eTopus Technology, Inc. a Delaware v. Liu

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN FRANCISCO DIVISION [7] 8 ETOPUS TECHNOLOGY, INC., Case No. 23-cv-06594-HSG (PHK) 9 Plaintiffs, 10 v. ORDER RESOLVING DISCOVERY DISPUTE RE: DEFENDANT’S FIVE 11 HANLI LIU, FLASH DRIVES AND DOCUMENTATION TO CONFIRM 12 Defendants. DEFENDANT’S EMPLOYMENT BY ZHEJIANG UNIVERSITY [13] Re: Dkts. No. 41, 42, and 46. [15] 16 This is a trade secrets case, in which Plaintiff Etopus Technology, Inc., (“Etopus”) alleges 17 generally that Defendant Hanli Liu misappropriated certain trade secrets in the time period 18 surrounding his departure from Etopus (where he previously worked as an engineer). [Dkt. 1]. This 19 case has been referred to the undersigned for discovery. See Dkt. 43. Now before the Court is a 20 joint letter brief, filed on May 31, 2024, which raises two disputes concerning Plaintiff’s document 21 requests. [Dkt. 41]. In connection with this discovery letter brief, Defendant filed an “Objection” 22 to footnote 6 in the joint letter brief. [Dkt. 42]. The Court ordered the Parties to comply with the 23 undersigned’s Standing Discovery Order, including the meet and confer requirements therein, and 24 file a Status Report of the results of such meet and confer without including any additional argument 25 on the discovery dispute. [Dkt. 45]. The Parties filed their Joint Status Report on June 28, 2024, in 26 which they disappointingly reported that they were unable to resolve any of the disputes and (further 27 disappointingly and contrary to the Court’s June 5, 2024, Order) repeated arguments made in the 1 The Court determines that the disputes raised by the Parties in the instant joint letter brief 2 are amenable to resolution without oral argument. See Civil L.R. 7-1(b). For the reasons discussed 3 herein, the Court ORDERS Defendant to produce the five flash drives at issue and to produce 4 certain documentation to confirm his employment by Zhejiang University. 5 LEGAL STANDARD 6 Federal Rule of Civil Procedure 26(b)(1) provides that “[p]arties may obtain discovery 7 regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional 8 to the needs of the case.” Information need not be admissible to be discoverable. Id. Relevancy, 9 for purposes of discovery, is broadly defined to encompass “any matter that bears on, or that 10 reasonably could lead to other matter that could bear on, any issue that is or may be in the case.” In 11 re Williams-Sonoma, Inc., 947 F.3d 535, 539 (9th Cir. 2020) (quoting Oppenheimer Fund, Inc. v. 12 Sanders, 437 U.S. 340 , 350–51 (1978)); see also In re Facebook, Inc. Consumer Privacy User 13 Profile Litig., No. 18-MD-2843 VC (JSC), 2021 WL 10282215 , at *4 (N.D. Cal. Sept. 29, 2021) 14 (“Courts generally recognize that relevancy for purposes of discovery is broader than relevancy for 15 purposes of trial.”) (alteration omitted). 16 While the scope of relevance is broad, discovery is not unlimited. ATS Prods., Inc. v. 17 Champion Fiberglass, Inc., 309 F.R.D. 527, 531 (N.D. Cal. 2015) (“Relevancy, for purposes of 18 discovery, is defined broadly, although it is not without ultimate and necessary boundaries.”). 19 Information, even if relevant, must be “proportional to the needs of the case” to fall within the scope 20 of permissible discovery. Fed. R. Civ. P. 26(b)(1). The 2015 amendments to Rule 26(b)(1) 21 emphasize the need to impose reasonable limits on discovery through increased reliance on the 22 common-sense concept of proportionality: “The objective is to guard against redundant or 23 disproportionate discovery by giving the court authority to reduce the amount of discovery that may 24 be directed to matters that are otherwise proper subjects of inquiry. The [proportionality 25 requirement] is intended to encourage judges to be more aggressive in identifying and discouraging 26 discovery overuse.” Fed. R. Civ. P. 26 advisory committee’s note to 2015 amendment. In 27 evaluating the proportionality of a discovery request, a court should consider “the importance of the 1 the parties’ resources, the importance of the discovery in resolving the issues, and whether the 2 burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). 3 The party seeking discovery bears the burden of establishing that its request satisfies the 4 relevancy requirements under Rule 26(b)(1). La. Pac. Corp. v. Money Mkt. 1 Inst. Inv. Dealer, 285 5 F.R.D. 481 , 485 (N.D. Cal. 2012). The resisting party, in turn, has the burden to show that the 6 discovery should not be allowed. Id. The resisting party must specifically explain the reasons why 7 the request at issue is objectionable and may not rely on boilerplate, conclusory, or speculative 8 arguments. Id.; see also Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975) (“Under 9 the liberal discovery principles of the Federal Rules defendants were required to carry a heavy 10 burden of showing why discovery was denied.”). 11 The Court has broad discretion and authority to manage discovery. U.S. Fidelity & Guar. 12 Co. v. Lee Inv. LLC, 641 F.3d 1126 , 1136 n.10 (9th Cir. 2011) (“District courts have wide latitude 13 in controlling discovery, and their rulings will not be overturned in the absence of a clear abuse of 14 discretion.”); Laub v. U.S. Dep’t of Int., 342 F.3d 1080, 1093 (9th Cir. 2003). As part of its inherent 15 discretion and authority, the Court has broad discretion in determining relevancy for discovery 16 purposes. Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005) (citing Hallett 17 v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002)). The Court’s discretion extends to crafting discovery 18 orders that may expand, limit, or differ from the relief requested. See Crawford-El v. Britton, 523 19 U.S. 574, 598 (1998) (holding trial courts have “broad discretion to tailor discovery narrowly and 20 to dictate the sequence of discovery”). For example, the Court may limit the scope of any discovery 21 method if it determines that “the discovery sought is unreasonably cumulative or duplicative, or can 22 be obtained from some other source that is more convenient, less burdensome, or less expensive.” 23 Fed. R. Civ. P. 26(b)(2)(C)(i). 24 DISCUSSION 25 The Parties’ joint discovery letter brief raises two distinct disputes: (A) whether Defendant 26 should be required to turn over five identified USB flash drives to Plaintiff’s electronic forensic 27 expert for analysis; and (B) whether Defendant should be required to produce documents evidencing 1 A. The Five USB Flash Drives 2 During discovery in this case, Defendant produced for inspection his personal laptop 3 computer and the hard drive from his desktop computer. [Dkt. 41 at 2]. Plaintiff employed a 4 forensic expert to examine these devices, and that expert confirmed that no confidential information 5 belonging to Plaintiff was on either device because Defendant had re-formatted both devices and 6 thus deleted any files on those devices. Id. Plaintiff argues that Defendant deleted the files from 7 both devices to hide evidence of wrongdoing; Defendant argues that he deleted the files on both 8 devices because Plaintiff sent him a demand letter which Defendant contends demanded he cease 9 possessing any of Plaintiff’s confidential information. Id. 10 Plaintiff’s forensic expert was able to identify the undisputed fact that Defendant attached 11 five USB flash memory devices to his computers around the time period of Defendant’s recent 12 resignation from Etopus. Id. Plaintiff identifies the five USB flash drives as follows: [13] Last Connected 14 Serial Number Friendly Name Date/Time UTC-08:00 (M/d/yyyy)[DST] 15 6&1be5eee0&0&000000 Micron CT2000X10PROSSD9 SCSI Disk Device 12/23/2023 12:00 0111227312 Generic Flash-Disk USB Device 12/26/2023 15:44 [16] 6&3531a072 SCSI DISK USB Device 1/2/2024 14:51 17 0376219020003005 Samsung Type-C USB Device 1/3/2024 17:45 4928UYNZMFP73SUO JetFlash Transcend 4GB USB Device 2/13/2024 21:42 [18] 19 Dkt. 41 at n.5. 20 Plaintiff argues that examination of these USB flash drives will show whether Defendant 21 copied or loaded files containing Defendant’s confidential information onto these memory devices 22 from either the laptop or home desktop. Id. at 3. Plaintiff concedes that if the forensic examination 23 of these devices does not show any such files were on these USB drives, this case may well be 24 dismissed voluntarily. [Dkt. 46 at 3]. 25 Defendant argues that three of the USB devices are used by Defendant and his family for 26 personal uses, and thus these devices contain personal data unrelated to any issues in this case. 27 Defendant argues that the requests for production of these three USB devices violates his and his 1 Defendant further argues that the “last connection date” for these devices all post-date the 2 date that Defendant reformatted his laptop and home desktop, and therefore it would have been 3 impossible to transfer any files containing Plaintiff’s confidential information onto the USB drives 4 since none could have existed on the reformatted devices after the date they were reformatted. Id. 5 Plaintiff counters that the “last connection date” for these devices does nothing to show 6 whether and when these devices were connected to the laptop and home computer prior to those 7 “last connection” dates. Id. at 3. Plaintiff argues that nothing stopped Defendant from connecting 8 these USB devices to the laptop and home computer prior to the date those were reformatted, and 9 thus nothing stopped Defendant from transferring files containing Plaintiff’s confidential 10 information onto those USB devices prior to Defendant’s resignation date. Id. 11 Plaintiff further argues that there is a Protective Order in this action which protects the 12 personal, private information of Defendant and his family, sufficient to overcome concerns about 13 their rights to privacy. Id. Further, Plaintiff proposes that only Plaintiff’s outside forensic expert 14 would have access to the USB devices, to further safeguard any privacy concerns. [Dkt. 46 at 3]. 15 The Court FINDS that discovery of files from these five identified USB devices is within 16 the scope of relevance for purposes of discovery. However, Plaintiff has failed to demonstrate why 17 surrender of these devices for forensic inspection is required, particularly in the face of 18 representations under Rule 11 by Defendant’s counsel that the devices contain private, personal 19 information of Defendant and his family. Turning over the five USB devices for inspection is not 20 proportional to the needs of this case, based on the current record. That does not mean that discovery 21 of the files on those USB devices is barred. Neither Party has explained why they should deviate 22 from the normal procedures for electronic discovery. Neither Party has discussed or explained why 23 counsel here apparently failed to follow (or cite) the Court’s Guidelines for the Discovery of 24 Electronically Stored Information (“eDiscovery Guidelines”). See 25 https://www.cand.uscourts.gov/filelibrary/1117/ESI_Guidelines-12-1-2015.pdf. 26 In the modern era of electronic discovery, it is not normal for a party requesting discovery 27 to demand surrender of storage devices for forensic inspection as the first step. Nor is it normal for 1 devices for potentially relevant, responsive electronic files. Defendant’s argument that the USB 2 devices contain lots of personal data is mooted by a normal search of the electronic files. Plaintiff’s 3 admitted mere suspicion that the USB devices might contain Plaintiff’s confidential information 4 does not (on the current record) support wholesale inspection of the devices, but rather is addressed 5 proportionally through a normal search of the electronic files. The Court is at a loss to understand 6 how and why experienced counsel (particularly lead trial counsel, who should have known better 7 and, going forward, are expected to meaningfully participate in the meet and confers of lead counsel 8 required by this Court’s Standing Discovery Order) here were unable to treat and resolve this dispute 9 as a normal eDiscovery process. 10 Because counsel here either ignored or inexplicably refused to follow normal eDiscovery 11 procedures here, the Court ORDERS as follows: 12 If not already in the possession of Defendant’s counsel, Defendant’s counsel shall take 13 immediate possession of the five identified USB devices and shall take all appropriate steps to 14 ensure they are not tampered with. Defendant’s counsel shall either engage a competent eDiscovery 15 service provider or use the services of qualified eDiscovery staff within their law firm to image and 16 store an accurate copy of all the files on each of the five identified USB devices using industry 17 standard software or platforms (such as Relativity) to create a searchable database of the files from 18 those devices. Defendant’s counsel’s eDiscovery service provider/staff shall complete this imaging 19 process within thirty days of this Order. Within five (5) business days of the date of this Order, 20 counsel for Plaintiff SHALL propose to Defendant’s counsel a reasonable number of reasonably 21 targeted search terms to be used to search for responsive, relevant documents from the database of 22 files copied from the USB devices. The Parties shall promptly meet and confer thereafter to 23 negotiate the search terms, and the Court ORDERS counsel to cooperate reasonably in both 24 proposing and counterproposing search terms. Further, the Court ORDERS counsel to include their 25 respective eDiscovery providers and forensic experts in any such meet and confers to assist in 26 resolving disputes over technical issues. As soon as the database of files from the USB devices is 27 searchable, Defendant’s counsel is ORDERED to run test searches using proposed and 1 after de-duplication) with Plaintiff’s counsel as part of the meet and confer process. The Court 2 ORDERS the Parties to complete negotiations over search terms within forty-five (45) days of the 3 date of this Order. Once search terms are finalized, the Court ORDERS Defendant to produce from 4 the database of files from the USB drives all non-privileged documents, files, or electrically stored 5 information which result from searching using the finally agreed-upon search terms. Defendant 6 shall follow the procedures in the Protective Order for designation of any such produced documents 7 as confidential under the Protective Order. Defendant SHALL complete such production within 8 sixty (60) days from the date of this Order. 9 Counsel are further ORDERED to read, comply with, and follow the Court’s eDiscovery 10 Guidelines as appropriate here. Counsel may not unilaterally alter the deadlines or procedures set 11 forth in this Order. If counsel wish to be relieved of any deadlines or procedures set forth, they shall 12 submit any such modifications to the Court by Stipulation and Proposed Order. Unless ordered 13 otherwise, the deadlines and procedures herein shall remain in place. 14 The Court takes note of Defendant’s argument that the costs of this litigation are burdensome 15 because he is an individual. And the Court is cognizant that eDiscovery services include additional 16 costs. Accordingly, the Court GRANTS Defendant leave to surrender the five identified USB 17 devices to Plaintiff’s forensic expert instead of proceeding under the normal eDiscovery processes 18 discussed above. The Court ORDERS Defendant to file a Notice with the Court, within three (3) 19 business days from the date of this Order, indicating whether Defendant opts to surrender the five 20 USB devices to Plaintiff’s forensic expert instead of following the eDiscovery procedures set forth 21 above. If Defendant fails to file such Notice by the deadline, then the Parties SHALL follow the 22 eDiscovery procedures set forth above. If Defendant opts to surrender the five USB devices within 23 the deadline, Plaintiff’s counsel shall immediately thereafter provide the contact information for 24 Plaintiff’s forensic expert and Defendant’s counsel shall thereafter deliver (or have delivered) the 25 five USB devices to that forensic expert with all deliberate speed. Defendant’s counsel shall provide 26 notice of delivery of the USB devices to Plaintiff’s counsel on the same day delivery occurs. 27 Plaintiff’s forensic expert shall provide notice of receipt of the five USB devices immediately upon 1 the same day of receipt of the notice from the expert. The Plaintiff’s forensic expert shall treat those 2 five devices (and all files and information stored therein) at the highest level of confidentiality under 3 the Protective Order and shall not copy, share, disclose, or make available in any way personal files, 4 information, or data of Defendant or his family with Plaintiff, Plaintiff’s counsel, or any other person 5 or entity. For purposes of this Order, “personal files, information, or data” includes but is not limited 6 to Social Security numbers, bank account numbers, personally identifying information, information 7 or files identifying, relating to, or discussing any minor children, and other files or information 8 which on their face are of a personal, intimate, or family nature. If Defendant opts to surrender the 9 five USB devices, Plaintiff’s forensic expert shall only retain copies of responsive, relevant, non10 privileged files or data or information from those devices, and shall complete their investigation and 11 forensic examination of those devices within sixty days of receipt of the USB devices. Plaintiff 12 shall produce to Defendant a copy set of the responsive, relevant, non-privileged files or data or 13 information from those devices which Plaintiff’s expert has retained. Defendant’s counsel shall 14 promptly designate those produced documents as appropriate under the Protective Order. 15 Immediately at the conclusion of the sixty (60) days, Plaintiff’s forensic expert shall deliver (or 16 cause to be delivered) all five of the USB devices back to counsel for Defendant. 17 Counsel for Plaintiff shall immediately serve a copy of this Order on their forensic digital 18 expert, and shall immediately secure an undertaking under oath from that expert agreeing to comply 19 with this Order. 20 B. Documents Relating to Defendant’s Employment at Zhejiang University 21 Apparently, upon resigning from Etopus, Defendant indicated that he was joining Zhenjiang 22 University (located in China) as a researcher or professor. [Dkt. 41 at 4]. Based on Defendant’s 23 alleged contacts with other former employees of Etopus and certain identified companies in China, 24 Plaintiff seeks documents regarding Defendant’s current employment and his ownership in any 25 companies in China. Id. 26 Defendant asserts general arguments that the requests are “overbroad, harassing, and seek 27 irrelevant information.” Id. at 5. As the Party resisting discovery, Defendant may not rely on 1 485. Aside from the conclusory argument that the requests are “overbroad” and “harassing,” 2 Defendant makes no showing or detailed argument to support those assertions. Defendant argues 3 that the requests are irrelevant because he has “already informed Plaintiff that he has not disclosed 4 Plaintiff’s confidential information to his currently [sic] employer.” [Dkt. 41 at 5]. Plaintiff 5 responds that Defendant has represented that he has found no documents responsive to the request 6 for documents regarding an offer of employment by any university in China, which is unusual since 7 he has represented he joined Zhejiang University. Id. at 4. Plaintiff argues that confirming whether 8 or not Defendant is actually employed by Zhejiang University and whether or not he has current ties 9 to the companies identified in China is highly relevant to whether or not misappropriation of 10 confidential information has occurred here or not. Id. 11 The Court FINDS that the request for documents regarding Defendant’s current employment 12 is relevant within the scope of discovery – if he is currently employed by Zhejiang University, then 13 that is potentially relevant to his defense that no misappropriation has occurred; conversely, if he is 14 employed by a competitor of Etopus, that is potentially relevant to Plaintiff’s claims. However, to 15 the extent the requests seek any and all documents regarding current employment, they are not 16 proportional. Again, this is an issue which the Court is disappointed that counsel could not resolve 17 through reasonable and direct negotiations. The Court ORDERS Defendant to produce documents 18 sufficient to evidence his current employment, his current employer (or employers if he has multiple 19 jobs), and any sources of income Defendant receives from any entity or person worldwide. This 20 order includes any employment contracts, recent paycheck stubs/receipts, or university webpages, 21 directories, or staff manuals from Zhejiang University. This order further includes each employment 22 contract, contract for services, consulting agreements, or other agreements between Defendant and 23 any person or entity under which Defendant has ever received or is currently receiving 24 compensation, income, or revenue since January 1, 2023, (other than Etopus). Defendant shall 25 complete this ordered production within thirty (30) days from the dates of this Order. 26 The Court FINDS that the request for documents relating to Defendant’s ownership in or 27 relationships with certain identified companies or persons in China is also relevant within the scope 1 who started companies in China in 2023. [Dkt. 1 at ¶ 5]. If Defendant has no ownership interest in 2 the identified companies in China, that would potentially be relevant to his defense that no 3 misappropriation has occurred; conversely, if Defendant has ownership in interest in the identified 4 companies, that would potentially be relevant to Plaintiff’s claims. However, to the extent the 5 requests seek all documents relating to Defendant’s ownership or relationships with any company 6 worldwide, the requests are not proportional. Again, the Court is disappointed that experienced 7 counsel were unable to resolve this dispute through reasonable cooperation in the meet and confer 8 process. 9 Accordingly, the Court ORDERS Defendant to produce documents sufficient to evidence 10 any ownership interest Defendant owns or controls in Xin Zhi Yuan (Shanghai) Technology Ltd.; 11 San Ya Fu Guang Lin; San Ya Xin Zhi Yuan No. 1; or any company, partnership, or corporation 12 worldwide for which any of either Xi Liu, Hong Yin, or Zheng Wang have any ownership interest, 13 are an officer, director, or partner, or control. See Dkt. 1 at ¶ 5. The Court further ORDERS 14 Defendant to produce any contracts or agreements between (on the one hand) Defendant and (on 15 the other hand) any of Xin Zhi Yuan (Shanghai) Technology Ltd.; San Ya Fu Guang Lin; San Ya 16 Xin Zhi Yuan No. 1; or any company, partnership, or corporation worldwide for which any of either 17 Xi Liu, Hong Yin, or Zheng Wang have any ownership interest, are an officer, director, or partner, 18 or control. If Defendant confirms after a reasonable search that no documents exist as ordered 19 herein, Defendant’s counsel shall provide promptly a supplemental response to Plaintiff’s document 20 requests attesting to the lack of existence of any such documents, attesting to the fact that 21 Defendant’s counsel performed the search for documents directly (and did not rely solely on their 22 client), and attesting to whether Defendant’s counsel themselves performed a reasonable, good faith 23 search, where such response shall be certified by counsel under Fed. R. Civ. P. 11 (and shall be a 24 representation to the Court on behalf of all counsel for Defendant, not merely the counsel signing 25 the supplemental response). 26 CONCLUSION 27 For the reasons discussed herein, the Court ORDERS the production of files from the five 1 the USB devices for inspection instead) and ORDERS Defendant to produce employment 2 documents and corporate ownership/relationship documents as detailed above. In light of the 3 Court’s resolution of these disputes, the Court DENIES Defendant’s “Objection” to footnote 6 in 4 the joint letter brief as moot. This Order RESOLVES Dkts. 41, 42, and 46. 5 The Parties and their counsel are again admonished to review and comply with the Court’s 6 Guidelines for Professional Conduct at Section 9 on Discovery, this Court’s Discovery Standing 7 Order (particularly Section H on discovery dispute resolution), and the Federal Rules of Civil 8 Procedure, particularly Rules 1 and 26. See Fed. R. Civ. P. 26 advisory committee’s note to 2015 9 amendment (“It is expected that discovery will be effectively managed by the parties in many 10 cases.”). 11 The Court is concerned by the apparent lack of effective communication between counsel 12 during the mandatory meet and confers. If the Parties demonstrate an inability to resolve discovery 13 disputes in a reasonable manner consistent with Rules 1 and 26 (as well as this Court’s directives 14 and Orders), the Court will consider imposing additional meet and confer procedures for future 15 discovery disputes, including but not limited to requiring any counsel directly involved in any of the 16 meet and confers to meet and confer in person; requiring in-person meet and confers by lead trial 17 counsel regardless of lead counsels’ geographic proximity; requiring meet and confers to take place 18 in person at the San Francisco courthouse or other location; requiring in-house counsel or Party 19 representatives (or Parties themselves, if any are natural persons) to attend all meet and confers; the 20 imposition of appropriate sanctions (including monetary sanctions) for failure to adequately and 21 reasonably meet and confer; and/or any other sanction or other procedure the Court deems 22 appropriate in the circumstances. [23] 24 IT IS SO ORDERED. 25 Dated: July 5, 2024 26 ______________________________________ PETER H. KANG 27 United States Magistrate Judge