Jump to Navigation | Jump to Content
American Bar Association

Litigation News

Appellate Court Affirms Sanction for Violating Protective Order

By Jeffrey B. Tracy, Litigation News Associate Editor – February 6, 2009

A recent California appellate court decision highlights the need for attorneys to strictly comply with stipulated protective orders that seek to safeguard confidential information, even when the court fails to do so. The opinion also raises the danger of relying on informal, oral advice from an ethics hotline.

Background of the Dispute
In Wallis v. PHL Associates, Inc. [PDF], the California Court of Appeal upheld sanctions of $43,678.42 against an attorney for notifying her client that the opposing counsel had filed its confidential trade secret statement in the public court file. Prior to making the disclosure, the attorney had even consulted within her state’s ethics hotline to determine whether she had to disclose the public filing to her client. The appeals court determined, however, that the attorney should have adhered to the terms of the protective order and not told her client.

The issue arose in a trade secrets dispute between an animal vaccine manufacturer and a former employee. Dale Wallis sued her former employer, PHL Associates, for profiting from a vaccine that she claimed to have invented. PHL counter-claimed for misappropriation of trade secrets, alleging that Wallis had stolen the vaccine from PHL.

During the course of the litigation, the parties agreed to a protective order, which permitted the parties to designate documents as confidential and submit those documents to the court under seal. The manufacturer’s counsel apparently sent a declaration with 800 attached documents to the trial court in a sealed envelope, labeled “confidential.” Approximately 250 of the 800 attached documents were marked as confidential pursuant to the protective order. The other documents were not. Somehow, the document later appeared in the court’s file that was available to the public.

Upon learning that the document was available to the public, the employee’s counsel contacted the California State Bar ethics hotline and said she was told that she had a duty to her client to tell her about the availability of the documents and the legal effect that this availability had on her status as trade secrets.

The former employee client then enlisted the help of a courier service and friends to view and copy the document in hopes of defeating the vaccine manufacturer’s claim that the vaccine was a trade secret. The vaccine manufacturer then moved for sanctions against both the former employee and her counsel.

Trial Court Decision
The trial court found that the vaccine manufacturer had “substantially complied” with the classifying procedures identified in the protective order. As such, the trial court found that the former employee’s counsel had acted in bad faith and violated the protective order, in part, because she told her client about the documents without adhering to the procedures for declassifying the allegedly confidential documents.

Third District Ruling
In affirming the trial court, the Third District Court of Appeals in California held, in part, that “[the former employee’s counsel] made no attempt to follow [the declassifying] provision of the protective order, a fact supporting the determination that her actions were frivolous and taken in bad faith.”

Effects on Protective Order Cases
Wallis has broad-reaching implications for conflicts surrounding protective orders. Not only does the decision address the “substantially complied” standard, but, more importantly, Wallis emphasizes the need to follow the proper declassification procedures when a conflict arises,” says John Hutchins, Atlanta, GA, cochair of the Section of Litigation’s Intellectual Property Litigation Committee .

“When a conflict arises as to the confidentiality of a document under a protective order, the best practice is to first raise the issue with opposing counsel, and, if that fails to address the problem, raise the issue with the Court before taking any action at all,” Hutchins says.

Lawrence D. Rosenberg, Washington, D.C., cochair of the Section’s Trial Practice Committee, agrees, noting that “in dealing with protective orders, it is critical to make sure that any conflict or issue surrounding the protective order is resolved with the court prior to disclosure of arguably protected information to an unauthorized recipient.”

Lessons from Wallis
Wallis provides important lessons for all litigators. “While ethics hotlines are helpful, they cannot be relied upon absent some written opinion,” says Rosenberg. “Regardless of any advice received from an ethics hotline, it is still the lawyer’s individual responsibility to research and learn relevant ethical rules in any given case,” he stresses.

Technology Issues
The case also highlights another potential problem in filing documents under seal, namely, the problem with certain Adobe programs that allow someone to remove a redaction from a document, notes David Soley, Portland, ME, cochair of the Section’s Trial Practice Committee.

“Some courts simply may not have the proper technology to keep a document confidential,” says Soley. Specifically, “there are certain Adobe programs, that when a document is filed under seal using that program, the public can still access the document simply because a federal court may not be properly equipped with the proper technology,” Soley warns.

Keywords: Protective order, confidentiality, ethics, Wallis v. PHL Associates, Inc., Third Circuit


Be the first to comment.


We welcome your comments. Please use the form below to post.

Copyright © 2017, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).

Back to Top