Jenny Yoo Collection, Inc. v. David's Bridal, Inc.

Background

Jenny Yoo Collection, Inc. (JY) asserted claims for trade dress infringement, design-patent infringement, breach of contract, fraudulent inducement, and unjust enrichment against David’s Bridal, Inc. (DB) and Clayton, Dubilier & Rice, LLC (CDR). The claims arose from DB’s marketing, promotion, and sale of its Style-Your-Way (SYW) dresses. JY alleged that those dresses incorporated protected features of its four-panel convertible Aiden and Annabelle bridesmaid dresses.

JY had previously sued DB and CDR in a 2016 action concerning DB’s Versa line of four-panel convertible dresses. The parties resolved that action through a confidential 2018 settlement agreement. Under that agreement, DB agreed to phase out U.S. distribution of the Versa dresses, including by ending U.S. sales by the end of 2018. JY released DB and CDR from claims it had brought or could have brought in the earlier action, except claims arising under the settlement agreement.

Discovery request and the parties’ positions

JY asked the court to compel discovery about the development and marketing of the Versa dresses and other events before January 1, 2017. JY did not assert infringement claims concerning the Versa dresses in this action. The SYW dresses at issue here were designed in 2017 and introduced in 2018.

JY offered three reasons for seeking the earlier information. First, it argued that it might eventually elect rescission—cancellation of the settlement agreement—as a remedy for its breach-of-contract or fraudulent-inducement claims, potentially making information about pre-settlement Versa sales relevant to damages. Second, JY argued that its fraudulent-inducement damages could include the value of the claims it would likely have obtained through litigation or settlement absent the alleged fraud. Third, JY argued that the SYW and Versa dresses were substantially identical, making information about the Versa dresses relevant to whether DB and CDR willfully infringed JY’s trade-dress and patent rights when developing and selling the SYW dresses.

The defendants opposed the request. They argued that discovery about the Versa dresses was not relevant to the SYW claims and was disproportionate to the needs of the case. DB also stated during a conference that avoiding the burden and expense of the discovery now requested was one of its primary reasons for entering the 2018 settlement agreement.

Court’s analysis

Under Federal Rule of Civil Procedure 26(b)(1), discovery may concern nonprivileged information relevant to a claim or defense and proportionate to the case’s needs. The court explained that district courts have broad discretion to limit discovery and to grant or deny requests to compel discovery.

The court rejected JY’s rescission theory because JY had not rescinded the 2018 agreement and was not seeking rescission as a remedy in its complaint. The court also explained that rescission generally must be exercised promptly after the injured party learns of the alleged fraud. The possibility that JY might later succeed in rescinding the agreement was therefore too remote to justify the requested broad discovery.

The court recognized that, under New York law, a plaintiff fraudulently induced to settle a disputed claim may seek the value of the claim extinguished by the settlement. But the court concluded that this possibility did not automatically entitle JY to full damages discovery at this early stage. The fraudulent-inducement claim had not yet survived the defendants’ motions to dismiss, and it might later fail at summary judgment or trial. The court noted that JY could renew its request for pre-2017 discovery if it prevailed on the fraudulent-inducement claim at summary judgment. It also noted that JY could later ask the district judge to divide the trial into liability and damages phases and seek damages discovery if it prevailed on liability.

The court also rejected JY’s willfulness theory. DB disputed that the six-panel SYW dresses were substantially identical to the four-panel Versa dresses, and JY had offered nothing beyond its complaint’s allegations to establish that factual premise. The court concluded that JY had not shown that discovery about the design and sales of the withdrawn Versa dresses from 2012 through 2016 was relevant or proportionate to whether the defendants acted willfully in 2017 and 2018. The court stated, however, that JY was entitled to discovery about the design, development, and sales of the SYW dresses.

Ruling

Judge Barbara Moses denied JY’s application for an order compelling the defendants to produce all relevant documents concerning the Versa and SYW dresses without a time limit. The opinion also states that the parties’ separate dispute concerning the defendants’ reliance on Local Patent Rules 5 and 10 had been resolved for the defendants during a November 27, 2019 telephone conference.