Opinion ID: 1622303
Heading Depth: 1
Heading Rank: 9

Heading: whether the chancery court erred in refusing to permit eds discovery regarding the costs and profit margins of consultec.

Text: ¶ 51. On July 13, 2001, Consultec filed a motion for a protective order to prevent the disclosure of certain documents submitted by Consultec in response to a request for a proposal issued by DOM for its fiscal agent contract. On July 25, 2001, EDS filed a motion to compel after Consultec refused to respond to certain questions propounded to Consultec during discovery. In its requests for production, EDS requested documents pertaining to Consultec's strategy for the preparation and calculation of the pricing component, formulation of its technical component, and presentation of its bid; selection of Consultec's key staff members; and all aspects of Consultec's implementation of the Health Insurance Portability and Accountability Act (HIPAA) portion of the State Medicaid Administration Contract. EDS also requested each of Consultec's bid proposals submitted in response to DOM's 1999 and 2000 RFPs. Consultec opposed production of all of these documents citing certain trade secrets and confidential information. Consultec moved the chancery court to enter a protective order to prevent Consultec from being required to disclose any confidential information to EDS. ¶ 52. Although much of the information requested was proprietary and confidential in nature, the chancellor granted EDS's motion to compel in part subject to limitations and restrictions outlined in the protective order which was issued on August 16, 2001. The chancellor found the HIPAA issue to be outside the scope of the pleadings. The chancellor also found the question regarding EDS employees who had contacted Consultec about future employment to be irrelevant and outside the scope of discovery. Following Miss. R. Civ. P. 26(d)(7) which provides that trade secrets may be disclosed in a designated way, the chancellor granted Consultec's motion for a protective order to the extent that confidential information was only to be released to EDS attorneys and not officers, directors or agents of EDS, only to the extent necessary to litigate this matter.... ¶ 53. On September 4, 2001, Consultec filed a motion to modify and clarify the chancellor's previous protective order. Consultec first sought clarification of the chancellor's intentions regarding disclosure of confidential documents and testimony to in-house EDS attorneys. Consultec moved that the disclosed confidential documents be restricted to outside counsel and consultants retained by outside counsel in regards to this litigation. Consultec also asked that the chancellor revisit the issue of the discoverability of Consultec's pricing models used in the calculation of its pricing components for the 1999 and 2000 bids. Consultec argued disclosure of this information to EDS would be detrimental to Consultec as EDS is Consultec's primary competitor. ¶ 54. On September 14, 2001, the chancellor issued an order granting Consultec's motion. The chancellor made clear that any person, in-house counsel or not, who was an officer, director or agent of EDS, would be precluded from access to any information obtained during the course of this litigation which was classified as confidential. The chancellor also determined Consultec provided sufficient evidence to justify preventing disclosure of the pricing models at issue. The chancellor stated: This court therefore finds that EDS has failed to establish a basis with which this court should require Consultec to divulge its pricing plans. To require the release of confidential information solely on the basis of alleged fraudulent activity without anything [sic] specific facts to support the charges is inappropriate. To do so would establish that entities who merely make allegations of fraudulent conduct against a company without any specific facts to support such an allegation would be able to obtain the confidential proprietary information from the accused party. ¶ 55. EDS now argues the chancellor improperly refused EDS any discovery regarding Consultec's bids on the fiscal agent contract. EDS contends that in its second amended complaint, it asserted that Consultec fraudulently underbid the contract and, therefore, tortiously interfered with EDS's contractual and prospective business relations with DOM. EDS also argues that the information sought would prove a fact of consequence to the pleaded claims; therefore, the information is relevant. EDS does not disagree that the information sought is confidential; however, EDS contends confidentiality does not render documents immune from discovery. ¶ 56. DOM argues EDS neither pled fraud with particularity as is required by Miss. R. Civ. P. 9(b), [12] nor did EDS offer any proof which could be said to meet the clear and convincing standard of proof to establish fraud. [13] Therefore, according to DOM, EDS is not justified in its invasive discovery request. DOM argues Consultec has already produced thousands of pages of confidential documents pursuant to the chancellor's protective order. The only documents which have been withheld are Consultec's pricing models which contain the most confidential information used by Consultec in preparing its bids. DOM argues there was substantial evidence to support the chancellor's decision to exclude the pricing models from discovery. ¶ 57. In regard to matters relating to discovery, the chancellor has considerable discretion. This Court will not disturb discovery orders unless there has been an abuse of discretion. See Ill. Cent. R.R. v. Winters, 815 So.2d 1168, 1172 (Miss.2002); Dawkins v. Redd Pest Control, Inc., 607 So.2d 1232, 1235 (Miss.1992). The trial court's grant or denial of a motion to compel is subject to an abuse of discretion standard of review on appeal. Taylor Machine Works, Inc. v. Great American Surplus Lines Ins. Co., 635 So.2d 1357, 1363 (Miss.1994). Where, however, limitations on discovery are improvidently ordered or allowed and important information is denied a litigant reversal will obtain. Dawkins v. Redd Pest Control Co., Inc., 607 So.2d 1232, 1235 (Miss.1992). In Dawkins, guidelines were enumerated for determining whether there was an abuse of discretion: [A] trial court's discretion in the discovery area is generally guided by the principles that (a) the court follow the general policy that discovery be encouraged, (b) limitations on discovery should be respected but not extended, (c) while the exercise of discretion depends on the parties' factual showings disputed facts should be construed in favor [of] discovery, and (d) while the importance of the information must be weighed against the hardships and cost of production and its availability through other means, it is preferable for the court to impose partial limitations on discovery rather than an outright denial. Any record which indicates a failure to give adequate consideration to these concepts is subject to the attack of abuse of discretion, regardless of the fact that the order shows no such abuse on its face. Id. at 1236 (quoting 23 Am.Jur.2d, Depositions and Discovery § 5 (1983)). Fred's Stores of Miss., Inc. v. M & H Drugs, Inc., 725 So.2d 902, 919 (Miss. 1998). ¶ 58. Miss. R. Civ. P. 26 states in pertinent part: b) Scope of Discovery. Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows: (1) In General. Parties may obtain discovery regarding any matter, not privileged, which is relevant to the issues raised by the claims or defenses of any party. The discovery may include the existence, description, nature, custody, condition and location of any books, documents, or other tangible things; and the identity and location of persons (i) having knowledge of any discoverable matter or (ii) who may be called as witnesses at the trial. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence. (d) Protective Orders. Upon motion by a party or by the person from whom discovery is sought, and for good cause shown, the court in which the action is pending, or in the case of a deposition the court that issued a subpoena therefor, may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following: (7) that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way.... (emphasis added). A trade secret is defined by Miss.Code Ann. § 75-26-3(d) (Rev.2000) as: information, including a formula, pattern, compilation, program, device, method, technique or process, that: (i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. ¶ 59. The chancellor in her protective order found that although most documents requested by EDS were confidential and proprietary in nature, nonetheless, EDS's attorneys would have access to all requested documents except Consultec's pricing models. Consultec had stated that the documents produced were the bases for its bid, and aside from the pricing models being extremely confidential, especially to EDS, Consultec's biggest competitor, the pricing models were cumulative to the other documents produced. ¶ 60. Because EDS failed to base its allegations of fraud on any specific facts, we find that the chancellor did not abuse her discretion in refusing to allow EDS access to the highly confidential pricing models of Consultec.