In re DENTAL SUPPLIES ANTITRUST LITIGATION

Filing 162

ORDER re 157 MOTION for Leave to Electronically File Document under Seal filed by Comfort Care Family Dental, P.C.; 158 Reply in Opposition, filed by Henry Schein, Inc., Patterson Companies, Inc., Benco Dental Supply Company: See attached Order for details. Ordered by Magistrate Judge Gary R. Brown on 3/27/2017. c/ecf (Johnston, Linda)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------X
In Re DENTAL SUPPLIES ANTITRUST
LITIGATION,

ORDER
CV 16-696 (BMC) (GRB)

--------------------------------------------------------------X
GARY R. BROWN, United States Magistrate Judge:
Before the undersigned is a motion 1 by liaison counsel for the Class Action plaintiffs in
this antitrust action, requesting amendment of the existing Confidentiality Order to include an
“Outside Attorney’s Eyes Only” designation. DE 157-1. Said motion was referred to the
undersigned by the Honorable Brian M. Cogan. See Electronic Order dated March 15, 2017.
The request emanates from a subpoena served upon non-party Amazon.com (“Amazon”) by
plaintiffs’ counsel, seeking, in relevant part, “documents regarding Amazon’s contract
negotiations with dental supplies manufacturers.” DE 157-1 at 2. The instant application
follows concerns raised by Amazon’s counsel that the subject documents, which would include
highly confidential pricing information and business terms, could be viewed by defendants’ in-

1

As the parties recognize, this motion constitutes a discovery dispute subject to this District’s
meet and confer rule. See Local Rule 37.3; see also Fed. R. Civ. P. 37(a)(1) and 26(c)(1). “To
satisfy the Rule's meet-and-confer requirement, the certification must set forth ... essential facts
sufficient to enable the court to pass a preliminary judgment on the adequacy and sincerity of the
good faith conferment between the parties, such as the names of the parties who conferred or
attempted to confer, the manner by which they communicated, the dispute at issue, as well as the
dates, times, and results of their discussions, if any.” Milton Abeles, Inc. v. Creekstone Farms
Premium Beef, LLC, No. CV 06-3893 (JFB) (AKT), 2009 WL 2495802, at *3 (E.D.N.Y. Aug.
12, 2009). By any measure, the parties’ efforts here fall far short of this standard. See DE 157-1
at 3 (“Plaintiffs wrote to Defendants . . . offering to meet and confer [but] none of the []
Defendants responded); DE 158 (“Patterson and Schein, however, believed their position was
conveyed by Benco’s [written] response”). In order to keep this complex matter on schedule, the
undersigned has opted to overlook this failing. The parties are cautioned, however, that this
courtesy will not be extended again. All future efforts to comply with the meet-and-confer
requirement will involve actual human conversation between and among counsel.
1

house counsel under the existing confidentiality order. See DE 127. In the motion, plaintiffs
cite compelling evidence which helps explain Amazon’s concerns. See generally DE 157-1.
Defendants oppose this application on several grounds. First, defendants claim that
plaintiffs lack standing to file the motion. DE 158 at 1. Second, defendants argue that plaintiffs
have failed to demonstrate good cause sufficient to justify modifying the confidentiality order.
Id. at 2. Third, defendants suggest that granting the request would substantially burden and
prejudice defendants. Id. at 3.
For the following reasons and to extent described herein, the motion is granted.
DISCUSSION
Standing
Defendants’ standing argument is readily dispatched. The only citation offered in
support of this position is a partial quotation of Rule 26(c)(1), by which defendants suggest that
the Rule “entitles only ‘[a] party or any person from whom discovery is sought’ to move for a
protective order of the type that class plaintiffs seek.” Id. at 1 (quoting Fed. R. Civ. P. 26(c)(1)).
Generally where “the burden of literal compliance with this subpoena falls to a third-party, [a
party] lacks standing to oppose [a subpoena] on undue burden grounds.” Malibu Media, LLC v.
Doe, No. 15-CV-3504 (JFB) (SIL), 2016 WL 4444799, at *6 (E.D.N.Y. Aug. 23, 2016); cf. In re
Application of FB Foods, Inc., No. M8-85 (JFK), 2005 WL 2875366, at *1 (S.D.N.Y. Nov. 2,
2005) (“Absent a showing of privilege or privacy, a party ordinarily lacks standing to challenge a
non-party subpoena with a motion for a protective order or to quash.”)
This, however, is a distinctly different situation. Plaintiffs are not seeking to quash a
subpoena -- indeed, plaintiffs served the subject demand. Rather, the instant application seeks to
modify the existing confidentiality order in an effort to help facilitate compliance with a
subpoena. Courts have distinguished between protective orders seeking to quash a third party
2

subpoena and setting limitations on the use of information produced pursuant to a subpoena. For
example, in Funai Elec. Co., Ltd. v. Orion Elec. Co., Ltd., Nos. 02-Civ. 2605 (AGS) (JCF); 01
Civ. 3501 (AGS) (JCF), 2002 WL 31413681, at *1 (S.D.N.Y. Oct. 25, 2002), which presented
similar facts, Magistrate Judge Francis found that “failure of the third-parties to mount their own
attack on the subpoenas indicates, however, that Orion's claims of burden and overbreadth are
unsubstantiated.” Id. Notwithstanding this determination, the court held that “[n]evertheless . . .
production shall be made in accordance with the protective order in this case.” Id. Insofar as
the outcome of the instant motion affects their ability to prepare and present their case, plaintiffs
have standing to seek modification of the protective order.
Even assuming, arguendo, that plaintiffs lack standing to make the instant application,
the Court retains the discretion to modify or amend a protective order sua sponte, a power it
retains even after dismissal of the action. See Gambale v. Deutsche Bank AG, 377 F.3d 133,142
(2d Cir. 2004) (“A district court . . . acts within its jurisdiction when it modifies or vacates a
protective order . . . irrespective of whether it does so before or after a stipulation of dismissal
has been filed”). Given the dictates of Rule 26, exercise of such discretion is highly appropriate
under these circumstances. See Fed. R. Civ. P. 26(c)(1)(G) (empowering the court to “issue an
order to protect a party or person [by] requiring that a trade secret or other confidential research,
development, or commercial information not be revealed or be revealed only in a specified
way”). In a competitive market environment, pricing data, such as the information at issue here,
can be among the most sensitive commercial information. See PepsiCo, Inc. v. Redmond, 54
F.3d 1262, 1265 (7th Cir. 1995) (“pricing architecture is highly confidential and would be
extremely valuable to a competitor”). In these circumstances, the protection of important
business interests of a third party – here the confidential information of Amazon – demands that
3

the Court take steps to prevent the unfair disclosure of such information, irrespective of how that
concern was brought to the Court’s attention.
Good Cause
“[I]nformation may be subject to protection from discovery because of its commercial
value. The most common situation is that in which the producing party is able to demonstrate
that the dissemination of confidential information will place it at a competitive disadvantage. In
these circumstances, the commercial value of the information at issue can generally be protected
by a protective order limiting the purposes for which the information can be used and the extent
to which it can be disseminated.” Cohen v. City of New York, 255 F.R.D. 110, 118 (S.D.N.Y.
2008). In evaluating a proposed protective order designed to safeguard competitive information,
one court held:
Where a party seeks a protective order restricting the scope of discovery of
technical, proprietary information, the court should balance ... the interests in full
disclosure of relevant information and reasonable protection from economic
injury. Relevant considerations in striking this balance include: 1) whether the
person receiving the confidential information is involved in competitive decision
making or scientific research relating to the subject matter of the patent, 2) the
risk of inadvertent disclosure of proprietary information, 3) the hardship imposed
by the restriction, 4) the timing of the remedy and, 5) the scope of the remedy.
The competing interests to be evaluated in determining the outcome of such a
dispute are one party's right to broad discovery and the other party's ability to
protect its confidential materials from misuse by competitors.
Infosint S.A. v. H. Lundbeck A.S., No. 06 Civ. 2869 (LAK) (RLE), 2007 WL 1467784, at *2
(S.D.N.Y. May 16, 2007) (denying application for “Outside Counsel Eyes Only” designation
where in-house counsel not involved in competitive decision-making).
Counsel for defendants assert that the “Attorney’s Eyes Only” designation in the existing
confidentiality order is sufficient to protect “certain (unspecified) Amazon documents that

4

Amazon ‘does not want the Defendants’ employees to view,’” because “the only employees at
issue here are a limited number of in-house attorneys for each defendant.” DE 158 at 2
(emphasis original). Defendants’ counsel correctly points out that, at least presumably, the inhouse “attorneys are members of state and federal bars, subject to professional responsibility
requirements, and take seriously their obligations under the existing Confidentiality Order.” Id.
at 2-3.
The problem here, though, is that “in-house counsel” is a position that comes in many
flavors. The duties and responsibilities of an attorney working for an enterprise may encompass
transactional work, competitive decision-making, compliance, securities disclosure, the conduct
or supervision of litigation, or any combination thereof. “In-house counsel wear a variety of
corporate hats: lawyer, business advisor, corporate officer and dealmaker, to name just a few.”
Anna Rotman, Preserving Privilege When In-House Counsel Wear Multiple Hats, Texas
Lawyer, July 14, 2014. Clearly, then, the duties of each affected in-house attorney must be
considered before this argument can hold water. “If counsel is determined to be involved in
competitive decision-making, the issue is whether there is a demonstrated need for access to the
documents sufficient to outweigh the concerns such access gives rise to.” Infosint, 2007 WL
1467784, at *5 (citing Quotron Systems, Inc. v. Automatic Data Processing, Inc., 141 F.R.D. 37,
40 (S.D.N.Y. 1992)). Given that defendants have not provided any information about the
individual attorneys at issue, the Court is simply not in a position to make this determination.
It is for these reasons that defendants’ reliance upon United States Steel Corp. v. United
States, 730 F.2d 1465, 1468 (Fed.Cir.1984) is somewhat misplaced. In that case, the court
premised its determination that it was inappropriate to exclude in-house counsel based upon
“present in-house counsel's divorcement from competitive decisionmaking.” Id. In fact, the
5

court explicitly held that “[i]n a particular case, e.g., where in-house counsel are involved in
competitive decisionmaking, it may well be that a party seeking access should be forced to retain
outside counsel or be denied the access recognized as needed.” Id. Absent information on this
point, the determination cannot be made.
Burden
Finally, defendants contend that the limitation proposed imposes an undue burden upon
them, hampering their ability to effectively defend the case. DE 158 at 3 (“The ability of inhouse attorneys to consider such evidence and discuss it with outside counsel is necessary for
each defendant to develop litigation strategies, to make litigation decisions, and to advise internal
decision-makers who do not have access to the confidential litigation record”). As noted, the
Court is required to balance “the interests in full disclosure of relevant information and
reasonable protection from economic injury.” Infosint, 2007 WL 1467784, at *2. In this case,
the Court must weigh the risks of economic injury to Amazon against the burdens imposed on
defendants by limiting disclosure to outside counsel.
Several factors relevant to striking this balance remain unexplained in the scant factual
record here. One is the relative level of involvement of in-house counsel and outside counsel in
the defense of the instant litigation. “A confidentiality order that excludes in-house counsel may
be found to cause minimal prejudice when ‘[o]utside counsel has been involved in this litigation
from the beginning and is fully familiar with the facts.’” Infosint, 2007 WL 1467784, at *5
(quoting Sullivan Mktg., Inc. v. Valassis Commc'ns, Inc., No. 93 Civ. 6350 (PKL),1994 WL
177795, at *3 (S.D.N.Y. May 5, 1994)). Additionally, defendants have failed to proffer any
description of firewalls or other protections that would be put in place to help ensure the security
of the subject data. Id. (“When the challenged counsel is also litigation counsel, courts have
6

permitted access, but with controls tailored to prevent accidental disclosure”) (citing Motorola,
Inc. v. Interdigital Tech. Corp., No. Civ. A 93-488 (LON), 1994 WL 16189689, at *4 (D. Del.
Dec. 19, 1994) and Commissariat A L'Energie Atomique v. Dell Computer Corp., No. Civ. A.
03-484 (KAJ), 2004 WL 1196965, at *2 (D. Del. May 25, 2004)). As noted in United States
Steel, “status as in-house counsel cannot alone create that probability of serious risk to
confidentiality and cannot therefore serve as the sole basis for denial of access.” 730 F.2d at
1469. At the same time, that case, decided in 1984, did not have to grapple with the security of
information electronically sent to or stored in the integrated I.T. systems commonly used by inhouse counsel.
The larger problem with this argument is that its fundamental premise remains in the
realm of the hypothetical. No party to this litigation has yet seen the subject data, so there is, as
yet, no way to know whether it is critical to the formulation of a defense, entirely irrelevant or
something in between. Similarly, until the information is reviewed, the severity of the risk of
economic injury cannot be fully measured. On the bright side, however, the information can be
obtained and reviewed, and the issues raised are not irremediable.
Accordingly, the Court grants the subject application, authorizing the addition of an
Outside Attorney’s Eyes Only designation to the confidentiality order. 2 The subject information
may be obtained and, as appropriate, so designated, and then reviewed by outside counsel. After
review, should any party believe that the designations made are inappropriate, or that the
significance of the information is such that some accommodation must be made to afford access
to one or more in-house attorneys, such party may – after conferring in good faith with opposing
2

To be clear, this Order is limited to granting leave to submit an amended confidentiality order
as described herein. The Court shall not wordsmith that Order here. Rather, the parties are to
meet and confer, and agree upon appropriate language.
7

counsel – apply to the undersigned for further relief. Should such occasion arise, counsel
representing Amazon are not only welcome, but encouraged, to make appropriate filings (under
seal if necessary) and participate in any argument. Counsel for plaintiffs shall serve a copy of
this Order and any future relevant motion papers upon counsel for Amazon.
SO ORDERED
Dated: Central Islip, New York
March 27, 2017
/s/ Gary R. Brown
GARY R. BROWN
United States Magistrate Judge

8