The opinion of the court was delivered by: Magistrate Judge Martin C. Ashman
Judge Robert W. Gettleman
MEMORANDUM OPINION AND ORDER
Plaintiffs Heather Daniels and Urban Bratz, LLC ("Plaintiffs") have brought this action against Defendants Spencer Gifts, LLC ("Spencer Gifts"), Spencer Gifts Holding, LLC, and Spencer Gifts Online, LLC ("Defendants") for violations of the Copyright Act, 17 U.S.C. § 101 et seq., the Lanham Act, 15 U.S.C. § 1125(a), and various state laws. Plaintiffs design and sell children's apparel with original graphic designs. Defendants operate a nationwide chain of gift stores. According to Plaintiffs, Heather Daniels created and copyrighted an original design for a T-shirt titled "Sorry Boys, My Daddy Says I Can't Date 'Till I'm 30" and submitted it to Defendants for consideration as an item to be sold in stores. Plaintiffs allege that Defendants misappropriated this copyrighted design and began selling identical shirts in Spencer Gifts stores and on the company's website.
Shortly after this suit was filed, Plaintiffs served discovery requests on Defendants on or around August 26, 2010. On September 23, 2010, Plaintiffs filed a motion for sanctions based on Defendants' alleged failure to answer these requests properly. District Judge Robert Gettleman referred the motion to this Court for a decision pursuant to N.D. Ill. Rule 72.1. Plaintiffs later withdrew that motion, filed two new sanctions motions, two supplemental sanctions motions, and a motion to compel. As the supplemental motions incorporated Plaintiffs' earlier motions, the Court denied the initial motions without prejudice. Before the Court now are Plaintiffs' two supplemental motions for sanctions and the motion to compel. After multiple hearings and two forensic examinations, the Court finds that Plaintiffs' motions should be denied.
This dispute centers around Plaintiffs' belief that Defendants have failed to produce discovery responses that adequately account for the number of "Sorry Boys" shirts Spencer Gifts ordered (or cancelled), paid for, and sold. The details of this dispute are complex and have been exhaustively briefed by the parties. In its simplest terms, Plaintiffs believe that Defendants ordered up to 95,500 shirts and have not properly accounted for approximately 70,000 of those orders. The parties agree that Spencer Gifts purchased the "Sorry Boys" shirts through its vendor, Tee Shirt Central, and not from Plaintiffs directly. Spencer Gifts did so electronically by using a third party, known as SPS Commerce ("SPS"), which provides business-to-business integration for ordering and shipping commerce through a computer-based system that exchanges business information between companies in a standard format. SPS then sent the order information it received to Tee Shirt Central. In turn, Tee Shirt Central shipped the shirts directly to Spencer Gifts. Defendants gave the merchandise SKU (Stock Keeping Unit) numbers, seven of which were assigned to the various kinds of "Sorry Boys" shirts purchased from Tee Shirt Central.
On August 26, 2010, Plaintiffs filed a motion for expedited discovery and attached their discovery requests to it. District Judge Gettleman granted Plaintiffs' motion and ordered Defendants to respond to the discovery requests by September 20, 2010. (Dckt. 8). The Defendants did so in a timely manner. On September 23, however, Plaintiffs filed their first motion for sanctions, claiming that Defendants had violated Judge Gettleman's discovery order by refusing to hand over all the documents Plaintiffs sought. (Dckt 22). Judge Gettleman referred the motion to this Court.*fn1 Several months later, Plaintiffs filed two motions for sanctions and then a supplemental motion that incorporated the earlier filings. (Dckt. 77).
The supplemental motion alleged, inter alia, that Defendants misstated the number of shirts sold, falsely represented that Spencer Gifts did not keep records on a store-by-store basis, and intentionally scrambled produced data. Functioning as much as a motion to compel as one for sanctions, Plaintiffs asked the Court to order Defendants to produce all of its computer records on a bit-by-bit basis and turn over all records of internet sales. In the alternative, Plaintiffs sought the harsh sanction of default judgment.
At the hearing on Plaintiffs' motion, it became clear that a number of issues concerning what Defendants had actually produced and how that production should be interpreted could not be decided based on the parties' briefs. For instance, Defendants admitted to certain errors in its original production, though some of the initial mistakes had already been corrected. Central to the parties' dispute was Plaintiffs' allegation that Spencer Gifts ordered 95,500 shirts. Defendants contended that Spencer Gifts received fewer than 25,000 shirts. Accordingly, the Court ordered Defendants to provide an affidavit clarifying various fact issues related to these claims.
On May 12, 2011, the Chief Financial Officer for SPS, Kim Nelson, signed an affidavit stating that the seven "Sorry Boys" SKUs showed that Spencer Gifts issued purchase orders in a total amount of 24,865 shirts. She also testified that Tee Shirt Central invoiced Spencer Gifts for a total of 24,874 shirts. (Dckt. 130 at Ex. D). Plaintiffs filed further objections, and the Court held a hearing on May 23, 2011. The parties again disputed the underlying fact issues of how many "Sorry Boys" shirts had been ordered, cancelled, or sold. The Court made clear that such factual disputes were not within the scope of the issues referred by Judge Gettleman and were matters that went to the merits of Plaintiffs' underlying claims at trial. Instead, the only relevant issues were whether Defendants had adequately responded to Plaintiffs' discovery requests and whether sanctions were warranted.
Based on the parties' differences on the reliability and interpretation of Defendants' production, the Court ordered that a forensic exam of the SKUs at issue should take place at Defendants' place of business. All seven of the "Sorry Boys" SKUs were included, and access was granted to Defendants' database and other sources for additional financial information. Plaintiffs were allowed to chose their own forensic expert, to copy the database in native format, and to be accompanied by their counsel at the exam. (Dckt. 137).
Unfortunately, the subsequent forensic exam did not end the dispute between the parties. Plaintiffs filed a status report on the forensic exam, claiming that their expert, Joseph Caruso, had been prevented by Defendants from conducting the exam himself and was required to relay his requests through an employee of the Defendants. (Dckt. 142 at 7). On July 26, 2011, Plaintiffs also filed a motion to compel the production of certain emails they claimed Defendants had failed to turn over as part of Plaintiffs' August 2010 discovery requests. (Dckt. 140).
In order to achieve some resolution of the parties' ongoing disagreement, the Court ordered the parties to work out a joint electronic query concerning all the issues Plaintiffs wished to explore in a second forensic exam. The Court laid particular stress on the need for cooperation between the parties. A letter by Defendants' counsel dated August 8, 2011 reflects what appears to be the terms agreed to during a recess at the August 1 hearing. (Dckt. 198 at Ex. 4). These included, among other things, inquiries concerning Spencer Gifts' proprietary merchandise and inventory system, Spencer's Integrated Retail Information System ("SIRIS"), and its use of the PeopleSoft financial accounting package, which records Spencer Gifts' accounts payable and receivable. (Id.). Plaintiffs requested minor changes to the queries. (Dckt. 201 at Ex. G). The exam went forward, and Defendants produced the results on or around August 17, 2011. As before, however, further controversy resulted from this effort, and Plaintiffs filed a second supplemental motion for sanctions on September 21, 2011. Plaintiffs claimed that Defendants failed to produce forensics after August 2010, attempted to conceal SKU 0220588, and tried to hide a variety of other data allegedly responsive to Plaintiffs' requests. (Dckt. 156).
The two sanctions motions currently pending seek the harsh sanction of default judgment based on allegations that the Defendants deliberately concealed evidence, altered information, and acted to obstruct the discovery process. Like the initial motion for sanctions (Dckt. 22), however, they also seek to compel discovery and are essentially hybrid documents that are both motions to compel and motions for sanctions. In fact, the great majority of this Court's efforts has been directed towards clarifying what Plaintiffs are requesting, what Defendants have produced, and whether any relevant information exists that has not been turned over to Plaintiffs. The Court decides these issues by first turning to Plaintiffs' motion to compel and then taking up the motions for sanctions.
A party may file a motion to compel under Fed. R. Civ. P. 37 whenever another party fails to respond to a discovery request or when its response is insufficient. Fed. R. Civ. P. 37(a).
Courts have broad discretion in resolving such disputes and do so by adopting a liberal interpretation of the discovery rules. Wilstein v. San Tropai Condo. Master Assoc., 189 F.R.D. 371, 375 (N.D. Ill. 1999). Federal Rule of Civil Procedure 26(b)(1) provides that the "[p]arties may obtain discovery regarding any non privileged matter that is relevant to any party's claim or defense." Fed. R. Civ. P. 26(b)(1). Discoverable information is not limited to evidence admissible at trial. Instead, such information is relevant "if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Id.
Plaintiffs' requests for production included the following demand as Request No. 8: Produce exact forensic copies (i.e. bit-by-bit copies) of all database files, e-mail or other files maintained on servers or mainframes or microcomputers containing electronically stored information relative to the amount and cost of production info children and infant apparel generated by SPENCER bearing the design "Sorry Boys."
Although Plaintiffs claim in general terms that two of their other discovery requests sought email communications, they fail to specify what those requests were. The Court does not address issues that have not been raised, and it limits its discussion to the sole request cited by Plaintiffs in their motion.
Plaintiffs contend that Defendants responded to Request No. 8 by producing only two email communications that Plaintiffs themselves already possessed. The first, dated March 23, 2009, involves a brief email exchange between Spencer Gifts' associate buyer, Cori Totoro, and Heather Daniels in which Ms. Daniels invited Ms. Totoro to view her merchandise on a website designed for it. The second, dated February 9, 2010, is a response to Heather Daniels' inquiry as to whether Spencer Gifts was interested in carrying her line of clothing. Cori Totoro responded that she was the company's buyer for children's wear and that Ms. Daniels could send her information about her merchandise. (Dckt. 140 at Ex. D).
Plaintiffs argue that Defendants have failed to produce many other emails allegedly in their possession that are responsive to Plaintiffs' request. As an initial matter, the scope of this demand significantly exceeds what was sought in Request No. 8. Plaintiffs contend at this point that Defendants must turn over all emails "germane to this case." But Request No. 8 did not include such an exceptionally broad and unspecific category of information. It only sought emails concerning "the amount of sales and cost of production" related to the "Sorry Boys" shirts. Only the narrower discovery request stated in Request No. 8 is at issue here.
Plaintiffs rely first on an affidavit of a former employee, Kelsie Bailey, who worked for Spencer Gifts for two months in 2010. Ms. Bailey stated that the store she worked in received emails encouraging stores to promote the "Sorry Boys" shirts and to place them at eye level. Ms. Bailey did not claim that the emails she received contained any information about the shirts' cost or that she sent emails to Spencer Gifts on the number of shirts she sold. (Dckt. 140 at Ex. H). As such, Ms. Bailey's testimony has no relevance to the information sought in Request No. 8 and does not suggest that Defendants have discoverable communications they failed to produce.
Equally unpersuasive is an email between Ms. Daniels and a Spencer Gifts employee named Joyce Wilson, in which Ms. Daniels invited Ms. Wilson to "check out" the website for the "Sorry Boys" shirts. (Dckt. 140 at Ex. G). Plaintiffs contend that this email shows that Defendants must possess other emails that should have been produced. But Ms. Daniels' email merely introduced the shirts to Ms. Wilson and does not contain any information about the costs of production or the merchandise. Presuming that Defendants even had a copy of this email, they were ...