Joint Stock Soc. v. Udv North America, Inc.
| Citation | 104 F.Supp.2d 390 |
| Decision Date | 11 July 2000 |
| Docket Number | No. Civ.A. 95-749-GMS.,Civ.A. 95-749-GMS. |
| Parties | JOINT STOCK SOCIETY, "Trade House of Descendants of Peter Smirnoff, Official Purveyor to the Imperial Court," and The Russian American Spirits Company, Plaintiffs, v. UDV NORTH AMERICA, INC., and Pierre Smirnoff Company, Defendants. |
| Court | U.S. District Court — District of Delaware |
David L. Finger, Wilmington, Delaware, for intervenor Rita Katz Farrell.
M. Duncan Grant, Tara L. Lattomous, Monica Leigh Loftin, Andrea B. Untenberger, Pepper Hamilton, LLP, Wilmington, Delaware, Powell, Goldstein, Frazer & Murphy LLP, Atlanta, GA (James W. Hawkins, Hillary Harp, Todd E. Jones, of counsel), for plaintiffs The Joint Stock Society and The Russian American Spirits Company.
Allen M. Terrell, Jr., Peter B. Ladig, Richards, Layton & Finger, Wilmington, DE, Howrey, Simon, Arnold & White LLP, Washington, DC (William L. Webber, Kenneth W. Brothers, Kelly Clement, Erik Bertin, of counsel), for defendants UDV North America, Inc. and Pierre Smirnoff Company.
On July 1, 1999, this court allowed Rita Farrell, a reporter with Reuters News Service, to intervene in this matter for the specific purpose of challenging the "confidential" designation of over 8,000 pages of material filed under seal in this case. Emphasizing the important First Amendment and common law interests in affording Ms. Farrell timely access to these judicial records, the court appointed a special master to preside over the de-classification process in order to afford Ms. Farrell timely access to the material she desired.
In the months which followed, the special master conducted a series of weekly meetings with the parties in an effort to narrow the documents that were in dispute. As a result of these meetings, roughly six thousand pages of material (or two-thirds of the sealed filings) were voluntarily released from seal by the parties. The vast majority of these documents had been submitted by the plaintiffs in opposition to the defendants' motions for summary judgment.
On August 13, 1999, roughly one hundred documents were submitted for the special master's review. These materials were broken down into the following six categories: discovery materials and motions; vodka formula and process documents; consumer research studies; strategic planning and marketing information; financial information; and information that related to the defendants' activities in Russia. Pursuant to the order of reference, the special master was to "determine whether any of these documents contain[ed] legitimate trade secrets or other proprietary information which [would] warrant their continued `confidential' designation under the January 26, 1998 protective order issued in this case." After the parties had briefed this issue, the special master heard oral argument. He issued his report and recommendation on January 24, 2000.
The parties have now filed their objections to the report and recommendation. The court has reviewed the record and finds no error in the overwhelming majority the special master's conclusions. Therefore, his report and recommendation will be adopted in large part, and most of the objections to it which were lodged by the plaintiffs and Ms. Farrell will be overruled. Nevertheless, the court will order that a limited number of the Russian materials be unsealed because even if they were improperly obtained and placed into the record, the defendants have not shown that the disclosure of these materials would subject them to a harm which overrides the important interests at stake. Finally, after reviewing the record, the court will not alter the initial allocation of the special master's fee which split his costs evenly between the plaintiffs and the defendants. The following sections discuss the bases for these rulings in greater detail.
When reviewing the special master's report and recommendation, this court must accept his findings of fact unless they are clearly erroneous; his conclusions of law are reviewed de novo. See, e.g., Essex County Jail Annex Inmates v. Treffinger, 18 F.Supp.2d 418, 421 (D.N.J. 1998). Generally, the determination of whether information constitutes a trade secret is a factual one. See, e.g., North Atl. Instruments, Inc. v. Haber, 188 F.3d 38, 44 (2d Cir.1999) (applying New York law); Pate v. National Fund Raising Consultants, Inc., 20 F.3d 341, 344 (8th Cir. 1994) (applying Colorado law); Zoecon Indus. v. American Stockman Tag Co., 713 F.2d 1174, 1179 (5th Cir.1983) (applying Texas law). As a consequence, this portion of the special master's findings cannot be disturbed unless a review of the entire record leaves this court "with the definite and firm conviction that a mistake has been committed." See, e.g., Katz v. AT & T Corp., 191 F.R.D. 433, 436 (E.D.Pa. 2000); accord Treffinger, 18 F.Supp.2d at 421.
The plaintiffs and Ms. Farrell object to the following portions of the special master's report and recommendation: (1) the standard of review which he applied; (2) his decision to recommend keeping the Russian materials under seal, especially without considering the availability of less restrictive alternatives; (3) his decision to recommend keeping the defendants' consumer research studies and other proprietary information under seal, although they allegedly evince fraud; and (4) his decision to recommend keeping certain vodka formulas under seal, even though these formulas are no longer used by the defendants.1 Finally, the plaintiffs also object to (5) this court's decision to appoint a special master in the first place and to divide his fee evenly between the parties. The court will address these issues in turn.
The plaintiffs and Ms. Farrell first contend that the special master should have used a heightened First Amendment or common law standard when conducting his review of the sealed documents (instead of the good cause standard which, they claim, he applied). In particular, these two parties argue that the defendants were obligated to show "an overriding interest based on findings that disclosure is essential to preserve higher values and is narrowly tailored to serve that interest." See Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1073 (3d Cir.1984). Under this more rigorous standard, they argue, several of the documents should be unsealed.
In his report and recommendation, the special master spent six pages discussing the similarities and differences between these varying standards of review. See Rept. & Rec. at 5-10. Ultimately, he concluded that, in this instance, the good cause standard imposed by Rule 26 and the strict scrutiny required by the First Amendment effectively merge. Id. at 8-9.
As the special master observed, under the good cause standard, he was required to examine the materials submitted for his review on a document-by-document basis in order to determine whether the defendants had made a "particularized showing of the need for continued secrecy" by specifically demonstrating that the disclosure of these materials would cause them to suffer a "clearly defined and serious injury." Id. at 7-8 (). In conducting this exacting type of analysis, the special master noted, he was essentially engaging a narrowly tailored review of the sealed materials in order to determine whether there was a compelling interest in keeping them under seal. Id. at 8-9.
More important, the special master also noted that although Ms. Farrell had a right of presumptive access to view these sealed materials (a right which was only heightened by the recent ruling on summary judgment), this right was not absolute. Id. at 10 (citing Bank of Am. Nat'l Trust & Sav. Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 344 (3d Cir.1986)). For example, the special master pointed out, Ms. Farrell "is not entitled to see trade secrets or other proprietary information if the disclosure of this information would expose the defendants to a competitive injury." Id. (citing Leucadia, 998 F.2d at 166). The special master also noted that other interests may outweigh Ms. Farrell's common law right of access to the sealed documents. Id. ().
The special master's citation to Leucadia is an important one. There, the Third Circuit held that although the strong, common law right of presumptive access to judicial records is "firmly entrenched" in our legal system, it must nevertheless be "balanced against the factors militating against access." 998 F.2d at 165 (quoting Hotel Rittenhouse, 800 F.2d at 344). As the Leucadia court explained, one of these factors is whether the documents at issue "contain[] trade secrets or other confidential business information...." Id. at 166 (). Thus, "[t]o overcome the presumption [of access which the common law affords], the party seeking protection must show good cause by demonstrating a particular need for protection." Id. (quoting Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1121 (3d Cir.1986)) (emphasis added). In other words, the court must engage in a "careful fact finding [process which] balanc[es] the competing interests" at stake in order to determine whether "the strong presumption of openness can be overcome by the secrecy interests of private litigants." Id. at 167.
As a review of the special master's report and recommendation makes clear, this is exactly what he did. He examined each and every document submitted for his review, considering whether the disclosure of the material...
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