Do it yourself: Court clarifies obligations of party that breaches protective order and implied undertaking

In Molo v Chanel, Associate Justice Tabib clarified what a party is required to do when it has breached a protective order.

Molo commenced copyright infringement proceedings against Chanel in several countries, including Canada. In the Canadian proceeding, Chanel produced documents to Molo that were marked as confidential pursuant to a Protective Order issued by the Court. In contravention of the Protective Order, Molo shared Chanel’s information with its foreign counsel in France, Italy, Taiwan, Germany and the United States, and the confidential information was filed with the Court in at least one foreign jurisdiction. Chanel brought a motion for sanctions against Molo for breaching the Protective Order and the implied undertaking rule and to prevent further use or disclosure of the confidential information.

The Court dismissed the request for sanctions (dismissal of part of the claim) on the basis that Molo’s breach had not caused prejudice to Chanel beyond the cost and the expense of the motion.  As well, the Court held that “any harm to the integrity of the judicial process caused by the breach is insufficiently linked to the form of sanction sought”.

The Protective Order provided:

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 disclosed 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.

Associate Judge Tabib concluded that Molo’s obligations in the event of a breach of the Protective Order were to:

• promptly notify all foreign counsel in writing that the information provided to them was disclosed in breach of a Protective Order;
• instruct all foreign counsel to advise Molo of all persons to whom they in turn had disclosed the information, and details of that disclosure; and
• instruct all foreign counsel to immediately:
  • cease using the information;
  • refrain from disclosing or using it any further unless this Court had authorized it;
  • return the information and all copies thereof to Molo, or destroy them;
  • require all other persons to whom they disclosed the information to do the same; and
  • report to Molo as to the performance of these instructions.

Chanel was satisfied that sufficient steps had been taken in respect of the German, Taiwanese and American solicitors.  The only issue was therefore the disclosure to the French and Italian solicitors.  Molo’s only evidence regarding the steps it had taken with respect to its Italian and French counsel was that it had requested that those attorneys “destroy/delete” the confidential information that they received. The Italian and French lawyers explained that their professional obligations prevented them from disclosing to the Court what information they had received or what they had done with that information, even with Molo’s consent. The evidence therefore did not establish that Molo had complied with its obligations under the Protective Order.

Associate Justice Tabib noted that it was not foreign counsel’s obligation to remedy Molo’s breach of the Protective Order; rather, Molo had to take the prescribed steps to remedy its breach:

Indeed, 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. Instead, everyone, from Chanel to Molo’s Canadian and foreign counsel, have been fixated on obtaining, as directly as possible from the foreign cousel [sic], an account of what they have done with the information. The roadblocks that have been thrown up by these solicitors were created precisely because Chanel preferred, naturally, to obtain the information directly from them rather than from Molo. However, this has allowed Molo to conveniently retreat to the sidelines. It has been content to let the lawyers work out what foreign counsel could or could not disclose indirectly to Chanel or to the Court.

This is wrongheaded. Molo committed the breach, and the remedial and informational obligation are Molo’s. Given how significantly Molo has failed to account for its own actions and efforts, I decline to delve into the minutiae of whether the foreign counsel’s position appears justified and whether or how a more useful response could be elicited from them. It is up to Molo, not up to Chanel or to the Court, to figure out what information it can obtain from its own foreign solicitors, and to determine whether and how Molo can use it to effectually and substantially comply with its obligations. …

The Court granted Chanel’s motion in part, with costs. A copy of the decision is available here.