NANJING CIC INTERNATIONAL CO., LTD., Plaintiff, v. JAMES SCHWARTZ, et al., Defendants.
Case 6:20-cv-07031-EAW-MWP
UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK
October 20, 2023
MARIAN W. PAYSON, United States Magistrate Judge
DECISION & ORDER; 20-CV-7031EAW
PRELIMINARY STATEMENT
Nanjing CIC International Co., Ltd., (“CIC“) commenced this action against Foundry Associates, Inc., and its owner and Chief Executive Officer James Schwartz (“Schwartz“) (collectively, “defendants“) alleging claims for breach of fiduciary duty and unjust enrichment.1 (Docket # 1). Currently pending before this Court is CIC‘s motion to remove the Attorneys’ Eyes Only (“AEO“) designation from a summary sales and commission report (the “Sales Report“) produced by defendants.2 (Docket # 62). For the reasons discussed below, CIC‘s motion to de-designate is granted in part and denied in part.
BACKGROUND
CIC sources, distributes, and sells component parts to manufacturers. (Docket # 1 at ¶ 8). According to CIC, in 2003 it retained Foundry as a sales agent to assist in the
As this litigation progressed, the parties exchanged document discovery while attempting to negotiate a stipulated protective order.3 (Docket # 79 at 12, 31). A dispute arose in the negotiations concerning whether plaintiff could use documents produced in this litigation in support of its claims against Chen in the Chinese litigation. (See generally Docket ## 51, 53). According to CIC, although it had obtained a liability verdict against Chen in that litigation, it had been unable to establish its actual, rather than statutory, damages because Chen had refused to produce relevant information regarding her sales. (Docket # 62-20 at 8). Both Chen and CIC have appealed the decision in the Chinese litigation, and CIC wishes to introduce in those appellate proceedings the sales data produced by defendants in this litigation in order to establish its actual damages. (Id. at 7-9).
According to CIC, the initial version of the protective order drafted by defendants was silent with respect to the use of non-confidential documents in other litigation. (Docket ## 53 at 2; 53-1). After CIC expressed its intention to introduce non-confidential documents into evidence in the Chinese litigation, defendants requested that the draft be amended to include the following provision:
Nonpublic Discovery Material exchanged by the parties in this action, regardless of whether it has been designated as Confidential or Attorneys’ Eyes Only, shall be used only for purposes of this litigation and for no other purposes.
(Docket # 51-1 at ¶ 10). CIC objected to the proposed change and instead suggested the following provision:
Discovery Material designated as Confidential or Attorneys’ Eyes Only shall be used only for purposes of this litigation and for no other purposes.
(Id.).
Unable to agree, the parties contacted the Court for assistance. (Docket ## 51, 53). At the Court‘s direction, the parties participated in a conference call with the Court‘s law clerk Christin Cornetta, Esq., who provided the parties with the Court‘s guidance on the dispute and advised that a formal motion would be required in the event the parties were unable to agree. On March 28, 2023, the parties jointly submitted a proposed confidentiality stipulation that contained the language proposed by CIC. (Docket # 54). The Court issued the Confidentiality Stipulation and Order proposed by the parties a few days later (the “Protective Order” or “Order“). (Docket # 56).
The Protective Order permits a producing party to designate discovery material as “Confidential” if it contains:
trade secrets, proprietary business information, competitively sensitive information, or other information the disclosure of which, in the good-faith judgment of the Designating Party, would be detrimental to the conduct of the Designating Party‘s business or the business of any of the Designating Party‘s customer or clients.
(Id. at ¶ 2(a)). It further permits a party to designate discovery material as “Attorneys’ Eyes Only” if it is:
of such a private, sensitive, competitive, or proprietary nature that present disclosure to persons other than those [permitted by the Order] would reasonably be expected to cause irreparable harm or materially impair the legitimate competitive position of the Designating Party. A designation of Discovery Material as Attorneys’ Eyes Only constitutes a representation that such Discovery Material has been reviewed by an attorney for the Designating Party and that there is a valid basis for the designation.
(Id. at ¶ 2(b)). In addition, the Protective Order contains a provision delineating the “anticipate[d]” scope of information permitted to be designated:
The parties anticipate that “Confidential Information” or information “for Attorneys’ Eyes Only” will be limited to names of contacts, contact information, contact person‘s personality and preferences of communications and business dealings, customized product specifications and other technical requirements, specific business patterns, procurement habits, frequencies and inclinations, pricing preferences, confidential pricing information, information concerning margins, confidential commercial terms of sale, quality control standards, customized and unique requirements for material certification, packaging, and shipping information.
(Id. at ¶ 2(c)).
On April 21, 2023, defendants produced the 106-page Sales Report and designated the entire document as AEO. (Docket ## 62-1 at ¶ 3; 62-2). According to defendants, the Sales Report contains sales and commissions information “reflecting its business between 2013 and 2022 with” Chen. (Docket # 68 at ¶ 9). Specifically, the information in the Sales Report is organized by and presented in monthly tables containing seven different columns reflecting: (1) customer name; (2) invoice number; (3) total invoice amount; (4) amount actually received by Chen‘s company; (5) Foundry‘s commission rate for the invoice; (6) the total commission owed to Foundry for the invoice; and (7) notes concerning the invoice. (Docket ## 62-1 at ¶ 4; 62-2; 68 at ¶ 12).
DISCUSSION
In support of their AEO designation, defendants submitted a declaration from Schwartz that, because it was submitted prior to several concessions by CIC, addresses all of the information contained in the Sales Report, not simply the Customer Invoiced Amounts currently in dispute. (Docket # 68). Schwartz maintains that Foundry considers the information in the Sales Report to be “confidential, proprietary, and trade secret information.” (Id. at ¶ 14). Schwartz characterizes the Sales Report as a compilation of Foundry‘s “customer information, order history, purchasing habits, purchasing preferences, as well as specific pricing and shipping information and commercial terms on individual orders.” (Id.). With such information, Schwartz continues, Foundry‘s direct competitors, such as CIC, would gain a competitive advantage by learning the identities of the Foundry customers that continued to order parts from China and “the precise ordering history and ordering volume on a customer-by-customer and
CIC disputes that the information contained in the Sales Report is entitled to any confidentiality protection. (Docket ## 62-20; 74). As an initial matter, CIC maintains that the information contained in the Sales Report does not qualify for protection under the terms of the parties’ Protective Order because it falls outside the scope of paragraph 2(c), quoted supra, which articulates the parties’ anticipated scope of protectible information. (Docket ## 62-20 at 10-11; 70-8 at 9-11). With respect to the identity of CIC‘s former customers, CIC notes that defendants previously disclosed those customers in interrogatory responses without designating the information as AEO or Confidential. (Docket ## 70-4 at ¶ 6; 70-6 at 3-4). Regarding the invoice amounts, CIC describes that information as “bare bone[s] summary sales numbers” too general to offer any competitive advantage. (Docket # 74 at 4). Beyond that, according to CIC, the Sales Report neither identifies the specific products or services purchased, nor provides the specific quantities purchased. (Id.). CIC represents that it seeks to use the information only to litigate this case and to support its actual damages claim in the Chinese litigation. (Id. at 7).
Examining the language of the Protective Order, I agree with CIC that the challenged information does not clearly fall within paragraph 2(c). Although Schwartz in his declaration asserts that the Sales Report contains customer “order history, purchasing habits, and
Unlike CIC, however, I do not interpret the Protective Order as restricting Confidential or AEO treatment to only the information listed in paragraph 2(c). Significantly, the provision does not state that the parties “agree” that protectible information is limited to the listed information, only that the parties “anticipate” that it will be so limited. Their use of the word “anticipate” rather than “agree” strongly suggests that they intended the list to be a non-exhaustive, illustrative list of the categories of information that both sides envisioned would meet their agreed-upon definitions of AEO and Confidential. Indeed, interpreting paragraph 2(c) to be exhaustive as advocated by CIC would render superfluous the phrase “[t]he parties anticipate that.” See Taylor v. Las Vegas Metro. Police Dep‘t, 2019 WL 5839255, *7 n.5 (D. Nev. 2019) (“[t]o interpret the list as exhaustive would render the phrase ‘such as’ superfluous“), reconsideration denied by, 2020 WL 620275 (D. Nev. 2020); Two Locks, Inc. v. Kellogg Sales Co., 68 F. Supp. 3d 317, 331 (E.D.N.Y. 2014) (“[w]here, as here, a court is faced with two interpretations of a contract, courts have avoided adopting an interpretation that renders clauses of the contract meaningless or superfluous“) (citing LaSalle Bank Nat‘l Assoc. v. Nomura Asset Cap. Corp., 424 F.3d 195, 206 (2d Cir. 2005) (“[a]n interpretation of a contract that has the
As defendants correctly note, courts commonly find that sales information is entitled to protection as either AEO or confidential. See All Plastic, Inc. v. SamDan LLC, 2021 WL 2979005, *2 (D. Colo. 2021) (“courts have permitted AEO designations with respect to financial information regarding sales and profits“) (collecting cases); In re Novartis & Par Antitrust Litig., 2019 WL 5722055, *10 (E.D. Pa. 2019) (“[a]n analysis of other decisions from federal district courts establishes [that] producing sales documents under [AEO] is not out of the ordinary“) (collecting cases); Nelson-Ricks Cheese Co. v. Lakeview Cheese Co., 2017 WL 4839375, *2 (D. Idaho 2017) (“courts have generally viewed sales data as trade secrets or confidential information“); see also In re Keurig Green Mountain Single-Serve Coffee Antitrust Litig., 2023 WL 196134, *3 (S.D.N.Y.) (“courts in this [d]istrict have permitted the redaction of confidential information such as sales and pricing data on the grounds that its disclosure would work a competitive harm on the disclosing enterprise“), reconsideration denied by, 2023 WL 3966703 (S.D.N.Y. 2023). That said, “decisions regarding the propriety of confidentiality designations are intensely fact-based,” Sprint Nextel Corp. v. Simple Cell Inc., 2015 WL 13840324, *4 (D. Md. 2015), and should be guided by the terms of the parties’ negotiated Protective Order. Thus, I turn to the parties’ agreed-upon definitions of “AEO” and “Confidential.”
In their supplemental submission, defendants contend that Foundry would be harmed even if disclosure of the Sales Report were limited to the Customer Invoiced Amounts. (Docket # 73 at 5). They cite Schwartz‘s representation that “it would be devastating from a competitive standpoint because [Foundry‘s] competitors would know exactly who [Foundry‘s] customers were, how often they were ordering, and approximate sales volumes.” (Id. (citing Docket # 68 at ¶ 19)). Again, however, they fail to explain how competitors could use this information to enhance their competitive position.
Judged under this standard, Schwartz‘s assertions of harm from disclosure of the Customer Invoiced Amounts are too conclusory and non-specific to justify AEO designation under the Protective Order. See NewMarket Corp. v. Innospec Inc., 2011 WL 2144695, *4 (E.D. Va. 2011) (“while [p]laintiffs have made general allegations of the harm that will result from the disclosure, they have failed to allege specific facts, through affidavits or otherwise, of any clearly defined injury to its competitive position[;] [t]he good cause requirement contemplates a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements“) (internal quotations omitted); Home Fed. Bank of Tenn. v. Home Fed. Bank Corp., 2020 WL 12863501, *4 (E.D. Tenn. 2020) (“[w]here the movant is a business seeking protection, it must demonstrate that disclosure would cause significant harm to its competitive and financial position[;] [t]hat showing requires specific demonstrations of fact, supported where possible by affidavits and concrete examples, rather than broad, conclusory allegations of potential harm“); Glob. Material Techs., Inc. v. Dazheng Metal Fibre Co., 133 F. Supp. 3d 1079, 1084 (N.D. Ill. 2015) (“the designating party must show that disclosure will result in a clearly defined and serious injury, by pointing to specific demonstrations of fact[;] . . . [c]onclusory statements – including broad allegations of potential harm or competitive injury – are insufficient to meet the good cause standard“) (internal quotations omitted). Specifically,
Whether the Customer Invoiced Amounts may be designated as “Confidential” under the terms of the protective order presents a closer question. The order permits Foundry to designate information as “Confidential” if it contains “trade secrets, proprietary business information, competitively sensitive information, or other information the disclosure of which, in the good-faith judgment of [Foundry], would be detrimental to the conduct of [Foundry‘s] business or the business of [Foundry‘s] customers or clients.” (Docket # 56 at ¶ 2(a)). In contrast to AEO treatment, confidential treatment under the Protective Order does not require a
Although defendants have failed to establish that disclosure of the Customer Invoiced Amounts would cause irreparable harm or material impairment to Foundry‘s business, Schwartz‘s declaration supports defendants’ contention that the information – at least the more recent sales information – is commercially sensitive. According to Schwartz, disclosure of the Customer Invoiced Amounts would provide Foundry‘s competitors with an advantage because they would know the identities of Foundry‘s customers and the gross monthly volume of Foundry‘s sales to them (Docket # 68 at ¶ 19), information they could use for competitive purposes, presumably to target potential lucrative customers.
The information that defendants seek to designate spans approximately nine years. As Schwartz himself appears to acknowledge, there is diminished competitive or commercial sensitivity associated with older, staler invoice information. (Id. at ¶ 15) (“[t]he confidential nature of this information is heightened because most of the Reports relate to sales made since 2017, which reflect more recent customer information and order history than earlier years“). Here, defendants have not shown, nor can the Court appreciate, how years-old customer summary invoice amounts remain commercially sensitive. See Tasty One, 2023 WL 2434241 at *3 (“[p]laintiff fails to explain how information about three-to six-year-old sales can harm its current market standing“); In re Syngenta AG MIR 162 Corn Litig., 2020 WL 1303967, *3 (D. Kan. 2020) (“all of the business information is already many years old, and plaintiff has not shown that any particular information is not stale and that plaintiff would likely still be harmed by disclosure“); Water, Inc. v. Everpure, Inc., 2011 WL 13186051 at *2 (“[b]ecause most of the requested information is several years old, it is
I reach a different conclusion with respect to the more recent Customer Invoiced Amounts. Defendants have proffered sufficient information to support their contention that recent sales information is commercially and competitively sensitive and have therefore established good cause to designate those Customer Invoiced Amounts as “Confidential.”5 See Home Fed. Bank of Tenn. v. Home Fed. Bank Corp., 2020 WL 12863501 at *10 (holding documents should be redesignated from AEO to confidential); Sprint Nextel Corp., 2015 WL 13840324 at *6 (“[t]he [c]ourt is sensitive to [d]efendants’ interests in protecting its commercial information[;] . . . the [c]ourt will direct that [d]efendants change the designation . . . from [AEO] to ‘confidential‘“); Glob. Material Techs., 133 F. Supp. 3d at 1088 (finding defendant had failed to establish good cause for AEO designation but permitting confidential designation; “this court is sensitive to the need to protect commercial information and agrees that the two groups of documents relevant here should maintain their ‘confidential’ status under the first tier of the protective order“).
CONCLUSION
For the reasons stated above, CIC‘s motion to de-designate the Sales Report (Docket # 62) is GRANTED in part and DENIED in part.
IT IS SO ORDERED.
s/Marian W. Payson
MARIAN W. PAYSON
United States Magistrate Judge
Dated: Rochester, New York October 20, 2023
