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 (CCC)(JSA), Civil Action No. 19-8761 (CCC)(JSA) United States District Court, D. New Jersey Filed January 05, 2024 Cavanaugh, Dennis, Special Master (Ret.) ORDER & OPINION OF THE SPECIAL MASTER JUDGE DENNIS CAVANAUGH, RET. AS TO DISCOVERY DISPUTES BETWEEN ZIONS AND JJHCS *1 Before the Special Master is a discovery dispute between Defendant-Third Party Plaintiff Zions Bancorporation, N.A. (“Zions”) and Third-Party Defendant Johnson & Johnson Healthcare Systems, Inc. (“JJHCS”). Zions seeks to compel JJHCS to provide responses to certain requests for production (RFPs) previously served. In analyzing this dispute, the Special Master has reviewed and considered position statements submitted by the parties following the Court's September 28, 2023 status conference at which time this dispute was also addressed. For the reasons set forth below, it is the finding of the Special Master that Zions’ request that JJHCS be ordered to provide responses to RFPs is DENIED in part and GRANTED in part under the parameters set forth below. I. Procedural History and Factual Background As the Special Master is writing principally for the benefit of the parties, the Court will only briefly address those facts and procedural events pertinent to a resolution of this dispute. This litigation arises out of what the parties typically refer to as the “Alliance fraud.” The fraud centers on the distribution, sale and reimbursement of diabetic test strips (“DTS”) manufactured by Plaintiffs LifeScan, Inc. (“LifeScan”) and Roche Diagnostics Corporation/Roche Diabetes Care, Inc. (“Roche”), whose separate lawsuits have been coordinated for discovery purposes. Plaintiffs charge that a now defunct entity known as Alliance Medical Holdings, LLC (“Alliance”) through its officers, directors, investors and lenders schemed to sell non-retail DTS, but was reimbursed by pharmacy benefit managers (“PBMs”) for sales of retail strips, profiting from the price difference. Zions, a bank, provided a substantial loan to Alliance. Plaintiffs charge that the bank did so with knowledge of the underlying Alliance fraud, profiting from the relationship. Zions, on the other hand, maintains that it had no knowledge of the underlying fraud and, in fact, suffered a $29 million loss on a credit agreement with Alliance. At the inception of this litigation in 2017, LifeScan and JJHCS, were affiliated entities and each filed suit as Plaintiffs arising out of the fraud. During initial phases of discovery, both entities provided written responses to initial demands. In May 2019, JJHCS dismissed its claims after the parent company (Johnson & Johnson) sold LifeScan and, for a period of time, was not involved in this litigation. After JJHCS’ exit, LifeScan continued to provide productions which, it says, included documents that had been under JJHCS’ custody and control. In November 2022, however, Zions filed a third-party complaint against JJHCS, effectively bringing that entity back into the fray. Zions also served discovery on JJHCS. JJHCS (and LifeScan) have consistently taken the position throughout this litigation that Zions has filed a legally insufficient and meritless third-party action, in part, to avoid certain discovery limitations arising out of previous orders. Zions counters that JJHCS is a separate legal entity (from LifeScan) and, as such, cannot refuse to independently provide discovery and cannot refuse based upon its position that Zions’ third-party claims are legally deficient. *2 On September 28, 2023, a status conference was convened. Among the issues discussed during the conference were disputes between Zions and JJHCS. While certain discovery disputes were resolved, this dispute remains outstanding. Simply put, Zions claims that JJHCS has failed to properly respond to requests for production of documents and asks that the court compel the third-party defendant to do so. II. Zions’ Position Statement Zions asserts its RFPs are relevant to its claims but that JJHCS has refused to respond because it does not accept that Zions’ claims are legally cognizable and because it expects its pending motion to dismiss the third party action will be granted. This, however, says Zions is not a basis to refuse providing discovery. JJHCS has objected to each of Zions’ 59 RFPs. They are effectively divided into two categories: (1) for the majority, JJHCS asserts that the RFPs are duplicative of those served on and thereafter answered by LifeScan; and (2) as to the remainder (20 RFPs) JJHCS contends they are irrelevant. There is one outlier, RFP 57, which requests documents JJHCS will rely on to support its defenses to which it responded “[t]o the extent JJHCS’ motion to dismiss is not granted, JJHCS will produce responsive, non-privileged documents on which it intends to rely.” As to category one, the duplicative documents, Zions says that JJHCS is a distinct legal entity and cannot rely on LifeScan's prior responses as its own. Zions maintains that since JJHCS processed and paid rebate claims which form LifeScan's damages and JJHCS at the relevant time directly communicated with PBMs, there must exist other responsive documents beyond those of the four custodians identified by LifeScan. Additionally, Zions reiterates its claim that LifeScan never identified proper custodians and therefore that production was deficient. As to category two, the non-duplicative requests, Zions says that JJHCS has refused to conduct a search based upon “its unfounded belief that Zions’ claims are not legally cognizable.” Zions emphasizes that throughout this litigation the parties have been required to proceed with discovery notwithstanding pending motions to dismiss, so JJHCS should not be treated differently. Additionally, given the approaching fact discovery deadline, JJHCS must be compelled to provide discovery. III. JJHCS’ Position Statement In a much lengthier statement, JJHCS contends that Zions has filed a meritless third-party complaint and thereafter requested additional documents from JJHCS that it had no right to obtain from LifeScan. As noted, there are two categories of documents: (1) those that are entirely redundant of LifeScan's discovery and (2) those that are “otherwise irrelevant, overbroad, and/or not proportional to the needs of the case[.]” As to the duplicative discovery, JJHCS maintains that LifeScan conducted a reasonable search and produced relevant documents in JJHCS's possession. This is because the previous relationship between LifeScan and JJHCS has resulted in Zions seeking the same documents from the same custodians. Therefore, for all intents and purposes, JJHCS (through LifeScan) has fully responded to these demands. The non-duplicative requests stand on different grounds. That is, JJHCS maintains that these RFPs are irrelevant and overbroad and, therefore, are not the proper subject of discovery. JJHCS argues that the requests seek the same type of documents that other parties have sought from LifeScan “and LifeScan (for good reason) refused to provide them.” The requests fall into three “overbroad and irrelevant” categories: (1) damages to JJHCS; (2) general practices as to PBMs; and (3) general anti-diversion practices. *3 As to JJHCS's damages (six requests), JJHCS is not a plaintiff in this litigation and is therefore not asserting a claim for damages. Given this, these demands are irrelevant. Instead, JJHCS maintains that this is a camouflaged and backdoor attempt to seek information as to LifeScan, but that entity has also responded to these identical requests. Hence, there is no reason to compel JJHCS to perform another search. As to JJHCS's general practices regarding PBMs (five requests), JJHCS insists that these categories are extremely broad and it is unclear how any request is tied into the Alliance scheme. To the extent that the requests do involve Alliance, LifeScan has already responded. To the extent Zions seeks documents unrelated to Alliance, Zions fails to show how these requests are relevant and, moreover, Zions’ prior motion to compel LifeScan to produce communications with PBMs unrelated to Alliance was denied. Additionally, the requests here are even broader and relate to communications concerning “numerous non-LifeScan Johnson & Johnson products.” In short, Zions seeks documents disconnected from Alliance. All of this, says JJHCS, is simply a fishing expedition to uncover something to support Zions’ third-party contribution complaint. As to anti-diversion practices, (four requests), if the requests seek information about Alliance's conduct, then LifeScan's prior production response fulfills this request. If Zions seeks documents related to Johnson & Johnson's general anti-diversion work, then the requests are overbroad and irrelevant. Therefore, actions that JJHCS may have undertaken as to other diverters are unrelated to Alliance and have no bearing on when LifeScan became aware of the Alliance fraud or how it was harmed. Therefore, information as to general anti-diversion efforts have no bearing on Zions’ third-party action. IV. Analysis and Findings Since the parties place the demands and the responses to those demands into distinctive categories, the Special Master will also do so. As to the duplicative demands (category one), JJHCS has made a strong and logical argument that since LifeScan and JJHCS were both formerly affiliated, LifeScan's responses and JJHCS's responses are effectively one and the same. Indeed, the records custodians identified in this litigation whose documents were searched for and have been produced were essentially employees of the same organization (commonly referred to as “Johnson & Johnson”) at all relevant times and at the inception of this lawsuit. Since LifeScan has responded to these demands and, in doing so, produced documents from the same former JJHCS employees designated as records custodians, the Special Master finds that the third-party defendant has complied with Zions demands. In turn, Zions has failed to demonstrate a cogent reason why JJHCS should re-conduct the same search and retrieval. The only issue as to the duplicative documents which may exist is whether JJHCS has made clear which LifeScan responses match which Zions’ demands. In reviewing the responses, the Special Master finds, however, that there is indeed a clear and direct correlation between the demands made and the responses served on behalf of LifeScan. For example – and there are multiple examples of this – as part of its response to request number 7 (RFP 7), JJHCS states that it “objects to this Request as duplicative of the request for production that Zions served on LifeScan, including Zions’ request numbers 30 & 77 to LifeScan. LifeScan has already conducted a reasonable search and production of documents including from JJHCS custodians.” In short, JJHCS has adequately matched Zions’ demands to a specific and previously rendered LifeScan response. Zions has failed to demonstrate that by doing so, JJHCS is deficient in complying with its demands. Therefore, as to these RFPs, Zions’ application is DENIED. *4 The Special Master now turns to the non-duplicative demands (category 2). As to these, Zions charges that JJHCS refuses to respond due solely to its repeatedly stated position that the third-party complaint is without merit and, therefore, there is no need to provide discovery at this time given JJHCS's pending motion to dismiss. However, while that may provide the underlying motive for the third-party defendant's refusal to respond to certain document requests, that is not quite the position that JJHCS has advanced in opposition to the motion. Instead, JJHCS (like LifeScan before it) principally argues that what Zions seeks by way of these RFPs is documentation that is irrelevant to the parties’ claims or defenses or to the Alliance fraud. In part, JJHCS argues that as a third-party defendant it is not seeking any form of damages. Therefore, as to those RFPs cited by JJHCS which requests documents related to its “damages” (RFP numbers 25-27, 42, 50 and 51), JJHCS has answered, among other things, that it is not asserting any claims in this case “let alone one for damages.” In the Special Master's assessment, the answer constitutes a direct response by JJHCS (which is no longer a plaintiff in this litigation and cannot be seeking damages) to the requests for production and, therefore, it has complied and, as to these demands, the application is DENIED. However, there remain other non-duplicative demands which are seemingly tailored to JJHCS in its role as a third-party defendant and which must be considered. The first group relate to third-party defendant's general practices as to PBMs (RFP numbers 21, 43, 44, 45 and 53). Notably, these requests do not only seek documents limited to communications between JJHCS and PBMs specific as to Alliance, but are much broader. For example, RFP 21 requests all communications “related to agreements between JJHCS and any PBM pertaining to PBM mail order pharmacy operations.” Another example, RFP 44, seeks all communications “related to marketing efforts by JJHCS directed at any PBMs.” RFP 45 seeks all practices, protocols and procedures “to review and/or verify claims from PBMs in connection with issuing rebates.” In short, none of the demands seek documentation relating directly to Alliance or to the Alliance fraud or to communicate with PBMs as to Alliance but instead go to Zions’ assertion in this third-party action that the DTS manufacturers engaged in anti-competitive conduct and were in league with the PBMs. Similarly, as to the second group directed at anti-diversion practices (RFP numbers 30, 39, 40 and 41), these requests also concern JJHCS's general anti-diversion work, not strictly work related to the Alliance fraud. As to these RFPs the Special Master agrees with JJHCS that Zions’ demands are again an attempt to obtain from JJHCS documents pertinent to LifeScan. In fact, the Court has previously ruled on discovery disputes between Zions and LifeScan which addressed substantially similar requests. [See, for example, the Order and Opinion of the Special Master dated October 5, 2021 (ECF 520) and the Order and Opinion of the Special Master dated July 21, 2022 (ECF578)]. Both decisions (which arose from of a series of discovery disputes between the two parties) resulted in orders that restricted Zions’ discovery demands to production of documents from LifeScan which had some bearing on or connection with Alliance or the Alliance fraud, not with LifeScan's communications with pharmacy benefit managers unrelated to Alliance or general (non-Alliance) anti-diversion efforts. With this said, however, certainly, in the event that JJHCS is in possession of documents not already produced by LifeScan which concern communications with PBMs involving Alliance or documents as to anti-diversion practices which include Alliance, Zions is entitled to production of these documents. Consistent with previous decisions of this Court, therefore, JJHCS is ORDERED to produce any non-duplicative documents in its possession which in any way relate to Alliance and/or the Alliance fraud and are responsive to RFPs 21, 30, 39, 40, 41, 44, 45 and 53. To this extent, Zions’ application is GRANTED. Should JJHCS contend that documents responsive to the enumerated RFPs have, in fact, already been produced during the course of this litigation through discovery served on LifeScan, JJHCS must provide a response which clearly and specifically delineates which previously produced documents correspond to these requests for production. V. Conclusion *5 For the reasons previously set forth, Zions’ request that JJHCS be ordered to provide responses to certain RFPs is DENIED in part and GRANTED in part.