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Workflow Solutions, LLC v. Riffel


December 19, 2008


The opinion of the court was delivered by: Hon. Leo S. Papas U.S. Magistrate Judge


On October 16, 2008, Plaintiff Workflow Solutions ("Plaintiff") filed an Ex Parte Application for An Order To, inter alia, Expedite Discovery ("Ex Parte App.") On November 5 and 12, 2008, the Court held a Status Conference and Settlement Conference in this action.

The Court, having reviewed Plaintiff's Ex Parte App., and GOOD CAUSE APPEARING, HEREBY ORDERS Defendant George Riffel ("Defendant") to respond in detail under penalty of perjury to each contention alleged in Plaintiff's Ex Parte App. Riffel's response shall be annotated to all documents, including e-mails, which substantiate his position. Riffel's response shall be filed with the Court and served on opposing counsel on or before January 12, 2009. With regard to 4 (a)-(e) below, all documents responsive to Plaintiff's requests shall be produced to the Court in unredacted and unedited form. Responses shall be filed and served to the following:

1. Pre-Settlement Improper Disclosures/Use of Confidential Information

1(a). Plaintiff alleges that in April 2008, prior to the settlement of the underlying case, Defendant disclosed the 7% pricing discount he had offered on behalf of Defendant to Brookstone "2 weeks before (he was) downsized." Defendant then incorporated the same 7% discount in Smart Source's agreement with Brookstone, which enabled Smart source to match Brookstone's pricing discount, (Ex. G to Ex Parte App.)

1(b). In April 2008, Defendant improperly obtained confidential information about Brookstone's on-going product orders from Defendant's customer service representative Anna Ching ("Ching"). Defendant used that information as a basis for telling Scott Alton ("Alton") to limit the orders from Defendant and reduce overall product inventory with Defendant, which thereafter Brookstone did. (Ex. F to Ex Parte App.)

1(c). In April 2008, Defendant disclosed confidential information about Plaintiff's plans to move inventory to another warehouse in a few days. Defendant then advised Alton to demand that "all inventory stays put until Father's Day." (Ex. F to Ex Parte App.)

1(d). After the settlement of the underlying case Defendant gave Alton confidential information about Plaintiff's pricing and profit margins: "The bag and battery profits have traditionally funded this program in the most part so losing margin here would really hurt the health of the program." (Ex. H to Ex Parte App.)

1(e). Defendant asked Alton to get him the user name and password to access Plaintiff's confidential customer website. (Ex. I to Ex Parte App.)

2. Targeting Plaintiff's Employees 2(a). Defendant assured Alton that, as of May 22, 2008, "we have everything lined up and ready to go, including support personnel." (Ex. L to Ex Parte App.)

2(b). On July 29, 2008, Ching announced her plan to resign from Plaintiff, after receiving a telephone call from Alton. (Declaration of Bob Abbonzio in support of Ex Parte App.) Until Ching was on board at Smart Source, Defendant was expected to manage the new Brookstone account. (Ex. P to Ex Parte App.)

2(c). Defendant called Defendant's Account Executive Dave Hunt, told Hunt that the Brookstone account was moving to Smart Source, and asked about Hunt's plans and options after a recent change to Hunt's compensation plan at Plaintiff. Smart Source was actively recruiting Hunt, who was Plaintiff's lead account executive for Brookstone. (Declaration of Bob Abbonzio in support of Ex Parte App.)

3. False, Misleading, Disparaging Statements about Plaintiff 3(a). Defendant told Alton and Brookstone that Plaintiff had decided to "exit the vertical retail market" business model and revert to a "manufacturing mentality." (Ex. S to Ex Parte App.) Defendant claimed that Plaintiff had terminated the employment of nearly every employee who was part of the vertical retail market team, beginning with himself. These statements were false. Plaintiff terminated Defendant's employment because Defendant misappropriated money through false business expenses. Plaintiff did not terminate Ching's employment and did not terminate others identified by Defendant.

3(b). Prior to settlement of the underlying case, on April 17, 2008, Defendant told Alton that Plaintiff had "down sized" him. Defendant did not tell Alton that his employment was terminated due to Defendant's misappropriation of money through false business expenses.

3(c). On June 8, 2008, Defendant wrote to Alton and reasserted that he was "down sized" by Plaintiff, and that "the expense account was the vehicle they used as only an excuse." (Ex. R to Ex Parte App.) Alton apparently had learned that Defendant had misled him about the true reason for Defendant's termination from Plaintiff.

3(d). On June 8, 2008, Defendant told Alton that Plaintiff would now "run the accounts until the profit margins suffer and they completely abandon the vertical." (Ex. R to Ex Parte App.) This statement was untrue.

3(e). On July 24, 2008, after the settlement of the underlying case, Defendant gave Alton "reasons to move" from Brookstone:

1. Defendant claimed a "change in Plaintiff's business model from vendor neutral distribution model to manufacturing mentality" and "loss of retail vertical market focus."

2. Defendant claimed an unspecified "High level management change and culture change."

3. Defendant claimed "Recent price increases on shopping bags" - which Alton recognized as "bum" information. (Ex. S to Ex Parte App.)

3(f). On August 10, 2008, Defendant prepared talking points for Smart Source's meeting with Brookstone after Brookstone apparently began to question whether Defendant and Alton had worked out an "inappropriate" deal.

1. Defendant claimed that "(Plaintiff) will try anything to prevent the loss of the Brookstone account to SS or GR. Even though they are for sale and exiting the retail vertical market they will stop at nothing to prevent the account from joining SS." (Ex. T to Ex Parte App.)

2. Defendant claimed that the 7% discount Smart Source gave Brookstone was "far more grater[sic] than what would have occurred had they stayed with Plaintiff." In fact, Defendant had offered the same 7% discount on behalf of Plaintiff two weeks before Plaintiff terminated Defendant's employment. (Ex. F to Ex Parte App.)

3. Defendant claimed that Plaintiff would "institute release charges, line item charges and storage charges soon," when his interference with the Brookstone account, causing a huge loss, is what led to the need for such charges. (Ex. T to Ex Parte App.)

4. Defendant claimed that "SS has hired the account management team and a few members of the retail vertical market team" In fact, Defendant had been trying to help Smart Source hire these people, but did not succeed.

5. Defendant claimed that "(Plaintiff) has terminated all the members of the retail vertical market team except for one." In fact, Plaintiff had terminated Defendant. Plaintiff did not terminated Ching's employment, nor Ed Violoria's employment.

4. Selective Production and Withholding Records 4. When Plaintiff and Defendant tried to resolve the current dispute, Defendant selectively produced some documentation that Plaintiff requested.

4(a). Plaintiff refused to produce his complete business plan from March 2008. (Ex. K to Ex Parte App.)

4(b). Defendant had communications through other email addresses, but he did not produce any such communications. (Ex. V to Ex Parte App.)

4(c). Defendant had communications using Yahoo! Messenger, but did not produce any such communications. (Exs. W, L to Ex Parte App.)

4(d). Defendant withheld 2 pages of unspecified information. (Ex. X to Ex Parte App.)

4(e). Defendant withheld at least 55 pages of "intro letters," a "brochure," power point materials and other unspecified documents, which he apparently used in connection with a sales presentation to Plaintiff's customer, Perfumania. (Ex. Y to Ex Parte App.)


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