MERCK & CO. INC. SECURITIES LITIGATION IN RE: MDL1658
Filing
405
LETTER OPINION. Signed by Magistrate Judge Cathy L. Waldor on 10/5/12. (jd, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
CHAMBERS OF
MARTIN LUTHER KING COURTHOUSE
50 WALNUT ST.
ROOM 4040
NEWARK, NJ 07101
973-776-7862
CATHY L. WALDOR
UNITED STATES MAGISTRATE JUDGE
October 5, 2012
LETTER OPINION
Re:
In re Merck & Co., Inc. Securities, Derivative & ERISA Litigation,
The Consolidated Securities Action, No. 05-2367 (SRC)
Presently before the Court is the informal request of Lead Plaintiffs the Public Employees’
Retirement System of Mississippi, Steven LeVan, Jerome Haber and Richard Reynolds, and
Plaintiff Rhoda Kanter (collectively, “Plaintiffs”) to compel several categories of discovery from
Defendants (collectively, “Merck” or “Defendants”) and Merck’s opposition to same. (Docket Entry
No. 325 (“Pls.’ Br.”)); Docket Entry No. 337 (“Defs.’ Br.”)). Plaintiffs seek to compel the following
categories of documents: (1) documents produced in connection with any government investigation;
(2) documents concerning the decline in Merck’s stock price on November 1, 2004; (3) specific
categories of documents from outside a January 1, 1998 through December 31, 2004 time period;
(4) custodial files concerning VIOXX® (“VIOXX”); (5) a complete set of “audit files” for Merck’s
statistical database files concerning VIOXX; and (6) responsive documents stored on Merck’s shared
drives. The Court has conducted a thorough review of the parties’ submissions and will address each
document category in turn.
Background
The parties are intimately familiar with the facts giving rise to this action. As such, the Court
will provide facts only insofar as they are relevant to the pending dispute. This action arises out of
the allegedly material false and misleading statements and omissions that Merck made to investors
from May 21, 1999 through September 30, 2004 (the “Class Period”) concerning the cardiovascular
(“CV”) safety and commercial viability of VIOXX that allegedly inflated the price of Merck stock
throughout the Class Period.
The current disputes concern Defendants’ responses to Plaintiffs’ First Set of Requests for
the Production of Documents, served by Plaintiffs on January 13, 2012 (the “Requests”). Before
serving these Requests, the parties conducted several in-person meet-and-confer sessions to discuss
the scope of Defendants’ prior document productions in other related Derivative and ERISA
litigations (the “Related Actions”). Additionally, as of June 2012, Plaintiffs have sought and
obtained discovery of more than 24 million pages of documents relating to VIOXX. Discovery has
since continued on a rolling basis. The following categories of document production remain
contested.
Documents Previously Produced to the Government:
Plaintiffs request that Defendants produce any documents that they previously produced to
the government and which are otherwise responsive to Plaintiffs’ Requests. (Pls.’ Br at 5-9).1
Plaintiffs specifically seek to compel the following categories of documents: (1) privileged
documents produced to the Department of Justice (“DOJ”) or documents produced to the DOJ
pursuant to a confidentiality and non-waiver agreement; (2) communications with the DOJ or
documents created for the purpose of responding to the DOJ’s investigation; and (3) documents
sufficient to identify the Bates ranges, dates, search terms used, and custodians of any productions
made to the government. (Id.).
A.
Privileged Documents Produced to the DOJ Pursuant to a Confidentiality and
Non-Waiver Agreement
Plaintiffs request privileged documents produced to the DOJ pursuant to a Confidentiality
and Non-Waiver Agreement. Plaintiffs believe they are entitled to these documents despite the
existence of a confidentiality agreement between Defendants and the DOJ. First, as Defendants have
already produced the documents to the government, they are not privileged. To that end, the Third
Circuit does not recognize the “selective waiver” doctrine. Accordingly, Merck’s voluntary
production of documents to the government operated as a complete waiver of any privilege that was
otherwise applicable. Plaintiffs further argue that this production will not impose an undue burden
on Defendants because Defendants have already gathered and produced the responsive documents.
Defendants disagree with both of Plaintiffs’ characterization of its agreement with the government
and interpretation of the applicable case law. First, Merck’s agreement with the DOJ was not simply
a confidentiality agreement. Instead, Merck provided the DOJ with privileged documents pursuant
to a confidentiality and non-waiver agreement. Second, Defendants submit that many circuits
recognize selective waiver in similar suits where defendant’s agreement with the government
expressly preserved both confidentiality and the party's right to assert the privilege against third
parties.
Plaintiffs rely heavily on the Third Circuit’s decision in Westinghouse Elec. Corp. v.
Republic of Philippines, 951 F.2d 1414, 1431 (3d Cir. 1991) in arguing that Defendants waived any
privilege or confidentiality interests they may have had when they produced these documents to the
1
During the meet-and-confer process, Defendants proposed to define “government” as “any United States
investigatory body that conducted an investigation relating to Vioxx, including Congressional committees, the
Department Of Justice, the Office of Inspector General of the Department of Health and Human Services, the SEC,
State Attorneys General, and State Medicaid fraud Control Units.” (Defs.’ Br. at 5, n.4) (citing Pls.’ Ex. 4, at 6).
Plaintiffs do not object to this definition. (Id.).
-2-
government. The Westinghouse Court addressed the question of:
Whether a party that discloses information protected by the
attorney-client privilege and the work-product doctrine in order to
cooperate with a government agency that is investigating it waives the
privilege and the doctrine only as against the government, or waives
them completely, thereby exposing the documents to civil discovery
in litigation between the discloser and a third party.
951 F.2d 1414, 1417 (3d Cir. 1991).
In Westinghouse, plaintiffs alleged that defendant had obtained a large power plant contract
in the Philippines by bribing a former government official. During discovery, the plaintiff sought
documents generated during an internal investigation conducted by Westinghouse's outside counsel.
The internal inquiry was taken in response to the SEC’s investigation into whether Westinghouse
had obtained the contract with bribes. Westinghouse disclosed the documents sought by the
plaintiffs to the Securities and Exchange Commission (“SEC”) and the DOJ in order to cooperate
with their investigations. The Third Circuit held that, despite Westinghouse’s claim that it had
disclosed the information to the SEC and the DOJ in order to cooperate with the investigations,
Westinghouse’s disclosures waived the protection because they did little to further the privilege’s
purpose. That is, preservation would not “encourage clients to obtain informed legal assistance.”
Id. at 1425-26 (internal citations omitted)
The Westinghouse Court additionally rejected defendant’s argument that attorney-client
privilege was not waived because defendant reasonably expected the agencies to keep the documents
it disclosed to them confidential:
Westinghouse [contends] that the . . . SEC’s regulations
concerning confidentiality and the stipulated court order
memorializing the confidentiality agreement between Westinghouse
and the DOJ must be regarded as preserving the attorney-client
privilege with respect to the information disclosed because of
Westinghouse’s expectations of confidentiality engendered thereby.
We reject Westinghouse’s argument that it did not waive the privilege
because it reasonably expected that the SEC and the DOJ would
maintain the confidentiality of the information that it disclosed to
them.
Id. at 1426-27.2
2
The Westinghouse Court equally rejected this argument with respect to work-product protection in finding
that “[e]ven if we had found that the agencies had made such an agreement, . . . , it would not change our
conclusion.” 951 F.2d at 1430.
-3-
Merck bears the burden of establishing every element of attorney-client privilege, including
that the communication was made in confidence and the privilege has not been waived. Schwarz
Pharma., Inc. v. Teva Pharma. USA, Inc., No. 01-4995, 2007 WL 2892744, at *2 (D.N.J. Sept. 27,
2007). Merck must also prove it is entitled to work-product protection. Cooper Health System v.
Virtua Health, Inc., 259 F.R.D. 208, 213 (D.N.J. 2009). Here, Defendants argue that privileged
documents that it provided to the DOJ pursuant to a confidentiality and non-waiver agreement
remain protected from disclosure in this action. On July 15, 2008, Merck entered into an agreement
with the DOJ that provided that the government would maintain the confidentiality of the materials
produced to it and expressly provided that “Merck does not extend [its] limited waiver of the
attorney-client privilege and work product protection to any third party and/or private entity.”
(Defs.’ Br. at 9) (citing Pls.’ Ex. 9 at 2-3, ¶ 4). Merck concedes that the Westinghouse Court held
that defendant’s voluntary disclosure of privileged documents to the DOJ waived the privilege
despite the existence of a confidentiality agreement between defendant and the DOJ. However,
Merck contends Westinghouse left open the possibility that privilege would be preserved where, as
here, the defendant entered into an express confidentiality and non-waiver agreement in connection
with the government investigation. (Defs.’ Br. at 6). Merck relies on the following language:
We also note that the agreement between Westinghouse and
the DOJ preserved Westinghouse’s right to invoke the attorney-client
privilege only as to the DOJ - and does not appear in any way to have
purported to preserve Westinghouse’s right to invoke the privilege
against a different entity in an unrelated civil proceeding . . . .
951 F.2d at 1427 (emphasis added).
Merck essentially asks this Court to adopt a “compromise position” with respect to selective
waiver. This approach was discussed at length in In re Columbia/HCA Healthcare Corp. Billing
Practices Litig., 293 F.3d 289 (6th Cir. 2002). Under this approach, privilege would be preserved
“if the documents were produced to the SEC under a protective order, stipulation or other express
reservation of the producing party’s claim of privilege as to the material disclosed.” Teachers Ins.
& Annuity Association of America v. Shamrock Broadcasting Co., 521 F.Supp. 638, 646 (S.D.N.Y.
1981). Preservation would be appropriate because “[t]he disclosing party had made some effort to
preserve the privacy of the privileged communication, rather than having engaged in abuse of the
privilege by first making a knowing decision to waive the rule’s protection and then seeking to
retract that decision in subsequent litigation.” Id.
The Second Circuit affirmed this position in 1993 in In re Steinhardt Partners, L.P., 9 F.3d
230 (2d Cir. 1993). Steinhardt involved an SEC investigation into irregularities in the treasuries
market. Steinhardt voluntary disclosed a memorandum and exhibits concerning its involvement in
the treasuries market. Id. at 232. The memorandum had been marked “FOIA [Freedom of
Information Act] Confidential Treatment Requested,” but the parties never formally entered a
confidentiality agreement. Id. The Second Circuit found that Steinhardt waived any work product
protection by voluntarily submitting the memorandum to the SEC. Id. at 235. In so holding,
-4-
however, the Court declined to adopt a per se rule that all voluntary disclosures to the government
waive privilege. Instead, matters of privilege relating to governmental investigations must be done
on a “case-by-case” basis as a “rigid rule would fail to anticipate situations . . . in which the SEC and
the disclosing party have entered into an explicit agreement that the SEC will maintain the
confidentiality of disclosed materials.” Id. at 236. Courts in the Southern District of New York relying on the language in Steinhardt - have suggested that waiver will not be found when documents
are disclosed to the government pursuant to a confidentiality agreement. See In re Leslie Fay
Companies, Inc. Sec. Litig., 161 F.R.D. 274, 284 (S.D.N.Y. 1995) (“We think that the
[confidentiality] agreement satisfies the standard articulated in Steinhardt.”); Police and Fire Ret.
Sys. Of the City of Detroit v. SafeNet, Inc., 2010 WL 935317, at *1 (S.D.N.Y. Mar. 12, 2010)
(Steinhardt prompts district courts within the Second Circuit “to give the existence of confidentiality
agreements weighty consideration in rendering selective waiver discussions.”).
This District has not expressly addressed this “some selective waiver” approach. Having
reviewed the arguments and relevant case law, this Court declines to adopt this approach and finds
that because Merck voluntarily disclosed these materials to the government, it cannot establish that
these documents are privileged. First, the Second Circuit’s position toward selective waiver,
beginning with Steinhardt, is much broader than Westinghouse allows. In Steinhardt, and the cases
to follow, the existence of a confidentiality agreement itself counseled in favor of preserving the
privilege. However, the Westinghouse Court explicitly rejected the notion that privilege could be
preserved if the non-moving party and the government entered into a confidentially agreement.
Westinghouse, 951 F.2d at 1426-27 (rejecting defendant’s argument that “the stipulated court order
memorializing the confidentiality agreement between Westinghouse and the DOJ must be regarded
as preserving the attorney-client privilege . . . .”). Second, Westinghouse remains the law of this
Circuit and this District. United States v. Murray, 468 Fed.Appx. 104, 2012 WL 745617 (3d Cir.
2012); Wachtel v. Guardian Life Ins. Co., No. 01-4183, 2006 WL 1286188 (D.N.J. May 8, 2006);
Wawrzynek v. Gliatech, Inc., No. 03-5346, 2004 WL 887414 (E.D.Pa. Mar. 26, 2004); Shionogi
Pharma, Inc. v. Mylan Pharma, Inc., No. 10-1077, 2011 WL 6651274 (D.Del. Dec. 21, 2011). This
Court declines to draw an exception or distinction to Westinghouse at this juncture. Accordingly,
documents produced to the DOJ pursuant to a Confidentiality and Non-Waiver Agreement must be
turned over to Plaintiffs.
B.
Communications with the Government or Documents Created for the Purpose of
Responding to Any Government Investigation
Plaintiffs additionally request communications with the government, or documents created
for the purpose of responding to any government investigation. Merck objects to this request. First,
Merck contends that the parties previously agreed that these documents would not be subject to
turnover. (Defs.’ Br. at 9). Second, Merck argues that a party’s communications with the
government during the course of a grand jury investigation are protected from discovery under
Federal Rule of Criminal Procedure 6(e) as matters occurring before a grand jury. (Id.). Third,
Merck argues that communications exchanged in the course of negotiating a resolution are protected
from disclosure by the settlement privilege. (Id. at 9-10).
-5-
First, to the extent the documents Plaintiffs seek involve Merck's communications with the
government during the course of a grand jury investigation, those documents need not be produced.
Disclosure of grand jury material is contrary to the “long established policy that maintains the
secrecy of grand jury proceedings in the federal courts.” U.S. v. Jackson, No. 00-138, 2009 WL
1578939, at *2-3 (D.N.J. Jun. 4, 2009) (internal quotation omitted). This principle is codified in
Rule 6(e) of the Federal Rules of Criminal Procedure (“Rule 6(e)”). Rule 6(e) applies “not only to
information drawn from transcripts of grand jury proceedings, but also to anything which may reveal
what occurred before the grand jury.” Id. (internal quotation omitted). There are exceptions to Rule
6(e). Courts may authorize disclosure “preliminarily to or in connection with a judicial proceeding.”
FED. R. CRIM. P. 6(e)(3)(E)(i). A party seeking disclosure of grand jury materials under this
exception must show (1) that the materials sought are necessary to avoid possible injustice in another
proceeding, (2) the need for disclosure is greater than the need for secrecy, and (3) the request is
structured to cover only those materials satisfying the first two requirements. Douglas Oil Co. v.
Petrol Stops Nw., 441 U.S. 211, 222, 99 S.Ct. 1667, 60 L.Ed.2d 156 (1979). Once the party seeking
disclosure makes this showing, the district court “must weigh the competing interests and order so
much disclosure as needed for the ends of justice.” In re Grand Jury Matter (Catania), 682 F.2d 61,
65 (3d Cir. 1982). Plaintiffs do not address Rule 6(e) in their moving papers. The party moving for
court-ordered disclosure bears a heavy burden of demonstrating that an exception applies. Jackson,
2009 WL 1578939, at *3. As Plaintiffs do not even discuss Rule 6(e) in their papers, they cannot
satisfy this heavy burden.
Additionally, Courts have reiterated the need to maintain grand jury secrecy even after an
investigation has concluded. See U.S. ex rel. Underwood v. Genentech, Inc., No. 03-3983, 2010 WL
3955786 (E.D.Pa. Oct. 5, 2010) (quoting Douglas Oil, 441 U.S. at 222) (“For in considering the
effects of disclosure on grand jury proceedings, the courts must consider not only the immediate
effects upon a particular grand jury, but also the possible effect upon the functioning of future grand
juries . . . . Thus, the interests in grand jury secrecy, although reduced, are not eliminated merely
because the grand jury has ended its activities.”). Accordingly, the fact that Merck has settled with
the government, thus concluding the government investigation, does not change this Court’s
analysis.
Second, Merck argues that communications exchanged in the course of negotiating a
resolution with the government are protected from disclosure. Plaintiffs’ request implicates the
tension between Federal Rule of Evidence 408 and Federal Rule of Civil Procedure 26. Pursuant
to FED. R. EVID. 408, settlement negotiations may not be admissible at trial. FED. R. EVID. 408. In
contrast, discovery rules are meant to be construed liberally so as to permit the discovery of any
information which is relevant and is reasonably calculated to lead to the discovery of admissible
evidence. FED. R. CIV. P. 26. “Courts in this circuit and others, to effectuate the goals of both [Rule
26 and Rule 408] have required a more ‘particularized showing’ that the evidence sought is relevant
and calculated to lead to the discovery of admissible evidence.” Block Drug Co. v. Sedona Labs.,
Inc., No. 06-350, 2007 WL 1183828, at *1 (D. Del. Apr. 19, 2007) (citing Lesal Interiors, Inc. v.
Resolution Trust Corp., 153 F.R.D. 552, 562 (D.N.J. 1994)). Plaintiffs’ papers fail to make this
‘particularized showing.’ Merck need not produce any communications regarding settlement
-6-
negotiations with the government. 3
C.
Bates Ranges, Dates, Search Terms Used, and Custodians of Any Productions Made
to the Government
Lastly, Plaintiffs request (1) documents sufficient to identify the Bates numbers and dates of
production of documents that Defendants produced to the government in connection with any
VIOXX-related investigation and (2) documents sufficient to identify the Merck custodians whose
documents Merck has produced to the Government, the date ranges covered by each such custodial
productions and the search terms used to collect and produce such documents. (Pls.’ Br. at 9) (citing
Ex. 1, Request Nos. 9-11). Plaintiffs argue any responsive documents will reveal or clarify the
overlap between documents Merck previously produced to the government and documents produced
here thus avoiding unnecessary duplication and needless controversy. Merck contends that this
disclosure is similarly inappropriate as permitting Plaintiffs to reconstruct the grand jury
investigation through Bates ranges, dates, search terms, and custodians would violate Rule 6(e).
(Defs.’ Br. at 10). Moreover, Merck argues that it has already agreed to produce responsive,
non-privileged documents previously provided to the government. As such, the requested disclosure
serves no purpose. (Id. at 10-11).
The Court finds that disclosing the Bates ranges, dates, search terms used, and any
productions made to the government may reveal what occurred before the grand jury. Rule 6(e) thus
governs the disclosure of these materials. In re Grand Jury Matter, 697 F.2d 511, 512 (3d Cir. 1982)
(“Rule 6(e)(2) applies to anything which may reveal what occurred before the grand jury”) (internal
quotation omitted). For the reasons stated above, Rule 6(e) similarly prohibits this Court from
granting Plaintiffs’ request.
Documents Regarding the November 1, 2004 Decline in Merck’s Stock Price:
Plaintiffs’ Request No. 71 seeks documents concerning any and all discussions,
communications or analysis(es) of why the price of Merck securities declined following the
publication of a November 1, 2004 Wall Street Journal article quoting internal documents that
revealed to the market that Merck executives were aware of the CV risks of VIOXX. (Pls.’ Br. at
9-10). Plaintiffs argue that responsive documents are highly relevant to both Plaintiffs’ loss
causation claim and Defendants’ scienter as these discussions and/or communications may reflect
scienter-related facts referenced in said communications. Additionally, Plaintiffs contend that such
scienter facts may impact the duration of the Class Period likely to be certified by the Court,
potentially extending through November 1, 2004. (Id. at 10).
Defendants submit that this request is irrelevant because, in ruling on Defendants’ motion
3
The Court may reconsider this request should Plaintiffs make the required particularized showing.
Additionally, to the extent Plaintiffs seek communications this Court has not specifically addressed, Plaintiffs are
free to submit a supplemental informal motion to compel those communications.
-7-
to dismiss, the Court found that Plaintiffs had not adequately pled loss causation for the November
1, 2004 corrective disclosure. (Defs.’ Br. at 11). In other words, as the issue is no longer pending
before the Court, discovery on this issue is improper.
Plaintiffs are not entitled to documents regarding the November 1, 2004 decline in Merck’s
stock price. At the outset, it is clear that Rule 26’s broad definition of what can be obtained through
discovery sets a liberal parameter for this Court when determining whether discovery is relevant.
Oppenheimer Fund, Inc. v. Sanders, 473 U.S. 340, 351, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978)
(relevancy is “construed broadly to encompass any matter that bears on, or that reasonably could lead
to other matter that could bear on, any issue that is or may be in the case.”). Discovery cannot,
however, be obtained without limit. Discovery of matter not “reasonably calculated to lead to the
discovery of admissible evidence” is not within Rule 26(b)(1)’s broad scope. Id. at 2390.
Here, Judge Chesler has ruled that, “as a matter of law, the [November 1, 2004] corrective
disclosure identified by Plaintiffs, which post-dates the withdrawal of Vioxx from the market, cannot
form the basis of loss causation related to the fraud alleged in the Complaint.” In re Merck, Nos.
05-1151. 05-2367, 2011 WL 3444199, at *31 (D.N.J. Aug. 8, 2011). “[P]arties may only obtain
discovery regarding issues properly presented and pending in the lawsuit. Thus it is proper to deny
discovery of matter that is relevant only to claims or defenses that have been stricken. Therefore,
rulings granting dispositive motions also define, and narrow, the scope of permissible discovery.”
Breslin v. Dickinson Tp., No. 09-1396, 2011 WL 3292924, at *7 (M.D.Pa. Aug. 1, 2011) (internal
quotation omitted). Accordingly, documents relating to the change in Merck’s stock price on
November 1, 2004 are presently irrelevant as the Court has already decided that the Complaint failed
to allege a plausible connection between the publication of the Wall Street Journal article and loss.
In re Merck, 2011 WL 3444199, at *31. Any remaining relevance as to, for example, scienter or
intent, is outweighed by the burden production will impose upon the parties and the Court.
Plaintiffs additionally argue that they intend to file an amended complaint in this action that
would re-allege a class period extending through November 1, 2004. (Pls.’ Br. at 10). The Court
cannot compel discovery based on anticipated filings. To find otherwise would result in inefficiency
for both the parties and the Court, particularly when the discovery sought may prove irrelevant.
Plaintiffs’ request is thus denied.
Documents Responsive to Specific Requests from Outside the Class Period:
The parties dispute the cut-off date for certain of Plaintiffs’ Requests. Plaintiffs ask that
responsive documents from after the end of the Class Period be produced for certain Requests
through either June 30, 2005, June 30, 2006, or through the present. (Pls.’ Br. at 15-16). In support,
Plaintiffs argue that courts routinely hold that the start and end dates of a class period should not
dictate a defendant’s production of responsive documents. (Id. at 11 citing Nairobi Holdings Ltd.
v. Brown Bros. Harriman & Co., 2005 WL 742617, at *2-3 (S.D.N.Y. Mar. 17, 2005); Owens v.
Sprint/United Mgmt. Co., 221 F.R.D. 649, 655 (D. Kan. 2004); In re Control Data Corp. Sec. Litig.,
1988 WL 92085, at *3 (D.Minn. Dec. 10, 1987)). Second, Plaintiffs contend that numerous
-8-
important events have occurred well after the end of the Class Period that are highly relevant to
Plaintiffs’ claims; namely, Merck’s response to SEC notifications, comments made by Merck
scientists at an FDA Advisory Committee meeting, Defendant Raymond Gillmartin’s early
retirement as Merck’s Chairman and CEO, and various articles published in the New York Times,
the New England Journal of Medicine, and the Journal of the American Medical Association. (Pls.’
Br. at 11-14). Plaintiffs believe documents related to these events and disclosures are potentially
relevant to Plaintiffs’ claims that Defendants were not candid with either investors or the medical
community about the risks of VIOXX and are additionally relevant to showing Defendants’ state of
mind. (Id. at 14).
In contrast, Defendants maintain that Plaintiffs are not entitled to documents dated after
December 31, 2004. (Defs.’ Br. at 11-13). Merck argues that the pertinent issue in this case is what
Defendants knew and believed at the time they made the alleged misstatements - not what they
might have known or believed after the close of the Class Period. Accordingly, the publications to
which Plaintiffs have cited, for example, are merely self-serving postmortem articles co-authored
by plaintiff-side experts that do not bear on the pertinent issue in this action. (Id. at 12, n. 9). In an
effort to compromise, however, Defendants have offered to produce documents through the end of
the following quarter, i.e., December 31, 2004. In sum, Defendants submit that they have already
produced numerous documents post-dating the Class Period and should thus not be required to
undertake the enormous burden and expense that will result if they comply with Plaintiffs’ Requests.
The class period is not always determinative of what is relevant for discovery. Grossman,
et al. v. First Pennsylvania Corp., No. 89-9234, 1992 WL 38402, at *2 (E.D.Pa. Feb. 24, 1992)
(citing In re Control Data Sec. Litig., No. 3-85-1241, 1988 WL 92085 (D.Minn. Feb. 22, 1988)).
A scheme to defraud under the securities laws may include efforts to conceal the fraud or avoid
detection. Id. (citing S.E.C. v. Holschuh, 694 F.2d 130, 143 (7th Cir. 1982). As such, there are
numerous instances in which post-offering statements, documents, or conduct, for example, have
been treated as admissible evidence on the issue of scienter, intent and knowledge. In re Control
Data Sec. Litig., 1988 WL 92085, at *3. Where intent is a critical issue, “there is no hard and fast
rule fixing a relevant discovery time period.” Grossman, 1992 WL 38402, at *2; In re Control Data
Sec. Litig., 1988 WL 92085, at *3 ("[t]here is no rule fixing discovery in class-action litigation to
the class period.") (internal citation omitted).
Although relevance is a critical factor in determining whether to compel discovery, the Court
must also balance the relevance of the discovery sought with the burden the requested production
will cause the non-moving party, here Merck. District courts have broad discretion in deciding
discovery matters, to both ensure that a party is not burdened with producing insufficiently probative
information and to ensure that the court’s resources are allocated in the most judicious and efficient
manner. Jaffee Pension Plan v. Household Int’l, Inc., No. 02 C 5893, 2006 WL 3445742, at * 3
(N.D.Ill. Nov. 22, 2006). Federal Rule of Civil Procedure 26(b)(2) specifically requires courts to
limit discovery where “the discovery sought is unreasonably cumulative or duplicative, or can be
obtained from some other source that is more convenient, less burdensome, or less expensive” and
where “the burden or expense of the proposed discovery outweighs its likely benefit, considering the
-9-
needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at
stake in the action, and the importance of the discovery in resolving the issues.” FED. R. CIV. P.
26(b)(2)(C)(i) & (ii).
Here, the Court finds that the burden of the proposed discovery outweighs the benefit it could
potentially generate. Plaintiffs have submitted approximately thirty (30) requests for documents
through either June 30, 2005, June 30, 2006, or the present. (Pls.’ Br. at 15-16). The requests range
from “Merck Board of Director minutes concerning VIOXX” to “documents concerning VIOXX and
work performed by public relations or media consulting firms, etc.” (See Request Nos. 74 and 83).
The sheer breadth of these requests, the time, burden, and expense it will cause Merck, and the
potential burden it will impose upon the Court all counsel against compulsion. Jaffee, 2006 WL
334572, at *2. Next, with respect to the series of publications post-dating the Class Period, the Court
is not persuaded that said publications were particularly significant events. Merck maintains that the
aforementioned articles are, generally, summaries of prior expert reports in related Merck actions.
(Defs.’ Opp. Br. at 12, n.9). Merck has produced the complete transcripts of this testimony. (Id.).
The Court finds that any potentially responsive documents would likely be cumulative and/or
duplicative.
Moreover, Merck has already produced over 24 million pages of documents (including
numerous documents that post-date the withdrawal of VIOXX in September 2004). (Id. at 13).
Although the quantity of production is not determinative, “a voluminous prior production makes it
considerably more likely that further discovery will be duplicative.” Jaffee, 2006 WL 334572, at *2.
“[T]he volume of prior discovery is a useful resource for estimating the burden that will be imposed
on defendants by requiring them to repeat procedures similar to those that resulted in the prior
production.” Id. Lastly, as noted, Defendants have produced post-class period discovery through
December 31, 2004, a quarter after the close of the Class Period end date. This further militates
against requiring Merck to conduct additional searches for relevant discovery as, again, production
will likely be duplicative and cumulative. FED. R. CIV. P. 26(b)(2). Defendants need not produce
documents responsive to Plaintiffs’ Requests that are dated after December 31, 2004.
Documents From the Files of Additional Custodians:
Next, Plaintiffs have requested responsive documents from the custodial files of relevant
statisticians, statistical programmers, other additional relevant employees and former employees of
Merck, and of any individual Defendants whose custodial files had not been produced. (Pls.’ Br. at
16). Specifically, Plaintiffs seek custodial documents from fifty-nine (59) individuals. (Id. at 17).
Plaintiffs have attached an Appendix to their deficiency letter identifying each individual statistician
and statistical programmer, along with a discussion of why each individual is reasonably likely to
have possessed documents relevant to Plaintiffs’ claims in their respective custodial files. (Id.).
Defendants, who are now in receipt of said Appendix, propose that the parties meet-and-confer with
respect to the fifty-nine listed individuals to attempt to agree to a reasonable production. The Court
believes this is a prudent path. Accordingly, the parties shall engage in good faith negotiations with
respect to the additional custodians listed on Plaintiffs’ Appendix. The parties are to submit a joint
-10-
letter to the Court if the meet and confer proves unsuccessful in resolving the above dispute
regarding any of these custodians.
Audit Files:
Plaintiffs have additionally requested that Defendants produce a set of “audit files” for any
databases concerning the results of any VIOXX-related clinical trials or analyses, including the audit
files for specific database files called CTS and SAS. (Pls.’ Br. at 18). Defendants maintain that
Plaintiffs’ request is overly broad and unduly burdensome. (Defs.’ Br. at 15). Defendants have
nonetheless agreed to produce any SAS audit files collected on a rolling basis. (Id.). In light of
Defendants’ representation, the Court need not rule on this category of documents at this time. The
parties are instructed to submit a joint letter setting forth their position if the parties are ultimately
unable to resolve this dispute without further assistance from the Court.
Shared Drive Documents:
Lastly, Plaintiffs move to compel the production of responsive documents form Merck’s
shared drives and databases. (Pls.’ Br. at 19). Defendants have agreed to search its shared drive files
and shall produce any responsive documents to Plaintiffs. (Defs.’ Br. at 15). Again, the parties are
instructed to reach out to the Court for assistance should they be unable to resolve this dispute.
Conclusion
For the foregoing reasons, Merck is to turn over purportedly privileged documents previously
produced in connection with government investigations concerning VIOXX. Merck need not
produce any other documents at this time. The parties are to inform the Court if further intervention
is required. The Court will hold an in-person status conference on November 2, 2012 at 12:30 p.m.
in Courtroom 4C to address any remaining discovery disputes.
SO ORDERED.
s/Cathy L. Waldor
Cathy L. Waldor, U.S.M.J.
-11-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?