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Redfin Corp. v. IPAYONE.COM, LLC

United States District Court, W.D. Washington, Seattle

March 20, 2018

REDFIN CORPORATION, Plaintiff,
v.
IPAYONE.COM, LLC, Defendant.

          ORDER

          Honorable Richard A. Jones United States District Judge

         This matter comes before the Court on Plaintiff's Motion for Protective Order, Motion to Seal, and Motion to Compel. Dkt. ## 25, 35, 36.

         I. BACKGROUND

         On August 11, 2017, Plaintiff Redfin Corporation (“Redfin”) filed this lawsuit against Defendant iPayOne.com, LLC (“iPayOne”), seeking a declaratory judgment that it has not misappropriated any iPayOne trade secrets under federal law, Washington state law, and California state law. Dkt. # 1. Redfin also seeks a declaratory judgment that it did not breach a nondisclosure agreement. Id. On October 30, 2017, pursuant to a stipulation by the parties, Redfin filed an Amended Complaint that contained further allegations regarding iPayOne's entity status and other related allegations. Dkt. ## 20, 22. iPayOne then filed an answer and counterclaim against Redfin on November 2, 2017, alleging that Redfin misappropriated iPayOne's trade secrets and breached a nondisclosure agreement. Dkt. # 23.

         II. DISCUSSION

         A. Motion to Seal

         As a preliminary matter, Redfin filed a Motion to Seal Exhibit 13 submitted in support of its Motion to Compel. Dkt. # 35. Exhibit 13 was provided by iPayOne to Redfin and iPayOne has designated it as confidential. Pursuant to Local Rule 5(g), the party who designates a document confidential must provide a “specific statement of the applicable legal standard and the reasons for keeping a document under seal, including an explanation of: (i) the legitimate private or public interest that warrant the relief sought; (ii) the injury that will result if the relief sought is not granted; and (iii) why a less restrictive alternative to the relief sought is not sufficient.” W.D. Wash. Local Rules LCR 5(g).

         The exhibit at issue is the Amended Trade Secret Identification provided by iPayOne to Redfin. Dkt. # 38. iPayOne alleges that it contains “confidential business information that has not been disclosed to any person other than Redfin.” Id. However, iPayOne's four-sentence explanation does not meet the requirements of Local Rule 5(g) or the applicable legal standard. iPayOne does not provide a “specific statement of the applicable legal standard”, the legitimate private or public interest that warrant the relief sought, the injury that will result if relief is not granted, and why a less restrictive alternative to the relief sought is not sufficient. Therefore, Redfin's Motion to Seal is DENIED. Dkt. # 35. However, the Court gives iPayOne leave to file a modified Response that is in compliance with the Local Rules and applicable legal standard.

         B. Motion for Protective Order

         A district court has discretion under Federal Rule of Civil Procedure 26(c) to limit discovery “for good cause . . . to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense . . . .” Fed.R.Civ.P. 26(c)(1); Wood v. McEwen, 644 F.2d 797, 801 (9th Cir. 1981).

         The parties agreed that iPayOne would identify its alleged trade secrets as part of their joint discovery plan. Dkt. # 18. Redfin alleges that this trade secret disclosure does not sufficiently identify the alleged trade secrets and seeks a protective order from the Court barring further discovery related to trade secrets until iPayOne identifies them with more particularity. Dkt. # 25. Redfin urges the Court to apply § 2019.210 of the California Uniform Trade Secrets Act (“CUTSA”) to this case to prevent iPayOne from “improperly rummaging through Redfin's internal documents.” Dkt. # 25. Pursuant to CUTSA, “the party alleging the misappropriation shall identify the trade secret with reasonable particularity” before commencing discovery relating to the trade secret. Cal. Civ. Proc. Code § 2019.210. iPayOne does not dispute Redfin's request to apply § 2019.210 to this case, but argues that its' trade secret disclosure is sufficient and in keeping with the statute's purpose of “dissuad[ing] the filing of meritless complaints.” Dkt. # 28.

         After review of iPayOne's Trade Secret Identification (Dkt. # 29 Ex. 2) and Amended Trade Secret Identification (Dkt. # 38), as well as other exhibits submitted by the parties, the Court finds that iPayOne has identified the alleged misappropriated trade secrets with “reasonable particularity”. The Court notes that the purpose of § 2019.210 is to give notice of the issues that may arise at trial and provide reasonable guidance in ascertaining the boundaries of appropriate discovery. See Openwave Messaging, Inc. v. Open-Xchange, Inc., No. 16-CV-00253-WHO, 2018 WL 692022, at *4 (N.D. Cal. Feb. 2, 2018). iPayOne's Amended Trade Secret Identification indicates that the allegedly misappropriated trade secrets originate out of several conference calls between iPayOne and Redfin employees, and identifies the trade secrets as the success metrics of certain marketing strategies and campaigns, market research, and other aspects underlying its “1% commission structure”. Dkt. # 38. This information is sufficient to give Redfin notice of what issues may arise later in this litigation as well as the scope of appropriate discovery. As such, the Court finds that iPayOne has sufficiently defined its trade secrets for the purposes of § 2019.210[1]. Redfin's Motion for Protective Order is DENIED. Dkt. # 25.

         C. Motion to Compel

         The Court has broad discretion to control discovery. Avila v. Willits Envtl. Remediation Trust, 633 F.3d 828, 833 (9th Cir. 2011). That discretion is guided by several principles. Most importantly, the scope of discovery is broad. A party must respond to any relevant discovery request that is not privileged and that is “reasonably calculated to lead to the discovery of admissible evidence.” Fed.R.Civ.P. 26(b)(1). The Court, however, must limit discovery where it can be obtained from some other source that is more convenient, less burdensome, or less expensive, or where its “burden or expense . . . outweighs its likely benefit, considering the needs of the case, the amount in controversy, ...


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