The opinion of the court was delivered by: Whelan, District Judge.
AMENDED MEMORANDUM OPINION AND ORDER
Before the court are defendant Gartner Group, Inc.'s objections to the
magistrate judge's September 28, 1998 order sanctioning Gartner for
failing to produce discovery. For the reasons expressed herein, the court
sustains Gartner's objections.
Plaintiff Computer Economics, Inc. ("CEI") is a newsletter publisher
specializing in the information technology industry. CEI publishes eight
analytical and investigative newsletters in the fields of corporate
computing, Internet marketing and electronic commerce. Defendant Gartner
Group, Inc. ("Gartner") is an international publisher of various
publications including books, reports, CD-ROM discs, surveys, and analyses
relating to the computer and information industry.
In November 1995 a representative from Gartner contacted CEI and
arranged a tour of CEI's headquarters in Carlsbad, California. According
to CEI, Gartner stated that it was seeking to expand its newsletter
publishing business and was investigating possible opportunities for
acquisition, including CEI. On or about January 1996, CEI allegedly sent
Gartner a document containing confidential information concerning CEI's
sales volumes, subscription renewal rates, and marketing techniques.
On February 16, 1996 Gartner toured CEI's headquarters a second time
and was allegedly provided with additional trade secrets. At the
conclusion of the tour, Gartner informed CEI that Gartner did not wish to
acquire CEI's operations. During the next 18 months Gartner launched nine
newsletters in direct competition with CEI, each containing content
similar to CEI's newsletters.
On January 13, 1998 CEI commenced this action against Gartner in San
Diego Superior Court. The complaint asserts state law claims sounding in
trade secret misappropriation, breach of contract, and fraud. In
essence, CEI alleges that Gartner used the confidential information
obtained during the February 1996 tour of CEI's facilities to expand its
newsletter publication business. In February 1998, Gartner removed this
action to federal court based on diversity of citizenship.
Gartner's refusal to produce discovery was based on a unique statutory
provision of California's Uniform Trade Secrets Act: Section 2019(d) of
the California Code of Civil Procedure. That statute prevents a plaintiff
from conducting discovery in a trade secret misappropriation case until
it identifies its allegedly misappropriated trade secrets "with
reasonable particularity." Cal.Civ.Proc.Code § 2019(d) (West 1997)
(hereinafter "CCP § 2019(d)"). Gartner stated that it would produce
the requested discovery within five days of receipt of CEI's trade secret
CEI responded that CCP § 2019(d) was a procedural rule applicable
only in California state courts. Between April and July 1998 the parties
exchanged further correspondence in an attempt to resolve the dispute.
CEI declined to identify its allegedly misappropriated trade secrets.
In July 1998 CEI and Gartner filed cross-motions on the subject. CEI
filed a motion to compel Gartner to respond to CEI's interrogatories
while Gartner filed a motion to compel CEI to identify its allegedly
misappropriated trade secrets. Both motions were based on the central
question of whether CCP § 2019(d) applied in federal court. Although
Gartner acknowledged that there was no authority directly addressing the
issue, its motion referred to several cases where federal courts applied
CCP § 2019(d) without analysis, presumably because the issue was not
in dispute.*fn1 CEI disagreed and argued that CCP § 2019(d) was a
rule of procedure applicable only in state courts.
By order dated August 12, 1998, the magistrate judge granted CEI's
motion to compel discovery and denied Gartner's motion to compel trade
secret identification under CCP § 2019(d). The magistrate judge
rejected Gartner's arguments that CCP § 2019(d) was enforceable in
federal court, concluded that Gartner was not substantially justified in
invoking CCP § 2019(d) to resist discovery, and indicated that
sanctions would be imposed. On September 28, 1998 after additional
briefing on the amount of sanctions, the magistrate judge ordered Gartner
to pay $6,856.45 to reimburse CEI for the costs of bringing its motion to
compel. The order concluded that sanctions were appropriate because the
cases cited by Gartner "d[id] not support [its] argument that section
2019(d) is a substantive obligation enforced by federal courts in trade
secret litigation." The order concluded that "it is clear that Plaintiff
was not obligated to identify its trade secrets before commencing
discovery in this action."
Gartner objects to the September 28 order on three grounds. First,
Gartner argues that CCP § 2019(d) is rule of substance that should
be enforced in federal court. Second, Gartner contends that even if CCP
§ 2019(d) is not applicable, its reliance on that statute was
reasonable and justified such that sanctions were inappropriate. Third,
Gartner asserts that
$6,856.45 represents an excessive and disproportionate sanction award.
This court requested additional briefing on whether the doctrine
announced in Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed.
1188 (1938) required application of CCP § 2019(d) in federal court.
For the reasons expressed herein, the court sustains Gartner's objections
and holds that CCP § 2019(d) is applicable in this case.
A party may object to a non-dispositive pretrial order of a U.S.
Magistrate Judge within ten days after service of the order.
Fed.R.Civ.P. 72(a). The magistrate judge's order will be upheld unless
it is "clearly erroneous or contrary to law." Id.; 28 U.S.C. § 636
(b)(1)(A). The "clearly erroneous" standard applies to the magistrate
judge's factual determinations and discretionary decisions, including
orders imposing discovery sanctions. Maisonville v. F2 Am., Inc.,
902 F.2d 746, 748 (9th Cir. 1990) (holding that factual determinations
made in connection with sanction award are reviewable for clear error);
Grimes v. City and County of San Francisco, 951 F.2d 236, 240 (9th Cir.
1991) (holding that discovery sanctions are nondispositive pretrial
matters reviewable for clear error under Rule 72(a)). Under this
standard, "the district court can overturn the magistrate judge's ruling
only if the district court is left with the definite and firm conviction
that a mistake has been made." Weeks v. Samsung Heavy Indus. Co., Ltd.,
126 F.3d 926, 943 (7th Cir. 1997).
On the other hand, the "contrary to law" standard permits independent
review of purely legal determinations by a magistrate judge. See, e.g.,
Haines v. Liggett Group, Inc., 975 F.2d 81, 91 (3d Cir. 1992) ("the
phrase `contrary to law' indicates plenary review as to matters of
law."); Medical Imaging Centers of America Inc. v. Lichtenstein,
917 F. Supp. 717, 719 (S.D.Cal. 1996) (Brewster, J.) ("Section 636(b)(1)
. . . has been interpreted to provide for de novo review by the district
court on issues of law."); 12 Charles Alan Wright, Arthur R. Miller &
Richard L. Marcus, Federal Practice and Procedure § 3069 at 350 & 355
(2d ed. 1997). Thus, the district court should exercise its independent
judgment with respect to a magistrate judge's legal conclusions. Gandee
v. Glaser, 785 F. Supp. 684, 686 (S.D.Ohio 1992), aff'd 19 F.3d 1432 (6th
Careful review of the transcript of the hearings before the magistrate
judge, the briefs filed by the parties, and the magistrate judge's order
reveals that the sanctions order was based solely on a determination that
CCP § 2019(d) is a rule of procedure inapplicable in federal court.
Since the magistrate judge's order was based entirely on a conclusion of
law, Harvey's Wagon ...