Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

ON COMMAND VIDEO CORP. v. LODGENET ENTERTAINMENT C

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA


August 7, 1997

ON COMMAND VIDEO CORPORATION, a Delaware Corporation, Plaintiff,
v.
LODGENET ENTERTAINMENT CORPORATION, a Delaware corporation, Defendant.

The opinion of the court was delivered by: ARMSTRONG

ORDER SUSTAINING IN PART AND OVERRULING IN PART DEFENDANT'S OBJECTIONS TO THE FINDINGS AND RECOMMENDATIONS OF MAGISTRATE JUDGE JAMES

 This action is a patent infringement suit brought by plaintiff On Command Video ("plaintiff" or "OCV") against defendant LodgeNet Entertainment Corporation ("defendant" or "LodgeNet"). The parties are presently before the Court on defendant's Objections to the Magistrate's Report and Recommendations ("the Report"). Having read and considered the papers filed, and having reviewed the record, the Court SUSTAINS in part and OVERRULES in part defendant's objections. *fn1"

  BACKGROUND

 Plaintiff alleges that defendant has infringed and continues to infringe its patent which encompasses the technology for a video movie delivery system. On June 5, 1995, at the outset of this case, the parties submitted to the Court a stipulated Protective Order governing the exchange of confidential discovery materials. Paragraph 11 of the protective Order provided as follows:

 

Any information designated as Confidential Information shall not be used by the other party for any purpose other than in connection with preparation of the parties [sic] analysis of issues presented in this litigation.

 The Court approved the Protective Order on June 8, 1995 and the Order was filed on June 9, 1995.

 On February 27, 1996, plaintiff used materials produced by defendant during discovery and subject to the Protective Order as the basis for filing a separate lawsuit against defendant in San Francisco County Superior Court. Viewing plaintiff's actions to be in violation of the Protective Order, defendant filed a Motion to Enforce Protective Order before the Court. Plaintiff responded by serving a Motion for Sanctions against defendant pursuant to Federal Rule of Civil Procedure 11. The Court referred these matters to Magistrate Judge Maria-Elena James for findings and recommendations.

 On April 3, 1997, the Magistrate issued her Report in which she concluded, inter alia, that plaintiff did not violate the Protective Order and that there was no basis for imposing contempt sanctions or enjoining the state court lawsuit. Defendant now presents the following objections to the Magistrate's Report:

 

* The Magistrate erred as a matter of law by refusing to recommend enforcement of the plain language of the Protective Order. The Magistrate's interpretation of the Protective Order is clearly erroneous.

 

* The Magistrate's conclusion that the purpose of the Protective Order is not evident from the face of the Protective Order is clearly erroneous.

 

* The Magistrate erred as a matter of law by recommending that OCV be allowed to invoke the substantial compliance defense.

 

* The Magistrate's conclusion that OCV substantially complied with the Protective Order is clearly erroneous.

 

* The Magistrate's conclusion that the Court is barred by the Anti-Injunction Act from issuing an injunction to prevent OCV from pursuing its state court action is clearly erroneous.

 

* The Magistrate's recommendations not to fine OCV's attorneys, and not to award attorneys' fees to LodgeNet are clearly erroneous.

 

* The Magistrate erred as a matter of law in stating that LodgeNet's subsequent motion to enforce the Protective Order did not appear to have been filed within the safe harbor period.

 (Def.'s Obj. at 2-3.) Defendant also requests that the Court render an advisory opinion concerning whether it would exercise supplemental jurisdiction over the state court action. (Id. at 11.)

 STANDARD OF REVIEW

 A magistrate judge's findings and recommendations on matters which are dispositive of a claim or defense are reviewed de novo. See 28 U.S.C. § 636(b)(1)(C); Fed. R. Civ. P. 72(b). A magistrate's determination of non-dispositive matters is entitled to deference unless it is clearly erroneous or contrary to law. Grimes v. City & County of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991) (citing 28 U.S.C. § 636(b)(1)(A) and Fed. R. Civ. P. 72(a)).

 Issues related to a protective order are collateral to the substantive issues in the litigation, and hence, are deemed nondispositive. C.f., Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir. 1997). Similarly, the decision of whether to impose Rule 37 sanctions for discovery violations is also considered a non-dispositive matter. See Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1465 (9th Cir. 1988). *fn2" However, because only a district court may hold a party in contempt, Grimes, 951 F.2d at 240, the Magistrate's findings on the issue of civil contempt will be reviewed de novo. *fn3"

 DISCUSSION

 A. ENFORCEMENT OF THE PROTECTIVE ORDER

 The salient question presented is whether plaintiff violated the parties' Protective Order by using discovery obtained thereunder for the purpose of initiating a separate state court lawsuit. A protective order should be read in a reasonable and common sense manner so that its prohibitions are connected to its purpose. In re Dual Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993).

 The Magistrate determined that there was no such violation. In reaching this conclusion, the Magistrate reasoned, inter alia, that there was "no express provision which states that the filing of a subsequent action, which is based on protected confidential information, violates the Protective Order." (Report at 15.) She also found that "there is no express provision which states that the filing of a subsequent lawsuit based on protected confidential information without prior amendment, or attempt to amend, the pleadings or the Protective Order, violates the Protective Order." (Id.)

 The Court disagrees with the Magistrate's analysis of the Protective Order. Contrary to the findings of the Magistrate, paragraph 11 of the Protective Order unequivocally bars all uses of confidential materials except one -- "[the] analysis of issues presented in this litigation." (Emphasis added). Although the Magistrate is technically correct that the filing of a state court action based on confidential information disclosed in this action is not expressly precluded, to construe the language of paragraph 11 as permitting plaintiff to engage in such conduct would render said provision meaningless. Indeed, as defendant correctly points out, it would have been impractical to attempt to articulate every conceivable impermissible use of discovery subject to the Protective Order. (See Def.'s Obj. at 5.) *fn4"

 Plaintiff argues that a "literal" interpretation of the Protective Order is overly restrictive and would, in effect, immunize defendant for any wrongful acts uncovered during this litigation. (Pl.'s Opp'n at 6 (citing Report at 18 n.14).) The Magistrate also expressed this concern, reasoning that the use of the term "presented" modifies "issues presented in this litigation", such that evidence of wrongful conduct could be used only in conjunction with claims which were already pleaded. (Report at 18 n.14.) The Court finds such an interpretation of the Protective Order untenable, as there are no restrictions in the Protective Order concerning the addition of claims to this litigation nor is there any plausible basis therefore.

 Finally, the parties dispute the purpose of the Order. The Court notes that the Protective Order does not expressly state its purpose. Nevertheless, the Court agrees with defendant that from the plain language of the Order, it is readily apparent that it is intended to limit the use of confidential information to this case. Plaintiff asserts that the purpose is to protect commercial secrets. (Mag.'s Rep. at 10.) Unfortunately for plaintiff, there are no terms in the Protective Order to corroborate such an interpretation.

  At bottom, the Court finds, based on a common sense, plain reading of paragraph 11 of the Protective Order, that plaintiff has violated the Protective Order and that defendant is entitled to its enforcement. The purpose of the Order is to limit the use of confidential information to this case. By using such information to file a separate lawsuit in another forum, plaintiff violated the plain terms of the Protective Order. As such, plaintiff is barred from using any confidential information subject to the Protective Order except in the instant litigation. C.f., Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1203 (7th Cir. 1996) ("We hold that the Anti-Injunction Act does not bar courts with jurisdiction . . . from issuing injunctions to protect the integrity of their rulings, including pretrial rulings like discovery orders . . . ."). Defendant's objections to the Magistrate's recommendation to not enforce the Protective Order is SUSTAINED.

 B. CIVIL CONTEMPT FOR VIOLATION OF THE PROTECTIVE ORDER

 1. Applicable Law

 The next issue presented is whether the Magistrate erred in recommending that plaintiff not be held in civil contempt "A court has the power to adjudge in civil contempt any person who willfully disobeys a specific and definite order requiring him to do or to refrain from doing an act." Shuffler v. Heritage Bank, 720 F.2d 1141, 1146 (9th Cir. 1983); Fed. R. Civ. P. 37(b)(2)(D). "To succeed on its motion for civil contempt, [defendant] had to show by clear and convincing evidence that [plaintiff] violated the [Protective Order] beyond substantial compliance, and that the violation was not based on a good faith and reasonable interpretation of the [Protective Order]." Wolfard Glassblowing Co. v. Willy Vanbragt, Mary Vanbragt d/b/a Zodiac Expressions, 118 F.3d 1320, 1997 WL 367388 at *2 (9th Cir. 1997) (citing In re Dual Deck, 10 F.3d at 695).

 2. Analysis of Contempt Issue

 In the instant case, the Magistrate concluded that plaintiff should not be held in civil contempt because defendant failed to establish that plaintiff violated the Protective Order; that plaintiff's actions were not based on a good faith and reasonable interpretation of the order; and that plaintiff failed to substantially comply with the order. (Report at 23-26.) The Magistrate further denied defendant's request for contempt sanctions in the amount of $ 5,000 for violating the Protective Order and $ 1,000 per day until such time as plaintiff withdraws the state action. (Id. at 27.)

 The Court agrees with defendant that the Magistrate's decision not to find plaintiff in civil contempt of the Protective Order is incorrect. Plaintiff has clearly violated the Protective Order and its efforts to comply therewith are virtually non-existent. In her Report, the Magistrate opined that plaintiff substantially complied with the Order and that plaintiff's conduct amounted to nothing more than a "harmless technical violation". (Report at 24-26.) To support these conclusions, the Magistrate noted plaintiff's attempts to seal the state court record and the fact that the state court pleadings did not disclose any proprietary information. (Id.) Relying on these findings, plaintiff asserts that "[its] actions certainly demonstrate substantial compliance with the Protective Order." (Pl.'s Resp. at 13.)

 The difficulty with the Magistrate's reasoning is that the Protective Order is not limited to the mere disclosure of protected information. Rather, as defendant correctly points out, it prohibits use. (See Protective Order P 11 ("Any information designated as Confidential Information shall not be used. . .") (emphasis added).) Plaintiff's use of protected information to file a separate state court lawsuit--as opposed to this litigation--is tantamount to no compliance at all. The Court finds that plaintiff has not substantially complied with the Protective Order and the Magistrate's finding to the contrary is incorrect.

 The Court also disagrees with the Magistrate's determination that plaintiff's actions were based on a good faith and reasonable interpretation of the order. See Vertex Distrib. v. Falcon Foam Plastics, Inc., 689 F.2d 885, 889 (9th Cir. 1982) (noting that a party should not be held in contempt if its conduct was "based on a good faith and reasonable interpretation of the court's order."). As discussed above, the Protective Order clearly prohibits all uses of information deemed confidential except one: the parties' analysis of issues presented in this litigation. For plaintiff to conclude that Paragraph 11 of the Protective Order could reasonably be interpreted as permitting the filing of a completely separate lawsuit in state court strains credulity. The Court therefore SUSTAINS defendant's objections to the Magistrate's conclusion that plaintiff should be held in civil contempt for violation of the Protective Order. *fn5"

 2. Sanctions for Civil Contempt

 The Magistrate declined to impose a civil contempt fine because she determined that (1) there was no basis for a finding of contempt and (2) defendant failed to substantiate its request for a $ 5,000 contempt fine and $ 1,000 per day coercive fine. (Report at 27.)

 Defendant asserts that the Magistrate erred in declining to assess a contempt fine against the plaintiff and to award attorney's fees to defendant. Insofar as the Magistrate based this decision on the conclusion that plaintiff did not violate the Protective Order, defendant is correct. However, defendant ignores the Magistrate's finding that defendant failed to present a factual basis to substantiate the amounts requested. (Report at 27.) Since defendant failed to do so, the Magistrate did not err in denying defendant's request. See Dual Deck, 10 F.3d at 696 (noting that party aggrieved by contemnor is entitled only to "'actual loss' for 'injuries resulting from the noncompliance.'") (quoting in part In re Crystal Palace Gambling Hall, 817 F.2d 1361, 1366 (9th Cir. 1987)). Defendant's objection to the Magistrate's recommendation to not fine or impose attorneys' fees against plaintiff is OVERRULED.

 3. Injunction of the State Court Action

 The Magistrate concluded in her Report that the Court is precluded under the Anti-Injunction Act, 28 U.S.C. § 2283, from enjoining plaintiff from pursuing the state court action. The Anti-Injunction Act states:

 

A court of the United States may not grant an injunction to stay proceedings in a state court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect and effectuate its judgments.

 28 U.S.C. § 2283.

 Whether to impose an injunction is a matter of judicial discretion. Blalock Eddy Ranch v. MCI Telecommunications Corp., 982 F.2d 371, 375 (9th Cir. 1992). Exceptions to the Act are strictly construed. Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 145-46, 100 L. Ed. 2d 127, 108 S. Ct. 1684 (1988). Any doubts concerning the propriety of enjoining a state court action should be resolved in favor of permitting the action to proceed. Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir. 1987), 485 U.S. 993, 108 S. Ct. 1302, 99 L. Ed. 2d 512 (1988).

 In the instant case, defendant argues an injunction barring the state court action from proceeding is "necessary and appropriate to effectuate and prevent further frustration of the Court's Protective Order." (Def.'s Obj. at 9.) Defendant further contends that an injunction would mitigate some of the damage resulting from the plaintiff's violation of the Protective Order. Defendant fails to present any authority or evidence to support these contentions and the Court is not otherwise convinced that an injunction barring further prosecution of the state court action is either necessary or appropriate. Therefore, the Court OVERRULES defendant's objection in this regard.

 4. Conclusion Regarding Civil Contempt

 The Court has concluded that plaintiff is barred under the Protective Order from using confidential information for any purpose other than analyzing the issues presented in this case. Any violation of this Order of enforcement which results in actual damage to defendant may be compensable under the authority cited above. While the Magistrate did not err in declining to award civil contempt sanctions or attorneys' fees against plaintiff and finding that an injunction of the state court proceedings is inappropriate, defendant is not foreclosed from presenting a properly supported request for civil contempt sanctions for actual damages resulting from a violation of the enforcement of the Protective Order. *fn6"

 However, given the fact that this case has already been overlitigated, the parties are warned that no requests or motions of any nature will be considered absent a good faith effort to resolve the dispute without court intervention. In addition, all requests and motions must be supported by applicable legal authority and declarations to support any factual assertions, if appropriate. Failure to comply with these requirements may subject the parties and/or their attorneys to sanctions.

 C. PLAINTIFF'S RULE 11 MOTION

 As noted, plaintiff filed a motion for Rule 11 sanctions against defendant based on the latter's initial filing of its Motion to Enforce the Protective Order on April 12, 1996. On May 10, 1996, defendant filed a second Motion to Enforce the Protective Order. Id. Defendant did not formally withdraw its first Motion. (Pl.'s Opp'n at 22.) On May 13, 1996, plaintiff filed another Motion for Sanctions with the Court. Id. at 23.

 The Magistrate found that although defendant's second motion regarding the Protective Order was not filed within the Rule 11 safe harbor period, sanctions were not warranted against defendant. (Report at 41.) Notwithstanding the fact that she denied plaintiff's motion for sanctions, defendant now argues that the Magistrate's finding that its substitute motion was filed outside the safe harbor window is clearly erroneous.

 Since the Magistrate declined to impose sanctions, her comments regarding the safe harbor period are irrelevant. *fn7" Accordingly, the Court OVERRULES AS MOOT defendant's objection that the Magistrate erred in stating in dicta that defendant did not comply with the safe harbor rule.

 D. EXERCISE OF SUPPLEMENTAL JURISDICTION

 Defendant objects to the Magistrate's refusal to determine whether this court would exercise supplemental jurisdiction over the state law-based claims. Although defendant's argument is not entirely clear, it appears that it contends that the Court should now state whether or not it would exercise supplemental jurisdiction. (Def.'s Obj. at 11.) Defendant's request for an advisory opinion is DENIED. The Court will decide whether to exercise supplemental jurisdiction if and when plaintiff seeks to have such claims litigated in this Court.

 E. SCHEDULING ISSUES

 An 8-12 day jury trial was originally scheduled to commence on March 17, 1997. However, because the parties underestimated the length of the trial, the Court was unable to accommodate the expanded trial as scheduled due to a conflict with other matters previously set for trial. As a result, on March 12, 1997, the Clerk informed the parties that the March 17 trial date was vacated. Pursuant to the Court's instructions, the Clerk also informed the parties to meet and confer regarding the possibility of stipulating to have further proceedings take place before a Magistrate Judge. Although the parties were instructed to contact the Court regarding their intentions, the parties failed to do so. *fn8" Therefore, the Court will schedule a further Case Management Conference for the purpose of rescheduling the trial date in this action.

 In the event the parties are in agreement that the instant matter may be referred to a Magistrate Judge of this Court for further proceedings, the parties may submit a stipulation to that effect, thereby obviating the need to file a joint Case Management Statement and to appear at the further Case Management Conference.

 CONCLUSION

 For the reasons stated above,

 IT IS HEREBY ORDERED THAT:

 1. Defendant's objection to the Magistrate's finding that plaintiff did not violate the Protective Order is SUSTAINED. Plaintiff shall not use any confidential information subject to the Protective Order except in this litigation.

 2. Defendant's objection to the Magistrate's finding that plaintiff was not in civil contempt is SUSTAINED.

 3. Defendant's objection to the Magistrate's finding that plaintiff should not be sanctioned or subject to attorneys' fees is OVERRULED.

 4. Defendant's objection to the Magistrate's finding that the Court may not enjoin the state court proceeding is OVERRULED.

 5. Defendant's objection to the Magistrate's findings on the Rule 11 motion is OVERRULED.

 6. Defendant's request for a determination of whether the Court would exercise supplemental jurisdiction over the causes of action presented in the state court action is DENIED.

 7. A further case management conference in the above-captioned matter shall take place on September 24, 1997 at 3:00 p.m., in Courtroom 3, 1301 Clay Street, 3rd Floor, Oakland, California, 94612. The parties shall file a joint (updated) case management statement at least ten (10) days prior to the conference. Failure to timely file a case management conference statement may result in sanctions.

 IT IS SO ORDERED.

 DATED: August 7, 1997

 SAUNDRA BROWN ARMSTRONG

 United States District Judge


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.