When it comes to confidentiality designations, “Attorneys’ Eyes Only” (“AEO”) typically offers the most stringent level of “protection” for sensitive information disclosed during a case.  No one except the attorneys can see the information; not even the opposing party.  But what separates AEO information from regular old “Confidential” information?

The Business Court considered this question in Maxwell Foods, LLC v. Smithfield Foods, Inc., 2021 NCBC Order 24 (N.C. Super. Ct. Nov. 23, 2021), as part of a dispute between the world-leader in pork production (Smithfield) and one of its suppliers (Maxwell).  (For context on the industry scuffle, we wrote about it here.)  In particular, the Court addressed Maxwell’s contention that the following three categories of information should be treated as merely Confidential and not AEO (as Smithfield had designated):

i.   Smithfield’s active contracts with its hog suppliers

ii.   The prices that Smithfield has paid and the number of hogs that it has bought under the contracts

iii.   The same pricing and volume information going back to 2017 for contracts that are now expired.

Judge Conrad concluded that none of this information was deserving of AEO protection.

First, Smithfield had not shown, according to the Court, that the contracts were “unusually sensitive” and noted that “[w]ith one exception, the contracts lack confidentiality clauses, meaning that the suppliers have no obligation to keep their terms secret.”  Id. ¶ 7.  The Court identified “one exception” that might be deserving of heightened protection, but since Smithfield had not sought to distinguish that contract, the court would not either.

With respect to the pricing and volume information, those were “artifacts” of Smithfield’s contracts with its suppliers—which, again, Smithfield had not safeguarded with confidentiality clauses.  Id. ¶ 9.  The Court further noted that Smithfield had disclosed similar information to suppliers in the past, suggesting it was unlikely that “disclosure of the same kinds of information to Maxwell in this case would create a genuine risk of competitive injury.”  Id. ¶ 9.   The Court also observed that the protective order in the case restricted the use and dissemination of the information, thereby offering a degree of protection even absent the heightened designation.

At bottom, the Court’s analysis focused on two factors: (1) whether Smithfield had historically protected the information against disclosure to third parties; and (2) the risk of harm posed if the AEO designations were lifted.  Since Smithfield generally had not protected the information from third parties and the risk of harm was low, a “strong showing of confidentiality and risk of harm” could not be made.  Id. ¶ 10.  The Court thus overturned all of Smithfield’s AEO designations, while leaving open their future use “for the rare document that truly deserves it.”  Id. ¶ 11.

Take-Aways

• AEO designations may be overturned in the Business Court absent a “strong showing of confidentiality and risk of harm.” Id. ¶ 10. 

• A contract lacking a confidentiality clause is unlikely to be afforded AEO protection in the Business Court. 

• Similarly, information contained within a contract lacking a confidentiality clause is unlikely to be afforded AEO protection in the Business Court.

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