Millennium Laboratories, Inc. v. Allied World Assurance Company (U.S.), Inc.

Filing 252

ORDER denying Plaintiff's 250 Ex Parte Motion to Reopen Case for Limited Purpose of Modifying Protective Order; granting Plaintiff's 251 Ex Parte Motion to Modify Protective Order. Signed by Judge Cynthia Bashant on 10/24/2017. (jah)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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MILLENNIUM LABORATORIES,
INC.,

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ORDER:

Plaintiff,

v.

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Case No. 12-cv-2280-BAS-KSC

(1) DENYING EX PARTE
MOTION TO REOPEN
THE CASE

ALLIED WORLD ASSURACE
COMPANY (U.S.), INC.,

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AND

Defendant.

(2) GRANTING EX PARTE
APPLICATION TO
MODIFY PROTECTIVE
ORDER

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[ECF Nos. 250, 251]

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Pending before the Court is Plaintiff Millennium Laboratories, Inc.’s

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(“Millennium”) ex parte motions to reopen the case and modify the protective order.

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(ECF Nos. 250, 251.) The Court addresses each request below.

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I.

BACKGROUND

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A.

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The instant case arose from a dispute between Millennium and Defendant

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Allied World Assurance Company (U.S.) Inc. (“Allied”) over coverage under an

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insurance policy the parties negotiated. (ECF No. 235 at 2.) Several competitors of

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Millennium had filed private lawsuits and several whistleblowers had filed qui tam

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actions against Millennium based on allegations that Millennium had engaged in

This Case

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illegal activities. (Id.) Millennium bought the policy that was at issue in this case to

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protect itself from future lawsuits, and asked Allied for coverage in responding to

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several subpoenas issued by the DOJ. (Id.)

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On April 17, 2013, this Court entered a protective order (the “Protective

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Order”), which permitted the parties to designate discovery materials as

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“Confidential” or “Attorneys’ Eyes Only.” (ECF No. 42 ¶¶1−2, 7−8.) The Protective

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Order restricts the parties from using designated materials for purposes outside of this

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lawsuit and generally limits disclosure to specific persons involved in the litigation.

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(Id. ¶¶14−15, 18−19.).

Another Protective Order was subsequently entered,

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replacing and superseding the original, which included an additional prohibition on

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Allied from using or disclosing information protected by the Health Insurance

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Portability and Accountability Act (“HIPAA”). (ECF No. 79.) Pursuant to the

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Protective Order, several deposition transcripts were designated as “Confidential,”

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including the deposition transcript of Ryan Uehling, a former Millennium employee.

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The last pronouncement by the Court in this case was its order granting

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Defendant Allied’s motion for reconsideration of the Court’s prior September 30,

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2015 summary judgment order. (ECF No. 235.) The Court reversed its prior grant

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of summary judgment in favor of Millennium. (Id.) Millennium appealed the Court’s

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order. (ECF No. 240; see also No. 16-55432, ECF No. 1, Docketed Cause (9th Cir.

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Mar. 22, 2016).) That appeal remains pending.

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B.

The Collateral Uehling Litigation

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In August 2016, a qui tam action that Ryan Uehling (“Uehling”) filed against

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Millennium in the United States District Court for the District of Massachusetts in

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2012 was transferred to another judge in this district. See Uehling v. Millennium

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Laboratories, Inc., No. 16-cv-02812-L-MDD, ECF No. 1 (S.D. Cal. Aug. 8, 2016).

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The claim in that litigation is a cause of action under the False Claims Act, 31 U.S.C.

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§3730(h) for Millennium’s alleged retaliation against Uehling. In June 2017, the

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court presiding over the Uehling Litigation issued a protective order, which limits the
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use and disclosure of material designated as “Confidential” or “For Counsel Only.”

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(ECF No. 251-2, Ferrantella Declaration (“Ferrantella Decl.”) ¶9, Ex. 1.) Such

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materials can only be used in connection with the Uehling Litigation. (Id.)

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In September 2017, Uehling propounded discovery on Millennium requesting

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production of deposition transcripts from this case, including Uehling’s deposition

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transcript. (Id. ¶6.) Millennium’s deadline to comply with the discovery request was

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October 6, 2017. (Id. ¶2.) Prior to that deadline, Millennium and Uehling conferred

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about the request and necessity of modifying the Protective Order so that the parties

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can access deposition testimony in this case prior to the discovery cutoff of November

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10, 2017. (Id. ¶3.) Millennium agreed to produce transcripts pertaining to Uehling

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from this case, subject to its objections and to modification of the Protective Order.

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(Id. ¶7.) Millennium and Uehling have agreed that any deposition transcript or

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document that is subject to the Protective Order will only be produced in the Uehling

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Litigation pursuant to that case’s protective order. (Id. ¶10.) Millennium and

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Uehling agree that deposition testimony pertaining to Uehling is discoverable and

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may overlap with claims or issues in the Uehling Litigation. (Id. ¶11.)

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On October 16, 2017, Millennium provided notice to Allied of its intent to seek

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modification of the Protective Order. (Id. ¶4.) Millennium represents that counsel

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for Allied does not intend to oppose Millennium’s request to the extent Millennium

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only seeks modification of the protective order with respect to Uehling’s deposition

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testimony and other testimony referencing Uehling, and with the understanding that

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the material would be subject to the protection for information designated

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“Confidential” under the protective order in the Uehling Litigation. (Id.)

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Millennium’s ex parte request to reopen the case and separate ex parte request
to modify the Protective Order followed.

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C.

Requested Modification to the Protective Order

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Millennium seeks the following modification to the Protective Order:

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Millennium Laboratories, Inc. and Millennium Health, LLC have

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permission to produce documents designated as CONFIDENTIAL or

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ATTORNEYS’ EYES ONLY in this action to the attorneys and parties

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in the action entitled Uehling v. Millennium Laboratories, Inc., No. 16-

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cv-02182-L-MDD (S.D. Cal.), in response to a valid subpoena or

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discovery request in that case and under the terms of the Protective Order

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in that action.

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II.

DISCUSSION
A.

The Request to Reopen Case to Modify the Protective Order is
Unnecessary

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The Court first addresses Millennium’s ex parte request to reopen the case for

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the purpose of modifying the protective order. Millennium contends that a motion to

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reopen the case is necessary in order for the Court to consider its ex parte application

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to modify the Protective Order. The Court finds that “reopening” the case is not

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necessary for it to modify the Protective Order.

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As long as a protective order remains in effect, the Court that issued the

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protective order retains the power to modify it. See Beckman Indus. v. Int’l Ins. Co.,

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966 F.2d 470, 473 (9th Cir. 1992); United Nuclear Corp. v. Cranford Ins. Co., 905

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F.2d 1424, 1427 (10th Cir. 1990). The law is clear that a party subject to a protective

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order may return to the issuing court to seek modification of that order. Patriot Rail

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Corp. v. Sierra R.R. Co., No. 2:09-cv-00009-MCE-EFB, 2012 WL 219331, at *1

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(E.D. Cal. Jan. 24, 2012) (citing Osband v. Woodford, 290 F.3d 10936, 1039 (9th Cir.

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2002)). The Protective Order that Millennium, a party to the order, seeks to modify

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remains in effect, particularly in light of the fact that the parties’ obligations remain

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in effect while the case is on appeal. (ECF No. 79 ¶29.) The Protective Order further

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provides that it can only be modified by Court order or by written agreement among

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the parties subject to this Court’s approval. (Id. ¶31.) This Court, thus, retains the

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power to modify it and it is not necessary for this case to be “reopened” in order to

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consider Millennium’s request to modify.

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Accordingly, the Court denies the request to reopen the case as unnecessary

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and proceeds to assess Millennium’s ex parte motion to modify the Protective Order.

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B.

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Millennium seeks to modify the Protective Order for the purpose of complying

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with Uehling’s discovery requests in the Uehling Litigation without violating its

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obligation under the Protective Order.

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Modification of the Protective Order is Warranted

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Applicable Legal Standard

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Ninth Circuit precedent strongly favors disclosure to meet the needs of parties

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in pending litigation. Beckman Indus., 966 F.2d at 475. The use of discovery

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materials in “one litigation to facilitate preparation in other cases advances the

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interests of judicial economy by avoiding the wasteful duplication of discovery.”

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Foltz v. State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1131 (9th Cir. 2003). The

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Ninth Circuit has instructed that a court issuing a protective order should generally

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grant a request to modify the protective order to allow collateral litigants to obtain

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relevant material where reasonable restrictions on collateral disclosure will continue

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to protect an affected party’s legitimate privacy interests. Id. at 1132.

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However, a collateral litigant’s request for modification of a protective order

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is not automatically granted. Id. The litigant must demonstrate the relevance and

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general discoverability of the protected materials to the collateral proceedings. Id.

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The court that issued the protective order must satisfy itself that the protected

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discovery is sufficiently relevant to the collateral litigation such that duplicative

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discovery will be avoided by modifying the protective order. Id. The court makes

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only a rough estimate of relevance; it “does not decide whether the collateral litigants

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will ultimately obtain the discover materials.” Id. at 1132−33. Because the court that

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issued in the protective order is in the best position to make a relevance assessment

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of the requested materials, the collateral litigant is not required to obtain a relevance
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determination from the court overseeing the collateral litigation prior to requesting

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modification of a protective order from the court that issued it. Id. at 1132.

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Before modifying a protective order, the court that issued the order must also

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weigh the countervailing reliance interest of the party opposing modification against

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the policy of avoiding duplicative discovery. Id. at 1133. Reliance on a blanket

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protective order will not justify a refusal to modify. Id. (“[R]eliance will be less with

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a blanket protective order, because it is by nature overinclusive” (quoting Beckman,

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966 F.2d at 476)). A legitimate interest in preventing public disclosure of materials

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produced in discovery pursuant to a protective order can be accommodated by

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placing the collateral litigant under the same restrictions on use and disclosure

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contained in the original protective order. Id.
2.
Analysis

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Millennium advances three reasons for modifying the Protective Order. First,

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Millennium contends that if the Court does not modify the Protective Order it will be

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placed in the untenable position of choosing between complying with Uehling’s

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discovery requests, or risk violating the terms of the Protective Order. Second,

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Millennium argues that modifying the Protective Order will promote efficiency

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because testimony in this case pertaining to Uehling’s claims may reduce the need

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for the parties to pursue duplicative discovery or ask questions similar to witness who

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are common to both cases. Third, Millennium argues that no prejudice will result

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from the requested modification because any protected material in this case will be

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produced subject to the protective order in the Uehling Litigation.

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Applying the aforementioned principles underlying modification of a

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protective order for use of protected materials in collateral litigation, the Court finds

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that the protected discovery is relevant to the Uehling Litigation and is generally

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discoverable. The Court further finds that Allied’s reliance interests are outweighed

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by the policy of avoiding duplicative discovery.

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a.

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Relevance of the Protected Materials

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Millennium does not aver that the deposition testimony in this case is highly

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relevant to the Uehling Litigation, but only intimates that the testimony “may overlap

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with the claims or issues in th[e] [Uehling Litigation].” (Ferrantella Decl. ¶11.) The

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Court’s relevance inquiry hinges on the degree of overlap in facts, parties, and issues

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between the suit covered by the protective order and the collateral proceedings. Foltz,

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331 F.3d at 1132. Millennium acknowledges that Uehling supervised another former

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Millennium employee, Kelly Nelson1, and was deposed in this case regarding matters

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pertaining to Millennium.

(ECF No. 251-1 at 4.)

Although Millennium’s

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acknowledgment does not itself make a strong showing of the relevance of the

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protected material to the Uehling Litigation, the Court is satisfied that the protected

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discovery is sufficiently relevant to warrant modification of the Protective Order.

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Although there is not a perfect overlap in the parties in this case and the

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Uehling Litigation, Millennium is a party to both litigations and Uehling, a party to

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the Uehling Litigation, was deposed in this case. This is a sufficient overlap in the

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Court’s view.

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The facts and issues underlying this case also overlap in part with the Uehling

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Litigation. This case involved an insurance policy Millennium purchased from

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Allied to cover its litigation costs. (ECF No. 251 at 2.) The facts underlying the

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purchase of that policy link this case and the Uehling Litigation. Millennium

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purchased that policy in the wake of lawsuits from several competitors and

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whistleblowers, like Uehling, who alleged that Millennium engaged in unlawful

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business practices, that it encouraged health care providers to submit false and/or

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fraudulent claims to health insurers and that it provided unlawful kickbacks to those

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Although Millennium does not provide further detail regarding Kelly Nelson,
Uehling alleges that Nelson sued Millennium for wrongful discharge. (United States
ex rel Ryan Uehling v. Millennium Laboratories, Inc., No. 1:12-cv-10132-NMG,
ECF No. 87, Third Am. Compl. ¶182 (D. Mass. Mar. 9, 2016).) Millennium
deposed Uehling in the Nelson wrongful discharge litigation. (Id.)
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providers. (Id.) The Uehling Litigation concerns Millennium’s termination of

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Uehling allegedly in response to his investigation and questioning of Millennium

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regarding its allegedly illegal activities in violation of the False Claims Act. (United

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States ex rel Ryan Uehling v. Millennium Laboratories, Inc., No. 1:12-cv-10132-

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NMG, ECF No. 87, Third Am. Compl. ¶¶178, 201−203 (D. Mass. Mar. 9, 2016).)

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Although the Uehling Litigation does not concern Allied’s insurance policy, Uehling

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alleges that Millennium deposed him as nonparty witness for five days of deposition

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in two litigations, including this one and the Nelson litigation, as post-termination

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retaliation measures and solely to gather information about Uehling’s qui tam action

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and to intimidate Uehling. (Id. ¶182.) Millennium’s relevance argument omits this

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allegation.

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The Court finds that there is a sufficient degree of overlap between this case

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and aspects of the Uehling Litigation that warrants a modification of the Protective

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Order to make the protected materials available to the litigants in the Uehling

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Litigation. Modification of the Protective Order will advance the interests of judicial

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economy by avoiding potentially wasteful duplication of discovery in the Uehling

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Litigation. This Court does not presume to decide that the court presiding over the

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Uehling Litigation will ultimately permit Uehling to use to the deposition testimony

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in this case to support his retaliation claim.

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The Court acknowledges that there is a dispute between Millennium and

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Uehling as to whether deposition testimony in this case that does not pertain to

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Uehling is relevant to Uehling’ retaliation claim. (Ferrantella Decl. ¶7.) This Court

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will not wade into that dispute because it “must refrain from embroiling itself in the

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specific discovery disputes applicable only to the collateral suit. Foltz, 331 F.3d at

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1133. That dispute is for the collateral court to decide.

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b.

Allied’s Reliance Interest in the Existing Protective Order

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As to the reliance interests of the parties in the existing Protective Order, the

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Court finds that although Allied has not opposed the requested modification, Allied’s
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reliance interests in the Protective Order do not outweigh the policy of avoiding

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duplicative discovery.

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protective order in the Uehling Litigation.

Moreover, any interest will be accommodated by the

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Here, the Protective Order does not confer blanket protection over all

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discovery materials in this case, but it does allow a party or non-party to designate

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materials as “Confidential” or “Attorneys’ Eyes Only” without a good cause

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determination by this Court. (ECF No. 79 ¶7(a)−(b).) Allied’s reliance interest on

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this type of blanket protective order does not justify denying the motion to modify.

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See, e.g., Oracle USA Inc. v. Rimini St., No. 2:10-cv-00106-LRH-PAL, 2012 U.S.

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Dist. LEXIS 174441, at * (D. Nev. Dec. 7, 2012). Even if Allied had a legitimate

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reliance interest in the current Protective Order, that interest “can be accommodated

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by placing the collateral litigant under the same restrictions on use and disclosure

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contained in the original protective order.” Foutz, 331 F.3d at 1332. There is a

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protective order in the Uehling Litigation, which prevents disclosure of materials

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designated as “Confidential” or “For Counsel Only” to persons or entities outside of

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the Uehling Litigation. (Ferrantella Decl. Ex. 1 ¶3.) The Protective Order similarly

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limits disclosure of protected material. (ECF No. 79 ¶¶ 14−15, 18−19.) Millennium

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represents that protected material from this case which is produced in the Uehling

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Litigation will be subject to the appropriate designation under that case’s protective

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order. (ECF No. 251-1 at 4.)

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The Court will therefore grant Millennium’s request to modify the Protective

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Order for the limited purpose of complying with discovery requests in the Uehling

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Litigation. In granting this request, the Court modifies Millennium’s requested

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modification to include an additional condition that protected materials in this case

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may be produced only upon their appropriate designation under the Uehling

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Litigation protective order as either “Confidential” or “For Counsel Only.”

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III.

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CONCLUSION & ORDER
In light of the foregoing, the Court HEREBY ORDERS that:
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of modifying the Protective Order is DENIED. (ECF No. 250.)

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2.

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Millennium’s ex parte motion to modify the Protective Order is
GRANTED. (ECF No. 251.)

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Millennium’s ex parte motion to reopen the case for the limited purpose

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The Protective Order (ECF No. 79) is HEREBY MODIFIED to
include the following provision as a paragraph 36:

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Millennium Laboratories, Inc. and Millennium Health, LLC have

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permission to produce documents designated as CONFIDENTIAL or

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ATTORNEYS’ EYES ONLY in this action to the attorneys and parties

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in the action entitled Uehling v. Millennium Laboratories, Inc., No. 16-

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cv-02182-L-MDD (S.D. Cal.) (the “Uehling Litigation”), in response to

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a valid subpoena or discovery request in that case, and only upon the

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appropriate designation by Millennium of any such document it

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produces as either “CONFIDENTIAL” or “FOR COUNSEL ONLY”

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under the protective order in the Uehling Litigation.

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IT IS SO ORDERED.
DATED: October 24, 2017

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