Krypt, Inc. v. RoPaar LLC

Background

Krypt and RoPaar provide SAP implementation and consulting services. Clay Robinson worked for Krypt as a Professional Services Consultant from May 1, 2016, to February 12, 2019, and shortly after leaving Krypt began working at RoPaar. Krypt alleges that RoPaar conspired with Robinson to misappropriate Krypt’s trade secrets in violation of the federal Defend Trade Secrets Act and the California Uniform Trade Secrets Act. Krypt also brings a breach-of-contract claim against Robinson, but that claim was not relevant to this discovery dispute.

Krypt asked the court to compel RoPaar to respond to Requests for Production Nos. 24 and 25 and Interrogatories Nos. 1 through 3. The requests sought documents or information identifying each person RoPaar had employed from January 1, 2012, to the present, the dates of those employments, and each person to whom RoPaar had offered employment during that period.

Legal standard

Federal Rule of Civil Procedure 26(b)(1) permits discovery of information relevant to a claim or defense and proportional to the needs of the case. Proportionality considers factors including the importance of the issues, the amount in controversy, the parties’ access to information and resources, the importance of the discovery, and whether its burden or expense outweighs its likely benefit.

Court’s analysis

Krypt offered two reasons for seeking the information. First, it argued that evidence showing RoPaar had disproportionately or exclusively recruited high-level Krypt employees could suggest that RoPaar intended to conspire to misappropriate trade secrets and specifically intended to misappropriate the trade secrets at issue through Robinson. Second, Krypt argued that the recruitment information could support its position that Krypt and RoPaar were direct competitors.

The court rejected the first rationale. It explained that, at least in California, a company’s recruitment of a competitor’s employees is not inherently improper. The court distinguished lawful recruitment from improperly seeking confidential information that employees are obligated not to disclose. Krypt’s operative complaint alleged that RoPaar had hired Robinson and other former Krypt employees, but it did not allege that those other employees had misused or disclosed Krypt’s confidential information or trade secrets. The court concluded that Krypt’s trade-secret claims were limited to the conduct of RoPaar and Robinson concerning Robinson’s recruitment and employment. It therefore found no reasonable justification for the requested broad discovery.

The court also considered Krypt’s argument that the discovery would show the companies were competitors. The court assumed Krypt wanted to establish that its trade secrets had independent economic value because they were not generally known or readily ascertainable by a competitor. But Krypt did not explain why recruiting each other’s employees would demonstrate that the companies were direct competitors. The court stated that more compelling evidence might include whether the companies offered similar services or competed for business from the same customers or customer categories. Krypt did not show that identifying RoPaar’s employees and prospective employees over the prior eight years would produce relevant evidence on that issue.

Disposition

Judge Beth Freeman denied Krypt’s request for an order compelling RoPaar to respond to Requests for Production Nos. 24 and 25 and Interrogatories Nos. 1 through 3. The opinion does not state that the underlying trade-secret claims were resolved by this order.