QUINTILES IMS INCORPORATED et al v. VEEVA SYSTEMS, INC.

Filing 241

ORDER AND OPINION OF THE SPECIAL MASTER. Signed by Special Master Dennis M. Cavanaugh, U.S.D.J. (Ret.) on 5/13/2019. (ld, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Case No.: 2:17-CV-00177-CCC-MF
IQVTA, INC. and IMS SOFTWARE
SERVICES, LTD,
Plaintiffs! Counterclaim Defendants,
vs.

ORDER & OPINION OF THE SPECIAL
MASTER

VEEVA SYSTEMS, INC.,
DefendanV Counterclaim Plaintiff.

This matter comes before the Special Master on Defendant-Counterclaim Plaintiff Veeva
Systems, Inc.’s (“Veeva”) motion to overrule Plaintiffs-Counterclaim Defendants IQVIA, Inc.

and IMS Software Services, LTD’s, (collectively “IQVIA”) assertion of privilege over
documents subpoenaed from Ernst & Young LLP (“EY”). After considering the submissions of
the parties, based upon the following, it is the opinion of the Special Master that Veeva’s motion
to overrule IQVIA’s assertion of privilege over documents subpoenaed from EY is GRANTED.
DISCUSSION
Background
Prior to the commencement of litigation in this matter, clients of IQVIA asked it to

license certain IQVIA data to Veeva for use by Veeva in its Master Data Management (“MDM”)
offering. Veeva had data offerings in the market and in development that competed with IQVIA
data. In light of this, Vceva provided IQVIA with various assurances that IQVIA data would not
be used by Veeva to improve Veeva’s offerings. EY was subsequently retained by IQVIA “to
evaluate the various assurances made by Veeva that (1) IMS Health reference data could be used

in Veeva’s MDM offering without risk that IMS Health reference data would be used,
intentionally or inadvertently, to improve Vccva’s own competing reference data offerings, and
(2) these assurances are capable of confirmation with an audit of reasonable scope and cost.”
TQVIA intended to “use the information from the EY assessment to determine whether the
assurances could be confirmed and serve as a basis for INS Health to license its reference data to
Veeva for use in Vccva’s MDM offering.”
EY prepared a Statement of Work for Third Party Access Agreement Compliance
Services dated August 10, 2015. The Scope of Service provided that EY would review IQVIA’s
Service Providers’ compliance with the terms of its Third Party Access Agreement between
IQVIA and the Service Provider, including: (1) review the terms of the pre-selected TPAs; (2)
review the terms of the pre-selected Client Project Confirmations; (3) review Service Providers’
offerings, including Service Providers’ Master Data Management offering and offerings that
utilize reference data; (4) identify and analyze the relevant IME Products and Services supplied
to Clients; (5) identify and analyze the relevant IMS Products and Services supplied to Service
Provider under the terms of the TPAs and CPCs, or obtained by the Service Providers from
Clients or otherwise; (6) review the Service Providers’ process and procedures that may include
the delivery, storage, usage, security and disposition of the identified IMS Products and Services,
including Service Providers’ production, staging and testing environments; (7) assess and
document the process and procedures designed to protect IMS’s intellectual property rights in the
identified IMS Products and Services, including IMS data intended to enhance, improve, update,
validate, create, develop, or benchmark any Service Provider data, product or offerings; and (8)
identify examples of non-compliance with the terms of the TPAs and CPC in connection with the
delivery, storage, usage, security or disposition of the IMS Products and Services.

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With respect to the legal nature of the Scope of Service, the Statement of Vork provides:
“Although we have made no independent inquiry or determination with respect thereto, we
acknowledge your belief that any services and reports provided by EY, or any portions of such
reports..., are or may be protected from disclosure by the attorney-client privilege, work product
protection, or both.” In the Limitation on Scope of Work section, it provides: “None of the
Services or any Reports will constitute any legal opinion or advice.”
Veeva and IQVIA subsequently entercd into a Factual Findings & Reimbursement
Agreement wherein Veeva agreed to pay for 50% of the aggregate amount of the final invoice
for EY’s assessment of Veeva’s assurances. In exchange, at the conclusion of the EY
assessment, Vecva was to receive a full written copy of the factual findings that included all facts
and observations gathered in the course of the audit but did not include any IQVIA confidential
infomrntion, recommendations or advice provided to TQVIA by EY.
IQVIA subsequently filed a Complaint on January 10, 2017. In April 2018, Veeva
subpoenaed EY seeking documents related to EY’s audit of Vceva. These requests included: (I)
documents related to IQVTA and EY’s discussions of a possible audit of Veeva, including but not
limited to, any discussion or negotiation of the scope of work, plans for contemplated or actual
subject matter of an audit, instructions relating to the analysis or conclusions to be included, fees
for the work, Lime to perform work, topics to pursue, goals, parameters, and further guidance; (2)
documents relating to BY’s audit of Veeva, including any notes, emails, reports, summaries,
records of phone calls, messages, and any communications between EY and IQVIA regarding
the results of BY’s audit: (3) any engagement letters, scope of work, retention letters, fee
schedules, or other documents governing IQVIA and EY’s relationship; and (4) documents and
communications relating to or concerning IQVIA’s repose to BY’s audit of Veeva. IQVIA

3

subsequently claimed privilege over a number of the documents. According to its February 15,
2019, Amended Privilege Log, IQViA claims attorney-client privilege over 1,411 withheld
documents and 893 redacted documents.
Arguments
Veeva
Veeva argues that IQVIA’s privilege assertions over these documents is improper as
these documents do not involve communications between IQVIA and its in house counsel, but
rather involve a third party, EY. Veeva does not believe EY was retained to assist IQVIA
lawyers in rendering legal advice, but rather was commissioned to perform the Veeva assessment
as a business project desigued to help IQVIA make a busincss decision with respect to
information obtained from internal Veeva systems. Veeva believes that in all instances, IQVIA’s
in-house counsel was acting in a business role. Veeva thus argues that BY’s work was squarely
in the business arena and that communications are not protected from disclosure by attorneyclient privilege.
Veeva further argues that the Koval exception only applies when a client’s attorneys need
a third party to translate or interpret information central to the provision of legal advice and that
the third party’s role must he to facilitate communication between the attorney and client. Veeva
argues that the narrow Koval exception does not apply in this matter because EY was analyzing
Veeva’s information, not information possessed by IQVIA. Since EY was not putting
information gained from IQVIA into usable form for their attorneys to render legal advice,
Veeva argues the Koval exception cannot apply.
Veeva finally argues that regardless of the merits of IQVIA’s privilege claim, IQVIA’s
offensive use of the EY assessment in its Complaint and throughout its case means that IQV1A
has waived privilege over the subject matter under the sword and shield doctrine.
4

IQVIA
JQVTA argues that attorney-client privilege protects IQVIA’s in-house counsel’s
communications with BY because the documents were intended to be confidential, the work was
performed for a predominately legal purpose, and the work was necessary for IQVIA’s counsel’s
provision of legal advice.
IQVIA points to the Statement of Work, which makes clear that EY was to treat

communications, work product and documentation relating the BY’s services as confidential.
TQVIA also highlights the fact that the Factual Findings & Reimbursement Agreement made
clear that Veeva was not entitled to receive work product prepared at the direction of IQVIA,
ikmded by IQVIA, or reflecting the work product of its auditors beyond the fact finding.
IQVIA further argues that the communications at issue were made for a predominately
legal purpose and that incidental requests for business advice do not vitiate the attorney-client
privilege. IQVTA argues that the Koval standard is satisfied here as TQVIA retained BY for
insight necessary to address a legal problem regarding how to protect its intellectual property.
IQVIA explains that under its TPA program, IQVIA’s in-house counsel drafts TPA agreements
that (I) allow its clients to share certain data licensed from IQVIA with the clients’ other vendors
for certain purposes; and (2) include restrictions and conditions designed to prevent third-parties
from misappropriating or misusing the data to which TQVIA has agreed to give them access.
IQVTA argues that EY’s role was critical in allowing IQVTA’s in-house counsel to evaluate
whether changes, if any, were required to its TPA agreements to ensure that IQVIA’s intellectual
property would be safe.
IQVIA argues that BY was hired for its technical expertise in analyzing and translating
complex technical systems and processes into something that IQVIA’s counsel could read,
understand, and use to offer TQVIA legal advice. IQVIA ffirther argues that it is not the law in
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this Circuit that because the focus of EY’s work was Veeva’s systems and related processes
rather than IQVIA’s own information, EY could not have been acting as an interpreter or
translator.
Opinion
At the outset, the Special Master notes that Veeva has not alleged inadequacy with
IQVIA’s privilege log and the parties have not provided document-by-document arguments
concerning IQVIA’s assertion of privilege over the documents at issue. Rather, Veeva’s
arguments challenge the application of the attorney-client privilege to these documents as a
whole, As such, the parties have not requested and the Special Master has not required IQVIA to
produce each document for in camera

review.

The attorney-client privilege protects (1) communications (2) between “privileged
persons” (3) made in confidcnce (4) intended to receive or give legal assistance. In re Thieglobe
Commc’ns Corp., 493 F.3d 345, 359 (3d Cir. 2007), as amended (Oct. 12, 2007) (quoting
Restatement (Third) of the Law Governing Lawyers

§

68 (2000)). “Privileged persons”

are

the

client, the attorney, and “any of their agents that help facilitate attorney-client communications
or the legal representation.” Id. (citing to

§

70 of the Restatement). The purpose of the privilege

is to encourage “ftill and ftank” communication between the client and attorney. Id., at 360
(quoting Upjohn Co. v United States, 449 U.S. 383, 389, 101 S.Ct. 677,66 L.Ed.2d 584 (1981)).
The

party

asserting the privilege bears the burden of proving that it applies. See In re

Grand Jury, 705 F.3d 133, 160 (3d Cir. 2012) (citing to In re Grand July Empanelled Februaiy
14, 1978, 603 F.2d 469, 474 (3d Cir. 1979) (alterations omitted) (quoting United States v.
Landof 591 F.2d 36, 38 (9th Cir. 1978)). A party asserting waiver of the privilege bears the

6

burden of proving the waiver. See Sampson v. Sch. Dist. of Lancaster, 262 F.R.D. 469, 478—79
(ED. Pa. 2008).
Although there is no accountant-client privilege, see Couch v. United States, 409 U.s.
322, 334, 93 S.Ct. 611, 34 L.Ed.2d 548 (1973), the attorney-client privilege may attach to
communications with an accountant “where the client, or the client’s attorney, retains an
accountant for the purpose of obtaining or providing legal advice.” See United Slates v. Antolini,
271 Fed.Appx. 268, 271 n. 1 (citing United States v. Kovel, 296 F.2d 918, 922 (2nd Cir. 1961)).
“What is vital to thc privilege is that the communication be made in confidence for the purpose
of obtaining legal advice from the lawyer. If what is sought is not legal advice but only
accounting service

.

.

.

or if the advice sought is the accountant’s rather than the lawyer’s, no

privilege exists.” United Slates v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961) (citations omitted).
The critical inquiry, as noted above, is whether a communication involving a third party acting as
an agent of the attorney was made for a legal purpose. Kovel, 296 F.2d at 922. “If the third party
consultant is involved in the giving of legal advice, the privilege obtains.” In re CV Therapeutics,
2006 WL 1699536, at *6 (citing SrnithKline, 232 F.R.D. at 476—77).
While the Third Circuit has adopted the Kovel approach, it has been loadi to construe the
privilege broadly and has viewed what assists an attorney in rendering legal advice narrowly. See
United States v. Rod/nyc!? International, 897 F.2d 1255. 1264 (3d Cir. 1990) (holding and quoting

from Kovel, “most vital to the privilege is that the communication be made in confidence for the
purpose of obtaining legal advice from the lawyer.”); but see In re G—I Holdings, Inc, 218
F.R.D. 428, 435 (D.N.J. 2004) (holding that Kovel does not protect all third party communication
“necessary to assist the lawyer in rendering legal service to the client,” and rejecting “findings of
an attorney-client privilege based [solely] on the necessity or value of the provided assistance”

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but rather adopting a requirement that the third-party be acting as a “translator or interpreter of
client communications.”). Continuing in that narrow tone, “[t]he privilege does not apply merely
because a statement was uttered by or to an attorney (or an attorney’s agent). Nor does it attach
simply because a statement conveys advice that is legal in nature.” [(PD Labs., Inc. v. Clorox
Co., 202 F,R.D. 410, 414 (D.N.J. 2001) (citing Westinghouse Elec. Corp., 951 F.2d at 1423—24).
Rather, “the privilege extends to ‘only those disclosures-necessary to obtain informed legal
advice-which might not have been made absent the privilege.” Id.
As the Supreme Court has recognized, however, “the administration of the privilege in
the ease of corporations presents

...

special problems.” Commodity Futures Trading Comm ‘n v.

Weintraub, 471 U.S. 343, 348, 105 S.Ct. 1986, 85 L.Ed.2d 372 (1985)). “Communications which
relate to business rather than legal matters do not fall within the protection of the privilege.”
Leonen v. Johns—Manvilk’, 135 F.R.D. 94, 98 (D.N.J. 1990); see also Coleman v. Am. Broad.
Co., 106 F.R.D. 201, 205 (D.D.C. 1985). Therefore, the general rule is that “while legal advice
given to a client by an attorney is protected by the privilege, business advice generally is not.” In
re Nat ‘1 Smelting of New Jersey, inc. Bondholders’ Litig., No. 84—3199, 1989 U.S. Dist. LEXIS
16962, at * 18 (D.N.J. Juno 29, 1989) (citation omitted); see also Claude P. Bamberger In! ‘I, Inc.
i

Rohm & Haas Co., No. 96—1041, 1997 WL 33768546, at *2 (D.N.J. Aug. 12, 1997)

(“Business and personal advice are not protected by the privilege

(citing United States v.

Davis, 636 F.2d 1028, 1044 (5th Cir. 1981))).
Given that “legal advice is often intimately intertwined with and difficult to distinguish
from business advice

.

.

.

.

[andj [bjecause it is often too difficult, impractical and unrealistic to

compartmentalize whether certain advice given to a client is legal in nature or business in nature
in the context of a complicated.

.

.

transaction, the policy behind the attorney-client privilege is

8

best upheld where the attorney-client relationship is predominantly for the purpose of rendering
legal services.” Louisiana Mien. Police Employees RCL Sys. v. Sealed Air Corp., 253 F.R.D. 300,
306 (D.N.J. 2008) (citations and quotations omitted). The party claiming privilege “should
demonstrate that the communication would not have been made but for the client’s need for legal
advice or services” Sealed Air Corp., 253 F.R.D. at 306 (citing Leonen v. Johns-Manville, 135
F.R.D. 94, 99 (DN.J. 1990)).
In the instant matter, the Special Master must determine whether any attorney-client
privilege that existed between IQVIA and IQVIA’s in-house cotLnsel transferred to and protected
communications between BY and IQVIA, internal communications betwecn EY staff; and
documents preparcd by EY diring EY’s assessment of Veeva’s processes and systems.
Based on the record, BY was hired by IQVIA to assess Veeva’s systems and processes in
order to provide its professional opinions as to the assurances made by Veeva that IQVIA data
would be safe in Veeva’s MDM system and would not be used by Veeva to improve its own data
offerings. The Scope of Service indicates that while BY was providing services for the provision
of legal advice by the TQVIA legal department, the professional conclusion regarding Vccva’s
assurances being sought was that of BY’s not IQVIA’s legal team. As such, the advice being
sought from the Veeva assessment was that of BY’s rather than IQVIA’s in-house legal team and
thus no privilege exists. See Kovel, 296 F.2d at 922.
Additionally, it is the opinion of the Special Master that the Veeva assessment served a
predominately busincss purpose. While the audit may also have supported IQVIA’s thinking on
how ii would procced with the licensing of IQVIA reference data to Veeva for master data
management purposes under the TPA program and inform IQVJA’s thinking on TPA agreement
terms, the audit was predominantly for business purposes, not legal purposes. The primary

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purpose of the audit was to determine the accuracy of Veeva’s assurances that IQVIA reference
data could be used in Veeva’s MDM offering without risk that IQVTA’s data would be used by
Veeva to improve its own offerings. Thus the audit was intended to inform IQVIA’s business
decision on whether or not to allow Veeva to use its reference data in Veeva’s MDM offering.
While licensing of this data and TPA agreements are intimately intertwined with and difficult to
distinguish from the business purposes of the EY audit, here, the EY assessment would not have
been undertaken but for IQVIA’s need to make a business determination as to whether, at the
request of IQYIA’s clients, IQVIA would allow its clients to share certain data licensed from
TQVIA with Veeva for use by Veeva in its MDM offering. While this generally involves
cvaiuation of TPA agreements and licensing protections, it does not change thc fact that the
central purpose of the undertaking was business in nature. EY was chiefly engaged to assess the
assurances made by Veeva regarding its protection of TQVIA data. That the information obtained
from EY’s assessment of Veeva might inform IQVIA’s decision on whether its ‘EPA agreements
were sufficient does not transform the purpose of the EY audit into a predominately legal one
and thus shield all EY communications from disclosure.
Furthermore, the Special Master notes that EY was evaluating Veeva’s systems and
processes, not IQVIA’s technical information. The fundamental purpose of attorney-client
privilege is “to encourage clients to make fill disclosure to their attorneys” Fisher v. United
States, 425 U.S. 391, 403, 96 5.0. 1569, 48 L.Ed.2d 39 (1976). Here, the information being
disclosed and assessed by EY was technical information possessed by Veeva, not IQVIA.
Accordingly it is difficult to imagine how extending attorney-client privilege to the EY
communications related to EY’s assessment of Veeva’s systems and processes would promote
the fundamental purpose of attorney-client privilege. While BY’s assessment of Veeva’s

to

assurances may have been beneficial to IQVIA’s counsel in providing advice to IQVIA, “the
privilege protects communications between a client and an attorney, not communications that
prove important to an attorney’s legal advice to a client.” United States v. Ackert, 169 F.3d 136,
139 (2d Cir, 1999). Therefore, “a communication between an attorney and a third party does not
become shielded by the attorney-client privilege solely because the communication proves
important to the attorney’s ability to represent the client.” Id,
For the reasons stated herein, the Special Master will order IQVIA to withdraw its
assertion of attorney-client privilege over the disputed BY documents, which Vceva shall be
allowed to obtain from BY.

DENNIS M. CAVANAUGH, U.S.DJ. (Ret.)
Special Master
Date: May 13, 2019

II