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Amtote International Inc. v. Kentucky Downs, LLC

United States District Court, W.D. Kentucky, Bowling Green Division

November 16, 2018

AMTOTE INTERNATIONAL INC., Plaintiff
v.
KENTUCKY DOWNS, LLC AND EXACTA SYSTEMS, LLC; and MAGELLAN GAMING, LLC, Defendants PARIMAX HOLDINGS, LLC, and AMTOTE INTERNATIONAL INC., Plaintiffs
v.
KENTUCKY DOWNS, LLC, EXACTA SYSTEMS, LLC; and MAGELLAN GAMING, LLC, Defendants

          MEMORANDUM OPINION AND ORDER

          H. Brent Brennenstuhl United States Magistrate Judge

         Plaintiff, AmTote International, has filed a motion to compel discovery of “math sheets” from Defendant, Exacta Systems, LLC (DN 218 in No. 1:15-cv-47-GNS and DN 171 in No. 1:15-cv-82). AmTote argues that the math sheets are within the purview of the Court's prior discovery order issued on December 11, 2017 (DN 187 in No. 1:15-cv-47-GNS and DN 194 in No. 1:15-cv-82), which ordered all “documents and information” relating to the development and operation of the Exacta system to be produced (Id. at 5134). Exacta has filed a response in opposition (DN 238 in No. 1:15-cv-47 and DN 191 in No. 1:15-cv-82). AmTote filed a reply (DN 241 in No. 1:15-cv-47 and DN 193 in No. 1:15-cv-82).

         Nature of the Case

         This Order relates to two pending cases. In the first, AmTote International sued Defendants Kentucky Downs, LLC; Encore Gaming, LLC n/k/a Exacta Systems, LLC; and Magellan Gaming, LLC for breach of contract, tortious interference with an existing contract, and threatened and actual misappropriation of trade secrets (DN 1 and DN 142 SEALED in No. 1:15-cv-47). AmTote asserts its customer, Kentucky Downs, improperly provided proprietary information concerning their historical horse racing gaming system to the other named Defendants, who in turn used that information to develop a competing service (DN 1 and DN 142 SEALED). Kentucky Downs allegedly proceeded to terminate their business relationship with Plaintiffs and used the newly developed system at their facilities in violation of a contract between AmTote and Kentucky Downs. This case was initiated on April 3, 2015 (Id.). See AmTote Int'l, Inc. v. Kentucky Downs, LLC et al., Civil Action No. 1:15-cv-00047-GNS (W.D. Ky.).

         In the second case, Parimax Holdings sued Kentucky Downs, LLC, Exacta Systems, LLC f/k/a Encore Gaming, LLC and Magellan Gaming, LLC for breach of contract, tortious interference with an existing contract, unjust enrichment, unfair competition and misappropriation of trade secrets (DN 1 and DN 93 in No. 1:15-cv-82). The suit stems from Defendant's alleged use of former Plaintiff, RaceTech KY, LLC's, confidential and proprietary information and licensed technology in violation of an Equipment and License Agreement between RaceTech KY and Kentucky Downs (DN 1 and DN 93). This case was initiated on June 29, 2015. See Parimax Holdings, LLC v. Kentucky Downs, LLC et al., Civil Action No. 1:15-cv-00082-GNS (W.D. Ky.).

         The parties agreed that discovery in the two cases shall proceed jointly (DN 111 in No. 1:15-CV-00047-GNS and DN 64 and DN 141 in No. 1:15-CV-00082-GNS). A lengthy discovery process has ensued. AmTote has filed a motion to compel discovery of “math sheets” from Exacta (DN 218 in No. 1:15-cv-47-GNS and DN 171 in No. 1:15-cv-82). Exacta filed a response objecting to AmTote's motion and requested a hearing on the matter (DN 238 in No. 1:15-cv-47 and DN 191 in No. 1:15-cv-82). AmTote filed a reply (DN 241 in No. 1:15-cv-47 and DN 193 in No. 1:15-cv-82).

         Arguments of the Parties

         AmTote argues that the math sheets are discoverable documents. They cite this Court's previous Discovery Order (DN 187 in No. 1:15-cv-47 and DN 137 in No. 1:15-cv-82) which ruled that all documents related to the design, development, and operation of the Exacta system are relevant in this case (DN 218 PageID # 5135 and DN 171 PageID # 2879 in No. 1:15-cv-82). AmTote contends the math sheets are within the scope of that order (Id.). They add that production of the math sheets is essential to determining if Exacta's system is derivative of their own and maintain that any risk of proprietary information becoming public is mitigated by the protective orders already in place (Id. at 5138-5139 and 2881-2883).

         Exacta argues that AmTote has not met its burden to show that the math sheets are relevant or necessary. They argue that this Court's prior order should not control here because the math sheets were not specifically at issue (DN 238 PageID # 6329). Exacta emphasizes the potential harm it would suffer if its trade secrets or otherwise confidential information were disclosed, especially considering AmTote is a competitor in an industry with few participants. They contend that this risk outweighs any “incremental value” the math sheets may provide AmTote (Id. at 6339-6349). Exacta requests this Court deny AmTote's motion, or in the alternative requests the Court conduct a hearing at which the math sheets can be reviewed by the Court in camera. (Id. at 6350).

         Conclusions of Law

         Rule 26(b)(1) of the Federal Rules of Civil Procedure guides the evaluation of any discovery request. The Rule provides that “[p]arties may obtain discovery regarding 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). In assessing whether the discovery is “proportional to the needs of the case, ” courts should consider “the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Id.; Advisory Committee Notes 2015 Amendment.

         On December 11, 2017, this Court granted in part Plaintiff's Motion to Compel (DN 187).

         That order explained, given the nature of the case, that information regarding the design, development, and operation of the Exacta System was relevant:

The undersigned is cognizant that these requests seek a substantial amount of confidential and proprietary information, but confidential and proprietary information is at the center of this dispute. It is common for courts to order parties to turn over source code when some type of infringement of proprietary information is alleged. Moreover, there is a protective order in place in this case that protects sensitive information (DN 63). Finally, AmTote has convinced the Court via the affidavit of expert Gerry Kitchen that viewing the source code and other schematic and planning materials outlined in the requests above is essential if AmTote is to prove its claims… The undersigned wishes to avoid confusion and future litigation ...

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