Elements Spirits, Inc. et al v Iconic Brands, Inc

Filing 91

ORDER DENYING DEFENDANTS MOTION FOR RECONSIDERATION OF MAGISTRATE JUDGES ORDER 87 by Judge Dean D. Pregerson . (lc). Modified on 5/9/2016 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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ELEMENTS SPIRITS, INC., a
California corporation;
FABRICA DE TEQUILAS FINOS
S.A. De C.V., a Mexican
corporation; WORLDWIDE
BEVERAGE IMPORTS, LLC, a
Nevada limited liability
company,

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Plaintiffs,
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v.
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ICONIC BRANDS, INC., a
California corporation;
GRACE KIM BRANDI, an
individual ,
Defendants.
___________________________

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Case No. CV 15-02692 DDP (AGRx)
ORDER DENYING DEFENDANTS’ MOTION
FOR RECONSIDERATION OF MAGISTRATE
JUDGE’S ORDER
[Dkt. No. 87]

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Presently before the Court is Defendants’ Motion for

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Reconsideration of the Magistrate Judge’s Order Denying Defendants’

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Challenge to Designation of Discovery as “Attorneys’ Eyes Only.”

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(Dkt. No. 87.)

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Court adopts the following order.

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I.

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Having considered the parties’ submissions, the

BACKGROUND
The background facts giving rise to this litigation are well-

known to the parties and the Court.

(See Order Granting in Part

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and Denying in Part Plaintiffs’ Motion to Dismiss First Amended

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Counterclaims, Dkt. No. 46.)

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parties entered into a stipulated protective order.

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In February 2016, Defendants-Counterclaimants filed a motion

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challenging the Plaintiffs-Counterdefendants’ designation of

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certain third party discovery materials as “Attorneys’ Eyes Only”

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rather than “Confidential” under the protective order.

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70.)

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Magistrate Judge issued a detailed minute order deciding the motion

Relevant here, in December 2015, the
(Dkt. No. 57.)

(Dkt. No.

On March 16, 2016, after the motion was fully briefed, the

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without a hearing.

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Defendants-Counterclaimants’ motion and held that good cause

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supported Plaintiffs-Counterdefendants’ designation of the

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discovery materials as “Attorneys’ Eyes Only.”

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2016, Defendants-Counterclaimants filed this Motion for

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Reconsideration of the Magistrate Judge’s decision.

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II.

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(Dkt. No. 82.)

The Magistrate Judge denied

(Id.)

On April 4,

(Dkt. No. 87.)

LEGAL STANDARD
A district judge may refer certain nondispositive pretrial

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matters to a magistrate judge.

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the referral, the district judge can reconsider the magistrate

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judge’s decision only if “it has been shown that the magistrate

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judge’s order is clearly erroneous or contrary to law.”

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“Nondispositive issues include discovery sanctions” and other

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discovery matters.

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1414 (9th Cir. 1991).

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III. DISCUSSION

28 U.S.C. § 636(b)(1)(A).

After

Id.

See Bhan v. NME Hosps., Inc., 929 F.2d 1404,

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The Magistrate Judge’s decision held that the third party-

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produced documents that had been designated as “Attorneys’ Eyes

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Only” by Plaintiffs-Counterdefendants were appropriately
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designated.

(Dkt. No. 82.)

Plaintiffs-Counterdefendants claimed

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that the designation was necessary to prevent the individual

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Defendants-Counterclaimants, Grace Kim Brandi and her new company,

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Iconic Brands, Inc., from gaining confidential cost and pricing

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information on Plaintiffs-Counterdefendants’ KAH tequila.

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2.)

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“that could be used to determine the individual cost basis of a

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bottle of KAH tequila.”

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to limit Defendants-Counterclaimants’ access to that cost

(Id. at

The designation was limited to only those produced documents

(Id.)

Plaintiffs-Counterdefendants sought

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information because the parties are competitors in the tequila

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industry.

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(Id.)

The Magistrate Judge found the designation appropriate because

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protective orders and designations are “common in litigation

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between competitors in order to limit access to sensitive

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information to counsel and experts.”

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v. Syntech Int’l, Inc., 242 F.R.D. 552, 555 (C.D. Cal. 2008)).)

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The Magistrate Judge then balanced the “risk of competitive harm to

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[Plaintiff-Counterdefendant] Elements from disclosure of

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competitive information to [Defendant-Counterclaimant] Brandi,

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against the risk to [Defendants-Counterclaimants] Iconic brands and

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Brandi that a restriction of access to counsel and experts will

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impair their ability to litigate this action.”

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Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir.

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1992)).)

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(Id. (citing Nutratech, Inc.

(Id. (citing Brown

The Magistrate Judge found that the parties were competitors

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at the wholesale level and that the documents at issue involved

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wholesale pricing and cost for KAH tequila.

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Judge held that “[t]he risk of competitive harm from disclosure is
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(Id.)

The Magistrate

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substantial because a competitor with knowledge of a rival’s cost

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and price to a retailer would have an obvious advantage in

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soliciting that customer’s business.”

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held that “[n]onpublic wholesale pricing/cost information qualifies

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as confidential commercial information” under Federal Rule of Civil

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Procedure 26(c)(1)(G) and Nutratech.

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that the rule applies to “a trade secret or other confidential

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research, development, or commercial information”).)

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(Id.)

The Magistrate Judge

(Id. (quoting FRCP 26 to say

Further, the Magistrate Judge found that Defendants-

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Counterclaimants had not shown that “their ability to prosecute

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this litigation will be impaired if Brandi does not have access to

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her competitor’s wholesale cost/price information.”

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Defendants-Counterclaimants had argued that Brandi was “the person

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most qualified to evaluate Elements’ accounting” but the Magistrate

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Judge found that Brandi was not an accountant and her expertise

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based on industry experience did not mean that an accounting expert

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who is not a competitor of Plaintiffs-Counterdefendants would not

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also be qualified to review Elements’ accounting, thus lessening

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any prejudice.

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(Id. at 2-3.)

(Id. at 3 (quoting Joint Stipulation at 18).)

Defendants-Counterclaimants now argue on reconsideration that

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the Magistrate clearly erred in striking the balance between the

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parties’ competing concerns.

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Defendants-Counterclaimants argue that the District Court had held

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that Brandi had “properly pled a right to an accounting from

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plaintiffs, and the documents which plaintiffs want to conceal from

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Brandi are directly relevant to such an accounting.”

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see also id. at 5-6, 10-13.)

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claim that designating the documents as “Confidential” rather than

(Mot. Reconsideration, Dkt. No. 87.)

(Id. at 2;

Further, Defendants-Counterclaimants

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“Attorneys’ Eyes Only” better strikes the balance between the risk

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of harm to Plaintiffs-Counterdefendants and of prejudice to

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Defendants-Counterclaimants because designating the documents as

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“Confidential” would prevent Brandi from using the information in

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any way not connected to the litigation and would keep the

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information nonpublic so that other competitors would not find out

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the cost information.

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(Id.)

The Court recognizes that Defendants-Counterclaimants’
arguments are valid considerations.

However, these concerns were

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properly evaluated by the Magistrate Judge under the proper legal

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standard.

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contrary to law in the Magistrate Judge’s ruling on this matter.

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Even if the information in the protected documents is relevant to

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the case, the information can still be accessed by an accounting

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expert and attorneys in order to litigate the case with minimal

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prejudice to both sides.

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reconsider the Magistrate Judge’s well-reasoned decision.

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IV.

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Thus, there is no evidence of clear error or a decision

Therefore, the Court declines to

CONCLUSION
For the reasons stated above, Defendants-Counterclaimants’

Motion for Reconsideration is DENIED.

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IT IS SO ORDERED.

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Dated: May 9, 2016
DEAN D. PREGERSON
United States District Judge

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