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Patriot Rail Corp., A Delaware Corporation v. Sierra Railroad Company

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA


March 13, 2012

PATRIOT RAIL CORP., A DELAWARE CORPORATION,, PLAINTIFF,
v.
SIERRA RAILROAD COMPANY, A CALIFORNIA CORPORATION, DEFENDANT. AND RELATED COUNTERCLAIM.

The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

ORDER

Defendant and Counterclaimant Sierra Railroad Company ("Sierra") requests, through the motion presently before the Court, an order enforcing the terms of Amended Protective Order, filed on January 24, 2012, and now in place with respect to the above-captioned matter.

Due to ongoing acquisition negotiations between Sierra and a prospective purchaser, Iowa Pacific Holdings ("IPH"), and due diligence disclosures requested by IPH as to pending litigation, including the present case, Sierra filed a motion to permit amendment of the initial May 21, 2009 Protective Order to permit such disclosure. That Motion was granted by order dated January 24, 2012 (ECF No. 189) and, as indicated above, an Amended Protective Order (ECF No. 190) was issued that same day.

Under the terms of the Amended Protective Order, Sierra was permitted to disclose its litigation files to a prospective purchaser like IPH, in order to satisfy due diligence requests, so long as 1) said prospective purchase executes a stipulation to be bound by the terms of the Amended Protective Order; 2) a "list of documents" proposed to be disclosed is provided to Defendant Patriot Rail Corporation ("Patriot"); and 3) Patriot is given the opportunity to designate a "certain narrow category of documents" as "highly confidential." and subject to only restricted disclosure. In discussing use of the "highly confidential" designation, Patriot was warned to avoid resort to "mass, indiscriminate, or routinized" categorization. ECF No. 190, 2:25-26.

Sierra now asks the Court to enforce the terms of the Amended Protective Order on grounds that Patriot has sought to designate virtually "the entire contents of Sierra's litigation file, even documents produced by third parties or by Sierra itself, as 'highly confidential.'" Motion, 3: 21-22. According to Sierra, that amounts to just the kind of mass designation that the Amended Protective Order prohibited.

Sierra also argues that Patriot makes the same kind of due diligence requests of its own potential acquisition targets, including the aborted purchase negotiations that underlie the present litigation.

Patriot counters that Sierra has failed to satisfy the second prerequisite for disclosure,*fn1 which requires that Sierra provide a "list of documents" to be provided so that Patriot, in turn, can designate within five days which of those documents should be classified as "highly confidential".

By its own admission, Sierra has simply "described the contents of its litigation file in categorical fashion." Motion, 2:8. It accordingly provided counsel for Patriot with only eight general categories of documents it sought to disclose. See Decl. of Louis A. Gonzalez, Ex. B. Patriot's counsel objected by email dated February 1, 2001 (see id.), stating that the terms of the Amended Protective Order "clearly directs Sierra to Provide a concise list of documents- not categories." Id., emphasis in original. Patriot went on to designate, in extremely broad fashion, the documents it sought to protect as "highly confidential" in the face of the general categories of documents identified by Sierra.

The Court agrees that the specific terms of the Amended Protective Order provide that a "list of documents be provided" before Patriot is obligated to designate any documents so listed as "highly confidential". The eight broad categories identified by Sierra do not suffice in that regard. While the Court is sympathetic to Sierra's claim that it has to make its litigation files available to IPH to satisfy IPH's due diligence request, and cannot predict just what documents IPH chooses to examine, that does not obviate the terms of the Amended Protective Order which unequivocally require that a "list of documents" be furnished to Patriot beforehand.

Although the Court recognizes that a document by document listing may be onerous and even largely unnecessary to the extent various groups of documents have been generated by Patriot, it is equally clear that more particularity has to be provided by Sierra in order to meet the requirements of the Amended Protective Order. The parties are encouraged to work together on a mutually acceptable means of identification, short of a serial description of each and every piece of paper in Sierra's litigation file, that will satisfy their concerns. In the meantime, however, the categorical description offered by Sierra is not adequate and cannot support the present motion.

Defendant Sierra's Motion to Enforce Amended Protective Order (ECF No. 197) is accordingly DENIED, without prejudice, at this time.*fn2

IT IS SO ORDERED.


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