15 August 2008
Miller & Martin, PLLC
by T. Harold Pinkley and Charlnette A. Richard
Businesses dislike litigation. There are a number of reasons for this, such as cost, risk of loss, and disruption of normal business operations. Less often noted, but just as important, is the risk of revealing important confidential or proprietary business information. Such information can include not only trade secrets but also customer lists, pricing, and other business-related information that clients would very much like to keep away from competitors, regardless of whether they are adversaries in litigation. Once protected information is out of the bag, for all practical purposes it has become public knowledge.
How can trial attorneys help our clients protect sensitive information during both pre-trial discovery and the introduction of evidence at trial? As always, it is a good idea to start with the rules. Federal Rule of Civil Procedure 26(c)1 gives us a way to prevent the release of confidential and privileged information. Whether you are a plaintiffs’ attorney in a personal-injury lawsuit trying to limit the release of confidential psychiatric records or a defense attorney in a products-liability case shielding sensitive trade secrets, Federal Rule 26(c) provides effective privacy safeguards.2
Advance Preparation
Always take steps to protect confidential information before an emergency arises in a deposition or at trial. The time to take action is during discovery and, preferably, before any sensitive information has been disclosed. For example, suppose you’re defending a deponent who happens to be a chief new-product design engineer, and she’s being interrogated about potential new products by a lawyer for your client’s prime competitor; if you haven’t already laid the groundwork for Rule 26(c) protection, you’ve waited too long. In such event, you may have to resort to the awkward procedure of Rule 30(d)(3) (formerly 30(d)(4)) which requires that you suspend the deposition and seek a court order limiting the scope of questioning. This procedure is uncertain, time-wasting and potentially much more costly than addressing the issue ahead of time.
Order Of Protection
An order of protection entered in advance is an excellent tool for preventing or remedying unwanted disclosures during depositions and the inappropriate introduction of testimony or exhibits at trial. Under Rule 26(c), the trial court has the authority to seal, limit or prohibit pre-trial discovery to protect a “trade secret or other confidential research, development, or commercial information.”3 A balancing approach is used to reconcile the interests of the party seeking information, the public’s right to access information, and the interests of the party desiring to protect information.
Obtaining an order of protection pursuant to Rule 26(c) is a multistep process. The party requesting protection must first make a good-faith effort to resolve the discovery dispute with opposing counsel. If this effort is unsuccessful, the party needing protection should file a motion explaining why good cause exists for obtaining an order, which is subject to a strict standard.4
To prove good cause, one must demonstrate actual or potential harm. As one court has stated, “[B]road allegations of harm, unsubstantiated by specific examples or articulated reasoning,” are not sufficient to establish good cause.5 “[T]he district court should consider whether the case involves issues important to the public. If the matter involves issues or parties of a public nature, and involves matters of legitimate public concern, this should be a factor weighing against entering or maintaining an order of confidentiality.”6 However, if the court finds that the “case involves private litigants, and concerns matters of little legitimate public interest,” good cause will likely be found.7
If the party seeking the protective order succeeds in showing good cause, the burden then shifts to the requesting party to show that the information is relevant and necessary.8 Some courts have held that this burden is subject to even stricter scrutiny than the burden for obtaining an order.9 If the requesting party fails to satisfy its burden, the discovery request is generally denied.10 However, if the requesting party is able to satisfy its burden, the court must then “weigh the potential injury from disclosure against the moving party’s need for the information.”11 Regarding this higher standard, one federal district court has explained:
[O]nce the privilege is asserted by the owner, the party seeking discovery must make a clear showing that the documents are relevant to the issues involved in the litigation. In doubtful situations, production will not be ordered. The court is aware that this standard is higher than the hurdle for discovery of unprivileged but relevant documents but this court considers such a higher standard necessary in order to guard against the possible use of doubtfully relevant trade secrets by the opposing parties for their own business ends.12
If the court determines it can sufficiently protect the trade secret or other confidential information, the court should issue a protective order which incorporates the interests of both parties.13 If, on the other hand, the court determines that a protective order cannot sufficiently protect the trade secret, the court may deny the request for information.14 The protective order should remain effective throughout subsequent litigation, including trial, and can be used to object to the attempted introduction of evidence that falls under the scope of the protection.
Protecting trade secrets and other proprietary information is an important and long-standing practice recognized the highest court of the land.15 “Federal law and the substantive law in every state recognize the importance of providing strong legal protection for trade secrets.”16 It is important for both sides to put forth their very best arguments and evidence at the trial court level in favor of or against protective orders, for it is difficult to obtain reversal on appeal;17 the burden falls on the appellant to show the trial court’s abuse of discretion.18
Modification Of Protective Orders
Are protective orders permanent? What happens if someone wants to lift or modify the order down the road? Is this possible? The answer is that orders of protection are not necessarily permanent and are subject to being lifted or modified. Only the trial court, however, has the authority to lift or to modify its previous order.19 It is paramount for the trial court to provide a detailed explanation of its decision.20
The federal Courts of Appeal, however, differ on the standard used for determining whether to modify an existing order.21 The Second and Sixth circuits typically use a strict approach, which does “not allow modification absent a showing of improvidence in the grant of the initial protective order, or some extraordinary circumstance, or some compelling need.”22
Most circuits, however, reject this strict standard. Instead, most circuits have adopted the method used by the Third Circuit, which mirrors the balancing test used to determine whether a protective order should be granted in the first instance, while also considering the original parties’ reliance on the protective order since it was initially granted. The objective is to determine whether good cause exists for maintaining the order.23 In making this determination, the court will consider whether allowing access to protected materials can be granted without causing harm to legitimate privacy interests; if so, access should be granted. Unless the motion seeks to modify a blanket protective order, the movant has the burden of establishing that the need for access to the materials outweighs the privacy concerns. When modification of a blanket protective order is sought, the party seeking to maintain the confidentiality must designate the documents alleged to be confidential and then establish that good cause exists with respect to those documents.24
In sum, Rule 26(c) protects the rights of litigants who have a legitimate reason for maintaining privacy both throughout the discovery process and at trial. Its purpose can be summarized in one sentence: “[l]itigants do not give up their privacy rights simply because they have walked, voluntarily or involuntarily, through the courthouse door.”25
Footnotes
1. As amended December 1, 2007. According to the Advisory Committee Notes for the 2007 Amendment, “the language of Rule 26 has been amended as part of the general restyling of the Civil Rules to make them more easily understood and to make style and terminology consistent throughout the rules. These changes are intended to be stylistic only.”
2. Most states have enacted similar rules. See Francis H. Hare, Jr., James L. Gilbert & William H. Remine, Confidentiality Orders (1988) § 7.17, at 238 n.11.
3. All references to Rule 26 are to the Federal Rules of Civil Procedure.
4. Rule 26©.
5. Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1121 (3rd Cir. 1986).
6. Pansy v. Borough of Stroudsburg, 23 F.3d 772, 787 (3rd Cir. 1994).
7. Id.
8. In re Remington Arms Co., 952 F.2d 1029, 1032 (8th Cir 1991); see also Am. Standard, Inc. v. Pfizer Inc., 828 F.2d 734, 743 (Fed. Cir. 1987).
9. See, e.g., Duplan Corp. v. Deering Milliken Inc., 397 F. Supp. 1146, 1185 (D.S.C. 1975).
10. Centurion Indus. V. Warren Steurer, 665 F.2d 323, 325 (10th Cir. 1981).
11. Hartman v. Remington Arms Co. Inc., 143 F.R.D. 673, 674 (W.D. Mo. 1992).
12. Duplan Corp., 397 F.Supp. at 1185.
13. Seattle Times v. Rhinehart, 467 U.S. 20, 35-36 (1984).
14. Hartman, 143 F.R.D. at 675.
15. See, e.g., Carpenter v United States, 484 U.S. 19 (1987); Ruckleshaus v. Monsanto Co., 467 U.S. 986 (1984).
16. Arthur R. Miller, “Confidentiality, Protective Orders, and Public Access to the Courts,” 105 Harv. L. Rev. 427, 472 (1991).
17. See, Pansy, supra, at 783; Am. Standard, Inc., supra, at 743; Rachels v. Steele, 633 S.W.2d 473, 475 (Tenn. Ct. App. 1981).
18. Rachels, 633 S.W.2d at 475.
19. Poliquin v. Garden Way, Inc., 989 F.2d 527, 535 (1st Cir. 1993); Beckman Indus., Inc. v Int’l. Ins. Co., 966 F.2d 470, 472 (9th Cir. 1992); United Nuclear Corp. v . Cranford Ins. Co., 905 F.2d 1424, 1427 (10th Cir. 1990).
20. Pansy, 23 F.3d at 789.
21. See Ballard v. Herzke, 924 S.W.2d 652, 659 (Tenn. 1996).
22. See, e.g., Palmieri v. New York, 779 F.2d 861, 864–66 (2nd Cir. 1985); United States v Kentucky Utils. Co., 927 F.2d 252, 255 (6th Cir. 1991). But see Meyer Goldberg, Inc. of Lorain v. Fisher Foods, Inc., 823 F.2d 159, 163–64 (6th Cir. 1987).
23. Pansy, 23 F.3d at 790.
24. Ballard, 924 S.W.2d at 660 (citing Pansy, 23 F.3d at 790).
25. Miller, 105 Harv. L. Rev. at 466.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Posted in Trade Secret Articles
Tags: Client Information, Discovery, Federal Rules, Proprietary Business Information, Protective Orders, Trade Secrets
