WEST VIRGINIA PIPE TRADES HEALTH & WELFARE FUND, et al., Plaintiffs, v. MEDTRONIC, INC., et al., Defendants Civil No. 13-1686 (JRT/FLN) United States District Court, D. Minnesota Signed June 11, 2015 Filed June 12, 2015 Counsel Brian C. Gudmundson, Carolyn G. Anderson, Zimmerman Reed, PLLP, Minneapolis, MN, Christopher M. Wood, Shawn A. Williams, Ekaterini M. Polychronopoulos, Nadim Gamal Hegazi, Robbins Geller Rudman & Dowd LLP, San Francisco, CA, Danielle S. Myers, Arthur C. Leahy, Susannah R. Conn, Robbins Geller Rudman & Dowd LLP, San Diego, CA, Anne T. Regan, Hellmuth & Jonnson, Edina, MN, Christopher F. Moriarty, William S. Norton, Motley Rice LLC, Mount Pleasant, SC, James M. Hughes, Motley Rice LLC, Mt. Pleasant, SC, William Henry Narwold, Motley Rice LLC, Hartford, CT, for Plaintiffs. Amanda Margaret MacDonald, Janine Marie Pierson, Joseph G. Petrosinelli, Steven M. Farina, Williams & Connolly LLP, Washington, DC, James K. Langdon, Theresa M. Bevilacqua, Dorsey & Whitney LLP, Kristin K. Zinsmaster, Jones Day, Minneapolis, MN, for Defendants. Noel, Franklin L., United States Magistrate Judge ORDER *1 THIS MATTER came before the undersigned United States Magistrate Judge on May 11, 2015 on Defendants' motion for protective order (ECF No. 99) and Plaintiffs' motion to compel production of documents (ECF No. 117). For the reasons set forth below, both motions are GRANTED in partand DENIED in part. Plaintiffs are institutional investors that allege Medtronic, Inc. (“Medtronic”), and certain current and former officers, executives, and paid consultants (collectively “Defendants”), issued false and misleading statements and engaged in a fraudulent scheme to mislead investors regarding Medtronic's financial condition, especially with respect to the safety and efficacy of Medtronic's product INFUSE. Am. Compl. ¶¶ 1–6, ECF No. 28. INFUSE is the trade name of rhBMP-2, a bone morphogenetic protein (“BMP”) which induces the body to develop new bone tissue. Id. ¶ 7. INFUSE was approved by the FDA in July 2002. Id. ¶ 8. Similarly, Plaintiffs claim that Medtronic concealed known risks associated with AMPLIFY, a second-generation BMP involving the same bone-growth-inducing protein as INFUSE. Id. ¶ 22. Plaintiffs allege that Defendants defrauded investors by manipulating early studies of INFUSE and made false statements defending the reliability of these studies when new, more accurate studies were later published. Id. ¶¶ 15–19, 24–37, 87. As a result, Medtronic's stock traded at artificially inflated prices during the Class Period, but dropped significantly when the truth was revealed. Id. ¶¶ 25, 38, 138–145. I. Defendants' MOTION FOR PROTECTIVE ORDER Plaintiffs served their Notice of Rule 30(b)(6) Deposition of Medtronic on January 26, 2015, seeking Medtronic's testimony on seven topics spanning the fourteen-year period between January 1, 2000 and December 31, 2013. Defs.' Mem. in Supp. 2, ECF No. 124; Bevilacqua Decl. Ex. 1, ECF No. 126. Specifically, Plaintiffs seek testimony related to: (1) Medtronic's procedures for conducting clinical trials, publication of clinical trial results, compensation of consulting physicians, and peer review process; (2) Medtronic's communications with the FDA; (3) Medtronic's internal investigation or review of clinical data regarding INFUSE and AMPLIFY, including The Spine Journal articles published in May and June 2011 and the Yale University review from August 2011; (4) Medtronic's processes and procedures for collecting information and responding to various government inquiries; (5) Medtronic's retention of and any compensation to consulting physicians for services related to rhBMP-2 products; (6) all steps taken to maintain, search for, and preserve all documents in the custody and control of Defendants; and (7) Medtronic's computer operating systems. See ECF No. 126 Ex. 1, at 2–4. Defendants now seek a protective order that: (1) limits the scope of Plaintiffs' Rule 30(b)(6) inquiry on Topics 1, 2, and 5 to a time period of January 1, 2009 to December 31, 2011; and (2) prohibits Plaintiffs from inquiry into Topics 4, 6, and 7 completely. ECF No. 124 at 2. *2 “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense....” Fed. R. Civ. P. 26(b)(1). “Relevant information need not be admissible at trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Id. However, pursuant to Rule 26(c) of the Federal Rules of Civil Procedure, a court “may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c)(1). “The burden is therefore upon the movant to show the necessity of its issuance, which contemplates a particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements.” Gen. Dynamics Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1212 (8th Cir. 1973). A. Relevant Time Period for Topics 1, 2, and 5 According to Defendants, Plaintiffs' fourteen-year time period applicable to Topics 1, 2, and 5 is overbroad, unduly burdensome, and not reasonably calculated to the discovery of admissible evidence. ECF No. 124 at 6. Defendants argue that producing deposition witnesses to testify to a fourteen-year time period is unreasonable because the relevant class period is limited to the eleven-month span between September 8, 2010 and August 3, 2011. See Id. at 8–11. At the hearing, Defendants' counsel stressed the fact that there are essentially no individuals employed at Medtronic today who could testify to events before 2004. The only witness Medtronic identified as having the knowledge and capability to testify to these Topics from 2004 through 2013 was Dr. Julie Bearcroft. Medtronic represented to the Court that in order to provide other deposition witnesses, Medtronic would need to identify and locate former employees with the requisite knowledge. Additionally, Defendants argue that Plaintiffs' claims are subject to a two-year statute of limitations and a five-year statute of repose; therefore, any discovery requests seeking information before June 27, 2008 are simply “not actionable.” See Id. at 8; see also 28 U.S.C. § 1658(b)(1). Conversely, Plaintiffs argue that the fourteen-year time period is appropriate considering the fact that Defendants scheme is alleged to have begun prior to the FDA's approval of INFUSE in 2002. Pls.' Opp'n Mem. 8, ECF No. 130. Indeed, Plaintiffs argue that the U.S. Senate Committee on Finance's October 2012 report revealed that numerous acts in furtherance of the alleged scheme occurred between 2000 and 2011. See Id. at 8–10. With respect to Defendants' statute of limitations and statute of repose arguments, Plaintiffs argue that such statutes do not absolve a party from compliance with discovery requests. Id. at 14. The Court agrees with Plaintiffs that the relevant statutes of limitations and of repose do not serve as an absolute bar to discovery in this matter prior to June 27, 2008. Additionally, this Court concludes that Defendants have failed to show good cause to limit Topics 1, 2, and 5 to their proposed three-year time period. However, the Court finds that Plaintiffs' proposed fourteen-year time period is too broad and would impose an undue burden upon Medtronic. Accordingly, this Court concludes that a reasonable time period for discovery is between January 1, 2004 and December 31, 2013. Medtronic must provide a Rule 30(b)(6) designee who can offer testimony on Topics 1, 2, and 5 between January 1, 2004 and December 31, 2013. B. Relevancy of Topics 4, 6, and 7 Defendants claim that Topics 4, 6, and 7 are designed solely to question Medtronic's document retention and collection practices. ECF No. 124 at 12–13. According to Defendants, these topics are improper “discovery on discovery,” which are irrelevant to the parties claims or defenses and not subject to deposition absent a showing of discovery misconduct or deficient production. Id. at 12. In response, Plaintiffs argue that testimony on these topics would streamline discovery and assist Plaintiffs in establishing the evidentiary record. ECF No. 130 at 17–19. Moreover, Plaintiffs argue they are entitled to understand Medtronic's information repositories and organization. Id. *3 The Court agrees with Medtronic and orders that Plaintiffs are prohibited from questioning Medtronic's Rule 30(b)(6) designee on Topics 4, 6, and 7. These topics are not reasonably calculated to lead to the discovery of admissible evidence as they merely seek to discover Medtronic's document retention and discovery practices, topics not subject to this lawsuit. II. PLAINTIFFS' MOTION TO COMPEL PRODUCTION OF DOCUMENTS On January 5, 2015, Plaintiffs served Defendants with their First Set of Requests for Production of Documents. Pls.' Mem. in Supp. 1–3, ECF No. 119; Wood Decl. Ex. 1, ECF No. 120. Defendants objected generally to the relevant time period of these requests as well as to various specific requests. See ECF No. 119 at 1–3; ECF No. 120 Ex. 2. Plaintiffs now seek to compel the production of documents responsive to Document Request Nos. 9, 16, 17, 19, 20, 22–24, 26, and 27 during the time period of January 1, 2000 to December 31, 2013. ECF No. 119 at 4. A. Relevant Time Period In general, the arguments regarding Plaintiffs' requested fourteen-year time period for production of documents are identical to those detailed above and do not bear repetition. See ECF No. 119 at 10–13; Defs.' Opp'n Mem. 5–14, ECF No. 133. Medtronic does, however, argue additional facts suggesting that producing documents over a fourteen-year time period would be unduly burdensome, and proposes a three-year period of time for Plaintiffs' requests. See ECF No. 133 at 5–14. After reviewing the record, the Court concludes that Plaintiffs' proposed fourteen-year time period for the production of documents is too broad and would impose an undue burden upon Medtronic. However, the Court also finds that Medtronic's proposed three-year time period is too narrow. Accordingly, the Court orders that, unless narrowed further by Plaintiffs, the relevant time period for the production of documents is January 1, 2004 to December 31, 2013. B. Document Request No. 9 Document Request No. 9 seeks “documents concerning Medtronic's promotion, sales and marketing of INFUSE, for any indication including, but not limited to, sales force training materials.” ECF No. 120 Ex. 1, at 12. Plaintiffs have since narrowed this Request to seek only such documents that refer to any clinical study or trial of INFUSE or any publication regarding the safety and efficacy of INFUSE. See Id. Ex. 3, at 3. Plaintiffs claim that this request calls for information central to the alleged scheme in this case. See ECF No. 119 at 16–17. Conversely, Defendants argue that promotion or sales practices related to INFUSE are not relevant to claims surrounding the design of clinical trials, reporting of adverse events, and reviewing of publications. ECF No. 133 at 15–16. The Court finds that sales and marketing materials related to INFUSE are relevant to Plaintiffs' claims and are therefore discoverable. See Fed. R. Civ. P. 26(b) (“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense....”). The safety and efficacy of INFUSE is central to this lawsuit and any related marketing or sales materials may illuminate the alleged scheme by Medtronic to minimize or conceal safety risks of INFUSE from the public. Thus, to the extent Plaintiffs seek to compel the production of documents responsive to Document Request No. 9 as narrowed, the motion is granted. C. Document Request No. 16 *4 Document Request No. 16 seeks “[a]ll documents and communications concerning the Yale Study.” ECF No. 120 Ex. 1, at 14. Plaintiffs argue that the results of the Yale Study and Medtronic's involvement, participation, and internal reaction to the study are relevant to Plaintiffs' claims. See ECF No. 119 at 17–18. Defendants oppose the request, claiming that it seeks irrelevant information that is not in their custody or control. See ECF No. 133 at 16–17. The Court agrees with Plaintiffs and concludes that information related to the Yale Study is discoverable. The Yale Study allegedly confirms that rhBMP-2 was not more effective than ICBG, as well as the fact that the studies at issue in this case were manipulated—facts relevant to Plaintiffs claims. See ECF No. 119 at 18. Thus, to the extent Defendants have any responsive documents in their possession, Plaintiffs' motion to compel the production of documents responsive to Document Request No. 16 is granted. D. Document Request No. 17 Document Request No. 17 seeks all documents concerning communications between Medtronic and the SEC, New York Stock Exchange, U.S. Department of Justice, or any other regulatory agency concerning Medtronic's financial results or securities. See ECF No. 120 Ex. 1, at 14. Plaintiffs have agreed to narrow this request to Defendants' proposed time period (years 2009–2011). See ECF No. 119 at 19. Plaintiffs claim that these documents are relevant to proving the existence of an overarching scheme in violation of federal securities laws with the intended effect of impacting Medtronic's financial statements and stock prices. Id. at 19. Defendants oppose the request, maintaining that it is improper to request all documents exchanged with government regulators that do not parallel the claims in the case. ECF No. 133 at 18. The Court concludes that the requested communications between Medtronic and government regulators are discoverable. Any such communications may shed light on the existence of the alleged scheme in violation of federal securities laws, particularly any attempt by Medtronic to artificially inflate stock prices. Moreover, Plaintiffs have already agreed to narrow the time period of this request thereby reducing the burden upon Medtronic. Thus, to the extent Plaintiffs seek documents between January 1, 2009 and December 31, 2011 that are responsive to Document Request No. 17, the motion is granted. E. Document Request No. 19 Document Request No. 19 seeks “[a]ll calendars, diaries, daybooks, appointment books, telephone logs, or similar documents reflecting the Medtronic business activities of each Individual Defendant, including all related documents necessary to identify personal and business phone numbers, e-mail addresses, and executive/administrative assistants.” ECF No. 120 Ex. 1, at 14. Defendants oppose this request, arguing that information related to other business activities in which Medtronic employees were engaged is not relevant, and thus, Plaintiffs are only entitled to these materials insofar as they relate to INFUSE or AMPLIFY. ECF No. 133 at 19. The Court disagrees with Defendants and concludes that calendars and phone logs are relevant and therefore discoverable. Calendars and other similar records of day-to-day business management may provide evidence of an individual Defendant's personal involvement in the alleged scheme. Plaintiffs' motion to compel the production of documents responsive to Document Request No. 19 is granted. F. Document Request No. 20 *5 Document Request No. 20 seeks documents connected with or used in any Board of Directors meeting. See ECF No. 120 Ex. 1, at 14–15. Plaintiffs have narrowed this Request as follows: (1) January 1, 2000 through September 27, 2010 and August 4, 2011 through December 31, 2013: All final board or committee meeting agendas and full board packets during the time period that reference INFUSE or AMPLIFY. (2) September 28, 2010 through August 3, 2011: All final board or committee meeting agendas and full board packets. ECF No. 119 at 21. Plaintiffs argue that Board materials are relevant to Defendants' knowledge of the alleged scheme. Id. In contrast, Defendants contend that they should only have to produce documents that relate to INFUSE and/or AMPLIFY between 2009 and 2011. ECF No. 133 at 19. The Court concludes that the requested Board materials, as narrowed by Plaintiffs, are relevant to the alleged scheme and therefore discoverable. Board materials may show Defendants' knowledge of the risks of INFUSE, or of any decisions by Defendants to conceal or downplay those risks. Plaintiffs' motion to compel the production of documents responsive to Document Request No. 20 as narrowed is granted. However, unless otherwise narrowed by Plaintiffs, Defendants need only provide documents after January 1, 2004. G. Document Request Nos. 22 & 24 Document Request Nos. 22 and 24 both seek documents related to litigation against Medtronic regarding INFUSE or AMPLIFY. See ECF No. 120 Ex. 1, at 15. Plaintiffs argue that Medtronic has been engaged in “myriad litigation” related to INFUSE for the past seven years and that any such documents are relevant in this action. See ECF No. 119 at 22–27. Conversely, Defendants contend that any such documents related to earlier litigation and/or investigations have very little to do with the design of Medtronic's clinical trials or reporting of adverse events. ECF No. 133 at 21. Similarly, information from hundreds of products liability lawsuits simply are not relevant to securities fraud. Id. at 22. The Court agrees with Defendants and concludes that documents from numerous investigations and lawsuits unrelated to securities fraud are not relevant to the issues in this case. Namely, whether Medtronic concealed or minimized the risks of INFUSE in order to artificially inflate the value of their stock and defraud investors. Thus, to the extent Plaintiffs seek to compel the production of documents responsive to Document Request Nos. 22 and 24, the motion is denied. H. Document Request No. 23 Document Request No. 23 seeks documents and communications concerning any investigation of compensation of consultant physicians by Medtronic. See ECF No. 120 Ex. 1, at 15. Plaintiffs have since narrowed this Request to only investigations relating to any clinical study, trial, or publication regarding the safety and efficacy of INFUSE. See ECF No. 119 at 24–25. Plaintiffs argue that the compensation of consultant physicians by Medtronic relating to clinical studies and safety and efficacy of INFUSE are central to the allegations in this case. Id. at 25. Defendants, however, contend that they cannot be sure what Plaintiffs mean by the word “investigation,” that they have already produced the Senate Finance Committee documents related to physician compensation, and that further production on this request is premature. See ECF No. 133 at 22–23. *6 The Court concludes that documents related to the compensation of consultant physicians are plainly relevant to the issues of this case and therefore discoverable. Indeed, compensation of consultant physicians is a key component of the alleged scheme in which Defendants allegedly manipulated reports related to the safety and efficacy of INFUSE. Thus, to the extent Plaintiffs seek to compel the production of documents responsive to Document Request No. 23 as narrowed, the motion is granted. I. Document Request No. 26 Document Request No. 26 seeks “[a]ll documents concerning Medtronic's corporate code(s) of ethical conduct, code(s) of business conduct, and Corporate Integrity Agreements, and all documents concerning actual, reported or potential violations by any officer, employee, agent or director including, but not limited to, reports concerning Medtronic's Voice Your Concern confidential hotline.” ECF No. 120 Ex. 1, at 16. Plaintiffs have since narrowed this Request to only such documents as they pertain to rhBMP-2, INFUSE or AMPLIFY. See ECF No. 119 at 27. Plaintiffs argue that such reports are relevant to the claim that Medtronic edited journals to downplay concerns about the safety and efficacy of INFUSE. Id. at 28. Defendants objected to this Request on relevance grounds, but have since offered to produce business conduct standards and related codes of ethics for the years 2009–2011 as well as compliance logs related to misconduct in conjunction with INFUSE or AMPLIFY. See ECF No. 133 at 23. The Court concludes that Document Request No. 26, as narrowed by Plaintiffs, is relevant and discoverable. Documents concerning violations by Medtronic employees pertaining to rhBMP-2, INFUSE or AMPLIFY relate to the allegation that concerns about safety and efficacy of INFUSE were concealed or minimized. Thus, to the extent Plaintiffs seek to compel the production of documents responsive to Document Request No. 26 as narrowed, the motion is granted. J. Document Request No. 27 Document Request No. 27 seeks documents concerning Medtronic's compliance with the Sarbanes-Oxley Act. See ECF No. 120 Ex. 1, at 16. Defendants claim that Medtronic's compliance with the Act is irrelevant. SeeECF No. 133 at 23–24. Regardless, Defendants have offered to produce policies and procedures regarding Sarbanes-Oxley controls from 2009–2011. Id. at 24. The Court concludes that documents concerning Medtronic's compliance with the Sarbanes-Oxley Act are relevant and discoverable. Allegations of securities fraud are central to this case, therefore, documents concerning Defendants' compliance with the Act are relevant to the existence of the alleged scheme to defraud investors. Thus, to the extent Plaintiffs seeks to compel the production of documents responsive to Document Request No. 27, the motion is granted. III. CONCLUSION Based on the foregoing, and all of the files, records and proceedings herein, IT IS HEREBY ORDERED that: 1. Defendants' motion for protective order (ECF No. 99) is GRANTED in part and DENIED in part, as follows: a. To the extent Defendants seek to prohibit deposition testimony on Topics 4, 6, and 7, the motion is GRANTED. b. To the extent Defendants seek to limit its Rule 30(b)(6) designee's deposition testimony on Topics 1, 2, and 5 to January 1, 2009 until December 31, 2011, the motion is DENIED. However, the Court orders that the scope of Topics 1, 2, and 5 is limited to information between the dates of January 1, 2004 and December 31, 2013. *7 2. Plaintiffs' motion to compel production of documents (ECF No. 117) is GRANTED in part and DENIED in part, as outlined within the body of this Order. Defendants must provide Plaintiffs with full and complete responses to Plaintiffs' document requests that comply with the findings made by this Court within 30 days of the date of this Order. Unless narrowed further by Plaintiffs, the relevant time period for the production of documents is January 1, 2004 to December 31, 2013.