METROPAK CONTAINERS CORPORATION

OSHRC Docket No. 77-3861

Occupational Safety and Health Review Commission

September 30, 1980

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Before CLEARY, Chairman; BARNAKO and COTTINE, Commissioners.  

COUNSEL:

Baruch A. Fellner, Office of the Solicitor, USDOL

Francis V. LaRuffa, Regional Solicitor, U.S. Department of Labor

Douglas T. Moring, General Attorney, Kraft, Inc., for the employer

OPINION:

DECISION

BY THE COMMISSION:

This is a case under the Occupational Safety and Health Act of 1970, 29 U.S.C. § §   651-678 ("the Act").   A Memorandum and Order of Administrative Law Judge Jerome C. Ditore, granting the Secretary's uncontested motion to withdraw a citation alleging that Metropak Containers Corporation ("Metropak") violated the Act, is before the Commission for review pursuant to section 12(j) of the Act, 29 U.S.C. §   661(i).

The citation at issue alleged that Metropak violated section 5(a)(2) of the Act, 29 U.S.C. §   654(a)(2), by failing to comply with the noise standard at 29 C.F.R. §   1910.95(b)(1).   Metropak timely contested the citation, and the case was assigned to Judge Ditore.   As part of his pretrial discovery, the Secretary of Labor ("the Secretary") moved to have a private noise expert enter Metropak's facility for the purpose of discovering facts relevant to the feasibility of engineering controls to reduce noise.   [*2]   Metropak resisted the Secretary's discovery motion in part on the ground that such an entry would jeopardize the company's trade secrets. Judge Ditore granted the Secretary's motion, subject to eight conditions.   Conditions one through seven concerned the time, place and manner of inspection and report to the court.   The eighth condition provided that:

Any information obtained by Complainant's two representatives or agents from their entry upon Respondent's premises is to be used solely for the purpose of this case and for no other purpose.   The information shall not be disclosed to any person, persons or organizations other than the parties herein.

Pursuant to the judge's order, two discovery entries were conducted and two reports were prepared.   Thereafter, the compliance officer working on the Metropak case showed one of the reports to his Area Director because the Area Director was engaged in settlement negotiations on a similar case involving one of Metropak's competitors. The Area Director, unaware of Judge Ditore's order, in turn showed the report to the competitor. Upon learning of this action, Metropak moved that the case be dismissed, or in the alternative, that any [*3]   evidence obtained pursuant to the order be excluded from evidence.   Judge Ditore declined to dismiss the case but excluded all evidence resulting from the entries. n1 Subsequently, the Secretary moved to withdraw the citations on the ground that even with the excluded evidence he could not prove the feasibility of engineering controls.   The motion was granted.

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n1 We note that of the two reports produced by the Secretary's expert, only one was disclosed to Metropak's competitor. However, we will not question the propriety of the judge's decision to exclude both reports, since there is nothing in the record to suggest that the two reports contained substantially different information.

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Neither party petitioned for review of the judge's ruling.   Commissioner Cottine, sua sponte, directed that the case be reviewed on the following issues:

1.   Whether the administrative law judge properly excluded all evidence obtained by representatives of the Secretary of Labor during their two entries upon the Respondent's   [*4]   property for discovery because the Secretary failed to comply with the protective order entered by the judge.

2.   Whether remedies or sanctions other than the exclusion of evidence are authorized under 29 U.S.C. §   659(c) and Commission Rule 102, when a party, its agents or attorneys violate a protective order entered by the Commission or its administrative law judge.

Metropak has not taken exception to the original discovery order, the exclusionary ruling, or the order vacating the citation.   It does, however, contend that dismissal of the citation would have been a proper remedy for violation of the protective order. In a letter filed in lieu of a brief, the Secretary asserts that he did not move to withdraw the citation as a result of the judge's exclusionary order, but so moved because he could not have sustained his burden of proof even with the excluded evidence.   The Secretary also asserts that he has taken further steps to insure the confidentiality of such documents in the future.   Thus, the Secretary asks that the judge's order vacating the citation be allowed to stand.

I

Section 15 of the Act, 29 U.S.C. §   664, authorizes the Commission and its judges to "issue such orders [*5]   as may be appropriate to protect the confidentiality of trade secrets," and Commission Rule 54, 29 C.F.R. §   2200.54, authorizes Commission judges to issue appropriate orders for failure to comply with an order of a judge. n2 Rule 54 does not specify sanctions to be taken for noncompliance. Therefore we look to the Federal Rules of Civil Procedure for guidance. n3

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n2 Rule 54.   Failure to comply with orders for discovery.

If any party or intervenor fails to comply with an order of the Commission or the Judge to permit discovery in accordance with the provisions of these rules, the Commission or the Judge may issue appropriate orders.

n3 Section 12(g) of the Act, 29 U.S.C. §   661(f), provides in pertinent part:

Unless the Commission has adopted a different rule, its proceedings shall be in accordance with the Federal Rules of Civil Procedure.

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Federal Rule of Civil Procedure 41(b) authorizes the involuntary dismissal of an action or claim for failure to comply with a court order. n4 Federal Rule 37(b) provides a [*6]   range of sanctions which may be taken against one who resists discovery. n5 Respondent asserts on review that Federal Rule 37 is pertinent, but we disagree.   The clear thrust of that rule is, in the words of the Advisory Committee, "against parties or persons unjustifiably resisting discovery." n6 In this case it was the party who sought discovery who ultimately violated the order, and that violation was not in the nature of resistance to discovery. Federal Rule 41(b) is more directly applicable to the facts of this case in the sense that it deals with failure to comply with any court order.   However, the sanction authorized under that rule is involuntary dismissal, and the question immediately before us concerns the propriety of an exclusionary ruling.   A court's inherent power to protect the integrity of its orders, on the other hand, extends to any lesser sanction which a court might find appropriate to the circumstances and which is not inconsistent with the Federal Rules.   See Van Bronkhorst v. Safeco Corp., 529 F.2d 943 (9th Cir. 1976); United States v. Moss-American, Inc., 78 F.R.D. 214 (E.D. Wis. 1978).

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n4 Rule 41.   Dismissal of Actions.

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(b) Involuntary Dismissal: Effect Thereof. For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendent may move for dismissal of an action or of any claim against him.

n5 Rule 37.   Failure to Make Discovery: Sanctions.

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(b) Failure to Comply with Order.

(1) Sanctions by Court in District Where Deposition is Taken. If a deponent fails to be sworn or to answer a question after being directed to do so by the court in the district in which the deposition is being taken, the failure may be considered a contempt of that court.

(2) Sanctions by Court in Which Action is Pending. If a party or an officer, director, or managing agent of a party or a person designated under Rule 30(b)(6) or 31(a) to testify on behalf of a party fails to obey an order to provide or permit discovery, including an order made under subdivision (a) of this rule or Rule 35, the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following:

(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;

(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting him from introducing designated matters in evidence;

(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party;

(D) In lieu of any of the foregoing orders or in addition thereto, an order treating as a contempt of court the failure to obey any orders except an order to submit to a physical or mental examination;

(E) Where a party has failed to comply with an order under Rule 35(a) requiring him to produce another for examination, such orders as are listed in paragraphs (A), (B), and (C) of this subdivision, unless the party failing to comply shows that he is unable to produce such person for examination.

In lieu of any of the foregoing orders or in addition thereto, the court shall require the party failing to obey the order or the attorney advising him or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.

n6 Fed. R. Civ. P. 37, 28 U.S.C.A., Notes of Advisory Committee on Rules.

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Exercise of this inherent authority is a matter within the sound discretion of the court.   Consequently, our standard for review is whether Judge Ditore abused his discretion in excluding evidence for unauthorized disclosure. Duquesne Light Co., 80 OSAHRC    , 8 BNA OSHC 1218, 1980 CCH OSHD P24, 384 (No. 78-5034, 1980).

Exclusion of evidence as a sanction for misconduct or dilatoriness is usually employed to effectuate important public policies.   1 WEINSTEIN'S EVIDENCE, P402[03] (2d ed. 1976).   In this case, Judge Ditore's ruling furthers public policies in favor of protection of judicial authority and in favor of protection of trade secrets. The first principle is so fundamental as to need no elaboration.   The confidentiality of trade secrets, however, is a matter that bears further discussion.   We have stressed repeatedly that we regard employers' claims of trade secret very seriously and have gone to great lengths to assure trade secret confidentiality when the Secretary employs outside experts to conduct discovery entries on employers' premises. n7 We have done so not only out of a generalized [*9]   concern for the employer's property interest in trade secrets, but also to effectuate section 15 of the Act, supra, wherein Congress has placed upon the Commission a special mandate to protect the confidentiality of trade secrets. In light of the public policies served by the exclusionary ruling in this case, we find no abuse of discretion. n8

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n7 In Owens-Illinois, Inc., 78 OSAHRC 105/C1, 6 BNA OSHC 2162, 1978 CCH OSHD P23,218 (No. 77-648, 1978), we ruled that a protective order requiring outside experts to maintain confidentiality of trade secrets shall require that the Secretary provide the employer with a resume of the expert who is to conduct the inspection, that the expert sign an oath swearing not to disclose trade secret information except to the Secretary's representatives, and that the Secretary enter into a contract with the expert making the employer a third-party beneficiary entitled to bring an action against the Secretary or the expert in the event of unauthorized disclosure.

n8 It must also be remembered that Commission judges do not have the full range of sanctions available to them that are available to federal court judges.   For example, Commission judges have no contempt power, Owens-Illinois, Inc., supra note 7, and cannot award costs and attorney fees against a party, John W. McGowan, 77 OSAHRC 189/E10, 5 BNA OSHC 2029, 1977-78 CCH OSHD P22,268 (No. 76-1308, 1977), aff'd, 604 F.2d 855 (5th Cir. 1979).

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Moreover, this case raises no countervailing considerations of the type that sometimes arise when imposition of a sanction acts to penalize the client rather than the offending counsel.   Working men and women, represented by the Secretary of Labor, do have an interest in a safe and healthful workplace, and hence have an interest in a full adjudication of alleged safety and health violations that affect them.   But they, as well as the public at large, have at the same time a compelling interest in a high standard of conduct among government employees, in protection of judicial authority, and in the protection of trade secrets.

Our conclusion is not affected by the fact that Metropak never actually substantiated its claims of trade secrets. n9 Whether the report shown to Metropak's competitor contained trade secrets or not, the Secretary was bound to maintain the confidentiality of material subject to the disclosure limitation.   "[A]n order issued by a court with jurisdiction over the subject matter and person must be obeyed by the parties until it is reversed by orderly and proper proceedings." United   [*11]    States v. United Mine Workers, 330 U.S. 258, 293, (1947).   "[T]he alternative would be to frustrate and disrupt the progress of the trial with issues collateral to the central questions in litigation." Maness v. Meyers, 419 U.S. 449, 459 (1975).

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n9 We have held that in order adequately to raise a claim of trade secrets, an employer must allege in an appropriate pleading that a certain trade secret exists and provide a description of its general nature.   These allegations must be supported by affidavits of individuals who possess personal knowledge of the alleged trade secrets. Owens-Illinois, supra note 7.

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II

Metropak asserts on review that remedies or sanctions other than exclusion of evidence are authorized under section 10(c) of the Act, 29 U.S.C. §   659(c), and Commission Rule 102 n10 when a party, its agents, or attorneys violate an order entered by the Commission or its administrative law judge.   Specifically, Metropak argues that vacation of the citation would have been a more proper sanction [*12]   under the circumstances.   It also urges the Commission to refer this matter to the Department of Justice for investigation of a possible violation of 18 U.S.C. §   1905. n11

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n10 Section 10(c) of the Act, 29 U.S.C. §   659(c) provides in pertinent part:

The Commission shall [after a hearing] issue an order, based on findings of fact, affirming, modifying or vacating the Secretary's citation or proposed penalty, or directing other appropriate relief . . . .

Commission Rule 102, 29 C.F.R. §   2200.102, provides:

Rule 102 Standards of conduct.

All persons appearing in any proceeding shall conform to the standards of ethical conduct required in the courts of the United States.

n11 18 U.S.C. §   1905 provides in pertinent part:

§   1905.   Disclosure of confidential information generally

Whoever, being an officer or employee of the United States or of any department or agency thereof, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, . . . shall be fined not more than $1,000, or imprisoned not more than one year, or both; and shall be removed from office or employment.

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A

Metropak contends that its motion to dismiss should have been granted, citing the rationale and policy considerations expressed by the U.S. District Court for the Eastern District of Wisconsin in Moss-American, supra. There, an Environmental Protection Agency ("EPA") employee falsified evidence in connection with a court action brought by the EPA.   Upon discovering the fraud, the District Court elected to dismiss the action rather than to exclude the falsified evidence because exclusion of evidence which has been thoroughly discredited hardly constitutes a penalty and because lesser sanctions would have had insufficient punitive or deterrent impact.

Because of the strong policy favoring disposition of cases on their merits, we have generally required a showing of contumaciousness or actual prejudice before vacating citations for failure to follow Commission rules or orders.   See Duquesne Light Co., supra; Ralston Purina Co., 79 OSAHRC 81/E6, 7 BNA OSHC 1730, 1979 CCH OSHD P23,897 (No. 78-145, 1979).   In the instant case Metropak has neither claimed nor proved that it was prejudiced [*14]   by disclosure of the confidential report.   Nor has it suggested that the Secretary's agent acted in willful disregard of the confidentiality order.   Unlike the federal employee in Moss-American who consciously attempted to perpetrate a fraud upon the court, the Secretary's agent acted negligently, not maliciously.

At the same time, we recognize that the confidential reports constituted an important part of the Secretary's prima facie case n12 and that their exclusion might well have had the practical effect of a dismissal had the Secretary not chosen to withdraw the citation on a ground not related to the exclusion order.   Consequently, the exclusionary ruling in this case could not be fairly described as an appreciably lesser sanction than outright dismissal.   An exclusion order which amounts to dismissal might well constitute an abuse of discretion where there has been no showing of prejudicial or contumacious misconduct.   However, as we indicated above, violation of an order meant to protect trade secrets, even where noncompliance is negligent rather than willful, is a particularly serious matter.   It is the object of the order in question -- to protect possible trade secrets [*15]   -- which even in the absence of prejudice or contumaciousness warrants imposition of a sanction only nominally less severe than dismissal.

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n12 Economic and technological feasibility of abatement are elements of the Secretary's prima facie case in proving noise standard violations.   Samson Paper Bag Co., 80 OSAHRC    , 8 BNA OSHC 1515, 1980 CCH OSHD P24,555 (No. 76-222, 1980).

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B

Metropak urges the Commission to refer this matter to the Department of Justice for investigation of a possible violation of 18 U.S.C. §   1905, which makes it a criminal offense punishable by a fine of $1,000 or imprisonment for one year or both for a federal employee to disclose confidential information except as authorized by law.

We will forward to the United States Attorney for the District of New Jersey a copy of this opinion, together with a cover letter stating that a violation has been alleged and that the matter may warrant an investigation.   We wish to point out to Metropak, however, that Metropak itself could call the matter [*16]   to the attention of the United States Attorney. n13

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n13 Unlike Chairman Cleary, we do not presume to exercise the investigatory and prosecutorial discretion exclusively entrusted to the United States attorneys.   See generally 28 U.S.C. §   547.

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Metropak also expresses concern that there may still be copies of the protected report in the Secretary's files, subject to unauthorized disclosure in the future.   However, the hearing record shows that Judge Ditore ordered both parties to surrender to the court all copies of the reports.   In the absence of evidence to the contrary, we presume that the Secretary has complied fully.

Finally, the Secretary states that he has taken steps to assure that orders limiting disclosure of confidential matters are not violated in the future.   Specifically, the Secretary proposes to mark each page of protected reports "CONFIDENTIAL" and to safeguard all such reports in the Secretary's office.   We hereby endorse these measures and will henceforth regard them as minimal precautions [*17]   to be taken in connection with such matters.

Accordingly, the judge's order vacating the citations is affirmed.   SO ORDERED.  

CONCURBY: CLEARY (In Part)

DISSENTBY: CLEARY (In Part)

DISSENT:

CLEARY, Chairman, Concurring and Dissenting:

I agree with my colleagues that the judge's decision should be affirmed for the reasons given in the majority opinion.   I also agree that an employer's claim of trade secrets is a serious matter and that the Commission has an affirmative obligation to assure trade secret confidentiality.

I dissent, however, from that aspect of the majority decision that would refer the opinion in this case to the United States Attorney for the District of New Jersey ("United States Attorney") for an investigation of a possible violation of 18 U.S.C. §   1905. This action by the majority is an outstanding example of overkill - of creating a "tempest in a teapot."

The conduct of the Secretary's representatives is not to be condoned, of course.   It is clear, however, that their actions were essentially inadvertent and that the Secretary was embarrassed by the incident.   Furthermore, the Secretary has taken steps to insure the confidentiality of such reports in the future.   This is not enough for my [*18]   colleagues though - they want their "pound of flesh." Why?   Neither party in this case petitioned for review of the judge's decision; Commissioner Cottine, sua sponte, directed that the case be reviewed.   Metropak has not claimed that it has been damaged by disclosure of the report; we do not even know if the report contained trade secrets.

My colleagues take the extraordinary step of forwarding a copy of this opinion to the United States Attorney.   Yet, they carefully avoid expressing an opinion on the issue of a section 1905 violation.   If the U.S. Attorney's office for the District of New Jersey is anything like most United States Attorneys' offices, I am sure that they will have better things to do than investigate this referral.   Thus, I am confident that the United States Attorney will see this referral for what it is and will give it the attention it deserves.