The opinion of the court was delivered by: Cathy L. Waldor, U.S.M.J.
CHAMBERS OF MARTIN LUTHER KING COURTHOUSE CATHY L. WALDOR 50 WALNUT ST. UNITED STATES MAGISTRATE JUDGE ROOM 4040 NEWARK, NJ 07101 973-776-7862
The Consolidated Securities Action,
Presently before the Court is the informal request of Lead Plaintiffs the Public Employees' Retirement System of Mississippi, Steven LeVan, Jerome Haber and Richard Reynolds, and Plaintiff Rhoda Kanter (collectively, "Plaintiffs") to compel several categories of discovery from Defendants (collectively, "Merck" or "Defendants") and Merck's opposition to same. (Docket Entry No. 325 ("Pls.' Br.")); Docket Entry No. 337 ("Defs.' Br.")). Plaintiffs seek to compel the following categories of documents: (1) documents produced in connection with any government investigation; (2) documents concerning the decline in Merck's stock price on November 1, 2004; (3) specific categories of documents from outside a January 1, 1998 through December 31, 2004 time period; (4) custodial files concerning VIOXX® ("VIOXX"); (5) a complete set of "audit files" for Merck's statistical database files concerning VIOXX; and (6) responsive documents stored on Merck's shared drives. The Court has conducted a thorough review of the parties' submissions and will address each document category in turn.
The parties are intimately familiar with the facts giving rise to this action. As such, the Court will provide facts only insofar as they are relevant to the pending dispute. This action arises out of the allegedly material false and misleading statements and omissions that Merck made to investors from May 21, 1999 through September 30, 2004 (the "Class Period") concerning the cardiovascular ("CV") safety and commercial viability of VIOXX that allegedly inflated the price of Merck stock throughout the Class Period.
The current disputes concern Defendants' responses to Plaintiffs' First Set of Requests for the Production of Documents, served by Plaintiffs on January 13, 2012 (the "Requests"). Before serving these Requests, the parties conducted several in-person meet-and-confer sessions to discuss the scope of Defendants' prior document productions in other related Derivative and ERISA litigations (the "Related Actions"). Additionally, as of June 2012, Plaintiffs have sought and obtained discovery of more than 24 million pages of documents relating to VIOXX. Discovery has since continued on a rolling basis. The following categories of document production remain contested.
Documents Previously Produced to the Government:
Plaintiffs request that Defendants produce any documents that they previously produced to the government and which are otherwise responsive to Plaintiffs' Requests. (Pls.' Br at 5-9).*fn1
Plaintiffs specifically seek to compel the following categories of documents: (1) privileged documents produced to the Department of Justice ("DOJ") or documents produced to the DOJ pursuant to a confidentiality and non-waiver agreement; (2) communications with the DOJ or documents created for the purpose of responding to the DOJ's investigation; and (3) documents sufficient to identify the Bates ranges, dates, search terms used, and custodians of any productions made to the government. (Id.).
A. Privileged Documents Produced to the DOJ Pursuant to a Confidentiality and Non-Waiver Agreement
Plaintiffs request privileged documents produced to the DOJ pursuant to a Confidentiality and Non-Waiver Agreement. Plaintiffs believe they are entitled to these documents despite the existence of a confidentiality agreement between Defendants and the DOJ. First, as Defendants have already produced the documents to the government, they are not privileged. To that end, the Third Circuit does not recognize the "selective waiver" doctrine. Accordingly, Merck's voluntary production of documents to the government operated as a complete waiver of any privilege that was otherwise applicable. Plaintiffs further argue that this production will not impose an undue burden on Defendants because Defendants have already gathered and produced the responsive documents. Defendants disagree with both of Plaintiffs' characterization of its agreement with the government and interpretation of the applicable case law. First, Merck's agreement with the DOJ was not simply a confidentiality agreement. Instead, Merck provided the DOJ with privileged documents pursuant to a confidentiality and non-waiver agreement. Second, Defendants submit that many circuits recognize selective waiver in similar suits where defendant's agreement with the government expressly preserved both confidentiality and the party's right to assert the privilege against third parties.
Plaintiffs rely heavily on the Third Circuit's decision in Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1431 (3d Cir. 1991) in arguing that Defendants waived any privilege or confidentiality interests they may have had when they produced these documents to the government. The Westinghouse Court addressed the question of:
Whether a party that discloses information protected by the attorney-client privilege and the work-product doctrine in order to cooperate with a government agency that is investigating it waives the privilege and the doctrine only as against the government, or waives them completely, thereby exposing the documents to civil discovery in litigation between the discloser and a third party.
951 F.2d 1414, 1417 (3d Cir. 1991).
In Westinghouse, plaintiffs alleged that defendant had obtained a large power plant contract in the Philippines by bribing a former government official. During discovery, the plaintiff sought documents generated during an internal investigation conducted by Westinghouse's outside counsel. The internal inquiry was taken in response to the SEC's investigation into whether Westinghouse had obtained the contract with bribes. Westinghouse disclosed the documents sought by the plaintiffs to the Securities and Exchange Commission ("SEC") and the DOJ in order to cooperate with their investigations. The Third Circuit held that, despite Westinghouse's claim that it had disclosed the information to the SEC and the DOJ in order to cooperate with the investigations, Westinghouse's disclosures waived the ...