Opinion
Cheryl L. Adams, Jennifer Leighn Sta. Ana, U.S. Department of Labor-San Francisco Office of the Solicitor, San Francisco, CA, Grace A. Kim, Nisha Parekh, U.S. Department of Labor Office of the Solicitor, Los Angeles, CA, for Plaintiff.
Donald L. Havermann, Pro Hac Vice, Sean K. McMahan, Pro Hac Vice, Morgan Lewis & Bockius LLP, Tess J. Ferrera, Pro Hac Vice, Holifield Janich Rachal Ferrera, Washington, DC, Jeffrey S. Portnoy, Cades Schutte LLP, William M. Harstad, Carlsmith Ball LLP, Scott I. Batterman, Robert E. Chapman, Clay Chapman Iwamura Pulice & Nervell, Honolulu, HI, David R. Johanson, Pro Hac Vice, Hawkins Parnell Thackston & Young LLP, Napa, CA, Douglas A. Rubel, Pro Hac Vice, Hawkins Parnell & Young, LLP, Cary, NC, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ AMENDED JOINT MOTION FOR ENTRY OF PROTECTIVE ORDER
Richard L. Puglisi, United States Magistrate Judge
Before the Court is Defendants’ Joint Motion for Entry of Protective Order, filed on April 2, 2019 ("Motion"). ECF No. 82. Plaintiff filed his Opposition on April 16, 2019. ECF No. 85. Defendants filed their Reply on April 29, 2019. ECF No. 87. Pursuant to Local Rule 7.2(d), the Court elected to decide the Motion without a hearing. ECF No. 84. After careful consideration of the submissions of the parties and the relevant legal authority, the Court GRANTS IN PART AND DENIES IN PART Defendants’ Motion. BACKGROUND
Plaintiff filed this action under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001 et seq. ("ERISA") alleging that Defendants breached their fiduciary duties in connection with the sale of Bowers + Kubota Consulting, Inc. ("the Company") to the Bowers + Kubota Consulting, Inc. Employee Stock Ownership Plan ("the ESOP") resulting in the ESOP paying far more for the Company than it was worth. See ECF No. 1.
In the present Motion, Defendants ask the Court to approve and enter their proposed blanket protective order regarding confidential material to be produced in discovery in this case.
DISCUSSION
Under Federal Rule of Civil Procedure 26(c)(1), "[t]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." Fed.R.Civ.P. 26(c)(1). Rule 26(c) confers "broad discretion on the trial court to decide when a protective order is appropriate and what degree of protection is required." Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36, 104 S.Ct. 2199, 81 L.Ed.2d 17 (1984); see also Veterans for Common Sense v. Shinseki, 644 F.3d 845, 888 (9th Cir. 2011) (" ‘[B]road discretion is vested in the trial court to permit or deny discovery.’ ") (quoting Hallett v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002)). The burden is on the party seeking the order to "show good cause" by demonstrating harm or prejudice that will result from the discovery. See Phillips ex rel. Estates of Byrd v. General Motors Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002). "If a court finds particularized harm will result from disclosure of information to the public, then it balances the public and private interests to decide whether a protective order is necessary." Id. at 1211; see also In re Roman Catholic Archbishop of Portland in Oregon, 661 F.3d 417, 424 (9th Cir. 2011).
In the present Motion, Defendants ask the Court to enter a protective order to prevent disclosure of information that the parties deem confidential. See ECF No. 82. Defendants submitted their proposed protective order with their Motion ("Proposed Order"). See ECF No. 82-1. Defendants appear to take issue with the characterization of their Proposed Order as a "blanket" protective order. See ECF No. 82-2 (stating that the proposed order "does not confer blanket protections"). The term is not used pejoratively, but rather refers to protective orders that seek protection for material that the parties designate as confidential without making any showing to the Court that particular documents or information are entitled to confidential treatment.
Blanket protective orders are routinely entered in civil litigation, generally at the joint request of the parties where discovery involves confidential information. See, e.g., Crossfit, Inc. v. Nat’l Strength & Conditioning Ass’n, No. 14CV 1191-JLS(KSC), 2015 WL 12466532, at *3 (S.D. Cal. July 16, 2015) ("Blanket protective orders are routinely approved by the Court."). As other district courts in this circuit have recognized, "the use of blanket protective orders conserves judicial resources -- and taxpayer money -- by eliminating the requirement that a party move for a protective order every time that party produces documents they contend are confidential." Van v. Wal-Mart Stores, Inc., No. C 08-5296 PSG, 2011 WL 62499, at *2 (N.D. Cal. Jan. 7, 2011); see also Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1133 (9th Cir. 2003) ("[A] party seeking the protection of the court via a blanket protective order typically does not make a ‘good cause’ showing required by Rule 26(c) with respect to any particular document."). "Blanket protective orders are entered to facilitate the exchange of discovery documents. They make no findings that a particular document is confidential or that a document’s disclosure would cause harm." Small v. Univ. Med. Ctr. of S. Nev., No. 2:13-CV-00298-APG, 2015 WL 1281549, at *3 (D. Nev. Mar. 20, 2015).
As discussed in detail below, the Court declines to enter the Proposed Order submitted by Defendants because it is overly broad and contradicts several obligations that Plaintiff has under federal law. Defendants argue that the Proposed Order is written to allow Plaintiff to comply with its obligations under federal law. ECF No. 82, 87. The Court disagrees. As noted by Plaintiff in his Opposition, several provisions of the Proposed Order are inconsistent with the Freedom of Information Act ("FOIA"), ERISA, and other federal regulations. ECF No. 85.
First, the Proposed Order defines confidential material as follows:
Confidential Material may include, inter alia, all nonpublic materials containing information related to financial or business plans, data or projections; proposed plans or strategies; studies or analyses by internal or external experts; financial or tax data; competitive analyses; personnel, including officers, directors or partners; information or documents subject to confidentiality or non-disclosure agreements with third parties; or other commercially sensitive or proprietary information.
ECF No. 82-1 at 5. As proposed, the definition of confidential material includes "all nonpublic material" regarding various categories of business information. Id. Under FOIA, the definition of confidential material is more narrow. Specifically, FOIA protects from disclosure statutorily protected documents, trade secrets and privileged or confidential commercial or financial information, agency memoranda, personnel and medical files, law enforcement records, financial institution regulatory documents, and geological data. See 5 U.S.C. § 552(b). Although there may be some overlap regarding privileged or confidential commercial or financial information, the definition contained in the Proposed Order casts too broad a net regarding "all nonpublic materials" and allows the parties to designate material that would not otherwise be entitled to protections under FOIA.
Second, the Proposed Order’s restrictions on disclosure conflicts with Plaintiff’s obligations to comply with federal regulations related to FOIA. As detailed in Plaintiff’s Opposition, Plaintiff must comply with the United States Department of Labor’s regulations regarding the disclosure of confidential documents. See ECF No. 85 at 10-11. These regulations provide specific procedures for handling confidential information, which conflict with the Proposed Order. Id. Under the Department of Labor’s regulations, the disclosing party has an opportunity to object to the release of confidential information, but the Department retains the decision-making power to determine whether disclosure is appropriate. Id. Under the Proposed Order, the parties are prohibited from disclosing information that has been designated as confidential absent consent or a court order. See ECF No. 82-1 at 9.
Third, the Proposed Order requires the parties to treat certain discovery as confidential for set periods of time regardless of whether that information is entitled to such designation. For example, the Proposed Order requires the parties to treat all documents produced in discovery as confidential for a period of six weeks. See ECF No. 82-1 at 6 ("all Party and Non-Party productions shall be deemed Confidential Material for thirty (30) business days following their production)". Additionally, the Proposed Order requires the parties to treat all deposition testimony as confidential for three weeks following receipt of the transcript. Id. at 7-8. These provisions impose additional restrictions on Plaintiff that conflict with the disclosure requirements and procedures of FIOA. See ECF No. 85 at 12.
Finally, the Proposed Order restricts the use of Confidential Material to only this litigation, which conflicts with Plaintiff’s obligations under ERISA to share information with other governmental agencies. ECF No. 82-1 at 9 ("Confidential Material shall be used only for purposes of advising on, preparing for and litigating the Action (including appeals) and not for any other purpose whatsoever without the written consent of the Designator or by order of the Court."). This provision restricts the use of all confidential material to this litigation only. As detailed in Plaintiff’s Opposition, ERISA provides that Plaintiff shall make information available to any person affected by matters under investigation, shall refer matters regarding civil and criminal violations to the appropriate agencies, and shall share information with the Internal Revenue Service. ECF No. 85 at 14-17. The Proposed Order’s restriction on the use of discovery material that has been designated as confidential conflicts with these statutory obligations.
The Court is not persuaded by the sample protective orders involving the Department of Labor attached to Defendants’ Motion. The protective order entered by the court in the Southern District of Mississippi appears to only apply to documents produced pursuant to a subpoena. See ECF No. 82-3 at 8-11 ("the terms of this Protective Order shall apply to, and shall govern, documents pertaining or relating to the subpoena issued by the Secretary of Labor to Community Bank and DirecTV"). It does not appear to be a blanket protective order applicable to all discovery like the one sought by Defendants in the pending Motion. Similarly, the order entered by the court in the Eastern District of Wisconsin appears to apply only to discovery produced by nonparties to the litigation. ECF No. 82-3 at 12-22 (stating that the order applies to material "produced by a Non-Party in discovery"). Further, that order expressly provides that the Department of Labor may disclose any material to governmental agencies and may make all disclosures required under FOIA. Id. at 20.
However, the Court finds that Defendants have adequately demonstrated that confidential material is likely to be exchanged during discovery in this action and that an appropriate limitation on the parties’ use of confidential material will facilitate discovery. Accordingly, the Court finds good cause to ORDER as follows:
Any party or non-party may designate as "confidential" any document or response to discovery which that party or non-party considers in good faith to contain information involving trade secrets or confidential information subject to protection under the Federal Rules of Civil Procedure or applicable law ("Confidential Information"). Confidential Information shall not be disclosed to any person other than: (a) counsel for the parties to this litigation; (b) employees of such counsel; (c) any officer or employee of a party, to the extent deemed necessary by counsel; (d) consultants or expert witnesses retained for this litigation; (e) any authors or recipients of the Confidential Information; (f) the court, court personnel, and court reporters; (g) witnesses; (h) any persons entitled to receive such information under the Freedom of Information Act; and (i) any person or governmental agency with which the Department of Labor has a responsibility to share information under federal law. Any persons receiving Confidential Information shall not disclose such information to any person who is not entitled to receive such information. If any party challenges the confidentiality designation of any material, the party shall notify the designating party or non-party. The designating party or non-party shall then either remove the designation or file a motion for a protective order to maintain the confidentiality designation of the material at issue. A party’s designation of any discovery material as "confidential" for purposes of this litigation has no effect on public access under federal law.
CONCLUSION
Based on the foregoing, the Court GRANTS IN PART AND DENIES IN PART Defendants’ Joint Motion for Entry of Protective Order as detailed above.
IT IS SO ORDERED.