Nerium SkinCare Inc et al v. Nerium International LLC et al
Filing
261
ORDER ACCEPTING 247 FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE re: 205 Motion for Order to Show Cause. The Court directs the Clerk to seal Plaintiff Nerium SkinCare, Inc.'s 193 Brief inSupport of A pplication to Compel Statutory Records Inspection. Additionally, Plaintiffs Nerium SkinCare, Inc. and Nerium Biotechnology, Inc. are hereby ORDERED to appear and SHOW CAUSE why they should not be held in civil contempt for violating the Court's Agreed Protective Order. (Ordered by Judge Jane J. Boyle on 6/1/2017) (epm)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
NERIUM SKINCARE, INC., on behalf of
itself and in a derivative capacity for
Nerium International, LLC, and NERIUM
BIOTECHNOLOGY, INC.,
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Plaintiffs,
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v.
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NERIUM INTERNATIONAL, LLC, JEFF §
A. OLSON, and JO PRODUCTS, LLC,
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Defendants.
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CIVIL ACTION NO. 3:16-CV-1217-B
ORDER ACCEPTING FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF
THE UNITED STATES MAGISTRATE JUDGE
Before the Court is Defendants Nerium International, LLC, Jeff A. Olson, and JO Products,
LLC’s Motion to Enforce Protective Order, and for Order to Show Cause and for Sanctions. Doc.
205. The Court referred this Motion to Magistrate Judge Horan. Doc. 207. After full briefing and
a hearing, Judge Horan issued his Findings, Conclusions, and Recommendation. Doc. 247. Plaintiffs
timely objected to Judge Horan’s Findings, Conclusions, and Recommendation. Doc. 255. For the
reasons explained below, the Court OVERRULES Plaintiffs’ Objection and ACCEPTS and
ADOPTS the Findings, Conclusions, and Recommendation of the United States Magistrate Judge.
Federal Rule of Civil Procedure 72(a) provides that a “district judge . . . must consider timely
objections” to a magistrate judge’s order on a non-dispositive matter “and modify or set aside any part
of the order that is clearly erroneous or is contrary to law.” Fed. R. Civ. P. 72(a). Rule 72(a)’s
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“‘clearly erroneous’ standard applies to the factual components of the magistrate judge’s decision.”
Lahr v. Fulbright & Jaworski, L.L.P., 164 F.R.D. 204, 208 (N.D. Tex. 1996) (quoting Smith v. Smith,
154 F.R.D. 661, 665 (N.D. Tex. 1994)). The “contrary to law” language, on the other hand, refers
to the magistrate’s legal conclusions, which are “reviewable de novo, and the district judge reverses
if the magistrate judge erred in some respect in [his] legal conclusions.” Arters v. Univision Radio
Broad. TX, L.P., No. 3:07-CV-0957-D, 2009 WL 1313285, at *2 (N.D. Tex. May 12, 2009)
(alteration in original) (internal quotation marks omitted) (quoting Lahr, 164 F.R.D at 208). An
“abuse of discretion standard governs review of ‘that vast area of choice that remains to the
[magistrate judge] who has properly applied the law to the fact findings that are not clearly
erroneous.’” Id. (alteration in original) (quoting Lahr, 164 F.R.D. at 208). Overall, Rule 72(a)’s
framework for review is “highly deferential.” Blue v. Hill, No 3:10-CV-2269-L, 2014 WL 2217334,
at *2 (N.D. Tex. May 29, 2014).
By way of review, the Court entered an Agreed Protective Order in this case on June 10,
2016, which outlined procedures for handling “confidential information” in the course of this
litigation. Doc. 22. On February 9, 2017, Plaintiff Nerium SkinCare, Inc. filed its Brief in Support
of Application to Compel Statutory Records Inspection. Doc. 193. Plaintiff did not file this brief
under seal, though it cited repeatedly to a corresponding appendix (Doc. 194) which Plaintiff did file
under seal and which contained numerous documents designated “confidential” pursuant to the
Agreed Protective Order. Two weeks later, Plaintiffs filed their Motion for Expedited Relief to Set
Summer Trial Date, and/or Consider Motion to Terminate Company, and to Appoint Limited
Receiver Pending Trial. Doc. 201. Again, Plaintiffs did not initially file this document under seal;
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however, the following day, Defendants filed a motion to seal this document in accordance with the
Agreed Protective Order, which Plaintiffs did not oppose and which the Court granted. Doc. 203,
Mot. to Seal; Doc. 204, Order Granting Mot. to Seal. A week later, Defendants filed the Motion to
Enforce Protective Order, and for Order to Show Cause and for Sanctions, and Brief in Support
(Doc. 205), which the Court referred to Magistrate Judge David Horan. Doc. 207.
After reviewing the parties’ briefing and hearing oral argument on Defendants’ Motion, Judge
Horan issued his Findings, Conclusions, and Recommendation. Judge Horan found “(1) that the
Agreed Protective Order was in effect when Plaintiff Nerium Skincare, Inc. [sic] filed its Brief in
Support of Application to Compel Statutory Records Inspection on February 9, 2017; (2) that the
Agreed Protective Order was a definite and specific court order requiring Plaintiffs to perform or
refrain from performing a particular act or acts with knowledge of that order—and specifically
required Plaintiff Nerium Skincare, Inc. [sic] to treat Confidential Information in certain
ways—including that ‘[n]o materials designated “Confidential” may be filed with the Court absent
a request by the parties that such materials be either entered under seal or otherwise protected from
public disclosure’ ; and (3) that Plaintiff Nerium Skincare, Inc. [sic] failed to comply with the Agreed
Protective Order by, despite filing documents and deposition testimony designated as Confidential
Information in a sealed Appendix to Plaintiff’s Brief in Support of Application to Compel Statutory
Records Inspection, failing to file under seal the Brief in Support of Application to Compel Statutory
Records Inspection or Plaintiffs Nerium SkinCare, Inc. and Nerium Biotechnology, Inc.’s Motion for
Expedited Relief to Set Summer Trial Date, and/or Consider Motion to Terminate Company, and
to Appoint Limited Receiver Pending Trial, which each cite, repeat, or quote specific information
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from the same documents that are included in the appendix and designated as Confidential
Information.” Doc. 247, Findings, Conclusions, & Recommendation 19–20 (internal citations
omitted). Accordingly, Judge Horan recommended that the Court seal Plaintiff’s records inspection
brief and order Plaintiffs to appear and show cause why they should not be held in civil contempt for
violating the Court’s Agreed Protective Order. Id. at 23–24.
Plaintiffs object to the Magistrate’s findings, arguing primarily that the Agreed Protective
Order allows parties to “describe aspects of materials that are not confidential” and that “[n]one of
the information described by Plaintiffs was confidential” anyway. Doc. 255, Pls.’ Objs. 8, 13. Plaintiffs
contend that Judge Horan’s findings are subject to de novo review because they are either “a
contempt order” or a “legal conclusion.” Id. at 8.
First, the Court notes that Judge Horan’s findings constitute neither a final order of contempt
nor a legal conclusion. Judge Horan merely certified facts which he found to this Court and made
a recommendation that the Court order Plaintiffs to appear for a show cause hearing, only after
which could there be a final order of contempt. See Doc. 247, Findings, Conclusions, &
Recommendation 16 (“The undersigned, pursuant to 28 U.S.C. §§ 636(b) and 636(e)(6), now
certifies the following facts . . . .”). However, even upon de novo review, the Court agrees with the
findings of the Magistrate and for the same reasons. Plaintiffs have clearly done more here than
generally describe non-confidential aspects of documents designated as “Confidential” in accordance
with the Agreed Protective Order. And—as Judge Horan noted—whether the documents designated
as “Confidential” under the Protective Order ever truly contained “confidential” information, and
whether Defendants had already publicly revealed aspects of those documents, does “not affect
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whether [Plaintiffs] violated the Agreed Protective Order.” Id. at 21.
Here, there was a Protective Order in place. It described the process for designating
documents as “Confidential,” which Defendants followed. Per the Protective Order, such
information could only be filed with the Court under seal. If Plaintiffs disagreed that a document so
designated truly contained confidential information, the Protective Order provided mechanisms for
challenging that designation. But until it was agreed or determined otherwise, the parties were
required to afford the documents and the information contained within them “Confidential”
treatment. Thus, Plaintiff cannot argue here that information in its unsealed briefs drawn from
materials marked “Confidential”—which Plaintiffs rightly filed under seal—was not confidential
information. Therefore, the Court agrees with the Magistrate that clear and convincing evidence
shows that a definite and specific court order was in place and that Plaintiffs violated that order by
filing their records inspection brief and their motion for a summer trial date in the public record
without sealing them.
Accordingly, the Court directs the Clerk to seal Plaintiff Nerium SkinCare, Inc.’s Brief in
Support of Application to Compel Statutory Records Inspection (Doc. 193) pursuant to the Court’s
Agreed Protective Order. Doc. 22. Additionally, Plaintiffs Nerium SkinCare, Inc. and Nerium
Biotechnology, Inc. are hereby ORDERED to appear and SHOW CAUSE why they should not be
held in civil contempt for violating the Court’s Agreed Protective Order and be subject to
appropriate judicial sanctions to coerce compliance with the Court’s Order and/or compensate
Defendants Nerium International, LLC, Jeff A. Olson, and JO Products, LLC for any losses sustained
as a result of Plaintiffs’ noncompliance. Parties should be prepared to discuss this issue at the June
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14, 2017 Status Conference. See Doc. 240. No additional briefing is necessary at this time.
SO ORDERED.
SIGNED: June 1, 2017.
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JANE J. BOYLE
UNITED STATES DISTRICT JUDGE
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