CMB Export, LLC et al v. Atteberry et al

Filing 101

ORDER entered on September 29, 2016 by Judge Sara Darrow. Plaintiff CMB's 84 objection is DENIED, and the Magistrate Judge's order of October 20, 2015 AFFIRMED. The 94 , 96 motions to strike are MOOT. Plaintiff's 98 motion seeking to present additional authority is GRANTED. (SC, ilcd)

E-FILED

Thursday, 29 September, 2016 05:49:44 PM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
ROCK ISLAND DIVISION
CMB EXPORT, LLC, CMB SUMMIT,
LLC, d/b/a CMB REGIONAL CENTERS,
Plaintiffs,
v.
KIMBERLY ATTEBERRY,
CHRISTOPHER ATTEBERRY, and
VERMILLION CONSULTING, LLC,
Defendants.

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Case No. 4:13-cv-04051-SLD-JEH

ORDER
Before the Court are Plaintiffs’ objection to the Magistrate Judge’s order of October 20,
2015, or seeking clarification of same, ECF No. 84; Defendants’ motion to strike the putative
reply to the response to this motion, ECF No. 94; another motion strike that reply filed by
interested party CanAm Enterprises, LLC (“CanAm”), alternatively styled a motion for leave to
file a “short surreply,” ECF No. 96; and Plaintiff’s motion seeking to present additional authority
pertaining to its appeal, ECF No. 98. For the following reasons, the objection is DENIED, the
motions to strike MOOT, and the motion to present additional authority GRANTED.
BACKGROUND1
The United States operates a visa system, the EB-5 Program, that allows wealthy foreign
nationals to live and work in the country indefinitely if they invest in American businesses in
such a way as to create full time employment for American workers. Plaintiffs CMB Export,
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The facts recounted here are taken from Plaintiffs’ “Complaint at Law,” ECF No. 1, unless otherwise noted.

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LLC and CMB Summit, LLC (collectively “CMB”) help foreign investors channel their money
into the country in such a way as to qualify for the visas. CMB has been designated a “Regional
Center” by the EB-5 Program. (“Regional centers” free foreign investors somewhat from the
requirements of job creation by allowing investors to create both “direct” and “indirect” jobs,
terms of art whose precise meanings are not relevant here. See U.S. Citizenship and Immigration
Services: EB-5 Immigrant Investor Pilot Program, https://www.
uscis.gov/sites/default/files/USCIS/Resources/Resources%20for%20Congress/Congressional%2
0Reports/EB-5%20Investor%20Pilot%20Program.pdf (visited Sept. 22, 2016).) CMB and other
regional centers channel foreign investments by creating partnerships in which the foreign
investor client becomes a limited partner. The partnership then invests money in such a way as
to satisfy the visa requirements for the client. CMB uses its expertise and knowledge of
domestic investment opportunities on behalf of its clients. In the course of this work, CMB
gathers information about potential investors and investments, at least some of it confidential,
and also claims that it creates “proprietary business models for client contact, outreach, project
evaluation, and project development.” Compl. ¶ 10.
Defendant Kimberly Atteberry used to be the Chief Economist for United States
Citizenship and Immigration Services, which administers the EB-5 visa program and regulates
participants. Mot. Protective Order 3, ECF No. 71. However, she went to work for CMB. She
started on July 8, 2011, and was promoted to vice-president on November 12, 2012. Her
responsibilities included evaluating projects for investment, and liaising with representatives of
these businesses, with immigration professionals, and with government officials. She had access
to “virtually all” of the information CMB now asserts to be proprietary, including information
about potential investors and investments, all of which was assertedly “protected by non-

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disclosure agreements.” Compl. ¶ 13. She also had access to CMB’s sales and development
plans, marketing plans, “legal documents,” and “financial performance evaluations.” Id. CMB’s
owner also, apparently as a favor to Atteberry, gave her husband, Defendant Christopher
Atteberry, a job at his high-end antique firearm auction house.
On February 26, 2013, Kimberly Atteberry resigned. CMB claims that it quickly found
the Atteberrys had taken “vast amounts” of proprietary information when she left, including
information from all the categories mentioned above. Compl. ¶ 19. CMB also alleges that
Christopher Atteberry took digital files from CMB’s servers, some of which detailed a current
CMB investment project and loan. CMB also claims that it found out that even while Kimberly
Atteberry had been a vice president, she had tried to arrange with some of CMB’s “investment
targets” to do business separately once she left and started her own business. To this end, CMB
claims, she lied to both sides, concealing her contacts from CMB and telling some of the contacts
that CMB was no longer interested in projects that, in fact, she wanted later to invest in with the
company she would go on to create, Defendant Vermillion Consulting, LLC (“Vermillion”).
CMB contacted local law enforcement, which searched the Atteberrys’ house on March
4, 2013, and seized evidence that CMB believes contains copies of their proprietary information.
Unfortunately for CMB, the seized material is currently in the custody of the U.S. Attorney, and
apparently completely unavailable to CMB in trying to prove its case. Mem. Supp. Objection 9.
CMB filed suit on June 14, 2013, under federal-question jurisdiction, alleging (I)
violations of the Illinois Trade Secret Act (“ITSA”), 765 ILCS 1065/1–9, Compl. ¶¶ 33–38; (II)
violations of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030(g), Compl. ¶¶ 39–
44; (III) a state law claim for breach of fiduciary duty as to Kimberly Atteberry only, id.

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at ¶¶ 45–48; (IV) a state law civil conspiracy claim, id. at ¶¶ 49–54; and (V) a state law tortious
interference claim, id. at ¶¶ 55–59. Discovery has proceeded actively for years.
The current motions have arisen because CMB seeks discovery of documents in
Defendants’ possession that were generated in the course of business dealings between
Defendant Vermillion, which now works as a facilitator of EB-5 visa applications, and third
party corporations Civitas, CanAm, and EB5 Capital. These third parties, who have appeared
through counsel in the instant litigation, assert that these materials are privileged by
nondisclosure agreements (“NDA”) between themselves and Defendants, and not relevant in any
event to CMB’s claims.
On May 20, 2015, CMB filed a motion to compel production of discovery relating to
several requests it had made and Defendants had refused, including requests concerning entities
for which Kimberly Atteberry had worked after leaving CMB. ECF No. 56. CMB represented
in this motion that Defendants had asserted the existence of NDAs governing the information,
and had claimed that it was not likely to lead to the discovery of admissible evidence. Mot.
Compel 2, ECF No. 56. CMB claimed that it had offered to enter into a protective agreement to
safeguard against disclosure to the public of any material governed by an NDA, but that
Defendants refused. Id. at 2–3. CMB argued then, as it has continued to do, that it needed
access to communications between Defendants and entities they had worked for after Atteberry
left CMB because those communications might contain CMB’s proprietary information, or
contain references to Atteberry’s alleged earlier malfeasance as an employee of CMB, both of
which would be relevant to its claims for relief. Id. at 3. Defendants responded that CMB had
no reason it could point to to think that these communications contained proprietary information,
and that insofar as the communications would tend to show that Atteberry had “poached” CMB’s

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clients, she had not signed a non-compete contract, and such actions on her part would have no
relevance to CMB’s claims. Resp. Mot. Compel 3, ECF No. 60.
The Magistrate Judge held a hearing on July 27, 2015, in which he granted CMB’s
motion to compel as to most of its numbered discovery requests (a few were withdrawn). Jul.
27, 2015 Minute Entry, ECF No. 63. The Magistrate Judge ordered the parties to submit a draft
joint protection order to the Court. Id.
On August 24, 2015, however, Defendants filed a motion for reconsideration, ECF No.
66, asserting a “recent revelation that multiple third parties have a significant interest in
protecting the production of certain materials that have been compelled.” Mot. Reconsideration
3. Shortly afterward several companies describing themselves as competitors of CMB
(presumably, they are facilitators of EB-5 visa applications and investment schemes) sought
leave to appear in order to assert their confidentiality interests in the materials CMB sought
discovery of. Civitas Capital Group (“Civitas”), and Encore Enterprises Inc. and Encore Global
Investment Management, LLC (“Encore”) filed a motion for leave to file an amicus brief, ECF
No. 67, which the Court granted, Aug. 25, 2015 Text Order; and EB5 Capital (“EB5”) moved for
a protective order, ECF No. 71. These motions revealed that CMB had already served subpoenas
directly on Encore, EB5, and CanAm. Mot. Leave 3, ECF No. 67; EB5 Mot. Protective Order 3,
ECF No. 71. Encore had successfully contested the subpoenas in federal district court in Texas;
EB5 had agreed to produce materials pursuant to the Court’s earlier protective order, ECF No.
50.
In their amicus brief, Civitas and Encore argued CMB was seeking access to their
confidential information in way that was “misusing the discovery process to obtain competitive
trade secret information about its competitors” which “would be highly valuable . . . and would

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create an unfair marketplace.” Amicus Brief 1, 3, ECF No. 68. The documents would disclose
their “reasoning and methodology utilized . . . in analyzing, processing, financial modeling and
submitting EB-5 project applications, term sheets, plans, and studies . . . [and] customers,
business partners and potential business partners.” Id. at 11. Encore and Civitas sought either
that CMB’s discovery requests be denied, or that a special master be appointed to review the
material CMB asserted to be discoverable before it was produced. Amicus Brief 18. EB5 asked
that the already-entered protective order be extended to cover any documents it might be forced
to produce. EB5 Mot. Protective Order 10.
The Magistrate Judge held another hearing on September 8, 2015, at which
representatives of CMB, Defendants, Encore, and Civitas were present. Sept. 8, 2015 Minute
Entry. He directed the parties to confer amongst themselves regarding the documents of which
production was sought, and directed counsel for CMB to provide the third parties a list of
materials of which CMB sought production. He deferred ruling on the motion for
reconsideration. Thereafter, an amended protective order entered, ECF No. 76. The final party
to show up, CanAm, then filed a motion seeking to prevent discovery of its proprietary
information in Defendants’ possession because of its previous disclosure, pursuant to subpoena,
of “hundreds of pages of documents showing business relationships, contracts, and projects”
related to Defendants and relevant to the lawsuit. CanAm Mot. Protective Order 1–6, ECF No.
80.
On October 20, 2015, the Magistrate Judge held a hearing with representatives of all the
principles and third parties present. At the hearing, counsel for CMB indicated that while the
parties had negotiated in good faith, per the Court’s September 8 directions, they had been
unable to narrow the scope of discovery. Oct 15, 2015 Tr. (“Tr.”) 5–6, ECF No. 87. The parties

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repeated their arguments from briefing, and the Magistrate Judge probed whether the broad
requests were justified. For instance, the Magistrate Judge asked whether CMB had any
evidence that Atteberry had provided any inappropriate information to Encore, and counsel for
CMB indicated that he did not “have a specific document or interaction [he could] point to other
than the fact that [Kimberly Atteberry] began working [at Encore] two months after she left
CMB . . . .” Tr. 15. He indicated that CMB had evidence showing that Atteberry had had email
contact with officials at Civitas about projects “she was engaged on when she was at CMB.” Id.
at 20. CanAm indicated that, while CMB and CanAm had negotiated the production of some 70
pages of relevant material pursuant to an earlier subpoena, CanAm objected to CMB’s
continuing and broad requests for information in Defendants’ possession. Id. at 35–36. CanAm
also described the limited nature of Atteberry’s work. “[She applied] job creation analyses . . . to
particular facts of the projects that are specific to CanAm. So, what we have here is a lot of just
highly confidential information about the nature of a potential project, about the particular parties
that are involved in the project, the size of the project (inaudible) going from CanAm to Ms.
Atteberry and then . . . the economic analysis and [her opinion] about whether . . . the project is a
suitable candidate for EB5.” Tr. 33.
In response to the parties’ argument, the Magistrate Judge noted that he had previously
granted CMB’s broad discovery request because CMB could not access the materials the
government had seized, and thus was not in a position to make particularized requests for
information. Tr. 40. He observed, however, that he made that ruling before the third parties had
appeared in order to assert their interests in these discovery materials, and he stated that their
newly-asserted interests “change[d] the analysis that [he] made originally as it relates to scope,
breadth, relevance, [and] burden as to this discovery.” Id. at 41. He noted that CMB had not

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demonstrated Atteberry engaged in a “pattern” of release and misuse of its proprietary
information sufficient to justify broad discovery of any and all material that might relate to her
later employment with CMB’s competitors. Id. at 44. And he observed that the discovery
burden, as well as the risk of disclosure of confidential information, being placed on non-parties
to the lawsuit by the original grant of CMB’s discovery requests on July 27, 2015, was far
greater than had been apparent before those parties had appeared. Id. at 48–49. He then granted
Defendants’ motion for reconsideration, ECF No. 66,
to this extent . . . That, as it relates to these third parties, discovery that the
plaintiff seeks from the defendant . . . they must make a specific showing through
motion with the courts—specific—as to how the discovery sought relates to their
claim in this case as to a stolen trade secret.
So, I need specifics. You have got to . . . link it up to some evidence that
you have that is going to give the Court a basis to believe that the information you
seek is more than a fishing expedition because right now what this looks like is a
long-line fishing expedition of grand order.
Id. at 50 (emphasis added).
The appeal from this order, currently before the Court, followed on November 3, 2015.
DISCUSSION
Although it withdraws its discovery requests as to materials relating to Encore, Mem.
Supp. Objection 1 n.1, ECF No. 85, CMB seeks to be allowed to pursue all the discovery
requests the Magistrate Judge had approved at the July 27, 2015 hearing, which included all
communications between Defendants and Civitas, CanAm, and EB5 that might be in
Defendant’s possession, id. at 12. CMB argues that, because it has shown some evidence that
Atteberry used CMB’s information in communications with third parties, it has made a showing
sufficient that Defendants should be required to turn over for discovery all their documentary
evidence of business dealings with CMB’s competitors made after Kimberly Atteberry left
CMB. Id. at 4–5. CMB again argues that the parties’ agreed protective order is more than
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sufficient to allay any fears the third parties may have about confidentiality, id. at 7–11, and
argues that the Court should find baseless the third parties’ fears that CMB’s in-house counsel
would convey their competitive information to CMB, were she to find any in her review of
discovery Defendants produced, id. at 4–5.
Defendants, CanAm, EB5, and Civitas argue CMB has failed to establish the Magistrate
Judge’s decision was clearly erroneous or contrary to law or that the procedure set forth at the
hearing for seeking future discovery was unattainable. Def. Res. to Obj. 6–7, ECF No. 89;
CanAm Opp. to Obj. 9–13, ECF No. 88; EB5 Opp. to Obj. 10–13, ECF No. 90; Civitas Opp. to
Obj. 6–8.
I.

Legal Framework On an Appeal From a Magistrate’s Order
When a pretrial matter not dispositive of a party’s claim or defense is referred to a
magistrate judge to hear and decide, the magistrate judge must promptly conduct
the required proceedings and, when appropriate, issue a written order stating the
decision. A party may serve and file objections to the order within 14 days after
being served with a copy. . . . The district judge in the case must consider timely
objections and modify or set aside any part of the order that is clearly erroneous
or contrary to law.

Fed. R. Civ. P. 72(a). “The clear error standard means that the district court can overturn the
magistrate judge’s ruling only if the district court is left with the definite and firm conviction that
a mistake has been made.” Weeks v. Samsung Heavy Indus. Co., 126 F.3d 926, 943 (7th Cir.
1997).
II.

Analysis
CMB complains that it has “nowhere else to go to discover Atteberry’s and Vermillion’s

documents,” Mem. Supp. Objection 5, implying that if it is barred access to the material it seeks
to discover, it is effectively barred from the evidence it needs to support its claims against
Defendants. But this is inaccurate. The Magistrate Judge’s grant of the motion to reconsider

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was extremely limited, and does not prevent CMB from obtaining any discoverable material
under Rule 26(b)(1); it does not even put limits on the breadth of requests CMB can make to
Defendants about proprietary information they took with them from CMB and continue to
possess. Rather, the Magistrate Judge’s order merely puts in place a restriction on the scope of
requests CMB can make about a narrow category of information: communications Defendants
have had with third parties in which CMB’s proprietary information has been discussed. To
obtain discovery under the Magistrate Judge’s order, CMB need only approach him with specific
evidence of how the discovery it seeks production of relates to one of its claims. See Tr. 49–50.
To object to this order, as CMB has done, is to ask this Court to find that the Magistrate Judge
must order discovery of all material Defendants may have regarding their business interactions
with the third parties, without any further showing of relevance to CMB’s claims. The only
reasoning CMB offers in favor of this extremely broad discovery, which the Magistrate Judge
considered and rejected, is that on two occasions, EB5 and CanAm have shown knowledge of
information that CMB regards as its proprietary information. Mem. Supp. Objection 4.
To the extent that these incidents help show how the discovery CMB seeks relates to its
claims, it may use that information to request the Magistrate Judge to order the discovery, as he
invited CMB to do and made explicit that CMB was not foreclosed from doing. However, to the
extent that these incidents are asserted to show a pattern of Kimberly Atteberry’s use of CMB’s
trade secrets or confidential information, they do not justify the discovery of all material relating
to any business dealings Defendants have subsequently had with CMB’s competitors. (Or
anyway, the Magistrate Judge was not clearly erroneous in so ruling.)
Federal Rule of Civil Procedure Rule 26(b)(1) permits discovery of information relevant
to any party’s claim or defense, but the potential relevance of discovery requests must be

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considered in light of the other factors identified by the rule: it must be “proportional to the
needs of the case, considering . . . the parties’ relative access to relevant information, the parties’
resources, the importance of the discovery in resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). Here,
after initially granting CMB’s broad discovery requests, the Magistrate Judge modified his order
in light of the third parties’ arguments, finding that CMB had made a weak showing as to
Atteberry’s alleged “pattern” of disclosures,” Tr. 44, and that the burden placed on the nonparties to the lawsuit by unchecked, weakly-substantiated discovery of their business
communications with Defendants was more substantial than had initially been evident, id. at 48–
49. These factual findings are not clearly erroneous; indeed, they are eminently justified by the
evidence and argument before the Magistrate Judge. The Court will not disturb them.
CMB relies on Gotham Holdings, LP v. Health Grades, Inc., 580 F.3d 664 (7th Cir.
2009), for the proposition that contractual agreements with third parties to litigation do not bar
discovery, because the litigants themselves are not bound by the agreements. See Gotham, 580
F.3d at 665 (“Contracts bind only the parties. No one can ‘agree’ with someone else that a
stranger’s resort to discovery under the Federal Rules of Civil Procedure will be cut off.”). But
Gotham concerned an explicit discovery request for documents exchanged in arbitration, which
one side refused to turn over to the other in discovery. Id. The Seventh Circuit observed that
“[n]o one contend[ed] that the subpoena exceed[ed] the bounds set by Fed. R. Civ. P. 26(b)(1).”
Id. Here, by contrast, the very reasons for the Magistrate Judge’s order were the factors of
relevance and burden identified by the Rule. And, rather than barring discovery of a particular
set of documents, the Magistrate Judge merely required a certain amount of specificity in
requests for discovery, which he would then evaluate on their merits. Gotham is distinguishable.

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CONCLUSION
Accordingly, Plaintiff CMB’s objection, ECF No. 84, is DENIED, and the Magistrate
Judge’s order of October 20, 2015 AFFIRMED. The motions to strike, ECF Nos. 94, 96, are
MOOT. Plaintiff’s motion seeking to present additional authority ECF No. 98, is GRANTED.

Entered this 29th day of September, 2016.
s/ Sara Darrow
SARA DARROW
UNITED STATES DISTRICT JUDGE

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