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Management Registry Inc. v. A.W. Companies, Inc.

United States District Court, D. Minnesota

October 22, 2019

Management Registry Incorporated, Plaintiff,
A.W. Companies, Inc., et al., Defendants.


          Katherine Menendez United States Magistrate Judge.

         This matter is before the Court on Eric Berg's Motion to Intervene and for Contempt. Berg Mot., ECF No. 311. The Court held a hearing on the motion on October 3, 2019. For the reasons that follow, the motion is granted in part. Mr. Berg is permitted to intervene for limited purposes in this case and although a finding of contempt is unnecessary, the Court concludes that defendants Wendy Brown and A.W. Companies (“AW”), and their attorney, Alex Loftus, [1]should be subject to sanctions under Federal Rule of Civil Procedure 37(b)(2) for violating the Protective Order.

         I. Background

         Mr. Berg was originally a defendant in the lawsuit, but in August, 2018, MRI dismissed its claims against him. Order (Aug. 9, 2018), ECF No. 163. He is now performing work in some capacity for MRI. On December 7, 2018 Mr. Berg filed a separate lawsuit against Mr. Brown, Ms. Brown, and AW in Minnesota state district court. The state court litigation remains pending and, at the time of the October 3, 2019 hearing in this matter, Mr. Berg's deadline for responding to the defendants' motion for summary judgment in that case was fast approaching.

         In July 2019, Mr. Berg received a subpoena from the parties seeking his deposition in this case. Through his counsel, Scott Moriarty, Mr. Berg made clear that his subpoenaed deposition testimony could not be used in the state court litigation. Moriarty Decl, Ex. 1, ECF No. 315-1. At the hearing, Mr. Moriarty explained the context for his email in more detail. Specifically, Mr. Moriarty represented, without disagreement from defense counsel, that the defendants in the state court litigation had failed to serve any written discovery requests by the applicable state court deadline, which had passed. Though their requests were untimely, the defendants took the position in the state case that they would not take Mr. Berg's deposition in connection with that matter until he responded to their written discovery requests. Mr. Moriarty's communications in response to the federal subpoena attempted to avoid responding to discovery requests in the state court case that the defendants had allegedly failed to diligently pursue. To put it simply, Mr. Berg did not want the defendants to use the federal-case deposition to end-run the already expired state court deadlines.

         During Mr. Berg's deposition in this case, Mr. Moriarty designated certain testimony regarding Berg's income and his consulting work “Confidential-Attorney's Eyes Only” (“AEO”) under the Protective Order. Moriarty Decl., Ex. 3, ECF No. 318-1; see also Protective Order (“PO”), ECF No. 88. Mr. Moore was representing the defendants at the deposition and did not object to the AEO designation. After he received a transcript of the deposition, Mr. Moriarty informed the parties' counsel that he was preliminarily designating the entire transcript AEO, but would follow up with the parties regarding a “more detailed description of the matters to be designated Confidential or AEO.” Moriarty Decl., Ex. 4, ECF No. 315-4. Neither Mr. Moore, nor his co-counsel, Mr. Loftus, objected to the designation.

         A few weeks after Mr. Berg's deposition, on September 4, 2019 Mr. Moriarty took Ms. Brown's deposition in the state court litigation. Ms. Brown testified regarding her knowledge of Mr. Berg's approximate income from his consulting business and indicated she learned those details after reading his deposition transcript from this case. Moriarty Decl., Ex. 5, ECF No. 318-2. Because Mr. Moriarty had notified counsel that the deposition transcript should be treated as AEO material, and the Protective Order in this case prevents AEO designated information from being used in another proceeding or from being shared with a party, Mr. Berg believed Ms. Brown's testimony showed the Protective Order had been violated. Mr. Moriarty raised this issue with Mr. Moore during Ms. Brown's deposition, but Mr. Moore asked that the matter be addressed later. On September 6, 2019, Mr. Moriarty sent Mr. Moore and Mr. Loftus a letter asking to discuss this issue sometime before September 11th. Moriarty Decl., Ex. 6, ECF No. 315-6. Neither Mr. Moore nor Mr. Loftus raised any disagreement with the propriety of the designation in response to the September 6th letter or at any other time, and Mr. Moriarty received no other response.

         On September 18, 2019, Mr. Moriarty drafted a letter narrowing the specific portions of Mr. Berg's transcript that were being designated Confidential and AEO. Moriarty Decl., Ex. 7, ECF No. 315-7. On September 19, 2019, despite having received Mr. Moriarty's September 6th and 18th letters, the defendants in the state court litigation publicly filed the transcript of Mr. Berg's August 13, 2019 deposition. Moriarty Decl., Ex. 8, ECF No. 315-8. Mr. Berg's motion to intervene and for contempt followed. After the October 3rd hearing on the present motion, Mr. Loftus notified Mr. Moriarty that the defendants in the state court litigation would withdraw the entire motion for summary judgment they filed. E-mail from A. Loftus to S. Moriarty (October 3, 2019, 11:15 CST) (on file with the Court).

         II. Intervention

         Mr. Berg contends that he should be allowed to intervene for the limited purpose of addressing the defendants' and their attorneys' alleged violations of the Protective Order and to remedy the harm caused by those violations. See Intervention Pleading, ECF No. 311-1. MRI has not taken any position on Mr. Berg's request. Min. Entry (Sept. 23, 2019), ECF No. 320. The defendants oppose Mr. Berg's motion, arguing that he has not shown a valid basis to intervene. Defs.' Resp., ECF No. 321.

         Mr. Berg claims a right to intervene under Rule 24(a), or alternatively, that his intervention is permissible under Rule 24(b). “A party seeking mandatory intervention under Rule 24(a) must establish that ‘(1) it has a recognized interest in the subject matter of the litigation; (2) the interest might be impaired by the disposition of the case; and (3) the interest will not be adequately protected by the existing parties.'” WaterLegacy v. U.S. E.P.A., 300 F.R.D. 332, 338 (D. Minn. 2014) (quoting S.D. ex rel. Barnett v. U.S. Dep't of Interior, 317 F.3d 783, 785 (8th Cir. 2003)).

         Even if intervention as a matter of right cannot be demonstrated, a court has discretion to allow intervention under Rule 24(b) and must construe the Rule liberally, resolving any doubts in favor of the person seeking to intervene. WaterLegacy, 300 F.R.D. at 338-39. A court may permit intervention by anyone who “(A) is given a conditional right to intervene by a federal statute; or (B) 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). Courts must consider (1) whether the motion is timely; (2) whether a shared question of law or fact exists between the movant's claim and the main action; and (3) whether intervention will result in undue delay or prejudice to the original parties. Franconia Minerals (US) LLC v. United States, 319 F.R.D. 261, 265 (D. Minn. 2017). When a person “seek[s] to intervene only to modify a protective order or unseal documents, and not to litigate a claim on the merits, an independent basis for jurisdiction is not required.” Flynt v. Lombardi, 782 F.3d 963, 967 (8th Cir. 2015) (reversing district court's order denying journalist's motion to intervene for the purpose of seeking to unseal judicial records). “[P]ermissive intervention under Rule 24(b) is an appropriate procedural vehicle for non-parties” who seek to litigate their interests with respect to confidentiality orders. See Id. (discussing permissive intervention for the purpose of seeking access to judicial records that are unavailable due to confidentiality orders).

         The defendants generally allege that Mr. Berg should not be allowed to intervene because the interests he seeks to protect are collateral to the substance of the dispute between the parties. See Defs.' Resp. at 6-13. However, they do not point to any controlling Eighth Circuit precedent addressing the issue here: whether a nonparty that has marked information provided in discovery confidential pursuant to a protective order may intervene to obtain enforcement of that protective order.

         The defendants next argue that Mr. Berg's request to intervene should be denied because he cannot show any injury and therefore lacks standing. They assert that the information designated as confidential (the amount Mr. Berg was paid by MRI for consulting work), is already available from other sources, so the disclosure of his transcript in the state court litigation in support of the defendants' summary-judgment motion caused no harm. See Defs.' Resp. at 6- 9. For two reasons, this argument is flawed.

         First, the Court concludes that a traditional showing of injury is not required in this context. When an intervenor seeks to be involved in litigation for a limited purpose related to the application of a confidentiality order, some courts conclude that the usual requirement of standing is unnecessary. See In re Baycol Prods. Litig., 214 F.R.D. 542, 544 (D. Minn. 2003) (“To date the Eighth Circuit has not yet ruled on whether standing is a prerequisite for permissive intervention. … Other courts, however, have created an exception to the standing requirement when third parties seek intervention solely to challenge a confidentiality order.”). The Court agrees that a traditional showing of standing is unnecessary under the circumstances presented here.

         Courts have permitted third parties to intervene under Rule 24 for “collateral discovery issues” under similar circumstances. J.D. Fields & Co. v. Nucor-Yamato Steel Co., No. 4:12-cv-00754-KGB, 2015 WL 12696208, at *2-4 (E.D. Ark. June 15, 2015) (granting nonparty's motion to intervene for the limited purpose of opposing the plaintiff's motion to remove confidentiality designations from the nonparty's information produced in discovery); see also California Parents for Equalization of Educ. Materials v. Torlakson, No. 17-cv-00635-CRB(JSC), 2018 WL 3930141, at *4-6 (N.D. Cal. Aug. 16, 2018) (granting nonparty's motion to intervene for the limited purpose of joining a motion to maintain confidentiality designations on documents produced pursuant to Rule 45 subpoena). Consistent with these cases, the Court finds that where a nonparty has been subpoenaed for a deposition, has marked aspects of his deposition testimony confidential pursuant to a protective order, and claims that a party to the case has used his information in violation of the protective order, permissive intervention under Rule 24(b) is appropriate.

         The Court is convinced that Mr. Berg should be permitted to intervene under Rule 24(b). There is no principled distinction between allowing a nonparty to a lawsuit to intervene to modify a protective order or unseal records and allowing intervention in a case like this one. Mr. Berg is a third party whose interests are affected by the Court's application of the Protective Order in this case. He is not seeking to have a claim adjudicated on the merits here, but merely to intervene to ensure that his confidential information is protected. Allowing him to intervene will not delay this litigation or prejudice any of the parties' rights. S. Dakota ex rel Barnett v. U.S. Dep't of Interior, 317 F.3d 783, 787 (8th Cir. 2003) (“The principal consideration in ruling on a Rule 24(b) motion is whether the proposed intervention would unduly delay or prejudice the adjudication of the parties' rights.”).

         Second, the record demonstrates that, even if some sort of injury is required in this context, Mr. Berg has shown such harm. Specifically, the defendants' violation of the Protective Order likely required Mr. Berg to begin preparing a response to a summary judgment motion that he would not have otherwise had to defend. Indeed, his response to the state court summary judgment motion would have been due the day after the October 3rd hearing before this Court if Mr. Loftus had not subsequently agreed during the hearing to withdraw that motion. Although counsel for the defendants claimed that the information in question was available from “other sources, ” the only information that was submitted in support of the defendants' summary judgment motion in the state case was Mr. Berg's deposition transcript. ...

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