Pacific Steel Group v. CMC Fabricators, Inc. dba CMC Rebar, et al.

• Court: District Court, S.D. California
• Decided: April 16, 2026
• Docket: 3:22-cv-00892
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 PACIFIC STEEL GROUP, Case No.: 3:22-cv-00892-L-JLB

14 Plaintiff, ORDERS: 15 v. GRANTING DEFENDANTS’ EX PARTE APPLICATION FOR LEAVE 16 CMC FABRICATORS, INC. dba CMC TO FILE SUR-REPLY IN REBAR, et al., 17 OPPOSITION TO PLAINTIFF’S Defendants. MOTION FOR SANCTIONS; 18

19 GRANTING REQUEST IN OPPOSITION TO FILE SUR-SUR- 20 REPLY; 21 DENYING PLAINTIFF’S MOTION 22 TO FILE DOCUMENTS UNDER 23 SEAL

24 [ECF Nos. 274, 277] 25 26 Before the Court is the Ex Parte Application of Defendants CMC Steel Fabricators, 27 Inc. dba CMC Rebar, CMC Steel US, LLC, and CMC Rebar West (“Defendants”) for 28 Leave to File Sur-reply in Opposition to Plaintiff’s Motion for Sanctions on the grounds 1 that Plaintiff included new evidence, arguments, and authorities in its Reply briefing. (ECF 2 No. 274.) Defendants filed their proposed Sur-reply with the Ex Parte Application. (ECF 3 No. 274 at 7-16 - Ex. A.) Plaintiff filed an Opposition to the Ex Parte Application 4 requesting it be denied on the grounds that the evidence and arguments offered in its Reply 5 are properly responsive to the Opposition to the Motion for Sanctions. (ECF Nos. 279.) 6 Plaintiff requests, in the alternative, that if Defendants are allowed a Sur-reply, Plaintiff be 7 given leave to file a Sur-sur-reply. (ECF No. 279.) Plaintiff filed its proposed Sur-sur- 8 reply with its Opposition briefing. (ECF No. 279-1; ECF No. 282 [corrected].) Plaintiff 9 also requests to file under seal materials related to its opposition briefing that were 10 designated as Confidential by Defendants during the discovery process. (ECF No. 277). 11 Defendants did not oppose the Motion to Seal. 12 For the reasons set forth below, Defendants’ Ex Parte Application for Leave to file 13 a Sur-reply is GRANTED. Plaintiffs are also given leave to file a Sur-sur-reply. Plaintiff’s 14 Motion to File Documents related to this Ex Parte Application under seal is DENIED. 15 I. BACKGROUND 16 Plaintiff and Defendants compete in the steel rebar furnishing and installation 17 (“F&I”) market in California. Plaintiff claims that Defendants sold F&I services below 18 cost and as loss leaders with the purpose of injuring competitors or destroying competition 19 in violation of California law. 20 The current motion before the Court, on which leave to file additional briefing is 21 sought, is Plaintiff’s Motion for Sanctions against Defendants for purported spoliation of 22 electronically stored information (ESI). (ECF No. 257.) In the Motion for Sanctions, 23 Plaintiff claims that Defendants failed to preserve potentially relevant ESI, primarily in the 24 form of information contained in text messages, laptops, and OneDrive backups of 25 Defendants’ former employees. (Id. at 6.) Defendants do not dispute that they “reset” the 26 company-issued mobile phones and laptops of departing employees as part of their routine 27 practice, resulting in the loss of information that cannot be duplicated or restored. The 28 1 parties dispute whether this amounts to spoliation of evidence under Federal Rule of Civil. 2 Procedure. 37(e), including whether Defendants should have preserved the evidence. 3 Plaintiff argues that Defendants should have ceased the automatic reset of company- 4 issued phones, laptops, and OneDrive backups of departing employees at the outset of 5 litigation because this ESI likely included business information relevant to the issues in 6 dispute.1 (ECF No. 257 at 6-7.) Plaintiff proffers evidence that Defendants’ employees 7 texted about business matters in the form of texts from personal devices of some key 8 custodians: “[T]he text messages produced by Mr. Davis and Mr. Dennison regarding 9 CMC Rebar’s predatory scheme demonstrate that the text messages of the agreed-upon 10 CMC Rebar custodians [whose company texts were not preserved] are not only potentially 11 relevant – but critical evidence.” (Id.at 19.) Plaintiff contends that the existence of texts 12 discussing business matters makes it likely that the destroyed ESI from key custodians also 13 contained relevant information and that Defendants should have known this at the outset 14 of the litigation and preserved them. (Id.) Plaintiff also claims that Defendants attempted 15 to conceal the destruction of cell phone and laptop information, and this indicates intent 16 warranting the requested sanctions. (Id. at 9.) 17 Defendants, in their Opposition, contend that the destroyed texts and laptop 18 information (and the OneDrive backups) “were not preserved pursuant to [Defendants] 19 normal retention practices for the simple, benign, and undisputed reason that those devices 20 should not contain any substantiative business information.” (ECF No. 261 at 6.) 21 Defendants urge this conclusion because “CMC Rebar employees are instructed not to 22 conduct business outside of company-managed applications on mobile devices – texts are 23 not on managed applications.” (Id. at 7.) Defendants also dispute that Plaintiff’s evidence 24 25 26 1 The parties do not dispute that any duty to preserve evidence in anticipation of litigation 27 occurred, at the latest, when the Northern California action was filed by Plaintiff on October 30, 2020. That action included the current claims that are now pending before this 28 1 offered in support of the Motion for Sanctions shows that relevant evidence was destroyed: 2 “There is no evidence that any other former employees texted about relevant issues, let 3 alone through texts CMC Rebar would have been aware of, had access to, or had control 4 over.” (Id. at 18.) 5 The parties also dispute whether there was prejudice as required for sanctions under 6 Federal Rule of Civil Procedure 27(e)(1), whether there was the requisite intent as required 7 for sanctions under subsection (e)(2), and what level of culpability is required for the intent 8 element. District Judge M. James Lorenz reserved the issue of adverse sanctions under 9 Federal Rule of Civil Procedure 27(e)(2), and only the issue of sanctions under Federal 10 Rule of Civil Procedure 37(e)(1) is before this Court on the Motion for Sanctions. (ECF 11 No. 276 at 2.) Therefore, the issue of what standard applies for an adverse instruction 12 sanction under Federal Rule of Civil Procedure 37(e)(2) is reserved for the District Judge. 13 However, the referral order directs this Court to rule on the Ex Parte Application as a 14 nondispositive matter pursuant to 28 U.S.C. § 636(b)(1)(A), Federal Rule of Civil 15 procedure 72 (a), and Civil Local Rule 72.1(b). (Id. at 1.) 16 II. THE EX PARTE APPLICATION 17 In the Ex Parte Application, Defendants contend that they should be given an 18 opportunity to address “new matters” raised by Plaintiff in its Reply. Defendants identify 19 numerous “new” matters as bases for the requested additional briefing. (ECF. No. 274 at 20 2.) Defendants first argue that Plaintiff’s filing of over 100 pages of new evidence with its 21 Reply, primarily emails and text messages of Defendants’ employees, violates Civil Local 22 Rule 7.1(f)(2)(a) and “deprived CMC Rebar of the opportunity to respond and present the 23 Court with a balanced record.” (Id. at 3.) Defendants also contend that Plaintiff’s Reply 24 cites new case law on the legal standard that should be applied to the intent element for the 25 adverse sanctions request. (Id. at 4.) Finally, Defendants claim Plaintiff’s Reply 26 “deliberately mischaracterizes the facts and evidence” presented in the prior briefings on 27 the Motion for Sanctions, including calling some facts “undisputed” that it “knows to be 28 false.” (Id. at 9-14.) 1 Plaintiff disagrees and argues that all evidence, arguments, and case law offered for 2 || the first time in the Reply are not “new” but are in “direct response to an inaccurate claim 3 |}in CMC Rebar’s Opposition.” (ECF No. 279 at 2.) Plaintiff claims that the extensive text 4 ||messages and emails of Defendants’ former employees first filed with its Reply rebut 5 ||Defendants’ Opposition statement that “[t]here is no evidence that any other former 6 ||employees texted about relevant issues.” (/d.) Plaintiff further claims that the volume of 7 ||evidence filed with the Reply is irrelevant “because Pacific Steel does not rely upon the 8 || content of the text messages; it relies on the number of messages showing that CMC Rebar 9 || custodians do, in fact, text about business matters.” (/d.) Plaintiff addresses Defendants’ 10 || contention about new case law in the Reply by claiming the Reply addresses the Opposition 11 |}arguments on the legal standard to be applied and that Defendants “identif]y] no rule 12 || prohibiting a moving party from citing responsive cases on reply. . ..”. Ud. at 3.) Finally, 13 || Plaintiff claims it did not make “mischaracterizations” that warrant more briefing but made 14 || arguments to rebut those made in the Opposition. (/d. at 5.) 15 Plaintiff requests that if leave is granted to file a Sur-reply, Plaintiff should be 16 allowed to file a Sur-sur-reply. (Id. at 5.) 17 || Il. DISCUSSION 18 A. Legal Standard for Additional Briefing 19 Local Rule 7.1 provides that copies of all documentary evidence which the movant 20 intends to submit in support of motion, or other request for ruling by the court, must be 21 || served and filed with the motion. “It is improper for a moving party to introduce new facts 22 or different legal arguments in the reply brief than those presented in the moving papers.” 3 Do. v. Tri City Healthcare Dist., No. 19cv2253-MSB (NLS), 2020 WL 6484633, at *2 (S.D. Cal. Nov. 4, 2020) (quoting U. S. ex rel. Giles v. Sardie, 191 F. Supp. 2d 1117, 1127 46 || (C-D. Cal 2000).) 97 However, reply evidence submitted in direct response to evidence raised in the 28 || opposition is not “new.” Jn re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 955 (C.D. Cal.

1 |}2015). Evidence submitted with a reply brief is also not new evidence “when it is submitted 2 to rebut arguments raised in the opposition brief.” Cabrales v. BAE Sys. San Diego Ship 3 Repair, Inc., No. 21-cv-02122-AJB-DDL, 2024 WL 115799 at *1 (S.D. Cal. + Jan. 10, 2024). Arguments not made in a moving brief but made in response to matters that were raised in the opposition are also not considered new. A// Star Seed v. Nationwide

7 Agribusiness Ins. Co., No. 12cv146 L (BLM), 2014 WL 1286561, at *15 (S.D. Cal. Mar g 2014). 9 The Local Rules in this district do not authorize the filing of a surreply. Still, district 10 |/courts have discretion to either permit or preclude the filing of surreply. U.S. v. Venture 11 ||One Mortg. Corp., 13-CV-1872 W (JLB), 2015 WL 12532139, at *2 (S.D. Cal. 12 26, 2015). Such discretion “should be exercised in favor of allowing a surreply only 3 where a valid reason for such additional briefing exists, such as where the movant raises new arguments in its reply brief.” Jd. Discretion is also properly exercised in favor of a surreply when the reply brief appears to introduce new evidence. Id.; see also Do., 2020

17 WL 6484633 at *2. Even if the reply is largely responsive to issues raised in the opposition, 1g || the court may find it in the interests of fairness to allow additional briefing where the reply 19 ||presents further evidence and arguments not raised in the moving papers. Sherman v. 20 || Yahoo! Inc., No. 13cv0041-GPC-WVG, 2015 WL 5604400, at *3 (S.D. Cal. 21 Sept. 23, 2015); see also Dunsmore v. San Diego Cnty. Sheriff’s Dep’t, 20-cv-00406-AJB- 22 Il DDL, 2025 WL 605041, at *2 (S.D. Cal. Feb 25, 2025) (submitting further evidence and arguments in support of issues raised in the moving papers, rather than merely responding to the opposition, deprives the opposing party of the opportunity to respond). 6 B. = Analysis 97 Plaintiff's moving papers presented the argument (among others) that the lost text ng || messages likely contained relevant business information that is probative in this matter and

1 that Defendants should have reasonably known this and taken steps to preserve the ESI. 2 In support of this argument, Plaintiff submitted a selection of text messages from the 3 personal phones of Defendants’ former employees who were later designated as ESI 4 custodians. (ECF No. 257-7). In their Opposition, Defendants disputed that this evidence 5 shows employee use of texting about substantive business matters and stated that: “There 6 is no evidence that any other former employees texted about relevant issues, let alone 7 through texts CMC Rebar would have been aware of, had access to, or had control over.” 8 (ECF No. 261 at 18.) In response, Plaintiff submitted numerous pages of text messages 9 with its Reply. 10 This is not a situation where the Defendants raised this issue for the first time in its 11 Opposition. This issue was presented by Plaintiff in the moving papers and Plaintiff chose 12 what evidence to present on this point. Defendants took issue with the evidence Plaintiff 13 relied on, arguing that it did not prove Plaintiff’s point. Plaintiff then chose to present 14 additional text messages arguing that the sheer volume of the messages now being 15 proffered supports its original argument from the moving papers. This amounts to new 16 evidence and further argument on this point and not merely a rebuttal argument about the 17 adequacy of Plaintiff’s evidence presented with the moving papers. Although Plaintiff 18 claims it is not offering additional text messages for the “content” of the messages, in the 19 interests of fairness, Defendants should have an opportunity to address both the volume 20 and the content of the newly presented reply evidence. For this reason, the Court is 21 exercising its discretion to allow additional briefing by both parties. 22 IV. MOTION TO SEAL 23 Plaintiff brings its Motion to Seal certain information filed in connection with its 24 Sur-sur-reply, specifically excerpts from the Deposition of Christy Higgenbotham and a 25 redacted version of the Sur-sur-reply that quotes or paraphrases the deposition testimony. 26 27 2 Similar arguments are presented with respect to information stored on employee laptops 28 1 (ECF No. 277 at 2.) Plaintiff requests sealing on the basis that the excerpts were designated 2 as “CONFIDENTIAL” or “HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY” 3 by Defendants during discovery pursuant to the August 24, 2023 Protective Order 4 approved. (Id.) Plaintiff has no dog in the fight and therefore takes no position on the 5 propriety of sealing these materials. (Id.) Plaintiff sets forth no argument in support of 6 sealing. (Id.) Although Defendants have joined in previous motions by Plaintiff to file 7 under seal documents containing matter the Defendants have produced and designated as 8 confidential, Defendants did not join in the instant motion. Consequently, no party has put 9 forward any facts or argument in support of the Motion to Seal. 10 A party seeking to seal a judicial record bears the burden of overcoming the strong 11 presumption of public access. Nia v. Bank of Am., No. 21-CV-1799-BAS-BGS, 2024 WL 12 171659, at *1 (S. D. Cal. Jan.12, 2024); Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 13 F.3d 1092, 1096 (9th Cir. 2016). The showing required to meet this burden depends on 14 whether the materials to be sealed are “more than tangentially related to the merits” in 15 which case the “compelling reasons” standard applies. Ctr. for Auto Safety, 809 F.3d at 16 1096-98. When the materials involved do not surpass the tangential relevance threshold, 17 the “good cause” standard applies. Id. The Ninth Circuit in Center for Auto Safety held 18 that when sealed materials are attached to a discovery motion unrelated to the merits of the 19 case, application of the “good cause” standard is appropriate. Id. at 1097. However, 20 “neither the parties' agreement that documents shall be filed under seal, nor a party 21 designating documents as confidential, is sufficient to meet the good cause standard.” 22 Anderson v. Marsh, 312 F.R.D. 584, 594 (E.D. Cal. 2015). 23 Here, the Court has nothing before it other than the fact that the material sought to 24 be filed under seal was designated confidential by the Defendants. That is inadequate. 25 Accordingly, Plaintiff’s Motion to Seal materials related to its Sur-sur-reply is 26 DENIED. 27 / / / 28 | || V. CONCLUSION 2 Upon review, the Court finds that exercising its discretion in favor of allowing 3 ||additional briefing is in the interests of fairness. Accordingly, Defendants’ Ex Parte 4 Application for Leave to File a Sur-reply is GRANTED. Defendants shall file the 5 proposed Sur-reply attached as Exhibit A to the Ex Parte Application and supporting 6 ||documents on the docket by April 21, 2026. For the same reasons, Plaintiff's request to 7 || file a Sur-sur-reply is GRANTED. Plaintiffs shall file the unredacted proposed Sur-sur- 8 reply attached as Exhibit | to the Opposition to the Ex Parte Application on the docket by 9 || April 21, 2026. No other briefing is allowed. 10 IT IS SO ORDERED. 11 ||Dated: April 16, 2026 -

n. Jill L. Burkhardt 13 ited States Magistrate Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28