Federal Trade Commission v. Reckitt Benckiser Pharmaceuticals, Inc., No. 3:2014mc00005 - Document 42 (E.D. Va. 2015)
Court Description: MEMORANDUM OPINION. See Opinion for details. Signed by District Judge Robert E. Payne on 03/09/2015. (ccol, )
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Federal Trade Commission v. Reckitt Benckiser Pharmaceuticals, Inc. Doc. 42 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA 1 !r^ Richmond Division J MAR 1 0 2015 1 FEDERAL TRADE COMMISSION, L CLERK, U.S. DiSTR.CT COUm Plaintiff, RICHMOND, VA Misc. V. RECKITT [J J No. 3:14mc5 BENCKISER PHARMACEUTICALS, INC., Defendant. MEMORANDUM OPINION This matter FEDERAL TRADE INVESTIGATIVE COMMISSION'S is before the COMMISSION DEMAND MOTION Court FOR AN (Docket TO No. ENFORCE CIVIL MEMORANDUM IN SUPPORT THEREOF on the ORDER 2), PETITION THE ENFORCING CIVIL FEDERAL TRADE the INVESTIGATIVE (Docket No. OF DEMAND 38),^ the AND claim of attorney-client privilege in response to the Civil Investigative Demand ("CID") made by Reckitt Benckiser Pharmaceuticals, Inc. ("Reckitt"), and the Court's ORDER TO SHOW CAUSE (Docket No. 6, amended in Docket No. 20). BACKGROUND On June issued a determine 13, CID to whether 2013, the Reckitt Reckitt Federal pursuant had to Trade Commission which the engaged in FTC unfair ("FTC") sought to methods of ^ Counsel are instructed that motions and memoranda are entirely separate documents with different legal significance and thus are not to be melded into a single document. Dockets.Justia.com competition with respect to its branded drug, Suboxone. In particular, the FTC is: Investigating whether Reckitt abused public regulatory processes, including filing a citizen petition with the U.S. Food and Drug Administration {"FDA") and negotiating with competing manufacturers, to maintain its monopoly in the market for Suboxone, an opioid treatment distributed through prescription, rather than by clinic-based methods. PETITION OF THE FEDERAL TRADE COMMISSION FOR AN ORDER ENFORCING CIVIL INVESTIGATIVE DEMAND (Docket No. 2), p. 1 ("FTC Petition"). In response documents, but to the CID, has withheld Reckitt produced almost approximately the grounds of attorney-client privilege. withheld documents as consisting of: 28,000 600,000 documents on Reckitt describes the "(a) emails containing confidential requests made by Reckitt to its attorneys seeking legal advice regarding the content and preparation of various documents; (b) drafts of those various documents accompanying these confidential requests provided by Reckitt to its lawyers for review; (c) comments, notes, and mark-ups of the draft documents prepared by Reckitt's counsel and provided to Reckitt; and (d) draft letters, memoranda, documents prepared by Reckitt's position statements and other attorneys and shared with Reckitt in the course of providing legal advice." Docket No. 33, at 8. The FTC describes the documents as "drafts and other documents relating to [the] petition, including draft memoranda, draft letters, draft press releases, draft documents, and draft reports, among others." public relations Docket No. 24, at 6. The FTC requiring Petition Reckitt to asked produce the Court to the to FTC issue the Reckitt has withheld on ground of privilege. an order documents that Specifically, the FTC contends that certain types of documents are not privileged, namely: "(1) published; (3) drafts of documents published or intended to be (2) attorney notes or edits related to those drafts; emails related to or accompanying the drafts; and (4) attorney advice provided based on the drafts, such as in emails and memoranda." Cause, that was at later 9. The Court issued an Order to Show amended, scheduling a hearing privilege issue. Docket No. 6; Docket No. 20. MEMORANDUM IN COMMISSION FOR (Docket No. 24). has replied review. SUPPORT AN ORDER OF PETITION ENFORCING OF CIVIL on the The FTC filed a THE FEDERAL TRADE INGESTIGATIVE DEMAND Reckitt has responded (Docket No. 25); the FTC (Docket Thereafter, No. 35) the FTC, and the issue is now ripe for acting under the erroneous belief that it prevailed on its motion for an order enforcing the CID (Docket No. 2) and to enforcement was required, MOTION TO ENFORCE CIVIL elaborate on its view that blanket filed the FEDERAL TRADE COMMISSION'S INVESTIGATIVE DEMAND AND MEMORANDUM IN SUPPORT THEREOF (Docket No. 38) which also has been fully briefed and is ripe for review. DISCUSSION I. Existence Of The Claimed Privilege Reckitt argues that it cannot be required to produce the documents sought by the FTC because those documents, which "includ[e] draft memoranda, draft letters, draft press releases, draft public others", relations documents, and draft reports, among are protected from disclosure by the attorney-client privilege. Docket No. privilege applies, 24 it at 6. affords "When the attorney-client confidential communications between lawyer and client complete protection from disclosure." In re Grand Jury Subpoena (4th Cir. 2003) (Grand Jury 2003) , 341 F. 3d 331, 335 (internal citations and quotations omitted). In the Fourth Circuit, the attorney-client privilege: ...applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication the bar of a was made (a) is a member of court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates informed to a (a) fact of by his which client the (b) attorney was without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. Id. (quoting United States v. Jones, 696 F.2d 1069, 1072 (4th Cir. 1982 The (per curium))). proponent carries the burden of establishing the existence of the attorney-client relationship, the applicability of the privilege to the specific communication at issue, and the absence of waiver. Jones, full Grand Jury 2003, 341 F. 3d at 335 (quoting 696 F.2d at 1072). "Because this privilege impedes the and free discovery of the truth, it must be narrowly construed and recognized only to the very limited extent that excluding relevant evidence has a public good transcending the normally predominant principal of utilizing all rational means for ascertaining truth." The FTC argues Grand Jury 2003, 341 F.3d at 335. that attorney-client privilege does not apply to the withheld documents because "the Fourth Circuit has long held that 'the attorney-client privilege does not apply to communications disclosure'", in connection which with would include here a proposed Reckitt's public published citizen petition, and the other documents that it seelcs in the FTC Seal, Petition. Docket 33 F.3d 342, with that point, the No. 354 24 (citing United (4th Cir. 1994)). States v. Under Reckitt takes issue arguing that the Fourth Circuit has rejected FTC's "purely legal argument" and instead has recognized "the distinction between confidential communications regarding a document and the later publication of the document itself." Docket No. 33, at 17. Reckitt further argues that the privilege is inapplicable only when the attorneys serve "as mere conduits of information to be disclosed publicly" rather than as providers of legal advice, and that this distinction turns on the client's expectations of confidentiality. Id. at 18, 22 (citing Grand Jury 2003). In the the mere Fourth Circuit, relationship of "it is the unquestioned rule that attorney-client presumption of confidentiality." 748 F.2d 871, 875 (4th Cir. does not warrant a United States v. (Under Seal), 1984). Instead, "the privilege applies only when the persons claiming the privilege [have] as a client consulted an attorney for the purpose of securing a legal opinion or services." I^ Further, "even where the confidential communications of the client are present, privilege will not apply when disclosure is intended." Real Estate Income Fund, F.R.D. 398, 412-14 Inc. v. Neuberger Berman Lola Brown Trust No. IB, 230 (Dist. Md. 2005). The Fourth Circuit has held that attorney-client privilege "does not apply to the situation where it is the intention or understanding of the client that the communication is to be made known to others." In re Grand Jury Proceedings, 1356 (4th Cir. 1984). satisfy the 727 F.2d 1352, This is because that situation does not requirement that a communication attorney-client privilege be confidential. falling under To determine whether confidentiality existence of was the intended, "[r]ather attorney-client than look to the or to the relationship existence or absence of a specific request for confidentiality, a court must look to the services which the attorney has been employed to provide, and determine if those services would reasonably be expected to entail the publication of the client's communications." United States v. (Under Seal), 748 F.2d at 875 (holding that a client retaining an attorney to investigate only the possibility of filing papers did not have the required intent to publish) ; See also In re Grand Jury Proceedings, 727 F.2d at 1358 prospectus (holding that, when a client decides to publish a before retaining an attorney, that client has demonstrated the required intent to publish and attorney client privilege does not apply). The Fourth Circuit has also held that, "if a client communicates information to his attorney with the understanding that the information information, was to be States V. will as well as published' Under Seal, (Under Seal), c l a r i f i e d that: be revealed to others, 'the details underlying the data which will not enjoy the privilege." 33 that F.3d at 354 748 F.2d at 875). United (quoting United States v. The Court of Appeals further "the details underlying the communications published relating are the the the document... to be published containing data, all preliminary drafts of the any the data document, and containing preparation material necessary to the of the document. Copies of other documents, attorney's data, notes the contents of which were necessary to published document the preparation will of the lose also the privilege." United States v. "if any of (Under Seal), the 748 F.2d at 875, non-privileged documents n.7. However, contain client communications not directly related to the published data, those communications, if otherwise privileged, must be removed by the reviewing court before the document may be produced." The determination of (1) what services the Id. lawyer was employed to provide and (2) the client's understanding whether the information will be revealed to others are both matters of fact. Thus, unless the parties stipulate to those points or they are not contested, decisions on both points must be based on record evidence. Reckitt published argues documents that do the not communications lose their underlying protection under the the attorney-client privilege because they have the status of "legal advice" that the company intended to be confidential. It contends that the attorney-client privilege does not exist when the attorney serves as a "mere conduit" for communication information to the public and that where the attorney provides 8 "legal advice regarding the content of various documents," the attorney-client privilege applies in full force. at 22.^ Reckitt's positions misapprehend Docket No. 33, the law in this circuit. As discussed above, relevant inquiry unaltered whether, not information at together, is the the Fourth Circuit has held that the time whether through the an the client merely attorney to attorney and the client funneled public, were but working the client had enlisted the attorney's services in order to prepare a document that would eventually be released to the public. If the client has solicited the attorney's services to facilitate the production of a public document, Circuit has extend to held that the attorney-client the published data and the the Fourth privilege details does not underlying it. That, of course, could include any of the documents that Reckitt has labeled "legal advice", if the "legal advice" qualifies as a detail underlying the published data. Reckitt also argues that the most recent case on point. In re: Grand Jury Subpoena 341 F.3d 331 attorney-client (4th Cir. privilege 2003), to the weighs Fourth Circuit ("Grand Jury 2003"), in documents favor of extending that it seeks to ^ The parties agree that the question here is whether the privilege exists, not whether a privilege has been waived. See Oral Argument Transcript, October 27, 2014 (Docket No. 37) at 35, 37-38. withhold. In Grand Jury 2003, the Fourth Circuit "reiterated the client's intent to publish as the touchstone for determining whether confidentiality was expected and whether attorney-client privilege would attach." Grand Jury 2003, Neuberqer, 230 F.R.D. In the client included a false statement in the green card application that he sent to the Naturalization Services. FBI, at 414. Immigration and When the client was questioned by the he indicated that he had answered the question as he had based on previous conversations with an attorney. After being subpoenaed, the attorney refused to answer questions about the alleged advice and claimed attorney-client privilege, which the district court Circuit stated Counsel and Fourth that and Circuit "the [client] recognized. underlying regarding The communications his Fourth between submission...[were] privileged, regardless of the fact that those communications may have assisted document." [the client] in answering questions Grand Jury 2003, 341 F.3d at 336. in a public "The Government's question asked Counsel to reveal the substance of legal advice that she may have given Appellant concerning his submission [of the form] - a confidential communication within the scope of the privilege." that clearly falls Id. Reckitt contends that Grand Jury 2003 is to be construed as contradicting previous Fourth Circuit decisions on the subject. That contention fails for two 10 reasons. First, there is a difference between Grand Jury 2003 and the Circuit's previous cases that explains the holding in Grand Jury 2003 and that limits its employed reach. the information; advice." In Grand Jury 2003, attorney he had for purposes consulted Neuberger, 230 "the client had not with F.R.D. at of publishing the attorney 414. That for is a any legal quite different circumstance than the Fourth Circuit cases in which a client retains an attorney for the purpose of "assist[ing] in preparing [a] prospectus which was to be published" (In re Grand Jury Proceedings, securities 727 filings F.2d at to be 1358) filed or with for the Commission (United States v. Under Seal, helping to draft Securities Exchange 33 F.3d at 354) or for preparing the kinds of documents that are intended for public disclosure. In Grand Jury 2003, legal advice disclosure. a public discussed and not the client consulted the attorney for for assistance in making a public While the client in Grand Jury 2003 eventually made disclosure with his that contained attorney, the some of client did the not information solicit the attorney's services for the purpose of drafting the disclosure. Rather, the relationship was initiated for the purposes of communicating legal advice which would later allow the client to decide what to do with such advice. Under those circumstances, the decision in Grand Jury 2003 is consistent with the precept 11 that "the attorney-client privilege does protect coiranunications made between attorney and client when the client is only considering publication... and is seeking legal advice regarding that possibility." In re Grand Jury Proceedings, 22 F.3d at 354 (emphasis in original). And, considered on its facts, Grand Jury 2003 does not alter earlier circuit law governing documents prepared to be published. Second, Reckitt's view of Grand Jury 2003 necessitates the conclusion that Grand Jury 2003 overrules, sub silento, a long standing line of opinions that establish the principle that the attorney-client privilege does not apply to communications in connection with a proposed public disclosure of the sort here at issue. That, of course, cannot be done other than by an ^ decision. Cir. See McMellon v. 2004) United States, 387 F.3d 329, 334 banc (4th ("[W]hen there is an irreconcilable conflict between opinions issued by three-judge panels of this court, the first case followed, to decide the issue is the one that must be unless and until it is overruled by this court sitting en banc or by the Supreme Court.") And, even if Grand Jury 2003 departed from that precept, it certainly would not have done so silently. Reckitt U.S. 383 also (1981). issue in this case. company that, relies But, on Upjohn Upjohn does Co. not v. United control States, the 449 privilege In Upjohn, Upjohn Co. was a pharmaceutical after discovering that a foreign subsidiary had 12 "made payments to or for the benefit of foreign officials in order to secure government business", government ordered its general counsel to conduct an internal investigation into the "questionable payments." Id. at 387. As part of the investigation, counsel distributed letters and questionnaires to mid- and lower-level employees. The letters and questionnaires were described as "highly confidential." Id. investigation several revealed a history of Eventually, the questionable payments and Upjohn "voluntarily submitted a preliminary report to the Securities and Exchange Commission." Id. Revenue investigation issued Service a summons questionnaires notes conducted of for, sent the employees." an among to at other Upjohn interviews Id. independent evidence, employees and conducted...with 388. Upjohn The Internal claimed the written "memorandums or officers and attorney-client privilege and refused to produce the requested documents. Supreme Court reversed the lower courts' and decision The and upheld Upjohn's claim of attorney-client privilege. Reckitt argues questionnaires, that the attorneys' Supreme Court's notes, and ruling memoranda that the concerning employee interviews were protected by attorney-client privilege in Upjohn supports its argument that the documents being sought by the FTC are likewise protected. Reckitt, the fact that Upjohn's 13 Docket No. 33, at 10. "investigation was Says undertaken with a view towards disclosing the payments to the SEC" rendered analogous the factual situations here and in Upjohn and thus warrants applying the direct holding of Upjohn in this case. Id. at 11. Reckitt's argument fails for two reasons. First, the "public disclosure" issue was not in front of the Supreme Court in Upjohn. The question in Upjohn was whether the "scope of attorney-client privilege in the corporate context" extended to communications counsel. between Upjohn, 449 "decline [d] to govern conceivable all lower-level U.S. lay down at a broad employees 386. future The rule or questions and Court specifically series in of this instead ruled only on the facts in front of it. corporate rules area" Id. to and Second, the factual similarities between the situation in Upjohn and the one presented here are not as complete as Reckitt seems to think. It appears from the Supreme Court's opinion in Upjohn that corporate counsel was enlisted by the corporation to investigate whether any improper payments were made in order to determine whether the authorities. company needed I^ at to 386-87 file a notice (Stating that a with the proper letter sent by Upjohn referenced "possibly illegal" payments and indicated that the General determining Counsel's the nature investigation was "for the purpose and magnitude of any payments by of the Upjohn Company or any of its subsidiaries to any employee or 14 official of eventually a foreign submitted investigation, government.") to the SEC Although as a a report was of this result the investigation in Upj ohn was not undertaken for the purpose of submitting a public report. investigation was conducted, Upjohn Rather, when the "was only considering publication" rather than seeking counsel's help in preparing it. In re Grand Jury Proceedings, 22 F.3d at 354. That fact pattern is not the case presented by this record. In conclusion, in the Fourth Circuit, the attorney-client privilege with respect to confidential communications does not apply to published documents and the underlying details and data if, at the time the communication was made, the client intended that the document was to be made public. attorney has demonstrate been the authorized client's to intent Therefore, perform to have "when the services his that communications published...the client losets] the right to assert the privilege as to the subject matter of those communications." United States V. (Under Seal), 748 F.2d at 876. It is important to note, however, that the intended publication of a communication does not eviscerate the privilege for all of the material produced publication. contain Rather, client published data, for, or in connection with, "if any of the non-privileged documents communications not those communications, 15 directly related to the if otherwise privileged, must be removed by the reviewing court before the document may be produced." n.7. In privileged United States v. other in words, their (Under Seal), 74 8 F.2d at 875, although entirety, some documents other may documents, not such be as attorney's notes, communications between the attorney and client containing relevant data, and other documents which might contain "details underlying the data" might well be privileged. That determination would require an individualized inspection of the documents to ensure that only non-privileged content is disclosed. II. In Camera Review "[C]ourts are generally thought to have broad discretion to determine whether a privilege is properly asserted." Election Com'n v. Christian Coalition, Va. 1998). in camera disputed. This determination can, inspection of the 178 F.R.D. 456, and often does, documents whose Federal 461 (E.D. involve an privilege is Although the Supreme Court has restricted the ability of district courts to conduct an in camera review of documents that might fall under the crime fraud exception^ there is no ^See United States v. Zolin, 491 U.S. 554 (1989). Zolin holds in part that, "before engaging in in camera review to determine the applicability of the crime-fraud exception, the judge should require a showing of a factual basis adequate to support a good faith belief by a reasonable person... that in camera review of the materials may reveal evidence to establish the clam that the crime-fraud exception applies. Once that showing in made, the 16 such restriction for client privilege. ("While it other types of challenges to attorney- See Christian Coalition, 178 F.R.D. at 462 is necessary for a party to make a prima facie showing of fraud before a court will review attorney client documents under the crime fraud exception, there is no basis for such a showing under ordinary circumstances. Additionally, there is no indication that the Supreme Court intended for its holding in Zolin to apply to a Grand Jury Proceedings, Term, 1991, 33 F.3d 342, [non-analogous case]."); Thursday Special 350 {4th Cir. Grand Jury 1994) In re September ("Zolin did not provide a general rule applicable to all in camera reviews of any material submitted by parties...Zolin does not proscribe all in camera reviews of in camera submissions absent the requisite showing."). Deciding whether documents at issue to is conduct thus within an in the camera purview review of this of the Court. The parties are at odds as to whether in camera review would be helpful at this time. that in camera master is The FTC argues that it "does not believe review of necessary at the this 22,327 documents time... [because] by a special having a special master review all of the documents now when many of them likely do not involve a true factual dispute would be unnecessarily decision whether to engage in in camera review rests with the district court." Id. at 573 (internal citations and quotations omitted). 17 expensive and Instead, time-consuming." the FTC requests Docket that the No. 38 Court at issue 10-11.'' an order "requiring Reckitt to produce to the FTC the types of documents [that the court's privileged." documents, Id. information the documents on resolve 11. its are Finally, proposal, at opinion If Reckitt describes continues as not to withhold any the FTC requests that Reckitt be required to "provide new Id. forthcoming] privileged any log on a sufficient light of to explain why the Court's would, disputes special master conflicts by-category basis." in remaining be sent to a those privilege in for in camera document-by-document ruling." the FTC's review "to or category- Id. Reckitt has suggested "that the Court might benefit from in camera review conjunction FTC's of with demand privilege is "Reckitt's document [the for from FTC's] a proposal rejection and individualized that No. to 39 selected by of contemplated at resolve 17. the Reckitt The issue 22,000 documents on the basis of ^ document privilege opposition...[to communication Docket Reckitt's blanket improper, attorney-client necessary." a by FTC show] log that review the of Court responds of privilege is the attorney-client each is that for camera review of a itself in over single unprecedented and '' The number of documents sometimes is said to be 28, 000 and at other times 22,000. issue is In either event, voluminous. 18 the number of documents at fundamentally unfair." misunderstand Docket No. Reckitt's 40 at 11. proposal. The FTC appears to Although Reckitt initially suggests that the Court review only one document of Reckitt's choosing, it does so in an attempt to convince the court that further individualized, does not, blanket as the ruling camera review would be necessary. FTC suggests, for all 22,327 invite the Court to It make a documents based on one document analysis. In camera review is appropriate and necessary in this case. The applicable exception to the attorney-client privilege has limits to its reach and only encompasses published documents and the underlying Without an ^ is not documents (as more fully described above). camera review of the actual documents at issue, it possible for the Court Circuit's attorney-client limitations that are correctly privilege inherent in that to apply law, body the Fourth including of law. the Thus, a special master will be appointed to determine the most efficient way to review the documents or categories of documents; to devise a system to determine what documents fall within the rule that excludes controlling Fourth production of the documents privilege; them from privilege Circuit such documents as and to to which report to as decisions; for there to set camera remains the Court 19 outlined as herein a schedule review; any and in for to examine dispute as to to whether attorney- client privilege extends to said documents. To that end, Reckitt will be required to identify and produce all documents that, based on this decision, do not require further review for privilege. That must be done by April 1, 2015. The Court previously has provided to counsel the names of three candidates to serve as Special Master and has given the parties some information about the candidates. 2015, counsel shall advise whether, and why, By March 15, there is objection to any candidate and shall state their respective preferences in order. If any party desires serve as Special Master, to suggest other candidates it shall do so by March 15, to 2015 and shall provide each candidate's experience and qualifications. Reckitt, as the party claiming privilege, initially shall bear the fees and expenses incurred by the Special Master. Court, however, The reserves the right to reallocate that burden as a cost of the litigation upon appropriately supported motion. The PETITION ENFORCING argued. CIVIL OF THE INVESTIGATIVE TRADE DEMAND COMMISSION (Docket No. FOR AN ORDER 2) has been That motion will be granted to the extent that Reckitt identifies require ^ abeyance documents camera pending that, review. report (Docket No. 38), based on this Otherwise, of FEDERAL TRADE COMMISSION'S DEMAND FEDERAL the Special decision, decision will Master. As do be to not in the MOTION TO ENFORCE CIVIL INVESTIGATIVE there is no need for argument. 20 For the reasons set forth above, that motion (Docket No. 38) will be denied. It is so ORDERED. Ill Robert E. Payne Senior United States District Judge Richmond, Virginia Date; March ^ , 2015 21
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