United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
Lindsay, United States District Judge
the court is the Government's Expedited Motion to Enforce
Protective Order, filed April 17, 2018 (Doc. 445). Having
considered the motion, Defendant S.K. Laboratories,
Inc.'s opposition brief (Doc. 449), the Government's
reply (Doc. 451), the revised Protective Order (Doc. 248),
the record, and applicable law, for the reasons set forth
below, the court denies the Government's
Expedited Motion to Enforce Protective Order.
November 1, 2013, the Government submitted an affidavit in
support of a search warrant In the Matter of Search of
S.K. Laboratories Inc., 5420 E. La Palma Ave., Anaheim,
CA 92807, attesting to the existence of probable cause to
believe that violations of federal law involving the
introduction of adulterated food into interstate commerce had
occurred at S.K. Laboratories, Inc.'s (“S.K.
Labs”) place of business. See Search Warrant
Affidavit Excerpts, attached as Exhibit A to Declaration of
Joseph M. McMullen (“McMullen Declaration”) (Doc.
449-1), at Declaration Exhibit 1, at 4 (“I submit there
is probable cause to believe that . . . Sitesh Patel, the VP
and operator of SK Labs, as well as others, used the Subject
Premises in furtherance of violations of federal law,
including offenses involving . . . the introduction of
adulterated foods into interstate commerce [and] conspiracy
to cause the introduction of adulterated food into interstate
commerce.”). The scope of the Search Warrant was
limited to searching only S.K. Labs' premises.
Id. at 1-2. On November 6, 2013, federal agents
executed the warrant and, as part of the seizure, made a
forensic copy of the computer hard-drive of Rahul Shah, an
accountant who had an office physically located at S.K. Labs.
2014, Department of Justice Attorney Patrick Runkle returned
an electronic copy of the materials seized during the
execution of the search warrant to Patrick Hall, then-counsel
for S.K. Labs, which included a copy of Mr. Shah's
computer hard-drive containing his confidential tax files. On
November 4, 2015, the Government filed the Indictment in this
case. Mr. Shah is not named as a defendant in the
Indictment. On December 22, 2015, the Honorable
Magistrate Judge Karen E. Scott in the Central District of
California granted the Government's motion to unseal the
Search Warrant application and affidavit. In correspondence
dated December 31, 2015, Mr. Runkle advised the parties that
he distributed the “forensic images from the USP Labs
and SK Labs search warrants” to the parties.
September 15, 2016, the Government filed an unopposed motion
for a protective order (Doc. 157), which the court granted on
September 20, 2016 (Doc. 168). The protective order barred
Defendants and their counsel “from disclosing to any
third party any federal government document that has been
disclosed by the government in discovery” without leave
of the court, except for use in this case. Id. On
May 24, 2017, the Government filed a motion to broaden the
language of the protective order to provide further
protection to third parties. The court granted the motion and
issued a Revised Protective Order expanding the language to
cover “disclosing or using any document or factual
information that has been disclosed by the government in
discovery in the above-captioned matter, whatever that
document or information's source.” Revised
Protective Order 2 (Doc. 248).
March 14, 2018, Joseph M. McMullen, Esq., who is counsel to
S.K. Labs in this matter, filed a civil action on behalf of
Mr. Shah in the Central District of California. Shah v.
United States, No. 18-cv-405 (C.D. Cal. filed Mar. 14,
2018) (the “California Action”). A copy of the
complaint in the California Action is attached to the
Government's motion as Exhibit A. The complaint in the
California Action alleges that federal agents executed a
search warrant at S.K. Labs in 2013. Id. ¶ 17.
During that search, the complaint alleges, agents imaged
numerous hard drives and servers found on the premises,
including a hard drive belonging to Mr. Shah. Id.
¶¶ 24-25. The complaint alleges that following the
search, the Government (and in particular, DOJ Trial Attorney
Mr. Runkle) “failed. . . to obtain a cooperating
witness among the targets of [the USP Labs] investigation,
” but then “[n]onetheless . . . filed an
indictment against USPLabs, S.K. Labs, and several
individuals . . . .” Id. ¶ 27. The
complaint alleges that “[t]he forensic copy of Mr.
Shah's computer hard-drive was among the materials that
DOJ Prosecutor Runkle sent to [the other defendants]”
in the present criminal action. Id. ¶
The complaint alleges the Government's intent in
producing the “Shah” hard drive to the USP Labs
defendants was to “sew [sic] discord among the
defendants named in the indictment.” Id.
¶ 28. According to the complaint, Mr. Shah later
“discovered . . . that DOJ Prosecutor Runkle had
disseminated . . . all of Mr. Shah's confidential CPA
client files and his own federal and state income tax returns
filed jointly with his wife” to the USP Labs
defendants. Id. ¶ 30. The complaint alleges
that the Government was not authorized to disclose the tax
return information contained on Shah's hard drive to the
defendants in the present case, and that the government has
“taken no steps retrieve the copy of Mr. Shah's
hard-drive from the members of the public who received it,
nor to otherwise try to protect the privacy interests of [the
parties whose tax returns were contained on the hard
drive].” Id. ¶¶ 33-34. The complaint
asserts that this series of events violated 26 U.S.C. §
6103. (A civil remedy for such a violation is provided by 26
U.S.C. § 7431.) The complaint states that in disclosing
materials to the defendants pursuant to Rule 16, the
government illegally leaked the files to members of the
public. The complaint asks for more than $700, 000 in
damages. Id. at 8-9.
motion, pointing to the California Action, the Government
contends that Mr. McMullen recently filed a “frivolous
civil lawsuit against the United States in the Central
District of California incorrectly asserting that the
government's Rule 16 discovery disclosures in the present
case violated a federal tax privacy statute.” Mot. 1.
According to the Government: “Mr. McMullen's
litigation of the [California Action] necessitates violating
the protective order in the present case, which precludes the
defendants and their counsel from ‘disclosing or using
any document or factual information that has been disclosed
by the government in discovery' for any purpose other
than ‘the litigation of this case.'”
Id. (quoting Revised Protective Order, Doc. 248 at
2). The Government also contends that “the allegations
in the [California Action] and related statements by Mr.
McMullen to the press go well beyond zealous advocacy and are
improper.” Id. The Government asks this court to
order Mr. McMullen to cease sharing or using discovery from
the present case in other cases, order the defendants and
counsel to account for any prior disclosures of information
covered by the protective order for purposes other than the
present litigation, and make any other order the court deems
appropriate under the circumstances.
opposition, S.K. Labs, relying on the attached Declaration of
Mr. McMullen (see Doc. 449-1), and the chronology of
events in this action, argues that none of the allegations in
the California Action is “based on documents or factual
information provided in the Government's discovery
materials.” Opp'n Br. 6 (Doc. 449). According to SK
Labs and Mr. McMullen's Declaration in support:
On November 7, 2017, in advance of the Court's pretrial
motion deadline, undersigned defense counsel for S.K. Labs
interviewed Mr. Shah regarding the execution of the Search
Warrant. No. documents or factual information contained in
the Government's discovery materials were shared or
discussed with Mr. Shah.
Undersigned counsel interviewed Mr. Shah regarding his lack
of awareness that the Government had seized, retained, and
disclosed to S.K. Labs' counsel the contents of the
pre-discovery 2014 Hard-Drives, which included his tax client
files and personal tax information. Undersigned counsel
further advised Mr. Shah of Mr.
Runkle's statement that he distributed the forensic
images from the SK Labs search warrant to the other parties,
and confirmed that Mr. Shah had not provided his consent ...