EHO360, LLC v. Opalich

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EHO360, LLC, Plaintiff, v. NICHOLAS OPALICH and TAMMY RADCLIFF, Defendants.

Civil Action No. 3:21-CV-0724-B

United States District Court, N.D. Texas, Dallas Division

August 5, 2022

MEMORANDUM OPINION AND ORDER

JANE J. BOYLE UNITED STATES DISTRICT JUDGE

Before the Court are Defendants Nicholas Opalich (Opalich) and Tammy Radcliff (Radcliff) (collectively, Defendants)'s Objections to Magistrate Judge David L. Horan's June 7 2022 Order granting Plaintiff EHO360, LLC (EHO)'s Motion to Compel and Request for Discovery Sanctions (Doc. 70), and Prospective Intervenor HospisRx, LLC (HospisRx)'s Limited Motion to Intervene (Doc. 72) (the Motion to Intervene). For the reasons given below, the Court OVERRULES the Objections to the Magistrate Judge's Order granting Plaintiff's Motion to Compel and DENIES HospisRx's Motion to Intervene.

I. BACKGROUND

This dispute arises from two high-level executives' alleged involvement in a business venture competing with their former employer. EHO is a “prescription claims processor and pharmacy benefit manager” (PBM). Doc. 42, 2d Am Compl., ¶ 8. In February 2019, EHO hired Opalich as its Chief Executive Officer. Id. ¶ 15. Opalich signed an employment agreement that contained, among other provisions, noncompete, nonsolicitation, and confidentiality restrictions. See id. ¶¶ 16-21. In July 2020, “EHO hired Radcliff . . . as its Executive Vice President of Hospice PBM Division.” Id. ¶ 24. Radcliff also signed an employment agreement that contained, among other provisions, noncompete and confidentiality restrictions. See id. ¶¶ 25-29. EHO terminated Opalich's employment in September 2020. Id. ¶ 46. Radcliff notified EHO of her resignation in March 2021. Id. ¶ 58.

In March 2021, EHO filed suit against Opalich, Radcliff, and HospisRx.^[1] Doc. 1, Compl., ¶¶ 3-4, 7. EHO claims that Opalich and Radcliff “breached their contractual and fiduciary duties to EHO, pilfered EHO's confidential and proprietary information, and are using EHO's confidential and proprietary information to operate a competing business”-HospisRx. Doc. 42, 2d Am. Compl., ¶¶ 1, 6.

In May 2021, EHO moved for a preliminary injunction to prevent Opalich, Radcliff, and HospisRx from “disclosing or using EHO's confidential information,” which EHO claimed Opalich and Radcliff had transferred to HospisRx. Doc. 13, Mot. Prelim. Inj., 1. A few days later, HospisRx moved to dismiss the claims against it for lack of personal jurisdiction. Doc. 15, Mot. Dismiss. The Court set a hearing on the two motions for July 16, 2021. Doc. 22, Order Setting Briefing & Hr'g. As briefing proceeded, on June 16, 2021, EHO filed a motion to expedite discovery, requesting leave to serve requests for productions on Opalich, Radcliff, and EHO, and to conduct limited depositions of Opalich, Radcliff, and EHO's corporate representative. Doc. 26, Mot. Expedite Disc. Finding that “[EHO]'s discovery requests [were] expansive . . .[,] the Court ha[d] not yet ruled on [HospisRx's] motion to dismiss . . . [and] formal discovery w[ould] not commence for at least several weeks” and because the motion was filed almost a month after the motion for preliminary injunction and only a month before the July 16 hearing, the Court exercised its discretion to deny the request for expedited discovery on the preliminary injunction and jurisdictional issues. Doc. 33, Order, 3-4.

Two days before the July 16, 2021 motion hearing, EHO filed a Motion for a Protective Order of Confidentiality. Doc. 34, Mot. Protective Order. This motion stated:

EHO anticipates that certain documents and information likely to be produced or disclosed by the Parties and third-parties during the course of pre-trial proceedings, the currently scheduled injunction hearing, and discovery may contain material that the producing/disclosing party considers to be confidential, such as nonpublic commercial information that is technical or commercially advantageous to its possessor, confidential personnel information, and other protectable information. As a result, EHO's counsel forwarded via email a draft stipulated protective order of confidentiality for Defendants' consideration on July 12, 2021.

On July 14, 2021, counsel for the Parties met and conferred regarding the substance of the proposed protective order. During that conference, counsel for Defendants and Plaintiff agreed on the form and substance of a draft protective order, which is the document attached as Exhibit A. Despite agreeing to the form and substance of Exhibit A, however, counsel for Defendants advised that they would not stipulate to the entry of a protective order while the Defendants have pending motions to dismiss for lack of jurisdiction.

In light of Parties' agreement on everything other than timing of the filing, and in the interest of ensuring that the Parties' interests are protected in advance of the preliminary injunction hearing and in discovery, EHO seeks the relief of the Court in the form of entering the attached proposed protective order.

Id. ¶¶ 2-4. The motion's Certificate of Conference stated: “Counsel for Defendants [who then included HospisRx] advised that they agree to the form and substance of the proposed order attached to this Motion, but would not join in the submission of it prior to hearing on Defendants' pending motions.” Id. at 5. On July 15, 2021, the Court granted the motion for entry of a protective order and entered the Protective Order that had been submitted by EHO as Exhibit A to that motion. Doc. 35, Elec. Order; Doc. 36, Protective Order.

At the July 16, 2021 hearing, the Court ruled that it lacked personal jurisdiction over HospisRx. See Doc. 39, Order Denying Prelim. Inj., 8. The Court also denied EHO's motion for a preliminary injunction, emphasizing that “on the current record . . . Plaintiff . . . has no evidence that i[t] has actually lost customers to HospisRx,” which was “newly formed.” Id. at 11. Noting that EHO “stands in a unique position” because its alleged competitor was still becoming operational the Court allowed EHO to “again move for a preliminary injunction” if it “[s]hould . . . discover new evidence warranting a preliminary injunction during the course of discovery.” Id. at 11-12. HospisRx was terminated as a party to the action on July 27, 2021. See generally Opalich, 2021 WL 3174502.

The claims against Opalich and Radcliff proceeded and the Court entered a scheduling order. See Doc. 42, 2d Am. Compl; Doc. 50, Am. Scheduling Order. EHO served its initial discovery requests on Defendants on October 12, 2021. Doc. 60-1, Mot. Compel Ex. A, 3. Discovery did not run smoothly and on April 15, 2022, EHO filed its Motion to Compel, alleging that despite multiple requests, conferences, and supplemental productions, Opalich and Radcliff's discovery responses and document production continued to be deficient. Doc. 60, Mot. Compel, 4-5. Specifically, EHO alleged that Defendants' “second supplemental production did not remedy Opalich's and Radcliff's refusal [to] disclose other information related to HospisRX and other competing business opportunities, which they expressly stated they were withholding” on relevance grounds. Id. at 5-6. This Court referred the Motion to Compel to Magistrate Judge Horan, who on June 7, 2022, granted the Motion to Compel and ordered Opalich and Radcliff to produce the disputed information. Doc. 69, Elec. Order Granting Mot. Compel. Defendants timely filed Objections to Judge Horan's Order. Doc. 70, Objs. On June 23, 2022, HospisRx filed its Motion to Intervene, seeking to intervene as of right for the limited purpose of obtaining a protective order to safeguard HospisRx's confidential information subject to Judge Horan's Order. Doc. 72, Mot. Intervene. Defendants' Objections and HospisRx's Motion to Intervene are ripe for review and the Court addresses them in turn.

II. LEGAL STANDARDS

A. Objections Under Rule 72

A party has fourteen days to file objections to a magistrate judge's written order deciding a non-dispositive pretrial matter referred by the district court. Fed.R.Civ.P. 72(a). When objections are filed, the district court must “modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Id.

B. Intervention Under Rule 24

Federal Rule of Civil Procedure 24(a)(2) allows intervention as of right when the movant shows:

(1) the application for intervention [is] timely; (2) the applicant [has] an interest relating to the property or transaction which is the subject of the action; (3) the applicant [is] so situated that the disposition of the action may, as a practical matter, impair [its] ability to protect that interest; (4) the applicant's interest [is] inadequately represented by the existing parties to the suit.

Sommers v. Bank of Am., N.A., 835 F.3d 509, 512 (5th Cir. 2016) (quoting Texas v. United States, 805 F.3d 653, 657 (5th Cir. 2015)). Timeliness is a threshold requirement for which the court considers four factors:

(1) The length of time during which the would-be intervenor actually knew or reasonably should have known of its interest in the case before it petitioned for leave to intervene; (2) the extent of the prejudice that the existing parties to the litigation may suffer as a result of the would-be intervenor's failure to apply for intervention as soon as it knew or reasonably should have known of its interest in the case; (3) the extent of the prejudice that the would-be intervenor may suffer if intervention is denied; and (4) the existence of unusual circumstances militating either for or against a determination that the application is timely.

Id. at 512-13 (quoting Ford v. City of Huntsville, 242 F.3d 235, 239 (5 th Cir. 2001)). “The timeliness inquiry ‘is contextual' [and] ...