Cool Runnings International Inc v. Gonzalez ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 COOL RUNNINGS INTERNATIONAL, Case No. 1:21-cv-974-DAD-HBK INC., 12 ORDER DENYING DEFENDANT DRC Plaintiff, CONTRACTING, LLC’S MOTION FOR 13 EXPEDITED DISCOVERY v. 14 (Doc. No. 23) ANDRONICO ADAN GONZALEZ, 15 ABIMAEL LUPIAN UTRERA, JOSE OLIVARES LUPIAN, DRC 16 CONTRACTING, LLC., 17 Defendants. 18 19 Pending before the Court is Defendant DRC Contracting, LLC’s motion for expedited 20 discovery, attaching the declaration of counsel, Shane G. Smith, filed July 21, 2021. (Doc. No. 21 23, “Motion”). Plaintiff Cool Runnings International, Inc. filed its response in opposition to 22 Defendant’s Motion on July 28, 2021, attaching the declaration of counsel, Dirk Paloutzian. (Doc. 23 No. 30, “Response”). Defendant filed a Reply, attaching a supplemental declaration of attorney 24 Shane G. Smith. (Doc. No. 32, “Reply”). On August 3, the Court heard oral argument on the 25 Motion. For the following reasons, the Court denies Defendant’s Motion. 26 I. BACKGROUND 27 The action involves two commercial refrigeration businesses: Plaintiff Cool Runnings 28 International, Inc. (“Cool Runnings”) and Defendant DRC Contracting, LLC (“DRC 1 Contracting). On June 18, 2021, Cool Runnings filed the complaint alleging unauthorized access 2 to its computer system and misappropriation of trade secrets against DRC Contracting, and its 3 three former employees of Cool Runnings, who are now employees of DRC Contracting: 4 Andronico Adan Gonzalez, Abimael Lupian Utrera, and Jose Olivares Lupian. (Doc. No. 1). 5 The complaint sets forth six counts, including inter alia, violations of the Federal Defend Trade 6 Secrets Act and California Uniform Trade Secrets Act, Cal. Civ. Code § 3426.2. (Id. at 15-17). 7 On July 12, 2021, Plaintiff filed a motion for preliminary injunction and later filed an 8 amended notice to comply with Eastern District of California Local Rules 65 and 230. (Doc. Nos. 9 6, 17). Plaintiff seeks to enjoin Defendant DRC Contracting from obtaining, retaining, using, 10 transmitting, disseminating, directly or indirectly, Plaintiff’s trade secrets or work product they 11 derived from Plaintiff’s trade secrets; enjoin Defendant from using any information obtained from 12 Plaintiff’s computer system, including to solicit business from Plaintiff’s customers; requiring 13 Defendant to disgorge itself from Plaintiff’s trade secrets and provide verification process 14 whereby Defendant’s electronically stored information is examined to verify the return and 15 removal of all Plaintiff’s trade secrets. (Doc. No. 6 at 1-2). Plaintiff’s motion for a preliminary 16 injunction is scheduled to be heard on September 21, 2021, at 9:30 a.m. in Courtroom 5 before 17 District Judge Drozd. (Doc. No. 27). Defendant’s opposition is due September 7, 2021. (Id.). 18 On July 21, 2021, Defendant DRC Contracting filed the instant motion for expedited 19 discovery. (Doc. No. 23). Defendant argues it needs expedited discovery to defend against 20 Plaintiff’s motion for preliminary injunction. (Id.). The motion initially sought nine requests for 21 production of documents (“RFPs), four interrogatories and the deposition of Mr. Ernesto Tapia. 22 (Id. at 10-12). As to each of the discovery requests, Defendant states it is relevant to the 23 “[l]ikelihood of success on the merits of [Plaintiff’s] trade secret claims.” (Id.). At oral argument 24 Defendant withdrew RFPS 2, 7-9, and Interrogatories 3-4. (See also Doc. No. 32 at 8). 25 Defendant primarily contends that it cannot adequately respond to Plaintiff’s motion for a 26 preliminary injunction because Plaintiff has not identified what trade secret information is at 27 issue. Defendant also posits as a defense that Cool Runnings may have shared its project material 28 spreadsheet, or other internal documents, with its clients, or otherwise failed to protect its trade 1 secrets. 2 II. APPLICABLE STANDARD AND ANALYSIS 3 Federal Rule of Civil Procedure 26(d) prohibits a party from seeking discovery from a 4 source before the parties have conferred as required under Rule 26(f). In the Ninth Circuit, courts 5 use “good cause” standard to determine whether discovery should be allowed to proceed prior to 6 a Rule 26(f) conference. See Am. LegalNet, Inc. v. Davis, 673 F. Supp. 2d 1063, 1067 (C.D. Cal. 7 2009); see also TGI Friday’s Inc. v. Stripes Restaurants, Inc., Case No. 1:15-cv-00592-AWI- 8 SAB, 2015 WL 2341991, *2 (E.D. Ca. 2015). “Good cause exists ‘where the need for expedited 9 discovery, in consideration of the administration of justice, outweighs the prejudice to the 10 responding party.’” Semitool Inc. v. Tokyo Electron America, Inc., 208 F.R.D. 273, 276 (N.D. 11 Ca. 2002). The court must make this evaluation considering “the entirety of the record . . . and 12 [examine] the reasonableness of the request in light of all the surrounding circumstances.” Id. at 13 275. 14 The parties agree in considering whether good cause exists, the court considers: (1) 15 whether a preliminary injunction is pending; (2) the breadth of the discovery request; (3) the 16 purpose for requesting the expedited discovery; (4) the burden on the [opposing party] to comply 17 with the requests; and (5) how far in advance of the typical discovery process the request was 18 made. See TGI Fridays, 2015 WL 2341991 *2 (citing Am. LegalNet, Inc., 673 F. Supp. 2d at 19 1067). A general rule, motions for expedited discovery in connection with motions for 20 preliminary injunctions are made by the moving party requesting the injunctive relief, not the 21 opposing party who does not carry the high burden. Id. (other citations omitted). 22 Defendant must sustain its burden by showing good cause to obtain expedited discovery 23 well in advance of the Rule 26(f) conference, which is a departure from usual discovery 24 procedures. Id. at 1066. Having considered the parties’ respective pleadings and hearing 25 argument on the same, the Court finds Defendant DRC Contracting has not shown good cause. 26 A. Preliminary Injunction 27 A preliminary injunction is pending in this case, but it is Plaintiff’s motion. Plaintiff, as 28 the moving party, bears the burden of proof to demonstrate that the requirements for a 1 preliminary injunction have been met. Granny Good Foods Inc. v. Brotherhood of Teamsters and 2 Auto Truck Drivers Local No. 70 of Alameda County, 415 U.S. 423, 443 (1974). The burden on 3 Plaintiff is a heavy one to justify this “extraordinary remedy.” Earth Island Institute v. Carlton, 4 626 F.3d 462, 469 (9th Cir. 2010). Accordingly, the lack of discovery in this action is more 5 prejudicial to Plaintiff than Defendant since Plaintiff bears the burden of proof on its motion for a 6 preliminary injunction. Further, the fact that a preliminary injunction is filed does not ipso facto 7 give rise to expedited discovery. See e.g., Am. LegalNet, Inc., 673 F. Supp. 2d at 1066; and TGI 8 Fridays, Inc., 2015 U.S. Dist. LEXIS 62885, *5. Thus, at most this factor is neutral. 9 B. Breadth and Purpose of Discovery 10 The Court addresses these factors together as they are intertwined. Defendant’s discovery 11 is not narrowly tailored to obtain information relevant to Defendant’s articulated defense to 12 Plaintiff’s motion for a preliminary injunction. (Doc. No. 23 at 10-11). Instead, Defendant states 13 its requested discovery is relevant for defending the “likelihood of success on the merits” of 14 Plaintiff’s claim. (Id.). Essentially, Defendant’s discovery requests are directed at the merits of 15 Plaintiff’s motion. But, as noted supra, this burden is borne by Plaintiff. 16 With regards to RFP No. 1 and Interrogatory No. 2, and request to Take Mr. Tapia’s 17 deposition, to the extent Defendant contends it does not know what trade secret information is at 18 issue without obtaining the requested discovery, the complaint and attachments, along with the 19 Plaintiff’s motion for a preliminary injunction and exhibits, sets forth the facts alleging the trade 20 secret information and constitute the evidence upon which Plaintiff will rely during the 21 preliminary injunction hearing. Aside from obtaining unredacted copies of exhibits B and C 22 attached to Mr. Ernesto Tapia’s declaration in support, Plaintiff’s motion for a preliminary 23 injunction identifies the evidence it intends to rely upon in support of its motion. (See Doc. No. 24 6). Regarding the two exhibits, the parties submitted a proposed stipulated protective order and 25 the Court this same day approved the proposed stipulated protective order. Thus, these 26 documents in unredacted form will now be available to Defendant. Plaintiff nonetheless points 27 out that the subject documents are already in the constructive possession of DRC Contracting 28 since exhibit B was attached to an email received by Defendant’s employee and exhibit C is a 1 “carbon copy” of that document.1 2 If Defendant maintains that this information is insufficient and/or is inadequate in 3 identifying Plaintiff’s trade secrets, such argument is properly raised in response to Plaintiff’s 4 motion for a preliminary injunction, or in Fed. R. Civ. P. 12(b)(6) or 12(e) motion. The Court 5 notes DRC Contracting filed a motion to dismiss in response to the complaint, which also is 6 pending before the District Court. (Doc. No. 31). 7 Regarding RFP 3 and 4 and Interrogatory No. 1 concerning documents related to Cool 8 Runnings’ proposals for the two PriceSmart projects that were awarded to Defendant DRC 9 Contracting, the Court finds this discovery is not narrowly tailored to any specific defense. In its 10 moving papers, Defendant identifies this as relevant only to disproving Plaintiff is likely to 11 prevail on the merits, without articulating the specific defense for which this discovery is 12 necessary. At the hearing, Defendant vaguely suggested that Plaintiff may have provided its 13 proprietary documents to its clients. Clearly reciprocal discovery of DRC Contracting 14 communications and proposals with PriceSmart may be relevant to prove Plaintiff’s claims, but 15 the reverse appears to be at best a speculative attempt to uncover evidence without any basis that 16 a “smoking gun” exists. To the extent that Defendant maintains such proprietary documents have 17 found their way into public hands, Defendant arguably would already have these documents and 18 would be able to identify the sources from which they were obtained. 19 Similarly, Defendant provides no reason why communications to and from Russell 20 Moulton sought in RFP 5 and 6 would support any defenses to the motion for preliminary 21 injunction. The Court agrees that that Defendant DRC mischaracterizes Plaintiff’s reference to 22 “RMoulton” in the footer of the project materials document attached to the April 8 email. 23 Thus, the Court finds Defendant’s requested discovery is not narrowly tailored to any 24 identified defense. Thus, the Court finds these factors weigh against Defendant’s motion to 25 expedite discovery. 26 /// 27 1 Notably, to the extent Plaintiff’s business order form is one such exhibits, Defendant Adan, Defendant 28 DRC’s agent, has the form in his possession already. 1 C. Burden on Plaintiff 2 Defendant argues that the expedited discovery does not pose any greater burden on 3 | Plaintiff than what would be imposed by later discovery. The Court disagrees. The abbreviated 4 | period to properly respond to the requested discovery, in particular the time to prepare a witness 5 | fora deposition, would impose an undue burden on Plaintiff. See Apple, Inc. v. Samsung 6 | Electronics Co., Ltd., Case No. 11-cv-01846, 2011 WL 1938154, *3 (N.D. Cal. May 18, 2011) 7 | (finding Rule 30(b)(6) deposition on expedited timeline to be unduly burdensome given the need 8 | to prepare a witness to testify on behalf of the corporation). This burden would be further 9 | exacerbated because in addition to responding to the Defendant’s expedited discovery, Plaintiff is 10 | now required to respond to Defendant’s dispositive motion. Thus, this factor weighs heavily 11 | against expediting discovery. 12 D. Rule 26(f) Scheduling Conference 13 Defendant notes the scheduling conference is set for February 17, 2022. (Doc. No. 4). 14 | Thus, the expedited discovery is well in advance of the scheduled date. This date is not the fault 15 | of either party, but reflects the judicial emergency facing this Court. The parties are free to move 16 | the Court to advance the date of the scheduling conference if necessary, to advance this case. For 17 || purposes of this Motion, the Court finds this factor a neutral factor. 18 Accordingly, it is ORDERED: 19 Defendant’s motion to expedite discovery (Doc. No. 23) is DENIED. 20 21 Dated: _ August 5, 2021 oe Zh. Sareh Back 22 HELENA M. BARCH-KUCHTA 33 UNITED STATES MAGISTRATE JUDGE 24 25 26 27 28