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Pesky v. United States

October 19, 2010


The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge



Plaintiffs request a protective order in this case. The Government objects. After failed attempts to informally mediate the dispute, the parties filed short briefs. For the reasons explained below, the Court will enter Plaintiffs' proposed protective order, but with certain modifications suggested by the Government.


Generally, the public should be given access to documents and information produced during discovery. Phillips ex rel. Estates of Byrd v. General Motors Corp., 307 F.3d 1206, 1210 (9th Cir. 2002). Thus, pretrial discovery is presumptively public. Id. However, "Rule 26(c) authorizes a district court to override this presumption where 'good cause' is shown." Id. In relevant part, Rule 26(c) states that "[t]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense . . . ." Fed. R. Civ. P. 26(c). A party asserting good cause bears the burden, for each particular document it seeks to protect, of showing that specific prejudice or harm will result if no protective order is granted. Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1130 (9th Cir. 2003).

In this case, Plaintiffs assert that they, and potentially third parties, will be harmed absent a protective order. Specifically, they suggest that the public disclosure of personal, financial and other sensitive information unnecessary to the resolution of this lawsuit, but contained in documents otherwise necessary or useful to the resolution of this lawsuit, will cause the harm. As an example, Plaintiffs explain that an issue in the case is whether they were entitled to a deduction for a charitable contribution of stock that was affected via a direct transfer of shares from one brokerage account to the charity's brokerage account. Plaintiffs contend that the brokerage account statements reflecting this transfer are useful to substantiating the claimed deduction, but they also apparently reflect the brokerage account numbers, which could expose both Plaintiffs and the charity to theft, fraud or other misuse of that information if it is made public. Plaintiffs contend that similar issues are presented by information which may be produced regarding Plaintiffs' home mortgage, deductions resulting from pass-through entities in which Plaintiffs hold interests, and related tax items that may be substantiated through documents and information that contain both relevant and irrelevant, but highly sensitive, personal and confidential, information.

However, Plaintiffs concede that because this case involves the litigation of tax issues, it necessarily requires disclosure of information generally considered private and confidential. Plaintiffs indicate that they are not seeking to keep the parties from obtaining and using information that is necessary to the resolution of this lawsuit. Accordingly, Plaintiffs propose a Protective Order which imposes a good faith standard upon the party claiming protection, requires a party to designate only those pages of multi-page documents actually containing confidential information as subject to the Protective Order, provides a process for resolving disputes concerning the designation of information as confidential information, and provides for broad use and disclosure of confidential information by the parties for purposes related to this lawsuit. Plaintiffs suggest that by entering a protective order at this early stage of the litigation, the parties will conserve time and resources by reducing or eliminating ongoing discovery disputes.

Although the Government opposes a protective order altogether, it also takes issues with specific portions of Plaintiffs proposed protective order should the Court be inclined to enter the order. Under the circumstances of this case and the examples given by Plaintiffs, the Court finds good cause to enter a protective order which includes the general process outlined in Plaintiffs' proposed protective order. However, the Court agrees with several of the Government's proposed changes. Therefore, the Court will briefly explain its reasons for adopting some of the Government's proposed changes below.

1. Paragraph 2

The Government takes issue with Plaintiffs attempt to protect "proprietary information of a commercially, financially or personally sensitive nature." The Government argues that this is not the correct standard as a matter of law. The Government contends that controlling standard for protective orders is Fed. R. Civ. P. 26(c). The Government is correct about the standard. However, information of a commercially, financially or personally sensitive nature may fall within that standard. Accordingly, the Court will adopt the Government's proposed language, with the understanding that some commercially, financially or personally sensitive information will likely be covered under that standard.

2. Paragraph 4

The Government contends that Plaintiffs seek to shift the burden of challenging any designations to the Government and improperly alleviating themselves of the burden of establishing that the information is protected under Fed. R. Civ. P. 26(c). The Government argues that it should not be forced to file motions to declassify information that Plaintiffs unilaterally contend is confidential.

The language suggested by Plaintiffs is fairly standard for protective orders issued by this Court. Moreover, the language does not shift the burden. It states that "[t]he party who designated the information as confidential information shall bear the burden of demonstrating that the information is entitled to protection from disclosure under this order and applicable law." The Court expects counsel to act in good faith when designating information as confidential, so the objections should be minimal and the burden light. Under these circumstances, the Court will use the language proposed by Plaintiffs.

3. Paragraph 5

The Government contends that Plaintiffs refuse to include a provision that makes clear that all documents which have already been made public should remain public. The Government suggests language to that effect. The Court agrees with the Government's contention, and there is at least some precedent for generally finding a waiver in such circumstances. Level 3 Communications, LLC v. Limelight Networks, Inc., 611 F.Supp.2d 572, 583-84 (E.D.Va. 2009). This is particularly true where Plaintiffs themselves have made the information public. Accordingly, the Court will add the language suggested by the Government. However, Plaintiffs may petition the Court, through the Court's informal mediation process or by formal motion, if they have an argument that any such information was inadvertently or improperly made public -- particularly in a case where the disclosure was made by a third party.

4. Paragraph 7

The Government takes issue with Plaintiffs' request to have all confidential information in filings with the Court made under seal. The Government argues that it is contrary to law and conflates the standard for protective orders with that for sealing information. In Pintos v. Pac. Creditors Assoc., 605 F.3d 665, 677-78 (9th Cir. 2009), the Ninth Circuit ruled that a party must establish "compelling reasons" supported by "specific factual findings" by the Court to justify keeping pleadings secret with respect to dispositive motions. "This standard derives from the common law right to inspect and copy public records and documents, including judicial records and documents." Id. at 678. However, the "good cause" standard applies when a party seeks access to discovery attached to nondispositive motions because they are typically only tangentially related or unrelated to the underlying cause of action. Id. Thus, the public's interest in accessing the information is not as strong.

The Court agrees with the Government's concern that all confidential information be filed under seal. The protective order will therefore apply to all confidential information attached to nondispositive motions, but the higher "compelling reasons" standard will need to be met before information attached to dispositive motions may be filed under seal. In these circumstances, the parties shall meet and confer to determine whether the information should be filed under seal. If the parties cannot agree, they shall attempt to informally mediate the matter as outlined in the Court's Case Management Order. If that fails, the parties may brief the issue and the Court will issue a ruling.

5. Paragraph 9

The Government contends that Plaintiffs' proposal undermines existing law and key Government functions by requiring that any confidential information be used solely for this litigation and not survive the conclusion of this matter. For example, the Government explains that it must maintain certain records after the conclusion of this lawsuit in accordance with the Justice Department's written record retention policy, and that it has an obligation to disclose certain non-exempt information under the FOIA. 5 U.S.C. § 522. The Government also states that paragraph 9 is inconsistent with paragraph 5 of the proposed protective order.

The proposed protective order states that it applies except as specifically set forth in paragraph 5. Therefore, paragraph 5 is not a concern. However, the Court is cognizant of the Government's retention policies and its obligations under FOIA. Accordingly, the Court will adopt Plaintiff's language, but carve out an exception for these two circumstances. Plaintiffs' may ...

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