Security Alarm Financing Enterprises, Inc. v. Parmer et al

Filing 210

MEMORANDUM OPINION AND ORDER OVERRULING INTERVENOR'S OBJECTIONS AND AFFIRMING MAGISTRATE JUDGE'S ORDER GRANTING IN PART PLAINTIFF'S MOTION TO REQUIRE NON-SOLICITATION AGREEMENT AND DENYING IN PART MOTION LIMITING DISCLOSURE OF COMPETIT IVE INFORMATION. Guardian's objections to the magistrate judge's order granting in part plaintiff's 199 motion to require a non-solicitation agreement and denying in part the limiting of disclosure of competitive information 204 are OVERRULED. Thus, this Court AFFIRMS the magistrate judge's order. The sale shall proceed at the time and place designated in the order readvertising and rescheduling the sale of assets by Magistrate Judge Seibert 209 . Signed by Senior Judge Frederick P. Stamp, Jr on 9/29/2014. (kd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
SECURITY ALARM FINANCING
ENTERPRISES, INC.,
Plaintiff,
v.

Civil Action No. 1:12CV88
(STAMP)

BETTY PARMER, SECURE US, INC.,
and MITCH BROZIK,
Defendants,
and
GUARDIAN SECURITY, INC.,
and UNITED BANK, INC.,
Intervenors.
MEMORANDUM OPINION AND ORDER
OVERRULING INTERVENOR’S OBJECTIONS AND
AFFIRMING MAGISTRATE JUDGE’S ORDER GRANTING IN PART
PLAINTIFF’S MOTION TO REQUIRE NON-SOLICITATION AGREEMENT
AND DENYING IN PART MOTION LIMITING
DISCLOSURE OF COMPETITIVE INFORMATION
I.
In

this

civil

case,

Background
intervenor

Guardian

Security,

Inc.

(“Guardian”) objects to the magistrate judge’s order granting in
part plaintiff’s motion to require a non-solicitation agreement and
denying

in

part

the

information (“order”).

limiting

of

disclosure

See ECF No. 204.

of

competitive

This case involves an

alleged sham sale of defendant Mitch Brozik’s (“Brozik”) former
company, Secure US, Inc. (“Secure US”), to his aunt, Betty Parmer
(“Parmer”).

Brozik allegedly sold Secure US to Parmer to avoid a

monetary

judgment

that

plaintiff

Enterprises, Inc. (“SAFE”) received.
entered

a

judgment

$1,132,028.42.

for

plaintiff

Security

Alarm

Financing

On May 22, 2014, this Court
against

Parmer

equaling

Then on May 28, 2014, this Court issued an order

granting the plaintiff’s writ of fieri facias and appointed United
States Magistrate Judge James E. Seibert as the officer to seize
and sell the property of Secure US in order to satisfy the judgment
against it.
On June 19, 2014, SAFE filed a motion seeking an order of sale
of

assets.

Following

this,

the

magistrate

judge

held

an

evidentiary hearing on July 15, 2014, where all parties involved
presented evidence and testimony regarding SAFE’s motion.

During

the hearing, all witnesses testified that as time passed, the
assets’ value would decrease.

Magistrate Judge Seibert entered an

order granting the motion for sale of assets finding (1) the
testimony and evidence presented credible, aside from Brozik’s
testimony to the contrary, and (2) that the sale should proceed
because it is in the best interests of the parties.

Magistrate

Judge Seibert found it in the best interest of the parties to enter
an order for the sale1 (“Sale Orders”) of assets because of the

1

Magistrate Judge Seibert initially entered an order of sale
(ECF No. 186).
However, the magistrate judge later entered an
“Amended Order Attaching Notice of Sale to Order Granting Motion
for Sale of Assets” that incorporated the initial order of sale(ECF
No. 187). Thus, this Court refers to both orders collectively as
“Sale Orders.”
2

continued

decline

in

continued

litigation.

the

assets’

Under

the

value
Sale

resulting
Orders,

the

from
sale

this
was

originally scheduled to occur on Tuesday, September 9, 2014 at 9:30
a.m.
Following Magistrate Judge Seibert’s Sale Orders, Brozik filed
both an objection and supplemental objection on August 25, 2014.
Brozik objected to the Sale Orders on four grounds.2

On September

5, 2014, this Court overruled Brozik’s objections and affirmed the
magistrate judge’s Sale Orders in its memorandum opinion and order.
See ECF No. 194.

Following that opinion and order, Guardian, a

bidder for Secure US’s assets, filed a motion to intervene.
No. 195.

ECF

In its motion to intervene, Guardian claimed it was

denied access to necessary information for the scheduled sale of
the assets, and requested this Court postpone the sale until a
later date.

In its order, this Court granted Guardian’s motion,

and postponed the sale until September 24, 2014.

ECF No. 198.

Following that order, on September 11, 2014, SAFE filed a
motion for a protective order to limit disclosing competitive
information or to at least require a non-disclosure agreement. ECF
No. 199.

SAFE intended this motion to limit the information

Guardian would receive prior to the sale.

SAFE argued that

bidders, including Guardian, requested confidential information

2

Brozik’s objections are not relevant to this opinion. His
objections and this Court’s opinion overruling those objections can
be found at ECF No. 194.
3

that not all bidders could access, specifically customer accounts.
Thus, bidders with that information, like Guardian, could “poach”
the customers listed on the customer accounts for sale at the
auction.

Because of this, the magistrate judge entered an order

requiring Guardian to sign a non-disclosure agreement and a nonsolicitation agreement that (1) limited Guardian’s access to only
the subscriber contacts and customer accounts for bid purposes and
(2) Guardian could not unfairly use such information. ECF No. 204.
On September 19, 2014, Guardian timely filed objections to the
magistrate judge’s order. ECF No. 205. Guardian first claims that
the agreements required under the order limits what information
Guardian may access.

Guardian claims that the order allows

Guardian access to only the customer accounts, but not several
other items of information3 it seeks before the sale begins.
Therefore, Guardian argues that the terms of the non-disclosure and
non-solicitation agreements for the customer accounts should apply
to these other items, thus allowing Guardian full and necessary
access.
Second, Guardian claims the order disadvantages it as a bidder
in several ways.

Specifically, Guardian asserts that the order

only limits what Guardian, and not other bidders, may access and

3

These items include total active recurring monthly revenue,
total active monitored accounts, distribution of accounts by credit
score, list of accounts receivable, and insurance policies in
force.
4

forces only Guardian to adhere to the terms of non-disclosure and
non-solicitation

agreements.

However,

other

bidders

who

may

already have access to information that Guardian currently may not
access will be in an unfair position when the bidding occurs.4
Finally, Guardian claims that the order limits its future business
in West Virginia because it limits Guardian’s ability to solicit
the customers listed under the accounts for sale.
Then,

on

September

Guardian’s objections.

22,

2014,

SAFE

ECF No. 207.5

filed

a

response

to

SAFE first argues that the

value of the assets continues to drop, and thus the sale of assets
needs to happen sooner rather than later.

Second, SAFE accuses

Guardian of deceiving everyone by first seeking only the customer
accounts under the non-disclosure agreement, but now seeking more
information than everyone believed it would need for the bid.
Third, SAFE claims that if Guardian is given more information, it
will

harm

the

overall

value

of

the

assets

at

auction.

Specifically, SAFE asserts that bidders will fear that overly
informed parties, like Guardian, could lure away the customers
listed under the customer accounts.
value of the customer accounts.

Thus, that would decrease the
Finally, SAFE asserts that no

4

Here, Guardian is referring to SAFE and Select Security, who
currently operates Secure US (the company whose assets are at issue
in this action) on behalf of Parmer.
5

Defendant Betty Parmer also filed a response. She states she
adopts SAFE’s response in its entirety. ECF No. 208.
5

other bidders received more information than Guardian, and thus
Guardian’s claims and apprehension are baseless.6
For

the

reasons

stated

below,

this

Court

affirms

the

magistrate judge’s order and overrules Guardian’s objections.
II.

Applicable Law

Title 28, United States Code, Section 636(b)(3) provides that
“[a] magistrate judge may be assigned such additional duties as are
not inconsistent with the Constitution and laws of the United
States.”

See also L. R. Civ. P. 72.01 (stating that a magistrate

judge of this district is designated to perform, and may be
assigned, any duty allowed by law to be performed by a magistrate
judge).

This “additional duties” clause of § 636 does not provide

a statutorily defined standard of review. However, because “orders
relating to postjudgment execution . . . are more analogous to
nondispositive pretrial discovery dispositions,” this Court applies
the “clearly erroneous” standard of review to the magistrate
judge’s order. Fuddruckers, Inc. v. KCOB I, L.L.C., 31 F. Supp. 2d
1274, 1276 n.1 (D. Kan. 1998); see also 12 Charles A. Wright &
Arthur R. Miller, Federal Practice and Procedure § 3068.1 (2d ed.
1997)

(“[o]rders

discovery,

for

regarding
example,

the

hardly

scheduling
seem

to

of

postjudgment

warrant

de

novo

reexamination by the district court”).

6

It should be noted that the asset sale has been postponed
until October 7, 2014, because the advertisements for the sale
failed to include all of the assets for sale. See ECF No. 209.
6

Under the clearly erroneous standard, the court must accept
the trier’s findings of fact and the conclusions drawn from it,
unless “after scrutinizing the entire record, [the court] form[s]
a strong unyielding belief that a mistake has been made.”

Avery

v. Hughes, 2010 WL 1009987, No. 09-CV-265 (D.N.H. Mar. 16, 2010)
(quoting Phinney v. Wentworth Douglas Hosp., 199 F.3d 1, 4 (1st
Cir. 1999)).

Or, stated differently, clearly erroneous means that

“although there is evidence to support it, the reviewing court on
the entire evidence is left with the definite and firm conviction
that a mistake has been committed.” United States v. United States
Gypsum Co., 333 U.S. 364, 395, 68 S. Ct. 525, 92 L. Ed. 746 (1948);
see also Story v. Norwood, 659 F.3d 680, 685 (8th Cir. 2011)
(expounding on clear error standard).
III.

Discussion

As mentioned above, Guardian first asserts that the magistrate
judge’s order limits its access to other items of information it
requests.

Specifically, Guardian claims that the order limits its

access to only the customer accounts, subject to signing nondisclosure and non-solicitation agreements.

Because of these

limitations in the scope of information it can attain, Guardian
believes the order places it at a disadvantage.

However, the

magistrate judge acknowledged in his order that in a judicial sale
of assets that involve customer accounts, many interests must be
balanced.

Of those interests, the two primary interests here are
7

confidentiality of customer information and future competition
among interested bidders. In order to balance those interests, the
magistrate judge limited the scope of information Guardian could
access and the use of the information by requiring Guardian to
submit to non-disclosure and non-solicitation agreements.
This Court agrees with the magistrate judge’s requirements and
limitations regarding the customer accounts.
assets

involved

limitations.

here

warrant

the

magistrate

The nature of the
judge’s

ordered

Although the limitations could disadvantage Guardian

if other bidders, to the exclusion of Guardian, received unfettered
access to all information, here no evidence exists to claim that is
the case.

Guardian’s claim here fails to demonstrate that the

magistrate judge clearly made a mistake.

Thus, this Court affirms

the magistrate judge’s order limiting the scope of information that
Guardian may access.
Guardian next claims that the order limits information that
only Guardian may access but not the information that bidders or
other parties may access.

Specifically, Guardian asserts that

bidders Select Security, who operates the former Secure US for
defendant Parmer until the sale occurs, and SAFE receive an unfair
advantage from the order.

Because the order applies only to

Guardian and not these other two potential bidders, Guardian claims
the order greatly disadvantages it by placing limitations only on
Guardian.

Thus, Guardian seeks to have either the magistrate

8

judge’s order vacated or exclude SAFE and Select Security from the
sale of assets.
Guardian’s objection hardly demonstrates that the magistrate
judge clearly made a mistake.

As provided in the order, this sale

requires a balancing of competition among interested bidders and
concerns about customer confidentiality because of the customer
accounts involved.

This Court fails to see any evidence that some

potential bidders have received greater access to information than
Guardian. The parties that Guardian seeks to exclude from the sale
have obtained more information, if any, simply through their status
as

parties

involved

in

this

case.

The

fact

they

may

have

“received” more information is an inherent risk that exists through
no unfair act of the parties attempting to disadvantage Guardian.
Therefore, this Court agrees with the magistrate judge’s order.
Finally, Guardian objects to the magistrate judge’s order
because it claims that its “non-access” to the information Guardian
seeks has or will hinder its business in West Virginia.

In

particular,

to

Guardian

claims

that

the

order

subjects

competitive limitations that no other bidder faces.

it

As stated

above, the order requires Guardian to sign non-disclosure and nonsolicitation agreements in order to gain access to the customer
accounts. Because no other bidder faces such limitations, Guardian
asserts that these limitations will so disadvantage Guardian at the

9

sale that its future business in West Virginia will be seriously
compromised.
This Court again agrees with the magistrate judge’s order.
The agreements balance interests that will ultimately make the
auction as competitive and fair as the circumstances can allow.
Although SAFE and Select Security could theoretically have obtained
additional information, they obtained such information through
their participation in this civil action.

These are circumstances

that fail to show preferential treatment to the extent that
Guardian claims will unfairly disadvantage it at the auction. This
Court

fails

to

see

any

clear

error

by

the

regarding the limitations placed on Guardian.

magistrate

judge

Therefore, this

Court overrules Guardian’s objections and affirms the magistrate
judge’s order.
Guardian’s

contentions

fail

to

demonstrate

a

“strong

unyielding belief that a mistake has been made” so as to have this
Court alter the magistrate judge’s order. Id. Its objections fail
to convince this Court that the magistrate judge made any errors.
This Court overrules all of Brozik’s objections to the magistrate
judge’s order.

10

IV.
For

the

reasons

Conclusion

stated,

Guardian’s

objections

to

the

magistrate judge’s order granting in part plaintiff’s motion to
require a non-solicitation agreement and denying in part the
limiting of disclosure of competitive information (ECF No. 204) are
OVERRULED.

Thus, this Court AFFIRMS the magistrate judge’s order.

The sale shall proceed at the time and place designated in the
order

readvertising

and

rescheduling

the

sale

of

assets

by

Magistrate Judge Seibert (ECF No. 209).
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

September 29, 2014

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

11