Covance, Inc. v. InClin, Inc. et al

Filing 60

Discovery Order. Signed by Judge Maria-Elena James on 10/7/2016. (mejlc3, COURT STAFF) (Filed on 10/7/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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COVANCE, INC.,

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Case No. 16-cv-00429-YGR (MEJ)

Plaintiff,
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DISCOVERY ORDER

v.

Re: Dkt. No. 49

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INCLIN, INC., et al.,

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Defendants.
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United States District Court
Northern District of California

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INTRODUCTION

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Pending before the Court is the joint letter brief filed by Defendants InClin, Inc. (“InClin”)

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and Hope Davies (“Davies”) (collectively, “Defendants”) and Plaintiff Covance, Inc. (“Covance”

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or “Plaintiff”). The Letter Brief addresses InClin’s Interrogatories to Plaintiff, Set One, Nos. 11

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and 23 and Defendants’ Request for Production of Documents, Set One Nos. 6, 8, 42, and 47.

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Ltr., Dkt. No. 49; see also Reqs. & Resps., id., Ex. A, Dkt. No. 49-1. Defendants also request

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attorneys’ fees and costs they incurred in preparing the Letter Brief. Id. at 2. The presiding judge,

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the Honorable Yvonne Gonzales Rogers, referred this case for discovery to the undersigned judge.

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Referral Order, Dkt. No. 50. In accordance with the undersigned’s Discovery Standing Order, the

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parties have met and conferred in person, but have been unable to resolve their disputes. See

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Status Rept., Dkt. No. 59. Now, having considered the parties’ positions, relevant legal authority,

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and the record in this case, the Court issues the following Order.
BACKGROUND1

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Covance and InClin are competing contract research organizations that provide services to

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The parties did not provide a joint background section in their letter; accordingly, the Court’s
background section reflects facts outlined in the parties’ Joint Case Management Statement. See
Jt. Case Management Stmt. at 1-2, Dkt. No. 34 (providing a joint factual background); see also
Compl., Dkt. No. 1.

the pharmaceutical and biotechnology industries. Davies was employed by Covance from 2007

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until her voluntary departure in March 2015. She worked in Covance’s Madison, Wisconsin

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office. Davies is now an employee of InClin. This action arises out of Defendants’ alleged

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misappropriation of Covance’s trade secrets and other confidential business information. Covance

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alleges Davies disclosed its trade secrets and confidential business information to InClin, and

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InClin induced Davies, and possibly other former Covance employees, to breach their respective

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confidentiality agreements with Covance for InClin’s benefit. Covance contends that despite

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promises to fully investigate Covance’s allegations and to return Covance’s trade secrets and

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confidential business information, InClin has failed to do so. The Complaint includes claims for

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misappropriation of trade secrets in violation of the California Uniform Trade Secrets Act, Cal.

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United States District Court
Northern District of California

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Civ. Code §§ 3246 et seq. (“CUTSA”), breach of contract, breach of confidential relationship,

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intentional interference with contractual relationship, and violations of California’s Unfair

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Competition Law, Cal. Bus. & Profs. Code §§ 17200, et seq. See Compl., Dkt. No. 1.

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LEGAL STANDARD
Federal Rule of Civil Procedure 26 provides that a party may obtain discovery “regarding

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any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the

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needs of the case[.]” Fed. R. Civ. P. 26(b)(1). Factors to consider include “the importance of the

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issues at stake in the action, the amount in controversy, the parties’ relative access to relevant

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information, the parties’ resources, the importance of the discovery in resolving the issues, and

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whether the burden or expense of the proposed discovery outweighs its likely benefit.” Id.

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Discovery need not be admissible in evidence to be discoverable. Id. However, “[t]he parties and

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the court have a collective responsibility to consider the proportionality of all discovery and

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consider it in resolving discovery disputes.” Fed. R. Civ. P. 26 advisory committee notes (2015

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amendments). Thus, there is “a shared responsibility on all the parties to consider the factors

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bearing on proportionality before propounding discovery requests, issuing responses and

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objections, or raising discovery disputes before the courts.” Salazar v. McDonald’s Corp., 2016

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WL 736213, at *2 (N.D. Cal. Feb. 25, 2016); Goes Int’l, AB v. Dodur Ltd., 2016 WL 427369, at

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*4 (N.D. Cal. Feb. 4, 2016) (citing advisory committee notes for proposition that parties share a
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“collective responsibility” to consider proportionality and requiring that “[b]oth parties . . . tailor

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their efforts to the needs of th[e] case”).
Rule 26(c) “confers broad discretion on the trial court to decide when a protective order is

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appropriate and what degree of protection is required.” Seattle Times Co. v. Rhinehart, 467 U.S.

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20, 36 (1984). “The court may, for good cause, issue an order to protect a party or person from

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annoyance, embarrassment, oppression, or undue burden or expense,” including by (1) prohibiting

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disclosure or discovery; (2) conditioning disclosure or discovery on specified terms; (3)

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preventing inquiry into certain matters; or (4) limiting the scope of disclosure or discovery to

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certain matters. Fed. R. Civ. P. 26(c)(1).
DISCUSSION

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The Court addresses each of the discovery requests below, then Defendants’ request for

United States District Court
Northern District of California

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costs and attorney’s fees.

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A.

Interrogatory 11 and Request for Production 42
The Complaint alleges Covance and InClin are “direct competitors” but Defendants

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dispute this allegation. Compl. ¶ 11. Consequently, Defendants request the names of Plaintiff’s

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customers and all documents “relating to and referencing” the clients serviced by Covance’s

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Madison, Wisconsin office during the time Davies worked there (Reqs. & Resps. at 3, 112) “so

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that they can compare them to InClin’s own customers” (Ltr. at 1). They contend their requests

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are “limited” and only seek the names of customers and no further information about them. Id. at

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1-2. They also argue the Protective Order (Dkt. No. 39) addresses “[a]ny concerns about

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confidentiality[.]” Ltr. at 2.
Plaintiff questions the logic of Defendants’ theory and the relevance of this discovery,

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noting “under Defendants’ faulty reasoning, Covance and InClin could not possibly be

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competitors if Covance’s Madison office has not worked with a customer for which InClin also

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worked.” Id. at 3. They contend “Defendants’ requests are thus nothing more than an improper

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attempt to gain access to Covance’s confidential customer list.” Id.

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The Court utilizes the PDF or ECF-assigned page numbers.
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While neither party provides any case law for their position, the Court agrees with Plaintiff

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that Defendants have not demonstrated the relevance of this discovery, particularly where the

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potential burden to Plaintiff in exposing its customer lists to Defendants may be significant.

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Defendants have not explained how knowing the names of Covance’s customers or obtaining all

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documents “relating to or referencing” them helps prove Plaintiff and InClin are not direct

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competitors, or how this information is otherwise of particular importance in resolving the issues

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in this litigation. Given the potential risk and burden to Plaintiff, and without some more concrete

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articulation of relevance by Defendants, the Court denies Defendants’ request to compel Plaintiffs’

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response to Interrogatory 11 and Request for Production 42.

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B.

Plaintiff alleges it has suffered damages as a result of Defendants’ actions. Compl. ¶¶ 39,

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United States District Court
Northern District of California

Interrogatory 23 and Request for Production 47

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48, 53, 60, 65. Defendants argue damages are an element of each of Plaintiff’s claims, but that

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Plaintiff has objected to stating and itemizing the alleged damages and to producing documents

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relating to damages on the grounds that such discovery is “premature” and its damages

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information is confidential. Ltr. at 2.
The Court notes that Plaintiff opposed any request to phase discovery prior to mediation,

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and the parties did not request to bifurcate issues, claims, or defenses. Jt. Case Management Stmt.

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at 4, 6. The Court further notes that factual discovery closes in just over three weeks, and trial is

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scheduled to begin in March 2017. See Minute Entry, Dkt. No. 35. Under these circumstances, it

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is unclear to the Court how damages discovery could be “premature.” The Court grants

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Defendants’ request to compel Plaintiff’s response to Interrogatory 23 and Request for Production

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47. Plaintiff may qualify its responses as necessary to reflect that it reserves the right to amend its

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response based on its analysis of documents produced by Defendants and the testimony of an

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expert witness, but it must provide the information currently in its possession.

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C.

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Request for Production 6
In paragraph 16 of the Complaint, Plaintiff alleges Davies had access to a variety of its

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confidential information and trade secrets, which “is central to Plaintiff’s competitive advantages

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in its industry and is extremely valuable to Plaintiff.” Defendants request Plaintiff produce “[a]ll
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contribution margins, billing guides, costing guides, marketing information, customer pricing

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models or ‘other sensitive and useful customer information,’ to which DAVIES allegedly had

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access in her role as a Contract Analyst.” Reqs. & Resps. at 7-8. Defendants contend Plaintiff has

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not produced any responsive discovery, withholding documents on the basis that they are

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confidential and providing the information is unduly burdensome. Defendants argue they need

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this information to determine whether it is, in fact, confidential or protectable as a trade secret.

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Ltr. at 2.
Plaintiff disagrees with Defendants’ representations, arguing it has produced “all

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information, of which it is currently aware, that Davies misappropriated.” Ltr. at 4. Because
Defendants’ request seeks information that Plaintiff does not allege was misappropriated, Plaintiff

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Northern District of California

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argues it is overbroad and unduly burdensome. Id. The Court agrees, and denies the request to

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compel Plaintiff to respond to Request for Production 6.

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Should Plaintiff discover additional information that Davies misappropriated and fail to

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produce it by the discovery deadline, Defendants may request an order from the presiding judge

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prohibiting Plaintiff from using the late-disclosed information to support its claims.

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D.

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Request for Production 8
CUTSA makes unlawful the “misappropriation” of “trade secrets.” Cal. Civ. Code § 3426,

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et seq. “Trade secrets” are defined as “information, including a formula, pattern, compilation,

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program, device, method, technique, or process, that: (1) Derives independent economic value,

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actual or potential, from not being generally known to the public or to other persons who can

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obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are

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reasonable under the circumstances to maintain its secrecy.” Id. § 3426.1(d). Plaintiff bears the

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burden of proving the information Defendants misappropriated was a trade secret. See Language

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Line Servs., Inc. v. Language Servs. Assocs., Inc., 944 F. Supp. 2d 775, 779 (N.D. Cal. 2013) (“A

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plaintiff asserting a trade secret misappropriation claim under [CUTSA] bears the burden of

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proving each element of the claim as to each trade secret. [Citations.] . . . [A] plaintiff must

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‘demonstrate (1) the plaintiff owned a trade secret . . . .’”).

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In setting forth its CUTSA claim, Plaintiff alleges it incurred “much effort and expense” in
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assembling its alleged trade secrets and confidential information. Compl. ¶ 16; see also id. ¶ 32

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(“Covance’s Trade Secrets derive independent economic value from not being generally known to

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the public or to competitors....[; the] Trade Secrets would have substantial value if acquired by any

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competitor or third party, as they would allow [them] to obtain the benefits of Covance’s research

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and customer pricing models without having to invest the substantial amount of time and

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resources that Covance has already invested.”) Defendants contend Plaintiff has refused to

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produce any documents supporting or substantiating this “effort and expense,” on the ground the

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information is confidential and the request is unduly burdensome, disproportionate and premature.

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Ltr. at 2. Plaintiff argues this request is vague, overly broad, and unduly burdensome. Id. at 4.
Defendants are entitled to challenge one of the elements of Plaintiff’s CUTSA claim: that

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United States District Court
Northern District of California

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the information at issue is a trade secret because Plaintiff has derived independent economic value

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from keeping the information from being generally known to others. Defendants, however, do not

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need “[a]ll documents which relate to or refer to the ‘effort and expense’ incurred by Covance in

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assembling the trade secrets and other confidential information referenced” in the Complaint

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(Reqs. & Resps. at 9-10 (emphasis added)) to do so. Defendants are entitled to those documents

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Plaintiff will use to establish that the information Plaintiff contends was misappropriated qualifies

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as trade secrets under CUTSA. The Court accordingly grants the request to compel in part;

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Plaintiff shall produce those documents it contends show Covance incurred effort and expense in

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assembling the trade secrets and confidential information. The Court overrules the prematurity

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and confidentiality objections: discovery closes this month, and the Stipulated Protective Order

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addresses Plaintiff’s confidentiality concerns.

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E.

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Attorneys’ Fees & Costs
The Court, in its discretion, denies Defendants’ request for attorneys’ fees and costs. See

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Fed. R. Civ. P. 37(a)(C) (“If the motion is granted in part and denied in part, the court may . . .

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apportion the reasonable expenses for the motion.” (emphasis added)).

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CONCLUSION
For the reasons stated above, the Court GRANTS IN PART and DENIES IN PART
Defendants’ request to compel as stated and DENIES Defendants’ request for attorneys’ fees and
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costs. Plaintiff shall produce the information and documents described above within two weeks of

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the date of this Order.

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IT IS SO ORDERED.

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Dated: October 7, 2016
______________________________________
MARIA-ELENA JAMES
United States Magistrate Judge

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United States District Court
Northern District of California

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