Protective Orders for Confidential Business Documents

What can a protective order do for a business producing documents?

A protective order can limit what is produced, how it is produced, and who may see it, if you show good cause. Rule 26.03(a) lets the court, on motion “by a party or by the person from whom discovery is sought, and for good cause shown,” make “any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”

The rule then lists eight forms of protection. Two matter most in a business case:

• Terms and conditions. Clause (2) allows an order “that the discovery may be had only on specified terms and conditions, including a designation of the time or location or the allocation of expenses, for the disclosure or discovery.” Confidentiality tiers, access lists, and end-of-case return duties all rest here.
• Confidential business information. Clause (7) allows an order “that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way.”

A protective order can also narrow what is discoverable. Rule 26.02(b) opens “Unless otherwise limited by court order, the scope of discovery is as follows,” and allows discovery of “any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.” Rule 26.03(a) lists orders “that the discovery not be had” and “that certain matters not be inquired into, or that the scope of the discovery be limited to certain matters.” In the usual case, though, the order controls the handling of documents you must produce anyway. Judges have room to shape it: the Minnesota Supreme Court has said that a district court has “broad discretion” under Rule 26.03 “to fashion protective orders and to order discovery only on specified terms and conditions,” in In re Polaris, Inc., 967 N.W.2d 397 (Minn. 2021). How the rest of the process works for a company being sued is covered in Minnesota civil discovery for a business defendant.

Who has to show good cause, and how much?

The business asking for protection carries the burden of showing good cause, but in a case with many documents the court can start with a general showing and require specifics only when a designation is challenged. The Minnesota Court of Appeals put it this way in Star Tribune v. Minnesota Twins Partnership, 659 N.W.2d 287 (Minn. App. 2003): “Generally, the burden of demonstrating good cause rests with the party seeking a protective order.”

The same opinion describes how an umbrella order works. In cases involving large numbers of documents, the court may enter one “upon a general showing of good cause by the producing party.” After production, the other side may identify documents it believes do not deserve protection, and “the burden of demonstrating good cause for each challenged document lies with the party seeking protection.” The case involved a public commission’s lawsuit against a baseball team, so the court also weighed the state’s public-data law before affirming the order.

Two consequences follow for a business:

1. A failed motion can end in an order to produce. Under Rule 26.03(b), “If the motion for a protective order is denied in whole or in part, the court may, on such terms and conditions as are just, order that any party or person provide or permit discovery.”
2. Expenses can follow the motion. Rule 26.03(c) provides: “Rule 37.01(d) applies to the award of expenses incurred in connection with the motion.” Under Rule 37.01(d)(2), if the motion is denied, the court “shall, after affording an opportunity to be heard, require the moving party or the attorney filing the motion or both of them to pay to the party or deponent who opposed the motion the reasonable expenses incurred in opposing the motion, including attorney fees, unless the court finds that the making of the motion was substantially justified or that other circumstances make an award of expenses unjust.” If the motion is granted, Rule 37.01(d)(1) likewise says the court “shall” require the party “whose conduct necessitated the motion” to pay the moving party’s reasonable expenses, unless the court finds the motion “was filed without the movant’s first making a good faith effort to obtain the discovery without court action,” the opposing position was “substantially justified,” or “other circumstances make an award of expenses unjust.” If the motion is granted in part and denied in part, Rule 37.01(d)(3) lets the court “apportion the reasonable expenses incurred in relation to the motion among the parties and persons in a just manner.”

When should you raise a protective order in a Minnesota case?

Raise it at the start of discovery, before the first confidential document is due, and never by simply refusing to respond. Except in a proceeding exempted from initial disclosure or when the court orders otherwise, Rule 26.06 requires the parties to confer “as soon as practicable,” and the discovery plan they prepare under Rule 26.06(c) must state their views on “any other orders that the court should issue under Rule 26.03,” so the Rule 26 discovery conference is the natural place to propose a stipulated order.

Waiting until a request arrives and then going silent is the costly path. Rule 37.04 allows sanctions when a party fails “(3) to serve a written response to a request for inspection submitted pursuant to Rule 34, after proper service of the request,” and it adds: “The failure to act described herein may not be excused on the ground that the discovery sought is objectionable unless the party failing to act has applied for a protective order as provided by Rule 26.03.” A timely written response that objects to producing the confidential categories until an order is entered, paired with a proposed order, keeps you on the right side of that rule.

If the other side will not agree, the motion still requires a conversation first. Minn. Gen. R. Prac. 115.10 provides: “No motion will be heard unless the parties have conferred in an attempt to resolve their differences prior to the hearing. The moving party shall initiate the conference.” The rule adds: “The moving party shall certify to the court, before the time of the hearing, compliance with this rule or any reasons for not complying, including lack of availability or cooperation of opposing counsel.” The same exchange often decides who files first, because the other side’s alternative is a motion to compel. In federal court in Minnesota, Fed. R. Civ. P. 26(c)(1) writes the requirement into the protective-order rule itself: “The motion must include a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the dispute without court action.”

Why should a stipulated order be entered by the court?

Most protective orders start as an agreement between the parties, and the agreement becomes far more useful once the judge signs it as an order. Minn. R. Civ. P. 29 lets the parties, “Unless otherwise directed by the court,” agree to “modify other procedures governing or limitations placed upon discovery,” so a confidentiality agreement is valid between you and the other side even without a signature from the bench.

Three rules explain why the signature still matters:

1. Sanctions. In Little ex rel. Nash v. Miklya, 403 N.W.2d 228 (Minn. 1987), the Minnesota Supreme Court held that “a stipulation under Rule 29 of the Minnesota Rules of Civil Procedure is the functional equivalent of a court order for purposes of sanctions under Rule 37.02.” That case involved a stipulation to a medical examination that counsel signed “[i]n lieu of obtaining a formal order,” so an entered order removes any argument over whether your agreement had the same effect.
2. Privilege beyond the two parties. Minn. R. Evid. 502(d) provides: “An agreement on the effect of disclosure in a state proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.” A non-waiver term in a private agreement does not bind a third party who later wants the same document.
3. Contempt. The contempt statute, Minn. Stat. § 588.01, subd. 3, reaches “(3) disobedience of any lawful judgment, order, or process of the court.”

In one case, the other side asked for a protective order before it would produce the rest of the documents my client had requested, because some of them held medical information. I drafted the stipulation and the proposed order and sent both to the other side’s attorney, so the agreement and the order for the judge’s signature could be reviewed together.

What terms should a business negotiate in the order?

The terms that protect a business are the ones that say, in specific acts, who may see each category of document, for what purpose, and what happens to every copy at the end. Rule 26.03(a)(7) supports an order that confidential commercial information “be disclosed only in a designated way,” and the parties write the designated way.

1. Tiers. A Confidential tier for ordinary sensitive records, and a narrower Attorneys’ Eyes Only tier for current pricing, margins, customer lists, source code, and plans, limited to outside lawyers and named experts. No Minnesota appellate decision prescribes these tiers; they are a negotiated use of clause (7).
2. Access list and acknowledgment. A requirement that every person outside the lawyers sign a short acknowledgment of the order’s terms before seeing protected material, with a copy to you.
3. Use only in this case. A limit allowing protected documents to be used only for prosecuting, defending, or settling this lawsuit, never for business decisions, other lawsuits, or publicity.
4. Designation and challenge procedure. How documents are marked, how the other side challenges a marking, and who must file the motion. The burden stays with you under Star Tribune, so a reason for each designation belongs in your file from the start.
5. Filing under seal. A procedure for filing protected documents with the court, so a party filing a motion does not have to guess (the next sections cover the filing rule).
6. Privilege non-waiver. A claw-back term tied to Rule 26.02(f)(2) and a court finding of non-waiver under Minn. R. Evid. 502(c).
7. End of the case. Return or destruction of protected documents and copies, with written certification, after final judgment or settlement.

The end-of-case term is often the one that settles a later dispute. In one employment case, the employer demanded that my client return and destroy company emails he had kept after his termination. My proposal was that I hold those copies as confidential under the case’s protective order, use them only in the case, and handle them under the order’s end-of-case paragraph.

How does the order protect privilege if a document slips out?

If a privileged document is produced by mistake, Rule 26.02(f)(2) lets you demand it back, and Minn. R. Evid. 502 decides whether the privilege survived. Under Rule 26.02(f)(2), after you give notice of the claim and its basis, the receiving party “must promptly return, sequester, or destroy the specified information and any copies it has and may not use or disclose the information until the claim is resolved,” and it “may promptly present the information to the court under seal for a determination of the claim.”

The return procedure does not answer whether the privilege was waived. The advisory committee’s 2007 comment says the rule “does not create any presumption or have any impact on the validity of the claim of privilege, nor does it excuse the inadvertent or regretted production.” That question goes to Minn. R. Evid. 502(b): an inadvertent disclosure in a state court proceeding is not a waiver if the holder “took reasonable steps to prevent disclosure” and “promptly took reasonable steps to rectify the error, including (if applicable) following Minnesota Rule of Civil Procedure 26.02(f)(2).”

A protective order can make that protection stronger. Under Rule 502(c), “A state court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court - in which event the disclosure is also not a waiver in any other state court proceeding.” Separately, the discovery plan under Rule 26.06(c)(4) addresses “any issues about claims of privilege or of protection as trial-preparation materials, including - if the parties agree on a procedure to assert these claims after production - whether to ask the court to include their agreement in an order.” In federal court in Minnesota, Fed. R. Evid. 502(d) gives the same tool: “A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court.”

A claw-back fails if the document was never privileged. In Polaris, a company inadvertently produced an outside-counsel audit report and sought it back. The court adopted the predominant purpose test for documents mixing legal and business advice and upheld the finding that the report was mainly business advice, protecting only its legal-advice portions. It also held that appellate courts have jurisdiction to review the denial of a claw-back request by a petition for a writ of prohibition. Which internal documents qualify in the first place is covered in attorney-client privilege inside a company.

What changes when trade secrets are in the production?

When the lawsuit is a trade secret case, Minnesota’s trade secret act requires the court to preserve the secrecy of the alleged trade secret by reasonable means, and a protective order is one of the listed means. Minn. Stat. § 325C.05 provides: “In an action under sections 325C.01 to 325C.07, a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.”

That duty applies only “In an action under sections 325C.01 to 325C.07.” In any other business case, the protection for a trade secret comes from Rule 26.03(a)(7) and the good-cause showing described above. In a federal trade secret case under the Defend Trade Secrets Act, 18 U.S.C. § 1835(a) provides that in “any prosecution or other proceeding under this chapter, the court shall enter such orders and take such other action as may be necessary and appropriate to preserve the confidentiality of trade secrets.”

How you produce the information also matters to whether it stays a trade secret. The statutory definition in Minn. Stat. § 325C.01, subd. 5 covers information that, among other things, “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Because the definition looks at those efforts, an attorneys’ eyes only tier should be in place before any trade secret is produced, as part of the same reasonable measures to protect trade secrets your business takes outside litigation.

A business that is not a party has its own tool. Under Minn. R. Civ. P. 45.03(c)(2), when a subpoena “(A) requires disclosure of a trade secret or other confidential research, development, or commercial information,” the court may, “to protect a person subject to or affected by the subpoena, quash or modify the subpoena,” or, “if the party in whose behalf the subpoena is issued shows a substantial need for the testimony or material that cannot be otherwise met without undue hardship and assures that the person to whom the subpoena is addressed will be reasonably compensated,” order production “only upon specified conditions.” The steps to object to a nonparty subpoena start with a written objection served within the period the rule sets.

Are documents produced in discovery public?

Documents exchanged in discovery are generally not public, because they are not filed with the court; the risk begins when someone files them. Minn. R. Civ. P. 5.04(b) lists discovery requests and responses among the papers that “shall not be filed unless authorized by court order or rule.”

In Star Tribune, the Court of Appeals held that the media had no common-law or First Amendment right to a CD-ROM of documents produced in discovery and never filed, and it explained that “The common-law presumption of access generally only extends to documents that have been filed with the court.” The opinion drew a further line: documents filed with discovery motions are treated differently from discovery documents filed in connection with motions that require the court to resolve the merits, which are subject to the common-law right of access.

Filing a protected document under seal takes permission. Under Minn. Gen. R. Prac. 11.04, a document may be filed as confidential or sealed only if “(a) The court has issued an order permitting the filing of the particular document or class of documents under seal or as confidential,” a rule or statute authorizes it, or “(c) The filer files a motion for leave to file as confidential or under seal not later than at the time of submission of the document.” The rule adds: “Upon review, the court may modify the designation of any document incorrectly designated as confidential or sealed and shall provide prompt notice of any such change to the person who filed the document.” A protective order meets clause (a) only if it permits the filing of a particular document or class of documents under seal or as confidential.

How is a protective order enforced after a violation?

A party that breaks a protective order can be held in constructive contempt, and the Minnesota Supreme Court calls an order that clearly defines the acts required “one essential prerequisite” for that remedy. Under Minn. Stat. § 588.01, subd. 3, “Constructive contempts are those not committed in the immediate presence of the court, and of which it has no personal knowledge,” and they include “(3) disobedience of any lawful judgment, order, or process of the court.”

The penalty has a statutory condition. Minn. Stat. § 588.02 provides that “Every court and judicial officer may punish a contempt by fine or imprisonment, or both,” and adds: “When it is a constructive contempt, it must appear that the right or remedy of a party to an action or special proceeding was defeated or prejudiced by it before the contempt can be punished by imprisonment or by a fine exceeding $50.” To seek imprisonment or a fine above that amount, you need a record showing how the violation defeated or prejudiced your right or remedy in the case, such as a competitor’s use of your pricing.

The order’s wording comes first. In Sehlstrom v. Sehlstrom, 925 N.W.2d 233 (Minn. 2019), a case about a settlement judgment rather than a protective order, the Minnesota Supreme Court repeated that “one essential prerequisite is that the prior decree or order of a court sought to be enforced by contempt must clearly define the acts to be performed by the alleged contemnor,” and reversed a contempt finding for lack of that clarity. A protective order written as specific acts (who may view each tier, for what use, and what must happen to each copy) meets that prerequisite. When you suspect a violation, gather the emails, access logs, and copies that show who saw your documents and how they were used before you raise it with the court.

Protective Orders in Document Production

A protective order works best when you propose it early, get it entered by the court, and write it as specific acts: tiers of access, use only in the case, a sealed-filing procedure, a privilege non-waiver finding, and an end-of-case return. Each piece rests on a Minnesota court rule, and the trade secret and contempt statutes add force where they apply. More on business disputes is in my litigation material. If you would like a second set of eyes on a proposed protective order or a document request your company has received, email aaron@aaronhall.com with a brief description of the situation.