UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION DEFENDANTS OBJECTIONS TO MAGISTRATE JUDGE S JANUARY 8, 2013 ORDER

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1 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION PEERLESS INDUSTRIES, INC., Plaintiff, Case No. 1:11-cv-1768 vs. CRIMSON AV, LLC, and VLADIMIR GLEYZER, Honorable Joan H. Lefkow Magistrate Judge Susan Cox Defendants. DEFENDANTS OBJECTIONS TO MAGISTRATE JUDGE S JANUARY 8, 2013 ORDER Defendants, CRIMSON AV, LLC ( Crimson ) and VLADIMIR GLEYZER ( Gleyzer and collectively, Defendants ), by and through their attorneys, Joseph R. Marconi, Victor J. Pioli, Christopher W. Loweth, and M. Miles Sukovic, of Johnson & Bell, Ltd. and Jacques M. Dulin of Innovation Law Group, Ltd., submit the following objection pursuant to 28 U.S.C. 636(b) and Rule 72 of the Federal Rules of Civil Procedure, object to Magistrate Judge Susan E. Cox s ruling made on January 8, 2013 which granted the Plaintiff Peerless Industries, Inc. s Second Renewed Motion for Discovery Sanctions (Doc. No. 123) and Motion to Compel the Deposition of Tony Jin (Doc. No. 119). In support of their objections, Defendants state as follows: A. Peerless Second Motion for Sanctions Introduction Peerless filed an original motion for sanctions raising issues regarding the sufficiency of certain categories of documents produced by Crimson and Sycamore Manufacturing Co., Ltd. ( Sycamore ) 1 claiming that it did not appear that their production was complete. On June 27, 1 Magistrate Judge Cox previously ordered that Crimson must produce Sycamore s documents. Magistrate Judge Cox ruled that Crimson and Sycamore are so closely connected that Sycamore s documents are to be deemed to be in the possession and control of Crimson. (Doc. No. 82). 1

2 2012, Magistrate Judge Cox granted Peerless original Motion for Discovery Sanctions in part (Doc. No. 100). Crimson timely filed a motion to reconsider and objections to Magistrate Judge Cox s June 27, 2012 order pursuant to Fed. R. Civ. P. 72. (Doc. No. 102). 2 In its motion to reconsider and Rule 72 objections, Crimson clarified any confusion that may have lingered as to whether its Rule 34 document production was complete. Crimson attached affidavits from the principles of both Crimson and Sycamore attesting to the completeness of their productions and addressing the specific issues raised by Peerless original motion. Crimson s motion to reconsider and Rule 72 objections stated in relevant part: Defendants have produced all the documents in their possession. To the best of Defendants knowledge, there are no further documents. In compliance with this Court s Order, Defendants are producing declarations from both Crimson and Sycamore that the documents in their possession have been produced.defendants have made responsive productions. Peerless cannot identify what specific documents Crimson has allegedly failed to produce. All Crimson can argue is that that it does not appear that Crimson s production is complete. This does not provide an adequate basis for a sanctions order. Motion to Reconsider and Rule 72 Objections (Doc. No. 102, at pp. 7-8). Despite Crimson and Sycamore s affidavits, Magistrate Judge Cox would not reconsider her June 27, 2012 order because she ruled that the affidavits should have been tendered sooner. See July 17, 2012 Trans., Ex. A, at pp Having attested that Crimson and Sycamore s productions were complete, Crimson believed this was the end of the matter and that this case would finally proceed on its merits. Realizing that its claims will soon be exposed as meritless, Crimson once again sought to engage in discovery battles regarding the alleged insufficiency of Crimson/Sycamore s document production. Crimson responded to Peerless charges by once again affirming that its production 2 Magistrate Judge Cox denied Crimson s motion to reconsider. Crimson s Rule 72 objections to Magistrate Judge Cox s June 27, 2012 order is still pending before this Court. 2

3 was complete and asked Peerless to identify what documents it believed Crimson had failed to produce. See, e.g., 9/20/2012 Letter from V. Pioli to G. Norrod, Ex. B. Peerless failed to identify and still has not to this day identified any documents that Crimson and/or Sycamore has failed to produce. Yet, Peerless filed a second motion for sanctions (Doc. No. 123). Peerless second motion claims that sanctions are appropriate because the Rule 30(b)(6) deposition of Crimson s designated representative did not provide sufficient light on what steps Sycamore took to comply with Peerless discovery requests. Crimson was mindful of the game that Peerless was playing in trying to set up its second sanctions motion when it noticed Crimson s Rule 30(b)(6) deposition and designated areas of inquiry related to Sycamore s document production. The issue was raised with the Court by Crimson prior to the deposition at the October 25, 2012 status conference: MR. LOWETH (counsel for Crimson): Well, when you issued your ruling, Judge, we cooperated, and we did get documents from China. But now all of a sudden we have to put Mr. Gleyzer [Crimson s President] in a 30(b)(6) deposition situation where he s going to have to answer as to what the company in China when he doesn t really THE COURT: Well, he could answer to the best of his ability. I mean, that s all any that s all any deponent can do. See October 25, 2012 Trans. Ex. C, at p. 10. Mr. Gleyzer, Crimson s President, was deposed on November 14, 2012 and he answered questions regarding Sycamore s production to the best of his ability. Predictably, Peerless shortly thereafter filed its second motion for sanctions based on Mr. Gleyzer s allegedly deficient answers regarding what steps Sycamore took to comply with Peerless discovery requests. (Doc. No. 123). Magistrate Judge Cox s January 8, 2013 order granted Peerless second motion for sanctions. B. Peerless Motion to Compel Rule 30(b)(1) Deposition of Tony Jin in Chicago Shortly before renewing its motion for discovery sanctions, on November 15, 2012, Peerless moved to compel the deposition of Boahua Tony Jin. (Docket No. 119). Peerless had previously 3

4 noticed the deposition of Mr. Jin in February of 2012, and in November, it sought to compel his appearance in Chicago. Peerless had previously been told by Crimson s counsel that Mr. Jin, a foreign national living in China, would not be able to travel to Chicago for his deposition. Based on the testimony provided by Crimson at the June, 2011 injunction hearing, contrary to its earlier position, Peerless argued that Mr. Jin was a managing agent of Crimson. See generally, Doc. 127, Ex. A, Hearing Transcript of June 7, It should be noted that Sycamore was sued by Peerless on March 2, 2011 for substantially the same issues and claims as Peerless asserts in the present case in Peerless Industries v. Sycamore Mfg. Co., Ltd., International Center for Dispute Resolution Case No T Summary judgment was granted to Sycamore on the gravamen of Peerless claims on January 20, See Summary Judgment Order, Ex. E. Magistrate Judge Cox granted Peerless motion and ordered that Mr. Jin travel more than 30 hours roundtrip to Chicago in the next 30 days to appear for a deposition in a case that Sycamore is not even a party to. (Doc. 132). Standard of Review Federal Rule of Civil Procedure 72(a) implements 28 U.S.C. 636(b)(1)(A), authorizing a party to serve objections within 14 days of any magistrate judge s order on non-dispositive matters referred to a magistrate judge from a district judge. Fed. R. Civ. P. 72(a), 28 U.S.C Under Rule 72(a), the District Court may consider and shall modify or set aside any portion of the Magistrate Judge s Order found to be clearly erroneous or contrary to law. When the Magistrate Judge s Order is based upon legal conclusions and not on her findings of fact, the clearly erroneous standard does not apply and the scope of district court's review of motion is plenary. Jernryd v. Nilsson, 1987 U.S. Dist. LEXIS 9803, ** 2-3, 117 F.R.D. 416, 417 (N.D. Ill. 1987); see 4

5 also, Jochims v Isuzu Motors, 1993 U.S. Dist. LEXIS * 5, 151 FRD 338, 340 (S.D. Iowa 1993) and Gandee v. Glaser, 785 F. Supp. 684, 686 (D. Ohio 1992). Where the issue presented does not concern an unadulterated legal conclusion, but rather the application of a legal standard to a particular set of facts the corresponding review is for clear error Only if the [magistrate] judge misapprehends the governing rule of law does our review become more searching. McFarlane v. Life Insurance Company of North America, 999 F.2d 266, 267 (7th Cir. 1993) ( A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed; United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 92 L.Ed. 746, 68 S.Ct. 525 (1948)). Argument I. There Is No Basis For Entering A Sanctions Order Related To Defendants Document Production Magistrate Judge Cox s January 8, 2013 order (Doc. No. 132) granted Peerless second motion for sanctions (Doc. No. 123). There are seemingly two bases for Magistrate Judge Cox s order: (1) she believes the affidavits provided by Crimson/Peerless were not sufficient; and (2) Mr. Gleyzer s answers in his deposition regarding what steps Sycamore took to comply with Peerless discovery requests. A. Crimson and Sycamore Have Repeatedly Affirmed That They Have Produced All Responsive Documents In Their Possession The only issues raised by Peerless regarding the sufficiency of Crimson and/or Sycamore s production of documents were those contained in its original motion for sanctions. Crimson and Sycamore addressed each of the issues raised by Peerless in Crimson s motion to reconsider and Rule 72 objections (Doc. No. 102). Crimson provided affidavits from Mr. Gleyzer and Mr. Jin regarding the completeness of their companies productions. Id. Crimson subsequently affirmed 5

6 that Crimson and Sycamore s productions were complete and its belief that the affidavits supplied so attested to that fact. See 9/20/2012 Letter from V. Pioli to G. Norrod, Ex. B. Counsel for Crimson wrote to counsel for Peerless: If the affidavits do [not] [sic.] make clear to Peerless that Crimson has no further production, please explain why and as an accommodation, we will consider asking our client to submit another verification including language that we produced to Peerless documents Bates Stamped [include range] based on the protocol of searching Crimson s hard drives as agreed by the parties, and to the best of our knowledge, there are no further documents in our possession that we reasonably believe are responsive to Peerless requests for production. Id., at pp Peerless never responded to Crimson s request. Instead, it simply filed its second motion for sanctions. Crimson addressed all of the alleged deficiencies claimed by Peerless in their original motion for sanctions in Crimson s motion to reconsider and Rule 72 objections (Doc. No. 102). Magistrate Judge Cox acknowledged as much at the hearing on Crimson s motion to reconsider, but still upheld her June 17, 2012 sanctions order because of the timeliness of Crimson and Sycamore s productions and affidavits. See July 17, 2012 Trans., Ex. A, at pp Through its motion to reconsider and Rule 72 objections (Doc. No. 102), the affidavits from Mr. Gleyzer and Mr. Jin, and the repeated representations of counsel (see, e.g., 9/20/2012 Letter to G. Norrod, Ex. B), Crimson has made it abundantly clear that it has produced all the documents it believes are responsive to Peerless requests. Simply, there are no documents left to produce. Unsurprisingly, Peerless cannot identify any documents that Crimson and/or Sycamore have failed to produce. Magistrate Judge Cox s January 8, 2013 order does not identify any documents Crimson and/or Sycamore has failed to produce. There is no basis for sanctioning Crimson for failing to produce unidentified imaginary documents. Indeed, if Magistrate Judge Cox s sanctions award is upheld, Peerless can file motions for sanctions ad infinitum because Crimson and Sycamore have no more documents to produce. 6

7 B. The Efforts Undertaken By Crimson To Obtain Documents From Sycamore Are Sufficient Peerless noticed Crimson s Rule 30(b)(6) deposition regarding Sycamore s efforts to gather documents simply as ruse to be able to file its motion for sanctions. Peerless could not have been any more transparent in its true intentions. This issue was raised with the Court by counsel for Crimson prior to Mr. Gleyzer s deposition. See October 25, 2012 Trans. Ex. C, at p. 10. Peerless knew full well that neither Mr. Gleyzer nor anyone else at Crimson (in Illinois) would know the specifics and details of the efforts undertaken by Sycamore (in China) to gather documents. Mr. Gleyzer answered counsel for Peerless questions to the best of his ability. Mr. Gleyzer relayed that he asked Mr. Jin to gather Sycamore s documents that were responsive to Peerless requests, but that he did not know specifically how he collected those documents. 3 See Gleyzer Dep., Ex. D, at pp Peerless actions were entirely reasonable. Magistrate Cox nevertheless ruled that Crimson took a back seat approach that was unacceptable. However, it is not clear what Magistrate Judge Cox expects that Mr. Gleyzer was supposed to have done. Mr. Gleyzer relayed Peerless requests to Mr. Jin; Mr. Jin then made the determination on behalf of Sycamore regarding what documents were responsive; Mr. Jin then ed the responsive documents to Crimson s vendor and the documents were produced. See Gleyzer Dep., Ex. D, at pp If Magistrate Judge Cox is sanctioning Crimson because Mr. Gleyzer did not know what methodology Mr. Jin employed in determining what documents were responsive to Peerless requests, the sanction is entirely unwarranted. Whatever methodology Mr. Jin employed is a question that must be asked of Mr. Jin, not Mr. Gleyzer or anyone else at Crimson. As will be discussed infra, Peerless is seeking and will take the deposition of Mr. Jin shortly. Peerless can ask 3 Of course, counsel for Peerless did not ask the logical follow-up question of Mr. Gleyzer regarding what non-specific knowledge Mr. Gleyzer possessed. 7

8 Mr. Jin all the questions it wants regarding his document production efforts. Instead, Peerless continues to play the discovery games it has played throughout this case and noticed up a Rule 30(b)(6) deposition for Crimson regarding Sycamore s production to play a game of gotcha with Crimson. Peerless efforts should not be condoned or supported by the Court. II. There Is No Basis Or Authority To Compel Tony Jin, A Chinese National Who Does Not Reside Or Travel To The United States, To Appear In Chicago For Deposition Magistrate Judge Cox s January 8, 2013 order granted Peerless motion to compel the deposition of Tony Jin and ordered that it proceed in Chicago. (Doc. No. 132, at pp. 3-6). Magistrate Judge Cox concluded that Mr. Jin is a managing agent of Crimson and that it would not be a hardship to compel Mr. Jin to travel to Chicago from China. A. Mr. Jin Is Not A Managing Agent Of Crimson To determine whether a person is a managing agent, the following must be established: (1) that he has general powers allowing him to exercise judgment and discretion in corporate matters; (2) that he can be re lied on to testify, at the corporation's request, in response to the discovery proponent's demands; (3) whether there are any other employees who have more authority than the individual in question; (4) Jin s general responsibilities respecting the matters involved in this litigation; and (5) whether Jin can be expected to identify with the interests of the corporation. See Murata Mfg. Co. v. Bel Fuse, Inc., 242 F.R.D. 470, 476 (N.D. Ill. 2007). The testimony presented by Peerless from the injunction hearing does not establish conclusively that Jin exercises judgment and discretion over Crimson s affairs. At the hearing, Peerless presented evidence that Jin was not the owner of Crimson rather, the sole member is Modern Century Development. (Doc. 127, Ex. A, p. 110, lns ). Further, at the injunction hearing, Peerless objected to evidence that Jin exercised control over Crimson. (Doc. 127, Ex. A, 8

9 pp , Dasso [counsel for Peerless]: [T]he suggestion that Crimson is Mr. Jin is not consistent with the documents. ) While Jin has supplied declarations, that is not the same as participating actively in this case. Jin has always been identified by Crimson as a foreign national, and as a non-employee of Crimson. (See Doc. 127, Ex. B, p. 2). The declarations provided by Jin have been obtained because of specific allegations made by Peerless. Another factor is Jin s responsibilities regarding the matters involved in this litigation. It is true that Sycamore manufactures the products at issue in this case. However, that conduct should not be the grounds for seeking Mr. Jin s deposition, as Sycamore is currently subject to a binding arbitration brought by Peerless for the very same conduct at issue in this case. Allowing Peerless to use this case against Crimson as a weapon against Sycamore is an abuse of process. It is not surprising that Jin s interests align with Crimson. Peerless is attempting to prevent Sycamore from selling products in the United States through this law suit. Simply stating that Jin s interests align with those of his sole distributor is not a major revelation. However, that does not justify exposing Sycamore to the cost of providing a witness in the United States when Sycamore did not choose this forum. B. If Mr. Jin Is Somehow Deemed To Be A Managing Agent Of Crimson, There Is No Basis For Making Him Travel To Chicago From China For A Deposition When His Deposition May Be Taken Via Videoconference If Mr. Jin is deemed to be a managing agent of Crimson, he should not be forced to travel 30 plus hours roundtrip to Chicago for his deposition. There is no reason why Mr. Jin cannot be deposed via teleconference which would not impose undue travel hardships on any party. In Playboy Enter. International, Inc. v. Smartitan Pte. Ltd., 2011 U.S. Dist. LEXIS , at *6-7 (N.D. Ill. Nov. 17, 2011), a corporate employee in Hong Kong was allowed to testify via 9

10 teleconference rather than being forced to travel to Chicago for his deposition. The court reasoned that: [C]ompelling Mr. Lui to travel in excess of thirty hours round-trip to be deposed in Chicago would place an unnecessary hardship upon him. Proceeding with the deposition via video-conference is the most economical solution, by eliminating the time, effort and expense inherent to travel.taking the deposition via videoconference is the most logical, economical solution because nobody is required to travel. Playboy, 2011 U.S. Dist. LEXIS , at *5-6. The same is true in the present case. Mr. Jin can be deposed via video conference and eliminate the hardship on all parties related to travel and expense. The court in Playboy also noted that the deposition can be scheduled during the court s regular business hours thus enabling the court to intervene in any dispute that may arise. Id., at *7. Likewise, Mr. Jin s deposition can be scheduled at a mutually convenient time during the court s business hours. Conclusion There is simply no basis for entering a sanctions order. Crimson and Sycamore have produced all documents in their possession responsive to Peerless requests. In addition, Mr. Gleyzer is a Crimson employee and answered questions regarding Sycamore s production to the best of his ability. To the extent Peerless seeks additional information regarding Sycamore s collection efforts, they will be able to ask Mr. Jin. Mr. Jin is not a managing agent and his deposition cannot therefore be compelled pursuant to Rule 30(b)(1). Even if Mr. Jin is deemed a managing agent of Crimson, he should not be compelled to travel 30 plus hours to Chicago for his deposition. Mr. Jin can easily be deposed via video conference. 10

11 For all of these reasons stated above, Defendants object to the Court s January 8, 2013 order pursuant to Rule 72 of the Federal Rules of Civil Procedure and ask that said order be vacated. Respectfully submitted, Dated: January 22, 2013 CRIMSON AV, LLC and VLADIMIR GLEYZER By: /s/ Christopher W. Loweth Joseph R. Marconi (# ) Victor J. Pioli (# ) Christopher W. Loweth (# ) M. Miles Sukovic (# ) JOHNSON & BELL, LTD. 33 W. Monroe Street, Suite 2700 Chicago, Illinois (312) Jacques M. Dulin INNOVATION LAW GROUP, LTD. 237 N. Sequim Ave Sequim, WA (360) Admitted Pro Hac Vice

12 CERTIFICATE OF SERVICE I hereby certify that on this 22 nd day of January, 2013, I caused to be served true and correct copies of Defendants Objection to Magistrate Judge s Order by causing copies of the same to be served to the following by operation of the CM/ECF System of the U.S. District Court for the Northern District of Illinois: James Dasso Aaron J. Weinzierl Jonathan Garlough Foley & Lardner LLP 321 North Clark Street, Suite 2800 Chicago, IL /s/ Christopher W. Loweth Christopher W. Loweth