Clayton v. Automated Gaming Technologies, Inc.

Filing 148

STIPULATION and ORDER signed by Judge John A. Mendez on 9/15/14: Designation of Expert Witnesses due by 1/12/2015. Discovery due by 4/15/2015. Dispositive Motions filed by 5/20/2015. Final Pretrial Conference set for 7/31/2015 at 11:00 AM in Courtroom 6 (JAM) before Judge John A. Mendez. Jury Trial set for 9/14/2015 at 09:00 AM in Courtroom 6 (JAM) before Judge John A. Mendez. (Kaminski, H)

Download PDF
1 6 DOWNEY BRAND LLP MATTHEW J. WEBER (Bar No. 227314) KATIE KONZ (Bar No. 271436) CHRISTOPHER B. BURTON (Bar No. 296582) 3425 Brookside Road, Suite A Stockton, CA 95219-1757 Telephone: (209) 473-6450 Facsimile: (209) 473-6455 mweber@downeybrand.com kkonz@downeybrand.com cburton@downeybrand.com 7 Attorneys for Defendants 8 AUTOMATED GAMING TECHNOLOGIES, INC., JOHN B. PRATHER and ROBERT MAGNANTI 2 3 4 5 9 10 11 DOWNEY BRAND LLP 12 13 14 GILBERT J. PREMO Attorney at Law, State Bar No. 48503 500 Northfield Lane Lincoln, CA 95648-8321 Telephone: (415) 974-6664 Facsimile: (415) 762-5350 gilbertpremo@gmail.com Attorney for Plaintiff KEITH R. CLAYTON 15 16 UNITED STATES DISTRICT COURT 17 EASTERN DISTRICT OF CALIFORNIA 18 19 KEITH R. CLAYTON, Plaintiff, 20 v. 21 22 23 AUTOMATED GAMING TECHNOLOGIES, INC., a Nevada corporation, JOHN R. PRATHER, and ROBERT MAGNANTI 24 Case No. 2:13-cv-00907-JAM-EFB STIPULATION AND ORDER TO MODIFY FIRST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER AS MODIFIED BY THE COURT Defendants. 25 26 27 AND RELATED COUNTERCLAIM. 28 1384484.1 1 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 Plaintiff KEITH R. CLAYTON (“Plaintiff”) and Defendants AUTOMATED GAMING 2 TECHNOLOGIES, INC. (“AGT”), JOHN B. PRATHER (“Prather”) and ROBERT MAGNANTI 3 (“Magnanti”) (collectively “Defendants”) respectfully submit this Stipulation and [Proposed] 4 Order to Modify the 1st Amended Status (Pre-Trial Scheduling) Order (Docket No. 84), entered 5 herein on January 29, 2014. For the reasons stated below, the parties request a short continuance 6 of the pre-trial and trial dates. In support of this Stipulation, the parties provide the Court with 7 the following background demonstrating good cause for parties’ request, as required by Fed. R. 8 Civ. P. 16(b): 9 a) Since the time of entry of the 1st Amended Status Order, several motions to dismiss with respect to the pleadings were filed and decided. AGT filed a Second Amended 11 Counterclaim on May 8, 2014 and the pleadings were not finally settled until one claim of said 12 DOWNEY BRAND LLP 10 counterclaim was dismissed on August 12, 2014, and Plaintiff filed an Answer to AGT’s Second 13 Amended Counterclaim on August 26, 2014. Not until the pleadings were settled could the full 14 claims of the parties be known, nor could discovery be focused on issues that would be known to 15 remain until trial or dispositive motions. For example, it would be premature to depose a witness 16 on issues that may be removed by dismissal, or before all the parties’ claims were known. 17 b) The original intermediate deadlines before the trial date, such as expert reports and 18 the discovery cutoff, as set forth by the parties in their First Amended Joint Status Report, have 19 in the course of experience in this case, been recognized by the parties as premature. This is in 20 some part due to the fact that the parties' intermediate deadlines were premised on a requested 21 May 11, 2014 trial date, but the Court's Order set the trial date three weeks later, on June 1, 2014. 22 It is in other part based on recognition that the original intermediate deadlines were unnecessarily 23 long before trial, and on the experience in this case to date. 24 c) Discovery issues and disputes have arisen with respect to difficult issues 25 concerning computer programs and computer source code, each party seeking to protect claimed 26 trade secret information that it is claimed that the other could exploit. Issues have also arisen 27 with respect to financial information and records. It was necessary to proceed to a hearing 28 before Magistrate Judge Brennan on July 30, 2014, resulting in orders entered by Judge Brennan 1384484.1 2 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 on August 6, 2014 clarifying some of these issues, and supplemental production pursuant to those 2 orders which only began on August 13, 2014. Other issues remain. More time is necessary to 3 resolve these issues, and proceed with discovery necessary in order to obtain information 4 necessary for expert reports and trial of this matter. 5 Plaintiff and Defendants submit the following amended status report in support of this 6 Stipulation: 7 A. NATURE OF THE CASE 8 1. 9 Plaintiff is an ex-employee of AGT. Plaintiff’s Third Amended Complaint, filed Plaintiff’s Version November 27, 2013, alleges breach by AGT of an alleged oral agreement (“Software Sale 11 Contract”), by which AGT agreed to pay $225,000 for a software program (“Administrative 12 DOWNEY BRAND LLP 10 Application” or “Admin App”) written by Plaintiff prior to employment (and on which Plaintiff 13 owns a registered copyright), and breach of Plaintiff’s written employment agreement with AGT 14 dated September 14, 2009, as amended by a Second Employment Agreement dated March 31, 15 2010. Under the Employment Agreement dated September 14, 2009, AGT agreed to pay 16 Plaintiff, in addition to his salary, 1.5% of the gross profit of his department, and 1% of the stock 17 of AGT for each year of employment. Under the Second Employment Agreement dated March 18 31, 2010, AGT further agreed, in addition to the foregoing, to pay Plaintiff 10% to 15% 19 (depending on the number of sales) of the gross profit of each software sale of software 20 developed by Plaintiff during his employment. (All such percentage payments agreed to be made 21 are hereinafter referred to as “royalties”). Plaintiff alleges that AGT paid not more than $3,500 22 on the Admin App, and did not pay him any of the promised royalties or stock, as well as, for the 23 last four months of his employment, not paying his salary. In reliance upon the Software Sale 24 Contract, plaintiff used the Admin App as the foundation for software applications he wrote for 25 AGT, including but not limited to a program called the CBMS. 26 By reason of AGT's almost total breach of the above contracts, plaintiff resigned from 27 employment and gave AGT notice of rescission of the Software Sales Contract on March 5, 2013, 28 and notice to cease and desist from any further use of the Admin App which plaintiff had 1384484.1 3 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 delivered to AGT (including use in the CBMS, which was a derivative work of the Admin App), 2 and demanded the past due payments under the Employment Agreement, and restitution for AGT 3 previous use of the Admin App. 4 Further, AGT and its controlling officer defendants did not cease and desist from use of 5 the Admin App, but rather have infringed on plaintiff's copyright in the Admin App by continuing 6 to market derivative works of the Admin App, wherefore plaintiff also seeks relief against all 7 Defendants for copyright infringement. 8 Plaintiff seeks rescission and restitution as to the Software Sales Contract, and/or damages 9 for its breach, and for damages for breach of the Employment Agreement, and damages for 10 copyright infringement, and an injunction.1 11 Plaintiff denies the allegations of AGT's Second Amended Counterclaim, discussed DOWNEY BRAND LLP 12 below. Plaintiff did not withhold delivery of the CBMS, or any information to which AGT was 13 entitled, and the Admin App software on which he registered a copyright was his own creation 14 prior to employment, and did not benefit from any technical or proprietary information from AGT 15 (who, in fact, when plaintiff joined AGT, had no technical staff, source code or proprietary 16 information of its own to offer plaintiff, and only consisted of marketing personnel). 17 2. 18 Defendants’ deny the allegations in Plaintiff’s Third Amended Complaint. AGT is a Defendants’ Version 19 Nevada Corporation that develops and sells software and hardware to support cash processing 20 industries. In 2009, AGT hired Plaintiff to be an executive vice president of its Software 21 Department, where Plaintiff agreed to provide support for the development, distribution and 22 support of products sold by AGT. At the time of his employment, Plaintiff offered to sell AGT 23 some application he claimed he had designed, which AGT believes is the Admin App alleged in 24 1 25 26 27 28 Plaintiff's Third Amended Complaint further alleged that AGT and its not only failed to make any promised payments of stock or royalties for over 3-1/2 years, or other than token payments for the Admin App, but when Plaintiff sued for relief, AGT and its controlling officers, defendants Prather and Magnanti, falsely denied making the promises that they did make in those contracts, thus evidencing that they made those promises without intention of performing them, and were guilty of fraud. The Court, however, . dismissed this claim for promissory fraud with prejudice on April 3, 2014, based on the "economic loss rule," 1384484.1 4 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 Plaintiff’s complaint. Although the parties had discussions regarding the purchase and sale of this 2 alleged application, the parties never reached nor executed an agreement for such a purchase. In 3 addition, contrary to Plaintiff’s allegations, AGT never executed an amended employment 4 agreement with Plaintiff in 2010. Defendants also deny any allegations of fraud and copyright 5 infringement. 6 AGT alleges in its Second Amended Counterclaim that Plaintiff breached his fiduciary 7 duties as an officer2 by, among other things, refusing to provide AGT with a "security code" for a 8 CBMS software program Plaintiff wrote for AGT, and by initially refusing to turn over the 9 CBMS to AGT in order to demand payment regarding the disputed software sale contract and “additional and excessive compensation.” It further alleged that Plaintiff misappropriated 11 proprietary information obtained from AGT and used it improperly in the software for which he 12 DOWNEY BRAND LLP 10 sought a copyright. AGT alleges that it sustained damages as a result of Plaintiff’s breaches of 13 his fiduciary duties. 14 B. ANTICIPATED MOTIONS AND SCHEDULING OF MOTIONS 15 1. 16 Plaintiff has a pending motion claiming that AGT's has not complied with an Order of Plaintiff’s Anticipated Motions 17 Judge Brennan of August 6, 2014 compelling production of documents. Plaintiff anticipates that 18 further such motions may be necessary. AGT's Counterclaim seeks the alleged costs of writing a 19 program to replace the CBMS, which alleged replacement program AGT calls "Horizon", but 20 AGT has not allowed full inspection, as ordered by the Court, of the alleged replacement program 21 and its source code, and other documents appear not to have been produced. Plaintiff also 22 anticipates filing a motion to stay or abate AGT's Second Amended Counterclaim on the grounds 23 that AGT is doing intrastate business in California,, and is required to qualify to do business in 24 California, but has not so qualified, and therefore is barred from maintaining its Counterclaim 25 under California Corporations Code §2203 26 Plaintiff later anticipates filing a motion for summary judgment, or in the alternative, or 27 28 2 AGT takes the position that Plaintiff was a former officer of it only as a result of the Court’s ruling, issued on November 27, 2013. (Docket No. 59.) 1384484.1 5 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 partial summary judgment after sufficient discovery and depositions, and prior to the deadline for 2 filing dispositive motions. 3 2. 4 Defendants anticipate filing motions to compel with respect to their discovery, both Defendants’ Anticipated Motions outstanding and future discovery, as appropriate. Defendants have requested all copies of 6 Plaintiff’s Administrative Application and its source code, as existed during various times. 7 Because Plaintiff has indicated his refusal to make a complete production all such information, a 8 motion to compel may be necessary if the parties cannot resolve these issues through the meet 9 and confer process. Defendants also anticipate filing a Motion for Summary Judgment or, in the 10 alternative, a Motion for Partial Summary Judgment. Defendants anticipate that any Motions for 11 Summary Judgment and/or Partial Summary Judgment will be filed after some discovery has 12 DOWNEY BRAND LLP 5 been conducted, and prior to the deadline for filing dispositive motions as set by this Court. 13 C. ANTICIPATED DISCOVERY AND THE SCHEDULING OF DISCOVERY 14 1. 15 By Plaintiff 16 In addition to serving three Document Requests on AGT, as to which plaintiff is still Anticipated Discovery 17 awaiting full production, a set of Request for Admission on AGT, plaintiff has served numerous 18 Custodian of Records subpoenas on customers of AGT to discover sales for which plaintiff is 19 entitled to royalties under the Employment Agreement, or to damages for copyright infringement, 20 as well as investigation AGT's claims that the CBMS did not function properly, and that it was 21 replaced by the allegedly "rebuilt" software, "Horizon," Plaintiff plans additional written 22 discovery. 23 Plaintiff anticipates deposing at least four employees of AGT - Prather, Magnanti, David 24 Weiss and Tim Savage, and certain ex-employees of AGT. There is also the question of whether 25 the "Horizon" software copies plaintiff's Admin App, and whether the alleged costs of writing the 26 Horizon software claimed by AGT were incurred for that application, as opposed to other work 27 for AGT. Thus, it may be necessary to depose the third party contractors that AGT claims it paid 28 to write the "Horizon" software. Also, because AGT has claimed that the CBMS did not work 1384484.1 6 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 properly, and that customers complained about the CBMS, and that the alleged malfunctions in 2 the CBMS caused AGT to lose customers, it may be necessary to depose several customers of 3 AGT.3 4 5 For these reason, plaintiff requests that the number of permitted oral depositions be increased to fifteen (15). 6 Defendants’ Discovery. 7 AGT has served two Document Requests on Plaintiff, for which it is still waiting for full 8 and complete responses and production, and Defendants anticipate serving further written 9 discovery including, but not limited to, written interrogatories and requests for admissions. Defendants have also requested (and are awaiting) production and inspection of Plaintiff’s source 11 code to his Administrative Application that existed at various times, including before, during, and 12 DOWNEY BRAND LLP 10 after his employment with AGT. Defendants further anticipate taking Plaintiff’s deposition and 13 subpoenaing documents and testimony from third parties, if necessary. 14 AGT disputes Plaintiff’s need to conduct more than the permitted number of depositions. 15 Additional depositions are not necessary for Plaintiff’s claims nor are they necessary for AGT’s 16 breach of fiduciary duty counterclaim. Further, Plaintiff has not demonstrated such need and the 17 issue is premature, especially when neither side has conducted any depositions. If additional 18 depositions are in fact needed, the parties can meet and confer on the issue or request permission 19 from the Court at that time. 20 2. 21 Scheduling of Discovery a. 22 Subjects of Non-Expert Discovery: (1) 23 Plaintiff’s Position Plaintiff anticipates continuing discovery on the formation and performance of contracts 24 25 26 27 28 3 It is not clear that AGT's claims based on alleged malfunctioning of the CBMS software, allegedly caused by Clayton's alleged lack of his allegedly misrepresented abilities, or claims for the costs of "rebuilding" the software, survived dismissal of AGT's fraud claim, The claim for "breach of fiduciary duty" only alleges initial delay in delivery in the CBMS, alleged failure to provide a security code, and alleged use of AGT's "proprietary" information in the Admin App as copyrighted by plaintiff. However, until is clarified as to whether such claims based on alleged deficiencies in the CBMS survived, plaintiff must anticipate such discovery. 1384484.1 7 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 in issue, including not limited to depositions of AGT's officers and employees. Plaintiff also 2 anticipates continuing to conduct extensive document discovery of AGT's books and records of 3 sales, profit and financial condition, because the contracts in issue provided for payment to 4 plaintiff of a percentage of AGTs sales, including sales of software developed by plaintiff, and a 5 percentage of AGT's stock. Without such discovery, the amount due and which became due to 6 plaintiff from AGT's sales, and the value of AGT's stock , cannot be determined. Such discovery 7 is also necessary to discover AGT' continuing sales of derivative works of plaintiff's Admin App, 8 and accordant copyright damages. 9 10 Plaintiff also anticipates continuing discovery on the subjects raised by AGT's Second Amended Counterclaim, as indicated in the preceding section on plaintiff's anticipated discovery. 11 (2) DOWNEY BRAND LLP 12 Defendants’ Position. Defendants intend to continue to conduct discovery with respect to Plaintiff’s contractual 13 claims and his copyright infringement claim, and any other issues relevant to their defense of 14 Plaintiff’s claims and AGT’s prosecution of its breach of fiduciary duties claim. AGT has 15 served two sets of request for production of documents and things on Plaintiff. Plaintiff served 16 incomplete and evasive responses and produced over 200,000 pages of documents in response. 17 Defendants are in the process of meeting and conferring with Plaintiff on his deficient responses 18 and his unduly burdensome production, which Defendants are still in the process of reviewing. 19 Plaintiff’s responses to AGT’s Request for Production of Documents and Inspection, Set Two, is 20 not yet due. Despite requesting all copies of and source code to Plaintiff’s Admin App, during 21 various time periods, Plaintiff has not produced and indicated his refusal to make a complete 22 production or permit inspection of all such requested information. The production and inspection 23 of Plaintiff’s Admin App (all versions and source code before, during, and after his employment 24 with AGT) is critical to Defendants’ ability to defend against Plaintiff’s claims. As such, 25 Defendants will continue to conduct discovery, and move to compel as necessary, on these issues. 26 b. Proposed Changes to the Limitation on Discovery 27 Plaintiff’s position is that Defendant’s Executive Vice President, John Prather, is the key 28 witness for Defendant, had the most extensive contact with Plaintiff, and is the most involved in 1384484.1 8 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 running AGT’s business. Seven (7) hours may not be enough to complete his deposition, and 2 Plaintiff requests that fourteen (14) hours be allowed for his deposition. 3 Plaintiff also requests permission to conduct up to fifteen (15) oral depositions because of 4 the issues raised by AGT's Counterclaim, as discussed above in the section on anticipated 5 discovery. 6 Defendants dispute that an additional seven (7) hours of deposition is necessary for Mr. Prather. Defendants believe the seven (7) hours provided by the Federal Rules of Civil Procedure 8 is sufficient. Defendants also dispute Plaintiff’s need for additional depositions. Additional 9 depositions are not necessary for Plaintiff’s claims nor are they necessary for AGT’s breach of 10 fiduciary duty counterclaim. Further, Plaintiff has not demonstrated such need and the issue is 11 premature, especially when neither side has conducted any depositions. If additional depositions 12 DOWNEY BRAND LLP 7 are in fact needed, the parties can meet and confer on the issue or request permission from the 13 Court at that time. 14 c. 15 Expert Discovery: The parties submit that expert disclosures should take place on January 12, 2015, and 16 rebuttal expert disclosures should take place on February 11, 2015. 17 D. 18 STIPULATED CUT-OFF DATES While the parties agree that the intermediate cutoff dates should be changed, particularly 19 for expert disclosures and the discovery cutoff, Defendants believe that, given the circumstances, 20 some limited extension of the trial date is needed to accommodate these changes, while Plaintiff 21 believes that the trial date could be held. The parties have compromised, and respectfully request 22 the following cutoff dates and trial date: 23 Expert Disclosures January 12, 2015 24 Rebuttal Expert Disclosures February 11, 2015 25 Discovery Cut-Off April 15, 2015 26 Law and Motion Hearing Cut-Off May 27, 2015 27 Final Pretrial Conference June 12, 2015 28 Trial July 6, 2015 1384484.1 9 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 STIPULATION 2 3 The parties, through their counsel, HEREBY STIPULATE to amend the 1st Amended Status (Pre-trial Scheduling) Order as set forth above. 4 5 DATED: September 12, 2014 DOWNEY BRAND LLP 6 7 By: /s/ Katie Konz MATTHEW J. WEBER KATIE KONZ CHRISTOPHER B. BURTON Attorneys for Defendants AUTOMATED GAMING TECHNOLOGIES, INC., JOHN B. PRATHER and ROBERT MAGNANTI 8 9 10 11 DOWNEY BRAND LLP 12 DATED: Sept. 12, 2014 13 By: /s/ Gilbert J. Premo [as authorized on 9/12/2014] GILBERT J. PREMO Attorney for Plaintiff KEITH R. CLAYTON 14 15 16 /// 17 18 19 20 21 22 23 24 25 26 27 28 /// 1384484.1 10 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER 1 ORDER AS MODIFIED BY THE COURT 2 Based on the stipulation of the parties, and finding good cause therefore, 3 IT IS HEREBY ORDER that the 1st Amended Status (Pre-trial Scheduling) Order will be 4 modified as follows: 5 Expert Disclosures January 12, 2015 Rebuttal Expert Disclosures February 11, 2015 Discovery Cut-Off April 15, 2015 Dispositive motion filing May 20, 2015 Dispositive motion hearing June 17, 2015 at 9:30 a.m. Joint pretrial statement July 24, 2015 Final Pretrial Conference July 31, 2015 at 11:00 a.m. Trial September 14, 2015 at 9:00 a.m. 6 7 8 9 10 11 DOWNEY BRAND LLP 12 13 IT IS SO ORDERED. 14 DATED: September 15, 2014 15 16 /s/ John A. Mendez________________ JOHN A. MENDEZ UNITED STATES DISTRICT JUDGE 17 18 /// 19 20 21 22 23 24 25 26 27 28 1384484.1 11 STIP. & [PROPOSED] ORDER TO MODIFY 1ST AMENDED STATUS (PRE-TRIAL SCHEDULING) ORDER

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.


Why Is My Information Online?