Hobbs v. Employers Mutual Casualty Company
ORDER granting in part and denying in part 17 Motion for Protective Order. Signed by US Magistrate Judge Daneta Wollmann on 1/8/17. (Wollmann, Daneta)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
ORDER ON DEFENDANT’S MOTION
FOR PROTECTIVE ORDER (DOC. 17)
EMPLOYERS MUTUAL CASUALTY
Pending is Defendant Employers Mutual Casualty Company’s Motion for
Protective Order (Doc. 17). United States District Court Judge Jeffrey L. Viken,
Chief Judge, referred Defendant’s Motion to this magistrate judge for
determination. (Doc. 22).
This case is a diversity action alleging bad faith insurance practices on
the part of Defendant Employers Mutual Casualty Company. The action stems
from Defendant’s alleged bad-faith denial of Plaintiff Jimmy Hobbs’ worker’s
Plaintiff seeks production of documents regarding, among other things,
Defendant’s personnel files and compensation information, well as documents
related to the worker’s compensation claim. Defendant requests that Plaintiff
agree to a Stipulated Protective Order under Federal Rule of Civil Procedure
26(c). In its proposed order, Defendant requests that information “qualifying
for protected status shall be limited to private, non-public information
(including non-public financial and business records, personnel data and files,
and information obtained from third parties pursuant to a nondisclosure
agreement), trade secrets or other research, development or commercial
information, and is generally treated as confidential or proprietary by the
designating party.” (Doc. 20-2).
Plaintiff agrees that a protective order should issue, but Plaintiff and
Defendant dispute the terms of the proposed order. Defendant’s proposed
order allows the party producing sensitive documents to designate them as
confidential. (Doc. 20-2). Plaintiff opposes this provision and requests that the
Court approve whether an item should be protected. (Doc. 20-3).
Federal Rule of Civil Procedure 26(c) governs the issuance of protective
orders, and requires that “good cause” be shown for a protective order to issue.
“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) (quoting Wright &
Miller, Fed. Practice & Procedure: Civil § 2035 at 264–65).
In considering whether good cause exists for a protective order, the
federal courts have generally adopted a balancing process. . . .
[T]he court . . . must balance the requesting party’s need for
information against the injury that might result if uncontrolled
disclosure is compelled. When the risk of harm to the owner of [a]
trade secret or confidential information outweighs the need for
discovery, disclosure [through discovery] cannot be compelled, but
this is an infrequent result.
Once the court determines that the discovery policies require that
the materials be disclosed, the issue becomes whether they should
be disclosed only in a designated way, as authorized by the last
clause of Rule 26(c)(7). . . . Whether this disclosure will be limited
depends on a judicial balancing of the harm to the party seeking
protection (or third persons) and the importance of disclosure to
the public. Courts also have a great deal of flexibility in crafting
the contents of protective orders to minimize the negative
consequences of disclosure and serve the public interest
Burke v. Ability Ins. Co., No. 12-CV-4051-KES, 2013 WL 842512, at *2 (D.S.D.
Mar. 6, 2013) (quoting Pansy v. Borough of Stroudsburg, 23 F.3d 772, 787 (3d
The trial court has significant discretion in either granting or denying a
protective order, and “only an abuse of discretion would be cause for reversal.”
Gen. Dynamics Corp., 481 F.2d at 1212. Similarly, Rule 26(c) confers “broad
discretion on the [district] court to decide . . . what degree of protection is
required.” Misc. Docket Matter No. 1 v. Misc. Docket Matter No. 2, 197 F.3d
922, 925 (8th Cir. 1999) (internal quotations omitted). Courts routinely grant
protective orders that limit access to sensitive or proprietary information.
Burke, 2013 WL 842512 at *3 (internal citation omitted).
The issue before this court was previously addressed by the District
Court of South Dakota in Pochat v. State Farm, No. 08-CV-5015-JLV, Doc. 44
(D.S.D. Dec. 11, 2008) and in Burke. In both Pochat and Burke, plaintiffs
submitted claims for bad faith insurance practices. Plaintiffs in both cases
sought discovery of information concerning the insurance companies’ claims
handling polices, practices, and procedures, including personnel files,
compensation information, and other sensitive information. The insurance
companies requested protective orders. The district court found that plaintiffs’
requests were reasonable and relevant to the bad faith claims. However, the
district court also found that the requested information in both cases
implicated the insurance companies’ confidential and proprietary business
practices, and the companies established the requested information
constituted a trade secret. See Burke, 2013 WL 842512 at *5 (citing Pochat,
No. 08-CV-5015-JLV, Doc. 44).
In this case, Defendant does not object to the disclosure of the requested
information subject to a protective order at this time. Therefore, the court will
assume without deciding that the information is relevant and necessary to
litigate Plaintiff’s claims. See Burke, 2013 WL 842512 at *5. The court finds
that, like Pochat and Burke, a limited protective order is appropriate because it
will satisfactorily protect both parties’ interests: Plaintiff will have access to the
requested information, and competitors will be unable to exploit Defendant’s
internal policies. See Burke, 2013 WL 842512 at *5. The potential harm to
Defendant that would result from unrestricted disclosure outweighs the
public’s interest in disclosure. Id. at *6 (citing Pansy, 23 F.3d at 787).
Therefore, the court finds that Defendant has met its burden to show good
cause for a protective order.
Like in both Burke and Pochat, however, the court declines to adopt the
protective order proposed by Defendant because it allows the producing party
to designate any document as confidential “if it believes the document qualifies
for protected status.” (Doc. 20-2). “The court is concerned that this broad
language will serve to give each party ‘carte blanche to decide what portions of
the record shall be kept secret.’” Burke, 2013 WL 842512 at *7 (citing Citizens
First Nat’l Bank of Princeton v. Cincinnati Ins. Co., 178 F.3d 943, 945 (7th Cir.
1999)); Pochat, No. 08-CV-5015-JLV, Doc. 44 at 21. While the court finds that
Defendant has established good cause for a limited protective order to secure
its trade secrets and other confidential information, the order shall not allow
the parties to designate at will whether an item shall be labeled as confidential.
Good cause appearing, it is hereby
ORDERED that Defendant’s Motion for Protective Order (Doc. 17) is
granted in part and denied in part consistent with the above opinion. The
parties shall confer on the provisions of a protective order and, if an agreement
is reached, shall file a stipulated protective order by January 31, 2018. If the
parties are unable to come to an agreement on the terms of the protective
order, Defendant shall notify the court on or before January 31, 2018, and the
court will enter a protective order of its own.
NOTICE OF RIGHT TO APPEAL
Pursuant to 28 U.S.C. § 636(b)(1)(A), any party may seek reconsideration
of this order before the district court upon a showing that the order is clearly
erroneous or contrary to law. The parties have fourteen (14) days after service
of this order to file written objections pursuant to 28 U.S.C. § 636(b)(1)(A),
unless an extension of time for good cause is obtained. See FED. R. CRIM. P.
58(g)(2); 59(a). Failure to file timely objections will result in the waiver of the
right to appeal questions of fact. FED. R. CRIM. P. 59(a). Objections must be
timely and specific in order to require review by the district court.
DATED this 8th day of January, 2018.
BY THE COURT:
United States Magistrate Judge
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