Abrams v. Intuitive Surgical, Inc. et al

Filing 178

ORDER by Magistrate Judge Howard R. Lloyd re 170 Discovery Dispute Joint Report No. 4. (hrllc2, COURT STAFF) (Filed on 10/12/2016)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION United States District Court Northern District of California 11 12 IN RE INTUITIVE SURGICAL SECURITIES LITIGATION 13 Case No. 5:13-cv-01920 EJD (HRL) ORDER RE DISCOVERY DISPUTE JOINT REPORT NO. 4 14 Re: Dkt. 170 15 16 17 In this putative class action, plaintiffs sue Intuitive Surgical, Inc. (Intuitive) and several 18 individual defendants for alleged securities fraud. Plaintiffs claim that defendants concealed 19 safety defects in Intuitive’s da Vinci Surgical System and lied about the company’s business 20 metrics and financial prospects. 21 In Discovery Dispute Joint Report (DDJR) No. 4, plaintiffs seek an order compelling the 22 production of two categories of documents: (1) exhibits to deposition transcripts from litigation 23 between Intuitive and its insurance carriers; and (2) “Quality Audit” documents. The matter is 24 deemed suitable for determination without oral argument. Civ. L.R. 7-1(b). Upon consideration 25 of the parties’ respective arguments, this court grants plaintiffs’ request for discovery in part and 26 denies it in part. 27 28 A. Deposition Exhibits The request at issue seeks “[t]ranscripts of all depositions of Intuitive Employees taken in 1 the Insurance Actions since the date each such action was initiated.” (Dkt. 170-2, DDJR No. 4, 2 Ex. B at ECF p. 10). The term “Insurance Actions” refers to two insurance coverage lawsuits filed 3 in this district by Intuitive’s carriers against Intuitive. 1 This court is told that in those actions, the 4 insurers claimed that Intuitive’s failure to report product liability claims during its application for 5 insurance coverage provided a basis for rescission of certain insurance policies. Plaintiffs point 6 out that, in the present case, they allege that Intuitive’s failure to disclose specific information 7 about the number and nature of product liability suits the company faced rendered defendants’ 8 statements about safety false or misleading. Although defendants contend that the Insurance Actions have little or no bearing on this 9 lawsuit, they agreed to produce non-privileged portions of the requested transcripts that have some 11 United States District Court Northern District of California 10 connection to plaintiffs’ claims. Transcripts were produced in redacted form. The specific dispute 12 now presented to this court is whether or not plaintiffs’ request for deposition “transcripts” 13 includes the deposition exhibits. Defendants argue that exhibits are not included because plaintiffs’ request only asks for 14 15 “transcripts” (a term which plaintiffs did not define) and does not expressly say “exhibits.” 16 Plaintiffs contend that exhibits are impliedly included in “transcripts.” In any event, plaintiffs 17 claim that the requested exhibits fall within the scope of a prior request, which sought 18 “[d]ocuments concerning disputes or reservations of rights as to coverage for any and all claims 19 arising out of the use of or concerning da Vinci including but not limited to Intuitive’s litigation 20 with its product liability insurance carriers, Illinois Union Insurance Co. and Navigator Specialty 21 Insurance Company.” (Dkt. 170-1, DDJR No. 4, Ex. A at ECF p. 50). As to this earlier request, 22 plaintiffs say that they offered to narrow it to documents Intuitive produced in the Insurance 23 Actions, and that defendants initially agreed, but later reneged, citing relevance, burden, and 24 patient privacy (HIPPA) concerns. There seems to be no dispute that the transcripts contain at least some information that is 25 26 relevant under Fed. R. Civ. P. 26(b), defendants having produced portions that they apparently 27 1 28 See Case No. 3:13-cv-04863-JST Illinois Union Ins. Co. v. Intuitive Surgical, Inc. and Case No. 3:13-cv-05801-JST Navigators Ins. Co. v. Intuitive Surgical, Inc. 2 1 determined have some connection to plaintiffs’ claims. Accordingly, plaintiffs’ request for 2 documents is granted as follows: Defendants shall forthwith produce exhibits referenced in the 3 portions of the transcripts they produced to plaintiffs. However, to the extent any of the exhibits 4 contain patient-specific information protected under HIPPA, defendants may redact that 5 information. Plaintiffs have not shown why discovery of such information is relevant or necessary 6 to this lawsuit. 7 B. “Quality Audits” Plaintiffs propounded discovery requests seeking “Annual Third-Party Audits” and 8 9 “Internal Audit Records” identified by Intuitive’s corporate designees during Fed. R. Civ. P. 30(b)(6) depositions. (Dkt. 170-2, DDJR No. 4, Ex. B at ECF pp. 18, 21). Plaintiffs subsequently 11 United States District Court Northern District of California 10 narrowed these requests to “Quality Audits” as defined in 21 C.F.R. § 820.22. Briefly stated, that 12 regulation provides that medical device manufacturers “shall establish procedures for quality 13 audits and conduct such audits to assure that the quality system is in compliance with the 14 established quality system requirements and to determine the effectiveness of the quality system.” 2 15 Plaintiffs say that in July 2013, the Food and Drug Administration (FDA) sent Intuitive a warning 16 letter, concluding that Intuitive’s devices were adulterated because Intuitive failed to fully 17 implement quality system design controls required under 21 C.F.R. § 820.30. Inasmuch as reports 18 of quality audits must be reviewed by management, see 21 C.F.R. § 820.22, plaintiffs say that the 19 requested documents are relevant to management’s knowledge of violations identified in the 20 FDA’s letter. They claim that they have found no quality audit documents in defendants’ 21 2 22 23 24 25 26 27 The full text of 21 C.F.R. § 820.22 is as follows: Each manufacturer shall establish procedures for quality audits and conduct such audits to assure that the quality system is in compliance with the established quality system requirements and to determine the effectiveness of the quality system. Quality audits shall be conducted by individuals who do not have direct responsibility for the matters being audited. Corrective action(s), including a reaudit of deficient matters, shall be taken when necessary. A report of the results of each quality audit, and reaudit(s) where taken, shall be made and such reports shall be reviewed by management having responsibility for the matters audited. The dates and results of quality audits and reaudits shall be documented. 28 3 1 2 production. Defendants, on the other hand, claim that they have already produced quality audit documents. According to them, Intuitive’s Fed. R. Civ. P. 30(b)(6) witnesses testified that the 4 company performs a host of internal and third-party audits. The problem, say defendants, is that 5 plaintiffs refused to narrow their request to audits pertaining to relevant systems or activities, and 6 instead sought records of all quality audits Intuitive has performed. Nevertheless, defendants say 7 that they have searched for and produced documents pertaining to quality audits, including any 8 documents that were circulated to the individual defendants (or to any of the agreed-upon 9 custodians of electronically stored information) and which contained agreed-upon search terms. 10 Additionally, defendants confirm that keyword searches of their production database identifies 11 United States District Court Northern District of California 3 some 200 documents relating to quality audits, including Quality Audit Observation Tracking and 12 Report spreadsheets, Internal Audit Observations, External Audit Observations, Audit Notes, 13 Audit Reports, Audit Plans, Mock FDA Audit Observations, and others. 14 This court finds no basis on this record to doubt the veracity of defendants’ 15 characterization of their production. Moreover, plaintiffs have not sufficiently explained why they 16 believe defendants’ document production is deficient. Their request for an order compelling 17 further discovery therefore is denied. 18 19 20 21 SO ORDERED. Dated: October 12, 2016 ______________________________________ HOWARD R. LLOYD UNITED STATES MAGISTRATE JUDGE 22 23 24 25 26 27 28 4

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