On Command Video Corp. v. Lodgenet Entertainment Corp. (976 F. Supp. 917, 1997)

United States District Court for the Northern District of California 1997-08-08

Citations

Full opinion text

ORDER SUSTAINING IN PART AND OVERRULING IN PART DEFENDANT’S OBJECTIONS TO THE FINDINGS AND RECOMMENDATIONS OF MAGISTRATE JUDGE JAMES '

ARMSTRONG, District Judge.

This action is a patent infringement suit brought by plaintiff On Command Video (“plaintiff’ or “OCV”) against defendant LodgeNet Entertainment Corporation (“defendant” or “LodgeNet”). The parties are presently before the Court on defendant’s Objections to the Magistrate’s Report and Recommendations (“the Report”). Having read and considered the papers filed, and having reviewed the record, the Court SUSTAINS in part and OVERRULES in part defendant’s objections.

BACKGROUND

Plaintiff alleges that defendant has infringed and continues to infringe its patent which encompasses the technology for a video movie delivery system. On June 5, 1995, at the outset of this case, the parties submitted to the Court a stipulated Protective Order governing the exchange of confidential discovery materials. Paragraph 11 of the Protective Order provided as follows:

Any information designated as Confidential Information shall not be used by the other party for any purpose other than in connection with preparation of the parties [sic] analysis of issues presented in this litigation.

The Court approved the Protective Order on June 8,1995 and the Order was filed on June 9,1995.

On February 27, 1996, plaintiff used materials produced by defendant during discovery and subject to the Protective Order as the basis for filing a separate lawsuit against defendant in San Francisco County Superior Court. Viewing plaintiffs actions to be in violation of the Protective Order, defendant filed a Motion to Enforce Protective Order before the Court. Plaintiff responded by serving a Motion for Sanctions against defendant pursuant to Federal Rule of Civil Procedure 11. The Court referred these matters to Magistrate Judge Maria-Elena James for findings and recommendations.

On April 3,1997, the Magistrate issued her Report in which she concluded, inter alia, that plaintiff did not violate the Protective Order and that there was no basis for imposing contempt sanctions or enjoining the state court lawsuit. Defendant now presents the following objections to the Magistrate’s Report:

• The Magistrate erred as a matter of law by refusing to recommend enforcement of the plain language of the Protective Order. The Magistrate’s interpretation of the Protective Order is clearly erroneous.

• The Magistrate’s conclusion that the purpose of the Protective Order is not evident from the face of the Protective Order is clearly erroneous.

• The Magistrate erred as a matter of law by recommending that OCV be allowed to invoke the substantial compliance defense.

• The Magistrate’s conclusion that OCV substantially complied with the Protective Order is clearly erroneous.

• The Magistrate’s conclusion that the Court is barred by the Anti-Injunction Act from issuing an injunction to prevent OCV from pursuing its state court action is clearly erroneous.

• The Magistrate’s recommendations not to fine OCVs attorneys, and not to award attorneys’ fees to LodgeNet are clearly erroneous.

• The Magistrate erred as a matter of law in stating that LodgeNet’s subsequent motion to enforce the Protective Order did not appear to have been filed within the safe harbor period.

(Def.’s Obj. at 2-3.) Defendant also requests that the Court render an advisory opinion concerning whether it would exercise supplemental jurisdiction over the state court action. (Id. at 11.)

STANDARD OF REVIEW

A magistrate judge’s findings and recommendations on matters which are dis-positive of a claim or defense are reviewed de novo. See 28 U.S.C. § 636(b)(1)(C); Fed. R.Civ.P. 72(b). A magistrate’s determination of non-dispositive matters is entitled to deference unless it is clearly erroneous or contrary to law. Grimes v. City & County of San Francisco, 951 F.2d 236, 241 (9th Cir.1991) (citing 28 U.S.C. § 636(b)(1)(A) and Fed.R.Civ.P. 72(a)).

Issues related to a protective order are collateral to the substantive issues in the litigation, and hence, are deemed nondispositive. Cf., Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir.1997). Similarly, the decision of whether to impose Rule 37 sanctions for discovery violations is also considered a nondispositive matter. See Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1465 (10th Cir.1988). However, because only a district court may hold a party in contempt, Grimes, 951 F.2d at 240, the Magistrate’s findings on the issue of civil contempt will be reviewed de novo.

DISCUSSION

A. ENFORCEMENT OF THE PROTECTIVE ORDER

The salient question presented is whether plaintiff violated the parties’ Protective Order by using discovery obtained thereunder for the purpose of initiating a separate state court lawsuit. A protective order should be read in a reasonable and common sense manner so that its prohibitions are connected to its purpose. In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir.1993).

The Magistrate determined that there was no such violation. In reaching this conclusion, the Magistrate reasoned, inter alia, that there was “no express provision which states that the filing of a subsequent action, which is based on protected confidential information, violates the Protective Order.” (Report at 15.) She also found that “there is no express provision which states that the filing of a subsequent lawsuit based on protected, confidential information without prior amendment, or attempt to amend, the pleadings or the Protective Order, violates the Protective Order.” (Id.)

The Court disagrees with the Magistrate’s analysis of the Protective Order. Contrary to the findings of the Magistrate, paragraph 11 of the Protective Order unequivocally bars all uses of confidential materials except one — “[the] analysis of issues presented in this litigation.” (Emphasis added). Although the Magistrate is technically correct that the filing of a state court action based on confidential information disclosed in this action is not expressly precluded, to construe the language of paragraph 11 as permitting plaintiff to engage in such conduct would render said provision meaningless. Indeed, as defendant correctly points out, it would have been impractical to attempt to articulate every conceivable impermissible use of discovery subject to the Protective Order. (See Def.’s Obj. at 5.)

Plaintiff argues that a “literal” interpretation of the Protective Order is overly restrictive and would, in effect, immunize defendant for any wrongful acts uncovered during this litigation. (Pl.’s Opp’n at 6 (citing Report at 18 n. 14).) The Magistrate also expressed this concern, reasoning that the use of the term “presented” modifies “issues presented in this litigation”, such that evidence of wrongful conduct could be used only in conjunction with claims which were already pleaded. (Report at 18 n. 14.) The Court finds such an interpretation of the Protective Order untenable, as there are no restrictions in the Protective Order concerning the addition of claims to this litigation nor is there any plausible basis therefor.

Finally, the parties dispute the purpose of the Order. The Court notes that the Protective Order does not expressly state its purpose. Nevertheless, the Court agrees with defendant that from the plain language of the Order, it is readily apparent that it is intended to limit the use of confidential information to this case. Plaintiff asserts that the purpose is to protect commercial secrets. (Mag.’s Rep. at 10.) Unfortunately for plaintiff, there are no terms in the Protective Order to corroborate such an interpretation.

At bottom, the Court finds, based on a common sense, plain reading of paragraph 11 of the Protective Order, that plaintiff has violated the Protective Order and that defendant is entitled to its enforcement. The purpose of the Order is to limit the use of confidential information to this case. By using such information to file a separate lawsuit in another forum, plaintiff violated the plain terms of the Protective Order. As such, plaintiff is barred from using any confidential information subject to the Protective Order except in the instant litigation. C.f., Winkler v. Eli Lilly & Co., 101 F.Sd 1196, 1203 (7th Cir.1996) (“we hold that the Anti-Injunction Act does not bar courts with jurisdiction ... from issuing injunctions to protect the integrity of their rulings, including pretrial rulings like discovery orders____”). Defendant’s objections to the Magistrate’s recommendation to not enforce the Protective Order is SUSTAINED.

B. CIVIL CONTEMPT FOR VIOLATION OF THE PROTECTIVE ORDER

1. Applicable Law

The next issue presented is whether the Magistrate erred in recommending that plaintiff not be held in. civil contempt. “A court has the power to adjudge in civil contempt any person who willfully disobeys a specific and definite order requiring him to do or to refrain from doing an act.” Shuffler v. Heritage Bank, 720 F.2d 1141, 1146 (9th Cir.1983); Fed.R.Civ.P. 37(b)(2)(D). “[T]o succeed on its motion for civil contempt, [defendant] had to show by clear and convincing evidence that [plaintiff] violated the [Protective Order] beyond substantial compliance, and that the violation was not based on a good faith and reasonable interpretation of the [Protective Order].” Wolfard Glassblowing Co. v. Willy Vanbragt, Mary Vanbragt d/b/a Zodiac Expressions, 118 F.3d 1320, 1322 (9th Cir.1997) (citing In re Dual-Deck, 10 F.3d at 695).

2. Analysis of Contempt Issue

In the instant case, the Magistrate concluded that plaintiff should not be held in civil contempt because defendant failed to establish that plaintiff violated the Protective Order; that plaintiffs actions were not based on a good faith and reasonable interpretation of the order; and that plaintiff failed to substantially comply with the order. (Report at 23-26.) The Magistrate further denied defendant’s request for contempt sanctions in the amount of $5,000 for violating the Protective Order and $1,000 per day until such time as plaintiff withdraws the state action. (Id. at 27.)

The Court agrees with defendant that the Magistrate’s decision not to find plaintiff in civil contempt of the Protective Order is incorrect. Plaintiff has clearly violated the Protective Order and its efforts to comply therewith are virtually non-existent. In her Report, the Magistrate opined that plaintiff substantially complied with the Order and that plaintiff’s conduct amounted to nothing more than a “harmless technical violation”. (Report at 24-26.) To support these conclusions, the Magistrate noted plaintiff’s attempts to seal the state court record and the fact that the state court pleadings did not disclose any proprietary information. (Id.) Relying on these findings, plaintiff asserts that “[its] actions certainly demonstrate substantial compliance with the Protective Order.” (PL’s Resp. at 13.)

The difficulty with the Magistrate’s reasoning is that the Protective Order is not limited to the mere disclosure of protected information. Rather, as defendant correctly points out, it prohibits use. (See Protective Order ¶ 11 (“Any information designated as Confidential Information shall not be. used----”) (emphasis added).) Plaintiffs use of protected information to file a separate state court lawsuit — as opposed to this litigation — is tantamount to no compliance at all. The Court finds that plaintiff has not substantially complied with the Protective Order and the Magistrate’s finding to the contrary is incorrect.

The Court also disagrees with the Magistrate’s determination that plaintiffs actions were based on a good faith and reasonable interpretation of the order. See Vertex Distrib. v. Falcon Foam Plastics, Inc., 689 F.2d 885, 889 (9th Cir.1982) (noting that a party should not be held in contempt if its conduct was “based on a good faith and reasonable interpretation of the court’s order.”). As discussed above, the Protective Order clearly prohibits all uses of information deemed confidential except one: the parties’ analysis of issues presented in this litigation. For plaintiff to conclude that Paragraph 11 of the Protective Order could reasonably be interpreted as permitting the filing of a completely separate lawsuit in state court strains credulity. The Court therefore SUSTAINS defendant’s objections to the Magistrate’s conclusion that plaintiff should be held in civil contempt for violation of the Protective Order.

3.Sanctions for Civil Contempt

The Magistrate declined to impose a civil contempt fine because she determined that (1) there was no basis for a finding of contempt and (2) defendant failed to substantiate its request for a $5,000 contempt fine and $1,000 per day coercive fine. (Report at 27.)

Defendant asserts that the Magistrate erred in declining to assess a contempt fine against the plaintiff and to award attorneys’ fees to defendant. Insofar as the Magistrate based this decision on the conclusion that plaintiff did not violate the Protective Order, defendant is correct. However, defendant ignores the Magistrate’s finding that defendant failed to present a factual basis to substantiate the amounts requested. (Report at 27.) Since defendant failed to do so, the Magistrate did not err in denying defendant’s request. See Dual-Deck, 10 F.3d at 696 (noting that party aggrieved by contemnor is entitled only to “ ‘actual loss’ for injuries resulting from the noncompliance.’”) (quoting in part In re Crystal Palace Gambling Hall, 817 F.2d 1361, 1366 (9th Cir.1987)). Defendant’s objection to the Magistrate’s recommendation to not fine or impose attorneys’ fees against plaintiff is OVERRULED.

4. Injunction of the State Court Action

The Magistrate concluded in her Report that the Court is precluded under the Anti-Injunction Act, 28 U.S.C. § 2283, from enjoining plaintiff from pursuing the state court action. The Anti-Injunction Act states:

A court of the United States may not grant an injunction to stay proceedings in a state court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect and effectuate its judgments.

28 U.S.C. § 2283.

Whether to impose an injunction is a matter of judicial discretion. Blalock Eddy Ranch v. MCI Telecommunications Corp., 982 F.2d 371, 375 (9th Cir.1992). Exceptions to the Act are strictly construed. Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 145-46, 108 S.Ct. 1684, 1689, 100 L.Ed.2d 127 (1988). Any doubts concerning the propriety of enjoining a state court action should be resolved in favor of permitting the action to proceed. Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir.1987), cert. denied, 485 U.S. 993, 108 S.Ct. 1302, 99 L.Ed.2d 512 (1988).

In the instant case, defendant argues an injunction barring the state court action from proceeding is “necessary and appropriate to effectuate and prevent further frustration of the Court’s Protective Order.” (Def.’s Obj. at 9.) Defendant further contends that an injunction would mitigate some of the damage resulting from the plaintiff’s violation of the Protective Order. Defendant fails to present any authority or evidence to support these contentions and the Court is not otherwise convinced that an injunction barring further prosecution of the state court action is either necessary or appropriate. Therefore, the Court OVERRULES defendant’s objection in this regard.

5. Conclusion Regarding Civil Contempt

The Court has concluded that plaintiff is barred under the Protective Order from using confidential information for any purpose other than analyzing the issues presented in this case. Any violation of this Order of enforcement which results in actual damage to defendant may be compensable under the authority cited above. While the Magistrate did not err in declining to award civil contempt sanctions or attorneys’ fees against plaintiff and finding that an injunction of the state court proceedings is inappropriate, defendant is not foreclosed from presenting a properly supported request for civil contempt sanctions for actual damages resulting from a violation of the enforcement of the Protective Order.

However, given the fact that this case has already been overlitigated, the parties are warned that no requests or motions of any nature will be considered absent a good faith effort to resolve the dispute without court intervention. In addition, all requests and motions must be supported by applicable legal authority and declarations to support any factual assertions, if appropriate. Failure to comply with these requirements may subject the parties and/or them attorneys to sanctions.

C.PLAINTIFF’S RULE 11 MOTION

As noted, plaintiff filed a motion for Rule 11 sanctions against defendant based on the latter’s initial filing of its Motion to Enforce the Protective Order on April 12, 1996. On May 10, 1996, defendant filed a second Motion to Enforce the Protective Order. Id. Defendant did not formally withdraw its first Motion. (Pl.’s Opp’n at 22.) On May 13, 1996, plaintiff filed another Motion for Sanctions with the Court. Id. at 23.

The Magistrate found that although defendant’s second motion regarding the Protective Order was not filed within the Rule 11 safe harbor period, sanctions were not warranted against defendant. (Report at 41.) Notwithstanding the fact that she denied plaintiffs motion for sanctions, defendant now argues that the Magistrate’s finding that its substitute motion was filed outside the safe harbor window is clearly erroneous.

Since the Magistrate declined to impose sanctions, her comments regarding the safe harbor period are irrelevant. Accordingly, the Court OVERRULES AS MOOT defendant’s objection that the Magistrate erred in stating in dicta that defendant did not comply with the safe harbor rule.

D. EXERCISE OF SUPPLEMENTAL JURISDICTION

Defendant objects to the Magistrate’s refusal to determine whether this court would exercise supplemental jurisdiction over the state law-based claims. Although defendant’s argument is not entirely clear, it appears that it contends that the Court should now state whether or not it would exercise supplemental jurisdiction. (Def.’s Obj. at 11.) Defendant’s request for an advisory opinion is DENIED. The Court will decide whether to exercise supplemental jurisdiction if and when plaintiff seeks to have such claims litigated in this Court.

E. SCHEDULING ISSUES

An 8-12 day jury trial was originally scheduled to commence on March 17, 1997. However, because the parties underestimated the length of the trial, the Court was unable to accommodate the expanded trial as scheduled due to a conflict with other matters previously set for trial. As a result, on March 12, 1997, the Clerk informed the parties that the March 17 trial date was vacated. Pursuant to the Court’s instructions, the Clerk also informed the parties to meet and confer regarding the possibility of stipulating to have further proceedings take place before a Magistrate Judge. Although the parties were instructed to contact the Court regarding their intentions, the parties failed to do so. Therefore, the Court will schedule a further Case Management Conference for the purpose of rescheduling the trial date in this action.

In the event the parties are in agreement that the instant matter may be referred to a Magistrate Judge of this Court for further proceedings, the parties may submit a stipulation to that effect, thereby obviating the need to file a joint Case Management Statement and to appear at the further Case Management Conference.

CONCLUSION

For the reasons stated above,

IT IS HEREBY ORDERED THAT:

1. Defendant’s objection to the Magistrate’s finding that plaintiff did not violate the Protective Order is SUSTAINED. Plaintiff shall not use any confidential information subject to the Protective Order except in this litigation.

2. Defendant’s objection to the Magistrate’s finding that plaintiff was not in civil contempt is SUSTAINED.

3. Defendant’s objection .to the Magistrate’s finding that plaintiff should not be sanctioned or subject to attorneys’ fees is OVERRULED.

4. Defendant’s objection to the Magistrate’s finding that the Court may not enjoin the state court proceeding is OVERRULED.

5. Defendant’s objection to the Magistrate’s findings on the Rule 11 motion is OVERRULED.

6. Defendant’s request for a determination of whether the Court would exercise supplemental jurisdiction over the causes of action presented in the state court action is DENIED.

7. A further case management conference in the above-captioned matter shall take place on September 24, 1997 at 3:00 p.m., in Courtroom 3, 1301 Clay Street, 3rd Floor, Oakland, California, 94612. The parties shall file a joint (updated) ease management statement at least ten (10) days prior to the conference. Failure to timely file a case management conference statement may result in sanctions.

IT IS SO ORDERED.

REPORT & RECOMMENDATION

JAMES, United States Magistrate Judge.

Before this Court are Defendant’s Motion to Enforce the Confidential Protective Order and Motion for Sanctions. Having reviewed the parties’ moving papers, the applicable statutory and case law authority, and Good Cause Appearing, this Court recommends that the District Court DENY Defendant’s Motion to Enforce the Protective Order and DENY Plaintiffs Motion for Sanctions.

BACKGROUND OF UNDISPUTED FACTS

As Defendant’s Motion to Enforce the Confidential Protective Order, hereinafter Defendant’s Motion, and Motion for Sanctions do not necessarily pertain to the essence of Plaintiffs federal action, the Court does not present a factual background, but instead sets forth the undisputed facts before presenting its factual findings:

On February 16, 1995, Plaintiff filed this federal action against Defendant alleging patent infringement of U.S. Patent No. Re. 34,611. (Def. Mot. p. 2; Decl. D. Fairbairn, p. 2; PL Opp. p. 1).

On April 17, 1995, Defendant filed and served its Answer and Counterclaim alleging non-infringement, invalidity and unenforceability of the patent. (Def. Mot. p. 2; Decl. D. Fairbairn, p. 2; Pl. Opp. p. 1).

In May 1995, the parties produced their initial disclosures and exchanged documents, pursuant to Federal Rule of Civil Procedure 26(a) and Civil L.R. 16. (Def. Mot. p. 3; Decl. D. Fairbairn, p. 2; Pl. Opp. p. 2).

On June 2, 1995, the parties entered into the “Stipulated Protective Order Governing Exchange of Information Deemed Confidential by The Parties,” hereinafter the Protective Order, which governed the exchange of confidential information during the course of litigation, including formal and/or informal discovery. (Def. Mot. p. 3.; Decl. D. Fair-bairn, p. 2 & Ex. A; Pl. Opp. p. 2).

On June 8, 1995, the District Court granted the Protective Order. (Def. Mot. p. 2; Decl. D. Fairbairn, Ex. A p. 10; PL Opp. p. 2).

On July 31, 1995, Defendant served its Response to Plaintiffs First Amended Set of Interrogatories by Plaintiff and Counter Defendant. (Def. Mot. p. 4; Decl D. Fairbairn, p. 3 & Ex. B, p. 1; PL Opp. p. 2; Decl. R. Doyle, p. 2). The cover sheet of Defendant’s responses was marked “CONFIDENTIAL— SUBJECT TO PROTECTIVE ORDER” and each lower right hand page was marked “Confidential Subject to Protective Order.” (Def. Mot. p. 4. & Decl. D. Fairbairn, Ex. B, p. 1). Interrogatory No. 3 requested:

State whether LodgeNet has ever conducted or authorized an inspection and analysis of an OCV system, and if so, state the reason why such an inspection or analysis was conducted, identify the persons involved, and when it occurred.

In response, Defendant stated, in part:

LodgeNet personnel have evaluated OCV equipment, systems and services. In January 1990, Casey Flynn and James Salas evaluated an OCV system at the Stanford Parks Hotel, Menlo Park California. In March 1992, Veto Hills, Steve Truckenmiller and David Bankers evaluated two OCV systems at the Holiday Inn Crown Plaza and the Fairmont Hotel, both in San Francisco, California. In February 1993, David Bankers evaluated an OCV system at Chicago O’Hare, Chicago, Illinois and in June 1994, David Bankers evaluated an OCV system at the Downtown Hilton in Minneapolis, Minnesota.

On August 29-30, 1995, Plaintiff deposed David Bankers, a representative of LodgeNet. (Def. Mot. p. 4; PL Opp. p. 3; Decl. R. Doyle, p. 2). At the deposition, Defendant’s counsel produced documents, specifically Jimmy Salas’ notes of competitive review conducted in January 1990 of Plaintiffs system, Def. Mot. p. 4; Pl. Mot. p. 3; Decl. R. Doyle, p. 2, and three memorandum regarding competitive reviews conducted in March 1992 by David Bankers and others in the San Francisco area. (Def. Mot. p. 5; PL Opp. p. 3). Additionally, Plaintiffs counsel learned of two videotapes which covered the January 1990 and March 1992 competitive reviews. (PL Opp. p. 3; Decl. R. Doyle, p. 2).

On August 30, 1995, Defendant’s counsel produced to Plaintiffs counsel a videotape illustrating the competitive review conducted by Jimmy Salas and Casey Flynn on January 10, 1995, at the Stanford Park Hotel. (Def. Mot. p. 4; PL Opp. p. 3; Decl. R. Doyle p. 2).

On August 31, 1995, David Bankers was further deposed. (Def. Mot. p. 4; PL Opp.3; Decl. R. Doyle, p. 2). At the deposition, Plaintiffs counsel stated that the videotape produced on August 30, 1995, appeared incomplete, and requested a complete copy. (Def. Mot. p. 4; PL Opp. p. 3; Decl. R. Doyle, p. 2). Additionally, Plaintiffs counsel requested a copy of the March 1992 competitive review videotapes. (PL Opp. p. 3; Decl. R. Doyle, p. 2).

On September 11, 1995, the parties filed the Joint Case Management Statement. (Def. Mot. p. 7; PL Opp. p. 2). Paragraph A(6) states that “[Ajdditional claims that a party intends to add are listed below: Additional claims will be added by January 1, 1996.” (Def. Mot. p. 7; Decl. D. Fairbairn, Ex. Q, p. 5; PL Opp. p. 2).

On September 21, 1995, Defendant produced to Plaintiff a new videotape of the January 10, 1990 competitive review and the videotape of the March 1992 competitive review. (Def. Mot. p. 4 & 5; PL Opp. p. 3; Decl. R. Doyle, p. 2-3 & Ex. 1 & 2).

On September 25, 1995, the District Court granted the Joint Case Management Conference Order, drafted and signed by the parties. (Court Docket, Item # 56).

■ On November 9-10,1995, Plaintiff deposed Steven Truckenmiller, a LodgeNet employee. (Def. Mot. p. 5; Pl. Opp. p. 4).

On November 14, 1995, Plaintiff deposed Jimmy Salas, a former LodgeNet employee. (Def. Mot. p. 5; PI. Opp. p. 3; Decl. R. Doyle, p. 3).

On February 27, 1996, Plaintiff filed a complaint against Defendant in the San Francisco Superior Court which alleged Defendant’s misappropriation of Plaintiffs trade secrets in January 1990, in violation of California Civil Code § 3426, et seq. and the tortious interference of Plaintiffs business relationships with the Sheraton Hotel Corporation in 1990 through 1992. (Def. Mot. p. 7; Decl. D. Fairbairn, Ex. R; PL Opp. p. 4; Decl. R. Doyle, p. 3).

REPORT

I. Defendant’s Motion to Enforce the Federal Protective Order.

A. Defendant’s Arguments.

Defendant moves the Court to find that (1) Plaintiffs state court action violates the federal protective order, granted by the District Court on June 8,1995; (2) Plaintiff should be sanctioned for said violation; (3) Plaintiffs state action should be enjoined; (4) Plaintiff should be ordered to move the District Court for leave to amend the complaint or to exercise supplemental jurisdiction over the state claim; and, (5) Plaintiff should be assessed attorney’s fees and costs for Defendant’s services and expenditures in filing and litigating this motion.

i. Plaintiff’s state court action is premised on confidential information subject to the federal protective order.

Defendant asserts that Plaintiffs state court action is premised on clearly confidential information obtained by Plaintiff during the course of this federal action. (Def. Mot. pp. 3-6; Decl. D. Fairbairn, p. 9). Defendant proffers Plaintiffs state court complaint in support of this assertion, stating that the pleadings therein expressly refer to the January 1990 and March 1992 competitive reviews conducted by LodgeNet on OCV’s system as the wrongful acts on which the state court action is based. (Def. Mot. pp. 7-8; Decl. D. Fairbairn, p. 9 & Ex. R).

Specifically, Defendant states that in Paragraph 9 of the state court complaint, Plaintiff “[specifies] the acts of January 1990 in the County of San Mateo, and March 1992 in the City and County of San Francisco, as the wrongful acts giving rise to the new lawsuit,” and “[identifies] Jimmy Salas as disclosing the above wrongful acts.” (Def. Mot. p. 8; Decl. D. Fairbairn, Ex. R). In Paragraph 22 of the state court complaint, Plaintiff identifies the above as the wrongful acts giving rise to the second claim of the state court lawsuit and identifies Jimmy Salas as the source of disclosure for such acts. (Def. Mot. p. 8; Decl. D. Fairbairn, Ex. R). In Paragraph 36 of the state court complaint, Plaintiff identifies the above as the wrongful acts giving rise to the third claim of the state court lawsuit and identifies Jimmy Salas as the source of disclosure for such acts. (Def. Mot. p. 8; Decl. D. Fairbairn, Ex. R).

And, in Paragraphs 18, 33, and 44 of the state court complaint, Plaintiff expressly admits that the basis of the state court lawsuit was discovered during the course of the instant federal action while Plaintiff prepared its analysis of the issues presented and that the wrongful acts discovered are confidential. (Def. Mot. p, 8; Decl. D. Fairbairn, Ex. R). Moreover, Plaintiff admits that prior to the federal lawsuit, Plaintiff did not know, nor had reason to know, that Defendant’s wrongful acts were the reason Plaintiff lost the Sheraton Hotel contracts which were subsequently obtained by Defendant. (Def. Mot. p. 8; Decl. D. Fairbairn, Ex. R).

Additionally, Defendant proffers the Declaration of David Fairbairn and attached exhibits as evidence that the confidential information was obtained through the course of the federal litigation.

(1) Defendant’s response to Interrogatory No.3 of Defendant’s Response to Plaintiffs First Amended Set of Interrogatories, (Ex. B);

(2) the depositions of David Bankers, (Ex. C, D, E, & F), Steven Truckenmiller, (Ex. I & J), and Jimmy Salas, (Ex. K), in which Plaintiff asked extensive and specific questions regarding the January 1990 competitive reviews and the participation of Jimmy Salas and Casey Flynn, the March 1992 competitive reviews, the notes taken by Jimmy Salas of the competitive reviews, the videotapes of the competitive reviews; the confidential memorandum regarding the March 1992 competitive reviews and Defendant’s acquisition strategy, bid, and negotiations of the ITT Sheraton Hotel Corporation contracts,

(3) Jimmy Salas’ handwritten notes made during the January 1990 competitive review, (Ex. G);

(4) the videotape of the January 1990 competitive review conducted by Jimmy Salas and Casey Flynn, (Ex. H);

(5) the three memorandum pertaining to the March 1992 competitive review, (Ex. L);

(6) the videotape of the March 1992 competitive review, (Ex. M);

(7) LodgeNet’s proposal for the Sheraton Hotels of Hawaii, (Ex. N);

(8) David Banker’s notes regarding a meeting with Sheraton Hotels, (Ex. 0);

(9) LodgeNet’s letter to ITT Sheraton Corporation regarding the proposed configuration of LodgeNet’s system, (Ex. P).

Defendant contends that the information Plaintiff obtained and discovered during the course of this litigation, and on which Plaintiffs state court lawsuit is premised, is confidential and subject to the Protective Order granted by the District Court. (Def.Mot. p. 1, pp. 7-8, p. 11). Defendant proffers that all of the above exhibits were marked “CONFIDENTIAL-SUBJECT TO PROTECTIVE ORDER.” (Decl.D.Fairbairn, pp. 3-7). Defendant also contends that the statement of Plaintiffs counsel during the November 14, 1995 deposition of Jimmy Salas fully evidences Plaintiffs understanding that the marked documents and information surrounding Defendant’s investigation of Plaintiffs system was confidential and subject to the Protective Order:

Everything that’s being said here is confidential, it’s subject to a confidentiality order ... you shouldn’t discuss [any] of the things that you see here or that I’m going to show you, because they’ve been produced to us by LodgeNet on a confidential basis.

(Def. Mot. p. 6; Decl. D. Fairbairn, p. 7 & Ex. K).

Plaintiffs awareness of the confidentiality of the discovered information and the Protective Order’s application is further shown by the Declaration of Luke Ellis, Plaintiffs counsel, filed by Plaintiff in opposition to Defendant’s October 1995 motion for partial summary judgment. (Def. Mot. p. 6; Decl. D. Fairbairn, pp. 7-8). Attached as exhibits to the Declaration of Luke Ellis was a sketch made by Jimmy Salas, handwritten notes of Jimmy Salas, a report from David Bankers to Defendant’s executive committee; excerpts from the August 29, 1995 deposition of David Bankers; and the videotape produced by Defendant’s of the January 1990 competitive review. (Def. Mot. p. 6; Decl. D. Fair-bairn, pp. 7-8). Defendant states that all of the exhibits were marked “Confidential.” (Def. Mot. p. 6; Decl. D. Fairbairn, pp. 7-8). Furthermore, Luke Ellis filed the Declaration under seal with a cover page that stated “CONTAINS CONFIDENTIAL MATERIAL SUBJECT TO PROTECTIVE ORDER.” (Def. Mot. p. 6; Decl. D. Fairbairn, pp. 7-8).

ii. The purpose of the federal Protective Order is to limit the use of confidential information and not merely to prohibit disclosure or use of competitive information.

Defendant asserts that the purpose the Protective Order is set forth in Paragraph 11, which states that confidential information “shall not be used by the other party for any purpose other than in connection with preparation of the parties’ analysis of issues presented in this litigation.” (Def.Mot. P. 11). As Plaintiff used confidential information to file its state court action, Defendant argues that Plaintiff has violated the express terms and purpose of the Protective Order. (Def.Mot. p. 11).

Defendant disputes Plaintiffs assertion that the purpose of the Protective Order is only to prevent the disclosure of confidential information or the competitive use of eonfidential information (Def.Reply, p. 3). Defendant states it was Plaintiff who drafted the initial protective order in which Paragraph 11 stated:

[a]ny information designated as Confidential Information shall not be used by the other party for any purpose other than in connection with this litigation.

(Def. Reply, p. 3 & Ex. A, p. 5).

More importantly, it was Plaintiff who later revised the Protective Order to further restrict the use of confidential information to the parties’ “preparation of the analysis of issues presented in this litigation. ” (Def.Reply, p. 3). Plaintiff did not propose limiting the use of confidential information to prevent the competitive use of confidential information. (Def.Reply, p. 3). Hence, both Plaintiff and Defendant “exhibited unequivocal intent to limit the use of confidential information to the preparation of issues in this action.” (Def.Reply, p. 3). Given Plaintiffs initial draft and subsequent revisions, Plaintiff should not be allowed to rewrite the meaning of the Protective Order. (Def.Reply, p. 3).

iii. Plaintiff may not avail itself of the defense of substantial compliance.

Defendant requests that the Protective Order be strictly enforced and that the Court sanction and/or hold Plaintiff in civil contempt for this violation, pursuant to Federal Rule of Civil Procedure 37(b)(2). (Def.Mot. p. 1, p. 10). Defendant maintains that Plaintiff may not avail itself of the defense of substantial compliance against the Court’s finding of contempt, and cites Vertex Distributing, Inc. v. Falcon Foam Plastics, Inc., 689 F.2d 885 (9th Cir.1982), as authority that the substantial compliance defense only applies when an order is ambiguous. (Def. Mot. p. 12 & n. 2). Here, the Protective Order is not ambiguous. (Def.Mot. p. 12). Rather, a “literal reading of the protective order clearly defines what acts are prohibited; the prohibitions have been agreed to by both parties; and both parties are on notice of what the prohibitions are.” (Def.Mot. p. 13).

Moreover, Defendant distinguishes the Protective Order from In re Dual-Deck Video Cassette Antitrust Litigation, Go-Video, Inc. v. The Motion Picture Ass’n of Am. et al., 10 F.3d 693 (9th Cir.1993), where the court found the protective order at issue to be clearly overly broad. (Def.Mot. p. 12). Here, the “prohibition on use of information is strictly limited to ‘Confidential Information,’ as opposed to ‘all information’ produced in discovery.” (Def.Mot. p. 12).

Lastly, Defendant claims that even if the substantial compliance defense was available, Plaintiff cannot claim that it has substantially complied with the "Protective Order. Both Go-Video and Vertex require that Plaintiff (1) base its actions on a good faith and reasonable interpretation of the District Court’s order, and (2) make every reasonable effort to comply with the Protective Order. (Def. Mot. p. 13, Def. Reply p. 2).

Here, Plaintiff made no attempt to comply with the order. (Def.Mot. p. 13). Pursuant to the Joint Case Management Statement, the deadline for amendments to this federal complaint, January 1, 1996, expired prior to Plaintiffs commencement of the state court action. Plaintiff did not attempt to amend its federal complaint to include the state court allegations. (Def.Mot. p. 13). And, while Plaintiffs state court complaint states that the alleged wrongful acts are not described with particularity in order to protect the confidentiality claims of both parties, such remedial action does not constitute a “reasonable effort to comply.” (Def.Mot. P. 13). The violation is the filing of the state action itself. (Def. Mot. p. 13 ). Finally, Plaintiff did not seek to amend the Protective Order to allow its use of the confidential information, Def. Mot. p. 13, nor did Plaintiff move the District Court to clarify the Protective Order. (Def.Reply, p. 5). Given Plaintiffs inaction, Defendant argues that Plaintiff has not taken any steps to comply with the Protective Order, and therefore has not demonstrated substantial compliance. (Def. Mot. p. 13; Def. Reply, pp. 4-5).

B. Plaintiffs Arguments.

i. Plaintiffs state court action is premised on confidential information subject to the federal Protective Order.

Plaintiff does not dispute that the state court action is premised on information obtained through the course of discovery during this federal action and subject to the Protective Order. (Pl.Opp. pp. 2-3, p. 6).

ii. The purpose of the federal Protective Order is to prohibit disclosure or use of competitive information.

Rather, Plaintiff asserts that the purpose of the protective order is to “protect the [privacy] proprietary commercial information,” not to immunize Defendant from subsequently discovered illegal conduct, nor to limit the forum of subsequent litigation to federal jurisdiction. (Pl.Opp. p. 6). Plaintiff cites as authority Federal Rule of Civil Procedure 26(c)(7), which permits a court to order “that a trade secret or other confidential information ... not be revealed or be revealed only in a designated way.” (Pl.Opp. p. 6). As such, Plaintiff has not disclosed any proprietary or product information, nor does Defendant “allege [Plaintiff] used ‘confidential information’ for competitive gain, or that [Plaintiff] permitted others to use it competitively.” (Pl.Opp. p. 9). More importantly, the information which Defendant asserts was wrongfully disclosed does not relate to competitively useful proprietary or product information. (Pl.Opp. p. 9). Hence, Plaintiff has not revealed any trade secrets. (PLOpp. p. 9).

Moreover, Plaintiff asserts it went to great lengths to prevent the specific disclosure of Defendant’s wrongful acts. (PLOpp. p. 10). Plaintiff attempted to file the state court action under seal and was subsequently prevented from doing so by the state court. (Pl. Opp. p. 10; Decl. R. Doyle, p. 4 & Ex. 3 & 4). Plaintiff removed all factual descriptions of Defendant’s actions from the complaint. (Pl. Opp. p. 10; Decl. R. Doyle, p. 4 & Decl. D. Fairbairn, Ex. R). Plaintiff attempted to enter into a state protective order with Defendant. (Pl. Opp. p. 10; Decl. R. Doyle, p. 4 & Ex. 5). Plaintiff also filed its response to Defendant’s state court opposition under seal. (PL Opp. pp. 10-11; Decl. R. Doyle, p. 5 & Ex. 8). In contrast, Defendant’s answer provided detailed factual disclosures, such as the fact and nature of the competitive reviews, the testimony given at the deposition of David Bankers, and the documents produced by Defendant. (Pl. Opp. p. 10; Decl. R. Doyle, p. 4 & Ex. 6 & 7). Thus, any factual disclosures resulting from the state court action can be attributed entirely to Defendant.

iii.Plaintiffs actions, under Go Video, do not violate the protective order.

Next, Plaintiff disputes Defendant’s interpretation of Go-Video. The Ninth Circuit’s holding did not rest on the “ambiguity” of the protective order. (PLOpp. p. 7). Defendant’s conclusion is neither stated in the opinion, nor does Defendant proffer any citation from Go-Video as support. (PLOpp. p. 7). Rather, in Go-Video, the court had no difficulty construing the protective order as overly broad, and expressly recognized that any construction “[m]ust give effect to its legitimate purpose — protection from disclosure of commercial secrets, rather than immunity from suit.” (Pl.Opp. p. 7).

Plaintiff argues that Go-Video is dispositive of the circumstances now before the Court. (Pl.Opp. pp. 6-7). Go-Video provides that commencement of a new action based on information learned through discovery does not violate the protective order, nor does it constitute civil contempt. (Pl.Opp. p. 6).

Go-Video requires (1) a violation of the court order, (2) beyond substantial compliance, (3) not based on a good faith and reasonable interpretation of the order, and (4) by clear and convincing evidence. (PL Opp. p. 5). As discussed above, Plaintiff has not disclosed proprietary or product information, and therefore, has not violated the purpose of the Protective Order. (Pl.Opp. p. 11). Plaintiff’s actions were based on a reasonable and good faith interpretation of the Protective Order and case law. (Pl.Opp. p. 11). And, Defendant has not proffered clear and convincing evidence of any such disclosure and thus fails to meet the burden of proof. (Pl.Opp. pp. 5-7).

Additionally, Plaintiff asserts that neither Go-Video, nor any other ease, mandates that Plaintiff should have amended, or attempted to amend, the federal complaint prior to filing the state court action. (Pl.Opp. p. 10). And, the Protective Order does not state that amendment is required. (Pl.Opp. p. 10). Again, the purpose of the Protective Order is to prevent competitive uses of “confidential information.” (Pl.Opp. p. 11). “Use of information gained thereunder to file suit in the only forum with non-discretionary jurisdiction to adjudicate such claims cannot violate the order.” (Pl.Opp. p. 11). Hence, Plaintiff has no obligation to seek leave to amend the pleadings or the protective order. (Pl.Opp. p. 11).

iv. Plaintiff’s choice of forum is appropriate.

Finally, Plaintiff claims its state court action is appropriate because the California Superior Court is the only court with both inpersonam jurisdiction and non-discretionary subject matter jurisdiction over Plaintiffs state action. (Pl.Opp. p. 11). Federal subject matter jurisdiction does not exist. (Pl. Opp. p. 11). Plaintiffs state action alleges violations of California’s trade secret statute and seeks California tort remedies. (Pl.Opp. p. 11). Hence, no federal question is presented. (Pl.Opp. p. 11). Additionally, Plaintiff and Defendant are Delaware corporations. (Pl.Opp. p. 11). Hence, diversity does not exist for federal jurisdiction, pursuant to 28 U.S.C. § 1332(c). (Pl.Opp. p. 11).

Thus, the only basis for federal jurisdiction is supplemental jurisdiction, pursuant to 28 U.S.C. § 1367(a). (Pl.Opp. p. 12). Plaintiff argues that the District Court most likely would decline to exercise its power of supplemental jurisdiction, as there is no “common nucleus of operative facts” existing between the state and federal actions. Pursuant to the Uniform, Trade Secrets Act, California Civ.Code, §§ 3426, et seq., the elements of Plaintiffs state action claim for misappropriation of trade secrets are “(1) whether the property is a trade secret; (2) the misappropriation of that trade secret, (3) by a wrongful act, (4) resulting in damages to Plaintiff.” (Pl.Opp. p. 12., p. 21). Plaintiffs state action claim for intentional and negligent interference with prospective economic advantage requires showing (1) that an economic relationship containing the probability of future economic benefit existed between Plaintiff and a third party, (2) Defendant’s knowledge thereof, (3) an intentional or negligent acts by Defendant to disrupt that economic benefit, (4) that the relationship was actually disrupted, and (5) that Plaintiff was damaged. (Pl.Opp. p. 21).

In contrast, the elements of the federal patent infringement action are (1) the validity of the patent, (2) infringement, and (3) damages. (Pl.Opp. p. 20). And, the patent allegedly violated was issued on August 7, 1990, thus “tortious conduct occurring prior to August 7, 1990, is necessarily distinct from conduct constituting acts of patent infringement.” (PLOpp. p. 20).

Additionally, the damages of the state and federal actions do not duplicate one another. (PLOpp. p. 21). In Plaintiffs state claim for misappropriation of trade secrets, damages commence January 10,1990. (PLOpp. p. 21). In Plaintiffs state claim for interference with prospective economic advantage, damages commence in 1992 when Defendant allegedly acquired the Sheraton Hotel contracts. (PL Opp. p. 21). In Plaintiffs federal action for patent infringement, damages commence on November 22, 1994. (PLOpp. p. 21). Thus, Plaintiff seeks to recover damages in its state action for conduct and events occurring in 1990 through 1992, while in the federal action, Plaintiffs recovery of damages is after November 22,1994. (PLOpp. p. 1).

Plaintiff argues that the District Court would decline to exercise supplemental jurisdiction of Plaintiffs state claim because of the novel or complex issues, pursuant to 28 U.S.C. § 1367(c). (PLOpp. p. 12). And, Plaintiff asserts that combining the federal and state actions would have delayed the federal trial, significantly increased discovery, which was already extraordinary, and overwhelmed, confused and prejudiced the jury. (PLOpp. p. 13).

Finally, Plaintiff disputes that the parties agreed, via the Protective Order, to file subsequent legal actions in federal court. (Pl. Opp. p. 13). Moreover, the parties may not consent to federal jurisdiction where federal jurisdiction is not conferred. (PLOpp. p. 13).

C. The Protective Order’s Requirements and Purpose.

Again, Plaintiff does not dispute that its state court action is premised on information obtained during the course of the federal action at bar and subject to the Protective Order. Accordingly, this Court examines the Protective Order’s provisions and purpose to determine whether Plaintiffs use of the confidential information violates, either expressly or impliedly, the Protective Order.

This Court’s review of the Protective Order demonstrates that:

(1) there is no express provision which states that a subsequent action, which is based on protected confidential information, is subject to federal jurisdiction, (See Decl. D. Fairbairn, Ex. A);

(2) there is no express provision which states that the filing of a subsequent action, which is based on protected confidential information, violates the Protective Order, (See Decl. D. Fair-bairn, Ex. A);

(3) there is no express provision which states that prior to filing a subsequent action, which is based on protected confidential information, a party must seek leave to amend the federal pleadings, (See Decl. D. Fairbairn, Ex. A);

(4) there is no express provision which states that prior to filing a subsequent action, which is based on protected confidential information, a party must amend, or attempt to amend, the Protective Order, (See.Deel.D.Fairbairn, Ex. A), and;

(5) there is no express provision which states that the filing of a subsequent lawsuit based on protected confidential information without prior amendment, or attempt to amend, the pleadings or the Protective Order, violates the Protective Order, (See Decl. D. Fairbairn, Ex. A).

Given the absence of any express provision which states Defendant’s position, this Court must infer whether Plaintiffs use of the confidential information to file the state action violates the Protective Order. Thus, the Court must determine the intended purpose of the Protective Order in order to determine whether Plaintiffs actions impliedly violate the parties’ agreement. See Go-Video, 10 F.3d at 695 (“For the protective order to comply with common sense, a reasonable reading must connect its prohibitions to its purpose.”).

Review of the Protective Order demonstrates that there is no express provision by which the parties state their intended purpose for entering into the agreement. See Go-Video, 10 F.3d at 695. Hence, the Court must attempt to discern the parties’ intended purpose of the Protective Order by its language and the evidence proffered by the parties.

Paragraph 11 of The Protective Order states:

Any information designated as Confidential Information shall not be used by the other party for any purpose other than in connection with preparation of the parties analysis of issues presented in this litigation.

(Decl.D.Fairbairn, Ex. A, p. 5).

Paragraph I of the Protective Order defines Confidential Information as:

[a]ny type of information which is designated pursuant to this Protective Order as confidential by the supplying party, whether it be a document, an object, information contained in a document, information revealed in a deposition, information revealed in an interrogatory answer or other form of evidence or discovery, formal or informal.

(Decl.D.Fairbairn, Ex. A, p. 2).

Paragraph 9 of the Protective Order determines the method by which Confidential Information is designated.

Paragraph 10 of The Protective Order states that “[i]n designating information as Confidential Information, the supplying party will make such designation only as to that information which it in good faith believes to be confidential.” (Deel.D.Fairbairn, Ex. A, p. 5).

Defendant argues that the purpose of the protective order is expressly stated in Paragraph 11: To limit the parties’ use of confidential information to “the preparation of the parties’ analysis of issues presented in this litigation.” (Def.Mot. p. 12). “[A] literal reading of the protective order clearly defines what acts are prohibited; the prohibitions have been agreed to by both parties; and both parties are on notice of what the prohibitions are.” (Def.Mot. p. 13). Defendant proffers Plaintiffs initial draft of the Protective Order and subsequent revisions to demonstrate that both parties understood this to be the purpose of the Protective Order. (Def. Reply, p. 3 & Decl. D. Fairbairn, Ex. A & B).

The Court finds that Defendant’s argument and evidence are not dispositive of the Protective Order’s purpose. Both the initial draft and the current language of Paragraph 11 merely state the use of the confidential information exchanged, yet fail to show on their face the parties’ purpose for entering into the agreement. The Court opines that this is an important factual distinction, given that knowledge of the parties’ purpose for entering into the agreement is necessary to determine whether Plaintiffs action impliedly violated the Protective Order. See Go-Video, 10 F.3d at 695 (“For the protective order to comply with common sense, a reasonable reading must connect its prohibitions to its purpose.”).

And, contrary to Defendant’s assertion, neither the initial draft, nor the current language of Paragraph 11 expressly or impliedly state the specific acts which are prohibited, the specific prohibitions agreed to by the parties, or the specific prohibitions of which the parties had notice. Here, Defendant demonstrates to this Court the vagueness of Paragraph 11, rather than the purpose of the protective order. Accordingly, this Court finds that Defendant fails to establish the purpose of the Protective Order.

Plaintiff argues that the purpose of the protective order is to prevent the disclosure of confidential proprietary or product information from competitive use or gain, citing Federal Rule of Civil Procedure 26(c)(7) which grants the court the authority to order a protective order for this purpose.

Review of the Protective Order shows that there is no express provision which states that the purpose of the Protective Order is to prevent the disclosure of confidential product or proprietary information for competitive use or gain. (See Decl. D. Fairbairn, Ex. A). And while Rule 26(c)(7) does authorize the court’s issuance of a protective order for the protection of trade secrets, said rule does not by itself demonstrate that this was the parties’ purpose for entering into the Protective Order. Nor does it demonstrate that this was the District Court’s basis for granting the Protective Order. Hence, Plaintiffs position is conclusory and unsupported.

Accordingly, Plaintiff fails to establish the purpose of the Protective Order.

This Court has extensively reviewed the parties’ moving papers, declarations, and the proffered evidence, yet cannot determine the parties’ purpose for entering into the Protective Order. The Protective Order fails to expressly state Defendant’s position. It fails to expressly state the parties’ purpose for entering into the agreement. And, both parties fail to establish the purpose of the protective order. Thus, there is no basis on which this Court may render a reasonable, factual determination of the parties’ intended purpose of the Protective Order.

E. The Court’s Findings of Facts.

Based on review of Plaintiffs and Defendant’s arguments, declarations and proffered evidence, this Court makes the following findings of facts:

1. Plaintiff learned of the January 1990 and March 1992 competitive reviews or evaluations performed by Jimmy Salas, a former employee of Defendant, and other personnel, through Defendant’s response to Plaintiffs Interrogatory No. 3. (Def. Mot. p. 4 & 5; PL Opp. p. 2; Decl. R. Doyle, p. 2). This response served as a general reference to information on which Plaintiff formed the basis of the state court lawsuit. (Def. Mot. p. 4 & 5; Pl. Opp. p. 2; Decl. R. Doyle, p. 2).

2. Pursuant to Paragraph 9(d) of the Protective Order, Defendant’s response to Plaintiffs Interrogatory No. 3 was marked confidential and subject to the Protective Order;

3. Pursuant to Paragraph 9(c) of the Protective Order, the Deposition of David Bankers, and the testimony rendered therein, was deemed confidential and subject to the Protective Order;

4. Pursuant to Paragraph 9(b) of the Protective Order, Jimmy Salas’s notes of the January 1990 competitive review conducted on Plaintiffs system, designated as D053545-48, were marked confidential and subject to the Protective Order;

5. Pursuant to Paragraph 9(b) of the Protective Order, David Bankers’ three memorandum of the March 1992 competitive reviews conducted on Plaintiffs system, designated as D053528-D053544, were marked confidential and subject to the Protective Order;

6. Pursuant to 9(d) of the Protective Order, the videotape of the January 1990 competitive review on Plaintiffs system, designated as D058682, was marked confidential and subject to the Protective Order;

7. Pursuant to 9(d) of the Protective Order, the videotape of the March 1992 competitive reviews conducted by Defendant on Plaintiffs systems, designated D058683, was marked confidential and subject to the Protective Order;

8. Pursuant to Paragraph 9(c) of the Protective Order, the Deposition of Steven Truckenmiller, and the testimony rendered therein, was deemed confidential and subject to the Protective Order;

9. Pursuant to Paragraph 9(c) of the Protective Order, the Deposition of Jimmy Salas, and the testimony rendered therein, was deemed confidential and subject to the Protective Order;

10. Pursuant to Paragraph 9(b) of the Protective Order, the Sheraton Hotels of Hawaii proposal was marked confidential and subject to the Protective Order;

11. Pursuant to Paragraph 9(b) of the Protective Order, David Bankers’ notes of a meeting with the Sheraton Hotels, were marked confidential and subject to the Protective Order;

12. Pursuant to Paragraph 9(b) of the Protective Order, LodgeNet’s letter to ITT Sheraton Corporation regarding the proposed configuration of LodgeNet’s system, was marked confidential and subject to the Protective Order;

13. Plaintiffs state court action is premised on the above confidential information, all of which is subject to the Protective Order;

14. The Protective Order does not expressly state that the parties’ subsequent litigation was subject to federal jurisdiction;

15. The Protective Order does not expressly state that the filing of a subsequent action, based on protected confidential information, violates the Protective Order;

16. The Protective Order does not expressly state that prior to filing the state action, Plaintiff was required to seek leave to amend the federal pleadings;

17. The Protective Order does not expressly state that prior to filing the state action, Plaintiff was required to amend the Protective Order;

16. The Protective Order does not expressly state the parties’ intended purpose for entering into the Protective Order.

17. The Protective Order does not expressly state that the parties’ intended purpose for entering into the Protective Order is to prevent the disclosure of confidential proprietary or product information for competitive gain or use.

F. Whether Plaintiff Should Be Held In Civil Contempt.

Contrary to Defendant’s argument, Go-Video sets forth the standards for civil contempt. See Go-Video, 10 F.3d at 695; Religious Technology Center v. Netcom On-Line Communication Services, 923 F.Supp. 1231 (N.D.Cal.1995), and therefore applies to the circumstances at bar.

“Civil contempt in this context consists of a party’s disobedience to a specific and definite court order by failure to take all reasonable steps within the party’s power to comply.” Go-Video, 10 F.3d at 695; Religious Technology, 923 F.Supp. at 1259. “The contempt ‘need not be willful,’ and there is no good faith exception to the requirement of disobedience to a court order.” Go-Video, 10 F.3d at 695; Religious Technology, 923 F.Supp. at 1259. “But a person should not be held in contempt if his action ‘appears to be based on a good faith and reasonable interpretation of the [court’s order].’” Go-Video, 10 F.3d at 695; Religious Technology, 923 F.Supp. at 1259.

“Substantial compliance” with the court order is a defense to civil contempt, and is not vitiated by “a few technical violations” where every reasonable effort has been made to “comply.” Go-Video, 10 F.3d at 695; Religious Technology, 923 F.Supp. at 1259.

“The party alleging civil contempt must demonstrate that the alleged contemnor violated the court’s order by ‘clear and convincing evidence,’ not merely a preponderance of evidence.... ” Go-Video, 10 F.3d at 695; Religious Technology, 923 F.Supp. at 1259.

“The court must properly determine (1) that plaintiff violated the court order, (2) beyond substantial compliance, (3) not a good faith and reasonable interpretation of the order,