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Star Direct Telecom, Inc. v. Global Crossing Bandwidth

July 23, 2010

STAR DIRECT TELECOM, INC., A CALIFORNIA CORPORATION, ET AL., PLAINTIFFS,
v.
GLOBAL CROSSING BANDWIDTH, INC., A CALIFORNIA CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Marian W. Payson United States Magistrate Judge

REPORT & RECOMMENDATION

PRELIMINARY STATEMENT

Plaintiffs Star Direct Telecom, Inc ("Star Direct") and United States Telesis, Inc. ("U.S. Telesis") have brought this breach of contract action against defendant Global Crossing Bandwidth, Inc. ("Global Crossing"). All three companies provide telecommunication services to other companies and consumers. Among other claims, plaintiffs allege that Global Crossing breached its agreement with them by restricting and thereafter terminating plaintiffs' telecommunications services to the United Kingdom (the "UK traffic"). (Docket # 1). As a result, plaintiffs claim, they were forced to pay higher prices for replacement services from alternative carriers. Global Crossing has filed counterclaims against the plaintiffs arising from their alleged failure to pay Global Crossing amounts owed under their agreement. (Docket # 17).

Currently pending before this Court is Global Crossing's motion seeking dismissal of plaintiffs' claims and judgment in its favor on its counterclaim as a sanction for plaintiffs' failure to comply with this Court's discovery orders. (Docket # 135). Specifically, Global Crossing seeks sanctions for plaintiffs' failure to provide certain documents related to the UK traffic (the "UK documents") and for their failure to appear for a deposition noticed pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure. (Id.). Global Crossing further seeks reimbursement of its attorney's fees and costs associated with the scheduled deposition. (Id.).

For the reasons discussed below, I recommend that the district court impose sanctions in the form of a preclusion order prohibiting plaintiffs from presenting evidence in support of certain of their damages claims. In addition, I also recommend that plaintiffs be required to bear jointly and severally the expenses incurred by Global Crossing in connection with the September 10, 2009 deposition.

FACTUAL BACKGROUND

I. Qwest Invoices and the UK Documents

Since February 2007 Global Crossing has sought from plaintiffs the production of documents relating to their damages resulting from the restriction and subsequent termination of the UK traffic. (See Docket # 101-2 at 2). Specifically, Global Crossing has sought documents detailing the amounts that plaintiffs' customers were charged and paid for the UK traffic when those services were provided by Global Crossing, the amounts charged and paid for the UK traffic after Global Crossing restricted and terminated those services and the invoiced amounts charged to plaintiff by alternative carriers to provide replacement services (collectively, "the UK documents"). (Id.). Relevant to this motion, those requested documents encompass invoices from alternative carrier Qwest, which plaintiffs and their affiliates used to provide UK traffic to their customers following Global Crossing's restriction and termination of that traffic in 2005. Global Crossing consistently has maintained that those invoices "are necessary to evaluate [p]laintiffs' claim that they paid higher rates to Qwest for UK termination calls." (Docket # 135-2 at 8).

Global Crossing's pursuit of the UK documents has been the subject of several previous motions before this Court. First, on February 5, 2009, this Court granted Global Crossing's motion to compel plaintiffs to produce the UK documents, among other records. (Docket # 95). Plaintiffs were ordered to produce the documents by February 13, 2009. (Id.). Although plaintiffs did produce some responsive documents in a timely manner, they failed to produce the UK documents. (Docket # 101-2 at 5).

On February 23, 2009, the parties agreed to participate in a mediation and to stay all discovery disputes pending mediation. (Docket # 110, Ex. 4). The mediation was held on April 23, 2009 and was unsuccessful. Immediately thereafter, Global Crossing renewed its demand for the UK documents and requested that they be produced by May 4, 2009. (Id. at Ex. 5). Plaintiffs failed to produce the UK documents by the requested date.

On May 19, 2009, Global Crossing filed its second motion relating to the UK documents. This motion sought an order precluding plaintiffs from supporting their claims for damages resulting from the restriction of the UK traffic as a sanction for their failure to produce the UK documents. (Docket # 101). On May 22, 2009, plaintiffs produced some of the UK documents, but did not produce invoices from Qwest during 2005, the time period during which Global Crossing restricted and ultimately terminated the UK traffic. (Docket # 121 at 5). On July 13, 2009, this Court denied Global Crossing's motion to preclude, but awarded attorneys' fees as a sanction for plaintiffs' failure to comply with its February 2009 order. (Docket # 115).*fn1

In addition, this Court extended the discovery deadline to September 14, 2009 for the limited purpose of allowing Global Crossing to notice a Rule 30(b)(6) deposition of plaintiffs and to obtain the outstanding 2005 Qwest invoices. (Id.).

On August 5, 2009, plaintiffs produced to Global Crossing 70 CD-ROMs of documents, totaling 60,000 pages. (Docket # 135-2 at 3, 4). On August 31, 2009, Global Crossing advised plaintiffs that their recent production still lacked Qwest invoices from 2005. (Id. 4, Ex. G).

On August 26, 2009, plaintiffs' counsel, Technology Law Group ("TLG"), moved to withdraw as counsel. (Docket # 128). On August 27, 2009, during oral argument on a separate issue, I addressed TLG's motion to withdraw and warned counsel that I did not intend to grant any further extensions of the discovery deadline even if TLG were permitted to withdraw.*fn2 I further directed plaintiffs to submit affidavits affirming their understanding of this Court's admonition. Plaintiffs submitted the requested affidavits on September 9, 2009. (Docket # 132). The affidavits stated, inter alia, that plaintiffs understood that the Court would grant no further extensions to the discovery deadlines and that they had instructed TLG ...


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