Opinion ID: 548
Heading Depth: 1
Heading Rank: 11

Heading: Dr. Gerber's Reliance Interest

Text: Having determined that the disclosure of Dr. Gerber's Confidential Information to the IRS via the United States Attorney's Office violated the plain meaning of the terms of the protective orders, we must next determine whether the district court's subsequent modification of the protective orders operated retroactively to repair the problem. We conclude that it did not. Protective orders serve the vital function of secur[ing] the just, speedy, and inexpensive determination of civil disputes by encouraging full disclosure of all evidence that might conceivably be relevant. Martindell v. Int'l Tel. & Tel. Corp., 594 F.2d 291, 295 (2d Cir.1979) (quotation and citation omitted). This being the case, courts should be wary of retroactive attempts to modify them in ways that undermine the justified reliance of a witness such as Dr. Gerber on a valid order circumscribing the use and availability of information disclosed through discovery. Unless protective orders are fully and fairly enforceable, witnesses relying upon such orders will be inhibited from giving essential testimony in civil litigation, thus undermining a procedural system that has been successfully developed over the years for disposition of civil differences. Id. [W]itnesses might be expected frequently to refuse to testify pursuant to protective orders if their testimony were to be made available to the Government for criminal investigatory purposes in disregard of those orders. Id. at 295-96. These concerns overshadow the general rule that the district court has broad discretion in judging whether [the alleged] injury [to the party opposing modification] outweighs the benefits of any possible modification of the protective order. Wilk v. Am. Med. Ass'n, 635 F.2d 1295, 1299 (7th Cir.1980). Typically, when considering whether to modify a protective order, courts examine any tangible prejudice to the party opposing modification that outweighs the benefits of modification. Where, as here, it is the federal government that seeks to undermine the continued integrity of the protective order, however, courts have required a greater showing than the typical standard. Given the government's vast investigatorial resources and power for oppression, United Nuclear, 905 F.2d at 1428 n. 1, courts have required a showing of unusual circumstances, Wilk, 635 F.2d at 1300, or even extraordinary circumstances, United Nuclear, 905 F.2d at 1428 (quotation omitted), before permitting the government to benefit from access to confidential information provided pursuant to a protective order via modification of the order. The government fails to identify the presence of such unusual or extraordinary circumstances in this case. For reasons we will explain in the next section of this opinion, the SEC's alleged obligation to cooperate with other governmental agencies by disclosing information to them does not qualify as such an extraordinary circumstance.
In ruling against Dr. Gerber, the district court relied, in part, on the SEC's alleged statutory and regulatory obligation to share information with other governmental law enforcement agencies. Aplt.App. at 367. While this alleged obligation is reflected in the plain language of the orders permitting sharing of information with specified agencies for very limited purposes, it will not support the nearly unlimited construction placed on it by the government. The assertion of a law enforcement purpose is insufficient, without more, to justify actions in derogation of a valid protective order. See Chem. Bank v. Affiliated FM Ins. Co., 154 F.R.D. 91, 93 (S.D.N.Y.1994). Moreover, we find this reliance on a law enforcement rationale as a means of bypassing the limitations reflected in the protective orders to be unfounded. The statutes the government identified, see id. at 168 n. 15, and on which this alleged duty was predicated, are permissive rather than mandatory. See 15 U.S.C. § 77t(b) (The Commission may transmit such evidence as may be available concerning such acts or practices to the Attorney General who may, in his discretion, institute the necessary criminal proceedings under this subchapter.); 15 U.S.C. § 78u(d)(1) (same); 15 U.S.C. § 78x(c) (The Commission may, in its discretion and upon a showing that such information is needed, provide all `records' (as defined in subsection (a) of this section) and other information in its possession to such persons, both domestic and foreign, as the Commission by rule deems appropriate if the person receiving such records or information provides such assurances of confidentiality as the Commission deems appropriate.). See also 17 C.F.R. § 240.24c-1(b) (same; further delimiting authorities to whom such information may be provided). Because, based on these statutes, the SEC's ability to share information with other governmental authorities represents a permissive power rather than a mandatory duty, it does not provide an extrinsic limit on the SEC's ability to enter into binding protective orders. The SEC can certainly make a discretionary decision to forego its opportunity to share documents with others, including law enforcement agencies, in the interest of obtaining such documents from a deponent. Moreover, we cannot endorse the government's shift of position here. Having cabined its discretion by agreeing to a protective order that limited the purposes for which Confidential Information could be sharedthus showing a lack of concern for the effect of such limitations on the use of the Confidential Information for law enforcement purposesit is odd to find the government now advancing a much broader alleged law enforcement duty as a shield to a charge that it violated the protective order.
The government makes two arguments for exempting the U.S. Attorney/DOJ from the strictures of the protective orders. It argues, first, that because the U.S. Attorney/DOJ was not a party to the protective orders, it could not be bound or limited by them and was therefore not prevented from turning over information to the IRS. While in general a nonparty is not bound by a protective order, see Gonzales v. City of Castle Rock, 366 F.3d 1093, 1119 (10th Cir.2004) (en banc) (Kelly, J., concurring in part and dissenting in part), reversed on other grounds, 545 U.S. 748, 125 S.Ct. 2796, 162 L.Ed.2d 658 (2005), that rule is inapplicable under the particular facts of this case. To facilitate cooperation between federal government agencies, the protective orders permitted the nonparty U.S. Attorney/DOJ to receive Confidential Information without the need to intervene and seek disclosure through a motion under Fed.R.Civ.P. 24. But the protective orders also contemplated that the U.S. Attorney/DOJ would only receive such documents pursuant to its terms, which prohibited their further dissemination. The U.S. Attorney/DOJ was specifically named in the protective orders and it is clear that its receipt of documents from the SEC, which was unquestionably a party to the protective order and bound by its terms, was permitted only because the U.S. Attorney/DOJ was permitted to act in concert with the SEC in sharing information. Cf. In re Zyprexa Injunction, 474 F.Supp.2d 385, 419 (E.D.N.Y.2007) (stating that under Fed.R.Civ.P. 65(d), persons named in an injunction who act in concert with other parties are considered parties for purpose of its binding effect). Moreover, the government does not argue that the U.S. Attorney/DOJ lacked actual knowledge of the protective orders. The U.S. Attorney/DOJ's receipt of the Confidential Information was therefore conditioned upon its obedience to the plain language of the protective orders forbidding further disclosure, and it was not free to violate them by sharing the Confidential Information with the IRS. The government's other argument relies on its contention that the protective orders did not require that the United States Attorney's Office be given notice of the limited use to which Confidential Information could be put. Aplee Br. at 4. It claims that the intent of the disclosure provision was to exempt the Department of Justice from any restrictions on the use of the Confidential Information. Id. at 16 (emphasis added). The district court clarified in its modification order that the use restrictions in the ... Protective Orders did not ... apply to the U.S. Attorney's Office or the DOJ. Aplt.App. at 367. But this interpretation runs contrary to the plain language of the orders, as we have noted above. We therefore cannot accept the government's argument that would permit it unlimited use of the Confidential Information simply by passing it through the U.S. Attorney/DOJ.
The government further argues that by insisting on enforcement of the protective orders, Dr. Gerber is essentially requesting to be granted use immunity for his testimony in the SEC proceedings. Citing In re Grand Jury Subpoena, 836 F.2d 1468 (4th Cir.1988), it contends that such immunity is unavailable in a civil proceeding. The government further argues that Dr. Gerber has no right to use a protective order as a substitute for either seeking immunity or invoking his Fifth Amendment rights in subsequent proceedings. These contentions, however, distort Dr. Gerber's position. He has not requested use immunity or even de facto use immunity in this action. He has merely asked the district court to enforce its own protective order in the instant civil suit. Such enforcement does not represent an actual or de facto grant of use immunity. Moreover, the facts of In re Grand Jury Subpoena are easily distinguished from those in this case. There, the Fourth Circuit, relying in part on [t]he sweeping power of the grand jury to compel the production of evidence, id. at 1471, ruled that deponents in a civil case could not use a civil protective order to block a grand jury criminal subpoena requiring production of their sealed depositions. But no such criminal subpoena is at issue in this case. [3] The IRS obtained the Confidential Information through the SEC and DOJ's voluntary disclosure, not through a criminal subpoena. This disclosure, unprompted by a grand jury subpoena, clearly violated the plain language of the protective order. The government's use immunity argument fails.
The February 2, 2004 protective order requires that within 45 days of the conclusion of litigation, the Confidential Information be returned to counsel for Dr. Gerber, or destroyed. Aplt.App. at 123. The district court denied Dr. Gerber's request that the Confidential Information in the hands of the IRS be returned to him. It noted that [w]hen the Protective Orders were issued, the court clearly contemplated that the SEC could and would turn over the material to the U.S. Attorney's Office and the DOJ for law enforcement purposes and that the material would not be returned. Id. at 367. Again, this interpretation runs contrary to the plain language of the first protective order. On the rationale advanced in its order, the district court's decision to permit the IRS to keep the Confidential Information represents an abuse of discretion, for the reasons we have outlined in this opinion.