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Liqwd, Inc. v. L'Oreal USA, Inc.

United States District Court, D. Delaware

April 26, 2019

LIQWD, INC. and OLAPLEX LLC, Plaintiffs,
v.
L'ORÉAL USA, INC., L'ORÉAL USA PRODUCTS, INC., L'ORÉAL USA S/D, INC., and REDKENS 5TH AVENUE, NYC, L.L.C., Defendant.

          MEMORANDUM AND ORDER

          Joseph F. Bataillon, Senior United States District Judge.

         This matter is before the Court on the objections, D.I. 575, by defendants to the report and recommendation of the magistrate judge, D.I. 524. Defendants contend that the magistrate judge erred in not granting their motion to protect confidential information contained in a nondisclosure agreement.[1]

         I. Legal Standard

         The standard of review for a report and recommendation is governed by 28 U.S.C. § 636(b)(1)(C) and Federal Rule of Civil Procedure 72(b). The district court “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made” and “may also receive further evidence or recommit the matter to the magistrate judge with instructions.” 28 U.S.C. § 636(b)(1)(C). Similarly, Rule 72(b)(3) requires de novo review of any recommendation that is dispositive of a claim or defense of a party.

         The Supreme Court has construed the statutory grant of authority conferred on magistrate judges under 28 U.S.C. § 636 to mean that nondispositive pretrial matters are governed by § 636(b)(1)(A) and dispositive matters are covered by § 636(b)(1)(B). Gomez v. United States, 490 U.S. 858, 873-74 (1989); see alsoFed. R. Civ. P. 72(a). Under subparagraph (B), a district court may refer a dispositive motion to a magistrate judge “to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition.” 28 U.S.C. § 636(b)(1)(B); see EEOC v. City of Long Branch, 866 F.3d 93, 99-100 (3d Cir. 2017). The product of a magistrate judge, following a referral of a dispositive matter, is often called a “report and recommendation.” Id.“Parties ‘may serve and file specific written objections to the proposed findings and recommendations' within 14 days of being served with a copy of the magistrate judge's report and recommendation.” Id. (quoting Fed.R.Civ.P. 72(b)(2)).

         “If a party objects timely to a magistrate judge's report and recommendation, the district court must ‘make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.'” EEOC, 866 F.3d at 99 (quoting 28 U.S.C. § 636(b)(1)).

         II. Discussion

         Defendants filed a motion and two letters requesting redaction which were denied by the magistrate judge. A party seeking closure must demonstrate that the information “is the kind . . . that courts will protect and that disclosure will work a clearly defined and serious injury to the party seeking closure.” SoftView LLC v. Apple Inc., No. 10-389-LPS, 2012 WL 3061027, at *9 (D. Del. July 26, 2012).

         The defendants contend that the magistrate judge erred in finding that the NonDisclosure Agreement (hereinafter “NDA”) between the parties imposed no confidentiality obligations after termination. In addition, the defendants contend that the magistrate judge erred in finding that the confidential information belongs to the plaintiffs.

         Defendants contend they showed good cause and a clear and serious injury and are thus entitled to redactions. Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994); see also Glenmede Tr. Co. v. Thompson, 56 F.3d 476, 483 (3d Cir. 1995) (citing Pansy, 23 F.3d at 787-91). Defendants rely on paragraph 2 “Discussion Information” of the NDA which provides:

Each party agrees that, without the prior written consent of the other party, it will not disclose to any person (other than its Representatives) the fact that the Confidential Information has been made available to us, that discussions or negotiations are taking place or have taken place concerning a possible Transaction involving us and the Company or any of the terms, conditions or other facts with respect to any such possible Transaction, including the status thereof and the identities of the parties thereto (collectively, the “Discussion Information”). You shall be responsible for any breach of this paragraph by your Representatives to the same extent as if they were parties hereto.

(D.I. 262, Ex. C ¶ 2, page I.D. 14770). Paragraph 5 requires that the information shall be given confidential treatment. Id. at ¶ 5. Both plaintiffs and the magistrate judge agree that generally the redactions fall within the parameters of paragraph 2 of the NDA, absent a reason to the contrary. D.I. 524 ¶ 11.

         As to the issue of the expiration of the NDA, defendants argue the confidential agreement extends beyond the three-year term, relying on the broad wording of ¶ 4. See D.I. 262, Ex. C ¶ 4 (“Notwithstanding the return or destruction of Confidential Information pursuant to this Section 4, we will continue to be bound by the confidentiality and other obligations in this Agreement”).

         Defendants also argue that the confidential information, in addition to being covered by the NDA, is likewise covered under the Stipulated Protective Order which prohibits the parties from disclosing “protected information” denoted as “confidential” or “highly confidential.” D.I. 54 ¶ 15.a. at page I.D. 1813. Defendants likewise disagree that this information is already public, and if it is public, it is likely due to the fact that plaintiff filed the complaint with confidential information. Defendants contend that the plaintiffs cannot benefit from this behavior. SeeSun Microsystems, Inc. v. Versata Enterprises, Inc., 630 F.Supp.2d 395, 410 (D. Del. 2009) (a party may not benefit from its own inequitable conduct). Even if some of the information is ...


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