Opinion
Case No. 99 C 8237
August 21, 2000.
MEMORANDUM OPINION
Before the Court is the Motion by Defendant Baker Taylor, Inc. ("Baker") to Dismiss the Amended Counterclaims of Third-Party Defendant VR Record Company, Inc., d/b/a VR Distribution ("VR"), or, in the alternative, for a More Definite Statement and to Strike VR's Affirmative Defenses. For the reasons set forth below, this Court grants Baker's Motion to Strike VR's Affirmative Defenses in part and grants Baker's Motion to Dismiss VR's Counterclaims in part.
BACKGROUND
In February 1999, Plaintiff Franklin Capital Corporation ("Franklin") entered into an agreement with VR to purchase from VR some of its account receivables. One of the accounts receivables Franklin was assigned was that of Baker. Baker is a book, music, and videotape distribution company. Baker had offered to purchase a selection of recordings by Judy Garland on compact disk from VR. VR delivered the disks to Franklin, and assigned the contract to Franklin to collect on the account receivables. In the meantime, Cakewalk Productions, an unrelated third-party, sent Baker a cease and desist letter stating that it and not VR owned the copyrights to the recordings, and that Baker was to refrain from further distribution. Baker suspended its distribution and revoked its acceptance of the CDs.
Franklin filed a two-count complaint against Baker in the Circuit Court of Cook County for breach of contract. Baker subsequently removed the action to federal district court on the basis of diversity. Baker then answered, asserted affirmative defenses, and filed counterclaims and third-party claims against Franklin and Third-party Defendant VR. VR answered Baker's allegations, provided affirmative defenses, and asserted counterclaims against Baker. Baker, in its motion, seeks to strike VR's affirmative defenses under Fed.R.Civ.Pro. 12(f) and dismiss VR' s counterclaims under Fed.R.Civ.Pro. 12(b)(6).
DISCUSSION
A. Motion to Strike Affirmative Defenses;
Pursuant to Fed.R.Civ.Pro. 8(c), a party is required to set forth any affirmative defenses in a responsive pleading, though by today's liberal pleading standards, failure to do so does not necessarily rob the defendant of the opportunity to assert such a defense. See Bobbitt v. Victorian House. Inc., 532 F. Supp. 734, 736 (N.D.Ill. 1982). An affirmative defense is generally an admission of the allegations of the complaint, coupled with some additional reason why the defendant should not be held liable. See Id. Rule 8(c) lists nineteen items considered to be "avoidances" or "defenses" which must be plead separately or "affirmatively". See Fed.R.Civ.Pro. 8(c). Given that it may be difficult to determine whether a particular matter should be plead affirmatively, especially whether it may fall under Rule 8(c) "catch-all" phrase, the pleader is usually given the benefit of the doubt when setting forth a purported affirmative defense. See Sanwa Business Credit Co. v. Harris, No. 91 C 0204, 1991 WL 156116, at *1 (N.D.Ill. Aug. 6, 1991). Furthermore, Rule 8(c) provides, "When a party has mistakenly designated a defense as a counterclaim or a counterclaim as a defense, the court... shall treat the pleading as if there had been a proper designation."
A motion to strike an affirmative defense under Rule 12(f) should not be granted unless the defense is "patently defective". See Heller Financial. Inc. v. Midwhey Powder. Inc., 883 F.2d 1286, 1294 (7th Cir. 1989). Rule 12(f) reads:
Upon a motion made by a party before responding to a pleading or, if no responsive pleading is permitted by these rules, upon motion made by a party within 20 days after the service of the pleading upon the party or upon the court's own initiative at any time, the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.
Since affirmative defenses are pleadings, they are subject to all the pleading requirements of the Federal Rules. See Heller Financial. Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294; Flasza v. TNT Holland Motor Express. Inc., 155 F.R.D. 612, 613 (N.D.Ill. 1994). In Bobbitt, Judge Shadur of this District set forth a three-part test for examining affirmative defenses subject to a motion to strike:
(1) Initially the court will determine whether the matter is appropriately pleaded as an affirmative defense. Only matters that deserve a clear "no" answer will be stricken to make the pleadings more precise;
(2) If a matter may remain as an affirmative defense the Court will determine whether the matter is appropriately pleaded under the requirements of Rules 8 and 9. Any defense inadequately pleaded will be dismissed without prejudice to enable defendants to correct that technical deficiency;
(3) Any matter permitted to stand as an affirmative defense will be tested under a standard identical to Rule 12(b)(6). If it is impossible for defendants to prove a set of facts in support of the affirmative defense that would defeat the complaint, the matter will be stricken as legally insufficient.Bobbitt at 737; see also Heller Financial. Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1295 (holding that where defendant's affirmative defenses omitted a short and plain statement of the facts and failed completely to allege the necessary elements of the claims, such defenses were "nothing but bare bones conclusory allegations" which should be stricken).
In this Motion to Strike, Baker alleges that VR's affirmative defenses 2-19 fail to meet even the liberal pleading requirements of the Federal Rules. VR asserts that courts generally disfavor motions to strike affirmative defenses, and that motions to strike will not be granted unless the defenses are insufficient as a matter of law or present no questions of fact. See Man Roland Inc. v. Ouantum Color Corp., 57 F. Supp.2d 576, 578 (N.D.Ill. 1999). VR however does not set forth any details responsive to Baker's allegations. After reviewing VR's affirmative defenses and applicable case law, this Court finds the affirmative defenses numbered 2-19, except 16, even as amended, insufficient and should be stricken from VR's answer.
VR's Second Affirmative Defense states:
As a second affirmative defense, this answering defendant alleges that Plaintiff in counterclaim [Baker] has failed to join an indispensable party to wit Cakewalk and/or Sid Luft.
This, without more, is insufficient. VR fails to allege sufficient details to allow this Court to even inquire whether either party might be indispensable and as such, fails to allege a claim upon which relief can be granted. See Dunlop v. Beloit College, 411 F. Supp. 398, 401 (W.D.Wis. 1976) (finding on a motion to dismiss for failure to join an indispensable party, at a minimum defendant must produce evidentiary materials from which court could make findings of fact on which claim is based).
VR's 14th Affirmative Defense without more, is insufficient, and therefore also stricken. VR's 14th Affirmative Defense states:
As a fourteenth affirmative defense this answering defendant alleges that Neither [sic] Baker nor its presumed source of information, Cakewalk, have demonstrated that BCD did not have the rights, title and interest in the copyrights to the Recordings at the time that the Products were created, manufactured, and distributed. Moreover, Cakewalk has never obtained a ruling from any competent legal tribunal to the effect that BCD did not have the rights, title and interest in the copyrights to the Recordings at the time that the Products were created, manufactured, marketed, or distributed. In fact, Cakewalk knew or should have known of the existence of the Products and BCD's prior and valid rights, title and interest to the Recordings at the time that Cakewalk acquired any rights, title and interests to the Recordings in November, 1998. Finally Baker and Cakewalk know or should know that the Products have been marketed and distributed by VR in interstate commerce without any legal restraint. Accordingly, Baker is guilty of "unclean hands" in that Baker acted precipitously and without due reflection in refusing to proceed with the contract merely upon the assertion by Cakewalk that Cakewalk had rights and that the rights Cakewalk had were to the Recordings at issue. WHEREFORE, VR respectfully requests that this Court enter judgment in favor of VR on all counts and order that Baker take nothing.
VR's 15th Affirmative Defense is also stricken. It states:
As a fifteenth affirmative defense this answering defendant alleges that Neither [sic] Baker nor its presumed source of information, Cakewalk, have demonstrated that BCD did not have the rights, title and interest in the copyrights to the Recordings at the time that the Products were created, manufactured, marketed, and distributed. Moreover, Cakewalk has never obtained a ruling from any competent legal tribunal to the effect that BCD did not have the rights, title and interest in the copyrights to the Recordings at the time that the Products were created, manufactured, marketed and distributed. In fact, Cakewalk knew or should have know of the existence of the Products and of BCD's prior and valid rights, title and interest to the Recordings at the time that Cakewalk acquired any rights title and interests to the Recordings in November, 1998. Finally, Baker and Cakewalk know or should know that the Products have been marketed and distributed by VR in interstate commerce without any legal restraint. Accordingly, Baker has breached the covenant of good faith and fair dealing by terminating the contract without giving VR time to prove though [sic] legal process or otherwise that Cakewalk did not have the rights it asserted. WHEREFORE, VR respectfully requests that this court enter judgment in favor of VR on all counts and order that Baker take nothing.
Both "unclean hands" and "good faith and fair dealing" essentially translate into "bad faith" defenses. See Jones Apparel Group. Inc. v. Piccone, No. 94 Civ 0754, 1994 WL 260767, at *4 (S.D.N.Y. Jun. 8, 1994);Lockett v. Prudential Ins. Co. of America, 870 F. Supp. 735, 737 (W.D.Tex. 1994). The party asserting the "bad faith" defense must specifically allege bad faith. See Jones, at *4. In VR's 14th and 15th Affirmative Defenses, it is not specifically alleged with regard to Baker. The bad faith assertion might be read as directed at Cakewalk [party sending "cease-and-desist" letter to Baker which seems to have caused Baker not to pay VR [Franklin], but we cannot see how the bad faith of Cakewalk bars Baker's allegations against VR. As such, the 14th and 15th Affirmative Defenses are stricken.
VR's 16th Affirmative Defense stands, though it is more properly treated as a counterclaim. It states:
As a sixteenth affirmative defense this answering defendant alleges that Baker has breached its agreement with VR by failing to remit to VR or to VR's assign the funds due for the CDs received and not returned by Baker. WHEREFORE, VR respectfully requests that this Court enter judgment in favor of VR on all counts and order that Baker take nothing.
Given the principles this Court laid out above, failure to properly designate a counterclaim is not grounds alone for striking it from the pleadings. See Fed.R.Civ.Pro. 8(c). Baker does not otherwise object to the so-called 16th Affirmative Defense. As such, VR's 16th Affirmative Defense stands.
VR's 17th Affirmative Defense is stricken. It states:
As a seventeenth affirmative defense this answering defendant alleges that Baker has made several misrepresentations to third-party retailers that the Products were "counterfeit", "bootleg" or "infringing", thereby casting a false light upon VR and the Products. Baker's misrepresentations are false because the Products were created, manufactured, marketed, and distributed under valid rights, title and interest in copyrights to the Recordings, [sic] Accordingly, Baker's acts and omissions constitute an unjustified interference with the prospective business advantages of VR and breach the covenant of good faith and fair dealing. WHEREFORE, VR respectfully requests that this Court enter judgment in favor of VR on all counts and order that Baker take nothing.
Interpreting this affirmative defense first as a fraud claim, it must fail because it does not meet the pleading requirements of Fed.R.Civ.Pro. 9(b) (stating "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity"). The reference to "circumstances" in the rule requires "the plaintiff to state "the identity of the person who made the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Vicom, Inc. v. Harbridge Merchant Services. Inc., 20 F.3d 771, 777 (7th Cir. 1994) (citations omitted). Even if the misrepresentation was properly plead, the affirmative defense would nonetheless have to be stricken because it is not a claim upon which relief can be granted. VR cannot assert a claim against Baker for misrepresentations Baker made to third-parties. See Broadcasters Media Service. Inc. v. Keys, No. 99 C 0212, 1999 WL 965448, at *3 (N.D.Ill. Sep. 30, 1999). As a result, the affirmative defense of fraud is stricken.
Further, this allegation fails to satisfy the requirements of pleading a count for tortious interference with prospective business interests. Generally, the law requires the identification of the business interest that was interfered with. See. e.g., 45 AM.JuR.2D Interference § 1;Fellhauer v. City of Geneva, 142 Ill.2d 495, 511, 568 N.E.2d 870, 877 (1991). Having failed to so assert, the claim should be stricken.
Finally, this allegation also fails to satisfy the Illinois pleading requirements for the breach of the covenant of good faith and fair dealing, which is an issue of bad faith and is recognized as a tort. See Lockett v. Prudential Ins. Co. of America, 870 F. Supp. 735, 740 (W.D.Tex. 1994). As such, it must be plead with more detail than VR sets forth. See Jones Apparel Group. Inc. v. Piccone, No. 94 Civ 07547 1994 WL 260767, at *3 (S.D.N.Y. Jun. 8, 1994). Were this an assertion of a claim against Baker for breach of covenant of good faith and fair dealing, as we assume for the purposes of this motion, the affirmative defense should be stricken.
VR's 8th, 11th, and 18th Affirmative Defenses are also stricken insofar as they allege failure to mitigate damages. Although pleading requirements in mitigation defenses are lenient (See Gorwin v. Local 282. I.B.T., 838 F. Supp. 116, 123 (S.D.N.Y. 1993)), the Federal Rules require more than bare bones conclusory allegations. See Cohn v. Taco Bell Corp., No. 92 C 5852, 1995 WL 493453, at *2 (N.D.Ill. Aug. 16, 1995) (concluding that though not required to plead mitigation with specificity, the party pleading mitigation is obligated to supply enough facts to put opposite party on notice of the course the opposite party was legally obligated to take). VR does not provide any facts to place Baker on notice. For example, the 18th Affirmative Defense states:
As an eighteenth affirmative defense this answering defendant alleges that Baker has failed to mitigate damages. WHEREFORE, VR respectfully requests that this Court enter judgment in favor of VR on all counts and order that Baker take nothing.
Furthermore, even when faced with Baker's motion to strike, VR fails to provide any support or insight which might make such a vague defense sufficient. As such, this Court strikes VR's 8th, 11th, and 18th Affirmative Defenses.
VR's 19th Affirmative Defense is also stricken. The Affirmative Defense states:
As a nineteenth affirmative defense this answering defendant alleges that Baker breached the agreement it had with VR not to publicize Sid Luft's involvement except in a manner controlled by VR or BCD, by publicizing Sid Luft's involvement with the project in a manner that gave the impression to Cakewalk that rights Cakewalk claimed to have were being infringed. WHEREFORE, VR respectfully requests that this Court enter judgment in favor of VR on all counts and order that Baker take nothing.
Again, VR fails to relate the context which would make this claim an affirmative defense. See Linc Finance Corporation v. Onsuteaka, No. 95 C 4928, 1995 WL 708575, at *3 (N.D.Ill. Nov. 30, 1995) (finding insufficiently stated affirmative defense where the defendant had asserted a failure of "meeting of the minds' but had not characterized the differences in the parties' states of mind and how the failure was material to the defense). It is not clear whether this agreement is a contract, which generates obligations for Baker, and as such fails to state a claim upon which relief can be granted. It also is not clear whether the agreement is even related to the contract at issue, and as such it is unclear whether, assuming the defense were asserted properly, that it could even stand as a proper defense. As such, the 19th Affirmative Defense is stricken.
The remaining affirmative defenses (numbers 3, 4, 5, 6, 7, 9, 10, 12, 13) fail simply because they do not meet even liberal notice pleading requirements and as such, are insufficient without more because they simply assert a right to relief without placing Baker on notice as to the context of the defense. See Heller Financial. Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1295 (7th Cir. 1989). Bare bones conclusory allegations, without more, will be stricken.
B. Motion to Dismiss Counterclaims;
Baker moves to strike VR's counterclaims pursuant to Rule 12(b)(6). The purpose of a Rule 12(b(6) motion to dismiss for failure to state a claim upon which relief can be granted is to test the sufficiency of the complaint and not to decide the merits of the case. In ruling on a motion to dismiss, the court must construe the complaint's allegations in the light most favorable to the plaintiff, and all well-pleaded facts and allegations in the plaintiff's complaint must be taken as true. See Bontkowski v. First National Bank of Cicero, 998 F.2d 459, 461 (7th Cir. 1993). The allegations of a complaint should not be dismissed for failure to state a claim "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Sherwin Manor Nursing Center. Inc. v. McAuliffe, 37 F.3d 1216, 1219 (7th Cir. 1994). In order to withstand a motion to dismiss, a complaint must allege facts sufficiently setting forth the essential elements of the cause of action. See Lucien v. Preiner, 967 F.2d 1166, 1168 (7th Cir. 1992).
VR's amended answer asserts a breach of contract claim, a trade libel claim, and a "tortuous [sic] interference with business" claim, VR's reply challenges Baker's motion on the ground that Baker unreasonably relies on Illinois law because choice-of-law questions have not been decided. As a response to Baker's motion, this is inapposite and insufficient, and this Court therefore grants Baker's motion to dismiss with regard to the trade libel counterclaim and the "tortuous [sic] interference with business" claim. For reasons explained below, we deny Baker's motion to dismiss with regard to the breach of contract counterclaim.
We reemphasize that in ruling on a motion to dismiss, all well-pleaded allegations in the complaint are taken as true and all reasonable inferences therefrom are drawn in the plaintiff's favor. See Nabisco. Inc. v. American United Logistics, ink, No. 99 C 0763, 2000 WL 748131, at *6 (N.D.Ill. Jun. 1, 2000). In a diversity action, the adequacy of the pleadings is assessed in accordance with the federal, not state, rules of civil procedure. See Dawn Equipment Co. v. Micro-Trak Sys., Inc., 186 F.3d 981, 986 (7th Cir. 1999) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). A plaintiff may plead conclusions, so long as they are sufficient to understand the gravamen of the complaint. See Doherty v. City of Chicago, 75F.3d 318, 326 (7th Cir. 1996); Jackson v. Marion County, 66 F.3d 151, 153-54 (7th Cir. 1995). A breach of contract claim must allege: (1) the existence of a valid and enforceable contract; (2) performance by plaintiff under the contract; (3) breach of the contract by defendant; and (4) injury to plaintiff as a result of the breach. See Petri v. Gatlin, 997 F. Supp. 956, 964 (N.D.Ill. 1997).
VR has adequately set forth the components of a breach of contract claim for pleading requirements. VR alleges the existence of a contract between VR and Baker. VR also alleges that it performed its part of the contract, producing and delivering the CD's at issue in this lawsuit. VR further alleges that Baker failed to pay for the CD's as obligated, and that as a result, VR suffered injury. By federal pleading standards, this is sufficient to defeat a motion to dismiss.
VR's "trade libel" claim is not sufficient. The claim is word-for-word identical with VR's fraudulent misrepresentation claim propounded in its initial Answer. Even presuming the misrepresentation claim is properly plead, the counterclaim would have to be stricken because it is not a claim upon which relief can be granted. As with the affirmative defense of fraudulent misrepresentation, VR does not have a claim against Baker for misrepresentations Baker made to third-parties. See Broadcasters Media Service. Inc. v. Keys, No. 99 C 0212, 1999 WL 965448, at *3 (N.D.Ill. Sep. 30, 1999).
VR would like to plead around the deficient fraud claim and the particularity requirements of the Federal Rules by simply renaming the claim "trade libel." This too is unavailing. VR claims Baker asserted to third-parties, including one identified party, that VR's products were "counterfeit, bootleg, or infringing." Under Illinois law, libel claimants can proceed under libel per se or libel per quod doctrines. See TimeMed Labeling Systems. Inc. v. MedPlus. Inc., NO. 95 C 5148, 1996 WL 467262, at *1 (N.D.Ill. Aug. 13, 1996). Since VR has not plead injury with specificity, we assume that VR is proceeding under libel per se.See Poth v. Paschen Contractors. Inc., No. 85 C 8499, 1986 WL 15081, at 3 (N.D.Ill. Dec. 18, 1986). Establishing libel per se requires a serious charge of incapacity or misconduct so obviously and actually hurtful that proof of their injurious nature is dispensed with. See Harris Trust Savings Bank v. Phillips, 154 Ill. App.3d 574, 578, 506 N.E.2d 1370, 1373 (1st Dist. 1987). The four types of libel per se according to lllinois law are: 1)those imputing the commission of a crime; 2)those imputing infection with a loathsome disease; 3)those imputing unfitness or want of integrity in performing the duties of an office or employment; and 4)those imputing lack of ability in a person's business, trade, or profession. See Van Horne v. Muller, 185 Ill.2d 299, 705 N.E.2d 898, 902 (1998). Since Baker's alleged defamatory statements do not fall into any of the categories, VR's counterclaim is stricken.
VR also alleges "tortuous [sic] interference with business opportunities" by Baker. For the purposes of this motion, we will assume VR is referring to tortious interference in the economic relationship between VR and third-parties. An essential component of the claim of tortious interference is the existence of a relationship, whether contractual or otherwise economic, with which the alleged wrongdoer interfered. See 45 AM.JuR.2D Interference § 1; Broadcasters Media Service. Inc. v. Keys, No. 99 C 0212, 1999 WL 965448, at *4 (N.D.Ill. Sep. 30, 1999). VR does not set forth allegations of any relationship which Baker allegedly interfered with. As such, VR fails to allege an essential component of the interference claim, and its counterclaim is stricken.
CONCLUSION
For the reasons stated above, this Court grants in part and denies in part Baker's Motion to Strike VR's Affirmative Defenses. Likewise, this Court grants in part and denies in part Baker's Motion to Dismiss VR's counterclaims.
SMITHLINE BEECHAM CORP. v. APOTEX CORP., TORPHARM, INC. (N.D.Ill 2000)
Smithkline Beecham Corporation and Beecham Group, p.l.c., Plaintiffs, v. Apotex Corp., Apotex, Inc., and Torpharm, Inc., Defendants. No. 98 C 3952 United States District Court N. D. Of Illinois, Eastern Division AUGUST 21, 2000.
MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
This matter is before the Court on Plaintiffs' Rule 72(a) Objections to Magistrate Judge Edward A. Bobrick's May 26, 2000 Order granting in part and denying in part TorPharm's motion to compel the production of documents, as modified by Judge Bobrick's June 27, 2000 Order denying Plaintiffs' Motion for Reconsideration. For the reasons set forth below, we grant in part and deny in part Plaintiffs' objections.
BACKGROUND
This is a patent infringement action brought by Plaintiffs SmithKline Beecham Corporation ("SmithKline Beecham") and Beecham Group, p.l.c. ("Beecham") (collectively, "Plaintiffs") against defendants Apotex Corp., Apotex, Inc., and TorPharm, Inc. (collectively, "Defendants"). Beecham obtained United States Patent No. 4,721,723 on the drug Crystalline Paroxetime Hydrochloride Hemihydrate on January 26, 1988, and eventually assigned it to SmithKline Beecham. SmithKline markets the drug as Paxil and sells over one billion tablets each year in the United States.
On May 18, 1998, TorPharm notified Plaintiffs that it had filed an Abbreviated New Drug Application with the FDA for "Paroxetime Hcl Tablets." TorPharm claimed that its product did not infringe on Plaintiffs' patent because it contained Paroxetime in an anhydrous state, as opposed to a hemihydrous state. Plaintiffs contend that paroxetime hydrochloride in an anhydrous state will convert to a hemihydrous state. They filed this infringement action on June 26, 1998.
The dispute currently before the Court concerns the discoverability of approximately 1500 documents relating to the conception, reduction to practice, development, and testing of Plaintiffs' invention. Plaintiffs withheld these documents on attorney client privilege and work product grounds, and on February 16, 2000, TorPharm moved to compel their production. On February 23, 2000, we referred the motion to Magistrate Judge Edward A. Bobrick for resolution. Plaintiffs responded on March 14, 2000, including in their submission the affidavit of Brian Russell, a member of the Corporate Intellectual Property Department of SmithKline Beecham p.l.c.
On March 22, 2000, Judge Bobrick held a hearing on Defendants' motion. He informed Plaintiffs that, from a brief review of their December 30, 1999 Withheld Document Log, the court had been unable to determine whether the documents were discoverable. He therefore ordered Plaintiffs to produce an updated privilege log that complied with the standards set forth in Allendale Mut. Ins. Co. v. Bull Data Systems, Inc., 145 F.R.D. 84 (N.D. Ill. 1992) and In re General Instruments Securities Litigation, 190 F.R.D. 527 (ND. Ill. 2000). Judge Bobrick warned Plaintiffs that if the updated privilege log were not sufficiently detailed to allow the court to determine whether the elements of the attorney client privilege or work product doctrine were established, he would order the documents produced.
On April 5, 2000, Plaintiffs submitted a 386-page Amended Withheld Document Log. Defendants then sought production of an additional 200 or so documents, forcing Plaintiffs to filed a third, 89-page Supplemental Amended Privilege Log.
On May 26, 2000, Judge Bobrick issued an Order granting in part and denying in part Defendants' motion to compel. SmithKline Beecham Corp. v. Apotex Corp., 193 F.R.D. 530 (N.D. In. 2000). The magistrate judge upheld Plaintiffs' claims of privilege as to documents involving "confidential legal advice flowing either to or from the plaintiffs' United Kingdom [attorney or patent agent]." On the other hand, Judge Bobrick granted Defendants' motion with respect to (1) communications for which the patent agent might have been acting as merely a "conduit" of information, rather than a legal advisor; and (2) documents he found to lack the limited audience or distribution necessary to support a claim of confidentiality.
On June 12, 2000, Plaintiffs simultaneously filed Rule 72(a) Objections with this Court and a Motion for Reconsideration with Judge Bobrick. The text of the two documents was the same, and attached to both was a new affidavit from Charles Kinzig. The Kinzig affidavit contained further identifying information regarding the withheld documents, as well as a portion of Plaintiffs' corporate confidentiality policy. The motion for reconsideration also offered, for the first time, to make documents available for in camera inspection if Judge Bobrick so desired.
On June 26, 2000, Judge Bobrick denied Plaintiffs' motion for reconsideration except with respect to 30 documents for which Defendants had withdrawn their motion to compel. He refused to consider any evidence not submitted prior to his May 26 order, citing Caisse Nationale de Credit v. CBI Industries, 90 F.3d 1264, 1270 (7th Cir. 1996) and Bachman v. Bear Stearns Co., 57 F. Supp.2d 556, 564 (N.D. Ill. 1999) for the proposition that motions for reconsideration, to the extent they are tolerated, are not opportunities to rehash old arguments or submit new evidence that could already have been presented.
On July 7, Plaintiffs filed a reply to Defendants' opposition to their Rule 72(a) objections. Attached to the reply were four documents — numbers 258, 539, 741, and 1465 on Plaintiffs' privilege log — which Plaintiffs submitted for in camera review by this Court. Defendants have moved to strike the in camera submission on the basis that our consideration of evidence not presented to the magistrate judge would nullify the referral of the dispute to that court. Defendants also request that we strike the Kinzig affidavit, first offered with the Motion for Reconsideration, on the same grounds.
LEGAL STANDARD
A magistrate judge's ruling on a non-dispositive matter may be reversed only on a finding that the order is clearly erroneous or contrary to law. Fed.R.Civ.Proc. 72(a). "A finding is "clearly erroneous when although there is enough evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). Courts have consistently found routine discovery motions, such as motions to compel, to be "non-dispositive" within the meaning of Rule 72(a). Weeks v. Samsung Heavy Industries Co., Ltd., 126 F.3d 926, 943 (7th Cir. 1997); Boboski v. Board of Educ. of Cary Consol. School Dist. 26, 141 F.R.D. 88 (N.D. Ill. 1992).
DISCUSSION
I. Motions to strike
Defendants move to strike the Kinzig affidavit and the in camera submission of documents 258, 539, 741, and 1465 on the ground that this evidence was not before Magistrate Judge Bobrick at the time of the May 26 order. In reviewing a magistrate judge's nondispositive order for clear error, we may only properly consider the evidence that was before the magistrate judge at the time of the order. If we were to permit the introduction of new evidence at this stage, we would essentially be conducting an impermissible de novo review of the order. Fed.R.Civ.Proc. Rule 72(a); Contimental Bank. N.A. v. Premier Systems. Inc., No. 88 C 7703, 1989 WL 65045 (N.D. Ill. June 2, 1989) (Marshall, J.); Haines v. Liggett Group. Inc., 975 F.2d 81, 91 (3dCir. 1992).
Plaintiffs argue that the evidence in question was proffered to Judge Bobrick and is therefore properly before this Court. TorPharm moved to compel production on February 16, 2000. Judge Bobrick ruled on that motion more than three months later, on May 26. In the interim, Plaintiffs briefed the issue, submitted three privilege logs, and attended at least one hearing. At none of those junctures did Plaintiffs offer any documents for in camera review or suggest that such review was appropriate or necessary. Nor did they offer the affidavit of Charles Kinzig, which they now argue demonstrates Judge Bobrick's clear error. It was not until Judge Bobrick issued a final order compelling production of certain documents that Plaintiffs finally submitted the Kinzig affidavit and offered to make the documents available for in camera review via a motion for reconsideration.
Judge Bobrick's refusal to consider the Kinzig affidavit or to accept Plaintiffs' offer of an in camera review was not clearly erroneous or contrary to law. On the contrary, his actions are supported by clear Seventh Circuit precedent holding that a motion to reconsider is not the appropriate vehicle for the introduction of new evidence that could have been presented to the court prior to the ruling. Moro v. Shell Oil Co., 91 F.3d 872, 876 (7th Cir. 1996); Bally Export Corp. v. Balicar. Ltd., 804 F.2d 398, 404 (7thCir 1986).
SmithKline argues that it did not present the Kinzig affidavit or in camera submission until the motion to reconsider because the evidence responds only to an argument that was never made by Defendants — that litigation was not anticipated prior to May 18, 1998. However, this argument misapprehends the burden of proof for claims of work product protection. That burden rests solely on the party seeking application of the doctrine. U.S. v. Hamilton, 19 F.3d 350, 354 (7th Cir. 1994); BinksMfg. Co. v. Nat'l Presto Industries Inc., 709 F.2d 1109, 1119 (7th Cir. 1983). Thus, Plaintiffs were required to present sufficient evidence to support a finding, as to each document: (1) that the primary purpose behind its creation was to aid in possible litigation; and (2) that there existed at that time an identifiable resolve to litigate. Allendale Mut. Ins. Co. v. Bull Data Systems. Inc., 145 F.R.D. 84, 87 (N.D. Ill. 1992). At the March 22, 2000 hearing Judge Bobrick expressly directed Plaintiffs' attention to this standard.
We are not persuaded, therefore, that Plaintiffs were unaware of the need to demonstrate that litigation was anticipated earlier than May of 1998, simply because Defendants did not make an issue of it. Accordingly, the Kinzig affidavit and documents submitted for in camera review were never properly before Judge Bobrick, and it would be inappropriate for us to consider them here.
II. Common interest
Plaintiffs claim the magistrate judge erred in ordering production of documents Plaintiffs exchanged with Ferrosan/Novo Nordisk, with whom the magistrate judge found Plaintiffs had a common legal interest. Such a common interest does not itself confer a privilege on the documents exchanged between the parties. Rather, the party claiming privilege must demonstrate that the document is protected by the attorney client or other established privilege. In re Regents of the University of California, 101 F.3d 1386 (Fed. Cir. 1996); Baxter Travenol Laboratories. Inc. v. Abbott Laboratories, No. 84 C 5102, 1987 WL 12919 (N. D. 111. June 19, 1987). Judge Bobrick held that the privilege had apparently been waived for a number of the Ferrosan/Novo Nordisk documents because they were distributed to employees whose capacities-and consequently need for access to the document-were unclear. Plaintiffs counter that the recipients' responsibilities were described elsewhere in the log.
We will not find that Judge Bobrick committed clear error in refusing to search a 1500-entry, 386-page document for the specific titles and responsibilities of individuals that Plaintiffs took the time to describe only as "employees." This objection is denied.
III. Work product
Plaintiffs contend that Judge Bobrick committed clear error in ordering numerous documents dated after May 18, 1998 produced despite Plaintiffs' work product claims. In determining whether Plaintiffs had adequately supported their work product claims, Judge Bobrick looked to the privilege logs and supporting affidavits to determine whether: (1) there was a substantial and significant threat of litigation, and (2) production of the materials was caused by the anticipation of litigation. He determined that, "on this record, we are constrained to find that plaintiffs could not have anticipated litigation prior to May 18, 1998."
Plaintiffs do not challenge the criteria articulated by Judge Bobrick for evaluating claims of work product. They do, however, contend that the record before the magistrate judge clearly indicated that litigation was ongoing in Canada and Spain prior to May 1998 and that litigation was anticipated as early as 1992. In support of this argument, Plaintiffs cite various log entries stating that litigation was either ongoing or anticipated, as well as the affidavit of Brian Russell, one of Plaintiffs' UK patent agents. In his affidavit, Russell testifies that, "[s]ince 1992, SB has anticipated litigation with respect to paroxetime patents." He then lists numerous documents which, he states, "are, or reflect, confidential internal SB communications prepared primarily for the purpose of aiding in future litigation."
We agree with Plaintiffs that those log entries which expressly indicate that a document was prepared in aid of ongoing litigation, in combination with the Russell affidavit, clearly meet the standard adopted by Judge Bobrick. Neither the original May 26 order or the June 27 order on Plaintiffs' motion for reconsideration acknowledges the existence of such entries or of the corresponding testimonial evidence. We hold that this oversight was clear error and find the elements of the work product doctrine satisfied as to those documents described as having been prepared in connection with ongoing paroxetime patent litigation. These include, but may not be limited to, documents 539, 741, 751, and 1391.
As for Plaintiffs' claim that litigation was anticipated prior to May 1998, we cannot find clear error in Judge Bobrick's analysis. Although Plaintiffs' privilege log entries describe documents as having been prepared for or in connection with "anticipated paroxetime patent litigation," neither they nor the Russell affidavit set forth objective facts justifying such a characterization. That is, Plaintiffs never demonstrated, with anything more than conclusory statements, a substantial and significant threat of litigation, despite being explicitly directed to do so by Judge Bobrick. Therefore, although one might conclude from Plaintiffs' submissions that litigation was anticipated prior to May 1998, the magistrate judge's refusal to uphold Plaintiffs' work product claims was not, under the circumstances, clearly erroneous. American Motors Corp. v. Great American Surplus Lines Ins. Co., No. 87 C 2496, 1988 WL 2788 at *1 (N.D. Ill. Jan. 8, 1988), citingAnderson v. City of Bessemer, 470 U.S. 564, 573 (1985) ("Ordinarily, under clearly erroneous review, if there are two permissible views, the reviewing court should not overturn the decision solely because it would have chosen the other view.").
IV. "Third country" communications
Plaintiffs object to the magistrate judge's order that they produce documents 367, 399, 404, 530, 538, 542, 544, 545, 652, 669, 673, 710, 712, 752, 757, 763, 795, 892, and 922. Plaintiffs argue that those documents were not "mere transmittals of non-confidential information from the UK agent to a foreign agent, intended for a foreign patent office," but rather confidential communications seeking or providing legal advice. This argument is somewhat misguided, since Judge Bobrick only rejected three of the listed documents — 367, 399, and 795 — on the complained — of ground. As to these three documents, Judge Bobrick's holding is clearly erroneous. Each represents a confidential communication between a SmithKline Beecham UK patent agent and a foreign attorney and is described as seeking or providing legal advice. Such documents are, by Judge Bobrick's own reasoning, protected by the attorney client privilege.
We overrule Plaintiffs' objections regarding the other "third country" communications on Plaintiffs' list.
V. Agendas and minutes of meetings with counsel present
Plaintiffs argue that Judge Bobrick erroneously ordered a number of documents produced even though they fell into a category of documents the magistrate judge held to be privileged-minutes of meetings with counsel present to provide legal advice. A review of the documents in question reveals no clear error. First, certain of the documents were ordered produced on other grounds-for example, failure to prove common interest or confidentiality (see discussion in Parts II and VI of this opinion).
As for documents 587, 858, 1209, 1225, 1232, 1238, 1239, 1243, 1249, and 1252, Judge Bobrick did order them produced on the basis that the record did not show that counsel was present to provide legal advice. Communications from an attorney to his or her client are protected only if the client can "demonstrate with reasonable certainty that the lawyer's communication rested in significant part on the client's confidential disclosure." In re Sealed Case, 737 F.2d 94, 99 (D.C. Cir. 1984). A review of the relevant log entries reveals that they arguably fail under this standard. Accordingly, we are not "left with the definite and firm conviction that a mistake has been committed," and we deny the objection.
VI. Documents distributed to SmithKline UK management
Judge Bobrick rejected Plaintiffs' attorney-privilege claims as to a number of documents described as distributed to "management" without more, or to employees whose capacities were not clearly identified. Plaintiffs argue that the privilege should distinguishable from the "uncertain privilege" struck down in Upjohn Co. v. United States, 449 U.S. 383, 393 (1981). Judge Bobrick's adoption of the test was consequently not contrary to law.
Nor was its application clearly erroneous. Plaintiffs were forewarned of the level of specificity Judge Bobrick would require from their privilege log entries. It was not unreasonable for the magistrate judge to have difficulty determining, from a general description like "management," whether a document had been too broadly distributed to seriously allow a claim of confidentiality. Similarly, Russell's testimony that the legal advice was "within the scope of the receiving employees duties" arguably falls short of showing that the employees needed access to the information.
Accordingly, we deny Plaintiffs objections and accept the magistrate judge's recommendations as to documents described as distributed to "management" without more, or to employees whose need for access to the document was not established.
VII. Communications with UK patent agents
Judge Bobrick upheld Plaintiffs' claims of attorney client privilege for confidential communications with U.K. patent agents who were "more or less functioning as attorneys." Plaintiffs assert that Judge Bobrick failed to analyze their attorney client privilege claims under this framework — which we agree is the correct not be waived for documents circulated among management. They also point to the Russell affidavit, which contains testimony to the effect that legal advice was only circulated to "employees of SB concerning matters within the scope of the receiving employees duties" and that "such advice [was] given and received in confidence." Plaintiffs argue that these descriptions were sufficient to demonstrate that the documents in question were confidential attorney client communications.
When the confidentiality of an otherwise privileged document is not maintained, the privilege is lost. "Where the client is a corporation, the privilege is waived if the communications are disclosed to employees who did not need access to the communication." Baxter Travenol, 1987 WL 12919 at *4, citing cases. Judge Bobrick therefore looked to whether the record contained enough information to establish that the recipients of a communication required, or had the capacity, to act upon the information distributed in determining whether to uphold Plaintiffs' claims of privilege.
This test has been applied in other cases in this district and has never been rejected by the Seventh Circuit; it has also been adopted by courts in other circuits. Baxter Travenol, 1987 WL 12919 at *5;Diversified Industries. Inc. v. Meredith, 572 F.2d 596, 609 (8th Cir. 1977); United States of American Telephone Telegraph Co., 86 F.R.D. 603, 620-21 (D.D.C. 1979). We believe that it sufficiently apprises parties of the terms under which a particular communication will be protected, and is therefore one — for more than 50 documents listed on page 10 of Plaintiffs' memorandum in support of their objections. Judge Bobrick discussed these documents in the work product section of his order. He ultimately ordered their production, categorizing them as "materials for which plaintiffs [unsuccessfully] claim work product immunity and to which no other privilege has been established or is claimed."
For a detailed discussion on this point, see our opinion denying TorPharm's Rule 72(a) objections to Magistrate Judge Bobrick's 5/26/00 order, issued concurrently with this one.
Defendants argue that the words "to which no other privilege has been established" indicate that the magistrate judge considered, and rejected, Plaintiffs attorney client privilege claims for the documents in question. However, by that logic it is equally possible that Judge Bobrick mistakenly viewed them as documents for which no other privilege was claimed. Indeed, the latter is the more likely scenario. The order contains a detailed 14-page discussion of the attorney client privilege and specifically lists documents for which Judge Bobrick rejected Plaintiffs' claims. None of the 50 documents to which Plaintiffs now refer was expressly mentioned in the magistrate judge's attorney client privilege discussion.
Furthermore, a review of the relevant log entries reveals that they would likely have been found privileged under the legal framework applied to the remainder of Plaintiffs' attorney client privilege claims. For example, Document 939 is described as a confidential communication from a SmithKline Beecham scientist to a SmithKline Beecham UK patent agent for the purpose of securing legal analysis of information in anticipation of patent litigation. Judge Bobrick deemed confidential communications with UK patent agents privileged where the patent agent is more or less functioning as an attorney. This document clearly falls into this category and does not come under any of the exceptions to the privilege set forth in the magistrate judge's opinion. The analysis is the same for many of the other documents on Plaintiffs' list. Accordingly, we find that Judge Bobrick ordered the documents in question produced without first considering Plaintiffs' attorney client privilege claims, and that this was clear error.
Consequently, we have reviewed Plaintiffs' attorney client privilege claims as to the specified documents de novo. Plaintiffs have described the documents as falling into the following categories: (1) patent agents being provided with information by their client so that they could provide legal advice and legal assistance (documents 301, 307, 417, 434, 470, 478, 569, 608, 636, 640, 646, 696, 708, 725, 794, 806, 809, 814, 939, 940, 953, 955, 960, 979, 985, 1143, 1153, 1160, 1163, 1165, 1166, 1200, 1236, 1271, 1274, and 1346);(2) patent agents seeking information from their client in order to provide such legal advice and assistance (documents 348, 349, 469, 489, 531, 681, 704, 723, 726, 734, 740, 773, 782 and 1391); and (3) patent agents providing legal advice to their client (documents 352, 473, 474, 703, 1156, 1267, 1391). We agree with that characterization, and hold that the magistrate judge should have found that the patent agents were functioning as attorneys, and seeking or providing confidential legal advice, with respect to these documents. We therefore reject the magistrate judge's recommendation that the above mentioned documents be produced.
CONCLUSION
For the foregoing reasons, we grant in part and deny in part Plaintiffs' objections, as set forth in the body of this order. Plaintiffs are hereby ordered to produce those documents found not to be immune from discovery within 15 days of receipt of this order.