*1 This matter is before the Court on Defendants’ motion for sanctions. [Doc. 113.] Pursuant to the provisions of 28 U.S.C. § 636(b) and Local Civil Rule 73.02(B)(2)(e), D.S.C., this magistrate judge is authorized to review all pre-trial matters in cases involving litigation by individuals proceeding pro se and to submit findings and recommendations to the District Court.[1]

Plaintiffs filed this action on June 16, 2018 [Doc. 1] and filed an Amended Complaint on February 1, 2019 [Doc. 80]. On May 6, 2019, Defendants filed a motion for sanctions. [Doc. 113.] Plaintiffs filed a response in opposition of Defendants’ motion on May 20, 2019. [Doc. 116.] And Defendants filed a reply on May 28, 2019. [Doc. 120.] This motion is now ripe for review.

This case (the “South Carolina Action”) arises out of Lazarus Pharmaceuticals, Inc. (“Lazarus”) and Cameron Pharmaceuticals, LLC's manufacture and sale of a pharmaceutical phenobarbital and belladonna alkaloids (“PBA”) elixir product used to treat irritable bowel syndrome (“IBS”). [Doc. 1 ¶¶ 1, 16.] Plaintiffs distribute and market Donnatal pharmaceutical products, which also contain PBA, to treat IBS. [Id. ¶¶ 16–17.] In their original Complaint, they alleged that Defendants are “seeking to exploit the success of Donnatal Elixir by manufacturing and marketing a ‘knock-off’ PBA elixir while aided by intellectual property wrongfully obtained from Plaintiffs.” [Id. ¶ 18.] Plaintiffs claimed that Defendants “falsely represent that their PBA elixir is available and functions as a generic substitute for Donnatal Elixir.” [Id.] This case largely centers around Lazarus's alleged actions in having its product linked to Donnatal Elixir on drug databases. Plaintiffs allege that this linking creates the perception that Lazarus’ product is an FDA-approved generic equivalent to Donnatal Elixir.” [Id. ¶ 53.]

The parties stipulated to the entry of a confidentiality order in this case for the purpose of protecting the confidentiality of sensitive documents and information exchanged in the discovery process (the “Confidentiality Order”). [Doc. 69.] The Court entered the Confidentiality Order on October 17, 2018. [Doc. 70.] It provides that “[d]ocuments designated CONFIDENTIAL under this Order shall not be used or disclosed by the parties or counsel ... for any purposes whatsoever other than preparing for and conducting the litigation in which the documents were disclosed. [Id. ¶ 5(a) (emphasis added).] It also specifies to whom those materials may be disclosed, and it establishes procedures for the filing of confidential materials and for de-designating them as confidential so that they might be used for a purpose other than for litigating this case in South Carolina.[2] [Id. ¶¶ 5(b), 6, 8.]

*2 After the Court entered the Confidentiality Order, the parties exchanged a substantial number of documents during discovery, many of which they designated as “confidential.” [Docs. 113-1 at 3; 116 at 5.] Lazarus's CEO Mark Thompson also provided deposition testimony, and portions of his testimony were marked “confidential.” [Doc. 113-1 at 3.]

Also pursuant to the discovery process, Plaintiffs subpoenaed and sought to depose Lazarus's sole PBA Elixir manufacturer, Vitae Enim Scientific, Inc. (“VeV”), and its principals, Boris Gites and Charles Cavallino (collectively, “the VeV parties”). [Docs. 113-1; 116 at 5.] VeV is located in San Diego, California, and the VeV parties requested that a separate protective order be entered in the Southern District of California to facilitate production of its confidential materials and to protect any deposition testimony given in the present case as needed while avoiding subjecting itself to this Court's jurisdiction (the “Protective Order”). [Docs. 113-1 at 4.] Plaintiffs agreed to that request and submitted a stipulated Protective Order to the California District Court, which entered the Protective Order on February 22, 2019. [Doc. 113-2.] Similar to the Confidentiality Order, the Protective Order prohibits materials designated as “confidential” from being “used for any purpose other than in connection with compliance with this Order or the South Carolina Action, unless and until such designation is removed either by agreement of the Parties, or by order of the Court.” [Id. ¶ 7 (emphasis added).] And, also similar to the Confidentiality Order, the Protective Order provides a process for de-designating materials as confidential. [Id. ¶ 13.]

On March 12, 2019, the VeV parties produced documents responsive to Plaintiffs’ subpoenas, many of which were designated as confidential. [Docs. 113-1 at 4; 116 at 5.] The Parties also scheduled depositions for the VeV parties to take place on April 24 and 25, 2019. [Docs. 113-1 at 4; 116 at 5.]

On April 5, 2019, Plaintiffs filed suit in the Southern District of California against the VeV parties (the “California Action”), alleging claims of misappropriation of trade secrets and unfair competition among other causes of action. See Concordia Pharm. Inc. S.A.R.L. v. Vitae Enim Vitae Sci. Inc., No. 3:19-cv-00643-GPC-JLB, Doc. 1. Then, on April 15, 2019, Plaintiffs filed a motion for preliminary injunction in the California Action seeking to prohibit VeV from manufacturing Lazarus's PBA Elixir (the “Injunction Motion”). Id., Doc. 11-2. Plaintiffs’ memorandum in support of the injunction relied extensively upon materials obtained through discovery in this case that had been designated as confidential and had not been de-designated as such under the process set out in the Confidentiality Order or Protective Order (collectively, the “Orders”). [Doc. 113-3; see also Docs. 113-8 at 4; 116 at 6.] Plaintiffs sought to file the confidential materials under seal and requested of the California District Court that Plaintiffs “be permitted to use this information in connection with this action and file the [confidential] documents ... under seal.” Concordia Pharm. Inc. S.A.R.L., No. 3:19-cv-00643-GPC-JLB, Doc. 11-15.

Defendants obtained a redacted copy of the injunction filings a few days after they were filed, and within 24 hours following their review, Defendants’ attorney notified Plaintiffs’ counsel that Plaintiffs’ use of the confidential materials in the Injunction Motion clearly violated the Confidentiality Order. [Doc. 113-4 at 2.] Accordingly, counsel demanded that Plaintiffs withdraw the Injunction Motion by the end of the day. [Id.] Counsel sent this notice the morning of Friday, April 19, 2019. [Id.] Later the same day, counsel for the VeV parties notified Plaintiffs’ attorney that Plaintiffs’ preliminary injunction filing also violated the Protective Order and demanded the Injunction Motion be withdrawn. [Doc. 113-5 at 2.] Counsel for the VeV parties informed Plaintiffs’ attorney that if Plaintiffs refused to withdraw the Injunction Motion, the VeV parties would not appear for the scheduled depositions the following week because Plaintiffs had “demonstrated a clear unwillingness to adhere to the Court's express mandate with respect to discovery.” [Id.] Defendants’ counsel also notified Plaintiffs’ attorney that if the depositions did not proceed as scheduled because of Plaintiffs’ refusal to withdraw the Injunction Motion, Defendants would request an award of fees and costs wasted because of Plaintiffs’ conduct. [Doc. 113-6 at 2.]

*3 Plaintiffs refused to voluntarily withdraw the Injunction Motion, however, and on the night of Friday, April 19, filed an ex parte motion with the California District Court requesting an order finding Plaintiffs’ motion to file documents under seal was proper under the Protective Order and compelling the VeV parties to attend the depositions as scheduled on April 24 and 25. [See Doc. 113-8]; Concordia Pharm. Inc. S.A.R.L., No. 3:19-cv-00643-GPC-JLB, Doc. 11. Realizing that the depositions would proceed as scheduled if Plaintiffs prevailed concerning their motion, Defendants’ counsel determined they needed to travel to San Diego and be prepared for that contingency. [Doc. 113-1 at 8.] Accordingly, Counsel traveled from Greenville, South Carolina, to San Diego, arriving on the night of Monday, April 22. [Id.]

The next day, April 23, the California District Court scheduled a hearing to take up Concordia's ex parte motion on April 24. [Docs. 113-1 at 8; 116 at 8.] Following that hearing, the Honorable Barry Ted Moskowitz, the District Court Judge who had issued the Protective Order, denied Plaintiffs’ motion, ruling that Plaintiffs’ injunction filings plainly violated the Protective Order's prohibition against the use of confidential materials outside of the South Carolina Action. [Doc. 113-9 at 18–19.] Concordia subsequently withdrew the Injunction Motion the next evening. [Docs. 113-1 at 8; 116-11.]

On April 30, 2019, counsel for Defendants notified Plaintiffs’ attorney that Defendants would be filing an “appropriate motion to recover its fees and costs unless Concordia w[ould] agree to reimburse Defendant[s] for them.” [Doc. 116-12.] Defendants asked that Plaintiffs apprise them of their position by noon the following day. [Id.] The parties exchanged communications over the next few days discussing the basis for the proposed motion and the amounts Defendants would seek to recover. [Id.]

Finally, on May 3, at 12:48 p.m., Defendants’ counsel sent an email to Plaintiffs’ attorney as follows:

[Doc. 120-1 at 3.] Counsel later extended the deadline for a response from Plaintiffs until 10 a.m. on Monday. [Id. at 2.] Defendants represent, however, that Plaintiffs never responded, and Defendants filed their motion for sanctions on May 6, 2019. [Doc. 120 at 12.]

The Court has authority to sanction a party for failure to comply with a protective order pursuant to Rule 37(b). SAS Inst., Inc. v. World Programming Ltd., No. 5:10-cv-25-FL, 2014 WL 1760960, at *4 (E.D.N.C. May 1, 2014) (collecting cases). “The sanctions available under Federal Rule of Civil Procedure 37(d) are those set forth in Rule 37(b)(2)(A)(i)–(vi).” In re: Am. Med. Sys., Inc. Pelvic Repair Sys. Prod. Liab. Litig., MDL No. 2325, 2016 WL 6645778, at *5 (D.S.C. Nov. 8, 2016). “Furthermore, under Rules 37(b)(2)(C) and 37(d)(3), ‘instead of or in addition to’ the more severe sanctions set forth in Rule 37(b)(2)(A), the court ‘must require the party failing to act, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.’ ” Id. “The Fourth Circuit has developed a four-part test for a district court to use when determining what sanctions to impose under Rule 37. The court must determine (1) whether the non-complying party acted in bad faith, (2) the amount of prejudice that noncompliance caused the adversary, (3) the need for deterrence of the particular sort of non-compliance, and (4) whether less drastic sanctions would have been effective.” Anderson v. Found. for Advancement, Educ. & Emp't of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998).

*4 Defendants argue that the Court should sanction Plaintiffs for violating the Orders. [Doc. 113-1.] The Court agrees.[3]

Plaintiffs plainly violated the Orders, first by using the confidential materials as support for the Injunction Motion, and then by refusing to withdraw the Injunction Motion when Defendants demanded that they do so. Plaintiffs do not argue that their filing of the documents in support of the Injunction Motion was somehow in compliance with the Orders, which prohibited confidential materials from being used for any purpose other than in connection with complying with the Orders or with the South Carolina Action. [Doc. 70 ¶ 5(a); Doc. 113-2 ¶ 7.] Nor do they argue that they even attempted to follow the procedures set out in the Orders for de-designating materials as confidential. [Doc. 70 ¶ 8; Doc. 113-2 ¶ 13.] In fact, they do not even argue that there was any reasonable reading of the Orders under which their conduct was in compliance.[4] The undersigned also discerns no ambiguity in the Orders, and the Court finds that Plaintiffs acted in bad faith in refusing to withdraw the Injunction Motion before litigating the issue.

*5 Plaintiffs argue that the Court should not impose sanctions because Defendants were not prejudiced by any violation of the Orders. [Doc. 116 at 12–13.] The Court disagrees. Had Plaintiffs promptly withdrawn the Injunction Motion when Defendants demanded that they do so, rather than insisting on litigating the issue, they would have saved Defendants’ counsel from traveling across the country for the deposition that ended up not occurring. For that reason, Plaintiffs’ refusal to withdraw the Injunction Motion prejudiced Defendants by causing them to incur the expenses of that trip, at a minimum.[5]

Plaintiffs next argue that they should not be held responsible for the nonoccurrence of the depositions because the VeV parties also played a role in the cancellation of the depositions. [Id. at 13.] The Court disagrees with Plaintiffs’ analysis.

The VeV parties made their position clear on Friday: They would be deciding that day whether they would be participating in the depositions, and they would not voluntarily participate unless Plaintiffs withdrew their Injunction Motion by the end of the day. [Doc. 113-5 at 2.] The VeV parties’ position was a reasonable one, and Plaintiffs do not argue otherwise. The VeV parties could not well expose their confidential information to a party who was unwilling to abide by the confidentiality agreements it enters into. Plaintiffs were well aware of the VeV parties’ position, and Defendants put Plaintiffs on notice that if the depositions did not happen because Plaintiffs persisted in violating the protection order by refusing to withdraw the Injunction Motion that day, Defendants would seek to hold Plaintiffs accountable.

Plaintiffs’ response was not only to continue to refuse to withdraw the Injunction Motion before the weekend, but actually to exacerbate the situation by moving to require the VeV parties to attend the depositions as scheduled, thereby forcing Defendants to prepare, and travel across the country, for depositions that would not occur if Plaintiffs did not prevail on its motion. Plaintiffs make no argument now that Defendants’ response to the difficult situation they found themselves in was either unforeseeable or unreasonable.

The bottom line is that Plaintiffs acted indefensibly, and in bad faith, in refusing to promptly remedy the situation.[6] In so doing, they put the other parties in difficult positions, and the other parties all responded predictably and reasonably. It was Plaintiffs who were to blame for their bad-faith noncompliance, and their refusal to satisfy the obligations that the Orders imposed resulted in harm to Defendants.[7]

*6 The Court also finds that there is certainly a need for deterrence of this sort of noncompliance. Plaintiffs made a conscious decision to disregard their obligations under the Orders. Clearly sanctions are necessary to alter their decision-making calculus, in addition to remedying the harm they have caused to others by their noncompliance.

In sum, for the reasons discussed, the Court finds that an award of sanctions is appropriate. At this stage, however, the Court does not have before it enough to make findings regarding the amount of prejudice that Plaintiffs’ noncompliance caused. Accordingly, by July 3, 2019, Defendants shall file a memorandum addressing that issue, along with an affidavit of costs and fees. Plaintiff shall file a response by July 10, 2019.

Wherefore, based upon the foregoing, the Defendants’ motion for sanctions [Doc. 113] is GRANTED. By July 3, 2019, Defendants shall file a memorandum addressing the amount of prejudice that Plaintiffs’ noncompliance caused, along with an affidavit of costs and fees. Plaintiff shall file a response by July 10, 2019. Thereafter, the Court will issue a separate Order addressing the amount of sanctions.

IT IS SO ORDERED.

Although no party is proceeding pro se in this case, on February 4, 2019, this Court consolidated this case as the lead case with Civil Action Number 6:18-cv-704-HMH-JDA and referred all actions to the undersigned for pretrial consideration. [Doc. 85.]

The Order provides:

Plaintiffs argue that, regardless of whether sanctions are otherwise justified, the Court should not award sanctions because Defendants failed to satisfy Local Civil Rule 7.02, D.S.C. [Doc. 116 at 16.] That rule requires, with certain exceptions that do not apply here, that “all motions shall contain an affirmation by the movant's counsel that prior to filing the motion he or she conferred or attempted to confer with opposing counsel and attempted in good faith to resolve the matter contained in the motion.” Plaintiffs do not deny that Defendants’ motion contained the affirmation; rather, they argue that the affirmation was incorrect. The Court disagrees. Defendants’ counsel several times brought Plaintiffs’ noncompliance to opposing counsel's attention and warned that if Plaintiffs’ intransigence resulted in the cancellation of the depositions, Defendants would seek to hold Plaintiffs responsible for the resulting harm. When Plaintiffs continued to refuse to comply and Defendants ended up traveling to, and preparing for, depositions that did not occur, counsel demanded that Defendants be reimbursed for their losses or they would be forced to make an appropriate motion. Defendants’ counsel even went so far as to identify a specific amount—$38,100—that he expected his client would accept to settle the matter, and Plaintiffs’ counsel offered no further response. In short, Defendants’ counsel met and exceeded what Rule 7.02 required, and Plaintiffs offer no authority supporting their argument that the rule demanded more.

In cursorily arguing that their use of the confidential materials in the California Action was not in bad faith, Plaintiffs point out that they moved to file the documents under seal in the California District Court. [Doc. 116 at 12.] But Plaintiffs’ efforts to file the materials under seal is a red herring because it was the fact that the materials were being used at all in the California Action that violated the Orders, not the manner in which the materials were filed.

It is for this reason that Plaintiffs miss the mark with their arguments that they “quickly requested clarification from the Southern District of California and withdrew their filings” once the California court ruled against them. [Doc. 116 at 14–15 (citing Smith v. Bradley Pizza, Inc., No. 0:17-cv-2032-ECT-KMM, 2019 WL 430851 (D. Minn. Feb. 4, 2019).] Plaintiffs’ insistence on litigating the issue rather than promptly withdrawing the Injunction Motion—along with moving to have the California District Court require the depositions to proceed as scheduled—prejudiced Defendants by leaving them in the position of having to travel to and prepare for depositions that did not end up taking place.

Defendants argue that had Plaintiffs followed the de-designation process set out in the Orders, they “would have been obligated to consult with both Defendants and counsel for VeV,” but by doing so, it would have lost the element of surprise that it enjoyed in filing the California Action and moving for a preliminary injunction. [Doc. 113-1 at 5–6.]

Plaintiffs also argue that “the depositions of the VeV Parties were postponed, not cancelled” and thus “Defendants’ preparations for those depositions, just like Plaintiffs’ preparations for those same depositions, will be put to use when the depositions are rescheduled.” [Doc. 116 at 15.] However, this argument goes only to the extent of the damage caused to counsel and has little or no bearing regarding whether sanctions should be awarded.