Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-00009/USCOURTS-caed-2_09-cv-00009-26/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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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

PATRIOT RAIL CORP., a

Delaware corporation, No. 2:09-cv-00009-MCE-EFB

Plaintiff,

v. ORDER

SIERRA RAILROAD COMPANY, 

a California corporation,

Defendant.

______________________________

And Related Counterclaim.

______________________________

----oo0oo----

Defendant and Counterclaimant Sierra Railroad Company

(“Sierra”) request, through the motion presently before the

Court, an order modifying the terms of protective order, filed on

May 21, 2009, and now in place with respect to the abovecaptioned matter. 

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Case 2:09-cv-00009-TLN-AC Document 189 Filed 01/24/12 Page 1 of 4
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Due to ongoing acquisition negotiations between Sierra and a

prospective purchaser, Iowa Pacific Holdings (“IPH”), and due

diligence disclosures requested by IPH as to pending litigation,

including the present case, Sierra asks that the terms of the

protective order be amended to permit such disclosure. Sierra

filed this Motion when it was unable to reach any consensus with

Plaintiff Patriot Rail Corp. (“Patriot”) as to how a due

diligence disclosure could be effectuated.

By order dated October 24, 2011, this Court gave the parties

fourteen (14) days to reach a mutually acceptable revision of the

protective order currently in place. By declarations filed by

counsel on behalf of both sides on November 7 and 8, 2011, the

parties notified the Court that they were unable to reach any

compromise. Consequently, as the Court indicated it would do in

the absence of an agreement, it will now unilaterally make the

changes to the protective order it deems appropriate under the

circumstances.

First, although the Court did earlier decline to modify the

protective order upon Sierra’s request, modification would be

necessary in the event a potential purchaser was interested in

acquiring Sierra, at this point that development has moved beyond

mere speculation given Sierra’s representation that actual sales

negotiations with a specific entity, IPH, are now occurring. 

Sierra’s claim in that regard is corroborated by a declaration to

the same effect from Daniel Marko, IPH’s General Counsel. 

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The concrete nature of those negotiations and Marko’s specific

request for Sierra’s litigation files (including files related to

the present action) in order to assess Sierra’s value as an

acquisition target, are sufficient to cause the Court to revisit

the issue at this time. Given the difference between the

circumstances now and the hypothetical nature of Sierra’s

previously denied request for modification, the Court rejects

Patriot’s claim that Sierra’s current request is nothing more

than an untimely request for reconsideration as to its previous

order.

The law is clear that a party subject to a protective order

may return to the issuing court to seek modification of that

order. Osband v. Woodford, 290 F.3d 1036, 1039 (9th Cir. 2002). 

That includes stipulated protective orders like the original

order issued here. United Nuclear Corp. v. Cranford Ins. Co.,

905 F.2d 1424, 1427 (10th Cir. 1990). Also significant is the

fact that protective orders may be modified to meet the

reasonable needs of parties in pending litigation. See, e.g.,

Beckman Industries v. Int’l Ins. Co., 966 F.2d 470, 475 (9th Cir.

1992).

Here, the Court is persuaded that Sierra’s potential

acquisition by ICH does warrant modification of the protective

order. Significantly, Patriot made similar due diligence

requests with respect to pending litigation during the ultimately

unsuccessful purchase negotiations underlying this very case,

insisting that it could not determine Sierra’s value, and make a

considered purchase offer, without obtaining access to its

litigation files. See Decl. Of Michael Hart, ¶ 3. 

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Fundamental notions of equity and fair play require that Sierra

be afforded a similar right, particularly if confidentiality

precautions as to the use of any due diligence information are

established.

Filed concurrently herewith is an amended protective order

which includes the modifications the Court deems appropriate

following its review and analysis of all the materials submitted

by both sides in connection with the motion. The Court believes

those modifications recognize not only Sierra’s right to provide

needed due diligence disclosures, but also Patriot’s

confidentiality concerns in any divulged information. Sierra’s

Motion for an Order Modifying Protective Order (ECF No. 167) is

accordingly GRANTED.1

IT IS SO ORDERED.

Dated: January 23, 2012

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

 Because oral argument was not of material assistance, the 1

Court ordered this matter submitted on the briefs. E.D. Cal.

Local Rule 78-230(h). 

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