The opinion
‘ IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION □
5:20-CV-47-D
VAMSI MOHAN NALLAPATI et al., )
Plaintiffs,
v. ORDER
JUSTH HOLDINGS, LLC et al.,
Defendants. - .
On February 6, 2020, Vamsi Mohan Nallapati (“Vamsi”) filed a complaint against Justh
Holdings, LLC (“TJusth”) seeking cancellation of three trademark registrations and declaratory and
injunctive relief [D.E. 1]. On October 9, 2020, Vamsi amended his complaint [D.E. 32]. On January
21, 2021, the parties entered into a consent protective order governing discovery in this case and a
related case [D.E. 44]. On March 10, 2021, the parties agreed to allow Vamsi to amend his “
complaint and Justh to counterclaim, adding additional defendants [D.E. 55]. On March 10, 2021,
Vamsi and IGM Surfaces, LLC (collectively “plaintiffs”), filed an amended complaint [D.E. 56].
On March 31, 2021, Justh and Hari Hara Prasad Nallapaty (“Prasad”) (collectively “defendants” and
“counterplaintiffs”) answered the amended complaint and alleged three counterclaims against —
Vamsi, Rohit Gangwal, Vinay Bharadwaj, Cosmos Granite Dallas, LLC, Cosmos Granite Charlotte,
LLC, and Cosmos Granite Charleston, LLC (collectively “counterdefendants”) [D.E. 58]. On May
12, 2021, plaintiffs moved to strike defendants’ first affirmative defense and counterdefendants
moved to dismiss the counterclaims for failure to state aclaim [D.E. 69]. The court also received
documents in support of the motions [D.E. 70]. On June 2, 2021, Prasad and Justh responded in
opposition [D.E. 71]. On June 16, 2021, plaintiffs and counterdefendants replied [D.E. 72].
On October 28, 2021, Prasad and Justh moved for a protective order to bar plaintiffs from
accessing certain financial documents [D.E. 77] and filed a memorandum in support and exhibits
[D.E. 78] and proposed sealed documents [D.E. 79, 80, 81, 82]. Prasad and Justh also filed a motion
to seal [D.E. 83] and a memorandum in support [D.E. 84]. On November 12, 2021, Vasmi and IGM □
Surfaces, LLC, responded opposing the protective order [D.E. 85]. As explained below, the court
denies plaintiffs’ motion to strike, denies counterdefendants’ motion to dismiss, denies defendants’
motion for a protective order, and grants defendants’ rion to seal.
L oe
A.
The court has reviewed plaintiffs’ motion to strike and counterdefendants’ motion to Hismisst
See, ¢.g., Fed. R. Civ. P. 12(6)(6); Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Bell Atl. Corp.
v. Twombly, 550 US. 544, 555-63, 570 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187,
"190 (4th Cir. 2010), aff'd, 566 U.S. 30 (2012); Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc.,
591 F.3d 250, 255 (4th Cir. 2009); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). The
court denies the motions as meritless. .
B. .
Prasad and Justh move for a protective order [D.E. 77]. On October 12, 2021, plaintiffs
served a subpoena on Unity National Bank of Houston (“Unity”) seeking documents concerning a
loan agreement between Unity and Justh in which Justh granted a security interest in the trademarks
at issue in this case. See Mot. Prot. Order [D.E. 77] 1; [D.E. 78] 3. On October 28, 2021, Prasad
and Justh moved for a protective order under Federal Rule of Civil Procedure 26(c) prohibiting
discovery of documents from Unity concerning defendants’ financial information. See Mot. Prot.
.
Order at 1; [D.E. 78] 2. Prasad and Justh have not moved to aussi the subpoena under Federal Rule
of Civil Procedure 45(d)(3)(B). See Mot. Prot. Order. Unity has not contested the subpoena, moved
to quash the subpoena, or expressed concern about its scope. See [D.E. 85] 2. Defendants argue that
as competitors in the stone industry, plaintiffs should not be able to obtain financial details about
defendants’ business and that the information sought is irrelevant. See [D.E. 78] 8-9. Prasad and
Justh ask the court to bar discovery of the loan agreement entirely or to limit the scope of discovery
to the Security Agreement, Intellectual Property Security Agreement, and Justh’s representations
about the ownership of the trademarks at issue. See Mot. Prot. Order at 1. On November 12, 2021,
_ plaintiffs responded in opposition. See [D.E. 85]. Plaintiffs argue that the information sought is
relevant to their damages, is within the scope of the consent protective order, and is the type of
discovery sought and obtained in the parties’ related case in this district. See [D.E. 85] 2, 4-9.
Plaintiffs also argue defendants lack standing to challenge the third-party subpoena. See id, at □□□□
Rule 45 of the Federal Rules of Civil Procedure permits a party to issue subpoenas for the
production of Acumen from nonparties. See Fed. R. Civ. P. 45(a)(1)(C). “Ordinarily, a party does
not have standing to challenge a subpoena issued to a nonparty unless the party claims some personal
right or privilege in the information sought by the subpoena.” United States v. Idema, 118 F. App’x
740, 744 (4th Cir. 2005) (per curiam) (unpublished); 9A CHARLES ALAN WRIGHT & ARTHUR R.
MILLER, FEDERAL PRACTICE AND PROCEDURE § 2459 (3d ed. 2021). A party, however, has standing
to ener a subpoena under Rule 26 even if it lacks standing to bring a motion to quash under
Rule 45. See Artis v. Murphy-Brown LLC, No. 7:14-CV-237-BR, 2018 WL 3352639, □□□□
(E.D.N.C. July 9, 2018) (unpublished); EEOC v. Bojangles’ Rests., Inc., No. 5:16-CV-654-BO, 2017
WL 2889493, at *4 (E.D.N.C. July.6, 2017) (unpublished); Brown v. Mountainview Cutters, LLC,
No. 7:15-CV-00204, 2016 WL 3045349, at *2 (W.D. Va. May 27,2016) (unpublished); Beach □□□□□
Inc. v. L&L Wings, Inc., No. 2:11-CV-00044-F, 2015 WL 13718077, at *1-2 (E.D.N.C. May 5,
2015) (unpublished); HDSherer LLC v. Nat. Molecular Testing Corp., 292 F.R.D. 305, 307-08
(D.S.C. 2013); Singletary v. Sterling Transp. Co., 289 F.R.D. 237, 240 n.2 (E.D. Va. 2012).
Therefore, the court addresses defendants’ motion.
Defendants seek a protective order under Rule 26. See Mot. Prot. Order at 1. Rule 26
provides for broad discovery. See Fed. R. Civ. P. 26(b)(1) (“Parties 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, considering 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. Information within this scope of discovery need not
be admissible in evidence to be discoverable.”). Courts have construed relevance broadly “to
encompass ‘any possibility that the information sought may be relevant to the claim or defense of
any party.’” EEOC v. Sheffield Fin, LLC, No. 1:06CV00889, 2007 WL 1726560, at *3 (M.D.N.C.
June 13,2007) (unpublished) (quoting Merrill v. Waffle House. Inc., 227 F.R.D. 467, 473 W .D. Tex.
2005)); cf. Herbert v. Lando, 441 U.S. 153, 177 (1979).
A district court has broad discretion in determining relevance during discovery and can
impose appropriate limitations on discovery. See Nicholas v. Wyndham Int’l, Inc., 373 F.3d 537,
543 (4th Cir. 2004); Watson v. Lowcountry Red Cross, 974 F.2d 482, 489 (4th Cir. 1992). Rule 26
provides that “[t]he court may, for good cause, issue an order to protect a party or person from
annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c)(1).
Such orders may prescribe, ae other measures, “forbidding the disclosure or discovery” or
“forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain
matters.” Fed. R. Civ. P. 26 (c)(1)(A), (c)(1)(D). “A party moving for a protective order has the
burden of making a particularized showing of why discovery should be denied, and conclusory or
generalized statements in the motion fail to meet this burden.” Artis, 2018 WL 3352639, at *2.
Defendants argue that “the requested documents simply have no relevance to . . . [any of the]
claims in this action.” [D.E. 78] 7. Plaintiffs respond that the documents sought relate to “trademark
value, the value of alleged infringements, and profits or other damages flowing from unfair
competition and other trademark misuse.” [D.E. 85] 2. Plaintiffs seek “damages, both compensatory
and exemplary (including trebled damages and punitive damages, as permitted by law), in amounts
to be determined at trial in connection with the illegal and improper acts of Defendants” in addition
to injunctive and declaratory relief. [D.E. 56] 18. If plaintiffs prove defendants violated the Lanham
Act’s provisions relating to unfair competition, as alleged, they “shall be entitled . . . to recover (1)
defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” 15
US.C. § 1117(a); see [D.E. 56] J] 60-64. Because the subpoenaed information concerns plaintiffs’
damages, the subpoenaed information is relevant to the valuation of the alleged damages. See Fed.
R. Civ. P. 26(b)(1).
Defendants also argue plaintiffs can obtain the information through the discovery process -
between the parties and that a third-party subpoena is unnecessary. See [D.E. 78] 9. Under Rule
26(b)(2)(C)(i), defendants can challenge discovery if it “is unreasonably cumulative or duplicative,
or can be obtained from some other source that is more convenient, less burdensome, or less
expensive.” Although defendants have standing to challenge the subpoena under Rule 26, they
cannot raise the rights of a third party in doing so. See 8A WRIGHT & MILLER, FEDERAL PRACTICE
AND PROCEDURE § 2035. It is not inconvenient, burdensome, or expensive to defendants for
plaintiffs to obtain the subpoenaed documents from Unity. Tellingly, Unity has not moved to quash
the subpoena or otherwise objected to the subpoena. See [D.E. 85] 2. Moreover, “bank records are
the business records of the bank, in which the party has no personal right.” United States v. Gordon,
247 F.R_D. 509, 510 (.D.N.C. 2007); see Idema, 118 F. App’x at 744.
Defendants also claim that the discovery request will “harm Justh’s banking relationship and
make Unity less willing to work with Justh in the future.” [D.E. 78] 7. Essentially, defendants argue
that plaintiffs getting the loan documents and communications from Unity will indirectly burden
defendants because of the possible harm to their ability to obtain credit. Even assuming that Rule
26 covers this speculative argument, Prasad and Justh have not plausibly alleged that allowing
plaintiffs to obtain these documents from Unity will be expensive or burdensome to Justh and
Prasad. As plaintiffs note, Unity has not objected to the subpoena and defendants have served
similar subpoenas on plaintiffs’ banks in the related case in this district. See [D.E. 85] 1; see, ¢.g.,
[D.E. 85-1, 85-2] (exhibits of bank subpoenas). Likewise, Prasad and Justh have not provided any
basis, beyond speculation, for their contention that the subpoena will harm their future banking
relationships. Therefore, the court denies defendants’ motion for a protective order.!
| Prasad and Justh also argue that the information sought is confidential business information
and claim that the parties are now competitors, “no longer share financial information,” and
“[nJeither party has access to the other’s financial documents, loan information, or business records.”
[D.E. 78] 2. The parties in this case are involved in numerous cases across the country litigating
various issues relating to the breakdown of their business relationship. On January 21, 2021, the
parties entered into a consent protective order to govern the protections for discovered documents
in this and the parties’ related case in this district. See [D.E. 44]. Although the parties are business
competitors in the granite and stone industry, they are also former business partners and are involved
in litigation across the country regarding their rights to their businesses and properties. In this action,
defendants stake the propriety of their trademarks on the allegation that the trademarks are the
subject of the ongoing winding up of a partnership. See [D.E..58] 1-2. In this action and related
cases, defendants claim they need accurate financial records from the plaintiffs to complete the
alleged winding up. See [D.E. 58] 26-28. Given these arguments and the ongoing litigation,
plaintiffs and defendants hardly maintain the kind of closely guarded confidentiality around their
C.
On October 28, 2021, defendants filed a motion to seal [D.E. 83]. After applying the
governing standard, the court grants defendants’ motion to seal.
I.
In sum, the court DENIES plaintiffs’ motion to strike and counterdefendants’ motion to
dismiss as meritless [D.E. 69], DENIES defendants’ motion for a protective order as meritless [D.E.
78], and GRANTS defendants’ motion to seal [D.E. 83].
SO ORDERED. This 28 day of January, 2022.
sts S C. DEVER III
United States District Judge
business finances that would be typical of competitors in the same industry. _