Combis Sport Enterprise Company Limited v. Precision Shooting Equipment Incorporated

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Combis Sport Enterprise Company Limited, No. CV-24-00371-TUC-CKJ (MSA) 10 Plaintiff, ORDER 11 v. 12 Precision Shooting Equipment Incorporated, et al., 13 Defendants. 14 15 Pending before the Court are Plaintiff Combis Sport Enterprise Company’s motion 16 to compel and Defendant Precision Shooting Equipment LLC’s motion for a protective 17 order. The Court will grant Plaintiff’s motion in part and deny Defendant’s motion. 18 Background 19 The first amended complaint contains the following allegations. For years, Plaintiff 20 manufactured and sold sports equipment to Defendant Precision Shooting Equipment Inc. 21 (PSE Inc.) on a purchase-order basis. (Doc. 25, ¶ 7.) Plaintiff would invoice PSE Inc. only 22 after shipping the equipment. (Id. ¶ 8.) Plaintiff alleges two distinct breaches of these 23 contracts. First, PSE Inc. became delinquent on invoices for shipped equipment. (Id. ¶ 9.) 24 Plaintiff and PSE Inc. executed a payment plan under which PSE Inc. agreed to pay the 25 outstanding amount (nearly $1.4 million) through weekly payments. (Id. ¶¶ 9–11.) PSE 26 Inc. defaulted on the payment plan with about $895,000 outstanding. (Id. ¶ 18.) Second, 27 PSE Inc. canceled several orders for customized equipment that used PSE Inc.’s registered 28 design or bore its trademarked logo. (Id. ¶¶ 19–20.) The cancelation occurred after Plaintiff 1 had manufactured the equipment but before the equipment was shipped. (Id. ¶ 19, 22.) 2 Plaintiff is owed nearly $2 million for the canceled orders. (Id. ¶¶ 22–23.) 3 In February 2023, PSE Inc. entered into an Asset Purchase Agreement with 4 Defendant Precision Shooting Equipment LLC (PSE LLC), through which PSE LLC 5 purchased PSE Inc.’s assets and business. (Id. ¶ 15.) Under the Agreement, PSE LLC 6 assumed all liabilities of PSE Inc. for “Trade Payables,” including a “Trade Payable” owed 7 to Plaintiff. (Id. ¶¶ 16–17.) Plaintiff sought permission from PSE Inc. and PSE LLC to sell 8 the canceled orders, but PSE LLC conditioned its permission on terms that Plaintiff could 9 not accept. (Id. ¶ 21.) In May 2024, Plaintiff made a final demand to PSE Inc. and PSE 10 LLC for payment of the sum of the outstanding invoices and canceled orders (about $2.8 11 million), to no avail. (Id. ¶ 24.) 12 Plaintiff initiated this lawsuit against both PSE Inc. and PSE LLC. (Doc. 25.) In 13 Count One, Plaintiff alleges a claim of breach of contract arising from the outstanding 14 invoices. (Id. ¶¶ 25–32.) In Count Two, Plaintiff alleges a claim of breach of contract 15 arising from the canceled orders. (Id. ¶¶ 33–40.) In Count Three, Plaintiff alleges that PSE 16 LLC is the successor in liability to PSE Inc. and thus liable for both the outstanding 17 invoices and the canceled orders. (Id. ¶¶ 41–47.) 18 Discussion 19 I. Plaintiff’s motion to compel will be granted in part. 20 Plaintiff seeks an order compelling PSE LLC to produce documents concerning its 21 negotiation of the Asset Purchase Agreement with PSE Inc.; its communications with PSE 22 Inc. about the outstanding invoices, the canceled orders, and Plaintiff generally; and PSE 23 Inc.’s internal communications about Plaintiff. PSE LLC argues that the motion should be 24 denied because Plaintiff did not meet and confer before filing it. PSE LLC argues further 25 that Plaintiff’s motion should be denied because the unambiguous terms of the Asset 26 Purchase Agreement provide that liability for the canceled orders lies solely with PSE Inc. 27 The Court will grant Plaintiff’s motion to the extent that it seeks an order compelling PSE 28 LLC to respond. The Court will deny the motion to the extent it seeks fees, because the 1 record is not clear as to whether Plaintiff’s counsel sufficiently met and conferred. 2 A. Plaintiff has not established that it sufficiently met and conferred. 3 Federal Rule of Civil Procedure 37(a)(1) provides that a motion to compel discovery 4 “must include a certification that the movant has in good faith conferred or attempted to 5 confer with the person or party failing to make disclosure or discovery in an effort to obtain 6 it without court action.” Similarly, Local Rule of Civil Procedure 7.2(j) provides that “[n]o 7 discovery motion will be considered or decided unless a statement of moving counsel is 8 attached thereto certifying that after personal consultation and sincere efforts to do so, 9 counsel have been unable to satisfactorily resolve the matter.” 10 Plaintiff’s counsel asserts that he had several written and verbal communications 11 with PSE LLC’s counsel before filing the motion to compel, and that PSE LLC’s counsel 12 never raised a substantive objection to Plaintiff’s request for documents. (Doc. 63 at 6–7.) 13 During the hearing, he added that while “at one point in time [PSE LLC’s counsel] talked 14 about difficulty getting these documents or going through these documents,” PSE LLC’s 15 counsel never stated that PSE LLC did not have the documents. (Doc. 76 at 9.) PSE LLC’s 16 counsel maintains that he did raise a substantive objection before Plaintiff filed the motion, 17 and that the motion was filed amidst those discussions. (Doc. 62 at 5; Doc. 76 at 11–12.) 18 The Court lacks sufficient information to resolve the parties’ inconsistent positions. 19 As Plaintiff has not convinced the Court that it satisfied the meet-and-confer requirement, 20 Plaintiff’s motion could be denied outright. However, the federal and local rules give the 21 Court discretion to decide a motion to compel even when that requirement has not been 22 met. See Fed. R. Civ. P. 37(a)(5)(A)(i) (providing that a successful movant must be denied 23 fees if he failed to meet and confer); LRCiv 83.6 (providing that the Court may suspend a 24 local rule for good cause). Failing to resolve the dispute, which has been briefed and 25 argued, will only result in delay. Therefore, the Court will decide the merits of the dispute. 26 B. PSE LLC will be ordered to comply with Plaintiff’s document requests. 27 A party is entitled to obtain documents that are in another party’s “possession, 28 custody, or control.” Fed. R. Civ. P. 34(a)(1). The documents must be within the scope of 1 discovery, which includes “any nonprivileged matter that is relevant to any party’s claim 2 or defense and proportional to the needs of the case.” Fed. R. Civ. P. 26(b)(1). 3 First, relevance. The standard for relevance in discovery is broader than the one for 4 admissibility at trial. Cont’l Cirs. LLC v. Intel Corp., 435 F. Supp. 3d 1014, 1018–19 5 (D. Ariz. 2020) (quoting In re Bard IVC Filters Prods. Liab. Litig., 317 F.R.D. 562, 566 6 (D. Ariz. 2016)). Evidence is admissible at trial if it “has any tendency to make a fact more 7 or less probable than it would be without the evidence,” and “the fact is of consequence in 8 determining the action.” Fed. R. Evid. 401. Here, Plaintiff’s requests for production are 9 relevant to Plaintiff’s claims of breach of contract arising from the outstanding invoices 10 and canceled orders. Plaintiff claims that PSE LLC is liable for both because it accepted 11 such liability in the Asset Purchase Agreement. (Doc. 25, ¶¶ 15–18, 21, 41–46.) It is easy 12 to see how the requested documents—relating to PSE LLC’s negotiation of the Agreement, 13 PSE LLC’s communications with PSE Inc. regarding Plaintiff, and PSE Inc.’s internal 14 records regarding the outstanding invoices and canceled orders—will be probative toward 15 whether Plaintiff’s claims have merit. Indeed, PSE LLC does not challenge Plaintiff’s 16 requests on relevancy grounds. 17 Second, proportionality. The proportionality of a discovery request turns on “the 18 importance of the issues at stake in the action, the amount in controversy, the parties’ 19 relative access to relevant information, the parties’ resources, the importance of the 20 discovery in resolving the issues, and whether the burden or expense of the proposed 21 discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). Under these factors, 22 Plaintiff’s requests are proportional to the needs of this case. Whether PSE LLC assumed 23 liability in the Asset Purchase Agreement is determinative of Plaintiff’s claims against PSE 24 LLC, so the requested documents go toward a key issue and are important to resolving that 25 issue. Next, Plaintiff’s alleged damages approach $3 million. (Doc. 25, ¶ 24.) This high 26 amount in controversy justifies more intrusive discovery. Finally, the record indicates that 27 PSE LLC has access to relevant records that Plaintiff does not: PSE LLC’s initial 28 disclosures state that it has “[t]he Asset Purchase Agreement, and related documents and 1 correspondence between PSE Inc. and PSE LLC”; PSE Inc.’s discovery response states 2 that “PSE Inc.’s books and records were transferred to PSE LLC” after the Agreement 3 closed; and PSE Inc. filed a statement reaffirming that it transferred “its business records 4 of ‘every kind and nature’” to PSE LLC. (Doc. 57-1 at 19, 29; Doc. 70.) 5 PSE LLC’s written response does not discuss any of the proportionality factors 6 listed in Rule 26(b)(1). Instead, PSE LLC argues that Plaintiff’s requests are not 7 proportional because “the terms of the [Asset Purchase Agreement] unambiguously 8 provide that liability for the Cancelled Orders remains with PSE Inc.” (Doc. 62 at 6.) In 9 other words, PSE LLC takes the incredible position that Plaintiff is not entitled to merits 10 discovery because Plaintiff’s claim lacks merit. 11 This argument borders on frivolous. The purpose of discovery is to disclose 12 information about the merits of a dispute. See Fed. R. Civ. P. 26 advisory committee note 13 to 1946 amendments (“The purpose of discovery is to allow a broad search for facts, the 14 names of witnesses, or any other matters which may aid a party in the preparation or 15 presentation of his case.”); Hickman v. Taylor, 329 U.S. 495, 501 (1947) (stating that 16 discovery is designed “to narrow and clarify the basic issues between the parties” and to 17 “ascertain[] the facts . . . relative to those issues”). As such, it makes no sense whatsoever 18 to deny a party information about the merits on the ground that his claim lacks merit. See 19 Cruz v. Nike Retail Servs., No. 23-cv-874, 2023 WL 6967410, at *4 (S.D. Cal. Oct. 20, 20 2023) (“Moreover, as a matter of pure logic, ‘plaintiff does not get discovery to prove her 21 claims because she is going to lose’ is hopelessly circular.”). PSE LLC’s attempt to frame 22 the issue as one of proportionality (i.e., Plaintiff’s claims lack merit, so any discovery on 23 them would be disproportional) is flatly unpersuasive. The proportionality provision was 24 added to Rule 26 “to deal with the problem of over-discovery.” Fed. R. Civ. P. 26 advisory 25 committee’s note to 1983 amendment. It gives “the court authority to reduce the amount 26 of discovery that may be directed to matters that are otherwise proper subjects of inquiry,” 27 but it was never intended “to deprive a party of discovery that is reasonably necessary to 28 afford a fair opportunity to develop and prepare the case.” Id. (emphases added). 1 Plaintiff’s claims allege that PSE LLC accepted liability under the Asset Purchase 2 Agreement. PSE LLC did not challenge the legal sufficiency of those claims (e.g., through 3 a motion to dismiss); it filed an answer. Plaintiff is therefore entitled to discovery on its 4 claims, and “the question of the sufficiency of [Plaintiff’s] case as a matter of law” must 5 wait until “after discovery closes.” Nat. Res. Def. Council v. Curtis, 189 F.R.D. 4, 8 6 (D.D.C. 1999). 7 At the hearing, PSE LLC’s counsel argued that PSE LLC would not know what to 8 look for if it is ordered to respond, because its officers “have no idea about any facts or 9 circumstances surrounding canceled orders” and would be “flying blind.” (Doc. 76 at 18.) 10 Given that PSE LLC undeniably took possession of at least some of PSE Inc.’s documents 11 (PSE Inc. says it was all documents), that two of PSE Inc.’s former officers now work for 12 PSE LLC, and that the outstanding invoices and canceled orders presumably have dates 13 and transaction numbers that would be useful in developing search inquiries, the Court 14 doubts that PSE LLC’s search would be as difficult as alleged. Regardless, PSE LLC’s 15 concerns do not establish that Plaintiff’s discovery requests are disproportional and thus 16 are not a reason to deny discovery. To the extent that any issues arise, counsel must meet 17 and confer to facilitate production. 18 Therefore, Plaintiff’s motion to compel will be granted to the extent that it seeks an 19 order compelling PSE LLC to respond. The motion will be denied to the extent that it seeks 20 sanctions, as Plaintiff has not convinced the Court that it sufficiently met and conferred. 21 Fed. R. Civ. P. 37(a)(5)(A)(i). 22 II. PSE LLC’s motion for a protective order will be denied. 23 A district court may issue a protective order “for good cause . . . to protect a party 24 or person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed. 25 R. Civ. P. 26(c)(1). “For good cause to exist, the party seeking protection bears the burden 26 of showing specific prejudice or harm will result if no protective order is granted.” Phillips 27 ex rel. Estates of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1210–11 (9th Cir. 2002). 28 “Broad allegations of harm, unsubstantiated by specific examples or articulated reasoning, 1 do not satisfy the Rule 26(c) test.” Beckman Indus. v. Int’l Ins., 966 F.2d 470, 476 (9th Cir. 2 1992) (quoting Cipollone v. Liggett Grp., 785 F.2d 1108, 1121 (3d Cir. 1986)). The district 3 court has “broad discretion . . . to decide when a protective order is appropriate and what 4 degree of protection is required.” Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36 (1984). 5 PSE LLC argues that Plaintiff “seeks to place undue burden on PSE LLC by 6 requesting information that is disproportionate to the needs of the case.” (Doc. 62 at 6.) It 7 says that Plaintiff seeks “information about the liabilities of PSE Inc. from PSE LLC,” 8 which is “inherently inappropriate, given that PSE LLC was not a part of the circumstances 9 surrounding the Cancelled Orders.” (Id. at 7.) Finally, PSE LLC says that Plaintiff should 10 already have the documents it seeks since it was a party to the canceled orders, and that the 11 equities favor entry of a protective order because “PSE LLC is already embroiled in this 12 case over the Cancelled Orders, despite not . . . having any liability for the Cancelled 13 Orders.” (Id.) 14 PSE LLC has not shown good cause for a protective order. Its argument is merely 15 an extension of the one in opposition to Plaintiff’s motion to compel: PSE LLC is not liable, 16 so discovery is disproportional; and since discovery is disproportional, it would impose an 17 undue burden. As explained above, Plaintiff seeks information that is proportional to the 18 needs of the case. In addition, PSE LLC has not provided specific examples showing how 19 responding to the requests would be unduly burdensome (e.g., because of unreasonable 20 expense or time commitment). To the extent that PSE LLC says that Plaintiff should 21 already have the documents in its possession, the record contains information to the 22 contrary. (Doc. 57-1 at 19, 29; Doc. 70.) PSE LLC’s motion will therefore be denied. 23 * * * 24 Before concluding, an observation and warning: the Court is troubled by PSE LLC’s 25 response to Plaintiff’s requests for production. Plaintiff’s motion to compel makes clear 26 that all ten of its document requests were directed to both PSE Inc. and PSE LLC, and PSE 27 LLC’s understanding of this is clear from its response to the motion. Yet, PSE LLC’s 28 discovery response, which was served the day PSE LLC responded to the motion, answered 1 || seven of the requests as follows: “This Request is not directed to PSE LLC, and therefore 2 || no response is provided.” (Doc. 63-1 at 8-9.) PSE LLC’s motion response 1s not consistent 3 || with its discovery response. The parties are warned that gamesmanship will not be tolerated 4|| moving forward. 5 ook ok 6 IT IS ORDERED that Plaintiff's motion to compel (Doc. 57) is granted in part || and denied in part as set forth above. Defendant Precision Shooting Equipment LLC is 8 || ordered to search for and produce documents responsive to Plaintiffs “First Request for 9|| Production of Documents to Defendants.” Such production must be delivered to counsel || for Plaintiff no later than 14 days from the date this Order is docketed. 11 IT IS FURTHER ORDERED that Defendant’s motion for a protective order (Doc. 62) is denied. 13 Dated this 15th day of August, 2025. 14 S 16 17 18 19 20 21 22 23 24 25 26 27 28 -8-