Free Motion to Continue - District Court of California - California

Case 3:08-cv-01166-IEG-POR

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Daniel T. Pascucci, Esq. (SBN 166780) [email protected] Nathan R. Hamler, Esq. (SBN 227765) [email protected] MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO PC 3580 Carmel Mountain Road, Suite 300 San Diego, California 92130 Telephone: (858) 314-1500 Facsimile: (858) 314-1501 Mark B. Mizrahi, Esq. (SBN 179384) [email protected] BELASCO JACOBS & TOWNSLEY, LLP 6100 Center Drive, Suite 630 Los Angeles, California 90045 Telephone: (310) 743-1188 Facsimile: (310)743-1189 Attorneys for Defendant INNOVATION VENTURES, LLC dba LIVING ESSENTIALS UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

HANSEN BEVERAGE COMPANY, a Delaware corporation, Plaintiff,

Case No. 08-cv-1166 IEG (POR) LIVING ESSENTIALS' EX PARTE APPLICATION FOR DISCOVERY TO RESPOND TO MOTION FOR PRELIMINARY INJUNCTION Courtroom.: 1, Fourth Floor Judge: Irma E. Gonzalez Date Filed: 07/01/08

18 v. 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION INNOVATION VENTURES, LLC dba LIVING ESSENTIALS, a Michigan corporation, Defendant.

Hansen Beverage Company ("Hansen") filed a Motion for Preliminary Injunction seeking to enjoin the defendant Innovation Ventures, LLC ("Living Essentials") from selling a product called 5-HOUR ENERGY®, a 2 oz. liquid, dietary supplement that has produced over $150,000,000 in revenue to Living Essentials over the last four (4) years. In effect, Hansen's motion seeks to shut down defendant's entire business without any discovery on the merits. 1 Case No. 08-cv-1166 IEG (POR)

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1

Hansen claims that the name 5-HOUR ENERGY® is misleading and that claims made on the bottle of 5-HOUR ENERGY® are false. In support of its motion, Hansen submitted an alleged "expert" opinion from an in-house physiologist employee, Dr. Thomas Davis, in support of its claims that Living Essentials' advertising is false. Hansen also submitted a declaration of its CEO, Rodney Sacks, stating that Hansen will be irreparably harmed if the injunction does not issue. In this motion, Living Essentials seeks discovery to allow it to properly respond to Hansen's motion and a continuance of the hearing to accommodate a short discovery period. Living Essentials' counsel contacted Hansen's counsel to request this discovery. Hansen denied the request. (See Declaration of Nathan Hamler, submitted herewith, ("Hamler Decl."), Ex. A, ¶ 4). Hansen does not want discovery on its motion because it knows that discovery will demonstrate that its employee expert, Dr. Davis' declaration was at best misleading, and that Hansen's claims of irreparable harm are specious given Hansen's knowledge about 5-HOUR ENERGY® for years.1 Good cause exists to permit Living Essentials to take discovery and to continue the hearing date. Given the sweeping relief Hansen seeks--removal of Living Essentials' widely successful 5HOUR ENERGY® product from the market -- Living Essentials should be given sufficient opportunity to take discovery on issues raised in Hansen's motion, any defenses thereto, and the irreparable harm Hansen alleges it will suffer if an injunction does not issue. In conjunction with this motion, Living Essentials has filed an Ex parte Motion for Continuance of the Preliminary Injunction Hearing to allow time for this discovery to go forward.

Indeed, not coincidently, Hansen is planning this quarter to release a 3oz. "energy drink" (Hansen's current energy drinks come in 16, 24 and 36 oz. cans) to directly compete with 5-HOUR ENERGY®. The motive behind Hansen's preliminary injunction motion is clear ­ knock out the market leader while introducing its own product to replace it. 2 Case No. 08-cv-1166 IEG (POR)

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II.

BACKGROUND FACTS A. Living Essentials Product Over the last four (4) years, Living Essentials has sold a 2 oz. supplement under the

5 HOUR ENERGY® Trademark as illustrated below.

The 5 HOUR ENERGY® supplement has been widely successful. In just four years, revenue from the sales of the 5 HOUR ENERGY® product has exceeded $150,000,000. Living Essentials has also invested substantially in advertising and marketing. Living Essentials has spent over $40,000,000 in advertising and marketing in connection with the 5 HOUR ENERGY® product. Living Essentials is the market leader in this 2 oz. liquid, supplement market. B. Hansen's Monster Energy Products

Hansen markets "energy drinks" under the name Monster®. These Monster energy drinks currently come in 16, 24 and 36 oz. sizes, a can is shown below: /// /// /// /// 3

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Hansen is on the verge of introducing its own 3 oz "energy shot," as Hansen calls it. (Hamler Decl., Ex. B, Hansen Q2 2008 Earnings Call transcript at 4.) Hansen appears to have been monitoring the 2oz "energy shot" market for quite some time, waiting for it to grow before introducing its own product. (Id. at 11.) Hansen's CEO Sacks recently stated: We think [energy shots] will remain a niche within the energy category. But it will be part of it and if it's part of it you know we don't see any reason why we shouldn't be playing in that category and be a part for that reason we took the decision. We sort of saw and wanted it to mature it to a sufficiently high level to justify the costs and focus of launching products and putting efforts and manpower behind it. Id. If Hansen has been monitoring this market, it has been aware of Living Essentials' popular, market-leading 5 HOUR ENERGY® product. Hansen announced that it wanted to "quickly" release its new energy shot, which would directly compete with Living Essentials' product, and expects to do so next quarter. (Id. at 4.) /// /// /// /// 4 Case No. 08-cv-1166 IEG (POR)

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III.

ARGUMENT A. This Court Should Grant Defendant's Application For Discovery And Continue The Preliminary Injunction Hearing

Living Essentials needs discovery from Hansen to enable it to fully and fairly respond to Hansen's preliminary injunction motion. The information Living Essentials seeks is only available through discovery and without it Living Essentials would be unfairly prejudiced. Moreover, discovery will create a better record on which the Court can decide the preliminary injunction motion. Given that the complained of activity has been ongoing for four (4) years and given Hansen's knowledge of it, Hansen could not possibly be prejudiced by a continuation of the hearing on its motion for a short discovery period. 1. Living Essentials Need Only Demonstrate That Good Cause Exists For Expedited Discovery

The Federal Rules generally provide that a party may not initiate discovery before the parties have met and conferred pursuant to Fed. R. Civ. Pro. 26(f). See Fed. R. Civ. Pro. 26(f). However, Fed. R. Civ. Pro. 26(d) provides that the Court may authorize earlier discovery "for the convenience of parties and witnesses and in the interests of justice." Further, under Fed. R. Civ. Pro. 30(a) the Court can grant plaintiff leave to take a deposition prior to the Rule 26(f) meeting of the parties, and Rules 33 and 34(b) expressly provide that a Court may allow a shorter time than normal for answering interrogatories and producing documents. A court may grant requests to take discovery prior to the parties' meeting under Rule 26(f) where the requesting party demonstrates good cause. Semitool, Inc. v. Tokyo Electron America, Inc., 208 F.R.D. 273, 276 (N.D. Cal. 2002). "Good cause may be found where the need for expedited discovery, in consideration of the administration of justice, outweighs the prejudice to the responding party." Id. "It should be noted that courts have recognized that good cause is frequently found in cases involving claims of infringement and unfair competition." Id. Moreover, expedited discovery will be granted more generally where, as here, the plaintiff seeks injunctive relief. See, e.g., RDS Group Ltd. v. Davison, No. 02-8168, 2003 LEXIS 1337 (E.D.Pa. Jan. 17, 2003)(granting expedited discovery for pending preliminary injunction hearing); 5

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TKR Cable Co. v. Cable City Corp., 1996 U.S. Dist. LEXIS 11941, at *27-34 (D.N.J. 1996)(confirming previously ordered expedited discovery in conjunction with preliminary injunctive relief); 6 MOORE'S FEDERAL PRACTICE 3d § 26.121, at pp. 26-296 to 26-298 ("expedited discovery is particularly appropriate when a plaintiff seeks injunctive relief"); 8 WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 2104, at p. 51 (1999)(expedited discovery should be granted when circumstances exist "that would be likely to prejudice the party if he were compelled to wait the required time"); see also Commodity Futures Trading Com'n v. Int'l Fin. Services, 2002 WL 1801723 (S.D.N.Y. 2002); (ordering expedited depositions and document production from third parties); FTC v. Ontario, Inc., 2001 WL 34135319 (N.D.Ga. 2001) (ordering expedited depositions of third parties on 24 hours notice). 2. Good Cause Exists for Expedited Discovery Given the Complexity of the Issues, the Magnitude of the Relief and the Absence of any Prejudice to Hansen

Good cause exists to warrant Living Essentials taking expedited discovery to allow it to adequately respond to Hansen's motion for preliminary injunction. Hansen's motion is a complex motion supported by both a fact declaration and an "expert" declaration that seeks sweeping relief--removal of Living Essentials' market leading 5-HOUR ENERGY® product from the market, effectively destroying defendant's business. Although Living Essentials strongly believes that there are substantial questions as to Hansen's likelihood of success and ability to establish irreparable harm, Living Essentials should be given sufficient opportunity to take discovery on issues raised in Hansen's Motion for Preliminary Injunction, any defenses thereto, and the irreparable harm Hansen alleges it will suffer if an injunction does not issue given the sweeping relief Hansen seeks. Hansen's motion addresses complex scientific issues. In support of its motion, Hansen submitted the "expert" opinion of Thomas P. Davis, a Hansen employee with a doctorate in physiology. (Dkt. #7, Ex. 3.) Living Essentials needs discovery to test Dr. Davis' conclusions and to submit its own expert declaration, if necessary. Hansen also submits the declaration of its CEO, Rodney Sacks, who asserts that Living Essentials use of the name 5-HOUR ENERGY®, as well as its advertising, has caused Hansen 6

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irreparable harm that must be immediately stopped. (Dkt. #7, Ex. 2, ¶33.) In the declaration, Sacks notes that Living Essentials has been selling its product for years; yet, he does not explain why Hansen only recently came under the threat of irreparable harm. Oakland Tribune, Inc. v. Chronicle Pub. Co., 762 F.2d 1374, 1377 (9th Cir.1985)("Plaintiff's long delay before seeking a preliminary injunction implies a lack of urgency and irreparable harm ." ) Living Essentials needs discovery to test Hansen's factual claims that Hansen will be irreparably harmed absent an injunction2. Moreover, Hansen's motion seeks to prevent Living Essentials from using the very name and bottle advertising that it has used for four (4) years. Living Essentials estimates at this time that it stands to immediately lose tens of millions of dollars if Hansen's preliminary injunction motion is successful and Living Essentials is enjoined from selling its 5-HOUR ENERGY® brand supplement under the trademark it has used for nearly four (4) years. This figure does not account for customers and shelf space Living Essentials will likely permanently lose as a result of keeping its 5HOUR ENERGY® product off the shelves, the harm such an injunction would impose upon Living Essentials' relationships with distributors and retailers and other business partners, or other collateral damage resulting from the injunction Hansen seeks. Given the drastic relief sought by Hansen, and the devastating effects it would have on Living Essentials' business, the interests of justice require allowing Living Essentials to conduct expedited discovery prior to responding to Hansen's preliminary injunction motion. The expedited discovery Living Essentials seeks is limited and specifically tailored to Hansen's claims in its preliminary injunction motion, any defenses thereto, and Hansen's claims of irreparable harm. As an example only, Hansen asserts that Living Essentials' advertisements have "adversely affected Hansen's sales," and that "Hansen has suffered and continued to suffer irreparable harm as a result of Living Essentials' false statements." (Dkt. #7, Ex. 2, ¶33.) Hansen
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In a telephone conversation with Hansen's counsel discussing a stipulation to this discovery, Hansen's attorney asserted that discovery on irreparable harm was not necessary given that it is presumed, as indicated in Hansen's brief. Hansen is applying old law. After eBay v. MercExchange LLC, 547 U.S. 388 (2006), courts no longer apply this presumption. North American Medical Corp. v. Axiom Worldwide Inc., 522 F.3d 1211 (11th Cir. 2008)(presumption of harm not applied in preliminary injunction analysis after Supreme Court's eBay decision.); see also Tillery v. Leonard & Sciolla, LLP, 437 F. Supp. 2d 312, 329 (E.D. Pa. 2006)(denying motion for a preliminary injunction). 7 Case No. 08-cv-1166 IEG (POR)

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has provided no documentation or economic analyses supporting these assertions. Given what is at stake in this motion, Living Essentials is entitled to obtain the foundation of this speculative testimony (if any) and to test its credibility and veracity. Nor will Hansen be prejudiced by allowing Living Essentials to take discovery. Any delay will likely be less than two or three months. Hansen has likely known about 5-HOUR ENERGY® for years, an additional, short delay will in no way prejudice Hansen. Good cause clearly exists to permit Living Essentials to take expedited discovery in order for it to properly respond to Hansen's motion for preliminary injunction. 3. The Discovery Sought by Living Essentials

Living Essentials seeks the following limited discovery: · Fifteen (15) document requests and five (5) interrogatories directed to the issues raised in the Hansen preliminary injunction motion and any Living Essential defenses, returnable fifteen (15) days from the date of service; Deposition of Hansen pursuant to Fed. R. Civ. P. 30(b)(6); Depositions of witnesses who submitted declarations in support of Hansen's preliminary injunction motion; Two half-day depositions of other witnesses discovered with information directed to the issues raised in the Hansen preliminary injunction motion and any Living Essentials defenses. Discovery from any third parties with information relevant to the Hansen preliminary injunction motion and any Living Essentials defenses.

· · ·

·

Living Essentials seeks the above-described discovery specifically to respond to Hansen's preliminary injunction motion. Although Living Essentials intends to limit its discovery solely to the issues raised in the papers submitted by Hansen and any defenses, in doing so, Living Essentials in no way waives its ability to take more discovery of Hansen and/or the above-identified witnesses and third parties at a later time in the litigation. Living Essentials' goal in seeking discovery at this stage of the litigation is merely to test and gather information regarding Hansen's claims of liability and irreparable harm and any defenses thereto. /// /// 8

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IV.

CONCLUSION Living Essentials respectfully requests that the Court enter an order allowing it to take

limited, expedited discovery concerning matters raised by Hansen's preliminary injunction motion and any defenses thereto. Respectfully submitted, Dated: August 21, 2008 MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO PC By s/Nathan Hamler Nathan R. Hamler, Esq. Attorneys for Defendant INNOVATION VENTURES, LLC dba LIVING ESSENTIALS Mark A. Cantor (MI Bar No. P32661) Pro Hac Vice Application Anticipated Marc Lorelli (MI Bar No. P63156) Pro Hac Vice Application Anticipated Thomas W. Cunningham (MI Bar No. P57899) Pro Hac Vice Application Anticipated BROOKS KUSHMAN P.C. 1000 Town Center, Twenty-Second Floor Southfield, MI 48075-1238 Telephone: (248) 358-4400 Facsimile: (248) 358-3351

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4410968v.1

CERTIFICATE OF SERVICE I, the undersigned, certify and declare that I am over the age of 18 years, employed in the County of San Diego, State of California, and am not a party to the above-entitled action. On August 21, 2008, I filed a copy of the following document(s): LIVING ESSENTIALS' EX PARTE APPLICATION FOR DISCOVERY TO RESPOND TO MOTION FOR PRELIMINARY INJUNCTION by electronically filing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following: Norman L. Smith, Esq. Edward J. McIntyre, Esq. Alison L. Pivonka, Esq. SOLOMON WARD SEIDENWURM & SMITH 401 B Street, Suite 1200 San Diego, CA 92101 (619) 231-0303 Attorneys for Plaintiff HANSEN BEVERAGE COMPANY [email protected] [email protected] [email protected]

Executed on August 21, 2008, at San Diego, California. I hereby certify that I am employed in the office of a member of the Bar of this Court at whose direction the service was made.

s/Nathan Hamler Nathan R. Hamler, Esq.

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