Knight Capital Partners Corp. v. Henkel AG & Co.
290 F. Supp. 3d 681
E.D. Mich.2017Background
- KCP brokered a proposed three-way deal among itself, Henkel Corporation (Henkel US), and AIS for patented oil‑cleaning technology; KCP alleges Henkel KGaA (Henkel Global) induced Henkel US to scuttle the deal and breached a nondisclosure agreement.
- KCP served written discovery on Henkel Global and a subpoena on Henkel US seeking communications, contracts, presentations, meeting notes, and other documents about the negotiations and related business plans.
- Henkel Global and Henkel US objected, invoking EU/German data‑privacy laws and demanding an onerous protective order with model contractual clauses, unilateral redaction rights, a two‑tier confidentiality regime, and automatic sealing of court filings.
- KCP moved to compel; Henkel US moved to quash or obtain a protective order; Henkel Global moved for a protective order. Henkel Global submitted an expert affidavit interpreting the German Federal Data Protection Act as broadly blocking production.
- The court reviewed the statute, the parties' submissions, and precedent, and concluded the German law contains a litigation exception permitting necessary disclosures; it denied many of Henkel’s proposed restrictions and granted KCP’s motions to compel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a two‑tier confidentiality designation (Confidential / Attorney’s‑Eyes‑Only) is permissible | Two‑tier is unnecessary and may be abused; KCP's principals should access documents | Need E‑A‑O to protect trade secrets and prevent principal‑level competitive misuse | Allowed: two‑tier designation permitted; parties may challenge specific designations to court |
| Whether automatic sealing of filed materials is permitted | Blanket sealing is unwarranted; sealing must be justified document‑by‑document | Automatic sealing needed to protect confidential information from public disclosure | Denied: automatic sealing rejected; sealing requires compelling, narrowly tailored justification |
| Whether German Federal Data Protection Act bars production of discovery | Discovery is necessary for U.S. litigation; statute contains an exception for transfers "necessary...for the establishment, exercise or defence of legal claims" | German law and commentary prohibit disclosure of personal data in pre‑trial discovery; Hague Convention and German process required | Held for KCP: statute's litigation exception applies; German privacy law does not bar production here; defendant failed to carry burden to show prohibition |
| Whether subpoena to Henkel US should be quashed or conditioned on Henkel’s model clauses | Subpoena seeks relevant documents; production should proceed subject to reasonable protective order | Quash or issue protective order with specific European model clauses and redaction control; invoke blocking statute | Denied quash; compelled production by set date; protective order granted in part and denied in part |
Key Cases Cited
- Loyd v. Saint Joseph Mercy Oakland, 766 F.3d 580 (6th Cir.) (discovery scope is traditionally broad)
- In re Ohio Execution Protocol Litigation, 845 F.3d 231 (6th Cir.) (discussing Rule 26 limits and protective order standards)
- Paycom Payroll, LLC v. Richison, 758 F.3d 1198 (10th Cir.) (recognizing attorney‑eyes‑only for trade secrets)
- Shane Group, Inc. v. Blue Cross Blue Shield of Michigan, 825 F.3d 299 (6th Cir.) (sealing court records requires compelling reasons and narrow tailoring)
- Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court, 482 U.S. 522 (Sup. Ct.) (foreign blocking statutes do not automatically bar U.S. court‑ordered discovery; comity and Restatement factors guide analysis)
- de Fontbrune v. Wofsy, 838 F.3d 992 (9th Cir.) (Fed. R. Civ. P. 44.1 permits courts to consider varied sources and conduct independent inquiry into foreign law)