Foster Miller Inc. v. Babcock & Wilcox Industries Ltd., 2002 FCT 428

Date: 20020412

Neutral citation: 2002 FCT 428

Docket: T-2002-94

BETWEEN:

FOSTER-MILLER, INC. and

ELECTRIC POWER RESEARCH INSTITUTE, INC.

Plaintiffs/

Defendants by Counterclaim

- and -

BABCOCK & WILCOX INDUSTRIES LTD.

Defendant/

Plaintiff by Counterclaim

Docket: T-1373-00

AND BETWEEN:

FOSTER-MILLER, INC., FOSTER-MILLER, CANADA LTD.

and ELECTRIC POWER RESEARCH INSTITUTE, INC.

Plaintiffs/

Defendants by Counterclaim

- and -

BABCOCK & WILCOX CANADA LTD.

Defendant/

Plaintiff by Counterclaim

REASONS FOR ORDER

O'KEEFE J.

[1]                 This is a motion by the plaintiffs for an order pursuant to Rule 151 of the Federal Court Rules, 1998 for a confidentiality order in the form annexed to the motion.

[2]                 There are two groupings of documents for which the order is sought. The Schedule "A" documents are licensing reports and the plaintiffs request that these documents be subject to the requirements of Rule 152(2). The Schedule "B" documents have been referred to as technical documents. The plaintiffs are content to obtain an order with respect to the Schedule "B" documents which would allow the defendants' solicitors and two designated employees of the defendant to see the documents for the sole purpose of assisting counsel in these actions. The plaintiffs would make modest expurgations to the Schedule "B" documents to remove certain sensitive information irrelevant to this action.

[3]                 The defendants oppose the granting of the order.

[4]                 Prior to the hearing of the motion, the parties agreed that the following documents in Schedule "B" would be subject to the confidentiality order:

Electric Power Research Institute, Inc. Document Nos. 62, 63, 64, 65, 66

Foster-Miller, Inc. Document Nos.                                              86 and 87

Foster-Miller, Canada Ltd. Document Nos.                                2 and 3

[5]                 The plaintiffs have provided copies of the documents for my review.

[6]                 Issue

Should the confidentiality order issue?

[7]                 Relevant Rules

Rules 151 and 152 of the Federal Court Rules, 1998 state:

[8]                 Mr. Justice MacKay in Apotex Inc. v. Wellcome Foundation Ltd. (1993), 51 C.P.R. (3d) 305 (F.C.T.D.) summarized very succinctly the law relating to the issuance of protective orders at pages 309, 310, 311 and 312:

The general principle of the court and its process being open to public scrutiny, including access for the public to court documents, is fundamental to our system of justice. Striking a balance between that principle and the interests of justice between the parties, including the bona fide commercial and proprietary interests of parties to litigation has led to the practice in this and other courts of providing by protective or confidentiality orders that information obtained in preparation for trial may, in appropriate cases, be maintained in confidence, not accessible to the general public, in the court's processes . . .

. . .

In my view, it is sufficient demonstration of the need for a confidentiality order in relation to information to be produced, if the moving party believes that its proprietary, commercial and scientific interests would be seriously harmed by producing information upon which those interests are based. That is particularly so at the stage of pre-trial preparations, in my view. Considerations relating to application of the principle of an open court may be weighed differently by the trial judge, if this matter proceeds to trial, for he or she will control the process at the trial including what documentary information adduced at trial should be treated in confidence.

Moreover, there are three considerations that favour the grant of the order basically in the terms specified. First, those terms reflect the terms of protective orders granted upon consent in parallel litigation in the United States in which the parties here are directly or indirectly involved. There is merit in a case where parallel litigation is underway in the United States to have reasonably comparable protective orders, provided the terms are not contrary to principle or practice in this court: see Foseco International Ltd. v. Bimac Canada (1980), 51 C.P.R. (2d) 51 (F.C.T.D.) at pp. 53-9, per Walsh J. and Procter & Gamble Co. v. Kimberly-Clark of Canada Ltd. (1987), 16 C.P.R. (3d) 114 at p. 119, 15 F.T.R. 46, 15 C.I.P.R. 16 (T.D.) per Muldoon J.

Second, while the terms of the order are broad in their application to information of all kinds, and in leaving the initiative to the producing party to designate what is confidential, by its terms the order also provides opportunity to a receiving party to object to the classification as confidential. If the objection is not resolved between the parties the court shall do so on application, and the court of its own motion may determine that information classed as confidential by a party shall not be so treated. Thus, the court ultimately may control the "declassification" of information originally classified as confidential by a producing party.

The third consideration favouring the order, in my view, is the practice of this court, as I understand it, in issuing protective orders in relation to information produced in discovery where a party believes in good faith that its commercial business or scientific interests associated with trade secrets may be seriously harmed by disclosure that is open to public assess [sic]: see Foseco and Procter & Gamble, supra; Deprenyl Research Ltd. v. Canguard Health Technologies Inc. (1992), 41 C.P.R. (3d) 228, 32 A.C.W.S. (3d) 128 (F.C.T.D.); and note also Molson Breweries v. Labatt Brewing Co., unreported, Court File No. A-550-92, June 3, 1992 (F.C.A") [reported 43 C.P.R. (3d) 61, [1992] 3 F.C. 78, 144 N.R. 321]. The practice reflects a recognition that in a case such as this, at this state particularly, the preparation of the litigation belongs primarily to the litigants. At the hearing, counsel for the plaintiffs suggested that the purpose of the order as sought was primarily to protect this action, not other interests of the parties, in view of other actions initiated by the defendant against the plaintiffs, also underway in this court. While the confidentiality order now issued would preclude use in any other action of confidential information received in this action, that aspect of the order, as all aspects, may in a proper case be varied by the court.

[9]                 In Pfizer Canada Inc. v. Novopharm Ltd. (1996) 70 C.P.R. (3d) 176 (F.C.T.D.) Cullen J. stated:

It is established case law that an order preventing counsel from showing relevant evidence to his client to get instructions, while not unknown, should only be granted in very unusual circumstances: Zeneca Pharma Inc. v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 1 (F.C.T.D.).    The onus is on the party requesting the more restrictive order to establish the need for such a restriction on the ordinary disclosure of materials which may be relevant to the issues in the case. The burden on the requesting party is a heavy one, as the request is for a deviation from the normal procedures which ensure the efficiency and integrity of the legal justice system. On confidentiality orders, MacKay J. has stated in Apotex Inc. v. Wellcome Foundation Ltd. (1993), 51 C.P.R. (3d) 305 (F.C.T.D.) at pp. 309-310:

. . .

In the circumstances that were before Mr. Justice MacKay, he found three considerations that favoured granting a broad protective order that included "for counsel's eyes only" protection for certain information within its framework. These considerations are relevant to the present case, and aid this Court in deciding whether the respondents' situation warrants an unusual restrictive order.

The three considerations that MacKay J. took into account, and which subsequently were applied by Gibson J. of this Court in Zeneca Pharma Inc. v. Minister of National Health and Welfare, ibid. (hereinafter, Zeneca), at 6-7, were: 1) the existence of a similar order granted upon consent in parallel litigation elsewhere; 2) authority for a party to object to a designation of confidentiality and for the court to ultimately "declassify" in appropriate circumstances; and 3) the practice of this court in issuing protective orders where a party believes in good faith that its commercial business or scientific interests associated with trade secrets may be seriously harmed by disclosure that is open to public access.

[10]            With respect to the documents listed in Schedule "A" (the licensing reports), the plaintiffs' affiant, Dr. William A. Ribich stated at paragraphs 6 to 9 of his affidavit:

The documents listed in the tables under Schedule "A" are licensing reports issued annually since 1989 by Foster-Miller to its licensor and co-Plaintiff Electric Power Research Institute (EPRI). The licensing reports summarize Foster-Miller's sales and service activities concerning the sludge lance systems that are at issue in the present actions. The licensing reports have never been made public.

The licensing reports reveal:

·                 Foster-Miller's pricing to all its clients, including spare parts sales, new system sales, and service job sales;

·                 all of Foster-Miller's customers, including potential opportunities; and

·                 details of Foster-Miller's pricing and bids, i.e., what Foster-Miller charges for each individual item, how Foster-Miler [sic] breaks down its bids, etc.

With the above information, a competitor could accurately predict what Foster-Miller would bid on a job in the future. Foster-Miller's main competitor in Canada and in other parts of the world is the Defendant Babcock & Wilcox Canada.

I am therefore of the view that Foster-Miller's commercial interests could be harmed by the disclosure of the licensing reports listed under Schedule "A".

[11]            The plaintiffs' affiant, Carole Druhan, at paragraphs 5 to 7 of her affidavit, states the following about Schedule "A" documents:

The documents listed in the tables under Schedule "A" are licensing reports issued annually since 1989 by Foster-Miller to EPRI. These licensing reports are kept by my department. The licensing reports have never been made public.

The licensing reports summarize Foster-Miller's sales and service activities concerning the sludge lance systems that are at issue in the present actions and provide information about Foster-Miller's royalty payments made to EPRI on these sludge lance systems. Each licensing report appears to reveal:

·                 Foster-Miller's pricing to all its clients, including spare parts sales, new system sales, and service job sales;

·                 all of Foster-Miller's customers, including potential opportunities; and

·                 details of Foster-Miller's pricing and bids, i.e., what Foster-Miller charges for each individual item, how Foster-Miler [sic] breaks down its bids, etc.

With the above information, a competitor could accurately predict what Foster Miller would bid on a job in the future. Since this could affect the quantum of royalty payments ultimately paid to EPRI, I am of the view that EPRI's commercial interests could be harmed by the disclosure of the licensing reports listed under Schedule "A".

[12]            I have reviewed the affidavit of Stephen Georgas with respect to the Schedule "A" documents. It seems to me from a perusal of all of the affidavits that the plaintiffs have not divulged the details that they now seek to protect. The plaintiffs are prepared to provide or did provide summaries of the figures contained in the Schedule "A" documents.

[13]            The parties, Foster-Miller, Inc. and Babcock & Wilcox Canada Ltd. had entered into a consent confidentiality agreement on another matter involving a flexible hose.

[14]            I am satisfied on the evidence provided by the plaintiffs' affiants that the Schedule "A" documents are confidential and that a confidentiality order with respect to the Schedule "A" documents should issue as the plaintiffs have met the tests for the issuance of a confidentiality order, including "for counsel's eyes only" protection for the Schedule "A" information. There was a consent confidentiality and non-disclosure agreement between Foster-Miller, Inc. and Babcock & Wilcox Canada Ltd. with respect to a flexible hose which was to be part of the lancing system. The plaintiffs have provided affidavit evidence that their "commercial interests could be harmed" by the disclosure of the Schedule "A" documents.

[15]            With respect to the Schedule "B" documents, the plaintiffs' affiant, William A. Ribich, in paragraphs 11 to 19 of his affidavit deposed:

This letter contains pricing information for one variety of sludge lance system that is at issue in this action. My comments above with regard to the licensing reports apply to this document as well.

I am prepared to allow access to these documents by two designated employees of the Defendant for the sole purpose of assisting counsel in the actions provided the pricing information in this letter is expurgated.

FMI Documents 86 - 87 & FMC Documents 2 - 3

These documents set out the private inter-company arrangements made between Foster-Miller and Foster-Miller Canada. These documents, which contain sensitive information about discounts offered to Foster-Miller Canada on equipment, engineering consulting and spare parts order, have never been made public. The information contained in these documents could be used by a competitor such as the Defendant to predict what Foster-Miller and/or Foster-Miller Canada would bid on a job in the future.

I am therefore of the view that Foster-Miller's and Foster-Miller Canada's commercial interests could be harmed by the disclosure of these documents.

I am prepared to allow access to these documents by two designated employees of the Defendant for the sole purpose of assisting counsel in the actions provided the discounting and any other financial information is expurgated.

FMI Documents 88, 97, 98, 100, 109, 110, 111, 112 , 113, 114, 115, 116 & FMC Documents 4 - 15

These documents are technical proposals, technical presentations and/or invoices for services rendered to do individual operations as well as to Ontario Hydro and other major customers in Canada and elsewhere. These documents have never been made public.

These documents contain detailed information about Foster-Miller and Foster-Miller Canada's sludge lancing hardware and service offerings in Canada and elsewhere, including pricing, payment terms, crew size, estimated time to complete job, etc. The latter information, the time required to complete various service operations, is one reason that these documents are confidential. Using this information and estimating labor rates a competitor such as the Defendant could predict what Foster-Miller and/or Foster-Miller Canada would bid on a job in the future. The information contained in these documents could also be used by a competitor to learn precise construction details about Foster-Miller's sludge lance systems, including dimensions, materials used, and improve his product. Furthermore, this material stresses the technical and financial features that make our equipment attractive. Revealing this would allow our competitors to directly address our major sales points.

I am therefore of the view that Foster-Miller's and Foster-Miller Canada's commercial interests could be harmed by the disclosure of these documents.

I am prepared to allow access to these documents by two designated employees of the Defendant for the sole purpose of assisting counsel in the actions provided certain particularly sensitive financial-related information is expurgated. I am prepared to discuss with the Defendant where this sensitive information is located in each of these documents.

[16]            The plaintiffs' affiant, Carole Druhan, stated the following in her affidavit about the Schedule "B" documents:

EPRI Documents 63-66

EPRI Documents 63-66 are Royalty Sharing Agreements which set out the private arrangements made between EPRI and the other co-funders of the sludge lance systems that are at issue in these actions. These documents disclose the amount that each of the co-funders committed to the project, and the percentage of royalties generated by licensing that each co-funder is therefore entitled to receive.

Neither these documents, nor the royalty sharing formula set out in these documents have ever been made public. EPRI has never shared Agreements of this sort with third parties.

Royalty Sharing Agreements of the type set out in EPRI Documents 63-66 are negotiated on a case by case basis. EPRI would not want these Agreements to fall into the public domain and to therefore be used by a third party as a precedent in its negotiations with EPRI.

I am therefore of the view that EPRI's commercial interests could be harmed by the disclosure of these documents.

EPRI is prepared to allow access to these documents by two designated employees of the Defendant for the sole purpose of assisting counsel in the actions provided all financial information is expurgated.

[17]            The affidavit filed on behalf of the defendants states that the documents are old documents and does agree to the expurgation of certain sensitive financial information. The defendants also state that much of the technical information has already been published and therefore, no longer confidential. The plaintiffs stated that any disclosure of the technical documents was not of a general nature and not disclosure of the detailed information contained in these documents.

[18]            I am of the opinion that the affidavit evidence of the plaintiffs' affiants quoted earlier in paragraphs 15 and 16 of these reasons sufficiently establishes that the plaintiffs' commercial interests could be harmed by the disclosure of these documents. I am satisfied that the Schedule "B" documents are confidential. Accordingly, I am prepared to issue the confidentiality order requested for the Schedule "B" documents.

[19]            The confidentiality order shall be granted in the form attached to these reasons as Schedules "A".

ORDER

[20]            IT IS ORDERED that the confidentiality order shall be granted in the form attached to these reasons as Schedules "A".

                                                                                     "John A. O'Keefe"            

                                                                                                      J.F.C.C.                      

Ottawa, Ontario

April 12, 2002

SCHEDULE "A"

Date: 20020412

Ottawa, Ontario, this 12th day of April, 2002

PRESENT:      THE HONOURABLE MR. JUSTICE JOHN A. O'KEEFE J.

Docket: T-2002-94

BETWEEN:

FOSTER-MILLER, INC. and

ELECTRIC POWER RESEARCH INSTITUTE, INC.

Plaintiffs/

Defendants by Counterclaim

- and -

BABCOCK & WILCOX INDUSTRIES LTD.

Defendant/

Plaintiff by Counterclaim

Docket: T-1373-00

AND BETWEEN:

FOSTER-MILLER, INC., FOSTER-MILLER, CANADA LTD.

and ELECTRIC POWER RESEARCH INSTITUTE, INC.

Plaintiffs/

Defendants by Counterclaim

- and -

BABCOCK & WILCOX CANADA LTD.

Defendant/

Plaintiff by Counterclaim

CONFIDENTIALITY ORDER

UPON motion by the plaintiffs for a confidentiality order pursuant to Rule 151;

AND UPON reviewing the affidavits filed herewith;

AND UPON hearing the submissions of counsel for the parties;

AND UPON being satisfied that the documents listed under Schedules "A" and "B" are confidential, notwithstanding the public interest in open and accessible court proceedings;

THIS COURT ORDERS that:

1.          This order shall apply to all documents listed under Schedules "A" and "B".

2.          The documents listed in Schedule "A" shall be subject to the requirements of Rule 152(2) of the Federal Court Rules, 1998.

3.          The documents listed in Schedule "B" shall not be subject to the requirements of Rule 152(2) of the Federal Court Rules, 1998. All documents listed under Schedule "B" shall not be disclosed, directly or indirectly, during the course of this action or at any time after its resolution, without the consent in writing of the parties, or further order of the Court, to any person, firm or corporation other than:

(a)         the members, associates, associated or retained patent agents and employees of the firms of Miller Thomson and Deeth, Williams & Wall; and

(b)         two designated employees of the defendant for the sole purpose of assisting counsel in the actions.

4.          Each person under subparagraph 3(b) to whom the documents listed under Schedule "B" are disclosed shall be given a copy of this confidentiality order prior to receiving such documents and its provisions shall be explained to such persons by a solicitor. Each such person, prior to receiving such documents, shall agree in writing not to disclose such documents to anyone not exempted by this confidentiality order and not to make use of any of such documents or anything contained in such documents for any purpose other than in connection with this action and subject to the provisions of this order. Each such person shall acknowledge in writing that s/he is fully conversant with the terms of this confidentiality order and agrees to comply with it and be bound by it.

5.          No person shall use the documents listed under Schedule "B" or anything contained in such documents other than for the purposes of this action pursuant to the terms and conditions of this order.

6.          The documents listed under Schedules "A" and "B" shall be filed with the registry of this Honourable Court in sealed envelopes marked with the title of these proceedings and the following statement:

"CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER OF THE HONOURABLE MR. JUSTICE JOHN A. O'KEEFE DATED APRIL     , 2002. This envelope contains confidential documents, and is not to be opened nor the contents thereof to be displayed or revealed except by order of the Court."

All such documents filed with the Court shall be endorsed with an appropriate caption stating that the documents are confidential.

7.          When the documents listed under Schedules "A" and "B" are to be discussed at trial or other court proceedings, the party seeking to discuss, quote or refer to such documents shall first ensure that only persons authorized to have access to such documents pursuant to this order are present.

8.          When information pertaining to the documents listed in Schedules "A" and "B" is incorporated in the transcript of the trial or other court proceeding, the disclosing party shall arrange with the reporter to preserve the confidentiality of such information. Information pertaining to the documents listed in Schedules "A" and "B" may be designated as confidential pursuant to this order on the record or by notifying the opposing counsel in writing within thirty (30) days of the receipt of the transcript of those pages and lines that are confidential.

9.          This order shall be without prejudice to the right of any party to apply to the Court at any time:

(a)         to have some or all of the documents listed under Schedules "A" and "B" excluded from the provisions of this order, to add persons to whom confidential information or documents may be disclosed or to otherwise vary or terminate the effect of this order; and

(b)         for any modification or vacation of the strictures imposed by this order as applied to any of the documents listed under Schedules "A" and "B".

10.        Neither anything in this confidentiality order nor any failure by a party to challenge the designation of a document listed under Schedules "A" and "B" as confidential shall be construed as an admission or agreement that any specific document is or is not confidential or is or is not otherwise subject to discovery or admissible in evidence.

11.        Upon final disposition of this action, including all appeals, each person to whom the documents listed under Schedules "A" and "B" have been disclosed shall either return all such documents, and all copies thereof, or destroy all such documents and all copies thereof. Counsel for a party may, at its option, retain one archive copy of any such document.

12.        Nothing in this order shall:

(a)         affect any implied undertaking imposed on any party pursuant to jurisprudence of this Court;

(b)         in any way restrict the use of the documents listed under Schedules "A" and "B" by the party disclosing the documents or its solicitors.

13.        Any party may apply to this Court to amend or vary the terms of this order or to seek direction as to its application.

14.        The obligations of this order shall survive the termination of the actions and shall continue to bind the parties.

                                                                                    "John A. O'Keefe"             

                                                                                                      J.F.C.C.

Schedule "A"

A.           EPRI Documents

B.           Foster-Miller, Inc. Documents

Schedule "B"

A.           EPRI Documents

B.           Foster-Miller, Inc. Documents

C.           Foster-Miller Canada Documents

                          FEDERAL COURT OF CANADA

                                       TRIAL DIVISION

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                   T-2002-94

STYLE OF CAUSE:FOSTER MILLER, INC. ET AL. v. BABCOCK &

WILCOX INDUSTRIES LTD.

PLACE OF HEARING:                                   TORONTO

DATE OF HEARING:                                     APRIL 9, 2002

REASONS FOR ORDER : O'KEEFE, J.

DATED:                      APRIL 12, 2002

APPEARANCES:

ELLIOTT SIMCOE                                             FOR PLAINTIFFS

JAMES BEAMISH                                              FOR DEFENDANT

STEPHEN GEORGAS                                                    FOR DEFENDANT

SOLICITORS OF RECORD:

SMART & BIGGAR

OTTAWA                                                            FOR PLAINTIFFS

DEETH WILLIAMS WALL

TORONTO                                                          FOR DEFENDANT

MILLER THOMSON LLP

TORONTO                                                          FOR DEFENDANT