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RealPage, Inc. v. Enterprise Risk Control. LLC

United States District Court, E.D. Texas, Sherman Division

March 30, 2017

REALPAGE, INC., REALPAGE VENDOR COMPLIANCE LLC
v.
ENTERPRISE RISK CONTROL, LLC, LONNIE DERDEN No. 4

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         Pending before the Court is Plaintiffs' Motion to Compel Production of Computer Images (Dkt. #49). After reviewing the relevant motion and pleadings, the Court finds the motion should be granted.

         BACKGROUND

         This motion is before the Court as Plaintiff's second discovery related motion filed in less than two weeks. The first motion dealt with several alleged discovery issues and the Court entered a memorandum opinion and order (Dkt. #61). The present motion deals with a single issue: Whether the Defendants must turn over a mirror image of all computers involved in development of Defendants' vendor compliance application. The Court grants the motion with modification.

         This issue stems from a deficiency of the source code produced by Defendants so far. Defendant Enterprise Risk Control, LLC (“Enterprise”) began developing a vendor compliance application sometime in 2012 after Lonnie Derden (“Derden”) left his employment with Plaintiffs. Around the same time, Tom Bean (“Bean”) also left his job with Plaintiffs and began his own software development company, IDC Software LLC (“IDC”). Sometime in 2012, Derden hired Bean and IDC to create a vendor compliance application. Derden instructed Bean that he wanted an application that was “completely different” than Plaintiffs' application. Bean worked on this code for Enterprise until Enterprise hired him as a full-time employee in July 2013. According to Bean's affidavit, when he joined Enterprise he transferred his code onto Enterprise's computers and removed the code from IDC's computer.

         On December 19, 2016, and according to the Agreed Protective Order and Source Code Protocol (Dkt. #34), Defendants made their source code available to Plaintiffs. The portions of code that Defendants produced account for all development starting July 3, 2013 until present day. Plaintiffs investigated the source code and identified comments made by “ERC Development” on July 23, 2012 and comments by Bean on October 23, 2012 and April 28, 2013. Defendants have not produced the source codes encompassing these dates. Defendants insist that the pre-July 2013 source code was destroyed and therefore cannot be produced.

         On March 1, 2017, Plaintiffs filed this motion seeking a mirror image of all computers used in the development of Defendants' vendor compliance application (Dkt. #49). On March 15, 2017, Defendants filed a response (Dkt. #56). On March 22, 2017, Plaintiffs filed a reply (Dkt. #58).

         LEGAL STANDARD

         Courts hesitate to authorize direct access to an opposing party's electronic storage device. A.M. Castle & Co. v. Byrne, 123 F.Supp.3d 895, 900 (S.D. Tex. 2015). As a threshold matter, the requesting party must show that the responding party has somehow defaulted in its obligation to search its records and produce the requested data. In re Weekley Homes, L.P., 295 S.W.3d 309 (Tex. 2009). The requesting party should also show that the responding party's production “has been inadequate and that a search of the opponent's [electronic storage device] could recover deleted relevant materials.” Diepenhorst v. City of Battle Creek, No. 1:05-CV-734, 2006 WL 1851243, at *3 (W.D. Mich. June 30, 2006).

         Courts have however been more open to allowing access to computer files when the computer was used to download trade secrets, the misappropriation of which is at issue in the suit. A.M. Castle & Co., 123 F.Supp.3d at 901. However, only a qualified expert should be afforded such access. Diepenhorst, 2006 WL 1851243, at *2. Consistent with the prohibition against fishing expeditions, a court may not give the expert carte blanche authorization to sort through the responding party's electronic storage device. See In re Ford Motor Co., 345 F.3d 1315, 1317 (11th Cir. 2003).

         ANALYSIS

         Although the Court does not necessarily agree with Plaintiffs' characterization of facts and of Defendants' behavior during discovery, the Court nevertheless finds good cause that limited forensic imaging should be conducted because a search of Defendants' electronic devices could recover important deleted materials.

         The Court does not agree with Plaintiffs when they argue that Defendants have changed their theory on whether more code exists. The letter from Defendants' counsel Joseph Regan (“Regan”) stated, “There is nothing more, and no earlier versions, ' the [Enterprise] has to produce” (Dkt. #49, Exhibit C at p. 3). The fact that Plaintiffs' expert David Cowen found comments dating back to October 2012 does not refute this assertion (See Dkt. #49, Exhibit D at p. 4). Even though somebody clearly worked on the code back in October 2012, the Court already recognized that Defendants' have provided sufficient explanation of good faith destruction of pre-July 2013 code (Dkt. #61 at p. 15). Therefore, Defendants take a consistent position by claiming that even if changes were made to code before July 2013, they do not have possession of that code because Bean destroyed the code when he joined Enterprise in July 2013.

         Further, the Court does not find that Defendants have been egregiously uncooperative in discovery. Plaintiffs cite their own motion to compel to support their assertions that Defendants have not complied with discovery requests (See Dkt. #49 at p. 5). ...


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