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Controlled Kinematics, Inc. v. Novanta Corp.

United States District Court, D. Massachusetts

July 15, 2019

CONTROLLED KINEMATICS, INC., Plaintiff,
v.
NOVANTA CORPORATION, Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO COMPEL AND PLAINTIFF'S CROSS-MOTION FOR PROTECTIVE ORDER

          ALLISON D. BURROUGHS, U.S. DISTRICT JUDGE.

         Currently pending before the Court is a discovery dispute concerning certain discovery requests that seek information relating to Plaintiff Controlled Kinematics, Inc.'s (“CKI”) daily activities and interactions with Defendant Novanta Corporation's (“Novanta”) competitors. For the reasons explained herein, Novanta's motion to compel [ECF No. 33] is GRANTED in part and DENIED in part, and CKI's cross-motion for a protective order [ECF No. 39] is GRANTED in part and DENIED in part.

         I. BACKGROUND

         CKI is an independent sales representative for manufacturers of precision motion control solutions, such as Novanta. [ECF No. 27 (“Amended Complaint” or “Am. Compl.”) ¶¶ 1, 11]. Novanta supplies photonics and motion control components to original equipment manufacturers in the medical and advanced industrial technology markets. [Id. ¶ 12]. CKI has worked as an independent sales representative for Novanta's subsidiaries, MicroE Systems, Inc. (“MicroE”) and Applimotion, Inc. (“Applimotion”) and currently does work for one of Novanta's competitors, Allied Motion. [Id. ¶¶ 14-15, 20; ECF No. 39 at 1].

         In 2000, MicroE hired CKI as an independent sales agent. [Am. Compl. ¶ 15]. In June 2002, CKI and MicroE executed a written sales contract in which they agreed that CKI would be paid a 10% commission on sales. [Id. ¶ 16]. Novanta acquired MicroE in 2004. [Id. ¶¶ 14, 17]. CKI continued to serve as an independent sales agent for MicroE following the acquisition. [Id. ¶ 18]. Although Novanta initially paid CKI 10% commissions pursuant to the existing contract, between the time of the acquisition and December 2014, Novanta repeatedly reduced CKI's commission rate. [Id. ¶ 23].

         In December 2014, CKI and Novanta negotiated a new written sales contract. [Id. ¶¶ 25- 26]. The December 2014 contract provided for a commission rate of 10% and contained the following term concerning payment of commissions following termination:

For purchase orders that the Agent has presented to GSI[1] prior to the effective date of termination, and that GSI then accepts, in whole or substantial part, within the twelve month period immediately following the date of termination, the Agent will be entitled to the compensation that it would have received under this Agreement if this Agreement had not been terminated, specifically, but without limitation, Schedule A, provided, however, that if the Agent has been terminated for a material breach of this Agreement pursuant to Subsection 8.2, below, then the Agent will receive no compensation from GSI for orders accepted after the effective date of termination.

[Id. ¶¶ 30, 32].

         In approximately 2000, CKI also started working as an independent sales agent for Applimotion, which was acquired by Novanta in 2015. [Id. ¶¶ 14, 20]. CKI did not have a written contract with Applimotion, but received 10% commissions that were paid on a monthly basis. [Id. ¶¶ 20, 34]. CKI continued to work with Applimotion following the acquisition, and Novanta paid the 10% commission rate on sales of Applimotion products. [Id. ¶ 35].

         In the summer of 2015, Novanta rebranded MicroE and Applimotion products and services under the name “Celera Motion Group.” [Id. ¶ 36]. Around the same time, Novanta informed CKI that it wished to renegotiate the December 2014 contract covering MicroE products and to lower the commission rate it paid. [Id.]. Contract negotiations were delayed until February 2016 and continued through May 2016, but were not successful. [Id. ¶¶ 38-56]. Novanta sought to reduce CKI's commissions from 10% to 3% and withheld commissions earned during the first quarter of 2016 on Applimotion products on the ground that no contract requiring the commissions was in effect. [Id. ¶¶ 49-51].

         On June 3, 2016, Novanta informed CKI that it was being terminated “without cause” as an independent sales representative for MicroE and Applimotion products effective October 1, 2016. [Id. ¶¶ 57, 59-60]. Novanta believed that CKI was “doing essentially nothing” to earn the $1 million annual commission it had been receiving and that such a large commission was not justified based on the minimal work reported by CKI. [ECF No. 18 (Counterclaims) ¶¶ 11-13]. Novanta asserts that during 2016, CKI actively courted Novanta's competitors and set up a business to compete directly with Novanta. [Id. ¶¶ 14-15].

         When CKI reached out to Novanta in 2017 regarding payment of commissions earned during the last quarter of 2016, Novanta refused to pay commissions on MicroE products based on Novanta's belief that CKI was not entitled to any commissions because all purchase orders during the quarter had been generated by Novanta personnel. [Am. Compl. ¶ 73]. Novanta also continued to take the position that CKI was not entitled to commissions on sales of Applimotion products because there was no written agreement requiring commissions to be paid. [Id. ¶ 77].

         On June 2, 2017, CKI filed this lawsuit against Novanta seeking to recover sales commissions earned following the October 1, 2016 termination date. [ECF No. 1 ¶ 1 (“Complaint”)]. The Complaint alleged violations of California's Independent Wholesale Sales Representative Contractual Relations Act of 1990 (Cal. Civil Code § 1738.10), violations of Massachusetts General Laws ch. 104, §§ 7-9, violations of Massachusetts General Laws ch. 93A, breach of contract, restitution, and unjust enrichment. [Id. ¶¶ 98-131]. On November 29, 2017, the Court denied a partial motion to dismiss. [ECF No. 15]. Novanta answered the complaint on December 22, 2017 and asserted counterclaims for breach of contract, restitution, and unjust enrichment. [ECF No. 18 (Counterclaims) ¶¶ 16-27]. On June 5, 2018, CKI filed the Amended Complaint and added a claim for bad faith termination. See [Am. Compl. ¶¶ 132-34].

         On October 10, 2018, Novanta served its First Requests for Production and First Set of Interrogatories. [ECF No. 37-3]. CKI served responses to the Requests for Production on November 9, 2018 and to the Interrogatories on November 16, 2018. [ECF Nos. 34-1, 34-2]. On December 13, 2018, CKI provided a supplement to its November 9, 2018 Responses to Novanta's First Set of Requests for Production. [ECF No. 34-3].

         On December 18, 2018, Novanta filed a motion to compel certain discovery responses. [ECF No. 33]. On January 11, 2019, CKI opposed the motion to compel and filed a cross-motion for a protective order. [ECF Nos. 37, 39]. Novanta opposed the cross-motion for a protective order on January 25, 2019 and filed a reply brief in support of its motion to compel on February 1, 2019. [ECF Nos. 42, 43].

         II. MOTION TO COMPEL

         Pursuant to Federal Rule of Civil Procedure 26(b), parties are entitled to discovery “regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” On a motion to compel, “[t]he party seeking information in discovery over an adversary's objection has the burden of showing its relevance.” Johansen v. Liberty Mut. Grp., Inc., No. 15-cv-12920-ADB, 2017 WL 6045419, at *1 (D. Mass. Dec. 6, 2017) (citing TG Plastics Trading, Co. v. Toray Plastics, No. 09-cv-336S, 2010 WL 936221, at *2 (D.R.I. Mar. 12, 2010)); see Karl v. Bizar, No. 2:09-cv-00034, 2009 WL 3418676, at *3 (S.D. Ohio Oct. 19, 2009) (“The proponent of a motion to compel discovery bears the initial burden of proving that the information sought is relevant.”). Once a showing of relevance is made, the party opposing disclosure bears the burden of showing that the requested discovery is improper. See Aronstein v. Mass. Mut. Life Ins. Co., No. 15-cv-12864-MGM, 2017 WL 2818993, at *2 (D. Mass. June 29, 2017).

         “District courts exercise broad discretion to manage discovery matters” and “to tailor discovery narrowly.” Heidelberg Americas, Inc. v. Tokyo Kikai Seisakusho, Ltd., 333 F.3d 38, 41 (1st Cir. 2003); Primarque Prod. Co. v. Williams W. & Witt's Prod. Co., No. 15-cv-30067-TSH, 2016 WL 6090715, at *2 (D. Mass. Oct. 18, 2016). When exercising this discretion, courts assess disputed discovery requests in light of the proportionality considerations articulated in Rule 26(b)(1), including “the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” See Fed.R.Civ.P. 26(b)(1); Sustainable Sourcing, LLC v. Brandstorm, Inc., No. 12-cv-30093-MAP, 2017 WL 217747, at *2 (D. Mass. Jan. 18, 2017) (“concepts of relevance and proportionality dictate limits on the discovery to which Plaintiff is entitled”).

         Novanta seeks to compel discovery responses from CKI on two topics: (i) the activities of CKI's employees and (ii) CKI's work, and preparation to work, for Novanta's competitors. [ECF No. 34 at 5]. CKI has cross-moved for a protective order barring discovery of CKI's work as a sales representative for any company other than Novanta and its predecessors. [ECF No. 39].

         A. Activities of CKI, Its Principals, and Its Employees (Novanta's Request for Production No. 26)

         Novanta intends to defend this lawsuit by demonstrating that CKI did not earn post-termination sales and therefore is not entitled to any post-termination commissions. [ECF No. 34 at 7]. In support of this anticipated defense, Novanta sought to discover the sales activities of CKI and its employees during 2015 and 2016 in part through Request for Production No. 26 (“RFP No. 26”), which requests: “[a]ll documents showing what CKI and its principals and employees were doing on a daily basis in 2015 and 2016, including, without limitation, calendars, date books and meeting notices.” [ECF No. 34-2 at 12]. CKI objected to RFP No. 26 as “vague, overbroad, and seek[ing] information not reasonably calculated to lead to the discovery of admissible evidence, ” but agreed to produce “calendars and datebooks [sic] entries concerning efforts by CKI, its principals and employees, to sell Novanta products.” [Id.].

         Novanta contends that the information sought by RFP No. 26 is “directly relevant to [its] defense that CKI failed to perform its contractual obligations” under the December 2014 contract concerning sales of MicroE products, which required that CKI “diligently and actively promote, sell, support, install, and maintain” MicroE products. [ECF No. 34 at 7-8]. Novanta further asserts that documents after October 1, 2016 are relevant ...


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