Czarninski Baier de Adler v. Upper New York Investment Company, LLC, C.A. No. 6896-VCN (Sept. 28, 2012).
Why is this case important? This decision addresses some of the practical problems parties face when dealing with multi-national related litigation and protective orders limiting who can review discovery. In this case, the individuals in question were plaintiff’s husband and plaintiff’s non-U.S. lawyers. The Court found that the plaintiff’s husband would be permitted to have access to materials designated by defendants as “confidential” and plaintiff’s non-U.S. lawyers would be allowed access to materials designated by defendants as “highly confidential.”
In this case, there are allegations that Delaware entities were formed to defraud the plaintiff who is a resident of Israel. As the Court noted, the “burden of proving that particular information is confidential and entitled to restrictions on use and public access is placed on the party seeking confidential treatment.” “Where designations of confidentiality have been made pursuant to a protective order, the burden is on the designating party to show good cause why its designations should be sustained if the non-designating party objects.” That burden is satisfied by a showing that “disclosure of the information would work a clearly defined and serious injury.” As a result, the defendants, as the designating party, had the burden to show good cause why their restrictive designations should bind both plaintiff’s husband and her out-of-country lawyers which, the Court found, the defendants failed to do.
With respect to the request to prohibit the husband from seeing certain information, the Court stated:
Although a non-party spouse carve-out may be appropriate in some cases, while inappropriate in others, this Court is persuaded that [plaintiff]’s request is reasonable and appropriate under the circumstances. For a spouse to confide in her husband and to seek his guidance on litigation matters are not unusual, especially in an intra-family dispute involving millions of dollars. Moreover, [plaintiff]’s request is understandable given that she has consistently relied upon her husband to handle family business and litigation matters. Because their interests are presumably unified, it is relatively unlikely that the husband would risk tainting [plaintiff]’s stature before this Court by independently violating a protective order. And, to the extent that Defendants need to restrict highly sensitive information from the husband, they may do so because he will not have access to their ‘highly confidential’ information. Thus, for the foregoing reasons, the Court will allow [plaintiff]’s husband access to Defendants’ ‘confidential’ information provided that he signs a declaration that he is willing to abide by the terms of the protective order and submit to the jurisdiction of this Court.
With respect to the defendants argument that plaintiff’s non-U.S. counsel should not be permitted access to certain information, the Court noted that the “attorneys’ eyes only” designation is disfavored by this Court and is only appropriate where “compelling circumstances warrant protection of the information,” for example, with regard to trade secret information. The Court went on to state:
[t]here is some risk that [non-U.S. Attorneys], with access to Defendants’ highly confidential information, could use this information, intentionally or unintentionally, against them in the actions pending in Israel and Ecuador, and then frustrate, and perhaps evade, the enforcement of a protective order [but] the Court is not persuaded that this risk warrants protection beyond the terms of the proposed protective order.
Much of this risk (if not all of it) derives from the fact that these international actions are related and Defendants’ highly confidential information might be useful, to some extent, in all of the proceedings. There is no specific risk that arises simply because a lawyer is not readily amenable to the jurisdiction of this Court. Moreover, Defendants cite no authority for barring a person from having access to confidential information under a protective order solely because he or she resides in a foreign country. [non-U.S. Attorneys] have given assurances (under penalty of perjury) that they will be bound by the terms of the proposed protective order and submit to the jurisdiction of this Court for any enforcement proceedings related to any alleged violation of the protective order. Defendants have not conjured up any reason why this Court should doubt their declarations….The multiple-venue litigation among the parties would seem inevitably to overlap, and the uncertainties of overlapping discovery efforts, subject to different discovery rules, would seem to be unavoidable. Regardless, the Defendants have not shown that those uncertainties justify limiting the access of [non-U.S. Attorneys] to ‘highly confidential’ materials beyond the limitations imposed on lawyers in the United States.