v. Higher One, Inc., No. 6:2013mc06020 - Document 6 (W.D.N.Y. 2014)
Court Description: -CLERK TO FOLLOW UP-ORDER granting in part and denying in part 1 Motion to Quash. The Clerk is directed to close this action. Signed by Hon. Charles J. Siragusa on 2/21/14. (KAP)
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v. Higher One, Inc. Doc. 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK __________________________________________ HIGHER ONE, INC., Plaintiff-Respondent, ORDER -vs13-mc-6020 CJS TOUCHNET INFORMATION SYSTEMS, INC., Defendant-Movant. __________________________________________ INTRODUCTION Defendant-Movant TouchNet Information Systems, Inc. (“ TouchNet” ) seeks an order quashing a subpoena served by Plaintiff-Respondent Higher One, Inc. (“ Higher One” ) in connection w ith patent litigation that is pending in the U.S. District Court for the District of Connecticut. The subpoena w as served on TouchNet’ s non-testifying expert w itness, Tom Bell (“ Bell” ), w ho resides in this Judicial District. The application is granted in part and denied in part. BACKGROUND The parties’ respective businesses relate to the facilitation of payments involving colleges, universities and students. TouchNet states t hat it “ is in the business of developing softw are and licensing it to numerous colleges and universities in t he United States and elsew here,” and that its softw are “ facilitates electronic payments betw een Schools, their students, and others in the campus community.” For example, TouchNet’ s softw are purportedly “ allow s Schools to present students’ tuition and 1 Dockets.Justia.com other bills online,” and to “ electronically deposit disbursements to a student-designated bank account, such as a refund of an overpayment (if, for example, a student drops a class), or, as relevant to this matter, a disbursement of the student’ s residual f inancial aid – often referred to in higher education as a ‘ refund.’ ” 1 Higher One’ s business also pertains to such refunds. According to TouchNet, Higher One derives most of its revenue from account revenue consisting principally of f ees from debit cards w hich Plaintiff (through its banking partner) issues to students as a means of receiving their Refunds. Plaintiff issues its debit cards t hrough a tw o-part strategy. First, under the “ OneDisburse” program, the School agrees to outsource the disbursement of Refunds to Plaintiff, such that the School sends the full amount of each student’ s Refund to Plaintiff, and Plaintiff forw ards the funds to the student in accordance w ith t he st udent’ s instructions. Students, by making a designation through Plaintiff, may request their Refunds to be furnished by paper checks, ACH transfers, or deposits to their Plaintiff debit cards. The Schools provide Plaintiff w ith the students’ contact information and Plaintiff markets to students in an effort to increase both the number of new “ OneAccounts” and usage of existing “ OneAccounts.” 2 On February 24, 2009, Higher One obtained a U.S. patent (“ the 536' patent” ), entitled “ Systems and Methods to Facilitate a Transfer of a Refund Amount from an Educational Institution to a Student.” Shortly thereafter, on February 27, 2009, Higher One commenced the aforementioned patent infringement litigation against TouchNet 1 Motion to Quash [#1-1] at pp. 1-2. 2 Motion to Quash [#1-1] at pp. 2-3. 2 in the District of Connecticut. 3 Higher One maintains that one of TouchNet’ s “ softw are modules,” entitled “ TouchNet B+ Payment - eRefunds,” infringes the ‘ 536 Patent. 4 TouchNet has asserted various defenses in that action, including that the ‘ 536 Patent is invalid because it w as anticipated, and rendered obvious, by prior art. More specifically, TouchNet maintains that “ the claims in the ‘ 536 Patent w ere anticipated, and rendered obvious, by multiple campus card programs introduced, at least, as early as the mid-1990s.” 5 TouchNet asserts counterclaims, seeking a declaratory judgment that it is not infringing t he ‘ 536 patent, and that the patent is unenforceable in any event. Additionally, TouchNet is asserting a counterclaim for unfair competition, in w hich it accuses Higher One of filing a baseless infringement law suit in order to negatively affect TouchNet’ s business relationships. 6 In connection w it h it s defense of the patent infringement action, TouchNet retained Bell as a non-t est ifying consulting expert, purportedly because Bell has know ledge regarding the “ multiple campus card programs” that w ere allegedly in use prior to the issuance of the ‘ 536 Patent. TouchNet indicates that, “ in order to better understand these campus card programs, [it] hired Tom Bell as a non-testifying expert, 3 United States District Court for the District of Connecticut, Docket No. 3:09-cv-00337- 4 See, Amended Complaint, 3:09-CV-00337 AWT, Docket No. [#39] (D.Conn.). 5 Motion to Quash [#1-1] at p. 4. 6 See, Answ er to Amended Complaint, 3:09-CV-00337 AWT, Docket No. [#45] (D.Conn.). AWT. 3 given that Mr. Bell has w orked w ith campus card programs.” 7 Specifically, for approximately ten years, betw een 2001 and 2011, Bell previously w orked for Blackboard, Inc. (“ Blackboard” ), “ a provider of campus card solutions.” 8 The problem w ith that, as Higher One sees it, is that Blackboard is one of Higher One’ s business partners, w ith w hom it has shared confidential information: Early on, Higher One partnered w ith [Blackboard], a provider of campus card solutions so that customers of both Blackboard and Higher One could integrate the tw o companies’ product offerings. Tow ards that end, Higher One has exchanged sensitive and proprietary information regarding Higher One’ s business and product s w ith Blackboard on a confidential basis. As per Higher One’ s contracts w ith Blackboard, Blackboard employees are required to keep Higher One’ s information confidential. 9 Because of that business relationship, Higher One indicates that it w ants to find out w hat, if anything, Bell learned about Higher One w hile he w as w orking at Blackboard, and w hether he shared any confidential information about Higher One w ith TouchNet. More specifically, Higher One states: Higher One is now aw are that Mr. Bell w as a high level employee at its part ner Blackboard until at least 2011, and since 2001, Mr. Bell w as likely exposed to Higher One' s confidential information. Mr. Bell w orked for Blackboard from 2001 to July 2011 as a Vice President for Commerce Industry Relations and later as the Vice President for Strategic Consulting - Transact (the business unit of Blackboard w ith w hich Higher One’ s products integrate). Higher One is entitled to determine the extent of Mr. Bell’ s know ledge of Higher One and its business, and the extent 7 Motion to Quash [#1-1] at p. 4. 8 Higher One’ s Response [#3] at p. 2. 9 Higher One’ s Response [#3] at p. 2. 4 to w hich he may have communicated that information to TouchNet. 10 (emphasis added). Higher One, though, doesn’ t specify the nature of the confidential information that it shared w ith Blackboard, or explain how such information relates to t he underlying patent litigation, if at all. Nor does Higher One indicate that it has checked w ith its partner, Blackboard, to see to w hat, if any, confidential information Bell may have had access. Overall, as evident from the quote above, Higher One doesn’ t offer any evidence that Bell has any particular conf idential information concerning Higher One, or that he has shared such information w ith TouchNet. Nevertheless, Higher One maintains that it is entitled to discover w hether any improper exchange of information has occurred. In that regard, Higher One has served a deposition subpoena on Bell, along w ith an attached list of eleven document requests, demanding: 1. All documents and communications w ith or concerning Bill Norw ood [(identified by Higher One as being ‘ involved in the campus card program at the Florida State University Card Application Technology Center in the mid-1990' s)] since 2009 concerning Higher One, Inc. or the Higher OneTouchNet patent litigation. 2. All documents and communications w ith or concerning TouchNet, including Dan Toughey [apparently an employee of TouchNet], since 2009 concerning Higher One, Inc. or the Higher One-TouchNet patent litigation. 3. All documents and communications w ith or concerning [TouchNet’ s law firm,] Spencer Fane Britt and Brow ne LLP, including Patrick Whalen, 10 Higher One’ s Response [#3] at pp. 2-3. 5 Kyle Elliott, Nick Badgerow , or Lih Chen, since 2009 concerning Higher One, Inc. or the Higher One-TouchNet patent litigation. 4. A copy of any Confidentiality Undertaking signed by [Bell] concerning the Higher One-TouchNet patent litigation. 5. A copy of any engagement or retainer agreement [betw een Bell and] TouchNet or Spencer Fane Britt and Brow ne LLP concerning the Higher One-TouchNet patent litigation. 6. A copy of any invoices sent by [Bell] to TouchNet or Spencer Fane Britt and Brow ne LLP concerning the Higher One-TouchNet patent litigation. 7. Documents sufficient to evidence any payments made to [Bell] by TouchNet or Spencer Fane Britt and Brow ne LLP concerning the Higher One-Touchnet patent litigation. 8. All communications w ith or concerning Heartland Payment Systems since 2009 concerning Higher One, Inc. or the Higher One-TouchNet patent litigation. 9. All documents and communications since 2009 concerning Higher One, Inc. or the Higher One-TouchNet patent litigation. 10. All documents and communications w ith or concerning Commerce Bank since 2009 concerning Higher One or the Higher One-Touchnet patent litigation. 11. All documents and communications w ith or concerning Blackboard, Inc. since 2009 concerning Higher One or the Higher One-TouchNet patent litigation. Docket No. [#1-3]. In this regard, Higher One indicates that it is seeking facts from Bell, not expert 6 opinions, and specifically, facts regarding “ the extent of Mr. Bell’ s know ledge of Higher One and its business, and the extent to w hich he may have communicated that information to TouchNet.” 11 Higher One maintains that it is entitled to “ (1) a limited deposition to question Mr. Bell regarding the facts that pre-date his involvement in the Patent Lit igat ions, as w ell as the information Mr. Bell learned about Higher One because of his employment at Blackboard (even if it post-dates his retention), and w hether he shared that information w ith TouchNet or TouchNet’ s counsel; and (2) all non-privileged documents regarding the same.” 12 Notably, the subpoena also demands “ all documents and communications” betw een Bell and TouchNet’ s attorneys concerning Higher One and/or the patent litigation, including retainer agreement s, invoices and payment receipts. 13 On December 27, 2013, TouchNet filed the subject miscellaneous action and moved to quash the subpoena.14 TouchNet maintains that the subpoena violates Fed. R. Civ. P. 26(b)(4)(D), since it seeks discovery from “ an expert . . . w ho is not expected to be called as a w itness at trial.” TouchNet contends that although that rule provides an exception, and allow s such discovery upon a show ing of “ exceptional circumstances,” Higher One has not made such a show ing. Alternatively, TouchNet 11 Higher One’ s Response [#3] at p. 3. 12 Higher One’ s Response [#3] at pp. 3-4. 13 See, Motion to Quash, Exhibit A [#1-3]. 14 TouchNet indicates that is has standing to bring the motion, since its w ork product w ould be inevitably disclosed if Higher One w as permitted to depose Webb. Higher One does not challenge TouchNet’ s standing. 7 indicates that t he subpoena should be quashed based on the attorney w ork-product doctrine. TouchNet relies largely, though not exclusively, on Moore U.S.A. Inc. v. Standard Register Co., 206 F.R.D. 72, 74-75 (W.D.N.Y. 2001) (Curtin, J.). In support of the application, TouchNet submits an affidavit from Bell, in w hich he indicates, inter alia, the follow ing: 1) TouchNet retained him on February 2, 2012; 2) prior to being retained, he had no know ledge regarding any Higher One patent or patented invention; and 3) prior to being retained, he had no know ledge of the parties’ law suit. Higher One responds by reiterating that during Bell’ s employment w it h Blackboard, he w as “ likely exposed to Higher One’ s confidential information.” Higher One asserts that such exposure w as “ likely” since Bell w as Vice President for Blackboard’ s “ Strategic Consulting-Transact” business unit, “ w ith w hich Higher One’ s products integrate.” 15 Higher One also contends that Bell’ s affidavit is suspect, since he does not “ mention a lack of confidential information regarding Higher One, Higher One’ s business or Higher One’ s products.” 16 In reply, TouchNet has submitted, inter alia, a supplemental affidavit from Bell in w hich he indicates the follow ing: 1) he does not recall attending any strategic planning or development meetings w ith Higher One w hile he w as employed by Blackboard; 2) he does not possess any confidential material relating to Higher One 15 Higher One’ s Response [#3-1] at pp. 2-3. 16 Higher One’ s Response [#3-1] at p. 3. Additionally, Higher One contends that “ the timing and circumstances” of TouchNet’ s retainer of Bell is “ suspect,” since TouchNet’ s attorney indicated that Bell w as retained in 2010, w hile Bell indicates that he w as retained in 2012. How ever, as proof of such alleged inconsistency, Higher One relies only on an unsw orn statement in its memo of law , w hich the Court is not crediting. 8 and has not provide TouchNet or TouchNet’ s attorney w ith any confidential material relat ing to Higher One; and 3) he has not seen any “ attorney’ s eyes only” communications betw een Higher One and TouchNet’ s counsel. DISCUSSION TouchNet maintains that the Court should quash the subpoena as violating FRCP 26(b)(4)(D),17 w hich states, in pertinent part: Expert Employed Only for Trial Preparation. Ordinarily, a party may not, by interrogatories or deposition, discover facts know n or opinions held by an expert w ho has been retained or specially employed by another party in anticipation of litigation or to prepare for trial and w ho is not expected to be called as a w itness at trial. But a party may do so only: (i) as provided in Rule 35(b); or (ii) on show ing exceptional circumstances under w hich it is impracticable for the party to obtain facts or opinions on the same subject by other means. FRCP 26(b)(4)(D) (West 2014). In this context, [e]xceptional circumstances may be established by demonstrating that the party seeking discovery is unable to obtain equivalent information that is essential to the preparation of the case from other sources. This includes situations in w hich the object or condition observed by the nontestifying expert is no longer observable by experts hired by the party seeking discovery. A second situation commonly recognized as constituting exceptional circumstances is w hen it is possible to replicate the expert discovery, but the costs w ould be judicially prohibitive. Another example of ‘ exceptional circumstances’ is w hen there are no other available experts in the same field or subject area. 17 Prior to 2010, this section w as numbered as FRCP 26(b)(4)(B). TouchNet’ s papers also make a passing reference to FRCP 45, w hich, in pertinent part, provides that a court must “ quash or modify a subpoena that,” inter alia, “ requires disclosure of privileged or other protected matter, if no exception or w aiver applies, or subjects a person to undue burden.” FRCP 45(c)(3)(A) (West 2014). 9 M OORE’ S FEDERAL PRACTICE, 3d ed. § 26.80[2] (LexisNexis 2011). On the other hand, [a] party may engage in discovery w ith respect to information that a consultant expert acquired prior to the time he or she w as retained by an opposing party. Further, Rule 26(b)(4) does not preclude the discovery of facts and opinions that an opposing party’ s consultant experts acquired in anticipation of the litigation but prior to being retained by the opposing party. Id. In the instant case, the record indicates t hat on February 2, 2012, TouchNet retained Bell as a non-testifying expert, in anticipation of litigation or to prepare f or trial, on February 2, 2012. Accordingly, Higher One cannot obtain discovery from Bell concerning facts or opinions that he obtained or formed after that date, unless it can demonstrate exceptional circumstances. In that regard, the Court finds that Higher One has not demonstrated exceptional circumstances based on Bell’ s former employment w ith Blackboard. Moreover, w hile in general “ [p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’ s claim or defense,” see, FRCP 26(b)(1), Higher One has not made any convincing argument that Bell has confidential information concerning Higher One, or even if he did, that such information w ould be relevant to any claim or defense in this action. See, Mandell v. The Maxon Co., Inc., No. 06 Civ. 460 (RWS), 2007 WL 3022552 at * (S.D.N.Y. Oct. 16, 2007) (“ The party seeking discovery bears the burden of initially show ing relevance.” ) (citation and internal quotation marks omitted). Consequently, TouchNet’ s motion to quash is granted w ith regard to: 1) information that post-dates February 2, 2012, including communications betw een Bell and TouchNet’ s attorneys; 10 and 2) information concerning alleged confidential information shared betw een Higher One and Blackboard. How ever, Higher One also seeks ordinary fact discovery from Bell, concerning the period prior to w hich he w as retained by TouchNet. TouchNet const rues the comments to Rule 26(b)(4)(D) as prohibiting Higher One from discovering “ facts and opinions know n by Mr. Bell prior to being retained by Touchnet,” because he “ w as not involved w ith the underlying facts of this case.” Motion to Quash [#1-1] at p. 8. On that point, t he Advisory Committee Notes to Rule 26(b)(4)(B), later re-numbered as 26(b)(4)(D), state that the rule does not address itself to the expert w hose information w as not acquired in preparation for trial but rather because he w as an actor or view er w ith respect to the transactions or occurrences that are part of the subject matter of the law suit. Such an expert should be treated as an ordinary w itness. TouchNet apparent ly interprets that statement to mean that Bell cannot be deposed regarding any information that he had prior to being retained, unless it relates specifically to the parties’ dispute. See, Motion to Quash [#1-1] at p. 9 (“ Bell w ould only be an ordinary w itness if Plaintiff could prove his involvement w ith the specific facts of this case, or if he had been an employee of either party prior to this litigation. Because Plaintiff cannot make such a show ing, Plaintiff’ s subpoena should be quashed even if it is tailored to facts know n by Mr. Bell prior to being retained by TouchNet.” ). The Court, how ever, understands the rule, and the Committee Notes, to mean that a non-testifying expert w itness can be deposed concerning matters that pre-date his 11 retention by the opposing party, “ like an ordinary w itness,” subject to the relevancy requirements and any privileges that may apply. See, e.g., Millsaps v. Aluminum Co. of America, MDL No. 875, EDPA Civil No. 10–84924, 2012 WL 203458 at * 2 (E.D.Pa. Jan. 24, 2012) (Observing that Rule 26(b)(4)(D) “ does not bar a deposition w here the w it ness has relevant know ledge outside his or her role as a consulting expert, and appropriate precautions can be taken at the deposition under Rule 30(c)(2) w ith respect to the w itness' s protected information.” ). In the instant case, therefore, Higher One may depose Bell concerning, for example, “ his know ledge of his previous activities and experience w ith campus card programs (namely, the allegedly invalidating prior art TouchNet asserts).” 18 CONCLUSION TouchNet’ s application to quash is granted in part and denied in part, as explained above. The Clerk is directed to close this action. SO ORDERED. Dated: Rochester, New York February 21, 2014 ENTER: /s/ Charles J. Siragusa CHARLES J. SIRAGUSA United States District Judge 18 Higher One’ s Response [#3] at p. 5. 12
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