LIFESCAN, INC., et al., Plaintiffs, v. Jeffrey C. SMITH., et al., Defendants. Roche Diagnostics Corporation, et al., Plaintiffs, v. Jeffrey C. Smith., et al., Defendants Civil Action No. 17-5552 and 19-8761 (CCC)(JSA) United States District Court, D. New Jersey Signed August 11, 2022 Counsel PETER C. HARVEY, PATTERSON, BELKNAP, WEBB & TYLER, LLP, NEW YORK, NY, IRAM PAGAN VALENTIN, TIMOTHY MARK ORTOLANI, Kaufman Dolowich Voluck LLP, HACKENSACK, NJ, CLAUDIA A. COSTA, Gordon & Rees LLP, Florham Park, NJ, for Defendant. JEFFREY C. SMITH. MARION RAMSEY HARRIS, MARION RAMSEY HARRIS, NEW YORK, NY, for Defendant. STEVEN L. HADLOCK. JAMES S. RICHTER, MIDLIGE RICHTER LLC, BASKING RIDGE, NJ, ASHLEY BRYNE AKAPO, DENTONS US LLP, NEW YORK, NY, MARC BRETT SCHLESINGER, MINTZ & GOLD LLP, NEW YORK, NY, Defendant. TRAVIS HUGHES. BRIAN P. O'NEILL, BRITTANY A MANNA, CHIESA SHAHINIAN & GIANTOMASI PC, ROSELAND, NJ, CHRISTOPHER J. BORCHERT, ALSTON & BIRD LLP, New York, NY, JEFFREY SCOTT CHIESA, CHIESA SHAHINIAN & GIANTOMASI PC, ROSELAND, NJ, JOSEPH MARSICO, CEDAR GROVE, NJ, KYLE EDWARD VELLUTATO, O'TOOLE SCRIVO LLC, CEDAR GROVE, NJ, CLAUDIA A. COSTA, Gordon & Rees LLP, Florham Park, NJ, MARIE L. MATHEWS, RONALD LAWRENCE ISRAEL, CHIESA SHAHINIAN & GIANTOMASI PC, ROSELAND, NJ, for Defendant. ALISON WISTNER. PAUL A. CARBON, BERKELEY HEIGHTS, NJ, CLAUDIA A. COSTA, Gordon & Rees LLP, Florham Park, NJ, for Defendant. LEE H. ROSEBUSH. KERRY C DONOVAN, WINSTON & STRAWN LLP, NEW YORK, NY, for Defendant. HUGHES & COMPANY. Cavanaugh, Dennis, Special Master ORDER & OPINION OF THE SPECIAL MASTER JUDGE DENNIS CAVANAUGH, RET. RE IN CAMERA REVIEW *1 This matter before the Special Master arises from a motion previously filed by Defendant Zions Bancorporation, N.A. (“Zions” or “Defendant”). That motion sought to compel Plaintiff LifeScan, Inc. (“LifeScan” or “Plaintiff”) to produce documents relating to “business practices and pre-suit investigations” performed by certain third party consultants LifeScan had hired. On May 5, 2022, the Special Master issued an Order which denied Zions’ motion pending in camera review. The Order further required that the parties meet and confer in order to agree upon a representative sample of 100 documents listed in privilege logs from two of those consultants (KPMG and K2) to be submitted for review. However, after the parties could not reach agreement on those 100 documents, the Special Master directed that each party select 50 documents, which were thereafter submitted by LifeScan and have been reviewed by the Special Master. As a consequence of this review and for the reasons herein, the Special Master GRANTS Zions’ motion. The Special Master will not reiterate the factual and procedural history of this matter since the parties are familiar with the underlying facts of this litigation and the procedural events which led to the in camera review. The Special Master will, however, set forth the mechanics employed during the in camera review. As stated, Plaintiff provided 100 documents for review – 50 chosen by LifeScan and 50 chosen by Zions.[1] Plaintiff also provided a spreadsheet enumerating the documents and supplied notes for additional context as well as an ex parte letter setting forth a chronology. The documents principally involved two third party consultants/vendors’ KPMG and K2 and were roughly divided between the two entities. An overwhelming number of the documents were in the form of email strings which included (at various times) as recipients individuals affiliated with LifeScan or its predecessor, Johnson & Johnson, KPMG, K2, in-house counsel and outside counsel for Plaintiff. While 100 documents were submitted, there were at least 500 to 600 separate emails, as part of the email strings, often containing the same correspondence exchanged between individuals. There were also a handful of spreadsheets and attachments submitted in conjunction with the emails. As the parties are aware, the principle purpose of the in camera document submission was to permit the Special Master to review a cross-section or representative sample of documents listed in the privilege logs in order to generally assess the validity of Plaintiff's position. The documents were withheld from discovery under the premise that they were protected by the attorney-client privilege or the work product doctrine or both. The purpose of the review was not to assess whether any individual document was or was not privileged and indeed while this review involved a voluminous set of communications, only a portion of the documents set forth in the logs were provided. *2 With these parameters in mind, the Special Master will now turn to an analysis of the in camera review. The legal standards which underpin this motion and this review have been set forth in detail in the Special Master's Order and Opinion dated May 5, 2022, and will not be reiterated here in detail. Instead, the Special Master will very briefly address the pertinent legal principles. That is, when a party takes the stance that discovery is shielded by the attorney-client privilege or by the work product doctrine, it is the party making this assertion who has the burden of showing the privilege or the protection exists and has not been waived. See, In Re: Grand Jury Empaneled Feb. 14, 1978, 603 F. 2d 469, 474 (3d. Cir. 1979) as to the attorney-client privilege and Konico, Inc. v. U.S. Dep't. of Justice, 687 F. 2d 724, 730 (3d Cir. 1982), as to the work product doctrine. Therefore, the responsibility here of demonstrating that the communications at issue are entitled to privilege or protection rests squarely on the shoulders of LifeScan which has resisted producing the documents to date. The communications at issue do not simply involve a client and its attorneys but also include within their gambit third parties, i.e., hired consultants who performed what might be called investigative services on behalf of LifeScan. Communications involving third party agents (here KPMG, K2 and Zetetic) are entitled to attorney-client privilege as long as the communications in question were for legal purposes. In Re: Flonase Antitrust Litig., 879 F. Supp. 2d 454, 460 (E.D.Pa. 2012). As to the work product doctrine, that qualified protection arises out of Federal Rule of Civil Procedure 26(b)(3) which provides, “Ordinarily, a party may not discover documents...that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant...or agent).” The purpose of the latter doctrine is to shelter the mental processes of the attorney representing the client, providing a privileged area within which an attorney can analyze and prepare a client's case. See, In Re: Sendant Corp. Sec. Litig., 343 F. 3d 658, 661-662 (3d. Cir. 2003). Accordingly, a key element of the attorney-client privilege and the work product doctrine centers on whether the communications at issue were made for legal purposes. The Special Master concludes that Plaintiff has failed to meet its burden to demonstrate that the documents are shielded by either the attorney-client privilege or the work product doctrine. As addressed in the prior Order and Opinion, a review of the documents provided for in camera inspection further demonstrates that the diversion of diabetic test strips was a longstanding and ongoing concern of LifeScan, but not one limited to the actions of a specific entity – Alliance. In short, diversion was a general business concern for LifeScan and even prior to 2014, LifeScan had retained one of the vendors at issue here (KPMG) to provide assistance in that regard. The consultant assisted in discovering the players in the diversion schemes, the extent to which the diversions impacted its business and the losses incurred as a consequence of Plaintiff's products being improperly channeled at an inappropriate price. While this situation certainly had the potential for legal ramifications, as the Special Master sees it, this distribution or channeling issue was primarily a business matter and an ongoing problem which LifeScan needed to address and, in fact, took steps to do so. *3 Adding to this preexisting issue, it appears that during the course of 2014, as a result of what might be called the “whistleblower” action, LifeScan became aware of a problem with a pharmacy, Ingram Medical, a predecessor/affiliate of Alliance. This led to a heightened concern as to this distributor of diabetic test strips, an entity which had been a defendant in counterfeit litigation previously initiated by LifeScan that resulted in a settlement. Efforts then followed to investigate this matter which led to the identification of other pharmacies and/or distributors in what appeared to be a fraudulent distribution scheme. By the end of that year, K2 was retained by LifeScan (through its attorneys) to provide investigative services. KPMG, which had an existing business relationship with LifeScan for the purpose of analyzing product diversion, was also alerted to what has become known as the “Alliance fraud” and also contributed services to LifeScan to assess the extent of the diversion, the entities involved and the potential business losses caused to Plaintiff. Obviously, at some point, LifeScan made a determination that it had a potential legal claim as to product diversion due to a scheme employed by the Alliance-related entities. Nevertheless, for a substantial period of time at and after April 2014, LifeScan with the assistance of its hired consultants with whom the company and its attorneys communicated, were engaged in business-related exchanges which, in the Special Master's assessment, would have transpired with or without the prospect of litigation. As our courts have stated, communications which relate to business matters rather than legal matters do not fall within the protection of the attorney-client privilege and, therefore, the general rule is “while legal advice given to a client by an attorney is protected by the privilege, business advice generally is not.” See, Leonen v. Johns-Manville, 135 F.R.D. 94 (D.N.J. 1990). As the court stated in In re Riddell Concussion Reduction Litig., “it is clear, however, that not all communications with an attorney's agent are protected...If the communications would have been made in the normal course of business even if the attorney did not need the information to give legal advice, the communication is not privileged...The agent's involvement must be necessary to the lawyer's provision of legal advice [and] the party claiming the third-party as an agent...has the burden to show that a privilege exists and that the privilege has not been waived.” 13-cv-7585, 2016 WL 7108455, at *6 (D.N.J. Dec. 5, 2016), on reconsideration in part, 13-cv-7585, 2017 WL 11633446 (D.N.J. Jan. 5, 2017). As to the assertion that the communications among and between LifeScan, its consultants and its attorneys are protected as work product, in this Circuit, the resisting party must establish that there existed an identifiable specific claim of impending litigation when the materials were prepared and the involvement of an attorney does not by itself evidence “anticipation of litigation.” See, In Re: Gabapentin Litigation, 214 F.R.D. 178, 183 (D.N.J. 2003). Further, a party must establish that the material was produced because of the prospect of litigation and for no other purpose and in determining whether a document satisfies this standard, the inquiry is whether “in light of the nature of the document and the factual situation of the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.” In Re: Grand Jury Proceedings, 604 F. 2d 798, 803 (3d. Cir. 1979). The fact that documentation was ultimately used in litigation does not establish that it was produced because of the prospect of litigation and for no other purpose. Hence, documents created for other purposes that prove useful in subsequent litigation are not attorney work product. See, In Re: Gabapentin Litigation, 214 F.R.D. at 184. It is the conclusion of the Special Master that the communications at issue are not protected by either the attorney-client privilege or the work product doctrine. While LifeScan ultimately made a decision to file suit against Alliance and others as a result of the diversion scheme at the heart of this lawsuit, its investigation of the Alliance-related entities arose from an ongoing global concern with product diversion. The communications exchanged and the materials produced as a result of the investigation of Alliance, which may prove useful in this litigation, were neither necessary for Plaintiff to obtain informed legal advice (as this was an ongoing, longstanding business concern) nor solely related to an identifiable specific claim of impending litigation and for no other purpose. Having hired outside consultants to assess a business issue, albeit a serious financial concern, LifeScan risked the possibility that the materials exchanged with and the communications made to third party consultants could be subject to discovery in the event that litigation ensued. Therefore, the Special Master finds that the communications at issue are discoverable and shall be produced in this matter. Conclusion *4 For the reasons set forth, Defendant Zions’ prior motion compelling LifeScan to produce documents and communications relating to investigations performed by third party consultants is now GRANTED. LifeScan must produce the documents at issue from its consultants, KPMG, K2 and Zetetic, Inc. within thirty (30) days of the date of this order. Footnotes [1] Plaintiff also submitted three documents from another consultant, Zetetic, Inc.