FILED

Electronically
CV22-02015
2023-03-27 03:53:12 PM
Alicia L. Lerud
Clerk of the Court
1 2620 Transaction # 9580324
Ryan T. Gormley, Esq.
2 Nevada Bar No. 13494
[email protected]
3 Brittany M. Llewellyn, Esq.
Nevada Bar No. 13527
4 [email protected]
Jonathan J. Winn, Esq.
5 Nevada Bar No. 12896
[email protected]
6 WEINBERG, WHEELER, HUDGINS,
GUNN & DIAL, LLC
7 6385 South Rainbow Blvd., Suite 400
Las Vegas, Nevada 89118
8 T: (702) 938-3838
F: (702) 938-3864
9 Attorneys for Defendants
David McNeely and 5 Alpha Industries, LLC
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12 IN THE SECOND JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA

13 IN AND FOR THE COUNTY OF WASHOE
14 HILLARY SCHIEVE, an individual; Case No. CV22-02015
VAUGHN HARTUNG, an individual, Dept. No. D15
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Plaintiffs,
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DEFENDANTS DAVID MCNEELY AND
17 v. 5 ALPHA INDUSTRIES, LLC’S
OBJECTION TO THE DISCOVERY
18 DAVID MCNEELY, an individual; 5 COMMISSIONER’S
ALPHA INDUSTRIES, LLC, a Nevada RECOMMENDATION FOR ORDER
19 limited liability company; and DOES I

20 through X and ROES I through X, inclusive,

21 Defendants.

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Defendants David McNeely and 5 Alpha Industries, LLC (“5 Alpha”) (collectively
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“Defendants”) submit this Objection to the Discovery Commissioner’s Recommendation for Order,
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dated March 15, 2023 based upon the following Memorandum of Points and Authorities, the papers
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and pleadings on file herein, and any oral argument that the Court elects to entertain.
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 1 MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION

3 Plaintiffs Hillary Schieve and Vaughn Hartung allege that Defendants McNeely and 5 Alpha

4 invaded their privacy and otherwise caused them damage by using a GPS device to monitor the

5 location of their vehicles as part of investigations performed on behalf of a presently unidentified

6 third party. McNeely is a licensed private investigator in the State of Nevada and owner of 5 Alpha.

7 In this objection, Defendants seek reversal of the Discovery Commissioner’s

8 Recommendation for Order (“Recommendation”), where the Discovery Commissioner ordered

9 Defendants to produce documents sufficient to identify the client(s) who hired Defendants to

10 investigate Plaintiffs (“Confidential Client(s)”). In making this decision, the Recommendation

11 erroneously determined that the identity of the Confidential Client(s) does not constitute a trade

12 secret under Nevada law. The Recommendation further erred by concluding that in deciding

13 whether to order the disclosure of information within the scope of NRS 648.200, a court may only

14 consider the discoverability of the information under NRCP 26(b)(1).

15 At bottom, the identity of a client that hires a private investigator is confidential and

16 sensitive information. The party hiring a private investigator expects confidentiality. Indeed, in a

17 typical private investigator/client engagement, awareness of the fact that a private investigator was

18 hired and, more importantly, by who could have obvious significant consequences. Think an

19 employer investigating an employee for possible workplace misfeasance or a spouse investigating a

20 spouse for possible infidelity. The artful pleading of claims that can survive Nevada’s liberal notice

21 pleading standard and a showing of relevance and proportionality should not be all that is required

22 to justify such discovery, particularly in a pre-discovery procedural posture, as is the case here. The

23 Discovery Commissioner’s decision otherwise is contrary to law and should not stand.

24 II. BACKGROUND

25 The Court granted Plaintiffs’ ex parte motion requesting leave to issue subpoenas to

26 Defendants seeking documents sufficient to identify the individual or entity that hired Defendants.
27 (See Order Granting Mot. for Leave to Issue Subpoenas, filed 01/20/23).

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 1 Defendants objected to the subpoenas, leading to Plaintiff Schieve, prior to the addition of

2 Hartung as a plaintiff, filing a motion to compel. (See Mot. to Compel, filed 02/02/23). Defendants

3 opposed the motion and moved for a protective order. (See Defs.’ Opp’n to Pls.’ Mot. to Compel

4 and Countermotion for Protective Order, filed 02/16/23). Defendants argued that the identity of the

5 Confidential Client(s) is confidential and protected information under NRS 648.200, NRS 49.325

6 (as a trade secret), and/or as confidential commercial information under NRCP 26(c)(1)(G). Given

7 this, Defendants argued that the information should not be ordered disclosed at this time and,

8 alternatively, other means could be implemented to prevent immediate and public disclosure, such

9 as staggered discovery or “Doe” pleading.

10 On March 15, 2023, the Discovery Commissioner issued the Recommendation. (See

11 Recommendation for Order, filed 03/15/23). The Discovery Commissioner granted Plaintiffs’

12 motion to compel, denied Defendants’ countermotion for protective order, and ordered Defendants

13 to “produce to Plaintiffs, no later than March 28, 2023, the documents described in the subpoenas

14 duces tecum previously served upon them in this action.” (Recommendation at 28). In doing so, the

15 Discovery Commissioner concluded that the identity of the Confidential Client(s) did not qualify for

16 protection as a trade secret under NRS 49.325 and was discoverable under NRS 648.200 because it

17 was relevant and proportional to the needs of the case. (See Recommendation at 5-16).

18 Defendants’ Motion to Dismiss, or Alternatively, Motion for a More Definite Statement is

19 pending. Defendants’ reply in support of the motion is currently due on March 30, 2023.

20 III. ARGUMENT

21 A. Legal Standard

22 Under NRCP 16.3, a party has 14 days to object to a discovery commissioner’s

23 recommendation. NRCP 16.3(c)(2); see also WDCR 24(6) (“A party shall have 14 days from

24 service of written findings of fact and recommendations [from the discovery commissioner] within

25 which to file and serve an objection, or a motion to adopt or modify the findings of fact and

26 recommendations.”) Upon receipt of an objection, the court may affirm, reverse, or modify the
27 discovery commissioner’s ruling or remand with instructions. NRCP 16.3(c)(3).

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 1 It does not appear that the Nevada Supreme Court has set forth the standard of review of an

2 objection to a discovery commissioner’s recommendation. The Court has remarked, however, that

3 the relationship between a discovery commissioner and the district court is similar to the

4 relationship between a magistrate judge and the federal district court. See Valley Health Sys., LLC v.

5 Eighth Judicial Dist. Court, 127 Nev. 167, 172, n. 8, 252 P.3d 676, 679, n. 8 (2011) (citing United

6 States v. Howell, 231 F.3d 615 (9th Cir. 2000)). Thus, under that parallel, a discovery

7 commissioner’s recommendation should be reviewed under a “clearly erroneous or contrary to law”

8 standard, the same standard afforded a federal district court’s review of an objection to a magistrate

9 judge’s recommendation on a non-dispositive issue. See 28 U.S.C. § 636(b)(1)(A); United States v.

10 Desage, 229 F. Supp. 3d 1209, 1212 (D. Nev. 2017). A recommendation is “clearly erroneous” if

11 the reviewing court has a “definite and firm conviction that a mistake has been committed.” Id.

12 (citation omitted). A recommendation is “contrary to law” “when it fails to apply or misapplies

13 relevant statutes, case law, or rules of procedure.” Id. (citation omitted).

14 B. The Discovery Commissioner Erred By Concluding That The Identity Of The

Confidential Client(s) Does Not Qualify For Protection As A Trade Secret.
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16 NRS 49.325 provides a privilege for trade secrets if “the allowance of the privilege will not

17 tend to conceal fraud or otherwise work injustice.” NRS 49.325(1). In Nevada, a trade secret is

18 broadly defined as “information that ‘derives independent economic value, actual or potential, from

19 not being generally known to, and not being readily ascertainable by proper means by the public,’

20 as well as information that ‘is the subject of efforts that are reasonable under the circumstances to

21 maintain its secrecy.’” Finkel v. Cashman Pro., Inc., 128 Nev. 68, 74, 270 P.3d 1259, 1264 (2012)

22 (quoting NRS 600A.030(5)(a)-(b)). The factors to consider in determining whether information

23 qualifies as a trade secret include: (1) the extent to which the information is known outside of the

24 business and the ease or difficulty with which the acquired information could be properly acquired

25 by others; (2) whether the information was confidential or secret; and (3) the extent and manner in

26 which the employer guarded the secrecy of the information. Id.

27 When it came to whether the identity of the Confidential Client(s) qualifies for protection as

28 a trade secret under NRS 49.325, the Recommendation relies on cases and reasoning related to

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 1 whether client lists generally qualify as a trade secret. (See Recommendation at 6-9). Under that

2 framework, the Discovery Commissioner reasoned that the inquiry focuses on costs and efforts

3 spent finding, developing, or retaining a client. (See Recommendation at 6:19-7:1) (“In fact, courts

4 have held that a customer list qualifies as a trade secret only if it was the product of great expense

5 and effort.”). The Discovery Commissioner found that Defendants did not make the necessary

6 showing under those considerations. (See Recommendation at 9:12-14) (“Significantly, Defendants

7 do not present evidence that they incurred any expense or exerted any effort to obtain this client.”).

8 These cases, however, did not address the private investigator/client relationship and ignore

9 the intrinsic importance of confidentiality when it comes to the business of a private investigator.

10 When addressing the confidential nature of the private investigator/client relationship, the

11 Recommendation effectively rejects the notion that the confidentiality associated with the private

12 investigator/client relationship is relevant to the trade secret inquiry: “As explained in the preceding

13 paragraph, while the personal relationship between a business and its customer has value, the

14 secrecy of that relationship is not what makes it valuable to the business.” (Recommendation at

15 9:18-20).

16 Under the Recommendation’s own reasoning, however, if the secrecy of the relationship

17 were what makes the relationship valuable to the business, the identity of the client would qualify

18 for trade secret protection. In the context of the private investigator/client relationship, the secrecy

19 of the relationship between the private investigator and client is precisely what makes the

20 relationship valuable to the business. Because, without the secrecy, there would be no relationship.

21 This differs from a typical business. For instance, Starbucks may have a list identifying

22 millions of customers for which they spent countless resources finding, developing, and retaining.

23 That list may qualify for trade secret protection under the traditional client list framework. Yet the

24 identity of a single Starbucks customer would not qualify as a trade secret because “the secrecy of

25 that relationship is not what makes it valuable to the business.” Indeed, Starbucks wants its

26 customers to publicly visit its stores, publicly consume its goods, and publicly reveal their
27 preference and relationship with Starbucks. Keeping the relationship “secret” would actually harm

28 Starbucks.

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 1 The same is not true for a private investigator and client. There, a client seeking a private

2 investigator expects confidentiality. If a private investigator does not maintain that confidentiality,

3 then the client will use a different private investigator who does; this could also prevent the private

4 investigator from obtaining new clients. Moreover, if such confidential information is readily

5 discoverable from any private investigator, then a potential client may just opt against using a

6 private investigator at all. In the private investigative industry, that is the “independent economic

7 value” derived from the identity of the client not being generally known. (See Recommendation at

8 11) (criticizing Defendants as not providing any “explanation for why the identity of their client

9 derives independent economic value from not being generally know”). It goes beyond mere

10 prevention of recruitment of a client by a competing private investigative firm—the confidentiality

11 is the secret sauce. Accordingly, without “the secrecy of that relationship,” there is no relationship

12 or other relationships, thus, the “secrecy” is “what makes it valuable to the business.”

13 The Recommendation almost appears to recognize this fact in footnote 12 but then dismisses

14 it as not “the kind of information the law has traditionally viewed as warranting protection as a trade

15 secret.” (Recommendation at 8, n. 12). But that is not the test. Under Nevada law, the test is

16 whether the information “derives independent economic value, actual or potential, from not being

17 generally known to, and not being readily ascertainable by proper means by the public, as well as

18 information that is the subject of efforts that are reasonable under the circumstances to maintain its

19 secrecy.” Finkel, 128 Nev. at 74, 270 P.3d at 1264.

20 By relying on cases in other jurisdictions and a framework not applicable here, the

21 Recommendation lost sight of that test and the reasoning above. Under the circumstances here and

22 Nevada law, the identity of the Confidential Client(s) “derives independent economic value . . .

23 from not being generally known to, and not being readily ascertainable by proper means by the

24 public,” and the information has been the subject of reasonable efforts to maintain its secrecy. Thus,

25 the identity of the Confidential Client(s) qualifies as a trade secret. The Discovery Commissioner’s

26 decision otherwise is contrary to the law and should be reversed.

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 1 C. The Discovery Commissioner’s Conclusion That NRS 648.200 Affords Information
Within The Scope Of NRS 648.200 No Protection Beyond The Limitations On
2 Discoverability Imposed By NRCP 26(b)(1) Is Contrary To Law.
3 NRS Chapter 648 governs the licensing and practice of private investigators in the State of
4 Nevada.1 NRS 648.200 protects information acquired by private investigators related to their

5 services by making it unlawful for the private investigator to divulge such information, except at the

6 direction of the employer or client for whom the information was obtained. Specifically, the statute

7 provides the following:

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It is unlawful for any licensee or any registered employee or other
9 employee, security guard, officer or member of any licensee:
10 1. To divulge to anyone, except as he or she may be so
required by law to do, any information acquired by him or her
11 except at the direction of the employer or client for whom the
information was obtained.
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2. To make a false report to his or her employer or client.
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NRS 648.200.
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15 With respect to NRS 648.200, the Recommendation correctly suggests, albeit without

16 affirmatively deciding, that a client’s identity qualifies “as a piece of information that would be

17 encompassed by NRS 648.200(1).” (Recommendation at 15:16-17). The Recommendation goes on

18 to conclude that under NRS 648.200 and DeChant v. State, 116 Nev. 918, 10 P.3d 108 (2000), this

19 information must be disclosed if requested in litigation if it “falls within the scope of discovery

20 under NRCP 26(b)(1).” (Recommendation at 16:2). The scope of discovery under NRCP 26(b)(1)

21 includes “any nonprivileged matter that is relevant to any party’s claims or defenses and

22 proportional to the needs of the case.” NRCP 26(b)(1).

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25 The Nevada Legislature has regulated private investigators (previously referred to as “private
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detectives”) for many decades for the benefit of the public. In doing so, the Legislature has
26 recognized the “vital” nature of their work “to an individual citizen.” See Minutes of the Assembly
Committee on State, County, and City Affairs, 3-31-1967 (“At the present time there is no control
27 over [private investigators] and when it is considered how vital their work can be to an individual

28 citizen it is desirable that some controls be established.”)

(https://www.leg.state.nv.us/Division/Research/Library/LegHistory/Minutes/1967/Assembly/StateC
ountyCityAffairs/3-31-67.pdf).
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 1 This is not the proper inquiry. In their Opposition, Defendants argued that a court should

2 strike a balance between the interests for and against disclosure. The Opposition cited to an Ohio

3 case concerning the disclosure of private investigative client files, which referenced the use of a

4 balancing test under similar circumstances: Quinlan v. Ohio Dep’t of Com., Div. of Consumer Fin.,

5 678 N.E.2d 225, 230 (Ohio App. 1996). (See Defs.’ Opp’n to Pls.’ Mot. to Compel and

6 Countermotion for Protective Order at 6:7-9). There, under a regulation featuring a “unless required

7 by law” disclosure exception similar to NRS 648.20’s language, the Ohio court explained that “a

8 balance must be struck between the confidentiality interests of a private investigator’s clients and

9 the division’s interest in pursuing effective regulation of the private investigation industry.” Id. at

10 230 (citing Ohio Adm. Code 1301:4-5-17). The Recommendation does not mention this case.

11 Here, this reasoning applies equally. A balance must be struck between the confidentiality

12 interests of a private investigator’s clients and a litigants’ interest in pursuing litigation against such

13 a client. See Saini v. In’l Game Tech., 434 F. Supp. 2d 913, 919 (D. Nev. 2006) (providing that

14 “[d]isclosure of non-trade secret confidential information is similarly recognized as a serious

15 harm”). For instance, a court should consider whether the information that falls within the scope of

16 NRS 648.200 is in fact secret or confidential; the steps taken to maintain the confidentiality of the

17 information; the impact upon the client of having the confidential information disclosed; the

18 potential chilling effect on the private investigative industry that the disclosure would have; whether

19 the lawsuit is non-frivolous and brought in good faith; and the importance of the information sought

20 to the case of the party seeking disclosure. See Walker v. N. Las Vegas Police Dep’t, No.

21 214CV01475JADNJK, 2015 WL 8328263, at *4 (D. Nev. Dec. 8, 2015) (relying on similar

22 considerations for a balancing test related to disclosure of information within “the official

23 information privilege”).

24 This reasoning aligns with the Nevada Supreme Court’s treatment of non-privileged

25 financial information. The Court has concluded that “public policy suggests that . . . financial status

26 [should] not be had for the mere asking.” Rock Bay, LLC v. Eighth Judicial Dist. Court, 129 Nev.
27 205, 213, 298 P.3d 441, 447 (2013) (“In the context of post-judgment discovery, courts have

28 recognized that a nonparty’s privacy interests must be balanced against the need of the judgment

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 1 creditor for the requested information.”) (citation omitted); see Hetter v. Eighth Judicial Dist.

2 Court, 110 Nev. 513, 520, 874 P.2d 762, 766 (1994) (recognizing that “[c]laims for punitive

3 damages can be asserted with ease and can result in abuse and harassment if their assertion alone

4 entitles plaintiff to financial discovery,” thus, “before tax returns or financial records are

5 discoverable on the issue of punitive damages, the plaintiff must demonstrate some factual basis for

6 its punitive damage claim”). So too confidential information that falls within the scope of NRS

7 648.200. It should not be “had for the mere asking”—a balancing test should be imposed or a

8 showing of “some factual basis” required.

9 The Recommendation relies on DeChant to justify its decision to dismiss the need for any

10 showing beyond discoverability under NRCP 26(b)(1). (See Recommendation at 12:11-13:16).

11 DeChant, however, did not address this issue. The reference to “discretion” in DeChant that the

12 Discovery Commissioner relies on is less than clear, particularly when it is taken into account that

13 the district court in DeChant found that under NRS 648.200 it “did not have the discretion to order

14 the disclosure of [the investigator’s] raw notes.” 116 Nev. at 922, 10 P.3d at 111 (emphasis added).

15 In response, the Nevada Supreme Court was merely explaining that the district court did have the

16 “discretion” to compel the disclosure. See id. at 926, 10 P.3d at 113 (emphasis added). The Court

17 did not elaborate on what may or may not go into that discretionary determination. At most,

18 DeChant can be read as not imposing a balancing test or a heightened showing. But it certainly does

19 not foreclose the use or adoption of one. Given NRS 648.200, the sensitive nature of information

20 within the scope of NRS 648.200, and public policy considerations related to the private

21 investigative industry, a balancing test or heightened showing should be imposed. The Discovery

22 Commissioner’s conclusion to the contrary should be reversed.

23 IV. CONCLUSION

24 Based on the foregoing, Defendants respectfully request that this Court reverse, or remand

25 with instructions, the Discovery Commissioner’s Recommendation.

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 1 AFFIRMATION
2 Pursuant to NRS 239B.030, the undersigned hereby affirms that this document does not
3 contain the social security number of any person.

4 DATED: March 27, 2023.

5 /s/ Ryan T. Gormley
Ryan T. Gormley, Esq.
6 Brittany M. Llewellyn, Esq.
Jonathan J. Winn, Esq.
7 WEINBERG, WHEELER, HUDGINS,
8 GUNN & DIAL, LLC
6385 South Rainbow Blvd., Suite 400
9 Las Vegas, Nevada 89118
Attorneys for Defendants
10 David McNeely and 5 Alpha Industries, LLC
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 1 CERTIFICATE OF SERVICE

2 I hereby certify that on the 27th day of March, 2023, a true and correct copy of the foregoing
3 DEFENDANTS DAVID MCNEELY AND 5 ALPHA INDUSTRIES, LLC’S OBJECTION

4 TO THE DISCOVERY COMMISSIONER’S RECOMMENDATION FOR ORDER was

5 electronically filed and served on counsel through the Court’s electronic service system, unless

6 service by another method is stated or noted, to the following:

7 Adam Hosmer-Henner, Esq.

Chelsea Latino, Esq.
8
Philip Mannelly, Esq.
9 Jane Susskind, Esq.
McDonald Carano, LLP
10 100 W. Liberty St., Tenth Floor
Reno, NV 89501
11 [email protected]
[email protected]
12 [email protected]
[email protected]
13 Attorneys for Plaintiffs

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16 /s/ Cynthia S. Bowman

An employee of WEINBERG, WHEELER,
17 HUDGINS, GUNN & DIAL, LLC
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