Walker Products, Inc. v. Cong et al Case No. 8:23-cv-02201-JVS-ADS United States District Court, C.D. California Filed February 07, 2025 Selna, James V., United States District Judge Proceedings: [IN CHAMBERS] Order Regarding Motion for Sanctions [103, 107] [Redacted] *1 Before the Court is Walker Products, Inc.'s (“Walker Products”) motion for sanctions. (Mot., Dkt. No. 103 (redacted), 107-1 (unredacted).) Yue (Frank) Cong (“Cong”) and All Automotive Megahub (“AAM”, collectively, “Defendants”) filed an opposition. (Opp'n, Dkt. No. 120.) Walker Products replied. (Reply, Dkt. No. 139.) For the following reasons, the Court DENIES the motion. I. BACKGROUND The procedural and factual background of this case are familiar to the Parties. The Court recites the background only as necessary to resolve the instant motion. On January 30, 2024, Walker Products served its first set of Requests for Production (“RFPs”) to Cong. (Mot. at 6; Opp'n at 9.) Cong heavily disputed this discovery, claiming that the RFPs were confusingly worded, propounded discovery before identifying the trade secret at issue, and were overboard and voluminous. (Opp'n at 9-10.) On April 22, 2024, Cong responded to the RFPs by providing several documents, responses, and objections to RFPs. (Opp'n at 10.) Walker Products argues that Cong failed to produce many documents that he did, in fact, have in his possession and that were responsive to the RFPs. (Mot. at 7.) Cong argues that he struggled to understand many of Walker Products RFPs, but nevertheless conducted diligent searches for responsive documents. (Opp'n at 10.) Cong amended his responses on May 3, 2024, stating that he had conducted a diligent search and producing a final set of responsive documents. (Id.) On May 9, 2024, Cong served his first set of Special Interrogatories to Walker Products. (Opp'n at 10.) Cong claims that this set of interrogatories was intended to, among other things, get Walker Products to refine its description of the alleged trade secret. (Id.) Walker Products responded to the Special Interrogatories and Defendants objected that the response was still too broad. (Id.) On June 11, 2024, Walker Products propounded its Interrogatories on Cong, which asked Cong to identify Walker Products' customers that he solicited business from, obtained goods and services from, or communicated with. (Mot. at 7–8.) Walker Products claims that Cong served belated responses stating that he had not communicated with those customers nor conducted business with them. (Id. at 8.) Walker Products filed a motion to compel further responses. (Dkt. Nos. 23–24.) Between June 11, 2024 and the present motion, the Parties have filed various discovery-related motions, including: Motion to Withdraw Certain Deemed Admissions (see Dkt. Nos. 82, 157); Motion to Compel Further Responses and Renewed Request for Forensic Inspection (see Dkt. Nos. 86, 158); Motion to Re-Designate Plaintiff's Blanket Designation of Documents as Attorneys' Eyes Only (see Dkt. No. 92, 159); Motion to Compel Defendants Frank Cong's Further Responses to Interrogatories (Dkt. No. 75); Motion to Compel Cong's Further Responses to Request for Admission (Dkt. No. 47).[1] *2 Walker Products now requests that the Court impose sanctions on Defendants for various failures to produce documents and delays in discovery. II. LEGAL STANDARD The Court may impose sanctions under its inherent authority for “willful disobedience of a court order or when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Fink, 239 F.3d 989, 991 (9th Cir. 2001) (quoting Roadway Express, Inc. v. Piper, 447 U.S. 752, 766 (1980)) (cleaned up). “[S]anctions are available if the court specifically finds bad faith or conduct tantamount to bad faith. Sanctions are available for a variety of types of willful actions, including recklessness when combined with an additional factor such as frivolousness, harassment, or an improper purpose.” Id. at 994. “Before awarding sanctions under its inherent powers, however, the court must make an explicit finding that counsel's conduct ‘constituted or was tantamount to bad faith.’ ” Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997) (citation omitted). “[C]ourts have inherent power to dismiss an action when a party has willfully deceived the court and engaged in conduct utterly inconsistent with the orderly administration of justice.” Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 589 (9th Cir. 1983). Because dismissal is such a harsh penalty, “it should be imposed only in extreme circumstances.” Id. Before imposing terminating sanctions, courts must make a finding of “willfulness, fault, or bad faith.” Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006). After finding bad faith, courts will assess five factors: (1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Id. (quoting Anhheuser-Busch, Inc. v. Nat. Beverage Distribs., 69 F.3d 337, 348 (9th Cir. 1995)). III. DISCUSSION A. Terminating Sanctions Walker Products foremost requests case-terminating sanctions. (Mot. at 20.) The first step in determining whether terminating sanctions are warranted is to examine whether there is evidence of bad faith, willfulness, or fault. See Wyle, 709 F.2d at 589. In support of its contention, Walker Products lists five instances deserving of terminating sanctions: (1) False, verified RFP responses, (2) false, verified Rog responses, (3) failure to comply with Judge Spaeth's Order, (4) spoliation of emails, (5) continued perjury. (Id. at 21–22.) For the following reasons, the Court declines to award terminating sanctions for any of these reasons. Walker Products first argues that Cong falsely insisted that he lacked documents responsive to many of Walker Products' RFPs, when in reality he had at least 8,000 responsive records. Walker Products is correct that Cong signed a verification form attesting to have diligently searched for the documents served by Walker Products in their RFP. (See Van Buiten Decl., Ex. 9.) Moreover, there is cause for suspicion about the lack of production by Cong. As aptly stated by Judge Spaeth during hearings regarding this discovery, “[w]hat appears to me or what I'm concerned about is that Mr. Cong didn't do a sufficient search....” (December 4, 2024 Hearing, Dkt. No. 73, 24:9–12.) Nevertheless, the Court finds that there is not enough evidence of bad faith or willfulness on the part of Cong deserving of termination sanctions. Indeed, Cong's counsel stated that if Cong missed something inadvertently, they would provide that to Walker Products. (Van Buiten Decl., Ex. 11.) Additionally, after Judge Spaeth ordered Cong to turn over supplemental discovery, Defendants produced further discovery. Therefore, termination sanctions are not appropriate. *3 Second, Walker Products argues that Cong produced false interrogatory responses when he falsely insisted that he had no dealings or communications with specific Walker Products' customers and vendors. (Mot. at 21.) This allegation cannot support termination sanctions. Judge Spaeth addressed these concerns in her October 16, 2024 hearing, where she stated that Walker Products' interrogatories were “drafted very confusing[ly],” thus providing a potential alternative reason for Defendants' lack of response. (See October 16 Hearing, Dkt. No. 36, 16:21–25.) Because there is a non-willful explanation for Cong's failure to comply with the interrogatories, the Court declines to find bad faith. Third, Walker Products argues that Cong failed to comply with Judge Spaeth's Order requiring him to produce all responsive records from his devices. (Mot. at 21.) The Court declines to award terminating sanctions for this conduct. Cong served supplemental responses on December 9, 2024, consistent with Judge Spaeth's order and complied with Judge Spaeth's order regarding forensic examination of electronic devices. Additionally, Judge Spaeth denied Walker Products' motion for forensic imaging of Cong's electronic devices finding that Walker Products had not met its burden of showing that Cong defaulted on its discovery obligations. (See Dkt. No. 158, at 2.) Thus, the Court will not award sanctions under this theory. Fourth, Walker Products argues that the spoliation of emails warrants termination sanctions where Cong “invited” the CEO [redacted] revoke his email access in order to avoid turning over many otherwise responsive emails. (Mot. at 21–22.) There is insufficient evidence presented by Walker Products that Cong sought to have his access cut-off by [redacted] rather than [redacted] independently deciding to shutout Cong for its own business reasons. Therefore, Cong's conduct does not amount to willfulness required to support terminating sanctions. Fifth, Walker Products argues that Cong's “continued perjury” should result in terminating sanctions where he lied about his lack of involvement with InQBrands and Nernex brand, as well as communications with Walker costumers and vendors. (Mot. at 22.) The Court notes that Defendants could have conducted a more thorough search, particularly with respect to Cong's communications to claimed Walker Products' customers and vendors like [redacted] and InQBrands. However, there is no evidence that Defendants' answers to Walker Products' interrogatories were an act of perjury or willful withholding, rather than mere inadvertence or confusion. Thus, the Court will not grant case-terminating sanctions on this basis. Because the Court finds that Defendants have not acted with the requisite bad faith, fault, or willfulness, there is no need to proceed to the second step of assessing the five-factors for terminating sanctions. Accordingly, the Court declines to grant terminating sanctions. B. Other Sanctions Walker Products requests that, in the alternative, the Court award other sanctions, such as attorneys' fees. (Mot. at 25.) Walker Products provides little argument in support of this position. The Court declines to award attorneys' fees. The Court cannot say at this time that Defendants' behavior was tantamount to bad faith such that shifting attorneys' fees are warranted. The Court notes that both Parties have failed, in some respect, to properly conduct discovery in this matter. Most recently, Judge Spaeth noted that Walker Products policy for blanket designations as Attorneys' Eyes Only “contradicts the explicit language in the Protective Order.” (Dkt. No. 159.) If the Court were to presume bad faith each time a party failed in some respect to properly conduct discovery, few cases would be adjudicated. *4 Accordingly, the Court declines to award other sanctions. IV. CONCLUSION For the foregoing reasons, the Court DENIES the motion. The Parties shall meet and confer and, within seven (7) days of this Order, notify the Court via email to the Courtroom Deputy Clerk whether the Order may be filed on the public docket or if parts of the sealed order should be redacted from the publicly filed version. If the parties request that any portions of the order remain sealed, when submitting their request, they shall attach a copy thereof with proposed redactions for the Court's review. IT IS SO ORDERED. The Court further finds that oral argument would not be helpful on this matter. Fed. R. Civ. P. 78; L.R. 7-15. Accordingly, the Court VACATES the February 10, 2025, hearing for the sanctions motion. Footnotes [1] These are just several of the motions filed by both Parties to show the numerosity of discovery pleadings filed in this matter.