Federal Trade Commission v. Boehringer Ingelheim Pharmaceuticals, Inc.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 14, 2014 Decided February 20, 2015

No. 12-5393

FEDERAL TRADE COMMISSION,

APPELLANT

v.

BOEHRINGER INGELHEIM PHARMACEUTICALS, INC.,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:09-mc-00564)

Mark S. Hegedus, Attorney, Federal Trade Commission,

argued the cause for appellant. With him on the briefs were

Jonathan E. Nuechterlein, General Counsel, David C. Shonka,

Principal Deputy General Counsel, John F. Daly, Deputy

General Counsel for Litigation, and Leslie Rice Melman,

Assistant General Counsel for Litigation. David L. Sieradzki,

Attorney, entered an appearance.

Lawrence D. Rosenberg argued the cause for appellee.

With him on the brief was Michael Sennett.

Before: ROGERS, GRIFFITH and WILKINS, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILKINS.

2

WILKINS, Circuit Judge: In 2009, the Federal Trade

Commission initiated an antitrust investigation into a patent

settlement agreement between Boehringer Ingelheim

Pharmaceuticals, Inc. (“Boehringer”), a brand-name

pharmaceutical company, and Barr Industries (“Barr”), a

generic drug manufacturer. As part of its investigation, the

FTC issued an administrative subpoena seeking various

documents relating to the settlement. When Boehringer failed

to comply, the FTC initiated an enforcement proceeding in the

District Court for the District of Columbia. See FTC v.

Boehringer Ingelheim Pharm., Inc., 286 F.R.D. 101 (D.D.C.

2012). Although Boehringer ultimately certified compliance

with the subpoena, it withheld hundreds of responsive

documents under the work product doctrine and the attorney-

client privilege. After the FTC objected, the District Court

reviewed in camera a sample of the contested documents, and

found that almost all were properly withheld under the work

product doctrine or the attorney-client privilege. On appeal,

the FTC challenges the District Court’s application of the

work product doctrine.

The FTC first asserts that the District Court erred as a

matter of law when it concluded that settlement documents

pertaining to a co-promotion agreement between Boehringer

and Barr were prepared “in anticipation of litigation,” as

required under the work product doctrine. According to the

FTC, this conclusion cannot be reconciled with Boehringer’s

representation that the co-promotion agreement involved

payment for other services apart from Barr’s agreement to

dismiss the patent litigation. We reject the FTC’s argument

and hold that a settlement term may have independent

economic value and still be considered part of a settlement for

purposes of work product protection. In addition, we find that

the District Court reasonably concluded that the bulk of the

contested co-promotion materials were prepared “in

3

anticipation” of the Boehringer-Barr litigation. The sole

exception is a small group of documents drafted after the

settlement was executed, which the District Court did not

explicitly address. Accordingly, we generally affirm the

District Court’s findings on this issue but remand for further

consideration with respect to the post-settlement documents.

The FTC next argues that the District Court committed

legal error by applying an overly expansive definition of

“opinion” work product, which is highly protected, as

opposed to “fact” work product, which is substantially less so.

Because we agree that the District Court misapprehended the

proper distinction between fact and opinion work product, we

reverse and remand on this issue.

I.

Boehringer manufactures Aggrenox and Mirapex, two

patented pharmaceutical drugs that earn hundreds of millions

of dollars in U.S. sales each year. In 2005, Barr sought and

received FDA approval to market generic versions of these

drugs, which led Boehringer to sue Barr for patent

infringement. See Boehringer Ingelheim Int’l GmbH v. Barr

Labs. Inc., Civ. Action No. 05-700-JJF (D. Del. filed Sept. 26,

2005). Barr, in turn, contended that Boehringer’s patents

were invalid. While the Delaware litigation was pending,

Boehringer and Barr entered into settlement negotiations.

Boehringer’s senior vice president and general counsel, Marla

Persky, served as its lead negotiator during these discussions.

FTC Investig. Hr’g Tr. at 70-71, J.A. 755-56. To this end,

Persky and her staff engaged in both legal and business

activities, including evaluating possible litigation outcomes,

considering potential antitrust concerns, and evaluating and

negotiating the business terms of the settlement. Id. at

113-16, 118, 120-23, J.A. 772-80.

4

On August 11, 2008, the two companies settled their

dispute on the following terms: Barr would refrain from

marketing its generic versions of Aggrenox and Mirapex in

the immediate future, but Boehringer would permit Barr to

enter the market several months ahead of the expiration of

Boehringer’s patents. Boehringer, 286 F.R.D at 105; see also

Aggrenox Settlement Agreement, J.A. 871-83; Press Release,

J.A. 886-88. In the meantime, under a related co-promotion

agreement, Barr would help Boehringer promote Aggrenox to

medical professionals in exchange for certain specified fees

and royalties on Aggrenox sales. Boehringer, 286 F.R.D at

105; see also Co-Promotion Agreement, J.A. 889-930.

While this type of settlement deal is not necessarily

unlawful, see FTC v. Actavis, Inc., 133 S. Ct. 2223, 2237-38

(2013), such a settlement may be subject to antitrust scrutiny

if it appears that the patent-holding firm – here, Boehringer –

was using the co-promotion agreement as a vehicle to avoid

legitimate competition. Id. at 2236-37. And, indeed, the

specific terms of this settlement raised the suspicions of the

FTC that Boehringer was simply paying Barr off in order to

delay the entry of generics into the market. Boehringer, 286

F.R.D at 105. The FTC initiated an investigation and served

Boehringer with a subpoena duces tecum. Id. After

Boehringer failed to meet a deadline for production, the FTC

filed a petition in district court for an order enforcing the

subpoena. Id.

Boehringer ultimately completed production and certified

compliance with the subpoena, although it withheld nearly a

quarter of identified responsive documents as protected by the

attorney-client privilege, the work product doctrine, or both.

Id. at 106. The FTC was not satisfied with Boehringer’s

response and objected that many of the withheld documents

fell outside the scope of these privileges. Id. It specifically

5

challenged Boehringer’s refusal to produce documents

containing financial analyses of the Aggrenox co-promotion

agreement, forecasting analyses of alternative time lines for

generic entry into the market, and financial analyses of the

business terms of the settlement agreement. Id. at 108. The

FTC also challenged Boehringer’s withholding of several

other categories of documents not at issue in this appeal. See

id. at 112 (discussing emails, notes, and reports on strategic

decisions and other issues; emails containing legal advice or

requests for legal advice; transmittal emails; and duplicate

documents); Appellant’s Br. 12-16 (limiting challenge on

appeal to financial documents analyzing litigation settlement

and co-promotion agreement).

By agreement of the parties, Boehringer submitted a

sample set of documents in camera to the District Court.

Boehringer, 286 F.R.D at 106. After reviewing the

documents, the District Court issued a decision largely

upholding Boehringer’s work product claims. Id. at 108-12.

The District Court first explained why the financial

analyses and forecasts fell within the scope of the work

product doctrine. It began by observing that work product

developed for the purpose of settling a lawsuit falls within the

scope of materials prepared “in anticipation of litigation,” as

required under Rule 26. Boehringer, 286 F.R.D. at 107, 109;

see FED. R. CIV. P. 26(b)(3) (protecting from disclosure

materials “prepared in anticipation of litigation”). The

documents analyzing litigation outcomes and the settlement

terms were, therefore, plainly work product. Boehringer, 286

F.R.D. at 109. As for the co-promotion agreement materials,

the court found that the co-promotion agreement was

“integral” to the global settlement deal and therefore also

belonged in the class of materials prepared in anticipation of

litigation. Id.

6

The District Court next considered whether the materials

sought were fact work product, which may be discovered

under certain circumstances, or opinion work product, which

is subject to strict protection. Id. at 109-10. It found that

although the materials resembled financial reports that might

be prepared in the standard course of business, the specific

reports were prepared using “information and frameworks”

provided by Boehringer counsel and reflected, at minimum,

counsel’s opinions as to what data were important in

determining an acceptable settlement. Id. at 109. On these

grounds, the District Court concluded that the materials

constituted opinion work product, deserving of the utmost

protection. Id. at 110. The District Court further found that

the FTC had not demonstrated the sort of “overriding and

compelling” need required to pierce opinion work product

protection. Id. at 109-10. Because the District Court found

that the documents were wholly protected under the work

product doctrine, it did not reach Boehringer’s attorney-client

privilege claims with respect to any of these financial

documents. See id.

The FTC contends that the District Court erred in two

ways. It first argues that the District Court failed to properly

consider whether many of these materials – particularly, the

financial analyses of the Aggrenox co-promotion agreement

and materials produced after the settlement agreement was

executed – actually were prepared “in anticipation of

litigation.” It next asserts that even if all of the contested

documents are work product, then they are, at most, fact work

product and therefore may be discovered by the FTC upon a

showing of substantial need and undue hardship.

7

II.

We review a district court’s decision to enforce an

administrative subpoena for abuse of discretion. See U.S.

Int’l Trade Comm’n v. ASAT, Inc., 411 F.3d 245, 253 (D.C.

Cir. 2005). A district court necessarily abuses its discretion if

it applies the incorrect legal standard, a question that is

reviewed de novo. See Conservation Force v. Salazar, 699

F.3d 538, 542 (D.C. Cir. 2012); FTC v. Church & Dwight

Co., 665 F.3d 1312, 1315 (D.C. Cir. 2011).

A district court’s factual findings are reviewed for clear

error. Boca Investerings P’ship v. United States, 314 F.3d

625, 629 (D.C. Cir. 2003). A finding is clearly erroneous,

even where there is record evidence to support it, if “the

reviewing court on the entire record is left with the definite

and firm conviction that a mistake has been committed.”

Awad v. Obama, 608 F.3d 1, 6-7 (D.C. Cir. 2010) (internal

quotation marks omitted).

III.

A.

The Supreme Court first articulated the federal work

product doctrine in Hickman v. Taylor, 329 U.S. 495 (1947),

where it was asked to define the reach of the pre-trial

deposition and discovery mechanisms established by the then-

new Federal Rules of Civil Procedure. These rules, which

required each party “to disgorge whatever [relevant, non-

privileged] facts he has in his possession,” dramatically

expanded the scope of pre-trial discovery. Id. at 507. Under

a literal reading of the Rules, a party would be entitled to

discover any non-privileged trial preparation materials, such

8

as attorney notes from witness interviews, created by his

opponent in that litigation. See id. at 506.

The Supreme Court rejected this literal reading, holding

that compelled disclosure of attorney work product would

“contravene[] the public policy underlying the orderly

prosecution and defense of legal claims.” Id. at 510. The

Court explained that in performing one’s duties as a lawyer:

[I]t is essential that a lawyer work with a certain degree

of privacy, free from unnecessary intrusion by opposing

parties and their counsel. Proper preparation of a client’s

case demands that he assemble information, sift what he

considers to be the relevant from the irrelevant facts,

prepare his legal theories and plan his strategy without

undue and needless interference.

Id. at 510-11. Readily compelling the disclosure of such work

product to opposing counsel would lead to “[i]nefficiency,

unfairness and sharp practices.” Id. at 511.

Hickman clarified that discovery of an attorney’s work

materials was permitted only in limited circumstances. Id. A

party seeking such materials must establish “adequate reasons

to justify production through subpoena or court order,” and

even then, discovery is limited to “relevant and non-

privileged facts.” Id. at 511-12 (emphasis added).

Hickman was later codified in substantial part in Rule

26(b)(3) of the Federal Rules. Rule 26 provides that a party

generally may not discover “documents and tangible things

that are prepared in anticipation of litigation or for trial by or

for another party or its representative[.]” FED. R. CIV. P.

26(b)(3)(A). Such discovery is permissible, however, if “the

party shows that it has substantial need for the materials to

9

prepare its case and cannot, without undue hardship, obtain

their substantial equivalent by other means,” so long as

counsel’s “impressions, conclusions, opinions, or legal

theories” are not disclosed. FED. R. CIV. P. 26(b)(3)(A)-(B);

see FED. R. CIV. P. 81(a)(5) (providing that the Federal Rules

apply to proceedings to enforce an administrative subpoena).

The work product protection is broader than the attorney-

client privilege in that it is not restricted solely to confidential

communications between an attorney and client. In re Sealed

Case, 676 F.2d 793, 808-09 (D.C. Cir. 1982). It is narrower,

however, insofar as the doctrine protects only work performed

in anticipation of litigation or for trial. See Senate of Puerto

Rico v. Dep’t of Justice, 823 F.2d 574, 586 (D.C. Cir. 1987)

(“The work product doctrine does not extend to every written

document generated by an attorney . . . rather, work product

covers only documents prepared in contemplation of

litigation.”) (internal quotation marks omitted). A document

prepared as work product for one lawsuit will retain its

protected status even in subsequent, unrelated litigation. See

FTC v. Grolier Inc., 462 U.S. 19, 27-28 (1983); In re Murphy,

560 F.2d 326, 333-35 (8th Cir. 1977) (holding that materials

prepared for patent settlement retained work product

protection in subsequent antitrust litigation).

B.

1.

When considering whether a document is prepared “in

anticipation of litigation,” this Court employs a “because of”

test, inquiring “whether, in light of the nature of the document

and the factual situation in the particular case, the document

can fairly be said to have been prepared or obtained because

of the prospect of litigation.” United States v. Deloitte LLP,

10

610 F.3d 129, 137 (D.C. Cir. 2010) (internal quotation marks

omitted); accord 8 CHARLES ALAN WRIGHT ET AL., FEDERAL

PRACTICE & PROCEDURE § 2024, at 502 (3d ed. 2010). Where

a document would have been created “in substantially similar

form” regardless of the litigation, work product protection is

not available. Deloitte, 610 F.3d at 138 (quoting United

States v. Adlman, 134 F.3d 1194, 1195 (2d Cir. 1998)).

The FTC does not challenge the District Court’s ruling

that documents created by Boehringer for the purpose of

settling the patent infringement litigation are protected work

product. It takes issue, however, with the District Court’s

finding that the materials relating to the co-promotion

agreement fall within the category of protected settlement

documents.

The FTC points out that Boehringer has represented that

the co-promotion agreement, despite being part of the

litigation settlement, was a “fair arms-length business

arrangement” that had independent economic value apart

from the litigation settlement. April 6, 2010 Letter from

Boehringer counsel to the FTC, J.A. 577; FTC Investig. Hr’g

Tr. 112-13, J.A. 991-92. The FTC contends that the

purported “arms-length” nature of the co-promotion

agreement logically compels a finding that the related

documents would have been created “in substantially similar

form” irrespective of the patent infringement litigation.

Appellant’s Br. 21, 33-41. According to the FTC, Boehringer

may not point to the independence of the co-promotion

agreement from the litigation settlement for purposes of its

antitrust defense while relying on the interdependence of

these agreements to avoid discovery.

We find no merit in the proposition that any settlement

term that has some independent economic value to both

11

parties must always be treated as an ordinary (non-litigation)

business transaction for purposes of work product protection.

Common sense and practical experience teach that settlement

deals routinely include arrangements that could be isolated

from the overall agreement and stand on their own but were

nonetheless crafted for the purpose of settling litigation.

Indeed, the Supreme Court’s refusal in Actavis to hold reverse

payment settlement agreements presumptively unlawful

anticipates that a reverse payment could “represent payment”

for “other services” aside from a party’s agreement to end

litigation yet still be part of the settlement. 133 S. Ct. at 2237.

Upon our review of the record, we find no clear error in

the District Court’s factual finding that the co-promotion

agreement was “integral” to the broader settlement.

Boehringer, 286 F.R.D. at 109. Accordingly, the District

Court did not err in drawing the legal conclusion that the co-

promotion agreement materials were prepared “in anticipation

of” the patent litigation and were therefore entitled to work

product protection.

The FTC posits that our ruling on this point could lead to

gamesmanship by counsel in future cases. It imagines a

scenario in which parties engaged in litigation settlement

discussions could tack on an unrelated side deal for the

purpose of evading regulatory scrutiny. See Appellant’s

Reply Br. 12-13, 17. While we do not have occasion to rule

on such facts, we note that the work product doctrine is “an

intensely practical one, grounded in the realities of litigation

in our adversary system.” United States v. Nobles, 422 U.S.

225, 238 (1975). We do not reach the question of whether the

work product protection is available in the hypothetical

situation where settlement terms run far afield of the

12

underlying litigation, or where there is evidence, not present

here, of gamesmanship or abuse. 1

2.

The FTC also raises a temporal objection to many of the

withheld documents. It notes that the District Court

characterized the documents as having been prepared “to

assess settlement option[s].” Boehringer, 286 F.R.D. at 109.

This finding is inconsistent with the dates on many documents

(including at least eight submitted in camera) that were

prepared after the settlement agreement was executed. See

Index of Challenged Entries at 36, J.A. 703.

Boehringer concedes that many documents were created

after settlement negotiations concluded. See Appellee’s Br.

15. It asserts, however, that these materials contain

information initially prepared in anticipation of the settlement,

related to other pending litigation, or involving requests for or

the provision of legal advice. Id. While Boehringer articu-

lates potentially viable grounds for protection, these grounds

are not the reasons articulated by the District Court, which

characterized all of the documents as having been created in

anticipation of the Boehringer-Barr litigation and settlement.

Boehringer, 286 F.R.D. at 109. We therefore remand for

consideration of whether these documents were, in fact,

created in anticipation of litigation. 2

1

Because we find that the documents are protected, we do not

reach Boehringer’s alternative argument that the co-promotion

agreement materials are protected because counsel used them to

evaluate potential antitrust liability.

2

The FTC also suggests that documents created prior to the

commencement of settlement negotiations cannot be related to the

13

C.

As noted, Rule 26 distinguishes between opinion work

product, which reveals “the mental impressions, conclusions,

opinions, or legal theories of a party’s attorney or other

representative concerning the litigation,” and fact work

product, which does not. FED. R. CIV. P. 26(b)(3)(B); see In

re Sealed Case, 124 F.3d 230, 235-36 (D.C. Cir. 1997), rev’d

on other grounds sub nom. Swidler & Berlin v. United States,

524 U.S. 399 (1998). The District Court, after reviewing

financial analysis documents submitted in camera, concluded

that the documents contained information that, while

primarily factual in nature, gave insight into the highly

protected mental impressions of counsel. Boehringer, 286

F.R.D. at 109-10. Specifically, it found that the documents

revealed not only what data the attorneys were seeking, but

also “information and frameworks” developed by counsel. Id.

at 109. On this basis, it ruled that the documents contained

only opinion work product and fact product inextricably

intertwined with counsel’s opinions and thus were wholly

protected from disclosure. Id. at 110.

The FTC argues that the District Court applied an overly

broad definition of opinion work product. After carefully

reviewing the materials submitted in camera and the record as

a whole, we agree.

When a factual document selected or requested by

counsel exposes the attorney’s thought processes and theories,

it may be appropriate to treat the document as opinion work

product, even though the document on its face contains only

settlement. Appellant’s Br. 6, 33. We find no merit to this

proposition. To the contrary, one would expect a company’s

attorneys to discuss settlement strategy internally before entering

into negotiations with opposing counsel.

14

facts. See Dir., Office of Thrift Supervision v. Vinson &

Elkins, LLP, 124 F.3d 1304, 1308 (D.C. Cir. 1997) (“At some

point . . . a lawyer’s factual selection reflects his focus; in

deciding what to include and what to omit, the lawyer reveals

his view of the case.”). At the same time, however, “not

every item which may reveal some inkling of a lawyer’s

mental impressions . . . is protected as opinion work product.”

In re San Juan Dupont Plaza Hotel Fire Litig., 859 F.2d

1007, 1015 (1st Cir. 1988). Opinion work product protection

is warranted only if the selection or request reflects the

attorney’s focus in a meaningful way. See Dir., Office of

Thrift Supervision, 124 F.3d at 1308; In re San Juan Dupont

Plaza Hotel Fire Litig., 859 F.2d at 1015 (heightened

protection is triggered only if “disclosure creates a real,

nonspeculative danger of revealing the lawyer’s thoughts”).

And where a document contains both opinion and fact work

product, the court must examine whether the factual matter

may be disclosed without revealing the attorney’s opinions.

See Deloitte, 610 F.3d at 139 (remanding case to district court

to assess whether a redacted version of a document containing

opinion work product could be disclosed); In re Sealed Case,

146 F.3d 881, 888 (D.C. Cir. 1998) (same).

In Sealed Case (1997), for example, we held that attorney

notes of preliminary interviews with a witness were not

necessarily opinion work product, as the mere fact that an

attorney had chosen to write a fact down was not sufficient to

convert that fact into opinion work product. 124 F.3d at

236-37. Rather, there must be some indication that the lawyer

“sharply focused or weeded the materials.” Id. at 236. After

in camera review of the documents in that case revealed that

much of the information contained therein “could be

classified as opinion only on a virtually omnivorous view of

the term,” we reversed and remanded to the district court for

reexamination. Id. at 236-37.

15

As in Sealed Case, many of the documents at issue here

contain only factual information requested or selected by

counsel. Much of what the FTC seeks is factual information

produced by non-lawyers that, while requested by Ms. Persky

and other attorneys, does not reveal any insight into counsel’s

legal impressions or their views of the case.

In holding to the contrary, the District Court implied that

an attorney’s mere request for a document was sufficient to

warrant opinion work product protection. In discussing

financial reports, the court noted that the reports were

“prepared at the behest of [Boehringer] attorneys,” who

requested the use of “certain data.” Boehringer, 286 F.R.D. at

110. The District Court further noted that “[r]evealing the

data chosen for this analysis would necessarily reveal the

attorneys’ mental impressions, including, at a bare minimum,

that the attorneys believed such analyses of that data was [sic]

necessary or important to determining an appropriate

settlement.” Id.

As is plain from the District Court’s decision, the

materials in the joint appendix, and Boehringer’s in camera

submissions, however, counsel’s requests were often general

and routine. And indeed, the District Court noted that the

documents requested by the FTC are “the sort of financial

analyses one would expect a company exercising due

diligence to prepare when contemplating settlement options.”

Id. In many documents, the only mental impression that can

be discerned is counsel’s general interest in the financials of

the deal. But such interest reveals nothing at all: anyone

familiar with such settlements would expect a competent

negotiator to request financial analyses like those performed

here, and Boehringer does not attempt to hide this interest in

its briefs. There is no “real, nonspeculative danger of

revealing the lawyer’s thoughts” when the thoughts are

16

already well-known. In re San Juan Dupont Plaza Hotel Fire

Litig., 859 F.2d at 1015.

Moreover, as Ms. Persky observed in her testimony

before the FTC, questions about whether the agreements

made financial sense were a matter of business judgment, not

legal counsel. See FTC Investig. Hr’g Tr. at 68, J.A. 590. In

fact, the financial parameters of an acceptable settlement were

provided by Boehringer’s board of directors and its business

managers. Id. A company may select an executive who is a

lawyer to negotiate the business terms of a settlement; this

does not mean that the lawyer’s thoughts relating to financial

and business decisions are opinion work product when she is

simply parroting the thoughts of the business managers.

The District Court also reasoned that many of the

documents were created using specific “information and

frameworks” provided by Boehringer counsel. Boehringer,

286 F.R.D. at 109. In many documents, however, the

“information and frameworks” provided have no legal

significance. For example, in several documents, the

“frameworks” provided by counsel are simply time frames for

requested financial data – for example, forecasting in x-month

intervals. Boehringer posits that disclosing these time frames

could reveal something of legal significance, but it has failed

to explain how. Where an attorney’s mental impressions are

those that “a layman would have as well as a lawyer in these

particular circumstances, and in no way reveal anything

worthy of the description ‘legal theory,’” those impressions

are not opinion work product. In re HealthSouth Corp. Sec.

Litig., 250 F.R.D. 8, 11 (D.D.C. 2008) (quoting In re John

Doe Corp., 675 F.2d 482, 493 (2d Cir. 1982)).

Where it appears that the focus or framework provided by

counsel is obvious or non-legal in nature, it is incumbent upon

17

the party claiming opinion work product protection to explain

specifically how disclosure would reveal the attorney’s legal

impressions and thought processes. The District Court failed

to demand such a showing from Boehringer and instead

concluded categorically that the contested documents were

highly protected opinion work product. This was error.

D.

1.

The District Court’s error matters because, as noted, a

party’s ability to discover work product often turns on

whether the withheld materials are fact work product or

opinion work product. A party generally must make an

“extraordinary showing of necessity” to obtain opinion work

product. In re Sealed Case, 676 F.2d at 811; see also Dir.,

Office of Thrift Supervision, 124 F.3d at 1307 (observing that

opinion work product is “virtually undiscoverable”). By

contrast, “[t]o the extent that work product contains relevant,

nonprivileged facts,” the work product doctrine “merely shifts

the standard presumption in favor of discovery and requires

the party seeking discovery to show ‘adequate reasons’ why

the work product should be subject to discovery.” In re

Sealed Case, 676 F.2d at 809 (emphasis added) (quoting

Hickman, 329 U.S. at 512). This “adequate reasons” test

corresponds to Rule 26(b)(3)’s requirement, adopted in 1970,

that a party seeking fact work product demonstrate that “it has

substantial need for the materials to prepare its case and

cannot, without undue hardship, obtain their substantial

equivalent by other means.” FED. R. CIV. P. 26(b)(3)(A)(ii);

see In re Sealed Case, 676 F.2d at 809 n.59.

The District Court, believing that the contested

documents contained only opinion work product or facts

18

inextricably intertwined with legal opinions, confined its

inquiry to whether the FTC had demonstrated an “overriding

and compelling need” for those materials and concluded that

it had not. Boehringer, 286 F.R.D. at 109-10. Because the

FTC does not claim that it is entitled to opinion work product,

we have no occasion to consider whether the District Court

applied the correct standard for evaluating when opinion work

product immunity may be pierced.

On the other hand, the FTC does contend that it is

entitled to any facts that can be reasonably excised from

counsel’s legal opinions and mental processes. Because it is

the duty of the District Court to consider whether the FTC had

met the less demanding standard for fact work product, see

FED. R. CIV. P. 26(b)(3)(A)(ii), the customary next step would

be to remand the case to allow the District Court to make this

determination in the first instance.

Each party contends, however, that we have what we

need to decide whether the FTC has met the Rule 26(b)(3)

standard in that party’s favor, based on other findings made

by the District Court. Boehringer points specifically to the

District Court’s observation that the documents contain “no

smoking guns” and are “not in any way evidence of any

conspiratorial intent to violate the law.” Appellee’s Br. 54

(quoting Boehringer, 286 F.R.D. at 110). This statement,

Boehringer argues, is “fatal” to the FTC’s claim of need. Id.

Boehringer’s theory seems to be that a party “needs” fact

work product only if the materials are critical to, or

dispositive of, a key issue at trial.

We find no merit in Boehringer’s argument, for two

reasons. First, although some courts have demanded a

heightened showing of a document’s relevance or probative

value for discovery of fact work product, see Logan v.

19

Commercial Union Ins. Co., 96 F.3d 971, 977 (7th Cir. 1996),

we have never characterized Rule 26(b)(3)’s “substantial

need” requirement in this manner. See, e.g., Dir., Office of

Thrift Supervision, 124 F.3d at 1308; In re Sealed Case, 676

F.2d at 809-10. Nor is such an approach consistent with the

1970 amendments to Rule 26 or the case law that they

codified, as we explain below. Second, even if a heightened

relevance requirement were appropriate during discovery in a

typical post-complaint civil lawsuit, such a rule would be

misplaced in the investigatory context of an agency subpoena

enforcement proceeding. See Linde Thomson Langworthy

Kohn & Van Dyke, P.C. v. Resolution Trust Corp., 5 F.3d

1508, 1512 (D.C. Cir. 1993); FTC v. Texaco, Inc., 555 F.2d

862, 872 (D.C. Cir. 1977) (en banc).

The FTC, on the other hand, maintains that the District

Court implicitly determined that the FTC had satisfied the

“substantial need” and “undue hardship” requirements.

Because the District Court found that the financial documents

are relevant to the FTC’s investigation and would provide

unique information that the FTC cannot reasonably obtain

elsewhere, and because we detect no error in this finding, we

agree with the FTC. We discuss each of these points in turn.

2.

The meaning of Rule 26(b)(3)’s “substantial need”

requirement is not clear from the plain language of the rule.

Cf. Pierce v. Underwood, 487 U.S. 552, 563-64 (1988)

(discussing the ambiguity implicit in the term “substantial”

while interpreting 28 U.S.C. § 2412(d)(1)(A)); see also A.I.A.

Holdings, S.A. v. Lehman Bros., Civ. Action No. 97-4978,

2000 WL 1639417, at *2 (S.D.N.Y. Nov. 1, 2000) (noting

that “[t]he law is not well developed as to what constitutes

‘substantial need’”); Special Project, The Work Product

20

Doctrine, 68 CORNELL L. REV. 760, 802 (1983) (“The

substantial need requirement is the least uniformly applied by

the courts.”). Helpfully, the Advisory Committee’s notes on

the amendments “provide a reliable source of insight into the

meaning of a rule, especially when, as here, the rule was

enacted precisely as the Advisory Committee proposed.”

United States v. Vonn, 535 U.S. 55, 64 n.6 (2002)

(interpreting FED. R. CRIM. P. 11(h)).

The “substantial need” and “undue hardship”

requirements were added to Rule 26(b)(3) in an attempt to

clarify and codify the tests developed by the Supreme Court

in Hickman and by the lower courts construing former Rule

34’s “good cause” provision. See FED. R. CIV. P. 26(b)(3)

advisory committee’s note to 1970 Amendments (hereinafter

Advisory Committee’s Notes), reproduced at 48 F.R.D. 487,

500-01; see also In re Sealed Case, 676 F.2d at 810 n.59;

WRIGHT ET AL., supra, § 2023, at 489 (characterizing Rule

26(b)(3) as “a largely accurate codification of the doctrine

announced in the Hickman case and developed in later cases

in the lower courts”). The Committee explained that the

amendments were intended to require an inquiry into “the

importance of and need for” the fact work product at issue, as

well as “alternative sources for securing the same

information.” Advisory Committee’s Notes, 48 F.R.D. at

500. The Committee did not further define the “substantial

need” and “undue hardship” concepts.

The Committee did provide guidance, however, by

pointing to four cases that had demanded a “special showing”

to obtain trial preparation materials; it explained that the new

“substantial need” and “undue hardship” requirements

reflected the holdings of those cases. Id. (citing Guilford

Nat’l Bank v. Southern Ry., 297 F.2d 921 (4th Cir. 1962);

Mitchell v. Bass, 252 F.2d 513 (8th Cir. 1958); Hauger v.

21

Chicago, R.I. & Pac. R.R., 216 F.2d 501 (7th Cir. 1954);

Burke v. United States, 32 F.R.D. 213 (E.D.N.Y. 1963)). The

Committee also approved of a list of circumstances under

which witness statements could be discoverable, as recited in

a fifth case, Southern Ry. v. Lanham, 403 F.2d 119 (5th Cir.

1968). Advisory Committee’s Notes, 48 F.R.D. at 501. 3

These cases indicate that a moving party’s burden is

generally met if it demonstrates that the materials are relevant

to the case, the materials have a unique value apart from those

already in the movant’s possession, and “special

circumstances” excuse the movant’s failure to obtain the

requested materials itself. See Mitchell, 252 F.2d at 518-19

(permitting discovery of opponent’s witness statements where

witnesses refused to speak with movant); Burke, 32 F.R.D. at

215 (permitting discovery of accident report materials where

information contained therein was otherwise unavailable); cf.

Hauger, 216 F.2d at 505-06 (finding no “special

circumstances” warranting disclosure of witness statements

where plaintiff had deposed those same witnesses, and

3

Each of these cases involved factual work product prepared by

non-attorneys. See Lanham, 403 F.2d at 126-27 (claim agents);

Hauger, 216 F.2d at 506 (agents); Mitchell, 252 F.2d at 518

(investigators); Guilford, 297 F.2d at 922 (claim agent); Burke, 32

F.R.D. at 214 (post office personnel). Although Hickman did not

expressly apply to work product prepared by non-lawyers, these

courts required a special showing for such materials under Rule

34’s “good cause” provision. See, e.g., Mitchell, 252 F.2d at

518-19; Guilford, 297 F.2d at 927; but see Hauger, 216 F.2d at

506-07 (finding “no logical basis” for distinguishing between

statements taken by counsel and a counsel’s agent and therefore

applying both Rule 34 and Hickman). The 1970 amendments

abolished the distinction between factual materials prepared by

counsel and those prepared by non-attorneys. FED. R. CIV. P.

26(b)(3)(A); see Nobles, 422 U.S. at 254 n.16.

22

plaintiff’s purported need for materials for purposes of

impeachment was speculative); Guilford, 297 F.2d at 923-27

(finding no “special circumstances” where plaintiff possessed

substantially similar materials and impeachment value was

speculative). A list of special circumstances was provided in

Lanham, where the Fifth Circuit observed that a

contemporaneous witness statement typically would be

discoverable if the witness was unavailable, reluctant, or

hostile, or if the witness had a lapse of memory or deviated

from prior statements. 403 F.2d at 128-31.

Although each of these cases mentioned the relevance of

the requested documents, none articulated a requirement that

the documents be essential to the claim or probative of a

critical element. The Advisory Committee notably did not

cite any of the then-existing decisions demanding a

heightened showing of relevance. Compare Republic Gear

Co. v. Borg-Warner Corp., 381 F.2d 551, 558 (2d Cir. 1967)

(requiring party seeking fact work product to demonstrate that

the documents were “essential to the preparation of

[movant’s] case on [a] critical issue” in the litigation).

Boehringer’s argument that factual work product is

discoverable only if it contains a “smoking gun” therefore has

no basis in the Committee notes or the cases cited therein.

The Advisory Committee also observed that the

substantial need and undue hardship requirements

corresponded to the showing required under Hickman, see

Advisory Committee’s Notes, 48 F.R.D. at 501, which further

supports the conclusion that no heightened showing of

relevance is required. Hickman instructed that fact work

product that is unavailable elsewhere may be discovered if it

is admissible or could “give clues as to the existence or

location of relevant facts” – a standard remarkably similar to

the relevance standard under Rule 26(b)(1). Hickman, 329

23

U.S. at 511; see FED. R. CIV. P. 26(b)(1) (evidence is relevant

if admissible or “appears reasonably calculated to lead to the

discovery of admissible evidence”). Indeed, a mere relevance

requirement is consonant with Hickman’s statement that

“[m]utual knowledge of all the relevant facts gathered by both

parties is essential to proper litigation.” 329 U.S. at 507

(emphasis added).

Of course, this interest in liberal discovery must be

balanced against the key goal underlying the protection for

fact work product: that each side must undertake its own

investigation of the relevant facts and not simply freeload on

opposing counsel. See Guilford, 297 F.2d at 926 (work

product rule serves to prevent a less-than-diligent litigant

from “perform[ing] its functions either without wits or on wits

borrowed from the adversary”) (quoting Hickman, 329 U.S. at

516 (Jackson, J., concurring)); Nat’l Union Fire Ins. v.

Murray Sheet Metal Co., Inc., 967 F.2d 980, 985 (4th Cir.

1992) (characterizing the substantial need and undue hardship

requirements primarily as “an ‘anti-freeloader’ rule designed

to prohibit one adverse party from riding to court on the

enterprise of the other”). But neither of these competing

interests is served when unique, relevant information is

withheld from a party that never had an opportunity to obtain

the information on its own. The “substantial need” inquiry

requires a careful examination of whether non-disclosure will

impair the truth-seeking function of discovery. See Dir.,

Office of Thrift Supervision, 124 F.3d at 1308 (finding no

substantial need for fact work product where movant already

possessed similar materials). A moving party need not show,

however, that the requested documents are critical to, or

dispositive of, the issues to be litigated. 4

4

There has been a ratcheting up of the “substantial need” standard

in recent years by some courts, due at least in part to a conflation of

24

3.

Boehringer’s argument for a “smoking gun” standard is

problematic for a second reason. Even if such a requirement

were justified in the context of a typical civil proceeding –

where the scope of the charges are clear – such a rule would

be misplaced in the investigatory context here. We have

previously observed that in an administrative subpoena

enforcement proceeding, “[t]he district court is not free to

speculate about the possible charges that might be included in

a future complaint, and then to determine the relevance of the

subpoena requests by reference to those hypothetical

charges.” Texaco, 555 F.2d at 874. In undertaking this

investigation, the FTC is “merely exercising its legitimate

what is sufficient and what is necessary to demonstrate need. For

example, in In re Int’l Sys. & Controls Corp. Sec. Litig., 693 F.2d

1235 (5th Cir. 1982), the fact work product sought related to an

“essential element” of plaintiff’s claims; the Fifth Circuit noted that

this “could be grounds for a finding of substantial need,” but did

not hold that such a finding was required. Id. at 1241. This

“essential element” language nevertheless was incorporated into the

legal standard articulated by a popular treatise, see 6 JAMES WM.

MOORE ET AL., MOORE’S FEDERAL PRACTICE § 26.70[5][c], at 26-

457 to 26-459 (3d ed. 2009), and has been applied by district

courts, see, e.g., Fletcher v. Union Pac. R.R. Co., 194 F.R.D. 666,

672 (S.D. Cal. 2000) (finding no substantial need for surveillance

videos because they were not “essential to [plaintiff]’s prima facie

case”); see also Nat’l Cong. for Puerto Rican Rights v. City of New

York, 194 F.R.D. 105, 110 (S.D.N.Y. 2000) (collecting cases where

materials sought were “essential” to party’s defense, were “crucial”

to determination of liability, or carried “great probative value on

contested issues”); Nevada v. J-M Mfg. Co., 555 F. App’x 782, 785

(10th Cir. 2014) (relying on National Congress and the cases cited

therein as providing minimum standards and denying discovery of

fact work product because movant failed to show that the evidence

“carr[ied] great probative value”).

25

right to determine the facts” and to decide whether a

complaint should issue. Id.; see also Linde Thomson, 5 F.3d

at 1512 (“An investigation conducted by the [FTC] may

conceivably neither culminate in litigation, nor be initially

designed to inspire it.”). If the District Court is correct that

the contested materials reveal an absence of conspiratorial

intent, then the materials nevertheless may be helpful to the

FTC in determining whether to issue a complaint in the first

place.

4.

We turn to the FTC’s argument that the District Court

implicitly found that the FTC had met the “substantial need”

and “undue hardship” requirements. When it decided not to

require Boehringer to disclose facts contained in the financial

analyses and forecasts, the District Court based this decision

on its misplaced belief that the information could not be

disclosed without revealing protected legal opinions and

attorney thought processes. The District Court never

suggested that the FTC had failed to make the requisite

showing for factual work product.

To the contrary, the District Court stated that it was

“sympathetic to the FTC’s argument that these financial

analyses are the only documents that could demonstrate

whether or not [Boehringer] was using the co-promotion

agreement to pay Barr not to compete.” Boehringer, 286

F.R.D. at 110. The District Court then credited the FTC’s

argument with respect to the emails that accompanied the

financial documents, and it directed Boehringer to produce

“factual work product that can be reasonably excised from

any indication of opinion work product.” Id. We agree with

the FTC that this ruling makes clear that the District Court

found that the FTC had shown a substantial need and undue

26

hardship for materials relating to financial analyses and

forecasts. And although Boehringer asserts that the FTC

possesses equivalent documents or could reproduce similar

analyses on its own, none of these arguments are persuasive.

As the District Court indicated, Boehringer’s

contemporaneous financial evaluations provide unique

information about Boehringer’s reasons for settling in the

manner that it did. Id.; see also United States v. Brown Univ.,

5 F.3d 658, 671-72 (3d Cir. 1993) (considering evidence of

party’s intent when assessing the likely antitrust effects of the

challenged conduct); Guilford, 297 F.2d at 926 (noting the

special value of contemporaneous witness accounts).

We therefore will remand to the District Court to revisit

the financial documents in light of the correct legal standards,

as clarified above. The District Court should determine which

of the sampled documents may be produced, in full or in

redacted form, as factual work product. To the extent that any

such documents were withheld in whole or in part on the

alternative basis of attorney-client privilege, the District Court

will have to determine whether this privilege independently

bars discovery. 5

5

In its opening brief, the FTC asserts that the District Court abused

its discretion in accepting and relying on in camera, ex parte

affidavits. See Appellant’s Br. 53-58. But the FTC is precluded

from raising this issue on appeal, as it presented no explanation for

its failure to object, much less “exceptional circumstances” to

excuse its failure. Marymount Hosp., Inc. v. Shalala, 19 F.3d 658,

663 (D.C. Cir. 1994) (noting that arguments not made below

generally are deemed waived). We therefore decline to consider

this issue.

27

IV.

For the foregoing reasons, we vacate in part, affirm in

part, and remand for further proceedings consistent with this

opinion.

So ordered.