Owens v. Liberty Life Assurance Company of Boston
MEMORANDUM AND OPINION by Magistrate Judge H. Brent Brennenstuhl on 12/14/2016: Liberty's motion 60 for a protective order of confidentiality is granted. By separate order, the court will grant the motion and set for the conditions of the protective order. cc: counsel (JBM)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
CIVIL ACTION NO. 4:15-CV-00071-JHM-HBB
LIBERTY LIFE ASSURANCE
COMPANY OF BOSTON
MEMORANDUM AND OPINION
Before the Court is the motion of Defendant Liberty Life Assurance Company of Boston
("Liberty") requesting entry of a protective order of confidentiality (DN 60). Plaintiff Paulette
Owens ("Owens") responded (DN 64), and Liberty filed a reply (DN 69). This matter is ripe for
This is an ERISA disability benefits case. Owens has been granted specified discovery
into issues that may indicate a conflict of interest affecting Liberty's coverage decision (DN 26).
Liberty initially requested a protective order covering certain documents relating to personnel
matters and alleged trade secrets (DN 48). The undersigned denied the initial motion because
Liberty did not adequately demonstrate that public disclosure of the information at issue would
result in a "clearly defined and very serious injury" (DN 54 at 5 (quoting Mitchell v. Home
Depot U.S.A., No. 3:11-CV-332, 2012 U.S. Dist. LEXIS 82562, *4-5 (W.D. Ky. June 13,
The undersigned did not foreclose Liberty from filing a subsequent request with a more
definite statement outlining the injury it would suffer if these documents are not kept
confidential. The motion now under consideration is Liberty's subsequent request. For the
reasons set forth below, the motion is granted.
In its motion, Liberty identifies six categories of information it wishes to keep
confidential. These include:
(a) customized claims handling policies, procedures, and
(b) bonus plan for employees, as reflected in Liberty's Variable
(c) organizational structure of its claims and appeals units;
(d) contracts with third party vendors;
(e) contracts, including financial compensation, with its consulting
(f) training curricula provided to specific employees
(DN 60-1 at p. 2).
Liberty asserts these materials should be protected both because they qualify as trade
secrets and because there is good cause (Id. at p. 1). Notably, Liberty is not refusing to produce
these documents altogether, but rather is seeking to do so under a protective order (Id.). In
support of its motion, Liberty filed the affidavit of Paula McGee, litigation manager for Liberty
(DN 63-1). The affidavit asserts, in short, that the disability insurance market is competitive,
that policies, procedures, contracts, bonus plans, organizational structure, and similar
information is how an insurance company gains a competitive advantage, and that, were
Liberty's competitors to gain ready access to this information, they would enjoy an unfair
advantage over Liberty (Id. at pp. 1-4).
In response, Owens argues that the burden is on Liberty to show good cause for
protecting each document (DN 64 at p. 2). Additionally, Owens contends Liberty has provided
only conclusory allegations with no support for its argument that the documents are trade secrets
(Id. at p. 3). Finally, Owens argues that whatever harm that might befall Liberty if these
documents are not protected is outweighed by the public's interest in open judicial proceedings
(Id. at p. 7).
Despite this Court's recent explanation of the marked distinction between an order issued
to ensure the confidentiality of certain documents as compared with an order sealing the court's
docket (DN 54 at p. 3), Owens has again conflated these independent concepts. The undersigned
again notes that the Sixth Circuit has recently discussed this issue, explaining that the public's
interest in open judicial proceedings only becomes compelling when a party attempts to seal
documents in the court record. Rudd Equip. Co., Inc. v. John Deere Const. & Forestry Co., 834
F.3d 589, 593-94 (6th Cir. 2016) (internal quotations and citations omitted). This heightened
standard does not apply to the ordinary trading back and forth of documents during discovery.
Id. at 593.
Documents exchanged in response to interrogatories and requests for production are not
part of the court record. They only become part of the record if they are used by a party during
the proceedings or if the court so orders. Fed. R. Civ. P. 5(d)(1). Liberty's motion does not
request that this Court seal its confidential documents when entered into the record. It is instead
asking that documents remain confidential during discovery. When and if the documents are
designated as part of the record, the parties can at that time litigate the public's interest in
accessing those individual documents.
Having articulated this distinction, the undersigned addresses Liberty's motion. A party
may move for a protective order requiring that trade secrets or other confidential information not
be revealed or be revealed in a specified way. Fed. R. Civ. P. 26(c)(1)(G).
There is a
presumption that pre-trial processes will remain public, but a party can overcome the
presumption by demonstrating that failing to protect the information will result in "clearly
defined and very serious injury."
Mitchell, 2012 U.S. Dist. LEXIS 82562 at *4 (internal
quotations omitted). Conclusory allegations will not satisfy this burden, and a party must allege
some specific competitive harm. Id. at 4-5 (citations omitted).
The affidavit of Paula McGee alleges several examples of potential serious harm to
Liberty if the types of documents at issue are not designated confidential. First, McGee outlines
the lengths to which Liberty goes to maintain the confidentiality of this material outside these
proceedings. Claims handling and bonus structure materials are located on Liberty's intranet,
which can only be accessed by an authorized user with a password (DN 63-1 at p. 2 ¶ 10).
Liberty's customized contracts with third-party vendors are maintained at Liberty's corporate
offices, and only employees with a legitimate need to know the contracts' contents are permitted
to access them (Id. at p. 3 ¶ 13).
Moreover, Liberty has invested substantial time and resources in preparing these
materials (Id. at p. 1 ¶ 2).
As a result, Liberty has identified three avenues by which
dissemination of this information could lead to a serious competitive disadvantage.
Liberty's competitors could copy this information and adapt it for their own use (Id. at p. 4 ¶ 17).
Second, in copying the materials, the competitor would save a substantial amount of resources on
the front end of developing its business (Id.). And finally, Liberty would not be compensated for
the use of its proprietary information (Id.).
McGee's affidavit offers the evidence needed to establish that leaving these documents
unprotected could result in serious harm. Plaintiff's argument that the affidavit contains only
conclusory allegations is unavailing.
Liberty has set out a plausible scenario where
dissemination of its confidential material could result in serious damage to its business. Nothing
further is necessary.
Liberty further alleges the types of documents at issue constitute trade secrets. A trade
(a) Derives independent economic value, actual or potential, from
not being generally known to, and not being readily ascertainable
by proper means by, other persons who can obtain economic value
from its disclosure or use, and
(b) Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
Ky. Rev. Stat. Ann. § 365.880(4).
Thus, information must satisfy four criteria to qualify as a trade secret.
information must derive its value as a result of its confidential nature. Second, a competitor must
be able to realize an advantage from obtaining the information.
information makes efforts to maintain its confidentiality.
Third, the holder of the
And finally, those efforts are
Here, the evidence discussed above from McGee's affidavit leads to a conclusion that the
types of information identified in Liberty's motion qualify as trade secrets. First, all disability
insurance companies perform similar services. Thus, any market advantage Liberty enjoys is
derived from how it handles claims, compensates and trains its employees, and manages its
contracts with third parties. Second, developing a successful system requires both time and
financial resources. It follows that, were a competitor to obtain a model of a successful system
that it could implement immediately, the competitor would realize an advantage.
Moreover, as mentioned above, McGee's affidavit discusses how Liberty protects this
information. Specifically, McGee states:
Statements are posted on Liberty Life's intranet site and are
contained in the Claims Handling Materials themselves prohibiting
any dissemination or unauthorized use of any information
contained on the intranet.
Specifically, each page on Liberty Life's intranet contains
the following language: "02016 Liberty Mutual Insurance
Company[.] The information contained herein is considered
proprietary and may contain trade secret or competitively sensitive
information and therefore should not be disseminated outside
Liberty Mutual Group."
Each policy, procedure, and exception comprising Liberty
Life's Claims Handling Materials contains the following additional
language: "All information contained on this Group Benefits
Disability Claims intranet site is Proprietary-Trade Secret and for
the internal use of authorized users of Group Benefits Disability
claim ONLY. Copying, printing, or reproducing in any form
without permission is prohibited."
Liberty Life's policies with regard to dissemination of
confidential information are given to new employees when they
Liberty Life's computer systems and programs require user
identifications and passwords; Liberty Life's employees must agree
not to disclose their passwords to others. Access to its intranet is
provided only to employees who are able to access the information
via its password-protected intranet system.
The fact that the documents/information identified in
numerical paragraphs 2 and 3, above, are available through Liberty
Life's private intranet system constantly reminds Liberty Life
employees that this information is to be kept strictly confidential,
(DN 63-1 at p. 2 ¶¶ 6-11).
It is clear that Liberty has undertaken efforts to maintain confidentiality. The issue then
is whether these efforts were reasonable. See Ky. Rev. Stat. Ann. 365.880(4)(b). Plaintiff argues
that blanket password policies for the company intranet is not sufficient to meet this threshold
(DN 64 at p. 4-5). This argument ignores the fact that each page within the intranet itself
contains a confidentiality reminder. And, employees are given Liberty's confidentiality policies
when they are hired.
Owens additionally asserts that, because employees are legally entitled to discuss their
bonuses among themselves, and because employees must necessarily list salary information on
applications for loans and credit cards, that the bonus structure cannot be considered confidential
(Id.). This claim confuses individual salaries with an overall structure for providing incentive
bonuses. Listing one's salary on a credit card application is in no way analogous to telling the
credit card company how your employer structures compensation for you and all of your
The requirement for information to qualify as a trade secret is that efforts to protect
confidentiality are reasonable, not that they are impenetrable or fail-safe. The undersigned finds
Liberty's efforts reasonable and concludes Liberty has met its burden and established that the
information in question qualifies for trade secret protection.
For the forgoing reasons, Liberty's motion (DN 60) for a protective order of
confidentiality is granted. By separate order, the court will grant the motion and set for the
conditions of the protective order.
December 14, 2016
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