UHLIG LLC v. Shirley et al

Filing 390

ORDER granting 321 Motion for Disclosure; granting in part and denying in part 326 Motion for Disclosure; denying 338 Motion to Confirm Confidentiality Designations. Signed by Magistrate Judge William M Catoe on 7/28/09.(ladd, )

IN THE DISTRICT COURT OF THE UNITED STATES F O R THE DISTRICT OF SOUTH CAROLINA GREENVILLE DIVISION

U h lig LLC, Plaintiff, vs. J o h n Adam Shirley, et al., Defendants.

) ) ) ) ) ) ) ) ) )

Civil Action No. 6:08-1208-HFF-W M C ORDER

T h is matter is before the court on several pending motions related to the p la in tiff's economist's report (doc. 321, 326, 338). On September 4, 2008, the Honorable H e n ry F. Floyd, United States District Judge, referred nondispositive motions to this court. O n May 8, 2009, plaintiff Uhlig provided all parties the Expert Report of B. Perry W o o d s id e , Ph.D. (the "W o o d s id e Report"), and documents supporting and underlying the W o o d s id e Report. The W o o d s id e Report estimates the financial damages suffered by the p la in tif f at several millions of dollars. Uhlig designated certain pages of the W o o d s id e Report a s Confidential, Attorney's Eyes Only ("AEO"), or Limited Attorney's Eyes Only ("LAEO") under th e court's Confidentiality Order (doc. 64). On May 11, 2009, counsel for defendants Todd B a ld re e , L1 Technology, LLC, L1 Land LLC, and L1 Holdings, Inc. (collectively, the "Baldree d e fe n d a n ts ") and counsel for defendants John Adam Shirley, Prism Content Solutions, LLC, a n d Eventelope, LLC (collectively, the "Shirley defendants"), requested that their clients be a llo w e d to see all information contained in the W o o d s id e Report. In response, Uhlig reduced th e level of protection applicable to much of the information in the W o o d s id e Report by p r o v id in g the First Redacted W o o d s id e Report on May 14, 2009. After further discussions w i th defense counsel, Uhlig provided another version of the W o o d s id e Report, the Second R e d a cte d W o o d s id e Report, on May 18, 2009.

O n May 21, 2009, the Baldree defendants filed a motion to disclose damages c a lc u la tio n to defendants (doc. 321).1 The Baldree defendants are sued as alleged "aiders a n d abettors" in this case. They argue that since they are not competitors of Uhlig, there is n o legitimate concern that Mr. Baldree would use the information contained in the calculation fo r any purpose other than to defend himself and his companies in this litigation. The Baldree d e fe n d a n ts contend that fairness requires that Mr. Baldree be permitted free and unfettered c o m m u n ic a t io n s with his counsel to challenge Uhlig's alleged damages. Mr. Baldree is a b u s in e s s m a n who holds an M.B.A. These defendants argue that Mr. Baldree's assistance is a ls o needed in selecting an expert witness to address and counter the report of Uhlig's expert w itn e ss . They further argue that Mr. Baldree is entitled to know the methodology selected by U h lig to reach its number so that he can help counsel evaluate other methodologies that were re je c te d by Uhlig. O n May 27, 2009, the Shirley defendants filed a motion for the disclosure of d a m a g e s calculations and production of materials (doc. 326). The Shirley defendants argue th a t Mr. Shirley's background and experience puts him in a far better position to evaluate the v a rio u s numbers and propositions in Uhlig's calculations than does his counsel. The Shirley d e fe n d a n ts argue that it would be patently unfair to deny Mr. Shirley the right to use his own s k ills , experience, and education to assist with his defense. They argue that the use of his s k ills and experience is particularly important here given the costs that the Shirley defendants h a ve already incurred in this litigation, the fact that Eventelope is no longer in business, and th a t Prism, the source of Mr. Shirley's income, is a relatively small operation. They argue that th e y are likely to incur far greater expenses if Mr. Shirley is not allowed to use his own e d u c a tio n , skills, and experience to assist in his own defense. Moreover, they argue that the d e sig n a tio n s by Uhlig prevents meaningful communications between counsel and client and

Counsel for defendant Jennifer Clark submitted a letter to the court dated June 2, 2009, stating th a t Clark joined in the motions of the Baldree and Shirley defendants.

1

2

fo re c lo s e Mr. Shirley's ability to use his experience to aid his counsel in selecting the a p p ro p ria te expert to evaluate and address the assertions made by Uhlig's expert. T h e Shirley defendants argue that the documents on which the W o o d s id e R e p o rt are based are just as important as the report itself. Specifically, they contend that the A E O designation for CCM revenue information is inconsistent with the treatment the d o c u m e n t received in the past when it was sent to Uhlig by Cox Custom Media ( "CCM") in J a n u a r y 2008, a month before Uhlig purchased the assets of CCM. CCM and Uhlig were c o m p e tito rs when CCM sent this information to Uhlig, but now Uhlig claims the information is so sensitive that a party subject to the Confidentiality Order cannot even look at it in the o ff ic e s of its counsel for the benefit of preparing a defense. The Shirley defendants also note th a t it makes no sense for emails between Uhlig and Mr. Shirley and the attachments thereto to be marked as AEO as, obviously, Mr. Shirley has seen these documents before. T h e Shirley defendants ask that the court compel Uhlig to produce the in fo rm a t io n that was redacted from the documents upon which the W o o d s id e Report was b a se d . As noted above, on May 18, 2009, Uhlig provided the documents expressly referred to in the W o o d s i d e Report to the defendants. However, Uhlig redacted some of the

in fo rm a tio n from those documents. The redactions appear in Uhlig's Consolidated Financial S ta te m e n ts and the "Notes to Consolidated Financial Statements." Notably, material was re d a c te d under the section labeled "Intangible Assets." The Shirley defendants argue that his in fo rm a tio n clearly addresses issues regarding the purchase of assets from CCM and other e n titie s , as well as how the assets from those purchases were accounted for. They argue that in light of the opinion of Uhlig's expert and his reliance on these documents to form his o p in io n , this information clearly bears on the nature and extent of injuries that Uhlig claims to h a ve suffered. T h e Shirley defendants also ask that the court order Uhlig to produce certain o th e r documents that they claim are relevant to the nature and extent of damages that Uhlig

3

c la im s to have suffered. The documents sought are: (1) an active list of customers that Uhlig c la im s it purchased from CCM as part of the Asset Purchase Agreement;(2) a current list of c u s to m e rs who were former customers of CCM and up to date revenues generated for each; (3 ) an active list of customers that Uhlig claims it purchased from certain entities since J a n u a ry of 2007, as of the date of the purchase of those entities; and (4) a current list of Uhlig c u s to m e rs who were former customers of certain entities since January of 2007. They argue th a t the lists of customers that Uhlig allegedly purchased from CCM and other entities, as well a s information showing which of these customers are still customers of Uhlig, is highly re le v a n t to Uhlig's claim for damages. In the damages report, Uhlig's expert applies an "a v e ra g e customer life expectancy" number to calculate the damages that it alleges have b e e n caused by the defendants. This number is based on an attrition rate spanning over the p a s t five or so years. The Shirley defendants argue that they are entitled to look at data re la te d to Uhlig's retention of customers that it allegedly obtained from entities that it p u rc h a s e d , including CCM, to see how that data compares to the "average customer life e x p e c ta n c y" and attrition rate used by Uhlig's expert. They contend this information also "b e a rs on the nature and extent of injuries" that Uhlig claims to have suffered and should be p ro d u c e d . O n June 4, 2009, plaintiff Uhlig filed a motion to confirm its confidential d e sig n a tio n s of documents, which also served as an opposition to the defendants' motions fo r disclosure. Uhlig notes that the court's standard Confidentiality Order provides that a party m a y designate documents as Confidential or AEO after an attorney has reviewed the d o cu m e n ts and in good faith "determined that the documents contain information protected fro m disclosure by statute, sensitive personal information, trade secrets, or confidential re s e a rc h , development, or commercial information" (doc. 64 at ¶ 3). The parties have agreed th a t by the same standard, documents may also be designated LAEO, which means that a

4

p a rty may view, but not copy or take, such documents while in control of their counsel (m. to c o n f ir m , ex. G). T h e portions of the Second Redacted W o o d s id e Report that are designated A E O are the seven numeric multiples used in valuing the business segments and customers in the CCM-Uhlig transaction and a margin percentage that are redacted from page 5 and U h lig 's gross margin that is redacted from page 7. Otherwise, the remaining pages of the W o o d s id e Report are designated Confidential or LAEO, so that all parties, counsel, and e x p e rts may view them. Also designated AEO are certain attachments to the W o o d s id e R e p o rt: Exhibit I entitled "Lost Profits Calculations - based on purchase price multiple"; Exhibit II entitled "Average Customer Life (Years)"; and Exhibit III entitled "Lost Profits Calculations." U h lig argues that these documents contain trade secrets and highly sensitive proprietary in f o r m a tio n . Also, certain documents considered by Dr. W o o d s id e in preparing the Report h a v e been designated AEO: Proposed agreement, email discussing compensation terms, a n d Sales Compensation W o r k sh e e t, between John Adam Shirley and Mark A. Uhlig (U06894 - U06902); January 29, 2008, email from Chad Richardson to Mark A. Uhlig, with attached "R e c a p Grid" and statement of "CCM W o r k in g Capital" (U06903 - U06905); Uhlig Purchase P ric e W o rk s h e e t dated January 31, 2008 (U06906-6907); Uhlig Valuation Notes for CCM (U 0 6 9 0 8 - U06912); January 10, 2008, email from Jordan W h ic h a rd to Mark A. Uhlig, with a tta c h e d documents Uhlig letter_0001.pdf, ccm due diligence response as of 1-10-08.doc, a n d CCM Key Stats Final.xls (U06913 - U06920); Uhlig Cox CustomMedia Revenue Analysis d a te d February 15, 2008, and CCM financial statements (U06921 - U06928); Uhlig LLC In d e p e n d e n t Auditors' Report and Consolidated Financial Statements dated December 31, 2 0 0 8 (U06929 - U06946); and Uhlig Customer Life Data FINAL 5-5-09.xls. U h lig argues that it has shown good cause for its designations under the C o n fid e n tia lity Order and that it will be harmed by further release of this specific information to the defendants, who actively are competing against Uhlig. Uhlig further argues that the

5

d e fe n d a n ts are not prejudiced by a lack of access to certain of Uhlig's confidential commercial in fo rm a tio n because their counsel and experts can freely analyze and critique the W o o d s id e R e p o r t and the underlying documents. U h lig further argues that the additional documents requested by the Shirley d e f e n d a n ts 2 go well beyond Dr. W o o d s id e 's report and analysis. Uhlig further notes that Dr. W o o d s id e did not have, nor did he request, that information to conduct his analysis and that "it is difficult to conceive of any legitimate purpose for Shirley's demand of customer names a n d revenue figures." This court agrees. T h is court has considered the arguments of the parties and finds that the d e fe n d a n ts are entitled to view the complete W o o d s id e Report, the documents attached to th e report, and the documents on which that report is based. Accordingly, the portions of the re p o rt and the supporting documents that are currently designated AEO should be changed to an LAEO designation, which means that a party may view, but not copy or take, such d o cu m e n ts while in control of their counsel. However, the Shirley defendants' request for a d d itio n a l documents that were not used by Dr. W o o d s id e in his report is denied. W h e re fo re , based upon the foregoing, the Baldree defendants' motion to d is c lo s e damages calculation to defendants (doc. 321) is granted; the Shirley defendants' m o tio n for disclosure of damages calculations and production of materials (doc. 326) is g ra n te d in part and denied in part; and plaintiff Uhlig's motion to confirm confidentiality d e sig n a tio n s of damages documents (doc. 338) is denied. IT IS SO ORDERED. J u ly 28, 2009 G r e e n v ille , South Carolina
2

s /W illia m M. Catoe U n ite d States Magistrate Judge

The additional documents sought by the Shirley defendants are: (1) an active list of customers th a t Uhlig claims it purchased from CCM as part of the Asset Purchase Agreement; (2) a current list o f customers who were former customers of CCM and up to date revenues generated for each; (3) an a c tiv e list of customers that Uhlig claims it purchased from certain entities since January of 2007, as o f the date of the purchase of those entities; and (4) a current list of Uhlig customers who were former c u s to m e rs of certain entities since January of 2007.

6