Court Opinion

ID: 2684130
Source: CourtListenerOpinion
Date Created: 2014-07-17 04:00:15.253999+00
Date Added: 2024-06-11T13:13:48.834084
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 13-2302

                       CASCADE YARNS, INC.,

                      Plaintiff, Appellant,

                                v.

   KNITTING FEVER, INC.; DESIGNER YARNS, LTD.; EMMEPIEFFE, SRL;
 FILATURA PETTINATA V.V.G. DI STEFANO VACCARI & C.(S.A.S.); SION
          ELALOUF; JAY OPPERMAN; DEBBIE BLISS; DOES 1-5,

                           Defendants,

        CASHMERE AND CAMEL HAIR MANUFACTURERS INSTITUTE,

                      Third Party, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Nathaniel M. Gorton, U.S. District Judge]

                              Before

                       Lynch, Chief Judge,
               Howard and Kayatta, Circuit Judges.

     Robert J. Guite and Sheppard, Mullin, Richter & Hampton LLP on
brief for appellant Cascade Yarns, Inc.
     Robert J. Kaler, and Holland & Knight, LLP on brief for
appellee Cashmere and Camel Hair Manufacturers Institute.

                          June 19, 2014
             LYNCH, Chief Judge.     This appeal arises from a discovery

dispute in litigation between two yarn manufacturers, Cascade

Yarns, Inc. ("Cascade") and Knitting Fever, Inc. ("KFI"), in the

Western District of Washington.              Cascade, the plaintiff in the

Washington action, accused KFI of making false representations

about the cashmere content of its yarns.

             The recipient of the discovery request at issue in this

case, Cashmere and Camel Hair Manufactures Institute ("CCMI"), is

a nonprofit corporation that offers confidential tests of the fiber

content of cashmere samples to its members, as well as retailers

and suppliers of cashmere and camel hair goods.                    CCMI is not a

party to the Washington action, but Cascade subpoenaed documents

from CCMI in Massachusetts related to its confidential fiber

testing    program    and   possible    correspondence       with    KFI.      Not

satisfied with the redacted documents CCMI had produced in response

to   the   subpoena,    Cascade    moved     to   enforce    the    subpoena   in

Massachusetts federal district court, arguing that the documents it

sought from CCMI were relevant to its claims against KFI.                        A

magistrate    judge    denied   Cascade's      motion   to   compel,    and    the

district court affirmed the magistrate judge's order. Though faced

with a formidable abuse of discretion standard of review and the

dismissal of all of its claims in the Washington case, Cascade,

undaunted, has appealed.        Finding there was no abuse of discretion

in the denial of this discovery, we affirm.

                                       -2-
                                               I.

             On May 24, 2010, Cascade sued KFI in federal district

court in Washington asserting, inter alia, unfair competition and

RICO claims based on KFI's alleged mislabeling of the cashmere

content of some of its yarns.                  On May 18, 2011, Cascade served a

subpoena on CCMI seeking two categories of documents: (1) CCMI's

correspondence with KFI or its agents; and (2) "[a]ll documents

related to yarn distributed by [KFI], such as [a] request for fiber

testing or results of such a test."                  The subpoena listed twelve

brand names under which KFI yarns are sold but indicated that the

request was not limited only to those brands.

             CCMI objected to the subpoena but produced 101 documents

on August 19, 2011, which it had redacted and designated as "highly

confidential" as permitted by a Stipulated Protective Order in the

Washington action.1          The documents included eleven requests for

fiber-content       testing       of    yarn    samples   in   2006   and   responses

thereto;   CCMI had redacted the names of the parties making those

testing requests.

             In     a    letter    to    CCMI's     counsel,    Cascade's     counsel

disagreed that the documents were "highly confidential" and sought

production     of       additional      documents,     including      correspondence

between CCMI and KFI. CCMI refused to waive the confidentiality of

     1
         The Washington district court later ruled that the
documents ought be marked as only "confidential," not "highly
confidential," pursuant to its order.

                                           -3-
the documents it had produced and objected to the balance of

Cascade's subpoena as "overbroad, unduly burdensome, and [requiring

CCMI] to search through years of its files looking for information

of marginal relevance to the basic issues in [Cascade's] case."

             On December 8, 2011, Cascade moved to compel CCMI's

compliance with the subpoena in Massachusetts federal district

court. Cascade asserted that the documents it sought were relevant

to its case as plaintiff -- that is, to its unfair competition and

RICO claims against KFI -- because (1) they relate to yarn products

that Cascade alleged were mislabeled and (2) unredacted copies of

the testing requests that CCMI had produced might show KFI's

knowledge of its cashmere mislabeling.         CCMI opposed the motion on

January 6, 2012.       KFI chose not to get involved in this discovery

dispute.

             Cascade's motion was referred to a magistrate judge, who

held a hearing on February 2, 2012.             At that hearing, CCMI's

attorney stated that KFI had not submitted any yarn samples to CCMI

for testing and that the requests for testing of KFI yarns had

mostly   come   from    small    retailers.    These   non-party   smaller

retailers,      in   turn,      had   relied   on   CCMI's   promise    of

confidentiality. CCMI also explained that the test results had, at

best, limited probative value to Cascade's mislabeling claims

because they were merely preliminary scans of the fiber content of

the submitted yarn samples.

                                      -4-
            The magistrate judge denied Cascade's motion on February

6, 2012 "for reasons set forth in the opposition of [CCMI], a non-

party to the underlying litigation."           The order cited Fed. R. Civ.

P. 26(b)(2)(C)(iii), which directs a court to limit discovery if

"the burden or expense of the proposed discovery outweighs its

likely benefit . . . ."         The magistrate judge, citing Continental

Datalabel, Inc. v. Avery Dennison Corp., No. 10-mc-10176-RGS, 2010
WL 2473154 (D. Mass. June 15, 2010), gave special consideration to

CCMI's status as a non-party without any interest in the underlying

dispute between the two yarn manufacturer parties, neither of whom

was a dues-paying member of the nonprofit.             See id. at *1 (denying

motion to enforce subpoena on non-party where non-party had already

complied with requests that were not overbroad or intrusive).               The

magistrate       judge   also   viewed    Cascade's     request   for   CCMI's

confidential test results of the cashmere content of sample yarns

as   more   or    less   an   attempt    to   co-opt   CCMI's   expertise   and

imprimatur for its own benefit (and without payment).               See In re

Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig., 249
F.R.D. 8, 12-13 (D. Mass. 2008).

            The district court affirmed the magistrate judge's order,

to which Cascade had objected, on September 20, 2013.             See Fed. R.

Civ. P. 72(a) (directing district court to modify or set aside a

magistrate judge's order in a nondispositive matter if it is

"clearly erroneous" or "contrary to law").

                                        -5-
            While CCMI and Cascade have litigated this discrete

discovery    dispute   in    Massachusetts   district   court,   several

developments in the underlying Washington action have greatly

narrowed the relevance of the documents Cascade seeks from CCMI.

First, by October 2012 -- months before the Massachusetts district

court affirmed the discovery ruling in favor of CCMI -- the

Washington district court had already dismissed all of Cascade's

claims against KFI.2    See Cascade Yarns, Inc. v. Knitting Fever,

Inc., 905 F. Supp. 2d 1235 (W.D. Wash. 2012); Cascade Yarns, Inc.

v. Knitting Fever, Inc., No. C10-861RSM, 2012 WL 2565067 (W.D.

Wash. Jun. 29, 2012).       Second, the Washington district court also

dismissed KFI's counterclaims against Cascade alleging that Cascade

had made false statements regarding the cashmere content of KFI's

yarns.3   See Cascade Yarns, Inc. v. Knitting Fever, Inc., No. 2:10-

cv-00861 (W.D. Wash. Sep. 10, 2013), ECF No. 962.         When Cascade

entered the notice of appeal in this case, only KFI's counterclaims

alleging Cascade's false statements as to the milk protein fiber

     2
         In April 2013, Cascade filed a new suit against KFI
alleging that KFI had failed to properly identify the country of
origin of certain yarns. Cascade does not argue that the discovery
it seeks from CCMI is relevant to these new claims.
     3
       The Washington district court denied KFI's first motion for
reconsideration of the district court's dismissal of counterclaims
related to its cashmere labeling on April 14, 2014. On April 24,
2014, KFI filed a second motion for reconsideration, which is
currently pending before the district court.

                                    -6-
content of its yarns had not been dismissed.         Cascade's original

claims against KFI did not concern the milk fiber content of yarns.

            Given that CCMI tests only for cashmere fibers, not milk

protein, the requested documents are now arguably relevant only to

a much narrower set of issues.           As to the second category of

requested   documents,   Cascade   contends   that   disclosure   of   the

identity of the retailers that submitted the KFI yarn testing

requests to CCMI is now relevant to KFI's damages against Cascade

arising out of pending counterclaims.       The argument is that those

requests are relevant because they show another reason, independent

of Cascade, for retailers to have stopped purchasing KFI yarns.

Cascade also asserts that evidence that KFI relied on analysis done

by Professor Kenneth Langley, retained by CCMI to do preliminary

fiber testing, could support a defense for Cascade of "unclean

hands."

            As to the first category of subpoenaed documents, CCMI's

correspondence with KFI or its agents, Cascade makes no specific

claim of relevance to the now-narrowed issues pending in the

Washington action.    Cascade complains only that CCMI has withheld

responsive documents. CCMI has represented to this court, however,

that it has not had any correspondence with KFI or its agents.4

     4
        CCMI's counsel explained that he has communicated with
KFI's counsel regarding CCMI's objections to a similar subpoena it
received several months earlier in a separate action brought
against KFI in the United States District Court for the Eastern
District of Pennsylvania.    The plaintiff in that case, a KFI

                                   -7-
                                    II.

           We reject CCMI's threshold argument that the appeal is

moot given the status of the Washington action. Whether the appeal

was worth pursuing is a different matter than whether it is moot.

           Cascade has explained that the documents it seeks are

still relevant to its defense against counterclaims that were not

dismissed.     In     addition,     there   is    still     a   motion     for

reconsideration pending before the Washington district court that

concerns KFI's cashmere-related counterclaims.             As a result, we

decide this appeal on the merits.

           Discovery orders are reviewed for abuse of discretion.

Cusumano v. Microsoft Corp., 162 F.3d 708, 713 (1st Cir. 1998).

"Under that standard, 'we may reverse a district court only upon a

clear showing of manifest injustice, that is, where the lower

court's   discovery   order   was    plainly     wrong    and   resulted    in

substantial prejudice to the aggrieved party.'"           In re Subpoena to

Witzel, 531 F.3d 113, 117 (1st Cir. 2008) (emphasis added) (quoting

Saldana-Sanchez v. Lopez-Gerena, 256 F.3d 1, 8 (1st Cir. 2001)).

           We decline to disturb the district court's ruling that

Cascade's interest in the contested discovery, even at the time of

that ruling, was slim compared to the burdens on the opponent of

customer, was represented by the same attorneys representing
Cascade in the pending Washington action against KFI. The district
court in Pennsylvania dismissed the case in March 2013. Cascade
does not argue that this correspondence between attorneys is
relevant to the Washington action.

                                    -8-
the discovery, CCMI.            The district court accorded appropriate

weight to the fact that CCMI is a stranger to the underlying

litigation. Cusumano, 162 F.3d at 717 ("[C]oncern for the unwanted

burden thrust upon non-parties is a factor entitled to special

weight      in    evaluating    the   balance    of   competing     needs.");   cf.

Heidelberg Ams., Inc. v. Tokyo Kikai Seisakusho, Ltd., 333 F.3d 38,

42   (1st     Cir.    2003)    (upholding      district   court    order   quashing

subpoena on non-party to underlying litigation where there was

imbalance between the need for the subpoena and the burden sought

to be placed on the non-party).

                 Cascade's arguments do not overcome the "high hurdle" of

showing a discovery order is both "plainly wrong" and has resulted

in "substantial prejudice."            In re Subpoena to Witzel, 531 F.3d at

117.       Cascade has not even bothered to address the "substantial

prejudice"        prong   of   the    review    standard,   which    is    itself   a

sufficient basis for upholding the challenged discovery ruling.

See id. at 120.        As to the "plainly wrong" element, Cascade relies

primarily on a factually distinct, unpublished case from the

District of Maine, McFadyen v. Duke University,                   No. 2:12-mc-196-

KHR, 2012 WL 4895979 (D. Me. Oct. 12, 2012).5

       5
         In McFadyen, the defendant, Duke University, sought
correspondence between a non-party academic and the plaintiffs,
former members of the Duke lacrosse team. The plaintiffs had sued
Duke University over its handling of an investigation regarding a
dancer who had accused Duke lacrosse team members of certain crimes
in 2006 after she had performed at a team party. The plaintiffs
admitted they had given interviews to the academic on this very

                                         -9-
            Cascade also makes the bold assertion that the magistrate

judge's order, which the district court affirmed, lacked a legal

and factual basis. That order cited both rules and case law, which

were directly relevant. The discovery order was plainly not "based

on an incorrect legal standard or a misapplication of the law." Ji

v. Bose Corp., 626 F.3d 116, 122 (1st Cir. 2010) (quoting In re

Subpoena to Witzel, 531 F.3d at 117) (internal quotation mark

omitted).    The district court's factual findings, including that

CCMI was a disinterested party to the Washington action, are also

supported by the record.          Accordingly, there was no abuse of

discretion even well before the Washington court pared down the

litigation before it.

                                    III.

            For   the   reasons   stated,   the   district   court's   order

denying Cascade's motion to enforce the subpoena is affirmed.

            Costs are awarded to CCMI.

topic, and the district court enforced the subpoena, reasoning that
the plaintiffs could not "invo[ke] the shield of privacy while
pursuing claims against Duke based upon the very events about which
they spoke with [the academic]."     2012 WL 4895979, at *4.     In
contrast, here, CCMI has represented that it has neither
corresponded with nor received test requests from KFI.

                                    -10-