Gzk, Inc. v. Schumaker Ltd. PartnershipGzk, Inc. v. Schumaker Ltd. Partnership
{¶ 1} Food, Folks & Fun, Inс. (“Food-Folks”), appeals from the trial court’s decision and entry ordering it to provide certain financial documents to GZK, Inc., pursuant to a subpoena.
*109 {¶ 2} Food-Folks advances two related assignments of error on appeal. First, it contends that the trial court erred by ordering it to produce the documents in response to GZK’s subpoena. Second, it claims that the trial court erred in refusing to place restrictions on the disclosure of its documents.
I. Factual and Procedural Background
{¶ 3} The record reflects that Food-Folks is in the business of operating Kentucky Fried Chicken and other fast-food franchises. GZK is in the business of operating Lee’s Famous Recipe Fried Chicken and other fast-food franchises. As sellers of fried chicken, Food-Folks and GZK compete against one another in the region. Food-Folks is not a party to the present lawsuit, which involves a dispute between GZK and FFF Management, Inc. (“FFF”), a corporation that exists for the purpose of buying real estate and leasing it to Food-Folks for the operation of Kentucky Fried Chicken restaurants. Although they are distinct corporate entities, Food-Fоlks and FFF have the same directors and shareholders.
{¶ 4} In the present case, GZK asserted a cause of action against FFF for tortious interference with contractual relations. The claim stems from FFF’s allegedly improper interference with GZK’s efforts to purchase real estate in Miamisburg, Ohio, from Dorothy Schumaker. In particular, GZK asserted that FFF attempted to buy the real estate to enable Food-Folks to build and operate a Kentucky Fried Chicken franchise there, despite knowing that GZK had a right of first refusal to purchase the prоperty. GZK sought lost profits and punitive damages for FFF’s tortious interference.
{¶ 5} In the course of proceedings below, GZK served Food-Folks with a subpoena purportedly requesting “all financial and business documents.”
1
Food-Folks responded by objecting to the subpoena pursuant to
{¶ 6} GZK then filed a “response in opposition” to the objections. The trial court construed this filing as a motion to enforce the subpoena. In its filing, GZK agreed to modify the scope of its subpoena and sought, “for the years 2001 *110 through 2004, gross-sales figures, expenses, and operating costs, for all the Kentucky Fried Chicken stores under the control of Food, Folks & Fun in Montgomery, Miami, Greene, Warren, Preble and Clark counties.” GZK also responded to each of Food-Folks’s objections. With regard to Food-Folks’s trade-secret objection, GZK argued as follows:
{¶ 7} “Due to Food, Folks & Fun’s corporate structure and its position as FFF’s operating arm, its financial documents are relevant and likely to lead to the discovery of admissible evidence. Even assuming the production of this information would constitute trade secrets and is otherwise confidential, this Court has previously ruled against FFF in this manner and ordered FFF’s documents produced. As such, Food, Folks & Fun, being the same corporate entity, is required to produce the same. FFF and Food, Folks & Fun together constitute the same corporate entity involved in the action giving rise to the claims in this lawsuit. GZK is therefore entitled to financial documents that fully illustrate the entity’s financial structure.”
{¶ 8} Food-Folks then filed a memorandum in opposition to GZK’s motion to enforce the subpoena. Therein, it responded to GZK’s trade-secret argument as follows:
{¶ 9} “Food, Folks objected to producing its financial data on the grounds that it constituted tradе secrets. GZK argues that (1) the Court has already ruled against FFF on this issue, and (2) Food, Folks is the same as FFF. GZK is simply wrong.
{¶ 10} “First, FFF has never raised a trade secrets objection to the Court. Since FFF never made that objection, the issue could not have been decided against it already.
{¶ 11} “Second, Food, Folks is not the ‘same’ entity as FFF. Food, Folks is not a party to this lawsuit, and is not bound by any prior rulings. Besides, because it is a third party, its concerns about the confidentiality of its data are different than those of either GZK or FFF.
{¶ 12} “Third, while the Court overruled GZK’s trade secrets objectiоn, the evidence before the Court was that GZK had waived that objection by failing to timely raise that objection. Food, Folks has timely raised the issue.
{¶ 13} “In any event, there is no reason that the Court should treat GZK and Food, Folks similarly. GZK placed its profitability at issue by suing to collect lost profits damages; Food, Folks has not.”
{¶ 14} On June 16, 2005, the trial court filed a decision and entry “sustaining in part and overruling in part objections of Food, Folks & Fun to subpoena” and “sustaining in part and overruling in part GZK’s motion to enforce subpoena.” Therein, the trial court held that GZK’s document rеquest was overbroad. It *111 limited the subpoena to “gross sales figures, expenses and operating costs for all KFC restaurants under the control of Food, Folks & Fun in Montgomery County” from 2001 through 2004. As so limited, the trial court found that the requested documents were relevant and were reasonably calculated to lead to the discovery of admissible evidence.
{¶ 15} On the trade-secret issue, the trial court stated that GZK had taken the position that the requested documents were not trade secrets. The trial court also noted that it previously had found FFF’s financiаl documents to be relevant and reasonably calculated to lead to the discovery of admissible evidence. The trial court then found that Food-Folks had failed to demonstrate how its confidentiality concerns were different from those of GZK or FFF. As a result, the trial court overruled Food-Folks’s trade-secret objection to the subpoena. Finally, the trial court held that Food-Folks’s actual knowledge of the subpoena rendered its argument about defective service meritless and that GZK’s offer to pay a mileage fee and tо reimburse Food-Folks for its expenses disposed of those issues. This timely appeal followed. 2
II. Analysis
{¶ 16} In its appellate brief, Food-Folks has divided its two assignments of error into four- arguments. As a means of analysis, we turn first to Food-Folks’s final argument, which states:
{¶ 17} “The trial court erred by enforcing a fatally defective subpoena.”
{¶ 18} Food-Folks contends that the subpoena issued by GZK was fatally defective because it was delivered via certified mail by someone not authorized to serve it and because it did not include witness-attendance and mileage feеs. Food-Folks also notes that no return of service was filed. In response, GZK insists that certified-mail service was proper. It also asserts that witness-attendance and mileage fees are not applicable here and, in any event, that defects in tendering the fees may be cured after service of the subpoena.
{¶ 19} The foregoing arguments implicate
*112 {¶ 20} “A subpoena may be served by a sheriff, bailiff, coroner, clerk of court, constable, or a deputy of any [of the above], by an attorney at law, or by any other person designated by order of court who is not a party and is not less than eighteen years of age. Service of a subpoena upon a person named therein shall be made by delivering a copy of the subpoena to the person, by reading it to him or her in person, or by leaving it at the person’s usual place of residence, and by tendering to the person upon demand the fees for one day’s attendance and the mileage allowed by law. The person serving the subpoena shall file a return of the subpoena with the clerk. If the witness being subpoenaed resides outside the сounty in which the court is located, the fees for one day’s attendance and mileage shall be tendered without demand. The return may be forwarded through the postal service or otherwise.”
{¶ 21} The first sentence of
{¶22} Upon review, we find Food-Folks’s argument to be the more persuasive. In our view, an attorney does not deliver a subpoena to a person, within the meaning of
{¶ 23} Our interpretation of
{¶ 24} Other portions of the Ohio Rules of Civil Procedure also support our conclusion. For example,
{¶25} Finally, we draw additional support for our interpretation of
{¶ 26} In finding that GZK’s service of the subpoena satisfied
{¶ 27} In our view, the trial court erred in relying on
Denovchek.
Nowhere in its opinion did the Ohio Supreme Court address
who
was required to deliver a subpoena or whether certified-mail service satisfied
{¶ 28} On appeal, GZK also cites
State v. Castle
(1994),
*115
{¶ 29} Although we have found that the trial court erred by enforcing a defectively served subpoena, we anticipate that GZK may re-serve the subpoena in compliance with
{¶ 30} “The trial court erred by enforcing the subpoena without reviewing the documents containing Food-Folks’ trade secrets.”
{¶ 31} Food-Folks notes that a trade secret includes any financial information that “derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic vаlue from its disclosure or use,” provided that the financial information “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
{¶ 32} Food-Folks also points out that the Ohio Supreme Court has adopted a six-factor test for determining whether information qualifies as a trade secret. These factors are as follows: “(1) The extent to which the information is known outside the business; (2) the extent to which it is known to those inside the business, i.e., by the employees; (3) the precautions taken by the holder of the trade secrеt to guard the secrecy of the information; (4) the savings effected and the value to the holder in having the information as against competitors; (5) the amount of effort or money expended in obtaining and developing the information; and (6) the amount of time and expense it would take for others to acquire and duplicate the information.”
State ex rel. Plain Dealer v. Ohio Dept. of Ins.
(1997),
{¶ 33} Food-Folks argues that the trial court should have given it an opportunity to address the foregoing factors. Food-Folks also contends that the trial court should have reviewed its financial documents in camera and should have considered a protective order prior to requiring disclosure of the documents. In response, GZK asserts that Food-Folks should have taken the initiative to address the six factors before the trial court ruled on the matter. Given Food- *116 Folks’s failure to do so, GZK contends the trial court did not err in rejecting the trade-secret argument. GZK also notes that Food-Folks did not request a hearing or an in camera review prior to the trial court’s ruling. Finally, GZK argues that FFF previously disclosed some of Food-Folks’s financial information, thereby waiving any trade-secret argument.
{¶ 34} Upon review, we agree with Food-Folks that the trial court should have given it an opportunity to address the trade-secret factors and should have conducted an in camera review before ordering disclosure of the financial documents. In reaching this conclusion, we recognize that the party asserting trade-secret status has the burden to demonstrate that its information qualifies as a trade secret.
State ex rel. Plain Dealer,
{¶ 35} Food-Folks responded to GZK’s subpoena by serving GZK with written objections, as authorized by
{¶ 36} “Due to Food, Folks & Fun’s corporate structure and its position as FFF’s operating arm, its financial documents are relevant and likely to lead to the discovery of admissible evidence. Even assuming the production of this information would constitute trade secrets and is otherwise confidential, this Court has previously ruled against FFF in this manner and ordered FFF’s documents produced. As such, Food, Folks & Fun, being the same corporate entity, is required to produce the same. FFF and Food, Folks & Fun together constitute the same corporate entity involved in the action giving rise to the claims in this lawsuit. GZK is therefore entitled to financial documents that fully illustrate the entity’s financial structure.” (Emphasis added.)
*117 {¶ 37} In making the foregoing argument, GZK expressly assumed that the financial documents qualified as trade secrets, but asserted that they nevertheless were discoverable because they were relevant and because FFF had been required to produce similar documents. In light of GZK’s assumption that the financial records at issue were trade secrets, Food-Fоlks had no reason to address the six trade-secret factors, to argue the trade-secret issue in its memorandum in opposition to GZK’s motion to compel, or to request an in camera review. Instead, Food-Folks responded to the points raised by GZK and argued that the documents were not relevant, that FFF, unlike Food-Folks, had never raised a trade-secret defense, and that FFF and Food-Folks were distinct corporate entities.
{¶ 38} In its subsequent decision and entry, however, the trial court misread GZK’s motion to compel as presenting an argument “that the information that it is requesting is not trade secret and cannot be withheld on that basis.” The trial court then found the financial records to be relevant and noted Food-Folks’s failure to specify its trade-secret concerns. As a result, the trial court rejected Food-Folks’s trade-secret contention out of hand.
{¶ 39} In our view, the trial court abused its discretion by misreading GZK’s motion to compel, which assumed that the documents were trade secrets, and then summarily rejecting Food-Folks’s trade-secret argument. If the trial court were inclined to reject Fоod-Folks’s trade-secret argument, despite GZK’s express assumption that the documents did qualify as trade secrets, it first should have granted Food-Folks an opportunity to address the issue and should have conducted an in camera review. In light of GZK’s presumption in its motion to compel that the financial documents were trade secrets, Food-Folks had no reason to anticipate that the trial court would rule otherwise. Therefore, we conclude that Food-Folks did not forfeit its ability to challenge the trial court’s trade-secret ruling or waive its right to seek a hearing on the matter and an in camera review.
{¶ 40} Finally, we reject GZK’s claim that FFF previously disclosed some of Food-Folks’s financial information, thereby waiving any trade-secret argument. Although they are closely aligned, FFF and Food-Folks are distinct corporate entities. The fact that FFF may have disclosed some documents in the past does not preclude Food-Folks from raising a trade-secret objection. Moreover, we find it unlikely that FFF previously disclosed the same financial information GZK seeks from Food-Folks. If that were the case, GZK would have no need to obtain the information a second time.
{¶ 41} Based on the reasoning set forth above, we sustain Food-Folks’s assignments of error, insofar as it contends that the trial court erred in ordering *118 it to produce financial documents to GZK without first allowing it to address the trade-secret issue and without conducting an in camera review.
{¶ 42} In its remaining two arguments, Food-Folks asserts:
{¶ 43} “The trial court erred by compelling disclosure of documents that are not reasonably calculated to lead to the discovery of admissible evidence to support GZK’s lost profits claim.”
{¶ 44} “The trial court erred by compelling disclosure of documents that are not reasonably calculated to lead to the discovery of admissible evidence to support GZK’s punitive damages claim.”
{¶ 45} Food-Folks contends that its financial records are irrelevant to the issues in this case and are not reasonably calculated to lead to the discovery of admissible evidence. We disagree. A trial court enjoys broad discretion in the regulation of discovery.
Whitt v. ERB Lumber,
III. Conclusion
{¶ 46} Based on the reasoning set forth above, we hold that the trial court erred in enforcing a defectively served subpoena. The trial court also erred by nоt giving appellant Food-Folks an opportunity to address its trade-secret argument and by not conducting an in camera review before ordering disclosure of certain financial documents. Accordingly, we hereby reverse the trial court’s judgment entry sustaining GZK’s motion to enforce the subpoena.
Judgment reversed.
Notes
. We have been unable to locate a copy of the subpoena anywhere in the record. For purposes of our analysis herein, we are relying on the parties' undisputed representations about the contents of the subpoеna and the manner in which GZK served it on Food-Folks.
. The parties agree that the trial court’s decision and entry is a final, appealable order under
. On appeal, GZK stresses that
. We note, too, that the quoted language from Denovchek is dicta, given the Ohio Supreme Court’s holding that the appellant had no right to appeal from the dismissal of a contempt motion against the witness who had failed to comply with the subpoena.
. As for Food-Folks’s argument about the absence of a return of service, we note that