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Topline Solutions, Inc. v. Sandler Systems, Inc.

United States District Court, D. Maryland

April 3, 2017

TOPLINE SOLUTIONS, INC., Plaintiff/Counter-Defendant,
v.
SANDLER SYSTEMS, INC., Defendant/Counter-Plaintiff.

          MEMORANDUM

          ELLEN LIPTON HOLLANDER, UNITED STATES DISTRICT JUDGE

         This Memorandum addresses the Objection filed by Sandler Systems, Inc. (“SSI” or “Sandler”), defendant and counter-plaintiff, as to discovery rulings made by U.S. Magistrate Judge Mark Coulson. The facts set forth below are limited to those pertinent to the Objection.

         I. Factual Background

         Nearly seven and a half years ago, Topline Solutions, Inc. (“Topline, Inc.”), plaintiff, sued Sandler for, inter alia, breach of two contracts. In August 2016, SSI moved for leave to file a counterclaim against Topline, Inc. and a third party complaint against Steven Kraner, the president, founder, and sole shareholder of Topline, Inc. ECF 253 (“Motion for Leave to File”); ECF 312, ¶ 17. I shall refer to Topline, Inc. and Kraner collectively as “Topline.”

         At a hearing held on November 30, 2016, Judge Motz granted the Motion for Leave to File. See ECF 297. The Counterclaim was docketed on December 1, 2016, at ECF 298. A few days later, on December 12, 2016, SSI filed an amended counterclaim and third party complaint. ECF 312 (“Amended Counterclaim”).

         The underlying lawsuit is rooted in events that begin in 1991, when Kraner purchased an SSI franchise. ECF 89-38, ¶ 4 (Kraner Declaration, 11/18/11). Thereafter, Kraner informally began to modify SSI's intellectual property, in an attempt to adapt those materials to the high- tech market. See ECF 89-38, ¶¶ 6-15. Kraner's alterations were not formally authorized by SSI and constituted a breach of the franchise agreement with SSI. Id. ¶¶ 33-34. In 2004, Kraner assigned to Topline, Inc. his rights and duties under his first franchise agreement with SSI. ECF 312, ¶ 18. In 2005, after SSI learned of Kraner's modifications, the parties entered into the High Tech Bootcamp Agreement (“HTBCA” or “AMR”). ECF 312, ¶¶ 35-41; see ECF 312-7 (HTBCA).

         The purpose of the HTBCA was to “confirm in writing [the parties'] agreement with respect to the production and ownership” of SSI's intellectual property and “to provide for the payment of the production fee by . . . Topline [, Inc.] to SSI . . . .” ECF 312, ¶¶ 35, 38; see ECF 312-7, ¶ B. The HTBCA essentially provides, in pertinent part, that neither Topline, Inc. nor Kraner could register SSI's intellectual property with the United States Copyright Office, and that Topline, Inc. and Kraner relinquished any right independently to produce or reproduce SSI's intellectual property, or any variation thereof. See ECF 312-7, ¶ 4-4.2.

         SSI claims that, on or about May 13, 2016, it became aware of Topline's registration of a “work” with the Copyright Office, over 450 pages in length, called Building Your Sales Factory. ECF 312, ¶ 45; see ECF 312-11 (paper format only). SSI received a certified copy of Building Your Sales Factory from the Copyright Office on or about August 10, 2016. Id. ¶ 50. According to SSI, the certified copy of Building Your Sales Factory included numerous pages of SSI's intellectual property, which it claims that it never provided to Topline. Id. ¶ 51. SSI also avers that Topline's copyright application was made without its consent, in violation of the HTBCA. Id. ¶¶ 52, 57. On this basis, SSI filed the Motion for Leave to File.

         Sandler asserts four counts in its Amended Counterclaim: breach of the HTBCA (Count I); breach of the franchise agreement (Count II); copyright infringement (Count III); and fraud (Count IV). See ECF 312, ¶¶ 54-80. Building Your Sales Factory is central to the Amended Counterclaim. See ECF 312, ¶¶ 54-80.

         The Court held a telephone scheduling conference with counsel on December 8, 2016, to address the impact of the filing of a counterclaim and third-party complaint. See docket. And, on December 9, 2016, the Court issued an Order governing the schedule. ECF 311. And, with respect to discovery, ECF 311 provided, in pertinent part, id.: “Additional discovery, limited to the counterclaim and third party complaint, shall be completed by April 10, 2017.” (Emphasis added).

         II. Discovery Dispute

         On February 3, 2017, SSI filed correspondence with Judge Coulson, to whom the many discovery disputes have been assigned (see docket, Aug. 18, 2014), [1] informing him of a dispute between the parties regarding interrogatories and a request for document production that SSI propounded on December 19, 2016. ECF 329. In particular, SSI informed Judge Coulson that Topline objected to nine of SSI's fifteen interrogatories and eleven of SSI's thirteen document requests. ECF 329 at 1-2. According to SSI, id. at 2: “What little information [Topline] provided in response to the six interrogatories they purported to answer was de minimis and incomplete because Topline, [Inc.] and Mr. Kraner have adopted an unreasonably narrow interpretation of the allegations made against them.”

         Among many other things, SSI requested from Topline, ECF 329-3 at 5-6:

5. “Documents sufficient to identify any and all orders for training or other materials or documents you received from 2005 to the present”;
6. “All documents concerning sales training programs, manuals, workbooks, videos, audios, powerpoints, or other materials or documents you created, in whole or in part, from 2005 to the present”; and
7. “Documents sufficient to identify any and all fees you charged any and all clients or customers from 2005 ...

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