Bailey et al v. Gatan, Inc. et al

Filing 140

ORDER signed by Magistrate Judge Carolyn K. Delaney on 8/22/16 ORDERING that Defendants' MOTION for Sanctions (ECF No. 105 ) is GRANTED in part. Plaintiffs/relators' MOTIONS to file under seal the deposition transcripts of Brent Baile y and Emily Wade (ECF No. 129 ) and to file under seal Plaintiff/relator Emily Wade's 8/17/16 declaration (ECF No. 132 ) are GRANTED. The Clerk of Court is directed to seal Plaintiffs/relators' opposition (ECF No. 115). Defendants shall file a redacted version of Plaintiffs/relators' opposition within five days of the date of this order. (Mena-Sanchez, L)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA and
STATE OF CALIFORNIA, ex. rel.
BRENT BAILEY AND EMILY WADE, ,

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Plaintiffs/Relators,

No. 2:12-cv-106 MCE CKD

ORDER

v.
GATAN, INC, et al.,
Defendants.

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Defendants’ motion for sanctions came on regularly for hearing on August 17, 2016.

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Daniel Bartley appeared for plaintiffs/relators. Matthew Kahn and Deena Klaber appeared for

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defendants. Upon review of the documents in support and opposition, upon review of documents

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submitted in camera, upon hearing the arguments of counsel, and good cause appearing therefor,

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THE COURT FINDS AS FOLLOWS:

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In this qui tam action, plaintiffs/relators allege claims under the federal and California

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False Claims Acts arising out of defendants’ manufacture and selling of cameras and other

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accessories used with electron microscopes. Relators claim the products were defective because

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they allegedly leak harmful X-ray radiation.

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A protective order was entered on October 26, 2015. ECF No. 79. That order, in

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pertinent part, defines “Confidential” information as “information (regardless of how it is
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generated, stored or maintained) or tangible things that qualify for protection under Federal Rule

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of Civil Procedure 26(c), as well as confidential or sensitive proprietary, business, commercial or

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personal information.” ECF No. 79, ¶ 2.2. “Attorneys Eyes Only” is defined as “extremely

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sensitive ‘Confidential Information or Items,’ disclosure of which to another Party or Non-Party

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would create a substantial risk of serious harm.” ECF No. 79, ¶ 2.7. Under the recitation of

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particularized need for protection and need for a court order, the parties recite that “this action is

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likely to require production of confidential, highly confidential, and proprietary information of

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Gatan, its parent corporation, Roper Technologies, Inc. (“Roper”), and Gatan’s customers and

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competitors, the disclosure or use of which could cause severe and irreparable damage to the

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business of the Producing Party. This includes invoices, price information, pricing strategies,

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budgets and other financial records, customer identities, customer lists, documents reflecting

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business strategies, audits, internal policies and procedures, information related to the design or

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development of products, proprietary technology related to products, internal compliance

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materials, private contracts, sales and profit information, and payroll or compensation

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information.” ECF No. 79, ¶ 3.

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Defendants contend that the relators violated the protective order by reviewing documents

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designated “Attorneys Eyes Only” and by divulging the content of documents designated

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“Confidential” and “Attorney Eyes Only” to customers of Gatan. Defendants further contend that

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relators violated the protective order by using protected material for purposes other than this

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litigation.

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The court has thoroughly reviewed the depositions of relators as well as all declarations

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and documents submitted in connection with the pending motion. Upon this review, the court

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finds that relators have violated the protective order by reviewing documents properly designated

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“Attorney Eyes Only” and that plaintiffs’ counsel is culpable in this violation. In addition, while

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arguably it would not have been a violation of the protective order to simply inquire of Gatan’s

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customers whether they had received a letter of disclaimer, relators here did more. Relators claim

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that they did not specifically share the contents of protected documents with Gatan customers;

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however, review of their deposition transcripts demonstrate that relators “warned” the customers
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based on what they thought the protected documents showed. In addition, it is readily evident

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that relators used information from documents designated as “Confidential” or “Attorneys Eyes

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Only” for purposes other than this litigation. Relators have admitted that they discovered from

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protected documents the names of institutions to which Gatan products had been sold and used

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that general information to contact specific individuals to warn them about alleged X-ray leakage.

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Such conduct violated the protective order. ECF No. 79, ¶ 8.1 (protected material may be used

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only for prosecuting, defending, or attempting to settle this litigation); ¶ 8.2 (disclosure of

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“confidential” information may not be made to third parties); ¶ 8.3 (disclosure to plaintiffs of

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documents designated “Attorneys Eyes Only” is barred).

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Turning to the question of the appropriate sanction for violation of the protective order,

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the court recognizes the difficulties encountered by plaintiffs/relators and their counsel in

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processing a significant document production made near the end of discovery and that the

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documents were produced as they were maintained in the ordinary course of business, causing

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approximately 30 documents designated as “Attorneys Eyes Only” to be scattered among 5,000

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documents. The court also recognizes that plaintiffs/relators believe (whether justified or not)

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that the protected documents raise serious concerns regarding public health. However,

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plaintiffs/relators do not have the right to engage in blatant violations of the protective order. The

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court will therefore direct payment of reasonable expenses incurred in connection with the motion

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of $5,000 under Federal Rule of Civil Procedure 37(b)(2)(C). Considering all the circumstances

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of this case, the court finds that an award greater than that amount would be unjust.

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In addition, while cognizant of prior restraint issues, the court will bar plaintiffs/relators

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from communicating with Gatan’s customers regarding X-ray radiation emissions from

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configurations of electron microscopes and Gatan products. While plaintiffs/relators claim that

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much of the information which led to their contacts with Gatan customers is publicly available, it

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is clear that the thread leading to those contacts trails back to protected documents produced by

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defendants. The court concludes that the only way to compel compliance with the court’s

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protective order is by barring plaintiffs/relators from engaging in certain communications.

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Defendants’ request to also bar plaintiffs’ counsel, however, sweeps with too broad a broom and
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would create unwarranted impediment to prosecution of the matter. The court will reserve

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decision on whether to issue the evidentiary sanctions sought by defendants pending further

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briefing from defendants as to the precise nature of the alleged harm caused by relators’

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conversations with the customers contacted by relators.

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Accordingly, IT IS HEREBY ORDERED that:

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1. Defendants’ motion for sanctions (ECF No. 105) is granted in part.

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A. Reasonable expenses in the amount of $5,000 are awarded to defendants

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against plaintiffs/relators Brent Bailey and Emily Wade, and their counsel Daniel Bartley, jointly

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and severally;

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B. Until conclusion of this litigation, absent further order from the Court,

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plaintiffs/relators Brent Bailey and Emily Wade are prohibited from having communications with

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any of defendants’ customers regarding X-ray radiation emissions from configurations of electron

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microscopes and Gatan products.

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C. Within fourteen days, defendants shall submit further briefing with regard to

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the alleged harm caused by plaintiffs/relators’ conversations with the customers contacted by

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plaintiffs/relators. Plaintiffs/relators shall file further briefing on the issue within fourteen days

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after defendants’ briefing is filed. Defendants may file a reply within seven days of

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plaintiff/relators’ briefing. The matter shall thereafter stand submitted.

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D. The court declines to enter issue sanctions with respect to recovery of money
damages.

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2. Plaintiffs/relators are cautioned that further violation of the protective order may result
in evidentiary sanctions and/or the recommendation that the action be dismissed.

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3. Plaintiffs/relators’ counsel is directed to serve a copy of this order on plaintiffs/relators.

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4. Plaintiffs/relators’ motions to file under seal the deposition transcripts of Brent Bailey

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and Emily Wade (ECF No. 129) and to file under seal plaintiff/relator Emily Wade’s August 17,

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2016 declaration (ECF No. 132) are granted.

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5. The Clerk of Court is directed to seal plaintiffs/relators’ opposition (ECF No. 115).

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Defendants shall file a redacted version of plaintiffs/relators’ opposition within five days of the

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date of this order.

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6. With respect to any further documents produced in this action, any documents

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designated “Confidential” or “Attorneys Eyes Only” shall be segregated in the production from

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documents that are not so designated.

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Dated: August 22, 2016

_____________________________________
CAROLYN K. DELANEY
UNITED STATES MAGISTRATE JUDGE

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