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Coll v. Stryker Corp.

United States District Court, D. New Mexico

May 24, 2017

CLARKE COLL, Plaintiff, [1]
v.
STRYKER CORPORATION and HOWMEDICA OSTEONICS CORPORATION, Defendants.

          MEMORANDUM OPINION AND ORDER OVERRULING OBJECTIONS AND AFFIRMING ORDER TO DE-DESIGNATE DISCOVERY MATERIAL MARKED “ATTORNEYS' EYES ONLY”

         THIS MATTER is before the Court on Defendants' Objections to Magistrate Judge's Memorandum Opinion and Order Granting Plaintiff's Motion to De-Designate Discovery Material Marked “Attorneys' Eyes Only” [Doc. 138], filed on March 29, 2017. The Honorable Stephan M. Vidmar, United States Magistrate Judge, issued his Memorandum Opinion and Order (“MOO”) granting Plaintiff's motion to de-designate discovery material marked “Attorneys' Eyes Only” on March 15, 2017. [Doc. 132]. Plaintiff responded in opposition to the objections, [Doc. 146], and Defendants replied, [Doc. 157]. Being fully advised in the premises, the Court finds that Defendants fail to show that the MOO is “clearly erroneous or contrary to law.” Fed.R.Civ.P. 72(a). Accordingly, the Court will overrule the objections, affirm the Magistrate Judge's MOO, and order Defendants, within 30 days and at their own cost, to provide one additional copy of the discovery materials to Plaintiff with a lesser or no designation under the Agreed Protective Order, [Doc. 59].

         Background

         In the 1990's, Wayne Augé, II, M.D., (the originally named Plaintiff in this action) made innovative developments in orthopedic medicine and surgery. Defendants were interested in his inventions, and they entered into a series of confidentiality agreements with him for their common benefit. Defendants utilized Dr. Augé's inventions in several products that went to market. Over the years, however, as Defendants marketed new products with his inventions, Dr. Augé came to believe that Defendants were not fulfilling their agreements to honor his ownership rights or to pay him what they owed. So, Dr. Augé filed this lawsuit in 2014.

         The parties anticipated that some materials disclosed in discovery would be sensitive, and they entered into an Agreed Protective Order (“APO”) early on. [Doc. 59]. The APO provided for two tiers of protection: “Confidential” and “Attorneys' Eyes Only.” Id. at 1, 4. Confidential information may be accessed by the parties, including Dr. Augé, but cannot be used for any purpose outside this litigation. Id. at 1, 3. Material designated “Attorneys' Eyes Only” (“AEO”) may not be accessed by the parties, including Dr. Augé, and is intended to protect “trade secrets or highly confidential, non-public, personal or proprietary business information, disclosure of which could be especially detrimental or harmful to the designating party if disclosed to opposing parties.” Id. at 4.

         On August 26, 2016, Defendants produced 86, 802 pages of initial disclosures. [Doc. 88] at 8. Of those, approximately 63, 335 pages (or 3, 809 documents) were designated AEO. Id.

         Plaintiff first objected to the designations in writing on September 30, 2016. [Doc. 89-12] at 4. That same day, defense counsel explained that the designations were necessary because the materials constituted “internal [research and development] and product development files.” Id.; [Doc. 88] at 9. Counsel conferred at least twice more. See [Doc. 88] at 8-9, 9 n.12; [Doc. 68] at 5; [Doc. 102] at 2. Although the APO instructs the producing party (i.e., Defendants) to submit the dispute by formal motion within ten calendar days of the parties' “conference” on the dispute, Plaintiff actually filed the motion on November 8, 2016. [Doc. 68]. Plaintiff asked the Court to de-designate the materials and to award attorney fees. Id. at 11. Judge Vidmar granted the motion on March 15, 2017. [Doc. 132]. Defendants timely objected pursuant to Fed.R.Civ.P. 72. [Doc. 138].

         Standard

         “There is no absolute privilege for trade secrets and similar confidential information.” Centurion Indus., Inc. v. Warren Steurer & Assocs., 665 F.2d 323, 325 (10th Cir. 1981) (alterations omitted) (quoting Fed. Open Mkt. Comm. v. Merrill, 443 U.S. 340, 362 (1979)). Under Fed.R.Civ.P. 26(c)(1)(G), a court may, for good cause, issue a protective order (or permit a party to avail itself of an already issued protective order) to require that “a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way.” In re Cooper Tire & Rubber, Co., 568 F.3d 1180, 1188 (10th Cir. 2009). A party seeking that its information only be revealed in a certain way, such as limiting who can view or access the materials, under this Rule “must first establish that the information sought is a trade secret [or other confidential research, development, or commercial information].” Id. at 1190; Fed.R.Civ.P. 26(c)(1)(G). Further, that party must additionally “demonstrate that its disclosure might be harmful.” In re Cooper Tire, 568 F.3d at 1190 (quoting Centurion, 665 F.2d at 325). To establish the requisite harm, the party seeking protection must make a “particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements.” E.g., Layne Christensen Co. v. Purolite Co., 271 F.R.D. 240, 245 (D. Kan. 2010) (quoting Gulf Oil Co. v. Bernard, 452 U.S. 89, 102 n.16 (1981)); accord Jenner & Block, Moore's AnswerGuide Federal Discovery Practice § 16.29(b) (2017 ed.) (a showing of “specific prejudice or harm” is required to limit the disclosure of trade secrets).

         For example, in McKellips v. Kumho Tire Co., a products liability case, the parties had entered into a protective order that prohibited the plaintiffs and their counsel from sharing certain discovery material (e.g., “confidential research, development, or proprietary business information”) outside the litigation. 305 F.R.D. 655, 661 (D. Kan. 2015). The protective order notwithstanding, the defendant Kumho opposed producing certain discovery materials, such as the number of tires produced; the specifications and blueprints for the subject tire; skim stock compounds and formulas; manufacturing processes; manufacturing or design defects found; tread separation studies and testing; speed rating; and driver response, effects, risk, and causes of tread separation. Id. at 661, 664. Kumho considered these materials to be trade secrets. The Court agreed, but only in part.

         Kumho had submitted an affidavit in support of its position that the skim stock compounds and formulas for its tires constituted trade secrets. Id. at 663. The court was persuaded that the skim stock materials constituted trade secrets. Id. However, the court found that Kumho had not met its burden to establish that the other material constituted trade secrets. Id. at 664. For example, the court found that Kumho's vague characterization of the disputed material as “manufacturing processes” was not enough. Id. Kumho had not identified any particular aspect of its manufacturing processes that was unique to it, closely guarded, and if disclosed, would be valuable to competitors. Id. Further, the court found that the protective order already in place provided sufficient protection for Kumho's information. Other than the skim stock materials, therefore, the court ordered Kumho to produce the discovery materials.

         In Northern Natural Gas Co. v. L.D. Drilling, Inc., the District of Kansas similarly addressed whether materials sought in discovery constituted trade secrets. 2010 U.S. Dist. LEXIS 145522; 2010 WL 9519354 (D. Kan. Mar. 26, 2010) (unpublished). The plaintiff Northern wanted entry onto L.D. Drilling's land in order to collect natural gas samples from certain gas wells. U.S. Dist. LEXIS 145522 at *12. L.D. Drilling submitted an affidavit supporting its claim that allowing such sampling would expose its trade secrets. Id. at 27. The affiant, Mr. Davis, explained that information about the physical and chemical composition of material produced from the wells was economically valuable, especially because the information was not generally known or readily ascertainable to those who might otherwise make use of it. Id. The court did not indicate whether the affidavit was convincing. Instead, the court assumed without finding that the gas samples were trade secrets and went on to hold that LD Drilling failed to show that it would be harmed by disclosure of the samples. Id. at 30-31.

         Once the party seeking protection for its trade secrets has met its initial burden-to show that the materials constitute trade secrets and disclosure of them might cause harm-the burden then shifts to the party seeking disclosure to establish that such disclosure is “relevant and necessary to the action.” Centurion, 665 F.2d at 325.

The need for the trade secrets should be balanced against the claim of harm resulting from the disclosure. “It is within the sound discretion of the trial court to decide whether trade secrets are relevant and whether the need outweighs the harm of disclosure.” If the party seeking discovery cannot prove that the information is relevant and necessary, then discovery should be denied. However, if the party meets its burden, “the trade secrets should be disclosed, unless they are privileged or the subpoenas are unreasonable, oppressive, annoying, or embarrassing.”

In re Cooper Tire, 568 F.3d at 1190 (internal citations omitted) (quoting Centurion, 665 F.2d at 325, 326).

Where the protection sought is only to prevent certain identified individuals from viewing the materials, such as in-house counsel or the patent inventor, the court must balance the risk of inadvertent disclosure of trade secrets to competitors against the risk to the other party that protection of these trade secrets will prejudice its ability to prosecute or defend the present action.

Layne Christensen, 271 F.R.D. at 249.

         Judge Vidmar found that these standards were consistent with the APO.

         Judge Vidmar found that the APO in this case set forth the following. The party designating materials AEO must provide (1) a description of the documents so marked, and (2) a description of how such documents relate to the issues in this action. [Doc. 132] at 6 (citing [Doc. 59] at 4, ¶ 10). If the receiving party objects to the AEO designation, he must notify the producing party in writing. The parties must use their best efforts to resolve the objections between themselves. If they cannot resolve the objections, the producing party has ten calendar days (from the date “of the conference”) to file a formal motion with the Court. “The Producing Party shall bear the burden of proof on the issue.” If no motion is filed within ten days, the AEO designation will be re-designated or removed. The Producing Party shall, at its expense, provide to the other parties to this action one additional copy thereof from which the AEO designation has been adjusted appropriately. Id. (citing [Doc. 59] at 7, ¶ 16).

         Judge Vidmar found that Defendants failed to meet their initial burden.

         Judge Vidmar found that Defendants failed to meet their burden to show that the discovery material (more than 63, 000 pages) constituted “trade secrets . . . or proprietary business information, disclosure of which could be especially detrimental or harmful to the designating party if disclosed to opposing parties.” [Doc. 132] at 7 (quoting [Doc. 59] at 4, ...


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