Cave Consulting Group, Inc. v. OptumInsight, Inc.,

Filing 160

Order by Chief Magistrate Judge Joseph C. Spero granting in part and denying in part 155 Motion. Leave to file a motion for reconsideration is denied. Certification of interlocutory appeal is granted. OptumInsight's request for a stay is granted in part as described herein. The hearing set for January 13, 2017 is vacated. (jcslc2S, COURT STAFF) (Filed on 12/29/2016)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 CAVE CONSULTING GROUP, INC., 7 Case No. 15-cv-03424-JCS Plaintiff, 8 v. 9 OPTUMINSIGHT, INC., 10 Defendant. United States District Court Northern District of California 11 12 I. ORDER DENYING LEAVE TO FILE MOTION FOR RECONSIDERATION AND GRANTING MOTION FOR CERTIFICATION OF INTERLOCUTORY APPEAL Re: Dkt. No. 155 INTRODUCTION Defendant OptumInsight, Inc. moves for leave to file a motion for reconsideration of the 13 14 Court’s October 25, 2016 order (dkt. 151)1 granting in part the motion to compel brought by 15 Plaintiff Cave Consulting Group, Inc. (“CCGroup”), or for certification of an interlocutory appeal, 16 and for a stay of the discovery obligations imposed by that order. The Court finds the matter 17 suitable for resolution without oral argument and VACATES the hearing set for January 13, 2017. 18 OptumInsight’s motion is DENIED as to leave to file a motion for reconsideration, but 19 GRANTED as to certification of interlocutory appeal and GRANTED IN PART as to a stay of the 20 Court’s previous order.2 21 This order assumes the parties’ familiarity with the history of this case and the contents of 22 the Court’s previous order, which found that OptumInsight’s predecessor Symmetry, Inc. waived 23 attorney-client privilege as to certain subject matter by intentionally disclosing privileged 24 information in a proceeding before the United States Patent and Trademark Office, and that 25 Symmetry’s waiver continued in effect after Symmetry merged into OptumInsight under Delaware 26 1 27 28 Cave Consulting Grp. v. OptumInsight, Inc., No. 15-cv-03424-JCS, 2016 WL 6216696 (N.D. Cal. Oct. 25, 2016). 2 The parties have consented to the jurisdiction of the undersigned magistrate judge for all purposes pursuant to 28 U.S.C. § 636(c). 1 law. 2 II. MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION 3 The local rules of this Court require that a party seeking leave to move for reconsideration 4 of an interlocutory order “must specifically show reasonable diligence in bringing the motion, and 5 one of the following:” 6 (1) That at the time of the motion for leave, a material difference in fact or law exists from that which was presented to the Court before entry of the interlocutory order for which reconsideration is sought. The party also must show that in the exercise of reasonable diligence the party applying for reconsideration did not know such fact or law at the time of the interlocutory order; or 7 8 9 (2) The emergence of new material facts or a change of law occurring after the time of such order; or 10 United States District Court Northern District of California 11 (3) A manifest failure by the Court to consider material facts or dispositive legal arguments which were presented to the Court before such interlocutory order. 12 13 14 Civ. L.R. 7-9(b). OptumInsight argues that reconsideration is appropriate here based on the Court’s failure 15 to consider what OptumInsight contends were dispositive legal arguments, and based on the 16 Court’s inherent authority to prevent clear error and manifest injustice. Mot. (dkt. 155) at 4. 17 OptumInsight relies primarily on two purported errors: the finding of subject matter waiver, and 18 the conclusion that waiver continued to apply to material generated after Symmetry merged with 19 OptumInsight. 20 As for the former, OptumInsight contends that the Court improperly “rel[ied] on cases 21 applying a broad waiver pursuant to the crime-fraud exception or to communications in the same 22 proceeding relating to reliance upon an opinion of counsel.” Id. at 11. Remarkably, OptumInsight 23 does not identify any specific case cited in the Court’s decision that it believes is not applicable to 24 the facts at hand. The Court does not agree that its prior decision rested on inapposite authority. 25 OptumInsight also argues that the Court’s ruling is inconsistent with an advisory committee note 26 to Rule 502 of the Federal Rules of Evidence. Id. at 10–11. Given that OptumInsight did not cite 27 that note in its brief opposing the motion to compel, and only mentioned it in passing at the 28 hearing, OptumInsight has not demonstrated a “manifest failure by the Court to consider . . . 2 1 dispositive legal arguments which were presented to the Court before” the previous order. See 2 Civ. L.R. 7-9(b)(3). Moreover, the Court is not persuaded that its prior ruling is inconsistent with 3 the advisory committee note, much less the text of the Rule and authority interpreting it. Finally, 4 OptumInsight suggests that the Court has improperly set the scope of the waiver as “co-extensive 5 with the allegations of wrongdoing in Plaintiff’s Second Amended Complaint.” Mot. at 11. 6 OptumInsight mischaracterizes the Court’s decision, which set the scope of the waiver based on 7 the subject matter of Symmetry’s intentional disclosure of attorney-client communications and 8 attorney work product to the USPTO, not based on CCGroup’s allegations in this litigation. See 9 Order re Mot. to Compel at 13–16. The Court finds no grounds warranting reconsideration of the 10 scope of the waiver. United States District Court Northern District of California 11 With respect to the effect of the merger, OptumInsight contends that it did not have an 12 opportunity to address that issue because CCGroup did not discuss it in its motion to compel. 13 Mot. at 6–7. Three days after CCGroup filed its motion to compel, however, and more than ten 14 days before OptumInsight filed its opposition, the Court issued its order denying OptumInsight’s 15 motion to dismiss the second amended complaint, which expressed the Court’s view that “[t]he 16 corporation that continues after a merger generally stands in the shoes of both constituent 17 corporations.” Order Denying Mot. to Dismiss 2d Am. Compl. (dkt. 127) at 27.3 OptumInsight 18 did not address that holding in its opposition to the motion to compel. CCGroup’s reply brief 19 explicitly argued that the Court’s reasoning in the motion to dismiss order also applied to the 20 motion to compel. See dkt. 139 at 13. At the hearing, the Court made clear its tentative position 21 that the waiver would include documents generated after the merger. OptumInsight nevertheless 22 failed to address the significance of the merger in any way at the hearing. Under these 23 circumstances, the procedural disadvantage OptumInsight faced as a result of CCGroup’s failure 24 to address the significance of the merger in its initial brief does not warrant reconsideration. Moreover, the only case that OptumInsight cites as authority for a different outcome in its 25 26 present motion and that concerns waiver of privilege is a twenty-three year old unpublished 27 3 28 Cave Consulting Grp. v. OptumInsight, Inc., No. 15-cv-03424-JCS, 2016 WL 4744165 (N.D. Cal. Sept. 12, 2016). 3 1 decision by the Fifth Circuit. That case held that a district court did not abuse its discretion in 2 holding that an earlier corporation’s failure to respond to discovery requests in a timely manner 3 did not warrant imposing waiver of privilege as a sanction against a successor corporation that had 4 purchased the assets of the first corporation. See Team Bank, N.A. v. Grant, 983 F.2d 233 (table), 5 1993 WL 4731, at *2 (5th Cir. Jan. 8, 1993) (per curiam). There is no indication that a merger 6 occurred in that case, and the Fifth Circuit’s decision does not reference the Delaware merger 7 statute at issue here. See id. Neither Team Bank nor any of the other cases that OptumInsight 8 cites—which involve the first sale doctrine and issues of sovereign immunity rather than waiver of 9 privilege—warrant reconsideration of the Court’s previous order. OptumInsight’s motion for leave to file a motion for reconsideration of the Court’s order finding that Symmetry’s intentional 11 United States District Court Northern District of California 10 disclosure of privileged information effects a waiver of privilege applicable to post-merger 12 OptumInsight is DENIED. OptumInsight also suggests that its current motion would give the Court an opportunity to 13 14 reconsider its examination of Ritz Camera & Image, LLC v. Sandisk Corp., 700 F.3d 503 (Fed. 15 Cir. 2012), Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059 (Fed. Cir. 1998), and the 16 necessity of showing knowledge of fraud in a Walker Process claim in the order denying 17 OptumInsight’s motion to dismiss CCGroup’s second amended complaint. Mot. at 7; see Order 18 Denying Mot. to Dismiss 2d Am. Compl. OptumInsight filed the present motion more than two 19 months after that order was issued, and more than one month after it answered the complaint that it 20 had sought to dismiss. To the extent that the present motion could be construed as seeking leave 21 to file a motion for reconsideration of the order denying OptumInsight’s motion to dismiss, that 22 request is DENIED for failure to “specifically show reasonable diligence in bringing the motion.” 23 See Civ. L.R. 7-9(b). 24 III. 25 MOTION FOR CERTIFICATION OF INTERLOCUTORY APPEAL A district court may certify an interlocutory order for appeal upon the determination that it 26 “involves a controlling question of law as to which there is substantial ground for difference of 27 opinion and that an immediate appeal from the order may materially advance the ultimate 28 termination of the litigation.” 28 U.S.C. § 1292(b). Interlocutory appeal is “applied sparingly and 4 1 only in exceptional cases.” In re Cement Antitrust Litig., 673 F.2d 1020, 1027 (9th Cir. 1982). 2 Matters of attorney-client privilege may, however, warrant interlocutory appeal under § 1292(b) 3 where “a privilege ruling involves a new legal question or is of special consequence, and district 4 courts should not hesitate to certify an interlocutory appeal in such cases.” Mohawk Indus., Inc. v. 5 Carpenter, 558 U.S. 100, 111 (2009). The effect of a corporate merger on the scope of waiver of attorney-client privilege caused 6 by one party to the merger’s disclosure of privileged material appears to be a novel question of 8 law. Although, as discussed above, the Court is satisfied that reconsideration would not alter its 9 conclusion on the subject, a different court could conceivably reach a different outcome. The 10 issue is of “special consequence,” see id. at 111, here given the amount of material that may be 11 United States District Court Northern District of California 7 subject to that waiver and its potential consequence to CCGroup’s claims, aspects of which turn 12 on what information OptumInsight’s attorneys had at various points in the parties’ history of 13 litigation. The Court is also mindful that absent interlocutory review, post-judgment appeal of the 14 Court’s previous order would be of little value to OptumInsight, as disclosure of the material at 15 issue to an adversary cannot be undone. The Court finds that the conditions for interlocutory 16 review under § 1292(b) are satisfied here, and GRANTS OptumInsight’s motion for certification 17 of an appeal to the Federal Circuit.4 An amended version of the Court’s October 25, 2016 order 18 will be filed separately stating that the conditions of § 1292(b) are satisfied. 19 IV. STAY OF PROCEEDINGS Certification of interlocutory appeal under § 1292(b) does not stay proceedings in the 20 21 district court unless either the district court or the court of appeals so orders. See § 1292(b). 22 OptumInsight argues with good reason that it should not be required to devote significant 23 resources to preparing documents for production while its obligation to produce them remains in 24 dispute. On the other hand, CCGroup’s concern that OptumInsight’s failure to work towards 25 production during that time will result in undue delay of the proceedings is also persuasive. As a 26 compromise, the Court hereby ORDERS that OptumInsight must produce any documents that are 27 4 28 Although CCGroup disputes that any interlocutory appeal is appropriate, both parties agree that the Federal Circuit is the appropriate forum for such an appeal in this case. 5 1 subject to the previous order compelling production no later than twenty-one days after the 2 disposition of the interlocutory appeal. Whether meeting that deadline requires preparation 3 while the appeal is pending is left to the judgment of OptumInsight and its counsel. The parties are encouraged to meet and confer to determine what effect, if any, the 4 5 interlocutory appeal should have on other deadlines and proceedings in this action. 6 V. 7 CONCLUSION For the reasons discussed above, OptumInsight’s motion for leave to file a motion for 8 reconsideration is DENIED, its motion for certification of interlocutory appeal is GRANTED, and 9 its motion for a stay of the previous order is GRANTED IN PART. An amended version of the 10 United States District Court Northern District of California 11 12 13 14 Court’s previous order reflecting certification of interlocutory appeal will follow. IT IS SO ORDERED. Dated: December 29, 2016 ______________________________________ JOSEPH C. SPERO Chief Magistrate Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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