United States District Court, D. South Dakota, Southern Division
ORDER [PLAINTIFF'S MOTION TO COMPEL, DOCKET NO.
VERONICA L. DUFFY UNITED STATES MAGISTRATE JUDGE
matter is pending before the court on plaintiffs Scott and
Lynda Hoffmans' (“the Hoffmans”) amended
complaint [Docket No. 12] alleging strict products liability
and negligent infliction of emotional distress against
defendants, MJC America, Ltd. and Gree, USA, Inc. (“MJC
and Gree USA.”) The Hoffmans filed a motion to compel
MJC and Gree USA to produce their Rule 26(a) initial
disclosures, Docket No. 23, and the district court, the
Honorable Lawrence L. Piersol, referred that motion to this
magistrate judge for determination pursuant to 28 U.S.C.
§ 636(b)(1)(A). See Docket No. 26. The time for
the MJC and Gree USA to respond to the Hoffmans' motion
has passed, and MJC and Gree USA have not responded. The
Hoffmans now ask the court to grant their motion, and for the
court to order sanctions against MJC and Gree USA under
Fed.R.Civ.P. 37(a)(3)(A) and an award of expenses and
attorney's fees incurred by the Hoffmans in bringing the
motion under Fed.R.Civ.P. 37(a)(5)(A).
Hoffmans filed their complaint on December 14, 2018, based on
events that occurred on November 8, 2018. The following
recitation of facts is a summary from the Hoffmans'
amended complaint [Docket 12], which was filed on January 29,
2019. It is not meant to lend the court's imprimatur as
to the verity of those facts, but merely to provide context
for discussion of the instant dispute.
case arises out of product defects alleged by the Hoffmans in
a dehumidifier designed and manufactured by Gree Electrical
Appliances, Inc. of Zhuhai (“Gree China”), a
Chinese corporation, and imported into the United States by
its wholly owned subsidiary, Hong Kong Gree Electrical
Appliance Sales, LTD (“Gree Hong Kong”), also a
Chinese Entity, and sold by the MJC and Gree USA in the
in 2010, Gree China and MJC branded and sold Gree products
under the name “Soleus Air powered by Gree” to
United States retailers doing business in South Dakota such
as Home Depot, Lowes, and Menards.
about September, 2010, Gree China and Gree Hong Kong entered
into an agreement to form a joint venture between Gree Hong
Kong and MJC, whereby Gree Hong Kong would own 51% and MJC
would own 49% of a company to be called Gree USA. Gree USA
would then market, sell, and distribute products made by Gree
China in the United States.
2010 through 2013, Gree China manufactured and sold one
million eight hundred forty thousand dehumidifiers, via Gree
Hong Kong, to MJC and Gree USA. MJC and Gree USA then sold
these dehumidifiers in the United States.
Hoffmans assert that at least as early as September, 2012,
Gree China knew of defects in the dehumidifiers and attempted
to convince Gree USA and MJC not to report these to the
United States Consumer Products Safety Commission.
Hoffmans also assert Gree China and Gree Hong Kong
represented to MJC, Gree USA, South Dakota retailers, and the
general public, including residents of South Dakota, that its
dehumidifiers were certified by the Underwriters Laboratory
(“UL”) and that the design and materials used in
the manufacturing of its dehumidifiers complied with UL
Standard 474 and Standard 94. The Hoffmans assert the
representations by Gree China and Gree Hong Kong regarding
the materials used in the manufacturing of the dehumidifiers
were knowingly false.
Hoffmans further assert that in 2016, as part of a settlement
of litigation between MJC, Gree China, and Gree Hong Kong,
Gree China and Gree Hong Kong agreed to defend and indemnify
MJC for product liability claims relating to the defects with
the humidifiers. The Hoffmans assert the dehumidifier
purchased by them and made subject of this lawsuit was
manufactured by Gree China, and sold by MJC and Gree USA.
Hoffmans assert Gree China's knowledge of the UL fraud,
and Gree China's knowing sale of its defective and
unreasonably dangerous products, is imputed to Gree USA
because officers and directors of Gree China were, at all
times material to this lawsuit, officers and directors of
Hoffmans assert that by July, 2012, after receiving a number
of consumer complaints, and after being contacted by the
United States Consumer Product Safety Commission to respond
to consumer complaints, MJC had actual knowledge that the
dehumidifiers manufactured by Gree China were fire hazards.
Hoffmans further assert Charlie Loh and Jimmie Loh, the
owners of MJC, and as officers and directors of Gree USA,
contacted Gree China to express their concerns. The Hoffmans
claim that during a September, 2012, meeting, Larry Lam, an
employee of Gree Hong Kong, informed the Lohs that Gree China
and Gree Hong Kong were aware that plastics used in
constructing the dehumidifier were not compliant with UL 94
and 474. Plaintiffs assert that at the conclusion of the
meeting, Gree China, Gree USA, MJC, and Gree Hong Kong agreed
not to recall their products or to report the defective
design and defective materials issues to the United States
Consumer Products Safety Commission, its retail customers, or
the general public to avoid adverse publicity and loss of
Hoffmans assert Gree China, Gree Hong Kong, Gree USA and MJC
continued to sell their dehumidifiers. On September 12, 2013,
the United States Consumer Products Safety Commission
announced that Gree China manufactured dehumidifiers were
being recalled because of serious fire and burn hazards. The
initial recall included dehumidifiers manufactured between
January, 2005, and August, 2013.
Hoffmans assert that on or about March 25, 2016, Gree China,
Gree Hong Kong, and Gree USA entered a settlement agreement
with the Consumer Products Safety Commission in which they
admitted knowingly manufacturing and distributing defective
dehumidifiers as outlined above. They ultimately agreed to
pay a civil penalty of fifteen million, four hundred fifty
thousand dollars ($15, 450, 000.00) to settle the charges
Hoffmans purchased the dehumidifier which is the subject of
this lawsuit in Sioux Falls, South Dakota. On November 8,
2018, the Hoffmans' dehumidifier started a fire and
caused damage to real and personal property owned by the
Hoffmans. As a result of the fire, the Hoffmans incurred
property damage and other losses from the loss of their home.
As a result of the fire, plaintiff Scott Hoffman claims to
have suffered emotional distress.
Hoffmans' counsel has outlined the facts pertinent to the
pending motion in the affidavit of their counsel. Docket No.
25. The following facts are gleaned from that affidavit and
from the court's own docket. On January 25, 2019, Gree
USA and MJC filed an answer. Docket No. 9. Other foreign
entities originally named by the Hoffmans in this lawsuit
filed a motion to dismiss. Docket No. 10. On January 29,
2019, the Hoffmans filed an amended complaint. Docket No. 12.
On April 2, 2019, the district court entered an order denying
as moot the motion to dismiss [Docket No. 15] because the
parties who made the motion (Gree Electrical Appliances, Inc.
and Hong Kong Gree Electric Appliance Sales, Ltd.) had been
omitted from the plaintiffs' amended complaint. Docket
April 29, 2019, the district court entered an order for a
discovery report and scheduling information. Docket No. 16.
That order required the parties to, within thirty days
following the appearance of a defendant, or sixty days after
the service of the complaint upon a defendant, hold a Rule
26(f) meeting. Id. The parties were instructed to
file a report of their meeting, on what had previously been
referred to as the Form 52 Report of Parties' Planning
Meeting. Id. The district court carefully outlined
all the information which was to be included in the report.
parties held their Rule 26(f) planning meeting telephonically
on May 21, 2019, and their discovery report was filed on June
5, 2019. Docket No. 17. In their discovery report, the
parties agreed to produce their Rule 26(a)(1) initial
disclosures by June 21, 2019. See Docket No. 17,
Item D.10. The Hoffmans' counsel then reminded
MJC and Gree USA they had never filed an answer to the
amended complaint. Docket No. 25-3. MJC and Gree USA filed
their answer to the amended complaint on July 3, 2019. Docket
31, 2019, the Hoffmans' counsel emailed counsel for MJC
and Gree USA. Counsel for MJC and Gree USA stated their Rule
26 disclosures (which were by then at least a month overdue
pursuant to the parties' discovery report) (Docket 17)
“should be filed soon.” See Docket No.
25-4. By August 7, 2019, MJC and Gree USA had not yet
provided the Rule 26 initial disclosures. Docket No. 25-5.
The Hoffmans' counsel again emailed defense counsel,
asking for the Rule 26 initial disclosures by August 16,
2019. Id. In response, on August 8, 2019, MJC and
Gree USA filed their Rule 26 initial disclosures on the
court's CM/ECF system.
August 12, 2019, the Hoffmans' counsel again emailed a
letter to counsel for MJC and Gree USA regarding their Rule
26 initial disclosures. Docket No. 25-6. The subject of this
communication was the sufficiency of the disclosures.
Id. The Hoffmans' counsel asserted MJC and Gree
USA's initial disclosures were deficient in the following
ways: (1) they failed to identify any non-experts as
individuals likely to have discoverable information; (2) they
failed to provide any documents or information to support the
affirmative defenses pled in the amended answer; and (3) they
failed to provide a declarations page to the insurance
agreement they produced. The Hoffmans' counsel asked that
the initial disclosures be supplemented by August 19, 2019.
August 16, 2019, MJC and Gree USA's counsel contacted the
Hoffmans' counsel by telephone, requesting an extension
of time to refile the defendants' Rule 26 initial
disclosures. Docket No. 25, ¶ 11. The Hoffmans'
counsel agreed to an extension of time until August 26, 2019.
Id. As of the date the Hoffmans filed their motion
to compel, MJC and Gree USA ...