Fed. Trade Comm'n v. Sysco Corp.

• Decision Date: 12 March 2015
• Docket Number: Civil No. 1:15–cv–00256 APM
• Parties: Federal Trade Commission, et al., Plaintiffs, v. Sysco Corporation, et al., Defendants.
• Court: U.S. District Court — District of Columbia

83 F.Supp.3d 1

Federal Trade Commission, et al., Plaintiffs

v.Sysco Corporation, et al., Defendants.

Civil No. 1:15–cv–00256 APM

United States District Court, District of Columbia.

Signed March 12, 2015

Stephen Weissman, Alexis Gilman, Catherine Sanchez, Christopher Abbott, David J. Laing, Jeanne Nichols, Krisha A. Cerilli, Kristian Sjoberg Rogers, Mark Seidman, Matthew McDonald, Melissa Davenport, Michael Derita, Ryan Quillian, Sophia Vandergrift, Stephen Mohr, Thomas H. Brock, Federal Trade Commission, Nicholas Alan Bush, DC Office of the Attorney General, Washington, DC, Natalie S. Manzo, Office of the Attorney General, Los Angeles, CA, Robert W. Pratt, Illinois Office of the Attorney General, Chicago, IL, Layne M. Lindebak, Iowa Department of Justice, Des Moines, IA, Gary Honick, Office of the Maryland Attorney General, Baltimore, MD, Benjamin Jack Velzen, James William Canaday, Office of the Minnesota Attorney General, St. Paul, MN, Kimberly Rae Parks, Office of the Ohio Attorney General, Columbus, OH, James A. Donahue, III, Jennifer Ann Thomson, Office of the Attorney General, Harrisburg, PA, Sarah Oxenham Allen, Stephen John Sovinsky, Office of the Attorney General, Richmond, VA, for Plaintiffs.

Haidee L. Schwartz, Ian Simmons, Katrina M. Robson, Richard G. Parker, Edward D. Hassi, Haidee L. Schwartz, O'Melveny & Myers LLP, Peter Coyne Thomas, Peter C. Herrick, Philip Mirrer-Singer, Simpson Thacher & Bartlett, LLP, Washington, DC, Andrea B. Levine, Joseph F. Tringali, Simpson, Thacher & Bartlett LLP, New York, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

Amit P. Mehta, United States District Judge

On February 23, 2015, the court entered a Protective Order Governing Confidential Material that places strict limits on who may receive documents designated as “Confidential Material.” ECF # 25 (“Protective Order”). As presently drawn, the Protective Order does not grant access to Confidential Material to officers and employees of Defendants Sysco Corp. (“Sysco”), USF Holding Corp., and U.S. Foods, Inc. (collectively “US Foods”). Id. ¶ 7.

Defendants have moved to modify the Protective Order to permit certain members of their in-house legal teams to have access to Confidential Material.¹ After hearing argument at the status conference held on March 4, 2015, the court ruled that each Defendant may designate up to two members of its in-house legal team to receive access to Confidential Material. Order, ECF # 48. As a precondition to access, the designee would have to attest, like the declarant in F.T.C. v. Whole Foods Market, Inc., No. 07–1021, 2007 WL 2059741 (D.D.C. July 6, 2007), that he or she is not involved in the company's “competitive decision-making.” Id. at *2. On March 6, 2015, Defendants filed the sworn declarations of four in-house lawyers: (1) Russell Libby, Sysco's Chief Legal Officer and Executive Vice President of Corporate Affairs; (2) Barrett Flynn, Counsel in Sysco's Litigation Department; (3) Dorothy Capers, Associate General Counsel for U.S. Foods; and (4) Andrew Nelson, former Assistant General Counsel for U.S. Foods, who will serve as an outside litigation consultant. ECF # 56–# 59. All four declarants attested that they do not participate in “competitive decision-making” as described in Whole Foods.Id.

The court permitted Plaintiffs—the Federal Trade Commission and various States—as well as two third-party interveners—Reinhart Foodservice, L.L.C., and Shamrock Food Company (“Shamrock”) (collectively, “Interveners”)—to object to Defendants' designations. Neither Plaintiffs nor Interveners have objected to the designation of Mr. Flynn, Ms. Capers or Mr. Nelson. The court, therefore, will grant Defendants' motion to modify the Protective Order to permits those three in-house lawyers to access Confidential Material.

As to Mr. Libby, there is a dispute. It must be said at the outset that the contest about Mr. Libby is not about his integrity or his ethics. Mr. Libby is an accomplished lawyer and a member in good standing of the Georgia bar. The court harbors no doubts about Mr. Libby's integrity, ethics or willingness to comply with the Protective Order. But those considerations alone do not control the inquiry here. The question under Whole Foods is whether a designated in-house lawyer is “positioned to advise the client as to business decisions that the client would make regarding [competitive decision-making].” 2007 WL 2059741, at *2 (citation omitted) (internal quotation marks omitted). “Competitive decision-making” includes “business decisions that the client would make regarding, for example, pricing, marketing, or design issues when that party granted access has seen how a competitor has made those decisions.” Id. (citation omitted) (internal quotation marks omitted); see also U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468 n. 3 (Fed.Cir.1984) (stating “competitive decision[-]making” is “shorthand for a counsel's activities, association, and relationship with a client that are such as to involve counsel's advice and participation in any or all of the client's decisions (pricing, product design, etc.) made in light of similar or corresponding information about a competitor”). The primary concern underlying the “competitive decision-making” test is not that lawyers involved in such activities will intentionally misuse confidential information; rather, it is the risk that such information will be used or disclosed inadvertently because of the lawyer's role in the client's business decisions. See Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir.1992) ; Carpenter Tech. Corp. v. Armco, Inc., 132 F.R.D. 24, 27 (E.D.Pa.1990).

The court concludes that Mr. Libby is too close to Sysco's competitive decision-making functions to meet the Whole Foods standard. As Chief Legal Officer and Executive Vice President for Corporate Affairs, Mr. Libby is a member of Sysco's Executive Team. Libby Decl. ¶ 3. Mr. Libby has candidly acknowledged that issues such as pricing, purchasing, and marketing may be discussed at the Executive Team's weekly meetings. Id. Although he does not have final decision-making authority as to those decisions, id. the Whole Foods test is not strictly limited to decision-making responsibility; it more broadly encompasses a lawyer's “activities, association, and relationship” with a client and its competitive decision-making activities. Whole Foods, 2007 WL 2059741, at *2. Mr. Libby's membership on the Executive Team brings him well within the orbit of Sysco's competitive decision-making activities. Mr. Libby also is chiefly responsible for Sysco's mergers and acquisitions, which involves “evaluation of market competitors as potential acquisition targets.” Libby Decl. ¶ 3. Although Whole Foods did not specifically identify mergers and acquisitions as falling within the scope of competitive decision-making, the list of competitive activities identified in Whole Foods was meant to be illustrative and not exhaustive. Clearly, there is some risk of inadvertent use or disclosure of a competitor's confidential information when a lawyer's responsibilities include evaluating competitors for potential acquisition.

Although Mr. Libby has not met the Whole Foods test, he is still able to assist outside counsel and advise Sysco on litigation strategy. Mr. Libby will have access to redacted final and draft pleadings, expert reports, affidavits, and deposition transcripts, and to discovery not designated as Confidential Material. He will also have access to all of Sysco's records and, if given consent, relevant documents from U.S. Foods. Mr. Libby is not in any way prevented from imparting his personal knowledge of the foodservice industry, Sysco's...