Nanjing CIC International Co., Ltd. v. Schwartz

CourtDistrict Court, W.D. New York
DecidedOctober 20, 2023
Docket6:20-cv-07031
StatusUnknown

This text of Nanjing CIC International Co., Ltd. v. Schwartz (Nanjing CIC International Co., Ltd. v. Schwartz) is published on Counsel Stack Legal Research, covering District Court, W.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nanjing CIC International Co., Ltd. v. Schwartz, (W.D.N.Y. 2023).

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK _______________________________________

NANJING CIC INTERNATIONAL CO., LTD., DECISION & ORDER Plaintiff, 20-CV-7031EAW v.

JAMES SCHWARTZ, et al.,

Defendants. _______________________________________

PRELIMINARY STATEMENT Nanjing CIC International Co., Ltd., (“CIC”) commenced this action against Foundry Associates, Inc., and its owner and Chief Executive Officer James Schwartz (“Schwartz”) (collectively, “defendants”) alleging claims for breach of fiduciary duty and unjust enrichment.1 (Docket # 1). Currently pending before this Court is CIC’s motion to remove the Attorneys’ Eyes Only (“AEO”) designation from a summary sales and commission report (the “Sales Report”) produced by defendants.2 (Docket # 62). For the reasons discussed below, CIC’s motion to de-designate is granted in part and denied in part.

BACKGROUND CIC sources, distributes, and sells component parts to manufacturers. (Docket # 1 at ¶ 8). According to CIC, in 2003 it retained Foundry as a sales agent to assist in the

1 The complaint also asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud, but those causes of action were dismissed by the district court. (Docket ## 1, 41).

2 During oral argument, counsel for CIC clarified that its motion does not seek modification of the stipulated protective order. (Compare Docket # 62-20 at 19 (“even if this Court agrees that the documents do not qualify for AEO protection but do still meet the requirements to be made confidential, CIC should be entitled to submit the documents in the Chinese Litigation”) with 79 at 27-28 (“we’re . . . not . . . ask[ing] your Honor to modify the confidentiality order that has already been agreed and executed”). development of customers in the United States. (Id. at ¶ 11). The gravamen of CIC’s complaint is that Foundry and CIC’s former employee E. Chen (“Chen”) colluded to steal CIC’s U.S. customer base. Chen, a resident of China, worked for CIC from 2003 until she resigned in 2013. (Id. at ¶¶ 28, 34). According to the complaint, following her resignation, Chen, through her own

companies, worked with Foundry to source the component parts for U.S. manufacturers. (Id. at ¶¶ 35-55). CIC thereafter commenced a lawsuit against Chen in China and the pending lawsuit against Foundry and Schwartz in the United States. (Id. at ¶ 36). As this litigation progressed, the parties exchanged document discovery while attempting to negotiate a stipulated protective order.3 (Docket # 79 at 12, 31). A dispute arose in the negotiations concerning whether plaintiff could use documents produced in this litigation in support of its claims against Chen in the Chinese litigation. (See generally Docket ## 51, 53). According to CIC, although it had obtained a liability verdict against Chen in that litigation, it had been unable to establish its actual, rather than statutory, damages because Chen had refused to produce relevant information regarding her sales. (Docket # 62-20 at 8). Both Chen and CIC

have appealed the decision in the Chinese litigation, and CIC wishes to introduce in those appellate proceedings the sales data produced by defendants in this litigation in order to establish its actual damages. (Id. at 7-9). According to CIC, the initial version of the protective order drafted by defendants was silent with respect to the use of non-confidential documents in other litigation. (Docket ## 53 at 2; 53-1). After CIC expressed its intention to introduce non-confidential documents into evidence in the Chinese litigation, defendants requested that the draft be amended to include the following provision:

3 The parties agreed to abide by a version of the protective order proposed by defendants pending their negotiations and the Court’s resolution of any disputes. (Docket # 51). Nonpublic Discovery Material exchanged by the parties in this action, regardless of whether it has been designated as Confidential or Attorneys’ Eyes Only, shall be used only for purposes of this litigation and for no other purposes.

(Docket # 51-1 at ¶ 10). CIC objected to the proposed change and instead suggested the following provision: Discovery Material designated as Confidential or Attorneys’ Eyes Only shall be used only for purposes of this litigation and for no other purposes.

(Id.). Unable to agree, the parties contacted the Court for assistance. (Docket ## 51, 53). At the Court’s direction, the parties participated in a conference call with the Court’s law clerk Christin Cornetta, Esq., who provided the parties with the Court’s guidance on the dispute and advised that a formal motion would be required in the event the parties were unable to agree. On March 28, 2023, the parties jointly submitted a proposed confidentiality stipulation that contained the language proposed by CIC. (Docket # 54). The Court issued the Confidentiality Stipulation and Order proposed by the parties a few days later (the “Protective Order” or “Order”). (Docket # 56). The Protective Order permits a producing party to designate discovery material as “Confidential” if it contains: trade secrets, proprietary business information, competitively sensitive information, or other information the disclosure of which, in the good-faith judgment of the Designating Party, would be detrimental to the conduct of the Designating Party’s business or the business of any of the Designating Party’s customer or clients.

(Id. at ¶ 2(a)). It further permits a party to designate discovery material as “Attorneys’ Eyes Only” if it is: of such a private, sensitive, competitive, or proprietary nature that present disclosure to persons other than those [permitted by the Order] would reasonably be expected to cause irreparable harm or materially impair the legitimate competitive position of the Designating Party. A designation of Discovery Material as Attorneys’ Eyes Only constitutes a representation that such Discovery Material has been reviewed by an attorney for the Designating Party and that there is a valid basis for the designation.

(Id. at ¶ 2(b)). In addition, the Protective Order contains a provision delineating the “anticipate[d]” scope of information permitted to be designated: The parties anticipate that “Confidential Information” or information “for Attorneys’ Eyes Only” will be limited to names of contacts, contact information, contact person’s personality and preferences of communications and business dealings, customized product specifications and other technical requirements, specific business patterns, procurement habits, frequencies and inclinations, pricing preferences, confidential pricing information, information concerning margins, confidential commercial terms of sale, quality control standards, customized and unique requirements for material certification, packaging, and shipping information.

(Id. at ¶ 2(c)). On April 21, 2023, defendants produced the 106-page Sales Report and designated the entire document as AEO. (Docket ## 62-1 at ¶ 3; 62-2). According to defendants, the Sales Report contains sales and commissions information “reflecting its business between 2013 and 2022 with” Chen. (Docket # 68 at ¶ 9). Specifically, the information in the Sales Report is organized by and presented in monthly tables containing seven different columns reflecting: (1) customer name; (2) invoice number; (3) total invoice amount; (4) amount actually received by Chen’s company; (5) Foundry’s commission rate for the invoice; (6) the total commission owed to Foundry for the invoice; and (7) notes concerning the invoice. (Docket ## 62-1 at ¶ 4; 62-2; 68 at ¶ 12).

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Nanjing CIC International Co., Ltd. v. Schwartz, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nanjing-cic-international-co-ltd-v-schwartz-nywd-2023.