Court Enforces a Protective Order
What relief is available to a Court when dealing with the breach of a protective order and breach of the implied undertaking rule? The Federal Court had occasion to consider this question in Molo Design Ltd. v. Chanel Canada ULC, 2023 FC 140. In a decision dated January 30, 2023, the Federal Court made an order to enforce a Protective Order issued in the action and to enforce the implied undertaking rule.
The facts were that a co-founder of the plaintiff Molo Design Ltd. disclosed information in documents disclosed by Chanel in the action that were designated “Confidential” under a Protective Order. The disclosure was made in an email to Molo’s lawyers in France, Italy, Taiwan, and the United States.
The Protective Order say clearly that Confidential Information “shall be kept confidential, shall be used solely for the purpose of the Proceeding and shall not be disclosed to anyone except in accordance with the terms of this Order.”
Chanel sees relief by way of remedial measures to ensure no further use or disclosure of confidential information occurs and also seeks sanctions to punish Molo for this conduct.
The Court considered sanctions and remedial measures.
Sanctions
The Court described the violation of a Protective Order and breach of the implied undertaking rule as follows:
The violation of a Protective Order is a very serious matter. It can cause harm to the party whose confidential information was unlawfully disclosed. It can also have very grave consequences for the party and the persons who breached the Order. They may be subject to contempt of Court proceedings, and liable to fines or imprisonment. A violation of the implied undertaking rule is an equally serious matter. It erodes public confidence in the judicial process and strikes at the authority of the Court. The consequences for those breaching it range from suspension or dismissal of their proceeding to contempt of Court proceedings (Juman v Doucette 2008 SCC 8 at para 29).
Chanel sought a sanction to dismiss part of Molo’s statement of Claim. In this case the Court declined to grant the sanction because Molo’s breach had not caused prejudice to Chanel beyond the costs of the motion and because any harm to the judicial process caused by the breach is insufficiently linked to the form of sanction sought.
The Court expressly declined to make a ruling as to the state mind or intent of the co-founder or of Molo in case Chanel might wish to bring future contempt proceedings.
Remedial Measures
The Court looked to the terms of the Protective Order that indicated what a party must do when it is responsible for the unauthorized disclosure of information designated as “Confidential”. The applicable provisions of the Order provide that:
17. In the event that Confidential Information or Solicitor’s Eyes Only Information is disclosed to anyone other than in the manner authorized by this Order, the Receiving Party responsible for such disclosure shall immediately bring all pertinent facts relating to the disclosure to the attention of the Producing Party who designated the Information as Confidential Information or Solicitor’s Eyes Only Information and shall make every effort to prevent further disclosure of the Information.
20. Any Party who inadvertently discloses Confidential Information or Solicitor’s Eyes Only Information shall, upon discovery of the disclosure, promptly notify in writing all inadvertent recipients of the Information in question. The recipients of the document shall then promptly request all persons to whom the Information was disclosed to refrain from reading or viewing the Information and return it and all copies thereof to the Party who ddisclosed it, or destroy the Information and all copies thereof. No such inadvertently disclosed document or information contained therein may be used or disclosed by the recipient(s) without leave of the Court.
Chanel was satisfied by Molo’s compliance efforts in respect of the German, Taiwanese and American lawyers.
With regard to the French and Italian lawyers, both took the position that they could not reveal communications from their client due to their respective reading of their professional obligations.
The Court found that Molo had not complied with the specific obligation in he protective order. The Court clarified “it seems to have been lost in the heat of litigation that the breach is Molo’s, that the remedial obligations are Molo’s, that the efforts to meet these obligations are Molo’s and that the consequences of failure will be visited on Molo.”
Rather than focus on what the French and Italian lawyers can or can not do, the Court noted that “Molo has a clear duty to “make every effort” to prevent further disclosure of the information it unlawfully disclosed. Some of the required elements of this effort are spelled out in this Order. How Molo achieves this is its own business, but it is required to provide all relevant facts to Chanel, including confirmation of how it has fulfilled its obligation and, if any element cannot be met, to disclose the efforts it made and why they have failed.”
With that background, the Court made the following Order:
- The Plaintiff shall, forthwith:
a. Communicate a copy of this Order and of the Protective Order … [to the French lawyer and to the Italian lawyer];
b. Instruct [the French lawyer and the Italian lawyer], in writing, that the information provided to them in [the co-founder’s] email … was provided in breach of the Protective Order ….;
c. Instruct [the French lawyer and the Italian lawyer], in writing, to advise it of all persons to whom they in turn have disclosed the information, and of the details of that disclosure;
d. Instruct [the French lawyer and the Italian lawyer], to immediately:
a. cease using the information
b. refrain from disclosing or using it any further unless this Court had authorized it;
d. require all other persons to whom the information was disclosed to cease and refrain from using or disclosing the information and to destroy or return it to them, so that they can destroy or return it to the Plaintiff; and
e. report to the Plaintiff as to the performance of these instructions.
- The Plaintiff shall, in a timely fashion and on a rolling basis, provide to Chanel all relevant fact relating to the performance of its obligations under this Order and under the Protective Order.
- To the extent the Plaintiff is unable to comply with any part of this Order, it shall provide to Chanel all relevant facts regarding why it is unable to comply and what steps it has taken to attempt to comply with this Order and with its obligations under the Protective Order.
- The obligations set out in this Order are not intended to be limitative to of the steps the Plaintiff may be required to take to comply with the requirements of the Protective Order.
- The Defendants’ rights to seek other sanctions, including in the form of contempt proceedings, in respect of past breaches of the Protective Order and of the Implied Undertaking Rule are reserved.
- The Defendants’ rights to seek any form of redress or sanctions in respect of breaches of the Protective Order that were not known to them as of December 5, 2022 are reserved.
The Federal Court noted that if the French lawyer and the Italian lawyer still found themselves bound by their narrow interpretation of their professional ethics then the course open to Molo might be to have the lawyers return all documents to Molo and cease to act.
The Court noted that “Molo has a clear duty to “make every effort” to prevent further disclosure of the information it unlawfully disclosed. Some of the required elements of this effort are spelled out in this Order. How Molo achieves this is its own business, but it is required to provide all relevant facts to Chanel, including confirmation of how it has fulfilled its obligation and, if any element cannot be met, to disclose the efforts it made and why they have failed.”
The case notes that a breach of a Protective Order and the implied undertaking rule is a very serious matter and the Court will be clear about the responsibility of the party committing the breach.
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