Ciccio v. SmileDirectClub, LLC
Ciccio v. SmileDirectClub, LLC
2022 WL 2204174 (M.D. Tenn. 2022)
March 11, 2022
Funk, Samuel P., Special Master
Summary
The court found that the emails between SmileDirect and a third-party regulatory consultant, Ms. Chessor, did not contain or seek legal advice and thus did not qualify for attorney-client privilege. The court did not address any ESI in this case.
Additional Decisions
DR. JOSEPH CICCIO, et al. Plaintiffs,
v.
SMILEDIRECTCLUB, LLC, et al. Defendants
v.
SMILEDIRECTCLUB, LLC, et al. Defendants
Civil No. 3:19-cv-00845
United States District Court, M.D. Tennessee, Nashville Division
Filed March 11, 2022
Counsel
Edward M. Yarbrough, Walter Justin Adams, Bone, McAllester & Norton, PLLC, Nashville, TN, Joshua K. Payne, Michael T. Sansbury, Morgan Franz, Robert K. Spotswood, Spotswood Sansom & Sansbury LLC, Birmingham, AL, Richard L. Stone, Law Offices of Richard L. Stone, PLLC, New York, NY, for Plaintiffs Dr. Joseph Ciccio, Dr. Vishu Raj, Dr. Arthur Kapit, Dena Nigohosian, Dana Johnson.Walter Justin Adams, Edward M. Yarbrough, Bone, McAllester & Norton, PLLC, Nashville, TN, for Plaintiffs Joseph A. Ciccio, Jr. D.D.S. and Peter B. DeMarest, D.M.D., PLLC, Arthur L. Kapit, D.D.S., M.SC. D., P.A., Alamo Ranch Orthodontics, PLLC.
Andrew Fiorella, James R. Bedell, Michael D. Meuti, Benesch, Friedlander, Coplan and Aronoff, LLP, Cleveland, OH, Hannah Stowe, Lally A. Gartel, Nicholas Secco, Mark K. Norris, Carl M. Johnson, Pro Hac Vice, David Albert Rammelt, Pro Hac Vice, Benesch, Friedlander, Coplan and Aronoff, LLP, Chicago, IL, D. Alexander Fardon, Elizabeth O. Gonser, John R. Jacobson, Riley, Warnock & Jacobson, Nashville, TN, Michael B. Silverstein, Benesch, Friedlander, Coplan and Aronoff, LLP, Columbus, OH, for Defendants SmileDirectClub, LLC, David Katzman, Steven Katzman, Camelot Venture Group, Alexander Fenkell, Jeffrey Sulitzer.
Funk, Samuel P., Special Master
ORDER ON THE SPECIAL MASTER'S IN CAMERA REVIEW OF DOCUMENTS PRODUCED PURSUANT TO DOCKET ENTRY 303
*1 Pending before the Special Master is the in camera review of documents produced pursuant to the Order on Joint Discovery Dispute Statement Regarding Defendants' Privilege Log. (Doc. 303.)
FACTUAL BACKGROUND
On December 3, 2021, the parties filed under seal a Joint Discovery Dispute Statement Regarding Defendants' Privilege Log (the “Privilege Joint Statement”) contemporaneous with 1) a redacted and publicly-filed version of the Privilege Joint Statement; 2) a motion to seal; and 3) a declaration in support of its motion to seal. (Docs. 292-295.)[1] In the Privilege Joint Statement, the parties addressed six (occasionally overlapping) issues:
1. the redaction of information Defendants deem to be “protected content”;
2. Defendants' invocation of the common interest doctrine;
3. Defendants' claim of attorney-client privilege concerning communications involving third parties;
4. Defendants' claim of privilege concerning regulatory advice;
5. Defendants' claim of privilege concerning factual summaries of regulatory activity, including activity related to 510(k) clearances; and
6. Defendants' alleged waiver of privilege as to “mistaken advice” regarding 510(k) matters.
(Sealed Doc. 295 at 1.)
On December 23, 2021, the Special Master issued an Order on Joint Discovery Dispute Statement Regarding Defendants' Privilege Log. (Doc. 303.) In that order, the Special Master instructed Provider Plaintiffs to identify and the Defendants to produce documents from the following categories for in camera review: (1) communications with certain third parties (id. at 8-11); (2) documents and communications containing regulatory advice (id. at 11-12); and (3) documents and communications relating to summaries of regulatory activity (id. at 12-13). The Special Master also requested that Defendants provide proof supporting their assertion that certain documents are protected from disclosure pursuant to a common interest arrangement. (Id. at 6-8.)
On January 7, 2022, Provider Plaintiffs identified documents for in camera review from the three categories identified above. And on January 14, 2022, Defendants produced the documents in question in addition to evidence Defendants contend support their invocation of the common interest doctrine.
ANALYSIS
Defendants argue that the attorney-client privilege protects a number of documents and communications from disclosure. The attorney-client privilege protects communications:
(1) where legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to the purpose, (4) made in confidence (5) by the client, (6) are at this instance permanently protected (7) from disclosure by himself or by the legal advisor, (8) unless the protection is waived.
Doe v. Hamilton Cnty. Bd. Of Educ., 2018 WL 542971, at *2 (E.D. Tenn. Jan. 24, 2018) (quoting Reed v. Baxter, 134 F.3d 351, 356 (6th Cir. 1998)). Additionally, “the burden of establishing the attorney-client privilege rests with the person asserting it,” or Defendants in this instance. Id. Lastly, the attorney-client privilege is narrowly construed and only applies where necessary to achieve its purpose. Id.
*2 As a general rule, “the attorney-client privilege may be ‘waived by voluntary disclosure of private communications by an individual or corporation to third parties.’ ” K & S Assocs., Inc. v. Am. Ass'n of Physicists in Med., 2011 WL 249361, at *2 (M.D. Tenn. Jan. 26, 2011) (citing United States v. Dakota, 197 F.3d 821, 825 (6th Cir. 1999)). Similarly, work product protection can be waived through the disclosure to third parties. Id. There are exceptions to this rule, which are addressed below. In addition to the analysis below, the Special Master incorporates the analysis contained in his Order on Joint Discovery Dispute Statement Regarding Defendants' Privilege Log. (Doc. 303.)
I. Defendants Fail to Substantiate Their Common Interest Claims
Defendants invoke the common interest doctrine to justify the nondisclosure of communications between Defendants and third parties, which are noted on Defendants Privilege Log at Entries 1614, 3107, 3107.1, 3107.2, 3113, 3113.1, 3113.2, 3114, and 3139. (Sealed Doc. 295.) The common interest doctrine is not an independent basis for privilege itself, but is an exception to the waiver of attorney-client privilege through the voluntary disclosure of private communications by an individual or corporation to third parties. Elvis Presley Enters., Inc. v. City of Memphis, 2020 WL 4015476, at *7 (W.D. Tenn. July 16, 2020). The common interest doctrine may be claimed in three instances:
(1) when a single attorney represents multiple clients (i.e., joint client privilege); (2) when parties share a common defense, (1) typically in the criminal context (i.e., joint defense privilege); or (3) when two or more clients share a common legal or commercial interest and share legal advice with respect to that common interest (i.e., common interest arrangement).
Id. The parties agree that only the third instance is at issue here: the common interest arrangement.
A common interest arrangement is limited in the following ways: (1) all attorneys and clients have agreed to take the joint approach, either orally or in writing, prior to the communications taking place; (2) the doctrine only applies to communications regarding and in furtherance of the common interest; and (3) party communications made outside the presence of counsel may not be privileged. Elvis Presley Enters., Inc. v. City of Memphis, 2020 WL 4283277, at *3 (W.D. Tenn. Mar. 12, 2020). In the Privilege Joint Statement, the parties disagreed over whether the parties to a common interest agreement must have an identical legal interest or whether a commercial interest alone will suffice. (Sealed Doc. 295 at 4-5, 16-17.) The Special Master need not decide that issue here. Defendants have failed to substantiate the existence of a common interest agreement, whether written or oral. Without this agreement, there is no common interest, commercial or otherwise.[2]
*3 Defendants have produced five additional documents in support of their assertion of the common interest doctrine: a declaration in support of the common interest doctrine and four agreements supposedly supporting the common interest doctrine. None of these documents demonstrate the existence of a common interest agreement or arrangement.
First, Defendants submitted the Declaration of Philip Harrison, Vice President of Strategy & Corporate Development of Defendant SmileDirectClub, LLC. Mr. Harrison states that his declaration is made in support of Defendants' assertion of the common interest doctrine related to communications made with 1) TCW Asset Management Company, LLC, 2) Cortland Capital Market Services LLC, 3) Bank of America, National Association, and 4) 3L Capital. Mr. Harrison then generally describes SmileDirect's relationship with each of these entities. At no point, however, does Mr. Harrison claim that a common interest agreement, whether oral or written, existed between these entities. Nor does Mr. Harrison claim that SmileDirect shared a common interest, legal or otherwise, with any of these entities.[3] Accordingly, Mr. Harrison's declaration offers no support for the common interest doctrine to apply between SmileDirect and the entities.
Second, Defendants produced four separate agreements related to TCW Asset Management Company, LLC (two agreements), 3L Capital, and Bank of America. The Special Master was not provided any agreement or engagement letter for Cortland Capital Market Services LLC. None of these documents evidence the existence of a common interest agreement. Instead, the documents are financing agreements, a warrant document, a nondisclosure agreement that makes no reference to a common interest (much less an agreement regarding the same), and an engagement letter for investment banking services. On the Special Master's review, not one of these agreements makes any reference to a common interest, whether legal or commercial. These documents, without more, offer no support for Defendants' common interest claims.
Accordingly, any communications between SmileDirect and any of the entities identified immediately above must be produced, including but not limited to those entries on Defendants' privilege log identified by Provider Plaintiffs in the Privilege Joint Statement. Defendants must produce these communications within ten (10) days of this Order.
II. Defendants Have Failed to Allege that Any Privilege Exists with the Identified Third Parties
Provider Plaintiffs also take issue with Defendants' assertion of attorney-client privilege for communications involving parties outside of SmileDirect. Specifically, Provider Plaintiffs take issue with Defendants withholding communications with the following third parties: 1) FDA Third Party Review Program; 2) Progressive Lifestyles Inc.; 3) Clayton Dubilier & Rice, LLC; 4) Ian Kitching; and 5) Maureen Miller and Dynaflex (collectively, the “SmileDirect Third Parties”). (Sealed Doc. 295 at 6.)
But Defendants’ production of documents for in camera review fall short of the standard outlined and facts present in cases such as Genesco. (See Doc. 303 at 9-10.) Based on the Special Master's review of communications with the SmileDirect Third Parties, no exception applies to the general rule that the privilege (to the extent any exists in the first place) is waived by voluntary disclosure of communications to third parties. The Special Master will address each of the SmileDirect Third Parties in turn.
*4 FDA Third Party Review Group: SmileDirect's communications do not appear to have been made pursuant to a common interest agreement and there is no indication that the FDA Third Party Review Group was retained by SmileDirect for the purpose of providing legal advice. The FDA's website describes the Third Party Review Program as such:
The 510(k) Third Party Review Program provides medical device manufacturers with a voluntary alternative review process, in which accredited Third Party Review Organizations (3P510k Review Organizations) are allowed to review certain low-to-moderate risk medical devices. The program is intended to help yield more rapid 510(k) decisions and to allow the FDA to focus its resources on higher risk devices, while still maintaining oversight of the review of lower risk devices eligible for third party review.
U.S. FOOD & DRUG ADMINISTRATION, 510(k) Third Party Review Program, https://www.fda.gov /medical-devices/premarket-submissions/510k-third-party-review-program (last visited March 3, 2022). It does not appear that the Third Party Review Program provides legal advice to organizations that avail themselves of this “voluntary alternative review process.” If anything, the FDA Third Party Review Group—a qualifying Third Party Review Organization—is more akin to the FDA itself, not a consultant retained to provide legal advice. All previously withheld emails and communications between Defendants and the FDA Third Party Review Group, including but not limited to David Yungvirt, that appear on Defendants' privilege log must be produced within ten (10) days of this Order.[4]
Progressive Lifestyles: Plaintiffs only selected one document related to Progressive Lifestyles: Privilege Log Entry 4339, Bates Stamped Defs_Priv_Log_011183. That document is an email chain that includes an email between Steve Katzman (SmileDirect's CEO) and Susan Greenspon Rammelt, then-outside counsel for SmileDirect and now SmileDirect's General Counsel. This communication between Katzman and Greenspon Rammelt would have been privileged when made. But then an individual named John Williams at Progressive Lifestyles is added to the communication.
It is not clear what role either Williams or Progressive Lifestyles play in SmileDirect's operations. But SmileDirect has not presented any evidence that the parties had entered a common interest agreement with Williams or Progressive Lifestyles. Nor has SmileDirect provided any evidence supporting its statement that either Williams or Progressive Lifestyles was retained for the purposes of providing legal advice. (Sealed Doc. 295 at 18.) And SmileDirect certainly has not provided the sorts of detail which Courts have found compelling when finding that outside consultants were retained for the purpose of providing legal advice. Genesco, 302 F.R.D. at 180-81 (M.D. Tenn. Mar. 10, 2014); (Doc. 303 at 9-10.) Defendants must produce all previously-withheld communications with Williams and Progressive Lifestyles within ten (10) days of this Order.
*5 Clayton Dubilier & Rice, LLC (“CDR”): Provider Plaintiffs challenge Defendants' assertion of privilege regarding communications with CDR. In the Privilege Joint Statement, SmileDirect stated that “SmileDirect engaged CDR to assist with the acquisition of a 510(k).” (Sealed Doc. 295 at 18.) SmileDirect also produced additional documents to aid the Special Master's in camera review. At most, these documents support that CDR made an investment to advance SmileDirect's 510(k) regulatory activities, but there is no support that CDR was retained to provide legal advice regarding this process. Nor is there any evidence of a common interest agreement. As for the emails themselves, they contain nothing more than CDR employees checking in on or inquiring about the 510(k) process. Defendants must produce all previously-withheld communications with CDR within ten (10) days of this Order.
Ian Kitching: Provider Plaintiffs challenge Defendants' assertion of privilege regarding communications with Ian Kitching. Defendants produced Kitching's engagement letter to aid the Special Master's in camera review. The engagement letter demonstrates that Kitching was retained as a consultant “in connection with its 510k submission to the FDA and any and all related documentation, verification and validation in connection therewith.” There is no reference to legal advice or a common interest agreement. And the communications produced for in camera review do not change the scope of Kitching's engagement in any way. The emails are nothing more than updates on the 510(k) application process, the application itself, and deficiencies identified by the FDA Third Party Review Group. Defendants must produce all previously-withheld communications with Ian Kitching within ten (10) days of this Order.
Maureen Miller: Provider Plaintiffs challenge Defendants' assertion of privilege related to communications with Ms. Miller, who was outside counsel for Dynaflex, a third party with which SmileDirect was negotiating a transaction. SmileDirect does not appear to argue that communications with Ms. Miller are privileged. Instead, it argues that communications with Ms. Miller are nonresponsive attachments to an otherwise responsive and privileged email. (See Sealed Doc. 295 at 18.) With respect to communications with Ms. Miller, there cannot be a claim of privilege over any otherwise responsive documents on which she is included.
Turning now to the contested parent email for Entry 2791: an email between SmileDirect employees (including General Counsel Greenspon Rammelt), outside counsel for SmileDirect, and Kerry Kellogg with 3L Capital. In this email, the parties are discussing ongoing negotiations over the Dynaflex transaction. As discussed above, SmileDirect has not sufficiently alleged a common interest agreement with 3L Capital to prevent the waiver of the privilege of these communications. Nor has SmileDirect alleged sufficient facts to support an argument that 3L Capital is an agent or expert “retained by counsel for the purpose of providing legal advice.” Genesco, 302 F.R.D. at 190. According to Mr. Harrison's declaration, 3L Capital merely “held an equity stake in SmileDirect before SmileDirect's Initial Public Offering.” This does not rise to the standard articulated in Genesco.
As for the attachments to this email, on which Ms. Miller is included, SmileDirect has argued that they are not relevant. (See Sealed Doc. 295 at 18.) The Special Master is inclined to agree, but SmileDirect included the parent email on its privilege log, indicating some relevance to Provider Plaintiffs' claims and requests for production. And the Special Master has found that SmileDirect waived the privilege for that communication by including third-party 3L Capital. Accordingly, SmileDirect must produce the entire family of documents for Entry 2791 and any other responsive communications with Maureen Miller within ten (10) days of this Order.
III. Certain Documents Withheld on the Grounds that they Contain Regulatory Advice Grounds Must Be Produced
*6 Defendants have also withheld a number of documents and communications related to regulatory compliance. A “communication is not privileged simply because it is made by or to a person who happens to be an attorney.” Zigler v. Allstate Ins. Co., 2007 WL 1087607, at *1 (N.D. Ohio April 9, 2007). The communication “must have the primary purpose of soliciting legal, rather than business, advice.” Id. (cleaned up). Documents will be protected even if they touch on business issues so long as they are prepared for the purpose of obtaining or rendering legal advice. Id.
After reviewing the documents produced by Defendants for in camera review, the Special Master concludes that these communications ultimately fall into three separate categories and Defendants must update their privilege log and production accordingly.[5]
First, certain of the communications produced for in camera review are appropriately withheld in their entirety on privilege grounds. This includes the following privilege log entries produced for the Special Master's in camera review: 1367 (and family), 1475, 2394, 2410, and 3201. These entries primarily consist of internal SmileDirect emails involving SmileDirect's General Counsel, Greenspon Rammelt, and do not include any third parties. The documents arguably touch on both business and legal issues, but they contain sufficient legal advice to protect them from disclosure. Accordingly, Defendants' privilege determinations on regulatory emails involving internal counsel and external attorneys, which also do not include any third parties, are appropriate and similar documents are not required to be produced in this action.
Second, certain of the documents produced for in camera review should be produced in redacted form. This includes the following privilege log entries produced for the Special Master's in camera review: 4708 and 4563 and families. For both of these entries, although a third party, Lacey Chessor, is on earlier email(s), she is subsequently dropped off and the internal SmileDirect emails that follow, which include Greenspon Rammelt, are privileged and may be redacted for that reason. The attachments to the emails provided for in camera review are not privileged and must be produced. These entries and all other similar entries on Defendants' privilege log must be redacted and produced within ten (10) days of this Order.
Third, a number of the documents produced for in camera review must be produced in their entirety. This includes the following privilege log entries produced for the Special Master's in camera review: 1358 (and family); 1359 (and family); 1426; 1427 (and family); 2447 (and family); 3669; 4667 (and family); and 4476 (and family). These communications do not contain legal advice. What's more, even if they were arguably privileged, a number of the communications include third parties that would otherwise destroy that privilege. Defendants have not provided any support for the proposition that it had entered into a common interest agreement or sought legal advice from the following: MRC-X and Kim Strohirch (Entries 1358, 1359, 3669); Lacey Chessor, a third-party medical device consultant at Knoell USA (Entries 1426, 2447, 4476,[6] and 4667).[7] These communications and their attachments must be produced. Additionally, Defendants are ordered to produce all other non-privileged regulatory communications that are consistent with the entries identified in this paragraph and reviewed by the Special Master within ten (10) days of this Order.
IV. Defendants' Legal Sync Reports Are Appropriately Withheld on Privilege Grounds
*7 Lastly, Provider Plaintiffs challenge Defendants' privilege claims related to Legal Sync Reports or Legal Sync Meeting communications. According to Defendants, the “Legal Sync Reports are weekly reports summarizing all legal issues pending within SmileDirect.” (Sealed Doc. 295 at 20.) Almost all of the documents produced to the Special Master for in camera review on this topic are privileged or contain privileged information. The documents and communications include communications from Greenspon Rammelt regarding legal issues and summaries of legal activities that were prepared by counsel. On a handful of occasions, a parent email is not privileged, but the attached report is privileged. And in certain other instances, a report should be redacted instead of withheld in its entirety. The Special Master holds as follows:
• Privileged Entries that do not need to be produced in any form: 87.2 (and parent); 144.1 (and parent); 648 (and family); 4051.1 (and parent); 4413.1 (and parent); 4538.1 (and family); and 4688 (and family).
• Parent email is not privileged and must be produced, but attachment is privileged and does not need to be produced in any form: 59.13 (and parent); 97.16 (and parent); 3571.2 (and parent); and 4572.8 (and parent).
• Weekly Sync Reports that only contain limited legal advice or privileged information: 121; 130; 3279; and 3284. For these entries, each of the Weekly Sync Reports contained a “Legal” update in the body of the email, which can be redacted, but the report must otherwise be produced.
Defendants must produce the parent documents identified above and redact the “Legal” updates in the Weekly Sync Reports and produce those redacted versions within ten (10) days of this Order. Additionally, Defendants are instructed to review their privilege log for other Legal Sync documents, re-analyze these entries, and produce any other documents consistent with the analysis above within ten (10) days of this Order.
CONCLUSION
Accordingly, the SPECIAL MASTER:
1. ORDERS the Defendants to produce documents consistent with this Order within ten (10) days of this Order;
2. ORDERS the Defendants to produce a revised privilege log consistent with this order and the Special Master's Order on Joint Discovery Dispute Statement Regarding Defendants' Privilege Log (Doc. 303) within ten (10) days of this Order; and
3. DIRECTS the Clerk to terminate any open docket entry flowing from Sealed Docket Entry 295.
Footnotes
The motion to seal will be addressed in a separate order.
As noted, the common interest arrangement is an exception to the waiver of otherwise privileged communications. It is not, in and of itself, its own privilege. Elvis Presley Enters., Inc. v. City of Memphis, 2020 WL 4015476, at *7 (W.D. Tenn. July 16, 2020) (“The common interest privilege is not an independent basis for privilege, but an exception to the general rule that the attorney-client privilege is waived when privileged information is disclosed to a third party.” (cleaned up)). Accordingly, the underlying communications must be privileged on their own terms as well. But Defendants only argue in passing that the information at issue here is actually privileged. (Sealed Doc. 295 at 17 (“It was merely sharing privileged information with a third party that shared SmileDirect's commercial interests.”).) And it is not clear that any of the underlying communications disclosed to third parties themselves are actually privileged.
SmileDirect also did not offer a declaration from any of the entities with which it claims it shared a common interest.
Defendants have submitted briefing and additional materials regarding these third parties. For each of these third parties, the briefing and documents demonstrate that these third-party communications either are not privileged or the privilege is waived through the presence of the third party. Accordingly, the Special Master is ruling on all communications with these individuals, as opposed to limiting his ruling to the documents reviewed in camera.
This analysis excludes emails with third parties such as the FDA Third Party Review Group and Kitching—third parties retained for consulting or business services. Those communications are not privileged and the analysis in Section II is unchanged by the analysis in this Section.
The Special Master notes that the subject line and in the middle of the body of this email the following language appears: “**Attorney Client Privileged Communication**”. Of course, just because a party labels a document privileged does not make it so. First, this communication does not contain or seek legal advice. Second, Ms. Chessor, an outside regulatory consultant, is included as well.
Based on Entry 4667, it appears that SmileDirect hired Ms. Chessor at a later date. But this does not change the fact that these emails do not contain or seek legal advice.