American Fireglass v. Moderustic Inc.
3:15-cv-02866
S.D. Cal.Jun 28, 2019Background
- Plaintiff American Fireglass sued; Defendant Moderustic counterclaimed under the Lanham Act and California UCL for false advertising based on Plaintiff’s website statements that certain products were “tumbled.”
- The magistrate judge previously allowed limited damages discovery in related patent issues and ordered the parties to meet and confer about relevancy and proportionality; dispute remained unresolved and was briefed further after summary judgment rulings.
- The district judge denied Plaintiff’s motion for summary judgment on the Lanham Act and UCL counterclaims, finding the website statements were literally false.
- Defendant seeks broad financial records (balance sheets, QuickBooks exports, profit & loss, sales receipts, loan and credit information) for 2015–2017 to support damages and disgorgement claims.
- The court limited damages discovery to materials tied to the false advertising at issue (i.e., products actually advertised as “tumbled” or variants) and ordered production of gross sales for those products and, if Plaintiff will rely on expense evidence at trial, the related expense documents.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entitlement to damages discovery for Lanham Act / UCL counterclaims | Discovery for patent damages was main focus; objected to overbroad requests and to producing native QuickBooks data | Entitled to damages discovery to prove lost sales and disgorgement tied to Plaintiff’s false use of “tumbled” | Court: Defendant may obtain limited damages discovery tied specifically to products advertised as “tumbled”; Defendant failed to justify broader requests tied to Instruction 15.27 lost-profits proof, so those broader requests denied |
| Scope of producible financial documents (which products/timeframe) | Contends only a five-month inadvertent mislabeling (March–Aug 2016); objects to production beyond accused products/time | Asserts broader advertising period and seeks multiple years and broad financial categories to show lost sales and consumer confusion | Court: Production limited to gross sales for products actually advertised using “tumbled” (or variants) during the relevant advertising period; parties dispute which products/timeframe—must be resolved; lost-profits discovery not ordered absent a specific showing tied to Instruction 15.27 factors |
| Disgorgement (profits) vs. actual damages (lost profits, other factors) | Opposes overbroad financial disclosure; challenges relevance | Seeks gross revenue and expense data to compute disgorgement of profits attributable to false advertising | Court: Under model instruction for disgorgement, Defendant entitled to Plaintiff’s gross receipts for products advertised as “tumbled”; if Plaintiff will present expense offsets at trial, it must produce supporting expense documents and meet-and-confer on scope/format |
| Format and reliability of production (native QuickBooks vs summarized spreadsheet) | Refused to produce native QuickBooks; offered a verified summary (attachment) and noted inability/overbreadth of extracting only accused-product data from database | Wants native/raw QuickBooks data to verify reliability and prevent manipulation of summaries | Court: Plaintiff may provide a verified sworn certification attesting to accuracy of sales data summary to address reliability concerns; production in native QuickBooks not required if verification provided; parties to meet-and-confer on expense documents and format, with court intervention if no agreement by set date |
Key Cases Cited
- Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003) (UCL remedies limited to injunctive relief and restitution)