Orthofix Inc. v. Hunter
Filing
11
ORDER Granting in Part and Denying in Part Non-Party DJO, LLC's Motions to Quash Subpoenas. Signed by Magistrate Judge Jan M. Adler on 1/15/2014. (All non-registered users served via U.S. Mail Service)
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
9
SOUTHERN DISTRICT OF CALIFORNIA
10
27
In re: Subpoena of DJO, LLC in the ) Case No. 13CV2004-MMA(JMA)
)
matter of
13CV2268-MMA(JMA)
)
)
ORTHOFIX, INC.,
)
) ORDER GRANTING IN PART
Plaintiff/Counter) AND DENYING IN PART NONDefendant,
) PARTY DJO, LLC’S MOTIONS
) TO QUASH SUBPOENAS
v.
)
)
ERIC W. HUNTER,
)
)
Defendant/Counter)
Plaintiff.
)
)
In re: Subpoena of DJO, LLC in the )
)
matter of
)
)
ORTHOFIX, INC.,
)
)
Plaintiff/Counter)
Defendant,
)
)
v.
)
)
ROBERT LEMANSKI,
)
)
Defendant/Counter)
Plaintiff.
)
)
Non-party DJO, LLC (“DJO”) has filed two motions to quash in
28
relation to two subpoenas that were issued by Plaintiff Orthofix, Inc.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
1
(“Orthofix”) in connection with two lawsuits initiated by Orthofix against its
2
former, and DJO’s current, employees Eric W. Hunter (“Hunter”) and
3
Robert Lemanski (“Lemanski”). The litigation against Hunter is pending in
4
the United States District Court, Northern District of Ohio, Western Division,
5
Orthofix, Inc. v. Hunter, Case No. 13-CV-828-JZ (“the Hunter case”). The
6
case against Lemanski is pending in the United States District Court,
7
Eastern District of Michigan, Southern Division, Orthofix, Inc. v. Lemanski,
8
Case No. 13-CV-11421-SJM-RSW (“the Lemanski case”). The subpoenas
9
were issued out of the United States District Court, Southern District of
10
California by counsel for Orthofix and command DJO to produce and
11
permit inspection of certain documents.
12
After the motions to quash were filed, counsel for Orthofix and DJO
13
were ordered to meet and confer regarding all disputed issues and, if the
14
meet and confer did not resolve all issues, with respect to the Hunter case,
15
to file a joint statement entitled “Joint Supplemental Statement Regarding
16
Corrected and Amended Motion to Quash Subpoena” (“Joint Statement’)
17
informing the Court as to which issues remained in dispute. Briefing for the
18
Motion to Quash the subpoena issued in connection with the Hunter case
19
consists of: DJO's Corrected and Amended Partial Motion to Quash
20
[Orthofix, Inc. v. Hunter, Case No. 13CV2004-MMA(JMA) (S.D. Cal.), Doc.
21
No. 2]; Orthofix's Opposition [Id., Doc. No. 6]; DJO's Reply [Id., Doc. No. 7];
22
and the parties' Joint Statement [Id., Doc. No. 10]. With respect to the
23
Lemanski case, counsel were ordered to file a Joint Motion for
24
Determination of Discovery Dispute ("Joint Motion"), which addresses all
25
remaining disputed issues and supercedes DJO's Motion to Quash
26
Subpoena. [Orthofix., Inc. v. Lemanski, Case No. 13CV2268-MMA(JMA)
27
(S.D. Cal.), Doc. No. 7.] As explained in the Joint Statement and Joint
28
Motion, counsel have substantially narrowed the scope of the disputed
2
1
issues through the meet and confer process; however, Orthofix and DJO
2
were not able to reach agreement on three of the document requests in
3
Orthofix’s Subpoenas: Requests Nos. 1, 7, and 9. [13CV2004-MMA(JMA)
4
(S.D. Cal.), Doc. No. 10; 13CV2268-MMA(JMA) (S.D. Cal.), Doc. No. 7 &
5
7-1.]
6
I.
7
FACTUAL & PROCEDURAL BACKGROUND
Hunter and Lemanski are former employees of Orthofix, and are
8
alleged to have sold bone-growth stimulators on behalf of Orthofix for a
9
combined nineteen years. These products help patients recover after
10
surgery by helping fractures to fuse more quickly. They are used by a
11
specialized subset of surgeons on a small portion of their patients based on
12
the unique prescribing criteria established by a given surgeon in
13
consultation with Orthofix sales representatives like Hunter and Lemanski.
14
Orthofix claims that since Hunter and Lemanski departed the company, it
15
has suffered a drastic loss of sales of these products, reaching into the
16
millions of dollars. Orthofix believes these sales have been redirected to
17
DJO by Hunter and Lemanski using their knowledge of Orthofix’s
18
customers, including purchasing histories, product preferences and
19
prescription patterns they obtained while employed by Orthofix. Orthofix
20
contends that in order to conceal the violations of their contractual and
21
common law duties, Hunter and Lemanski ostensibly sell other DJO
22
products while introducing other DJO employees to their respective former
23
Orthofix customers, and while sharing Orthofix’s confidential and trade
24
secret customer information with the other DJO employees, who then
25
receive the credit for the bone-growth stimulator sales.
26
In the Hunter and Lemanski cases, Orthofix alleges its former
27
employees breached agreements each entered into when they became
28
Orthofix employees. Hunter signed an Agreement of Non-Competition,
3
1
Confidential Information, Inventions (“the Hunter Agreement”), which was
2
entered into on March 20, 2000. [13CV2004-MMA(JMA) (S.D. Cal.), Doc.
3
No. 2-3] The Hunter Agreement, as reformed by the Northern District of
4
Ohio, provides that, for one year after he leaves Orthofix, Hunter will not
5
“directly or indirectly, solicit sales on behalf of, or assist another in soliciting
6
sales on behalf of any enterprise or individual engaged in production of
7
equipment for or rendering the service of invasive or non-invasive spine or
8
bone healing, within a 100 mile radius of [Hunter]’s home.”1 [13-CV-828-JZ
9
(N.D. Ohio), Doc. No. 47.] The Hunter Agreement also prohibits Hunter
10
from using confidential information that was acquired during the course of
11
his employment after his separation from Orthofix. [13CV2004-MMA(JMA)
12
(S.D. Cal.), Doc. No. 2-3, Art. 2.] The Sales Agreement (“the Lemanski
13
Agreement”) entered into by Lemanski is dated March 13, 2006 and
14
prohibits Lemanski from directly or indirectly soliciting his former Orthofix
15
customers and from disclosing or using Orthofix’s confidential information
16
and trade secrets after his departure. [13CV2268-MMA(JMA) (S.D. Cal.),
17
Doc. No. 7 & 7-1.]
18
In the Hunter case, Orthofix has asserted causes of action for
19
breaches of the non-compete and non-disclosure provisions of the Hunter
20
Agreement, as well as misappropriation of trade secrets and tortious
21
interference with business relations. [13-CV-828-JZ (N.D. Ohio), Doc. No.
22
24 (First Amended Complaint).] In the Lemanski case, Orthofix’s causes of
23
action are for breaches of the unfair competition, non-solicitation and
24
non-disclosure provisions of the Lemanski Agreement, as well as
25
misappropriation of trade secrets and tortious interference with business
26
1
27
28
This provision (the “Restrictive Covenant”) was originally silent on both scope of
geographic reach and scope of prohibited activity. As originally written, the Restrictive
Covenant would prohibit Hunter from engaging in any job for any competitor anywhere in the
world. On October 21, 2013, however, the Northern District of Ohio reformed the Hunter
Agreement prusuant to the parties’ Agreed Order.
4
1
relations. [13-CV-11421-SJM-RSW (E.D. Mich.), Doc. No. 9 (First
2
Amended Complaint).]
3
II.
LEGAL STANDARD
4
Federal Rule of Civil Procedure 45 governs discovery of non-parties
5
by subpoena. See Fed. R. Civ. P. 45. A non-party witness is subject to the
6
same scope of discovery under Rule 45 as a party is under Rule 34. See
7
Fed. R. Civ. P. 45 (Advisory Committee’s note to the 1970 amendments).
8
Under Rule 34, the rule governing the production of documents between
9
parties, the proper scope of discovery is as specified in Rule 26(b). Fed. R.
10
Civ. P. 34. Rule 26(b), in turn, permits the discovery of any non-privileged
11
material "relevant to any party’s claim or defense...." Fed. R. Civ. P
12
26(b)(1). Relevance, for the purposes of discovery, is defined broadly and
13
"[r]elevant information need not be admissible at trial if the discovery
14
appears reasonably calculated to lead to the discovery of admissible
15
evidence." Id.
In addition to the discovery standards under Rule 26 that are
16
17
incorporated by Rule 45, Rule 45 itself provides that "on timely motion, the
18
court for the district where compliance is required must quash or modify a
19
subpoena that... subjects a person to undue burden." Fed. R. Civ. P.
20
45(d)(3)(A)(iv). In determining whether a subpoena poses an undue
21
burden, courts "weigh the burden to the subpoenaed party against the
22
value of the information to the serving party." Travelers Indem. Co.v.
23
Metropolitan Life Insur. Co., 288 F.R.D. 111, 113 (D. Conn. 2005); Moon v.
24
SCP Pool Corp., 232 F.R.D. 633, 637 (C.D. Cal. 2005). Generally, this
25
requires consideration of "relevance, the need of the party for the
26
documents, the breadth of the document request, the time period covered
27
by it, the particularity with which the documents are described and the
28
//
5
1
burden imposed." Id. (quoting United States v. IBM, 83 F.R.D. 97, 104
2
(S.D.N.Y. 1979)).
Rule 45(d)(3)(B)(i) also permits the Court to quash or modify the
3
4
subpoena if it requires disclosing a trade secret or other confidential
5
research, development, or commercial information. Once the nonparty
6
shows that the requested information is a trade secret or confidential
7
commercial information, the burden shifts to the requesting party to show a
8
"substantial need for the testimony or material that cannot be otherwise
9
met without undue hardship; and ensures that subpoenaed person will be
10
reasonably compensated." Rule 45(d)(3)(C)(i)&(ii). Upon such a showing,
11
the court may order appearance or production under specified conditions.
12
Id. See also Klay v. Humana, 425 F.3d 977, 983 (11th Cir. 2005); Heat &
13
Control, Inc. v. Hester Industries, Inc., 785 F.2d 1017, 1025 (Fed. Cir.
14
1986). Trade secret or commercially sensitive information must be
15
"important proprietary information" and the party challenging the subpoena
16
must make "a strong showing that it has historically sought to maintain the
17
confidentiality of this information." Compaq Computer Corp. v. Packard Bell
18
Elec., Inc., 163 F.R.D. 329, 338 (N.D. Cal. 1995).
19
III.
DISCUSSION
20
The subpoenas issued in the Hunter and Lemanski cases are
21
virtually identical. Other than the substitution of the name “Lemanski” for
22
the name “Hunter,” the document requests in the two subpoenas are
23
identical. Likewise, the dispute between Orthofix and DJO as to each
24
document request is the same, so the Court will address both subpoenas
25
together.
26
A.
Request No. 1
27
Request No. 1 of the Subpoenas calls for:
28
Documents, including commission reports, reflecting the total
monthly sales made to the customers on the list attached
6
2
hereto as Attachment 1, identified by product model name and
number and sales representative(s), from January 1, 2011 to
the present.
3
Attachment 1 to the respective subpoenas is a list of 73 persons and
4
entities and is designated by Orthofix as "Confidential – Subject to
5
Protective Order." The lists attached to the subpoenas are identical.
1
DJO contends its sales records are confidential and proprietary trade
6
7
secrets. [13CV2268-MMA(JMA) (S.D. Cal.), Doc. No. 7-3 (Affidavit of
8
Jeffery Blazevich), ¶ 7.] As detailed in that affidavit, “[t]he type of sales
9
records sought by Request 1 are documents that DJO maintains in
10
confidence and does not publicly disclose.” Id. Orthofix does not dispute
11
these are sensitive and confidential documents.
12
Because the sales records are confidential, the burden shifts to
13
Orthofix to show a ‘substantial need’ for this information. Gonzales v.
14
Google, Inc., 234 F.R.D. 674, 684 (N.D. Cal. 2006). Orthofix argues it
15
needs the requested sales records because DJO has structured
16
Lemanski’s role such that he has called on his former Orthofix customers
17
along with another DJO employee who acts as the salesperson of record.
18
[13CV2268-MMA(JMA) (S.D. Cal.), Doc. No. 7, p. 7.] Sales conducted in
19
this manner would violate Lemanski’s contractual prohibition against
20
indirectly soliciting his former customers but would not be reflected in his
21
commission records, the only sales records DJO has agreed to produce.
22
Hunter is also alleged to have contacted his former Orthofix customers and
23
to have shared Orthofix’s confidential and proprietary information and trade
24
secrets with other DJO employees in order for them to assist him in
25
stealing the customers. [13CV2004-MMA(JMA) (S.D. Cal.), Doc. No. 6, p.
26
6.]
27
28
Orthofix seeks the sales records because evidence of Hunter’s and
Lemanski’s alleged solicitation of their former Orthofix customers and
7
1
disclosure or use of Orthofix’s confidential information and trade secrets
2
would be reflected by changes in DJO’s total sales of bone-growth
3
stimulators to their former Orthofix customers from the periods before and
4
after they joined DJO. Increases in DJO’s sales to these accounts, coupled
5
with the drastic decreases in Orthofix’s sales, Orthofix argues, are strong
6
evidence of Hunter’s and Lemanski’s solicitation of their former Orthofix
7
customers and/or their disclosure of Orthofix’s confidential information to
8
allow others to do so.
9
DJO has agreed to produce commission reports reflecting Hunter’s
10
and Lemanski’s sales of products to their respective former customers for
11
the period November 14, 2012 (the date they both commenced
12
employment with DJO) to the present, but contends the request is
13
overbroad in that: 1) it seeks all of DJO’s sales records for 73 persons and
14
entities, regardless of whether Hunter or Lemanski were involved in those
15
sales, and regardless of whether either man ever called on those
16
customers for Orthofix; and 2) it seeks records dating back to January 2011
17
– nearly two years before Hunter and Lemanski began working for DJO.
18
With respect to DJO’s first objection, records of sales to customers
19
who were serviced by Hunter or Lemanski while they were employed with
20
Orthofix are clearly relevant to Orthofix’s claims. This includes DJO’s
21
records of sales to Hunter’s or Lemanski’s former Orthofix customers,
22
irrespective of whether either Hunter or Lemanski received a commission
23
or other credit for the sale made by DJO, as these records are relevant to
24
Orthofix’s claim that Hunter and Lemanski violated the contractual
25
prohibition against directly or indirectly soliciting their former customers.
26
DJO claims, however, the list of 73 persons and entities for which records
27
are sought in connection with the Lemanski case includes Orthofix
28
customers with which Lemanski was not involved. The same argument is
8
1
raised with respect to the Hunter subpoena. Orthofix does not respond to
2
the distinction drawn by DJO between customers with whom Hunter and
3
Lemanski were involved on behalf of Orthofix, as those with whom they
4
were not. Instead, Orthofix simply offers arguments directed to establishing
5
the relevance and need for discovery as to Hunter’s and Lemanski’s former
6
Orthofix customers. [See e.g. 13CV2268-MMA(JMA) (S.D. Cal.), Doc. No.
7
7, pp. 6-8.] The request, therefore, is overbroad to the extent it calls for
8
records of persons or entities with which Lemanski was not involved in
9
sales on behalf of Orthofix, as Orthofix has not shown a substantial need
10
for this information. The same analysis and conclusion applies to records of
11
sales to customers with which Hunter was not involved while he was
12
employed by Orthofix.
As for Orthofix’s request for sales records that precede Hunter’s and
13
14
Lemanski’s employment with DJO, these records are needed in order to
15
evaluate whether DJO experienced a change in sales of bone-growth
16
stimulators to Hunter’s and Lemanski’s former Orthofix customers after
17
they joined DJO; these records are necessary for the before and after
18
comparison to determine whether DJO’s sales to these customers
19
increased after Hunter and Lemanski came on board. DJO argues
20
Orthofix’s request for sales records that precede Hunter’s and Lemanski’s
21
employment with DJO is a “fishing expedition.” As the court in
22
Northwestern Mem’l Hosp. v. Ashcroft colorfully noted, however, "and of
23
course, pretrial discovery is a fishing expedition and one can't know what
24
one has caught until one fishes [b]ut Fed.R.Civ.P. 45(c) allows the fish to
25
object, and when they do so the fisherman has to come up with more...."
26
Gonzalez, 234 F.R.D. 674, quoting Northwestern Mem’l Hosp. v. Ashcroft,
27
362 F.3d at 931 (7th Cir. 2004). Here, Orthofix has shown a substantial
28
//
9
1
need for records of sales that were made prior to Hunter’s and Lemanski’s
2
employment with DJO such that it will be permitted to “fish” in these waters.
3
B.
4
Request No. 7 calls for:
5
All sold order or other contracts or agreements between DJO
and any of the following entities or anyone associated with
these entities that were in effect from January 1, 2011 to the
present:
6
7
8
9
10
11
12
Request No. 7
(a) St. Ann's Hospital – Toledo, Ohio
(b) St. Vincent's Hospital – Toledo, Ohio
(c) St. Charles Hospital – Toledo, Ohio
(d) Wood County Hospital – Bowling Green, Ohio
(e) Promedica Orthopedic and Spine Hospital – Toledo,
Ohio
(f) Toledo Hospital – Toledo, Ohio
(g) Flower Hospital – Sylvania, Ohio
(h) St. Luke's Hospital – Toledo, Ohio
(i) Orthopedic Institute of Ohio – Lima, Ohio
13
Orthofix subsequently agreed to narrow this request to only those
14
agreements that have been amended or replaced since Hunter and
15
Lemanski joined DJO, plus the previous version of any such agreements.
16
DJO maintains that even with this limitation the request is overbroad
17
because it seeks documents that pre-date Hunter’s and Lemanski’s
18
employment with DJO. Orthofix, it claims, has no substantial need to learn
19
what pricing and other confidential terms DJO negotiated with hospitals
20
without Hunter’s and Lemanski’s involvement, and to the extent Hunter and
21
Lemanski were involved in making sales on behalf of DJO to hospitals they
22
serviced while at Orthofix, this information would be disclosed in
23
documents produced in response to Request No. 1.
24
Hunter and Lemanski helped negotiate sold-order agreements with
25
customers while employed with Orthofix. Orthofix contends the defendants
26
used the confidential and trade secret information regarding this
27
negotiating process they acquired from Orthofix, including the specific
28
terms and pricing contained in these agreements and Orthofix’s pricing
10
1
strategies, to help DJO negotiate sold-order agreements with many of their
2
former Orthofix customers. Like changes in sales, changes in sold-order
3
agreement terms could provide evidence of Hunter’s and Lemanski’s
4
alleged use and disclosure of Orthofix’s confidential information and trade
5
secrets. The only way to evaluate whether Hunter and Lemanski used
6
Orthofix’s terms and pricing strategies to benefit DJO is to evaluate
7
whether any changes in terms occurred after they joined DJO and, if so,
8
what those changes were; therefore, documents pre-dating Hunter’s and
9
Lemanski’s employment by DJO are relevant to Request No. 7, just as they
10
are relevant to Request No. 1.
11
C.
Request No. 9
12
Request No. 9 seeks "All 2011, 2012 and 2013 business plans,
13
forecasts, sales projections, and comments regarding the customers on the
14
list attached hereto as Attachment 1. According to DJO, "[t]hese
15
documents are “among the most sensitive competitive documents that DJO
16
creates... [and] provide a virtual blueprint to DJO’s competitive activities.”
17
[13CV2268-MMA(JMA) (S.D. Cal.), Doc. No. 7-3, ¶ 11.]
Orthofix subsequently agreed to narrow this request to only those
18
19
2013 plans, forecasts and projections which reference the sale of
20
competitive products to Hunter’s and Lemanski's former Orthofix
21
customers, plus any older versions which mention recruiting Hunter or
22
Lemanski to join DJO. Orthofix contends these documents would provide
23
strong evidence of Hunter’s and Lemanski’s solicitation of their former
24
Orthofix customers and their disclosure of Orthofix’s confidential
25
information and trade secrets. This information, Orthofix argues, will prove
26
the effect that Hunter’s and Lemanski’s solicitation, use and disclosure of
27
Orthofix’s confidential information and trade secrets has had on DJO’s
28
//
11
1
sales, and changes in these projections will demonstrate the effects of their
2
involvement.
Orthofix has not demonstrated a substantial need to justify
3
4
compelling the disclosure of DJO’s highly sensitive business projections to
5
its competitor. The relevance of discovery about what DJO planned to do
6
before Hunter and Lemanski joined, or what it plans to do going forward, is,
7
at best, tangential to the issue of whether Hunter and Lemanski breached
8
their non-compete agreements or misappropriated trade secrets. Request
9
No. 9 of the subpoena to DJO is, therefore, quashed.
D.
10
11
Document Production Is Contingent on a Resolution of Any
Dispute Regarding Orthofix’s Identification of its Trade
Secrets
DJO contends any discovery of documents that may be
12
13
relevant to Orthofix’s trade secret misappropriation claim is premature
14
because in the Lemanski case, Lemanski contends Orthofix has not
15
provided a sufficient identification of its trade secrets. Any questions as to
16
whether Orthofix must identify its trade secrets with reasonable particularity
17
prior to discovery and, if so, whether it has done so, are matters for the
18
Eastern District of Michigan to resolve, assuming the parties are unable to
19
do so. If this is a pending issue in the Hunter case, the same analysis and
20
conclusion apply. The Court’s order that DJO produce documents
21
responsive to the subpoena is, therefore, contingent on the resolution of
22
this issue, to the extent it exists, in the respective underlying actions.
23
IV.
24
CONCLUSION
As set forth above, DJO’s motions to quash Orthofix’s subpoenas are
25
granted in part with respect to Request No. 1. With respect to Request No.
26
1, the Hunter subpoena is quashed to the extent it calls for records of sales
27
to persons or entities with which Hunter was not involved in sales on behalf
28
of Orthofix. Request No. 1 of the Lemanski is also quashed to this extent.
12
1
DJO’s motions to quash are denied with respect to Request No. 7, and
2
granted in full with respect to Request No. 9.
3
DJO shall produce responsive documents within twenty-one calendar
4
days of entry of this order, or within twenty-one calendar days of the
5
resolution of any dispute between Hunter or Lemanski and Orthofix as to
6
whether Orthofix must identify its trade secrets with reasonable particularity
7
prior to discovery and, if so, whether it has done so.
8
9
IT IS SO ORDERED.
DATED:
January 15, 2014
10
Jan M. Adler
U.S. Magistrate Judge
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
13
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?