McDonald Apiary, LLC v. Starrh Bees, Inc., et al
MEMORANDUM AND ORDER overruling 81 Order on Appeal to Magistrate Judge Order. The plaintiff's objection 81 is overruled. The defendant's request for expedited consideration 93 is referred to the United States Magistrate Judge for disposition. Ordered by Judge John M. Gerrard. (DCD)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
MCDONALD APIARY, LLC, a
Nebraska Limited Liability Company,
MEMORANDUM AND ORDER
STARRH BEES, INC., a California
Corporation, et al.,
This matter is before the Court on the plaintiff's objection (filing 81) to
the Magistrate Judge's memorandum and order (filing 77) denying the
plaintiff's motion for protective order (filing 72) in part. The Court will
overrule the plaintiff's objection.
The parties' dispute relates to the plaintiff's request for an "attorneys'
eyes only" (AEO) provision in the protective order. Fed. R. Civ. P. 26(c)
requires good cause for a protective order to be issued. The burden is
therefore upon the movant to show the necessity of its issuance, which
contemplates a particular and specific demonstration of fact, as distinguished
from stereotyped and conclusory statements. Gen. Dynamics Corp. v. Selb
Mfg. Co., 481 F.2d 1204, 1212 (8th Cir. 1973). Such a determination must
also include a consideration of the relative hardship to the non-moving party
should the protective order be granted. Id.
An AEO designation should only be used on a relatively small and
select number of documents where a genuine threat of competitive or other
injury dictates such extreme measures. Glob. Material Techs., Inc. v. Dazheng
Metal Fibre Co., Ltd., No. 12-cv-1851, 2015 WL 5611667, at *3 (N.D. Ill. Sept.
23, 2015). Requiring an AEO provision is a drastic remedy given its impact
on the party entitled to the information, in that it prevents a party from
reviewing documents with counsel, and can hamper the ability of the party to
present his or her case. Gillespie v. Charter Commc'ns, No. 4:14-cv-207, 2015
WL 5638055, at *6 (E.D. Mo. Sept. 24, 2015). The AEO designation must be
used selectively because discovery and trial preparation are made
significantly more difficult and expensive when an attorney cannot make a
complete disclosure of relevant facts to a client, and because it leaves the
litigant in a difficult position to assess whether the arguments put forward on
its behalf are meritorious. Glob. Material Techs., 2015 WL 5611667, at *3.
And because restrictions on a litigant's access to information that may
constitute or lead to evidence may severely hamper the litigant's
participation, denying a litigant that right could well border on a denial of
due process. Martinez v. City of Ogden, No. 1:08-cv-87, 2009 WL 424785, at *3
(D. Utah 2009). Therefore, any designation of material as "attorneys' eyes
only" should be reserved for only those rare instances in which it is truly
justified, and there is no other effective alternative. Gillespie, 2015 WL
5638055, at *6.
A court may issue a protective order when necessary to limit the
disclosure of trade secrets and other confidential research, development, and
commercial information under Rule 26(c)(1)(G). Layne Christiansen Co. v.
Purolite Co., 271 F.R.D. 240, 248 n.20 (D. Kan. 2010); see Gillespie, 2015 WL
5638055, at *6. An AEO provision may be justified where there is a specific
factual showing that especially sensitive information is at issue or the
information is to be provided to a competitor. Stout v. Remetronix, Inc., 298
F.R.D. 531, 535 (S.D. Ohio 2014). But there is no absolute privilege for trade
secrets or other confidential information, and the mere presence of trade
secrets does not automatically entitle the producing party to an AEO
provision. Id. at 534-35; Layne Christiansen, 271 F.R.D. at 248 n.20.
The party seeking an AEO provision must identify, with sufficient
particularity, the harm it will suffer. Stout, 298 F.R.D. at 535. In the business
context, such a showing requires specific demonstrations of fact, supported
where possible by affidavits and concrete examples. Id. The moving party
must do more than show that it is a competitor of the receiving party or that
the documents in question disclose information about the moving party's
relationship with other competitors. Glob. Material Techs., 2015 WL 5611667,
at *3. Instead, the moving party needs to show that the disclosure of the
particular AEO-designated materials to even a small number of the other
party's personnel would risk the disclosure of sensitive competitive
information. Id. For instance, it may show the competitive harm that would
befall it by virtue of disclosing the confidential information. Layne
Christensen, 271 F.R.D. at 249. The Court may consider such factors as
(1) the extent to which the information is known outside of his
business; (2) the extent to which it is known by employees and
others involved in his business; (3) the extent of measures taken
by him to guard the secrecy of the information; (4) the value of
the information to him and to his competitors; (5) the amount of
effort or money expended by him in developing the information;
(6) the ease or difficulty with which the information could be
properly acquired or duplicated by others.
Stout, 298 F.R.D. at 535 (citation and quotation omitted). But conclusory
statements are insufficient to show that that the designating party is at an
appreciable risk. Glob. Material Techs., 2015 WL 5611667, at *3; see Stout,
298 F.R.D. at 534.
And even when the moving party has made an initial showing to
support an AEO provision, the party seeking unrestricted disclosure may
establish that such disclosure is necessary and relevant to the action. Layne
Christensen, 271 F.R.D. at 249. The Court must consider whether the
proposed limitation would impair the ability of the party seeking full
disclosure to proceed effectively with the litigation. Id. In doing so, the Court
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. The court should also consider whether
prohibiting the individual's access to the information would
hamper the party's ability to assess the merits of the litigation.
This involves considering the individual's specific role in the
litigation, whether his or 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 the litigation.
Id. at 249-250. Finally, the Court must balance the needs of the party seeking
the information against the potential for harm resulting from disclosure. See,
Stout, 298 F.R.D. at 535; Layne Christensen, 271 F.R.D. at 249.
With those propositions in mind, the Court turns to the plaintiff's
objection. The Magistrate Judge's order correctly reflects the legal principles
set forth above. See filing 77 at 3-4. And a district court may reconsider a
magistrate judge's ruling on nondispositive pretrial matters only where it has
been shown that the ruling is clearly erroneous or contrary to law. See, 28
U.S.C. § 636(b)(1)(A); Ferguson v. U.S., 484 F.3d 1068 (8th Cir. 2007).
Because the plaintiff has identified no legal error in the Magistrate Judge's
decision, the question is whether her factual findings—that is, her finding
that the plaintiff did not meet its burden of showing good cause in this case—
are clearly erroneous. The Court finds that they are not.
The plaintiff presented evidence to the Magistrate Judge that the
defendants could use information regarding potential beehive locations, or
landowners and beehive owners, to "create an unfair competitive
environment." Filing 74-1 at 4. But, as the Magistrate Judge pointed out,
while the plaintiff contends that it keeps such information secret, there is
little evidence that such information—which was, by its nature, known to the
various people with whom the plaintiff contracted—was protected by actual
confidentiality agreements.1 Filing 77 at 6-7. The Court cannot say the
Magistrate Judge was clearly wrong in finding that the plaintiff had not met
its burden of showing a particularized risk of injury resulting from disclosure
without an AEO provision. The plaintiff also presented evidence that if its
bank account records were revealed to the defendants, they "could use that
information to undermine [the plaintiff] in the marketplace, knowing its bank
account balances, numbers, and other information." Filing 74-1 at 4. But it is
not clear to the Court how that information could be used to harm the
plaintiff, so the Court again cannot say that the Magistrate Judge was clearly
wrong in finding that the plaintiff had not shown harm would come to it if
the information was discussed between the defendants and their counsel.
And finally, the defendant presented evidence that the beekeeping and honey
production industry is uniquely specialized, that the defendants would be
unable to effectively litigate without consultation between the defendants
and counsel on matters specific to the industry, and that any other available
experts were likely to also be competitors of the plaintiff. Filing 76-1 at 2-3.
The defendants' counsel will, clearly, be required to rely on the defendants'
expertise in the industry.
In sum, the Court finds no clear error in the Magistrate Judge's
decision to deny the plaintiff's request for an AEO provision. An AEO
provision should not be authorized simply because one of the parties would
prefer that certain information not be disclosed to an opposing party.
Gillespie, 2015 WL 5638055, at *6. That appears to be the case here. The
Court also notes that the protective order, as entered, prohibits the use of
information designated as "confidential" for "any business, commercial or
competitive purposes" or for any purpose other than trial preparation. Filing
78 at 3. That provision can be enforced to protect the information provided to
the defendants in this case. See, id.; Dsuska v. Green Bay Packaging Inc., 291
F.R.D. 251, 261 (E.D. Wisc. 2013).
The Court understands that a significant issue in this case is whether information
allegedly taken from the plaintiff by the defendants included "trade secrets" within the
meaning of Nebraska law. Nothing in the Magistrate Judge's order, or this order, should be
construed as settling that question. As noted above, even trade secrets are subject to
disclosure, and are not automatically entitled to an AEO provision.
IT IS ORDERED:
The plaintiff's objection (filing 81) is overruled.
The Defendants' Request for Expedited Consideration
(filing 93), to the extent not mooted by this memorandum
and order, is referred to the United States Magistrate
Judge for disposition.
Dated this 4th day of March, 2016.
BY THE COURT:
John M. Gerrard
United States District Judge
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