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Scientific Games Corp. v. AGS, LLC

United States District Court, D. Nevada

May 18, 2018

Scientific Games Corp., et al., Petitioners,
v.
AGS LLC, Respondent Narrowed Document Requests Judge Koppe's Order

          ORDER OVERRULING PETITIONER'S OBJECTIONS, AFFIRMING MAGISTRATE JUDGE'S ORDER, AND DENYING MOTION TO STRIKE [ECF NOS. 66, 67, 70]

          Jennifer A. Dorsey U.S. District Judge

         This discovery dispute arises from petitioners Scientific Games Corp., Balley Technologies, Inc., and Bally Gaming, Inc.'s (Scientific Games) attempt to obtain documents and deposition testimony from AGS, LLC, which is a third party to a separate court action filed against Scientific Games in the Northern District of Illinois. Magistrate Judge Koppe quashed Scientific Games's third-party subpoena in part and compelled discovery in part. Scientific Games objects to Judge Koppe's order and asks me to overrule the parts of the order quashing the subpoenas and compelling AGS to produce the requested information. I overrule Scientific Games's objections and affirm Judge Koppe's order. AGS also moves to strike Scientific Games's objections for failure to comply with local rules. I deny that motion.

         Background

         Scientific Games makes automatic card shufflers for casino card tables. It is also a defendant in a case pending in the United States District Court for the Northern District of Illinois. The plaintiffs in that case brought antitrust-monopolization claims against Scientific Games arising out of alleged sham patent litigation against DigiDeal, a company that also makes automatic card shufflers. AGS is a non-party to the Illinois action, but it entered into an intellectual-property agreement with Shuffle Tech, one of the Illinois plaintiffs, for technology related to automatic card shufflers. DigiDeal once had a similar agreement with Shuffle Tech, which Shuffle Tech alleges that Scientific Games disrupted by pursuing the sham patent litigation.

         Scientific Games served AGS with deposition and document subpoenas aimed at AGS's involvement in developing and selling a card shuffler based on the technology acquired from Shuffle Tech. AGS objected to the majority of the requests, so Scientific Games initiated this action with a motion to compel AGS to comply. After the parties met and conferred and narrowed their dispute to specific document requests and deposition topics, they filed a joint statement outlining the remaining issues requiring court attention. The table below outlines the narrowed requests and Judge Koppe's determinations for each:

Narrowed Document Requests
Judge Koppe's Order
No. 2
Documents sufficient to show AGS's sales projections for any casino automatic card shufflers covered by AGS's agreement with Shuffle Tech and/or the sales of which will result in any compensation to Shuffle Tech.
Quashed
No. 3
Documents sufficient to show AGS's current and projected costs for manufacturing any casino automatic shufflers covered by AGS's agreement with Shuffle Tech and/or the sales of which will result in compensation to Shuffle Tech.
Quashed
No. 4
Documents sufficient to show when any casino automatic card shufflers covered by AGS's agreement with Shuffle Tech and/or the sales of which will result in any compensation to Shuffle Tech became or will be available for sale, and in what quantity.
Quashed
No. 6
Documents sufficient to show all projections related to automatic card shufflers for future payments, royalties, or other financial transfers from AGS to DigiDeal, Shuffle Tech, Aces Up, and/or Poydras-Talrick Holdings.
Quashed

Deposition Topics

No. 1
Your relationship with any Plaintiff and/or DigiDeal, including but not limited to any contractual, corporate, financial, or other relationship related to automatic card shufflers.
Compelled
No. 2
Your sales, cost, and revenue projections for any shuffler using or incorporating technology developed by Shuffle Tech.
Quashed
No. 3
All payments by You to any Plaintiff or DigiDeal related to automatic card shufflers.
Compelled
No. 4
The revenue or profits that any Plaintiff has realized or is entitled to in connection with Your development and sale of any card shuffler.
Compelled

         Judge Koppe quashed document requests nos. 2, 3, and 6 and deposition topic no. 2 because AGS demonstrated that the information was confidential and contained trade secrets, and that AGS risked competitive disadvantage through disclosure to Scientific Games, a competitor that already enjoys a large market share in the automatic-card-shuffler industry.[1]Judge Koppe also determined that Scientific Games did not meet its burden to show that it has a substantial need for the information.[2] Judge Koppe noted that AGS had already agreed to provide a report of actual payments and expenses that AGS has made to Shuffle Tech and AGS presented evidence showing that any future royalty payment obligation ceased in April 2018.[3]

         Judge Koppe quashed document request no. 4 because AGS's Vice President of Table Games declared under penalty of perjury that “there is no current prototype [for their automatic card shuffler], and, as a result, there are no documents showing when any such shuffler will be sold and in what quantity.”[4] Because it would therefore be impossible to comply with the document request, Judge Koppe quashed the subpoena for that request.

         Scientific Games moves for reconsideration of the portions of Judge Koppe's order quashing its subpoenas. It contends that Judge Koppe clearly erred when she determined that AGS established that the information Scientific Games sought was confidential or contained trade secrets. Scientific Games also argues that Judge Koppe's determination that Scientific Games did not meet its burden to show it has a substantial need for the requested information was contrary to law.

         Discussion

         A. Standard of review

         A district judge may reconsider any pretrial order of a magistrate judge if it is “clearly erroneous or contrary to law.”[5] The clearly erroneous standard applies to a magistrate judge's findings of fact.[6] “A finding is clearly erroneous when[, ] although there is evidence to support it, the reviewing body on the entire evidence is left with the definite and firm conviction that a mistake has been committed.”[7] A magistrate judge's order “is contrary to law when it fails to apply or misapplies relevant statutes, case law[, ] or rules of procedure.”[8] The district judge “may affirm, reverse, or modify” the ruling made by the magistrate judge, or remand the ruling to the magistrate judge with instructions.[9]

         B. Trade-secret and confidential-information discovery standard

         “The Ninth Circuit has long held that nonparties subject to discovery requests deserve extra protection from the courts.”[10] A third-party can object to the production of subpoenaed documents to the extent that doing so discloses “a trade secret or other confidential research, development, or commercial information.”[11] In analyzing such an objection, courts must first determine if the subpoenaed party has shown that the requested information is protected as a trade secret or confidential commercial information.[12] The party resisting discovery “must make a strong showing that it has historically sought to maintain the confidentiality of this information.”[13]

         When a subpoenaed party meets its initial burden, “the burden shifts to the requesting party to show a ‘substantial need for the testimony or material that cannot be otherwise met without undue hardship . . . .”[14] “Substantial need” requires a showing that “the requested discovery is relevant and essential to a judicial determination of [the party's] case.”[15] The district judge must “balance the need for the trade secrets [or confidential information against the claim of injury resulting from disclosure.”[16] “The determination of substantial need is particularly important in the context of enforcing a subpoena when discovery of a trade secret or confidential commercial information is sought from non-parties.”[17] If the requesting party establishes a substantial need, the court then looks to whether procedures exist (i.e., protective orders) to mitigate any burden or prejudice to the nonparty.[18]

         D. Judge Koppe's order was not clearly erroneous or contrary to law.

         AGS objected to document requests 2, 3, and 6 because they sought “information that is a trade secret and/or confidential commercial information.”[19] Notwithstanding those objections, AGS indicated that it did not have “adequate responsive documents” to any of the document requests because “AGS does not have a casino card shuffler fully developed and/or ready for production, mass production[, ] or a complete trial in a casino.”[20] Because no product exists, AGS contends that it does not have sales projections, manufacturing costs, or a sense of quantities of the product that AGS will eventually produce. To the extent that AGS has draft projections, AGS contends they are speculative and confidential. But in an effort to resolve this matter, AGS agreed to provide to Scientific Games immediate written notice of all actual payments, if any, when paid to Shuffle Tech through April 2018, when all of AGS's payment obligations to Shuffle ...


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