The Best Label Company v. Custom Label & Decal, LLC

Background

The Best Label Company, LLC (BLC) sued defendants alleging, among other things, misappropriation of trade secrets, trademark infringement, defamation and disparagement, and unfair competition. BLC served document subpoenas on 14 of defendants’ customers. The parties appeared to agree that at least some of the requested information related to BLC’s claim for damages from business it allegedly lost because of defendants’ conduct.

Defendants asked for a protective order—a court order limiting or preventing discovery—to bar production of responsive documents concerning business conducted after October 9, 2019. Defendants relied on BLC’s filing of a certification of cancellation with the California Secretary of State on that date, which stated that BLC no longer had the right to conduct business in California. BLC argued that its interests had been transferred to Resource Label Group (RLG) under a merger agreement in which RLG was the surviving entity. RLG was not then a party, and BLC had moved to substitute RLG as the plaintiff.

Legal Standard

Under Rules 45 and 26 of the Federal Rules of Civil Procedure, subpoenaed discovery may cover information relevant to a claim or defense and proportional to the needs of the case. A court may issue a protective order for good cause to prevent annoyance, embarrassment, oppression, or undue burden or expense. A party seeking protection from a subpoena issued to a nonparty generally must identify a personal right or privilege affected by the requested documents.

Discussion and Ruling

The parties agreed that some discovery from the customers was relevant. Their only remaining dispute was whether documents concerning business after October 9, 2019 were relevant. BLC was currently claiming damages based on alleged misconduct continuing past that date, although defendants disputed the damages claim and the issue remained unresolved.

The court held that defendants had not shown good cause for limiting the discovery. Defendants had not identified a personal right or interest supporting their relevance objection. The court also declined to rely on arguments raised at the hearing about possible disruption of customer relationships and confidentiality because those arguments had not been included in defendants’ written submission and were inconsistent with defendants’ representation that they had withdrawn their other objections. The court further stated that the existing protective order could adequately address confidentiality concerns.

The court therefore denied defendants’ request for a protective order. It required the parties to treat the customers’ document production as “Highly Confidential — Attorneys’ Eyes Only” for 14 days after production. During that period, defendants could notify BLC in writing of documents they believed contained defendants’ confidential information, subject to the existing protective order’s requirements. Judge Virginia K. DeMarchi issued the order.