The opinion
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
EMCYTE CORP.,
Plaintiff,
v. 2:19-cv-769-JES-NPM
XLMEDICA, INC., and ANNA STAHL,
Defendants / Counterclaimants,
v.
EMCYTE CORP. and PATRICK PENNIE,
Counterclaim Defendants.
DISCOVERY ORDER
This action presents a trademark-infringement suit and a tortious-interference
countersuit. But so far, the action has been commandeered by discovery disputes.
While neither side is entirely blameless, fault for the discovery logjams and
inordinate delays lies almost exclusively with defendants Anna Stahl and her
company XLMedica. Among numerous examples that could be cited, they were
rather coy about and ultimately refused to give EmCyte the address of Stahl’s twin
sister and business partner Angel Oliferuk (even though Oliferuk resided with Stahl,
as EmCyte eventually discovered), and EmCyte had to go so far as to obtain court
orders—or at least move to compel—to get Stahl, Oliferuk, and another business
partner, Susie Lopez,1 to appear for depositions.
Defendants’ tendency to be less than straight with the court just makes matters
worse. We were told—repeatedly—that XLMedica is nothing more than a moribund
“one woman shop,” only to learn that XLMedica is in fact a robust enterprise
supported by a multi-state sales force and marketing, promotion, and financial
personnel.2 We were told—repeatedly—that Defendants did not have any more
documents responsive to discovery requests, only to learn that they simply didn’t
look for documents where any reasonable person would (such as Lopez’s and
Oliferuk’s files) or reasonably search the files of other custodians.3 And now, we
are faced with Defendants’ contumacious refusal to comply with a crystal-clear
directive stated repeatedly by the court: to provide EmCyte a copy of the entire
native file of XLMedica’s Quickbooks data.
We first tried to unloose this Gordian knot during a March 2021 discovery
hearing, in which the court ordered Stahl to appear for her deposition, ordered
XLMedica to produce the native file of its Quickbooks data, and ordered both Stahl
and XLMedica to produce other documents and supplement their interrogatory
answers. (Docs. 107, 110). In October 2022—immediately after the courthouse was
1 Lopez is such a critical figure to Defendants’ enterprise that, by their own account, they would
suffer “irreparable harm” if she were to discontinue working with them. See Doc. 258 at 3, 7.
2 Among other things, see generally Doc. 274.
3 Id. Especially pages 155-164, 167-170, 174-175, 207.
struck by the eyewall of Hurricane Ian—the court held a status conference and
disposed of a second round of discovery motions. (Docs. 228, 229, 234, 235, 237).
Among other things, the court ordered the parties to exchange detailed descriptions
about the methods employed to identify and produce responsive documents, to
produce certain documents, and to continue conferring about their respective
document requests; ordered XLMedica (once again) to supplement its interrogatory
answers; and rejected Defendants’ request to allow them to unilaterally amend the
parties’ stipulated confidentiality agreement. (Doc. 237). And because Defendants
had steadfastly certified—unjustifiably and in bad faith—that they had “no
responsive documents” after deliberately using an unreasonable plan to identify,
collect, and produce responsive documents, the court found EmCyte entitled to a
fee-and-expense award for having to litigate this discovery violation. (Doc. 246).
But two issues remained: determining a reasonable amount for this award and
deciding who should have to pay it—Defendants, their counsel, or both. So the court
directed EmCyte to quantify the fees and expenses related to its sanctions motion,
and it directed Defendants to appear in person for an evidentiary hearing. (Docs.
237, 246). Purported conflicts were presented about Defendants’ availability for the
evidentiary hearing (Doc. 258), and thus, the court instead conducted a full-day
status conference with the parties’ counsel in December 2022 to narrow the issues
in dispute and steer their discovery efforts to a conclusion. (Docs. 262, 263, 271).
The record developed during the December 2022 conference confirmed
Defendants’ document-production efforts were improper, and their discovery
certifications were unjustified. For example, after the October 2022 hearing,
Defendants produced about 1600 pages of non-duplicative and responsive
documents from the files of Lopez and Oliferuk—custodians whose files would have
been searched by any reasonable and good-faith litigant from the very beginning.4
With the sustained pattern of unreasonable intransigence in response to various
discovery requests despite the multiple changes in counsel for the defense, the
conference also confirmed that Defendants, rather than their counsel, should bear
the brunt of the fee award to EmCyte for having to litigate this issue. Finally, the
conference confirmed that fact discovery was substantially complete.
Surprisingly, the production of the native file of XLMedica’s Quickbooks data
remained at issue. Defense counsel reported that—for eventual production to
EmCyte—Stahl had given the file to her prior counsel (the second of her three sets
of lawyers who have represented her in this matter), but they could not confirm that
it was ever furnished to EmCyte. And they resisted the production of any complete,
4 In fact, between the October 2022 and December 2022 hearings in this matter, the defendants
produced an additional 4,469 pages of documents (almost double what they produced before). See
Doc. 250 at 3, 5. This substantial production of documents belied not only Defendants’ discovery
responses, but their representations to the court in opposition to EmCyte’s motion for sanctions.
See, e.g., Doc. 152 at 12 (“EmCyte’s mere wish for more documents or suspicion that ‘there must
be more’ does not change the reality that there is not more.”); id. at 14 (“Much to EmCyte’s
dismay, Defendants cannot produce what they do not have.”).
native-file updates going forward. But the court declined their invitation to revisit
its prior ruling, rejected their suggestions that only truncated or filtered sets of data
should be provided instead, and directed them to produce the entire native file within
two weeks and to continue sending a complete copy of the entire native file every
month thereafter.
On the eve of the full-day status conference, Defendants filed a motion for
sanctions against EmCyte concerning its document-production certifications, and
this motion remains pending. (Doc. 245). In the time since the conference,
Defendants have also filed a motion for a protective order concerning non-party
subpoenas that EmCyte has directed to certain financial institutions. (Doc. 281). And
because Defendants continue to defy the court’s orders directing them to produce
the entire native file of the Quickbooks dataset, EmCyte has filed a motion
requesting an evidentiary hearing to determine an appropriate sanction. (Doc. 279).
I. Quantifying an Appropriate Expense-of-Motion Award for Defendants’
Improper Document-Production Practices
Having determined that EmCyte is entitled to a fee-and-expense award for its
discovery-violation motion (Doc. 142) and that this sanction should be assessed
against Defendants, rather than their counsel, we are left with determining an
appropriate amount to be paid. EmCyte seeks $37,566. (Doc. 257). XLMedica and
Stahl argue the award should be in the neighborhood of $3,000 - $5,000. (Doc. 269
at 19). Falling in between, the court imposes an $11,329 sanction against the
defendants.
The lodestar method guides the analysis for arriving at a reasonable sanction.
The lodestar figure is the product of a two-step, fact-intensive, and case-specific
inquiry, asking: (1) what would a lawyer in this division assess a paying client per
hour to provide representation comparable to the legal skill, expertise, and acumen
supplied for the matter at hand, and (2) practicing good billing judgment, how many
hours would it have been appropriate for the lawyer to bill such a client for the
services at issue? See Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 551-553
(2010); City of Burlington v. Dague, 505 U.S. 557, 562-67 (1992); Norman v. Hous.
Auth. of City of Montgomery, 836 F.2d 1292, 1299-1302 (11th Cir. 1988).
A. Reasonable hourly rate
“[A] reasonable hourly rate is the prevailing market rate in the relevant legal
community.” Norman, 836 F.2d at 1299 (internal citations omitted). The court “is
itself an expert on the question and may consider its own knowledge and experience
concerning reasonable and proper fees and may form an independent judgment
either with or without the aid of witnesses as to value.” Id. at 1303 (quoting Campbell
v. Green, 112 F.2d 143, 144 (5th Cir. 1940)). At bottom: “It is the job of the district
court in a given case to interpolate the reasonable rate based on an analysis of the
skills . . . exhibited by the attorney in the case at bar. . ..” Id. at 1301.
EmCyte requests an hourly rate of $570 for attorney Alejandro Fernandez and
$450 for attorney Kateryna Karpenko. Defendants counter with $350-400 for
Fernandez and $275 for Karpenko. Notwithstanding EmCyte’s arguments, this
document-production issue could arise in any civil matter and presents a relatively
straightforward question. Considering the circumstances of this case and the local
market for the services provided, the court finds that $400 is a reasonable hourly rate
for this discovery dispute.
B. Reasonable number of hours
The second step in computing the lodestar is determining the reasonable
number of hours expended. “Time spent is reasonable, and thus compensable, if it
would be proper to charge the time to a client.” In re Home Depot Inc., 931 F.3d
1065, 1087 (11th Cir. 2019). Since it is “the duty of the courts to see that excessive
fees and expenses are not awarded,” the fee applicant’s timesheets must be viewed
from the perspective of a cost-sensitive client, and if such a client would refuse to
authorize the work or balk at certain entries, and justifiably so, then they should not
be awarded. ACLU of Ga. v. Barnes, 168 F.3d 423, 428 (11th Cir. 1999). In other
words, fee applicants must exercise “billing judgment” and exclude hours “that
would be unreasonable to bill to a client and therefore to one’s adversary irrespective
of the skill, reputation or experience of counsel.” Id. (quoting Norman, 836 F.2d at
1301 (emphasis in original)). “When a district court finds the number of hours
claimed is unreasonably high, the court has two choices: it may conduct an hour-by-
hour analysis or it may reduce the requested hours with an across-the-board cut.”
Bivins v. Wrap It Up, Inc., 548 F.3d 1348, 1350 (11th Cir. 2008).
EmCyte seeks to recover fees for 66.1 hours in relation to the motion for
sanctions. (Doc. 257 at 8). XLMedica and Stahl counter that EmCyte should be
entitled to no more than 17 hours. (Doc. 269 at 13). The court lands somewhere in
between. The nineteen-page motion for sanctions and seven-page reply are not
complex. A large portion of the papers is dedicated to recounting the facts of the
case. And EmCyte’s legal argument for sanctions, and Defendants’ response, did not
raise any difficult or novel issues. Further, some of the time entries provided by
EmCyte are vague, include block billing, and appear to include efforts that would
have been undertaken regardless of the sanctions motion. Having reviewed the fee
motion and its exhibits, the response, and the underlying sanctions motion and
related filings, the court finds 28 hours reasonable.5
C. Expenses
EmCyte’s request for $129 associated with legal-research fees (Doc. 257-1 at
7) is reasonable.
5 In the prior sanctions-entitlement order (Doc. 246), the court reserved ruling on whether EmCyte
would also be entitled to its fees and expenses associated with the then-contemplated evidentiary
hearing for the Rule 26(g)(3) apportionment inquiry. But given the further developed record after
that order, an evidentiary hearing on this issue became unnecessary.
II. Defendants’ Motion for Sanctions
In an apparent attempt to divert attention away from their discovery
misconduct, Defendants—just before the full-day status conference discussed
above—filed a tit-for-tat sanctions motion against EmCyte. (Doc. 245). In a nutshell,
the motion argues that EmCyte’s post-Ian disclosures about its document-collection-
and-production methods were vague and incomplete, and that the disclosures
revealed that EmCyte’s prior discovery responses were improper. But statements by
EmCyte that it would produce any responsive documents to the extent they exist are
a far cry from Defendants’ affirmative misrepresentations that no responsive
documents exist. And during the status conference, Defendants conveyed that no
further document production from EmCyte was warranted. Finally, the defendants’
disclosures about their own document-collection-and-production methods were no
less vague and incomplete. Thus, Defendants’ attempt to offset sanctions falls flat.
III. Defendants’ Motion for Protective Order
Defendants XLMedica and Stahl seek protection from four subpoenas
directed to three of their banks and a credit-card issuer for their financial records.
(Doc. 281). In support, they allude to Stahl’s privacy interests, argue that portions of
these records are not relevant, and contend that the records would be cumulative of
information previously produced to EmCyte.
Generally, parties may “obtain discovery regarding any nonprivileged matter
that is relevant to any party’s claim or defense and proportional to the needs of the
case. . ..” Fed. R. Civ. P. 26(b)(1). But the court “may, for good cause, issue an order
to protect a party or person from annoyance, embarrassment, oppression, or undue
burden or expense.” Fed. R. Civ. P. 26(c)(1). “The party seeking a protective order
has the burden to demonstrate good cause, and must make ‘a particular and specific
demonstration of fact as distinguished from stereotyped and conclusory statements’
supporting the need for a protective order.” Auto-Owners Ins. Co. v. Southeast
Floating Docks, Inc., 231 F.R.D. 426, 429-30 (M.D. Fla. Sept. 28, 2005) (quoting
United States v. Garrett, 571 F.2d 1323, 1326 n.3 (5th Cir. 1978)).
As acknowledged by Defendants’ cited authorities, relevancy trumps privacy.
And the complaint (Doc. 22) and the counterclaim (Doc. 179) put both XLMedica
and Stahl’s revenues and profits at issue. Thus, their financial records are
discoverable. See Pro Video Instruments, LLC v. Thor Fiber, Inc., No. 618-cv1823-
ORL-31-LRH, 2019 WL 13067426, *3 (M.D. Fla. Nov. 21, 2019) (compelling a
defendant in a trademark-infringement suit to produce financial documents and
collecting cases doing the same). Moreover, the parties’ confidentiality agreement
serves to ameliorate any privacy concerns.
XLMedica and Stahl nevertheless argue that the financial records would be
cumulative because they have already provided information about XLMedica’s
sales. For at least two reasons, this argument fails. First, not just revenues, but
profits, are at issue, and not just those of XLMedica. Further, one must know
expenses to arrive at profits. And second, EmCyte is not required to blindly accept
the veracity of the sales information provided. So, in sum, the defendants have failed
to demonstrate good cause for any protection from the subpoenas.
IV. EmCyte’s Motion for a Sanctions Hearing
At this point, it is nothing short of shocking that Defendants have not only
refused to produce the entire native Quickbooks data set, but that they have resorted
to imposing by self-help the very same limits on this discovery that the court
squarely rejected during the December 7, 2022 hearing.
During the March 30, 2021 discovery hearing, the court ruled no less than
three times that Defendants needed to produce the entire native file of the their
Quickbooks data:
THE COURT: So I don’t know if she’s maintaining her books electronically
or by paper, but, again, we see a lot of operations like this are using some
kind of QuickBooks software or something similar. And, to the extent that
that’s the case, if it’s, like, a QuickBooks type operation, then that – I’ll go
ahead and let you know the native file needs to be produced on that, whatever
software it is.
* * *
THE COURT: And, again, I did mention, if there’s some kind of software
being used to maintain the books of the company, like a QuickBooks type
application, I agree with you that native format should be produced.
* * *
THE COURT: And, as I've already said, if the company’s books are
maintained in something like QuickBooks, that native file needs to be
produced ….
(Doc. 110 at 36, 39, 42-43). And contrary to the false narrative recently conjured by
the defendants (Doc. 280 at 6-7), this ruling was neither limited to sales data nor
limited in any other way. Defense counsel recognized as much during the
December 7, 2022 hearing. (Doc. 274 at 136, 139-140, 144 (acknowledging that the
court had ordered the production of an “unfettered backup” and arguing for a
truncated production going forward)). In fact, while Defendants attempt to recast the
court’s March 2021 directive as responsive to only two requests for “sales” data, one
of the requests they cite requested not just sales data but revenue, cost, and profit
data as well. (Doc. 280 at 6).
Defendants also offer the false construct that the March 2021 hearing
concerned only six requests for production. That is a wildly inaccurate and
misinformed characterization. One need only glance at the motion to compel then at
issue (Doc. 73 at 2) to recognize that when the court rejected the suggestion that
neither defendant should have to respond to more than 30 requests for production
(Doc. 110 at 19, 31, 44), it overruled Defendants’ blanket objections to 96 requests
directed to XLMedica (Doc. 73-2) and 96 requests directed to Stahl (Doc. 73-3).
Moreover, the motion put at issue—and the hearing addressed—the scope of native
ESI that should be produced in response to all of the requests for production. (Doc.
73 at 4). And thus, with all the document requests in mind, the court declined to
compel the production of native email files, but it required the production of the
entire native Quickbooks data file.
And if any doubt lingered, the court put it to rest during the December 2022
hearing. By not only the words expressed, but by the tone of voice, facial
expressions, and gestures that accompanied them, it could not have been lost on
defense counsel that the court was surprised and frustrated to learn during the
December 2022 hearing that the entire native Quickbooks dataset may not have been
produced. 6 Even the cold transcript leaves no doubt that the court directed
Defendants—once again—to produce the entire native Quickbooks data file:7
THE COURT: Let me ask you, let me confirm, EmCyte has yet to receive
a native QuickBooks file, like, as of today?
PLAINTIFF COUNSEL: As of today we have no QBB file, Your Honor.
THE COURT: That’s the file that an expert would need to open up
QuickBooks and see how it’s been run –
PLAINTIFF COUNSEL: That’s correct.
* * *
6 Further undermining Defendants’ arguments, their counsel adamantly claimed at the opening of
the December 2022 hearing that the entire native Quickbooks file had been produced. (Doc. 274
at 52 (DEFENSE COUNSEL: “We’ve produced the Quickbooks file. Prior counsel did, all the
data …. The actual [electronic] file from Quickbooks was produced.”)). But after a lunchtime
recess, they conceded that they could not confirm its production. (Doc. 274 at 134).
7 As memorialized in the minutes: “Court discussed the defendants’ discovery efforts to date and
ordered defendants to produce their Quickbooks file in native format within two weeks and at the
end of each month thereafter until trial.” (Doc. 271).
THE COURT: I’m familiar that – from other cases that, you know, a native
file from QuickBooks has all sorts of audit trail features inside of it. So if
you have a native file, you’re going to be able to tell if someone’s gone back
and changed things ….
* * *
DEFENSE COUNSEL: [W]hat I understand the QBB file to be is an
unfettered backup of the entire QuickBooks.
THE COURT: Well, any -- I don’t mean to get hung up on the extension,
the file extension. Any native file from QuickBooks that an expert could, you
know -- pull up their QuickBooks and start seeing -- seeing everything[.]
* * *
THE COURT: But obviously what I’m contemplating is, yes, the native file
from QuickBooks such that an expert witness can load the file, and it’s as if
that expert witness is sitting at XLMedica’s computer and just opened up the
QuickBooks file. It’s as if they’re right there. I mean, short of this remoting
in, they have the data, and they have everything.
* * *
THE COURT: Obviously we did order production of the QuickBooks
native file some, I don’t know, 18 months ago or so. … I don’t see any reason
why [attorney’s-eyes-only] treatment of that QuickBooks information is not
sufficient. So please get that over to the plaintiffs, the current version. And
I want you to continue to send current versions at the end of every month
going forward. Again, that needs to be in some format that somebody can
load it up live and use it just as if they’re sitting at Stahl’s or Oliferuk’s
computer and looking at QuickBooks themselves. So whether it’s QBB or
whatever file extension it is, that data needs to be sent over and -- and
continually sent over until we get this case resolved. So does that make
sense?
DEFENSE COUNSEL: Yes.
* * *
PLAINTIFF COUNSEL: So we want the entirety of the QuickBooks.
THE COURT: Yeah. That’s a yes. Yes. Native file, the entire thing,
from, I guess, the -- you know -- well, my recollection of how QuickBooks
works, I mean, it’s going to be from the inception of the file through its
current, you know, format.
DEFENSE COUNSEL: I don’t think you can parse it.
THE COURT: No. I don’t think so.
DEFENSE COUNSEL: I think if you produce it today, it will have
everything in the past.
THE COURT: You’ll have everything all the way back to when you first
started using it.
(Doc. 274 at 51, 68, 136, 138, 145, 245-246, 247) (emphasis added).
And in the course of adhering to its prior order, the court specifically rejected
the defendants’ suggestions that something other than the entire native dataset
should be produced:
DEFENSE COUNSEL: Yeah. So my response to their request for the
update is that we are willing to have a certified public accountant who has
their own ethical obligation to go and verify that the reports that are generated
from the updated version are true, correct, and accurate, an independent CPA
that can verify that and provide that information but that falls short of giving
the QBB file because it doesn’t have all the unnecessary, irrelevant data to
them. So they get what they --
THE COURT: Well, I’m not going to unwind the order.
* * *
DEFENSE COUNSEL: [M]y response to the updated request is to have a
CPA independently verify that those reports are accurate. They could use
that through the [Q]BB files. This way it doesn’t go into the hands of the
other side, and they have the verification that it is accurate.
THE COURT: No, no. I’m not – I’m not revisiting giving the native
QuickBooks data. That’s water under the bridge, and any time to have
revisited it, I think, is long since passed.
(Doc. 274 at 139-141).
But as if this colloquy with the court never took place, the defendants
proceeded to do just that. They filtered the QuickBooks data through an outside
accounting firm and produced a truncated file limited to what they deemed to be
sales data. (Doc. 279 at 6-7; Doc. 280 at 10). This is entirely improper. Defendants
never sought reconsideration or lodged any Rule 72(a) objection to the March 2021
order; nor did they seek any reconsideration or object to the December 2022 order.
And the time to do so has long since passed. Instead, they simply disregarded the
court’s clear and unambiguous directives and essentially revised the court’s order on
their own. This misconduct is entirely unjustified and warrants sanctions.
But to fashion an appropriate sanction, the court must first determine who is
to blame—Defendants or their counsel? If Defendants are culpable, then remedies
such as striking all or part of their pleadings may be appropriate—especially since
the previous imposition of monetary sanctions did not serve to deter them. Or if fault
lies with their counsel, then perhaps monetary sanctions and disciplinary or other
remedial measures are warranted. And if Defendants continue to defy the court’s
orders, contempt proceedings may be necessary. Thus, an evidentiary hearing will
be held to ferret this out.
V. Conclusion
For the reasons discussed during the December 2022 hearing and as set forth
above, the court provides as follows:
1. The November 10, 2022 order (Doc. 246) is VACATED IN PART such
that the evidentiary hearing contemplated therein will not be held because
it has become unnecessary. Defendants’ motion to stay such evidentiary
hearing (Doc. 258) is DENIED AS MOOT.
2. Plaintiff’s fee-and-expense motion (Doc. 257), as a supplement to its
motion for sanctions (Doc. 142), is GRANTED IN PART. By
October 27, 2023, Defendants must file a notice of compliance certifying
they have paid $11,329 to EmCyte. A failure to fully comply may result
in further sanctions including the entry of a default and/or a dismissal
of the counterclaims. Plaintiff’s motion for leave to file a reply brief (Doc.
277) is DENIED AS MOOT.
3. Defendants’ motion for sanctions (Doc. 245) is DENIED. Defendants’
motion for leave to file a reply brief (Doc. 260) is DENIED AS MOOT.
4. Plaintiff’s motion for a sanctions hearing (Doc. 279) is GRANTED. An
in-person evidentiary hearing will be set by separate notice. Defendants
must attend in person. XLMedica may appear through Stahl or another
corporate designee prepared to testify on its behalf.
5. Defendants’ motion for a protective order (Doc. 281) is DENIED.
ORDERED on September 29, 2023.
Lida Ee Line □□□
NICHOLAS P. MIZEL
UNITED STATES MAGISTRATE JUDGE
-18-