The Franchise Memorandum

In a case that demonstrates the difficulties of maintaining confidentiality during litigation, the United States Court of Appeals for the First Circuit dismissed Coverall’s interlocutory appeal from a district court order partially denying its request for a protective order to protect select passages of deposition testimony. Awuah v. Coverall North Am., Inc., 2009 WL 3429574 (1st Cir. Oct. 27, 2009). The appeal arose out of a class action filed by Coverall’s franchisees alleging that Coverall made misrepresentations, failed to keep its contractual promises, and wrongly classified the plaintiffs as independent contractors. During a deposition, Coverall’s former CFO revealed privileged and confidential information about Coverall’s business practices, and Coverall sought an order to protect that information. The district judge granted protection for some passages of the deposition but not all of it.

Coverall argued on appeal that its case qualified for interlocutory review under the “important issue” criterion of the collateral order doctrine because it involved disclosing trade secrets, an important issue meriting immediate review. The First Circuit disagreed. It noted the well-established rule that appellate courts have regularly denied interlocutory appeals challenging discovery orders. It then stated that to merit immediate review, the case must present a disputable legal issue that is important because of the likelihood that it will arise in other cases. In this case, there was no legal issue and the district judge’s decision about which information could be disclosed was very fact-specific.