Share Corporation v. Momar Inc et al

Filing 35

ORDER signed by Judge J P Stadtmueller on 2/26/10 denying 3 plaintiff's Motion for Discovery. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
____________________________________________ S H A R E CORPORATION, P l a i n t if f , v. M O M A R , INC., RICHARD ARENSBERG, FRED BAYER, TED BERGER, W E N D Y BUTTREY, STEPHEN KUTI, ROD MILLER, LAW R E N C E SMITH, and IRA W O R E N , D e fe n d a n t. ____________________________________________ Case No. 10-CV-109

ORDER
T h e plaintiff, Share Corporation ("Share"), is a W is c o n s in - b a s e d company that s e lls "speciality chemical solutions," such as disinfectants and cleaners. Share a lle g e s that one of its competitors, Momar Inc. ("Momar"), and several of Momar's e m p lo ye e s have engaged in some "dirty" business. Specifically, on February 9, 2 0 1 0 , the plaintiff filed a complaint in this court against Momar and its employees, R ic h a rd Arensberg ("Arensberg"), Ted Berger ("Berger"), Rod Miller ("Miller"), Ira W o re n ("W o re n "), Fred Bayer ("Bayer"), W e n d y Buttrey ("Buttrey"), Stephen Kuti (" K u ti") , and Lawrence Smith ("Smith"), alleging that the defendants collectively vio la te d state contract and tort law when they breached agreements the employees s ig n e d when they worked for the plaintiff. (Docket #1). Three days later, Share o p te d to file a motion to expedite discovery in the case (Docket #3) and a motion for a temporary retraining order or a preliminary injunction. (Docket #4). Share claims

tha t the motion to expedite discovery is necessary such that the plaintiff can "prepare for the temporary injunction hearing." (Pl.'s Mot. for an Order to Expedite Disc. 2). H a vin g received briefs from both sides on the motion to expedite discovery, the court w ill now address the merits of that motion. S h a re outlines the facts propelling its motion for expedited discovery in its o rig in a l complaint, its brief to the court, and in an affidavit submitted by John W rig h t ("W rig h t"), the Senior Vice President of Sales for Share. In his affidavit, W rig h t notes th a t Share employed all of the defendants, excluding Momar, up until 2009. (W rig h t A ff. ¶ 3). Four of the defendants, Bayer, Buttrey, Kuti, and Smith, were employed a s sales representatives, selling Share's products in various parts of the United S tate s . (W rig h t Aff. ¶ 2-3). Share's sales representatives are trained by and report to "managers." Four former managers are named as defendants in this litigation: A r e n s b e rg , Berger, Miller, and W o re n . (W rig h t Aff. ¶ 3). At the commencement of th e ir employment with Share, both the defendant managers and sales r e p r e s e n ta tiv e s signed agreements in which they pledged to keep certain trade s e c re ts and information 1 confidential and to not solicit Share's customers or

The agreem e n t the em p lo ye e s signed include an exhausting list of inform a tio n which Share alleges to be confidential, including Share's "product form u la tio n s , m a n u f a c tu r in g processes, financial inform a tio n , m a r k e t in g and sales plans, m a t e r ia ls developed for sales, m a r k e t in g , prom o t io n , and training." (Pl's Br. 3-4). M o r e o v e r , W r ig h t's affidavit lists m o r e inform a t io n Share considers to be confidential such as, "the identify o f the purchasing agents and buyers, the nature of the business, particular purchasing requirem e n ts and h a b its , stocking requirem e n ts , product applications, uses and preferences, prices paid for particular products, a n d practices and procedures of custom e r s and prospective custom e r s . " (W r i g h t Aff. ¶ 8).

1

-2-

e m p lo ye e s .2 A majority of the defendants resigned their position with Share in the s u m m e r of 2009 and have since "all gone to work for" Momar. (W r ig h t Aff. ¶ 13). W rig h t asserts in his affidavit, that since joining Momar, the defendants have: (1) s o lic ite d sales from customers to whom they previously sold while employed at S h a r e ; (2) used or disclosed Share's confidential information; and (3) solicited e m p lo ye e s of Share to join Momar. W ith this, the plaintiff has moved the court to a llo w discovery in this case to commence in order to substantiate the plaintiff's a rg u m e n ts to secure a preliminary injunction. (Docket #3). Fed. R. Civ. P. 26(d) provides that "except in categories exempted from initial d is c lo s u re [s ] . . . or when authorized under these rules or by order or agreement of the parties, a party may not seek discovery from any source before the parties have c o n fe rre d as required by Rule 26(f)." Here, the parties have not had a Rule 26(f) c o n fe re n c e , nor has there been any scheduling order. As such, Share may not c o m m e n c e discovery without the consent of the defendants or an order from this c o u rt. See Fed. R. Civ. P. 26(f)(1); Fed. R. Civ. P. 16(b)(2). Share has requested th e court's permission to expedite discovery. (Docket #3).

Specifically, the non-solicitation clauses included a provision that the em p lo ye e s for a period of one ye a r following the end of their affiliation with Share would not "solicit business for chem ic a l sales within his [o r her] geographic region from any custom e r s whom he [or she] served while em p lo ye d at Share, or who w e r e served by persons working under his [or her] direct supervision or control and with whom he [or she] had d ir e c t contact as an em p lo y e e of Share." Moreover, each m a n a g e r agreed that for a period of three years f o llo w in g the end of their em p lo ym e n t with Share they would not "solicit any em p lo ye e s of Share to work with h im [or her in the chem i c a l sales industry] or any [chem ic a l sales] com p a n y with whom he [or she] was e m p lo y e d or with which he [or she] is affiliated."

2

-3-

N e ith e r the Federal Rules of Civil Procedure, nor its accompanying notes p ro vid e the court with any guidance regarding its authority to allow expedited d is c o v e ry. However, as this court discussed in an order from September of last ye a r, when a motion for a preliminary injunction is pending before the court the c o u rt's determination on whether expedited discovery is appropriate is guided by a "g o o d cause" or "reasonableness" standard. See Edgenet, Inc. v. Home Depot U .S .A ., Inc., 259 F.R.D. 385, 387 n2 (E.D. W is . 2009) (citing Centrifugal Acquisition C o rp . v. Moon, No. 09-C-327, 2009 U.S. Dist. LEXIS 56170, at *4 n1 (E.D. W is . May 6 , 2009)). The reasonableness standard allows expedited discovery when the need fo r the expedited discovery outweighs the prejudice to the responding party, based o n the "entirety of the record to date and the reasonableness of the request in light o f the surrounding circumstances."3 Edgenet, 259 F.R.D. at 387. As expedited d is c o ve ry is "not the norm," the plaintiff must make "some prima facie showing of the n e e d for the expedited discovery." Merrill Lynch, Pierce, Fenner & Smith v.

O 'C o n n o r, 194 F.R.D. 618, 624 (N.D. Ill. 2000). The court must protect defendants fro m unfairly expedited discovery. Notaro v. Koch, 95 F.R.D. 403, 405 (S.D.N.Y. 1 9 8 2 ).

Part of the reasonableness inquiry will also ask whether the discovery would "better enable the court to judge the parties' interests and respective chances for success on the m e r its at a prelim in a r y injunction h e a r in g ." Philadelphia Newspapers v. Gannett Satellite Info. Network, No. 98-CV-2782, 1998 U.S. Dist. L E X IS 10511, at *4 (E.D. Pa. July 15, 1998). Moreover, the court notes that m o t io n s for expedited discovery a r e typically denied when the m o v a n t's discovery requests are overly broad." Qwest Com m c 'n s Int'l Inc. v. W o r ld q u e s t Networks, Inc., 213 F.R.D. 418, 420 (D. Colo. 2003)

3

-4 -

H e re , Share has failed to establish the requisite "good cause" for expedited d is c o ve ry. Upon a close examination of all of the documents Share has submitted,4 the court can only conclude that all of the plaintiff's allegations are purely speculative a t this stage of the litigation and do not justify court ordered discovery prior to any p o ten tia l hearing on a preliminary injunction. Share has three substantive

a rg u m e n ts to support the suspicions it alleges in its complaint. First, the plaintiff has s u b m itte d a list of customers who Share alleges have "been solicited" by some of the d e fe n d a n ts in violation of agreements they had with Share. (W rig h t Aff. ¶ 16). A list o f customers, in and of itself, does not indicate that illicit solicitation might have o c c u rre d ; it seems equally as likely to this court that the customers listed sought out th e sales representatives to continue doing business with them, as Share's own c o m p la in t concedes the company's only connection with these customers was th r o u g h its sales representatives. (Compl. ¶ 17). Second, Share points to the fact th a t one of the defendants, Lawrence Smith, left Share on January 1, 2010, and jo in e d Momar to show that Momar and the remaining defendants must have illicitly s o lic ite d Smith to join Share's competitor. (W rig h t Aff. ¶ 16). However, the mere fact th a t Smith accepted employment with one of Share's competitors does not d e m o n s tra te a need for the court to authorize discovery at such an early stage of the litig a tio n , as there is nothing in the record to indicate that Smith was solicited to work

This includes Share's com p la in t and accom p a n y in g exhibits, Share's m o t io n for a tem p o r a r y r e s t r a in in g order/prelim in a r y injunction, Share's m o t io n for expedited discovery, and the John W r i g h t ' s a f f i d a v it .

4

-5 -

a t Momar by Share's former employees. Finally, Share asserts that because the d e fe n d a n t sales representatives and managers worked for the plaintiff and are now e m p lo ye d by Momar in a similar capacity, they must be "using or disclosing Share's c o n fid e n tia l information and trade secrets" for the benefit of themselves or Momar. (W rig h t Aff. ¶ 14). Again, such a claim is purely speculative and, while Share's a lle g a tio n may prove to be true, expedited discovery, because of the burden it im p o s e s on all parties, should not be used as a means to test claims that are wholly u n s u b s tan tia te d .5 Moreover, the plaintiff has not explained the need for the court to impose expedited discovery deadlines, as opposed to the typical path parties take p rio r to a preliminary injunction hearing with the parties agreeing on their own to a m u tu a lly acceptable discovery plan. M o re o ve r, the court finds that the harm imposed on the defendants in this c a s e in having to engage in the proposed expedited discovery plan would be s ig n ific a n t. Share's proposed discovery plan is opened-ended and broad, allowing fo r: (1) no more than fifteen interrogatories within ten business days of service; (2) n o more than twenty requests for production of documents within ten business days o f service; and (3) depositions of all of the individual defendants within twenty b u s in e s s days from service. Share does not limit the discovery to any particular is s u e s . Such an intense discovery process is particularly burdensome given that the

The court's com m e n t is propelled by the fact that m o r e than half a year has passed since Share's e m p lo ye e s resigned from the com p a n y. Despite this sizable length of tim e , Share subm itte d little evidence to indicate that the defendants are acting in violation of the law. This delay also m a k e s the court doubt S h a r e 's need to expedite the initial stages of this litigation.

5

-6-

in d ivid u a l defendants live in Georgia, New York, North Carolina, South Carolina, D e la w a re , and Vermont, respectively. (Compl. ¶¶ 2-10). W e ig h in g the plaintiff's n e e d for court ordered expedited discovery versus the burden such an order would im p o s e on the defendants, the court concludes that the expedited discovery that has b e e n proposed is inappropriate in this case and will deny the plaintiff's motion for e xp e d ite d discovery without prejudice. However, the court readily acknowledges the need for all parties to engage in some limited discovery in case there remains a need for a hearing on a p re lim in a ry injunction after this order.6 In fact, the court will not hold such a hearing if the parties have not engaged in some preliminary discovery, as the court refuses to become the forum in which to do the discovery. Going forward, the court strongly e n c o u ra g e s the parties to engage in open and honest discussions to work out a m u tu a lly agreeable discovery plan in anticipation of a potential hearing on a p r e lim in a r y injunction in this case. For now, however, the court declines to impose a broad expedited discovery plan, when the plaintiff has not demonstrated the need fo r such a course of action. A c c o rd in g ly,

As such, the court warns the defendants that the current order is not an excuse to obstruct the d is c o v e r y process before a potential prelim in a r y injunction hearing. The court expects the defendant to heed i t s invitation to engage in discovery discussions with the plaintiff prior to such a hearing or risk appropriate s a n c t io n s .

6

-7-

IT IS ORDERED that plaintiff's motion for discovery (Docket #3) be and the s a m e is hereby DENIED. D a te d at Milwaukee, W is c o n s in , this 26th day of February, 2010. BY THE COURT:

J .P . Stadtmueller U .S . District Judge

-8-