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EBAY’S MOTION FOR SANCTIONS CASE NO. C 08-04052 JF PVT
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
EBAY INC.,
Plaintiff,
v.
DIGITAL POINT SOLUTIONS, INC.,
SHAWN HOGAN, KESSLER’S
FLYING CIRCUS, THUNDERWOOD
HOLDINGS, INC., TODD DUNNING,
DUNNING ENTERPRISE, INC., BRIAN
DUNNING, BRIANDUNNING.COM,
and DOES 1-20,
Defendants.
Case No. C 08-04052 JF PVT
PLAINTIFF EBAY INC.’S NOTICE
OF MOTION AND MOTION FOR
DISCOVERY SANCTIONS
AGAINST BRIAN DUNNING,
BRIANDUNNING.COM,
THUNDERWOOD HOLDINGS,
INC., AND KESSLER’S FLYING
CIRCUS
Hearing Date: April 2, 2010
Time: 9:00 a.m.
Courtroom: 3
Judge: Hon. Jeremy Fogel
DAVID R. EBERHART (S.B. #195474)
deberhart@omm.com
SHARON M. BUNZEL (S.B. #181609)
sbunzel@omm.com
COLLEEN M. KENNEDY (S.B. #227107)
ckennedy@omm.com
O’MELVENY & MYERS LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
Telephone: (415) 984-8700
Facsimile: (415) 984-8701
Attorneys for Plaintiff eBay Inc.
Case5:08-cv-04052-JF Document194 Filed02/26/10 Page1 of 9
eBay Inc. v. Digital Point Solutions, Inc. et al Doc. 194
Dockets.Justia.com
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- 1 - EBAY’S MOTION FOR SANCTIONS CASE NO. C 08-04052 JF PVT
NOTICE OF MOTION AND MOTION
PLEASE TAKE NOTICE THAT, on April 2, 2010, at 9:00 a.m., or as soon
thereafter as the matter may be heard, in Courtroom 3 of the United States District Court
for the Northern District of California, San Jose Division, located at 280 South 1st St., San
Jose, California, 95113, Plaintiff eBay, Inc. (“eBay”) will and hereby does move for an
order sanctioning and holding in contempt defendants Brian Dunning, BrianDunning.com,
Thunderwood Holdings, Inc., and Kessler’s Flying Circus for their violations of this
Court’s January 12, 2010 order.
eBay’s Motion seeks sanctions and an order of contempt pursuant to the Court’s
inherent authority, Federal Rule of Civil Procedure 37(b)(2) and 18 U.S.C. § 401(3)
against Defendants for their willful violation of the Court’s order.
The Motion is based on this Notice, the attached Memorandum of Points and
Authorities, all supporting declarations and attached exhibits, the pleadings and other
records on file with the Court, the oral argument of counsel, all relevant matters judicially
noticeable, and such further evidence and arguments as the Court may consider.
DATED: February 26, 2010 DAVID R. EBERHART
SHARON M. BUNZEL
COLLEEN M. KENNEDY
O’MELVENY & MYERS LLP
By: /s/ David R. Eberhart
DAVID R. EBERHART
Attorneys for Plaintiff eBAY INC.
Case5:08-cv-04052-JF Document194 Filed02/26/10 Page2 of 9
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- 2 - EBAY’S MOTION FOR SANCTIONS CASE NO. C 08-04052 JF PVT
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
Defendants Brian Dunning, Thunderwood Holdings, Inc., BrianDunning.com and
Kessler’s Flying Circus are in contempt of this Court’s January 12, 2010 Order (the
“Order”) because they have failed to produce the documents and discovery responses
ordered by this Court. The discovery requests at issue have been pending for more than a
year and these defendants have had more than six weeks to comply with the Order, yet
they intentionally flout this Court’s mandates.
The January 12 Order requires (i) the individual defendants to produce all
responsive documents that have previously been provided to the government, and (ii) the
entity defendants to provide complete responses to eBay’s requests for production,
interrogatories, and requests for admission. See Order (Docket #183), at 12-13. Even in
the face of the Court’s admonition on January 29, 2010 that the January 12 Order was in
effect even in the absence of a ruling on the stay motion, Defendants Brian Dunning,
Thunderwood Holdings, Inc. (“THI”), BrianDunning.com and Kessler’s Flying Circus
(“KFC”) (collectively, the “BD/KFC Defendants”) did not comply with the Order in any
material way. Their sole alleged act of compliance was Leo Presiado’s production of 44
pages of documents that Rackspace had previously produced to Mr. Presiado instead of
the subpoenaing party—eBay—and which Mr. Presiado had wrongfully embargoed for
nearly five months. The defendants other than the BD/KFC Defendants have taken some
steps to comply with the Order and are not the subject of eBay’s motion.
Rather than comply, the BD/KFC Defendants have pursued a course of delay and
obfuscation—first refusing to provide any timeline for compliance and subsequently
providing a litany of varied and conflicting excuses for their failure to comply. The only
explanation for their inaction is that they simply do not intend to comply with the Order.
Instead, they seek to delay their provision of discovery for as long as possible, in the hope
that this Court would either grant their motion to stay outright (which it did not do) or
would grant a stay following any future indictment. The BD/KFC Defendants’ actions
Case5:08-cv-04052-JF Document194 Filed02/26/10 Page3 of 9
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- 3 - EBAY’S MOTION FOR SANCTIONS CASE NO. C 08-04052 JF PVT
leave eBay with no choice but to move for sanctions in order to force their compliance.
II. FACTUAL BACKGROUND
On January 13, 2010, the day after receiving the Court’s Order granting eBay’s
motions to compel, eBay contacted counsel for all defendants to meet and confer
regarding when their clients would comply with the Order. See Declaration of Colleen M.
Kennedy in Support of eBay’s Motion for Sanctions (“Kennedy Decl.”), Ex. 1. Yet the
BD/KFC Defendants’ counsel refused to provide eBay with any information regarding
their timeline for compliance. Patrick McClellan, counsel for KFC, never responded to
eBay’s January 13 correspondence. Kennedy Decl., ¶ 2. Leo Presiado, counsel for Brian
Dunning, BrianDunning.com and THI, stated in response to eBay’s January 13
correspondence that he had “not yet had a chance to evaluate and determine what would
constitute an adequate time period within which to prepare the subject responses,” and
invited eBay to contact him the following week. Kennedy Decl., ¶ 4, Ex. 3. eBay again
contacted Mr. Presiado on January 21, 2010 to inquire about his clients’ compliance with
the Order, but Mr. Presiado failed to respond. Kennedy Decl., ¶ 5, Ex. 4.
At the January 29, 2010 Case Management Conference and motion hearing, this
Court made clear that discovery should proceed pending the Court’s ruling on the motions
to stay. The Court explicitly stated in response to a question from one of defendants’
counsel that it expected all defendants to comply with the Order: “At the moment, you
should assume the January 12th order is in effect.” 1/29/10 Transcript, 17:22–23. Despite
this clear instruction to all parties, however, both Mr. Presiado and Mr. McClellan now
state that they will not provide any discovery to eBay until March 1, at the earliest.
In a letter dated February 12, 2010—his last correspondence with eBay on this
issue—Mr. Presiado stated that a March 1 production date is reasonable because the Order
“does not state a date by which the responses are to be provided.” Kennedy Decl., Ex. 5.
He also indicated that his compliance with even that deadline will be contingent on this
Court’s denial of the motions to stay and on the absence of any indictments issued in the
case. Id.
Case5:08-cv-04052-JF Document194 Filed02/26/10 Page4 of 9
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- 4 - EBAY’S MOTION FOR SANCTIONS CASE NO. C 08-04052 JF PVT
Mr. Presiado’s February 12, 2010 letter appeared to abandon his previous, false
assertions that he and eBay’s counsel David Eberhart reached an agreement following the
January 29, 2010 hearing granting Mr. Presiado’s clients an additional 30 days from that
date to produce the required discovery. In correspondence and conversations with eBay’s
counsel, Mr. Presiado made a series of conflicting and nonsensical assertions regarding
this supposed agreement, which were promptly refuted by eBay. See Kennedy Decl., ¶¶
4, 13-14, Exs. 5-10. No such agreement ever existed. See Declaration of David R.
Eberhart in Support of eBay’s Motion for Sanctions (“Eberhart Decl.”) ¶¶ 2-4.
KFC’s counsel Patrick McClellan has pursued a similar course of delay. After
failing to respond for nearly one month to eBay’s January 13, 2010 inquiry regarding
KFC’s timeline for compliance, Mr. McClellan acknowledged during a telephone
conversation with eBay’s counsel on February 9, 2010 that he still had yet to assess
KFC’s obligations under the Order. Kennedy Decl., ¶ 3, Ex. 2. Mr. McClellan
subsequently promised compliance within 15 days of February 10, 2010, or more than six
weeks after the Order issued. Id. But two days later, Mr. McClellan withdrew even this
proposal, notifying eBay that he had been informed by Mr. Presiado of a purported
agreement with Mr. Eberhart to a 30-day timeline, and that Mr. McClellan was now
taking the position that this fictitious agreement applied equally to KFC. Kennedy Decl.,
¶ 15. Mr. McClellan therefore stated that he, too, would refuse to agree to comply with
the Court’s Order any earlier than March 1.
III. ARGUMENT
A. This Court Should Hold The BD/KFC Defendants In Contempt For
Their Violations Of The Order.
The BD/KFC Defendants’ intentional failure to comply with the Order constitutes
a breach of their discovery obligations for which the Court may impose sanctions,
including contempt. See In re Heritage Bond Litig., 223 F.R.D. 527, 531 (C.D. Cal. 2004)
(citations omitted) (“A party may be found in contempt of court in which the action is
pending for failure to obey any discovery order.”). Rule 37 of the Federal Rules of Civil
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- 5 - EBAY’S MOTION FOR SANCTIONS CASE NO. C 08-04052 JF PVT
Procedure provides that if a party “fails to obey an order to provide or permit discovery,”
the court may issue “further just orders,” including “treating as contempt of court the
failure to obey any order.” Fed. R. Civ. P. 37(b)(2); see also 18 U.S.C. § 401(c)
(codifying judicial enforcement of court orders). A party may be held in civil contempt if
the court finds by clear and convincing evidence that the party violated an order of the
court beyond substantial compliance, and that the violation was not based on a good faith
and reasonable interpretation of the order. On Command Video Corp. v. LodgeNet Entm’t
Corp., 976 F. Supp. 917, 922 (N.D. Cal. 1997).
The BD/KFC Defendants’ conduct satisfies each of the elements of civil contempt.
None of these defendants can be found to have substantially complied with the court’s
order and none of them can demonstrate that “every reasonable effort has been made to
comply.” In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th
Cir. 1993). To the contrary, the BD/KFC Defendants have taken every possible
opportunity to delay compliance,1 and have now indicated that they do not intend to
comply until March 1, nearly seven weeks after the Order was issued. The BD/KFC
Defendants’ strategy of delay stands in contrast with the actions of the other defendants in
this action, Todd Dunning, Dunning Enterprise, Inc., Shawn Hogan and Digital Point
Solutions, Inc., who have all made efforts to comply with the Order.
Further, the BD/KFC Defendants’ failure to comply was neither done in good faith
nor based on any reasonable interpretation of the Order. Counsel for the BD/KFC
Defendants effectively refused to meet and confer with eBay at all until after their motions
to stay were heard, in a blatant attempt to delay compliance in the hope that a stay would
issue. Kennedy Decl., ¶¶ 2-6, Exs. 3-4. Not only did they refuse to discuss the issue with
eBay in a timely manner, their later statements made clear that the BD/KFC Defendants
1 The only aspect of the Order with which the BD/KFC Defendants have attempted to comply
was eBay’s request that Mr. Presiado turn over to eBay a small production of documents
belonging to Rackspace, which were provided to Mr. Presiado by Rackspace in September 2009
pursuant to eBay’s subpoena. But none of the BD/KFC Defendants has produced to eBay any of
their own documents or otherwise attempted to provide any supplemental discovery on their own
behalf.
Case5:08-cv-04052-JF Document194 Filed02/26/10 Page6 of 9
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made no effort to comply with the Order until after their stay motions were heard.
Kennedy Decl., ¶¶ 3-4, Ex. 2.
Putting aside the fabricated “agreement” to a 30-day extension, the BD/KFC
Defendants have provided no basis for their contention that an additional 30 days is
necessary. Nor would any such assertions be credible. Despite their repeated statements
that the FBI has seized and refused to return “all of” the BD/KFC Defendants’ records and
documents, see, e.g., Kennedy Decl, Ex. 11, at 10, those defendants apparently have had
access to some responsive materials since at least October 2008, when they submitted
documents as exhibits to their motions of motions to dismiss eBay’s First Amended
Complaint. Kennedy Decl., Exs. 12-13. Further, the BD/KFC Defendants can no longer
dispute that they have had ongoing access to electronic materials stored on at least two
servers residing at Rackspace US, Inc., as reflected by the billing records produced by
Rackspace in response to eBay’s subpoena. See Kennedy Decl., Ex. 14. Regardless, any
current claims of the need for more time ring hollow in light of the BD/KFC Defendants’
decision to squander the first several weeks following the Order in the hope that a stay
would issue.
Under these circumstances, eBay has no reason to believe that these defendants
will comply with the Order without court intervention. Indeed, the most reasonable
interpretation of the BD/KFC Defendants’ actions is that they have been seeking to delay
their compliance with the Order for as long as possible, in the hopes that a stay would
issue to relieve them from compliance. Although the BD/KFC Defendants became aware
at the January 29, 2010 hearing that this Court was likely to deny their motion to stay
(which it now has done), they could still attempt to delay compliance with the Order until
an indictment issued, thereby providing them with a renewed basis to argue for a stay.
eBay’s maintains that, even if an indictment issues, it will be impossible to assess whether
a stay is appropriate until the specifics of any indictment are known, and eBay has
requested the opportunity to be heard on that issue should an indictment occur. But there
is certainly no basis to allow any potential future indictment to excuse the BD/KFC
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Defendants from complying with the Order. If the BD/KFC Defendants had responded to
eBay’s discovery requests in a timely manner, or had complied with the Order in a timely
manner, the discovery eBay seeks would have been provided long before any future
indictment or resulting stay. The BD/KFC Defendants’ purposeful delays in complying
with the Order should not be rewarded now or in the future.
Even assuming that the BD/KFC Defendants’ proposed March 1 compliance date
had been made in good faith—and that they ultimately perform, which seems highly
unlikely given their failure to make any interim production of their own documents—a
delay of seven weeks to comply with a court order is patently unreasonable. This is
especially true because eBay’s discovery requests have been pending for more than a year
and its motions to compel were filed nearly five months ago.
B. eBay Is Entitled To Sanctions In The Form Of Attorneys’ Fees.
Rule 37 states that “the court must order the disobedient party, the attorney
advising that party, or both to pay the reasonable expenses, including attorney’s fees,
caused by the failure, unless the failure was substantially justified or other circumstances
makes an award of expenses unjust.” Fed. R. Civ. P. 37(b)(2)(C); see also Hyde & Drath
v. Baker, 24 F.3d 1162, 1170 (9th Cir. 1994) (“Rule 37(b)(2) provides for the award of
reasonable expenses and attorney’s fees ‘caused by the failure’ to obey a court order to
permit or provide discovery.”). The BD/KFC Defendants’ persistent and unjustified
refusal to comply with the Order warrants an award, at a minimum, of eBay’s expenses
and fees incurred as a result of these defendants’ violations of the Order. Accordingly,
eBay requests that the Court award $39,545.50, plus such other amounts as the Court
deems appropriate. This figure constitutes the fees expended to date by eBay’s counsel on
both meeting and conferring with the BD/KFC Defendants’ counsel regarding their
compliance with the Order and on bringing this motion. See Eberhart Decl., ¶¶ 5-10, Ex.
A.
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IV. CONCLUSION
For the reasons discussed above, eBay respectfully requests that the Court impose
sanctions on Defendants Brian Dunning, BrianDunning.com, THI and KFC in the form of
a contempt order and/or an award of attorneys’ fees, and that the Court order these
Defendants’ immediate compliance with the January 12, 2010 Order.
DATED: February 26, 2010 DAVID R. EBERHART
SHARON M. BUNZEL
COLLEEN M. KENNEDY
O’MELVENY & MYERS LLP
By: /s/ David R. Eberhart
DAVID R. EBERHART
Attorneys for Plaintiff eBAY INC.
Case5:08-cv-04052-JF Document194 Filed02/26/10 Page9 of 9
