United States District Court, N.D. Indiana, Hammond Division
APEX COLORS, INC. Plaintiff,
CHEMWORLD INTERNATIONAL LIMITED, INC., CHEMWORLD INTERNATIONAL LIMITED, LLC, ATUL MODI, MANOJ MODI, and PAUL BYKOWSKI, Defendants.
OPINION AND ORDER
R. CHERRY, MAGISTRATE JUDGE
matter is before the Court on Plaintiff's Motion for
Sanctions for Failing to Comply with This Court's Order
to Produce Cost and Profit Information [DE 447], filed by
Plaintiff Apex Colors, Inc. on December 23, 2016. Defendants
Atul Modi, Manoj Modi, and Chemworld International Limited,
Inc., and Chemworld International Limited, LLC (collectively
“Chemworld”) filed a response on January 3, 2017,
and Apex filed a reply on January 10, 2017.
January 5, 2016, Apex issued written discovery requests to
Chemworld. Chemworld did not respond, prompting Apex to file
a Motion to Compel. On March10, 2016, the Court denied the
Motion to Compel as moot because Chemworld responded to the
discovery after the motion was filed. However, the Court
granted fees incurred in bringing the motion.
27, 2016, Apex filed a second Motion to Compel related to the
same January 5, 2016 discovery, arguing that Chemworld's
answers were incomplete. Two of the requests at issue were
Interrogatories Nos. 3 and 4, which sought revenues, costs,
and profits on pigment and dye sales:
3. For the period 2003 to the present, state or identify
business records showing all payments received from customers
developed or identified by Paul Bykowski, and state or
identify business records showing what amount of that payment
went to Mr. Bykowski or another company or person at his
direction. Also state or identify business records itemizing
any expenses associated with these sales (for example, the
cost of Chemworld purchasing the product from a supplier).
4. For the period 2003 to the present, state or identify
business records showing profits attributable to sales from
customers developed or identified by Paul Bykowski.
(ECF 447, Ex. A). In the May 27, 2016 motion, Apex argued
that “Interrogatories 3-4 ask for the revenue, cost and
profits on pigment and dye sales, and what portion of those
profits are paid to Chemworld and what portion of those
profits are paid to Paul Bykowski. Chemworld produced sales
information but did not provide costs or profits.” (ECF
378, p. 5). Apex further argued that it could not calculate
the profits for each sale by subtracting the cost from the
sales price, as Chemworld had suggested Apex do, because
Chemworld had not provided the cost attributable to each sale
and because counsel is not competent to present evidence at
trial about Chemworld's profits. Apex argued that the
profit information must come from Chemworld itself. In
response, Chemworld argued, in part, that the preliminary
injunction ruling narrowed the scope of discovery and that
the discovery requests are confusing. However, Chemworld did
not provide any specific response to the arguments related to
Interrogatories Nos. 3 and 4.
16, 2016, the Court issued an Order granting the Motion to
Compel and requiring Chemworld to, among other things,
“provide a supplemental response to Interrogatories 3
and 4 and provide the missing cost and profit
information.” (ECF 383, p. 8).
25, 2016, Chemworld supplemented its discovery answers but
did not provide the cost and profit data. Instead, Chemworld
explained that it calculates the costs associated with sales
on a month-to-month basis, throws out those cost records at
the end of each month, and does not retain any spreadsheets
that reflect earlier costs. (Check Ex. B). Instead, Chemworld
responded that the only way to calculate Chemworld's
profit is to double the amount paid to Bykowski. Chemworld
further stated that the business records kept in ordinary
course identify the date of the sale or of shipping, the item
purchased, the customer, the quantity, the unit price, and
the gross sales amount.
instant motion, Apex asks the Court to sanction Chemworld for
failing to provide the information responsive to
Interrogatories Nos. 3 and 4 as ordered by the Court on June
argues that, even if it is true that Chemworld destroys its
costs information on a monthly basis, Chemworld has not
provided, at a minimum, any cost records for July 2016 (the
month following the Court's June 16, 2016 Order) or the
months thereafter, much less the cost records from the time
Apex initially served the discovery on January 5, 2016, or
when Chemworld was on notice of this litigation with
Apex's cease and desist letter in 2013. Apex represents
that Chemworld has not provided any cost or expense record.
Apex contends that, if Chemworld has been destroying records
relevant to this litigation for a period of years, it has
engaged in spoliation. Apex also contends that it is not
believable that Chemworld does not keep records of costs
associated with its sales because, at a minimum, the record
would be necessary in order to calculate taxes.
offers no response to these arguments. In fact, Chemworld
does not address the discovery requested in Interrogatories
Nos. 3 and 4 anywhere in its response brief. Instead,
Chemworld discusses Requests for Production Nos. 3 and 4,
which are different in scope. Chemworld's brief is thus
largely nonresponsive to the motion. Notably, Chemworld
offers no explanation for its failure to maintain cost
records starting June 16, 2016, if not starting January 5,
2016, or even earlier.
support of its motion, Apex explains that it needs this
information to calculate its damages with some degree of
reasonable certainty. If Apex proves that Chemworld is
liable, one measure of damages is lost profits. With the
discovery produced to date, Apex only has information on
Chemworld's revenues and the payments to Bykowski. Apex
notes that, Chemworld admits that it calculates profits by
subtracting costs from revenues and then gives a portion of
the profits to Bykowski. However, Chemworld has not turned
over the records its uses to make this calculation; rather,
Chemworld explained that it destroys these records.
argues that it should not have to rely on Chemworld's
representations that Chemworld fairly calculates profit or
that Chemworld in fact pays Bykowski half of the profits.
Apex offers, for example, that Chemworld could attribute a
commercially unreasonable amount of money to administrative
expenses, which would artificially reduce profits. Of course,
this is speculation. But, without the cost ...