Defendants Cigna Corporation, Cigna Health and Life Insurance Company, Connecticut General Life Insurance Company, Cigna Behavioral Health, Inc., Cigna Behavioral Health of California, Inc., Cigna Health Management, Inc., Cigna Healthcare of California, Inc., (collectively, “Cigna”) and Viant, Inc. and MultiPlan, Inc. (collectively, “MultiPlan”) (and together with Cigna, “Defendants”) move for sanctions against Plaintiffs TML Recovery, LLC, MMR Services, LLC, Southern California Recovery Centers Oceanside, LLC, Addiction Health Alliance, LLC, DR Recovery Encinitas, LLC, Southern California Addiction Center, Inc., 12 South LLC, Woman's Recovery Center, LLC, and Pacific Palms Recovery, LLC, and their counsel (Arnall Golden Gregory LLP) for their violation of the Stipulated Protective Order (“SPO”) (ECF No. 19).

In the Special Master's Report & Recommendation No. 12 (ECF No. 266), the Special Master found that Plaintiffs and their counsel violated the SPO by failing to properly challenge Defendants' confidentiality designations prior to disclosing “attorneys' eyes only” documents and information to Plaintiffs' executives. See ECF No. 266, at 3 (“Plaintiffs did violate the terms of the SPO. Thus, the focus of the Court's inquiry must be on the appropriate remedy.”).

Because of this violation, Defendants request that the Court enter an order sanctioning Plaintiffs as follows:

See Exhibit A (Cigna's Supplemental Letter Brief re: Sanctions [July 13, 2023], at 1); Exhibits C (MultiPlan's Supplemental Letter Brief re: Sanctions [July 13, 2023], at 1).[2]

Plaintiffs, on the other hand, argue that “[i]n most instances, an appropriate sanction for violating a protective order is a modest monetary sanction or limited fee award.” See Exhibit B (Plaintiffs' Supplemental Letter Brief re: Sanctions [July 13, 2023], at 3.) Moreover, Plaintiffs note that they had every right to use “attorneys' eyes only” information in opposing Cigna's Motion for Summary Judgment; what is objectionable, however, is “the form” in which Plaintiffs presented the information to the Court, i.e., “attorneys' eyes only” information was attached to Plaintiffs' executives' declarations. See ECF Nos. 241-3, 241-4, 241-5, 241-6, 241-7, 241-8, 241-9, 241-10.

*2 Having reviewed the briefing submitted by the Parties (see Exhibits A, B, and C), the Special Master makes the following recommendation regarding the sanctions the Court should impose on Plaintiffs and Plaintiffs' Counsel for their violation of the SPO[3]:

I. PROCEDURAL BACKGROUND

Most of the relevant procedural background is set forth in the Special Master's Report & Recommendation No. 12. See ECF NO. 266, at 4.

On June 28, 2023, Plaintiffs' Counsel requested that the Special Master “invite short briefs on the sole issue of the appropriate sanction” for Plaintiffs' and Plaintiffs' Counsel violation of the SPO. See Exhibit D (Plaintiffs' Counsel Email to Special Master [June 28, 2023]). Cigna opposed Plaintiffs' Counsel's request for supplemental briefing on the issue of sanctions. See Exhibit D (Cigna's Email to Special Master [July 5, 2023]).

Between July 5, 2023, and July 10, 2023, the Special Master consulted with the Court regarding Plaintiffs' Counsel's request for supplemental briefing on what sanctions should issue because of Plaintiffs'/Plaintiffs' Counsel's violation of the SPO. The Court and the Special Master determined that supplemental briefing would assist the Court in deciding what sanctions to order. Accordingly, on July 10, 2023, the Special Master requested that the parties submit letter briefs on July 13, 2023, not exceeding three pages, regarding the appropriate sanction(s) the Court should issue. The Special Master received the supplemental letter briefs on July 13, 2023. See Exhibits A, B, and C.

II. FACTUAL BACKGROUND

A. Special Master's Report & Recommendation No. 12

In Special Master's Report & Recommendation No. 12 (see ECF No. 266), the Special Master made the following findings:

See ECF No. 266.

In summary, Plaintiffs and Plaintiffs' Counsel did violate the terms of the SPO by failing to follow the procedures set forth therein, thus allowing some of Plaintiffs' executives (Messrs. Izzo, Schrier, and Bower) to review documents containing “attorneys' eyes only” information and to fashion arguments in opposition to Cigna's Motion for Summary Judgment.

B. The SPO – Relevant Provisions

Pursuant section 7.3 of the SPO, a Receiving Party (Plaintiffs' Counsel) may disclose Defendants' “Confidential – Attorneys' Eyes Only” designated material to: (a) the Court and its personnel; (b) the Receiving Party's Outside Counsel of Record in this Action ...; (c) the Receiving Party's House Counsel; (d) Experts ... of the Receiving Party to whom disclosure is reasonably necessary for this Action and who have signed the ‘Acknowledgment and Agreement to be Bound’ (Exhibit A [to the SPO]); (e) any person designated by the Court in the interest of justice, upon such terms as the Court may deem proper; (f) court reporters and their staff; and (g) any mediator or settlement officer who may be utilized ....” See ECF No. 19, at § 7.3. Thus, while the SPO limits who may review “attorneys' eyes only” information, counsel, experts, and others who the Court deems proper may use “attorneys' eyes only” in advocacy.

Pursuant to section 10 of the SPO, “[i]f a Receiving Party learns that, by inadvertence or otherwise, it has disclosed Protected Material to any person or in any circumstance not authorized under the [SPO], the Receiving Party must immediately (a) notify in writing the Designating Party of the unauthorized disclosures, (b) use its best efforts to retrieve all unauthorized copies of the Protected Material, (c) inform the person or persons to whom unauthorized disclosures were made of all the terms of this Order, and (d) request such person or persons to execute the ‘Acknowledgement and Agreement to Be Bound’ that is attached [ ] as Exhibit A” to the SPO. See ECF No. 19, at § 10.

Pursuant to section 12.3 of the SPO, “Protected Material may only be filed under seal ....” See ECF No. 19, at § 12.3.

III. LEGAL STANDARD

*4 “Rule 37 of the Federal Rules of Civil Procedure authorizes the Court to impose sanctions when a party has violated a discovery order, including a protective order issued pursuant to Rule 26.” See Doherty v. State Farm General Ins. Co., No. CV 19-1963-JFW (PLAx), 2020 WL 2510642, at *5 (C.D. Cal. March 4, 2020); Apple, Inc. v. Samsung Elecs. Co., Ltd., No. 5:11-cv-01846-LHK (PSG), 2014 WL 12596470, at *5 (N.D. Cal. Jan. 29, 2014) (“[T]he Ninth Circuit has repeatedly held that Rule 37 ‘provide[s] comprehensively for enforcement of all [discovery] orders, including Rule 26(c) protective orders.’ ”) (citations omitted). Moreover, pursuant to section 14 of the SPO, “Any violation of [the SPO] may be punished by any and all appropriate measures including, without limitation, contempt proceedings and/or monetary sanctions.” See ECF No. 19, at 17; see also id. at 9 (“Frivolous challenges, and those made for an improper purpose ... may expose the Challenging Party to sanctions.”).

“[P]rotective order violations may, but do not necessarily, constitute sanctionable conduct. Rule 37 provides that the court ‘may issue further just orders' in response to violations of discovery orders, including the judicial establishment of facts, striking certain evidence or defenses, or other appropriate sanctions for various discovery violations.’ ” See Apple, Inc., 2014 WL 12596470, at *5 (citing Fed. R. Civ. Proc. 37). Additionally, the Ninth Circuit has recognized that the harshest sanctions—such as exclusion of evidence or dismissal—are to be reserved for cases of bad faith or willful misconduct. See Falstaff Brewing Corp. v. Miller Brewing Co., 702 F.2d 770, 782-84 (9th Cir. 1983); U.S. v. Sumitomo Marine & Fire Ins. Co., Ltd., 617 F.2d 1365, 1369-70 (9th Cir. 1980); Apple, Inc., 2014 WL 12596470, at *5. But where the Court exercises its discretionary power, particularly in the case of ordering sanctions, such power “must be used with great restraint and caution.” See Life Technologies Corp. v. Biosearch Technologies, Inc., No. C-12-00852 WHA (JCS), 2012 WL 1600393, at *11-12 (N.D. Cal. May 7, 2012) (citations omitted).

Indeed, where a party requests “case dispositive sanctions,” an additional five factor balancing test is utilized: “(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Connecticut Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1096 (9th Cir. 2007). Of these factors, factors three (prejudice) and five (the availability of less drastic sanctions) are given the most weight. See Valley Eng'rs v. Electric Eng'g Co., 158 F.3d 1051, 1057 (9th Cir. 1998).

The “ideal” sanction:

Apple, Inc., 2014 WL 12596470, at *6; see also Grimes v. City & Cnty. of S.F., 951 F.2d 236, 240-41 (9th Cir. 1991) (“The very purpose of Rule 37 is to [e]nsure compliance with discovery orders ... [t]he court may, within reason, use as many and as varied sanctions as are necessary to hold the scales of justice even.”) (internal citations and quotations omitted).

In all circumstances, however, the district court's authority to issue sanctions is subject to the following limitations: (1) the sanction must be just; and (2) the sanction must specifically relate to the particular claim at issue in the order. See United States v. Nat'l Med. Enters., Inc., 792 F.2d 906, 910-11 (9th Cir. 1986). And, while the Court has the discretion to choose among a wide range of sanctions, the appropriate remedy usually depends on (1) the severity of the violation and (2) the scope of the violation. See Societe Internationale Pour Participations Industrielles et. Commerciales, S.A. v. Rogers, 357 U.S. 197, 208 (1958).

IV. SPECIAL MASTER'S RECOMMENDATION

A. The Severity of Plaintiffs'/Plaintiffs' Counsel's SPO Violation

*5 Pursuant to the SPO, Plaintiffs' Counsel were entitled to use Defendants' “attorneys' eyes only” information in opposing Defendants' motions for summary judgment. See ECF No. 19, § 7.3. However, instead of Plaintiffs' Counsel reviewing Defendants' “attorneys' eyes only” information (see ECF No. 19, § 7.3) for the purpose of developing arguments to oppose Cigna's Motion for Summary Judgment, Plaintiffs' Counsel permitted Plaintiffs, specifically Messrs. Izzo, Schrier, and Bower, to review “attorneys' eyes only” documents/information for the purpose of presenting arguments in opposition to Cigna's Motion for Summary judgment. This was improper. Thus, Plaintiffs'/Plaintiffs' Counsel's chosen vehicle (the form) of presenting the information to the Court was objectionable.

Plaintiffs' Counsel were certainly careless in their interpretation of the SPO. Indeed, by construing too literally certain terms of the SPO, Plaintiffs' Counsel failed to take all steps reasonably necessary to honor the very purpose of the SPO—to prevent the unauthorized disclosure of information to certain personnel. See ECF No. 266, at 9-10 (Plaintiffs unpersuasively argued that because Defendants did not properly label documents as “attorneys' eyes only,” the documents did not qualify as such); ECF No. 266, at 10 (Plaintiffs' interpretation of “Receiving Party” was far too broad); ECF No. 266, at 11-12 (Plaintiffs failed to properly challenge Defendants' “attorneys' eyes only” designations pursuant to the procedures set forth in the SPO); ECF NO. 266 at 12-13 (Plaintiffs' interpretation of what information Defendants believed no longer qualified as “attorneys' eyes only” was overbroad and, therefore, incorrect).

However, the Special Master does not find that Plaintiffs/Plaintiffs' Counsel acted maliciously, in bad faith, or sought to disclose Defendants' “attorneys' eyes only” information to Plaintiffs to gain a competitive advantage; rather, Plaintiffs' Counsel carelessly interpreted the SPO for the singular purpose of trying to present evidence to the Court in their Opposition to Cigna's Motion for Summary Judgment. And Plaintiffs did so in the context of a less-than-clear SPO and after Defendants' waiver of some information designated “attorneys' eyes only” in large, multicolumn spreadsheets containing other confidential and “attorneys' eyes only” information.

Also cutting against Defendants' characterization of Plaintiffs' SPO violation as “severe” and in “bad faith” is the fact that prior to the May 19, 2023, hearing before the Special Master concerning Defendants' Motion, Plaintiffs (i) informed Defendants that some of Plaintiffs' personnel reviewed information designated “attorneys' eyes only” (ECF No. 266, at 26-28), (ii) informed Defendants that the unauthorized recipients of the “attorneys' eyes only” information “did not share the AEO documents with anyone,” (iii) the unauthorized recipients no longer had the documents, and (iv) the unauthorized recipients each “signed Exhibit A to the SPO acknowledging and agreeing to be bound by the terms therein.” See Exhibit B, at 2-3, Ex. A (“The recipients did not share the documents with anyone, no longer had the documents by May 19, 2023, and signed Exhibit A to the SPO, § 10.”). Thus, Plaintiffs/Plaintiffs' counsel did follow section 10 of the SPO after an unauthorized disclosure. See ECF No. 19, at § 10.

Finally, Plaintiffs/Plaintiffs' Counsel filed the “attorneys' eyes only” information under seal, as required by the SPO (ECF No. 19, at § 12.3), thereby minimizing the risk of disclosure to further unauthorized persons and business competitors. See Exhibit B, at 3.

B. Just and Appropriate Sanctions

In crafting this Report & Recommendation, the Special Master surveyed case law concerning similar protective order violations. The case law encouraged restraint when issuing sanctions, particularly if the sanctions would impact disposition of the case on the merits, the prejudice to the complaining party was not severe, and no prior sanctions had been issued. See, e.g., Aloe Vera of Am., Inc. v. U.S., 376 F.3d 960, 965-66 (9th Cir. 2004) (Where disobedient party willfully disobeyed a court order—multiple times—by “repeatedly attempting to disclose [ ] confidential information to a broader audience than the court had authorized,” the Ninth Circuit affirmed district court's decision to award attorneys' fees and costs only); Sciara v. Campbell, No. 2:18-cv-01700-DJA, 2022 WL 16837242, at *2-6 (D. Nev. Nov. 9, 2022) (Where forensic exam revealed disobedient party violated the protective order on “at least twenty-two occasions,” the district court declined to impose dispositive and evidentiary sanctions given the prejudice to the disobedient party and the desire to dispose of cases on the merits; instead only injunctive sanctions were ordered by the court); Apple, Inc., 2014 WL 12596470, at *7-10 (despite “widespread distribution of confidential information to hundreds of people who were not authorized to have access to it,” and “failures to follow the procedures set forth in ... the protective order,” the court imposed only monetary sanctions); Ajaxo Inc. v. Bank of Am. Technology and Operations, Inc., No. CIV-S-07-0945-GEB GGH, 2008 WL 11387092, at *2-3 (E.D. Cal. Oct. 2, 2008) (Where plaintiffs and their counsel (i) disclosed confidential - attorneys' eyes only documents to plaintiffs' founders and principals and to plaintiffs' expert (who was not designated as such pursuant to the terms of the protective order), and (ii) where plaintiffs' counsel was “not paying sufficient attention to the Protective Order,” the court awarded defendants attorneys' fees and costs and prevented plaintiffs' founders from being present at future depositions in the case); Harmon v City of Santa Clara, 323 F.R.D. 617, 626 (N.D. Cal. 2018) (Where disobedient party and counsel negligently violated the protective order—i.e., “did not take all reasonable steps within their power to comply”—judicial admonishment and reimbursement of attorneys' fees and costs was sufficient “embarrassment ... to deter future misconduct”); Life Technologies Corp., 2012 WL 1600393, at *11-12 (issuing order precluding witnesses who reviewed information in violation of the protective order from testifying as to the improperly disclosed information).

*6 Moreover, because Defendants are requesting potentially “case dispositive” sanctions—the striking of Plaintiffs' declarations submitted in opposition to Cigna's Motion for Summary Judgment—the focus of the inquiry is whether (i) the discovery violation “threatens to interfere with the rightful decision of the case” (i.e., prejudice to the complaining party) and (ii) the availability of less drastic sanctions. See Valley Eng'rs v. Electric Eng'g Co., 158 F.3d 1051, 1057 (9th Cir.1998) (quoting Adriana Intl. Corp. v. Lewis & Co., 913 F.2d 1406, 1412 (9th Cir.1990); Connecticut Gen. Life Ins. Co., 482 F.3d at 1096.

Defendants' request to strike the below-listed declarations should be denied.

As set forth above, the Special Master does not find that Plaintiffs acted in bad faith. Rather, Plaintiffs were careless in their interpretation and compliance with the SPO. Harmon, 323 F.R.D. at 626 (Where disobedient party and counsel negligently violated the protective order—i.e., “did not take all reasonable steps within their power to comply”—judicial admonishment and reimbursement of attorneys' fees and costs was sufficient “embarrassment ... to deter future misconduct”). Moreover, striking the above-listed declarations jeopardizes this Court's preference to resolve matters on the merits, and the availability and issuance of lesser sanctions (see infra) will still promote the ultimate goal of ensuring Plaintiffs'/Plaintiffs' Counsel's compliance with the SPO. See Grimes, 951 F.2d at 240-41 (“The very purpose of Rule 37 is to [e]nsure compliance with discovery orders ....”)

*7 Furthermore, given that Plaintiffs' Counsel always had the right to use “attorneys' eyes only” information to counter Cigna's claims, but Plaintiffs' Counsel error was attaching the “attorneys' eyes only” information to Plaintiffs' declarations in opposition, the Special Master finds that striking the declarations in their entirety is a step too far. Plaintiffs' Counsel's error does not justify the potentially case dispositive sanctions that Defendants seek. See Ajaxo Inc., 2008 WL 11387092, at *2-3.

Nathaniel Izzo, Ryan Schrier, and Aaron Brower indisputably reviewed “attorneys' eyes only” documents and information provided to them by Plaintiffs' Counsel in violation of the SPO. See Exhibit A, at Ex. A (attaching list of “attorneys' eyes only” documents Messrs. Izzo, Schrier, and Brower reviewed); No. 19, at § 7.3. Pursuant to Plaintiffs' Counsel's representations, no other unauthorized recipients reviewed “attorneys' eyes only” documents and information. See Exhibit B, at 2. Accordingly, Messrs. Izzo, Schrier, and Brower shall be prohibited from using the “attorneys' eyes only” documents and information disclosed to them in violation of the SPO to make any further argument about positions Plaintiffs support in this action. See Life Technologies Corp., 2012 WL 1600393, at *11-12 (issuing order precluding witnesses who reviewed information in violation of the protective order from testifying as to the improperly disclosed information). Should Messrs. Izzo, Schrier, and Brower (or other Plaintiffs personnel) attempt to utilize the improperly disclosed information to make arguments in this action, such conduct will expose Plaintiffs and Plaintiffs' Counsel to additional (and likely harsher) sanctions.

On or before July 20, 2023, Messrs. Izzo, Schrier, and Bower shall each declare under penalty of perjury—if true—that they did not share the “attorneys' eyes only” documents they reviewed with anyone, no longer had access to the “attorneys' eyes only” documents on or before May 19, 2023, signed Exhibit A to the SPO, § 10, and are complying with Exhibit A the SPO, § 10. While Plaintiffs' Counsel has made this representation (see Exhibit B, at 2-3, Ex. A), the Special Master finds it necessary that Plaintiffs (Messrs. Izzo, Schrier, and Bower) submit declarations confirming as such.

In effect, Defendants seek a sanction requesting that Plaintiffs and their counsel comply with the SPO and Exhibit A (the Acknowledgement and Agreement to be Bound) attached thereto.

The Special Master does recommend that the Court's order include an admonition stating that Plaintiffs are prohibited from using documents and information provided to Plaintiffs in violation of the SPO for any purpose outside of this litigation.

Pursuant to Fed. R. Civ. Proc. 37(c), “the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” See Fed. R. Civ. Proc. 37(c).

The Special Master does not find that Plaintiffs' failure to comply with the SPO “was substantially justified” or that the circumstances present here “make an award of expenses unjust.” See Fed. R. Civ. Proc. 37(c). The Special Master does find that Defendants are entitled to their attorneys' fees and costs in prosecuting this motion for sanctions stemming from Plaintiffs' violation of the SPO. See Apple, Inc., 2014 WL 12596470, at *9 (holding disobedient party's counsel shall reimburse prosecuting party and its counsel “for any and all costs and fees incurred in litigating” a motion for sanctions stemming from a protective order violation); see also Dairy, LLC v. Milk Movement, Inc. No. 2:21-cv-02233 WBS AC, 2022 WL 17994355, at *2 (E.D. Cal. Dec. 29, 2022) (“The court agrees as to monetary sanctions: Fed. R. Civ. Proc. 37(b)(2)(C) makes clear that absent certain special circumstances, payment of reasonable expenses, including attorneys' fees, is mandatory.”).

*8 Accordingly, Defendants shall submit declarations detailing the fees and costs incurred in prosecuting their Motion on or before July 20, 2023. See, e.g., Exhibit A, at 1 n.1 (“If fees and costs are awarded, Cigna will submit a declaration detailing the fees and costs incurred in prosecuting this Motion.”) Plaintiffs and Plaintiffs' Counsel shall pay Defendants attorneys' fees and costs that this Court deems reasonable. See Ajaxo Inc., 2008 WL 11387092, at *4-5 (detailing analysis for ascertaining reasonable attorneys' fees and costs).

V. CONCLUSION

For the foregoing reasons, the Special Master makes the following recommendation regarding what sanctions the Court should order stemming from Plaintiffs/Plaintiffs' Counsel's violation of the SPO:

IT IS SO RECOMMENDED.