Paul Johnson Drywall Incorporated v. Sterling Group LP

District Court, D. Arizona·Decided December 17, 2021·No. 2:21-cv-01408·Unknown

Opinion

WO

Paul Johnson Drywall Incorporated, et al., No. CV-21-01408-PHX-DWL

Plaintiffs, ORDER

v.

Sterling Group LP,

Defendant. Pending before the Court are a pair of related discovery motions: (1) a renewed motion for expedited discovery by Plaintiff Paul Johnson Drywall, Inc. (“PJD”) (Doc. 58);1 and (2) a motion for protective order by Defendant The Sterling Group, L.P. (“Sterling”) (Doc. 60). PJD’s motion is fully briefed (Docs. 65, 67), neither side has requested oral argument, and the Court finds it unnecessary to wait for Sterling’s motion to become fully briefed because the issues are interrelated and adequately addressed by the existing briefing. For the following reasons, both motions are denied. On July 13, 2021, PJD initiated this action by filing a complaint in Maricopa County Superior Court. (Doc. 1 ¶ 1.) PJD thereafter filed an amended complaint. (Id. ¶ 2.) As discussed in more detail in a recent order, PJD’s overarching theory is that it shared certain

1 Although the motion was filed by PJD and its then co-plaintiffs, those co-plaintiffs have since been dismissed from this action. (Doc. 66.) Thus, for ease of reference, the Court will use the shorthand “PJD” when referring to actions that were taken by all of the original plaintiffs. confidential information, known as the “Protected Information,” with Sterling pursuant to a non-disclosure agreement (“NDA”) between the parties, that the NDA only allowed Sterling to disseminate the Protected Information to third parties for limited purposes and after taking appropriate safeguards, and that Sterling violated these obligations by sharing the Protected Information with third parties for unauthorized purposes and without following the agreed-upon safeguards. (Doc. 66.) On August 13, 2021, Sterling removed the action to this Court. (Doc. 1.) At the time of removal, the state court had not yet ruled on a motion by PJD to set a preliminary injunction hearing and adopt expedited discovery procedures. (Docs. 10, 40.) On September 8, 2021, PJD attempted to file its operative pleading, the second amended complaint (“SAC”). (Doc. 29.) After various sealing-related disputes, a partially redacted version of the SAC was filed in the public record. (Doc. 56.) On September 22, 2021, Sterling filed a motion to dismiss the SAC. (Doc. 37.) This motion later became fully briefed. (Docs. 48, 50.) On September 30, 2021—before the motion to dismiss became fully briefed—the Court held a hearing on PJD’s motion to set a preliminary hearing and adopt expedited discovery procedures. (Doc. 45 [minute entry]; Doc. 52 [transcript].) The Court ultimately denied PJD’s request to authorize expedited discovery, because the specific discovery requests proposed by PJD were overbroad, but also noted that the parties’ dispute seemed to stem from Sterling’s failure to “provide crisp and clear information in response to a prelitigation request” by PJD for information about the identity of the third parties with whom Sterling had shared the Protected Information and the steps Sterling had taken to safeguard the Protected Information. (Doc. 52 at 33-35.) Thus, the Court ordered the parties to continue meeting and conferring about these issues and stated that, if PJD “remain[ed] dissatisfied at the conclusion of that process, [it was] welcome to resubmit a renewed request for expedited discovery that is more tailored and tiered.” (Id. at 35.) On November 15, 2021, the parties participated in a Rule 26(f) conference. (Doc. 58 at 12; Doc. 65 at 16-17.) Although this conference occurred earlier than required under the applicable rules, the parties jointly agreed to expedite it. (Id.) On November 24, 2021, PJD filed the first motion now pending before the Court— the renewed motion for expedited discovery. (Doc. 58.) That same day, PJD served its first set of interrogatories and requests for production (“RFPs”) on Sterling. (Doc. 59.) On December 8, 2021, Sterling filed an opposition to the motion for expedited discovery. (Doc. 65.)2 That same day, Sterling filed the second motion now pending before the Court—a motion for protective order (Doc. 60). On December 13, 2021, the Court issued an order denying Sterling’s motion to dismiss the SAC in significant part. (Doc. 66.) On December 15, 2021, PJD filed a reply in support of its motion for expedited discovery. (Doc. 67.) I. PJD’s Motion For Expedited Discovery A. The Parties’ Arguments PJD contends that, although it attempted to meet and confer with Sterling in good faith following the September 30, 2021 hearing to obtain more information about Sterling’s information-sharing activities (and the safeguards that Sterling followed when conducting those activities), Sterling has not provided complete information during this process. (Doc. 58 at 12-13.) Thus, PJD renews its earlier request to pursue expedited discovery from Sterling on these topics. (Id.) More specifically, PJD argues that Sterling should be required to answer four interrogatories and respond to five RFPs within 14 days of the entry of the order granting the request for expedited discovery and that Sterling should then be required to produce a Rule 30(b)(6) witness by December 31, 2021 to provide related testimony. (Id. at 13-16.) In support of this proposal, PJD argues that the topics addressed in its proposed discovery requests are “clearly relevant to its trade secret, breach of contract, and misappropriation claims and [are necessary] to prevent the threat of current, 2 More precisely, Sterling sought to file a sealed version of the response on December 8, 2021 (Doc. 61), and after the sealing request was denied (Doc. 63), Sterling filed the unsealed version on December 9, 2021 (Doc. 65). ongoing harms from the unprotected dissemination of PJD Information,” that any burden on Sterling is minimal because PJD has “significantly narrowed” the scope of the original expedited discovery requests that were discussed during the September 30, 2021 hearing, and that “the fact that ordinary discovery has now commenced in this lawsuit is another basis for ordering compliance with [the proposed discovery requests] on an expedited basis.” (Id.) Sterling opposes PJD’s motion. (Doc. 65.) As an initial matter, Sterling defends the sufficiency of its disclosure efforts in the aftermath of the September 30, 2021 hearing and characterizes PJD’s requests during this period as a “moving target.” (Id. at 2-13.) On the merits, Sterling argues that PJD’s motion should be denied for three reasons: (1) PJD has failed to establish the sort of “good cause” required to justify expedited discovery because PJD’s proposed discovery requests are simply intended to provide support for PJD’s claims; (2) PJD has failed “to specifically identify the trade secret or Protected Information at issue” and “courts in trade-secret cases . . . regularly require a trade-secrets plaintiff to identify those secrets with reasonably particularity prior to commencing discovery”; and (3) because PJD has not defined the information at issue with the necessary degree of specificity, complying with the proposed discovery requests “would require Sterling to search through and produce thousands and thousands of communications and documents related to the Transaction that will undoubtedly be irrelevant and unhelpful to either party,” thus rendering the proposed discovery requests “overly broad and unduly burdensome.” (Id. at 13-16.) Sterling also dismisses as irrelevant the fact that the Rule 26(f) conference has already occurred because it informed PJD during the Rule 26(f) conference that it opposes engaging in any discovery until the Court rules on the motion to dismiss the SAC and until PJD defines the trade secrets and confidential information at issue with more specificity. (Id. at 16-17.) Finally, Sterling argues that if the Court allows expedited discovery, Sterling should be allowed to serve its own expedited requests and schedul

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