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UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

Unitherm Food Systems, Inc.,

Civ. No. 14-4034 (JNE/BRT)

Plaintiffs, v. ORDER Hormel Foods Corporation; and Hormel Foods Corporate Services, LLC, Defendant.

Dennis D. Brown, Esq., Brown Patent Law, PLLC; Edward F. Fox, Esq., Jeffrey R. Mulder, Esq., Mark R. Bradford, Esq., Bassford Remele, PA; J. Christopher Davis, Esq., Jonathan D. Cartledge, Esq., Paul D. Kingsolver, Esq., Johnson & Jones, P.C., counsel for Plaintiff. Kurt J. Niederluecke, Esq., Ted C. Koshiol, Esq., and Timothy M. O’Shea, Esq., Fredrikson & Byron, PA, counsel for Defendants.

This matter is before the Court on Plaintiff Unitherm Food System, Inc.’s (“Unitherm”) motion to compel Defendants Hormel Foods Corporation and Hormel Foods Corporate Services, LLC (“Hormel”) to produce documents (Doc. No. 56). The Court held a hearing on the motion on August 20, 2015, at which the parties were represented by counsel. Federal Rule of Civil Procedure 26 governs discovery in federal court, allowing parties “to obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). “Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the

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discovery of admissible evidence.” Id. In the discovery context, relevance is a broad concept. See Sentis Group, Inc. v. Shell Oil Co., 763 F.3d 919, 926 (8th Cir. 2014). Once the party seeking discovery makes a threshold showing that the discovery is relevant under Rule 26(b)(1), see Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992), “[t]he party resisting production bears the burden of establishing lack of relevancy or undue burden,” St. Paul Reinsurance Co., Ltd. v. Commercial Fin. Corp., 198 F.R.D. 508, 511 (N.D. Iowa 2000). Discovery under the Federal Rules of Civil Procedure, however, is not without bounds. Federal Rule of Civil Procedure 26(b)(2)(C) provides: On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues. In addition, Federal Rule of Civil Procedure 1 instructs that the rules “should be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding.” Key to the Court’s rulings on this discovery motion is a determination of whether Plaintiff Unitherm has shown that the discovery sought is relevant to the claims 2

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remaining in this case. In the Court’s January 27, 2015 Order, United States District Court Judge Paul A. Magnuson dismissed Plaintiff’s misappropriation of trade secrets claim (Count II) and accounting claim (Count IV). Therefore, remaining in the case at this stage are Plaintiff’s claims for breach of contract (Count I), unjust enrichment (Count III), and declaration of ownership (Count V). (See Doc. No. 24, 1/27/15 Order.) Unitherm alleges that Hormel breached the contract by: (1) terminating the joint agreement without notice; (2) concealing its own precooked bacon development activities from Unitherm; (3) falsely telling Unitherm that “the Process” was not commercially viable; and (4) taking “the Process” for its own. (Id. at 5.) With respect to the unjust enrichment claim, Judge Magnuson recognized that unjust enrichment cannot be maintained when the parties’ relationship is governed by a valid contract, but allowed Unitherm to plead in the alternative, observing, “as Unitherm argues, some of Hormel’s allegedly tortious conduct took place after Hormel terminated the parties’ contract, and thus may be the subject of an unjust-enrichment claim.” (Id. at 7.) Following Judge Magnuson’s Order, the parties submitted their Joint 26(f) Report, wherein Plaintiff provided a summary of the remaining claims as follows: Plaintiff is seeking damages for breach of joint development and confidentiality agreements relating to the disclosure of Plaintiff’s invention to Defendants over a three year period involving a number of meetings and communications, followed by the abrupt termination of the joint development agreement by Defendants just prior to Defendants’ filing of a patent application that Plaintiff claims incorporates Plaintiff’s invention. Plaintiff also seeks damages for unjust enrichment arising out of Defendants’ conduct and use of Plaintiff’s invention in the manufacture and sale of pre-cooked bacon products. Plaintiff further seeks a declaratory judgment from the court regarding ownership of Plaintiff’s invention. 3

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(Doc. No. 33, Joint Rule 26(f) Report 1.) Unitherm has propounded approximately sixty document requests and Hormel agreed to produce documents responsive to most of those requests. (See Doc. No. 59, Decl. of Jeffrey R. Mulder in Supp. of Pl.’s Mot. to Compel (“Mulder Decl.”) ¶ 2, Ex. 1.) Unitherm now moves to compel complete responses to ten document requests (i.e., Document Request Nos. 2, 5, 7, 11, 12, 17, 48, 49, 50, 51). (Doc. No. 58, Pl.’s Mem. of Law in Supp. of Mot. to Compel (“Pl.’s Mem.”) 4–8.) In short, Unitherm seeks an order compelling discovery from Hormel “regarding its Bacon1 product and the finances associated therewith, as well as information about Hormel’s other pre-cooked bacon endeavors.” (Pl.’s Mem. 3–4.) The heart of Hormel’s objection is that the “commercialization and sale” of the Bacon1 product is “not relevant to any remaining theory of liability or damages.” (Doc. No. 78, Hormel’s Mem. in Opp’n to Pl.’s Mot. to Compel (“Hormel’s Mem.”) 7.) Breach of Contract Discovery As background, the parties contractually agreed to “work together to develop an oven that uses very high (approaching 100%) steam levels for cooking.” 1 (Doc. No. 1,

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The Joint Development Agreement stated that “[t]his oven process would initially be focused on producing bacon,” and indicated that “[Hormel] has developed a prototype high steam level oven that produces such bacon and would like to work with [Unitherm] to develop commercial ovens using high steam levels which would be exclusive to [Hormel] (“The Project”).” (Joint Development Agreement at 1.) The agreement allowed for both Hormel and Unitherm to “share information and ideas to assist in the development of the Project,” and stated that “[a]ll information shared relating to the Project shall be considered confidential in accordance with the terms of the Mutual Confidential Disclosure Agreement” signed by the parties. (Id.) 4

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Compl., Ex. 2 (“Joint Development Agreement”) at 1.) The parties also agreed to a term of exclusivity for the supply by Unitherm to Hormel “of equipment related to the project.” 2 (Id. at 2.) A second agreement governed confidential information. (Doc. No. 1, Compl., Ex. 1 (“Mutual Confidential Disclosure Agreement”).) Unitherm claims that “certain requests regarding the marketing and analysis of Bacon1” are relevant to its breach-of-contract claim, arguing that “[t]he assessment by Hormel of the viability of the product, of all Hormel’s attempts at pre-cooked bacon products prior to, during, and after its work with Unitherm, and related issues are squarely relevant to whether Hormel improperly ended the contractual relationship with Unitherm.” (Pl.’s Mem. 15.) The Court agrees that some of the discovery sought is relevant to Unitherm’s breach-of-contract claim. Specifically, the Court will permit discovery regarding Hormel’s assessment of the commercial viability of the product prior to the termination of the agreement. Thus, as limited below, Plaintiff’s motion to compel responses to

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Specifically, the exclusivity provision states: Following completion of a commercially viable application of the Project, the parties will negotiate an agreement by which UNITHERM will be the exclusive supplier to HORMEL of equipment related to the Project for an initial period of five (5) years. Such agreement will include provisions to govern performance and pricing of the equipment. During said period of exclusivity, UNITHERM shall not license, sell, offer to sell or otherwise provide the Project or information regarding the Project to third parties. Nor shall UNITHERM undertake to develop a similar Project for or with a third party. Following the initial five (5) year period of exclusivity, the parties will attempt, in good faith, to negotiate an agreement by which the exclusivity period is extended.

(Id.) 5

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Document Request Nos. 2 and 51 is granted. And Hormel has already agreed to produce documents relating to the development of pre-cooked bacon products, which is also the topic contained in Document Request Nos. 5 and 12 and at issue in Unitherm’s motion. (See Mulder Decl. ¶ 2, Ex. 1 at Hormel’s (uncontested) Responses to Requests 1, 3, 4, 6, 8, 9, 10, 13, 14, 15, 16, 18, 19, 20, 21, 22, 29, 30, 31, 41, and 45.) Therefore, to the extent that any information sought in Document Request Nos. 5 and 12 is discoverable, the Requests are duplicative of other requests. The remainder of those requests are overly broad and therefore denied. Unjust Enrichment Discovery Unitherm also requests extensive financial, sales, and marketing information relating to Hormel’s Bacon1 product. For example, Unitherm seeks “[a]ll documents related to the sale and profitability of the Bacon1 product, including sales volume, dollars generated, costs of sales and other costs, profit and loss statements, gross or net profitability analysis, shipments made to customers, and all contracts or agreements with other parties regarding the Bacon1 product.” (Pl.’s Mem. 5 (Request No. 7).) In seeking this broad discovery, Unitherm generically argues that these requests are relevant to its unjust enrichment claim and damages. Unitherm, however, has not explained how the financial information for the bacon product is relevant to any illegal conduct that Hormel participated in, other than its now dismissed trade secrets claim. 3 The Court ruled that

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Although not referenced in its brief, at the hearing Unitherm’s counsel argued a new theory to the Court — that if the contract would not have been wrongfully terminated, then the exclusivity provision in the Joint Development (Footnote Continued on Next Page) 6

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Unitherm’s invention or Process was not a trade secret after July 2009 and that any alleged misappropriation before July 2009 was beyond the three-year statute of limitations (Doc. No. 24, 1/27/15 Order at 6); therefore, any damages theory or unjust enrichment claim related to any misappropriation of trade secret is not relevant. 4 Unitherm relies heavily on Micro Display Systems Inc. v. Axtel, Inc., 699 F. Supp. 202 (D. Minn. 1988), for the proposition that its unjust enrichment claim is separate from its trade secret claim, and therefore discovery should be allowed on its unjust enrichment claim. However, Micro Display has no bearing on the resolution of the discovery dispute presently before the Court. The court there held that common law causes of action may be pursued only if they address conduct that is distinct from the conduct addressed in the Minnesota Uniform Trade Secrets Act (“MUTSA”). Micro Display, 699 F. Supp. at 205. Therefore, the Micro Display case only speaks to whether an unjust enrichment claim can

(Footnote Continued from Previous Page) Agreement would have provided an opportunity for Unitherm and Hormel to extend their agreement for another five years, and that, according to Unitherm, there would have been a possibility for negotiating an agreement that would have included royalties or rights to a portion of Hormel’s bacon sales that flowed from the use of the ovens that were developed through the Project. The Court notes, however, that the exclusivity provision in the Joint Development Agreement only allowed for an agreement for “the exclusivity period [to be] extended.” (Joint Development Agreement at 2.) And the “exclusivity period” referenced in the agreement related only to Unitherm supplying equipment related to the Project. (Id.) 4

The undersigned is not making any dispositive determination regarding Unitherm’s claims — Plaintiff’s trade secret claim was dismissed by Judge Magnuson when he ruled that Unitherm had disclosed its invention before the contract terminated. 7

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survive in the presence of a MUTSA claim. It in no way addresses what discovery would be relevant to the unjust enrichment claim at issue in this case. Furthermore, Unitherm has not identified a damages theory related to any benefit that Hormel illegally received from Unitherm that would allow for recovery based on Bacon1 product sales. 5 “Some threshold showing of relevance must be made before a party is required to open wide the doors of discovery and to produce a variety of information which does not reasonably bear upon the issues in the case.” Hofer, 981 F.2d at 380. “[T]he relevant standard is not so liberal as to allow a party to roam in shadow zones of relevancy and to explore matter which does not presently appear germane on the theory it might conceivably become so.” St. John v. Napolitano, 274 F.R.D. 12, 16 (D.D.C. 2011) (quotations omitted). Unitherm has not made a threshold showing of relevance for the discovery of financial and marketing information for Hormel’s Bacon1 product. 5

“To prevail on a claim of unjust enrichment, a plaintiff must show that a defendant knowingly received something of value that it was not entitled to, and that it would be unjust for the defendant to keep those benefits.” Rainbow Play Sys., Inc. v. GroundScape Techs., LLC, 364 F. Supp. 2d 1026, 1040 (D. Minn. 2005); see also Estate of Lane v. CMG Mortgage, Inc., Civil No. 14-3277, 2015 WL 2195176, at *8 (D. Minn. May 11, 2015) (stating that the plaintiff must “prove that Defendant[] received something of value, which they were not entitled to, under circumstances that would make it unjust to permit its retention”). “‘Unjust’ may mean illegal or unlawful, or simply that it would be morally wrong to allow a defendant to enrich itself at a plaintiff’s expense.” Rainbow Play Sys., 364 F. Supp. 2d at 1040 (quoting Gallinger v. North Star Hosp. Mut. Assur., Ltd., 64 F.3d 422, 426 (8th Cir. 1995)). “Recovery for unjust enrichment may include either costs avoided by a defendant or the net enrichment that the defendant received.” Rainbow Play Sys., 364 F. Supp. 2d at 1040 (citing Cooley v. Major Media Mgmt. Corp., 402 N.W.2d 815, 817 (Minn. Ct. App. 1987)); see also Stonebridge Collection, Inc. v. Carmichael, 791 F.3d 811, 818 (8th Cir. 2015) (stating that unjust enrichment damages “may be calculated solely from defendants’ gain”). 8

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While this Court determines that some of the requests at issue relate to the breachof-contract claim and should be granted as limited below, other requests are either overbroad or are untethered to any articulated theory of liability or damages for breach of contract or unjust enrichment and thus denied based on Unitherm’s failure to make a threshold showing of relevance. 6 Based on the motions, the parties’ written submissions, the oral argument at the hearing, and on all the documents and proceedings herein, the Court grants in part and denies in part the motion. Accordingly, IT IS HEREBY ORDERED that: 1.

Plaintiff’s Motion to Compel (Doc. No. 56) is GRANTED IN PART and DENIED IN PART as follows: a. Regarding Doc. Req. No. 2, which requests all documents relating to budgets, projections, and marketing of the Bacon1 product, the motion is GRANTED IN PART as to projections and marketing of the Bacon1 product from 2007-2010 because that information is related to the breach of contract claim (i.e., falsely telling Unitherm that the Process was not commercially viable). The motion is otherwise DENIED. b. Regarding Doc. Req. No. 5, which requests all documents relating to the

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Even if the slightest relevance could be found, the Court also concludes that for those requests denied “the burden and expense of [such] proposed discovery outweighs its likely benefit” in this case. Fed. R. Civ. P. 26(b)(2)(C)(iii). Although Hormel did not submit an affidavit describing the burden of additional discovery, it states that it has searched for and produced over 12,000 pages of documents and that responding to this request would be “onerous” and would require additional work disproportionate to the claims at issue. (Doc. No. 79, Decl. of Ted. C. Koshiol in Opp’n to Pl.’s Mot. to Compel ¶ 4; Hormel’s Mem. 12.) Further, Unitherm previewed that “certain Hormel witnesses already deposed may need to undergo further deposition examination on any discovery obtained pursuant to this motion” (Pl.’s Mem. 9–10 n.4), which would be yet another undue burden on Hormel when the topic would encompass discovery with very minimal relevance. 9

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specifications, curing, and other treatment of raw products for producing the Bacon1 product, as well as all documents related to flavor, color, organoleptic specifications, and other specifications and characteristics of Bacon1, the motion is DENIED as duplicative of Doc. Req. No. 16, and otherwise DENIED as overbroad. c. Regarding Doc. Req. No. 7, which requests all documents related to the sale and profitability of the Bacon1 product, including sales volume, dollars generated, costs of sales and other costs, profit and loss statements, gross or net profitability analyses, shipments made to customers, and all contracts or agreements with other parties regarding the Bacon1 product, the motion is DENIED as overbroad because it is unlimited in time and because Plaintiff has not made a threshold showing of relevance. d. Regarding Doc. Req. No. 11, which requests all documents relating to the marketing, budgets and projections of sales, actual sales, and contracts with other parties in relation to the development, production, and marketing of precooked sliced bacon products from Jan. 1, 1990 to June 1, 2007, to the extent this request is not otherwise granted in paragraph a above, the motion is DENIED as overbroad. e. Regarding Doc. Req. No. 12, which requests all documents relating to the patent applications for processes, systems, or equipment involved in the making of precooked sliced bacon products from Jan. 1, 1990 to June 1, 2007, the motion is DENIED as duplicative of other requests, and otherwise DENIED as overbroad. f. Regarding Doc. Req. No. 17, which requests all documents related to the marketing, including market tests and surveys, budgets and projections of sales, actual sales, and contracts with other parties in relation to the development, production, marketing, and patenting of precooked sliced bacon products after June 1, 2007 to the present, to the extent this request is not otherwise granted in paragraph a above, the motion is DENIED as overbroad and because Plaintiff has not made a threshold showing of relevance. g. Regarding Doc. Req. No. 48, which requests all intellectual property licenses entered into by Hormel or otherwise known to Hormel since Jan. 1, 2000 for any food product or food processing equipment, and would include licenses for patents, trademarks, and trade secrets, the motion is DENIED as overbroad. h. Regarding Doc. Req. No. 49, which requests all documents relating to the 10

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volume of licensed food product or food processing equipment subject to royalty, the royalties paid or received, the basis for computation of royalties, the character of royalties, and the amounts, the motion is DENIED as overbroad. i. Regarding Doc. Req. No. 50, which requests all financial statements whether monthly, quarterly, or annually, including income statements and balance sheets, for the Hormel entity or division that includes the Bacon1 product and the Bacon1 project from 2008 to the present, the motion is DENIED as overbroad and because Plaintiff has not made a threshold showing of relevance. j.

Regarding Doc. Req. No. 51, which requests all documents related to the value or anticipated benefits of the Bacon1 project or process from Jan. 1, 2008 to the present, including any analyses of actual or anticipated cost, quality, marketing, or other advantages over preexisting methods of cooking and selling bacon, the motion is GRANTED to the extent it requests documents discussing or referencing the value or anticipated benefits of the Bacon1 project or process over pre-2008 methods of cooking and selling bacon from January 1, 2008 to the present because that information is related to the breach of contract claim (i.e., falsely telling Unitherm that the Process was not commercially viable). The motion is otherwise DENIED.

k. Regarding Plaintiff’s request for attorney’s fees and costs, the motion is DENIED.

Date: August 26, 2015 s/ Becky R. Thorson BECKY R. THORSON United States Magistrate Judge

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