Snow v. Align Technology, Inc.

Filing 31

Discovery Order re: 1 MOTION to Compel filed by Misty Snow, 27 Joint Discovery Letter Brief Regarding Plaintiffs' Discovery Requests to Non-Party OrthoFi. Signed by Judge Thomas S. Hixson on 6/5/2023. (tshlc1, COURT STAFF) (Filed on 6/5/2023)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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MISTY SNOW,
Plaintiff,

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DISCOVERY ORDER

v.

Re: Dkt. Nos. 1, 27
ALIGN TECHNOLOGY INC,
Defendant.

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United States District Court
Northern District of California

Case No. 23-mc-80055-VC (TSH)

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We are here on Plaintiffs’ motion to compel non-party OrthoFi to produce certain data that

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Plaintiffs would like to use in the underlying action Snow v. Align Technology, Inc., No. 21-cv-

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3269, pending in this court. The Court held hearings on May 4, 2023, and June 1, 2023, and now

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issues this order.

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By way of background, OrthoFi provides software to dental practices that performs various

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financial transactions, such as patient billing, collections and insurance processing. Among other

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things, OrthoFi’s software provides a patient interface and payment system for orthodontic

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treatments, such as Invisalign. OrthoFi collects payments directly from both patients and

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insurance companies and remits those payments to dental practices. OrthoFi also provides patient

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financing, collections, and insurance claims management services to practices. OrthoFi therefore

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has many thousands of data points showing what the individual dental practices charged patients

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for orthodontic treatment, including Invisalign.

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Plaintiffs say this data is helpful to their experts’ ability to analyze and measure

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“passthrough” or the extent to which changes in the price Align charges dentists for clear aligners

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are then passed on to end user customers in the form of higher Invisalign prices. Plaintiffs served

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a subpoena on OrthoFi on August 3, 2022 seeking transaction-level data for each sale of clear

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dental aligners OrthoFi financed from May 4, 2017 to the present, including the identity of the

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dentist’s office through which each sale was facilitated. After months of negotiations, OrthoFi

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produced two things. First, it produced a transactional dataset containing approximately 8.5

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million data points, including what the treatment was (e.g., braces, aligners, brackets), estimated

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insurance benefits, patient payment responsibility, down payments, and total cost of treatment. In

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this dataset, the dentist/practice providing each treatment is identified only by a “Practice ID,” a

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number made up by OrthoFi in place of the dentist/practice’s name. Second, OrthoFi produced a

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spreadsheet listing its dental practice customers by name and by zip code.

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Northern District of California

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Plaintiffs filed the present motion to compel seeking data sufficient to match OrthoFi’s

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Practice IDs with those practices’ zip codes. Here we need to pause for a moment because things

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get a little complicated. You might have thought that Plaintiffs would ask for a translation

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between Practice IDs and the names of the dental practices. From the motion to compel, it seems

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like that is what Plaintiffs originally wanted, but in an effort to accommodate OrthoFi’s

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confidentiality concerns, Plaintiffs stated they would accept a matching of Practice IDs with zip

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codes because that would provide a reasonable basis for matching practice names to practice IDs.

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ECF No. 1 at 10. In other words, OrthoFi wouldn’t need to explicitly list each of its dental

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practice customers by name in a way that revealed each practice’s pricing. But Plaintiffs would be

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able to figure that out. At the May 4, 2023 hearing Plaintiffs explained that Align has produced its

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transactional data showing sales to dental practices by name and zip code. Plaintiffs thought that

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by using order volumes and zip codes, they could make a good guess about which dental practice

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corresponds to each Practice ID. Thus, while on the surface it might seem like Plaintiffs are not

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seeking confidential information – “You don’t have to tell us the prices each of your dental

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customers charges its customers; just give us the zip code” – in fact, that is the very information

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Plaintiffs think they can figure out from the zip codes. And this compromise proposal failed to

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satisfy OrthoFi for this very reason, among others.

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At the May 4 hearing the Court requested supplemental briefing concerning the propriety

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of subpoenaing a software provider for its customers’ data that happens to be in the software

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provider’s possession only by virtue of the services it provides. The parties provided that briefing,
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ECF No. 27, which was helpful. Following that submission, the Court issued a tentative order

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denying the motion to compel. The tentative order expressed the view that the name of the dental

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practice that corresponds each Practice ID was irrelevant, in view of Plaintiffs’ need to extrapolate

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from OrthoFi’s customers anyway.
At the June 1 hearing, Plaintiffs offered a new theory of relevance. They assert that

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Northern District of California

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through data produced by Align at the wholesale level and the anonymized data produced by

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OrthoFi at the retail level, Plaintiffs’ experts have been able to show a relationship between order

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volume and pricing. However, Plaintiffs say that Align has criticized their model based on retail

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price variations that can’t be explained by volume.1 Plaintiffs strongly suspect that these

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variations are due to geography – for example, that prices in big, expensive cities like New York

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are higher than in rural areas. Plaintiffs argue that telling them the zip codes associated with each

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Practice ID would materially advance their experts’ analysis. Plaintiffs also assert that there are

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no other useful sources retail-level pricing that would give them this information.
This is a new theory of relevance, and it seems like a good one. It is an interesting change

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of plans from using zip codes as a way of guessing the dental practice’s name to using zip codes as

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zip codes. It doesn’t solve the problem that Plaintiffs and likely Align could guess the name of the

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dental practice associated with each Practice ID in the same way that Plaintiffs had planned to

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before, so it doesn’t alter OrthoFi’s confidentiality concerns. However, this new theory of

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relevance does overcome the Court’s concern in the tentative ruling that the requested information

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was not relevant.
Of course, mere relevance isn’t good enough. Plaintiffs are seeking “confidential . . .

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commercial information” within the meaning of Federal Rule of Civil Procedure 45(d)(3)(B)(i)

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because the information they would obtain would allow them to determine the prices charged by

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each of OrthoFi’s customers. Therefore, Plaintiffs must “show a substantial need for the . . .

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material that cannot otherwise be met without undue hardship,” and the Court must “ensure[] that

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the subpoenaed person will be reasonably compensated.” Id. (d)(3)(C).

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The Court has not seen the parties’ expert reports and is relying on Plaintiffs’ counsel’s
description of the contested issues.
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Northern District of California

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Plaintiffs have shown a substantial need for the material because it is necessary for their

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experts’ analysis. They argue that Align has criticized their model for the inability to explain

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retail price variances that can’t be explained by order volume. Plaintiffs make a logical argument

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that prices likely differ by location, and the zip codes would allow them to show that. Further,

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having zip codes for OrthoFi’s customers would provide a perfect line up with the pricing data

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OrthoFi has produced – as opposed to using some other type of data concerning variations in retail

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pricing because then it would be unclear if that other data actually explained the price variations in

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OrthoFi’s customers’ pricing data. Further, Plaintiffs insist there is no other source for this type of

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retail pricing data for Invisalign. In this proposed class action, Plaintiffs likely need to

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demonstrate classwide injury, and their analysis of the alleged retail passthrough is important

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toward that end. Even if fact discovery were still open on the monopolization claim, which it is

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not, subpoenaing OrthoFi’s hundreds of customers would be an undue burden.

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The Court believes that OrthoFi will be reasonably compensated. Plaintiffs have agreed to

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pay OrthoFi $10,000 for subpoena compliance, which is the only specific amount of money

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OrthoFi has requested. ECF No. 1 at 15. OrthoFi states that its contracts provide that “[r]eceiving

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Party may disclose the Disclosing Party’s Confidential Information in response to a valid order by

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a court or other governmental body, or as otherwise required by law; provided, however, that the

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Receiving Party provides the Disclosing Party prompt notice of such order or requirement and a

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reasonable opportunity, if permitted by law, to object to such disclosure and seek a protective

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order.” ECF No. 9-1 ¶ 8. And OrthoFi contends that providing its customers with the required

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notice would be disruptive. Id. ¶ 10. However, OrthoFi has never quantified the burden of

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providing that notice or even really explained what is involved in such a notification.

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The Court must also balance the non-parties’ competing concerns. OrthoFi’s legitimate

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concern is the potential harm to its customer relationships from its customers learning that OrthoFi

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was required to disclose their pricing information in a way that the receiving parties could link to

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the specific customers. This concern is real but it is also difficult to weigh or quantify. For

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example, even though the Court assumes that OrthoFi’s customers’ retail prices are confidential

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commercial information, it is not clear to what extent the dental practices themselves think that.
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Retail prices are by definition charged to the public, so they’re never really secret. Assuming that

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market forces operate in dentistry as elsewhere, dental practices probably know what their nearby

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competitors are charging – otherwise, how do you set your prices? – and may assume their

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competitors know their pricing as well. This suggests that OrthoFi’s fears of a negative customer

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reaction may be overstated.

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Northern District of California

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The other affected non-parties are the dental practices themselves. As noted above, it’s

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unclear how confidential they regard their retail prices. Further, there is a protective order in the

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underlying action, which Plaintiffs included with the motion to compel. ECF No. 1-6. It allows a

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non-party like OrthoFi to designate information confidential or highly confidential, and it limits

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the use of protected material to prosecuting, defending, or attempting to settle this litigation. This

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should be adequate to protect OrthoFi’s customers’ retail pricing information from being used for

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any purpose that would adversely affect them. Further, the Court will give them an additional

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opportunity to object if they believe the existing protective order is for some reason insufficient.

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Accordingly, weighing all of these factors, the Court concludes that Plaintiffs’ motion to

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compel should be and is now GRANTED. Within ten days of the date of this order, any OrthoFi

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customer may file a motion for a protective order setting forth any reasons why the zip code or zip

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codes associated with its Practice ID should not be provided to Plaintiffs. On the eleventh day

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after the date of this order, OrthoFi shall provide this information to Plaintiffs for all customers

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who have not moved for a protective order. OrthoFi shall designate this information highly

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confidential within the terms of the protective order in the underlying Snow action.

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IT IS SO ORDERED.

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Dated: June 5, 2023

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THOMAS S. HIXSON
United States Magistrate Judge

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