OTC SOLUTIONS, LLC, et al v. JOHN DOES 1-50

Filing 19

MEMORANDUM AND OPINION AND ORDER signed by MAG/JUDGE L. PATRICK AULD on 10/5/2011. ORDERED that Plaintiff's Motion for Immediate Compliance with Subpoena and Order to Show Cause Against iContact Corporation (Docket Entry 9 ) is DENIED AS MOOT. (Butler, Carol)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

OTC SOLUTIONS, LLC; GOLDEN
DRAGON MEDIA, INC.; and PUDONG
LLC,
Plaintiff,
v.
JOHN DOES 1-50,
Defendants.

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1:10CV500

MEMORANDUM OPINION AND ORDER
OF UNITED STATES MAGISTRATE JUDGE
This case comes before the Court for a ruling on Plaintiffs’
Motion for Immediate Compliance with Subpoena and Order to Show
Cause Against iContact Corporation.

(Docket Entry 9.)

For the

reasons that follow, the Court will deny Plaintiffs’ motion as
moot.
Factual Background
The

Complaint

alleges

the

following

facts

regarding

the

alleged theft by unknown parties of certain of Plaintiffs’ email
subscriber

lists

(“Subscriber

Lists”)

which

Plaintiffs

had

entrusted to third-party vendor iContact Corporation (“iContact”):
Plaintiffs

are

financial

communications

and

consulting

companies specializing in micro-cap and small-cap companies listed
on the OTC Bulletin Board, OTC.PK, AMEX, and NASDAQ. (Docket Entry
1, ¶ 8.)

Their services include creating and distributing stock

reports to interested parties via email.

(Id.)

The stock reports

are only distributed to subscribers to Plaintiffs’ newsletters
(id., ¶ 9.) and, to become a subscriber, a person must proactively
choose to receive Plaintiffs’ newsletters (id.).

Given the nature

of online marketing and promotion, as well as constraints on the
use of spam email, such Subscriber Lists have significant value.
(Id.)

In order to protect and manage the process of distributing

its newsletters to the Subscriber Lists, Plaintiffs entrusted their
Subscriber Lists to third-party vendor iContact.

(Id., ¶ 15.)

iContact specializes in email and internet marketing.

(Id.)

In April 2010, unknown individuals (the “John Doe Defendants”)
unlawfully

gained

access

to

Plaintiffs’

downloaded them from iContact.

Subscriber

(Id., ¶ 17.)

Lists

and

To gain such access,

the John Doe Defendants either breached iContact’s security or
unlawfully obtained Plaintiffs’ passwords and access codes to gain
unauthorized

access

to

maintained at iContact.
Plaintiffs’

Subscriber

the

Subscriber

(Id., ¶ 20.)
Lists,

one

or

Lists

that

Plaintiffs

After misappropriating
more

of

the

John

Doe

Defendants used the lists to distribute newsletters intended to
imitate the newsletters created and distributed by Plaintiffs.
(Id., ¶ 21.)

Specifically, one or more Defendants uploaded the

misappropriated Subscriber Lists to new and/or separate accounts at
iContact through an iContact computer and/or network and then used
iContact’s email marketing services to distribute their own illegal
spam

newsletters.

Plaintiffs’

(Id.)

suspicions

that

Employees
their

at

iContact

Subscriber

Lists

confirmed
had

been

uploaded to new accounts controlled by others, who then used

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iContact’s services to send out illegal spam newsletters.

(Id.)

In addition, one or more of the John Doe Defendants have also used
the misappropriated Subscriber Lists to distribute promotional
newsletters and advertisements through other internet marketing
firms similar to iContact.

(Id., ¶ 23.)

Although Plaintiffs expended substantial effort to identify
the John Doe Defendants before filing the Complaint, they could not
determine the specific identities of the individuals responsible
for the security breach and/or unlawful access at iContact and the
misappropriation of Plaintiffs’ Subscriber Lists.

(Id., ¶ 24.)

Procedural Background
Following their filing of the Complaint against the unknown
John Doe Defendants, Plaintiffs filed a Motion for Accelerated PreConference Discovery (Fed. R. Civ. P. 26(D)).

(Docket Entry 5.)

In that motion, Plaintiffs requested permission to “conduct early
discovery,

through

targeted

third-party

subpoenas,

to

secure

information regarding the identity of some, if not all, of the John
Doe Defendants currently named in this matter.”

(Id. at 1.)

The

Court granted Plaintiffs’ motion (Docket Entry 8), and Plaintiffs
thereafter served subpoenas on relevant third-parties, including
iContact (see Docket Entry 9 at 1).
Over

the

course

of

two

months,

Plaintiffs

and

iContact

negotiated the terms of a letter agreement through which iContact
sought to protect the confidentiality of the information requested
by Plaintiffs. (See Docket Entry 10, ¶¶ 10-35.) Although iContact
and Plaintiffs came to an agreement over substantially all of the

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terms of the letter agreement, they reached an impasse regarding
who would execute the Letter Agreement on behalf of Plaintiffs.
(See id.)

iContact insisted that each Plaintiff individually

execute the letter agreement.

(See id., ¶¶ 33-35.)

Plaintiffs

took the position that an “attorney’s eyes only” provision in the
agreement

adequately

protected

iContact

and

that

counsel alone should execute the letter agreement.

Plaintiffs’

(See id.)

As

a result of this impasse, Plaintiffs filed the instant Motion for
Immediate Compliance with Subpoena and Order to Show Cause against
iContact Corporation.

(Docket Entry 9.)

Through said motion,

Plaintiffs asked the Court to “enter an order requiring iContact to
immediately and fully comply with the terms of the subpoena and
appear before this Court and show cause why it should not be held
in contempt.”

(Id. at 1-2.)

iContact responded by contending that “the obvious solution to
[the

instant]

problem

is

to

have

the

Court

enter

an

order

essentially along the lines otherwise agreed to by the parties [in
the letter agreement], but also comprehending within the scope of
the order the individual Plaintiffs and not just their counsel.”
(Docket Entry 12 at 4.)

iContact also stated that “[o]nce an

appropriate protective order is in place iContact is in a position
to promptly provide the information requested.”

(Id. at 5.)

According to Plaintiffs’ Reply, despite iContact’s objections
and its request for a protective order, on the day following the
filing

of

its

Response,

iContact

provided

information responsive to Plaintiffs’ subpoena.

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Plaintiffs

with

(See Docket Entry

18 at 3.)

However, the data logs provided by iContact begin on

June 28, 2010, and iContact’s production contained no information
from April and May 2010.

As “[t]he data theft at issue in

(Id.)

this litigation occurred sometime prior to the end of April, and
the illegal spamming occurred in late April and May of 2010” (id.),
Plaintiffs deemed iContact’s production “critically incomplete”
(id.).

“While all other disputes have been resolved, iContact’s

only explanation regarding the missing data logs has been, and
remains, that the data in question does not exist.”

(Id. at 3-4.)

“iContact has not explained whether this is because the data never
existed, because the data was erased or destroyed, or because the
data simply exists in a hard to access location.”

(Id. at 4.)

In light of iContact’s production, Plaintiffs asked, in their
Reply, that this Court issue an order “compelling iContact: (1) to
immediately and fully comply with the Subpoena by explaining why
the data logs at issue are unavailable prior to June 28, 2010 and
taking all steps necessary to preserve any remaining evidence
concerning those data logs; and (2) to appear and show cause why it
should not be held in contempt for its failure to comply with the
Subpoena and for the destruction of evidence, if appropriate.”
(Id. at 9-10.)
further filings.

Neither iContact nor Plaintiffs have made any
(See Docket Entries dated Dec. 6, 2010, to

present.)
Discussion
iContact’s

production

(Docket Entry 9) moot.

renders

Plaintiffs’

instant

motion

Said motion focuses only on the protective

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order dispute and iContact’s related total failure to respond to
the subpoena in asking the Court to “enter an order requiring
iContact to immediately and fully comply with the terms of the
subpoena and appear before this Court and show cause why it should
not

be

held

Plaintiffs

in

filed

contempt.”
the

instant

(Id.

1-2.)1

at

motion

and

However,

iContact

after

responded,

iContact apparently abandoned its position regarding the protective
order and produced materials in response to the subpoena, as
Plaintiffs’ Reply recognized: “[D]espite having filed a [r]esponse
in

opposition

iContact

to

attempted

Plaintiff’s
to

comply

[m]otion,

on

with

Subpoena

the

October
by

21,

2010,

producing

materials . . . it deemed responsive pursuant to the terms of a
signed letter agreement . . . .”

(Docket Entry 18 at 3.)

Plaintiffs’ Reply then raised a new dispute regarding iContact’s
allegedly inadequate production of materials pertaining to the
period prior to June 28, 2010.

(See id. at 3-4.)

1

Plaintiffs’ Memorandum in Support of Motion for Immediate Compliance with
Subpoena and Order to Show Cause Against iContact Corporation also requests that
“any show cause order require iContact to establish why it should not, pursuant
to Rule 54(d) of the Federal Rules of Civil Procedure, have to reimburse
Plaintiffs the reasonable attorneys’ fees and costs associated with having to
address its blatant noncompliance with the Subpoena.” (Docket Entry 10 at 15.)
Plaintiffs have cited no authority for the proposition that Rule 54(d) authorizes
attorneys’ fees against a nonparty for failure to comply with a subpoena. (See
id.) Further, even if the Court did have such authority, Rule 54(d)(2)(B)(ii)
requires the moving party to “specify the judgment and the statute, rule, or
other grounds entitling the movant to the award[.]” Plaintiffs have made no such
specifications. (See id.) Notably, Rule 45, which addresses subpoenas, contains
no provision allowing for an award of attorneys’ fees. See, e.g., Bailey Indus.,
Inc. v. CLJP, Inc., 270 F.R.D. 662, 672-73 (N.D. Fla. 2010) (denying award of
attorneys’ fees under Rule 45 and citing similar cases holding that Rule 45
provides no such sanction).
Given the absence of authority from Plaintiffs
demonstrating the propriety of any fee-shifting in this case, the Court declines
to order any such fee-shifting.

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The issue of the existence of data pertaining to the time
period prior to June 28, 2010, however, was not contemplated in
Plaintiffs’

original

motion

(see

Docket

Entry

9).

Instead,

Plaintiffs only raised that matter in their Reply (see Docket Entry
18), to which, under the applicable rules, iContact has had no
opportunity

to

respond.

Accordingly,

although

the

Court

is

sensitive to Plaintiffs’ concerns raised for the first time in
their Reply, such matters are distinct from the issue raised by the
pending motion.
If Plaintiffs require adjudication of the matters identified
in their Reply, they must file a separate motion which affords
iContact a full and fair opportunity to respond.

Prior to the

filing of any such motion, the Court strongly encourages Plaintiffs
and iContact to work cooperatively together to attempt to resolve
this matter without further need of judicial intervention.

To the

extent further litigation must occur, the Court notes that “even an
informed suspicion that additional non-privileged documents exist
. . . cannot alone support an order compelling production of
documents.”

Kinetic Concepts, Inc. v. ConvaTec Inc., 268 F.R.D.

226, 252 (M.D.N.C. 2010) (citing Univ. of Kansas v. Sinks, No. 062341-KHV-GLR, 2007 WL 869629, at *3 (D. Kan. Mar. 22, 2007)
(unpublished)

(“The

Court

cannot

compel

a

party

to

produce

documents based solely on opposing speculation and belief that

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responsive

documents

exist

and

that

the

producing

party

is

withholding them.”)).2
Conclusion
iContact’s production in response to Plaintiff’s subpoena,
though belated, renders Plaintiff’s Motion for Immediate Compliance
with Subpoena and Order to Show Cause Against iContact Corporation
(Docket Entry 9) moot.

Questions regarding the completeness of

iContact’s production and the existence of data pertaining to the
time

period

prior

to

June

28,

2010,

are

more

appropriately

addressed through a separate motion to compel and separate briefing
as that issue presents distinct inquiries from iContact’s general
failure to comply with Plaintiffs’ subpoena based on a dispute over
a protective order.

2

As a final matter, the Court notes that a subpoena commanding a
production of documents “must issue . . . from the court for the district where
the production or inspection is to be made.”
Fed. R. Civ. P. 45(a)(2)(C).
Although the record does not appear to contain a copy of the actual subpoena
issued in this case, some of the materials in the record indicate that Plaintiffs
sought production in Utah. (See Docket Entry 6-2 at 2; Docket Entry 10-2 at 7.)
Plaintiffs must “move the issuing court for an order compelling production or
inspection.” Fed. R. Civ. P. 45(c)(2)(B)(i). Moreover, only “[t]he issuing
court may hold in contempt a person who, having been served, fails without
adequate excuse the obey the subpoena.” Fed. R. Civ. P. 45(e). In connection
with any subsequent motion in this Court to compel a response to or otherwise
enforce a subpoena, Plaintiffs must be prepared to show that the subpoena
properly was issued from this Court and to address whether any “failure to obey
must be excused [because] the subpoena purports to require [a] nonparty to attend
or to produce at a place outside the limits of Rule 45(c)(3)(A)(ii),” Fed. R.
Civ. P. 45(e).

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IT IS THEREFORE ORDERED that Plaintiff’s Motion for Immediate
Compliance with Subpoena and Order to Show Cause Against iContact
Corporation (Docket Entry 9) is DENIED AS MOOT.

/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
October 5, 2011

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