The opinion of the court was delivered by: JOHN W. DARRAH, District Judge
MEMORANDUM OPINION AND ORDER
The Plaintiffs, Aero Products International, Inc. ("Aero") and Robert
B. Chaffee, filed suit against the Defendants, Intex Recreation
Corporation ("Intex"); Quality Trading, Inc. ("Quality Trading"); and
Wal-Mart Stores, Inc. ("Wal-Mart"). Presently before the Court is
Plaintiffs' Motion for Sanctions. For the following reasons, the
Plaintiffs' motion is denied.
The Federal Rules of Civil Procedure provides authority to sanction
litigants that fail to comply with their discovery obligations.
Rule 37(c)(1) provides:
A party that without substantial justification fails
to disclose information as required by Rule 26(a) or
26(e)(1) shall not, unless such failure is harmless,
be permitted to use as evidence at trial, at a
hearing, or on a motion, any witness or information
not so disclosed. In addition or in lieu of this
sanction, the court, on motion after affording
opportunity to be heard, may impose other appropriate
sanctions. In addition to requiring payment of
reasonable expenses, including
attorney's fees, caused by the failure, these
sanctions may include any actions authorized under
subparagraphs (A), (B), and (C) of subdivision (b)(2)
of this rule and may include informing the jury of the
failure to make the disclosure.
Rule 37(b)(2)(A) states that if a party fails to comply with a court
order regarding discovery, "an order that the matters regarding which the
order was made or any other designated facts shall be taken to be
established for the purposes of the action in accordance with the claim
of the party obtaining the order" may be entered.
District courts have "wide latitude in fashioning appropriate"
discovery sanctions. Johnson v. Kakyand, 192 F.3d 656, 661 (7th Cir.
1999). However, a sanction must be proportionate to the circumstances
resulting in a litigant's failure to comply with its discovery
obligations. "The sanction must be one that a reasonable jurist, apprized
of all of the circumstances, would have chosen as proportionate to the
infraction." Salgado v. Gen, Motors Corp., 150 F.3d 735, 740 (7th Cir.
If a litigant knows have should of known that it failed to comply with
a discovery order, it may be found at fault for failure to comply with
the order. See Melendez v. Illinois Bell Tel, Co., 79 F.3d 661, 671 (7th
Cir. 1996). A knowing and willing violation of a discovery order merits a
finding of bad faith against the violating litigant. While bad faith is
not necessary to impose sanctions, discovery sanctions are proper if the
litigant acts in bad faith, willfully violates a discovery order, or is
found at fault for failure to comply with a discovery order. In re
Golant, 239 F.3d 931, 936, n.1 (7th Cir. 2001).
Intex is part of a multi-corporation structure. Defendant Intex sells
the products that Plaintiffs accuse infringe their United States patent
rights. A separate management corporation provides management services to
Intex. Tien Zee is the president of both Intex and the separate
management corporation, and Tien Zee's holding company owns both
entities. These companies are collectively referred to as the "American
Intex purchases the accused products from a foreign corporation, "Intex
Trading Ltd." A separate, second foreign management corporation provides
Intex Trading Ltd. with management services. Tien Zee runs Intex Trading
Ltd. and is the president of the foreign management corporation. Tien Zee
also runs the factories that design and manufacture the accused products.
These companies are collectively referred to as the "Foreign Entities."
Plaintiffs sought production of documents relating to the development
of the original accused products. According to Plaintiffs, Intex
developed the accused products by copying Plaintiffs' patented air
mattress. In January 2003, Plaintiffs asked Intex for the documents in
the possession of the Foreign Entities. Intex did not produce a single
document related to the development of these products; Intex stated, in
May 2003, that these materials are not discoverable because they are in
the possession of the Foreign Entities. However, despite the links that
Plaintiffs claim ...