FILED

2 | FEB: 2 6 2020

Sten EPCS EN : ¢ . 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA iol} 11 || WHOLESALE SPORTS, INC., Case No.: 18cv1341-LAB(KSC) 2 Plaintiff, ORDER DENYING PLAINTIFF’S | 13 || v. . -REQUESTS TO RE-OPEN FACT - DISCOVERY AND RE-OPEN THE || ANDREW HENLE; LES SPORTS DEADLINE FOR AMENDING THE

16 Defendants. [Doc. No. 35,| 17 18 AND RELATED COUNTERCLAIMS. 19 0 Before the Court is the parties’ Joint Opposed Motion Regarding Plaintiffs Request to Amend the Scheduling Order. [Doc. No. 35.] In the Joint Motion, plaintiff 9 seeks an order re-opening fact discovery and re-opening the time for amending the □ 3 pleadings. Plaintiffs reason for the request is discovery of “new evidence” believed to necessitate depositions of percipient witnesses and amendments to the Complaint. [Doc. 5 No. 35, at p. 2.] Defendants vigorously oppose plaintiffs requests to re-open fact %6 discovery and extend the time for amending the Complaint. [Doe. No..35, at pp. 4-6; 16 07 26.] The Joint Motion is 26 pages in length and was submitted with three declarations 28 and several exhibits totaling 65 pages. □

.

1 Background □ 2 Plaintiff is in the business of manufacturing and distributing sporting equipment in 3 || the United States, such as hockey sticks, helmets, jerseys, and socks. [Doc. No. 1, at 4 ||p. 3.] These sporting goods and equipment are sold under the brand “Tron” or “TronX” (the “Tron brands”). [Doc. No. 1, at pp. 3-4.] Plaintiff “conducts a substantial portion of 6 sales through the internet, and primarily through two websites: hockeytron.com and 7 ||hockeywest.com. [Doc. No. 1, at p. 3.] 8 On September 15, 2014, the parties entered into a written distribution agreement 9 entitled the “Hockey Tron Agreement.” [Doc. No. 1, at p. 4; Doc. No. 5, at p. 4.] Under 10 agreement, defendant was granted the exclusive right to import Tron and TronX. 11 || brand sporting equipment and other products and distribute them, in Canada. [Doc. No. 1 12 |lat p: 4.) The agreement allowed defendant to operate independently in Canada under the 13 ||name “Tron Canada.” [Doc. No. 1, at p. 4.] In addition, the agreement provided for 14 defendants to pay plaintiff “a fee based on a percentage of the costs of the goods it 15 imported pursuant to the Hockey Tron Agreement.” [Doc. No. 1, at p.5.] Using □

. 16 || plaintiffs business management software, defendants were responsible under the 17 || agreement “for setting up and operating hockeytron.com and tronsports.com websites to 18 || conduct retail and wholesale business in Canada.” [Doc. No. 1, at p.5.] 19 Defendants consistently placed orders from 2014 through 2016. To fulfill © 20 || defendants’ orders, plaintiff obtained specific goods from its manufacturers. Defendants 21 ||also ordered products directly from manufacturers approved by plaintiff, [Doc. No. 1, at 22 5.] Initially, sales of Tron products expanded in Canada. [Doc. No. 1, at p. 6.] 23 _ Problems with the parties’ business relationship began to occur in 2016. Plaintiff 24 threatened not to continue filling orders “based on [defendants’] non-payment of fees” 25 |) and later concluded defendants had “no intention of paying outstanding fees” or fees 26 incurred for any additional orders. [Doc. No. 1, at p. 6.] The Complaint further alleges 27 that defendants were hiding sales of Tron products to avoid paying the contracted fee; 28 ||selling goods under the brand “Troy” through a separate website; and “affixing the Tron

1 Brands to equipment not approved by [plaintiff] and of an inferior quality... .” [Doc. |INo. 1, at pp. 6-7.] In addition, the Complaint alleges defendants began “engaging in 3 || conduct that undermined the benefits [plaintiff] expected to receive under the Hockey _ 4 Tron Agreement,” such as damaging plaintiffs business relationships with its vendors. 5 || [Doc. No. 1, at pp. 6-7.] The Complaint alleges defendants’ “fraudulent conduct... was 6 intended to further their efforts to misappropriate [plaintiff 5] goodwill.” [Doc. No. 1, at 7 p.7] 8 Defendants also filed a Counter-Complaint alleging that plaintiff breached the 9 Hockey Tron Agreement “by intentionally and repeatedly selling products in Canada in 10 contravention of the exclusivity provision,” which created confusion in the Canadian 11 marketplace and caused defendants to lose sales, [Doc. No. 5, at pp. 4-5.] The Counter- 12 || Complaint also alleges plaintiff breached the Hockey Tron Agreement by shipping 13 inferior goods to them that did not meet product specifications and could not be sold. 14 ||[Doc. No. 5, at-p. 5.] In addition, the Counter-Complaint alleges plaintiff failed to 15 || provide adequate support and assistance with the software defendants were required to 16 use under the Hockey Tron Agreement, and this caused monetary damages and 17 “tremendous aggravation.” [Doc. No. 5, at p. 6.] Finally, the Counter-Complaint alleges 18 || defendants discovered during the evolving business relationship that plaintiff failed to 19 || provide “truthful and accurate costing information, which inevitably led to lower than 20 |j anticipated profits.” [Doe. No. 5, at p. 7.] 21 Discussion 22 A party seeking to modify a scheduling order must show “good cause.” Fed, R. Civ. P. 16(b)(4). “Rule 16(b)’s ‘good cause’ standard primarily considers the diligence 24 the party seeking the amendment [ofa scheduling order]. The district court may 25 ||modify the pretrial schedule ‘if it cannot reasonably be met despite the diligence of the 26 party seeking the extension.’ Fed.R.Civ.P. 16 advisory committee's notes (1983 27 ||amendment).” Johnson v, Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th □□□□ 28 1992). To justify re-opening discovery, the moving party must show it “diligently □ 2.

1 |}pursued its previous discovery opportunities. ...” Panatronic USA v. AT&T Corp., 287 2 F.3d 840, 846 (9th Cir. 2002). A request to re-open discovery may be denied if the parties already “had ample opportunity to conduct discovery.” Id. | 4 |} Once a Rule 16 scheduling order is entered setting a deadline for amending the 5 || pleadings, a party seeking to amend a pleading after the deadline must first satisfy 6 Rule 16’s “good cause” standard. AmerisourceBergen Corp. v. Dialysist West, Inc., 465 \\F3d 946, 953 (9th Cir. 2006). “Unlike Rule 15 (a)’s liberal amendment policy which □ || focuses on the bad faith of the party seeking to interpose an amendment and the prejudics 9 || to the opposing party, Rule 16(b)’s ‘good cause’ standard primarily considers the □ 10 |) diligence of the party secking the amendment.” Johnson v. Mammoth, 975 F.2d at 609. ||In other words, a party seeking leave to amend a pleading filed after the entryofa =~ |/Rule 16 scheduling order cannot “appeal to the liberal amendment procedures afforded 13 || by Rule 15; [the party’s] tardy motion [must] satisfy the more stringent ‘good cause’ 14 || showing required under Rule 16.” AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 952 (9th Cir. 2006). 16 In sum, for this Court to grant plaintiffs request to modify the Amended

17 ||Scheduling Order, plaintiff must first establish “good cause” to re-open discovery and 18 ||“good cause” to re-open the deadline for amending the pleadings. If “good cause” to re- open the deadline for amending the pleadings is established, it would then be necessary 20 ||-for plaintiff to file a Rule 15 motion to amend the Complaint, and that motion to amend 21 || would be considered by Judge Burns, as the District Judge assigned to the case, unless 22 the motion is referred to the undersigned Magistrate Judge. See 28 U.S.C. 636(a)&(b). 23 As noted above, plaintiff's reason for seeking to re-open fact discovery and the 24 deadline for amending the Complaint is that “new evidence has recently come to light.” 25 ||{Doc. No. 35, at p. 2.] Plaintiff submitted the Declaration of its chief executive officer it 26 support of its contention that its discovery of “new evidence” establishes good cause to 27° re-open discovery and re-open the time for amending the pleadings. [Doc. No. 35-2.] 28 |) The Declaration first explains that the “new evidence” consists of “an e-mail string”

1 received by plaintiff on November 28, 2019 from one of its sales representatives, a copy . 2 |/of which is attached as Exhibit 1 to the Declaration. Plaintiff believes the e-mail string 3 ||“shows unequivocally” that defendants are breaching the Hockey Tron Agreement “by 4 directly soliciting not only [plaintif? s] existing customers in the United States but doing 5 ||so through [plaintiffs] independent sales representatives.” [Doc. No. 35-2, at p. 2.] 6 Plaintiff believes this e-mail evidence shows defendants have been using plaintiffs 7 || distribution lines in the United States and Cariada to divert orders for plaintiff's Tron 8 || products to its own line of competing Troy products. [Doc. No. 35, at pp. 8-9.] 9 || However, without more, the Court notes based on a review of Exhibit 1 that the e-mails 10 not clearly and unequivocally support plaintiff's contentions. 1] The Declaration further explains that on December 19, 2019 plaintiff began 12 tracking additional e-mails of its employee, Pat Lovett, because of “a material drop in 13 |; sales in the fall of 2019.” [Doc. No. 35-2, at p. 2.] According to the Declaration, 14 ||Mr. Lovett’s e-mails, examples of which are attached as Exhibits 2, 3 and 4, prove he 15 ||“was part of a conspiracy with defendants to defraud [plaintiff] and direct orders from 16 || [plaintiff's] customers in the United States and Canada to ‘Troy’ in order to avoid 17 payment of royalties.” [Doc. No. 35-2, at p. 2.] Plaintiff terminated Mr. Lovett’s 18 |/employment on December 24, 2019. [Doc. No. 35-2, at p. 2.] Next, the Declaration states that plaintiff has obtained evidence indicating 20 || defendants are using the Tron website “to entice unknowing customers who wish to 21 |;purchase Tron products but substituting ‘Troy’ products when fulfilling the orders.” 22 ||[Doc. No. 35-2, at p. 2.] According to the Declaration, plaintiff's representatives 23 ||“ordered Tron products from California through defendant’s Tron website, 24 || ‘besthockey.ca.’ Defendant[s] not only shipped to California, but fraudulently 25 substituted ‘Troy’ products for the Tron products ordered.” [Doc. No. 35-2, at p. 2.] 26 Plaintiff believes this evidence shows defendants substituted Troy products for Tron. 27 products to “defraud” plaintiff “out of royalties” and mislead customers. In addition, 28 || plaintiff believes this evidence shows a breach of the covenant of good faith and fair

1 || dealing. [Doe. No. 35, at pp. 8-9.] The Court notes that the Declaration does not reveal 2 when the alleged order by plaintiffs representatives was placed or when the alleged 3 substitution took place. 4 Finally, the Declaration of plaintiff's chief executive officer states as follows: 5 ||“While [plaintiff] had suspected defendant was attempting to solicit our United States 6 || customers to break into the United States market and directly compete with Tron, [the 7 || subject e-mails were] the first time we had direct evidence of that fact.” [Doc. No. 35-2, 8 |lat p. 2.) oe In opposition, defendants submitted convincing evidence in a Declaration by lead 10 |jcounsel with attached exhibits, which indicate that plaintiff's purported “new evidence” 11 ||is “nothing new,” was not “just discovered” recently, and/or would have been known to

12 |/plaintiff during the normal discovery period if they completed key discovery and 13 ||reviewed defendants’ discovery responses. [Doc. No. 35, at pp. 18-23.] Defendants believe plaintiff “is trying to hustle a second chance at discovery.” [Doc. No. 35, at 15 22.] 16 First, defendants represent they disclosed prior to the close of discovery that they 17 || were selling Troy products in the United States. [Doc. No. 35, at pp. 4, 18.] In support 18 of this argument, the Declaration by defendants’ lead counsel represents that defendants 19 || produced copies of a customer list and a detailed sales report on May 17, 2019 disclosin; 20 that defendants were selling Troy products in the United States. Redacted versions of th 21 || customer list and sales report are attached as Exhibit D to counsel’s Declaration. [Doc. 22 35, at p. 17-18; Doc. No. 35-3, at pp. 3-4, citing Ex. D, at Doc. No. 35-3, at pp. 16- 23 17] 24) 0 5 a □□ 26 In other arguments, defendants challenge the viability of the allegations and 27 ||amendments plaintiff seeks to add to the Complaint. Although these issues might be 28 relevant toa Rule 15 motion to amend the Complaint, they are unrelated to the issue of diligence and will not be addressed herein.

1 Second, defendants contend the e-mails submitted by plaintiff from Mr. Lovett 2 ||“about filling orders for plaintiff's Tron products with defendants? Troy products... do not show” what plaintiff contends. [Doc. No. 35, at pp. 4-5, 18.]. More importantly, 4 |/however, defendants point out that Mr. Lovett used plaintiffs e-mail domain ||/(pat@wholesalesportsinc.com), and the witnesses named in defendants’ initial 6 || disclosures listed Mr. Lovett as a sales representative for both plaintiff and defendants. / 7 |\redacted version of defendants’ initial disclosures listing Mr. Lovett as a sales 8 || representative for both plaintiff and defendants (i.e., “VP Sales at WSI and VP Sales 9 ||'Troy Apparel, Inc.”) is attached to the Declaration of defendants’ lead counsel. [Doc. 10 No. 35, at p. 5; Doc. No. 35-3, at pp. 4, 23.] Therefore, defendants contend plaintiff 11 ||“clearly knew Mr. Lovett worked and made sales for both plaintiff and defendants from 12 at least the outset of discovery, but they never took his deposition. They never took any 13 depositions during discovery.” [Doc. No. 35, at p. 5.] Alternatively, if these are “new 14 ||revelations” to plaintiff, defendants contend it is because of plaintiff's “failure to review __ 15 ||discovery responses” and/or to investigate its “suspicions” earlier, apparently failing to. 16 || discover relevant information about its own employee “right under its nose the whole 17 ||time.” [Doc. No. 35, at pp. 21-22.] 18 _ Third, in response to plaintiff's contention that its representatives ordered Tron 19 || products from California through defendants’ Tron website, “besthockey.ca,” but in: 20 || filling the order defendants substituted Troy products in place of Tron products,. 21 ||defendants point out that plaintiff did not state when this alleged substitution took place. 22 ||[Doc. No. 35, at p. 19.] Defendants not only deny this occurred, they assert this “could 23 not be a new alleged discovery.” [Doc. No. 35, at p. 19.] The Declaration of defendants 24 lead counsel indicates plaintiff was aware as of May 2019 that the besthockey.ca website 25 “was taken down.” [Doc. No, 35-3, at p. 4.]. Attached as Exhibit F to defense counsel’s 26 || Declaration is a copy of a letter from plaintiff's counsel dated May 30, 2019, which state 27 part as follows: “It has come to our attention that the website, www.besthockey.ca, 28 || which [defendants] control, has recently been taken down.” [Doc. No. 35-3, at p. 26]

. 1 || This letter also reminds defendants of their obligation to preserve evidence and 2 ||specifically alleges defendants used the website to sell Tron goods and then “filled orders 3 placed through that website using Troy goods.” [Doc. No. 35-3, at p. 27.] 4 _ Fourth, the Declaration of defendant’s lead counsel further states that plaintiff 5 ||“made minimal efforts during the normal discovery period.” [Doc. No. 35-3, at p. 2.] As 6 ||examples, counsel’s Declaration states that plaintiff did not follow up on discovery

_ 7 ||responses, did not take any depositions, and failed to provide witnesses in response to □ 8 defendants’ deposition notices. [Doc. No. 35-3, at p. 3.] Based on correspondence 9 || between counsel that is attached to the Declaration of defendants’ lead counsel, it appear both parties essentially agreed to delay discovery with the hope of settling the case. [See ll fle. g., Doc. No. 35-3, at p. 12 (stating “we'll agree to postpone the deposition provided 12 || you'll agree to present the WSI 30b6 witness(es) in the near term after discovery closes 13 || (if we don’t settle soon)”).] In this regard, the Court notes that the representations of 14 || defendants’ lead counsel are consistent with plaintiff's statement that “the. parties 15 exchanged written discovery, but no depositions [were] taken” prior to the deadline 16 |jcompleting fact discovery. [Doc. No. 35, at p. 8.] 17 Based on its alleged discovery of “new evidence,” plaintiff's new counsel wants tc 18 take the depositions of percipient witnesses [Doc. No. 35, at p. 2; Doc. No. 35-1, at pp. | 19 ||2] and add two causes of action to the Complaint. [Doe. No. 35, at p..12.] To complete ‘20 || depositions, plaintiff wants the Court to re-open discovery from now until May 22, 2020 21 (i.e., for about three months). [Doc. No. 35, at pp. 2-3.] This case has been pending for 22 ||more than a year and a half since the Complaint was filed on June 20, 2018. [Doc. No. 23 The deadline for filing motions to amend the pleadings was February 25, 2019 □□□□□ ; 24 |l year ago). [Doc. No. 20, at p. 1.] On June 27, 2019, the Court issued an Amended 25 ||Scheduling Order extending the fact discovery and other deadlines, because defendant 26 ||Henle was recovering from surgery. [Doc: Nos. 20, 23-2, 24.] The amended deadline fo: 27 | completing fact discovery was November 1, 2019 (z.¢., about two months ago). [Doc. 28 No. 24, at p. 1.] Even taking into consideration the three months necessary for defendan . .

- 1 Henle to recover from surgery, the parties had approximately seven (7) months to 2 || complete fact discovery in a case that does not involve a complex set of disputed facts. 3 || [Doc. Nos. 20, 23-2, 24.] The amended deadline for completing expert discovery is 4 || March 20, 2020. [Doc. No. 24, at p. 3.] 5 Plaintiff states in the Joint Motion that it does not want to re-open or extend the 6 || deadline for completing expert discovery or continue the final Pretrial Conference, whick _7 |lis scheduled for August 24, 2020. [Doc. No. 35, at p. 2; Doc. No. 24, at p. 4.] However, 8 the Court re-opens discovery for three months until May 22, 2020, as plaintiff requests 9 it would be necessary to extend all other dates and deadlines in the Amended Scheduling 10 |} Order, including the final Pre-Trial Conference, to avoid prejudice to defendants. In this 11 regard, the Court notes that potential prejudice to an opposing party “might supply 12 || additional reasons” to deny a motion seeking modification of a scheduling order even _ 13 though the focus of the inquiry is the moving party’s diligence and reasons for seeking 14 ||modification. Johnson v. Mammoth, 975 F.2d at 609. 15 Defendants contend re-opening discovery without extending other deadlines, such 16 |) as the deadlines for designating experts, completing expert discovery, and filing 17 || dispositive motions, would give plaintiff an unfair advantage. [Doc. No. 35, at p. 22.] 18 || For example, if plaintiff conducts additional discovery and amends the complaint, 19 || defendants have indicated they would like the opportunity to complete additional — 20 || discovery and would also consider designating experts and filing a potentially dispositiv: ||motion. [Doc. No. 35, at p. 22-23.] Defendants specifically argue that if the Court re- 22 || opens discovery, they should be able to complete their “timely noticed 30(b)(6) 23 || deposition of plaintiff,” which plaintiff delayed “under the guise of settlement progress 24 || which went nowhere.” [Doc. No. 35, at p. 23.| In other words, defendants contend 25 plaintiff's request to modify the current Amended Scheduling Order will result in 26 || significant delays in bringing the case to trial. 27 Under the circumstances presented, it is this Court’s view that plaintiff has not 28 established good cause for re-opening fact discovery and re-opening the deadline for

1 || amending the pleadings. Without more, a lack of diligence is demonstrated in the record 2 || before the Court. Plaintiff has not addressed defendants’ arguments or evidence 3 || indicating that it “made minimal efforts during the normal discovery period.” [Doc. No. 4 ||35-3, at p. 2.] Nor has plaintiff addressed defendants’ arguments of evidence indicating 5 || plaintiff knew or should have known of the “new evidence” well before the expiration of 6 || the November l, 2019 discovery deadline, and if it did not, it was because it was not 7 || diligent in reviewing discovery responses or in completing key discovery, such as 8 || depositions, prior to the deadline. [Doc. No. 35, at pp. 18-20, 22-23.] 9 Conclusion - Based on the foregoing, plaintiffs requests to re-open the time for completing fact 11 || discovery and to re-open the deadline for amending the pleadings are DENIED for failur 12 ||to establish good cause. . 13 ITISSOORDERED. 14 Dated: February BZ. 2020 Ui >/

16 : on. Karen Crawford | United States Magistrate Judge 17 . 18 19 20 01 .

22 ||,

24 25 26 □ 27

10