Diamond Ventures v. Barreto, Hector

892

States does not outweigh citizens the facts a ‘direct effect’ in the United States makes they intent”) that organized company unlikely outside Congress’ this was the United States and that its (emphasis original); losses I.T. Consul- cf. tants, instant Republic Pakistan, transaction thus occurred else Inc. v. 351 of where.”) 1184, (D.C.Cir.2003) (Pakistan’s contrary. is not F.3d 1190 Weltover Weltover, 619, payment failure to meet obligation 504 U.S. 112 S.Ct. 2160 under (U.S. providing contract “place performance payment was for Ar in Virginia gentina’s had direct effect in obligations”; ultimate U.S. because contractual “the in- volvement of a U.S. bank was rescheduling obligations immediate therefore had unavoidable”). Neither “[m]oney Rong’s direct effect in U.S. because mone- tary loss nor his supposed was loss of control over Bril- have been delivered to a Holdings liance New York caused the deposit bank not forth di- was rect effect in coming”); the U.S. to allow him Walpex Trading see also to sue Co. v. Zedan, Liaoning Province. Yacimientos 849 Fiscales Bolivia F.2d Petroliferos nos, (S.D.N.Y. at (injury F.Supp. foreign suffered country 389-90 1989) (direct that has “eventual” effect in effect U.S. does not United States found effect). constitute direct activity when commercial Nor is the gov of Bolivian loss allegedly by third-party ernment’s suffered instrumentality occurred investors outside in the United a U.S. because contract States as result of was to be the one- performed day suspension primarily trading United on the foreign States and NYSE buyer sufficient establish a utilized U.S. direct effect. banking resources to v. payment). facilitate In Corzo Banco de Central Reserva the Second Cir del Peru, (9th Cir.2001) cuit’s F.3d (unanimously Weltover decision af (if entirely firmed cause action Supreme Court), arises in foreign the court country, declared fact “[t]he that courts United “often look to the States place computer legally companies might significant where have giving acts been af- by ... rise to fected the claim breaches [resulting occurred” to from determine Weltover, location Peruvian bank’s jurisdictionally act] “direct ir- effect.” relevant”). (2d Inc. v. Argentina, 941 F.2d Cir.1991); Trade, see also United World Prod,. Ass’n,

Inc. Mangyshlakneft v. Oil (10th Cir.1994), cert. de

nied, 513 U.S. S.Ct.

L.Ed.2d 787 (rejecting American citizen’s claim that profits his lost caused VENTURES, LLC, DIAMOND Appellee by foreign alleged state’s of oil breach contract entered into parties in Moscow BARRETO, Administrator, Hector V. specifying delivery of Sicily oil to with United States Small Business payment in Paris constituted direct effect Administration, Appellant. 1605(a)(2): under “[ajppellant section 1605(a)(2) No. interpret § have us 05-5258. in a manner give that would the district courts United States of Appeals, Court jurisdiction virtually over any arising suit District of Columbia Circuit. out of an overseas transaction in which an Argued May American claims citizen have suffered loss from July the acts of a Decided foreign state. We 1605(a)(2) think that language

limiting jurisdiction to cases where there is Burch, At- Assistant United States

Alan argued appellant. for the torney, the cause Wainstein, At- L. United States Kenneth Ryan, Assistant torney and Michael J. Attorney, R. were brief. United States Lawrence, States Craig Assistant United Attorney, appearance. entered argued for the N. Rose the cause Joshua appellee. HENDERSON, ROGERS

Before: GRIFFITH, Judges. Circuit capitalization, filed Opinion including general Court Circuit sources of Judge categories anticipated HENDERSON. investment MAQ, funds. reprinted Appendix Joint opinion Concurring filed Circuit (JA) 25. The states that the infor Judge ROGERS. kept mation “will included therein be con HENDERSON, LECRAFT KAREN fidential to the extent permitted law.” Judge. Circuit Id. Between December 2001 and October applied for Diamond Ventures an Barretto, Hector Administrator the from SBIC license the SBA four times (SBA), Small Business Administration See, and was a each time. denied license interlocutory seeks review of a district Pierson, Letter from D. e.g., Jeffrey SBA allowing principals court order the and Investment, Associate for (Di- Administrator employees of Diamond Ventures LLC Peek, Partner, C. Earl Ventures) Managing Dia to applications amond access (Feb. 25, 2003), mond Ventures 182. JA submitted to SBA connection with Diamond principal organizer, Ventures’ the SBA’s Small Business Investment Peek, complaint Earl then (SBIC) filed a Company program. The district against SBA, alleging behalf Diamond granted protective a court access via order applications had Ventures’ been denied on pursuant issued to Federal Rule of Civil the basis of race in Equal violation of Diamond Procedure 26 Ventures’ law- Act, Opportunity Credit 15 U.S.C. against following suit the SBA. For the seq.2 §§ 1691 et reasons, we grant interlocutory appeal, reverse district court’s order Pursuing discovery, Diamond Ventures and remand for further proceedings. sought production of all submitted other applicants SBIC to the SBA. The I. SBA offered Ventures’ counsel

Under program, the SBA’s see 15 SBIC access to all than more 300 SBIC §§ U.S.C. et seq., appli a successful applications it has on but opposed file dis- granted cant is to operate license as an applications closure of the to Diamond SBIC, capital a small venture resource employees on Ventures’ and small The guaran businesses.1 SBA grounds each applicant has an SBIC tees the SBIC’s securities the event expectation of privacy regarding its own fails, the SBIC allowing SBIC to bet MAQ policy and that the SBA’s tois treat leverage capital ter investment. the information contained therein confi- as application process heart of the involves parties dential. The not agree could on a applicant’s completion of Manage eventually order and filed simul- Questionnaire ment (MAQ), Assessment taneous for protective motions un- descriptions which includes detailed der Federal Rule of Civil Procedure 26(c)(7).3 applicant’s proposed operations, invest JA 65. The two motions strategies, expertise ment proposed except were identical that Diamond Ven- retto, 03-1449, 1. Unless otherwise noted the facts are taken Compl., No. 2nd Am. R. Doc. parties' the Memo, from submissions below. See Support Def's of Mot. for Prot. 26(c)(7) provides Order, may 3.Rule 6; party that a JA Plaintiff's Mem. re: Mot. Def’s trade Order, move "that a or other secret confiden- Prot. JA 65. research, development, tial or commercial in- originally brought pro Peek only the claim se on formation not revealed or be revealed behalf of designated way.” himself Diamond Ventures. Di- ain "[t]he Under rule amond Ventures later retained restricting counsel and court enter an order disclo- complaint filed an amended with as itself sure of trade secrets and confidential re- only search, plaintiff. development, Diamond Ventures v. Bar- or commercial informa- Order). “officers to allow its consideration The Reconsidera- sought tures’ version ... who have a need personnel other Order noted that Diamond Ventures pre- in order to use materials argued “persuasively[ would be ] prosecution in the and assist pare for cost for it to hire prohibitive independent MAQ applications action” access to this experts merely to review the documents. limited access to Diamond the SBA’s while Instead, rely principals’ it must on its ex- Compare Diamond counsel.4 Ventures’ pertise determining to assist counsel in ¶ 3(a)(ii), Prot. Order Proposed Ventures’ competitive what information is relevant Prot. Proposed with SBA’s Order JA to the claims.” Id. The ¶ 3(a), counsel 60. Diamond Ventures’ JA appeals SBA the three orders and could not argued that Diamond Ventures petitions for a alternative writ of manda- claim adequately its discrimination press preventing mus release the information. assistance because without Peek’s Appellant’s Br. 16-17. expertise. Diamond Ventures’ Peek’s that an outside hiring counsel also stated II. “pro- be expert to review the would A. Jurisdiction Pl.’s re: Def.’s

hibitively expensive.” Mot. v. In Cohen Industrial Loan Order, Prot. JA 75. Beneficial Mot. for 541, 1221, 69 S.Ct. 93 Corp., 337 U.S. 18, 2005 the court January On district (1949), the United L.Ed. 1528 States Su motion, the SBA’s by minute order denied preme Court set forth the “collateral or (Denial Order), week later and one JA 127 interlocutory authorizing der” doctrine motion, Diamond enter- granted Ventures’ long of an so as the order appeal “[1] order Dia- order that allowed ing conclusively disputed determined] employees mond Ventures’ question, important issue [2] resolved] (Protective MAQs. JA access to the 128 separate completely from the merits Order). for recon- The SBA filed a motion action, effectively unreviewable [3][is] 18, 2005, the April district sideration. On from a final Will v. appeal judgment.” motion, stating the SBA’s court denied — Hallock, -, , 126 S.Ct. U.S. - — that persuaded that it “was not 952, 957, (quota 163 L.Ed.2d 836 confidential, is MAQs] information [in omitted). doctrine is “strin tions or, claims, appli- as Defendant to gently]” applied “overpower so as not privacy in expectation have an cants finality of 28 substantial interests” 17, they Apr. 2005 submit.” (Re- § Id. 1291.5 JA 175 U.S.C. Reconsideration Order discovery.... disputed to docu- during ment team whose access The court obtained fit, limiting any plaintiffs' ability how to can sees fashion ments is used, it, may be who Ap- the information prosecute action at a feasible cost.” this al., et Federal Civil etc....” Baicker-McKee 2Br. n. 1. pellee's Handbook, ed.) (2003 (citing Se 571-2 Rules Rhinehart, 104 attle v. U.S. Times provides courts of 5. 28 U.S.C. (1984) (emphasis 81 L.Ed.2d 17 S.Ct. jurisdiction appeals appeals "shall have added)). courts of all final decisions the district from A is "final” un the United States.” decision management proposed 4. Diamond Ventures' nothing 1291 if it "leaves der section Peek, included, Dileep in addition Rao Pig judgment.” to do but execute the court pro- proposed Marbarosh. The SBA's Milton Veneman, (D.C.Cir. v. deny any sought tective order Diamond ford States, 2004) (quoting Catlin v. United principal employee access Ventures 229, 233, 65 89 L.Ed. 911 U.S. S.Ct. argues MAQs. Diamond Ventures before us (1945)). manage- only member of the Peek “is third weighed The first and Cohen factors against finality. the interest plainly are met this case. The Protec Morris, See United v. States conclusively (under tive (D.C.Cir.2003) Cohen, Order determines sole F.3d dispute: issue in this Ventures’ issue “if important the interests that principals’ employees’ access to potentially go unprotected without addition, MAQs. In granting the order immediate appellate review of that issue such access would be unreviewable at the significant efficiency are relative to the litigation’s end because the harm the SBA sought interests to be advanced adher alleges competitive harm to ap the SBIC rule”) — ence to the judgment (citing final plicants caused Diamond Ventures’ Digital Direct, Equip. Desktop 511 U.S. principals’ review MAQs— of the formers’ 863, 879, 114 S.Ct. 128 L.Ed.2d 842 could not be on appeal. undone See Provi (1994)); (“The id. at importance FBI, dence Journal v. 890 prong requires weighing institutionally (1st Cir.1979) (confidentiality lost once doc stake.”) significant status or relationship at pursuant uments were surrendered omitted). (quotations In Philip Morris we order; court quo “[t]he status could never held that a discovery order implicating the restored”). The closer issue is the attorney-client privilege significant was requirement, second Cohen which itself compared to the counterbalancing interest of prongs: consists two separability and finality privilege because the “rests at importance. As separability, Diamond the center adversary system.” of our Ventures’ management’s access to the Morris, Philip 314 F.3d at 618. In Medi MAQs has nothing to do with the merits of Records, cal significant the interest under its discrimination claim. Diamond Ven Cohen’s second factor was the docu argues tures that the “importance” factor sought to ments be discovered were cov is lacking information, because confidential by psychotherapist’s ered privilege un material, unlike privileged is discoverable der Federal Rule of by Evidence 501 and under the federal Appellee’s rules. Br. the medical privilege records under the (citing 16-18 and distinguishing re In District of Columbia Municipal Code. Med (Medical Records), Sealed Case 381 F.3d Records, ical 381 F.3d at 1209-10. 1205, (D.C.Cir.2004) (Medical Using test, Philip Morris we Records) (discovery order compelling dis privacy competitive believe the and inter of privileged closure information “im was of ests the SBIC applicants that “would portant in Cohen’s sense” appel because potentially go unprotected without immedi lant claimed information by was appellate ate review” overcome the inter psychotherapist’s privilege and interests in finality. out, est As points the SBA promoted by protecting it from disclosure MAQ contains information of the type were “weightier than the societal interests “routinely protected” under the Trade by ordinary advanced Se operation of final Act, (citation (cit crets judgment Appellant’s Reply principles”) Br. 7 quota and omitted). 1905), ing tion § marks U.S.C. “important An and under Exemp issue” under Cohen is of section 552 by determined not of the Freedom of Act,6 nature of the being sought information Information Douglas but McDonnell cf. by Corp. Dep’t Force, interest that would be harmed if v. U.S. Air 1182, (D.C.Cir.2004) immediate review were not allowed (concluding Exemption exempts FOIA's privileged from disclo- confidential.” 5 U.S.C. sure "trade secrets and commercial or 552(b)(4). finan- cial person information obtained from a funds, likely anticipated sources investment pricing information at JA and contact infor- harm id. names competitive substantial cause disclosure). equity partners, mation of id. its at JA The exempt from therefore “investing strategy.” Its “in- current declarations from SBA submitted MAQ, vesting strategy,” according to the stating that the former SBA officials represents the ideal dollar distribution of successfully past in the invoked SBA has applicant’s among industry investments infor- Exemption protect MAQ 4 to FOIA and its investment and risk sectors overall of Mar- from disclosure. See Decl. mation Id. philosophy. reduction at JA Dennin, Administra- garet Theresa Chief Morris, delay,” Philip “cost[ ] Division, tive Officer for SBA Investment F.3d at would be release ¶ (“SBA confi- JA 58 has never disclosed information —submitted the SBA with dential information contained business be kept notice information would con- request”); to a FOIA response by permitted fidential extent law— Wyatt, former SBA Gen- of Michael Decl. This potential competitor. cost out- ¶ (“SBA Counsel, 5, thé takes eral JA review,” weighs piecemeal the “costs of id. that their position Applicants and advises 617-18, finality that underlie the rule [MAQ] fall FOIA Ex- submissions within because, disclosed, once the information is 4”). equate While we do not emption confidentiality SBIC inter- applicant’s secret,7 MAQ we do believe with trade permanently lost. As in est on the the notice face of the Morris, that the where we held release that the information submitted “will itself attorney-client covered kept permit- to the extent confidential the “institution- privilege would eviscerate well as SBA’s and SBIC ted law” as in “full and frank communica- al interest” in confi- applicants’ institutional interests attorney,” client and id. at tion between MAQ dentiality bring the within caselaw 618, MAQ releasing information whose interlocutory appeal. allowing confidentiality applicant an is notified will notice, on the applicant An SBIC relies “full and protected would eviscerate the be along given with other assurances the applicant frank” disclosure between SBA,8 MAQ in to deciding submit SBA to the effective and the strategies which discloses vital business program. If an enforcement of the SBIC categories investors from such as of to hesitates disclose information applicant SBA, apply- plan has funds before to the regarding whom it solicited its business may to a li- categories agency then have make MAQ at JA of ing, note, however, termining weigh MAQ which interests to 7. We that if balance, Act, statutory look to con- Trade Secrets Rule 26 courts were under the they fidentiality provisions, if not even do could be discoverable. See Fed. nonetheless (court 26(c)(7); privileges.”). "may create enforceable supra note R.Civ.P. restricting disclosure of trade enter an order ¶¶ 4-5, (“I secrets,” fit”); fashioning "any it sees See Dennin Decl. JA 57-58 have to receive feed- Aerospace Corp. opportunities had numerous v. Titanium Metals Grumman (E.D.N.Y.1981)(“Nor regarding objections to Corp., back from SBICs their 91 F.R.D. disclosure, through response provide any Act ... either does the Trade Secrets request litigation, of preventing or in civil Disclosure a FOIA basis for disclosure. proprietary business infor- discovery is confidential and pursuant to the rules disclosure SBA, law,' including they [MAQ the terms of the mation submit to 'authorized which disclosed permit.”). protection provided by SBA has never Any information].... Act contained balancing confidential business information would still be relevant to the statute appropriate protective MAQs required ... absent an interests under Rule See Med- of order.”). Records, ("[I]n de- ical F.3d at without the full censing decision benefit of § Federal Practice and Procedure (2d ed.1987) resulting in potentially a loss (determining pro- “reasonable information — given public fisc the fact that the tective ... measures to minimize the effect an guarantees SBIC’s securities SBA party on the making the disclosure” the event of default. See 15 U.S.C. confidential information within trial court’s 683(b) (authorizing “purchase, SBA to discretion). We review the district court’s timely to guarantee payment all discovery ruling for abuse of discretion. on, principal and interest as scheduled de Records, Medical 381 F.3d at 1211. With participating bentures or securities issued respect to a pursu- order issued SBIC). by” Moreover, the SBIC program 26(c)(7), ant Rule district court crippled by applicants’ could be also future balancing undertake “an individualized unwillingness to disclose information re many present interests that garding their plans upon learning business particular omitted); (quotation case.” Id. Ap here. Case, re see In Sealed 21-22; Br. pellant’s see also Akzo N.V. v. (D.C.Cir.1988) (remanding discovery order Comm., U.S. Int'l Trade because district court did en- not “show denied, (Fed.Cir.1986), cert. 482 U.S. gagement in this pro- essential balancing 107 S.Ct. 96 L.Ed.2d 382 cess”). (“Disclosure of sensitive materials to argues SBA the district adversary undoubtedly [business] court made three mistakes of fact that led have a chilling effect on the parties’ will it to improperly weigh the in competing ingness provide infor confidential First, terests. the district court stated it mation to the [agency’s] essential fact- persuaded “was not that the informa finding processes.”) We believe the confi MAQ or, tion” “[was] confidential as dentiality an SBIC in applicant’s MAQ claims, Defendant that the applicants have sufficiently formation is a important inter expectation of privacy in the informa est to our authorize review under Cohen. they submit.” Reconsideration Order B. The Merits Second, JA 175. it was not convinced “disclosure information to noted, As the district court has competitive bidders could be harmful to wide discretion in managing discovery. applicants chill bidding process” and Records, (“ Medical 381 F.3d at 1215 ‘Rule inasmuch as “there no competitive is ad judge vests trial with broad discre “ vantage because do not compete SBICs tion to tailor discovery narrowly,’ and “ Third, with each for funding.” other Id. ‘it is appropriate court, for the in exercis the district court ing found that Ven ..., its Diamond discretion to undertake some ’ lawyers ”) rely tures’ had to substantive on its balancing principals’ of interests .... Britton, expertise to (quoting in determining assist them 523 U.S. Crawford-El 574, 598, MAQ what S.Ct. information was L.Ed.2d 759 relevant to the (1998) (alterations Records) discrimination Medical claim because it would be and v. McClatchy, Laxalt costly too for Diamond to hire an Ventures (D.C.Cir.1987)); Wright Miller, and expert.9 outside 129; 9. The district court also concluded that to the JA Reconsideration Order at JA extent public the SBA feared disclosure 175. The SBA that maintains once Diamond data, MAQ negated by stipu- that fear was principals Ventures' regard- have information lation in the "protected Protective Order ing operations that strategies business and solely material shall be used purposes for applicants, they other SBIC cannot be reason- ¶ litigation." 3(a) this Protective ably expected Order using to refrain from the infor- applicant’s with SBA that the district counted an SBIC agree We confidential finding appli- MAQ. court erred in that SBIC competitive and interests its expectation privacy no cants have scale, the other On side of the face of the their notice on the —the district court overvalued Diamond Ven MAQ information included therein that the purported expert tures’ need for an extent kept “will be confidential to the MAQs in review the order to its support permitted by finding. its law” belies discrimination claim.11 The information reject- ignored district court the notice and i.e., relevant the race of the claim— uncon- explanation ed without principals of applicants12 other SBIC as showing applicants that have tested strategies well as the business of other privacy applica- in their expectation applicants comparison SBIC for to its ap the SBA will not disclose tions believe collected, plications be we are confi —can the information contained them. See dent, by counsel without an expert’s assis ¶ ¶¶ 58; Wyatt 4- JA Decl. Dennin Decl. argument tance. Diamond Ventures’ Moreover, 149.10 the fact that SBIC JA hiring expert to an outside review the doc directly compete applicants not with costly uments would too factor on —a for licensure does not each other SBIC relied, expressly which the district court not compete mean that SBIC licensees do see Reconsideration Order at JA 175-76 market for fund- capital the venture (“Plaintiff argues, persuasively, ing principals, Diamond Ventures’ —if prohibitive would be cost for it to hire MAQs, particular, Peek in review other independent experts merely review the they information about gain will successful Instead, rely it must documents. on its categories strategies, investor SBICs’ principals’ expertise to assist counsel in to use the funding sources and be able determining comparative what information again once apply either to is relevant and to the claims. compete funding licensure or to SBIC In the Court that Plaintiffs capital [and] in the venture market or both. finds short, erroneously in prosecuting the district court dis- interests this case and hav- merely they presumed because learned of it in and SBA have for decades to be mation litigation. discovery

this Use are not unusu- from and from limitations orders, e.g., Wright by Exemption 4 al in of FOIA.” Declaration of Mi- Miller, Wyatt, Practice and chael JA 150-51. Federal Procedure K. (2d ed.1987) cases), (citing n. 21 and there no Ven- Ventures' that Peek can reason conclude 11. Diamond claim willfully disobey "expert” tures' substitute for an outside is some- given court order. But see U.S. Steel v. United what dubious that he has failed in four 1465, States, (Fed.Cir.1984) attempts to Let- 730 F.2d obtain SBIC license. See Pierson, Jeffrey (recognizing D. SBA Associate likelihood of inadvertent disclo- ter from Investment, Peek, sure of if disclosed Administrator to C. Earl trade secrets Partner, (Feb. competitor's Managing to in-house counsel "involved Diamond Ventures 25, 2003), decisionmaking”). competitive JA 182. MAQ 10.A former General Counsel declared 12. The itself does not ask for informa- SBA experience representing regarding Ventures’s that in his over 100 race. Diamond photographs applicants, applicants expec- proposes to review sub- SBIC "have an counsel MAQ [MAQ] tation that SBA will withhold materi- mitted with the related documents "normally photographs of als from and to allow include disclosure” which MAQs key proposed management principals to Ventures' access members MAQ to a direct com- team” in order to determine race of would result in "disclosure petitor proprietary Appli- applicants. Mem. re: Def.’s Mot. for of confidential and. Pl.’s 5, Applicants of Order at JA 65. [SBIC] cant data the sort that Prot. representation outweigh ing adequate legal I. competing arising Defendant’s interests jurisdiction The court has holds of public from unfounded fears doctrine, under the collateral order see harm.”) competitive irrelevant —is Cohen v. Corp., Indus. Loan Beneficial balancing. originally That Peek filed 541, U.S. S.Ct. 93 L.Ed. 1528 pro se his action and was accorded in (1949), an interlocutory challenge over ato by pauperis status the district court

forma allowing discovery of no on fi- bearing has Diamond Ventures’ third-party applications a submitted to the corporation nancial health because can- (“SBA”) not file a action or Small pro se Business Administration appear forma pauperis. See Rowland v. Men’s with of promise “confidentiality] to the Calif. 194, 201-02, Colony, 506 U.S. 113 S.Ct. However, permitted by extent law.” there (1993) (“It 716, 121 L.Ed.2d 656 has been suggest is no need to party’s that one’s law the part better of two centuries unilateral compromised assertion of a corporation may that a appear “privacy “trade secret” interest” would only through federal courts licensed coun- “importance” suffice meet the prong sel”). inability Diamond Ventures’ alleged the collateral Digital order doctrine. See expert hire an should not be balanced Direct, Inc., Equip, Desktop 511 U.S. against legitimate confidentiality inter- 863, 879, 114 S.Ct. 128 L.Ed.2d 842 ests all other applicants and the (1994); United States v. Morris district court erred as matter of law Inc., (D.C.Cir.2003). States, doing so. See Koon v. United liberality Such would not make for a “nar U.S. 116 S.Ct. 135 L.Ed.2d rule, row” exception finality (because district court “[a] Digital Equip., 511 U.S. S.Ct. definition abuses its discretion when it 1992, and open way could for interme law,” an error of makes abuse “[t]he appellate diate review of all manner discretion standard includes review to de- discovery disputes. termine guided that the discretion was not conclusions”); legal erroneous Medical MDK, The Fourth Circuit Inc. v. Records, Koon). 381 F.3d at 1211 (quoting House, Inc., (4th Mike’s Train 27 F.3d 116 reasons, Cir.1994), foregoing rejected

For the we conclude collateral order review that the district court abused its discretion type of the “trade dispute on the secret” — in ordering of all other basis of its difficulty concern about the applicants for SBIC licensure be disclosed cabining the notion of a trade secret: Diamond Ventures’ and em- dangers exception trade secrets ployees. Accordingly, we vacate Part to the nonappealability of discovery or- 3(a)(ii) of the Protective Order entered apparent. ders should be A judicially January 2005 and remand for further exception created to nonappealability for proceedings. The SBA’s challenges to the categories of sensitive information is the Denial Order and the Reconsideration Or- quintessential slippery slope. petition der and its for mandamus relief are dismissed as moot. House, Mike’s Train F.3d at 120. I concern, share this but conclude that

So it is ordered. answered in this instance because the ROGERS, Judge, Circuit concurring. Act, § Trade Secrets 18 U.S.C. 1905 (2000),1generally protects I scope type would limit this of in- jurisdic- the of our tion holdings formation from following merits in the disclosure it when the manner: government hands of a agency, and the 1. prohibits, The Trade respects, employees Secrets Act government in relevant of the federal

901 protections in- within the of the important institutional fall Trade an agency has Act, pro- which third-party ap- by plain Secrets letter by in full disclosure terest by hibits release the SBA of information licensing program. to its plicants income, any profits, on the “source described, through three dec- SBA The losses, expenditures any person or larations, com- the sensitive nature of the [e.g., MAQs], applicants the who submit ap- contained in the mercial information firm, association,” ... or 18 U.S.C. (known as the licensing plication Further, § the 1905. SBA submitted Questionnaire, Assessment Management declarations from current and former “MAQ”). acknowledges, court or As the officials SBA stating SBA the has 897-98, MAQs contain infor- Op. the at Exemption successfully invoked FOIA 4 as of the mation that the SBA describes protect MAQ information from disclo- protected” type “routinely under maintains, Additionally, the sure.2 SBA Act, § 18 Trade Secrets U.S.C. dispute, and Diamond Ventures does not Exemption (regarding trade se- under full of the information disclosure re- or infor- crets and commercial financial MAQs quested by is critical to the mation) of of Information the Freedom of the Small Business In- success 552(b)(4) (2000). (“FOIA”), § Act 5 U.S.C Company program. Appel- vestment disputes Although Ventures 21-22; Br. Op. lant’s at at 897-98. Trade sensitivity requested of some information protections Act are at least co- Secrets MAQs, MAQs “are by the admits protections with the afforded extensive likely to contain financial information of under FOIA Exception McDonnell prohibited the kind whose disclosures is Douglas Corp., 375 F.3d at 1185 (citing if by Trade Act such disclo- Secrets ” Donovan, Corp. CNA Fin. 830 F.2d by Appel- sure is not ‘authorized law.’ (D.C.Cir.1987)). 1132, 1151 capi- lee’s Br. at 3-M. Given that venture although the compete Consequently, protection tal firms one with another Act funding, of in- Trade is not private afforded Secrets evidentiary the case in requested by privilege, as was formation of the sort interlocutory In re appeals harm to Sealed MAQ could “cause substantial (Medical Records), competitive position person Case (D.C.Cir.2004), Morris, from whom the information was ob- 1210 617-18, tained,” protections in Douglas Corp. v. F.3d at this McDonnell Force, statutory instance are similar to the bar Dep’t the Air 375 F.3d (D.C.Cir.2004) England, 375 F.3d (citing Nat’l Parks & In re Morton, (D.C.Cir.2004). statutory protections Ass’n v. Conservation (D.C.Cir.1974)), inform institutional interests and thus would and the publishing], disclosing], divulging], or 18 U.S.C. any any making] or to known in manner Dennin, Margaret Theresa Chief 2. See Decl. any extent not authorized law informa- for SBA Investment Di- Administrative Officer coming to him in the course his ¶ vision, (“SBA never disclosed confi- has employment or duties ... which official contained in dential business information concerns or relates to the trade response request to a FOIA work, secrets, processes, operations, style order"); appropriate absent an apparatus, identity, or or to the confidential Wyatt, K. former SBA Gen- Decl. of Michael data, ¶ any Counsel, ("SBA amount or source of position statistical takes eral losses, income, profits, expenditures of Applicants submis- [MAQ] their advises firm, 4”); Op. person, corporation, Exemption any partnership, fall within FOIA sions 896-97. or association .... analysis “importance” bility expert’ light element to hire an In of these analysis scope errors, and limit the Cohen apparent it is the district court jurisdiction that holding is to failed to legally balance the relevant fac- analysis, appeal. (Medical hear this Under this Records), tors. See Sealed Case no occasion to court has consider whether 1217; Case, 381 F.3d at In re Sealed a a will discovery compro- claim that (D.C.Cir.1988); F.2d LaSalle cf. “privacy” gives or “trade mise secrets” FTC, Extension Univ. v. 627 F.2d dispute to an appealable rise the ab- (D.C.Cir.1980). The SBA does not chal- (1) (or compara- sence of Trade Secret Act lenge protective order, with its use statutory) upon party ble restrictions limitation, insofar as it allows counsel for information, holding the England, see MAQs; Diamond Ventures to review the governmental at inter- challenges only provision allowing est, to the similar SBA’s institutional and principals of Diamond Ventures to review programmatic interest in full MAQs. Op. at n. 9. This court 897-98, parties, Op. at might third well-positioned not to conclude that be compromised were the information district court “overvalued Diamond Ven- during discovery made available tures’ purported an expert need for potential Here, licensee. MAQs,” review the atOp. particu- both considerations increase the relative larly any we be “confident” that importance of po- the interests that would illegal redlining might be revealed tentially go unprotected without immediate approval patterns appellate England, review. See 375 F.3d apparent may be to “counsel without an 1176; Moms, at 314 F.3d at 617. I assistance,” expert’s id. at 899. Such con- day question leave for another clusions run counter to the district court’s jurisdic- whether the court would have findings, which predicated are upon its tion under the collateral order doctrine greater familiarity litigation, with the a party points only where to the bare unnecessary, are because they ger- are not 26(c)(7) standard of Fed.R.Civ.P. as the mane to the question of whether the dis- source of its interest from disclo- trict court balanced the relevant factors. generally, sure. Wright, Miller & Marcus, Procedure, Federal Practice And (2006). Civ.2d 2043

II. merits, Turning to the it suffices to hold NOVAK, Appellant Dominic that the district court abused discretion by failing legally to consider the relevant CAPITAL MANAGEMENT AND DE- generally factors. See Kickapoo Tribe in CORPORATION, VELOPMENT Babbitt, Kan. v. al., Appellees. et (D.C.Cir.1995). concludes, As the court 04-7149, No. 04-7150. Op. 898-900, the district court failed both to promise address the SBA’s of con- Appeals, United States Court of fidentiality to third-party applicants and to District of Columbia Circuit. consider the fact that third-party appli- Argued Sept. compete cants with each other the mar- July Decided ket for venture capital funding; additional- ly, the district court legally considered the

irrelevant factor of Diamond ina- Venture’s

Case Details

Case Name: Diamond Ventures v. Barreto, Hector

Court Name: Court of Appeals for the D.C. Circuit

Date Published: Jul 7, 2006

Citation: 452 F.3d 892

Docket Number: 05-5258

Court Abbreviation: D.C. Cir.