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Allstate Insurance Co. v. Zeefe

United States District Court, E.D. Kentucky, Central Division, Lexington

July 13, 2015

ALLSTATE INSURANCE COMPANY, et al., Plaintiffs.
v.
KEVIN ZEEFE and SANDRA ZEEFE, Defendants.

MEMORANDUM OPINION AND ORDER

KAREN K. CALDWELL, Chief District Judge.

This matter is before the Court on Plaintiffs' ("Allstate") motion to expedite discovery and Defendants' ("Kevin and Sandra") motion to compel and for contempt. (DE 29; DE 33). Allstate initiated this action alleging that Kevin and Sandra misappropriated and misused Allstate's confidential and proprietary information. (DE 1 at 12-24; DE 2-1 at 9-17.) Allstate filed the present motion to timely complete discovery and because they are concerned that Kevin and Sandra possess-and could disseminate-electronic copies of Allstate's confidential and proprietary information. (DE 29). Kevin and Sandra moved to compel Allstate to remove its materials from Kevin and Sandra's building and for the Court to find Allstate in contempt for failing to previously remove these materials. (DE 33).

The Court will grant Plaintiffs' motion, grant Defendants' motion in part, and deny Defendants' motion in part for the reasons set forth below.

I. FACTUAL BACKGROUND

On July 1, 2005, Kevin Zeefe became a Financial Specialist for Allstate Life Insurance Company and signed an Exclusive Financial Specialist Agreement. (DE 2-3). "As a [Financial Specialist] for Allstate, Kevin partnered with Exclusive Agents to solicit the Exclusive Agent's Allstate customers for the purchase of Allstate financial products." (DE 2-1 at 6.) Accordingly, Kevin had access to Allstate's confidential customer information so that he could sell more Allstate products to existing Allstate customers. On March 1, 2008, Sandra Zeefe became an Exclusive Agent for Allstate Insurance Company and signed an Exclusive Agency Agreement. (DE 2-7). Therefore, as of March 2008, Kevin and Sandra both sold Allstate products and Kevin had access to all of Sandra's customer information.

Both Kevin's and Sandra's Agreements with Allstate contained non-compete clauses and clauses requiring Kevin and Sandra to maintain Allstate's confidential information, establishing that the confidential information was Allstate's exclusive property, and limiting the use of Allstate's confidential information to Allstate-related business. (DE 2-3 at 3-4, 8-9; DE 2-7 at 3-4, 8-9.) Allstate contends that Kevin and Sandra violated these Agreements. (DE 2-1 at 9-11.)

Specifically, Allstate alleges that Kevin began using Allstate's confidential information to sell competing products. (DE 2-1 at 9.) On August 8, 2014, Kevin terminated his Exclusive Financial Specialist Agreement, but Allstate claims that Kevin continued using Allstate's confidential information-notably the customer lists and resources available to Sandra as an Exclusive Agent-to sell competing products after he terminated his Agreement. (DE 2-1 at 9-10.) Thus, on May 22, 2015, Allstate terminated Sandra's Exclusive Agency Agreement and the Allstate Territorial Sales Leader, Eric Harvey, asked Kevin and Sandra to "pack up all [of Sandra's] customer files and return all Allstate property in her possession in accordance with the EA Agreement." (DE 2-6 at 5.) Kevin and Sandra did not comply. (DE 2-1 at 11.) Accordingly, on May 28, 2015, Allstate filed this action and moved for a temporary restraining order and a preliminary injunction. (DE 1; DE 2-1).

On June 2, 2015, the Court and the parties engaged in a teleconference to discuss Allstate's claim that Kevin and Sandra misappropriated and misused Allstate's confidential information. (DE 20). Kevin and Sandra verified that they possessed and maintained all of Allstate's property, ranging from customer files to pens. The Court Ordered that Kevin and Sandra make Allstate's confidential and proprietary information-including customer files and a particular phone number tied to Allstate-available for an agent to retrieve on June 5, 2015 at 11:00 a.m. ( See DE 20 at 1.) The Court also scheduled a follow-up teleconference to confirm the June 5 exchange and to establish a schedule to efficiently resolve this matter. (DE 20 at 1.)

During the follow-up teleconference, the parties verified that Allstate retrieved the customer files and left with a completed transfer form for the phone number tied to Allstate. ( See DE 26 at 1.) Therefore, the Court found that it was not necessary to preliminarily enjoin Kevin and Sandra. ( See DE 27 at 1.) This Court and the parties also agreed that discovery would be completed within ninety days; Kevin and Sandra did not object to Allstate's June 5 exchange or to the discovery plan. ( See DE 26 at 1.)

Allstate then issued written interrogatories and requests for production of Kevin and Sandra's electronic devices. (DE 29 at 2.) Allstate proposed that Kevin and Sandra's electronic devices should be submitted to a neutral forensic examiner, and the neutral forensic examiner would determine whether Kevin or Sandra saved electronic copies of Allstate's confidential and proprietary information. (DE 29 at 1-4.) Kevin and Sandra refused to comply. (DE 29 at 1.) Additionally, Kevin and Sandra now claim that Allstate failed to remove all of its property on June 5 and that Allstate has not "separate[d] its name from the Zeefe's ( sic ) on the internet." (DE 33 at 1.)

II. ANALYSIS

A. Expedited Discovery

Federal Rule of Civil Procedure 26(d) vests district courts with the discretion to order expedited discovery. The moving party must demonstrate good cause for expedited discovery and must narrowly tailor requests to obtain specific information. Ky. CVS Pharmacy v. McKinney, No. 5:13-cv-25-KSF, 2013 WL 1644903, at *1 (E.D. Ky. Apr. 16, 2013) (granting a motion to expedite in an employment dispute arising under a covenant not to compete); 5ifth Element Creative, LLC v. Kirsch, No. 5:10-cv-255-KKC, 2010 WL 4102907, at *2 (E.D. Ky. Oct. 18, 2010). District courts must also consider whether evidence may be lost, misappropriated, or destroyed with time. See Best v. Mobile Streams, Inc., No. 1:12-cv-564, 2012 WL 5996222, at *1 (S.D. Ohio Nov. 30, 2012).

Here, Allstate requests expedited production of Kevin and Sandra's electronic devices to a neutral forensic examiner. Allstate lists the following reasons as "good cause" for expedited discovery: (1) Allstate has substantial reason to believe that Kevin and Sandra made electronic copies of its confidential and proprietary information; (2) electronic data are easily transferable, and dissemination would cause Allstate irreparable harm; (3) time is of the essence; (4) Kevin and Sandra used Allstate's confidential and proprietary information in the past, despite employment Agreements including covenants not to compete and clauses prohibiting the use of Allstate's information for personal gain; and (5) Kevin and Sandra's history of non-cooperation and ...


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