Hearing Transcript 050615

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

NESTLE PURINA PETCARE COMPANY, ) )

Plaintiff/Counterclaim Defendant, )

) v. )

) No. 4:14-CV-859 RWS THE BLUE BUFFALO COMPANY, LTD., )

)Defendant/Counterclaim Plaintiff, ) ) v. ) )BLUE STATE DIGITAL INC., )PRCG/HAGGERTY LLC, and JOHN DOES )1-8. ) )Counterclaim Defendants. ) )

STATUS AND MOTION HEARING BEFORE THE HONORABLE RODNEY W. SIPPEL

UNITED STATES DISTRICT JUDGE

MAY 6, 2015 APPEARANCES: For Plaintiff: Carmine R. Zarlenga, III, Esq.

MAYER BROWN LLP 1999 K Street, N.W. Washington, DC 20006

Richard M. Assmus, Esq. MAYER BROWN LLP

71 S. Wacker Drive Chicago, IL 60606

David A. Roodman, Esq. BRYAN CAVE LLP 211 North Broadway, Suite 3600 St. Louis, MO 63102

For Defendant: Steven A. Zalesin, Esq. Adeel A. Mangi, Esq. PATTERSON AND BELKNAP 1133 Avenue of the Americas New York, NY 10036

Appearances Cont'd:

For Defendant: David H. Luce, Esq. CARMODY MACDONALD P.C. 120 South Central, Suite 1800 Clayton, MO 63105

Darren Johnson, Esq. PAUL AND WEISS 1285 Avenue of the Americas New York, NY 10019

For Counter Charles A. Weiss, Esq. Defendant PRCG/ BRYAN CAVE LLP Haggerty: One Metropolitan Square

211 North Broadway, Suite 3600 St. Louis, MO 63101

For Counter Michael A. Kahn, Esq. Defendant Blue CAPES AND SOKOL State Digital: 7701 Forsyth Boulevard, 12th Floor

Clayton, MO 63105

REPORTED BY: SHANNON L. WHITE, RMR, CRR, CSR, CCR Official Court Reporter United States District Court 111 South Tenth Street, Third Floor St. Louis, MO 63102 (314) 244-7966

PRODUCED BY COURT REPORTER COMPUTER-AIDED TRANSCRIPTION

3

Nestle Purina v Blue Buffalo Company -- 05-06-15

(PROCEEDINGS BEGAN AT 10:05 AM.)

THE COURT: Good morning. We're here today in the

case styled Nestle Purina against Blue Buffalo, 4:14-CV-859.

Would counsel make their appearances, please?

MR. ZARLENGA: Carmine Zarlenga, Mayer Brown, for

Purina.

MR. ASSMUS: Richard Assmus also for Mayer Brown for

the plaintiff, Nestle Purina.

MR. ROODMAN: David Roodman, Bryan Cave, on behalf of

Purina.

MR. WEISS: Charles Weiss on behalf of PRCG/Haggerty.

MR. KAHN: Michael Kahn, Your Honor, on behalf of

Blue State Digital.

MR. LUCE: Morning, Judge. Dave Luce with Carmody.

With me today is Steve Zalesin, Adeel Mangi, and Darren

Johnson on behalf of Defendant Blue Buffalo.

THE COURT: Very good. All right. Are there any

announcements before we begin to work our way through the

pending motions this morning?

MR. ZALESIN: There is one.

THE COURT: Good.

MR. ZALESIN: Good morning, Your Honor. Steve

Zalesin for Blue Buffalo. The parties worked out and

submitted to Your Honor a joint proposed scheduling order

which would extend all deadlines by roughly two months.

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THE COURT: The experts were, like, four months out,

weren't they? Or did I missing something?

MR. ZALESIN: There were some further extensions at

the back end.

THE COURT: Two months, four months.

MR. ZALESIN: I think that had a lot to do with

trying not to ruin anybody's Christmas or Thanksgiving.

THE COURT: Okay.

MR. ZALESIN: But recent developments suggest to Blue

Buffalo at least that that -- even that revised schedule is

going to need further revision. And the reason for that is

that Blue Buffalo has determined that it is going to bring

third-party claims in this proceeding against Wilbur-Ellis,

which is the supplier Your Honor has heard so much about,

which delivered product to Blue Buffalo's co-packers, which

was not what Blue Buffalo ordered and purchased and paid for,

not what it was labeled to be. We've previously told the

Court that we may at some point bring Wilbur-Ellis in as a

party to these proceedings if the facts warrant such a claim.

What has occurred in the very recent past is the week

before last, the end of the week of last week of April -- so I

think it was the 23rd -- we got a significant new production

of material and information from Wilbur-Ellis in response to

third-party subpoenas and discovery requests that both Blue

Buffalo and Nestle had served on Wilbur-Ellis.

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And we then analyzed that information carefully over

the weekend and last week and were able to determine for the

first time that the Wilbur-Ellis mislabeling scheme did, in

fact, impact a significant proportion of Blue Buffalo's dry

pet food products that were manufactured from material that

was shipped to our co-packers prior to May of 2014. And as a

result of that determination, we've decided to assert

third-party claims against Wilbur-Ellis and possibly others

involved in that mislabeling scheme.

Now, we did not come to this decision lightly, Your

Honor. As you know, Blue Buffalo has been the party that has

been pushing for tighter discovery, tighter deadlines in this

case. We wanted to try this case this year, in 2015, and get

it resolved in no small part because we have counterclaims in

the case in which we seek, among other things, a permanent

injunction against the ongoing attack or advertising campaign

that Purina is still running to this day, calling Blue Buffalo

liars and dishonest and what have you.

But this latest production from Wilbur-Ellis provides

an important puzzle piece that had been missing until now,

which is: What proportion of the shipments to our co-packers,

in fact, were impacted by the mislabeling? And we now know

from their most recent spreadsheets and documents that the

answer appears to be a very -- a substantial proportion. So

we intend now to take prompt action against Wilbur-Ellis.

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As I mentioned, we are also looking at the

possibility of additional third-party defendants who were

complicit in that mislabeling conduct. We'll come to a

decision on that in the next couple of days, but we thought we

should make the Court aware of our intentions.

Now, let me be clear about what this means for Blue

Buffalo and its position in this case. Nestle Purina brought

this case alleging that Blue Buffalo had intentionally lied

about the ingredients in its pet foods, said we were using

high-quality, expensive ingredients when, in fact, we were

knowingly substituting cheaper, lower-quality ingredients.

That claim is completely false. Blue Buffalo had no knowledge

that it was being defrauded by its supplier, as were

apparently many other pet food manufacturers who were sourcing

from Wilbur-Ellis, which is one of the biggest names in the

business.

We ordered high-priced, high-quality chicken meal.

We paid for high-priced, high-quality chicken meal, but that's

not what we got in many instances. And Nestle Purina is

trying to capitalize on this.

We believe that this, in fact, had no impact on

Nestle Purina or its business. This is really a matter

between Blue Buffalo and its suppliers and Blue Buffalo and

its customers, but if Blue Buffalo is found to have any

liability in this case -- because we did put in our ads and on

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our bags "no chicken by-product meal," and that turns out not

to be true in many cases -- then if we have liability to

Nestle Purina, then those responsible should have to answer

for it.

So we would expect, Your Honor, with your permission,

to be in a position to file an amended answer, counterclaims,

and third-party claims within two weeks. We would request

until -- today's the 6th; so that would be May 20. If that's

acceptable to the Court. And we would respectfully request

the Court's permission to do so.

We are willing, obviously, if Your Honor prefers, to

file a formal motion for leave to bring these additional

third-party claims. Your Honor's existing scheduling order

had a cutoff date. I'm not even sure when it was, but it was

some months ago for adding parties. But we just got this

information from Wilbur-Ellis.

And I should add, Your Honor, that Nestle Purina has

been in a rush to judgment saying, oh, it's obvious, it's been

obvious for six months or longer, that a significant

proportion of these products were impacted.

That is not true. We have been waiting on

Wilbur-Ellis. The information has been coming out very

slowly. They sent us information about turkey meal, which is

a relatively minor ingredient, in February. It wasn't until

the end of April they sent us the information we needed on

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chicken meal, and now that the facts have come to our

attention, we intend to act.

THE COURT: All right. Mr. Zarlenga.

MR. ZARLENGA: Well, Your Honor, it may be the first

time in this case that I actually agree with a lot of what Mr.

Zalesin said. Whoever put on their labels that the product

has no chicken by-product meal on product that has that in it

should be held responsible. We've been saying that from the

beginning.

I do disagree that Blue Buffalo needed a year to

figure this out. It was obvious a year ago. And you will see

today, later in this hearing, that it should have been

determined three years ago, and we'll go through the documents

on that because they relate to the declassification motion.

So we think this is a very late development that Blue

Buffalo is only doing because they are completely backed into

a corner. The first day this case was filed, within five

hours, with not one single shred of due diligence, they

categorically denied -- those are not my words; those are the

chairman of the company's words -- every single allegation in

the case.

The other thing that I will just say that needs to be

corrected is that every time -- it happens in every hearing.

Blue Buffalo gets up here and tries to tell you what my case

is about. Every time they get it wrong. And we are not

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alleging intentional knowledge or dishonesty or falsehoods on

their part that they knew about things. I don't need to prove

that. I think that that evidence is -- there will be plenty

of evidence indicating that's what happened, but I don't need

to prove that. That's not an element of my claim. And the

Court just issued a ruling keeping in two codefendants that

we'd like out of the case, saying you don't need to have

intent. Blue Buffalo exploited that, and my claims exploit

that too. I don't want to take on that burden, but I do think

it may come out in this trial. And clearly, to me, it

indicates that they knew or certainly should have known this

was a problem, a widespread, long-term problem for many years.

So I don't have much more to say. I don't object to

bringing in a third party.

THE COURT: That's my question. I mean, whatever

happens, I don't want there to be any confusion about how we

got there. You know, the rule says "leave shall be freely

granted," and I always set the marker as before that date, you

know, there's not much of a conversation. After that date we

need to have a conversation or motion practice to determine

whether it's appropriate in this case to amend or add.

So are you consenting to giving them two weeks to

file their amended pleadings, or do you want them to file a

motion with your opportunity to respond?

MR. ZARLENGA: I will gladly give them two weeks, but

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I may want to amend our pleadings because a lot -- this is

new. The admission part is new. This has been -- we have

spent a year fighting tooth and nail over this question which

really wasn't necessary, from our standpoint.

THE COURT: Right.

MR. ZARLENGA: It was a monumental waste of our time.

So, therefore, we may seek relief on that, and we may seek

some other relief. There's been new things that have come out

that I would like to add to the complaints. So if we're going

it rephrase things, reframe things, then I want that

opportunity too. And provided I get it, I have no objection

to adding Wilbur-Ellis or whoever else is going to be added.

THE COURT: So by May 20 Blue Buffalo's to file its

proposed amended pleadings, which you suggest were amended

answer, amended counterclaim, and new third-party practice.

Is that --

MR. ZALESIN: That's correct, Your Honor. And just

to be clear, we currently are facing a deadline of this Friday

pursuant to your most recent order on the granting in part the

ad agency's motions to dismiss our counterclaims with leave to

amend to file amended counterclaims against the ad agencies.

I would request --

THE COURT: I'm going to roll that all together.

MR. ZALESIN: Yes, if that's permissible. Now, if

Mr. Zarlenga is going to file another pleading, then we're

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going to have to answer that, but I think what -- it makes

sense because we want to get the case started against

Wilbur-Ellis, and if we have to amend in response to Mr.

Zarlenga's amended pleading, we can do that.

We've also, Your Honor, given some thought to what

the amended schedule might look like and recognizing that

Wilbur-Ellis and any other parties we might bring in will

obviously have a say or may want to have a say on that

subject.

THE COURT: Well, we're certainly not going to tell

them they don't get to participate.

MR. ZALESIN: Obviously. But we think that extending

the proposed extended schedule by an extra three months should

allow ample time. Wilbur-Ellis has been well aware of the

issues relating to their shipments since the fall of 2014.

They've been engaged in third-party discovery with both Blue

Buffalo and Nestle Purina all this time; so this is hardly

going to come out of right field for them.

So that would take us -- right now we are proposing

the end of July. If we added August, September, October, that

would take us to the end of October, and it would give

Wilbur-Ellis roughly six months of fact discovery to get its

defenses ready for trial and its expert and then on to expert

reports.

So that's a preliminary set of thoughts on how much

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additional time this is going to add to the overall life of a

case.

THE COURT: Mr. Zarlenga, you might as well attack

the CMO issue now, or the alternative is just to vacate it and

wait until everybody gets back together again, but I don't

think that's a good idea.

MR. ZARLENGA: You do not think that's a good idea?

THE COURT: Do you?

MR. ZARLENGA: I don't know.

THE COURT: I can be persuaded it is, but I hate

having no deadlines. That makes me really nervous.

MR. ZARLENGA: So I defer to the Court. That's fine.

Your Honor knows more about this than I do. Just that, okay,

I'm facing an unknown. This is brand new. I had no notice of

this this morning.

THE COURT: Okay.

MR. ZARLENGA: Right? So, you know, you've been

flexible. If flexibility is needed, then maybe we'll, you

know, extend it further. I don't know.

THE COURT: I've talked about this before. The Rule

No. 1 that no lawyer reads, which is that every decision in

the conduct of a case should be done as inexpensively as

possible, if this is new information to you but we're prepared

to move on and bring Wilbur-Ellis in -- I'm trying to get my

brain around "it's new information to me" -- how we manage

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this so we don't, in the interim, end up -- I'll tell you. I

mean, when I do a Rule 16 order, a case management order, the

reason I have that marker out there about when you amend is

that, after that date, we need to talk about what can we do to

minimize the cost of changing course.

Obviously, bringing in a new party, especially in

this case, we're going to change course here. You're talking

about maybe some different theories. I don't know.

MR. ZARLENGA: Well, so if I can answer that

directly.

THE COURT: How do we manage this so we're not doing

things we're going to have to repeat again? Wilbur-Ellis

isn't going to just take your word for it, right? They're out

there. I mean, everybody is kind of looking at them for now.

They may have another version of events.

MR. ZARLENGA: Yeah. And I will go through that.

I'm pretty sure I know what that is. I'll go through that

later today. It's germane to one of the motions, but -- so

following up on the Rule 1 -- and I do, I read the rules cover

to cover every year. Once a year.

THE COURT: Oh.

MR. ZARLENGA: And sometimes I read them backwards

because that way --

THE COURT: You don't get bored by the time you get

to them.

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MR. ZARLENGA: -- you focus on the ones at the end

first, which everybody ignores --

MR. ZALESIN: He really is a fun guy.

THE COURT: I hope it's not on vacation. That's all

I'm going to say. Sitting by the pool at the Breakers,

reading the Rules of Civil Procedure.

MR. ZARLENGA: Every time I read them, I see

something new. Every single time, I see something new.

THE COURT: Well, the Chief Justice just sent over a

bunch of new rules to Congress.

MR. ZARLENGA: No. I mean, I see something that

maybe has been in there a long time.

THE COURT: There will be new ones this year, you

know, and it's about -- the new focus is on proportionality.

MR. ZARLENGA: Right. Right. So let's go back to

your Rule 1 point, which I like. So, for example, that timing

is great if Blue Buffalo comes clean, so to speak, on how much

of this is in their product, which is now, you know, the issue

du jour, not whether, how much, how long. It would be nice.

It would save us a lot of money, you know. The money we

spent, we've already spent, maybe we'll get that back, but

I --

THE COURT: I don't want to keep down that path if

we're redefining.

MR. ZARLENGA: Right. I'd like to get some answers

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on that that make it easy. That would be great. But if we

have to go, you know, hammer and tong, tooth and nail, you

know, document by document, which we've done over the last

year, I don't think that's enough time. That's all I'm

saying.

THE COURT: Well, you know, we need to take a release

valve off of it today. The real question is: Once

Wilbur-Ellis gets here and we get back together, what's the

new world version going to be after that happens?

MR. ZARLENGA: Right. I agree.

THE COURT: And we know the current schedule is not

going to occur.

MR. ZARLENGA: I don't see any way that can happen.

THE COURT: So I will extend everything in the

interim for three months, understanding I still think it's

always good to have deadlines, but when we bring a new

substantial party in like this and -- I take it this is a

little bit of a sea change in how we're approaching the case.

It's not "no." It's "We got duped."

MR. ZALESIN: That's right, Your Honor. We have been

saying --

THE COURT: Is that the CliffsNotes version? You've

been saying, "It ain't so," but if it is so, and it looks like

it might be so, we got somebody else who's got to hold the bag

for this is what you're saying.

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MR. ZALESIN: Yeah. Look, we've been saying since

the fall of 2014 "We got duped." We certainly knew that there

was some material shipped to our co-packers by Wilbur-Ellis

that was mislabeled, and we admitted that not only in this

court but publicly to consumers in the fall of 2014.

What we didn't know is: Was it material? Are we

talking about one percent of our bags or some larger

proportion? And there's still work to be done. We don't know

the bottom-line answer yet, but we know it's --

THE COURT: You've concluded it's material.

MR. ZALESIN: It's material, it's substantial, and

it's a serious, serious issue between Blue Buffalo and

Wilbur-Ellis for sure.

THE COURT: So the one thing that's clear to me today

is we're not going to talk about Wilbur-Ellis depositions

today. It's --

MR. ZALESIN: I have not --

THE COURT: I think it would be fundamentally unfair

to take a deposition and then show up with a complaint against

somebody.

MR. ZALESIN: Well, we will certainly --

THE COURT: The landscape is a little different for

them.

MR. ZALESIN: I agree, Your Honor.

THE COURT: Unless there's a different view of the

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universe here. I wouldn't -- if I was in private practice and

I knew there was a lawsuit coming against my client but I

haven't seen it yet, I wouldn't let them show up and sit for a

deposition --

MR. ZALESIN: Yeah.

THE COURT: -- until I know what I'm dealing with.

MR. ZALESIN: Yeah. We anticipate that that will be

Wilbur-Ellis' position. We have not discussed the issue with

Wilbur-Ellis.

THE COURT: It would certainly be a deposition you'd

end up taking twice if you redefine the case, and that's not

helpful.

MR. ZALESIN: In all likelihood -- they are

represented by Covington & Burling, a big, very sophisticated

firm. I don't think they're going to put their person out

there until they see --

THE COURT: Paul Tagliabue gone back there yet so he

can --

MR. ZALESIN: I don't know.

THE COURT: Okay.

MR. ZALESIN: In any event, that seems almost

inevitable that we're going to wind up with an adjournment of

the third-party depositions against Wilbur-Ellis until they're

properly joined.

THE COURT: Till we define their participation. I

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just don't see, out of a fundamental sense of fairness, that

it makes any sense to go down that road.

MR. ZALESIN: Do you disagree?

MR. ZARLENGA: Well --

THE COURT: Oh. Okay.

MR. ZARLENGA: You know, I'll use a line I use with

my wife sometimes: I only care about me.

THE COURT: How does that work out for you?

MR. ZARLENGA: It's a train wreck every time.

THE COURT: But I'm going to keep doing it and hope

one day I'll get a different result. You know what that's the

definition of.

MR. ZARLENGA: We've been waiting a really long time

to get to Wilbur-Ellis and for --

THE COURT: Apparently, you're going to get them big

time.

MR. ZARLENGA: Yeah, well. So, I mean, look, I agree

with you, Your Honor. I mean, it is -- we have to take --

THE COURT: You wouldn't let your client show up for

a deposition knowing that they're going to get a lawsuit next

week.

MR. ZARLENGA: You know I wouldn't; so . . .

THE COURT: You wouldn't.

MR. ZARLENGA: No, I would not. So, yeah, that's

fine. That's fine. I do want to --

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THE COURT: But it's all about me.

MR. ZARLENGA: Well, it doesn't work here either. It

doesn't work here either.

I do want to correct something because this does

bother me. It just bother me.

THE COURT: Okay. Let's get it out.

MR. ZARLENGA: I will put this document on the

screen. So this is what Blue Buffalo said what they actually

said on October 14. Can you see that?

THE COURT: I have it.

MR. ZARLENGA: Okay. Just want to make sure. They

did not admit that there was by-product meal in their product.

They said in the first highlighted line in this letter from

the chairman of Blue Buffalo to so-called pet parents: "Since

this Wilbur-Ellis plant was the source of some of our chicken

meal, we may have received some of these mislabeled

shipments." Period. "May have."

And they have said that consistently. Even a week

ago their CEO said that under oath in a deposition. So I

don't know how anybody could be up here saying, oh, we

admitted this a long time ago. Not true.

So this was the first time anybody admitted it.

MR. ZALESIN: Your Honor, I object. I object to

putting what I believe is confidential designated material up

on the ELMO. There's no reason for this right now.

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Wilbur-Ellis -- we said in October of 2014 exactly what we

knew. We knew that they had sent some stuff to our

co-packers. We didn't know whether we had gotten any of it.

We admitted what we knew. More facts have been coming out.

Our CEO is not allowed to see Wilbur-Ellis'

confidential information produced in discovery; so whatever he

said was based on what he knew from Blue Buffalo's

information, not what Wilbur-Ellis has since shared with us as

outside counsel.

So there's really no need to try this case or try

this issue right now. He's just trying to score some points.

I'm trying to contain the trial of the case in the media

because that seems to be where Purina is now headed. There's

no purpose for this.

THE COURT: I understand your angst, okay?

MR. ZARLENGA: They put this in the media and just a

minute ago said they've admitted that this was a problem last

year. It's just not true, Your Honor.

THE COURT: Words have meaning. I get what you're

saying.

MR. ZARLENGA: Right. So, I mean, we got the first

admission in a deposition, you know, less than two weeks ago.

Should have been a year ago. It was a simple question.

THE COURT: Well, I'm not going to borrow trouble

today. If there are new motions for me to deal with on that,

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for whatever reason, we'll take it up at the time.

So any other announcements before we begin today?

Oh, Mr. Kahn.

MR. KAHN: Your Honor --

THE COURT: You may remember it's a funny language

where skating on thin ice can get you in hot water.

MR. KAHN: He is forcing that in this case yet, Your

Honor. At the risk of coming out of my foxhole for a very

minor point?

THE COURT: Yes, sir.

MR. KAHN: This Court granted us -- I'm sorry -- for

Blue State Digital until -- an extension until May 11 to file

its answer to the second amended counterclaim.

THE COURT: Well, if they're going to file, repackage

everything, I'm going to vacate the third-party requirements

to respond, and then they'll -- the May 20 date will trigger a

new deadline.

MR. KAHN: Good. I just didn't want to bother the

Court with another --

THE COURT: You don't need to double up.

MR. KAHN: Thank you, Your Honor.

THE COURT: So we will take that as it comes.

Anything else?

Mr. Weiss, you're feeling left out.

MR. WEISS: I'm fine, Your Honor. I'm happy about

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the admissions.

THE COURT: So it's not about you, is it? All right.

So are we ready to do motions to compel, or is there

anything else we should talk about before we get started?

MR. ZARLENGA: The only thing I'd like to say is I

have an overview that I'd like to talk about. I don't know

when that's going to be --

THE COURT: Well, if it's an overview, that suggests

that it touches a lot of points.

Mr. Zalesin, you'll get a chance to share your

overview.

MR. ZALESIN: That's fine, Your Honor. I think our

motion is actually first on the agenda, and, you know, I was

going to give an overview as well, but, you know.

MR. ZARLENGA: Well, I didn't get to --

MR. ZALESIN: He's there. Let him go.

THE COURT: It's all good, you know. The first shall

be last, the last shall be first, and here we go.

MR. ZARLENGA: So I think this ties together

everything we're here for today, and I take -- I mean, I'm

assuming the Wilbur-Ellis time allocation and issue is off of

the table, so now --

THE COURT: There's no reason to talk about it today.

MR. ZARLENGA: We're down to three motions, which are

two motions to compel by Blue Buffalo and our motion for

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declassification of certain documents and testimony.

And I think there's a very much a unifying theme

here, and that theme flows out of what we just heard from Mr.

Zalesin. It flows out of deposition admissions that just

occurred. And the theme is that "this didn't happen" is no

longer a Blue Buffalo defense in this case. That's not their

defense. It was their defense, but it's not anymore.

So now they have new goals. Because they can't use

that defense anymore, their new goals are to open up several

new lines or, actually, in some cases, old lines of discovery

on new fronts that really don't have one thing to do with

what's in the Blue Buffalo products or one thing to do with

what's on the petfoodhonesty.com website. They don't have one

thing to do with any claim that's in this case. And that

covers everything they're asking for in both motions.

At the same time, the other goal they have, which has

become apparent just in the last few minutes, is Blue Buffalo

wants to keep all the recent developments in this case a big

secret even though they say that they believe in transparency

with consumers. They wrote that in letters in this -- related

to this case. They want to keep things a secret.

And to us, Your Honor, neither one of those goals is

appropriate. Neither one of those goals should consume a lot

of our time or the Court's time. So that's my overview, for

what it is worth.

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THE COURT: All right. Mr. Zalesin.

MR. ZALESIN: Thank you, Your Honor. So the first of

the now three motions that are still on the agenda is Blue

Buffalo's motion to compel disclosure by -- or production by

Nestle Purina of information in three categories: Number one,

Nestle Purina's so-called premium or ultra premium pet food

products; number two, any efforts or analysis by Nestle Purina

of a potential acquisition of Blue Buffalo; and third,

information relating to glucosamine, which is an ingredient in

certain of both parties' products, but in our case it's a

treat product called Jolly Joints which they have attacked.

So as we spelled out in our papers in support of the

motion, Your Honor, the discovery in this case that we've

obtained from Purina tells a pretty disturbing story, from our

standpoint, and I would call it a well-documented attempt at

premeditated corporate murder, and I don't think that's too

strong a term to use.

What the record shows -- and I'm not going to go into

details, and I'm not going to put up documents on the ELMO

because they are confidential, but I'm just going to describe

in general terms what we've learned.

For years, Nestle Purina admired and coveted Blue

Buffalo's business and its success in the premium pet food

market. And why was that? Because the premium market is the

segment of the market that's been growing rapidly.

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Mainstream pet foods like Purina Dog Chow have been

basically stagnant for years. The growth is in the premium

market, and Nestle Purina has been losing customers to premium

competitors, including Blue Buffalo but also others, because

consumers want better, higher-quality foods for their pets.

So what do they do? Well, first thing they do is

they try to penetrate that market their own -- on their own

with products that they offered that were positioned as

premium or ultra premium products, but those efforts failed.

And I won't go into the details, but I don't think you'll get

too much push back from Purina that it has not been a success

in that category or that segment of the market.

Then looked at acquiring Blue Buffalo or some other

already existing competitor in that marketplace, but it

decided it couldn't do that for legal reasons. And so it

turned to brass knuckles, and that's really what it's been

doing for the last year, and hired an army of consultants to

design a political-style smear campaign to attack Blue Buffalo

and destroy its credibility.

He says they have never alleged or contended that we

did anything deliberately or knowingly. Their advertising

uses the word "lying." A pet food company is lying about its

ingredients. That's what they're advertising to consumers.

That doesn't mean that we accidently included something that

we didn't intend to include. That means that we knowingly

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told -- made a false statement. That's the definition of a

lie. Words have meaning, as Your Honor just said.

So they hired this army of consultants. They did

focus group research. They said, what message will resonate

with the consumer? How can we undermine Blue Buffalo? It's

doing so well in the marketplace. How can we put a stop to

their success? And they settled on this paradoxically named

so-called Project Truth, which is supposed to expose the truth

about Blue Buffalo, with "truth" in quotation marks, and

attack the company's honesty and credibility.

And as one component of that effort they decided to

bring this lawsuit because that's news, and news drives

website traffic in the 21st century, and that's exactly what

they've done. So they have a PR campaign, levered off the

lawsuit saying: We sued Blue Buffalo. It's true. Just read

the lawsuit. Come look at our petfoodhonesty.com website.

Come look at our other internet and social media

advertisements and learn that Blue Buffalo is a lying company.

That's the story that the documents are going to

tell. He's going to dispute it. You know, we'll -- that's

what the trial will be for, but that's Blue Buffalo's

assessment of the facts that we've learned from the documents

produced in this case. And we have attached many of them to

our motion papers.

Now, they did get lucky, as we've been discussing,

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because one of their many subpoenas went out to Wilbur-Ellis,

and Wilbur-Ellis, it turns out, was giving us material that we

did not order. We paid for the higher-priced chicken meal.

We got, in many instances, lower-priced other poultry

ingredients, and that issue is going to have to be worked out

now in our third-party claims against Wilbur-Ellis.

But, nevertheless, you've heard it this morning --

you'll continue to hear it -- Nestle Purina is going to paint

Blue Buffalo as the villain here. If only we had exercised

even a modicum of diligence, they'll tell you, we would have

known about this, and we looked the other way, and we're

culpable, et cetera, and that's why we are liable, and also

that they suffered injury as a result of our misstatements

which were attributable to misconduct by third parties

including Wilbur-Ellis.

And that's where our motion really comes in here,

Your Honor, because if they're going to contend that they lost

sales and lost profits because of the mislabeling scheme by

Wilbur-Ellis and the fact that Wilbur-Ellis -- excuse me --

that Blue Buffalo was victimized by that mislabeling scheme,

then we had a long discussion at the last hearing about how

you prove damages in a false advertising case.

And I think Your Honor put your finger on it -- put

his finger on it. They've got to show the delta. They've got

to prove that the sales that they would have made and the

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profits that they would have earned are different from and

greater than what they actually achieved and that that's all

attributable to, or some substantial part of it is

attributable to, the specific false advertising at issue in

this case.

And, remember, we're talking about two different

things here. There's the -- the reason why Purina has been

losing customers for its base mainstay business is that

consumers want higher-quality, better, more natural, more

wholesome foods with better ingredients for their pets.

That's the selling proposition. That's what consumers want.

They don't want the cheap stuff and fillers anymore. They

want the higher-quality stuff. And that's why they've been

losing business, because that's the market trend.

Now, whether Blue Buffalo was able to deliver on all

of its promises to each of its customers is an issue between

us and Wilbur-Ellis, we believe, and our customers, but that's

their challenge. Purina's got to prove that, because of our

mislabeling or misstatements on a proportion of our products,

they were injured. And they've told us in meet and confers

and they have conceded in open court and in their papers that

one of the focuses of -- focal points of their damages case is

going to be their so-called premium products; that their

premium products did not do as well in the marketplace as they

expected that they would do or they would have done and that

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failure of those products from Nestle Purina is attributable

to Blue Buffalo's so-called false advertising.

And that's fine. If they want to try to prove that

case, they have a right to do that, but what they can't do is

assert that case and then refuse to provide the discovery that

we need to defend ourselves against that charge.

We have seen the tip of the iceberg in discovery, and

we know that there are reasons wholly unrelated to Blue

Buffalo's statements and business activities why those Purina

products failed in the marketplace, and we are entitled to a

complete discovery record to build that defense. And I don't

think Nestle Purina disputes that, but what they're saying is

we're asking for too many documents and that what they've

given us so far is good enough. And why? Because their

experts, their damages consultants, have deemed it sufficient

to conduct a proper damages analysis.

And I don't understand that argument. A party does

not get to pick and choose which of its relevant materials it

will produce in discovery based upon its outside consultant's

undisclosed analysis and opinions as to what's sufficient and

what is not.

We are asking for the core information that we need

to defend this charge. We're asking for information about the

launch of those products, their pricing, their sales strategy,

and their market performance. And we can't guess at what

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their experts deem sufficient and what proportion of the

overall relevant information that represents. We're not

asking for every document in the company, as they hyperbolize

in their opposition papers. This is actually a relatively

small part of their business. We're asking for the core

documents on a narrow subset of products which they assert are

the basis for their damage claim. Okay. So that's the

premium products.

The second issue is any efforts by Nestle Purina or

analysis in connection with any efforts to acquire Blue

Buffalo. And the reason we believe this is relevant, Your

Honor, is that they have -- as I said a moment ago, they are

telling one story in this case and in their ongoing

advertising campaign against Blue Buffalo about how we're

liars and we're dishonest and what have you, and as recently

as 2013, months before the filing of this case, we know for a

fact -- and they don't dispute -- that they were looking at

acquiring Blue Buffalo.

And it's highly likely that those internal documents

and analyses contain candid assessments by their executive

team of Blue Buffalo and its business that might differ, just

might differ from the story they're telling in their public

relations campaign. They have not ever said that these

documents are voluminous. In fact, they've dismissed the

suggestion that they took even a hard look at this, saying,

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oh, they got back to us in ten days and said it's not going to

work for legal reasons.

Well, if that's true, these documents should be

relatively, you know, concise and not too burdensome to

produce, but we believe they are relevant and that they should

be turned over.

And then, finally, the issue of glucosamine and Jolly

Joints. And this is candidly, Your Honor, this is a small

issue. First of all, Jolly Joints is a very small product for

Blue Buffalo, and this is a small issue in the context of this

case, but it is emblematic of a bigger problem, which is that

Nestle Purina desperately wants discovery in this case to be a

one-way street.

We -- both companies -- have products that contain

glucosamine, which is an ingredient that is thought to have

some joint health benefits actually for both humans and for

pets, and both companies sell products that make claims along

those lines.

We're providing the discovery that they are asking

about our Jolly Joints treats and our glucosamine and the

substantiation we have for those claims, but we're asking

them, hey, what about your own claims, which we believe to be

directly analogous and on point, and what about your

substantiation?

And their answer is, well, this case is not about

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Nestle Purina or about Nestle Purina's product. It's only

about Blue Buffalo. So you don't get that kind of discovery.

And that is just contrary to Advertising Law 101,

Your Honor. That information from Nestle Purina is obviously

relevant for at least two reasons. First, if they're going to

attack our advertising and they're making the same claims

based on the same kind of scientific substantiation, then that

is a viable defense for Blue Buffalo that their attack is not

credible. How can they talk out of both sides of their mouth

at the same time? They seem to be skillful at that, but that

would be a defense certainly.

Or, second, alternatively, if it turns out that they

don't have the substantiation for the claims they are making

but they are making them nonetheless and it's the same kind of

claims for the same ingredient and the same kinds of products,

then that could very clearly give rise to a defense of unclean

hands that -- whereby a claimant in a false advertising case

is not permitted to recover or obtain an injunction against

conduct that it itself committed.

And we're not talking about something that's wholly

different from or unrelated to the misconduct that they are

alleging. It's not we're going after some, you know, toxic

waste dumping allegation against them. This is the same exact

issue. And it's very much on point.

My favorite unclean hands case in this context is

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Hagen Dazs against Frusen Gldj, the two ice cream

companies. Hagen Dazs sued Frusen Gldj alleging that by

using that name Frusen Gldj they were implying that the ice

cream was of Scandinavian descent when, in fact, it was not.

And the defendant responded and said: You got to be

kidding me. What do you think Hagen Dazs is? You know, you

come from the United States with no association with

Scandinavia, and the court upheld that unclean hands defense.

And this is potentially the exact same thing here, Your Honor.

We haven't seen the discovery yet because they haven't given

it to us, but that's our point. So they should have to

provide that kind of discovery.

And you're going to hear more about this issue later

in the context of Blue Buffalo's other motion with respect to

Nestle Purina's procurement and quality control procedures,

but again, they very much want this case to be a one-way

street whereby they get to criticize and take pot shots at

Blue Buffalo. Oh, your specifications are not good enough,

and, oh, you do enough testing, and yet give us absolutely no

window into what they are doing to see whether they live up to

the very standard of conduct that they are attempting to hold

Blue Buffalo to. And that's not appropriate. And our motion

to compel here should be granted.

Thank you, Your Honor.

MR. ZARLENGA: Your Honor, I think I'll just go in

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reverse order. So on the discovery relating to glucosamine in

our products, there's no allegation in this case that any of

our products are mislabeled or that there's not enough

glucosamine in them.

Blue Buffalo's brought a separate case against us

wherein they allege false advertising as to like, I don't

know, ten different products. And if they want to bring that

claim, which they have not done, it belongs in that case.

The difference between the cases that Mr. Zalesin

cites and this case, one is that this Court already ruled on

October 22, and I quote, "If you have a Lanham Act case

against Purina, you need to bring it. I am not going to

generate it here." And that was in direct response to this

two-way street argument.

Well, I think Blue Buffalo's getting more than a

two-way street. We've given them plenty of discovery, but

they want to take discovery on theories that aren't alleged

and there's no facts to support. There's no facts to support

them. They don't even say we don't have enough glucosamine in

anything or that it's missing or that anything is mislabeled.

They just want to dig into it, and this is the case with other

things as well.

So until there's a claim for it somewhere, that

discovery is not appropriate, just to try to find something

somewhere that they can possibly use as a defense. That's

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just too remote.

The sale documents is very interesting. Mr. Zalesin

said just in 2013 we tried to buy Blue Buffalo. Totally,

totally contrary to fact. Blue Buffalo's new CEO who came

from Nestle, not Nestle Purina but another Nestle affiliate,

went to work and first thing he did when he got there was he

called Nestle and said, "Hey, great idea. Do you guys want to

buy us? Would you guys like to buy us?"

So they initiated that discussion, and we said: No

thanks -- thanks, but no thanks -- very promptly. And now

they're trying to use that as a springboard for discovery in

this case? That's -- frankly, Your Honor, that's crazy.

So I don't know what difference it makes if Nestle

considered whether to buy Blue Buffalo or not to buy Blue

Buffalo. No one is claiming an offer was made. No one's

claiming that one was rejected. I mean, it seems really

fanciful to just get into discovery on that just because they

think maybe there's something there.

So let's get to the more substantial issue, which is

the premium products. I want to put on the screen what it is

they're asking for. This is the list of document requests

that's appended to the current motion. Notably, a Request No.

10 and Request No. 47 already been the subject of motion.

Already denied. So I don't know why those are just appearing

again. There's been no request for reconsideration made.

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But in any case, the statement that is in the brief

about "this calls for every document in the company," that was

my doing because I did not know what they meant by "premium

products." I really didn't know. There's been testimony in

the case that different people view the categories

differently, use different lingo. I did not understand that

what they are actually talking about is a very narrow category

of products.

So they're not asking for every document in the

company. So I stand corrected; although, I think I was

justified in being worried because we have two pages of specs

here, and the word "premium products" isn't in there, but yet

it is the subject of the motion. It's referenced in the

motion numerous times. It's never defined.

And so we didn't really know what they were going

for. But even still, there's no limitation on any of the

documents they're asking for. They just want a, quote,

complete set, unquote. It's overbroad. It was denied before.

It should be denied again, Your Honor, for the same reasons.

Now, the one thing that Mr. Zalesin said that maybe

is persuasive is that this might relate to damages. Well,

first of all, any failures we've had with our products, any

problems, that's already baked into the sales. That's baked

in. But beyond that, I am not at this point even sure what

our damages are going to look like.

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The first thing I'm going to do when I go back and

see this new complaint is reevaluate whether to seek

disgorgement, and this goes to a lot of what Mr. Zalesin was

saying. Blue Buffalo is saying they are so successful.

They're this wonderful company.

The Blue Buffalo Company, their brands, are built

entirely on an ingredient advertising platform. We now know

today that a lot of that advertising is false. Purina thought

that before they brought this case, and they looked at that,

and they didn't like that. They didn't like Blue Buffalo

saying by-products were bad. Not true. They didn't like Blue

Buffalo saying Purina and all the other big pet food companies

were misleading consumers. Not true. They didn't like Blue

Buffalo saying "we don't have by-product meal in our product"

when they do. So, you know, this was an understandable

concern, and now we find out it was a valid concern.

And Mr. Zalesin says I got lucky. Well, I guess I'm

a really lucky guy, Your Honor. I guess I'm a really lucky

guy. But it wasn't luck that got us here. It was a lot of

hard work.

And so I don't know what the damages in this case are

going to look like, how they're going to be computed, but I am

going to look at disgorgement because now we have wrongdoing.

We have wrongdoing that I can base that on, and that's going

to make it easier.

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So I think it's premature to simply order us to

produce every document we have about our premium products.

Unless you have any questions, that completes my argument on

that motion, Your Honor.

THE COURT: All right.

MR. ZALESIN: Very briefly, Your Honor. We talked

about disgorgement as a remedy and false advertising

litigation at the last hearing, but it does not work in a

multi-player market like this where, if there are any damages

to any competitors, they're spread across a large swath of

competitors, and we don't think disgorgement works, but again,

they can assert that later.

THE COURT: If they bring it up, you'll get a chance

to respond, and we'll figure it out.

MR. ZALESIN: Absolutely. They can assert that

later. But unless he's saying, "I'm changing course and I'm

withdrawing what I've previously told both Blue Buffalo and

the Court," which is that Purina's damages -- alleged

damages -- are based in part on loss of sales of premium

products, then he's got to provide discovery on that.

And, again, our discovery is targeted to sales and

pricing and reasons for failure and success because that's

exactly the information we need to defend that charge. So if

he wants to think about whether he's going to withdraw that,

we can wait and see, but barring that, we need that discovery.

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On the acquisition, I don't think he said anything --

THE COURT: What do you think they have that's worth

discovering?

MR. ZALESIN: What do I think they have? Well --

THE COURT: Here's why I'm talking about this. "All

documents about X" leaves me a little cold because that's,

that's -- so what precisely? I mean, is there a market study

evaluation? An evaluation of Blue Buffalo? I mean, something

more specific than "all documents reflecting X."

MR. ZALESIN: Business plans, launch plans, marketing

strategy, brand plans so our experts can analyze them and say,

as they internally concluded, these are not very good plans,

and that's probably why they failed. Analyses that they've

done either during the lifetime of those products or after

they withdrew them about the reasons for their failure. These

are the basic tools.

We don't need every -- look, if they have a bill from

themselves to a customer that reflects the price of which they

were selling it, we don't need every bill. Obviously, we need

documents --

THE COURT: That's why "all documents and

communications" is kind of tough.

MR. ZALESIN: Okay. We can work with them on

narrowing and focusing and getting the documents that are

sufficient to show the issues that we need, but on certain

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types of documents like internal presentations, discussions

amongst executives about the reasons why their products failed

or succeeded and in what degree, we can only guess as what

they have. And so that's why our requests are framed the way

they are. But this notion that, you know, this case is about

Blue Buffalo's products and not Purina's just isn't going to

work.

THE COURT: Well, no. I mean, you might as well come

up. It may be hard to stand at the podium together, I know.

MR. ZARLENGA: It's difficult, Your Honor.

THE COURT: You're sitting through depositions

together; so . . .

MR. ZARLENGA: I'm glad I'm taller.

THE COURT: I mean, your damages require some

production of your analysis of your market, the quality of

your products in the marketplace and what's happening. You're

going to say that some of it is as a result of Blue Buffalo's,

quote, false advertising.

MR. ZARLENGA: The failure of our what they call

"premium products" is totally due to that. Completely. So --

THE COURT: And they want to look at --

MR. ZARLENGA: It's not reflected in our documents

because they kept it to themselves or didn't know themselves,

one or the other, and so we didn't know that it was false

advertising. We only suspected.

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But make no mistake about it. Their advertising was

very aggressive that big pet food companies were quite bad,

and don't buy stuff from them because they mislead and fool

consumers. I mean, millions of dollars were spent on that

advertising -- millions -- over a long period of time. So it

had an effect. It had an effect. I just don't know what the

damages are going to look like at this point. We are a long

way from that now. And I have to rethink it. I mean, I think

it's fair that I get to rethink it based on new information.

And make no mistake, Your Honor. Mr. Zalesin is not

standing here having seen no documents about our premium

products. I mean, I don't know if you read the briefs, but

he's got a story in there, and it's got cites to it, cites to

documents that talk about the premium products not succeeding,

but an incomplete story, because at the time no one that wrote

those documents knew of the extent of the falsehoods in the

Blue Buffalo advertising. So I think --

THE COURT: But help me out with this argument that

you provided sufficient information to them to make their

damage analysis.

MR. ZARLENGA: It's the same argument --

THE COURT: "Sufficient" is a pregnant negative in a

way, and that's causing me some angst.

MR. ZARLENGA: Yeah. It's the same argument that

ties into the question you've raised. Hey, don't ask for

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everything. Focus it. Let's figure out what it is exactly

that you want. And we have -- I heard a little bit of focus,

but that is not the motion that's on file before the Court.

The motion on file before the Court that we oppose, that we

opposed in the meet and confer discussions, was: We want

everything. We want everything.

So we need to narrow it down or not have it at all,

which would be my preference, but if the Court is inclined to

grant discovery, it needs to be narrowed to something

reasonable and meaningful.

THE COURT: I am inclined to grant discovery on it

because it goes to the heart of the case -- "what's the

damage?" -- unless you change your damage theory, but I do

think that all documents relating to the launch -- I mean,

that's just too broad. So I want to give you a chance maybe

in the same two-week period to reask these questions, the

document requests. More tailored.

As to the potential acquisition, what is it you're

really looking for there?

MR. ZALESIN: Well, the potential acquisition, that

should be in a folder, in a fairly small folder, whether it's

electronic or physical, at Nestle Purina because, by Mr.

Zarlenga's account, they only spent a week or ten days looking

at it -- at least in 2013, although they had been looking at

it multiple times for years prior to that.

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And why am I interested in that? He didn't address

this at all. I'm interested in it because it will contain, we

believe, their senior executive team's honest assessment,

candid assessment, of Blue Buffalo and its business. He's

coming in here now and saying 100 percent of their marketplace

problems are caused by Blue Buffalo and the problems that we

had with Wilbur-Ellis. That's ridiculous. Even the documents

that they've produced to us for reasons unrelated to these

requests tell a different story, as he just acknowledged.

But these acquisition-related documents we believe

will reflect a different assessment of Blue Buffalo than the

one that they are publicly pleading and they are publicly

advertising currently. And that's why we want them. There's

no burden assertion here whatsoever. For all I know, they

don't have any documents, but if they have them, they should

turn them over.

MR. ZARLENGA: Your Honor, I think there's zero

probative value to this inquiry. None. I mean, any documents

that talk about an assessment of Blue Buffalo are not reliable

because they are based on incomplete information. And I'm not

saying that all -- that all sales damage is a result of the

Wilbur-Ellis problems. It's not just the Wilbur-Ellis issue.

It's the issue of advertising, Blue Buffalo advertising on TV

that says in no uncertain terms, it's unequivocal, that they

don't have poultry by-product meal in their products. Other

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people do. And don't buy those products because they're

fooling you.

That's what -- that's what consumers saw. That's

what made a big impact. The fact that there's by-products in

there, I mean, that's a terrible thing given those

advertisements, but it's not the only thing that caused the

damage. The advertising caused the damage. The advertising

with falsehoods built into it caused the damage.

And so any assessments of Blue Buffalo without that

information, the assessments that Mr. Zalesin is talking about

as to why products failed, totally incomplete. Not complete.

MR. ZALESIN: Well, Your Honor, he can make that

argument at trial if he wants to and say we didn't know

everything we know today when we wrote these documents in

2013, and subsequent events changed our assessment. That

doesn't mean they're not discoverable. They're still

relevant. And if that's such a great argument, he'll convince

the jury of its merit, but it doesn't give him a basis for

withholding the discovery.

MR. ZARLENGA: It just gets into the probative value

of things.

THE COURT: It does make it hard. And I understand

where you're coming from, but he's also right that it doesn't

make it not discoverable. So to the extent there's any

analysis of the potential acquisition of Blue Buffalo, you

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should produce that, but the point is well taken. But it's

your whole case, whether it's repeated then or later or

before, that it's based on inaccurate information because of

the circumstances we didn't -- we now know to be true that we

didn't know at the time.

That's obviously going to be a theme that will

permeate everything in this case; so . . .

MR. ZALESIN: That's right.

THE COURT: There's no reason to withhold it on that

basis just because something is now -- we now know facts to be

different than we believed them to be at the time.

MR. ZALESIN: And then, Your Honor --

THE COURT: So I'll grant the motion to compel as to

the acquisition issues. I want you to rework your document

requests as to the launch of the -- and be specific as to

premium products, which products you're talking about, not

just premium products.

So that leaves us with glucosamine.

MR. ZALESIN: Yeah. On glucosamine I think all he

said is we haven't alleged -- you know, we have an affirmative

case that their advertising is false. We're not required to

do that. They put this at issue by suing us alleging that our

advertising is false, and we're entitled to defend ourselves

in part by looking at their identical advertising and their

substantiation for making virtually the same claims. So we

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don't have to plead it. That's our defense. We're entitled

to the discovery. It's that simple.

MR. ZARLENGA: Your Honor, I just don't agree with

that, that it's a defense to a false advertising case; that we

make the same kind of advertising, which we don't do. We

don't make false advertising. So it's just not -- that

would --

THE COURT: He's suggesting that you're essentially

generating the same type of product, making the same claims

but coming in here and saying, "But you can't say that even

though we say it about our products."

MR. ZARLENGA: But they don't have enough of the

ingredient in their products. That's the difference.

MR. ZALESIN: That may be his defense, but we're

entitled to see how much is in their products, what is their

internal analysis of what you need to make a particular claim,

and they make this for a variety of their products, these

statements about --

THE COURT: This isn't even well-settled, you know.

The effect of glucosamine is still a debatable point. Period.

MR. ZALESIN: Absolutely. But both parties are

saying it, and they don't get carte blanche. They don't get

to criticize our conduct without having to answer for their

own conduct.

MR. ZARLENGA: I think it's a very dangerous notion,

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Your Honor, to say that anybody who asserts a false

advertising claim against somebody who has now admittedly

false advertised must then, in turn, turn over any documents

they have about any similar advertising that is not even

alleged to be false. I think that is a farfetched notion. I

don't think the law goes that far. So that's my position on

that.

THE COURT: All right. Well, it would be a much

harder question if it wasn't the exact same issue and the

exact same type of products; so I will grant the motion to

compel on the glucosamine. Although you have to understand at

some point motions in limine and other limiting motions may

prevent this from ever getting anywhere, and I'm kind of sad

we're distracted by this issue because I don't think that's

what this case is about, but here we are. And given the scope

of discovery, I will grant the motion to compel on the

glucosamine issues.

So that brings us to the motion to reconsider, or has

that been resolved? This is the air classification technology

and the human grade issues. Oh, good. Talk slowly.

MR. MANGI: Absolutely, Your Honor. Good morning.

Your Honor, through this motion Blue Buffalo seeks the

production of documents that fall into three categories. As

you flagged, part of it relates to ingredient procurement,

part of it is quality control, and then part of it goes to

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human grade claims that Purina has been making in the

marketplace.

Now, Your Honor is also correct that some aspects of

these issues in relation to procurement and quality control

were before you on an earlier motion that you ruled on in

October. At that time, Your Honor's ruling was that, while

Purina can have discovery of Blue Buffalo in relation to its

procurement and its quality control, we would not be permitted

discovery of them on those issues.

Now, we had noted, Your Honor, at the time,

respectfully, that we thought that was, frankly, an unfair

ruling and one unprecedented, in our experience, in terms of

Lanham Act litigation because it goes to the very theme that

Mr. Zalesin was just presenting, which is they are then given

leave to hold us to any type of standard they deem appropriate

in terms of these issues while evading any examination of what

they're doing on the same points.

But Your Honor noted that, to the extent it becomes

an issue, as the case emerges -- and we were still at early

days then -- we could come back.

THE COURT: That's my greatest weakness, is you can

make me change my mind.

MR. MANGI: Your Honor, I believe in this instance we

will be able to do that, and the reason for that is that what

Purina has done in this case subsequently not just opens the

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door to all this discovery, frankly it blows that door

entirely off its hinges. And let me explain why. Let's start

with ingredient procurement.

Now, Purina has launched an attack independent of the

Wilbur-Ellis issue on another supplier that Blue Buffalo uses

for chicken meal, named DAR PRO. Now, DAR PRO is a publicly

listed, large company. It's one of the biggest suppliers of

chicken meal in the country. They have operations on five

continents. They work in pharmaceuticals, feed, and a number

of different areas.

After this lawsuit was filed, a Blue Buffalo

executive exchanged some emails with his contact at DAR PRO

wanting to learn more about chicken meal and its production.

In the course of those emails, the DAR PRO executive described

a manufacturing technology that DAR PRO uses, and this, as

Your Honor notes, is what they refer to as "air

classification" -- utilizing the densities of properties of

materials to separate them.

Now, Blue Buffalo has never had any reason to

question DAR PRO's expertise or its methodologies, and indeed,

even after this lawsuit was filed, DAR PRO has assured Blue

Buffalo in writing that it meets our specifications and is

confident in its ability to do so.

Now, regardless, Nestle Purina now argues -- and they

have taken this position in aggressive questioning at

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depositions; you see it in their papers -- that DAR PRO's

methodology is somehow inappropriate or illegitimate.

Now, Your Honor's not going to decide today certainly

whether DAR PRO is right about what they do or whether Purina

is right in its attack, but what we submit fundamental

fairness requires here is that if Purina is going to come in

and attack Blue Buffalo saying, "How could you use DAR PRO;

they're an illegitimate company using illegitimate methods,"

then we are entitled to ask, "Well, do you use DAR PRO

yourself?" We're allowed to ask, "Do you use vendors that use

the same methodologies you are attacking through us?"

And this is not some idle speculation. We have

documents produced by DAR PRO in this case in response to

their subpoena. And while these are incidental references, I

grant, they make very clear that Nestle is dealing with them.

We refer to one document in our papers from August of 2014,

well after the lawsuit is filed, and DAR PRO is talking about

Nestle coming and looking at their plant and requalifying it

for the purchases of chicken meal. And there's the other

documents talking about Nestle purchases in 2012, 2013, 2014.

So ultimately here, Your Honor, our point is very

simple. The most natural line of cross-examination here is:

Well, isn't it true, Purina witness, that you were using the

same company you're attacking?

THE COURT: But they're not making the same claims

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about their product you're making about yours. It's a horse

of a different color.

MR. MANGI: Actually, no, Your Honor, because their

premium products make exactly the same claim. They have

banner advertisements that say "no poultry by-product meal."

It's almost indistinguishable from us. Maybe we have a

copyright claim against them for copying our advertising on

those products. That's why --

THE COURT: Go ahead. Go ahead and add that to your

counterclaim.

MR. MANGI: Well, but that's why, Your Honor, when

Mr. Zarlenga says, oh, you know, by-products are -- they're

saying by-products are bad, and that's untrue, well, they are

speaking out of both sides of their mouth because that's their

advertising. And it's not a question of us needing to add

something to our counterclaim. This is a question of

fundamental credibility.

THE COURT: It's about your copyright claim.

MR. MANGI: Understood. When they're making that

claim saying, okay, it's illegitimate to use chicken meal from

this source, and they're using the same source or they're

using other vendors that use similar methodologies, we should

get those facts. And all we're talking about here is getting

those facts. They can then argue whatever they want to in

terms of trial in terms of why that should be disregarded or

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why it should be ignored, but the facts are certainly

relevant.

And we can see an example of their discomfort on this

issue, Your Honor, in the declaration that they submit in

support of their motion. They put in the declaration from

their director of purchasing, but he's very careful in that.

He says, in the present tense, that we don't buy air

classified material. He doesn't address whether they've ever

bought it. He doesn't talk about what his basis would be for

knowing what their vendors use or that he made any inquiries

as to their methodologies. And he doesn't even address this

fundamental question -- do they use DAR PRO? -- which the

documents certainly suggest they do.

So simply put, Your Honor, when it comes to

ingredient procurement, given the attack they've made in the

course of discovery saying that this vendor is inappropriate,

illegitimate, or this methodology is inappropriate,

illegitimate, we should be allowed to put in front of the jury

basic facts showing that they were using the same vendors or

the same methodologies and the extent to which they did so.

Now, that then takes me to the second area, which

relates to quality controls. And here, Your Honor, we see

again similar themes coming forth. As Mr. Zalesin mentioned

this morning, one thing that they attack is the testing that

Blue Buffalo does as part of its QC process on incoming

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chicken meal. They say that if we had used, quote, a modicum

of diligence, we would have known what Wilbur-Ellis was up to.

In other words, we're to blame for being the victims of

Wilbur-Ellis' conduct.

Now, Blue Buffalo's position on this issue is very

simple, and it's been ver

Documents

Hearing Transcript 050615