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Strategic Marketing and Research Team, Inc. v. Auto Data Solutions, Inc.

United States District Court, E.D. Michigan, Southern Division

March 31, 2017

STRATEGIC MARKETING AND RESEARCH TEAM, INC., Plaintiff/Counter-Defendant,
v.
AUTO DATA SOLUTIONS, INC., Defendant/Counter-Plaintiff. # ADS's Request for Production Objection

          OPINION AND ORDER GRANTING DEFENDANT/COUNTER-PLAINTIFF'S MOTIONS TO COMPEL [10], FOR LEAVE TO FILE SUR-REPLY [17], AND FOR LEAVE TO FILE AN AMENDED COUNTERCLAIM [21], AND DENYING PLAINTIFF/COUNTER-DEFENDANT'S MOTION TO DISMISS AND REMAND [14]

          HONORABLE STEPHEN J. MURPHY, III Judge

         Plaintiff Strategic Marketing and Research Team, Inc. ("SMART") sued Defendant Auto Data Solutions, Inc. ("ADS") for alleged violations of Michigan law that arose from the parties' business relationship. Defendant filed a counterclaim and removed the action on July 31, 2015. Before the Court are Defendants' motions to compel, for leave to file a sur-reply, and for leave to file an amended counterclaim, and Plaintiff's motion to dismiss and remand the case for lack of subject matter jurisdiction. The Court has reviewed the briefs, and finds that a hearing is not necessary. See E.D. Mich. LR 7.1(f). For the following reasons, the Court will grant ADS's motions and deny SMART's motion.

         BACKGROUND

         SMART is a Michigan-based company that uses consumer data to create marketing programs for automobile dealers. ECF 1, PgID 12, ¶ 6. ADS is a California-based company that sells that consumer data. Id. ¶ 7. In 2014, SMART purchased a large amount of data from ADS ("the Data"), along with "certain dispatch and reporting services in conjunction with the Data." Id. ¶ 9-11. According to SMART, the Data was significantly less accurate than what ADS guaranteed, and even fell below industry standards. When ADS's allegedly evasive responses and inaccurate billing practices compounded the problems caused by the "junk" Data, SMART switched to another data provider. Id. at PgID 13, ¶¶ 14-16.

         ADS tells a different story. Rather than compiling the data records itself, ADS claims it "purchases the records from third-party vendors" and sells them to its customers. ECF 1, PgID 33, ¶ 5. To protect its relationships with those vendors and "prevent its customers from undercutting it, " ADS enters into a non-compete agreement with each customer, pursuant to which the customer agrees not to purchase the data records from the vendors directly. Id. ¶ 7.

         ADS claims that it executed a non-compete agreement with SMART in 2011 (referred to by ADS in its briefing as a "Non-Disclosure and Non-Circumvention Agreement, " or "NDA") and that SMART has a copy. Id. ¶ 8. The NDA provided that during the parties' business relationship and for five years after termination of the relationship, ADS would not market its records to SMART's clients and SMART would not purchase data from ADS's vendors. The parties' relationship carried on for the next three years as ADS sold mail, email, and telephone records to SMART.

         ADS claims it first assisted SMART with using the records to "deploy" marketing emails in January 2014, "when SMART tapped ADS to locate a vendor that would be able to deploy conquest email addresses, " and ADS engaged vendor Act-On Software to provide the services to SMART. ECF 1, PgID 34, ¶ 10. SMART stopped purchasing records from ADS in November 2014. According to ADS, SMART purchased records from three of ADS's vendors during the NDA's five-year post-relationship period: Act-On, Innodatave, and DataShark (also known as Netunim LLP). Id. ¶¶ 11-13. ADS also claims SMART still owes payment for a "substantial amount of data" purchased in 2014. Id. ¶ 14.

         SMART initiated the present litigation in Michigan's 52-4 District Court on June 26, 2015. ECF 1, PgID 11-18. In its complaint, SMART brought state law claims of breach of contract (Count I), breach of warranty (Count II), quasi-contract (Count III), and negligence (Count IV), and sought less than $25, 000 as relief. On July 29, 2015, ADS filed an answer and a counterclaim for state law breach of contract-payment (Count I), implied-in-fact contract (Count II), unjust enrichment (Count III), breach of contract-non-compete agreement (Count IV), and tortious interference with a contract/business expectancy (Count V). ECF 1, PgID 32-39. As relief, ADS sought $20, 364.00 in unpaid invoices, and "an amount in excess of $75, 000" for the damages resulting from SMART's alleged breach of the NDA. ADS removed the action to the Court two days later, and SMART answered ADS's counterclaim.

         On September 23, 2015, the parties submitted a joint discovery plan, and the Court issued a scheduling order, setting as deadlines March 31, 2016 for discovery and April 29, 2016 for dispositive motions. After two stipulated extensions, the final scheduling order set as deadlines September 1, 2016 for discovery and October 3, 2016 for dispositive motions. Ten days before the discovery deadline, ADS filed a motion for the Court to compel the production of "documents responsive to [ADS's] Requests for Production Nos. 1-23 contained in [ADS's] First Set of Interrogatories and First Set of Requests for Production, " and the depositions of SMART representatives Katina and Michael Uzelac. ECF 10, PgID 95-96. The Court subsequently adjourned the remaining dates in the scheduling order to allow for adequate time to address the motion. In its response brief, SMART argued that ADS's motion to compel "brings into focus a subject matter jurisdiction defect which ADS has been trying to avoid." ECF 11, PgID 160.

         On November 10, 2016, SMART raised the jurisdictional issue in a motion to dismiss and remand the case. ECF 14. After the parties fully briefed the motion, ADS sought leave to file a sur-reply to SMART's reply brief. The Court scheduled a hearing for ADS's motion to compel and SMART's motion to dismiss, and three days before the hearing, ADS filed the instant motion for leave to file an amended counterclaim. The Court cancelled the hearing; briefing for the motion for leave to amend recently concluded.

         DISCUSSION

         The parties' filings began with a discovery dispute and snowballed into a challenge to the Court's jurisdiction to hear the case, and a request to amend the counterclaim that ADS relied on to remove the case. Specifically, the parties' dispute centers on the existence and force of the NDA, and the language of an unsigned version of the NDA provided by ADS ("Unsigned NDA"). I. ADS's Motion to Compel [10]

         First, the Court will address ADS's motion for an order compelling SMART to produce "documents responsive to [ADS's] Requests for Production Nos. 1-23 contained in [ADS's] First Set of Interrogatories and First Set of Requests for Production, " and requiring SMART representatives Katina and Michael Uzelac to sit for depositions. ECF 10, PgID 95-96.

         "Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case." Fed.R.Civ.P. 26(b)(1). If a party fails to respond to discovery, including if that party's discovery response is evasive or ...


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