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Maniscalco v. Brother International Corp.

March 4, 2010

MARK MANISCALCO, ET AL., PLAINTIFFS,
v.
BROTHER INTERNATIONAL CORPORATION (USA), DEFENDANT.
JAMES MCFADDEN, ET AL., PLAINTIFFS,
v.
BROTHER INTERNATIONAL CORPORATION (USA), DEFENDANT.



The opinion of the court was delivered by: Wolfson, United States District Judge

NOT FOR PUBLICATION

OPINION

Presently before the Court is Defendant Brother International Corporation's ("BIC"), appeal from two Orders, dated June 29, 2009 (the "June 29 Order") and October 23, 2009 (the "October 23 Order"), by the Magistrate Judge ordering the production of certain design and engineering documents of BIC's parent corporation, Brother Industries Ltd. ("BIL"). Defendant argues that the Court should vacate the Magistrate Judge's Orders because the Magistrate Judge's findings regarding BIC's control over BIL's design records are clearly erroneous and contrary to law. Plaintiffs, Mark Maniscalco and James McFadden ("Plaintiffs"), contend that the Magistrate Judge's findings are entitled to great deference and should not be reversed because Defendants have failed to demonstrate that the Magistrate Judge abused her discretion in determining that Defendants had control over BIL's design records. The Court has considered the parties' moving, opposition, and reply papers, as well as the papers submitted by Amicus Curiae, the Organization for International Investment ("OFII"). For the reasons that follow, the Court will reverse the decision of the Magistrate Judge and vacate the June 29 and October 23 Orders.

I. Procedural History and Background

The Court will only recount facts relevant for the purpose of this motion. Defendant BIC, a Delaware corporation headquartered in Bridgewater, New Jersey, is a subsidiary of Brother Industries LTD ("BIL") and the authorized United States distributer and provider of customer support for Brother(c) brand inkjet Multi-Function Center line of all-in-one devices, which function as printers, fax machines, scanners and copiers (collectively, the "MFC machines"). AC ¶¶ 1, 15; 6, 9-13.*fn1 BIC also markets, advertises and distributes the replacement Original Equipment Manufacture ("OEM") ink cartridges used by the MFC machines. AC ¶1; 13. The MFC machines are manufactured by BIL, BIC's parent company, in Japan.

Plaintiffs filed putative class actions asserting claims relating to the MFC machines. One category of claims asserted relates to BIC's purported concealment of a printhead defect "referred to as the 'ME41 defect' because most model MFC machines display the error code, 'Machine Error 41' on their LCD screens when their print heads failed." Id. at ¶ 7.*fn2 The other allegations relate to the purported inordinate propensity of the MFC machines to consume and purge ink. Specifically, Plaintiffs allege that the MFC machines are designed to falsely display the message "INK Empty" and to cease printing, copying, and faxing until the cartridge is replaced despite the fact that a substantial quantity of ink remains in the cartridge. Id. at ¶ 5; 3, 17-20. Additionally, Plaintiffs allege that the MFC machines are designed to accelerate the depletion of ink by (i) implementing a "self-cleaning" feature that will deplete the cartridges even if the machine is not used and (ii) setting the MFC machine's default settings to use color ink even if the user seeks to print exclusively in black ink. Id. at ¶ 6.

Defendant denies Plaintiffs' claims, and asserted as one of its defenses that:

MFC products utilize a "duty cycle" which results in wetting the printheads when the products are not in use and which purges the clotted ink, i.e., ink that has been exposed to air and is somewhat dried, features which use relatively small quantities of ink in order to avoid damage to the products' printheads and which maintain superior print quality subsequent to a period during which the products have not been used.

Id. at ¶¶ 5, 25-26.*fn3 Defendant further asserted that

[T]o avoid permanent damage to the products' printheads and other product components, its MFC products are designed so that they will no longer print once one or more of the inkjet cartridges is empty.

Id. at ¶ 27. Additionally, Defendant stated that

MFC products employ two different LCD read-outs concerning ink levels, the first of which informs the user that the ink level is "near empty" and the second of which informs the user that the ink level is "empty." Brother further states that, when the user sees the "near empty" LCD read out, it is incumbent upon h(im)(er) to be prepared to replace the appropriate inkjet cartridge; once the LCD read-out changes from "near empty" to "empty", the products have insufficient ink to continue to print, such that, except for maintaining a small quantity sufficient to prevent air inflow into the ink delivery system and printing mechanism -- which would degrade future print quality and could cause damage to the entire ink supply system -- further printing and "duty cycles" are disabled until the empty cartridge(s) (is)(are) replaced.

Id. at ¶ 30. Plaintiffs assert that BIC reiterated the foregoing defenses in its portion of the parties' Joint Discovery Plan, yet when plaintiffs attempted to verify these statements in discovery (i.e., request documents related to these defenses and Plaintiffs' allegations), "BIC declined to produce facts that BIC deemed to be 'technical information relating to design changes in the relevant printers' because such requests seek 'information from an entity that is not a party to this action [BIL]." Plaintiffs' Opp. Br. at 4 (quoting Joint Letter Brief dated October 10, 2008 ("Joint Letter Brief"), Ex. 2 at 6-7 (document requests); Joint Letter Brief, Ex. 3 at 12, 15-24 (document requests); Joint Letter Brief, Ex. 7 at 5-11, 13 (interrogatories)). Plaintiffs contend that after spending months trying to resolve the matter informally, they "moved for an order compelling the production of the so-called 'design-related' documents BIC claims are in BIL's possession, or, in the alternative, for an order precluding BIC from using that information in this litigation." Plaintiffs' Opp. Br. at 5.*fn4 BIC objected to Plaintiffs' discovery requests for design related documents on the grounds that any documents relating to the design of the MFC machines and inkjet cartridges were not within the possession, custody or control of BIC. Significantly, however, BIC advised "that to the extent 'design' or 'technical' information was in BIC's possession, custody or control, BIC produced such documents." Joint Letter Brief at 42 (citing Def. Ex. 16). BIC claims to have produced "thousands of pages of highly technical information for the dozens of models at issue in the purported class." Id. (Citing Def. Exhs. 15, 19, 20, 21). Accordingly, what is at issue are design related documents in the physical possession of BIL.*fn5

On December 8, 2008, following oral argument on the discovery dispute, the Magistrate Judge concluded that the Plaintiffs had failed to satisfy their burden of proving that BIC had control over documents pertaining to the design of the MFC machines and inkjet cartridges which were in the physical possession of its Japanese corporate parent, BIL. Tr. 33:2-21. The Magistrate Judge ordered BIC to submit to a 30(b)(6) deposition on issues related to BIC's control over the design documents. Id. Thereafter, Plaintiffs took 30(b)(6) depositions of Donald W. Cummins, BIC's Senior Vice President of Marketing and a member of BIC's board of directors, and Charles Stadler, BIC's Vice President of National Service.

On June 29, 2009, after reviewing the parties' original and supplemental submissions related to the production of design related documents, the Magistrate Judge ordered the production of the requested documents from BIL, finding that BIC had "control" over the documents as that term is used Fed.R.Civ.P. 34(a). BIC subsequently moved for reconsideration of the June 29 Order, which motion was denied on October 23, 2009.

II. Standard of Review

"A United States Magistrate Judge may 'hear and determine any [non-dispositive] pretrial matter pending before the court.'" Cardona v. Gen. Motors Corp., 942 F. Supp. 968, 971 (D.N.J. 1996) (quoting 28 U.S.C. § 636 (b)(1)(A)); see also Fed. R. Civ. P. 72(a). A magistrate judge's ruling concerning discovery is non-dispositive. Eisai Co., Ltd. v. Teva Pharmaceuticals USA, Inc., 629 F.Supp.2d 416, 433 (D.N.J. 2009). The district court will only reverse a magistrate judge's decision on these matters if it is "clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); L. Civ. R. 72.1(c)(1)(A). A magistrate judge's finding is clearly erroneous when, although there may be some evidence to support it, the reviewing court, after considering the entirety of the evidence, "is left with the definite and firm conviction that a mistake has been committed." Dome Petroleum Ltd. v. Employers Mut. Liab. Ins. Co., 131 F.R.D. 63, 65 (D.N.J. 1990) (quotations omitted). "A district judge's simple disagreement with the magistrate judge's findings is insufficient to meet the clearly erroneous standard of review." Andrews v. Goodyear Tire & Rubber Co., Inc., 191 F.R.D. 59, 68 (D.N.J. 2000) (citations omitted). In contrast, "the phrase 'contrary to law' indicates plenary review as to matters of law." Haines v. Liggett Group, Inc., 975 F.2d 81, 91 (3d Cir. 1992); accord In re Human Tissue Products Liability Litigation, No. 06-135 (WJM), 2009 WL 1097671, * 1 (D.N.J. Apr. 23, 2009) (citation omitted). See also, Mruz v. Caring, Inc., 166 F.Supp.2d 61, 66 (D.N.J. 2001) ("[T]his ...


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