Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_03-cv-00873/USCOURTS-azd-2_03-cv-00873-2/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 15:1126 Patent Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Physician's Choice of Arizona,)

Inc., )

)

Plaintiff, ) No. CIV 03-0873 PHX RCB

)

vs. ) O R D E R

)

Visual Changes Skin Care )

International, Inc., )

)

Defendant. ) )

I. Introduction

On December 15, 2004, Plaintiff Physician's Choice of Arizona

("PCA") filed a Request for Conference Regarding Discovery

Management. (doc. 92). Defendant Visual Changes responded to this

request by agreeing that a hearing should be held and submitting

some of their own requests to the Court. (doc. 95). The hearing was

initially scheduled for Friday, January 21, 2005, to resolve only

one issue, but was vacated at the request of the parties a few days

prior to the conference. (doc. 98, 109). The parties assured the

Court that they were resolving many of the discovery disputes on 

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their own, and would only request a rescheduling of the hearing if

any issues remained after their discussions. 

On February 8, 2005, the parties stipulated to the

rescheduling of the hearing. (doc. 109). In an order submitted on

February 14, 2005, the Court scheduled the hearing for March 7,

2005, at 2:00pm. (doc. 114). The Court also requested that the

parties brief the issues to be discussed and their positions ten

days prior to the conference date. Both parties submitted briefs

and filed numerous additional motions prior to the hearing.

Essentially, the parties contested each others' discovery actions. 

After reviewing the parties' briefs and hearing oral arguments

on the contested matters, the Court, on April 19, 2005, issued an

order ruling on the contested discovery issues. Order (doc. 165).

Thereafter, on May 6, 2005, PCA filed a motion for attorneys' fees.

Motion (doc. 172). This motion was fully briefed on July 21, 2005.

Reply (doc. 200). However, due to their pending settlement

discussions, the Court delayed ruling on this motion. Those

discussions have apparently been fruitless. Having carefully

reviewed the arguments submitted by the parties on this motion, the

Court now rules.

II. Motion for Attorney's Fees 

In its motion, PCA asserts that, pursuant to Rules 26(c) and

37(a)(4) of the Federal Rules of Civil Procedure, it should be

awarded its attorney's fees because it was the prevailing party on

five out of the six discovery disputes addressed in the Court's

April 19, 2005 Order. Mot. (doc. 172) at 1-2. In relation to

discovery motions, Rule 37(a)(4) holds that a court,

...shall, after affording an opportunity to be

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heard, require the party or deponent whose

conduct necessitated the motion or the party or

attorney advising such conduct or both of them to

pay to the moving party the reasonable expenses

incurred in making the motion, including

attorney's fees, unless the court finds that the

motion was filed without the movant's first making

a good faith effort to obtain the disclosure or

discovery without court action, or the opposing

party's...[position] was substantially justified,

or that other circumstances make an award of

expenses unjust. 

Fed.R.Civ.P. 37(a)(4)(A)-(B). The "substantially justified" test

for opposing a discovery motion "has never been described as

meaning 'justified to a high degree,' but rather has been said to

be satisfied if there is a 'genuine dispute,'...or 'if reasonable

people could differ as to the appropriateness of the contested

action[.]'" Pierce v. Underwood, 487 U.S. 552, 565 (1988). 

Here, PCA argues that it "prevailed in (1) obtaining a

protective order that Visual Changes was to cease its ex parte

contacts with Mickey Miller; (2) obtaining a Court order compelling

the deposition of Mickey Miller to go forward before PCA was

required to respond to Visual Changes' December 9, 2004 discovery

requests; (3) obtaining a protective order that Visual Changes was

to withdraw its third-party subpoenas and letters offering

compensation for evidence; (4) obtaining a Court order compelling

the deposition of Carmen Urena to go forward; and (5) obtaining a

protective order that Greg Smith and the law firm of Dowling, Aaron

& Keeler either withdraw as counsel for Visual Changes, or cease

their request for confidential information and trade secrets." Id.

at 4-5. The Court believes that an award of fees is appropriate on

some but not all of these matters.

First, the Court finds an award of fees appropriate in

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1The Court notes that Visual Changes' fourth argument, regarding

Miller's attorney, was not raised or discussed in relation to the

Court's order of April 19, 2005. Order (doc. 165).

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relation to the matters involving Visual Changes' ex parte contacts

with Mickey Miller. Visual Changes does not contest that PCA

prevailed on this issue in the Court's order of April 19, 2005. 

Resp. (doc. 196) at 2. However, Visual Changes asserts that

reasonable people could differ as to the appropriateness of its

actions. Id. at 5. In support of this claim, Visual Charges notes

that (1) although Arizona law applies in this case, California law

allows unrestrained contact with former corporate employees; (2)

Miller defined himself as an independent contractor, not an

employee; (3) the "thrust" of interviews with Miller related "not

to what [Miller] had done in the course of patent prosecution but

rather his 'beefs' with PCA and his reports about actions by PCA's

president[;]" and (4) Miller was represented by independent counsel

in another legal matter and "after learning of that lawyer's

role,...made sure that [he] was aware and had no objections to the

interviews[.]" Id. at 5-8.1 Additionally, Visual Changes asserts

that an award of fees on this issue would be "unjust" since, in the

end, Miller performed a valuable service to the Court as he "acted

as a 'whistleblower' [sic] reporting critical document

destruction[.]" Id. at 8. 

The Court disagrees that Visual Changes' actions were

"substantially justified" or that an award of fees on this matter

would be "unjust." In its order, the Court specifically found

"Defendant's contact with Miller to be inappropriate and

unethical." Order (doc. 165) at 5. The Court shall grant PCA's

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fees in relation to this issue.

Second, the Court finds an award of fees appropriate in

relation to the protective order sought by PCA to screen Gregory

Smith from certain discovery in this case. Again, Visual Changes

does not contest that PCA prevailed on this issue in the Court's

order of April 19, 2005. Resp. (doc. 196) at 4. However, Visual

Changes asserts that reasonable people could differ as to the

appropriateness of its actions in relation to this matter. Id. at

11-12. In support of this claim, Visual Charges argues that it

took the position that no protective order was necessary because

(1) the patent claims had been withdrawn from the case; and (2)

there was a need to coordinate between Visual Changes and third

parties who PCA has sued on the same patents. Id. at 11. "Visual

Changes also took the position that no special provisions were

required on account of Mr. Smith's role in Visual Changes because

he had no operational duties in the corporation and could maintain

confidentiality." Id. at 11-12. 

The Court disagrees that Visual Changes' actions were

"substantially justified." In its order, the Court specifically

found that "Mr. Smith's involvement in this case is unique and

fraught with potential conflicts." Order (doc. 165) at 5. In

light of Smith's personal relationship with the Vice President of

Visual Changes, Lori Pope Smith, and the hostility shown between

the parties in this matter, it is difficult for the Court to see

how reasonable people could differ on whether Smith's continued

involvement in the case would raise serious confidentiality

concerns. The Court shall grant PCA's fees in relation to this

issue.

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Third, the Court deems an award of fees appropriate in

relation to PCA's request that the Court order that the deposition

of Mickey Miller proceed. Visual Changes disputes PCA's assertion

that it prevailed on this issue in the Court's order of April 19,

2005. Resp. (doc. 196) at 4. Specifically, although the Court

granted PCA's request that the Miller deposition occur before PCA

responded to Visual Changes' discovery requests, Visual Changes

asserts that it prevailed on its request that the deposition be

limited to matters not covered by any attorney-client privilege. 

Id. at 2-3, 8-9. In any event, Visual Changes argues that its

position was substantially justified. Id. at 9. 

The Court disagrees that Visual Changes' position regarding

the Miller deposition was "substantially justified." Originally,

PCA had noticed the deposition of Miller in January 2005. Order

(doc. 165) at 5. This deposition, however, was vacated upon an

agreement by the parties. Id. At the time of the hearing in March

2005, PCA wished to reschedule the deposition, but Visual Changes

refused. Id. The issue of Visual Changes' discovery requests was

only raised at the hearing on March 7, 2005. Id. at 5-6. 

Moreover, it is not clear to the Court that the issue of PCA

inquiring into privileged matters at the proposed Miller deposition

was ever truly contested by the parties. Reply (doc. 200) at 2-3.

The Court shall grant PCA's fees in relation to this issue.

The Court does not, however, believe that fees are appropriate

in relation to PCA's request that the Court order the scheduling of

the deposition of Carmen Urena. Initially, PCA sought a court

order approving its ex parte contact with Urena and allowing PCA to

notice and schedule her deposition. Visual Changes disputes PCA's

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assertion that it prevailed on this issue, arguing that it never

directly objected to the deposition. Resp. (doc. 196) at 3. 

This matter was not briefed by Visual Changes prior to the

hearing on March 7, 2005. Order (doc. 165) at 11. However, at the

hearing, although Visual Changes stated that it did not object to

the deposition, it argued that it would only be a "fishing

expedition" and would be irrelevant. Oral Argument Transcript,

March 7, 2005 at 03:19:53PM-03:20:13PM. Regardless, the Court

believes this dispute falls within the normal course of events that

occur in litigation. The Court shall deny PCA's fees in relation

to this issue.

Finally, the Court does not believe that an award of fees is

appropriate in relation to the matters of Visual Changes' thirdparty subpoenas and offers of money for evidence. At the hearing

on March 7, 2005, PCA argued that Visual Changes had filed illegal

and abusive subpoenas. Order (doc. 165) at 7. PCA asserted that

subpoenas issued by Visual Changes to PCA customers and industry

contacts were issued without notice to PCA. Id. In addition, PCA

argued that Visual Changes had committed misconduct by contacting

potential witnesses and offering them money to produce documents

and supporting testimony against PCA on issues important to a

defense by Visual Changes. Id. at 8. Specifically, PCA submitted

a letter allegedly sent by Visual Changes' counsel that offers $100

for each invoice produced by the solicited individual that is

helpful to their case. Id. PCA asserted that this violated

federal law, 18 U.S.C. § 201, and Arizona ethics rule 3.4(b),

relying on Arizona Ethics Opinion 97-07, prohibiting actions that

influence the testimony of witnesses. Id. In its order, the Court

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2 The Court notes that Visual Changes' argument regarding the

status of the materials sought as "documents" instead of "testimony"

was not raised or discussed in relation to the Court's order of April

19, 2005. Order (doc. 165).

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deemed such activities to be unethical and ordered Visual Changes

to immediately withdraw any issued but unresponded to subpoenas and

to cease the issuance of any such subpoenas and letters offering

compensation for evidence. Id. at 8. 

Visual Changes does not dispute that PCA prevailed on these

issues in the Court's order of April 19, 2005. Resp. (doc. 196) at

3. However, Visual Changes asserts that reasonable people could

differ as to the appropriateness of its actions in relation to

these matters. Id. at 11-12. Specifically, Visual Charges argues

that such practices are common in patent litigation, and, in any

event, the materials sought by Visual Changes were "documents" not

"testimony," of which only the latter is forbidden by the ethical

rule and statute cited by PCA.2 In response, PCA asserts that "the

offers necessarily sought testimony to establish the foundation for

any sales records obtained and to influence that testimony by

offering more money for documents (and testimony) favoring Visual

Changes' defenses." Reply (doc. 200) at 6-7. 

Although the Court is not convinced that such practices are

"common," it agrees that the ethical rule and statute cited by PCA

do not apply. At the outset, it is not clear to the Court that 18

U.S.C. § 201, a criminal statute, applies to this civil matter.

Regardless, the federal law and ethical rule 3.4(b) seem to relate

to unlawful payments of money for testimony. "A lawyer shall

not...offer an inducement to a witness that is prohibited by law."

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ER 3.4(b); see also Exbt. F (doc. 125). Arizona Ethics Opinion 97-

07 held that ER 3.4(b) does not prohibit "the payment of reasonable

fees to a fact witness[,]" however, "a fee that is unreasonably

high will tend to appear as an illegal and unethical inducement to

color testimony." Id. at 3-4. 

Here, the contested letters indicate that Visual Changes

sought "information and/or documentation," and that payment was

offered for the production of "invoices," thus documents. P. Brief

(doc. 125) at 11. The Court finds that PCA has not sufficiently

established that Visual Changes' letters sought "testimony." Thus,

the Court shall deny PCA's fees in relation to this issue.

Therefore, 

IT IS ORDERED that PCA's motion for attorney's fees (doc. 172)

is GRANTED in part and DENIED in part. It is denied as to the

matters regarding the third-party subpoenas, offers of money, and

the Urena deposition. However, the motion is granted as to the

other three matters raised by PCA. Any award of fees is subject to

a reasonableness determination. Thus, PCA shall file an accounting

of the related fees, under oath, within twenty days of this order. 

Response and reply may be filed in accordance with this Court's

local rules. 

DATED this 20th day of March, 2006.

Copies to counsel of record

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