Stoneeagle Services Inc v. Gillman et al

Filing 388

Memorandum Opinion and Order granting 342 Motion for Protective Order filed by Talon Transaction Technologies Inc. (See order for specifics) (Ordered by Magistrate Judge David L Horan on 11/13/2013) (mcrd)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
STONEEAGLE SERVICES, INC.,
Plaintiff,
V.
DAVID GILLMAN, ET AL.,
Defendants.

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No. 3:11-cv-2408-P

MEMORANDUM OPINION AND ORDER
Defendant Talon Transaction Technologies, Inc. of Texas (“Talon”) has filed a
Motion for Protective Order, see Dkt. No. 342, which Judge Solis has referred to the
undersigned magistrate judge, see Dkt. No. 346. Plaintiff StoneEagle Services, Inc.
(“Plaintiff”) filed its Response to Talon’s Motion, see Dkt. No. 357, and Talon filed its
reply, see Dkt. No. 361. The Motion is now ripe, and, having considered the briefing
and applicable law, the Court determines that Talon’s Motion should be granted.
Background
Plaintiff brought the instant action on September 16, 2011, alleging, among
other things, that the defendants misappropriated Plaintiff’s trade secrets and
confidential information. The parties were involved in a business arrangement wherein
certain confidential information was disclosed by Plaintiff to various defendants under
a non-disclosure agreement.
During the course of discovery, the Court entered a Protective Order to govern
the disclosure of trade secrets and other confidential information, including financial
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information. See Dkt. No. 56 at 1. The Protective Order protects information that is
“Confidential” and information that is “Confidential Attorneys’ Eyes Only.” Id.
Pursuant to the Protective Order,
the Parties may designate as “Confidential,” or “Confidential Attorneys’
Eyes Only,” any document, testimony, answers to interrogatories or other
information or discovery material that they believe contains or discloses
trade secrets, internal policies, procedures and operations, non-public
customer, client or investor information, forecasts or strategies, analyses,
appraisals, valuations or other non-public sensitive commercial, financial,
private, and/or proprietary business or personal information.
Id. Under the Protective Order’s terms, the discovering party can object to the
producing party’s designation. See id. at 3. If a party objects to the designation, the
producing party must file a motion for protective order within fourteen days or the
party loses the designation. See id. at 4.
Talon produced several private financial documents to Plaintiff in response to
its discovery requests and designated the documents “Attorneys’ Eyes Only.” See Dkt.
No. 342 at 3-4; Dkt. No. 343 at 4-9. The information includes “statements of Talon’s
income, costs, expenses, and other proprietary financial information for the years 2011
and 2012.” See Dkt. No. 342 at 3-4; see also Dkt. No. 343 at 4-9.
Several months after Talon produced the documents, Plaintiff challenged the
designation. See Dkt. No. 342 at 4. Talon offered to downgrade the designation of the
documents to “Confidential.” See Dkt. No. 342 at 4. While Plaintiff agreed to the
downgraded designation, Plaintiff also requests that it be permitted to use the

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documents in a related state court case between the parties. See Dkt. No. 357 at 1.1
Talon therefore filed its Motion with the Court, seeking an order to prevent
Plaintiff from placing Talon’s claimed confidential and private financial information
into the public domain. See Dkt. No. 342. Plaintiff merely responded that “no harm”
would result to Talon if Plaintiff used the documents in the state court action because
Plaintiff “agrees to maintain the documents as ‘Confidential’ in the related action and
to take all steps to make sure that the document is not publicly disclosed to anyone
other than the state court.” Dkt. No. 357 at 2.
Legal Standards and Analysis
While Talon frames the issue in its Motion as a question of whether the financial
information at issue was properly designated as “Confidential,” the undersigned sees
it as whether it is proper to alter the Protective Order so that Plaintiff may use the
information in a manner not provided for in the Protective Order. Indeed, the parties
seem to agree that the documents at issue be designated as “Confidential.” See Dkt. No.
342 at 1; Dkt. No. 357 at 1.
Assuming arguendo that a dispute does exist regarding the Confidential
designation, courts generally agree that financial information constitutes confidential
information that falls under the protection of a protective order. See Homevestors of

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Plaintiff states in its Response that the related case is styled SWG
Investments, Ltd. v. Regions Bank v. Talon Transaction Technologies, Inc., and
Plaintiff is the assignee of SWG Investment Ltd.’s judgment against Talon. See Dkt.
No. 357 at 1 n.1. Neither party provided any additional proof as to how the instant
case and the state court case, or the parties to each, are related.
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Am., Inc. v. LeGate, No. 3:12-cv-1850-P, 2013 WL 3348948, at *5 (N.D. Tex. July 3,
2013) (“The Court is mindful that sensitive information may be contained in HBN’s
balance sheets and profit and loss statements. Therefore, the Court orders that all
financial documents produced by HBN shall be treated as confidential and governed
by the Protective Order....”). A review of the documents at issue reveals that they
contain information related to Talon’s profits and losses, cash flow, and balance sheets.
See Dkt. No. 343 at 5-9. In light of the content of the documents and the fact that
Plaintiff does not contest that the information is Confidential and protected under the
Protective Order, it appears that the information is properly designated as
“Confidential” under the Protective Order.
But Plaintiff suggests that, even if the information is Confidential under the
Protective Order, this Court “can set conditions on the usage of the documents in the
related case.” See Dkt. No. 357 at 2. Plaintiff provides no support for this contention,
however, and the undersigned can find none. And, as Talon points out, the process by
which documents are deemed confidential in state court proceedings differs greatly
from the process in federal court. Compare TEX. R. CIV. P. 76a, with FED. R. CIV. P.
26(c). Thus, the undersigned now evaluates whether the Protective Order may be
altered under the circumstances.
“‘An agreed protective order may be viewed as a contract, and once parties enter
an agreed protective order they are bound to its terms, absent good cause to modify or
vacate the protective order.’” Orthoflex, Inc. v. ThermoTek, Inc., Nos. 3:11-cv-870-D &
3:10-cv-2618-D, 2013 WL 3095106, at *3 (N.D. Tex. June 20, 2013) (quoting Paine v.
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City of Chicago, No. 06 C 3173, 2006 WL 3065515, at *2 (N.D. Ill. Oct. 26, 2006)). “As
with all contracts, the ultimate question is what was the parties’ mutual intent. The
answer to that question is to be found within [the protective order’s] four corners, and
not by reference to what might satisfy the purposes of one of the parties to it.” Id.
The Protective Order states that “Confidential Discovery Material received
through discovery in this action shall be used solely by the discovering party and solely
for the purposes of this action.” Dkt. No. 56 at 2. Thus, the plain language of the
Protective Order demonstrates that the parties’ mutual intent, as reflected within the
Protective Order’s four corners, does not include an exception for the parties to use the
documents in related litigation.2 See Orthoflex, 2013 WL 3095106, at *4; see also U.S.
Phillips Corp. v. Iwasaki Elec. Co., 142 F. App’x 516, 518 (2d Cir. 2005) (permitting use
of confidential materials in a related case where the “plain language” of the protective
order “affords broad discretion” to the district court to permit such disclosure). Plaintiff
does not dispute this fact but, in essence, asks the Court to alter the terms of the
Protective Order, after Talon produced documents with the assurance that they would
be afforded the protection offered under the Protective Order. This the Court will not
do, especially in light of the Protective Order’s plain language.

The undersigned acknowledges that the Protective Order was not
completely agreed to by both parties. See Dkt. Nos. 39, 45, & 49. However, the only
provisions upon which the parties failed to agree related to the consulting expert
disclosure provision and the snap-back provision, and as such, the relevant
provisions were agreed to by the parties. See Dkt. No. 45 at 2. Moreover, the
protective order at issue in Orthoflex also was not completely agreed to, as, much as
in the instant case, the court there made modifications before entering it. See Dkt.
No. 56; Orthoflex, 2013 WL 3095106, at *3.
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Moreover, Plaintiff has provided no good cause as to why the Protective Order
should be modified, including providing no indication or explanation as to why it
cannot use the discovery process in its state court proceedings to try to obtain the
information it desires. In fact, the United States Court of Appeals for the Fifth Circuit
has recognized that it may do so and that “questions of discoverability in the state
litigation of materials discovered in the federal litigation are, of course, for the state
courts ... before whom the litigation ... is pending.” See Superior Oil Co. V. Am.
Petrofina Co. of Tex., 785 F.2d 130, 130 (5th Cir. 1986). Thus, the undersigned
concludes that it is not proper to alter the Protective Order, especially where Talon
produced information with the assurance of the protection of the Protective Order and
where no showing has been made that the information would be relevant or not
obtainable through the state court discovery process.
Conclusion
For the foregoing reasons, Defendant Talon Transaction Technologies, Inc. of
Texas Motion for Protective Order [Dkt. No. 342] is GRANTED.
SO ORDERED.
DATED: November 13, 2013

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DAVID L. HORAN
UNITED STATES MAGISTRATE JUDGE

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