sound discretion" of the court. Doninger v. Pac. Northwest Bell, Inc., 564 F.2d 1304, 1313 (9th Cir. 1977); see also Artis v. Deere & Co., 276 F.R.D. 348, 351 (N.D. Cal. 2011) (citing Vinole, 571 F.3d at 942). "Although a party seeking class certification is not always entitled to discovery on the class certification issue, [the Ninth Circuit has] stated that the propriety of a class action cannot be determined in some cases without discovery and that the better and more advisable practice for a District Court to follow is to afford the litigants an opportunity to present evidence as to whether a class action was maintainable.'" Vinole, 571 F.3d at 942 ("Our cases stand for the unremarkable proposition that often the pleadings alone will not resolve the question of class certification and that some discovery will be warranted.")(internal citations omitted). To deny discovery when "the propriety of a class action cannot be determined . . . without discovery, for example where discovery is necessary to determine the existence of a class or set of subclasses . . . would be an abuse of discretion." Id. However, if "the plaintiffs fail to make even a prima facie showing of Rule 23's prerequisites, . . . the burden is on the plaintiff to demonstrate that discovery measures are likely to produce persuasive information substantiating class allegations. Doninger, 564 F.2d at 1313.
First, the Court notes that the assigned district judge has already effectively concluded that class discovery is appropriate in this case. (ECF 85 at 12-14 (rejecting Outlaw's request to preemptively deny class certification as premature based in part on the parties not having taken formal discovery).) Given the Stores' class allegations, including the proposed class and subclasses, have already withstood Outlaw's preemptive challenge to class certification through a challenge to the pleadings, and the district judge has already indicated class discovery is appropriate in this case, the Court need not revisit these issues. Class discovery prior to certification is appropriate in this case.
Second, the Court finds, subject to the limitations on scope discussed below, the Stores are entitled to class discovery to, at a minimum, (1) identify class members for purposes of establishing numerosity — "the class is so numerous that joinder of all members is impracticable" (Rule 23(a)(1)); (2) demonstrate that the Stores' claims are typical of the class — "the claims or defenses of the representative parties are typical of the claims or defenses of the class;" and (3) categorize the class members into the alleged subclasses. Doninger, 564 F.3d at 1313 (explaining it "would be an abuse of discretion" to deny discovery when "discovery is necessary to determine the existence of a class or set of subclasses"). Additionally, this information is largely solely within Outlaw's possession because only Outlaw has the demand letters it sent to class members and the settlement agreements with the class members that may or may not have followed. This information is central to identifying how may stores received Outlaw's demand letters with false statements and classifying them into the proposed subclasses of those that were sued (proposed sued subclass), were not sued (threatened subclass), or paid a settlement (proposed payment subclass) following receipt of Outlaw's demand letters.
The appropriate scope of the discovery as to specific topics, requests for production and interrogatories is discussed further below, but the Court finds the Stores are entitled to precertification class discovery and have established that, other than the limitations imposed below, the discovery sought is relevant for purposes of class certification.
The discovery requests at issue are discussed below by topic, however, there are numerous defined terms (capitalized terms) within the requests that are part of numerous requests and accordingly numerous topics. Given their applicability across numerous topics the definitions are provided first and then the topics are discussed.
YOU is defined as:
RETAIL STORE is defined as:
DEMAND LETTER is defined as:
ENHANCEMENT PRODUCTS are defined as follows:
This topic encompasses RFP No. 1 and Interrogatories Nos. 1 and 2.
Interrogatories 1 and 2 ask Outlaw to:
The Stores argue the demand letters and the identities of those the demand letters were sent to are relevant and necessary to identify all class members for purposes of establishing numerosity, the superiority of the class action, manageability, typicality, adequacy, predominance, and ascertainability. Additionally, the Stores assert that the demand letters are needed to classify the class members among the subclasses. The Court first addresses the request for production of the demand letters and then the interrogatories.
Outlaw does not specifically address any of these relevancy arguments. Instead, Outlaw argues the requests are overbroad in two specific ways. Outlaw argues it should only have to produce demand letters that specifically assert a store violated RICO and also resulted in a settlement. Outlaw argues that because the class definition only encompasses class members that received letters that are "substantially similar" to that received by the class representative, only demand letters that assert that the store is violating RICO should be produced. Outlaw also seeks to narrow that narrowed production further to only those demand letters that resulted in a settlement because it asserts that those are the only stores that could have suffered any harm.
The Court will not delve into every possible way the Stores argue these demand letters are relevant for class certification, particularly when Outlaw has not specifically challenged any of them. In short, the Court finds that the demand letters sought in the request are relevant, at a minimum, for purposes of identifying class members to establish numerosity, categorizing the class members among the defined subclasses in conjunction with other discovery requested, and establishing that the Stores' claims are typical of the class. See Doninger, 564 F.3d at 1313 (finding the denial of discovery when "the propriety of a class action cannot be determined . . . without discovery, for example where discovery is necessary to determine the existence of a class or set of subclasses . . . would be an abuse of discretion.") (emphasis added). As discussed above, the demand letters are essentially the foundation, or first step, of the scheme alleged in the SACC. (II.) And, because the requests are limited to only demand letters that concern the enhancement products, threaten litigation, and offer settlement, the requests are sufficiently narrowed to conduct that allegedly befell the class. Additionally, knowing who received the demand letters in combination with other information, discussed below, will also allow the Stores to determine which, if any, subclass they belong to. But, at a minimum, the Stores need the demand letters to know how many stores were targeted by the alleged scheme. The next step of the scheme may be different, hence different subclasses, but the demand letters are the common act across all the subclasses and the foundation of the alleged scheme. This discovery is relevant for class certification purposes. See Hamm v. Cal. Dev. Co., 509 F.2d 205, 210 (1975) (Finding denial of discovery "where discovery is necessary to determine the existence of a class or set of subclasses" would be an abuse of discretion); see also Artis, 276 F.R.D. at 352 (Finding disclosure of contact information for class members is "common practice in the class action context.").
Additionally, the Court has considered whether it would be a more proportional course to have Outlaw respond to the interrogatories instead of providing the letters because it could address the numerosity issue sufficiently. However, as the Stores point out, the demand letters are also important in showing the members of the class all experienced this same conduct by Outlaw, i.e. as to the demand letters, that they made uniform assertions and threats. This is relevant to show typicality, i.e. that the Stores suffered "the same event or practice or course of conduct that gave rise to the claims of other class members and [their] claims were based on the same legal theory." Ramirez, 2020 WL 946973 at *17; see also Parsons v. Ryan, 754 F.3d 657, 685 (9th Cir. 2014) ("We do not insist that the named plaintiffs' injuries be identical with those of the other class members, only that the unnamed class members have injuries similar to those of the named plaintiffs and that the injuries result from the same, injurious course of conduct.") (emphasis added).
As to Outlaw's attempt to narrow the requests to only demand letters that assert a store violated RICO and demand letters that resulted in a settlement, the Court is not persuaded. First, limiting the production to only demand letters asserting a RICO violation would have the effect of the undersigned redefining or striking class allegations through a discovery request. Defining a "substantially similar" letter in the class definition to be only a letter asserting a RICO violation changes the scope of the definition from substantially similar to a letter asserting a RICO violation. It changes the class definition. The Court recognizes the SACC places more emphasis on the assertion of a RICO violation in the letters than a Lanham Act violation, but the Court finds for purposes of discovery, the Stores are entitled the scope requested. The Stores counterclaims do include allegations that one of Outlaw's most fear-invoking false statements in their letters to stores is that the store is violating RICO and the allegations go to great lengths to establish this assertion is completely baseless. (SACC ¶¶ 27-28, 30-31, 40-45, 47.) Additionally, the sample form letter attached to the SACC includes a claim the store has violated RICO with a form civil complaint including a RICO claim. (SACC, Ex. A.) However, there is nothing in the SACC that specifically limits the Stores' claims to only those instances where the demand letter sent to a store asserted a RICO violation. On the contrary, the SACC includes a lengthy list of other false and misleading statements in the letters, including the assertion the store has violated the Lanham Act and Outlaw will be entitled to punitive and triple damages under it. (SACC ¶¶ 27-29, 38-39, 46, 48, 50-52.) Outlaw has selected one allegedly false and misleading statement and attempted to limit the class to that statement when the allegations of the SACC and the class definition are not so narrow. The discovery produced and certification process might ultimately result in that sort of narrowing, but it is not appropriate for the Court to effectively narrow a class definition via the denial of relevant discovery.
The Court is also not persuaded that the demand letters should be limited to only those that resulted in a settlement. The SACC alleges that the class representatives suffered injuries other than paying a settlement. (SACC ¶¶ 33-35, 89.
The next question is whether the request is proportional to the needs of the case. As discussed above, the demand letters are a foundational part of the RICO claim because they are a common part of the pattern of conduct by Outlaw that all the class members allegedly experienced. Additionally, this discovery has the potential to factor significantly in numerosity. The subclass divisions would divide them further, but if the number of stores that received uniform demand letters is small, it would weigh heavily in determining whether class treatment is appropriate. In this respect, it is discovery that goes to a very important issue in the case and is likely to be very beneficial. See Rule 26(b)(1) (listing among factors to consider for proportionality, "the importance of the discovery in resolving the issues" and "whether the burden or expense of the proposed discovery outweighs its likely benefit). Outlaw asserts that the production will be "unduly burdensome" and "will require significant resources" but provides the Court with no other explanation. This is not an instance where the burden of the production is readily apparent. Outlaw does not explain how the documents are kept, if they are searchable electronically, or otherwise provide the Court with any explanation that would even suggest the burden is significant enough that the discovery should be limited because the burden of it "outweighs its likely benefit." Rule 26(b)(1). Additionally, this information, like most of the information sought in this Motion is likely exclusively in the possession of Outlaw. See id. (listing among factors to consider for proportionality "the parties' relative access to relevant information"). Here, the Stores have crafted a relatively narrow document request that will allow them to identify the members of the class and, in conjunction with responses to other discovery, categorize them into subclasses.
As to the interrogatories, the Court finds they are largely duplicative of the letters that will be produced. See Rule 26(b)(2) ("On motion or on its own, the court must limit the frequency or extent of discovery otherwise allow by the rules or by local rule if it determines that . . . the discovery sought is unreasonably cumulative or duplicative, . . . or the party seeking discovery has had ample opportunity to obtain the information by discovery in the action.") The most persuasive bases for producing the demand letters is identification of class members and classification of them into subclasses based on the demand letters in combination with other discovery responses. The identities of the retail stores that have been sent a demand letter (Interrogatory No. 1) and the identifies of retail stores that have been sent a demand letter that included a RICO violation (Interrogatory No. 2) will be contained in the demand letters produced. In this respect the responses to the interrogatories are duplicative and will already be available to the Stores from the demand letter production itself. As the Stores allege, they should be able to provide notice to class members, if the class is certified, from the addresses "set forth at the top of each of the fraudulent demand letters." (SACC ¶ 81.) The only additional information that would be disclosed by responding to the interrogatories is present and last known contact information for the recipients of the letters.
Outlaw must respond to RFP No. 1. Outlaw is not required to respond to Interrogatories 1 and 2.
This topic encompasses RFP No. 10. More specifically, this RFP requests:
RELATING TO means:
The Stores argue that this discovery is relevant to show how Outlaw operates the scheme and identify class members for purposes of class certification. More specifically, they argue that these documents will show that Outlaw starts by threatening liability of $100,000 and then, through subsequent communications, lower settlement offers are made. They also contend that the communications will identify class members and support typicality, adequacy, commonality, manageability, and predominance as well as confirm Outlaw co-conspirators' knowledge that settlements were purely nuisance rather than true disputed claims. The Stores additionally argue the communications will identify other members of Outlaw's conspiracy.
In Opposition, Outlaw again does not address the relevancy of this discovery for purposes of class certification or otherwise, as is their obligation. As the party opposing the discovery, Outlaw has the burden of "clarifying, explaining, and supporting its objections with competent evidence." Louisiana Pac., 285 F.R.D at 485 (explaining obligations of party opposing discovery). As noted above, Outlaw combines its argument regarding this topic with its argument regarding the demand letters. In this respect, Outlaw argues that it should only produce communications regarding demand letters that asserted a RICO violation and also resulted in a settlement. The Court rejects those arguments for the same reasons set forth above. (III.B.3.a).)
However, the Court has independently considered the relevancy of this discovery and finds it is relevant. First, the limitation that communications relate to a demand letter is a significant limitation on the scope of the discovery requested because demand letter is narrowly defined. The universe of communications with the retail stores is broad, particularly given the vague definition the Stores provide for retail stores,
As narrowed, this discovery is relevant to showing the class members suffered a common course of conduct by Outlaw in violation of RICO. As discussed above with regard to the demand letters, showing the class members experienced a similar course of conduct by Outlaw is relevant to show typicality, i.e. that the Stores suffered "the same event or practice or course of conduct that gave rise to the claims of other class members and [their] claims were based on the same legal theory." Ramirez, 2020 WL 946973 at *17; see also Parsons, 754 F.3d at 685 ("We do not insist that the named plaintiffs' injuries be identical with those of the other class members, only that the unnamed class members have injuries similar to those of the named plaintiffs and that the injuries result from the same, injurious course of conduct.") (emphasis added).
Although, as discussed above, the demand letters are the first conduct the stores experienced, the scheme alleged involves the next steps by Outlaw that would be evidenced in their follow-up communications with the stores. The course of this conduct might show Outlaw was engaging in a uniform course with all stores or that some stores were treated differently for particular reasons. These consistencies from uniformity or unique treatment could establish (or destroy) commonality and show whether "questions of law or fact common to class members predominate over any questions affecting individual members" for purposes of Rule 23(b)(3)'s predominance requirement. Vaquero, 824 F.3d at 1154; see also Rule 23(a)(2) (One or more members of a class may be sued as representative parties on behalf of all members only if . . . there are questions of law or fact common to the class.")
The Court also notes that the Stores will be required to show that their "damages resulted from [Outlaw's] conduct" to establish predominance. Vaquero, 824 F.3d at 1154. The subclasses in the SACC and the respective class representatives appear intended to deal with the diverging ways class members' damages will be proven (threatened, sued, paid settlement) and Outlaw's communications with class members may provide the evidentiary proof the Stores will need to show which subclasses the class members fall into and whether there are enough members in the subclasses for numerosity. Even if the communications were not necessary to establish numerosity for the class as a whole, the communications are important in determining how many class members fall into each subclass and whether numerosity is met for each subclass. See Gomez v. Rossi Concrete, Inc., 270 F.R.D. 579, 587 (S.D. Cal. 2010) (citing Betts. v. Reliable Collection Agency, Ltd., 659 F.2d 1000, 1005 (9th Cir. 1982) and Rule 23(c)(5) (Explaining Rule 23(a)'s "requirements must be satisfied with respect to each class and subclass.").
The Court has also considered whether this discovery is proportional to the needs of the case. Given Outlaw addressed this topic in conjunction with its argument regarding the demand letters, it makes the same unexplained and unsupported assertions that responding "will require significant resources" and that it is "unduly burdensome." The Court again rejects these assertions for the same reasons discussed above. (III.B.3.a) Additionally, the Court finds this discovery is important to the resolving numerous issues in the case, i.e. the class certification issues discussed above and Outlaw's communications with the retail stores are likely to be only realistically obtainable through Outlaw. Rule 26(b)(1) ("importance of resolving discovery issues" and "parties' relative access to the relevant information" are factors in proportionality).
Outlaw shall respond to RFP No. 10 as clarified and narrowed by the Court.
This topic addresses Interrogatory No. 5. More specifically, the Stores' request Outlaw:
The Stores argue Outlaw's production of only demand letters sent by Tauler Smith to the defendants in this litigation and only law firms Outlaw used to pursue this litigation are insufficient. Additionally, the Stores argue the law firms are both witnesses and potential members of the Outlaw scheme, i.e. co-conspirators. They contend that if Tauler Smith is the only firm that has represented Outlaw, then Outlaw should be compelled to provide that answer.
Outlaw argues this interrogatory, like the demand letters discussed above, should be limited to law firms that represented Outlaw in conjunction with demand letters that include a threat of a RICO violation by the target store. Outlaw also seems to argue that this discovery should not be allowed because the Stores might use it to identify additional members of the scheme and attempt to add them as parties in the case. Finally, Outlaw argues that the identity of Outlaw's attorneys is a matter of public record and available on PACER
The Court agrees that only responding as to defendants in this litigation is incomplete and insufficient because it does not fully respond to this interrogatory absent a declaration indicating that Tauler Smith is the only law firm that has represented Outlaw in conjunction with a demand letter or any litigation regarding the enhancement products. However, the Court must also consider Outlaw' other challenges to this interrogatory.
The Court finds this interrogatory is largely properly limited in scope. The first portion of Interrogatory No. 5 is because it only seeks the names of law firms representing Outlaw in conjunction with demand letters.
The Court further finds that the availability of some of this information in PACER is not a sufficient basis to deny the Stores this discovery. See Hill v. Asset Acceptance, LLC, No. 13-cv-1718 BEN (BLM), 2014 WL 3014945, at *7 (S.D. Cal. July 3, 2014) (collecting cases rejecting the availability of public documents as a basis to deny discovery). There may be instances where the ease of obtaining documents from a public source might factor into the proportionality analysis, however, here, it is not at all clear that the information sought would necessarily be obtainable through PACER, depending on whether all Outlaw's litigation related to the enhancement products has been filed in federal court given PACER provides electronic access to federal cases. Additionally, there are cost associated with PACER and it is not clear why the Stores should be required to incur that cost when the information is available from Outlaw.
The scope of the second portion
Outlaw shall respond to Interrogatory No. 5 as modified by the Court.
This topic
The interrogatories ask Outlaw to:
SETTLEMENT AGREEMENT is defined as:
The Stores argue this discovery is relevant to identify those stores that paid Outlaw for purposes of establishing numerosity, superiority, and manageability for the payment subclass alleged in the SACC. The Stores also argue the actual terms of the settlement agreements are relevant to show the settlement agreement terms are uniform to establish predominance, and that the dollar amounts in the settlement agreements are needed to show damages are subject to common proof for the payment class.
Outlaw again does not address any of the Stores' relevancy arguments. Instead, Outlaw makes the same argument to limit the scope to settlements that followed after a demand letter with an assertion of a RICO violation. Outlaw also raises confidentiality. However, Outlaw's argument on confidentiality consists of the following "Next, these settlement agreements and the amounts of these settlements are confidential."
The Court addresses this last argument first and in conjunction explains why the Court finds the settlement agreements are relevant. The Court is not persuaded, particularly in the absence of any authority in support, that the Court should deny the Stores relevant discovery based on Outlaw's unfavorable view of the Stores' allegations. The Stores allege that the settlements were "protection money" paid as a result of the RICO scheme, what one court has referred to as a "shake down" threatening huge liability for small businesses and then getting them to settle quickly to avoid the expense of hiring an attorney. (SACC ¶¶ 3, 56, 59, 62, 80.) And, as with the prior requests, this one is limited to settlement agreements that followed a demand letter, bringing it squarely into the category of relevant discovery. The Court cannot deny relevant discovery because Outlaw thinks the Stores' claims lack merit.
The Court can limit relevant discovery based on proportionality, including under Rule 26(b)(1) based on the "importance of the issues at stake in the action" and the importance of the discovery in resolving the issues." But the Court cannot deny a party discovery on an issue as critical to their case as damages, particularly in a class action with a payment subclass defined as having "received a demand letter" and subsequently "paid or agreed to pay money to Tauler Smith LLP, Outlaw Laboratory or an agent of either." (SACC ¶ 79 (emphasis added).) Damages are an important issue in this case, not just for proving the counterclaims, but for class certification. See Vaquero, 824 F.3d at 1154 ("If the plaintiffs cannot prove damages resulted from the defendant's conduct, then the plaintiffs cannot establish predominance.") Additionally, as the Stores explain, the uniformity or lack thereof, of the terms of the settlement agreements are relevant to show that "questions of law or fact common to class members predominate over any questions affecting only individual members." Id. The Court will not deny this discovery based on Outlaw's unfavorable view of the merits or proportionality because the discovery is relevant and important to resolving important issues in the case.
As to confidentiality, Outlaw has in no way carried its burden. As the party opposing discovery, Outlaw "has the burden of showing that discovery should not be allowed, and also has the burden of clarifying, explaining, and supporting its objections with competent evidence." Louisiana Pac. Corp, 285 F.R.D. at 485. Outlaw has fallen far short of this burden. It provides no legal argument in favor of denying this discovery based on confidentiality. And, it provides no factual information from which the Court could attempt to analyze the issue itself. Outlaw says simply that "these settlement agreements are confidential." In the alternative, Outlaw could have moved for a protective order under Rule 26(c), but it did not. Based on the foregoing the Court would order the settlement agreements disclosed without limitation.
However, the Court cannot ignore that these settlement agreements were entered into with third parties. Based on the limited information provided by Outlaw, it seems highly likely that the settlement agreements allow production when ordered by a court because, as the Stores explain in Reply, Skyline's includes a provision that confidentiality applies "unless ordered by the court."
Accordingly, the Court orders as follows. Outlaw must either stipulate that all of its settlement agreements are substantially identical or produce the settlement agreements subject to the following protective order limitations. Each page of the settlement agreement must include a legend or label designating it as CONFIDENTIAL. The settlement agreements may only be used for prosecuting, defending, or attempting to settle this litigation and the settlement agreements may only be disclosed to the Stores counsel of record in this action and counsel of record's employees as reasonably necessary.
If the settlement agreements are produced, Outlaw is not required to respond to RFP No. 7 (requesting documents sufficient to show the total sum received in connection with settlement agreements), Interrogatory No. 3 (requesting the identity of each store with which Outlaw has entered a settlement agreement and the dollar amount of the settlement), or Interrogatory No. 8 (requesting the total amount received in conjunction with all settlement agreements). The production of the settlement agreements will provide all this information. See Rule 26(b)(2) (court must limit the extent of discovery otherwise allowed if it determines "the discovery sought is unreasonably cumulative or duplicative"). However, if any of the settlement agreements lack the amount of the settlement, or if Outlaw elects to provide a stipulation as to the uniformity of its settlement agreement terms, i.e. that they are substantially identical, Outlaw must respond to Interrogatory No. 3 and 8 to identify the stores and settlement amounts.
This topic encompasses RFPs Nos. 13 and 14 and Interrogatories Nos. 6 and 7. More specifically, the Stores' RFPs request:
The Stores' interrogatories request:
The Stores argues the identities of Outlaw investigators is relevant to its allegations that Outlaw dispatched "investigators" to purchase and take photos of the Rhino Products to use to shake down the stores. The Stores claim these investigators are either witnesses to the scheme or members of it. Similarly, the Stores argue the identities of Outlaw's employees are relevant to the allegation that Outlaw uses its employees to carry out the scheme. Outlaw argues the requests are overbroad in that they seek the identity of every Outlaw employee regardless of whether they had anything to do with this case and argue that if the Court is inclined to compel Outlaw to disclose this information it should be limited to those employees or independent contractors involved in issuing demand letters.
The Court finds RFP No. 14 and Interrogatory No. 7 are overbroad because they seek information about anyone employed by Outlaw for any reason. These requests would encompass irrelevant discovery not relevant to any claim in this case. As discussed at length and in relation to numerous requests above, limiting the requests by connecting them to the demand letters and its associated limitations narrowed those requests to discovery that is relevant. But here, there is no similar tether. All employees do not necessarily have anything to do with the scheme or know anything about it. However, Interrogatory No. 7 can be limited to employees or independent contractors that were involved in issuing demand letters. Because this should provide the Stores with the relevant information, Outlaw need not also respond to RFP No. 13.
The Stores indicate that Outlaw agreed to provide responses to RFP Nos. 3-6, 15-16, and 19-20,
Out of an abundance of caution, before finding waiver by Outlaw based on the foregoing, the Court Orders Outlaw and the Stores to meet and confer by March 11, 2020 and attempt to come to a resolution on these requests.
The Stores ask the Court to order Outlaw to pay the Stores' attorneys' fees incurred in bringing the Motion to Compel pursuant to Federal Rule of Civil Procedure 37(a)(5). Outlaw opposes, arguing the discovery requests were overbroad in seeking documentation and information that was not actually relevant.
Rule 37(a)(5) provides that if a motion to compel discovery is granted, as it was in part here,
A party's conduct is substantially justified "if reasonable people could differ as to whether the party requested must comply." Reygo Pac. Corp. v. Johnston Pump Co., 680 F.2d 647, 649 (9th Cir. 1982), overruled on other grounds as stated by Molski v. Evergreen Dynasty Corp., 500 F.3d 1047, 1055 n.2 (9th Cir. 2007); see also Pierce v Underwood, 487 U.S. 552, 565 (1988) (Interpreting substantially justified to mean "there is a `genuine dispute' or `if reasonable people could differ as to the appropriateness of the contested action."); see also Liew v. Breen, 640 F.2d 1046, 1050 (9th Cir. 1981) (Addressing whether conduct was substantially justified under Rule 37(b) and finding "a good faith dispute concerning a discovery question might, in the proper case, constitute `substantial justification.")
Here, the Motion to Compel was granted in part and denied in part. Some of the requests for production and interrogatories must be fully responded to while others have been narrowed and still others need not be responded to all because they are not proportional to the needs of the case based on proportionality. Given this outcome, the Court DENIES the request for attorneys' fees under Rule 37(a)(5).
Outlaw must respond to the discovery requests as set forth above by
(SACC ¶ 77.)
(SACC ¶ 78.)
(SACC ¶ 79.)
