If a Protective Order governing trade secrets is issued in your case, don't do this (or get out your checkbook)

This blog is intended to cover topics related to complex litigation.  But, based solely on the appellate decisions covered here, one might think that this site is restricted to class action topics.  While it is true that the bulk of appellate decisions mentioned on this blog relate to class actions, that has more to do with the fact that class actions are an easily "ascertained" subset of complex litigation than any decision to limit coverage of other "complex litigation" decisions.  Today, in Wallis v. PHL Associates (November 25, 2008), the Court of Appeal (Third Appellate District) considered some of the thorny issues related to trade secrets and protective orders in the context of reviewing a sanction award in the eyebrow-raising amount of $43,678.42.

The Court explained the conduct resulting in that unusually high sanction: 

“ In the course of this long-running litigation, the parties agreed to a protective order, which the court issued, allowing the parties to file under seal certain confidential documents containing alleged trade secrets. Cross-complainant PHL Associates, Inc. (PHL) filed the declaration of its attorney Tory E. Griffin, with attachments containing what PHL alleged were trade secrets. Although the declaration designated that it was filed under seal pursuant to the protective order and was sent to the trial court in a sealed envelope and labeled appropriately, the document later appeared in the court file available to the public.

Upon learning of the public availability of the declaration, attorney Mendoza notified her clients of the public availability. In an attempt to defeat PHL’s claim that the information attached to the declaration contained trade secrets, the Wallises and Mendoza had third-parties view and copy the declaration.

PHL, along with fellow cross-complainants Jeffrey T. Wichmann and Mary B. Holmes, filed a motion for sanctions pursuant to Code of Civil Procedure section 128.5 (section 128.5) against the Wallises and Mendoza for their conduct relating to the declaration. The trial court granted the motion, finding that the actions of the Wallises and Mendoza were frivolous and taken in bad faith.

(Slip op., at pp. 2-3.)  The Court of Appeal wasn't any more impressed with the conduct or the arguments than the trial court:  "The position of the Wallises and Mendoza, that the appearance of the declaration in the court’s public file allowed them to disclose the information attached to the Griffin declaration, was frivolous. And they acted in bad faith when they disclosed the information."  (Slip op., at pp. 3-4.)

File this under too cute by half.  Protective Orders are fairly common in class actions and other types of complex litigation.  But, in my experience, Protective Orders are not taken as seriously as they should be.  This decision is a painful reminder that a court may not look favorably on cynical attempts to end-run a protective order.  And this (disregarding protective orders) may be more common that you might think.  I was commended by a trial court recently for not using information subject to a "use" protective order, despite an urgent need to do so.  Following the trial court's order shouldn't have been so unusual as to receive praise, but it was.  Just remember that they call them protective Orders for a reason.