ARCONIC INC. v. NOVELIS INC. et al
Filing
752
MEMORANDUM OPINION re 751 Order re objections to R&R 38 and 39. Signed by Judge Joy Flowers Conti on 9/30/21. (mh)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ARCONIC CORPORATION AND
HOWMET AEROSPACE INC.,
Plaintiffs and Counterclaim Defendants,
) CIVIL ACTION NO. 17-1434
)
) JUDGE JOY FLOWERS CONTI
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v.
NOVELIS INC. and NOVELIS CORP,
Defendants and Counterclaim Plaintiffs.
OPINION
Pending now before the court are objections (ECF Nos. 725, 726) filed by Arconic
Corporation and Howmet Aerospace Inc. (collectively, “Arconic”) to the special master’s Report
and Recommendation (“R&R”) #38 (ECF No. 715) and R&R #39 (ECF No. 716, with sealed
attachments at ECF Nos. 717, 718). Novelis Inc. and Novelis Corp. (collectively, “Novelis”)
filed responses to the objections (ECF Nos. 732, 733). The court heard oral argument on
September 8, 2021. The objections are ripe for disposition.1
The disputes involve the scope of discovery. In R&R #38, the special master
recommended that Arconic’s request that Novelis supplement its interrogatory responses with a
more definite statement of Novelis’ claimed improvements be denied. In R&R #39, the special
master recommended that:
1. The scope of discovery for Novelis’ counterclaims that relate to the
publication of the ‘440 patent application shall be limited to:
1
This opinion does not address special master R&R #40 (involving discovery about the Georgia Pacific factors), or
any objections thereto.
a. The seven items of confidential information the Court allowed to proceed
in the Summary Judgment Order, as identified by Arconic in blue in the
attached Exhibit A, and
b. The Improvements asserted by Novelis, as identified by Novelis in yellow
in the attached Exhibit B;
2. Within seven days of this Report & Recommendation, Novelis shall identify
any portions of the ‘440 patent application that exceed sub-parts (a) and (b)
above:
a. That it intends to assert as grounds for its counterclaims related to the
publication of the ‘440 patent application, and/or
b. That it intends to assert as a defense to Arconic’s breach of contract
claims related to the seven items of confidential information;
3. If Novelis identifies additional grounds pursuant to (2) above, Arconic shall
be permitted to ask deposition questions on those additional portions of the
patent application.
(ECF No. 716 at 10-11). Novelis represented that it does not intend to assert portions of the ‘440
patent application that exceed subparts 1(a) and (b). (ECF No. 732 at 4).
Standard of Review
There is a split of authority with respect to the appropriate standard of review. A court
generally reviews a special master’s R&R de novo, pursuant to Federal Rule of Civil Procedure
53. Commissariat %22a l'Energie Atomique v. Samsung Elecs. Co., 245 F.R.D. 177, 179 (D.
Del. 2007) (“The plain language of Rule 53 shows that the review of a Special Master's decision
requires the court to make a de novo determination, not conduct a de novo hearing.”).
Pursuant to Federal Rule of Civil Procedure 53(f)(5), however, courts review objections
to a special master's ruling on a procedural matter only for abuse of discretion. See Fed. R. Civ.
P. 53(f)(5) (“Unless the appointing order establishes a different standard of review, the court may
set aside a master's ruling on a procedural matter only for an abuse of discretion.”). Nothing in
the special master appointment order in this case (ECF No. 50) changes the applicable standard
of review.
2
The majority of courts regard a special master’s determination about the scope of
discovery as a procedural matter subject to “abuse of discretion” review. Ravin Crossbows, LLC
v. Hunter's Mfg. Co., No. 5:18-CV-1729, 2020 WL 7706257, at *2 (N.D. Ohio Dec. 29, 2020);
Accord In re Hardieplank Fiber Cement Siding Litig., No. 12-md-2359, 2014 WL 5654318, at
*1 (D. Minn. Jan. 28, 2014) (collecting decisions). In In re Lincoln Nat'l COI Litig., No. 16-CV06605-GJP, 2019 WL 3940912, at *2 (E.D. Pa. Aug. 21, 2019), the court noted a split of
authority on this issue and concluded that “[g]iven the nature of the discovery disputes here,” the
objections to the special master’s findings would be reviewed de novo. See also Callwave
Commc'ns LLC v. AT&T Mobility LLC, No. CV 12-1701-RGA, 2016 WL 3450736, at *1 (D.
Del. June 16, 2016) (explaining that a failure to comply with the schedule would be a procedural
matter under Rule 53(f)(5), but resolution of attorney-client privilege issues and exclusion of
evidence at trial would be non-procedural and subject to de novo review under Rule 53(f)(3),(4)).
In the exercise of caution, the court will apply a de novo review to the pending objections
in this case.
Procedural History
The pending discovery disputes must be viewed in the context of the unique and tortuous
procedural history of this litigation. (See ECF No. 623). Of particular relevance, the court and
special master engaged in repeated efforts to have Arconic identify its claimed trade secrets and
confidential information (“TS IDs”). After Arconic submitted four non-compliant TS IDs, the
court granted partial summary judgment in favor of Novelis and against Arconic on Arconic’
trade secrets claims at counts I, III, V and VI of the second amended complaint. The court did
not enter summary judgment on counts II and IV of Arconic’s second amended complaint with
respect to 7 pieces of confidential information identified by the special master in R&R #33 (the
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“7 items”).
Contrary to Arconic’s argument (ECF No. 726 at 3), at no time did the court hold that the
reasonable particularity trade secret standards apply to breach of contract claims. To the
contrary, the court recognized the confidential information claims were different, both
substantively and procedurally, than trade secret claims. (ECF No. 623 at 38). The court
observed that the “substantive law governing confidential information claims is less demanding.
Information need not rise to the level of a trade secret in order to qualify for protection.” (ECF
No. 623 at 38). See also R&R #5 (special master recognized that under Pennsylvania law,
confidential information claims may be pleaded in the alternative “if Arconic fails to prove that
its claimed trade secrets meet the legal requisites for such a claim.”) (ECF No. 92 at 14). The
special master gave Arconic leave to amend its complaint to plead breaches of confidential
information as separate claims. Id.
Arconic, not the court, intertwined the disclosure obligations for its trade secrets and
confidential information. From the beginning of the identification process, Arconic took the
position that the contractual breach of confidential information claims were pleaded in the
alternative, in the event that its claimed trade secrets were found not to have all the indicia of
trade secret status. (See R&R #3, ECF No. 89 at 4). The chart attached to R&R #3 provided
Arconic with the opportunity to identify separately the trade secrets and confidential information
(ECF No. 89-1). Arconic did not do so; instead, Arconic contended that the 43 items it listed in
TS ID #2 were trade secrets but, in the alternative, the same 43 items constituted confidential
information (ECF No. 98 at 21-22). Arconic maintained this position throughout the litigation.
See Transcript, ECF No. 521-7 at 112 (Arconic’s counsel explaining that the trade secrets and
confidential information in TS ID #4 are “the same 288”).
4
In R&R #3, the special master recommended that the same disclosure standards should
apply to the trade secrets and confidential information because Arconic regarded them as closely
related. Arconic did not object to this combined treatment; the court adopted R&R #3; and it
therefore became the law of the case. In R&R #5, the special master recommended that
Arconic’s trade secret and confidential information claims be dismissed, subject to its ability to
replead after it made a TS ID in conformance with the standards in R&R #3. Arconic was given
an opportunity to separately plead its confidential information claims. (See R&R #5 at 17, ECF
No. 92, adopted without objection as the opinion and order of court at ECF Nos. 113, 114). As
the court observed in the December 9, 2020 opinion:
To reiterate, the court dismissed the relevant counts of Arconic’s original
complaint for failure to plead plausible trade secrets or confidential information.
Arconic did not object to the dismissal. By not objecting to R&R ## 3 and 5,
Arconic admitted its duty to make pre-discovery disclosures of its claimed trade
secrets with reasonable particularity and to show good cause for any revisions to its
dsclosures. Arconic also conceded that its trade secret and confidential information
claims were properly dismissed because it failed to do so. The court emphasized
that the legal reasoning in R&R #5 “will govern future proceedings” and was the
law of the case (ECF No. 112 at 2).
ECF No. 623 at 9. In sum, Arconic long ago waived its ability to challenge that its trade secrets
and confidential information must be disclosed with reasonable particularity.
Ultimately, Arconic’s repeated failures to make a proper TS ID resulted in summary
judgment being granted on all its trade secret claims, and all its confidential information claims
except the 7 items, as explained in the December 9, 2020 opinion and order. The court explained
that Arconic’s failure to provide a proper TS ID affected the scope of the case, as follows: “If a
party, despite three years and four attempts, cannot even identify with reasonable particularity its
own trade secrets, there is no possible way for those trade secrets to be adjudicated on the
merits.” ECF No. 623 at 40.
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Discovery on both Arconic’s claims and Novelis’ counterclaims had been stayed pending
a proper TS ID. R&R #20 (ECF No. 209). The court reopened discovery in the December 9,
2020 opinion and order. The court explained: “The confidential information claims will proceed
on the narrow basis identified in R&R #33. Discovery shall commence forthwith and shall be
completed as expeditiously as possible.” ECF No. 623 at 40.
Legal Analysis
Federal Rule of Civil Procedure 26(b)(1) governs the scope of discovery and provides:
Unless otherwise limited by court order, the scope of discovery is as follows:
Parties may obtain discovery regarding any nonprivileged matter that is relevant to
any party's claim or defense and proportional to the needs of the case, considering
the importance of the issues at stake in the action, the amount in controversy, the
parties' relative access to relevant information, the parties' resources, the
importance of the discovery in resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its likely benefit. Information within
this scope of discovery need not be admissible in evidence to be discoverable.
The court is required to impose limits on discovery in some circumstances:
On motion or on its own, the court must limit the frequency or extent of discovery
otherwise allowed by these rules or by local rule if it determines that:
(i)
the discovery sought is unreasonably cumulative or duplicative, or can be
obtained from some other source that is more convenient, less burdensome,
or less expensive;
(ii)
the party seeking discovery has had ample opportunity to obtain the
information by discovery in the action; or
(iii)
the proposed discovery is outside the scope permitted by Rule 26(b)(1).
Fed. R. Civ. P. 26(b)(2)(C). The parties’ disputes will be addressed seriatim.
A. Novelis’ identification of its claimed confidential information
Arconic, misleadingly, frames the issue as whether the same identification standard
applies to Arconic’s and Novelis’ breach of contract claims. In essence, Arconic argues that
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because the court required Arconic to identify its claimed trade secrets and confidential
information with reasonable particularity, Novelis must also do so.
This false equivalence ignores several important distinctions, including: (1) the tortuous
procedural history of Arconic’s failures to make proper TS IDs; (2) Arconic’s position that its
trade secrets and confidential information were the same; (3) Novelis did not assert trade secret
claims; and (4) the gravamen of Novelis’ contract theory is not that Arconic published its trade
secrets/confidential information, but that Arconic wrongfully terminated the 2012 Technology
Access & License Agreement (the “contract”). The actual issue, as the court sees it, is the
appropriate scope of discovery at this stage of the case.
As reflected in its summary of the procedural history, the court recognized the legal
distinctions between trade secret and confidential information claims throughout this litigation.
Indeed, the court directed Arconic to replead those counts of the complaint to make them
separate. If the court had treated the trade secrets and confidential information claims as
identical, it would have granted summary judgment in favor of Novelis on counts II and IV in
their entireties.
The reasonable particularity TS ID disclosure obligation was imposed on Arconic –
without objection – because Arconic defined its trade secrets and confidential information as
being the same. In other words, contrary to Arconic’s suggestion, the court never applied the
same legal rules to trade secret and breach of confidential information claims; instead, it merely
imposed the same disclosure obligations on Arconic to enable discovery to proceed. Because
Novelis never asserted trade secret claims, the reasonable particularity standard does not apply to
Novelis’ disclosures.
Engaging in full-blown discovery on the full scope of Novelis’ claimed proprietary
technology is not appropriate at this stage of the case. The disputes have been substantially
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narrowed. The court recognized in its December 9, 2020 opinion that “[Arconic] cannot prove
that [Novelis] breached its contractual duties if it cannot identify what trade secrets it disclosed
to [Novelis]. Those concerns are heightened when the parties’ contracts specifically permit the
other party to use general industry practices and improvements it independently developed.”
(ECF No. 623 at 23). The court determined that Arconic did not adequately identify any of its
trade secrets, and that Arconic properly identified only 7 items of confidential information. In
short, Arconic cannot win on its claims based on trade secrets or confidential information
Arconic did not tell Novelis about. See December 9, 2020 Opinion (ECF No. 623 at 30-31)
(discussing Big Vision Private Ltd. v. E.I. DuPont De Nemours & Co., 1 F. Supp. 3d 224
(S.D.N.Y. 2014) and NEXT Payment Sols., Inc. v. CLEAResult Consulting, Inc., No. 1:17-CV8829, 2020 WL 2836778 (N.D. Ill. May 31, 2020)).
It necessarily follows that Arconic cannot defend against Novelis’ counterclaims by
contending it rightfully terminated the contract by pointing to alleged trade secrets or
confidential information it did not properly identify to Novelis. As the special master observed,
Novelis’ counterclaims, in this context, are the mirror image of Arconic’s claims. Judgment was
entered against Arconic on the trade secrets claims and any confidential information claims other
than the 7 items. The judgment is law of the case with respect to the issues Arconic seeks to use
to defend against the wrongful termination counterclaims, other than the 7 items articulated by
the special master. In other words, Arconic would only be justified in terminating the contract if
Novelis disclosed those 7 items. Only information about Novelis’ independent knowledge
concerning the 7 items (i.e., whether the 7 items are really Arconic’s confidential information)
remains relevant.
The primary focus of both the claims and counterclaims is on Arconic’s technology; i.e.,
whether Novelis disclosed Arconic’s information; and whether Arconic had a valid basis to
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terminate the contract. Novelis’ technology only becomes relevant to rebut Arconic’s claims of
ownership. Arconic’s attempt to conduct full-blown discovery into all of Novelis’ claimed
improvements (as opposed to limiting such discovery to the 7 items which might justify
Arconic’s termination of the contract) is not proportional to the needs of the case, and the
burden, expense and time required to conduct Arconic’s proposed discovery far outweighs its
likely benefit.2 Arconic did not articulate how the more detailed disclosure of Novelis’
technology it seeks is relevant and proportional to the claims and defenses that remain in the
case. Fed. R. Civ. P. 26(b); Cole's Wexford Hotel, Inc. v. Highmark Inc., 209 F. Supp.3d 810,
823 (W.D. Pa. 2016), on reconsideration sub nom. Cole's Wexford Hotel, Inc. v. UPMC &
Highmark Inc., No. CV 10-1609, 2017 WL 432947 (W.D. Pa. Feb. 1, 2017) (“scope of discovery
is limited to matter that is relevant to claims or defenses and is proportional to the needs of a
case.”).
Arconic specifically objects to Novelis’ Improvement Charts, and in particular, the
references to “various process parameters.” Arconic argues that the shortcomings in the
Improvement Charts were not entirely cured by the special master in requiring Novelis to: (1)
highlight the portions of the ‘440 patent covered by its claimed improvements; and (2) in R&R
#39, to further identify any other prior knowledge on which it intends to rely.
Arconic identifies 3 categories of Novelis improvements: (1) unrelated to either the ‘440
patent or Arconic’s 7 items; (2) in the ‘440 patent but unrelated to the 7 items; and (3) arguably
overlapping with the 7 items. Arconic concedes that the highlighted patent satisfies Novelis’
ordinary discovery obligation with respect to categories (2) and (3). ECF No. 726 at 14.
Arconic maintains that Novelis’ response is insufficient with respect to category (1). For the
2
Even though there is a robust protective order in place, the court is reluctant to order unnecessary disclosures of
sensitive corporate information between these fierce industry competitors.
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reasons set forth above, the court concludes that discovery about category (1), i.e., Novelis
improvements that are unrelated to either the ‘440 patent or Arconic’s 7 items, is not relevant or
proportional to the needs of this case. Indeed, Arconic admits that it “does not understand the
importance of the information.” (ECF No. 726 at 15). Arconic’s objections to R&R #38 will be
DENIED.
B. Scope of Rule 30(b)(6) deposition questions
Arconic wants to ask Novelis’ corporate witnesses about where the information in the
‘440 patent application came from. Novelis raised objections to topics 9, 12, 13, 20, 23-25 of the
Rule 30(b)(6) deposition notice and now seeks a protective order. Arconic states that it wants to
make a record, but did not articulate how the evidence it seeks relates to the claims remaining in
this case. As set forth in R&R #39, the special master recommended that Arconic be permitted
to ask deposition questions about the 7 items of confidential information and the other
Improvements identified by Novelis in yellow highlighting on the patent (ECF No. 718).
Arconic contends that the additional information it seeks is “central” to Novelis’
counterclaims. For the reasons set forth above, the court disagrees with Arconic. Novelis’
technology only becomes relevant to rebut Arconic’s contention that it had a valid reason to
terminate the contract. Arconic could not terminate the contract based on alleged trade secrets or
confidential information that it never properly identified to Novelis. It is only discovery about
Novelis’ technology relating to the remaining 7 items of Arconic’s confidential information that
is proportional to the needs of this case. The court’s December 9, 2020 opinion and order
reopening discovery stated that the “confidential information claims will proceed on the narrow
basis identified in R&R #33.” ECF No. 623 at 40. That decision applies equally to the scope of
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Novelis’ counterclaims and directs the proper scope of discovery.3 The more expansive
discovery now sought by Arconic is not relevant to the claims remaining in the case and is not
proportional to the needs of this litigation.
Conclusion
In accordance with the foregoing, Arconic’s Objections to R&R #38 and R&R #39
(ECF Nos. 725, 726) will be DENIED. R&R #38 and R&R #39 will be adopted as the opinions
of the court, as supplemented herein.
An appropriate order follows.
Dated: September 30, 2021
/s/ Joy Flowers Conti
Joy Flowers Conti
Senior United States District Judge
3
Novelis offered to provide testimony about specific improvements Novelis made to the A951 process. As
explained above, the court would be inclined to limit discovery solely to the 7 items. Novelis, however, did not
object to R&R #39, so discovery will proceed under the broader scope articulated by the special master.
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