United States District Court, D. Nebraska
CFGENOME, LLC, a Delaware limited liability company; and DR. M. ROHAN FERNANDO, an individual; Plaintiffs/Counter Defendants,
STRECK, INC., Defendant/Counter Plaintiff
GARY KRZYZANOWSKI, Third-Party Defendant.
MEMORANDUM AND ORDER
R. Zwart United States Magistrate Judge
before me is the motion to quash filed by
Plaintiffs/Counter-Defendants CFGenome, LLC, Dr. M. Rohan
Fernando, and Third-Party Defendant, Gary Krzyzanowski.
(Filing No. 178). For the reasons explained below,
the court will grant the motion for protective order/to quash
subparagraphs (d), (e), (f), and (i) of topics 17 through 24
of the proposed subpoena to be served on Patricia Alvarado,
(Filing No. 180-4), and the court will grant the
motion for protective order/to quash paragraphs 4 through 9,
14, 15, 17, and 20; subparagraph (f) of topics 10, 11, 12,
and 13; and subparagraphs (d), (e), and (h) of topics 24
through 29 of the proposed subpoena to be served on UNMC.
(Filing No. 180-3). The court will not quash
paragraph 22 of the proposed subpoena to be served on UNMC.
may move for an order protecting it from disclosure of
discovery. See Fed.R.Civ.P. 26(c). The party moving for the
protective order has the burden to demonstrate good cause for
issuance of the order. See Miscellaneous Docket Matter
No. 1 v. Miscellaneous Docket Matter No. 2, 197 F.3d
922, 926 (8th Cir. 1999). Upon a showing of good cause, the
court may forbid the discovery or modify the disclosure by
specifying the terms or method of discovery. See Fed.R.Civ.P.
the discovery is requested in a third-party subpoena, the
federal and local rules limit a party's capacity to
object. See Fed.R.Civ.P. 45; NECivR 45.1. “[An] adverse
party has standing to object to a third-party subpoena on
grounds of relevance or to protect a personal right or
privilege in the information requested.” Jenkins v.
Pech, No. 8:14CV41, 2015 WL 728305, at *3 (D. Neb. Feb.
19, 2015) (citing Streck, Inc. v. Research & Diagnostic
Sys., Inc., No. 8:06CV458, 2009 WL 1562851, at *3 (D. Neb.
June 1, 2009).
scope of permissible discovery is broad. The Federal Rules of
Civil Procedure allow for discovery of “any
nonprivileged matter that is relevant to any party's
claim or defense and proportional to the needs of the
case.” Fed.R.Civ.P. 26(b)(1). Relevancy for the
purposes of discovery, includes “any matter that bears
on, or that reasonably could lead to other matters that could
bear on, any issue that is or may be in the case.”
Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351
(1978). When the discovery sought appears relevant on its
face, the party resisting discovery has the burden to
establish that the discovery is not relevant, or is “of
such marginal relevance that the potential harm occasioned by
the discovery would outweigh the ordinary presumption in
favor of broad disclosure.” Streck, Inc. v. Research
& Diagnostic Sys., Inc, 8:06CV458, 2009 WL 1562851, at *3
(D. Neb. June 1, 2009) (quoting Moses v. Halstead, 236
F.R.D. at 671.) However, when the relevancy of the
discovery request is not readily apparent, the court need not
consider proportionality unless the moving party first shows
how the requested information is relevant. Id.
the scope of discovery under a subpoena is the same as the
scope of discovery under Rules 26(b) and 34 and is subject to
the rules that apply to other methods of discovery,
(McGehee v. Nebraska Dept. of Corr. Servs. No.
4:18-cv-3092, 2019 WL 266423 (D. Neb., Jan. 17, 2019), the
standard for nonparty discovery may require a stronger
showing of relevance than for party discovery. Cor
Clearing, LLC v. Calissio Res. Grp. Inc., 8:15-cv-317
(D. Neb. 2016).
The Claims and Defenses Raised
court's relevance determination rests on the claims and
defenses raised in the operative pleadings: The Amended
Complaint filed by CFGenome and Fernando, (Filing No.
58), as narrowed by the parties' joint stipulation
for dismissal, (Filing No. 154); Defendant Streck
Inc.'s Answer and Affirmative Defenses to Plaintiffs'
Amended Complaint, (Filing No. 69); Defendant
Streck's Amended Counterclaim and Third Party Complaint,
(Filing No. 59); the Answer to First Amended
Counterclaims filed by CFGenome and Fernando, (Filing No.
70); and Third-Party Defendant Krzyzanowski's
Amended Answer and Affirmative Defenses to the Third-Party
Complaint, (Filing No. 144).
Amended Complaint filed by CFGenome and Fernando.
Amended Complaint alleges as follows:
worked for Streck from 2007 until September of 2014. In late
2013, Fernando signed an Employee Confidential Information,
Inventions, and Non-Solicitation Agreement regarding his work
at Streck (the “Agreement”). Fernando left his
employment at Streck when Dr. Wayne Ryan (“Dr.
Ryan”), the founder and former CEO of Streck, was
pushed out of the company by Streck's new CEO, Connie
Ryan (Dr. Ryan's daughter). After leaving Streck,
Fernando began various research projects and worked as a
consultant for CFGenome. Fernando's work was funded by
CFGenome, and in a written agreement, Fernando agreed to
assign any new inventions to CFGenome. (Filing No. 58, at
CM/ECF p. 5, ¶ 24).
began working on an idea for a chemical composition to be
used in a blood collection tube that would stabilize
extracellular vesicles in a blood sample. This research began
more than a year after he left his Streck employment,
ultimately resulting in the invention of a new type of blood
collection tube, the Exo DNA ProTeck Blood Collection
Tube®, (“ProTeck BCT”). The ProTeck BCT
directly competes with a Streck product, the Cell-Free DNA
BCT® (“Cell-Free BCT”).
of 2016, Streck accused Plaintiffs of misappropriating
Streck's trade secrets and confidential information, and
it accused Fernando of violating the Agreement by disclosing
Streck's confidential and trade secret information,
(Agreement, ¶ 2, the “confidentiality”
provision); using information from his Streck employment to
invent new products within one year of his Streck employment,
and not assigning the rights to those products/advancements
to Streck, (Agreement, ¶ 4, the “holdover”
provision); and soliciting business away from Streck in favor
of CFGenome, (Agreement, ¶ 5, the
“non-solicitation” provision). Plaintiffs
responded to these accusations by filing a lawsuit seeking
declaratory relief; specifically, an order finding Plaintiffs
did not misappropriate trade secrets in violation of Federal
Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836, that
Fernando did not violate his Agreement with Streck, and that
the holdover provision of the Agreement is void as against
denies Plaintiffs are entitled to the relief requested, and
it alleges Plaintiffs' claims are barred by the doctrines
of estoppel, waiver, laches, unclean hands, and the
applicable statute of limitations. (Filing No. 69, at
CM/ECF p. 11).
Streck's Amended Counterclaims.
asserts counterclaims against CFGenome and Fernando.
(Filing No. 59, at CM/ECF pp. 7-46), which allege,
in essence,  as follows:
working for Streck, Fernando was integrally involved in
Streck's business, including the research, design,
product development, and marketing of the Streck Cell-Free
BCT. Within that capacity, Fernando gained access to
Streck's confidential information and trade secrets,
including the documented formulas, compilations, processes,
procedures, and techniques developed by Streck for its
Ryan, founder of Streck, and Fernando are members of
CFGenome. CFGenome was formed in June of 2014. Dr. Ryan had
established a laboratory at UNMC, and on August 10, 2014,
Fernando represented to UNMC personnel that he hoped
“to develop noninvasive prenatal diagnostic
tests”-the precise field he worked in for Streck as a
researcher and developer of the Cell-Free BCT-in a paid
position at Dr. Ryan's UNMC laboratory. When Fernando
left his Streck employment in September of 2014, he denied
any intent to work for Dr. Ryan. Contrary to this
representation, Fernando began working with Dr. Ryan, and
ultimately the ProTeck BCT was created. CFGenome and Fernando
could not have developed a blood collection product without
using information Fernando obtained while working for Streck.
As such, the ownership of the ProTeck BCT must be assigned to
2016, Fernando, on behalf of CFGenome, personally approached
at least one Streck customer and informed that customer that
CFGenome will be able to provide alternative blood collection
tubes at a price much lower than Streck's current
pricing. In addition, CFGenome has misrepresented the
performance and cost advantages of using the ProTeck BCT
compared to the Cell-Free BCT. CFGenome's webpage lists
its members and their former employment for Streck, without
disclaiming a continued affiliation between CFGenome and
Streck. By doing so, CFGenome is using Streck's
reputation to promote and market CFGenome's products,
leaving the impression that Streck is endorsing CFGenome, and
confusing customers and vendors as to the source of products
on the market. And CFGenome's marketing materials and
instructions, including verbiage and diagrams, were copied
and/or derived from Streck's Cell-Free BCT materials and
conduct on behalf of CFGenome violated the confidentiality,
holdover, and non-solicitation terms of his Agreement with
alleges the following 14 Counterclaims against CFGenome and
I. misappropriation of trade secrets in violation of the
II. breach of contract;
III. tortious interference with contract;
IV. tortious interference with prospective advantage;
V. declaratory judgment as to intellectual property rights;
VI. Lanham Act violation as to tube stability;
VII. Lanham Act violation for attempting to capitalize on
Streck's reputation and good will in the industry by
falsely implying CFGenome and its members remain affiliated
VIII. Nebraska Deceptive Trade Practice Act violation as to
IX. Nebraska Deceptive Trade Practice Act violation for
attempting to capitalize on Streck's reputation and
goodwill in the industry by falsely implying CFGenome and its
members remain affiliated with Streck;
X. trademark infringement;
XI. copyright infringement;
XII. unjust enrichment;
XIII. unfair competition based on confusion between product
XIV. breach of fiduciary duty.
(Filing No. 59, at CM/ECF pp. 29-44, ¶¶
97-203). Streck seeks injunctive relief and damages,
including but not limited to recovery of Streck's lost
profits, disgorgement of wrongfully gained profits, general
damages and consequential damages, and where applicable,
statutory and/or punitive damages.
and Fernando raise a plethora of defenses. In addition to
challenging whether evidence will support the elements of
Streck's claims, they allege Streck's claims are
barred, in whole or in part, by the statute of limitations,
estoppel, laches, waiver, and/or unclean hands, and the
Digital Millennium Copyright Act, 17 U.S.C. § 512.
CFGenome and Fernando allege Streck's claims to enforce
the Agreement must be denied as unconscionable and in
violation of public policy, and Streck's claims based on
the speech or communicative conduct of CFGenome and Fernando
violate the First Amendment. CFGenome and Fernando allege
Streck's copyright claims are barred by the doctrines of
fair use, misuse of copyright, and implied license, and the
Lanham Act claims are barred by the doctrine of fair use.
CFGenome and Fernando allege Streck has failed to mitigate
its damages, and any statutory damages sought are
unconstitutionally excessive and disproportionate to any
actual damages that may have been sustained in violation of
the Due Process clause.
Streck's Third Party Claims.
filed a third party claim against Gary Krzyzanowski, a former
Streck employee. (Filing No. 59, at CM/ECF pp.
47-54, ¶¶ 1-39). Streck's third party
claim alleges as follows:
was responsible for manufacturing the Cell-Free BCT while at
Streck, and he was familiar with the technical challenges
Streck faced when attempting to manufacture that product on a
commercial scale. Krzyzanowski knew the confidential and
trade secret solutions employed by Streck to overcome those
manufacturing challenges. His duties included injecting the
formula used into the Cell-Free BCT.
employment at Streck was terminated on August 5, 2014.
Shortly thereafter, Krzyzanowski was offered and accepted
employment for CFGenome. He then attempted to recruit a key
employee away from Streck in September of 2016. He is now a
member of CFGenome, performing the same responsibilities at
CFGenome that he did for Streck, and using his Streck
knowledge and experience to do so.
to his departure from Streck, Krzyzanowski entered into an
Employee Confidential Information, Inventions, and
Non-Solicitation Agreement mirroring the Agreement signed by
Fernando. Along with Fernando, Krzyzanowski published an
abstract which included confidential and trade secret
information obtained while working for Streck. And like
Fernando, in website marketing for CFGenome, Krzyzanowski
recites his professional experience at Streck while failing
to explain that neither he nor CFGenome are currently
affiliated with, or sponsored or approved by, Streck.
Krzyzanowski copied Streck's instructional materials,
diagrams and artwork to promote CFGenome's competing
alleges claims against Krzyzanowski for:
I. breach of the confidentiality and holdover provisions of
his Agreement with Streck; II. misappropriation of trade
secrets in violation of the DTSA; and III. a declaratory
judgment as to intellectual property rights.
(Filing No. 59, at CM/ECF pp. 47-54, ¶¶
seeks injunctive relief and damages, including but not
limited to recovery of Streck's lost profits,
disgorgement of wrongfully gained profits, general and
consequential damages, and where applicable, statutory and/or
alleges most, if not all, the same defenses alleged by
CFGenome and Fernando in response to Streck's
counterclaims. (Filing No. 144).
The Discovery in Dispute.
parties agreed that subpoenas could be served on the
University of Nebraska Medical Center (“UNMC”)
and a former Streck employee, Patricia Alvarado
(“Alvarado”). On August 29, 2018, Streck served
its notice of intent (Filing No. 180-2) to serve
these subpoenas. (Filing No. 180-3 and Filing
No. 180-4.) CFGenome, Fernando, and Krzyzanowski
(collectively “CFG”) objected to portions of the
parties have engaged in several meet and confer sessions
beginning in October 2018 to discuss the discovery disputes
over the third party subpoenas, issues related to CFG's
Motion for Protective Order (Filing No. 118),
Streck's Motion to Amend (Filing No. 140), and
the resulting Order of this court (Filing No. 157).
CFG objected to the subpoenas and suggested ways to narrow
them. (Filing No. 180-5).
a call with the undersigned magistrate judge on March 12,
2019, the parties mentioned there were ongoing disagreements
regarding the third-party subpoenas. (Filing No.
160). Following the call, Streck revised the subpoenas.
CFG objected and reasserted the same positions it had taken
during previous meet and confer sessions.
1, 2019, the parties participated in another telephone
conference with the undersigned magistrate judge. (Filing
No. 172). Following the call, the parties met and
conferred as ordered by this court, but they did not resolve
the relevance and privilege issues asserted by CFG. As to the
motions now pending before me, CFG suggests that as to some
of the revised subpoena requests, the subpoenas can be issued
as written, but some ...