Allstate Insurance Company v. Warns
Filing
139
MEMORANDUM. Signed by Judge Catherine C. Blake on 11/12/13. (mps, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ALLSTATE INSURANCE
COMPANY
v.
JENNIFER WARNS
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Civil No. CCB-11-1846
MEMORANDUM
Allstate Insurance Company (“Allstate”) brings this suit against defendant Jennifer
Warns,1 a former Allstate claims adjuster who began working for a plaintiffs’ law firm with
litigation pending against Allstate’s insureds. Allstate seeks monetary and injunctive relief for
Warns’ alleged breach of fiduciary duty and breach of contract. Now pending before the court
are (a) Warns’ renewed motion for summary judgment, (b) Allstate’s motion to seal its
opposition to Warns’ renewed motion for summary judgment, (c) Warns’ motion to strike
Allstate’s Exhibit N from its opposition to Warns’ renewed motion for summary judgment, and
(d) Allstate’s motion to seal the declarations of David I. Ackerman and Kenneth J. Pfaehler,
submitted in opposition to Warns’ motion to strike Exhibit N. The issues in this case have been
fully briefed, and oral argument was held on November 7, 2013. For the reasons stated below,
the court will grant in part and deny in part Warns’ motion for summary judgment, grant in part
and deny in part Allstate’s motion to seal its opposition, deny Warns’ motion to strike Allstate’s
1
Jennifer Warns is referred to as “Jennifer Allen” in some of the documents attached to the
parties’ motions and responses.
1
Exhibit N, and grant in part and deny in part Allstate’s motion to seal the declarations of
Ackerman and Pfaehler.
BACKGROUND
For thirty-three years, from February 1977 to July 2010, Warns worked as a claims
adjuster at Allstate’s Baltimore Claims Office. She was responsible for handling lead paint
liability claims against Allstate’s insureds. (Aff. of Michael Kevin Barry, ECF No. 116-16 at ¶
10.) Initially, Warns handled all the lead paint claims in the office. (Id.) But eventually, the
caseload became too big for one person, and in June 2004, the lead paint claims were split
between Warns and claims adjuster Melynda Tayson. (Id.) As a claims adjuster, Warns worked
with defense counsel for Allstate and communicated with them regarding strategy, analysis,
evaluation, and factual issues in lead paint lawsuits against Allstate’s insureds. (See id. at ¶ 14;
Aff. of Benjamin L. Kirson, ECF No. 116-43 at ¶¶ 11–12; see also Warns tr., ECF No. 116-2, at
186:6–190:3.)2 Warns also maintained files from the early 1990s to 2010 on the lead paint
litigation; those files included lists of properties owned by Allstate’s insureds and information
regarding lead paint testing, lead paint violation notices, and insurance coverage on the
properties. (See Aff. of Barry at ¶¶ 8, 10, 19.)
2
Warns initially stated that she “did not participate in the formulation of strategy,” (First Decl. of
Jennifer Warns, ECF No. 15-1 at ¶ 53), but according to her supervisor at Allstate, she requested
legal advice from attorneys at various law firms, requested and received legal memoranda related
to lead paint litigation, decided with counsel whether to bring certain cross-claims and counterclaims, and was consulted on an appeal in a lead paint matter. (See Decl. of Barry, ECF No.
116-19 at ¶ 10.) Similarly, Warns claimed in her first declaration that she “knew nothing about
discovery or the strategy or tactics governing it,” (First Decl. of Warns at ¶ 51), but according to
her supervisor, Warns attended depositions of witnesses and requested other deposition
transcripts. (See Decl. of Barry at ¶¶ 9, 10b, 10c, 10e.) There are other inconsistencies between
Warns’ initial description of her work at Allstate and her supervisor’s description of her work.
(Compare First Decl. of Warns at ¶ 52 (claiming that she was not involved in selecting or
evaluating experts), with Decl. of Barry at ¶ 11f (suggesting that Warns was involved in the
analysis of an expert witness for Allstate).)
2
As a condition of her employment, Warns did not sign a noncompete agreement, but she
acknowledged her receipt of the Allstate Code of Ethics (“Code of Ethics” or “Code”), and her
agreement to it, in both 2009 and 2010. (See 2009-2010 Annual Compliance Confirmation, ECF
No. 116-10; 2010-2011 Annual Compliance Confirmation, ECF No. 116-11.) The Code of
Ethics provided in relevant part that: “Allstate considers employees’ and customers’ personal
data to be confidential information and information assets. As such, when working with this
data, employees and other authorized users must take necessary precautions to ensure the
protection and privacy of this confidential information.” (Code of Ethics, ECF No. 116-5, at 34.)
The Code of Ethics also stated that the Allstate employee is “responsible for safeguarding all
information under your control,” and this information may only be shared with “people with a
legitimate need to know.” (Id. at 24.) It further admonished: “You may not appropriate for your
own personal benefit information in which Allstate has a proprietary interest. You or another
person may not derive personal benefit from confidential or ‘inside information’ that you
obtained in the course of your work.” (Id. at 19.)
Allstate first heard of Warns’ relationship with David Albright, Jr.—an attorney at
Bennett & Albright, P.A,3 who represents plaintiffs in lead paint litigation, including cases
against Allstate—in July 2009. (Aff. of Melynda Tayson, ECF No. 116-38 at ¶ 9.) Around that
time, Warns had hosted a party at her home. (Id.) Among those in attendance were Albright and
other members of the plaintiffs’ bar. (Id.; see also Aff. of Barry at ¶ 25.) On July 14, 2009,
Allstate managers met with Warns to counsel her regarding the Code of Ethics and to tell her not
to repeat the event. (Aff. of Barry at ¶ 25; see also Aff. of Barry, Ex. B., ECF No. 116-18.)
Specifically, Allstate managers advised Warns that even innocent actions may have the
3
At that time, the firm was known as Bennett & Albright, P.A. The firm was later called The
Law Offices of David Albright, Jr.
3
appearance of wrongdoing, and unauthorized conversations with plaintiffs’ attorneys regarding
ongoing lead paint litigation may jeopardize Allstate’s defense in those matters. (Aff. of Barry,
Ex. B.) During this conversation with Allstate managers, Warns did not disclose her social
relationship with Albright. (See Warns tr. at 389:6–390:7.)
Later deposition testimony and an affidavit revealed that Warns and Albright had a social
relationship around the time of Warns’ conversation with Allstate managers. (See id. at 389:22–
390:11; Albright tr., ECF No. 116-3, at 47:18–48:2.) According to Warns, she first met Albright
in 2000, and by 2009, they were meeting on a social basis at least monthly. (Warns tr. at 380:3–
8, 382:14–18.) While Warns was still employed at Allstate, she and Albright would meet for
dinner or to go for walks. (Id. at 381:21–382:3; see Albright tr. at 157:17–158:19.) According
to Tayson, from about fall 2009 to the beginning of July 2010, Warns showed her items—
including cards, flowers, cookies, and candies—that Albright had sent to her. (Aff. of Tayson at
¶ 10.) Warns and Albright both maintained that, during their social meetings, they only
discussed personal matters and did not discuss anything related to Allstate. (Warns tr. at 381:21–
382:8; Albright tr. at 157:20–22, 158:22–159:2.)
Warns submitted her resignation from Allstate on June 9, 2010, and remained employed
there until July 2, 2010. (Aff. of Barry at ¶ 31.) She told colleagues at Allstate that she was
leaving for personal reasons, including her divorce; she did not mention any plans to take a
position at Bennett & Albright. (See id.; see also Aff. of Tayson at ¶ 14.) Less than a week after
Warns left Allstate, Tayson, an Allstate co-worker, could not locate the files Warns kept on lead
paint litigation. (Tayson tr., ECF No., 116-8, at 70:2–71:17, 75:12–15.) According to Tayson,
there were “approximately one to one a half drawers full of these documents.” (Id. at 70:12–13.)
Moreover, Tayson maintained that “[t]here was no reason for anyone else to take” the folders, as
4
she and Warns were the only two adjusters in the office who handled lead paint litigation. (See
id. at 75:16–76:10.) According to Peter Farquharson, an Allstate supervisor, a “blue binder”
containing “information that [Warns] had gathered over the course of many years of handling
lead paint, especially with Stanley Rochkind” also went missing from the office after Warns’
departure from Allstate. (Farquharson tr., ECF No. 116-9, at 26:7–17, 28:6–10, 66:17–19.)
After her resignation Warns attempted to operate a home business, but later she was hired
by Albright to work at Bennett & Albright. (See Warns tr. at 46:17–49:3, 133:3–9.) Albright
maintained that he did not want Warns doing “secretarial work” at the firm. (Id. at 46:14–47:5.)
Rather, according to Albright, Warns was hired to work on uninsured claims. (Albright tr. at
45:17–22.) Before Warns was hired, Bennett & Albright did not employ anyone whose only task
was to work on uninsured cases. (Id. at 46:1–4.)
In the three years prior to Warns’ departure from Allstate, Bennett & Albright filed
approximately fifty-five lead paint cases against Allstate’s insureds, (see Allstate’s Supplemental
Objections and Answers, Ex. 3, ECF No. 116-4); in the two years following Warns’ departure
from Allstate, the firm filed more than one hundred lead paint cases against Allstate’s insureds.
(Barry tr., ECF No. 116-7, at 65:11–18.) Over thirty cases were filed against Rochkind, an
Allstate policy holder. (See Allstate’s Supplemental Objections and Answers, Ex. 3.) Several
other cases named Benjamin Kirson, an Allstate insured who owned rental properties in
Baltimore, as a defendant. (See Allstate’s Third Supplemental Objections and Answers, Ex. 2,
ECF No. 116-6.) Although Michael Barry, Warns’ former direct supervisor at Allstate, believed
that the increase in cases indicates that Warns helped Albright in Allstate matters, he offered no
direct proof that Warns shared confidential information gathered from her employment at
Allstate. (See Barry tr., Ex. 5, ECF No. 111, at 67:13–71:20.) Likewise, although Kirson was
5
concerned that Warns shared confidential information gleaned at Allstate with her new
employer, he offered no evidence that this was taking place. (See Aff. of Kirson at ¶ 28.)
Farquharson also believed that Warns shared confidential Allstate information with Albright, but
could offer no proof that she disclosed this information. (See, e.g., Farquharson tr., Ex. 7, ECF
No. 111, at 83:19–85:1.)
Albright provided a number of reasons for the increase in litigation against Allstate,
unrelated to Warns joining the firm. For instance, Albright uses a proprietary search engine,
which provides the names of tenants at a particular property known to have chipping, peeling,
and flaking paint. (See Albright tr., Ex. 4, ECF No. 111, at 131:1–132:3.) Once the search
engine identifies the tenants that have lived at the property, Albright’s firm sends letters to the
potential clients. (Id. at 133:15–134:3.) Albright also receives referrals from other lawyers. (Id.
at 185:11–16.) Finally, in August 2008, Albright hired his mother, Jodie Albright, to increase
the volume of his business by establishing leads on possible claims with ministers, heads of
community groups, community activists, and other individuals and organizations. (Id. at 27:5–
10, 114:3–115:1.)
During Warns’ tenure at Bennett & Albright, few measures were taken to ensure she did
not work on cases involving Allstate. For instance, files involving Allstate’s insureds were not
segregated or marked with a warning that they should not be accessed by Warns. (Albright tr.,
ECF No. 116-3, at 168:15–18, 285:14–22.) According to Albright, he was unaware of any effort
to prevent Warns from accessing Allstate matters on the firm’s case management system. (Id. at
168:19–169:3.) In addition, attorneys at the firm were not told to refrain from discussing
Allstate matters with Warns. (See id. at 284:8–285:12; see also id. at 167:4–8.) Indeed, in June
2011, Albright sent an email to Warns regarding a negotiation for settlement of multiple Allstate
6
cases. (See Email to Jen Allen, ECF No. 116-12.) Warns also was involved in cases where
Rochkind was a defendant. (See, e.g., Email to Jackie Pena, ECF No. 116-13.)
Similarly, Warns was involved in the Fulgham trial in which Patrick Connor—a lead
paint expert with whom Warns had worked while at Allstate—testified for the defense. (See
Warns tr. 646:20–648:5; see also Opp’n to Mot. for Summ. J., ECF No. 116, at 50.)4 The parties
agree that, during the Fulgham trial, Albright cross-examined Connor using a particular exhibit,
but they do not appear to agree on whether Warns obtained the exhibit from Connor during her
employment at Allstate. (Compare Mot. for Summ. J., ECF No. 111, at 5–6, with Opp’n to Mot.
for Summ. J. at 49–51.) According to Warns, she obtained the exhibit from a manufacturer.
(See Mot. for Summ. J. at 6; see also Albright tr., Ex. 4, ECF No. 111, at 41:8–41:13.) Allstate,
however, suggests that Warns obtained the exhibit when she attended a March 2008 meeting at
Rollins, Smalkin, Richards & Mackie, LLC, during which Connor gave a presentation. (See
Opp’n to Mot. for Summ. J. at 49–51; see also First Decl. of Warns at ¶ 19.)
The court denied Warns’ motion to dismiss or for summary judgment on February 29,
2012. The parties then proceeded to discovery, and on October 15, 2012, the court denied
without prejudice Warns’ motion for summary judgment. On April 2, 2013, Warns filed a
renewed motion for summary judgment. Allstate responded on April 26, 2013, and also moved
to seal its response. On June 6, 2013, Warns moved to strike Allstate’s Exhibit N from its
response in opposition to Warns’ motion for summary judgment. Allstate filed its opposition to
Allstate’s motion to strike on June 24, 2013, and additionally, moved to seal the accompanying
declarations of Ackerman and Pfaehler. The court held oral argument on November 7, 2013.
4
Allstate was not a party to the Fulgham case.
7
ANALYSIS
a. Motion for Summary Judgment
Warns moves for summary judgment pursuant to Federal Rule of Civil Procedure 56(a).
Rule 56(a) provides that summary judgment should be granted “if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a) (emphasis added). Whether a fact is material depends upon the
substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). Accordingly,
“the mere existence of some alleged factual dispute between the parties will not defeat an
otherwise properly supported motion for summary judgment.” Id. “A party opposing a properly
supported motion for summary judgment ‘may not rest upon the mere allegations or denials of
[his] pleadings,’ but rather must ‘set forth specific facts showing that there is a genuine issue for
trial.’” Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003)
(alteration in original) (quoting Fed. R. Civ. P. 56(e)). The court must view the evidence in the
light most favorable to the nonmovant and draw all justifiable inferences in his favor. Scott v.
Harris, 550 U.S. 372, 378 (2007) (citation omitted); see also Greater Baltimore Ctr. for
Pregnancy Concerns, Inc. v. Mayor and City Council of Baltimore, 721 F.3d 264, 283 (4th Cir.
2013) (citation omitted). At the same time, the court must not yield its obligation “to prevent
factually unsupported claims and defenses from proceeding to trial.” Bouchat, 346 F.3d at 526
(citation and internal quotation marks omitted).
In support of her motion for summary judgment, Warns attempts a number of general
legal arguments, but none of the arguments may stand. Warns claims that the First Amendment
bars Allstate’s claims, but Allstate is correct that she offers no explanation for why this is so.
Furthermore, the court can find no reason why any potential injunction preventing Warns from
8
sharing confidential Allstate information would constitute an impermissible prior restraint on
speech. Cf. Jakanna Woodworks, Inc. v. Montgomery Cnty., 344 Md. 584, 600, 689 A.2d 65, 72
(1997) (citation omitted) (“A scheme that places unfettered discretion in the hands of a
government official or group to grant or deny a permit or license to engage in a right that is
guaranteed by the First Amendment is an impermissible prior restraint on speech.”). Allstate
also is correct that Warns offers no support for the argument that the court lacks jurisdiction over
the present action. It is unclear whether Warns disputes personal jurisdiction in this matter.
Nevertheless, Warns waived this argument when she did not include it in her earlier motion to
dismiss. See Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 704
(1982).5 The court is particularly perplexed by Warns’ argument that Allstate does not have
standing to protect its insureds’ privileges; the court has already ruled on this issue and explained
why this is not so. (See Op., ECF No. 107.) Finally, as to Warns’ argument that Allstate’s
claims are barred by the Maryland Uniform Trade Secrets Act (“MUTSA”),6 Warns undercuts
her own argument by outlining in detail why each document at issue in the current litigation does
not qualify as a “trade secret” and thus falls outside of MUTSA protection. Allstate agrees with
Warns’ assessment that this case does not involve trade secrets. In the absence of any dispute as
5
6
Of course, the court has a continuing duty to assess its subject matter jurisdiction.
The MUTSA governs cases involving trade secrets, defined as:
information, including a formula, pattern, compilation, program, device, method,
technique, or process, that: (1) 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 (2) Is the
subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Md. Code Ann., Com. L. § 11-1201(e); see also LeJeune v. Coin Acceptors, Inc., 381 Md. 288,
305, 849 A.2d 451, 461 (2004) (“With a few enumerated exceptions . . . , the Maryland Uniform
Trade Secrets Act currently provides the exclusive civil remedy for misappropriation of a trade
secret . . . .”).
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to whether MUTSA applies, the court declines to rule on the matter. Accordingly, the court must
move on to whether there is a genuine factual dispute.
1. Breach of Fiduciary Duty
Under Maryland law, “there is no universal or omnibus tort for the redress of breach of
fiduciary duty by any and all fiduciaries,” but “[t]his does not mean that there is no claim or
cause of action available for breach of fiduciary duty.” Kann v. Kann, 344 Md. 689, 713, 690
A.2d 509, 521 (1997). Indeed, the weight of authority suggests there is a cause of action for
breach of fiduciary duty, continuing after the termination of employment, not to misappropriate
or disclose confidential information obtained during employment. See, e.g., NCH Corp. v.
Broyles, 749 F.2d 247, 254 (5th Cir. 1985) (citation omitted); Stone Castle Fin., Inc. v.
Friedman, Billings, Ramsey & Co., 191 F. Supp. 2d 652, 661–62 (E.D. Va. 2002); Inflight
Newspapers, Inc. v. Magazines In-Flight, LLC, 990 F. Supp. 119, 137 (E.D.N.Y. 1997) (citation
omitted). To pursue a claim for breach of fiduciary duty, counsel must “identify the particular
fiduciary relationship involved, identify how it was breached, consider the remedies available,
and select those remedies appropriate to the client’s problem.” Kann, 344 Md. at 713, 690 A.2d
at 521. Since Kann, a successful claim for breach of fiduciary duty may result in injunctive
relief but not in monetary damages. See Wasserman & Wasserman Goldsten Family LLC v. Kay,
197 Md. App. 586, 630–32, 14 A.3d 1193, 1219 (2011) (citations omitted). Where there is no
noncompete agreement between the employee and the employer, the employee’s right to
compete after termination is limited only by misuse of trade secrets or confidential information.
Dworkin v. Dworkin, 77 Md. App. 774, 781, 551 A.2d 947, 950 (1989).
The court first considers the available remedies for Warns’ alleged breach of fiduciary
duty. During the November 7, 2013, hearing, counsel for Allstate conceded that screening
10
measures are likely the appropriate remedy, rather than barring Warns from working for Bennett
& Albright. In any event, the court concludes that injunctive relief preventing Warns from
working for Albright, Bennett & Albright, or other attorneys representing lead paint plaintiffs is
not appropriate in light of the fact that there is no noncompete agreement between Warns and
Allstate.7 Instead, in the absence of a noncompete agreement, Allstate may only obtain relief to
prevent the misuse of confidential information. Thus, to the extent Allstate seeks to bar Warns
from working for Albright, Bennett & Albright, and other lead paint law firms, Warns’ motion
for summary judgment will be granted.8
The court moves on to determine whether the information Warns allegedly provided to
Bennett & Albright, qualifies as confidential information. Whether information is deemed
7
Even if there were a noncompete agreement between Warns and Allstate, the agreement likely
could not reasonably limit her ability to work for Albright, Bennett & Albright, or other law
firms representing lead paint plaintiffs. In Maryland, courts will enforce noncompete agreements
only if “their terms are reasonable in light of the interests of the employer, the employee, and the
general public.” Labor Ready, Inc. v. Abis, 137 Md. App. 116, 128, 767 A.2d 936, 942 (2001).
The court considers three factors to determine whether the agreement is reasonable: “(1) whether
restraint is necessary for the protection of the business or goodwill of the employer, (2) whether
it imposes upon the employee any greater restraint than is reasonably necessary to secure the
employer’s business or goodwill, and (3) whether the degree of injury to the public is such loss
of the service and skill of the employee as to warrant nonenforcement of the covenant.” Id.
(citation and internal quotation marks omitted). A noncompete agreement should, in short, cover
no more activity than is necessary to protect the employer’s business and goodwill. Id. Here, a
restriction on Warns’ employment with Albright, Bennett & Albright, and other lead paint law
firms would fail factor (2). There are more narrow means available to secure Allstate’s business
or goodwill, such as screening measures at Bennett & Albright. Appropriate screening measures
might include: barring Warns from working on litigation involving Allstate and its insureds,
marking and/or segregating files involving Allstate and its insureds, and instructing lawyers and
other employees of the law firm not to discuss matters involving Allstate and its insureds with or
around Warns. The court encourages the parties to consult to determine whether they might
agree on appropriate screening measures.
8
The court rejects, however, Warns’ argument during the November 7, 2013, motions hearing
that Allstate may not seek screening measures because it was Albright, not Warns, who failed to
set up screening. Warns is the one with the fiduciary duty to Allstate, not Albright.
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confidential depends upon the applicable facts. See Dworkin v. Blumenthal, 77 Md. App. 774,
781, 551 A.2d 947, 950 (1989). The court in Dworkin considered:
(1) the extent to which the information is known outside of [the employer’s] business; (2)
the extent to which it is known by employees and others involved in [the employer’s]
business; (3) the extent of measures taken by [the employer] to guard the secrecy of the
information; (4) the value of the information to [the employer] and to his competitors; (5)
the amount of effort or money expended by [the employer] in developing the
information; (6) the ease or difficulty with which the information could be properly
acquired or duplicated by others.
Id. at 781–82, 551 A.2d at 950 (citation omitted). Thus, for example, a list of customers may be
considered confidential and even a trade secret. See Home Paramount Pest Control Cos., Inc. v.
FMC Corp. / Agric. Prods. Grp., 107 F. Supp. 2d 684, 692 (D. Md. 2000); Dworkin, 77 Md.
App. at 781, 551 A.2d at 950; see also Restatement (Second) Agency § 396(b) (“[A]fter
termination of the agency, the agent . . . has a duty to the principal not to use or to disclose . . .
written lists of names, or other similar confidential matters . . . .”).
The lead paint files, covering lead paint litigation from the early 1990s to 2010 and that
Warns allegedly provided to Bennett & Albright, qualify as confidential information. The files
contained lists of properties owned by Allstate’s insureds and information regarding lead paint
testing, lead paint violation notices, and insurance coverage on the properties. The list of
properties owned by Allstate’s insureds would constitute valuable information for Bennett &
Albright, as it would identify potential targets for lead paint litigation. Moreover, although it is
true that in litigation defendants might have to disclose with whom they are insured and their
policy number, (see Farquharson tr., Ex. 7, ECF No. 111, at 31:12–33:18), the court cannot find
this information is readily available prior to litigation. (See id. at 44:15–45:12 (explaining that,
for Warns to compile a list of properties owned by one of Allstate’s insureds, she had to call the
Allstate Claim Support Office and then wait for that office to research, find, and send the
12
policy).) The court also notes that the list of properties owned by Allstate’s insureds was
compiled over a period of about twenty years, suggesting a significant amount of effort was
expended in gathering this information. Taken together, the above factors suggest the lead paint
files, compiled by Warns from the early 1990s to 2010, are confidential.
The court is even more concerned about the information Warns possesses regarding
Allstate defense strategies. Over the course of thirty-three years of employment at Allstate,
Warns worked and communicated extensively with defense counsel and was privy to litigation
and settlement strategies. She requested legal advice from defense counsel, worked with defense
counsel to decide to bring cross-claims and counter-claims, attended witnesses’ depositions, and
was consulted on an appeal. The information Warns gathered while working with Allstate’s
counsel is not known outside the employer’s business and, indeed, is not likely known to many
employees within the business: Warns was one of only two adjusters in her office working on
lead paint claims. It is the kind of information that would be valuable to adversaries in litigation
but is not easily obtainable. In short, the information Warns gathered from working closely with
Allstate defense counsel is certainly confidential, if not privileged.
Having determined that the information qualifies as confidential, the court turns to
whether there is any genuine dispute that Warns provided this information to Bennett &
Albright. While not conclusive, Allstate’s proffered evidence, taken as a whole and considering
credibility issues to be resolved by the trier of fact, is sufficient to permit the case to go forward.
First, as explained above, it is clear Warns had access to confidential information while at
Allstate. As to the lead paint files, Warns denies that she took them. According to Allstate,
however, the files were missing after Warns’ departure, and she was one of only two people with
reason to access them. Allstate urges the court to consider those two facts in combination with
13
the increase in cases filed by Bennett & Albright against Allstate, the lack of measures to screen
Warns from Allstate matters, and Warns’ involvement in Allstate matters at Bennett & Albright.
Considering all those facts in the light most favorable to the non-movant, Allstate, the court
determines that Allstate has proffered enough evidence to raise a genuine dispute as to whether
Warns shared confidential information with Bennett & Albright. The court is also concerned
that Allstate’s confidential information continues to be at risk in the absence, which is not
disputed, of any measures to screen Warns from matters involving Allstate and its insureds.
Thus, Warns’ motion for summary judgment as to breach of fiduciary duty will be granted in
part, as to Allstate’s attempt to bar Warns from working for Albright, Bennett & Albright, and
other lead paint firms, and otherwise denied.
2. Breach of Contract
In Maryland, the elements of a breach of contract action are: (1) the defendant owed the
plaintiff a contractual obligation; and (2) the defendant breached that obligation. Taylor v.
NationsBank, N.A., 365 Md. 166, 175, 776 A.2d 645, 651 (2001) (citation omitted). In
Maryland, a plaintiff alleging breach of contract need not “prove damages resulting from the
breach, for it is well settled that where a breach of contract occurs, one may recover nominal
damages even though he has failed to prove actual damages.” Taylor v. NationsBank, N.A., 365
Md. 166, 175, 776 A.2d 645, 651 (2001) (citations omitted); see also PFB, LLC v. Trabich, 304
Fed. App’x 227, 228 (4th Cir. 2008) (citation and internal quotation marks omitted).9 Put
another way, nominal damages are appropriate when the plaintiff has suffered an injury from the
defendant’s breach of contract but it is impossible to calculate damages or the damages
calculation is based on “speculation or conjecture.” Kleban v. Eghrari-Sabet, 174 Md. App. 60,
9
Unpublished opinions are for the soundness of their reasoning, not for any precedential value.
14
95, 920 A.2d 606, 627 (2007). For example, in Trabich, the Fourth Circuit applied Maryland
law and concluded that PFB was entitled only to nominal damages because it did not
demonstrate its lost profits or out-of-pocket expenses with “reasonable certainty.” Trabich, 304
Fed. App’x at 228.
As an initial matter, the court deals with Warns’ argument that Allstate cannot pursue a
breach of contract claim because it is duplicative of the claim for breach of fiduciary duty.
Warns offers no legal authority for the notion that Allstate may not pursue both claims. Indeed,
the court is not aware of any Maryland case that stands for this proposition. Warns’ argument on
this point, therefore, will not prevail.
The court turns to the potential remedy for Warns’ alleged breach of contract. Allstate
claims as damages the increase in cases filed against its insureds following Warns’ departure,
making the bare claim that those damages exceed $75,000. Applying Maryland law, Allstate
need not itemize a specific damages amount to maintain a breach of contract claim.
Nevertheless, if Allstate cannot show with reasonable certainty what its damages are, its
potential recovery is limited to nominal damages. Indeed, even after discovery, Allstate has not
been able to put a number value to the increase in lawsuits filed against its insureds. Any
calculation of Allstate’s damages based on the increase in lawsuits would be based on
speculation. Accordingly, Allstate may only seek nominal damages, and to the extent it seeks
any other monetary damages, Warns’ motion for summary judgment will be granted.
Warns admits that “she was to abide by the Code of Ethics as a condition of her
employment,”10 but argues that Allstate cannot maintain a claim for breach of contract because
10
In an earlier opinion, the court refrained from ruling on whether a contractual obligation
existed between Warns and Allstate. (Op., ECF No. 41, at 19.) In deciding to delay this ruling,
the court reasoned that Allstate did not contend Warns signed the Code of Ethics or any other
15
she was not contractually obligated to Allstate after she left her position as a claims adjuster.
(Mot. for Summ. J. at 19.) But if Warns did in fact take files from Allstate, this conduct would
have occurred during her employment. Moreover, this conduct would have violated the Code of
Ethics, which provides that Allstate employees may only share proprietary Allstate information
with people with a “need to know” and may not appropriate proprietary Allstate information for
their own personal benefit. (See Code of Ethics at 19, 24.) Thus, regardless of whether the Code
of Ethics continued to govern Warns’ behavior after she left Allstate, she would have breached
the Code of Ethics by removing the files from Allstate for her own personal benefit. Because, as
explained above, there is a genuine dispute as to whether Warns removed the files from Allstate,
Allstate’s breach of contract claim would survive even if the contractual obligation did not
continue. Warns’ motion for summary judgment therefore will be granted in part, as to
Allstate’s claim for monetary damages, and otherwise denied. Should it ultimately prevail on the
breach of contract claim, Allstate will be entitled to nominal damages only.
b. Motion to Seal Allstate’s Opposition
Allstate moves to seal its opposition to Warns’ renewed motion for summary judgment.
Local Rule 105.11 requires that a party seeking to seal documents provide specific factual
representations justifying the sealing and an explanation for “why alternatives to sealing would
noncompete or nondisclosure agreement. Now discovery has revealed that Warns acknowledged
her receipt of the Allstate Code of Ethics, and her agreement to it, in both 2009 and 2010.
Accordingly, the court concludes that the Code of Ethics created a contractual obligation
between Warns and Allstate. Cf. Zahodnick v. Int’l Bus. Machs. Corp., 135 F.3d 911, 915 (4th
Cir.1997) (upholding injunctive relief for a breach of confidentiality claim where a former
employee had signed two nondisclosure agreements). Finally, the court recognizes an
inconsistency between Warns’ motion for summary judgment and her accompanying
memorandum; although she maintains in her motion that “the Code of Ethics [wa]s not a
contractual term” of her employment, (see Mot., ECF No. 110 at ¶ 5I), Warns seems to state the
opposite in her accompanying memorandum. (See Mot. for Summ. J. at 19.) Regardless of
whether Warns admits the Code of Ethics created a contractual obligation, the court finds such
an obligation was formed when she acknowledged and agreed to the Code in 2009 and 2010.
16
not provide sufficient protection.” Local R. 105.11 (D. Md. 2011); see Minter v. Wells Fargo
Bank, N.A., 258 F.R.D. 118, 120–21 (D. Md. 2009). According to the Fourth Circuit, “[t]he right
of access in any given case may vary depending on the nature of the case and the specific item
under review.” Va. Dep’t of State Police v. Washington Post, 386 F.3d 567, 576 (4th Cir. 2004)
(citation omitted). The court therefore must determine the public interest in accessing the
specific documents at issue. See Stone v. Univ. of Md. Medical Sys. Corp., 855 F.2d 178, 180–81
(4th Cir. 1988). When the document at issue is a dispositive civil motion, such as a motion for
summary judgment, the First Amendment applies so that public access “may be denied only on
the basis of a compelling governmental interest, and only if the denial is narrowly tailored to
serve that interest.” Id.; see also Rushford v. New Yorker Magazine, Inc., 846 F.2d 249, 253 (4th
Cir. 1988). By contrast, when the document is related to a non-dispositive civil motion, it is not
clear whether the First Amendment applies. See Va. Dep’t of State Police, 386 F.3d at 580
(citations and internal quotation marks omitted) (stating that the court has not held that the public
has a First Amendment right to access non-dispositive civil motions, but also stating that
“proceedings in civil cases are traditionally open . . . and in some civil cases the public interest in
access . . . may be as strong as, or stronger than, in most criminal cases”).
As to Allstate’s motion to seal its opposition to Warns’ renewed motion for summary
judgment, Allstate argues that each page of the opposition contains confidential information that,
if publicly disclosed, may harm Allstate’s business interests as well as possibly Warns or
Albright. Allstate therefore maintains that redaction is not a feasible option and would render its
papers incomprehensible. As a preliminary matter, the court notes that the more stringent First
Amendment test applies to the determination of whether to seal Allstate’s opposition, as it relates
to a dispositive civil motion. Applying this more rigorous standard, the court determines that
17
Allstate meets its burden only in part. Exhibit N is properly redacted, but still contains
Albright’s sensitive financial information—in particular, personal checks and bank statements—
that need not be made publicly available. Thus, Exhibit N will be sealed. The remaining
documents, however, contain information that is largely summarized in this Memorandum, is not
confidential, and is already heavily redacted. The court finds Allstate has not “established with
specificity that disclosure of the [remaining] material will result in some kind of substantial
harm” to its business and “that that harm outweighs both the necessity of the material to
dispositive motions practice in this case and the traditional right to public access of judicial
documents and records.” Waterkeeper Alliance, Inc. v. Alan & Kristin Hudson Farm, 278
F.R.D. 136, 142 (D. Md. 2011) (emphasis added) (citation omitted). Indeed, Allstate makes only
the sweeping claim that public disclosure of its opposition would harm its business interests.
Accordingly, Allstate’s motion to seal its opposition will be granted in part, as to Exhibit N, and
will be otherwise denied. As it was instructed earlier in the court’s February 29, 2012,
Memorandum (see Op., ECF No. 41, at 32–33), Allstate will be instructed to file proposed
redacted versions of the documents at issue, together with the necessary specific factual
representations justifying secrecy. See id. The temporary seal will remain in place until the
redacted versions are approved.
c. Motion to Strike
Warns moves to strike Allstate’s Exhibit N from its opposition to her renewed motion for
summary judgment. She argues that a confidentiality agreement—executed in connection with
Albright’s divorce—precludes Allstate from using as an exhibit cancelled checks and statements
from Albright’s personal checking account at M & T Bank. The cancelled checks and bank
statements were sent, unsolicited, to Allstate’s counsel by Albright’s ex-wife, Elizabeth Hand.
18
The agreement at issue, dated September 30, 2011, is entitled “Non-Disclosure/Confidentiality
Agreement in Regard to All Discovery, Testimony, and Other Evidence Produced or Otherwise
Created in David Albright v. Elizabeth Albright.” (See Ex. 4, ECF No. 128-2, at 18.) It
provides, in pertinent part, that:
In an effort to resolve the issues between the parties, the Requesters have requested
personal financial information from David Albright and financial information from
Bennett & Albright, P.A. Mr. Albright and Bennett & Albright desire to receive from the
Requesters assurances that such information will not be disclosed for any purpose, other
than those specifically set forth herein.
(Id. (emphasis in original).) The agreement continues by defining “[c]onfidential [i]nformation”
as including, but not limited to, “all documents received from Bennett & Albright, P.A.” (Id.)
To begin, the court notes that Exhibit N is not relevant to the motion for summary
judgment, and the court will not rely on the exhibit in ruling on the motion. It is also unclear
how Warns may enforce an agreement between Albright and his ex-wife. In Maryland, an
individual does not possess the right to enforce a contract merely because it operates to her
benefit; instead, an individual may enforce a contract if she is a party or a third-party beneficiary
to the contract. See CR-RSC Tower I, LLC v. RSC Tower I, LLC, 429 Md. 387, 457, 56 A.3d
170, 212 (2012) (citation omitted). Here, Warns was neither a party nor a third-party beneficiary
to the confidentiality agreement. Simply because the agreement operates to her advantage does
not mean she has the right to seek its enforcement. Accordingly, Warns may not move to strike
Exhibit N based on the confidentiality agreement between Albright and his ex-wife.11
Next, to the extent that Warns’ motion to strike is intended to include a motion to
disqualify counsel for Allstate, it will be denied. Disqualification is a drastic measure, as it
11
Having decided that Warns may not enforce the confidentiality agreement, it is unnecessary to
consider whether the agreement applies only to business information of Bennett & Albright, and
not to Albright’s personal affairs.
19
deprives a litigant of her right to choose her own counsel. Gross v. SES Americom, Inc., 307 F.
Supp. 2d 719, 722 (D. Md. 2004) (citations omitted). The court must be mindful of the
possibility that a disqualification motion may be abused for tactical purposes. See Shaffer v.
Farm Fresh, Inc., 966 F.2d 142, 146 (4th Cir. 1992) (citation omitted). Accordingly, in a motion
to disqualify opposing counsel, the movant must satisfy a high standard of proof that
disqualification is warranted. See Buckley v. Airshield Corp., 908 F. Supp. 299, 304 (D. Md.
1995); see also Tessier v. Plastic Surgery Specialists, Inc., 731 F. Supp. 724, 729 (E.D. Va.
1990). Only where a lawyer has a conflict that clearly calls into question “the fair and efficient
administration of justice” will the court grant a motion to disqualify. See Gross, 307 F. Supp. 2d
at 723 (citations and internal quotation marks omitted).
Warns falls short of this high standard of proof. She alleges that Allstate’s counsel
violated Rule 4.4(a) of the Maryland Rules of Professional Conduct, which states that a lawyer
shall not “use methods of obtaining evidence that the lawyer knows violate the legal rights of [an
individual].” To support this claim, she makes the bare assertion that Allstate’s counsel solicited
the cancelled checks and bank statements from Hand. Warns likewise offers mere speculation
that Allstate’s counsel had contact with Hand prior to her sending Albright’s financial
information. According to Warns, disqualification of Allstate’s counsel also is appropriate
because they cannot protect their own interests and, at the same time, serve those of their client;
however, she offers no explanation of how counsel’s interests diverge from the interests of
Allstate. Taken together, Warns’ conclusions, unsupported by any evidence, do not in any way
justify the drastic measure of disqualification.
20
d. Motion to Seal Declarations
Allstate moves to seal the declarations of Ackerman and Pfaehler, submitted in
opposition to Warns’ motion to strike Exhibit N. According to Allstate, the declarations contain
sensitive information regarding Albright’s business activities as well as personal information
regarding Warns. As a result, Allstate maintains that public disclosure of the sensitive and
personal information may adversely harm Albright or Warns.
The court agrees only in part with Allstate. In particular, Exhibits 1 and 2 of Pfaehler’s
declaration contain private financial information for Albright, which—although properly
redacted—need not be made publicly available. Even applying the less stringent sealing
standard, the court cannot discern any public interest in accessing Albright’s personal checks and
bank statements. Therefore, the court will seal Exhibits 1 and 2 of Pfaehler’s declaration.
The court also will, sua sponte, seal Exhibit 1 attached to Warns’ motion to strike
Allstate’s Exhibit N. See Pacheco v. Sears, Roebuck and Co., No. 1:05CV293, 2006 WL
1789140, at *7 n.1 (M.D.N.C. June 26, 2006) (deciding, sua sponte, to seal an exhibit). Exhibit
1 contains the same private financial information for Albright included in Exhibits 1 and 2 of
Pfaehler’s declaration.
As to Ackerman’s and Pfaehler’s declarations and the remaining documents attached as
exhibits, the court need not determine whether the First Amendment standard applies because
Allstate does not meet its burden under either standard. The declarations and remaining exhibits
contain little, if any, confidential information. Indeed, much of the information contained in
those documents is summarized in this Memorandum. The remaining documents, accordingly,
shall not be sealed. Allstate will be instructed to file proposed redacted versions of the
documents at issue, together with specific factual representations justifying secrecy. See
21
Waterkeeper Alliance, Inc., 278 F.R.D. at 142. The temporary seal will remain in place until the
redacted versions are approved.
CONCLUSION
For the reasons stated above, Warns’ motion for summary judgment will be granted in
part and denied in part, Allstate’s motion to seal its opposition to Warns’ motion for summary
judgment will be granted in part and denied in part, Warns’ motion to strike Allstate’s Exhibit N
will be denied, and Allstate’s motion to seal the declarations of Ackerman and Pfaehler will be
granted in part and denied in part. Having narrowed the potential relief so that Allstate may seek
only nominal damages for the breach of contract claim, and may not seek to bar Warns from
working for Bennett & Albright, the court urges the parties to confer with one another. A
conference call with counsel will be scheduled to discuss whether any further proceedings may
be necessary.
A separate order follows.
November 12, 2013
Date
/s/
Catherine C. Blake
United States District Judge
22
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