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West Virginia Pipe Trades Health & Welfare Fund v. Medtronic, Inc.

United States District Court, D. Minnesota

October 12, 2017

WEST VIRGINIA PIPE TRADES HEALTH & WELFARE FUND, EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII, and UNION ASSET MANAGEMENT HOLDING AG, Plaintiffs,
v.
MEDTRONIC, INC., WILLIAM A. HAWKINS, GARY L. ELLIS, RICHARD E. KUNTZ, JULIE BEARCROFT, RICHARD W. TREHARNE, and MARTIN YAHIRO, Defendants.

          ARTHUR C. LEAHY, JONAH H. GOLDSTEIN, ROBERT R. HENSSLER, JR., DANIELLE S. MYERS, SUSANNAH R. CONN, AND HILLARY B. STAKEM, ROBBINS GELLER RUDMAN & DOWD LLP, SHAWN A. WILLIAMS, ROBBINS GELLER RUDMAN & DOWD LLP, CHRISTOPHER M. WOOD, ROBBINS GELLER RUDMAN & DOWD LLP, JAMES M. HUGHES AND CHRISTOPHER F. MORIARTY, MOTLEY RICE LLC, CAROLYN G. ANDERSON AND BRIAN C. GUDMUNDSON, ZIMMERMAN REED, PLLP, WARREN PRICE, III, PRICE OKAMOTO HIMENO LUM, FOR PLAINTIFFS.

          JOSEPH G. PETROSINELLI, STEVEN M. FARINA, AND AMANDA M. MACDONALD, WILLIAMS & CONNOLLY LLP, JAMES K. LANGDON AND THERESA M. BEVILACQUA, DORSEY & WHITNEY LLP, FOR DEFENDANTS.

          MEMORANDUM OPINION AND ORDER ON OBJECTIONS TO ORDER OF THE MAGISTRATE JUDGE

          JOHN R. TUNHEIM, United States District Court Chief Judge

         Plaintiffs West Virginia Pipe Trades Health & Welfare Fund (“the Fund”), Employees' Retirement System of the State of Hawaii (“ERS”), and Union Asset Management Holding AG (“Union”) (collectively, “Plaintiffs”) bring this consolidated class action against Medtronic and several of its officers and employees (collectively, “Medtronic”), alleging that Medtronic engaged in a scheme to defraud investors in violation of federal securities laws.

         Plaintiffs moved to compel Medtronic to produce documents dating from January 1, 2000, to December 13, 2013. On June 12, 2015, Magistrate Judge Franklin L. Noel issued a discovery order (“the June 2015 order”) granting in part and denying in part Plaintiffs' motion. Specifically, the Magistrate Judge narrowed the discovery period to documents from January 1, 2004, to December 31, 2013. Medtronic objects to the June 2015 order. Separately, Medtronic moved to compel Plaintiffs to re-produce two Rule 30(b)(6) designees and to produce responsive documents with respect to document request number 1. On July 14, 2017, the Magistrate Judge issued a discovery order (“the July 2017 order”) granting Medtronic's motion. Plaintiffs object to the July 2017 order.

         Because the Court will find that the Magistrate Judge's orders were not clearly erroneous, the Court will overrule the parties' objections, but will modify the Magistrate Judge's July 2017 order to clarify the scope of the re-production of Plaintiffs' Rule 30(b)(6) designees.

         BACKGROUND

         Medtronic is the producer of the INFUSE bone graft, a bone morphogenetic protein (“BMP”) that induces the body to form bone tissues. (Am. Consolidated Class Action Compl. ¶ 7, Nov. 4, 2013, Docket No. 28.) Plaintiffs allege that Medtronic intentionally concealed significant safety risks of INFUSE from the public and, as a result, Medtronic's stock traded at artificially inflated prices from September 28, 2010 to August 3, 2011. (Id. ¶ 15, 25.) Plaintiffs claim that Medtronic's scheme and misrepresentations caused investors to lose hundreds of millions of dollars following the disclosure of the safety risks of INFUSE. (Id. at ¶ 38.)

         I. BACKUP TAPES

         Plaintiffs served Medtronic with 29 discovery requests for responsive documents dating from January 1, 2000, to December 31, 2013. (Decl. of Christopher M. Wood ¶ 2, Ex. 1 at 11-17, Apr. 27, 2015, Docket No. 120.) Plaintiffs subsequently moved to compel the production of these documents. (Mem. Supp. Pls.' Mot. to Compel at 1-2, Apr. 27, 2017, Docket No. 119.)

         In response, Medtronic submitted an affidavit from Cynthia Rowe, an eDiscovery specialist, explaining that Plaintiffs' requests would require Medtronic to restore backup tapes from January 1, 2000, to August 22, 2007. (Decl. of Cynthia Rowe ¶¶ 14-17 (“Rowe Decl.”), May 4, 2015, Docket No. 134.) Rowe alleged that, in the best case scenario, Medtronic would need to restore five to six backup tapes per custodian for each 180-day period. (Id. ¶ 17.) Medtronic requested that the Magistrate Judge narrow Plaintiffs' discovery period to January 1, 2009, to December 31, 2011. (Defs.' Opp'n to Pls.' Mot. to Compel at 15 May 4, 2015, Docket No. 133.)

         In its June 2015 order, the Magistrate Judge granted Plaintiffs' motion but narrowed the discovery period to January 1, 2004, to December 31, 2011. (Order (“June 2015 Order”) at 11-12, June 12, 2015, Docket No. 144.) Citing Medtronic's concerns about restoring its backup tapes, the Magistrate Judge explained, “Plaintiffs' proposed fourteen-year time period for the production of documents is too broad and would impose an undue burden upon Medtronic.” (Id. at 5.) The Magistrate Judge, however, disagreed with the much narrower discovery period requested by Medtronic. (Id.)

         Medtronic objected to the Magistrate Judge's June 2015 order. (Obj. to Magistrate Judge's Order, June 29, 2015, Docket No. 148; Defs.' Suppl. Aff. Supp. Obj. to Magistrate Judge's Order at 2, May 5, 2017, Docket No. 268.) In support of its objection, Medtronic submitted an affidavit from Jason Bergerson, an eDiscovery specialist, alleging that it would take between 245 and 255 days and approximately $3, 500, 000 to restore the 5, 393 backup tapes. (Aff. of Jason Bergerson ¶¶ 4-5, May 5, 2017, Docket No. 269.)

         II. DEPOSITIONS OF CORPORATE DESIGNEES

         In May and June 2015, Medtronic noticed Plaintiffs of its intent to take Rule 30(b)(6) depositions about fourteen topics:

1. The factual basis for Plaintiffs' allegations in the Complaint, including (but not limited to) the factual basis for this matter proceeding as a class action.
2. Plaintiffs' claimed amount of damages, including the amount of damages and the method used to arrive at that amount.
3. The organizational and reporting structuring of any division or other business unit of [the organization] that analyzes, purchases, sells, or otherwise has involvement with Medtronic Securities.
4. [The organization's] policies and procedures for engaging in the purchase or sale of securities which governed the purchase or sale of Medtronic Securities during the Class Period.
5. The reason(s) [the organization] decided to purchase and/or sell Medtronic Securities during the Class Period.
6. The information relied upon by [the organization] in making any decision to purchase or sell . . . Medtronic Securities during the Class Period, including (but not limited to) the decision to purchase or sell . . . following (a) the publication of The Spine Journal on or about May 25, 2011; and (b) the publication of The Spine Journal on or about June 28, 2011.
7. The trading activity of [the organization] in Medtronic Securities from January 1, 2009 until December 31, 2011.
8. All communications concerning [the organization's] efforts to monitor the performance of or value of Medtronic Securities, including communications with third-party investment professionals, rating agency professionals, analysts, and members of the media.
9. [The organization's] use of outside investment managers and hedge funds to hold Medtronic Securities from January 1, 2009 until December 31, 2011.
10. The method used by [the organization] to calculate gains and losses in Medtronic Securities . . . from January 1, 2009 until December 31, 2011.
11. [The organization's] analysis of [The Spinal Journal articles and other medical journal articles].
12. Records, if any, that allow [the organization] to trace shares of Medtronic Securities to those acquired or sold in connection with [The Spine Journal articles].
13. [The organization]'s accounting and tax treatment of any investment, purchase, sale or trade of any Medtronic Security from 2009 through 2011.
14. The fee arrangement(s) between [the organization] and the other named Plaintiffs, including any financial arrangements between Robbins Geller Rudman & Dowd LLP and ...

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