E. & J. Gallo Winery, Doing Bus., Inc. v. Visserijonderzoek

E. & J. GALLO WINERY, doing business as SAN JOAQUIN VALLEY CONCENTRATES;G3 ENTERPRISES, INC. doing business as DELAWARE G3 ENTERPISES, INC.;and MCD TECHNOLOGIES, INC., Plaintiffs, v. INSTITUUT VOOR LANDBOUW-EN VISSERIJONDERZOEK;EIGEN VERMOGEN VH INSTITUUT VOOR LANDBOUW-EN VISSERIJONDERZOEK;FLANDERS' FOOD; and DOES 1-10, Defendants.

Case No. 1:17-cv-00808-DAD-EPG

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

June 18, 2018

ORDER GRANTING DEFENDANTS' MOTION FOR PROTECTIVE ORDER STAYING DISCOVERY BY PLAINTIFFS PENDING PLAINTIFFS' COMPLIANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE § 2019.210

(ECF No. 49)

I. INTRODUCTION

On June 15, 2017, E. & J. Gallo Winery, doing business as San Joaquin Valley Concentrates; G3 Enterprises, Inc., doing business as Delaware G3 Enterprises, Inc.; and MCD Technologies, Inc., (collectively, "Plaintiffs" or "Gallo") commenced this action by the filing of a Complaint against Instituut Voor Landbouw-En Visserijonderzoek and Eigen Vermogen VH Instituut Voor Landbouw-En Visserijonderzoek (collectively, "Defendants" or "ILVO").¹ (ECFNo. 1.) Plaintiffs allege, among other things, that Defendants misappropriated trade secrets for a food drying device called the Refractance Window dryer (the "RW dryer"). (ECF No. 1 at 18-20.)

Now before the Court is Defendants' Motion for Protective Order Staying Discovery by Plaintiffs Pending Compliance with California Code of Civil Procedure 2019.210 filed on March 8, 2018. (ECF No. 49.) On April 13, 2018 and May 30, 2018, the Court heard oral arguments on the motion. (ECF Nos.63, 79.)

For the reasons discussed below, and as stated on the record at the May 30, 2018 hearing, (ECF No. 87), Defendants' motion for protective order staying discovery is granted.²

II. BACKGROUND

The motion at issue concerns Cal. Code of Civ. Proc. § 2019.210 regarding the level of particularity for disclosure of trade secrets. Specifically, Section 2019.210 requires "the party alleging the misappropriation [to] identify the trade secret with reasonable particularity." Cal. Civ. Proc. Code § 2019.210.

In their Complaint, Plaintiffs described their trade secrets as "information relating to how to assemble the refractance window dryer's belt, the design of the exhaust system for evacuating water vapor produced during the drying process, the design for recirculating water through the system, designs for belt sanitation, system for dried product removal, system for liquid product feeding, and the design and materials choices for the belt." (ECF No. 1 at 2.)

On September 25, 2017, and October 12, 2017, the parties met and conferred telephonically concerning the issue of Section 2019.210 applicability and compliance. (ECF Nos. 62 at 2, 62-1.) Plaintiffs agreed to comply with the disclosure obligations set forth in Section 2019.210. (ECF No. 62-1.) Specifically, Plaintiffs stated, "We have agreed to apply CCP 2019.210 to the trade secret claims in this case to assist expeditious discovery. . . . We do agree toand will serve a CCP 2019.210 statement promptly after service of your answer." (ECF No. 62-1 at 6, 9.)

On December 22, 2017, Defendants served their first set of interrogatories on Plaintiffs. (ECF No. 61 at 2.) Plaintiffs responded to Defendants' interrogatories on January 22, 2018. (ECF No. 62-6.) On February 14, 2018, the parties met and conferred telephonically, during which Plaintiffs asserted that Section 2019.210 is inapplicable and that their interrogatory responses satisfy their disclosure obligations under the Federal Rules of Civil Procedure. (ECF No. 62 at 4.)

On March 2, 2018, Defendants filed a Motion for Protective Order Staying Discovery by Plaintiffs Pending Compliance with California Code of Civil Procedure § 2019.210. (ECF No. 49.) Defendants allege that Plaintiffs reversed their explicit commitment to adhere to Section 2019.210, asserting now that Section 2019.210 is inapplicable in federal court. (ECF No. 59 at 6.) Plaintiffs produced their First Supplemental Objections and Responses to the First Set of Interrogatories on March 16, 2018, (ECF Nos. 62-10 to -12), to which Defendants object as "vague" and "indecipherable." (ECF No. 59 at 14.)

On April 13, 2018, the Court heard arguments on Defendants' motion for a protective order, (ECF No. 49), and issued an order on April 17, 2018, requiring Plaintiffs to supplement their responses to Defendants' Interrogatories 1 and 2 by May 14, 2018. (ECF Nos. 67, 71.) Plaintiffs served supplemental responses to Defendants' Interrogatories 1 and 2 on May 14, 2018, (ECF No. 77-1), and the parties met and conferred telephonically on May 17, 2018. (ECF No. 77 at 3.) On May 21, 2018, Plaintiffs produced revised supplemental statements in response to the meet and confer. (ECF No. 77-2.)

During a hearing held on May 30, 2018, the parties disputed whether Plaintiffs' revised supplemental responses to Defendants' Interrogatories 1 and 2 comply with Section 2019.210. (ECF No. 87.) In the discovery motion now before the Court, Defendants contend that Plaintiffs' trade secret disclosures still fall short of the reasonable particularity requirement in Section 2019.210. (ECF No. 50.) Defendants seek to compel Plaintiffs' compliance with Section 2019.210 prior to taking discovery. (ECF No. 50.)

In opposition, Plaintiffs contend that Section 2019.210 is a state discovery provisionsuperseded by the Federal Rules of Civil Procedure. (ECF No. 59 at 38-40.) Alternatively, Plaintiffs argue that even if Section 2019.210 controls, their responses are sufficiently specific to satisfy the disclosure obligation under the state discovery rule. (Id. at 40-43.)

III. DISCUSSION

A. Applicability of Section 2019.210

Initially, the parties disagree as to whether application of California Code of Civil Procedure Section 2019.210 applies in this federal case. Under the California Uniform Trade Secret Act ("CUTSA"), a plaintiff asserting misappropriation of trade secrets must comply with the disclosure provision set forth in Section 2019.210 prior to commencing discovery. Specifically, Section 2019.210 provides:

In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act (Title 5 (commencing with Section 3426) of Part 1 of Division 4 of the Civil Code), before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.

Cal. Civ. Proc. Code § 2019.210.

Defendants, citing Computer Economics, Inc. v. Gartner Grp., Inc., 50 F. Supp. 2d 980, 991-92 (S.D. Cal. 1999), contend that Section 2019.210 is a "substantive component of the CUTSA that was enacted by California's legislature specifically to limit the potential for abusive trade secret misappropriation claims," and is thus enforceable in federal court. (ECF No. 59 at 17.) Moreover, Defendants contend that "[a] federal court cannot separate CCP § 2019[.210] from the whole of California's Uniform Trade Secrets Act without frustrating the legislature's legitimate goals and disregarding the purposes of Erie." (ECF No. 59 at 17.)

In opposition, Plaintiffs contend that Section 2019.210 is procedural, thus inapplicable in federal proceedings. (Id. at 38-40.) Plaintiffs argue, quoting Funcat Leisure Craft, Inc. v. Johnson Outdoors, Inc., No. CIV. S-06-0533GEBGGH, 2007 WL 273949, at *2 (E.D. Cal. Jan. 29, 2007), that "it is not within the discretion of the district court to willy nilly apply bits and pieces of the discovery civil procedure codes of the various states, even the state in which the district court sits." (Id. at 38.)

Pursuant to Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), "federal courts sitting in diversity jurisdiction apply state substantive law and federal procedural law." Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996). The distinction between "substance" and "procedure" is not fixed, but depends on the legal context of each case. Hanna v. Plumer, 380 U.S. 460, 471 (1965). In its choice of law review, the court first determines whether application of the state rule conflicts with any applicable Federal Rule of Civil Procedure. Id. If the rules conflict, the federal rule governs. Id. Absent any conflict, the court's analysis turns to whether application of the federal rule would significantly affect the outcome of the litigation or encourage forum-shopping. Id.

"While the Ninth Circuit has not decided whether Section 2019.210 applies to actions in federal court, district courts within the circuit have reached differing conclusions on the issue." Social Apps, LLC v. Zynga, Inc., No. 4:11-CV-04910 YGR, 2012 WL 2203063, at *1 (N.D. Cal. June 14, 2012). Specifically, district courts are divided on whether Section 2019.210 touches on procedural or substantive matters. Compare Funcat, 2007 WL 273949, at *2 (finding that Section 2019.210 is a procedural provision and does not supersede the directly conflicting discovery requirements under Federal Rule of Civil Procedure 26), AtPac, Inc. v. Aptitude Solutions, Inc., No. CV S-10-294 WBS KJM, 2010 WL 11571246, at *1 (E.D. Cal. Sept. 22, 2010) (concluding that Section 2019.210 is inapplicable in federal trade secret actions), Hilderman v. Enea TekSci, Inc., No. 05cvl049 BTM(AJB), 2010 WL 143440, at *2 (S.D. Cal. Jan.8, 2010) (finding that Section 2019.210 conflicts with Rule 26), and Computer Economics, Inc., 50 F.Supp.2d at 988 (holding that Section 2019.210 complements rather than conflicts with federal discovery rules), Gabriel Technologies Corp. v. Qualcomm Inc., No. 08CV1992 AJB (MDD), 2012 WL 849167 at *2 (S.D. Cal. March 13, 2012) (finding that Section 2019.210 should be applied because it does not conflict with any federal rule and avoids undesirable forum shopping), with Advante International Corp. v. Mintel Learning Technology, No. C 05-01022 JW (RS), 2006 WL 3371576 (N.D. Cal. Nov.21, 2006) (declining to...