Young B. Kim, United States Magistrate Judge.
In this diversity suit involving the meltdown of an international business relationship, metal fiber manufacturer Global Material Technologies, Inc. ("GMT") sued Dazheng Metal Fibre Co., Ltd. ("DNZ") and Dazheng Metal Fibre Co., Ltd. d/b/a ChuanGuPing ("Tru Group"), both foreign corporations organized under Chinese law, and Chinese citizen Dong Jue Min (collectively, "the defendants"), alleging that DNZ and Tru Group misappropriated GMT's trade secrets and used GMT's confidential customer information to lure away its customers. The case is now approaching the end of the fact-discovery phase, during which GMT sought and received a number of documents that are designated as being for "Attorney's Eyes Only." Before the court are Plaintiff's Motion to Remove the "Attorneys' Eyes Only" Designations on Certain Documents Produced by Tru Group, (R. 238), and Plaintiff's Motion to Remove the "Attorneys' Eyes Only" Designations on Documents Produced by Third-Party Respondent Federal-Mogul Holdings Corporation, (R. 246). For the following reasons, the first motion is granted and the second motion is granted in part and denied in part:
GMT originally filed this suit in the United States District Court for the Middle District of Tennessee. (R. 1.) In its amended complaint GMT identifies itself as a manufacturer of various metallic wool products that outsourced some of its manufacturing operations to DNZ from 2003 through 2007. (R. 38, Am. Compl. ¶¶ 8, 11.) GMT alleges that it was DNZ's primary customer from 1996 through 2009 and that it had a 25% ownership interest in DNZ. (Id. ¶¶ 12-13.) It alleges that by way of this "unique business relationship" DNZ gained access to GMT's confidential and proprietary customer information and competitive pricing strategies. (Id. ¶¶ 15, 18.) GMT alleges that DNZ eventually "usurped this information and used it to identify and contact GMT customers" and ultimately offered them "a pricing scheme based upon GMT's confidential pricing scheme." (Id. ¶ 19.) According to GMT, "DNZ, through Tru Group, and possibly through other subsidiary companies of DNZ, including but not limited to Seamarky Industrial, Ltd., used (and still uses) its confidential knowledge of GMT's pricing scheme in determining the pricing
About a year after the suit was filed, the court in Tennessee entered a two-tiered protective order that had been agreed to by the parties. (R. 50.) The protective order limits the disclosure of confidential material — defined as "any document, testimony, statement and/or information produced pursuant to discovery requests and/or revealed during depositions in this matter" — to the parties, potential and retained expert witnesses, attorneys of record, and counsel's staff personnel on a need to know basis. (Id. ¶¶ 1-2.) Additionally, the protective order allows the parties to designate confidential material as "attorneys' eyes only" where:
(Id. ¶ 3.) Three months after the court entered the protective order, in March 2012, the court granted DNZ's motion to transfer the case to the Northern District of Illinois. (R. 67.) In the course of discovery this court recognized that the protective order entered in the Middle District of Tennessee "is still in full force and effect." (R. 154.)
According to the briefs the parties submitted in connection with the current motions, in July 2014 Tru Group produced two groups of documents labelled with the attorneys' eyes only ("AEO") designation. The first group consists of email correspondence dated from October 2009 through April 2010 between a former Tru Group sales employee and third-party customer Federal-Mogul Corporation. (R. 238, Pl.'s Mem. at 2 & Sealed Ex. A.) The second group consists of about 60 pages of invoices dated from July 2010 through August 2011 between Tru Group and Federal-Mogul and its affiliates. (Id. at 2 & Sealed Ex. B.) Both groups of documents convey then-contemporaneous pricing information, payment terms, and general identification of product specification numbers. Additionally, during discovery Federal-Mogul has produced approximately 520 documents under the AEO designation consisting of invoices and communications conveying pricing, payment terms, testing, and product specifications for GMT, DNZ, and non-party Seamarky, along with internal Federal-Mogul documents that convey information regarding, among other things, its supplier selection process, pricing, and purchasing strategies. (R. 260, Federal-Mogul Resp. at 4.) In the current motions, GMT seeks an order removing the AEO designation from the documents produced by the defendants and Federal-Mogul, arguing that the "confidential" designation is sufficient to protect their legitimate interests.
Federal Rule of Civil Procedure 26(c)(1) allows a court to, "for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including... (G) requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way." But because there is a "presumption of
Once a protective order has been entered, the party seeking to protect documents under its shield "must continue to show good cause for confidentiality when challenged." In re: Bank One Securities Litig. First Chi. Shareholder Claims, 222 F.R.D. 582, 586 (N.D.Ill.2004). To make that showing, the designating party must show that disclosure will result in a "clearly defined and serious injury," by pointing to "specific demonstrations of fact." In re: Aqua Dots Prods. Liab. Litig., 08 CV 2364, 2009 WL 1766776, at *1, *4 (N.D.Ill. June 23, 2009) (quotations omitted). The "harm must be significant, not a mere trifle." Cipollone v. Liggett Grp., Inc., 785 F.2d 1108, 1121 (3rd Cir.1986). Conclusory statements — including "broad allegations of potential harm" or competitive injury — are insufficient to meet the good cause standard. Chicago Mercantile Exch., Inc. v. Technology Research Grp., LLC, 276 F.R.D. 237, 241 (N.D.Ill.2011); Culinary Foods, 151 F.R.D. at 303. "If there is any doubt as to whether the material should be sealed, it is resolved in favor of disclosure." In re: Bank One, 222 F.R.D. at 586.
Although two-tiered protective orders contemplating that some documents will be produced with a heightened AEO designation are not uncommon, the 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." Team Play, Inc. v. Boyer, No. 03 C 7240, 2005 WL 256476, at *1 (N.D.Ill. Jan. 31, 2005). 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. Motorola, Inc. v. Lemko Corp., 08 CV 5427, 2010 WL 2179170, at *5 (N.D.Ill. June 1, 2010). To justify the AEO designation, the designating 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 designating party's relationships with other competitors. Id. at *4. Instead, the designating 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. Conclusory statements are insufficient to show that a "slight expansion of disclosure" puts the designating party at an appreciable risk. Id.
In the motion directed at Tru Group's document production, GMT seeks an order removing the AEO designation from two groups of documents consisting
In attempting to meet its burden as the designating party to show that there is good cause for maintaining the AEO designation on the challenged groups of documents, Tru Group has made only the kinds of broad allegations of unspecified harm that consistently have been found insufficient to justify the "extreme measure" of preventing a party's attorneys from sharing the documents with their clients. See Team Play, 2005 WL 256476, at *1. Tru Group's response to the current motion hinges on three blanket good-cause statements: (1) that disclosing the documents to "GMT employees would harm the business of both Tru Group and Federal-Mogul by causing GMT to gain an unearned competitive advantage over Tru Group"; (2) that disclosure would give GMT "unfair leverage over negotiations with Federal-Mogul"; and (3) that disclosure would harm Tru Group's relationship with Federal-Mogul. (R. 245, Defs.' Resp. at 1, 3.) Nowhere in its eight-page response does Tru Group elaborate on these assertions or describe with any particularity how these generalized harms would arise from allowing GMT's attorneys to review the documents with a limited number of GMT employees. In particular, it has not addressed in any meaningful way GMT's argument that this information is stale. Instead, it simply asserts that "GMT has cited no evidence that the pricing information is in fact stale." (Id. at 4.) But as the party seeking to prevent GMT from reviewing the documents, it is Tru Group's burden, not GMT's, to establish good cause and explain with particularity why the information is not stale. See Motorola, 2010 WL 2179170, at *4.
With respect to the staleness question, Tru Group has not explained with any particularity how allowing GMT employees to view years-old invoices and specifications could give GMT any unfair competitive advantage in the current market or lead to unfair leverage over the customers identified in the documents. Nor has it submitted any affidavits supporting its assertions. The relevant documents are all
Even assuming for the purposes of argument that Tru Group had established that the years-old information is not stale, there remains the disturbingly murky question regarding whether Tru Group and DNZ still can be considered competitors with GMT. In other words, given what can only be described as vague and shifting explanations the defendants have given as to whether Tru Group and DNZ are still functioning companies, the court is unable to determine whether the AEO-designated information has any on-going value to either company. As GMT points out, and as noted above, on March 10, 2015, the defendants filed a statement with this court in response to GMT's request for more information as to why they had produced so few documents from electronic storage devices in response to GMT's discovery requests. (R. 238, Pl.'s Mem. Ex. C, March 10, 2015 Ltr.) The defendants explained the paltry production by admitting that they had "liquidated" their computers as part of a "winding down" process that began in March 2011. (Id. at 3.) Nowhere in that letter did the defendants suggest that the "winding down" process had been reversed or that they were continuing to operate. In its response to the current motion, Tru Group asserts that nothing in the letter "indicates that DNZ and Tru Group do not intend to re-start their operations upon resolution of this litigation." (R. 245, Defs.' Resp. at 4.) Actually, that is exactly the impression that the letter gave. If DNZ and Tru Group foresaw a possibility that their businesses were merely on hold temporarily, why would they "liquidate" their equipment? The impression the letter was no doubt intended to, and in fact did, convey was that DNZ and Tru Group liquidated their computers because they had gone out of business. And yet now, faced with the persuasive argument that disclosure of the AEO-designated documents could provide no competitive disadvantage to defunct companies, Tru Group now says that the defendants "continue to do some business — and nothing indicates that they will not resume full production." (Id.) It is hard not to see this assertion as an about-face in the defendants' representations to this court.
The defendants' obligation to justify the continued AEO designation in the face of GMT's challenge is to identify a clearly defined and serious injury. See Aqua Dots, 2009 WL 1766776, at *1. Given Tru Group's failure to explain why the data
There are several reasons why Tru Group's reliance on the supply agreement in this context does not help it to meet the good cause threshold. First, the mere existence of a confidentiality agreement is not in itself a valid reason to object to discovery. See JAB Distribs., LLC v. London Luxury, LLC, 09 CV 5831, 2010 WL 4008193, at *4 (N.D.Ill. Oct. 13, 2010) ("Defendant proffers no case in support of its argument that a confidentiality agreement precludes a party from producing documents pursuant to a protective order."); Mike v. Dymon, Inc., 95-2405-EEO, 1996 WL 606362, at *3 (D.Kan. Oct. 17, 1996) ("That plaintiff may have a contractual, legal obligation not to reveal confidential information of [third-party] is not a valid objection to the requested discovery."). Second, it appears that Tru Group is balancing its argument on an assertion of Federal-Mogul's confidentiality rights. For example, it argues that Federal-Mogul "continues to expressly assert its right to maintain the most restrictive designation" for this information, pointing to a November 2014 letter in which counsel for Federal-Mogul asserted that the continued AEO designation is proper. (R. 245, Defs.' Resp. at 4-5.) But Tru Group has not shown that it has standing to assert Federal-Mogul's confidentiality interests. See Krumwiede v. Brighton Assoc., LLC, 05 CV 3003, 2006 WL 2644952, at *2-3 (N.D.Ill. Sept. 12, 2006). Federal-Mogul has not moved to intervene in the case to respond to the current motion and Tru Group has not attempted to show that it has standing to advocate a non-party's confidentiality position. See id. Third, Tru Group's assertion that Federal-Mogul has not agreed to remove the AEO designations from the documents relevant to this motion appears to stand on shaky ground. (R. 245, Defs.' Resp. at 5 n. 1.) Not only did Federal-Mogul lodge no objection to the current motion with this court, but in its response to the second motion seeking to redesignate AEO documents from its own production (discussed in Section B below), Federal-Mogul suggests that the barrier to removing the AEO designation on DNZ documents has been erected by the defendants. Specifically, it states that "DNZ has denied Federal-Mogul's requests to waive the confidentiality provision and/or approve of any attempt to remove the AEO designation" with respect to DNZ pricing and payment documents. (R. 260, Federal-Mogul Resp. at 14.) That assertion suggests that the defendants are pointing to Federal-Mogul's confidentiality rights as a shield despite Federal-Mogul's willingness to waive those rights with respect to at least some subset of DNZ documents. For all of these reasons, Tru Group has not shown that its obligations under the supply agreement present good cause to prevent the redesignation
It is important to note that an additional consideration in determining whether the continued AEO designation is appropriate is to weigh the risks to the defendants from disclosure against GMT's need to view the information in order to litigate its claims. See Autotech Techs. Ltd. P'ship v. Automationdirect.com, Inc., 237 F.R.D. 405, 412 (N.D.Ill.2006). Great care must be taken to prevent the unnecessary curtailment of a party's trial preparation. Farnsworth v. Procter & Gamble Co., 758 F.2d 1545, 1547 (11th Cir.1985). But trial preparation and trial itself are made significantly more difficult and expensive when a party's attorney is unable to share with the party facts that are material to its prosecution of the case. See Motorola, 2010 WL 2179170, at *5. That is especially true here, where GMT's claims turn in part on whether it can prove that the defendants misappropriated its customer and pricing information in an attempt to lure away its business. (See, e.g., R. 38, Am. Compl. ¶ 104.) As GMT points out, the disputed documents are relevant to helping it determine the scope of its claims. Tru Group argues that GMT can get around this problem by preparing lists of its historic pricing structures for its counsel to compare to the AEO-designated documents. (R. 245, Defs.' Resp. at 7.) While that approach might work in some contexts, because Tru Group has not convincingly shown that it will be harmed by allowing GMT representatives to view these two groups of documents, it has not shown that the added difficulty and expense inherent in its proposal are justified. That said, this court is sensitive to the need to protect commercial information and agrees that the two groups of documents relevant here should maintain their "confidential" status under the first tier of the protective order.
In its related motion targeting documents produced by Federal-Mogul, GMT argues that Federal-Mogul improperly designated 2,800 pages of its 6,480-page document production as AEO. (R. 246, Pl.'s Mem. at 2.) The AEO-designated documents include invoices dated April-May 2010 for DNZ products shipped by Tru Group to Federal Mogul and dated between September 2011 and 2013 for DNZ products shipped by Seamarky to Federal-Mogul, as well as internal and external communications between Federal-Mogul and Delano Mok or Alex Chan regarding shipments, and pricing of DNZ products or otherwise regarding Federal-Mogul's commercial relationship with DNZ and Seamarky. (Id. at 2-3.) According to Federal-Mogul's response, however, only three categories remain in dispute: (1) documents revealing DNZ pricing, payment terms, testing, and product specifications; (2) similar documents as category (1) pertaining to Seamarky; and (3) documents that convey Federal-Mogul's supplier selection process, purchasing strategies, and procedures for commodity purchasing, testing, specifications, and purchasing frequency. (R. 260, Federal-Mogul Resp. at 4.) GMT provided this court only with samples of the AEO-designated documents (filed under seal). That sampling is sufficient because "[c]ourts are not required to make good cause determinations on a document-by-document basis as such a requirement would impose an excessive burden upon the court in cases with thousands of documents at issue." In re: Northshore Univ. Healthsystem, 254 F.R.D. 338, 342 (N.D.Ill.2008).
Because Federal-Mogul is not a party to this lawsuit, the good-cause showing it must make in defense of its AEO designation is less demanding than the burden shouldered by the defendants. See
GMT first seeks to remove the AEO designation from a group of documents it filed under seal as Group Exhibit A, pertaining to invoices, product quality analyses, and product-related communications between DNZ and Federal-Mogul. These documents include invoices and packing lists conveying information that is substantially similar, but not identical, to the documents at issue in the motion addressed in Section A of this opinion.
Because Federal-Mogul established good cause, the burden shifts to GMT as the party seeking discovery "to show why the court should allow dissemination of the materials." See Culinary Foods, 151 F.R.D. at 300. GMT makes two points that weigh in favor of reducing the Group A designation from AEO to confidential. First, as described above, GMT points to Federal-Mogul's assertion that "DNZ has denied Federal-Mogul's requests to waive the confidentiality provision and/or approve of any attempt to remove the AEO designation." (R. 260, Federal-Mogul Resp. at 14.) This assertion suggests that DNZ is using its confidentiality agreement with Federal-Mogul to cloak information that Federal-Mogul otherwise would be willing to redesignate, even though it is unclear whether and to what extent DNZ remains in the business of manufacturing, exporting, or selling metal fibers. Second, GMT submitted with its motion Group Exhibit F, which includes a series of packing lists, invoices, and product analyses that are substantively similar to those represented in Group Exhibit A, except they are dated September and October 2010 instead of April and May 2010. (R. 246, Pl.'s Mem. Sealed Group Exs. A & F.) Despite their substantive similarity, Federal-Mogul produced the documents in Group Exhibit F with only the confidential designation. In its response to GMT's motion, Federal-Mogul ignores this inconsistency and fails to explain why it assigned differing designations to groups of documents that appear to convey the same kinds of substantive information. As GMT points out, it has a substantial interest in being able to view these documents with its attorneys because the information conveyed therein goes to the heart of its trade secrets claims. For these reasons, GMT has shown that the documents in Group Exhibit A should be redesignated as confidential.
Next GMT seeks removal of the AEO designation from a group of documents filed under seal at Group Exhibit B, pertaining to Federal-Mogul's supply arrangements with Seamarky, a non-party competitor of GMT. GMT admits that these documents reveal pricing strategies, product characteristics, and/or supply quantity and quality data, but argues nonetheless that they do not qualify for AEO protection because it insists that they are stale. As noted above, Cleveland's affidavit provides support for Federal-Mogul's AEO designation under the lower good-cause threshold for non-parties, because his statements provide evidence that despite their age the relevant documents could skew current negotiations and strategies in the relatively limited global supply market for metal fiber. Moreover, GMT does not dispute that Seamarky is currently its direct competitor. Courts have made clear that the AEO designation is particularly appropriate in situations where the confidential information might otherwise be used to gain a commercial advantage by a direct competitor. See, e.g., In re: Zimmer NexGen Knee Implant Prods. Liab. Litig., 11 CV 5468, 2013 WL 6490343, at *4 (N.D.Ill.Dec. 10, 2013).
GMT also argues that redesignation of Group Exhibit B is appropriate because, according to it, the documents "raise grave questions concerning the veracity" of the defendants' representations that they are unrelated to Seamarky. (R. 246, Pl.'s Mem. at 9.) Although GMT acknowledges that Federal-Mogul and Seamarky are both non-parties who have a confidentiality agreement that governs the AEO-designated documents, it asserts that the defendants
Given the lower good-cause threshold that applies to non-party Federal-Mogul, see Northshore, 254 F.R.D. at 342-43, Cleveland's affidavit is sufficient to demonstrate that Federal-Mogul had good cause to produce most of the documents sampled in GMT's Group Exhibits C and D under the AEO designation. These documents generally consist of communications between Federal-Mogul and the defendants' representatives Delano Mok and Alex Chan regarding DNZ products and internal Federal-Mogul communications relating to its decision to purchase products from the defendants and Seamarky in 2009 and 2010. In attempting to illustrate that these communications are either stale or otherwise inappropriately designated as AEO, GMT directs specific arguments to a sampling of small groups of these communications. For example, GMT quotes fairly extensively from a set of emails between Mok and Federal-Mogul dated December 2009 through May 2010, produced at FM 6004-6011, to argue that these communications are merely "embarrassing" to the defendants but "not so sensitive that they merit a heightened AEO designation." (R. 246, Pl.'s Mem. at 12.) But those emails reveal the kinds of price proposals, pricing formulas, and product specifications that courts have found deserving of AEO status. See, e.g., Stanislaus, 2012 WL 6160468, at *5. Given Cleveland's representations that this information can reverberate in the current market, the court is unable to conclude that they are stale. Similarly, GMT challenges Federal-Mogul's internal report analyzing its decision to change suppliers in 2010 and an email discussing that report, produced at FM 6066-6088. (R. 246, Pl.'s Mem. at 13-14.) But because these documents convey Federal-Mogul's supply strategies and product requirements, their disclosure is also potentially harmful to the extent they can be interpreted to predict its future purchasing strategies, as Cleveland's affidavit suggests. See Stanislaus, 2012 WL 6160468, at *2 (noting that historical information is not stale if it "can be extrapolated to predict future strategies and practices").
Federal-Mogul has not made a convincing argument, however, as to why there is good cause to maintain the AEO designation for the documents produced in Group Exhibit C at FM 6107 and 4090-4093. As GMT points out, these emails convey a discussion about a change in Federal-Mogul's supplier but they do not reveal any product information, pricing details, or sourcing strategy. In defense of its AEO designation Federal-Mogul argues that the emails reveal how a supplier's
Additionally, it must be noted that GMT's challenge to the AEO designation of two sub-sets of documents within Group Exhibits C and D have gone unanswered by Federal-Mogul in its response. GMT points out that Federal-Mogul produced an agreement dated November 14, 2013, in two separate places in its production, one under the AEO designation and one labelled only "confidential." (R. 246, Pl.'s Mem. Ex. D at FM 3660-3662 & FM 0003-0004.) Similarly, GMT points out that Federal-Mogul produced a series of emails twice, once at FM 3636-3643 under the "confidential" label and once at FM 4156-4162 with the AEO designation.
Finally, the court notes that in its response Federal-Mogul requests an order requiring GMT to reimburse it for the fees and costs it incurred in responding to the current motion and any future document redesignations. (R. 260, Federal-Mogul Resp. at 14-15.) But because the court has determined that a portion of its AEO designations are to be reduced to confidential status, and because Federal-Mogul has cited no cases supporting an argument that it is entitled to fees and costs in this specific context, that request is denied. Going forward, however, GMT should identify for Federal-Mogul which documents it considers improperly designated in light of this opinion before engaging in dialogue to discharge its meet and confer obligations under Federal Rule of Civil Procedure 37(a)(1) and Local Rule 37.2.
For the foregoing reasons, Plaintiff's Motion to Remove the "Attorneys' Eyes Only" Designations on Certain Documents Produced by Tru Group is granted. The documents filed under seal as Exhibits A and B to that motion, (R. 238-1; R. 238-2), are to be treated as "confidential" under the protective order as of October 8, 2015, as long as the defendants have not filed an objection to this ruling pursuant to Rule 72(a). Plaintiff's Motion to Remove the "Attorneys' Eyes Only" Designations on Documents Produced by Third-Party Respondent Federal-Mogul Holdings Corporation is granted in part and denied in part. The motion is granted with respect to the documents filed as Group Exhibit A, the documents filed in Group Exhibit C as FM 6107 and 4090-4093, and the documents filed in Group Exhibit D as FM 3660-3662 and FM 4156-4162. Those documents are to be treated as "confidential" under the protective order as of October 8, 2015, as long as Federal-Mogul has not filed an objection to this ruling pursuant to Rule 72(a). The motion is denied in all other respects.