Opinion
Cause No. 1:01-MC-44.
January 17, 2002
MEMORANDUM OF DECISION AND ORDER
INTRODUCTION
This matter is before the Court on the motion of Herley Industries, Inc. ("Herley") to compel nonparty Raytheon Communications Systems ("Raytheon") to respond to a subpoena duces tecum served in connection with a suit pending in the United States District Court for the Eastern District of New York, Robinson Laboratories, Inc. and Ben Robinson v. Herley Indus., Inc., Civil Action No. 01-4404 (E.D.N.Y.) (the "New York action").
Raytheon maintains that it is simply "Raytheon Company" and has never done business as "Raytheon Communications Systems" or "Raytheon Systems Corporation."
In response, Raytheon filed a motion to quash the subpoena duces tecum under Fed.R.Civ.P. 45(c)(3)(B). On January 15, 2002, oral argument was heard on the two motions. Present at the hearing was counsel for Herley, corporate counsel for Raytheon and counsel for Robinson Laboratories and Ben Robinson, the Plaintiffs/Counterclaim Defendants in the New York action, who also appeared for another nonparty, RH Labs.
For the reasons hereinafter provided, the motion to compel will be GRANTED, the motion to quash will be DENIED, and the Court will order the production of certain documents subject to the confidentiality agreement of counsel or any protective order subsequently sought and entered.
FACTUAL AND PROCEDURAL BACKGROUND
To oversimplify, the New York action involves claims brought by Robinson Laboratories and Ben Robinson ("Ben"), a former Herley employee, against Herley for breach of an asset purchase agreement, and for Ben's termination from Herley allegedly in violation of his employment agreement. (See Herley M. Ex. A.)
Herley responded with an Answer, Affirmative Defenses and Counterclaims against Robinson Laboratories and Ben contending, inter alia, that Ben misappropriated confidential business information from Herley and then with his son started a new competing business, RH Labs. Raytheon, one of Herley's customers, is involved in the current discovery dispute as a nonparty because Herley contends that Ben (perhaps in the guise of RH Labs) approached the Fort Wayne division of Raytheon to siphon off some of Herley's business and to otherwise interfere with Herley's relationship with Raytheon. (See Herley Mem. Ex. B.)
What brings this before us now is Herley's issuance of a subpoena from this Court to obtain both a Fed.R.Civ.P. 30(b)(6) deposition from Raytheon and some documents. (See Herley Mem. Ex. C.) In essence, Herley seeks information involving any communications between Raytheon and RH Labs since January 1, 2000, RH Labs' marketing and sales to Raytheon, RH Labs' product designs, and information involving the "TDU Program," a contract between Herley and Raytheon which Herley alleges was mismanaged by Ben during his employment with them.
In response, Raytheon contends in its Motion to Quash that it is unsure the information sought by Herley is even relevant since they do not know what trade secrets Ben supposedly misappropriated, the request is otherwise overly broad and premature, and they have a concern that if they comply with the subpoena they will produce some confidential information of RH Labs to one of its competitors, Herley.
Raytheon also conclusorily contends that the subpoena will divulge Raytheon's confidential proprietary information, but no details as to what that might be emerged during oral argument. (See Raytheon M em., at 4.)
At the January 15, 2002 hearing, counsel for Ben and RH Labs observed that while the counterclaim only complains about Ben, the subpoena seeks RH Labs' materials. Moreover, RH Labs contends that another proposed protective order (i.e., a little more restrictive than the one currently approved by counsel in the New York action) should be fashioned to protect RH Labs' trade secrets from being disclosed to Herley's counsel and then to Herley representatives; in other words, RH Labs wants "Confidential-Attorney's Eyes Only" protection. In this regard, the Court directed counsel to file a copy of the confidentiality agreement fashioned by counsel which in the form of a protective order has yet to be entered in the New York action. The agreement was filed as part of the record on January 15, 2002 (the "Confidentiality Agreement").
It seems undisputed that after Ben's termination from Herley, he joined his son's new business, RH Labs. Ben's son is also a former Herley employee who left just a few months before Ben. RH Labs has not appeared in this case and as of the date of this order, their counsel has not been admitted to practice in this district.
The Court has also been favored with a transcript of the January 11, 2002 proceedings conducted by United States Magistrate Judge Boyle for the Eastern District of New York (the "Transcript"). (See January 16, 2002 "Submission.") The transcript reveals that Magistrate Judge Boyle determined that no protective order should issue from that court addressing this or any other nonparty discovery sought by Herley since generally it is relevant to the New York action. (See Transcript, at 6, 15-16.)
Apparently, a stay order was entered by the United States Magistrate Judge in the District of New Hampshire involving some separate Herley litigation with a different group of former Herley employees who allegedly took proprietary information. This Court and Magistrate Judge Boyle do not view that stay order as precluding the discovery sought here. (See Transcript, at 15-16.) Therefore, Raytheon cannot contend on that basis that this discovery is premature or is subject to that stay.
DISCUSSION
The federal discovery rules govern the two motions currently before the Court. As a preliminary matter, Herley must show that its requests are relevant to its claims against Ben and Robinson Labs, within the meaning of Fed.R.Civ.Pro. 26(b)(1). See Mycogen Plant Science, Inc. v. Monsanto Co., 164 F.R.D. 623, 625-26 (E.D.Pa. 1996); Pioneer Hi-Bred International, Inc. v. Holden's Foundation Seeds, Inc., 105 F.R.D. 76, 81 (N.D.Ind. 1985); Shields Enterprises, Inc. v. First Chicago Corp., 1988 WL 142200, *3 (N.D.Ill. Dec. 28, 1988); In re Indep. Serv. Orgs. Antitrust Litigation, 162 F.R.D. 355, 356 (D.Kan. 1995); Quotron Sys., Inc. v. Automatic Data Processing, 141 F.R.D. 37, 41 (S.D.N.Y. 1992).Raytheon then must show that the information Herley seeks is subject to a privilege or some other form of protection. See Mycogen Plant Science, 164 F.R.D. at 626; Shields Enterprises, 1988 WL 142200, at *4 (quoting 8 C. Wright A. Miller, Federal Practice and Procedure, § 2043 at 301 (1970)). Here, Raytheon asserts the subpoena calls for trade-secret or confidential proprietary information. See Fed.R.Civ.P. 45(c)(3)(B).
If Raytheon establishes that confidential information is being sought, the burden then falls upon Herley to show a "substantial need for the testimony or material that cannot be otherwise met without undue hardship". Fed.R.Civ.P. 45(c)(3)(B)(iii); see c.f. Mycogen Plant Science, 164 F.R.D. at 626.
Moreover, while both Rule 26 and Rule 45 protect trade secrets, that protection is not absolute. Mycogen Plant Science, 164 F.R.D. at 626; Federal Open Mkt. Comm. of the Fed. Reserve Sys. v. Merrill, 443 U.S. 340, 362, 99 S.Ct. 2800, 61 L.Ed.2d 587 (1979) ("[t]here is no absolute privilege for trade secrets and similar confidential information."). Indeed, "[o]rders forbidding any disclosure of trade secrets or confidential commercial information are rare. More commonly, the trial court will enter a protective order restricting disclosure to counsel or to the parties." Federal Open Mkt. Comm., 443 U.S. at 362 n. 24.
1. Relevancy
Here, at least in a discovery sense, Herley's subpoenas seek information relevant to this action. See Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (relevant evidence "encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case."). We are confident the information is relevant because Magistrate Judge Boyle, who knows this case intimately, has expressed just such an opinion. (See Transcript, at 15-16.) This is important because "[a] district court whose only connection with a case is supervision of discovery ancillary to an action in another district should be especially hesitant to pass judgment on what constitutes relevant evidence thereunder." Compaq Computer Corp. v. Packard Bell Electronics, 163 F.R.D. 329, 335 (N.D. Cal. 1995). Moreover, Herley has agreed to narrow its discovery requests to the Fort Wayne division of Raytheon, and to communications between Raytheon and RH Labs after January 2000, thus further assuring that only relevant information will be produced. So, at bottom, while Herley has apparently obtained at least some evidence establishing a basis for this claim, it needs to dig deeper to determine precisely what information was misappropriated, or what interference occurred, and by whom. This is precisely the thrust of their current efforts. Therefore, we conclude that the material sought from Raytheon as listed in Herley's subpoenas is relevant to the underlying action.
2. Raytheon's Purported Trade Secrets and Confidential Information
Raytheon next contends that if forced to comply with the subpoena, it may produce confidential information of RH Labs to a competing vendor, Herley, or even some of their own confidential proprietary information. As to the latter point, Raytheon must "establish, in the first instance, that the information sought is within [the trade secret] provision of [Rule 45(c)]." 8 Charles Wright Arthur Miller, Federal Practice and Procedure § 2043 (2001); see also Coca-Cola Bottling Co. of Shreveport, Inc. v. Coca-Cola Co., 107 F.R.D. 288, 292 (D. Del 1985); Puritan Bennett Corp. v. Pruitt, 142 F.R.D. 306, 308 (S.D.Iowa 1992). Mere conclusory allegations that the documents contain such confidential information is insufficient to meet this burden. Culinary Foods Inc. v. Rachem Corp., 151 F.R.D. 297, 301 n. 1 (N.D.Ill. 1993).
While counsel for Raytheon complains that the subpoena is a "fishing expedition" for competitively sensitive information, he merely does so by positing that all of the documents sought "speak for themselves as to their commercial confidential nature." (Raytheon Mem., at 4.) Such conclusory allegations alone are insufficient to demonstrate that the materials requested contain confidential trade secret information. See Culinary Foods, 151 F.R.D. at 301 n. 1. For example, there is no evidence the information sought is in fact secret, that it is the subject of reasonable measures to keep it secret, and that it is valuable because it is kept secret. Kobelco Metal Poweder of America, Inc. v. Energy Cooperative, Inc., 2001 WL 1397311, *2 (S.D. Ind. Oct. 30, 2002).
Even if the materials sought were protected as confidential or trade secrets, we conclude that Herley has shown a "substantial need" for the documents, within the meaning of Rule 45(c)(3)(B)(iii). Although Herley may pursue many of the same documents it seeks from Raytheon through other parties or nonparties, Herley can learn through its subpoena the fact of transmittal. See Mycogen Plant Systems, 164 F.R.D. at 627. That is, central to Herley's case is whether Ben, or someone else, actually used and transmitted the allegedly misappropriated confidential information. Moreover, Raytheon may have internal documents relevant to Herley's claims that Herley should be able to see regardless of whether RH Labs received them or not. Indeed, Raytheon may even have documents that other parties have not maintained. Id. (citing Coca-Cola Bottling Co., 107 F.R.D. at 292 ("the information [sought] must be necessary for the movant to prepare its case for trial, which includes proving theories and rebutting its opponent's theories.")).
Nevertheless, if upon further examination Raytheon feels the materials do in fact reveal some confidential Raytheon information, it can respond by either submitting redacted documents (redacting the commercially sensitive material) or by submitting the unredacted documents to this Court for an in camera inspection together with a document index identifying each document, its author, date and subject matter, and a basis for the claim of protection. See, e.g., Vaughan Furniture Co., Inc. v. Featureline Mfg., Inc., 156 F.R.D. 123, 129 (M.D.N.C. 1994).
However, to the extent the disclosure of the subpoenaed materials would reveal some confidential information of another nonparty, Raytheon shall produce the materials subject to the Confidentiality Agreement in the New York action, which may soon take the form of a protective order and which is ample assurance the interests of any nonparties will be protected.
CONCLUSION
For the foregoing reasons, Raytheon's motion to quash is DENIED and Herley's motion to compel is GRANTED. Therefore, Raytheon shall produce the materials subpoenaed, subject to the Confidentiality Agreement in the New York action, and shall submit to the Rule 30(b)(6) deposition as requested. The responsive documents are to be produced on or before January 29, 2002. The Rule 30(b)(6) deposition is to be scheduled at a mutually convenient time but is to occur no later than February 6, 2002.
The Court understands that the last date to complete all discovery in the New York action is February 7, 2002. (See Transcript, at 23.)