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Atmosphere Hospitality Management, LLC v. Curtullo

United States District Court, D. South Dakota, Western Division

January 12, 2015

ZELJKA CURTULLO, Defendant, SHIBA INVESTMENTS, INC. and KARIM MERALI, Defendants And Third-Party Plaintiffs,
JAMES HENDERSON, Third-Party Defendant.


VERONICA L. DUFFY, Magistrate Judge.


This matter is before the court on plaintiff Atmosphere Hospitality Management, LLC's complaint, filed pursuant to the court's diversity jurisdiction, 28 U.S.C. ยง 1332. Now pending is a motion for a protective order, Docket No. 141, also filed by Atmosphere. The district court, the Honorable Karen E. Schreier, referred this motion to this magistrate judge for decision. See Docket No. 165


The general background of the facts of this litigation and the identity of the parties is set forth in this court's recent opinion filed at the court's Docket No. 168. That statement of facts is incorporated by reference herein. The hyphenated version is that plaintiff and defendants, Karim Merali and Shiba Investments, Inc., entered into two agreements, a licensing agreement and an operating agreement.[1] Under the former, plaintiff granted defendants the right to use plaintiff's "Adoba" brand for defendants' hotel in Rapid City, South Dakota. Under the latter, plaintiff undertook to operate defendants' hotel under the "Adoba" brand. Litigation ensued after defendants unilaterally terminated both agreements in April, 2013. Zeljka Curtullo is a defendant who was added to the lawsuit later.

On September 3, 2014, defendants served plaintiff with their third set of discovery requests consisting of, inter alia, eleven interrogatories and fifteen requests for the production of documents. Initially, plaintiff objected to answering the interrogatories as they were above the maximum limit of 25 interrogatories set by the district court in this case. See Docket No. 55. However, after filing the initial motion but before filing its reply brief, plaintiff provided answers to those interrogatories to defendants. See Docket No. 160 at p. 2. The court finds the issue of the interrogatories to now be moot and will not discuss that issue further.

Believing that many of the requests for documents called for proprietary information, plaintiff's counsel wrote to defendants' counsel on September 8, 2014. See Docket No. 143-4. In that letter, plaintiff inquired whether defendants were agreeable to entering into a confidentiality agreement. Id. at p. 3. If so, plaintiff's counsel stated that she would draft a confidentiality agreement and send it to defense counsel for his review. Id . Plaintiff received no response to this inquiry.

On October 2, 2014, plaintiff's counsel sent another letter to defense counsel, this time enclosing a proposed confidentiality agreement. See Docket No. 143-5. Plaintiff indicated that if defendants would sign the agreement, the discovery could be turned over the next day. Id . Again, plaintiff received no response to this inquiry.

On October 3, 2014, plaintiff's counsel sent a letter along with plaintiff's responses to defendants' third set of requests for admission. See Docket No. 143-6. Again, plaintiff's counsel inquired about the matter of whether defendants would agree to enter into a confidentiality agreement for the protection of plaintiff's proprietary information. Id.

On October 6, 2014, plaintiff produced documents in response to defendants' third set of requests for the production of documents, but withheld three documents it deemed proprietary. See Docket No. 143-7. Plaintiff again inquired, in writing, about whether defendants would agree to a confidentiality agreement for the three documents that were being withheld. Id . At 5:04 pm on October 6, defendants' counsel responded that he would like to see a detailed privilege log before determining whether to agree to a confidentiality agreement. See Docket No. 157-1. Plaintiff filed its motion for a protective order one minute later. See Docket No. 141.

After filing the motion, plaintiff's counsel wrote to defendants' counsel on October 29, 2014, giving details regarding the three documents plaintiff had withheld. See Docket No. 161-1 at pp. 2-3. Again, plaintiff's counsel asked "whether you will sign the Protective Order I proposed and we can take the issue off the Court's docket." Id. at p. 3. Plaintiff states that, once again, it received no response from defendants. Plaintiff now asks the court to grant a protective order as to the three documents it has withheld. See Docket No. 141. A proposed order was supplied to the court for consideration. See Docket No. 141-1.

Defendants resist plaintiff's motion. They argue that plaintiff did not meet and confer with defendants prior to filing the instant motion. Defendants also object to the terms of plaintiff's proposed protective order, arguing that the terms of the order would prevent defendants from examining witnesses about the documents covered by the order.


A. Plaintiff Has Satisfied the Meet-and-Confer Requirement

Rule 37(a)(1) requires the parties to meet and confer to attempt to resolve discovery disputes prior to filing a motion to compel. See FED. R. CIV. P. 37(a)(1). In addition, this court's local rules impose a similar requirement. See DSD LR 37.1. The record indicates that plaintiff's counsel wrote to defendants' counsel on four occasions prior to filing the instant motion, identifying the need for a protective order and even supplying a proposed protective order. Although plaintiff's counsel inquired whether defendants would agree to enter into a confidentiality agreement on these occasions, no response is in the record until October 6, one minute before the instant motion was filed.

Defense counsel portrays plaintiff's attempts to meet-and-confer as unreasonable as he was in trial in Lawrence County on October 2 and 3. However, that does not explain counsel's failure to respond altogether to the September 8 letter, even if just to indicate whether defendants were amenable to the idea of a protective order.

Plaintiff points out that Rule 37 does not allow plaintiff to simply withhold documents; if plaintiff believed it was entitled to protection, it was incumbent upon plaintiff to move for a protective order. Plaintiff asserts that it was required to do so before close of business on October 6 because that is when the discovery responses were due. The court finds that plaintiff's attempts to meet and confer satisfy Rule 37 and Local Rule 37.1.

That being said, the intent of the meet-and-confer requirement is to allow the parties to discuss the discovery matter and see if a solution can be arrived at. To that end, personal communication between the lawyers, face-to-face or via telephone, is encouraged. It is too easy to take rigid positions on issues when all that takes place are exchanges of letters or email. This case has no doubt created tensions between counsel with its multiple discovery disputes, and the tenor of the briefing on this motion shows it, but the court encourages counsel in the future to attempt more personal contact with the other side when trying to resolve a discovery dispute.

B. Whether a Protective Order is Warranted

Rule 26(c) of the Federal Rules of Civil Procedure address the issue of protective orders. That rule provides in pertinent part:

The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense including one or more of the following:... (G) requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way;

See FED. R. CIV. P. 26(c)(1)(G).

The trial court has significant discretion in either granting or denying a protective order, and "only an abuse of that discretion would be cause for reversal." General Dynamics Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1212 (8th Cir. 1973). Under Rule 26(c), a court may grant a protective order only upon a showing of good cause by the moving party. Id . The movant must articulate "a particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements." Id . (additional citation and quotation marks omitted); see also Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994) ("Good cause is established on a showing that disclosure will work a clearly defined and serious injury to the party seeking disclosure. The injury must be shown with specificity. Broad allegations of harm, unsubstantiated by specific examples or articulated reasoning, do not support a good cause showing.") (additional citations and quotation marks omitted). The court must also consider "the relative hardship to the non-moving party should the protective order be granted." General Dynamics Corp., 481 F.2d at 1212 (additional citation omitted).

In Pansy, The Third Circuit set forth a thoughtful analysis of the goodcause standard that this court finds instructive. Although Pansy dealt specifically with the issue of whether the trial court abused its discretion in first granting and then subsequently refusing to modify a confidentiality order over a settlement agreement, confidentiality orders over matters concerning stages of litigation and protective orders over discovery are "functionally similar, and require similar balancing between public and private concerns." Pansy, 23 F.3d at 786.

In considering whether good cause exists for a protective order, the federal courts have generally adopted a balancing process.... [T]he court... must balance the requesting party's need for information against the injury that might result if uncontrolled disclosure is compelled. When the risk of harm to the owner of [a] trade secret or confidential information outweighs the need for discovery, disclosure [through discovery] cannot be compelled, but this is an infrequent result.
Once the court determines that the discovery policies require that the materials be disclosed, the issue becomes whether they should "be disclosed only in a designated way, " as authorized by the last clause of Rule 26(c)(7).... Whether this disclosure will be limited depends on a judicial balancing of the harm to the party seeking protection (or third persons) and the importance of disclosure to the public. Courts also have a great deal of flexibility in crafting the contents of protective orders to minimize the negative consequences of disclosure and serve the public interest simultaneously.

Id. at 787 (additional citations omitted).

The balancing test requires courts to consider a variety of factors to determine if a protective order is appropriate. Id. at 789. These factors, discussed below, "are unavoidably vague and are of course not exhaustive" so as to provide courts with "the ...

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