Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-00840/USCOURTS-cand-3_05-cv-00840-1/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Contract Dispute

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

LOVELAND INDUSTRIES, INC. d/b/a 

UAP WEST, a Colorado corporation,

Plaintiff,

 v.

WILBUR-ELLIS COMPANY, a California

corporation; DOUGLAS SNYDE, an

individual; WILLIAM FRANCIS, an

individual; ARMON AZEVEDO, an

individual; and DOES 1 through 20,

inclusive,

Defendants.

 

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No. C 05-0840-SC

ORDER AFFIRMING AND

CLARIFYING THIS

COURT'S APRIL 22,

2005 ORDER AND

GRANTING PLAINTIFF'S

MOTION FOR A

PROTECTIVE ORDER

I. Introduction

Plaintiff Loveland Industries, Inc. d/b/a UAP West

("Plaintiff" or "Loveland") brings this action alleging, among

other things, misappropriation of trade secrets against three

former employees and their present employer, Wilbur-Ellis Company

(collectively, "Defendants"). Plaintiff has also filed Motions

for a Temporary Restraining Order and Preliminary Injunction,

which are now set to be heard before this Court on May 19, 2005. 

Presently before this Court are various discovery and prediscovery related motions filed by both parties, the resolution of

which are necessary prior to the TRO/Preliminary Injunction

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For the Northern District of California

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Hearing. Accordingly, and for the reasons discussed herein, the

Court affirms its previous Order granting Defendants' motion to

compel Plaintiff to disclose with specificity the trade secrets

allegedly misappropriated in compliance with California CCP §

2019(d). Further, the Court adopts Plaintiff's proposed

Protective Order, provided it is altered in compliance with this

Order. Finally, the Court denies Defendants' motion to unseal the

Castellon Declaration, and orders both parties to proceed with

discovery in accordance with the Federal and local rules.

II. Procedural Background

Plaintiff filed this action on February 28, 2005. 

Plaintiff's complaint alleges, among other things, that Defendants

misappropriated Plaintiff's trade secrets in violation of

California Civil Code § 3426, that Defendants violated the

Computer Fraud and Abuse Act, 18 U.S.C. §§ 1030, et seq., and that

Defendants violated various aspects of the California Business &

Professions Code § 17200. On March 31, 2005, Plaintiff moved this

Court to issue a Temporary Restraining Order and set a hearing on

a Preliminary Injunction. The Court set a hearing on the TRO and

both parties appeared before this Court on April 8, 2005. At the

hearing, the Court ordered Plaintiff to provide Defendants with

information specifying the trade secrets Plaintiff believed to be

misappropriated, and to make available to Defendant any materials

Plaintiff filed under seal. Both parties agreed to continue the

hearing on the TRO and Preliminary Injunction to May 9, 2005. 

On April 15, 2005, Plaintiff filed an ex parte application

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for a Protective Order, and also sought the Court's permission to

file a declaration ("Castellon Declaration") under seal. Because

the Court was not ready to issue a protective order until it had a

chance to hear from Defendants, the Court allowed Plaintiff to

file the Castellon Declaration under seal, subject to the Court's

standing order that all sealed evidence be made available to

Defendants' counsel. On April 18, 2005, Defendants filed an

Opposition to Plaintiff's Motion for a Protective Order, and a

Motion for Administrative Relief to Unseal the Castellon

Declaration. Defendants attached to these motions Defendants' own

suggested Protective Order. On April 20, 2005, Defendants filed

another round of motions, seeking Orders from the Court compelling

Discovery responses and Plaintiff's CCP 2019(d) Disclosure, in

addition to an interim Protective Order pending such compliance. 

This Court issued a brief Order on April 22, 2005, in which it

Ordered Plaintiff to produce to Defendants a specification of the

alleged "trade secrets" that form the basis of this action, in

compliance with California Code of Civil Procedure § 2019(d).

Plaintiff filed an opposition to Defendants' pending motions on

April 25 as well as a Motion for Reconsideration of the Court's

April 22 Order. Finally, on April 26, 2005, Plaintiff filed a

Motion to Compel Defendants to produce certain computer property

in Defendants' possession, to which Defendants object.

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III. Legal Standards

A. Motion to Compel

In general, parties may obtain discovery regarding any

matter, not privileged, that is relevant to a claim or defense of

any party. Fed.R.Civ.P. 26(b)(1). For good cause, the Court may

order discovery of any matter relevant to the subject matter

involved in the action. Id. A motion to compel a discovery

response is appropriate when a party disobeys a proper request by

refusing to produce relevant, nonprivileged discovery. See

Fed.R.Civ.P. 37(a)(2). The movant must certify that it has in

good faith conferred or attempted to confer with the party failing

to make discovery in an effort to secure information or material

without court action. See id.

B. Protective Order

"It is well-established that the fruits of pretrial discovery

are, in the absence of a court order to the contrary,

presumptively public." Philips v. Gen. Motors, 307 F.3d 1206,

1210 (9th Cir. 2002). When a party makes a motion asserting good

cause for a protective order pursuant to Rule 26(c), "the court in

which the action is pending may make any order which justice

requires to protect a party or person from annoyance,

embarrassment, oppression, or undue expense or burden including

... that a trade secret or other confidential research,

development, or commercial information not be revealed or be

revealed only in a designated way." Fed. R. Civ. P. 26(c). Under

Rule 26(c), "the party asserting good cause bears the burden, for

each particular document it seeks to protect, of showing that

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In balancing the public and private interests, courts have

looked to the following factors: (1) whether disclosure will

violate any privacy interests; (2) whether the information is being

sought for a legitimate purpose or for an improper purpose; (3)

whether disclosure of the information will cause a party

embarrassment; (4) whether confidentiality is being sought over

information important to public health and safety; (5) whether the

sharing of information among litigants will promote fairness and

efficiency; (6) whether a party benefitting from the order of

confidentiality is a public entity or official; and (7) whether the

case involves issues important to the public. Glenmede Trust Co.

v. Thompson, 56 F.3d 476, 483 (3d Cir. 1995), cited with approval

in Phillips, 307 F.3d at 1211-12.

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specific prejudice or harm will result if no protective order is

granted." Foltz v. State Farm Mut. Aut. Ins. Co., 331 F.3d 1122,

1130 (9th Cir. 2003)(citations omitted). "Where a business is the

party seeking protection, it will have to show that disclosure

would cause significant harm to its competitive and financial

position. That showing requires specific demonstrations of fact,

supported where possible by affidavits and concrete examples,

rather than broad, conclusory allegations of harm." Deford v.

Schmid Prods. Co., 120 F.R.D. 647, 653 (D. Md. 1987). "[B]road

allegations of harm, unsubstantiated by specific examples of

articulated reasoning do not satisfy the Rule 26(c) test." 

Beckman Indus., Inc. v. Int'l Ins. Co., 966 F.2d 470, 476 (9th

Cir. 1992). If the Court finds that Plaintiffs have met their

burden to show particularized harm will result from disclosure of

the information to the public, the court must then balance the

public and private interests to decide whether protection is

warranted.1 Phillips, 307 F.3d at 1211. A judge has broad

discretion "to decide when a protective order is appropriate and

what degree of protection is required." Id.

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IV. Discussion

To resolve the parties dispute prior to the hearing on the

TRO, the Court must consider both parties' requests for Protective

Orders and various motions to compel. For the reasons discussed

below, this Court finds that Plaintiff must be compelled to

identify its trade secrets with a higher level of specificity

prior to the commencement of discovery. To guard against improper

use of this information, this Court also finds that Plaintiff is

entitled to a Protective Order. 

A. CCP 2019(d)

On May 9, 2005, the Plaintiff will appear before this Court

to argue that Defendants must be enjoined from further use,

disclosure or dissemination of trade secrets wrongfully taken from

Plaintiff. In order for this Court to consider Plaintiff's

position, and indeed, in order for Defendants to defend against

it, Plaintiffs must first reveal to its opponents and the Court

which of its trade secrets are implicated. California law

requires as much. Section 2019(d) of the California Code of Civil

Procedure states:

In any action alleging the misappropriation of a trade

secret under the Uniform Trade Secrets Act (Title 5

(commencing with Section 3426) of Part 1 of Division 4

of the Civil Code), before commencing discovery relating

to the trade secret, the party alleging the

misappropriation shall identify the trade secret with

reasonable particularity subject to any orders that may

be appropriate under Section § 3426.5 of the Civil Code. 

Cal. Civ. Code § 2019(d). Section 3426.5 allows the court to

issue a protective order to ensure the confidentiality of

Plaintiff's trade secret identification. One Federal court found

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that CCP § 2019(d) "promotes well-investigated claims, frames the

appropriate scope of discovery, prevents needless discovery

disputes, and enables defendants to form complete and wellreasoned defenses." Computer Economics, Inc. v. Gartner Group,

Inc., 50 F. Supp. 2d 980, 992 (S.D. Cal. 1999). Moreover, CCP §

2019(d) "harmoniously coexists with various provisions of [Federal

Rule of Civil Procedure] 26 and enhances the court's ability to

control discovery in trade secret cases." Id.

Plaintiff argues that it has already complied with the

requirements of CCP § 2019(d) by delivering to Defendants a

document describing certain computer files allegedly taken by

Defendants from Plaintiff's place of business. Defendant urges

this Court to require Plaintiff to specify how the information

contained in these files differs from publicly available

information.

This Court finds that Plaintiff has not yet specified its

trade secrets with reasonable particularity. To the Court's

knowledge, Plaintiff attempted to meet its 2019(d) obligations

through a single document describing various computer files. 

Although the threshold requirements of section 2019(d) are

minimal, more is required of Plaintiff than a description of

various computer files. See Excelligence Learning Corp. v.

Oriental Trading Co., 2004 WL 2452834 *4 (N.D. Cal. 2004). In

essence, what section 2019(d) requires is that Plaintiff inform

Defendants of the proprietary information that differs from other

publicly available information or data commonly known to those in

the trade. Plaintiff may meet its burden by demonstrating where

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certain data was developed exclusively by Plaintiff for the

benefit of its business, how such data is materially different

from other publicly available data or data commonly known in the

trade, and how Plaintiff sought to keep that information

confidential.

Once Plaintiff has met the requirements of section 2019(d),

Defendant may not continue to postpone discovery by making various

objections to the merits of Plaintiff's trade secrets claims. 

Whether information provided to the government or to third parties

renders potential trade secrets non-confidential are issues to be

determined at a later stage of this litigation. For the purposes

of discovery, Plaintiff need only comply in good faith with the

"threshold requirements of Section 2019(d) for the purposes of

commencing discovery." Excelligence Learning, 2004 WL 2452834 at

*4. 

B. Protective Order

As noted above, when a party is required to make a section

2019(d) disclosure, that party is entitled to an order from the

Court protecting its confidential information. "[I]ssuance of a

protective order is essential to ensuring that a plaintiff who

complies with CCP § 2019(d) can prevent inadvertent disclosure of

its trade secrets. In federal court, a plaintiff may alleviate

its legitimate concerns that its trade secrets will be disclosed

to third parties by applying for a protective order under Rule

26(c)(7) before it complies with CCP § 2019(d)." Computer

Economics, Inc. v. Gartner Group, Inc., 50 F. Supp. 2d 980, 988-89

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2Defendants have submitted a Proposed Protective Order to this

Court that, in addition to differing from Plaintiff's Proposed

Protective Order on the levels of designation, also includes

substantive language defining trade secrets. See, e.g., Weil

Decl., Ex. L, ¶ 5.1. The Court observes that this language goes to

the merits of this dispute and is clearly beyond the scope of the

protective order; it will not be included.

9

(S.D. Cal. 1999). 

To this point, the parties have been unable to agree to a

stipulated protective order. On the one hand, Plaintiff insists

on having the option of being able to designate material "For

Attorneys' Eyes Only" to prevent the individual Defendants from

controlling and using this information in their capacity as

employees of one of Plaintiff's competitors. Defendants object

that the individual Defendants should be able to work with their

attorneys to identify and evaluate the material produced, and

should have access to all information--even that designated

"Attorneys' Eyes Only."2 This Court agrees that the individual

defendants should be able to view all of the material produced in

this action against them.

Plaintiff, however, is entitled to a significant level of

protection from having proprietary information used by either its

former employees or by its competitors. Therefore, this Court

orders the parties to make the following change to Plaintiff's

Proposed Protective Order: the designation "Highly Confidential--

Attorney's Eyes Only" shall be deleted. Instead, the Protective

Order shall allow two levels of designation: 1) "Highly

Confidential" and 2) "Confidential." Under either designation,

Defendants may provide the named Defendants in this action with

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copies of the disclosed information. At all times, the named

Defendants will be subject to contempt for any misuse or

disclosure of the protected information. 

V. Conclusion

This Court HEREBY GRANTS Plaintiff's Motion for a Protective

Order. Plaintiff is directed to make changes to its Proposed

Protective Order in accordance with the discussion above, and

submit a copy to the Court for approval within 2 days of the date

of this Order. Moreover, and also in accordance with the

foregoing, this Court HEREBY ORDERS Plaintiff to describe with

greater particularity the trade secrets it seeks to protect

through this action. Plaintiff should submit such information to

the Court and to Defendants on the day following this Court's

approval of its Protective Order. Parties are ORDERED to appear

before the Court on May 19, 2005 at 10:00 a.m. for hearing on

Plaintiff's Motion for TRO and Preliminary Injunction.

IT IS SO ORDERED.

Dated: May 6, 2005

 /s/ Samuel Conti 

UNITED STATES DISTRICT JUDGE

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