Wednesday, December 28, 2005, 12/28/2005 10:13:00 AM

Disclosing Trade Secrets in Non-Trade Secrets Litigation

By Todd
We are struck by the numbers of litigated employment cases where a party claims that it cannot or will not supply a requesting party with documents containing its trade secrets. This occurs routinely in cases where the former sales employee sues for wrongful discharge, the employer responds to the complaint saying "the former employee was an underpeforming salesperson," and then the plaintiff requests documents and information concerning: (a) how the former employee ranked versus the other salespeople who are still working there; and (b) what the company's forecasts for sales were for the termination period and whether those forecasts, and sometimes the per-employee quotas, were realistic or reasonable. All of this information is claimed by the former employee to be evidence of whether the employer's stated rationale for termination, poor sales performance, is pretextual.

On December 21, 2005, the United States District Court for the District of Kansas was asked to review just such a conflict. Seems Don Hatten Chevrolet maintained information on sales and sales projections that was not public. The parties apparently negotiated, with the Court's ultimate approval through the entry of the same, a protective order for documents and information disclosed in the litigation. That said, Don Hatten Chevrolet still refused to turn over a number of financial statements requested by plaintiff contending that they were not germane to the issue at hand and that they contained trade secrets. The Court, noting that Don Hatten Chevrolet rendered these documents and information germane, in establishing its "poor sales performance" defense, and ordered them produced. The Court did so noting that Don Hatten Chevrolet bore the burden of showing that the disclosures would cause "harm" and further noting the existence of the protective order covering this information was adequate protection.

Suffice it to say that Don Hatten Chevrolet could have seen this coming when it established its defense. In civil litigation, if you want to use a defense that implicates documents and information you don't want the world to see, sharpen your pencil early and draft a comprehensive protective order that you want the requesting party to agree to. It is simply no strategy at all to raise "poor sales performance" as a defense and then refuse to disclose the sales performance documents and information supporting, or refuting, that defense.

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