Global Material Techs., Inc. v. Dazheng Metal Fibre Co., Ltd.

• Decision Date: 23 September 2015
• Docket Number: No. 12 CV 1851,12 CV 1851
• Citation: 133 F.Supp.3d 1079
• Parties: Global Material Technologies, Inc., a New York Corporation, Plaintiff, v. Dazheng Metal Fibre Co., Ltd., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

133 F.Supp.3d 1079

Global Material Technologies, Inc., a New York Corporation, Plaintiff,

v.Dazheng Metal Fibre Co., Ltd., et al., Defendants.

No. 12 CV 1851

United States District Court, N.D. Illinois, Eastern Division.

Signed September 23, 2015

Phillip Stewart Reed, Jonathan Samuel Goodman, Nika K. Feeney, Patzik, Frank & Samotny Ltd., Chicago, IL, for Plaintiff.

Eugene Meyers, Leodis C. Matthews, Dacheng Law Offices, LLP, New York, NY, Jenna Marie Smith, Dacheng Law Offices, Samuel Alexander Montiel, John Z. Huang & Associates, P.C., Chicago, IL, Ryan Michael Helgeson, Wessels Sherman Joerg Liszka Laverty Seneczko P.C., St. Charles, IL, for Defendants.

MEMORANDUM OPINION and ORDER

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:

Background

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 scheme it offered (and still offers) to GMT customers." (Id. ¶ 45.) These allegations form the basis of GMT's claim that the defendants violated the Uniform Trade Secrets Act. (Id. ¶¶ 113–118.)

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:

the disclosing party and its counsel believe in good faith that the material contains proprietary information ... including but not limited to material constituting or containing trade secrets or other confidential research, development, financial, or commercial information, that the disclosing party reasonably believes is of such a nature and character that unlimited disclosure of such information to the receiving party will be harmful to the disclosing party or to its business or will provide the receiving party a competitive advantage over the disclosing party.

(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.

Analysis

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 public access to discovery materials," the court is required to make a good-cause determination before entering a protective order shielding relevant information from public disclosure. Citizens First Nat'l Bank of Princeton v. Cincinnati Ins. Co., 178 F.3d 943, 946 (7th Cir.1999)

. As the Seventh Circuit has recognized, "[m]any a litigant would prefer that the subject of the case—how much it agreed to pay for the construction of a pipeline, how many tons of coal its plant uses per day, and so on—be kept from the curious (including its business rivals and customers), but the tradition that litigation is open to the public is of very long standing." Union Oil Co. of Cal. v. Leavell, 220 F.3d 562, 567 (7th Cir.2000). Accordingly, the party seeking a protective order must show specific facts showing good cause to justify the protective order. Culinary Foods, Inc. v. Raychem Corp., 151 F.R.D. 297, 300, 303 (N.D.Ill.1993).

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...