-TRJ Davis et al v. Blackwater Lodge and Training Center, Inc. et al

Filing 150

MEMORANDUM AND OPINION. Signed by District Judge T. S. Ellis, III on 11/05/2010. (nmcc )

-TRJ Davis et al v. Blackwater Lodge and Training Center, Inc. et al

Doc. 150

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IN T H E U N I T E D S T A T E S D I S T R I C T C O U R T

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NOV - 5 2010

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FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division

UNITED STATES OF AMERICA ex rel.

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clerk, u.s. district c o u r t
ALEXANDRIA. VIRGINIA

MELAN DAVIS and BRAD DAVIS, Plaintiffs,

Case No. I:08cvl244

E R I K P R I N C E , e t al.,
Defendants.

MEMORANDUM OPINION

In this False Claims Act1 case, the magistrate judge issued a protective order that authorizes any party's counsel to designate any discovery materials2 as confidential and then
prohibits any party from making any public disclosure o f that material. Plaintiffs filed an objection to the protective order, pursuant to Rule 72(a) o f the Federal Rules o f Civil Procedure, arguing that the protective order is "clearly erroneous and contrary to law." For the reasons that
follow, the magistrate j u d g e ' s o r d e r must be vacated.
I.

Plaintiffs, Melan and Brad Davis, are former employees o f one o f the corporate defendants. O f the six named defendants, five are corporate entities and one is an individual. The five corporate entities are: (1) Xe Services, LLC, a private security company that provides
tactical training, security services, logistics, and crisis m a n a g e m e n t ; (2) B l a c k w a t e r Security

Consulting, LLC, a private company that provides private security services; (3) U.S. Training
Center, Inc., the corporate o w n e r o f a training facility in North Carolina that provides tactics and

' 3 1 U.S.C. § 3729 (West 2010).

2As used in this Memorandum Opinion, "discovery materials" refers to all information
obtained in the discovery process, including documents, deposition transcripts, interrogatory questions and responses, and the like.

Dockets.Justia.com

weapons training to military, security, and law enforcement professionals; (4) Greystone, Ltd., an international provider o f security and support services; and (5) Prince Group LLC, a private
holding company. The individual defendant, Erik Prince, allegedly owns and controls all o f the corporate defendants. All six defendants are collectively referred to herein as "Xe."
Plaintiffs brought this suit alleging that defendants submitted false claims to the U.S. Government in violation o f the False Claims Act. More specifically, plaintiffs allege that defendants were awarded two government contracts: (i) a Department o f Homeland Security contract to provide security services in Louisiana in the aftermath o f Hurricane Katrina; and (ii) a

Department o f State contract to provide security services in Iraq and Afghanistan. According to

plaintiffs, defendants submitted false claims with respect to both contracts by inflating the
number o f hours worked by employees, falsifying personnel muster sheets, billing for needless

expenses, and providing worthless services.

After plaintiffs filed suit, defendants filed a motion for a comprehensive protective order
prohibiting the disclosure o f all discovery materials and enjoining the parties from making any
extrajudicial statements relating to the litigation. In support o f their motion, defendants argued
that plaintiffs' counsel had already made a number o f prejudicial c o m m e n t s to the media, and

that she had stated an intent to publish all non-confidential discovery materials on the internet. Defendants argued that this public disclosure would serve no purpose other than to taint the jury
pool and to annoy, embarrass, and harass the defendants. In response, plaintiffs a r g u e d t h a t d e f e n d a n t s ' p r o p o s e d protective o r d e r would be contrary to well-established law. Specifically, plaintiffs c o n t e n d e d that a blanket o r d e r

prohibiting public disclosure o f all discovery documents would be inappropriate because it
would prevent the public from learning about information o f legitimate public concern, and it

would hinder plaintiffs' ability to gather evidence from witnesses who heard about the case from

media outlets and then contacted plaintiffs' counsel.

Defendants' motion was referred to a magistrate judge, who, after hearing argument, issued a protective order prohibiting the parties from publicly disclosing any discovery materials

designated as "confidential" by either party, and further prohibiting any party from making

extrajudicial statements relating to those materials designated as "confidential" by either party.
Specifically, the protective order states as follows: Until the court orders otherwise, no party or counsel for a party, or their agents or employees, may reveal or disseminate any information obtained through use o f the discovery process in this action, which information has not also been gained through means independent o f this c o u r t ' s processes, and which information has been designated as "confidential" by counsel for any party in this action. Extrajudicial s t a t e m e n t s by the parties and counsel are also limited to this extent, but no [sic] otherwise. No discovery materials may be filed with the court without prior order. No discovery material that has been designated "confidential" may be revealed in any motion, memorandum or e x h i b i t thereto w i t h o u t p r i o r order, and counsel feeling the n e e d to reference such material shall file a motion to seal that complies
with Local Civil Rule 5.

Plaintiffs filed a Rule 7 2 ( a ) objection to the magistrate j u d g e ' s protective order. In their

pleadings, the parties re-state many o f the arguments made in their initial pleadings submitted to the magistrate judge. As the parties have fully briefed and argued their respective positions, the issues presented by plaintiffs' objection are ripe for determination.
II.

Rule 72(a) o f the Federal Rules o f Civil Procedure permits a party to submit objections to
a magistrate j u d g e ' s ruling on n o n d i s p o s i t i v e matters, s u c h as d i s c o v e r y orders. Fed. R. Civ. P.
72(a); 28 U . S . C . § 6 3 6 ( b ) ( 1 ) ( A ) ; s e e Fed. Election Comm'n v. Christian Coalition, 178 F.R.D.

456,459-60 (E.D. Va. 1998) (citing Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525

(2d Cir. 1990)). As a nondispositive matter, the magistrate j u d g e ' s discovery order is properly governed by the "clearly erroneous or contrary to law" standard o f review. See Jesselson v.
Outlet Assocs. o f Williamsburg, LP, 784 F. Supp. 1223, 1228 (E.D. Va. 1991).
HI.

In general, there are three ways in which parties may seek to prevent public disclosure o f
discovery materials developed during the course o f a litigation. First, parties always have the option o f entering into a private non-disclosure agreement. A district court plays no role in reviewing or approving such agreements unless one o f the parties files suit for breach o f the non

disclosure agreement. Because non-disclosure agreements protecting discovery materials are
problematic for a number o f reasons, parties rarely resort to this means o f preventing public
disclosure of such materials.

The second means by which parties may protect discovery materials from disclosure is to

seek a protective order, pursuant to Rule 26(c) o f the Federal Rules o f Civil Procedure. Rule
26(c) states that "[t]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." Fed. R. Civ. P. 26(c). The party seeking a protective order has the burden o f establishing "good cause" by
demonstrating that "specific prejudice or harm will result i f no protective o r d e r is granted."

Phillips v. Gen. Motors Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002).3
3See also Lathon v. Wal-Mart Stores East, LP, No. 3:09cv57, 2009 WL 1810006, at *5 (E.D. Va. June 24, 2009) ( " F o r good c a u s e to e x i s t the party s e e k i n g p r o t e c t i o n bears the burden o f showing specific prejudice or harm that will result i f no protective o r d e r is granted."); Great Am. Ins. Co. v. Gross, No. 3 : 0 5 c v l 5 9 , 2 0 0 7 WL 1577503, at *12 (E.D. Va. May 30, 2007) ("Rule 2 6 ( c ) ' s good cause requirement indicates that ' t h e burden is upon the movant to show the necessity o f its issuance, which contemplates a particular and specific demonstration o f fact as distinguished from stereotyped and conclusory statements.'" (quoting SEC v. Dowdell, No. 3:01cv00116, 2002 WL 1969664, at *2 (W.D. Va. Aug. 21, 2 0 0 2 ) ) ; Brittain v. Stroh Brewery

The third means o f preventing public disclosure o f information in the course o f litigation

applies only to court documents (i.e., documents filed in the court record). Under wellestablished Fourth Circuit precedent, there is a presumption in favor o f public access to judicial records and a district court has the authority to seal court documents only " i f the p u b l i c ' s right o f

access is outweighed by competing interests." See Ashcraft v. Conoco, Inc., 218 F.3d 288, 302

(4th Cir. 2000). Importantly, before granting a motion to seal any court document, a district

court must follow a three-step process: (1) provide public notice o f the request to seal and allow interested parties a reasonable opportunity to object; (2) consider less drastic alternatives to

sealing the documents, and (3) provide specific reasons and factual findings supporting its
decision to seal the documents and for rejecting alternatives. Id.

In this case, the first and third means of preventing disclosure o f litigation information

are not in issue; there is no private non-disclosure agreement nor is there any sealing of court
documents. Instead, at issue in this case is the magistrate j u d g e ' s Rule 26(c) protective order,

which broadly prohibits public disclosure of any discovery materials designated as confidential by any party. Plaintiffs have the burden of proving that this order is contrary to Rule 26(c).
Plaintiffs have met this burden.

Under Rule 26(c), a district court may issue a protective order only upon a finding of

good cause.4 Yet, this does not mean that a district court must determine good cause on a
document-by-document, or transcript-page-by-transcript-page, basis. Instead, a magistrate judge

Co., 136 F.R.D. 4 0 8 , 4 1 2 (M.D.N.C. 1991) (holding that the party requesting the protective order "must make a particular request and a specific demonstration o f facts in support o f the request as

opposed to conclusory or speculative statements about the need for a protective order and the
h a r m w h i c h w o u l d be s u f f e r e d w i t h o u t o n e " ) .

4See Fed. R. Civ. P. 26(c); In re Wilson, 149 F.3d 249, 252 (4th Cir. 1998) (holding that
a court may enter a protective order governing trade secrets upon a showing o f good cause).

or district judge may issue an order protecting specifically delineated categories o f documents

upon a showing that good cause exists to protect each category.5 Such an order--commonly
referred to as an "umbrella" order--is faithful to Rule 26(c)'s good cause requirement because a
judge has made a determination in the first instance that there is good cause to protect documents

falling into a particular category. Under this type o f "umbrella" order, the parties are authorized to designate whether discovery materials fall within any o f the enumerated good cause categories set forth in the protective order. O f course, the parties may disagree whether specific documents,
transcripts, or other discovery materials fall within one o f the good cause categories. In the event that a p a r t y ' s designation o f a particular document is challenged by the opposing party, the party

seeking to avoid disclosure has the burden o f persuading the court that the designated material
falls within a particular good cause category.

Here, the protective order violates Rule 26(c) by delegating the good cause determination

to the parties, thereby erasing the rule's requirement that there be ajudicial determination of

good cause. The use of good cause categories in a protective order prevents this inappropriate
delegation and instead limits the parties to determining whether a particular document or other

5See Pearson v. Miller, 211 F.3d 57, 73 (3d Cir. 2000) ("[A] district court is empowered
to issue umbrella protective orders protecting classes o f documents after a threshold showing by the party seeking protection."); Citizens First Nat 7 Bank o fPrinceton v. Cincinnati Ins. Co., 178 F.3d 943, 946 (7th Cir. 1999) (holding that "[tjhere is no objection to an order that allows the parties to keep their trade secrets (or some other properly demarcated category o f legitimately confidential information) out o f the public record") (emphasis added); Askew v. R & L Transfer,
Inc., 3 : 0 8 c v 8 6 5 , 2 0 0 9 WL 5 0 6 8 6 3 3 , at *1 (M.D. Ala. Dec. 1 7 , 2 0 0 9 ) ( " B e f o r e entering any protective order, the Court must find that good cause warrants the entry o f the order with respect to each category o f documents or information sought to be included in the order.") (quoting In re Alexander Grant & Co. Litig., 820 F.2d 352, 355-57 (11th Cir. 1987)); Gwerder v. Besner, No. 0 7 - 3 3 5 - H A , 2 0 0 7 WL 2 9 1 6 5 1 3 , at *2 (D. Or. Oct. 5, 2 0 0 7 ) ( " T h e c o u r t m a y issue p r o t e c t i v e orders that protect classes o f documents upon a threshold showing o f appropriate circumstances warranting such umbrella protection."); Cumberland Packing Corp. v. Monsanto Co., 184 F.R.D. 504, 506 (E.D.N. Y. 1999) ("[A] party is more likely to be able to establish such good cause i f it presents to the court a discrete category o f documents and explains why those documents should
be sealed.").

discovery materials fits within a good cause category. To be sure, under the protective order at
issue, a party may challenge a confidential designation, and the magistrate judge would then determine whether good cause exists to maintain the designation. This is not sufficient to comply with Rule 26(c), which requires a judicial finding o f good cause in the first instance--

i.e., before a protective order is granted.6
Nor is the protective order rescued by defendants' argument that there is good cause to

prohibit public dissemination o f all discovery materials because plaintiffs' counsel has stated her

intent to publish all non-confidential discovery materials on her website. Many circuits have

sensibly held that where discovery materials are not protected by a valid protective order, parties

may use that information in whatever manner they see fit. See Jepsen, Inc. v. Makita Elec.
Works, Ltd., 30 F.3d 854, 858 (7th Cir. 1994) ("Absent a valid protective order, parties to a law

suit may disseminate materials obtained during discovery as they see fit."). It cannot logically

6 Some cases contain broad language suggesting that a court may delegate to the parties the responsibility to make a good faith determination of good cause in the first instance, and that the court will only make a good cause determination if a party's good faith determination is challenged. See, e.g., Chicago Tribune Co. v. Bridgestone/Firestone, Inc., 263 F.3d 1304,1307 (11th Cir. 2001) (emphasizing that umbrella orders obviate "the need to litigate the claim to protection document by document, and postpone^ the necessary showing of 'good cause' required for entry of a protective order until the confidential designation is challenged"). These cases are unpersuasive; Rule 26(c) explicitly requires a court to make a good cause determination
before issuing a protective order.

7See also San Jose Mercury News, Inc. v. United Slates Dist. Ct., 187 F.3d 1096, 1103 (9th Cir. 1999) ("It is well-established that the fruits of pretrial discovery are, in the absence of a court order to the contrary, presumptively public."); Public Citizen v. Liggett Group, Inc., 858 F.2d 775, 780 (lsl Cir. 1988) ("Indeed, the Supreme Court has noted that parties have general
first amendment freedoms with regard to information gained through discovery and that, absent a valid court order to the contrary, they are entitled to disseminate the information as they see

fit."); Oklahoma Hosp. Ass'n v. Oklahoma Pub. Co., 748 F.2d 1421, 1424 (10th Cir. 1984)
("While it may be conceded that parties to litigation have a constitutionally protected right to disseminate information obtained by them through the discovery process absent a valid protective o r d e r , . . . it does not follow that they can be compelled to disseminate such information."); Exum v. U.S. Olympic Committee, 209 F.R.D. 2 0 1 , 2 0 6 (D. Colo. 2002) ("In the

be the case that good cause exists to prohibit the public disclosure of discovery materials because
a party states an intent to d i s s e m i n a t e t h o s e materials in a c c o r d a n c e w i t h the law. In o t h e r

words, a party cannot lose the right to disseminate all discovery materials not protected by a
protective order simply by stating an intent to exercise that very right. To show good cause, a
party must demonstrate more than that an opposing party intends to disseminate discovery
materials; rather, it must show that the disclosure o f those materials will cause specific prejudice

or harm, such as annoyance, embarrassment, oppression, or undue burden or expense.8 And,
importantly, the fact that public disclosure o f discovery materials will cause some annoyance or
e m b a r r a s s m e n t is not sufficient to warrant a protective order; the a n n o y a n c e or embarrassment

must be particularly serious.9
Finally, it is worth noting that defendants also sought a protective order prohibiting the

parties from making any extrajudicial statements regarding this litigation on the ground that such
statements risk tainting the jury pool. The magistrate judge appropriately denied the request for

a blanket gag order. Broad gag orders are restraints on expression and raise First Amendment
concerns. See, e.g., United States v. Brown, 218 F.3d 415,424-25 (5th Cir. 2000). In the Fourth
absence o f a showing o f good cause for confidentiality, the parties are free to disseminate discovery materials to the p u b l i c " ) .

8See Glenmede Trust Co. v. Thompson, 56 F.3d 476,483 (3d Cir. 1995) ("'Good cause'
is established when it is specifically demonstrated that disclosure will cause a clearly defined and serious injury."); Martinelli v. Petland, Inc., Nos. 10-407-RDR, 09-529-PHX-DGC, 2010 WL 3947526, at * 10 (D. Kan. Oct. 7, 2010) ("A protective order may only issue i f the moving party demonstrates the basis for the order falls into one o f the categories listed in Rule 26(c): annoyance, oppression, undue burden or expense."); Humboldt Baykeeper v. Union Pac. R.R.
Co., 244 F.R.D. 560, 563 (N.D. Cal. 2007) ( " B y definition, a protective o r d e r must protect against something--something negative.").

9See Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1121 (3d Cir. 1986) ("[B]ecause
release o f information not intended by the writer to be for public consumption will almost always have some tendency to embarrass, an applicant for a protective order whose c h i e f concern is e m b a r r a s s m e n t m u s t d e m o n s t r a t e t h a t the e m b a r r a s s m e n t will be particularly serious.").

-8-

Circuit, district courts may restrict extrajudicial statements by parties and counsel only ifthose

comments present a "reasonable likelihood" of prejudicing a fair trial. In re Russell, 726 F.2d
1007,1010 (4th Cir. 1984); see also Am. Science &Eng'g. Inc. v. Autoclear. LLC, 606 F. Supp.

2d 617,625-26 (E.D. Va. 2008) ("Courts may disallow extrajudicial statements by litigants that risk tainting or biasing the jury pool."). Here, nothing in the current record ofthis case supports
defendants' contention that a blanket gag order is warranted because nothing presented thus far

suggests that statements made by either party present a "reasonable likelihood" oftainting the
jury pool.

Yet, it is appropriate to prohibit extrajudicial statements revealing the substance of
discovery materials that fall within a good cause category ofa valid protective order. Omitting
such a restriction renders a protective order toothless. Thus, it is appropriate in this case to enter

a protective order that sets forth categories for which there is a judicial finding of good cause to

protect information falling into those categories, and it is also appropriate to include in that order
a prohibition on extrajudicial statements revealing the content of discovery materials falling into
those categories.
IV.

Accordingly, the magistrate judge's protective order is vacated, and a new protective
order will issue consistent with the principles outlined in this Memorandum Opinion.
An appropriate Order will issue.

Alexandria, Virginia
November 5,2010

T . S . E l l i s , III

United States District Judge

9-