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CE Design Ltd. v. Cy's Crabhouse North

August 23, 2010

CE DESIGN LTD., PLAINTIFF,
v.
CY'S CRABHOUSE NORTH, INC. AND CY'S CRABHOUSE & SEAFOOD GRILL, INC., DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

CE Design Ltd. (CE Design) has sued Cy's Crabhouse North, Inc. and Cy's Crabhouse & Seafood Grill, Inc. (collectively, Cy's Crabhouse), alleging violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227(b)(1)(C). On June 11, 2010, this Court issued a decision denying defendant's motion to dismiss and ordering a further hearing on certain alleged discovery violations and alleged payments made by plaintiffs' counsel to a third party witness.*fn1 The parties have submitted voluminous filings in advance of that hearing. The Court has concluded that these filings present sufficient information to allow the Court to rule without the need to conduct a hearing. The Court's findings are below.

Background

Business to Business Solutions (B2B), a business based in New York and run by Caroline Abraham (Abraham), worked for Macaw (also known as Maxileads), a Romanian company, to send fax advertisements in the United States. Abraham was B2B's only employee, but her son Joel Abraham (Joel) sometimes helped her with technical aspects of the business. According to Abraham, database records for B2B indicate that Cy's Crabhouse purchased two sets of 5,000 fax advertisements for a total of $328 on November 1, 2005. In November 2005, CE Design received an unsolicited fax advertisement for Cy's Crabhouse; that advertisement is the basis of this lawsuit.

A class was certified on July 27, 2009, and the case is currently set for trial on September 13, 2010. On March 29, 2010, Cy's Crabhouse filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 37(b)(2) for alleged discovery violations. Cy's Crabhouse argued that the case should be dismissed because plaintiff's counsel had violated discovery obligations by failing to turn over to the defense a copy of a B2B hard drive that included information about fax clients, e-mails, and logs recording sent faxes. Cy's Crabhouse also alleged that plaintiff's counsel used information from the hard drive to initiate new TCPA lawsuits against other former B2B customers in violation of a protective order entered in this case. Cy's Crabhouse further alleged that plaintiff's counsel had improperly attempted to influence Caroline Abraham's participation in the discovery process by sending her attorney a check for $5,000. Abraham herself sent a letter to the Court complaining about plaintiff's counsel's use of the information from the hard drive to initiate new TCPA lawsuits. The Court treated this letter as a motion for protective order.

On June 11, 2010, the Court issued a decision denying the motion to dismiss. The Court also ordered a further hearing to address plaintiff's counsel's use of the B2B materials to initiate other lawsuits and ordered plaintiff's counsel to submit sworn statements explaining the $5,000 check that plaintiff's attorney Brian Wanca sent to Caroline Abraham's attorney. In advance of that hearing, the parties have submitted voluminous filings. As indicated earlier, the Court has determined that these filings present sufficient information for the Court to rule without holding a further hearing.

Discussion

A. Alleged Violation of the Protective Order

On July 2, 2008, the Court entered an agreed protective order in this case. It states:

[A]ny party or third party that submits to the jurisdiction of this Court for adjudication of production and designation disputes who is required to produce documents or disclose information in discovery in this case (the "Producing Person") may designate as "confidential" any non-public material that the producing person believes, in good faith, contains information related to a grade secret, customer lists, non-public pricing information, personal consumer information, including social security numbers or consumer credit report, confidential research or any other information subject to a legally protected right to privacy ("Confidential Information").

See Docket no. 81. To designate material confidential, the protective order required the producing person to mark or stamp it "confidential" (in the case of documents) or inform counsel for the parties in writing that it is confidential (for any material not reduced to documentary form). Plaintiff's counsel argue that they did not violate the protective order when they used materials from the B2B hard drive to initiate new lawsuits because Abraham had failed to designate those materials confidential when she turned them over.

In its June 11 decision, the Court noted that plaintiff's counsel had represented to Abraham that the material would be treated as confidential and subject to a protective order. The Court ruled, however, that Cy's Crabhouse had not shown that it suffered any prejudice as a result and therefore declined to dismiss the case on this ground. The Court stated that it was nonetheless concerned regarding the alleged misuse of the B2B materials, and ordered a "further hearing to determine how the materials from B2B have been used and the rationale supporting such use." Docket no. 260 at 13. CE Design, 2010 WL 2365162, at *7.

As the Court has indicated, Abraham had also sent a letter to the Court complaining about plaintiff's counsel's use of the B2B hard drive materials to initiate other cases. The Court treated this letter as a request for a protective order. The Court found that although the protective order it had entered stated that requests for confidentiality should be made at the time of disclosure, there was good reason for the delay -- namely, that Abraham had been given reason to believe by plaintiff's counsel that the materials were already designated confidential or would be so designated. The Court ruled that "going forward, the documents, disks, and media containing B2B customer information and fax lists shall be treated as 'confidential' as defined by the protective order." Id. at *9. As a result, both sides were precluded from using the information on the hard drive for any purpose other than the defense or prosecution of this action. Id.

In advance of the anticipated hearing on the use of B2B materials, plaintiff's counsel have submitted a statement to the Court. In it, they again argue that the materials on the B2B hard drive were not confidential under the protective order because Abraham did not follow the process established in the protective order for designating materials ...


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