Digital Assurance Certification, LLC v. Pendolino

Filing 46

ORDER denying 29 motion for expedited discovery. Signed by Magistrate Judge Thomas B. Smith on 2/23/2017. (Smith, Thomas)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
DIGITAL ASSURANCE CERTIFICATION,
LLC,
Plaintiff,
v.

Case No: 6:17-cv-72-Orl-31TBS

ALEX PENDOLINO, JR. ,
Defendant.
ORDER
This alleged theft of trade secrets case comes before the Court without oral
argument on Plaintiff’s Motion for Limited Expedited Discovery (Doc. 29). Defendant
opposes the motion (Doc. 39). Alternatively, if the motion is granted, then Defendant
wants expedited discovery from Plaintiff (Id.).
Plaintiff, Digital Assurance Certification, LLC (“DAC”) is in the business of helping
issuers of municipal bonds and private sector borrowers of municipal bond proceeds
comply with Securities and Exchange Commission (“SEC”) regulations and post-issuance
tax requirements (Doc. 1, ¶ 6). It also acts as a dissemination agent for voluntary and
required disclosures made by its clients (Id.). DAC alleges that in the conduct of its
business, it “relies on trade secret laws to protect its client lists, client contracts, pricing
information, client reports and its methodologies, analyses, systems, and tools, … all of
which involve the use of valuable information proprietary to DAC that is not known to the
general public.” (Id., ¶ 12). DAC states that it takes “significant steps to protect” its trade
secrets (Id., ¶ 13), including by requiring each employee to sign a confidentiality
agreement, DAC’s computer system is password protected, and all employees are

required to create new, complex passwords every 90 days (Id., ¶ 15). The contracts
between DAC and its clients also contain restrictions to preserve the confidentiality of
DAC’s work product (Id., ¶ 16).
Defendant was employed by DAC from August 6, 2013 through October 10, 2017
(Doc. 44, ¶ 1). His work included compliance reviews for clients, answering banker and
client questions, responding to requests for proposals, participation in contract
negotiations, drafting contracts, marketing DAC’s services, answering in-house
questions, and obtaining documents and bond identification numbers from the Municipal
Securities Rule Making Board’s Electronic Municipal Market Access (“EMMA”) website
and Bloomberg terminal (Id., ¶ 3).
On October 10, 2016, Defendant resigned from DAC (Doc. 1, ¶ 21). The next day,
DAC sent Defendant a letter informing him that his resignation was not accepted and that
he was being terminated for cause (Id., ¶ 23). Defendant now works for Lumesis, Inc.,
which is one of DAC’s competitors (Id., ¶ 26).
DAC alleges that in the week before Defendant left its employ, he inserted a USB
drive into his work computer and accessed every document on DAC’s shared drive (Id., ¶
29). Those documents contain: “(1) the identity of DAC’s clients; (2) pricing information,
including standard pricing and customized pricing (such as discounts or pricing formulas)
used for specific clients, and other specific contract terms; (3) a description of the
services and processes provided to each of DAC’s clients, including standard services
and any customized services; and (4) analyses undertaken by DAC regarding clients’
regulatory obligations and their compliance history.” (Id., ¶ 31). DAC asserts that this
information is proprietary, and would be highly useful in the hands of a competitor (Id.).
DAC also alleges that prior to his separation from employment, Defendant had custody of

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executed client contracts containing trade secrets including the identity of clients, pricing
information, and information about the customized services provided to clients (Id., ¶ 24).
After Defendant left, these contracts could not be located in his office (Id.).
DAC’s complaint alleges that Defendant has: (1) violated the Defend Trade
Secrets Act of 2016, 18 U.S.C. § 1836; (2) violated the Florida Uniform Trade Secrets
Act; (3) violated FLA. STAT. §§ 688.001 et seq.; (3) breached a confidentiality agreement;
and (4) violated the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (Id.). DAC has
filed a motion for temporary restraining order (Doc. 20), which is set for hearing on March
2, 2017. In preparation for the hearing, DAC seeks expedited discovery from Defendant.
Defendant has filed his own declaration in which he states that he did not access
all of DAC’s files in the week before he left, he never downloaded those files, he did not
retain any of DAC’s electronic or paper files, and he does not have possession of any of
DAC’s confidential or proprietary information (Doc. 44, ¶¶ 46-47). Defendant also states
that all of the information he used to perform his duties for DAC was based on information
available from public sources, including Official Statements, Audited Financial
Statements, Annual Financial Information and Operating Data, and Event Notices that are
publicly available through the EMMA website (Doc. 44, ¶¶ 6-7). According to Defendant,
other information, including the identity of potential clients, is available from the SEC
website (Id., ¶ 8). He says he is not aware of any specialized process, procedures or
algorithms used by DAC to obtain or compile the information he used and to which he had
access (Id., ¶ 9). Defendant also states that the names of DAC’s issuer clients are
publicly available on its website, or the Issuers’ Official Statements (Id., ¶ 10). He asserts
that because DAC’s issuer clients are public entities, its pricing agreements with those
clients are posted online through the public entity’s websites as a matter of public record

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(Id.). Defendant says that while a password was required to access DAC’s shared
network, once on the network, none of DAC’s information was password protected. And,
Defendant asserts that during the entire time he was employed by DAC, his password
never changed and he was never prompted or asked to change it (Id., ¶¶ 12-13).
Defendant has also filed the declaration of Lumesis’ President and Chief Operating
Officer, Timothy J. Stevens (Doc. 41). According to Mr. Stevens, an investigation has
been conducted, and none of the folders and files saved on Defendant’s work computer
contain DAC’s information relating to its clients, pricing, technology, services, or the like
(Id., ¶ 7). The investigation has also not uncovered any evidence that Defendant “has
provide Lumesis with any documents, data, trade secret or confidential information
regarding DAC, its services and products, pricing or clients.” (Id., ¶ 8). Finally, Mr.
Stevens states that he “was able to confirm that there is no reasonable basis to believe
that [Defendant] has used or provided any DAC documents, data or information through
any of Lumesis’ electronic network systems, or utilized it in the performance of his work
for Lumesis.” (Id., ¶ 9).
This Court utilizes the good cause standard to determine whether expedited
discovery should be permitted. Biosense Webster, Inc. v. Scott, No. 6:13-cv-258-Orl27TBS, 2013 WL 1611338, at *1 (M.D. Fla. April 15, 2013) (citing Nassau Terminals, Inc.
v. M/V Bering Sea, No. 99-104-CIV-J-20C, 1999 WL 1293476, at * 1(M.D. Fla. July 1,
1999) (stating that moving party has the burden of showing good cause why discovery
should be expedited) vacated on other grounds, 2013 WL 5596239; Dell, Inc. v.
BelgiumDomains, LLC, No. Civ. 07-22674, 2007 WL 6862341, at *6 (S.D. Fla. Nov. 21,
2007); Semitool, Inc. v. Tokyo Electron America, Inc., 208 F.R.D. 273, 274 (N.D. Cal.

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2002)); Thyssenkrupp Elevator Corp. v. Hubbard, No. 2:13-cv-202-FtM-29SPC, 2013 WL
1953346, at *1 (M.D. Fla. May 10, 2013).
Factors the Court considers in deciding whether a party has shown good cause
include: (1) whether a motion for preliminary injunction is pending; (2) the breadth of the
requested discovery; (3) the reason(s) for requesting expedited discovery; (4) the burden
on the opponent to comply with the request for discovery; and (5) how far in advance of
the typical discovery process the request is made. Biosense at *1 (citing Disability Rights
Council of Greater Wash. v. Wash. Metro. Area Transit Auth., 234 F.R.D. 4, 6 (D.D.C.
2006)).
Some courts have observed that when there is a pending motion for a preliminary
injunction, “expedited discovery is appropriate “because of the expedited nature of the
injunctive proceedings.” Philadelphia Newspapers, Inc. v. Gannett Satellite Information,
No. CIV.A.98-CV-2782, 1998 WL 404820, at *2 (E.D. Pa. July 15, 1998) (quoting
Ellsworth Associates, Inv. v. United States, 917 F.Supp. 841, 844 (D.D.C. 1996).
Furthermore, expedited discovery may “better enable the court to judge the parties’
interests and respective chances for success on the merits at a preliminary injunction
hearing.” Id. (citing Edudata Corp. v. Scientific Computers, Inc., 599 F.Supp. 1084, 1088
(D. Minn. 1984) aff’d in part, rev’d in part on other grounds, 746 F2d 429 (8th Cir. 1985)).
This factor weighs in favor of granting Plaintiff’s motion for expedited discovery.
Still, “courts generally deny motions for expedited discovery when the movant’s
discovery requests are overly broad.” Id. DAC’s proposed requests for production are not
narrowly tailored to the time constraints under which the parties are operating, or the
specific issues to be addressed at the hearing on the motion for a temporary restraining
order. The time frame set by DAC in its requests to produce begins August 6, 2013 and

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continues through the present and beyond, to the date of judgment or verdict (Doc. 29-1
at 5). This is overbroad given DAC’s contention that the theft of its trade secrets and other
confidential information occurred in October, 2016. The breadth and burdensomeness of
DAC’s requests for production is also evidenced by its definition of “Documents” which is
seventeen lines long (Id., at 4). Adding to the problems with DAC’s requests are
instructions which include:
If an document or thing is claimed to not be in Your
possession or control, state the reasons for the lack of
possession or control, the date such document or thing was
last possessed, and the present location and custodian of the
document or thing. In the event that any document or thing
called for by these Requests has been lost or destroyed,
please set forth with respect to each such document or thing:
(1)
recipient(s);

the author(s), creator(s) or originator(s);

(2)

the addressee(s), custodian(s) or

(3)
the identity of each person who was sent,
furnished or who received, viewed or has had custody of the
document or thing:
(4)
the date of the document or the date on
which the thing was created;
(5)
the date, place, manner, reason and
circumstances of destruction;
destruction;

(6)

the identity of persons authorizing

(7)
the identity of persons destroying the
document or thing; and
(8)
the numbered document request to which
the document or thing responds.
(Id.). The motion for expedited discovery was fully briefed on February 21, 2017, just
eight days before the hearing on the motion for temporary restraining order. It is

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unreasonable to expect Defendant to comply with instruction like this in the short time
frame available to the parties.
DAC’s requests for production, which the Court finds overbroad include:
5.
All Documents reflecting or relating to any
communications between and among You and another person
that discuss, reference, relate to, or involve: (a) DAC; (b)
DAC’s Confidential or Trade Secret Information; DAC’s
technology; and (d) DAC’s clients.
6.
All Documents reflecting or relating to any
communications between and among You and any former or
current DAC client.
8.
All Documents reflecting or relating to any
communications with or among any current or former
employee of DAC after your separation of employment from
DAC.
10.
All Documents that contain information used by
Lumesis to develop its Summary Page.
(Id., at 6). While these matters may be relevant to the issues raised in DAC’s complaint,
they go far beyond what is needed for the hearing on the motion for a temporary
restraining order. Moreover, DAC is asking Defendant to produce documents and things
that belong to non-party Lumesis which, to the Court’s knowledge, has not consented to
the production of its information.
Defendant’s declaration largely answers DAC’s interrogatories. The information
Defendant has provided addresses whether he believes he had access to any
confidential or trade secret information belonging to DAC; why he asked for remote
access to DAC’s S-drive on October 5, 2017; what he downloaded before leaving work
that day; whether he downloaded any information or removed any files on October 10,
2016; why he resigned from DAC; his alleged sharing of DAC’s confidential and trade
secret information; and the electronic devices he possesses. Additional information

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requested in the interrogatories goes beyond what the Court will permit by way of early
discovery in preparation for the upcoming hearing.
The remaining good cause factors also weigh in favor of Defendant. The burden of
complying with DAC’s proposed discovery, particularly the requests for production, is
great, and the requested discovery is sought with little time remaining before the hearing
on the motion for temporary restraining order.
For these reasons, DAC’s motion for expedited discovery is DENIED. Because
Defendant’s request for expedited discovery is made in the alternative, it is mooted by
this decision.
DONE and ORDERED in Orlando, Florida on February 23, 2017.

Copies furnished to Counsel of Record

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