Aloe Vera of America, Inc. v. U.S.
| Decision Date | 19 July 2004 |
| Docket Number | No. 03-15265.,03-15265. |
| Citation | 376 F.3d 960 |
| Parties | ALOE VERA OF AMERICA, INC., a Texas corporation; Rex G. Maughan; Ruth G. Maughan; Maughan Holdings, an Arizona corporation, Plaintiffs-Appellants, Bureau of National Affairs, Inc.; Tax Management, Inc., Intervenors-Appellees, and Gene Yamagata; Yamagata Holdings, Inc., a Nevada corporation, Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Robert E. Miles, Quarles & Brady Streich Lang LLP, Phoenix, AZ, for the plaintiffs-appellants.
David J. Bodney and Peter S. Kozinets, Steptoe & Johnson LLP, Phoenix, AZ, for the intervenors-appellees.
Appeal from the United States District Court for the District of Arizona; James A. Teilborg, District Judge, Presiding. D.C. No. CV-99-01794-JAT.
Before: WALLACE, KOZINSKI and GRABER, Circuit Judges.
In 1997, the Bureau of National Affairs ("BNA") published an article disclosing that the Internal Revenue Service ("IRS") and National Tax Administration of Japan ("NTA") had begun an audit of Aloe Vera of America and Forever Living Products Japan, two members of the Forever Living Products group of companies (collectively "Aloe Vera"). Aloe Vera wrote to BNA in protest and demanded BNA identify its sources. Eventually, BNA and Aloe Vera entered into a Confidential Release and Covenant Not to Sue (the "Settlement Agreement"). Although BNA would not identify its sources for the article, it did agree to provide Aloe Vera with certain other confidential information. In turn, Aloe Vera agreed to release BNA from liability for the article and to keep confidential the Settlement Agreement and BNA disclosures. Aloe Vera was permitted to disclose the confidential information only to a handful of authorized recipients named in the agreement, including "United States authorities," or as required by court order.
In 1998, Aloe Vera sued the United States, claiming that the IRS had disclosed its tax return information to NTA and seeking damages for disclosure to an insecure recipient and disclosure of false information. BNA intervened and filed a motion for a protective order prohibiting disclosure of the Settlement Agreement or the information BNA had disclosed to Aloe Vera.
On September 28, 2001, the district court ordered Aloe Vera to provide the government with the BNA disclosures, but only after the government had signed a confidentiality agreement prohibiting it from disclosing the documents to anyone who was not an attorney for one of the parties:
[Aloe Vera] must disclose to [the government] the documents currently filed under seal. However, such documents shall be disclosed to the [government] subject to a confidentiality agreement to be executed by the [government]. Pursuant to such confidentiality agreement, the [government] shall not be allowed to reveal such documents to anyone who is not an attorney for a party to this case. Additionally, if any other parties are added to this case following September 28, 2001, the [government] shall not disclose the documents to such new party without prior court [approval].
(Emphasis added). The court's order included the following timetable:
[BNA] shall prepare a[nd] file the proposed Protective Order in this case by October 12, 2001;
... [I]f any party wishes to object to the proposed form of Protective Order, they shall do so by October 19, 2001;
... [P]rior to the Court entering the Protective Order, [Aloe Vera] shall obtain a written agreement from [the government] that [it] will not disclose any of the information obtain[ed] from the sealed documents to any individual or entities who are not parties to this action;
... [I]f [the government] refuses to sign a confidentiality agreement in this case, [Aloe Vera] shall not disclose the sealed documents to [the government] ... [I]f [the government] is not willing to enter a confidentiality agreement, [Aloe Vera] shall advise the Court of this refusal by October 26, 2001;
... [I]f [the government] is willing to enter a confidentiality agreement, a copy of such agreement shall be filed with the Court, and provided to [BNA] by October 26, 2001;
... [I]f [BNA] has any objection to the confidentiality agreement, [BNA] shall make such objection by November 2, 2001;
... [O]nce the Court has entered the Protective Order, [Aloe Vera] may disclose the sealed information to the [government] subject to the written confidentiality agreement signed by the [government].
On October 12, 2001, in compliance with the court's order, BNA submitted a proposed protective order, which stated that BNA disclosures could be provided only to counsel for parties to the case. The government and Aloe Vera objected on October 19 on grounds that the order was too restrictive. Aloe Vera proposed an alternative protective order that would have allowed disclosure to a wide array of people, including current employees, officers, partners or directors, representatives and agents of the parties; former employees, officers, partners or directors of the parties who are potential witnesses; any other person designated by stipulation of the parties; and outside experts or consultants of third parties who need not be identified to BNA prior to disclosure. BNA took the position that Aloe Vera's and the government's objections were "fundamentally at odds" with the attorneys' eyes only restriction in the district court's order. Accordingly, BNA filed a response to Aloe Vera's and the government's objections and sought sanctions against Aloe Vera.
The district court also required that, by October 26, Aloe Vera either file and serve a confidentiality agreement consistent with the district court's order and signed by the government, or inform the court of the government's unwillingness to sign such an agreement. Aloe Vera consulted with the government about a proposed agreement, and the government objected to language restricting disclosure to counsel of the parties. Rather than informing the court of the government's objection, however, Aloe Vera simply omitted that language. On October 25, Aloe Vera's counsel instructed his secretary to fax the proposed confidentiality agreement to the government, BNA and the district court, but only the government received the fax. The proposed agreement permitted disclosure to "parties to the action" — not merely the lawyers, as the district court's order had directed. On November 1, the government signed the agreement and sent it to Aloe Vera.
On November2 — the court-ordered deadline for BNA to object to Aloe Vera's proposed agreement — Aloe Vera's counsel faxed the agreement, signed by the government, to BNA with a letter stating: "Having received no objection from you regarding the agreement, I assume it is acceptable to your client, and I intend to release the documents at issue to the Government, subject to the terms of the agreement, early next week." BNA was not pleased. It immediately filed a Notice of Plaintiff's Failure to Comply with the Court's Order of September 28, 2001, and an Objection to Confidentiality Agreement.
Following a status conference on November 26 and in its November 29 order, the district court confirmed that its September 28, 2001, order authorized Aloe Vera to disclose the confidential information to the government, not to anyone else:
[T]he Court has ordered [Aloe Vera] to disclose the documents to [the government] (after the confidentiality agreement and protective order have been entered). Beyond this very limited disclosure to [the government], the Court has not authorized [Aloe Vera] to produce or use the documents in question or otherwise depart from [its] contractual obligations in the settlement agreement with [BNA]....
... [O]ther than one limited disclosure to [the government]... in this case, the Court has in no way altered [Aloe Vera's] obligations under the settlement agreement that [Aloe Vera] voluntarily entered into with [BNA]. Further, [Aloe Vera] shall not interpret this Court's orders as authorizing [it] to depart from their obligations under the settlement agreement with [BNA]. [BNA] may renew its request for attorneys fees on this issue at the hearing on [December] 11th.
BNA and the government finally agreed on a protective order that complied with the district court's September 28, 2001, order, and the district court filed the order on December 12. On December 17, 2001, the court ordered BNA and Aloe Vera to file briefs regarding BNA's request for sanctions. After considering over seventy pages of briefs and affidavits, the court found that Aloe Vera had violated the September 28, 2001, order. It rejected Aloe Vera's argument that it "did not know that the granting of a protective order in favor of [BNA] was not an opportunity for [it] to re-litigate whether [it] would be able to use the confidential documents for purposes of [its] case in depositions of both [its] own witnesses and [the government's] witnesses." The court also found that Aloe Vera had violated its order by failing to notify the court that the government was objecting to the "attorneys' eyes only" restriction in its proposed confidentiality agreement.
The court also held in its November 8, 2002, order that Aloe Vera had acted wrongfully when it informed BNA in its November 2 letter that it "intended to disclose the information without the Court required confidentiality agreement being in place; this threatened disclosure also would have violated the September 28, 2001, Order." In addition, the court noted that Aloe Vera's actions had forced BNA "to respond to the [protective] order proposed by [Aloe Vera] which went beyond the disclosure authorized by the Court." It also pointed out that BNA, "though having won on the protective order issue, was forced to respond to [Aloe Vera's] threat to disclose the confidential documents without any confidentiality agreement in place," and that "to protect its...
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