Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-02171/USCOURTS-casd-3_15-cv-02171-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441bc Removal- Breach of Contract

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U8I

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OCT 0 4 2016 2

3 CLERK, U.S. DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DEPUTY 4

BY 4

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

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11 INTERLABSERVICE, OOO, a Russian

limited liability company,

Case No.: 15cv2171-KSC

12 ORDER GRANTING DEFENDANT’S

MOTION FOR POSTING OF A

BOND PURSUANT TO

CALIFORNIA CODE OF CIVIL

PROCEDURE SECTION 1030;

ORDER REQUIRING PLAINTIFF

TO POST A BOND IN THE

AMOUNT OF $58,422.50

13 Plaintiff,

v. 14

ILLUMINA, INC., a Delaware

corporation,

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16 Defendant.

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19 [Doc. No. 30.]

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22 Before the Court is defendant’s Motion for Posting of a Bond Pursuant to

California Code ofCivil Procedure Section 1030 [Doc. No. 30]; plaintiffs Opposition to

the Motion [Doc. No. 33]; and defendant’s Reply [Doc. No. 34]. In the Motion,

defendant argues that plaintiffshould be ordered by the Court to post a security bond for

defendant’s anticipated litigation costs in the amount of $77,517.50. Defendant argues

that plaintiffshould be ordered to post a security bond, because it is a foreign entity that

is essentially immune from judgment in California, and because defendant has shown

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there is a reasonable possibility that it will prevail against plaintiffin this action and

obtain a judgment in its favor. [Doc. No. 30-1, at pp. 12-21.]

In its Opposition, plaintiff contends that no security bond should be imposed,

because defendant failed to meet its burden ofshowing there is a reasonable probability it

will prevail in the action. In addition, plaintiff argues that it will be unfairly burdened if

the Court imposes a security bond, and this burden could preclude resolution ofthe case

on the merits. Even ifthe Court determines that a bond is proper, plaintiff argues that the

amount requested by defendant is excessive and should be reduced. [Doc. No. 33, at pp.

9-10.]

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10 For the reasons outlined below, the Court finds that plaintiffs Motion for Posting

of a Bond Pursuant to California Code ofCivil Procedure Section 1030 must be

GRANTED. As outlined more fully below, the Court finds that plaintiffmust be ordered

to post a bond in the amount of $58,422.50. This amount represents the reasonable costs

defendant expects to recover ifit prevails against plaintiff on the causes of action in the

First Amended Complaint.

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16 Background

Plaintiffs First Amended Complaint includes causes of action for breach of

contract and common counts. According to the First Amended Complaint, plaintiff

Interlabservice, OOO, is a limited liability company based in Russia, and defendant

Illumina is a Delaware corporation with headquarters in San Diego. [Doc. No. 20, at pp.

1-2.] Jurisdiction in this case is based on diversity of citizenship. [Doc. No. 20, at p. 2.]

Plaintiff alleges in the First Amended Complaint that it entered into a series of

distributor agreements with defendant Illumina, Inc. between 2011 and 2014. Under the

terms ofthese agreements, plaintiffwas required to provide warranty services to end

customers who purchased defendant’s products through plaintiff. [Doc. No. 20, at pp. 3-

4.] According to plaintiff, defendant was obligated under these agreements to reimburse

plaintifffor the expense ofproviding warranty services and replacement parts to end

customers. [Doc. No. 20, at p. 4, 14,17.]

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1 Plaintiff alleges that defendant breached the agreements by refusing to honor its

warranty obligations. As a result, plaintiff claims it was forced to provide warranty

services, supplies, and parts to customers without any compensation from defendant.

[Doc. No. 20, at pp. 5-6.] Plaintiffs claims for damages caused by defendant’s alleged

failure to meet its contract obligations exceeds $500,000. [Doc. No. 20, at p. 7.]

Defendant filed a Cross-Complaint against plaintiff which includes the following

causes of action: (1) breach of written contract; (2) breach of covenant of good faith and

fair dealing; (3) breach of fiduciary duty; and (4) intentional interference with economic

advantage. [Doc. No. 2, at p. 1.] The Cross-Complaint claims damages in excess of

$75,000. [Doc. No. 2, at pp. 7-8.]

Defendant’s Cross-Complaint generally alleges that it entered into distributor

agreements with plaintiff which required plaintiffto “use all commercially diligent

efforts to market, distribute and support” defendant’s medical devices in Russia and to

refrain from undertaking any “unilateral activities” involving defendant’s medical

devices after the agreement terminated. [Doc. No. 2, at p. 3.] In connection with the

distributor agreements, defendant alleges that it also issued a written power of attorney

authorizing plaintiffto act as its representative in Russia, so that plaintiff could register

defendant’s products with the Russian government as required under Russian law. [Doc.

No. 2, at p. 3.] Defendant believes plaintiff was aware that defendant could not import,

market, or sell its medical devices in Russia without “continued registration.” [Doc. No.

2, atp. 3.]

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22 The Cross-Complaint further alleges that the most recent distributor agreement

expired by its own terms on December 31, 2014. [Doc. No. 2, at p. 3.] Defendant alleges

that plaintiff secretly and maliciously de-registered defendant’s medical devices in Russia

sometime between December 2014 and May 2015. [Doc. No. 2, at pp. 3-4.] Defendant’s

belief is that plaintiff de-registered the medical devices in order to disrupt and interfere

with defendant’s relationship with its new distributor and to retaliate against defendant

for allowing the distributor agreements between plaintiff and defendant to terminate

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without renewal. [Doc. No. 2, at pp. 6-7.] As a result ofthis de-registration of medical

devices, defendant claims it experienced an “actual disruption” of its existing and

potential business relationships and its ability to market and sell its medical devices in

Russia through its new distributor. Defendant further claims that it incurred attorney’s

fees and other expenses to reinstate the registration of its medical devices in Russia.

[Doc. No. 2, at pp. 4-7.]

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7 Discussion

8 Defendant’s Motion for a Bond to Secure Costs. /.

In support of its Motion for Post of a Bond, defendant cites Civil Local Rule

65.1.2(a) and California Code of Civil Procedure Section 1030. Essentially, defendant’s

argument is that its request for a security bond is justified, because defendant has met its

burden of showing it is likely to defeat plaintiff’s breach of contract and common counts

causes of action. According to defendant, plaintiff cannot prevail against defendant on

these causes of action, because it is unable to point to any specific terms ofthe parties’

distributor agreements that defendant breached. [Doc. No. 30-1, at pp. 13-15.] In

Opposition, plaintiff contends that it will prevail in the action, because the terms ofthe

parties’ distributor agreements support its allegation that defendant breached the

agreements by failing to fulfill its warranty obligations. [Doc. No. 33, at pp. 3-6.]

Local Rule 65.1.2(a) states as follows: “A judge may, upon demand of any party,

where authorized by law and for good cause shown, require any party to furnish security

for costs which may be awarded against such party in an amount and on such terms as are

appropriate.” CivLR 65.1.2(a). In Montserrat Overseas Holdings, S.A. v. Larsen, 709

F.2d 22 (9th Cir. 1983), the Ninth Circuit considered whether a similar court rule was

properly applied by the District of Hawaii. Citing Rule 290-1 ofthe Rules of Court for

the District of Hawaii, the plaintiff in a diversity action alleging breach of a real estate

contract was ordered by the Court to post a bond to cover potential attorney’s fees. Id. at

24. On appeal, the Ninth Circuit affirmed the order requiring the plaintiffto post a bond

for potential attorney’s fees, because the plaintiff was a foreign corporation with no assets

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1 in the United States, the amount ofthe bond was not excessive, Hawaii law provided for

the recovery of attorney’s fees, and the action appeared to lack merit. Id. at 24-25.------

“There is no specific provision in the Federal Rules of Civil Procedure relating to

security for costs. However, the federal district courts have inherent power to require

plaintiffs to post security for costs.” In re Merrill Lynch Relocation Management, Inc.,

812 F.2d 1116,1121 (9th Cir. 1987). “Typically federal courts, either by rule or by caseto-case determination, follow the forum state's practice with regard to security for costs,

as they did prior to the federal rules; this is especially common when a non-resident party

is involved.” Simulnet EastAssociates v. Ramada Hotel Operating Co., 37 F.3d 573, 574

(9th Cir. 1994), citing 10 Wright, Miller & Kane, Federal Practice and Procedure: Civil

2nd § 2671. In sum, this Court has authority to impose a bond requirement under Local

Rule 65.1.2(a) and/or California Code of Civil Procedure Section 1030.

California Code of Civil Procedure Section 1030 provides in part as follows:

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15 (a) When the plaintiff in an action or special proceeding resides out of

the state, or is a foreign corporation, the defendant may at any time apply to

the court by noticed motion for an order requiring the plaintiffto file an

undertaking to secure an award of costs and attorney's fees which may be

awarded in the action or special proceeding. For the purposes ofthis section,

‘attorney's fees’ means reasonable attorney's fees a party may be authorized

to recover by a statute apart from this section or by contract.

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20 (b) The motion shall be made on the grounds that the plaintiff resides

out ofthe state or is a foreign corporation and that there is a reasonable

possibility that the moving defendant will obtain judgment in the action or

special proceeding. The motion shall be accompanied by an affidavit in

support ofthe grounds for the motion and by a memorandum of points and

authorities. The affidavit shall set forth the nature and amount of the costs

and attorney's fees the defendant has incurred and expects to incur by the

conclusion ofthe action or special proceeding.

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(c) Ifthe court, after hearing, determines that the grounds for the

motion have been established, the court shall order that the plaintiff file the

undertaking in an amount specified in the court's order as security for costs

and attorney's fees.

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Cal. Code Civ. Proc. §§ 1030(a)-(c).

“The purpose of[Section 1030] is to enable a California resident sued by an outof-state resident to secure costs in light ofthe difficulty of enforcing a judgment for costs

against a person who is not within the court’sjurisdiction.” Yao v. Superior Court, 104

Cal. App. 4th 327, 331 (2002) (internal citations and quotations omitted). Under

California law, a defendant seeking to impose a bond under Section 1030 has the burden

to show there is a “reasonable possibility” that it will prevail in the action and obtain

judgment in its favor. Baltayan v. Estate ofGetemyan, 90 Cal. App. 4th 1427, 1432

(2001). A plaintiff “seeking relieffrom the requirement ofposting a bond or undertaking

has the burden ofproofto show entitlement to such relief. ffl]If adequate evidence

supports relieffrom the requirement ofposting a bond or undertaking, the trial court may

then exercise its discretion by waiving the requirement of a security.” Williams v.

FreedomCard, Inc., 123 Cal. App. 4th 609, 614 (2004).

When considering whether to order an out-of-state or foreign plaintiffto post a

security bond, the Ninth Circuit in Simulnet v. Ramada, 37 F.3d 573, held that District

Courts must “strike a delicate balance” and take care “not to deprive a plaintiffof access

to the federal courts,” as this could have “serious constitutional implications.” Id. at 575-

576. The Ninth Circuit also cited several key factors that should be considered to

determine whether it is appropriate to impose a bond to secure potential costs. These

factors include: (1) the purpose ofthe action and whether it was being pursued for an

improper purpose; (2) whether the posting of a bond would effectively infringe an

impecunious plaintiffs constitutional right of access to the courts; (3) the degree of

probability or improbability ofsuccess on the merits; and (4) the fairness and

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reasonableness ofthe amount ofthe security bond being sought as viewed from the

perspectives ofthe moving defendant and the non-domiciliary plaintiff. Id. at 575-576.

In Simulnet v. Ramada, 37 F.3d at 573, the Ninth Circuit considered whether the

Nevada District Court properly applied a Nevada statute that is similar to California’s

Section 1030 when it ordered the out-of-state plaintiffto post a cost bond five days

before trial. Id. at 574. The litigation progressed in the District Court for three years

without a request for a cost bond. During this time, the parties engaged in extensive

discovery and the District Court denied two summary judgment motions by the

defendant. At the pre-trial conference five days before trial, the defendant argued that the

plaintiff should be ordered to post a cost bond, because it had already incurred a

substantial amount of attorney’s fees and costs to defend the action, and the underlying

contracts provided for attorneys’ fees to the prevailing party. When asked whether it

would be able to pay these costs ifthe defendant prevailed in the action, the plaintiff

acknowledged that it was insolvent. Id. Based on the amount offees and costs defendant

said it had already incurred, the District Court imposed a $500,000 cost bond. Id. When

the plaintiff was unable to post the bond, the District Court dismissed the action. Id.

On appeal, the Ninth Circuit in Simulnet v. Ramada reversed, concluding based on

the particular facts and circumstances ofthe case that the District Court abused its

discretion in imposing the cost bond. Id. at 576. Noting that the “common practice” is to

“apply the applicable state law,” the Ninth Circuit’s reversal was based in part on the

District Court’s failure to follow Nevada law. However, the Ninth Circuit’s main

concern was that the plaintiff had been unconstitutionally deprived of “access to the

federal courts” because of an “impecunious circumstance.” Id. at 575-576. Key facts

cited by the Ninth Circuit to support the reversal were that: (1) the District Court knew

the plaintiff would be unable to post the bond; (2) there was nothing to indicate the

plaintiff was pursuing the case for an improper purpose; (3) the case proceeded for three

years without a bond; and (4) the plaintiff’s claims survived two defense motions for

summary judgment, so it was apparent there were issues of fact for trial. Id.

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More recently, in at least two unpublished cases, the Ninth Circuit concluded cost

bonds were appropriate under California Code of Civil Procedure 1030. First, in Kourtis

v. Cameron, 358 Fed.Appx. 863 (9th Cir. 2009), a copyright infringement action, the

Ninth Circuit held that cost bonds imposed by the District Court under Section 1030 were

appropriate, because the plaintiffs lived out of state and the defendants were able to show

a “reasonably possibility” they would prevail based on a favorable ruling in a

“substantially similar” case. Id. The Ninth Circuit also concluded the amount ofthe

bond was reasonable, particularly because the District Court “reasonably reduced” the

amount of the bond when the plaintiffs “presented additional financial information.” Id.

at 867.

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Similarly, in Pittman v. Avish Partnership, 525 Fed.Appx. 591 (9th Cir. 2013), an

Americans with Disabilities Act case, the Ninth Circuit concluded that a cost bond was

appropriate under California Code of Civil Procedure Section 1030, because the plaintiff

lived out of state, and the defendant met its burden of showing it was likely to prevail in

the action. Defendant met this burden by submitting evidence showing that plaintiff’s

attorney had a history of filing frivolous lawsuits against the defendants. Defendant also

submitted evidence demonstrating that the plaintiff made statements during deposition

testimony in other lawsuits that were “irreconcilable” with the allegations in the pending

action. Id. at 593. The Ninth Circuit further concluded that the amount ofthe bond was

reasonable, because the District Court properly considered the amount of the bond from

the perspective of both plaintiff and defendants and reduced the amount of the bond from

$240,000 to $50,000 after giving the plaintiff an opportunity to submit additional

financial information. Id. at 594.

Here, it is undisputed that plaintiff is a limited liability company based in Russia.

In addition, plaintiff does not challenge defendant’s contention that a judgment issued by

this Court against plaintiff would be unenforceable in Russia. [Doc. No. 33, at pp. 1-2;

Doc. No. 20, at pp. 1-2.]

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Accordingly, the Court finds that subsection (a) of California Code of Civil Procedure

Section 1030 has been satisfied, because plaintiff is a foreign corporation. —----

Defendant argues there is a reasonable possibility that it will defeat the two causes

of action alleged in the First Amended Complaint for breach of contract and common

counts. [Doc. No. 30-1, at p. 13.] Both ofthese causes of action are based on the same

set of factual allegations. [Doc. No. 20, at pp. 4-7.] In defendant’s view, plaintiff has not

cited and cannot cite any specific provision ofthe subject distributor agreements that

defendant breached, because there is nothing in the parties’ agreements that specifically

state that defendant was required to reimburse or compensate plaintiff for warranty

services or parts. [Doc. No. 30-1, at pp. 14-15.]

Defendant also submitted several declarations in support of its Motion, at least two

of which persuasively challenge plaintiff’s theory ofthe case. [Doc. No. 30-4, at pp. 1-

4.] Mr. Garcia’s Declaration states that he has been a Senior Distribution Manager for

defendant’s international operations since April 2012. In this position, Mr. Garcia is

responsible for managing distribution and sales channels in Europe, the Middle East, and

Africa. [Doc. No. 30-4, at p. 1.] From April 2012 through January 2014, he worked with

plaintiff and was plaintiff’s “primary point of contact.” [Doc. No. 30-4, at p. 2.]

Mr. Garcia explains in his Declaration that plaintiff and defendant operated during

the relevant time period pursuant to distributor agreements. Plaintiff would purchase

defendant’s products directly from defendant and resell them to customers in Russia,

Ukraine, and Kazakhstan. [Doc. No. 30-4, at p. 2.] Defendant’s products “generally

come with a one-year warranty guaranteeing free replacement parts to end-customers.”

[Doc. No. 30-4, at p. 2.] Pursuant to the parties’ distributor agreements, plaintiff would

receive warranty requests directly from customers, order replacement parts from

defendant free of charge, and then provide those parts and warranty services to the

customers free of charge. [Doc. No. 30-4, at p. 2.]

Mr. Garcia further explains in his Declaration that his primary contact with

plaintiff was through its representative, Andrey Lomonosov. [Doc. No. 30-4, at 2.] In

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2012, Mr. Garcia states that he was advised by Mr. Lomonosov about a problem plaintiff

was having with ordering replacement parts free of charge from defendant for customers

with warranty issues. Under Russian law, parts ordered on a free-of-charge basis were

subject to customs duties, various taxes, and a long, cumbersome process that took many

months to complete. As a result, Mr. Lomonosov advised Mr. Garcia that plaintiff had

decided to order and pay for replacement parts for some customers and had spent some

$30,000 to $40,000 doing so. In addition, plaintiff delayed ordering about $80,000 worth

of parts for other customers with warranty issues. [Doc. No. 30-4, at p. 3.]

Mr. Garcia states in his Declaration that in late 2012 the parties discussed the

replacement parts issue during meetings and reached an agreement so that plaintiff could

avoid the difficulties associated with ordering parts on a free-of-charge basis. According

to Mr. Garcia, defendant agreed to increase plaintiffs discount on its purchases of

defendant’s products from 15 percent to 20 percent. This extra discount was then

incorporated into the parties’ 2013 distributor agreement. At the time, the parties

believed this would be enough to compensate plaintiff for having to pay for replacement

parts instead of ordering them on a free-of-charge basis. [Doc. No. 30-4, at p. 3.] In

support of his Declaration, Mr. Garcia also submitted copies of e-mails which reflect that

Mr. Lomonosov understood the parties’ agreement and that plaintiffwould be responsible

for paying the cost ofwarranty orders thereafter. [Doc. No. 30-4, at pp. 3-4.]

Defendant also submitted the Declaration ofMr. Lomonosov, which states that he

worked for plaintifffrom 2011 to 2014 and during this time period was responsible for

managing plaintiffs relationship with defendant. Based on a review ofthe Declaration of

Mr. Lomonosov, it is apparent that his understanding ofthe distributor agreements and

the parties’ working relationship during the relevant time period is the same as that of

Mr. Garcia. [Doc. No. 30-6, atpp. 1-3.]

In Opposition to defendant’s Motion, plaintiff argues that it will prevail on the

merits ofits First Amended Complaint, because the terms ofthe distributor agreements

support its allegations that defendant was responsible for all warranty obligations

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“without any changes” and “until the very end” ofthe parties’ business relationship.

[Doc. No. 33, at pp. 2-9.] In support ofits Opposition, plaintiffsubmitted the Declaration

ofDmitry Veryutin which contradicts the Declarations submitted by defendant. [Doc.

No. 33-1, at pp. 1-8.]

Mr. Veryutin’s Declaration states that he is a member ofplaintiffs board of

directors and is responsible for its legal affairs. [Doc. No. 33-1, at p. 2.] In conclusory

fashion, Mr. Veryutin states that defendant “was always responsible for reimbursing

[plaintiffs] cost of providing customer support and cost ofreplacement parts for

[defendant’s] products covered by the warranty.” [Doc. No. 33-1, at p. 3.] Although

Mr. Veryutin further states that there were discussions about making changes to

plaintiffs warranty obligations, he claims the proposed changes were “never finalized

and never became part ofthe distributor agreements, despite the fact that some but not all

transactions carried [a] bigger discount.” [Doc. No. 33-1, at p. 3.] In addition,

Mr. Veryutin states that any changes to the discount rate were “due to the general strategy

shift for [defendant] regarding its pricing for distributors worldwide, rising list prices and

[a] desire to maintain market share and gratitude for excellent results achieved by

[plaintiff] in promoting [defendant’s] products in its exclusive territory.” [Doc. No. 33-1,

at p. 3.] Mr. Veryutin’s Declaration also attacks the credibility ofMr. Lomonosov.

[Doc. No. 33-1, at p. 4.]

Contrary to the statements made by Mr. Garcia and Mr. Lomonosov in their

Declarations, it is Mr. Veryutin’s position that defendant was always responsible for

reimbursing plaintifffor the cost ofwarranty replacement parts and services [Doc. No.

33-1, at p. 3] and that any increases in the discount rate were not intended to compensate

plaintifffor any warranty replacements parts. [Doc. No. 33-1, at p. 3.] However,

plaintiffs Opposition and Mr. Veryutin’s Declaration fail to clearly identify any specific

provisions ofthe distributor agreements which provide that defendant was required to

reimburse plaintifffor the cost ofwarranty parts and/or services. Rather, plaintiffs

Opposition only cites general provisions ofthe distributor agreements indicating

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defendant offered warranties on its products. Nor does plaintiffs Opposition explain

how it intends to prove the allegations in the First Amended Complaint that defendant

breached the distributor agreements by allegedly failing to reimburse plaintifffor the

costs ofproviding warranty services and replacement parts to end customers in plaintiffs

territory. [Doc. No. 20, at p. 4.]

Unlike the Declarations ofMr. Garcia and Mr. Lomonosov, Mr. Veryutin’s

Declaration does not include details from which this Court can conclude that his

statements are based on personal knowledge and actual involvement in day-to-day

operations or negotiations.1 The Declarations ofMr. Garcia and Mr. Lomonosov not

only explain the positions they held during the relevant time period but also show they

were in a position to understand how the distributor agreements worked in practice, and

how the parties understood their obligations under the distributor agreements. Although

Mr. Veryutin’s contrary Declaration suggests there may be factual issues for trial, his

Declaration is not enough to convince the Court to deny defendant’s Motion for Posting

of a Bond. Rather, based on the facts and circumstances presented, the Court finds that

defendant submitted more than enough evidence to show there is a reasonable possibility

thatjudgment will be entered in its favor as to the causes of action in the First Amended

Complaint.

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Under the circumstances presented, the Court finds that defendant is entitled to an

order requiring plaintiffto post a bond or surety pursuant to California Code ofCivil

Procedure Section 1030 and Civil Local Rule 65.1.2(a). Defendant has shown there is

good cause for plaintiffto furnish security for costs. In addition, defendant satisfied the

requirements of Section 1030 by submitting enough evidence to show that plaintiffis a

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Defendant filed Objections to statements made in Mr. Veryutin’s Declaration.

[Doc. No. 34-1, at pp. 1-6.] The Court sustains plaintiffs objections to the extent they

contend that Mr. Veryutin’s statements lack foundation. Fed.R.Evid. 602.

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foreign corporation and that there is a reasonable possibility judgment will be entered in

its favor as to the causes of action in the First Amended Complaint.

II. Amount ofthe Bond or Surety.

As noted above, defendant seeks an order requiring plaintiffto post a bond or

surety in the total amount of $77,517.50. This amount is based on defendant’s

anticipated recoverable pre-trial and trial costs, which are set forth in its Opposition and

in the Declaration ofMatthew R. Jedreski, who is one of defendant’s attorneys. [Doc.

No. 30-1, atpp. 20-21.]

Plaintiff argues that the amount of any bond or surety ordered by the Court should

be “nominal” in order to “maintain equities.” [Doc. No. 33, at p. 1.] Plaintiffbelieves

the amount ofthe bond requested by defendant is “overly excessive” and should be

dramatically reduced. [Doc. No. 33, at p. 10.] In this regard, Mr. Veryutin’s Declaration

states as follows: “Requiring [plaintiff] to pay a very large sum ofmoney at the outset of

litigation would be [tanta]mount to a terminating sanction,” because plaintiffwould be

required to “deposit the full amount of [a] bond in cash in lieu ofsurety as [plaintiff] has

no credit history in the USA. [In addition, plaintiff] is already taxed by being forced to

litigate a case on the other side ofthe world against a much larger and much better

financed party in its own back yard.” [Doc. No. 33-1, at p. 4-5.]

Plaintiffs Opposition argues that it was “forced” to litigate the case here rather

than in Russia even though most ofthe witnesses are located in Russia, because

defendant “intentionally chose a home court advantage by requiring that the case be

brought only in San Diego.” [Doc. No. 33, at p. 2.] In this regard, plaintiffrefers to

Section 18.8 ofthe distributor agreements which state in part as follows: “The parties

hereby consent to the exclusive jurisdiction of, and venue in, the state and federal courts

within San Diego County, California, U.S.A.” [Doc. No. 33, at p. 2.] Defendant’s Reply

presents a contrary view that plaintiff could have filed suit in Russia and argued that the

forum selection clause is unenforceable but chose instead to sue defendant here for

tactical and strategic advantages. [Doc. No. 34, at pp. 3-4.]

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Despite its contention that a bond or surety requirement “would be equal to [a]

terminating sanction” [Doc. No. 33, at p. 10; Doc. No. 33-1, at p. 4], plaintiff did not

submit any specific evidence to show that it would be financially unable to meet the

requirement or that it would be unable to effectively litigate the case if defendant’s

Motion is granted. Mr. Veryutin’s Declaration merely states in conclusory fashion that

plaintiffs financial condition has been adversely affected by the Russian economy; that

plaintiffis already disadvantaged by having to litigate the case in the United States; and

that plaintiff has no credit history in the United States, so plaintiffwould only be able to

satisfy a bond requirement by depositing the full amount ofthe bond in cash. [Doc. No.

33-1, at pp. 3-4.] Therefore, based on the lack ofrelevant information submitted, the

Court has no reason to conclude that plaintiffwould be effectively denied access to the

Court if defendant’s Motion is granted and plaintiffis ordered to post a bond.

Defendant’s Anticipated Pre-Trial Costs.

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13 A.

14 1. Deposition Costs.

Generally, the Federal Rules ofCivil Procedure allow each party in a case to take a

total often depositions. Each deposition is generally limited to one day ofseven hours.

Fed.R.Civ.P. 30(a)(2)(A)(i); 30(d)(1).

Defendant represents that it intends to take a total often depositions in the case.

First, defendant intends to depose seven ofplaintiffs officers, directors, and managing

agents who “had direct involvement with the formation ofthe [distributor agreements],

its modifications, the 5% discount deal, and the performance regarding warranty orders.”

[Doc. No. 30-2, at p. 2.] Second, defendant intends to depose Mr. Lomonosov and

Nikolay Egorov, plaintiffs former employees who were “central to the negotiation ofthe

Distributors Agreement when they worked for [plaintiff], and to transactions involving

warranty orders with [defendant].” [Doc. No. 30-2, at p. 2.] Third, defendant intends to

depose plaintiffs damages expert. [Doc. No. 30-2, at p. 2.]

Based on a statement previously made by plaintiffin writing, defendant anticipates

that plaintiff also intends to take a total often depositions in the case. [Doc. No. 30-2, at

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1 p. 3; Doc. No. 34, at p. 10.] However, in Opposition to the instant Motion, plaintiff

complains that the number of anticipated depositions is too high. Plaintiffs position is

that each party only needs to depose two witnesses each, so the total number of

depositions should be four. [Doc. No. 33, at p. 10.] However, plaintiff does not explain

the basis for its beliefthat it is only necessary for the parties to depose two witnesses

each for a total offour depositions.2 Since defendant provided adequate justification for

taking ten depositions and plaintiffrepresented that it will only need to take two

depositions, the Court will calculate the appropriate amount for the requested bond or

surety based on a total oftwelve depositions, ten by defendant and two by plaintiff.

However, the Court will require plaintiffto seek leave ofCourt ifit decides to take more

than two depositions in the case.

To depose the ten witnesses identified above, defendant states that “it will need a

court reporter and videographer” at a total cost of $11,800.00. [Doc. No. 30-2, at p. 2.]

Based on “discount rates” obtained from a reporting service, Mr. Jedreski’s Declaration

states that the cost of a videographer will be $275.00 for the first hour and $100.00 for

each additional hour for a total estimated cost of $935.00 for each deposition. The cost of

a court reporter is $35.00 per hour with a total estimated cost of $245.00 per deposition.

[Doc. No. 30-2, at p. 3.] Defendant has not explained why it believes that it needs both a

court reporter and videographer for each and every deposition.

Federal Rule ofCivil Procedure 30(b)(3)(A) provides in part as follows: “The

party who notices the deposition must state in the notice the method for recording the

testimony. Unless the court order otherwise, testimony may be recorded by audio,

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26 As noted above, the Federal Rules permit each party to take ten (10) depositions

without seeking leave ofCourt. Fed.R.Civ.P. 30(a)(2). The Court notes that plaintiffhas

not filed a motion for a protective order seeking to limit the number of depositions

defendant intends to take in the case. Fed.R.Civ.P. 26(c).

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1 audiovisual, or stenographic means. The noticing party bears the recording costs....

Fed.R.Civ.P. 30(b)(3)(A).

Although the Federal Rules permit the noticing party to select the method for

recording, Federal Courts have indicated that deposition costs may not be recoverable if

they are “merely incurred for convenience.” U.S. E.E.O.C. v. W&O, Inc., 213 F.3d 600,

620 (11th Cir. 2000). See also Kalitta Air L.L.C. v. Central Texas Airborne System, Inc.,

741 F.3d 955, 959 (9th Cir. 2013); Humphreys & Partners Architects, L.P. v. Lessard

Design, Inc., 152 F.Supp.3d 503, 526 (E.D. Va. 2015). Without more, this Court

questions the need to incur the considerable expense ofhaving a videographer present for

all ten of defendant’s anticipated depositions. Since no justification has been provided

from which the Court can conclude it is reasonably necessary to videotape all ten

depositions, the Court will exclude videography expenses from defendant’s estimate of

recoverable costs for the purpose of determining the appropriate amount for the posting

of a bond or surety. With the exclusion ofthe videography expenses, defendant’s

anticipated deposition costs are significantly reduced from $11,800.00 to $2,450.00 for a

court reporter only.

As to some witnesses, defendant reasonably anticipates that it will be necessary to

retain an interpreter who charges $795 for six hours plus $150 for each additional hour.

[Doc. No. 30-2, at p. 3.] In this regard, Mr. Jedreski’s Declarations states that defendant

believes it will need to retain an interpreter for “ten seven-hour depositions ofRussian

witnesses.” [Doc. No. 30-2, at p. 3.] To reach the total often anticipated depositions

where it will need to retain an interpreter, Mr. Jedreski refers to two non-party witnesses,

Mr. Lomonosov and Mr. Egorov, plus “seven” ofplaintiffs officers, directors, and

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26 The exclusion ofthe costs for a videographer at this time is solely for the purpose

of calculating an appropriate and fair amount for a bond or surety under Section 1030 and

is not intended to preclude defendant from seeking reimbursement of any such costs ifit

should prevail at trial.

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managing agents, because they all speak Russian. [Doc. No. 30-2, at p. 2-3 (emphasis

added).] Although defendant’s estimate of $9,450.00 includes the cost of a Russian

interpreter for a total often depositions, defendant has only identified nine anticipated

deponents who speak Russian (z. e., seven ofplaintiffs officers, directors, and managing

agents, and two ofplaintiffs former employees). [Doc. No. 30-2, at p. 2.] Accordingly,

the Court finds that defendant’s estimated costs for a Russian interpreter during

depositions must be reduced from $9,450.00 to $8,505.00.

2. Costs Related to Non-Party Witnesses and Service ofProcess.

Since both Mr. Lomonosov and Mr. Egorov reside in Russia and speak Russian as

their first language, defendant’s estimate includes anticipated costs of $4,030.00 to cover

the cost ofserving these witnesses with translated subpoenas and another $80 in witness

fees. Defendant also expects to incur $40 in witness fees to depose plaintiffs damages

expert. [Doc. No. 30-2, at p. 2.] Plaintiffhas not specifically challenged the

reasonableness ofthese costs. Therefore, defendant reasonably anticipates total costs in

this category to be $4,110.00.

3. Cost ofCertified Transcripts.

As noted above, defendant intends to take a total often depositions in the case, and

based on a prior written representation by plaintiff, defendant also believed that plaintiff

intended to take a total often depositions in the case. Based on this information,

defendant anticipated it would need to spend a total of $21,900.00 to order certified

copies oftranscripts for a total oftwenty (20) depositions at an estimated cost of

$1,095.00 for each transcript. However, plaintiffindicated in its Opposition to

defendant’s Motion that it will only need to depose two witnesses. [Doc. No. 30-2, at

p. 3; Doc. No. 33, at p. 10.] Since defendant provided adequate justification for taking

ten depositions and plaintiffrepresented that it will only need to take two depositions, the

Court will calculate the appropriate amount for the requested bond or surety based on a

total oftwelve depositions, ten by defendant and two by plaintiff. However, the Court

will require plaintiffto seek leave ofCourt ifit decides to take more than two depositions

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in the case. Based on this new information, defendant can reasonably anticipate ordering

certified transcripts for twelve (12) deponents at a cost of $1,095.00 each. Accordingly,

the Court finds that defendant’s estimated costs for certified deposition transcripts must

be reduced from $21,900.00 to $13,140.00.

In sum, defendant reasonably expects to incur recoverable pre-trial costs of:

(1) $2,450.00 to retain a court reporter for a total often depositions; (2) $8,505.00 to

retain a Russian interpreter for nine depositions; (3) $4,110.00 to serve Mr. Lomonosov

and Mr. Egorov with translated subpoenas in Russia; and (4) $13,140.00 to order certified

deposition transcripts for twelve (12) deponents. Therefore, defendant’s total anticipated

recoverable pre-trial costs are $28,205.00.

Defendant’s Anticipated Trial Costs.

Since the parties’ commercial dealings took place over a period of about three and

one-half years, defendant estimates that the trial in this case will last seven days and that

it will incur costs of about $3,832.50 for obtaining certified trial transcripts from the court

reporter, assuming that plaintiffwill split the total cost. [Doc. No. 30-2, at p. 3.] Plaintiff

has not specifically challenged the reasonableness ofthese costs.

With respect to the attendance oftwo key, non-party witnesses at trial,

Mr. Lomonosov and Mr. Egorov, defendant expects to incur witness fees, per diem costs,

and travel expenses in the amount of $2,692.00, plus an additional $1,590.00 to pay the

costs of a Russian interpreter during their trial testimony. [Doc. No. 30-2, at p. 4.]

Plaintiff has not specifically challenged the reasonableness ofthese costs.

Since plaintiffhas produced “thousands of documents in Russian,” defendant

estimates that it will incur costs to translate approximately 100 documents to be used as

exhibits at trial. Defendant estimates the cost ofthese translations will be approximately

$22,103.00. Plaintiffhas not specifically challenged the reasonableness ofthese costs.

In sum, defendant reasonably expects to incur recoverable trial costs of

$30,217.50, and based on the information set forth in the previous section, defendant

reasonably expects to incur recoverable pre-trial costs of $28,205.00. Thus, the total

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1 amount ofpre-trial and trial costs that defendant reasonably expects to incur is

$58,422.50. Therefore, the Court finds that it is reasonable to require plaintiffto post a

Section 1030 bond in the amount of $58,422.50.

Conclusion

Based on the foregoing, the Court finds that plaintiffs Motion for Posting of a

Bond must be GRANTED pursuant to California Code ofCivil Procedure Section 1030

and Civil Local Rule 65.1.2(a). Under the circumstances ofthe case and based on the

evidence submitted, plaintiffis ORDERED to post a bond in the amount $58,422.50

within thirty (30) days ofthe entry ofthis Order. Plaintiffshall refer to the Local Rules

ofthe Southern District ofCalifornia to ensure proper compliance with this Order.

IT IS SO ORDERED.

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12 Dated: October 3,2016

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14 United States Magistrate Judge

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