Securities & Exchange Commission v. Merrill Scott & Associates, Ltd.

FILED
United States Court of Appeals
Tenth Circuit

March 23, 2010
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

v. No. 08-4029

MERRILL SCOTT & ASSOCIATES,
LTD.; MERRILL SCOTT &
ASSOCIATES, INC.; PHOENIX
OVERSEAS ADVISERS;
GIBRALTER PERMANENTE;
PATRICK M. BRODY; DAVID E.
ROSS, II; MICHAEL G.
LICOPANTIS,

Defendants.

UNITED STATES OF AMERICA,

Intervenor-Appellee,

and

RICHARD GERBER,

Interested Party-
Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D.C. No. 2:02-CV-00039-TC-DN)
Submitted on the briefs: *

Samuel Rosenthal, Patton Boggs, LLP, New York, New York for Appellant.

Brett L. Tolman, United States Attorney, Stephen J. Sorenson, Assistant United
States Attorney, Brian D. Bailey, Special Assistant United States Attorney, Salt
Lake City, Utah for Appellee.

Before KELLY, McKAY, and BRISCOE, Circuit Judges.

KELLY, Circuit Judge.

This case requires us to determine the scope of certain protective orders

entered to safeguard personal financial information provided by an alleged tax

evader who was also the victim of a securities fraud scheme. Dr. Richard Gerber

invested money with defendant Merrill Scott & Associates (Merrill Scott) under a

nominee arrangement promising large tax savings. The Securities and Exchange

Commission (SEC) subsequently sued Merrill Scott for securities fraud. A

receiver was appointed in the SEC action. The receiver took charge of assets

belonging to Dr. Gerber’s nominee entity, Dark Amethyst, LLC. In order to

recover these assets, Dr. Gerber agreed to provide certain personal and

confidential financial information to the receiver. The district court entered two

*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.

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protective orders to safeguard the confidentiality of this information.

Dr. Gerber’s confidential information later found its way into the hands of

the Internal Revenue Service (IRS). Dr. Gerber sought a finding that the SEC had

violated the protective orders. He also sought return of his confidential

information from the IRS and the Department of Justice (DOJ). For its part, the

United States intervened to seek modification of the protective orders specifically

to permit disclosure to the IRS. The district court clarified that its protective

orders permitted the SEC to disclose Dr. Gerber’s confidential information to

other governmental agencies, and denied his motion for return of documents. He

appeals from this order. He also seeks review of an unappealed order of the

magistrate judge permitting the United States to intervene in this action. We

dismiss the appeal from the order permitting intervention for lack of jurisdiction,

affirm in part and reverse in part the district court’s Order and Memorandum

Decision modifying the protective orders, and remand for further proceedings.

BACKGROUND

1. First Protective Order

The district court appointed the receiver on January 23, 2002 to marshal

and take control of Merrill Scott’s assets. On February 2, 2004, pursuant to a

stipulation between the SEC, the receiver, and Dr. Gerber, the district court

entered the first protective order at issue. This order provided that all

confidential information supplied by Dr. Gerber, including documents and

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deposition testimony, would be used solely for the purpose of litigating the SEC

action and related litigation commenced by the receiver or the SEC, and for no

other purpose, including “any other legal proceedings.” Aplt. App. at 120. As

relevant here, it further provided that the “Confidential Information shall not be

disclosed, repeated, given, shown, made available, or communicated in any way

to anyone other than to the following persons to whom it is necessary that such

Confidential Information be given for [purposes of pursuing the SEC action and

related litigation]: . . . (f) the United States Attorney’s Office for the District of

Utah.” Id. The order also provided that “[w]ithin 45 days of the conclusion of

this litigation by dismissal, final judgment, disposition of appeal, or settlement,

Confidential Information produced in this litigation . . . shall be returned to

counsel for Dr. Gerber . . . or else the receiving party shall destroy all such

Confidential Information.” Id. at 122-23. The order provided that it could be

modified for good cause. Shortly after the issuance of this protective order,

Dr. Gerber provided deposition testimony during which he supplied Confidential

Information to the SEC and the receiver.

2. Second Protective Order

The second protective order, entered December 8, 2004, involved a number

of former clients of Merrill Scott, including Dr. Gerber. It provided that all

Confidential Information supplied by these former clients would be “used solely

for purposes directly related to this Action” and for no other purpose. Id. at 131.

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The Confidential Information would “not be disclosed, repeated, given, shown,

made available, or communicated in any way to anyone other than . . . (f) the

United States Attorney’s Office for the District of Utah or any other department

or agency of the federal government.” Id. at 132 (emphasis added). In

negotiating the terms of the order with the SEC and the receiver, the former

Merrill Scott clients did not agree to the language permitting disclosure to

departments or agencies of the federal government other than the United States

Attorney’s Office. The SEC and the receiver nevertheless approved the order as

to form and forwarded it to the district court, which signed it.

The former investors subsequently filed an objection to the order as entered

with the district court. They contended, among other things, that the disputed

language was improper because the district court had previously ruled that

disclosure would be limited to “the U.S. Justice Department, for the reason that

the [SEC] was under statutory obligation [to make such disclosures],” but that

disclosure should be made to no other federal agency. Id. at 140. On

December 21, 2004, the district court entered an order removing the reference to

“any other department or agency of the federal government,” id. at 146, and

otherwise left the language of the order in place. This second order also provided

that it could be modified for good cause.

3. Disclosure to the IRS

During the month of August 2005, an IRS Special Agent contacted counsel

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for Dr. Gerber. The Agent indicated that he was investigating Dr. Gerber and had

reviewed a substantial amount of material concerning him. He subsequently sent

Dr. Gerber’s attorney a collection of documents, some of which had the word

“Confidential” stamped on them and the name “Gerber” with a number,

indications that they had been furnished by Dr. Gerber at his deposition in the

SEC action. Apparently, the IRS received these documents from the United

States Attorney’s Office, which in turn had received them from the SEC.

Beginning in late 2005, the IRS issued a number of third-party

administrative summonses to banks, law firms, and brokerages concerning

Dr. Gerber’s tax liability. Dr. Gerber moved in the United States District Court

for the District of Columbia to quash the summonses, and the IRS moved to have

them enforced. At a meeting in June 2007 with Dr. Gerber’s attorneys, IRS

Special Agents admitted that they had read Dr. Gerber’s deposition taken in the

SEC action. After the district court in the summons enforcement action was

informed that there had apparently been a violation of the protective order, the

IRS withdrew its summons and asked the district court to dismiss the enforcement

action as moot.

4. United States’ Motion to Modify Protective Orders

In October 2007, the district court entered an order approving a settlement

between the SEC, the receiver, and Dr. Gerber. Shortly before the settlement, the

United States sought to intervene in this action and to modify the protective

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orders to permit broader disclosure to and use by agencies other than the SEC.

The government admitted that the SEC had provided Confidential Information to

the United States Attorney’s Office, and that the U.S. Attorney had, in turn,

provided this evidence “to interested investigators and auditors of the [IRS].” Id.

at 165. It argued that this was consistent with the government’s reading of the

protective orders, which did not restrict the use that the U.S. Attorney could make

of the documents. It requested that the protective orders be modified to make it

clear that they “permit the United States Attorney’s office to use the disclosed

information and materials to perform its functions of promoting and enforcing

compliance with the civil and criminal laws of the United States.” Id. at 174.

Dr. Gerber opposed the intervention and filed a cross-motion with the court

for return of all documents allegedly disseminated in violation of the protective

orders and for discovery to determine the extent of any violation. A magistrate

judge assigned to this case granted the motion to intervene. Proclaiming himself

“troubled by the lack of information about the precise manner in which materials

apparently subject to protective orders in this case have come into the possession

of” the IRS, id. at 322, he ordered that discovery be permitted.

Dr. Gerber did not file objections to the portion of the order permitting

intervention. The government objected to the magistrate judge’s decision

permitting discovery. The district court subsequently held a hearing on the

government’s objections. At this hearing, the district court stated, “I apologize

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for my errors . . . I clearly contemplated . . . that the SEC could turn

[Confidential Information] over to the U.S. Attorney’s Office and the [DOJ] . . . .

When I signed that other order that did away with that, I was in error.” Id. at 343.

Dr. Gerber’s counsel did not consider this judicial concession of error

dispositive. He conceded that the SEC could turn over materials to the DOJ, but

only for use “in this action.” Id. at 344. He argued that the DOJ had therefore

violated the order by turning materials over to the IRS, which were being used

against him in other contexts. He also argued that Dr. Gerber had given his

deposition in reliance on the terms of the protective order, and that disclosure to

the IRS of the information he had provided violated his Fifth Amendment

privilege against self-incrimination.

5. District Court’s Order

On January 30, 2008, the district court entered its Order and Memorandum

Decision. It ruled, first, that the question of whether Dr. Gerber had knowingly

and intelligently waived his Fifth Amendment privilege was not before the court.

This issue should be handled in a subsequent criminal proceeding against him, if

one were filed. Discovery (as ordered by the magistrate judge) was unnecessary

since there was no factual dispute that disclosure occurred and the question was

what should be done with the confidential material Dr. Gerber had produced. On

that issue, the district court found that “the use restrictions in the February 2004

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and December 2004 Protective Orders did not, and do not, apply to the U.S.

Attorney’s Office or the DOJ,” id. at 367, particularly since the SEC had a

statutory duty to provide materials to the DOJ without interference by the

protective orders. “And such a holding extends to the IRS, because even though

the IRS is part of the Department of Treasury, it too has obligations to investigate

criminal wrongdoing and enforce the tax laws.” Id. at 367-68. The district court

therefore vacated the magistrate judge’s order permitting discovery, denied

Dr. Gerber’s motion for return of documents, and vacated that portion of its order

of December 21, 2004 that removed the reference to “any other department or

agency of the federal government” from its December 8, 2004 protective order.

ANALYSIS

1. Jurisdiction

We ordered the parties to brief the issue of whether the district court’s

order on discovery issues was immediately appealable. Also before us is whether

this court has jurisdiction over Dr. Gerber’s challenge to the magistrate judge’s

order permitting the government to intervene in this action.

A. Intervention Order

Dr. Gerber contends that the government’s motion to intervene should have

been denied as untimely. He did not, however, specifically object to the

magistrate judge’s order permitting intervention. His failure to do so strips us of

jurisdiction to review the challenged order. “Under [28 U.S.C.] § 636(b)(1)(A), a

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magistrate judge may not issue a final order directly appealable to the court of

appeals. Properly filed objections resolved by the district court are a prerequisite

to our review of a magistrate judge’s order under § 636(b)(1)(A).” Hutchinson v.

Pfeil, 105 F.3d 562, 566 (10th Cir. 1997) (citation omitted). See also Fed. R. Civ.

P. 72(a) (“A party may not assign as error a defect in the [magistrate judge’s]

order not timely objected to.”).

Dr. Gerber contends that he did raise the untimeliness of the government’s

intervention before the district court. He cites references to the standards

required for intervention that he made in his response to the government’s

objections to the discovery portion of the magistrate judge’s order. We do not

agree that this sufficiently presented the issue of intervention. Dr. Gerber should

have filed his own objections to the timeliness of the government’s motion to

intervene.

Dr. Gerber also contends that his silence did not operate as a waiver

because there was nothing to appeal on the intervention issue in the magistrate

judge’s ruling. He reasons that the magistrate judge merely permitted the

government to “intervene” for the limited purpose of responding to discovery and

did not actually rule on his primary objections to intervention. A careful reading

of the order, however, does not bear out this contention. The magistrate judge

specifically found that “the United States of America . . . should be permitted to

intervene for the limited purpose of resolving the issues raised in its motion and

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in Dr. Gerber’s motion.” Aplt. App. at 321. It granted “the motion of the United

States of America . . . for purposes of seeking clarification or modification of the

protective orders.” Id. at 322. We therefore conclude that Dr. Gerber’s failure to

appeal the magistrate judge’s order granting intervention deprives us of

jurisdiction to hear his appeal of that order.

B. Discovery/Protective Order

The government contends that we lack jurisdiction to review the district

court’s discovery order. This court has “jurisdiction of appeals from all final

decisions of the district courts of the United States.” 28 U.S.C. § 1291. A

decision is “final” when it “ends the litigation on the merits and leaves nothing

for the court to do but execute the judgment.” Boughton v. Cotter Corp., 10 F.3d

746, 748 (10th Cir. 1993) (quotation omitted). Discovery orders entered during

the course of litigation ordinarily are not “final” under this definition. Id.

Dr. Gerber contends that jurisdiction exists under an exception to the final

order rule known as the “collateral order rule” or “Cohen doctrine.” See Cohen v.

Beneficial Indus. Loan Corp., 337 U.S. 541 (1949). In order to fall under this

exception, “an order must [1] conclusively determine the disputed question,

[2] resolve an important issue completely separate from the merits of the action,

and [3] be effectively unreviewable on appeal from a final judgment.” Boughton,

10 F.3d at 749 (quotation omitted).

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 As a general matter, “discovery orders are not appealable under the Cohen

doctrine.” Id. But we recognized an exception in a case where a third party was

granted leave to intervene solely for the purpose of seeking modification of a

protective order and where the underlying controversy had already been

concluded. United Nuclear Corp. v. Cranford Ins. Co., 905 F.2d 1424, 1426

(10th Cir. 1990). In United Nuclear, we held this court had jurisdiction either

under the Cohen doctrine or because the order modifying the terms of a protective

order was an appealable final judgment. Id. 1

For similar reasons, the order challenged here also meets the Cohen test. It

“conclusively determined” the question of whether the protective order would be

modified and the Confidential Material returned to Dr. Gerber. The issue of

disclosure of the Confidential Material was wholly separate from the underlying

merits of this action, which involves alleged violations of the securities laws by

another party. And, while the underlying controversy between the SEC and

Merrill Scott may not yet have concluded, that portion of the underlying

controversy involving Dr. Gerber is complete. There is no indication that he will

1
In United Nuclear, this court did not conduct a detailed analysis of the
Cohen factors. But the Second Circuit, in a case involving facts similar to those
of this case, also reached the conclusion that it had jurisdiction over an
interlocutory order modifying a protective order, after conducting a complete
Cohen analysis. See SEC v. TheStreet.Com, 273 F.3d 222, 228 (2d Cir. 2001).
See also Sears v. Nissan Motor Co., No. 90-2169, 1991 WL 80741, at *1-*2
(10th Cir. May 16, 1991) (finding order vacating protective order reviewable
under Cohen).

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have any right of review from the district court’s modification of the protective

order at the ultimate conclusion of this litigation. Cf. Mohawk Indus. Inc. v.

Carpenter, 130 S. Ct. 599, 607 (2009) (rejecting collateral appeal of discovery

order by party in part because district court could “vacat[e] an adverse judgment

and remand[] for a new trial in which the protected material and its fruits are

excluded from evidence.”). We conclude that we have jurisdiction to address the

merits of the challenged order of the district court.

2. Merits

In his appellate briefing, Dr. Gerber complains of many alleged

improprieties by the SEC and the IRS in connection with his Confidential

Information, and appears to be arguing that these agencies should be sanctioned

for disobeying the protective orders. Aplt. Opening Br. at 44. His specific

request for relief is, however, quite limited. He asks only that the protective

orders be reinstated, and that the government be ordered to return his Confidential

Information. Id. On remand, the district court should grant him this relief, for

reasons we will explain. Dr. Gerber also requests that we reinstate the magistrate

judge’s order requiring discovery into how the IRS obtained the Confidential

Information, but he fails to show any need for further discovery in light of the

limited nature of the relief he has requested. Accordingly, we affirm this aspect

of the district court’s order. Also, in light of the limited relief requested, we need

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not consider the propriety of other forms of relief. 2

“The district court has broad discretion over the control of discovery, and

we will not set aside discovery rulings absent an abuse of that discretion.”

Cummings v. Gen. Motors Corp., 365 F.3d 944, 952 (10th Cir. 2004), abrogated

on other grounds by Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394

(2006). “[A]s a sheer matter of power the court has authority to alter the terms of

a protective order it has entered, and . . . ordinarily requests to modify are

directed to the district court’s discretion and subject to review only for abuse of

discretion.” 8 Charles Alan Wright, Arthur R. Miller & Richard L. Marcus,

Federal Practice & Procedure § 2044.1, at 575-76 (2d ed. 1994). See also

Rohrbough v. Harris, 549 F.3d 1313, 1321 (10th Cir. 2008) (“The modification of

a protective order, like its original entry, is left to the sound discretion of the

district court.”). “Under [the abuse of discretion] standard, we will not disturb a

trial court’s decision absent a definite and firm conviction that the lower court

made a clear error of judgment or exceeded the bounds of permissible choice in

the circumstances.” Cummings, 365 F.3d at 953 (quotation omitted)

Upon consideration, we conclude that the district court abused its discretion

by interpreting and/or modifying its previous orders to permit disclosure of

2
If Dr. Gerber were seeking an order enjoining the IRS from using the
Confidential Information in collateral proceedings, for example, concerns about
ripeness might arise. Moreover, any attempt to prevent the IRS from obtaining
documents it already has received would obviously involve mootness concerns.

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Dr. Gerber’s Confidential Material to the IRS, and by denying his cross-motion

for the return of documents. Dr. Gerber provided Confidential Material in

reliance on the SEC’s agreement, incorporated into the district court’s protective

orders, to limit disclosure of this Confidential Material to the persons and

agencies listed in them, and only for the purposes stated. Allowing the

government to breach the promises made in the protective orders would encourage

similar improper conduct in the future and would discourage future civil litigants

from relying on the government’s promises. The plain meaning of the protective

orders prohibited the disclosures made in this case, and the district court failed to

give proper consideration to Dr. Gerber’s reliance interest in modifying them.

A. Plain Meaning of Protective Orders

The starting point for interpretation of a protective order lies in its plain

language. See City of Hartford v. Chase, 942 F.2d 130, 134-35 (2d Cir. 1991)

(“Because the Confidentiality Order was part of a court-approved agreement, it

must be construed according to general principles of contract law . . . Thus,

deference is to be paid to the plain meaning of the language . . . and the normal

usage of the terms selected.” (citation and quotation omitted)). Both protective

orders provided that the Confidential Information would only be shared for the

purposes of pursuing the SEC action and related litigation, and for no other

purpose. Each then identified those with whom it would be shared.

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 The first protective order specifically limited such “sharing” of

Confidential Information for the purposes of pursuing the SEC action and related

litigation. The second protective order permitted sharing the information with

specified persons “to whom it is necessary that such Confidential Information be

given.” Aplt. App. at 132. Both the first protective order, and the second as

modified by the district court on December 21, 2004, permitted the SEC to

provide Confidential Information to the United States Attorney’s Office for the

District of Utah, which could then use it for the purposes described in the orders.

As a recipient of Confidential Information, the United States Attorney’s Office

was prohibited from further disclosing or using it except as specifically provided

within the protective orders. Id. at 119-20, 131-32. Thus, by their plain

language, the protective orders prohibited the disclosures of Confidential

Information made to the IRS in this case.

B. Dr. Gerber’s Reliance Interest

Having determined that the disclosure of Dr. Gerber’s Confidential

Information to the IRS via the United States Attorney’s Office violated the plain

meaning of the terms of the protective orders, we must next determine whether

the district court’s subsequent modification of the protective orders operated

retroactively to repair the problem. We conclude that it did not.

Protective orders serve the vital function of “secur[ing] the just, speedy,

and inexpensive determination of civil disputes by encouraging full disclosure of

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all evidence that might conceivably be relevant.” Martindell v. Int’l Tel. & Tel.

Corp., 594 F.2d 291, 295 (2d Cir. 1979) (quotation and citation omitted). This

being the case, courts should be wary of retroactive attempts to modify them in

ways that undermine the justified reliance of a witness such as Dr. Gerber on a

valid order circumscribing the use and availability of information disclosed

through discovery. Unless protective orders are “fully and fairly enforceable,

witnesses relying upon such orders will be inhibited from giving essential

testimony in civil litigation, thus undermining a procedural system that has been

successfully developed over the years for disposition of civil differences.” Id.

“[W]itnesses might be expected frequently to refuse to testify pursuant to

protective orders if their testimony were to be made available to the Government

for criminal investigatory purposes in disregard of those orders.” Id. at 295-96.

These concerns overshadow the general rule that “the district court has

broad discretion in judging whether [the alleged] injury [to the party opposing

modification] outweighs the benefits of any possible modification of the

protective order.” Wilk v. Am. Med. Ass’n, 635 F.2d 1295, 1299 (7th Cir. 1980).

Typically, when considering whether to modify a protective order, courts examine

any tangible prejudice to the party opposing modification that outweighs the

benefits of modification. Where, as here, it is the federal government that seeks

to undermine the continued integrity of the protective order, however, courts have

required a greater showing than the typical standard. Given the government’s

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“vast investigatorial resources and power for oppression,” United Nuclear,

905 F.2d at 1428 n.1, courts have required a showing of “unusual circumstances,”

Wilk, 635 F.3d at 1300, or even “extraordinary circumstances,” United Nuclear,

905 F.2d at 1428 (quotation omitted), before permitting the government to benefit

from access to confidential information provided pursuant to a protective order

via modification of the order.

The government fails to identify the presence of such unusual or

extraordinary circumstances in this case. For reasons we will explain in the next

section of this opinion, the SEC’s alleged obligation to cooperate with other

governmental agencies by disclosing information to them does not qualify as such

an extraordinary circumstance.

C. SEC’s Alleged Regulatory Disclosure Obligations

In ruling against Dr. Gerber, the district court relied, in part, on the SEC’s

alleged “statutory and regulatory obligation” to share information with other

governmental law enforcement agencies. Aplt. App. at 367. While this alleged

obligation is reflected in the plain language of the orders permitting sharing of

information with specified agencies for very limited purposes, it will not support

the nearly unlimited construction placed on it by the government.

The assertion of a law enforcement purpose is insufficient, without more, to

justify actions in derogation of a valid protective order. See Chem. Bank v.

Affiliated FM Ins. Co., 154 F.R.D. 91, 93 (S.D.N.Y. 1994). Moreover, we find

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this reliance on a law enforcement rationale as a means of bypassing the

limitations reflected in the protective orders to be unfounded. The statutes the

government identified, see id. at 168 n.15, and on which this alleged duty was

predicated, are permissive rather than mandatory. See 15 U.S.C. § 77t(b) (“The

Commission may transmit such evidence as may be available concerning such

acts or practices to the Attorney General who may, in his discretion, institute the

necessary criminal proceedings under this subchapter.”); 15 U.S.C. § 78u(d)(1)

(same); 15 U.S.C. § 78x(c) (“The Commission may, in its discretion and upon a

showing that such information is needed, provide all ‘records’ (as defined in

subsection (a) of this section) and other information in its possession to such

persons, both domestic and foreign, as the Commission by rule deems appropriate

if the person receiving such records or information provides such assurances of

confidentiality as the Commission deems appropriate.”). See also 17 C.F.R.

§ 240.24c-1(b) (same; further delimiting authorities to whom such information

may be provided).

Because, based on these statutes, the SEC’s ability to share information

with other governmental authorities represents a permissive power rather than a

mandatory duty, it does not provide an extrinsic limit on the SEC’s ability to

enter into binding protective orders. The SEC can certainly make a discretionary

decision to forego its opportunity to share documents with others, including law

enforcement agencies, in the interest of obtaining such documents from a

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deponent.

Moreover, we cannot endorse the government’s shift of position here.

Having cabined its discretion by agreeing to a protective order that limited the

purposes for which Confidential Information could be shared--thus showing a lack

of concern for the effect of such limitations on the use of the Confidential

Information for law enforcement purposes--it is odd to find the government now

advancing a much broader alleged law enforcement “duty” as a shield to a charge

that it violated the protective order.

D. Limits on Enforceability of Protective Orders

The government makes two arguments for exempting the U.S.

Attorney/DOJ from the strictures of the protective orders. It argues, first, that

because the U.S. Attorney/DOJ was not a party to the protective orders, it could

not be bound or limited by them and was therefore not prevented from turning

over information to the IRS. While in general a nonparty is not bound by a

protective order, see Gonzales v. City of Castle Rock, 366 F.3d 1093, 1119

(10th Cir. 2004) (en banc) (Kelly, J., concurring in part and dissenting in part),

reversed on other grounds, 545 U.S. 748 (2005), that rule is inapplicable under

the particular facts of this case. To facilitate cooperation between federal

government agencies, the protective orders permitted the nonparty U.S.

Attorney/DOJ to receive Confidential Information without the need to intervene

and seek disclosure through a motion under Fed. R. Civ. P. 24. But the protective

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orders also contemplated that the U.S. Attorney/DOJ would only receive such

documents pursuant to its terms, which prohibited their further dissemination.

The U.S. Attorney/DOJ was specifically named in the protective orders and

it is clear that its receipt of documents from the SEC, which was unquestionably a

party to the protective order and bound by its terms, was permitted only because

the U.S. Attorney/DOJ was permitted to act “in concert with” the SEC in sharing

information. Cf. In re Zyprexa Injunction, 474 F. Supp. 2d 385, 419 (E.D.N.Y.

2007) (stating that under Fed. R. Civ. P. 65(d), persons named in an injunction

who act in concert with other parties are considered “parties” for purpose of its

binding effect). Moreover, the government does not argue that the U.S.

Attorney/DOJ lacked actual knowledge of the protective orders. The U.S.

Attorney/DOJ’s receipt of the Confidential Information was therefore conditioned

upon its obedience to the plain language of the protective orders forbidding

further disclosure, and it was not free to violate them by sharing the Confidential

Information with the IRS.

The government’s other argument relies on its contention that the

protective orders did not require that the United States Attorney’s Office be given

notice of the limited use to which Confidential Information could be put. Aplee

Br. at 4. It claims that “the intent of the disclosure provision was to exempt the

Department of Justice from any restrictions” on the use of the Confidential

Information. Id. at 16 (emphasis added). The district court “clarified” in its

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modification order that “the use restrictions in the . . . Protective Orders did

not . . . apply to the U.S. Attorney’s Office or the DOJ.” Aplt. App. at 367. But

this interpretation runs contrary to the plain language of the orders, as we have

noted above. We therefore cannot accept the government’s argument that would

permit it unlimited use of the Confidential Information simply by passing it

through the U.S. Attorney/DOJ.

E. Use Immunity Argument

The government further argues that by insisting on enforcement of the

protective orders, Dr. Gerber is essentially requesting to be granted use immunity

for his testimony in the SEC proceedings. Citing In re Grand Jury Subpoena,

836 F.2d 1468 (4th Cir. 1988), it contends that such immunity is unavailable in a

civil proceeding. The government further argues that Dr. Gerber has no right to

use a protective order as a substitute for either seeking immunity or invoking his

Fifth Amendment rights in subsequent proceedings.

These contentions, however, distort Dr. Gerber’s position. He has not

requested use immunity or even de facto use immunity in this action. He has

merely asked the district court to enforce its own protective order in the instant

civil suit. Such enforcement does not represent an actual or de facto grant of use

immunity.

Moreover, the facts of In re Grand Jury Subpoena are easily distinguished

from those in this case. There, the Fourth Circuit, relying in part on “[t]he

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sweeping power of the grand jury to compel the production of evidence,” id. at

1471, ruled that deponents in a civil case could not use a civil protective order to

block a grand jury criminal subpoena requiring production of their sealed

depositions. But no such criminal subpoena is at issue in this case. 3 The IRS

obtained the Confidential Information through the SEC and DOJ’s voluntary

disclosure, not through a criminal subpoena. This disclosure, unprompted by a

grand jury subpoena, clearly violated the plain language of the protective order.

The government’s “use immunity” argument fails.

F. Return of Documents

The February 2, 2004 protective order requires that within 45 days of the

conclusion of litigation, the Confidential Information be returned to counsel for

Dr. Gerber, or destroyed. Aplt. App. at 123. The district court denied

Dr. Gerber’s request that the Confidential Information in the hands of the IRS be

returned to him. It noted that “[w]hen the Protective Orders were issued, the

court clearly contemplated that the SEC could and would turn over the material to

the U.S. Attorney’s Office and the DOJ for law enforcement purposes and that the

material would not be returned.” Id. at 367. Again, this interpretation runs

3
The Fourth Circuit noted that the government had two options in seeking to
obtain the deposition transcripts: it could subpoena the transcripts as part of a
grand jury investigation, or seek permissive intervention in the civil action to
request that the protective order be modified or vacated. Grand Jury Subpoena,
836 F.3d at 1470. The government chose the latter option in this case.

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contrary to the plain language of the first protective order. On the rationale

advanced in its order, the district court’s decision to permit the IRS to keep the

Confidential Information represents an abuse of discretion, for the reasons we

have outlined in this opinion.

CONCLUSION

We DISMISS Dr. Gerber’s appeal for lack of jurisdiction to the extent that

it challenges the district court’s order permitting the United States to intervene in

this action. We AFFIRM the district court’s Order and Memorandum Decision to

the extent it denies further discovery, REVERSE those portions of the order

(1) denying Dr. Gerber’s request for return of documents, and (2) modifying

and/or interpreting the protective orders in derogation of their plain language, and

REMAND for further proceedings in accordance with this opinion.

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