CITATION: Teti v. Mueller Water Products Inc., 2015 ONSC 813
COURT FILE NO.: CV-13-489853
REASONS RELEASED: February 4. 2015
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ROBERT TETI and ITET CORPORATION v. MUELLER WATER PRODUCTS INC., MUELLER CO., MUELLER CANADA LTD., and MUELLER INTERNATIONAL, LLC.
BEFORE: Master R. Dash
COUNSEL: Joseph Etigson and Paul Lomic, for the plaintiffs
Kenneth D. Hanna, for the defendants
REASONS FOR DECISION
[1] On February 2, 2015 I granted the defendants’ motion for a protective order with reasons to follow. These are the reasons.
[2] In this action the plaintiffs assert that the defendants misappropriated the plaintiffs’ confidential information respecting its remote municipal water shut off system or used it as a springboard for the defendants’ own system called the 420RDM. The defendants assert in their defence inter alia that its 420RDM was independently conceived or created by a related company, Mueller Systems, LLC.
[3] Before exchanging documentary productions the parties, by their lawyers, signed on March 18 and 20, 2014 a consent to a specific Protection Order (“PO”), The PO contained definitions of Confidential Information (“CI”) and of Highly Confidential Information (“HCI”). HCI was defined as CI “which is, in addition, commercial, customer or financial information, the disclosure of which could reasonably be expected to prejudice the competitive position of the disclosing Party and/or would reveal significant technical or business advantages”.
[4] CI was to be kept from public view, but could be provided to outside counsel, experts and up to “10 officers, directors, in-house counsel or other employees of a receiving party or any company related to or affiliated with a Party to whom disclosure is needed for purposes of this action” (collectively the “Receiving Party”). HCI could be provided to outside counsel and experts but NOT to the Receiving Party.
[5] Among the provisions of the PO were mechanisms by which the receiving party could challenge the CI and HCI designations of the disclosing party. Section 22 of the PO set out the mechanism of challenge including written notification, conferring of the parties and if the parties could not agree, the receiving party “may bring a motion to the court for determining the status of the information.” On such motion the disclosing party has the burden of establishing that the information is CI or HCI. Further, section 31 provides that the PO is without prejudice to the right of any party to “apply to the court at any time” to have some or all of the designated CI or HCI excluded from the PO, for directions as to any dispute in the application of the PO or to vary or terminate the effects of the PO.
[6] On April 1, 2014 the defendants booked a date for a consent motion to sign the PO. On April 23, 2014 the parties exchanged affidavits of documents and unredacted productions. The defendants designated an extremely large number of productions as HCI (1749 of 1836 productions) which the defendants claim are research and development documents and emails respecting same.
[7] The plaintiffs objected to a large number of the documents designated as HCI. The parties attempted to resolve the designation issues but were unsuccessful and on May 12, 2014 the plaintiffs purported to withdraw their consent to the PO. The motion on consent was cancelled and the opposed motion for the PO was filed and ultimately heard by me.
[8] The motion is for the granting of a PO. It is NOT a motion to approve or contest any or all of the specific HCI designations. The PO to which the parties consented provides the mechanism for making and challenging the designations. The motion before me is to sign the PO which in turn sets the procedural framework for designating information as CI and HCI and for challenging those designations.
[9] The only evidence filed by the plaintiffs is that of Mr. Etigson’s law clerk, primarily to attach copies of correspondence and documents. No affidavits were filed by those involved in negotiating or consenting to the PO such as the plaintiff Mr. Teti or his counsel, Mr. Etigson.
[10] There is no evidence that the consent was given in error or by mistake or that counsel did not have his client’s instructions. In the absence of such evidence a party cannot arbitrarily withdraw its consent.[^1] There is no evidence that the solicitor had limited authority which was disclosed to the other side.[^2]
[11] “Surprise” may be grounds to withdraw a consent[^3]. In argument Mr. Etigson says he was surprised at the quantity and nature of the documents designated by the defendants as HCI and that withholding those documents from his clients will limit the plaintiffs’ ability to properly instruct their counsel. In particular he argues that if Mr. Teti is not privy to the scientific and creative documents he will be unable to determine if the 420RDM arose through independent creation or from the plaintiffs’ confidential information (directly or as a springboard).
[12] Unfortunately for the plaintiff, no evidence has been proffered to that effect in order to substantiate Mr. Etigson’s argument. I cannot take judicial notice of what Mr. Teti requires to instruct counsel. Further, there is no evidence that the expert retained or to be retained by the plaintiffs, and to whom the HCI will be provided, will be unable to opine on the key issue of independent creation.
[13] While the court is to enquire into the “circumstances” of the consent[^4] there is no evidence from the plaintiffs as to those circumstances. In particular there is no evidence about what Mr. Teti and Mr. Etigson anticipated by the HCI designation, the definition to which they consented, and which definition included information which “would reveal significant technical or business advantages” or what they anticipated when they agreed to a term that such information could be withheld from Mr. Teti. There is no evidence of what the plaintiffs believed could be classified as HCI and withheld from Mr. Teti. There is no evidence of mistake or surprise.
[14] In any event, as noted, the plaintiffs have the right under the PO to challenge the defendants’ designations of particular documents as HCI and the onus would be on the defendants to establish that the designated documents meet the definition of HCI.
[15] As the plaintiffs have consented to the order and there is no evidentiary basis to permit the plaintiffs to withdraw their consent, the PO was granted.
[16] Since the order was signed pursuant to the parties’ consent, there is no need for the court to consider whether the defendants have met the test or provided a sufficient evidentiary basis for a confidentiality order as set out in Sierra Club of Canada v. Canada[^5] or to engage in the balancing of interests including the right to a fair trial or to determine if a reasonable and less restrictive alternative measure would suffice to prevent a risk to the defendants’ commercial interests. It is unnecessary to consider the principles set out in Eisses v. CPL Systems Canada Inc.[^6]. to determine if a PO should be granted, although I do note that in that case Master Glustein (as he then was) was of the view that if a competitor could obtain an unfair advantage by the release of commercially sensitive information, there would be a prima facie right to a PO unless there was “evidence” of prejudice. In the absence of the consent herein, I would have considered that it is a legitimate purpose of a PO to prevent disclosure to a competitor of commercial and scientific information associated with trade secrets which could be harmed by disclosure, particularly when the terms of the PO itself permit the parties to challenge the designation of specific documents[^7], such as is the matter before me. In the absence of consent, I would also have been mindful of cases where a “counsel’s eyes only” order that would have the effect of impairing the client’s ability to instruct counsel or interfere with the solicitor-client relationship should be granted rarely and only in the clearest of cases[^8].
[17] It is of course unnecessary to consider at this time the principle in Parsons v. McDonald’s Restaurants of Canada Ltd.[^9] that where a party “wishes to seek a confidentiality order with respect to specific documents” it should not make a single generic description of all such documents, but should produce the documents to the court or at least “identify them and describe their contents with sufficient particularity” to enable the receiving party to “provide the court with precise reasons why the order should not be granted with respect to some, or all, of the information.” The motion before me is not to make a PO “with respect to specific documents”, as was the case in Parsons, but to order a PO which in turn sets out a mechanism for designating documents as CI or HCI and for challenging those designations. Undoubtedly the principles in Parsons may be important if a motion is brought under sections 22 or 31 of the PO to challenge whether a document has been properly designated as HCI. In any event, unlike in Parsons, the HCI documents have already been provided to plaintiffs’ counsel so that the plaintiffs would be in a position to provide reasons why specific documents should not be designated as HCI.
[18] I wish to emphasize that nothing in my order or in these reasons specifically approves (or disapproves) of the vast numbers of documents designated by the defendants as HCI either individually, or by category or in their entirety. Whether the defendants can successfully defend each such designation on a motion pursuant to sections 22 or 31 of the PO is not for me to determine on the motion before me today. I would hope that on any such motion, both parties will proffer sufficient evidence to enable the court to make such determination in all the circumstances.
[19] I also should not be taken as agreeing with the defendants’ position that Mueller Systems deserves any special consideration for the protection of its documents as a “non-party” to this action. Although it is a separate corporate entity and technically it is a non-party since it is not (yet) named as a corporate defendant, it is affiliated with and not by any means at arm’s length to the corporate defendants. As such, I would give no additional consideration to any code of ethics, tacit understanding or even express agreement among the family of Mueller companies to protect Mueller Systems’ documents or give Mueller Systems any greater protection as a non-party than I would give to the Mueller corporations who are named defendants.
[20] Finally, I would encourage the parties to agree upon a solution that will provide sufficient protection to the defendants’ commercial interests while enabling the plaintiffs to properly instruct counsel. This will require both parties to take a good hard look at each document for the defendants to determine what they really need to withhold from Mr. Teti to prevent risk of harm and for Mr. Teti to determine what he really needs to see to determine if the 420RDM was created with the use of the plaintiffs’ own confidential information. This may require the parties to return to the drawing board and require additional protection to reduce the risk of harm such as restricting disclosure only to Mr. Teti with no right to make copies or make further distribution to anyone including other members of his organization, an undertaking from Mr. Teti as to what use he may or not make of the information and destruction of all copies when no longer required for this litigation. I am certain that counsel working creatively can devise much better terms than the court could suggest.
Master R. Dash
DATE: February 4, 2015
[^1]: Re Rose, 1943 327 (ON CA), [1943] O.W.N. 457 (C.A.) at paras 5 and 6
[^2]: Larizza v. Scrivo, 2013 ONSC 7929 (SCJ) at para 23
[^3]: Re Rose, supra at para. 6
[^4]: Larizza, supra, at para. 23
[^5]: Sierra Club of Canada v. Canada, 2002 SCC 41 (SCC) at para. 53
[^6]: Eisses v. CPL Systems Canada Inc., 2008 1946 (ON SC), 2008 O.J. No. 239 (SCJ-Master) at para. 5
[^7]: Lundbeck Canada Inc. v. Canada, 2007 FC 412, 2007 F.C. 412 at paras. 15 and 16
[^8]: I.M.P. Group Ltd. v. Skyservice Business Aviation Inc., 2013 ONSC 4956 (SCJ-Master) at para. 22; PharmaScience Inc. v. GlaxoSmithKline Inc., 2007 FC 360, 2007 F.C. 360 at para. 1
[^9]: Parsons v. McDonald’s Restaurants of Canada Ltd., [2003] O.J. No. 4732 (S.C.J.) at paras. 13 and 20