Anaqua, Inc. v. Bullard.

• Court: Superior Court of Delaware
• Decided: May 11, 2015
• Docket: 14M-10-278
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY

Anaqua, Inc., ) ) Plaintiff, ) ) v. ) ) C.A. No. N14M-10-278 Mark Bullard, ) ) Defendant, ) )

Date Submitted: April 20, 2015 Date Decided: May 11, 2015

ORDER

THIRD PARTY LECORPIO, LLC’S MOTION TO QUASH PLAINTIFF’S OUT- OF-STATE SUBPOENA IS GRANTED IN PART.

Theodore A. Kittila, Esq., Greenhill Law Group, LLC., 1000 N. West Street, Suite 1200., Wilmington, DE, 19801. Attorney for Anaqua.

Sharon Oras Morgan, Esq., Kasey H. DeSantis, Esq., Fox Rothschild, LLP., 919 N. Market Street, Suite 300, Wilmington DE, 19801. Attorneys for Third-Party Lecorpio.

MANNING, Commissioner Before the Court is Third-Party Lecorpio’s Motion to Quash portions of Plaintiff

Anaqua’s out-of-state subpoena. Lecorpio argues that Anaqua’s subpoena improperly

seeks to obtain confidential trade secret information of Lecorpio.

Facts and Procedural History

The genesis of this litigation is defendant Mark Bullard’s previous employment

with Plaintiff, Anaqua, in Massachusetts. Bullard is now an employee of Lecorpio, a

Delaware LLC., with its headquarters and principal place of business in California.

Anaqua and Lecorpio are direct competitors in the esoteric field of intellectual property

asset management software (“IP Systems”)—hence the rub.

The parties do not dispute the basic facts of the case thus far. Bullard worked for

Anaqua as Vice President of Sales and served on its executive team starting in 2008. At

the time Bullard was hired he signed a standard confidentially agreement and a world-

wide twelve (12) month non-competition and non-disclosure agreement that would take

effect upon termination of his employment with Anaqua, whether voluntary or otherwise.

On September 20, 2013, Bullard terminated his employment with Anaqua, ostensibly to

take time off to write a book, which he apparently did. 1

On May 1, 2014, Lecorpio issued a press release stating that Bullard had joined

Lecorpio’s team as Vice President of product management and that he had previously

been Vice President of sales for Anaqua. Undoubtedly surprised, Anaqua filed suit

against Bullard and Lecorpio in the Superior Court for the Commonwealth of

Massachusetts on May 6, 2014. Anaqua alleged two counts of breach of contract by

Bullard, one for competition and one for trade secrets. Anaqua also alleged one count of

tortious interference with contractual relations by Lecorpio. Anaqua claimed that 1 Pillows for Your Prison Cell, Mark D. Bullard, Brainsquall (May 20, 2014).

1 Lecorpio knew of Bullard’s non-competition clause but hired him anyway, going so far

as to agree to indemnify him from any claims by Anaqua. Litigation ensued, and on July

24, 2014, Lecorpio was dismissed from the Massachusetts action for lack of personal

jurisdiction. Bullard, however, was preliminarily enjoined from employment with

Lecorpio for a period of 150 days (the balance of the 12 month non-competition clause),

required to post a security bond with the court in the sum of $150,000.00, and ordered not

to disclose or provide to Lecorpio, or others, any confidential information and/or trade

secrets of Anaqua. 2 On the same day, the Massachusetts Court also entered an Order for

a protective order and expedited discovery by way of document production and

depositions, including Bullard himself.

On or about October 2, 2014, counsel for Anaqua deposed Bullard—to an extent.

Bullard produced one single page in response to the document production request.

Bullard claimed that much of what Anaqua sought was on his company (i.e. Lecorpio’s)

laptop computer and he could not (or would not) access it. Unhappy with Bullard’s

obstreperous responses, Massachusetts counsel for Anaqua sought relief with the

Massachusetts Superior Court. No longer having personal jurisdiction over Lecorpio to

compel cooperation with the subpoena, Anaqua sought, as was granted, an Order of

Commission by the Commonwealth of Massachusetts. The Order of Commission, issued

pursuant to Mass. Gen. Laws ch. 223A § 10(a)(2), authorized “the appropriate judicial

authority in the State of Delaware to issue a subpoena” to Lecorpio’s registered agent for

service in Delaware. The Order of Commission was filed in the New Castle County

Superior Court on October 30, 2014 and an out-of-state Subpoena duces tecum was

2 See Memorandum and Order, Commonwealth of Massachusetts Superior Court Civil Action No. 14- 1491-BLS1, Billings, Justice of the Superior Court, July 24, 2014.

2 issued to Lecorpio pursuant to 10 Del. C. § 4311. 3 On November 19, 2014, Lecorpio

filed its Objections to Plaintiff's Out-of-State Subpoena. By December 5, 2014,

Lecorpio’s objections had morphed into a full-blown Motion to Quash Anaqua’s Out-of-

State Subpoena and thus this Court’s involvement in the litigation.

In the interim, Anaqua served Bullard and Lecorpio a cease and desist letter on

May 19, 2014. In response, Bullard marched into court in California, his new state of

residence, and filed suit against Anaqua seeking declaratory relief from the non-

competition contract. On December 24, 2014, the Superior Court of California, County

of Alameda, issued an Order declaring that the non-competition agreement between

Bullard and Anaqua, and the choice of law provision in the contact, was unenforceable

and void as a matter of California law. 4

Back in Delaware, Lecorpio now moves to quash the following deposition topics

and document production requests made pursuant to Anaqua’s Subpoena:

Deposition Topics

Topic 2: Your communication with Bullard regarding Anaqua, including, but not limited to, communications with Bullard regarding Anaqua’s Products, Anaqua’s sales efforts and/or methodology, Anaqua’s pricing and pricing methodology, Anaqua’s roadmaps and software development plans, and Anaqua’s clients or prospective clients.

Topic 4: Bullard’s input, suggestions, contributions, recommendations, and/or proposals regarding Lecorpio’s Development Plans and Roadmaps.

Topic 5: Lecorpio’s software features, functions, capabilities, and/or modules as those software features, functions, capabilities and/or modules existed on the date Lecorpio first communicated with Bullard.

3 See 10 Del. C. § 4311, Delaware Uniform Interstate Depositions and Discovery Act. 4 See Bullard vs. Anaqua, Inc., Superior Court of California, County of Alameda, Order, No. RG14725925, Harbin-Forte, Judge (Dec. 24, 2014).

3 Document Production

Request 5. All communications (1) between Lecorpio and Bullard regarding the Identified Customers; (2) between Bullard and the Identified Customers; and/or (3) between Lecorpio and the Identified Customers regarding, mentioning, or referencing Bullard. 5

Request 9. Lecorpio’s Development Plans and Roadmaps to the extent that such Development Plans and Roadmaps reflect, include, or contain any input, suggestions, contributions, recommendations, and/or proposals by Bullard.

Request 10. Any and all lists or descriptions of Lecorpio’s software, functions, capabilities, and/or modules as this features, functions, capabilities and/or modules existed on the date Lecorpio first communicated with Bullard.

This Court held an initial hearing on the pending Motion to Quash on January 9,

2014; however, no ruling was made at that time. Lecorpio filed its Opening Brief in

Support of its Motion to Quash the Out-of-State Subpoena on February 4, 2015. Anaqua

filed its Answering Brief in Opposition to Lecorpio’s Motion to Quash on February 18,

2015. Lecorpio filed a Reply in Further Support of Its Motion to Quash on February 23,

2015.

The Court held a second hearing on February 26, 2015. At that hearing, after

argument by counsel and review of the parties’ submissions, the Court issued a

preliminary ruling and informed Anaqua that before it could reach the merits of some of

the six disputed discovery items, Anaqua would need to file an Identification of Trade

Secrets (“ITS”) with the Court.

An office conference was held on March 6, 2015. At the office conference,

Anaqua notified the Court that it intended to pursue the discovery topics and would file

an ITS. The Court set a briefing schedule at that time and informed the parties that no

further action will be taken without a Confidentiality Agreement between the parties in 5 Revised as of March 5, 2015, per letter from counsel for Anaqua.

4 place. 6 Anaqua submitted its ITS to the Court on March 20, 2015. 7 At the request of the

Court, Anaqua filed a Supplemental Response regarding the ITS on April, 1, 2015. The

parties subsequently stipulated to an extension of time, and Lecorpio filed its Response to

Anaqua’s ITS on April 20, 2015. On April 27, 2015, Lecorpio filed an Objection and

Response to Anauqa’s March 5, 2015, revision to Document Request No. 5.

Briefing on the Motion to Quash is now complete and the issue is ripe for

decision.

Governing Law

Discovery in a civil case is generally controlled by Superior Court Civil Rule 26.

In this case, Lecorpio argues that the disputed deposition topics and documents Anaqua

seeks will force it to reveal confidential and proprietary trade secret information. When

trade secret information is at issue, the dispute is controlled by Super Court Civil Rule

45(c)(3)(A). Rule 45(c)(3)(A) states that “[o]n timely motion, the Court shall quash or

modify a subpoena if it . . . (ii) requires disclosure of privileged information or other

protected matter and no exception or waiver applies.”

The Delaware Supreme Court has held that “[i]n cases involving trade secrets, the

plaintiff is required to disclose, before obtaining discovery of confidential proprietary

information of its adversary, the trade secrets it claims were misappropriated.” 8

Additionally, such a disclosure must be made with “reasonable particularity.” 9

6 The parties subsequently completed and filed a Confidentially Agreement with the Court on March 20, 2015. 7 Due to the sensitive nature of the information disclosed pursuant to the ITS, only the Certificate of Service was e-filed, the actual ITS documents were hand-delivered to the undersigned Commissioner. 8 See Smithkline Beecham Pharm. Co., v. Merck & Co., 766 A.2d 442, 447 (Del. 2000) (citations omitted). 9 Id.

5 A “trade secret” has been defined as “information, including a formula, pattern,

compilation, program, device, method, technique or process that derives independent

economic value, actual or potential, from not being generally known, and not being

readily ascertainable by proper means. . . .” 10

Analysis

Anaqua filed a 104 page ITS with the Court, and a second supplemental filling, at

the Court’s request, explaining the ITS in greater detail, on March 26, 2015. The ITS

document itself, labeled pages 000001 – 000104, consists largely of power-point slides,

software screen-shots, release notes, and other internal company information. The ITS

contains six general types of information: (1) release schedules, (2) product development,

(3) release notes, (4) new capabilities, (5) product design, and (6) goals. Anaqua asserts

that this information constitutes propriety trade secrets and was known by Bullard upon

his departure on September 20, 2013.

It is apparent to the Court that Anaqua has made a good-faith effort to satisfy the

ITS disclosure requirement and has made reasonable discovery demands based on the

nature of the claims in the Massachusetts action. Some of the information provided in the

ITS, while arguably stale at this point, would have certainly been valuable to a competitor

in the IP Systems field in 2013—when Bullard jumped ship. Undoubtedly, Bullard left

Anaqua with proprietary information that could have benefited Lecorpio, one obvious

example being product pricing, something not publicly disclosed. However, as Lecorpio

is quick to point-out, Anaqua can point to no direct evidence of disclosure or misuse of

such information by Bullard; a fact also noted by the Massachusetts Court. 11

10 See Savor, INC., v. FMR CORP., 2004 WL 1965869, at *6 (Del. Super. July 15, 2004). 11 See Memorandum and Order, Commonwealth of Massachusetts, No. 14-1491-BLS1, at 26.

6 The irony of this litigation is not lost on the Court. Lecorpio seeks relief from this

Court despite having created this situation by not respecting the non-competition

agreement between Bullard and Anaqua. Undoubtedly Lecorpio knew that once Bullard

became a California resident its lawyers could have the non-competition agreement

quickly voided by a California court. However, while the Court is sympathetic to the

position Anaqua finds itself in, the law is clear, before Anaqua can force Lecorpio to

disclose trade secret information, Anaqua must first reveal the information allegedly

misappropriated. 12 At this point, while Anaqua has disclosed a wealth of information,

some of it confidential (much of it apparently not), Anaqua has only revealed information

Bullard knew of, or at least had access to prior to his departure in 2013—not information

improperly disclosed. 13

Simply put, Anaqua is attempting to use the discovery process to search for

evidence of Bullard’s unlawful disclosure of trade secrets—evidence it does not currently

possess. While Anaqua is understandably unhappy with the turn of events since Bullard

so openly and flagrantly breached the non-competition agreement, Anaqua can’t compel

Lecorpio to disclose trade secret information in the hunt for the proverbial “smoking

gun” it hopes and assumes must exist. 14

12 See Smithkline, 766 A.2d at 447. 13 The Court does not reach, nor need decide, if the information Anaqua disclosed in its ITS meets the definition of a trade secret at this point. 14 In Savor, Inc. v. FMR Corp., a misappropriation of trade secrets case with some similarities, the Delaware Superior Court granted summary judgment to the defendant where the plaintiff could offer no direct evidence that misappropriation had occurred. The plaintiff argued that misappropriation must have occurred and that the defendant had the motive and opportunity to misappropriate. See Savor, 2004 WL 1965869, at *8–9. While Savor was in a different procedural posture than this case, the Court’s analysis is instructive.

7 Accordingly, pursuant to Rule 45(c)(3)(A), the Court will quash and/or modify

the disputed topics as follows:

Topic 2: Motion to Quash—DENIED. This topic covers Anaqua’s information

and does not seek or implicate disclosure of Lecorpio’s trade secrets in any way.

Anything Bullard shared with Lecorpio about Anaqua is certainly fair game.

Topic 4: Motion to Quash—GRANTED. This topic would impermissibly require

Lecorpio to disclose trade secret information without the requisite prior showing of

unlawful disclosure by Bullard.

Topic 5: Motion to Quash—GRANTED IN PART. The Court will modify this

topic to allow questioning about such information as it was publicly known or available

on the date Lecorpio first communicated with Bullard.

Document Production

Request 5: Motion to Quash —GRANTED IN PART. The request is overbroad

in its scope and implicates potentially privileged information and trade secrets. The

Court will modify the request to require production about such documents that “. . .

mention[], or reference[] Bullard concerning or regarding his previous employment at

Anaqua.”

Request 9: Motion to Quash—GRANTED. The request calls for the disclosure

of Lecorpio’s trade secret information without the requisite prior showing of unlawful

disclosure by Bullard.

8 Request 10: Motion to Quash—GRANTED IN PART. The Court will modify

this request to allow production of documents regarding information that was publicly

known or available on the date Lecorpio first communicated with Bullard.

Conclusion

Consistent with this Court’s Scheduling Order of March 6, 2015, Lecorpio shall

submit to deposition and document production, at its principal place of business, no later

than 30 days from the date of this Order.

For the reasons set forth herein, Defendant’s Motion is GRANTED IN PART.

IT IS SO ORDERED.

/s/ Bradley V. Manning BRADLEY V. MANNING, Commissioner

oc: Prothonotary