Opinion
Civil Action No. 04-N-1228 (CBS) [04-X-0057].
August 13, 2004
MEMORANDUM ORDER
THIS MATTER comes before the court on Defendant Household International, Inc. and its affiliate Household Finance Corporation's (collectively "Household") Motion to Stay Subpoena Pending Decision of Arbitrator or, in the alternative, Motion to Quash Subpoena, filed on June 14, 2004. Plaintiff Lawrence E. Jaffe Pension Plan filed its Opposition on July 6, 2004, and Household filed a Reply in Support of Its Motion on July 26, 2004. The court heard oral argument on the pending motion during a hearing on July 28, 2004.
Household's motion seeks to quash a subpoena duces tecum served on Marc Tull, a Colorado resident, in connection with Lawrence E. Jaffe Pension Plan v. Household International, Inc., Case No. 02-C-5893 (N.D. Ill.) (hereinafter "the Jaffe litigation"). The subpoena duces tecum seeks production of "all documents in and concerning the [arbitration] entitled Sheila M. Hennessy and Marc B. Tull v. Household Finance and MBNA, JAMS/Endisute, Denver, Colorado (hereinafter "the Hennessy arbitration"). In the alternative, Household moves to stay production under the subpoena duces tecum pending a ruling by the arbitrator as to the application of a confidentiality agreement negotiated by the parties in the Hennessy arbitration and subsequently endorsed by the arbitrator. Apparently, Mr. Tull is willing to produce documents in response to the Rule 45 subpoena duces tecum, but is concerned that such production would violate the confidentiality agreement governing the arbitration.
During the hearing on July 28th, this court was advised that in May 2004, Plaintiff served written discovery in the Jaffe litigation. Plaintiff's counsel expressed her belief that Household's discovery responses were deficient and represented to this court that she had discussed these perceived deficiencies with Household's counsel in the Jaffe litigation. Defense counsel denied the suggestion that Household had been delinquent in responding to discovery, as evidenced by the approximately two million pages of documents produced in response to Plaintiff's discovery requests. Without attempting to weigh the merits of the evolving discovery dispute in the Northern District of Illinois, it would seem that the parties have discharged their duty to confer under Fed.R.Civ.P. 37(a)(2)(A). Plaintiff's counsel also acknowledged during the July 28th hearing that her Fed.R.Civ.P. 34 requests for production in the Jaffe litigation encompass many of the same categories of information and documents sought through the subpoena duces tecum served on Mr. Tull.
After reviewing the parties' briefs and the cases cited therein, and considering the arguments of counsel, this court denied Household's motion to quash and granted the motion to stay. This Memorandum Order explains in greater detail the reasoning underlying the court's decision.
As a preliminary matter, the court notes a dispute between Household and Plaintiff regarding the characterization of the requested documents. Plaintiff claims that the arbitrator made no specific determination as to the confidentiality of any document produced in the arbitration. Although Defendant contends that all documents produced in the Hennessy arbitration have been deemed confidential "pursuant to order of the arbitrator," Household has not produced a copy of that "order." To the contrary, it appears that on December 9, 2003, counsel in the Hennessy arbitration reached an "agreement" to "treat as confidential" all documents disclosed by the parties in connection with the arbitration. See Exhibit B attached to Defendant's Motion to Stay Subpoena. See also United Nuclear Corp. v. Cranford Insurance Co., 905 F.2d 1424, 1427 (10th Cir. 1990) (a stipulated protective order permits litigants to provide full disclosure of relevant information without fear of subsequent dissemination to nonparties and without the expense and delays associated with discovery disputes concerning specific information or documents). This blanket "agreement" was accepted by the arbitrator. Perhaps the arbitrator's decision to adopt the parties' blanket protective order is dispositive for purposes of the pending motion. Cf. In re Arbitration Between Security Life Insurance Company of America, 228 F.3d 865, 871 (8th Cir. 2000) (after noting the "well-recognized federal policy favoring arbitration, held that federal courts are not required to second-guess an arbitrator's judgment over discovery and are not required to make an independent relevance determination before requiring compliance with an arbitration panel's subpoena). It bears noting that such a blanket protective order would not be controlling in the context of a civil lawsuit and would not relieve the court of its obligation to find "good cause" for a protective order under Fed.R.Civ.P. 26(c). See Jepson, Inc. v. Makita Electric Works, Ltd., 30 F.3d 854, 858 (7th Cir. 1994) (even if parties agree that a protective order should be entered, the court still must independently determine if "good cause" exists for the issuance of that order); Greater Miami Baseball Club Limited Partnership v. Selig, 955 F. Supp. 37, 39 (S.D.N.Y. 1997) (in the absence of any litigated determination as to the existence of good cause for confidentiality, a party had no justifiable basis for assuming testimony would remain confidential). However, to decide the instant motion, it is not necessary to resolve the boundaries between the arbitrator's authority to control discovery in the arbitration and this court's power to enforce its subpoena. Cf. Church of Scientology v. United States, 506 U.S. 9, 12 (1992) (federal courts do not have the authority to give opinions on abstract propositions or to declare rules of law which cannot affect the matter at issue in the pending case).
Although not cited in Household's briefs, some courts have left open the possibility that a confidentiality agreement between parties to an arbitration might circumscribe discovery in a collateral lawsuit. See, e.g., Contship Containerlines, Ltd. v. PPG Industries, Inc., 2003 WL 1948807 (S.D.N.Y. 2003) (defendant moved to compel production of documents exchanged between plaintiffs as the parties in an earlier arbitration involving the same incident that gave rise to the litigation; in granting motion, noted that neither plaintiff could cite a contractual provision or other agreement that gave rise to an obligation of confidentiality in the arbitration); United States v. Panhandle Eastern Corp., 118 F.R.D. 346, 350 (D. Del. 1988) (defendant sought protective order preventing disclosure of documents to plaintiff relating to arbitration proceedings involving the defendant and a third-party; in requiring disclosure, noted that defendant could not point to any actual agreement of confidentiality reached by the parties in the arbitration). Certainly, a court should not cavalierly disregard the expectations of the parties to an arbitration as memorialized in their confidentiality agreement. See Securities and Exchange Commission v. TheStreet.Com, 273 F.3d 222, 230 (2d Cir. 2001) (expressing some reluctance "to permit modifications of protective orders in part because such modifications unfairly disturb the legitimate expectations of litigants"); State ex rel. Butterworth v. Jones Chemicals, Inc., 148 F.R.D. 282, 288 (M.D. Fla. 1983) (acknowledging that failure to protect a party's reliance on a protective order would not only prejudice the confidentiality interests of that party, but also would undermine the effectiveness of protective orders in facilitating discovery).
While I have not found any cases directly on point, there are decisions that recognize a court's authority to modify a protective order. See, e.g., United Nuclear Corp. v. Cranford Insurance Co., 905 F.2d at 1427 (10th Cir. 1990) (district court that issued protective order had the power and discretion to modify that order to permit disclosure of information to parties in similar litigation; however cautioned that "questions of the discoverability in the [collateral] litigation of the materials discovered in [this] litigation are, of course, for the [collateral] courts"). See also United States v. Parke-Davis, 210 F.R.D. 257, 258 (D. Mass. 2002) (noting that "[c]ourts have the inherent power to modify protective orders in light of changed circumstances during the time that such orders are in effect"). As the court persuasively noted in Grove Fresh Distributors, Inc. v. Everfresh Juice Co., 24 F.3d 893, 896 (7th Cir. 1994),
[W]here a third party wishes to modify a protective order so as to avoid duplicative discovery in collateral litigation, policy considerations favoring the efficient resolution of disputes justify modification unless such an order would tangibly prejudice substantial rights of the party opposing modification. Even if such prejudice is demonstrated, the court has broad discretion in determining whether the injury outweighs the benefits of modification.
Given that Plaintiff has requested much of the same material in the Jaffe litigation through formal requests for production, the court is hard-pressed to see how modification of the protective order in the Hennessy arbitration would result in any prejudice to Defendant's rights. Cf. Beckman Industries, Inc. v. International Ins. Co., 966 F.2d 470, 475-76 (9th Cir. 1992) (granting state court litigants' motion to intervene and modify protective order, where state litigation involved the same type of action, where protective order was a stipulated blanket order and parties to federal action had never made "good cause" showing for protective order in the first place).
Presumably, Mr. Tull has no objection to disclosing the documents he produced during the Hennessy arbitration.
The court's research has not found, and the parties have not cited, any Tenth Circuit decisions which directly address the issues raised in the pending motion. In the absence of any controlling precedent, the court will be guided by common sense and the admonition to construe and apply the Federal Rules of Civil Procedure in a manner "to secure the just, speedy, and inexpensive determination of every action." See Fed.R.Civ.P. 1.
Defendant argues that the subpoena duces tecum served on Mr. Tull should be quashed because it seeks the production of confidential information and because Plaintiff has failed to establish a compelling need for these materials. According to Defendant, the documents in question
concern Household's internal underwriting processes and decisions, Household's internal corporate policies, Household's training materials and employee compensation packages, confidential agreements between Household and another company, and documents from a specific employee's personnel file.See Household's Reply at 6. Household correctly notes that Rule 45(c)of the Federal Rules of Civil Procedure permits the court to quash or modify a subpoena that subjects a person to undue burden or requires disclosure of a trade secret or other confidential commercial information. See Fed.R.Civ.P. 45(c)(3)(A)(iv) and (B)(I). However, under the particular facts in this case, Defendant's reliance on Rule 45 is misplaced.
Household does not claim that the Tull subpoena imposes an undue burden on Defendant, seeks privileged information, or that responsive documents are wholly irrelevant to the Jaffe litigation. While the subpoena duces tecum might lead to the disclosure of confidential business information, that does not necessarily require the court to quash the subpoena entirely. Defendant disclosed documents in the Hennessy arbitration pursuant to a confidentiality agreement which presumably provided all the safeguards Household felt were necessary. The trial court in the Jaffe litigation has entered an Interim Stipulation and Order Governing the Confidential Treatment of Discovery Material. Under the terms of that Order, "all Discovery Material will be deemed confidential and may be disclosed only to counsel to the parties in the litigation . . . and to their employees and contractors (including contract lawyers and litigation support firms)." To the extent that Household believes its confidential materials require protection, quashing the Tull subpoena would seem to be an extreme and unnecessary remedy. See Advisory Committee Notes to 1991 Amendments to Fed.R.Civ.P. 45 (providing that the court is authorized to quash, modify, or condition a subpoena to protect the person subject to or affected by the subpoena "from unnecessary or unduly harmful disclosures of confidential information") All the confidentiality protections that Household requires have been afforded by the Interim Stipulation entered in the Jaffe litigation and by the parties' agreement in the Hennessy arbitration, which Household presumably had a part in negotiating. Given the protections already in place, Household has failed to show how production of the Hennessy documents to Plaintiff would result in "unduly harmful disclosures."
As an alternative form of relief, Defendant argues that the court should stay compliance with the Tull subpoena duces tecum pending a decision by the arbitrator with respect to whether, or to what extent, the confidentiality agreement in the Hennessy arbitration precludes disclosure of documents produced by Household in that arbitration. Household appears to rely on Fed.R.Civ.P. 26(c), which permits the court to "make any order which justice requires to protect a party . . . from annoyance, embarrassment, oppression, or undue burden or expense." Rule 26(c) also states that the court may require "that the discovery may be had only by a method of discovery other than that selected by the party seeking discovery." See Fed.R.Civ.P. 26(c)(3).
Consistent with my authority under Rule 26(c)(3), I will require Plaintiff to obtain production of the desired Household documents through the discovery requests already served or to be served in the Jaffe litigation. In view of the nascent disputes involving Plaintiffs' discovery requests in the Jaffe litigation, and the significant duplication between those document requests and the subpoena duces tecum served on Mr. Tull, I see little to be gained by having multiple jurisdictions address issues of relevance and supervise document production under different confidentiality agreements. For example, this court lacks sufficient knowledge of the claims and defenses in Jaffe to address Household's challenge to the relevance of the documents previously disclosed to Mr. Tull, including the one personnel file produced in the Hennessy arbitration. If Plaintiffs truly believe that Household's document production in the Jaffe litigation is deficient, a remedy is available in the Northern District of Illinois. See Fed.R.Civ.P. 37(a)(2)(B) (a party may move to compel if a responding party fails to comply with obligations under Rule 34). See also Petersen v. Douglas County Bank Trust Co., 940 F.2d 1389, 1391 (10th Cir. 1991) (finding nothing improper where the jurisdiction issuing the subpoena transferred the resulting motion to compel to the district with jurisdiction over the underlying litigation); Goodyear Tire Rubber Co. v. Kirk's Tire Auto Servicenter, 211 F.R.D. 658, 660 (D. Kan. 2003) ("it is within the discretion of the court that issued the subpoena to transfer motions involving the subpoena to the district in which the action is pending"). Given Plaintiff's outstanding discovery requests and the concomittant remedies available in the Northern District of Illinois, I find no compelling reason to resolve the novel question of whether a district court can supersede a confidentiality order adopted by a arbitrator in a collateral proceeding. That issue can be left for another case and more pressing circumstances.
Accordingly, the court will grant Defendant's motion to stay compliance with the subpoena duces tecum served on Mr. Tull subject to the following conditions. On or before 12:00 p.m. on August 2, 2004, Household must produce those non-privileged documents tendered by Household in the Hennessy arbitration that are also responsive to Fed.R.Civ.P. 34 requests served by Plaintiff in the Jaffe litigation. Any documents produced by Household in compliance with this Order will be deemed to have been produced pursuant to Rule 34 requests propounded in Lawrence E. Jaffe Pension Plan v. Household International, Inc., Case No. 02-C-5893 (N.D. Ill.). To the extent that Household withholds any documents on the basis of privilege, Defendant must provide a privilege log consistent with Fed.R.Civ.P. 26(b)(5) on or before August 2, 2004, at 12:00 p.m.
During a subsequent status conference on August 3, 2004, counsel for Household advised the court that his client had produced to Plaintiff all documents that had been disclosed to Mr. Tull in the Hennessy arbitration that were also responsive to Plaintiff's requests for production of documents in the Jaffe litigation. At the conclusion of the August 3rd status conference, counsel for Plaintiff made an oral motion to withdraw the subpoena duces tecum served on Mr. Tull.