The opinion of the court was delivered by: Sweet, District Judge.
Plaintiff Paper Corporation of the United States ("Paper
Corporation") has moved pursuant to Rule 15, Fed.R.Civ.P. to
amend its complaint in its action against defendant Schoeller
Technical Papers, Inc. ("Schoeller") as well as to compel
discovery from Schoeller pursuant to Rule 37, Fed.R.Civ.P. The
instant motions mark another round in the litigation between
the sales representative, Paper Corporation, and the
manufacturer, Schoeller, that arose out of an alteration in
their relationship. For the reasons set forth below, the motion
to amend is denied, and the motion to compel is granted in part
and denied in part.
The motion to amend comes in response to the court's opinion
of July 10, 1990, (the "Amended Complaint Opinion"), granting
in part and denying in part Schoeller's motion to dismiss Paper
Corporation's amended complaint.
Since the filing of the Amended Complaint Opinion, discovery
proceeded until the cut-off date of November 30, 1990. On
November 19, 1990, Paper Corporation filed its motion for leave
to file a second amended complaint. Oral argument on the motion
to amend was heard on December 7, 1990, and the motion was
considered fully submitted as of that date.
On February 19, 1991, Paper Corporation moved to compel
discovery. The court heard oral argument on the discovery
motion on February 22, 1991. The court will address both
motions in this opinion.
Familiarity with the background of this dispute is assumed,
as the court has previously set forth the history of the market
conditions and the relationship between Paper Corporation and
Schoeller in the Opinion. The following factual recitation
assumes the facts as alleged by Paper Corporation in its
proposed second amended complaint as submitted in connection
with this motion. This statement of facts will therefore be
limited to placing in context only those facts as alleged by
Paper Corporation that are new.
Paper Corporation — a division of Paper Corporation of
America — is a Delaware Corporation with its principal place
of business in Valley Forge, Pennsylvania. Paper Corporation is
an independent distributor of paper products. Among the
companies for which Paper Corporation serves as a distributor
is Schoeller. Paper Corporation has been distributing Schoeller
products to manufacturers of "every day greeting cards" (the
"greeting card business") since 1964. Among Paper Corporation's
accounts in the greeting card business is Hallmark Cards,
In 1979, Paper Corporation began distributing Schoeller
polycoated paper products in markets other than the
photographic paper market (the "polycoated business"). Among
Paper Corporation's accounts in the polycoated business is
Avery International Fasson Division ("Fasson").
Schoeller is a wholly-owned subsidiary of Felix Schoeller,
Jr. Gmbh ("FSG"), a German corporation. Before February 1986,
FSG had only a 50% interest in Schoeller, with Mead Corporation
("Mead") owning the other half. In February, 1986, Mead sold
its interest in Schoeller to FSG (the "acquisition").
At a management meeting held shortly after the acquisition,
Hans Michael Gallenkamp ("Gallenkamp"), the chief executive
officer of FSG as well as the chairman of the board of
Schoeller, called a meeting of Schoeller's management. Present
at the meeting were, among others, Arlon King ("King"), a
member of Schoeller management. King and Gallenkamp agreed and
decided that Schoeller would terminate Paper Corporation as a
1. The Hallmark Claim
In the First Amended Complaint Opinion, the court dismissed
Paper Corporation's fraud claim relating to the greeting card
business and the Hallmark account on the grounds that it did
not plead fraud with sufficient particularity to survive a
motion to dismiss. Schoeller II, 742 F. Supp. at 811.
Alternatively, the Opinion noted that under New York law,
"where the alleged fraud concerns the performance of a
contract, as it does here, the claim is treated as one sounding
in contract rather than tort." Id., citing Trusthouse Forte
(Garden City) Management, Inc. v. Garden City Hotel, Inc.,
106 A.D.2d 271, 483 N.Y.S.2d 216 (1st Dept. 1984); Vista Co. v.
Columbia Pictures Industry Inc., 725 F. Supp. 1286, 1294
(S.D.N.Y. 1989); Airlines Reporting Corp. v. Aero Voyagers,
Inc., 721 F. Supp. 579, 582 (S.D.N.Y. 1989).
In the instant case, Paper Corporation's fraud claim with
respect to the Hallmark account as set forth in the proposed
second amended complaint relates solely to the alleged breach
of contract. The alleged fraud, as pleaded in the proposed
second amended complaint, derives from Schoeller's alleged
decision of February 1986 to terminate its relationship with
Paper Corporation. That decision, according to the complaint,
rendered fraudulent any ensuing contracts between Schoeller and
Paper Corporation with respect to the Hallmark Account. The
fraudulent conduct, according to Paper Corporation, may be
inferred from the intent to terminate and the subsequent
To support its unfair competition claim, Paper Corporation
relies on language quoted in the Amended Complaint Opinion
stating that misappropriation, false representation, and
competition by a buyer with a seller constitute "unfair
competition." Schoeller II, 742 F. Supp. at 813 (citing
McCarthy, Trademarks and Unfair Competition § 1.5 at 16-17
Paper Corporation, however, apparently ignores the next
paragraph in the above cited opinion, which cites the case of
Ray v. Proxmire for the proposition that the scope of the
unfair competition action is limited to three categories:
"passing off one's goods as those of another, engaging in
activities solely to destroy a rival and using methods
themselves independently illegal." 581 F.2d 998, 1002 (D.C.
Cir.), cert. denied, 439 U.S. 933, 99 S.Ct. 326, 58 L.Ed.2d 329
The allegations making up Paper Corporation's claim of unfair
competition do not describe any of the above activities. If
anything, Schoeller engaged in the alleged fraudulent
representations to advance its own business, and not solely to
destroy that of Paper Corporation. The "misappropriation"
alleged by Paper Corporation in the complaint, moreover, does
not relate to the kind of misappropriation that allows a
competitor to "pass off" his goods as those of another. In
addition, none of the allegations forming the basis for the
unfair competition claim, e.g., fraud, breach of contract,
constitutes "methods themselves independently illegal."
Finally, under New York law, the likelihood of confusion of
the plaintiff's and defendant's products has been held to be a
necessary element of a common-law unfair competition claim.
See Berlitz Schools of Languages, Inc. v. Everest House,
619 F.2d 211 (2d Cir. 1980) (likelihood of confusion "sine qua non"
of unfair competition action); Pristine Indus. v. Hallmark,
753 F. Supp. 140 (S.D.N.Y. 1990). Paper Corporation makes no such
allegation in its proposed second amended complaint; the
proposed amendment would thus not withstand a motion to
dismiss. Therefore, its motion to add an unfair competition
count to the complaint is denied.
II. The Motion to Compel
After the filing of the original complaint in April of 1989,
Schoeller moved to dismiss the complaint and for a protective
order staying discovery pending the disposition of the motion
to dismiss pursuant to Rule 26(c), Fed.R.Civ.P. At a hearing on
those motions on June 8, 1989, the court stayed
all discovery. On October 11, 1989, the court dismissed all of
Paper Corporation's claims except for the breach of contract
claim that pertained to sales to Hallmark.
On November 13, 1989, Schoeller served its responses to Paper
Corporation's first set of interrogatories, document requests,
and requests for admissions (the "first set of
interrogatories"). Schoeller objected to those requests that
pertained solely to the dismissed claims.
On November 29, 1989, Paper Corporation moved for leave to
amend its complaint, based on deposition discovery of Gall and
of Hallmark. At a hearing on December 15, 1989, the court (1)
permitted Paper Corporation to revise further the pleading
before serving it and (2) restricted discovery to the Hallmark
claim until the court ruled on Schoeller's anticipated motion
to dismiss the amended complaint.
From the time of the December 15 hearing until after the
courts issuance of the Second Amended Complaint Opinion on July
10, 1990, no further discovery was taken.
On October 31, 1990, Paper Corporation served a second set of
interrogatories and document requests (the "second set of
interrogatories"). The second interrogatory request sought,
among other things, information relevant only to the claims
dismissed in the Amended Complaint Opinion.
Schoeller responded to the second set of interrogatories on
November 30, 1990, the date fixed by the court with the
agreement of the parties for the completion of discovery.
Schoeller objected to many of the document requests on the
grounds that the requests (i) went beyond the allowable scope
of Rule 26(b)(1), Fed.R.Civ.P., (ii) related to dismissed
claims or (iii) were duplicative or unreasonably burdensome.
Schoeller offered Paper Corporation the opportunity to inspect
In the meantime, the parties proceeded with depositions. On
November 28, 1990, Paper Corporation took the deposition of
Robert Bishop, Schoeller's Manager of Production Services.
Bishop testified that, upon the instruction of counsel, he had
withheld from discovery certain information, relating to,
inter alia, the claims which the Amended Complaint Opinion had
Counsel for Paper Corporation made several requests for the
documents believed to be withheld, first at the November 28,
1990 deposition, and later by two letters to Schoeller's
counsel. By letters of January 17, 1991, and of January 30,
1991, counsel for Schoeller stated its belief that the
documents requested fell outside the permissible scope of
Paper Corporation filed its motion to compel on February 19,
1991. The motion seeks to resolve the discovery dispute that
has arisen with respect Schoeller's responses to essentially
two sets of requests, (1) Schoeller's responses to the first
and second sets of interrogatories (the "interrogatory
responses") and (2) Schoeller's response to Paper Corporation's
request that it produce the documents referred to in the
November 28 deposition of Bishop (the "Bishop documents").
B. The Bishop Documents
Paper Corporation seeks discovery of the documents that
Bishop testified he had withheld, pursuant to the instruction
of counsel, on the ground that they related only to dismissed
Rule 26, Fed.R.Civ.P. provides in pertinent part, "Parties
may obtain discovery regarding any matter, not privileged,
which is relevant to the subject matter involved in the pending
action. . . ." Interpreting the meaning of the phrase "relevant
to the subject matter involved in the pending action" for the
purposes of a motion relating to discovery for class action
purposes, the Supreme Court in Oppenheimer Fund, Inc. v.
Sanders, 437 U.S. 340, 352, 98 S.Ct. 2380, 2390, 57 L.Ed.2d 253
(1978) stated that "it is proper to deny discovery of matter
that is relevant only to claims or defenses that have been
stricken, or to event that occurred before an applicable
limitations period, unless the information sought is otherwise
relevant to issues in the case."
Thus, while the phrase "relevant to any subject matter
involved in the pending action" has been construed broadly to
"encompass any matter that bears on, or that reasonably could
lead to other matter that could bear on, any issue that is or
may be in the case", id. at p. 351, 98 S.Ct. at 2389, citing
Hickman v. Taylor, 329 U.S. 495, 501, 67 S.Ct. 385, 388, 91
L.Ed. 451 (1947), drawing the line at stricken claims, where in
this case, Paper Corporation has had several opportunities to
revise the pleadings, seems an appropriate boundary. See
Oppenheimer, 437 U.S. at 351-52, 98 S.Ct. at pp. 2389-90.
Moreover, where, as here, drawing the line to exclude requests
relating solely to the Fasson account allows for a neat
partition of the discoverable from the undiscoverable.
Accordingly, Schoeller need not produce those of the Bishop
documents that relate solely to the Fasson claims. Schoeller
must respond to those items among the Bishop document requests
as set forth and identified on p. 4 at ¶ 17 of the affidavit of
Paper Corporation's counsel Howard Scher (the "Scher
Affidavit") as follows: the Bishop "crib sheet" (item (1) of ¶
17); documents relating to direct sales to Paper Corporation
customers/former Paper Corporation customers relating to the
greeting card business (item (3)); historical sales data
relating to the greeting card business (item (4)); summary
calculations listing capacity as it relates to the greeting
card business (item (5)); analyses prepared by Schoeller
relating to the greeting card business (item (6)); business
plans relating to the greeting card business (item (7)).
C. The Interrogatory Responses
In accordance with the holding as set forth above, Schoeller
is ordered to produce the responses to the following requests
as set forth in the Scher Affidavit ¶ 20: items (1), (2), and
(6), to the extent that the items sought relate to the greeting
card business. Pursuant to the requests set forth in items (7),
(8) and (10), Schoeller is ordered to provide a breakdown by
customer of figures requested in so far as they relate to the
greeting card business.
For the reasons set forth above, Paper Corporation's motion
to amend the complaint is denied. Paper Corporation's motion to
compel is granted as set forth above with regard to those items
requested that relate to the claims now pending before the
It is so ordered.