Hope for Families & Community Services, Inc. et al v. Warren, et al.

Filing 329

MEMORANDUM OPINION AND ORDER that defendants' 292 JOINT MOTION to Reconsider and to Stay "two aspects" of the court's 252 Memorandum Opinion and Order is DENIED; that VictoryLand is DIRECTED to produce the discovery that is th e subject of 292 joint motion on or before April 28, 2009. To the extent that other court-ordered discovery disclosures required by 252 Memorandum Opinion and Order remain outstanding (Doc. 300 ), VictoryLand is DIRECTED to make the required disclosures on or before April 28, 2009. Signed by Honorable William Keith Watkins on 4/21/2009. (Attachments: # 1 Civil Appeals Checklist)(cc, )

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IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION H O P E FOR FAMILIES & COMMUNITY ) S E R V IC E , INC., et al., ) ) P l a i n t if f s , ) ) v. ) ) D A V ID WARREN, et al., ) ) D e f e n d a n ts . ) C A S E NO. 3:06-CV-1113-WKW M E M O R A N D U M OPINION AND ORDER B e f o r e the court is Defendants Macon County Greyhound Park, Inc., d/b/a V ic to ryL a n d , and Milton McGregor's ("Defendants") Joint Motion to Reconsider and to Stay (D o c. # 292) "two aspects" of the court's Memorandum Opinion and Order (Doc. # 252). T h a t Memorandum Opinion and Order overruled in part and sustained in part Plaintiffs' o b je c tio n s to the Magistrate Judge's discovery rulings. (Doc. # 252.) Plaintiffs Lucky P a la c e, LLC ("Lucky Palace") and the Macon County nonprofit organizations ("Charities") f iled a Response to the joint motion (Doc. # 312) to which Defendants submitted a Reply (D o c . # 318). Having carefully considered the arguments of counsel, the applicable law, and th e evidentiary record before the Magistrate Judge, the court finds that Defendants have not p re se n te d a legally sufficient reason to justify reconsideration of the Memorandum Opinion a n d Order or to warrant a stay. I . MOTION TO RECONSIDER A district court has broad discretion to reconsider an interlocutory order. See Toole v . Baxter Healthcare Corp., 235 F.3d 1307, 1315 (11th Cir. 2000); see also United States v. A c o sta , 669 F.2d 292, 293 (5th Cir. Unit B 1982) ("[T]he district court has broad power to rec o n side r the correctness of its interlocutory rulings.").1 It may reconsider an interlocutory ru lin g "for any reason it deems sufficient." Canaday v. Household Retail Servs., Inc., 119 F . Supp. 2d 1258, 1260 (M.D. Ala. 2000), aff'd sub nom. Perry v. Household Retail, 268 F .3 d 1067 (11th Cir. 2001). The first aspect of the Memorandum Opinion and Order that is the basis of the joint m o tio n for reconsideration pertains to the order compelling VictoryLand to disclose annual g ro ss receipts and annual gross profits from electronic bingo from the inception of its e le c tro n ic bingo operations to the present and the finding that the Magistrate Judge's ruling in this regard was clearly erroneous and contrary to law. (Doc. # 252 at 22.) More s p e c if ic a lly, Defendants object to this court's finding that the financial information subject to disclosure is not a trade secret. They contend that, in light of the applicable standard of re v ie w that prevents reversal of a magistrate judge's order that is not clearly erroneous or c o n t r a ry to law, this court's factual conclusion that, "while [Sheriff Warren] may have c h o se n not to look at VictoryLand's financial information, he had access to it" (Doc. # 252 a t 21), is wrong and that the concomitant legal conclusion i.e., that Sheriff Warren's access Decisions of Unit B of the former Fifth Circuit are binding precedent in this circuit. Stein v. Reynolds Sec., Inc., 667 F.2d 33, 34 (11th Cir. 1982). 1 2 to this information "cut[] against VictoryLand's argument that the information [was] private o r a trade secret" also is wrong (Doc. # 252 at 22). (See Doc. # 292 at 6-8; Doc. # 318 a t 2.) Contrary to Defendants' assertion, however, the court did not "fail[] to consider" other arg u ab ly clarifying portions of Sheriff Warren's deposition testimony. (Doc. # 292 at 7.) It re v ie w e d the entire deposition testimony, including Sheriff Warren's statement that, "if [he h a d ] wanted to see [VictoryLand's financial information] [he] could [have]" (Doc. # 292 (q u o tin g Warren Dep. at 323)), and recognized the competing considerations evolving from th a t testimony (see, e.g., Doc. # 292 at 7-8 (citing Warren Dep. at 321-25)).2 E v e n assuming that VictoryLand has demonstrated that the limited financial in f o rm a tio n subject to disclosure has been maintained with secrecy and that the other e le m e n ts of 8-27-2 of the Alabama Code are satisfied, see Ex parte Miltope Corp., 823 S o . 2d 640, 644-46 (Ala. 2001), that assumption would not alter the court's finding that d is c lo s u re is required. "[T]here is no absolute privilege for trade secrets and similar c o n f id e n tia l information." Fed. Open Mkt. Comm. of Fed. Reserve Sys. v. Merrill, 443 U.S. 3 4 0 , 362 (1979), quoted in Festus & Helen Stacy Found., Inc. v. Merrill Lynch, Pierce F e n n e r, & Smith Inc., 432 F. Supp. 2d 1375, 1380 (N.D. Ga. 2006). The Federal Rules of Defendants make much of the sheriff's testimony in relation to their privacy argument. The argument originated in VictoryLand's contention that, as a privately-owned company, its business records and information are entitled to ironclad secrecy. The core analysis debunking that argument (Doc. # 252 at 19-22) focuses on the public nature of the actions of a public official charged with public oversight of a publically-regulated activity, bingo gambling. In that context, it is not surprising, indeed it would be expected, that the sheriff has access to records as he testified. That would be a reasonable expectation on his part under the circumstances. Whether he acted upon that expectation, or whether he was entirely wrong to have that expectation, is beside the point. 2 3 C iv il Procedure contemplate that circumstances will arise when a trade secret will be d is c o v e ra b le and that a court may enter a protective order "requiring that a trade secret . . . b e revealed only in a specified way[.]" Fed. R. Civ. P. 26(c)(1)(G). In Empire of Carolina, In c . v. Mackle, 108 F.R.D. 323 (S.D. Fla. 1985), the court explained: I n order to resist discovery of . . . confidential information, a party must first e s t a b lis h that the information sought is indeed confidential and then d em o n strate that its disclosure might be harmful. Once these requirements are m e t, the burden shifts to the other party to establish that discovery of the trade s e c re ts or confidential information is relevant and necessary to the action. The d istric t court then must balance the need for protection of the trade secrets a g a in s t the claim of injury resulting from disclosure. Discovery may be denied if proof of relevancy or need is not established, but if relevancy and need are s h o w n , the trade secret should be disclosed. Determination of whether the n e e d outweighs the harm of disclosure falls within the sound discretion of the trial court. Id . at 326. T h e court carefully balanced and weighed the competing interests in drawing the line v e ry near the position of VictoryLand. Most of the information sought by Plaintiffs was, on b a la n c e, not discoverable by parties who seek to compete with VictoryLand. Consider the ite m s not ordered produced: L u c k y Palace's Request Number 12: "[A]ll documents, internal memos, notes, f o re c as ts , correspondence, e-mails, electronic filed information regarding all financial in f o rm a tio n for [VictoryLand] regarding the operation of electronic bingo in Macon County, A la b a m a , from its inception at Victory[L]and until the present." (Doc. # 143-3 at 5-6.) 4 T h e Charities' Request Number 15: All VictoryLand's financial information f r o m 2003 to the present, to include "financial statements, balance sheets, bank statements, p rof it reports and income and expense reports[.]" (Doc. # 107-2.) Thus, the vast majority of Plaintiffs' requests were denied by this court and the M a g is tra te Judge, and properly so. For a potential competitor, the denied records represent a virtual roadmap for competition complete with pot holes and rest stations, financial and b u sin e ss destinations to be sought, and those to be bypassed. Their discovery denial was duly w e ig h e d , and intentional. O n the other hand, gross receipts and gross profits from electronic bingo (not from all V icto ryL a n d 's operations) are not the kind of confidential information that would contain f o rm u la ic business planning, devices, methods, techniques or processes, or that would give a competitor an advantage or competitive boost. Gross receipts and profitability are financial sn a p sh o ts that are highly relevant as to motive, and to quantify them generally as simply " p ro f ita b le " or "highly profitable" is to say a thing is as long as a piece of string. In the m o tiv e context, this court has determined that a more specific sense of the level of p ro f ita b ility of VictoryLand's electronic bingo operations is relevant and may lead to the d is c o v e ry of other admissible evidence. Not only is this information relevant, but it also is necessary to Plaintiffs' action, and th e injury VictoryLand says it will suffer from disclosure of its annual gross receipts and a n n u a l gross profits simply does not justify protection through non-disclosure. Plaintiffs' 5 n e e d for the information also outweighs the claimed injury, notwithstanding Defendants' p ro te s ta tio n s to the contrary (Doc. # 292 at 12; Doc. # 252 at 16). On balance, most of VictoryLand's confidential information is protected by nond is c lo s u re ; the rest is protected by the Consent Protective Order (Doc. # 104), which ensures th a t VictoryLand's interest in maintaining the confidentiality of the limited financial in f o rm a tio n to be disclosed will be safeguarded. Disclosure will occur only within the p a ra m e te rs established by that order, and no valid reason has been given, and none will be a ss u m e d , that Plaintiffs' attorneys who, jointly with Defendants' attorneys, requested and a re bound by the Consent Protective Order will disregard their duties under that protective o rd e r. In short, no argument has been advanced that warrants reconsideration of the order c o m p e llin g VictoryLand to produce annual gross profits and annual gross receipts from e le c tro n ic bingo from the inception of its electronic bingo operations to the present.3 The o p p o s ite finding by the Magistrate Judge was clearly erroneous and contrary to law.4 T h e second aspect of the Memorandum Opinion and Order that is the basis of the joint m o tio n for reconsideration pertains to the order compelling VictoryLand to produce d o cu m en ts reflecting Fred D. Gray's ("Gray") ownership interest in VictoryLand on January The additional arguments presented in Defendants' motion in support of reconsideration of the order compelling VictoryLand to produce gross profits and receipts (Doc. # 292 at 14-24) have been considered, but are not persuasive under the applicable the standard of review. To reiterate, the majority of the Magistrate Judge's findings were neither clearly erroneous nor contrary to law. For those few instances found to offend the law of the case previously established by this court in its March 5, 2008 Order (Doc. # 144), the characterization of this court's position as merely a "different view" than that of the Magistrate Judge (Doc. # 292 at 13) is also clearly erroneous, as was demonstrated in the Memorandum Opinion and Order (Doc. # 252). 4 3 6 1 , 2003, each transfer of ownership to or from Mr. Gray since that date to the present, to in c lu d e the number of shares and the percentage of Mr. Gray's ownership interest when c o m p a r e d to the whole, and all dividend or shareholder, director, committee or other p a ym e n t s to Mr. Gray by date, description and amount. (Doc. # 252 at 34.) Defendants' p r in c i p a l argument rests upon their strong disagreement with the validity of Plaintiffs' b rib e ry theory, but the reasons for rejecting that argument as a bar to discovery have been a d e q u a te ly addressed. (See, e.g., Doc. # 252 at 25-30.) Defendants' opposition also is p re m is e d upon an affidavit from S. Lee Yates. As to the latter, no showing has been made th a t this evidence was not previously available to Defendants (Doc. # 292 at 25), and the a f f id a v i t also was not before the Magistrate Judge (see Doc. # 228 at 5 (Defendants' brief in support of earlier-filed motion to strike, citing Haines v. Liggett Group, Inc., 975 F.2d 81, 9 1 (3d Cir. 1992), for the proposition that the district court's review of the magistrate judge's d is c o v e ry rulings is "limit[ed] . . . to the evidence that was before the magistrate [judge] at the time that he or she made the decision in question" (emphasis omitted)); see also C in c in n a ti Ins. v. Cochran, No. 5:05cv93, 2005 WL 5277203, at *2 (N.D. Fla. Sept. 22, 2 0 0 5 ) ("Under the clearly erroneous standard, it is inappropriate to consider evidence not p re se n te d to the magistrate judge." (citing Haines, 975 F.2d at 93)), aff'd 198 F. App'x 831 (1 1 th Cir. 2006).5 Thus, the Yates affidavit will not be considered. To the extent that Defendants suggest otherwise (Doc. # 318 at 2 n.2), the Order entered on January 26, 2009 (Doc. # 251 at 1 n.1) is not to the contrary. 5 7 I I . MOTION TO STAY Alternatively, Defendants request a stay of the foregoing two aspects of the M e m o ra n d u m Opinion and Order (Doc. # 252) "to allow Defendants sufficient time to p re s e n t those issues to the Eleventh Circuit and to give that Court time to consider them." (D o c . # 292 at 2.) A stay pending appeal is an "extraordinary remedy" for which the movant b e a rs the burden of proof. Belcher v. Birmingham Trust Nat'l Bank, 395 F.2d 685, 685 (5th C i r. 1968).6 The traditional four factors governing injunctive relief apply to whether a m o v an t has shown that a stay pending an appeal is warranted. See Weng v. U.S. Attorney G e n ., 287 F.3d 1335, 1338 n.5 (11th Cir. 2002); Belcher, 395 F.2d at 685-86. Those factors re q u ire the movant to demonstrate (1) that there is a strong or substantial likelihood of s u c c es s on the merits, (2) that the movant will suffer irreparable injury absent a stay in the d is tric t court, (3) that a stay will not substantially harm other interested parties, and (4) that th e public interest will not be harmed. See Belcher, 395 F.2d at 685-86; accord In re Grand J u ry Proceedings, 689 F.2d 1351, 1353 (11th Cir. 1982). In their motion, Defendants have not addressed these four elements. (Doc. # 292.) T h e only discussion of these elements is in the reply brief and is focused upon the court's p rio r finding that VictoryLand's annual gross receipts and gross profits from electronic bingo a re not trade secrets, but that discussion is not sufficiently developed to be helpful. (Doc. # In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as binding precedent all decisions handed down by the former Fifth Circuit prior to October 1, 1981. 6 8 3 1 8 at 8-9.) As to the first element, in its March 9, 2009 Order dismissing the Grays' appeal su a sponte for lack of jurisdiction, the Eleventh Circuit concluded that this court's M e m o r a n d u m Opinion and Order (Doc. # 252) was "not final or immediately appealable" (D o c . # 304). Hence, to the extent that Defendants intend to file an appeal of the M e m o r a n d u m Opinion and Order (Doc. # 252), they cannot show a substantial likelihood of s u c c es s on the merits because the merits cannot be reached. In any event, the court has o p in e d that application of the pertinent balancing test requires disclosure within the strict co n fin es of the Consent Protective Order, even if the gross receipts and gross profits are fo u n d to be trade secrets. This finding weighs against Defendants' statements that disclosure w o u ld result in "irreparable injury" to VictoryLand's business and that a stay "would serve th e public interest of protecting trade secrets under Alabama law" (i.e., the second and fourth e le m e n ts ). (Doc. # 318 at 8.) Finally, as to the third element, the court finds that a stay w o u ld result in substantial harm to Plaintiffs; the dispositive motion deadline would have to b e stayed indefinitely, discovery could not be completed, and the trial surely would be d elayed . Accordingly, the court finds that Defendants have not demonstrated that they are en titled to a stay of the court's Memorandum Opinion and Order pending the "present[ation]" o f their issues to the Eleventh Circuit. (Doc. # 292 at 2.) 9 I I I . CONCLUSION A cco rd in g ly, it is ORDERED that Defendants' Joint Motion to Reconsider and to Stay (D o c . # 292) "two aspects" of the court's Memorandum Opinion and Order (Doc. # 252) is D E N IE D . V ic to ryL a n d is DIRECTED to produce the discovery that is the subject of the joint m o tio n (Doc. # 292) on or before April 28, 2009. To the extent that other court-ordered d isc o v e ry disclosures required by the Memorandum Opinion and Order (Doc. # 252) remain o u ts ta n d in g (Doc. # 300 5), VictoryLand is DIRECTED to make the required disclosures o n or before April 28, 2009. D O N E this 21st day of April 2009. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE 10

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