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

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

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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 standardssetting 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 icemaking 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 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-992251 (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 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 (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 the Church of Scientology); documents relating to meetings or conversations between Scotsman and Manitowoc, a different ice machine manufacturer who is not a party to this suit; 5

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documents relating to a meeting between Manitowoc Ice and Scotsman about supposed communications from the Department of Justice about Plaintiff and the Church of Scientology; 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 of Justices keep separate orders as it would relate to air flow contaminate problems common to the commercial ice machines of Scotsman, Manitowoc and other ice machine manufacturers; conversations that were part of a collective effort to publicly deny the existence of defective airflows in ice machines and blame Plaintiffs character to increase or maintain the 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 also Smart 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, in Axxess 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. Peters Matthew B. Mock Brian L. Josias SCHIFF HARDIN LLP 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 Phone: (312) 258-5500 Fax: (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 copy to be served on counsel of record, who is listed below: Nicholas J. Motherway Motherway & Napleton, LLP 100 West Monroe St,, Suite 200 Chicago, IL 60603 Phone (312) 726-2699 nmotherway@mnlawoffice.com

/s/ Matthew B. Mock

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