In this patent infringement action, Slide Fire Solutions, LP ("Slide Fire") moved to compel discovery responses from Bump Fire Systems ("Bump Fire"). Bump Fire also requested a protective order to prevent the disclosure of certain discovery, including sensitive trade secrets and financial information.
With respect to the financial information, the court analyzed the motion to compel under the new proportionality standards set for in Fed.R.Civ.P. 26: The party seeking discovery, to prevail on a motion to compel or resist a motion for protective order, may well need to make its own showing of many or all of the proportionality factors, including the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, and the importance of the discovery in resolving the issues, in opposition to the resisting party's showing. And the party seeking discovery is required to comply with Rule 26(b)(1)'s proportionality limits on discovery requests; is subject to Rule 26(g)(1)'s requirement to certify "that to the best of the person's knowledge, information, and belief formed after a reasonable inquiry: ... (B) with respect to a discovery request..., it is: (i) consistent with these rules and warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law, or for establishing new law; (ii) not interposed for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; and (iii) neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action"; and faces Rule 26(g)(3) sanctions "[i]f a certification violates this rule without substantial justification." FED. R. CIV. P. 26(g)(1)(B), 26(g)(3); see generally Heller v. City of Dallas, 303 F.R.D. 466, 475-77, 493¬95 (N.D. Tex. 2014).
The court noted, however, that the "amendments to Rule 26(b) and Rule 26(c)(1) do not alter the basic allocation of the burden on the party resisting discovery to - in order to prevail on a motion for protective order or successfully resist a motion to compel - specifically object and show that the requested discovery does not fall within Rule 26(b)(1)'s scope of relevance (as now amended) or that a discovery request would impose an undue burden or expense or is otherwise objectionable or properly subject to a protective order. See McLeod, 894 F.2d at 1485; Heller, 303 F.R.D. at 483-93."
With this understanding, the court granted the motion to compel, ordering that Defendant must produce "information reflecting the account numbers of its accounts with banks and financial institutions used for Defendant's business purposes. Considering the importance of the issues at stake in the action, the parties' relative access to relevant information, and the importance of the discovery in resolving the issues, including Plaintiff's asserted need to conduct third-party discovery as to damages, and where Defendant's counsel reported that Defendant's financial accounting is accomplished in part through its account statements from banks and financial institutions, the Court finds that this discovery is relevant to Plaintiff's claims, including its damages analyses, and proportional to the needs of the case. Again, any confidentiality concerns can be addressed by utilizing the mechanisms established by the Court's Protective Order."
The court also granted the motion with respect to the Defendant's tax returns, finding that the discovery was appropriate under the new standards articulated in Fed.R.Civ.P. 26. Defendant must produce "unredacted copies of its annual federal and state tax returns - including any returns as to Florida sales tax - since 2013. Considering the importance of the issues at stake in the action, the parties' relative access to relevant information, and the importance of the discovery in resolving the issues, including Plaintiff's damages analyses and asserted need to conduct third-party discovery, and where Defendant's counsel reported that Defendant's financial accounting is accomplished in part through its tax returns, the Court finds that this discovery is relevant to Plaintiff's claims, including its damages analyses, and proportional to the needs of the case. Again, any confidentiality concerns can be addressed by utilizing the mechanisms established by the Court's Protective Order."
Finally, the court turned to the issue of Plaintiff's request for an award of its reasonable expenses, including attorneys' fees, under Rules 37(a)(5)(A). Rule 37(a)(5)(A) provides that, if a motion to compel is granted, or if the requested discovery is provided after the motion was filed, "the court must, after giving an opportunity to be heard, require the party ... whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees," except that "the court must not order this payment if: (i) the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action; (ii) the opposing party's nondisclosure, response, or objection was substantially justified; or (iii) other circumstances make an award of expenses unjust." FED. R. CIV. P. 37(a)(5)(A). And Rule 37(a)(5)(C) provides that, "[i]f the motion is granted in part and denied in part, the court may issue any protective order authorized under Rule 26(c) and may, after giving an opportunity to be heard, apportion the reasonable expenses for the motion." FED. R. CIV. P. 37(a)(5)(C).
The court then granted "Defendant until February 29, 2016 to file a response to this order to explain why the Court should not require Defendant Bump Fire Systems, LLC and/or its counsel to pay Plaintiff Slide Fire Solutions, LP, as required by Rule 37(a)(5), the expenses, including attorneys' fees, that Plaintiff incurred in making its motions to compel Defendant's responses to requests for production and answers to interrogatories."
Slide Fire Solutions, LP v. Bump Fire Systems, LLC, Case No. 3:14-cv-3358-M (N.D. Tex. Feb. 4, 2016)
The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.