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CMB Export, LLC v. Atteberry

United States District Court, C.D. Illinois, Rock Island Division

September 29, 2016




         Before the Court are Plaintiffs' objection to the Magistrate Judge's order of October 20, 2015, or seeking clarification of same, ECF No. 84; Defendants' motion to strike the putative reply to the response to this motion, ECF No. 94; another motion strike that reply filed by interested party CanAm Enterprises, LLC (“CanAm”), alternatively styled a motion for leave to file a “short surreply, ” ECF No. 96; and Plaintiff's motion seeking to present additional authority pertaining to its appeal, ECF No. 98. For the following reasons, the objection is DENIED, the motions to strike MOOT, and the motion to present additional authority GRANTED.


         The United States operates a visa system, the EB-5 Program, that allows wealthy foreign nationals to live and work in the country indefinitely if they invest in American businesses in such a way as to create full time employment for American workers. Plaintiffs CMB Export, LLC and CMB Summit, LLC (collectively “CMB”) help foreign investors channel their money into the country in such a way as to qualify for the visas. CMB has been designated a “Regional Center” by the EB-5 Program. (“Regional centers” free foreign investors somewhat from the requirements of job creation by allowing investors to create both “direct” and “indirect” jobs, terms of art whose precise meanings are not relevant here. See U.S. Citizenship and Immigration Services: EB-5 Immigrant Investor Pilot Program, https://www.
 0Reports/EB-5%20Investor%20Pilot%20Program.pdf (visited Sept. 22, 2016).) CMB and other regional centers channel foreign investments by creating partnerships in which the foreign investor client becomes a limited partner. The partnership then invests money in such a way as to satisfy the visa requirements for the client. CMB uses its expertise and knowledge of domestic investment opportunities on behalf of its clients. In the course of this work, CMB gathers information about potential investors and investments, at least some of it confidential, and also claims that it creates “proprietary business models for client contact, outreach, project evaluation, and project development.” Compl. ¶ 10.

         Defendant Kimberly Atteberry used to be the Chief Economist for United States Citizenship and Immigration Services, which administers the EB-5 visa program and regulates participants. Mot. Protective Order 3, ECF No. 71. However, she went to work for CMB. She started on July 8, 2011, and was promoted to vice-president on November 12, 2012. Her responsibilities included evaluating projects for investment, and liaising with representatives of these businesses, with immigration professionals, and with government officials. She had access to “virtually all” of the information CMB now asserts to be proprietary, including information about potential investors and investments, all of which was assertedly “protected by non- disclosure agreements.” Compl. ¶ 13. She also had access to CMB's sales and development plans, marketing plans, “legal documents, ” and “financial performance evaluations.” Id. CMB's owner also, apparently as a favor to Atteberry, gave her husband, Defendant Christopher Atteberry, a job at his high-end antique firearm auction house.

         On February 26, 2013, Kimberly Atteberry resigned. CMB claims that it quickly found the Atteberrys had taken “vast amounts” of proprietary information when she left, including information from all the categories mentioned above. Compl. ¶ 19. CMB also alleges that Christopher Atteberry took digital files from CMB's servers, some of which detailed a current CMB investment project and loan. CMB also claims that it found out that even while Kimberly Atteberry had been a vice president, she had tried to arrange with some of CMB's “investment targets” to do business separately once she left and started her own business. To this end, CMB claims, she lied to both sides, concealing her contacts from CMB and telling some of the contacts that CMB was no longer interested in projects that, in fact, she wanted later to invest in with the company she would go on to create, Defendant Vermillion Consulting, LLC (“Vermillion”).

         CMB contacted local law enforcement, which searched the Atteberrys' house on March 4, 2013, and seized evidence that CMB believes contains copies of their proprietary information. Unfortunately for CMB, the seized material is currently in the custody of the U.S. Attorney, and apparently completely unavailable to CMB in trying to prove its case. Mem. Supp. Objection 9.

         CMB filed suit on June 14, 2013, under federal-question jurisdiction, alleging (I) violations of the Illinois Trade Secret Act (“ITSA”), 765 ILCS 1065/1-9, Compl. ¶¶ 33-38; (II) violations of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030(g), Compl. ¶¶ 39- 44; (III) a state law claim for breach of fiduciary duty as to Kimberly Atteberry only, id. at ¶¶ 45-48; (IV) a state law civil conspiracy claim, id. at ¶¶ 49-54; and (V) a state law tortious interference claim, id. at ¶¶ 55-59. Discovery has proceeded actively for years.

         The current motions have arisen because CMB seeks discovery of documents in Defendants' possession that were generated in the course of business dealings between Defendant Vermillion, which now works as a facilitator of EB-5 visa applications, and third party corporations Civitas, CanAm, and EB5 Capital. These third parties, who have appeared through counsel in the instant litigation, assert that these materials are privileged by nondisclosure agreements (“NDA”) between themselves and Defendants, and not relevant in any event to CMB's claims.

         On May 20, 2015, CMB filed a motion to compel production of discovery relating to several requests it had made and Defendants had refused, including requests concerning entities for which Kimberly Atteberry had worked after leaving CMB. ECF No. 56. CMB represented in this motion that Defendants had asserted the existence of NDAs governing the information, and had claimed that it was not likely to lead to the discovery of admissible evidence. Mot. Compel 2, ECF No. 56. CMB claimed that it had offered to enter into a protective agreement to safeguard against disclosure to the public of any material governed by an NDA, but that Defendants refused. Id. at 2-3. CMB argued then, as it has continued to do, that it needed access to communications between Defendants and entities they had worked for after Atteberry left CMB because those communications might contain CMB's proprietary information, or contain references to Atteberry's alleged earlier malfeasance as an employee of CMB, both of which would be relevant to its claims for relief. Id. at 3. Defendants responded that CMB had no reason it could point to to think that these communications contained proprietary information, and that insofar as the communications would tend to show that Atteberry had “poached” CMB's clients, she had not signed a non-compete contract, and such actions on her part would have no relevance to CMB's claims. Resp. Mot. Compel 3, ECF No. 60.

         The Magistrate Judge held a hearing on July 27, 2015, in which he granted CMB's motion to compel as to most of its numbered discovery requests (a few were withdrawn). Jul. 27, 2015 Minute Entry, ECF No. 63. The Magistrate Judge ordered the parties to submit a draft joint protection order to the Court. Id.

         On August 24, 2015, however, Defendants filed a motion for reconsideration, ECF No. 66, asserting a “recent revelation that multiple third parties have a significant interest in protecting the production of certain materials that have been compelled.” Mot. Reconsideration 3. Shortly afterward several companies describing themselves as competitors of CMB (presumably, they are facilitators of EB-5 visa applications and investment schemes) sought leave to appear in order to assert their confidentiality interests in the materials CMB sought discovery of. Civitas Capital Group (“Civitas”), and Encore Enterprises Inc. and Encore Global Investment Management, LLC (“Encore”) filed a motion for leave to file an amicus brief, ECF No. 67, which the Court granted, Aug. 25, 2015 Text Order; and EB5 Capital (“EB5”) moved for a protective order, ECF No. 71. These motions revealed that CMB had already served subpoenas directly on Encore, EB5, and CanAm. Mot. Leave 3, ECF No. 67; EB5 Mot. Protective Order 3, ECF No. 71. Encore had successfully contested the subpoenas in federal district court in Texas; EB5 had agreed to produce materials pursuant to the Court's earlier protective order, ECF No. 50.

         In their amicus brief, Civitas and Encore argued CMB was seeking access to their confidential information in way that was “misusing the discovery process to obtain competitive trade secret information about its competitors” which “would be highly valuable . . . and would create an unfair marketplace.” Amicus Brief 1, 3, ECF No. 68. The documents would disclose their “reasoning and methodology utilized . . . in analyzing, processing, financial modeling and submitting EB-5 project applications, term sheets, plans, and studies . . . [and] customers, business partners and potential business partners.” Id. at 11. Encore and Civitas sought either that CMB's discovery requests be denied, or that a special master be appointed to review the material CMB asserted ...

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