Montgomery v Risen # 94 | S.D.Fla._1-15-cv-20782_94_D Memo of Law re 91

8/20/2019 Montgomery v Risen # 94 | S.D.Fla._1-15-cv-20782_94_D Memo of Law re 91

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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF FLORIDA

Case No. 15-cv-20782-MARTINEZ/GOODMAN

DENNIS MONTGOMERY,

Plaintiff,

v.

JAMES RISEN et al.,

Defendants. ________________________/

DEFENDANTS’ PRE-HEARING MEMORANDUM

HOLLAND & KNIGHT LLPSanford L. Bohrer

[email protected] W. Toth

[email protected] Brickell Avenue, Suite 3300Miami, Florida 33131Tel: (305) 374-8500Fax: (305) 789-7799

DAVIS WRIGHT TREMAINE LLP Laura R. Handman (admitted pro hac vice)

[email protected] J. Ratner (admitted pro hac vice)

[email protected] Pennsylvania Ave., NW, Suite 800Washington, D.C. 20006Tel.: (202) 973-4200Fax: (202) 973-4499

Counsel for Defendants

Case 1:15-cv-20782-JEM Document 94 Entered on FLSD Docket 08/04/2015 Page 1 of 7


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Under the Court’s July 20, 2015 order (ECF No. 91), Defendants file this pre-hearing

memorandum on the discovery dispute over the adequacy of Plaintiff’s responses, objections,

and production to Defendants’ first set of interrogatories and requests for production.1 The

parties have conferred on three occasions about this dispute.

1. The Court Should Order Plaintiff to Produce the Relevant Software and Related

Information over Plaintiff’s Objection that the Material Is Classified

This is a libel action Plaintiff brought against author James Risen, his publisher, and its

holding company, arising from statements in Chapter 2 (“Chapter”) of Risen’s book, Pay Any

Price: Greed, Power, and the Endless War (the “Book”), that report allegations Plaintiff

defrauded the federal government by selling it useless software.2 To defend against Plaintiff’s

claim that statements in the Book are false because the software allegedly works, Defendants

requested a copy of the software, government tests that Plaintiff alleges validated the software,

the software’s current location, and other information about the software.3 Plaintiff refuses to

produce this software and related information, even under the protective order, and even after

being provided the authority set forth herein (see Exhibit 1, attached hereto), asserting that he is

not legally permitted to produce “secret” classified information.4

As the non-producing party, Plaintiff bears the burden to justify withholding the software

and related information.5 But Plaintiff fails to support his objection with any specific basis

1 Additional disputes over the adequacy of Plaintiff’s responses to discovery will be addressed atthe hearing.2 (ECF No. 44, Am. Compl. ¶¶ 120-27, 181-84, 202-21, 230-36.)

3 (ECF No. 90-1, Defs.’ Interrogs. 9-15 & Reqs. for Produc. 7-15, 26-32, 36-47, 53.) On August3, Defendants identified to Plaintiff an expert qualified to test the software, and thus compliedwith the scheduling order (ECF No. 48) to the extent possible given Plaintiff’s failure to produce.4 (ECF No. 90-2, Pl.’s Resp. & Objections to Interrogs. 9-15) (objecting that “the interrogatory callsfor information some of which the Plaintiff is not legally permitted to disclose as being confidentialor secret”); ( Id., Pl.’s Resp. & Objections to Reqs. for Produc. 7-15, 26-32, 36-47, 53) (objecting ongrounds of “legal restrictions on the Plaintiff responding” or that “he is not legally permitted todisclose all documents or information”).5 Adelman v. Boy Scouts of Am., 276 F.R.D. 681, 689 (S.D. Fla. 2011) (Goodman, J.) (“As the party resisting discovery, [the non-producing party] has the burden to demonstrate specifically

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required under Local Rule 26.1(g)(3)(A), identifying no contract, order, or other source that

prohibits him from turning over this material. Such a generalized assertion that material sought

in discovery is classified is insufficient.6

Moreover, orders in Plaintiff’s previous cases show that his software is not classified and

he must produce it. In a case in which Plaintiff’s former employer, eTreppid, sued Plaintiff for

allegedly misappropriating the subject software, the U.S. government moved for and obtained a

protective order under the state secrets privilege to protect classified information from discovery

(“U.S. Protective Order”).7 The U.S. Protective Order, specifically excluded Plaintiff’s software

from its scope, stating that “[t]his Order does not preclude the Parties from serving or taking any

discovery . . . relating to . . . [t]he computer source code, software, programs, or technical

specifications relating to any technology owned or claimed by any of the Parties.”8 Thus, the

magistrate judge found that “[t]he clear understanding in drafting and issuing th[e] [U.S.]

protective order was that the parties would be discussing the nature and capabilities of the

technology, and the type of work each party performed for the government.”9

Nonetheless, Plaintiff refused to produce the software and related information in both the

Nevada litigation and in his later bankruptcy proceedings in which the U.S. Protective Order was

also entered. In the Nevada action, the magistrate and district judges repeatedly ordered Plaintiff

how the request is unreasonable or not relevant.”). 6 See Lyondell-Citgo Ref., LP. v. Petroleos De Venezuela, S.A., 2005 WL 356808, at *3(S.D.N.Y. Feb. 15, 2005) (affirming order compelling production of purportedly classified board

minutes, reports, and presentations despite party’s claim that doing so would violate criminallaw, because “sustain[ing] an objection on the basis of general statements” would give thegovernment-related “party an unfair advantage over its adversary”); Roule v. Petraeus, 2012 WL2367873, at *7 (N.D. Cal. June 21, 2012) (denying the “Government’s general objection toPlaintiff's discovery requests . . . that the ‘classified information is not discoverable or used incivil cases such as this one’”) (citation omitted).7 ( Montgomery v. eTreppid Technologies, Inc., 3:06-cv-00056-PMP-VPC (“eTreppid ”), ECF No.253 (D. Nev. Aug. 29, 2007), attached hereto as Exhibit 2.)8 ( Id., at 2-3, ¶ 4(c).)9 (eTreppid , ECF No. 645, at 6 n.3, attached hereto as Exhibit 3.)

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to produce the software, but he refused.10 Thus, the district judge held Plaintiff in contempt,

imposing a penalty of $2,500 per day until he produced the software.11 Instead of producing the

software, Plaintiff settled the action and signed confessions of judgment for $25 million.12 Then,

Plaintiff declared bankruptcy and continued to refuse to produce or describe the software in

bankruptcy.13 The Court should not permit him to withhold the software again, especially when

it is central to his burden to prove falsity and Defendants’ defense on that element. 14

Even if the software and related materials were classified, only the government, not a

private party such as Plaintiff, may invoke the state secrets privilege to prevent disclosure of

classified information.15 Despite having notice, the government has not intervened here to assert

the state secrets privilege.16 The Court should order Plaintiff to produce the software and related

information and warn him of the consequences if he fails to comply.17

10 ( Id., ECF No. 645, & eTreppid , ECF Nos. 728, 765, 769, attached hereto as Exhibit 4.)11 (eTreppid , ECF No. 815, at 3-5, attached hereto as Exhibit 5.)12 (eTreppid , ECF Nos. 897, 898, attached hereto as Exhibit 6.)13 In his bankruptcy case deposition, Plaintiff either testified that he did not have the software orit was subject to the U.S. Protective Order, or he refused to testify under the Fifth Amendment

privilege against self-incrimination. ( In re Dennis and Brenda Montgomery, 2:10-bk-18510-BB,Dep. Tr. 61:10-62:15; 79:7-80:5; 193:10-194:24; 234:3-22; 267:20-269-17; 333:16-21 (Bankr.C.D. Cal.), relevant excerpts attached hereto as Exhibit 7.) Department of Justice (“DOJ”)lawyers who attended his deposition, however, did not object to the questions under the U.S.Protective Order. Ultimately, Plaintiff was denied discharge in bankruptcy. (eTreppid , ECF Nos. 1206, ¶ 22, 1208, ¶ 22, attached hereto as Exhibit 8.)14 Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767, 776-77 (1986).15 E.g., United States v. Reynolds, 345 U.S. 1, 7 (1953) (“The [state secrets] privilege belongs tothe Government and must be asserted by it; it can neither be claimed nor waived by a private party.”); (Ex. 2, U.S. Protective Order, ECF No. 253, at 4, ¶ 8) (same).)16 Counsel for Defendants notified attorneys at DOJ who previously intervened to assert the statesecrets privilege in Plaintiff’s past cases about his objections and responses to discovery, thisdiscovery hearing, and his deposition scheduled for August 20.

17 If Plaintiff does not produce the software and related information critical to Defendants’ defense,an award of attorney’s fees would not suffice because Plaintiff says he is destitute and fees wouldnot compensate for Defendants’ inability to test the software and rebut the self-serving claim that itworks. The most appropriate remedy if the software is not produced: dismissal, since Plaintiffcould not, as a matter of law, carry his burden of proving falsity, and Defendants could not fullydefend, without the allegedly classified information. See, e.g., Trulock v. Lee, 66 F. App’x 472,476-77 (4th Cir. 2003) (per curiam) (affirming dismissal of libel action brought by former officialrepresented by Mr. Klayman because classified information subject to state secrets privilege wascentral to the element of falsity and defense of truth); Restis v. Am. Coal. Against Nuclear Iran, Inc., 2015 WL 1344479, at *5-8 (S.D.N.Y. Mar. 23, 2015) (dismissing libel action based on

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2. The Court Should Compel Production of Material Relevant to Plaintiff’s Domicile

Plaintiff may not withhold information about his alleged domicile in Florida, such as his

purported lease in Florida and the location of his bank and credit card accounts, when domicile is

relevant to Defendants’ pending motion to dismiss or transfer for lack of personal jurisdiction,

improper venue, and convenience under 28 U.S.C. §1404(a), and to damages. 18 Defendants request

proof of Plaintiff’s domicile particularly because his and his counsel’s credibility on such matters is

questionable.19 Indeed, evidence suggests Plaintiff continues to live in Washington. On February

23, 2015 – the same day he registered to vote in Florida from Washington, Plaintiff appeared

telephonically from Washington before a U.S. Tax Court judge in Los Angeles and led the court to

believe he lived in Washington.20 On February 24 (the very next day), he filed suit here claiming to

be a Florida citizen. On May 13, 2015, Plaintiff’s counsel in his criminal prosecution in Nevada for

allegedly passing bad checks obtained a continuance by representing that Plaintiff was ill and in

Washington.21 And although Plaintiff asserts he is under constant medical care – the basis for the

accelerated discovery and trial schedule – all his doctors are in Washington.22

statements by organization accusing plaintiff of violating Iran sanctions because litigating the casewould disclose states secrets). See also Fed. R. Civ. P. 37(b)(2)(A)(i)-(vii); Lyondell-Citgo Ref., LPv. Petroleos de Venezuela, S.A., 2005 WL 1026461, at *4 (S.D.N.Y. May 2, 2005) (affirmingadverse inference instruction against party refusing to produce allegedly classified informationunder court order).18 Soghanalian v. Soghanalian, 693 F. Supp. 1091, 1093 (S.D. Fla. 1988) (explaining that “theentire course of conduct” is relevant to domicile, including lease of property and location ofchecking account); Jaisinghani v. Capital Cities/ABC, Inc., 973 F. Supp. 1450, 1453 (S.D. Fla.1997) (among other factors are “home ownership, driver’s license, voting registration, locationof family, location of business and where taxes are paid”).19 A federal judge found Plaintiff committed perjury in a declaration opposing a motion for attor-

neys’ fees when he argued that “California, not Nevada, was the proper forum to resolve the feedispute.” Montgomery v. eTreppid Techs., LLC , 2010 WL 1416771, at *16 (D. Nev. Apr. 5, 2010).The Middle District of Florida recently found that Plaintiff’s counsel “misrepresented the basis forvenue in [that] case,” and transferred the case to D.C. (Freedom Watch v. Dep’t of State, No. 1:14-cv-01832-JEB, ECF No. 35, at 8 (M.D. Fla. Oct. 27, 2014), attached hereto as Exhibit 9.)20 ( Montgomery v. Commissioner of the IRS , No. 9008-09, Tr. 34:21-35:6; 37:11-22 (U.S. TaxCourt Feb. 23, 2015), relevant excerpts attached hereto as Exhibit 10.)21 (State of Nevada v. Montgomery, No. C-268764, Tr. 1:17-21 (Nev. D. Ct., Clark Cnty.May 13, 2015), attached hereto as Exhibit 11.)22 (ECF No. 90-2, Pl.’s Resp. to Interrog. 22, at 24.) In re Lordy, 214 B.R. 650, 662 (Bankr. S.D.

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3. The Court Should Compel Production of Relevant Unproduced Medical Records

Plaintiff did not produce medical records before 2011 or evidence of current medical

treatment after April 2015. These documents are relevant to his claim that the Book aggravated

his pre-existing medical condition and caused him emotional damages, his claim of imminent

risk of death to obtain an accelerated schedule, and his claim of domicile in Florida.23 The Court

should compel him to produce outstanding relevant medical evidence or execute a release.24

4. The Court Should Compel Production of Relevant Unproduced Tax Returns

In this Circuit, tax returns need only be “arguably relevant” to obtain them in discovery.25

Tax returns are relevant to Plaintiff’s claimed economic loss.26 Plaintiff refused to produce federal

tax returns from 2008-14, state returns from 2003-14, and any of his trust’s tax returns claiming he

did not possess them. But “[t]he Plaintiff has control over his past tax returns even if he does not

have actual possession of the returns”; he “can obtain his past returns from the IRS” and state

authorities.27 The Court should compel him to produce tax records in his control or execute a

release (see note 24).

Fla. 1997) (“location of the person’s doctors” is domicile factor).23 E.g., Anderson v. City of Naples, 2010 WL 4853916, at *2 (M.D. Fla. Nov. 22, 2010) (requiring plaintiff to disclose “medical history for the past ten years” particularly when “Plaintiff’s medicalrecords are highly relevant to . . . claims of aggravation of prior injury”).24 Plaintiff refused to sign medical and tax return release authorizations. While this Court hasrequired a party to first serve a third-party subpoena and then move for an order compelling theopposing party to execute a release, Frasca v. NCL (Bahamas) Ltd., 2013 WL 2646839, at *2(S.D. Fla. June 12, 2013) (Goodman, J.), given that Plaintiff’s deposition is currently scheduled forAugust 20 to meet the expedited discovery schedule and given that these third parties will inevitab-ly require Plaintiff to sign a release under HIPAA and the IRS Code, Defendants respectfullyrequest that this Court follow cases that “almost universally hold, explicitly or implicitly, that Rule

34, along with Rule 37, empowers federal courts to compel parties to sign written authorizationsconsenting to the production of various documents” that are within Plaintiff’s control. Lischka v.Tidewater Servs., Inc., 1997 WL 27066, at *2 (E.D. La. Jan. 22, 1997) (collecting cases) (cited inFrasca).25 Maddow v. Procter & Gamble Co., 107 F.3d 846, 853 (11th Cir. 1997); Coach, Inc. v. SwapShop, Inc., 2013 WL 4407064, at *2 (S.D. Fla. Aug. 13, 2013).26 E.g., Young Apartments, Inc. v. Town of Jupiter, Fla., 2006 WL 5849319, at *3 (S.D. Fla. Dec.1, 2006).27 Hernandez v. Wilsonart Int’l, Inc., 2010 WL 2653223, at *2 (M.D. Fla. July 2, 2010)(compelling plaintiff to produce tax returns he did not possess).

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Certificate of Good-Faith Conference;

Conferred But Unable to Resolve the Issues Presented in the Motion

In accordance with Local Rule 7.1(a)(3)(A), the undersigned certifies that Defendants’counsel has conferred with all parties or non-parties who may be affected by the relief sought inthis motion in a good-faith effort to resolve the issues but has been unable to resolve the issues.

s/Brian W. Toth

Dated: August 4, 2015 Respectfully submitted,

s/Brian W. TothSanford L. BohrerFlorida Bar No. 160643

[email protected] W. TothFlorida Bar No. 57708 [email protected] & K NIGHT LLP701 Brickell Avenue, Suite 3300Miami, Florida 33131Telephone: (305) 374-8500Fax: (305) 789-7799

– and –

Laura R. Handman (admitted pro hac vice)[email protected] J. Ratner (admitted pro hac vice)[email protected] WRIGHT TREMAINE LLP1919 Pennsylvania Ave., NW, Suite 800Washington, D.C. 20006Tel.: (202) 973-4200Fax: (202) 973-4499

Counsel for Defendants

CERTIFICATE OF SERVICE

I certify that on August 4, 2015, I filed this document with the Clerk of Court using

CM/ECF, which will serve this document on all counsel of record.

s/Brian W. Toth

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EXHIBIT 1

Case 1:15-cv-20782-JEM Document 94-1 Entered on FLSD Docket 08/04/2015 Page 1 of 3


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Shapiro, Marni

From: Ratner, Micah

Sent: Friday, July 24, 2015 6:05 PM

To: Larry Klayman ([email protected])

Cc: [email protected]; [email protected]; [email protected]

Subject: Meet and confer follow-up

Attachments: Protective Order Aug. 29, 2007.pdf; Order on motion to compel source code, ECF645.pdf; Judge Pro's order affirming order compelling production of source code, EC

728.pdf; Order Denying Stay and Requiring Production of Source Code, ECF 765.pdf;

OTC on producing source code, ECF No. 769.pdf; Order imposing monetary penalty

non-production of source code, ECF No. 815.pdf

Larry,

I’m writing to follow up on our Tuesday, July 22, 2015 meet and confer call. You said you would double-chec

number of interrogatories and document requests that you did not fully respond to and would let us know the results

a day or two. We have not heard back from you. Please respond with the results of your search as soon as possible.

U.S. Protective Order and Orders to Produce the Software

In our call on Tuesday, I told you that Mr. Montgomery’s software is not covered by the U.S. protective order

(ECF 253), later orders in the Nevada litigation required Mr. Montgomery to produce his software (ECF 645, 728, 765,

769), and that court held him in contempt and required him to pay penalties until he produced the software (ECF No.

815). You asked me to send you those orders. They are attached.

These orders mean that Mr. Montgomery’s software is not classified and he must produce it. The U.S. protect

order states: “This Order does not preclude the Parties from serving or taking any discovery from other Parties or thir

parties relating to, or questioning, the following: . . . The computer source code, software, programs, or technical

specifications relating to any technology owned or claimed by any of the Parties (‘the Technology’).” ECF No. 253, at 2¶ 4(c). It is not just the software itself that is not classified. Magistrate Judge Cooke found that “[t]he clear

understanding in drafting and issuing th[e] [U.S.] protective order was that the parties would be discussing the nature

and capabilities of the technology, and the type of work each party performed for the government.” ECF No. 645, at 6

n.3. As you can see from the orders, Judge Pro and Magistrate Judge Cooke repeatedly ordered Mr. Montgomery to

produce the software, and when he did not comply, Judge Pro held him in contempt and imposed penalties of $2,500

per day until he produced the software.

Thus, we ask you to withdraw your objection and produce the software, tests allegedly validating the softwar

identify the location of the software, and produce other materials that you asserted are classified but that plainly are

not.

Misstatements of Defendants Meet and Confer Positions

As we also discussed on Tuesday, Plaintiff’s responses and objections to Defendants’ discovery misstate many

positions Defendants took in meet and confer. You asked me to identify your misstatements in writing and I do so

below.

• We did not agree that Mr. Montgomery “would answer this interrogatory subject to his objections a

with full reservation of all rights,” or that he “would produce documents subject to his objections,”

which you assert in response to almost every interrogatory and document request. Rather, we made



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clear that he must comply with Judge Goodman’s procedures and the local rules that require

objection-by-objection statements of which documents you withheld subject to the objection and

which you produced.

• We did not agree with your objection that interrogatories that require narrative responses would be

left for deposition. We said the opposite: a narrative response to an interrogatory is entirely

appropriate and it would be more efficient for your client to answer the interrogatories before the

deposition.

•

We did not agree that the definition of “your company” or “your companies” is limited to companieswhich the Plaintiff has an ownership or financial interest. (E.g. Resp. to Int. 9, 12.) In our meet and

confer, we pointed out the definition of Montgomery’s companies. (Definitions (O).) It includes, amo

other things, companies that employed Mr. Montgomery, such as Blxware.

• We did not agree that medical records on “plaintiff’s request to accelerate the trial schedule need no

be produced.” (Resp. to Doc. Req. 33.) We asked you to produce these documents.

• We didn’t withdraw accountant interrogatory. (Int. 23.) Rather, we narrowed it to identify any

accountant who may have information about damages Mr. Montgomery claims.

We ask that you correct your responses and objections to remove these misstatements.

Once again, we ask that you produce all outstanding responsive documents and answer allinterrogatories fully so that we can move forward with discovery without further involving the Court.

Have a nice weekend.

Regards,

Micah

Micah Ratner | Davis Wright Tremaine LLP 1919 Pennsylvania Avenue NW, Suite 800 | Washington, DC 20006-3401

Tel: 202-973-4223 | Fax: 202-973-4423Email: [email protected] | Website: www.dwt.com

Anchorage | Bellevue | Los Angeles | New York | Portland | San Francisco | Seattle | Shanghai |Washington, D.C



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EXHIBIT 2



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PETER D. KEISLER Assistant Attorney GeneralSTEVEN W. MYHREActing United States AttorneyDistrict of NevadaGREG ADDINGTON

Assistant United States Attorney Nevada Bar 6875100 West Liberty, Suite 600Reno, Nevada 89501VINCENT M. GARVEYDeputy Branch Director CARLOTTA P. WELLSSenior Trial CounselFederal Programs BranchCivil Division - Room 7150U.S. Department of Justice20 Massachusetts Ave., NW/P.O. Box 883Washington, D.C. 20044

Telephone: (202)514-4522Facsimile: (202) 616-8470

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

DENNIS MONTGOMERY, et al., )

)Plaintiffs, )

) 3:06-CV-00056-PMP-VPCv. ) BASE FILE

)

ETREPPID TECHNOLOGIES, INC., ) 3:06-CV-00145-PMP-VPCet al., ))

Defendants. ) ____________________________________)

UNITED STATES’ REVISED PROPOSED PROTECTIVE ORDER

Pursuant to Federal Rule of Civil Procedure 26, in order to protect the classification,

confidentiality and the rights to information and documents developed and disclosed in

connection with this litigation, and to facilitate discovery by and among the parties to this

action and from third parties, the United States hereby proposes entry of the following

protective order.

Case 3:06-cv-00056-PMP-VPC Document 196 Filed 06/21/2007 Page 4 of 8

______________UNITED STATES

Case 3:06-cv-00056-PMP-VPC Document 253 Filed 08/29/07 Page 1 of 5Case 1:15-cv-20782-JEM Document 94-2 Entered on FLSD Docket 08/04/2015 Page 2 of 6


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IT IS HEREBY ORDERED as follows:

1. Certain information that may or may not be relevant to the claims and/or

defenses of eTreppid Technologies, LLC and its current or former officers or employees

(hereinafter collectively referred to as “eTreppid”), Warren Trepp, Dennis Montgomery, the

Montgomery Family Trust and/or Dennis Montgomery and Brenda Montgomery as trustees of

the Montgomery Family Trust (hereinafter collectively referred to as “the Parties”), as

delineated in paragraphs 2 and 3 below, is subject to the state secrets privilege, the disclosure

of which reasonably could be expected to cause serious, and in some cases exceptionally

grave, damage to the national security of the United States. Such information shall not be

subject to discovery or disclosure by any of the Parties during all proceedings in these actions,

and shall be excluded from evidence at trial.

2. The Parties shall not serve or take any discovery relating to or questioning the

existence or non-existence of any actual or proposed relationship, agreement, connection,

contract, transaction, communication or meeting of any kind between any entity in the

intelligence community as defined by the National Security Act of 1947,

50 U.S.C. § 401(a)(4), which includes intelligence elements of the military services, or any

current or former official, employee or representative thereof (hereinafter collectively referred

to as “intelligence agency”) and the Parties.

3. The Parties shall not serve or take any discovery relating to or questioning any

actual or proposed intelligence agency interest in, application of or use of any technology,

software or source code owned or claimed by the Parties.

4. This Order does not preclude the Parties from serving or taking any discovery

from other Parties or third parties relating to, or questioning, the following:

Case 3:06-cv-00056-PMP-VPC Document 196 Filed 06/21/2007 Page 5 of 8Case 3:06-cv-00056-PMP-VPC Document 253 Filed 08/29/07 Page 2 of 5Case 1:15-cv-20782-JEM Document 94-2 Entered on FLSD Docket 08/04/2015 Page 3 of 6


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a. The existence and nature of the “Big Safari” contract (hereinafter referred to as

“the Big Safari Contract”) between eTreppid and the Unites States Air Force, including but not

limited to the fact that the Big Safari Contract required eTreppid to perform data analysis and

the fact that the data analysis eTreppid performed under the Big Safari Contract involved

image identification technology;

b. The fact that the Big Safari Contract required employees and/or officers of

eTreppid to sign secrecy agreements with the Department of Defense;

c. The computer source code, software, programs, or technical specifications

relating to any technology owned or claimed by any of the Parties (“the Technology”);

d. Any contract, relationship, agreement, connection, transaction, communication

or meeting of any kind relating to the Technology, unless covered by paragraphs 2 or 3 above;

e. Any actual or potential commercial or government applications of the

Technology, unless covered by paragraphs 2 or 3 above;

f. Facts relating to the issue of ownership by the Parties of any right or interest in

the Technology, unless covered by paragraphs 2 or 3 above;

g. The revenue, income, expenses, profits and losses of the Parties, unless

disclosure of such information would be covered by paragraphs 2 or 3 above; and

h. Any consideration received by any of the Parties relating to the Technology,

unless covered by paragraphs 2 or 3 above.

5. The Parties shall not discuss, mention, question or introduce as evidence, either

at trial, in any pleading or motion, or in any case-related correspondence, any actual or

proposed relationship, agreement, connection, contract, transaction, communication or

meeting of any kind between any intelligence agency and any of the Parties.



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6. The Parties shall not discuss, mention, question or introduce as evidence, either

at trial, in any pleading or motion, or in any case-related correspondence, any actual or

proposed intelligence agency interest in, application of or use of the Technology.

7. No question and no document request in discovery or at trial shall require a

response that would include any information covered by paragraphs 2, 3, 5 or 6 above, but if

the responding party believes that a full and complete response could disclose information

within the scope of the state secrets privilege, the responding party shall provide timely notice

of such belief and the full and complete response to the United States prior to responding, and

shall respond only with information that the United States has determined is not subject to the

state secrets privilege.

8. The military and state secrets privilege, the claim that any discovery is

covered by paragraphs 2 or 3 above, and the claim that any evidence is covered by

paragraphs 2 or 3 above, can only be invoked by the United States. These claims cannot be

asserted by a private individual or entity.

9. All Parties shall serve the attorneys for the United States with (a) a copy of

all notices of depositions, (b) a copy of all requests for discovery and responses thereto,

and (c) a copy of all pleadings and motions filed together with supporting memoranda

(hereinafter collectively referred to as the “documents”), unless such documents request or

relate to information covered by paragraphs 2 or 3 above. If the documents request or

relate to information covered by paragraphs 2 or 3 above, the Parties shall submit the

documents to the United States for privilege review prior to service or filing. All

documents filed or sought to be used as evidence by the Parties in this case shall be

unclassified. This requirement applies to all motions, pleadings, briefs, and any other

document, including exhibits, correspondence, or anything appended thereto or filed

therewith. If the United States determines that a document or discovery response includes



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information covered by paragraphs 2 or 3 above, the United States shall redact the

information and provide the parties and Court with a redacted copy of the document or

discovery response.

10. The Clerk of the Court shall send attorneys for the United States a copy of all

future decisions and notices for hearings in these cases.

11. As the United States deems necessary, attorneys for the United States may

attend all depositions and proceedings in this case and may make objections as necessary to

protect national security information. If attorneys for the United States assert an objection

based on the need to protect national security information with respect to either witness

testimony or documents introduced or otherwise relied upon during a deposition, then the

witness shall be precluded from testifying with respect to the line of inquiry that engendered

the objection, and the document shall be withdrawn from the record pending an order of the

Court with respect to the scope of the government’s national security objection.

12. To protect the United States’ interests, attorneys for the United States may

participate in any proceeding in these cases, including but not limited to motions hearings, all

pre-trial proceedings, or trial by making and opposing motions, submitting briefs, and

participating in arguments.

13. The United States shall be excepted from all party discovery during the

pendency of its motions to dismiss the claims against the Department of Defense.

It is so ordered.

Dated:

United States District Judge

Case 3:06-cv-00056-PMP-VPC Document 196 Filed 06/21/2007 Page 8 of 8

August 29, 2007

_______________________________

PHILIP M. PRO

United States District Judge



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EXHIBIT 3



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UNITED STATES DISTRICT COURTDISTRICT OF NEVADA

DENNIS MONTGOMERY, et al., ) 3:06-CV-0056-PMP (VPC) )

Plaintiffs, ) ) ORDER REGARDING

vs. ) SOURCE CODE DISCOVERY)

ETREPPID TECHNOLOGIES, LLC., et al., ))

Defendants. ) ____________________________________)

On February 21, 2008, this court held a discovery status conference and considered the m

of eTreppid Technologies, LLC and Warren Trepp (“eTreppid”) to compel production of ce

discovery (#s 431 & 433) and the opposition of Dennis Montgomery and the Montgomery Family

(“Montgomery parties”) (#432). The court directed the parties to file supplemental points

authorities, and they did so (#s 461-463; # 467). The Montgomery parties also filed a request for ju

notice (#468) and a motion for permission to file under seal those documents referenced in the re

for judicial notice (#469). The parties then filed replies (#s 498 & 500), and the court heard

argument on April 2, 2008 and took the matter under submission.

I. Facts

In 1998, Dennis Montgomery and Warren Trepp formed eTreppid, formerly known as Intr

a small, start-up technology company. Mr. Trepp contributed his business expertise, and

Montgomery contributed his considerable experience as an inventor and software developer. In th

of 2005, disagreements arose between Messrs. Trepp and Montgomery, and this litigation ensue

A. The Contribution Agreement

The Montgomery parties and eTreppid signed two agreements that are relevant to this disco

dispute. The first is a September 28, 1998 contribution agreement (#432, Ex. G). The contrib

agreement states that the Montgomery parties were to contribute Mr. Montgomery’s “know-how,

secrets, patent rights, copyrights, trademarks, licenses and permits, . . . relating to or used in conne

with, or otherwise describing or consisting of any part of, the software compression techno



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contained on that certain Software Compression Engine Development Program contained on CD

1, . . .” Id. at Ex. G, section 1.2.1. The contribution agreement also contains a provision w

expressly excludes “any other tangible or intangible assets of Contributor not specified herein.”

Ex. G, section 1.3.

All parties agree that the contents of CD No. 1 are essential to an understanding of the

nature and extent of Mr. Montgomery’s contribution; however, none of the parties has CD No. 1

copy. See Declarations of Warren Trepp, Doug Frye, and Dennis Montgomery, #s 464, 465 &

B. The Operating Agreement

In addition to the contribution agreement, the parties also signed an operating agreement na

Mr. Montgomery as manager and Mr. Trepp as management committee chair of eTreppid (#467, E

sections 6.1.1 & 6.1.5.). As eTreppid’s manager, Mr. Montgomery and his affiliates were prohi

from competing with eTreppid by:

(i) developing, licensing or exploiting in any manner any software programs or other technology which is competitive with the Technologyor the Business of the LLC, or providing any services or supplies whichare encompassed within the definition of the “Business” of the LLC as setforth in this Agreement; (ii) purchasing or otherwise acquiring, owning,holding, operating, managing, investing in or otherwise disposing of alike business of the LLC’s Business and interests therein of any kind or nature; or (iii) otherwise engaging in any or all aspects of a like businessof the LLC’s Business. The Manager’s or his Affiliates’ participation inany of the activities restricted by this paragraph shall be deemed a breachof the Manager’s duties herein.

Id. at Ex. A, section 6.5.

C. Copyrights

Another set of documents relevant to this dispute are Mr. Montgomery’s copyrights. B

joining eTreppid, Mr. Montgomery developed pattern recognition software, and the U.S. Copy

Office granted a series of copyrights, which the Montgomery Family Trust owns (#7, ¶ 8).

Montgomery parties allege that after the registration of these copyrights, Mr. Montgomery devel

derivative works based on the pattern recognition technology originally copyrighted between 198

January 1987. Id. at ¶ 9. Mr. Montgomery alleges that these copyrights were not contributed to eTre

pursuant to the contribution agreement.



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D. eTreppid Operations

From January 1999 until January 2006, Mr. Montgomery served as eTreppid’s chief techno

officer. As chief technology officer, Mr. Montgomery was responsible for day-to-day bus

operations, development of eTreppid’s technology, making hiring decisions, and overseeing

programmers who worked for eTreppid. See #469, Ex. D, Transcript of February 7, 2006 prelim

injunction hearing before the Second Judicial District Court of the State of Nevada, Case No. C

0114 at page 245, lines 4-14; 250:2-6 (“Tr.”). In contrast, Mr. Trepp had no technical knowledg

served as the investor with business experience, relying on Mr. Montgomery for the daily operatio

eTreppid. Tr. at 245:4-14.

Mr. Montgomery was also responsible for backing up the eTreppid source code, which S

Venables, an eTreppid employee, defined as “the actual ... files that are used to be compiled int

software” eTreppid developed. Tr. 28, lines 7-10 & 23-24; 29:1-2. The eTreppid source code con

of multiple source code files, which consist of more than one hundred different projects and thous

of files. Tr. at 54:21-24. Mr. Montgomery was the sole individual at eTreppid responsible for ba

up and maintaining the source code, which was a necessary precaution in the event computer hard

failed. Tr. at 29:21-24; 30:1-5 & 16-22. The original copy of the eTreppid source code was locat

the SRCSERVER, and Mr. Montgomery made copies of the hard drives of all of the programme

the building, which he routinely copied on two work stations in eTreppid’s warehouse. Tr. at 3

34:1-12. Prior to December 21, 2005, all of the source code was backed up. Tr. at 34:13-24; 35

After the Christmas holidays, eTreppid employees returned to work and discovered that nearly

eTreppid’s source code had been deleted. Tr. at 39:12-24; 40, 42, 43:1-19. On January 10, 2006, sh

after the discovery of the missing source code, Messrs. Trepp and Montgomery argued, and

Montgomery left eTreppid and never returned. Tr. at 46:23-24; 47:1-18.

II. The Parties’ Claims and Counterclaims

The operative pleadings in this action are the Montgomery parties’ first amended complain

and eTreppid’s answer to the first amended complaint and counterclaim (#393). The parties’ claim

counterclaims are critical to the court’s analysis of what information and documents are reason

calculated to lead to the discovery of admissible evidence pursuant to Fed.R.Civ.P. 26(b)(1).



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On July 30, 2007, the District Court dismissed the Montgomery Parties’ copyright claims “only 1

extent those claims are based on any allegations eTreppid and Trepp infringed the novel aspects of the Derivworks” (#217).

On March 20, 2007, in the consolidated case, the District Court dismissed with prejudic2

Montgomery Parties’ counterclaim requesting an accounting based on the fact that the claim is pre-emptfederal copyright law. See Case No. 3:06-CV-00145-PMP-VPC, #91. This order was also filed in the bas3:06-CV-00056-PMP-VPC, at docket #131. To the extent that the order did not technically dismisMontgomery Parties’ accounting claim in their first amended complaint file in case number 3:06-CV-00PMP-VPC, see #7, the court does so now.

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A. The Montgomery parties’ amended complaint (#7)

1. Copyright infringement

The Montgomery parties allege that the Montgomery Family Trust owns certain copyright

derivative works, and that for approximately three years, eTreppid exploited the derivative w

without any license or payment of royalties (#7, ¶¶ 21-23). The Montgomery parties allege tha

Trepp intentionally directed a willful infringement of the copyrights and derivative works, and they

damages. Id. at ¶¶ 24-26.1

2. Copyright infringement - unlawful distribution of copyrighted winjunction

The Montgomery parties allege that they own the derivative works and that eTreppid vio

the trust’s right and interest to distribute copies of the derivative works to the public in violation

U.S.C. § 106(3). Id. at ¶¶ 27-30. The Montgomery Parties seek to enjoin eTreppid from fu

infringement. Id .

3. Declaratory relief

The Montgomery parties seek a judicial declaration that they own the derivative works

further, that any actual or implied oral nonexclusive license either never existed or was terminated

at ¶¶ 31-33. The Montgomery parties also seek a declaration that the trust is entitled to 100 perce

the license fees obtained by the exploitation and sub-licensing of the derivative works. Id. at ¶¶ 3

4. Accounting

The Montgomery parties seek an accounting of all profits derived from eTreppid’s all

exploitation of the copyrights and derivative works. Id. at ¶¶ 36-39.2

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285

5. Breach of fiduciary duty

The Montgomery parties allege that Mr. Trepp owed fiduciary duties to Mr. Montgomery

that Mr. Trepp violated those duties by improperly using his majority interests to reduce those o

Montgomery by paying himself a high salary, improperly deducting business expenses, and ta

distributions and misappropriating money from the company at Mr. Montgomery’s expense. Id.

40-44.

6. Fraud

The Montgomery parties allege that Mr. Trepp induced Mr. Montgomery to becom

shareholder in eTreppid and to contribute his software technology by falsely representing tha

Montgomery would share equally with Mr. Trepp in the profits of the company. Id. at ¶¶ 45-48.

further alleged that Mr. Trepp failed to share the profits equally, and that the Montgomery pa

suffered damages as a result. Id. at ¶¶ 49-51.

7. Breach of contract

The Montgomery parties allege that pursuant to the contribution agreement, Mr. Montgo

contributed his software compression technology in return for a fifty percent ownership in eTreppid

that Mr. Trepp breached the agreement by reducing the Montgomery parties’ ownership interest i

company. Id. at ¶¶ 52-57.

8. Misappropriation of trade secrets

The Montgomery parties allege that the derivative works are trade secrets and that eTreppi

wrongfully attempted to misappropriate and convert those derivative works, causing the Montgo

Parties damage. Id. at 58-62.

9. Conversion

The Montgomery parties allege that they own the derivative works, which are current

eTreppid’s possession, but that eTreppid has converted this property for its own use and has refus

return it. Id. at ¶¶ 63-65. The Montgomery parties allege they have suffered damages as a result.

¶ 66.

///



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The court notes that this claim for relief precipitated the United States Protective Order, which go3

disclosures of this kind (#253). The clear understanding in drafting and issuing that protective order wathe parties would be discussing the nature and capabilities of the technology, and the type of work each performed for the government. In addition, the court issued a protective order governing disclosure of secrets and other confidential information (#264).

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10. Declaratory relief against the United States

Although the Montgomery parties stipulated to dismiss this claim against the United S

(#295), the Montgomery parties make the following allegations in this claim for relief, whic

relevant to this discovery dispute:a. [I]n order to defend Trepp’s and eTreppid’s claims of trade secret

misappropriation and prosecute their own claims, Montgomerywill be obligated to disclose the nature of the technology, the typeof work that he has performed on government contracts using histechnology versus that of eTreppid, and the capabilities of histechnology versus that of eTreppid in performing work for certaingovernment agencies.

b. [T]hese disclosures go to the very core of Defendants’ expecteddefense of this action, making it virtually, if not literally,impossible to defend without violating Montgomery’s secrecy

oath and compromising national security.c. Montgomery ... must make such disclosures in order to establish

his ownership interests in the technology.

Id. at ¶¶ 71-72.3

B. eTreppid’s Counterclaims (#393)

eTreppid names not only the Montgomery parties as counterdefendants, but also Edra Bli

Opspring LLC, Atigeo LLC, and Michael Sandoval as parties in its counterclaim.

1. Misappropriation of trade secrets - N.R.S. § 600A.010 et seq.

eTreppid alleges that the counterdefendants misappropriated its trade secret materials, wh

defines as its “Source Code for digital compression products, including compression, pa

recognition, object tracking, anomaly detection technology, film colorization and other applicat

(#393, ¶¶ 63-71).

2. Breach of contract

eTreppid alleges that in improperly taking eTreppid’s trade secrets, Mr. Montgomery brea

the contribution agreement. Id. at ¶¶ 72-75.



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3. Conversion

eTreppid alleges that the counterdefendants have converted eTreppid’s confidential inform

and trade secrets for their own use. Id. at ¶¶ 76-78.

4. Breach of fiduciary duty

eTreppid alleges that based on the misappropriation of trade secrets, the Montgomery pa

as members of eTreppid and/or the management committee, breached their fiduciary duties to eTre

Id. at ¶¶ 79-84.

5. Tortious and contractual bad faith

eTreppid alleges that Mr. Montgomery breached the implied contractual covenant of good

and fair dealing based upon the allegations outlined in the counterclaim. Id. at ¶¶ 85-90.

6. Declaratory relief

eTreppid seeks a judicial determination of the rights and duties of the parties pursuant t

parties’ written agreements and state statutes. Id. at ¶¶ 91-93.

7. Intentional interference with contract

eTreppid alleges that all counterdefendants were aware of its contracts with third parties and

they intentionally interfered with those contracts. Id. at ¶¶ 94-99.

8. Intentional interference with contract

eTreppid alleges that counterdefendants Blixseth, Sandoval, Opspring, and Atigeo were a

of Mr. Montgomery’s contracts with eTreppid, and intentionally interfered with those contracts.

¶¶ 100-105.

9. Claim and delivery

eTreppid alleges that it owns certain computer hard drives and other electronic storage m

and devices that may contain eTreppid’s intellectual property, that Mr. Montgomery wrongfully

the property and, on information and belief, may have copied confidential information, converting

Mr. Montgomery’s own use or demanding payment of money for its return. Id. at ¶¶ 106-110.

///

///

///



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10. Civil Conspiracy

eTreppid alleges that the counterdefendants acted in concert to misappropriate eTrep

technology and harm eTreppid’s ability to fulfill prospective economic relationships, thereby viol

the preliminary injunction. Id. at ¶¶ 111-115.11. Intentional interference with prospective economic relations

eTreppid alleges that it had prospective economic relationships with third parties, of whic

counterdefendants were aware, and that they intentionally interfered with those potential relations

Id. at ¶¶ 116-122.

III. The February 7, 2006 Preliminary Injunction Hearing

Prior to the removal and consolidation of these actions, the state court held a prelim

injunction hearing to decide whether to enjoin the Montgomery parties from destroying, usin

assigning eTreppid’s source code pending the outcome of this litigation. A copy of the transcr

attached as Exhibit D to the Montgomery parties’ request for judicial notice (#469) (“Tr.”). Durin

hearing, the state court heard testimony from Mr. Trepp, Mr. Montgomery, and eTreppid emplo

familiar with the computer operations at the company. Both Mr. Trepp and Mr. Montgomery tes

that during Mr. Montgomery’s tenure at eTreppid, the government contracted only with eTreppid

not Mr. Montgomery in his individual capacity. Tr. at page 72, lines 20-24; pages 73-77; 229:24;231, 232:1-12.

After twelve hours of testimony, the court issued a preliminary injunction and found:

1. Pursuant to the employment agreement between the parties, thesubsequent undisputed conduct of the parties throughout thecourse of Montgomery’s employment with ETreppid, andMontgomery’s acquiescence to and active participation incontractual agreements entered into by ETreppid with third parties involving the Source Code and technology at issue,[ETreppid] is likely to prevail on the merits of its claims;

2. [Etreppid] has demonstrated a reasonable probability that [it] willsuffer irreparable harm if a preliminary injunction does not issue[because] the record reflects that the Source Code is essential toETreppid’s operations;

3. The technology at issue includes data compression software,image detection software, and pattern recognition software, whichnecessarily relies upon the Source Code for it’s operation, and isalleged to be valued in excess of $100,000,000;



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4. Without the Source Code, ETreppid may be forced to foregoentering into valuable contracts for the use or sale of saidtechnology; and

5. [ETreppid] may suffer damages in excess of $10,000 per day if

[it] remains without possession of the Source Code.(#15, Ex. 7). Based upon these findings, the state court enjoined the Montgomery parties, an

persons in active concert or participation with them, “from destroying, hypothecating, transfer

modifying, and/or assigning the ETreppid Source Code, from discussing ETreppid technology, inclu

anomaly detection and pattern recognition software, with any third-party, except experts and

persons and witnesses necessary to Defendant’s case and counsel, provided, however, that

witnesses and counsel shall not disclose any information to others about ETreppid Source Code.

Ex. 7 at 3.

IV. Legal Analysis and Discussion

Federal Rule of Civil Procedure 26(b) provides that “Parties may obtain discovery regardin

non-privileged matter that is relevant to any party’s claim or defense.” Fed.R.Civ.P. 26(b)(1). Fu

“[r]elevant information need not be admissible at the trial if the discovery appears reasonably calcu

to lead to the discovery of admissible evidence.” Id . Rule 26(c) allows the court to protect parties

undue burden and expense in discovery by “requiring that a trade secret or other confidential resedevelopment, or commercial information not be revealed or be revealed only in a specified w

Fed.R.Civ.P. 26(c)(1)(G). Trade secrets do not have “automatic and complete immunity

disclosure, but [courts] have in each case weighted their claim to privacy against the need

disclosure.” Advisory Committee Notice to 1970 Amendments to Rule 26(c). The Ninth Circuit has

that “disclosure of trade secrets will be required only where such disclosure is relevant and nece

to the prosecution or defense of a particular case.” Hartley Pen Co. v. United States District Cou

S.D. Cal., 287 F.2d 324, 330-31 (9 Cir. 1961). The party seeking disclosure must “establish thath

trade secret sought is relevant and necessary to the prosecution or defense of the case before a co

justified in ordering disclosure.” Id.

Although the parties have focused almost exclusively on their respective trade secre

copyright claims as those relate to the discovery eTreppid seeks, the court considers the discovery i



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The court also addresses this request for production below as it relates to source code and 4

technology Montgomery claims as a trade secret.

10

broader context of all of the claims and counterclaims alleged.

A. Etreppid’s request for production-1: No. 22 and request for productioNo. 4 – CD No 1

The discovery requests at issue are:

1. Request No. 22 (RFP-1):

All documents that relate to the software that [Mr. Montgomery]transferred to eTreppid under the terms of the September 28, 1998Contribution Agreement (including, but not limited to: all source code – whether in printed or electronic form – executable files, shop notes,laboratory notes, and any other memoranda).4

2. Request No. 4 (RFP-2)

All documents that relate to the software that [Mr. Montgomery]transferred to eTreppid under the terms of the September 28, 1998Contribution Agreement (including, but not limited to, all source code – whether in printed or electronic form – executable files, shop notes,laboratory notes, and any other memoranda).

After this discovery dispute arose, the court ordered the parties to file declarations with the

concerning possession of CD No. 1. Mr. Trepp states in his declaration that he instructed eTre

employees “to examine every hard drive, CD, or other storage device they could find in order to l

this ‘CD 1,’” but “these efforts have not resulted in the location of this item” (#464). Mr. Trepp

states that during his tenure at eTreppid, Mr. Montgomery provided Mr. Trepp with CDs, DVDs a

hard drives “that allegedly contained the then-current version of the eTreppid Source Code, which

Trepp] would then store at an off-site location. These storage media should have contained the s

code contributed on ‘CD1,’ as well as other source code developed by eTreppid.” Id. However

Trepp attests that having directed the review of these media, they “do not and have never contain

completed version of the eTreppid Source Code for any period of time.” Further, “while these bac

did contain a portion of an early, 2001 version of one of eTreppid’s compression products, this w

that was located on the backup media.” Id.

Doug Frye, a member of eTreppid and its counsel, also filed a declaration concernin

whereabouts of CD No. 1 (#465). Mr. Frye states that he searched his files, both at his office a



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home, and did locate a CD that Mr. Montgomery had given to him. Id. Mr. Frye does not reca

circumstances or the date that Mr. Montgomery gave him the CD, but recalls that Mr. Montgomery

him at the time that it contained a backup copy of eTreppid’s technology. Id. Mr. Frye gave the C

Mr. Trepp, and upon examination by eTreppid employees, Mr. Frye attests that it does not contain so

code or other useful information. Id.

Mr. Montgomery also filed his declaration concerning CD No. 1 and attests that he is unab

locate the original or a copy of CD No. 1, nor does he believe it existed in printed form (#466).

Montgomery states that CD No. 1 contained software programs for software compression techno

and included executable files and related source code and a “software compression engine develop

program.” Id. Mr. Montgomery further attests that while he was careful to maintain his work pro

in an organized fashion to insure he could reconstruct his work, the FBI destroyed that organiz

during the seizure at his home and storage facility. Id. Moreover, he contends that ther

discrepancies between the FBI seizure list and the FBI return lists, which have not been resolved

this makes it impossible for him to determine whether or if the work product can be reconstructed a

Id. Mr. Montgomery goes on to state that even if he had all of the software compression files he h

of September 1998 when he signed the contribution agreement, he could not reconstruct CD N

without actually reviewing the files, which is not technically feasible, given the alleged destruction

failure to return all of his property. Id. Although Mr. Montgomery’s declaration is silent conce

whether he ever delivered CD No. 1 to Mr. Trepp or someone at eTreppid, Mr. Montgomery tes

at the preliminary injunction hearing that he gave it to Mr. Frye (#469, Ex. E, Tr. at page 143, line

24; 135:1-10).

It is undisputed that what is on CD No. 1 is pivotal to the parties’ claims and counterclaim

this proceeding. Remarkably, this key piece of evidence apparently no longer exists. Messrs. Fry

Trepp state under penalty of perjury that they have searched every piece of media located at eTre

and in other locations where it might be found, but that the media that Mr. Montgomery provided d

his tenure at eTreppid – whether CD No. 1 or otherwise – contain nothing relevant to the claims al

in this action, including “data compression software.” Mr. Montgomery likewise states under pe

of perjury that he gave CD No. 1 to Mr. Frye back in September 1998, and that to the extent he m



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have had possession of CD No.1, the FBI search of his home and storage units resulted in lo

destruction of certain of his work product. Mr. Montgomery states that it is virtually impossible

create CD No.1 based on technical lack of feasibility, accessibility of files, time and expense.

At this point in the litigation, the court will not order Mr. Montgomery to recreate CD No.

it reserves this issue for future consideration after more thoroughly testing Mr. Montgomery’s allega

that the FBI lost or destroyed property such that it prevents him from being able to re-create CD N

In the interim, the court draws two conclusions. First, these document production requests are br

than simply seeking production of CD No. 1. Second, the court agrees with eTreppid tha

Montgomery’s declaration is silent as to whether he has in his possession any documents or inform

that was contained on CD No. 1, other than to state that CD No. 1 itself did not exist in printed f

The court concludes that documents pertaining to CD No. 1 are likely to lead to the disco

of admissible evidence, and the Montgomery parties are ordered to produce all documents, inclu

but not limited to those in electronic form, which are responsive to RFP-1, No. 22, and RFP-2, N

B. Etreppid’s request for production-1, Nos. 3, 4, 6, 8, 9, 16, 18, 19, 20 & 22request for production-2, Nos. 1, 2, & 3 and any others to the extentseek source code and other technology Montgomery claims as a trade s

eTreppid’s first request for production of documents includes the following items in disp

1. Request No. 3: All documents that contain some or all of the full text of eathe copyrights.

2. Request No. 4: All documents that contain some or all of any material, incin and/or protected by the copyrights, that you contend defenhave, either collectively or individually, infringed.

3. Request No. 6: All documents that contain some or all of the full text of work that you contend is a “derivative work” of the copyrig

4. Request No. 8: All documents that relate to your contention that defendeither collectively or individually, have infringed upon any ocopyrights.

5. Request No. 9: All documents that relate to your contention that defendeither collectively or individually, have infringed upon any that you contend is a ‘derivative work’ of the copyrights.

6. Request No. 16: All documents that relate to eTreppid’s technology, prodand/or research and development efforts (including bulimited to: any and all marketing documents, business pPowerPoint presentations, white papers, correspondence, anotes of meetings with customers or potential customers).



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RFP-1 Nos. 18, 19 & 20 are identical to RFP-2 Nos. 1, 2, & 3.5

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7. Request No. 18: All documents that contain any source code, written by yunder your direction, that relate to the fields of data compres pattern recognition, object tracking or anomaly dete(including but not limited to: all of any part of a software proor algorithm).

8. Request No. 19: All documents that relate to any research and development emade, by you or by anyone working under your direction, ifields of data compression, object tracking, pattern recognor anomaly detection (including, but not limited to: any annotes, diagrams, laboratory materials, or source code).

9. Request No. 20: Executable versions of any and all software, developed by y by anyone working under your direction, which relates tfields of data compression, object tracking, pattern recognor anomaly detection.

10. Request No. 22: All documents that relate to the software that you transferr

eTreppid under the terms of the September 28, 1998 ContribAgreement (including but not limited to: all source cowhether in printed or electronic form – executable files, notes, laboratory notes, and any other memoranda).

eTreppid’s second request for production of documents includes these items in dispute:

1. Request No. 1: Please produce all documents that contain any source cwriten by you or under your direction, that relate to the fieldata compression, pattern recognition, object tracking or anodetection (including, but not limited to: all or any part software program or algorithm).

2. Request No. 2: Please produce all documents that relate to any researchdevelopment efforts made, by you or by anyone working uyour direction, in the fields of data compression, object trac pattern recognition, or anomaly detection (including, bulimited to: any and all notes, diagrams, laboratory materiasource code).

3. Request No. 3: Please produce all executable versions of any and all softdeveloped by you or by anyone working under your direcwhich relates to the fields of data compression, object trac pattern recognition, or anomaly detection.5

This dispute also concerns Request Nos. 30 and 31 in the first request for productio

documents, and Request Nos. 6, 7, and 24 through 28, of the second request for production of docum

to the extent that responses may also implicate the dispute over disclosure of documents related t

issue.



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As earlier noted, the debate among the parties concerning these document production req

centers on the trade secret and copyright claims; however, the parties’ numerous other claim

counterclaims include a wide range of tort and equitable claims, and the court must consider

requests in that broader context. The court has reviewed the parties pleadings, the transcript o

preliminary injunction hearing, the order that followed, as well as the legal arguments and evid

concerning this dispute.

The court also noted earlier that the Montgomery parties originally named the United S

Department of Defense as a defendant in their amended complaint, and those allegations are

contrary to the position the Montgomery parties’ new counsel now takes concerning disclosure o

Montgomery’s technology (#7, ¶¶ 68-74). While it is true that the United States has since

dismissed, as has the tenth claim for relief, the allegations are telling. Plaintiffs allege that “in ord

defend Trepp’s and eTreppid’s claims of trade secret misappropriation and prosecute their own cl

Montgomery will be obligated to disclose the nature of the technology, the type of work that h

performed on the government contracts using his technology versus that of eTreppid, and the capabi

of his technology versus that of eTreppid in performing work for certain government agencies.”

¶ 71. The Montgomery parties further allege that, “these disclosures go to the very core of [eTrepp

expected defense of this action, making it virtually, if not literally, impossible to defend. . . .” Id. at

This makes sense, and is the very reason that the parties subsequently executed not only a stan

protective order governing disclosure of trade secrets, but also the United States’ protective

governing the military and state secrets privilege. With these safeguards in place, it was presumed

the parties could proceed to discover information relating to their respective claims and defenses

The court also finds instructive both the preliminary injunction transcript and state co

preliminary injunction order. Having heard the testimony of Mr. Trepp, Mr. Montgomery, and eTre

employees intimately familiar with eTreppid’s operations, the state court issued a preliminary injun

and concluded that Mr. Montgomery took technology of value when he left eTreppid. The state

order does not specifically define eTreppid’s source code, but includes in that term “data compre

software, image detection software, pattern recognition software, which necessarily relies upo

Source Code for its operation,” and the court later includes a reference in the order to “anomaly dete



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and pattern recognition software,” all of which the court clearly understood to be at the heart of this

(#15, Ex. 7). The final sentence of this order is instructive: “The Court issues this injunction to mai

the status quo and to avert any irreparable harm that ETreppid may suffer and based on the risk tha

Montgomery could delete and/or transfer the last version of the ETreppid Source Code that rem

intact.” Id.

The Montgomery parties contend eTreppid cannot take discovery on its trade secret c

because it must first specifically identify the trade secret, and a protective order is proper until a pla

claiming trade secret misappropriation has adequately identified its own trade secret. IMAX Co

Cinema Technologies, Inc., 152 F.3d 1161 (9 Cir. 1998). The pivotal difference between this ath

and Imax is the facts.

Imax concerned the patents that Imax acquired to the “rolling loop projector,” making

world’s largest supplier of such projectors. Imax, 152 F.3d at 1163. To protect the secrecy o

undisclosed technology, Imax included a confidentiality provision in each sales or lease agreem

which forbade customers from disclosing confidential information about the system. Id. T

individuals, who were never employed by Imax, formed a company with the goal of developing

own large format projector that would compete with Imax. Id. They obtained a copy of an Imax m

that was not marked confidential, and they then observed, disassembled, measured, photograp

traced, and sketched the Imax projector. Id. Eventually, the company unveiled it’s own “rolling l

projector at a trade show, and Imax sued, alleging misappropriation of trade secrets and u

competition. Id. at 1163-64. However, Imax was unable to identify the dimensions and toleranc

its projector design that were its claimed trade secrets, and the court granted summary judgment ag

Imax on that claim. Id. at 1170.

The fact that Imax held the patents to the projector, developed and sold the projector, yet

unable to identify the allegedly misappropriated trade secret dictated the court’s conclusion in Ima

other words, since Imax, or an employee of Imax whom Imax could consult, created the projector

therefore the trade secret, it ought to be able to identify it. In contrast, Mr. Montgomery cam

eTreppid with CD No.1 and his years of computer training and expertise. He agreed to devote all o

technical know-how solely for the benefit of eTreppid during his tenure there. He oversaw



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company’s software development programs, and he alone was the custodian of eTreppid’s source

and was entrusted with insuring its security. Neither Mr. Trepp, Mr. Frye, or any of the eTr

software engineers had Mr. Montgomery’s level of access to eTreppid’s source code, so when h

eTreppid and allegedly took eTreppid’s “source code” with him, eTreppid could not possibly ide

its alleged trade secret because the one person who could identify it was gone. To further comp

matters, no one has a copy of CD No. 1, the technology Mr. Montgomery initially contribut

eTreppid.

What the source code is, or is not, is a central issue in this action. This court agrees wit

Montgomery parties that the preliminary injunction order does not give eTreppid a monopoly i

development of software and technology in the fields of anomaly detection and pattern recognition

that the injunction is limited to the “source code at issue.” However, the order expressly enjoin

Montgomery from using that source code pending disposition of this action. Mr. Montgomery a

he is in possession of the source code eTreppid used in fulfilling its contractual obligations and th

continues to work to improve that technology with the financial assistance of his new empl

however, he contends this does not violate the preliminary injunction order because the technolo

is using belongs to him (Dec. of Mr. Montgomery, #462, Ex. B; see also #115, Case No. 3:06-CV-0

PMP (VPC)). Because Mr. Montgomery took or deleted the source code from eTreppid’s compu

a finding Judge Perry made in February 2006 – eTreppid cannot define the source code witho

requested discovery, and it is clear that it will be impossible to adequately prosecute or defend

myriad of claims and counterclaims without defining the source code.

This case also revolves around the technology developed at eTreppid for use in contracts

government entities. It was eTreppid, not Mr. Montgomery, who entered into these contracts. How

Mr. Montgomery claims that the technology used in these contracts is derived from his copyrights, w

he never assigned to eTreppid. eTreppid contends that some or all of the technology used in

contracts is derived from CD No.1 and that Mr. Montgomery agreed to devote all of his know-ho

the exclusive benefit of eTreppid. In response, Mr. Montgomery essentially asks eTreppid and this

to “take his word for it” that all that eTreppid is entitled to is that which was contributed on the

vanished CD No. 1, and that any technology he now possesses is solely derived from his unassi



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copyrights. In other words, the valuable trade secret in this case is his because he says so. This i

enough.

Disclosure of trade secrets will be required where such disclosure is relevant and necessa

the prosecution and defense of the parties claims. See Hartley Pen Co., 287 F.2d, 324, 33

Discoverable information need only appear “reasonably calculated to lead to the discovery of admis

evidence.” Fed.R.Civ.P. 26(b)(1). Because the protective order regarding trade secrets is in plac

court believes that the Montgomery Parties are protected from the technology’s misuse in the even

this court determines that the Montgomery parties are the rightful owners of the disputed techno

Fed.R.Civ.P. 26(c)(1)(G). To sort out what rightfully belongs to the Montgomery parties and eTre

it makes sense to take discovery on this technology, particularly in light of the fact that CD No

longer exists. The questions to be answered are what technology eTreppid began with in Septe

1998 and what technology was developed at eTreppid in the ensuing seven years. Only after so

through this tangle can the parties reasonably argue ownership and develop their claims and defe

accordingly. Simply put, there is no conceivable way eTreppid can describe its trade secret, becaus

Montgomery has made that impossible based upon the events that occurred in December 2005

January 2006.

The court is convinced that neither eTreppid nor the Montgomery parties will be ab

conclusively prove ownership of the technology without analysis of the source code; thus, the

concludes that documents related to the source code and other technology Montgomery claims as a

secret are “reasonably calculated to lead to the discovery of admissible evidence.” The Montgo

parties are ordered to produce all documents, including but not limited to those in electronic form, w

are responsive to RFP-1, Nos. 3, 4, 6, 8, 9, 16, 18, 19, 20 & 22 , and RFP-2, Nos. 1, 2 & 3 as limit

the court below.

V. Conclusion

Based upon the foregoing, and for good cause appearing, IT IS HEREBY ORDERED:

1. eTreppid’s motion to compel (#431) is GRANTED IN PART AND DENIED

PART as more fully set forth in this order and as follows:



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a. Produce all documents responsive to RFP-1, Nos. 4, 6, 8, 16 & 22 and R

No. 4;

b. Produce documents responsive to RFP-1, No. 3 as limited to the “full text of

of the copyrights.” eTreppid shall have leave to request documents w

contain a reference to some or all of the text of the copyrights if good cau

shown that such further discovery is reasonably calculated to lead to

discovery of admissible evidence;

c. Produce documents responsive to RFP-1, No. 9 as limited to 1998 to the pre

and

d. Produce documents responsive to RFP-1, Nos. 18, 19 & 20 and RFP-2, N

2 & 3 as limited to 1997 to the present. eTreppid shall have leave to re

documents pre-dating

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