I. INTRODUCTION

*1 Pursuant to the Order Appointing Special Master (Dkt. No. 77), the purpose and scope of the Special Master's appointment is to “determine whether Defendants have complied with the orders of the court entered pursuant to the Stipulated Order Entering a Temporary Restraining Order (Docket No. 38), including whether Defendants have used any of the information Plaintiff contends is trade secret or confidential and, if such use occurred, the manner and extent of such use.” See also Dkt. No. 82 (confirming that the Special Master shall conduct an “investigation into whether Defendants have complied with the orders of the Court entered pursuant to the Stipulated Order Entering a Temporary Restraining Order (Dkt. No. 38)”); see also Court Hr'g Tr. (06/17/19), at 26:1-19 (The Court appointed the Special Master to ensure that “confidential and trade secret information, including thumb drives containing such information, be returned” to Plaintiff, and that copies—whether paper or electronic—be deleted from Defendants' files).

The Stipulated Order Entering A Temporary Restraining Order (Dkt. No. 38) (the “TRO”), states that “Defendants, their agents, servants, employees, attorneys, successors and assigns and all persons, firms and corporations acting in concert with them, and each of them, be ... restrained from accessing, transmitting, using, or disclosing Hill Phoenix's confidential or trade secret information (including customer and employee lists and contract information) for any purpose, including soliciting customers and employees.” Dkt. No. 38, at ¶ 1. The TRO further provides that “[e]ach Defendant shall: [ ] return to Hill Phoenix all of Hill Phoenix's confidential and trade secret information, including any thumb drives or external storage devices containing such information; [ ] and delete any copies, whether paper or electronic, of Hill Phoenix's confidential and trade secret information, regardless of where or how stored.” Dkt. No. 38, at ¶¶ 3a. and 3b.

The Special Master has completed his investigation and makes the following findings regarding Defendants' compliance with the orders of the court entered pursuant to the Stipulated Order Entering a Temporary Restraining Order (Dkt. No. 38). See Dkt. No. 77, at ¶ 2(D) (The Court tasked the Special Master to “file a report of his findings with the Court prior to the hearing currently set for September 9, 2019.”)

II. FACTUAL BACKGROUND

In Scheduling & Procedure Order No. 2 (Dkt. No. 87), the Special Master determined that an interview process, as opposed to the costly and time-consuming appointment of an independent expert to conduct a forensic review of every business and personal computer in Defendants' possession, would enable the Special Master “[t]o determine whether Defendants have complied with the orders of the court entered pursuant to the Stipulated Order Entering a Temporary Restraining Order (Docket No. 38), including whether Defendants have used any of the information Plaintiff contends is trade secret or confidential and, if such use occurred, the manner and extent of such use.” Dkt. No. 77; see also Court Hr'g Tr. (06/17/19), at 44:1-19 (The Court stated that to provide “confidence”, the Special Master can “call back to the company” and “talk to people” to determine that all of Hill Phoenix's confidential and trade secret information has been returned).

*2 The Special Master asked for and received from Plaintiff and Defendants proposed witnesses for the Special Master to interview. See Dkt. No. 83, at 2:16-3:7; Dkt. No. 87, at 5:1-6:14; Defendants' Proposal re interview of witnesses (08/05/19); Plaintiff's Response to Special Master's Scheduling & Procedure Order No. 2 – Proposed Additional Questions and Witnesses (08/20/19). The Special Master also invited and received proposed interview topics and questions from Plaintiff and Defendants. Id.

On August 26, 2019, the Special Master conducted witness interviews, outside the presence of counsel, of the following individuals:

The Witnesses were placed under oath by a certified court reporter. The court reporter also transcribed the Special Master's interviews of the above-listed Witnesses. The Special Master has attached the witness interview transcripts to this Report & Recommendation. See Ex. A (interview of Chad Van Nerynen); Ex. B (interview of Paul Panzarella); Ex. C (interview of Renee Israelson); Ex. D (interview Dave Rogers); and Ex. E (interview David Lowe).

The Special Master asked each witness a series of questions concerning the following topics:

The Special Master has reviewed the interview transcripts, his notes, the Parties' submissions, and the records on file with the Court to arrive at the following findings.

III. THE SPECIAL MASTER'S FINDINGS

A. Restraint on Accessing, Transmitting, Using, or Disclosing Hill Phoenix's Confidential or Trade Secret Information

The Special Master finds that Defendants have complied with the TRO's requirement that Defendants, their agents, servants, employees, attorneys, successors and assigns and all persons, firms and corporations acting in concert with them, and each of them, be ... restrained from accessing, transmitting, using, or disclosing Hill Phoenix's confidential or trade secret information (including customer and employee lists and contract information) for any purpose, including soliciting customers and employees.” Dkt. No. 38, at ¶ 1.

*3 As a threshold matter, less than 40 documents are arguably confidential or trade secret. See Dkt. No. 87, at 2:12-16; Dkt. No. 87-1; Plaintiff's Response to Special Master's Scheduling & Procedure Order No. 1, at 5:22-6:16. Indeed, should the Parties litigate whether the approximately 40 documents are in fact confidential or trade secret, the Special Master suspects that the number of confidential and/or trade secret documents will decline even further. See Imax Corp. v. Cinema Tech. Inc., 152 F.3d 1161, 1164-65 (9th Cir. 1998) (“A plaintiff seeking relief for misappropriation of trade secrets must describe the ‘subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons ... skilled in the trade.”); In re General Capacitor, 325 F. Supp. 3d 1029, 1037 (N.D. Cal. 2018) (To establish the existence of a “trade secret”— the first element—Plaintiff must show that its information (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy). Accordingly, the universe of documents that Defendants and their employees are prohibited from accessing, transmitting, using, or disclosing for any purpose is limited.

After the TRO issued, the Special Master finds that Defendants did not utilize Hill Phoenix's confidential or trade secret information to perform work on behalf of Classic. SM Tr. (Nerynen), at 9:8-10; SM Tr. (Panzarella), at 9:5-18; SM Tr. (Rogers), at 10:5-15; SM Tr. (Israelson), at 9:14-22, 10:21-24; see also Dkt. No. 57-1, at ¶ 19; Dkt. No. 57-4, at ¶¶ 5-7; Dkt. No. 57-6, at ¶ 8; Dkt. No. 57-7, at ¶¶ 16-21. Furthermore, the Witnesses uniformly testified that they did not utilize Plaintiff's confidential or trade secret information to solicit business from third parties. SM Tr. (Nerynen), at 9:8-10; SM Tr. (Panzarella), at 14:1-20; SM Tr. (Lowe), at 23:16-18 (“Q: And have you relied on any of the documents in Hill Phoenix to solicit business from those customers? A: Absolutely not.”); see also Dkt. No. 57-1, at ¶¶ 26-26; Dkt. No. 57-4, at ¶ 7; Dkt. No. 57-6, at ¶¶ 7-8; Dkt. No. 57-7, at ¶¶ 16-21. Finally, the Witnesses confirmed that no documents, ESI, or any other information covered by the TRO currently exists or ever existed on Classic's computer system. SM Tr. (Nerynen), at 8:23-9:7); SM TR. (Panzarella), at 10:3-7; 14:1-20; SM Tr. (Rogers), at 10:5-15, 19:20-20:3; SM Tr. (Lowe), at 8:23-9:1, 18:17-20; SM Tr. (Israelson), at 10:25-11:21; see also Dkt. No. 57-6, at ¶ 20; Dkt. No. 57-7, at ¶¶ 16-21. In short, even though certain alleged confidential and/or trade secret documents were taken from Hill Phoenix and downloaded and accessed through the Witnesses' personal computers, the Witnesses testified, under oath, that they did not transmit or utilize information from those documents to Plaintiff's detriment. See SM Tr. (Lowe), at 8:24-9:15, 15:1-9; see also id. at 20:12-23:4 (describing all the steps taken by Classic to ensure compliance with the TRO); SM Tr. (Rogers), at 18:4-19:6.

Given the Witnesses' collective testimony, and finding no compelling evidence to the contrary in Plaintiff's briefing filed with the Court, the Special Master concludes that Defendants did not violate the TRO's prohibition on Defendants' accessing, transmitting, using, or disclosing Hill Phoenix's confidential or trade secret information (including customer and employee lists and contract information) for any purpose, including soliciting customers and employees.” Dkt. No. 38, at ¶ 1. In other words, after the TRO issued, Defendants reasonably complied with the TRO's restraint prohibiting Defendants from utilizing any of Hill Phoenix's confidential or trade secret information for any purpose.

B. The Return of Hill Phoenix's Confidential and Trade Secret Information

The TRO requires that “[e]ach Defendant shall: [ ] return to Hill Phoenix all of Hill Phoenix's confidential and trade secret information, including any thumb drives or external storage devices containing such information; [ ] and delete any copies, whether paper or electronic, of Hill Phoenix's confidential and trade secret information, regardless of where or how stored.” Dkt. No. 38, at ¶¶ 3a. and 3b.

i. Defendants Have Made Good Faith Efforts to Return Documents, ESI, and Information Taking From Hill Phoenix

*4 Based on the Witnesses' interview testimony, the Special Master finds that with the excepion of a few circumstances (see infra, Part B.ii. & B.iii.), Defendants have returned documents, ESI, and any other information covered by the TRO to Hill Phoenix. The Special Master also finds that, again, based on the testimony presented, with the exception of a few record types (see infra, Part B.ii. & B.iii.), Defendants have deleted documents, ESI, and other information covered by the TRO.

a. Mr. Nerynen

Plaintiff asserts that Mr. Nerynen “was caught removing from Plaintiff's premises binders containing confidential and trade secret information.” Plaintiff's Response to Special Master's Scheduling & Procedure Order No. 2 – Proposed Additional Questions and Witnesses, at 2:10-15. If Mr. Nerynen “was caught,” that means that Mr. Nerynen did not remove confidential or trade secret information from Plaintiff. The Special Master finds that based on Mr. Nerynen's testimony, and the lack of evidence to the contrary on file with the Court, Mr. Nerynen did not take any documents, ESI, flash drives, of hard drives containing Hill Phoenix documents. SM Tr. (Nerynen), at 7:13-16. Furthermore, Mr. Nerynen did not email Hill Phoenix documents to himself or access a cloud storage system containing Hill Phoenix documents after he left Hill Phoenix's employ. Id. at 7:17-23. To conclude, based on the evidence presented, the Special Master finds that Mr. Nerynen had no documents, ESI, or other information to return to Plaintiff and/or destroy.

b. Ms. Israelson

Approximately 3 to 4 weeks prior to Ms. Israelson leaving Plaintiff's employ, Ms. Israelson testified that she emailed Hill Phoenix documents containing customer information to her personal Gmail account. SM Tr. (Israelson), at 7:15-8:23. After Hill Phoenix became aware of the email and asked for Ms. Israelson to return the documents, she testified that she promptly complied. SM Tr. (Israelson), at 7:20-9:1. Ms. Israelson also confirmed to the Special Master that she deleted any emails and attachments potentially containing Hill Phoenix confidential or trade secret information from her personal Gmail account. SM Tr. (Israelson), at 8:24-10:7. From Ms. Israelson's testimony, the Special Master finds that she undertook reasonable and thorough efforts to ensure that the email potentially containing Hill Phoenix's confidential and trade secret information was deleted entirely from her email files. SM Tr. (Israelson), at 9:14-10:16. In short, the Special Master finds that Ms. Israelson has complied with the TRO. There is no compelling evidence to the contrary that has been presented to the Special Master or is on file with the Court.

c. Mr. Rogers

When Mr. Rogers left Plaintiff's employ, he testified that he emailed to his personal email his payroll records, paystubs, resignation letter, and annual incentive plan (“AIP”). SM Tr. (Rogers), at 7:20-10:13. Mr. Rogers downloaded and saved these documents to his personal computer. SM TR. (Rogers), at 9:3-5. Mr. Rogers further testified that he did not download the aforementioned documents to any thumb drives, and that he did not email the documents to Classic. SM Tr. (Rogers), at 9:24-10:15. Mr. Rogers has provided a copy of all the documents he took from Hill Phoenix to his counsel; and all paper copies of the documents he took have been turned over to counsel and the Special Master. SM Tr. (Rogers), at 9:6-10. With the exception of his resignation letter and AIP plan, Mr. Rogers has testified that he deleted all Hill Phoenix documents from his computer that could be covered by the TRO. SM Tr. (Rogers), at 14:10-15:5. No evidence has been presented to the Special Master to refute Mr. Rogers' testimony. Therefore, the Special Master finds that Mr. Rogers has complied with the TRO.

d. Mr. Lowe

*5 When Mr. Lowe left Plaintiff's employ, he transferred documents from Hill Phoenix's computer system to five USB thumb drives. SM Tr. (Lowe), at 7:18-20, 15:11-16:21. Mr. Lowe also emailed documents from the Hill Phoenix computer system to himself. SM Tr. (Lowe), at 7:18-20. The documents taken consist of his resignation letter, evaluations, photographs, agreements with the Hill Phoenix, AIP records, an installation/proposal template, Hill Phoenix and customer contacts, and personal records. SM Tr. 9:16-10:4; 17:7-18.

With the exception of home remodel photos, AIP records, and his resignation letter, Mr. Lowe testified that he deleted all other documents that could potentially contain Hill Phoenix's confidential or trade secret information. SM Tr. (Lowe), at 12:10-11:9, 17:19-18:20. In other words, Mr. Lowe deleted Hill Phoenix documents he uploaded to his computer from the USB thumb drives, and he deleted emails he sent to himself from Hill Phoenix potentially containing Hill Phoenix's confidential or trade secret information. SM Tr. (Lowe), at 14:7-25. Mr. Lowe's testimony further establishes that he even deleted the telephone numbers for customer contacts that he gathered over his multiple years of service. Id. Mr. Lowe has since returned all the thumb drives he utilized to remove documents from Hill Phoenix's computer system to his counsel, who in turn provided the thumb drives to Plaintiff's counsel. SM Tr. (Lowe), at 16:22-24. The Special Master finds Mr. Lowe to be credible. Based on Mr. Lowe's testimony, and the lack of persuasive evidence to the contrary, the Special Master finds that Mr. Lowe returned and deleted the documents covered by the TRO.[2]

ii. Bonus and Annual Incentive Plans

Messrs. Lowe, Rogers, and Panzarella confirmed that they have retained copies of their compensation records, i.e., timecards, compensation information, bonus and/or annual incentive plans. SM Tr. (Panzarella), at Ex. 1 (“weekly timesheets for PJ Panzarella for the year 2018); SM Tr. (Rogers), at 7:20-8:2, 10:19-11:2; SM Tr. (Lowe), at 10:16-11:5, 17:19-18:3. Hill Phoenix contends these records are trade secret; Defendants dispute this assertion. To avoid any non-compliance with the TRO, the Special Master recommends the following:

The Parties are directed to meet and confer 3 days after this Report & Recommendation is filed with the Court to determine whether Plaintiff will bring the above described motion to compel or permit Messrs. Rogers, Lowe, and Panzarella to retain their compensation records.

iii. Mr. Panzarella and the Missing USB Thumb Drive

Mr. Panzarella admitted that when he left Plaintiff's employ, he downloaded Hill Phoenix documents to a USB thumb drive. SM Tr. (Panzarella), at 7:14-17; Dkt. No. 57-7, at ¶ 10. Mr. Panzarella then downloaded the contents of the thumb drive to his personal computer. SM Tr. (Panzarella), at 10:8-14; Dkt. No. 57-7, at ¶ 13. After instructions from counsel, Mr. Panzarella provided the Hill Phoenix documents to Defendants' counsel via a different USB thumb drive, then deleted the documents from his personal computer. SM Tr. (Panzarella), at 11:18-20; Dkt. No. 57-7, at ¶ 15; Panzarella Depo. Tr., at 73:12-25. Mr. Panzarella admits that he has been unable to locate the original thumb drive that contained the Hill Phoenix documents. SM Tr. (Panzarella), at 10:12-11:13.

It is unclear whether Mr. Panzarella simply misplaced the thumb drive or whether the thumb drive is, in fact, lost. Mr. Panzarella's testimony regarding his efforts to locate the thumb drive reveals that he has not devoted substantial effort to locating the original thumb drive that contained the Hill Phoenix documents. See SM Tr. (Panzarella), at 11:6-13 (“Q: Have you looked for the thumb drive that you brought from Hill Phoenix [ ] that was on your computer? A: I just looked for a thumb drive; I don't know which thumb drive it was on.”) (emphasis added); id. at 10:15-11:5 (“Q: What did you do with [the thumb drive]?. A: Probably lost it ... when it came time to return those files or to give it back to the attorneys, [Ms. Ghassemian] basically sa[id] ‘I need those back.’ So I was looking for a thumb drive. I don't know if it was the thumb drive because they're generic thumb drives.”) (emphasis added); Panzarella Depo. Tr., at 70:4-9 (“A: I provided [counsel] a thumb drive with the files. I didn't know you needed the thumb drive. Q: Yes, we need the thumb drive. Do you still have the actual thumb drive? A: I don't know if I have it or not, honestly. Q: And you didn't look for it? A: I looked for thumb drives, but I don't know which thumb drive is which thumb drive.”).

In other words, while it is clear that Mr. Panzarella searched for a thumb drive, it is unclear whether he made a reasonable and good faith effort to locate the original thumb drive that contained the Hill Phoenix documents he downloaded. For the foregoing reason, Mr. Panzarella is ordered to search for the original thumb drive that he used to download Hill Phoenix documents on April 11 and 12, 2019. Mr. Panzarella shall submit a declaration to the Court describing what efforts he undertook to locate the thumb drive that he used to download Hill Phoenix documents prior to his departure from Hill Phoenix. This declaration shall be filed with the Court and provided to the Special Master on or before September 9, 2019.

*7 The Special Master should note that Mr. Panzarella testified that he deleted all Hill Phoenix files from his personal computer that could contain confidential or trade secret information. SM Tr. (Panzarella), at 11:14-20; 11:24-12:2; 13:16-25. Furthermore, Mr. Panzarella confirmed during his interview that he did not email any Hill Phoenix documents covered by the TRO to other individuals. SM Tr. (Panzarella), at 12:10-13:7. Accordingly, what remains is for Mr. Panzarella to confirm that the thumb drive he used to remove Hill Phoenix documents in the days leading up to his departure from the company is, in fact, lost.

IT IS SO ORDERED.