05-16 Doc #30 Memorandum in Support of Stay

7/30/2019 05-16 Doc #30 Memorandum in Support of Stay

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ROBERT ALMBLAD, ))

Plaintiff, )

)

v. )

)

SCOTSMAN INDUSTRIES, INC., and )

KEVIN FINK, )

)

Defendants. )

____________________________________)

Case No. 1:13-cv-01297

MEMORANDUM IN SUPPORT OF DEFENDANTS MOTION TO

STAY DISCOVERY PENDING RESOLUTION OF MOTION TO DISMISS

Defendants Scotsman and Kevin Fink, through their motion, seek to stay discovery until

the Court has an opportunity to address their pending motion to dismiss. Discovery, if allowed

to proceed, will be broad, burdensome and likely to involve a large number of contested issues.

The motion to dismiss raises pure legal issues and, if granted, will dispose of this entire case.

Defendants only seek to stay discovery until the Court has an opportunity to rule on that motion

to dismiss. Plaintiff will not suffer any significant prejudice from the stay. There is no urgent

need to begin discovery. Plaintiff voluntarily waited almost a year after his claims accrued to

file suit.

Plaintiff filed this action asserting claims for defamation and a violation of the Lanham Act

on February 19, 2013. Both claims stem from statements Defendant Kevin Fink made on

Scotsmans behalf during a teleconference in which Plaintiff participated on February 28, 2012.

Plaintiff had claimed that commercial ice machines made by all manufacturers, including

Scotsman, have a design defect, but that the defect could be eliminated by retrofitting them

Case: 1:13-cv-01297 Document #: 30 Filed: 05/16/13 Page 1 of 13 PageID #:92


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with a device that Plaintiff tried to license to Scotsman and other ice machine manufacturers.

When Plaintiff proposed to the foodservice equipment standards-setting organization (whose

standards are incorporated into state and local food codes around the country) that it should

change its ice machine standards, Scotsman responded to Plaintiffs claims about Scotsmans

equipment by defending its products during a teleconference of a task group that the standards-

setting body formed to consider Plaintiffs proposed changes. Plaintiff alleges that he was

defamed during that teleconference.

Plaintiffs preservation requests to date reveal that Plaintiff intends to pursue extremely

broad discovery on topics that have no material relevance to this case including supposed

antitrust violations, the sale of Scotsman, communications about the Church of Scientology,

communications between Scotsman and another ice machine company about their businesses,

communications from the Department of Justice and other topics that have virtually nothing to

do with Plaintiffs defamation and Lanham Act claims. Even the discovery that may be relevant

to this case will be sweeping with depositions of numerous non-parties scattered across the

United States and other countries. Moreover, Plaintiffs prior litigation experience suggests that

he may have ulterior motives in pursuing this litigation. The short stay that Scotsman seeks will

help protect against the burdens of discovery until the Court has determined whether there is

even a claim upon which relief potentially could be granted.

BACKGROUND

A. Plaintiffs Claims For Defamation and False Advertising

Plaintiffs First Amended Complaint At Law (the FAC) has two counts. Count I is a

claim for defamation, and Count II is a claim for a violation of the false advertising prohibitions

of the Lanham Act, 15 U.S.C. 1125. He seeks $400 million in damages, $200 million for each



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count. Both claims arise out of statements Defendants allegedly made during a February 28,

2012 telephonic conference meeting (the NSF Conference) convened by NSF International

(NSF), an organization that sets sanitation standards for certain foodservice equipment,

including ice machines. The NSF Conference was convened in response to an Issue Paper that

Plaintiff had submitted. Plaintiff had asked NSF to consider a change to the NSF standard

applicable to ice making machines (NSF Standard 12). The purpose of the NSF Conference

was to discuss whether Plaintiffs proposed changes were necessary or appropriate to address

what Plaintiff had vociferously claimed were public health issues.

Prior to the NSF Conference, Plaintiff tried to license to Scotsman and other ice machine

manufacturers technology that he claimed prevented ambient air from entering ice making areas

of commercial ice making machines. When Scotsman, and apparently other ice machine

manufacturers as well, showed little interest, Plaintiff responded with a barrage of inflammatory

videos posted on the internet and e-mails circulated to NSF and its task group claiming that the

ice machines of Scotsman and other manufacturers had a design defect that rendered their ice-

making process unsanitary. Based on testing Scotsman had conducted prior to the NSF

Conference, Scotsman disagreed and explained why to the NSF task group. (See Memorandum

in Support of Defendants Motion to Dismiss (ECF No. 20) at 2-4.) Plaintiff filed this lawsuit

nearly one year later.

B. Plaintiff Has Made Similar Claims For Suspect Reasons In Prior Litigation.

Plaintiff has previously made similar claims about purported product defects in a

different setting the key duplication industry. Just like the claims Plaintiff made about ice

machines, Plaintiff publicly suggested that existing key duplication machines made by a leading

manufacturer, Axxess Technologies (Axxess), exhibited high failure rates producing defective



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keys that would not work, and that Plaintiff had invented revolutionary new technology that

would make the existing Axxess technology obsolete. (Verified Complaint in Axxess

Technologies, Inc. v. Robert E. and Yvonne Almblad and Laser Key II LP , United States District

Court for the District of Arizona Case No. Civ-99-2251 (Verified Complaint), attached hereto

as Exhibit A.) But Plaintiff ultimately was forced to recognize that his claims were false and

misleading, to publicly recant them and to issue a corrective press release. (Jan. 3, 2000

Stipulated Preliminary Injunction inAxxess Technologies, Inc. v. Robert E. and Yvonne Almblad

and Laser Key II LP, United States District Court for the District of Arizona Case No. Civ-99-

2251 (Injunction Order), attached hereto as Exhibit B.) Among the claims he was forced to

retract were statements in his press release that the existing technology was inferior because it

had a failure rate of 30 to 50% -- when the actual failure rate with Axxess equipment was only

5%. (Id. at 4; Verified Complaint, Ex. A at 10.)

As was the case with his overtures to Scotsman, Plaintiff made his key duplication

defect claims after trying to license his technology to Axxess. (Verified Complaint, Ex. A at

6.) Plaintiff first sent Axxess (and, in this case, Scotsman) a video purporting to demonstrate his

revolutionary technology and demanded an exorbitant royalty ($40 million, plus a 16%

running royalty, for a worldwide license) or else plaintiff would go public with his video.

(Opposition to Defendants Motion for Leave to File Counterclaim inAxxess Technologies, Inc.

v. Robert E. and Yvonne Almblad and Laser Key II LP, United States District Court for the

District of Arizona Case No. Civ-99-2251 (Axxess Brief) at 3-4, attached hereto as Exhibit C.)

Apparently frustrated by Axxess reluctance to license the technology, Plaintiff issued a press

release worded so that it appeared to come jointly from his company and Axxess, claiming that

Axxess technology was obsolete. (Id. at 5.) Axxess sued Plaintiff in the United States



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District Court for the District of Arizona for his false representations. (Verified Complaint, Ex.

A.) Shortly before Axxess was set to close on the sale of all its stock, Plaintiff tried to file a

$100 million counterclaim. Axxess opposed the counterclaim, in part, by demonstrating that the

proposed counterclaim was being filed in bad faith as part of an effort to disrupt the

contemplated sale. (Axxess Brief, Ex. C at 9.) The court denied Plaintiff leave to even file the

counterclaim because doing so would be futile, as Plaintiff could not state a claim for relief.

(May 3, 2000 Order in Axxess Technologies, Inc. v. Robert E. and Yvonne Almblad and Laser

Key II LP, United States District Court for the District of Arizona Case No. Civ-99-2251 at 9,

attached hereto as Exhibit D.)

C. Plaintiff is Likely To Seek Extremely Broad Discovery.

During the parties Rule 26(f) conferences, Scotsman raised the issue of document

preservation and identified several categories of evidence it sought to have Plaintiff preserve. In

return, Plaintiffs counsel likewise sent Defendants counsel a preservation letter. (May 2, 2013

Letter (May 2 Letter), attached hereto as Exhibit E.) Plaintiff outlined eighteen separate

categories of documents that he contends Defendants should preserve for discovery. These

include numerous categories of information that go far beyond the subject matter of the

Amended Complaint:

documents relating to potential antitrust violations; documents relating to the sale value of the Scotsman company; documents relating to the value of Scotsman to potential buyers; communications from the Department of Justice to Scotsman about Robert Almblad, ice

machines or the Church of Scientology (Plaintiff is apparently a former member of theChurch of Scientology);

documents relating to meetings or conversations between Scotsman and Manitowoc, adifferent ice machine manufacturer who is not a party to this suit;



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documents relating to a meeting between Manitowoc Ice and Scotsman about supposedcommunications from the Department of Justice about Plaintiff and the Church ofScientology; and

documents relating to withholding of payments to Scotsman employees.(May 2 Letter, Ex. E at 1-2.)

Likewise, Plaintiffs initial Rule 26(a) disclosures identify fourteen potential witnesses,

employed by or related to at least seven different entities and residing in locations across the

United States from Denver to Florida and in other countries. (Plaintiffs Fed. R. Civ. P 26(a)(1)

Disclosures (Plaintiffs disclosure), attached hereto as Exhibit F.) Plaintiffs list includes

Luciano Berti the CEO of Scotsmans ultimate parent company, the ALI Group, S.p.A., who

resides in Italy; neither ALI Group nor Mr. Berti had any involvement with Scotsman when the

alleged defamatory statements were made as ALI Group acquired Scotsman ten months later in

December 2012. Plaintiffs initial disclosures suggest he will seek discovery from these fourteen

individuals on a broad range of topics, many of which have virtually nothing to do with

Plaintiffs defamation and false advertising claims, including:

the profit and/or losses of Scotsman during relevant periods; the impact and potential impact of Plaintiffs inventions upon the potential sale of

Scotsman;

conversations with Manitowoc Ice management before and after the U.S. Department ofJustices keep separate orders as it would relate to air flow contaminate problemscommon to the commercial ice machines of Scotsman, Manitowoc and other ice machinemanufacturers;

conversations that were part of a collective effort to publicly deny the existence ofdefective airflows in ice machines and blame Plaintiffs character to increase or maintainthe profitability of ice machines and NSF;

the financial status of Scotsman; and all engineering issues relating to air flows in the commercial ice machines of Scotsman,

Manitowoc Ice and other commercial ice machine manufacturers.



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(Id.)

D. The Likely Burden on Scotsman and Non-Parties

Responding to the discovery outlined in Plaintiffs May 2 Letter and Rule 26 disclosures

will likely involve the collection and review of electronic and paper documents from three

different Scotsman facilities in Illinois, Colorado and South Carolina. Given the broad scope of

discovery, even if some reasonable limits are placed on Plaintiffs requests, ESI and paper

discovery is likely to be extremely burdensome in terms of costs and resources.

Plaintiffs disclosures show that discovery directed to non-parties will also be

considerably broad in scope and resource-intensive. Plaintiff may seek depositions from

witnesses located in Italy, Canada, Illinois, Colorado, Michigan, Wisconsin, Florida, and

Massachusetts.

E. Defendants Motion to Dismiss

On May 9, Defendants timely moved to dismiss this entire action under Federal Rule of

Civil Procedure 12(b)(6), because Plaintiff has failed to state a claim on either count of his

Amended Complaint. (ECF Nos. 19-20.) With respect to Count I, Defendants Motion argues

that Defendants statements were not defamatory because they referred only to Scotsmans own

equipment rather than Plaintiff; merely explained Scotsmans interpretations of a provision in a

model administrative food code, or were otherwise constitutionally protected statements under

the First Amendment. (Def. Mot. at 6-13.) Defendants Motion likewise shows that Plaintiffs

Lanham Act claim in Count II is meritless because Plaintiff does not compete with Scotsman and

therefore lacks standing to sue, and because the statements were not made in a promotional or

advertising context, as required to state a claim. (Def. Mot. at 13-15.)



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The Motion to Dismiss may dispose of the entire case. The Motion does not raise mere

pleading failures, but rather demonstrates that as pleaded, both counts are flawed as a matter of

law, and amendment will not cure their flaws.

F. Local Rule 37.2 Certification

Pursuant to FRCP 26(c)(1) and LR 37.2, Defendants counsel conferred with counsel for

Plaintiff regarding Defendants request to stay discovery. On May 15, 2013 at approximately

10:30 a.m., Charles Peters, counsel for Defendants, and Nicholas Motherway, counsel for

Plaintiff, spoke via telephone in regard to Defendants request to stay discovery. Counsel were

unable to reach agreement. Counsel for Plaintiff agreed to stay depositions, but claimed he

wanted to pursue document discovery to see if he could find evidence of other claims or claims

against additional parties.

ARGUMENT

A. A Stay Of Discovery Is Appropriate.

Discovery in this matter should be stayed pending the resolution of Defendants motion

to dismiss, which, if granted, would completely dispose of Plaintiffs claims. District courts

have broad discretion in controlling discovery matters. Packman v. Chi Tribune Co., 267 F.3d

628, 646 (7th Cir. 2001). Rule 26 authorizes a court to limit or stay discovery for good cause

in order to protect a party or person from undue burden or expense. Fed. R. Civ. P. 26(c)(1).

An order staying discovery pending the resolution of a dispositive motion is an appropriate

exercise of the courts discretion, and stays of discovery during the pendency of motions to

dismiss are granted with substantial frequency. In re Sulfuric Acid Antitrust Litig., 231 F.R.D.

331, 336-37 (N.D. Ill. 2005); See alsoSmart Options, LLC v. Jump Rope, Inc., No. 12-C-2498,

2012 WL 5499434, at *2 n.1 (N.D. Ill. Nov. 13, 2012); Lantz v. American Honda Motor Co.,



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Inc., No. 06-C-5932, 2007 WL 1424614, at *3 (N.D. Ill. May 14, 2007); Weigel Broadcasting

Co. v. TV-49, Inc., 466 F. Supp. 2d 1011, 1012 (N.D. Ill. 2006); Moline v. TransUnion, LLC, 222

F.R.D. 346, 348 (N.D. Ill. May 14, 2004). Indeed, as a recent district court opinion from the

Southern District of Indiana noted in granting a motion to stay, such relief is particularly

appropriate in light of the Supreme Courts recent adoption of a more rigorous pleading

standard that rested, in part, upon the concern that plaintiffs were subjecting defendants to

discovery costs despite having no legally cognizable claims. Sanders v. City of Indianapolis,

1:09-CV-0622-SEB-JMS, 2010 WL 1410587, at *1 (S.D. Ind. Apr. 2, 2010).

In considering a motion to limit discovery, the Seventh Circuit has held that the district

judge must compare the hardship to the party against whom discovery is sought, if discovery is

allowed, with the hardship to the party seeking discovery if discovery is denied. Marrese v.

Am. Acad. of Orthopaedic Surgeons, 706 F.2d 1488, 1493 (7th Cir. 1983) on reh'g, 726 F.2d

1150 (7th Cir. 1984) rev'd on other grounds, 470 U.S. 373, 105 S. Ct. 1327, 84 L. Ed. 2d 274

(1985). The Court must consider the nature of the hardship as well as its magnitude, and thus

give more weight to interests that have a distinctively social value than to purely private

interests. Id.

As other judges in this district and elsewhere have noted, a stay of discovery is

appropriate where the motion to dismiss can resolve the case-at least as to the moving party, or

where the issue is a threshold one, such as jurisdiction, standing, or qualified immunity. In re

Sulfuric Acid Antitrust Litig., 231 F.R.D. at 337 (internal citations omitted); see also U.S.

Catholic Conf. v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 79-80 (1988); Bilal v. Wolf,

No. 06-C-6978, 2007 WL 1687253, at *1 (N.D. Ill. June 06, 2007) ([s]tays of discovery are not

disfavored and are often appropriate where the motion to dismiss can resolve the case-at least as



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to the moving party); Ross v. Duggan, 113 Fed. Appx. 33, 45 (6th Cir. 2004) (If the plaintiff

possessed information sufficient to state a claim, he should have referenced it in his amended

complaint; and if the plaintiff did not possess such information ... any discovery on the subject

would have constituted an unjustified fishing expedition.); Gray v. First Winthrop Corp., 133

F.R.D. 39, 40 (N.D. Cal. 1990) (it is conceivable that a stay might be appropriate where the

complaint was utterly frivolous, or filed merely in order to conduct a fishing expedition or for

settlement value.).

A stay is warranted here. As an initial matter, Defendants motion to dismiss raises pure

questions of law and no factual inquiry beyond the facts alleged or referenced in the FAC is

required. Preparation of Plaintiffs response needs no discovery of additional facts, nor would

the submission of additional facts assist the Court in resolving the Motion. In those

circumstances, a stay of discovery is particularly appropriate. Sprague v. Brook, 149 F.R.D. 575,

577 (N.D. Ill. 1993) ([a] plaintiff's right to discovery before a ruling on a motion to dismiss may

be stayed when the requested discovery is unlikely to produce facts necessary to defeat the

motion.).

Staying discovery pending the resolution of the motion to dismiss will protect Defendants

from incurring the burden and costs of responding to the extraordinarily broad discovery that

Plaintiff appears to seek. Moreover, given the breadth and questionable relevance of many of the

topics Plaintiff indicates he intends to pursue, a stay would also save Defendants and the Court

from having to address many potential discovery disputes. All of that discovery and motion

practice will be unnecessary if Defendants motion to dismiss is granted.

While the proposed stay is justified based solely on the breadth of Plaintiffs

contemplated discovery, a stay may be particularly appropriate here because Plaintiffs prior



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litigation history suggests that he may have ulterior motives in pursuing that broad discovery. As

described above, Plaintiff has previously made similar claims about equipment in the key

duplication industry. Just as he did here, inAxxess Technologies, he issued public statements

attacking a manufacturers products in an attempt to pressure it to license one of his inventions.

In that instance, he was ultimately forced to agree to cease dissemination of his misleading press

release, retract his statements, and publish a new press release correcting the misstatements he

made. Axxess claimed that he was using the press efforts and ultimately the litigation process to

impede Axxess proposed sale of its business to another company. When Plaintiff sought leave

to file a $100 million counterclaim on the eve of that proposed sale, the court refused to allow

him to do so, characterizing the counterclaim as futile. This Court need not rule on Plaintiffs

motives here at this time. But Plaintiffs prior attempts to use litigation to manipulate business

transactions do, at a minimum, raise additional concerns. Plaintiff may be attempting to use

discovery not to discover facts about the alleged defamatory statements, but rather to fish for any

additional information he might be able to use to pressure Scotsman into some sort of proposed

licensing arrangement or other deal. That risk can be minimized by first determining if Plaintiff

can even state a claim for relief, before he is allowed to rummage through Defendants files.

Granting this motion will also protect third parties from the need to respond to

burdensome and expensive discovery. Plaintiff has listed individuals associated with numerous

third parties in his Rule 26 disclosures and, if discovery proceeds, they are likely to be

subpoenaed and deposed. Discovery will likely need to be sought from individuals who

participated in or observed the NSF Conference. These individuals are located throughout the

country, including Wisconsin, Florida, Georgia, Pennsylvania, California, Massachusetts, and



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Michigan. This discovery will be inconvenient and expensive for the Defendants. It will also

impose substantial costs and burdens on non-parties who must respond to the discovery.

B. Plaintiff Will Not Be Prejudiced.

Finally, a stay will not unfairly prejudice Plaintiff. Defendants motion to dismiss raises

purely legal issues and Plaintiff does not need discovery to enable him to respond to that motion.

Moreover, Plaintiff waited to file this lawsuit nearly a full year after his cause of action accrued.

As Plaintiffs own inaction confirms, there is no urgency to this suit, such that a brief stay will

cause any unfair prejudice to Plaintiff. Staying discovery until after a ruling on the motion to

dismiss will likely conserve party, non-party and judicial resources.

IV. Conclusion

For the foregoing reasons, the Court should enter an order staying all discovery pending

resolution of Defendants Motion To Dismiss (ECF No. 19).

Dated: May 16, 2013 Respectfully submitted,

/s/ Charles H.R. Peters_______

Charles H. R. PetersMatthew B. MockBrian L. JosiasSCHIFF HARDIN LLP233 South Wacker Drive, Suite 6600Chicago, Illinois 60606Phone: (312) 258-5500Fax: (312) 258-5600

Counsel for Defendants Scotsman Industries, Inc.and Kevin Fink



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CERTIFICATE OF SERVICE

I hereby certify that on May 16, 2013, I electronically filed the foregoing Memorandum

in Support of Defendants Motion to Stay Discovery Pending Resolution of Motion to

Dismiss, with the Clerk of Court using the CM/ECF system, which will cause an electronic copyto be served on counsel of record, who is listed below:

Nicholas J. MotherwayMotherway & Napleton, LLP100 West Monroe St,, Suite 200Chicago, IL 60603Phone (312) [email protected]

/s/ Matthew B. Mock


Documents

05-16 Doc #30 Memorandum in Support of Stay