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Margel v. E.G.L. Gem Lab Ltd.

May 29, 2008

GUY MARGEL, ET AL., PLAINTIFFS,
v.
E.G.L. GEM LAB LTD., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Pitman, United States Magistrate Judge

OPINION AND ORDER

I. Introduction

I write to resolve three discovery disputes pending among the parties: (1) defendants' application for a finding that plaintiffs have failed to respond fully to defendants' requests for the production of documents; (2) plaintiffs' application to compel defendants to produce additional documents, and (3) defendants' application to continue the deposition of Thomas van Schoonbeek and to compel the production of Monique Krautstengel for deposition.*fn1

For the reasons set forth below, (1) defendants' application for a finding that plaintiffs have failed to respond fully to defendants' requests for the production of documents is denied; (2) plaintiffs' application to compel E.G.L. Gem Lab Ltd. ("EGL-USA") to produce additional documents is granted to the extent that (a) no later than ten (10) business days from the date of this Order, EGL-USA is to either produce or make otherwise available to plaintiffs that part of its electronic database that evidences the issuance of certificates for the period from January 1, 2002 through the present and (b) no later than ten (10) days from the date of this Order, EGL-USA is to produce documents evidencing its sales, revenues, net income figures as well as documentary support for any other damages it claims as a result of plaintiffs' actions since January 1, 2000, and (3) defendants' application to continue the deposition of Thomas van Schoonbeek and to compel plaintiffs to produce Monique Krautstengel to be deposed is denied.

II. Facts Giving Rise to the Parties' Claims

This is an action among gem grading laboratories and their principals concerning, in essence, the right to use certain trademarks in the United States and the right to issue grading certificates that bear those marks.

In 1974, plaintiff Guy Margel opened an international gem grading business. The business eventually grew to include gem grading facilities in Belgium, South Africa, France, Turkey, England, Israel, India, South Korea and the United States.

Margel registered the trademarks EUROPEAN GEMOLOGICAL LABORATORY and E.G.L. (collectively, the "EGL Marks") for use in connection with his gem grading business. In January 1986, Margel sold the assets and the business of his lab in the United States, which was named European Gemological Laboratory, Inc., to N.K. Gemological Services, Inc., which was wholly owned by defendant Krasnianski. As part of the transaction, the resulting entity --E.G.L. Gem Lab Ltd. ("EGL-USA") -- acquired the right to use Margel's United States trademarks throughout the United States except for the Los Angeles area where Margel retained the right to use the marks. The agreements executed at that time also provided that (1) Margel would provide EGL-USA with grading certificates on demand, (2) EGL-USA would pay Margel $1.25 for each certificate that it issued and (3) Margel would also perform consulting services for EGL-USA.

A dispute among the parties arose in 1997 that was resolved through arbitration. The material terms of the arbitration decision provided that unpaid certificate fees would be paid, Margel would continue to receive certificate fees, Margel and EGL-USA would institute a uniform quality assurance program worldwide and Margel would surrender to EGL-USA any rights he had to use the EGL Marks anywhere in the United States.

Although Margel's diamond grading facilities are located overseas, Margel's laboratories advertise their grading services in periodicals that are distributed in the United States and his own grading certificates, bearing the EGL Marks, have been introduced into the United States.

Plaintiffs allege that despite the fact that their uses of EGL Marks is entirely lawful, defendants have engaged in a publicity campaign that mischaracterizes plaintiffs' activities as illegal and has resulted in the tarnishing of plaintiffs' professional image. Plaintiffs also allege that since 2004, defendants have failed to pay the $1.25 for each certificate EGLUSA issued. In their counterclaims, defendants allege that plaintiffs are using the EGL Marks in the United States illegally, thereby committing trademark infringement, dilution and a number of other torts and damaging defendants' goodwill.

III. Defendants' Document Request

Defendants first contend that plaintiffs have failed to respond fully to plaintiffs' request for the production of documents and that sanctions should be imposed.

I conducted discovery conferences concerning plaintiffs' document production on both November 20, 2005 and January 30, 2006. After hearing defendants' claims of alleged deficiencies at the November 2005 conference, including the fact that plaintiffs' total production of documents consisted of less than 200 pages, I directed plaintiffs' counsel to reconfirm with his client that document production was complete and to provide affidavits or affirmations from the principals of the laboratories in Belgium, Israel and South Africa attesting that each had read ...


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