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Cooper Hospital v. Sullivan

October 29, 1998

COOPER HOSPITAL/UNIVERSITY MEDICAL CENTER, COOPER HEALTHCARE SERVICES, INC., AND COOPER DATA SERVICES CORPORATION,
PLAINTIFFS,
V.
JOHN M. SULLIVAN, ET AL.,
DEFENDANTS.
COOPER HOSPITAL/UNIVERSITY MEDICAL CENTER, COOPER HEALTHCARE SERVICES, INC., AND COOPER DATA SERVICES CORPORATION,
PLAINTIFFS,
V.
FLEX/SYS TECHNOLOGY CORPORATION, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Stephen M. Orlofsky United States District Judge

HON. STEPHEN M. ORLOFSKY

OPINION

ORLOFSKY, District Judge

Plaintiffs, Cooper Hospital/University Medical Center, Cooper Healthcare Services, Inc., and Cooper Data Services Corporation (collectively "Cooper"), have moved before this Court for a protective order seeking to prevent Defendant, KPMG Peat Marwick, LLP ("Peat Marwick"), Defendant, Alan B. Reed, and Defendants, Flex/sys Corporation, Flex/sys Technology Corporation, Flex/sys (New Jersey) Corporation, Flex/sys Data Corporation-Cherry Hill, Donald G. Fellner, and Walter I. Tanenbaum (collectively "Flex/sys"), from publicly commenting upon or disseminating a document entitled "Report of the Ad Hoc Internal Control Committee of the Board of Trustees: The Cooper Health System" ("Report"), *fn1 which this Court ordered Cooper to produce in Cooper Hospital/University Medical Center, et al. v. Sullivan, et al., ___F.R.D. ___, 1998 WL 721242, at *10 (D.N.J. Oct. 15, 1998) ("Cooper I"). *fn2

This motion for a protective order represents Cooper's third bite at the apple in an unabashed attempt to delay and forestall the inevitable disclosure of the Report to Peat Marwick. *fn3 First, Magistrate Judge Robert B. Kugler ordered Cooper to produce the Report, denying its application for a protective order. See Cooper I, 1998 WL 721242, at *5. Second, Cooper appealed to this Court from that part of the Magistrate Judge's order compelling production of the Report, but not, ironically, the denial of its application for a protective order. See id. at *6. In Cooper I, I affirmed Magistrate Judge Kugler's decision. I stayed my Order compelling Cooper to produce the Report for fifteen days, because Cooper's counsel requested an opportunity to seek a protective order on "unspecified grounds." In staying my Order of October 15, 1998, I directed Cooper and Peat Marwick to brief the question of why a protective order based on "unspecified grounds" had not been waived by Cooper's failure to present these grounds to Magistrate Judge Kugler in the first instance.

Although Cooper now states that it intends "to make the Report available to the public along with a written statement on November 3, 1998[,]" it seeks a protective order from this Court to prevent Peat Marwick from "tak[ing] a public position with respect to the Report or otherwise engag[ing] in a public trial of the issues against Cooper and its management based on the Report." See Affidavit of Terrence W. Camp, Esq. (dated Oct. 23, 1998), ¶¶ 2, 11. In support of this motion, Cooper has all but ignored this Court's order to brief the issue of waiver, failed to address controlling adverse authority, and advanced what can only be described as a frivolous argument to restrict Peat Marwick's First Amendment rights. Notwithstanding my earlier admonition to Cooper's counsel not to engage in "dilatory tactics," See Cooper I, 1998 WL 721242, at *17, Cooper has persisted in its "stonewalling." Cooper's intransigence brings to mind what Justice Brandeis once observed in a similar context: "Sunlight is said to be the best of disinfectants . . . ." Louis D. Brandeis, Other People's Money 62 (1933). For the reasons set forth below, Cooper's motion for a protective order will be denied.

I. BACKGROUND

The facts and convoluted procedural history culminating in Cooper's second motion for a protective order are set forth in detail in this Court's October 15, 1998, opinion, Cooper Hospital/University Medical Center, et al. v. Sullivan, et al., ___F.R.D. ___, 1998 WL 721242, at *1 (D.N.J. Oct. 15, 1998), and, therefore, shall not be repeated here.

In response to a federal criminal investigation into an embezzlement scheme perpetrated by former Cooper executives, Cooper's Board of Trustees appointed an Ad Hoc Committee ("Committee") to review Cooper's internal financial procedures and controls. See id. at *2. The Committee employed the forensic accounting firm of Nihill & Reidley to review Cooper's financial documents, and the law firm of Saul, Ewing, Remick & Saul, LLP, as special counsel, to compile the Report. See Cooper I, 1998 WL 721242, at *2. The "Report was completed in November, 1996, and submitted to Cooper's Board of Trustees in January, 1997." Id.

On December 12, 1997, in its initial disclosures, Cooper identified the Report as a privileged document. See Cooper I, 1998 WL 721242, at *5. Peat Marwick, Flex/sys and Alan B. Reed moved before Magistrate Judge Kugler to compel production of the Report. See id. In response, Cooper:

opposed the joint application to compel production of the Report, arguing that the Report was protected by the work-product doctrine and the attorney-client privilege. In addition, Cooper filed a cross-application seeking a protective order on the grounds that the Report contained commercially sensitive material which was the product of self-critical analysis. Cooper I, 1998 WL 721242, at *5 (internal citations and footnote omitted). On May 7, 1998, Magistrate Judge Kugler granted the motion to compel production of the Report, and denied Cooper's cross application for a protective order. See id.

On May 22, 1998, Cooper appealed the Magistrate Judge's decision to this Court. See Cooper I, 1998 WL 721242, at *6. "Specifically, Cooper appeal[ed] from that portion of Magistrate Judge Kugler's order which [held] in pertinent part that `Cooper and the [United States and the State of New Jersey] were adversaries and thus the disclosure [of the Report] to the government resulted in the waiver of any work-product privilege which might have been asserted.'" Id. (quoting Plaintiffs' Notice of Appeal (filed May 22, 1998)). Cooper did not appeal "from the denial of its cross-application for a protective order based on the grounds that the Report contained commercially sensitive material, or the denial of its cross-application for a protective order based upon the assertion of the self-critical analysis privilege." Cooper I, 1998 WL 721242, at *6.

On October 15, 1998, I affirmed Magistrate Judge Kugler's decision, holding:

because the magistrate judge's predicate finding, that the United States and the State of New Jersey were Cooper's adversaries at the time the Report was disclosed, is not clearly erroneous, the magistrate's subsequent finding that Cooper waived the work-product privilege as to all adversaries is not clearly erroneous or contrary to law. Therefore, Magistrate Judge Kugler's order compelling Cooper to produce the Report will be affirmed. Cooper I , 1998 WL 721242, at *14.

In addition, "I [held] that Magistrate Judge Kugler's order compelling production of the Report must also be affirmed on the independent ground that the Report was not prepared primarily in anticipation of litigation[;]" and thus, ab initio, the Report was not shielded from discovery by the work-product privilege. Id. at *14-15.

In Cooper I, I also discussed the correspondence I received from Cooper's counsel prior to deciding the appeal from Magistrate Judge Kugler's order compelling production of the Report. See Cooper I, 1998 WL 721242, at *15-17. I wrote:

Cooper's counsel has now informed the Court that Cooper will move for a protective order if I affirm Magistrate Judge Kugler's order compelling disclosure of the Report on, as yet, unspecified grounds. Although, I intimate no opinion regarding the merits of a motion not yet before me, the fact that Cooper has not appealed the denial of its previous application for a protective order raises the question of whether a second application for a protective order based upon grounds not advanced before Magistrate Judge Kugler has been waived. See Lithuanian Commerce Corp. v. Sara Lee Hosiery, 177 F.R.D. 205, 209-213 (D.N.J. 1997) (Orlofsky, J.) (holding that any argument not first addressed to the magistrate judge may not be raised before the district court for the first time on appeal because it was waived). Cooper I, 1998 WL 721242, at *16.

Accordingly, in the event that Cooper filed a motion for a protective order with this Court, I ordered the parties "to address in their memoranda of law in support of and in opposition to Cooper's motion for a protective order the issue of waiver discussed in . . . this opinion." Cooper I, 1998 WL 721242, at *17.

As expected, on October 23, 1998, following my decision in Cooper I, Cooper filed its Notice of Motion for a Protective Order. See Plaintiffs' Notice of Motion for a Protective Order (filed Oct. 23, 1998). In a "Catch-22," Cooper continues to seek a protective order even though it plans to make the Report available to the public on November 3, 1998. See Affidavit of Terrence M. Camp, Esq., ¶ 2 (dated Oct. 23, 1998). Cooper contends that "[i]t should be protected from a sensationalistic and untimely trial in the press which may undermine public confidence . . ." in Cooper. See Plaintiffs' Brief in Support of Motion for a Protective Order ("Pls. Brief") at 2 (dated Oct. 23. 1998). Cooper further contends that Peat Marwick should be prohibited from "speaking about or disseminating information to the public" which it may have obtained outside the discovery process. See Pls. Brief at 15.

Conspicuously absent from Cooper's moving papers is any citation to, or a discussion of Lithuanian Commerce Corp. v. Sara Lee Hosiery, 177 F.R.D. 205, 209-213 (D.N.J. 1997), a case which I specifically ordered the parties to consider. See Cooper I, 1998 WL 721242, at *16.

In opposition to Cooper's motion for a protective order, Peat Marwick contends: (1) that "Cooper's failure to appeal . . . [the first] denial of its request for a protective order bars it from relitigating the issue now[;] . . .[(2) that] Cooper has failed to show good cause to justify the entry of a protective order[; and] . . . [(3) that] any protective order preventing Peat Marwick . . . from disseminating a public document dealing with issues of public concern would violate the First Amendment." See Peat Marwick's Brief in Opposition to Motion for Protective Order ("Defs. Brief") at 2 (filed Oct. 28, 1998).

II. DISCUSSION

A. Waiver

In Cooper I, I specifically directed the parties "to address in their memoranda of law in support of and in opposition to Cooper's motion for a protective order the issue of waiver discussed in [Lithuanian Commerce Corp. v. Sara Lee Hosiery, 177 F.R.D. 205, 209-13 (D.N.J. 1997) (Orlofsky, J.)]." Cooper I, 1998 WL 721242, at *16-17. Cooper does not mention Sara Lee in its moving papers, and its entire discussion of waiver consists ...


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