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Palm Bay International, Inc. v. Marchesi di Barolo S.p.A.

April 26, 2009

PALM BAY INTERNATIONAL, INC., PLAINTIFF,
v.
MARCHESI DI BAROLO S.P.A., DEFENDANT.



The opinion of the court was delivered by: A. Kathleen Tomlinson, Magistrate Judge

ORDER

I. PRELIMINARY STATEMENT

Following upon this Court's determination and Order [DE 111] resolving various discovery issues, Defendant Marchesi di Barolo S.p.A. ("Defendant" or "Marchesi") "moved" for an Order (1) "clarifying" this Court's November 9, 2009 Order; (2) to compel Plaintiff to permit an inspection of the allegedly defective wine in its possession; and (3) to compel Plaintiff to produce additional documents and provide evidence regarding its litigation hold. See DE 112. Plaintiff Palm Bay International, Inc. ("Plaintiff" or "Palm Bay") opposed Defendant's motion. See DE 115.

Subsequent to these filings, the Court was informed in a further communication from Defendant's counsel that the parties had resolved item number two above regarding an inspection of the allegedly defective wine, but had not been able to resolve the third issue and still sought the clarification requested in item number one. See DE 119. These issues are addressed in turn below.

II. DISCUSSION

A. Defendant's Motion For Clarification Of Prior Order

1. Sales Data For All Italian Brands

Defendant seeks "to clarify this Court's Order regarding Marchesi's right to discovery relevant to Palm Bay's mitigation of damages." See DE 112. Specifically, Defendant seeks Plaintiff's sales data for "all Italian brands for 2007, 2008, and 2009... to demonstrate that Palm Bay has substituted sales of Marchesi's products with the sales of lower priced wines in its portfolio." Id. Defendant asserts that it needs this information "to show [that] Palm Bay is mitigating its damages by finding and selling lower priced substitutes for Marchesi's wine." Id. Moreover, Defendant's expert identified "a trend among consumers in 2008 and 2009 toward purchasing lower priced wines which may have benefitted other Italian wines distributed by Palm Bay." See Declaration of Robert J. Cantor, annexed as Exhibit A to DE 112 ("Cantor Decl."), ¶ 8. Thus, according to the Defendant's expert, the sales data for Plaintiff's other Italian brands for 2007-2009 is needed "in order to properly evaluate the full impact on lost profits of such trend." Id.

In opposition, Plaintiff contends that the requested sales data is irrelevant to the instant action and to the issue of mitigation,*fn1 and that "sales by Palm Bay of lower priced wines from the entirety of its portfolio" is not a mitigating factor for Palm Bay's damages. DE 115. To this end, Plaintiff argues that trends in sales of other brands of wine which Palm Bay had in its portfolio prior to Defendant's alleged breach of the Importation Agreement have no bearing on the damages incurred by Plaintiff as a result of Defendant's alleged breach. In other words, if, according to the trend identified by Defendant's expert, Palm Bay's sales of less expensive brands of wine increased in 2008 and 2009, these increased sales would not "reduce the damage suffered by Palm Bay by reason of the wrongful termination of the Marchesi brands" which constituted the entirety of Palm Bay's Piedmont portfolio. Id. Similar to its argument in opposition to Defendant's previous motion to compel, namely, that Plaintiff is unable to sell a substitute brand of wine to its customers,*fn2 here Plaintiff contends that its damages "may only be mitigated by sales of Piedmont brands" obtained after Defendant's termination of the Importation Agreement (i.e., that Palm Bay can only replace the Marchesi brands with wine sales of other Piedmont brands).

In my Order of November 9, 2009, I observed that Plaintiff may well have a plausible argument that it was unable to mitigate its damages related to the defective Olive Garden wine based on Plaintiff's argument that, without that line of wine, "it can not satisfy its customer's demands for Marchesi products." DE 111 at 8. However, I also ruled that Defendant is entitled to discovery related to Plaintiff's efforts to mitigate the damages allegedly incurred as a result of the termination of the Importation Agreement, separate and apart from the inability to replace the defective Olive Garden wine. Id. Neither party has pointed to any provision in the Importation Agreement as a basis to support or deny the production of this information. Defendant's expert asserts that because both he and Plaintiff's expert viewed certain information in a trade publication regarding a trend among consumers in 2008 and 2009 (toward purchasing lower priced wines which may have benefitted other Italian wines distributed by Palm Bay), he should be given all of Plaintiff's 2007 and 2008 sales data from so he can evaluate the trend against that information. See Cantor Decl., ¶ 8. If Plaintiff's expert considered such material and information in formulating his expert opinion, then, under the Federal Rules, Defendant is entitled to that information. However, that fact is far from clear in the parties' submissions. The remaining "deficiencies" concerning mitigation which Defendant's expert attempts to point out Plaintiff's expert report can be addressed at the expert's deposition, and, in any event, is a topic that goes to the weight of the expert's findings, not this motion. Moreover, Defendant has not provided any persuasive case law supporting its position that sales by Palm Bay from its entire portfolio should be considered in mitigation.

The previous Order remains in effect -- Plaintiff was directed to produce documents "showing its efforts to mitigate its damages resulting from the termination of the Importation Agreement as alleged in the First Amended Complaint." See DE 111 at 9. The Court presumes that Plaintiff has complied with the Order. If Plaintiff has not produced any documents in this regard because it takes the position that it had no duty to mitigate, or that its damages could only be mitigated by sales of Piedmont brands it obtained post-termination, then this issue will be resolved by the trier of fact, as stated in the earlier Order, and Defendant will undoubtedly take up its burden of proving that Plaintiff had a duty to mitigate and failed to make reasonable efforts to do so.

For these reasons, Defendant's motion to compel Plaintiff's sales data for all Italian brands for 2007, 2008, and 2009 is denied. Plaintiff is on notice that if it has not produced documents on this issue at this juncture, it will be precluded from introducing such documents at trial or on summary judgment.

2. Chart Of Accounts

Defendant also seeks to compel Plaintiff to produce "an accounting document created in the ordinary course of business called a 'Chart of Accounts' ('Chart') to determine what information Palm Bay maintains in its accounting and financial documents that is relevant to Marchesi products, and at what level of detail that information is maintained." DE 112. Defendant argues that its expert needs such a chart to "analyze Palm Bay's alleged damages." Id. According to Defendant's expert, the chart would "allow for a better understanding of fixed and variable costs and the allocation of those costs to the various producers... [and] would provide the... expert with a better sense of ...


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