Federal prosecutors today were scheduled to participate in a closed-door hearing in a Richmond federal appeals court over the propriety of grand jury subpoenas in a trade secrets theft investigation.
Lawyers for Kolon Industries Inc., which makes a high-strength fiber that competes with Kevlar brand technology, lost their effort last year to quash U.S. Justice Department subpoenas in U.S. District Court for the Eastern District of Virginia.
Senior Judge Robert Payne’s decision in July affirming the subpoenas is not public, and the briefs in the appeals court are under seal.
Yesterday evening, the U.S. Court of Appeals for the 4th Circuit announced it was closing hearing to the public, abandoning the court’s general practice of keeping grand jury subpoena hearings open and using pseudonyms to protect the secrecy of the proceedings.
Kolon’s lawyers at Paul, Hastings, Janofsky & Walker and Richmond’s LeClairRyan urged the court to prohibit the public from attending the hearing. Large portions of Kolon’s motion (PDF) are blacked out.
The Justice Department deferred to the court on whether it should keep the hearing open. An assistant U.S. attorney in Richmond, Richard Cooke, said in court papers (PDF) filed March 18 that pre-indictment disclosure could cause prospective witnesses to hesitate before they voluntarily testify before the grand jury.
But Cooke also noted secrecy is no longer necessary when the contents of grand jury matters have become public.
The government’s ongoing grand jury investigation of Kolon is noted in a parallel civil case that is pending in Richmond federal district court. There, Kolon is defending against trade secrets claims that a rival company, E.I. du Pont de Nemours, filed in February 2009.
The suit, based in part on the prosecution of a former DuPont engineer named Michael Mitchell, alleges Kolon conspired to steal DuPont’s Kevlar brand technology. Mitchell, who’d worked for DuPont for more than 25 years, was sentenced last year on trade secrets charges to 18 months in prison. Mitchell was accused of proving Kolon confidential information from DuPont.
Kolon’s attorneys said in the parallel civil case that prosecutors were unfairly piggybacking on DuPont in the civil action, using subpoenas to try to grab documents outside of the grand jury’s power. Lawyers for Kolon argue DOJ used DuPont’s suit to revive a criminal investigation that the government had declared “dead” in early 2009. (DuPont, represented by McGuireWoods and Crowell & Moring, denies it had any improper relationship with the Justice Department.)
In arguing the grand jury subpoenas were improper, Kolon’s lawyers also point to a decision last year in San Francisco federal district court, where a trial judge quashed DOJ subpoenas in an investigation of price-fixing in the liquid crystal display market. In that case, documents entered the United States from overseas. Prosecutors served grand jury subpoenas on several law firms.
Last December, the U.S. Court of Appeals for the 9th Circuit reversed Judge Susan Illston’s decision in the LCD investigation and ordered the law firms to produce certain documents.
Toshiba Corp.’s attorneys at White & Case, one of the firms that received subpoenas, have asked the U.S. Supreme Court to review the 9th Circuit's decision. White & Case lawyers, including Washington partner Eric Grannon, argue federal appeals courts are split over whether grand jury subpoenas trump civil protective orders.
Paul Hastings partner Stephen Kinnaird was expected to argue the appeal for Kolon in the 4th Circuit this morning. Kinnaird earlier declined to comment, citing the fact the case is under seal and the litigation is ongoing. Cooke was scheduled to argue for the government.
For Kinnaird, the argument marks the second time he's been in front of the 4th Circuit for Kolon in civil and criminal trade secret litigation.
Earlier this month, the 4th Circuit unanimously upheld Kolon’s antitrust counterclaim that DuPont has monopolized the United States market for para-aramid fiber, a foundation for, among other products, body armor and fiber optic cables. Kinnaird argued the case for Kolon.
In the civil action in the appeals court, the Justice Department and Federal Trade Commission backed Kolon in its effort to revive its monopoly claims. Neither agency, however, took a position on the merits of Kolon’s allegations.