United States District Court, D. Oregon
ST. JUDE MEDICAL S.C., INC., Plaintiff,
LOUISE MARIE JANSSEN-COUNOTTE, Defendant, and BIOTRONIK, INC., Third-Party Subpoena Recipient
Principal case pending in U.S. District Court, Western District of Texas, Austin Div., Case No. A-14-CA-877-SS).
For Plaintiff: Paul A. C. Berg, COSGRAVE VERGEER KESTER LLP, Portland, OR; Stephen M. Nickelsburg and Roni Bergoffen, CLIFFORD CHANCE U.S. LLP, Washington, DC.
For Subpoena Recipient Biotronik, Inc., Third-Party: E. Sean Donahue, DONAHUE & ASSOCIATES, Portland, OR; Ned H. Bassen, HUGHES HUBBARD & REED LLP, New York, NY.
No appearance was entered by Defendant Louise Marie Janssen-Counotte.
OPINION AND ORDER ON MOTION FOR RECONSIDERATION OR TRANSFER
Michael H. Simon, United States District Judge.
Plaintiff St. Jude Medical S.C., Inc. (" St. Jude" or " St. Jude U.S." ) previously brought a motion to compel compliance with a third-party subpoena that it served upon Biotronik, Inc. (" Biotronik" or " Biotronik U.S." ). After that motion was fully briefed and argued, the Court granted St. Jude's motion in part and appointed a special master to assist in resolving the remainder of the issues. Dkts. 19, 20. Biotronik now moves the Court to reconsider its decision or to transfer the dispute to the Western District of Texas, where the underlying, principal case is pending. The Court has considered the parties' arguments as set forth in their memoranda and supporting materials. For the reasons stated below, Biotronik's motion is DENIED.
The parties and events leading to the present motion are adequately chronicled in the Court's prior Opinion and Order dated March 23, 2015. Dkt. 19 at 2-11. For ease of understanding the Court's resolution of the pending motion, however, the parties and their relationships relevant to this motion are briefly stated as follows:
o St. Jude U.S. and Biotronik U.S. are both members of multinational corporate groups that compete in the worldwide medical-technology market.
o Biotronik U.S. is owned by MS Holding II SE, a German company. MS Holding II S.E. also owns Biotronik S.E. & Co. KG (" Biotronik SE" ), a German company. Biotronik AG is another European company affiliated with Biotronik U.S.
o Defendant Louise Marie Janssen-Counotte (" Janssen" ) was previously employed as a vice president by St. Jude U.S.'s European affiliates and is now president of Biotronik U.S.
o The " Biotronik Group," as defined in Janssen' s employment agreement, includes Biotronik U.S. and all of its affiliated companies, including Biotronik SE, Biotronik AG, and MS Holding II SE.
o Max Schaldach is the beneficial owner of the entire Biotronik Group. Christian Bluemel and Werner Braun are also high-level executives of companies within the Biotronik Group. Janssen negotiated her employment by Biotronik U.S. with Messrs. Schaldach, Bluemel, and Braun.
Biotronik argues that the Court erred on two counts: first, in holding that Biotronik U.S. had " control," within the meaning of Rule 45 of the Federal Rules of Civil Procedure, over certain documents held by its European affiliates; and second, in permitting St. Jude to proceed with its third-party subpoena without disclosing which particular trade secrets it alleges were stolen. Biotronik also invokes for the first time the application of the Hague Convention on the Taking of Evidence in Civil or Commercial Matters (" Hague Evidence Convention" or " Convention" ), opened for signature March 18, 1970, 23 U.S.T. 2555. Finally, despite having litigated the merits of this discovery dispute in this Court and not having previously consented to this discovery dispute being heard by the court presiding over the principal case, Biotronik now moves to transfer this discovery dispute to the Western District of Texas after having lost on the merits of most of its arguments.
A. Rule 45 and the Meaning of " Control"
In its motion for reconsideration, Biotronik argues that, among other things, the Court misapplied the Ninth Circuit's standard in In re Citric Acid Litigation, 191 F.3d 1090 (9th Cir. 1999), for when a corporate entity has " control" over documents that are owned by and in the possession of a legally distinct entity. According to Biotronik,
In Citric Acid, the Ninth Circuit ruled that a party lacks legal control over documents in the possession of an affiliated entity where the affiliates in question are separate entities under the law and any contract governing the parties' relationship does not expressly give the subpoenaed party the right to obtain the records upon demand. 191 F.3d at 1107 (discussing United States v. International Union of Petroleum & Indus. Workers, 870 F.2d 1450, 1452 (9th Cir. 1989)).
Dkt. 25 at 9. Biotronik adds that " [t]he Court here did not apply this standard" and that " [t]he facts of Citric Acid are remarkably similar to those present here." Id. at 9-10.
Biotronik is incorrect on both points. The Court correctly applied the Ninth Circuit's standard in Citric Acid, and the facts of that case are not relevantly similar to the present dispute. Indeed, it is this factual distinction that explains how this Court correctly applied the Citric Acid standard yet arrived at a different result. In short, Citric Acid involved a contractual relationship among affiliated entities and the parties' contract did not provide that one party had the right to control documents owned by the other. There was no agency relationship alleged in Citric Acid. In relevant contrast here, St. Jude has shown that a principal-agent relationship exists here, and it is a basic premise of the law governing principal-agent relations that an agent must comply with the lawful directives of the principal concerning matters within the agency relationship. Thus, the case pending before this Court involving St. Jude and Biotronik, unlike Citric Acid, does present the " right to control" documents owned by another (namely, the agent of the subpoenaed party) and thereby satisfies the control requirement set forth in Citric Acid.
In Citric Acid, the Ninth Circuit addressed whether the district court abused its discretion in denying a plaintiff's motion to compel third party Coopers & Lybrand LLP (" C& L-US" ) to produce various documents in the possession of an autonomous but affiliated firm Societe Fidciare Suisse Coopers & Lybrand (" C& L-Switzerland" ). Both C& L-US and C& L-Switzerland were members of C& L International, an association organized under the laws of Switzerland consisting of member accounting firms throughout the world. Although the members share " Coopers & Lybrand" in their names, they were legally distinct and autonomous entities. Citric Acid, 191 F.3d at 1106. C& L-Switzerland apparently had some connection with the European Citric Acid Manufacturers Association (" ECAMA" ), a European trade association that the plaintiffs alleged was used by the defendant and its worldwide competitors as a vehicle for conducting illegal international price-fixing. Id. at 1097. One of the plaintiffs served C& L-US with a subpoena to produce both documents in its possession and documents in the possession of C& L-Switzerland. C& L-US produced documents in its possession, sent a letter to C& L-Switzerland asking entity to produce responsive documents in its possession, and C& L-Switzerland declined. The plaintiff moved to compel C& L-US to produce documents held by C& L-Switzerland, and the district court denied the motion, finding that C& L-US lacked legal control over documents held by C& L-Switzerland. The plaintiff appealed to the Ninth Circuit (along with the plaintiff's appeal of the district court's order granting summary judgment to the defendant). The Ninth Circuit affirmed both the grant of summary judgment and the denial of the motion to compel. Id. at 1107-1108. The plaintiff raised no allegation and presented no evidence that C& L-Switzerland had acted as an agent for C& L-US in performing any relevant work for ECAMA. Thus, no " agency" issues were raised in Citric Acid.
In affirming the district court's denial of the plaintiff's motion to compel, the Ninth Circuit noted that the text of Rule 45 requires a party served with a subpoena for records to produce only those records that are in its " possession, custody, or control." Id. at 1107. Following earlier precedent, the Ninth Circuit said: " Control is defined as the legal right to obtain documents upon demand." Id. at 1107 (quoting United States v. International Union of Petroleum & Indus. Workers, 870 F.2d 1450, 1452 (9th Cir. 1989) (" IUPIW " )). In discussing IUPIW, the Ninth Circuit in Citric Acid noted that in that case " [t]he court concluded that IUPIW lacked legal control over documents in the possession of local unions because IUPIW and each local union were separate entities under the law and because the contract governing the union relationship did not expressly give IUPIW the right to obtain the records of local unions upon demand." Id. at 1107. As in Citric Acid, there was no discussion in IUPIW of any potential principal-agency relationship among the national union and the local unions.
Thus, the Ninth Circuit in Citric Acid only considered " control" in the context of a contractual relationship among entities when there was no allegation of any agency relationship. Moreover, the Ninth Circuit in IUPIW observed in dicta that " [a] corporation must produce documents possessed by a subsidiary that the parent corporation owns or wholly controls." IUPIW, 870 F.2d at 1452. In expressing that observation, there was no analysis of any specific contractual terms that might allow the parent to assert control over the documents owned by its subsidiary corporation. In addition to this comment, there are numerous cases that hold that a parent corporation has " control" over documents owned by a wholly-owned subsidiary--even without any explicit analysis of specific contractual terms.
Moreover, there are numerous cases that hold that " control," for purposes of document discovery under the Federal Rules of Civil Procedure, " may be established by the existence of a principal-agent relationship." See, e.g., Rosie v. Romney, 256 F.Supp.2d 115, 119 (D. Mass. 2003) (citing cases); see also Allen v. Woodford, 2007 WL 309945, at *2 (E.D. Cal. 2007) (" 'Control' may be established by the existence of a principal-agent relationship." ). This is also entirely consistent with the common law governing the principal-agent relationship. See Restatement (Third) of Agency § 8.09(2) (2005) (" An agent has a duty to comply with all lawful instructions received from the principal and persons designated by the principal concerning the agent's actions on behalf of the principal." ); see also Restatement (Third) of Agency § 8.11 (discussing an agent's duty to use reasonable effort to provide the principal with facts that the agent knows).
The burden is on the party seeking the production of documents to prove that the opposing or subpoenaed party has the requisite control. IUPIW, 870 F.2d at 1452. Here, St. Jude has satisfied its burden by showing that Messrs. Schaldach, Bluemel, and Braun acted as agents for Biotronik, Inc. when they negotiated and reached agreement with Defendant Janssen to have Ms. Janssen leave her position with St. Jude in Europe to become the president of Biotronik, Inc. (Biotronik U.S.) in the United States. See Opinion and Order (Dkt. 19) at 15-16.
This does not necessarily mean that every entity European affiliate in the " Biotronik Group" is an agent of Biotronik, Inc. The agency relationship likely goes only so far as the specific Biotronik entities associated with Messrs. Schaldach, Bluemel, or Braun. For example, if a specific entity within the Biotronik Group had absolutely no connection with any of these three individuals, or with anyone else negotiating with Ms. Janssen for her to become president of Biotronik, Inc., then St. Jude would not have met its burden of showing that this specific entity was an agent of Biotronik, Inc. This issue, however, is likely to be more theoretical than it is real because Mr. Schaldach is the beneficial owner of the entire Biotronik Group. Id. at 14. Thus, responsive documents concerning or involving Ms. Janssen's hiring away from St. Jude to work as president of Biontronik, Inc., including communications among or involving Messrs. Schaldach, Bluemel, or Braun, must be produced to ...