ALLENTOWN – A battle for the levying of sanctions is still underway between an Easton couple and Sherwin-Williams, as the company wants a federal judge to sanction plaintiff counsel for the alleged dissemination of its confidential trade secrets.
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 versus 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. 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.
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, 2021.
“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.”
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.”
UPDATE
Plaintiff counsel filed a motion opposing the imposition of sanctions on March 10, albeit with an apology to the Court and explaining that the confidential information was mistakenly included in the filing.
“Plaintiffs’ counsel’s office wrongly included two pages marked ‘confidential’ that contained identical Composition Data Sheets of Defendant’s product marketed as ‘Thompson’s WaterSeal Penetrating Timber Oil’ at the end of an exhibit to plaintiffs’ earlier motion. This was accidental and unintentional. They were included by a litigation paralegal, and unfortunately undersigned counsel did not see that he had included these two pages at the end of the exhibit,” per the plaintiff’s motion.
“When this improper disclosure was brought to our attention by defense counsel – about 30 minutes after the filing of the motion, we immediately contacted the court clerk’s office, and then your chambers, to correct this error. I apologized to defense counsel and advised that we would immediately rectify the situation. We continued to follow-up with the clerk’s office and court chambers until the issue was resolved shortly thereafter.”
Plaintiff counsel further explained that, in its view, the defense already provided 90 percent of the formula of the product in question in its own filings in this case, and that competitors would likely be able to reverse-engineer the product based on those other disclosures.
According to plaintiff counsel, “Any sanctions beyond these actual compensatory measures is not justified by the record, and respectfully should be denied.”
In response, the defense filed an additional brief restating their desire to see sanctions imposed on plaintiff counsel, on March 29.
“Aware of their precarious position, plaintiffs and their counsel try, albeit unsuccessfully, to make the case that Sherwin-Williams is making a mountain out of a molehill. For starters, they suggest that Sherwin-Williams – one of the longest-standing and best-known paint and coatings companies in the world – does not know its own industry. They also argue that Sherwin-Williams has failed to substantiate the magnitude of the harm that results from disclosure of its trade secrets. In their view, this is a ‘no harm, no foul’ situation because, according to plaintiffs’ counsel and their supposed expert, the composition of Sherwin-Williams’ products can just as easily be discerned through reverse engineering, and, in their opinion, Sherwin-Williams has suffered no harmed at all. They are wrong,” according to the defense brief.
“Ultimately, the only thing plaintiffs and their counsel have established is that they do not so much regret violating the protective order as they regret getting caught. But protective orders are not purely pro forma; they ‘are not suggestions that may be disregarded at counsel’s whim or convenience.’ Indeed, ‘lawyers and litigants who decide that they will play by rules of their own invention will find that the game cannot be won.’ As shown in Sherwin-Williams’s opening brief, plaintiffs and their counsel’s violation of the protective orders is serious, and poses an existential threat to Sherwin-Williams. Plaintiffs and their counsel’s efforts to downplay the gravity of their contempt underscores the need for serious sanctions here. An appropriate order should follow.”
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, Ilan Rosenberg 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