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Mutual Industries, Inc. v. American International Industries

United States District Court, E.D. Pennsylvania

March 28, 2014




Presently before the Court are Defendant American International Industries' Motion for Protective Order (ECF No. 37) and Plaintiff Mutual Industries, Inc.'s Cross-Motion for Sanctions (ECF No. 38). For the following reasons, Defendant's Motion will be denied and Plaintiff's Motion will be granted in part and denied in part.


Plaintiff Mutual Industries, Inc. is a Pennsylvania corporation that sells beauty supplies. (Am. Compl. ¶¶ 1, 3-6, ECF No. 10.) Defendant American International Industries is the "leading manufacturer and distributor of beauty supply products and skin care products." ( Id. at ¶ 11.) This is a diversity action in which Plaintiff alleges that Defendant sought to eliminate Plaintiff from the beauty supply market by tortiously interfering with five distribution contracts that Plaintiff had with three different representative groups. ( Id. at ¶¶ 2, 11, 12.)

Plaintiff commenced this lawsuit on June 30, 2011, in the Court of Common Pleas of Philadelphia, Pennsylvania. (Notice of Removal, Compl. Ex. A, ECF No. 1.) On August 4, 2011, Defendant removed the action to this Court pursuant to 28 U.S.C. § 1332 and 28 U.S.C. § 1441. (Notice of Removal ¶ 14.) On August 11, 2011, Defendant filed a motion for a more definite statement. (ECF No. 3.) On October 11, 2011, we filed a Memorandum and Order, granting in part and denying in part Defendant's motion. (ECF Nos. 8, 9.) Plaintiff subsequently filed an Amended Complaint in compliance with that order. (Am Compl.) Defendant filed an answer to the Amended Complaint on December 29, 2011. (ECF No. 12.)

The disputes over discovery have been ongoing. On September 12, 2012, Plaintiff first served Defendant with Interrogatories and Requests for Production of Documents. (July 15 Mem. 2, ECF No. 35.) After its initial discovery request, Plaintiff served Defendant with two supplemental document requests asking for Defendant's financial information. ( Id. ) These requests are currently at issue. Defendant filed Responses and Objections to Plaintiff's initial discovery requests, and did not respond to Plaintiff's supplemental document requests. ( Id. ) Essentially, Defendant produced nothing over the course of the discovery process. As a result, Plaintiff sent Defendant a letter seeking more meaningful responses to its discovery requests, to which Defendant responded by reiterating its objections and responses to Plaintiff's discovery requests. ( Id. ) Unsatisfied with Defendant's response, Plaintiff filed a Motion to Compel Discovery Responses on November 16, 2012. (ECF No. 27.) On July 15, 2013, we filed a Memorandum and Order granting in part and denying in part Plaintiff's motion. (July 15 Mem.; July 15 Order, ECF No. 36.) We directed Defendant to provide information in response to Plaintiff's Interrogatories and Document Requests, and to provide a privilege log for documents withheld based on privilege. (July 15 Mem.; July 15 Order.)

Following the July 15 Order, Defendant and Plaintiff had various communications regarding Defendant's response to the discovery requests seeking Defendant's financial information. (Pl.'s Mot. Exs. A, B.) Defendant continued to produce nothing. Consequently, Plaintiff sent Defendant a letter via e-mail notifying it that if Plaintiff did not receive complete responses from Defendant by September 19, 2013, Plaintiff would file a motion for sanctions. (Pl.'s Mot. Ex. C.) Two days later, Defendant sent an e-mail to Plaintiff and provided two documents to Plaintiff-a privilege log and a document that responded to some of the Interrogatories. ( Id. at Ex. D.) In the same e-mail, Defendant requested that Plaintiff contact Defendant to discuss a confidentiality agreement with regard to Defendant's private financial information. ( Id. ) Plaintiff claims that there was already an existing Confidentiality Agreement between the parties. ( Id. at ¶ 39 & Ex. E.) On October 4, 2013, Plaintiff wrote to Defendant because it was unsatisfied with Defendant's discovery responses. ( Id. at Ex. F.) Defendant responded stating that it was working to produce responsive documents and that it would "of course, like to avoid any unnecessary motion practice in this matter." ( Id. at Ex. G.) On October 11, 2013, Defendant wrote to Plaintiff reiterating that it was gathering documents for production. (Id. at Ex. H.)

On October 22, 2013, Defendant filed the instant Motion for Protective Order, which concerns the documents Defendant previously said it was working on producing. (Def.'s Mot., ECF No. 37.) Defendant seeks an order quashing Plaintiff's supplemental document requests for: (1) a copy of Defendant's most recent balance sheet prepared in accordance with generally accepted accounting principles; and (2) a copy of Defendant's most recent financial statements whether prepared internally or by outside accountants for any purpose and including any footnotes, accountants' reports, and other attachments or explanatory notes. ( Id. at 3.) Plaintiff filed a Response and a Cross-Motion for Sanctions on November 4, 2013. (Pl.'s Mot., ECF No. 38.). Defendant replied to its motion on November 18, 2013. (ECF No. 39.)


A. Motion for Protective Order

1. Legal Standard

Federal Rule of Civil Procedure 26(b)(1) provides that any non-privileged material relevant to any claim or defense of the action is discoverable. See Fed.R.Civ.P. 26(b)(1). However, courts are permitted to issue orders to protect a party from "annoyance, embarrassment, oppression, or undue burden or expense, " related to the discovery if the party seeking the order shows that "good cause" exists for the protection of that material. Fed.R.Civ.P. 26(c)(1); Glenmede Trust Co. v. Thompson, 56 F.3d 476, 483 (3d Cir. 1995) (citations omitted). Broad allegations of harm will not suffice to establish good cause. Glenmede Trust Co., 56 F.3d at 483. Instead, a party must show "that disclosure will result in a clearly defined, specific and serious injury...." Shingara v. Skiles , 420 F.3d 301, 306 (3d Cir. 2005) (citing Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994)).

In determining whether good cause exists, courts must balance "the privacy interests of the parties against the public interest in access to the discovery information." Id. (quotations omitted). The Third Circuit has established several factors that courts should balance: (1) whether disclosure will violate any privacy interests; (2) whether the information is being sought for a legitimate purpose or for an improper purpose; (3) whether disclosure of the information will cause a party embarrassment; (4) whether confidentiality is being sought over information important to public health and safety; (5) whether the sharing of information among litigants will promote fairness and efficiency; (6) whether a party benefitting from the order of confidentiality is a public entity or official; and (7) whether the case involves issues important to the public. Pansy, 23 F.3d at 787-91; see Shingara , 420 F.3d at 306. The Third Circuit has also adopted a balancing test when considering whether to grant a protective order. Saldi v. Paul Revere Life Ins. Co., 224 F.R.D. 169, 175 (E.D. Pa. 2004). "When the risk of harm to the owner of [a] trade secret or ...

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