September 24, 2012 Top Story

Cautionary Tale: Attorneys Must Guard Confidential Information

Attorneys can be subject to sanctions even for inadvertent violation of protective orders

Sara E. Costello

Attorneys can be sanctioned under Fed. R. Civ. P. 37(b) for violations of protective orders, even when inadvertent, the U.S. Court of Appeals for the Fifth Circuit recently held. Smith & Fuller, P.A. v. Cooper Tire & Rubber Co [PDF]. In approving the $29,667 fee award imposed on appellants, the Fifth Circuit rejected the Eleventh Circuit’s prior “narrow reading of Rule 37(b)” in Lipscher v. LRP Publications, Inc.

Mistaken Disclosure of Confidential Documents Results in Sanctions Award 

In a products liability lawsuit involving Cooper Tire & Rubber Company, the U.S. District Court for the Southern District of Texas entered a confidential protective order pursuant to Rule 26(c). Cooper fought for strict language in the protective order and alleged it ultimately “produced thousands of pages of trade secrets or confidential information in reliance” on the order.

Shortly before trial, plaintiffs’ counsel participated in a conference for personal injury attorneys on “obtaining discovery from Cooper.” Counsel mistakenly copied onto disks and distributed to the attorneys attending the conference some of the confidential information produced by Cooper in the products liability case. Upon a motion brought by Cooper, the district court found the plaintiff’s counsel’s dissemination of the disks violated the protective order.

After the violation was discovered, the district court ordered plaintiffs’ counsel to immediately take action to correct the violation. Further, although the court found [PDF] that the law firm did not willfully violate the protective order, it ordered them to pay Cooper $29,667 in fees and expenses. The court imposed this sanction pursuant to Rule 37(b), which allows sanctions when parties fail “to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a).” Noting that plaintiffs’ counsel had previously violated a similar protective order, the court held that the sanction was necessary “to deter future violations of protective orders and to reflect the seriousness of such orders.” The court also considered it significant that “Cooper had sought a strongly worded protective order and had vigorously moved for its enforcement.”

The Fifth Circuit Affirms Sanctions under Rule 37(b) 

Plaintiffs’ counsel then appealed to the Fifth Circuit, contending that the disclosure was inadvertent and that such a high award was unreasonable. The Fifth Circuit disagreed, finding “it was well within the court’s discretion to use sanctions as a tool to deter future abuse of discovery.”

In doing so, the Fifth Circuit refused to follow a “narrow” contradictory holding from the Eleventh Circuit that had held federal district courts lacked authority to impose Rule 37(b) sanctions for violation of Rule 26(c) protective orders. In Lipscher v. LRP Publications, Inc., the Eleventh Circuit had relied on the literal language of Rule 37(b)(2), emphasizing the rule “does not mention Rule 26(c) protective orders,” and concluding protective orders are not orders “to provide or permit discovery” and do not fall within the scope of Rule 37(b)(2).

Rejecting the Lipscher logic, the Fifth Circuit found there is “significant authority in support of the imposition of Rule 37(b) sanctions for violation of Rule 26(c) protective orders.” It cited to holdings in the Ninth Circuit and U.S. District Court for the District of Maine in support of this rule interpretation.

The Fifth Circuit also rejected the appellants’ argument that the amount of fees awarded to Cooper was unreasonable. It found that “[t]he extra time and effort exerted on this matter could have been avoided” if the appellants had “been more careful in the handling of Cooper’s confidential materials.”

Inadvertent or Outrageous Behavior?

Some attorneys are troubled by the idea that counsel could inadvertently disclose information and yet still be sanctioned. If the disclosure was “inadvertent, then sanctions are not warranted,” believes David J. Wolfsohn, Philadelphia, past cochair of the ABA Section of Litigation’s Trial Evidence Committee. In addition, he believes the Eleventh Circuit’s interpretation of the rules is the more widely accepted view of the civil procedure rules within the legal community. The “common perception is that there is a difference between an order to compel and a protective order,” he says.

Other attorneys believe the Fifth Circuit’s ruling was more in response to contemptible behavior than a plot to expand attorneys’ fear they are going to be sanctioned for mistakes. In fact, the disclosure of confidential documents in the case was “outrageous,” argues James A. King, Columbus, OH, vice-chair of the Section of Litigation’s Trial Evidence Committee. He notes that the disclosure of confidential material was widely distributed in electronic form, made at a conference specifically targeting Cooper Tire, and the lawyer had previously been sanctioned for similar behavior. Therefore, “the ruling is not surprising. I would assume under facts like these, the violation could result in sanctions,” says King.

Advice on Complying With Protective Orders

Even so, there are certain lessons attorneys can take from this case to prevent sanctions and the violation of a protective order, King notes. Attorneys must understand the scope of the protective order involved in their case, he says. Further, he advises if the disclosure of confidential material occurs, attorneys should “take immediate steps to retrieve the documents or get assurances that they were destroyed.” Wolfsohn agrees. “These cases are cautionary tales; attorneys should remember that they may be held to a very high standard,” he says.

Sara E. Costello is an associate editor for Litigation News.

Keywords: confidential information, protective orders, sanction, Fifth Circuit

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