Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-05232/USCOURTS-cand-5_04-cv-05232-29/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1331 Fed. Question

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28 1 The holding of this court is limited to the facts and the particular circumstances

underlying the present motion.

ORDER, page 1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

DAN L. WHITNEY, JANET R.

HADLEY, MARGARET A. KORNOWBROWN, ERIC BRELLE,

Plaintiffs,

v.

CHARLES WURTZ, VERISCAPE, INC.,

RENEE TADLOCK, REGINA

RYGELIS, WILL ARNTZ, SAM

JACOBS, GARY BERKOWITS, BRIAN

ROE and DOES 1-20,

Defendants. __________________________________

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Case No.: C 04-5232 PVT

ORDER DENYING MOTION FOR

ORDER RELEASING DOCUMENTS

FROM PROTECTIVE ORDER AND

SETTING HEARING DATE FOR

DEFENDANTS ARNTZ AND

JACOB’S MOTIONS FOR

SUMMARY JUDGMENT

I. INTRODUCTION AND FACTUAL BACKGROUND

Plaintiffs Dan L. Whitney, Janet R. Hadley, Margaret A. Kornow-Brown and Eric Brelle

(collectively, “Plaintiffs”) allege breach of contract, termination, and deceit by lying about the

financial health of the company against their former employer, Veriscape, Inc.1

 The Complaint

also alleges that Defendants Charles Wurtz, Renee Tadlock, Regina Rygelis, Will Arntz, Sam

Jacobs, Gary Berkowits, and Brian Roe are liable as the alter ego of Defendant Veriscape. 

Case 5:04-cv-05232-PVT Document 212 Filed 02/09/07 Page 1 of 6
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ORDER, page 2

On February 6, 2007, the parties appeared before Magistrate Judge Patricia V. Trumbull

for hearing on Plaintiffs’ Motion to Release Documents from Protective Order. The documents

in question were produced under an “attorney eyes only” confidentiality designation. Plaintiff’s

counsel now seeks to be able to disclose the documents in question to his clients. For the

following reasons, the Motion is Denied. 

II. DISCUSSION

A. Motion to Release Documents from Protective Order

Plaintiffs’ counsel, Mr. Beck, would like to show to his clients four categories of

documents: 1) Financial Statements; 2) Customer Agreements 3) Sales by Customer; and 4) List

of 186 Customers and Prospective Customers. The Stipulated Protective Order in effect in this

case provides for “Highly Confidential - Attorneys’ Eyes Only” to apply to 

extremely sensitive ‘Confidential Information or Items’ whose disclosure to

another party or nonparty would create a substantial risk of serious injury that

could not be avoided by less restrictive means.

Stipulated Protective order ¶ 2.4. Defendants oppose the motion, arguing that the Plaintiffs work

for a direct competitor and, therefore, the risk of injury cannot be avoided by less restrictive

means. 

1. Financial Statements

Plaintiffs’ counsel wants to show his clients the EBITDAs - Earnings before interest,

taxes, depreciation, and Amortization or “Earnings Statements”, Balance Sheets, and Statements

of Changes in Cash. 

a. Earnings Statements

Plaintiffs’ Counsel argues that these documents are relevant to the defenses that the

company had few commissionable sales and there was not sufficient income to pay Plaintiffs’

salaries. The question, however, is not whether the documents are relevant to the defenses, but

rather whether Plaintiffs need to see the documents personally. Plaintiffs’ counsel argues that

Plaintiffs would know if the Earnings Statements are accurate, specifically whether the expenses

are accurate. Defendants respond that Plaintiffs are not accountants and were not responsible for

making the payments in the statements. Therefore, Plaintiffs cannot verify the Earnings

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ORDER, page 3

Statements. The Court is persuaded that any limited ability of Plaintiffs to verify the statements

does not warrant the risk of disclosure to a direct competitor. 

Plaintiffs’ counsel also lists questions he would like to ask his clients about the

expenses, such as why expenses are so high and whether salary is counted as an expense. As

Defendants argue, counsel can get that information from his clients without revealing

confidential information. For example, he can ask his clients what expenses fit into ‘engineering

expense” without revealing any confidential information. In reply, Plaintiffs’ counsel lists more

questions he would like to ask his clients. Counsel seeks definitions of various types of revenue

and for which types of revenue Plaintiffs were entitled to commissions; to know whether

Whitney had input into how Sales and Marketing expense was spent or if he knows how the

money was spent; and whether it was 2002 when Veriscape claimed not to have money to pay

salaries. Plaintiffs’ counsel also wants to ask about his clients knowledge of the exact amount

of money Veriscape had in the bank in 2002 and of a specific short term loan. As above,

however, counsel can ask these questions without revealing confidential information. 

b. Balance Sheets

Plaintiffs’ Counsel argues that he wants to ask his clients about the substantial amount of

current assets shown at the end of each year on the balance sheets. Plaintiffs’ Counsel claims

that he does not want to spend money in depositions asking about this issue if his clients can

explain it. First, counsel can ask his clients generally about why money available was not spent

on salaries. Second, Plaintiffs are planning to depose Defendants and the court is not persuaded

that Plaintiffs will incur any undue expense in asking Defendants these questions at the

depositions. 

c. Statement of Changes in Cash

Plaintiffs’ Counsel argues that he needs to show his clients the Statement of Changes in

Cash because they show a substantial amount of money raised by loans. Counsel argues he

needs his clients to verify the accuracy of the statement and whether they know if the money

raised was earmarked for a particular purpose. Again, Plaintiffs would not be able to verify the

accuracy of these statements any better, and indeed they would be worse than, a professional

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ORDER, page 4

forensic accountant. Plaintiffs’ Counsel also argues that the Plaintiffs will testify that they were

told the money raised from certain loans from Arntz would be used to pay their salaries. Thus,

he argues, he needs to be able to ask if a particular loan was from Arntz. However, if counsel

cannot ask this question to his clients without revealing confidential information, he can ask

Defendants at their depositions.

2. Sales by Customer

Plaintiffs’ Counsel wants to ask his clients if the amount of money provided as sales for

the four customers named in the Complaint comport with their understandings. (First Amended

Complaint ¶¶ 87, 90, 93, 96.) Counsel also wants to ask his clients if there were sales to anyone

else. As for the former, he can ask them what they think sales were without revealing the

confidential information. As for the latter, he can ask his clients to name the companies to whom

sales were made. Counsel also argues that his clients need to know the amount of sales to Bank

of Montreal so they can tell him whether to bother spending money on discovery. However,

counsel knows the amount and should be capable of deciding on his own if that amount is worth

pursuing. Thus, there is no reason to reveal this highly confidential information. 

3. Customer Agreements

Plaintiffs’ Counsel claims that the contracts are “super-technical and complex. This

attorney cannot understand them.” (Opp. At 4:18-19). Defendants argue that the contracts are

not so complex as to warrant violating their legitimate need to keep this extremely confidential

information from reaching its current, direct competitor. The Court has examined a sample

contract and finds that it is not prohibitively technical or complex. Moreover, Defendant Regina

Rygelis explained how to read the customer contracts to Plaintiffs’ counsel. (Rygelis Decl. ¶ 8.) 

Ms. Rygelis also produced the general ledger from 2002-2004 and explained how to cross

reference the entries in the ledger with the contracts to trace all income and determine where the

money was spent. (Rygelis Decl. ¶ 9.) Accordingly, counsel should be able to now understand

the contracts. If he cannot, he must hire expert help.

Counsel also claims his clients need to see the actual contracts to know whether they

contend that they negotiated the contracts. As Defendants correctly point out, it is not logical

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28 2

 If Plaintiffs claim not to currently have these documents, Defendants shall produce them

without requiring Plaintiffs to issue formal discovery requests. 

ORDER, page 5

that Plaintiffs need to see the actual contracts to know whether they contend they negotiated

them.

Finally, in Reply, Plaintiffs’ counsel contends that he needs to show contracts to his

clients to ask why there are contracts for two customers for whom there is no sales listed in the

sales by customer. Counsel can get this information at Defendants’ depositions. He can also ask

his clients this question in a general way without revealing confidential information. Counsel

also argues he wants to ask his clients why the amount in the Sales by Customer is so low

compared to the value of the contract, as he understands it. Again, he can ask his clients how

sales revenue is booked, using hypothetical examples instead of revealing confidential

information. Alternatively, counsel could propound interrogatories to Defendants to obtain this

information. The question under the protective order is whether there less restrictive means exist

that protect the holder of the information. The question is not whether maintaining

confidentiality will be slightly more expensive for the person seeking the information.

4. 186 Customer List 

Plaintiffs provided Defendants with a list of 186 potential customers that they claim they

contacted on behalf of Veriscape. The document at issue is a modified version of that list, with

all of the contact information for the potential customers and who Veriscape claims made the

initial contact. Plaintiffs claim they supplied the list, so it cannot be confidential. However, the

document in question is not the original list, it is a new document with additional, confidential

information. Defendants persuasively argue that Plaintiffs can figure out what customers and

potential customers they worked on from non confidential weekly sales status reports. Thus,

there is no need for Plaintiffs to see the confidential data.2

B. Hearing Date for Motions for Summary Judgment

On October 6, 2006, Defendants’ Arntz and Jacobs moved for summary judgment,

claiming that there is no evidence that they are the alter egos of Veriscape and that alter ego is

the sole basis for liability against them. The hearing was originally set for November 14, 2006. 

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ORDER, page 6

On October 18, 2006, Plaintiff Dan Whitney (“Whitney”) moved to continue the summary

judgment hearing under Local Rule 6-3. On November 6, 2006, the court granted the motion to

continue. At the hearing on February 6, 2007, the Court, after allowing Counsel for Mr. Arntz

and Mr. Jacobs, Mr. Kravitz to appear by telephone, the Court specially set the hearing for the

Arntz and Jacobs Motions for Summary Judgment for 10:00 a.m. on Wednesday, May 2, 2007.

III. CONCLUSION

For the foregoing reasons, It Is Hereby Ordered that:

1. Plaintiffs’ Motion to Release Documents from Protective Order is Denied;

and

2. The Motions for Summary Judgment filed Mr. Arntz and Mr. Jacobs shall

be heard on 10:00 a.m. on Wednesday, May 2, 2007

IT IS SO ORDERED 

sDated: February 9, 2007

____________________________

PATRICIA V. TRUMBULL

United States Magistrate Judge

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