SciGrip, Inc. v. Osae,
2015 NCBC 86.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
DURHAM COUNTY 13 CVS 2854
SCIGRIP, INC. f/k/a IPS STRUCTURAL
ADHESIVES HOLDINGS, INC. and IPS
INTERMEDIATE HOLDINGS
CORPORATION, ORDER & OPINION ON PLAINTIFFS’
RENEWED MOTION TO COMPEL
Plaintiffs,
DISCOVERY RESPONSES FROM
v. DEFENDANT SAMUEL B. OSAE
SAMUEL B. OSAE and SCOTT BADER,
INC.,
Defendants.
{1} THIS MATTER is before the Court upon (1) Plaintiffs SciGrip, Inc. f/k/a IPS
Structural Adhesives Holdings, Inc. and IPS Intermediate Holdings Corporation’s
(collectively, “IPS” or “Plaintiffs”) Renewed Motion to Compel Discovery Responses
from Defendant Samuel B. Osae (“Defendant” or “Mr. Osae”) (the “Motion” or “Motion
to Compel”) and (2) Mr. Osae’s request to view Plaintiffs’ Supplemental Responses to
discovery requests, invited by the Court’s July 13, 2015 Scheduling Order, in the
above-captioned case. As explained below, the Court DENIES Plaintiffs’ Motion to
Compel without prejudice to Plaintiffs’ right to renew its Motion for good cause
shown, and DENIES Defendant’s request to view Plaintiffs’ Supplemental Responses
to discovery requests (“Supplemental Responses”) without prejudice to Mr. Osae’s
right to renew his request for good cause shown.
Lynch, Cox, Gilman & Goodman, P.S.C., by Donald L. Cox and William H.
Mooney, and Law Offices of Denise Smith Cline, PLLC, by Denise Smith Cline,
for Plaintiffs SciGrip, Inc. and IPS Intermediate Holdings Corp.
Mast, Schulz, Mast, Johnson, Wells, & Trimyer, P.A., by George B. Mast and Lily
Van Patten, for Defendant Samuel B. Osae.
Ogletree, Deakins, Nash, Smoak & Stewart, P.C., by Patrick Lawler and Phillip
J. Strach, for Defendant Scott Bader, Inc.
Bledsoe, Judge.
I.
PROCEDURAL BACKGROUND
{2} Plaintiffs develop and produce “acrylic-based structural adhesives that are
used in the marine and other industries to bond fiberglass and other material
together.” (Am. Compl. ¶ 7.) Plaintiffs initially brought suit against Mr. Osae, a
former employee, and Defendant Scott Bader, Inc. in 2008 to enforce the employment
agreement between Plaintiffs and Mr. Osae and to protect their proprietary
information. (Am. Compl. ¶ 23.) That litigation resulted in a TRO and a Consent
Order among the parties. (Am. Compl. ¶ 29.) Plaintiffs initiated the current
litigation in November 2014, alleging breach of the Consent Order and
misappropriation of Plaintiffs’ trade secrets. The Amended Complaint alleges that
Mr. Osae disclosed Plaintiffs’ confidential and trade secret information not only to
Defendant Scott Bader, Inc., but also to Mr. Osae’s current employer, Engineered
Bonding Solutions, LLC (“EBS”), a non-party Florida company. (Am. Compl. ¶ 68.)
{3} Plaintiffs filed the Motion to Compel on March 3, 2015, and initial briefing
was completed on March 23, 2015. The Motion requests that the Court compel Mr.
Osae to produce documents relating to EBS. (Pls.’ Renewed Mot. Compel 6.) The
Court held a hearing on Plaintiffs’ Motion on May 12, 2015, at which Plaintiffs and
Mr. Osae were represented by counsel.
{4} On May 13, 2015, the Court entered an Order deferring ruling on the Motion
and ordering Plaintiffs to serve Supplemental Responses to Mr. Osae’s discovery
requests to describe with sufficient particularity Plaintiffs’ alleged trade secrets and
confidential information that Plaintiffs allege have been misappropriated. The Court
further ordered the parties to engage in good faith attempts at resolving Mr. Osae’s
objections to the sufficiency of Plaintiffs’ supplemental identification.
{5} On July 13, 2015, Mr. Osae reported to the Court via e-mail that the parties
reached an “agreement that Plaintiffs’ trade secret identification ha[d] been
sufficiently particularized.” (Tiffany Clark E-mail, July 13, 2015.) Mr. Osae
therefore withdrew his objection to Plaintiffs’ discovery responses based on
insufficient trade secret identification. He then raised new objections “over the
appropriate scope of Plaintiffs’ discovery requests,” in particular arguing that
Plaintiffs cannot obtain from him the confidential and trade secret information of his
current employer, EBS, located on the company-owned laptop computer EBS has
provided to Mr. Osae for use in his work for EBS. (Tiffany Clark E-mail, July 13,
2015.) More specifically, Mr. Osae now contends “that documents, which constitute
proprietary trade secret information of [EBS], are not discoverable or compellable
from [Mr.] Osae. Rather, [Mr. Osae avers that] such documents must be sought from
[EBS] in the current Florida litigation between Plaintiffs and [EBS].”1 (Tiffany Clark
E-mail, July 13, 2015.) Mr. Osae further argues that he should be allowed to view
the alleged trade secrets, proprietary information, and confidential information
Plaintiffs claim Mr. Osae has misappropriated – all of which Plaintiffs disclosed
under an “Attorneys Eyes Only” confidentiality restriction – as such information falls
under Paragraph 3(b)(v) of the Consent Protective Order (“CPO”) entered in this case.
(Tiffany Clark E-mail, July 13, 2015.)
{6} The Court entered an order to schedule supplemental briefing on Mr. Osae’s
two most recent objections to Plaintiffs’ discovery requests on July 13, 2015. The
parties’ supplemental briefing was completed on July 31, 2015, and the Motion to
Compel is now ripe for review.
1 In conjunction with its efforts to obtain EBS’s proprietary and trade secret information from Mr.
Osae, IPS also has sought such items from EBS directly and issued a third-party subpoena duces
tecum upon EBS in Florida. EBS has resisted the third-party subpoena, and the issue continues to be
litigated in the matter styled IPS Structural Adhesives Holdings, Inc. and IPS Intermediate Holdings
Corporation. v. Engineered Bonding Solutions, LLC, Civil Action No: 05-2013-CA-069331 (Fla. Cir. Ct.
18th Jud. Cir., Brevard Cnty.). Most recently, the Florida Circuit Court ordered EBS to comply with
the subpoena so long as IPS grants EBS’s outside counsel “attorney’s eyes only” access to IPS’s trade
secret information. (Pls.’ Supplemental Disc. Status Report Ex. A.) IPS has also brought suit against
EBS for trade secret misappropriation in federal court in Florida. Complaint, SciGrip, Inc. et al. v.
Engineered Bonding Solutions, LLC, No. 6:15-CV-653-Orl-22KRS (M.D. Fla. Apr. 23, 2015). The
federal case is in the very early stages of discovery. (Pls.’ Disc. Status Report, pp. 3–4.)
II.
FACTUAL BACKGROUND
{7} For purposes of this Order and Opinion, the Court recites those facts from
the Amended Complaint that are relevant to the Court’s legal determinations. The
Court, however, does not make any factual findings concerning these allegations in
connection with Plaintiffs’ Motion.
{8} Plaintiffs’ Motion to Compel arises out of the alleged misappropriation of
Plaintiffs’ trade secrets by Mr. Osae, who was employed by IPS from July 2000 until
August 2008 as the “Application and Development Manager and the only formula
chemist employed by the IPS Durham operation at th[at] time.” (Am. Compl. ¶ 8.)
Mr. Osae terminated his employment with IPS in August 2008. He subsequently
began working for Defendant Scott Bader, Inc., (Am. Compl. ¶¶ 16–18), and Plaintiffs
contend that Mr. Osae misappropriated their trade secrets in conjunction with Scott
Bader, Inc.’s European patent application (“Patent Application”).2 (Am. Compl. ¶ 41.)
{9} In 2011, Mr. Osae became a 25% owner and managing member of the newly
formed EBS. (Am. Compl. ¶ 42–45.) Plaintiffs contend that “EBS is a direct
competitor of IPS in the structural adhesives industry,” (Am. Compl. ¶ 43), and that
Mr. Osae used Plaintiffs’ trade secret information to develop products for EBS in
violation of his confidentiality agreement with Plaintiffs. (Am. Compl. ¶ 45.)
{10} Through written and oral discovery, Plaintiffs have sought information
regarding EBS’s confidential trade secret information from Mr. Osae. (See, e.g., Pls.’
Renewed Mot. Compel Exs. A & E.) Mr. Osae has denied his ability to produce EBS’s
confidential trade secret information – although he admits he has access to such
information – because he alleges that he cannot be “required to disclose proprietary
trade secret information belonging to [EBS], a non-party foreign corporation who is
2 Plaintiffs allege that during the time it employed Mr. Osae, Scott Bader, Inc. filed an application for
a European patent for new adhesive products that utilized certain confidential information of IPS
known only to Mr. Osae and other IPS employees who developed products during the period from 2000
to the fall of 2008. Plaintiffs assert that the information disclosed in the Patent Application that was
confidential and proprietary includes the identity and combination of chemicals that were unique to
IPS’s own adhesive products. (Am. Compl. ¶¶ 31–33.)
in direct competition with Plaintiffs in the structural adhesive industry.” (Def.’s
Mem. Supp. Objections Pls.’ Disc. Reqs. 1.)
{11} On February 27, 2015, the parties entered into the CPO, under which certain
discovery documents could be designated as “Confidential” or “Highly Confidential—
Attorneys Eyes Only”. (CPO ¶¶ 1–3.) The Highly Confidential designation restricts
access to outside counsel only, subject to some exceptions. (CPO ¶ 3(b).)
{12} On June 29, 2015, Mr. Osae’s counsel received Plaintiffs’ Supplemental
Responses to Mr. Osae’s discovery requests, which were prompted by the Court’s May
13 Order directing Plaintiffs to describe their trade secrets with sufficient
particularity. (Tiffany Clark E-mail, July 13, 2015; Order on Pls.’ Renewed Mot.
Compel Disc. 3.) Plaintiffs designated their responses, which contain confidential
and proprietary trade secret information, as Highly Confidential—Attorneys Eyes
Only. Mr. Osae contends that to properly defend this case, he must be able to view
Plaintiffs’ alleged trade secrets contained in their supplemental discovery responses,
notwithstanding the protective order entered in this case. (Def.’s Mem. Supp.
Objections Pls.’ Disc. Reqs. 8.)
III.
ANALYSIS
{13} North Carolina’s liberal discovery rules permit parties to obtain discovery
on any relevant, non-privileged matter that appears “‘reasonably calculated’ to lead
to the discovery of admissible evidence.” Analog Devices, Inc. v. Michalski, 2006
NCBC LEXIS 14, at *22, *40 (N.C. Super. Ct. Nov. 1, 2006) (“Rule 26(b)(1) makes
clear that liberal discovery is permitted.”) (quoting Shellhorn v. Brad Ragan, Inc.,
38
N.C. App. 310, 313,
248 S.E.2d 103, 106 (1978)). However, “[i]t is equally clear under
the Rules that North Carolina judges have the power to limit or condition discovery
under certain circumstances.” Id. at *40.
A. N.C. R. Civ. P. 34
{14} Rule 34 of the North Carolina Rules of Civil Procedure (“Rule 34”) permits a
party to request that any other party produce documents “within the scope of Rule
26(b) and which are in the possession, custody or control of the party upon whom the
request is served.” N.C. R. Civ. P. 34(a). “‘[D]ocuments are deemed within the
possession, custody or control of a party for purposes of Rule 34 if the party has actual
possession, custody or control of the materials or has the legal right to obtain the
documents on demand.’” Lowd v. Reynolds, 205 N.C. App. 208, 215,
695 S.E.2d 479,
484 (2010) (emphasis omitted) (requiring plaintiff to produce his medical records
because he had the legal right to obtain his own medical records pursuant to HIPPA)
(quoting Pugh v. Pugh,
113 N.C. App. 375, 380–81,
438 S.E.2d 214, 218 (1994)). See,
e.g., Milks v. Mills, No. COA08-1313,
2009 N.C. App. LEXIS 1234, at *16 (N.C. Ct.
App. Aug. 4, 2009) (unpublished) (“Defendant [improperly] failed to produce
documents that were being held by his agents, such as the documents that were in
the hands of his accountant, insurer, and bank.”); Nat’l Fin. Partners Corp. v. Ray,
2014 NCBC LEXIS 50, at *49 (“[A] litigating parent corporation has control over
documents in the physical possession of its subsidiary corporation where the
subsidiary is wholly owned or controlled by the parent.”) (quoting Am. Angus Ass'n
v. Sysco Corp.,
158 F.R.D. 372, 375 (W.D.N.C. 1994)).
{15} Plaintiffs first claim that Mr. Osae has “actual possession” of the EBS
documents because they are located on “his laptop computer.” (See Renewed Mot.
Compel 10; Reply Supp. Renewed Mot. Compel 7; Pls.’ Br. Regard. Outstand. Disc.
Disputes 3) (emphasis added). Mr. Osae’s testimony as cited by Plaintiffs, however,
indicates that the laptop in question is an EBS-owned computer rather than Mr.
Osae’s personal computer. (See Renewed Mot. Compel Ex. A, pp. 18–19.) Thus, the
question before the Court is whether an individual “possesses” for Rule 34 production
purposes company documents stored on a company-provided laptop.
{16} No North Carolina court has ruled on this specific issue. At least one federal
court has considered a nearly identical case. Devon Robotics v. DeViedma, No. 09-cv-
3552, 2010 U.S. Dist. LEXIS 108573 (E.D. Pa. Oct. 7, 2010). In Devon Robotics, the
court ordered the defendant to produce documents after concluding that the
defendant “actually possessed” his non-party employer’s documents stored on his
laptop computer.
Id. at *7–8. In reaching its conclusion, the court noted that
“‘custody and control are broader than possession’” and “[p]resumably . . . cases
involving actual possession are more straightforward.”
Id. at *7 (quoting Modern
Eng’g, Inc. v. Peterson, No. 07-1055,
2007 U.S. Dist. LEXIS 51131, *6–7 (C.D. Ill. July
16, 2007). Indeed, this premise is consistent with other authorities that physical
possession without regard to legal ownership is sufficient under Fed. R. Civ. P. 34.
See In re Bankers Trust Co.,
61 F.3d 465 (6th Cir. 1995) (holding that Federal Reserve
Board’s regulations retaining legal ownership of certain documents were not
determinative and compelling bank to disclose such documents in its actual
possession); 8B Charles Alan Wright & Arthur R. Miller, Federal Practice &
Procedure § 2210 (3d ed. 2015) (“A party may be required to produce documents and
things that it possesses even though they belong to a third person who is not a party
to the action.”) (emphasis added).
{17} The present case, however, presents a highly unique scenario distinct from
the above cases, none of which dealt with discovery of a non-party competitor’s trade
secret and confidential information. Here, Plaintiffs seek to discover trade secret and
proprietary information of their direct competitor solely through one of its employees.
Typically, when a company alleges trade secret violations by an employee who has
departed and begun employment with a competitor, the competitor is either joined as
a party in the lawsuit or, if the competitor is a non-party, the company seeks discovery
of the competitor’s documents from the competitor itself through a third-party
subpoena under Rule 45. See, e.g., Boston Sci. Corp. v. Lee, No. 5:14-mc-80188-BLFPSG, 2014 U.S. Dist. LEXIS 107584, at *2 (N.D. Cal. Aug. 4, 2014) (seeking
production of defendant former employee’s work computers through a third-party
subpoena of defendant’s new employer, plaintiff’s direct competitor, in a case alleging
trade secret misappropriation); RCR Enters., LLC v. McCall,
2014 NCBC LEXIS 69,
at *39 (N.C. Super. Ct. Dec. 19, 2014) (seeking non-party competitor’s documents
through subpoena of non-party competitor when company brought suit solely against
former employee); DSM Dyneema, LLC v. Thagard,
2014 NCBC LEXIS 51, at *4–5
(N.C. Super. Ct. Oct. 9, 2014) (bringing misappropriation of trade secrets claim
against former employee and direct competitor); Taidoc Tech. Corp. v. OK Biotech
Co., Ltd.,
2014 NCBC LEXIS 49, at *2 (N.C. Super. Ct. Oct. 9, 2014) (bringing
misappropriation of trade secrets claim directly against competitor).
{18} Thus, the Court has concerns about the implications of compelling discovery
of EBS’s trade secrets on the basis of Mr. Osae’s possession of a company laptop. In
a workforce where employees have access to a multitude of company documents
through any number of portable electronic devices, the traditional line between
possession and access has been blurred. Cf. SCR-Tech LLC v. Evonik Energy Servs.,
LLC, 2014 NCBC LEXIS 72, at *27–28 (N.C. Super. Ct. Dec. 31, 2014) (quoting Pugh,
113 N.C. App. at 380,
438 S.E.2d at 218) (distinguishing actual possession from a
practical ability to obtain the requested materials).
{19} Further, other factors caution against compelling Mr. Osae to produce EBS’s
trade secret information, including IPS’s active pursuit of such documents from EBS
directly in the Florida state court and federal litigation, and EBS’s repeated assertion
that it is not subject to personal jurisdiction in North Carolina.3 (Pls. Suppl. Disc.
Status Report, Ex. C.) In fact, obtaining confidential trade secret information from a
non-party competitor is preferable under Rule 45 because Rule 45 affords greater
protections to non-parties. Bank of Am. Corp. v. SR Int’l Bus. Ins. Co., 2006 NCBC
LEXIS 17, at *29 (N.C. Super. Ct. Nov. 1, 2006) (noting the courts’ obligation to
protect non-parties from burden and expense without sufficient justification). See
also Kilgo v. Wal-Mart Stores, Inc.,
138 N.C. App. 644, 648,
531 S.E.2d 883, 887 n.5
(2000) (“A subpoena duces tecum is appropriate to make discovery of documentary
evidence held by a non-party.”).
{20} Therefore, the Court declines to compel production of trade secret and
proprietary information of a non-party competitor where the plaintiff seeks such
information through an employee’s possession of a company laptop and the non-party
competitor has refused to submit to North Carolina jurisdiction. The Court, however,
3 Indeed, the Florida state court subpoena has already been upheld, even on appeal. Under Judge
Turner’s order, EBS will be compelled to produce the requested documents once the parties reach some
mutual agreement by which EBS’s outside counsel gains “attorney’s eyes only” access to IPS
documents produced in the present case. (Pls. Suppl. Disc. Status Report 1–2).
reserves to Plaintiffs the right to renew their motion in the event that all reasonable
efforts to obtain the documents directly from EBS fails.
{21} Plaintiffs next allege that even if Mr. Osae lacks actual possession, he has
access to information responsive to Plaintiffs’ discovery requests, which he should be
compelled to produce in the circumstances present here. (See, e.g., Renewed Mot.
Compel 9–11; Reply Supp. Renewed Mot. Compel 7.) Mr. Osae has not denied this
allegation but instead argues that he does not have “custody or control,” or a “legal
right to obtain” the EBS documents that Plaintiffs seek to discover under Rule 34,
because, as an agent of EBS, he has no authority to obtain and turn over his
principal’s trade secret information. (Def.’s Mem. Supp. Objections Pls.’ Disc. Reqs.
6–8.)
{22} In response, Plaintiffs contend that under North Carolina law, the principal,
i.e., EBS, can be held vicariously liable for the tortious conduct of its agent, i.e., Mr.
Osae. Thus, Plaintiffs argue that this agency relationship compels the production of
the requested documents because, while Mr. Osae allegedly misappropriated IPS’s
trade secrets, he was purportedly “targeted for employment by EBS; provided a 25%
membership interest in EBS without a capital contribution; is a Member/Manager of
EBS; is the Vice President of Technology; is solely responsible for the development of
EBS structural adhesive products; is the author of the EBS documents sought; and
utilized IPS’s trade secret information in the development of EBS’s products.” (Pls.’
Resp. Br. to Def.’s Mem. Regard. Outstand. Disc. Disputes 5.) Accordingly, IPS
contends that “discovery regarding the structural adhesive products developed by
Defendant Osae, as an agent of EBS, is certainly warranted under North Carolina
law.” (Pls.’ Resp. Br. to Def.’s Mem. Regard. Outstand. Disc. Disputes 5.) Plaintiffs’
second argument therefore ultimately focuses on the relevance of the requested
information.
{23} The issue here, however, is not the information’s relevance; rather, the issue
is whether relevant information can be compelled from EBS’s agent or whether
Plaintiffs must obtain the relevant discovery from EBS directly. Although Mr. Osae
may have practical “possession, custody or control” over EBS’s trade secret
information, Plaintiffs have not proffered evidence showing that Mr. Osae is EBS’s
principal or otherwise has actual authority to turn over EBS’s confidential trade
secret information. While North Carolina law is clear that a principal may be
compelled to turn over the principal’s documents that are in the “possession, custody
or control” of his agents, this Court has found no authority compelling an agent to
turn over his principal’s confidential trade secret information. See generally State v.
Weaver, 359 N.C. 246, 258,
607 S.E.2d 599, 606 (2005) (“Two essential elements of an
agency relationship are: (1) the authority of the agent to act on behalf of the principal,
and (2) the principal’s control over the agent.”) (emphasis added); SCR-Tech,
2014
NCBC LEXIS 72, at *27–29 (plaintiff failed to adequately rebut that evidence in its
“possession, custody or control” was spoliated, because plaintiff, at some point in time,
had the practical ability to obtain and had de facto control over the evidence, it
belonged to plaintiff, and it could have been accessed by an agent through permission
granted by plaintiff).
{24} Although North Carolina’s appellate courts have yet to address this specific
issue, the Court finds authority from other jurisdictions persuasive in determining
whether a company’s confidential trade secret information is discoverable from an
employee of the company, when the company is neither joined in the action nor has
given its employee permission to disclose its information. See e.g., Braswell v. United
States, 487 U.S. 99, 109–10 (1988) (“The [U.S. Supreme] Court has consistently
recognized that the custodian of corporate or entity records holds those documents in
a representative rather than a personal capacity.”); Shcherbakovskiy v. Da Capo Al
Fine, Ltd.,
490 F.3d 130, 139 (2d. Cir. 2007) (holding that chairman and minority
shareholder could not be compelled to produce company documents absent a finding
that he had undisputed control of the board); Am. Maplan Corp. v. Heilmayr,
203
F.R.D. 499, 501 (D. Kan. 2001) (holding that minority shareholder could not be
compelled to disclose company documents in a lawsuit against him personally, absent
evidence that he was the “alter ego” of the company); In re Kuntz,
124 S.W.3d 179,
184 (Tex. 2003) (holding that the employee’s “mere access to the relevant [documents]
does not constitute physical possession of the documents under the definition of
‘possession, custody or control’” because his access to the information was strictly
limited to the use of the documents in furtherance of his employer’s services); Moore’s
Federal Practice § 34.14 (2)(c) (“When an action is against an officer individually, and
not also against the corporation, production may be denied unless there is evidence
that the officer is the ‘alter ego’ of the corporation.”).
{25} Plaintiffs correctly assert that Mr. Osae, as a 25% owner and a membermanager of EBS, rises above the level of a mere employee. Plaintiffs have not,
however, demonstrated to the Court that Mr. Osae, as a minority owner of EBS, can
be compelled to produce confidential or proprietary company documents under North
Carolina law on the basis of his minority ownership interest.
{26} Additionally, it appears to the Court that Mr. Osae’s 25% ownership interest
would not give him an unqualified right to obtain the requested documents from EBS
under Florida law.4 See Fla. Stat. § 605.0410(2) (2015); Louis T.M. Conti and Gregory
M. Marks, Florida’s New Revised LLC Act, Part II, Fla. B.J., Nov. 2013, at 50
(describing a member’s access rights to documents as limited to those which are
material to the member’s rights and duties under the operating agreement and
preserving the LLC’s right to object to unreasonable or improper requests).
Nevertheless, the Court notes that Mr. Osae’s demand rights may conceivably entitle
him to access EBS’s requested trade secrets and proprietary information under
Florida law under appropriate circumstances, but the record as it stands does not
support that conclusion. Should Plaintiffs develop or uncover evidence that Mr.
Osae’s demand rights entitle him, or other similarly situated EBS owners, to obtain
the requested confidential and proprietary information, such facts might argue for a
different conclusion.
{27} In summary, Plaintiffs have not pointed to any North Carolina or persuasive
authority finding that a person’s status as an agent, employee, minority shareholder,
or part-owner of a company equates to “possession, custody, or control” of the
company’s confidential or proprietary documents for purposes of discovery.
4 EBS is organized as a member-managed LLC under Florida law. (Am. Compl. ¶ 42.)
Accordingly, the Court concludes that Mr. Osae is not required to produce EBS’s
corporate documents in discovery and, thus, that Plaintiffs’ Motion to Compel Mr.
Osae to produce EBS’s documents should be denied.
B. “Highly Confidential—Attorney’s Eyes Only” Documents
{28} The CPO stipulates that the designation “Highly Confidential—Attorney’s
Eyes Only” shall “be minimally used and an effort will be made to limit its use to
information which is proprietary business information relating to recent, present, or
planned activities of the designating party and which has been and is being
maintained in confidence by the designating party.” (CPO ¶ 3(b).) Such documents
shall be made available only to the parties’ outside counsel of record, with limited
exceptions. (CPO ¶ 3(b).)
{29} Under the CPO, documents designated as Highly Confidential—Attorney’s
Eyes Only may be disclosed to certain people other than outside counsel of record
provided they meet certain criteria. The current dispute revolves around the
following language:
In addition, such documents may be made available to the following, to
the extent it is reasonably necessary to disclose the material to them for
purposes of this action; they are not a party to this action or an affiliate
of any party to this action or a competitor or [sic] any party to this action;
and they are not current or former officers, directors, consultants or
employees of any party to this action, or of any affiliate of any party to
this action, or of a competitor of any party to this action:
....
v) the author, addressee or any other person identified in the
material as a recipient thereof, who would otherwise be entitled
to receive and retain such information.
. . . If a person identified in item (v) is not a party or the member, officer,
director, or employee of a party, then such person must first sign
an agreement . . . agreeing to be bound by this Order.
(CPO¶ 3(b)).
{30} Mr. Osae argues that he should be given to access to Plaintiffs’ Supplemental
Responses to Defendant’s discovery requests, which his counsel received on June 29,
2015, and which identify the trade secret, confidential, and proprietary information
that Plaintiffs allege Mr. Osae misappropriated. Mr. Osae advances this argument
on the grounds that he qualifies under the “author” exception of Paragraph 3(b)(v).
Alternatively, he claims that those documents should be re-classified as
“Confidential” because their contents relate to past trade secrets while the Highly
Confidential—Attorney’s Eyes Only designation is intended for “recent, present, or
planned activities of the designating party.” (Def.’s Mem. Supp. Objections Pls.’ Disc.
Reqs. 8–10.)
{31} Mr. Osae further contends that the CPO is ambiguous as to whether parties
can access Highly Confidential—Attorney’s Eyes Only documents under the author
exception. He reads Paragraph 3(b)’s sentence beginning “If a person identified in
item (v) is not a party” as contemplating a scenario in which a party may gain access
under the author exception to Highly Confidential—Attorney’s Eyes Only materials
despite the express statements to the contrary in other parts of Paragraph 3(b).
Citing the rule that ambiguities in contract language must be construed against the
drafter, Mr. Osae urges the Court to resolve this purported ambiguity in his favor.
(Def.’s Mem. Supp. Objections Pls.’ Disc. Reqs. 10) (quoting Cosey v. Prudential Ins.
Co. of Am., 735 F.3d 161, 169 (4th Cir. 2013) (citation omitted)). Plaintiffs challenge
this interpretation of Paragraph 3(b), suggesting instead that there is no ambiguity
and that the phrase “if a person identified in item (v) is not a party” simply bolsters
the express restriction of Highly Confidential—Attorney’s Eyes Only materials to
non-parties. (Pls.’ Resp. Br. to Def.’s Mem. Regard. Outstand. Disc. Disputes 8–9.)
{32} As an initial matter, Mr. Osae has failed to demonstrate that Plaintiffs are
the “drafters” of the language in question and thus is entitled to have any ambiguity
in the CPO construed against Plaintiffs. See Novacare Orthotics & Prosthetics E.,
Inc. v. Speelman, 137 N.C. App. 471, 476,
528 S.E.2d 918, 921 (2000) (citation
omitted) (defining “drafter” as the party responsible for choosing the questionable
language). To the contrary, the parties jointly moved for entry of the CPO and jointly
stipulated to the CPO, and neither the motion nor the stipulation indicates a primary
drafter.
{33} Turning then to the CPO language in question, the Court does not find Mr.
Osae’s suggested contract construction persuasive. The Highly Confidential—
Attorney’s Eyes Only designation gives access only to outside counsel and, when
necessary, to certain people falling within one of five permissive categories, so long
as those persons are not parties to the action. (CPO ¶ 3(b)). The five permissive
categories are (i) paralegals and support personnel employed by outside counsel, (ii)
consulting experts and testifying experts engaged by outside counsel, (iii) deposition
court reporters and videographers, (iv) the Court and its personnel, and (v) “the
author, addressee or any other person identified in the material as a recipient thereof,
who would otherwise be entitled to receive and retain such information.” (CPO ¶ 3(b)).
Under the plain meaning of these provisions, it is certainly likely that a party to the
action might fall within item (v). A party to the action, however, would not fall within
items (i)–(iv) because those categories identify persons connected to outside counsel
or the Court and not to the facts relevant to the underlying dispute. Therefore, the
Court concludes that the language in question – “[I]f a person identified in item (v) is
not a party . . . [then he must first agree to be bound by this Order]” – merely serves
to bolster the prohibition of party access to Highly Confidential—Attorney’s Eyes
Only materials and does not permit Mr. Osae to take advantage of the author
exception since he is a party defendant. In short, the CPO contemplates that “certain
areas of proprietary information may require special handling and should not be
available even to the parties,” (CPO ¶ 3(b)), and the Court concludes that Plaintiffs
have properly invoked that protection over their Supplemental Responses here.
{34} Alternatively, Mr. Osae seeks reclassification of Plaintiffs’ Supplemental
Responses as “Confidential” rather than “Highly Confidential—Attorney’s Eyes
Only.” First, Mr. Osae asserts that Plaintiffs improperly classified the documents
under the CPO, which states that the Highly Confidential—Attorney’s Eyes Only
designation “shall be minimally used” and should be reserved for “proprietary
business information relating to recent, present or planned activities” of the
designating party. (CPO ¶ 3(b).) The documents should be reclassified, Mr. Osae
argues, because they regard Plaintiffs’ trade secrets developed in the past and do not
relate to Plaintiffs’ “recent, present, or planned activities.” (Def.’s Mem. Supp.
Objections Pls.’ Disc. Reqs. 10.)
{35} Under the CPO, the designating party bears the burden of maintaining its
challenged designation. (CPO ¶ 4.) Plaintiffs posit here that the trade secrets and
proprietary materials designated as Highly Confidential—Attorney’s Eyes Only
represent their recent and present activities because they are currently
manufacturing product lines using those trade secrets that they believe Defendant
misappropriated. (Pls.’ Resp. Br. to Def.’s Mem. Regard. Outstand. Disc. Disputes 8.)
The CPO does not further define or explain the phrase “recent, present, or planned
activities,” and the Court concludes that, under such broad terms, Plaintiffs have
adequately demonstrated that their trade secrets and proprietary material relate to
recent or present manufacturing and sales activities. Thus, the Court declines to
reclassify the Highly Confidential—Attorney’s Eyes Only designation of Plaintiffs’
Supplemental Responses on this basis. See Mainstreet Collection, Inc. v. Kirkland's,
Inc., 270 F.R.D. 238, 246–47 (E.D.N.C. 2010) (looking to the parties’ agreed-upon CPO
terms in denying a motion to re-designate).
{36} Next, Defendant claims that much of the Highly Confidential—Attorney’s
Eyes Only material has already been made public through the European Patent
Application of Defendant Scott Bader, Inc., and that Mr. Osae’s ability to view those
documents is essential to his defense. Plaintiffs argue in opposition, however, that
stripping away the Highly Confidential—Attorney’s Eyes Only designation on the
basis of public disclosure in the Patent Application would be unfair and contrary to
public policy in this case where the Patent Application is part of Mr. Osae’s alleged
misappropriations. (Pls.’ Resp. Br. to Def.’s Mem. Regard. Outstand. Disc. Disputes
9; Am. Compl. ¶ 41.)
{37} The Court finds Plaintiffs’ contention persuasive based on the current
record. Moreover, the Court finds the two non-binding cases Mr. Osae relies upon to
advance his argument distinguishable from the instant case. First, in LendingTree,
Inc. v. LowerMyBills, Inc., No. 3:05CV153-C, 2006 U.S. Dist. LEXIS 84915 (W.D.N.C.
Nov. 20, 2006), the federal magistrate judge removed the confidentiality designation
from certain documents that had been publicly disclosed in an earlier trial. Unlike
here, however, the LendingTree case did not involve the removal of the confidentiality
designation from documents, the misappropriation of which comprised part of the
alleged misconduct in the case. Similarly, in Haemonetics Corp. v. Baxter Healthcare
Corp.,
593 F. Supp. 2d 298 (D. Mass. 2009), the federal district court removed an
“outside counsel’s eyes only” designation when no good cause for a heightened
designation was shown and the heightened designation prohibited access to expert
witnesses and others. Unlike the “outside counsel’s eyes only” designation in
Haemonetics, however, here Mr. Osae’s ability to defend his case is not unfairly
prejudiced by the Highly Confidential—Attorney’s Eyes Only designation because the
CPO’s Highly Confidential—Attorney’s Eyes Only designation provides access to
consulting and testifying experts and their employees engaged by outside counsel.
(CPO ¶ 3(b)(ii).)
{38} Accordingly, the Court is not persuaded that Plaintiffs have improperly
invoked the Highly Confidential—Attorney’s Eyes Only designation or that the
designation should be reclassified to Confidential. The Court thus concludes that Mr.
Osae’s request to view Plaintiffs’ Supplemental Responses to discovery requests
should be denied but without prejudice to Mr. Osae’s right to renew his request for
good cause should new evidence be developed or circumstances materially change.
III.
CONCLUSION
{39} WHEREFORE, the Court hereby DENIES Plaintiffs’ Motion to Compel
Discovery Responses from Defendant Samuel B. Osae without prejudice to Plaintiffs’
right to renew its Motion for good cause shown, and DENIES Mr. Osae’s request to
view Plaintiffs’ Supplemental Responses to discovery requests without prejudice to
Mr. Osae’s right to renew his request for good cause shown.
SO ORDERED, this the 28th day of September, 2015.
/s/ Louis A. Bledsoe, III
Louis A. Bledsoe, III
Special Superior Court Judge
for Complex Business Cases
