First, the district court had reasoned that given the joint defense agreement, Static’s attorney knew or reasonably should have known that OJ Commerce would improperly use any disclosed information in defense of the Florida action. However, Static argued that it made the disclosures for consulting purposes in the Wisconsin action; had not disclosed any information to OJ Commerce’s counsel until after the latter had executed a required undertaking to be bound by the terms of the protective order; and had reminded OJ Commerce of the protective order’s requirements with each disclosure of designated information. On these facts, the Federal Circuit found Static had done “exactly what was required to ensure that [OJ Commerce’s counsel] would abide by the protective order,” and that there was no sufficient basis for finding Static’s counsel should have known that OJ Commerce “would independently decide to violate the protective order.”
The district court had also reasoned more broadly that use of designated information in a joint defense strategy generally was a violation of the protective order. Here, the Federal Circuit deferred to Taggart’s guidance that a contempt finding may be appropriate where the alleged contemnor’s conduct was based on an “objectively unreasonable understanding” of the order at issue. Noting that the Wisconsin protective order’s stated purpose was to protect against “public dissemination and disclosure” of designated materials, the Court concluded that it was not objectively unreasonable for Static to have read the order as permitting disclosures or uses entirely internal to protective order signatories, including developing a joint defense strategy, and thus there was a “fair ground of doubt” that such use was improper.
Because the district court abused its discretion in holding Static and its counsel in contempt for OJ Commerce’s unauthorized use, the Federal Circuit reversed the contempt and sanctions orders. Judge Reyna dissented, arguing that Seventh Circuit law requires deferential review of sanctions orders, and otherwise agreeing that Static could not reasonably have believed that OJ Commerce would not use disclosed information in defending the Florida action.
The opinion can be found here.
By Jason A. Wrubleski
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