KAMA CORP.
OSHRC Docket No. 77-3206; 77-3501
Occupational Safety and Health Review Commission
January 29, 1979
[*1]
Before CLEARY, Chairman; BARNAKO and COTTINE, Commissioners
COUNSEL:
Baruch A. Fellner, Office of the Solicitor, USDOL
Marshall H. Harris Reg. Sol., USDOL
Martin Wald, for the employer
OPINION:
ORDER
BY THE COMMISSION:
This case is before the Commission on an interlocutory appeal under 29 C.F.R. § 2200.11(b). Respondent asserts that it possesses trade secrets that will be compromised if the Secretary of Labor employs nonfederal experts to conduct an inspection of Respondent's plant for discovery purposes. The issues are whether the Secretary must show good cause to use nonfederal experts in the inspection and whether Respondent is entitled to a hearing at which it will be given the opportunity to establish the existence of the alleged trade secrets.
As a result of an inspection conducted by OSHA compliance officers, Respondent was issued two citations alleging, inter alia, a violation of the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq, for failure to comply with 29 C.F.R. § 1910.95(b)(1). Specifically, it was alleged that the employees who operated the main grinder and the lump crusher at Respondent's plastic manufacturing plant were subjected to noise [*2] exceeding permissible exposure levels and that Respondent had failed to utilize feasible administrative or engineering controls to reduce these sound levels.
Respondent filed a notice of contest relating to this and other items in the citations. A complaint and amended complaint were filed by Complainant and answered by Respondent with denials of having violated the cited standards.
Subsequently, on March 21, 1978, Complainant served upon Respondent a "Request for Entry Upon Land for Inspection and Other Purposes," pursuant to Rule 34 of the Federal Rules of Civil Procedure made applicable to Review Commission proceedings by 29 C.F.R. § 2200.2(b). n1 The request asked that Respondent permit Complainant, his attorney, government industrial hygienists, and a private acoustical engineering consultant to enter Respondent's plastic manufacturing facility "to inspect, photograph, sample or otherwise test all equipment, machines, tools, materials, in short, all processes related to" the operations of the main grinder and lump grinder.
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n1 This section states:
In the absence of a specific provision, procedure shall be in accordance with the Federal Rules of Civil Procedure.
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On April 7, 1978, Respondent filed a response opposing Complainant's request. In this response, Respondent maintained that it possesses trade secrets that would be exposed during an inspection of its plant. Respondent argued that, if Complainant's request were granted, n2 a protective order should issue pursuant to Rule 26(c) of Federal Rules of Civil Procedure and that the inspection should be limited to employees of the federal government.
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n2 Respondent's first argument in its Response asks that Complainant's request for inspection be completely denied. This argument, based upon Fourth Amendment grounds, alleged that the initial search warrant used by OSHA to inspect Respondent's plant was improperly obtained, and that any subsequent inspection "would be tainted by the prior unlawful inspection." (p.9). In ruling on the Secretary's motion, the Administrative Law Judge found that Respondent's constitutional objection could not provide a valid basis for denying the motion since the Commission is without power to review the action of the U.S. Magistrate who issued the inspection warrant. Respondent has not raised its constitutional objection in its interlocutory appeal now before the Commission.
[*4]
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On April 24, 1978, Complainant filed a "Motion to Compel Inspection of Respondent's Work Site and to Allow Discovery." In its supporting memorandum (p.7), Complainant asked that Respondent be required to identify with some degree of particularity the nature and area of Respondent's alleged trade secrets. Complainant further suggested that, if Respondent satisfactorily demonstrated the existence of trade secrets warranting protection, a protective order be issued binding the nonfederal noise consultant employed by Complainant to non-disclosure of such secrets.
In its "Response to Complainant's Motion to Compel Inspection and Allow Discovery," filed on May 5, 1978, Respondent admitted that it had no trade secrets incident to the operation sought to be observed by Complainant's acoustical engineering consultant (p.6). Respondent asserted, however, that during a travel through the facilities to the operations that were the subject of Complainant's discovery request, the consultant would observe several of Respondent's trade secrets, namely:
(1) extrusion profile; (2) extrusion conditions; (3) the condition [*5] of material in process and how such material is stored; (4) the installation of the extruder; (5) relationship of the extruder to the roll stand; and (6) the nature of the rewind equipment among others. (p.6).
On May 16, 1978, Commission Judge Henry Osterman, relying on the authority of Reynolds Metals Co., 78 OSAHRC 51/F1, 3 BNA OSHC 1749, 1975-76 CCH OSHD P20,214 (No. 4385, 1975), ("Reynolds I"), issued an order granting Complainant's request to reinspect Respondent's premises within 30 days with the following limitation:
That any trade secrets disclosed by the aforesaid inspection shall be utilized solely for the purposes of this administrative proceeding and revealed only during the course of this proceeding to persons properly involved in the preparation or presentation of the legal case in this proceeding.
On July 17, 1978, Respondent filed a motion requesting the Commission to stay reinspection proceedings, or in the alternative, to hold a hearing that would:
(a) afford Respondent the opportunity to establish that its trade secrets would be compromised if an inspection were conducted, and
(2) establish whether the Secretary has good cause to utilize nonfederal [*6] experts in the inspection. n3
Respondent submitted an affidavit of its president, averring that it possessed various trade secrets that would be exposed during a walk-through in its plant.
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n3 Respondent argued that, on the authority of Reynolds Metals Co., 78 OSAHRC 51/D4, 6 BNA OSHC 1667, 1978 CCH OSHD P22,806 (No. 4385, 1978) ("Reynolds II") which was decided after the ALJ issued his Order, it should be entitled to a hearing on these issues.
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Respondent's "Motion to Stay Inspection" was denied in Judge Osterman's Order of July 26, 1978, in which the Judge indicated that he saw no reason to deviate from his May 16, 1978 Order authorizing the inspection of Respondent's premises "on [the] condition that Respondent's trade secrets be protected."
On August 7, 1978, Respondent filed an "Appeal As a Matter of Right and [in the alternative a] Petition for Permission to Appeal [the] Order of [the] Review Commission Judge Denying Respondent's Motion to Stay Inspection Proceedings Requested by the Secretary." A unanimous [*7] Commission granted Respondent's interlocutory appeal as of right pursuant to Commission Rule 11(b), 29 C.F.R. § 2200.11(b) n4 and granted Respondent's Motion to Stay Inspection Proceedings pending disposition of the interlocutory appeal.
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n4 Rule 11(b) of the Occupational Safety and Health Review Commission Rules of Procedure states:
§ 2200.11 Protection of trade secrets and other confidential information.
* * *
(b) Interlocutory appeal from an adverse ruling under this section shall be granted as of right.
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The issues which Respondent requests the Review Commission to decide are:
a. Whereas Respondent has averred that it possesses trade secrets, did the Review Commission Judge err by granting permission to the Secretary to conduct a reinspection of Respondent's premiser with a non-federal acoustical engineering expert in the absence of the establishment of good cause by the Secretary for not using a federal employee?
b. Did the Review Commission Judge err by granting permission to the Secretary to use a non-federal [*8] acoustical engineering expert to conduct a reinspection of Respondent's premises without first holding a hearing at which Respondent could be afforded the opportunity to establish that it possesse[s] trade secrets that [are] subject to compromise if the Secretary uses non-federal personnel? (Respondent's Appeal, pp.5-6).
In that case we held that the possibility of disclosure of trade secrets to an expert who is not a federal employee does not preclude the granting of a motion for entry upon Respondent's land for discovery purposes so long as the Respondent's trade secrets are adequately protected. We concluded in Owens that trade secrets could be adequately protected by appropriate protective orders and a provision in the Secretary's contract with the outside expert that would allow the employer an enforceable third-party beneficiary interest. Owens also described the minimum requirements of an acceptable protective order and indicated the procedure to be followed [*9] when a trade secret claim is made by an employer. To the extent that Reynolds I and II, supra, are inconsistent with Owens they have been overruled. Accordingly, this case is remanded to the Judge for further proceedings consistent with the Commission decision in Owens. It is so ORDERED.
CONCURBY: BARNAKO (In Part)
DISSENTBY: BARNAKO (In Part)
DISSENT:
BARNAKO, Commissioner, concurring in part and dissenting in part:
I agree that this case must be remanded for further proceedings on the Secretary's discovery motion.