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Nelson-Ricks Cheese Company, Inc. v. Lakeview Cheese Company LLC

United States District Court, D. Idaho

May 15, 2018

NELSON-RICKS CHEESE COMPANY, INC., an Idaho corporation, Plaintiff,
v.
LAKEVIEW CHEESE COMPANY, LLC, a Nevada limited liability company, Defendant.

          MEMORANDUM DECISION AND ORDER

          David C. Nye, U.S. District Court Judge.

         I. INTRODUCTION

         Pending before the Court is Defendant Lakeview Cheese Company LLC's (“Lakeview”) Motion for Sanctions. Dkt. 83. Upon review, the Court will GRANT IN PART and DENY IN PART Lakeview's Motion as outlined below.

         II. BACKGROUND

         On September 29, 2017, Nelson-Ricks Cheese Company, LLC (“NRCC”) notified Lakeview that it had served subpoenas on fifteen Lakeview customers seeking financial information related to Lakeview's sales over a five-year period. On October 20, 2017, Lakeview filed an Emergency Motion to Quash the Subpoenas. Dkt. 47. The Court granted the Motion to Quash and issued a Protective Order on October 26, 2017. Dkt. 57.

         In its decision on the Motion to Quash, the Court found that the subpoenas were improper, that NRCC issued them in violation of the protective order in place at the time (by not including a copy of the protective order), and that the subpoenas directed the customers to tender their responses to Greenberg Cheese Company-a non-party to this lawsuit, a direct competitor of Lakeview's, and the principle place of business of NRCC's CEO, Michael Greenberg. Id. The Court concluded that Lakeview, not the fifteen non-party customers, was the correct party from which to get this information and that the customers might have inadvertently disclosed sensitive financial information as a result of the subpoenas.

         In light of the Court's decision, Lakeview filed a Motion to Amend Answer (Dkt. 66), seeking to add a counterclaim against NRCC for abuse of process. In its discretion, the Court denied the Motion (Dkt. 81), but ruled that it would entertain a motion for sanctions. Relying on Rule 1 and the Court's duty to “secure the just, speedy, and inexpensive determination of every action and proceeding, ” Fed.R.Civ.P. 1, the Court reasoned the additional time and expense of a counterclaim outweighed any possible benefit. However, the Court recognized Lakeview's need for appropriate recovery and granted it leave to file the instant Motion for Sanctions. Id.

         II. LEGAL STANDARD

         A. Sanctions

         Under Rule 26 of the Federal Rules of Civil Procedure, a Court can impose Rule 37 sanctions in order to financially compensate, or make whole, an aggrieved party who had to defend against improper tactics used by another party during discovery.

         Federal Rule of Procedure 26(c)(3) provides that Rule 37(a)(5) applies to the award of expenses in regards to protective orders. Rule 37(a)(5), in turn, outlines that, when a Court grants a protective order, “the Court . . . must require the party . . . whose conduct necessitated the motion . . . to pay the movant's reasonable expenses incurred in making the motion, including attorney fees.” Fed.R.Civ.P. 37(a)(5)(A).

         Rule 45 also allows for recovery when a party issuing a subpoena fails to “take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena.” Fed.R.Civ.P. 45(d)(1). When a violation occurs, the court can “impose an appropriate sanction-which may include lost earnings and reasonable attorney's fees- on a party or attorney who fails to comply.” Id.

         B. Attorney Fees

         After determining that a basis exists for a proper award of attorney fees, the Court must calculate a reasonable fee award. Hensley v. Eckerhart, 461 U.S. 424, (1983). Generally, the Court utilizes the “lodestar figure, ” which multiplies the number of hours reasonably expended on the litigation by a reasonable hourly rate. Id. The Court can then adjust the lodestar figure if necessary, based upon the factors set forth in Kerr v. ScreenExtras Guild, Inc.,526 F.2d 67 (9th ...


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