ALLENTOWN – Sherwin-Williams wants a federal judge to sanction counsel for an Easton couple for the alleged dissemination of its confidential trade secrets, in the couple’s lawsuit resulting from their use of one of the company’s deck stainers, which supposedly caused a fire on their property.
Scott Mains and Andrea Mains of Easton first filed a complaint on Jan. 7, 2020 in the U.S. District Court for the Eastern District of Pennsylvania against The Sherwin-Williams Co., of Cleveland, Ohio.
The Mains claimed they purchased Sherwin-Williams’ Thompson’s WaterSeal Penetrating Timber Oil for their deck and placed application materials with the product left on it on the lawn next to the deck.
They alleged that on Aug. 26, 2018, the application materials left on the lawn spontaneously caught on fire, causing extensive damage to the property. The Mains added the stain was defective and unreasonably dangerous, and that the product lacked adequate warnings and instructions.
On Feb. 27, 2020, Sherwin-Williams filed an answer to the Mains’ complaint, denying each of their claims in their entirety and countering with 42 affirmative defenses.
Among the forty-plus defenses were:
• The Mains’ lawsuit failing to state a claim against Sherwin-Williams upon which relief may be granted;
• If contributing negligence by the plaintiffs were discovered, then any recovery is barred pursuant to the Pennsylvania Comparative Negligence Act;
• Because of plaintiffs’ own contributory negligence, comparative negligence, assumption of the risk and/or because plaintiffs disregarded certain open and obvious risks; and
• Because their damages were proximately caused by an unforeseeable misuse, application, alteration, modification, and/or abuse of the Thompson’s WaterSeal Penetrating Timber Oil identified in the complaint.
Sherwin-Williams filed a motion on Dec. 23, 2020, seeking a protective order and confidentiality in the instant action.
“Sherwin-Williams asks this Court to enter a confidentiality and protective order to prevent non-party State Farm Fire and Casualty Insurance Company from obtaining confidential trade secrets and other proprietary information that Sherwin-Williams expects to produce in discovery. State Farm is a non-party subrogating insurer that has authorized plaintiffs to pursue claims against Sherwin-Williams to recoup monies paid by State Farm to plaintiffs following a fire that damaged the plaintiffs’ home,” the motion stated.
“The parties agreed in the Joint Rule 26(f) Report that a confidentiality and protective order is necessary to protect the proprietary interests of Sherwin-Williams, but a dispute exists as to whether State Farm is entitled to access this information. Counsel for plaintiffs contends that State Farm is his ‘client’ and that he is ‘compelled’ to share confidential information with representatives at State Farm. This position is problematic because State Farm is not a party to the litigation, and its insurance agreement with plaintiffs cannot impose an obligation on Sherwin-Williams to disclose its confidential trade secrets. State Farm chose not to pursue Sherwin-Williams as a party, and has no ability compel public disclosure of confidential trade secrets.”
By virtue of the order, the motion asked to limit disclosure of protected information to the plaintiffs, testifying witnesses, and to any retained experts consistent with prevailing law.
“While Sherwin-Williams takes no position as to relevance and/or discoverability, it contends that any documents or materials containing this type of information are highly sensitive, proprietary, and constitute confidential trade secrets that warrant protection from disclosure to non-parties,” per the motion.
Without an order limiting public dissemination, including to non-party State Farm – the largest property and casualty insurer in the country and a regular litigant in fire-related subrogation claims – Sherwin-Williams will risk public disclosure of proprietary information related to its product development, chemical formulations, internal business operations, and other closely guarded trade secrets.”
U.S. District Court for the Eastern District of Pennsylvania Judge John M. Gallagher ruled to partially grant the protective order, in a memorandum opinion issued on April 7.
“We agree with plaintiffs and find that State Farm should not be barred from accessing discoverable materials. We emphasize that we are bound by the Third Circuit’s decision in United Coal Cos. v. Powell Constr. Co. There, pursuant to ratification agreements, the plaintiff sued on behalf of two insurance companies. While the companies were not named parties in the litigation, the Third Circuit treated them as such,” Gallagher said.
“It remarked that ‘the effect of service of the…ratification agreements was as if [the companies] had been parties from the beginning of the action.’ To that end, the Third Circuit characterized the companies as co-plaintiffs’ with the named plaintiff. Under United Coal, State Farm is not, as Sherwin-Williams states, a ‘stranger to this litigation.’ Because State Farm is considered a co-plaintiff, we will not foreclose it from accessing materials produced in discovery.”
However, Gallagher added that he concurred with Sherwin-Williams that the requested disclosures be made available to counsel only.
“Given the likelihood that defendant will produce sensitive, proprietary information about its products, we will issue a protective order that allows for ‘Attorneys’ Eyes Only’ designations. And as defendant acknowledges, ‘Plaintiffs will have an opportunity to challenge’ any such designations under the order,” Gallagher stated.
Gallagher also denied a motion from the plaintiffs to quash a subpoena from the defendants, for documents relating to the plaintiffs’ house fire, as the plaintiffs did not demonstrate they would face “an undue burden” by answering the subpoena.
“Plaintiffs have not made that showing. The requested documents are clearly relevant to this case, and plaintiffs have not explained how production of the documents would be unduly burdensome. As a result, we will not quash the subpoena,” Gallagher said.
UPDATE
Following the issuance of the protective order in April 2021, Sherwin-Williams filed a motion for sanctions on Feb. 23, connected to what it argues are disclosures of the formula used to create its paints, in filings made by the plaintiffs in both November 2021 and January 2022.
“Plaintiffs and their counsel failed miserably to meet [an expectation of confidentiality] here. Sherwin-Williams’s greatest fear in disclosing its confidential product formulas became a reality when plaintiffs, the insurance company for which they are acting as a front, and their counsel published Sherwin-Williams’ ‘secret sauce’ for the world – including all of Sherwin-Williams’ competitors – to see, putting Sherwin-Williams’ business in jeopardy. The gravity of plaintiffs and their attorneys’ infraction cannot be overstated,” the motion stated, in part.
“The confidential, proprietary, trade secret product formula plaintiffs chose to publish for the world to see happens to be the formula for a ‘bread and butter’ brand and product line that dominates in its particular market segment, and generates substantial annual revenue. And to make matters worse, plaintiffs and their attorneys were repeat offenders, having engaged in a similar violation (albeit limited to a couple of ingredients) less than two months earlier. Sherwin-Williams brought that first violation [in November 2021] to opposing counsel’s attention, and allowed them to correct the situation without further consequence, expecting plaintiffs and their lawyers had learned their lesson. They did not. Instead, they doubled down and put the entire formula online.”
The company said that the plaintiffs’ repeated disclosures of confidential information made in violation of a standing protective order warranted “severe sanctions”, including fees and costs expended to bring this matter to the Court’s attention, plus monies for competitive harm suffered by the company – which they say would far exceed the total value of the instant case.
“Plaintiffs and their counsel have repeatedly violated this Court’s protective order, and in doing so have exposed defendant The Sherwin-Williams Company to an immeasurable risk of harm. They should be held in contempt, sanctioned appropriately and their entire case dismissed with prejudice,” per the motion.
“At the very least, they should be required to account for their handling of Sherwin-Williams’ confidential information, barred from asserting any claim based on Sherwin-Williams’ proprietary product formulation, and ordered to return or destroy every single confidential document produced in discovery that identifies the composition of that product. Finally, plaintiffs and their counsel should be ordered to reimburse Sherwin-Williams in full for the fees and costs incurred in bringing this matter to the Court.”
For counts of strict liability, negligence and breach of implied warranty, the plaintiffs are seeking monetary relief in excess of $75,000, plus interest, all other appropriate relief and a trial by jury.
The plaintiffs are represented by Kenneth Levine and Matthew M. Connolly of de Luca Levine, in Blue Bell.
The defendant is represented by C. Tyler Havey, Ann T. Field and Eric C. Rosenberg of Gordon & Rees, in Philadelphia.
U.S. District Court for the Eastern District of Pennsylvania case 5:20-cv-00112
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com