A federal judge in Colorado declined to sanction Plaintiff DTC Energy Group Inc. (“DTC”) for disclosing information governed by a civil protective order. DTC Energy Group, Inc. v. Hirschfeld, 1:17-cv-01718 (D. Colo. July 27, 2020).

DTC, a consulting and staffing firm serving the oil and gas industry across the United States, filed suit in July 2017 against Defendants Ally Consulting, LLC (“Ally”), a former business partner and direct competitor of DTC, and two former DTC employees.

The amended complaint alleged a variety of claims, including trade secret misappropriation, unfair competition, breach of employment contract, and civil conspiracy to steal trade secrets.

During  discovery, and subject to an oral protective order issued by the court, Ally produced to DTC documents and information that contained certain of Ally’s trade secrets.  DTC later shared documents produced as “confidential” in the litigation with both its outside criminal attorney and with a Denver assistant district attorney after receiving a grand jury subpoena for those documents.  Ally and the other defendants accused DTC of malfeasance and of willful violation of the protective order, and sought sanctions in the  litigation.

The record confirmed that DTC and its  outside counsel had been in contact with the district attorney in efforts to convince him to bring criminal charges against Defendants for the conduct alleged in the litigation.  Several months later, apparently as a result of DTC’s communications with the district attorney, DTC received a grand jury subpoena seeking Defendant’s confidential documents, including those containing trade secret information.  In denying Defendant’s motion for sanctions, the judge explained that the grand jury subpoena prevailed over the protective order, and “[b]y necessary implication, therefore the Court cannot find that Plaintiff committed any sanctionable conduct” by complying with the subpoena or for failing to disclose the existence of the subpoena to Defendants despite instructions from the DA to the contrary.

Similarly, the Court found that DTC did not violate the protective order by providing documents to its separate criminal attorney.  The Court recognized that it was not clear that a criminal attorney engaged outside of the litigation would be covered by the protective order’s language allowing disclosure of discovery materials to “needed personnel in the attorney’s offices.” However, the judge ultimately determined that this language could reasonably be construed to include an attorney hired to represent the interests of the client in potential related criminal proceedings.

While this outcome may sound surprising, the court’s order serves to highlight (and perhaps provide a well needed reminder) that all protective orders have their limitations.  The Court in this case noted some conflicting case law in other Circuits, that could result in a different outcome based on the jurisdiction in which a lawsuit is pending and the facts of the case.  Parties served with subpoenas or other requests to produce documents that may include confidential documents under a protective order should carefully assess their obligations under the evolving law to avoid potential missteps.