Monster Energy Co. v. Vital Pharmaceuticals, Inc., et al Case No. 5:18-cv-01882-JGB-SHK United States District Court, C.D. California Filed May 26, 2021 Counsel D. Castellanos, Deputy Clerk, Attorney(s) Present for Plaintiff(s): None Present Not Reported, Court Reporter, Attorney(s) Present for Defendant(s): None Present Kewalramani, Shashi H., United States Magistrate Judge Proceedings (IN CHAMBERS): ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PROTECTIVE ORDER PROHIBITING DEPOSITION OF MONSTER ENERGY CO.'S CO-CEOs RODNEY C. SACKS AND HILTON H. SCHLOSBERG [ECF NO. 392] *1 On May 22, 2021, following a hearing with this Court, Plaintiff Monster Energy Co. (“Monster” or “Plaintiff”) filed its Notice of Motion and Motion for Protective Order Relating to Apex Witnesses Pursuant to ECF 388 (“Motion” or “Mot.”), as well as supporting materials, seeking to prohibit Defendants Vital Pharmaceuticals, Inc.(“VPX”) and John H. Owoc (“Mr. Owoc,” and collectively with VPX, “Defendants”) from taking the deposition of Monster Beverage Corporation's (“Monster Bev.”) Co-Chief Executive Officers (“CEOs”) Rodney C. Sacks (“Mr. Sacks”) and Hilton H. Schlosberg (“Mr. Schlosberg”). Electronic Case Filing Numbers (“ECF Nos.”) 392-396. On May 24, 2021, Defendants filed their redacted Opposition to Motion for a Protective Order for Relating to Apex Witnesses (“Opp'n” or “Opposition”), ECF No. 397, and an unredacted version with accompanying exhibits under seal, ECF No. 399. The matter stands ready for decision. After reviewing the parties' arguments from both the briefing and attachments, for the reasons set forth below, the Court GRANTS IN PART AND DENIES IN PART Plaintiff's Motion. And Plaintiff is ordered to make Mr. Sacks available for remote deposition for no longer than 2 hours. I. BACKGROUND A. Procedural History Monster commenced this action in September 2018 against Defendants. ECF No. 1, Compl. On April 3, 2019, Monster filed its First Amended Complaint (“FAC”) against Defendants alleging the following claims: (1) a violation of the Lanham Act; (2) unfair competition; (3) false advertising; (4) trade libel; (5) intentional interference with contractual relations; (6) intentional interference with prospective economic advantage; (7) conversion; (8) larceny; (9) false patent marking; (10) a violation of the California Uniform Trade Secrets Act; (11) a violation of the Defend Trade Secrets Act; and (12) a violation of the Computer Fraud and Abuse Act (“CFAA”). ECF No. 61, First Amended Complaint (“FAC”) at 36-47. Monster is seeking, among other forms of relief, compensatory damages that Monster estimates to be “at least $300-400 million.” ECF No. 94, Joint Rule 26(f) Rep. at 8. On May 20, 2019, the Court denied in part Defendants' Motion to Dismiss and concluded Monster sufficiently pleaded its Lanham Act, unfair competition, and false advertising claims, among other claims. ECF No. 95, Order re: Mot. to Dismiss. The FAC alleged that Defendants label and market BANG Energy Drink (“BANG”) in a manner that improperly leads customers to believe that BANG provides certain benefits, when, in fact, it does not. ECF No. 61, FAC at ¶¶ 44-55. With respect to the Lanham Act, unfair competition, and false advertising claims, Monster alleged, in addition to the falsity of other claims made regarding the benefits of drinking BANG, that there is no creatine in BANG and that “Super Creatine” is in fact creatyl-L-leucine, a fundamentally different molecule than creatine; creatyl-L-leucine is functionally useless and passes through the body largely unutilized; and, finally, even if creatyl-L-leucine did break down into creatine, which it does not, there is not enough of it in BANG to have a material effect on the body. Id. at ¶¶ 51-55, ¶¶ 121-147. *2 With respect to the contract claims, Monster alleged, in addition to other claims, that Defendants interfered with contracts that Monster has with retailers regarding shelf space and placement of products through use of improper tactics. Id. at ¶¶ 152-165. Finally, Monster asserted a series of trade secret and CFAA claims arising from Defendants' actions in hiring former Monster employees, requiring these employees to provide information regarding pricing and other proprietary information, giving false assurances to those former Monster employees that providing such information was permissible, and improperly accessing Monster's computers. Id. at ¶¶ 184-204. The current Motion and Opposition arise from an earlier hearing on April 28, 2021, when Defendants initially sought to depose Messrs. Sacks and Schlosberg, but the Court requested that the parties continue to discuss the matter as the record was not fully developed at the time. ECF No. 368, Minutes of Deposition Scheduling Dispute. As a result, the current issue and filings were provided in a further effort by VPX to depose Messrs. Sacks and Schlosberg. The fact discovery deadline in this matter is scheduled for May 31, 2021. ECF 355, Revised Scheduling Order. II. DISCUSSION A. General Legal Standards Regarding Discovery Federal Rule of Civil Procedure (“Rule”) 26(b)(2) governs the scope of permissible discovery and provides: Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable. Relevancy, for purposes of discovery, “has been construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case.” Nguyen v. Lotus by Johnny Dung Inc., No. 8:17-cv-01317-JVS-JDE, 2019 WL 3064479, at *1 (C.D. Cal. June 5, 2019) (internal citations and quotation marks omitted). “Generally, the purpose of discovery is to remove surprise from trial preparation so the parties can obtain evidence necessary to evaluate and resolve their dispute.” Duran v. Cisco Sys., Inc., 258 F.R.D. 375, 378 (C.D. Cal. 2009) (internal citations and quotation marks omitted). Because discovery must be both relevant and proportional, the right to discovery, even plainly relevant discovery, is not limitless. See Fed. R. Civ. P. 26(b)(1); Nguyen, 2019 WL 3064479, at *1. Discovery may be denied where: “(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).” Fed. R. Civ. P. 26(b)(2)(C). “The party seeking to compel discovery has the burden of establishing that its request satisfies the relevancy requirements of Rule 26(b)(1). The party opposing discovery then has the burden of showing that the discovery should be prohibited, and the burden of clarifying, explaining or supporting its objections.” Bryant v. Ochoa, No. 07-cv-200 JM (PCL), 2009 WL 1390794 at * 1 (S.D.Cal. May 14, 2009). “The party opposing discovery is ‘required to carry a heavy burden of showing’ why discovery should be denied.” Reece v. Basi, No. 2:11-cv-2712 TLN AC P, 2014 WL 2565986, at *2 (E.D. Cal. June 6, 2014), aff'd, 704 F. App'x 685 (9th Cir. 2017) (quoting Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir.1975)). *3 “The district court enjoys broad discretion when resolving discovery disputes, which should be exercised by determining the relevance of discovery requests, assessing oppressiveness, and weighing these factors in deciding whether discovery should be compelled.” United States ex rel. Brown v. Celgene Corp., No. CV 10-3165 GHK (SS), 2015 WL 12731923, at *2 (C.D. Cal. July 24, 2015) (internal citations and quotation marks omitted). B. Apex Standards Deposition The applicable standards regarding “apex” depositions are set out in detail in Hunt v. Cont'l Cas. Co., No. 13-CV-05966-HSG, 2015 WL 1518067, at *1–2 (N.D. Cal. Apr. 3, 2015): Federal Rule of Civil Procedure 26(c)(1) provides that “[t]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense,” including by prohibiting a deposition or limiting its scope. Fed. R. Civ. P. 26(c)(1)(A) and (B). “For good cause to exist, the party seeking protection bears the burden of showing specific prejudice or harm will result if no protective order is granted.” In re Transpacific Passenger Air Transp. Antitrust Litig., No. C 07–05634 CRB, 2014 WL 939287, at *1 (N.D. Cal. 2014) (citing Phillips v. GMC, 307 F.3d 1206, 1210–1211 (9th Cir. 2002)). Absent extraordinary circumstances, it is rare for a court to disallow the taking of a deposition. See Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975) (“[A] strong showing is required before a party will be denied entirely the right to take a deposition.”) (internal quotations and citations omitted); In re Google Litig., No. C 08–03172 RMW, 2011 WL 4985279, at *2 (N.D. Cal. 2011) (“A party seeking to prevent a deposition carries a heavy burden to show why discovery should be denied.”); Apple Inc. v. Samsung Electronics Co., Ltd., 282 F.R.D. 259, 263 (N.D. Cal. 2012) (“[I]t is very unusual for a court to prohibit the taking of a deposition altogether absent extraordinary circumstances.”) (internal quotations and citation omitted); Powertech Technology, Inc. v. Tessara Inc., No. C 11–6121 CW, 2013 WL 3884254, at *1 (N.D. Cal. 2013) (same). “In determining whether to allow an apex deposition [i.e., the deposition of a high-level executive], courts consider (1) whether the deponent has unique first-hand, non-repetitive knowledge of facts at issue in the case and (2) whether the party seeking the deposition has exhausted other less intrusive discovery methods.” Apple v. Samsung, 282 F.R.D. at 263. A district court has broad discretion to determine whether, on the totality of the record, a party seeking a protective order has met its burden of showing good cause to block an apex deposition. See Apple v. Samsung, 282 F.R.D. at 262–263 (finding that upon a party's showing of good cause, the court has discretion to limit or preclude an apex deposition, particularly where the discovery sought can be obtained from a less burdensome source); In Re Google Litig., 2011 WL 4985279 at *2 (finding that when a party seeks to pursue an apex deposition, “the court may exercise its discretion under the federal rules to limit discovery” by precluding or limiting the deposition). The party seeking to take such a deposition does not need to prove conclusively in advance that the deponent definitely has unique, non-repetitive information; instead, “where a corporate officer may have any first-hand knowledge of relevant facts, the deposition should be allowed.” Grateful Dead Productions v. Sagan, No. C 06–7727(JW) PVT, 2007 WL 2155693, at *1, n. 5 (N.D. Cal. 2007) (emphasis in original) (citing Blankenship, 519 F.2d at 429 and Anderson v. Air West, Inc., 542 F.2d 1090, 1092–93 (9th Cir. 1976)). See also Powertech, 2013 WL 3884254 at *2 (noting that the party seeking deposition “was not required to prove that [deponent] certainly has [relevant] information”). Nor has formal “exhaustion” been viewed as an absolute requirement; instead, exhaustion of other discovery methods is an important, but not dispositive, consideration for a court to take into account in deciding how to exercise its discretion. In re Transpacific, 2014 WL 939287 at *5 (noting that exhaustion of other discovery routes is an “important consideration” but not a necessary precondition to the taking of an apex deposition). *4 The burden remains with the party seeking the protective order, in this case Plaintiff, to prevent the taking of the deposition. Hunt, 2015 WL 1518067, at *1, n.1. C. Analysis There does not appear to be any dispute regarding the fact that Messrs. Sacks and Schlosberg are apex witnesses for purposes of this analysis. See generally ECF No. 399-1, Opp'n. The Court next turns to “(1) whether the deponent[s] ha[ve] unique first-hand, non-repetitive knowledge of facts at issue in the case and (2) whether the party seeking the deposition has exhausted other less intrusive discovery methods.” Hunt, 2015 WL 1518067, at *1. With respect to the first prong related to whether the apex witnesses have “unique first-hand, non-repetitive knowledge of facts at issue in the case,”, Plaintiff offers the declarations of Messrs Sacks and Schlosberg to show that they do not have “unique first-hand, non-repetitive knowledge of the facts at issue in the case.” See ECF No. 394, Sacks Decl.; ECF No. 395, Schlosberg Decl. In his declaration, Mr. Sacks states that he: (1) has no “unique personal knowledge” regarding Defendants' “Super Creatine” claims and relies on scientists who “develop formulations and ingredients,” ECF No. 394, Sacks Decl. at ¶ 3; (2) has no information regarding theft of trade secret information by former Monster employees, id. at ¶ 4; (3) other than high level communications, does not have “primary responsibility for negotiating shelf space agreements” or enforcing them, id. at ¶ 5; (4) assesses competition with BANG “at a high level,” id. at ¶ 6; (5) has participated on phone calls with outside counsel regarding cases between Plaintiff and Defendants, id. at ¶ 7; and (6) “was involved in various parts of the development of Reign energy drink beverage” but does not have “unique knowledge about any efforts to add creatine as an ingredient to Reign ... ,” id. at ¶ 8. Similarly, Mr. Schlosberg's declaration states that he “understand[s] that Monster has filed this case against VPX for, among other things, false advertising relating to its claims about ‘Super Creatine’; theft of Monster trade secret information; and interference with Monster retail shelf space. [He] do[es] not have unique knowledge about Monster's claims against VPX in this case.” ECF No. 395, Schlosberg Decl. at ¶ 4. Plaintiff also argues that the following facts show that Defendants only seek to depose Messrs. Sacks and Schlosberg for harassment and improper purposes rather than to truly obtain information related to the case: (1) late issued notice under Rule 30(b)(6) regarding information relevant in the case, on May 12, 2021; (2) the remarks made by Mr. Owoc at his deposition and on social media that shows a level of personal animus against Messrs. Sacks and Schlosberg; (3) failure to show and inquire from a deposition witness, who was the author, about a document that was cited to the Court during the previous hearing as showing Mr. Sacks' involvement in the matter; and (4) refusal to identify topics regarding which Defendants seek to question Messrs. Sacks and Schlosberg. ECF No. 393, Mot. at 6-9. In response, Defendants contend that these actions are not relevant to the analysis of whether to allow the apex depositions to go forward and that Plaintiff has not shown any undue burden by allowing the depositions to go forward. ECF No. 399-1, Opp'n at 14-17. *5 With respect to the “other less intrusive discovery methods” prong, Plaintiff contends that Defendants “ha[ve] deposed, or will depose many senior executives at Monster, including: President of the Americas ... (two times); Chief Scientific Officer Tom Davis; Chief Brand Officer Mark Hall; and Chief Financial Officer Thomas Kelly.” ECF No. 393, Mot. at 16. As a result, Plaintiff contends that these depositions of other high-level executives will provide Defendants the necessary information to which Defendants are entitled in this case. Id. Plaintiff further argues that, as high-level executives, Messrs. Sacks and Schlosberg “are provided ... information from others who have ... primary responsibilities [regarding the relevant areas of inquiry] and who VPX can, will, or has already deposed in this case.” Id. at 14. Finally, it appears that Plaintiff's Rule 30(b)(6) witness(es) have been or will be deposed shortly. Id. at 16. In response, Defendants contend that they need not exhaust other sources of discovery, and that Defendants are only now seeking these apex depositions after having deposed “28 other non-expert depositions” and having “served more than “1,500 total discovery requests—yet still ha[ve] questions that only co-CEOS, Mr. Sacks and Mr. Schlosberg can answer.” ECF No. 339-1, Opp'n at 18. At the outset, the Court advises the parties that in an effort to discuss the materials proffered by Defendants in this matter, which is covered by the protective order in this case, the Court will discuss the materials at a higher level of specificity so as not to disclose protected information but which the Court believes will allow it to sufficiently explain its analysis. If the parties believe any information that should not be disclosed to the public is included in this Order, they may petition the Court to redact those portions under the Central District of California's Local Rules. Before addressing the proffered evidence by Defendants, the Court notes that, though Defendants have taken the approach that they need not share with Plaintiff the areas of inquiry regarding which they seek to question Messrs. Sacks and Schlosberg, in the Court's experience, identifying the topics of inquiry would have likely resulted in a more focused discussion and briefing by the parties. Nevertheless, Defendants cite to documents and transcripts of depositions, which show that “not only were the CEOs involved in tracking BANG and developing a knock-off product, but they were involved throughout the relevant timeline.” ECF No. 399-1, Opp'n at 14. In this regard, Defendants indicate that either Mr. Sacks, Mr. Schlosberg, or both were involved in creating a fact sheet regarding BANG, in email exchanges from executives in which one or both CEOs were involved discussing category expansion at various retailers, and in email exchanges related to general strategy discussions regarding selling BANG and Reign. Id. at 399-1 at 11-12. Further, Defendants proffer testimony from prior depositions in which either or both of the CEOs offered advice on how to capture certain market segments, had authority on branding decisions, had authority on product decisions, had authority on how to emphasize certain aspects of Monster's product(s), have knowledge regarding ingredients and ingredient choices in Plaintiff's products, and are involved in strategy related to Plaintiff's products customer base. Id. at 12-14. Based on the proffer from Defendants, it does not appear likely that Messrs. Sacks or Schlosberg have “unique first-hand, non-repetitive knowledge of facts at issue in the case” as they relate to the theft of trade secret claims or the CFAA claims. With respect to the shelf-space agreements and tortious interference claims, the information provided does not appear to show that the co-CEOs have information regarding this aspect other than high-level discussions, which other executives appear to have first-hand knowledge regarding. However, even though the co-CEOs do not appear to have information related to the “Super Creatine” aspect of the Lanham Act, branding, or unfair competition claims, the information regarding branding, strategy, and marketing of Plaintiff's competitive product would appear to be relevant to at least the damages portion of such claims, if not aspects of the claim as it relates to marketing certain ingredients over others. *6 Specifically, Defendants identified information where Mr. Sacks has ultimate control over relevant areas of branding and marketing sand exercises that control, such that he would appear to have unique, first-hand knowledge of those issues. This, combined with the general standard that “it is very unusual for a court to prohibit the taking of a deposition altogether absent extraordinary circumstances,” Apple, 282 F.R.D. at 263, and the amount of damages at issue in this case, between “$300-400 hundred million,” ECF No. 94, Joint Rule 26(f) Rep. at 8, warrant Defendants' taking a deposition of the opposing parties' CEO in this matter. Though some information may be obtained through other avenues, the Court does not find that the absence of doing so by Defendants is dispositive in this case. Additionally, Messrs. Sacks and Schlosberg's generalized statements that “[h]aving to sit for an unnecessary deposition would be a significant burden on [his] time and pre-existing commitments, especially before May 31, 2021,” see ECF No. 394, Sacks Decl., at ¶ 9, ECF No. 395, Schlosberg Decl., at ¶ 10, are not sufficient to warrant a protective order as being unduly burdensome. Defendants proffer, however, “is insufficient to warrant unrestricted deposition time and subject matter.” Apple, 282 F.R.D. at 265. Therefore, considering that Mr. Sacks has been the CEO longer and during the entirety of the relevant time period in this case, it would be appropriate to make Mr. Sacks available for a video deposition of no longer than 2 hours in this matter in a manner that is agreeable to the parties. This amount of time, combined with the extensive discovery that has already taken place, would allow for Defendants to make the necessary inquiries and obtain the necessary information. III. CONCLUSION For the reasons previously set forth, Plaintiff's Motion For Protective Order is GRANTED IN PART AND DENIED IN PART. IT IS SO ORDERED.