Do Confidentiality Orders Protect Confidential Information from Discovery in Subsequent Cases?

Tuesday, 02 June 2015 14:32 Written by  Thomas P. Donnelly

By Thomas P. Donnelly, Esquire Reprinted with permission from the May 29, 2015 issue of The Legal Intelligencer. (c) 2015 ALM Media Properties. Further duplication without permission is prohibited.

Confidentiality agreements have become commonplace in commercial litigation.  The purpose of a confidentiality agreement as the protection from disclosure of either private personal or sensitive business information which gives a party a competitive advantage is certainly a noble one and one which mandates an agreement against such disclosure in a wide variety of circumstances.  Often, the parties seek the imprimatur of the court by requesting the court adopt the agreement of the parties as an order thereby incorporating the court’s power to impose sanctions in the event of breach.  The entry of such an order, whether intentionally or as an unintended consequence,  may change the nature of a third party, foreign to the dispute with respect to which the confidentiality order was entered, to obtain information produced in the prior litigation.  

Traditionally, mere confidentiality agreements have been ignored by courts when faced with a subsequent discovery request for relevant information produced in a prior matter between different litigants.  Courts have reasoned that confidentiality agreements as private contracts between litigants have no bearing on the discovery process and could not alone be the basis of a motion for protective order precluding production. 

Securing the imprimatur of the court modifies the analysis.  As most confidentiality agreements impose obligations which survive termination of the matter to which they relate, disclosure of information deemed confidential in response to a subsequent subpoena may constitute a breach of the express terms of the prior order and thus expose a disclosing party to both damages and potential sanctions.  A party subject to subpoena may be faced with the predicament of choosing which valid court order must be breached and which sanction is preferred. 

By analogy, a foreign party seeking discovery by subpoena over a prior protective order seeks an order from a different court which modifies the terms of the protective order.  An argument can be made that comity prevents such a modification.  Comity, as between the federal court system and the states, was defined by the Supreme Court as “a proper respect for state functions, a recognition of the fact that the entire country is made up of a Union of separate governments, and a continuance of the belief that the National Government will fare best if the States and their institutions are left free to perform their separate functions in their separate ways. . . . [T]he concept . . . represent[s] . . . a system in which the National Government, anxious though it may be to vindicate and protect federal rights and federal interests, always endeavors to do so in ways that will not unduly interfere with the legitimate activity of the states”.  Younger v. Harris, 401 U.S. 37, 44 (1971), as cited by Resolution Trust Corporation v. Castellett, 156 F.R.D. 89 (D. New Jersey 1994) (emphasis added).  As a necessary corollary to the above principle, “the court which has originally entered a particular judgment should be accorded, as a matter of comity, the right to determine whether relief from its own judgment should be granted.”  (See also, In re Steward, 338 B.R. 654 (D. New Jersey 2006), citing In re James, 940 F.2d 46, 51 (3d Cir. 1991).

In Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir. 1994), the United States District Court for the Eastern District of Pennsylvania held that the court must balance the requesting party’s “need for discovery against the injury that might result if uncontrolled disclosure is compelled”.  Id. at 787.  In addition, when deciding whether to “modify an already-existing confidentiality order, the parties’ reliance on the order is a relevant factor.”   Id. at 789 (emphasis in the original).  In applying the balancing test set forth in Pansy, and in analyzing the reliance interest of the parties involved, the Court must be mindful of “the extent to which the order induced the party to allow discovery or settle the case”.  Id. at 790, quoting Beckman Indus., Inc. v. International Ins. Co., 966 F.2d 470, 475-76 (9th Cir. 1992). 

Magistrate Sitarski of the United States District Court for the Eastern District of Pennsylvania, in an unreported and non-precedential opinion, addressed the impact of prior protective orders as a subsequent subpoena.  See Savant Systems, LLC v. Crestron Electronics, 2012 WL 987404 (E.D. Pa. March 22, 2012).  In Savant, Plaintiff served non-party, Lutron, with a subpoena to produce documents that Lutron received through the discovery process in a different matter against Crestron.  Crestron moved to quash the subpoena on the basis that the documents were marked confidential under an agreed protective order.  The Savant Court agreed and quashed the subpoena issued to Lutron finding that it would be an “abuse of the discovery process to order a defendant in the instant litigation to produce all documents which he had submitted in another case under the judicial imprimatur that those documents, when submitted, were judicially protected as confidential.”  Id. at *4, quoting Zenith Radio Corp. v. Matsushita Elec. Indus. Co., No. 74-2451, 1978 WL 1333, at *3 (E.D.Pa. May 2, 1978).

In contrast, the District Court in Maryland held to the contrary in Tucker v. Ohtsu Tire and Rubber Co., 191 F.R.D. 495 (D. Md. 2000).  “Looking for a practical solution to the dilemma, the court in Tucker identified four ‘rules of reason’ to help determine whether modification of a another court’s earlier protective order is justified”.  Abel v. Mylan, 2010 U.S. Dist. LEXIS 106436.  The Tucker factors include (1) whether the prior protective order was the result of deliberation and analysis by the court or was it merely an order entered by agreement or stipulation of the parties (2) the identity of the party from whom discovery is sought (3) whether the case in which the original protective order was issued was still pending, and if not, the burden and expense to the party seeking disclosure to file a new action simply seeking modification of the order issued there and finally (4) whether it is possible for the court to incorporate terms in its own order which will further the protections originally entered by the first court. Tucker, at 501.

Certainly, the confidentiality order does not preclude the confidential information produced in prior litigation from discovery in total.  Rather, the confidentiality order may limit the sources from which such information is available and require that a party seeking information subject to a prior protective order seek to obtain that information from the party which originally produced it in prior litigation if at all possible.   

Tom Donnelly is a Partner with Antheil, Maslow & MacMinn, LLP based in Doylestown, Pennsylvania. His practice focuses primarily on commercial litigation and transactions, employment disputes and personal injury.  To learn more about the firm or Tom Donnelly, visit www.ammlaw.com.

Last modified on Friday, 05 June 2015 16:06
Thomas P. Donnelly

Thomas P. Donnelly

Tom’s practice focuses on commercial litigation and transactions. In litigation, Tom represents both Plaintiffs and Defendants. Throughout his career, he has undertaken the representation of both individual and corporate clients in subject matters concerning fraud, contracts, employment agreements, breach of fiduciary duty, securities violations, real estate and insurer bad faith. Tom’s clients include individuals and businesses local to the Philadelphia area, as well as national corporations.

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