CMI Roadbuilding, Inc v. Iowa Parts, Inc et al
ORDER granting 88 Motion to Lower Designation re 38 Protective Order by Plaintiff CMI Roadbuilding, Inc (see text of Order). Signed by Chief Magistrate Judge CJ Williams on 5/26/2017. (skm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
CMI ROADBUILDING, INC., and CMI
ORDER GRANTING PLAINTIFFS’
IOWA PARTS, INC.,
This case is before the Court on plaintiffs’ resisted Motion to Lower Designation.
(Doc. 88). The motion requested oral argument. Defendant timely resisted. (Doc. 95).
Plaintiffs filed a timely reply brief (Doc. 102) with both unsealed and sealed exhibits.
The Court heard oral argument on May 24, 2017.
represented by attorneys Michael Weston and Randy Baker. Defendant was represented
by attorney Timothy Zarley. All attachments were considered and the motion is now
ripe for decision.
This lawsuit concerns allegations of misappropriation of trade secrets, conversion,
and unjust enrichment. A Second Amended Complaint was filed on April 11, 2017.
On August 17, 2016, a protective order was entered by the Court. (Doc.
38). Discovery closes on August 9, 2017. (Doc. 62). A jury trial is scheduled before
the Honorable Linda R. Reade on Monday, January 15, 2018. (Doc. 70).
On October 24, 2016, the Court ordered that defendant produce the roughly 1,000
pages of “plans, specifications, and drawings relating to Cedarapids, Inc., Standard
Havens, and Terex . . . electronically in native format, where available.” (Doc. 50).
The Court also permitted plaintiffs to take a Rule 30(b)(6) deposition of a “person who
is knowledgeable regarding the manner in which Iowa Parts’ designs are stored, in what
format, and how they may be accessed.” (Id.).
Pursuant to the above production, the dispute here arises. Defendant electronically
produced the documents, approximately 1,000 pages labeled as 550 CAD, with an
Attorney’s Eyes Only (AEO) designation. Plaintiffs seek to compel defendant to redesignate the 550 CAD documents from an AEO designation to a “Confidential”
designation. Pursuant to their efforts to negotiate with defendant, plaintiffs offered that
the documents receive a limited confidential designation, namely that the 550 CAD
documents be disclosed only to (1) Mr. David Emerson, an employee of plaintiffs, and
(2) Mr. Joe Musil, a consultant. Defendant did not agree. (Doc. 88-2).
Overall, defendant contends that the AEO designation is proper. Defendant alleges
that the 550 CAD documents contain confidential propriety information, namely new and
improved designs. Defendant also contends that the 550 CAD documents are not relevant
to the case as plaintiffs have failed to identify with reasonable particularity their trade
secrets at issue. Lastly, defendant contends that even if the Court deems the 550 CAD
documents relevant, rather than ordering a lower designation the Court should compel
plaintiffs to take the 30(b)(6) deposition as permitted in the prior order (Doc. 50).
Defendant states that a portion of the 550 CAD documents have a reference number to a
Cedarapids, Inc. part drawing, and that the portion of the 550 CAD documents without
such reference number are “original and novel design[s]” created by defendant. (Doc.
95-1). During oral argument, defendant could not identify how many of the 550 CAD
documents contained a reference to a Cedarapids, Inc. drawing.
The Court now turns to the protective order in place. The order specifies the
process by which an opposing party may dispute a designation and ultimately which party
bears the burden of proof with regard to the confidentiality designation. First, paragraph
16 instructs the receiving party to notify, in writing, the designating party that its AEO
designation is not in good faith and request relief. (Doc. 38, at 5 ¶ 16). After a fiveday waiting period, the objecting party may apply to the Court for relief regarding the
desired reduction in designation. Plaintiffs complied with paragraph 16. (Doc. 88-3).
Second, paragraph 17 specifies that the party “assert[ing] the claim of confidentiality”
bears the burden of proof.
An AEO designation is a “drastic remedy” appropriate in only limited situations
because it limits the “ability of the receiving party to view the relevant evidence, fully
discuss it with counsel, and make intelligent litigation decisions . . . and limits the ability
of a party to provide needed assistance to counsel.” McDonald Apiary, LLC v. Starrh
Bees, Inc., 8:14CV351, 2016 WL 299014, *2 (D. Neb. Jan. 25, 2016) (quotations
omitted). Under Rule 26 of the Federal Rules of Civil Procedure, a court may for good
cause issue an order to protect a party by requiring that trade secret information be not
revealed or revealed only in a specified way. FED. R. CIV. P. 26(1)(G). “There is no
absolute privilege [against disclosure] for trade secrets and similar confidential
information.” Taiyo Intern., Inc. v. Phyto Tech Corp., 275 F.R.D. 497, 500 (D. Minn.
2011) (quoting Fed. Open Mkt. Comm. Of Fed. Reserve Sys. v. Merill, 443 U.S. 340,
362 (1979), and 8 CHARLES ALAN WRIGHT ET AL., Federal Practice and Procedure §
2043). The designating party bears the burden of “demonstrating ‘good cause’ and
requires a particular and specific demonstration of fact as distinguished from conclusory
or stereotyped statements.” EQ Oklahoma, Inc. v. A Clean Env’t Co., No. 11-CV-510GKF-PJC, 2012 WL 5429869, at *1 (N.D. Okla. Nov. 7, 2012) (citing Gen. Dynamics
Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1212 (8th Cir. 1973)). Plaintiffs cite the
following passage from the Northern District of Oklahoma case, which the Court finds
An “Attorneys’ Eyes Only” provision is sometimes appropriate where there
is a danger of proprietary and highly confidential information being
disclosed to and used by a competitor. See Covelo Clothing, Inc. v.
Atlandia Imports, Inc., 2007 WL 4287731, *1 (D. Colo. Dec. 5, 2007)
(unpublished) (“confidential information that may be used against the
company by a direct competitor is generally afforded more protection”).
However, [the defendant] has provided this Court with no insight
whatsoever into what proprietary or confidential information it believes
could be used by [the plaintiff] to [the defendant]’s detriment. To establish
good cause under Rule 26(c)(1)(H) [sic], [the defendant] must first
demonstrate that the information sought constitutes a trade secret, or other
confidential research, development, or commercial information, and then
demonstrate that its disclosure might be harmful. Centurion Indus., Inc. v.
Warren Steurer & Assocs., 665 F.2d 323, 325 (10th Cir. 1981). [The
defendant] has done neither. In fact, all [the defendant] has done is alleged
that “sensitive trade material” should not be disclosed because of “potential
injury.” [Dkt. # 50, p. 1–2]. Other than a generic and broad reference to
financial information, [the defendant] has not identified what “sensitive
trade material,” if any, exists, or what the “potential injury” could be. [The
defendant]’s mere conclusory and stereotyped statements do not satisfy [the
defendant]’s burden under Rule 26. Samson Resources [Co., LLC v. J.
Aron & Co.], [No. 08–CV–752–TCK–SAJ,] 2009 WL 1606564 [(N.D.
Okla. Jun. 8, 2009)], (requiring a particular and specific demonstration of
EQ Oklahoma, Inc., 2012 WL 5429869, at *2.
After consideration of the parties’ oral arguments and briefings, the Court finds
that defendant is not justified in designating approximately 1,000 pages of drawings as
AEO. These drawings are relevant to plaintiffs’ claims as plaintiffs contend that these
drawings are essentially replicas of their drawings with some possible modifications.
Defendant has not made an adequate showing of the need for AEO designation for all
1,000 drawings other than the generalized and conclusory assertions that they contain
defendant’s own trade secrets. This case is about, in part, whether these drawings contain
plaintiffs’ trade secrets. Plaintiff have made an adequate showing of the need to have
people with knowledge of such drawings view them to determine if they contain plaintiffs’
trade secrets, a task that is beyond the knowledge and skills of attorneys. Although, in
theory, plaintiffs’ retained expert could do this, there is little time left to complete
discovery in this case and even were that not the case, plaintiffs’ own employees will
have a greater ability to make that determination in the first instance than a retained expert
who would not be as knowledgeable about plaintiffs’ designs.
Plaintiffs and defendant compete, albeit indirectly, in the asphalt plant industry.1
The Court is cognizant of the damage that defendant could theoretically suffer if a direct
competitor seizes and uses defendant’s new designs.
That theoretical danger is
ameliorated here, however, for several reasons. First, there is a protective order in place
to prevent just such a misuse of information. Second, the Court will only allow two
individuals—Mr. Emerson and Mr. Musil—to have access to the 550 CAD documents.
This is necessary for the plaintiffs to determine how many of the 1,000 pages of 550
CAD documents, if any, allegedly originated from plaintiffs’ trade secrets. Furthermore,
the Court notes that the two individuals will be bound by the “confidential” designation
as described in the protective order and are not free to misuse this information nor use it
outside of this pending lawsuit in any manner.
The Court grants plaintiffs’ motion to lower designation with regard to disclosing
the 550 CAD documents only to Mr. Emerson and Mr. Musil with a designation of
The Court understands that plaintiffs manufacture asphalt plants, while defendant
manufactures parts for asphalt plants.
Defendant shall label the 550 CAD documents as
“Confidential—For Mr. Emerson’s and Mr. Musil’s Eyes Only” and provide these
documents to plaintiffs within fourteen (14) days from the date of this order.
IT IS SO ORDERED this 26th day of May, 2017.
Chief United States Magistrate Judge
Northern District of Iowa
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