X Corp. v. Doe

816 F. Supp. 1086, 8 I.E.R. Cas. (BNA) 609, 1993 U.S. Dist. LEXIS 4746, 1993 WL 90355
CourtDistrict Court, E.D. Virginia
DecidedMarch 25, 1993
DocketCiv. 92-338-A (UNDER SEAL)
StatusPublished
Cited by24 cases

This text of 816 F. Supp. 1086 (X Corp. v. Doe) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
X Corp. v. Doe, 816 F. Supp. 1086, 8 I.E.R. Cas. (BNA) 609, 1993 U.S. Dist. LEXIS 4746, 1993 WL 90355 (E.D. Va. 1993).

Opinion

*1087 MEMORANDUM OPINION

ELLIS, District Judge.

I.

This is the second chapter in a dispute concerning whether a former corporate house counsel may retain and disclose confidential documents and information obtained during the course of his employment because he believes they reflect an ongoing fraud perpetrated by his former employer on the federal government. In the first chapter, the Court concluded that such disclosure was permissible only if a reasonable attorney would believe that the disputed documents and information clearly established the employer-client’s fraud. See X Corp. v. Doe, 805 F.Supp. 1298 (E.D.Va.1992) ("X Corp. /”). In this second chapter, the Court applies this standard to the undisputed facts.

More precisely, plaintiff, X Corp. (“X Corp.”), brought this action to prevent defendant, John Doe (“Doe”), from disclosing confidential information obtained during his tenure at X Corp. and to compel him to return approximately 4,300 pages of documents he took with him following his discharge. For his part, Doe claims that he is, entitled to disclose such information and documents because they establish fraud on the part of X Corp. and, as such, fall outside the scope of Doe’s ethical duty of confidentiality.. Doe has also asserted a counterclaim against X Corp., alleging that he was unlawfully fired in retaliation for actions X Corp. believed he was taking in furtherance of a qui tam suit, in violation of the False Claims Act, 31 U.S.C. §§ 3729-3733.

At the outset, plaintiff sought a preliminary injunction, which was granted in part and denied in part. In essence, the Court preliminarily enjoined Doe from disclosing any confidential information or documents, but declined, for the time being, to mandate the return of the disputed documents to X Corp.. See X Corp. I, 805 F.Supp. 1298. In doing so, the Court set forth the burden of proof Doe must meet in order to prevail: put simply, he must establish that a reasonable attorney in his position would have found that the documents and information in issue clearly establish fraud. Id. at 1310.

This matter is before the Court on the parties’ cross-motions for summary judgment on this issue and, as no material facts are disputed, it is now ripe for summary disposition. Also before the Court is X Corp.’s motion for summary judgment on Doe’s counterclaim. Here, too, the material facts are undisputed. For the reasons stated below, the Court now orders the return of the disputed documents to X Corp. and grants summary judgment in favor of X Corp. both on its claims and on Doe’s counterclaim.

II.

X Corp. is a major supplier of computer equipment. At all times relevant to this action, X Corp. sold computer equipment to the federal government pursuant to contracts negotiated with the General Services Administration (“GSA”). Most- of these sales were conducted under the terms of a Multiple Award Schedule Contract (“MASC”) that incorporates certain standard contract provisions set forth in Part 52 of the Federal Acquisition Regulations (“FAR”) System. See 48 C.F.R. § 52.100 et seq. Two FAR’s, the New Materials Clause, FAR 52.210-5, *1088 and the Price Reduction Clause, FAR 215.22, are particularly relevant here. The former requires government contractors to supply only “new, including recycled” equipment to the federal government, while the latter requires contractors to provide notice of discounts provided to commercial customers that are deeper than those received by the federal government under the- relevant MASC contracts. Both FAR’s were incorporated in the MASC contracts that X Corp. negotiated with the GSA during Doe’s tenure as in-house corporate counsel.

X Corp. hired Doe in March 1989 as a member of its in-house legal staff based in Northern California. Formerly an Associate Deputy Attorney General of the United States and Chief of Staff to the Attorney General, Doe was a member of the bar of Pennsylvania. When he was hired, Doe executed an “Employment, Invention, and Confidential Information Agreement” (“Confidentiality Agreement”), in which he expressly agreed (i) to return to X Corp. all records obtained during, or in connection with, his employment and (ii) to preserve X Corp.’s confidential information. 1 Thereafter, in the course of his employment, Doe regularly received confidential information from X Corp. management and its employees in order to provide legal opinions and advice. During approximately two years with X Corp., Doe dealt with various matters related to X Corp.’s compliance with government regulations and the antitrust laws. Eventually, he became the in-house attorney primarily responsible for ensuring such compliance. In January 1990, shortly after he began working on compliance matters, he became concerned about X Corp.’s apparent use of remanufac-tured components in computer systems sold as new to the government. Concerned that this practice was in violation of the FAR’s New Materials Clause, Doe began an investigation. In the course of this investigation, Doe reviewed legal opinions X Corp. had previously obtained from outside counsel concerning X Corp.’s compliance with federal regulations. Believing these opinions to be inadequate, Doe informed X Corp.’s general counsel on January 31, 1990 that these opinions had “not definitively dealt” with what constituted “new” or “recycled” equipment required by the regulations.

By April of 1990, Doe had become convinced that the prudent course of action would be for X Corp. to disclose, in response to government contract solicitations, that equipment sold as new to the government could contain some remanufaetured components. X Corp. then made such a disclosure. Specifically, on April 10, in response to a government solicitation for a MASC schedule contract for fiscal year 1991, X Corp. advised the GSA that, if its proposal were accepted, “[s]ome equipment sold as new may contain some used or remanufactured components which are warranted the equivalent of new.” GSA accepted X Corp.’s proposal and awarded it the contract, which included the foregoing language. 2 Doe subsequently conducted a detailed study of all GSA orders during fiscal years 1989 and 1990 in order to determine whether used and/or remanufactured equipment had been shipped to the government. This study revealed that the government had received no used components and very few remanufactured components in these two years. X Corp. reported the re- *1089 suits of this study to the GSA on May 29, 1990. 3

Closely related to Doe’s concerns over X Corp.’s compliance with the New Materials Clause were his concerns that X Corp.’s re-manufactured equipment program did not comply with the FAR’s Price Reduction Clause. Doe became particularly concerned with X Corp.’s procedures for segregating and tracking “new,” “used” and “remanufac-tured” equipment and the manner in which remanufactured orders were filled.

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Bluebook (online)
816 F. Supp. 1086, 8 I.E.R. Cas. (BNA) 609, 1993 U.S. Dist. LEXIS 4746, 1993 WL 90355, Counsel Stack Legal Research, https://law.counselstack.com/opinion/x-corp-v-doe-vaed-1993.