State of Vermont v. Living Essentials, LLC

State of Vermont v. Living Essentials, LLC et al., No. 443-7-14 Wncv (Tomasi, J., April 8, 2016).
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]
STATE OF VERMONT
SUPERIOR COURT CIVIL DIVISION
Washington Unit Docket No. 443-7-14 Wncv
State of Vermont,
Plaintiff
v.
Living Essentials, LLC,
Innovation Ventures, LLC,
Defendants
Opinion and Order on Joint Motion for a Protective Order
This is a consumer protection enforcement action brought by the State of
Vermont against Defendants in relation to their marketing of various formulations
of a beverage known as “5-hour ENERGY®.” The parties have jointly sought a
protective order, pursuant to a Vt. R. Civ. P. 26(c), to govern the use and disclosure
of “confidential” and “highly confidential” materials obtained in the litigation phase
of this controversy. The parties have stipulated to most of the terms of the order
but disagree on certain other provisions. They have submitted the stipulated terms
for approval by the Court and have presented their points of disagreement for
resolution by the Court. As the Court advised at the March 15, 2016 hearing, it will
resolve the disputes conceptually through this Order and directs that the parties
then confer and submit a revised proposed stipulation consistent with this Order.1
1 The parties noted at the hearing that the proposed stipulation in the record
inadvertently omitted some noncontroversial provisions that the parties wished to
include in the final order. Any such corrections should be included in the revised
order.
As a general matter, a protective order limited to materials that Defendants
in good faith classify as confidential or highly confidential is appropriate in this case
and supported by good cause. Id. The agreed-upon terms proposed by the parties,
subject to the Court’s discretion over modifications, are reasonable.
There are three principal disputes between the parties. Defendants seek
terms requiring that any access to material designated as highly confidential is to
be recorded in a log to better enable it to police any future breaches of the protective
order. The State opposes any logging requirement as overly burdensome.
Defendants also seek language in several provisions the effect of which would be to
prevent counsel for the State of Vermont from discussing any materials protected in
this case with counsel for other states that are prosecuting similar cases against
Defendants. The State requests language that ensures that it will be able to discuss
protected materials in its possession with counsel for other prosecuting states who
have independently obtained the same material. Defendants also hope to subject
materials already produced to the State pursuant to an earlier confidentiality
agreement to the terms of this protective order.
1. The Requirement of an Access Log
The Defendants’ proposed logging requirement would only apply to materials
that are designated highly confidential. The Court’s understanding is that such
materials will be very limited. Indeed, Defendants intimated at the hearing that
there will be very few, if any, documents that will carry that designation.
2
There are protective orders already in place in some other states where
analogous litigation against the Defendants is currently ongoing. It appears that
Washington has a logging requirement similar to what Defendants are seeking, and
Indiana appears not to have any logging requirement. The judge in the Oregon case
indicated at a discovery hearing that a log would be required for non-lawyers, but
the final protective order appears to limit access to attorneys and have no logging
requirement.
Based on the foregoing, the Court believes a limited logging requirement is
non-burdensome and provides a reasonable way to track who has viewed such
documents and on what dates the access occurred. The Court does not find it
necessary, however, to extend the logging requirement to counsel of record for the
State or other attorneys within the Office of the Attorney General who are
designated to have access. They are officers of the court, have elevated ethical
obligations, will be required to adhere to the protective order, and are subject to the
Court’s supervision and discipline.
2. Discussion of Protected Materials
Defendants seek to prevent attorneys for the State who legitimately have
access to protected materials in this case from discussing those materials with
attorneys representing other states who are involved in similar litigation against
the Defendants. The State resists the imposition of any limitation on its ability to
converse freely with attorneys for the other states who independently have obtained
access to the same materials. To be clear, the State does not propose to disclose
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protected materials obtained in this case with attorneys for other states who do not
already have access to the same materials. It merely wants to be able to discuss
those materials with others who already have them. The issue in controversy is
discussion, not disclosure.
As a general matter, this Court has the same reaction as that expressed by
the Oregon Court in response to similar arguments by Defendants: “I—this
particular provision I’m having a hard time wrapping my mind around how if, as
part of the investigation, Oregon knows that Document A exists and they finally get
it. Let’s say it’s the formula. And they also know that Washington has the formula,
why [can’t they] talk about it. That’s the part I don’t understand.” Transcript of
Oral Argument at 17, State of Oregon v. Living Essentials, Inc., No. 14-cv-09149
(Or. Cir. Ct. Nov. 20, 2015).2
Defendants argue that allowing such interactions would undermine the
protective orders already granted in other states, would allow the attorneys in other
states surreptitiously to use Vermont’s litigation to acquire discovery materials that
they could not acquire in their own states, would allow the attorneys in the
prosecuting states to “gang up” on Defendants, and would be in stark contrast to the
widely established practice norm of never permitting such cross-jurisdictional
discussions in cases of this sort. The Court disagrees.
2Contrary to Defendants’ representation at the hearing in this case, the Oregon
Court ruled orally that such attorney discussions are permissible. See id. at 37–40.
The Oregon final protective order incorporates that ruling at ¶ 12(d)(2).
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There is no apparent way by which allowing attorneys for the State of
Vermont to engage in the proposed discussions with attorneys for other states
would undermine protective orders in the other states. Attorneys in those states
are subject to their own protective orders and are required to comply with them. If
those orders prohibit discussions with Vermont attorneys, then there will be no
such interactions.
The same is true of Defendants’ argument that other states will use this
action to obtain discovery materials unavailable under the rules and orders in their
own states. The issue at hand—discussion, not disclosure—should have no effect on
the acquisition of protected materials, here or elsewhere.
Defendants also complain that, with concurrent suits against them in
multiple states, allowing the attorneys in those states to discuss protected material
would allow the prosecuting states an unfair advantage, i.e., the ability to strategize
over documents that the states jointly possess. While such discussions could well
occur, the real question is whether such exchanges amount to significant and unfair
prejudice.
The Court has found no clear authority that this type of potential prejudice
provides a proper basis for a protective order under Vt. R. Civ. P. 26(c). The
legitimate basis for the order in this case is to protect against the prejudice that
Defendants might suffer if materials properly designated confidential or highly
confidential are disclosed to persons who should not have them. Defendants’ more
general interest in equalizing the parties’ strategic advantages and disadvantages is
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outside the scope of a protective order, has no firm basis in the case law, and has
nothing to do with their legitimate confidentiality concerns.3 Defendants’ interest
in prohibiting attorney discussions about evidence presumably would be no
different if this case involved no confidential materials whatsoever. That fact alone
shows the tenuous nature of Defendants’ position.
Defendants further argued at the hearing in this case that barring attorney
discussions in the manner they have urged is standard practice and doing anything
different in this case would upset the settled expectations of practitioners and
become an unfortunate precedent. No authority was cited for that contention. The
terms of protective orders and their modification are widely litigated and reported.
The Court has surveyed the reported federal cases. Limitations on attorney
discussions apparent in the case law generally appear to be intended to protect the
confidentiality of the protected information. The Court was unable to find cases in
which a protective order was issued specifically to prevent one person with
legitimate access to confidential material from discussing that same material with
another person who also had legitimate access to that material. The salient interest
evidenced in the case law is in appropriate limitations on use and disclosure, which
3Defendants asserted at the hearing that allowing attorney discussions would bog
the parties down in additional needless discovery and discovery disputes due to
those discussions. The Court does not see that as a likely eventuality. Moreover,
the Court notes that one virtue of an umbrella protective order largely implemented
by the parties without the Court’s involvement is that it should grease the wheels of
discovery and minimize disputes. If attorney discussions about confidential
materials are not permitted, then the State’s interest would be to challenge
Defendants’ confidentiality designations at every turn and the wisdom of having
granted a broad protective order at all might become questionable.
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are not at issue here. Even then, some courts will modify protective orders freely to
allow the use of protected materials in collateral litigation to avoid the inefficiencies
of “duplicative discovery.” See, e.g., Grove Fresh Distributors, Inc. v. Everfresh Juice
Co., 24 F.3d 893, 896 (7th Cir. 1994); cf. In re Ethylene Propylene Diene Monomer
(EPDM) Antitrust Lit., 255 F.R.D. 308, 317 (D. Conn. 2009) (noting more stringent
standard employed in the Second Circuit). In any event, whether the norm or not,
the Court is not persuaded that Rule 26(c) counsels in favor of the relief sought by
Defendants.
Defendants next argue that, practically speaking, there is no reasonable way
for Vermont’s attorneys to know which documents the lawyers of other states
already possess without first disclosing the protected material at issue. This is a
legitimate concern, but it is not without remedy. A large body of documents already
was exchanged between Defendants and several states, including Vermont,
pursuant to pre-suit investigative demands. Defendants and the participating
states certainly know what materials were produced during that process. In
addition, the Defendants indicated at the hearing that it would not be burdensome
for them to produce documents in this case with a Bates prefix indicating which
documents already have been produced in connection with the earlier investigative
demand.
The documents previously delivered to the states were produced in
accordance with their own confidentiality agreement. That agreement did not
prohibit attorneys in different states from conferring regarding the documents.
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Ultimately, the Court sees no justification for artificially curtailing such
discussions, which have already been occurring, through a claw-back protective
order in this case.
As for other materials, the Court is not persuaded that there is no reasonable
way to discuss jointly possessed confidential material without a substantial risk of
inadvertently disclosing materials that should not have been shared. For example,
the State may make discovery requests of Defendants for materials produced in the
litigation occurring in another state. If that were deemed an appropriate request by
the Defendants or the Court, the State would have confirmation that the other state
also has the documents produced in response to the request. Alternatively, the
Oregon order permits cross-jurisdictional discussions “where it is readily apparent
or obvious that the party or counsel already has been provided with authorized
access to the Confidential Information.”
The Court is not certain whether a generally stated provision of the sort used
in Oregon is the best way to resolve this matter in this case. The parties have a far
better understanding of the nature of the materials at issue and how and why
attorney discussions may unfold. For now, the Court requests that the parties
confer and attempt to agree on language that strikes a fair balance between
permitting discussions among attorneys who already possess the same documents
and avoiding disclosures to attorneys who lack independent access to the protected
materials.
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3. Application of the Protective Order to Previously Produced Materials
Lastly, the parties dispute whether the previously produced investigative
materials should be exempt from or subject to this protective order. No doubt, some
of those investigative materials will be responsive to discovery requests, will be
produced, and will be subject to the protective order in this action -- unless they are
specifically excluded from its provisions by definition, as the State proposes.
Defendants persuasively argue, however, that the earlier confidentiality agreement
does not have as much detail as the proposed protective order has with regard to
how confidential and highly confidential documents are to be handled in actual
litigation. For example, it does not go into specifics with regard to how the
documents are to be handled in court filings and depositions. The Court agrees.
With the dispute regarding cross-jurisdictional discussions resolved in the
State’s favor, the Court believes it will be beneficial to include the previously
produced documents under the umbrella of the instant protective order insofar as it
controls the use of the materials in the course of court litigation. The instant
protective order will provide clear guidance to both sides on how to handle
documents that have been designative a “confidential” or “highly confidential” in
this proceeding.
Order
Accordingly, the parties shall confer regarding the terms of a revised order
and shall submit it to the Court for approval within 45 days. If any disagreements
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remain, which the Court trusts will not occur, the parties shall advise the Court
that additional Court intervention is needed.
Electronically signed on April 07, 2016 at 06:08 PM pursuant to V.R.E.F.
7(d).
________________________
Timothy B. Tomasi
Superior Court Judge
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