TAC Holdings LLC v. Atlatl Group LLC

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] TAC H oldings LLC, ) No. CV-22-02150-PHX-SPL ) [9] ) 10 Plaintiff, ) ORDER vs. ) ) [11] ) Atlatl Group LLC, et al., ) [12] ) 13 Defendants. ) ) 14 ) 15 Before the Court is Defendant the Atlatl Group, LLC, Bravada Yachts LLC, Aaron 16 Browning, and Robert Gutierrez’s (collectively, the “Bravada Defendants”) Motion for 17 Protective Order (Doc. 63) and Plaintiff TAC Holdings, LLC’s Motion for Order to Show 18 Cause and for Sanctions (Doc. 64). The Court rules as follows. 19 I. BACKGROUND 20 October 31, 2023, the Court held an oral argument to address the parties’ Joint 21 Motion for Discovery Dispute Resolution (Doc. 39). Because the parties failed to clearly 22 explain the issues in dispute, the Court ordered the parties to file a supplemental “joint 23 notice of issues detailing the specific discovery requests at issue and why that information 24 is being requested.” (Doc. 47). On November 7, 2023, the parties filed a Joint Notice of 25 Issues which outlined all the parties’ issues and arguments. (Doc. 49). On November 22, 26 2023, the Court resolved each of these issues. (Doc. 54). On February 15, 2024, the 27 Bravada Defendants filed the pending opposed Motion for Protective Order (Doc. 63). On 28 February 26, 2024, Plaintiff filed the pending Motion for Order to Show Cause and for 1 Sanctions (Doc. 64). Both motions are fully briefed. The Court held an oral argument to 2 address these motions on April 3, 2024. At the hearing, the Court ordered the Bravada 3 Defendants to disclose to Plaintiff’s counsel all missing bank statements pursuant to the 4 Court’s Order (Doc. 54 at 5), produce the information requested in Plaintiff’s Request for 5 Production No. 13, and file a supplemental briefing identifying the specific documents that 6 they are seeking to protect. (Doc. 72). On April 10, 2024, the Bravada Defendants filed a 7 Supplemental Brief to Motion for Protective Order. (Doc. 73). 8 II. LEGAL STANDARD 9 “‘It is well-established that the fruits of pretrial discovery are, in the absence of a 10 court order to the contrary, presumptively public.’ Rule 26(c) authorizes a district court to 11 override this presumption where ‘good cause’ is shown.” San Jose Mercury News, Inc. v. 12 U.S. Dist. Ct., 187 F.3d 1096 , 1103 (9th Cir. 1999) (internal citations omitted).1 But see 13 Ctr. for Auto Safety v. Chrysler Group, LLC, 809 F.3d 1092, 1097 (9th Cir. 2016) (whether 14 “compelling reasons” or merely “good cause” must be shown to limit public access and 15 warrant court protection depends on the relationship of the document to the merits of the 16 case). In order to show good cause exists to limit the public’s access to material under Rule 17 1 Rule 26(c) of the Federal Rules of Civil Procedure provides: 18 (1) In General. A party or any person from whom discovery is sought may move for a protective order in the court where the action is pending 19 . . . . The motion must include a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an 20 effort to resolve the dispute without court action. The court may, for good cause, issue an order to protect a party or person from annoyance, 21 embarrassment, oppression, or undue burden or expense, including one or more of the following: [22] (A) forbidding the disclosure or discovery; (B) specifying terms, 23 including time and place or the allocation of expenses, for the disclosure or discovery; (C) prescribing a discovery method other than the one 24 selected by the party seeking discovery; (D) forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to 25 certain matters; (E) designating the persons who may be present while the discovery is conducted; (F) requiring that a deposition be sealed and 26 opened only on court order; (G) requiring that a trade secret or other confidential research, development, or commercial information not be 27 revealed or be revealed only in a specified way; and (H) requiring that the parties simultaneously file specified documents or information in 28 sealed envelopes, to be opened as the court directs. 1 26(c), “the party seeking protection bears the burden of showing specific prejudice or harm 2 will result if no protective order is granted.” Phillips v. Gen. Motors Corp., 307 F.3d 1206 , 3 1210-11 (9th Cir. 2002); see also Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172 , 4 1178 (9th Cir. 2006) (“A party seeking to seal a judicial record then bears the burden of 5 overcoming this strong presumption by meeting the “compelling reasons” standard.”). 6 “Broad allegations of harm, unsubstantiated by specific examples or articulated reasoning, 7 do not satisfy the Rule 26(c) test.” Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470 , 476 8 (9th Cir. 1992) (citation omitted). Rather, the party seeking protection must make a 9 “particularized showing of good cause with respect to [each] individual document.” San 10 Jose Mercury News, 187 F.3d at 1103. 11 III. DISCUSSION 12 a. Bravada Defendant’s Motion for Protective Order (Doc. 63) 13 The Bravada Defendants’ Motion requests all financial documents, third-party 14 contracts, and engineering or design files be kept confidential and filed under seal. (Doc. 15 63 at 1). Their Proposed Protective Order extends broadly to “[c]ertain documents sought 16 in pretrial discovery in this action [that] may contain non-public confidential, proprietary, 17 commercially sensitive, or trade secret information . . ..” (Doc. 63-1 at 1). In Response, 18 Plaintiff asks the Court to deny the Bravada Defendants’ Motion because it is a blanket 19 protective order, the Bravada Defendants failed to make any showing that the requested 20 information should be kept confidential, and it is untimely. (Doc. 65 at 4). At the oral 21 argument hearing held on April 3, 2024, the Court addressed this matter and ordered the 22 Bravada Defendants to file a supplemental motion identifying the specific documents that 23 they seek to protect. (Doc. 72). On April 10, 2024, the Bravada Defendants filed a 24 supplemental briefing enumerating specific documents. (Doc. 73). 25 After considering the parties’ briefings and oral arguments, the Court finds that the 26 Proposed Protective Order does not meet Rule 26(c)’s threshold. More specifically, the 27 Court finds that the Bravada Defendants failed to make any particularized showing that 28 disclosure will cause a clearly defined injury or that “good cause” exists. See Glenmede 1 Trust Co. v. Thompson, 56 F.3d 476, 483 (3d Cir. 1995); AGA Shareholders, LLC v. CSK 2 Auto, Inc., 2007 WL 4225450 (D. Ariz. Nov. 28, 2007). 3 First, the Bravada Defendants argue that public disclosure of certain bank 4 statements would allow their competitors access to “the identity of vendors and customers, 5 pricing for materials and labor, the identity of contractors and subcontractors and 6 Defendants’ profit, cost and margin data” which would cause them significant competitive 7 harm. (Doc. 73 at 2; Doc. 63 at 3). This is not persuasive. See Glob. Indus. Inv. Ltd. v. 1955 8 Cap. Fund I GP LLC, No. 21-CV-08924-HSG, 2023 WL 6165695 , at *2 (N.D. Cal. Sept. 9 20, 2023) (“Other than a generic explanation that such information is confidential and 10 “competitively sensitive,” however, Respondents do not explain how this specific 11 information could cause them competitive harm. Generic explanations of competitive harm 12 are insufficient to justify sealing this information.”). Moreover, the Court has already held 13 that these bank statements are relevant in this case and has limited the production to bank 14 statements dated between June 2020 to present. (See Doc. 54 at 4–5). Accordingly, the 15 Bravada Defendants’ request for a protective order with respect to its bank statements is 16 denied. 17 Next, the Bravada Defendants argue that third-party contracts and discovery related 18 to the acquisition of Destination Yachts, Inc should also be kept confidential and filed 19 under sealed. (Doc. 73 at 3; Doc. 63 at 3). The Bravada Defendants assert that these 20 documents should be protected because they “contain sensitive information of individuals 21 and entities that have purchased other houseboats and details regarding specific houseboats 22 and amounts for which those boats were purchased, which would cause competitive harm 23 to the Atlatl Group, LLC.” (Doc. 73 at 3; Doc. 63 at 3). They also assert that public 24 disclosure of these documents could subject the Bravada Defendants to liability for breach 25 of confidentiality provisions. (Doc. 73 at 3). Again, the Court has already held that this 26 information is relevant and has ordered the Bravada Defendants to produce these 27 documents in discovery. (See Doc. 54 at 4 (“Plaintiff alleges that its funds were used to 28 pay back earlier investor-customers.”); see id. (“This request is relevant because the 1 Complaint alleges that the Bravada Defendants used Plaintiff’s money to purchase 2 Destination.”). The Court is persuaded that Plaintiff’s need for understanding how its funds 3 were allocated outweighs the Bravada Defendants’ confidentiality concerns. Mixed Chicks, 4 LLC. v. Sally Beauty Supply, LLC., No. CV 11-0452 AG (FMOX), 2011 WL 13137374 , at 5 *4 (C.D. Cal. Dec. 7, 2011) (“Here, the court is persuaded that plaintiff’s need for the 6 customer lists outweighs defendant’s and the non-party witnesses’ confidentiality 7 concerns.”). Accordingly, the Bravada Defendants’ request for a protective order with 8 respect to third-party contracts is denied. 9 Finally, the Bravada Defendants asks that the Court protect any “engineering or 10 design files” because they contain “proprietary trade secrets.” (Doc. 63 at 4). “The burden 11 is on the party requesting a protective order to demonstrate that (1) the material in question 12 is a trade secret or other confidential information within the scope of Rule 26(c), and (2) 13 disclosure would cause an identifiable, significant harm.” See Deford v. Schmid Prod. Co., 14 a Div. of Schmid Lab’ys, 120 F.R.D. 648, 653 (D. Md. 1987); see also IntelliCAD Tech. 15 Consortium v. Suzhou Gstarsoft Co., 508 F. Supp. 3d 790 , 795 (D. Or. 2020) (“After a 16 party seeking a protective order shows that the information at issue is a trade secret or 17 otherwise confidential and that disclosure would be harmful, the burden shifts to the party 18 seeking disclosure to show that disclosure is warranted.”). “Under federal law, there is no 19 absolute privilege for trade secrets; instead, courts weigh the claim to privacy against the 20 need for disclosure in each case, and district courts can enter protective orders allowing 21 discovery but limiting the use of the discovered documents.” Pasadena Oil & Gas 22 Wyoming LLC v. Montana Oil Properties Inc., 320 F. App’x 675, 677 (9th Cir. 2009). 23 Here, the Bravada Defendants failed to meet its burden of showing that its engineering and 24 design files are trade secrets that require protection. The Court also finds that this 25 information is relevant to Plaintiff’s allegation that that the Bravada Defendants “operate[] 26 much more like a Ponzi scheme than a legitimate business, using payments from investor27 customers not for the construction of a houseboat for those investor-customers, but to pay 28 back other, earlier investor-customers.” ((Doc. 1 at 9 ¶ 63; Doc. 54 at 4). Accordingly, the Bravada Defendants’ request for a protective order with respect to any engineering or 2| design files is denied. 3 b. Plaintiff's Motion for Order to Show Cause and For Sanctions (Doc. 64) 4 The Court has reviewed and considered the parties’ briefing and arguments with respect to Plaintiff's Motion for Order to Show Cause and For Sanctions (Doc. 64). The 6 | Court denies Plaintiff's Motion at this juncture. However, the Court will not tolerate any 7 | additional non-compliance from the Bravada Defendants with respect to the discovery 8 | issues that have been addressed several times now. In the event the Bravada Defendants 9| fail to comply with the Court’s Orders moving forward, it will not be so lenient. 10 IV. CONCLUSION 11 The Court concludes that there is no good cause to grant the Bravada Defendants’ 12 | Proposed Protective Order. Thus, the Bravada Defendants’ Motion for Protective Order is 13 | denied. The Court also denies Plaintiff's Motion for Order to Show Cause and For Sanctions. 15 Accordingly, 16 IT IS THEREFORE ORDERED that Defendant the Atlatl Group, LLC, Bravada Yachts LLC, Aaron Browning, and Robert Gutierrez’s Motion for Protective Order (Doc. 18 | 63) is denied. 19 IT IS FURTHER ORDERED that Plaintiff TAC Holdings, LLC’s Motion for 20 | Order to Show Cause and for Sanctions (Doc. 64) is denied without prejudice. 71 Dated this 7th day of May, 2024. [22] United States District didge