Silversun Indus., Inc. v. PPG Indus., Inc.

• Decision Date: 06 November 2017
• Docket Number: No. 17 C 4346,17 C 4346
• Citation: 296 F.Supp.3d 936
• Parties: SILVERSUN INDUSTRIES, INC., Plaintiff, v. PPG INDUSTRIES, INC. and PPG Kansai Automotive Finishes U.S., LLC, Defendants.
• Court: U.S. District Court — Northern District of Illinois

296 F.Supp.3d 936

SILVERSUN INDUSTRIES, INC., Plaintiff,

v.PPG INDUSTRIES, INC. and PPG Kansai Automotive Finishes U.S., LLC, Defendants.

No. 17 C 4346

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

Signed November 6, 2017

Todd A. Rowden, Patrick Morales Doyle, Holly Hannah Campbell, Thompson Coburn Llp, Chicago, IL, Jonathan G. Musch, Justin Powers Mulligan, Steven Garlock, Thompson Coburn Llp, St. Louis, MO, for Plaintiff.

Kirsten R Rydstrom, Reed Smith LLP, Pittsburgh, PA, James Terrence Hultquist, Jillian Lee Burstein, Reed Smith, LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Jeffrey Cole, United States Magistrate Judge

INTRODUCTION

Defendant, PPG, is a Forbes 500, multi-billion dollar, world-wide company, in the business of supplying paints, paint coatings, optical products, and specialty materials. Defendant, PPG Kansai Automotive Finishes U.S., LLC, is a joint venture between PPG Industries and Kansai Paint of Japan. According to the Complaint, the Plaintiff develops chemical technologies "to replace traditional tools that have negative environmental impact." Specifically, it develops "detackifiers," which are agents used to remove the "stickiness from among other things, paint and flocculant polymers to aid in automotive paint booth operations." [Dkt. #1]. The Plaintiff has alleged that the Defendants misappropriated its complicated Trade Secret for use in the Defendant's business–a charge the Defendants have denied. [Dkt. # 26].

The parties have essentially agreed on a Protective Order to govern future proceedings in this case. They cannot, however, agree on whether Ms. Anne M. Foulkes, one of PPG's in-house counsel, should have access to the Plaintiff's claimed Trade Secret. Ms. Foulkes, a twenty two-year-veteran with PPG, is, among other things, its corporate Secretary, who, its counsel conceded at oral argument, attends meetings of the Board of Directors in an "advisory capacity."¹ Ms. Foulkes says she has "commercial legal responsibilities for the majority of PPG's business units,"–and they are many–but not, she says, "the business unit at issue in this litigation (PPG's Automotive OEM Coatings business)." [Dkt. # 37–1–C, ¶3–4]. (Emphasis supplied)(parenthesis in original). Nor, she says, does she have legal responsibility for PPG's Architectural Coatings Business unit. Id. She does not explain even generally what "commercial legal responsibilities" means or of what it consists, or with whom she interacts with regularity.

Despite the breadth of Ms. Foulke's approved, virtually unlimited participation in this case, and the eminent skill and experience of their retained counsel, Reed Smith–which has some 1,700 plus lawyers in offices around the world–the Defendants insist in their brief that unless she has access to the Plaintiff's Trade Secret information, they cannot litigate the present case "efficiently and effectively." We take this otherwise unelaborated and unexplained assertion with a grain of salt since "[l]awyers' talk is no substitute for data." Phillips v. Allen , 668 F.3d 912, 916 (7th Cir. 2012).² See also , United States v. Morton Salt Co. , 338 U.S. 632, 653, 70 S.Ct. 357, 94 L.Ed. 401 (1950) ; Mitze v. Colvin , 782 F.3d 879, 882 (7th Cir. 2015) ; O'Bannon v. Nat'l Collegiate Athletic Ass'n , 802 F.3d 1049, 1068 (9th Cir. 2015) ("The NCAA also asserts before us that it has no intent to license its intellectual property for use in video games in the future, but we place no weight on that assertion. Statements in... briefs are not evidence."). But more on this later. See infra 943, and cases cited infra at 946-47.

In response to questions at oral argument, counsel for PPG said that Ms. Foulkes was one of 25 in-house lawyers, and he acknowledged that she was not a chemist and had no chemical, scientific or other specialized scientific training. It was conceded that she was not a patent or trademark lawyer, and would have to be taught about the Trade Secret in this case "so she could be helpful." When asked specifically what Ms. Foulkes was "going to do for you," I was told her participation would be "a matter of efficiency" and that "somebody like her would be helpful," although how she would was never explained or immediately apparent since but for learning the specifics of the Plaintiff's claimed trade secret, she was free to participate in the case.

Each side cites cases that explore and analyze the present problem, including two from this court. See Federal Trade Commission v. Advocate Health Care Network , 162 F.Supp.3d 666, 668 (N.D.Ill. 2016) ; Autotech Technologies Ltd. Partnership v. Automationdirect.com, Inc., 237 F.R.D. 405 (N.D.Ill. 2006). See also United States v. Aetna Inc. , 2016 WL 8738420 (D.D.C. 2016) (discussing, inter alia , Federal Trade Commission v. Advocate Health Care , supra ). Although there is judicial agreement on the general principles applicable to cases like this, courts not surprisingly have arrived at different results. It could hardly be otherwise, since "[w]hether an unacceptable opportunity for inadvertent disclosure exists...must be determined...by the facts on a counsel-by-counsel basis...." Federal Trade Commission v. Advocate Health Care , 162 F.Supp.3d at 668. Accord, United States v. Aetna Inc. , 2016 WL 8738420, at *5 (D.D.C. 2016) ; ST Sales Tech Holdings, LLC v. Daimler Chrysler Co., LLC , 2008 WL 5634214 (E.D.Tex. 2008) ; Highway Equip. Co. v. Cives Corp. , 2007 WL 1612225, at *3 (N.D. Iowa 2007). See also In re Deutsche Bank Tr. Co. Americas , 605 F.3d 1373, 1378 (Fed. Cir. 2010).

The court's explication in United States Steel Corporation on the problem of inadvertent disclosure has yet to be improved on:

Whether an unacceptable opportunity for inadvertent disclosure exists, however, must be determined, as above indicated, by the facts on a counsel-by-counsel basis, and cannot be determined solely by giving controlling weight to the classification of counsel as in-house rather than retained. Meaningful increments of protection are achievable in the design of a protective order. It may be that particular circumstances may require specific provisions in such orders. In such cases, the order would be developed in light of the particular counsel's relationship and activities, not solely on a counsel's status as in-house or retained.

730 F.2d 1465, 1468 (Fed. Cir. 1984).

The emphasis on the facts of the case is consistent not only with long experience and common sense, but is mandated by the Supreme Court's recognition that "[t]o generalize is to be imprecise. Virtually every legal (or other) rule has imperfect applications in particular circumstances." Barnhart v. Thomas , 540 U.S. 20, 29, 124 S.Ct. 376, 157 L.Ed.2d 333 (2003) (Emphasis supplied)(parenthesis in original). See Kingsley v. Hendrickson , ––– U.S. ––––, 135 S.Ct. 2466, 2473, 192 L.Ed.2d 416 (2015). Thus, "[t]he first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the legally relevant." Upjohn Company v. United States , 449 U.S. 383, 390, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981) ( emphasis supplied). Facts, not "general propositions ... decide concrete cases." Lochner v. New York , 198 U.S. 45, 76, 25 S.Ct. 539, 49 L.Ed. 937 (1905) (Holmes, J., dissenting).

A.

Since there must be a discriminating inquiry into the precise facts and posture of each case, access to Highly Confidential information cannot be denied solely because of an attorney's status as in-house counsel. Nor can access be permitted merely because in-house counsel is bound by the same rules of professional responsibility as retained counsel. Sullivan Mktg., Inc. v. Valassis Commc'ns, Inc. , 1994 WL 177795, at *2 (S.D.N.Y. 1994). The question is always whether there is a sufficient risk of inadvertent disclosure of the information. The court in Sullivan Mktg. barred in- house counsel from viewing sensitive proprietary documents, since it determined that the Government had carried its burden of demonstrating that the risk of injury outweighed the need for disclosure to General Counsel, observing that there was an unacceptably high risk of either utilization or inadvertent disclosure.

"Involvement in ‘competitive decision making’ is the oft-cited most critical factor weighing in favor of denial of access [to in-house counsel]." Datatrak Int'l, Inc. v. Medidata Sols., Inc. , 2011 WL 3652444, at *1 (N.D. Ohio 2011) ; Blanchard & Co. v. Barrick Gold Corp. , 2004 WL 737485, at *9 (E.D. La. 2004). Since talismanic phrases and semantic cataloguing do not decide concrete cases, Hughes v. Talen Energy Mktg., LLC , ––– U.S. ––––, 136 S.Ct. 1288, 1300, 194 L.Ed.2d 414 (2016) ; Davis v. Bandemer , 478 U.S. 109, 122, 106 S.Ct. 2797, 92 L.Ed.2d 85 (1986) ; Flynn v. Shultz , 748 F.2d 1186, 1190 (7th Cir. 1984), the phrase, "competitive decision-making," is, as the court stressed in United States Steel Corp. , merely "a serviceable 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." 730 F.2d at 1468 n. 3. See also Koninklijke Philips N.V. v. Amerlux, LLC , 167 F.Supp.3d 270 (D.Mass. 2016) ; Federal Trade Commission v. Advocate Health Care Network , supra ; Federal Trade Commission v. Sysco Corp. , 83 F.Supp.3d 1, 3–4 (D.D.C. 2015).

Invocation of words and phrases is not enough. Nor is it enough to say that competitive business decisions per-se are not made by in-house counsel, but by others. Decision-making responsibility in the present context more broadly encompasses a lawyer's activities, association, and relationship with a client and the latter's competitive decision-making activities. "Competitive decision-making includes ‘business decisions that the client would make regarding, for...