Tuesday, July 23, 2019
Panel Says Exclusion of Emails Was Proper Where They Were Produced After Discovery Cut-Off
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has affirmed the denial of a new trial sought by a technology firm in an action it lost against a Hollywood accounting firm in which it sought damages of $13 million in lost profits and $11.8 million in attorney fees.
The plaintiff, PNY Technologies, Inc., blamed its loss on the action by District Court Judge Maxine M. Chesney of the Northern District of California in excluding as evidence emails between the plaintiff and a company with which it had been doing business, SanDisk Corporation. The emails concerned expectations of future business dealings.
Under a license agreement, SanDisk had the right “to have an independent Third Party accounting firm” audit PNY’s books to ascertain the amount of royalties that were owed. The certified public accounting firm of Miller, Kaplan, Arase & Co. LLP undertook that task, and determined that the figure was somewhere between $20 million and $40 million.
PNY disputed the amount; SanDisk ceased doing business with PNY and brought suit against it in Santa Clara Superior Court; a jury turned in a verdict in favor of SanDisk in an amount in excess of $28.5 million; a settlement was reached. PNY, a New Jersey-based company, then sued Miller Kaplan in New Jersey state court, and Miller Kaplan removed the case to federal court in Northern California based on diversity of citizenship.
A jury found that Miller Kaplan made false and fraudulent representations as to being “independent” of SanDisk but that this did not result in harm to PNY. Chesney denied a motion for a new trial, sought in part on the exclusion of emails that would have shown that PNY would have realized profits had it not been for Miller Kaplan’s conduct.
The judge had excluded the evidence because they were not provided to Miller Kaplan until after the discovery cut-off.
In denying a new trial, Chesney rejected PNY’s contention that the late production was not prejudicial to Miller Kaplan because there was still time to conduct depositions. She wrote:
“…Miller Kaplan could not simply have taken whatever discovery it wanted after it received PNY’s untimely disclosure; it would have been required to move to reopen fact discovery, given that the deadline set by the Court had already passed. Moreover, at a time when Miller Kaplan would have turned its attention to other important aspects of trial preparation, it would have had to schedule and conduct a number of depositions and other discovery pertaining to the late-disclosed emails, thereby putting it at a disadvantage and disrupting the schedule previously adopted by the Court after careful consideration.”
In affirming on Friday, a Ninth Circuit panel said in a memorandum decision:
“The district court did not abuse its discretion by denying PNY’s motion for a new trial based on the court’s exclusion of certain emails as a discovery sanction….PNY’s late disclosure of the emails was not harmless because Miller Kaplan would have had to depose additional witnesses while preparing for trial….
“Contrary to PNY’s contention, the exclusion of the emails was not tantamount to a dismissal of PNY’s claim for lost profits. Therefore, the district court was not required to consider whether the late disclosure involved willfulness, fault, or bad faith, and the availability of lesser sanctions, such as continuing the trial to allow additional limited discovery about the emails….PNY introduced witness testimony to support its claim for lost profit damages.”
The case is PNY Technologies, Inc. v. Miller, Kaplan, Arase & Co. LLP, 17-15732
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