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Sloan Valve Company, A Delaware Corporation v. Zurn Industries

May 23, 2012


The opinion of the court was delivered by: Honorable Amy J. St. Eve


AMY J. ST. EVE, District Court Judge:

Before the Court is Plaintiff Sloan Valve Company's ("Sloan") renewed motion for sanctions against Defendants Zurn Industries, Inc. and Zurn Industries, LLC (collectively, "Zurn") for failure to make discovery and comply with the Magistrate Judge's orders. Sloan argues that Zurn has, among other things, failed to search adequately for and produce responsive documents and has failed to timely instruct its employees to preserve relevant evidence. Sloan asks the Court to enter an order finding that Zurn is in default with respect to issues of liability and setting a schedule for damages discovery, expert discovery on damages, and trial on damages and equitable relief. In the alternative, Sloan requests that the Court find, as an irrebuttable fact, that Zurn copied Sloan's dual flush product. Sloan also requests attorney's fees for its motion. For the following reasons, the Court grants Sloan's motion in part and denies it in part.


Sloan filed this lawsuit on January 13, 2010, alleging that Zurn had appropriated its "dual mode flush valve invention," thereby infringing U.S. Patent No. 7,607,635, entitled "Flush Valve Handle Assembly Providing Dual Mode Operation" and the corresponding U.S. Patent Application Publication No. 2006/0151729. (R. 1, Compl.*fn2 ) Zurn has asserted counterclaims for invalidity, non-infringement, and inequitable conduct. (R. 287, First Am. Answer and Counterclaim.)

This is one of many discovery motions that Sloan has filed in this case. See R. 63, 86, 110 & 234. Sloan filed a motion to compel discovery and award sanctions on July 23, 2010, arguing that Zurn failed to produce documents that Sloan had requested. (R. 86.) Because of the small number of documents that Zurn had produced as compared to Sloan and Sloan's perceived gaps in Zurn's production, Sloan suspected that Zurn had not conducted an adequate document search. As a remedy, Sloan sought an order compelling Zurn to, among other things, "conduct a document search that is in compliance with the Federal Rules of Civil Procedure and provide documents responsive to Sloan's Requests for Production Nos. 1-48." (R. 87, Sloan's Mem. of Law in Supp. of July 23 Mot. at 15.)

The Court referred the matter to the assigned Magistrate Judge, who, on August 16, 2010, denied Sloan's motion as moot due to an agreement of the parties. (R. 107, 108.) On the same date, the Magistrate Judge entered an agreed order (the "August 16 Order"), requiring Zurn to deliver a letter to Sloan by August 27, 2010 setting "forth in detail a description of how Zurn went about its search for documents responsive to Plaintiff's Request for Production Nos. 1 through 48, including electronic searching for documents." (R. 108, Aug. 16 Order ¶ 10.) The August 16 Order also required Zurn to supplement its production and to "certify by written letter to Sloan that Zurn has not withheld any documents located through the searches that are responsive to Sloan's document requests." (Id. ¶ 11.) On August 27, 2010, Zurn sent a letter to Sloan, certifying that it "can confirm that it has not withheld any non-privileged documents that are responsive to Sloan's document requests." (R. 231-1, Zurn Aug. 27, 2010 Ltr. at 3.) Zurn also described its document collection efforts in the letter, albeit with little substantive detail. Specifically, Zurn stated the following:

Zurn identified its current and former engineers with varying levels of involvement in the testing, development, and marketing of Zurn's manual dual-flush handles, including the accused products. With the help of Zurn's [information technology or "IT"] personnel, we secured digital copies of the email records, hard drives, and networked storage drives affiliated with each employee. Through this process, we collected approximately 25,000 unique documents consisting of approximately 200,000 total pages. Using a focused, iterative approach, we developed and applied a set of comprehensive search terms to the document set that eventually narrowed the scope of documents to the production set of April 28, 2010. On May 21, 2010, pursuant to Sloan's request, we supplemented Zurn's initial document production with email attachments not produced in the initial production set, along with an Excel spreadsheet correlating the document control numbers of both productions.

As discovery progressed, we continued to refine our search to include specific terms such as "IAPMO," "ASME," "Greenspec," etc. In response to Sloan's inquiries, we also ran additional queries against the original documents set, but did not identify any additional responsive documents beyond those already produced. Zurn's supplemental productions of July 9 and July 26, 2010 included additional test data, technical drawings, and prior art documents compiled from a comprehensive onsite inspection of Zurn's paper and networked archives at both its Erie, PA and Sanford, NC facilities. Finally, Zurn's productions of August 26-27, 2010 included product information on Zurn's flush valve handles incorporating a brass retainer, native files corresponding to CAD files previously produced, and sales and ordering information for Zurn's Z6003-AV-DF product as well as its flush handle products having a brass retainer. (Id. at 2-3.)

On September 20, 2010, Sloan filed a motion for sanctions against Zurn for failure to comply with the August 16, 2010 Order. (R. 110, Sept. 20 Mot.) On October 5, 2010, the parties appeared before the Magistrate Judge, who determined that Zurn's August 27 letter did not provide sufficient detail about Zurn's searches.*fn3 (R. 140, Oct. 5 Hr'g Tr. 35:12-13.) Although the Magistrate Judge denied Sloan's motion with respect to the particular relief that Sloan sought, he ordered Zurn to supplement its description of its searches for responsive documents with specific information, including (a) the identities and credentials of the IT personnel who assisted in developing and executing any searches for [electronically stored information or "ESI"], or who processed the ESI obtained through those searches; (b) the custodians whose ESI was searched, and their job titles within Zurn; (c) the servers that were searched; (d) the search terms or other filters used in conducting the searches; (e) the steps used to process documents identified through the searches; (f) the steps taken to preserve and produce metadata; and (g) the searches of files held by the Webb law firm to locate responsive ESI and hard copy documents not in the files of Zurn. (R. 135, Oct. 5, 2010 Order.) The Magistrate Judge also ordered Zurn to produce one or more Federal Rule of Civil Procedure ("Rule") 30(b)(6) witnesses to testify regarding Zurn's document searches and preservation efforts. (Id.)

On October 19, 2010, Zurn served on Sloan its "Supplemental Description of Search for Responsive Documents" (the "Supplemental Description") pursuant to the Magistrate Judge's October 5, 2010 Order. (R. 231-8.) In it, Zurn explained in detail the measures it took to locate responsive documents. Sloan thereafter deposed the following Rule 30(b)(6) witnesses in November 2010:

C Michael A. Funari (Zurn's engineering manager who oversaw document collection at Zurn's Sanford, North Carolina facility);

C Chris Rodriguez (Zurn's Computer Assisted Design ("CAD") supervisor, who generated a listing of CAD drawings that Zurn's counsel used to identify responsive documents);

C James Hasselman (Zurn's IT manager, who generated directory listings that Zurn's counsel used to identify responsive documents);

C Steven Johnston (Zurn's outside counsel who led the search for responsive documents); and C Cory Ranallo (employee of Zurn's third party document processing vendor, CLiCKs).

On December 16, 2010, the Court granted Zurn's motion to stay the case pending the United States Patent and Trademark Office's reexamination of the patent at issue. (R. 157, Dec. 16, 2010 Order.) Upon Sloan's motion, the Court reopened the case and lifted the stay on November 10, 2011. (R. 192, Nov. 10, 2011 Order.) After the parties had an opportunity to engage in further discovery, Sloan filed its renewed motion for sanctions on January 23, 2012.

(R. 223.) On April 20, 2012, after the parties had fully briefed Sloan's renewed motion, Zurn filed supplemental evidence, consisting of two declarations, with the Court. (R. 299, 300.) Three days later, on April 23, 2012, Zurn produced approximately 2,900 additional documents to Sloan. Sloan filed a response to Zurn's supplemental submission on April 30, 2012. (R. 303.)


Courts have discretion in determining whether to impose sanctions for discovery violations. See Brown v. Columbia Sussex Corp., 664 F.3d 182, 190 (7th Cir. 2011); see also Danis v. USN Comm'cns, No. 98 C 7482, 2000 WL 1694325, at *31 (N.D. Ill. Oct. 20, 2000) ("A court is given broad discretion to choose the appropriate sanction for a discovery violation given the unique factual circumstances of every case."). The Seventh Circuit has instructed that "[a]lthough there is no requirement that the district court select the 'least drastic' sanction, district courts should only impose sanctions that are 'proportionate to the circumstances surrounding a party's failure to comply with discovery rules.'" Rice v. City of Chicago, 333 F.3d 780, 784 (7th Cir. 2003) (quoting Melendez v. Illinois Bell Tel. Co., 79 F.3d 661, 672 (7th Cir. 1996)); see also Wade v. Soo Line R.R. Corp., 500 F.3d 559, 564 (7th Cir. 2007) ("The punishment should fit the crime, so fees and fines - which can be scaled as appropriate - often are the best sanctions.") (citations omitted). Sanctions are intended generally to "ameliorate the prejudice caused to an innocent party by a discovery violation," "punish the party who violates his or her obligations," and "to deter others from committing like violations." Danis, 2000 WL 1694325, at *31 (citing cases).

Rule 37(b)(2)(A) provides that a Court may impose sanctions on a party who fails to obey a discovery order, including striking pleadings in whole or in part, staying further proceedings until the order is obeyed, dismissing the action in whole or in part, directing that the matters embraced in the order be taken as established for purposes of the action, prohibiting the disobedient party from supporting or opposing designated claims or defenses, rendering a default judgment, and treating the party's failure to comply as a contempt of court. Fed. R. Civ. P. 37(b)(2)(A)(i)-(vii). Further, pursuant to Rule 37(b)(2)(C), a court must order the disobedient party, its attorney, or both to pay the reasonable expenses, including attorney's fees, caused by the failure "unless the failure was substantially justified or other circumstances make an award of expenses unjust." Fed. R. Civ. P. 37(b)(2)(C).


This case involves Zurn's alleged infringement of Sloan's patent for a dual flush toilet handle, which provides two different flush volumes depending on which way the user pushes the handle. According to Sloan, Zurn has failed to produce information that would establish, among other things, the extent to which Zurn copied Sloan's dual flush handle after learning about it sometime in the middle of 2005. Sloan asserts that such information is relevant to both Sloan's claim of willful infringement of its patent and Zurn's counterclaim that the patent is invalid due to obviousness. Documents that Zurn has produced, Sloan argues, "strongly suggest that Zurn copied Sloan's product," but Sloan suspects that Zurn is withholding additional documents that would support Sloan's position.

Sloan identifies six ways in which Zurn has failed to comply with its discovery obligations: (1) Zurn failed to conduct an adequate search of its CAD database; (2) Zurn's search of the K:Drive (shared drive) was flawed; (3) Zurn's search of the J:Drive was flawed; (4) Zurn failed to search for critical ESI generated by its part-replicating machine ("CCM Machine"); (5) Zurn produced Rule 30(b)(6) witnesses who did not adequately prepare for their testimony; and (6) Zurn failed to timely issue a document preservation notice to its employees. The Court addresses each of these arguments below.

Although sanctions in some form against Zurn are appropriate based on Zurn's problematic conduct, as explained below, Zurn's conduct, based on the record, does not rise to a level that justifies the harsh sanctions of a default judgment or an adverse inference or finding. See In re Thomas Consol. Indus., Inc., 456 F.3d 719, 724 (7th Cir. 2006) ("When ordering the sanctions of default judgment . . . under Rule 37(b), the court must find that the party against whom these sanctions are imposed displayed willfulness, bad faith or fault.") (citing Maynard v. Nygren, 332 F.3d 462, 467-68 (7th Cir. 2003) and In re Golant, 239 F.3d 931, 936 (7th Cir. 2001)); see also Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008) (holding that an adverse inference instruction for failure to preserve documents requires a showing that the party destroyed the documents in bad faith). Instead, as discussed below, the Court reopens discovery and orders Zurn to conduct additional searches and provide additional information consistent with this Order. The Court also imposes monetary sanctions against Zurn for its continual failure to comply with its discovery obligations. See Rice, 333 F.3d at 783 (court should impose sanctions that are proportionate to the circumstances surrounding the party's failure to comply with discovery obligations).

I. CAD Drawings and Database

A. Zurn's drawings

Zurn uses two relevant types of shop drawings that show how a product is to be manufactured--assembly drawings and detail drawings. (R. 233-7, Bauer 11/18/2010 Dep. Tr. 53:4-54:18.) The assembly drawing identifies by part and drawing number each of the product's components. (Id.) A detail drawing contains all of the dimensional details about a component.

(R. 233-10, Detail Drawing.) Zurn also creates assembly drawings for sub-assemblies of a product. A complete set of assembly and detail drawings allows one to determine the dimensions of a product as well as its components, the configuration of those ...

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