Case Name: BrightEdge Technologies, Inc. v. Gabriel Martinez, et al.

Case No.: 2013-1-CV-256794

(1) Searchmetrics Inc.’s Motion to Filed Under Seal Materials Submitted with BrightEdge’s Motion to Compel Searchmetrics to Provide Supplemental Privilege Log and for Monetary Sanctions
(2) Plaintiff BrightEdge Technologies, Inc.’s Motion to File Under Seal Materials Submitted with Cross-Defendants Yu and Ziola’s Reply in Support of Motion to Compel Further Discovery
(3) Plaintiff BrightEdge’s Motion to Adopt in Part and Set Aside in Part Discovery Referee Report No. 20 and Objection in Part to Report No. 20
(4) Plaintiff BrightEdge’s Motion to Adopt in Part and Set Aside in Part Report No. 21

Factual and Procedural Background

This action arises from the alleged misappropriation of trade secrets. In the operative first amended complaint (“FAC”), BrightEdge alleges that its former employees, Gabriel Martinez (“Martinez”) and Cullen McAlpine (“McAlpine”), copied its confidential information and used said information on behalf of Searchmetrics, its competitor. Based on the foregoing, BrightEdge asserts causes of action for trade secret misappropriation, civil conspiracy to commit misappropriation of trade secrets, inducing breach of contract, breach of contract, and civil conspiracy.

Subsequently, Searchmetrics filed a cross-complaint against BrightEdge and Jim Yu (“Yu”) and Tom Ziola (“Ziola”), in which it alleges that cross-defendants Yu and Ziola made several false representations to potential customers about the efficacy of its search engine optimization products and/or services. The cross-complaint asserts causes of action for trade libel, interference with prospective economic advantage, unfair competition, and false advertising.

Discussion

I. Searchmetrics’ motion to file under seal materials submitted with BrightEdge’s motion to compel Searchmetrics to provide supplemental privilege log and for monetary sanctions is unopposed and GRANTED.

A court has the authority to order that a record be filed under seal only if it expressly finds facts that establish:

1. there exists an overriding interest that overcomes the right of public access to the record;
2. the overriding interest supports sealing the record;
3. a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;
4. the proposed sealing is narrowly tailored; and
5. no less restrictive means exist to achieve the overriding interest.

(Cal. Rules of Court, Rule 2.550.)

The California Rules of Court do not define what constitutes an “overriding interest.” Instead, this has been left to case law. Different “[c]ourts have found that, under appropriate circumstances, various statutory privileges, trade secrets, and privacy interests, when properly asserted and not waived, may constitute overriding interests.” (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 298, fn.3 (quoting Judicial Council advisory committee comment to [former] Rule 243.1) (affirming lower court order unsealing certain records over defendants’ objection that the materials contained proprietary trade secrets); see also NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1222, fn.46 (overriding interests found in various cases include: protection of minor victims of sex crimes from further trauma and embarrassment, privacy interests of a prospective juror during individual voir dire, protection of witnesses from embarrassment or intimidation so extreme that it would traumatize them or render them unable to testify, protection of trade secrets, protection of information within the attorney-client privilege, and enforcement of binding contractual obligations not to disclose, safeguarding national security, ensuring the anonymity of juvenile offenders in juvenile court, ensuring the fair administration of justice, and preservation of confidential investigative information).)

A declaration supporting a motion to seal should be specific, not conclusory, as to the facts supporting the overriding interest. If the court finds that the supporting declarations are conclusory or otherwise unpersuasive, it may conclude that the moving party has failed to demonstrate an overriding interest that overcomes the right of public access. (In re Providian Credit Card Cases, supra, 96 Cal.App.4th at pp. 301, 305.)

Further, where some material within a document warrants sealing but other material does not, the document should be edited or redacted if possible, to accommodate the moving party’s overriding interest and the strong presumption in favor of public access. (Cal. Rules of Court, Rule 2.550, subd. (e)(1)(B); see In re Providian Credit Card Cases, supra, 96 Cal.App.4th at p. 309.) In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis. (In re Providian Credit Card Cases, supra, 96 Cal.App.4th at p. 309.)

Searchmetrics’ motion to seal is unopposed. Searchmetrics requests sealing Exhibits AB and AC in their entirety to the Declaration of John F. Gaustad in support of BrightEdge’s motion to compel Searchmetrics to provide supplemental privilege log and for monetary sanctions as they contain confidential business information and/or private individual information which is the subject of a confidentiality order, acknowledging that the parties maintain a right of privacy in those records. The request appears to be narrowly tailored.

Accordingly, Searchmetrics’ motion to file under seal materials submitted with BrightEdge’s motion to compel Searchmetrics to provide supplemental privilege log and for monetary sanctions is GRANTED. The court finds: (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest.

The court clerk is directed to seal the following unredacted documents and no public access to the unredacted documents will be allowed without further order from this court:

Exhibits AB and AC in their entirety to the Declaration of John F. Gaustad in support of BrightEdge’s motion to compel Searchmetrics to provide supplemental privilege log and for monetary sanctions

Counsel for moving party must contact clerk to facilitate the sealing of said documents.

II. Plaintiff BrightEdge Technologies, Inc.’s motion to file under seal materials submitted with cross-defendants Yu and Ziola’s reply in support of motion to compel further discovery is GRANTED.

BrightEdge requests sealing (1) the unredacted version of the reply in support of cross-defendants Yu and Ziola’s motion to compel further discovery (lodged Dec. 21, 2017) and; (2) the unredacted version of the amended separate statement in support of cross-defendants Yu and Ziola’s motion to compel further discovery (lodged Dec. 21, 2017) as they contain confidential business information and/or private individual information which is the subject of a confidentiality order, acknowledging that the parties maintain a right of privacy in those records. The request appears to be narrowly tailored.

BrightEdge’s motion to seal is conditionally unopposed. Searchmetrics states it does not oppose the motion on the condition that sealing the items does not constitute a determination or finding that these items or any part of them are or contain trade secrets owned by BrightEdge. In granting the motion to seal, the court is not making any such determination or finding.

Accordingly, BrightEdge’s motion to file under seal materials submitted with cross-defendants Yu and Ziola’s reply in support of motion to compel further discovery is GRANTED. The court finds: (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest.

The court clerk is directed to seal the following unredacted documents and no public access to the unredacted documents will be allowed without further order from this court:

(1) the unredacted version of the reply in support of cross-defendants Yu and Ziola’s motion to compel further discovery (lodged Dec. 21, 2017)
(2) the unredacted version of the amended separate statement in support of cross-defendants Yu and Ziola’s motion to compel further discovery (lodged Dec. 21, 2017)

Counsel for moving party must contact clerk to facilitate the sealing of said documents.

III. Plaintiff BrightEdge’s motion to adopt in part and set aside in part discovery referee report no. 20 and objection in part to report no. 20.

A. Discovery dispute.

On July 29, 2016, Searchmetrics served, by electronic mail, BrightEdge with a Request for Production of Documents (“RPD”), set two.

On August 31, 2016, BrightEdge served, by electronic mail, its response to Searchmetrics’ RPD, set two. On October 5, 2016, January 20, 2017, and February 28, 2017, BrightEdge served supplemental responses.

On March 22, 2017, Searchmetrics filed a motion to compel BrightEdge to provide further responses to RPD, nos. 48, 50, 52, 54, 56, 58, 60, 62, 64, 66, 70, 72, 74, 76 – 82 (“Trade Secret RPDs”), 99 – 101 (“NDA RPDs”), 127, 133 – 134, 137 – 140, 143 – 144 (“Competitor RPDs”); to produce metadata, rule on sufficiency of privilege log; and for sanctions.

On or about April 17, 2017, the court appointed discovery referee (Hon. Kevin J. Murphy (Ret.)) issued report number 20 in which he recommended granting Searchmetrics’ motion to compel except as to RPD, nos. 100 and 127 to which the discovery referee recommended sustaining objections as well as sustaining BrightEdge’s objections based upon privilege with the understanding that an appropriate privilege log would be produced.

On December 22, 2017, BrightEdge filed the instant motion to adopt, in part, and set aside, in part, the discovery referee’s report, number 20.

B. Legal standards regarding referee reports.

A court may direct a special reference to a discovery referee to resolve the parties’ discovery disputes. (Code Civ. Proc., § 639.) If the reference is ordered without the parties’ consent, the discovery referee’s report is advisory only, not determinative, and the trial court must independently consider the referee’s findings and any objections submitted by the parties before accepting or rejecting the referee’s recommendations. (Lopez v. Watchtower Bible and Tract Society of New York, Inc. (2016) 246 Cal.App.4th 566, 588–89 (“Lopez”); In re Marriage of Petropoulos (2001) 91 Cal.App.4th 161, 175–76; Code Civ. Proc., §§ 639, subd. (a)(5), 643, subd. (c), 644, subd. (b).)

“The court has broad discretion to determine the best method for considering a party’s challenges to the referee’s findings, and the court is not required to hold a hearing or conduct a de novo analysis of the underlying arguments. In its review, the court should give the referee’s findings ‘great weight’ and focus on the parties’ objections to those findings.” (Lopez, supra, 246 Cal.App.4th at p. 589, internal citations omitted.)

On the issue of timeliness and waiver, this court will adopt the ruling made by Judge Folan in her May 2, 2017 order.

Turning then to BrightEdge’s objections to the referee’s report, BrightEdge first takes issue with the referee’s recommendation to overrule its objection to the Trade Secret RPDs on the ground that they are overbroad and finding BrightEdge improperly included “clarifying language” in its substantive response to the Trade Secret RPDs. In this court’s independent analysis of the referee’s findings, the court is satisfied that the referee already considered the argument that BrightEdge again advances here, i.e., that the parties had already agreed to limit the scope of the Trade Secret RPDs, and rejected the argument based on the evidence presented. Such a ruling does not infringe upon BrightEdge’s ability to supplement its discovery responses.

BrightEdge further objects to the referee’s recommendation to overrule its objection to RPD, numbers 99 and 101 of the NDA RPDs on the ground that they are overbroad. Through the NDA RPDs, Searchmetrics seeks to determine whether BrightEdge publicly disclosed any information without requiring an NDA which BrightEdge now asserts is trade secret. If so, the information would be relevant in that it has a tendency to prove or disprove BrightEdge’s assertion that the information is now trade secret. While RPD, numbers 99 and 101 “limits … requests to BrightEdge customers,” the referee found RPD, number 100 “is not limited to customers and is too expansive in scope.” BrightEdge argues that, whether to limited to customers or not, the NDA RPDs are all overbroad since the requests encompass information which BrightEdge is not even asserting is trade secret. In opposition, Searchmetrics affirms, “it intends to prove BrightEdge’s bad faith with the information requested by RFPs 99 to 101, confirming that BrightEdge claims as trade secret in this lawsuit the same material it freely publicized.” The court agrees with BrightEdge that the NDA RPDs, whether limited to customers or not, is overbroad and encompasses information which it not at issue in this case. Accordingly, the court will set aside the discovery referee report, number 20, in part. BrightEdge’s objection to the NDA RPDs (nos. 99 – 101) on the ground that they are overbroad is SUSTAINED.

Both BrightEdge and Searchmetrics argue the referee erred in sustaining an objection based on overbreadth to RPD, no. 127, but otherwise overruling BrightEdge’s objection to the Competitor RPDs. BrightEdge contends the Competitor RPDs are all overbroad while Searchmetrics contends the Competitor RPDs are all entirely relevant to its cross-claims and establishing punitive damages against BrightEdge. After engaging in an independent analysis, the court finds no legal or evidentiary basis for overturning the discovery referee with regard to the Competitor RPDs.

On the issue of metadata, the discovery referee found BrightEdge explained in its responses to the RPDs and in opposition to Searchmetrics’ motion to compel that “such information does not exist and that the original metadata associated with the email attachments were not spoliated, but overridden as a matter of course to match the time and data metadata of parent emails when the parent emails and attachments were moved to third-party servers for storage.” Searchmetrics contends BrightEdge should be required to produce a supplemental response in compliance with Code of Civil Procedure section 2031.230 which states:

A representation of inability to comply with the particular demand for inspection, copying, testing, or sampling shall affirm that a diligent search and a reasonable inquiry has been made in an effort to comply with that demand. This statement shall also specify whether the inability to comply is because the particular item or category has never existed, has been destroyed, has been lost, misplaced, or stolen, or has never been, or is no longer, in the possession, custody, or control of the responding party. The statement shall set forth the name and address of any natural person or organization known or believed by that party to have possession, custody, or control of that item or category of item.

Code of Civil Procedure section 2031.230 comes into play only if a party responds with a “representation that the party lacks the ability to comply with the demand for inspection, copying, testing, or sampling of a particular item or category of item.” (Code Civ. Proc., §2031.210, subd. (a)(2).) The court finds no evidence of such a representation being made by BrightEdge in response to the RPDs. Therefore, BrightEdge is under no obligation to provide a response in compliance with Code of Civil Procedure section 2031.230.

With regard to the issue of sanctions, the court will not disturb the discovery referee’s ruling awarding sanctions against BrightEdge. In awarding discovery sanctions, the discovery referee is vested with substantial discretion and the court finds no legal or evidentiary basis for overturning the discovery referee in that regard.

Accordingly, BrightEdge’s motion to adopt, in part, discovery referee report no. 20 is GRANTED. BrightEdge’s motion to set aside, in part, discovery referee report no. 21 is GRANTED, in part, as discussed above. BrightEdge shall provide a further response, without objection (except as to any claim of privilege) to Searchmetrics’ RPD, set two, nos. 48, 50, 52, 54, 56, 58, 60, 62, 64, 66, 70, 72, 74, 76 – 82, 127, 133 – 134, 137 – 140, 143 – 144 and produce all documents responsive thereto within 15 days of the date of the filing of this order. BrightEdge shall pay $7,000 to Searchmetrics within 20 days of the date of the filing of this order.

IV. Plaintiff BrightEdge’s motion to adopt in part and set aside in part report no. 21.

A. Discovery dispute.

In an order issued August 22, 2016, this court (Hon. Folan) ordered Searchmetrics to provide further responses to certain items in BrightEdge’s requests for production of documents (“RPD”). The order further stated, “To the extent that any documents or devices are withheld based on the attorney-client privilege, attorney work product protection, and/or third-party privacy protection, Searchmetrics shall provide BrightEdge with a privilege log identifying the information withheld and furnishing a factual basis for the privilege or protection claimed.”

On or about March 10, 2017, Searchmetrics provided its First Supplemental Device Privilege Log and on or about March 13, 2017, Searchmetrics provided its Revised Third Supplemental Privilege Log.

Deeming the privilege logs to be deficient, on March 22, 2017, BrightEdge filed a motion to compel Searchmetrics to provide supplemental privilege logs and for monetary sanctions.

On or about April 17, 2017, the court appointed discovery referee (Hon. Kevin J. Murphy (Ret.)) issued report number 21 in which he recommended granting BrightEdge’s motion to compel a supplemental privilege log only as to the supplemental device privilege log, nos. 2, 52 – 53, 98, 382 – 407, 423 – 425, 428 – 429, and 431 – 435. The referee’s recommendations also directed Searchmetrics to add Bates numbers to redacted documents and recommended denying BrightEdge’s request for monetary sanctions.

On December 22, 2017, BrightEdge filed the instant motion to adopt, in part, and set aside, in part, the discovery referee’s report, number 21.

B. Legal standards regarding referee reports.

A court may direct a special reference to a discovery referee to resolve the parties’ discovery disputes. (Code Civ. Proc., § 639.) If the reference is ordered without the parties’ consent, the discovery referee’s report is advisory only, not determinative, and the trial court must independently consider the referee’s findings and any objections submitted by the parties before accepting or rejecting the referee’s recommendations. (Lopez v. Watchtower Bible and Tract Society of New York, Inc. (2016) 246 Cal.App.4th 566, 588–89 (“Lopez”); In re Marriage of Petropoulos (2001) 91 Cal.App.4th 161, 175–76; Code Civ. Proc., §§ 639, subd. (a)(5), 643, subd. (c), 644, subd. (b).)

“The court has broad discretion to determine the best method for considering a party’s challenges to the referee’s findings, and the court is not required to hold a hearing or conduct a de novo analysis of the underlying arguments. In its review, the court should give the referee’s findings ‘great weight’ and focus on the parties’ objections to those findings.” (Lopez, supra, 246 Cal.App.4th at p. 589, internal citations omitted.)

In seeking to set aside discovery referee’s report number 21, BrightEdge’s principal objection is that the discovery referee erred in finding the bulk of Searchmetrics’ privilege logs to be sufficient.

A privilege log must identify with particularity each document the responding party claims is protected from disclosure by a privilege and provide sufficient factual information for the propounding party and court to evaluate whether the claim has merit. [Citations.] The precise information required for an adequate privilege log will vary from case to case based on the privileges asserted and the underlying circumstances. In general, however, a privilege log typically should provide the identity and capacity of all individuals who authored, sent, or received each allegedly privileged document, the document’s date, a brief description of the document and its contents or subject matter sufficient to determine whether the privilege applies, and the precise privilege or protection asserted.

(Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1130.)

As an example, BrightEdge directs the court to item number 6 from Searchmetrics’ Revised Third Supplemental Privilege Log which identifies an e-mail dated August 6, 2014 authored by Gabriel Martinez to Tom Schuster. Searchmetrics asserts the document is protected by the attorney-client privilege based on “Communications between non-attorneys regarding legal strategy at the direction of counsel in support of litigation.”

Evidence Code section 954 provides: “Subject to Section 912 and except as otherwise provided in this article, the client, whether or not a party, has a privilege to refuse to disclose, and to prevent another from disclosing, a confidential communication between client and lawyer….” [Footnote.] (See Kerner v. Superior Court (2012) 206 Cal.App.4th 84, 116, 141 Cal.Rptr.3d 504 [“[t]he attorney-client privilege protects confidential communications between a client and his or her attorney made in the course of an attorney-client relationship”].) “[T]he attorney-client privilege applies only to confidential communications.” (Anten v. Superior Court (2015) 233 Cal.App.4th 1254, 1260, fn. 6, 183 Cal.Rptr.3d 422; see Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1129, fn. 5, 195 Cal.Rptr.3d 694 [“the attorney-client privilege attaches only to confidential communication made in the course of or for the purposes of facilitating the attorney-client relationship”]; Benge v. Superior Court (1982) 131 Cal.App.3d 336, 346, 182 Cal.Rptr. 275 [“[t]he privilege includes only confidential communications”].)
Section 952 defines a confidential attorney-client communication: “[A] ‘confidential communication between client and lawyer’ means information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.”

(Behunin v. Superior Court (2017) 9 Cal.App.5th 833, 843–844.)

BrightEdge contends the author of the email identified, Gabriel Martinez, is a defendant in this action and the recipient, Tom Schuster, is Searchmetrics’ former CEO. The capacity of these two individuals is not set forth in the privilege log. Assuming these individuals are who BrightEdge contend they are, the email communication between them is, on its face, not a communication between an attorney and client, but rather a CEO and an employee. The privilege log admits as much in stating that the email is a “communication between non-attorneys.”

As explained by the court in Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1129 (Catalina), “a responding party preserves its objections based on the attorney-client privilege … by serving a timely written response asserting those objections. …the trial court may not deem them waived based on any deficiency in the response or privilege log. [Citations.] Nor may the court overrule the objections unless it receives sufficient information to decide whether they have merit. [Citations.] Instead, the court is limited to ordering further responses and imposing sanctions if the responding party acted without substantial justification in providing a deficient response or privilege log. [Citations.]”

Here, Judge Folan has already ordered Searchmetrics to provide “a privilege log identifying the information withheld and furnishing a factual basis for the privilege or protection claimed.” Finding the privilege log deficient, BrightEdge filed the underlying motion to compel a supplemental privilege log and, based on a review of item number 6 above, justifiably so. As explained in Catalina, supra, the deficiency of a privilege log does not render the objection waived. However, at some point, Searchmetrics, having been given ample opportunity to sufficiently identify its objections, must stand by the adequacy of its privilege log and BrightEdge will have the right to test the validity of Searchmetrics’ objection via a motion to compel. This court will not engage in a piecemeal review of the adequacy of the privilege log where the discovery referee has already had the opportunity to review the privilege log and consider its sufficiency.

With regard to the issue of sanctions, the court will not disturb the discovery referee’s ruling denying sanctions to either party. In awarding discovery sanctions, the discovery referee is vested with substantial discretion and the court finds no legal or evidentiary basis for overturning the discovery referee in that regard.

Accordingly, BrightEdge’s motion to adopt, in part, discovery referee report no. 21 is GRANTED. BrightEdge’s motion to set aside, in part, discovery referee report no. 21 is DENIED.