Bussing v. Legent Clearing, LLC et al

Filing 148

MEMORANDUM AND ORDER granting in part and denying in part the defendant's #141 Motion for Protective Order. A protective order reflecting the contents of this decision will be separately filed. Ordered by Magistrate Judge Cheryl R. Zwart. (MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
JULIE A. BUSSING,
Plaintiff,

8:12CV238

vs.
MEMORANDUM AND ORDER
COR CLEARING, LLC, COR
SECURITIES HOLDINGS, Inc.; CARLOS
P. SALAS, CHRISTOPHER L. FRANKEL,
JEFFREY N. SIME, STEVEN A.
SUGARMAN,
Defendants.
The defendants have moved for a protective order, arguing their “customer
information, trade secrets, current financial information, and confidential settlement
communications are information that is confidential and proprietary,” and use and disclosure
of such records must be for attorney’s eyes only (“AEO”). (Filing No. 141). The plaintiff
opposes the motion, stating the defendants “have identified only broad, generic categories of
information they believe might be subject to AEO protection: “customer information, trade
secrets, current financial information, and confidential settlement communications,” they fail
to acknowledge that “much information about Defendant COR Clearing already is public,”
and their motion “does not even approach ‘a particular and specific demonstration of fact, as
distinguished from conclusory statements.’” (Filing No. 145, at CM/ECF p. 6).
As explained by Plaintiff’s counsel, “the dispute before the Court is narrow: whether
the protective order entered should have an ‘attorney’s eyes only’ or ‘AEO’ provision as
requested by Defendants.” (Filing No. 145, at CM/ECF p. 3).

STATEMENT OF FACTS

Plaintiff Julie Bussing is the president of Prime Clearing, a financial services
business. (Filing No. 143-6). In that capacity, she primarily focuses “on platform design and
integration work for next generation clearing.” (Filing No. 143-6, at CM/ECF p. 1). Neither
Bussing nor Prime Clearing directly compete with any of the Defendants. (Filing No. 1449). Defendants’ argue, however, that “Ms. Bussing is currently a consultant in the industry,
and has no reason to be privy to trade secret or other proprietary information that would be
valuable to [Defendants’] competitors or customers as leverage.” (Filing No. 144-4, at
CM/ECF p. 3). As such, they claim Ms. Bussing could use Defendants’ discovery responses
to compete, or assist her clients in competing, against the Defendants’ business. (Filing No.
144-4, at CM/ECF p. 3).

The defendants claim that documents identifying their customers, clients, and
correspondents’ names, financial figures that came into existence after Plaintiff's departure,
Defendants’ Change of Control Plan, Internal Financial Reports that show Defendants’
current financial condition, and confidential settlement agreements from employment claims
should be subject to an “attorney eyes only” protective order. (Filing No. 144-5, at CM/ECF
p. 3, 6, 8, 10); (Filing No. 147, at CM/ECF p. 6-7). Defendants claim the plaintiff cannot be
trusted to comply with a protective order, citing allegations in their counterclaim alleging
that in her submissions to the court, the plaintiff modified the recipient information and
disclosed privileged and confidential e-mail correspondence addressed to COR Clearing’s
legal counsel without Defendants’ consent. (Filing No. 112, at CM/ECF p. 33-34,¶¶ 81-84).
Bussing was a pro se party when these alleged acts occurred.

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LEGAL ANALYSIS
The discovery process presents “an opportunity for litigants to obtain – incidentally or
purposefully – information that not only is irrelevant but if publicly released could be
damaging. . . .” Seattle Times Co. v. Rhinehart, 467 U.S. 20, 35, (1984). Pursuant to Rule
26(c)(7) of the Federal Rules of Civil Procedure, upon a finding of good cause, the court may
enter “any order which justice requires to protect a party or person from annoyance,
embarrassment, oppression, or undue burden,” including that “confidential research,
development or commercial information not be revealed or be revealed only in a designated
way.” Fed. R. Civ. P. 26(c)(7).

The court may enter a protective order which permits certain discovery to be seen by
only counsel. An “attorneys eyes only” protective order prevents a party from viewing the
opposing party’s sensitive business information while allowing the parties’ lawyers to litigate
on the basis of that information. Paycom Payroll, LLC v. Richison, 758 F.3d 1198, 1202-03
(10th Cir. 2014) (quoting In re City of New York, 607 F.3d 923, 935 (2d Cir. 2010)). But
limiting disclosure of discovery to the attorneys is appropriate only in very limited situations.
It is a drastic remedy because “it limits the ability of the receiving party to view the relevant
evidence, fully discuss it with counsel, and make intelligent litigation decisions.” Ragland v.
Blue Cross Blue Shield of N. Dakota, 2013 WL 3776495, at *1 (D.N.D. June 25, 2013).
And it “limits the ability of a party to provide needed assistance to counsel,” (Ragland, 2013
WL 3776495, at *1), which may result the in the denial of fundamental due process rights.
Martinez v. City of Ogden, 2009 WL 424785, at *3 (D. Utah Feb. 18, 2009). An “attorneys
eyes only” protective order “should not be authorized simply because one of the parties
would prefer that certain information not be disclosed to an opposing party.” Ragland, 2013
WL 3776495, at *2.
The party seeking attorney eyes only protection has the burden of providing: 1) the
information sought is a trade secret or other confidential research, development, or
commercial information, and 2) its disclosure might be harmful.

If these threshold

requirements are met, the burden shifts to the party seeking discovery to establish that the
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disclosure of information requested is relevant and necessary to the action. The court must
then balance the need of the party seeking discovery against the opposing party's claim of
potential injury resulting from the disclosure. MGP Ingredients, Inc. v. Mars, Inc., 245
F.R.D. 497, 500 (D. Kan. 2007). Where discovery of confidential commercial information is
involved, the court must “balance the risk of disclosure to competitors against the risk that a
protective order will impair prosecution or defense of the claims.” Nutratech, Inc. v. Syntech
(SSPF) Int'l, Inc., 242 F.R.D. 552, 555 (C.D. Cal. 2007). See also Martinez v. City of
Ogden, 2009 WL 424785, at *2 (D. Utah Feb. 18, 2009) (“Attorney's-eyes-only protection is
usually employed to protect against business harm that would result from disclosure of
sensitive documents to a competitor.”).
In weighing these competing interests, the court must consider “whether the
individual to be prohibited from accessing the information would be virtually unable to
compartmentalize the information and not use the information to seek to gain an unfair
competitive advantage.” Layne Christensen Co. v. Purolite Co., 271 F.R.D. 240, 249-50 (D.
Kan. 2010).

The court must also consider whether prohibiting a party’s access to the

information would hamper that party’s ability to assess the merits of the litigation, taking
into consideration whether her expertise is specialized and not widely available through the
retention of other experts, and whether this specialized expertise is essential to the proper
handling of her lawsuit. Layne Christensen Co., 271 F.R.D. at 249-50.
To establish good cause, that party opposing disclosure must submit “a particular and
specific demonstration of fact, as distinguished from stereotyped and conclusory statements.”
Layne Christensen Co. v. Purolite Co., 271 F.R.D. 240, 244 (D. Kan. 2010). See also
Burlington N. R. Co. v. Omaha Pub. Power Dist., 703 F. Supp. 826, 831 (D. Neb. 1988),
aff'd, 888 F.2d 1228 (8th Cir. 1989) (citing Restatement (First) of Torts § 757 (1939), and
listing the relevant factors a moving party must show for trade secret protection). But they
need not demonstrate, on a document-by-document basis, each item worthy of protection.
Provided the moving party makes a threshold showing of good cause, the court may enter an

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“umbrella” protective order protecting a category of documents from disclosure to anyone
other than counsel. Cipollone v. Liggett Grp., Inc., 785 F.2d 1108, 1122 (3d Cir. 1986).

The court must initially decide whether the defendants have met their burden of
showing that the information they seek to designate as Attorney Eyes Only” is confidential
commercial information, the disclosure of which will harm the defendants. The defendants’
proposed protective order recites “client lists, customer information, non-public business or
financial strategies, business plans, strategic plans, sales and marketing plans, markets
surveys, earnings or other financial projections, and information related to confidential
settlements with persons not involved in this litigation” as warranting Attorneys Eyes Only
protection. But subject to the exceptions further discussed below, the evidence discusses
these categories of discovery, if at all, in very broad terms with not precise explanation of
what the defendants seek to protect. For example, “customer information,1” and business,
strategic, and sales and marketing plans are broadly identified as needing Attorney Eyes
Only protection. But the defendants have submitted no evidence specifically describing any
of the documents within these categories, whether and why all documents within these broad
descriptions must be protected by an Attorneys Eyes Only designation, the measures the
defendants have taken to maintain the confidential status of these documents, whether the
documents are currently available from another source, the extent of defendants’ companyspecific effort in creating any formulas, surveys, or business strategies underlying the
documents, or how their release to the plaintiff will harm the defendants. The defendants’
conclusory statements and arguments in their briefs cannot replace the requisite factual
showing for granting an Attorney Eyes Only protective order.

The court finds, however, that two categories of documents listed by the defendants
should be protected by an Attorney Eyes Only designation: Client lists and confidential
settlement agreements with third parties. From the record, the court can reasonably infer that

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Since it is listed separately, “customer information” must be something different than
“client lists.” The court does not know how the defendants are defining “customer information.”

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the plaintiff either competes with the defendants herself, or she consults with Defendants’
competitors.

Once she knows the names on the defendants’ client list, she will have

difficulty compartmentalizing that information as she performs her own work. Louisiana
Pac. Corp. v. Money Mkt. 1 Institutional Inv. Dealer, 285 F.R.D. 481, 491 (N.D. Cal. 2012).
And she could, inadvertently use information from the defendants’ client lists to create an
unfair competitive environment against the defendants. Moreover, the client lists themselves
do not appear to be critical to pursuing the plaintiff’s claims.

On balance, the court

concludes the client lists should be designated as Attorney Eyes Only documents. See, e.g.,
Nutratech, Inc. v. Syntech (SSPF) Int'l, Inc., 242 F.R.D. 552, 555 (C.D. Cal. 2007) (holding
the fear of competitive harm from disclosing supplier and customer lists to the competitor’s
president and owner, rather than counsel, was legitimate—“such lists are customarily
produced subject to an ‘attorney's eyes only’ order”).

The defendants further claim that documents reflecting settlements with third parties,
and containing confidentiality clauses, must be afforded Attorney Eyes Only protection. By
their very nature, these documents were not intended to be seen by anyone other than the
defendants and the settling third parties—who are not parties to this litigation. However, the
confidentiality clauses of settlement agreements must occasionally give way when those
agreements are relevant in other litigation. Under such circumstances, the court will grant
Attorney Eyes Only protection to these settlement agreements, but with a caveat: If after
seeing the documents, Plaintiff’s counsel believes one or more of them must be discussed
with the plaintiff to fully and fairly prepare for trial, Plaintiff’s counsel may move to do so—
on a document-by-document basis. If that occurs, the defendants will have the burden of
showing the documents cannot be adequately protected from disclosure if designated as
“Confidential” rather than “Attorney Eyes Only.”

The Plaintiff asks for a court order stating the defendants will be sanctioned if they
later present a “a properly structured motion” to request Attorney Eyes Only protection. The
court will not enter an in futuro order. But upon review of the email correspondence
between the parties, it appears Plaintiff repeatedly requested a detailed explanation of the
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documents and case law so the parties could craft an appropriate protective order without
court intervention, but that information was not forthcoming. And as to nearly all the
documents they seek to protect with an Attorney Eyes Only designation, the defendants
failed to file evidence before this court describing with any particularity the documents they
want to withhold from Bussing’s personal review. Any motion seeking to do so now will
likely not be a motion to reconsider, but rather a motion to “do over.” Such motions slow the
discovery process substantially and waste the parties’ and the court’s resources. But how the
court will respond if such a motion is later filed will be decided on evidence submitted at that
time, and not in this order.
Accordingly,
IT IS ORDERED:
1)
The defendants’ motion for protective order, (Filing No. 141), is granted in
part and denied in part as set forth in this order.
2)

A protective order reflecting the contents of this decision will be separately

filed.
July 6, 2015.
BY THE COURT:
s/ Cheryl R. Zwart
United States Magistrate Judge

*This opinion may contain hyperlinks to other documents or Web sites. The U.S. District Court for the District of
Nebraska does not endorse, recommend, approve, or guarantee any third parties or the services or products they
provide on their Web sites. Likewise, the court has no agreements with any of these third parties or their Web sites.
The court accepts no responsibility for the availability or functionality of any hyperlink. Thus, the fact that a
hyperlink ceases to work or directs the user to some other site does not affect the opinion of the court.

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