3M COMPANY, Plaintiff, v. AIME LLC, et al., Defendants CASE NO. 2:20-cv-01096-TL United States District Court, W.D. Washington Signed February 13, 2023 Counsel Nancy M. Erfle, Gordon Rees Scully Mansukhani LLP, Seattle, WA, Thomas H. Castelli, Pro Hac Vice, W. Greg Lockwood, Gordon Rees Scully Mansukhani LLP, Portland, OR, for Plaintiff. David Dallas Dickey, Pro Hac Vice, The Yerrid Law Firm, Tampa, FL, R. Gale Porter, Pro Hac Vice, Porter Law Group, Tampa, FL, Richard D. Ross, Law Firm of Richard D. Ross, Seattle, WA, for Defendants. Tsuchida, Brian A., United States Magistrate Judge ORDER GRANTING PLAINTIFF 3M'S MOTION FOR DISCOVERY SANCTIONS *1 Plaintiff 3M moves for an order of contempt and sanctions because defendants failed to timely produce all documents required by the Court's order to compel (Dkt. 62), and responded to plaintiff's second set of discovery requests months after the due date and the close of discovery despite repeated admonitions not to abuse the discovery process. Dkts. 81, 97. Defendants oppose plaintiff's motion, but their response substantiates 3M's contentions and offers no credible explanation for continued discovery abuses, which may include spoliation of evidence. Dkt. 88. The Court GRANTS 3M's motion for non-dispositive discovery sanctions based on defendants’ violation of this Court's orders and the discovery process but does not reach the question of contempt. Dkt. 81. Given defendants’ repeated, intentional, and egregious discovery abuses, the Court ORDERS that defendants are precluded from presenting or relying on evidence produced after the November 23, 2022 discovery deadline, and 3M is entitled to an adverse inference against defendants related to any responses and materials that were not produced prior to the discovery deadline. The Court ORDERS defendants’ attorneys R. Gale Porter and Richard R. Ross to pay monetary sanctions as the result of their most recent discovery violations for the costs and fees incurred by 3M in bringing the current discovery motion. See Fed. R. Civ. P. 37(a)(5)(A); LCR 11(c). 3M shall submit an accounting of the costs and fees for bringing this motion by February 17, 2023. Mr. Porter and Mr. Ross shall either pay this amount directly to 3M or file an objection regarding 3M's accounting of its costs and fees by February 24, 2023. DISCUSSION On January 19, 2023, plaintiff 3M moved for contempt of this Court's order to compel (Dkt. 62), as well as for violation of its admonishment to defendants’ counsel against further discovery violations and deficiencies in professional conduct (Dkt. 55). Dkt. 81. On January 30, 2023, defendants responded by denying any wrongdoing while simultaneously submitting previously undisclosed discovery materials long after the November 23, 2023 discovery deadline. Dkt. 88. 3M replied by noting that defendants’ late-filed materials demonstrate their repeated bad faith conduct during discovery, suggest that defendants may have spoliated relevant materials as recently as November 2022, and substantiate their stated reasons for issuing sanctions for discovery abuses: (1) defendants have only now produced new documents responsive to their original Document Request Number 1 regarding defendants’ efforts to procure, broker, or sell 3M N95 respirators; (2) defendants continue to acknowledge and yet fail to produce responsive documents relating to criminal or administrative investigations despite defendant Mark Baciak's December 2022 deposition testimony that defendants received a subpoena from the United States Department of Justice and an inquiry from the FBI; and (3) defendants have responded to 3M's second set of discovery requests more than two months after the close of discovery while including photographs responsive to the original Document Request Number 21 that were subject to the Court's November 2022 order to compel. Dkt. 97. *2 The Court does not reach the question of contempt. The Court finds, however, that defendants have violated the November 2022 order to compel (Dkt. 62) and repeated admonitions against discovery abuses. A magistrate judge has the authority to order non-dispositive, pretrial discovery sanctions that are “flexible, selective, and plural.... as are necessary to hold the scales of justice even,” including proscriptive and monetary sanctions. Grimes v. City and County of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991) (citing C. Wright & A. Miller, FEDERAL PRACTICE AND PROCEDURE: CIVIL § 2281 (1970 & Supp.1988), Fed. R. of Civ. P. 11, 37, and 72); see Apple Inc. v. Samsung Electronics Co., Ltd., 888 F. Supp. 2d 976, 988 (N.D. Cal. 2012) (finding that magistrate judge's adverse inference jury instruction was a non-dispositive discovery sanction reviewed only for clear error); cf. Avila v. Olivera Egg Ranch, LLC, 2010 WL 7087074, at *1–2 (E.D. Cal. Feb. 18, 2010) (reviewing magistrate judge's adverse inference spoliation sanction for clear error); Dong Ah Tire & Rubber Co., 2009 WL 2485556 (N.D. Cal. Aug. 12, 2009) (same). “[A] permissive presumption is not properly characterized as ‘dispositive.’ ” Apple Inc., 888 F. Supp. 2d at 988. The Court imposes discovery sanctions against defendants’ use or reliance on their responses and materials produced after the discovery deadline; an adverse inference with respect to any responses or materials not produced by the discovery deadline; and monetary sanctions to be paid by defendants’ attorneys. 1. Document Request Number 1: All documents and things relating or referring to Mark Baciak, Michael Bingham and/or AIME's efforts to procure, broker, or sell 3M N95 respirators since January 1, 2020 Although defendants allege that they produced before the discovery deadline all documents related to the purchase and sale of 3M N95 respirators, defendants produced new documents responsive to Document Request Number 1 on January 30, 2023. For example, defendants produced for the first time a document purporting to be a printout from their Microsoft Dynamics System, which defendants used for customer relations management (“CRM”). Dkt. 88-1, at 3–4. Defendants did not disclose the existence of this database, despite being compelled by the Court to provide those records to 3M, until defendant Mr. Baciak's deposition on December 14, 2022, which took place after the close of discovery because defendants were recalcitrant in making Mr. Baciak available earlier and had to be ordered to do so. Dkt. 62, at 2–3; Dkt. 98-6, at 2. The Court cannot accept at face value defendants’ assertion that it matters not that they failed to disclose the very existence of Microsoft Dynamics System because they earlier searched the system and provided all responsive documents in June and November 2022. First, defendant Mr. Baciak contradicts himself in different sworn statements. In his December 2022 deposition, Mr. Baciak stated, in response to the question of whether Microsoft Dynamics could be used to print out a record of sales made by AIME, “The – our Dynamics instance was shut down over a year ago. It – it's very expensive to maintain per month, and we no longer maintained it.” Dkt. 98-6, at 2. When pushed about when it was shut down, Mr. Baciak said, though he could not be sure, “I believe it was in 2020.” Id. This was presumably an excuse for failing to produce files or documents from defendants’ CRM system for recording sales. In contrast, he stated in his January 30, 2023 declaration that attached a purported printout from Microsoft Dynamics, that he and defendant Michael Bingham used a backup of Microsoft Dynamics to verify all data when responding to discovery requests in June and November of 2022. Dkt. 88-1, at 2. Second, as 3M notes, the very printouts that Mr. Baciak supplied to support his statements appear to contradict them. The system backups appear to have been available “starting from: 01/02/2023,” which suggests that no such backups were used in 2022 to respond to discovery. Dkt. 88-1, at 4. Moreover, that the system shows recent transactions as starting and ending on “8/3/2020,” suggests that the database itself was not used to respond to discovery requests in 2022. Dkt. 88-1, at 3. *3 Regardless, defendants have failed to provide any printouts from the Microsoft Dynamics System itself to demonstrate that the CRM device contains the same or similar information to what was provided in discovery in June and November 2022. Without the Microsoft Dynamics System records, it is impossible to reconcile the inconsistencies in Mr. Baciak's sworn statements. The CRM system records were clearly responsive to 3M's request for all documents and things relating or referring to Mark Baciak, Michael Bingham and/or AIME's efforts to procure, broker, or sell 3M N95 respirators since January 1, 2020. Defendants violated this Court's order to compel discovery. Dkt. 62. 2. Document Request Number 20: All documents related to any criminal and/or administrative investigations that you have been the subject of Defendant Mr. Baciak testified in his deposition that defendants received a subpoena from the United States Department of Justice shortly after the 3M lawsuit was filed and had correspondence with the FBI. Dkt. 98-6, at 3–4.[1] Defendants produced neither the subpoena from the DOJ nor any correspondence with the FBI. Defendants improperly withheld documentation responsive to Document Request Number 20 and have intentionally violated the discovery process. Dkts. 55, 62. Defendants’ reasons for failing to produce the subpoena from the DOJ and the correspondence with the FBI are specious. First, defendants state that “[t]here is no indication or communication that AIME was the ‘subject of’ that investigation”; though the subpoena clearly concerned “ ‘N-95 Filtering Facepiece Respirators,’ ” 3M is never mentioned; and the subpoena itself stated in boldface “IMPORTANT NOTICE – REQUEST FOR NONDISCLOSURE OF SUBPEONA [sic].” Dkt. 88, at 3. Defendants’ linguistic contortions are unpersuasive and demonstrate their deliberate refusal to respond. “Subject” is commonly defined as “something concerning which something is said or done.” Merriam-Webster Online Dictionary, available at https://www.merriam-webster.com/dictionary/subject (last accessed Feb. 13, 2023). Defendants were therefore the subject of the subpoena and more broadly the subject of a criminal investigation, regardless of whether they were the primary subject of the investigation. Without producing the subpoena (the existence of which only came to light during Mr. Baciak's deposition), there is no way to evaluate whether defendants protestations were well-founded or contradicted. It is non-sensical to argue that 3M had to be mentioned in the subpoena because the request was for information regarding defendants, and a subpoena involving N-95 respirators is relevant to the current litigation. As to the purported request for nondisclosure of the subpoena, there is a protective order in place that covers sensitive and confidential information such that any concerns regarding confidentiality could have been addressed by following set procedures. Dkt. 49. Moreover, as 3M notes, witnesses, subjects, and targets of federal grand jury investigations are not subject to grand jury secrecy rules. See FED. R. CRIM. PROC. 6(e)(2); In re Grand Jury Subpoena to Amazon.com Dated Aug. 7, 2006, 246 F.R.D. 570, 574–75 (W.D. Wis. 2007). *4 Defendants’ failure to turn over all materials relating to the subpoena from DOJ and the correspondence involving the FBI was improper and constitutes only the most recent example of discovery abuses. Defendants should have revealed the existence of the DOJ and FBI inquiries long before the late-taken deposition of Mr. Baciak in December 2022, and having revealed those communications, they should have immediately been produced. 3. Late Response to 3M's Second Request for Production of Documents and Second Set of Interrogatories Served on October 22, 2022 Defendants offer no cognizable reason for responding to 3M's second request for production and second set of interrogatories over two months past their due date and the discovery deadline, arriving only on January 30, 2023, when defendants responded to the current motion and the motion for summary judgment. Production included, for example, photographs from their website that should have been produced in response to 3M's original Document Request Number 21 that was subject to this Court's earlier order to compel. See Dkt. 56, at 10; Dkt. 62; Dkt. 97, at 7. Defendants therefore acknowledge that they violated the letter and spirit of the discovery rules and violated this Court's order to compel. Defendants therefore continue a pattern of discovery abuse that began at the very outset of exchanging information with 3M. See, e.g., Dkt. 34, at 28 (December 2021 order denying defendants’ motion to compel because “Defendants fail to state with particularity the grounds for a court order and the relief sought”); Dkt. 50, at 1 (March 2022 order denying defendants’ motion to compel “because plaintiff has demonstrated that defendants failed to meet and confer meaningfully and in good faith to explain why their requests are relevant and proportional to the needs of this case, particularly in light of the Court's dismissal of several of defendants’ counterclaims”); Dkt. 55, at 1–2 (April 2022 order issuing an admonishment to defendants’ counsel that “further disregard for the Local Rules and professional conduct will not be tolerated”); Dkt. 62 (November 2022 order granting 3M's motion to compel based on discovery abuses by defendants’ counsel); Dkt. 66 (November 2022 order that Mr. Porter and Mr. Ross pay monetary sanction of $7,950 based on discovery abuses, and noting that counsel provided no reasonable basis to excuse their filing a response to a motion to compel a week late and a response to the order to show cause a day late without seeking extensions of time). Moreover, 3M credibly contends that newly produced documents may demonstrate spoliation of evidence and failure to mitigate, including photos taken on November 3, 2022, of defendants dumping raw materials related to their alleged manufacturing operation. Dkt. 97, at 7; Dkt. 98-3, at 1–3. The Court finds that defendants’ late production and responses are further evidence of misconduct and blatant disrespect for the discovery process, including violating the Court's November 2022 order to compel (Dkt. 62). CONCLUSION The Court GRANTS 3M's motion for non-dispositive discovery sanctions based on defendants’ violation of this Court's orders and the discovery process but does not reach the question of contempt. Dkt. 81. Based on repeated, intentional, and egregious discovery abuses, the Court ORDERS that defendants are precluded from presenting or relying on evidence produced after the November 23, 2022 discovery deadline, and 3M is entitled to an adverse inference against defendants related to any responses and materials not produced prior to the discovery deadline. The Court ORDERS defendants’ attorneys R. Gale Porter and Richard R. Ross to pay monetary sanctions as the result of their most recent discovery violations for the costs and fees incurred by 3M in bringing the current motion. See Fed. R. Civ. P. 37(a)(5)(A); LCR 11(c). 3M shall submit an accounting of the costs and fees for bringing this motion by February 17, 2023. Mr. Porter and Mr. Ross shall either pay this amount directly to 3M or file an objection regarding 3M's accounting of its costs and fees by February 24, 2023. *5 DATED this 13th day of February, 2023. Footnotes [1] 3M cited Mr. Baciak's Deposition page 124, lines 3–22 with respect to the FBI correspondence but failed to excerpt page 124 in attachments to the motions for summary judgment and for contempt/sanctions. See, e.g., Dkt. 78-18, at 16–17 (jumping from deposition pages 123 to 163); Dkt. 98-6, at 4–5 (jumping from deposition pages 123 to 196). Nonetheless, Mr. Baciak admits that the FBI contacted him on page 123, and defendants have not challenged 3M's characterization of Mr. Baciak's statements regarding correspondence with the FBI made on the omitted page 124.