The opinion of the court was delivered by: Debevoise, Senior District Judge
Plaintiffs' case arises out of allegations of deception and bad faith conduct by a health insurance company. Plaintiffs Beverly Clark, Jesse J. Paul, Warren Gold, Linda M. Cusanelli, Carole L. Walcher, and Terri L. Drogell have filed a class action complaint against The Prudential Insurance Company of America ("Prudential") alleging that Prudential concealed a fatal actuarial defect in a health insurance plan sold across the nation. Presently before the Court is Plaintiffs' appeal of a discovery order dated March 1, 2011 (the "March 2011" order) denying Plaintiff's challenge to the confidentiality designations of fifteen documents. Plaintiffs argue that the documents are not protectable as confidential material under Rule 26(c) and that the current designation is unsupportable.
For the reasons set forth below, the March 2011 Order is REVERSED as to the designation of the fifteen documents at issue.
The facts of this case and procedural history are discussed at great
length in several prior opinions dated September 14, 2009 (Doc. No.
39), September 9, 2010 (Doc. No. 98), and March 15, 2011 (Doc. No.
156). The essential details are as follows. Plaintiffs are former
customers of Prudential who purchased health insurance plans marketed
under the name Coordinated Health Insurance Program*fn1
("CHIP"). Prudential sold CHIP throughout the United States
from 1973 through 1981. The terms of CHIP permitted purchasers to
continue to renew the policies
indefinitely. However, Plaintiffs allege that when Prudential ceased
selling CHIP in 1981, it destabilized the risk pool for existing
policyholders, rendering it a virtual certainty that premiums would
spiral out of control until all plan participants were forced to drop
their coverage. Plaintiffs further allege that Prudential concealed
this fact from CHIP policyholders, causing them to pay above-market
premiums for many years and to forego the opportunity to purchase
alternative health care coverage while they were healthy enough to
The case has seen extensive motion practice and several modification to Plaintiffs' putative claims and class representatives. On February 16, 2011, Plaintiffs filed their Fifth Amended Complaint ("5AC") alleging (1) fraudulent misrepresentation, on behalf of a Multi-State Fraud Class; (2) fraudulent omissions, on behalf of a Multi-State Fraud Class; (3) breach of the duty of good faith and fair dealing, on behalf of a California Subclass; and (4) violation of California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200, et seq., on behalf of a California Subclass. (Doc. No. 140).
Discovery has been ongoing since the fall of 2009, much of it directed at Prudential's business records. On March 22, 2010, the Court approved a Discovery Confidentiality Order ("DCO") that was previously negotiated and agreed-to by the parties. (Doc. No. 71). The DCO permits the parties to designate material as "Confidential Business Information" if it includes:
(i) Sensitive nonpublic financial information and statements;
(ii) Business or technical information that, if disclosed to the general public or competitors of any Party could reasonably be expected to cause competitive harm to that Party;
(iv) Proprietary business information, including business methods or practices, business plans and records of internal deliberations and decision-making, and policies and procedures not generally published;
(v) Individual personal information that is protected from disclosure under state or federal law, including identifying personal information, about any Party, any employee of any party, or any third party;
(vi) Any other information, the disclosure of which would, in the good faith judgment of the Party designating the information as Confidential Materials, reasonably be expected to cause competitive harm to that Party and be detrimental to the conduct of that Party's business or the business of any of that Party's customers or clients, or would cause one or more of the Parties substantial harm.
Pursuant to the DCO, the parties are required to prevent documents designated as "Confidential Business Information" from becoming a part of the public record. Cognizant of Court rules regarding sealed filings, the DCO does not explicitly instruct the parties to file designated documents under seal, but the confidentiality obligations that it imposes effectively requires them to do so. The DCO also reaffirms that in adjudicating disputes over the designation of documents, the designating party shall have the burden of demonstrating that the material is deserving of protection.
In August of 2010, Plaintiffs asked Prudential to remove the confidentiality designation on 15 documents*fn2 previously produced by Prudential. (Pl. Ex. 29). Prudential refused to do so, claiming that the documents reflected "proprietary business information." (Pl. Ex. 30). In October, the parties took the dispute to Judge Shipp, writing a joint letter dated October 19, 2010 that attached the relevant documents and included arguments from both sides. (Doc. No. 108).
On March 1, 2011, Judge Shipp issued an order denying Plaintiff's challenge. (Doc. No. 147). The March 2011 order did not articulate the reasoning behind the decision. Plaintiffs now appeal Judge Shipp's decision and ask this Court to find that the documents are not entitled to protection under Rule 26(c).
A Magistrate Judge's decision is to be overturned only to the extent that the ruling is "clearly erroneous or contrary to law." L. Civ. R. 72.1(c)(1)(A). The burden of showing that a ruling is "clearly erroneous or contrary to law rests with the party filing the appeal." Marks v. Struble, 347 F. Supp. 2d 136, 149 (D.N.J. 2004). A finding is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Dome Petroleum Ltd. v. Employers Mut. Liab. Ins. Co., 131 F.R.D. 63, 65 (D.N.J. 1990) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). Moreover, "[a] ruling is contrary to law if the magistrate judge has misinterpreted or misapplied applicable law." Pharmaceutical Sales and Consulting Corp. v. J.W.S. Delavau Co., Inc., 106 F.Supp.2d 761, 764 (D.N.J. 2000).
Where an appeal seeks review of a matter within the purview of the Magistrate Judge, such as a discovery dispute, an even more deferential standard, the "abuse of discretion standard" must be applied. Kounelis v. Sherrer, 529 F.Supp.2d 503, 518 (D.N.J. 2008) ("[w]here a magistrate judge is authorized to exercise his or her discretion, the decision will be reversed only for an abuse of discretion."); see also Holmes v. Pension Plan of Bethlehem Steel Corp., 213 F.3d 124, 138 (3d Cir. 2000) (discovery orders reviewed for abuse of discretion). An abuse of discretion occurs "when the judicial action is arbitrary, fanciful or unreasonable, which is another way of saying that discretion is abused only where no reasonable man would take the view adopted by the trial court. If reasonable men could differ as to the propriety of the action taken by the trial court, then it cannot be said that the trial court abused its discretion." Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 115 (3d Cir. 1976).
Applying this deferential standard, this Court will examine each document to determine whether confidentiality protection was appropriately granted. As the March 2011 order does not articulate its reasoning, the Court is guided only by the Federal Rules and ...