Spectrum Scientifics, LLC v. Celestron Acquisition, LLC

Background

Defendants asked the court to resolve a discovery dispute involving subpoenas served on non-party Optronics Technologies, Inc. (Orion) and two Orion employees, Debbie Woodward and Steve Peters. The subpoenas sought a corporate representative to testify under Federal Rule of Civil Procedure 30(b)(6) about 11 topics, along with individual depositions of Woodward and Peters.

The underlying case is a private antitrust class action brought by direct purchasers of telescopes. The plaintiffs allege that defendants and related entities participated in a long-running conspiracy involving price fixing, restrictions on distributors’ trade and credit terms, and the acquisition of Meade to obtain control of the U.S. telescope market.

Orion is a telescope distributor and was the plaintiff in an earlier private antitrust action against Ningbo Sunny and its U.S. affiliates. After a six-week trial, a jury found Ningbo Sunny and Meade liable for violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act and awarded damages. The Ninth Circuit later affirmed the judgment in part and sent back only the valuation of a settlement set-off. Defendants in the current case were not parties to that earlier action, but they contend that they settled with Orion before it was filed and obtained general releases.

Orion’s Status and the Discovery Standard

The court could not determine from the record whether Orion was an unnamed member of the proposed class. The court concluded, however, that even if Orion fell within the proposed class, it was not merely an unnamed class member. Orion possessed information from its earlier litigation that other potential class members did not, had collected and produced evidence concerning the alleged conspiracy, and competed in at least one market involved in the case.

Federal Rule of Civil Procedure 45 governs discovery from non-parties, and the permitted scope is the same as under Rule 26(b). Discovery may seek nonprivileged information relevant to a claim or defense and proportional to the needs of the case. Courts must limit discovery that is cumulative, duplicative, available from a more convenient source, outside the permitted scope, or unduly burdensome. Rule 45 also requires courts to quash or modify subpoenas that impose an undue burden or require disclosure of protected information, among other circumstances.

Corporate Deposition

The court determined that Orion could not claim complete protection from deposition discovery. Documents Orion had already produced from its earlier litigation did not eliminate any obligation to provide testimony about the subjects of those documents.

The court nevertheless found that defendants’ Rule 30(b)(6) notice was not reasonably limited. Topics concerning Orion’s purchases, supply agreements, and product catalogs appeared directed at exploring possible anticompetitive conduct by Orion, but defendants did not explain how that conduct was relevant to a claim or defense. Other topics concerning communications with plaintiffs, counsel, and the current litigation appeared directed at whether Orion coordinated with the direct purchaser plaintiffs to bring the class action. The court noted that this issue had already been rejected as a basis for finding class counsel inadequate and that defendants had been prohibited from raising it again in future class-certification briefing. Defendants also did not explain how that coordination was relevant to a claim or defense.

The court found additional topics unreasonably broad. For example, one topic could require a corporate representative to authenticate every document Orion had produced, creating an extraordinary preparation burden. Other topics sought testimony about every document or communication concerning telescopes connected to any defendant since January 1, 2010, and communications with a wide range of telescope-industry participants about other retailers. The court expected that some information within those topics might be relevant, but found that defendants had not adequately justified their breadth or described the examination subjects with reasonable particularity.

The court therefore denied defendants’ request for an order requiring Orion to produce a corporate representative to testify about the noticed topics, without prejudice. Defendants may serve an amended notice describing relevant topics with reasonable particularity.

Individual Employee Depositions

Defendants described Woodward as responsible for sales transactional data and Peters as knowledgeable about merchandising strategy and product management. But they did not explain how the employees’ information was relevant to a claim or defense or why their individual depositions were necessary in addition to a corporate deposition of Orion.

Because the relevance and proportionality of the proposed employee depositions were not self-evident, the court denied defendants’ request for an order requiring Orion to produce Woodward and Peters for deposition at that time.

Disposition

The court denied, without prejudice, defendants’ request to require Orion to produce a Rule 30(b)(6) corporate representative. It also denied defendants’ request to require Orion to produce its individual employees for deposition at that time. The court stated that some testimony from Orion or its employees might be warranted, but defendants had not adequately explained what testimony they needed or why they needed it. Defendants may serve an amended notice or seek employee depositions if they provide an adequate justification.