Perez v. Chimes District of Columbia, Inc. et al

Filing 187

MEMORANDUM AND ORDER denying the Secretary's 165 Motion for Protective Order. Signed by Judge Richard D. Bennett on 4/6/2017. (dass, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
*
EDWARD C. HUGLER,
Acting Secretary of Labor,
*
Plaintiff,

*

v.

*

CHIMES DISTRICT OF
COLUMBIA, INC., et al.,

Civil Action No.: RDB-15-3315

*
*

Defendants.
*

*

*

*

*

*

*

*

*

*

*

*

*

*

MEMORANDUM ORDER
Acting United States Secretary of Labor Edward C. Hugler, (“the Secretary”) has
brought a ten-count Amended Complaint against The Chimes D.C., Inc. Health & Welfare
Plan (the “Plan”) and its alleged fiduciaries and service providers, including Defendants FCE
Benefit Administrators, Inc.; Gary Beckman; and Stephen Porter (the “FCE Defendants”),
alleging violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), as
amended, 29 U.S.C. § 1001, et seq. First Am. Compl., p. 1-2, ECF No. 102. The facts of this
case have been previously set forth in this Court’s Memorandum Opinion of September 19,
2016 (ECF No. 135). See Perez v. Chimes D.C., Inc., et al., No. RDB-15-3315, 2016 WL
4993293, at *1 (D. Md. Sept. 19, 2016).

Currently pending before this Court is the

Secretary’s Motion for Protective Order (ECF No. 165). A hearing on the pending Motion
was conducted in this Court yesterday, April 5, 2017. For the reasons set forth on the record
at the conclusion of that hearing, and further explained herein, the Secretary’s Motion for
Protective Order (ECF No. 165) is DENIED.
1

The Secretary has moved for a Protective Order “in order to prevent actual and
potential witnesses [in the instant action] from embarrassment, oppression, and undue
burden or expense due to intimidation and disclosure of informants’ identities” by the FCE
Defendants. See Mem. Supp. Mot., p. 1, ECF No. 165-1. Specifically, the Secretary objects
that the FCE Defendants have initiated a separate action against a former FCE employee,
Donna Zapata, in the 285th Judicial District Court of Bexar County, Texas, FCE Benefit
Administrators, Inc. v. Donna Zapata, Case No. 2015-CI-20447 (the “Zapata Action”), as a
“retaliatory litigation tactic[ ],” aimed primarily at “chill[ing] the willingness of witnesses to
voluntarily cooperate with the [Secretary]” in the instant ERISA action. Id. at 2, 10. The
Secretary alleges that the FCE Defendants have abused the discovery process in that action
in order to obtain “privileged informants’ identities and statements” and requests a
Protective Order “to prevent the disclosure of privileged information and to protect
potential and current witnesses from harassment and undue burden or expense from
defending against [FCE’s] frivolous [litigation].” Id. at 9-10. The Secretary further claims
that the FCE Defendants have “misled former and current employees about the scope of
their employee confidentiality agreements,” causing those current and former employees to
incorrectly believe that they are prohibited from cooperating with the Department of
Labor’s ongoing investigation of FCE in connection with this action. Id. at 1.
STANDARD OF REVIEW
Under Rule 26(c) of the Federal Rules of Civil Procedure, “[a] party or any person
from whom discovery is sought may move for a protective order in the court where the
action is pending.” Fed. R. Civ. P. 26(c) (2015) (emphasis added). “The court may, for good
2

cause, issue an order to protect a party or person from annoyance, embarrassment,
oppression, or undue burden or expense, including . . . forbidding the disclosure or
discovery . . . [or] forbidding inquiry into certain matters, or limiting the scope of disclosure
or discovery to certain matters.” Id. “The burden is on the movant to establish good cause
under Rule 26(c); the movant must set forth specific and particular facts, rather than broad
conclusory statements as to why a protective order should issue.” Innovative Therapies, Inc. v.
Meents, 302 F.R.D. 364, 377 (D. Md. 2014) (citing Baron Fin. Corp. v. Natanzon, 240 F.R.D.
200, 202 (D. Md. 2006)). Rule 26 grants trial courts broad discretion “to decide when a
protective order is appropriate and what degree of protection is required.” Id. (citing
Wright, Miller & Marcus, Federal Practice and Procedure: Civil 2d § 2036).
ANALYSIS
As explained on the record at yesterday’s hearing, this Court lacks jurisdiction to
restrict discovery in the Zapata Action, a separate action pending in Texas state court. The
United States Court of Appeals for the Ninth Circuit has expressly held in Kirshner v. Uniden
Corp. of Am., 842 F.2d 1074, 1081 (9th Cir. 1988) that “a district court’s power to control
discovery does not extend to material discovered in a separate action, notwithstanding the
fact that the parties [in that case] were identical” (emphasis added). The Ninth Circuit in
Kirshner vacated a Protective Order issued by the United States District Court for the Central
District of California “compel[ling] the return of documents obtained through discovery in a
separate action.” Kirshner, 842 F.2d at 1081. The Court held that “[t]he remedy for a party
seeking the return of material improperly discovered in a separate action is to seek a
protective order from the court that presided over the discovery process in that discrete
3

proceeding.” Id. (emphasis added). Likewise, the United States Court of Appeals for the
Second Circuit has held in Bridge C.A.T. Scan Assocs. v. Technicare Corp., 710 F.2d 940, 947 (2d
Cir. 1983) that the United States District Court for the Eastern District of New York lacked
authority to issue a Rule 26(c) Protective Order prohibiting the disclosure of trade data
obtained prior to discovery in the instant case. See also Schoenbaum v. E.I. DuPont De Nemours
& Co., No. 4:05CV01108 ERW, 2008 WL 4790332, at *2 (E.D. Mo. Oct. 28, 2008) (“the
general rule is that, a district court’s power to control discovery does not extend to material
discovered in a separate action, notwithstanding the fact that the parties were identical (citing
Kirshner) . . . [although] protective orders are occasionally issued to restrict the use of any
discovery [in] the instant action.”) (quotations omitted) (emphasis added)).
To the extent the Secretary seeks to restrict certain discovery in the pending Zapata
Action, the Secretary may move to intervene in that action pursuant to Rule 60 of the Texas
Rules of Civil Procedure, which provides that “[a]ny party may intervene by filing a pleading,
subject to being stricken out by the court for sufficient cause on the motion of any party.”
Additionally, to the extent the Secretary is specifically concerned that the FCE Defendants
have retaliated against potential witnesses with respect to this ERISA action, Sections 502
and 510 of ERISA, 29 U.S.C. §§ 1132, 1440, provide the Secretary a right of action to enjoin
Defendants from “discriminat[ing] against any person because he has given information or
has testified or is about to testify in any inquiry or proceeding relating to this chapter . . . .”
As for the Secretary’s contention that certain statements by the FCE Defendants and
their agents have misled current and former FCE employees, counsel for the Department of
Labor has specifically directed this Court to consider one particular letter dated November
4

24, 2015, in which Sandie Darling, General Counsel for FCE, stated that FCE’s NonDisclosure and Non-Compete Agreements prohibit FCE employees and former employees
from “disclos[ing] Confidential Information to any person, firm, corporation, or other entity
. . . .” See FCE Letter, p. 26, ECF No. 165-2. The Secretary contends that this Letter had
the effect of suggesting to recipients that they were prohibited from speaking to the
Department of Labor with respect to this case or the Department’s ongoing investigation of
FCE. However, as this Court explained on the record at yesterday’s hearing, nothing about
this standard language is improper or coercive. Accordingly, the Secretary has failed to meet
its burden under Rule 26(c) of the Federal Rules of Civil Procedure.
Furthermore, at this Court’s hearing, counsel for the Department of Labor submitted
two additional declarations for this Court’s in camera review, in which two FCE employees
stated that agents of FCE have specifically instructed them not to cooperate with
Department of Labor investigators.

Following this Court’s in camera review, these

declarations have now been filed under seal. As explained on the record, these Declarations
do not justify issuance of the Protective Order requested by the Secretary in the pending
Motion. As discussed on the record, and reiterated supra, the Secretary may seek alternative
relief with respect to its concerns as to witness coercion and intimidation, including moving
this Court to compel testimony of those potential witnesses who may be under the mistaken
belief that their Non-Disclosure Agreement with FCE prohibits them from cooperating with
the Department of Labor’s ongoing investigation. However, the requested Protective Order
with respect to all FCE communications with current and former employees is not
warranted.
5

CONCLUSION
For the reasons stated on the record at this Court’s hearing conducted yesterday,
April 5, 2017, and further explained above, the Secretary’s Motion for Protective Order
(ECF No. 165) is DENIED.
Dated:

April 6, 2017
/s/
Richard D. Bennett
United States District Judge

6

_