Safety Today, Inc. v. Roy et al
Filing
104
OPINION AND ORDER granting 71 Motion to Consolidate Cases; granting in part and denying in part 78 Sealed Motion for Protective Order; granting 82 Sealed Motion for Leave to File Counterclaims & granting 88 Sealed Motion to Compel. Discovery cut-off is extended until 9/1/2013 & Dispositive Motions deadline is extended until 10/1/2013. Signed by Magistrate Judge Terence P Kemp on 3/27/2013. (kk2)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Safety Today, Inc.,
Plaintiff,
v.
:
:
:
Susan Roy, et al.,
Defendants.
Safety Today, Inc.,
Plaintiff,
v.
Case No. 2:12-cv-510
:
JUDGE MICHAEL H. WATSON
Magistrate Judge Kemp
:
:
:
:
William C. Rankin,
Defendant.
Case No. 2:12-cv-929
:
JUDGE JAMES L. GRAHAM
Magistrate Judge Kemp
:
OPINION AND ORDER
This is a case in which defendants Susan Roy and Joanne
Brady are alleged to have taken confidential information from
plaintiff Safety Today, Inc. (“Safety Today”), to benefit their
new employer, defendant Safeware, Inc. (“Safeware”).
Safety
Today claims that Ms. Roy, Ms. Brady, and Safeware (collectively
“defendants”) violated the Ohio Trade Secrets Act, O.R.C.
§1333.61, converted its property, and committed tortious
interference with prospective business relations and
opportunities.
Safety Today also claims that Ms. Roy and Ms.
Brady breached the duties of good faith and loyalty.
Currently before the Court are a motion to consolidate cases
(Doc. #71) and a motion for leave to file counterclaims (Doc.
#82) filed by defendants, a motion for a protective order (Doc.
#78) filed by Safeware, and a motion to compel (Doc. #88) filed
by Safety Today.
The Court will consider these motions in turn.
I. Motion to Consolidate Cases
Defendants move to consolidate this case with Safety Today,
Inc. v. William Rankin, No. 2:12-cv-929, on the grounds that
“[t]he cases are nearly identical and share multiple common
questions of law and fact.”
(Doc. #71).
Safety Today opposed
the motion, primarily due to its view that this case, which was
filed first, is further along and could significantly delay
resolution of its claims.
(Doc. #80).
Safety Today also argues
that there are disparate factual issues which predominate over
the common issues of law.
Id. at 2.
In response, defendants
argue that the distinguishing issues of fact and different
procedural stages weigh in favor of consolidation.
(Doc. #85).
Consolidation of cases is provided for in Fed. R. Civ. P.
42(a), which states, in pertinent part, that the Court
may order consolidation of actions involving “a common
question of law or fact...." The underlying purpose of this
long-standing rule is to promote economy in the administration of
justice. See Feldman v. Hanley, 49 F.R.D. 48, 50 (S.D.N.Y.
1969). Any savings of litigant and judicial resources achieved
by consolidation must be balanced against any prejudice to the
parties, including potential confusion of the issues, which might
result from consolidation. See Arroyo v. Chardon, 90 F.R.D. 603,
605 (D.P.R. 1981). It is not a prerequisite to consolidation
that there be a complete identity of legal and factual issues
posed in the cases which are the subject of the request. See
Thayer v. Shearson, Loeb, Rhoades, Inc., 99 F.R.D. 522, 523
(W.D.N.Y. 1983). Rather, as long as there are some common
questions of either law or fact, the Court has the
flexibility under Fed. R. Civ. P. 42 to allow cases to proceed
jointly with respect to such matters in which joint proceedings
would not be unduly prejudicial and would be an effective
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utilization of judicial resources. See Brewer v. Republic Steel
Corp., 64 F.R.D. 591, 594 (N.D. Ohio 1974); see also Cantrell v.
GAF Corp., 999 F.2d 1007, 1010-11 (6th Cir. 1993).
The Court’s broad discretion to consolidate cases involving
common questions of law and fact is not limited to ordering
consolidation for all purposes. Fed. R. Civ. P. 42(a) “also
contemplates consolidation for purposes of particular segments of
the litigation, such as pretrial proceedings.” Magnavox Co. v.
APF Electronics, Inc., 496 F.Supp. 29, 32 (N.D. Ill. 1980). By
ordering only a partial consolidation, the Court reserves the
ability to assess the status of the cases following the
completion of consolidated proceedings and then to determine if a
trial on all issues, or only some, would be a more efficient and
more appropriate use of the Court’s and the parties’ resources.
Here, the cases involve common questions of law and fact.
More specifically, both cases involve allegations that former
Safety Today employees misappropriated Safety Today’s
confidential information to benefit a new employer, and both
cases involve claims that defendants violated the Ohio Trade
Secrets Act, O.R.C. §1333.61, converted Safety Today property,
committed tortious interference with prospective business
relations and opportunities, and breached the duties of good
faith and loyalty.
It is clear that the cases are related under
S.D. Ohio Local Rule 3.1(b), in that they “[c]all for a
determination of the same or substantially identical questions of
law or fact” and “[w]ould entail a substantial duplication of
effort and expense by the Court and the parties if heard by
different judges.”
Further, counsel for defendants is the same
in both cases, and it appears that there will be a substantial
amount of overlap in discovery and motions practice in each case.
Based on the foregoing, it makes sense to consolidate the
cases for discovery purposes as well as for the purposes of
motions practice in order to avoid duplicative discovery and the
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filing of overlapping motions which, in order to be properly
considered, should reflect developments in both cases. Whether a
single trial might also be the most efficient and least
prejudicial way to resolve these cases can be determined once
more discovery is completed and the factual and legal
similarities or differences in trial evidence can be assessed
more completely. Therefore, the Court will grant the motion for
consolidation as it relates to all pretrial proceedings. The
Clerk of Courts will be directed to file a copy of this order in
Safety Today, Inc. v. William Rankin, No. 2:12-cv-929 and
reassign that action to the Honorable Michael H. Watson, with the
undersigned continuing to serve as the Magistrate Judge in both
cases.
II. Motion for Leave to File Counterclaims
Defendants have filed a motion for leave to file
counterclaims, rather than a motion for leave to amend their
answer to add the counterclaims.
(Doc. #82).
A counterclaim is
not a stand-alone pleading; rather, “a counterclaim is to be
included in a pleading.”
See Health v. Audatex North Am., Inc.,
No. 11-2779, 2012 WL 177413, at *3 (E.D. Pa. Jan. 23, 2012)
(citing Fed. R. Civ. P. 13(a)&(b) and explaining instances where
“[a] pleading must state as a counterclaim” and where “[a]
pleading may state as a counterclaim”).
Consequently, defendants
should have filed a motion for leave to amend their answer to
include the counterclaims, as opposed to a motion for leave to
file counterclaims.
For purposes of efficiency, however, the
Court will not require defendants to re-file the motion.
Instead, the Court will construe defendants’ motion to be filed
properly as a motion for leave to amend the answer to add the
counterclaims.
For the following reasons, the Court will grant
the motion.
Defendants seek to add counterclaims for tortious
interference with a contract and/or prospective business
4
relations and defamation and/or defamation per se.
Ex. 2).
(Doc. #82,
Safety Today has not filed any opposition to the motion.
The basis for defendants’ proposed counterclaims is a letter that
defendants allege that Safety Today sent to Safeware customers
after the preliminary injunction hearing.
Id. at 3.
The letter
states, in pertinent part, that “the Federal Court acknowledged
that Sue Roy and Joanne Brady not only took Safety Today’s
confidential information and trade secrets but used such
information to solicit the business of Safety Today customers.”
Id.
According to defendants, the letter “completely
misrepresented this Court’s Decision – which never concluded that
any of the information at issue was either confidential or a
trade secret – to Safeware’s customers . . . , whom Ms. Roy
currently services.”
Id.
Defendants allege that the letter had
nothing to do with explaining the case to its customers; rather,
they claim that Safety Today “misrepresented the Court’s
[d]ecision as part of a marketing plan.”
Id. at 4.
This Court must first determine whether there is good cause
for leave to amend the answer under Fed. R. Civ. P. 16(b) because
defendants seek to amend their answer to add the counterclaims
after the date established for amending pleadings in the Court’s
preliminary pretrial order.
(Doc. #26).
The touchstone of the
good cause inquiry under Fed. R. Civ. P. 16(b) is whether the
moving party acted diligently in attempting to meet the deadline
for amending pleadings.
See Deghand v. Wal-Mart Stores, 904 F.
Supp. 1218, 1221 (D. Kan. 1995)(“The party seeking an extension
must show that despite due diligence it could not have reasonably
met the scheduled deadlines.”)
Further, although the primary
focus of the inquiry is upon the moving party’s diligence,
prejudice to the other side is a factor to be considered.
See
Inge v. Rock Fin. Corp., 281 F.3d 613, 625-26 (6th Cir. 2002).
Here, the letter giving rise to the proposed counterclaims
5
is dated October 12, 2012, after the deadline established for
amending pleadings.
The record reflects that defendants filed
the motion within a reasonable time after learning of the
existence of the letter.
Further, Safety Today has not opposed
the motion and, given the procedural posture of the case, it will
not suffer significant prejudice if amendment is allowed.
Consequently, the Court finds that good cause for leave to amend.
Fed. R. Civ. P. 15(a)(2) states that when a party is
required to seek leave of court in order to file an amended
pleading, “[t]he court should freely give leave when justice so
requires.”
The Court of Appeals has spoken extensively on this
standard, relying upon the decisions of the Supreme Court in
Foman v. Davis, 371 U.S. 178 (1962) and Zenith Radio Corp. v.
Hazeltine Research, Inc., 401 U.S. 321 (1971), decisions which
give substantial meaning to the "when justice so requires."
In
Foman, the Supreme Court indicated that the rule is to be
interpreted liberally, and that in the absence of undue delay,
bad faith, or dilatory motive on the part of the party proposing
an amendment, leave should be granted.
Foman, 371 U.S. at 182.
In Zenith Radio Corp., the Court indicated that mere delay, of
itself, is not a reason to deny leave to amend, but delay coupled
with demonstrable prejudice either to the interests of the
opposing party or of the Court can justify such denial.
Zenith
Radio Corp., 401 U.S. at 331.
In this case, as noted above, Safety Today has not opposed
defendants’ motion, and it will not be significantly prejudiced
if defendants are permitted to amend their answer.
That is,
given the current posture of this case, the Court is not
persuaded that Safety Today will incur significant costs
associated with discovery or delay as a result of the proposed
counterclaims.
Consequently, defendants’ motion for leave will
be granted, and defendants are permitted to file an amended
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answer consistent with this Court’s order.
III. Discovery Motions
Safeware has filed a “motion for a protective for a
protective order to forbid plaintiff’s request for entry on land
to inspect and image” under Fed. R. Civ. P. 26(c).
(Doc. #78).
In the motion, Safeware opposes Safety Today’s request to inspect
and image the following items:
1.
All computers, hard drives, servers, electronic
storage devices, and media, whether hand-held,
laptop, or desktop, smart phones, external hard
drives, Zip drives, floppy disks, DVDs, USB
devices, or other drives or electronic media
storage devices in your possession, custody, or
control
upon
which
any
of
Safety
Today’s
information currently resides and/or may have
resided in the past;
2.
The hard drives of any computers within Safeware’s
possession, custody, or control used by any of Ed
Simmons, Ed Arthur, Susan Roy, Sean Roth, Beth
Sandberg, and Jodi Wright from April 1, 2012 to the
present;
3.
The hard drives of any mail servers and file
servers within Safeware’s possession, custody, or
control that have been in use at any time between
April 1, 2012 and present.
Id. at 2 (quoting Pl.’s First Request to Def. Safeware, Inc. To
Permit Entry Onto Land for Inspection and Other Purposes, Ex. A).
Safeware requests a protective order forbidding defendants’
request for three reasons:
First, it has no basis in fact. Second, the oppressive
and unduly burdensome request is aimed solely to burden
and annoy its competitor. Third, it fails all three Rule
26(b)(2)(c) prohibitions because (i) it is unreasonably
cumulative, (ii) there is no factual support for it
despite ample opportunity for discovery, and (iii) the
burden and expense outweigh the likely benefit.
Id. at 5.
According to Safeware, its “counsel assured Plaintiff
that everything Defendants Roy and Brady took with them has been
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sequestered, and that it would destroy any remaining information
in Safeware’s possession.”
Consequently, Safeware maintains that
it is entitled to a protective order and Safety Today’s discovery
request should be denied.
Id. at 8.
In response, Safety Today filed a memorandum in opposition
to the motion for a protective order and a cross-motion to compel
Safeware “to permit entry onto land for inspection and other
purposes.”
(Doc. #87).
Safety Today argues that it is “not
obligated to provide ‘evidence’ of Safeware’s use of [its]
information prior to being permitted to conduct discovery.”
at 4.
Id.
According to Safety Today, “it is through the [r]equest
and discovery process itself that Safety Today seeks to learn the
extent to which Safeware is in possession of and/or is using
Safety Today’s information.”
Id.
Safety Today maintains that
its request is neither oppressive nor unduly burdensome.
It
further explains that it “does not seek to disrupt Safeware’s
business but instead seeks only to image the [d]evices, which
would permit Safeware to continue to operate its business as
usual.”
Id.
Safeware filed a reply brief in support of its motion for a
protective order. (Doc. #97).
In its reply, Safeware argues that
“a bare allegation that Safeware is using Plaintiff’s
information– which has been repeatedly contradicted through
discovery– cannot justify Plaintiff’s requests.”
Id. at 1.
Further, Safeware maintains that Safety Today’s request is broad
enough that, if granted, “would provide unrestricted access for
[Safety Today] to inspect and copy everything from its direct
competitor.”
Id.
Thus, Safeware urges the Court to grant its
motion for a protective order.
This Court has substantial discretion to issue protective
orders pursuant to Fed. R. Civ. P. 26(c), which states that,
“[t]he court may, for good cause, issue an order to protect a
8
party or person from annoyance, embarrassment, oppression, or
undue burden or expense. . . .”
The incorporation of the concept
of “good cause” implies that a flexible approach may be taken,
depending on the nature of the interests sought to be protected
and the interests that the protective order would infringe.
Hines v. Wilkinson, 163 F.R.D. 262, 266 (S.D. Ohio 1995).
See
The
burden of establishing good cause for a protective order rests
with the party seeking the protection.
See Nix v. Sword, 11 Fed.
Appx. 498, 500 (6th Cir. 2001).
In this case, the Court finds that good cause exists to
compel the discovery requested under Fed. R. Civ. P. 37 and issue
a protective order under Fed. R. Civ. P. 26 limiting the
disclosure of information obtained to “attorneys’ eyes only.”
The record reflects that Safety Today and Safeware are business
competitors, and Safeware has suggested that the requested
discovery could result in Safety Today’s obtaining information
which may affect its competitive position in the marketplace.
(Doc. #97 at 1).
A protective order which designates the
information obtained as “attorneys’ eyes only” constitutes a
practical and cost-effective way to protect Safeware’s interest
in sensitive information from Safety Today, its competitor, while
complying with Safeware’s obligations for discovery.
See Layne
Christiansen Co. v. Purolite Co., 271 F.R.D, 240, 247 (D. Kan.
2010); see also Netquote, Inc. v. Byrd, No. 07-cv-630, 2007 WL
2438947, at *4 (D. Colo. Aug. 23, 2007) (finding attorneys’ eyes
only protections warranted where parties were in direct
competition).
Consistent with the Court’s finding that good
cause exists for the discovery, it disagrees with Safeware’s
position that Safety Today’s request is merely a pretense for
engaging in sensitive or burdensome discovery.
Consequently, the
Court will grant in part and deny in part the motion for a
protective order (Doc. #78) and grant the motion compel (Doc.
9
#88).
Finally, as per the parties’ agreed upon request, the
discovery cut-off is extended until September 1, 2013 and the
dispositive motion deadline is extended until October 1, 2013.
IV. Conclusion
For the reasons set forth above, defendants’ motion to
consolidate this case with Safety Today, Inc. v. William Rankin,
No. 2:12-cv-929 is granted (Doc. #71).
The Clerk of Courts is
directed to filed a copy of this order in Safety Today, Inc. v.
William Rankin, No. 2:12-cv-929 and to reassign that action to
the Honorable Michael H. Watson, with the undersigned continuing
to serve as the Magistrate Judge in both cases.
The motion for
leave to file counterclaims is likewise granted (Doc. #82), and
defendants are permitted to file an amended answer consistent
with this Court’s order.
The motion for a protective order is
granted in part and denied in part (Doc. #78) and the motion to
compel is granted (Doc. #88).
Disclosure of the information
requested shall be limited to “attorneys’ eyes only.”
Finally,
as per the parties’ agreed upon request, the discovery cut-off is
extended until September 1, 2013 and the dispositive motion
deadline is extended until October 1, 2013.
The deadlines are
likewise extended to September 1, 2013 and October 1, 2013
respectively in Safety Today, Inc. v. William Rankin, No. 2:12cv-929, given that the cases are consolidated for discovery
purposes as well as for the purposes of motions practice.
V. Procedure for Reconsideration
Any party may, within fourteen days after this Order is
filed, file and serve on the opposing party a motion for
reconsideration by a District Judge.
28 U.S.C. §636(b)(1)(A),
Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt.
I., F., 5.
The motion must specifically designate the order or
part in question and the basis for any objection.
Responses to
objections are due fourteen days after objections are filed and
10
replies by the objecting party are due seven days thereafter.
The District Judge, upon consideration of the motion, shall set
aside any part of this Order found to be clearly erroneous or
contrary to law.
This order is in full force and effect, notwithstanding the
filing of any objections, unless stayed by the Magistrate Judge
or District Judge.
S.D. Ohio L.R. 72.4.
/s/ Terence P. Kemp
United States Magistrate Judge
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