MDK, Inc. v. Mike's Train House, Inc.

• Decision Date: 22 June 1994
• Docket Number: No. 93-2230,93-2230
• Citation: 27 F.3d 116
• Parties: 1994-1 Trade Cases P 70,620 MDK, INCORPORATED, Appellant, v. MIKE'S TRAIN HOUSE, INCORPORATED, a Maryland Corporation, Plaintiff-Appellee, Lionel Trains, Incorporated, a Michigan Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 116

27 F.3d 116

1994-1 Trade Cases P 70,620

MDK, INCORPORATED, Appellant, v. MIKE'S TRAIN HOUSE, INCORPORATED, a Maryland Corporation,

Plaintiff-Appellee,

Lionel Trains, Incorporated, a Michigan Corporation,

Defendant-Appellee.

No. 93-2230.

United States Court of Appeals, Fourth Circuit.

Argued April 13, 1994.

Decided June 22, 1994.

ARGUED: Peter M. Foley, Leboeuf, Lamb, Leiby & MacRae, Raleigh, NC, for appellant. Robert Joseph LaRocca, Kohn, Nast & Graf, P.C., Philadelphia, PA, for appellee.

ON BRIEF: M. Toler Workman, Leboeuf, Lamb, Leiby & MacRae, Raleigh, NC, for appellant.

Steven A. Asher, Kohn, Nast & Graf, P.C., Philadelphia, PA, Richard L. Wharton, Clark, Wharton & Berry, Greensboro, NC, for appellee.

Before RUSSELL, WILKINSON, and HAMILTON, Circuit Judges.

Dismissed by published opinion. Judge WILKINSON wrote the opinion, in which Judge RUSSELL and Judge HAMILTON joined.

OPINION

WILKINSON, Circuit Judge:

The question before us is whether this court has jurisdiction to review a district court decision compelling a company to submit to discovery where it is not a party to the underlying litigation. Because we find that this nonfinal discovery order does not fall under the collateral order exception of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), we dismiss the appeal for want of jurisdiction.

I.

This appeal traces its origins to a lawsuit filed in Michigan federal court. See Mike's Train House, Inc. v. Lionel Trains, Inc., No. CA 93-60138 (E.D.Mich.). The Michigan litigation involves antitrust allegations in the model trains market. These trains come in a variety of sizes, or "gauges," including O gauge, HO gauge, and N gauge. Both parties to the Michigan litigation manufacture O gauge trains and related products, and the plaintiff in that case, Mike's Train House, is a former distributor for the defendant, Lionel Trains, Inc. Mike's alleges that when it decided to begin manufacturing O gauge trains on its own, Lionel sought an agreement with Mike's to restrict output. Mike's further alleges that its refusal to agree to those output restrictions led Lionel to terminate the distributorship. Mike's maintains that these actions constitute a misuse of monopoly power in violation of section two of the Sherman Act. See 15 U.S.C. Sec. 2.

In response, Lionel contends that it is not a monopolist because its share of the total train market--which includes all gauges--is too small. Mike's, however, has contested Lionel's broad view of the market. It has attempted to prove that O gauge products constitute the relevant market and that Lionel monopolizes that market. To support this contention, Mike's has sought information from other model train manufacturers. The information was sought through subpoenas requesting business records regarding (1) annual sales revenues, (2) total annual revenue on a product by product basis, and (3) the costs of goods sold.

One of these subpoenas was served on MDK, Inc., a North Carolina manufacturer of O gauge products. MDK, arguing that the subpoena sought confidential commercial information and trade secrets, filed a motion in North Carolina federal district court to quash the subpoena. ¹ A hearing on MDK's motion was held before a magistrate judge in July 1993. The magistrate determined that Mike's was acting in good faith in seeking information from MDK. The magistrate further determined that Mike's had a critical need for the information because it would be used to determine the relevant market and the presence of monopoly power. The magistrate therefore concluded that the subpoena could be enforced and ordered the parties to negotiate an appropriate confidentiality order to safeguard the information subject to discovery. The magistrate also ordered Mike's to reimburse MDK for the costs it would incur in complying with the subpoena. This decision was subsequently upheld by the district court, and the parties proceeded to discuss the scope of the confidentiality order. MDK now appeals, claiming the rulings below inappropriately subject its vital business information to discovery.

II.

As a threshold matter, we must determine whether this court has jurisdiction to review the decision below. Circuit courts may hear "appeals from all final decisions of the district courts of the United States." 28 U.S.C. Sec. 1291. This finality requirement is a "historic characteristic of federal appellate procedure," Cobbledick v. United States, 309 U.S. 323, 324, 60 S.Ct. 540, 540, 84 L.Ed. 783 (1940), that advances the important interest of avoiding piecemeal review of ongoing district court proceedings. United States v. Nixon, 418 U.S. 683, 690, 94 S.Ct. 3090, 3098, 41 L.Ed.2d 1039 (1974). Such piecemeal review would not only delay the ultimate resolution of disputes by spawning multiple appeals, see Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 673-74, 66 L.Ed.2d 571 (1981), it would also "undermine the independence of the district judge" in conducting court proceedings, id. The rule against appeal of interlocutory rulings thus serves twin purposes. It both avoids the "enfeebling [of] judicial administration" that comes with undue delay, Cobbledick, 309 U.S. at 325, 60 S.Ct. at 541, 84 L.Ed. 783, and preserves the primacy of the district court as the arbiter of the proceedings before it, see Firestone, 449 U.S. at 374, 101 S.Ct. at 673, 66 L.Ed.2d 571.

Consequently, appellate review will generally be limited to those decisions "which end[ ] the litigation on the merits and leave[ ] nothing for the court to do but execute the judgment." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945); see Miller v. Simmons, 814 F.2d 962, 964 (4th Cir.1987). Discovery orders generally do not meet this requirement. Church of Scientology v. United States, --- U.S. ----, ---- n. 11, 113 S.Ct. 447, 452 n. 11, 121 L.Ed.2d 313 (1992); Barrick Group, Inc. v. Mosse, 849 F.2d 70, 72 (2d Cir.1988). Such orders "typically bespeak their own interlocutory character; they are necessarily only a stage in the litigation and almost invariably involve no determination of the substantive rights involved in the action." United States v. Sciarra, 851 F.2d 621, 627-28 (3d Cir.1988). Indeed, the considerations underlying the rule against review of interlocutory orders apply with particular force in the discovery context because that process has a special potential for spawning rulings that aggrieved parties would seek to appeal. The process of turning over private--and often damaging--information to an adversary inevitably creates friction. The sheer number of discovery rulings and the myriad procedural requirements governing them, see Fed.R.Civ.P. 26-37, provide fertile soil for the growth of appealable orders. Allowing immediate appeal of the orders resolving discovery disputes would only disrupt and delay district court proceedings and clog the courts of appeals with matters more properly managed by trial courts familiar with the parties and their controversy. See In re Insurers Syndicate for Joint Underwriting, 864 F.2d 208, 210-11 (1st Cir.1988).

III.

MDK nonetheless contends that the discovery ruling here is reviewable and advances two bases for appellate jurisdiction. First, MDK argues that because Mike's seeks discovery of MDK's trade secrets, review of the discovery decision is proper at this time. Second, MDK maintains that the district court's decision constitutes a collateral order reviewable under the doctrine enunciated in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). We hold that neither of these rationales confer jurisdiction upon this court to review the order below.

A.

MDK's position that orders mandating the discovery of trade secrets are appealable relies on the Tenth Circuit's holding in Covey Oil v. Continental Oil Co., 340 F.2d 993 (10th Cir.1965). However, subsequent events have undermined that ruling, and the Tenth Circuit itself recognizes that "the Supreme Court has indirectly overruled the Covey exception making it no longer viable." FTC v. Alaska Land Leasing, Inc., 778 F.2d 577, 578 (10th Cir.1985) (discussing United States v. Ryan, 402 U.S. 530, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971)). ² The dangers of a trade secrets exception to the nonappealability of discovery orders should be apparent. A judicially created exception to nonappealability for categories of sensitive information is the quintessential slippery slope. Many parties faced with discovery requests are apt to regard the information sought as sensitive or confidential and seek, at a minimum, to delay its disclosure through an interlocutory trip to an appellate court. In addition, trade secrets have widely been held to be discoverable upon appropriate findings and with an appropriate protective order, see Federal Open Mkt. Comm. v. Merrill, 443 U.S. 340, 362, 99 S.Ct. 2800, 2813, 61 L.Ed.2d 587 (1979) (noting that there is no absolute privilege protecting trade secrets from discovery); National Util. Serv., Inc. v. Northwestern Steel & Wire Co., 426 F.2d 222, 227 (7th Cir.1970) (same); Duplan Corp. v. Deering Milliken, Inc., 397 F.Supp. 1146, 1185 (D.S.C.1974) (same); 3 Roger M. Milgrim, Milgrim on Trade Secrets Sec. 14.02[a] (1993) (same), and we see no reason to overturn the general rule of nonappealability with respect to them.

B.

We are similarly unpersuaded that jurisdiction over this appeal is conferred by the collateral order doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Cohen recognized that a "small class" of "collateral" decisions may require review even where they do not conclude the litigation in question. Cohen, 337 U.S. at 546, 69 S.Ct. at 1225-26. In this circuit, an order will fall within this limited exception only if the "order conclusively determines the question in the trial court,...