Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-00265/USCOURTS-cand-3_15-cv-00265-9/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 12:22 Securities Fraud

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ORDER(No. 3:16-cv-00477-EMC (LB))

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United States District Court 

Northern District of California 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

San Francisco Division 

DAVID BARNES, 

Plaintiff, 

v. 

ENERGY RECOVERY, INC., et al., 

Defendants. 

Case No. 3:16-cv-00477-EMC (LB) 

ORDER 

Re: ECF No. 14 

IN RE: ENERGY RECOVERY, INC. 

SECURITIES LITIGATION 

Case No. 3:15-CV-00265-EMC 

ORDER 

The parties in the Barnes case filed a discovery dispute about certain documents that the 

plaintiff retained in hard copy and in electronic form from his previous employment with Energy 

Recovery, Inc. (“ERI”). ERI moved to return the documents; the court allowed the plaintiff in the 

related securities litigation to permissively intervene for the sole purpose of opposing ERI’s 

motion to return the documents.1

 The court held a hearing on April 7, 2016, fashioned a process 

 

1

 ECF Nos. 14, 28; Order — ECF No. 53. Citations are to material in the Electronic Case File 

(“ECF”); pinpoint citations are to the ECF-generated page numbers at the top of the documents. 

Case 3:15-cv-00265-EMC Document 97 Filed 04/07/16 Page 1 of 3
ORDER(No. 3:16-cv-00477-EMC (LB)) 2 

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for return of the information, and now captures that process in this order. 

Several things are not contested. The parties agree that the hard copies can be returned, and 

ERI agrees that the plaintiff’s private data should be excepted from return.2 The parties also agree 

that everything that the plaintiff has in electronic form will be copied and given to ERI.3 The 

Barnes parties’ main dispute is about the implication of deleting the material from the plaintiff’s 

hardware. The plaintiff in the related securities litigation issued a Rule 45 subpoena to preserve the 

electronically stored information (“ESI”), and the Barnes plaintiff fears that wiping the 

information from his computer is destroying evidence.4 

To resolve this issue, the parties agreed to the following procedure in court. First, the 

plaintiff’s counsel already has the ESI on a thumb drive and will provide it to ERI. Second, the 

plaintiff agreed to wipe the ESI from his devices and submit to a verification process through a 

third-party vendor. The parties will confer and agree to a vendor and a verification process. ERI 

will pay for the vendor. Third, the Barnes plaintiff’s attorney will retain a full copy of the ESI. 

Fourth, the parties already agreed in the related securities litigation to a protective order that 

requires ERI to treat any information from the Barnes plaintiff as the subject of a continuing 

request for production from the securities-litigation plaintiff.5 

The remaining issue is whether the Barnes plaintiff can share non-trade-secret information and 

documents with the plaintiff in the related securities case. (Barnes’s lawyer — who will have the 

only copy of the ESI apart from ERI — represented at the hearing that he will not share tradesecret information.) Because the district judge dismissed the securities claims with leave to amend, 

the case is pre-discovery, and the securities-litigation counsel are investigating to more fully plead 

their securities claims against ERI. 

Especially given the whistleblower protections in Sarbanes-Oxley and general case law, ERI’s 

 

2

 Opposition — ECF No. 35-1 at 13. 

3 Id.

4 Id. 

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 Order, Case No. 3:15-cv-00265-EMC — ECF No. 88. 

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ORDER(No. 3:16-cv-00477-EMC (LB)) 3 

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confidentiality agreement does not prevent the Barnes plaintiff from talking with counsel in the 

securities litigation. See Brado v. Vocera Communications, Inc., 14 F. Supp. 3d 1316, 1319 (N.D. 

Cal. July 30, 2014). “To hold to the contrary would severely compromise plaintiffs’ ability in 

securities cases to meet the heightened pleading requirements of the PSLRA.” Id. The court 

elaborated on this point at the hearing, but in sum, a confidentiality agreement cannot defeat 

access to a percipient witness with useful information about alleged fraud. Moreover, there is no 

issue here of sharing trade-secret information; the securities-litigation plaintiff disavows interest in 

it, and the Barnes plaintiff’s counsel can protect against its disclosure. The scope of the precomplaint investigation instead is about misrepresentations by the defendants in the securities 

litigation, including two who overlap with the defendants in the Barnes case: former CEO Thomas 

Rooney and current CEO Joel Gay. 

It is a different issue with respect to the documents. There is no formal request for documents; 

the Rule 45 subpoena is a preservation subpoena to prevent the return of information that the 

Barnes plaintiff might provide to the securities-litigation plaintiff. And because the securities 

litigation is pre-discovery, the court cannot order document production through ordinary channels, 

which would allow ERI to designate its productions under a protective order. Also, the court is 

reluctant to issue a blanket order about using information when it has no idea what the information 

is. The court also wonders whether the documents have any practical utility. The record suggests 

misrepresentations that ultimately are belied by public SEC filings. If that is so, a witness 

interview seems sufficient, and documents can await formal discovery. 

Given that the parties agreed to return a copy of all information to ERI, the court devises the 

following process. The Barnes plaintiff must designate any document he wants to give counsel in 

the securities case. ERI may object. The Barnes parties must confer and raise any dispute to the 

court via the joint letter-brief process described in the court’s standing order. 

IT IS SO ORDERED. 

Dated: April 7, 2016 ______________________________________ 

LAUREL BEELER 

United States Magistrate Judge 

Case 3:15-cv-00265-EMC Document 97 Filed 04/07/16 Page 3 of 3