IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA OTC SOLUTIONS, LLC; GOLDEN

DRAGON MEDIA, INC.; and PUDONG, LLC, Plaintiffs, v. JOHN DOES 1-50, Defendants. HEARING REQUESTED

PLAINTIFFS REPLY MEMORANDUM IN SUPPORT OF MOTION FOR IMMEDIATE COMPLIANCE WITH SUBPOENA AND ORDER TO SHOW CAUSE AGAINST ICONTACT CORPORATION Case No. 1:10-cv-00500-UA-LPA

Plaintiffs OTC Solutions, LLC, Golden Dragon Media, Inc. and Pudong, LLC (collectively Plaintiffs) respectfully submit this memorandum in support of their Motion for Immediate Compliance with Subpoena and Order to Show Cause Against iContact Corporation (the Motion). INTRODUCTION Plaintiffs subpoenaed information from iContact that is uniquely in iContacts possession, custody, or control, so that Plaintiffs can attempt to learn the identities of certain unknown individual and/or entities involved in the theft of information and data belonging to Plaintiffs. However, iContact Corporation (iContact) still has not

months after being served with a subpoena duly issued by this Courtfully complied with its clear obligations under the Federal Rules of Civil Procedure. Despite tremendous effort, the parties were unable to resolve their disputes and Plaintiffs only remaining
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recourse was to file the pending Motion seeking iContacts compliance.

iContact

opposed the motion, and belatedly sought further affirmative relief in the form of a protective order. One day after filing its opposition, iContact proceeded to attempt to comply in part with the subpoena and produced certain documents pursuant to an earlier negotiated letter agreement between the partiesand in the absence of a protective order issued by this Court. Because iContact still has not fully complied with the subpoena, and because the substance of iContacts opposition seeks additional affirmative relief, Plaintiffs are filing this reply memorandum. Accordingly, Plaintiffs respectfully request that this Court grant their Motion and enter an order requiring iContact to fully comply with the terms of the subpoena including preserving evidence responsive to the subpoena and appearing before this Court to show cause why it should not be held in contempt. SUMMARY OF ADDITIONAL FACTS On September 30, 2010, after more than two months of negotiating iContact Corporations (iContact) compliance with Plaintiffs subpoena for the production of documents issued on July 19, 2010 (the Subpoena), iContact had still not complied and the parties were at an impasse in their negotiations. Throughout Plaintiffs conferences and negotiations with iContact, iContact never once sought a protective order, preferring instead to protect its interests through some form of letter agreement. As a result of the parties failed negotiations, Plaintiffs only remaining recourse was to seek relief from this Court and filed the pending Motion. (See Docket no. 9.)

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iContact filed its Response to Plaintiffs Motion on October 20, 2010.

(See

Docket no. 12.) The Response went beyond simply answering Plaintiffs arguments, and attempted to seek affirmative relief in the form of a protective order. Curiously, despite having filed a Response in opposition to Plaintiffs Motion, on October 21, 2010, iContact attempted to comply with the Subpoena by producing materials (the Production) it deemed responsive pursuant to the terms of a signed letter agreement (the Agreement) (see Pls. Mem. Supp. of Motion, 10-11; Ex. H to Pls. Mem. Supp. of Motion), which the parties had been negotiating over several months and to which iContact had previously objected (necessitating the filing of the present motion). However, iContacts Production is critically incomplete. Missing from the

Production is vital evidence from a crucial period of timeApril and May 2010. Specifically, iContact produced certain data logs that demonstrate when the accounts in question were accessed and provide the IP addresses from which the access occurred. Unfortunately, the data logs produced by iContact begin on June 28, 2010. The data theft at issue in this litigation occurred sometime prior to the end of April, and the illegal spamming occurred in late April and May of 2010. Thus, it is critical to Plaintiffs case to learn when certain IP addresses were used in the months prior to June 2010 to access both Plaintiffs accounts and the accounts of the suspected John Doe defendants. From the date of the Production until the date of this filing, counsel for Plaintiffs has been conferring with counsel for iContact regarding its production, including the missing data logs. While all other disputes have been resolved, iContacts only

explanation regarding the missing data logs has been, and remains, that the data in
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question does not exist. iContact has not explained whether this is because the data never existed, because the data was erased or destroyed, or because the data simply exists in a hard-to-access location. The answer to this question is obviously very important to Plaintiffs, because if the data logs have been erased or exist in a hard-to-access location, there is still some chance that Plaintiffs will be able to recover this critical information through forensic investigation. Moreover, if the data has been erased or destroyed, this conduct would have occurred in violation of iContacts duty to preserve evidence, which was first triggered as least as early as in late April1 when iContact first learned of the data theft and illegal spamming, and was later reiterated in a preservation letter from counsel for Plaintiffs that was sent to iContact on June 22, 2010. (see iContact Preservation Letter, June 22, 2010, attached hereto as Exhibit A). ARGUMENT iContact has failed to meet its burden of persuasion regarding its reason for not fully complying with the Subpoena. (See Pls. Mem. Supp. of Motion, 11 (stating burden is on party opposing compliance and citing Kinetic Concepts, Inc. et al. v. Convatec Inc., 268 F.R.D. 226, 243 (M.D.N.C. 2010)).) Moreover, iContacts request for a protective order has been rendered moot by its partial Production pursuant to the terms of the
1

This obligation might even have been triggered much earlier because sometime in early February 2010, iContact experienced what it deemed a security incident with respect to communications from its customers that their subscribers were receiving more spam than usual . . . [with] [t]hese customers believ[ing] there was a correlation between the increase in spam and their listing of the subscriber names in their iContact lists as some of their subscribers used unique identifiers to subscribe to their mailing lists. According to iContact, [u]pon receipt of these communications, [it] launched an investigation that included working with the Raleigh branch of the FBI and the District Attorneys office[,] and [b]ased on the information [iContact had as of the date of its press release about this incident], the subscriber email address is the only data that was compromised. See http://blog.icontact.com/blog/icontact-internal-investigation-of-spam-emails-updated/.

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Agreement. As set forth below, even if iContacts request is not moot, iContacts request should be denied as untimely. Accordingly, this Court should grant Plaintiffs Motion and enter an Order requiring iContact to fully comply with the Subpoena including preserving all relevant and responsive evidence and appear and show cause why it should not be held in contempt for its actions. A. iContact Should be Compelled to Immediately Comply With the Subpoena and to Show Cause Why it Should Not be Held in Contempt.

iContacts failure to fully comply with the Subpoena and the unavailability of vital evidence are inexcusable actions which warrant the Court granting Plaintiffs Motion. A non-party is subject to the same scope of discovery under [Rule 45] as that person would be as a party to whom a request is addressed pursuant to Rule 34 of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 45 advisory committees notes, 1991 Amendment, Subdivision (a); see also Kinetic Concepts, 268 F.R.D. at 240 (quoting the same advisory committee note). Moreover, Rule 37 provides generally for sanctions against parties or persons unjustifiably resisting discovery. Kinetic Concepts, 268 F.R.D. at 244 (quoting Fed. R. Civ. P. 37 advisory committees notes, 1970 Amendment) (emphasis added). Thus, although a non-party to the case, under the Federal Rules of Civil Procedure iContact is appropriately subject to a motion to compel and sanctions for failure to comply with the Subpoena. iContacts unjustifiable resistance to complying in full with the Subpoena is grounds for this Court to grant Plaintiffs Motion. iContact is not a party to this case, yet possesses documents Plaintiffs need to pursue this case. Specifically, the vital information which Plaintiffs seek from iContact is
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data logs of iContact customer activity during the time period of April and May 2010. The information contained in the data logs from that time period is crucial to Plaintiffs case regarding the identities of the person(s) and/or entities that stole and used Plaintiffs valuable subscriber lists (the Subscriber Lists). Plaintiffs initially sent a letter to iContact in early May 2010 notifying iContact of Plaintiffs concerns regarding the unauthorized use of their Subscriber Lists as well as the allegation that a security breach had occurred within iContact. (See Ex. A to Pls. Mem. Supp. of Motion.) Plaintiffs also sent a letter to iContact in June 2010 specifically requesting that all information and documents relevant to the unauthorized use of Plaintiffs Subscriber Lists be preserved by iContact because of potential litigation. (See Ex. A.) Both letters clearly put iContact on notice that Plaintiffs believed they had been harmed and that litigation regarding that harm was likely. However, even though it has been on formal notice since May 4, 2010 that it had evidence vital to potential litigation, iContact now claims that any evidence dated prior to June 28, 2010 is unavailable. Plaintiffs are unaware if iContacts assertion that the data is not available means that it never existed, that it has been destroyed, or that it is simply burdensome to access. Plaintiffs lack of knowledge on this issue stems from iContacts failure to respond to counsels inquiry on this specific issue. In any event, Plaintiffs need access to that data in order to further their case. The unavailability of data prior to June 28, 2010 significantly hinders Plaintiffs case. Plaintiffs Subscriber Lists were housed at iContact and Plaintiffs believe that the defendants in this case accessed their Subscriber Lists through iContact. Plaintiffs need
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access to iContacts data logs of customer activity for the relevant time period in order to determine who the John Doe defendants are in order to name them in an amended pleading. However, Plaintiffs have not been able to access that crucial evidence due to iContacts failure to comply with that remaining portion of the Subpoena. The most appropriate solution to this problem is an order from this Court compelling iContact to comply with the Subpoena which should at least include instructions to iContact to preserve all evidence relating to the data logs in question. B. iContacts Request for a Protective Order Should be Denied Because it is Now Moot

iContact asserts that production of documents and information responsive to the Subpoena will contain commercially valuable and trade secret electronic data. (See iContacts Resp. to Motion, 3.) iContact thus requests that this Court enter a protective order in line with the terms of the Agreement. In addition, iContact requests that this Court also bind each of the Plaintiffs individually to the terms of the requested protective order because iContact purportedly had insisted on Plaintiffs being individually bound to the Agreement all along. (See iContacts Resp. to Motion, 4.) Contrary to iContacts assertions, the request that the individual Plaintiffs be bound by the Agreement was not insisted upon by iContact throughout the conferences. In fact, that request was expressly removed from the Agreement as a result of negotiations between counsel for Plaintiffs and iContact and is memorialized as such in email communications among counsel. (See Exhibit D to Pls. Mem. Supp. of Motion, 6-7; Pls. Mem. Supp. of Motion, 27).

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Remarkably, inconsistent with iContacts assertion that a protective order is necessary for its production in response to the Subpoena and that Plaintiffs must be individually bound to the protective order, iContact has alreadywithout a protective orderpartially produced responsive materials pursuant to the terms of the Agreement. The Agreement does not contain any provision that binds the Plaintiffs individually to the Agreement. Included within the partial Production was information that iContact labeled attorneys eyes only, as provided for in the Agreement. The Production has now rendered moot both iContacts opposition to Plaintiffs Motion and iContacts request for a protective order from this Court. As iContact is clearly comfortable enough with the terms of the Agreement to produce information it deems highly confidential to Plaintiffs without a protective order in place, a protective order is no longer needed. Accordingly, iContacts request for a protective order should be denied as moot. However, even if the Court determines that iContacts request for a protective order is not moot, the request should still be denied as untimely. Although implied by iContact in its Response, the duty to seek a protective order was not, and never has been, on Plaintiffs.2 The party seeking the protective order, who has the burden of requesting and supporting it, should also be responsible for initiating the process. Permitting that party to . . . sit back and wait for a motion to compel can only serve to prolong and exacerbate discovery disputes. Brittain v. Stroh Brewery Co., 136 F.R.D. 408, 413 (M.D.N.C. 1991).
2

A request for a protective order must be timely made and is

Moreover, it was not the Courts obligation to provide any protections as to any confidential information which might be sought . . . (see iContacts Resp. to Motion, 1.) in this Courts Order for Accelerated Discovery, as is implied by iContact.

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considered timely if made prior to the date set for producing discovery. [But,] a failure to request a protective order prior to the time set for producing discover may be excused for good cause, such as lack of sufficient time or opportunity to obtain an order. See id. (citations omitted). Furthermore, the request for a protective order must be particular . . . and [include] a specific demonstration of facts in support of the request as opposed to conclusory or speculative statements about the need for a protective order and the harm which would be suffered without one. Id. at 412 (citation omitted). iContact has had the burden of requesting a protective order from the moment the Subpoena was issued and should have done so quickly. Until Plaintiffs were forced to file the Motion, however, iContact did not request such an order and has instead exacerbated Plaintiffs discovery process. Moreover, iContact has not shown good cause for failing to timely move for a protective order. In fact, iContact has also failed to meet the burden of requesting a protective order because it has not provided this Court with a specific demonstration of facts in support of its request nor has it shown the harm which would be suffered without a protective order. iContacts request for a protective order should be denied as moot. However, if it is not deemed moot, iContacts request is untimely, not properly before this Court, and iContact has failed to meet its burden to request a protective order. Accordingly, Plaintiffs respectfully request that this Court issue an order compelling iContact: (1) to immediately and fully comply with the Subpoena by explaining why the data logs at issue are unavailable prior to June 28, 2010 and taking all steps necessary to preserve any remaining evidence concerning those data logs; and (2) to
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appear and show cause why it should not be held in contempt for its failure to comply with the Subpoena and for the destruction of evidence, if appropriate. Plaintiffs

specifically request that the Court order that iContacts compliance include halting any destruction of relevant evidence relating to the data logs which may be occurring, preserving all relevant evidence relating to the data logs, and allowing Plaintiffs access to iContacts facilities and/or computer servers in order to attempt to retrieve evidence relating to the data logs currently deemed unavailable. CONCLUSION For the foregoing reasons, Plaintiffs respectfully request that this Court grant its Motion. DATED this 6th day of December, 2010. /s/ M. Todd Sullivan M. Todd Sullivan, NCSB # 24554 Womble Carlyle Sandridge & Rice, PLLC Post Office Box 831 Raleigh, North Carolina 27602 Telephone: (919) 755-2100 Facsimile: (919) 755-6058 Email: tsullivan@wcsr.com ATTORNEYS FOR PLAINTIFF OF COUNSEL: Brent R. Baker Juliette P. White John E. Delaney PARSONS BEHLE & LATIMER 201 South Main Street #1800 Salt Lake City, UT 84111 Phone: 801-532-1234 Fax: 801-536-6111 BBaker@parsonsbehle.com JWhite@parsonsbehle.com
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CERTIFICATE OF SERVICE I hereby certify I electronically filed the PLAINTIFFS REPLY MEMORANDUM IN SUPPORT OF MOTION FOR IMMEDIATE COMPLIANCE WITH SUBPOENA AND ORDER TO SHOW CAUSE AGAINST ICONTACT CORPORATION with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following non-CM/ECF participants by United States first class mail, postage prepaid and addressed as follows:

John L. Surratt Harris, Winfield, Sarratt & Hodges, LLP 1620 Hillsborough Street, Suite 200 Raleigh, NC 27605 jsurratt@harriswinfield.com

Neil S. Bagchi Bagchi Law, PLLC 51 Oakwood Drive Chapel Hill, NC 27517 neil@bagchilaw.com

DATED this 6th day of December 2010. /s/ M. Todd Sullivan M. Todd Sullivan, NCSB # 24554 Womble Carlyle Sandridge & Rice, PLLC Post Office Box 831 Raleigh, North Carolina 27602 Telephone: (919) 755-2100 Facsimile: (919) 755-6058 Email: tsullivan@wcsr.com ATTORNEYS FOR PLAINTIFF OF COUNSEL: Brent R. Baker Juliette P. White John E. Delaney PARSONS BEHLE & LATIMER 201 South Main Street #1800 Salt Lake City, UT 84111 Phone: 801-532-1234 Fax: 801-536-6111 BBaker@parsonsbehle.com JWhite@parsonsbehle.com

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