North Carolina Business Litigation Report

On Expert Witnesses, Confidential Material, And Protective Orders

Protective Orders usually list those persons who can view documents that are designated "confidential": like counsel of record and their staff, designated business representatives of the client, court reporters, and experts.

Sometimes information can be so sensitive that the producing party doesn't want to share it with an expert.  A well-designed Protective Order can deal with that type of concern.  That was the case in this  week's Order in SCR-Tech LLC v. Evonik Energy Services LLC, 2012 NCBC 43.  The issue was whether an expert designated by the Plaintiff should be allowed to see the confidential material produced by the Defendants under the terms of the Protective Order agreed to by the parties.

The Protective Order said that the party producing confidential information could object to it being seen by an expert "with current or prior employment within the industry in which the parties compete."

The Defendants objected to an expert named Staudt, who Defendants said "actively consulted for its competitors," being allowed to see the confidential material they had produced,   Plaintiff disagreed, and took the dispute to Judge Gale for resolution.

The Judge first concluded that the term "industry" as used in the Protective Order was "the broader SCR industry in which both parties operate and in which the expert was involved.  ("SCR" stands for "selective catalyst reduction," which is "a chemical process by which harmful nitrogen oxide contained in coal-burning power plants’ exhaust gas is converted into harmless nitrogen gas and water.")

The next step for the Business Court was to decide how to balance the risk to the Defendants of producing sensitive confidential information to an expert "with prior or ongoing involvement with [the Defendants'] competitors."  Op. 15.

North Carolina's courts hadn't addressed this issue yet, so Judge Gale looked to federal decisions for guidance.  The leading case is apparently Digital Equip. Co. v. MicroTech, Inc., 142 F.R.D. 488 (D. Colo. 1992).  It lays out five factors for consideration:

(1) the expert’s affiliation with the receiving party;

(2) the extent of regular employment, consultation, or association with the receiving party;

(3) present involvement in the receiving party's competitive decisions;

(4) the potential for future involvement of the expert in the receiving party’s competitive decisions; and

(5) if the expert’s involvement is deemed beyond the point of independent, the expert’s willingness to curtail or forego future involvement with the receiving party.

The past work done by Staudt for the Plaintiff did not give the Court much pause under the first two factors, as it was more than five years ago.   But Judge Gale was concerned more about Staudt's work for the Defendants' other competitors.  He said there was not enough information in the record on that point for him to make a decision, and he ordered the Plaintiff to supplement the record on Staudt's "independence" from those competitors, using the Digital factors.

Judge Gale also indicated that he might require Staudt to agree that he would not do future "non-litigation" consulting work with the Plaintiff related to the services at issue in the lawsuit.  He said that "[s]uch a covenant would eliminate concerns relating to the fourth and final Digital factors of future involvement with the receiving party."  Op. 22.

The SCR-Tech Order is a good illustration of the concerns that experts may present in a case between competitors.  Tailor your Protective Orders carefully in those types of cases.

 

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Mack Sperling
Brooks Pierce, LLP
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