Court Opinion

ID: 2652934
Source: CourtListenerOpinion
Date Created: 2014-02-12 01:01:28.107145+00
Date Added: 2024-06-11T09:11:03.999265
License: Public Domain

FILED
                                           United States Court of Appeals
               UNITED STATES COURT OF APPEALS      Tenth Circuit

                                                     February 11, 2014
                           TENTH CIRCUIT
                                                    Elisabeth A. Shumaker
                                                        Clerk of Court
STATE OF NEVADA; JOHN
HENDRIX,                                    No. 13-1104

         Plaintiffs-Appellees,
and
COMMONWEALTH OF
MASSACHUSETTS;
COMMONWEALTH OF VIRGINIA;
STATE OF CALIFORNIA; STATE
OF DELAWARE; STATE OF
FLORIDA; STATE OF ILLINOIS;
STATE OF INDIANA; STATE OF
NEW MEXICO; STATE OF NEW
YORK; STATE OF TENNESSEE;
THE DISTRICT OF COLUMBIA, ex
rel; UNITED STATES OF AMERICA,

         Plaintiffs,

v.                                           D. of Colo.
J-M MANUFACTURING COMPANY, (D.C. No. 1:11-CV-01691-MSK-MJW)
INC.,

         Defendant-Appellant,

and
FORMOSA PLASTICS
CORPORATION, U.S.A.,

         Defendant.
                           ORDER AND JUDGMENT *

Before LUCERO, SEYMOUR, and TYMKOVICH, Circuit Judges.

      This appeal arises from a collateral proceeding to a False Claims Act action

against J-M Manufacturing (J-M) in federal court in California. During the

course of litigation, the United States arranged to have Microbac Laboratories

conduct tests on J-M pipe to determine whether it would intervene in the action.

The government eventually declined to intervene. J-M subsequently served a

subpoena on Microbac, seeking the test results, which the plaintiffs in the

California case and the United States opposed.

      Affirming the order of the magistrate judge to quash the subpoena, the

district court held the test results constitute protected attorney work product under

Rule 26 of the Federal Rules of Civil Procedure for which J-M has not

demonstrated a substantial need. J-M appealed, and, exercising jurisdiction under

28 U.S.C. § 1291, we AFFIRM. 1

      *
         This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
      1
         We note the appellees’ observation that “[d]iscovery orders entered
during the course of litigation ordinarily are not ‘final’ under [§ 1291].” In re
Motor Fuel Temperature Sales Practice Litig., 641 F.3d 470, 482 (10th Cir. 2011)
(alterations in original) (quotation omitted). But “[c]ourts have recognized an
exception to the nonfinality of discovery orders where a district court, other than
                                                                        (continued...)

                                         -2-
      J-M Manufacturing is the world’s largest manufacturer of polyvinyl

chloride (PVC) pipe, which it sells to federal, state, and local governments for use

in water and sewer systems. In 2006, a former J-M employee filed under seal a

qui tam complaint pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq., on

behalf of various government entities in federal court in California. Several

states and dozens of municipalities intervened in the action. The complaint

alleged J-M falsely represented that its pipe was made and tested in conformity

with certain industry standards. In November 2013, a federal jury found J-M

liable for defrauding the government purchasers.

      This appeal concerns a collateral proceeding in the District of Colorado.

Shortly after the qui tam complaint was filed, the United States began

investigating whether it would intervene in the action. As part of its

investigation, the United States retained Microbac to test samples of J-M pipe at

the company’s Colorado laboratory. The United States and J-M negotiated over

the samples of pipe to be tested and tests to be performed. Although J-M

      1
        (...continued)
the district court before which the main action is pending, issues an order denying
discovery against a nonparty.” Hooker v. Cont’l Life Ins. Co., 965 F.2d 903, 904–
05 (10th Cir. 1992). We have held that “[t]he key question . . . is whether the
appealing party has any means, other than an immediate appeal, to obtain
appellate review.” Id. at 905. Unlike in Hooker, the order denying discovery in
this case is immediately appealable because “the district court denying discovery
and the district court considering the main action are [not] within the same
circuit.” Id.

                                         -3-
supplied the United States with samples for testing, the J-M pipe samples the

United States submitted to Microbac were different from those provided by J-M.

After Microbac concluded its tests, the United States declined to intervene. J-M

served Microbac with a subpoena, pursuant to Rule 45 of the Federal Rules of

Civil Procedure, seeking the test results. The plaintiffs filed a motion to quash

the subpoena, which the United States joined.

      The magistrate judge partially denied the motion to quash. He reasoned

that, because the plaintiffs were pursuing their fraud case on the theory that

“every piece of pipe” J-M manufactured was nonconforming, J-M had a

substantial need for any test results. The plaintiffs filed a motion for

reconsideration, asserting their theory of the case was that, although J-M falsely

represented that all of its pipes were manufactured and tested in conformity with

industry standards, some of the pipes did not so conform. Under this theory, the

plaintiffs would have to show only some of the pipes it purchased from J-M did

not conform to industry standards. The district court in California issued a

“Bifurcation Order” that clarified the plaintiffs were proceeding under such a

theory, which it called a “lottery ticket” theory. Upon reconsideration, the

magistrate judge reversed his previous order and quashed the subpoena. He

concluded that, because a single test’s results would have minimal probative

value under a “lottery ticket” theory, J-M did not have a substantial need for the

Microbac test results.

                                          -4-
      J-M appealed to the district court, which overruled J-M’s objections and

affirmed the magistrate judge’s order. Because the test results may reveal

attorney selective processes about which pipes to test or which tests to perform,

the court concluded that the test results qualified as opinion work product, which

our precedent suggests is absolutely privileged. In the alternative, the court held

that, even if the test results constitute only ordinary work product, J-M had not

demonstrated substantial need for them because the plaintiffs were proceeding

under the “lottery ticket” theory in the California case.

      We review de novo whether the district court employed the correct legal

standard in resolving a discovery request. Murphy v. Deloitte & Touche Grp. Ins.

Plan, 619 F.3d 1151, 1164 (10th Cir. 2010). If it has employed the correct

standard, we review a district court’s discovery orders for abuse of discretion,

reviewing factual findings for clear error and legal questions de novo. Frontier

Ref., Inc. v. Gorman-Rupp Co., 136 F.3d 695, 699 (10th Cir. 1998). An “abuse of

discretion will be found only where the trial court makes an arbitrary, capricious,

whimsical, or manifestly unreasonable judgment.” FDIC v. Oldenburg, 34 F.3d
1529, 1555 (10th Cir. 1994).

      “Ordinarily, a party 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 (including the other party’s attorney, consultant, surety,

indemnitor, insurer, or agent).” Fed. R. Civ. P. 26(b)(3)(A); see also Oklahoma v.

                                          -5-
Tyson Foods, Inc., 262 F.R.D. 617, 626 (N.D. Okla. 2009) (defining ordinary

work product as “materials generated by attorneys that are not opinion work

product; e.g., witness statements, investigative reports, photographs, diagrams,

and charts prepared in anticipation of litigation or for trial preparation.”). 2 Unlike

opinion work product, ordinary work product may be discoverable if the

requesting party has demonstrated substantial need for the materials and cannot

otherwise obtain them without undue hardship. Fed. R. Civ. P. 26(b)(3)(A)(i),

(ii). A substantial need exists where “the information sought is essential to the

party’s defense, is crucial to the determination of whether the defendant could be

held liable for the acts alleged, or carries great probative value on contested

issues.” Nat’l Cong. for Puerto Rican Rights v. City of New York, 194 F.R.D.
105, 110 (S.D.N.Y. 2000) (internal quotation marks omitted).

      The district court did not abuse its discretion in declining to overrule the

magistrate judge’s quashing of the subpoena. 3 J-M argues that the district court

abused its discretion because the court failed to consider new evidence that

      2
          Opinion work product reveals “the mental impressions, conclusions,
opinions, or legal theories of a party’s attorney or other representative concerning
the litigation.” Fed. R. Civ. P. 26(b)(3)(B). Opinion work product is absolutely
privileged. See In re Qwest Commc’ns Int’l Inc., 450 F.3d 1179, 1186 (10th Cir.
2006).
      3
         Although the district court also held that the test results qualify as
opinion work product, we need not reach that issue because, regardless of how we
classify the test results, J-M has fallen short of demonstrating substantial need for
them.

                                          -6-
allegedly showed the plaintiffs’ abandonment of the “lottery ticket” theory of

liability. In support of this argument, J-M points to the plaintiffs’ agreement in

the California case to produce all “non-privileged test results” pertaining to the

durability of J-M pipe because of their potential relevance to the conformity or

non-conformity of J-M pipe to industry standards. But this discovery agreement

did not affect the theory of liability that the plaintiffs were pursuing. Conceding

the potential relevance of J-M pipe test results in the context of a “lottery ticket”

theory does not signal abandonment of the theory. Nor does a showing of

“potential relevance” mean that J-M has demonstrated a substantial need for the

test results—J-M must show the test results “carr[y] great probative value on

contested issues.” Nat’l Cong. for Puerto Rican Rights, 194 F.R.D. at 110. J-M

has failed to carry this burden.

      J-M also argues that it has a substantial need for the test results because

they contradict the plaintiffs’ allegations that J-M “cherry-picked” pipe samples

for testing. One of the allegations in the complaint is that J-M cherry-picked

PVC pipe samples for testing for the purpose of misrepresenting the quality of its

pipes to government purchasers. Although J-M could conduct its own

independent testing on randomly selected pipes, it asserts that the plaintiffs could

                                          -7-
attack the credibility of any independent testing it arranges because J-M was

involved in the testing process, even if only minimally. 4

      Potential attacks on the credibility of independent testing done in

preparation for litigation are not sufficient to show a substantial need for an

opposing party’s test results. If we were to hold otherwise, this justification

could conceivably apply to all tests conducted by parties in anticipation of

litigation and would discourage parties from engaging in independent testing.

Further, even if we could practically enforce this rule, the Microbac test results

would have no probative value on the cherry-picking issue. The cherry-picking

allegations concern J-M’s process of selecting pipe samples for testing as part of

its alleged fraudulent scheme. And because J-M did not select the pipes that

Microbac tested, the test results would reveal nothing about J-M’s pre-discovery

selective process. Favorable test results would reveal only that some random

samples of pipe met industry standards, which is fully consistent with the

plaintiffs’ theory and would not contradict their cherry-picking allegations.

      We thus reject J-M’s alternative theory of substantial need. Because J-M

has failed to demonstrate a substantial need for the test results, we AFFIRM the

judgment of the district court. We DENY the motions to supplement the record.

      4
         At oral argument, J-M contended that the plaintiffs did in fact attack the
credibility of its independent testing at trial in California during cross-
examination.

                                         -8-
ENTERED FOR THE COURT,

Timothy M. Tymkovich
Circuit Judge

 -9-