Errant Gene Therapeutics, LLC et al v. Soan-Kettering Institute for Cancer Research

Filing 149

OPINION AND ORDER re: 134 MOTION for Sanctions and to Hold Errant Gene Therapeutics, LLC and its Attorneys in Contempt of Court filed by Sloan-Kettering Institute for Cancer Research. For the foregoing reasons, the court GRANTS SKI& #039;s motions to for Sanctions and DENIES its motion to hold EGT and its attorneys in contempt of Court. (Doc. Nos. 100 and 134.) IT IS HEREBY ORDERED THAT: 1. EGT and its attorneys refrain from further misuse of the AEO and Confidential informatio n obtained in this case pursuant to the Protective Order. 2. EGT pay SKI's reasonable attorneys' fees and costs of bringing these two motions for sanctions (Doc. Nos. 100 and 134.) 3. SKI submit hours and rates for the Court's approval on or before June 19, 2017. (Signed by Magistrate Judge Ronald L. Ellis on 6/5/2017) (mml)

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ERRANT GENE THERAPEUTICS, LLC,

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OPINION AND ORDER
15-CV-2044 (AJN) (RLE)

Plaintiff,

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RONALD L. ELLIS, U.S.M.J.:
I. INTRODUCTION
On November 3, 2016, Defendant Sloan-Kettering Institute for Cancer Research ("SKI")
filed a motion to enforce the Court's Protective Order and sanction Plaintiff Errant Gene
Therapeutics, LLC ("EGT") and its counsel. (Doc. No. 100). SKI filed a second motion for
sanctions and to hold EG T's lawyers in contempt of Court for additional violations of the
Court's Protective Order on February 8, 2017. (Doc. No. 134.) Because EGT has violated the
Protective Order by using protected information to initiate actions in other jurisdictions, the
Court GRANTS SKI's motions for sanctions, but does not certify the matter for contempt.

II. BACKGROUND
On March 18, 2015, Plaintiff Errant Gene Therapeutics, LLC initiated this action by
filing a Complaint against Sloan-Kettering Institute for Cancer Research. (Doc. No. 1.) The
Parties negotiated a protective order and submitted briefs as to the scope of the discovery to be
categorized as "Attorney Eyes Only" ("AEO") and the number of people who would have access
to information designated as "Confidential." (Doc. Nos. 52-54, 61-64, 66, 70, 72.) On June 2,
2016, the Court held oral argument on these issues and ruled that SKI' s proposed protective

,·_

order, (Doc. No. 53-1 ), would operate as the Parties' interim Protective Order until a final order
was issued by the Court. (Doc. No. 58.) The interim Protective Order contained the provision:
... Confidential and Attorneys' Eyes Only information shall be used by the Receiving
Party solely for the purposes of preparation for trial, pretrial proceedings, and trial of
actions and proceedings in the above-captioned action and not for any business,
commercial, regulatory, competitive, personal or any other action.
(Doc. No. 53-1 at if 8(1).) The Court issued an Opinion and Order adopting SKI's proposed
scope of the "Attorneys' Eyes Only" designation to include highly confidential research,
development, and commercial information. (Doc. No. 77 at 6-8.) In addition, the Court adopted
EGT' s proposal to limit disclosure of confidential informational to three employees. (Id at 8-9.)
The Court directed the Parties "to conduct discovery in [a] manner consistent with the opinion."
(Id at 9.) The Parties never filed a fully-executed amended protective order to replace the

interim Protective Order.
A. EGT's Proposed Motion

On September 22, 2016, EGT requested leave from The Honorable Alison J. Nathan to
file a Second Amended Complaint. (Doc. No. 87.) Judge Nathan terminated the Motion and
directed the Parties to resubmit the Motion before the undersigned. (Doc. No. 88.) On
September 30, 2016, the Court received a letter from EGT indicating that the Parties had
stipulated to EGT filing the Second Amended Complaint. Letter from Kenneth Sussmane,
Counsel for EGT, to the Honorable Ronald L. Ellis (Sept. 30, 2016). The letter indicated that a
motion requesting leave to file the Second Amended Complaint would be forthcoming, and
attached the proposed Second Amended Complaint which contained highlighting of sections that
SKI contended should be filed under seal. (Id.) EGT stated that those highlighted portions
should not be filed under seal or redacted. (Id.) On October 19, 2016, EGT filed a joint letter
from the Parties wherein EGT moved to file its Second Amended Complaint and the Parties
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argued their respective positions on sealing and redaction. (Doc. No. 96.) EGT filed a letter in
reply to some of SKI's arguments that the Second Amended Complaint should be filed under
seal on October 21, 2016. (Doc. No. 97, refiled at 103.) SKI objected to EGT's reply letter,
arguing that it was improperly filed outside the Court's instruction to submit discovery issues by
joint letter. (Doc. No. 98.)
B. SKl's November 3, 2016 Motion

In its first motion to enforce the Protective Order and sanction EGT and its counsel
[hereafter "SKI's First Motion"], SKI alleges that EGT violated the Court's Protective Order
through filing a complaint against Bluebird Bio, Inc. ("Bluebird") in the Circuit Court of Cook
County, Illinois, using information learned in discovery that was designated AEO and
Confidential (Doc. No. 102.) EGT filed its complaint against Bluebird on September 27, 2016
[hereinafter the "Illinois complaint"], and it states:
In the course of discovery in that [federal] case, Third Rock Ventures and SKI produced
documents relating to [Bluebird]' s communications and dealings with SKI. Those
documents were designated as 'attorneys eyes only,' thus EGT is precluded from publicly
reciting what such documents disclose in this Complaint.
Weiss Deel. Exh. 11. at if 67. Following paragraph 67, paragraphs 68-80 are redacted. Weiss
Deel. Exh. 11. SKI alleges that these redacted allegations contain information derived from
documents that are designated AEO and Confidential. (Doc. No. 102 at 9.)
On October 13, 2016, after being notified that SKI believed that the Illinois complaint
was a violation of the Protective Order, EGT filed a motion to voluntarily nonsuit the Illinois
case "out of an abundance of caution." (Doc. No. 104 at 6, 8.); Vickery Deel.

if 11.

The Illinois

court granted the motion on October 14, 2016. Vickery Deel. if 11.
SKI's First Motion seeks a Court Order that would "(1) enjoin EGT from further misuse
of protected materials, (2) revoke the pro hac vice admissions of the culpable attorneys [Vitale

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Vickery Niro & Gasey LLP] 1, (3) preclude EGT from any use of the non-party documents it
received under its subpoena, and (4) award SKI its reasonable attorneys' fees and costs incurred
on this motion and otherwise on account of the violations." (Doc. 102 at 5.)
C. SKl's February 8, 2017 Motion
SKI filed another motion alleging a second violation of the Protective Order on February
8, 2017 [hereinafter "SKI's Second Motion"]. (Doc. No. 134.) SKI alleges that EGT "used
protected information to file suit in New York Supreme Court ... [and] disclosed protected
information in its publicly filed state complaint." (Doc. No. 136.) EGT had initiated an action in
New York Supreme Court on January 26, 2017 [hereinafter the "New York complaint"]. (Id. at
9). SKI alleges that because the complaint was signed by Girondi, EGT's attorneys violated the
Protected Order by sharing AEO information with Girondi. (Id. at 10.);(Doc. No. 142 at 1.)
In SKI's Second Motion, it asks the Court to: (1) hold EGT in contempt, (2) order EGT
to dismiss the New York state action with prejudice, and (3) award SKI its attorneys' fees and
costs incurred in connection with this violation. (Doc. No. 136 at 5.)
III. DISCUSSION
A. SKl's First Motion for Sanctions
EGT contends that no AEO or Confidential information was disclosed in the Illinois
complaint. (Doc. No. 104 at 4.) It claims that all unredacted factual allegations came from the
publicly filed Amended Complaint in this case. (Id.) EGT argues that "by redacting the
confidential information in the Illinois complaint until such time as EGT obtained the legal rights
to disclose it, the information obtained under the Protective Order in this case was not being
'used."' (Doc. 104 at 4.) EGT has not provided any support for its contention that filing a

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Formerly named Niro Law
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complaint with redaction of protected information is not a violation of the Protective Order given
that the Protective Order expressly requires AEO and Confidential information to be :filed under
seal. (Doc.

53-1at~11.)

SKI argues that use of protected information alone, even without disclosure, is a violation
of the Protective Order. (Doc. No. 110. 5-6.) The Court agrees. Courts in this District have
found violations of similar protective orders where a party used protected information in another
action. Wolters Kluwer Fin. Servs. Inc. v. Scivantage, No. 07 CV 2352 (HB), 2007 WL
1498114, at *7-*8 (S.D.N.Y. May 23, 2007) (finding that the protective order which prohibited
use of "confidential" or "attorneys' eyes only" information to be used "in any other litigation
proceeding," barred the use of protected information to initiate a new action in another
jurisdiction.); In re Biovail Corp. Sec. Litig., 03cv8917 (RO) 247 F.R.D. 69, 70-71 (S.D.N.Y.
2007) (prohibiting the direct or indirect use of discovery material protected by the protective
order.) Courts in other jurisdictions have reached similar conclusions. Jazz Pharms., Inc. v.

Amneal Pharms., LLC, 13cv391(ES) (JAD), 2016 U.S. Dist. LEXIS 61373, *5-*7 (D.N.J. Jan.
22, 2016) (finding violations of a discovery confidentiality order which required that confidential
information be "used ... soley for the purposes of this litigation" where a party used the
knowledge of the contents from confidential documents to argue for discovery production in a
different case.); On Command Video Corp. v. LodgeNet Entm 't Corp., 976 F. Supp. 917, 922-23
(finding that "Plaintiffs use of protected information to file a separate state court lawsuit-as
opposed to this litigation-is tantamount to no compliance at all" and holding the plaintiff in
civil contempt.).
The plain language of the relevant terms prohibits EGT from using protected information
for any purpose other than its participation in this action. Because EGT did not seek permission

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from the Court, using the confidential and AEO information to file the Illinois complaint is a
violation of the Protective Order. Further, although EGT redacted the information in the Illinois
complaint, the Court finds that this was an additional violation of the Protective Order, which
requires that confidential and AEO information be filed under seal.
EGT argues that SKI's reading of the Protective Order is illogical because it would
preclude the use of information to bring a suit against Bluebird. (Doc. No. 104 at 8.) EGT claims
that since it cannot bring a suit against Bluebird in federal court, Bluebird would be immunized
from suit. (Id.) The Court disagrees. EGT failed to exercise its options to negotiate the
designations between the Parties or to request permission from the Court before filing its
complaint. (Doc. No. 53-1 at if 12.)
EGT has noted that "[a]ttempting to shield disclosure of wrongdoing by designating
information confidential-attorneys' eyes only may itself be sanctionable." (Doc. No. 104 at 1213) (internal quotation marks omitted.) Based on an email produced in discovery, EGT claims
that "'SKI gave confidential information regarding EGT to [B]luebird."' (Doc. No. 104 at 10.)
The Court is unable to make a determination on whether SKI has engaged in sanctionable
conduct, however, because EGT has failed to present sufficient evidence that SKI's designations
were done in bad faith.
EGT also argues that SKI has suffered no harm or prejudice from EGT's actions given
that the Illinois complaint was redacted and the only unredacted allegations were taken from the
publicly available Complaint in this action. EGT specifically notes that it moved to dismiss the
Illinois complaint within a day of being informed by SKI that it might have violated the
Protective Order. (Doc. No. 13.) This is a narrow definition of injury. While the actual

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information may not have been disclosed, SKI has been forced to use its resources to file this

motion to enforce the Protective Order_
The Court finds that EGT has violated the Protective Order by using in its Illinois
complaint AEO and confidential information it had obtained through discovery. The Court
GRANTS SKI' s request for an Order prohibiting EGT from further misuse of protected material.

The Court finds that monetary sanctions are appropriate for EGT's violation of the Protective
Order. In re Biovail Corp. Sec. Litig., 247 F.R.D. 69, 70-71(S.D.N.Y.2007) (awarding attorney
fees and expenses for bringing a motion for sanctions where a party initiated an action in a
different jurisdiction using information obtained under the protective order.)
SKI is also seeking the revocation of the Vitale Vickery Niro & Gasey LLP attorneys'
pro hac vice admissions and an order precluding EGT from using third-party documents

obtained from Third Rock in any substantive motion or at trial. (Doc. No. 102 at 10-18.)
Alternatively, SKI proposes that those attorneys be prohibited from further access to AEO
materials. SKI argues that the violation was knowing and willful as demonstrated by the fact
that the Parties had negotiated and briefed the scope of the Protective Order. (Doc. No. 102 at
11.) SKI asserts that this sanction is appropriate because the Protective Order has a "clear and
express prohibition on the use of discovery from this case for 'other purpose[ s] or any other
action."' (Id)
SKI argues that by violating the Protective Order, the Vitale Vickery Niro & Gasey LLP
attorneys have violated New York Rule of Professional Conduct 8.4 (c), which prohibits
attorneys from "engag[ing] in conduct involving dishonest, fraud, deceit or misrepresentation."
(Doc. No. 102 at 16.) The Court acknowledges that violations of a protective order have been
found to constitute a violation of Rule of Processional Conduct 8.4, see Peters v. Comm. On

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Grievances/or US. Dist. Court for S. Dist. Of New York, 748 F.3d 456, 459, 461-62 (2d Cir.
2014); In re Peters, 127 A.D.3d 103, 106-08 (First Dep't 2015). Due process requires that an
attorney be afforded notice and an opportunity to be heard before the client is denied counsel of
choice. In any case, revocation of the attorneys' pro hac vice status appears to be moot, because
this case has been dismissed. (Doc. No. 125.)
SKI has also requested that EGT be precluded from using Third Rock's documents that
were produced subject to the Protective Order in any substantive motion in the case and at trial.
(Doc. No. 102 at 17.) This issue is also moot given that this case has been terminated and there
will be no occasion for EGT to use the evidence in this case. Should EGT wish to use this
information in another action, it should follow the procedures established in the Protective Order
to request permission to use these documents or modify the Protective Order pursuant to
paragraphs 12 and 15 respectively. (Doc. No. 53-1.)
B. SKI's Second Motion for Sanctions
SKI argues that EGT violated the Protective Order by filing the New York complaint
because EGT "disclos[ed] information obtained only though Confidential and AEO designated
materials." (Doc. No. 136 at 10.) Additionally, because Girondi signed the New York
Complaint, SKI argues that EGT also violated the Protective Order by disclosing AEO
information to him. (Doc. No. 136 at 10.) Because EGT had previously challenged the
Confidential and AEO designations in its motion to unseal the proposed Second Amended
Complaint and because SKI had moved for sanctions for EGT's use of this information in the
Illinois complaint, SKI argues that EGT knew that the confidential information was subject to
the Protective Order. (Id. at 10-11.)

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EGT argues that the allegations containing the confidential information are "wholly
supported by an independent factual basis." (Doc. No. 141 at 2.) Paragraphs 52-54 of the New
York complaint explain how EGT alleges to have obtained the information:
52. SKI and Bluebird entered into a partnership for the purpose of wresting the rights to
the EGT Vector from EGT and ceding them to Bluebird, and SKI pressured EGT to
release such rights in furtherance of the partnership.
53. In a publicly filed motion to quash the deposition of Bluebird CEO Nick Leschly, in
the case of Errant Gene Therapeutics, LLC v. Sloan-Kettering Inst. for Cancer Research,
No. 15-CV-2044 (AJN), 2017 U.S. Dist. LEXIS 6990, Bluebird admitted: (1) Bluebird
was EGT's "main competitor" and (2) Bluebird entered into a separate agreement,
heretofore referred to as "the secret agreement," a secret agreement which was never
disclosed to EGT in the course of its dealings with SKI. EGT did not know and could not
have discovered such secret dealings otherwise, and EGT alleges that this agreement was
kept secret, by the design of both SKI and Bluebird, in order to wrest control of the EGT
Vector away from EGT and clear the path for Bluebird's development of its competing
vector.
54. The secret agreement precluded SKI from developing the EGT Vector with EGT or
any entity other than Bluebird. For example, in 2014, Biomarin Pharmaceutical, Inc., a
significant pharmaceutical company, approached SKI to seek to commercialize the EGT
Vector. Thereafter, Biomarin informed EGT that SKI was reticent to negotiate with
Biomarin due to preexisting contract rights and a purported option. At the time, EGT
believed that SKI was referring to EGT contract issues; it is now evident that the
existence of the secret agreement with Bluebird precluded SKI from doing a deal with
Biomarin and other third parties.
(New York Complaint iii! 52-54, Doc. No. 135-3.) EGT states that Bluebird's disclosure of the
agreement in the motion to quash "enabled Plaintiffs CEO Patrick Girondi to connect certain
past communications with SKI, Bluebird, and other third parties and events to the facts contained
in the motion to quash." (Doc. No. 141 at 2.) Thus, EGT denies that its counsel disclosed any
AEO information to Girondi. (Doc. No. 141 at 3.)
Given that the allegations in the New York complaint contain information that is also
contained in AEO documents, EGT has a heavy burden of demonstrating that Girondi "relied
solely upon an independently-developed factual basis to support its New York complaint." (Doc.
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No. 141at2.) This heavy burden cannot be satisfied merely through EGT's own attestation.
Independently verifiable information is necessary to substantiate EGT's claims. As SKI has
pointed out, EGT failed to provide a detailed account of the events Girondi claims to have served
as the basis for his inferences. The Girondi declaration does not explain how knowledge of an
agreement between SKI and Bluebird supported a conclusion that the agreement was formed "in
order to wrest control of the EGT Vector away from EGT and clear the path for Bluebird's
development of its competing vector;" or, more specifically, that the agreement "precluded SKI
from developing the EGT Vector with EGT or any entity other than Bluebird." (NY Complaint

iJiJ 52-54, Doc. No. 135-3 at 13.)
EGT also argues that it should not be sanctioned for filing the New York complaint
because it was expressly permitted to re-file its case in state court, by Judge Nathan's Order of
dismissal. (Doc. No. 124) However, the Order of dismissal did not excuse EGT from its duties
pursuant to the Protective Order, and the permission to re-file referred only to the case that had
been alleged up to that point and not to new allegations that had yet to be accepted in an
amended complaint.
Thus, the Court finds that EGT violated the Protective Order when it disclosed
information that was Confidential and AEO in its New York complaint and by sharing AEO
information with Girondi. The Court GRANTS SKI's request for Sanctions. The Court will not
certify the issue of contempt to the District Judge because the sanctions imposed by the Court
sufficiently addresses the misbehavior of EGT.
SKI also requests an Order requiring EGT to dismiss its New York State action with
prejudice. While the Court declines the invitation to order a dismissal, it notes that because EGT
must refrain from further misuse of the AEO and Confidential information obtained in this case,

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continuing to prosecute the New York action while avoiding further violation of this action's
Protective Order would he impractical if not impossible.

IV. CONCLUSION
For the foregoing reasons, the court GRANTS SKI's motions to for Sanctions and

DENIES its motion to hold EGT and its attorneys in contempt of Court. (Doc. Nos. 100 and
134.)

IT IS HEREBY ORDERED THAT:
1. EGT and its attorneys refrain from further misuse of the AEO and Confidential
information obtained in this case pursuant to the Protective Order.
2. EGT pay SKI's reasonable attorneys' fees and costs of bringing these two
motions for sanctions (Doc. Nos. 100 and 134.)
3. SKI submit hours and rates for the Court's approval on or before June 19, 2017.

SO ORDERED this 5th day of June 2017.
New York, New York

The Honorable Ronald L. Ellis
United States Magistrate Judge

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