noting the “sanctions available to the district court are discretionary and the imposition of such sanctions ‘as are just’ will not be reversed 1 unless there has been an abuse of discretion”
How later courts described this case
- noting the “sanctions available to the district court are discretionary and the imposition of such sanctions ‘as are just’ will not be reversed 1 unless there has been an abuse of discretion”
- ordering a deposition and document production where one 15 party had not returned the confidential documents nor submitted a declaration or other 16 testimony to his involvement in the improper document disclosure
Written by the judges who cited it.
The opinion
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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
OSRX, INC.; OCULAR SCIENCE, Case No. 23-cv-1131-BAS-DDL
11 INC.,
ORDER:
12 Petitioners,
(1) DENYING PETITIONERS’
13 v. OBJECTON TO MAGISTRATE
JUDGE’S RULING (ECF No. 9);
14 HYMAN PHELPS & MACNAMARA,
P.C; KARLA L. PALMER
15 AND
Respondents.
16
(2) DENYING RESPONDENTS’
17 MOTION FOR SANCTIONS (ECF No.
12)
18
19
20
21 Pending before the Court are two motions. Petitioners OSRX, Inc. and Ocular
22 Science, Inc. filed a motion to compel compliance with subpoenas issued to Respondents
23 Karla Palmer and her firm Hyman Phelps & Macnamara. (ECF No. 1.) Magistrate Judge
24 Leshner denied the petition. (ECF No. 6.) Petitioners then filed a motion objecting to
25 Magistrate Judge Leshner’s ruling. (ECF No. 9.) Respondents filed a response in
26 opposition to Petitioners’ objection which contained a motion for sanctions against
27 Petitioners. (ECF No. 12.) Petitioners’ objection and Respondents’ motion for sanctions
are now before the Court. For the following reasons, the Court Petitioners’
1 objection to Magistrate Judge Leshner’s ruling and DENIES Respondents’ motion for
2 sanctions.
3
4 I. RELEVANT BACKGROUND
5 This matter arises out of related, ongoing litigation between the parties involving
6 allegations of trademark infringement, false advertising, and unfair competition. See
7 ImprimisRx, LLC v. OSRX, Inc., No. 3:21-cv-1305-BAS-DDL (“ImprimisRx Litigation”).
8 On March 10, 2022, the Court granted the parties’ joint motion for the entry of a Protective
9 Order restricting the use and disclosure of discovery exchanged by the parties.
10 (ImprimisRx Litigation, ECF No. 23.) The Protective Order allowed for materials
11 designated “CONFIDENTIAL” or “CONFIDENTIAL – FOR COUNSEL ONLY” to be
12 shared with “counsel,” which was defined to include in-house attorneys, outside counsel
13 of record, attorneys and support staff employed by outside counsel, and other personnel
14 who are directly assisting counsel in this matter. (ImprimisRx Litigation, ECF No. 131 at
15 3.) The Protective Order required confidential information “must not be disclosed” to any
16 party not designated within the Protective Order and “must not be used for any purpose
17 other than in connection with this litigation.” (Id.) In May 2022, an attorney for
18 ImprimisRx emailed less than 15 documents designated “CONFIDENTIAL” or
19 “CONFIDENTIAL – FOR COUNSEL ONLY” to Palmer, who serves as outside counsel
20 for ImprimisRx assisting with regulatory matters. (ECF No. 9-1 at 7.)
21 At the end of 2022, OSRX received regulatory inquiries from a number of state
22 pharmacy boards. (ImprimisRx Litigation, ECF No. 131 at 4.) These inquiries appear to
23 be initiated because Palmer submitted complaints regarding OSRX’s compliance with
24 Section 503 of the Federal Food, Drug, and Cosmetic Act. (ImprimisRx Litigation, ECF
25 No. 127 at 4.) On their face, the regulatory complaints do not contain any confidential
26 information or information disclosed to Palmer pursuant to the Protective Order.
27 On December 28, 2022, OSRX served Palmer and her law firm with subpoenas
seeking documents and deposition testimony related to the confidential document
1 disclosure from May 2022. (ImprimisRx Litigation, ECF Nos. 118-5, 118-6.) The
2 subpoenas requested Palmer and her firm appear for a deposition to be questioned on any
3 communications related to compliance with state regulatory guidelines, any investigation
4 done in support of their state regulatory complaints, and any persons interviewed in
5 connection with the state regulatory complaints. (ImprimisRx Litigation, ECF Nos. 118-
6 5, 118-6.) At a January 27, 2023, discovery hearing, OSRX explained to Judge Leshner it
7 issued the subpoenas solely to investigate ImprimisRx’s alleged violation of the Protective
8 Order. (ECF No. 6 at 5.)
9 On February 3, 2023, OSRX filed a motion to compel Palmer and her firm to comply
10 with the subpoenas. (ImprimisRx Litigation, ECF No. 118.) In response, ImprimisRx
11 submitted a declaration from Palmer that identified twelve documents she received marked
12 “CONFIDENTIAL” or “CONFIDENTIAL – FOR COUNSEL ONLY” under the
13 Protective Order. (ECF No. 6 at 3–4.) According to Palmer’s declaration, ImprimisRx
14 disclosed these documents to her in order to obtain her assistance with the underlying
15 litigation. (ECF No. 6 at 2.) Palmer stated in her declaration she “did not disclose in any
16 way the [documents] to any state or federal regulatory agency, whether in writing or
17 verbally.” (ImprimisRx Litigation, ECF No. 136 ¶ 6.)
18 Following briefing, Judge Leshner determined the proper forum for OSRX to
19 enforce compliance with its subpoenas was in the United States District Court for the
20 District of Columbia. (ECF No. 6 at 4.) OSRX filed its motion to compel and on June 5,
21 2023, the United States District Court for the District of Columbia granted OSRX’s motion
22 to transfer the motion to compel to this District. (Id. at 5.) OSRX then filed a notice of
23 transfer and renewed motion to compel compliance in this District incorporating by
24 reference its original Motion and all prior briefing. (Id.)
25 On July 17, 2023, Judge Leshner ruled against the motion to compel compliance
26 with the subpoenas and engage in further discovery for two reasons: (1) a deposition of
27 Palmer would not provide further insight into whether she was “counsel” under the
Protective Order, and (2) there was no evidence in the record showing Palmer or her firm
1 provided the documents under the Protective Order to state boards or regulators. (ECF No.
2 6.) Judge Leshner also noted that a deposition of Palmer or document production by her
3 firm “would likely raise issues of the attorney-client privilege and the work product
4 doctrine.” (Id. at 6.) OSRX subsequently objected to this ruling under Federal Rule of
5 Civil Procedure 72(a). (ECF No. 9-1.) ImprimisRx, Palmer, and her firm responded to
6 OSRX’s objection and requested the Court sanction OSRX with attorney’s fees for alleged
7 harassment and “bad faith litigation conduct.” (ECF No. 12.) Those motions are now
8 before the Court.
9 II. MOTION OBJECTING TO MAGISTRATE JUDGE’S RULING
10 A. Standard of Review
11 A magistrate judge may issue a written order deciding any pretrial matter not
12 dispositive of a party’s claim or defense. Fed. R. Civ. P. 72(a). A party may appeal a
13 magistrate judge’s order on such matters by filing objections within 14 days of the order.
14 Id. This Court requires objections to be filed as a noticed motion. See Standing Order of
15 the Hon. Cynthia Bashant for Civil Cases ¶ 3.
16 A district judge “must consider timely objections and modify or set aside any part
17 of the order that is clearly erroneous or is contrary to law.” Fed. R. Civ. P. 72(a). Factual
18 determinations are reviewed for clear error and legal conclusions are reviewed de novo to
19 determine whether they are contrary to law. United States v. McConney, 728 F.2d 1195,
20 1200–01 (9th Cir. 1984), overruled on other grounds by Estate of Merchant v. CIR, 947
21 F.2d 1390 (9th Cir 1991). “Review under the clearly erroneous standard is significantly
22 deferential, requiring a definite and firm conviction that a mistake has been committed.”
23 Concrete Pipe & Prods. v. Constr. Laborers Pension Tr., 508 U.S. 602, 623 (1993)
24 (quotation omitted). In contrast, review of legal conclusions “permits independent review
25 of purely legal determinations by the magistrate judge.” F.D.I.C. v. Fidelity & Deposit
26 Co. of Md., 196 F.R.D. 375, 378 (S.D. Cal. 2000). “The reviewing court may not simply
27 substitute its judgment for that of the deciding court.” Grimes v. City & Cty. of San
1 Francisco, 951 F.2d 236, 241 (9th Cir. 1991). Judge Leshner’s findings are questions of
2 fact. Therefore, the Cout reviews his ruling for clear error.
3 B. Analysis
4 Petitioners first argue that Judge Leshner committed “clear error” because the Court
5 did not rule on whether a violation of the Protective Order occurred. (ECF No. 9-1 at 10.)
6 Petitioners are putting the cart before the horse. Petitioners moved to compel compliance
7 with subpoenas whose purpose they claim was to determine whether a violation of the
8 Protective Order occurred. (ECF No. 6 at 5.) If Judge Leshner had found a violation had
9 occurred, there would be no need to conduct further discovery into whether Respondents
10 violated the Protective Order. Petitioners’ motion, and the need for the subpoenas, would
11 then be moot.
12 Second, Judge Leshner found that deposition testimony or production of documents
13 was not necessary to assess whether a violation of the Protective Order occurred because
14 neither would assist the Court in determining whether Palmer fell within the Protective
15 Order’s definition of “counsel.” (ECF No. 6 at 5–6.) This determination is not clearly
16 erroneous. Assessing whether Palmer constitutes “counsel” involves interpreting the
17 language of the Protective Order, Palmer’s relationship with Plaintiff, and Palmer’s
18 involvement in this litigation. (ImprimisRx Litigation, ECF No. 131 at 7–8.) See, e.g., See
19 Apple, Inc. v. Samsung Elecs. Co., Ltd, Case No. 5:11-cv-01846-LHK, 2014 WL
20 12596470, at *4 (N.D. Cal. Jan. 29, 2019) (evaluating the protective order’s plain language
21 in assessing whether a violation occurred). Judge Leshner does not commit clear error in
22 finding Palmer’s declaration and briefing by the Respondents are sufficient for that
23 analysis.
24 Third, Petitioners argue deposing Palmer is appropriate discovery sanctions for
25 violating the Protective Order. The Court possesses wide discretion to determine what
26 would constitute reasonable sanctions for violating a protective order. See Sigliano v.
27 Mendoza, 642 F.2d 309, 310 (9th Cir. 1981) (noting the “sanctions available to the district
court are discretionary and the imposition of such sanctions ‘as are just’ will not be reversed
1 unless there has been an abuse of discretion”) (citing United States v. Sumitomo Marine &
2 Fire Ins. Co., 617 F.2d 1365, 1369 (9th Cir. 1980)); Chambers v. NASCO, Inc., 501 U.S.
3 32, 43 (1991) (describing the inherent powers of courts to manage their own affairs to
4 orderly dispose of cases). And, in some circumstances, compelling deposition testimony
5 and production of documents may be reasonable sanctions for violating a protective order.
6 See, e.g., Apple, 2014 WL 12596470, at *1; In re Zyprexa Injunction, 474 F. Supp. 2d 385,
7 406 (E.D.N.Y. 2007).
8 However, in this case, Petitioners did not move for sanctions for violating the
9 Protective Order. Nor did Judge Leshner find sua sponte that this sanction was necessary.
10 Furthermore, unlike the cases cited above, ImprimisRx and Palmer have been forthcoming
11 in providing information necessary to assess whether a violation of the Protective Order
12 occurred. See Apple, 2014 WL 12596470, at *1 (ordering discovery “[i]n light of the scant
13 explanation and evidence proffered by Samsung”); In re Zyprexa Injunction, 474 F. Supp.
14 2d 385, 406 (E.D.N.Y. 2007) (ordering a deposition and document production where one
15 party had not returned the confidential documents nor submitted a declaration or other
16 testimony to his involvement in the improper document disclosure). Given the facts before
17 the Court, Judge Leshner’s exercise of discretion was not clearly erroneous.
18 Fourth, Petitioners contend that Judge Leshner’s conclusion that there is “no
19 evidence in the record before this Court that Palmer disclosed the documents or their
20 contents to any state or federal boards” is clearly erroneous. (ECF No. 9-1 at 13.)
21 Petitioners argue such a conclusion is premature without further discovery and that the
22 factual record contains open questions surrounding the circumstances of the possible
23 Protective Order violation. (Id.)
24 The Court disagrees with this assessment. Petitioners have not identified a single
25 instance where the state regulatory complaints cite to material from the confidential
26 documents. (ECF No. 6 at 6.) Petitioners contend there may still have been unknown
27 disclosures; however, the record before the Court does not show that Judge Leshner
committed clear error in finding otherwise. (Id.) To wit, Palmer submitted a declaration
1 stating she has not disclosed any confidential documents to any regulatory agencies. (Id.)
2 While Petitioners may have ongoing questions about the state regulatory inquiries, Judge
3 Leshner did not err in his evaluation of the evidence before him.
4 Finally, Petitioners argue that Judge Leshner’s comments that the deposition of
5 Palmer and additional document production may raise concerns around privilege and the
6 work product doctrine are clearly erroneous. Petitioners contend Palmer was not acting in
7 her capacity as ImprimisRx’s attorney and therefore has no privilege to assert. (ECF No.
8 9-1 at 15.) They argue even if Palmer was acting as ImprimisRx’s attorney, the underlying
9 facts conveyed to an attorney are not privileged. (Id.)
10 First, while the attorney-client privilege does not protect the underlying facts
11 conveyed to an attorney, the underlying facts have already been relayed to petitioners here.
12 Cf. Upjohn Co. v. United States, 449 U.S. 383, 395 (1981); Klein v. Meta Platforms, Inc.,
13 No. 20-CV-08570-JD (VKD), 2022 WL 767096, at *3 (N.D. Cal. Mar. 11, 2022). In their
14 motion objecting to Judge Leshner’s ruling, Petitioners identify as facts to be obtained as
15 “what documents were conveyed to Palmer,” “when such documents were relayed,” “what
16 Palmer . . . did with those documents,” and “when Palmer became aware of the Protective
17 Order in this action.” (ECF No. 9-1 at 15.) These facts, however, have already been
18 adduced through Palmer’s declaration and statements by Respondents.
19 Second, Judge Leshner correctly considered ImprimisRx and Palmer’s attorney-
20 client relationship when making his decision. Even if Palmer submitted regulatory
21 complaints independently and not as ImprimisRx’s counsel, the subject matter of
22 Petitioners’ proposed depositions is likely to invoke questions that trespass into Palmer’s
23 representation of ImprimisRx and communications related to that representation. Indeed,
24 in their deposition topics list, Petitioners identify deposition topics that involve
25 communications between ImprimisRx and Palmer such as: “[a]ny and all communications
26 relating to [Petitioners’] compliance or alleged noncompliance with FDA or state
27 regulations;” “[a]ny and all investigation conducted by you or Karla Palmer in support of
the State Complaints;” and “the content” of interviews conducted by Respondents. (ECF
1 No. 1-1 at 7.) It was not clearly erroneous for Judge Leshner to consider the risks related
2 to Palmer’s representation of ImprimisRx in assessing whether to require compliance with
3 the subpoenas. Other district courts have similarly considered parties’ attorney-client
4 relationships when assessing whether to order depositions of counsel as discovery
5 sanctions or in the normal course of litigation. See, e.g., Sciara v. Campbell, No. 2:18-cv-
6 01700-DJA, 2021 WL 8321864, at *3 (D. Nev. Mar. 12, 2021); In re Sause Bros. Ocean
7 Towing, 144 F.R.D. 111, 116–17 (D. Or. 1991); Shelton v Am. Motors Corp., 805 F.2d
8 1323, 1329 (8th Cir. 1986).
9 Accordingly, Petitioners’ motion objecting to Judge Leshner’s previous ruling is
10 denied.
11 III. MOTION FOR ATTORNEY’S FEES
12 In their Opposition to Petitioners’ objection to Magistrate Judge Leshner’s ruling,
13 Respondents move the Court to sanction Petitioners for bad faith litigation conduct under
14 Federal Rule of Civil Procedure 45(d)(1). (ECF No. 12 at 15.)
15 Federal Rule of Civil Procedure 45(d)(1) allows the Court to sanction a party who
16 fails “to take reasonable steps to avoid imposing undue burden or expense on a person
17 subject to the subpoena.” The Court “may … impose sanctions when a party issues a
18 subpoena in bad faith, for an improper purpose, or in a manner inconsistent with existing
19 law.” Legal Voice v. Stormans Inc., 738 F.3d 1178, 1185 (9th Cir. 2013). Such sanctions
20 are discretionary. Id. The Court need not impose sanctions every time it denies a motion
21 to compel or finds a subpoena overbroad given that it “may sometimes result from normal
22 advocacy, which [ ] should not give rise to sanctions.” Id. (citing Mount Hope Church v.
23 Bash Back!, 705 F.3d 418, 425–27 (9th Cir. 2012)).
24 ImprimisRx moves to recover its attorneys’ fees because Petitioners allegedly
25 continue to “harass” ImprimisRx and Palmer in order to obtain unrelated discovery
26 amounting to “bad faith litigation conduct.” (ECF No. 12 at 15–16.) In reviewing the
27 record, the Court is not convinced. While Petitioners issued the subpoenas in pursuit of
material “not relevant to a claim or defense” in the litigation, their efforts to understand the
1 extent of the alleged protection order violation do not amount to “bad faith” or an improper
2 |}purpose. And while Judge Leshner found the deposition of Palmer and additional
3 document production unnecessary, Petitioners did not act with improper purpose in issuing
4 ||the subpoenas. Rather, OSRX aims to understand whether its ongoing regulatory
5 ||complaints are linked to the disclosure of confidential documents to Palmer. These
6 || questions are reasonable and a natural consequence of the document disclosure given the
7 || Protective Order and subsequent regulatory complaints initiated by Palmer. Accordingly,
8 Motion for Sanctions under Rule 45(d)(1) is denied.
9 CONCLUSION
10 For the forgoing reasons, the Court DENIES Petitioners’ objection to Magistrate
11 Judge Leshner’s ruling to deny Petitioners’ motion to compel compliance with the
12 || subpoena (ECF No. 9) and DENIES Respondents’ motion for sanctions (ECF No. 12).
13 IT IS SO ORDERED.
14 ,
fl
15 || DATED: December 7, 2023 Lill A (Syohan. □
16 United States District Judge
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