Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-00414/USCOURTS-azd-2_09-cv-00414-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

The Armored Group, LLC, a Nevada

limited liability company,

Plaintiff, 

vs.

Supreme Corporation, a Texas

corporation, et al.,

Defendants. 

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CV 09-414-PHX-NVW

ORDER

Pending before the Court is Plaintiff Armored Group, LLC’s (Armored Group)

Motion for Sanctions (doc. #76). 

I. Facts

The facts giving rise to this dispute are not contested. On November 13, 2009, the

Court entered a stipulated protective order that allowed each party to designate certain

types of information and documents as “Confidential” or “Confidential–Attorneys Only.” 

Documents could be designated as “Confidential” if they contained “trade secret,

proprietary, private, technical, commercial, pricing, financial, or other confidential

business information . . . that is not publicly known and cannot be reasonably ascertained

from publicly available documents or materials.” To obtain “Confidential” treatment, the

designated party was required to “indicat[e] on the record the specific testimony or

documents that contain Protected Information” or to provide “written notice” of the

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confidential materials in a deposition within fifteen business days after the date that the

court reporter forwards copies of the transcript to counsel. 

On December 2, 2009, Supreme deposed Mr. Pazderka, the Chief Executive

Officer of Armored Group. The deposition was not designated as Confidential. The next

day, Armored Group’s counsel, Colin Campbell, emailed Supreme Corporation’s

(Supreme) counsel, William Auther, to propose that the parties treat all depositions, in

their entirety, as Confidential. On December, 9, 2009, Supreme’s counsel agreed. On

December 16, 2009, the court reporter sent Supreme’s counsel a draft of Mr. Pazderka’s

deposition. The draft was not marked “Confidential.” Mr. Auther downloaded the draft

onto his computer, but because the disk sent by the court reporter was not marked

“Confidential” and Mr. Auther did not remember the email agreement with opposing

counsel, he did not mark the draft copy as “Confidential.”

In the meantime, an unrelated dispute arose between Armored Group and Armored

Solutions, Inc. (ASI), which was set for arbitration in Arizona. On December 16, 2009,

ASI retained Mr. Auther to assist its Massachusetts lead counsel, David Crevier, with the

arbitration proceedings in Arizona. On December 21, 2009, Mr. Crevier notified

Supreme’s arbitration counsel, John Blanchard, of his representation of ASI. Mr.

Blanchard voiced no objection to Mr. Auther’s representation of ASI based on his

representation of Supreme in this litigation. 

On January 20, 2010, Mr. Crevier called Mr. Auther to prepare for an initial case

conference scheduled by the arbitrator. During that call, Mr. Crevier asked Mr. Auther

whether Mr. Pazderka had been deposed in the Supreme litigation and, if so, whether he

could get a copy of the transcript. Not seeing “Confidential” on the draft transcript and

forgetting the email exchange with Armored Group’s counsel, Mr. Auther emailed the

draft transcript to Mr. Crevier on January 20, 2010. 

At 11:16 a.m. on January 21, 2010, Mr. Crevier emailed Mr. Auther about a

telephone conversation he had just finished with Mr. Blanchard about the arbitration

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matter. During that conversation, Mr. Crevier had mentioned that he had read Mr.

Pazderka’s deposition in the Supreme litigation, and Mr. Blanchard objected to his use of

the transcript because it was subject to a protective order. 

Five minutes later, at 11:21 a.m., Mr. Auther replied to Mr. Crevier’s email with

instructions not to use or disseminate the draft transcript until he could review the

applicable terms of the protective order. At 11:22 a.m., Mr. Crevier replied by email that

he had already sent copies of the draft transcript to his clients, Chris and Gail Light,

owners of ASI. At 11:24 a.m., Mr. Auther instructed Mr. Crevier to retrieve and destroy

all copies of the draft transcript. At 11:30 a.m., Mr. Auther followed up with a telephone

call to confirm that Mr. Crevier would retrieve and destroy all copies of the transcript,

including notes and summaries. Mr. Crevier agreed. Mr. Crevier, Chris Light, and Gail

Light, submitted affidavits confirming that they have destroyed all electronic and hard

copies of the transcript, including all notes and summaries. 

II. Analysis

There are three sources of authority that empower courts to sanction parties or

their lawyers for improper conduct: “(1) Federal Rule of Civil Procedure 11, which

applies to signed writings filed with the court, (2) 28 U.S.C. § 1927, which is aimed at

penalizing conduct that unreasonably and vexatiously multiplies the proceedings, and (3)

the court’s inherent power.” Fink v. Gomez, 239 F.3d 989, 991 (9th Cir. 2000). Armored

Group has not specified pursuant to which source of authority it seeks sanctions, but the

first two sources are inapplicable to the circumstances of this case, and therefore the

Court will assume that Armored Group seeks sanctions pursuant to the Court’s inherent

authority. “[B]ad faith is required for inherent power sanctions.” Id. at 993. Supreme

has submitted affidavits to the Court that Mr. Auther did not act in bad faith in disclosing

Mr. Pazderka’s deposition to unauthorized persons. According to the affidavits, the

disclosure was an oversight, not committed with the intention of gaining an unfair

advantage in the litigation involving ASI or otherwise. Furthermore, Mr. Auther took

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immediate steps to remedy the disclosure by contacting Mr. Crevier as soon as he realized

his error and asking him to immediately destroy all copies of the deposition and any notes

or summaries he had prepared. Supreme has also submitted affidavits that indicate that

Mr. Crevier, Chris Light, and Gail Light, the only unauthorized recipients of the

deposition, destroyed all of their copies of the deposition on January 21, 2010, a day after

the inappropriate disclosure was made. 

“Sanctions are available [only] if the court specifically finds bad faith or conduct

tantamount to bad faith.” See id. at 994. Armored Group admits that Mr. Auther did not

act in bad faith, stating that it “accepts [Mr. Auther’s] statement that he did not intend to

violate this Court’s Order.” (Doc. #76.) Armored Group further states that it has “no

reason to doubt counsel for Defendant’s explanation for why or how they violated the

Protective Order.” However, Armored Group argues that the disclosure prejudiced it, and

that “innocent mistake or not,” the protective order must have some consequence. 

Armored Group has not stated, however, how it was harmed. It argues only that

ASI is a fierce competitor of Armored Group, and that Mr. Pazderka testified at length

about the inner workings of his business, information that he did not want his competitors

to have. However, Armored Group does not point to any specific information in the

deposition that it did not want disseminated. In contrast, Supreme submitted affidavits

from Chris Light and Gail Light to the effect that they did not notice anything that was a

trade secret in the transcript and that there was nothing in the pages they read that they

believed would be helpful to them as competitors of Armored Group or Supreme. Mr.

Crevier has also stated, via affidavit, that the only fact that he learned from the transcript

was that Mr. Pazderka has a relationship with a company called Executive Armor. Mr.

Crevier asserts that he would have learned of the existence of Executive Armor anyways

because he intended to inquire about all relationships with manufacturers that Armored

Group had during the time it was operating under an agreement to use best efforts on

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behalf of ASI. Thus, Armored Group has not shown how it was prejudiced by the

disclosure.

Without more, sanctions against Supreme are not warranted. In the first place,

three of the sanctions sought by Armored Group are unnecessary. All copies of the

deposition transcript that were shared with unauthorized parties have been destroyed. 

Supreme has already identified all recipients of the transcripts. And, the destruction of

the deposition transcripts has been certified by affidavit. 

Armored Group also seeks that the Court order that Mr. Auther be removed as

local counsel in the ASI litigation. Counsel for Armored Group did not initially object to

Mr. Auther’s representation as local counsel in the ASI arbitration. Mr. Auther has

already indicated that the sharing of Mr. Pazderka’s deposition was done inadvertently

and without bad faith. The risk that confidential information will be shared in the future

is therefore low. The Court will not order Mr. Auther be removed as local counsel in the

ASI litigation. 

Finally, Armored Group seeks attorneys’ fees and monetary sanctions. As

explained, these sanctions can only be imposed if there has been bad faith conduct, which

is not present here. Armored Group’s request for fees and monetary sanctions is therefore

denied. 

IT IS THEREFORE ORDERED that Plaintiff Armored Group’s Motion for

Sanctions (doc. #76) is Denied. 

DATED this 22nd day of February, 2010.

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