MMR Constructors, Inc. v. JB Group of LA, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

MMR CONSTRUCTORS, INC. CIVIL ACTION

VERSUS

JB GROUP OF LA, LLC, ET AL. NO. 22-00267-BAJ-RLB

RULING AND ORDER

Before the Court is Defendants’ Motion To Dissolve Preliminary

Injunction (Doc. 161) (the “Motion to Dissolve”) and Motion For Sanctions

(Doc. 185) (the “Motion for Sanctions”) (collectively, the “Motions’”). The

Court heard Oral Argument on the Motions, both of which are opposed, (Docs. 174,

188). For reasons provided below, Defendants’ Motion to Dissolve will be denied,

while the Motion for Sanctions will be granted in part and denied in part.

L BACKGROUND

The factual background for this matter has been provided in several preceding

Rulings and Orders. (See Docs. 7, 69, 145). In brief, this case involves Defendant JB

Group of LA, LLC d/b/a Infrastructure Solutions Group (“ISG”) hiring numerous

employees from Plaintiff MMR Constructors, Inc. (“MMR”), and those hired

employees bringing MMR’s confidential business information and/or trade secrets

with them. After the Court granted Plaintiffs request for a temporary restraining

order, (Doc. 7), and preliminarily held that the facts as alleged in Plaintiffs Verified

Complaint, (Doc. 1), supported a finding that the materials allegedly misappropriated

by Defendants were trade secrets under the Defend Trade Secrets Act (“(DTSA”) and

the Louisiana Uniform Trade Secrets Act (““LUTSA”), Defendants opted to forego a

preliminary injunction hearing and instead entered into the Stipulated Preliminary

Injunction. (Doc. 28).

The Stipulated Preliminary Injunction enjoined Defendants from:

(1) Disclosing, disseminating, or using MMR’s trade secrets and

confidential business information, including, but not limited to, all

such trade secrets and confidential business information that reside

on any electronic storage device, cloud-based file repository or file-

sharing account, and/or email account used by Mr. Heroman, or any

other former MMR employee that now works for ISG, during their

employment with MMR or in their possession, custody, or control

during his employment with MMR or in his possession, custody, or

control;

(2) Accessing, studying, copying, or taking notes about MMR’s trade

secrets and confidential business information, including, but not

limited to, all such trade secrets and confidential business information

that reside on any electronic storage device, cloud-based file repository

or file-sharing account, and/or email account used by Mr. Heroman, or

any other former MMR employee that now works for ISG, during their

employment with MMR or in their possession, custody, or control;

(3) Destroying, altering, erasing, secreting, or failing to preserve any and

all of MMR’s trade secrets, business materials, property, proprietary

information, confidential information, and/or any and all record or

documents that may be relevant to this lawsuit; wherever located, and

in whatever form, including but not limited to any document, email,

report, software, files, electronic data, tangible evidence, financial

records, and any and all communications between Mr. Heroman and

any employee, member, investor, or consultant of ISG and its parent

companies, subsidiaries and affiliates;

(4) Failing to return and/or to allow the remediation of (in accordance with

the forensic protocol) the documents and information identified in the

Verified Complaint, and any other documents or information identified

through the forensic protocol, that contain MMR’s trade secrets and

confidential business information.

(Doc. 23). Roughly two years after the parties entered into the Stipulated Preliminary

Injunction, the Court discovered that Defendants had failed to abide by the terms of

the Stipulated Preliminary Injunction in a significant and material way, and

Defendants were held in contempt. (Doc. 145). The Court concluded in its Contempt

Order that the complex nature and usage of the allegedly misappropriated trade

secrets necessitated the appointment of a special master to monitor Defendants’

compliance. Ud.). The Court appointed a special master to oversee a remediation

protocol, whereby all of MMR’s confidential business information was to be located

and deleted from ISG’s servers. (Doc. 147). The remediation protocol and special

master appointment were done at Defendants’ expense, given that both were only

necessary because Defendants had failed to abide by the Stipulated Preliminary

Injunction for an extended period of time. (Doc. 145).

However, the remediation protocol and the special master’s fees are not

insignificant, and Defendants now request that the Court revisit the bases for the

Stipulated Preliminary Injunction so as to avoid payment of those fees. (Doc. 161-1

at p. 2). ISGis a relatively new company, and ISG’s counsel has represented that the

special master fees are damaging to the company’s ability to stay financially afloat.!

For their Motion To Dissolve, Defendants principally take aim with the

conclusion that MMR’s pricing information found in their estimating tools, which are

the “greensheets,” “overhead sheets” or “top sheets,” and “database,” and the form of

the estimating tools themselves, are trade secrets. In support of the effort to relitigate

the Stipulated Preliminary Injunction, Defendants have procured the depositions of

four new witnesses, who are and who testified in relevant part as follows.

1 This fairness argument falls on somewhat deaf ears. It was Defendants’ continued and

entirely avoidable violations of the Stipulated Preliminary Injunction, which Defendants

themselves agreed to, that necessitated the appointment of a special master.

a. Russell Gaudin

Russell Gaudin is a former MMR employee who has worked in the electrical

and instrumentation (“E&I”) industry for twenty-nine years. (Doc. 161-5 at p. 3). In

his career, Gaudin has also worked for Merit, ISC, and Excel, each of which are

competitors of MMR. (Ud. at pp. 3-4). While at MMR from 2016 to 2019, Gaudin

strictly worked as a project coordinator in business development. (/d. at pp. 4, 8). He

never had access to Plaintiffs estimating database, which he believed to contain

“historical data” that was refined over time according to the success or failure of any

particular job, or any other estimating software used by Plaintiff. Ud. at pp. 20, 31-

34, 41). Gaudin was not involved with the creation of any of Plaintiffs estimate bids.

Ud. at p. 8). Gaudin also did not have access to Plaintiffs project controls software,

its timekeeping database, or its job analysis program. (/d. at p. 41). Asked whether

he left MMR on his own terms or whether he was fired, Gaudin stated: “I don’t know.

That’s a debate. I don’t think there’s still an answer on that.” (Doc. 161-5 at p. 9).

Relatedly, Gaudin acknowledged that the way in which he left MMR made him

“pissed.” Ud. at p. 43). Gaudin currently possesses an informal business relationship

with ISG, and anticipates being paid for the work he is presently doing for the

company. (/d. at p. 46).

Gaudin further testified that various competitors in the E&I space, including

MMR, use similar or the same software/programs. (Id. at p. 5). Specifically, several

different E&I companies use Viewpoint in their business.? Gaudin also opined that

companies in the E&I space use “regular publication stuff like the NECA Book that

is for labor rates, and the phase coding system that comes from the master numerical

system for construction” to start an estimate, and then take these values and “kind

of massage[] it to fit them.”8 (/d.). This “massaging” is critical, and Gaudin testified

that, in his experience, “less than five percent” of change orders to bid estimates are

made according to NECA values alone. Ud. at pp. 18, 39). Gaudin believed that

adjustments to the change orders for bid estimates are also based on institutional

knowledge acquired from relevant employees in the E&I space, along with a variety

of pricing elements that will necessarily be somewhat job dependent. (Id. at pp. 13-

14 Gob-specific pricing elements include the weather for the contemplated job, the

location of the job site, etc.)).

Gaudin was directly questioned by counsel as to whether the estimating tools

were proprietary. He believed that the form of the estimating tools at Excel, Merit,

and ISC were not proprietary. Ud. at p. 16). Gaudin was then shown a stripped-down

version of an estimating tool in use at ISG, which was allegedly misappropriated from

Plaintiff. Ud. at p. 17). He commented that the estimating tool shown, which was

ISG’s equivalent to Plaintiffs greensheets, termed its “labor and material sheets,”

was dissimilar to the estimating tools he had seen at other E&I companies and had

2 Viewpoint is a third-party platform that offers construction management project tools to its

consumers. (Docs. 161-4 at p. 11, 161-5 at p. 5).

3 NECA refers to the National Electrical Contractors Association, which publishes materials

containing recommended pricing values for certain E&I work. (Doc. 161-5 at p. 5).

“a lot more stuff on it.” Ud. at p. 18). However, Gaudin was also able to say that

certain tabs within the labor and material sheet were similar to others that he has

seen before. (Id. at pp. 18-19). Gaudin opined that, based on what he was shown by

ISG, the form of the labor and material sheets were not proprietary, “[b]ecause it’s

the data that goes into it is what matters.” ([d. at pp. 19-20). To that point, Gaudin

stated that he “assume[d]” that the certain pricing units populating the estimating

tools were proprietary, and that the pricing units were continuously refined to provide

a competitive advantage for subsequent bid estimates. (/d. at p. 30). Gaudin further

believed that this process of refinement leads to the value of a particular estimating

tool that has not been updated to decrease over time. (/d. at p. 20). Despite this,

Gaudin stated that the estimating tool would be a valuable tool for a competing

company to “bump against,” or to check their pricing values against the competition

and revise where necessary. (/d. at p. 36). Gaudin further testified that the database

values contained in the estimating tools would be valuable to a newly formed

company. (/d. at p. 37).

Gaudin testified similarly as to overhead and top sheets, and opined that the

values contained therein would be proprietary for the duration of the job to which the

sheet corresponds to. Ud. at pp. 24-26). Gaudin offered these same opinions for the

job analysis programs he saw at Excel, Merit, and ISC, and for each proposal log he

saw at his various places of employment. (Id. at p. 27).

b. Rob Mason

Rob Mason worked at MMR from 2011 to 2016, and from 2022 to 2023. (Doc..

161-4 at pp. 6-7). Mason was fired from MMR in 2023, and admitted to carrying a

grudge against the company’s “senior leadership on the east coast.” (Id. at pp. 7-8).

After Mason was fired from MMR, he was hired by Merit, and fired again after two

weeks. (Doc. 161-6 at p. 7). Tracy Hollier, the president of Merit, opined that she did

not believe Mason to be a reliable worker whatsoever. (/d.).

While at MMR, Mason worked in project management. (Doc. 161-4 at p. 5).

From 2011 to 2016, Mason was responsible for several projects in South Carolina. (Id.

at p. 6). This responsibility involved creating change orders for existing bid estimates.

Ud.). Mason was not involved with the compiling of MMR’s database, or with

generating initial bid estimates. (/d. at pp. 7, 12). Mason did not know whether MMR

used NECA rates in their database to generate estimates, and has “no idea how

[MMR] built [its] database,” but opined that a lot of E&I companies use NECA rates

in some form. (/d. at pp. 12, 20, 44). Mason testified that at least some of the pricing

data in MMR’s database is “based on their company experience.” (Id. at p. 16).

However, this or other pricing data in MMR’s database would be subject to semi-

continuous refinement, and Mason believes that changes in material pricing or

varying environmental factors would lead to a certain snapshot of the database in a

particular greensheet to have minimal continuing value. (/d. at pp. 14-15).

When questioned as to whether the greensheet template in use at MMR was

proprietary, Mason testified that he believed it was not. (Id. at pp. 17, 19). Regarding

the data in the greensheets, Mason stated that certain pricing data, like labor unit

rates, would be proprietary if it were based on company experience. (Id. at p. 17).

However, Mason further testified that that any proprietary pricing information would

grow outdated and would lose value over the years. (/d. at pp. 30-31). To combat this,

an employee of Plaintiff would routinely go in and update the company’s database,

especially if a particular job went poorly. (/d. at pp. 18-19).

According to Mason, access to Plaintiffs database could have helped ISG bid

on jobs that were highly similar to the jobs that Plaintiff actually bid on, whether this

bid occurred one month or ten months later. Ud. at p. 20). Mason did not know

whether the data in an overhead or top sheet would be proprietary. (/d. at p. 31).

Mason offered additional opinions for the project control tools in use at MMR.

He testified that, based on alleged statements from unidentified third parties, the

timekeeper application in use at MMR was derivative of a project management

program he built in his original stint with the company. (Id. at p. 25).

Finally, as to the security measures in place at MMR, Mason testified that he

took a laptop from the company in 2016 and was not asked to return it. (Id. at p. 33).

In his second term with MMR, he was not permitted access to any project control

programs. (/d. at p. 55).

c. Billy Hoover

Billy Hoover worked for MMR from 2011 to 2019 as a Senior Project Estimator.

(Doc. 161-3 at p. 2). Hoover continued to serve in this role when he joined Merit. (Id.).

He testified that, in his opinion, greensheets would not be considered confidential or

proprietary after the corresponding project is “bidded out.” (/d. at p. 3). Like the other

deponents, Hoover stated that job-specific pricing elements would alter the value of

a greensheet that was created for a different job. Ud. at pp. 6-8). Hoover also opined

that MMR’s database from 2019 would “[n]Jot really” have any value to him at Merit

in 2022, because he “kn[ew] what rates should be based on [his] experience” and that

“rates across the board don’t change a whole lot.” (/d. at p. 8). However, in Hoover’s

experience, Plaintiff never shared its greensheets or overhead sheets with clients. Ud.

at p. 10).

Hoover also testified that he was “[s]omewhat” familiar with NECA, but he

was unaware that NECA did not publish certain labor instrumentation rates. (Id. at

p. 15). Those rates were apparently present in MMR’s database, and Hoover

understood those values to have been developed by MMR employee experience. □□□□

at p. 16). Hoover did not know how MMR built its database, yet thought that it was

developed by the company over time. Ud. at pp. 5, 14). Part of this development

apparently included the introduction of special material prices from certain vendors,

for which estimators would not adjust or alter. 7d. at p. 16). Other material pricing

and equipment rental pricing was done on a per-job basis by soliciting bids. Ud. at

pp. 5-6). Also, contradicting the testimony of some of the other deponents, Hoover did

not believe that the labor unit rates in MMR’s database would grow “stale” and lose

value over time. (/d. at p. 9).

Hoover expressed familiarity with MMR’s overhead sheets. (/d. at p. 19). While

he did not believe the form to be confidential to Plaintiff, he did believe that the values

populating the sheets, like the amount of profit, overhead, cost of insurance, worker’s

compensation, or vehicle costs, would be confidential to the company. (Id. at p. 19).

Upon leaving MMR in 2019, Hoover testified that he did not conduct an exit

interview with the company, and was not asked to return any of the company’s files.

(id. at pp. 10-11).

d. Tracy Hollier

Tracy Holler is the President of Merit, a competitor of MMR and ISG. (Doc.

161-6 at p. 2). Merit is currently contemplating entering a contractual relationship

with ISG. Ud. at pp. 10-11). She worked in the construction business for thirty years,

primarily as an estimator. (/d. at p. 8).

Hollier testified that, in her opinion, greensheets are confidential and

proprietary only while the corresponding bidding process is open. (/d. at pp. 38-4). She

testified that her business would not be harmed if Merit’s greensheets were released

from previous projects. (Id. at p. 9). However, Hollier also testified that her company

uses an off-the-shelf estimating software called Accubid for their bid estimates, and

does not use or maintain any modified database that materially differs from NECA

values. Ud. at pp. 8, 15). Like other deponents, Hollier stated that the pricing values

that comprise their database changes significantly over time, and that pricing will be

job-dependent in some respects. (/d. at p. 5). Hollier followed this testimony by stating

that if MMR possessed Merit’s database from previous years, the possession of this

database would have no value because of those pricing changes. (/d. at p. 6).

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Regarding the overhead or top sheets, Hollier offered a markedly different

opinion. She stated that overhead sheets were confidential and proprietary, because

they “disclose[] [her] competitiveness” because it has Merit’s “internal burdens,” i.e.

medical costs, insurance costs, and other overhead components like employee costs

and strategy. Ud. at p. 4). This information would still be beneficial to Merit’s

competitors at least a year afterwards. (/d.). Hollier also testified that the data within

the job analysis program at Merit is proprietary for “[e]very reason in the book,”

because it “is the basis for the execution of the project from a financial perspective.”

Ud. at p. 16).

Hollier never worked for MMR, and had no knowledge about MMR’s database

or estimating programs. (/d. at pp. 10, 12).

e. Kasey Kraft

Against the depositions outlined above, Plaintiff offered the sworn and

transcribed interview of Kasey Kraft. (Doc. 174-1). Kraft was the head of the

estimating team at ISG at the time of his interview, and had been recruited from

MMR. (ld. at pp. 36-37). Prior to leaving MMR for ISG, Kraft was caught downloading

numerous MMR files to take with him. (Doc. 1). He is a named Defendant in this suit.

Before the four witnesses above were deposed, Plaintiff requested to schedule

Kraft’s deposition. (Doc. 188-1). Defendants declined, and said that they would not

allow Plaintiff to depose any of their employees prior to Plaintiff producing certain

discovery materials and witnesses. U/d.). Kraft’s personal attorney then reached out

to Plaintiff independently to discuss the possibility of a settlement. (Doc. 188-2).

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Kraft and Plaintiff reached a settlement agreement (the “Settlement

Agreement”) on June 24, 2024. (Doc. 197). Plaintiff would drop Kraft from the suit if

he would give a transcribed confidential pre-deposition interview, followed by a

deposition. (/d.). The Settlement Agreement stated that Kraft would not disclose any

confidential information from his employment at ISG. (/d.). Additionally, the terms

of the Settlement Agreement were to be kept confidential, although Kraft could

inform other Defendants that the agreement required him to tell the truth in his

interview/deposition. (/d.). Kraft was also permitted to disclose to Defendants that he

had entered into a Settlement Agreement with Plaintiff. (/d.). No monetary payment

was attached to the Settlement Agreement. (/d.). Plaintiff and Kraft did not disclose

the transcribed interview, which was attended and documented by a court reporter,

to Defendants prior to the filing of their Motion to Dissolve.

The interview went forward on June 26, 2024. (Doc. 174-1). Kraft was

represented by his attorney at the interview. (/d.). In relevant respects, the interview

transcript reads like a deposition, although no counsel ever objected to any line of

questioning. (See id.). Therein, Kraft testified in MMR’s favor in all respects. Kraft

averred that MMR’s materials were valuable, were confidential and proprietary, were

taken, were not substantively changed, and continued to be used (because of their

value) until the Court issued its Contempt Order. (/d. at pp. 9, 11, 27, 31-32).

Kraft also answered questions concerning ISG’s business on several occasions.

(See, e.g., td. at pp. 5, 7). ISG’s counsel argue that some materials protected by

attorney-client privilege was disclosed, and that other confidential ISG information

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was disclosed by Kraft in violation of his confidentiality agreement with the company.

The day after Kraft conducted this transcribed interview, he allegedly told other

Defendants that he had settled with MMR and had spoken with MMR’s attorneys.

(Doc. 188 at p. 7).

The Court will not consider the transcribed interview of Kraft, for reasons

given in Section III(b) of this Ruling and Order.

II. LEGAL STANDARD

The parties dispute the standard by which to review a request to dissolve a

preliminary injunction. Defendants maintain that the standard for dissolving a

preliminary injunction is found in Federal Rule of Civil Procedure 54(b), and that a

preliminary injunction can be dissolved for “any reason” that the Court deems

sufficient. (Doc. 161-1 (citing Providence Title Co. v. Truly Title, Inc., 2021 WL

5008278 at *2-3 (E.D. Tex. Oct. 28, 2021))).

Plaintiff responds that motions to dissolve stipulated preliminary injunctions

are governed by Federal Rule of Civil Procedure 60(b), and that Defendants need to

show “a significant change either in factual circumstances or in law render[ing]

continued enforcement detrimental to the public interest.” See Total Safety v. Knox,

No. 19-2718, 2019 U.S. Dist. LEXIS 219082, at *3-5 (S.D. Tex. Dec. 18, 2019)

(emphasis in original). In Rule 60(b) motions: “[i]t is insufficient to show that the

enjoined party would be “better off” if the injunction is lifted. The enjoined party must

show “hardship so extreme and unexpected as to justify us in saying that they are the

victims of oppression.” U.S. v. Swift & Co., 286 U.S. 106, 119 (1982); see

13

also Valentine Sugars, Inc. v. Sudan, 34 F.3d 320, 322 (5th Cir. 1994) (changes in

business conditions from additional licensing not “new and unforeseen”); Sec. & Exch.

Comm'n v. Bryant, No. 4:17-CV-00336, 2017 WL 4407953, at *2 (E.D. Tex. Oct. 4,

2017). A Rule 60(b) motion is “generally not favored and is properly granted only

upon a showing of exceptional circumstances.” Marrero Pichardo v. Ashcroft, 374 F.3d

46, 55 (2d Cir. 2004). “The burden of proof is on the party seeking relief from

judgment.” Jd. at 55.

The weight of authority lies with Plaintiff. Courts, including some of those cited

to in Defendants’ Motion to Dissolve, generally require a significant change in factual

circumstances to modify a stipulated or consent preliminary injunction. See, e.g.,

Sulzer Mixpac AG v. DXM Co., No. 19 CIV. 9404 (LAP), 2022 WL 42803848, at *6

(S.D.N.Y. Sept. 15, 2022); Fed. Trade Commn v. Kutzner, No.

SACV1600999BROAFMX, 2017 WL 5229182, at *4 (C.D. Cal. June 12, 2017), aff'd

sub nom. Fed. Trade Comm'n v. Marshall, 781 F. App’x 599 (9th Cir. 2019); Bryant,

2017 WL 4407958, at *2; ICEE Distributors, Inc. v. J&J Snack Foods Corp., 445 F.3d

841, 850 (5th Cir. 2006) (“Modification of an injunction is appropriate when the legal

or factual circumstances justifying the injunction have changed,” and, absent this

change, modification to an injunction is inappropriate). The Court will therefore

require Defendants to show a significant change in factual circumstances to consider

dissolving the Stipulated Preliminary Injunction.4

4 One practical implication of applying this standard is that the Court will not consider

Defendant Jason Yates’s statement that he had Plaintiffs consent to use its estimating tools

at ISG, since these factual circumstances allegedly existed prior to Yates, the president of

ISG, and other Defendants forgoing the preliminary injunction hearing and entering into the

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Some courts have commented that this standard applies because stipulated

preliminary injunctions are essentially consent decrees. See, e.g., Valpak Direct Mktg.

Sys., Inc. v. Hyde, No. 8:06-CV-347-T-26EAJ, 2006 WL 1982877, at *2 (M.D. Fla. July

13, 2006); Chase v. Town of Ocean City, Md., No. CIV.A. ELH-11-1771, 2015 WL

4993583, at *5 (D. Md. Aug. 19, 2015); Fed. Trade Comm’n v. Enforma Nat. Prods.,

Inc., 362 F.3d 1204, 1218 (9th Cir. 2004) (discussing the issue at length and equating

a consent decree to a stipulated preliminary injunction, “which is essentially a

proposed injunction that reflects a temporary settlement”); Columbia River Advisors,

LLC vu. MKT & Assocs., LLC, No. 3:24-CV-05696-LK, 2024 WL 4188968, at *2 (W.D.

Wash. Sept. 18, 2024) (collecting cases).

II. ANALYSIS

a. Motion To Dissolve

Defendants move to dissolve the Stipulated Preliminary Injunction because in

their view and, as explained above, the depositions of Hoover, Gaudin, Mason, and

Holler have given new bases for the Court to conclude that the allegedly

misappropriated materials are not trade secrets because: “(1) they are generally

known to the relevant public or readily ascertainable through proper means; (2) [they]

have no independent economic value; and (3) MMR did not take reasonable steps to

protect them.” (Doc. 161-1 at p. 15). The Court addresses each argument in the

Stipulated Preliminary Injunction. However, the Court notes that even if the Rule 54(b)

standard did apply, Yates’s declaration that ISG had permission to use MMR’s materials, in

contradiction to the sworn allegations contained in the verified Complaint and provided

approximately two years after the fact, would hold little to no weight with the Court.

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following.

i. Generally Known to the Relevant Public or Readily

Ascertainable through Proper Means

Defendants argue that the forms and formats of Plaintiffs estimating tools are

not proprietary according to the new depositions. ([d.). Plaintiff appears to waive this

issue for present purposes. (Doc. 175 at p. 30).

Despite this, the Court finds that Defendants have not presented significant

new facts that merit revisiting the bases for the Stipulated Preliminary Injunction as

regarding the estimating tools. That is because regardless of the proprietary status

of the forms of the estimating tools, all witnesses agree that those forms pull from

Plaintiffs database in some way—and no witness presented by Defendant had any

knowledge as to how this database was developed and/or what the database is

composed of. (See Docs. 161-3, 161-4, 161-5, 161-6). Moving past this lack of personal

knowledge, the speculation offered by Hoover, Mason, and Gaudin of the values in

Plaintiffs database were conflicted. Each assumed that the values in the database

were 1n some way derivative of NECA values, but Hoover, Mason, and Gaudin each

also believed that the database was based on Plaintiffs historical data and process of

refinement. (Docs. 161-3 at p. 14, 161-4 at p. 16, 161-5 at p. 20). Furthermore, Hoover,

the only deponent who worked in estimating at MMR, testified that certain values in

the database were not offered by NECA or were based on MMR’s business

relationship with certain vendors, and that the special pricing resulting from these

relationships was proprietary and confidential. (Doc. 161-3 at pp. 8, 16). Additionally,

no argument was offered that the data populating MMR’s overhead sheets was

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publicly available or readily ascertainable.

As to the project control tools, Defendants argue that Plaintiffs materials are

generally available because they are created using a third-party software called

Viewpoint. (Doc. 161-1 at p. 11). Against this, Plaintiff notes that Ben Huffman, ISG’s

then head of project controls, testified that the project controls databases, such as the

job analysis program, the timekeeper application, and the “Bible,” which is a proposal

tracking software, that he built for ISG were based on MMR templates were

proprietary, were not solely built in Viewpoint, were custom-built, and could not be

found outside of MMR. (Docs. 119-7 at pp. 25, 31, 36, 119-8 at pp. 31, 39-40). The

Court finds Huffman’s testimony to be persuasive, as he has the most personal

knowledge of project control systems of any of the offered witnesses.

Defendants respond to this testimony by raising the same arguments put forth

in their opposition to Plaintiffs motion for contempt, and argue that none of the

project control systems built by Huffman are presently in use at ISG. (Doc. 161-1 at

p. 11). For the same reasons offered in the Court’s Contempt Order, (Doc. 145 at p.

13), these arguments are ineffective. The Court therefore concludes that Defendants

have not presented significant new facts showing that Plaintiffs project control

systems were generally known or readily ascertainable through proper means.

Defendants next take aim at the confidential status of the customer list that

Defendant David Heroman allegedly took from Plaintiff. (Doc. 161-1 at p. 9-10).

Defendants argue that this list is not confidential or proprietary, despite it clearly

being defined as such in the confidentiality agreement Plaintiff requires each

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employee to sign, (see Doc. 1-4 at p. 1), and despite Plaintiff averring that its customer

list is not publicly available or ascertainable in its original Verified Complaint, (Doc.

1 at p. 17). Defendants argue that because Plaintiff advertises its completed projects

on its websites, and because Hollier testified that she generally did not believe

customer lists to be proprietary, (Doc. 161-6 at p. 16), the customer list was generally

known or readily ascertainable through proper means. The new facts offered by

Defendants do not convince the Court that the Stipulated Preliminary Injunction

should be revisited as respecting Plaintiffs customer list, since Defendants have

offered no new facts showing that a list of Plaintiffs current or contemplated

customers, as opposed to those whose project has been completed, is generally known

to the relevant public or was readily ascertainable through proper means.

However, the plain language of neither Stipulated Preliminary Injunction nor

Plaintiffs form confidentiality agreement purport to apply to the personal business

contacts of employees departing from the company. (See Docs. 1-4, 23). This reading

of Plaintiffs confidentiality agreement is buoyed by the testimonies of Gaudin,

Mason, and Hoover, who each stated that Plaintiff did not request that they keep no

personal business contacts from their time with the company before the filing of

Plaintiffs Verified Complaint, and that such action was, to their knowledge, entirely

permissible and expected. (Docs. 161-3 at p. 11, 161-4 at pp. 31-32, 161-5 at p. 26).

The difference between personal business contacts and a confidential customer list is

in the existence of a relationship between the employee and the listed customer or

contact. See, e.g., Weighing & Control Servs., Inc. v. Williams, No. CIV.A. 88-5211,

18

1989 WL 6011, at *2 (H.D. La. Jan. 24, 1989) (“Louisiana courts have consistently

declined to issue an injunction [under LUTSA] against a former employee’s

solicitation of customers when the former employee relied on his memory and did not

have a list.”); L & B Transp., LLC v. Busby, No. CIV A 06-310FJPSCR, 2008 WL

4845108, at *5 (M.D. La. Feb. 12, 2008) (employee’s confidentiality agreement with

former employer was not breached when he did not take a customer list, and solicited

former employer’s customers from personal memory); Ozburn-Hessey Logistics, LLC

v. 721 Logistics, LLC, 40 F. Supp. 3d 487, 452 (E.D. Pa. 2014) (under Pennsylvania

law, customer lists can qualify for trade-secret protection, but “[a]Jn employee’s

personal business contacts, although made while in plaintiffs employ, are not

plaintiffs trade secrets.”); cf. Pure Air Daigle, LLC v. Stagg, No. 6:16-CV-01822, 2017

WL 4158851, at *8 (W.D. La. Sept. 15, 2017) (copying confidential customer lists can

be a breach of fiduciary duty under Louisiana law, but it is not a breach for “former

employees to solicit the clients of their former employers as long as they do so based

on their memory, experience, or personal contacts.”).

Plaintiff averred that Heroman took a confidential customer list, and

Defendants passed on the opportunity to combat this allegation in a preliminary

injunction hearing. Absent any significant new factual allegations, which were not

available to Defendants prior to the decision to enter the Stipulated Preliminary

Injunction, that this was not, in fact, what Heroman took from Plaintiff, the Court

has no reason to dissolve the Stipulated Preliminary Injunction on this ground. That

being said, both parties are instructed that the Stipulated Preliminary Injunction

19

does not apply to the personal business contacts of former MMR employees.

ii. Independent Economic Value

Defendants next argue that the testimonies of Gaudin, Mason, Hoover, and

Hollier establish that the estimating tools allegedly taken from Plaintiff have no

independent economic value because the data within the tools is three to four years

old, because there are certain pricing factors that are job-specific, and because any

estimate arising from these tools is revised by estimators in their usual course of

business. (Doc. 161-1 at pp. 17-19).

In making these arguments Defendants conflate the witnesses testimony as

between overhead sheets and greensheets. (See id. at p. 8 (“each of the deponents

testified uniformly. . . the figures in the overhead top/green sheets have no value for

subsequent bids or jobs.”)). The witnesses were anything but uniform on the value of

an overhead sheet after a bid is closed out. (See Doc. 161-6 at p. 4 (disclosure of an

overhead sheet would, in Hollier’s opinion, disclose her competitiveness and would

benefit Merit’s competitors up to at least a year after the overhead sheet was

prepared)). Even assuming arguendo that Hoover, Mason, and Gaudin were in

agreement with Hollier as to the value of the overhead sheets, which they were not,

(compare Doc. 161-5 at pp. 24-26 with 161-3 at p. 19), the Court finds, after reviewing

the transcripts, that the weight of Hoover, Mason, Gaudin, and Hollier’s testimonies

favor Plaintiff's case as to the value of the overhead sheets.

5 The Court takes up Defendants’ argument about Plaintiffs supposed failure to satisfy the

test set forth in Guy Carpenter & Co. v. Provenzale, 334 F.3d 459, 467 (5th Cir. 2008), for

their customer list in Section ITI(a)(iii) below.

20

Regarding the greensheets, the testimonies of Hoover, Gaudin, Mason, and

Hollier were more aligned. Each testified that certain pricing elements were

inherently subject to change based on global economic factors, along with job specific

facts, and that it is common in the E&I industry to change any bid estimate before

submission to the potential customer according to the assigned estimator’s

experience. Despite this, the Court finds that Defendants have failed to present new

facts sufficient for the Court to consider dissolving the Stipulated Preliminary

Injunction.

That is because, even accepting all of the above, the testimonies of Defendants’

witnesses revealed that Plaintiff's database, which is accessible through prior

greensheets, (1) contained confidential business information that would not be

subject to continual change, (see Doc. 161-3 at p. 16 (testifying to Plaintiffs special

vendor pricing)), (2) was built using historical data that was refined over time

according to Plaintiffs successes and failures, and contained pricing data that

potentially would not be subject to change, (see id. at p. 9 (discussing labor unit

rates)),° (3) had pricing data for certain material instrumentation that was not

publicly available, (see id. at pp. 15-16 (stating that Plaintiffs database had pricing

information for material instrumentation that was not available through NECA)),

6 Defendants respond to this testimony by noting that even if labor unit rates are temporally

stable, they are likely not stable across jobs. However, this response does not adequately

address the competitive advantage that Defendants allegedly gained, because on an

individual level each of the labor unit rates in a certain greensheet has potential value, and

because, in the aggregate, Defendants could locate, from the thousands of files allegedly

taken from Plaintiff, which include Plaintiffs estimating tools and bids for two entire years,

a submitted bid that is similar to the sought-after contract. (Doc. 58 at p. 3).

ZL

and (4) were still the basis, even if altered later in the process, for any submitted bid

estimate.

Additionally, the testimonies of Defendants’ witnesses were conflicting in some _

respects, (compare Doc. 161-5 at pp. 36-37 with Doc. 161-6 at p. 6; compare Doc. 161-

3 at p. 9 with Doc. 161-6 at p. 5), and the persuasiveness of the statements were

undercut by the respective deponent’s lack of relevant knowledge of Plaintiffs pricing

database, which is the actual item at issue. For example, Hollier testified that Merit

would not be harmed if someone took her company’s greensheet for a completed bid

to Plaintiff. However, Merit does not possess a custom database like Plaintiff, which

is why when she was questioned as to how one could acquire Merit’s database she

responded, “[c]all Accubid and get it.” (Doc. 161-6 at p. 8). As to Plaintiffs database,

Hollier had never worked for the company, and could not opine as to what the

database comprises. (/d. at p. 10).

Accordingly, the Court concludes that Defendants have not presented

significant new facts that warrant dissolution of the Stipulated Preliminary

Injunction as to the value of Plaintiffs estimating tools.”

Defendants later in their Motion to Dissolve repurpose the arguments

addressed above against the existence of irreparable harm. The Court dispatches this

repurposed argument with the analysis provided above.

7 As a general matter, the Court notes that the broad argument offered by Defendants that

so much time has passed between the facts alleged in the operative Complaint, (Doc. 53), and

now that the allegedly misappropriated materials have no value is weakened by Defendants’

admissions in the contempt proceedings that ISG used Plaintiffs materials well into 2024.

22

Defendants did not offer any argument as to the independent economic value

of the project control systems or customer lists, and so the Court does not address

those items here.

iii. Reasonable Steps

Finally, Defendants take up the sword once more to contest the adequacy of

Plaintiffs efforts to protect its disputed materials. The bases for this challenge are

that Hoover, Gaudin, and Mason testified that Plaintiff: (1) did not password protect

individual files, (2) did not instruct its employees on how to cooperate with its

confidentiality agreement, (8) did not conduct exit interviews or request the return of

its materials, and (4) allowed Mason to keep his company laptop in 2016. (Doc. 161-1

at pp. 21-24).

The Court again concludes that the offered depositions do not warrant

revisitation of the Stipulated Preliminary Injunction as to Plaintiffs security

measures. Hoover, Gaudin, and Mason did not offer testimony challenging Plaintiffs

assertion, made in its Verified Complaint, that it password protected its network,

which was one of the alleged facts relied upon by the Court in its ruling on Plaintiffs

TRO motion. (See Docs. 1 at p. 7, 7 at p. 9). Further, while Hoover, Gaudin, and Mason

testified that Plaintiff did not password protect individual files, this testimony is

undercut by the additional testimony from Mason and Gaudin, both of whom did not

work in estimating with Plaintiff, that the company restricted them from accessing

certain estimating tools or project control systems. (Docs. 161-4 at p. 32 (Mason

restricted from accessing certain files in 2023), 161-5 at p. 161-5 at pp. 20, 41 (Gaudin

23

restricted from accessing certain files, including estimating materials, in 2019)).

As to Plaintiffs efforts to instruct its employees on the terms and requirements

of the confidentiality agreement, the Court is similarly unpersuaded by Defendants’

arguments. The Court assumes that each signatory to the confidentiality agreement

has read its terms, Tetlow v. Loyola Univ. of New Orleans, 483 So. 2d 1242, 1244 (La.

Ct. App.) “One who signs a contract is presumed to know its terms”), writ denied,

488 So. 2d 689 (La. 1986), and the confidentiality agreement, which Plaintiff allegedly

required every employee to sign, (Doc. 1 at p. 6), plainly identifies the material that

Plaintiff considers to be confidential and a trade secret:

During and after the term of his employment, the EMPLOYEE agrees

to hold as confidential all knowledge and information he has acquired in

connection with his/her employment with MMR, and which is not

otherwise generally available to the public or third parties, including

but not limited to customer lists, financial information, pricing

information, marketing material, technical data, drawings,

memoranda, notes, programs, electronic gear, personnel records,

policies, other items, and papers and reproductions (all of which

is deemed “Confidential” and a trade secret) thereof relating the

business of MMR.

(Doc. 1-4 at p. 1 (emphasis added)). Even moving past this notice, Hoover and Gaudin

each testified that, to their understanding, taking Plaintiffs estimating tools and

project control systems would be wrong. (See Docs. 161-3 at pp. 12-18, 161-5 at pp.

35-36). This understanding is in accord with Plaintiffs Business Code of Ethics and

Rules of Conduct, mandatory agreements that each employee of Plaintiff must also

sign and abide by. (See Docs. 1-2 at p. 2, 1-3 at p. 2).

As to the lack of exit interviews and Plaintiffs alleged failure to request the

24

return of its materials, the Court begins by examining the latter. Hoover and Gaudin

testified that each did not keep any of Plaintiffs materials after they left the

company. (Docs. 161-3 at p. 18, 161-5 at p. 48). Mason did not either in his latter stint

with Plaintiff, although he did keep a laptop belonging to Plaintiff in 2016. (Doc. 161-

4 at pp. 33, 45-46). It is unclear what confidential information was located on or was

able to be accessed through this laptop, if any, given that the one program definitively

identified on the laptop was a program that was constructed by Mason in his spare

time. Ud. at pp. 33, 55). Due to this absence of alleged fact, along with the

approximate five-year period in between this event and those that form the basis of

Plaintiffs operative Complaint, (Doc. 53), the Court cannot determine whether

Plaintiff allowing Mason to keep the company’s laptop is a fact that weighs in favor

of Plaintiff or Defendants. Absent such facts, the Court has no reason to dissolve the

Stipulated Preliminary Injunction.

Additionally, Plaintiff alleged that it employs a data loss prevention software

in its initial verified Complaint. (Doc. 1 at p. 7). Plaintiff allegedly failing to ask for

the return of its materials from Hoover and Gaudin when neither took any materials,

and when this was presumably confirmed by Plaintiffs data loss prevention software,

is not a sufficient basis for the Court to conclude that Plaintiff did not take reasonable

efforts to maintain the confidentiality of its materials.

Regarding Defendants’ former point that Plaintiff failed to conduct exit

interviews, this alleged fact does not erase or overwhelm the protective measures that

were put in place by Plaintiff, and does not require that this Court find as such. See

25

Balearia Caribbean, Corp. v. Calvo, No. 16-23300-CIV, 2018 WL 6261497, at *4 (S.D.

Fla. Aug. 22, 2018) (plaintiff failing to conduct exit interviews was insufficient basis,

given other protective measures, to find that plaintiff did not exercise reasonable

efforts to protect its trade secrets); Vendavo, Inc. v. Long, 397 F. Supp. 3d 1115, 1188

(N.D. Ill. 2019) (plaintiff granted injunctive relief for misappropriation of trade

secrets despite failing to conduct exit interview or request return of materials when

relevant ex-employee signed a confidentiality agreement); Cont? Grp., Inc. v. KW

Prop. Mgmt., LLC, 622 F. Supp. 2d 1357, 1877 (S.D. Fla. 2009), order clarified, No.

09-60202-CV-COHN, 2009 WL 3644475 (S.D. Fla. Oct. 80, 2009) (same).

As to Defendants’ contention that the confidentiality agreement, standing

alone, does not demonstrate a reasonable effort from Plaintiff to maintain its trade

secrets, the Court responds with its prior analysis, (Doc. 7 at pp. 9-10 (citing Unif.

Trade Secrets Act § 1(4)(@i) cmts.)), undisturbed by any of Defendants witnesses, that

Plaintiffs Confidentiality Agreement does not stand alone. Rather, Plaintiffs

confidentiality agreement was buttressed by Plaintiff password-protecting its

network, limiting employee access to certain confidential business information, and

deploying a data loss prevention software to monitor the transfer of its confidential

information. These measures were sufficient support for the Court’s consideration of

the TRO. See Brown & Root Indus. Servs., LLC v. Brown, No. CV 21-291-JWD-SDJ,

2022 WL 4492087, at *9 (M.D. La. Sept. 9, 2022), report and recommendation

adopted, No. CV 21-291-JWD-SDJ, 2022 WL 44901386 (M.D. La. Sept. 27, 2022)

(plaintiffs password protecting their materials, requiring that employees sign

26

confidentiality agreements, and restricting access to confidential information were

reasonable measures); see AirFacts, Inc. v. de Amezaga, 909 F.8d 84, 97 (4th Cir.

2018) (“[plaintiff] took reasonable steps to maintain [its materials] secrecy. . .

[plaintiff] required all employees to sign confidentiality agreements, installed

monitoring software on every computer to track employees’ actions, and specifically

protected the [materials] by giving only “a few” employees access.”).

Additionally, because Plaintiff employed these measures, and because

customer lists were clearly identified by the terms of Plaintiffs confidentiality

agreement, the Court concludes that the first two elements of the Guy Carpenter test

are satisfied. See 334 F.3d at 467 (three factors include: “(1) what steps, if any, an

employer has taken to maintain the confidentiality of a customer list; (2) whether a

departing employee acknowledges that the customer list is confidential; and (8)

whether the content of the list is readily ascertainable.”). The Court has been

provided no additional testimony on the third element of the Guy Carpenter test, and

Plaintiff alleged in its Verified Complaint that the content of its customer lists was

not readily ascertainable. (Doc. 1 at pp. 5-6). There is therefore no basis to revisit the

Stipulated Preliminary Injunction’s application to Plaintiffs customer lists.

In summation, the Court’s TRO was followed by Defendants’ voluntary entry

into the Stipulated Preliminary Injunction, and Defendants have not, as shown

above, provided significant new facts that persuade the Court towards dissolution.

b. Motion For Sanctions

The Court now turns to Defendants’ Motion For Sanctions. (Doc. 185). Readers

27

will note the conspicuous absence of Kraft’s transcribed interview in the Court’s

analysis above. The Court, as mentioned previously and for the reasons below, will

grant Defendants’ Motion for Sanctions in part, and Kraft’s transcribed interview will

be stricken from the record. The Court first identifies the rule potentially violated by

Plaintiff taking the transcribed interview of Kraft without providing notice to other

Defendants, and then adjudicates Defendants’ request to disqualify Plaintiffs

counsel.

i. Rules of Professional Conduct

Defendants argue that Plaintiff violated an array of rules of professional

conduct for their conduct concerning Kraft, and that disqualification is potentially

necessary. Each of the rules is provided in pertinent part below.

ABA Model Rule 4.2: “[iJn representing a client, a lawyer shall not

communicate about the subject of the representation with a party the lawyer knows

to be represented by another lawyer in the matter, unless the lawyer has the consent

of the other lawyer or is authorized by law to do so.”

Louisiana Rule of Professional Conduct _(“LRPC”) 4.2:

Unless the lawyer has the consent of the other lawyer or is authorized

to do so by law or a court order, a lawyer in representing a client shall

not communicate about the subject of the representation with:

(a) a person the lawyer knows to be represented by another lawyer in

the matter; or

(b) a person the lawyer knows is presently a director, officer, employee,

member, shareholder or other constituent of a represented organization

and

(1) who supervises, directs or regularly consults with the

organization’s lawyer concerning the matter;

28

(2) who has the authority to obligate the organization with respect

to the matter; or

(3) whose act or omission in connection with the matter may be

imputed to the organization for purposes of civil or criminal

liability.

LRPC 38.4(a): “A lawyer shall not: [] unlawfully obstruct another party’s access

to evidence or unlawfully alter, destroy or conceal a document or other material

having potential evidentiary value. A lawyer shall not counsel or assist another

person to do any such act.”

LRPC 3.4(b): “A lawyer shall not... falsify evidence, counsel or assist a witness

to testify falsely, or offer an inducement to a witness that is prohibited by law.”

LRPC 3.4(f):

[A lawyer shall not] request a person other than a client to refrain from

voluntarily giving relevant information to another party unless: (1) the

person is a relative or an employee or other agent of a client, and (2) the

lawyer reasonably believes that the person’s interests will not be

adversely affected by refraining from giving such information.

LRPC 4.4(a): “(a) In representing a client, a lawyer shall not use means that

have no substantial purpose other than to embarrass, delay, or burden a third person,

or use methods of obtaining evidence that violate legal rights of such a person.”

ii. Alleged Violations

Defendants submit that Plaintiff violated each of the rules of professional

conduct identified above. (Doc. 185-1 at pp. 9-138).

For LRPC and ABA Rule 4.2, Defendants contend that Plaintiff violated its

duty to not communicate with Kraft, an employee of ISG who could obligate and

29

expose the company to liability with respect to the lawsuit, without ISG’s counsel

present. Ud. at p. 10).

Regarding LRPC 3.4(a), (b), and (f), Defendants argue that Plaintiff unlawfully

concealed Kraft’s interview transcript for three months, that Defendants offered an

inducement to Kraft to procure his interview that is prohibited by law, and that the

confidentiality provision in Kraft’s Settlement Agreement wrongfully obligated Kraft

to not give other Defendants relevant information. (/d. at p. 18).

Defendants finally argue that Plaintiff violated LRPC 4.4(a) and Federal Rule

of Civil Procedure 30(b). Defendants assert that Plaintiffs counsel neglecting to send

the transcript of Kraft’s interview was violative of ISG’s legal rights, as set forth in

Federal Rule of Civil Procedure 30(b), which obligates parties to give notice for

proposed deponents and, according to Defendants, turn over the transcript. (/d. at p.

18).

For these alleged violations, Defendants request that the Court strike the

transcribed interview and bar Kraft from further testimony. (/d. at p. 15). Defendants

state that only the preclusion of Kraft as a witness cures the ethics violation relating

to the testimony “induced” by the settlement agreement. (/d.). In the alternative,

Defendants request that the Court disqualify Plaintiffs counsel. (Ud. at p. 16).

Plaintiff responds that it violated no professional rules of conduct. For LRPC

4.2 and ABA Rule 4.2, Plaintiff argues that the presence of Kraft’s attorney renders

both rules inapplicable. (Doc. 188 at p. 10).

30

As to LRPC 3.4(b), Plaintiff responds by stating that conditioning a settlement

on taking a deposition is not an inducement that is prohibited by law. Plaintiff notes

that Defendants’ cases in support of its claims to this point concern when would-be

deponents were offered monetary compensation for testimony—an inapposite factual

circumstance to the one at issue here. (/d. at p. 12). Further, Plaintiff argues that the

only case cited by Defendants in support of barring Kraft from testifying whatsoever

that did not concern actual payment of a witness in some form was Dyll v. Adams,

which involved a communication requesting useful, as opposed to merely truthful,

testimony. Ud. at p. 16 (citing 1997 U.S. Dist. LEXIS 24694, at *2-3 (N.D. Tex. Apr.

28, 1997)). Plaintiff also argues that Defendants’ argument, taken to its logical

conclusion, would make the commonplace practice in criminal matters of offering

reduced sentences for testifying against one’s codefendants a wrongful act. (Doc. 188

at p. 17).

Finally, Plaintiff contends Defendants’ arguments for violations to LRPC

3.4(a), (f), and 4.4(a). For Rule 3.4(a), Plaintiff asserts that holding on to the interview

transcript for three months is not an unlawful concealment, and was within Plaintiffs

rights as the transcript was its work product. For Rule 3.4(H, Plaintiff argues that it

never requested Kraft to hold off on giving relevant information to Defendants. (Ud.

at p. 20). Rather, Plaintiff states that it allowed Kraft to disclose the existence of the

settlement agreement and his interview to other named Defendants. (/d.). Lastly,

Plaintiff contends that LRPC 4.4 is not violated because Plaintiff explicitly requested

31

that Kraft not provide them with any privileged material, and because the interview

transcript 1s not a deposition. Ud. at p. 21).

By the plain language of the rules, Plaintiff did not violate ABA Model Rule

4.2, LRPC 3.4(f), or LRPC 4.4(a). ABA Model Rule 4.2 was not triggered because Kraft

was represented by his own counsel, LRPC 3.4(f) was not violated because the terms

of the Settlement Agreement did not prevent Kraft from stating that he had entered

into a settlement agreement with Plaintiff, or that he had spoken with Plaintiff, and

LRPC 4.4(a) was not violated because the Court concludes, based on the discussion

below, that the Settlement Agreement was not a method of obtaining evidence that

violated other Defendants’ rights.

Defendants strenuously urge the Court to find that Plaintiff violated LRPC

3.4(b), because, in Defendants’ view, the Settlement Agreement was an inducement

to Kraft that was prohibited by law. The Court disagrees.

Defendants have offered no persuasive caselaw in support of their argument

that Plaintiff offering to settle their claims against Kraft in exchange for his truthful

testimony, without conditioning this offer on the content of Kraft’s testimony and

without offering any other sort of compensation, is an inducement that was prohibited

by law. To the contrary, the Settlement Agreement merely reiterates the obligation

Kraft assumed once he was deposed—an eventuality that all parties agree was going

to come to pass.

Defendants argue that several statements by Plaintiffs counsel in the

interview with Kraft indicate that Kraft’s dismissal was based on the content of his

32

testimony. (Doc. 185-1 at pp. 4-5). The Court is unconvinced. The Settlement

Agreement was executed prior to the interview, (Docs. 174-1, 189-1), and may not, by

its terms, be rescinded should Kraft fail to testify favorably. Kraft was and is

represented by capable counsel, who, in the event Kraft failed or fails to testify to the

benefit of Plaintiff, will still seek to enforce the Settlement Agreement (and will likely

be successful in doing so).

Defendants’ strongest arguments that counsel for Plaintiff violated their

ethical and legal obligations are found in LRPC 4.2(b), in LRPC 3.4(a), and in Federal

Rule of Civil Procedure 80. LRPC 4.2(b) is potentially triggered by Plaintiff speaking

with Kraft without other Defendants being present when Kraft’s testimony, as an

employee of ISG, could impute liability to the company. (Doc. 185-1 at p. 11).

Defendants are correct on this issue. Plaintiff communicating with Kraft at

length in a transcribed interview without notifying ISG was, at the very least,

contrary to notions of fair play.

Plaintiff argues that the comments to ABA Rule 4.2, upon which LRPC 4.2(b)

was originally based, indicate that the rule was not intended to apply when the

contacted individual is represented by counsel, whether that counsel be the

constituent’s personal representation or the organization’s. (Doc. 188 at p. 10).

Defendants respond that LRPC 4.2 differs substantially from ABA Rule 4.2, and that

Louisiana intentionally did not incorporate the language upon which Plaintiff relies.

(Doc. 194 at pp. 4-5). The Court concludes that Defendants have the stronger

argument, because of the purposes underlying Rule 4.2.

33

“The dual purposes behind Rule 4.2 are to prevent disclosure of attorney/client

communications and to protect the party from ‘lability-creating’ statements elicited

by a skilled opposing attorney.” Jenkins v. Wal-Mart Stores, Inc., 956 F. Supp. 695,

696 (W.D. La. 1997). Both purposes were potentially frustrated by Plaintiffs actions.

First, ISG’s exclusion from Kraft’s interview with Plaintiff offered no protection to

the disclosure of any attorney/client communications that Kraft conducted or was

privy to with ISG’s counsel.’ Fortunately, Kraft’s personal counsel and Plaintiffs

counsel were cognizant of this risk, and repeatedly instructed Kraft against this type

of disclosure. (Doc. 174-1 at pp. 2, 27). Second, as Defendants note, ISG and other

named Defendants were not afforded an opportunity to protect against the disclosure

of liability-creating statements by Kraft.

Having concluded that the purpose behind LRPC 4.2(b) may have been

compromised, the question before the Court becomes what action will “balance the

scales.” In re Shell Oil Refinery, 143 F.R.D. 105, 109 (E.D. La.), amended on

reconsideration in part, No. CIV. A. 88-1935, 1992 WL 275426 (E.D. La. Sept. 29,

1992), and amended, 144 F.R.D. 73 (B.D. La. 1992).9 The Court concludes that,

8 The Court does not address ISG’s arguments about alleged breaches to Kraft’s

confidentiality agreement because the Court is solely concerned with the dispute between

Plaintiff and Defendants, and not with ISG’s “internal problems” with its employees. See In

re Shell Oil Refinery, 143 F.R.D. 105, 108 (B.D. La.), amended on reconsideration in part, No.

CIV. A. 88-1935, 1992 WL 275426 (K.D. La. Sept. 29, 1992), and amended, 144 F.R.D. 73

(E.D. La. 1992).

This being said, and having not conducted an evidentiary hearing on the issue of whether

LRPC 4.2(b) was violated, the Court expressly declines to make a definitive finding on the

issue of whether Plaintiff breached LRPC 4.2(b). The Court also draws short of making such

a finding because, as noted below, satisfactory remedies are available to promote fair play—

those being the striking of Kraft’s transcribed interview and the other actions outlined below.

34

because Kraft has not been tainted as a witness and because no privileged

information was disclosed in his transcribed interview, the appropriate action is to

strike Kraft’s transcribed interview from the record, to mandate that Plaintiff include

other named Defendants on any further communications with Kraft and his personal

counsel, and to tax the costs associated with Kraft’s eventual deposition against

Plaintiff. See id. (preventing further ex parte communication with relevant employee,

but not any communication whatsoever); see Fisher v. Town of Boyce, 2017-470 (La.

App. 3 Cir. 9/6/17), 250 So. 3d 904, 911, writ denied, 2017-1705 (La. 12/5/17), 231 So.

3d 629 (upholding trial court ruling that struck affidavit of an organization’s officer,

created by improper contact with opposing counsel, but did not bar the officer from

further testimony); cf. Jenkins, 956 F. Supp. at 697 (requiring no ex parte

communications with defendant’s current employees).

Defendants argue that in several instances Kraft did, in fact, disclose

information protected by the attorney-client privilege because Plaintiff asked Kraft

for his opinion on how other Defendants were approaching the lawsuit and about the

actions of other Defendants prior to and after the entry of various rulings by the

Court. (Doc. 185-1 at pp. 6-7). The Court has reviewed the transcribed interview, and

disagrees. Kraft never disclosed any communications that he had with other named

Defendants’ counsel, nor any communications between other named Defendants and

their counsel. (See Doc. 174-1). The portions of the interview transcript identified by

Defendants as privileged, without any supporting authority whatsoever for this

conclusion, (see Doc. 185-1 at pp. 6-7), do not change the opinion of the Court.

35

Defendants also argue that the work-product privilege was breached because

Kraft was questioned as to what role Defendant Yates had in the litigation. This

argument significantly mischaracterizes the work-product privilege. “The work-

product doctrine ‘insulates a lawyer's research, analysis of legal theories, mental

impressions, notes, and memoranda of witnesses’ statements from an opposing

counsel's inquiries.” Adams v. Mem’ Hermann, 973 F.8d 348, 349 (5th Cir. 2020)

(quoting Dunn v. State Farm Fire & Cas. Co., 927 F.2d 869, 875 (5th Cir. 1991)). “It

protects materials prepared in anticipation of litigation, whether those materials

were prepared by the attorney or by agents of the attorney.” Jd. (citing In re Grand

Jury Proceedings, 601 F.2d 162, 171 (5th Cir. 1979)). The privilege does not extend to

the mental impressions or observations of Kraft as to Defendant Yates’s level of

involvement in this dispute, and Defendants again offered no authority in support of

this conclusion.

Defendants also contest that Plaintiff sought or obtained attorney-client

privileged information through its questioning of Kraft regarding the reason for ISG

adopting new estimating tools, any communications amongst ISG staff regarding use

of the estimating tools after the entry of the Stipulated Preliminary Injunction, the

seriousness with which ISG took the Stipulated Preliminary Injunction, the effect of

the Court’s Contempt Order, and communications that ISG had with its employees

about the Contempt Order. (Doc. 185-1 at pp. 6-9).

“For communication to be protected under the [attorney-client] privilege, the

proponent ‘must prove: (1) that he made a confidential communication; (2) to a lawyer

36

or his subordinate; (3) for the primary purpose of securing either a legal opinion or

legal services, or assistance in some legal proceeding.” Equal Emp. Opportunity

Comm'n v. BDO USA, L.L.P., 876 F.3d 690, 695 (5th Cir. 2017) (quoting United States

v. Robinson, 121 F.3d 971, 974 (5th Cir. 1997)) (emphasis in original). “Determining

the applicability of the privilege is a ‘highly fact-specific inquiry, and the party

asserting the privilege bears the burden of proof.” Jd. (quoting Stoffels v. SBC

Comme'ns, Inc., 263 F.R.D. 406, 411 (W.D. Tex. 2009)). Further, since application of

the attorney-client privilege has the effect of withholding relevant information from

the fact-finder, “it is interpreted narrowly so as to ‘appl[y] only where necessary to

achieve its purpose.” Id. (quoting Robinson, 121 F.3d at 974). Despite bearing the

burden of proof that the identified portions of Kraft’s interview were violative of other

Defendants’ attorney-client privilege, Defendants offer only general argument that

the actions of ISG and other named Defendants, or the communications of the same

to ISG’s non-lawyer employees, were improperly disclosed. Mindful of this Court’s

duty to apply the attorney-client privilege narrowly, the Court concludes that

Defendants have failed to carry their burden and holds that no information protected

by attorney-client privilege was disclosed.

To the extent Defendants argue that these identified portions of Kraft’s

interview were also violative of work-product privilege, they are twice mistaken. The

only materials identified in the above were the updated estimating tools, (Docs. 185-

1 at p. 7, 174-1 at p. 11), and those estimating tools were not “created by [ISG’s]

attorney or by agents of [ISG’s] attorney,” Adams, 9783 F.3d at 349, but rather were

BT

constructed by ISG’s employees in response to the Court’s initial Order, followed

immediately by Defendants’ voluntary commitment, requiring the company to do so.

(See Docs. 7, 23).

In arriving at the conclusions above, and as in In re Shell Oil Refinery, the

Court draws short of any definitive finding that Plaintiff violated LRPC 4.2(b). See

143 F.R.D. at 108 (E.D. La. 1992). Instead, the Court finds that Plaintiffs conduct

may have compromised the purpose, if not the letter, of LRPC 4.2(b), and thereby

notions of fair play, and that for this conduct the appropriate actions are limited to

those set forth above. Moreover, because the Court finds as such and because it has

sufficiently “balanced the scales,” a conclusion as to whether LRPC 3.4(a) or Federal

Rule of Civil Procedure 30 were violated by Plaintiff's same conduct is not necessary.

iii. Disqualification of Counsel

The U.S. Court of Appeals for the Fifth Circuit has held that “disqualification

cases are governed by state and national ethical standards adopted by the Court.”

Nguyen v. La. State Bd. of Cosmetology, 2014 WL 6801797, at *1 (M.D. La. Dec. 2,

2014) (citing FDIC v. U.S. Fire Ins. Co., 50 F.3d 1304, 1311-12 (5th Cir. 1995)). “At

least four ethical standards should be consulted in a district court’s consideration of

disqualification issues: (1) the local rules of the district; (2) the American Bar

Association’s (ABA’s) Model Rules of Professional Conduct; (3) the state rules of

conduct; and (4) the ABA’s Model Code.” Id. “Notwithstanding the fundamental

importance of safeguarding popular confidence in the integrity of the legal system,

attorney disqualification ...1is a sanction that must not be imposed cavalierly.” Id.

38

“All of the facts particular to a case must be considered, in the context of the relevant

ethical criteria and with meticulous deference to the litigant’s rights.” Jd.

Defendants have cited to multiple cases in which disqualification of an

attorney was ordered. (Doc. 185-1 at pp. 16-19 (citing Papanicolaou v. Chase

Manhattan Bank, N.A., 720 F. Supp. 1080 (S.D.N.Y. 1989); Fed. Deposit Ins. Corp. v.

Ernst & Young LLP, No. CV 20-1259, 2023 WL 4027886, (E.D. La. June 15, 2023);

Patel v. 7-Eleven, Inc., 2015 WL 9701188, (C.D. Cal. Apr. 14, 2015); Zachair, Lid. v.

Driggs, 965 F. Supp. 741 (D. Md. 1997), affd, 141 F.3d 1162 (4th Cir. 1998))). None

of the cases are similar to the facts before the Court, and the Court will exercise its

discretion to deny Defendants’ disqualification request.

In brief, Papanicolaou involved conversations between defense counsel and an

unrepresented opposing party, 720 F. Supp. at 1088, whereas here Kraft was

represented by his personal attorney, Ernst & Young LLP involved counsel viewing

documents they were not supposed to view and having those documents in their

possession for a number of years, 2023 WL 4027886, at *4, Patel involved a deposed

individual that was provided actual compensation in exchange for his testimony, 2015

WL 97011388, at *7, and Zachair involved a transcribed interview with defendants’

former general counsel, with whom the other defendants possessed an attorney-client

relationship, 965 F. Supp. at 753.1° The Court is convinced that disqualification of

10 Defendants offered two additional cases after Oral Argument, one that was cited in

Zachair, which was MMR/Wallace Power & Indus., Inc. v. Thames Assocs., 764 F. Supp. 712,

714 (D. Conn. 1991), and another case cited to in Thames Assocs., which was Am. Prot. Ins.

Co. v. MGM Grand Hotel-Las Vegas, Inc., No. CV-LV-82-26-HDM, 1986 WL 57464, at *1 (D.

a9

Plaintiffs counsel is not warranted given the facts before it, the interest that Plaintiff

has in maintaining the attorney of its choice, Burford v. Cargill, Inc., No. CIV.A. 05-

0288, 2009 WL 2381328, at *19 (W.D. La. July 30, 2009), and that the interests of

justice are served by the actions imposed in the previous section of this Ruling and

Order.

IV. CONCLUSION

Accordingly,

IT IS ORDERED that Defendants’ Motion To Dissolve Preliminary

Injunction (Doc. 161) be and is hereby DENIED.

IT IS FURTHER ORDERED that Defendants’ Motion For Sanctions

(Doc. 185) be and is hereby GRANTED IN PART and DENIED IN PART. The

Clerk of Court shall STRIKE Kraft’s transcribed interview, (Doc. 174-2), from the

record. The parties shall meet and confer to schedule Kraft’s deposition, and all

associated costs and fees shall be apportioned to Plaintiff. Plaintiff shall not engage

in further communications with Kraft without ISG’s presence.

Baton Rouge, Louisiana, this gee of December, 2024

Be R i

JUDGE BRIAN A. J SON

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

Nev. Maz, 11, 1986). The Court is similarly unpersuaded by the applicability of both cases to

the present facts.

40