Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_18-cv-00019/USCOURTS-cand-3_18-cv-00019-7/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 18:1836(a) - Injunction against Misappropriation of Trade Secrets

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

COLLATERAL ANALYTICS LLC,

Plaintiff,

v.

NATIONSTAR MORTGAGE LLC, et al.,

Defendants.

Case No.18-cv-00019-RS (JSC)

ORDER RE: SHARING OF

CONFIDENTIAL INFORMATION 

DISCOVERY DISPUTES

Re: Dkt. Nos. 162, 163

Through joint discovery letter briefs, the parties seek to prevent one of the other side’s 

designated experts from reviewing the objecting party’s confidential information. (Dkt. Nos. 162, 

163.) The Court heard oral argument on July 2, 2019.

I. Thomas Huffman

The parties stipulated to a protective order to govern the sharing of confidential 

information in this case. (Dkt. No. 62.) Among other things, the Order allows a party receiving 

the opponent’s confidential information to share the information with “Experts” as defined in the 

Order. (Dkt. No. 62 at ¶ 7.2(c).) An “Expert” is defined as “a person with specialized knowledge 

or experience in a matter pertinent to the litigation who (1) has been retained by a Party or its 

counsel to serve as an expert witness or as a consultant in this action, (2) is not a past or current

employee of a Party or of a Party’s competitor, and (3) at the time of retention, is not anticipated 

to become an employee of a Party or of a Party’s competitor.” (Id. ¶ 2.6 (emphasis added).)

Plaintiff asks to share Defendants’ confidential information with its retained expert, 

Thomas Huffman. It is undisputed, however, that Mr. Huffman previously worked for one of 

Defendants’ current competitors, Clear Capital. Thus, under the plain language of the Stipulated 

Protective Order, Mr. Huffman is not qualified to receive Defendants’ confidential information--

Case 3:18-cv-00019-RS Document 172 Filed 07/09/19 Page 1 of 5
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Mr. Huffman is a past employee of a Party’s competitor.

Plaintiff nonetheless insists that Mr. Huffman should be allowed to review Defendants’ 

confidential information because Defendants did not begin competing with Clear Capital until 

June 2015 at the earliest—two years after Mr. Huffman ceased employment with the company. It 

contends that because Defendants cannot articulate any potential harm from sharing their 

confidential information with Mr. Huffman, their objection to Plaintiff doing so should be 

overruled. (See Dkt. No. 62 ¶ 7.4.) 

The Court disagrees. The plain language of the Protective Order precludes Plaintiff from 

sharing Defendants’ confidential information with Mr. Huffman. The Protective Order does not 

have an exception for experts who were not employed by the competitor at the time it became a 

party’s competitor; nor does it have an exception for experts who are no longer actively involved 

in the relevant subject matter (Mr. Huffman is currently concentrating on his art). As Defendants 

explained at oral argument, in choosing their experts they followed the language negotiated by the 

parties and thus would be harmed by Plaintiff’s attempt to change the rules mid-stream. Further, 

the parties’ chosen rule makes some sense as it eliminates the need for the Court to make factual 

findings and resolve disputes as to exactly when a proposed expert worked for a company and 

when that company actually began competing with a party—disputes that the Court would have to 

resolve here if it accepted Plaintiff’s argument and ignored the Protective Order’s plain language.

The cases upon which Plaintiff relies are unpersuasive. In Advanced Micro Devices, Inc. v. 

LG Electronics, Inc., 2017 WL 3021018 (N.D. Cal. July 17, 2017), the objecting third-party did 

not argue that the plaintiff’s expert had performed work for a party’s competitor (or even its own 

competitor); thus, the Protective Order language at issue here was not implicated. Verigy US, Inc. 

v. Mayder, 2008 WL 4183493 (N.D. Cal. Sep. 8, 2008), is not helpful as the court gave no 

explanation for its decision not to follow the governing protective order’s plain language.

As there is no dispute that Mr. Huffman was employed by a competitor of Defendants, he 

may not receive Defendants’ confidential information under the plain language of the Stipulated 

Protective Order. (Dkt. No. 62 ¶ 2.6.) 

Case 3:18-cv-00019-RS Document 172 Filed 07/09/19 Page 2 of 5
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II. Lee Kennedy and Kevin Herzberg of AVMetrics

AVMetrics is an independent specialist in the testing and application of Automated 

Valuation Models (AVMs). AVMetrics’ core business provides AVM testing and benchmarking. 

It uses “its knowledge of the strength and weaknesses of commercially available AVMs,” such as 

that offered by Plaintiff, to help AVMetrics’ “customers choose the most competent AVM that 

will give them the best results at the lowest risk for their particular needs.” (Dkt. No. 163-4 ¶ 3.) 

The core business also consults with AVM businesses by “pointing out areas where the AVM is 

underperforming.” (Id. ¶ 6.) AVMetrics also offers a litigation support business, including expert 

consulting and testimonial services. Defendants have retained AVMetrics for its litigation support 

services and propose that they be allowed to share Plaintiff’s confidential information with Lee 

Kennedy and Kevin Herzberg, each of whom work for (and in the case of Mr. Kennedy own), AV 

Metrics. Plaintiff objects to their confidential information being shared with anyone from 

AVMetrics on the grounds that it has an ongoing confidential relationship with AV Metrics in 

which it has shared its confidential information subject to nondisclosure agreements. It also 

argues that given the nature of AVMetrics’ core business, there is a risk that AV Metrics will 

disclose Plaintiff’s confidential information to a competitor or use the information to its 

competitive disadvantage.

“In the ordinary course of litigation, a party is owed some degree of deference ‘in retaining 

and preparing an expert with the relevant industry experience and availability.’” Advanced Micro 

Devices, Inc. v. LG Electronics, Inc., 2017 WL 3021018 *1 (N.D. Cal. July 17, 2017) (internal 

quotation marks and citation omitted). “However, in particular circumstances, that interest must 

be balanced against an increased risk of improper use or disclosure borne by the producing party.”

GPNE Corp. v. Apple Inc., No. 5-12-CV-2885 LHK PSG, 2014 WL 1027948, at *1 (N.D. Cal. 

Mar. 13, 2014). AVMetrics receipt of Plaintiff’s confidential information presents such a risk.

AV Metrics’ ongoing core business involves consulting for Plaintiff’s competitors. It 

advises Plaintiff’s competitors on the strengths and weaknesses in their own AVM products. 

Common sense dictates that AVMetrics will have a difficult time separating what it learned about 

Plaintiff’s AVM products in this litigation when advising Plaintiff’s competitors in the future. 

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Further, when advising other customers on what AVM product to purchase, AVMetrics will, 

because of this litigation, have more “confidential” information about Plaintiff’s products than it 

will about other company’s products. These circumstances create a risk that it will use this “extra” 

information in evaluating Plaintiff’s AVM products and advising Plaintiff’s competitors as part of 

its core business. See Symantec Corp. v. Acronis Corp., No. 11-5310 EMC JSC, 2012 WL 

3582974, at *3 (N.D. Cal. Aug. 20, 2012). 

Apparently recognizing this risk, AVMetrics claims that its “people who work in litigation 

support do not also perform testing or consulting services in AVMetrics’ core business, and do not 

share any confidential information with those that do. John Walley Doug Were, Allison 

McDonald, and [Lee Kennedy] are all part of the litigation support group. Kevin Herzberg is a 

consultant with AVMetrics and works exclusively with the litigation support group.” (Dkt. No. 

163-4 ¶ 9.) This claim, however, is not credible, even apart from its lack of any specifics as to 

how these persons are “walled off.” Just one week after Mr. Kennedy signed his declaration 

attesting that AVMetrics’ five litigation support employees/contractors are “walled off” from its 

core business, a representative of AVMetrics advised Plaintiff’s outside attorney in connection 

with a subpoena that AVMetrics has only “6 employees/contractors.” That would leave one 

employee to perform all of AVMetrics’ core business. Not credible. Further, Mr. Kennedy does 

not explain how he, as a founder and owner, is “walled off” from a core part of his business. In 

any event, emails between Plaintiff and AVMetrics show that such a wall is more aspirational than 

real. 

Defendants do not claim that AVMetrics possesses unique expertise; indeed, they contend 

AV Metrics never reviews source code or algorithms (which begs the question of why they need 

to review Plaintiff’s source code and algorithms to offer assistance in this case). As Plaintiff has 

met its burden of showing that AVMetrics’ ongoing work creates a substantial risk of misuse of 

Plaintiff’s confidential information, and that the risk outweighs Defendants need to share the 

information with AVMetrics, Defendants may not share Plaintiff’s confidential information with 

Mr. Kennedy or Mr. Herzberg. 

The Court cautions that it is not ruling that no one from AV Metrics may serve as an expert 

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in this case; it is ruling only that pursuant to paragraph 7.4 of the Protective Order, neither Mr. 

Kennedy nor Mr. Herzberg may receive Plaintiff’s confidential information.

The Administrative motion to file exhibits under seal is GRANTED.

This Order disposes of Docket Nos. 162 and 163. 

IT IS SO ORDERED.

Dated: July 9, 2019

JACQUELINE SCOTT CORLEY

United States Magistrate Judge

Case 3:18-cv-00019-RS Document 172 Filed 07/09/19 Page 5 of 5