TGG Management Company, Inc. v. Petraglia

• Court: District Court, S.D. California
• Decided: November 25, 2019
• Docket: 3:19-cv-02007
• Status: Unknown

Opinion

7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA

10 TGG MANAGEMENT COMPANY Case No. 19-cv-2007-BAS-KSC 11 INC. (dba TGG ACCOUNTING), ORDER GRANTING IN PART 12 Plaintiff, PLAINTIFF’S EX PARTE MOTION FOR EXPEDITED 13 v. DISCOVERY

14 JOHN PETRAGLIA, et al., [ECF No. 42]

15 Defendants.

16 17

18 Plaintiff TGG Management Company, Inc. (“TGG”) filed a complaint against 19 eight Defendants: John Petraglia, Megan Zerba, Garrett Tapken, Erik Rhoades, 20 Sayva Solutions, Inc., Bubbly Brands, LLC, Sash Group, Inc., and Holiday Foliage, 21 Inc. TGG alleges, inter alia, trade secret misappropriation. Soon after filing its 22 complaint, TGG filed a motion for preliminary injunction, requesting the Court 23 enjoin Defendants from using its trade secret information. (ECF No. 23.) Along 24 with the motion, TGG also moves ex parte for expedited discovery. (“Ex Parte 25 Mot.,” ECF No. 24.) The Court invited any Defendant to file an opposition to the ex 26 parte motion. Various Defendants oppose the motion. (ECF Nos. 44–47.) 27 For the reasons set forth below, the Court GRANTS IN PART TGG’s ex parte 1 I. BACKGROUND 2 Plaintiff TGG provides management accounting and business advisory 3 services for business clients. (“PI Mot.,” ECF No. 23, at 1.) TGG was founded in 4 2006 by its current CEO Matt Garrett. Over time, Mr. Garrett and others developed 5 what they call “The TGG Way”— “a proven set of accounting and finance best 6 practices, processes and procedures, specially designed electronic tools, and other 7 trade secrets, coupled with financial guidance, to ensure the financial health and 8 success of TGG’s clients.” (Garrett Decl., ECF No. 23-1, ¶ 9.) The TGG Way “uses 9 an objective and measurable system for implementing accounting best practices, 10 quality control, and client and team communications. It is at the center of TGG’s 11 brand, and is what differentiates TGG from its competition.” (PI Mot. at 4.) The 12 TGG Way and TGG’s trade secrets give TGG a competitive advantage. (Id.) 13 Defendant John Petraglia began working for TGG in January 2016. (Garrett 14 Decl. ¶ 41.) By virtue of his role, Petraglia had access to some of TGG’s confidential 15 trade secret information. Petraglia left TGG in April 2019 and began working for 16 Defendant Sayva Solutions, Inc. (Id. ¶¶ 43, 45.) Similarly, Defendant Megan Zerba 17 began working for TGG in June 2013, had access to trade secret information while 18 at TGG, and now also works for Sayva Solutions. Upon their departure, both 19 Petraglia and Zerba refused to sign TGG’s Reminder of Confidentiality and 20 Nonsolicitation form. (Id. ¶¶ 44, 48.) Petraglia is listed as the current CFO of Sayva 21 and Zerba is listed as the Controller. (Id. ¶ 8.) “Sayva provides outsourced 22 professional services such as accounting, specialized project consulting, and full- 23 time recruiting services.” (PI Mot. at 3.) TGG alleges that as a result of Petraglia 24 and Zerba’s actions, Sayva has built an accounting division that directly competes 25 with TGG. (Id.) 26 After Petraglia and Zerba left, TGG hired the Berkeley Research Group to 27 conduct a forensic analysis of Petraglia’s and Zerba’s TGG-issued laptops. (Garrett 1 connected a personal external USB storage device to his TGG laptop computer and 2 accessed various files. (Jiminez Decl., ECF No. 23-24 ¶ 12.) TGG analyzed the list 3 of files Petraglia accessed and concludes, “[t]he files . . . are sweeping and include 4 many of TGG’s most valuable assets and proprietary trade secrets.” (PI Mot. at 10.) 5 Petraglia also emailed himself various TGG materials. (Id.) Zerba also copied 6 various TGG files onto a personal USB storage device before leaving TGG. (Jiminez 7 Decl. ¶ 14.)1 8 As to the other Defendants, Defendant Garrett Tapken also worked for TGG 9 and now works for TGG’s former client, Tosdal law Firm. (Garrett Decl. ¶¶ 50–53.) 10 Defendant Erik Rhoades previously worked for TGG and now works for a different 11 outsourced professional services provider, Pro Back Office. (Id. ¶¶ 54–57.) Bubbly 12 Brands, Sash Group, and Holiday Foliage are former clients of TGG. After Petraglia 13 and Zerba left TGG, these former clients began disengagement from TGG. TGG 14 believes the entities are working with Petraglia and Zerba, who are likely using 15 TGG’s trade secrets to perform accounting services. 16 TGG moves for a preliminary injunction on its claims brought pursuant to the 17 Defend Trade Secrets Act (“DTSA”), California Uniform Trade Secrets Act 18 (“CUTSA”), Computer Fraud and Abuse Act (“CFAA”), and Computer Data Access 19 and Fraud Act (“CDAFA”). Before the Court may resolve TGG’s preliminary 20 injunction motion, it must resolve TGG’s motion for expedited discovery 21 II. LEGAL STANDARD 22 Rule 26(d) of the Federal Rules of Civil Procedure generally provides that 23 formal discovery will not commence until after the parties have conferred as required 24 25 1 TGG claims that Berkeley’s forensic analysis shows only some of the information the former 26 employees took. (Ex Parte Mot. at 3.) This is because when Petraglia and Zerba initially left TGG, and through normal procedures, TGG began cleaning Petraglia’s TGG laptop so that it could be 27 repurposed. Some of this process occurred prior to the forensic analysis. (Id.) Therefore, TGG 1 by Rule 26(f). Fed. R. Civ. P. 26(d)(1). Courts may permit expedited discovery 2 before the Rule 26(f) conference upon a showing of good cause. See Apple Inc. v. 3 Samsung Elecs. Co., 768 F. Supp. 2d 1040, 1044 (N.D. Cal. 2011). “Expedited 4 discovery is not the norm” and, therefore, the moving party “must make some prima 5 facie showing of the need for the expedited discovery.” Merrill Lynch, Pierce, 6 Fenner & Smith v. O’Connor, 194 F.R.D. 618, 623 (N.D. Ill. 2000). Good cause 7 exists when the need for expedited discovery, in consideration with the 8 administration of justice, outweighs the prejudice to the responding party. See Am. 9 LegalNet, Inc. v. Davis, 673 F. Supp. 2d 1063, 1066 (C.D. Cal. 2009). 10 The good cause standard may be satisfied when a party seeks a preliminary 11 injunction. Id. In the context of a pending preliminary injunction motion, expedited 12 discovery may be ordered if it would “better enable the court to judge the parties’ 13 interests and respective chances for success on the merits at a preliminary injunction 14 hearing.” Yokohama Tire Corp. v. Dealers Tire Supply, Inc., 202 F.R.D. 612, 613 15 (D. Ariz. 2001). But the mere fact that a party has moved for a preliminary injunction 16 does not entitle the party to receive expedited discovery. Any discovery sought for 17 a preliminary injunction must be evaluated against the purpose of a preliminary 18 injunction, i.e., to preserve the status quo. Disability Rights Council of Greater 19 Wash. v. Wash. Metro. Area Transit Auth., 234 F.R.D. 4, 7 (D.D.C. 2006). A court 20 should examine the requested discovery based on the entirety of the record and the 21 reasonableness of the request in light of all surrounding circumstances. Am. 22 LegalNet, Inc., 673 F. Supp. 2d at 1067, Merrill Lynch, 194 F.R.D. at 624. Courts 23 examine the reasonableness of the request by considering a non-exhaustive set of 24 factors: (1) whether a preliminary injunction is pending, (2) the breadth of the 25 discovery requests, (3) the purpose for requesting the expedited discovery, (4) the 26 burden on the defendant of compliance with the requested discovery, and (5) how far 27 in advance of the typical discovery process the request was made. Am. LegalNet, 1 A court may deny a motion for expedited discovery if a moving party seeks 2 discovery that is not narrowly tailored to obtain information relevant to a preliminary 3 injunction determination and instead goes to the merits of the party’s claims. Am. 4 LegalNet, Inc., 673 F. Supp. 2d at 1069; see also Profil Institut Fur 5 Stoffwechselforschung GbmH v. Profil Inst. for Clinical Research, No. 16-cv-2762- 6 LAB-BLM, 2016 WL 7325466, at *4 (S.D. Cal. Dec. 16, 2016). A court may save 7 an otherwise impermissibly overbroad or burdensome expedited discovery request 8 by excising the offending aspects of the discovery request. See Roadrunner 9 Intermodal Servs., LLC v. T.G.S. Transp., Inc., No. 17-cv-01056-DAD-BAM, 2017 10 WL 3783017, at *3 (E.D. Cal. Aug. 31, 2017). 11 III. ANALYSIS 12 A. Discovery Sought by TGG 13 TGG seeks discovery that it claims is directly relevant to its preliminary 14 injunction motion. It seeks: 15 • All external drives used by Petraglia or Zerba to remove files from TGG’s systems 16 • All copies of all documents stored in Petraglia’s or Zerba’s Dropbox accounts 17 relating to TGG 18 • All copies of all documents, files, programs, or other materials that Petraglia or Zerba copied or took from TGG from December 1, 2018 to present, 19 including all copies of TGG documents that Petraglia or Zerba sent to or 20 received on personal email accounts or Sayva email accounts • All documents, files, programs, or other materials that Tapken and Rhoades 21 copied or took from TGG, or received from Petraglia or Zerba, from December 22 1, 2018 to present • Copies of all Sayva documents relating to any TGG documents, files 23 programs, or other materials or information in Sayva’s possession, including 24 relating to any use of those materials or information. • Copies of all Sash Bag, Holiday Foliage, and Bubbly Brands document 25 relating to any TGG documents, files, programs, or other materials or 26 information created, modified, or sent or in their possession after the disengaged from TGG, including relating to any use of those materials or 27 information. 1 TGG also seeks to take a no more than 3-hour deposition of Petraglia, Zerba, 2 and a 30(b)(6) corporate representative of Sayva. TGG further seeks to a take a no 3 more than 2-hour deposition of Tapken, Rhoades, and a 30(b)(6) corporate 4 representatives of Sash Bag, Holiday Foliage, and Bubbly Brands. (Id. at 7.) These 5 depositions are to “allow TGG to confirm the scope of the misappropriation” and to 6 confirm that “Defendants are currently using TGG’s trade secrets.” (Id. at 8.) 7 B. Discussion 8 One of Defendants’ main arguments in opposition to the motion for expedited 9 discovery is that the discovery requests are not narrowly tailored to the preliminary 10 injunction and instead, the information sought goes to the merits of the case. 11 As to the allegations against Petraglia and Zerba, it is clear to the Court that 12 TGG has more information regarding the alleged misappropriation than most other 13 plaintiffs have in other cases at this stage. TGG has already hired a forensic analysis 14 company to review Petraglia’s and Zerba’s laptops. (Garrett Decl. ¶ 62.) TGG can 15 point to at least some of the files that the two employees accessed, copied, and/or 16 emailed to themselves. (Id. ¶¶ 63–79, 83–84.) The fact that the list of documents 17 may not be complete, or the fact that TGG may not know exactly how this 18 information is being used, are issues that go to the merits of this case. 19 But the evidence that TGG claims to have as to the other Defendants is less 20 conclusive. TGG only states it has proof that Rhoades is in possession of some 21 confidential information. (Id. ¶ 84.) And TGG only knows that Tapken has 22 communicated with Petraglia regarding a former client’s financial, tax and billing 23 information. (Id. ¶ 82.) TGG is also unaware if the entity Defendants (Sayva 24 Solutions, Bubbly Brands, Sash Group, or Holiday Foliage) are in possession of any 25 confidential information by virtue of their relationships with TGG’s former 26 employees. The Court finds there is good cause to permit some discovery as it relates 27 to Tapken, Rhoades, and the entity Defendants. 1 discovery, the discovery requests are overbroad. Bubbly Brands, a former client of 2 TGG, points out that TGG and Bubbly Brands often exchanged information during 3 the course of their relationship regarding Bubbly Brands’ own financial data. A 4 discovery request for all documents that involve the two parties would require 5 Bubbly Brands “to produce back to TGG the same documents TGG provided during 6 the relationship.” (See BB Opp’n, ECF No. 47, at 2.) The Court finds that one small 7 change to the proposed discovery request will resolve this problem. As drafted 8 currently, TGG’s request for document production specifies that the entity 9 Defendants are to produce any TGG documents or information “created, modified, 10 or sent or in their possession after they disengaged from TGG, including relating to 11 any use of those materials or information.” (Ex Parte Mot. at 6.) A document request 12 for all TGG documents simply “in the possession” of the former client may indeed 13 lead to production of documents regarding the client’s financial data created during 14 the client’s relationship with TGG. Therefore, the Court modifies the request as 15 follows: 16 Copies of all Sash Bag documents relating to any TGG documents, files, 17 programs, or other materials or information created, modified, sent, or used after Sash Bag disengaged from TGG, including relating to any use of those 18 materials or information. 19 20 (See id.) The requests for Holiday Foliage and Bubbly Brands will be identical. 21 In sum, the Court finds that any discovery seeking further information as to 22 what documents Petraglia or Zerba removed from TGG goes to the merits of the case. 23 There is no good cause to permit such discovery. However, discovery relating to 24 what TGG documents, if any, Tapken and Rhoades have in their possession is 25 relevant and the Court finds good cause to permit this discovery. Further, there is 26 good cause for TGG to determine what information, if any, is in the possession of 27 Sayva, Sash Bag, Holiday Foliage, and Bubbly Brands. The Court finds such 1 chances for success on the merits at a preliminary injunction hearing.” Yokohama 2 Tire Corp., 202 F.R.D. at, 613.2 3 Further, the Court does not find good cause to allow depositions at this time. 4 TGG states the depositions are to “allow TGG to confirm the scope of the 5 misappropriation” and to affirm its belief that “Defendants are currently using TGG’s 6 trade secrets.” (Ex Parte Mot. at 8.) Determining just how much confidential 7 material has been misappropriated and the current use of the material does not relate 8 to the preliminary injunction, instead, it relates to the merits of the case. Therefore, 9 the Court declines to allow expedited discovery for depositions at this time. 10 IV. CONCLUSION 11 For the foregoing reasons, the Court GRANTS IN PART TGG’s motion for 12 expedited discovery. (ECF No. 24.) TGG may engage in expedited discovery for 13 the following requests for production and inspection: 14 • All copies of all documents, files, programs, or other materials that Tapken 15 copied or took from TGG, or received from Petraglia or Zerba, from December 16 1, 2018 to present. 17 • All copies of all documents, files, programs, or other materials that Rhoades 18 copied or took from TGG, or received from Petraglia or Zerba, from 19 November 1, 2018 to present. 20 21 2 Finally, Defendant Sayva points out that it has made efforts to remedy any use of confidential 22 information. Sayva has hired a company called iDiscovery Solutions “to conduct the forensic investigation and the remediation of all TGG documents that may have migrated” to Sayva from 23 the hiring of Petraglia or Zerba. (Sayva Opp’n, ECF No. 44, at 6.) iDiscovery Solutions has 24 preserved all TGG documents. (Id.) TGG’s counsel has been fully briefed on the scope of iDiscovery Solutions’ efforts. (Id.) 25 The Court commends the parties for working together to determine what information Sayva received through its hiring of Petraglia and Zerba. But this does not mean there is not good cause 26 to permit limited discovery. In fact, the discovery request likely will not be overly burdensome on 27 Sayva considering the company has already compiled the documents and has been forthcoming with TGG regarding its efforts thus far. 1 e Copies of all Sayva documents relating to any TGG documents, files, 2 programs, or other materials or information in Sayva’s possession, including 3 relating to any use of those materials or information. 4 e Copies of all Sash Bag documents relating to any TGG documents, files, 5 programs, or other materials or information created, modified, sent, or used 6 after Sash Bag disengaged from TGG, including relating to any use of those 7 materials or information. 8 e Copies of all Holiday Foliage documents relating to any TGG documents, 9 files, programs, or other materials or information created, modified, sent, or 10 used after Holiday Foliage disengaged from TGG, including relating to any 11 use of those materials or information. 12 e Copies of all Bubbly Brands documents relating to any TGG documents, files, 13 programs, or other materials or information created, modified, sent, or used 14 after Bubbly Brands disengaged from TGG, including relating to any use of 15 those materials or information. 16 || (See Ex Parte Mot. at 6.) The Court denies without prejudice the remainder of 17 ||TGG’s requests for expedited discovery as it relates to document production. The 18 ||Court also denies without prejudice TGG’s requests for expedited discovery as it 19 ||relates to depositions. (See id.) 20 Further, the parties disagree as to whether the permitted discovery will “count 21 against” the limits of discovery conducted later the normal scope of the case. If this 22 ||issue arises, the parties are to resolve the issue with Magistrate Judge Crawford. 23 ||Finally, any issues regarding the scope of or any objections to the discovery 24 permitted herein are to be referred to Magistrate Judge Crawford. 25 IT IS SO ORDERED. 26 /\ yy 27 || DATED: November 25, 2019 ill rd A Haha, 6 28 United States District Judge