E. & J. Gallo Winery et al v. Instituut Voor Landbouw - En Visserijonderzoek, et al.

Filing 95

ORDER GRANTING defendants' Motion for Protective Order Staying Discovery by Plaintiffs, document 49 . Order signed by Magistrate Judge Erica P. Grosjean on 6/18/2018. (Rooney, M)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 9 10 11 E. & J. GALLO WINERY, doing business as SAN JOAQUIN VALLEY CONCENTRATES; G3 ENTERPRISES, INC. doing business as DELAWARE G3 ENTERPISES, INC.; and MCD TECHNOLOGIES, INC., 12 Plaintiffs, 13 14 15 16 17 18 Case No. 1:17-cv-00808-DAD-EPG ORDER GRANTING DEFENDANTS’ MOTION FOR PROTECTIVE ORDER STAYING DISCOVERY BY PLAINTIFFS PENDING PLAINTIFFS’ COMPLIANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE § 2019.210 (ECF No. 49) v. INSTITUUT VOOR LANDBOUW-EN VISSERIJONDERZOEK; EIGEN VERMOGEN VH INSTITUUT VOOR LANDBOUW-EN VISSERIJONDERZOEK; FLANDERS’ FOOD; and DOES 1-10, 19 Defendants. 20 21 I. INTRODUCTION 22 On June 15, 2017, E. & J. Gallo Winery, doing business as San Joaquin Valley 23 Concentrates; G3 Enterprises, Inc., doing business as Delaware G3 Enterprises, Inc.; and MCD 24 Technologies, Inc., (collectively, “Plaintiffs” or “Gallo”) commenced this action by the filing of a 25 Complaint against Instituut Voor Landbouw-En Visserijonderzoek and Eigen Vermogen VH 26 Instituut Voor Landbouw-En Visserijonderzoek (collectively, “Defendants” or “ILVO”).1 (ECF 27 On November 7, 2017, Plaintiffs voluntarily dismissed their claims against Defendant Flanders’ Food. (ECF No. 30.) 1 28 1 1 No. 1.) Plaintiffs allege, among other things, that Defendants misappropriated trade secrets for a 2 food drying device called the Refractance Window dryer (the “RW dryer”). (ECF No. 1 at 18-20.) Now before the Court is Defendants’ Motion for Protective Order Staying Discovery by 3 4 Plaintiffs Pending Compliance with California Code of Civil Procedure 2019.210 filed on March 5 8, 2018. (ECF No. 49.) On April 13, 2018 and May 30, 2018, the Court heard oral arguments on 6 the motion. (ECF Nos.63, 79.) 7 For the reasons discussed below, and as stated on the record at the May 30, 2018 hearing, 8 (ECF No. 87), Defendants’ motion for protective order staying discovery is granted. 2 9 II. 10 BACKGROUND The motion at issue concerns Cal. Code of Civ. Proc. § 2019.210 regarding the level of 11 particularity for disclosure of trade secrets. Specifically, Section 2019.210 requires “the party 12 alleging the misappropriation [to] identify the trade secret with reasonable particularity.” Cal. 13 Civ. Proc. Code § 2019.210. 14 In their Complaint, Plaintiffs described their trade secrets as “information relating to how 15 to assemble the refractance window dryer’s belt, the design of the exhaust system for evacuating 16 water vapor produced during the drying process, the design for recirculating water through the 17 system, designs for belt sanitation, system for dried product removal, system for liquid product 18 feeding, and the design and materials choices for the belt.” (ECF No. 1 at 2.) 19 On September 25, 2017, and October 12, 2017, the parties met and conferred 20 telephonically concerning the issue of Section 2019.210 applicability and compliance. (ECF Nos. 21 62 at 2, 62-1.) Plaintiffs agreed to comply with the disclosure obligations set forth in Section 22 2019.210. (ECF No. 62-1.) Specifically, Plaintiffs stated, “We have agreed to apply CCP 23 2019.210 to the trade secret claims in this case to assist expeditious discovery. . . . We do agree to 24 25 26 27 28 2 On October 17, 2017, Defendants filed a motion to dismiss this action for failure to state a claim. (ECF No. 27.) On June 1, 2018, the court (Drozd, J.) dismissed MCD Technologies, Inc.’s claims against Defendants with leave to amend. (ECF No. 86.) The order provided, in relevant part that “the allegations of the complaint in support of the plaintiffs’ trade secret misappropriation claim provide defendants with reasonable notice of the issues which must be met at trial as well as reasonable guidance as to the scope of appropriate discovery prior thereto.” (Id. at 8-9.) The Court has reviewed this order, but it does not change the Court’s analysis of the issue before it. Judge Drozd’s order addressed a separate issue—the sufficiency of the complaint—and not the issue of full identification of trade secrets in compliance with California Code of Civil Procedure § 2019.210 or the policy behind it. 2 1 and will serve a CCP 2019.210 statement promptly after service of your answer.” (ECF No. 62-1 2 at 6, 9.) 3 On December 22, 2017, Defendants served their first set of interrogatories on Plaintiffs. 4 (ECF No. 61 at 2.) Plaintiffs responded to Defendants’ interrogatories on January 22, 2018. (ECF 5 No. 62-6.) On February 14, 2018, the parties met and conferred telephonically, during which 6 Plaintiffs asserted that Section 2019.210 is inapplicable and that their interrogatory responses 7 satisfy their disclosure obligations under the Federal Rules of Civil Procedure. (ECF No. 62 at 4.) 8 On March 2, 2018, Defendants filed a Motion for Protective Order Staying Discovery by 9 Plaintiffs Pending Compliance with California Code of Civil Procedure § 2019.210. (ECF No. 10 49.) Defendants allege that Plaintiffs reversed their explicit commitment to adhere to Section 11 2019.210, asserting now that Section 2019.210 is inapplicable in federal court. (ECF No. 59 at 6.) 12 Plaintiffs produced their First Supplemental Objections and Responses to the First Set of 13 Interrogatories on March 16, 2018, (ECF Nos. 62-10 to -12), to which Defendants object as 14 “vague” and “indecipherable.” (ECF No. 59 at 14.) 15 On April 13, 2018, the Court heard arguments on Defendants’ motion for a protective 16 order, (ECF No. 49), and issued an order on April 17, 2018, requiring Plaintiffs to supplement 17 their responses to Defendants’ Interrogatories 1 and 2 by May 14, 2018. (ECF Nos. 67, 71.) 18 Plaintiffs served supplemental responses to Defendants’ Interrogatories 1 and 2 on May 14, 2018, 19 (ECF No. 77-1), and the parties met and conferred telephonically on May 17, 2018. (ECF No. 77 20 at 3.) On May 21, 2018, Plaintiffs produced revised supplemental statements in response to the 21 meet and confer. (ECF No. 77-2.) 22 During a hearing held on May 30, 2018, the parties disputed whether Plaintiffs’ revised 23 supplemental responses to Defendants’ Interrogatories 1 and 2 comply with Section 2019.210. 24 (ECF No. 87.) In the discovery motion now before the Court, Defendants contend that Plaintiffs’ 25 trade secret disclosures still fall short of the reasonable particularity requirement in Section 26 2019.210. (ECF No. 50.) Defendants seek to compel Plaintiffs’ compliance with Section 27 2019.210 prior to taking discovery. (ECF No. 50.) 28 In opposition, Plaintiffs contend that Section 2019.210 is a state discovery provision 3 1 superseded by the Federal Rules of Civil Procedure. (ECF No. 59 at 38-40.) Alternatively, 2 Plaintiffs argue that even if Section 2019.210 controls, their responses are sufficiently specific to 3 satisfy the disclosure obligation under the state discovery rule. (Id. at 40-43.) 4 III. DISCUSSION 5 A. Applicability of Section 2019.210 6 Initially, the parties disagree as to whether application of California Code of Civil 7 Procedure Section 2019.210 applies in this federal case. Under the California Uniform Trade 8 Secret Act (“CUTSA”), a plaintiff asserting misappropriation of trade secrets must comply with 9 the disclosure provision set forth in Section 2019.210 prior to commencing discovery. 10 11 12 13 14 15 16 Specifically, Section 2019.210 provides: In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act (Title 5 (commencing with Section 3426) of Part 1 of Division 4 of the Civil Code), before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code. Cal. Civ. Proc. Code § 2019.210. Defendants, citing Computer Economics, Inc. v. Gartner Grp., Inc., 50 F. Supp. 2d 980, 17 991-92 (S.D. Cal. 1999), contend that Section 2019.210 is a “substantive component of the 18 CUTSA that was enacted by California’s legislature specifically to limit the potential for abusive 19 trade secret misappropriation claims,” and is thus enforceable in federal court. (ECF No. 59 at 20 17.) Moreover, Defendants contend that “[a] federal court cannot separate CCP § 2019[.210] 21 from the whole of California’s Uniform Trade Secrets Act without frustrating the legislature’s 22 legitimate goals and disregarding the purposes of Erie.” (ECF No. 59 at 17.) 23 In opposition, Plaintiffs contend that Section 2019.210 is procedural, thus inapplicable in 24 federal proceedings. (Id. at 38-40.) Plaintiffs argue, quoting Funcat Leisure Craft, Inc. v. Johnson 25 Outdoors, Inc., No. CIV. S-06-0533GEBGGH, 2007 WL 273949, at *2 (E.D. Cal. Jan. 29, 2007), 26 that “it is not within the discretion of the district court to willy nilly apply bits and pieces of the 27 discovery civil procedure codes of the various states, even the state in which the district court 28 sits.” (Id. at 38.) 4 1 Pursuant to Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), “federal courts sitting in 2 diversity jurisdiction apply state substantive law and federal procedural law.” Gasperini v. Center 3 for Humanities, Inc., 518 U.S. 415, 427 (1996). The distinction between “substance” and 4 “procedure” is not fixed, but depends on the legal context of each case. Hanna v. Plumer, 380 5 U.S. 460, 471 (1965). In its choice of law review, the court first determines whether application 6 of the state rule conflicts with any applicable Federal Rule of Civil Procedure. Id. If the rules 7 conflict, the federal rule governs. Id. Absent any conflict, the court’s analysis turns to whether 8 application of the federal rule would significantly affect the outcome of the litigation or 9 encourage forum-shopping. Id. 10 “While the Ninth Circuit has not decided whether Section 2019.210 applies to actions in 11 federal court, district courts within the circuit have reached differing conclusions on the issue.” 12 Social Apps, LLC v. Zynga, Inc., No. 4:11–CV–04910 YGR, 2012 WL 2203063, at *1 (N.D. Cal. 13 June 14, 2012). Specifically, district courts are divided on whether Section 2019.210 touches on 14 procedural or substantive matters. Compare Funcat, 2007 WL 273949, at *2 (finding that Section 15 2019.210 is a procedural provision and does not supersede the directly conflicting discovery 16 requirements under Federal Rule of Civil Procedure 26), AtPac, Inc. v. Aptitude Solutions, Inc., 17 No. CV S-10-294 WBS KJM, 2010 WL 11571246, at *1 (E.D. Cal. Sept. 22, 2010) (concluding 18 that Section 2019.210 is inapplicable in federal trade secret actions), Hilderman v. Enea TekSci, 19 Inc., No. 05cv1049 BTM(AJB), 2010 WL 143440, at *2 (S.D. Cal. Jan.8, 2010) (finding 20 that Section 2019.210 conflicts with Rule 26), and Computer Economics, Inc., 50 F.Supp.2d at 21 988 (holding that Section 2019.210 complements rather than conflicts with federal discovery 22 rules), Gabriel Technologies Corp. v. Qualcomm Inc., No. 08CV1992 AJB (MDD), 2012 WL 23 849167 at *2 (S.D. Cal. March 13, 2012) (finding that Section 2019.210 should be applied 24 because it does not conflict with any federal rule and avoids undesirable forum shopping), with 25 Advante International Corp. v. Mintel Learning Technology, No. C 05-01022 JW (RS), 2006 WL 26 3371576 (N.D. Cal. Nov.21, 2006) (declining to decide applicability of Section 2019.210 in 27 federal cases but using it as guide), Excelligence Learning Corp. v. Oriental Trading Co., 28 Inc., No. 5:03–CV–4947 JF (RS), 2004 WL 2452834 (N.D. Cal. June 14, 2004) (finding Section 5 1 2019.210 not binding, but applying it because there was no parallel trade secret discovery 2 provision in federal discovery rules). 3 Separate and apart from Section 2019.210, a “district court possesses inherent powers that 4 are ‘governed not by rule or statute but by the control necessarily vested in courts to manage their 5 own affairs so as to achieve the orderly and expeditious disposition of cases.’ ” Dietz v. Bouldin, 6 ––– U.S. ––––, 136 S.Ct. 1885, 1891(2016) (quoting Link v. Wabash R. Co., 370 U.S. 626, 630– 7 631 (1962)). Furthermore, district courts have broad discretion to control the timing and sequence 8 of discovery under Federal Rule of Civil Procedure 26. Crawford-El v. Britton, 523 U.S. 574, 599 9 (1998) (“Rule 26 vests the trial judge with broad discretion to tailor discovery narrowly and to 10 dictate the sequence of discovery.”). The purpose of discovery is to narrow and clarify the basic 11 issues between the parties and to ascertain the facts or information as to the existence or 12 whereabouts of facts relative to those issues. Hickman v. Taylor, 329 U.S. 495, 501 (1947). Thus, 13 through its wide discretion, district courts can direct the parties to narrow and clarify the issues in 14 the action at an early stage of litigation to further the goal of efficiency for the court and litigants. 15 After review of the law and circumstances in this case, the Court will require that 16 Plaintiffs identify their trade secrets with reasonable particularity compliant with Section 17 2019.210. Applying Section 2019.210 here will narrow and clarify the basic issues between the 18 parties, thereby furthering the goal of efficiency for the court and litigants. See, e.g., Agency 19 Solutions.Com, LLC v. TriZetto Group, Inc., 819 F.Supp.2d 1001, 1017 (E.D. Cal. 2011) (finding 20 that district courts have the inherent power to apply Section 2019.210 to constrain discovery and 21 facilitate case management); Applied Materials, Inc. v. Advanced Micro—Fabrication Equipment 22 (Shanghai) Co., No. C 07-5248 JW (PVT), 2008 WL 183520, at *1 (N.D. Cal. Jan.18, 2008) 23 (finding that district courts have inherent discretion to manage discovery by requiring Section 24 2019.210 compliant trade secret identifications); Coleman v. Schwarzenegger, Nos. CIV S-90- 25 0520 LKK JFM P, C01-1351 THE, 2007 WL 4276554, at *1 (E.D. Cal. Nov. 29, 2007) (finding 26 that “under Federal Rule of Civil Procedure 26(c), and in the inherent discretion of a court to 27 manage its own discovery, a court may sua sponte enter a protective order for good cause 28 shown.”). Moreover, Plaintiffs initially agreed to comply with Section 2019.210’s reasonable 6 1 particularity standard. (ECF No. 62-1 at 6, 9.) 2 Thus, the Court will require compliance with Section 2019.210 in this case. 3 B. Reasonable Particularity Requirement 4 We now turn to whether Plaintiffs’ supplemental interrogatory responses comply with this 5 requirement. Those responses are docket numbers ECF Nos. 62-10 to -12, which have been filed 6 under seal. 7 i. Section 2019.210 Reasonable Particularity Standard 8 A plaintiff alleging misappropriation of trade secrets is required to produce trade secret 9 disclosures sufficient to “allow the trial court to control the scope of subsequent discovery, 10 protect all parties' proprietary information, and allow them a fair opportunity to prepare and 11 present their best case or defense at a trial on the merits.” Phoenix Technologies, Ltd. V. 12 DeviceVM, Inc., 2010 WL 8590525, at *2 (N.D. Cal. Mar. 17, 2010); see also MAI Sys. Corp. v. 13 Peak Computer, Inc., 991 F.2d 511, 522 (9th Cir.1993) (holding that a trade secrets plaintiff 14 “must identify the trade secrets and carry the burden of showing that they exist.”); Universal 15 Analytics v. MacNeal–Schwendler Corp., 707 F. Supp. 1170, 1177 (C.D. Cal.1989), aff'd, 914 16 F.2d 1256 (9th Cir.1990) (finding that adequate disclosures distinguish trade secrets “from 17 matters of general knowledge in the trade or of special knowledge of those persons . . . skilled in 18 the trade”) (citation omitted). Further, a trade secrets plaintiff must clearly define its trade secrets 19 before commencing discovery. AgencySolutions.Com, 819 F. Supp. 2d at 1015. To meet this 20 requirement, the plaintiff must make two showings: “[f]irst, the plaintiff must clearly identify 21 what the ‘thing’ is that is alleged to be a trade secret, and second, the plaintiff must be able to 22 clearly articulate why that ‘thing’ belongs in the legal category of trade secret.” Id. Upon an 23 adequate disclosure, “the defendant may then use that level of detail to determine the limits of the 24 trade secret by investigating whether the information disclosed is within the public domain . . . or 25 to develop . . . defenses.” Loop AI Labs, Inc. v. Gatti, 195 F. Supp. 3d 1107, 1115 (N.D. Cal. 26 2016) (citing Brescia v. Angelin, 172 Cal.App.4th 133, 147 (2009)). 27 \\\ 28 \\\ 7 ii. Defendants’ Objection to Plaintiffs’ Use of Certain Language in its 1 2 Responses as Vague Defendants contend that Plaintiffs’ repeated use of the phrases “includes” and “e.g.,” to 3 4 describe alleged trade secrets is vague and falls short of its Section 2019.210 obligation to 5 identify trade secrets with reasonable particularity. (ECF No. 59 at 31; ECF No. 62-10 at 8, 10- 6 11.) 7 Plaintiffs argue that their discovery responses are detailed, satisfy the disclosure 8 requirements, and provide Defendants sufficient clarity about Plaintiffs’ trade secrets. (ECF No. 9 59 at 40-43, 48-50.) 10 The use of “catch-all” descriptions such as “including” has been rejected as “so vague and 11 unspecific as to constitute no disclosure at all since Defendants cannot ‘ascertain at least the 12 boundaries’ of the alleged trade secrets.” Loop AI Labs, Inc., 195 F. Supp. 3d at 1116 (quoting 13 Comp. Econs., 50 F. Supp. 2d at 984) (citation omitted in original). Moreover, the Ninth Circuit 14 has held that the use of such “catch-all” language is insufficient “because it does not clearly refer 15 to tangible trade secret material” and renders it unlikely that the district court or any trier of fact 16 would have expertise in discerning is the trade secret. Imax Corporation v. Cinema Technologies, 17 Inc., 152 F.3d 1161, 1167 (1998). Moreover, a defendant cannot be expected to prepare its 18 rebuttal to trade secrets claim without some concrete identification of exactly was 19 misappropriated or incorporated into the defendant’s product. Id. 20 Here, Plaintiffs’ repeated use of the catch-all phrases “e.g.” and “includes,” (ECF No. 62- 21 10 at 8, 10-11), is too vague, and thus fails to clearly define the boundaries of each alleged trade 22 secret. Such catch-all language serves as a tactical advantage to allow Plaintiffs expansion of 23 alleged trade secrets at a later time, which the Court does not permit. To satisfy the disclosure 24 provisions set forth in Section 2019.210, Plaintiffs must provide greater specificity avoiding the 25 use of catch-all statements. 26 27 Accordingly, Plaintiffs’ statements are insufficient and must be supplemented in conformity with the reasonable particularity requirement in Section 2019.210. 28 8 iii. Defendants’ Objection to Plaintiffs’ Use of Categorical Descriptions as Too 1 2 Broad and General 3 Defendants contend that Plaintiffs improperly use categorical descriptions of alleged trade 4 secrets such as “highly confidential business information” without the requisite clarification as to 5 how such “business information” formulates into identifiable trade secrets. (ECF No. 59 at 30.) 6 Moreover, Defendants argue that “[Plaintiffs’] vague description of the components of the 7 compilation could encompass virtually thousands of differing bits of information that Plaintiffs’ 8 counsel may later reassemble and identify as they see fit as this case progresses.” (Id.) 9 In opposition, Plaintiffs assert that the descriptions of the six enumerated trade secret 10 categories they have set forth are compliant with federal and state discovery provisions. (ECF No. 11 59 at 42.) 12 Courts have held that general identifications of trade secret categories fall short of the 13 level of particularity required by Section 2019.210 as they “render it impossible for Defendants to 14 conduct public domain or other research to challenge the alleged secrecy of the information at 15 issue. Instead, Defendants are left to guess at the specifics.” Loop AI Labs, 195 F. Supp. 3d at 16 1114-15; see also Social Apps, 2012 WL 2203063, at *4 (“A description of the category, or even 17 of the subcategories of information within a category, does not comply with the requirement to 18 identify the actual matter that is claimed to be a trade secret.”). Without adequate disclosure of 19 the alleged trade secrets, “[d]efendants cannot reasonably prepare [their] defenses and search for 20 art in the field if the boundaries of the trade secret are so undetermined.” Jobscience, Inc. v. 21 CVPartners, Inc., No. C 13–04519 WHA, 2014 WL 1724763, at *3-4 (N.D. Cal. May 1, 2014). 22 Here, Plaintiffs’ repeated references to unarticulated “trade secret information” in its 23 supplemental responses, (ECF No. 62-10 at 10-11), are too broad and fail to clearly articulate the 24 alleged trade secrets. Section 2019.210 mandates a more refined description of each individual 25 component and combination of components purported to be a trade secret prior to commencing 26 discovery on these claims. 27 28 Accordingly, Plaintiffs’ broad compilation trade secret identifications require greater specificity pursuant to Section 2019.210. 9 iv. Defendants’ Objection to Plaintiffs’ Reference to Elements and All 1 2 Combinations of Alleged Trade Secrets as Insufficient Defendants takes issue with Plaintiffs’ identification of elements along with a claim that 3 4 each element alone and in combination with other elements constitutes a trade secret. Defendants 5 contend that the total number of trade secrets is not fully known and is also not manageable in 6 one case. (ECF No. 87 at 15-19, 24.) 7 8 Plaintiffs contend that their disclosure of compilation trade secrets is consistent with case law. (ECF No. 87 at 8.) This Court agrees with Defendants that Plaintiffs’ disclosure is insufficiently specific. It 9 10 is worth noting that, at the first hearing, Plaintiffs represented to the Court that they were 11 asserting a total of six trade secrets. (ECF Nos. 71at 5, 87 at 8.) At the second hearing, after 12 Plaintiffs had supplemented their disclosure to supposedly provide more specification, Plaintiffs 13 asserted at least 455 individual and compilation trade secrets within six distinct categories. (ECF 14 No. 87 at 24.) This change demonstrates that Plaintiffs’ disclosures are vague and allow Plaintiffs 15 to considerably alter their assertion of trade secrets. 16 Accordingly, the Court orders Plaintiffs to supplement their disclosures to list out each 17 and every trade secret, even if it includes various combinations. At least the total number of trade 18 secrets asserted will be clear. 19 This Court will not limit the number of trade secrets at this time. It may very well be that 20 Plaintiffs proposed number is unmanageable and unwieldy, and might be the subject of an 21 appropriate motion by Defendants in the future. But the proper number of trade secrets is not 22 currently before this Court. The specificity of disclosure is. 23 24 Thus, Plaintiffs must supplement their statements by clearly listing each distinct trade secret—whether a single element or combination of elements. 25 IV. 26 CONCLUSION AND ORDER The Court finds that Plaintiffs’ disclosures are not sufficiently specific to satisfy the 27 reasonable particularity requirement pursuant to Section 2019.210. Accordingly, the Court grants 28 Defendants’ motion for protective order and stays discovery by Plaintiffs pending their 10 1 compliance with Section 2019.210. 2 Defendants need not respond to discovery requests by Plaintiffs for any information 3 related to misappropriation of trade secrets, but shall proceed with discovery on non-trade secret 4 claims. 5 The Court orders Plaintiffs to file a disclosure compliant with Section 2019.210 that 6 specifically identifies each alleged trade secret according to the standards set forth above no later 7 than July 13, 2018.3 8 9 IT IS SO ORDERED. 10 Dated: June 18, 2018 /s/ UNITED STATES MAGISTRATE JUDGE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 3 28 The Court incorporates the further guidance given during the May 30, 2018 hearing regarding the scope of this order. ECF No. 79, 87 . 11

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