United States District Court, E.D. California
ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFF'S RENEWED EX PARTE APPLICATION FOR LEAVE TO
CONDUCT EXPEDITED DISCOVERY (ECF NO. 9)
BARBARA A. McAULIFFE, UNITED STATES MAGISTRATE JUDGE
before the Court is Plaintiff's renewed ex parte
application for leave to conduct expedited discovery. (ECF
No. 9.) The Court finds the ex parte application suitable for
decision without oral argument, and the matter is deemed
submitted. For the reasons outlined below, Plaintiff's
renewed ex parte application for leave to conduct
expedited discovery shall be granted in part and denied in
Intermodal Services, LLC (“Plaintiff” or
“Roadrunner”) filed the instant diversity action
against Defendant T.G.S. Transportation, Inc.
(“Defendant” or “TGS”) on August 7,
2017. By its complaint, Roadrunner, a provider of regional
and national drayage services, asserts that TGS is knowingly
and continuing to interfere with a valid contract between
Roadrunner and a former Roadrunner employee, who is now
employed by TGS in violation of that contract.
relevant part, Roadrunner alleges that it entered into a
Stock Purchase Agreement (“SPA”) on November 2,
2012, with Jeffrey Cox, Double C Transportation
(“Double C”), Central Cal Transportation
(“Central Cal”) and David Chidester. Complaint at
¶ 9. On execution of the SPA, Roadrunner acquired all of
the outstanding stock of Double C and Central Cal.
Id. at ¶10. A non-competition, non-solicitation
and non-disclosure provision was included in the SPA and
applies to both Mr. Chidester and Mr. Cox. Id. at
¶ 11. Under the SPA, for restricted period through
December 31, 2017, Mr. Cox may not work for any entity that
competes with Roadrunner, may not use his knowledge of the
Central Cal or Double C businesses or his relationship with
customers to compete with Roadrunner, may not contact actual
or targeted customers of Central Cal or Double, may not seek
to induce employees or agents of Central Cal or Double C to
leave the companies or to stop performing services for them
or Roadrunner, may not disparage Roadrunner, Central Cal or
Double C or engage in conduct that is injurious to Central
Cal or Double C's reputation or interests. Id.
at ¶¶ 12-14. Finally, under the SPA, Mr. Cox may
not divulge, communicate or use any confidential information
or trade secrets of Central Cal or Double C to their
detriment. Id. at ¶ 15.
the SPA was executed, Double C merged into Central Cal and
hired Mr. Cox as Vice President. He served in that position
from November 2012 until January 2017, when he became Central
Cal's Director of Sales. He separated from his employment
with Central Cal on or around May 31, 2017. Id. at
¶ 16. Roadrunner alleges that in or around July 2017,
Mr. Cox was hired by TGS, a provider of international drayage
and domestic intermodal drayage and Roadrunner competitor.
Id. at ¶¶ 8, 18. Roadrunner further
alleges that Mr. Cox is soliciting Roadrunner's employees
and contractors and inducing them to leave Roadrunner to TGS.
Id. at ¶ 19. Roadrunner also contends that Mr.
Cox is soliciting or intends to solicit Roadrunner's
customers to take their business to TGS, using his knowledge
of Roadrunner and its affiliates. Id. at 24.
11, 2017, Roadrunner's legal counsel sent a letter to Tim
and Peter Schneider, President and Vice-President of TGS. The
letter addressed the non-compete provisions of the SPA, and
demanded that TGS cease its interference with
Roadrunner's contractual relationship with Mr. Cox. The
letter also asked TGS to confirm in writing that Mr. Cox
would not be an employee of TGS, that TGS would not
tortiously interfere with Roadrunner's contractual
agreement with Mr. Cox, and asked whether Mr. Cox disclosed
to TGS prior to employment that he was bound by the
non-competition, non-solicitation and confidential
information provisions. Id. at ¶ 27. TGS's
counsel responded to letter, but failed to confirm that Mr.
Cox would not be an employee of TGS. Id. at ¶
30. Roadrunner alleges that Mr. Cox is still an employee of
TGS and is continuing to violate the non-compete provisions
of the SPA, and that TGS is knowingly and intentionally
tortiously interfering with Roadrunner's contractual
agreement with Mr. Cox. Id. Roadrunner presents
claims against TGS for tortious interference with contract,
tortious interference with prospective economic relationship,
unjust enrichment/restitution, unfair competition and
conversion. Id. at pp. 7-10.
initial scheduling conference is set in this matter for
October 26, 2017. (ECF No. 4.) TGS has not yet filed an
answer or other responsive pleading to the complaint.
August 7, 2017, concurrent with the complaint, Roadrunner
filed an ex parte application for leave to conduct
expedited discovery. (ECF No. 2.) On August 8, 2017, the
Court denied Roadrunner's ex parte application
without prejudice because there was no indication that
Roadrunner had served the summons and complaint on Defendant
TGS, and the Court therefore lacked personal jurisdiction
over TGS. (ECF No. 5.)
August 9, 2017, Roadrunner filed a proof of service of the
summons and complaint. On the same date, Roadrunner filed its
renewed ex parte application for leave to conduct
expedited discovery. (ECF Nos. 7, 9.) By the application,
Roadrunner asserts that expedited discovery is needed to
ascertain the extent of harm caused by TGS and Cox's
wrongful solicitation of Roadrunner's employees,
contractors, drivers and customers in violation of the
non-competition, non-solicitation, and confidential
information provisions of the SPA. Roadrunner claims that it
is aware that TGS and Cox have solicited and hired dozens of
Roadrunner's employees, contractors and drivers, and have
solicited hundreds of thousands of dollars in business from
Roadrunner's customers, but Roadrunner does not know the
full extent of the information taken and used or the
solicitation. Roadrunner therefore argues that expedited
discovery is needed to fully consider the necessity of a
motion for a temporary restraining order or preliminary
injunction. (ECF No. 9 at pp. 2-3.)
therefore requests leave to conduct immediate discovery
tailored to: (1) The timing of when Mr. Cox informed TGS that
Mr. Cox was bound by restrictive covenants with Roadrunner,
including the non-competition, non-solicitation, and
confidential information provisions; (2) TGS and Mr.
Cox's communications with and solicitation of
Roadrunner's employees, contractors, drivers and
customers; and (3) Mr. Cox's use and disclosure of
Roadrunner's confidential information after Mr. Cox began
his employment with TGS. (ECF No. 9 at p. 3.) Roadrunner
seeks leave to conduct the following discovery: (1) two
depositions-one of TGS and one of Mr. Cox; (2) written
discovery in the form of 58 document requests to TGS; (3)
written discovery in the form of 54 document requests to Mr.
Cox; and (4) written discovery in the form of 7 requests to
three Roadrunner/CC/DC customers that went to TGS following
Mr. Cox's departure from Roadrunner. (ECF No. 9 at p.
10.) Roadrunner indicates that these requests will be limited
to three specific events and limited time periods: (1) TGS
and Mr. Cox's communications prior to Mr. Cox's
hiring; (2) documents contemporaneous to Mr. Cox's
hiring; and (3) documents since Mr. Cox joined TGS relating
to breach of the SPA. (Id.)
filed an opposition to the ex parte application on
August 11, 2017. (ECF No. 14.) TGS argues that Roadrunner has
failed to submit any admissible evidence in support of its
claims and that Roadrunner left out important facts. For
instance, TGS reports that it did not lure Mr. Cox away from
Roadrunner to use Roadrunner's confidential information
to target Roadrunner's customers. Instead, Roadrunner
fired Mr. Cox on May 31, 2017, after he filed a lawsuit
against Roadrunner disclosing accounting irregularities and
alleging the company had defrauded him regarding payment of
the sums due under the SPA. (ECF No. 14-1, Declaration of Ian
B. Wieland (“Weiland Decl.”) at ¶¶
3-6.) Mr. Cox's action remains pending and Roadrunner has
reportedly stonewalled any attempts by Mr. Cox to conduct
discovery in that case. (Id. at ¶ 11.) Next,
TGS contends that it does not have, has not used, and does
not need any Roadrunner confidential information to solicit
Roadrunner customers. (ECF No. 14-4, Declaration of Peter
Schneider (“Schneider Decl.”) at ¶ 2.) The
identity of these customers, and Mr. Cox's termination,
are well known in the industry. TGS reports that after
learning of Mr. Cox's termination, but long before he was
hired, TGS and other trucking companies in the industry
reached out to several customers of Roadrunner from which TGS
had already been seeking business. Id. Similarly,
long before Mr. Cox was hired by TGS, other Roadrunner
customers reached out to TGS seeking quotes for services
after Mr. Cox's firing. (Id. at ¶ 3.) TGS
also reports that prior to hiring Mr. Cox on July 1, 2017,
TGS was assured by Mr. Cox and his attorney that the
non-compete was not valid or enforceable. (Id. at
¶ 5.) Mr. Cox also filed a second lawsuit against
Roadrunner regarding the unenforceability of the non-compete
as well as Roadrunner's efforts, after firing him, to
preclude him from seeking alternative employment with TGS.
(Weiland Decl. at ¶ 10.)
asserts that Roadrunner has failed to submit any admissible
evidence that TGS or Mr. Cox has solicited a single customer
or employee of Roadrunner, let alone that TGS or Cox did so
using Roadrunner's proprietary and confidential
information. (Id. at ¶ 4.) In the absence of
such evidence, TGS contends that Roadrunner has not
established good cause for resolving its request on an ex
parte basis or for obtaining expedited discovery.
replied on August 14, 2017. (ECF No. 16.) In its reply,
Roadrunner contends that TGS has been aggressively using Mr.
Cox and Roadrunner's confidential information and
goodwill to solicit Roadrunner's employees, contractors
and customers. (ECF No. 16-1, Declaration of Ben Kirkland
(“Kirkland Decl.”) at ¶¶ 13-18.)
Roadrunner further contends that over the last few weeks, TGS
and Mr. Cox's solicitation has inflicted on Roadrunner
millions of dollars in lost revenues (Kirkland Decl.,
¶¶17-18), and the departure or threatened departure
of key employees and contractors from Roadrunner to TGS
(Kirkland Decl. at ¶¶ 13-16.) Roadrunner asserts
that the ex parte application is critical to arming
it with necessary-and otherwise unavailable-discovery to
evaluate and pursue a motion for preliminary injunction and
put an end to TGS's allegedly tortious interference
before Roadrunner has lost everything it acquired in the SPA.
(ECF No. 16 at p. 4.) Roadrunner explains that it this is a
critical time period because of the almond harvest season.
Rule of Civil Procedure 26(d) generally provides that a party
“may not seek discovery from any source before the
parties have conferred as required by Rule 26(f).
Fed.R.Civ.P. 26(d)(1); Qwest Commc'ns Int'l. Inc.
v. WorldQuest Networks. Inc., 213 F.R.D. 418, 419 (D.
Colo. 2003) (“Rule 26(d) of the Federal Rules of Civil
Procedure generally provides that formal discovery will not
commence until after the parties have conferred as required
by Rule 26(f).”). “However, courts may permit
expedited discovery before the Rule 26(f) conference upon a
showing of good cause.” In re Countrywide Fin.
Corp. Derivative Litig., 542 F.Supp.2d 1160, 1179 (C.D.
cause may be found where the need for expedited discovery, in
consideration of the administration of justice, outweighs the
prejudice to the responding party.” Semitool, Inc.
v. Tokyo Electron America, Inc., 208 F.R.D. 273, 276
(N.D. Cal. 2002). In considering whether good cause exists,
factors courts may consider include: (1) whether a
preliminary injunction is pending; (2) the breadth of the
discovery request; (3) the purpose for requesting the
expedited discovery; (4) the burden on the defendants to
comply with the requests; and (5) how far in advance of the
typical discovery process the request was made.”
Rovio Entm't Ltd. v. Royal Plush Toys, Inc., 907
F.Supp.2d 1086, 1099 (N.D. Cal. 2012). Good cause for
expedited discovery is frequently found in cases involving
claims of infringement and unfair competition or in cases
where the plaintiff seeks a preliminary injunction. See
AF Holdings LLC v. Doe, No. 2:12-CV-2206-JAM-EFB, 2012
WL 5464577, at *2 (E.D. Cal. Nov. 7, 2012), citing
Semitool, Inc., 208 F.R.D. at 276.
considering the relevant factors, the Court finds that
Roadrunner has demonstrated good cause for expedited
discovery. Roadrunner intends to seek a preliminary
injunction, the purpose of which is to preserve the status
quo. See U.S. Philips Corp. v. KBC Bank N.V., 590
F.3d 1091, 1094 (9th Cir. 2010) (“the very purpose of a
preliminary injunction . . . is to preserve the status quo
and the rights of the parties until a final judgment issues
in the cause”). The burden on the defendant to comply
with the requests will not be any greater than the general
discovery burdens contemplated by this action, and the
discovery will commence approximately one month before the
required 26(f) conference must be completed. As to the
breadth of discovery, the Court finds that the proposed
discovery is not sufficiently narrowly tailored, and
therefore the scope of expedited discovery shall be limited.
Accordingly, the Court modifies Roadrunner's requests as
shall be permitted to conduct the oral deposition of a TGS
designated employee most knowledgeable pursuant to Federal
Rule of Civil Procedure 30(b)(6) regarding the following
topics as set forth in the proposed Notice of Taking
Deposition (ECF No. 9-4, Exhibit 3 to Declaration of Michael
D. Lane) and, where indicated, modified by the Court:
TOPIC NO. 1: The interview and hiring process at TGS
including but not limited to, who interviewed and hired Mr.
Jeffrey Cox (“Cox”).
TOPIC NO. 3: Interview(s) of Mr. Cox.
TOPIC NO. 4: Any review prior to hiring Mr. Cox of his
November 2, 2012 Stock- ...