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 September 27, 2023 Cavanaugh, Dennis, Special Master (Ret.) ORDER & OPINION OF THE SPECIAL MASTER JUDGE DENNIS CAVANAUGH, RET. AS TO MERCATO'S MOTION TO COMPEL LIFESCAN TO SEARCH AND PRODUCE EMAILS OF RICHARD KAESER *1 Before the Special Master is a motion filed by defendant Mercato (“Mercato” or “Defendant”).[1] The motion arises out of a discovery dispute between Mercato and LifeScan, Inc. (“LifeScan”).[2] Defendant seeks an order compelling LifeScan to search for and produce responsive emails belonging to Richard Kaeser. In reaching the findings set forth in this Order and Opinion, the Special Master has relied upon the joint submission and exhibits provided by the parties. Based upon the review of the materials cited above, it is the finding of the Special Master that Mercato's motion is DENIED. I. Procedural History and Factual Background Since the parties are intimately familiar with the procedural posture and facts which underlie this litigation, the Special Master will only briefly set forth the procedural and factual history pertinent to this motion. This motion arises from litigation regarding the distribution and sale of diabetic test strips (“DTS”) manufactured by Plaintiff. LifeScan contends that various defendants, principally officers, directors and investors in Alliance Medical Holdings LLC (“Alliance”) engaged in a scheme that defrauded the manufacturer by improperly seeking reimbursement for the sale of retail DTS through the actions of covertly owned pharmacies. Mercato is one of those Alliance investors. LifeScan charges that Mercato was knowledgeable about this scheme and through its investment profited from the fraud engaged in by Alliance. At all times relevant to the issues in this motion, Richard Kaeser (“Kaeser”) was head of Johnson & Johnson's (“J&J”) Global Brand Protection team. LifeScan was formerly a unit of J&J but was subsequently spun off. Kaeser has not been identified by LifeScan as a records custodian. Mercato contends that as a consequence of revelatory testimony given by another former J&J employee at a recent deposition, LifeScan must now take steps to search for and produce documents and communications in the possession of Kaeser. LifeScan counters that it should not be compelled to do so. Despite efforts by the parties to resolve this dispute, they have reached an impasse. II. Mercato's Argument Mercato asserts that one of its core defenses is that LifeScan's claims are time barred because it knew of DTS diversion by Alliance and its predecessors years before filing suit against Mercato in July 2019. Mercato says Kaeser is a critical witness because he ran the J&J Global Brand Protection team that investigated Alliance. *2 Mercato asserts that Kaeser supervised personnel responsible for investigating NDC (National Drug Code) fraud and was directly involved with and discussed issues pertaining to Alliance. Mercato claims that it first became aware of Kaeser's role during a June 25, 2023 deposition of Lisa Smiley, a former J&J employee who was on the team. Prior to that deposition, says Mercato, it was unaware of Kaeser's critical role. Additionally, documents made available in discovery show Kaeser's involvement in the Alliance investigation, a fact which should have promoted LifeScan to include Kaeser among its custodians since he is likely to possess unique, non-duplicative communications relating to Mercato's statute of limitations defense. Mercato cites communications between Kaeser and the director of the Global Brand Protection group, Roy Albiani, addressing retention of an outside investigator (K2) concerning Alliance's fraudulent billing practices. Mercato posits that Kaeser likely received updates from the team that discussed Alliance. Mercato takes the position that LifeScan's response or lack thereof to discovering diversion by Alliance-affiliated pharmacies is a key issue in this case. That is, under Third Circuit law, a RICO plaintiff, which LifeScan is here, must exercise reasonable diligence to identify an injury caused by potentially fraudulent conduct, citing Mathews v. Kidder, Peabody & Co., 260 F. 3d 239, 252 (3d Cir. 2001). Therefore, Kaeser's actions are relevant to determining whether the head of the Global Brand Protection team was – or was not – aggressively pursuing Alliance. To further buttress its point, Mercato alleges that this is not the first time that LifeScan has failed to identify a relevant custodian and points to the late addition of Albiani, a director in the Global Brand Protection group, as a custodian. Albiani's documents, which have now been exchanged in discovery, demonstrate how early he learned that Alliance was a diverter of DTS. Moreover, according to Mercato, despite this, LifeScan initially failed to identify him in an effort to keep those documents away from Defendant. Albiani was only identified in early 2022 as a consequence of co-defendant, Zions, having pressed LifeScan to add him as a custodian due to his position with the company. Mercato argues that LifeScan is now doing the same thing with Kaeser. III. LifeScan's Argument LifeScan charges that Mercato, in effect, is attempting to pick and choose its custodians. Citing a previous decision by the Special Master, LifeScan maintains that courts normally play no role in designating a party's custodian unless the custodial choices are “manifestly unreasonable” or the requesting party “demonstrates that the resulting production is deficient.” Plaintiff emphasizes that Kaeser's responsibility was for global brand protection, i.e., for all of J&J's products encompassing more than 250 separate companies. The diversion of DTS from one U.S. channel to another makes up only a tiny part of this portfolio. This was a single fraudulent billing scheme. LifeScan says that the deposition of Lisa Smiley did not constitute a revelation and instead confirmed that Kaeser had not been involved in monitoring diversion generally, much less involved in a specific investigation. Instead, her testimony stands for the proposition that individuals on the team were responsible for monitoring diversion and those team members have already been identified and their records searched. Accordingly, there is no basis to conclude that Kaeser has unique, non-duplicative documents. Instead, Kaeser would have been the recipient of documents generated by others. Those documents have already been produced. Furthermore, the fact that Kaeser was Smiley's boss is a thin justification for delving into his documents. LifeScan asserts that courts have repeatedly held that a party need not designate a supervisor as a custodian solely on the basis of that supervisory role, citing Lutzeier v. Citi Group Inc., 4:14-CV-1832015, WL 430196, at *6-7 (E.D.Mo. Feb. 2, 2015). Mercato has failed to show that Kaeser has unique documents and Mercato's argument that the company should search his emails to confirm what they do not contain is specious. *3 LifeScan also says Mercato mischaracterizes the events leading to the addition of Albiani as a custodian. LifeScan's initial efforts to collect documents from the Brand Protection team identified three other employees (Smiley, Susan Liu, and Donna Anderson) as likely custodians and consequently they were duly identified as custodians and their documents were produced. Nevertheless, as a show of good faith, LifeScan voluntarily conducted a supplemental collection and review of Albiani's documents in 2021. Finally, LifeScan asserts that this motion is too late, citing the fact that discovery had been scheduled to close on September 1, 2023 (although it has now been extended to December 15). LifeScan describes Mercato's efforts as a belated request and maintains that Smiley's testimony confirms that she did not recall having spoken to Kaeser about the Alliance investigation so there is no reason to think that he is an important source of relevant information. Given that LifeScan has also produced responsive documents from the Brand Protection custodians which includes documents referencing Kaeser that listed his position, if Mercato felt he had important relevant information, Defendant would have pressed to have Kaeser identified earlier, but did not do so. IV. Legal Standard This is not the first time the Special Master has been called upon in this litigation to decide a dispute in which one party charges that another party has failed to properly designate a records custodian and to search for and produce relevant records possessed by that individual. Therefore, all of the parties are well aware of the controlling law on this issue and indeed the parties to this dispute do not seriously disagree on the standard by which this motion should be governed. Briefly stated, in this Circuit and District, and generally in the Federal courts, when a requesting party is dissatisfied with ESI (electronically stored information) discovery responses obtained through a custodial search, our courts have placed a noticeably heavy burden on the propounder to demonstrate that the custodial choices (the individuals or entities whose records are to be accessed and reviewed) were deficient or lacking. Our courts have routinely stated that the producing party has “the best knowledge as to how documents have been preserved and maintained” and as a consequence, it is the producing party who is “in the best position to determine the method by which [it] will collect documents.” Ford Motor Co. v. Edgewood Properties, Inc., 257 F.R.D. 418, 427 (D.N.J. 2009). When, as in this case, a moving party seeks to compel searches by an additional custodian, our courts have stressed, “[t]he requesting party is second-guessing the responding party's representation that it conducted a reasonable inquiry for the responsive information, and in either case [searching for ESI or paper documents], the burden appropriately lies with the requesting party to show that the responding party's search was inadequate.” Enslin v. Coca-Cola Bottling Co., 2:14-CV-06476, 2016 WL 7042206, at *3 (E.D.Pa. June 8, 2016) (citing Scott C. v. Bethlehem Area Sch. Dist., 00-CV-642, 2002 WL 32349817, at *1 (E.D.Pa. July 23, 2002). While our courts normally play no role in search design, search tools, search terms or designation of custodians, a court may intervene when a party demonstrates that the choices of those items are “manifestly unreasonable,” or the requesting party “demonstrates that the resulting production is deficient,” Mortgage Resolution Servicing v JP Morgan Chase Bank, NA, 15-CV-0293, 2017 WL 2305398, at *2 (S.D.N.Y. May 18, 2017). Moreover, the requesting party must be able to articulate a basis for the court to find that ESI in the possession of any additional or newly designated custodians would be different from and not simply duplicative of information that the responding party has already produced, Enslin, 2016 WL 7042206, at *1. Therefore, under these circumstances, Mercato bears the burden of demonstrating that LifeScan's choice of records custodians – a choice which did not include Richard Kaeser – fails to meet these criteria. V. Analysis and Findings *4 In reviewing the jointly filed submissions by the parties, at first blush, Kaeser's title – vice president of J&J's Global Brand Protection team – might suggest he had significant involvement in monitoring and analyzing DTS diversion. However, the facts presented by the litigants in this motion do not support that conclusion. Mercato takes the position that the deposition testimony of Lisa Smiley, a senior manager on the team who reported to Roy Albiani (see above), was some sort of revelation, but in the Special Master's estimation, that assertion is hyperbole. Instead, little to nothing in Smiley's testimony strongly supports the premise that Kaeser possesses yet unproduced, unique communication or documents which necessitates LifeScan to name him as a records custodian and then to search through his emails or conduct an additional ESI search. Briefly stated, Smiley testified that she was one of approximately 15 people on the Global Brand Protection team, a team whose primary remit was the scope of counterfeiting, diversion and tampering as to any LifeScan product anywhere in the world. See, Deposition of Lisa Smiley, pp. 21-22. Upon questioning, Smiley testified that she reported to Ray Albiani and that her boss's boss was Kaeser. Id. Kaeser had responsibility for the enterprise program of brand protection, meaning all pharmaceutical, medical device and consumer health products manufactured by LifeScan. Id. at 139-140. Kaeser's responsibilities did not include monitoring diversion personally. Instead, that work would be performed by others on the team. Id. Although Smiley, on occasions, communicated directly with Kaeser – through live meetings, emails, phone calls and Zoom conferences – and while some of those communications were indeed about diversion, Smiley could recall no conversations with Kaeser about the topics addressed at her deposition which concerned these issues. Id. at 140-141. She assumed Kaeser attended meetings that discussed brand protection topics but could not specifically recall discussions in Kaeser's presence about the diversion of DTS. Id. at 141-143. In a similar vein, emails Mercato relies upon to emphasize its position that Kaeser had a closer involvement with DTS diversion than LifeScan concedes, are also wanting. There is a brief email exchange in with Kaeser essentially approves budgeting for investigative services which took place in April 2015, as well as a letter from Kaeser to the “team” in which he requests the publication of a “regular GBP [Global Brand Protection] status report,” but there is little of substance in any of these communications. Instead, the communications suggest rather distant oversight by an executive managing a relatively large, multi-faceted organization. Therefore, in summary, despite Kaeser's title, based upon what has been presented by the parties in support of and in opposition to this application, the Special Master finds that Mercato has failed to show that LifeScan's choice of records custodians is manifestly unreasonable or that the resulting production is deficient. Nor has there been an adequate showing that Kaeser likely possesses unique documents which have not otherwise been produced from the custodial accounts of the individuals who indirectly reported to him as members of J&J's Global Brand Protection team. Therefore, Mercato has failed to meet its significant burden and this motion will be denied. VI. Conclusion *5 For the reasons set forth in this Order and Opinion, Mercato's motion seeking an order compelling LifeScan to produce responsive emails belonging to Richard Kaeser is DENIED. Footnotes [1] According to the movant, “Mercato,” collectively refers to defendants Mercato Management, LLC; Mercato Partners, LLC; Mercato Partners Growth II GP, LLC; Mercato Partners Growth II, LP; Mercato Partners Growth Affiliates II, LP; Mercato Partners AI II, LP; Mercato Partners Ingram, LLC; and Mercato Partners Ingram Co-Invest., LLC. Throughout this Order and Opinion, these entities will simply be referenced as Mercato. [2] Although not filed in the form of a motion, the Special Master has treated Mercato's request as such.