United States District Court, Southern District of New York
May 5, 2003
GUCCI AMERICA, INC., PLAINTIFF, AGAINST COSTCO WHOLESALE CORP., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Ronald L. Ellis, United States Magistrate Judge
OPINION & ORDER
Plaintiff Gucci America, Inc. ("Gucci") seeks sanctions, pursuant to Rule 37 of the Federal Rules of Civil Procedure, preventing defendants Costco Wholesale Corporation and National Distributors, Inc. (collectively "Costco") from using belatedly produced documents as evidence. Gucci claims that, from the beginning of this trademark infringement action, it has sought information regarding the costs incurred by Costco in connection with purchases and sales of Gucci products, including jewelry items. Gucci asserts that Costco did not produce documents with cost information for the jewelry until the last day of the discovery period, thus prejudicing Gucci's ability to calculate Costco's profits. Costco argues that it has been diligent in locating documents in response to discovery requests and that Gucci's request should be denied. For the reasons which follow,
IT IS HEREBY ORDERED THAT, pursuant to Rule 26(g)(3) of the Federal Rules of Civil Procedure, Costco bear the reasonable costs and attorney's fees incurred in deposing its jewelry buyer. Accordingly, Gucci must submit, by May 12, 2003, an accounting of its costs and fees.
In its complaint, filed on April 25, 2002, Gucci alleges, inter alia, that Costco infringed its trademark in violation of a prior injunction. On July 26, 2002, The Honorable Deborah A. Batts entered a scheduling order, granting Gucci's request for a discovery deadline of January 31, 2003. On September 12, 2002, Judge Batts referred this case to the undersigned for discovery. A few days prior to the end of discovery, the parties requested a ninety-day extension of the deadline. On January 31, 2003, Judge Batts granted the parties an additional sixty days, thereby extending the deadline to April 1, 2003.
In a conference with this Court on March 12, 2003, Gucci claimed that Costco had not disclosed its costs for jewelry items bearing the Gucci name. Costco had produced summary documents providing revenues for sales of the jewelry, but without precise cost figures. Gucci complained that Costco's witness, a jewelry buyer, testified that the costs listed in the disclosed documents reflected only the latest prices for such items, and were not accurate. During her deposition, the witness testified that cost information for the items was periodically purged from her computer system. She did not know whether Costco kept archive records. Gucci requested that it be allowed to depose an additional witness with knowledge about the computer archives. The Court denied the request, ordering Costco to verify in writing that archive records do not exist, and reminding Costco that it should produce any existing information.
According to Costco, it confirmed that the purchase orders for jewelry are purged from the computer system when goods are received, but Gucci claims Costco did not provide such verification in writing. Costco's Accounts Payable Operations department determined that cost information for the goods is automatically transferred to Costco's accounting system, and it downloaded the information from its accounting files. On April 1, 2003, the last day of discovery, Costco produced a table of the downloaded information, including jewelry item numbers and their corresponding cost figures. On April 14, 2003, Cosco produced a declaration explaining how it downloaded the information and identifying the items in the table.
Under Rule 26(g)(1) of the Federal Rules of Civil Procedure, an attorney's signature on a discovery disclosure "constitutes a certification that to the best of the signer's knowledge, information and belief, formed after a reasonable inquiry, the disclosure is complete and correct . . ." (Emphasis supplied). FED.R.CIV.P. 26(g)(1). Furthermore, Rule 26(g)(2) provides, in relevant part:
The signature of the attorney or party constitutes a
certification that to the best of the signer's
knowledge, information and belief, formed after a
reasonable inquiry, the [discovery] response . . . is
. . . (B) not interposed . . . to cause unnecessary
delay or needless increase in the cost of litigation;
and (C) not unreasonable or unduly burdensome or
FED.R.CIV.P. 26(g)(2)(A)(C); see also Metropolitan Opera Ass'n. Inc. v. Local 100, Hotel Employees and Restaurant Employees Int'l Union, 212 F.R.D. 178, 218-219 (S.D.N.Y. 2003) ("Rule 26(g) imposes on counsel an affirmative duty to engage in pretrial discovery responsibly"). According to Rule 26(g)(3),
[i]f without substantial justification a certification
is made in violation of the rule, the court, upon
motion or upon its own initiative, shall impose on the
person who made the certification, the party on whose
behalf the disclosure is made, or both, an appropriate
sanction, which may include an order to pay the amount
of the reasonable expenses incurred because of the
violation, including a reasonable attorney's fee.
(Emphasis supplied). FED.R.CIV.P.26(g)(3). Where a violation of Rule 26(g) occurs, imposition of sanctions is mandatory. FED.R.CIV.P.26(g) Advisory Committee Notes to 1983 Amendment; Chambers v. NASCO, Inc., 501 U.S. 32
, 51 (1991); Clark v. Westchester County, 1998 WL 709834, at *9 (S.D.N.Y. Oct. 9, 1998).
A simple inquiry to Costco's Accounts Payable Operations department revealed that the cost information was easily retrievable. Costco has not shown that producing the document earlier would have required any extraordinary diligence. Early in this litigation, Costco was on notice that Gucci sought information on costs for commercial dealings in Gucci items. At a conference held on October 7, 2002, the Court instructed Costco to produce information for jewelry items bearing the terms "Gucci link" or "Gucci style." On November 21, 2002, the Court again reminded Costco of its obligation to timely disclose information pertaining to the items. After Costco produced records lacking cost figures, Gucci questioned its jewelry buyer who lacked any knowledge about records. In February 2003, Gucci reiterated its requests for the information. Yet Costco waited until the end of discovery, after the issue was brought before the Court, to conduct a thorough search.
The Court finds that Costco has failed in its obligation under FED.R.CIV.P.26(g) to make a "reasonable inquiry" to ensure its disclosure was complete and accurate. Pursuant to Rule 26(g)(3) and the inherent authority of the Court, IT IS HEREBY ORDERED THAT counsel for Costco bear the reasonable expenses incurred in deposing Costco's jewelry buyer, including reasonable attorney's fees of Gucci. Gucci must submit, by May 12, 2003, an accounting of its costs and fees.
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