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Autotech Technologies Limited v. Automationdirect.com, Inc.

United States District Court, N.D. Illinois, Eastern Division
Jun 22, 2006
No. 05 C 5488 (N.D. Ill. Jun. 22, 2006)

Opinion

No. 05 C 5488.

June 22, 2006


THE AUTOTECH PARTIES' MEMORANDUM IN OPPOSITION TO AUTOMATIONDIRECT.COM'S BRIEF IN SUPPORT OF PROPOSED PROTECTIVE ORDER


Autotech Technologies Limited Partnership, AVG Advanced Technologies Limited Partnership, Shalli Industries, Inc., and Shalabh Kumar (collectively referred to herein as the "Autotech Parties"), by their attorneys, Cary S. Fleischer, David G. Susler, and Martin Corn, for their Memorandum in Opposition to AutomationDirect.com's Brief in Support of Proposed Protective Order, state as follows:

Martin Corn only represents AVG Advanced Technologies Limited Partnership and Shalabh Kumar.

I. INTRODUCTION

At least the Autotech Parties and AutomationDirect.com, Inc. ("ADC"), agree on one thing: it is essential to the Autotech Parties' continuing ability to both defend against ADC's claims as well as prosecute Autotech's own claims that the Autotech Parties' in-house attorneys and most critical employee, individual defendant Shalabh Kumar, be given access to ADC's information. Unfortunately, ADC arrives at the counter-intuitive conclusion that this Court should therefore deny the Autotech Parties the very access that is critically important to the Autotech Parties' ability to properly litigate this action.

The Autotech Parties have presented sworn statements from their attorneys and Mr. Kumar that these people are not involved in any areas of the Autotech Parties' business that could possibly result in the use or disclosure of ADC's confidential information. ADC fails to provide any evidence to rebut these statements, instead offering conclusory, unsupported innuendo to claim there is some undefined risk of use or disclosure. In fact, ADC fails altogether to discuss the relevant inquiry, namely, what risk ADC claims there might be to its allegedly confidential information if the Autotech Parties are provided the access they need.

ADC instead focuses its entire brief on demonstrating how critically important the people for whom access is being sought are to the Autotech Parties' defense and claims. The Autotech Parties agree.

ADC has failed to demonstrate that: (1) its information is confidential; and (2) there is any risk of exposure to its allegedly confidential information if the Autotech Parties' in-house attorneys and critical employee are given access. On the other hand, the Autotech Parties have demonstrated: (1) there is no risk of use or disclosure of ADC's allegedly confidential information; and (2) the Autotech Parties' defense and claims will be severely impaired if their in-house attorneys and critical employee are not given access to that information.

"The burden to show good cause is on the party seeking the [protective] order." (Memorandum Opinion and Order ("Opinion"), Dkt. No. 172, p. 8, ¶ 2, citing Jepson, Inc., v. Makita Elec. Works, Ltd., 30 F.3d 854, 858 (7th Cir. 1994).) In denying ADC's underlying motion for a Protective Order, this Court found, ADC's "[c]onclusory statements are not sufficient." (Opinion, Dkt. No. 172, p. 8, ¶ 2, citing Zenith Electronics Corp v. Exzec, Inc., 1998 WL 9181 at *8 and 8 C. Wright A. Miller, Federal Practice and Procedure § 2035, p. 265 (1970).) ADC nonetheless continues making the same conclusory statements.

The Autotech Parties' equitable, evenhanded Protective Order should therefore be entered.

II. ADC STILL HAS NOT SHOWN WHY THE INFORMATION IT SEEKS TO PREVENT THE AUTOTECH PARTIES FROM SEEING IS CONFIDENTIAL, OR HOW THEIR ACCESS COULD LEAD TO USE OR DISCLOSURE

ADC previously filed two (2) legal briefs, each of which should have explained how and why the information to which it seeks to prevent access is confidential. These briefs should also have explained why ADC believed the Autotech Parties' in-house attorneys and critical employee would use or disclose this information. However, neither of these briefs offered either of these explanations.

The Court's Opinion, now the law of the case, specifically found ADC had initially failed to make any showing whatsoever that the information was protectable. "In the end, there is nothing in ADC's opening brief that supports its position that its customer list information warrants protection as a trade secret or confidential material." (Opinion, Dkt. No. 172, p. 15, ¶ 2.)
The Court noted that ADC's reply brief finally attempted to develop its argument that the information may be confidential. After finding that ADC's argument might be waived because it was not developed until ADC's reply brief, (Opinion, Dkt. No. 172, p. 16, ¶ 1), the Court still found ADC's argument to be inadequate. "Even then, in its reply brief, ADC makes no mention of what law might be applicable to this issue. It is unclear whether ADC is claiming the customer list is `a trade secret, or . . . confidential research, development or commercial information.'" ( Id., p. 16, ¶ 2.) "If ADC considers its customer list information a trade secret, it does not say so. . . ." ( Id., p. 17, ¶ 1.)

ADC again fails to demonstrate how and why the information may be confidential in its brief in support of proposed Protective Order, marking its third failure to do so. ( See Dkt. No. 194.) This despite the fact that the Court's Opinion denying ADC's Motion for a Protective Order made clear that ADC's showing concerning the allegedly confidential nature of its information was woefully inadequate.

ADC also fails to show how there is a risk of use or disclosure of its allegedly confidential information should the Autotech Parties' in-house attorneys and critical employee see that information. Instead, ADC again makes leaps of unsupported, and insupportable, logic, claiming that the Autotech Parties' critical employee, Shalabh Kumar, will not be able to avoid using the information because he "runs" the Autotech Parties' "business." In fact, Mr. Kumar does not direct the Autotech Parties' sales people to contact specific customers. Instead, the sales people decide which customers to contact. ADC nonetheless contends, based on its conclusory statements and innuendo, that Mr. Kumar should be denied access to the information, despite the fact that he is the Autotech Parties' most knowledgeable person concerning the agreement and products that resulted in this case, and the parties' issues and claims in this matter.

Even more tenuous is ADC's argument why in-house attorneys David Susler and Martin Corn should be denied access to ADC's discovery materials. For all intents and purposes, ADC's argument is this: disclosure is inevitable because the in-house attorneys communicate regularly, and work closely, with Mr. Kumar and the Autotech Parties. But this is true of any competent attorney, regardless whether he is inside or outside, retained counsel. Taken to its logical conclusion, ADC's argument would permit only an incompetent attorney who does not properly communicate with his client to view the information.

ADC's failure to show that its information is the type of confidential information that is entitled to protection, and ADC's failure to show how giving the Autotech Parties access to the information could lead to an improper use or disclosure of the information each warrant that (a) no Protective Order ought to be entered or, in the alternative, (b) Autotech's Protective Order ought to be entered.

III. ADC ADMITS HOW IMPORTANT IT IS TO THE AUTOTECH PARTIES THAT THEIR LITIGATION ATTORNEYS AND MOST CRITICAL EMPLOYEE HAVE ACCESS TO ADC'S INFORMATION

In their memorandum in support of their proposed Protective Order, the Autotech Parties demonstrated the importance of their in-house attorneys and critical employee having access to ADC's information. Indeed, the Autotech Parties submitted the declarations of in-house attorneys David Susler and Martin Corn as well as critical employee Shalabh Kumar. These sworn statements have not been rebutted.

ADC argues, "Autotech has since dropped its insistence that [in-house attorney David] Susler be provided unrestricted access to discovery materials. . . ." ( See ADC's Brief in Support of Proposed Protective Order ("ADC's response brief"), Dkt. No. 194, p. 4, n. 3.) In support of its argument, ADC cites a single statement made during the status hearing on May 11, 2006. After this status hearing, Magistrate Judge Cole ordered each party to submit briefing and its proposed Protective Order. ( See Dkt. No. 184.) The Autotech Parties have neither waived nor conceded Mr. Susler's right to have access to ADC's information as a result of this isolated statement, made while the parties were still trying to negotiate an agreed Protective Order.

ADC does not deny the importance of these people's access to the information. In fact, ADC agrees! ADC admits Mr. Kumar's critical role in assisting Mr. Corn, who has been the lead attorney in every facet of discovery in this matter since he accepted the in-house position. ( See ADC's response brief, Dkt. No. 194, p. 2, ¶ 3, through p. 3, ¶ 1.)

A. ADC Has Failed to Articulate a Legitimate, Cognizable Reason Why In-House Attorneys David Susler and Martin Corn Should Not Have Access to ADC's Information.

The declarations of in-house attorneys David Susler and Martin Corn establish that they are not involved in the Autotech Parties' "competitive decisionmaking," e.g., decisions concerning the pricing, product design, marketing, advertising, and sales of the Autotech Parties' products, nor are they involved in related business areas. (Susler Decl., ¶ 5; Corn Decl., ¶ 14.) ADC even admits it cannot show Mr. Corn will be involved in competitive decisionmaking. In-house Attorneys Susler and Corn do not monitor litigation: they are two of the three attorneys actively involved in the Autotech Parties' litigation.

Specifically, ADC admits, "Here, it is somewhat difficult to gauge Mr. Corn as a competitive decision-maker, since he is still a new Autotech employee. . . ." (ADC's response brief, Dkt. No. 194, p. 10, ¶ 1.) ADC then argues that, because Autotech's legal department is small, Mr. Corn will, of necessity, become involved in Autotech's competitive decisionmaking. ADC's unsupported leap of logic depends on the false premise thatsomeone in Autotech's legal department must be involved in competitive decisionmaking. However, the sworn statements of Attorneys Susler and Corn establish that no one in Autotech's legal department is involved in competitive decisionmaking. Those decisions are made by Autotech's business people.

Cary Fleischer is the third attorney. Because he anticipated that Mr. Fleischer would be the lead trial attorney, Mr. Corn did not indicate he would be lead trial attorney when he entered his appearance in this action.

David Susler has not been involved with customer sales or marketing. (Susler Decl., ¶ 3.) Instead, the vast majority of Mr. Susler's work is litigation, with him performing a small amount of additional transactional work, e.g., reviewing contracts, preparing corporate documents, and similar tasks. (Susler Decl., ¶ 4.)

Martin Corn has worked almost exclusively on the subject case, as the lead attorney in handling discovery, since he started as in-house counsel three (3) months ago. (Corn Decl., ¶¶ 9-11.) Mr. Corn's interview comprised a discussion to determine if he was capable of handling this case, during which he was informed that he would be primarily responsible to litigate this matter. (Corn Decl., ¶¶ 3-6.)

Mr. Corn has taken all of the depositions noticed by the Autotech Parties since he started working for the Autotech Parties. Mr. Corn has taken the depositions of all three of the ADC Value Added Resellers that have been deposed to date. (Corn Decl., ¶ 12.) Mr. Corn has also defended the depositions of the two Autotech employees that ADC has deposed to date, one of which was a Rule 26(b) deponent. (Corn Decl., ¶ 13.)

Attorneys Susler and Corn report to the Autotech Parties' outside attorney Cary Fleischer, who instructs them how to handle the discovery, briefing, and Court conferences and hearings in this case. (Susler Decl., ¶¶ 6-7; Corn Decl., ¶¶ 15-16.) Attorneys Susler and Corn are Mr. Fleischer's de facto associates — the only difference is that their paychecks come from the Autotech Parties, not Mr. Fleischer's firm. (Susler Decl., ¶ 8; Corn Decl., ¶ 17.) ADC relies solely on the name at the top of Attorneys Susler's and Corn's paychecks to argue they should not be permitted to see ADC's allegedly confidential information. But this is a distinction without a difference.

This is the opposite of the typical inside/outside counsel relationship, where outside, retained counsel reports to, advises, and generally receives authority from in-house counsel.

The Autotech Parties' headquarters are in Bettendorf, Iowa. (Kumar Decl., ¶ 2.) All of ADC's allegedly confidential information is nevertheless kept in Mr. Fleischer's offices in Chicago, where Attorneys Susler and Corn have a dedicated office. (Susler Decl., ¶ 9; Corn Decl., ¶ 18.) Future productions of ADC's allegedly confidential information will similarly be kept in Mr. Fleischer's offices. (Susler Decl., ¶ 10; Corn Decl., ¶ 19.) Attorneys Susler and Corn only use the Autotech Parties' server to access the Internet. (Susler Decl., ¶ 11; Corn Decl., ¶ 20.)

ADC points to no evidence whatsoever to rebut the sworn declarations of Attorneys Susler and Corn. Instead, ADC's argument vis-a-vis Mr. Corn is that, since he works closely with Mr. Kumar, Mr. Corn will undoubtedly pass along the information to him. ( See ADC's response brief, Dkt. No. 194, pp. 10-13.) ADC's argument is obviously, inherently flawed: ADC argues that the only attorney who ought to have access to its allegedly confidential information is one who does not work closely with his client.

ADC makes no argument that Mr. Susler should not have access to its information, erroneously concluding that the Autotech Parties have conceded that Mr. Susler does not need to see the information. See n. 3, supra.

Indeed, ADC's argument is ludicrous. On the one hand, ADC argues that Mr. Corn must be denied access to ADC's information because his relationship to Mr. Kumar is too close. On the other hand, ADC argues that the only attorney who should be granted access to ADC's information should be outside, retained attorney Cary Fleischer because he has represented the Autotech Parties for nearly a quarter century. ( Compare ADC's response brief, Dkt. No. 194, p. 13, n. 8, with ADC's response brief, Dkt. No. 194, p. 13, ¶ 2.)

ADC's argument that Attorneys Susler and Corn should not be given access to its allegedly confidential information is based on the innuendo that, by virtue of their status as in-house counsel, they cannot be trusted. But it is improper to decide whether an attorney will be given access to an opposing party's confidential information based only on whether the attorney is outside, retained counsel or in-house counsel. U.S. Steel Corp. v. The United States, 730 F.2d 1465 (Fed. Cir. 1984). Because Attorneys Susler and Corn are, for all intents and purposes, the associates of Autotech Parties' outside, retained attorney Cary Fleischer and have no role in competitive decisionmaking, there is no risk they will improperly use or disclosure of ADC's information.

ADC openly admits, "Here, it is somewhat difficult to gauge Mr. Corn as a competitive decision-maker, since he is still a new Autotech employee, hired in March 2006." (ADC's response brief, Dkt. No. 194, p. 10, ¶ 1.) But ADC immediately leaps off this candid admission to reach a wholly illogical conclusion: "Autotech's legal department is small . . . and certain facts revealed during Mr. Corn's short tenure establish that there can be no doubt that he is, in effect, Mr. Kumar's in-house legal spokesman." Id.

The so-called "certain facts" upon which ADC relies to reach its improper conclusion that Mr. Corn "is, in effect, Mr. Kumar's in-house legal spokesman" are: (a) Mr. Kumar has been present at the deposition taken in this action, which ADC even admits he has a right to do; (b) Mr. Kumar allegedly "guided" Mr. Corn "behavior" by "communicating" with Mr. Corn when he began taking depositions on his third day of employment; and (c) Mr. Kumar went with Mr. Corn on a document production. (ADC's response brief, Dkt. No. 194, p. 10, ¶ 1, through p. 11, In. 6.) Based on these so-called "certain facts," ADC erroneously concludes that Mr. Corn will either inadvertently or, as ADC implies but is careful not to say, deliberately disclose ADC's information to his "boss," because "Mr. Corn is taking his direct instructions in this case straight from the top of the company." (ADC's response brief, Dkt. No. 194, p. 11, ¶¶ 1-2.) Not satisfied with its farfetched statements and arguments already made, ADC states what Mr. Corn must do in order to do his job!

Mr. Corn began working as in-house attorney on March 13, 2006 (Corn Decl., ¶ 9), and took his first deposition in this action two days later, on March 15, 2006 (Corn Supp. Decl., ¶ 4).

Specifically, ADC makes the unsupported claim that, "[i]f Mr Corn does not report his own analysis of the potential impact of developments in the case on the business of Autotech, he will not be doing his job. . . ." (ADC's response brief, Dkt. No. 194, p. 12, Ins. 2-4.)

The Autotech Parties are forced to respond to ADC's unsupported, and insupportable statements and arguments. Autotech has, for years, hired attorneys to work in-house, which attorneys have functioned as associates of Cary Fleischer. ( See Fleischer Decl., ¶¶ 2-6.) Mr. Fleischer has, since this case began, been primarily responsible for this litigation, with in-house attorney David Susler at all times serving as Mr. Fleischer's associate. (Fleischer Decl., ¶ 7.) When it became obvious that issues in this case involved the intellectual property areas of copyright and trademark, outside intellectual property litigation attorney Alan Dalinka was retained. (Fleischer Decl., ¶¶ 8-9.) The Autotech Parties subsequently advertised for an intellectual property litigation attorney, which advertisement ultimately resulted in Mr. Corn's employment as in-house attorney. (Corn Supp. Decl., ¶ 3.) Intellectual property litigator Martin Corn was hired in-house to replace Mr. Dalinka in this litigation. (Fleischer Decl., ¶ 9.)

ADC has failed to carry its burden of showing a legitimate justification for limiting Attorneys Susler and Corn's access to ADC purportedly confidential information. See Jepson, Inc., v. Makita Elec. Works, Ltd., 30 F.3d 854, 858 (7th Cir. 1994) (burden is on the party seeking the order). Attorneys Susler and Corn should therefore be granted access to ADC's allegedly confidential information.

Attorneys Susler and Corn have expressly confirmed their duty to maintain all ADC information as confidential in order to provide ADC with an additional, redundant assurance.

B. ADC Admits that Individual Defendant Shalabh Kumar Is the Autotech Parties Most Critical Employee Who Has Been Most Actively Involved with the EZ Touch and EZ Text Panels and the Subject Litigation. Mr. Kumar Is Not Involved in Targeting Specific Customers and Will Be Equally Bound by the Protective Order to Use the Discovery Only for the Purposes of this Litigation.

Equally tenuous is ADC's argument to prevent individual defendant Shalabh Kumar's access to the information. ADC fails to rebut Defendant Shalabh Kumar's sworn declaration that he is the person who is most actively involved with the EZ Touch and EZ Text Panels and ADC. Meanwhile ADC admits Mr. Kumar is very actively involved in the Autotech Parties' litigation of this dispute. ( See, e.g., ADC's response brief, Dkt. No. 194, p. 2, ¶ 3.) Indeed, Mr. Kumar is the most critical person to the Autotech Parties', and his own, defense in this matter.

ADC has failed to rebut any of Mr. Kumar's sworn statements that:

• He has been most actively involved in the subject litigation in an effort to help keep the costs of this action manageable. (Kumar Decl., ¶ 8.)
• He has attended every deposition as well as every substantive hearing and court conference. (Kumar Decl., ¶ 9-10.)
• He has been involved in every document production. (Kumar Decl., ¶ 11.)
• Because of his background regarding the parties' relationship and intimate knowledge of the development of the EZ Touch and EZ Text Panels, he is able to recognize the importance of some information that someone without his knowledge and background could not. (Kumar Decl., ¶ 12.)
• He is best equipped to analyze the complex, technical issues that are expected to arise in this case, which involves trademark, copyright, and anticipated patent issues. (Kumar Decl., ¶ 14.)

Mr. Kumar does not direct Autotech salespeople to contact specific customers. (Kumar Supp. Decl., ¶ 7.) Instead, the salespeople make their own decisions concerning which customers to contact and when. (Kumar Supp. Decl., ¶ 9.) The reason is simple: on the average business day, Autotech salespeople make more than a hundred (100) customer calls, contacting the customers and prospective customers who have inquired regarding Autotech's products. (Kumar Supp. Decl., ¶ 8.)

ADC has shown no risk that Mr. Kumar will use or disclose ADC's information. In addition, ADC has failed to cite any evidence whatsoever that even approaches a legitimate argument that permitting Mr. Kumar to see ADC's information could result in the possibility of some damage that is not addressed in the Autotech Parties' proposed Protective Order. Beyond these shortcomings in ADC's position, there is another important reason why Mr. Kumar should get to see the information. ADC seeks to hold Mr. Kumar personally liable for all of the alleged actions and omissions of the other Autotech Parties. So Mr. Kumar has a vested interest in this matter.

In an effort to brush over the obvious weaknesses in its argument, ADC states, without any support whatsoever, that "Autotech is a relatively small company without the formal, separate departments of larger companies for such areas as marketing, accounting, RD, and legal." ADC's response brief, Dkt. No. 194, pp. 11, ¶ 1.) Contrary to ADC's unsupported, and insupportable, claim, Autotech has a separate department for, inter alia, each of the following areas; marketing; accounting; research and development; and legal. ( See Kumar Suppl. Decl., ¶ 6.)

To deny access to the individual who is most knowledgeable regarding the issues in this litigation, also a cross-defendant in this case, would "unduly `hamstring' [the party's] litigious efforts." THK America, Inc., v. Nippon Seiko K.K., 141 F.R.D. 461, 462 (ND Ill. 1991). In the subject action, it would "unduly `hamstring' [both the Autotech Parties' and Mr. Kumar's] litigious efforts" if he is denied access to ADC's purportedly confidential information.

IV. ADC'S STONEWALLING OF AUTOTECH'S DISCOVERY EFFORTS

ADC first tried to prevent relevant discovery concerning its customer information from going forward at all. Having failed that, ADC is still trying to inhibit and delay the Autotech Parties' discovery of this relevant information. This appears to be part of a pattern of stonewalling by ADC.

ADC's motion for a Protective Order claimed inter alia that ADC's customer information was completely irrelevant to the trademark ownership and confusion issues presented in this action. Magistrate Judge Cole denied ADC's motion for a Protective Order and ordered the parties to propose a Protective Order under which that information could be produced.

In ADC's response to Autotech's second expedited request for production of documents and things, ADC objected that nearly every request was "not relevant and not reasonably calculated to lead to discovery of admissible evidence." ( See attached Ex. A.) For example, ADC claimed that documents relating to warranty returns were irrelevant despite the fact that ADC was asserting a claim against the Autotech Parties for breach of warranty relating to the warranty returns. ( Compare Ex. A, p. 5, req. no. 3, with Dkt. No. 159, pp. 1-4, ¶¶ 1-7.)

In fact, ADC even went so far as to take the position that its invoices for advertising the EZ Touch and EZ Text products are "not relevant," despite the fact that Autotech has asserted that ADC overcharged the parties' joint account for advertising expenses. ( See Ex. A, pp. 8-9, req. no. 10.)

ADC's position and proposed Protective Order are consistent with ADC's continuous approach in this litigation, i.e., to raise issues and then complain when the Autotech Parties want ADC to produce the information related to those same issues that ADC raised.

V. CONCLUSION

Goliath ADC admits it wants to take away David Autotech's stones. ADC's only purpose in limiting access to its information is to hamstring the Autotech Parties. ADC claims its customers know it owns the subject trademarks and are confused by the Autotech Parties' use of those marks. Yet ADC has repeatedly taken the position, both in its discovery responses and before this Court, that information concerning its customers is irrelevant to the issues in this case.

Denying the Autotech Parties' in-house attorneys and critical employee access to ADC's allegedly confidential information will severely limit the Autotech Parties' ability to defend themselves and prosecute Autotech's claims, which will not result in "the appropriate restrictions so that the interest in confidentiality is properly balanced with the need for discovery either to support a party's claim or defense." (Opinion, Dkt. No. 172, p. 18, ¶ 1.) The Autotech Parties' proposed Protective Order strikes that balance.

WHEREFORE, Autotech Technologies Limited Partnership, AVG Advanced Technologies Limited Partnership, Shalli Industries, Inc., and Shalabh Kumar pray this Honorable Court enter the proposed Protective Order submitted simultaneously herewith, and that the Court grant all other and further relief as it deems just and proper.


Summaries of

Autotech Technologies Limited v. Automationdirect.com, Inc.

United States District Court, N.D. Illinois, Eastern Division
Jun 22, 2006
No. 05 C 5488 (N.D. Ill. Jun. 22, 2006)
Case details for

Autotech Technologies Limited v. Automationdirect.com, Inc.

Case Details

Full title:AUTOTECH TECHNOLOGIES LIMITED PARTNERSHIP, an Illinois limited…

Court:United States District Court, N.D. Illinois, Eastern Division

Date published: Jun 22, 2006

Citations

No. 05 C 5488 (N.D. Ill. Jun. 22, 2006)