Sleep Number Corporation v. Young

Background

Sleep Number moved to compel additional discovery from Steven Jay Young, Carl Hewitt, and UDP Labs, Inc., and sought sanctions under Federal Rule of Civil Procedure 37. The requested discovery concerned custodians and electronic repositories, the defendants’ alleged trade secrets, electronic-information storage locations, business partnerships, and claimed investment or financing losses. Sleep Number also sought an order requiring the defendants to comply with all discovery-related agreements reached between counsel in the remainder of the case.

Sleep Number filed a second motion to compel concerning documents that the defendants had produced and later sought to claw back as protected by the attorney-client privilege or work-product protection. Sleep Number argued that the production waived protection over the produced documents and over broader subjects, including patent applications and patent-prosecution activities. The defendants argued that the parties’ discovery and protective orders preserved protection for inadvertently produced materials and that the disputed productions did not create a waiver.

Motion to Compel and Rule 37 Sanctions

The court denied as moot the requests concerning custodians, repositories, reports about where the defendants searched, and Interrogatory No. 13, because the court had already addressed those matters through its informal dispute-resolution process. The court reminded the defendants that they must timely supplement their interrogatory responses under Federal Rule of Civil Procedure 26(e).

The court had already ordered UDP to supplement its response to Interrogatory No. 10 about the trade secrets involved in its counterclaims and its response to Interrogatory No. 15 about lost investment or financing. Young and Hewitt were similarly bound by the response required for Interrogatory No. 10 because they had represented that their corresponding interrogatory was the same. Those prior rulings granted the motion to the extent it sought that relief.

The court granted the motion as to Interrogatory No. 14, which sought information about UDP’s actual or potential business partnerships. The court found that the defendants’ response, which identified selected documents without a sufficient narrative explanation and included apparently irrelevant documents, did not adequately answer the interrogatory. The defendants were ordered to provide a complete narrative response within 15 days, explain why any identified documents were responsive, and omit irrelevant materials. The court warned that failure to comply could lead to sanctions, including monetary sanctions, striking counterclaims, or contempt of court.

The court denied the request for a prospective order requiring compliance with every discovery-related agreement reached between counsel for the rest of the case. It characterized that request as seeking improper advance guidance rather than a ruling on a specific pending discovery dispute.

The court denied sanctions under Rule 37(a)(5)(A). Although some relief had been granted, the court found that an award of expenses would be unjust because Sleep Number had sought duplicative relief concerning custodians and repositories and had also lost its request for prospective relief. The court also denied sanctions under Rule 37(b)(2)(A), finding that Sleep Number relied on general accusations and did not identify a particular court order that the defendants had failed to obey or show that a listed sanction was justified.

Privilege Motion

The court interpreted the parties’ discovery and protective orders as protecting only inadvertent productions under Federal Rule of Evidence 502(d), not voluntary productions. It found that the productions in Volumes 1, 2, and 5 were voluntary rather than mistakes. The defendants therefore could not claw back the allegedly privileged documents in those volumes, and the court granted Sleep Number’s motion to that extent.

The court found that the 10 allegedly privileged documents from Volumes 3 and 4 had slipped through the screening of nearly 7,000 documents by mistake. Because those productions were inadvertent, the court denied Sleep Number’s motion as to Volumes 3 and 4. Sleep Number was required to return or destroy those documents, and its counsel was required to submit a declaration confirming that action within 15 days, unless either party appealed.

The court rejected Sleep Number’s request for a broad subject-matter waiver covering the defendants’ patent applications and patent-prosecution activities. Although the court found that some documents could not be clawed back, it concluded that fairness did not require disclosure of all other documents on the same subjects. Sleep Number could either use the documents it was allowed to keep or agree to return or destroy them, but it could not obtain the broad waiver it sought merely by preventing their return.

Disposition

The court ordered that Sleep Number’s Motion to Compel and for Rule 37 Sanctions was granted in part and denied in part. It ordered that Sleep Number’s second Motion to Compel was also granted in part and denied in part: Sleep Number could keep the allegedly privileged documents from Volumes 1, 2, and 5, but had to return or destroy those from Volumes 3 and 4. Judge Elizabeth Cowan Wright signed the order.