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)

Download PDF
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

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?