In Coca-Cola Bottling Co. of Shreverport, Inc. v. Coca-Cola Co., 107 F.R.D. 288 (D.Del., 1985), there was a dispute between the bottlers and the soda maker as to whether the soda maker's soda was covered in the bottling syrup pricing agreement. The bottlers moved for the court to compel the soda maker to turn over formula information for several sodas. The court held that the formula information was a trade secret, but that being a trade secret doesn't preclude it from discovery. The court decided that any discovery request for the information was subject to strict protective orders.
The case dealt with the secret formula for Coca-Cola, known by only two people in the company. The only written record of the formula is kept in a security vault at the Trust Company Bank in Atlanta, Georgia. Coca-Cola Bottling Co of Shreveport, Inc v Coca-Cola Co, 107 FRD 288, 289; 4 Fed R Serv 3d 1291 (D Del 1985). Coca-Cola bottling's attorney was Edmund N. Carpenter, II. Carpenter was an attorney in Delaware at the time. Carpenter held several positions with the Delaware Bar until his death in 2008. His funeral was covered by the Wall Street Journal. The attorney for Coca-Cola was Richard Allen of Morris, Nichols, Arsht & Tunnell LLP. The plaintiffs said that Coca-Cola had to give up the formula for discovery as a part of a contract dispute, which was directly related to the formula for diet Coke. Coca-Cola argued that the formula was not relevant and that giving up the formula would cause too much damage to the company. Id. at 290.
In ruling on the matter, Judge Murray M. Schwartz, said that he was well aware of the risks posed to Coca-Cola in divulging their formula and that exposing trade secrets is a powerful tool in the hands of plaintiffs to force settlements that might not do justice for the defendant; because the defendant would rather settle than let the plaintiff gain access to the defendant's trade secrets. Id. at 290. Despite this finding, Judge Schwartz held that trade secrets are not absolutely privileged information. Id. at 292. The holding was that when trade secrets are "sought during discovery, the governing relevance standard that the movant must satisfy is the broad relevance standard applicable to pre-trial discovery, i.e., the movant must show that the material sought is relevant to the subject matter of the lawsuit." Id. at 293. The reason Judge Murray cited for this standard came from Covey Oil Co. v. Continental Co., 340 F.2d at 999. In Covey, it was held that in the absence of an applicable privilege "[j]udicial inquiry should not be unduly hampered." Id. at 999. Further, Judge Murray cited Judge Learned hand in his opinion saying that disclosure of trade secrets may damage defendants; "[t]hat is, however, an inevitable incident to any inquiry in such a case; unless the defendant may be made to answer, the plaintiff is deprived of its right to learn whether the defendant has done it a wrong." Coca-Cola Bottling Co of Shreveport, Inc v Coca-Cola Co, 107 FRD 288, 293; 4 Fed R Serv 3d 1291 (D Del 1985).
Judge Murray went on to balance the harm done to Coca-Cola against the harm done to the defendant by not having relevant information disclosed, and decided that the formulae had to be disclosed. This result is not too surprising given the invocation of a right of the plaintiff "to learn whether the defendant has done it a wrong." Id. at 293. Full disclosure: I never won an award for the best grade in my evidence class, I am also not a practicing attorney. That being said, I don't remember a right of the plaintiff "to learn whether the defendant has done it a wrong." Id. at 293. When Judge Learned Hand says this in his decision in Grasselli Chemical Co. v. National Aniline & Chemical Co., 282 F. 379, the Judge does not cite a source for this right. This right has materialized through the writings of a famous judge; and now it is law.
The problem with this new right is that it flips the process. First, you complain that you have been wronged, in a complaint. Second, you discover evidence that is relevant in tending to prove or disprove the matter at hand. I have never heard, until Judge Hand told me, that first you start a trial by filing a complaint, and then you learn whether or not you have been wronged; further, you have a right to learn if you have been wronged. I can't say that I disagree with the result but the reasoning makes me very uncomfortable, especially when it comes from such a noted judge as Learned Hand.
The case dealt with the secret formula for Coca-Cola, known by only two people in the company. The only written record of the formula is kept in a security vault at the Trust Company Bank in Atlanta, Georgia. Coca-Cola Bottling Co of Shreveport, Inc v Coca-Cola Co, 107 FRD 288, 289; 4 Fed R Serv 3d 1291 (D Del 1985). Coca-Cola bottling's attorney was Edmund N. Carpenter, II. Carpenter was an attorney in Delaware at the time. Carpenter held several positions with the Delaware Bar until his death in 2008. His funeral was covered by the Wall Street Journal. The attorney for Coca-Cola was Richard Allen of Morris, Nichols, Arsht & Tunnell LLP. The plaintiffs said that Coca-Cola had to give up the formula for discovery as a part of a contract dispute, which was directly related to the formula for diet Coke. Coca-Cola argued that the formula was not relevant and that giving up the formula would cause too much damage to the company. Id. at 290.
In ruling on the matter, Judge Murray M. Schwartz, said that he was well aware of the risks posed to Coca-Cola in divulging their formula and that exposing trade secrets is a powerful tool in the hands of plaintiffs to force settlements that might not do justice for the defendant; because the defendant would rather settle than let the plaintiff gain access to the defendant's trade secrets. Id. at 290. Despite this finding, Judge Schwartz held that trade secrets are not absolutely privileged information. Id. at 292. The holding was that when trade secrets are "sought during discovery, the governing relevance standard that the movant must satisfy is the broad relevance standard applicable to pre-trial discovery, i.e., the movant must show that the material sought is relevant to the subject matter of the lawsuit." Id. at 293. The reason Judge Murray cited for this standard came from Covey Oil Co. v. Continental Co., 340 F.2d at 999. In Covey, it was held that in the absence of an applicable privilege "[j]udicial inquiry should not be unduly hampered." Id. at 999. Further, Judge Murray cited Judge Learned hand in his opinion saying that disclosure of trade secrets may damage defendants; "[t]hat is, however, an inevitable incident to any inquiry in such a case; unless the defendant may be made to answer, the plaintiff is deprived of its right to learn whether the defendant has done it a wrong." Coca-Cola Bottling Co of Shreveport, Inc v Coca-Cola Co, 107 FRD 288, 293; 4 Fed R Serv 3d 1291 (D Del 1985).
Judge Murray went on to balance the harm done to Coca-Cola against the harm done to the defendant by not having relevant information disclosed, and decided that the formulae had to be disclosed. This result is not too surprising given the invocation of a right of the plaintiff "to learn whether the defendant has done it a wrong." Id. at 293. Full disclosure: I never won an award for the best grade in my evidence class, I am also not a practicing attorney. That being said, I don't remember a right of the plaintiff "to learn whether the defendant has done it a wrong." Id. at 293. When Judge Learned Hand says this in his decision in Grasselli Chemical Co. v. National Aniline & Chemical Co., 282 F. 379, the Judge does not cite a source for this right. This right has materialized through the writings of a famous judge; and now it is law.
The problem with this new right is that it flips the process. First, you complain that you have been wronged, in a complaint. Second, you discover evidence that is relevant in tending to prove or disprove the matter at hand. I have never heard, until Judge Hand told me, that first you start a trial by filing a complaint, and then you learn whether or not you have been wronged; further, you have a right to learn if you have been wronged. I can't say that I disagree with the result but the reasoning makes me very uncomfortable, especially when it comes from such a noted judge as Learned Hand.
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