Practical Insights for Business Owners
Client Q & A: How do I make sure my confidential information is protected during litigation?
How do I make sure my confidential information is protected during litigation?
The discovery process in modern litigation is very broad—all documents potentially relevant to the disputed issues are in play. That means that in almost every commercial case it is possible that sensitive, proprietary, or otherwise confidential information will have to be turned over to your adversary. Often, that adversary is also a competitor. In those situations, you can usually obtain a court order, called a “protective order,” that protects against the unauthorized disclosure of such information. Litigants often agree that a protective order should be in place and ask the court to issue one. But if your opponent will not agree, you can still make a motion to the court to ask for one. Because a protective order is an order signed by a judge, it is binding on the parties and a party that breaches it can be held in contempt.
Protective orders are very common in commercial litigation. Typically, they prohibit disclosure of confidential information, whether produced in written (documentary) or oral (testimony) form, to anyone other than:
- The parties to the action
- Counsel to the parties, including paralegals and staff
- The court
- Vendors assisting counsel (copying, graphics, electronic document hosting, etc.)
- Experts (consulting and testifying)
- Witnesses who must be shown confidential information while testifying
If your litigation adversary is a business competitor, and the information disclosed could be used by your adversary to compete against you, protective orders can also have a heightened "attorneys' eyes only" level of protection. "Attorneys' eyes only" documents or testimony cannot be shown to anyone working for the adverse party who might be able to make use of the information for ongoing business.
Of course, a party is free to make whatever use it chooses of its own confidential information—protective orders restrict what your adversary does with your information, and what you do with theirs, not what anyone does with their own information.
When documents are covered by a protective order, they should be labeled "Confidential" (or a similar designation) in case they fall into the wrong hands. If such documents are filed publicly, they are typically filed under seal so that only the court can access them. Where feasible, documents that contain snippets of confidential information can be redacted and then filed with the clerk for public access so that only the confidential information is removed. Caution should be taken when deciding what information to designate as "Confidential" because some judges will scrutinize designations and do not look favorably on the practice of designating everything that is turned over to the other side as confidential. Also, the legal standard for filing documents under seal is different in New York state courts than it is in federal courts. So, the court you are in may make a difference in how easy it is to protect confidential business information. (And note that there are specific rules that apply in New York state court to the protection of confidential personal information, such as social security numbers, even if there is not a protective order in place.)
Protective orders typically have provisions whereby third parties who are called upon to produce evidence (see our prior Client Q&A on this topic) may designate their information as confidential. This mechanism can anticipate and overcome a common objection from subpoena recipients.
Care should be taken to lay out the consequences of a violation of a protective order in advance. It can be difficult, if not impossible, to quantify the damages associated with the improper disclosure of confidential information, so protective orders should specify the remedies for breach. Such remedies can include injunctive (non-monetary) relief.
At the end of a litigation, whether by settlement or judgment, a protective order should provide that all protected information must either be returned to the producing party or destroyed. Because litigants and attorneys can forget, proper follow-up is important to make sure all protected documents in the adversary’s files have been disposed of.
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While protective orders are commonplace, there are a number of pitfalls for the unwary. The last thing you want is to have satellite litigation over the improper use or disclosure of sensitive commercial data turned over in discovery, whether you are on the prosecuting or receiving end of the claim. We have extensive experience litigating and negotiating protective orders. Please reach out with questions.