A recent case in the Southern District of Florida serves as a reminder that even trade secrets may be subject to production to opposing counsel. Magistrate Judge Jonathan Goodman recently ordered a defendant “swingers’” club to produce its email distribution list to plaintiffs in Edmonson v. Velvet Lifestyles, LLC (S.D. Fla. Dec. 5, 2016).
Thirty-two professional models filed Lanham Act false advertising claims against Velvet Lifestyles, LLC and its president. Defendants run a private swingers’ club in Miami named Miami Velvet. Plaintiffs alleged that Defendants pirated and altered their images and used them on Defendants’ swingers’ club website and social media accounts. They also alleged that Defendants posted these images near pornographic photos.
Plaintiffs requested that Defendants produce the membership and email distribution list from their swingers’ club. Plaintiffs wanted this information to establish consumer deception or likelihood of confusion to prove their false advertising claim.
Defendants moved to protect their membership and email distribution lists from disclosure, arguing that it would violate associational and privacy rights and would improperly compel the production of trade secrets. Defendants contended that the lists were confidential customer information constituting protectable trade secrets.
The Court determined that while the membership list was properly protectable because it was not relevant discovery, the email distribution list was not. This determination was based on the following findings:
Plaintiffs had a clear need for the information given the difficulty they would have if they could not establish consumer confusion.
Defendants failed to meet their burden to show that their email distribution list had independent economic value.
Defendants failed to show they had taken reasonable efforts to maintain the list’s secrecy.
The list would be provided subject to a confidentiality order and Defendant could mark it as attorneys’ eyes only.
Was there anything Defendants could have done differently to protect their email distribution list? Likely not. Given the claims and defenses of the case, and the parties involved, it is doubtful that a finding that the email distribution list was a trade secret would have kept it from being produced.
Federal Rule of Civil Procedure 26 requires that a court balance a movant’s interest in preventing discovery against the other party’s interest in seeking the discovery before issuing a protective order. Here, Plaintiffs made a strong showing that the information was necessary to determine consumer confusion, a key aspect of its Lanham Act claim. Coupled with the facts that (1) the parties were not competitors, and (2) the list was subject to a confidentiality agreement limiting its use and disclosure, greatly limiting any potential harm Defendants could suffer, most judges would likely have found the email distribution list to be discoverable.
This case serves as a reminder to litigants that having a clearly established trade secret, doesn’t necessarily mean that you won’t be forced to produce it during litigation. Parties who anticipate that their trade secrets might become the subject of discovery should consider all options for protecting such information, including protective orders and filings under seal.
Do note, however, that this does not mean you should not attempt to make a case that your email/distribution/member list is a trade secret if presented with the same situation. Most protective orders or confidentiality agreements entered by courts only protect sensitive business information or information that may cause competitive harm if not subject to confidentiality designations. A weak showing that your list is a trade secret could leave your opponent an opening to move for de-designation, giving the opposing party, and potentially the public, access to your information.