Vendors Can Intervene To Shield IP In Pa. Shell Permit Row

March 14, 2017 | LAw360

Matt Fair

Law360, Philadelphia (March 14, 2017, 4:52 PM EDT) -- A Pennsylvania judge has set legal precedent after ruling that an interest in protecting confidential business information allowed a group of vendors to intervene in a dispute over air permits issued for a $2 billion ethane gas complex under development by a Royal Dutch Shell PLC unit.

Chief Judge Thomas Renwand of the state’s Environmental Hearing Board found on Friday that the four petitioners, despite having confidentiality agreements in place with Shell Chemical Appalachia LLC not to disclose their intellectual property, had unique interests that the petrochemical giant could not adequately represent in the permit dispute.

“Given that Shell Chemical has entered into confidentiality agreements with each of the petitioners that include consequences should Shell break the agreement, Shell certainly has some interest in making an effort to protect the information,” the opinion said. “[However,] each of the petitioners is the exclusive owner of its proprietary technology and, as such, has a strong and unique property interest that is not shared by Shell Chemical.”

The Clean Air Council and the Environmental Integrity Project launched an appeal before the EHB in August 2015 alleging that state regulators failed to comply with the federal pollution laws when then approved permits for the massive ethane cracker plant.

Included in Shell’s designs for the project are three polyethylene units, a cooling tower, a wastewater treatment plant, gas flare systems and storage vessels, according to the filing.

The environmentalists say that state regulators have a legal and ethical duty to restrict emissions from Shell’s ethane plant as much as possible, and that the company could have solved the problem by adding state-of-the-art emission monitors around the property’s fence line.

According to the opinion, the vendors filed discovery requests beginning in May that Shell said implicated trade secrets and proprietary information belonging to third-party vendors.

A group of four of those vendors — Univation Technologies LLC, Linde Engineering North America Inc., Ineos Sales Ltd. and John Zink Co. LLC — filed petitions to intervene in the case beginning in December looking to protect any potential proprietary information that might come out during discovery.

The environmental groups opposed the intervention bid on grounds that Shell had waited almost six months — causing prejudicial delay in the discovery process — before informing any of the vendors that their trade secrets were at issue in the case.

The challengers also argued that Shell was in a position to adequately protect the interests of the vendors as they dealt with proprietary information that might come up during ligation.

Judge Renwand, however, ruled that the lateness of the intervention petitions did not warrant denial.

“Precluding the third parties from intervening to protect their information simply because their petitions arrived at the close of discovery would make it impossible for them to have their day in court,” the opinion said. “Third parties do not necessarily know when their information is threatened and should be able to take steps to protect it when they learn it is at risk.”

The judge added that the vendors could play an important part in crafting orders limiting the release of proprietary information.

“The alleged confidential business information has not yet been produced so the intervenors could play a key role in the fashioning of a narrow protective order that would adequately protect their business interest, yet still provide the appellants with the discovery to which they are entitled,” the opinion said.

Joseph Minott, the executive director and chief counsel of Clean Air Council in Pennsylvania, noted that the interventions approved by the judge on Friday were extremely limited.

"Shell waited until the last minute to inform its vendors of the council's discovery request," he said in an email. "The vendors felt that Shell could not adequately protect their trade secrets. The vendors asked to intervene only for the purposes of being able to participate in ensuring that the discovery process protects their trade secrets."

The environmental groups are represented by Joseph Minott, Alexander Bomstein and Ernest Welde of the Clean Air Council and Adam Kron of the Environmental Integrity Project.

Shell is represented by Margaret Hill, Michael Krancer, Robert Scott and Frank Dante of Blank Rome LLP.

Univation is represented by Frank Emmerich and Aya Salem of Conrad O’Brien PC.

Linde is represented by John Carroll and Michelle Skjoldal of Pepper Hamilton LLP.

Ineos is represented by Andrew George of Baker Botts LLP.

John Zink is represented by Suzanne Schiller and Michael Meloy of Manko Gold Katcher & Fox LLP.

The case is Clean Air Council et al. v. Commonwealth of Pennsylvania et al., case number 2015-111, before the state’s Environmental Hearing Board.