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Design Basics LLC v. Petros Homes, Inc.

United States District Court, N.D. Ohio, Eastern Division

March 7, 2017

DESIGN BASICS, LLC, Plaintiff,
v.
PETROS HOMES, INC., et al., Defendants.

          MEMORANDUM OPINION & ORDER

          THOMAS M. PARKER, MAGISTRATE JUDGE

         This matter is before the court on a motion to exclude evidence under the authority of Rule 37, Fed. R. Civ. P., (ECF Doc. No. 70) filed by plaintiff, Design Basics, LLC. Plaintiff seeks to exclude defendants' use “of any evidence, whether directly or indirectly, on the issue of expenses, deductions, or allocations under § 504(b) that is not specifically identified payment evidence in Exhibit A to Defendant's Supplemental Response to Plaintiff's Interrogatory No. 9.” Defendant opposes the motion to exclude. The parties have consented to my jurisdiction.[1]

         The motion for Rule 37 sanctions is not well taken and will be DENIED.

         I. Factual Background

         Plaintiff Design Basics, Inc., is a building design firm that creates, markets, publishes, and sells licenses for the use of architectural designs. Plaintiff holds certificates of copyright registration issued by the United States Copyright Office for most of its designs. Plaintiff's designs at issue in the present case are: (1) Plan No. 2408 - Crawford; (2) Plan No. 2326 - Greensboro; (3) Plan No. 2355 - Waverly; (4) Plan No. 4998 - Holden; (5) Plan No. 7614 - Southwick; (6) Plan No. 8108 - Rose Hollow; and (7) Plain No. 2377 - Leighton.

         Plaintiff filed this lawsuit on September 4, 2014, claiming that defendant, Petros Homes, Inc., infringed on plaintiff's copyrighted plans by manufacturing and selling homes that used plaintiff's designs.[2] Plaintiff amended its complaint on February 24, 2016 to add Gary Naim and Sam Petros as defendants.[3] Plaintiff's amended complaint asserts a single cause of action: copyright infringement. Defendants have completely denied liability.

         II. Standard of Review

         It is well established that the scope of discovery is within the sound discretion of the trial court." Lavado v. Keohane, 992 F.2d 601, 604 (6th Cir. 1993). The Sixth Circuit reviews a decision to invoke discovery sanctions under Federal Rule of Civil Procedure 37 for abuse of discretion. Beil v. Lakewood Eng'g & Mfg. Co., 15 F.3d 546, 551 (6th Cir. 1994).

         Rule 26(a)(3), Fed. R. Civ. P., requires a party to make pretrial disclosures of the documents or exhibits the party expects to offer at trial and those it may offer if the need arises. Fed.R.Civ.P. 26(A)(iii). "… Unless otherwise directed by the court, these disclosures must be made at least 30 days before trial." Id. "Unless the court orders otherwise, all disclosures under Rules 26(a)(1) through (3) must be made in writing, signed, and served." Fed.R.Civ.P. 26(a)(4).

         Rule 37, Fed. R. Civ. P., authorizes the court to impose sanctions if a party fails to make a disclosure by the required date. “A party that without substantial justification fails to disclose information required by Rule 26(a) or 26(e)(1), or to amend a prior response to discovery as required by Rule 26(e)(2), is not, unless such failure is harmless, permitted to use as evidence at a trial … any witness or information not disclosed. In addition to or in lieu of this sanction, the court, on motion and after affording an opportunity to be heard, may impose other appropriate sanctions.” Fed.R.Civ.P. 37(c)(1).

         A party may thus be sanctioned, including having its evidence excluded if the failure to timely disclose was without “substantial justification” or creates “harm”" to the other party. The Sixth Circuit uses four factors to review a Rule 37 sanction: first, whether the party's failure to cooperate in discovery is due to willfulness, bad faith, or fault; second, whether the adversary was prejudiced by the party's failure to cooperate in discovery; third, whether the party was warned that failure to cooperate could lead to the sanction; and fourth, in regard to a dismissal, whether less drastic sanctions were first imposed or considered. Freeland v. Amigo, 103 F.3d 1271, 1277 (6th Cir. 1997).

         III. Arguments Presented

         The court has conducted several telephone conferences in this case to deal with discovery disputes between the parties. Plaintiff's motion to exclude evidence (ECF Doc. No. 70) relates to an ongoing discovery dispute. Plaintiff contends that defendants have not provided enough specific evidence and/or analysis related to their alleged expenses, which defendant will try to prove at trial to offset any prima facie damages showing made by plaintiff. Plaintiff wants defendants to identify the specific records reflecting the costs that were incurred in constructing and selling each infringing house. Defendants have provided computer generated summary reports listing their claimed costs that defendants created in the ordinary course of business but printed in response to discovery requests. They have also provided documents evidencing the expenses listed in the “summaries.” However, plaintiff argues that defendants have not provided the detailed analysis of these records which plaintiff has repeatedly requested. Plaintiff seeks to exclude the summary reports because defendants have not identified the specific documents supporting their claimed expenses for each home construction project. Plaintiff also complains that the defendants failed to prepare their representative, Gary Naim, to testify with sufficient depth regarding the topic of deductible expenses during a Rule 30(b)(6) deposition.

         In opposition, defendants claim that they produced a computer generated job cost detail report for each of the more than 80 homes in dispute. Defendants argue that these job cost detail reports are business records maintained in the ordinary course and were not merely litigation-created summaries of expenses. Defendants also argue that they produced available invoices, purchase and work orders, receipts, check stubs, and other similar payment records corresponding to the line item costs within the job cost reports. Defendants represent that they uploaded the supporting documentation onto a cloud-based network, thereby making them electronically available and searchable. ...


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