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The Fifth Circuit is Serious About Protective Orders

In a case of first impression in the Fifth Circuit, the Court has ruled that sanctions pursuant to Fed. R. Civ. P. 37(b) for a party’s failure “to obey an order to provide or permit discovery” are appropriate for the violation of a Confidentiality and Protective Order entered pursuant to Fed. R. Civ. P. 26(c).  In Smith & Fuller, P.A. v. Cooper Tire & Rubber Co., No. 11-20557 (5th Cir. June 21, 2012), counsel for the plaintiffs in a products liability case obtained documents from Defendant Cooper Tire that were marked confidential pursuant to a protective order.  Plaintiffs’ counsel “inadvertently” disclosed the confidential documents to other attorneys suing Cooper Tire pursuant to an information exchange cooperative.  Cooper Tire found out about the disclosure and asked for and received sanctions from the district court.

On appeal, the Fifth Circuit found that although the disclosures were inadvertent and were the mistake of an employee of the plaintiffs’ counsel, the district court did not abuse its discretion in awarding sanctions in the amount of $29,667.71, which represented Cooper Tire’s legal fees incurred in identifying and addressing the violation of the Confidentiality Order.  Although the Eleventh Circuit had previously ruled that sanctions pursuant to Rule 37 are not available for the violation of a Rule 26 protective order, the Fifth Circuit rejected this authority and held that Rule 37 is broad enough to encompass these sanctions.  Specifically, the Court held that a confidentiality order or a protective order is “an order to provide or permit discovery” as contemplated by Rule 37.  In reaching this conclusion, the Court noted that “no one disputes that Cooper produced thousands of pages of trade secrets or confidential information in reliance on the Protective Order.”

More importantly, the Court ruled that even though the disclosure was inadvertent, the district court was correct that lesser sanctions would not discourage future, similar conduct.

This decision makes it clear that parties that do not protect confidential information do so at their own peril.  Additionally, even if the confidential information is inadvertently disclosed, that is not an automatic defense to a request for sanctions.  In this case, however, the Court appears to have been influenced by the fact that the plaintiffs’ counsel had been previously sanctioned for willfully violating a protective order in another case.

Benjamin M. (Ben) Watson