In Re Subpoena to Boardwalk Storage Company LLC
Filing
28
ORDER denying 1 Motion to Quash or in the Alternative Limit the Subpoena to Produce Documents. Signed by Magistrate Judge Erin Wilder-Doomes on 4/5/2016. (BLR)
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UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
IN RE SUBPOENA TO
BOARDWALK STORAGE
COMPANY, LLC
CIVIL ACTION (MISC.)
NUMBER 14-39-JJB-EWD
UNDERLYING ACTION
UNITED STATES OF AMERICA
VERSUS
CIVIL ACTION
NUMBER 11-803-JJB-EWD
9.345 ACRES OF LAND, MORE
OR LESS, SITUATED IN IBERVILLE
PARISH, STATE OF LOUISIANA, ET AL.
RULING ON BOARDWALK STORAGE COMPANY LLC’S MOTION TO QUASH OR
IN THE ALTERNATIVE LIMIT THE SUBPOENA TO PRODUCE DOCUMENTS
SERVED ON IT BY PLAINTIFF UNITED STATES OF AMERICA
Before the court is the Motion to Quash or in the Alternative Limit the Subpoena to Produce
Documents (the “Motion to Quash,” R. Doc. 1) filed by Boardwalk Storage Company, LLC
(“BSC”). The Motion to Quash is opposed by the United States.1 For the reasons set forth herein,
the Motion to Quash is DENIED.
I.
Background
On September 12, 2013, the United States issued a subpoena to BSC to produce
documents.2 Thereafter, BSC filed the instant Motion to Quash, asserting that certain documents
sought via the subpoena constitute trade secrets or other confidential research, development, and
commercial information. In response, the United States asserts that the documents requested via
1
R. Doc. 6.
R. Doc. 1-1 and R. Doc. 1-2. The same subpoena was served on BSC’s Senior Vice President and General Counsel
(R. Doc. 1-1) and on BSC’s agent for service of process (R. Doc. 1-2). BSC’s Motion to Quash challenges both
subpoenas. R. Doc. 1, p. 1.
2
1
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the subpoena relate directly to claims made by BSC’s sister company and, even if such documents
are secret or confidential, BSC has provided no reason why a stipulated protective order already
in place cannot protect BSC’s interests.
The underlying suit giving rise to BLM’s subpoena is a federal condemnation action,
United States of America v. 9.345 Acres of Land, More or Less, Situated in Iberville Parish, State
of Louisiana, et al., No. 11-803-JJB-EWD, United States District Court, Middle District of
Louisiana (the “Underlying Action”). In the Underlying Action, the United States condemned
property located in Iberville Parish, Louisiana for the Strategic Petroleum Reserve.3 Specifically,
a map of the property taken (included as Schedule D attached to the United States’ Complaint in
Condemnation) reflects the property taken as Bayou Choctaw Facility, Dome Site Cavern 102.4
The sole issue to be determined in the Underlying Action is just compensation for the taking.5
II.
Analysis
a. Legal Standards
“Unless otherwise limited by court order, the scope of discovery is as follows: Parties may
obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense
and proportional to the needs of the case, considering the importance of the issues at stake in the
action, the amount in controversy, the parties’ relative access to relevant information, the parties’
resources, the importance of the discovery in resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its likely benefit. Information within this scope of
discovery need not be admissible in evidence to be discoverable.” Fed. R. Civ. P. 26(b)(1).6
3
See, R. Doc. 1-1.
4
R. Doc. 1-4.
5
See, Status Report, R. Doc. 41.
6
Rule 26(b)(1) of the Federal Rules of Civil Procedure was amended on December 1, 2015 to clarify the scope of
discovery. The 2015 amendments “restor[e] the proportionality factors to their original place in defining the scope of
2
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A subpoena may command a non-party to produce designated documents, electronically
stored information, or tangible things in his possession, custody, or control. Fed. R. Civ. P.
45(a)(1)(A)(iii). On timely motion, the court may quash or modify a subpoena if it requires
“disclosing a trade secret or other confidential research, development, or commercial information.”
Fed. R. Civ. P. 45(d)(3)(B)(i).
“There is no absolute privilege for trade secrets and similar confidential information.”
Occidental Chem. Corp. v. Louisiana Public Service Com’n, 2008 WL 566833, at *2 (M.D. La.
2/29/08), citing Centurion Industries, Inc. v. Warren Steurer and Assoc., 665 F.2d 323, 325 (10th
Cir. 1981). To resist discovery, “a party must first establish that the information sought is a trade
secret or other confidential information and then demonstrate that its disclosure would cause an
identifiable, significant harm.” Id. See also, Diaz v. Goodyear Tire and Rubber Co., 2009 WL
1298219, at *2 (M.D. La. 5/8/09) (“the first step in determining whether plaintiffs are entitled to
the information at issue in this motion is to examine whether [defendant] has established that the
requested information is indeed a protected trade secret.”). “Where a business is the party seeking
protection, it will have to show that disclosure would cause significant harm to its competitive and
financial position.” Occidental Chem. Corp. v. Louisiana Public Service Com’n, 2008 WL
566833, at *2 (M.D. La. 2/29/08). “That showing requires specific demonstrations of fact,
supported where possible by affidavits and concrete examples, rather than broad, conclusory
allegations or potential harm.” Id. If the movant meets this burden of proof, “then the burden
shifts to the party seeking the discovery to establish that the requested information is both relevant
discovery.” Fed. R. Civ. P. 26(b)(1) Advisory Committee Notes (2015). “The amendments to Rule 26 govern in all
proceedings in civil cases thereafter commenced and, insofar as just and practicable, in all proceedings then pending.”
American Federation of Musicians of the U.S. and Canada v. Skodam Films, LLC, ---F.R.D. ---, 2015 WL 7771078,
at *5 (N.D. Tex. 12/3/15). Given the “restorative nature” of the amendments, the court finds that application of the
amended version of Rule 26(b)(1) is “both just and practicable.” See, Williams v. U.S. Environmental Services, LLC,
2016 WL 684607, at n. 2 (M.D. La. 2/18/16).
3
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and necessary.” Diaz v. Goodyear Tire and Rubber Co., 2009 WL 1298219, at *2 (M.D. La.
5/8/09). “‘It is within the sound discretion of the trial court to decide whether trade secrets are
relevant and whether the need outweighs the harm of disclosure. Likewise, if the trade secrets are
deemed relevant and necessary, the appropriate safeguards that should attend their disclosure by
means of a protective order are also a matter within the trial court’s discretion.’” M-I LLC v. Stelly,
733 F. Supp. 2d 759, 802 (S.D. Tex. 2010), quoting R.C. Olmstead, Inc. v. CU Interface, LLC, 606
F.3d 262, 269 (6th Cir.2010) (quoting Centurion Indus., Inc. v. Warren Steurer & Assocs., 665
F.2d 323, 326 (10th Cir.1981)).
b. The Subpoena to BSC
The subpoena issued to BSC requests production of nine categories of documents. BSC
asserts in its briefing that it has no documents responsive to categories three, four, or six.7 With
regard to the remaining categories, BSC asserts that it will produce certain responsive documents
subject to the existing protective order.8 However, with respect to requests one, five, and seven,
BSC asserts that the requests “clearly require production of trade secrets and confidential
commercial information [and that] disclosure of this information will cause significant commercial
harm to BSC.”9 Accordingly, the three requests actually at issue in BSC’s Motion to Quash are as
follows:
1.
All documents related to that certain NG storage contract
dated July 24, 2013, by and between You and Dow (the
“Shipper”)…. This category includes any document related to the
7
R. Doc. 1, p. 6.
R. Doc. 1, pp. 6-7 (“The documents responsive to Requests 1, 2, 5, 7, 8, and 9 that do not constitute trade secrets or
confidential information are made up of contract documents and correspondence regarding the recently negotiated
Dow contract (Request 1), HUB Services and Parking and Lending agreements (Request 2), Wheeling agreements
(Request 8), and documents and correspondence related to considered or planned Open Seasons for natural gas storage
capacity at Bayou Choctaw Hub since August 15, 2012 (Request 9). These documents will be produced subject to the
existing protective order in place.”).
8
9
R. Doc. 1, p. 8.
4
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negotiation of the Dow Contract, any spreadsheet or analysis of the
storage rates or other financial terms of the Dow Contract, any
solicitation, response to solicitation, or inquiry that led to the
negotiation of the Dow Contract, any spreadsheet or analysis of
other storage contracts (past, present or prospective) with the
Shipper or any entity related to the Shipper as a parent, affiliated or
subsidiary company (or the predecessors to any such company), or
any other document related to the formation and execution of the
Dow Contract.
5.
All documents related to any forward looking projections or
analysis that considers NG storage contract rates associated with
storage capacity at the Bayou Choctaw Hub for which existing
storage contracts are set to expire in less than 5 years.
7.
All documents related to any analysis of existing storage
contract rates or storage contracts at the Bayou Choctaw Hub since
January 1, 2011.10
BSC argues that the above requests “specifically seek documents regarding BSC’s forward
looking projections or analysis relating to natural gas storage pricing. These requests are seeking
the inside playbook of BSC regarding how storage is valued and priced, the disclosure of which
would be detrimental to BSC’s ability to competitively negotiate and contract within the
industry.”11 BSC further explains that while it “is producing the recently negotiated contract with
Dow Hydrocarbons along with documents relating to the negotiation and consummation of that
contract…,” it seeks to withhold “any proprietary and confidential pricing projections and
analyses.”12
In support of BSC’s position that the documents requested are proprietary and confidential,
it submits the affidavit of Michael McMahon, Senior Vice President and General Counsel of
BSC.13 Therein, Mr. McMahon states that BSC’s pricing projections and analyses “constitute
10
R. Doc. 1-1, p. 3.
11
R. Doc. 1, p. 7.
12
R. Doc. 1, p. 9.
13
R. Doc. 1-3.
5
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trade secrets and Boardwalk Storage does not disclose its pricing projections and analysis to
anyone outside the company.”14 Mr. McMahon further asserts that BSC has taken steps to protect
its internal pricing information, projections, and analyses such as “designation of pricing
information as confidential and training its personnel that such information should not be disclosed
to anyone outside of the Company.”15 Mr. McMahon asserts that production of the requested
documents would cause significant commercial harm to BSC. Specifically, he states that BSC’s
“customers would necessarily know Boardwalk Storage’s ‘bottom line’ and its ability to negotiate
above that number would be placed in jeopardy, thus placing it [at] a significant disadvantage
when negotiating natural gas storage contracts.”16 He further states that “[d]isclosure of its pricing
methodology would be known to its competitors who would understandably use it against
Boardwalk Storage and perhaps other affiliates in attempting to attract or generate business.”17
In response to BSC’s assertions that documents responsive to requests one, five, and seven
are confidential trade secrets, the United States asserts that BSC has not provided a privilege log
to allow it or this court assess BSC’s claim.18 The United States further argues that BSC’s position
that these documents are not disclosed to anyone outside the company is undermined by emails
already produced by BSC, which “indicated” BSC “was prepared to provide Dow with the
information encompassed within the subpoena in order to support a counteroffer.”19
14
R. Doc. 1-3, ¶ 9.
15
R. Doc. 1-3, ¶ 9.
16
R. Doc. 1-3, ¶ 11.
17
R. Doc. 1-3, ¶ 11.
18
R. Doc. 6, p. 9.
19
R. Doc. 6, p. 9. The court does not agree with the United States that the referenced email is proof-positive that
BSC’s pricing projections and analyses (including methodologies, formulas, etc.) are not trade secrets or are shared
outside BSC or its family of companies. The email in question indicates only that BLM (allegedly BSC’s sister
company) considered making a counteroffer during negotiations with Dow to the extent it could present a “sound
case” for doing so.
6
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As noted by BSC, “‘trade secrets’ have been routinely defined as a ‘formula, pattern,
device, or compilation of information used in a business, which gives the owner an opportunity to
obtain an advantage over his competitors who do not know or use it.”20 Moreover, “[c]ustomer
lists, pricing information, client information, customer preferences, buyer contracts, and marketing
strategies have all been recognized as trade secrets.”21 Here, the court agrees that BSC’s methods
and formulas, as well as its analyses and projections of natural gas storage pricing constitute trade
secrets. Accordingly, the court must next consider whether the United States has established that
disclosure of this information is relevant and necessary.
The United States argues that BSC’s actual predictions “made in the ordinary course of the
business of contracting storage rates at the Bayou Choctaw facility” are relevant “to the United
States’ defenses against BLM’s claims and the United States’ own analysis of the Bayou Choctaw
facility’s income producing potential and the impacts of the loss of the storage cavern acquired to
that facility.”22 In contrast, BSC asserts that while the actual storage rates negotiated and agreed
to may be discoverable, “[t]he internal methodology and analyses of pricing developed and
employed by one individual company, as contrasted with the ultimate and agreed end price or rate
in a consummated market transaction, is not information properly relied upon by valuation
experts.”23 The court agrees with the United States that BSC’s analyses and predictions regarding
storage rates at the Bayou Choctaw facility are relevant. Such predictions and analyses (including,
20
R. Doc. 1, p. 8 (citing Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 261 (5th Cir. 2007)).
21
Rimkus Consulting Group, Inc. v. Cammarata, 255 FRD 417, 441 (S.D. Tex. 2008). Similarly, under Louisiana
law, a trade secret is defined in La. R.S. § 51:1431(4) as “information, including a formula, pattern, compilation,
program, device, method, technique, or process that: (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.”
22
R. Doc. 6, p. 10.
23
R. Doc. 1, p. 10.
7
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in BSC’s own words, its “bottom line”) are presumably based on BSC’s own commercial expertise
in valuing the Bayou Choctaw facility and are relevant to the issue of compensation. See, e.g.,
Levy v. US, 402 Fed. Appx. 979, 982 & 983 (5th Cir. 2010) (finding admission of evidence of
ongoing negotiations admissible and explaining that “[o]ffers to buy and sell property may not be
admissible as evidence of fair market value. It depends on the specifics of each case….Here, the
proposals came from identified, sophisticated developers who could be reasonably expected to
have investigated the value of the land before making a proposal.”).
Finally, BSC has forwarded no reason why the Stipulated Protective Order in place in the
Underlying Action (the “Protective Order”) is insufficient to protect its confidential information.24
Per the Protective Order, “[a]ny party or non-party may designate as ‘confidential’ (by stamping
the relevant page ‘Confidential’) any document or response to discovery which that party or nonparty considers in good faith to contain information involving trade secrets, or confidential or
proprietary business or financial information….”.25 The intention of the Protective Order was to
address defendants’ concerns that “certain records and information to be produced in discovery
will contain sensitive competitive business information, the disclosure to third parties of which
may cause harm to a disclosing party’s competitive position in the marketplace or may
compromise proprietary information such as trade secrets, formulas, price lists, product designs,
business strategies, and competitive bids.”26 The court finds no reason – and BSC has offered
none – that the current Protective Order will not adequately protect BSC. See, Richardson v. Axion
Logistics, 2013 WL 5554641, at *5 (M.D. La. 10/7/13) (“To the extent Axion objects to the
24
See, R. Doc. 62.
25
R. Doc. 62, p. 2.
26
R. Doc. 62, p. 1. BLM, the alleged sister company of BSC, filed the Unopposed Motion for Entry of the Stipulated
Protective Order. R. Doc. 60.
8
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subpoena on the grounds that the disclosure of such commercial information should be restricted,
such a remedy can be fashioned in the form of a protective order on terms proposed by the
parties.”).
III.
Conclusion
For the reasons set forth herein, the Motion to Quash (R. Doc. 1) is DENIED.
Signed in Baton Rouge, Louisiana, on April 5, 2016.
S
ERIN WILDER-DOOMES
UNITED STATES MAGISTRATE JUDGE
9
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