Process Controls International, Inc. v. Emerson Process Management et al
Filing
127
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Fisher's motion for leave to file a First Amended Counterclaim [#96] is denied as moot. IT IS FURTHER ORDERED that Automation's motion to amend its Complaint [#101] is granted and denied in pa rt as described in this Memorandum and Order, and its proposed Second Amended Complaint [#101-1] is deemed filed as of this date with paragraphs 187, 195, 206, and 223 stricken from it. IT IS FURTHER ORDERED that Emerson's motion for leave to f ile a sur-reply [#105] is granted. IT IS FURTHER ORDERED that Automation's motion for a Protective Order [#107] is granted and denied in part, and a modified version of its second proposed Protective Order will be entered this same date as the Protective Order in this case. IT IS FURTHER ORDERED that Automation's motion for an Electronic Discovery Order [#109] is denied without prejudice; the parties are further ordered to meet and confer in person and in good faith in an effort to co me to their own agreement about electronic discovery. IT IS FURTHER ORDERED that Automation's motion to disqualify Glenn E. Davis and the Law Firm of Gallop, Johnson & Neuman, L.C. [#111] is granted. IT IS FURTHER ORDERED that Fisher's motion for leave to file a Second Amended Counterclaim [#115] is granted, and its Second Amended Counterclaim is deemed filed as of this date. Signed by Honorable Catherine D. Perry on 05/10/2011. (BRP)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
PROCESS CONTROLS
INTERNATIONAL, INC., d/b/a
AUTOMATION SERVICE,
Plaintiff,
vs.
EMERSON PROCESS
MANAGEMENT, et al.,
Defendants.
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Case No. 4:10CV645 CDP
MEMORANDUM AND ORDER
Pending before me are several motions from the parties. Plaintiff Process
Controls International, Inc., doing business as Automation Service (Automation),
seeks to file a Second Amended Complaint. Automation also moves for a
Protective Order and an Electronic Discovery Order, and to disqualify Glenn E.
Davis and the Gallop, Johnson, & Neuman, L.C. law firm as defendants’ counsel.
Meanwhile, counterclaimant Fisher Controls International, LLC has filed two
motions to amend its counterclaim, and defendant Emerson Process Management
moves for leave to file a sur-reply to Automation’s motion to amend.
For the reasons that follow, I will grant in part and deny in part
Automation’s motion to amend its Complaint. I will also grant its motion to
disqualify Davis and the Gallop law firm, because I find that Davis and the firm
have been laboring under a conflict of interest and are accordingly prohibited from
representing Emerson in this matter. I will grant in part and deny in part
Automation’s motion for a Protective Order, but I will deny without prejudice
Automation’s request to enter an Electronic Discovery Order, because the parties
have not met and conferred in good faith to come to their own agreement. I will
also grant Emerson’s motion for leave to file a sur-reply. Finally, I will grant
Fisher’s unopposed motion to file a Second Amended Counterclaim, and will deny
as moot its motion to file a First Amended Counterclaim.
Discussion
I.
Automation’s Motion to Amend
Automation first seeks to file a Second Amended Complaint. The proposed
Second Amended Complaint joins two new defendants, counterclaimant Fisher
and non-party Rosemount, Inc. It also alleges that these defendants and Emerson
influenced former defendants Factory Mutual Insurance Company and FM
Approvals, LLC into denying Automation’s application for FM certification, and
that this amounted to false advertising, defamation, and tortious interference.
Finally, Automation amends its prayer for relief to include only damages relevant
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to its false advertising, defamation, and tortious interference claims. Defendants
oppose each of these amendments,1 and I will consider each in turn.
A.
Joinder of New Defendants Fisher and Rosemount
Automation’s proposed joinder of Fisher and Rosemount implicates Rules
15 and 21, Fed. R. Civ. P. Under Rule 15, a district court should grant leave to
amend freely “when justice so requires,” and a motion to amend should only be
denied for limited reasons, including plaintiff’s undue delay or bad faith in
bringing the motion, unfair prejudice to defendant, or futility of the amendment.
Foman v. Davis, 371 U.S. 178, 182 (1962); Amrine v. Brooks, 522 F.3d 823, 833
(8th Cir. 2008). The party opposing the amendment has the burden of
demonstrating that the amendment would be unfairly prejudicial. Roberson v.
Hayti Police Dep’t, 241 F.3d 992, 995 (8th Cir. 2001). Whether to grant a motion
for leave to amend is within the discretion of the district court. Popoalii v.
Correctional Med. Servs., 512 F.3d 488, 497 (8th Cir. 2008). Under Rule
20(a)(2), a person may be joined as an additional defendant if: “(A) any right to
relief is asserted against them jointly, severally, or in the alternative with respect
to or arising out of the same transaction, occurrence, or series of transactions or
1
Emerson has also moved for leave to file a sur-reply to Automation’s motion to amend,
which Automation opposes. In the interests of justice, I will grant Emerson’s motion to file the
sur-reply; I have considered it, as well as Automation’s response in opposition, in determining
whether to grant Automation’s motion to amend.
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occurrences; and (B) any question of law or fact common to all defendants will
arise in the action.”
Applying these factors to this case, I conclude that Automation’s motion to
join these parties as defendants should be granted. Emerson argues the motion
should be denied because of undue delay,2 but there is no evidence of that in the
record before me. It is true that Automation had some indication when it first filed
its original Complaint that Fisher and Rosemount were also involved in the
alleged smear campaign against it that forms the basis of its claims. Indeed,
several of the exhibits attached to its original Complaint were written or endorsed
by Fisher and Rosemount, or bear those companies’ signatures. However, there is
also evidence in the record that Emerson has been inconsistent in its answers to
Automation’s inquiries about the corporate structure of these three companies.
Although counsel for Emerson indicated at one time that all three are separate,
Automation also presents evidence that counsel has indicated as recently as
February of 2011 that these companies are related. On the basis of this record, I
cannot conclude that Automation’s delay in moving to join these parties was
undue.
2
Emerson also argues that joinder of these defendants is untimely under the Case
Management Order entered in this case. That is incorrect. In my February 1, 2011 Memorandum
and Order [Docket # 99], I granted the parties an additional ten days to move to amend their
pleadings, and I intended this to encompass amendments that might add parties. Because
Automation moved on February 10, 2011 to amend its Complaint and add these parties, its
motion is timely.
-4-
There is no other basis to deny Automation’s request to add parties.
Emerson claims no unfair prejudice if these defendants are joined, and there is no
evidence that there will be any. Discovery is still underway, and dispositive
motions are not due for several months. Finally, the amendments are not futile and
joinder is appropriate under Rule 20(a), because Automation claims and submits
some evidence suggesting that Emerson, Fisher, and Rosemount were all involved
in the same alleged smear campaign. These defendants will therefore be joined.
B.
Substantive Amendments to Complaint
Automation also moves to add allegations that these three defendants’
alleged smear campaign influenced the former FM defendants to deny
Automation’s request for FM certification, and that these actions amount to false
advertising, defamation, and tortious interference. For example, as part of Count
XI, alleging false advertising in violation of the Lanham Act, 15 U.S.C. § 1125,
Automation now alleges, “Emerson’s false advertising has also damaged
Automation Service by influencing FM and FMA to include in their standard a
requirement to gain approval of the [original equipment manufacturer] in order to
approve any remanufactured product.”
There are no factual allegations in the rest of Automation’s proposed
Second Amended Complaint to support these new allegations, however. For
example, Automation does not allege that any of defendants’ alleged false
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advertising or defamatory statements ever reached the FM parties before they
created the original equipment manufacturer requirement in 1998, or before they
denied Automation FM certification in 2009. Indeed, aside from Automation’s
conclusory allegation that defendants’ false statements influenced the FM
defendants to create this requirement, there are no factual allegations anywhere in
the proposed Second Amended Complaint indicating how this requirement was
created, whether Emerson ever contacted the FM defendants about Automation, or
if any of Emerson’s advertisements even reached the FM defendants.3 Rather,
Automation only alleges that this advertising material was sent to its customers or
published in the general market for remanufactured process control equipment.
Because the proposed Second Amended Complaint contains no factual allegations
from which I can draw the reasonable inference that defendants’ alleged false
statements and advertising reached the FM defendants and influenced their
decision not to certify Automation’s products, these amendments are futile and
3
As discussed in my November 10, 2010 Memorandum and Order, Automation alleged in
its original Complaint that Emerson and the FM defendants conspired together to create the
original equipment manufacturer requirement in order to unlawfully restrain Automation’s sales
and to maintain a monopoly in the market for remanufactured Emerson-brand process control
equipment. However, Automation never provided any factual allegations about the OEM
requirement in its original Complaint; it never allged any facts about defendants’ conspiracy, or
the requirement’s creation. In fact, it was this lack of factual detail supporting its allegations that
lead me to grant defendants’ motions to dismiss these antitrust claims under Bell Atlantic Corp.
v. Twombly, 550 U.S. 544 (2007). Automation includes the very same allegations in its Second
Amended Complaint about the formulation of the OEM requirement, and so there is still no basis
from which to infer that defendants ever conspired, or that defendants’ advertisements or
statements influenced the FM parties into creating the OEM requirement.
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must be denied. See Popoalii, 512 F.3d at 497 (amendments may be denied if
futile); see also Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (to survive a
motion to dismiss, plaintiff’s allegations must be enough to raise the right to relief
above the speculative level).
C.
Amendments to Prayer for Relief
Automation also seeks to amend its prayer for relief to clarify what relief it
seeks based on its claims for false advertising, tortious interference, and
defamation. Emerson only opposes these amendments to the extent that
Automation seeks liquidated damages for counterclaimant Fisher’s alleged
violation of their 2007 Settlement Agreement. As defendants point out and
Automation itself admits, however, this Agreement did not provide that
Automation would be entitled to liquidated damages for any breach. Instead, only
Fisher is entitled under the Agreement to liquidated damages. Because
Automation is not entitled to these damages, this amendment is futile, and I must
reject it. The remaining and unopposed amendments to the prayer will remain,
however.
Accordingly, Automation’s proposed Second Amended Complaint, as
amended by this Memorandum and Order, is deemed filed as of this date. In
particular, the Second Amended Complaint shall be filed with paragraphs 187,
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195, 206, and 223 stricken from it. The parties are reminded of their obligation
under the Rules to file responsive pleadings within the deadlines for doing so.
II.
Motion to Disqualify
Automation next moves to disqualify Glenn E. Davis and the law firm of
Gallop Johnson & Neuman LC as counsel for Emerson and counterclaimant
Fisher. In support of this motion, Automation presents evidence that, although
Davis and the Gallop law firm entered appearances on behalf of Emerson in May
of 2010, another attorney at Gallop, Mark Weisman, provided legal services to
Automation that same month and billed for those services in June of 2010.
Automation also presents evidence that Weisman and Gallop provided and billed
Automation for legal services since at least January of 2009, and continuing until
December of 2010. Meanwhile, this case has been pending since Automation filed
its original Complaint in April of 2010, and Davis and other counsel for Emerson
have filed motions to dismiss Automation’s Complaint and have opposed its
motions to amend. Automation asserts that it only discovered this potential
conflict of interest in March of 2011, when attorneys from Gallop refused to
represent a senior executive at Automation on an unrelated matter because of this
litigation. It argues that Davis and Gallop are prohibited under the Missouri Rules
of Professional Conduct from representing Emerson in this case, because
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Automation is a current client of Gallop’s and Weisman’s, and Weisman’s conflict
is imputed to Davis as a member of that firm.
Emerson opposes the motion to disqualify, contending that Automation is a
former client, not a current client, of Gallop’s and Weisman’s, and so because
Davis’s representation of Emerson is not substantially related to the firm’s former
representation of Automation, no conflicts exist. Emerson also argues that
Automation’s motion is untimely and unfair. I disagree with Emerson’s
interpretation of the facts and conclude that disqualification is necessary.
Within the Eighth Circuit, motions to disqualify are “subjected to
particularly strict scrutiny” because of the potential for abuse by opposing counsel.
Macheca Transport Co. v. Philadelphia Indem. Ins. Co., 463 F.3d 827, 833 (8th
Cir. 2006) (internal quotation marks and citations omitted). Before a motion to
disqualify may be granted, the party moving for disqualification must satisfy a
heavy burden of showing that continuing representation would be impermissible.
See A.J. by L.B. v. Kierst, 56 F.3d 849, 859 (8th Cir. 1995); accord Olson v. Snap
Prods, Inc., 183 F.R.D. 539, 542 (D. Minn. 1998). However, because courts also
have the duty to maintain public confidence in the legal profession and to ensure
the integrity of judicial proceedings, any legitimate doubts must be resolved in
favor of disqualification. See Olson, 183 F.R.D. at 542; see also Coffelt v. Shell,
577 F.2d 30, 32 (8th Cir. 1978) (same).
-9-
Automation’s motion implicates three Missouri Rules of Professional
Conduct.4 Governing current conflicts of interest, Rule 4-1.7(a) prohibits an
attorney from representing a client “if the representation involves a concurrent
conflict of interest.” Mo. S. Ct. R. 4-1.7(a). Such conflicts exist if:
(1) the representation of one client will be directly adverse to another
client; or
(2) there is a significant risk that the representation of one or more
clients will be materially limited by the lawyer’s responsibilities to
another client, a former client, or a third person or by a personal
interest of the lawyer.
Id. Despite the existence of such a conflict, Rule 4-1.7 also provides that a lawyer
may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to
provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one
client against another client represented by the lawyer in the same
litigation or proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
Id. R. 4-1.7(b). By contrast, Rule 4-1.9 prohibits an attorney from representing
one client against a former client in the same or a substantially related matter in
4
Local Rule 12.02 of the United States District Court for the Eastern District of Missouri
adopts the Missouri Supreme Court’s Rules of Professional Conduct as the District’s Rules of
Professional Conduct. See E.D. Mo. L. R. 12.02.
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which the current client’s interests are materially adverse to the former client’s,
unless the former client gives informed consent, confirmed in writing. Id. R. 41.9. Finally, Rule 4-1.10(a) prohibits lawyers associated in a firm from
“knowingly represent[ing] a client when any one of them practicing alone would
be prohibited from doing so by Rules 4-1.7 or 4-1.9 . . . .”
Here, Emerson argues that Automation is a former client of the Gallop law
firm’s and Weisman’s under Rule 4-1.9. Emerson admits that the Gallop law
firm, through Weisman, represented Automation in 2009 and 2010 and billed
Automation for 3.9 hours of services performed during that time. However,
Emerson denies that these matters make Automation a current client, arguing that
Weisman’s and the firm’s representation was limited to self-contained, brief
encounters in which Automation’s employees would seek employment advice, and
Weisman would answer their requests.
Even if I agreed that Weisman’s and the Gallop firm’s representation of
Automation in 2009 and 2010 was limited to “self-contained” representation – that
is, that the firm’s representation of Automation was not continual during this time
period, but began and ended each time Automation sought and received legal
services – it is undisputed that the firm actually represented both Automation and
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Emerson during this litigation.5 As outlined above, Automation sought and
received legal advice from Weisman and was billed for that advice throughout
2009 and 2010. Accordingly, an attorney-client relationship existed between
Weisman and Automation, and Weisman was therefore barred by Rule 4-1.7(a)
from representing another client against Automation. See Westinghouse Elec.
Corp. v. Kerr-McGee Corp., 580 F.3d 1311, 1319 (7th Cir. 1978) (attorney-client
relationship established when the client believes that it is consulting a lawyer in
his profession capacity and manifests her intention to seek professional legal
advice); see also Mo. S. Ct. R. 4-1.7(a) (prohibiting attorneys from representing
two clients if the representation of one will be directly adverse to the other). Any
conflicts arising from Weisman’s representation of Automation are imputed to
Davis, because they are attorneys in the same firm. See Mo. S. Ct. R. 4-1.10(a).
5
In fact, I conclude that Gallop’s representation of Automation was continual, and not
limited to discrete, or self-contained instances of representation as Emerson suggests. Generally,
representation ends as provided by contract or the lawyer has completed the contemplated
services. See Edelstein v. Optimus Corp., No. 8:10-cv-00061-JFB-FG3, 2010 WL 3843595, at
*2 (D. Neb. Sept. 24, 2010) (citing Restatement (Third) of the Law Governing Lawyers §
31(2)(e)). However, attorneys and clients may also contemplate a continuing relationship in
which the attorney handles legal matters as they arise. See id. at *3 (quoting Restatement § 31,
cmt. h). When considering whether representation has ended, a court may consider the parties’
course of dealing, including whether representation was limited to one matter, or whether it
continued for several different matters. See, e.g., id. Contracts with a client are to be construed
from the client’s viewpoint, however, and so “the client’s reasonable understanding of the scope
of the relationship controls.” See id. (quoting Restatement § 31, cmt. h). Here, the evidence
shows that since at least 2009, Automation has sought legal advice from Weisman from time to
time, and that Weisman has never declined representation, but instead has provided advice and
billed for that advice. Construing this relationship through Automation’s viewpoint, I cannot
conclude that the relationship was anything but continuing.
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Accordingly, Davis’ and the Gallop firm’s concurrent representation of Emerson
in this case is prohibited by Rule 4-1.7. See Mo. S. Ct. R. 4-1.7(a); see also id.
cmt. 6 (“Thus, absent consent, a lawyer may not act as an advocate in one matter
against a person the lawyer represents in some other matter, even when the matters
are wholly unrelated.”). As it is undisputed that Automation has not given the
written consent to this representation required by Rule 4-1.7(b), this concurrent
representation is prohibited by the Rules of Professional Conduct and subjects
Davis and the Gallop law firm to disqualification.
Emerson also argues that Automation’s motion is untimely and unfair. I
disagree. Under Missouri law, motions to disqualify should be filed with
“reasonable promptness” after the party becomes aware of the conflict, so as to
prevent that party from using disqualification as a strategic tool to deprive its
opponent of counsel of its choice after substantial preparation has been completed.
Polish Roman Catholic St. Stanislaus Parish v. Hettenbach, 303 S.W.3d 591, 599
(Mo. Ct. App. 2010); Terre Du Lac Prop. Owner’s Ass’n, Inc. v. Shrum, 661
S.W.2d 45, 48 (Mo. Ct. App. 1983). Here, the evidence reveals that Automation
became aware of the conflict in early March of 2011, after an attorney with the
Gallop firm declined to represent one of Automation’s executives in an unrelated
matter because of the firm’s representation of Emerson in this case. It filed its
motion to disqualify on March 17, 2011. On the basis of this record, I cannot
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conclude that Automation’s motion is untimely. Emerson speculates that
Automation must have known about the conflict before then, because Davis
entered an appearance as an attorney with the Gallop law firm in May of 2010.
There is no evidence to support that conclusion, however. Automation has
numerous employees, and it is undisputed that the employees who sought legal
advice from Weisman are not actively involved in this litigation. Accordingly, I
disagree that the motion is untimely. Compare Shrum, 661 S.W.2d at 48 (motion
untimely when defendant moved to disqualify nineteen months after the suit was
filed, and defendant undisputedly was aware of conflict when case was filed
against him and had even objected to potential conflict in a deposition months
before filing motion to disqualify).
I finally conclude that disqualification is required despite any potential
prejudice to Emerson. Because disqualification will deprive Emerson of one
counsel of its choice, Davis, I do not enter this Order lightly. The undisputed facts
reveal a clear conflict of interest between the Gallop law firm’s concurrent
representation of Automation and Emerson, even if in unrelated matters, which is
prohibited by Rule 4-1.7(a). Additionally, Emerson is represented by several
other, well-respected attorneys with years of experience among them. Most
importantly, however, this Court has a duty not only to adjudicate the facts and
legal issues before it, but also to maintain public confidence in the legal profession
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and to ensure the integrity of judicial proceedings, and any legitimate doubts must
be resolved in favor of disqualification. See Olson, 183 F.R.D. at 542. Given the
clear conflict of interest in this case, and the duty to ensure the integrity of these
proceedings, I conclude that I must disqualify Davis and the Gallop firm.
III.
Motion for a Protective Order
Automation next moves for a Protective Order prohibiting disclosure of its
confidential and proprietary information to four of Emerson’s in-house counsel.
Automation argues that these in-house attorneys pose too great a risk of
inadvertently disclosing Automation’s proprietary information, and so must be
denied access to it. In response, Emerson has filed its own proposed Protective
Order, which would allow the parties to designate only certain proprietary
information – pricing information, customer lists, marketing plans, or proprietary
software – as “Confidential Information: Outside Counsels’ Eyes Only.”
Automation replies with a new proposed Protective Order, a modified version of
the Court’s form Protective Order for patent cases found in Appendix A to the
Local Patent Rules for the Eastern District of Missouri. Automation’s modified
version would prohibit Emerson’s in-house counsel from reviewing any
information or documents that Automation determines contains confidential
proprietary information.
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Essentially, the parties agree that some proprietary information should be
kept confidential and viewable only by counsel, but they disagree over whether
this information may be viewed by in-house counsel as well. They also disagree
about whether they may designate any information as for counsels’ eyes only, or
whether such information should be limited to the list of proprietary information in
Emerson’s proposed Protective Order. I agree with Automation that the parties
should themselves be allowed to designate what information they deem as
confidential and proprietary and/or for counsels’ eyes only. Thus, I reject
Emerson’s proposed Protective Order as too limiting in the type of information the
parties may designate as confidential or for counsels’ eyes only. I also agree with
Automation that the Protective Order should contain a mechanism for the parties
to challenge and change the designation of information as confidential or for
counsels’ eyes only. However, I conclude that there is no evidence to support
Automation’s claim that any of Emerson’s in-house attorneys will disclose its
confidential and proprietary information. Accordingly, I will enter Automation’s
second proposed Protective Order as modified below as the Protective Order in
this case.
Pursuant to Rule 26(c), Fed. R. Civ. P., a district court may enter an order
protecting disclosure or discovery upon a showing of good cause. Fed. R. Civ. P.
25(c)(1). Such an order may specify the terms for the disclosure or discovery, or
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require that a trade secret or other confidential information not be revealed or be
revealed only in a specific way. See id. The party moving for a Protective Order
has the burden of demonstrating good cause for the order. Miscellaneous Docket
Matter No. 1 v. Miscellaneous Docket Matter No. 2, 197 F.3d 922, 926 (8th Cir.
1999). The good cause that must be shown includes a showing of specific harm or
prejudice that will result if no Protective Order is issued, see Frideres v. Schlitz,
150 F.R.D. 153, 156 (S.D. Iowa 1993), and a party must make “a particular and
specific demonstration of fact, as distinguished from stereotype and conclusory
statements.” Gulf Oil Co. v. Bernard, 452 U.S. 89, 102 n.16 (1981) (quoting 8C
Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2035
(1970)). In determining whether to issue the Protective Order, a district court
must also consider the hardship to the non-moving party if the order is granted.
General Dynamics Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1212 (8th Cir. 1973).
Here, Automation contends that none of Emerson’s in-house counsel should
have access to its confidential and proprietary information, because the risk for
those attorneys inadvertently disclosing this information is too high. In a leading
case on the issue of whether in-house counsel should be denied access to
confidential and proprietary information, the Court of Appeals for the Federal
Circuit held that access should not be denied solely because of counsel’s in-house
status. U.S. Steel Corp. v. United States, 730 F.2d 1465, 1469 (Fed. Cir. 1984);
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accord Brown Bag Software v. Symantic Corp., 960 F.2d 1465, 1470-71 (9th Cir.
1992); Matsushita Elec. Indus. Co. v. United States, 929 F.2d 1577, 1579 (Fed.
Cir. 1991). Instead, the court must consider each counsel on an individual basis,
reviewing that counsel’s actual duties at the client corporation, and determine
whether there is a risk that counsel will inadvertently reveal confidential and
proprietary information in the course of her day-to-day activities. U.S. Steel, 730
F.2d at 1468.
For example, in-house counsel may be denied access to confidential
information if counsel is involved in “competitive decisionmaking” at the
company. See id. The Federal Circuit defined competitive decisionmaking as:
shorthand for a counsel’s activities, association, and relationship with
a client that are such as to involve counsel’s advice and participation
in any or all of the client’s decisions (pricing, product design, etc.)
made in light of similar or corresponding information about a
competitor.
Id. at 1468 n.3. In other words, in-house counsel should be denied access if her
daily activities at the client – including her participation in decisions about
pricing, marketing, etc. – make it more likely that she will inadvertently reveal and
misuse confidential and proprietary information she learned about her client’s
competitor through discovery. See id.; compare Matsushita, 929 F.2d at 1580 (inhouse counsel should not have been denied access when counsel only came into
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daily contact with decisionmakers at client but did not actually participate in those
decisions himself).
Here, Automation contends Emerson’s four in-house counsel should be
denied access to its confidential and proprietary information, because these
attorneys have frequent contact with and “must clearly interact with competitive
decisionmakers” at Emerson.6 However, these arguments in favor of denying
access – that counsel has frequent contact with decisionmakers – were squarely
rejected by the Federal Circuit in U.S. Steel and Matsushita. Indeed, rather than
pointing out the frequent contacts these in-house counsel have with
decisionmakers at Emerson, Automation as the movant has the burden of showing
that these attorneys participate in these types of decisions themselves. See
Matsushita, 929 F.2d at 1580 (lower court’s finding that in-house counsel had
frequent contacts with decisionmakers was irrelevant to analysis, because the
“standard is not ‘regular contact’ with other corporate officials who make ‘policy,’
or even competitive decisions, but ‘advice and participation’ in ‘competitive
decisionmaking.’”). It has failed to meet this burden, however, and the only other
6
With respect to in-house counsel, John P. Dilger, Automation claims this counsel should
be denied access because he was involved in the facts leading up to this litigation, and has been
listed as a potential witness by Automation. But the evidence supporting this claim reveals that
Dilger merely requested an audit of Automation as part of the parties’ ongoing litigation and as
part of his role as counsel for Automation. Such activities are not the type of competitive
decisionmaking activities that would make counsel ineligible to review Automation’s
confidential information under U.S. Steel.
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evidence before me, four affidavits from Emerson’s in-house counsel, reveals that
none of these attorneys is involved in competitive decisionmaking. Instead, these
in-house counsel provide legal advice and analysis to Emerson. Because
Automation has failed to present any evidence of in-house counsels’ involvement
in competitive decisionmaking, its request to deny these attorneys access to its
proprietary information must be denied.
As discussed above, however, I agree with Automation that the Court’s
form Protective Order, as modified by Automation, is an appropriate Protective
Order for this case. It allows the parties to designate two levels of confidential
information – confidential information, and confidential information for counsels’
eyes only – as the parties see fit, and allows them to challenge designations if they
deem it necessary. Although the parties could not agree on whether Emerson’s inhouse counsel should have access to Automation’s proprietary information, their
briefs and the other evidence before me indicate that they at least agree that
proprietary information should be kept confidential, and that some information
should even be limited to counsels’ eyes only because of its highly sensitive
nature. I agree, and therefore conclude that good cause exists for entering this
Protective Order. In the absence of the parties’ agreement, it is the best fit for the
parties’ legitimate discovery concerns. Accordingly, Automation’s second
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proposed Protective Order as modified by this Order will be entered as the
Protective Order in this case.
IV.
Motion for Electronic Discovery Order
Automation moves for the entry of an Electronic Discovery Order to govern
discovery of electronically stored information in this case. In support of that
motion, Automation contends that the amount electronic discovery in this case will
be voluminous, and so an Order is necessary to organize and accommodate that
discovery. Emerson objects to the entry of such an Order, arguing it is
unnecessary because the parties have no discovery disputes and Emerson is ready
to produce all of its electronically stored information. It also contends that
Automation’s proposed Electronic Discovery Order is unduly burdensome. In
reply, Automation denies that its proposed Order is unduly burdensome.
Automation also contends that, although the parties do not yet have any disputes
over electronic discovery, an Electronic Discovery Order is still necessary because
of the great volume of documents in this case.
I will not enter an Electronic Discovery Order at this time. Rule 26(f), Fed.
R. Civ. P., anticipates and encourages parties’ good faith attempts to come to their
own agreements for the discovery of electronic data. Because my review of the
motion, memoranda, and exhibits associated with Automation’s request for such
an Order reveal that the parties have not made a good-faith effort to come to their
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own agreement, I will deny the request at this time. Cf. Scotts Co. LLC v. Liberty
Mut. Ins. Co., Civil Action 2:06-CV-899, 2007 WL 1723509, at *3-5 (S.D. Ohio
June 12, 2007) (denying plaintiff’s request for an electronic discovery order
compelling production of electronic documents from defendant, when record
revealed that the parties had not met and conferred in good faith to resolve their
disputes).
Accordingly, I will order the parties to meet and confer in person and make
all reasonable attempts to resolve this issue on their own. In the absence of any
actual discovery dispute, I cannot see any benefit from my creating an Electronic
Discovery Order for the parties from whole cloth, when they know better than I
what information they have and what information they need. Automation is
correct that the discovery in this case will be voluminous, but that reason alone is
insufficient for me to enter an Order for the parties when they have not first tried
in good faith to create their own agreement.
V.
Fisher’s Motions to Amend
Counterclaimant Fisher has filed two motions to amend its counterclaim.
The first, filed in January, seeks only to assert additional categories of relief in the
Prayer for Relief, while the second, filed in March, seeks to add newly discovered
allegations and a new count for misappropriation of trade secrets by Automation
and its employee, John Rooneo. Automation does not oppose either motion.
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Because it is unopposed, I will grant Fisher’s motion for leave to file its Second
Amended Counterclaim. Because the second motion for leave to amend makes
moot the first motion, I will deny that motion as moot. Fisher’s second amended
counterclaim is deemed filed as of this date, and the parties are reminded of their
duty under the Rules to serve any unserved party and to file responsive pleadings
within the time set by the Rules.
For these reasons,
IT IS HEREBY ORDERED that Fisher’s motion for leave to file a First
Amended Counterclaim [#96] is denied as moot.
IT IS FURTHER ORDERED that Automation’s motion to amend its
Complaint [#101] is granted and denied in part as described in this Memorandum
and Order, and its proposed Second Amended Complaint [#101-1] is deemed filed
as of this date with paragraphs 187, 195, 206, and 223 stricken from it.
IT IS FURTHER ORDERED that Emerson’s motion for leave to file a
sur-reply [#105] is granted.
IT IS FURTHER ORDERED that Automation’s motion for a Protective
Order [#107] is granted and denied in part, and a modified version of its second
proposed Protective Order will be entered this same date as the Protective Order in
this case.
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IT IS FURTHER ORDERED that Automation’s motion for an Electronic
Discovery Order [#109] is denied without prejudice; the parties are further ordered
to meet and confer in person and in good faith in an effort to come to their own
agreement about electronic discovery.
IT IS FURTHER ORDERED that Automation’s motion to disqualify
Glenn E. Davis and the Law Firm of Gallop, Johnson & Neuman, L.C. [#111] is
granted.
IT IS FURTHER ORDERED that Fisher’s motion for leave to file a
Second Amended Counterclaim [#115] is granted, and its Second Amended
Counterclaim is deemed filed as of this date.
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 10th day of May, 2011.
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