Wednesday, January 29, 2014

So Much for the Routine Protective Order

Nativi v. Deutsche Bank National Trust Company, No. H037715 (D6 Jan 23, 2014)

This meat of case deals with a significant issue in mortgage foreclosure law: when is a foreclosing bank required to honor a tenant
s lease to the foreclosed property. (Youll have to read the opinion if you want the answer to that question.) But it also addresses an interesting issue about protective orders. It holds that the trial court abused its discretion by granting a contested motion for protective order. Notably, the order the court gets reversed for entering contained many of the stock provisions that are common fare in the routine protective orders to which parties regularly stipulate.

The defendants in the case resisted giving some documents to the plaintiffs on the ground that they were confidential. The court did not agree. It granted a motion to compel and ordered them produced within twenty days. 

After defendants lost the motion, they tried to negotiate a stipulated protective order with the following features: (1) it would have permitted a producing party to prospectively designate documents as “confidential” at the time of their production; (2) it provided a procedure for receiving parties to challenge that designation with the court; (3) it precluded the use of documents marked confidential outside of the litigation; and (4) it require a party to request under seal with the court before filing confidential-marked documents

Plaintiffs declined to negotiate along those lines, taking the position that discovery in the case should be subject to public dissemination. So defendant went in ex parte to seek the entry of the order. The materials submitted with defendant’s application neither explained why the documents at issue contained confidential information nor provided any articulated basis for why defendants would be prejudiced absent the order. The court nonetheless granted the application and signed the proposed order. After plaintiffs lost summary judgment, they included the protective order issue in their appeal.

The court of appeal first disposed of plaintiffs’ argument that the request for a protective order was untimely. The trial court has a great deal of discretion on the issue. That it permitted the defendant to seek the order ex parte after the documents were ordered compelled was not enough to constitute an abuse of that discretion.

But on the merits of the protective order, the court of appeal did not agree. It did note that parties often enter broad stipulated orders that facilitate discovery by deferring disputes about what documents are actually confidential until a real dispute develops on that issue. But the parties never reached an agreement in this case. It was thus incumbent on defendant to meet its burden to show good cause. Notably, the court here expresses some doubt as to whether a court could ever issue an “an umbrella protective order that allows the parties to designate as confidential documents produced in discovery and specifies the permissible use of those designated documents” on a contested motion. (citation omitted). But even if it could, the defendants ex parte submission was “entirely conclusory and lacked any factual specificity” and thus did not meet the defendant’s burden to establish good cause. Defendant showed neither that the documents it was ordered to produce contained information in which it had a protectable confidentiality interest, nor how dissemination of the documents would result in an injury. Further, the order was overbroad in that it contained restrictions that went beyond restricting the use of the documents in advance of trial. The trial court thus abused its discretion in issuing the order.

Reversed in relevant part.

There has long been a disconnect between the kind of information many parties consider confidential and the kind of information the courts are willing to protect by entering a protective order on a contested motion. This case illustrates that disconnect. Although the decision is doubtless correct that the defendant here did not meet its burden to show good cause by a preponderance of the evidence, the language used in this opinion arguably goes well beyond that. Indeed, it doesn’t take a strained reading to understand the opinion as holding in that a party could never get the degree of protection commonly afforded under a stipulated “umbrella” or “blanket” protective order—i.e., the right to provisionally designate material confidential without making a document-by-document showing to the court—in the absence of an agreement between the parties.

If that
s what the courts suggesting, it is going too far. Although an “umbrella” or “blanket”* order like that sought by defendant is not warranted in every case—or in this case in particular—there is no reason why these kinds of orders should be per se improper, even in the absence of a stipulation. Indeed, the Federal Judicial Center’s Manual of Complex Litigation first endorsed their use in its second edition—which came out around the same the Discovery Act was passed—even when entered subject to a contested motion. The Manual continues to do so in its most recent version. See Manual of Complex Litigation, Fourth § 11:432 & n.126 (2004); see also id. § 420.27 (sample order). The Manual's position has been adopted by many federal courts. See generally Pansy v. Borough of Stroudsburg, 23 F.3d 772, 787 & n.12 (3d Cir. 1994); Poliquin v. Garden Way, Inc., 989 F.2d 527, 532 (1st Cir. 1993); Cipollone v. Liggett Grp., Inc., 785 F.2d 1108, 1122–23 (3d Cir. 1986); Gillard v. Boulder Valley Sch. Dist. Re.-2, 196 F.R.D. 382, 386 (D. Colo. 2000) (“The agreement of all parties is not required for the entry of a blanket protective order, however, so long as certain conditions are met.”); Parkway Gallery Furniture, Inc. v. Kittinger/Pa. House Grp., Inc., 121 F.R.D. 264, 268 (M.D.N.C. 1988) (same). Indeed, some federal district courts even provide their own sample umbrella orders.

These cases reason that an umbrella protective order is permissible, even without an agreement, so long as: (1) the moving party makes a threshold showing of good cause that the case will involve confidential material; (2) the designating party is required to act in good faith; and (3) in the event of dispute, the ultimate burden of establishing the protected nature of a document rests with the designating party. I would add that one additional requirement, unspoken in these cases, but present in all of them: That a document-by-document review by the court to address confidentiality issues would be wasteful of the court’s and the parties’ resources. Obviously, an umbrella order might be overkill in a slip-and-fall case with fifty pages of discovery, total. But in a case where there could be hundreds of thousands or even millions of documents in discovery, requiring a producing party to make a document-by-document showing of confidentiality to the court in the first instance is not in the interest of the litigants, much less an efficient use of the limited time of a busy trial court. See In re Alexander Grant & Co. Litig., 820 F.2d 352, 356 (11th Cir. 1987) (“Busy courts are simply unable to hold hearings every time someone wants to obtain judicial review concerning the nature of a particular document.”); Gillard, 196 F.R.D. at 385–86 (“In cases with more than a few sensitive documents, the use of particular protective orders can prove inefficient and burdensome because it requires a court to review and make a determination about each piece of information for which protection is sought before that information is disclosed to the other side.”).

California courts have previously recognized the utility of umbrella protective orders in greasing the wheels of civil discovery. See Mercury Interactive Corp. v. Klein, 158 Cal. App. 4th 60, 98–99 (2007). Indeed—so long as they leave the ultimate burden on the producing party in the event of a dispute—they further a core policy that pervades the Discovery Act: “to keep the trial courts out of the business of refereeing day-to-day discovery by requiring parties to conduct discovery and resolve disputes with minimal judicial involvement.” Fairmont Ins. Co. v. Superior Court, 22 Cal. 4th 245, 253–254 (2000). Courts should thus be reticent to “adopt a construction of the discovery provisions that would plunge the trial and appellate courts back into a sea of discovery disputes when their dockets are already at flood stage.” Id. (quotation omitted).  In complex cases, a per se rule that a trial court abuses its discretion by entering a protective order permitting a provisional designation of confidentiality by the producing party without a document-by-document showing to the court would do just that.

* Some courts have differentiate between blanket and umbrella orders by suggesting that one or other other treats everything as confidential while the other requires at least a good faith confidentiality designation by the producing party. The usage is not consistent. To be clear, in referring to either I mean only orders that permit designation.

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