Cranel, Incorporated v. Pro Image Consultants Group, LLC et al

Filing 57

ORDER denying 54 Motion for Protective Order and denying 54 Motion to Stay. Signed by Magistrate Judge Mark R. Abel on 07/17/2014. (sr1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

Cranel, Incorporated,
Plaintiff

:

Pro Image Consultants Group, LLC, et
al.,

Civil Action 2:13-cv-00766

:

v.

:

Judge Graham

:

Magistrate Judge Abel

:
Defendants
:
ORDER
This matter is before the Magistrate Judge on plaintiff Cranel, Incorporated’s
(“Cranel”) May 14, 2014 motion for a protective order and stay (doc. 54).
On December 9, 2013, defendant Frank Damico, Richard Morin, and Pro Image
Consultants Group, LLC’s (“Pro Image”) motion to stay was granted in part. See doc. 23.
The Order held
The case is stayed as to Morin and Damico, but not as to Pro Image
Consultants Group, LLC on the basis that corporate defendants have no
Fifth Amendment rights. To the extent that Pro Image should conclude
that it could not respond to requests for discovery or otherwise defend
itself without endangering the Fifth Amendment rights of defendants
Morin and Damico, Pro Image should then file a motion for a protective
order or other appropriate motion directed to specific discovery requests.
However, the fact that documents in Pro Image's possession might
incriminate Morin or Damico would not be a ground to resist a discovery
request. It is only if the act of production might incriminate the person
necessarily charged with producing the Pro Image documents that the
person making the production might assert a Fifth Amendment privilege.
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Third party discovery may go forward as well as motion practice between
the parties.
Doc. 23 at PageID# 201-02.
I.

Allegations in the Complaint

The complaint makes the following allegations. Plaintiff Cranel provides
information technology solutions and services and enterprise content management to
customers in the United States and Canada. Cranel offers an all-inclusive technology
and maintenance service called V-CARE®. Cranel uses confidential and proprietary
information to price the product. Cranel employed defendant Frank Damico as a district
manager and, later, as a national sales manager. Damico communicated Cranel's pricing
information for V-CARE® to defendants Pro Image Consultants Group, LLC and
Richard Morin. In the spring of 2012, Pro Image used the information to solicit Cranel's
V-CARE® customers when their contracts were about to expire. Claims are pleaded for
federal Computer Fraud and Abuse Act violations, RICO violations, Ohio corrupt
activity in violation of Ohio Revised Code §§ 2923.31, et seq., misappropriation of trade
secrets, conversion, tortious interference with customer relations, unfair competition,
breach of employee duty of loyalty, tortious interference with employment relations,
and theft.
II.

Arguments of the Parties
A.

Plaintiff Cranel, Incorporated

Shortly after FBI agents conducted searches of the homes of defendants Damico
and Morin, defendants moved to stay this case pending the outcome of the federal
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criminal investigation. At that time, Cranel consented to a partial stay except as to
discovery to defendant Pro Image and third parties under the belief that the criminal
proceedings against Morin and Damico would be resolved expeditiously. Because the
federal investigation has taken longer than expected, Cranel now seeks a stay of the
discovery. Cranel maintains that it has been prevented from obtaining discovery from
Pro Image on the basis that it is a single-member limited liability company owned by
Morin and counsel for defendants has indicated that any discovery directed toward Pro
Image will be objected to on Fifth Amendment grounds.
On February 6, 2014, Pro Image served its first set of document requests
comprising seven requests. Four days after Cranel’s response, Pro Image served its
second set of document requests seeking documents concerning 63 Cranel’s employees,
former employees, or independent contractors. After Cranel responded, Pro Image
served its third set of document requests totaling 80 requests. Pro Image also served its
first request for admissions and contingent interrogatories.
Cranel argues that Pro Image is using the partial stay as both a sword and a
shield. Cranel seeks a protective order relieving Cranel of its obligation to respond to
Pro Image’s third set of document requests and first set of requests for admission until
30 days after the stay is lifted and staying the case in its entirety pending the resolution
of the criminal matter in order to correct the one-sided situation that has resulted from
the partial stay.

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Cranel argues that although it has not served a single discovery request on any
defendant, it has been tasked with responding to nearly one hundred distinct document
requests, requests for admission, and contingent interrogatories. Cranel maintains that
this is fundamentally unfair. Cranel only seeks to postpone discovery until defendants
cease asserting the Fifth Amendment.
B.

Defendants Morin, Damico, & Pro Image Consultants

Defendants argue that the Court granted the request made by Cranel in its Order
granting the partial stay, and now Cranel complaints that the partial stay is unfair and
one-sided.
Pro Image maintains that it proceeded with discovery to ascertain facts from
Cranel to defeat the allegations that it had stolen, disclosed and used trade secrets, to
establish defendant’s defenses, and to test the credibility of Cranel. Pro Image contends
that its discovery requests have been neither unfair nor burdensome. According to Pro
Image, its first request for production of documents consisted of seven requests
narrowly focused on one element necessary to prove misappropriate of trade secrets,
namely whether Cranel took reasonable measures to protect the confidentiality and
secrecy of its alleged trade secrets. The second request, although focusing on 63
employees, only asked for three potential documents for each employees, which if such
documents existed, would presumably be located in the personnel files of its employees
and easily retrieved. The third request for documents, although numerous, was
narrowly tailored to specific allegations of the amended complaint and potential
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defenses. Cranel has not identified any specific request as objectionable, and Rule 26
does not limit the number of documents a party may request. Defendants maintain that
Cranel simply does not want to provide discovery responses because they would be
detrimental to its lawsuit.
Defendants argue that there has been no indication when the government will
take action, and it would be unfair and prejudicial to deprive defendants of their ability
to respond to this lawsuit by seeking information from Cranel to prove their defenses.
Defendants further argue that although emails and electronic documents can be
retrieved from backed-up systems, it is far costlier to do so than to produce documents
that are easily accessible at the present time.
III.

Discussion

Plaintiff’s argument regarding unfairness is premature. Plaintiff has not served
any discovery on Pro Image, so its argument that it is prevented from seeking discovery
while it is subject to discovery has not been tested. Plaintiff has failed to identify any
particular request as unduly burdensome, and the requests for discovery do not appear
unreasonable on their face.
Plaintiffs are DIRECTED to serve requests for discovery on Pro Image. If Pro
Image objects to the discovery requests, it should file a motion for a protective order
supported by affidavit(s) asserting the facts it relies on to support its position that it
should not be required to respond to the discovery. Even if defendant does move for a
protective order, it must search for, locate and preserve all documents responsive to the
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discovery requests so that they can be produced within 14 days after the lifting of the
stay of discovery against the individual defendants. Plaintiff is GRANTED an extension
of time to respond to defendants’ current requests for discovery until after Pro Image
has determined whether it will seek a protective order.
Plaintiff Cranel, Incorporated’s (“Cranel”) May 14, 2014 motion for a protective
order and stay (doc. 54) is DENIED.
If any party objects to this Report and Recommendation, that party may, within
fourteen (14) days, file and serve on all parties a motion for reconsideration by the
Court, specifically designating this Report and Recommendation, and the part thereof
in question, as well as the basis for objection thereto. 28 U.S.C. §636(b)(1)(B); Rule 72(b),
Fed. R. Civ. P.
The parties are specifically advised that failure to object to the Report and
Recommendation will result in a waiver of the right to de novo review by the District
Judge and waiver of the right to appeal the judgment of the District Court. Thomas v.
Arn, 474 U.S. 140, 150-152 (1985); United States v. Walters, 638 F.2d 947 (6th Cir. 1981);
United States v. Sullivan, 431 F.3d 976, 984 (6th Cir. 2005); Miller v. Currie, 50 F.3d 373,
380 (6th Cir. 1995). Even when timely objections are filed, appellate review of issues not
raised in those objections is waived. Willis v. Sullivan, 931 F.2d 390, 401 (6th Cir. 1991).

s/Mark R. Abel
United States Magistrate Judge
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