Valassis Communications, Incorporated v. News Corporation et al

Filing 115

ORDER granting 65 Joint Motion to Adopt the Stipulated Protective Order; granting 67 Motion to Transfer Case to the Southern District of New York; granting 81 Motion for TRO; denying 93 Motion to Strike; denying 102 Motion for Order to Replace Master. Signed by District Judge Arthur J. Tarnow. (MLan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
VALASSIS COMMUNICATIONS, INC.,
Case No. 13-14654
Plaintiff,
SENIOR U.S. DISTRICT JUDGE
ARTHUR J. TARNOW

v.
NEWS CORPORATION, ET AL.,
Defendants.
/

ORDER GRANTING JOINT MOTION TO ADOPT THE STIPULATED PROTECTIVE
ORDER [65]; GRANTING MOTION TO TRANSFER CASE [67]; GRANTING MOTION
FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION [81];
DENYING MOTION TO STRIKE SUPPLEMENTAL BRIEF [93]; DENYING MOTION
FOR ORDER TO REPLACE MASTER [102]
On March 6, 2017, Plaintiff filed a Motion seeking Transfer of this Case to
the Southern District of New York (S.D.N.Y.) or, alternatively, re-opening the
case, and reference to the assigned Magistrate Judge to permit continuance of
discovery [67]. Defendants filed a response [70] on March 20, 2017, and Plaintiff
replied [76] on March 23, 2017. Plaintiff filed a Motion for Temporary Restraining
Order (TRO) and Preliminary Injunction [81] on March 27, 2017. Defendants
responded [84] on March 28, 2017, and filed a supplemental brief [91] on March
31, 2017. On April 4, 2017, Plaintiff filed a Motion to Strike the Supplemental
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Brief [93], and a reply brief regarding the Motion for TRO [94]. Defendant
responded to the Motion to Strike [95] on April 5, 2017. A hearing was held on all
pending Motions on April 13, 2017. A Joint Motion to Adopt the Stipulated
Protective Order [65] was filed on January 17, 2017, and Defendants filed a
Motion for Order to Replace Master [102] on May 19, 2017.
For the reasons stated below, Plaintiff’s Motion to Transfer Venue to the
S.D.N.Y. [67] is GRANTED. Plaintiff’s Motion for TRO and Preliminary
Injunction [81] is GRANTED. A permanent injunction is entered, enjoining
Defendants from prosecuting the action before the Panel, absent the application of
Rule 53 upon transfer, and Defendants’ Motion for Order Appointing Replacement
Master [102] is DENIED. Plaintiff’s Motion to Strike Supplemental Brief [93] is
DENIED and the Joint Motion to Adopt the Stipulated Protective Order [65] is
GRANTED.
FACTUAL BACKGROUND
On March 30, 2016, the Court entered an uncontested Order in Valassis I
that, in effect, referred both Valassis I and Valassis II to the Special Masters. The
Special Panel subsequently recommended dismissal of Plaintiff’s notice of
violation in that case. Plaintiff did not file objections, deciding instead it would no
longer prosecute claims of tying or bundling under the 2011 order, focusing instead
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on the claims in Valassis II. After the filing of the R&R, on March 6, 2017,
Plaintiff brought the Motion to Transfer Venue or Re-Open case [67].
The Special Panel has recommended a discovery schedule for the case,
which Plaintiff has indicated to Defendants they will not contest. This schedule is,
per Defendants’ response, as follows:
The parties are currently preparing to begin depositions and fact
discovery is scheduled to be completed on June 19, 2017.1 (Id. at 2.)
Expert discovery will then take place between June and November
2017. (Id. at 3.) The deadline for dispositive motions is January 15,
2018, and the deadline for motions to limit or exclude expert
testimony is 30 days after a decision on the dispositive motions.
[70 at 15]. Fact discovery commenced on February 10, 2017, and document
discovery has been substantially completed. [Id].
ANALYSIS
1. MOTION FOR TRO [81]
Plaintiff requests a TRO and Preliminary Injunction to prevent Defendants
from utilizing the Special Masters panel prior to the resolution of the pending
Motion to Transfer the Action or Re-Open the case. [81]. Plaintiff also seeks
permanent injunctive relief preventing Defendants from prosecuting the case
before the expert panel if the motion to transfer venue or re-open the case is
granted.

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In the 2016 Order referring Valassis I and Valassis II to the Special Masters
panel, the Court relied upon the 2011 order in Valassis I, which provided, per the
R&R and the Order, for transfer of its claims to the expert panel. Specifically, the
Court stated the following reasons for the referral of the Valassis II motion to
dismiss and all pretrial motions to the expert panel: (1) to streamline the
progression of the cases by conducting simultaneous discovery because of
overlapping evidence; (2) to guard against the possibility that the resolution of that
related case by the Court could create inconsistent rulings; and (3) to avoid
duplicative discovery. There was no independent basis for the referral of the
Valassis II claims. Therefore, once the expert panel disposed of the Valassis I
claims, and this Court adopted that report, no rationale for transfer of Valassis II
claims to the Special Masters panel remains as the basis for the March 2016 order
has expired.
As Plaintiff points out, reliance of the Court on Rule 53 to justify the
continuing referral of Valassis II to the expert panel, would fail. Under Rule
53(a)(1), there are three possible reasons, outside of statute, that allow a Court to
appoint a Master: (A) perform duties consented to by the parties; (B) hold trial
proceedings or make recommend findings of facts on issue without a jury if there
is some exceptional condition or the expert is needed to perform an accounting or
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resolve a difficult computation of damages; or (C) address pretrial and post-trial
matters that cannot be addressed effectively and timely by an available district
judge or magistrate judge of the district.
Subsections A and B of Rule 53 unquestionably do not apply here, because
the role of the special master is no longer consented to by both parties and the case
is not yet at the stage of trial proceedings. Additionally, as discussed below, no
showing has been made of exceptional circumstance to qualify under Rule
53(a)(1)(C). Rule 53(a)(1)(C) could have justified the original referral because, at
that time, a parallel case existed that could have produced conflicting results in
rulings, and it promoted the efficiency of resolving overlapping discovery at the
same time for both cases. However, neither is applicable at this time, since
Valassis I has been disposed of.
Now, all that remains are Valassis II claims, and Defendants do not provide
a reason why these claims present an exceptional condition justifying referral.
Instead, they argue that Plaintiff stipulated to the use of the expert panel in both
Valassis I and Valassis II for all pretrial and discovery matters and, in their
supplemental brief, rely upon other assertions made by Plaintiff regarding the role

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of the panel.1 However, these documents do not support Defendants’ proposition.
While Plaintiff did stipulate to the use of the special master panel for all pretrial
and discovery motions in Valassis I and Valassis II, and that it would not contest
the Court’s order until an appeal, once Valassis I was disposed of and the March
2016 order was no longer in force, Plaintiff was under no obligation to refrain from
challenging the continued use of the panel based on its interpretation of the order.
After reviewing the order, the text makes clear its intention as detailed above, and
the Court agrees with Plaintiff’s interpretation. Further, the supplemental material
submitted to the Court does not reflect agreement about the role of the masters
panel after Valassis I was resolved, and accordingly, is not relevant.
Finally, as to the possibility of the Court continuing referral of Valassis II
with the special master panel under Rule 53, it is dubious that the Valassis II case
alone, without consent of both parties, is a viable candidate for master panel
consideration under the Federal Rules of Civil Procedure. Arguably, it is efficient
for the special master panel to continue its role on referral, given its familiarity
with all of the facts of the case. However, the Court must also take into
consideration the costs of the special master panel and guard against unreasonable
Plaintiff filed a Motion to Strike the Supplemental brief [93]. However, the
supplemental brief was filed well in advance of the hearing and Plaintiff had an
opportunity to address Defendants’ arguments in its reply brief. Therefore, this
Motion is denied.

1

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expense. Additionally, Defendants have not provided any reason that the special
master is needed, besides efficiency, and they have not demonstrated that the
matter is more complex than usual, or that it requires an inordinate amount of
discovery.
While Defendants rely upon several cases to support their position that
efficiency and expertise alone are enough to justify referral of the case to the
special masters, these cases are easily distinguishable from the case at hand. See
e.g. Auto Indus. Supplier Employee Stock Ownership Plan v. SNAPP Sys., Inc., No.
03-74357, 2006 WL 3627935, at *52-3(E.D. Mich. Dec. 12, 2006) (antitrust
experts appointed as special masters under Rule 53(a) when parties gave express
consent to have “all federal and state antitrust issues” and “all remaining motions”
decided by special masters); EEOC v. Aaron Rents, Inc., No. 3:08-cv-683, 2009
WL 4068008, at *5 (S.D. Ill. Nov. 24, 2009) (appointing special master to oversee
pretrial matters under Rule 53(a)(1)(C), after finding that the Court had never been
asked “for such extensive review at the discovery stage; never before has the
conduct of the parties required such review.”).
The Court, as discussed above, has determined that the March 2016 Order
no longer serves as a valid basis permitting referral of Valassis II, and that Plaintiff
no longer consents to the referral. Because Defendant proffers no argument as to
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why it would be significantly more effective for the special panel to deal with the
case, or why the case is so complex or so unique that it must go before the panel,
the proper forum for the case is with the district court, either here or in S.D.N.Y.
When addressing a request for a TRO or Preliminary Injunction, the Court
considers “(1) whether the movant has a strong likelihood of success on the merits;
(2) whether the movant would suffer irreparable injury without the injunction; (3)
whether issuance of the injunction would cause substantial harm to others; and (4)
whether the public interest would be served by issuance of the injunction.” Wyatt
v. Safeguard Properties LLC, No. 16-13312, 2016 WL 6277164, at *1 (E.D. Mich.
Oct. 27, 2016) (Tarnow, J.) (citing Bonnell, 241 F.3d at 809)
Upon application of the above-stated analysis, the Court believes that
Plaintiff has shown a likelihood of success on the merits; Defendants have not
provided any authority demonstrating that the Court currently has the authority to
continue to refer Valassis II to the special master panel, absent consent from
Plaintiffs. Therefore, the first consideration weighs in favor of Plaintiff.
As to the second factor, a wealth of case law exists which finds that
reference of matters to a master without proper reasoning and authority places a
risk that significant elements of the case will be decided by the master rather than
the Court, and reflect an “abdication of judicial function depriving the parties of a
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trial before the court on the basic issues involved in the litigation” In re U.S., 816
F.2d 1083, 1091 (6th Cir. 1987) (emphasis added), citing La Buy v. Howes Leather
Co., 352 U.S. 249, 77 S.Ct. 309, 1 L.Ed.2d 290 (1957). While Defendants attempt
to distinguish these cases based on their facts, the underlying rationale behind the
decisions remains clear. The issue is the loss of access to a federal forum for any
issues if the reference is improper, and here, without consent and without any
reason under Rule 53 to continue the reference of Valassis II, the right of the
Plaintiff to have its case heard in a federal forum must be respected.
Defendants have not presented any case law supporting referral when there is
no consent amongst all parties; and no real effort has been made to show that it
would be more efficient, or the case is sufficiently complex, to justify referral
under subsection C. Therefore, the Court agrees that an improper reference gives
rise to a risk of substantial harm to Plaintiff, as it would abrogate fundamental
Article III rights.
As to the third factor, an improper denial of a federal forum for its claim is
more pressing than the delay and costs cited by Defendant. Indeed, the issue of
costs also favors Plaintiff, when the cost of maintaining an expert panel is
considered. Therefore, this factor weighs also in favor of Plaintiff.

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Finally, the public interest factor must be considered. Defendants merely
reiterate their previous points of argument, which the Court has denied.
Considering the analysis above, the Court finds that this factor favors the Plaintiff.
Therefore, Plaintiff’s Motion for TRO and Preliminary Injunction [81] is
GRANTED and a permanent injunction is entered, enjoining Defendants from
prosecuting the action before the Panel, absent a persuasive showing Rule 53
supports transfer. Defendants’ Motion for Order Appointing Replacement Master
[102] is DENIED. Further, Plaintiff’s Motion to Strike Supplemental Brief [93] is
DENIED.
2. MOTION TO TRANSFER VENUE
“[A] Plaintiff is not bound by his choice of forum, if he later discovers that
there are good reasons for transfer.” Smith v. ABN AMRO Mortg. Grp. Inc., 434 F.
App’x 454, 465 (6th Cir. 2011). In the interest of justice, and for the convenience
of the parties and witness, “a district court may transfer any civil action to any
other district or division where it might have been brought or to any district or
division to which all parties have consented.” 28 U.S.C.A. §1404(a). When
deciding whether to transfer a case, the Court considers the following factors:
(1) the convenience of the parties; (2) the convenience of the
witnesses; (3) the relative ease of access to sources of proof; (4) the
availability of process to compel attendance of unwilling witnesses;
(5) the cost of obtaining unwilling witnesses; (6) the practical
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problems associated with trying the case most expeditiously and
inexpensively; and (7) the interest of justice.
Sullivan v. Tribley, 602 F. Supp. 2d 795, 800 (E.D. Mich. 2009).

The Court agrees that it is in the interest of justice, and convenience for both
parties, to transfer the case to the S.D.N.Y. First, as Plaintiff points out, Defendants
themselves have successfully sought transfer of a case sharing with the case at bar
significant overlapping issues and discovery with a matter pending in the Southern
District of New York. S.D.N.Y. See Order, Dial Corp. v. News Corp., 12-cv15613-AJT-MKM (Sept. 24, 2013 E.D. Mich.) [Dckt. 50].
In pursuing that Order, Defendant argued that New York was more
convenient because it was the location of Defendant’s conduct, policies, and
principle place of business. Thus, there existed a strong interest supporting
litigation of the case in that forum. Defendants also argued that Valassis I
concerned claims “related primarily to FSI, while [Dial] asserts claims relating to
in-store marketing as well as FSI.” Further, in that case, while there were witnesses
in Michigan that could be relevant to the Dial case, they could be deposed in
Michigan where they resided.
The reasons that weighed heavily in that case for transfer remain the same
here. Thus, in this case, the factors of convenience of forum are in favor of a New
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York venue. Defendants have their principal place of business located in New
York, and the documents involved in discovery are located in New York City.
Lead attorneys from both sides are located in the S.D.N.Y, and further, any
witnesses located in Michigan can be deposed there, so this factor is neutral. Any
change in forum would retain the status quo. These factors obviously support a
transfer in venue, just as they did in the Dial case.
Plaintiff also points to three recent developments that further provide good
reasons to effectuate a change in venue. Smith, 434 F. App’x at 465. First, the Dial
case has proceeded through discovery and summary judgment under Judge Pauley
of the S.D.N.Y. As pointed out at the hearing, most of the discovery in Valassis II,
which consists of more than 10 million documents, come from the Dial case. [100
at 42]. Additionally, deposition transcripts from Dial have been produced, and
Plaintiff is seeking additional documents from that case as well. While Defendants
contend that there is no guarantee that Judge Pauley would be assigned the case,
the fact that a matter Plaintiff considers to be a companion case exists, and was
fully litigated through summary judgment, suggests that a transfer would be in the
interests of justice.
Second, Plaintiff notes that, since Valassis II was filed, Harlan Clarke, which
is a wholly owned subsidiary of MacAndrews & Forbes, a New York-based entity,
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acquired Plaintiff. Defendants argue that this acquisition occurred in 2014, so is
not a persuasive factor. However, as asserted in Plaintiff’s third, changed
circumstance argument, when Valassis II was filed, Plaintiff was still pursuing
claims in under Valassis I, which in turn provided justification, both for filing the
case here and for retaining the matter in this District. Further, Plaintiff states that
the case was filed in the Eastern District because there are tying and bundling
claims brought as part of Valassis II (in addition to other non-tying and bundling
claims that are very similar to those brought in Dial), and tying and bundling
claims could only be brought against Defendant here per the 2011 order. Now that
the tying and bundling claims under the 2011 order have been resolved, there no
longer exists the rationale of judicial economy in keeping Valassis II here. Rather,
that factor weighs in favor of transferring to the S.D.N.Y.
In opposition to the Motion, Defendants’ principle objection is that they
would suffer prejudice because the case belongs before the special master panel.
[100 at 29]. However, as discussed above, the Court has found that there is no
longer authority supporting referral of the case at hand to the special master’s panel
without the consent of the Plaintiff. Therefore, this objection is moot. Defendant
also contended that there was no indication that Judge Pauley would be assigned
the case, or that he would accept it as a companion to Dial. However, this only
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speaks to the seventh factor of the test and is not relevant to the other six factors.
Given the analysis above, and the fact that consideration of the factors here weigh
in favor of transfer, as they did when the Defendants argued them in Dial, the
Motion to Transfer is GRANTED.
Accordingly,
IT IS ORDERED that Plaintiff’s Motion to Transfer Venue to the S.D.N.Y.
[67] is GRANTED.
IT IS FURTHER ORDERED that Plaintiff’s Motion for TRO and
Preliminary Injunction [81] is GRANTED. A permanent injunction is entered to
enjoin Defendants from prosecuting the action before the Panel absent the
application of Rule 53 upon transfer and Defendants’ Motion for Order Appointing
Replacement Master [102] is DENIED.
IT IS FURTHER ORDERED that Plaintiff’s Motion to Strike
Supplemental Brief [93] is DENIED.
IT IS FURTHER ORDERED that the Joint Motion to Adopt the Stipulated
Protective Order [65] is GRANTED.
SO ORDERED.

Dated: September 25, 2017

s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge
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