PROCEEDINGS: (1) ORDER DENYING PLAINTIFF’S MOTION FOR LIMITED EXPEDITED DISCOVERY; AND (2) ORDER DENYING PLAINTIFF’S MOTION TO PRESERVE EVIDENCE
On November 5, 2009, plaintiff filed a motion for limited expedited discovery and to preserve evidence, without filing a notice of motion, and on November 9, 2009, this Court granted plaintiffs request to shorten time for the hearing on the motion and scheduled the hearing for November 25, 2009. On November 20, 2009, defendants filed their opposition to plaintiffs motion for expedited discovery and to preserve evidence and the opposing declarations of Scott Davis with exhibits, Patricia Fitzpatrick with exhibits, Yuri Frayman with exhibit and Amy Reverdy, and on November 23, 2009, plaintiff its reply and exhibit and the “supplemental” declaration of Erez Bustan. Oral argument was heard on November 25, 2009.
BACKGROUND
I
On October 30, 2009, plaintiff American LegalNet, Inc. (“ALN”), a California corporation, filed an unverified complaint
1
against defendants Geoffrey Scott Davis and CalendarRules.com LLC, a California limited liability company, setting forth claims for: (1) copyright infringement (17 U.S.C. § 501); (2) unfair competition (Cal. Bus.
&
Prof. C. § 17200); (3) conversion; (4) intentional interference with prospective economic advantage; (5) breach of contract; (6) breach of fiduciary duty; (7) misappropriation of trade secrets (CaLCiv. C. § 3246); and (8) violation of Counterfeit Access Device and Computer Fraud & Abuse Act of 1984 (18 U.S.C. § 1030). ALN alleges it “is the premier provider of desktop to courthouse workflow software” and “offers the eDockets product, along with the Court Rules database.... ” Complaint ¶ 3. “These products automatically calendar events ... on electronic calendars ... and while doing so display a description of the relevant court rule(s)____” Complaint ¶¶ 8-9. In October 2007, ALN obtained a license from Open Text, Inc., to use and develop Open Text’s court rules database and LegalKey docketing software and its related customer lists, and, pursuant to its new license, hired an Open Text employee, defendant Davis. Complaint ¶¶ 10-16, Exhs. A-B. Upon being hired, Davis signed a proprietary information agreement and nondisclosure
Plaintiff seeks compensatory, statutory and punitive damages, Complaint ¶¶ 42-43, 55, 63, 67, 72-73, 85-86, 88, 96, restitution of defendants’ unjust enrichment, Complaint ¶ 47, the return of confidential and proprietary information. Complaint ¶ 54, attorney’s fees and costs, Complaint ¶ 87, and injunctive relief to prevent “[djefendants and their agents, employees, attorneys, representatives and anyone acting at their direction or behalf from misappropriating, using, or disclosing, without ALN’s express or implied consent, ALN’s proprietary information and trade secrets[,]” and enjoining Davis from continuing to breach his proprietary and nondisclosure agreements with plaintiff. Complaint ¶¶ 44, 48, 68, 89-90 & Prayer.
On October 30, 2009, plaintiff served defendants with the summons and complaint, and on November 19, 2009, defendants filed an answer to the complaint, raising numerous affirmative defenses, and separately filed counterclaims seeking damages and declaratory and injunctive relief for unfair business competition (Cal. Bus. & Prof. C. §§ 17200, et seq.) and intentional interference with prospective economic advantage.
II
On November 3, 2009, plaintiff filed a motion for a preliminary injunction, with the supporting declarations of Erez Bus-tan, James Sheridan, Kin Lee and Chelise Anderson, and set the hearing on the motion for a preliminary injunction for December 7, 2009. On November 23, 2009, defendants filed their opposition to plaintiffs motion for a preliminary injunction and the opposing declarations of Davis, Fitzpatrick, Frayman, Reverdy and Erik Goltzer with exhibits.
By its motion for a preliminary injunction, ALN seeks an order requiring defendants to “return to ALN all trade secret and copyright protected information that Davis has acquired pursuant to his employment at ALN” and an order prohibiting defendants from:
1. ... copying, using, making, or selling ALN’s copyright protected Court Rules database and proprietary electronic docketing software or any production that uses this information;
2. ... using any information purloined or stolen from ALN during Davis’s employment with ALN; [and]
3. ... using, disseminating, or selling ALN’s proprietary marketing strategy relating to its electronic docketing software[J
Proposed Order at 2.
DISCUSSION
III
“Rule 26(d) of the Federal Rules of Civil Procedure[
3
] generally provides that formal discovery will not commence until after the parties have conferred as required by Rule 26(f).”
Qwest Commc’ns Int’l, Inc. v. WorldQuest Networks, Inc.,
“The good cause standard may be satisfied where a party seeks a preliminary injunction.”
Qwest Commc’ns Int’l, Inc.,
Here, plaintiff seeks permission to conduct the following expedited discovery: (1) “the deposition of Defendant Geoffrey Scott Davis”; (2) for “its computer forensic expert, Encore Legal Solutions, ... to create a mirror image of Defendants’ computers’ hard drives and to analyze the hard drives drives”; (3) for “its computer forensic expert, Encore Legal Solutions, ... to create a mirror image of Defendants’ external hard drives including, but not limited to a Western Digital external hard drive with internal serial number 7
&
382B41A3 & 0 & 57442D574341-553430303035373439
&
0”;[
5
] (4) to request “documents, including emails, relating to Defendant Davis’s former employer and plaintiff, ALN, and ALN’s customers”; (5) to request “documents, including emails, relating to Defendant Davis’s or Calendar-Rules.com’s work with or for Open Text, Inc. and/or The Frayman Group since January 1, 2008, through and including the present”; (6) to request “documents, including emails, relating to ALN’s software and/or marketing strategies”; (7) “to propound interrogatories related to issues and facts covered under topics (4) through (6) above”; and (8) “to serve a third party subpoena under Fed.R.Civ.P. 45 on the hosting site for Defendants, GoDaddy.com, Inc.” Proposed Order at 2:7-27 (footnote added). In its reply to defendants’ opposition to its motion for expedited discovery, ALN, for the first time, sets forth the actual document requests
6
and interroga
Initially, the Court notes plaintiff has not limited its discovery requests to information “to preserve the status quo,” as it must.
Disability Rights Council of Great
er
Wash.,
Similarly, plaintiff does not in any way limit Requests nos. 2 and 3, the requests to allow its forensic expert to examine and make mirror images of defendants’ computers’ internal and external hard drives; rather, the requests would allow plaintiff to obtain all information on defendants’ internal and external hard drives. Significantly, plaintiff specifically does not limit the examination of defendants’ hard drives to the “Western Digital external hard drive with internal serial number 7 & 382B41A3 & 0 & 57442D574341553430303035373439
&
0[,]” — the one hard drive plaintiff suspects may have copied ALN’s trade secrets. Bustan Decl. ¶ 23; Sheridan Decl. ¶ 14. Clearly, the discovery plaintiff seeks is not “narrowly tailored to obtain information relevant to a preliminary injunction determination” and instead goes to the merits of plaintiffs claims in this action. Thus, plaintiff has not established good cause for the broad discovery set forth in Requests nos. 1 through 3, pertaining to the deposition of Davis and the creation of mirror images of defendants’ computers’ internal and external hard drives.
Disability Rights Council of Greater Wash.,
Requests nos. 4, 5 and 7 seek information relating to “ALN,” “ALN’s customers,” and defendants’ “work with or for Open Text, Inc. and/or The Frayman Group since January 1, 2008.” These requests are problematic since ALN has shown no nexus between them and the preliminary injunctive relief it seeks. First, plaintiffs motion for a preliminary injunction pertains to defendants’ alleged misappropriation and use of ALN’s copyrighted database and proprietary software, and not any other aspect of defendants’ business. Yet, ALN seeks extensive information about defendants’ sales, products and customers, none of which go to ALN’s motion for a preliminary injunction.
Second, ALN seeks extensive information about the business operations of Open Text, Inc., the company that initially licensed ALN to use its software, and The Frayman Group, a competitor of ALN— neither of whom are parties to this case— based solely on speculation that these companies may be assisting defendants in selling information allegedly misappropriated from ALN. On the other hand, defendants have provided evidence showing they, Open Text, Inc. and The Frayman Group are acting lawfully. The declarations of Scott Davis and Yuri Frayman establish that ALN obtained a non-exclusive license from Open Text, and in “November 2008 The Frayman Group, [sic] and Open Text entered in to [sic] an agreement where [The] Frayman Group became the sole partner for Open Text to support all LegalKey products,” including the Court Rules database from October 2007. Declaration of Scott Davis (“Davis Decl.”) ¶¶ 9-13; Declaration of Yuri Frayman (“Fray-man Decl.”) ¶¶ 1-5. In January 2009, The
Third, defendant Davis unequivocally states in his declaration that he and his company are using software and data they lawfully obtained from Open Text and from publicly-available Court Rules to provide support services for their Court Rules based calendaring system, Davis Decl. ¶¶ 35-48, Exh. E, and Davis reasonably explains that the similarities between ALN’s Court Rules database and defendants’ Calendarrules.com system stem from both being based on public court rules. Id. ¶¶ 35-42; see also Declaration of Amy Reverdy “Reverdy Decl.” ¶¶ 6-7 (Since October 2009, I and others have been working on “build[ing] rules for new courts based on information which is publicly available on the various websites of the courts.... ”). Further, Davis explains his use of two computers while employed at ALN, id. ¶¶ 43-46, and swears he “do[es] not have any computer files belonging to ALN.” Id. ¶ 47. This direct evidence is in stark contrast to the inference ALN asks the Court to draw from the declaration of its forensic expert, Mr. Sheridan, and the supplemental declaration of Mr. Bustan, that defendants could not possibly have developed their own software business in less than a year without having misappropriated ALN’s copyrighted and proprietary information. The Court declines to draw these inferences, and finds ALN has not shown good cause for the Court to grant Requests nos. 4, 5 and 7.
Request no. 6 seeks permission to discover information relating to “ALN’s software and/or marketing strategies.” These requests, too, are problematic because they are “unrestrained as to time and scope and, therefore, seek[ ] wholly irrelevant matter” to ALN’s motion for preliminary injunctive relief.
Merrill Lynch, Pierce, Fenner & Smith,
Request no. 8 seeks permission to serve a third party subpoena under Rule 45 “on the hosting site for Defendants, GoDaddy.com, Inc.” However, since plaintiff has not provided any evidence that GoDaddy.com, Inc., is defendants’ hosting site, this request must also be denied for lack of good cause. Even assuming arguendo Go-Daddy.com is defendant Calendar-Rules.com’s website’s host, plaintiff has again failed to limit the scope of the Rule 45 subpoena it seeks to information pertinent to its motion for a preliminary injunction.
The Court has considered the declarations ALN filed supporting its motion for a preliminary injunction in determining whether to grant plaintiffs motion for expedited discovery and to preserve evidence. However, these declarations do not show ALN will be irreparably harmed by delaying the broad-based discovery it now requests until after the initial conference between the parties under Rule 26(f).
See Dimension Data N. Am.,
For all these reasons, plaintiff has not shown good cause for the Court to grant its motion for expedited discovery. Rather, “the broad discovery that [plaintiff] seeks should be pursued more properly within the structure and supervision afforded by a court-approved scheduling order under Fed. R. Civ. P. 16(b).”
Qwest Commc’ns Int’l, Inc.,
IV
Federal courts have the implied or inherent power to issue preservation orders as part of their general authority “ ‘to manage their own affairs so as to achieve the orderly and expeditious disposition of eases.’ ”
Pueblo of Laguna v. United, States,
In determining whether to grant a request for a preservation order, the Court
To meet the first prong of this test, the proponent ordinarily must show that absent a court order, there is significant risk that relevant evidence will be lost or destroyed — a burden often met by demonstrating that the opposing party has lost or destroyed evidence in the past or has inadequate retention procedures in place. More than that, the proponent must show that the particular steps to be adopted will be effective, but not overbroad — the court will neither lightly exercise its inherent power to protect evidence nor indulge in an exercise in futility.
Id.
Some federal courts, however, have found the streamlined two-prong standard of the Court of Claims to be inadequate, and instead have adopted a “balancing test” which considers the following three factors:
1) the level of concern the court has for the continuing existence and maintenance of the integrity of the evidence in question in the absence of an order directing preservation of the evidence; 2) any irreparable harm likely to result to the party seeking the preservation of evidence absent an order directing preservation; and 3) the capability of an individual, entity, or party to maintain the evidence sought to be preserved, not only as to the evidence’s original form, condition or contents, but also the physical, spatial and financial burdens created by ordering evidence preservation.
Capricorn Power Co., Inc. v. Siemens Westinghouse Power Corp.,
Here, ALN seeks an order “to preserve all information relevant to the issues, facts, and circumstances raised in ALN’s Complaint.” Proposed Order at 3:12-13. More specifically, the proposed preservation order seeks to prevent defendants from “all purging, destruction, erasure, or recycling of information or storage media and to stop or disable all automatic functions, features, or procedures that purge, destroy, or erase information” “regardless of the form, format, equipment, or media in or on which the information is contained or stored.” Id. at 3:13-18.
However, ALN has not met its burden under either the streamlined two-prong standard or the more detailed three-prong standard. First, ALN has presented absolutely no evidence that any relevant information has been lost or destroyed. Rather, ALN’s request for a preservation order is based solely on the following statement in its motion:
[T]he evidence sought consists mainly of electronic data, which may be lost through a computer’s normal use. For example, information and data containedon a computer’s hard drive are automatically written over and replaced with new data.
Motion at 4:24-27. If ALN’s statement of how electronic data is routinely “written over and replaced” were sufficient to establish there is a “significant risk” that information will be lost or destroyed, a preservation order would issue in each and every case in the federal courts. It is not. Although preservation orders may be fairly routine in complex litigation,
Treppel,
Second, the preservation order ALN seeks applies “to all information” relevant to the Complaint. Yet, ALN has “provided no information with respect to the extent of the burden that would be imposed on [defendants] if [the requested] preservation order were entered” and “has therefore failed to demonstrate that the requested preservation order is ‘not unduly burdensome.’ ”
Treppel,
ORDER
1. Plaintiffs motion for expedited discovery IS DENIED.
2. Plaintiffs request for a preservation order IS DENIED.
Notes
. The declaration of Erez Bustan, plaintiffs President and Chief Executive Officer, which was filed in support of plaintiff's motion for preliminary injunction, sets forth many of the factual allegations of the complaint recited herein.
. ALN hired a forensic expert, Encore Discovery Solutions, who examined the computer Davis used at ALN and “found that a remote USB device connected to an external hard drive [Western Digital brand] accessed Davis's hard drive" on September 11 and October 2, 2008 and copied ALN’s Court Rules and docketing files. Complaint ¶¶ 28-29; see also Declaration of James Sheridan ("Sheridan Decl.”) ¶¶ 2, 11-18.
. Rule 26(d) provides:
A party may not seek discovery from any source before the parties have conferred as required by Rule 26(f), except in a proceeding exempted from initial disclosure under Rule 26(a)(1)(B), or when authorized by these rules, by stipulation, or by court order.
Fed.R.Civ.P. 26(d)(1).
.Courts have used the terms "good cause” and "reasonableness” interchangeably.
See,
e.g.,
Wachovia Sec., L.L.C. v. Stanton,
. This is the Western Digital brand external hard drive referred to in footnote 2 above. Sheridan Deck ¶ 14.
. Specifically, ALN asks defendants to produce:
1. All documents, software, or firmware that refer or relate to ALN’s CourtRules database, the LegalKey software or product as it relates to ALN’s CourtRules database, or ALN's eDockets software or product as it relates to ALN's CourtRules database.
2. All documents that refer or relate to Open Text, Inc. (“OPT”) or The Frayman Group ("TFG”); their commercial products; their products under development; intellectual property owned by, licensed, or assigned to OPT or TFG; or software owned by, licensed, or assigned to TFG or OPT.
3. All documents referring or relating to the advertising, promotion, sales, marketing, or announcement of any of Defendants' commercial products, including but not limited to press releases, tradeshow displays, price lists, pamphlets, brochures, catalogs, illustrations, and Internet displays.
4. All documents concerning the business plans of forecasts, sales plans or forecasts, marketing plans or forecasts, or strategic plans or forecasts involving any of Defendants' commercial products.
5. All documents identified or referred to in Defendants' Responses to ALN's First Set of Interrogatories to Defendants and any subsequent sets of Interrogatories.
Id. at 22:25-23:14.
. Specifically, ALN asks defendants to:
1. Identify and list (a) all customers or potential customers to whom Defendants have sold, attempted to sell, licensed, or attempted to license its products; (b) the person or people with whom Defendants discussed or negotiated such transactions; (c) the contact information for such person or people, including but not limited to name, company, phone and fax number, email, and webpage; and (d) identify all documents relating to, and all persons with knowledge of, such licensing or sales activities.
2. Identify all products licensed, commercially produced, marketed, distributed, offered for sale or sold by Defendants or any licensee or agent of Defendants and, for each such product: (a) identify the earliest and latest dates when the product was licensed, commercially produced, marketed, distributed, offered for sale or sold; (b) identify the product's brand name, the product name, and model number; and (c) state the total sales in units and in dollars of the product; and (d) identify the person or people relating to the creation, development, marketing, or selling of such products.
3. Identify all products licensed, commercially produced, marketed, distributed, offered for sale or sold by OpenText, Inc. or the Frayman Group or any licensee or agent of those companies since October 20, 2008, that Defendants have helped create, develop, market, or sell, and, for such product: (a) identify the earliest and latest dates of Defendants’ involvement, (b) identify when the product was licensed, commercially produced, marketed, distributed, offered for sale or sold; (c) identify the product's brand name, the product name, and model number; and (d) state the type and amount of compensation paid to Defendants; and (e) identify the person or people relating to the creation, development, marketing, or selling of such products.
4. Identify all consulting, advisory, or similar services that Defendants have performed, solicited, or negotiated since October 20, 2008, and, for each such service: (a) identify the start and finish dates when such services were performed, solicited, or negotiated; (b) state the type and amount of compensation paid to Defendants; (c) identify the person or people who performed the service, solicited the customer, or negotiated the services, including their name, company, address, phone number, and email address; and (d) and identify the customer of such services, including their name, company, address, phone number, and email address.
Id. at 15:22-17:2.
. In light of the Court's ruling, there is no need for the Court to address defendants’ claim that California Code of Civil Procedure § 2019.210, which requires a party to identify the trade secret with reasonable particularity, "expressly prohibt[s]” discovery at this state of the proceeding. See Opp. at 6:24-10:3.
. This standard precludes consideration of "whether plaintiff is likely to be successful on the merits of its case in deciding whether to protect records from destruction.”
Pueblo of Laguna,
. This test also rejects consideration of the "proof of a probability of success in the litigation" factor, as well as the "public interest” factor, generally considered when determining injunctive relief. Capricorn Power Co., Inc., 220 F.R.D. at 433 & n. 1.