MALLINCKRODT LLC et al v. WATSON LABORATORIES, INC.- FLORIDA et al

Filing 109

OPINION & ORDER granting 103 Motion to Compel. The Court will hold a teleconference, to be initiated by Plaintiffs, on February 17, 2017 at 12:30 PM. Depomed also shall appear for the teleconference, and Actavis shall transmit this Order to Depomed as soon as practicable. Signed by Magistrate Judge Cathy L. Waldor on 2/10/17. (sr, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

MALLINCKRODT LLC, and
MALLINCKRODT INC.,
Action No. 2:15-cv-3800 (KSH)(CLW)
Plaintiffs,
v.

OPINION & ORDER

ACTAVIS LABORATORIES FL, INC.,
Defendant.

This matter comes before the Court on the motion filed by Defendant Actavis Laboratories
FL, Inc. (Actavis) to compel the compliance of third-party Depomed, Inc. (Depomed) with two
subpoenas. (Motion, ECF No. 103.) 1 Depomed opposed the motion, ECF No. 104, and Actavis
filed a reply, ECF No. 105. The Court declined to hear oral argument pursuant to Rule 78 of the
Federal Rules of Civil Procedure and, for the reasons set forth below, grants the motion.
I.

Overview
In this Hatch-Waxman case, Plaintiffs allege patent infringement by Actavis in connection

with Actavis’ efforts to market generic versions of a narcotic pain medicine, Xartemis XR. (Am.
Compl., ECF No. 37, ¶¶ 1, 10-11.) Prior to FDA approval of Mallinckrodt’s NDA, “Mallinckrodt
licensed from Depomed patents, a patent application, and know-how[]” and Depomed
subsequently was Plaintiff in this suit along with Mallinckrodt. (Id., ¶¶ 4, 15.) Actavis denies that
it infringed on any patents and counterclaims alleging non-infringement and invalidity. (Am.
Answer and Counterclaim, ECF No. 39.) In the time since Plaintiff filed the amended complaint,

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References to the record use page numbers assigned by CM/ECF.

the parties pared down their allegations, ECF No. 66, and agreed to dismiss Depomed from this
action, ECF No. 71.
Actavis premises the instant motion on its “reasonabl[e] belie[f] that Depomed[. . .] has
information relevant to Actavis’s claims and defenses in this case that Actavis cannot otherwise
obtain from Plaintiffs or other sources.” (Motion, ECF No. 103, at 5.) Actavis emphasizes that
“Mallinckrodt did not develop Xartemis XR alone” and that its discovery “requests do not seek
any documents or information related to any other case nor do they seek documents or information
related to products that are not the subject of this lawsuit.” (Id., at 5, 8; Yang Decl., ECF No. 1032, ¶¶ 3-4.) Actavis seeks the following:
Document requests:
1. Depomed’s internal communications relating to any
infringement, validity, or enforceability of the Patents-in-Suit.
2. Depomed’s internal communications relating [to] NDA No.
204031 and any related [investigational new drugs (INDs)].
3. Depomed’s internal communications relating to any agreement
between Depomed and Mallinckrodt concerning the development of
XARTEMIS.
4. Depomed’s internal documents relating to Depomed’s
participation in the development of XARTEMIS.
Deposition topics:
1. Communications, scope of work, or meetings between Depomed
and any other party, including Mallinckrodt, that contributed to,
assisted with, or otherwise worked in any way on NDA No. 204031,
including but not limited to all communications, scope of work, or
meetings between Depomed and Mallinckrodt, concerning NDA
No. 204031.
2. Depomed’s or Depomed’s employees’ assistance with the
preparation and filing of NDA No. 204031, including any assistance
with the preparation and filing of any INDs related to NDA No.
204031.
3. Any agreement, including license agreements, between Depomed
and Mallinckrodt related to Depomed’s Acuform® drug delivery
technology and XARTEMIS.

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4. Documents or communications regarding Actavis or this
litigation, including documents or communications relating to
Actavis’s ANDA Product.
(Motion, at 7-8.)
In opposition, Depomed contends that “[n]one of Actavis’ claims or defenses in its lawsuit
with Mallinckrodt concern the Depomed patents[,]” yet Actavis nonetheless “subpoenaed
Depomed for documents and testimony regarding ownership information, confidential research
and development, privileged communications, trade secrets and sensitive financial business
records in connection with five of Depomed’s patents.” (Opp., ECF No. 104, at 8 (citing
Stipulation of Dismissal, ECF No. 81-4).) Depomed maintains that, despite Actavis’ subsequent
efforts to narrow its requests, Actavis seeks irrelevant information and its “improper subpoenas
continue to violate the proportionality requirements of Rule 26 and impose an undue burden on
Depomed—a non-party to this litigation—in violation of Rule 45[.]” (Opp., ECF No. 104, at 6-9.)
II.

Standard
“At any time, on notice to the commanded person, the serving party may move the court

for the district where compliance is required for an order compelling production or inspection.”
Fed. R. Civ. P. 45(d)(2)(B)(i). “[T]he permissible scope of discovery under Rule 45 is the same as
under Rule 26(b).” Biotechnology Value Fund, L.P. v. Celera Corp., No. 14-4046, 2014 WL
4272732, at *1 (D.N.J. Aug. 28, 2014) (citations omitted). Thus, as set forth in Rule 26(b)(1):
Parties may obtain discovery regarding any nonprivileged matter
that is relevant to any party’s claim or defense and proportional to
the needs of the case, considering the importance of the issues at
stake in the action, the amount in controversy, the parties’ relative
access to relevant information, the parties’ resources, the importance
of the discovery in resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its likely benefit.
Information within this scope of discovery need not be admissible
in evidence to be discoverable.

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“Rule 26 is to be construed liberally in favor of disclosure, as relevance is a broader inquiry at the
discovery stage than at the trial stage.” Cont’l Cas. Co. v. J.M. Huber Corp., No. 13-4298, 2016
WL 3509317, at *2 (D.N.J. June 27, 2016) (citing Tele–Radio Sys. Ltd. v. De Forest Elecs., Inc.,
92 F.R.D. 371, 375 (D.N.J. 1981)). “If the subpoenaing party shows the documents sought to be
relevant, the resisting non-party must ‘explain why discovery should not be permitted.’”
Biotechnology Value Fund, 2014 WL 4272732, at *1 (citations omitted). Factors to be considered
in assessing the reasonableness of a subpoena include:
1) relevance, 2) the need of the party for the documents, 3) the
breadth of the document request, 4) the time period covered by it, 5)
the particularity with which the documents are described, 6) the
burden imposed, and 7) the subpoena recipient’s status as a nonparty
to the litigation.
Id., at *2 (citations omitted). The resolution of the instant dispute lies within the Court’s sound
discretion. In re: Riddell Concussion Reduction Litig., No. 13-7585, 2016 WL 4119807, at *2
(D.N.J. July 7, 2016); Forrest v. Corzine, 757 F. Supp.2d 473, 477 (D.N.J. 2010) (“Magistrate
Judges are given wide discretion to manage cases and to limit discovery in appropriate
circumstances.”).
III.

Analysis

A.

Relevance
The Court first considers whether the discovery sought is relevant to any of Actavis’ claims

or defenses. Depomed objects to the relevance of the items sought and first characterizes
“Document Requests 2 and 4 and Deposition Topics 1 and 2” as “seek[ing] discovery on all of the
Orange Book listed patents and seek all the research and development that led to Xartemis,
including the five (5) Depomed patents that were dismissed from the suit and were the subject of
Actavis’ covenant-not-to-sue.” (Opp., at 11 (emphasis in original).) Similarly, Depomed contends

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that Deposition Topic 4 impermissibly encompasses past and present unrelated litigations between
Actavis and Depomed. (Id., at 10.) Depomed likewise argues that Document Request 2 and
Deposition Topic 2 “are improper because they seek irrelevant information on other products that
were developed by Depomed and Covidien, a former parent company of Mallinckrodt[]” and that
anything they developed “has nothing to do with the current suit[.]” (Id. (emphasis in original).)
Finally, Depomed disputes the relevance of “Document Request 3 and Deposition Topic 3
[because they] seek discovery into Depomed’s confidential business and licensing practices for
Depomed’s patents and intellectual property. (Id., at 12.)
Actavis argues that “Depomed’s internal communications regarding the infringement,
invalidity, or enforceability of the patents-in-suit are directly relevant to Actavis’s claims and
defenses” and that it is “reasonable for Actavis to believe that Depomed has in its sole possession,
custody, or control internal communications and testimony related to the patents-in-suit and the
development of Xartemis XR that had not already been produced by Mallinckrodt.” (Motion, at
11.) Actavis also contends that “any responsive information from Depomed bears at least on”
conception date, true inventorship, and nonobviousness. (Id., at 12.) And, in reply, Actavis
emphasizes that it “has repeatedly clarified, and as its subpoenas state on their faces, the subpoenas
are narrowly tailored to internal Depomed documents and information that directly relate to the
development of Xartemis or the patents-in-suit—the relevance of which Depomed does not
dispute.” (Reply, ECF No. 105, at 4-5 (emphasis in original).) On this point, Actavis reiterates that
“its requests for production and deposition topics pertain to the development of Xartemis XR or
the current patents-in-suit (and non-infringement, invalidity, or unenforceability of those patents)
– topics which are directly relevant to [its] claims and defenses in this litigation.” (Id., at 6.)

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Upon review of the parties’ arguments and pleadings, the discovery sought is plainly
relevant. As Actavis points out, the desired information bears directly on the outstanding claims
and defenses because Depomed played a substantive and public role in the development of
Xartemis XR and because this case concerns whether valid patents were infringed upon. Moreover,
Actavis’ narrowed requests do not apply as broadly as Depomed contends; rather, Actavis’
subpoenas are confined to Xartemis XR and the remaining patents-in-suit. Thus, for example,
Depomed’s disclosures and deposition testimony would not be drawn from unrelated litigations or
patents—whether with respect to Actavis, Depomed, or other entities. Similarly, discovery into
Depomed’s confidential business and licensing practices for its intellectual property would be
relevant and permissible only in relation to Xartemis XR and the remaining patents-in-suit.
B.

Proportionality, Undue Burden, and Cost-Shifting
Depomed contends that the discovery should not be permitted because the subpoenas

violate the proportionality requirement of Rule 26, impose an undue burden, and warrant costshifting if the Court were to order compliance. (Opp., at 13-22.) Depomed argues that “the
information sought by Actavis’ subpoenas imposes an oppressive time and financial burden on
Depomed, which overshadows any likely benefit to Actavis that it would receive from the
information[,]” and, by reference to a prior matter, estimates that compliance as to “the extensive
email and document searches” would cost about $400,000. (Id., at 14-16; Amin Decl., ECF No.
104-1.)
Actavis maintains that Depomed offers mischaracterization and speculation as to the
volume and cost of the discovery sought and asserts that it does not seek duplicative information.
(Motion, at 13-16.) Actavis also again represents that it “is cognizant of the burden its subpoenas

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may impose upon Depomed, and does not intend to seek any information from Depomed that it
can obtain from Mallinckrodt.” (Id., at 15.)
Depomed has failed to demonstrate that the discovery sought is disproportionate to the
needs of the case or constitutes an undue burden. First, as discussed above, Depomed overstates
the breadth of Actavis’ requests and Actavis has repeatedly described how it has revised its
requests to pertain only to Xartemis XR and the remaining patents-in-suit for the time period
associated with the product’s development. Actavis has likewise represented that it only seeks
items that it cannot obtain from Mallinckrodt. Thus, even though there “is no general rule that
plaintiffs cannot seek nonparty discovery of documents likely to be in [a party’s] possession[,]” it
is apparent that Actavis nonetheless narrowed its requests to minimize burden. See W. Penn
Allegheny Health Sys., Inc. v. UPMC, No. 09-00480, 2013 WL 12134101, at *3 (W.D. Pa. Feb.
15, 2013) (quoting Viacom Int’l, Inc. v. YouTube, Inc., 2008 WL 3876142 at *3 (N.D. Cal. Aug.
18, 2008); Visto Corp. v. Smartner Info. Sys., Ltd., 2007 WL 218771, at *3 (N.D. Cal. Jan. 29,
2007)). Indeed, some overlap between the disclosures of Mallinckrodt and Depomed would not
equate to disproportionality or undue burden because Actavis’ requests may yield “different
versions of documents, additional material, or perhaps, significant omissions[.]” See id.;
Biotechnology Value Fund, 2014 WL 4272732, at 3-4 (granting motion to compel compliance
with subpoena where proponent had “considerably narrowed the initial requests,” non-party’s
documents “could serve as important data points” to evaluating “a central issue in the underlying
case,” and confidentiality concerns were alleviated by the DCO). And, while Depomed’s non-party
status warrants keen sensitivity and reluctance as to the imposition of burden, see Opp., at 14-15
(collecting cases), it must be emphasized that Depomed is a former party uniquely positioned to
provide relevant discovery and has a financial stake in this litigation—however bearish the market

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for Xartemis XR may be at the moment. On balance, therefore, Depomed has failed to meet its
burden and the facts presented warrant granting the motion to compel compliance with the
subpoena. And, as a corollary, the facts here are distinguishable from cases in which such motions
were denied. See e.g., In re Lazaridis, 865 F. Supp. 2d 521, 528 (D.N.J. 2011) (finding undue
burden after weighing cost and burden “against the lack of a showing of actual need or relevance
of the information sought”); Haworth Inc. v. Herman Miller, Inc., 998 F.2d 975, 976-78 (Fed. Cir.
1993) (upholding denial of motion to compel where documents at issue could be obtained through
party and where movant “spun a convoluted scenario hypothesizing the existence” of a product
created by the nonparty that the parties agreed did not infringe).
Finally, an order to compel production must protect a non-party “from significant expense
resulting from compliance.” Fed. R. Civ. P. 45(d)(2)(A)(ii). The following may be considered to
determine whether to shift the cost of production: “1) whether the non-party has an interest in the
outcome of the case; 2) whether the non-party can more readily bear its cost than the requesting
party; and 3) whether the litigation is of public importance.” Maximum Human Performance LLC
v. Sigma-Tau HealthScience LLC, No. 12-6526, 2013 WL 4537790, at *4 (D.N.J. Aug. 27, 2013).
In support of its request for cost-shifting, Depomed minimizes its interest in this matter by
reference to the weak market for Xartemis and asserts that Actavis’ annual revenue dwarfs its own.
(Opp., at 19-22.) Actavis counters that, current market notwithstanding, Depomed has received ten
million dollars in milestone payments from Mallinckrodt, “continues to receive licensing revenue
on every sale of Xartemis[,]” and “should have anticipated subsequent Hatch-Waxman litigation
based on subsequent [ANDA] filers.” (Reply, at 9-10.) Actavis also stresses Depomed’s “excessive
representations of the time and cost it estimates it will incur to comply with the subpoenas[.]” (Id.,
at 10.)

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First, there is no discernible public importance. Next, Xartemis has a clear pecuniary
interest in this action by virtue of its past and future earnings. Furthermore, based on the meager
evidence presented on this point in the form of, e.g., expected earnings, pain relief market
saturation, or competitors’ performance, it cannot be concluded that Depomed’s interest is
“limited” and “marginal,” Opp., at 21, and that market conditions will not change. Next, accepting
that Depomed is considerably smaller than Actavis, it is nonetheless difficult to assess which party
can readily bear the cost because both entities apparently have resources to develop products and
conduct patent litigation, Depomed did not provide precise information on its inability to incur
such a cost, and there is no specific evidence concerning the overall vitality of each entity. A mere
disparity in size between a party and non-party should not suffice to impose the cost on the
ostensibly larger of the two. Moreover, Actavis highlights Depomed’s seemingly inconsistent
estimates with respect to the burdens of compliance, Reply at 11, n.4, and, in any event, Depomed’s
estimate does not present a particularized assessment of its anticipated costs. That is, aside from
hours, overall cost, the number of custodians, and reference to a “prior matter” with “similar
searches,” there is no description or detail, for example, regarding staffing, individual tasks,
durations thereof, hourly rates, or how the prior matter is an appropriate rubric—either for
Depomed or any vendor it utilizes. Without more, the Court is ill-positioned to assess the
significance of the costs and then shift those costs to Actavis. See Maximum Human Performance,
2013 WL 4537790, at *4 (granting motion to compel where non-party provided no financial
information to assess value of business relationship with party or its ability to pay). Accordingly,
Depomed shall bear its costs.

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IV.

Conclusion
In light of the foregoing, the Court grants Actavis’ motion to compel Depomed’s

compliance with two subpoenas.

ACCORDINGLY, IT IS on this 10th day of February, 2017,
ORDERED that Actavis’ motion to compel is granted; and
ORDERED that the Clerk shall terminate ECF No. 103; and
ORDERED that the Court will hold a teleconference, to be initiated by Plaintiffs, on
February 17, 2017 at 12:30 PM. Depomed also shall appear for the teleconference, and Actavis
shall transmit this Order to Depomed as soon as practicable.

s/Cathy L. Waldor
CATHY L. WALDOR
United States Magistrate Judge

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