Praecipio Consulting, LLC v. Howser

Background

Praecipio Consulting, LLC and Gaia Praecipio Buyer, Inc. sued Nicholas Howser and James Areias, alleging violations of the federal Defend Trade Secrets Act and breach of contract. The opinion states that Howser and Areias are former employees who now work for the plaintiffs’ competitor, identified in the background as catworkxs GmbH. The plaintiffs filed a request for expedited discovery along with a motion for a temporary restraining order and later sought discovery to prepare for a hearing on a forthcoming motion for a preliminary injunction. The parties had agreed on most of the requested temporary relief, but disputes about expedited discovery remained.

Legal standard

The court explained that a party seeking discovery before the usual conference required by Federal Rule of Civil Procedure 26(f) must show good cause. Factors can include whether a preliminary injunction is pending, the scope and purpose of the requested discovery, the burden on the responding parties, and how early the request was made.

Why the court found good cause

The plaintiffs sought forensic examination of Howser’s and Areias’s personal devices to determine whether they still possessed Praecipio trade-secret property. They also sought limited document requests, interrogatories, depositions, and two third-party subpoenas to prepare for the preliminary-injunction hearing.

The court found that the planned preliminary-injunction motion supported expedited discovery because the discovery was intended to develop the factual record for relief aimed at preserving the status quo. The defendants argued that the requests were too broad and burdensome, but the court said they had not explained the alleged burden, provided evidence describing it, or proposed narrower discovery. The court also considered the plaintiffs’ allegation that Areias destroyed two Praecipio-owned laptops after receiving an evidence-preservation notice. The opinion states that the defendants did not rebut or respond to that allegation. The court acknowledged privacy concerns but concluded that the requested discovery was not overbroad or unduly burdensome, noting that a forensic-examination protocol could address privacy concerns.

Trade-secret disclosure

The defendants argued that the plaintiffs should first identify their trade secrets before discovery could proceed. The court rejected that argument at this stage. The plaintiffs brought a federal Defend Trade Secrets Act claim, not a California Uniform Trade Secrets Act claim. The court held that the California statute’s requirement to identify trade secrets with reasonable particularity before discovery therefore did not apply. The court also noted that the defendants cited no authority requiring such a disclosure before expedited discovery connected to a preliminary-injunction hearing and that disclosure requirements can cause delay.

Noncompete clause

The defendants argued that the noncompete clause in the parties’ agreements was too restrictive and unenforceable, so the breach-of-contract claim could not support expedited discovery. The court declined to evaluate the clause’s validity at this stage. It reasoned that deciding the clause’s validity before allowing the requested discovery would be premature and that the federal trade-secret claim independently supported the discovery request.

Order

The court granted the plaintiffs’ request for expedited discovery. Within seven days after entry of the order, Howser and Areias must identify and surrender their personal electronic devices—such as laptops, computers, phones, and tablets—to a neutral forensic analyst. The examination must determine whether Praecipio property has been destroyed or returned and whether Howser or Areias transferred the documents to other devices or people for copying or reproduction. The parties must meet and confer about the forensic protocol and the neutral analyst.

The plaintiffs may also pursue the written discovery submitted as exhibits to Amanda L. Morgan’s declaration and may serve deposition subpoenas on Nicholas Howser, James Areias, Denise Johnson, and catworkx GmbH, including a Rule 30(b)(6) deposition of catworkx GmbH. Howser, Areias, and the third-party witnesses must respond to the written discovery within ten days after service, unless otherwise agreed, and must sit for depositions within seven days after serving their discovery responses, unless otherwise agreed. The parties must also meet and confer about reciprocal discovery sought by the defendants.