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In re Valeant Pharmaceuticals International, Inc.

United States District Court, D. New Jersey

April 12, 2019

In re Valeant Pharmaceuticals International, Inc., Securities Litigation. In re Valeant Pharmaceuticals International, Inc., Third-Party Payor Litigation,


          Michael A. Shipp United States District Judge

         This matter comes before the Court upon two motions: (i) in the action with Docket No. 15-7658 (the "Securities Class Action"), Class Plaintiffs' Motion to Compel (ECF No. 386)[1]and (ii) in the action with Docket No. 16-3087 (the "TPP Litigation"), Andrew Davenport and Philidor RX Services. LLC's ("Philidor RX") Motion to Continue Stay (TPP Litigation, ECF No. 91). In the Securities Class Action, Philidor RX and Philidor Entities[2] (collectively, "Philidor") opposed (ECF No. 391), and Class Plaintiffs sought leave to file a reply (ECF No. 394)[3]In the TPP Litigation, Plaintiffs opposed (TPP Litigation, ECF No. 93), and Andrew Davenport and Philidor RX replied (TPP Litigation, ECF No. 95), The Court decides the instant motions together because of the common parties, overlapping issues, and similar arguments. The Court has carefully considered the parties' submissions[4] and decides the motions without oral argument pursuant to Local Civil Rule 78.1. For the reasons set forth below. Class Plaintiffs' Motion to Compel is granted and Andrew Davenport and Philidor RX's Motion to Continue Stay is denied.

         I. BACKGROUND

         The parties are familiar with the factual background of these matters. The Court, accordingly, recounts the procedural history only to the extent necessaty to decide the instant motions.

         A. The Securities Class Action

         Class Plaintiffs seek documents and electronically stored information from Philidor. (See Exs. 2-35, ECF Nos. 386-4 to -37.) Class Plaintiffs state that on December 3, 2015, they issued subpoenas to Philidor, and issued subpoenas to the Philidor I utities sometime between June and August 2017. (Pis/ Moving Br. 4, ECF No. 386-1.) Class Plaintiffs state that on December 14, 2015, Philidor served objections and responses and indicated that it would produce documents responsive to certain of Class Plaintiffs" requests. (Id. at 5.) On July 11, 2016, the Honorable Lois H. Goodman, U.S.M.J.. vacated a previous order granting Class Plaintiffs expedited discovery and she granted a stay of the enforcement of the subpoenas issued to Philidor. (Order, ECF No. 143.)

         On October 19, 2017, the Court issued an order to show cause why certain proceedings, now consolidated into the Securities Class Action, should not be stayed. (See Order to Show Cause. ECF No. 273.) On November 29, 2017, pursuant to the parties' stipulation, the Court stayed all proceedings and discovery, except for certain exceptions, until the conclusion of the criminal trial in United States v. Tanner, etui, No. 17-61 (S.D.N.Y.) (the "Tanner Matter"). (Order, ECF No. 291.)

         On May 30, 2018, the parties advised the Court that guilty verdicts had been entered in the Tanner Matter and requested that the November 29, 2017 stay be lifted as of June 5, 2018. (Correspondence, ECF No. 315.) On June 5, 201.8, the Court lifted die discovery stay in the Securities Class Action. (Order, ECF No. 316.) On June 5, 2018, in the TPP Litigation, the parties submitted joint correspondence indicating that they disputed whether the Court's August 9. 2017 stay of all proceedings should be continued in light of a pending appeal in the Tanner Matter. (TPP Litigation, Correspondence, ECF No. 82.) On June 6, 2018, Philidor advised Class Plaintiffs' counsel that it would rely on correspondence in the TPP Litigation and would not produce any documents in response to the subpoenas. (Class Pis.' Moving Br. 7, ECF No. 386-1.)

         On October 26, 2018. Class Plaintiffs fded the instant Motion to Compel Philidor to comply with the subpoenas. (Mot. to Compel, ECF No. 386.) On November 5, 2018, Philidor opposed Class Plaintiffs' Motion to Compel. (Philidor`s Opp'n Br., ECF No. 391.) On November 12, 2018, Class Plaintiffs sought leave to file a reply brief attaching the same to their correspondence. (ECF No. 394.) On November 16, 2018, Valeant filed correspondence taking no position with respect to Class Plaintiffs' motion to compel. (Correspondence, ECF No. 400.) In the same correspondence, Valeant disputed Class Plaintiffs' suggestion that it controls or has access to Philidor`s documents. (Id.) Specifically, Valeant asserts that '`[a]lthough it received approximately 800 documents in late 2015 and early 2016, Valeant does not control or otherwise have access to Philidor`s documents." (Id., )

         B. The TPP Litigation

         In the TPP Litigation, on August 9, 2017, the Court granted Matthew Davenport, Andrew Davenport, and Philidor RX`s Motions to Stay. (TPP Litigation, Order, ECF No. 74.) On September 28, 2018. Judge Goodman ordered the parties to file any motion seeking to continue the stay. (TPP Litigation, Order, ECF No. 90.) On October 12, 2018. Andrew Davenport and Philidor RX ("Moving Defendants") filed the instant Motion to Continue Stay. (TPP Litigation, Mot. to Continue Stay, ECF No. 91.) All Plaintiffs opposed (TPP Litigation, Pis.' Opp'n Br., ECF No. 93). and Moving Defendants replied (TPP Litigation. Defs.` Reply Br. ECF No. 95).


         Class Plaintiffs argue that Philidor has inappropriately shifted Phitidor"s burden to move to quash or modify the subpoenas and forced Class Plaintiff;- to file the instant motion to compel. (Class Pls.` Moving Br. 10.) Thus, Class Plaintiffs frame the issue as whether a continued stay of discovery is appropriate and insist that applying the factors set forth in Walsh Securities, Inc. v. Crista Property Management, 7 F.Supp.2d 523, 526 (D.`N.J. 1998), a stay is not warranted. (Id.) Specifically, Plaintiffs argue that: (1) Philidor has failed to meet its burden of justifying a further stay; (2) Courts routinely reject indefinite stays pending the resolution of criminal appeals; (3) the lengthy nature of a stay pending resolution of any appeal in the Tanner Matter and consequent delay in necessary discovery is prejudicial; (4) the responsive documents are not protected by the Fifth Amendment: and (5) no testimony is being sought from Philidor. (See Id. 9-20.)

         Philidor opposes Class Plaintiffs' motion, arguing that a stay of discovery should continue in the TPP Litigation and compelling Philidor to respond to Class Plaintiffs' subpoenas "would create the same risk of prejudice to Andrew Davenport and Philidor that allowing discovery to proceed in the TPP Litigation would create." (Philidor's Opp'n Br. 1-2.) Philidor rejects Class Plaintiffs' burden shifting argument and insists that a mo ion to quash the subpoenas was not necessary given the parties' failure to address the subpoena:- in their request to the Court to lift the discovery stay. (Id. at 6.) Philidor next argues that the continued stay of discovery is warranted until after the Tanner Matter is completely resolved, including any criminal appeals, because courts in this district have held that a stay of civil proceedings pending the appeal of a guilty verdict is an appropriate safeguard of a criminal defendant's Fifth Amendment rights. (Id. at 8-9 (citing Seeman v. Locane No. 10-6597, 2015 WL 5822806, at *l (D.N J. Oct. I, 2015); Edwards v. Serrecchia, 15-3569, slip op. at 1 (D.NJ. Aug. 18, 2016)).) Philidor further argues that the remaining Walsh factors favor continuing the stay. (Id. at 9-11.)

         Philidor also argues that pursuant to Federal Rule of Civil Procedure 45, [5] the Court should stay the subpoenas because compliance would place an undue burden on Philidor. (Id. at 12.) In support of its undue burden argument, Philidor first contend: that Class Plaintiffs have no need for immediate production by Philidor because Class Plaintiffs 'have alleged they can obtain similar documentation from Valeant[, ]" and if Class Plaintiffs' allegations are true, Class Plaintiffs "can simply issue a discovery request under [Rule 34] to Valeant,' (Id. at 13-14.) Next, Philidor argues that the nature of the litigation and the delays in discovery result in the conclusion that "there is no compelling reason to compel immediate production by Philidor.'` (Id., ) Finally, Philidor argues that "requiring Philidor to respond to the subpoenas now would impose a significant risk to Philidor and Andrew Davenport." (Id. at 15.)

         In the TPP Litigation. Philidor repeats the same arguments regarding the satisfaction of the Walsh factors in support of its Motion to Continue Stay. (See TPP Litigation, Defs.' Moving Br.. ECF No. 91 -1.) TPP Plaintiffs aver that a stay of discovery i i its entirety is overbroad and request that the Court deny Philidor's motion or limit the stay to only non-documentary evidence from Andrew Davenport. (TPP Litigation. Pls.` Opp`n Br. 2, E< `F No. 93.) TPP Plaintiffs cite J.C. Penney Life Insurance Company v. Houghton, No. 86-2637 1986 WL 14732 (E.D. Pa. Dec. 24. 1986), in which the Court denied a stay of discovery sough by defendants who were appealing their criminal convictions stemming from issues overlapping those in a civil action. In Houghton, the court entered a protective order limited to "testimonial discovery concerning matters for which the defendants faced the possibility of additional criminal charges." (Id. at 6.) TPP Plaintiffs also note that the tailored discovery approach adopted in Locane is similar, if not a mirror of, the approach proposed by TPP Plaintiffs. (Id.) Moreover, TPP Plaintiffs aver that in Locane, the Honorable Anne E. Thompson. U.S.D.J, "expressly noted that permitting all other discovery to proceed avoided undue prejudice to plaintiffs." (Id.)

         Turning to the Walsh factors, TPP Plaintiffs argue that: (1) because the theories of liability in the criminal matter and civil matter are fundamentally different, overlap between the two cases is insignificant, and Davenport is the only overlapping defendant; (2) the delay of litigation is not prejudicial to Philidor, but will be prejudicial to Plaintiffs because it will delay their opportunity for their case to be heard; (3) delay weighs against the Court s interest in keeping litigation moving to conclusion without unnecessary delay; and (4) delay weighs against the public interest because "Congress designed RICO to encourage private civi. litigation to supplement criminal prosecution." (Id. at 8-12.) TPP Plaintiffs also argue that corporations, like Philidor, do not have a Fifth Amendment right against self-incrimination. (Id. a 9 (citing De'Omilia Plastic Surgery, PC v. Sweeton, No. 12-6415, 2013 WL 6070037, at *6 (D.N.J. Nov. 18, 2013)).)


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class Plaintiffs&#39; argument that Philidor inappropriately failed to respond to facially valid subpoenas after the Court&#39;s June 5, 2018 Order lifting the discovery stay in the Securities Class Action has merit. Indeed, Rule 45(d) provides a comprehensive scheme for objecting to, modifying, or quashing a subpoena. Philidor did not seek to avail itself of Rule 45&#39;s protection despite receiving correspondence from Class Plaintiffs ii July 2018 indicating that, in Class Plaintiffs&#39; view, the subpoenas were valid and Philidor was obligated to respond. (See Ex. 37, ECF No. 386-39.) On the other hand, Philidor is correct that the stay in the TPP ...

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