AMERICAN CAN COMPANY
OSHRC Docket No. 76-3969
Occupational Safety and Health Review Commission
November 30, 1979
[*1]
Before CLEARY, Commissioner; BARNAKO and COTTINE, Commissioners.
COUNSEL:
Baruch A. Fellner, Office of the Solicitor, USDOL
T. A. Housh, Jr., Regional Solicitor, U.S. Department of Labor
Michael Robilotto, American Can Company, for the employer
OPINION:
DECISION
BY THE COMMISSION:
The Secretary of Labor cited American Can for allegedly committing willful violations of the Act n1 for its failure to comply with the standards at 29 C.F.R. § § 1910.95(b)(1) and (b)(2). Specifically, the citation charged American Can with a failure to provide feasible administrative or engineering controls where noise levels in American Can's North Kansas City, Missouri ("Northtown") facility exceeded permissible levels, and a failure to administer an effective hearing conservation program.
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n1 The Occupational Safety and Health Act of 1970, 29 U.S.C. § § 651-678.
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American Can contested the citation. On September 14, 1976, the Secretary filed a complaint seeking affirmance only of the § 1910.95(b)(1) charge. On February 11, 1977, pursuant to Rules [*2] 34 and 37 of the Federal Rules of Civil Procedure, the Secretary filed a motion to compel entry for inspection by "outside experts" in acoustical engineering, i.e., experts not employed by the federal government. The purpose of the entry was to develop further evidence regarding the feasibility of implementing engineering controls to reduce the allegedly excessive noise levels in the Northtown plant. American Can opposed the Secretary's motion on the ground that entry by outside experts would endanger the confidentiality of certain of its trade secrets.
Following an evidentiary hearing on the Secretary's motion, Judge Wienman issued an order in which he found that a discovery entry of American Can's facility was likely to reveal the existence of "confidential research, development, and commercial information," and thus denied the motion to compel entry by a nonfederal expert. After the Secretary advised the judge that he would be unable to proceed with the case unless outside experts could conduct the discovery, American Can filed a motion to dismiss the complaint. On May 4, 1977, the judge granted the motion and vacated the citation. Following the Secretary's petition [*3] for review, Chairman Cleary directed review n2 on the issues of whether the judge erred in denying the Secretary's motion to compel entry and in dismissing the complaint and vacating the citation.
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n2 A Commission Member has the authority to direct a case for review by the full Commission pursuant to section 12(j) of the Act, 29 U.S.C. § 661(i).
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The apparent basis for the judge's ruling denying entry to outside experts was the Commission decision in Reynolds Metals Co., 78 OSAHRC 51/F1, 3 BNA OSHC 1749, 1975-76 CCH OSHD P20,214 (No. 4385, 1975) ("Reynolds I"). Subsequently, a divided Commission, in Owens-Illinois, Inc., 78 OSAHRC 105/C8, 6 BNA OSHC 2162, 1978 CCH OSHD P23,218 (No. 77-648, 1978), overruled Reynolds I to the extent that it required that certain discovery entries be made only by federal employees. We held that where a discovery entry might endanger an employer's trade secrets, the appropriate method of protecting those trade secrets was a protective order rather than a federal employee [*4] limitation. We also set forth certain minimum criteria that a protective order must satisfy. We further required that, unless the Secretary agrees to the entry of such a protective order, the employer must prove its allegation of trade secrets.
Owens-Illinois is controlling here, and we therefore vacate the judge's order, reinstate the citation and remand the case for further proceedings.
On remand, if the Secretary agrees to the entry of a protective order, then the judge is to enter a protective order that complies with the requirements we set forth in Owens-Illinois. We note that the Secretary has indicated his willingness to accede to the entry of a protective order. However, we believe that the Secretary should be accorded the right to reconsider his position in light of our Owens-Illinois decision. If the Secretary does not agree to the entry of such a protective order, then the judge is to reexamine the evidence presented at the hearing and make specific findings as to whether there are trade secrets likely to be disclosed by the discovery entry. n3 If he finds that American Can has demonstrated the existence of trade secrets likely to be revealed by the discovery [*5] entry, he should grant the Secretary's discovery request subject to a protective order containing the provisions outlined in Owens-Illinois.
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n3 Although the Judge previously examined this evidence and found that a discovery entry of American Can's plant was likely to reveal confidential matters, he made no specific findings that would assist the Commission in reviewing his determination. Moreover, the Secretary disputes whether American Can's evidence establishes a sufficient basis for the entry of a protective order. Under the circumstances, we think it would be inappropriate for us to resolve the question of the existence of trade secrets at this point in the proceedings, particularly since resolution of this question will be unnecessary if the Secretary, on remand, consents to the entry of a protective order. Fred's Frozen Foods, Inc., 79 OSAHRC , 7 BNA OSHC 1271, 1979 CCH OSHD P23,461 (No. 77-1817, 1979).
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Accordingly, we reinstate the citation, n4 and remand this case for further proceedings consistent [*6] with this decision and for a trial on the merits.
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n4 American Can maintains that the citation was invalidly issued. It argues that the alleged failure of the area director and the compliance officer to consider "economic" feasibility prior to the issuance of the citation demonstrates that the citation was not issued in "good faith." We find that this question is outside the scope of the direction for review. Moreover, the subject of whether a citation was issued in "good faith" requires factual determinations and accordingly should initially be resolved by the judge.
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So ORDERED.
CONCURBY: COTTINE
CONCUR:
COTTINE, Commissioner, concurring:
In Owens-Illinois, Inc., 78 OSAHRC 105/C8, 6 BNA OSHC 2162, 1978 CCH OSHD P23,218 (No. 77-648, 1978), the Commission concluded,
the likelihood that a discovery entry will disclose an employer's trade secret to those participating in the entry does not warrant barring the Secretary from using non-federal experts to make such an entry.
78 OSAHRC at 105/D1, 6 BNA OSHC at 2165, 1978 CCH [*7] OSHD P23,218 at p. 28,071 (emphasis added). The Commission further stated,
trade secrets can be protected most appropriately in discovery entries by the use of protective orders requiring outside experts to maintain the confidentiality of trade secrets.
Id. (footnote omitted and emphasis added). Owens-Illinois did not address whether the protection afforded an employer's trade secrets would be extended to other matters of a confidential nature.
American Can opposed the Secretary's motion for a discovery entry in this case on the grounds that entry by an outside expert would endanger the confidentiality of certain operations and matters of a proprietary interest to the Respondent. American Can does not claim that entry by outside experts would endanger the confidentiality of trade secrets. Accordingly, the majority errs by failing to distinguish between trade secrets and other matters of a confidential nature and by failing to specifically address whether the principles announced in Owens-Illinois are applicable to confidential information other than trade secrets.
Section 15 of the Act, 29 U.S.C. § 664, n1 specifically provides for the issuance [*8] of "such orders as may be appropriate to protect the confidentiality of trade secrets." This section references 18 U.S.C. § 1905 for the definition of a trade secret. Unfortunately, 18 U.S.C. § 1905 provides no definition of a trade secret. Instead it refers to several classes of information, including trade secrets, that are to be protected from disclosure. Specifically protected from disclosure is information that
concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association. . . .
Accordingly, the protection previously afforded to trade secrets under predecessor statutes is now extended to other confidential matters under 18 U.S.C. § 1905. n2
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n1 Section 15 states the following:
Sec. 15. All information reported to or otherwise obtained by the Secretary or his representative in connection with any inspection or proceeding under this Act which contains or which might reveal a trade secret referred to in section 1905 of title 18 of the United States Code shall be considered confidential for the purpose of that section, except that such information may be disclosed to other officers or employees concerned with carrying out this Act or when relevant in any proceeding under this Act. In any such proceeding the Secretary, the Commission, or the court shall issue such orders as may be appropriate to protect the confidentiality of trade secrets.
n2 Case law under a predecessor statute to 18 U.S.C. § 1905, 18 U.S.C. § 1355, defined "trade secrets" as
an unpatented, secret, commercially valuable plan, appliance, formula, or process, which is used for the making, preparing, compounding, treating or processing of articles, or materials which are trade commodities.
U.S. ex rel Norwegian Nitrogen Products Co. v. U.S. Tariff Comm., 6 F.2d 491, 495 (D.C. Cir. 1925), rev'd on other grounds, 274 U.S. 106 (1927).
[*9]
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Commission Rule 11(a), 29 C.F.R. § 2200.11(a), n3 recognizes the distinct classes of protected information when it provides for the issuance of orders necessary to protect the confidentiality of "trade secrets or other matters . . . the confidentiality of which is protected by 18 U.S.C. § 1905." The protection of trade secrets is directly authorized by section 15 of the Act, 29 U.S.C. § 664. n4 In contrast, the protection of confidential matters other than trade secrets is a matter of policy that finds statutory support in 18 U.S.C. § 1905. Though section 1905 is limited in its express application to disclosure by federal employees, it indicates a congressional determination that both trade secrets and other confidential information obtained as a result of a federal examination or investigation are entitled to protection. Accordingly, the holding of Owens-Illinois with respect to the protection afforded trade secrets under 29 U.S.C. § 664 and Commission Rule 11 is properly extended to the other confidential matters referred to in 18 U.S.C. § 1905. n5
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n3 The text of the rule is as follows:
Rule 11. Protection of trade secrets and other confidential information.
(a) Upon application by any person, in a proceeding where trade secrets or other matters may be divulged, the confidentiality of which is protected by 18 U.S.C. 1905, the Judge shall issue such orders as may be appropriate to protect the confidentiality of such matters.
n4 See generally 1 MILGRIM, TRADE SECRETS, § § 2.01, 6.01-6.02B (1978).
n5 In Carnation Co., 78 OSAHRC 54/D9, 6 BNA OSHC 1730, 1978 CCH OSHD P22,837 (No. 8165, 1978), appeal filed, No. 78-2894 (9th Cir. Aug. 18, 1978), the Commission expunged from a judge's decision information regarding the employer's 1973 net profit for a cited plant that was revealed to the judge only on the condition that the information be kept confidential.
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In this case Judge Wienman denied the Secretary's discovery motion on the basis that a discovery entry was likely to reveal "confidential research, development, and commercial information." On remand, should the Secretary fail to agree to [*11] the entry of a protective order that complies with the requirements set forth in Owens-Illinois, the judge should reexamine the evidence and determine whether any confidential matters or trade secrets within the meaning of 29 U.S.C. § 664, 18 U.S.C. § 1905, and 29 C.F.R. § 2200.11(a) are likely to be disclosed. His inquiry should not be limited to the disclosure of "trade secrets". If American Can demonstrates the existence of protected confidential information or trade secrets, a protective order as described in Owens-Illinois should be entered.
DISSENTBY: BARNAKO (In Part)
DISSENT:
BARNAKO, Commissioner, dissenting in part:
Judge Wienman held a hearing on the trade secrets issue raised in this case and denied the Secretary's motion to compel entry by a non-federal expert on the implicit basis that American Can possessed trade secrets which would be revealed to an individual conducting the discovery inspection requested by the Secretary. n1 My colleagues decline to rule on whether the judge's finding of trade secrets was correct. Instead, they note that if an appropriate protective order which meets the requirements enumerated in their decision in Owens-Illinois, Inc. n2 can be entered [*12] in this case, the issue of whether the judge's finding concerning trade secrets is correct will not have to be resolved. Therefore, they conclude that the case should be remanded to the judge for further proceedings consistent with Owens-Illinois, Inc.
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n1 The judge noted that the Secretary had introduced no evidence to establish good cause for the use of a non-federal expert. The judge's ruling on the Secretary's motion was apparently based on this ground as well.
n2 78 OSAHRC 105/C8, 6 BNA OSHC 2162, 1978 CCH OSHD P23,218 (No. 77-648, 1978).
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I dissented in Owens-Illinois, Inc. Following my rationale in Reynolds Metals Co., n3 I concluded that where trade secrets have been shown to exist, any discovery entry should be limited to a federal expert unless the Secretary shows good cause for use of an outside expert. On the other hand, if trade secrets are not established, there is no basis for barring the use of an outside expert. Accordingly, under my view of the law, a ruling on trade secrets is essential. [*13]
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n3 78 OSAHRC 51/F1, 3 BNA OSHC 1749, 1975-76 CCH OSHD P20,214 (No. 4385, 1975) and 78 OSAHRC 51/D4, 6 BNA OSHC 1667, 1978 CCH OSHD P22,806 (No. 4385, 1978).
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In this case, however, the judge's decision is not specific enough to permit meaningful review of his finding of trade secrets. The judge merely noted that American Can presented testimony of two witnesses in support of its trade secrets claim, while the Secretary called no witnesses on this question. Therefore, I agree with my colleagues to remand the case, but only for the purpose of having the judge state specific findings and conclusions as to what machine, device, process or other entity he finds to constitute a trade secret, his reasons for so finding, and the legal standard he applied in determining the existence of a trade secret. Under my view of the law, I believe that it will be necessary for the judge to make such findings and conclusions unless the Secretary agrees to use only federal employees in the discovery entry or American Can ceases its [*14] opposition to entry by other than federal personnel. The judge should not refrain from discussing in detail the asserted trade secrets for fear that by doing so a trade secret might be revealed; such a discussion is necessary to the proper disposition of trade secret issues. The proper procedure would be for the judge to seal the portion of the decision which describes the alleged trade secret. n4
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n4 I agree with the judge's finding that the Secretary failed to establish good cause for the use of a non-federal expert and therefore would limit the remand to the trade secrets issue. Once the judge makes specific findings on the trade secrets issue, the Commission should review those findings to determine whether the judge erred in his conclusion regarding trade secrets and limiting the Secretary's entry to use of a federal expert.
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I disagree with the view expressed by Commissioner Cottine that American Can's opposition to entry by an "outside" expert is not based on the ground that such entry would endanger American [*15] Can's trade secrets but rather is predicated on the basis that such entry would endanger "the confidentiality of certain operations and matters of proprietary interest," as distinct from trade secrets. American Can's brief couches its arguments in terms of trade secrets and cites authorities concerning trade secrets, including the definition of the term "trade secret" provided in Restatement of Torts § 757, comment b (1939). American Can concludes its argument on this issue with the statement:
[T]he Company asserts that it has established the evidence of confidential commercial information within the meaning of the term "trade secret" as that term is used in both Section 15 of the Act and in 18 U.S.C. Section 1905.
Therefore, I have no doubt that American Can's argument opposing the discovery inspection is grounded on potential jeopardy to its alleged trade secrets.
However, I agree with my colleague that "confidential matters" encompassed in 18 U.S.C. § 1905 warrant protection to the same extent as do trade secrets, and Commission Rule 11(a) so provides. n5 Thus, were American Can's argument predicated on protection of confidential matters rather than trade secrets, my analysis [*16] and conclusion would remain the same.
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n5 29 C.F.R. § 2200.11(a). This rule states:
Upon application by any person, in a proceeding where trade secrets or other matters may be divulged, the confidentiality of which is protected by 18 U.S.C. 1905, the Judge shall issue such orders as may be appropriate to protect the confidentiality of such matters.
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