March 2, 2020 / 9:08 PM / a month ago

SCOTUS stays discovery in sweeping antitrust MDL v. generic drugmakers

(Reuters) - Is the U.S. Supreme Court about to get involved in a messy dispute about electronic discovery?

On Friday, the court granted a stay to nearly three dozen generic pharmaceutical companies that are defendants in a vast antitrust case alleging that they rigged the market for more than 175 drugs. The stay postpones a March 9 deadline for the companies to produce millions of documents that contain such seemingly innocuous search terms as “call me”; “offer”; “heads up”; “speak”; “spoke” and “in person,” without prior screening for relevance. The drug companies argued in their stay application that they would suffer irreparable harm if they were forced to disclose sensitive corporate documents that may turn out to have nothing to do with the price-fixing allegations in the multidistrict litigation. On the same day that they filed the stay application, the defendants also filed a petition (2020 WL 749132) for Supreme Court review of the decision in which the 3rd U.S. Circuit Court of Appeals refused to halt the discovery order.

Plaintiffs in the generics price-fixing MDL – including 54 states, territories and commonwealths as well as dozens of name healthcare funds, drug cooperatives, wholesale pharmacy chains acting as named plaintiffs in class actions – opposed the drugmakers’ stay request, arguing (among other things) that the Supreme Court should not slow down this highly complex litigation by involving itself in a fact-specific discovery dispute. In an email, a spokeswoman for the Connecticut Attorney General, whose office was counsel of record for the plaintiffs opposing a stay, said Friday’s stay is just temporary and “does not relate to the merits of our case.”

The drugmakers’ counsel of record at the Supreme Court, Michael McConnell of Wilson Sonsini Goodrich & Rosati, did not respond to my email request for comment.

It’s extremely rare, as you know, for the Supreme Court to involve itself in discovery disputes – and even rarer to grant the extraordinary relief of a stay to block discovery. The plaintiffs’ brief opposing the stay said the only recent case in which the justices have stepped in to stay a discovery order was in 2017’s In re U.S. (138 S. Ct. 371), in which the White House had been ordered to turn over documents related to the rescission of the Deferred Action for Childhood Arrivals program. The plaintiffs called that “a very different and readily distinguishable circumstance” from a discovery order issued in sprawling private litigation by a trial judge who has been managing the case for years.

Discovery in the MDL began to heat up last year, after U.S. District Judge Cynthia Rufe of Philadelphia refused to dismiss big chunks of the plaintiffs’ cases. As the Connecticut AG explained in the plaintiffs’ opposition to the stay motion at the Supreme Court, state and federal regulators have been conducting their own investigation of the generics market alongside the MDL. In early 2019, Judge Rufe ruled that MDL plaintiffs could see materials that the drugmakers had turned over to state AGs – but included a “clawback” provision that allowed defendants to reclaim documents that fell outside of discovery parameters. Defendants tried to claw back more than 150,000 documents that they alleged were not relevant in the MDL. Plaintiffs protested – and the defendants, according to plaintiffs’ Supreme Court brief, ultimately withdrew their claw back demand on two-thirds of the documents.

Last fall, Judge Rufe ordered a similar process for discovery turned over directly from defendants. She ruled that the drug companies’ records custodians must produce all materials that contain agreed-upon search terms, conducting reviews only for privilege but not for relevance or responsiveness. But she included a provision allowing the companies to claw back confidential or irrelevant documents within 120 days. (The precise search terms are not clear from the Supreme Court stay briefing; defendants said plaintiffs were fishing for terms as vague and innocent as “coffee” but plaintiffs said they had to include seemingly innocuous words and phrases because of the nature of the alleged collusion. After defendants filed their stay application at the Supreme Court, the two sides apparently agreed on search terms but neither has disclosed the list.)

The drug companies asked the 3rd Circuit for a writ of mandamus, arguing that Judge Rufe’s order ignored the requirement in the Federal Rules of Civil Procedure that documents must be relevant to be subject to discovery. In a short, unpublished order in December, Judges Patty Shwartz, Luis Restrepo and Peter Phipps refused to grant mandamus, finding that trial courts have “wide latitude in controlling discovery,” and that Judge Rufe’s confidentiality and claw back provisions would safeguard defendants’ trade secrets and irrelevant personal and business information.

Judge Phipps dissented. “Even with that clawback provision, the order constitutes a serious and exceptional error,” he wrote in a footnote to the majority order. “Sequence is important in civil discovery. A party has the option of objecting to the production of documents on responsiveness and relevance grounds before producing them ... The discovery order here contravenes that fundamental principle.”

The drugmakers, whose Supreme Court petition has already gotten amicus support from the U.S Chamber of Commerce and other business groups, argue that the 3rd Circuit stands alone among federal appellate courts in allowing a trial judge to order the production of documents “that are neither relevant nor responsive” from defendants that have not engaged in discovery misconduct. They contend this is an issue of exceptional importance in civil procedure.

Though the MDL plaintiffs haven’t yet filed their brief opposing drugmakers’ petition for Supreme Court review, their opposition to a Supreme Court stay of Judge Rufe’s order emphasized that the trial judge issued a highly fact-specific order. Judge Rufe, they said, understood that documents relevant to the alleged collusion among drugmakers might appear to be innocuous outside of their proper context. The judge also saw defendants complain about irrelevance in their attempt to claw back material from the state AGs’ investigation – and then saw those same defendants drop most of their claw back demands. There’s simply no reason, according to the plaintiffs, for the Supreme Court to second-guess the trial judge on a discovery ruling that depends so heavily on the unique circumstances of this litigation.

The mere granting of a stay by the Supreme Court is no guarantee that the justices will vote to hear the discovery dispute. But it does suggest the case has captured the attention at least of Justice Samuel Alito, who oversees the 3rd Circuit. Stay tuned.

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