Montgomery v. Etreppid Techs.

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DENNIS MONTGOMERY, et al., Plaintiffs v. ETREPPID TECHNOLOGIES, LLC, et al., Defendants

Nos. 3:06-cv-00056-MMD-CSD, 3:06-cv-00145-MMD-VPC

United States District Court, D. Nevada

May 15, 2023

REPORT & RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE RE: ECF NO. 1216

Craig S. Denney, United States Magistrate Judge

This Report and Recommendation is made to the Honorable Miranda M Du, Chief United States District Judge. The action was referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1)(B) and the Local Rules of Practice LR 1B 1-4.

Before the court is a motion to intervene filed by non-party Michael J. Lindell. (ECF Nos. 1216, 1216-1, 1216-2.) The United States filed a response. (ECF No. 1232.) Lindell filed a reply. (ECF No. 1235.)

After a thorough review, it is recommended that Lindell's motion to intervene be denied.

I. BACKGROUND

This litigation involves two related cases, case 3:06-cv-00056-MMD-CSD (the Federal Action), and case 3:06-cv-00145-MMD-VPC (the Removed Action). In the Removed Action, eTreppid Technologies, Inc., asserted claims to protect and recover trade secrets from Dennis Montgomery. (See Third Am. Compl., ECF No. 93 in 3:06-cv-00145-MMD-VPC.) Montgomery, who was a former employee, officer, and director of eTreppid, filed counterclaims against eTreppid, and its majority shareholder, Warren Trepp, asserting that Montgomery was the owner of certain copyrights and derivative works he contributed in establishing eTreppid. (ECF No. 1-2 in 3:06-cv-00145-MMD-VPC.) He also included a claim for declaratory relief against the United States Department of Defense (DoD) regarding his obligations under a nondisclosure agreement and accounting for profits from eTreppid's use of the source code. (ECF No. 1-2.)

Montgomery also filed the Federal Action, asserting copyright infringement, misappropriation of trade secrets and related claims against eTreppid and Trepp. (ECF No. 1 in 3:06-cv-00056-MMD-CSD.) Montgomery then filed an amended complaint in the Federal Action that included a claim against the DoD, including copyright infringement (counts one and two), an accounting of profits derived from the source code (count four), conversion of the source code (count nine) and declaratory relief regarding Montgomery's non-disclosure agreement with the DoD (count ten). (ECF No. 7 in 3:06-cv-00056-MMD-CSD.)

Montgomery's claims against the United States largely related to a Classified Information Nondisclosure Agreement (NDA) Montgomery executed with the Defense Security Service, an agency within DoD, in September of 2003. (Id.; see also ECF No. 83-3 in 3:06-cv-00056-MMD-CSD.) Montgomery alleged he was prevented from disclosing information necessary to his claims and defenses as to eTreppid because of the NDA. He sought a declaration from the court that disclosure of the information he wanted to use in the litigation would not violate the NDA.

DoD filed motions to dismiss Montgomery's claims for lack of subject matter jurisdiction, which were later granted. (ECF No. 56, in 3:06-cv-000056-MMD-CSD, and ECF No. 39 in 3:06-cv-00145-PMP-VPC, order at ECF No. 177 in 3:06-cv-00056-MMD-CSD.) While the motions were pending, the United States moved for entry of a protective order based on assertion of the state secrets privilege by Director of National Intelligence (DNI) John Negroponte. (ECF No. 83 in 3:06-cv-00056-MMD-CSD.) The DNI asserted that disclosure of certain of the information at issue could reasonably be expected to cause serious, and even grave, damage to national security.

On March 15, 2007, the Federal Action and the Removed Action were consolidated. (ECF No. 123 in 3:06-cv-00056-MMD-CSD.)

The court entered DoD's requested protective order on August 29, 2007. (ECF Nos. 252, 253.) The order found that certain information may or may not be relevant to the claims was subject to the state secrets privilege, and such information should not be subject to discovery or disclosure by any of the parties during all proceedings in these actions, and should be excluded from evidence at trial. The order excluded from discovery or disclosure two categories of information, including: (1) “the existence or non-existence of any actual or proposed relationship” between the parties and any U.S. intelligence agency and (2) any “actual or proposed intelligence agency interest in, application of or use of any technology, software or source code owned or claimed by the Parties.” (ECF No. 196 in 3:06-cv-00056-MMD-CSD.)

The protective order exempted from its coverage discovery of certain information, including “[t]he computer source code, software, programs, or technical specifications relating to any technology owned or claimed by any of the Parties,” as well as any “actual or potential commercial or government applications of” this technology, so long as it did not relate to the aforementioned categories concerning U.S. intelligence agencies. The protective order applied to “discovery or disclosure during all proceedings in these” two actions. (Id.)

The Federal and Removed Actions were resolved in full by settlement, and were dismissed with prejudice on February 19, 2009. (ECF No. 962 in 3:06-cv-00056-MMD-CSD.) The court retained jurisdiction over the terms of the protective order. (Id.)

Non-party and proposed intervenor Lindell has been sued in the United States District Court for the District of Columbia, for defamation based on alleged statements he made about the administration of the 2020 presidential election and his contentions that various forms of fraud were perpetrated using the voting machines of a company called Dominion. See U.S. Dominion, Inc. v. My Pillow, Inc., case 1:21-cv-00445 (D. D.C.).

Lindell argues that he should be granted leave to intervene in this action both permissively, under Rule 24(b)(1)(B), and as of right under Rule 24(a)(2).

Lindell seeks to have the protective order in this action lifted so he may use data obtained from Montgomery to defend himself against claims asserted in defamation litigation. He argues the data he seeks to use in his defense may be covered by the protective order issued in this litigation. He asserts that he made the statements at issue in the Dominion case relying in part on information he received from Montgomery.

He seeks to use testimony and evidence concerning Montgomery's background and his work for U.S. intelligence agencies, and information from Montgomery himself, to defend against the defamation action. He states that the information he relied on is comprised of internet transmissions sent during the 2020 election that were collected by technology Montgomery developed and previously licensed to the United States. Lindell claims that Montgomery's data shows that voting machine manufacturers and their employees were hacked, as well as information related to illegal United States surveillance programs Montgomery worked in. Lindell claims he agreed to acquire ownership rights to Montgomery's data; however, the protective order entered in this case prohibits the use or disclosure of information related to Montgomery's work for or relationship with United States' intelligence agencies.

The United States opposes Lindell's motion, arguing Lindell lacks standing to intervene and he has not established a basis for either permissive or as of right intervention under Federal Rule of Civil Procedure 24. The United States further argues that if intervention is allowed, then good cause does not exist to lift or modify the protective order. (ECF No. 1232.)

After this motion was fully briefed, Montgomery filed a motion to restrict the application of the state secrets privilege, the protective order, and the NDA. (ECF No. 1236.) The court has recommended denial of that motion in a separate report and recommendation.

II. DISCUSSION

A. Intervention under Rule 24

As is relevant here, a court must allow intervention if the person seeking intervention “claims an interest relating to the property or transaction that is the subject of the actin, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.” Fed.R.Civ.P. 24(a)(1)-(2).

In addition, a court may allow intervention if the person seeking to intervene “has a claim or defense that shares with the main action a common question of law or fact.” Fed.R.Civ.P. 24(b)(1)(B). In determining whether to allow permissive intervention, the court must determine whether intervention “will unduly delay or prejudice the adjudication of the original parties' rights.” Fed.R.Civ.P. 24(b)(3).

B. Standing

As a preliminary matter, the United States argues that Lindell must demonstrate he has Article III standing to intervene in this long-closed litigation.

“Article III of the Constitution limits the exercise of judicial power to ‘Cases' and ‘Controversies.'” Town of Chester, N.Y. v. Laroe Estates, Inc., 581 U.S. 433, 438 (2017) (citing Article III, § 2, cl. 1). “If a dispute is not a proper case or controversy, the courts have no business deciding it, or expounding the law in the course of doing so.” Id. (citation and quotation marks omitted). “‘Standing to sue is a doctrine rooted in the traditional understanding of a case or controversy.'” Id. (quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016)). To have standing, “[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, 578 U.S. at 338 (citations omitted).

In Laroe, the Supreme Court held that a person seeking to intervene as of right under Rule 24...