ALLENTOWN – A federal judge has awarded more than $21,000 in legal fees to counsel for Sherwin-Williams, as part of a sanction related to prior dissemination of confidential trade secrets belonging to the company.
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 40-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.
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.”
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 by a paralegal.
Gallagher issued a memorandum opinion on May 6 which partially granted the defense’s motion for sanctions on plaintiff counsel, in response to the disclosures described above.
One such provision was finding plaintiff counsel in civil contempt.
“Just because a company is sued does not mean that its competitors should be able to plumb through federal court dockets and pluck proprietary information from public filings,” Gallagher said.
“Plaintiffs’ counsel’s conduct constitutes grounds for civil contempt. It is undisputed that: (1) The Court’s confidentiality and protective order is a valid order; (2) Plaintiffs’ counsel had knowledge of that order; and (3) By ‘improperly filing two confidential documents with the Court,’ plaintiffs’ counsel disobeyed that order. Having found these three elements satisfied, the Court concludes that plaintiffs’ counsel is in civil contempt for violating the confidentiality and protective order.”
Though Gallagher further found that imposing financial sanctions, without an evidentiary link to show that it lost sales due to the product information disclosures, was “simply a bridge too far” – the judge also put in place safeguards to prevent any further disclosures, accidental or not.
A third confidential disclosure would trigger immediate dismissal, Gallagher ruled.
“Discovery in this matter concerning issues related to product composition is hereby closed. Within 20 days of this order, Sherwin-Williams shall submit to the Court evidence to assess the reasonable fees and costs associated with bringing this matter to the Court’s attention. Plaintiffs and their counsel shall file their response in opposition (limited to the question of reasonableness only) within 10 days of Sherwin-Williams’ submission,” Gallagher said.
“Moving forward, plaintiffs’ counsel shall submit all future court filings to defendant’s counsel one day before such papers are filed, to ensure there are no future violations of the confidentiality and protective order. Any future violation of the confidentiality and protective order on the part of plaintiffs or their counsel shall result in the immediate dismissal of this case with prejudice.”
In response to Gallagher’s order, plaintiff counsel filed a response in opposition to the requested attorney’s fees sought by the defense.
“Any review of the reasonableness of the attorney fees requested must be considered here in the context of the actual events and positions of the parties. After plaintiffs filed their motion to compel on Jan. 27, 2022, with the improper document attached at the end of an exhibit, and the error was brought to light, plaintiffs’ counsel took immediate action along with defense counsel to bring this violation of the protective order to the attention of the court, and to work with the court system to timely remedy the error,” the response motion stated.
“Moreover, from an admission and position standpoint, at no time did plaintiffs or their counsel make an effort to contest that a violation of the protective order had occurred, whether factually or with some technical legal arguments. Nor have plaintiffs or their counsel ever contested – in accord with well-established Third Circuit precedents – that defendant would be entitled to reasonable attorney fees: as ‘the cost of bringing the violation to the attention of the court is part of the damages suffered.”
According to plaintiff counsel, the defense is seeking “compensation for approximately 70 hours of almost entirely partner-level work and billing rates to ‘bring the violation to the attention of the court.”
“When looked at globally, and when reviewed in detail below, the amounts requested are simply not reasonable. Also, as noted below, the legal billing for which reimbursement is sought also inappropriately included about seven hours of efforts undertaken to assert a separate claim or action against plaintiffs’ counsel personally for alleged damages incurred,” the response motion continued.
“Defendants have sought more than 70 hours’ worth of attorney fees for bringing this issue to the Court’s attention even though it only involved the following: Drafting of a 2-page letter to the Court seeking a conference, then attending such a teleconference, followed by a 10-page motion for sanctions and a three-page reply. Again, plaintiffs never denied any responsibility, or contested that a violation had occurred. The facts were never in dispute and there were no novel legal issues that were ever researched, briefed, or argued.”
UPDATE
In a June 28 memorandum opinion, Gallagher ruled that counsel for Sherwin-Williams would receive more than $21,000 in legal fees.
The Court first considers the challenge to time spent on preparing ‘a separate claim against [plaintiffs’] counsel and his firm for violating the confidentiality provisions of the protective order.’ Defendant’s requested fees include $1,896 for 6.2 hours billed primarily on researching and strategizing a separate lawsuit. Defendant is certainly entitled to recover ‘the cost of bringing the violation [of the protective order] to the attention of the court.’ Fees incurred in exploring a separate cause of action, however, do not fall within that scope,” Gallagher said.
“Plaintiffs also object to the fact that only senior attorneys billed on this matter. Given their familiarity with the case, and the seriousness of plaintiffs’ counsel’s violations of the protective order, the Court finds that it was reasonable for senior attorneys to complete the work at issue here. Plaintiffs further object to the amount of time spent by defendant’s attorneys drafting letters and briefs to the Court. First, defendant’s attorneys spent 2.9 hours in preparing a two-page correspondence dated Feb. 2, 2022. The Court finds nothing objectionable about the time spent on this task. The 2.9 hours were reasonable.”
Gallagher continued that defense counsel spent 40.5 hours in preparing the eleven-page motion for sanctions that was ultimately filed on Feb. 23, 2022, which resulted in $13,215 in fees.
“Plaintiff claims that ‘a partner level attorney should be expected to complete such a task in at most a full day and a half (or 12 billable hours), not with five full-days of work (or 40 hours of billing).’ This argument is wholly conclusory. The Court therefore finds the amount of time spent on the motion for sanctions to be reasonable,” Gallagher said.
“For the foregoing reasons, the Court shall deduct 6.2 hours’ worth of work from defendant’s fee award. The remaining hours, representing $21,549 in fees, are reasonable and fairly reflect ‘the cost of bringing the violation [of the protective order] to the attention of 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, 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