United States District Court, C.D. Illinois, Peoria Division
ORDER AND OPINION
THOMAS P. SCHANZLE-HASKINS, Magistrate Judge.
Before the Court is Defendant's Motion to Compel Discovery Cooperation and Memorandum in Support (d/e 28) (Motion to Compel Discovery) and Plaintiff's Response (d/e 33), Defendant's Motion to Compel Production of Documents in Response to Second Request and Memorandum in Support (d/e 34) (Motion to Compel Production) and Plaintiff's Response (d/e 41).
Plaintiff Orthofix, Inc. (Orthofix) and Defendant Melissa Gordon (Gordon), on September 1, 2007, entered into a Sales Agreement under which Gordon was to sell Orthofix products to physicians and other customers. Gordon marketed and sold a variety of products during her time with Orthofix, including, but not limited to, bone growth stimulators. Gordon was employed by Orthofix from September 1, 2007 to March 8, 2013 (Orthofix First Amended Complaint, paragraphs 35-36).
Orthofix' First Amended Complaint asserts claims against Gordon for breach of the employment contract between Orthofix and Gordon by breaching the customer non-solicitation provisions of the contract (Count I), breaching the unfair competition provisions of the contract (Count II), breaching the provisions of the contract promising not to disclose confidential information (Count III), misappropriating Orthofix' trade secrets (Count IV), and tortiously interfering with actual and prospective business relations (Count V). Orthofix has filed similar litigation against two other former sales people, Orthofix Inc. v. Hunter, No. 3:13-cv-00828, (N.D. Ohio) (Hunter), and Orthofix Inc. v. Lemanski, No. 2:13-cv-11421 (E.D. Mich.) (Lemanski).
The bench trial in Hunter proceeded before Judge Jack Zouhary on July 15, 2014. Closing arguments by counsel were presented to Judge Zouhary on August 21, 2014. Judge Zouhary has not ruled in the Hunter litigation.
On May 9, 2014, Gordon's counsel filed a Motion to Compel Discovery (d/e 28). On May 27, 2014, the parties filed a joint motion to extend the fact discovery deadline and to extend the deadline in paragraph five of the Scheduling Order so that the parties need not file discovery motions in advance of their mediation set in Chicago on June 16, 2014 (d/e 29). The Court granted the motion. The mediation was unsuccessful. The Motion to Compel Discovery (d/e 28) was fully briefed by the parties on July 30, 2014. On July 1, 2014, the Defendant filed her Motion to Compel Production (d/e 34). Orthofix filed its Response (d/e 41) on August 1, 2014.
Both Motions are awaiting decision by the Court.
A. Defendant's Motion to Compel Discovery (d/e 28)
Orthofix filed a Response to the Motion to Compel Discovery (d/e 33). In its Response, Orthofix' counsel notes that Orthofix has told Gordon on numerous occasions it will follow the guidance from two other Federal Judges who have already addressed some of the issues raised in the Motion to Compel Discovery. Attached to the Response is the April 29, 2014, Order of Judge Zouhary regarding discovery disputes in the Hunter litigation.
Gordon filed a Reply to Orthofix' Response (d/e 40). In that Reply, Gordon noted, on the eve of trial in Hunter, Orthofix disclosed that sales reports previously provided to Hunter in support of Orthofix' expert's damage calculations had caused duplicate sales to be reported more than doubling the damage figures claimed. A Motion for Sanctions was filed in Hunter concerning the amendment of the plaintiff's damage calculations (docket no. 88, Hunter). In that motion, counsel for Hunter noted that on April 14, 2014, Orthofix served its expert report alleging damages of $3, 845, 874. The motion also indicates, less than two weeks before trial, Orthofix served an amended expert report that offered an alternative damage analysis of $705, 668. The motion for sanctions also noted that on July 14, 2014, four business days before trial, Orthofix' counsel reported as follows:
Sales reports prepared by the Orthofix finance department which were the basis for Orthofix's expert's damage calculations overstated sales in the relevant period by approximately double. This overstatement was the result of an IT error in generating the report from Orthofix's database, which caused duplicate sales to be reported. As a result of this bad data unrecognized by Orthofix, its counsel, or its expert, Orthofix's expert's report overstated Orthofix's damages.
Counsel for Hunter also noted that Orthofix, after the disclosure set forth above, produced another expert report from their damage expert claiming damages of $1, 623, 877.
A review of the minutes of proceedings from the Hunter litigation indicates that on July 15, 2014, Judge Zouhary granted defendant's motion for sanctions in part. The minutes of proceedings for July 15, 2014, indicate that details of the ruling are contained in the transcript. To date, no transcripts have been filed in Hunter, and the Court, on September 3, 2014, entered a marginal entry order granting the motion for leave to file trial transcripts under seal subject to disclosure following the filing of final judgment.
Even though the Courts considering the Hunter and Lemanski litigation may have ruled on various discovery issues, a decision in another case is not binding on this Court unless principles of res judicata or collateral estoppel apply. RLJCS Enterprises, Inc. v. Professional Ben. Trust Multiple Employer Welfare Ben. Plan and Trust , 487 F.3d 494, 499 (7th Cir. 2007); Colby v. J.C. Penney Co., Inc. , 811 F.2d 1119, 1123-24 (7th Cir. 1987); Schultz v. Aviall, Inc. Long Term Disability Plan , 790 F.Supp.2d 697, 706 (N.D. Ill. 2011). The RLJCS Enterprises opinion goes so far as to say that District Court decisions have no authoritative effect. 487 F.3d at 499. Orthofix has made no argument that the rulings of the Courts in the Hunter and Lemanski litigations are binding on this Court based on principles of res judicata or collateral estoppel, and while these rulings may be instructive, Gordon, and the Court, are not bound by these rulings.
The problems with the damage calculations in the Hunter litigation, as set forth above, may certainly be considered by the Court in ruling on the discovery motions now pending in this litigation.
The Motion to Compel Discovery requests that Orthofix provide documents which Gordon believes are necessary for her damage analysis. Gordon argues that Orthofix cannot simply point to a sales decrease in Gordon's former territory and claim ipso facto that Gordon must have done something wrong. Gordon argues that if Orthofix' sales to her former customers declined, it is likely because other factors influenced the sales figures. Among those factors are publicity regarding government investigations and lawsuits involving Orthofix, decline in sale of bone growth stimulators due to insurers denying approval for reimbursement, and decline in sales revenue due to a new salesperson in Gordon's old territory. Gordon also argues that recent restatements of lower revenues for 2011 and 2012 suggest that a decrease in revenue after 2012 was the result of Orthofix now properly recognizing revenues.
Orthofix responds that it is not required to produce "broad swaths of data" not relied upon by Orthofix in its own damage calculations and not maintained by Orthofix in the normal course of business. Orthofix asserts that the burden of proving damages belongs to Orthofix. It argues that the burden is not upon Gordon or her expert to make an independent assessment of damages from raw data.
The Federal Rules of Civil Procedure grant the Court broad latitude regarding the type of information which may be discoverable. According to Federal Rule of Civil Procedure 26(b)(1), "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense". Discovery requests are relevant if there is a possibility that the information sought may be relevant to the subject matter of the action. Clark v. Ruck, No. 13 CV 3747, 2014 WL 1477925, at *2 (N.D.Ill. April 15, 2014) (citations omitted). Information sought "need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Fed.R.Civ.P. 26(b)(1). Courts are instructed to consider "the totality of the circumstances, weighing the value of the material sought against the burden of providing it" and taking into account society's interest in furthering "the truth-seeking function" in each particular case. Patterson v. Avery Dennison Corp. , 281 F.3d 676, 681 (7th Cir. 2002) (citation omitted).
Litigants are entitled to pursue discovery on defenses which show an alternative to evidence presented by the opposing party. Shelvy v. Wal-Mart Stores, 2014 WL 3882487 (N.D.Ill. August 7, 2014). In Shelvy, the court allowed the discovery of a personal injury plaintiff's employment records because they might contain information regarding injuries received in a prior accident which might be relevant to the physical and mental condition of the plaintiff. The court reasoned that information about the pre-existing injuries was relevant to causation and damages and might be a possible alternative cause for the injuries which the plaintiff claimed caused her damages. The Defendant herein seeks information to try to prove that there are alternative causes for the damages claimed by Plaintiff.
In the Defendant's Motion to Compel Discovery, the Defendant first seeks an order requiring production of documents sought under Gordon's first request for production of documents in paragraphs 39-43 and 45-51.
1) Requests for Per Unit Detail of Sales by Customer
(Defendant requests 39-43)
In requests 39-43, Gordon requests per unit sales information on a monthly basis. More specifically, Gordon requests information for sale of bone growth stimulators to each of Gordon's former customers for the following sales information: number of units sold, price per unit, revenue per unit, profit per unit, and cost per unit. Gordon alleges that the only information Orthofix provided at the customer level is a spreadsheet showing monthly revenue by customer and other documents showing average price per unit and average profit margin for company-wide sale of bone growth stimulators. Orthofix suggests that Gordon use the "average price" and "average profits" for her estimate of actual sales. Gordon contends that this method is unacceptable because the sale for each bone growth stimulator can vary widely from customer to customer.
In Motion to Compel (d/e 28, pg 4), Gordon indicates the per unit sales data is necessary in order to accurately determine damages in order to challenge Plaintiff's theory of computing damages, which is based upon ...