RealPage, Inc. et al v. Enterprise Risk Control. LLC et al
MEMORANDUM OPINION AND ORDER - It is therefore ORDERED that Plaintiffs' Motion to Compel Document Production, Motion to Overrule Objections, and Motion to Compel Document Custodian Deposition (Dkt. 40 ) is hereby GRANTED in part and DENIED in part. Defendants shall produce all items in accordance with this order within seven (7) days. Signed by Judge Amos L. Mazzant, III on 3/29/2017. (baf, )
United States District Court
EASTERN DISTRICT OF TEXAS
REALPAGE, INC., REALPAGE VENDOR
ENTERPRISE RISK CONTROL, LLC,
Civil Action No. 4:16-CV-00737
MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiffs’ Motion to Compel Document Production, Motion
to Overrule Objections, and Motion to Compel Document Custodian Deposition (Dkt. #40).
After reviewing the relevant pleadings and motion, the Court finds the motion should be granted
in part and denied in part.
Plaintiffs RealPage, Inc. and RealPage Vendor Compliance LLC (collectively,
“Plaintiffs” or “RealPage”) seek a preliminary injunction against Defendants Enterprise Risk
Control, LLC (“Enterprise”) and Lonnie Derden (“Derden”) (collectively, “Defendants”) from
using or benefiting from any of Plaintiffs’ trade secrets or other confidential or proprietary
information (Dkt. #10 at p. 17–18). At the center of the controversy is the allegation that Derden
and his employees took trade secret and confidential information from Plaintiffs and used it to
create a competing product sold by Enterprise.
On November 30, 2016, the Court entered an Agreed Order Continuing Preliminary
Injunction Hearing and Setting Discovery and Briefing Schedule (Dkt. #33) and an agreed
Protective Order and Source Code Protocol (Dkt. #34). The agreed discovery schedule set the
week of December 19, 2016 as the time to make Source Code available for inspection in
accordance with the agreed protective order, and December 19, 2016 as the deadline for parties
to serve responses to requests for production of documents (“RFPs”).
On December 2, 2016, Plaintiffs served their first set of requests for production to
Enterprise and Derden (Dkt. #40, Exhibits A, B). On December 19, 2016, Defendants served
their responses to Plaintiffs’ first set of RFPs (Dkt. #40, Exhibits C, D). Between December 19,
2016, and this motion, the parties discussed the allegedly inadequate responses (Dkt. #40,
Exhibits E, F).
On February 17, 2017, Plaintiffs filed this motion (Dkt. #40). On February 27, 2017,
Defendants filed their response, indicating that certain additional disclosures would be made
later that day (Dkt. #44). On the same day, Plaintiffs filed a reply (Dkt. #47). On February 28,
2017, Plaintiffs filed a supplemental reply, confirming that Defendants produced 7,343 emails
and their attachments the night before (Dkt. #48). On March 1, 2017, Defendants filed a surreply (Dkt. #51).
Under Federal Rule of Civil Procedure 26(b)(1), parties “may obtain discovery regarding
any nonprivileged matter that is relevant to any party’s claim or defense . . . .” Fed. R. Civ.
P. 26(b)(1). Relevance, for the purposes of Rule 26(b)(1), is when the request is reasonably
calculated to lead to the discovery of admissible evidence. Id.; Crosby v. La. Health & Indem.
Co., 647 F.3d 258, 262 (5th Cir. 2011). It is well-established that “control of discovery is
committed to the sound discretion of the trial court.” Freeman v. United States, 556 F.3d 326,
341 (5th Cir. 2009) (quoting Williamson v. U.S. Dep’t of Agric., 815 F.2d 368, 382 (5th Cir.
Rule 37 of the Federal Rules of Civil Procedure allows a discovering party, on notice to
other parties and all affected persons, to “move for an order compelling disclosure or discovery.”
Fed. R. Civ. P. 37(a)(1). The moving party bears the burden of showing that the materials and
information sought are relevant to the action or will lead to the discovery of admissible evidence.
Export Worldwide, Ltd. v. Knight, 241 F.R.D. 259, 263 (W.D. Tex. 2006). Once the moving
party establishes that the materials requested are within the scope of permissible discovery, the
burden shifts to the party resisting discovery to show why the discovery is irrelevant, overly
broad, unduly burdensome or oppressive, and thus should not be permitted. Id.
Federal Rule of Civil Procedure 34 governs requests for production of documents
(“RFPs”), electronically stored information, and tangible things. Rule 34 requires responses to
“either state that inspection and related activities will be permitted as requested or state with
specificity the grounds for objecting to the request, including the reasons.” Fed. R. Civ. P.
34(b)(2)(B). “An objection [to the entire request] must state whether any responsive materials are
being withheld on the basis of that objection.” Id. 34(b)(2)(C). On the other hand, “[a]n objection
to part of a request must specify the part and permit inspection of the rest.” Id.
After responding to each request with specificity, the responding attorney must sign their
request, response, or objection certifying that the response is complete and correct to the best of
the attorney’s knowledge and that any objection is consistent with the rules and warranted by
existing law or a nonfrivolous argument for changing the law. Fed. R. Civ. P. 26(g). This rule
“simply requires that the attorney make a reasonable inquiry into the factual basis of his
response, request, or objection.” Fed. R. Civ. P. 26(g) advisory committee note (1983).
The federal rules follow a proportionality standard for discovery. Fed. R. Civ. P.
26(b)(1). Under this requirement, the burden falls on both parties and the court to consider the
proportionality of all discovery in resolving discovery disputes. Fed. R. Civ. P. 26(b)(1),
advisory committee note (2015). This rule relies on the fact that each party has a unique
understanding of the proportionality to bear on the particular issue. Id. For example, a party
requesting discovery may have little information about the burden or expense of responding. Id.
“The party claiming undue burden or expense ordinarily has far better information—perhaps the
only information—with respect to that part of the determination.” Id.
Plaintiffs ask the Court to overrule Defendants’ objections and to order production of
certain documents. The Court will take each request in turn, beginning with objections to specific
RFPs and then addressing compulsion of documents.
Plaintiffs argue Enterprise’s objections to RFPs 1–3, 5–7, 9, 11–13, 15, 16, 18, and 19
and Derden’s objections to RFPs 2–5 should be overruled because they are boilerplate and not
stated with specificity. Defendants argue that Plaintiffs have not objected to the merits of the
objections, but only the specificity. Defendants further argue that their objections are specific
because they quoted specific portions of the questions that were vague or overbroad. The Court
agrees that Plaintiffs only make specificity arguments in their motion regarding Defendants’
responses to discovery. However, Plaintiffs do address the merits in their request to compel
documents. Therefore, the Court will address specificity here and the merits later.
a. “Subject to” language
As an initial matter, the Court finds Defendants waived each of their objections, except to
RFP 11, by including “subject to the foregoing” in the response. The practice of including
“subject to” or “without waiving” statements after objections is an age-old habit comparable to
belts and suspenders. This practice is “manifestly confusing (at best) and misleading (at worse),
and has no basis at all in the Federal Rules of Civil Procedure.” Keycorp v. Holland, No. 3:16cv-1948-D, 2016 WL 6277813, at *11 (N.D. Tex. Oct. 26, 2016) (quoting Carr v. State Farm
Mut. Auto. Ins., 312 F.R.D. 459, 470 (N.D. Tex. 2015)). Such an objection and answer “leaves
the requesting [p]arty uncertain as to whether the question has actually been fully answered,”
Consumer Elecs. Ass’n v. Compras & Buys Magazine, Inc., No. 08-21085-CIV, 2008 WL
4327253, at *3 (S.D. Fla. Sept. 18, 2008), and “wondering as to the scope of the documents or
information that will be provided as responsive.” Heller v. City of Dall., 303 F.R.D. 466, 487
(N.D. Tex. 2014).
Rule 34 does not allow this kind of hedging. Rule 34 allows a party either to “state that
inspection and related activities will be permitted as required” or to “state with specificity the
grounds for objecting to the request.” Fed. R. Civ. P. 34(b)(2)(B). If a party chooses to object to
part of a request, the party “must specify the part and permit inspection of the rest.”
Id. 34(b)(2)(C). A response that states “subject to the foregoing” is not specific enough as to
either (1) the completeness of the answer or (2) the availability of documents for inspection. The
Court finds that Defendants’ inclusion of “subject to the foregoing” is not supported by the
federal rules and goes against the purposes of a just, speedy, and inexpensive resolution. See
Carr, 312 F.R.D. at 470.
By answering questions “subject to” Defendants failed to specify the scope of their
answer in relation to the request. This makes it impossible for Plaintiffs or the Court to assess the
sufficiency of the response. Therefore, Defendants have waived each objection, except to RFP
11, by including “subject to” language in their responses. See Carr, 312 F.R.D. at 470.
Defendants shall fully supplement their responses to Plaintiffs’ requests, except RFP 11,
consistent with the proper manner of responding or answering as laid out above.
b. Boilerplate Objections
Further, Defendants waived several objections by making boilerplate objections. It is
well-established that parties cannot make general or boilerplate objections to discovery requests.
Heller, 303 F.R.D. at 483 (N.D. Tex. 2014). Rule 34 requires that a response to an RFP “must
either state that inspection and related activities will be permitted as requested or state an
objection to the request, including the reasons.” Fed. R. Civ. P. 34(b)(2)(B). The party resisting
discovery “must show specifically . . . how each [request] is not relevant or how each question is
overly broad, burdensome or oppressive.” McLeod, Alexander, Powel & Apffel, P.C. v. Quarles,
894 F.2d 1482, 1485 (5th Cir. 1990) (quoting Josephs v. Harris Corp., 677 F.2d 985, 991–92
(3d Cir. 1982)). A party may not “refuse discovery simply by making a boilerplate objection that
it is not proportional.” Rule 26(b)(1), advisory committee note (2015). Because “[i]n the face of
[general] objections, it is impossible to know whether information has been withheld and, if so,
why.” Heller, 303 F.R.D. at 483 (quoting Weems v. Hodnett, No. 10-cv-1452, 2011 WL
3100554, at *1 (W.D. La. July 25, 2011)).
Nearly all of Defendants’ responses begin with the objection:
[Defendant] objects on the basis that the request is overbroad, unduly
burdensome, and seeks information that is neither relevant nor likely to lead to the
scope of admissible discovery considering the proportionality of the needs in this
case, which includes the Parties’ relative resources vis-à-vis the other and the
burden/expense if the proposed discovery and likeliness of any benefit.
(Dkt. #40, Exhibit C, D). Defendants argue that their objections, including the one above, are not
boilerplate because they point out specific portions of the request that are objectionable
(Dkt. #44 at p. 17). The Court disagrees.
“Boilerplate” means “standardized text” or “ready-made or all-purpose language.”
Boilerplate, Merriam-Webster Collegiate Disctionary (11th ed. 2007); Boilerplate, Black’s Law
Dictionary (10th ed. 2014). Defendants used the above objection on eighteen of their twenty-five
RFP responses. This is the epitome of “standardized text.” Defendants appear to argue that
because they provided slight variations to each RFP, except Enterprise’s RFP 15, that the
objections are therefore specific to the request. The Court disagrees. Simply put, the above
objection does not “state with specificity the grounds for objecting to the request.” Fed. R. Civ.
P. 34(b)(2)(B). Defendants’ additional reasons after the objection, which often begin
“specifically,” address separate concerns such as relevance or ambiguity. However, those
objections stand or fall on their own. Therefore, Defendants’ failure to specify specific grounds
in the above objection results in waiver of the objection. Fed. R. Civ. P. 34(b)(2)(B); Keycorp,
2016 WL 6277813, at *11. The Court will now address the additional reasons that accompany
some of Defendants’ responses.
Enterprise’s responses to RFPs 1, 7, 9, 12, 16, and 18, and Derden’s response to RFP 2
make the same boilerplate objection but add that certain words or phrases are “overbroad, vague,
and ambiguous.” Defendants do not provide specific reasons for how these words are overbroad,
vague, or ambiguous, and therefore Defendants waived their objections. Heller, 303 F.R.D. at
Even if Defendants did not waive these objections, Defendants’ objections are overruled.
Defendants have not met their burden to explain the specific and particular way that each request
is overbroad, vague, or ambiguous after exercising reason and common sense to attribute
ordinary definitions to terms and phrases used in the request. Id. at 491. Further, based on the
Court’s review, these requests are not so overbroad, vague, or ambiguous as to be incapable of
reasonable interpretation and to prohibit Defendants’ responses. Thus, these objections are
Apart from the boilerplate objections, Enterprise objects to RFP 2 because documents
referring to products and services to the “now unlimited marketplace” of single-family and
multi-family marketplace is too broad. However, Enterprise also objects to RFPs 7 and 12
because they ask for documents that ask for more than the single-family and multi-family real
estate management areas because only the single-family and multi-family markets were
restricted. Enterprise explains that it does work for commercial tenants as well, but that was
never restricted and therefore not part of the claims before the Court. The Court finds that the
responses to RFPs 7 and 12 are inconsistent with the response to RFP 2. If Enterprise does
business in three areas, two of which are part of the suit, the Court does not see how a request for
documents relating to the two areas that are part of the suit is overbroad. Therefore, the Court
overrules Enterprise’s objection that the “unlimited” marketplace is overbroad. However, the
Court sustains Enterprise’s objections to documents encompassing commercial tenants in RFPs 7
c. Relevance Objections
Enterprise objects to RFPs 2, 6 and 12, and Derden objects to RFP 3 because requests for
documents about activities in the single-family or multi-family rental property markets after
restrictions in Derden’s Employment Agreement expired are not relevant to the claims or
defenses raised in this case. Plaintiffs do not respond to the merits of these objections. The Court
finds these objections sufficiently specific and agrees with Defendants. The Court sustains the
objections with modification.
The Employment Agreement expressly states that the Significant Owner Agreement’s
(“SOA”) restrictive period controls noncompetitive activities (Dkt. #1, Exhibit C at p. 6). The
SOA’s period is for five years after the date of Compliance Depot’s sale to Plaintiffs.1 The
Employment Agreement only restricted competition for three years after Derden’s termination.
The SOA’s period ended on May 5, 2016, after the Employment Agreement would have ended.
Therefore, Derden was restricted from competing until May 5, 2016. The Court sustains
Defendants’ objections to documents relating to the development or provision of products or
services offered by Defendants after the restrictions in the SOA expired.
Enterprise also objects to RFP 11 because documents showing payments to persons who
were involved in the development of Enterprise’s risk management application is not relevant.
Enterprise has agreed to produce documents that it relied upon in requesting a preliminary
injunction bond and has produced those documents. Based on Enterprise’s agreement, the Court
finds Enterprise has waived its objection on relevance grounds.
d. Privilege & Confidentiality
Enterprise also objects to RFPs 3 and 13 for privilege concerns and 7, 9, 11, and 13 for
confidentiality or proprietary issues. Derden objects to RFPs 3 and 4 on privilege grounds. On
February 27, 2017, Enterprise produced documents responsive to RFP 11, which contained
employee information. Based on Enterprise’s response and disclosure of information, the Court
finds Defendants waived the objection to RFP 11.
Regarding confidential and proprietary objections, Plaintiffs note that a protective order
already governs this case. To the extent that Enterprise is withholding any documents or
Compliance Depot, L.L.C. is a predecessor RealPage Vendor Compliance LLC. A more detailed factual history of
the Compliance Depot—RealPage transaction is available in the Court’s Memorandum Opinion and Order
information based on a confidentiality objection, those objections are overruled, and any
responsive documents should be produced subject to the protective order.
Finally, a privilege log must be produced for any documents, communications, or other
materials withheld from production on privilege grounds. See Fed. R. Civ. P. 26(b)(5). Neither
party addresses whether Defendants produced such a log. To the extent that Defendants have not
done so, the Court orders Defendants to produce a privilege log for each assertion of privilege
within seven (7) days of this order.
e. Harassing and Fishing Expedition
Enterprise objects to RFPs 5–7, 13, and 19, and Derden objects to RFPs 3 and 5 as
harassing and a fishing expedition. Defendants’ only reason for this objection is that Plaintiffs
are Defendants’ competitors. Considering the claims made in this case, the Court finds
Defendants’ reasoning is insufficient to explain the basis for these objections. Fed. R. Civ.
P. 34(b)(2)(B). Therefore, the Court overrules Defendants’ objections on these grounds.
For the Court to order production, Plaintiffs must show that Defendants failed to produce
documents or to permit the appropriate inspection. Fed. R. Civ. P. 37(a)(3)(B). An evasive or
incomplete response suffices to show a failure to respond. Id. 37(a)(4). When some documents
have been produced in response to a request, Courts have interpreted “evasive or incomplete” to
place a modest burden on the requesting party to support, with existing documents, a reasonable
deduction that other documents may exist or did exist but have been destroyed. See Zubulake v.
UBS Warburg LLC, 217 F.R.D. 309, 313 (S.D.N.Y. 2003); see also Hubbard v. Potter,
247 F.R.D. 27, 29 (D.D.C. 2008).
a. Communications Regarding Development
Plaintiffs argue that Defendants should produce “[c]ommunications between and among
employees or representatives or [Enterprise] and any third party related to the development of
[Enterprise’s] vendor compliance application” because they are directly relevant to the claim that
Enterprise’s application was developed using RealPage’s trade secrets. Defendants argue that
this request is overbroad because it asks for every work-related communication between
Enterprise’s employees and third parties.
The Court has already determined that Enterprise’s overbreadth objection was waived as
it was boilerplate and followed by “subject to” language. However, a party will still not be
compelled to produce documents if the request is overbroad or unduly burdensome on its face.
E.g., Aikens v. Deluxe Fin. Servs., Inc., 217 F.R.D. 533, 537–38 (D. Kan. 2003). The federal
rules follow a proportionality standard for discovery. See Fed. R. Civ. P. 26(b)(1). Under
Rule 26, a request must be proportional to the needs of the case when considering, “the
importance of the issues at stake in the action, the amount in controversy, the parties’ relative
access to relevant information, the parties’ resources, the importance of the discovery in
resolving the issues, and whether the burden or expense of the proposed discovery outweighs its
likely benefit.” Fed. R. Civ. P. 26(b)(1).
Plaintiffs’ request is proportional. Defendants’ development of its vendor compliance
application is very important to the issues at stake in the action. Plaintiffs’ claim centers on the
development of the vendor compliance application. This discovery may turn the case for either
side. The amount in controversy is large. Defendants’ own alleged harm from an injunction
against the application is $12 million. Only Defendants have access to the communications
requested. Finally, the burden is small because Defendants’ company is a small, relatively new
company and only a handful of people worked on the application.
On February 27, 2017, Defendants produced 7,343 emails and their attachments. It is not
clear whether these emails are responsive to this request, but it is clear that none of the emails are
dated before July 3, 2013.
Plaintiffs contend this production is still not enough. Plaintiffs argue that Defendants
should be compelled to produce additional emails regarding Bean’s assignment from when
Derden and Bean left RealPage in June 2012 to when Bean joined Defendants as a full-time
employee on July 3, 2013. The Court agrees.
Derden and Tom Bean (“Bean”) were RealPage employees until June 2012. In June
2012, Derden and Bean left RealPage and began their own companies. Derden began Enterprise,
and Bean began a software consulting company called IDC Software LLC (“IDC”). At some
point between June 2012 and July 2013, Bean asked Derden to see if Enterprise needed IDC’s
services. Ultimately, Bean developed a credentialing application based on Derden’s instruction.
In July 2013, Bean uploaded the code that he had created onto Enterprise’s server.
Defendants have not produced any emails for the period before Bean uploaded his code
to Enterprise’s server. Clearly, these would be relevant. Therefore, the Court orders Defendants
to provide all communications between and among employees or representatives or Enterprise
and any third party related to the development of Enterprise’s vendor compliance application for
the period between June 2012 and July 3, 2013, or to certify that all responsive emails have been
b. Email Attachments
Plaintiffs argue that the Court should compel production of attachments to two emails.
While this motion was pending, Defendants produced one of the attachments. Plaintiffs now
appear only to complain about the email labelled ERC000404. In their sur-reply, Defendants
assert that no document is being withheld (Dkt. #51 at p. 2). Assuming that Defendants have
produced the other attachment, the Court will only address the email labeled ERC000404.
The attachment to ERC00404 is discoverable because it is relevant to Plaintiffs’ trade
secret claim. Fed. R. Civ. P. 26(b)(1). Defendants hardly dispute this point (See Dkt. #44 at p. 9).
Defendants have located the powerpoint, but have not produced it apparently because it was
never distributed in written form, but only shown during an in-person presentation. The
powerpoint supposedly “illustrate[s] the new look and feel of [Enterprise’s] application” (Dkt.
#40, Exhibit G). The Court finds that the powerpoint, if it exists, should be produced. Plaintiffs
have shown evidence that suggests the powerpoint exists and Defendants have not provided a
valid reason for withholding it. Defendants shall certify in their amended response whether the
powerpoint referenced in the email labelled ERC000404 was used during the in-person
presentation. If Defendants cannot faithfully certify that the powerpoint was not used,
Defendants shall produce the powerpoint because it is relevant and responsive to requests asking
for communications relating to any products or services offered by Defendants to potential
customers. Plaintiffs’ motion to compel is granted on this ground.
c. Product Data, Design Specifications, Operations Specifications, and Related Documents
Plaintiffs argue that the Court should compel production of documents that Defendants
said they would produce in their initial disclosures. Specifically, Defendants stated that they
would produce “product data for [Enterprise’s] vendor compliance software, Indexer and Vendor
Services, which includes highly confidential and attorneys’ eyes only protected source code,
product design specifications, operation specifications, and related documents” as documents
that Defendants have in their possession, custody, or control and may support their claims.
Defendants argue that the source code satisfied this disclosure. Plaintiffs acknowledge that
Defendants produced source code, but argue that Defendants have not completely disclosed its
source code because there is a gap between June 2012 and July 2013 that Defendants do not
Plaintiffs provided a declaration from their forensic investigator, David Cowen
(“Cowen”), to prove that material information is missing from the source code that Defendants
produced. In his declaration, Cowen identifies facts that suggest significant edits to the source
code occurred between July 2012 and July 2013. Notably, Cowen states that “ERC
Development” made a comment on July 23, 2012. Cowen also states that other employees at
Enterprise used their real names when making comments and that Bean used his real name as
early as October 23, 2012 when making comments. This suggests the “ERC Development” is not
necessarily Bean or that Bean was not working completely independently from Enterprise when
developing code. Further, Bean added a comment on April 28, 2013 in the files “notcontrol.cs”
and “othercontrol.cs”. The Court finds that the comments are enough to suggest that significant
changes were made to the source code between July 2012 and July 2013.
Defendants explain this gap in their response. Defendants produced affidavits by
Enterprise’s software developer, Bean, and Chief Financial Officer, Gary Hofer (“Hofer”)
recounting the events from Bean’s development of the application in 2012 all the way up to this
litigation. According to Bean’s affidavit, IDC developed code for Enterprise before July 2013. In
July 2013, Enterprise hired Bean as a full-time employee. At that time, Bean transferred his code
onto Enterprise’s computers and removed the previous work from IDC’s computer, well before
either Bean or Enterprise anticipated litigation. Further, Enterprise certifies by Bean’s and
Hofer’s affidavit that all the code in their possession, custody, and control has been produced.
The Court is in a tough position. Plaintiff has produced evidence that significant changes
were made. However, Defendants have explained that the code containing those changes was
destroyed in good faith before this litigation. Even though evidence may suggest that more code
existed at one time, the Court cannot order a party to produce what it does not have. Orix USA
Corp. v. Armentrout, No. 3:16-mc-63-N-BN, 2016 WL 4095603, at *5 (N.D. Tex. Aug. 1, 2016).
Plaintiffs are entitled to an unequivocal representation, under oath, that Defendants have
produced all source code that they have in their possession, custody, and control, and that they
are not withholding any responsive code based on their objections or otherwise. Plaintiffs have
received that representation in Bean’s and Hofer’s affidavit, as well as Defendants’ responses to
this motion. The Court declines to order anything further from Defendants on this issue at this
Under the same heading, Plaintiffs complain that Enterprise’s responses to RFPs 1 and 8
are insufficient because the requests sought documents referred to in Defendants’ initial
disclosures and Daniel Millstone’s November 7, 2016 declaration (Dkt. #21, Exhibit B) that were
not provided. Defendants respond that they have produced all documents and that there simply
are not as many documents as Plaintiffs believe there to be. The Court agrees with Defendants.
Plaintiffs cite the Joseph Regan letter dated February 10, 2017 (Dkt. #40, Exhibit F) as
evidence that Defendants have not responded to repeated efforts to obtain the information. The
Court disagrees. The Regan letter specifically responds to Plaintiffs’ letter requesting documents.
Defendants explain that (1) it could not locate the “piece of paper” referenced in Millstone’s
declaration; (2) it admitted that the source code itself represents Millstone’s vision;
(3) Enterprise could not locate documents that evidence the “original design”; and (4) Enterprise
produced some Jira work order documents documenting corrections for “bugs” (Dkt. #40,
Exhibit F at p. 4). Further, in response to this motion, Defendants provide the affidavit of their
CFO, Hofer. Hofer clarifies that Jira is the only program Enterprise has used and that all Jira
documents, not just “bug fixes” have been produced. Thus, the Court finds that Defendants have
adequately responded to these requests. Plaintiffs’ motion on this ground is denied.
d. Project Management Software
Next, Plaintiffs argue that Defendants should be compelled to produce the content of any
project management software Enterprise used to develop its vendor compliance application
(Dkt. #40 at p. 9). Plaintiffs cite RFPs 1 and 8 as the relevant requests. The same reasoning
applies as it did for documents showing product data, design specifications, operations
specifications, and related documents above. Defendants have sworn under penalty of perjury
that Enterprise only used Jira and has produced those documents. Plaintiffs’ motion on this
ground is denied.
e. Evidence of Payments for Design and Development
Plaintiffs argue that Defendants should be compelled to produce documents showing the
$3.3 million in expenses, including payroll and overhead, to create the vendor compliance
application as requested in RFPs 9 and 11. Defendants respond that this information is
confidential as it relates to the individual employees’ compensation. Before this motion,
Defendants produced a summary sheet of compensation for six employees with the names
redacted. On February 27, 2017, Defendants produced a seventeen-page document showing
payroll expenses for 2013 through 2016. In their supplemental reply, Plaintiffs complain that this
is still not enough because it does not contain any payments to Bean from June 2012 to July
2013. The Court agrees that the production is insufficient and orders supplementation.
Bean’s affidavit states that he “began working on a software package with explicit
instructions” from Derden (Dkt. #44, Exhibit B at p. 2). Enterprise hired Bean in July 2013.
When he began his employment at Enterprise, Bean brought the code that he developed and
uploaded it onto Enterprise’s computers. However, Defendants have not produced any
documents regarding compensation for Bean’s time in creating this code or a purchase price of
the code. Therefore, it appears that Enterprise did not pay a dime for Bean’s code. The Court
doubts this conclusion. Defendants shall produce all documents related to payments paid to
develop its vendor compliance application, including any payments to Bean or IDC, or else
certify that Enterprise did not compensate Bean in any way for the code he brought to Enterprise.
f. Enterprise’s Revenues
Plaintiffs argue that Enterprise should be compelled to produce documents relating to its
revenues derived from its vendor compliance application as requested in RFP 19. Enterprise
argues that this request is not proportional because Enterprise’s sole project during its existence
has been to develop the vendor compliance application and thus the request is akin to “asking a
dental practice for all documents relating to teeth.” Nevertheless, in response, Enterprise agreed
to supplement its production “to include documents relied upon in requesting a preliminary
injunction bond as soon as is practicable.” However, Plaintiffs still argue that Defendants should
produce all documents relating to its revenues, not just those relied upon in requesting a bond
Federal Rule of Civil Procedure 65(c) provides that the movant must post bond before a
federal court may issue a preliminary injunction. The bond must be “in an amount the court
considers proper to pay the costs and damages sustained by any party found to have been
wrongfully enjoined or restrained.” Id. The bond requirement serves two functions. First, it
assures the enjoined party that it may readily collect damages from the funds posted or the surety
provided in the event that it was wrongfully enjoined, without further litigation and without
regard to the possible insolvency of the assured. Continuum Co. v. Incepts, Inc., 873 F.2d 801,
803 (5th Cir. 1989). Second, it provides the plaintiff with notice of the maximum extent of its
potential liability. Id.
Considering the factors in Rule 26, the Court finds Plaintiffs’ request, beyond what
Defendants have agreed to produce, is not proportional. The amount of bond is not an important
issue at stake in the action. Discovery on the bond issue is not important because the Court sets
the amount of bond, the damages caused by an erroneous preliminary injunction cannot exceed
the amount of the bond posted, and RealPage has not indicated that it would be unable to post a
certain amount of bond. Similarly, the burden placed on Enterprise by disclosing its revenues to
a competitor outweighs any likely benefit. Therefore, the Court denies Plaintiffs motion to
compel further production by Defendants. However, Defendants are ordered to produce the
agreed documents within seven (7) days of this order.
g. Process of Locating Documents
Although not directly addressed by Plaintiffs, Enterprise responded to RFPs 9, 16, and 19
with the only limitation that Enterprise was in the process of locating responsive documents.
Enterprise shall produce responsive documents within seven (7) days of this order.
Plaintiffs seek to depose a corporate representative of Enterprise concerning the
existence, retention, and location of Enterprise’s source code and documents. Plaintiffs also
request that this deposition does not count against their limit of five depositions and may occur
before the window for depositions begins. Plaintiffs argue that good cause exists to modify the
Court’s Order Amending Expedited Discovery and Briefing Schedule (Dkt. #37) because
Enterprise has not complied with its discovery obligations, and its claims that certain documents
do not exist is implausible.
The Court entered the current discovery and briefing schedule on an agreed motion by the
parties. The order provides that each side may take five depositions, excluding experts, but that
the order may be amended for good cause.
At this time, the Court does not find good cause to amend its prior order. Defendants
have provided evidence that Bean destroyed the code well before the anticipation of litigation.
Plaintiffs have five depositions to gather information to prove their case for preliminary
injunctive relief, including any issues of code destruction. Plaintiffs fail to show how the agreed
number of depositions is not sufficient to prove their claims and to investigate the issue of code
destruction. Therefore, the Court does not find good cause to amend its prior order at this time.
It is therefore ORDERED that Plaintiffs’ Motion to Compel Document Production,
Motion to Overrule Objections, and Motion to Compel Document Custodian Deposition
(Dkt. #40) is hereby GRANTED in part and DENIED in part. Defendants shall produce all
items in accordance with this order within seven (7) days.
IT IS SO ORDERED.
SIGNED this 29th day of March, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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